What changed in this filing

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Item 1. Financial Statements

2026-08-06 compared with 2026-05-07 · 452 added, 418 removed, 933 unchanged (48% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

March 31, 2026

($ in thousands)

42 unchanged sentences

Consolidated Statements of Income (unaudited)

Ended March 31,

($ in thousands, except per share data)

10 unchanged sentences

Provision for credit losses - loans

Provision (benefit) for unfunded commitments

Provision for unfunded commitments

Total provision for credit losses

7 unchanged sentences

Title insurance income

Gain on sale of assets

Loss on sale of assets

Total noninterest income

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financial statements (unaudited)

Financial Group, Inc.

Consolidated Statements of Comprehensive Income (unaudited)

Ended March 31,

Three Months Ended

Six Months Ended

($ in thousands)

Other comprehensive income

Other comprehensive income (loss)

Available for sale investment securities:

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Related tax (expense) benefit

Net effect on other comprehensive income

Net effect on other comprehensive income (loss)

Total comprehensive income

See notes to condensed consolidated financial statements (unaudited)

Financial Group, Inc.

Consolidated Statements of Shareholders’ Equity (unaudited)

Accumulated Other

($ in thousands, except per share data)

Comprehensive

($ in thousands, except per share data)

Balance, January 1, 2026

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Balance, March 31, 2026

Other comprehensive income

Cash dividends on common, $ 0.16 per share

Repurchased stock ( 28,364 shares)

Stock based compensation expense

Balance, June 30, 2026

Accumulated Other

($ in thousands, except per share data)

Comprehensive

($ in thousands, except per share data)

Balance, January 1, 2025

5 unchanged sentences

Balance, March 31, 2025

Other comprehensive income

Cash dividends on common, $ 0.15 per share

Repurchased stock ( 124,495 shares)

Stock based compensation expense

Balance, June 30, 2025

See notes to condensed consolidated financial statements (unaudited)

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Flows (unaudited)

Three Months Ended

Six Months Ended

($ in thousands)

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Gain from sale of loans

Gain on sale of assets

Loss on sale of assets

Interest receivable

Interest payable & other liabilities

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Investing Activities

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Proceeds from sales of premises, equipment

Proceeds from bank owned life insurance

Purchase of Federal Reserve and Federal Home Loan Bank Stock

Proceeds from sale of Federal Home Loan Bank Stock

Proceeds from sale of foreclosed assets

Acquisition, net of cash acquired (paid)

Net cash provided by investing activities

Net cash provided by (used in) investing activities

Financing Activities

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market, interest checking & savings accounts

Net (decrease) increase in time deposits

Net increase in securities sold under agreements to repurchase

Net increase in time deposits

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

Repayment of Federal Home Loan Bank advances

7 unchanged sentences

Interest paid

Income taxes paid

Supplemental non-cash disclosure

Transfer of loans to loans held for sale

Transfer of loans to foreclosed assets

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The accompanying unaudited condensed consolidated

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

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

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

required by GAAP for complete financial statements.

The condensed consolidated financial statements reflect all adjustments that are,

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

Those adjustments consist only of normal recurring adjustments.

Results of operations for the three months ended March 31, 2026, are

not necessarily indicative of results for the complete year.

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

information and with the instructions for Form 10-Q.

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

GAAP for complete financial statements.

The condensed consolidated financial statements reflect all adjustments that are, in the opinion

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

Those adjustments

consist only of normal recurring adjustments.

Results of operations for the six months ended June 30, 2026, are not necessarily indicative

of results for the complete year.

The condensed consolidated balance sheet of the

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

For further information, refer to the condensed

consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December

For further information, refer to the consolidated

financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

Accounting Standards not yet adopted:

Income Statement –

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

Income Statement – Reporting

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

Disaggregation of Income Statement Expenses

In November 2024, the FASB issued ASU 2024-03,

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

Disaggregation of Income

Statement Expenses.

The new standard requires tabular disclosure of certain costs and expenses including more detailed disclosures of

certain categories of expenses such as employee compensation, depreciation and intangible asset amortization that are components of existing

expense captions presented on the face of the income statement.

The ASU should be applied prospectively for annual reporting periods

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

The Company is currently evaluating the

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

In November 2024, the Financial Accounting Standards

Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03, Income Statement—Reporting Comprehensive

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

Disaggregation of Income Statement Expenses.

The new standard requires

tabular disclosure of certain costs and expenses including more detailed disclosures of certain categories of expenses such as employee

compensation, depreciation and intangible asset amortization that are components of existing expense captions presented on the face of

the income statement.

The ASU should be applied prospectively for annual reporting periods beginning after December 15, 2026, with retrospective

application and early adoption permitted.

The Company is currently evaluating the impacts of this guidance on the Company’s consolidated

financial statements.

NOTE 2 - EARNINGS PER SHARE

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

There were no anti-dilutive

shares in 2026 or 2025.

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

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

There were no anti-dilutive shares

in 2026 or 2025.

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

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

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

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Diluted earnings per common share

Six Months Ended

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

Distributed earnings allocated to common shares

Undistributed earnings allocated to common shares

Net earnings allocated to common shares

Net earnings allocated to participating securities

Net Income allocated to common shares and participating securities

Weighted average shares outstanding for basic earnings per share

Dilutive effect of stock compensation

Weighted average shares outstanding for diluted earnings per share

Basic earnings per common share

Diluted earnings per common share

3 – BUSINESS COMBINATIONS

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

The acquisition of Marblehead enabled the

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

It is expected that this transaction will

result in business synergies and economies of scale.

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

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

The acquisition of Marblehead enabled the Company

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

The acquisition was consistent with the Company’s

strategy to expand its presence in Northwest Ohio and to increase profitability by introducing existing products and services to the acquired

customer base.

The Company accounted for the transaction under

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months ended December 31, 2025.

The $ 0.7 million in merger expense is split between data processing and professional fees expense.

The $ 0.7 million in merger expense was split between data processing and professional fees expense.

a result of the acquisition, the Company recorded $ 3.9 million of goodwill and $ 1.7 million of intangible assets in the first quarter

The intangible assets are related to core deposits, which are being amortized over 10 years on a straight-line basis.

