Form 8-K

8-K — SB FINANCIAL GROUP, INC.

Accession: 0001213900-26-083789

Filed: 2026-07-31

Period: 2026-07-24

CIK: 0000767405

SIC: 6022 (STATE COMMERCIAL BANKS)

Item: Results of Operations and Financial Condition

Item: Financial Statements and Exhibits

Documents

8-K — ea0300064-8k_sbfin.htm (Primary)

EX-99.1 — TRANSCRIPT OF CONFERENCE CALL AND WEBCAST CONDUCTED ON JUNE 30, 2026 (ea030006401ex99-1.htm)

XML — IDEA: XBRL DOCUMENT (R1.htm)

8-K — CURRENT REPORT

8-K (Primary)

Filename: ea0300064-8k_sbfin.htm · Sequence: 1

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0000767405

2026-07-24

iso4217:USD

xbrli:shares

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)

July 31, 2026 (July 24, 2026)

SB FINANCIAL GROUP, INC

(Exact name of registrant as specified in its charter)

Ohio

001-36785

34-1395608

(State or other jurisdiction

of incorporation)

(Commission File Number)

(IRS Employer

Identification No.)

401 Clinton Street, Defiance, OH

43512

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including

area code (419) 783-8950

Not Applicable

(Former name or former address, if changed since

last report.)

Check the appropriate box below if the Form 8-K

filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General

Instruction A.2. below):

☐

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐

Soliciting material pursuant to Rule 1 4a- 12 under the Exchange Act (17 CFR 240.1 4a- 12)

☐

Pre-commencement communications pursuant to Rule 1 4d-2(b) under the Exchange Act (17 CFR 240.1 4d-2(b))

☐

Pre-commencement communications pursuant to Rule 1 3e-4(c) under the Exchange Act (17 CFR 240.1 3e-4(c))

Indicate by check mark whether the registrant

is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the

Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check

mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting

standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Securities registered pursuant to Section 12(b)

of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Shares, No Par Value 6,252,992 Outstanding at July 31, 2026

SBFG

The NASDAQ Stock Market, LLC

(NASDAQ Capital Market)

Item 2.02. Results of Operations and Financial Condition.

On July 24, 2026, SB Financial

Group, Inc. (the “Company”) hosted a conference call and webcast to discuss its financial results for the second quarter ending

June 30, 2026. A copy of the transcript for the conference call and webcast is furnished as Exhibit 99.1 and is incorporated herein by

reference.

The information in this Item

2.02, including Exhibit 99.1 furnished herewith, is being furnished and shall not be deemed to be “filed” for purposes of

Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that Section,

nor shall such information be deemed to be incorporated by reference in any registration statement or other document filed under the Securities

Act of 1933 or the Exchange Act, except as otherwise stated in such filing.

Item 9.01. Financial Statements and Exhibits.

(a) Not Applicable

(b) Not Applicable

(d) Exhibits

Exhibit No.

Description

99.1

Transcript of conference call and webcast conducted on June 30, 2026.

104

Cover Page Interactive Data File (embedded within the Inline XBRL document)

-1-

SIGNATURE

Pursuant to the requirements

of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto

duly authorized.

SB FINANCIAL GROUP, INC.

Dated: July 31, 2026

By:

/s/ Anthony V. Cosentino

Anthony V. Cosentino

Chief Financial Officer

-2-

INDEX TO EXHIBITS

Current Report on Form 8-K

Dated July 31, 2026

SB Financial Group, Inc.

Exhibit No.

Description

99.1

Transcript of conference call and webcast conducted on July 24, 2026.

104

Cover Page Interactive Data File (embedded within the Inline XBRL document)

-3-

EX-99.1 — TRANSCRIPT OF CONFERENCE CALL AND WEBCAST CONDUCTED ON JUNE 30, 2026

EX-99.1

Filename: ea030006401ex99-1.htm · Sequence: 2

Exhibit 99.1

Call Participants

EXECUTIVES

Anthony V. Cosentino

Executive VP & CFO

Mark A. Klein

Chairman, President & CEO

Steven A. Walz

Executive VP & Chief Lending Officer

ANALYSTS

Brian Joseph Martin

Brean Capital, LLC, Research Division

ATTENDEES

Sarah S. Mekus

The State Bank and Trust Company

Presentation

Operator

Good morning. and welcome to the SB Financial second quarter 2026 conference

call and webcast. Thank you. I would like to inform you that this conference call is being recorded and that all participants are in a

listen-only mode. We will begin with remarks by management and then open the conference up to the investment community for questions and

answers. I will now turn the conference over to Sarah Mekas with SB Financial. Please go ahead, Sarah.

