Core Insights - The article emphasizes the importance of a ranking system based on earnings estimates and revisions to identify winning stocks, while also acknowledging the diverse strategies investors may adopt [1] - Value investing is highlighted as a popular method for identifying undervalued stocks through fundamental analysis and established metrics [2] Company Analysis: SB Financial Group (SBFG) - SBFG is currently rated as a Zacks Rank 1 (Strong Buy) and has received an "A" grade in the Value category, indicating it is among the best value stocks available [3] - The company has a Price-to-Sales (P/S) ratio of 1.4, which is lower than the industry average of 1.81, suggesting it may be undervalued [4] - SBFG's Price-to-Cash Flow (P/CF) ratio stands at 8.39, significantly lower than the industry average of 16.42, indicating a favorable cash outlook and potential undervaluation [5] - The P/CF ratio for SBFG has fluctuated over the past year, with a high of 10.29 and a low of 7.29, and a median of 8.35, reinforcing its attractiveness as a value stock [5] - Overall, the metrics suggest that SBFG is likely undervalued, particularly in light of its strong earnings outlook, positioning it as one of the strongest value stocks in the market [6]

Group 1: SB Financial Group (SBFG) - SB Financial Group is a financial service holding company offering a full range of services for consumers and small businesses, including wealth management and lending [1] - The company has a Zacks Rank of 1 (Strong Buy) and has seen a 5.4% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [1] - The price-to-earnings (P/E) ratio is 8.47, significantly lower than the industry average of 29.50, and it has a Value Score of A [2] Group 2: First Financial Corporation Indiana (THFF) - First Financial Corporation Indiana is a multi-bank holding company providing various financial products and services across several states [3] - The company also carries a Zacks Rank of 1 and has experienced a 3.9% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [3] - The P/E ratio stands at 8.48, compared to the industry average of 10.20, and it has a Value Score of B [4] Group 3: Teradata (TDC) - Teradata offers an open and connected hybrid cloud analytics and data platform for AI [4] - The company holds a Zacks Rank of 1 and has seen a 7.8% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [4] - The P/E ratio is 11.30, which is lower than the industry average of 27.20, and it has a Value Score of B [5]

Financial Performance - Net income for Q3 2025 was $4.0 million, a 71.9% increase from $2.4 million in Q3 2024, with diluted earnings per share rising to $0.64 from $0.35[158]. - Operating revenue for Q3 2025 reached $16.6 million, a 15.9% increase from $14.3 million in Q3 2024[160]. - Net income for the first nine months of 2025 was $10.1 million, an increase of $2.2 million, or 28.3% compared to $7.8 million in the same period of 2024[165]. - Total operating revenue for the first nine months of 2025 was $49.1 million, up $7.7 million, or 18.5% from $41.5 million in the prior year[167]. Income and Expenses - Total noninterest income for Q3 2025 was $4.2 million, slightly up from $4.1 million in Q3 2024, while mortgage loan sales increased by 8.4%[158][162]. - Total noninterest expense for Q3 2025 was $11.5 million, an increase of $0.5 million from $11.0 million in Q3 2024, driven by higher mortgage activity and one-time fees[164]. - Total noninterest income was $13.4 million for the first nine months of 2025, an increase of $0.9 million from $12.5 million in the prior year[169]. - Total noninterest expense for the first nine months of 2025 was $35.8 million, up $3.8 million from $32.0 million in the prior year, including over $0.7 million in merger-related expenses[171]. Interest Income and Loans - Net interest income for Q3 2025 was $12.3 million, up from $10.2 million in Q3 2024, with a net interest margin of 3.48% compared to 3.16% in the prior year[161]. - Net interest income (NII) for the first nine months of 2025 was $35.7 million, an increase of $6.7 million from $29.0 million in the prior year, with a net interest margin of 3.44% compared to 3.08%[168]. - Total loans were $1.11 billion as of September 30, 2025, up $63.8 million, or 6.1% from year-end 2024[173]. Credit Losses and Delinquency - The provision for credit losses in Q3 2025 was $124,000, down from $200,000 in Q3 2024, with net charge-offs of $2,000 compared to $27,000 in the previous year[159]. - Provision for credit losses for the first nine months of 2025 was $1.1 million, compared to $0.2 million in the prior year, with net charge-offs of $132,000[166]. - Total delinquent loans at the end of Q3 2025 were $5.0 million, representing 0.45% of total loans, while the allowance for credit losses was 1.44% of total loans[160]. - Non-performing assets as a percentage of total assets decreased to 0.32% in Q3 2025 from 0.40% in Q3 2024[160]. Assets and Deposits - Total assets as of September 30, 2025, were $1.50 billion, an increase of $116.7 million, or 8.5% since December 31, 2024[173]. - Total deposits increased to $1.26 billion, an increase of $109.9 million, or 9.5% since the end of 2024[173]. - The Company had $285.0 million in liquid assets as of September 30, 2025, compared to $235.9 million at December 31, 2024[177]. Interest Rate Risk Management - The Company evaluates its exposure to interest rate changes by assessing both management processes and quantitative levels of exposure[190]. - The Federal Reserve's Joint Agency Policy Statement on Interest Rate Risk emphasizes the need for active oversight and a comprehensive risk management process[191]. - Financial institutions face lower profit margins if they cannot adapt to changing market interest rates, particularly when assets are funded with short-term liabilities[192]. - Institutions can manage interest rate risk through matching repricing periods, selling assets, repaying liabilities, or using hedging strategies[193]. - The Company does not currently utilize derivative financial instruments for interest rate risk management but may consider them as market conditions warrant[193]. - There has been no material change in the Company's market risk from the information in the Annual Report for the year ended December 31, 2024[194].

