SB FINANCIAL GROUP, INC.

Previous wording

Note 1 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, describes the significant accounting policies used in the development and presentation of the Company’s financial statements. The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States and conform to general practices within the banking industry. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. The Company’s financial position and results of operations can be affected by these estimates and assumptions and are integral to the understanding of reported results. Critical accounting policies are those policies that management believes are the most important to the portrayal of the Company’s financial condition and results, and they require management to make estimates that are difficult, subjective, and/or complex.

Current wording

Note 1 to the condensed consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, describes the significant accounting policies used in the development and presentation of the Company’s financial statements. The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States and conform to general practices within the banking industry. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. The Company’s financial position and results of operations can be affected by these estimates and assumptions and are integral to the understanding of reported results. Critical accounting policies are those policies that management believes are the most important to the portrayal of the Company’s financial condition and results, and they require management to make estimates that are difficult, subjective, and/or complex.

Previous wording

Net Income: Net income for the third quarter of 2025 was $4.0 million compared to net income of $2.4 million for the third quarter of 2024, an increase of $1.6 million or 71.9 percent. Diluted earnings per share (“DEPS”) of $0.64 for the third quarter of 2025 were higher compared to the DEPS of $0.35 for the third quarter of 2024. Net income for the third quarter of 2025 was positively impacted by higher interest income on loans, including a recapture of nonaccrual interest, partially offset by higher interest expense on deposits and wholesale borrowings. The quarter included an impairment on Mortgage Servicing Rights (“OMSR”) of $0.3 million. Total noninterest income increased slightly compared to the prior year to $4.2 million. Mortgage loan volume was down slightly as compared to the prior year, however sales of originated mortgages were up 8.4 percent for the same period.

Current wording

Net Income: Net income for the first quarter of 2026 was $4.3 million compared to net income of $2.2 million for the first quarter of 2025, an increase of $2.1 million, or 99.1 percent. Diluted earnings per share (“DEPS”) of $0.69 for the first quarter of 2026 were higher compared to the DEPS of $0.33 for the first quarter of 2025. Net income for the first quarter of 2026 was positively impacted by higher interest income on loans, partially offset by higher interest expense on deposits and wholesale borrowings. The quarter included a recapture on Mortgage Servicing Rights (“OMSR”) of $0.45 million. Total noninterest income increased slightly compared to the prior year to $4.7 million. Mortgage loan volume was higher as compared to the prior year, with sales of originated mortgages for the first quarter of 2026 up 36 percent as compared to the same period in 2025.

Previous wording

Provision for Credit Losses: The third quarter provision for credit losses was $124,000 as compared to a $200,000 provision for the prior year third quarter. The Company had net chargeoffs of $2,000 for the third quarter of 2025 compared to net chargeoffs of $27,000 for the year-ago quarter. The provision expense included $300,000 of growth-related provision, partially offset by a recapture of $176,000 for unfunded commitments. Total delinquent loans ended the quarter at $5.0 million, or 0.45 percent of total loans.

Current wording

Provision for Credit Losses: The first quarter provision for credit losses was $214,000 as compared to a $387,000 provision for the prior year first quarter. The Company had net chargeoffs of $26,000 for the first quarter of 2026 compared to net chargeoffs of $84,000 for the year-ago quarter. The provision expense included $300,000 of growth-related provision, partially offset by a recapture of $86,000 for unfunded commitments. Total delinquent loans ended the quarter at $3.3 million, or 0.28 percent of total loans.

Previous wording

Consolidated Revenue: Operating revenue, consisting of net interest income (“NII”) and noninterest income, was $16.6 million for the third quarter of 2025, an increase of $2.3 million, or 15.9 percent, from the $14.3 million generated during the third quarter of 2024.

Current wording

Consolidated Revenue: Operating revenue, consisting of net interest income (“NII”) and noninterest income, was $17.4 million for the first quarter of 2026, an increase of $2.0 million, or 13.3 percent, from the $15.4 million generated during the first quarter of 2025.

Previous wording

NII for the third quarter of 2025 was $12.3 million, which was up $2.1 million from the prior year third quarter’s $10.2 million. Comparing the third quarter of 2025 to the prior year third quarter, the Company’s earning assets increased $120.0 million, and the average yield on earning assets increased by 18 basis points. The net interest margin for the third quarter of 2025 was 3.48 percent compared to 3.16 percent for the third quarter of 2024. Funding costs (interest paid to consumers and other entities) for deposits and other interest-bearing liabilities for the third quarter of 2025 were 2.33 percent compared to 2.52 percent for the prior year third quarter.

Current wording

NII for the first quarter of 2026 was $12.7 million, which was up $1.4 million from the prior year first quarter’s $11.3 million. Comparing the first quarter of 2026 to the prior year first quarter, the Company’s earning assets increased $133.3 million, and the average yield on earning assets increased by 6 basis points. The net interest margin for the first quarter of 2026 was 3.48 percent compared to 3.40 percent for the first quarter of 2025. Funding costs (interest paid to consumers and other entities) for deposits and other interest-bearing liabilities for the first quarter of 2026 were 2.31 percent compared to 2.32 percent for the prior year first quarter.