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

For tax purposes, goodwill is

non-deductible but will be evaluated annually for impairment.

Loans acquired

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

For tax purposes, goodwill is non-deductible

but will be evaluated annually for impairment.

The following table summarizes the fair value

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information becomes available.

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

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

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

Potential adjustments, if any, will be related

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

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

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

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

Potential adjustments, if any, will be related to assets

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

($ in thousands)

January 17, 2025

Fair value of assets acquired

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The amortized cost and appropriate fair values,

together with gross unrealized gains and losses, of securities at March 31, 2026, and December 31, 2025, were as follows:

together with gross unrealized gains and losses, of securities at June 30, 2026, and at December 31, 2025, were as follows:

($ in thousands)

March 31, 2026

Treasury and Government agencies

June 30, 2026

Government agencies

Mortgage-backed securities

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December 31, 2025

Treasury and Government agencies

Government agencies

Mortgage-backed securities

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The amortized cost and fair value of securities

available-for-sale at March 31, 2026, by contractual maturity, are shown below.

available-for-sale at June 30, 2026, by contractual maturity, are shown below.

Expected maturities will differ from contractual maturities

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The fair value of securities pledged as collateral,

to secure public deposits and for other purposes, was $ 156.9 million at March 31, 2026, and $ 115.1 million at December 31, 2025.

fair value of securities delivered for repurchase agreements was $ 17.9 million at March 31, 2026, and $ 26.0 million at December 31, 2025.

to secure public deposits and for other purposes, was $ 138.0 million at June 30, 2026, and $ 115.1 million at December 31, 2025.

value of securities delivered for repurchase agreements was $ 17.5 million at June 30, 2026, and $ 26.0 million at December 31, 2025.

There were no realized gains or losses from sales

of available-for-sale securities for the three months ended March 31, 2026, and March 31, 2025.

of available-for-sale securities for the six months ended June 30, 2026, and June 30, 2025.

Certain investments in debt securities are reported

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Total fair value of these investments

was $ 182.4 million at March 31, 2026, and $ 187.0 million at December 31, 2025, which consisted of 127 securities, or approximately 91

percent, and 125 securities, or approximately 99 percent, respectively, of the Company’s available-for-sale investment portfolio

at such dates.

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

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

was $ 177.8 million at June 30, 2026, and $ 187.0 million at December 31, 2025, which consisted of 127 securities, or approximately 91 percent,

and 125 securities, or approximately 99 percent, respectively, of the Company’s available-for-sale investment portfolio at such

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

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

Securities with unrealized losses, aggregated

by investment class and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2026,

by investment class and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2026,

and at December 31, 2025, are as follows:

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12 Months or Longer

March 31, 2026

Number of Securities

Unrealized Losses

Treasury and Government agencies

June 30, 2026

Government agencies

Mortgage-backed securities

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December 31, 2025

Number of Securities

Unrealized Losses

Treasury and Government agencies

Government agencies

Mortgage-backed securities

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for credit losses (the “ACL”).

Changes in the ACL are recorded as provision

for (or reversal of) credit losses.

Changes in the ACL are recorded as provision for

(or reversal of) credit losses.

Available-for-sale securities are charged off against the allowance or, in the absence of any allowance,

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requirement to sell is met.

At March 31, 2026, and December 31, 2025, no ACL on available-for-sale securities was recorded.

At June 30, 2026, and December 31, 2025, no ACL on available-for-sale securities was recorded.

Management has made the accounting policy election

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Accrued interest receivable

on available-for-sale debt securities totaled $ 0.6 million at March 31, 2026, and $ 0.6 million at December 31, 2025.

on available-for-sale debt securities totaled $ 0.5 million at June 30, 2026, and $ 0.6 million at December 31, 2025.

Should the decline

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to hold for the foreseeable future, or until maturity or payoffs, are reported at their outstanding principal balances adjusted for any

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

purchased loans.

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

the loan term.

Generally, all loan classes are placed on nonaccrual status not later than 90 days past due, unless the loan is well-secured

and in the process of collection.

All interest accrued, but not collected, for loans that are placed on nonaccrual or charged off is

reversed against interest income.

The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying

for return to accrual.

Loans are returned to accrual status when all the principal and interest amounts contractually due are brought

current and future payments are reasonably assured.

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

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

Generally, all loan classes are placed on nonaccrual status not later than 90 days past due, unless the loan is well-secured and

in the process of collection.

All interest accrued, but not collected, for loans that are placed on nonaccrual or charged off is reversed

against interest income.

The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for

return to accrual.

Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current

and future payments are reasonably assured.

The following table summarizes the composition of the loan portfolio:

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Allowance for credit losses

The totals shown above are net of accretable

discounts on acquired loans and deferred loan fees and costs, which totaled $ 0.35 million in net fees at March 31, 2026, and $ 0.55 million

at December 31, 2025.

The totals shown above are net of accretable discounts

on acquired loans and deferred loan fees and costs, which totaled $ 0.30 million in net fees at June 30, 2026, and $ 0.55 million at December

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

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real estate markets or in the general economy.

The characteristics of properties securing the Company’s commercial real estate

portfolio are diverse, but with geographic location almost entirely in the Company’s market area.

Management monitors and evaluates

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

In general, the Company avoids financing single

purpose projects unless other underwriting factors are present to help mitigate risk.

In addition, management tracks the level of owner-occupied

versus non-owner-occupied commercial real estate loans.

The characteristics of properties securing the Company’s commercial real estate portfolio

are diverse, but with geographic location almost entirely in the Company’s market area.

Management monitors and evaluates commercial

real estate loans based on collateral, geography and risk grade criteria.

In general, the Company avoids financing single purpose projects

unless other underwriting factors are present to help mitigate risk.

In addition, management tracks the level of owner-occupied versus

non-owner-occupied commercial real estate loans.

Construction loans are underwritten utilizing

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if that ratio is exceeded.

Home equity lines of credit (“HELOCs”) are typically secured by a subordinate interest in 1-4

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

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

Repayment of these loans is

primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas, such

as unemployment levels.