Group 1: SB Financial Group, Inc. (SBFG) - SB Financial Group is a financial holding company for the State Bank and Trust Company with a Zacks Rank 1 [1] - The Zacks Consensus Estimate for its current year earnings has increased by 5.4% over the last 60 days [1] - The company has a price-to-earnings ratio (P/E) of 8.37, significantly lower than the industry average of 29.70, and possesses a Value Score of A [1] Group 2: Universal Corporation (UVV) - Universal Corporation is an agriproducts company that also carries a Zacks Rank 1 [2] - The Zacks Consensus Estimate for its current year earnings has increased by 6.5% over the last 60 days [2] - The company has a price-to-earnings ratio (P/E) of 10.84, compared to the industry average of 12.80, and possesses a Value Score of A [2] Group 3: Fox Corporation (FOXA) - Fox Corporation is involved in news, sports, and entertainment, holding a Zacks Rank 1 [3] - The Zacks Consensus Estimate for its current year earnings has increased by 5.6% over the last 60 days [3] - The company has a price-to-earnings ratio (P/E) of 14.78, which is lower than the industry average of 36.80, and possesses a Value Score of A [3]

Financial Performance - Net income for FQ3 2025 was $4 million, with diluted earnings per share of $0.64, representing an increase of approximately 83% compared to the prior year quarter[13] - Total operating revenue rose to $16.6 million, a 15.9% increase from $14.3 million in the prior year[35] - Noninterest income increased by 2.9% year-over-year to $4.2 million, driven by increased mortgage servicing rights and title service fees[22] - Total mortgage banking contribution was nearly $1.5 million, up over 10% compared to the third quarter of 2024[40] Asset and Loan Growth - Loan growth was approximately $80.6 million, or 7.8%, marking the sixth consecutive quarter of sequential loan growth[14] - The company expects a high single-digit level of loan growth in 2026, funded by bond portfolio runoff and 4% to 5% deposit growth[42] - There are approximately $40 million of unused line commitments expected to be funded in the next 6 to 12 months[56] Deposits and Interest Income - Deposits grew by nearly $103 million, or 9%, including $51 million related to Marblehead, with overall deposit growth at 4.5% when excluding Marblehead[14] - Net interest income totaled $12.3 million, a 21% increase from $10.2 million in FQ3 2024, with a 30% annualized growth rate from the linked quarter[14] - The net interest margin peaked at 3.48% this quarter, with expectations of funding costs rising in the future[37] - Loan yields reached a new high of 5.95%, up 23 basis points, contributing to an earning asset yield increase of 18 basis points to 5.31%[36] Expenses and Operating Costs - Operating expenses decreased by 3% from the linked quarter and increased by only $500,000 or 4.5% from the prior year[41] - Total expenses for Q4 are expected to remain around $11.5 million, leading to an estimated total of approximately $46 million for the entire year of 2025[77] - The expense outlook indicates ongoing pressure due to technology investments and talent acquisition, which may complicate future balance sheet expansion[76] Credit Quality and Allowance - Charge-offs returned to historic levels, with nonperforming assets totaling $4.9 million and an allowance for credit losses at 1.44% of total loans[33] - The allowance for credit losses increased by 1 basis point, remaining consistent with portfolio trends[45] - Total delinquencies were slightly lower at 45 basis points, with total classified loans down nearly $1.3 million or 21% from the prior year[45] - The coverage of non-performing assets (NPAs) is expected to exceed 0.40% as the company continues to manage its credit portfolio effectively[72] Shareholder Returns and Capital Management - A dividend of $0.155 per share was announced, equating to a 3.1% yield and 24% of earnings, marking the 13th consecutive year of increased annual dividend payouts[48] - The company repurchased 101,000 shares at an average price of just under $20, totaling $4.5 million for the year[44] - The company plans to slow down share buybacks to retain capital for potential acquisitions while maintaining a meaningful shareholder dividend above $4 million next year[88] Strategic Initiatives - The company is targeting a $100 million agricultural lending portfolio within a year, reflecting renewed emphasis on agricultural lending opportunities[32] - The Marblehead transaction integration is progressing well, with expectations of leveraging the brand's 117-year history to pursue new opportunities[85] - The company is focusing on expanding into Henry County, which has $800 million in deposits, with a significant portion currently held in community banks[86] - A pipeline of $37 million includes about $12 million in refinances, indicating a potential increase in refinancing activity if rates drop below 6%[82] Future Outlook - Mortgage volume is anticipated to rise by about 15% in Q4, reaching approximately $80 million, compared to $68 million in the previous quarter[77] - The company is structured to handle mortgage volumes between $450 million and $500 million, with hopes to achieve a volume in the 400 range as interest rates decline[80]

Financial Data and Key Metrics Changes - Net income for Q3 2025 was $4 million, with diluted earnings per share (EPS) of $0.64, representing an increase of approximately 83% compared to the prior year quarter [4] - Adjusted EPS, considering mortgage servicing rights impairment, was $0.68 for the quarter [4] - Tangible book value per share increased to $17.21, up 4.4% from $16.49 last year, and up 8.9% excluding acquisition payment for Marblehead [4] - Net interest income totaled $12.3 million, a 21% increase from $10.2 million in Q3 2024 [4][19] - Total operating revenue increased to $16.6 million, a 15.9% rise from $14.3 million in the prior year [19] Business Line Data and Key Metrics Changes - Loan growth was approximately $80.6 million, or 7.8%, marking the sixth consecutive quarter of sequential loan growth [5] - Deposits grew by nearly $103 million, or 9%, including $51 million related to Marblehead [5] - Mortgage originations for the quarter were $67.6 million, down from both the prior year and linked quarters [5][9] - Non-interest income increased by 2.9% from the prior year quarter to $4.2 million, driven by increased mortgage servicing rights and title service fees [9] Market Data and Key Metrics Changes - The company is preparing to enter a new market in Napoleon, Ohio, targeting $800 million in deposits [3] - The Columbus market has been a significant contributor to loan growth, representing 40% of total loan balances [12][13] Company Strategy and Development Direction - The company focuses on disciplined lending, core deposit growth, and careful expense management [3] - Key initiatives include revenue growth and diversity, organic growth for efficiency, deepening client relationships, operational excellence, and maintaining top-tier asset quality [8] - The integration of Marblehead Bank is seen as a strategic move to enhance community ties and expand market presence [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the final quarter of 2025, anticipating further reductions by the Federal Reserve and potential mortgage volume expansion [27] - The company expects to maintain a loan growth rate of 7.8%, consistent with historical averages [12] - Management highlighted the importance of maintaining strong asset quality metrics and targeting a reduction in non-performing assets [18] Other Important Information - Operating expenses decreased by approximately 3% from the linked quarter, with year-to-date expense growth at 9.5%, well below