What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-08-07 compared with 2024-04-30 · 322 added, 166 removed, 976 unchanged (33% of the section changed)

9 unchanged sentences

Mortgage loans held for sale

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

Loans receivable, net of allowance for credit losses of $ 65,255 – June 2024;

$ 64,670 – December 2023

20 unchanged sentences

authorized 1,000,000 shares;

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

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

Common stock, $ .01 par value;

authorized 20,000,000 shares;

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

issued and outstanding June 2024 – 11,582,606 shares;

December 2023 – 11,804,430 shares

22 unchanged sentences

PROVISION (CREDIT) FOR UNFUNDED COMMITMENTS

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

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

NON-INTEREST INCOME

3 unchanged sentences

Late charges and fees on loans

Loss on derivative interest rate products

Gain (loss) on derivative interest rate products

TOTAL NON-INTEREST INCOME

16 unchanged sentences

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Share Data)

SIX MONTHS ENDED

INTEREST INCOME

Investment securities and other

TOTAL INTEREST INCOME

INTEREST EXPENSE

Securities sold under reverse repurchase agreements

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

Subordinated debentures issued to capital trust

Subordinated notes

TOTAL INTEREST EXPENSE

NET INTEREST INCOME

PROVISION FOR CREDIT LOSSES ON LOANS

PROVISION (CREDIT) FOR UNFUNDED COMMITMENTS

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

NON-INTEREST INCOME

Overdraft and insufficient funds fees

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

Net gains on loan sales

Late charges and fees on loans

Gain (loss) on derivative interest rate products

TOTAL NON-INTEREST INCOME

NON-INTEREST EXPENSE

Salaries and employee benefits

Net occupancy and equipment expense

Office supplies and printing

Legal, audit and other professional fees

Expense on other real estate and repossessions

Acquired intangible asset amortization

Other operating expenses

TOTAL NON-INTEREST EXPENSE

INCOME BEFORE INCOME TAXES

PROVISION FOR INCOME TAXES

Basic Earnings Per Common Share

Diluted Earnings Per Common Share

Dividends Declared Per Common Share

See Notes to Consolidated Financial Statements

GREAT SOUTHERN BANCORP, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

2 unchanged sentences

Unrealized appreciation (depreciation) on available-for-sale securities, net of taxes (credit) of $( 434 ) and $( 2,165 ), for 2024 and 2023, respectively

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

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

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

Amortization of realized loss on termination of cash flow hedge, net of taxes of $( 463 ) and $( 463 ), for 2024 and 2023, respectively

Change in value of active cash flow hedges, net of taxes (credit) of $( 2 ) and $( 2,072 ) for 2024 and 2023, respectively

Comprehensive Income

SIX MONTHS ENDED

Unrealized appreciation (depreciation) on available-for-sale securities, net of taxes (credit) of $( 2,216 ) and $ 93 , for 2024 and 2023, respectively

Unrealized loss on securities transferred to held-to-maturity, net of taxes of $( 24 ) and $( 17 ) for 2024 and 2023, respectively

Amortization of realized loss on termination of cash flow hedge, net of taxes of $( 924 ) and $( 920 ), for 2024 and 2023, respectively

Change in value of active cash flow hedges, net of taxes (credit) of $( 971 ) and $ 74 for 2024 and 2023, respectively

Comprehensive Income

See Notes to Consolidated Financial Statements

3 unchanged sentences

(In Thousands, Except Per Share Data)

THREE MONTHS ENDED MARCH 31, 2023

THREE MONTHS ENDED JUNE 30, 2024

Comprehensive

1 unchanged sentence

Income (Loss)

Balance, January 1, 2023

Balance, March 31, 2024

Stock issued under Stock Option Plan

Common dividends declared, $ 0.40 per share

Common cash dividends declared, $ 0.40 per share

Change in fair value of cash flow hedges

Change in unrealized loss on held-to-maturity securities

Change in unrealized gain on available-for-sale securities

Change in unrealized loss on available-for-sale securities

Purchase of the Company’s common stock

Reclassification of treasury stock per Maryland law

Balance, June 30, 2024

THREE MONTHS ENDED JUNE 30, 2023

Comprehensive

Paid-in Capital

Income (Loss)