Home equity lines of credit (“HELOCs”) are typically secured by a subordinate interest in 1-4 family

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

Some consumer

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

Repayment of these loans is primarily dependent

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

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

Risk is mitigated by

the fact that these loans are of smaller individual amounts and spread over a large number of borrowers.

Risk is mitigated by the fact that these loans

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

Allowance for Credit Losses (ACL)

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Adjustments to historical loss information

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

delinquency level, or term as well as changes in economic conditions, such as changes in unemployment rates, property values, or other

relevant factors.

Accrued interest receivable related to loans

totaled $ 3.7 million both at March 31, 2026, and at December 31, 2025, and is excluded from the estimate of credit losses.

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

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

Accrued interest receivable related to loans totaled

$ 3.9 million at June 30, 2026, and $ 3.7 million at December 31, 2025, and is excluded from the estimate of credit losses.

The Company measures expected credit losses for

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The Company has identified the following portfolio segments:

& Industrial - Commercial & industrial loans consist of loans or lines of credit

to finance accounts receivable, inventory or other general business needs, and lease financing

agreements for equipment, vehicles, or other assets.

The primary risk associated with commercial

& industrial loans and lease financing agreements is the ability of borrowers to achieve

business results consistent with those projected at origination.

Failure to achieve these

projections presents risk the borrower will be unable to service the debt consistent with

the contractual terms of the loan or lease.

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

loans to purchase, construct, or refinance owner occupied nonresidential properties.

includes office buildings and other commercial facilities.

Commercial mortgages secured by

owner occupied properties are primarily dependent on the ability of borrowers to achieve

business results consistent with those projected at loan origination.

While these loans are

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

of collateral will not fully satisfy the obligation as the commercial real estate collateral

may be more adversely affected by conditions in the real estate markets or in the general

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

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

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

as well as multifamily properties.

The primary risk associated with nonowner occupied commercial

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

loan to produce adequate cash flow to service the debt.

While these loans are collateralized

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

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

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

● Agricultural

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

and general business needs or other assets.

The primary risk associated with agricultural

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

at origination.

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

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

● Residential

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

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

home and are secured by 1-4 family residential property.

Significant and rapid declines in

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

value of the collateral.

Equity Loans - Home equity loans consist of HELOCs and other lines of credit secured by

first or second liens on the borrower’s primary residence.

● Commercial & Industrial - Commercial

& industrial loans consist of loans or lines of credit to finance accounts receivable, inventory or other general business needs,

and lease financing agreements for equipment, vehicles, or other assets.

The primary risk associated with commercial & industrial

loans and lease financing agreements is the ability of borrowers to achieve business results consistent with those projected at origination.

Failure to achieve these projections presents risk the borrower will be unable to service the debt consistent with the contractual terms

of the loan or lease.

● Commercial Real Estate - Owner Occupied

- Owner occupied commercial real estate loans consist of loans to purchase, construct, or refinance owner occupied nonresidential properties.

This includes office buildings and other commercial facilities.

Commercial mortgages secured by owner occupied properties are primarily

dependent on the ability of borrowers to achieve business results consistent with those projected at loan origination.

While these loans

are collateralized by real property in an effort to mitigate risk, it is possible the liquidation of collateral will not fully satisfy

the obligation as the commercial real estate collateral may be more adversely affected by conditions in the real estate markets or in

the general economy.

● Commercial Real Estate – Nonowner Occupied

- Nonowner occupied commercial real estate loans consist of loans to purchase, construct, or refinance investment nonresidential properties.

This includes office buildings and other facilities rented or leased to unrelated parties, as well as multifamily properties.

risk associated with nonowner occupied commercial real estate loans is the ability of the income-producing property that collateralizes

the loan to produce adequate cash flow to service the debt.

While these loans are collateralized by real property in an effort to mitigate

risk, it is possible the liquidation of collateral will not fully satisfy the obligation as the commercial real estate collateral may

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

● Agricultural - Agricultural loans consist

of loans or lines of credit to finance farmland, equipment, and general business needs or other assets.

The primary risk associated with

agricultural loans is the ability of borrowers to achieve business results consistent with those projected at origination.

achieve these projections presents risk the borrower will be unable to service the debt consistent with the contractual terms of the loan.

● Residential Real Estate – Residential

real estate mortgage loans consist of loans to purchase, construct, or refinance the borrower’s primary dwelling, second residence

or vacation home and are secured by 1-4 family residential property.

Significant and rapid declines in real estate values can result in

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

● Home Equity Loans - Home equity loans consist

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

These loans are secured

by both senior and junior liens on the residential real estate and are particularly susceptible

to declining collateral values.

This risk is elevated for loans secured by junior liens as

a substantial decline in value could render the junior lien position effectively unsecured.

- Consumer loans consist of loans to finance unsecured home improvements, personal assets,

such as automobiles or recreational vehicles, and revolving lines of credit that can be secured

or unsecured.

Repayment of these loans is primarily dependent on the personal income of the

borrowers, which can be impacted by economic conditions in their market areas.

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

by both senior and junior liens on the residential real estate and are particularly susceptible to declining collateral values.

is elevated for loans secured by junior liens as a substantial decline in value could render the junior lien position effectively unsecured.

● Consumer - Consumer loans consist of loans

to finance unsecured home improvements, personal assets, such as automobiles or recreational vehicles, and revolving lines of credit that

can be secured or unsecured.

Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted

by economic conditions in their market areas.

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

which could result in unpaid balances in excess of the collateral.

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

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

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

For each segment, a Loss Driver

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

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

Report data, as well as peer institution data.

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

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

For each segment, a Loss Driver Analysis

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

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

data, as well as peer institution data.

In creating the DCF model, the Company has established

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

Company’s own loan-level loss data from January 2016 through March 31, 2026, contained within the model was supplemented with peer

Company’s own loan-level loss data from January 2016 through June 30, 2026, contained within the model was supplemented with peer

data in most loan pools as there was not sufficient loan-level detail from prior cycles reflecting similar economic conditions as the

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The resulting qualitative adjustments are applied to the relevant collectively evaluated loan pools.

