What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-05-07 compared with 2024-11-06 · 374 added, 569 removed, 471 unchanged (67% of the section changed)

8 unchanged sentences

(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;

(iii) the effects of any new or continuing public health issues on general economic and financial market conditions;

(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;

(vi) slower or negative economic growth caused by tariffs, 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;

50 unchanged sentences

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 September 30, 2024, the Company had one reporting unit to which goodwill has been allocated – the Bank.

As of March 31, 2025, 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.

1 unchanged sentence

Intangible assets that are not amortized are tested for impairment at least annually by comparing the fair values of those assets to their carrying values.

At September 30, 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.

At March 31, 2025, 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.

2 unchanged sentences

The terms of the agreement provide the 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 September 30, 2024, the amortizable intangible assets included the arena naming rights of $4.8 million, which are reflected in the table below.

The Company expects to amortize the naming rights intangible assets through non-interest expense over a period not to exceed 15 years.

At March 31, 2025, the amortizable intangible assets included the arena naming rights of $4.6 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.

3 unchanged sentences

This judgment may include developing cash flow projections, selecting appropriate discount rates, identifying relevant market comparables and incorporating general economic and market conditions.

Our regular annual impairment assessment occurs in the third quarter of each year.

The Company performed this annual review as of September 30, 2024 and concluded that no impairment of its goodwill or other intangible assets had occurred as of that date.

While management believes no impairment existed as of September 30, 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.

Management does not believe any of the Company’s goodwill or other intangible assets were impaired as of March 31, 2025.

While management believes no impairment existed as of March 31, 2025, 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:

September 30,

(In Thousands)

21 unchanged sentences

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 Federal Reserve 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.

Core PCE, which excludes food and energy prices was 2.7% at September 30, 2024, above the Federal Reserve’s target of 2%.

Core PCE, which excludes food and energy prices, was 2.6% at March 31, 2025, above the Federal Reserve’s target of 2%.

Based on Moody’s U.S.

Baseline Outlook and Alternative Scenarios Analysis dated October 2024, real GDP in 2024 is projected to be slightly higher than previously forecast.

Real GDP is projected to rise 2.7% in 2024 on an annual average basis, and is projected to grow 2.3% in 2025 and 2.1% in 2026.

Higher consumer spending and business investment drove the upward revisions to the outlook in those years.

The national unemployment rate changed little for the month of September 2024 at 4.1%, ranging from 3.4% to 4.1% since September 2022.

The number of unemployed individuals was 6.8 million as of September 2024 with 254,000 jobs added in September 2024.

In September 2024, the healthcare, government, social assistance, food services, and construction sectors contributed to 170,000 of the total job gains.

As of September 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 3.6% in September 2023 to 4.1% in September 2024.

Unemployment rates for September 2024 in the states where the Company has a branch or a loan production office were:

Arizona at 3.5%, Arkansas at 3.3%, Colorado at 4.0%, Georgia at 3.6%, Illinois at 5.3%, Iowa at 2.9%, Kansas at 3.3%, Minnesota at 3.4%, Missouri at 3.9%, Nebraska at 2.7%, North Carolina at 3.8%, Oklahoma at 3.4%, and Texas at 4.1%.

The rates above are slightly higher for a majority of these states compared to June 2024.

Of the metropolitan areas in which the Company does business, most are below the national unemployment rate for September 2024 of 4.1%.

Baseline Outlook and Alternative Scenarios Analysis dated March 2025, real GDP in 2025 is projected to rise 1.9% on an annual average basis;

this is a reduction to prior GDP forecasts for 2025, which anticipated growth of 2.3%.

GDP is projected to grow 1.7% in 2026 and 2.3% in 2027, before returning to trend in 2028.

The downward revision to GDP growth for 2025 is a result of widespread economic uncertainty;

key components to the revision resulted from weaker growth overseas and anticipated tariffs impacting imports and increases in federal spending due to changes in defense and immigration spending.

The national unemployment rate increased slightly to 4.2% for March 2025 compared to the previous quarter end at 4.1% for December 2024.

However, the unemployment rate for March 2025 is 0.2 basis points higher than the year prior.

The number of unemployed individuals was 7.1 million as of March 2025 with 228,000 jobs added.

In March 2025, the healthcare, retail trade, social assistance, transportation and warehousing areas contributed to the 125,000 of total job gains.

As of March 2025, the labor force participation rate (the share of working-age Americans employed or actively looking for a job) remained stable at 62.5%.

The unemployment rate for the Midwest, where the Company conducts most of its business, increased from 4.1% in December 2024 to 4.2% in March 2025.

Unemployment rates for March 2025 in the states where the Company has a branch or a loan production office were:

Arizona at 4.1%, Arkansas at 3.7%, Colorado at 4.8%, Georgia at 3.6%, Illinois at 4.8%, Iowa at 3.4%, Kansas at 3.8%, Minnesota at 3.1%, Missouri at 3.8%, Nebraska at 2.9%, North Carolina at 3.7%, and Texas at 4.1%.

These rates are slightly higher for a majority of the states compared to December 2024.

It is unknown at this time if actions being taken to reduce federal employment will impact the unemployment rates in these states.

Single Family Housing

Existing-home sales decreased 1.0% in September 2024 to a seasonally adjusted annual rate of 3.84 million, down 3.5% from the previous year.

In the Midwest, existing-home sales fell 2.2% in September 2024 to an annual rate of 900,000, down 5.3% from one year ago.

The median existing-home sales price rose 3.0% from September 2023 to $404,500 in September 2024, which is the 15th consecutive month of year-over-year price increases.

The median price in the Midwest was $306,600, up 5.0% from September 2023.

Existing-home sales slipped 5.9% in March 2025 to a seasonally adjusted annual rate of 4.02 million;

year-over-year sales fell 2.4%.

In the Midwest, existing-home sales slowed to 5% in March 2025 at an annual rate of 950,000, down 3.1% from one year earlier.

The median existing-home sales price rose 2.7% from March 2024 to $403,700 in March 2025.

The median price in the Midwest was $302,100, up 3.5% from March 2024.

All regions reported median price increases when compared to the prior year.

Total housing inventory registered at the end of September 2024 was 1.39 million units, up 1.5% from August 2024 and up 23% from 1.13 million one year ago.

Unsold inventory sat at a 4.3-month supply in September 2024, up from 4.2 months in August 2024 and 3.4 months in September 2023.

Total housing inventory registered at the end of March 2025 was 1.33 million units, up 8.1% from February 2025 and 19.8% from one year ago.

Unsold inventory sat at a 4-month supply at the end of March 2025, up from 3.5 months at the end of February 2025 and 3.2 months at the end of March 2024.

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 September 2024 were at a seasonally adjusted annual rate of 738,000, according to the U.S.

Single-family housing starts in March 2025 were at a rate of 1.3 million;

11.4% below the revised estimate for February 2025 but 1.9% higher than March 2024.

Sales of new single‐family houses in March 2025 were at a seasonally adjusted annual rate of 724,000 according to the U.S.

Census Bureau and the Department of Housing and Urban Development.

This is 4.1% above the August 2024 rate of 709,000 and 6.3% above the September 2023 rate of 694,000.

The median sales price of new houses sold in September 2024 was $426,300, in line with $426,100 reported in September 2023.

The average sales price in September 2024 of $501,000 was down from $515,000 in September 2023.

The seasonally‐adjusted estimate of new houses for sale at the end of September 2024 was 470,000.

This represents a supply of 7.6 months at the current sales rate.

According to Freddie Mac, the average commitment rate for a 30-year, fixed-rate mortgage was 6.44% as of October 18, 2024 which was up from 6.32% the previous week and down from 7.63% one year ago.

This was 7.4% above the February 2025 rate of 674,000 and 6.0% above the March 2024 rate of 683,000.

The median sales price of new houses sold in March 2025 was $403,600, slightly lower than the $411,500 reported in February 2025.

The seasonally‐adjusted estimate of new houses for sale at the end of March 2025 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 6.65% as of March 31, 2025, down from 6.74% one year ago.

Other Residential (Multi-Family) Housing and Commercial Real Estate

multi-family market experienced a continued strong recovery in demand through the first nine months of 2024, driven by stable economic growth plus a continued slowing of renter households, making the jump to ownership and creating fewer units to backfill.

multi-family market experienced a continued strong recovery in demand through 2024, driven by stable economic growth plus a continued slowing of renter households making the jump to ownership and creating fewer units to backfill.

Despite the notable growth in demand in 2024, the influx of new supply continued to saturate the market.

During the second quarter of 2024, 190,000 units were completed, with approximately 154,000 units delivered in the first two months of the third quarter.

Most new supply additions are concentrated at the 4 and 5 Star price point, contributing to the weakest rent growth observed in this market.

Consequently, the persistent imbalance between supply and demand stabilized the vacancy rate in the third quarter of 2024 at 7.9%.

Q4 2024 represented the strongest fourth-quarter absorption total on record.

Absorption for the first quarter of 2025 was 130,000 (preliminary figure) units, which is the strongest first-quarter total on record besides first-quarter 2021.

Most new supply additions are concentrated at the 4 and 5 star price point, which initially contributed to the weakest rent growth observed in this level of the market.

However, as of first-quarter 2025, the 4 and 5 star segment accounted for 77% of total absorption.

Due to the stronger absorption within the 4 and 5 star units, demand finally outpaced supply and lowered vacancy to 11.3% in that segment.

Overall vacancy in the multi-family market was 8% for the first quarter of 2025 and is forecasted to fall below this level by year-end and lower still in 2026.

The Midwest and Northeast regions have fared the best over the past two years in terms of rent growth.

Projected deliveries in the Midwest for 2024 are only 11,000 units higher than in 2019.

This controlled increase in projected new supply is expected to keep Midwestern markets more balanced, thereby avoiding the oversupply conditions that contributed to weaker rent growth in the Sun Belt.

The Sun Belt market rent growth has been sluggish, with numerous markets reporting negative year-over-year rent growth.

Austin, Texas and Raleigh, North Carolina have experienced the steepest rent declines over the past four quarters, with year-over-year rent growth of negative 5.7% and negative 2.9%, respectively.

The vacancy rate is also climbing for 4 & 5 Star properties in Austin, Texas from 10.4% in the second quarter of 2023 to 14.1% by the end of the second quarter of 2024.

Per CoStar, nationally, absorption is accelerating, offering the market an opportunity to stabilize and possibly begin recovering by the end of the year.

The third quarter of 2024 saw 152,000 units absorbed, bringing the year to date demand to 450,000 units, which is the strongest since 2021.

With supply numbers finally pulling back and demand surging, the large imbalances experienced in 2022 and 2023 appear to be lessening.

With the national vacancy rate anticipated to stabilize in the second half of 2024 and projected deliveries dropping almost in half in 2025, overall market conditions appear well-positioned to begin recovery.

The September 2024 national multi-family market vacancy rates remained consistent with the previous quarter at 7.9%.

Our market areas reflected the following apartment vacancy levels as of September 2024:

Rents are still down year over year as of March 2025 in 14 of the largest markets, primarily in markets where supply significantly outpaced demand.

Controlled increase in projected new supply is expected to keep Midwestern markets more balanced, thereby avoiding the oversupply conditions that contributed to weaker rent growth in the Sun Belt.

At the market level, projections suggest that all major markets will return to positive rent growth by the end of 2025.

Kansas City and Chicago continue to lead the nation in rent growth, each displaying 3% growth in the first quarter of 2025.

The March 2025 national multi-family market vacancy rate remained unchanged at 8% compared to the prior quarter-end.

Our market areas reflected the following apartment vacancy levels as of March 2025:

Springfield, Missouri at 5.8%, St.

Louis at 9.7%, Kansas City at 8.6%, Minneapolis at 7.0%, Dallas-Fort Worth at 11.5%, Chicago at 4.8%, Atlanta at 12.3%, Phoenix at 11.9%, Denver at 11.5% and Charlotte, North Carolina at 12.9%.

Absorption for the office industry has been flat for 2024 through September 30, 2024, but the addition of 11 million square feet (“SF”) of net new supply since April 2024 has pushed the vacancy rate up to a record 13.9%.

CoStar expects the vacancy rate to rise further before plateauing in 2026.

Net absorption for the office industry turned positive in the fourth quarter of 2024 and has remained stable into the first quarter of 2025.

Overall, the vacancy rate has remained unchanged since September 2024 at 13.9%.

Despite the demand-side improvement, supply additions have kept the national vacancy rate near a record high.

Improvements in demand vary significantly between markets.

The supply pipeline is diminishing rapidly, currently representing the lowest supply since 2012, with 64.4 million square feet under construction.

Positive absorption across some of the largest office markets, combined with a diminishing pipeline of supply, is expected to continue to hold the national vacancy rate steady.

CoStar expects the vacancy rate to rise slightly further for the remainder of the year before plateauing in 2026.

Rents are expected to flatten out in the next 12 months before beginning a recovery driven by stabilizing demand and a lack of relevant, competitive supply.

