GREAT SOUTHERN BANCORP, INC. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-looking Statements When used in this Quarterly Report on Form 10-Q and in other documents filed or furnished by Great Southern Bancorp, Inc. (the “Company”) with the Securities and Exchange Commission (the “SEC”), in the Company’s other press releases or other public or stockholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases “may,” “might,” “could,” “should,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “believe,” “estimate,” “project,” “intends” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements also include, but are not limited to, statements regarding plans, objectives, expectations or consequences of announced transactions, known trends and statements about future performance, operations, products and services of the Company. The Company’s ability to predict results or the actual effects of future plans or strategies is inherently uncertain, and the Company’s actual results could differ materially from those contained in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: (i) expected revenues, cost savings, earnings accretion, synergies and other benefits from the Company’s merger and acquisition activities might not be realized within the anticipated time frames or at all, and costs or difficulties relating to integration matters, including but not limited to customer and employee retention, might be greater than expected; (ii) changes in economic conditions, either nationally or in the Company’s market areas; (iii) the remaining effects of the COVID-19 pandemic on general economic and financial market conditions and on public health; (iv) fluctuations in interest rates, the effects of inflation or a potential recession, whether caused by Federal Reserve actions or otherwise; (v) the impact of bank failures or adverse developments at other banks and related negative press about the banking industry in general on investor and depositor sentiment; (vi) slower economic growth caused by changes in energy prices, supply chain disruptions or other factors; (vii) the risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses; (viii) the possibility of realized or unrealized losses on securities held in the Company’s investment portfolio; (ix) the Company’s ability to access cost-effective funding and maintain sufficient liquidity; (x) fluctuations in real estate values and both residential and commercial real estate market conditions; (xi) the ability to adapt successfully to technological changes to meet customers’ needs and developments in the marketplace; (xii) the possibility that security measures implemented might not be sufficient to mitigate the risk of a cyber-attack or cyber theft, and that such security measures might not protect against systems failures or interruptions; (xiii) legislative or regulatory changes that adversely affect the Company’s business; (xiv) changes in accounting policies and practices or accounting standards; (xv) results of examinations of the Company and Great Southern Bank by their regulators, including the possibility that the regulators may, among other things, require the Company to limit its business activities, change its business mix, increase its allowance for credit losses, write-down assets or increase its capital levels, or affect its ability to borrow funds or maintain or increase deposits, which could adversely affect its liquidity and earnings; (xvi) costs and effects of litigation, including settlements and judgments; (xvii) competition; (xviii) natural disasters, war, terrorist activities or civil unrest and their effects on economic and business environments in which the Company operates. The Company wishes to advise readers that the factors listed above and other risks described in the Company’s most recent Annual Report on Form 10-K, including, without limitation, those described under “Item 1A. Risk Factors,” subsequent Quarterly Reports on Form 10-Q and other documents filed or furnished from time to time by the Company with the SEC (which are available on our website at www.greatsouthernbank.com and the SEC’s website at www.sec.gov), could affect the Company’s financial performance and cause the Company’s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. The Company does not undertake-and specifically declines any obligation- to publicly release the result of any revisions, which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. Critical Accounting Policies, Judgments and Estimates The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States and general practices within the financial services industry. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates. 33 ​ Allowance for Credit Losses On January 1, 2021, the Company adopted the new accounting standard related to the allowance for credit losses. This standard eliminates the probable initial recognition threshold in GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. See Note 6 “Loans and Allowance for Credit Losses” in the Notes to Consolidated Financial Statements included in this report for additional information. The Company believes that the determination of the allowance for credit losses involves a higher degree of judgment and complexity than its other significant accounting policies. The allowance for credit losses is calculated with the objective of maintaining an allowance level believed by management to be sufficient to absorb estimated credit losses. 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. The allowance for credit losses is measured on a collective (pool) basis. Loans are aggregated into pools based on similar risk characteristics, including borrower type, collateral and repayment types and expected credit loss patterns. Loans that do not share similar risk characteristics, primarily classified loans with a balance greater than or equal to $100,000, are evaluated on an individual basis. For loans evaluated for credit losses on a collective basis, average historical loss rates are calculated for each pool using the Company’s historical net charge-offs (combined charge-offs and recoveries by observable historical reporting period) and outstanding loan balances during a lookback period. Lookback periods can be different based on the individual pool and represent management’s credit expectations for the pool of loans over the remaining contractual life. In certain loan pools, if the Company’s own historical loss rate is not reflective of the loss expectations, the historical loss rate is augmented by industry and peer data. The calculated average net charge-off rate is then adjusted for current conditions and reasonable and supportable forecasts. These adjustments increase or decrease the average historical loss rate to reflect expectations of future losses given economic forecasts of key macroeconomic variables including, but not limited to, unemployment rate, GDP, commercial real estate price index, consumer sentiment and construction spending. The adjustments are based on results from various regression models projecting the impact of the macroeconomic variables to loss rates. The forecast is used for a reasonable and supportable period before reverting to historical averages using a straight-line method. The forecast-adjusted loss rate is applied to the principal balance over the remaining contractual lives, adjusted for expected prepayments. The contractual term excludes expected extensions, renewals and modifications. 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. See Note 6 “Loans and Allowance for Credit Losses” in the Notes to Consolidated Financial Statements included in this report for additional information regarding the allowance for credit losses. Inherent in this process is the evaluation and risk assessment of individual credit relationships. From time to time, certain credit relationships may deteriorate due to changes in payment performance, cash flow of the borrower, value of collateral, or other factors. Due to these changing circumstances, management may revise its loss estimates and assumptions for these specific credits. In some cases, losses may be realized; in other instances, the factors that led to the deterioration may improve or the credit may be refinanced elsewhere and allocated allowances may be released from the particular credit. Goodwill and Intangible Assets Goodwill and intangible assets that have indefinite useful lives are subject to an impairment test at least annually and more frequently, if circumstances indicate their value may not be recoverable. Goodwill is tested for impairment using a process that estimates the fair value of each of the Company’s reporting units compared with its carrying value. The Company defines reporting units as a level below each of its operating segments for which there is discrete financial information that is regularly reviewed. As of March 31, 2024, the Company had one reporting unit to which goodwill has been allocated – the Bank. If the fair value of a reporting unit exceeds its carrying value, then no impairment is recorded. If the carrying value exceeds the fair value of a reporting unit, further testing is completed comparing the implied fair value of the reporting unit’s goodwill to its carrying value to measure the amount of impairment. Intangible assets that are not amortized will be tested for impairment at least annually by comparing the fair values of those assets to their carrying values. At March 31, 2024, goodwill consisted of $5.4 million at the Bank reporting unit, which included goodwill of $4.2 million that was recorded during 2016 related to the acquisition of 12 branches and the assumption of related deposits in the St. Louis market. Other identifiable deposit intangible assets that are subject to amortization are amortized on a straight-line basis over a period of seven years. In April 2022, the Company, through its subsidiary Great Southern Bank, entered into a naming rights agreement with Missouri State University related to the main arena on the university’s campus in Springfield, Missouri. The terms of the agreement provide the 34 ​ naming rights to Great Southern Bank for a total cost of $5.5 million, to be paid over a period of seven years. The Company expects to amortize the intangible asset through non-interest expense over a period not to exceed 15 years. At March 31, 2024, the amortizable intangible assets included the arena naming rights of $5.0 million, which are reflected in the table below. These amortizable intangible assets are reviewed for impairment if circumstances indicate their value may not be recoverable based on a comparison of fair value. For purposes of testing goodwill for impairment, the Company uses a market approach to value its reporting unit. The market approach applies a market multiple, based on observed purchase transactions for each reporting unit, to the metrics appropriate for the valuation of the operating unit. Significant judgment is applied when goodwill is assessed for impairment. This judgment may include developing cash flow projections, selecting appropriate discount rates, identifying relevant market comparables and incorporating general economic and market conditions. Management does not believe any of the Company’s goodwill or other intangible assets were impaired as of March 31, 2024. While management believes no impairment existed at March 31, 2024, different conditions or assumptions used to measure fair value of the reporting unit, or changes in cash flows or profitability, if significantly negative or unfavorable, could have a material adverse effect on the outcome of the Company’s impairment evaluation in the future. A summary of goodwill and intangible assets as of the dates indicated is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ December 31, ​ ​ 2024 ​ 2023 ​ ​ (In Thousands) Goodwill – Branch acquisitions $ 5,396 $ 5,396 Arena Naming Rights ​ 5,023 ​ 5,131 ​ ​ $ 10,419 ​ $ 10,527 ​ Current Economic Conditions Changes in economic conditions could cause the values of assets and liabilities recorded in the Company’s financial statements to change rapidly, resulting in material future adjustments to asset values, the allowance for credit losses, or capital that could negatively affect the Company’s ability to meet regulatory capital requirements and maintain sufficient liquidity. Following the housing and mortgage crisis and correction beginning in mid-2007, the United States entered an economic downturn. Unemployment rose from 4.7% in November 2007 to peak at 10.0% in October 2009. Economic conditions improved in the subsequent years, as indicated by higher consumer confidence levels, increased economic activity and low unemployment levels. The U.S. economy continued to operate at historically strong levels until the COVID-19 pandemic in March 2020, which severely affected tourism, labor markets, business travel, immigration and the global supply chain, among other areas. The economy plunged into recession in the first quarter of 2020, as efforts to contain the spread of the coronavirus forced all but essential business activity, or any work that could not be done from home, to stop, shuttering factories, restaurants, entertainment, sporting events, retail shops, personal services, and more. More than 22 million jobs were lost in March and April 2020 as businesses closed their doors or reduced their operations, sending employees home on furlough or layoffs. With uncertain incomes and limited buying opportunities, consumer spending plummeted. As a result, gross domestic product (GDP), the broadest measure of the nation’s economic output, plunged. The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), a fiscal relief bill passed by Congress and signed by the President in March 2020, injected approximately $3 trillion into the economy through direct payments to individuals and loans to small businesses intended to help keep employees on their payroll, fueling a historic bounce-back in economic activity. Total fiscal support to the economy throughout the pandemic, including the CARES Act, the American Rescue Plan of March 2021, and several smaller fiscal packages, totaled well over $5 trillion. The amount of this support was equal to almost 25% of pre-pandemic 2019 GDP and approximately three times the level of support provided during the global financial crisis of 2007-2008. Additionally, the Federal Reserve acted decisively by slashing its benchmark interest rate to near zero and ensuring credit availability to businesses, households, and municipal governments. The Federal Reserve’s efforts largely insulated the financial system from the problems in the economy, a significant difference from the financial crisis of 2007-2008. Purchases of Treasury and agency mortgage-backed securities totaling $120 billion each month by the Federal Reserve commenced shortly after the pandemic began. In November 2021, the Federal Reserve began to taper its quantitative easing (QE), winding down its bond purchases with its final open market purchase conducted on March 9, 2022. The federal government deficit was $2.8 trillion in fiscal 2021, close to $1.4 trillion in fiscal 2022, and $1.7 trillion in fiscal 2023. 