The qualitative

analysis increases or decreases the allowance allocation for each loan pool based on the assessment of factors described above.

each reporting period, management also considers the need to adjust the baseline lifetime loss rates for factors that may cause expected

losses to differ from those experienced in the historical loss periods.

Loans that do not share risk characteristics

are evaluated on an individual basis.

When management determines that foreclosure is probable and the borrower is experiencing financial

difficulty, the expected credit losses are based on the fair value of collateral at the reporting date adjusted for selling costs as

The qualitative analysis

increases or decreases the allowance allocation for each loan pool based on the assessment of factors described above.

During each reporting

period, management also considers the need to adjust the baseline lifetime loss rates for factors that may cause expected losses to differ

from those experienced in the historical loss periods.

Loans that do not share risk characteristics are

evaluated on an individual basis.

When management determines that foreclosure is probable and the borrower is experiencing financial difficulty,

the expected credit losses are based on the fair value of collateral at the reporting date adjusted for selling costs as appropriate.

The Company is also required to consider expected

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completed the acquisition of Marblehead.

The Company performed an analysis of the acquired non-PCD loan portfolio as part of the acquisition

process and recorded a provision for credit losses of $ 0.23 million subsequent to the date of acquisition.

The Company performed an analysis of the acquired non-Purchased Credit Deteriorated (“non-PCD”)

loan portfolio as part of the acquisition process and recorded a provision for credit losses of $ 0.23 million subsequent to the date of

The following tables summarize the activity related

to the ACL for the three months ended March 31, 2026, and March 31, 2025, and for the twelve months ended December 31, 2025.

to the ACL for the three and six months ended June 30, 2026, and June 30, 2025, and for the twelve months ended December 31, 2025.

($ in thousands)

For the three months ended March 31, 2026

Balance, beginning of period

losses on acquired

Provision for Credit Losses

Balance, end of period

For the three months ended

June 30, 2026

allowance for

credit losses

Provision for

Commercial & industrial

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($ in thousands)

For the three months ended March 31, 2025

Balance, beginning of period

Provision for Credit Losses

Balance, end of period

For the six months ended

June 30, 2026

allowance for

credit losses

Provision for

Commercial & industrial

3 unchanged sentences

($ in thousands)

For the twelve months ended December 31, 2025

Balance, beginning of period

Provision for Credit Losses

Balance, end of period

For the three months ended

June 30, 2025

allowance for

credit losses

Provision for

Commercial & industrial

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Residential real estate

($ in thousands)

For the six months ended

June 30, 2025

allowance for

credit losses

Provision for

Commercial & industrial

Commercial real estate - owner occupied

Commercial real estate - nonowner occupied

Residential real estate

($ in thousands)

For the twelve months ended

December 31, 2025

allowance for

credit losses

Provision for

Commercial & industrial

Commercial real estate - owner occupied

Commercial real estate - nonowner occupied

Residential real estate

Collateral dependent loans are loans for which

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The Company reviews individually evaluated loans for designation as collateral dependent loans, as well as other

loans that management of the Company designates as having higher risk.

These loans do not share common risk characteristics and are not

included within the collectively evaluated loans for determining the ACL.

loans that management designates as having higher risk.

These loans do not share common risk characteristics and are not included within

the collectively evaluated loans for determining the ACL.

The Company analyzes loans individually by classifying the loans as to credit

risk and includes loans with outstanding exposure greater than $ 100,000 .

This analysis is performed on a quarterly basis.

The following table presents an analysis of collateral-dependent

loans of the Company as of March 31, 2026, and December 31, 2025.

loans of the Company as of June 30, 2026, and December 31, 2025.

($ in thousands)

Collateral Type

March 31, 2026

June 30, 2026

Commercial & industrial

10 unchanged sentences

Under the current expected credit loss (“CECL”)

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

The ACL is calculated on an individual loan basis based on the shortfall between the fair value of the loan’s collateral,

which is adjusted for liquidation costs/discounts, and amortized cost.

If the fair value of the collateral exceeds the amortized cost,

no allowance is required.

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

The ACL is calculated on an individual loan basis based on the shortfall between the fair value of the loan’s collateral, which

is adjusted for liquidation costs/discounts, and amortized cost.

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

Credit Risk Profile

3 unchanged sentences

payment experience, credit documentation, public information and current economic trends, among other factors.

The Company analyzes loans

individually by classifying the loans as to credit risk.

This analysis includes loans with an outstanding balance greater than $ 100,000

and non-homogeneous loans, such as commercial and commercial real estate loans.

This analysis is performed on a quarterly basis.

Company uses the following definitions for risk ratings:

The Company uses the following

definitions for risk ratings:

Pass (grades 1 – 4):

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

Special Mention (5):

have potential weaknesses that deserve management’s close attention.

If left uncorrected, these potential weaknesses may result

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

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

Special Mention (5):

loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.

Ordinarily, special

mention credits have characteristics which corrective management action would remedy.

potential weaknesses that deserve management’s close attention.

If left uncorrected, these potential weaknesses may result in deterioration

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

Special mention loans are not adversely

classified and do not expose the Company to sufficient risk to warrant adverse classification.

Ordinarily, special mention credits have

characteristics which corrective management action would remedy.

Substandard (6):

inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any.

Loans so classified

must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.

Loans are inadequately

protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any.

Loans so classified must

have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.

They are characterized by the distinct possibility

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The following table presents loan balances by credit quality

indicators and gross chargeoffs by loan category and year of origination as of March 31, 2026.

indicators and gross chargeoffs by loan category and year of origination as of June 30, 2026.

($ in thousands)

Term Loans by Year of Origination

March 31, 2026

June 30, 2026

Commercial & industrial

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($ in thousands)

Term Loans by Year of Origination

Loans by Year of Origination

Revolving Loans Converted

December 31, 2025

29 unchanged sentences

The following tables present the Company’s

loan portfolio aging analysis as of March 31, 2026, and December 31, 2025.

loan portfolio aging analysis as of June 30, 2026, and December 31, 2025.

($ in thousands)

March 31, 2026

June 30, 2026

Commercial & industrial

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The categories of nonaccrual

loans as of March 31, 2026, and December 31, 2025, are presented in the following tables.