Values for multi-tenanted, investment-grade buildings targeting traditional office tenants have fallen 40-45% from their peak and could dip further as more liquidity leads to a final round of price adjustments.

Supply growth has slowed to a decade-low pace in 2024.

About 50 million SF in new deliveries is expected in 2024, roughly 60% of which had already been completed as of the beginning of the fourth quarter of 2024 and far below the 10-year average of around 70 million SF.

Lower interest rates and the ongoing pricing resets could trigger more renovations and supply reductions, including conversions of office buildings to other uses.

The ongoing reset in property values could lead to lower asking rates as more buildings transact at significant discounts to prior valuations.

CoStar reported office asking rents have remained steady over the past four years, and said a combination of aggressive discounts by new, low-basis owners, a looming lack of available space in premium new buildings, and an ongoing amount of sublease inventory is expected to keep office asking rents flat for the next 12 to 18 months.

With attendance rising only gradually and job growth stagnant, there appears little likelihood of a dramatic change in demand conditions in the next 18-24 months.

As of September 2024, national office vacancy rates remained stable at 13.9% compared to June 2024, while our market areas reflected the following vacancy levels:

Various indicators show office attendance was still trending upward, albeit slowly, but while attendance was rising, office-using job growth had nearly stalled.

The final settling of property values, which appears imminent, should maximize pressure on asking rates as more buildings transact at significant discounts to prior valuation.

With a lower cost basis, some new owners can undercut the competition and still generate acceptable returns, on occasion even with relatively low occupancy.

Others may choose to invest capital in their buildings to make them more competitive, keeping rents higher to justify their investment.

Transaction volumes, which regained momentum throughout 2024 and surged notably in the fourth quarter of 2024, continued improving in the first quarter of 2025, finishing 39% higher year-over-year.

This follows a 22% increase in total sales for 2024 compared to the cyclical lows of 2023.

CoStar reported office asking rents have remained steady over the past four years.

A combination of aggressive discounts by new, low-basis owners, a looming lack of available space in premium new buildings, and an ongoing amount of sublease inventory is expected to keep office-asking rents flat for the next 12 months.

With attendance rising only gradually and job growth stagnant, there appears little likelihood of a dramatic change in demand conditions over the next 12 months.

As of March 2025, national office vacancy rates remained stable at 13.9%, while our market areas reflected the following vacancy levels:

Springfield, Missouri at 2.0%, St.

Louis at 10.4%, Kansas City at 11.9%, Minneapolis at 11.5%, Dallas-Fort Worth at 18.2%, Chicago at 16.3%, Atlanta at 16.4%, Denver at 17.2%, Phoenix at 16.8% and Charlotte, North Carolina at 14.3%.

retail market is currently in one of its firmest fundamental positions on record thanks to steadily rising demand and limited new supply.

However, there has been a sharp uptick in bankruptcies and store closures.

There is just 576 million SF of space available for lease across the U.S., which was lower by over 5 million SF on a year-over-year basis and almost 200 million SF (or 26%) below the amount available for lease during the height of the pandemic.

Leasing activity remains concentrated in smaller spaces of under 2,500 SF, where activity is being driven by growth from quick-service restaurants and personal services.

Tenants such as Starbucks, Crumbl Cookies, Yum Brands, and Restaurant Brands International (owner of BK, Tim Hortons, Popeye’s, and Firehouse Subs) have all signed up for dozens of new locations over the past year.

Demand for junior and anchor spaces has been driven by tenants from numerous sectors, including discount, off-price, health and beauty, and discount grocery.

Approximately 27.9 million SF of retail space has been absorbed across the U.S.

over the past year, approximately 80% of which has flowed into the general retail (20.4 million SF) and neighborhood center (2.5 million SF) segments.

Seven of the top 10 markets leading the way in inventory-adjusted demand growth over the past year were in the Sun Belt, including four of the top five (Austin, Orlando, Miami and Phoenix).

The other three markets in the top 10 for inventory-adjusted demand growth over the past year were all in the Midwest, with Indianapolis, St.

Louis, and Minneapolis each seeing absorption of at least 1.5 million SF over that time.

A primary driver of tight conditions within the U.S.

retail market has been the limited amount of new development over the past 15 years.

Most retail construction activity comprises single-tenant build-to-suits, grocery-anchored neighborhood centers, or smaller ground-floor spaces in mixed-use developments.

Given the structural downshift in activity coupled with the fact that over three years of new deliveries 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 the foreseeable future, as retail construction starts fell to new historic lows as continued higher interest rates challenge the feasibility of many new potential retail developments at current rent levels.

Rents continue to rise at a healthy rate due to minimal availability and the significant boost in retail sales coming out of the pandemic.

Asking rents for retail spaces have increased by 2.1% over the past year to a record high of $25.00 per/SF.

During the third quarter of 2024, national retail vacancy rates remained steady at 4.1% while our market areas reflected the following vacancy levels:

Louis at 9.6%, Kansas City 10.9%, Minneapolis 11.2%, Dallas-Fort Worth at 17.9%, Chicago at 16.4%, Atlanta at 16.6%, Denver at 17.5%, Phoenix at 16.8% and Charlotte, North Carolina at 14.7%.

As of March 31, 2025, the U.S.

retail market witnessed the highest level of store closures and bankruptcy filings since 2020.

Significant competition from e-commerce retailers, rising costs, restricted access to capital and multiple years of below-average closures, all contribute to the uptick in store closures.

Bankruptcy filings are correlated to low home sales, which have weighed heavily on furniture, retail, appliance and home improvement sales.

As transaction volumes trended higher, the rise in cap rates has settled down.

Higher exit caps have made it more challenging for developers to meet their proformas and an increasing number are choosing to hold instead of taking their assets to market in the near term.

The shift in cap rates over the last two years was evident in the trend of single-tenant investment sales of net leased properties.

Fewer buyers were in the market, and investment opportunities continued to expand.

Unanchored and open-air shopping centers have seen cap rates above 7%, occasionally exceeding the 8% range, depending on market specifics and the quality of the asset.

However, the limited new retail construction and historically low availability rates should limit any potential surge in vacancy rates in the event of a demand pullback.

CoStar expects pricing risk to be neutral through the first half of 2025.

During the first quarter of 2025, national retail vacancy rates remained steady at 4.2% while our market areas reflected the following vacancy levels:

Springfield, Missouri at 2.2%, St.

Louis at 4.2%, Kansas City at 3.9%, Minneapolis at 2.6%, Dallas-Fort Worth at 4.6%, Chicago at 4.7%, Atlanta at 3.9%, Phoenix at 4.8%, Denver at 4.2%, and Charlotte, North Carolina at 3.2%.

industrial market performance continued to downshift in the third quarter of 2024.

While the national vacancy rate is not expected to rise above its 20-year average of 7.0%, the next 6-12 months could still prove challenging for the market.

industrial market performance continues to favor the tenant, reporting the 11 th consecutive quarter of vacancy rate increases in the first quarter of 2025.

While the national vacancy rate is not expected to rise above its 20-year average of 7.0%, forecasts for 2025 could still prove challenging for the market.

Net absorption has remained positive but continued to lose steam, with early 2024 registering the lowest first quarter absorption tally since 2012.

This weakness ties 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 Big Lots, Ashley Furniture, and Home Depot.

More positive signs for tenant demand have been emerging as the year progresses.

Led by sales at non-store retailers and general merchandise stores, overall real retail goods spending has been gradually rising since early 2024 as inflation subsides.

Declines that carried through last year have leveled off in 2024 for key indicators such as warehousing and storage employment and wholesale trade inventories.

imports, which also declined last year, have been rising since February 2024, meaning the volume of goods flowing through distribution centers across the U.S.

is back on the rise, with the exception being during the October 2024 strikes by dockworkers at major East Coast and Gulf Coast ports.

Net absorption for 2024 was 125 million SF compared to 133 million SF for 2023.

This weakness was tied partly to recent 12-year lows in home sales, which lowered sales of furniture, building materials, and appliances, leading to large distribution center closures by tenants including Big Lots, Ashley Furniture, and Home Depot.

industrial market is nearing the end of a record development surge.

Higher interest rates have caused construction starts on new industrial projects to fall over the past two years.

The volume of projects completing construction each quarter is expected to remain elevated through late 2024 or early 2025 but has already begun to decline and is expected to hit 10-year lows by late 2025.

Gradual but persistent decline in speculative development completions has already begun.

The amount of vacant space among existing Phoenix logistics properties 50,000 SF or larger has increased by 29 million SF, primarily due to speculative development since 2019 pushing the current vacancy rate among these buildings over 17%, while another 16.6 million SF worth of unleased space remains under construction.

Nationally, year-over-year industrial rent growth has decelerated over the past 24 months to 2.8%, a rate which is below the pre-pandemic five-year average.

In the near term, it is expected that rent growth will slow further in both the small bay and big box logistics sectors.

If net absorption can gradually increase, there is potential for rent growth to reaccelerate and return to the pre-pandemic three-year average of 5.5% to 6% by 2026-2027, given the limited amount of new supply that will likely be on track to complete during those years.

However, big box logistics properties in markets most saturated with speculative development such as Austin, Indianapolis, Greenville/Spartanburg, Phoenix, and San Antonio are most at risk of lagging in any developing rent recovery, either due to slower asking rent increases or lingering, high levels of concessions.

For the third quarter of 2024, national industrial vacancy rates increased to 6.8%, from 6.6% for the second quarter of 2024.

Our market areas reflected the following industrial vacancy levels for the third quarter of 2024:

Higher interest rates have caused construction starts on new industrial projects to fall over the past two and a quarter years.

Quarterly net supply additions are on pace to fall below the pre-pandemic three-year average by mid-2025 and continue declining through at least 2026 when supply growth is expected to hit an 11-year low.

A gradual but persistent decline in speculative development completions has already begun.

As of March 31, 2025, the amount of vacant space among existing Phoenix logistics properties 50,000 SF or larger has increased by 19 million SF, primarily due to speculative development since 2019 pushing the vacancy rate among these buildings over 20%, while another 8.2 million SF worth of unleased space remained under construction.

Nationally, year-over-year industrial rent growth slowed to 2.1% in March 2025, its lowest rate since 2012.

However, due to record rent growth during the pandemic, many leases are still renewing at higher rates after being marked to market.

Leasing activity increased in the first quarter of 2025 ahead of tariff escalations, with some markets increasing leasing volume by 50% above two-year averages.

A potential deterioration in goods spending risks derailing the recovery underway in key drivers of logistics leasing, including U.S.

imports and inventories, and could cause true net absorption to underperform CoStar’s already relatively conservative forecast for 2025.

For the first quarter of 2025, national industrial vacancy was 7.0%.

Our market areas reflected the following industrial vacancy levels for the fourth quarter of 2024:

Springfield, Missouri at 2%, St.

Louis at 4.2%, Kansas City at 5.6%, Minneapolis at 4.1%, Dallas-Fort Worth at 9.8%, Chicago at 5.4%, Atlanta at 7.4%, Phoenix at 11.7%, Denver at 7.6% and Charlotte, North Carolina at 8.6%.

Louis at 4.0%, Kansas City at 4.8%, Minneapolis 3.8%, Dallas-Fort Worth at 9.1%, Chicago at 5.6%, Atlanta at 8.1%, Phoenix at 12.4%, Denver at 8.1% and Charlotte, North Carolina at 9.7%.

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.

For discussion of the risk factors associated with multi-family and commercial real estate loans, see “Risk Factors – Risks Relating to Lending Activities – Our loan portfolio possesses increased risk due to our relatively high concentration of commercial and residential construction, commercial real estate, other residential (multi-family) and other commercial loans” and “Risk Factors – Risks Relating to Regulation – We currently exceed thresholds defined in interagency guidance on commercial real estate concentrations, and as such, we may incur additional expense or slow the growth of certain categories of commercial real estate lending” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024.

The profitability of the Company and, more specifically, the profitability of its primary subsidiary, the Bank, depends primarily on its net interest income, as well as provisions for credit losses and the level of non-interest income and non-interest expense.

2 unchanged sentences

When interest-earning assets approximate or exceed interest-bearing liabilities, any positive interest rate spread will generate net interest income.

Great Southern’s total assets increased $224.1 million, or 3.9%, from $5.81 billion at December 31, 2023, to $6.04 billion at September 30, 2024.

Details of the current period changes in total assets are provided below, under “Comparison of Financial Condition at September 30, 2024 and December 31, 2023.”

Net outstanding loans increased $121.7 million, or 2.7%, from $4.59 billion at December 31, 2023, to $4.71 billion at September 30, 2024.

The increase was primarily in other residential (multi-family) loans, partially offset by decreases in construction loans, commercial business loans, and one-to four- family residential loans.

Great Southern’s total assets increased $12.2 million, or 0.2%, from $5.98 billion at December 31, 2024, to $5.99 billion at March 31, 2025.

