What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-04-30 compared with 2023-11-07 · 315 added, 442 removed, 827 unchanged (48% of the section changed)

4 unchanged sentences

(In Thousands, Except Per Share Data)

SEPTEMBER 30,

Interest-bearing deposits in other financial institutions

3 unchanged sentences

Mortgage loans held for sale

Loans receivable, net of allowance for credit losses of $ 64,753 – September 2023;

Loans receivable, net of allowance for credit losses of $ 65,087 – March 2024;

$ 64,670 – December 2023

20 unchanged sentences

authorized 1,000,000 shares;

issued and outstanding September 2023 and December 2022 - - 0 - shares

issued and outstanding March 2024 and December 2023 - - 0 - shares

Common stock, $ .01 par value;

authorized 20,000,000 shares;

issued and outstanding September 2023 – 11,864,363 shares;

issued and outstanding March 2024 – 11,699,356 shares;

December 2023 – 11,804,430 shares

1 unchanged sentence

Retained earnings

Accumulated other comprehensive income (loss)

Accumulated other comprehensive loss

Total Stockholders’ Equity

6 unchanged sentences

THREE MONTHS ENDED

SEPTEMBER 30,

INTEREST INCOME

15 unchanged sentences

Net gains on loan sales

Net realized gain on sale of available for sale securities

Late charges and fees on loans

Gain on derivative interest rate products

TOTAL NON-INTEREST INCOME

NON-INTEREST EXPENSE

Salaries and employee benefits

Net occupancy and equipment expense

Office supplies and printing

Legal, audit and other professional fees

Expense on other real estate and repossessions

Acquired intangible asset amortization

Other operating expenses

TOTAL NON-INTEREST EXPENSE

INCOME BEFORE INCOME TAXES

PROVISION FOR INCOME TAXES

Basic Earnings Per Common Share

Diluted Earnings Per Common Share

Dividends Declared Per Common Share

See Notes to Consolidated Financial Statements

GREAT SOUTHERN BANCORP, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Share Data)

NINE MONTHS ENDED

SEPTEMBER 30,

INTEREST INCOME

Investment securities and other

TOTAL INTEREST INCOME

INTEREST EXPENSE

Securities sold under reverse repurchase agreements

Short-term borrowings, overnight FHLBank borrowings and other interest-bearing liabilities

Subordinated debentures issued to capital trust

Subordinated notes

TOTAL INTEREST EXPENSE

NET INTEREST INCOME

PROVISION FOR CREDIT LOSSES ON LOANS

PROVISION (CREDIT) FOR UNFUNDED COMMITMENTS

NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES AND PROVISION (CREDIT) FOR UNFUNDED COMMITMENTS

NON-INTEREST INCOME

Overdraft and insufficient funds fees

Point-Of-Sale and ATM fee income and service charges

Net gains on loan sales

Net realized gain on sale of available-for-sale securities

Late charges and fees on loans

Gain (loss) on derivative interest rate products

Loss on derivative interest rate products

TOTAL NON-INTEREST INCOME

16 unchanged sentences

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands, Except Per Share Data)

THREE MONTHS ENDED

SEPTEMBER 30,

Unrealized appreciation (depreciation) on available-for-sale securities, net of taxes (credit) of $( 1,782 ) and $ 2,258 , for 2024 and 2023, respectively

Unrealized loss on securities transferred to held-to-maturity, net of taxes of $( 13 ) and $( 65 ) for 2023 and 2022, respectively

reclassification adjustment for gains included in net income, net of taxes of $( 0 ) and $( 7 ) for 2023 and 2022, respectively

Amortization of realized gain on termination of cash flow hedge, net of taxes (credit) of $( 468 ) and $( 467 ), for 2023 and 2022, respectively

Change in value of active cash flow hedges, net of taxes (credit) of $( 832 ) and $( 5,876 ) for 2023 and 2022, respectively

Comprehensive Income (Loss)

NINE MONTHS ENDED

SEPTEMBER 30,

Unrealized appreciation (depreciation) on available-for-sale securities, net of taxes (credit) of $( 5,327 ) and $( 17,965 ), for 2023 and 2022, respectively

Unrealized (gain) loss on securities transferred to held-to-maturity, net of taxes (credit) of $( 12 ) and $( 5 ) for 2024 and 2023, respectively

reclassification adjustment for gains included in net income, net of taxes of $( 0 ) and $( 9 ) for 2023 and 2022, respectively

Amortization of realized gain on termination of cash flow hedge, net of taxes (credit) of $( 461 ) and $( 457 ), for 2024 and 2023, respectively

Change in value of active cash flow hedges, net of taxes (credit) of $( 969 ) and $ 2,146 for 2024 and 2023, respectively

Comprehensive Income (Loss)

See Notes to Consolidated Financial Statements

GREAT SOUTHERN BANCORP, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In Thousands, Except Per Share Data)

THREE MONTHS ENDED SEPTEMBER 30, 2023

Comprehensive

Paid-in Capital

Income (Loss)

Balance, June 30, 2023

Stock issued under Stock Option Plan

Common cash dividends declared, $ 0.40 per share

Change in fair value of cash flow hedges

Change in unrealized gain on held-to-maturity securities

Change in unrealized loss on available-for-sale securities

Purchase of the Company’s common stock

Reclassification of treasury stock per Maryland law

Balance, September 30, 2023

THREE MONTHS ENDED SEPTEMBER 30, 2022

Comprehensive

Paid-in Capital

Income (Loss)

Balance, June 30, 2022

Stock issued under Stock Option Plan

Common cash dividends declared, $ 0.40 per share

Change in fair value of cash flow hedges

Change in unrealized loss on held-to-maturity securities

Change in unrealized loss on available-for-sale securities

Purchase of the Company’s common stock

Reclassification of treasury stock per Maryland law

Balance, September 30, 2022

Comprehensive Income

See Notes to Consolidated Financial Statements

3 unchanged sentences

(In Thousands, Except Per Share Data)

NINE MONTHS ENDED SEPTEMBER 30, 2023

THREE MONTHS ENDED MARCH 31, 2023

Comprehensive

3 unchanged sentences

Stock issued under Stock Option Plan

Common cash dividends declared, $ 1.20 per share

Common dividends declared, $ 0.40 per share

Change in fair value of cash flow hedges

Change in unrealized gain on held-to-maturity securities

Change in unrealized loss on available-for-sale securities

Change in unrealized loss on held-to-maturity securities

Change in unrealized gain on available-for-sale securities

Purchase of the Company’s common stock

Reclassification of treasury stock per Maryland law

Balance, September 30, 2023

NINE MONTHS ENDED SEPTEMBER 30, 2022

Balance, March 31, 2023

THREE MONTHS ENDED MARCH 31, 2024

Comprehensive

4 unchanged sentences

Common cash dividends declared, $ 0.40 per share

Retained Earnings effect of ASU 2023-02 adoption

Change in fair value of cash flow hedges

Change in unrealized gain on held-to-maturity securities

Change in unrealized loss on held-to-maturity securities

Change in unrealized loss on available-for-sale securities

1 unchanged sentence

Reclassification of treasury stock per Maryland law

Balance, September 30, 2022

Balance, March 31, 2024

See Notes to Consolidated Financial Statements

3 unchanged sentences

(In Thousands, Except Per Share Data)

NINE MONTHS ENDED

SEPTEMBER 30,

THREE MONTHS ENDED

CASH FLOWS FROM OPERATING ACTIVITIES

7 unchanged sentences

Net (gain) loss on sale of premises and equipment

Net (gain) loss on sale/write-down of other real estate owned and repossessions

Net gain on sale of available-for-sale investments

Net loss on sale/write-down of other real estate owned and repossessions

Accretion of deferred income, premiums, discounts and other

(Gain) loss on derivative interest rate products

Loss on derivative interest rate products

Deferred income taxes

3 unchanged sentences

Income taxes refundable/payable

Net cash provided by operating activities

Net cash provided by (used in) operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

4 unchanged sentences

Proceeds from sale of other real estate owned and repossessions

Proceeds from sale of available-for-sale securities

Proceeds from maturities and calls of available-for-sale securities

Principal reductions on mortgage-backed securities

Purchase of available-for-sale securities

Purchase of Federal Home Loan Bank stock and change in other interest-earning assets

Net cash used in investing activities

Investment in tax credit partnerships

Redemption of Federal Home Loan Bank stock and change in other interest-earning assets

Net cash provided by (used in) investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

Net increase in certificates of deposit

Net increase (decrease) in checking and savings deposits

Net increase (decrease) in short-term borrowings

Net increase (decrease) in certificates of deposit

Net increase in checking and savings deposits

Net decrease in short-term borrowings

Proceeds from borrowing under Federal Reserve Bank Term Funding Program

Advances from borrowers for taxes and insurance

Dividends paid

Purchase of the Company’s common stock

Dividends paid

Stock options exercised

Net cash provided by financing activities

Net cash provided by (used in) financing activities

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

10 unchanged sentences

Those adjustments consist only of normal recurring adjustments.

Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the full year.

Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the full year.

The consolidated statement of financial condition of the Company as of December 31, 2023, has been derived from the audited consolidated statement of financial condition of the Company as of that date.

1 unchanged sentence

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (the “SEC”).

Reclassifications

Prior period consolidated financial statements are reclassified whenever necessary to conform to the current period presentation.

Correction of an Immaterial Error in Prior Period Financial Statements

Certain prior period amounts in the Consolidated Statements of Cash Flows have been corrected as discussed below.

No other financial statements or notes thereto were impacted by these corrections.

The Company has corrected its Consolidated Statements of Cash Flows for the three months ended March 31, 2023 within this Quarterly Report on Form 10-Q for an error in classification within the operating activities section of the statements of cash flows regarding amortization of terminated hedging transactions and for an error in classification regarding investments in tax credit partnerships between the operating activities and investing activities sections of the statements of cash flows.