March 31, 2026

loans as of June 30, 2026, and December 31, 2025, are presented in the following tables.

June 30, 2026

($ in thousands)

22 unchanged sentences

adjustments, principal reductions, and amortization and maturity date extensions.

These modifications allow the borrowers short-term

cash relief to allow them to improve their financial condition.

These modifications allow the borrowers short-term cash

relief to allow them to improve their financial condition.

If a loan modification is determined to be made to a borrower experiencing

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for Credit Losses section of this note.

For the three months ended March 31, 2026, and March 31, 2025, the Company did not modify any

loans made to borrowers experiencing financial difficulty.

The Company had no material modifications made to borrowers experiencing financial difficulty

for the six months ended June 30, 2026.

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

six months ended June 30, 2025.

The Company had no commitments to lend to borrowers

experiencing financial difficulty for which the Company had modified an existing loan as of March 31, 2026, and March 31, 2025.

experiencing financial difficulty for which the Company had modified an existing loan as of June 30, 2026, and June 30, 2025.

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

1 unchanged sentence

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

For the three months ended March 31, 2026, and March 31, 2025, the Company had no loan modifications made to borrowers experiencing

For the six months ended June 30, 2026, and June 30, 2025, the Company had no loan modifications made to borrowers experiencing

financial difficulty for which there was a payment default within the 12 months following the modification date.

At March 31, 2026, the Company had $ 0.4 million

At June 30, 2026, the Company had $ 0.6 million

in residential real estate loans in the process of foreclosure compared to $ 0.3 million at December 31, 2025.

10 unchanged sentences

funded over its estimated life, which are the same loss rates that are used in computing the ACL for loans.

The allowance for credit

losses for unfunded loan commitments of $ 1.3 million at March 31, 2026, is classified on the balance sheet within Other liabilities.

The following table presents the balance and

activity in the ACL for unfunded loan commitments for the three months ended March 31, 2026, and March 31, 2025.

Three Months Ended

The allowance for credit losses

for unfunded loan commitments of $ 1.4 million at June 30, 2026, is classified on the balance sheet within Other liabilities.

The following table presents the balance and activity

in the ACL for unfunded loan commitments for the three and six months ended June 30, 2026, and June 30, 2025.

Three Months Ended June 30,

Six Months Ended June 30,

($ in thousands)

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Adjustment for acquired loans

Provision (benefit) for unfunded commitments

Provision for unfunded commitments

Balance, end of period

NOTE 6 – GOODWILL

Three Months Ended

Three Months Ended June 30,

Six Months Ended June 30,

($ in thousands)

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Ending balance

Goodwill is not amortized, but is evaluated for

impairment annually as of December 31, or more frequently if events occur or circumstances change that indicate an impairment may exist.

As of March 31, 2026, and December 31, 2025, the carrying amount of goodwill was $ 27.2 .

The acquisition of Marblehead on January 17,

2025, resulted in the acquisition of approximately $ 3.9 million in goodwill.

Goodwill is not amortized, but is evaluated for impairment annually

as of December 31, or more frequently if events occur or circumstances change that indicate an impairment may exist.

As of June 30, 2026,

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

The acquisition of Marblehead on January 17, 2025, resulted

in the acquisition of approximately $ 3.9 million in goodwill.

When assessing goodwill for impairment, first,

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Alternatively, a quantitative goodwill test can be performed without performing a qualitative assessment.

Goodwill was assessed for impairment using a

qualitative test performed as of March 31, 2026.

Goodwill was assessed for impairment using a qualitative

test performed as of June 30, 2026.

The estimated fair value of the reporting unit was less than the net carrying value;

however, Management believes the cumulative impact of certain factors, including;

assets, loan and deposit growth, revenue expansion,

and stable asset quality, are sufficient to overcome the Company’s market value being slightly below its carrying value at March

31, 2026, and therefore no goodwill impairment existed as of that date.

No events or circumstances since March 31, 2026, were noted that

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

however, management

believes the cumulative impact of certain factors, including assets, loan and deposit growth, revenue expansion, and stable asset quality,

are sufficient to overcome the Company’s market value being slightly below its carrying value at June 30, 2026, and therefore no

goodwill impairment existed as of that date.

No events or circumstances since June 30, 2026, were noted that would indicate it was more

likely than not a goodwill impairment exists.

NOTE 7 – MORTGAGE SERVICING RIGHTS

2 unchanged sentences

The unpaid principal balance of mortgage loans serviced for others approximated

$ 1.48 billion at March 31, 2026, and December 31, 2025.

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

included in mortgage loan servicing fees in the condensed consolidated income statement for the three months ended March 31, 2026, and

$ 1.50 billion at June 30, 2026, and $ 1.48 billion at December 31, 2025.

Contractually specified servicing fees of $ 0.9 million and $ 1.9

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

June 30, 2026, respectively.

Servicing fees of $ 0.9 million and $ 1.8 million were included for the three and six months ended June 30,

2025, respectively.

1 unchanged sentence

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

Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

($ in thousands)

Carrying amount, beginning of year

Mortgage servicing rights capitalized during the year

Mortgage servicing rights amortization during the year

Mortgage servicing rights capitalized during the period

Mortgage servicing rights amortization during the period

Net change in valuation allowance

Carrying amount, end of year

Carrying amount, end of period

Valuation allowance:

Beginning of year

Beginning of period

Increase (reduction)

End of period

Fair value, beginning of period

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activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest

The Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the

Company’s known or expected cash payments principally related to certain variable-rate assets.

The Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the Company’s

known or expected cash payments principally related to certain variable-rate assets.

Non-designated Hedges

2 unchanged sentences

Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain

The Company executes interest rate swaps with commercial banking customers to facilitate their respective risk management

Those interest rate swaps are simultaneously hedged by offsetting interest rate swaps that the Company executes with a third

party, such that the Company minimizes its net risk exposure resulting from such transactions.

As the interest rate swaps associated

with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the

offsetting swaps are recognized directly in earnings.

The Company executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies.

Those interest rate swaps are simultaneously hedged by offsetting interest rate swaps that the Company executes with a third party, such

that the Company minimizes its net risk exposure resulting from such transactions.