Details of the current period changes in total assets are provided below, under “Comparison of Financial Condition at March 31, 2025 and December 31, 2024.”

Net outstanding loans increased $243,000 from December 31, 2024, to $4.69 billion at March 31, 2025.

The increase was primarily in other residential (multi-family) loans and construction loans, partially offset by decreases in commercial real estate loan and one-to four- family residential 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, no assurance can be given 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), in most of Great Southern’s primary lending locations, including Springfield, St.

Recent growth has occurred in some loan types, primarily other residential (multi-family) loans 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.

Certain minimum underwriting standards and monitoring 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.

7 unchanged sentences

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 or above that level are minimal.

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.

1 unchanged sentence

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 both September 30, 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 and an estimated 0.4% of our non-owner occupied one- to four-family residential loans had loan-to-value ratios above 100% at origination.

At both March 31, 2025 and December 31, 2024, 0.2% of our owner occupied one-to four-family residential loans had loan-to-value ratios above 100% at origination and an estimated 0.4% of our 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.

2 unchanged sentences

Available-for-sale Securities.

In the nine months ended September 30, 2024, available-for-sale securities increased $87.0 million, or 18.2%, from $478.2 million at December 31, 2023, to $565.2 million at September 30, 2024.

In the three months ended June 30, 2024, the Company elected to purchase some fixed rate securities similar to ones already in its portfolio, to provide interest rate protection if market interest rates should fall in future periods.

These securities are expected to yield over 5.00%.

See Note 5 “Investment Securities” in the Notes to Consolidated Financial Statements included in this report for additional information.

In the three months ended March 31, 2025, available-for-sale securities increased $2.5 million, or 0.5%, from $533.4 million at December 31, 2024, to $535.9 million at March 31, 2025.

Monthly principal payments on investment securities were generally offset in the period by increases in market value of the available-for-sale securities.

For further information on investment securities, see Note 5 to the accompanying financial statements contained in this Report.

Held-to-maturity Securities.

In the nine months ended September 30, 2024, held-to-maturity securities decreased $5.8 million, or 3.0%, from $195.0 million at December 31, 2023, to $189.3 million at September 30, 2024.

See Note 5 “Investment Securities” in the Notes to Consolidated Financial Statements included in this report for additional information.

In the three months ended March 31, 2025, held-to-maturity securities decreased $1.5 million, or 0.8%, from $187.4 million at December 31, 2024, to $185.9 million at March 31, 2025, due to principal repayments.

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 nine months ended September 30, 2024, total deposit balances decreased $24.2 million, or 0.5%.

Compared to December 31, 2023, transaction account balances decreased $19.1 million, or 0.6%, to $3.09 billion at September 30, 2024, and retail certificates of deposit decreased $154.0 million, or 16.2%, to $794.2 million at September 30, 2024.

The decrease in transaction accounts was primarily a result of a decrease in non-interest-bearing accounts and various NOW accounts, as small businesses and individuals appear to be drawing down their balances to pay for goods and services, or are seeking a higher-yielding alternative.

Retail time deposits decreased due to a decrease in retail certificates generated through the banking center network.

In the three months ended March 31, 2025, total deposit balances increased $152.5 million, or 3.3%.

Compared to December 31, 2024, transaction account balances increased $43.3 million, or 1.4%, to $3.10 billion at March 31, 2025, and retail certificates of deposit decreased $14.1 million, or 1.8%, to $761.7 million at March 31, 2025.

The increase in transaction accounts was primarily a result of an increase in various money market accounts.

Retail time deposits decreased due to a net decrease in retail certificates generated through the banking center network.

Competition for time deposits has been, and remains, significant in many of our markets.

Brokered deposits, including IntraFi program purchased funds, were $810.4 million and $661.5 million at September 30, 2024 and December 31, 2023, respectively.

Brokered deposits, including IntraFi program purchased funds, were $895.4 million and $772.1 million at March 31, 2025 and December 31, 2024, respectively.

The Company uses brokered deposits of select maturities from time to time to supplement its various funding channels and to manage interest rate risk.

The additional brokered deposits were used to repay some of the Company’s short-term borrowings.

Our deposit balances may fluctuate depending on customer preferences and our relative need for funding.

9 unchanged sentences

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 and Nine Months Ended September 30, 2024 and 2023 – Liquidity” below for further information on funding sources.

See “Results of Operations and Comparison for the Three Months Ended March 31, 2025 and 2024 – Liquidity” below for further information on funding sources.

Securities sold under reverse repurchase agreements with customers.

Securities sold under reverse repurchase agreements with customers increased $5.0 million from $70.8 million at December 31, 2023 to $75.8 million at September 30, 2024.

Securities sold under reverse repurchase agreements with customers increased $10.9 million from $64.4 million at December 31, 2024 to $75.3 million at March 31, 2025.

These balances fluctuate over time based on customer demand for this product.

Short-term borrowings and other interest-bearing liabilities .

Short term borrowings and other interest-bearing liabilities increased $189.6 million from $252.6 million at December 31, 2023 to $442.2 million at September 30, 2024.

The Company may, from time to time, utilize overnight borrowings, short-term FHLBank advances, and BTFP borrowings from the Federal Reserve Bank of St.

Short term borrowings and other interest-bearing liabilities decreased $154.3 million from $514.2 million at December 31, 2024 to $359.9 million at March 31, 2025, primarily due to the Company’s utilization of brokered deposits as an alternative source of funding.

The Company may, from time to time, utilize overnight borrowings, short-term FHLBank advances, and borrowings from the Federal Reserve Bank of St.

Louis (FRBSTL), depending on relative interest rates.

The Company’s FHLBank term advances were $-0- at both September 30, 2024 and December 31, 2023.

At September 30, 2024 and December 31, 2023, there was $261.0 million and $251.0 million, respectively, in overnight borrowings from the FHLBank, which were included in short term borrowings.

In January 2024, the Bank borrowed $180.0 million under the BTFP program.

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 $189.5 million at September 30, 2024.

The proceeds from these borrowings were primarily used to repay a portion of the Bank’s overnight borrowings from the FHLBank.

The Company’s FHLBank term advances were $-0- at both March 31, 2025 and December 31, 2024.

At March 31, 2025 and December 31, 2024, there was $359.0 million and $333.0 million, respectively, in overnight borrowings from the FHLBank, which were included in short term borrowings.

In January 2024, the Bank borrowed $180.0 million under the Federal Reserve Bank’s Bank Term Funding Program (BTFP).

The borrowing, which had a fixed interest rate of 4.83% and was secured primarily by the Bank’s held-to-maturity investment securities, was repaid in full upon maturity in January 2025.

Net Interest Income and Interest Rate Risk Management.

5 unchanged sentences

This was the first rate increase since September 29, 2006.

The FRB also implemented rate 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%.

The FRB also implemented rate increases of 0.25% on eight additional occasions from December 14, 2016 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.

6 unchanged sentences

At December 31, 2023, the Federal Funds rate was 5.50%.

In 2024, the FRB implemented a rate decrease of 0.50% in September.

At September 30, 2024, the Federal Funds rate was 5.00%.

Financial markets expect the possibility of further decreases in Federal Funds interest rates in 2024 and 2025 to be likely, but at a methodical pace and with interest rate decisions being made at each FRB meeting based on economic data available at the time.

Great Southern’s loan portfolio includes loans ($1.54 billion at September 30, 2024) tied to various SOFR indexes that will be subject to adjustment at least once within 90 days after September 30, 2024.

In 2024, the FRB implemented rate decreases of 0.50%, 0.25%, and 0.25% in September, November, and December respectively.

At December 31, 2024, the Federal Funds rate was 4.50%, and remained at that level at March 31, 2025.

Financial markets now expect the possibility of further decreases in Federal Funds interest rates in 2025 to be likely, but at a methodical pace and with interest rate decisions being made at each FRB meeting based on economic data available at the time.

Great Southern’s loan portfolio includes loans ($1.64 billion at March 31, 2025) tied to various SOFR indexes that will be subject to adjustment at least once within 90 days after March 31, 2025.

All of these loans have interest rate floors at various rates.

Great Southern also has a portfolio of loans ($782 million at September 30, 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.

Great Southern also has a portfolio of loans ($760.4 million at March 31, 2025) tied to a “prime rate” of interest 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.

In addition, Great Southern has a portfolio of loans ($8.0 million at September 30, 2024) tied to an AMERIBOR index that will adjust immediately or within 90 days of a change to the rate on this index.

In addition, Great Southern has a portfolio of loans ($9.7 million at March 31, 2025) tied to an AMERIBOR index that will adjust immediately or within 90 days of a change to the rate on this index.

All of these loans had interest rate floors at various rates.

At September 30, 2024, nearly all of these SOFR, AMERIBOR 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.

The current rates are such that a significant majority of these loans will also move fully with moderate future market interest rate decreases.

A rate cut by the FRB generally would have an anticipated immediate negative impact on the Company’s interest income on loans due to the large total balance of loans tied to the SOFR indexes 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.

At March 31, 2025, nearly all of these SOFR, AMERIBOR 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, and most are expected to move fully with future market interest rate decreases as many of these loans have floor rates well below their current index rate.

A rate cut by the FRB generally would be expected to have an immediate negative impact on the Company’s interest income on loans due to the large total balance of loans tied to the SOFR indexes 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.

2 unchanged sentences

Conversely, market interest rate increases would normally result in increased interest rates on our SOFR-based, AMERIBOR-based and prime-based loans.

As of September 30, 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 mostly neutral impact on net interest income.

As of March 31, 2025, 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 mostly neutral impact on net interest income.

Any negative impact of a falling Federal Funds rate and other market interest rates also falling could be more pronounced if we are not able to decrease non-maturity deposit rates accordingly.

4 unchanged sentences

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.

3 unchanged sentences

This has been especially true since early March 2023.

Deposit and other funding costs moderated a bit in late 2024 as the FRB cut the federal funds rate, but competition for deposits still remains significant in 2025.

For further discussion of the processes used to manage our exposure to interest rate risk, see “Item 3.

6 unchanged sentences

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 and Nine Months Ended September 30, 2024 and 2023.”

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, 2025 and 2024.”

Effect of Federal Laws and Regulations

30 unchanged sentences

Business Initiatives

Since early 2022, Great Southern had 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.

The system migration efforts were beset by a variety of significant issues, including having missed a second conversion date because of continued operational and system problems.

Therefore, Great Southern took 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, as well as the third-party vendor’s misrepresentations and omissions.

The third-party vendor filed a counterclaim alleging that Great Southern terminated the Master Agreement without cause and that Great Southern must pay an early termination fee in an amount to be proven at trial.

Great Southern denies the allegations in the third-party vendor’s counterclaim and will vigorously defend itself.

The parties continue informal settlement discussions, but there is no guarantee that the parties will reach a mutually agreed upon settlement to terminate the litigation.

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.

In 2025, the banking center at Benton and Chestnut in Springfield, Mo.

will be replaced with a newly-constructed building on the same property at 723 N.

Construction on the new building is anticipated to begin in the first quarter of 2025, with completion in the fourth quarter of 2025.

During construction, customers will be serviced from a temporary facility on the property.

The Company also has 11 other banking centers and an Express Center in Springfield.

Kris Conley, Chief Retail Banking Officer, will retire in December 2024 after a notable career at Great Southern Bank.

He joined the Company in 1998 and has led the retail banking division since 2010.

During his tenure, Great Southern expanded from 30 banking centers, mainly in southwest Missouri, to 89 banking centers across six states.

In early 2023, Conley announced his retirement plans to facilitate a smooth transition, with Laura Smith named as his successor.

Smith, who has been with Great Southern since 2003, previously managed the Company’s investment services division.

Kelly Polonus, Chief Communications & Marketing Officer, will also retire in December 2024, concluding a distinguished 41-year career in banking, including the last 22 years at Great Southern Bank.

She announced her planned retirement in mid-2023 to ensure a seamless management transition.

Succeeding Polonus will be Stacy Fender, who joined Great Southern in June 2024 after serving 18 years in communications and marketing roles at a regional healthcare system.

Great Southern has previously reported certain issues and contractual disputes regarding its proposed conversion to a new core banking platform to be delivered by a third-party vendor.

This ultimately led to Great Southern terminating the Master Agreement with the third-party vendor and initiating litigation against them, with the third-party vendor filing a counterclaim against Great Southern.

As of May 1, 2025, the parties have executed a settlement agreement whereby, in pertinent part, the parties will jointly stipulate to a dismissal of all legal actions and the termination of the Master Agreement.

Contemporaneously with this action, the

parties’ debit card servicing agreement has been extended.

Great Southern had previously recorded an accrued expense for these matters in 2024.

No additional material expenses are expected to be incurred in the settlement of this matter.

Technology updates and advancements continue with the Company’s current core provider.

Projects involving a full array of products and services are moving forward, with completions expected beginning in the third quarter of 2025 and continuing into 2026.