35 ​ The Federal Reserve aggressively raised the federal funds interest rates since early 2022 through mid-2023, pushing the federal funds rate to more than 5.50%, its highest level in 22 years. The Federal Reserve’s actions were motivated by surging inflation in 2021 caused by pandemic-fueled spending, which outpaced the ability of producers to supply goods and services after having been impacted by COVID-related shutdowns and clogged transportation systems. The Federal Reserve has made some headway in its attempt to force inflation down. The personal consumption expenditures (PCE) price index, the Federal Reserve's preferred measure of inflation, eased from its peak of 7.1% in June 2022 to 2.9% in December 2023, but core PCE, which excludes food and energy prices, has been slower to retreat and sat at 2.8% at March 2024, above the Federal Reserve's target of 2.0%. Moody’s is projecting real GDP in 2024 to be higher than previously forecast, but the persistence of high interest rates may slow economic growth. Real GDP is projected to rise 2.6% in 2024 on an annual average basis, an upward revision of 0.1%, and is projected to grow 1.6% in 2025 and 1.9% in 2026. Employment The national unemployment rate has ranged from 3.4% to 3.8% since March 2022. The number of unemployed individuals also remained steady at 6.4 million as of March 2024 with 303,000 jobs added in March 2024. In March 2024, employment gains in health and private education, government, and leisure and hospitality contributed to 208,000 of the total job gains. Leisure and hospitality employment rebounded to its pre-pandemic level, with 49,000 of job gains in March 2024, partly boosted by the milder winter. As of March 2024, the labor force participation rate (the share of working-age Americans employed or actively looking for a job) remained stable at 62.7%. The unemployment rate for the Midwest, where the Company conducts most of its business, increased from 3.3% in March 2023 to 3.6% in March 2024. Unemployment rates for March 2024 in the states where the Company has a branch or a loan production office were Arizona at 3.8%, Arkansas at 3.5%, Colorado at 3.7%, Georgia at 3.1%, Illinois at 4.8%, Iowa at 2.9%, Kansas at 2.7%, Minnesota at 2.7%, Missouri at 3.3%, Nebraska at 2.4%, North Carolina at 3.5% and Texas at 3.9%. Of the metropolitan areas in which the Company does business, most are below the national unemployment rate for March 2024 of 3.8%, except for Chicago at 4.7%. Single Family Housing Existing home sales decreased 4.3% in March 2024 from February 2024 to a seasonally adjusted annual rate of 4.19 million, down 3.7% from the previous year. In the Midwest, existing-home sales retracted 1.9% from February 2024 to an annual rate of 1.01 million in March 2024, down 1.0% from one year ago. The median existing-home sales price rose 4.8% from March 2023 to $394,000 in March 2024. All four U.S. regions registered price gains. The median price in the Midwest was $292,000, up 7.5% from March 2023. Total housing inventory registered at the end of March 2024 was 1.1 million units, up 4.7% from February 2024 and up 14.4% from one year ago of 970,000. Unsold inventory sat at a supply of 3.2 months in March 2024, up from 2.9 months in February 2024 and 2.7 months in March 2023. New home construction dropped precipitously after the financial crisis of 2007-2008 and has yet to fully recover. Issues contributing to the country’s current housing shortage include increasing labor and materials costs, availability of building materials, increased interest rates and tighter lending underwriting standards. Sales of new single‐family houses in March 2024 were at a seasonally adjusted annual rate of 693,000, according to the U.S. Census Bureau and the Department of Housing and Urban Development. This was 8.8% above the revised February 2024 rate of 637,000 and 8.3% above the March 2023 rate of 640,000. The median sales price of new houses sold in March 2024 was $431,000, down from $439,000 in March 2023. The average sales price in March 2024 of $525,000 was up from $520,000 in March 2023. The seasonally‐ adjusted estimate of new houses for sale at the end of March 2024 was 477,000. This represented a supply of 8.3 months at the current sales rate. According to Freddie Mac, the average commitment rate for a 30-year, fixed-rate mortgage was 7.1% as of April 18, 2024 which is up 6.9% from the previous week and 6.4% from one year ago. 36 ​ Other Residential (Multi-Family) Housing and Commercial Real Estate Rising consumer sentiment and slowing inflation resulted in a strong demand rebound in 2023 for the U.S. multifamily market. New deliveries for 2023 were at a 40-year high of almost 583,000 units. Supply additions are projected to fall by 21% in 2024 to 460,000 units, as a higher interest rate environment, combined with a pullback in construction lending, has seen some developers unable to move forward on proposed projects. This suggests the beginning of a meaningful pause in deliveries towards the end of 2024 and into 2025, allowing overbuilt Sun Belt markets to absorb their current supply overhang and return to equilibrium more quickly. Until then, these markets may experience significant performance pressures, especially in the 4 & 5 Star segment, where most of the new supply is priced. The Midwest and Northeast fared the best in 2023 with nine out of the ten strongest rent growth markets in 2023 from one of those two regions. The Chicago market rents rose from 3.0% to 3.7% in 2023. Downward pressure on rent growth will likely continue in the first half of 2024. Per CoStar projections, markets in the South and luxury properties remain at the most risk for weakness due to oversupply conditions, while Midwest and Northeast locations and mid-priced 3 Star properties could outperform. Although factors such as declining household formations, rising supply deliveries, and weakening demand may present temporary obstacles, the long-term issue of a major housing shortage remains in our nation. Thus, rent growth is anticipated to rebound above historical averages. As of March 31, 2024, the national multi-family market vacancy rate was 7.8%. Our market areas reflected the following apartment vacancy levels as of March 2024: Springfield, Missouri at 4.9%, St. Louis at 10.5%, Kansas City at 8.9%, Minneapolis at 8.3%, Tulsa, Dallas-Fort Worth at 10.8%, Chicago at 5.6%, Atlanta at 12.2%, Phoenix at 10.6%, Denver at 9.0% and Charlotte, North Carolina at 11.6%. Shrinking demand continues to plague the U.S. office market so far in 2024, shooting vacancy up to a record 13.8% and bringing cumulative negative absorption to more than 200 million SF since the beginning of 2020. Deliveries in 2025 are expected to be the lowest in a decade, tapering off to a negligible amount afterward. This should tighten the market for desirable first-generation space. Higher vacancy and deteriorating rents have severe implications for property values, with further cap rate expansion expected to exacerbate the situation. On average, values are down around 20% since the end of 2021. An additional value correction over the next 12-18 months is expected as a steady stream of low-rate loans maturing into a high rate environment provides motivation for repricing. Office users are continuing to respond to stable attendance and slowing employment growth by shrinking their footprints, resulting in ongoing occupancy losses. Tenants gave back another 20 million SF in the first quarter of 2024, bringing the market's losing streak to eight consecutive quarters. Shrinking overall demand has produced a negative-sum game in the market for leased space. There currently appears to be little likelihood of a dramatic change in demand conditions in the next 18-24 months, during which about 25% of leases executed before 2020 are set to expire. Thus, the outlook is for a continued rise in vacancy, which is expected to approach, if not exceed, 16% by the end of 2025. As of March 2024, the national office vacancy rate was 13.8%, while our market areas reflected the following vacancy levels at March 2024: Springfield, Missouri at 4.3%, St. Louis at 10.3%, Kansas City at 12.1%, Minneapolis at 10.9%, Dallas-Fort Worth at 18.1%, Chicago at 16.3%, Atlanta at 15.7%, Denver at 16.5%, Phoenix at 16.1% and Charlotte, North Carolina at 14.5%. The U.S. retail market is in one of its firmest fundamental positions on record thanks to steadily rising demand, a significant reduction in tenant bankruptcies and store closures, and limited new supply. Demand for retail space has increased by nearly 42 million SF during the past 12 months and over 200 million SF since the start of 2021. While the increase in demand for space has been driven by growth from numerous sources, the most significant gains are from tenants in the food and beverage, discount, off-price, and experiential sectors, which combined accounted for over half of all new leasing activity over the past year. Only 4.8% of retail space is currently available for lease, the lowest level on record. While demand for space continues to rise, new retail development activity remains minimal. Approximately 62 million SF of new retail space was delivered across the U.S. over the past year, more than 40% below the prior 10-year average. Most retail construction activity comprises single-tenant build-to-suits or smaller ground-floor spaces in mixed-use developments. Over 155 million SF of space has been demolished over the past five years, the vast majority of which was attached to, or within, underperforming malls. Given the structural downshift in activity coupled with the fact that over three-quarters of new deliveries during the past five years have had a tenant in place at delivery, the U.S. retail market has faced virtually no threat from new supply. This looks to continue for 37 ​ the foreseeable future, as retail construction starts fell to new historic lows and higher interest rates challenge the feasibility of many potential new retail developments at current rent levels. During the first quarter of 2024, national retail vacancy rates remained steady at 4.1% while our market areas reflected the following vacancy levels: Springfield, Missouri at 2.8%, St. Louis at 4.5%, Kansas City at 4.0%, Minneapolis at 2.6%, Dallas-Fort Worth at 4.5%, Chicago at 4.9%, Atlanta at 3.6%, Phoenix at 4.7%, Denver at 3.9%, and Charlotte, North Carolina at 2.7%. U.S. industrial market performance continued to downshift as 2024 kicked off. While the national vacancy rate is not expected to rise well above its 20-year average of 7.1%, the next 6-12 months could still prove to be the market's most challenging period over the next five years. Net absorption has remained positive but continued to lose steam, with early 2024 registering the lowest first quarter absorption tally since 2012. This weakness tied partly to recent 12-year lows in home sales, which has lowered sales of furniture, building materials, and appliances, leading to large distribution center closures by tenants including Bed Bath & Beyond, Ashley Furniture, and Home Depot. Third-party distributors that leased ahead of their long-term space needs during the pandemic have also been closing facilities they opened during 2020-2022. Oncoming new supply will likely push the national vacancy rate up further through late 2024. Higher interest rates have caused construction starts on new industrial projects to plummet since last fall. The volume of projects completing construction each quarter has already begun to decline and will likely hit 10-year lows in late 2025. This could set the stage for vacancies to begin tightening again and for rent growth to accelerate thereafter. Overall growth in real consumer goods spending has been re-accelerating since last spring even as inflation persists. Large distribution center expansions by companies that sell necessities consumers are still purchasing in high volume despite inflation, including Burlington Coat Factory, TJX Companies, Chuck and Dwight, and Nestle USA, which have all signed new leases larger than 700,000 SF this year. While a potential stagnation in consumer spending poses downside risks in CoStar’s absorption forecast for the next 12 months, high-tech manufacturing will likely be a key driver of leasing from 2024–26. The 2022 passage of the CHIPS and Science Act and the Inflation Reduction Act approved over $400 billion worth of incentives for growth in U.S. based high-tech manufacturing. CoStar is tracking more than 30 planned semiconductor, electric vehicle, and battery plants with estimated payrolls of more than 1,000 employees. The majority of these plants are targeting 2024–25 to begin production, with Arizona, Texas, Georgia, and the Carolinas securing the most new operations. New deliveries will likely remain elevated for the next six to nine months, driving the national vacancy rate higher. Higher interest rates have caused construction starts on new industrial projects to halt. Given the average construction time of 14 months for large industrial projects, this recent pullback in starts suggests that by late 2024, the number of new projects completing construction may begin to decline. This may set the stage for vacancies to stabilize or begin tightening again in late 2024, and for rent growth to accelerate thereafter. For the first quarter of 2024, national industrial vacancy rates increased to 6.2% from 4.5% as of March 31, 2023. Our market areas reflected the following industrial vacancy levels as of March 2024: Springfield, Missouri at 1.6%, St. Louis at 4.6%, Kansas City at 5.3%, Minneapolis at 4.0%, Dallas-Fort Worth at 9.5%, Chicago at 5.5%, Atlanta at 6.6%, Phoenix at 9.9%, Denver at 7.7% and Charlotte, North Carolina at 7.1%. Our management will continue to monitor regional, national, and global economic indicators such as unemployment, GDP, housing starts and prices, consumer sentiment, commercial real estate price index and commercial real estate occupancy, absorption and rental rates, as these could significantly affect customers in each of our market areas. General The profitability of the Company and, more specifically, the profitability of its primary subsidiary, the Bank, depend primarily on its net interest income, as well as provisions for credit losses and the level of non-interest income and non-interest expense. Net interest income is the difference between the interest income the Bank earns on its loans and investment portfolios, and the interest it pays on interest-bearing liabilities, which consists mainly of interest paid on deposits and borrowings. Net interest income is affected by the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on these balances. When interest-earning assets approximate or exceed interest-bearing liabilities, any positive interest rate spread will generate net interest income. 