As the interest rate swaps associated with this program

do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are

recognized directly in earnings.

Additionally, the Company enters into forward

1 unchanged sentence

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

The forward contracts that are

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

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

in noninterest income on the condensed consolidated statements of income.

The fair value of derivative instruments with a positive fair

value are reported in accrued income and included in Other assets in the condensed consolidated balance sheets, while derivative instruments

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

The table below presents the notional amount

and fair value of the Company’s interest rate swaps, IRLCs and forward contracts utilized as of March 31, 2026, and December 31,

March 31, 2026

The forward contracts economically

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

The IRLCs and forward contracts

are not designated as accounting hedges and are recorded at fair value with changes in fair value reflected in noninterest income on the

condensed consolidated statements of income.

The fair value of derivative instruments with a positive fair value are reported in accrued

income and included in Other assets in the condensed consolidated balance sheets, while derivative instruments with a negative fair value

are reported in accrued expenses and included in Other liabilities in the condensed consolidated balance sheets.

The table below presents the notional amount and

fair value of the Company’s interest rate swaps, IRLCs and forward contracts utilized as of June 30, 2026, and December 31, 2025.

June 30, 2026

December 31, 2025

16 unchanged sentences

The following table presents the amounts included

in the condensed consolidated statements of income for non-hedging derivative financial instruments for the three months ended March

31, 2026, and 2025.

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

June 30, 2026, and 2025.

Three Months Ended

June 30, Six Months Ended

($ in thousands) Statement of income classification 2026 2025 2026 2025

3 unchanged sentences

The following table shows the offsetting of financial assets and derivative

assets at March 31, 2026, and at December 31, 2025.

Gross amounts

assets at June 30, 2026, and at December 31, 2025.

offset in the

Net amounts of assets

Net amounts of

presented in the

Gross amounts not offset in the consolidated balance sheet

Gross amounts not offset in the

consolidated balance sheet

($ in thousands)

balance sheet

recognized assets

consolidated balance sheet

balance sheet

Financial instruments

Cash collateral

March 31, 2026

June 30, 2026

Interest rate swaps

1 unchanged sentence

Interest rate swaps

The following table shows the offsetting of financial liabilities

and derivative liabilities at March 31, 2026, and at December 31, 2025.

Gross amounts

The following table shows the offsetting of financial liabilities and

derivative liabilities at June 30, 2026, and at December 31, 2025.

offset in the

Net amounts of liabilities

Net amounts of

presented in the

Gross amounts not offset in the consolidated balance sheet

Gross amounts not offset in the

consolidated balance sheet

($ in thousands)

of recognized

balance sheet

1 unchanged sentence

Cash collateral

March 31, 2026

June 30, 2026

Interest rate swaps

2 unchanged sentences

NOTE 9 – DEPOSITS

Major classification of deposits at March 31,

Major classification of deposits at June 30, 2026,

and at December 31, 2025, were as follows:

5 unchanged sentences

Total Deposits

Included in time deposits at March 31, 2026,

and at December 31, 2025, were $ 41.6 million and $ 49.9 million, respectively, of reciprocal deposits which were obtained through the

Certificate of Deposit Account Registry Service (CDARS).

Included in time deposits at June 30, 2026, and

at December 31, 2025, were $ 39.4 million and $ 49.9 million, respectively, of reciprocal deposits which were obtained through the Certificate

of Deposit Account Registry Service (CDARS).

NOTE 10 – SHORT-TERM BORROWINGS

7 unchanged sentences

from 2028 through 2051.

As of March 31, 2026, these REPO agreements were secured by securities with a fair value totaling $ 17.9 million.

The maximum amount of outstanding agreements at any month end during the periods ending March 31, 2026, and December 31, 2025, was $ 10.8

As of June 30, 2026, these REPO agreements were secured by securities with a fair value totaling $ 17.5 million.

The maximum amount of outstanding agreements at any month end during the periods ending June 30, 2026, and December 31, 2025, was $ 10.8

million and $ 16.7 million, respectively.

The monthly average of such agreements totaled $ 10.0 million and $ 12.0 million, as of March

The monthly average of such agreements totaled $ 8.7 million and $ 12.0 million as of June 30,

2026, and December 31, 2025, respectively.

2 unchanged sentences

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

At both March 31,

At both June 30,

2026, and December 31, 2025, there were no borrowings drawn or securities pledged at the Discount Window.

At both March 31, 2026, and December 31, 2025,

At both June 30, 2026, and December 31, 2025,

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

1 unchanged sentence

The Company’s FHLB advances were secured

by $ 343.0 million in mortgage loans at March 31, 2026.

by $ 344.1 million in mortgage loans at June 30, 2026.

Advances consisted of fixed interest rates from 3.75 to 4.45 percent.

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

Aggregate annual maturities of FHLB advances at March 31,

Aggregate annual maturities of FHLB advances at June 30,

($ in thousands)

7 unchanged sentences

These securities

may be included in Tier 1 capital and may be prepaid at any time without penalty (with certain limitations applicable) under current

regulatory guidelines and interpretations.

The balance of the Capital Securities as of both March 31, 2026, and December 31, 2025, was

$ 10.3 million, with a maturity date of September 15, 2035 .

may be included in Tier 1 capital and may be prepaid at any time without penalty (with certain limitations applicable) under current regulatory

guidelines and interpretations.

The balance of the Capital Securities as of both June 30, 2026, and December 31, 2025, was $ 10.3 million,

with a maturity date of September 15, 2035 .

NOTE 13 – SUBORDINATED DEBT

2 unchanged sentences

million in aggregate principal amount of its 3.65 % Fixed to Floating Rate Subordinated Notes due in 2031 (the “Notes”).

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

The Notes mature on June 1, 2031 , and bear interest

at a fixed rate of 3.65 % through May 31, 2026.

From June 1, 2026, to the maturity date or earlier redemption of the Notes, the interest

rate will reset quarterly to an interest rate per annum, equal to the then-current-three-month SOFR provided by the Federal Reserve Bank

of New York plus 296 basis points.

The Company may redeem the Notes at any time after May 31, 2026, and at any time in whole, but not

in part, upon the occurrence of certain events.