During the three months ended March 31, 2025, the Company installed 10 ITM units in the St.

market, replacing existing end-of-life ATM units.

The ITMs, all located at banking center locations, offer customers live teller services, extended banking hours, and services beyond those traditionally available via an ATM.

In March 2025, the Company began construction of a new banking center at 723 N.

Benton in Springfield, Mo., to replace the existing facility at that location.

The new construction, designed as a next-generation banking center, will allow for flexibility in testing new designs, processes, technology and tools balanced with customer convenience.

Construction is expected to be completed in the fourth quarter of 2025.

During construction, customers are being served by a temporary facility on the property.

The Company has 11 other banking centers and an Express Center in Springfield.

On April 30, 2025, the Company notified holders that it will redeem on June 15, 2025 (the “Redemption Date”) all of the Company’s outstanding 5.50% Fixed-to-Floating Rate Subordinated Notes due June 15, 2030, having an aggregate principal amount of $75,000,000 (the “Subordinated Notes”), in accordance with the terms of the Subordinated Notes.

The total redemption price will be 100% of the aggregate principal amount of the Subordinated Notes, plus accrued and unpaid interest to, but excluding, the Redemption Date.

The Company will utilize excess cash on hand for the redemption payment.

The annual combined interest expense and amortization of deferred issuance costs on the Subordinated Notes has been approximately $4.4 million.

Headquartered in Springfield, Missouri, Great Southern offers a broad range of banking services to customers.

The Company operates 89 retail banking centers in Missouri, Iowa, Kansas, Minnesota, Arkansas and Nebraska and seven commercial lending offices in Atlanta, Charlotte, Chicago, Dallas, Denver, Omaha, and Phoenix.

The Company operates 89 retail banking centers in Missouri, Iowa, Kansas, Minnesota, Arkansas and Nebraska and commercial lending offices in Atlanta, Charlotte, Chicago, Dallas, Denver, Omaha, and Phoenix.

The common stock of Great Southern Bancorp, Inc.

is listed on the Nasdaq Global Select Market under the symbol “GSBC.”

Comparison of Financial Condition at September 30, 2024 and December 31, 2023

During the nine months ended September 30, 2024, the Company’s total assets increased by $224.1 million to $6.04 billion.

The increase was primarily in investment securities and loans.

Cash and cash equivalents were $208.4 million at September 30, 2024, a decrease of $3.0 million, or 1.4%, from $211.3 million at December 31, 2023.

Comparison of Financial Condition at March 31, 2025 and December 31, 2024

During the three months ended March 31, 2025, the Company’s total assets increased by $12.2 million to $5.99 billion.

The increase was primarily in interest-bearing deposits in other financial institutions.

Cash and cash equivalents were $217.2 million at March 31, 2025, an increase of $21.4 million, or 10.9%, from $195.8 million at December 31, 2024.

The Company’s available-for-sale securities increased $2.5 million, or 0.5%, compared to December 31, 2024.

The increase was primarily due to the purchase of several collateralized mortgage obligations and mortgage-backed securities, partially offset by normal monthly payments received related to the portfolio of mortgage-backed securities and collateralized mortgage obligations.

The available-for-sale securities portfolio was 9.4% and 8.2% of total assets at September 30, 2024 and December 31, 2023, respectively.

The available-for-sale securities portfolio was 8.9% of total assets at March 31, 2025 and December 31, 2024.

Monthly principal payments on investment securities were generally offset in the period by increases in market value of the available-for-sale securities.

The Company’s held-to-maturity securities decreased $1.5 million, or 0.8%, compared to December 31, 2024.

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 3.1% and 3.4% of total assets at September 30, 2024 and December 31, 2023, respectively.

Net loans increased $121.7 million from December 31, 2023, to $4.71 billion at September 30, 2024.

This increase was primarily in other residential (multi-family) loans ($627.8 million increase), which was partially offset by a decrease in construction loans ($383.3 million decrease) and commercial business loans ($91.0 million decrease).

The decrease in commercial business loans was primarily related to a few large loan payoffs early in 2024.

Despite the decrease in construction loans, the pipeline of construction loan commitments and the unfunded portion of construction loans remained strong in the nine months ending September 30, 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 increased $183.9 million, from $5.24 billion at December 31, 2023 to $5.42 billion at September 30, 2024.

This increase was primarily due to increases in short-term borrowings and brokered deposits, partially offset by a reduction in transaction account deposits and certificates of deposit.

Total deposits decreased $24.2 million, or 0.5%, from $4.72 billion at December 31, 2023 to $4.70 billion at September 30, 2024.

Transaction account balances decreased $19.1 million, from $3.11 billion at December 31, 2023 to $3.09 billion at September 30, 2024.

Total interest-bearing checking accounts increased $19.7 million, while non-interest-bearing checking accounts decreased $38.8 million.

Retail certificates of deposit decreased $154.0 million compared to December 31, 2023, to $794.2 million at September 30, 2024, due to competition for deposits.

Brokered deposits increased $148.9 million to $810.4 million at September 30, 2024, compared to $661.5 million at December 31, 2023.

Brokered deposits were utilized to offset reductions in other deposit categories and, along with borrowings, to fund increases in loans and investment securities.

The held-to-maturity securities portfolio was 3.1% of total assets at March 31, 2025 and December 31, 2024.

Net loans increased $243,000 from December 31, 2024, to $4.69 billion at March 31, 2025.

This increase was primarily in other residential (multi-family) loans ($43.2 million increase) and construction loans ($29.1 million increase), partially offset by a decrease in commercial real estate loans ($54.4 million decrease) and one-to four-family residential loans ($10.3 million decrease).

The decrease in commercial real estate loans was primarily related to a few large loan payoffs in 2025.

The pipeline of unfunded loan commitments decreased slightly in the first quarter of 2025, primarily due to a decline related to construction loans.

The unfunded portion of construction loans remained significant at March 31, 2025, notwithstanding this decline.

Total liabilities decreased $1.5 million from December 31, 2024, to $5.38 billion at March 31, 2025.

This decrease was primarily due to the repayment of the BTFP borrowings in January 2025, mostly offset by an increase in transaction account deposits and brokered deposits.

Total deposits increased $152.5 million, or 3.3%, from $4.61 billion at December 31, 2024 to $4.76 billion at March 31, 2025.

Transaction account balances increased $43.3 million, from $3.06 billion at December 31, 2024 to $3.10 billion at March 31, 2025.

Total interest-bearing checking accounts and non-interest bearing checking accounts increased $33.6 million and $9.7 million, respectively.

Retail certificates of deposit decreased $14.1 million compared to December 31, 2024, to $761.7 million at March 31, 2025, due to competition for these types of deposits.

Brokered deposits increased $123.3 million to $895.4 million at March 31, 2025, compared to $772.1 million at December 31, 2024.

Brokered deposits were utilized to offset reductions in other deposit categories and to repay BTFP 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 September 30, 2024, $300.0 million were floating rate deposits, which adjust daily, based on the effective federal funds rate index.

The Company also utilized brokered deposits with maturities within three to nine months as part of its interest rate risk management strategies.

The Company’s term FHLBank advances were $-0- at both September 30, 2024 and December 31, 2023.

At September 30, 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.

Of the total brokered deposits at March 31, 2025, $300.0 million were floating rate deposits, which adjust daily, based on the effective federal funds rate index.

The Company also utilized brokered deposits with maturities within six months as part of its interest rate risk management strategies.

The Company’s term FHLBank advances were $-0- at both March 31, 2025 and December 31, 2024.

At March 31, 2025 and December 31, 2024, 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 increased $189.6 million from $252.6 million at December 31, 2023 to $442.2 million at September 30, 2024.

At September 30, 2024, $261.0 million of this total was in overnight borrowings from the FHLBank, which were used to fund loan originations and purchases of investment securities, compared to $251.0 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 $189.5 million as of September 30, 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 $5.0 million, or 7.0%, from $70.8 million at December 31, 2023 to $75.8 million at September 30, 2024.

Short-term borrowings and other interest-bearing liabilities decreased $154.3 million from $514.2 million at December 31, 2024 to $359.9 million at March 31, 2025.

At March 31, 2025, $359.0 million of this total was in overnight borrowings from the FHLBank, which were used to fund loan originations and purchases of investment securities, compared to $333.0 million of overnight borrowings from the FHLBank at December 31, 2024.

At March 31, 2025 and December 31, 2024, there was $-0- and $180.0 million, respectively, in BTFP borrowings.

The BTFP borrowing, which had a fixed interest rate of 4.83%, was repaid in full upon maturity in January 2025.

Securities sold under reverse repurchase agreements with customers increased $10.9 million, or 16.9%, from $64.4 million at December 31, 2024 to $75.3 million at March 31, 2025.

These balances fluctuate over time based on customer demand for this product.

Total stockholders’ equity increased $40.3 million, from $571.8 million at December 31, 2023 to $612.1 million at September 30, 2024.

Accumulated other comprehensive loss (a reduction in equity) decreased $13.1 million during the nine months ended September 30, 2024, primarily due to increases in the fair value of available-for-sale investment securities and the fair value of cash flow hedges, as a result of decreased market interest rates.

Stockholders’ equity also increased due to net income of $46.9 million for the nine months ended September 30, 2024 and rose by $6.9 million due to stock option exercises.

Total stockholders’ equity increased $13.7 million, from $599.6 million at December 31, 2024 to $613.3 million at March 31, 2025.

Stockholders’ equity increased due to net income of $17.2 million for the three months ended March 31, 2025 and rose by $1.2 million due to stock option exercises during the period.

Accumulated other comprehensive loss (a reduction in equity) decreased $10.2 million during the three months ended March 31, 2025 (thereby increasing total stockholders’ equity), primarily due to increases in the fair value of available-for-sale investment securities and the fair value of cash flow hedges, as a result of decreased market interest rates.

Partially offsetting these changes were repurchases of the Company’s common stock totaling $10.2 million and dividends declared on common stock of $4.6 million.

Results of Operations and Comparison for the Three and Nine Months Ended September 30, 2024 and 2023

Net income was $16.5 million for the three months ended September 30, 2024 compared to $15.9 million for the three months ended September 30, 2023.

This increase of $611,000, or 3.8%, was primarily due to a decrease in non-interest expense of $1.8 million, or 5.2%, an increase in net interest income of $1.2 million, or 2.6%, and a decrease in income tax expense of $726,000, or 16.7%, partially offset by an increase in provision for credit losses on loans and unfunded commitments of $2.3 million, or 195.1%, and a decrease in non-interest income of $860,000, or 11.0%.

Net income was $46.9 million for the nine months ended September 30, 2024 compared to $54.7 million for the nine months ended September 30, 2023.

This decrease of $7.8 million, or 14.2%, was primarily due to a decrease in net interest income of $8.5 million, or 5.7%, and an increase in provision for credit losses on loans and unfunded commitments of $3.3 million, or 154.2%, partially offset by a decrease in income tax expense of $3.7 million, or 25.7%, a decrease in non-interest expense of $190,000, or 0.2%, and an increase in non-interest income of $121,000, or 0.5%.

Comparison of Results of Operations for the Three Months Ended March 31, 2025 and 2024

Net income was $17.2 million for the three months ended March 31, 2025 compared to $13.4 million for the three months ended March 31, 2024.

This increase of $3.8 million, or 28.0%, was primarily due to an increase in net interest income of $4.5 million, or 10.1%, and a decrease in provision for credit losses and unfunded commitments of $978,000, or 155.2%, partially offset by an increase in income tax expense of $1.1 million, or 35.6%, and an increase in non-interest expense of $400,000, or 1.2%.

Total Interest Income

Total interest income increased $8.5 million, or 11.3%, during the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

The increase was due to a $7.5 million, or 11.0%, increase in interest income on loans and a $977,000, or 15.3%, increase in interest income on investment securities and other interest-earning assets.

Interest income from loans and from investment securities and other interest-earning assets increased during the three months ended September 30, 2024 compared to the same period in 2023 due to higher average balances and higher average rates of interest.

Total interest income increased $21.8 million, or 9.9%, during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

The increase was due to a $20.0 million, or 9.9%, increase in interest income on loans and a $1.7 million, or 9.3%, increase in interest income on investment securities and other interest-earning assets.

Interest income from loans and from investment securities and other interest-earning assets increased during the nine months ended September 30, 2024 compared to the same period in 2023 due to higher average balances and higher average rates of interest.

Total interest income increased $2.9 million, or 3.7%, during the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

The increase was due to a $2.0 million, or 2.8%, increase in interest income on loans and an $858,000, or 13.6%, increase in interest income on investment securities and other interest-earning assets.

These increases were due to higher average balances and higher average rates of interest.

Interest Income – Loans

During the three months ended September 30, 2024 compared to the three months ended September 30, 2023, interest income on loans increased $5.9 million due to higher average interest rates on loans.

The average yield on loans increased from 5.92% during the three months ended September 30, 2023, to 6.44% during the three months ended September 30, 2024.