the 18.5% revenue growth [6][22] - The company repurchased 101,000 shares at an average price of just under $20, totaling nearly 252,000 shares repurchased this year [24][25] Q&A Session Summary Question: Can you discuss loan growth and recent hires? - Management highlighted the hiring of a seasoned agricultural lender and a replacement in the northern market, expecting growth opportunities in agriculture and urban markets [33][34] Question: What is the status of the pipeline of unfunded commitments? - Management indicated a healthy balance of unfunded commitments, with expectations to fund approximately $40 million in the next 6 to 12 months [37][40] Question: How will loan growth be funded in the next 6 to 12 months? - Management stated that available liquidity could be utilized for loan growth, but competitive pressures on deposit rates may impact margins [41][42] Question: What is the outlook for credit quality and reserve coverage? - Management expressed confidence in maintaining strong credit quality metrics and indicated potential improvements in non-performing assets [47][50] Question: What is the expense outlook for the coming quarters? - Management expects total expenses to remain stable, with a projected $11.5 million in Q4, driven by increased mortgage volume [52][54] Question: What is the outlook for mortgage volume next year? - Management anticipates an increase in mortgage volume as rates decline, with a potential return to the $400 million range [56][58]

Core Insights - SB Financial Group, Inc. (SBFG) reported quarterly earnings of $0.68 per share, exceeding the Zacks Consensus Estimate of $0.62 per share, and showing an increase from $0.41 per share a year ago, resulting in an earnings surprise of +9.68% [1] - The company posted revenues of $16.58 million for the quarter ended September 2025, which was 4.17% below the Zacks Consensus Estimate, but an increase from $14.31 million year-over-year [2] - SB Financial Group has surpassed consensus EPS estimates in all four of the last quarters and has topped consensus revenue estimates three times during the same period [2] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.59 on revenues of $16.8 million, and for the current fiscal year, it is $2.23 on revenues of $66.5 million [7] - The estimate revisions trend for SB Financial Group was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market [6] Industry Context - The Banks - Northeast industry, to which SB Financial Group belongs, is currently ranked in the top 14% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Core Insights - SB Financial Group, Inc. reported strong earnings for the third quarter of 2025, with net income of $4.0 million, a 71.9% increase year-over-year, and diluted earnings per share (DEPS) of $0.64, up 82.9% from the prior year [4][6][17] Financial Performance - Operating revenue for Q3 2025 was $16.6 million, a 15.9% increase from $14.3 million in Q3 2024 [4][7] - Net interest income rose to $12.3 million, reflecting a 21.1% increase from $10.2 million in the prior-year quarter, driven by sustained loan growth [5][6] - Noninterest income increased by 2.9% year-over-year to $4.2 million, primarily due to higher mortgage loan servicing fees and other noninterest income [10][11] - Total loans increased by $80.6 million, or 7.8%, compared to the prior year, with organic loan growth of $62.7 million [5][14] - Total deposits grew to $1.26 billion, an increase of $103.0 million or 8.9% year-over-year [15][19] Balance Sheet Highlights - As of September 30, 2025, total assets were reported at $1.50 billion, with a loan portfolio of $1.11 billion, marking a 7.8% increase year-over-year [14][29] - Shareholders' equity increased to $137.0 million, reflecting a $4.1 million rise from the prior year [15][29] Asset Quality - Nonperforming assets totaled $4.9 million, representing 0.32% of total assets, a decrease from 0.40% in the prior year [20][21] - The allowance for credit losses was strong at 1.44% of total loans, providing 345.4% coverage of non-performing loans [21][22] Mortgage Banking - Net mortgage banking revenue for Q3 2025 reached $1.5 million, up $136,000 from the prior-year quarter [8][9] - Mortgage originations totaled $67.6 million, while mortgage sales were $66.4 million [9] Management Commentary - The CEO highlighted the company's commitment to disciplined expense management and balanced revenue growth, emphasizing the strength of client relationships and the resiliency of the business model [7][17]

Core Viewpoint - SB Financial Group, Inc. is set to release its third quarter 2025 financial results on October 30, 2025, with a conference call scheduled for October 31, 2025 [1] Company Overview - SB Financial Group is a diversified financial services holding company based in Defiance, Ohio, operating through the State Bank & Trust Company and SBFG Title, LLC [3] - The State Bank offers a comprehensive range of financial services, including wealth management, mortgage banking, and commercial lending, with 26 offices across Ohio and Indiana [3] - SB Financial's common stock is traded on the NASDAQ Capital Market under the ticker symbol "SBFG" [3] Conference Call Details - Interested parties can join the conference call by dialing 888-338-9469 or accessing it via a live webcast [2] - An audio replay of the conference call will be available on the SB Financial Group website [2] Investor Contact Information - Key contacts for investors include Mark A. Klein, Chairman, President, and CEO, and Anthony V. Cosentino, Executive Vice President and CFO [4]

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited condensed consolidated financial statements and detailed notes for periods ended June 30, 2025, and December 31, 2024 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | ($ in thousands) | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :---------------- | | **Assets** | | | | Cash and due from banks | $79,463 | $25,928 | | Total assets | $1,486,301 | $1,379,517 | | **Liabilities** | | | | Total deposits | $1,249,822 | $1,152,605 | | Total liabilities | $1,352,653 | $1,252,009 | | **Shareholders' Equity** | | | | Total shareholders' equity | $133,648 | $127,508 | - Total assets increased by **$106.8 million** (**7.7%**) from December 31, 2024, to June 30, 2025, reaching **$1.486 billion**[8](index=8&type=chunk)[173](index=173&type=chunk) - Total deposits increased by **$97.2 million** (**8.4%**) from December 31, 2024, to June 30, 2025, reaching **$1.250 billion**[8](index=8&type=chunk)[173](index=173&type=chunk) [Condensed Consolidated Statements of Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) | ($ in thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total interest income | $18,467 | $15,654 | $35,839 | $30,954 | | Total interest expense | $6,339 | $5,995 | $12,432 | $12,115 | | Net Interest Income | $12,128 | $9,659 | $23,407 | $18,839 | | Total provision for credit losses | $597 | $- | $984 | $- | | Total noninterest income | $5,048 | $4,386 | $9,155 | $8,337 | | Total noninterest expense | $11,852 | $10,671 | $24,262 | $20,953 | | Net Income | $3,852 | $3,113 | $6,010 | $5,481 | | Basic earnings per common share | $0.60 | $0.47 | $0.93 | $0.82 | | Diluted earnings per common share | $0.60 | $0.47 | $0.93 | $0.82 | - Net income for Q2 2025 increased by **23.7%** to **$3.9 million**, and diluted EPS rose to **$0.60**, driven by higher interest income on loans[157](index=157&type=chunk) - For the first six months of 2025, net income increased by **9.7%** to **$6.0 million**, with diluted EPS up **13.4%** to **$0.93**, also benefiting from higher loan interest income[165](index=165&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) | ($ in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $3,852 | $3,113 | $6,010 | $5,481 | | Net effect on other comprehensive income (loss) | $1,380 | $(254) | $4,742 | $(1,970) | | Total comprehensive income | $5,232 | $2,859 | $10,752 | $3,511 | - Total comprehensive income significantly increased for both the three and six months ended June 30, 2025, primarily due to positive net effects on other comprehensive income from available-for-sale securities, contrasting with losses in the prior year[15](index=15&type=chunk) [Condensed Consolidated Statements of Shareholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) | ($ in thousands) | Balance, January 1, 2025 | Net income | Other comprehensive income | Cash dividends on common | Repurchased stock | Stock based compensation expense | Balance, June 30, 2025 | | :--------------- | :----------------------- | :--------- | :------------------------- | :----------------------- | :---------------- | :------------------------------- | :--------------------- | | Total | $127,508 | $6,010 | $4,742 | $(1,923) | $(3,030) | $341 | $133,648 | - Shareholders' equity increased from **$127.5 million** at January 1, 2025, to **$133.6 million** at June 30, 2025, driven by net income and other comprehensive income, partially offset by cash dividends and stock repurchases[17](index=17&type=chunk) - The Company repurchased **124,495** common shares for **$2.318 million** during Q2 2025 and **33,478** shares for **$0.712 million** during Q1 2025[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | ($ in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------- | :----------------------------- | :----------------------------- | | Operating Activities | | | | Net cash provided by (used in) operating activities | $3,078 | $(126) | | Investing Activities | | | | Net cash provided by investing activities | $7,226 | $3,728 | | Financing Activities | | | | Net cash provided by (used in) financing activities | $43,231 | $(4,584) | | Increase (decrease) in cash and cash equivalents | $53,535 | $(982) | | Cash and cash equivalents, end of period | $79,463 | $21,983 | - Operating activities generated **$3.1 million** in cash for the first six months of 2025, a significant improvement from a net use of **$0.1 million** in the prior year, driven by higher proceeds from loan sales[19](index=19&type=chunk)[182](index=182&type=chunk) - Investing activities provided **$7.2 million** in cash for the first six months of 2025, up from **$3.7 million** in the prior year, despite a **$3.0 million** cash payment for the Marblehead acquisition[19](index=19&type=chunk)[183](index=183&type=chunk) - Financing activities provided **$43.2 million** in cash for the first six months of 2025, a reversal from a net use of **$4.6 million** in the prior year, primarily due to increases in demand and time deposits[19](index=19&type=chunk)[184](index=184&type=chunk) [NOTE 1—BASIS OF PRESENTATION](index=12&type=section&id=NOTE%201%E2%80%94BASIS%20OF%20PRESENTATION) - SB Financial Group, Inc. is a financial holding company operating through its wholly-owned subsidiaries: The State Bank and Trust Company, SBFG Title, LLC, and SB Captive, Inc. State Bank also owns State Bank Insurance, LLC[20](index=20&type=chunk)[21](index=21&type=chunk) - The Company adopted ASU No. 2023-07 (Segment Reporting) on January 1, 2024, and ASU No. 2020-04 (Reference Rate Reform) through December 31, 2024, neither of which had a material impact on financial statements[24](index=24&type=chunk)[25](index=25&type=chunk) - ASU No. 2023-09 (Income Tax Disclosures) and ASU No. 2024-03 (Expense Disaggregation) are not yet adopted, with the latter's impact currently being evaluated[26](index=26&type=chunk)[27](index=27&type=chunk) [NOTE 2 - EARNINGS PER SHARE](index=13&type=section&id=NOTE%202%20-%20EARNINGS%20PER%20SHARE) | ($ and outstanding shares in thousands - except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income allocated to common shares and participating securities | $3,852 | $3,113 | $6,010 | $5,481 | | Weighted average shares outstanding for basic earnings per share | 6,448 | 6,692 | 6,464 | 6,703 | | Basic earnings per common share | $0.60 | $0.47 | $0.93 | $0.82 | | Diluted earnings per common share | $0.60 | $0.47 | $0.93 | $0.82 | - Basic and diluted EPS for Q2 2025 were **$0.60**, up from **$0.47** in Q2 2024. For the six months ended June 30, 2025, basic and diluted EPS were **$0.93**, up from **$0.82** in the prior year[29](index=29&type=chunk) - Weighted average basic common shares outstanding decreased to **6,448 thousand** for Q2 2025 from **6,692 thousand** in Q2 2024, and to **6,464 thousand** for the six months ended June 30, 2025, from **6,703 thousand** in the prior year[29](index=29&type=chunk) [NOTE 3 – BUSINESS COMBINATION](index=15&type=section&id=NOTE%203%20%E2%80%93%20BUSINESS%20COMBINATION) - Effective January 17, 2025, the Company acquired Marblehead Bancorp and its subsidiary, The Marblehead Bank, for **$5.0 million** in cash, aiming to expand its presence in Northwest Ohio and increase profitability[31](index=31&type=chunk) - The acquisition resulted in **$3.9 million** of goodwill and **$1.7 million** of core deposit intangible assets, with approximately **$0.7 million** in direct acquisition costs expensed[33](index=33&type=chunk) | ($ in thousands) | January 17, 2025 | | :--------------- | :--------------- | | **Fair value of assets acquired** | | | Cash and cash equivalents | $1,995 | | Investment securities | $30,123 | | Loans held for investment | $18,661 | | Goodwill | $3,919 | | Core deposit intangible | $1,710 | | Total assets acquired | $59,161 | | **Fair value of liabilities assumed** | | | Deposits | $53,088 | | Total liabilities assumed | $54,152 | | Total purchase price (cash) | $5,009 | [NOTE 4 – AVAILABLE-FOR-SALE SECURITIES](index=17&type=section&id=NOTE%204%20%E2%80%93%20AVAILABLE-FOR-SALE%20SECURITIES) | ($ in thousands) | June 30, 2025 Fair Value | December 31, 2024 Fair Value | | :--------------- | :----------------------- | :--------------------------- | | U.S. Treasury and Government agencies | $5,832 | $7,389 | | Mortgage-backed securities | $165,314 | $169,620 | | State and political subdivisions | $9,430 | $9,407 | | Other corporate securities | $15,379 | $15,171 | | Totals | $195,955 | $201,587 | - Available-for-sale securities decreased in fair value from **$201.6 million** at December 31, 2024, to **$196.0 million** at June 30, 2025, with total unrealized losses of **$32.3 million** at June 30, 2025[38](index=38&type=chunk)[41](index=41&type=chunk) - Management believes the declines in fair value for these securities are temporary, and no allowance for credit losses on available-for-sale securities was recorded at June 30, 2025, or December 31, 2024[41](index=41&type=chunk)[43](index=43&type=chunk) [NOTE 5 – LOANS AND ALLOWANCE FOR CREDIT LOSSES](index=20&type=section&id=NOTE%205%20%E2%80%93%20LOANS%20AND%20ALLOWANCE%20FOR%20CREDIT%20LOSSES) [Loan Portfolio Composition](index=20&type=section&id=Note%205.1%20-%20Loan%20Portfolio%20Composition) | ($ in thousands) | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :---------------- | | Commercial & industrial | $118,984 | $124,764 | | Commercial real estate - owner occupied | $137,924 | $134,431 | | Commercial real estate - nonowner occupied | $387,747 | $345,142 | | Agricultural | $60,924 | $64,680 | | Residential real estate | $310,126 | $308,378 | | HELOC | $59,683 | $53,811 | | Consumer | $19,331 | $15,529 | | Total loans | $1,094,719 | $1,046,735 | | Allowance for credit losses | $(15,645) | $(15,096) | | Loans, net | $1,079,074 | $1,031,639 | - Total loans, net of unearned income, increased by **$48.0 million** (**4.6%**) to **$1.09 