Balance, March 31, 2023

THREE MONTHS ENDED MARCH 31, 2024

Stock issued under Stock Option Plan

Common cash dividends declared, $ 0.40 per share

Change in fair value of cash flow hedges

Change in unrealized loss on held-to-maturity securities

Change in unrealized loss on available-for-sale securities

Purchase of the Company’s common stock

Reclassification of treasury stock per Maryland law

Balance, June 30, 2023

See Notes to Consolidated Financial Statements

GREAT SOUTHERN BANCORP, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In Thousands, Except Per Share Data)

SIX MONTHS ENDED JUNE 30, 2024

Comprehensive

10 unchanged sentences

Reclassification of treasury stock per Maryland law

Balance, March 31, 2024

Balance, June 30, 2024

SIX MONTHS ENDED JUNE 30, 2023

Comprehensive

Paid-in Capital

Income (Loss)

Balance, January 1, 2023

Stock issued under Stock Option Plan

Common cash dividends declared, $ 0.80 per share

Change in fair value of cash flow hedges

Change in unrealized loss on held-to-maturity securities

Change in unrealized gain on available-for-sale securities

Purchase of the Company’s common stock

Reclassification of treasury stock per Maryland law

Balance, June 30, 2023

See Notes to Consolidated Financial Statements

3 unchanged sentences

(In Thousands, Except Per Share Data)

THREE MONTHS ENDED

SIX MONTHS ENDED

CASH FLOWS FROM OPERATING ACTIVITIES

6 unchanged sentences

Net gain on loan sales

Net (gain) loss on sale of premises and equipment

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

Net loss on sale of premises and equipment

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

Accretion of deferred income, premiums, discounts and other

Loss on derivative interest rate products

Net non-cash gain recorded on contract termination

Deferred income taxes

3 unchanged sentences

Income taxes refundable/payable

Net cash provided by (used in) operating activities

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

6 unchanged sentences

Principal reductions on mortgage-backed securities

Purchase of available-for-sale securities

Investment in tax credit partnerships

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

Net cash provided by (used in) investing activities

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

Net increase (decrease) in certificates of deposit

Net increase in checking and savings deposits

Net decrease in short-term borrowings

Net increase (decrease) in checking and savings deposits

Net increase (decrease) in short-term borrowings

Proceeds from borrowing under Federal Reserve Bank Term Funding Program

Advances from borrowers for taxes and insurance

Purchase of the Company’s common stock

Repurchase of the Company’s common stock

Dividends paid

13 unchanged sentences

Those adjustments consist only of normal recurring adjustments.

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

Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the full year.

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

6 unchanged sentences

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

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

The Company has corrected its Consolidated Statements of Cash Flows for the six months ended June 30, 2023 within this Quarterly Report on Form 10-Q for an error in classification within the operating activities section of the statements of cash flows regarding amortization of terminated hedging transactions and for an error in classification regarding investments in tax credit partnerships between the operating activities and investing activities sections of the statements of cash flows.

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

6 unchanged sentences

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

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

Accordingly, the Company corrected the previously reported immaterial errors for the six months ended June 30, 2023 in this Quarterly Report on Form 10-Q.

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

For the Three Months Ended March 31, 2023

For the Six Months Ended June 30, 2023

As Previously

5 unchanged sentences

Investment in tax credit partnerships

Net cash used in investing activities

Net cash provided by (used in) investing activities

NATURE OF OPERATIONS AND OPERATING SEGMENTS

23 unchanged sentences

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

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

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

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

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

4 unchanged sentences

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

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

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

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

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

10 unchanged sentences

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

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

The adoption of ASU 2023-02 did not have a material impact on the Company’s consolidated financial statements and resulted in a reduction of retained earnings of $ 223,000 upon adoption on January 1, 2024.