38 ​ Great Southern’s total assets decreased $35.2 million, or 0.6%, from $5.81 billion at December 31, 2023, to $5.78 billion at March 31, 2024. Details of the current period changes in total assets are provided below, under “Comparison of Financial Condition at March 31, 2024 and December 31, 2023.” Loans. Net outstanding loans decreased $3.4 million, or 0.1%, from $4.59 billion at December 31, 2023, to $4.59 billion at March 31, 2024. This decrease was primarily in commercial business loans, commercial real estate loans, construction loans and one- to four-family residential loans, significantly offset by an increase in other residential (multi-family) loans. As loan demand is affected by a variety of factors, including general economic conditions, and because of the competition we face and our focus on pricing discipline and credit quality, we cannot be assured that our loan growth will match or exceed the average level of growth achieved in prior years. The Company’s strategy continues to be focused on maintaining credit risk and interest rate risk at appropriate levels. Recent growth has occurred in some loan types, primarily other residential (multi-family) and in most of Great Southern’s primary lending locations, including Springfield, St. Louis, Kansas City, Des Moines and Minneapolis, as well as our loan production offices in Atlanta, Charlotte, Chicago, Dallas, Denver, Omaha, and Phoenix. Underwriting standards and monitoring procedures utilized by the Company are designed to help assure the Company’s portfolio quality. All new loan originations that exceed lender approval authorities are subject to review and approval by Great Southern’s loan committee. Generally, the Company considers commercial construction, consumer, other residential (multi-family) and commercial real estate loans to involve a higher degree of risk compared to some other types of loans, such as first mortgage loans on one- to four-family, owner-occupied residential properties. For other residential (multi-family), commercial real estate, commercial business and construction loans, the credits are subject to an analysis of the borrower’s and guarantor’s financial condition, credit history, verification of liquid assets, collateral, market analysis and repayment ability. It has been, and continues to be, Great Southern’s practice to verify information from potential borrowers regarding assets, income or payment ability and credit ratings as applicable and as required by the authority approving the loan. To minimize construction risk, projects are monitored as construction draws are requested by comparison to budget and with progress verified through property inspections. The geographic and product diversity of collateral, equity requirements and limitations on speculative construction projects help to mitigate overall risk in these loans. Underwriting standards for all loans also include loan-to-value ratio limitations, which vary depending on collateral type, debt service coverage ratios or debt payment to income ratio guidelines, where applicable, credit histories, use of guaranties and other recommended terms relating to equity requirements, amortization, and maturity. Consumer loans, other than home equity loans, are primarily secured by new or used motor vehicles and these loans are subject to underwriting standards designed to assure portfolio quality. In 2019, the Company discontinued indirect auto loan originations. While our policy allows us to lend up to 95% of the appraised value on one-to four-family residential properties, originations of loans with loan-to-value ratios at that level are minimal. Private mortgage insurance is typically required for loan amounts above the 80% level. Few exceptions occur and would be based on analyses that determined minimal transactional risk to be involved. We consider these lending practices to be consistent with or more conservative than what we believe to be the norm for banks our size. At March 31, 2024 and December 31, 2023, 0.2% of our owner occupied one-to four-family residential loans had loan-to-value ratios above 100% at origination. At March 31, 2024 and December 31, 2023, an estimated 0.4% and 0.4% of total non-owner occupied one- to four-family residential loans had loan-to-value ratios above 100% at origination. The level of non-performing loans and foreclosed assets affects our net interest income and net income. We generally do not accrue interest income on these loans and do not recognize interest income until the loans are repaid or interest payments have been made for a period of time sufficient to provide evidence of improved repayment ability on the loans. Generally, the higher the level of non-performing assets, the greater the negative impact on interest income and net income. Available-for-sale Securities. In the three months ended March 31, 2024, available-for-sale securities decreased $12.9 million, or 2.7%, from $478.2 million at December 31, 2023, to $465.3 million at March 31, 2024. Held-to-maturity Securities. In the three months ended March 31, 2024, held-to-maturity securities decreased $1.6 million, or 0.8%, from $195.0 million at December 31, 2023, to $193.4 million at March 31, 2024. See Note 5 “Investment Securities” in the Notes to Consolidated Financial Statements included in this report for additional information. Deposits. The Company attracts deposit accounts through its retail branch network, correspondent banking and corporate services areas, internet channels and brokered deposits. The Company then utilizes these deposit funds, along with FHLBank advances and other borrowings, to meet loan demand or otherwise fund its activities. In the three months ended March 31, 2024, total deposit balances increased $51.7 million, or 1.1%. Compared to December 31, 2023, transaction account balances increased $60.4 million, or 1.9%, to $3.17 billion at March 31, 2024, and retail certificates of deposit decreased $32.7 million, or 3.5%, to $915.5 million at March 31, 2024. The increase in transaction accounts was primarily a result of an increase in various money market accounts as customers sought accounts paying a higher rate of interest. Retail time deposits decreased due to a decrease in retail certificates 39 ​ generated through the banking center network. Competition for time deposits remains significant in many of our markets. Brokered deposits, including IntraFi program purchased funds, were $685.5 million and $661.5 million at March 31, 2024 and December 31, 2023, respectively. The Company uses brokered deposits of select maturities and interest rate characteristics from time to time to supplement its various funding channels and to manage interest rate risk. Our deposit balances may fluctuate depending on customer preferences and our relative need for funding. We do not consider our retail certificates of deposit to be guaranteed long-term funding because customers can withdraw their funds at any time with minimal interest penalty. When loan demand trends upward, we can increase rates paid on deposits to attract more deposits and utilize brokered deposits to generate additional funding. The level of competition for deposits in our markets is high. It is our goal to gain deposit market share, particularly checking accounts, in our branch footprint. To accomplish this goal, increasing rates to attract deposits may be necessary, which could negatively impact the Company’s net interest margin. Our ability to fund growth in future periods may also depend on our ability to continue to access brokered deposits and FHLBank advances. In times when our loan demand has outpaced our generation of new deposits, we have utilized brokered deposits and FHLBank advances to fund these loans. These funding sources have been attractive to us because we can create either fixed or variable rate funding, as desired, which more closely matches the interest rate nature of much of our loan portfolio. It also gives us greater flexibility in increasing or decreasing the duration of our funding. While we do not currently anticipate that our ability to access these sources will be reduced or eliminated in future periods, if this should happen, the limitation on our ability to fund additional loans could have a material adverse effect on our business, financial condition and results of operations. See “Results of Operations and Comparison for the Three Months Ended March 31, 2024 and 2023 – Liquidity” for further information on funding sources. Securities sold under reverse repurchase agreements with customers. Securities sold under reverse repurchase agreements with customers increased $1.9 million from $70.9 million at December 31, 2023 to $72.8 million at March 31, 2024. These balances fluctuate over time based on customer demand for this product. Short-term borrowings and other interest-bearing liabilities . The Company’s FHLBank term advances were $-0- at both March 31, 2024 and December 31, 2023. At March 31, 2024, there were no overnight borrowings from the FHLBank. At December 31, 2023, there were $251.0 million in overnight borrowings from the FHLBank. In January 2024, the Bank borrowed $180.0 million under 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 at March 31, 2024. These funds were primarily used to repay a portion of the Bank’s overnight borrowings from the FHLBank. Short-term borrowings and other interest-bearing liabilities decreased $71.3 million from $252.6 million at December 31, 2023 to $181.3 million at March 31, 2024. The Company may utilize overnight borrowings, short-term FHLBank advances, and BTFP borrowings from FRBSTL depending on relative interest rates. Net Interest Income and Interest Rate Risk Management. Our net interest income may be affected positively or negatively by changes in market interest rates. A large portion of our loan portfolio is tied to one-month SOFR, three-month SOFR or the “prime rate” and adjusts immediately or shortly after the index rate adjusts (subject to the effect of contractual interest rate floors on some of the loans, which are discussed below). We monitor our sensitivity to interest rate changes on an ongoing basis (see “Quantitative and Qualitative Disclosures About Market Risk”). The current level and shape of the interest rate yield curve poses challenges for interest rate risk management. Prior to its increase of 0.25% on December 16, 2015, the FRB had last changed interest rates on December 16, 2008. This was the first rate increase since September 29, 2006. The FRB also implemented rate change increases of 0.25% on eight additional occasions beginning December 14, 2016 and through December 31, 2018, with the Federal Funds rate reaching as high as 2.50%. After December 2018, the FRB paused its rate increases and, in July, September and October 2019, implemented rate decreases of 0.25% on each of those occasions. At December 31, 2019, the Federal Funds rate stood at 1.75%. In response to the COVID-19 pandemic, the FRB decreased interest rates on two occasions in March 2020, a 0.50% decrease on March 3 and a 1.00% decrease on March 16. At December 31, 2021, the Federal Funds rate was 0.25%. In 2022, the FRB implemented rate increases of 0.25%, 0.50%, 0.75%, 0.75%, 0.75%, 0.75% and 0.50% in March, May, June, July, September, November and December 2022, respectively. At December 31, 2022, the Federal Funds rate was 4.50%. In 2023, the FRB implemented rate increases of 0.25%, 0.25%, 0.25% and 0.25% in February, March, May and July 2023, respectively. At March 31, 2024, the Federal Funds rate was 5.50%. Financial markets now expect the possibility of significant further increases in Federal Funds interest rates in 2024 to be unlikely, with interest rate decisions being made at each FRB meeting based on economic data available at the time. However, the FRB has further indicated, and financial markets now have begun to price in, that it is likely that the Federal Funds interest rate will remain near this peak level for several months before any rate cuts occur. 40 ​ Great Southern’s loan portfolio includes loans ($1.28 billion at March 31, 2024) tied to various SOFR indices that will be subject to adjustment at least once within 90 days after March 31, 2024. All of these loans have interest rate floors at various rates. Great Southern also has a portfolio of loans ($826.7 million at March 31, 2024) tied to a “prime rate” of interest that will adjust immediately or within 90 days of a change to the “prime rate” of interest. Of these loans, $814.5 million had interest rate floors at various rates. In addition, Great Southern has a portfolio of loans ($6.7 million at March 31, 2024) tied to an AMERIBOR index that will adjust immediately or within 90 days of a change to the “prime rate” of interest. All of these loans had interest rate floors at various rates. At March 31, 2024, nearly all of these SOFR and “prime rate” loans had fully indexed rates that were at or above their floor rate and so are expected to move fully with future market interest rate increases. A rate cut by the FRB generally would have an anticipated immediate negative impact on the Company’s net interest income due to the large total balance of loans tied to the SOFR indices or the “prime rate” index and will be subject to adjustment at least once within 90 days or loans which generally adjust immediately as the Federal Funds rate adjusts. Interest rate floors may at least partially mitigate the negative impact of interest rate decreases. Loans at their floor rates are, however, subject to the risk that borrowers will seek to refinance elsewhere at the lower market rate. There may also be a negative impact on the Company’s net interest income if the Company is unable to significantly lower its funding costs due to a highly competitive rate environment, although interest rates on assets may decline further. Conversely, market interest rate increases would normally result in increased interest rates on our SOFR-based, AMERIBOR-based and prime-based loans. As of March 31, 2024, Great Southern’s interest rate risk models indicate that, generally, rising interest rates are expected to have a modestly positive impact on the Company’s net interest income, while declining interest rates are expected to