billion** at June 30, 2025, from **$1.05 billion** at December 31, 2024[47](index=47&type=chunk)[173](index=173&type=chunk) - Commercial real estate (nonowner occupied) loans saw the largest increase, growing by **$42.6 million** to **$387.7 million**[47](index=47&type=chunk) [Loan Risk Characteristics](index=20&type=section&id=Note%205.2%20-%20Loan%20Risk%20Characteristics) - Commercial & Industrial and Agricultural loans are primarily underwritten based on borrower cash flows, with collateral as a secondary consideration, and are susceptible to fluctuations in cash flows and collateral values[48](index=48&type=chunk)[58](index=58&type=chunk) - Commercial Real Estate loans (owner and nonowner occupied) are primarily cash flow dependent and are sensitive to real estate market conditions and general economic factors, with construction loans carrying higher risks due to reliance on project success and long-term financing[49](index=49&type=chunk)[50](index=50&type=chunk)[54](index=54&type=chunk)[58](index=58&type=chunk) - Residential Real Estate, HELOC, and Consumer loans depend on borrowers' personal income and property values, with HELOCs secured by junior liens being particularly susceptible to declining collateral values[51](index=51&type=chunk)[58](index=58&type=chunk) [Allowance for Credit Losses (ACL) Methodology](index=21&type=section&id=Note%205.3%20-%20Allowance%20for%20Credit%20Losses%20(ACL)%20Methodology) - The ACL is estimated using relevant internal and external information, including historical credit loss experience, current conditions, and reasonable and supportable forecasts, with adjustments for loan-specific and environmental factors[53](index=53&type=chunk) - The Company primarily uses a Discounted Cash Flow (DCF) method for collective loan pools, with a one-year reasonable and supportable forecast period and a one-year straight-line reversion to the long-term historical average[55](index=55&type=chunk)[56](index=56&type=chunk) - Key inputs for the DCF model include loan-level detail, payment structure, loss history, forecasted loss drivers (from FRED), probability of default (PD), loss given default (LGD), and prepayment/curtailment rates[57](index=57&type=chunk)[59](index=59&type=chunk) [ACL Activity](index=24&type=section&id=Note%205.4%20-%20ACL%20Activity) | ($ in thousands) | Balance, beginning of period (June 30, 2025) | Initial allowance for credit losses on acquired PCD loans | Chargeoffs | Recoveries | Provision for Credit Losses | Balance, end of period (June 30, 2025) | | :--------------- | :------------------------------------------- | :---------------------------------------- | :--------- | :--------- | :-------------------------- | :------------------------------------- | | Total (3 months) | $15,391 | $- | $(49) | $3 | $300 | $15,645 | | ($ in thousands) | Balance, beginning of period (June 30, 2025) | Initial allowance for credit losses on acquired PCD loans | Chargeoffs | Recoveries | Provision for Credit Losses | Balance, end of period (June 30, 2025) | | :--------------- | :------------------------------------------- | :---------------------------------------- | :--------- | :--------- | :-------------------------- | :------------------------------------- | | Total (6 months) | $15,096 | $5 | $(135) | $5 | $674 | $15,645 | - The ACL increased by **$0.55 million** from December 31, 2024, to **$15.6 million** at June 30, 2025, due to **$0.23 million** from the Marblehead acquisition and **$0.30 million** of growth-related provision expense, partially offset by net charge-offs[65](index=65&type=chunk)[175](index=175&type=chunk) [Collateral-Dependent Loans](index=25&type=section&id=Note%205.5%20-%20Collateral-Dependent%20Loans) | ($ in thousands) | June 30, 2025 Total | June 30, 2025 Allocated Allowance | December 31, 2024 Total | December 31, 2024 Allocated Allowance | | :--------------- | :------------------ | :-------------------------------- | :---------------------- | :------------------------------------ | | Commercial & industrial | $3,534 | $65 | $2,877 | $380 | | Residential real estate | $1,073 | $23 | $801 | $26 | | Total | $5,183 | $101 | $4,477 | $419 | - Collateral-dependent loans increased to **$5.18 million** at June 30, 2025, from **$4.48 million** at December 31, 2024, with the allocated allowance for these loans decreasing from **$419 thousand** to **$101 thousand**[69](index=69&type=chunk) - For collateral-dependent loans, the ACL is measured based on the fair value of collateral, adjusted for liquidation costs/discounts, with no allowance required if collateral fair value exceeds amortized cost[70](index=70&type=chunk) [Credit Risk Profile and Loan Aging](index=27&type=section&id=Note%205.6%20-%20Credit%20Risk%20Profile%20and%20Loan%20Aging) - The Company categorizes loans into risk categories (Pass, Special Mention, Substandard, Doubtful, Loss) based on borrower ability to service debt, financial information, payment history, and economic trends[71](index=71&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk) | ($ in thousands) | June 30, 2025 Total Loans | December 31, 2024 Total Loans | | :--------------- | :------------------------ | :---------------------------- | | Pass (1 - 4) | $1,087,881 | $1,040,392 | | Special Mention (5) | $1,246 | $911 | | Substandard (6) | $4,292 | $4,991 | | Doubtful (7) | $1,300 | $441 | | Total Loans | $1,094,719 | $1,046,735 | | ($ in thousands) | June 30, 2025 Total Past Due | December 31, 2024 Total Past Due | | :--------------- | :--------------------------- | :------------------------------- | | Commercial & industrial | $3,182 | $3,281 | | Residential real estate | $1,219 | $2,023 | | Total Loans | $5,600 | $6,599 | [Nonaccrual Loans](index=31&type=section&id=Note%205.7%20-%20Nonaccrual%20Loans) - All loans past due **90 days** are systematically placed on nonaccrual status, with interest reversed from income and subsequent payments applied to principal[84](index=84&type=chunk) | ($ in thousands) | June 30, 2025 Total nonaccrual loans | December 31, 2024 Total nonaccrual loans | | :--------------- | :----------------------------------- | :--------------------------------------- | | Commercial & industrial | $3,306 | $2,927 | | Residential real estate | $1,585 | $1,539 | | Total loans | $5,872 | $5,516 | - Total nonaccrual loans increased to **$5.87 million** at June 30, 2025, from **$5.52 million** at December 31, 2024[85](index=85&type=chunk) [Unfunded Loan Commitments](index=32&type=section&id=Note%205.8%20-%20Unfunded%20Loan%20Commitments) - The Company maintains an allowance for off-balance sheet credit exposures, such as unfunded lines of credit and commitments, which is classified within Other liabilities[88](index=88&type=chunk) - The allowance for unfunded loan commitments was **$1.65 million** at June 30, 2025, up from **$1.34 million** at the beginning of the six-month period, with a provision of **$307 thousand** for the six months ended June 30, 2025[90](index=90&type=chunk) [NOTE 6 – GOODWILL](index=33&type=section&id=NOTE%206%20%E2%80%93%20GOODWILL) - Goodwill increased to **$27.16 million** at June 30, 2025, from **$23.24 million** at December 31, 2024, primarily due to the **$3.92 million** acquired goodwill from the Marblehead acquisition[91](index=91&type=chunk) - Goodwill is not amortized but is evaluated for impairment annually or more frequently if circumstances change. A quantitative impairment test as of June 30, 2025, showed no impairment[91](index=91&type=chunk)[93](index=93&type=chunk) [NOTE 7 – MORTGAGE SERVICING RIGHTS](index=33&type=section&id=NOTE%207%20%E2%80%93%20MORTGAGE%20SERVICING%20RIGHTS) - The unpaid principal balance of mortgage loans serviced for others increased to **$1.46 billion** at June 