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

10 unchanged sentences

EARNINGS PER SHARE

Three Months Ended March 31,

Three Months Ended June 30,

(In Thousands, Except Per Share Data)

5 unchanged sentences

Per common share amount

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

Six Months Ended June 30,

(In Thousands, Except Per Share Data)

Average common shares outstanding

Per common share amount

Average common shares outstanding

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

Diluted common shares

Per common share amount

Options outstanding at June 30, 2024 and 2023, to purchase 741,708 and 767,479 shares of common stock, respectively, were not included in the computation of diluted earnings per common share for each of the three month periods because the exercise prices of such options were greater than the average market price of the common stock for the three months ended June 30, 2024 and 2023, respectively.

Options outstanding at June 30, 2024 and 2023, to purchase 741,708 and 675,118 shares of common stock, respectively, were not included in the computation of diluted earnings per common share for each of the six month periods because the exercise prices of such options were greater than the average market price of the common stock for the six months ended June 30, 2024 and 2023, respectively.

INVESTMENT SECURITIES

10 unchanged sentences

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

March 31, 2024

June 30, 2024

(In Thousands)

4 unchanged sentences

Small Business Administration securities

March 31, 2024

June 30, 2024

(In Thousands)

16 unchanged sentences

States and political subdivisions

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

The amortized cost and fair value of available-for-sale and held-to-maturity securities at June 30, 2024, by contractual maturity, are shown below.

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

12 unchanged sentences

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

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

Total fair value of these investments at June 30, 2024 and December 31, 2023, was approximately $ 533.5 million and $ 456.9 million, respectively, which was approximately 97.2 % and 95.5 % of the Company’s total available-for-sale investment portfolio at those dates.

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

1 unchanged sentence

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

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

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

Held-to-maturity investments in debt securities are reported in the financial statements at their amortized carrying value at

June 30, 2024 and December 31, 2023, which was $191.2 million and $ 195.0 million, respectively.

Total fair value of these investments at June 30, 2024 and December 31, 2023 was approximately $ 165.2 million and $ 171.2 million, respectively.

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

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

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

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

March 31, 2024

The Company continually assesses its liquidity sources, both on-balance sheet and off-balance sheet, and believes that at June 30, 2024, it had ample liquidity sources to fund its ongoing operations.

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

June 30, 2024

Less than 12 Months

5 unchanged sentences

Agency collateralized mortgage obligations

Small Business Administration securities

States and political subdivisions securities

Small Business Administration securities

HELD-TO-MATURITY SECURITIES:

10 unchanged sentences

Agency collateralized mortgage obligations

Small Business Administration securities

States and political subdivisions securities

Small Business Administration securities

HELD-TO-MATURITY SECURITIES:

2 unchanged sentences

States and political subdivisions securities

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

There were no sales of available-for-sale securities during the three or six months ended June 30, 2024 and 2023, respectively.

Allowance for Credit Losses.

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

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

All of the mortgage-backed, collateralized mortgage, and SBA securities held by the Company as of June 30, 2024 were issued by U.S.

government-sponsored entities and agencies.

1 unchanged sentence

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

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

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

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

2 unchanged sentences

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

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

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

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

3 unchanged sentences

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.

Loans that do not share similar risk characteristics, primarily classified loans with balances 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.

Lookback periods can be different based on the individual pool and reflect 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.

6 unchanged sentences

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

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

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

In addition, the Company is required to record an allowance for off balance sheet credit exposures, including unfunded lines of credit, undisbursed portions of loans, written residential and commercial loan commitments, and letters of credit.

To determine the amount needed for allowance purposes, a utilization rate is determined either by the model or internally for each pool.

2 unchanged sentences

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

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

Classes of loans at June 30, 2024 and December 31, 2023 were as follows:

(In Thousands)

15 unchanged sentences

Weighted average interest rate

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

March 31, 2024

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

June 30, 2024

> 90 Days Past

52 unchanged sentences

Total non-accruing loans

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

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

No interest income was recorded on nonaccrual loans for the three or six months ended June 30, 2024 and 2023, respectively.

Nonaccrual loans for which there is no related allowance for credit losses as of June 30, 2024 and December 31, 2023, had an amortized cost of $ 2.4 million and $ 792,000 , respectively.

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

1 unchanged sentence

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

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

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

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

The following tables present the activity in the allowance for credit losses by portfolio segment for the three and six months ended June 30, 2024 and 2023.