have a modestly negative impact on net interest income. We model various interest rate scenarios for rising and falling rates, including both parallel and non-parallel shifts in rates. The results of our modeling indicate that net interest income is not likely to be significantly affected either positively or negatively in the first twelve months following relatively minor changes in market interest rates because our portfolios are relatively well matched in a twelve-month horizon. In a situation where market interest rates increase significantly in a short period of time, our net interest margin increase may be more pronounced in the very near term (first one to three months), due to fairly rapid increases in SOFR interest rates and “prime” interest rates. In a situation where market interest rates decrease significantly in a short period of time, as they did in March 2020, our net interest margin decrease may be more pronounced in the very near term (first one to three months), due to fairly rapid decreases in SOFR interest rates and “prime” interest rates. In the subsequent months, we would expect that net interest margin would stabilize and begin to improve, as renewal interest rates on maturing time deposits decrease. During 2020, we experienced some compression of our net interest margin due to Federal Fund rate cuts during the nine-month period of July 2019 through March 2020. Margin compression primarily resulted from changes in the asset mix, mainly the addition of lower-yielding assets and the issuance of subordinated notes during 2020, and net interest margin remained lower than our historical average in 2021. LIBOR interest rates decreased significantly in 2020 and remained very low in 2021, putting pressure on loan yields, and strong pricing competition for loans and deposits remained in most of our markets. Beginning in March 2022, market interest rates, including LIBOR interest rates, SOFR interest rates and “prime” interest rates, began to increase rapidly. This resulted in increasing loan yields and expansion of our net interest income and net interest margin throughout 2022 and into the first three months of 2023. In 2023, market interest rate increases moderated and loan yield increases moderated in line with market rates. However, there has been increased competition for deposits and other sources of funding, resulting in higher costs for those funds. This has been especially true since early March 2023. For further discussion of the processes used to manage our exposure to interest rate risk, see “Item 3. Quantitative and Qualitative Disclosures About Market Risk – How We Measure the Risks to Us Associated with Interest Rate Changes.” Non-Interest Income and Non-Interest (Operating) Expenses. The Company’s profitability is also affected by the level of its non-interest income and operating expenses. Non-interest income consists primarily of service charges and ATM fees, POS interchange fees, late charges and prepayment fees on loans, gains on sales of loans and available-for-sale investments and other general operating income. Non-interest income may also be affected by the Company’s interest rate derivative activities, if the Company chooses to implement derivatives. See Note 16 “Derivatives and Hedging Activities” in the Notes to Consolidated Financial Statements included in this report. Operating expenses consist primarily of salaries and employee benefits, occupancy-related expenses, expenses related to foreclosed assets, postage, FDIC deposit insurance, advertising and public relations, telephone, professional fees, office expenses and other general operating expenses. Details of the current period changes in non-interest income and non-interest expense are provided below, under “Results of Operations and Comparison for the Three Months Ended March 31, 2024 and 2023.” 41 ​ Effect of Federal Laws and Regulations General. Federal legislation and regulation significantly affect the operations of the Company and the Bank, and have increased competition among commercial banks, savings institutions, mortgage banking enterprises and other financial institutions. In particular, the capital requirements and operations of regulated banking organizations such as the Company and the Bank have been and will be subject to changes in applicable statutes and regulations from time to time, which changes could, under certain circumstances, adversely affect the Company or the Bank. Dodd-Frank Act. In 2010, sweeping financial regulatory reform legislation entitled the “Dodd-Frank Wall Street Reform and Consumer Protection Act” (the “Dodd-Frank Act”) was signed into law. The Dodd-Frank Act implemented far-reaching changes across the financial regulatory landscape. Certain aspects of the Dodd-Frank Act have been affected by the more recently enacted Economic Growth Act, as defined and discussed below under “-Economic Growth Act.” Capital Rules. The federal banking agencies have adopted regulatory capital rules that substantially amend the risk-based capital rules applicable to the Bank and the Company. The rules implement the “Basel III” regulatory capital reforms and changes required by the Dodd-Frank Act. “Basel III” refers to various documents released by the Basel Committee on Banking Supervision. For the Company and the Bank, the general effective date of the rules was January 1, 2015, and, for certain provisions, various phase-in periods and later effective dates apply. The chief features of these rules are summarized below. The rules refine the definitions of what constitutes regulatory capital and add a new regulatory capital element, common equity Tier 1 capital. The minimum capital ratios are (i) a common equity Tier 1 (“CET1”) risk-based capital ratio of 4.5%; (ii) a Tier 1 risk-based capital ratio of 6%; (iii) a total risk-based capital ratio of 8%; and (iv) a Tier 1 leverage ratio of 4%. In addition to the minimum capital ratios, the rules include a capital conservation buffer, under which a banking organization must have CET1 more than 2.5% above each of its minimum risk-based capital ratios in order to avoid restrictions on paying dividends, repurchasing shares, and paying certain discretionary bonuses. The capital conservation buffer became fully implemented on January 1, 2019. These rules also revised the prompt corrective action framework, which is designed to place restrictions on insured depository institutions if their capital levels show signs of weakness. Under the revised prompt corrective action requirements, insured depository institutions are required to meet the following in order to qualify as “well capitalized:” (i) a common equity Tier 1 risk-based capital ratio of at least 6.5%, (ii) a Tier 1 risk-based capital ratio of at least 8%, (iii) a total risk-based capital ratio of at least 10% and (iv) a Tier 1 leverage ratio of 5%, and must not be subject to an order, agreement or directive mandating a specific capital level. Economic Growth Act. In May 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Economic Growth Act”), was enacted to modify or eliminate certain financial reform rules and regulations, including some implemented under the Dodd-Frank Act. While the Economic Growth Act maintains most of the regulatory structure established by the Dodd-Frank Act, it amends certain aspects of the regulatory framework for small depository institutions with assets of less than $10 billion and for large banks with assets of more than $50 billion. Many of these amendments could result in meaningful regulatory changes. The Economic Growth Act, among other matters, expands the definition of qualified mortgages which may be held by a financial institution and simplifies the regulatory capital rules for financial institutions and their holding companies with total consolidated assets of less than $10 billion by instructing the federal banking regulators to establish a single “Community Bank Leverage Ratio” (“CBLR”) of between 8 and 10 percent. Upon election, any qualifying depository institution or its holding company that exceeds the CBLR will be considered to have met generally applicable leverage and risk-based regulatory capital requirements and any qualifying depository institution that exceeds the new ratio will be considered “well-capitalized” under the prompt corrective action rules. Currently, the CBLR is 9.0%. The Company and the Bank have chosen to not utilize the new CBLR due to the Company’s size and complexity, including its commercial real estate and construction lending concentrations and significant off-balance sheet funding commitments. In addition, the Economic Growth Act includes regulatory relief in the areas of examination cycles, call reports, mortgage disclosures and risk weights for certain high-risk commercial real estate loans. Business Initiatives Since early 2022, Great Southern has been preparing to convert to a new core banking platform (New System) to be delivered by a third-party vendor. As previously disclosed, the migration to the New System, originally scheduled for the third quarter of 2023, was delayed to mid-2024. In addition, as also previously disclosed, certain contractual disputes arose between Great Southern and the third-party vendor. While discussions were ongoing between the parties for an extended period of time, no meaningful progress was made in resolving the contractual disputes. 42 ​ The system migration efforts have been beset by a variety of significant issues, including having missed a second conversion date because of continued operational and system problems. Therefore, Great Southern has taken the following actions to protect its interests. On April 24, 2024, Great Southern informed the third-party vendor that it was terminating the Master Agreement between Great Southern and the third-party vendor in accordance with Great Southern’s rights under the Master Agreement. In addition, on April 24, 2024, Great Southern initiated legal action against the third-party vendor by filing a complaint in the U.S. District Court for the Western District of Missouri, Southern Division. The complaint seeks to recover damages caused by the third-party vendor’s material breach of the Master Agreement, inability and/or inaction on the part of the third-party vendor to effectively and timely manage the system migration, along with the third-party vendor’s misrepresentations and omissions. ​ Great Southern now expects to continue operations with its current core banking provider, which will allow Great Southern to offer its full array of products and services. ​ A retail banking center in Springfield, Missouri, was consolidated into a nearby banking center in January 2024. The office at 600 W. Republic Road was consolidated into the Great Southern banking center located at 2945 W. Republic Road, a short distance away. The vacated property was subsequently sold in April 2024. ​ The Company announced that its 2024 Annual Meeting of Stockholders will be held at 10 a.m. Central Time on May 8, 2024, and will be held in a virtual format. Stockholders will be able to attend the Annual Meeting via a live webcast. Holders of record of Great Southern Bancorp, Inc. common stock at the close of business on the record date, February 28, 2024, may vote during the live webcast of the Annual Meeting or by proxy. Please see the Company’s Notice of Annual Meeting and Proxy Statement available on the Company’s website, www.GreatSouthernBank.com, (click “About” then “Investor Relations”) for additional information about the virtual meeting. Comparison of Financial Condition at March 31, 2024 and December 31, 2023 During the three months ended March 31, 2024, the Company’s total assets decreased by $35.2 million to $5.78 billion. The decrease was primarily in cash and cash equivalents and investment securities. Cash and cash equivalents were $171.4 million at March 31, 2024, a decrease of $39.9 million, or 18.9%, from $211.3 million at December 31, 2023. The Company’s available-for-sale securities decreased $12.9 million, or 2.7%, compared to December 31, 2023. The decrease was primarily due to normal monthly payments received related to the portfolio of mortgage-backed securities and collateralized mortgage obligations. The available-for-sale securities portfolio was 8.1% and 8.2% of total assets at March 31, 2024 and December 31, 2023, respectively. The Company’s held-to-maturity securities decreased $1.6 million, or 0.8%, compared to December 31, 2023. The decrease was primarily due to normal monthly payments received related to the portfolio of mortgage-backed securities and collateralized mortgage obligations. The held-to-maturity securities portfolio was 3.3% and 3.4% of total assets at March 31, 2024 and December 31, 2023, respectively. Net loans decreased $3.4 million from December 31, 2023, to $4.59 billion at March 31, 2024. This decrease was primarily in commercial business loans ($58.6 million decrease), commercial real estate loans ($18.4 million decrease), construction loans ($11.8 million decrease) and one- to four-family residential loans ($10.2 million decrease), significantly offset by an increase in other residential (multi-family) loans ($98.2 million increase). The pipeline of loan commitments and the unfunded portion of construction loans remained strong in the first quarter of 2024. As construction projects were completed, the related loans were either moved from the construction category to the appropriate permanent loan categories or paid off. Total liabilities decreased $28.6 million, from $5.24 billion at December 31, 2023 to $5.21 billion at March 31, 2024. The decrease was primarily due to decreases in short-term borrowings, partially offset by an increase in transaction account deposits and brokered deposits. Total deposits increased $51.7 million, or 1.1%, from $4.72 billion at December 31, 2023 to $4.77 billion at March 31, 2024. Transaction account balances increased $60.4 million, from $3.11 billion at December 31, 2023 to $3.17 billion at March 31, 2024. Total interest-bearing checking accounts increased $79.2 million while non-interest-bearing checking accounts decreased $18.8 million. Retail certificates of deposit decreased $32.7 million compared to December 31, 2023, to $915.5 million at March 31, 2024. Customer retail time deposits initiated through our banking center network decreased $29.8 million and time deposits initiated through our national internet network decreased $2.9 million. 