This increase was primarily due to the repricing of floating rate loans as market interest rates increased in 2023 and the addition of fixed rate loans at higher rates in 2024.

Interest income on loans also increased $1.6 million as the result of higher average loan balances, which increased from $4.62 billion during the three months ended September 30, 2023, to $4.72 billion during the three months ended September 30, 2024.

During the three months ended March 31, 2025 compared to the three months ended March 31, 2024, interest income on loans increased $2.0 million.

Higher average loan balances, which grew from $4.67 billion during the three months ended March 31, 2024, to $4.76 billion during the three months ended March 31, 2025, accounted for $1.1 million of the increase in interest income on loans.

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 a slowdown in loan prepayments in 2023 and 2024, due to higher market interest rates.

Average loan balances increased in the other residential and commercial real estate categories, partially offset by a decrease in average loan balances in the construction and commercial business categories.

As construction loans were completed, they were either paid off or moved into the other residential or commercial real estate categories.

During the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, interest income on loans increased $16.7 million due to higher average interest rates on loans.

The average yield on loans increased from 5.84% during the nine months ended September 30, 2023, to 6.31% during the nine months ended September 30, 2024.

This increase was due to the same reasons noted above.

Interest income on loans also increased $3.3 million as the result of higher average loan balances, which increased from $4.62 billion during the nine months ended September 30, 2023, to $4.69 billion during the nine months ended September 30, 2024.

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 September 30, 2024 and 2023.

The Company recorded $6.1 million of interest income related to the swap in both the nine months ended September 30, 2024 and the nine months ended September 30, 2023.

At September 30, 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.

however, some loan growth has come as a result of the funding of previously approved but unfunded balances on construction loans and a slowdown in loan prepayments since 2023, due to higher market interest rates.

Interest income on loans also increased $933,000 due to higher average interest rates on loans.

average yield on loans increased from 6.13% during the three months ended March 31, 2024, to 6.23% during the three months ended March 31, 2025.

This increase was primarily due to the addition of both fixed rate loans and floating rate loans at higher rates in the latter half of 2024 and the first quarter of 2025.

In October 2018, the Company entered into an interest rate swap transaction which was terminated in March 2020.

Upon termination, the Company received $45.9 million, inclusive of accrued but unpaid interest, from its swap counterparty.

The net amount, after deducting accrued interest and deferred income taxes, is being accreted to interest income on loans monthly until the original termination date of October 6, 2025.

After this date, the Company will no longer have the benefit of that income from the terminated swap.

The Company recorded interest income related to the interest rate swap of $2.0 million in each of the three months ended March 31, 2025 and 2024.

At March 31, 2025, the Company expected to have a sufficient amount of eligible variable rate loans to continue to accrete this interest income ratably in future periods to October 6, 2025, after which no further interest income will be realized.

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.

4 unchanged sentences

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 of loan interest income related to this swap transaction of $1.9 million in the nine months ended September 30, 2024.

The Company recorded a reduction of loan interest income related to this swap transaction of $2.8 million and $7.5 million, respectively, in the three and nine months ended September 30, 2023.

As this interest rate swap reached its contractual termination date of March 1, 2024, there was no impact from this swap in the three months ended September 30, 2024, and there will be no further interest income impact 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.

Since reaching its contractual termination date on March 1, 2024, there has been no further interest income impact 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.

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.

The Company recorded a reduction of loan interest income related to these swap transactions of $2.7 million in both the three months ended September 30, 2024 and the three months ended September 30, 2023.

The Company recorded a reduction of loan interest income related to these swap transactions of $8.3 million in the nine months ended September 30, 2024, compared to a $4.4 million reduction of interest income in the nine months ended September 30, 2023.

At September 30, 2024, the USD-Prime rate was 8.00% and the one-month USD-SOFR OIS rate was 5.16334%.

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.

The Company recorded a reduction of loan interest income related to these swap transactions of $1.7 million and $2.8 million in the three months ended March 31, 2025 and 2024, respectively.

At March 31, 2025, the USD-Prime rate was 7.50% and the one-month USD-SOFR OIS rate was 4.33365%.

If market interest rates remain near or above 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 $1.1 million in the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

Interest income increased $614,000 as a result of an increase in average balances from $678.6 million during the three months ended September 30, 2023, to $758.8 million during the three months ended September 30, 2024.

Average balances of securities increased primarily due to investment securities purchases earlier in 2024, partially offset by normal monthly payments received related to the portfolio of U.S.

Interest income on investments increased $1.1 million in the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Interest income increased $515,000 as a result of an increase in average balances from $669.7 million during the three months ended March 31, 2024, to $738.1 million during the three months ended March 31, 2025.

Average balances of securities increased primarily due to investment securities purchases in 2024, partially offset by normal monthly payments received related to the portfolio of U.S.

Government agency mortgage-backed securities and collateralized mortgage obligations.

Interest income on investments also increased $460,000 as a result of higher average interest rates from 2.93% during the three months ended September 30, 2023, to 3.19% during the three month period ended September 30, 2024.

Interest income on investments also increased $549,000 as a result of higher average interest rates from 3.01% during the three months ended March 31, 2024, to 3.34% during the three months ended March 31, 2025.

The securities purchased in 2024 had higher interest rates than the rest of the portfolio.

Interest income on investments increased $1.4 million in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

Interest income increased $1.1 million as a result of higher average interest rates, which rose from 2.89% during the nine months ended September 30, 2023, to 3.10% during the nine month period ended September 30, 2024.

Interest income on investments also increased $304,000 as a result of an increase in average balances from $694.7 million during the nine months ended September 30, 2023, to $708.4 million during the nine months ended September 30, 2024.

Average balances of securities increased due to the same reasons noted above.

Interest income on other interest-earning assets decreased $97,000 in the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

Interest income decreased $109,000 as a result of a decrease in average balances from $104.5 million during the three months ended September 30, 2023, to $96.6 million during the three months ended September 30, 2024.

Partially offsetting this decrease, interest income increased $12,000 as a result of higher average interest rates, which rose from 5.22% during the three months ended September 30, 2023, to 5.27% during the three months ended September 30, 2024.

Interest income on other interest-earning assets increased $277,000 in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

Interest income increased $265,000 as a result of higher average interest rates, which rose from 4.91% during the nine months ended September 30, 2023, to 5.26% during the nine months ended September 30, 2024.

Interest income increased $12,000 as a result of an increase in average balances from $97.8 million during the nine months ended September 30, 2023, to $98.2 million during the nine months ended September 30, 2024.

Interest income on other interest-earning assets decreased $206,000 in the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Interest income decreased $275,000 as a result of lower average interest rates, which fell from 5.22% during the three months ended March 31, 2024, to 4.23% during the three months ended March 31, 2025.

This decline in the average interest rate was directly attributable to the decrease in the federal funds rate in the latter portion of 2024.

Partially offsetting this decrease, interest income increased $69,000 as a result of an increase in average balances from $100.5 million during the three months ended March 31, 2024, to $105.3 million during the three months ended March 31, 2025.

Total Interest Expense

Total interest expense increased $7.3 million, or 25.5%, during the three months ended September 30, 2024, when compared with the three months ended September 30, 2023, due to an increase in interest expense on short-term borrowings of $4.0 million, or 276.0%, an increase in interest expense on deposits of $3.3 million, or 12.9%, an increase in interest expense on securities sold under reverse repurchase agreements of $77,000, or 25.0%, and an increase in interest expense on subordinated debentures issued to capital trusts of $2,000, or 0.4%.

Total interest expense increased $30.2 million, or 41.8%, during the nine months ended September 30, 2024, when compared with the nine months ended September 30, 2023, due to an increase in interest expense on deposits of $22.2 million, or 36.1%, an increase in interest expense on short-term borrowings of $7.6 million, or 148.4%, an increase in interest expense on securities sold under reverse repurchase agreements of $241,000, or 27.7%, and an increase in interest expense on subordinated debentures issued to capital trusts of $91,000, or 7.1%.

Total interest expense decreased $1.7 million, or 5.1%, during the three months ended March 31, 2025, when compared with the three months ended March 31, 2024, due to a decrease in interest expense on deposits of $3.0 million, or 11.0%, and a decrease in interest expense on subordinated debentures issued to capital trusts of $72,000, or 15.9%, partially offset by an increase in interest expense on short-term borrowings of $1.4 million, or 46.2%, and an increase in interest expense on securities sold under reverse repurchase agreements of $38,000, or 11.4%.

Interest Expense – Deposits

Interest expense on demand and savings deposits increased $1.9 million due to average rates of interest that increased from 1.46% in the three months ended September 30, 2023 to 1.80% in the three months ended September 30, 2024.

Interest rates paid on demand deposits were higher in the 2024 period due to significant increases in overall market rates and competition for deposits.

Interest expense on demand deposits increased $55,000, due to an increase in average balances from $2.20 billion during the three months ended September 30, 2023, to $2.21 billion during the three months ended September 30, 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 demand and savings deposits increased $9.7 million due to average rates of interest that increased from 1.18% in the nine months ended September 30, 2023 to 1.76% in the nine months ended September 30, 2024.

Interest rates paid on demand deposits were higher in the 2024 period due to significant increases in overall market rates and competition for deposits.

Interest expense on demand deposits increased $281,000, due to an increase in average balances from $2.19 billion during the nine months ended September 30, 2023, to $2.22 billion during the nine months ended September 30, 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 $754,000 as a result of an increase in average rates of interest from 3.37% during the three months ended September 30, 2023, to 4.02% during the three months ended September 30, 2024.

Partially offsetting this increase, interest expense on time deposits decreased $540,000 due to a decrease in average balances of time deposits from $996.2 million during the three months ended September 30, 2023 to $856.4 million in the three months ended September 30, 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 2024.

Interest expense on time deposits increased $8.1 million as a result of an increase in average rates of interest from 2.76% during the nine months ended September 30, 2023, to 4.01% during the nine months ended September 30, 2024.

Partially offsetting this increase, interest expense on time deposits decreased $1.9 million due to a decrease in average balances of time deposits from $999.9 million during the nine months ended September 30, 2023 to $896.1 million in the nine months ended September 30, 2024.

As noted above, a large portion of the Company’s certificate of deposit portfolio matures within six to twelve months and therefore reprices fairly quickly.

Interest expense on brokered deposits increased $970,000, due to an increase in average balances from $669.8 million during the three months ended September 30, 2023 to $745.4 million during the three months ended September 30, 2024.

Interest expense on brokered deposits increased $103,000 due to average rates of interest that increased from 5.16% in the three months ended September 30, 2023 to 5.23% in the three months ended September 30, 2024.

Brokered deposits added during 2023 and 2024 were at higher market rates than brokered deposits previously issued.

Interest expense on demand and savings deposits decreased $1.7 million due to average rates of interest that decreased from 1.71% in the three months ended March 31, 2024 to 1.42% in the three months ended March 31, 2025.

Interest rates paid on demand deposits were lower in the 2025 period due to the Company strategically lowering rates throughout 2024 and into early 2025 to align with market rates.

Interest expense on demand deposits decreased $10,000, due to a decrease in average balances from $2.224 billion in the three months ended March 31, 2024, to $2.221 billion in the three months ended March 31, 2025.

Interest expense on time deposits decreased $1.5 million due to a decrease in average balances of time deposits from $937.7 million during the three months ended March 31, 2024 to $772.1 million in the three months ended March 31, 2025.

Interest expense on time deposits decreased $902,000 as a result of a decrease in average rates of interest from 3.93% in the three months ended March 31, 2024, to 3.53% in the three months ended March 31, 2025.

A large portion of the Company’s certificate of deposit portfolio matures within six months and therefore reprices fairly quickly;

this is consistent with the portfolio term over the past several years.

Competition for time deposits remains significant in our market areas, and upon maturity, a portion of these deposits were redeemed by customers.

Interest expense on brokered deposits increased $1.9 million due to an increase in average balances from $688.8 million during the three months ended March 31, 2024 to $892.6 million during the three months ended March 31, 2025.

Partially offsetting this increase, interest expense on brokered deposits decreased $824,000 due to average rates of interest that decreased from 5.25% in the three months ended March 31, 2024 to 4.58% in the three months ended March 31, 2025.

Brokered deposits added in 2024 and the first quarter of 2025 were at lower 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 on brokered deposits increased $4.5 million, due to an increase in average balances from $588.9 million during the nine months ended September 30, 2023 to $706.0 million during the nine months ended September 30, 2024.

Interest expense on brokered deposits increased $1.4 million due to average rates of interest that increased from 4.93% in the nine months ended September 30, 2023 to 5.24% in the nine months ended September 30, 2024.

As noted above, brokered deposits added during 2023 and 2024 were at higher market rates than brokered deposits previously issued.

Interest Expense – FHLBank Advances;

1 unchanged sentence

Subordinated Debentures Issued to Capital Trusts and Subordinated Notes

FHLBank term advances were not utilized during the three and nine months ended September 30, 2024 and 2023.