Sarah S. Mekus

The State Bank and Trust Company

Thank you and good morning, everyone. I’d like to remind you that this

conference call is being broadcast live over the internet and will be archived and available on our website at ir.yourstatebank.com. Joining

me today are Mark Klein, Chairman, President and CEO, Tony Cosentino, Chief Financial Officer, and Steve Walz, Chief Lending Officer.

Today’s presentation may contain forward-looking information. Cautionary statements about this information, as well as reconciliations

of non-GAAP financial measures, are included in today’s earnings release materials, as well as our SEC filings. These materials are available

on our website and we encourage participants to refer to them for a complete discussion of risk factors and forward-looking statements.

These statements speak only as of the date made and SB Financial undertakes no obligation to update them. I will now turn the call over

to Mr. Klein.

Mark A. Klein

Chairman, President & CEO

Thank you, Sarah, and good morning, everyone. Welcome to our second

quarter 2026 conference call and webcast. The second quarter of 2026 represented a period of strong execution across our franchise, reflecting

the consistency and resilience of our diversified revenue operating model. Our results reflected balanced performance across all business

lines, supported by high quality organic loan growth, stable recurring net interest income, expanded non-interest fee revenue, and disciplined

expense management. This quarter also marked the 18th month milestone of the Marblehead acquisition. And we now view that transaction

as a significant contributor to our funding base, expanding our presence in Northern Ohio and driving overall franchise stability.

Highlights for this quarter include net income at $4.5 million

with diluted earnings per share of $0.72 compared to $0.60 reported in the prior year quarter. This now marks our 62nd consecutive

quarter of operational profitability. Tangible book value per share ended at $19.04, an increase of approximately 15.8% from $16.44

in the prior year quarter. Adjusted tangible book value per share excluding AOCI ended the quarter at $22.57. Net interest income

expanded to $13.0 million, up 6.8% from $12.1 million in the prior year quarter, driven by stable funding dynamics and expanding

asset yields. Loan balances reached $1.19 billion, reflecting an increase of approximately $94.8 million or 8.7% from the prior year

quarter, a slight increase of $8.4 million from the linked quarter. This extends our trend of sequential loan growth to nine

consecutive quarters.

Total deposits climbed to $1.39 billion and increased to $141.3 million,

or just over 11% from the prior year quarter, and up $19.3 million, or 1.4% sequentially from the linked quarter. Non-interest income

finished at $5.0 million, accounting for approximately 27.8% of our total operating revenue as we continue to maintain stable fee-based

revenue streams. Non-interest expense run rate remained well controlled, finishing the quarter at $12.1 million compared to $11.9 million

for the prior year quarter. And asset quality remains a key characteristic of our company and a clear competitive advantage. Total non-performing

assets declined to $4.4 million, representing just 0.27% of our total assets, a reduction of over 28% compared to the prior year. Our

proactive approach to managing problem assets combined with our robust internal loan reviews has successfully driven down our overall

non-accruing balances.

We continue to remain focused on our five key strategic

initiatives as we have indicated in many prior quarters. That’s growing and diversifying revenue, adding more scale to the

organization to improve efficiency, expanding the number of households and services in those households, operational excellence, and

of course, asset quality. Let’s look a little closer at the revenue diversity. Mortgage originations for the quarter rebounded

strongly from the first quarter to $79.3 million, representing an increase of approximately 21% from the linked quarter, although

production was down compared to $97.9 million in the prior year period. The current residential pipeline has continued to stabilize

at the $25 million to $30 million level. Our teams continue to struggle with mortgage rates remaining well above the 6% mark, which

we feel is critical in moving into a more balanced split between purchase and refinance. Although our mortgage volume has been below

expectations, we have had a number of success stories from individual MLOs and from our regions. Specifically, our newest region,

Cincinnati, has delivered nearly $20 million in volume during the first half of this year, up by more than 50% from the same period

in 2025.