For the item related to the terminated hedging transactions, the Company is now including the amortization from accumulated other comprehensive income and related deferred taxes recognized in interest income as an item not providing cash in accretion of deferred income, premiums, discounts and other.

This was previously included in net changes in prepaid expenses and other assets.

For the item related to investments in tax credit partnerships, the Company is now including the amounts invested as an item using cash in the investing activities section.

This was previously included in net changes in prepaid expenses and other assets in the operating activities section.

The Company assessed the materiality of this change in presentation on prior period consolidated financial statements in accordance with SEC Staff Accounting Bulletin No.

99, “Materiality,” (ASC Topic 250, Accounting Changes and Error Corrections ).

Based on this assessment, the Company concluded that these error corrections in its statements of cash flows are not material to any previously presented financial statements.

The corrections had no impact on the Consolidated Statements of Financial Condition, Consolidated Statements of Income, Consolidated Statements of Comprehensive Income or Consolidated Statements of Stockholders’ Equity, or notes to these financial statements, for any previously presented interim or annual financial statements.

Accordingly, the Company corrected the previously reported immaterial errors for the three months ended March 31, 2023 in this Quarterly Report on Form 10-Q.

A summary of corrections reflecting the prior period impacts to the Company’s Consolidated Statements of Cash Flows are shown below (in thousands of dollars):

For the Three Months Ended March 31, 2023

As Previously

Operating Activities

Accretion of deferred income, premiums, discounts and other

Prepaid expenses and other assets

Net cash provided by operating activities

Investing Activities

Investment in tax credit partnerships

Net cash used in investing activities

NATURE OF OPERATIONS AND OPERATING SEGMENTS

4 unchanged sentences

Omaha, Nebraska;

and Tulsa, Oklahoma.

The Company and the Bank are subject to regulation by certain federal and state agencies and undergo periodic examinations by those regulatory agencies.

13 unchanged sentences

The main provisions for contract modifications include optional relief by allowing the modification as a continuation of the existing contract without additional analysis and other optional expedients regarding embedded features.

Optional expedients for hedge accounting permit changes to critical terms of hedging relationships and to the designated benchmark interest rate in a fair value hedge and also provide relief for assessing hedge effectiveness for cash flow hedges.

Optional expedients for hedge accounting permit changes to critical terms of hedging relationships and to the designated benchmark interest rate in a fair value hedge and provide relief for assessing hedge effectiveness for cash flow hedges.

ASU 2020-04 was effective upon issuance;

1 unchanged sentence

Based upon amendments provided in ASU 2022-06 discussed below, provisions of ASU 2020-04 can now generally be applied through December 31, 2024.

The application of ASU 2020-04 has not had, and is not expected to have, a material impact on the Company’s consolidated financial statements.

The application of ASU 2020-04 has not had, and is not expected to have;

a material impact on the Company’s consolidated financial statements.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848):

4 unchanged sentences

Based upon amendments provided in ASU 2022-06 discussed below, provisions of ASU 2021-01 can now generally be applied through December 31, 2024.

ASU 2021-01 has not had, and is not expected to have, a material impact on the Company’s consolidated financial statements.

In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (Topic 815):

Fair Value Hedging – Portfolio Layer Method .

ASU 2022-01 further clarifies certain targeted improvements to the optional hedge accounting model that were made under ASU 2017-12.

ASU 2022-01 expands the last-of-layer method and renames this method to portfolio layer method to reflect this expansion, as well as expanding the scope of the portfolio layer method to include nonprepayable financial assets.

It also specifies eligible hedging instruments and provides additional guidance on the accounting for and disclosure of hedge basis adjustments that are applicable to the portfolio layer method.

ASU 2022-01 permits an entity to apply the same portfolio hedging method to both prepayable and nonprepayable financial assets, thereby allowing consistent accounting for similar hedges.

ASU 2022-01 became effective for the Company on January 1, 2023.

The adoption of ASU 2022-01 did not have a material impact on the Company’s consolidated financial statements.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures .

ASU 2022-02 eliminates the troubled debt restructuring recognition and measurement guidance and, instead, requires that an entity evaluate whether a loan modification represents a new loan or a continuation of an existing loan.

It also enhances existing disclosure requirements and introduces new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty.

ASU 2022-02 became effective for the Company on January 1, 2023.

The adoption of ASU 2022-02 did not have a material impact on the Company’s consolidated financial statements.

The adoption of this ASU does, however, require changes in disclosures related to certain loan modifications.

ASU 2021-01 has not had, and is not expected to have;

a material impact on the Company’s consolidated financial statements.

In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848):

8 unchanged sentences

Previously, this method was only available for qualifying tax equity investments in low-income housing tax credit structures.

The Company is evaluating whether or not to use this method for other tax credit structures in which it invests.

Currently, the Company does not have a material amount of tax credit structures, other than low-income housing tax credit structures.

ASU 2023-02 will be effective for the Company on January 1, 2024, though early adoption is permitted, and its adoption is not expected to have a material impact on the Company’s consolidated financial statements.

ASU 2023-02 became effective for the Company on January 1, 2024.

The adoption of ASU 2023-02 did not have a material impact on the Company’s consolidated financial statements and resulted in a reduction of retained earnings of $ 223,000 upon adoption.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

ASU 2023-07 expands reportable segment disclosure requirements through enhanced disclosures about significant segment expenses.

ASU 2023-07 implements a new requirement to disclose significant segment expenses regularly provided to the chief operating decision maker, expands certain annual disclosures to interim periods, clarifies that single reportable segment entities must apply Topic 280 in its entirety and permits more than one measure of segment profit or loss to be reported under certain conditions.

ASU 2023-07 is effective for the Company for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is evaluating the requirements of the expanded segment disclosures but does not currently expect the additional disclosures to have a material impact on the Company’s consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

ASU 2023-09 is focused on additional income tax disclosures and requires public business entities, on an annual basis, to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income by the applicable statutory income tax rate).

ASU 2023-09 is effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2024, with early adoption permitted.

While the Company is currently assessing the impact applying this standard will have on its income tax disclosures, the adoption of ASU 2023-09 is not expected to have a material impact on the Company’s consolidated financial statements.

EARNINGS PER SHARE

Three Months Ended September 30,

(In Thousands, Except Per Share Data)

Average common shares outstanding

Per common share amount

Average common shares outstanding

Net effect of dilutive stock options – based on the treasury stock method using average market price

Diluted common shares

Per common share amount

Nine Months Ended September 30,

Three Months Ended March 31,

(In Thousands, Except Per Share Data)

5 unchanged sentences

Per common share amount

Options outstanding at September 30, 2023 and 2022, to purchase 758,129 and 364,199 shares of common stock, respectively, were not included in the computation of diluted earnings per common share for each of the three month periods because the exercise prices of such options were greater than the average market prices of the common stock for the three months ended September 30, 2023 and 2022, respectively.

Options outstanding at September 30, 2023 and 2022, to purchase 675,768 and 366,699 shares of common stock, respectively, were not included in the computation of diluted earnings per common share for each of the nine month periods because the exercise prices of such options were greater than the average market prices of the common stock for the nine months ended September 30, 2023 and 2022, respectively.

Options outstanding at March 31, 2024 and 2023, to purchase 871,587 and 672,368 shares of common stock, respectively, were not included in the computation of diluted earnings per common share for each of the three-month periods because the exercise prices of such options were greater than the average market prices of the common stock for the three months ended March 31, 2024 and 2023, respectively.

INVESTMENT SECURITIES

10 unchanged sentences

The amortized cost and fair values of securities were as follows:

September 30, 2023

March 31, 2024

(In Thousands)

4 unchanged sentences

Small Business Administration securities

September 30, 2023

March 31, 2024

(In Thousands)

16 unchanged sentences

States and political subdivisions

The amortized cost and fair value of available-for-sale and held-to-maturity securities at September 30, 2023, by contractual maturity, are shown below.

The amortized cost and fair value of available-for-sale and held-to-maturity securities at March 31, 2024, by contractual maturity, are shown below.

Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

12 unchanged sentences

Certain available-for-sale investments in debt securities are reported in the financial statements at an amount less than their amortized cost.

Total fair value of these investments at September 30, 2023 and December 31, 2022, was approximately $ 446.7 million and $ 472.0 million, respectively, which is approximately 99.7 % and 96.2 % of the Company’s total available-for-sale investment portfolio.

A high percentage of the unrealized losses were related to the Company’s mortgage-backed securities, collateralized mortgage obligations and SBA securities, which are issued and guaranteed by U.S.

Total fair value of these investments at March 31, 2024 and December 31, 2023, was approximately $ 458.8 million and $ 456.9 million, respectively, which is approximately 98.6 % and 95.5 % of the Company’s total available-for-sale investment portfolio.

A high percentage of the unrealized losses were related to the Company’s mortgage-backed securities, collateralized mortgage obligations and Small Business Administration (SBA) securities, which are issued and guaranteed by U.S.

government-sponsored entities and agencies.

The Company’s state and political subdivisions securities are investments in insured fixed rate municipal bonds for which the issuers continue to make timely principal and interest payments under the contractual terms of the securities.

Held-to-maturity investments in debt securities are reported in the financial statements at their amortized cost at September 30, 2023 and December 31, 2022, which was $ 196.7 million and $ 202.5 million, respectively.

Total fair value of these investments at September 30, 2023 and December 31, 2022 was approximately $ 166.1 million and $ 177.8 million, respectively.

Held-to-maturity investment securities are evaluated for potential losses under ASU 2016-13.

The Company continually assesses its liquidity sources, both on-balance sheet and off-balance sheet, and believes at September 30, 2023, that it has ample liquidity sources to fund its ongoing operations.