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

The Notes mature on June 1, 2031 , and held a fixed

interest rate of 3.65 % through May 31, 2026.

On June 1, 2026, the Notes moved into the floating rate period where the interest rate will

reset quarterly to an interest rate per annum, equal to the then-current-three-month SOFR provided by the Federal Reserve Bank of New

York plus 296 basis points until the maturity date or earlier redemption of the Notes.

At June 30, 2026, the interest rate on the Notes

The Company may redeem the Notes after June 1, 2026, in whole at any time, or in part from time to time, at a redemption price

equal to 100 percent of the outstanding principal amount to be redeemed, plus accrued but unpaid interest thereon to but excluding the

redemption date.

Any redemption of the Notes will be subject to prior regulatory approval.

incurred debt issuance costs for placement fees, legal and other out-of-pocket expenses of approximately $ 0.5 million, which are being

amortized over the life of the Notes.

The Company incurred debt issuance costs for

placement fees, legal and other out-of-pocket expenses of approximately $ 0.5 million, which are being amortized over the life of the Notes.

NOTE 14 – DISCLOSURES ABOUT FAIR VALUE

5 unchanged sentences

levels of inputs that may be used to measure fair value:

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

Level 2 Observable inputs other than Level 1 prices, such as quoted

prices for similar assets or liabilities;

Quoted prices in active markets for identical assets or liabilities

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

quoted prices in markets that are not active;

or other inputs that are observable or can be

corroborated by observable market data for substantially the full term of the assets or liabilities

Level 3 Unobservable inputs that are supported by little or no market

activity and that are significant to the fair value of the assets or liabilities

The following is a description of the valuation

methodologies and inputs used for assets measured at fair value on a recurring basis, recognized in the accompanying condensed consolidated

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

or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

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

The following is a description of the valuation methodologies

and inputs used for assets measured at fair value on a recurring basis, recognized in the accompanying condensed consolidated balance

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

Available-for-Sale Securities

20 unchanged sentences

Interest Rate Lock Commitments (IRLCs)

The fair value of IRLCs are determined using

the projected sale price of individual loans based on changes in the market interest rates, projected “pull-through” rates

(the probability that an IRLC will ultimately result in an originated loan), the reduction in the value of the applicant’s option

due to the passage of time, and the remaining origination costs to be incurred based on management’s estimate of market costs (Level

The fair value of IRLCs are determined using the

projected sale price of individual loans based on changes in the market interest rates, projected “pull-through” rates (the

probability that an IRLC will ultimately result in an originated loan), the reduction in the value of the applicant’s option due

to the passage of time, and the remaining origination costs to be incurred based on management’s estimate of market costs (Level

The following tables present the fair value measurements

of assets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements

fell at March 31, 2026, and at December 31, 2025.

fell at June 30, 2026, and at December 31, 2025.

($ in thousands)

Fair value at

March 31, 2026

Treasury and Government Agencies

7 unchanged sentences

Fair value at

December 31, 2025

Treasury and Government Agencies

8 unchanged sentences

Level 3 - significant unobservable inputs

The following table reconciles the beginning

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

unobservable (Level 3) inputs for the three months ended March 31, 2026, and 2025.

The following table reconciles the beginning and

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

unobservable inputs (Level 3) for the three and six months ended June 30, 2026, and 2025.

for the Three Months Ended

for the Six Months Ended

($ in thousands)

4 unchanged sentences

The following is a description of the valuation

methodologies and inputs used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying condensed

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

methodologies and inputs used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying condensed consolidated

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

Collateral-dependent Individually evaluated

6 unchanged sentences

the collateral, which is reviewed for accuracy and consistency by management.

Appraisers are selected from an approved list which is

maintained by management.

The appraised values are reduced by applying a discount factor to the value based on the Company’s loan

review policy.

All individually evaluated loans held by the Company were collateral dependent at March 31, 2026, and at December 31,

Appraisers are selected from an approved list which is maintained

by management.

The appraised values are reduced by applying a discount factor to the value based on the Company’s loan review policy.

All individually evaluated loans held by the Company were collateral dependent at June 30, 2026, and at December 31, 2025.

Mortgage Servicing Rights

Mortgage servicing rights do not trade in an

active, open market with readily observable prices.

Accordingly, fair value is estimated using discounted cash flow models associated

with the servicing rights and discounting the cash flows using discount market rates, prepayment speeds and default rates.

The servicing

portfolio has been valued using all relevant positive and negative cash flows including servicing fees;

miscellaneous income and float;

marginal costs of servicing;

the cost of carry of advances;

and foreclosure losses;

and applying certain prevailing assumptions used

in the marketplace.

Mortgage servicing rights do not trade in an active,

open market with readily observable prices.

Accordingly, fair value is estimated using discounted cash flow models associated with the

servicing rights and discounting the cash flows using discount market rates, prepayment speeds and default rates.

The servicing portfolio

has been valued using all relevant positive and negative cash flows including servicing fees, miscellaneous income and float, marginal

costs of servicing, the cost of carry of advances, and foreclosure losses, and applying certain prevailing assumptions used in the marketplace.

Due to the nature of the valuation inputs, mortgage servicing rights are classified within Level 3 of the hierarchy.

These mortgage servicing rights are tested for impairment on a quarterly basis.

These mortgage servicing

rights are tested for impairment on a quarterly basis.

($ in thousands)

Fair value at

Collateral-dependent

Individually evaluated loans

Mortgage servicing rights

11 unchanged sentences

Fair value at

March 31, Valuation Range

June 30, Valuation Range

($ in thousands) 2026 technique Unobservable inputs average)

Collateral-dependent

individually evaluated loans $ 345 Market comparable properties Comparability adjustments (%) 137 %

Mortgage servicing rights 2,497 Discounted cash flow Discount rate 10.38 %

5 unchanged sentences

Fair value at

December 31, Valuation Unobservable Range

($ in thousands) 2025 technique inputs average)

Collateral-dependent individually evaluated loans $ 955 Market comparable properties Comparability adjustments (%) 1 - 19% (12%)

December 31, Valuation Range

($ in thousands) 2025 technique Unobservable inputs average)

Collateral-dependent

individually evaluated loans $ 955 Market comparable properties Comparability adjustments (%) 1 - 19% (12 )%

Mortgage servicing rights 5,813 Discounted cash flow Discount rate 10.38 %

5 unchanged sentences

There were no changes in the inputs or methodologies

used to determine fair value at March 31, 2026, as compared to December 31, 2025.

used to determine fair value at June 30, 2026, as compared to December 31, 2025.

