SB FINANCIAL GROUP, INC.

Previous wording

This Quarterly Report on Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains certain forward-looking statements that are provided to assist in the understanding of anticipated future financial performance. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance. Examples of forward-looking statements include: (a) projections of income or expense, earnings per share, the payment or non-payment of dividends, capital structure and other financial items; (b) statements of plans and objectives of the Company or our management or Board of Directors, including those relating to products or services; (c) statements of future economic performance; (d) statements regarding future customer attraction or retention; and (e) statements of assumptions underlying such statements. Words such as “anticipates”, “believes”, “plans”, “intends”, “expects”, “projects”, “estimates”, “should”, “may”, “would be”, “will allow”, “will likely result”, “will continue”, “will remain”, or other similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying those statements. Forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include, without limitation:

Current wording

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

Previous wording

Provision for Credit Losses: The first quarter provision for credit losses was $387,000 as compared to a zero provision for the prior year first quarter. The Company had net charge-offs of $84,000 for the first quarter of 2025 compared to net charge-offs of $57,000 for the year-ago quarter. The provision expense included $13,000 for unfunded commitments, $224,000 due to the Marblehead acquisition and $150,000 of growth-related provision. Total delinquent loans (consisting of nonaccrual loans and loans greater than 30 days past due) ended the quarter at $5.9 million, or 0.54 percent of total loans.

Current wording

Provision for Credit Losses: The second quarter provision for credit losses was $597,000 as compared to a zero provision for the prior year second quarter. The Company had net charge-offs of $46,000 for the second quarter of 2025 compared to net recoveries of $16,000 for the year-ago quarter. The provision expense included $297,000 for unfunded commitments, and $300,000 of growth-related provision. Total delinquent loans ended the quarter at $5.6 million, or 0.51 percent of total loans.

Previous wording

Consolidated Revenue: Operating revenue, consisting of net interest income (“NII”) and noninterest income, was $15.4 million for the first quarter of 2025, an increase of $2.3 million, or 17.2 percent, from the $13.1 million generated during the first quarter of 2024.

Current wording

Consolidated Revenue: Operating revenue, consisting of net interest income (“NII”) and noninterest income, was $17.2 million for the second quarter of 2025, an increase of $3.1 million, or 22.3 percent, from the $14.0 million generated during the second quarter of 2024.

Previous wording

NII for the first quarter of 2025 was $11.3 million, which was up $2.1 million from the prior year first quarter’s $9.2 million. Comparing the first quarter of 2025 to the prior year first quarter, the Company’s earning assets increased $115.6 million, and the average yield on earning assets increased by 24 basis points. The net interest margin for the first quarter of 2025 was 3.40 percent compared to 2.99 percent for the first quarter of 2024. Funding costs (interest paid to consumers and other entities) for deposits and other interest-bearing liabilities for the first quarter of 2025 were 2.32 percent compared to 2.55 percent for the prior year first quarter.

Current wording

NII for the second quarter of 2025 was $12.1 million, which was up $2.5 million from the prior year second quarter’s $9.7 million. Comparing the second quarter of 2025 to the prior year second quarter, the Company’s earning assets increased $152.5 million, and the average yield on earning assets increased by 24 basis points. The net interest margin for the second quarter of 2025 was 3.48 percent compared to 3.12 percent for the second quarter of 2024. Funding costs (interest paid to consumers and other entities) for deposits and other interest-bearing liabilities for the second quarter of 2025 were 2.33 percent compared to 2.48 percent for the prior year second quarter.

Previous wording

Total noninterest income was $4.1 million for the first quarter of 2025, which increased slightly compared to $4.0 million for the prior year first quarter. In addition to the mortgage revenue detailed below, wealth management revenue was flat compared to the prior year. Recapture of mortgage servicing rights increased noninterest income by $0.01 million in the quarter, compared to a recapture of $0.18 million in the prior year first quarter. SBFG Title contributed revenue of $0.4 million in the first quarter of 2025, up $0.13 million from the prior year. Noninterest income as a percentage of average assets for the first quarter of 2025 was 1.14 percent compared to 1.19 percent for the prior year first quarter.