43 ​ Brokered deposits increased $24.0 million to $685.5 million at March 31, 2024, compared to $661.5 million at December 31, 2023. Brokered deposits were utilized to offset reductions in balances in other deposit categories and borrowings. The Company has the capacity to further expand its use of brokered deposits if it chooses to do so. Of the total brokered deposits at March 31, 2024, $300.0 million were floating rate deposits, which adjust daily, based on the effective federal funds rate index. The Company’s term FHLBank advances were $-0- at both March 31, 2024 and December 31, 2023. At March 31, 2024 and December 31, 2023, there were no borrowings from the FHLBank, other than overnight borrowings, which are included in the short-term borrowings category. The Company may utilize both overnight borrowings and short-term FHLBank advances depending on relative interest rates. Short-term borrowings and other interest-bearing liabilities decreased $71.3 million from $252.6 million at December 31, 2023 to $181.3 million at March 31, 2024. At March 31, 2024, none of this total was overnight borrowings from the FHLBank, compared to $154.5 million of overnight borrowings from the FHLBank at December 31, 2023. In January 2024, the Bank borrowed $180.0 million under the 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. These funds were primarily used to repay a portion of the Bank’s overnight borrowings from the FHLBank. Securities sold under reverse repurchase agreements with customers increased $1.9 million, or 2.7%, from $70.9 million at December 31, 2023 to $72.8 million at March 31, 2024. These balances fluctuate over time based on customer demand for this product. Total stockholders’ equity decreased $6.7 million, from $571.8 million at December 31, 2023 to $565.2 million at March 31, 2024. Accumulated other comprehensive loss (a reduction in equity) increased $10.0 million during the three months ended March 31, 2024, primarily due to decreases in the fair value of available-for-sale investment securities and the fair value of cash flow hedges, as a result of increased market interest rates. Stockholders’ equity also decreased due to repurchases of the Company’s common stock totaling $5.8 million and dividends declared on common stock of $4.7 million. Partially offsetting these decreases were net income of $13.4 million for the three months ended March 31, 2024 and a $692,000 increase in stockholders’ equity due to stock option exercises. Results of Operations and Comparison for the Three Months Ended March 31, 2024 and 2023 General Net income was $13.4 million for the three months ended March 31, 2024 compared to $20.5 million for the three months ended March 31, 2023. This decrease of $7.1 million, or 34.5%, was primarily due to a decrease in net interest income of $8.4 million, or 15.7%, and a decrease in non-interest income of $1.1 million, or 13.7%, partially offset by a decrease in income tax expense of $2.3 million, or 42.4%. Total Interest Income Total interest income increased $5.9 million, or 8.3%, during the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase was due to a $5.6 million increase in interest income on loans and a $289,000 increase in interest income on investment securities and other interest-earning assets. Interest income from loans and other interest-earning assets increased during the three months ended March 31, 2024 compared to the same period in 2023 due to higher average balances and higher average rates of interest. Interest income from investment securities increased during the three-months ended March 31, 2024 compared to the three-months ended March 31, 2023, primarily due to higher average rates of interest on investment securities mostly offset by lower average balances of investment securities. Interest Income – Loans During the three months ended March 31, 2024 compared to the three months ended March 31, 2023, interest income on loans increased $4.8 million due to higher average interest rates on loans. The average yield on loans increased from 5.76% during the three months ended March 31, 2023, to 6.13% during the three months ended March 31, 2024. This increase was primarily due to the repricing of floating rate loans as market interest rates increased. Interest income on loans also increased $878,000 as the result of higher average loan balances, which increased from $4.61 billion during the three months ended March 31, 2023, to $4.67 billion during the three months ended March 31, 2024. Since the end of 2022, loan originations and net loan growth have been muted; however, some loan growth has come as a result of the funding of previously approved but unfunded balances on construction loans and the slowed loan prepayments in 2023 and 2024, due to the increase in market interest rates. 44 ​ In October 2018, 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 was $400 million with a contractual termination date in October 2025. As previously disclosed by the Company, in March 2020, the Company and its swap counterparty mutually agreed to terminate this swap, effective immediately. The Company was paid $45.9 million, including accrued but unpaid interest, from its swap counterparty as a result of this termination. This $45.9 million, less the accrued to date interest portion and net of deferred income taxes, is reflected in the Company’s stockholders’ equity as Accumulated Other Comprehensive Income (AOCI) and is being accreted to interest income on loans monthly through the original contractual termination date of October 6, 2025. This has had the effect of reducing AOCI and increasing Net Interest Income and Retained Earnings over the periods. The Company recorded interest income related to the interest rate swap of $2.0 million in each of the three months ended March 31, 2024 and 2023. At March 31, 2024, the Company expected to have a sufficient amount of eligible variable rate loans to continue to accrete this interest income ratably 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. In March 2022, the Company entered into another 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 was $300 million, with a contractual 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 was reset monthly and net settlements of interest due to/from the counterparty also occurred monthly. To the extent that the fixed rate exceeded one-month USD-LIBOR/SOFR, the Company received net interest settlements, which were recorded as loan interest income. If one-month USD-LIBOR/SOFR exceeded the fixed rate of interest, the Company paid net settlements to the counterparty and recorded those net payments as a reduction of interest income on loans. The Company recorded a reduction in loan interest income related to this swap transaction of $1.9 million and $2.2 million in the three months ended March 31, 2024 and 2023, respectively. As this interest rate swap has reached its contractual termination date, there will be no further interest income impacts related to this swap. 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, 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 are 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. The Company recorded a reduction of loan interest income related to these swap transactions of $2.8 million in the three months ended March 31, 2024, compared to no reduction of interest income related to these swap transactions in the 2023 period. At March 31, 2024, the USD-Prime rate was 8.50% and the one-month USD-SOFR OIS rate was 5.32240%. If market interest rates remain near their current levels, the Company’s interest rate swaps will continue to have a negative impact on net interest income. Interest Income – Investments and Other Interest-earning Assets Interest income on investments increased $6,000 in the three months ended March 31, 2024 compared to the three months ended March 31, 2023. Interest income increased $63,000 as a result of higher average interest rates from 2.87% during the three months ended March 31, 2023, to 3.01% during the three months ended March 31, 2024. Substantially offsetting that increase, interest income decreased $57,000 as a result of a decrease in average balances from $706.9 million during the three months ended March 31, 2023, to $669.7 million during the three months ended March 31, 2024. Average balances of securities decreased primarily due to normal monthly payments received related to the portfolio of U.S. Government agency mortgage-backed securities and collateralized mortgage obligations. Interest income on other interest-earning assets increased $283,000 in the three months ended March 31, 2024 compared to the three months ended March 31, 2023. Interest income increased $177,000 as a result of higher average interest rates from 4.51% during the three months ended March 31, 2023, to 5.22% during the three months ended March 31, 2024. Interest income increased $106,000 as a result of an increase in average balances from $91.8 million during the three months ended March 31, 2023, to $100.5 million during the three months ended March 31, 2024. 45 ​ Total Interest Expense Total interest expense increased $14.3 million, or 78.3%, during the three months ended March 31, 2024, when compared with the three months ended March 31, 2023, due to an increase in interest expense on deposits of $13.0 million, or 88.6%, an increase in interest expense on short-term borrowings of $1.3 million, or 71.0%, and an increase in interest expense on subordinated debentures issued to capital trusts of $61,000, or 15.5%, partially offset by the decrease in interest expense on securities sold under reverse repurchase agreements of $9,000, or 2.6%. Interest Expense – Deposits Interest expense on demand and savings deposits increased $5.0 million due to average rates of interest that increased from 0.81% in the three months ended March 31, 2023 to 1.71% in the three months ended March 31, 2024. Interest rates paid on demand deposits were higher in the 2024 period due to significant increases in overall market rates. Interest expense on demand deposits increased $80,000, due to an increase in average balances from $2.18 billion during the three months ended March 31, 2023 to $2.22 billion during the three months ended March 31, 2024. The Company also experienced increased balances in various types of money market accounts due to the increase in average rates on these accounts. Interest expense on time deposits increased $4.4 million as a result of an increase in average rates of interest from 2.07% during the three months ended March 31, 2023, to 3.93% during the three months ended March 31, 2024. Partially offsetting this increase, interest expense on time deposits decreased $373,000 due to a decrease in average balances of time deposits from $1.02 billion during the three months ended March 31, 2023 to $937.7 million in the three months ended March 31, 2024. A large portion of the Company’s certificate of deposit portfolio matures within six to twelve months and therefore reprices fairly quickly; this is consistent with the portfolio over the past several years. Competition for time deposits remains significant in our market areas, and upon maturity, we lost some of these deposits to competitors. Older certificates of deposit that renewed or were replaced with new deposits generally resulted in the Company paying a higher rate of interest compared to the year-ago period due to increases in market interest rates and targeted promotions during 2023 and into early 2024. Interest expense on brokered deposits increased $3.0 million due to an increase in average balances from $456.8 million during the three months ended March 31, 2023 to $688.8 million during the three months ended March 31, 2024. Interest expense on brokered deposits increased $921,000 due to average rates of interest that increased from 4.53% in the three months ended March 31, 2023 to 5.25% in the three months ended March 31, 2024. Brokered deposits added during 2023 and 2024 were at higher market rates than brokered deposits previously issued. The Company uses brokered deposits of select maturities and interest rate structures from time to time to supplement its various funding channels and to manage interest rate risk. Interest Expense – FHLBank Advances; Short-term Borrowings, Repurchase Agreements and Other Interest-bearing Liabilities; Subordinated Debentures Issued to Capital Trusts and Subordinated Notes FHLBank term advances were not utilized during the three months ended March 31, 2024 and 2023. Interest expense on reverse repurchase agreements decreased $27,000 due to lower average balances. The average balance of repurchase agreements decreased from $147.0 million in the three months ended March 31, 2023 to $74.5 million in the three months ended March 31, 2024, which was due to changes in customers’ desire for this product, which can fluctuate. Partially offsetting this decrease, interest expense on reverse repurchase agreements increased $18,000 due to higher average interest rates during the three months ended March 31, 2024 when compared to the three months ended March 31, 2023. The average rate of interest was 1.80% for the three months ended March 31, 2024 compared to 0.94% for the three months ended March 31, 2023. Interest expense on short-term borrowings (including overnight borrowings from the FHLBank and BTFP borrowings from FRBSTL) and other interest-bearing liabilities increased $1.1 million during the three months ended March 31, 2024 when compared to the three months ended March 31, 2023 due to higher average balances. The average balance of short-term borrowings and other interest-bearing liabilities increased from $151.8 million in the three months ended March 31, 2023 to $241.6 million in the three months ended March 31, 2024, which was primarily due to changes in the Company’s funding needs and the mix of funding, which can fluctuate. Interest expense on short-term borrowings and other interest-bearing liabilities increased $126,000 during the three months ended March 31, 2024 when compared to the three months ended March 31, 2023 due to higher average rates of interest. The average rate of interest was 5.07% for the three months ended March 31, 2024, compared to 4.75% for the three months ended March 31, 2023. During the three months ended March 31, 2024, compared to the three months ended March 31, 2023, interest expense on subordinated debentures issued to capital trusts increased $61,000 due to higher average interest rates. The average interest rate was 46 ​ 7.08% in the three months ended March 31, 2024 compared to 6.18% in the three months ended March 31, 2023. The subordinated debentures are variable-rate debentures, which bear interest at an average rate of three-month SOFR (originally LIBOR), plus 1.60%, adjusting quarterly, which was 7.17% at March 31, 2024. There was no change in the average balance of the subordinated debentures between the 2023 and 2024 periods. In June 2020, the Company issued $75.0 million of 5.50% fixed-to-floating rate subordinated notes due June 15, 2030. The notes were sold at