Previous wording

Total noninterest income was $4.2 million for the third quarter of 2025, which increased compared to $4.1 million for the prior year third quarter. Mortgage revenue increased during the third quarter of 2025, as detailed below, while wealth management revenue was up slightly compared to the prior year. Impairment of mortgage servicing rights decreased noninterest income by $0.3 million in the quarter, compared to an impairment of $0.46 million in the prior year third quarter. SBFG Title contributed revenue of $0.54 million in the third quarter of 2025, up $0.06 million from the prior year. Noninterest income as a percentage of average assets for the third quarter of 2025 was 1.12 percent compared to 1.19 percent for the prior year third quarter.

Current wording

Total noninterest income was $4.7 million for the first quarter of 2026, which increased compared to $4.1 million for the prior year first quarter. Mortgage revenue increased during the first quarter of 2026, as detailed below, with wealth management revenue also up compared to the prior year. Impairment of mortgage servicing rights increased noninterest income by $0.45 million in the quarter, compared to a recapture of $0.01 million in the prior year first quarter. SBFG Title contributed revenue of $0.49 million in the first quarter of 2026, up $0.09 million from the prior year. Noninterest income as a percentage of average assets for the first quarter of 2026 was 1.21 percent compared to 1.14 percent for the prior year first quarter.

Previous wording

State Bank originated $67.6 million of mortgage loans during the third quarter of 2025 and sold $66.4 million, with $1.2 million of loans held for investment. This compares to $70.7 million originated for the third quarter of 2024, of which $61.3 million were sold with the remainder of loans held for investment. The third quarter 2025 originations and subsequent sales resulted in $1.3 million of gains, in line with the gains for the third quarter of 2024. Net mortgage banking revenue was $1.49 million for the third quarter of 2025 compared to $1.35 million for the third quarter of 2024.

Current wording

State Bank originated $65.8 million of mortgage loans during the first quarter of 2026 and sold $53.4 million, with $12.3 million of loans held for investment. This compares to $39.8 million originated for the first quarter of 2025, of which $39.3 million were sold with the remainder of loans held for investment. The first quarter 2026 originations and subsequent sales resulted in $0.98 million of gains, slightly higher than the gains for the first quarter of 2025. Net mortgage banking revenue was $1.89 million for the first quarter of 2026 compared to $1.46 million for the first quarter of 2025.

Previous wording

Consolidated Noninterest Expense: Total noninterest expense for the third quarter of 2025 was $11.5 million, which was up $0.5 million compared to $11.0 million in the prior-year third quarter. The quarter included higher expenses related to increased mortgage activity and one-time professional fees that drove expenses higher.

Current wording

Consolidated Noninterest Expense: Total noninterest expense for the first quarter of 2026 was $11.9 million, which was down $0.5 million compared to $12.4 million in the prior-year first quarter. The quarter included higher expenses related to increased mortgage activity and various expenses related to pending conversions of our technology systems. The prior year quarter included $0.73 million in one-time costs related to the merger of Marblehead into the Company.

Previous wording

Income Taxes: Income taxes for the third quarter of 2025 were $0.91 million (18.4 percent) compared to $0.75 million (24.2 percent) for the third quarter of 2024.

Current wording

Income Taxes: Income taxes for the first quarter of 2026 were $0.99 million (18.7 percent) compared to $0.43 million (16.6 percent) for the first quarter of 2025.

Previous wording

Total assets at September 30, 2025, were $1.50 billion, up $116.7 million, or 8.5 percent, since December 31, 2024. Total loans, net of unearned income, were $1.11 billion as of September 30, 2025, up $63.8 million, or 6.1 percent, from year-end. Total deposits at September 30, 2025, were $1.26 billion, an increase of $109.9 million, or 9.5 percent, since 2024 year end.

Current wording

Total assets at March 31, 2026, were $1.60 billion, up $59.2 million, or 3.8 percent, since December 31, 2025. Total loans, net of unearned income, were $1.18 billion as of March 31, 2026, up $0.5 million, or 0.01 percent, from year-end. Total deposits at March 31, 2026, were $1.37 billion, an increase of $64.6 million, or 4.9 percent, since 2025 year end.

Previous wording

Borrowed funds (consisting of FHLB advances, repurchase (“REPO”) agreements, trust preferred securities and subordinated debt) totaled $76.0 million at September 30, 2025. This was up slightly from year-end 2024 when borrowed funds totaled $75.6 million. Total shareholders’ equity for the Company of $136.9 million now stands at 9.15 percent of total assets compared to the December 31, 2024, level of $127.5 million, or 9.24 percent of total assets. Adjusting for the temporary impairment of Accumulated Other Comprehensive Loss, total equity would increase to $160.4 million, or 10.72 percent of total assets. The allowance for credit losses of $15.9 million is up $0.85 million from the December 2024 year-end level.