Current wording

Total noninterest income was $5.0 million for the second quarter of 2025, which increased compared to $4.4 million for the prior year second quarter. Mortgage revenue increase during the second quarter of 2025, as detailed below, while wealth management revenue was flat compared to the prior year. Recapture of mortgage servicing rights increased noninterest income by $0.16 million in the quarter, compared to a recapture of $0.04 million in the prior year second quarter. SBFG Title contributed revenue of $0.6 million in the second quarter of 2025, up $0.18 million from the prior year. Noninterest income as a percentage of average assets for the second quarter of 2025 was 1.35 percent compared to 1.31 percent for the prior year second quarter.

Previous wording

State Bank originated $39.8 million of mortgage loans during the first quarter of 2025 and sold $39.3 million, with $3.8 million of loans held for investment. This compares to $42.9 million originated for the first quarter of 2024, of which $36.6 million were sold with the remainder of loans held for investment. These first quarter 2025 originations and subsequent sales resulted in $0.9 million of gains, up $0.01 million from the gains for the first quarter of 2024. Net mortgage banking revenue was $1.46 million for the first quarter of 2025 compared to $1.54 million for the first quarter of 2024.

Current wording

State Bank originated $97.9 million of mortgage loans during the second quarter of 2025 and sold $74.3 million, with $23.6 million of loans held for investment. This compares to $75.1 million originated for the second quarter of 2024, of which $55.8 million were sold with the remainder of loans held for investment. These second quarter 2025 originations and subsequent sales resulted in $1.6 million of gains, up $0.3 million from the gains for the second quarter of 2024. Net mortgage banking revenue was $2.16 million for the second quarter of 2025 compared to $1.84 million for the second quarter of 2024.

Previous wording

Income Taxes: Income taxes for the first quarter of 2025 were $0.43 million (16.7 percent) compared to $0.48 million (16.9 percent) for the first quarter of 2024.

Current wording

Income Taxes: Income taxes for the second quarter of 2025 were $0.88 million (18.5 percent) compared to $0.26 million (7.7 percent) for the second quarter of 2024.

Previous wording

Net Income: Net income for the first quarter of 2025 was $2.2 million compared to net income of $2.4 million for the first quarter of 2024, a decrease of 8.9 percent. Diluted earnings per share (“DEPS”) of $0.33 for the first quarter of 2025 were slightly lower compared to the DEPS of $0.35 for the first quarter of 2024. Net income for the first quarter of 2025 was positively impacted by higher interest income on loans, which was offset by higher interest expense on deposits and wholesale borrowings. Total interest income continues to improve and was up 13.5 percent compared to the prior year first quarter. Mortgage loan volume was down slightly compared to the prior year first quarter; however, sales of originated loans were up 7.3 percent when compared to the first quarter of 2024. Included in the 2025 first quarter results were $0.7 million of merger related expenses and a little more than two months of activity from the Marblehead acquisition.

Current wording

Net Income: Net income for the first six months of 2025 was $6.0 million compared to net income of $5.5 million for the first six months of 2024, an increase of $0.5 million, or 9.7 percent. Diluted earnings per share (“DEPS”) of $0.93 for the first six months of 2025 were 13.4 percent higher compared to DEPS of $0.82 for the first six months of 2024. Net income for the first six months of 2025 was positively impacted by higher interest income on loans, which was partially offset by higher interest expense on deposits and wholesale borrowings. Total interest income continues to improve and was up $4.9 million or 15.8 percent compared to the prior year first six months. Mortgage loan volume was up $19.7 million, or 16.7 percent compared to the prior year first six months, with sales of originated loans up $21.1 million, or 22.9 percent when compared to the first six months of 2024. Included in the 2025 six months results were $0.7 million of merger related expenses and a little more than five months of activity from the Marblehead acquisition.