During the three months ended June 30, 2024, the Company did not record a provision expense on its portfolio of outstanding loans and during the six months ended June 30, 2024, recorded provision expense of $ 500,000 on its portfolio of outstanding loans.

During the three months ended June 30, 2023, the Company did not record a provision expense on its portfolio of outstanding loans and during the six months ended June 30, 2023, recorded provision expense of $ 1.5 million on its portfolio of outstanding loans.

One- to Four-

2 unchanged sentences

Allowance for credit losses

Balance, January 1, 2023

Balance, March 31, 2023

Provision (credit) charged to expense

Losses charged off

Balance, June 30, 2023

Allowance for credit losses

Balance, March 31, 2024

Provision (credit) charged to expense

Losses charged off

Balance, June 30, 2024

One- to Four-

Residential and

(In Thousands)

Allowance for credit losses

2 unchanged sentences

Losses charged off

Balance, June 30, 2023

Allowance for credit losses

Balance, January 1, 2024

Provision (credit) charged to expense

Losses charged off

Balance, June 30, 2024

The following tables present the activity in the allowance for unfunded commitments by portfolio segment for the three and six months ended June 30, 2024 and 2023.

The provision for losses on unfunded commitments for the three months ended June 30, 2024 was a credit (negative expense) of $ 607,000 , compared to a credit (negative expense) of $ 1.6 million for the three months ended June 30, 2023.

The provision for losses on unfunded commitments for the six months ended June 30, 2024 was a credit (negative expense) of $ 477,000 , compared to a credit (negative expense) of $ 2.4 million for the six months ended June 30, 2023.

One- to Four-

Residential and

(In Thousands)

Allowance for unfunded commitments

Balance, March 31, 2023

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

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

Provision (credit) charged to expense

Balance, June 30, 2023

Allowance for unfunded commitments

Balance, March 31, 2024

Provision (credit) charged to expense

Balance, June 30, 2024

One- to Four-

4 unchanged sentences

Provision (credit) charged to expense

Balance, March 31, 2023

Balance, June 30, 2023

Allowance for unfunded commitments

1 unchanged sentence

Provision (credit) charged to expense

Balance, March 31, 2024

Balance, June 30, 2024

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

6 unchanged sentences

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

March 31, 2024

June 30, 2024

December 31, 2023

17 unchanged sentences

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

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

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

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

The Company has adopted this update

prospectively.

The Company has adopted this update prospectively.

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

4 unchanged sentences

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

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

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

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

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

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

Amortized Cost Basis at March 31, 2024

The following tables show, as of the dates indicated, the composition of modifications made to loans to borrowers experiencing financial difficulty, by loan class and type of concession granted.

Each of the types of concessions granted comprised 1.0 % or less of their respective loan classes at June 30, 2024.

During the three and six months ended June 30, 2024, principal forgiveness of $ 241,000 and $ 255,000 , respectively, was completed on consumer loans and a land development loan.

During the three and six months ended June 30, 2023, principal forgiveness of $ 6,000 and $ 39,000 , respectively, was completed on consumer loans.

Amortized Cost Basis at June 30, 2024

Interest Rate

Modifications

(In Thousands)

14 unchanged sentences

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

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

March 31, 2024

The following tables depict the performance of loans (under modified terms) at June 30, 2024 and at December 31, 2023, respectively:

June 30, 2024

(In Thousands)

12 unchanged sentences

Loan Risk Ratings .

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

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

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

The analysis of the borrower’s ability to repay considers specific

information, including but not limited to current financial information, historical payment experience, industry information and collateral levels and types.

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

5 unchanged sentences

however, elements of uncertainty exist.

Margins of debt service coverage may be narrow, historical patterns of financial performance may be erratic, collateral margins may be diminished and the borrower may be a new and/or thinly capitalized company.

Margins of debt service coverage may be narrow, historical patterns of financial performance may be erratic, collateral margins may be diminished or the borrower may be a new and/or thinly capitalized company.

Some management weakness may also exist, the borrower may have somewhat limited access to other financial institutions, and that access may diminish in difficult economic times.