The following methods were used to estimate the

fair value of all other financial instruments recognized in the accompanying condensed consolidated balance sheets at amounts other than

Cash and Due From Banks, Interest Bearing

Time Deposits, Federal Reserve and Federal Home Loan Bank Stock, and Accrued Interest Receivable and Payable

Cash and Due From Banks, Interest Bearing Time

Deposits, Federal Reserve and Federal Home Loan Bank Stock, and Accrued Interest Receivable and Payable

The carrying amount approximates the fair value.

8 unchanged sentences

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

Deposits, Short-Term Borrowings, and FHLB

Deposits, Short-Term Borrowings, and FHLB Advances

Deposits include demand deposits, savings accounts,

4 unchanged sentences

The estimated fair value for fixed-maturity time deposits and FHLB advances are based on estimates

of the rate State Bank could pay on similar instruments with similar terms and maturities at March 31, 2026, and at December 31, 2025.

of the rate State Bank could pay on similar instruments with similar terms and maturities at June 30, 2026, and at December 31, 2025.

Loan Commitments

The fair value of loan commitments is estimated

using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the

present creditworthiness of the counterparties.

The estimated fair values for other financial instruments and off-balance-sheet loan

commitments approximate cost at March 31, 2026, and at December 31, 2025, and are not considered significant to this presentation.

using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present

creditworthiness of the counterparties.

The estimated fair values for other financial instruments and off-balance-sheet loan commitments

approximate cost at June 30, 2026, and at December 31, 2025, and are not considered significant to this presentation.

Trust Preferred Securities

6 unchanged sentences

of the Company’s other financial instruments carried at other than fair value .

The fair values of certain of these instruments

were calculated by discounting expected cash flows, which involves significant judgments by management and uncertainties.

is the estimated amount at which financial assets or liabilities could be exchanged in a current transaction between willing parties,

other than in a forced or liquidation sale.

Because no market exists for certain of these financial instruments, and because management

does not intend to sell these financial instruments, the Company does not know whether the fair values shown below represent values at

which the respective financial instruments could be sold individually or in the aggregate.

The fair values of certain of these instruments were

calculated by discounting expected cash flows, which involves significant judgments by management and uncertainties.

Fair value is the

estimated amount at which financial assets or liabilities could be exchanged in a current transaction between willing parties, other than

in a forced or liquidation sale.

Because no market exists for certain of these financial instruments, and because management does not

intend to sell these financial instruments, the Company does not know whether the fair values shown below represent values at which the

respective financial instruments could be sold individually or in the aggregate.

($ in thousands)

Fair value measurements using

March 31, 2026

June 30, 2026

Financial assets

36 unchanged sentences

A total of 500,000 common shares of the Company

are available for grants or awards under the 2017 Plan, of which 248,821 shares had been granted under the plan as of March 31, 2026.

are available for grants or awards under the 2017 Plan, of which 248,362 shares had been granted under the plan as of June 30, 2026.

The 2017 Plan is intended to advance the interests

2 unchanged sentences

The 2017 Plan permits

equity-based awards to be used to attract, motivate, reward and retain highly competent individuals upon whose judgment, initiative,

leadership and efforts are key to the success of the Company by encouraging those individuals to become shareholders of the Company.

equity-based awards to be used to attract, motivate, reward and retain highly competent individuals upon whose judgment, initiative, leadership

and efforts are key to the success of the Company by encouraging those individuals to become shareholders of the Company.

Stock option awards are granted with an exercise

3 unchanged sentences

Black-Scholes valuation model.

As of March 31, 2026, there were no stock options outstanding, and no unrecognized compensation cost related

As of June 30, 2026, there were no stock options outstanding, and no unrecognized compensation cost related

to stock option awards.

No stock options were granted in the first three months of 2026.

No stock options were granted in the first six months of 2026.

On February 5, 2013, the Company adopted a Long

1 unchanged sentence

These restricted stock awards vest over a four-year period and are intended to assist the Company in retention of key executives.

compensation cost charged against income for awards under the LTI Plan for the three months ended March 31, 2026 and March 31, 2025 was

$ 0.2 million.

As of March 31, 2026, there was $ 1.2 million

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

compensation cost charged against income for awards under the LTI Plan for the three and six months ended June 30, 2026, was $ 0.2 million

and $ 0.4 million, respectively, and for the three and six months ended June 30, 2025, was $ 0.2 million and $ 0.3 million, respectively.

As of June 30, 2026, there was $ 1.0 million of

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

under the 2017 Plan which were granted in accordance with the LTI Plan.

2 unchanged sentences

The table below is a summary of restricted stock

activity under the Company’s 2017 Plan for the three months ended March 31, 2026.

Weighted-Average Value per Share

activity under the Company’s 2017 Plan for the six months ended June 30, 2026.

Average Value

Nonvested, January 1, 2026

Nonvested, March 31, 2026

Nonvested, June 30, 2026

NOTE 16 – OPERATING SEGMENTS

2 unchanged sentences

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

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

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

The chief operating decision maker (“CODM”)

18 unchanged sentences

All revenues were

derived from banking operations for the three months ended March 31, 2026, and March 31, 2025, and there was no customer that accounted

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

derived from banking operations for the six months ended June 30, 2026, and June 30, 2025, and there was no customer that accounted for

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

NOTE 17 – GENERAL LITIGATION

3 unchanged sentences

It is the opinion of management that the disposition or ultimate resolution of any such claims, lawsuits and examinations pending

at March 31, 2026, will not have a material adverse effect on the consolidated financial position, results of operations and cash flow

at June 30, 2026, will not have a material adverse effect on the consolidated financial position, results of operations and cash flows

of the Company.

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

What changed 10-Q

Item 1. Financial Statements