FHLBank term advances were not utilized during the three months ended March 31, 2025 and 2024.

Interest expense on reverse repurchase agreements increased $33,000 due to higher average balances.

The average balance of repurchase agreements increased $20.4 million from $56.2 million in the three months ended September 30, 2023 to $76.6 million in the three months ended September 30, 2024, due to changes in customers’ desire for this product, which can fluctuate.

Partially offsetting this increase, interest expense on reverse repurchase agreements decreased $27,000 due to lower average interest rates during the three months ended September 30, 2024 when compared to the three months ended September 30, 2023.

The average rate of interest was 2.18% for the three months ended September 30, 2023 compared to 2.00% for the three months ended September 30, 2024, due to lower market interest rates.

Interest expense on reverse repurchase agreements increased $326,000 due to higher average interest rates during the nine months ended September 30, 2024 when compared to the nine months ended September 30, 2023.

The average rate of interest was 1.36% for the nine months ended September 30, 2023 compared to 1.95% for the nine months ended September 30, 2024, due to higher market interest rates.

Partially offsetting this increase, interest expense on reverse repurchase agreements decreased $85,000 due to lower average balances.

The average balance of repurchase agreements decreased $9.8 million from $85.8 million in the nine months ended September 30, 2023 to $76.0 million in the nine months ended September 30, 2024, due to changes in customers’ desire for this product.

Interest expense on short-term borrowings (including overnight borrowings from the FHLBank and BTFP borrowings from FRBSTL) and other interest-bearing liabilities increased $4.0 million during the three months ended September 30, 2024 when compared to the three months ended September 30, 2023 due to higher average balances.

The average balance of short-term borrowings and other interest-bearing liabilities increased $304.9 million from $103.8 million in the three months ended September 30, 2023 to $408.7 million in the three months ended September 30, 2024, primarily due to decreases in the Company’s deposits, which caused a change in the mix of funding, which can fluctuate, as these amounts were used to fund increases in loans and investment securities.

Partially offsetting this increase, interest expense on short-term borrowings (including overnight borrowings from the FHLBank and BTFP borrowings from FRBSTL) and other interest-bearing liabilities decreased $62,000 during the three months ended September 30, 2024 when compared to the three months ended September 30, 2023 due to lower average rates of interest.

The average rate of interest was 5.47% for the three months ended September 30, 2023, compared to 5.24% for the three months ended September 30, 2024.

The decrease in the average rate of interest was primarily due to the 2024 period including the BTFP borrowing, which had a lower rate of interest than the FHLB overnight borrowings.

Interest rates on borrowings also decreased in the latter half of September 2024 after the fed funds rate was cut by 50 basis points.

Interest expense on short-term borrowings (including overnight borrowings from the FHLBank and BTFP borrowings from FRBSTL) and other interest-bearing liabilities increased $7.6 million during the nine months ended September 30, 2024 when compared to the nine months ended September 30, 2023 due to higher average balances.

The average balance of short-term borrowings and other interest-bearing liabilities increased $195.6 million from $134.6 million in the nine months ended September 30, 2023 to $330.2 million in the nine months ended September 30, 2024, primarily due to the same reasons discussed above.

Interest expense on short-term borrowings (including overnight borrowings from the FHLBank and BTFP borrowings from FRBSTL) and other interest-bearing liabilities increased $60,000 during the nine months ended September 30, 2024 when compared to the nine months ended September 30, 2023 due to higher average rates of interest.

The average rate of interest was 5.12% for the nine months ended September 30, 2023, compared to 5.18% for the nine months ended September 30, 2024.

During the three months ended September 30, 2024, compared to the three months ended September 30, 2023, interest expense on subordinated debentures issued to capital trusts increased $2,000 due to higher average interest rates.

The average interest rate was 7.04% in the three months ended September 30, 2024 compared to 7.00% in the three months ended September 30, 2023.

The subordinated debentures are variable-rate debentures, which bear interest at an average rate of three-month SOFR (originally LIBOR), plus 1.60%, adjusted quarterly, which was 7.11% at September 30, 2024.

The average balance of repurchase agreements increased from $74.5 million in the three months ended March 31, 2024 to $82.4 million in the three months ended March 31, 2025, due to changes in customers’ desire for this product, which can fluctuate.

Interest expense on reverse repurchase agreements increased $5,000 due to higher average interest rates during the three months ended March 31, 2025 when compared to the three months ended March 31, 2024.

The average rate of interest was 1.80% for the three months ended March 31, 2024 compared to 1.83% for the three months ended March 31, 2025, due to changes in the mix of customer balances in these products.

Interest expense on short-term borrowings (including overnight borrowings from the FHLBank and BTFP borrowings from FRBSTL) and other interest-bearing liabilities increased $1.7 million due to higher average balances during the three months ended March 31, 2025 when compared to the three months ended March 31, 2024.

The average balance of short-term borrowings and other interest-bearing liabilities increased from $241.6 million in the three months ended March 31, 2024 to $392.6 million in the three months ended March 31, 2025, primarily in order to help fund increases in the Company’s balances of loans and investment securities, which caused a change in the amount and mix of funding.

Partially offsetting this increase, interest expense on short-term borrowings (including overnight borrowings from the FHLBank and BTFP borrowings from FRBSTL) and other interest-bearing liabilities decreased $246,000 due to lower average rates of interest during the three months ended March 31, 2025 when compared to the three months ended March 31, 2024.

The average rate of interest was 5.07% for the three months ended March 31, 2024, compared to 4.60% for the three months ended March 31, 2025.

Interest rates on borrowings decreased in the latter portion of 2024 after the federal funds rate was cut by 100 basis points from September to December 2024.

During the three months ended March 31, 2025, compared to the three months ended March 31, 2024, interest expense on subordinated debentures issued to capital trusts decreased $72,000 due to lower average interest rates.

The average interest rate was 6.01% in the three months ended March 31, 2025 compared to 7.08% in the three months ended March 31, 2024.

There was no change in the average balance of the subordinated debentures between the 2024 and 2025 three-month periods.

During the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, interest expense on subordinated debentures issued to capital trusts increased $91,000 due to higher average interest rates.

The average interest rate was 7.07% in the nine months ended September 30, 2024 compared to 6.61% in the nine months ended September 30, 2023.

The subordinated debentures are variable-rate debentures, as stated above.

There was no change in the average balance of the subordinated debentures between the 2023 and 2024 nine-month periods.

In June 2020, the Company issued $75.0 million of 5.50% fixed-to-floating rate subordinated notes due June 15, 2030.

1 unchanged sentence

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 or nine months ended September 30, 2024, compared to the three and nine months ended September 30, 2023.

There was no material change in interest expense on subordinated notes between the 2024 and 2025 three-month periods.

On April 30, 2025, the Company reported that it will redeem at par all $75.0 million of the subordinated notes on June 15, 2025.

For additional information, see “-Business Initiatives.”

Net Interest Income

Net interest income for the three months ended September 30, 2024 increased $1.3 million to $48.0 million compared to $46.7 million for the three months ended September 30, 2023.

Net interest margin was 3.42% in the three months ended September 30, 2024, compared to 3.43% in the three months ended September 30, 2023, a decrease of one basis point, or 0.3%.

The Company experienced increases in interest income on both loans and investment securities and increases in interest expense on deposits, short-term borrowings, subordinated debentures issued to capital trust and securities sold under reverse repurchase agreements with customers.

Net interest income for the nine months ended September 30, 2024 decreased $8.5 million to $139.6 million compared to $148.1 million for the nine months ended September 30, 2023.

Net interest margin was 3.39% in the nine months ended September 30, 2024, compared to 3.66% in the nine months ended September 30, 2023, a decrease of 27 basis points, or 7.4%.

The Company’s overall average interest rate spread decreased five basis points, or 1.8%, from 2.79% during the three months ended September 30, 2023 to 2.74% during the three months ended September 30, 2024.

The decrease was due to a 50 basis point increase in the weighted average rate paid on interest-bearing liabilities, partially offset by a 45 basis point increase in the weighted average yield earned on interest-earning assets.

In comparing the two periods, the yield on loans increased 52 basis points, the yield on investment securities increased 26 basis points and the yield on other interest-earning assets increased five basis points.

The rate paid on deposits increased 38 basis points, the rate paid on reverse repurchase agreements decreased 18 basis points, the rate paid on short-term borrowings and other interest-bearing liabilities decreased 23 basis points and the rate paid on subordinated debentures issued to capital trust increased four basis points.

Net interest income for the three months ended March 31, 2025 increased $4.5 million to $49.3 million, compared to $44.8 million for the three months ended March 31, 2024.

Net interest margin was 3.57% in the three months ended March 31, 2025, compared to 3.32% in the three months ended March 31, 2024, an increase of 25 basis points, or 7.5%.

The Company experienced increases in interest income on loans and investment securities, decreases in interest expense on deposits and subordinated debentures issued to capital trust, and increases in interest expense on short-term borrowings and securities sold under reverse repurchase agreements with customers.

The Company’s overall average interest rate spread increased 34 basis points, or 13.1%, from 2.66% during the three months ended March 31, 2024 to 3.00% during the three months ended March 31, 2025.

The increase was due to a 26 basis point decrease in the weighted average rate paid on interest-bearing liabilities and an eight basis point increase in the weighted average yield earned on interest-earning assets.

In comparing the two periods, the yield on loans increased 10 basis points, the yield on investment securities increased 33 basis points and the yield on other interest-earning assets decreased 99 basis points.

The rate paid on deposits decreased 32 basis points, the rate paid on reverse repurchase agreements increased three basis points, the rate paid on short-term borrowings and other interest-bearing liabilities decreased 47 basis points and the rate paid on subordinated debentures issued to capital trust decreased 107 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 and April 2023 and market rates moved higher more rapidly.

Overall competition for deposits has remained elevated in 2024 and market interest rates have been higher in 2024.

The Company’s overall average interest rate spread decreased 37 basis points, or 11.9%, from 3.09% during the nine months ended September 30, 2023 to 2.72% during the nine months ended September 30, 2024.

The decrease was due to an 80 basis point increase in the weighted average rate paid on interest-bearing liabilities, partially offset by a 44 basis point increase in the weighted average yield earned on interest-earning assets.

In comparing the two periods, the yield on loans increased 47 basis points, the yield on investment securities increased 21 basis points and the yield on other interest-earning assets increased 35 basis points.

The rate paid on deposits increased 75 basis points, the rate paid on reverse repurchase agreements increased 59 basis points, the rate paid on short-term borrowings and other interest-bearing liabilities increased 6 basis points and the rate paid on subordinated debentures issued to capital trust increased 46 basis points.

Overall competition for deposits remained elevated in 2024 and market interest rates were higher in 2024, until the federal funds rate was reduced in late 2024.

This resulted in lower market interest rates into the first quarter of 2025.

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.

2 unchanged sentences

Historical credit loss experience provides the basis for the estimation of expected credit losses.

Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as changes in 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.

Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as changes in underwriting standards, portfolio mix and 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.

2 unchanged sentences

Management determines which loans are non-homogeneous or 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 September 30, 2024, the Company recorded provision expense of $1.2 million on its portfolio of outstanding loans.

During the three months ended September 30, 2023, the Company did not record a provision expense on its portfolio of outstanding loans.

During the nine months ended September 30, 2024, the Company recorded provision expense of $1.7 million on its portfolio of outstanding loans, compared to $1.5 million in the nine months ended September 30, 2023.

Total net charge-offs were $1.5 million for the three months ended September 30, 2024, compared to net charge-offs of $99,000 in the three months ended September 30, 2023.

Total net charge-offs were $1.5 million for the nine months ended September 30, 2024, compared to net charge-offs of $227,000 in the nine months ended September 30, 2023.

The provision for losses on unfunded commitments for the three months ended September 30, 2024 was a negative provision of $63,000, compared to a negative provision of $1.2 million for the three months ended September 30, 2023.

The provision for losses on unfunded commitments for the nine months ended September 30, 2024 was a negative provision of $540,000, compared to a negative provision of $3.6 million for the nine months ended September 30, 2023.

General market conditions and unique circumstances related to specific industries and individual projects contribute to the determination of the level of provisions and charge-offs in each period.

The Bank’s allowance for credit losses as a percentage of total loans was 1.36% at September 30, 2024, compared to 1.39% at December 31, 2023.

Management considers the allowance for credit losses adequate to cover losses inherent in the Bank’s loan portfolio at September 30, 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 if 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.

During the three months ended March 31, 2025, the Company did not record a provision expense on its portfolio of outstanding loans.

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

Net charge-offs were $56,000 for the three months ended March 31, 2025, compared to net charge-offs of $83,000 in the three months ended March 31, 2024.

The provision for losses on unfunded commitments for the three months ended March 31, 2025 was a negative provision of $348,000, compared to a provision expense of $130,000 for the three months ended March 31, 2024.

General market conditions and unique circumstances related to specific industries and individual projects contribute to the determination of the levels of provisions and charge-offs in each period.