Individually, we have four MLOs that have eclipsed $10 million in volume,

and additionally, six more originators are at the 50% level of their 2026 goal commitment. This quarter’s volume growth represents a positive

pivot from the volume constraints we witnessed throughout 2025 and the slow seasonal start we experienced from the first quarter of the

year. Throughout that lower volume cycle, we made the deliberate strategic decision to keep our core processing infrastructure and originator

teams fully intact. That operational discipline continues to yield results today, providing us with the capacity to eventually capture

expanded market volume without adding incremental overhead. Our execution in the secondary market remains highly effective and allows

us to manage a larger pipeline of fixed rate commitments. We successfully sold 88.5% of our production in this period to maximize immediate

fee income while keeping the balance sheet liquid. Furthermore, our total mortgage servicing portfolio crossed a major milestone this

quarter, ending at $1.50 billion.

Because we have maintained this operational readiness, we have ample

capacity to continue scaling up toward more historical production levels. Peak Title recorded a strong quarter, generating revenue of

$577,000, up nearly 20% from the linked quarter and flat compared to the prior year, supported by strong collaboration and steady internal

referrals across our lending teams. This business remains an important part of our product suite and a valuable contributor to our fee

income diversification. Now pivoting to scale, our deposit growth has vastly exceeded expectations since the second quarter of 2025. We

have grown deposits in every quarter over the past year while keeping the increase in our deposit cost of funds at less than a 2.5% level

to just 181 basis points. Our core relationship model delivered an annual increase of $17.3 million in non-interest-bearing checking accounts,

which ended the quarter at nearly $258.6 million. We continue to see excellent traction growing these core balances organically by leveraging

our Treasury management capabilities and capturing new commercial relationships stemming from ongoing disruption in regional players and

regional markets.

Similar to our Q1 momentum, this disruption strategy has now

captured and delivered $130 million in cumulative balances as we track toward our long-term goal of $500 million from the ongoing

market disruption. As we have highlighted in previous discussions, our targeted commitment to our two nearby de novo markets this

year, Angola, Indiana, and Napoleon, Ohio, continues to yield results that exceed our original targets and expectations.

Capitalizing on branch consolidation and disruption by larger regional players has allowed us to successfully transition these low

cost core accounts back to a local relationship-driven banking model at State Bank. Following our strong 1Q performance, these

offices recorded $19.3 million in loans and $22.5 million in deposits and continue to expand their structural footprint well ahead

of schedule. Now for more scope. We continue to prioritize referrals as an effective way to deepen long-term client relationships

across the entire franchise. Concurrently, our Wealth Management Division finished the period with fees improving to $955,000 and

assets under care at nearly $556.9 million. Our alliance and alignment with Advisory Alpha is now operational and we’ve begun to

methodically transition our client relationships to not only allow our current client base, but also any future clients, an extended

array of products, advice, and investment vehicles.

Moving to operational excellence, we remain focused on matching

growth with disciplined execution. The second quarter reflected that mindset with expense levels remaining controlled relative to

revenue. Pre-tax pre-provision income increased 9.0% year over year to $5.8 million, reflecting our expanded balance sheet and

ongoing focus on positive operating leverage. To effectively support this expanded balance sheet scale, we have successfully added

talented lenders to fill open positions across our footprint, ensuring our teams have the necessary production capacity to sustain

our current growth trajectory. As highlighted earlier, linked quarter loan growth, while positive, was below our expectations for

the second quarter. The details reveal that unlike in prior quarters where Columbus was providing the bulk of that lift, this

quarter we had growth in three of our traditional markets that offset that generally flattish production elsewhere. Specifically,

Lima production was higher by $4.2 million, Fort Wayne, Indiana by $3.0 million, and Bowling Green had a growth of $1.4 million. Our

capital position remains strong with total shareholders’ equity climbing to $146.7 million, up 9.8% from $133.6 million a year

ago.

Capital levels remain robust, providing top tier, tangible common

equity and regulatory capital support that ensure balance sheet flexibility moving forward. And finally, asset quality. Credit

quality remained a key component in our ongoing high performance this quarter. Our allowance for credit losses rose to $16.4

million, representing 1.38% of our total loans and generating nearly a five-time coverage ratio of our non-performing loans. Our

ongoing commitment to rigorous credit administration is evident across our portfolios. Notably, our core criticized assets dropped

sharply this quarter to just $344,359, while our classified loans stood well contained at $4.08 million. Through the positive and

proactive efforts of our lending and collections teams, we successfully managed our gross total delinquency rate down to just 32

basis points from 51 basis points at this time last year. We continue to emphasize disciplined underwriting, proactive management of

problem assets, and prudent growth across all markets.