30, 2025, from **$1.43 billion** at December 31, 2024[94](index=94&type=chunk) | ($ in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------- | :----------------------------- | :----------------------------- | | Balance at beginning of period | $14,868 | $13,906 | | Mortgage servicing rights capitalized during the period | $1,182 | $1,031 | | Mortgage servicing rights amortization during the period | $(762) | $(608) | | Net change in valuation allowance | $170 | $219 | | Balance at end of period | $15,458 | $14,548 | - Mortgage servicing rights (MSR) balance increased to **$15.46 million** at June 30, 2025, from **$14.87 million** at the beginning of the six-month period, with **$1.18 million** capitalized and **$0.76 million** amortized[95](index=95&type=chunk) [NOTE 8 – DERIVATIVE FINANCIAL INSTRUMENTS](index=34&type=section&id=NOTE%208%20%E2%80%93%20DERIVATIVE%20FINANCIAL%20INSTRUMENTS) - The Company uses derivative financial instruments, specifically interest rate swaps, forward contracts, and Interest Rate Lock Commitments (IRLCs), to manage economic risks and facilitate customer risk management, not for trading or speculative purposes[96](index=96&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk) | ($ in thousands) | June 30, 2025 Notional Amount | June 30, 2025 Fair Value | December 31, 2024 Notional Amount | December 31, 2024 Fair Value | | :--------------- | :---------------------------- | :----------------------- | :-------------------------------- | :--------------------------- | | **Asset Derivatives** | | | | | | Interest rate swaps associated with loans | $96,374 | $1,852 | $79,235 | $4,029 | | Forward contracts | $16,077 | $96 | $11,000 | $69 | | **Liability Derivatives** | | | | | | Interest rate swaps associated with loans | $96,374 | $(1,852) | $79,235 | $(4,029) | | IRLCs | $25,000 | $(188) | $7,412 | $(21) | - The fair value of asset interest rate swaps decreased from **$4.03 million** at December 31, 2024, to **$1.85 million** at June 30, 2025, while IRLC liabilities increased from **$(21) thousand** to **$(188) thousand**[100](index=100&type=chunk) [NOTE 9 – DEPOSITS](index=36&type=section&id=NOTE%209%20%E2%80%93%20DEPOSITS) | ($ in thousands) | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :---------------- | | Non interest bearing demand | $241,245 | $232,155 | | Interest bearing demand | $205,581 | $201,085 | | Savings | $282,311 | $237,987 | | Money market | $249,536 | $222,161 | | Time deposits $250,000 or less | $217,293 | $208,273 | | Time deposits greater than $250,000 | $53,856 | $50,944 | | Total Deposits | $1,249,822 | $1,152,605 | - Total deposits increased by **$97.2 million** (**8.4%**) to **$1.25 billion** at June 30, 2025, from **$1.15 billion** at December 31, 2024, with significant growth in savings and money market accounts[106](index=106&type=chunk)[173](index=173&type=chunk) [NOTE 10 – SHORT-TERM BORROWINGS](index=36&type=section&id=NOTE%2010%20%E2%80%93%20SHORT-TERM%20BORROWINGS) | ($ in thousands) | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :---------------- | | Securities sold under repurchase agreements | $15,640 | $10,585 | - Securities sold under repurchase agreements increased to **$15.64 million** at June 30, 2025, from **$10.59 million** at December 31, 2024, secured by agency and mortgage-backed securities[107](index=107&type=chunk) - The Company had **$41.0 million** in federal funds lines and borrowing capabilities at the Federal Reserve Discount Window, with no amounts drawn or pledged at June 30, 2025[108](index=108&type=chunk)[109](index=109&type=chunk) [NOTE 11 – FEDERAL HOME LOAN BANK (FHLB) ADVANCES](index=37&type=section&id=NOTE%2011%20%E2%80%93%20FEDERAL%20HOME%20LOAN%20BANK%20(FHLB)%20ADVANCES) - FHLB advances totaled **$35.0 million** at June 30, 2025, secured by **$320.1 million** in mortgage loans, with fixed interest rates ranging from **3.75%** to **4.61%**[110](index=110&type=chunk) | ($ in thousands) | Debt | | :--------------- | :--- | | 2026 | $12,500 | | 2027 | $5,000 | | 2028 | $17,500 | | Total | $35,000 | [NOTE 12 – TRUST PREFERRED SECURITIES](index=37&type=section&id=NOTE%2012%20%E2%80%93%20TRUST%20PREFERRED%20SECURITIES) - The Company has **$10.31 million** in Trust Preferred Securities, with distributions payable quarterly at a variable rate based on **3-month CME Term SOFR plus 1.80%**, maturing on September 15, 2035[111](index=111&type=chunk) [NOTE 13 – SUBORDINATED DEBT](index=37&type=section&id=NOTE%2013%20%E2%80%93%20SUBORDINATED%20DEBT) - The Company has **$20.0 million** in **3.65%** Fixed to Floating Rate Subordinated Notes due 2031, bearing a fixed rate until May 31, 2026, then resetting quarterly to **3-month SOFR plus 296 basis points**[112](index=112&type=chunk)[113](index=113&type=chunk) - The Notes are redeemable after May 31, 2026, subject to regulatory approval, and incurred approximately **$0.5 million** in debt issuance costs[113](index=113&type=chunk) [NOTE 14 – DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES](index=38&type=section&id=NOTE%2014%20%E2%80%93%20DISCLOSURES%20ABOUT%20FAIR%20VALUE%20OF%20ASSETS%20AND%20LIABILITIES) [Fair Value Hierarchy and Methodologies](index=38&type=section&id=Note%2014.1%20-%20Fair%20Value%20Hierarchy%20and%20Methodologies) - Fair value measurements are categorized into a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1 prices), and Level 3 (unobservable inputs)[119](index=119&type=chunk) - Available-for-sale securities and interest rate contracts are primarily valued using Level 2 inputs, while forward contracts use Level 1, and IRLCs use Level 3 inputs[115](index=115&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk) [Recurring Fair Value Measurements](index=39&type=section&id=Note%2014.2%20-%20Recurring%20Fair%20Value%20Measurements) | ($ in thousands) | June 30, 2025 Fair Value | Level 1 | Level 2 | Level 3 | | :--------------- | :----------------------- | :------ | :------ | :------ | | U.S. Treasury and Government Agencies | $5,832 | $- | $5,832 | $- | | Mortgage-backed securities | $165,314 | $- | $165,314 | $- | | Interest rate contracts - assets | $1,852 | $- | $1,852 | $- | | Forward contracts | $96 | $96 | $- | $- | | IRLCs | $(188) | $- | $- | $(188) | - Most available-for-sale securities and interest rate contracts are classified as Level 2, while forward contracts are Level 1, and IRLCs are Level 3[121](index=121&type=chunk) [Nonrecurring Fair Value Measurements](index=40&type=section&id=Note%2014.3%20-%20Nonrecurring%20Fair%20Value%20Measurements) - Collateral-dependent individually evaluated loans and mortgage servicing rights are measured at fair value on a nonrecurring basis and are classified within Level 3 of the fair value hierarchy[123](index=123&type=chunk)[124](index=124&type=chunk) | ($ in thousands) | June 30, 2025 Fair Value | Level 3 | | :--------------- | :----------------------- | :------ | | Collateral-dependent Individually evaluated loans | $845 | $845 | | Mortgage servicing rights | $445 | $445 | [Unobservable (Level 3) Inputs](index=41&type=section&id=Note%2014.4%20-%20Unobservable%20(Level%203)%20Inputs) | ($ in thousands) | June 30, 2025 Fair value | Valuation technique | Unobservable inputs | Range (weighted-average) | | :--------------- | :----------------------- | :------------------ | :------------------ | :----------------------- | | Collateral-dependent individually evaluated loans | $845 | Market comparable properties | Comparability adjustments (%) | 1 - 28% (14%) | | Mortgage servicing rights | $445 | Discounted cash flow | Discount rate | 10.76% | | | | | Constant prepayment rate | 5.93% | | IRLCs | $(188) | Discounted cash flow | Loan closing rates | 55% - 96% | - Key unobservable inputs for Level 3 