9 unchanged sentences

Smaller loans are monitored as identified by the loan officer based on the risk profile of the individual borrower or if the loan becomes past due related to credit issues.

Loans rated Watch, Special Mention, Substandard or Doubtful are subject to quarterly review and monitoring processes.

Loans rated Watch, Special Mention, Substandard or Doubtful are subject to formal quarterly review and continuous monitoring processes.

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

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

The following tables present a summary of loans by category and risk rating separated by origination and loan class as of June 30, 2024 and December 31, 2023.

Term Loans by Origination Year

March 31, 2024

June 30, 2024

(In Thousands)

100 unchanged sentences

Investments in Affordable Housing Partnerships

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

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

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

At June 30, 2024, the Company had 22 such investments, with a net carrying value of $ 103.1 million.

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

2 unchanged sentences

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

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

The remaining federal affordable housing tax credits to be utilized through 2034 were $ 111.7 million as of June 30, 2024, assuming no tax credit recapture events occur and all projects currently under construction are completed as planned.

Amortization of the investments in partnerships is expected to be approximately $ 100.8 million, assuming all projects currently under construction are completed and funded as planned.

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

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

The Company’s usage of federal affordable housing tax credits approximated $ 2.8 million and $ 1.9 million during the three months ended June 30, 2024 and June 30, 2023, respectively.

Investment amortization was $ 2.5 million for the three months ended June 30, 2024, compared to $ 1.7 million for the three months ended June 30, 2023.

The Company’s usage of federal affordable housing tax credits approximated $ 5.6 million and $ 3.8 million during the six months ended June 30, 2024 and June 30, 2023, respectively.

Investment amortization was $ 5.1 million for the six months ended June 30, 2024, compared to $ 3.5 million for the six months ended June 30, 2023.

Investments in Community Development Entities

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

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

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

At June 30, 2024, the Company had one such investment, with a net carrying value of $ 249,000 .

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

5 unchanged sentences

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

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

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

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

Investment amortization amounted to $ 25,000 and $ 21,000 for the three months ended June 30, 2024 and 2023, respectively.

The Company’s usage of federal New Market Tax Credits approximated $ 60,000 and $ 50,000 during the six months ended June 30, 2024 and 2023, respectively.

Investment amortization amounted to $ 25,000 and $ 42,000 for the six months ended June 30, 2024 and 2023, respectively.

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

1 unchanged sentence

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

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

At June 30, 2024, the Company had one such investment, with a net carrying value of $ 127,000 .

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

1 unchanged sentence

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

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

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

The Company’s usage of certain federal rehabilitation/historic tax credits approximated $ 76,000 and $ 64,000 during the three months ended June 30, 2024 and 2023, respectively.

Investment amortization amounted to $ 64,000 and $ 53,000 for the three months ended June 30, 2024 and 2023, respectively.

The Company’s usage of certain federal rehabilitation/historic tax credits approximated $ 152,000 and $ 129,000 during the six months ended June 30, 2024 and 2023, respectively.

Investment amortization amounted to $ 127,000 and $ 107,000 for the six months ended June 30, 2024 and 2023, respectively.

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

11 unchanged sentences

One- to four-family residential

Other residential (multi-family)

Other residential

Commercial real estate

2 unchanged sentences

Other real estate owned not acquired through foreclosure

Total other real estate owned and repossessions

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

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

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

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

Other real estate owned and repossessions

At June 30, 2024 and December 31, 2023, residential mortgage loans totaling $ 32,000 and $- 0 -, respectively, were in the process of foreclosure.

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

1 unchanged sentence

(In Thousands)

Net loss on sales of other real estate owned and repossessions

Net (gains) on sales of other real estate owned and repossessions

Valuation write-downs

Operating expenses, net of rental income

Six Months Ended

(In Thousands)

Net (gains) on sales of other real estate owned and repossessions

Valuation write-downs

Operating expenses, net of rental income

PREMISES AND EQUIPMENT

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

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

As of June 30, 2024, the lease right of use asset value was $ 6.9 million and the corresponding lease liability was $ 7.1 million.