This commitment to disciplined execution is also evident in our agricultural

sector where our targeted efforts have successfully expanded total agricultural balances past the $81 million mark, reflecting an increase

of over $20 million from last year as we continue to track toward our long-term goal of a $100 million portfolio. With that, I’ll turn

it over to Tony Cosentino, our CFO, for some expanded comments on our second quarter financial performance.

Tony?

Anthony V. Cosentino

Executive VP & CFO

Thanks, Mark, and good morning again, everyone. Let me just

outline some highlights and important details of our second quarter results. This quarter, total operating revenue expanded to $17.9

million, an increase of 4.5% from $17.2 million in the second quarter of 2025 and expanding 3.0% from the $17.4 million recorded in

the linked quarter. As Mark noted, the quarter reflected a balanced revenue performance with stable net interest income and a

stronger contribution from our fee-based businesses. Mark detailed our GAAP net income earlier, and when we adjust both years for

OMSR valuation adjustments, adjusted diluted earnings per share advanced to $0.73 for the current period compared to $0.58 in the

second quarter of 2025, an increase of nearly 26% on an adjusted basis. Net interest income was driven higher by our reliance on the

growth of the top line, with interest income up $1.35 million from the prior year, easily outpacing the interest expense growth of

$527,000.

Despite the slight slowdown in loan growth, our low-cost deposit growth

coupled with higher overnight funding rates have boosted margins. As we indicated, last quarter reflected the peak of our margin percentage

level, with this quarter’s margin down slightly at 3.43% compared to 3.48% in the prior year and linked quarter. We continue to benefit

from a larger balance sheet and the ongoing repricing of interest-earning assets, although at a slower pace than prior quarters. Non-interest

income finished the quarter at $5.0 million. Our core mortgage banking contribution reached $1.9 million, down slightly from the $2.2

million reported in the second quarter of 2025, but expanding from $1.8 million in the linked quarter. Mortgage banking was supported

by core loan servicing fees contributing $934,000, while gain on sale of mortgages finished at $1.5 million. Our hedging program successfully

offset some of the rate market volatility, leaving the net OMSR valuation at a minor negative $54,000 for the period.

Volume this quarter moved decidedly in favor of purchase

activity, as 81% of our volume was purchase or construction. Notably, our total mortgage gain on sale percentage improved to 2.19%,

which was the highest level we have achieved since the second quarter of 2024. Operating expenses totaled $12.1 million for the

quarter, up 2.4% from $11.9 million in the prior year. This change reflects the impact of adding talented lenders to fill open

positions across our footprint, with salaries and benefits totaling $7.0 million. Our year-over-year expense comparison was heavily

mitigated by lower data processing fees, dropping to $693,000 from $888,000, reflecting system efficiencies as our one-time merger

integration costs cleared our run rate. Efficiency ratio for the quarter improved to 67.3%. And notably, operating leverage for the

quarter was a positive 1.9 times with revenue expanding by 4.5% compared to expense growth of 2.4%.

Turning back to the balance sheet, loan balances ended the quarter

at approximately $1.19 billion, as Mark indicated, reflecting continued year-over-year growth and a modest increase from year-end. Loans

to assets were a healthy 73.6%. Commercial real estate outstandings continue to drive our loan portfolio balances at $611.3 million, but

specifically exposure to office space is under 5.5% of our total loan portfolio, and excluding mortgage portfolio balances, no other segment

is higher than 10% of our current loan outstandings. Loan-to-deposit ratio at quarter end was 85.5%. We have significant liquidity currently,

but are aware of several large institutional deposit relationships that are moving to the wholesale market sector later this year. We

expect these losses to not be material to earnings given their marginal rates compared to what we can acquire from retail and TM calling

efforts. On capital management during the second quarter, we continued to adjust our share buyback posture to preserve absolute capital

flexibility, repurchasing a little over 28,000 shares at an average price of $22.06.