par, resulting in net proceeds, after underwriting discounts and commissions and other issuance costs, of approximately $73.5 million. These issuance costs are amortized over the expected life of the notes, which is five years from the issuance date, impacting the overall interest expense on the notes. There was no change in the interest expense on subordinated notes during the three months ended March 31, 2024, compared to the three months ended March 31, 2023. Net Interest Income Net interest income for the three months ended March 31, 2024 decreased $8.4 million to $44.8 million compared to $53.2 million for the three months ended March 31, 2023. Net interest margin was 3.32% in the three months ended March 31, 2024, compared to 3.99% in the three months ended March 31, 2023, a decrease of 67 basis points, or 16.8%. The Company experienced increases in interest income on both loans and investment securities. The Company experienced increases in interest expense on deposits, short-term borrowings and subordinated debentures issued to capital trust. The Company’s overall average interest rate spread decreased 87 basis points, or 24.6%, from 3.53% during the three months ended March 31, 2023 to 2.66% during the three months ended March 31, 2024. The decrease was due to a 124 basis point increase in the weighted average rate paid on interest-bearing liabilities, partially offset by a 37 basis point increase in the weighted average yield on interest-earning assets. In comparing the two periods, the yield on loans increased 37 basis points, the yield on investment securities increased 14 basis points and the yield on other interest-earning assets increased 71 basis points. The rate paid on deposits increased 127 basis points, the rate paid on reverse repurchase agreements increased 86 basis points, the rate paid on short-term borrowings and other interest-bearing liabilities increased 32 basis points, and the rate paid on subordinated debentures issued to capital trusts increased 90 basis points. Interest rates earned on loans and paid on deposits are affected by the mix of the loan and deposit portfolios, the stated maturity of loans and time deposits, the amount of fixed-rate and variable-rate loans and other repricing characteristics. In 2023, overall competition for deposits intensified as a few banks experienced significant liquidity issues in March 2023 and market rates moved higher more rapidly. Overall competition for deposits has remained elevated in early 2024. For additional information on net interest income components, refer to the “Average Balances, Interest Rates and Yields” tables in this Quarterly Report on Form 10-Q. Provision for and Allowance for Credit Losses Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for changes in current loan-specific risk characteristics such as underwriting standards, portfolio mix, delinquency level or term, as well as for changes in economic conditions, including but not limited to, changes in the national unemployment rate, commercial real estate price index, consumer sentiment, gross domestic product (GDP) and construction spending. Challenging or worsening economic conditions from higher inflation or interest rates, COVID-19 and subsequent variant outbreaks or similar events, global unrest or other factors may lead to increased losses in the portfolio and/or requirements for an increase in provision expense. Management maintains various controls in an attempt to identify and limit future losses, such as a watch list of problem loans and potential problem loans, documented loan administration policies and loan review staff to review the quality and anticipated collectability of the portfolio. Additional procedures provide for frequent management review of the loan portfolio based on loan size, loan type, delinquencies, financial analysis, ongoing correspondence with borrowers and problem loan workouts. Management determines which loans are collateral-dependent, evaluates risk of loss and makes additional provisions to expense, if necessary, to maintain the allowance at a satisfactory level. During the three months ended March 31, 2024, the Company recorded provision expense of $500,000 on its portfolio of outstanding loans, compared to a $1.5 million provision expense during the three months ended March 31, 2023. In the three months ended March 31, 2024 and 2023, the Company experienced net charge offs of $83,000 and net recoveries of $7,000, respectively. For the three months ended March 31, 2024, the Company recorded a provision for losses on unfunded commitments of $130,000, compared to a negative provision of $826,000 for the three months ended March 31, 2023. Total unfunded commitments decreased significantly during 2023, resulting in a lower required reserve, while total unfunded commitments did not change significantly in the three months 47 ​ ended March 31, 2024. General market conditions and unique circumstances related to specific industries and individual projects contribute to the level of provisions and charge-offs. The Bank’s allowance for credit losses as a percentage of total loans was 1.40% and 1.39% at March 31, 2024 and December 31, 2023, respectively. Management considers the allowance for credit losses adequate to cover losses inherent in the Bank’s loan portfolio at March 31, 2024, based on recent reviews of the Bank’s loan portfolio and current economic conditions. If challenging economic conditions were to last longer than anticipated or deteriorate further or management’s assessment of the loan portfolio were to change, additional loan loss provisions could be required, thereby adversely affecting the Company’s future results of operations and financial condition. Non-performing Assets As a result of changes in loan portfolio composition, changes in economic and market conditions and other factors specific to a borrower’s circumstances, the level of non-performing assets will fluctuate. At March 31, 2024, non-performing assets were $21.3 million, an increase of $9.5 million from $11.8 million at December 31, 2023. Non-performing assets as a percentage of total assets were 0.37% at March 31, 2024, compared to 0.20% at December 31, 2023. Compared to December 31, 2023, non-performing loans increased $9.6 million, to $21.3 million at March 31, 2024, and foreclosed and repossessed assets increased $24,000, to $47,000 at March 31, 2024. The majority of the increase in non-performing loans was in the other residential (multi-family) loans category, which increased $9.6 million from December 31, 2023. Non-performing Loans. Activity in the non-performing loans category during the three months ended March 31, 2024 was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Transfers to ​ Transfers to ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Beginning ​ Additions ​ Removed ​ Potential ​ Foreclosed ​ ​ ​ ​ ​ ​ ​ Ending ​ ​ Balance, ​ to Non- ​ from Non- ​ Problem ​ Assets and ​ Charge- ​ ​ ​ ​ Balance, ​ January 1 Performing Performing Loans Repossessions Offs Payments March 31 ​ (In thousands) One- to four-family construction ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — Subdivision construction ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ — Land development ​ 384 ​ — ​ — ​ — ​ — ​ — ​ — ​ 384 Commercial construction ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ — One- to four-family residential ​ 722 ​ 68 ​ (148) ​ — ​ — ​ — ​ (16) ​ 626 Other residential (multi-family) ​ — ​ 9,572 ​ — ​ — ​ — ​ — ​ — ​ 9,572 Commercial real estate ​ 10,552 ​ 461 ​ — ​ — ​ — ​ — ​ (401) ​ 10,612 Commercial business ​ 31 ​ — ​ — ​ — ​ — ​ (31) ​ — ​ — Consumer ​ 59 ​ 41 ​ — ​ — ​ — ​ (8) ​ (15) ​ 77 Total non-performing loans ​ $ 11,748 ​ $ 10,142 ​ $ (148) ​ $ — ​ $ — ​ $ (39) ​ $ (432) ​ $ 21,271 ​ At March 31, 2024, the non-performing commercial real estate category included five loans, two of which were added during the current period. The largest relationship in the category, which totaled $7.9 million, or 74.7% of the total category, was added to non-performing loans in 2023 and is collateralized by an office building in Missouri. Another loan, totaling $2.2 million, which was a purchased participation loan originally obtained through an FDIC-assisted acquisition, was added to non-performing loans in the fourth quarter of 2023. This loan is collateralized by a low-income assisted living facility in Wisconsin. During the three months ended March 31, 2024, material terms were changed on this loan, including the Company purchasing the lead participant’s $220,000 interest in this note. The other residential (multi-family) category of non-performing loans included one loan, which totaled $9.6 million and was added during the current period. The Company purchased a participation interest in this loan in 2018, and was not the lead lender for the relationship. This loan was collateralized by a student housing project in Texas and was foreclosed upon in April 2024. The Company does not currently expect any material charge-off on this foreclosed asset. The non-performing one- to four-family residential category included three loans, one of which was added during the current period. The largest relationship in the category totaled $529,000, or 84.4% of the category. The non-performing land development category consisted of one loan added in 2021, which totaled $384,000 and is collateralized by unimproved zoned vacant ground in southern Illinois. The non-performing consumer category included eight loans, five of which were added during the current period. 48 ​ Potential Problem Loans. Potential problem loans increased $16,000 from December 31, 2023. The increase during the period was primarily due to multiple loans, totaling $109,000, being added to potential problem loans, partially offset by $72,000 in loan payments and $21,000 in charge offs. Potential problem loans are loans which management has identified through routine internal review procedures as having possible credit problems that may cause the borrowers difficulty in complying with the current repayment terms. These loans are not reflected in non-performing assets. Activity in the potential problem loans categories during the three months ended March 31, 2024, was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Removed ​ Transfers to ​ ​ ​ ​ ​ Beginning ​ Additions ​ from ​ Transfers to ​ Foreclosed ​ ​ ​ Loan ​ Ending ​ ​ Balance, ​ to Potential ​ Potential ​ Non- ​ Assets and ​ Charge- ​ Advances ​ Balance, ​ January 1 Problem Problem Performing Repossessions Offs (Payments) March 31 ​ ​ (In thousands) One- to four-family construction ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — Subdivision construction ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ — Land development ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ — Commercial construction ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ — One- to four-family residential ​ 158 ​ 25 ​ — ​ — ​ — ​ — ​ (62) ​ 121 Other residential (multi-family) ​ 7,162 ​ — ​ — ​ — ​ — ​ — ​ — ​ 7,162 Commercial real estate ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ — Commercial business ​ — ​ 13 ​ — ​ — ​ — ​ — ​ — ​ 13 Consumer ​ 54 ​ 71 ​ — ​ — ​ — ​ (21) ​ (10) ​ 94 Total potential problem loans ​ $ 7,374 ​ $ 109 ​ $ — ​ $ — ​ $ — ​ $ (21) ​ $ (72) ​ $ 7,390 ​ At March 31, 2024, the other residential (multi-family) category of potential problem loans included one loan, which totaled $7.2 million and was added to potential problem loans in 2023. This loan is collateralized by an apartment and retail project in Oklahoma City, Oklahoma. This loan was fully paid off in April 2024. The one- to four-family residential category of potential problem loans included two loans, one of which was added during the current period. The largest relationship in this category totaled $98,000, or 81.0% of the total category. The commercial business category of potential problem loans included one loan, which totaled $13,000, and was added during the current period. The consumer category of potential problem loans included nine loans, six of which were added during the current period. Other Real Estate Owned and Repossessions. Of the total $1.0 million of other real estate owned and repossessions at March 31, 2024, $995,000 represents Bank-owned properties that were not acquired through foreclosure. Activity in foreclosed assets and repossessions during the three months ended March 31, 2024, was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Beginning ​ ​ ​ ORE and ​ ​ ​ ORE and ​ Ending ​ ​ Balance, ​ ​ ​ Repossession ​ Capitalized ​ Repossession ​ Balance, ​ ​ January 1 ​ Additions ​ Sales ​ Costs ​ Write-Downs ​ March 31 ​ (In thousands) One-to four-family construction $ — $ — $ — $ — $ — $ — Subdivision construction ​ — ​ — ​ — ​ — ​ — ​ — Land development ​ — ​ — ​ — ​ — ​ — ​ — Commercial construction ​ — ​ — ​ — ​ — ​ — ​ — One- to four-family residential ​ — ​ — ​ — ​ — ​ — ​ — Other residential (multi-family) ​ — ​ — ​ — ​ — ​ — ​ — Commercial real estate ​ — ​ — ​ — ​ — ​ — ​ — Commercial business ​ — ​ — ​ — ​ — ​ — ​ — Consumer ​ 23 ​ 53 ​ (29) ​ — ​ — ​ 47 Total foreclosed assets and repossessions ​ $ 23 ​ $ 53 ​ $ (29) ​ $ — ​ $ — ​ $ 47 ​ The additions and sales in the consumer category were due to the volume of repossessions of automobiles, which generally are subject to a shorter repossession process. Loans Classified “Watch” and “Special Mention” The Company reviews the credit quality of its loan portfolio using an internal grading system that classifies loans as “Satisfactory,” “Watch,” “Special Mention,” “Substandard” and “Doubtful.” Multiple loan reviews take place on a continuous basis by credit risk and 49 ​ lending management. Reviews are focused on financial performance, occupancy trends, delinquency status, covenant compliance, collateral support, economic considerations and various other factors. Loans classified as “Watch” are being monitored due to indications of potential weaknesses or deficiencies that may require future reclassification as special mention or substandard. Loans classified as “Watch” decreased $1.5 million, from $8.3 million at December 31, 2023 to $6.8 million at March 31, 2024, primarily due to one large commercial business loan being paid off. While loans classified as “Special Mention” are not adversely classified, they are deserving of management’s close attention to ensure repayment prospects and that the credit position of the assets does not deteriorate and expose the institution to elevated risk to warrant adverse classification at a future date. In the three months ended March 31, 2024, loans classified as “Special Mention” decreased $3.5 million, to $23.2 million, as one loan relationship totaling $9.6 million was downgraded