The Bank’s allowance for credit losses as a percentage of total loans was 1.36% at both March 31, 2025 and December 31, 2024.

Management considers the allowance for credit losses adequate to cover losses inherent in the Bank’s loan portfolio at March 31, 2025, based on recent reviews of the Bank’s loan portfolio and current economic conditions.

However, if challenging economic conditions persist or worsen, or if management’s assessment of the loan portfolio changes, additional provisions for credit loss may be required, which could adversely impact 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 September 30, 2024, non-performing assets were $7.7 million, a decrease of $4.1 million from $11.8 million at December 31, 2023.

Non-performing assets as a percentage of total assets were 0.13% at September 30, 2024, compared to 0.20% at December 31, 2023.

One other residential loan relationship, totaling $9.3 million, was transferred from non-performing loans to foreclosed assets held for sale in the three months ended June 30, 2024 and was sold for a gain during the three months ended September 30, 2024.

Another non-performing commercial real estate loan totaling $2.4 million was also resolved with no loss in the three months ended September 30, 2024.

Compared to December 31, 2023, non-performing loans decreased $4.3 million, to $7.5 million at September 30, 2024.

The majority of this decrease was in the non-performing commercial real estate loans category, which decreased $4.4 million from December 31, 2023.

Compared to December 31, 2023, foreclosed assets increased $240,000 to $263,000 at September 30, 2024.

At March 31, 2025, non-performing assets were $9.5 million, a decrease of $48,000 from $9.6 million at December 31, 2024.

Non-performing assets as a percentage of total assets were 0.16% at both March 31, 2025 and December 31, 2024.

Compared to December 31, 2024, non-performing loans decreased $91,000, to $3.5 million at March 31, 2025.

Compared to December 31, 2024, foreclosed assets increased $43,000 to $6.0 million at March 31, 2025.

Non-performing Loans .

Activity in the non-performing loans category during the nine months ended September 30, 2024 was as follows:

Activity in the non-performing loans category during the three months ended March 31, 2025 was as follows:

Repossessions

5 unchanged sentences

One- to four-family residential

Other residential

Other residential (multi-family)

Commercial real estate

1 unchanged sentence

Total non-performing loans

At September 30, 2024, the non-performing commercial real estate category included three loans, one of which was added during 2024.

The largest relationship in the category, which totaled $6.0 million, or 98.6% of the total category, was added to non-performing loans during the second quarter of 2023 and is collateralized by an office building in Missouri.

The balance of this relationship was reduced by a charge-off of $1.2 million during the three months ended September 30, 2024.

This asset was foreclosed upon in October 2024 and has been moved to foreclosed assets.

Another loan, totaling $2.4 million, which was a purchased participation loan originally obtained through an FDIC-assisted acquisition, was collateralized by a low-income assisted living facility in Wisconsin.

During the third quarter of 2024, the Company initiated foreclosure proceedings on this collateral through a sheriff’s sale.

The Company was outbid at the sale by another party and the loan was paid in full.

The non-performing land development category consisted of one loan added during the third quarter of 2024, which totaled $553,000 and is collateralized by improved commercial land in the Omaha, Nebraska area.

The non-performing one- to four-family residential category included four loans.

The largest relationship in the category totaled $525,000, or 88.6% of the category, and was added in the second quarter of 2024.

The non-performing consumer category included five loans.

The non-performing other residential category had one loan which was added in the first quarter of 2024 and was later transferred to foreclosed assets and subsequently sold.

At March 31, 2025, the non-performing one- to four-family residential category included nine loans, two of which were added during the three months ended March 31, 2025.

The largest relationship in the category totaled $884,000, or 28.7% of the category, and was added to non-performing loans in 2024.

It is collateralized by a single-family residential property in the Buffalo, N.Y.

The non-performing land development category consisted of one loan added in 2024, which totaled $368,000 and is collateralized by improved commercial land in the Omaha, Neb.

The non-performing consumer category included four loans, two of which were added in the three months ended March 31, 2025.

Potential Problem Loans.

Potential problem loans decreased $1.4 million, to $6.0 million at September 30, 2024 from $7.4 million at December 31, 2023.

The decrease during the period was primarily due to a $7.2 million loan in the other residential (multi-family) category that paid off during the period, partially offset by the addition of one loan relationship totaling $5.0 million ($4.4 million in the commercial real estate category and $598,000 in the consumer category) during the second quarter of 2024.

Potential problem loans increased $390,000, to $7.5 million at March 31, 2025 from $7.1 million at December 31, 2024.

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 category during the nine months ended September 30, 2024 was as follows:

Activity in the potential problem loans category during the three months ended March 31, 2025 was as follows:

Repossessions

5 unchanged sentences

One- to four-family residential

Other residential

Other residential (multi-family)

Commercial real estate

1 unchanged sentence

Total potential problem loans

At September 30, 2024, the commercial real estate category of potential problem loans included three loans, all of which are part of one relationship and were added in the second quarter of 2024.

At March 31, 2025, the commercial real estate category of potential problem loans included three loans, all of which are part of one relationship and were added to potential problem loans in 2024.

This relationship is collateralized by three nursing care facilities located in southwest Missouri.

The borrower’s business cash flow was negatively impacted by a labor shortage and a decrease in Medicaid reimbursement during 2022-2023.

Monthly payments were timely made prior to the transfer to this category and have continued to be paid.

The one- to four-family residential category of potential problem loans included seven loans, three of which were added during the third quarter of 2024 and two of which were added during the second quarter of 2024.

The largest relationship in this category totaled $154,000, or 23.0% of the total category.

The commercial business category of potential problem loans included two loans.

The largest relationship in this category totaled $191,000, or 99.0% of the total category, and was added during the second quarter of 2024.

The consumer category of potential problem loans included 13 loans, 12 of which were added at various times throughout 2024, including one home equity loan totaling $598,000 related to the nursing care facility relationship noted above.

The decrease in the other residential (multi-family) category of potential problem loans included the payment in full of one $7.2 million loan relationship that was collateralized by an apartment and retail project in Oklahoma.

The borrower’s business cash flow was negatively impacted by a reduction in labor participation and increased operating costs, as well as ongoing changes to the Missouri Medicaid reimbursement rate.

Monthly payments were made timely prior to the transfer to this category and have continued to be paid timely.

The one- to four-family residential category of potential problem loans included 12 loans, one of which was added to potential problem loans during the three months ended March 31, 2025 and one of which was transferred from the consumer category (the loan was drawn on a home equity line of credit) during the three months ended March 31, 2025.

The largest relationship in the one- to four-family category of potential problem loans, mentioned above as the loan transferred from the consumer category, totaled $966,000 and is collateralized by a single-family residential property in the Orlando.

The consumer category of potential problem loans included 16 loans, six of which were added at during the three months ended March 31, 2025.

The largest loan in the consumer category of potential problem loans is a home equity loan, totaling $748,000, related to the nursing care facility relationship, noted above.

Other Real Estate Owned and Repossessions.

All of the total $263,000 of other real estate owned and repossessions at September 30, 2024 were acquired through foreclosure.

Activity in foreclosed assets and repossessions during the nine months ended September 30, 2024 was as follows:

All of the $6.0 million of other real estate owned and repossessions at March 31, 2025 were acquired through foreclosure.

Activity in foreclosed assets and repossessions during the three months ended March 31, 2025 was as follows:

(In Thousands)

4 unchanged sentences

One- to four-family residential

Other residential

Other residential (multi-family)

Commercial real estate

1 unchanged sentence

Total foreclosed assets and repossessions

At September 30, 2024, the commercial real estate category of foreclosed assets consisted of one property which was transferred from non-performing loans during the three months ended September 30, 2024 and was sold in October 2024.

The other residential (multi-family) category of foreclosed assets previously included one property consisting of student housing in Texas, which was added during the three months ended June 30, 2024, as indicated above.

This property was sold in the three months ended September 30, 2024, with the Company realizing a gain of $300,000.

At March 31, 2025, the commercial real estate category of foreclosed assets consisted of two foreclosed properties, one of which was an office building in Clayton, Mo.

that was transferred from non-performing loans during the three months ended December 31, 2024.

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.

3 unchanged sentences

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” increased $890,000, from $8.3 million at December 31, 2023 to $9.2 million at September 30, 2024, primarily due to the addition of six loans totaling $4.3 million, partially offset by the payoff of a single $1.4 million loan and one loan totaling $993,000, that was downgraded to “Special Mention.” 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, which might warrant adverse classification at a future date.

In the nine months ended September 30, 2024, loans classified as “Special Mention” decreased $15.5 million, to $11.2 million, as two loan relationships were downgraded to “Substandard” and added to non-performing loans.

The largest relationship classified as “Special Mention” consisted of four commercial business loans totaling $7.0 million at September 30, 2024 (a decrease from $16.0 million at June 30, 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.

Since that time, the borrower has reduced debt by restructuring business operations, resulting in improved business cash flow and collateral margins.

Loans classified as “Watch” increased $10.7 million, from $15.9 million at December 31, 2024 to $26.6 million at March 31, 2025, primarily due to the addition of one loan totaling $11.0 million that is secured by a nursing care facility located in southwest Florida.

The loan was downgraded due to the borrower’s financial performance and delinquent taxes (which have since been paid).

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 positions of the assets do not deteriorate and expose the institution to elevated risk, which might warrant adverse classification at a future date.

In the three months ended March 31, 2025, loans classified as “Special Mention” decreased $26,000, to $1.4 million.

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 September 30, 2024, non-interest income decreased $860,000 to $7.0 million when compared to the three months ended September 30, 2023, primarily as a result of the following items:

Overdraft and insufficient funds fees :

Overdraft and insufficient funds fees decreased $710,000 compared to the same period in 2023.

This decrease was primarily due to the 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.

We expect this trend to continue in future periods.

Point-of-sale and ATM fees :

Point-of-sale and ATM fees decreased $257,000 compared to the same period in 2023 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.

Net gains on loan sales :

Net gains on loan sales increased $292,000 compared to the same period in 2023.

The increase was partially due to an increase in balance of fixed-rate single-family mortgage loans sold during the three months ended September 30, 2024 compared to the same period in 2023.

Fixed-rate single-family mortgage loans originated are generally subsequently sold in the secondary market.

The Company realized higher premiums on the sale of loans in the 2024 period compared to the 2023 period, as market interest rates were more stable in the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

For the nine months ended September 30, 2024, non-interest income increased $121,000 to $23.6 million when compared to the nine months ended September 30, 2023, primarily as a result of the following items:

Overdraft and insufficient funds fees :

Overdraft and insufficient funds fees decreased $2.1 million compared to the same period in 2023, for the same reason noted above.

Point-of-sale and ATM fees :

Point-of-sale and ATM fees decreased $966,000 compared to the same period in 2023, for the same reason noted above.

Net gains on loan sales :

Net gains on loan sales increased $998,000 compared to the same period in 2023, for the same reason noted above.

Other income :

Other income increased $1.9 million compared to the same period in 2023.

In the three months ended June 30, 2024, the Company recorded $2.7 million of other income, net of expenses and write-offs, related to the termination of the Master Agreement between the Company and a third-party software vendor for the conversion of the Company’s core banking platform.

This amount represented the elimination of certain deferred credits and other liabilities, along with the write-off of certain capitalized hardware, software and other assets, that previously had been recorded as part of the preparation to convert to the intended new core-banking platform.

For additional information, see Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Initiatives.”

For the three months ended March 31, 2025, non-interest income decreased $216,000, to $6.6 million, when compared to the three months ended March 31, 2024.

None of the components of non-interest income experienced increases or decreases exceeding $200,000 in comparing the two periods.

Non-interest Expense

For the three months ended September 30, 2024, non-interest expense decreased $1.8 million to $33.7 million when compared to the three months ended September 30, 2023, primarily as a result of the following items:

Legal, audit and other professional fees :

Legal, audit and other professional fees decreased $1.0 million from the same period in 2023, to $809,000.

In the three months ended September 30, 2024, the Company expensed a total of $39,000, compared to $903,000 expensed in the three months ended September 30, 2023, related to training and implementation costs for the intended core systems conversion and professional fees to consultants engaged to support the Company’s proposed transition of core and ancillary software and information technology systems, which was terminated in April 2024.

Expense on other real estate owned :

Expense on other real estate owned decreased $598,000 from the same period in 2023, to a gain of $536,000 in the three months ended September 30, 2024.

In the 2024 period, the Company recorded a gain on foreclosed asset sales of $459,000 compared to $22,000 in the same period in 2023.

Net occupancy expenses :

Net occupancy expenses increased $409,000 from the same period in 2023.

Various components of computer license and support expenses collectively increased by $369,000 in the 2024 three-month period compared to the same period in 2023.

For the nine months ended September 30, 2024, non-interest expense decreased $190,000 to $104.5 million when compared to the nine months ended September 30, 2023, primarily as a result of the following items:

Legal, audit and other professional fees :

Legal, audit and other professional fees decreased $1.1 million from the same period in 2023, to $4.4 million.