As we discussed during our first quarter call, we have guided

lower on buybacks for 2026 as our market price is now trading at 1.4 times tangible book. This disciplined stance ensures and

preserves balance sheet flexibility and remains fully aligned with our broader capital priorities and, most importantly, does

provide a floor for our market price. Turning lastly to asset quality, non-performing assets totaled $4.4 million, representing

0.27% of total assets, compared to $4.7 million in the linked quarter and $6.2 million in the prior-year quarter. While NPAs

declined sequentially and remain well-controlled, overall credit performance again remains sound. Allowance for credit losses as a

percentage of total loans is 1.38% compared to 1.39% in the linked quarter and 1.43% in the prior year. Coverage of non-performing

loans rose to 470% compared to 443% in the linked and 266% in the prior-year period. Net charge-offs, while slightly higher compared

to historical averages, remain modest at 6 basis points compared to just 1 basis point in the linked quarter and 2 basis points in

the prior-year quarter.

We dealt with a long-standing credit problem in the quarter, which

was fully allocated in our model, and that is working slowly towards resolution. Total gross delinquency rate ended the period under 35

basis points, and when we exclude those loans on non-accrual, that delinquency rate is effectively zero. I’ll now turn the call back over

to Mark for some closing remarks.

Mark A. Klein

Chairman, President & CEO

Thank you, Tony. We enter the second quarter and second half of 2026

with strong and steady momentum across our entire franchise. This quarter’s performance demonstrates that our diversified business model

can deliver solid profitability even when broader market conditions compress our historical fee-income volumes. With total assets under

our care now approaching the $3.7 billion mark, our growing scale is providing the positive operating leverage we need to drive consistent

long-term value. Our focus for the remainder of the year remains straightforward: executing on our strategies in our expansion markets

of Angola and Napoleon, supporting our lending teams to build on sequential loan growth, and continuing to leverage our core relationship

model to capture low-cost deposits amid regional market disruptions. At the same time, we remain deeply committed to our disciplined credit

underwriting standards, and this proactive approach to risk management has successfully kept our non-performing assets at a solid 0.27%.

Reflecting our consistent earning power and our ongoing commitment to shareholder returns, we’re pleased to pay a quarterly dividend payable

in August of $0.16 per share. This represents an annualized yield of approximately 2.4% and a conservative 22% payout ratio, keeping us

firmly on track for our 14th consecutive year of increasing annual dividend payouts to our shareholders. Now we’ll open the call up to

any questions. Sarah?

Sarah S. Mekus

The State Bank and Trust Company

Thank you. Operator, we’re now ready for questions.

Operator

We will now begin the question-and-answer session. To ask a question,

you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.

To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question

comes from Brian Martin with Brean. Please go ahead.

Question and Answer

Brian Joseph Martin

Brean Capital, LLC, Research Division

Hey, good morning, guys.

Mark A. Klein

Chairman, President & CEO

Good morning, Brian.

Brian Joseph Martin

Brean Capital, LLC, Research Division

Hey, maybe Tony, we could just start for a minute on your comments

about the margin and just kind of more broadly how you’re thinking about it. You know, there’s been a lot of comments this quarter from

other banks just about competition on both sides of the balance sheet. I know you commented last quarter that your margin peaked, so how

do you think the margin plays out from where we are here today? What are the puts and takes on where that’s trending? I know there was

some excess liquidity this quarter that impacted the margin as well with the deposit growth, but I’m just trying to understand dynamically

where we’re going to be trending here over the next couple quarters—both on the margin and if funding costs are bottoming while

you’re still seeing some repricing on the asset side.

Anthony V. Cosentino

Executive VP & CFO

Yes, sure. You know, as we talked about last quarter, we thought margin

percentage peaked in Q1 and was going to trend to stabilize or go down slightly, but I think it was more structural than anything else.

I mean, we had a lot of liquidity in the quarter as we talked about—deposit growth at pretty good pricing. I’m much more positive

now that we might move that percentage up slightly because we do have a fair amount of loan growth that I think we’re going to have here

in the second half of the year—more than I thought going into the quarter. We’ve looked at a number of very good credits with some

good pricing. So I think we’re going to use up quite a bit of that liquidity and that’s going to drive margins, certainly no less than

where they are and slightly higher moving forward, because I do think that’s going to be a bit of a positive force moving forward.

Mark A. Klein

Chairman, President & CEO

You know, Brian, one of the key metrics... we continue to take a larger

bite out of the ag sector as we’ve talked for a number of quarters. And with those loans have come low-cost deposits. So we’ve been doing

very well on finding low-cost deposits that keep that average down. When you add to the margin at the average, it’s been pretty good.