to “Substandard” and added to non-performing loans. The largest relationship consisted of four commercial business loans totaling $15.6 million at March 31, 2024 and is secured by business assets, equipment, accounts receivable and real estate. The relationship was added to the “Special Mention” category during 2023 due to stressed cash flow associated with business expansion. The borrower reduced debt significantly in 2023 by restructuring business operations, resulting in improved business cash flow and collateral margins and since December 31, 2023 has drawn $5.8 million on a working capital line of credit. Another relationship totaling $4.8 million at March 31, 2024 was added to the “Special Mention” category in 2023. This relationship is collateralized by three assisted care facilities located in southwest Missouri. Business cash flow was negatively impacted by a labor shortage and a decrease in Medicaid reimbursement during 2022-2023. Monthly payments continue to amortize the loan balance. See Note 6 “Loans and Allowance for Credit Losses” in the Notes to Consolidated Financial Statements included in this report for further discussion of the Company’s loan grading system. Non-interest Income For the three months ended March 31, 2024, non-interest income decreased $1.1 million to $6.8 million when compared to the three months ended March 31, 2023, primarily as a result of the following items: Overdraft and Insufficient Funds fees : Overdraft and Insufficient funds fees decreased $607,000 compared to the prior year period. This decrease was primarily due to a continuation of a multi-year trend whereby our customers are choosing to forego authorizing payments of certain items which exceed their account balances, resulting in fewer overdrafts in checking accounts and related fees. Point-of-sale and ATM fees : Point-of-sale and ATM fees decreased $518,000 compared to the prior year period. This decrease was primarily due to a portion of these transactions now being routed through channels with lower fees to us, which we expect will continue in future periods, and slightly lower usage of debit cards by our customers. Other income : Other income decreased $465,000 compared to the prior year period. In the 2024 period, the Company recorded $404,000 related to activity incentives for debit card usage, compared to $799,000 in the 2023 period. Non-interest Expense For the three months ended March 31, 2024, non-interest expense decreased $41,000 to $34.4 million when compared to the three months ended March 31, 2023, primarily as a result of the following items: Advertising : Advertising expenses decreased $297,000 from the prior year period, to $350,000. In the 2024 period, the Company received an annual marketing and card expense reimbursement for qualifying expenditures from its debit card brand provider of $423,000; this was used to offset marketing and advertising costs that included this branding. In the previous year period, $321,000 of this annual reimbursement was applied to marketing and advertising expenses. Legal, Audit and Other Professional Fees : Legal, audit and other professional fees decreased $256,000 from the prior year period, to $1.7 million. In the 2023 period, the Company expensed a total of $1.3 million related to legal expenses and training and implementation costs for the core systems conversion and professional fees to consultants engaged to support the Company’s transition of core and ancillary software and information technology systems. In the 2024 period, this expense was $929,000. Salaries and employee benefits : Salaries and employee benefits increased $453,000 from the prior year period. A majority of this increase related to normal annual merit increases in various lending and operations areas. Insurance : Insurance expense increased $277,000 from the prior year period. The increase was primarily due to increases in deposit insurance rates by the FDIC’s Deposit Insurance Fund, which went into effect in 2023. The Company’s efficiency ratio for the three months ended March 31, 2024, was 66.68% compared to 56.42% for the same period in 2023. The Company’s ratio of non-interest expense to average assets was 2.39% and 2.42% for the three months ended March 31, 50 ​ 2024 and 2023, respectively. Average assets for the three months ended March 31, 2024, increased $57.8 million, or 1.0%, from the three months ended March 31, 2023, primarily due to an increase in net loans receivable and interest bearing cash equivalents, partially offset by a decrease in investment securities. Provision for Income Taxes For the three months ended March 31, 2024 and 2023, the Company’s effective tax rate was 19.1% and 21.2%, respectively. These effective rates were near or below the statutory federal tax rate of 21%, due primarily to the utilization of certain investment tax credits and the Company’s tax-exempt investments and tax-exempt loans, which reduced the Company’s effective tax rate. The Company’s effective tax rate may fluctuate in future periods as it is impacted by the level and timing of the Company’s utilization of tax credits, the level of tax-exempt investments and loans, the amount of taxable income in various state jurisdictions and the overall level of pre-tax income. State tax expense estimates continually evolve as taxable income and apportionment between states is analyzed. The Company’s effective income tax rate is currently generally expected to remain at or below the statutory federal tax rate due primarily to the factors noted above. The Company currently expects its effective tax rate (combined federal and state) will be approximately 18.5% to 20.5% in future periods, primarily due to additional investment tax credits expected to be utilized beginning in 2024. 51 ​ Average Balances, Interest Rates and Yields ​ The following table presents, for the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed in both dollars and rates, and the net interest margin. Average balances of loans receivable include the average balances of non-accrual loans for each period. Interest income on loans includes interest received on non-accrual loans on a cash basis. Interest income on loans also includes the amortization of net loan fees, which were deferred in accordance with accounting standards. Net loan fees included in interest income were $1.2 million and $1.3 million for the three months ended March 31, 2024 and 2023, respectively. Tax-exempt income was not calculated on a tax equivalent basis. The table does not reflect any effect of income taxes. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ Three Months Ended ​ Three Months Ended ​ ​ 2024 ​ March 31, 2024 ​ March 31, 2023 ​ ​ Yield/ ​ Average ​ ​ ​ ​ Yield/ ​ Average ​ ​ ​ Yield/ ​ Rate Balance Interest Rate Balance Interest Rate ​ ​ (Dollars in Thousands) Interest-earning assets: ​ ​ ​ ​ ​ Loans receivable: ​ ​ ​ ​ ​ One- to four-family residential 3.95 % $ 889,969 ​ $ 8,697 3.93 % $ 909,672 ​ $ 8,165 3.64 % Other residential (multi-family) 7.20 ​ 959,975 ​ 16,858 7.06 ​ 785,126 ​ 12,684 6.55 ​ Commercial real estate 6.19 ​ 1,499,641 ​ 22,768 6.11 ​ 1,510,516 ​ 21,535 5.78 ​ Construction 7.60 ​ 856,571 ​ 15,844 7.44 ​ 920,020 ​ 16,206 7.14 ​ Commercial business 6.64 ​ 274,118 ​ 4,393 6.45 ​ 283,251 ​ 4,118 5.90 ​ Other loans 6.39 ​ 173,636 ​ 2,300 ​ 5.33 ​ 189,688 ​ 2,506 5.36 ​ Industrial revenue bonds(1) 6.09 ​ 11,956 ​ 216 7.26 ​ 12,734 ​ 224 7.15 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total loans receivable 6.26 ​ 4,665,866 ​ 71,076 6.13 ​ 4,611,007 ​ 65,438 5.76 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment securities(1) 2.66 ​ 669,680 ​ 5,010 3.01 ​ 706,894 ​ 5,004 2.87 ​ Other interest-earning assets 5.33 ​ 100,503 ​ 1,304 5.22 ​ 91,821 ​ 1,021 4.51 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total interest-earning assets 5.83 ​ 5,436,049 ​ 77,390 5.73 ​ 5,409,722 ​ 71,463 5.36 ​ Non-interest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ ​ ​ 90,474 ​ ​ ​ ​ 93,586 ​ ​ ​ ​ Other non-earning assets ​ ​ ​ 235,817 ​ ​ ​ ​ 201,236 ​ ​ ​ ​ Total assets ​ ​ ​ $ 5,762,340 ​ ​ ​ ​ $ 5,704,544 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing demand and savings 1.77 ​ $ 2,223,780 ​ 9,482 1.71 ​ $ 2,184,966 ​ 4,359 0.81 ​ Time deposits 4.08 ​ 937,720 ​ 9,165 3.93 ​ 1,016,042 ​ 5,185 2.07 ​ Brokered deposits ​ 5.12 ​ ​ 688,820 ​ ​ 8,990 ​ 5.25 ​ ​ 456,817 ​ ​ 5,106 ​ 4.53 ​ Total deposits 2.90 ​ 3,850,320 ​ 27,637 2.89 ​ 3,657,825 ​ 14,650 1.62 ​ Securities sold under reverse repurchase agreements ​ 2.02 ​ ​ 74,468 ​ ​ 333 ​ 1.80 ​ ​ 147,025 ​ ​ 342 ​ 0.94 ​ Short-term borrowings, overnight FHLBank borrowings and other interest-bearing liabilities 4.83 ​ 241,591 ​ 3,044 5.07 ​ 151,847 ​ 1,780 4.75 ​ Subordinated debentures issued to capital trusts 7.17 ​ 25,774 ​ 454 7.08 ​ 25,774 ​ 393 6.18 ​ Subordinated notes 5.92 ​ 74,619 ​ 1,106 5.96 ​ 74,319 ​ 1,106 6.04 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total interest-bearing liabilities 3.04 ​ 4,266,772 ​ 32,574 3.07 ​ 4,056,790 ​ 18,271 1.83 ​ Non-interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Demand deposits ​ ​ ​ 854,849 ​ ​ ​ ​ 1,008,006 ​ ​ ​ ​ Other liabilities ​ ​ ​ 67,879 ​ ​ ​ ​ 89,974 ​ ​ ​ ​ Total liabilities ​ ​ ​ 5,189,500 ​ ​ ​ ​ 5,154,770 ​ ​ ​ ​ Stockholders’ equity ​ ​ ​ 572,840 ​ ​ ​ ​ 549,774 ​ ​ ​ ​ Total liabilities and stockholders’ equity ​ ​ ​ $ 5,762,340 ​ ​ ​ ​ $ 5,704,544 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate spread 2.79 % ​ ​ ​ $ 44,816 2.66 % ​ ​ ​ $ 53,192 3.53 % Net interest margin* ​ ​ ​ ​ ​ ​ ​ ​ 3.32 % ​ ​ ​ 3.99 % Average interest-earning assets to average interest-bearing liabilities ​ ​ ​ 127.4 % ​ ​ ​ 133.3 % ​ ​ ​ * Defined as the Company’s net interest income divided by total average interest-earning assets. (1) Of the total average balances of investment securities, average tax-exempt investment securities were $57.6 million and $57.8 million for the three months ended March 31, 2024 and 2023, respectively. In addition, average tax-exempt loans and industrial revenue bonds were $11.4 million and $10.7 million for the three months ended March 31, 2024 and 2023, respectively. Interest income on tax-exempt assets included in this table was $568,000 and $637,000 for the three months ended March 31, 2024 and 2023, respectively. Interest income net of disallowed interest expense related to tax-exempt assets was $460,000 and $569,000 for the three months ended March 31, 2024 and 2023, respectively. ​ 52 ​ Rate/Volume Analysis The following table presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities for the periods shown. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in rate (i.e., changes in rate multiplied by old volume) and (ii) changes in volume (i.e., changes in volume multiplied by old rate). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to volume and rate. Tax-exempt income was not calculated on a tax equivalent basis. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ ​ 2024 vs. 2023 ​ ​ Increase (Decrease) Total ​ ​ Due to ​ Increase ​ ​ Rate Volume ​ (Decrease) ​ ​ (Dollars in Thousands) Interest-earning assets: ​ ​ ​ Loans receivable ​ $ 4,760 ​ $ 878 ​ $ 5,638 Investment securities ​ 63 ​ (57) ​ 6 Interest-earning deposits in other banks ​ 177 ​ 106 ​ 283 Total interest-earning assets ​ 5,000 ​ 927 ​ 5,927 Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ Demand deposits ​ 5,043 ​ 80 ​ 5,123 Time deposits ​ 4,353 ​ (373) ​ 3,980 Brokered deposits ​ ​ 921 ​ ​ 2,963 ​ ​ 3,884 Total deposits ​ 10,317 ​ 2,670 ​ 12,987 Securities sold under reverse repurchase agreements ​ ​ 18 ​ ​ (27) ​ ​ (9) Short-term borrowings, overnight FHLBank borrowings and other interest-bearing liabilities ​ 126 ​ 1,138 ​ ​ 1,264 Subordinated debentures issued to capital trust ​ 61 ​ — ​ 61 Subordinated notes ​ (7) ​ 7 ​ — Total interest-bearing liabilities ​ 10,515 ​ 3,788 ​ 14,303 Net interest income ​ $ (5,515) ​ $ (2,861) ​ $ (8,376) ​ Liquidity Liquidity is a measure of the Company’s ability to generate sufficient cash to meet present and future financial obligations in a timely manner through either the sale or maturity of existing assets or the acquisition of additional funds through liability management. These obligations include the credit needs of customers, funding deposit withdrawals, and the day-to-day operations of the Company. Liquid assets include cash, interest-bearing deposits with financial institutions and certain investment securities and loans. As a result of the Company’s ability to generate liquidity primarily through liability funding, management believes that the Company maintains overall liquidity sufficient to satisfy its depositors’ requirements and meet its borrowers’ credit needs. At March 31, 2024, the Company had commitments of approximately $41.0 million to fund loan originations, $1.20 billion of unused lines of credit and unadvanced loans, and $15.7 million of outstanding letters of credit. 