The Company has the intent and ability to hold these held-to-maturity securities until they are fully repaid.

Based on an evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes any declines in fair value of these debt securities are not credit-related.

The following table shows the Company’s available-for-sale and held-to-maturity securities’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2023 and December 31, 2022:

September 30, 2023

Held-to-maturity investments in debt securities are reported in the financial statements at their amortized carrying value at March 31, 2024 and December 31, 2023, which was $ 193.4 million and $ 195.0 million, respectively.

Total fair value of these investments at March 31, 2024 and December 31, 2023 was approximately $ 167.8 million and $ 171.2 million, respectively.

Held-to-maturity investment securities are evaluated for potential credit losses under ASU 2016-13.

The Company continually assesses its liquidity sources, both on-balance sheet and off-balance sheet, and believes at March 31, 2024, that it had ample liquidity sources to fund its ongoing operations.

Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for these available-for-sale debt securities are not credit related.

The following table shows the Company’s available-for-sale and held-to-maturity securities’ gross unrealized losses and fair values, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2024 and December 31, 2023:

March 31, 2024

Less than 12 Months

5 unchanged sentences

Agency collateralized mortgage obligations

States and political subdivisions securities

Small Business Administration securities

States and political subdivisions securities

HELD-TO-MATURITY SECURITIES:

10 unchanged sentences

Agency collateralized mortgage obligations

States and political subdivisions securities

Small Business Administration securities

States and political subdivisions securities

HELD-TO-MATURITY SECURITIES:

2 unchanged sentences

States and political subdivisions securities

There were no sales of available-for-sale securities during the three or nine months ended September 30, 2023.

Available-for-sale securities totaling $ 5.1 million were sold during the three months ended September 30, 2022, resulting in the recognition of a $ 31,000 gain during the period.

Available-for-sale securities totaling $ 10.2 million were sold during the nine months ended September 30, 2022, resulting in the recognition of a $ 38,000 gain during the period.

Gains and losses on sales of securities are determined on the specific-identification method.

There were no sales of available-for-sale securities during the three months ended March 31, 2024 or the three months ended March 31, 2023.

Allowance for Credit Losses.

On January 1, 2021, the Company began evaluating all securities quarterly to determine if any securities in a loss position require a provision for credit losses in accordance with ASC 326, Measurement of Credit Losses on Financial Instruments .

All of the mortgage-backed, collateralized mortgage, and SBA securities held by the Company as of September 30, 2023 were issued by U.S.

All of the mortgage-backed, collateralized mortgage, and SBA securities held by the Company as of March 31, 2024 were issued by U.S.

government-sponsored entities and agencies.

5 unchanged sentences

(i) current issuer bond ratings, (ii) historical loss rates for given bond ratings, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, (iv) updated financial information of the issuer, (v) internal forecasts and (vi) whether such securities provide insurance or other credit enhancement or are pre-refunded by the issuers.

These securities are highly rated by major rating agencies and have a long history of no credit losses.

Likewise, the Company historically has not experienced losses on these types of securities.

These securities are generally highly rated by major rating agencies and have a long history of no credit losses.

Likewise, the Company has not experienced historical losses on these types of securities.

Accordingly, no allowance for credit losses has been recorded for these securities.

LOANS AND ALLOWANCE FOR CREDIT LOSSES

The Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments , effective January 1, 2021.

The allowance for credit losses is measured using an average historical loss model that incorporates relevant information about past events (including historical credit loss experience on loans with similar risk characteristics), current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the loans.

12 unchanged sentences

Additionally, the allowance for credit losses considers other qualitative factors not included in historical loss rates or macroeconomic forecasts such as changes in portfolio composition, underwriting practices, or significant unique events or conditions.

In addition, ASU 2016-13 requires an allowance for off balance sheet credit exposures:

In addition, the Company is required to record an allowance for off balance sheet credit exposures:

unfunded lines of credit, undisbursed portions of loans, written residential and commercial commitments, and letters of credit.

3 unchanged sentences

however, the liability for unfunded lending commitments incorporates assumptions for the portion of unfunded commitments that are expected to be funded.

Classes of loans at September 30, 2023 and December 31, 2022 were as follows:

September 30,

Classes of loans at March 31, 2024 and December 31, 2023 were as follows:

(In Thousands)

6 unchanged sentences

Commercial real estate

Other residential

Other residential (multi-family)

Commercial business

3 unchanged sentences

Home equity lines of credit

Allowance for credit losses on loans

Allowance for credit losses

Deferred loan fees and gains, net

Weighted average interest rate

The following tables present the classes of loans by aging as of the dates indicated.

September 30, 2023

Classes of loans by aging were as follows as of the dates indicated:

March 31, 2024

> 90 Days Past

8 unchanged sentences

Commercial real estate

Other residential

Other residential (multi-family)

Commercial business

14 unchanged sentences

Commercial real estate

Other residential

Other residential (multi-family)

Commercial business

9 unchanged sentences

Non-accruing loans are summarized as follows:

September 30,

(In Thousands)

6 unchanged sentences

Commercial real estate

Other residential

Other residential (multi-family)

Commercial business

4 unchanged sentences

Total non-accruing loans

No interest income was recorded on these loans for the three and nine months ended September 30, 2023 and 2022, respectively.

Nonaccrual loans for which there is no related allowance for credit losses as of September 30, 2023 totaled $ 1.7 million.

No interest income was recorded on nonaccrual loans for the three months ended March 31, 2024 and 2023, respectively.

Nonaccrual loans for which there is no related allowance for credit losses as of March 31, 2024 and December 31, 2023, had an amortized cost of $ 2.6 million and $ 792,000 , respectively.

These loans are individually assessed and do not require an allowance due to being adequately collateralized under the collateral-dependent valuation method.

1 unchanged sentence

Collateral-dependent loans are identified primarily by a classified risk rating with a loan balance equal to or greater than $ 100,000 , including, but not limited to, any loan in process of foreclosure or repossession.

The following table presents the activity in the allowance for credit losses by portfolio segment for the three and nine months ended September 30, 2023 and 2022.

During the three months ended September 30, 2023, the Company did no t record a provision expense on its portfolio of outstanding loans.

During the nine months ended September 30, 2023, the Company recorded provision expense of $ 1.5 million on its portfolio of outstanding loans.

During both the three and nine months ended September 30, 2022, the Company recorded provision expense of $ 2.0 million on its portfolio of outstanding loans.

One- to Four-

Residential and

(In Thousands)

Allowance for credit losses

Balance, June 30, 2023

Provision (credit) charged to expense

Losses charged off

Balance, September 30, 2023

Allowance for credit losses

Balance, June 30, 2022

Provision (credit) charged to expense

Losses charged off

Balance, September 30, 2022

The following table presents the activity in the allowance for credit losses by portfolio segment for the three months ended March 31, 2024 and 2023.

During the three months ended March 31, 2024, the Company recorded provision expense of $ 500,000 on its portfolio of outstanding loans.

During the three months ended March 31, 2023, the Company recorded provision expense of $ 1.5 million on its portfolio of outstanding loans.

One- to Four-

5 unchanged sentences

Losses charged off

Balance, September 30, 2023

Balance, March 31, 2023

Allowance for credit losses

2 unchanged sentences

Losses charged off

Balance, September 30, 2022

The following table presents the activity in the allowance for unfunded commitments by portfolio segment for the three and nine months ended September 30, 2023 and 2022.

The provision for losses on unfunded commitments for the three months ended September 30, 2023 was a credit (negative expense) of $ 1.2 million, compared to a provision expense of $ 1.3 million for the three months ended September 30, 2022.

The provision for losses on unfunded commitments for the nine months ended September 30, 2023 was a credit (negative expense) of $ 3.6 million, compared to a provision expense of $ 3.3 million for the nine months ended September 30, 2022.

The analysis of the level and mix of unfunded commitments resulted in a decrease in the required reserve for such potential losses in the three and nine month periods of 2023 presented below.

One- to Four-

Residential and

(In Thousands)

Allowance for unfunded commitments

Balance, June 30, 2023

Provision (credit) charged to expense

Balance, September 30, 2023

Allowance for unfunded commitments

Balance, June 30, 2022

Provision (credit) charged to expense

Balance, September 30, 2022

Balance, March 31, 2024

The following table presents the activity in the allowance for unfunded commitments by portfolio segment for the three months ended March 31, 2024 and 2023.

The provision for losses on unfunded commitments for the three months ended March 31, 2024 was a provision expense of $ 130,000 , compared to a credit (negative expense) of $ 826,000 for the three months ended March 31, 2023.

One- to Four-

4 unchanged sentences

Provision (credit) charged to expense

Balance, September 30, 2023

Balance, March 31, 2023

Allowance for unfunded commitments

1 unchanged sentence

Provision (credit) charged to expense

Balance, September 30, 2022

Balance, March 31, 2024

The portfolio segments used in the preceding tables correspond to the loan classes used in all other tables in Note 6 as follows:

● The one- to four-family residential and construction segment includes the one- to four-family residential construction, subdivision construction, owner occupied one- to four-family residential and non-owner occupied one- to four-family residential classes.

● The other residential (multi-family) segment corresponds to the other residential class.

● The other residential (multi-family) segment corresponds to the other residential (multi-family) class.

● The commercial real estate segment includes the commercial real estate and industrial revenue bonds classes.

2 unchanged sentences

● The consumer segment includes the consumer auto, consumer other and home equity lines of credit classes.

The following table presents the collateral-dependent loans by class of loans:

September 30, 2023

The following table presents the amortized cost basis of collateral-dependent loans by class of loans:

March 31, 2024

December 31, 2023

7 unchanged sentences

Commercial real estate

Other residential

Other residential (multi-family)

Commercial business

4 unchanged sentences

Modified Loans.