Previous wording

Consolidated Noninterest Expense: Total noninterest expense for the first quarter of 2025 was $12.4 million, which was up $2.1 million compared to $10.3 million in the prior-year first quarter. The quarter included over $0.7 million in one-time merger-related expenses. Compared to the prior year, the 2025 first quarter included operating expenses for approximately 75 days of activity of Marblehead.

Current wording

Consolidated Noninterest Expense: Total noninterest expense for the first six months of 2025 was $24.3 million, which was up $3.3 million compared to $21.0 million in the prior-year first six months. The 2025 first six months included over $0.7 million in one-time merger-related expenses. Compared to the prior year, the 2025 first six months included operating expenses for approximately five and one half months of activity for Marblehead.

Previous wording

Total assets at March 31, 2025, were $1.5 billion, up $121.5 million, or 8.8 percent, since December 31, 2024. Total loans, net of unearned income, were $1.09 billion as of March 31, 2025, up $41.5 million, or 4.0 percent, from year-end. Total deposits at March 31, 2025, were $1.27 billion, an increase of $118.6 million, or 10.3 percent, since 2024 year end.

Current wording

Total assets at June 30, 2025, were $1.5 billion, up $106.8 million, or 7.7 percent, since December 31, 2024. Total loans, net of unearned income, were $1.09 billion as of June 30, 2025, up $48.0 million, or 4.6 percent, from year-end. Total deposits at June 30, 2025, were $1.25 billion, an increase of $97.2 million, or 8.4 percent, since 2024 year-end.

Previous wording

Borrowed funds (consisting of FHLB advances, repurchase (“REPO”) agreements, trust preferred securities and subordinated debt) totaled $76.1 million at March 31, 2025. This is up slightly from year-end 2024 when borrowed funds totaled $75.6 million. Total shareholders’ equity for the Company of $131.5 million now stands at 8.8 percent of total assets compared to the December 31, 2024, level of $127.5 million or 9.2 percent of total assets. Adjusting for the temporary impairment of Accumulated Other Comprehensive Loss, total equity would increase to $158.4 million or 10.6 percent of total assets.

Current wording

Borrowed funds (consisting of FHLB advances, repurchase (“REPO”) agreements, trust preferred securities and subordinated debt) totaled $80.7 million at June 30, 2025. This is up slightly from year-end 2024 when borrowed funds totaled $75.6 million. Total shareholders’ equity for the Company of $133.6 million now stands at 9.0 percent of total assets compared to the December 31, 2024, level of $127.5 million, or 9.2 percent of total assets. Adjusting for the temporary impairment of Accumulated Other Comprehensive Loss, total equity would increase to $159.1 million, or 10.7 percent of total assets.

Previous wording

The allowance for credit losses of $15.4 million is up $0.3 million from the December 2024 year-end level due to $0.09 million of net charge-offs, $0.23 million due to the Marblehead acquisition, and $0.15 million of growth-related provision expense. The Company has had stable asset quality through the first three months of 2025, with the non-performing asset ratio at 41 basis points and coverage on non-performing loans at 254 percent.

Current wording

The allowance for credit losses of $15.6 million is up $0.55 million from the December 2024 year-end level due to $0.13 million of net charge-offs, $0.23 million due to the Marblehead acquisition, and $0.30 million of growth-related provision expense. The Company has had stable asset quality through the first six months of 2025, with the non-performing asset ratio at 41 basis points and coverage on non-performing loans at 266 percent.

Previous wording

Liquidity relates primarily to the Company’s ability to fund loan demand, meet deposit customers’ withdrawal requirements and provide for operating expenses. Assets used to satisfy these needs consist of cash and due from banks, federal funds sold, interest-earning deposits in other financial institutions, securities available-for-sale and loans held for sale. These assets are commonly referred to as liquid assets. Liquid assets totaled $310.7 million at March 31, 2025, compared to $235.9 million at December 31, 2024.