And what do we say, Tony?

Anthony V. Cosentino

Executive VP & CFO

181 basis points.

Mark A. Klein

Chairman, President & CEO

Yes, yes. Very good pricing year-over-year. So I view that as a large

positive when it comes to adding loans at the 6.5% to 6.75% level, but bringing in those low-cost deposits—really non-cost transactional

accounts. So I see that, Brian, as a boost to that margin, but I know Tony’s got his handle on the numbers.

Brian Joseph Martin

Brean Capital, LLC, Research Division

Yes, and it sounds, Tony, like it maybe gets back to where it was last

quarter. I mean, if you get some of this loan growth, maybe you get back to that last quarter’s level, which is almost 3.50%—so

call it around 3.50%—or can you maybe not get back that high, and then it’s just more stability after that once you bring on the

loans and stabilize it? Is that what you’re thinking?

Anthony V. Cosentino

Executive VP & CFO

Yes, I think that 3.45% to 3.55% range is where we’re going to be,

probably in Q3 and on for some time. I feel like we’ve got enough momentum on the loan side, and we’ve had enough deposit growth that

we haven’t really had to be crazy on pricing to get there. I think the disruption in the markets that we’re in has been much better than

we anticipated, especially on the deposit side. So I think that’s going to sustain us for a while.

Mark A. Klein

Chairman, President & CEO

I mean, I’ll be surprised if we don’t move higher from where we were

in this quarter. Certainly, Tony, the mix of loans has helped from a C&I perspective, as well as the market disruption of a $28 billion

player.

Anthony V. Cosentino

Executive VP & CFO

Yes, yes.

Mark A. Klein

Chairman, President & CEO

Thank you.

Brian Joseph Martin

Brean Capital, LLC, Research Division

Yes, OK, that’s super helpful, Tony and Mark. And then maybe just

on the deposit growth—like you said, it’s been really strong. Is that normalizing going forward? I guess it sounds like you

still continue to capitalize on that, but maybe the growth in deposits is a little bit slower going forward. And the loan pipeline,

Tony, it sounds like that’s a bit stronger than expected?

Mark A. Klein

Chairman, President & CEO

Well, first on deposits, Brian, you know, we’re pretty excited about

the opportunities in the two new markets that we descended upon de novo. Angola is doing well, and Napoleon is doing well. As I mentioned

before, there’s a $1 billion in deposits in that new market that has had major disruptions, and we’re taking our share plus some. So I

would be a little more bullish on the opportunity to expand our deposit base well below the margin. As far as the pipeline, I know there’s

strong potential for significant growth in all markets coming up here for the second half of the year.

Anthony V. Cosentino

Executive VP & CFO

Yes, I would just supplement Mark’s comments. As we’ve indicated, we’re

going to lose about $40 million of what I call wholesale deposits from a client we’ve had for a number of years, probably in Q3. But again,

we’re up $140 million year-over-year, which is way outside what you would think would be a normalized deposit growth area. So if you normalize

that to call it a $100 million net of this deposit loss, we think we’re still going to be growing 3% to 5% per quarter over the linked

period based on everything we see. And flipping to your question about the loan pipeline, it is much stronger and kind of filling in steeper

than when we got into the middle of this. We’ve had a few paydowns, but it hasn’t been the dominant story like in prior years. It’s been

more about the production side, which was a little soft in Q2, and I think that’s ramping back up here in Q3.

Mark A. Klein

Chairman, President & CEO

And the paydowns, Tony, were more strategic than anything. So it wasn’t

like we got pruned; we decided to walk away on a couple of credits. But I know Steve’s pipeline looks strong, and we’re pretty bullish

on the second half of the year.

Steven A. Walz

Executive VP & Chief Lending Officer

No, certainly. I would just add, Brian, Columbus remains a core driver

of our growth. But what’s been encouraging, as Mark touched on earlier, is that the breadth has expanded. Going into the year, we talked

about that as a goal, and we’re seeing that come to fruition here. It is a function, to a significant degree, of that market disruption

Mark referenced earlier. Our legacy markets are participating in our growth story in a way that they had not over the last several years.

So we are encouraged. Certainly Columbus and our growth markets like Fort Wayne will play along, but the breadth of that expansion is

welcome as we look to the second half of the year.