As indicated in Note 3 , in March 2022, the FASB issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326):

In March 2022, the FASB issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures .

ASU 2022-02 eliminates the troubled debt restructuring recognition and measurement guidance and, instead, requires that an entity evaluate whether the loan modification represents a new loan or a continuation of an existing loan.

ASU 2022-02 eliminates the troubled debt restructuring (TDR) recognition and measurement guidance and, instead, requires that an entity evaluate whether the loan modification represents a new loan or a continuation of an existing loan.

It also enhances existing disclosure requirements and introduces new disclosure requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty.

ASU 2022-02 became effective for the Company on January 1, 2023.

Adoption of this ASU did not have a material impact on the Company’s results of operations, financial position or liquidity, but resulted in additional disclosure requirements related to gross charge offs by vintage year and the removal of troubled debt restructuring (“TDR”) disclosures, replaced by additional disclosures on the types of modifications of loans to borrowers experiencing financial difficulties.

The Corporation has adopted this update prospectively.

Under ASU 2022-02, loan modifications are reported if concessions have been granted to borrowers that are experiencing financial difficulty.

Information on these loan modifications originated after the effective date is presented according to the new accounting guidance.

Reporting periods prior to the adoption of ASU 2022-02 present information on TDRs under the previous disclosure requirements.

Adoption of this ASU on January 1, 2023 did not have a material impact on the Company’s results of operations, financial position or liquidity, but resulted in additional disclosure requirements related to gross charge offs by vintage year and the removal of TDR disclosures, replaced by additional disclosures on the types of modifications of loans to borrowers experiencing financial difficulties.

The Company has adopted this update

prospectively.

Loan modifications are reported if concessions have been granted to borrowers that are experiencing financial difficulty.

The estimate of lifetime expected losses utilized in the allowance for credit losses model is developed using average historical loss on loans with similar risk characteristics, which includes losses from modifications of loans to borrowers experiencing financial difficulty.

As a result, a change to the allowance for credit losses is generally not recorded upon modification.

As a result, a charge to the allowance for credit losses is generally not recorded upon modification.

For modifications to loans made to borrowers experiencing financial difficulty that are adversely classified, the Company determines the allowance for credit losses on an individual basis, using the same process that it utilizes for other adversely classified loans.

If collection efforts have begun and the modified loan is subsequently deemed collateral-dependent, the loan is placed on non-accrual status and the allowance for credit losses is determined based on an individual evaluation.

If necessary, the loan is charged down to fair market value less sales costs.

The following tables show the composition of loan modifications made to borrowers experiencing financial difficulty by the loan portfolio and type of concessions granted during the three and nine months ended September 30, 2023.

Each of the types of concessions granted comprised 2 % or less of their respective classes of loan portfolios at September 30, 2023.

During the three and nine months ended September 30, 2023, principal forgiveness of $ 13,000 and $ 52,000 , respectively, was completed on consumer loans.

A commercial real estate loan modified in the three months ended March 31, 2023, which totaled $ 21.6 million, was paid in full during the three months ended June 30, 2023.

Additionally, a one- to four-family residential loan of $ 143,000 and a commercial business loan of $ 16,000 were paid in full during the three months ended September 30, 2023.

Three Months Ended September 30, 2023

If necessary, the loan is charged down to fair market value less estimated sales costs.

The following tables show the composition of loan modifications made to borrowers experiencing financial difficulty by the loan portfolio and type of concessions granted as of the dates and for the periods indicated.

Each of the types of concessions granted comprised 2.0 % or less of their respective classes of loan portfolios.

No new loan modifications were made to borrowers experiencing financial difficulty during the three months ending March 31, 2024.

During the three months ended March 31, 2024, principal forgiveness of $ 14,000 was completed on consumer loans.

During the three months ended March 31, 2023, principal forgiveness of $ 4,000 was completed on consumer loans.

Amortized Cost Basis at March 31, 2024

Interest Rate

Modifications

(In Thousands)

1 unchanged sentence

One- to four-family residential

Other residential

Other residential (multi-family)

Commercial real estate

Commercial business

Nine Months Ended September 30, 2023

Amortized Cost Basis at December 31, 2023

Interest Rate

3 unchanged sentences

One- to four-family residential

Other residential

Other residential (multi-family)

Commercial real estate

1 unchanged sentence

The Company closely monitors the performance of loans to borrowers experiencing financial difficulty that are modified to understand the effectiveness of its modification efforts.

The following table depicts the performance (under modified terms) at September 30, 2023 of loans that were modified during the nine months ended September 30, 2023:

September 30, 2023

The following tables depict the performance (under modified terms) at March 31, 2024 and at December 31, 2023 of loans that were modified at March 31, 2024 and December 31, 2023, respectively:

March 31, 2024

(In Thousands)

1 unchanged sentence

One- to four-family residential

Other residential

Other residential (multi-family)

Commercial real estate

Commercial business

TDRs by class are presented below as of December 31, 2022.

December 31, 2023

Accruing TDR Loans

Non-accruing TDR Loans

Total TDR Loans

(In Thousands)

1 unchanged sentence

One- to four-family residential

Other residential

Other residential (multi-family)

Commercial real estate

Commercial business

The following table presents newly restructured loans, which were considered TDRs, during the three and nine months ended September 30, 2022, by type of modification:

Three Months Ended September 30, 2022

Interest Only

Modifications

(In Thousands)

Commercial real estate

Nine Months Ended September 30, 2022

Interest Only

Modifications

(In Thousands)

Commercial real estate

At December 31, 2022, of the $ 2.9 million in TDRs, $ 1.7 million were classified as substandard using the Company’s internal grading system.

The Company had no TDRs that were modified in the previous 12 months and subsequently defaulted during the year ended December 31, 2022.

During the three and nine months ended September 30, 2022, $ 66,000 and $ 578,000 of loans, respectively, met the criteria for placement back on accrual status.

The criteria are generally a minimum of six months of consistent and timely payment performance under original or modified terms.

Loan Risk Ratings .

The nature and extent of impairments of modified loans, including those which have experienced a subsequent payment default, are considered in the determination of an appropriate level of the allowance for credit losses.

The nature and extent of impairments of modified loans, including those that have experienced a subsequent payment default, are considered in the determination of an appropriate level of the allowance for credit losses.

The Company utilizes an internal risk rating system comprised of a series of grades to categorize loans according to perceived risk associated with the expectation of debt repayment.

The analysis of the borrower’s ability to repay considers specific information, including but not limited to current financial information, historical payment experience, industry information, collateral levels and collateral types.

A risk rating is assigned at loan origination and then monitored throughout the contractual term for possible risk rating changes.

Satisfactory loans range from Excellent to Moderate Risk, but generally are loans supported by strong recent financial statements.

The character and capacity of the borrower are strong, including reasonable project performance, good industry experience, liquidity and/or net worth.

The character and capacity of the borrower are solid, including reasonable project performance, good industry experience, liquidity and/or net worth.

The probability of financial deterioration seems unlikely.

6 unchanged sentences

If left uncorrected, these potential weaknesses may result in deterioration of repayment prospects or the Bank’s credit position at some future date.

It is a transitional grade that is closely monitored for improvement or deterioration.

This is a transitional grade closely monitored for improvement or deterioration.

The Substandard rating is applied to loans where the borrower exhibits well-defined weaknesses that jeopardize its continued performance and are of a severity that the distinct possibility of default exists.

7 unchanged sentences

In addition to the regular monitoring performed by the lending personnel and credit committees, loans are subject to review by the credit review department, which verifies the appropriateness of the risk ratings for the loans chosen as part of its risk-based review plan.

The following table presents a summary of loans by category and risk rating separated by origination and loan class as of September 30, 2023.

The following tables present a summary of loans by category and risk rating separated by origination and loan class as of March 31, 2024 and December 31, 2023.

Term Loans by Origination Year

March 31, 2024

(In Thousands)

3 unchanged sentences

Classified (7-9)

Current Period Gross Charge Offs

Subdivision construction

2 unchanged sentences

Classified (7-9)

Current Period Gross Charge Offs

Construction and land development

2 unchanged sentences

Classified (7-9)

Current Period Gross Charge Offs

Other construction

2 unchanged sentences

Classified (7-9)

Current Period Gross Charge Offs

One- to four-family residential

2 unchanged sentences

Classified (7-9)

Other residential

Current Period Gross Charge Offs

Other residential (multi-family)

Satisfactory (1-4)

1 unchanged sentence

Classified (7-9)

Current Period Gross Charge Offs

Commercial real estate

2 unchanged sentences

Classified (7-9)

Current Period Gross Charge Offs

Commercial business

2 unchanged sentences

Classified (7-9)

Current Period Gross Charge Offs

Satisfactory (1-4)

1 unchanged sentence

Classified (7-9)

Current Period Gross Charge Offs

Satisfactory (1-4)

1 unchanged sentence

Classified (7-9)

The following table presents a summary of loans by category and risk rating separated by origination and loan class as of December 31, 2022.

Current Period Gross Charge Offs

Term Loans by Origination Year

December 31, 2023

(In Thousands)

3 unchanged sentences

Classified (7-9)

Current Period Gross Charge Offs

Subdivision construction

2 unchanged sentences

Classified (7-9)

Current Period Gross Charge Offs

Construction and land development

2 unchanged sentences

Classified (7-9)

Current Period Gross Charge Offs

Other construction

2 unchanged sentences

Classified (7-9)

Current Period Gross Charge Offs

One- to four-family residential

2 unchanged sentences

Classified (7-9)

Other residential

Current Period Gross Charge Offs

Other residential (multi-family)

Satisfactory (1-4)

1 unchanged sentence

Classified (7-9)

Current Period Gross Charge Offs

Commercial real estate

2 unchanged sentences

Classified (7-9)

Current Period Gross Charge Offs

Commercial business

2 unchanged sentences

Classified (7-9)

Current Period Gross Charge Offs

Satisfactory (1-4)

1 unchanged sentence

Classified (7-9)

Current Period Gross Charge Offs

Satisfactory (1-4)

1 unchanged sentence

Classified (7-9)

FDIC-ASSISTED ACQUIRED LOANS

On March 20, 2009, Great Southern Bank entered into a purchase and assumption agreement with loss share with the Federal Deposit Insurance Corporation (FDIC) to assume all of the deposits (excluding brokered deposits) and acquire certain assets of TeamBank, N.A., a full service commercial bank headquartered in Paola, Kansas.