Current wording

Borrowed funds (consisting of FHLB advances, repurchase (“REPO”) agreements, trust preferred securities and subordinated debt) totaled $67.0 million at March 31, 2026. This was down slightly from year-end 2025 when borrowed funds totaled $77.3 million. Total shareholders’ equity for the Company of $143.7 million now stands at 8.95 percent of total assets compared to the level at December 31, 2025, of $141.2 million, or 9.14 percent of total assets. Adjusting for the temporary impairment of Accumulated other comprehensive loss, total equity would increase to $165.5 million, or 10.31 percent of total assets. The allowance for credit losses of $16.4 million is up $0.27 million, or 1.70 percent from the December 2025 year-end level.

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 $285.0 million at September 30, 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 $319.1 million at March 31, 2026, compared to $263.1 million at December 31, 2025.

Previous wording

The Company’s commercial real estate, first mortgage residential, agricultural and multi-family mortgage portfolio of $909.6 million at September 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 September 30, 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 $979.9 million at March 31, 2026, and $978.2 million at December 31, 2025, 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, 2026, 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 nine months ended September 30, 2025, and September 30, 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 three months ended March 31, 2026, and March 31, 2025, follows.

Previous wording

The Company experienced positive cash flows from operating activities for the nine months ended September 30, 2025, and September 30, 2024. Net cash provided by operating activities was $15.8 million for the nine months ended September 30, 2025, and $3.5 million for the nine months ended September 30, 2024. Highlights for the current year include $180.0 million in proceeds from the sale of loans, which is up $26.3 million from the prior year. Originations of loans held for sale was a use of cash of $175.9 million, which is up $17.6 million from the prior year . For the nine months ended September 30, 2025, there was a gain on sale of loans of $3.8 million, and depreciation and amortization on premises and equipment of $1.6 million.

Current wording

The Company experienced negative cash flows from operating activities for the three months ended March 31, 2026, and positive cash flows from operating activities for the three months ended March 31, 2025. Net cash used by operating activities was $3.0 million for the three months ended March 31, 2026, and net cash provided by operating activities was $6.7 million for the three months ended March 31, 2025. Highlights for the current year include $54.7 million in proceeds from the sale of loans, which is up $15.4 million from the prior year. Originations of loans held for sale was a use of cash of $59.5 million, which is up $23.2 million from the prior year . For the three months ended March 31, 2026, there was a gain on sale of loans of $1.1 million, and depreciation and amortization on premises and equipment of $0.6 million.

Previous wording

The Company experienced negative cash flows from investing activities for the nine months ended September 30, 2025, and September 30, 2024. Net cash used by investing activities was $5.0 million for the nine months ended September 30, 2025, and $14.9 million for the nine months ended September 30, 2024. Highlights for the current year include an increase of $45.6 million in loans, which is up $15.8 million from the prior year nine-month period, and $3.0 million paid for the Marblehead acquisition, net of cash acquired. These cash payments were offset by $16.8 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 three months ended March 31, 2026, and March 31, 2025. Net cash provided by investing activities was $2.1 million for the three months ended March 31, 2026, and $9.2 million for the three months ended March 31, 2025. Highlights for the current year include $4.4 million in proceeds from maturing securities, partially offset by a $1.4 million decrease in loans. The prior year activities include a $23.0 million decrease in loans and $3.0 million paid for the Marblehead acquisition, net of cash acquired, 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.

Previous wording

The Company experienced positive cash flows from financing activities for the nine months ended September 30, 2025, and September 30, 2024. Net cash provided by financing activities was $48.3 million for the nine months ended September 30, 2025, and $37.8 million for the nine months ended September 30, 2024. Highlights for the current period include a $46.7 million increase in transaction deposits and a $11.1 million increase in time deposits for the nine months ended September 30, 2025. This reflects a $33.0 million decrease in transaction deposits from the prior year nine-month period. Net repayments of Federal Home Loan Bank advances for the nine months ended September 30, 2025, were $1.0 million, compared to $48.6 million for the prior year nine-month period.

Current wording

The Company experienced positive cash flows from financing activities for the three months ended March 31, 2026, and March 31, 2025. Net cash provided by financing activities was $55.6 million for the three months ended March 31, 2026, and $63.3 million for the three months ended March 31, 2025. Highlights for the current period include a $65.6 million increase in transaction deposits compared to a $45.5 million increase for the three months ended March 31, 2025. Repayments of Federal Home Loan Bank advances for the three months ended March 31, 2026, were $7.5 million, compared to $1.0 million for the prior year three-month period.

Previous wording

The Company’s commercial real estate, first mortgage residential, agricultural and multi-family mortgage portfolios in the total amount of $909.6 million were pledged to meet FHLB collateralization requirements as of September 30, 2025. Based on the current collateralization requirements of the FHLB, the Company had approximately $162.8 million of additional borrowing capacity at September 30, 2025. The Company also had $44.2 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 $979.9 million were pledged to meet FHLB collateralization requirements as of March 31, 2026. Based on the current collateralization requirements of the FHLB, the Company had approximately $171.8 million of additional borrowing capacity at March 31, 2026. The Company also had $26.7 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 September 30, 2025, the Company had commitments to sell mortgage loans totaling $27.5 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.

Current wording

The Company has contractual obligations consisting of long-term debt obligations and operating lease obligations. In addition, as of March 31, 2026, the Company had commitments to sell mortgage loans totaling $20.4 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.