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

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

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

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

At June 30, 2024, expected lease terms ranged from 3.1 years to 14.4 years with a weighted-average lease term of 7.2 years.

The weighted-average discount rate at June 30, 2024 was 4.02 %.

For the three months ended June 30, 2024 and 2023, lease expense was $ 413,000 and $ 433,000 , respectively.

For the six months ended June 30, 2024 and 2023, lease expense was $ 895,000 and $ 843,000 , respectively.

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

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

The variable portion of these lease payments is not material.

The total lease expense related to ATMs for the three months ended June 30, 2024 and 2023 was $ 90,000 and $ 78,000 , respectively.

The total lease expense related to ATMs for the six months ended June 30, 2024 and 2023 was $ 171,000 and $ 150,000 , respectively.

The Company does not sublease any of its leased facilities;

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

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

March 31, 2024

In the three months ended June 30, 2024 and 2023, income recognized from these lease agreements was $ 339,000 and $ 325,000 , respectively, and was included in occupancy and equipment expense.

In the six months ended June 30, 2024 and 2023, income recognized from these lease agreements was $ 680,000 and $ 649,000 , respectively, and was included in occupancy and equipment expense.

June 30, 2024

December 31, 2023

4 unchanged sentences

For the Three Months Ended

March 31, 2024

March 31, 2023

June 30, 2024

June 30, 2023

(In Thousands)

6 unchanged sentences

Operating leases

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

For the Six Months Ended

June 30, 2024

June 30, 2023

(In Thousands)

Statement of Income

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

Supplemental Cash Flow Information

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

Operating cash flows from operating leases

Right of use assets obtained in exchange for lease obligations:

Operating leases

At June 30, 2024, future expected lease payments for leases with terms exceeding one year were as follows (In Thousands):

Future lease payments expected

17 unchanged sentences

The Bank utilizes brokered deposits as an additional funding source.

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

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

The aggregate amount of brokered deposits was approximately $ 670.0 million and $ 661.5 million at June 30, 2024 and December 31, 2023, respectively.

At June 30, 2024 and December 31, 2023, brokered deposits included $ 300.0 million of purchased funds through the IntraFi Financial network.

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

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

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

Excluding deposit accounts of the Company’s consolidated subsidiaries;

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

At June 30, 2024, there were brokered deposits totaling $ 185.1 million that had fixed rates of interest but were callable at the Bank’s discretion.

At June 30, 2024, approximately 32 % of the Company’s total deposits were uninsured, when including deposit accounts of consolidated subsidiaries of

the Company and collateralized deposits of unaffiliated entities.

Excluding deposit accounts of the Company’s consolidated subsidiaries, approximately 14 % of the Company’s total deposits were uninsured at June 30, 2024.

ADVANCES FROM FEDERAL HOME LOAN BANK

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

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

At June 30, 2024 and December 31, 2023, there were no outstanding term advances from the Federal Home Loan Bank of Des Moines.

At June 30, 2024 and December 31, 2023, there were outstanding overnight borrowings from the Federal Home Loan Bank of Des Moines, which are included in Note 12 below.

SECURITIES SOLD UNDER REVERSE REPURCHASE AGREEMENTS AND SHORT-TERM BORROWINGS

4 unchanged sentences

Overnight borrowings from the Federal Home Loan Bank

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

Borrowings from the Federal Reserve Bank at June 30, 2024, were part of the Federal Reserve Bank’s Bank Term Funding Program (BTFP).

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

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

The line is secured primarily by the Bank’s held-to-maturity investment securities, with assets pledged totaling approximately $ 191.3 million as of June 30, 2024.

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

1 unchanged sentence

The dollar amount of securities underlying the agreements remains in the asset accounts.

Securities underlying the agreements are being held by the Bank during the agreement period.

Securities underlying the agreements are held by the Bank during the agreement period.

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

1 unchanged sentence

These securities contractually mature daily.

March 31, 2024

June 30, 2024

December 31, 2023

7 unchanged sentences

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

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

Amortization of the debt issuance costs during the three months ended June 30, 2024 and 2023, totaled $ 74,000 and $ 75,000 , respectively.