The related loss sharing agreement was terminated early, effective April 26, 2016, by mutual agreement of Great Southern Bank and the FDIC.

Based upon the acquisition date fair values of the net assets acquired, no goodwill was recorded.

On September 4, 2009, Great Southern Bank entered into a purchase and assumption agreement with loss share with the FDIC to assume all of the deposits and acquire certain assets of Vantus Bank, a full service thrift headquartered in Sioux City, Iowa.

The related loss sharing agreement was terminated early, effective April 26, 2016, by mutual agreement of Great Southern Bank and the FDIC.

Based upon the acquisition date fair values of the net assets acquired, no goodwill was recorded.

On October 7, 2011, Great Southern Bank entered into a purchase and assumption agreement with loss share with the FDIC to assume all of the deposits and acquire certain assets of Sun Security Bank, a full service bank headquartered in Ellington, Missouri.

The related loss sharing agreement was terminated early, effective April 26, 2016, by mutual agreement of Great Southern Bank and the FDIC.

Based upon the acquisition date fair values of the net assets acquired, no goodwill was recorded.

On April 27, 2012, Great Southern Bank entered into a purchase and assumption agreement with loss share with the FDIC to assume all of the deposits and acquire certain assets of Inter Savings Bank, FSB (“InterBank”), a full service bank headquartered in Maple Grove, Minnesota.

The related loss sharing agreement was terminated early, effective June 9, 2017, by mutual agreement of Great Southern Bank and the FDIC.

Based upon the acquisition date fair values of the net assets acquired, no goodwill was recorded.

On June 20, 2014, Great Southern Bank entered into a purchase and assumption agreement with the FDIC to purchase a substantial portion of the loans and investment securities, as well as certain other assets, and assume all of the deposits, as well as certain other liabilities, of Valley Bank, a full-service bank headquartered in Moline, Illinois, with significant operations in Iowa.

This transaction did not include a loss sharing agreement.

Based upon the acquisition date fair values of the net assets acquired, no goodwill was recorded.

The following table presents the balances of acquired loans related to the various FDIC-assisted transactions at September 30, 2023 and December 31, 2022.

(In Thousands)

September 30, 2023

Carrying value of loans receivable

December 31, 2022

Carrying value of loans receivable

Current Period Gross Charge Offs

INVESTMENTS IN LIMITED PARTNERSHIPS

Investments in Affordable Housing Partnerships

The Company has invested in certain limited partnerships that were formed to develop and operate apartments and single-family houses designed as high-quality affordable housing for lower income tenants throughout Missouri and contiguous states.

At March 31, 2024, the Company had 22 such investments, with a net carrying value of $ 69.9 million.

At December 31, 2023, the Company had 22 such investments, with a net carrying value of $ 66.3 million.

Due to the Company’s inability to exercise any significant influence over any of the investments in Affordable Housing Partnerships, they all are accounted for using the proportional amortization method.

Each of the partnerships must meet the regulatory requirements for affordable housing for a minimum 15-year compliance period to fully utilize the tax credits.

If the partnerships cease to qualify during the compliance period, the credits may be denied for any period in which the projects are not in compliance and a portion of the credits previously taken may be subject to recapture with interest.

The remaining federal affordable housing tax credits to be utilized through 2034 were $ 73.1 million as of March 31, 2024, assuming no tax credit recapture events occur and all projects currently under construction are completed as planned.

Amortization of the investments in partnerships is expected to be approximately $ 66.3 million, assuming all projects currently under construction are completed and funded as planned.

The Company’s usage of federal affordable housing tax credits approximated $ 2.8 million and $ 1.9 million during the three months ended March 31, 2024 and March 31, 2023, respectively.

Investment amortization was $ 2.6 million for the three months ended March 31, 2024, compared to $ 1.8 million for the three months ended March 31, 2023.

Investments in Community Development Entities

The Company has invested in certain limited partnerships that were formed to develop and operate business and real estate projects located in low-income communities.

At March 31, 2024, the Company had one such investment, with a net carrying value of $ 274,000 .

At December 31, 2023, the Company had one such investment, with a net carrying value of $ 361,000 .

Due to the Company’s inability to exercise any significant influence over any of the investments in qualified Community Development Entities, they are all accounted for using the proportional amortization method.

Each of the partnerships provides federal New Market Tax Credits over a seven-year credit allowance period.

In each of the first three years, credits totaling five percent of the original investment are allowed on the credit allowance dates and for the final four years, credits totaling six percent of the original investment are allowed on the credit allowance dates.

Each of the partnerships must be invested in a qualified Community Development Entity on each of the credit allowance dates during the seven-year period to utilize the tax credits.

If the Community Development Entities cease to qualify during the seven-year period, the credits may be denied for any credit allowance date and a portion of the credits previously taken may be subject to recapture with interest.

The investments in the Community Development Entities cannot be redeemed before the end of the seven-year period.

The Company’s usage of federal New Market Tax Credits approximated $ 30,000 and $ 25,000 during the three months ended March 31, 2024 and March 31, 2023, respectively.

Investment amortization amounted to $ 25,000 and $ 21,000 for the three months ended March 31, 2024 and March 31, 2023, respectively.

Upon adoption of ASU 2023-02 on January 1, 2024, the Company recorded a reduction in the investment in these New Market Tax Credits, with a corresponding reduction in retained earnings, of $ 62,000 .

Investments in Limited Partnerships for Federal Rehabilitation/Historic Tax Credits

From time to time, the Company has invested in certain limited partnerships that were formed to provide certain federal rehabilitation/historic tax credits.

At March 31, 2024, the Company had one such investment, with a net carrying value of $ 191,000 .

At December 31, 2023, the Company had one such investment, with a net carrying value of $ 415,000 .

Under prior tax law, the Company utilized these credits in their entirety in the year the project was placed in service and the impact to the Consolidated Statements of Income has not been material.

Currently, such partnerships provide federal rehabilitation/historic tax credits over a five-year credit allowance period.

The Company’s usage of certain federal rehabilitation/historic tax credits approximated $ 76,000 and $ 64,000 during the three months ended March 31, 2024 and March 31, 2023, respectively.

Investment amortization amounted to $ 64,000 and $ 53,000 for the three months ended March 31, 2024 and March 31, 2023, respectively.

Upon adoption of ASU 2023-02 on January 1, 2024, the Company recorded a reduction in the investment in these Rehabilitation/Historic Tax Credits, with a corresponding reduction in retained earnings, of $ 161,000 .

Investments in Limited Partnerships for State Tax Credits

From time to time, the Company has invested in certain limited partnerships that were formed to provide certain state tax credits.

The Company has primarily syndicated these tax credits and the impact to the Consolidated Statements of Income has not been material.

OTHER REAL ESTATE OWNED AND REPOSSESSIONS

Major classifications of other real estate owned were as follows:

September 30,

(In Thousands)

5 unchanged sentences

One- to four-family residential

Other residential

Other residential (multi-family)

Commercial real estate

Commercial business

Foreclosed assets held for sale and repossessions

Total foreclosed assets held for sale and repossessions

Other real estate owned not acquired through foreclosure

Other real estate owned and repossessions

At September 30, 2023, there was no other real estate owned not acquired through foreclosure, as two properties were sold during the nine months ended September 30, 2023.

At December 31, 2022, other real estate owned not acquired through foreclosure included two properties, both of which were branch locations that were closed and held for sale.

At September 30, 2023 and December 31, 2022, residential mortgage loans totaling $ 27,000 and $ 173,000 , respectively, were in the process of foreclosure.

Total other real estate owned and repossessions

At March 31, 2024, other real estate owned not acquired through foreclosure included one property, which was a branch location that was closed and held for sale.

This property was sold in April 2024 at an immaterial loss.

At December 31, 2023, there was no other real estate owned not acquired through foreclosure.

At March 31, 2024 and December 31, 2023, residential mortgage loans totaling $ 41,000 and $- 0 -, respectively, were in the process of foreclosure.

Expenses applicable to other real estate owned and repossessions included the following:

Three Months Ended

September 30,

(In Thousands)

Net gains on sales of other real estate owned and repossessions

Valuation write-downs

Operating expenses, net of rental income

Nine Months Ended

September 30,

(In Thousands)

Net gains on sales of other real estate owned and repossessions

Net loss on sales of other real estate owned and repossessions

Valuation write-downs

2 unchanged sentences

Major classifications of premises and equipment, stated at cost, were as follows:

September 30,

(In Thousands)

6 unchanged sentences

The amount of the right of use asset and corresponding lease liability will fluctuate based on the Company’s lease terminations, new leases and lease modifications and renewals.

As of September 30, 2023, the lease right of use asset value was $ 6.9 million and the corresponding lease liability was $ 7.1 million.

As of March 31, 2024, the lease right of use asset value was $ 6.6 million and the corresponding lease liability was $ 6.8 million.

As of December 31, 2023, the lease right of use asset value was $ 6.6 million and the corresponding lease liability was $ 6.9 million.

At September 30, 2023, expected lease terms ranged from 0.6 years to 15.2 years with a weighted-average lease term of 7.0 years.

The weighted-average discount rate at September 30, 2023 was 3.76 %.