measurements include comparability adjustments for collateral-dependent loans, discount rates and prepayment rates for MSRs, and loan closing rates for IRLCs[127](index=127&type=chunk) [Fair Value of Other Financial Instruments](index=41&type=section&id=Note%2014.5%20-%20Fair%20Value%20of%20Other%20Financial%20Instruments) - The carrying amounts of cash, interest-bearing time deposits, FHLB stock, and accrued interest approximate their fair values[128](index=128&type=chunk) - Fair values for loans held for sale are based on quoted market prices or discounted estimated cash flows, while loans are valued using discounted estimated future cash flows incorporating credit, liquidity, and marketability factors[129](index=129&type=chunk)[130](index=130&type=chunk) | ($ in thousands) | June 30, 2025 Carrying amount | June 30, 2025 Fair value | Level 1 | Level 2 | Level 3 | | :--------------- | :---------------------------- | :----------------------- | :------ | :------ | :------ | | **Financial assets** | | | | | | | Cash and due from banks | $79,463 | $79,463 | $79,463 | $- | $- | | Loans, net of allowance for credit losses | $1,079,074 | $1,070,331 | $- | $- | $1,070,331 | | **Financial liabilities** | | | | | | | Deposits | $1,249,822 | $1,249,129 | $978,673 | $270,456 | $- | | Subordinated debt, net of issuance costs | $19,715 | $19,150 | $- | $19,150 | $- | [NOTE 15 – SHARE BASED COMPENSATION](index=43&type=section&id=NOTE%2015%20%E2%80%93%20SHARE%20BASED%20COMPENSATION) - The 2017 Stock Incentive Plan allows for grants of various equity-based awards, with **202,093** shares granted out of **500,000** authorized as of June 30, 2025[137](index=137&type=chunk) - Restricted stock awards under the LTI Plan vest over four years, with compensation cost of **$0.2 million** for Q2 2025 and **$0.3 million** for the six months ended June 30, 2025[140](index=140&type=chunk) | | Shares | Weighted Average Value per Share | | :----------------------- | :----- | :------------------------------- | | Nonvested, January 1, 2025 | 54,311 | $17.15 | | Granted | 21,003 | $23.43 | | Vested | (23,234) | $17.67 | | Forfeited | (8,366) | $18.11 | | Nonvested, June 30, 2025 | 43,714 | $19.71 | [NOTE 16 – OPERATING SEGMENTS](index=44&type=section&id=NOTE%2016%20%E2%80%93%20OPERATING%20SEGMENTS) - The Company operates as a single reportable segment, 'Banking,' providing community banking services including lending, banking, wealth management, and other financial services[144](index=144&type=chunk)[145](index=145&type=chunk) - The Chief Executive Officer, as the chief operating decision maker (CODM), evaluates performance and allocates resources based on consolidated financial statements, with no single customer accounting for more than **10%** of revenue[145](index=145&type=chunk) [NOTE 17 – GENERAL LITIGATION](index=44&type=section&id=NOTE%2017%20%E2%80%93%20GENERAL%20LITIGATION) - The Company is subject to ordinary course legal claims and lawsuits, but management believes their resolution will not have a material adverse effect on its financial position, results of operations, or cash flow[146](index=146&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=45&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion and analysis of financial condition, results of operations, critical policies, and performance [Cautionary Statement Regarding Forward-Looking Information](index=45&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Information) - The report contains forward-looking statements regarding future financial performance, plans, and economic conditions, which are subject to risks and uncertainties[147](index=147&type=chunk) - Key risks include economic and financial market conditions (inflation, interest rates, recession), bank failures, geopolitical instability, volatility of mortgage banking income, loan portfolio performance, operational and cybersecurity risks, competition, regulatory changes, and the ability to adapt to technological changes[147](index=147&type=chunk)[149](index=149&type=chunk) [Overview of SB Financial](index=48&type=section&id=Overview%20of%20SB%20Financial) - SB Financial Group, Inc. is an Ohio financial holding company, with its primary subsidiary being The State Bank and Trust Company, an Ohio-chartered commercial bank[150](index=150&type=chunk) - Other subsidiaries include Rurban Statutory Trust II (for Trust Preferred Securities), State Bank Insurance, LLC, SBFG Title, LLC, and SB Captive, Inc., which collectively form the Company[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk) [Critical Accounting Policies](index=48&type=section&id=Critical%20Accounting%20Policies) - The determination of the Allowance for Credit Losses (ACL) is a critical accounting policy, involving significant judgment and estimates of expected credit losses based on historical experience, current conditions, and forecasts[155](index=155&type=chunk) - Goodwill and Other Intangibles are recorded at fair value upon acquisition and are subject to annual impairment tests, requiring subjective judgments about future performance and potential impacts on earnings[156](index=156&type=chunk) [Three Months Ended June 30, 2025, compared to Three Months Ended June 30, 2024](index=49&type=section&id=Three%20Months%20Ended%20June%2030,%202025,%20compared%20to%20Three%20Months%20Ended%20June%2030,%202024) | Financial Metric | Q2 2025 ($ in thousands) | Q2 2024 ($ in thousands) | Change ($ in thousands) | Change (%) | | :--------------- | :----------------------- | :----------------------- | :---------------------- | :--------- | | Net Income | $3,852 | $3,113 | $739 | 23.7% | | Diluted EPS | $0.60 | $0.47 | $0.13 | 27.7% | | Total Interest Income | $18,467 | $15,654 | $2,813 | 18.0% | | Net Interest Income | $12,128 | $9,659 | $2,469 | 25.6% | | Total Noninterest Income | $5,048 | $4,386 | $662 | 15.1% | | Total Noninterest Expense | $11,852 | $10,671 | $1,181 | 11.1% | | Income Taxes | $875 | $261 | $614 | 235.2% | - Net interest income increased by **$2.5 million**, or **25.6%**, driven by an **18.0%** increase in total interest income, while the net interest margin improved to **3.48%** from **3.12%**[160](index=160&type=chunk) - Total noninterest income grew by **15.1%**, primarily due to increased mortgage revenue (up **$0.3 million**) and SBFG Title income (up **$0.18 million**), with recapture of mortgage servicing rights also contributing positively[161](index=161&type=chunk)[162](index=162&type=chunk) - Provision for credit losses was **$597 thousand** in Q2 2025, compared to zero in Q2 2024, including **$297 thousand** for unfunded commitments and **$300 thousand** for growth-related provision[158](index=158&type=chunk) [Six Months Ended June 30, 2025, compared to Six Months Ended June 30, 2024](index=50&type=section&id=Six%20Months%20Ended%20June%2030,%202025,%20compared%20to%20Six%20Months%20Ended%20June%2030,%202024) | Financial Metric | YTD 2025 ($ in thousands) | YTD 2024 ($ in thousands) | Change ($ in thousands) | Change (%) | | :--------------- | :------------------------ | :------------------------ | :---------------------- | :--------- | | Net Income | $6,010 | $5,481 | $529 | 9.7% | | Diluted EPS | $0.93 | $0.82 | $0.11 | 13.4% | | Total Interest Income | $35,839 | $30,954 | $4,885 | 15.8% | | Net Interest Income | $23,407 | $18,839 | $4,568 | 24.2% | | Total Noninterest Income | $9,155 | $8,337 | $818 | 9.8% | | Total Noninterest Expense | $24,262 | $20,953 | $3,309 | 15.8% | | Income Taxes | $1,306 | $742 | $564 | 76.0% | - Net interest income increased by **$4.6 million**, or **24.2%**, with the net interest margin improving to **3.43%** from **3.05%**[168](index=168&type=chunk) - Total noninterest income increased by **9.8%**, driven