Mark A. Klein

Chairman, President & CEO

Because, as we’ve talked, our model has been to gather low-cost transactional

deposits from our traditional markets and expand where there’s capital need, which is our growth markets. But as Steve said, that’s starting

to flip around a little bit. We’re getting the low-cost transaction deposits in our legacy markets, and now we’re identifying some loan

opportunities from those markets as well. So we’re kind of getting a double bump.

Brian Joseph Martin

Brean Capital, LLC, Research Division

Got you. And just in terms of the pickup in loans—where it’s

coming from—I know a lot of it’s been from Columbus, but with these other markets, if you think about the second half of the year,

does the growth stay balanced across the footprint? Is Columbus still leading it while these other markets are contributing and building?

Anthony V. Cosentino

Executive VP & CFO

Well, at a high level, I’m thinking we’re probably going to do between

$50 to $70 million in balance sheet increase on the loan side between now and the end of the year—without talking about paydowns.

With a normalized group of paydowns, that might be a $50 or $60 million net number. I would guess it’s probably 50% Columbus and 50% everywhere

else as I look at the pipeline today. To me that’s a victory, because last year we were 90% Columbus and 10% everywhere else. I’d like

that much better in terms of geographic spread.

Mark A. Klein

Chairman, President & CEO

And, Tony, that’s even without Columbus exiting the game! Columbus

is still in the game, so where we’re balancing it out, as we indicated, is Northwest Ohio and Northeast Indiana.

Anthony V. Cosentino

Executive VP & CFO

Yep.

Brian Joseph Martin

Brean Capital, LLC, Research Division

Yes, okay. No, that’s helpful. It sounds like you’re optimistic on

both the loan and deposit front. The broadening out is definitely a positive here. On the mortgage side—pretty easy outlook given

where the rate environment’s at. I know you talked about being more purchase money, which makes sense given rates. But thinking about

the full-year outlook for mortgage in terms of originations, activity, and pace... What does the outlook look like on mortgage?

Mark A. Klein

Chairman, President & CEO

Well, as you know, the rate environment has certainly made it difficult

for MLOs because we don’t have many people willing to refinance at 6.75%. That presents challenges. But that said, we’ve hired several

high-producing MLOs that are going to move the needle. We’ve got a nice team in Columbus, a good one expanding in Cincinnati, and Indy

is doing well. We continue to do some private client variable-rate mortgages to put on our books, which has been great—it doesn’t

deliver non-interest income, but it delivers margin revenue. I continue to remain optimistic on getting somewhere near that $300 million

mark, but it’s going to be a tough place to land this year, Tony.

Anthony V. Cosentino

Executive VP & CFO

Yes, I think we’re probably looking at an $80 million quarter in Q3,

very similar to Q2, and anywhere from $50 to

$60 million in Q4. Again, as we talked about on rates, we’re not

that far away. We’re 50 basis points from unpacking another $30 to $50 million in volume. But if we stay stuck at this 6.625% range

for the remainder of the year, then that $130 million is what we’re probably going to do, which is just your normal level of volume

from people moving and life changes. That additional $50 million is dependent on us seeing something at 6% or below, which I

certainly don’t see until maybe Q4.

Mark A. Klein

Chairman, President & CEO

We’ve got high producers that are highly incented, and we’re bringing

on more producers in newer markets. We’re going to continue to optimize the back end of our process—I’m going to go on record and

say we can do $400 million to $500 million without adding anybody. Those fixed costs are pretty much fixed, so it’s going to be accretive

to our whole process. With a little bit of play in the mortgage rate, I think we can ramp our results up dramatically.

Brian Joseph Martin

Brean Capital, LLC, Research Division

Got you. And just remind me, Mark, it sounds like you brought some

people on this quarter. Roughly how many MLOs have you added that aren’t in the numbers today?

Mark A. Klein

Chairman, President & CEO

We’ve added one in Columbus, one in Cincinnati, and I think we replaced

one in Indy. So two or three net additions right off the cuff. We’re generally right at that 27 level where we’ve been before. The good

part is they’re all very hungry and doing great things. What’s really ramped up recently is the FHLB 4.5% fixed-rate product out there

for households below 80% of median income. That’s gaining traction in all of our markets, and to my knowledge, there’s no cap on that

amount, so our people are pedaling that across our footprint.

Brian Joseph Martin

Brean Capital, LLC, Research Division

Got you. Okay. And on the gain on sale margin, Tony, is that in a similar

range to where it’s been? Nothing really changing there in pricing?