For the three months ended September 30, 2023 and 2022, lease expense was $ 446,000 and $ 408,000 , respectively.

For the nine months ended September 30, 2023 and 2022, lease expense was $ 1.3 million and $ 1.2 million, respectively.

At March 31, 2024, expected lease terms ranged from 3.3 years to 14.7 years with a weighted-average lease term of 7.6 years.

The weighted-average discount rate at March 31, 2024 was 3.99 %.

For the three months ended March 31, 2024 and 2023, lease expense was $ 483,000 and $ 411,000 , respectively.

The Company’s short-term leases related to offsite ATMs have both fixed and variable lease payment components, based on the number of transactions at the various ATMs.

The variable portion of these lease payments is not material and the total lease expense related to ATMs for the three months ended September 30, 2023 and 2022 was $ 84,000 and $ 80,000 , respectively.

The total lease expense related to ATMs for the nine months ended September 30, 2023 and 2022 was $ 234,000 and $ 228,000 , respectively.

The variable portion of these lease payments is not material, the total lease expense related to ATMs for the three months ended March 31, 2024, and 2023 was $ 81,000 and $ 72,000 , respectively.

The Company does not sublease any of its leased facilities;

1 unchanged sentence

In terms of being the lessor in these circumstances, all of these lease agreements are classified as operating leases.

In the three months ended September 30, 2023 and 2022, income recognized from these lease agreements was $ 326,000 and $ 300,000 , respectively, and was included in occupancy and equipment expense.

In the nine months ended September 30, 2023 and 2022, income recognized from these lease agreements was $ 975,000 and $ 890,000 , respectively, and was included in occupancy and equipment expense.

September 30, 2023

In the three months ended March 31, 2024 and 2023, income recognized from these lease agreements was $ 341,000 and $ 324,000 , respectively, and was included in occupancy and equipment expense.

March 31, 2024

December 31, 2023

4 unchanged sentences

For the Three Months Ended

September 30, 2023

September 30, 2022

(In Thousands)

Statement of Income

Operating lease costs classified as occupancy and equipment expense (includes short-term lease costs and amortization of right of use asset)

Supplemental Cash Flow Information

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

Right of use assets obtained in exchange for lease obligations:

Operating leases

For the Nine Months Ended

September 30, 2023

September 30, 2022

March 31, 2024

March 31, 2023

(In Thousands)

6 unchanged sentences

Operating leases

At September 30, 2023, future expected lease payments for leases with terms exceeding one year were as follows (In Thousands):

At March 31, 2024, future expected lease payments for leases with terms exceeding one year were as follows (In Thousands):

Future lease payments expected

1 unchanged sentence

Lease liability

September 30,

(In Thousands)

Time Deposits:

Weighted Average

Interest Rate

(In Thousands, Except Interest Rates)

Non-interest-bearing accounts

Interest-bearing checking and savings accounts

1.77 % and 1.67 %

Certificate accounts

0.00 % - 0.99 %

4 unchanged sentences

5.00 % and above

Total time deposits (weighted average rate 3.53 % and 1.93 %)

Non-interest-bearing demand deposits

Interest-bearing demand and savings deposits (weighted average rate 1.54 % and 0.65 %)

Brokered deposits (weighted average rate 5.06 % and 4.03 %)

Total Deposits

Brokered deposits

5.12 % and 5.20 %

The Bank utilizes brokered deposits as an additional funding source.

The aggregate amount of brokered deposits was approximately $ 669.3 million and $ 411.5 million at September 30, 2023 and December 31, 2022, respectively.

At September 30, 2023 and December 31, 2022, brokered deposits included $ 300.0 million and $ 150.0 million, respectively, of purchased funds through the IntraFi Financial network.

The aggregate amount of brokered deposits was approximately $ 685.5 million and $ 661.5 million at March 31, 2024 and December 31, 2023, respectively.

At March 31, 2024 and December 31, 2023, brokered deposits included $ 300.0 million of purchased funds through the IntraFi Financial network.

These IntraFi Financial deposits have a rate of interest that floats daily with an index of effective federal funds rate plus a spread.

At September 30, 2023, there were additional brokered deposits totaling $ 133.4 million that had variable rates of interest that reset monthly or quarterly and there were other brokered deposits totaling $ 185.5 million that had fixed rates of interest but are callable at the Bank’s discretion.

At September 30, 2023, approximately 35 % of the Company’s total deposits were uninsured, when including deposit accounts of consolidated subsidiaries of the Company and collateralized deposits of unaffiliated entities.

Excluding deposit accounts of the Company’s consolidated subsidiaries, approximately 16 % of the Company’s total deposits were uninsured at September 30, 2023.

At March 31, 2024, there were brokered deposits totaling $ 185.3 million that had fixed rates of interest but were callable at the Bank’s discretion.

At March 31, 2024, approximately 32 % of the Company’s total deposits were uninsured, when including deposit accounts of consolidated subsidiaries of the Company and collateralized deposits of unaffiliated entities.

Excluding deposit accounts of the Company’s consolidated subsidiaries;

approximately 15 % of the Company’s total deposits were uninsured at March 31, 2024.

ADVANCES FROM FEDERAL HOME LOAN BANK

At September 30, 2023 and December 31, 2022, there were no outstanding term advances from the Federal Home Loan Bank of Des Moines.

At September 30, 2023 and December 31, 2022, there were outstanding overnight borrowings from the Federal Home Loan Bank of Des Moines, which are included in Short-Term Borrowings below in Note 12 .

At March 31, 2024 and December 31, 2023, there were no outstanding term advances from the Federal Home Loan Bank of Des Moines.

At December 31, 2023, there were outstanding overnight borrowings from the Federal Home Loan Bank of Des Moines, which are included in Short-Term Borrowings below in Note 12 .

SECURITIES SOLD UNDER REVERSE REPURCHASE AGREEMENTS AND SHORT-TERM BORROWINGS

September 30,

(In Thousands)

1 unchanged sentence

Securities sold under reverse repurchase agreements

Short-term borrowings from Federal Reserve Bank

Overnight borrowings from the Federal Home Loan Bank

Borrowings from the Federal Reserve Bank at March 31, 2024, were part of the Federal Reserve Bank’s Bank Term Funding Program (BTFP).

The BTFP borrowing, which matures in January 2025 and has a fixed interest rate of 4.83 %, may be repaid in full or in part without penalty prior to its stated maturity date.

The line is secured primarily by the Bank’s held-to-maturity investment securities, with assets pledged totaling approximately $ 193 million as of March 31, 2024.

The Bank enters into sales of securities under agreements to repurchase (reverse repurchase agreements).

3 unchanged sentences

All agreements are written on a term of one-month or less.

The following table represents the Company’s securities sold under reverse repurchase agreements, by collateral type and remaining contractual maturity.

September 30, 2023

The following table reflects the Company’s securities sold under reverse repurchase agreements, by collateral type.

These securities contractually mature daily.

March 31, 2024

December 31, 2023

Overnight and

(In Thousands)

6 unchanged sentences

Total debt issuance costs of approximately $ 1.5 million were deferred and are being amortized over the expected life of the notes, which is five years .

Amortization of the debt issuance costs totaled $ 74,000 during each of the three months ended September 30, 2023 and 2022.

Amortization of the debt issuance costs totaled $ 223,000 during each of the nine months ended September 30, 2023 and 2022.

Amortization of the debt issuance costs during the three months ended March 31, 2024 and 2023, totaled $ 74,000 and $ 75,000 , respectively.

Amortization of the debt issuance costs is included in interest expense on subordinated notes in the consolidated statements of income, resulting in an imputed interest rate of 5.92 %.

At September 30, 2023 and December 31, 2022, subordinated notes are summarized as follows:

September 30, 2023

At March 31, 2024 and December 31, 2023, subordinated notes were as follows:

March 31, 2024

December 31, 2023

3 unchanged sentences

Reconciliations of the Company’s effective tax rates to the statutory corporate tax rates were as follows:

Three Months Ended September 30,

Tax at statutory rate

Nontaxable interest and dividends

Nine Months Ended September 30,

Three Months Ended March 31,

Tax at statutory rate

2 unchanged sentences

As a result, federal tax years through December 31, 2019 are now closed.

In addition, there are no pending audits by any state jurisdiction at March 31, 2024.

The Company was previously under State of Missouri income and franchise tax examinations for its 2014 and 2015 tax years.

2 unchanged sentences

In June 2021, the Company filed a formal protest with the Missouri Administrative Hearing Commission (MAHC), which has special jurisdiction to hear tax matters and is similar to a trial court, to continue defending the Company’s rights and associated tax position.

The Company has engaged legal and tax advisors and continues to believe it will ultimately prevail on the issue;

however, if the Company does not prevail, the tax obligation to the State of Missouri could be up to a total of $ 4.0 million for these tax years and additional amounts could be levied for subsequent tax years.

The MAHC has received documents from each party but no hearings have occurred to date.

The Company previously filed a motion for summary decision with the MAHC and, on January 26, 2024, the MAHC granted the motion in favor of the Company, upholding its position related to the exclusion of certain income in the calculation of Missouri income tax.

In February 2024, the Missouri Department of Revenue confirmed to the Company in writing that it would not exercise its right to appeal the decision to the Missouri State Supreme Court.

DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

12 unchanged sentences

Assets measured on a nonrecurring basis are assets that, due to an event or circumstance, were required to be remeasured at fair value after initial recognition in the financial statements at some time during the reporting period.

The Company considers transfers between the levels of the hierarchy to be recognized at the end of related reporting periods.