Current wording

Liquidity relates primarily to the Company’s ability to fund loan demand, meet deposit customers’ withdrawal requirements and provide for operating expenses. Assets used to satisfy these needs consist of cash and due from banks, federal funds sold, interest-earning deposits in other financial institutions, securities available-for-sale and loans held for sale. These assets are commonly referred to as liquid assets. Liquid assets totaled $289.8 million at June 30, 2025, compared to $235.9 million at December 31, 2024.

Previous wording

The Company’s commercial real estate, first mortgage residential, agricultural and multi-family mortgage portfolio of $890.3 million at March 31, 2025, and $852.6 million at December 31, 2024, which can and has been used to collateralize borrowings, is an additional source of liquidity. Management believes the Company’s current liquidity level, without these borrowings, is sufficient to meet its liquidity needs. At March 31, 2025, all eligible commercial real estate, first mortgage residential, agricultural and multi-family mortgage loans were pledged under an FHLB blanket lien.

Current wording

The Company’s commercial real estate, first mortgage residential, agricultural and multi-family mortgage portfolio of $896.7 million at June 30, 2025, and $852.6 million at December 31, 2024, which can and has been used to collateralize borrowings, is an additional source of liquidity. Management believes the Company’s current liquidity level, without these borrowings, is sufficient to meet its liquidity needs. At June 30, 2025, all eligible commercial real estate, first mortgage residential, agricultural and multi-family mortgage loans were pledged under an FHLB blanket lien.

Previous wording

The cash flow statements for the periods presented provide an indication of the Company’s sources and uses of cash, as well as an indication of the ability of the Company to maintain an adequate level of liquidity. A discussion of the cash flow statements for the three months ended March 31, 2025, and March 31, 2024 follows.

Current wording

The cash flow statements for the periods presented provide an indication of the Company’s sources and uses of cash, as well as an indication of the ability of the Company to maintain an adequate level of liquidity. A discussion of the cash flow statements for the six months ended June 30, 2025, and June 30, 2024, follows.

Previous wording

The Company experienced positive cash flows from operating activities for the three months ended March 31, 2025, and March 31, 2024. Net cash provided by operating activities was $6.7 million for the three months ended March 31, 2025, and $0.3 million for the three months ended March 31, 2024. Highlights for the current year include $39.3 million in proceeds from the sale of loans, which is up from $36.6 million in the prior year. Originations of loans held for sale was a use of cash of $36.3 million, which is down from $38.4 million in the prior year . For the three months ended March 31, 2025, there was a gain on sale of loans of $0.9 million, and depreciation and amortization on premises and equipment of $0.5 million.

Current wording

The Company experienced positive cash flows from operating activities for the six months ended June 30, 2025, and negative cash flows from operating activities for the six months ended June 30, 2024. Net cash provided by operating activities was $3.1 million for the six months ended June 30, 2025, and net cash used was $0.1 million for the six months ended June 30, 2024. Highlights for the current year include $113.6 million in proceeds from the sale of loans, which is up $21.1 million from the prior year. Originations of loans held for sale was a use of cash of $118.3 million, which is up $21.6 million from the prior year. For the six months ended June 30, 2025, there was a gain on sale of loans of $2.5 million, and depreciation and amortization on premises and equipment of $1.1 million.

Previous wording

The Company experienced positive cash flows from investing activities for the three months ended March 31, 2025, and March 31, 2024. Net cash provided by investing activities was $9.2 million for the three months ended March 31, 2025, and $11.7 million for the three months ended March 31, 2024. Highlights for the current year include an increase of $23.0 million in loans, which is up $31.6 million from the prior year three-month period, and $3.0 million paid for the Marblehead acquisition, net of cash acquired. These cash payments were offset by $6.1 million in proceeds from maturing securities, and $30.1 million in proceeds from the sale of securities which were acquired from Marblehead.