Anthony V. Cosentino

Executive VP & CFO

That’s right. Nothing changing.

Brian Joseph Martin

Brean Capital, LLC, Research Division

Okay, good. And then lastly on the expense front: given the pickup

in volume, obviously there are incentives that come along with that. How do we think about expenses in the back half of the year? Balancing

your great expense management with the growth you’re expecting, what do expenses look like?

Anthony V. Cosentino

Executive VP & CFO

Yes, I think they trend slightly higher than what we had in Q2.

Q2 was kind of the low end of the scale because we filled a couple of open slots, as Mark indicated. Compensation levels will move

slightly higher given the performance through the first half. We pay out incentives to a broad range of our team which we accrue for

all year long. Given the bottom-line performance and metrics on the deposit side, we’re going to have some higher expense levels.

We’re probably in that $12.3 to $12.4 million range in Q3, and probably at $12.0 million in Q4 as mortgage volume ramps down. So

it’s going to be higher by about $300,000 from where we were in Q2 into Q3, but other than that, it’s going to be pretty well

maintained.

Mark A. Klein

Chairman, President & CEO

Given that mortgage lending is highly variable

in compensation, we’d love to see it go up! Clearly we’ve attempted to make commercial lending variable as well—we pay great base

pay, but we also highly incent individuals to find commercial loans across our footprint. That goes up marginally, but that’s more fixed-cost

based than variable.

Brian Joseph Martin

Brean Capital, LLC, Research Division

Makes sense. And Tony, regarding funding the loan

growth in the second half... with that one potential $40 million deposit walkaway, what’s the outlook for managing liquidity to fund loan

growth given those deposit dynamics?

Anthony V. Cosentino

Executive VP & CFO

We’ve got an excess level of liquidity. Assuming the worst-case scenario

that $40 million walks out without any replacement, I think we can fund all of what I view as the medium-to-high end range of our loan

pipeline from now to the end of the year. Anything we build on the deposit side now is funding 2027 loan growth. So we’re not going to

slow down on deposit gathering, and given market disruptions, growth will continue to exceed expectations.

Mark A. Klein

Chairman, President & CEO

And we’re excited about the $20 million we get back in the Securities

Portfolio.

Anthony V. Cosentino

Executive VP & CFO

Absolutely.

Mark A. Klein

Chairman, President & CEO

Woven in there, plus payoffs and paydowns.

Anthony V. Cosentino

Executive VP & CFO

Yes. Good cash flow.

Brian Joseph Martin

Brean Capital, LLC, Research Division

In terms of excess liquidity today, Tony, how much do you have on the

balance sheet outside of normal capital to fund loan growth in the second half?

Anthony V. Cosentino

Executive VP & CFO

It’s probably $70 million, which is really

high relative to where we usually are. But we purposely stayed there hoping for the loan pipeline to turn around, which it is doing in

the second half. So we’ve stayed very liquid and flexible.

Brian Joseph Martin

Brean Capital, LLC, Research Division

OK, that’s what I figured was the case. I just wanted to make sure

I was clear on the deposit dynamics. It sounds like credit quality is really good as well. You’ve been working on legacy issues, but the

pipeline of new credits weakening doesn’t sound big, and you expect continued improvement on legacy credits?

Mark A. Klein

Chairman, President & CEO

Yes, we continue to see optimistic movement on some of the ones that

have been around a long time. It’s like watching paint dry sometimes in terms of getting rid of asset quality problems! But fortunately,

Brian, they’re not seven-figure things—they’re smaller six-figure things. They’re more of an annoyance than a needle mover.

Brian Joseph Martin

Brean Capital, LLC, Research Division

Yes, okay. That’s how I figured it. It’s a good story there and not

a lot to elaborate on. Thank you guys for taking the questions, I appreciate it.

Mark A. Klein

Chairman, President & CEO

All right, thanks, Brian.

Operator

This concludes our question and answer session. I would like to turn

the conference back over to Mark Klein for any closing remarks.

Mark A. Klein

Chairman, President & CEO

Thank you once again for joining us this morning. We certainly look

forward to speaking with you in October and giving you an update on our third quarter 2026 results. Thanks for joining us. Have a great

day. Goodbye.

Operator

The conference is now concluded. Thank you for attending today’s presentation.

You may now disconnect.

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