Recurring Measurements

The following table presents the fair value measurements of assets recognized in the accompanying statements of financial condition measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fell at September 30, 2023 and December 31, 2022:

Fair value measurements using

2 unchanged sentences

(In Thousands)

September 30, 2023

March 31, 2024

Available-for-sale securities

13 unchanged sentences

Interest rate derivative liability

The following is a description of inputs and valuation methodologies used for assets recorded at fair value on a recurring basis and recognized in the accompanying statements of financial condition at September 30, 2023 and December 31, 2022 as well as the general classification of such assets pursuant to the valuation hierarchy.

There were no significant changes in the valuation techniques during the nine-month period ended September 30, 2023.

The following is a description of inputs and valuation methodologies used for assets recorded at fair value on a recurring basis and recognized in the accompanying statements of financial condition at March 31, 2024 and December 31, 2023 as well as the general classification of such assets pursuant to the valuation hierarchy.

There were no significant changes in the valuation techniques during the three-month period ended March 31, 2024.

For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

6 unchanged sentences

Additional inputs include indicative values derived from the independent pricing service’s proprietary computerized models.

There were no recurring Level 3 securities at September 30, 2023 or December 31, 2022.

There were no recurring Level 3 securities at March 31, 2024 or December 31, 2023.

Interest Rate Derivatives.

1 unchanged sentence

Nonrecurring Measurements

The following table presents the fair value measurements of assets measured at fair value on a nonrecurring basis and the level within the hierarchy in which such measurements fell at September 30, 2023 and December 31, 2022:

The following table presents the measurement of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the measurements fell at March 31, 2024 and December 31, 2023:

Fair Value Measurements Using

2 unchanged sentences

(In Thousands)

September 30, 2023

March 31, 2024

Collateral-dependent loans

1 unchanged sentence

Collateral-dependent loans

The following is a description of valuation methodologies used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying statements of financial condition, as well as the general classification of such assets pursuant to the valuation hierarchy.

The following is a description of the valuation methodologies used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying statements of financial condition, as well as the general classification of such assets pursuant to the valuation hierarchy.

For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

5 unchanged sentences

The Company typically does not have commercial loans held for sale.

At September 30, 2023 and December 31, 2022, the aggregate fair value of mortgage loans held for sale was not materially different than their cost.

At March 31, 2024 and December 31, 2023, the aggregate fair value of mortgage loans held for sale was not materially different from their cost.

Accordingly, no mortgage loans held for sale were marked down and reported at fair value.

2 unchanged sentences

If a loan’s fair value as estimated by the Company is less than its carrying value, the Company either records a charge-off of the portion of the loan that exceeds the fair value or establishes a reserve within the allowance for credit losses specific to the loan.

Loans for which such charge-offs or reserves were recorded during the nine -months ended September 30, 2023 or the year ended December 31, 2022, are shown in the table above (net of reserves).

Loans for which such charge-offs or reserves were recorded during the three months ended March 31, 2024 or the year ended December 31, 2023, are shown in the table above (net of reserves).

Foreclosed Assets Held for Sale.

2 unchanged sentences

Foreclosed assets held for sale are classified within Level 3 of the fair value hierarchy.

There were no foreclosed assets held for sale at March 31, 2024 or December 31, 2023.

Fair Value of Financial Instruments

8 unchanged sentences

Loans and Interest Receivable.

The fair value of loans is estimated on an exit price basis incorporating contractual cash flows, prepayments, discount spreads, credit losses and liquidity premiums.

Loans with similar characteristics were aggregated for purposes of the calculations.

The fair value of loans is estimated on an exit price basis incorporating contractual cash flows, prepayment discount spreads, credit loss and liquidity premiums.

Loans with similar characteristics are aggregated for purposes of the calculations.

The carrying amount of accrued interest receivable approximates its fair value.

1 unchanged sentence

The fair value of demand deposits and savings accounts is the amount payable on demand at the reporting date, i.e., their carrying amounts.

The fair value of fixed maturity certificates of deposit is estimated through a discounted cash flow calculation using the average advances yield curve from 11 districts of the FHLB for the as of date.

The fair value of fixed maturity certificates of deposit is estimated based on a discounted cash flow calculation using the average advances yield curve from 11 districts of the FHLB for the as of date.

The carrying amount of accrued interest payable approximates its fair value.

10 unchanged sentences

The fair value of letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counterparties at the reporting date.

The following table presents estimated fair values of the Company’s financial instruments not recorded at fair value on the statements of financial condition.

The fair values of certain of these instruments were calculated by discounting expected cash flows, which involves significant judgments by management and uncertainties.

The following table presents estimated fair values of the Company’s financial instruments not recorded at fair value in the financial statements.

The fair values of certain of these instruments were calculated by discounting expected cash flows, which method involves significant judgments by management and uncertainties.

Fair value is the estimated amount at which financial assets or liabilities could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

Because no market exists for certain of these financial instruments and because management does not intend to sell these financial instruments, the Company does not know whether the fair values shown below represent values at which the respective financial instruments could be sold individually or in the aggregate.

September 30, 2023

March 31, 2024

December 31, 2023

24 unchanged sentences

The Company manages a matched book with respect to its derivative instruments in order to minimize its net risk exposure resulting from such transactions.

In addition, the Company has interest rate derivatives that are designated in a qualified hedging relationship.

In addition, the Company has interest rate derivatives that were designated in a qualified hedging relationship.

Nondesignated Hedges

The Company has interest rate swaps that are not designated as qualifying hedging relationships.

Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain loan customers, which the Company began offering during 2011.

The Company has interest rate swaps that are not designated in a qualifying hedging relationship.

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

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

1 unchanged sentence

As the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings.

At September 30, 2023, the Company had six interest rate swaps and one interest rate cap totaling $ 109.9 million in notional amount with commercial customers, and six interest rate swaps and one interest rate cap with the same aggregate notional amount with third parties related to its program.

At March 31, 2024, the Company had five interest rate swaps totaling $ 76.0 million in notional amount with commercial customers, and five interest rate swaps with the same aggregate notional amount with third parties related to its program.

In addition, the Company has one participation loan purchased totaling $ 8.6 million, in which the lead institution has an interest rate swap with its customer and the economics of the counterparty swap are passed along to the Company through the loan participation.

At December 31, 2022, the Company had six interest rate swaps and one interest rate cap totaling $ 107.0 million in notional amount with commercial customers, and six interest rate swaps and one interest rate cap with the same notional amount with third parties related to its program.

In addition, at December 31, 2022, the Company had one participation loan purchased totaling $ 8.8 million, in which the lead institution has an interest rate swap with their customer and the economics of the counterparty swap are passed along to the Company through the loan participation.

During the three months ended September 30, 2023 and 2022, the Company recognized net gains of $ 55,000 and $ 88,000 , respectively, in non-interest income related to changes in the fair value of these swaps.

During the nine months ended September 30, 2023 and 2022, the Company recognized net losses of $ 234,000 and net gains of $ 385,000 , respectively, in non-interest income related to changes in the fair value of these swaps.

At December 31, 2023, the Company had six interest rate swaps, totaling $ 82.2 million in notional amount , with commercial customers, and six interest rate swaps with the same notional amount with third parties related to its program.

In addition, at December 31, 2023, the Company had one participation loan purchased totaling $ 8.6 million, in which the lead institution has an interest rate swap with its customer and the economics of the counterparty swap are passed along to the Company through the loan participation.

During the three months ended March 31, 2024 and 2023, the Company recognized net losses of $ 13,000 and $ 291,000 , respectively, in non-interest income related to changes in the fair value of these swaps.

Fair Value Hedges

2 unchanged sentences

The total notional amount of the swaps was $ 95 million with a termination date of February 28, 2025.

Under the terms of the swaps, the Company receives a fixed rate of interest of 4.65 % and pays a floating rate of interest equal to USD-SOFR-COMPOUND plus a spread.

The floating rate resets monthly and net settlements of interest due to/from the counterparty also occurs monthly.

To the extent that the fixed rate of interest exceeds USD-SOFR-COMPOUND plus the spread, the Company receives net interest settlements which are recorded as a reduction of deposit interest expense.

If USD-SOFR-COMPOUND plus the spread exceeds the fixed rate of interest, the Company is required to pay net settlements to the counterparty and record those net payments as interest expense on deposits.

Under the terms of the swaps, the Company received a fixed rate of interest of 4.65 % and paid a floating rate of interest equal to USD-SOFR-COMPOUND plus a spread.

The floating rate reset monthly and net settlements of interest due to/from the counterparty occurred monthly.

To the extent that the fixed rate of interest exceeded USD-SOFR-COMPOUND plus the spread, the Company received net interest settlements, which were recorded as a reduction of deposit interest expense.

If USD-SOFR-COMPOUND plus the spread exceeded the fixed rate of interest, the Company was required to pay net settlements to the counterparty and record those net payments as interest expense on deposits.

In January 2024, the Company elected to terminate these swaps prior to their contractual termination date in 2025.

The Company received a net settlement payment from the swap counterparty totaling $ 26,500 upon termination.

At the time of the early termination, the Company recorded a market value adjustment to the brokered deposits of $ 163,000 , which is being amortized as a reduction of interest expense beginning in January 2024 through February 2025.

Cash Flow Hedges

8 unchanged sentences

The Company was paid $ 45.9 million from its swap counterparty as a result of this termination.

This $ 45.9 million, less the accrued interest portion and net of deferred income taxes, is reflected in the Company’s stockholders’ equity as Accumulated Other Comprehensive Income and a portion of it will be accreted to interest income on loans monthly through the original contractual termination date of October 6, 2025.

This $ 45.9 million, less the accrued interest portion and net of deferred income taxes, was reflected in the Company’s stockholders’ equity as part of Accumulated Other Comprehensive Income (AOCI) and a portion of it is being accreted to interest income on loans monthly through the original contractual termination date of October 6, 2025.

This has the effect of reducing Accumulated Other Comprehensive Income and increasing Net Interest Income and Retained Earnings over the period.