53 ​ Loan commitments and the unfunded portion of loans at the dates indicated were as follows (In Thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, December 31, December 31, December 31, December 31, ​ 2024 2023 2022 2021 2020 Closed non-construction loans with unused available lines ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Secured by real estate (one- to four-family) ​ $ 206,992 ​ $ 203,964 ​ $ 199,182 ​ $ 175,682 ​ $ 164,480 Secured by real estate (not one- to four-family) ​ ​ — ​ ​ — ​ ​ — ​ 23,752 ​ 22,273 Not secured by real estate - commercial business ​ ​ 120,387 ​ ​ 82,435 ​ ​ 104,452 ​ 91,786 ​ 77,411 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Closed construction loans with unused available lines ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Secured by real estate (one-to four-family) ​ ​ 103,839 ​ ​ 101,545 ​ ​ 100,669 ​ 74,501 ​ 42,162 Secured by real estate (not one-to four-family) ​ ​ 680,149 ​ ​ 719,039 ​ ​ 1,444,450 ​ 1,092,029 ​ 823,106 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loan commitments not closed ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Secured by real estate (one-to four-family) ​ ​ 20,410 ​ ​ 12,347 ​ ​ 16,819 ​ 53,529 ​ 85,917 Secured by real estate (not one-to four-family) ​ ​ 50,858 ​ ​ 48,153 ​ ​ 157,645 ​ 146,826 ​ 45,860 Not secured by real estate - commercial business ​ ​ 9,022 ​ ​ 11,763 ​ ​ 50,145 ​ 12,920 ​ 699 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 1,191,657 ​ $ 1,179,246 ​ $ 2,073,362 ​ $ 1,671,025 ​ $ 1,261,908 ​ The Company’s primary sources of funds are customer deposits, brokered deposits, short-term borrowings at the FHLBank, other borrowings, loan repayments, unpledged securities, proceeds from sales of loans and available-for-sale securities and funds provided from operations. The Company utilizes some or all these sources of funds depending on the comparative costs and availability at the time. The Company has from time to time chosen not to pay rates on deposits as high as the rates paid by certain of its competitors and, when believed to be appropriate, supplements deposits with less expensive alternative sources of funds. Since mid-2022, the Company has increased the interest rates it pays on many deposit products. The Company has also utilized both fixed-rate and floating-rate brokered deposits of varying terms, as well as overnight FHLBank borrowings and term borrowings from the FRB. At March 31, 2024 and December 31, 2023, the Company had the following available secured lines and on-balance sheet liquidity: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2024 December 31, 2023 Federal Home Loan Bank line $ 1,227.2 million ​ $ 919.1 million Federal Reserve Bank line ​ $ 391.9 million ​ $ 448.7 million Cash and cash equivalents ​ $ 171.4 million ​ $ 211.3 million Unpledged securities – Available-for-sale ​ $ 317.9 million ​ $ 352.8 million Unpledged securities – Held-to-maturity ​ $ 26.8 million ​ $ 191.7 million ​ Statements of Cash Flows. During the three months ended March 31, 2024, the Company had negative cash flows from operating activities compared to positive cash flows from operating activities for the three months ended March 31, 2023. The Company had positive cash flows from investing activities during the three months ended March 31, 2024, compared to negative cash flows from investing activities during the three months ended March 31, 2023. The Company had negative cash flows from financing activities during the three months ended March 31, 2024, compared to positive cash flows from financing activities during the three months ended March 31, 2023. Cash flows from operating activities for the periods covered by the Statements of Cash Flows have been primarily related to changes in accrued and deferred assets, credits and other liabilities, the provision for credit losses, depreciation and amortization, realized gains on sales of loans and the amortization of deferred loan origination fees and discounts (premiums) on loans and investments, all of which are non-cash or non-operating adjustments to operating cash flows. Net income adjusted for non-cash and non-operating items and the origination and sale of loans held for sale were the primary source of cash flows from operating activities. Operating activities used cash of $26.9 million and provided cash of $15.2 million during the three months ended March 31, 2024 and 2023, respectively. During the three months ended March 31, 2024 and 2023, investing activities provided cash of $13.5 million and used cash of $63.1 million, respectively. Investing activities in the three months ended March 31, 2024 provided cash primarily due to the net repayment of loans and investment securities and net redemption of FHLBank stock. Investing activities in the three months ended March 31, 2023 used cash primarily due to the net origination of loans. 54 ​ Changes in cash flows from financing activities during the periods covered by the Statements of Cash Flows were due to changes in deposits after interest credited and changes in short-term borrowings, as well as advances from borrowers for taxes and insurance, dividend payments to stockholders, repurchases of the Company’s common stock and the exercise of common stock options. During the three months ended March 31, 2024 and 2023, financing activities used cash of $26.5 million and provided cash of $64.1 million, respectively. In the three months ended March 31, 2024, financing activities used cash primarily as a result of net decreases in time deposits and short-term borrowings, purchases of the Company’s common stock and dividends paid to stockholders. partialy offset by net increases in checking and savings deposits. In the three months ended March 31, 2023, financing activities provided cash primarily as a result of net increases in time deposits and checking and savings deposits, partially offset by a decrease in short-term borrowings, purchases of the Company’s common stock and dividends paid to stockholders. Capital Resources Management continuously reviews the capital position of the Company and the Bank to ensure compliance with minimum regulatory requirements, as well as to explore ways to increase capital either by retained earnings or other means. At March 31, 2024, the Company’s total stockholders’ equity and common stockholders’ equity were each $565.2 million, or 9.8% of total assets, equivalent to a book value of $48.31 per common share. As of December 31, 2023, total stockholders’ equity and common stockholders’ equity were each $571.8 million, or 9.8% of total assets, equivalent to a book value of $48.44 per common share. At March 31, 2024, the Company’s tangible common equity to tangible assets ratio was 9.6%, compared to 9.7% at December 31, 2023 (See Non-GAAP Financial Measures below). Included in stockholders’ equity at March 31, 2024 and December 31, 2023, were unrealized losses (net of taxes) on the Company’s available-for-sale investment securities totaling $45.9 million and $40.5 million, respectively. This change in net unrealized loss during the three months ended March 31, 2024, primarily resulted from increasing intermediate-term market interest rates, which generally decreased the fair value of investment securities. In addition, included in stockholders’ equity at March 31, 2024, were realized gains (net of taxes) on the Company’s terminated cash flow hedge (interest rate swap), totaling $9.5 million. This amount, plus associated deferred taxes, is expected to be accreted to interest income over the remaining term of the original interest rate swap contract, which was to end in October 2025. At March 31, 2024, the remaining pre-tax amount to be recorded in interest income was $12.3 million. The net effect on total stockholders’ equity over time will be no impact as the reduction of this realized gain will be offset by an increase in retained earnings (as the interest income flows through pre-tax income). Also included in stockholders’ equity at March 31, 2024, was an unrealized loss (net of taxes) on the Company’s two outstanding cash flow hedges (interest rate swaps) totaling $16.0 million. Increases in market interest rates since the inception of these hedges have caused their fair values to decrease. During the three months ended March 31, 2024, increasing forward swap rates resulted in decreasing fair values of these hedges. As noted above, total stockholders’ equity decreased $6.7 million, from $571.8 million at December 31, 2023 to $565.2 million at March 31, 2024. Stockholders’ equity decreased due to repurchases of the Company’s common stock totaling $5.8 million and dividends declared on common stock of $4.7 million. Accumulated Other Comprehensive Loss increased $10.0 million (decrease to stockholders’ equity) during the three months ended March 31, 2024, primarily due to changes (decreases) in the market value of available-for-sale securities and in the fair value of cash flow hedges. Partially offsetting these decreases were net income of $13.4 million for the three months ended March 31, 2024 and an increase of $692,000 due to stock option exercises. The adoption of a new accounting standard (ASU 2023-02) in the first quarter of 2024 also decreased stockholders’ equity by $223,000. 55 ​ The Company had unrealized losses on its portfolio of held-to-maturity investment securities, which totaled $25.6 million at March 31, 2024, that were not included in its total capital balance. If these held-to-maturity unrealized losses were included in capital (net of taxes), they would have decreased total stockholder’s equity by $19.3 million at March 31, 2024. This amount was equal to 3.4% of total stockholders’ equity of $565.2 million. Banks are required to maintain minimum risk-based capital ratios. These ratios compare capital, as defined by the risk-based regulations, to assets adjusted for their relative risk as defined by the regulations. Under current guidelines, which became effective January 1, 2015, banks must have a minimum common equity Tier 1 capital ratio of 4.50%, a minimum Tier 1 risk-based capital ratio of 6.00%, a minimum total risk-based capital ratio of 8.00%, and a minimum Tier 1 leverage ratio of 4.00%. To be considered “well capitalized,” banks must have a minimum common equity Tier 1 capital ratio of 6.50%, a minimum Tier 1 risk-based capital ratio of 8.00%, a minimum total risk-based capital ratio of 10.00%, and a minimum Tier 1 leverage ratio of 5.00%. On March 31, 2024, the Bank’s common equity Tier 1 capital ratio was 13.0%, its Tier 1 risk-based capital ratio was 13.0%, its total risk-based capital ratio was 14.3% and its Tier 1 leverage ratio was 11.5%. As a result, as of March 31, 2024, the Bank was well capitalized, with capital ratios in excess of those required to qualify as such. On December 31, 2023, the Bank’s common equity Tier 1 capital ratio was 13.1%, its Tier 1 capital ratio was 13.1%, its total capital ratio was 14.3% and its Tier 1 leverage ratio was 11.6%. As a result, as of December 31, 2023, the Bank was well capitalized, with capital ratios in excess of those required to qualify as such. The FRB has established capital regulations for bank holding companies that generally parallel the capital regulations for banks. On March 31, 2024, the Company’s common equity Tier 1 capital ratio was 11.9%, its Tier 1 risk-based capital ratio was 12.4%, its total risk-based capital ratio was 15.2% and its Tier 1 leverage ratio was 11.0%. On December 31, 2023, the Company’s common equity Tier 1 capital ratio was 11.9%, its Tier 1 capital ratio was 12.4%, its total capital ratio was 15.2% and its Tier 1 leverage ratio was 11.0%. In addition to the minimum common equity Tier 1 capital ratio, Tier 1 risk-based capital ratio and total risk-based capital ratio, the Company and the Bank have to maintain a capital conservation buffer consisting of additional common equity Tier 1 capital greater than 2.5% of risk-weighted assets above the required minimum levels in order to avoid limitations on paying dividends, repurchasing shares, and paying discretionary bonuses. At March 31, 2024 and December 31, 2023, both the Company and the Bank had a capital conservation buffer that exceeded the required minimum levels. Dividends . During the three months ended March 31, 2024, the Company declared a common stock cash dividend of $0.40 per share, or 35% of net income per diluted common share for that three-month period, and paid a common stock cash dividend of $0.40 per share (which was declared in December 2023). During the three months ended March 31, 2023, the Company declared a common stock cash dividend of $0.40 per share, or 24% of net income per diluted common share for that three-month period, and paid a common stock cash dividend of $0.40 per share (which was declared in December 2022). The Board of Directors meets regularly to consider the level and the timing of dividend payments. The $0.40 per share dividend declared but unpaid as of March 31, 2024, was paid to stockholders in April 2024. Common Stock Repurchases and Issuances . The Company has been in various buy-back programs since May 1990. During the three months ended March 31, 2024, the Company repurchased 112,362 shares of its common stock at an average price of $51.44 per share and issued 7,288 shares of common stock at an average price of $35.41 per share to cover stock option exercises. During the three months ended March 31, 2023, the Company repurchased 99,121 shares of its common stock at an average price of $55.70 per share and issued 1,717 shares of common stock at an average price of $43.05 per share to cover stock option exercises. In December 2022, the Company’s Board of Directors authorized the purchase of up to one million shares of the Company’s outstanding common stock, under a program of open market purchases or privately negotiated transactions. At March 31, 2024, approximately 615,000 shares remained available in our stock repurchase authorization. Management has historically utilized stock buy-back programs from time to time, as long as management believed that repurchasing the Company’s common stock would contribute to the overall growth of shareholder value. The number of shares that will be repurchased at any particular time and the prices that will be paid are subject to many factors, several of which are outside of the control of the Company. The primary factors typically include the number of shares available in the market from sellers at any given time, the market price of the stock and the projected impact on the Company’s earnings per share and capital. Non-GAAP Financial Measures This document contains certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States (“GAAP”), specifically, the ratio of tangible common equity to tangible assets. 56 ​ In calculating the ratio of tangible common equity to tangible assets, we subtract period-end intangible assets from common equity and from total assets. Management believes that the presentation of this measure excluding the impact of intangible assets provides useful supplemental information that is helpful in understanding our financial condition and results of operations, as it provides a method to assess management’s success in utilizing our tangible capital as well as our capital strength. Management also believes that providing a measure that excludes balances of intangible assets, which are subjective components of valuation, facilitates the comparison of our performance with the performance of our peers. In addition, management believes that this is a standard financial measure used in the banking industry to evaluate performance. This non-GAAP financial measurement is supplemental and is not a substitute for any analysis based on GAAP financial measures. Because not all companies use the same calculation of non-GAAP measures, this presentation may not be comparable to other similarly titled measures as calculated by other companies. Non-GAAP Reconciliation: Ratio of Tangible Common Equity to Tangible Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2024 December 31, 2023 ​ ​ (Dollars in Thousands) ​ ​ ​ ​ ​ ​ ​ ​ Common equity at period end ​ $ 565,162 ​ $ 571,829 ​ Less: Intangible assets at period end ​ 10,419 ​ 10,527 ​ Tangible common equity at period end (a) ​ $ 554,743 ​ $ 561,302 ​ ​ ​ ​ ​ ​ ​ ​ ​ Total assets at period end ​ $ 5,777,176 ​ $ 5,812,402 ​ Less: Intangible assets at period end ​ 10,419 ​ 10,527 ​ Tangible assets at period end (b) ​ $ 5,766,757 ​ $ 5,801,875 ​ ​ ​ ​ ​ ​ ​ ​ ​ Tangible common equity to tangible assets (a) / (b) ​ 9.62 % 9.67 % ​ ​