by higher mortgage revenue (up **$0.36 million**) and SBFG Title income (up **$0.31 million**)[169](index=169&type=chunk)[170](index=170&type=chunk) - Total noninterest expense increased by **$3.3 million**, including over **$0.7 million** in one-time merger-related expenses and approximately five and a half months of Marblehead's operating expenses[171](index=171&type=chunk) [Changes in Financial Condition](index=51&type=section&id=Changes%20in%20Financial%20Condition) | Financial Metric | June 30, 2025 ($ in millions) | December 31, 2024 ($ in millions) | Change ($ in millions) | Change (%) | | :--------------- | :---------------------------- | :-------------------------------- | :--------------------- | :--------- | | Total assets | $1,486.3 | $1,379.5 | $106.8 | 7.7% | | Total loans, net | $1,094.7 | $1,046.7 | $48.0 | 4.6% | | Total deposits | $1,249.8 | $1,152.6 | $97.2 | 8.4% | | Borrowed funds | $80.7 | $75.6 | $5.1 | 6.7% | | Total shareholders' equity | $133.6 | $127.5 | $6.1 | 4.8% | - The allowance for credit losses increased by **$0.55 million** to **$15.6 million**, driven by the Marblehead acquisition and growth-related provision, with a non-performing asset ratio of **41 basis points** and coverage on non-performing loans at **266%**[175](index=175&type=chunk) [Capital Resources](index=51&type=section&id=Capital%20Resources) - State Bank was classified as 'well capitalized' under regulatory frameworks as of June 30, 2025, maintaining capital ratios above required minimums[176](index=176&type=chunk) | Capital Ratio | June 30, 2025 Actual Ratio | December 31, 2024 Actual Ratio | To Be Well Capitalized Ratio | | :------------ | :------------------------- | :----------------------------- | :--------------------------- | | Tier I Capital to average assets | 10.15% | 11.09% | 5.0% | | Tier I Common equity capital to risk-weighted assets | 12.53% | 13.43% | 6.5% | | Total Risk-based capital to risk-weighted assets | 13.78% | 14.69% | 10.0% | - Management opted out of the accumulated other comprehensive income treatment under Basel III, excluding unrealized gains and losses from available-for-sale securities from regulatory capital[177](index=177&type=chunk) [Liquidity](index=52&type=section&id=Liquidity) - Liquid assets increased to **$289.8 million** at June 30, 2025, from **$235.9 million** at December 31, 2024, ensuring the Company's ability to fund loan demand and meet withdrawal requirements[178](index=178&type=chunk) - The Company's Liquidity Policy, overseen by the Asset/Liability Committee (ALCO), identifies primary liquidity sources, monitors liquidity, and quantifies minimum requirements[179](index=179&type=chunk) - The Company had approximately **$157.0 million** of additional FHLB borrowing capacity and **$57.8 million** in unpledged securities available for additional borrowings at June 30, 2025[186](index=186&type=chunk) [Asset Liability Management](index=53&type=section&id=Asset%20Liability%20Management) - Asset liability management focuses on maintaining liquidity, maximizing net interest income, and minimizing the impact of interest rate fluctuations on earnings and capital[188](index=188&type=chunk)[189](index=189&type=chunk) - The Company's primary market risk exposure is interest rate risk, which is managed through policies, procedures, and information systems, but currently does not utilize derivative financial instruments for this purpose[188](index=188&type=chunk)[193](index=193&type=chunk) - The Federal Reserve Board's Joint Agency Policy Statement on Interest Rate Risk guides the Company's management process, emphasizing active board and senior management oversight[191](index=191&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=55&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material change in market risk from disclosures in the Annual Report on Form 10-K for December 31, 2024 - No material change in market risk from the information contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2024[195](index=195&type=chunk) [Item 4. Controls and Procedures](index=55&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated disclosure controls as effective, with no material changes in internal control over financial reporting - The Company's disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025, ensuring timely and accurate reporting of required information[196](index=196&type=chunk)[198](index=198&type=chunk) - No material changes in internal control over financial reporting occurred during the fiscal quarter ended June 30, 2025[197](index=197&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=56&type=section&id=Item%201.%20Legal%20Proceedings) The Company is involved in ordinary course legal actions, with no material adverse effect expected on financial position - The Company is party to various legal actions arising in the ordinary course of business[200](index=200&type=chunk) - Management believes that the disposition or ultimate resolution of these claims will not have a material adverse effect on the Company's consolidated financial position, results of operations, and cash flow[200](index=200&type=chunk) [Item 1A. Risk Factors](index=56&type=page&id=Item%201A.%20Risk%20Factors) Refers to detailed risk factors in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 - A detailed discussion of the Company's risk factors is included in 'Item 1A. Risk Factors' of Part I of the Annual Report on Form 10-K for the year ended December 31, 2024[201](index=201&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=56&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details the share repurchase program, including 124,495 common shares repurchased during Q2 2025 - The Company has a share repurchase program, announced December 18, 2024, authorizing the repurchase of up to **500,000** common shares through December 31, 2026[202](index=202&type=chunk) | Period | Total Number of Shares Purchased | Weighted Average Price Paid per Share | | :---------------- | :------------------------------- | :------------------------------------ | | 04/01/25 - 04/30/25 | - | $0.00 | | 05/01/25 - 05/31/25 | 48,786 | $19.57 | | 06/01/25 - 06/30/25 | 75,709 | $18.00 | | Total | 124,495 | $18.62 | - As of June 30, 2025, **331,599** shares remained available for repurchase under the program[203](index=203&type=chunk) [Item 3. Defaults Upon Senior Securities](index=56&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable for the reported period - This item is not applicable[204](index=204&type=chunk) [Item 4. Mine Safety Disclosures](index=56&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable for the reported period - This item is not applicable[204](index=204&type=chunk) [Item 5. Other Information](index=56&type=section&id=Item%205.%20Other%20Information) Confirms no other reportable information and no Rule 10b5-1 trading arrangement changes by officers - No director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025[206](index=206&type=chunk) [Item 6. Exhibits](index=58&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the Form 10-Q, including amendments, certifications, and Inline XBRL documents - The exhibits include Amended Articles of the Company, Certificates of Amendment, Amended and Restated Regulations, Rule 13a-14(a)/15d-14(a) Certifications, Section 1350 Certifications, and Inline XBRL documents[208](index=208&type=chunk) [Signatures](index=59&type=section&id=Signatures) Report signed by Chairman, President & CEO Mark A. Klein and EVP & CFO Anthony V. Cosentino on August 7, 2025 - The report was signed by Mark A. Klein, Chairman, President & CEO, and Anthony V. Cosentino, Executive Vice President & Chief Financial Officer, on August 7, 2025[212](index=212&type=chunk)