At September 30, 2023, the Company expected to have a sufficient amount of eligible variable rate loans to continue to accrete this interest income on the terminated swap in future periods.

At March 31, 2024, the Company expected to have a sufficient amount of eligible variable rate loans to continue to accrete this interest income on the terminated swap in future periods.

If this expectation changes and the amount of eligible variable rate loans decreases significantly, the Company may be required to recognize this interest income more rapidly.

The Company recorded $ 2.0 million of interest income related to this terminated swap in each of the three months ended March 31, 2024 and 2023.

In March 2022, the Company entered into an interest rate swap transaction as part of its ongoing interest rate management strategies to hedge the risk of its floating rate loans.

The notional amount of the swap is $ 300 million, with a termination date of March 1, 2024.

Under the terms of the swap, the Company receives a fixed rate of interest of 1.6725 % and pays a floating rate of interest equal to one-month USD-LIBOR (or the equivalent replacement rate if USD-LIBOR rate is not available).

The floating rate resets monthly and net settlements of interest due to/from the counterparty also occur monthly.

The floating rate of interest was 5.431 % as of September 30, 2023.

To the extent the floating rate of interest exceeds the fixed rate of interest, the Company is required to pay net settlements to the counterparty and records those net payments as a reduction of interest income on loans.

If the fixed rate of interest exceeds the floating rate of interest, the Company receives net interest settlements, which are recorded as loan interest income.

The notional amount of the swap was $ 300 million, with a termination date of March 1, 2024.

Under the terms of the swap, the Company received a fixed rate of interest of 1.6725 % and paid a floating rate of interest equal to one-month USD-LIBOR (or the equivalent replacement USD-SOFR rate once USD-LIBOR rate ceased to be available).

The floating rate reset monthly and net settlements of interest due to/from the counterparty also occurred monthly.

To the extent the floating rate of interest exceeded the fixed rate of interest, the Company was required to pay net settlements to the counterparty and record those net payments as a reduction of interest income on loans.

If the fixed rate of interest exceeded the floating rate of interest, the Company received net interest settlements, which were recorded as loan interest income.

As this interest rate swap has reached its contractual termination date, there will be no further interest income impacts related to this swap.

The Company recorded a reduction of loan interest income related to this swap transaction of $ 1.9 million in the three months ended March 31, 2024, compared to a reduction of $ 2.2 million in the three months ended March 31, 2023.

In July 2022, the Company entered into two additional interest rate swap transactions as part of its ongoing interest rate management strategies to hedge the risk of its floating rate loans.

The notional amount of each swap is $ 200 million with an effective date of May 1, 2023 and a termination date of May 1, 2028.

Under the terms of one swap, beginning in May 2023, the Company receives a fixed rate of interest of 2.628 % and pays a floating rate of interest equal to one-month USD-SOFR OIS.

Under the terms of the other swap, beginning in May 2023, the Company receives a fixed rate of interest of 5.725 % and pays a floating rate of interest equal to one-month USD-Prime.

In each case, the floating rate is reset monthly and net settlements of interest due to/from the counterparty also occur monthly.

Under the terms of one swap, the Company receives a fixed rate of interest of 2.628 % and pays a floating rate of interest equal to one-month USD-SOFR OIS.

Under the terms of the other swap, the Company receives a fixed rate of interest of 5.725 % and pays a floating rate of interest equal to one-month USD-Prime.

In each case, the floating rate resets monthly and net settlements of interest due to/from the counterparty also occur monthly.

To the extent the fixed rate of interest exceeds the floating rate of interest, the Company receives net interest settlements, which is recorded as loan interest income.

If the floating rate of interest exceeds the fixed rate of interest, the Company pays net settlements to the counterparty and records those net payments as a reduction of interest income on loans.

At September 30, 2023, the USD-Prime rate was 8.50 % and the one-month USD-SOFR OIS rate was 5.31663 %.

The Company recorded loan interest income of $ 2.0 million on the terminated interest rate swap during each of the three months ended September 30, 2023 and 2022.

The Company recorded loan interest income of $ 6.1 million on the terminated interest rate swap during each of the nine months ended September 30, 2023 and 2022.

The Company recorded negative loan interest income related to the March 2022 interest rate swap of $ 2.8 million in the three months ended September 30, 2023 and recorded negative loan interest income of $ 428,000 in the three months ended September 30, 2022.

The Company recorded negative loan interest income related to the March 2022 interest rate swap of $ 7.5 million in the nine months ended September 30, 2023 and recorded loan interest income of $ 610,000 in the nine months ended September 30, 2022.

The Company recorded negative loan interest income related to the two July 2022 interest rate swaps of $ 2.7 million and $ 4.4 million in the three and nine months ended September 30, 2023, respectively.

Net settlements on these two interest rate swaps began in May 2023.

At March 31, 2024, the USD-Prime rate was 8.50 % and the one-month USD-SOFR OIS rate was 5.32240 %.

The Company recorded a reduction of loan interest income related to these swap transactions totaling $ 2.8 million in the three months ended March 31, 2024, compared to no reduction of interest income in the 2023 period.

The effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affected earnings.

Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.

During each of the three and nine months ended September 30, 2023 and 2022, the Company recognized no non-interest income related to changes in the fair value of these derivatives.

During each of the three-months ended March 31, 2024 and 2023, the Company recognized no non-interest income related to changes in the fair value of these derivatives.

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Statements of Financial Condition:

Consolidated Statements

September 30,

of Financial Condition

1 unchanged sentence

Derivatives designated as hedging instruments

Active interest rate swaps

Derivative Liabilities

Active interest rate swap

Accrued expenses and other liabilities

9 unchanged sentences

Total derivatives not designated as hedging instruments

The following table presents the effect of cash flow hedge accounting through accumulated other comprehensive income on the statements of comprehensive income:

Amount of Gain (Loss)

Recognized in AOCI

Three Months Ended September 30,

Cash Flow Hedges

(In Thousands)

Terminated interest rate swap, net of income taxes

Active interest rate swaps, net of income taxes

The following table presents the effect of cash flow hedge accounting through AOCI on the statements of comprehensive income:

Amount of Gain (Loss)

Recognized in AOCI

Nine Months Ended September 30,

Three Months Ended March 31,

Cash Flow Hedges

3 unchanged sentences

The following table presents the effect of cash flow hedge accounting on the statements of income:

Three Months Ended September 30,

Cash Flow Hedges

(In Thousands)

Total Interest Income

Total Interest Expense

Terminated interest rate swap

Active interest rate swaps

Nine Months Ended September 30,

Three Months Ended March 31,

Cash Flow Hedges

8 unchanged sentences

If the Bank fails to maintain its status as a well-capitalized institution, then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations under the agreements.

Similarly, the Company could be required to settle its obligations under certain of its agreements if certain regulatory events occur, such as the issuance of a formal directive, or if the Company’s credit rating is downgraded below a specified level.

At September 30, 2023, the termination value of derivatives with our derivative dealer counterparties (related to loan level swaps with commercial lending customers and an active interest rate swap to hedge risk related to the Company’s variable rate loans) in an overall net asset position, which included accrued interest but excluded any adjustment for nonperformance risk, related to these agreements was $ 240,000 .

Similarly, the

Company could be required to settle its obligations under certain of its agreements if certain regulatory events occur, such as the issuance of a formal directive, or if the Company’s credit rating is downgraded below a specified level.

At March 31, 2024, the termination value of derivatives with our derivative dealer counterparties (related to loan level swaps with commercial lending customers and an active interest rate swap to hedge risk related to the Company’s variable rate loans) in an overall net asset position, which included accrued interest but excluded any adjustment for nonperformance risk, related to these agreements was $ 125,000 .

The Company has minimum collateral posting thresholds with its derivative dealer counterparties.

At September 30, 2023, the Company had given cash collateral to one derivative counterparty of $ 25.9 million to cover its net fair value position.

At March 31, 2024, the Company had given cash collateral to one derivative counterparty of $ 13.4 million to cover its net fair value position.

This counterparty position included collateral from the counterparty of $ 9.1 million for commercial lending swaps and collateral from the Company of $ 22.2 million for interest rate swaps related to variable rate loans.

At December 31, 2023, the termination value of derivatives with our derivative dealer counterparties (related to loan level swaps with commercial lending customers and an active interest rate swap to hedge risk related to the Company’s variable rate loans) in an overall net asset position, which included accrued interest but excluded any adjustment for nonperformance risk, related to these agreements was $ 137,000 .

The Company has minimum collateral posting thresholds with its derivative dealer counterparties.

At December 31, 2023, the Company had given cash collateral to one derivative counterparty of $ 11.6 million to cover its net fair value position.

This counterparty position included collateral from the counterparty of $ 8.2 million for commercial lending swaps, collateral from the Company of $ 19.2 million for interest rate swaps related to variable rate loans and collateral from the Company of $ 44,000 for swaps related to brokered deposits.

At December 31, 2022, the termination value of derivatives with our derivative dealer counterparties (related to loan level swaps with commercial lending customers) in a net asset position, which included accrued interest but excluded any adjustment for nonperformance risk, related to these agreements was $ 242,000 .

Additionally, the Company’s activity with one of its derivative counterparties met the level at which the minimum collateral posting thresholds take effect (collateral to be given by the Company) and the Company had posted collateral of $ 20.7 million to the derivative counterparty.

If the Company had breached any of these provisions at September 30, 2023 or December 31, 2022, it could have been required to settle its obligations under the agreements at the termination value.

If the Company had breached any of these provisions at March 31, 2024 or December 31, 2023, it could have been required to settle its obligations under the agreements at the termination value.

Under the collateral agreements between the parties, either party may choose to provide cash or securities to satisfy its collateral requirements.

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

What changed 10-Q

Item 1. Financial Statements