Current wording

The Company experienced positive cash flows from investing activities for the six months ended June 30, 2025, and June 30, 2024. Net cash provided by investing activities was $7.2 million for the six months ended June 30, 2025, and $3.7 million for the six months ended June 30, 2024. Highlights for the current year include an increase of $29.7 million in loans, which is up $24.5 million from the prior year six-month period, and $3.0 million paid for the Marblehead acquisition, net of cash acquired. These cash payments were offset by $11.5 million in proceeds from maturing securities, and $30.1 million in proceeds from the sale of securities which were acquired from Marblehead.

Previous wording

The Company experienced positive cash flows from financing activities for the three months ended March 31, 2025, and negative cash flows from financing activities for the three months ended March 31, 2024. Net cash provided by financing activities was $63.3 million for the three months ended March 31, 2025, and net cash used in financing activities was $8.4 million for the three months ended March 31, 2024. Highlights for the current period include a $45.5 million increase in transaction deposits and a $20.1 million increase in time deposits for the three months ended March 31, 2025. This reflects a $0.6 million increase in transaction deposits from the prior year three-month period and a $22.8 million increase in time deposits. Net repayments of Federal Home Loan Bank advances for the three months ended March 31, 2025, were $1.0 million, compared to $48.6 million for the prior year three-month period.

Current wording

The Company experienced positive cash flows from financing activities for the six months ended June 30, 2025, and negative cash flows from financing activities for the six months ended June 30, 2024. Net cash provided by financing activities was $43.2 million for the six months ended June 30, 2025, and net cash used in financing activities was $4.6 million for the six months ended June 30, 2024. Highlights for the current period include a $32.2 million increase in transaction deposits and a $11.9 million increase in time deposits for the six months ended June 30, 2025. This reflects a $9.7 million decrease in transaction deposits from the prior year six-month period and a $8.9 million increase in time deposits. Net repayments of Federal Home Loan Bank advances for the six months ended June 30, 2025, were $1.0 million, compared to $48.6 million for the prior year six-month period.

Previous wording

The Company’s commercial real estate, first mortgage residential, agricultural and multi-family mortgage portfolios in the total amount of $890.3 million were pledged to meet FHLB collateralization requirements as of March 31, 2025. Based on the current collateralization requirements of the FHLB, the Company had approximately $145.4 million of additional borrowing capacity at March 31, 2025. The Company also had $64.5 million in unpledged securities available to pledge for additional borrowings.

Current wording

The Company’s commercial real estate, first mortgage residential, agricultural and multi-family mortgage portfolios in the total amount of $896.7 million were pledged to meet FHLB collateralization requirements as of June 30, 2025. Based on the current collateralization requirements of the FHLB, the Company had approximately $157.0 million of additional borrowing capacity at June 30, 2025. The Company also had $57.8 million in unpledged securities available to pledge for additional borrowings.

Previous wording

The Company has contractual obligations consisting of long-term debt obligations and operating lease obligations. In addition, as of March 31, 2025, the Company had commitments to sell mortgage loans totaling $23.3 million. The Company believes that it has adequate resources to fund commitments as they arise and that it can adjust the rate on savings and time deposits to retain deposits in changing interest rate environments. If the Company requires funds beyond its internal funding capabilities, advances from the FHLB of Cincinnati and other financial institutions are available.

Current wording

The Company has contractual obligations consisting of long-term debt obligations and operating lease obligations. In addition, as of June 30, 2025, the Company had commitments to sell mortgage loans totaling $19.5 million. The Company believes that it has adequate resources to fund commitments as they arise and that it can adjust the rate on savings and time deposits to retain deposits in changing interest rate environments. If the Company requires funds beyond its internal funding capabilities, advances from the FHLB of Cincinnati and other financial institutions are available.