Amortization of the debt issuance costs during the six months ended June 30, 2024 and 2023, totaled $ 148,000 and $ 149,000 , respectively.

Amortization of the debt issuance costs is included in interest expense on subordinated notes in the consolidated statements of income, resulting in an imputed interest rate of 5.91 %.

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

March 31, 2024

At June 30, 2024 and December 31, 2023, subordinated notes were as follows:

June 30, 2024

December 31, 2023

3 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Tax at statutory rate

Nontaxable interest and dividends

Six Months Ended June 30,

Tax at statutory rate

Nontaxable interest and dividends

The Company and its consolidated subsidiaries have not been audited recently by the Internal Revenue Service (IRS).

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

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

In addition, there are no pending audits by any state jurisdiction at June 30, 2024.

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

2 unchanged sentences

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

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

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

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

7 unchanged sentences

● Other observable inputs (Level 2):

Inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity including quoted prices for similar assets, quoted prices for securities in inactive markets and inputs derived principally from or corroborated by observable market data by correlation or other means.

for similar assets, quoted prices for securities in inactive markets and inputs derived principally from or corroborated by observable market data by correlation or other means.

● Significant unobservable inputs (Level 3):

5 unchanged sentences

Recurring Measurements

The following table presents the fair value measurements of assets recognized in the accompanying statements of financial condition measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fell at March 31, 2024 and December 31, 2023:

Fair value measurements using

2 unchanged sentences

(In Thousands)

March 31, 2024

June 30, 2024

Available-for-sale securities

13 unchanged sentences

Interest rate derivative liability

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

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

The following is a description of inputs and valuation methodologies used for assets recorded at fair value on a recurring basis and recognized in the accompanying statements of financial condition at June 30, 2024 and December 31, 2023 as well as the general classification of such assets pursuant to the valuation hierarchy.

There were no significant changes in the valuation techniques during the six-month period ended June 30, 2024.

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

5 unchanged sentences

Inputs used for valuing Level 2 securities include observable data that may include dealer quotes, benchmark yields, market spreads, live trading levels and market consensus prepayment speeds, among other things.

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

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

Additional inputs include indicative

values derived from the independent pricing service’s proprietary computerized models.

There were no recurring Level 3 securities at June 30, 2024 or December 31, 2023.

Interest Rate Derivatives.

1 unchanged sentence

Nonrecurring Measurements

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

The following table presents the measurements of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the measurements fell at June 30, 2024 and December 31, 2023:

Fair Value Measurements Using

2 unchanged sentences

(In Thousands)

March 31, 2024

June 30, 2024

Collateral-dependent loans

1 unchanged sentence

Collateral-dependent loans

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

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

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

5 unchanged sentences

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

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

At June 30, 2024 and December 31, 2023, the aggregate fair value of mortgage loans held for sale was not materially different than their cost.

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

2 unchanged sentences

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

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

Loans for which such charge-offs or reserves were recorded are shown in the table above (net of reserves) at June 30, 2024 and December 31, 2023.

Foreclosed Assets Held for Sale.

2 unchanged sentences

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

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

There were no foreclosed assets held for sale at June 30, 2024 or December 31, 2023 which had valuation write-downs subsequent to the initial recording of the assets.

Fair Value of Financial Instruments

4 unchanged sentences

Fair values for held-to-maturity securities are estimated based on quoted market prices of similar securities.

For these securities, the Company obtains fair value measurements from an independent pricing service, which represent either quoted market prices for the identical asset or fair values determined by pricing models, or other model-based valuation techniques, that consider observable market data, such as interest rate volatilities, SOFR yield curve, credit spreads and prices from market makers and live trading systems.

techniques, that consider observable market data, such as interest rate volatilities, SOFR yield curve, credit spreads and prices from market makers and live trading systems.

These securities include U.S.

23 unchanged sentences

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

March 31, 2024

June 30, 2024

December 31, 2023

24 unchanged sentences

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

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

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

Nondesignated Hedges

4 unchanged sentences

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

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

At June 30, 2024, the Company had five interest rate swaps totaling $ 75.4 million in notional amount with commercial customers, and five interest rate swaps with the same aggregate notional amount with third parties related to its program.

In addition, the Company has one participation loan purchased totaling $ 8.5 million, in which the lead institution has an interest rate swap with its customer and the economics of the counterparty swap are passed along to the Company through the loan participation.

1 unchanged sentence

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

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

During the three months ended June 30, 2024 and 2023, the Company recognized a net loss of $ 7,000 and a net gain of $ 2,000 , respectively, in non-interest income related to changes in the fair value of these swaps.

During the six months ended June 30, 2024 and 2023, the Company recognized net losses of $ 20,000 and $ 289,000 , respectively, in non-interest income related to changes in the fair value of these swaps.

Fair Value Hedges

21 unchanged sentences

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

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

At June 30, 2024, the Company expected to have a sufficient amount of eligible variable rate loans to continue to accrete this interest income on the terminated swap in future periods.

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

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

The Company recorded $ 2.0 million of interest income related to this terminated swap in each of the three-month periods ended June 30, 2024 and 2023.

The Company recorded $ 4.1 million of interest income related to the swap in the six months ended June 30, 2024 and $ 4.0 million of interest income related to the swap in the six months ended June 30, 2023.

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

4 unchanged sentences

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

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

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

As this interest rate swap reached its contractual termination date of March 1, 2024, there has been no further interest income impact related to this swap after the three months ended March 31, 2024.

The Company recorded a reduction of loan interest income related to this swap transaction of $ 1.9 million in the six months ended June 30, 2024.

The Company recorded a reduction of loan interest income related to this swap transaction of $ 2.6 million and $ 4.7 million, respectively, in the three and six months ended June 30, 2023.

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

5 unchanged sentences

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

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

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

At June 30, 2024, the USD-Prime rate was 8.50 % and the one-month USD-SOFR OIS rate was 5.33643 %.

The Company recorded a reduction of loan interest income related to these swap transactions of $ 2.8 million and $ 1.7 million, respectively, in the three months ended June 30, 2024 and 2023.

The Company recorded a reduction of loan interest income related to these swap transactions totaling $ 5.5 million and $ 1.7 million, respectively, in the six months ended June 30, 2024 and 2023.

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

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

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

During each of the three and six months ended June 30, 2024 and 2023, the Company recognized no non-interest income related to changes in the fair value of these derivatives.

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

3 unchanged sentences

Derivatives designated as hedging instruments

Derivative Liabilities

Active interest rate swap

Active interest rate swaps

Accrued expenses and other liabilities

12 unchanged sentences

Recognized in AOCI

Three Months Ended March 31,

Three Months Ended June 30,

Cash Flow Hedges

2 unchanged sentences

Active interest rate swaps, net of income taxes

Amount of Gain (Loss)

Recognized in AOCI

Six Months Ended June 30,

Cash Flow Hedges

(In Thousands)

Terminated interest rate swap, net of income taxes

Active interest rate swaps, net of income taxes

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

Three Months Ended March 31,

Three Months Ended June 30,

Cash Flow Hedges

4 unchanged sentences

Active interest rate swaps

Six Months Ended June 30,

Cash Flow Hedges

(In Thousands)

Total Interest Income

Total Interest Expense

Terminated interest rate swap

Active interest rate swaps

Agreements with Derivative Counterparties

2 unchanged sentences

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

Similarly, the

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

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

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

At June 30, 2024, the termination value of derivatives with our derivative dealer counterparties (related to loan level swaps with commercial lending customers and interest rate swaps to hedge risk related to the Company’s variable rate loans) in an overall net asset position, which included accrued interest but excluded any adjustment for nonperformance risk, related to these agreements was $ 118,000 .

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

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

At June 30, 2024, the Company had given cash collateral to one derivative counterparty of $ 13.3 million to cover its net fair value position.

This counterparty position included collateral from the counterparty of $ 8.9 million for commercial lending swaps and collateral from the Company of $ 22.2 million for interest rate swaps related to variable rate loans.

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

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

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

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

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

If the Company had breached any of these provisions at June 30, 2024 or December 31, 2023, it could have been required to settle its obligations under the agreements at the termination value.

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

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

What changed 10-Q

Item 1. Financial Statements