In the 2024 period, the Company expensed a total of $1.9 million, compared to $2.7 million expensed in the 2023 period, related to training and implementation costs for the intended core systems conversion and professional fees to consultants engaged to support the Company’s proposed transition of core and ancillary software and information technology systems, which was terminated in April 2024.

Expense on other real estate owned :

Expense on other real estate owned decreased $453,000 from the same period in 2023, to a gain of $190,000.

In the 2024 period, the Company recorded a gain on foreclosed loan sales of $491,000 compared to $41,000 in the 2023 period.

Net occupancy expenses :

Net occupancy expenses increased $960,000 from the same period in 2023, for the same reason noted above.

For the three months ended March 31, 2025, non-interest expense increased $400,000, to $34.8 million, when compared to the three months ended March 31, 2024, primarily as a result of the following items:

Net occupancy and equipment expenses :

Net occupancy and equipment expenses increased $694,000, or 8.9%, from the prior-year period.

This increase was primarily related to various components of computer license and support expenses related to upgrades of core systems capabilities and collectively increased by $322,000 in the three months ended March 31, 2025 compared to the same period in 2024.

In addition, parking lot maintenance expenses, primarily related to above normal snow removal activity, collectively increased by $232,000 in the three months ended March 31, 2025 compared to the same period in 2024.

Salaries and employee benefits :

Salaries and employee benefits increased $536,000, or 0.9%, from the same period in 2023.

Salaries and employee benefits increased $473,000, or 2.4%, in the three months ended March 31, 2025 compared to the prior-year period.

Much of this increase related to normal annual merit increases in various lending and operations areas.

The Company’s efficiency ratio for the three months ended September 30, 2024, was 61.34% compared to 65.13% for the same period in 2023.

The Company’s efficiency ratio for the nine months ended September 30, 2024, was 64.05% compared to 61.04% for the same period in 2023.

The Company’s ratio of non-interest expense to average assets was 2.27% and 2.38% for the three- and nine-months ended September 30, 2024, respectively, compared to 2.49% and 2.45% for the three- and nine-months ended September 30, 2023, respectively.

Average assets for the three months ended September 30, 2024, increased $249.6 million, or 4.4%, compared to the three months ended September 30, 2023, and average assets for the nine months ended September 30, 2024, increased $139.6 million, or 2.4%, compared to the nine months ended September 30, 2023.

The increases in average assets were primarily due to growth in net loans receivable and available-for-sale securities.

Legal, audit and other professional fees :

Legal, audit and other professional fees decreased $687,000 in the three months ended March 31, 2025 compared to the same period in 2024, to $1.0 million.

In the three months ended March 31, 2024, the Company expensed a total of $929,000 related to training and implementation costs for the then-anticipated core systems conversion and professional fees to consultants engaged to support the Company’s proposed related transition of core and ancillary software and information technology systems, with no such costs expensed in the three months ended March 31, 2025.

The Company’s efficiency ratio for the three months ended March 31, 2025, was 62.27% compared to 66.68% for the same period in 2024.

The Company’s ratio of non-interest expense to average assets was 2.34% for the three months ended March 31, 2025 compared to 2.39% for the three months ended March 31, 2024.

Average assets for the three months ended March 31, 2025, increased $200.2 million, or 3.5%, compared to the three months ended March 31, 2024, primarily due to growth in average balances of net loans receivable and investment securities.

Provision for Income Taxes

For the three months ended September 30, 2024 and 2023, the Company’s effective tax rate was 18.0% and 21.5%, respectively.

For the nine months ended September 30, 2024 and 2023, the Company’s effective tax rate was 18.5% and 20.8%, respectively.

These effective rates were at 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.

For the three months ended March 31, 2025 and 2024, the Company’s effective tax rate was 20.0% and 19.1%, respectively.

These effective rates were 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.

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 are analyzed.

The Company currently expects its effective tax rate (combined federal and state) will be approximately 18.0% to 20.0% in future periods, primarily due to additional investment tax credits being utilized beginning in 2024.

The Company currently expects its effective tax rate (combined federal and state) will be approximately 18.0% to 20.0% in future periods.

Average Balances, Interest Rates and Yields

The following tables present, 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 both in dollars and rates, and the net interest margin.

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 both in dollars and rates, and the net interest margin.

Average balances of loans receivable include the average balances of nonaccrual loans for each period.

1 unchanged sentence

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 $1.1 million and $1.5 million for the three months ended September 30, 2024 and 2023, respectively.

Net loan fees included in interest income were $3.4 million and $4.4 million for the nine months ended September 30, 2024 and 2023, respectively.

Net loan fees included in interest income were $970,000 and $1.2 million for the three months ended March 31, 2025 and 2024, respectively.

Tax-exempt income was not calculated on a tax equivalent basis.

The tables do not reflect any effect of income taxes.

September 30,

Three Months Ended

September 30, 2024

September 30, 2023

(Dollars in Thousands)

Interest-earning assets:

Loans receivable:

One- to four-family residential

Other residential

Commercial real estate

Commercial business

Industrial revenue bonds(1)

Total loans receivable

Investment securities(1)

Interest-earning deposits in other banks

Total interest-earning assets

Non-interest-earning assets:

Cash and cash equivalents

Other non-earning assets

Interest-bearing liabilities:

Interest-bearing demand and savings

Time deposits

Brokered deposits

Total deposits

Securities sold under reverse repurchase agreements

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

Subordinated debentures issued to capital trusts

Subordinated notes

Total interest-bearing liabilities

Non-interest-bearing liabilities:

Demand deposits

Other liabilities

Total liabilities

Stockholders’ equity

Total liabilities and stockholders’ equity

Net interest income:

Interest rate spread

Net interest margin*

Average interest-earning assets to average interest-bearing liabilities

* Defined as the Company’s net interest income divided by total average interest-earning assets.

Of the total average balances of investment securities, average tax-exempt investment securities were $57.0 million and $56.1 million for the three months ended September 30, 2024 and 2023, respectively.

In addition, average tax-exempt loans and industrial revenue bonds were $10.4 million and $13.7 million for the three months ended September 30, 2024 and 2023, respectively.

Interest income on tax-exempt assets included in this table was $463,000 and $608,000 for the three months ended September 30, 2024 and 2023, respectively.

Interest income net of disallowed interest expense related to tax-exempt assets was $354,000 and $503,000 for the three months ended September 30, 2024 and 2023, respectively.

September 30,

Nine Months Ended

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

(Dollars in Thousands)

2 unchanged sentences

One- to four-family residential

Other residential

Other residential (multi-family)

Commercial real estate

Commercial business(1)

Industrial revenue bonds(1)

Total loans receivable

26 unchanged sentences

* Defined as the Company’s net interest income divided by total average interest-earning assets.

Of the total average balances of investment securities, average tax-exempt investment securities were $56.9 million and $57.0 million for the nine months ended September 30, 2024 and 2023, respectively.

In addition, average tax-exempt loans and industrial revenue bonds were $10.8 million and $14.2 million for the nine months ended September 30, 2024 and 2023, respectively.

Interest income on tax-exempt assets included in this table was $1.6 million and $1.9 million for the nine months ended September 30, 2024 and 2023, respectively.

Interest income net of disallowed interest expense related to tax-exempt assets was $1.3 million and $1.6 million for the nine months ended September 30, 2024 and 2023, respectively.

Of the total average balances of investment securities, average tax-exempt investment securities were $55.0 million and $57.6 million for the three months ended March 31, 2025 and 2024, respectively.

In addition, average tax-exempt loans and industrial revenue bonds were $10.0 million and $11.4 million for the three months ended March 31, 2025 and 2024, respectively.

Interest income on tax-exempt assets included in this table was $547,000 and $568,000 for the three months ended March 31, 2025 and 2024, respectively.

Interest income net of disallowed interest expense related to tax-exempt assets was $458,000 and $460,000 for the three months ended March 31, 2025 and 2024, respectively.

Rate/Volume Analysis

The following tables present the dollar amounts of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities for the periods shown.

The following table presents the dollar amounts 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).

1 unchanged sentence

Tax-exempt income was not calculated on a tax equivalent basis.

Three Months Ended September 30,

Increase (Decrease)

(Dollars in Thousands)

Interest-earning assets:

Loans receivable

Investment securities

Interest-earning deposits in other banks

Total interest-earning assets

Interest-bearing liabilities:

Demand deposits

Time deposits

Brokered deposits

Total deposits

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-bearing liabilities

Net interest income

Nine Months Ended September 30,

Three Months Ended March 31,

Increase (Decrease)

20 unchanged sentences

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 September 30, 2024, the Company had commitments of approximately $110.2 million to fund loan originations, $976.9 million of unused lines of credit and unadvanced loans, and $13.6 million of outstanding letters of credit.

At March 31, 2025, the Company had commitments of approximately $56.3 million to fund loan originations, $1.15 billion of unused lines of credit and unadvanced loans, and $17.6 million of outstanding letters of credit.

Loan commitments and the unfunded portion of loans at the dates indicated were as follows (In Thousands):

September 30,

Closed non-construction loans with unused available lines

12 unchanged sentences

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 had been increasing the interest rates paid on many deposit products.

In September 2024, the Company decreased the interest rates it pays on certain 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 September 30, 2024 and December 31, 2023, the Company had the following available secured lines and on-balance sheet liquidity:

September 30, 2024

December 31, 2023

In mid-2022, the Company steadily began increasing the interest rates it paid on many deposit products until September 2024 when the Company decreased the interest rates it paid on certain deposit products.

The Company has also utilized both fixed-rate and floating-rate brokered deposits of varying terms, as well as overnight FHLBank borrowings.

At March 31, 2025 and December 31, 2024, the Company had the following available secured lines and on-balance sheet liquidity:

Federal Home Loan Bank line

11 unchanged sentences

Unpledged securities – Held-to-maturity

191.7 million

Statements of Cash Flows.

During the nine months ended September 30, 2024 and 2023, the Company had positive cash flows from operating activities and financing activities.

The Company had negative cash flows from investing activities during the nine months ended September 30, 2024 and 2023.

The Company had positive cash flows from operating activities during the three months ended March 31, 2025 and negative cash flows from operating activities during the three months ended March 31, 2024.

During the three months ended March 31, 2025 and 2024, the Company had positive cash flows from investing activities and negative cash flows from financing activities.

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 provided cash of $34.3 million and $66.9 million during the nine months ended September 30, 2024 and 2023, respectively.

During the nine months ended September 30, 2024 and 2023, investing activities used cash of $191.5 million and $65.9 million, respectively.

Investing activities in the 2024 and 2023 periods used cash primarily due to net originations of loans, purchases of available-for-sale securities and investments in tax credit partnerships, partially offset by the payments received on investment securities.

Operating activities provided cash of $15.0 million and used cash of $26.9 million during the three months ended March 31, 2025 and 2024, respectively.

During the three months ended March 31, 2025 and 2024, investing activities provided cash of $9.4 million and $13.5 million, respectively.

Investing activities in the 2025 and 2024 periods provided cash primarily due to principal payments received on investment securities.

Changes in cash flows from financing activities during the periods covered by the Statements of Cash Flows were due primarily 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 and repurchases of the Company’s common stock.

During the nine months ended September 30, 2024 and 2023, financing activities provided cash of $154.3 million and $12.8 million, respectively.

In the 2024 period, financing activities provided cash primarily as a result of increases in FRB borrowings and short-term borrowings, partially offset by repurchases of the Company’s common stock, dividends paid to stockholders, and net decreases in time deposits and checking and savings deposits.

In the 2023 period, financing activities provided cash primarily as a result of net increases in time deposits and checking and savings deposits, partially offset by decreases in short-term borrowings, repurchases of the Company’s common stock and dividends paid to stockholders.

During the three months ended March 31, 2025 and 2024, financing activities used cash of $3.0 million and $26.5 million, respectively.

In the 2024 period, financing activities used cash primarily as a result of net repayments of short-term borrowings, repurchases of the Company’s common stock and dividends paid to stockholders, partially offset by increases in FRB borrowings and net increases in checking and savings deposits.

In the 2025 period, financing activities used cash primarily as a result of repayments of FRB borrowings, repurchases of the Company’s common stock and dividends paid to stockholders, partially offset by net increases in time deposits and checking and savings deposits and net increases in short-term borrowings.

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 September 30, 2024, the Company’s total stockholders’ equity was $612.1 million, or 10.1% of total assets, equivalent to a book value of $52.40 per common share.

At March 31, 2025, the Company’s total stockholders’ equity was $613.3 million, or 10.2% of total assets, equivalent to a book value of $53.03 per common share.

As of December 31, 2024, total stockholders’ equity was $599.6 million, or 10.0% of total assets, equivalent to a book value of $51.14 per common share.

At September 30, 2024, the Company’s tangible common equity to tangible assets ratio was 10.0%, compared to 9.7% at December 31, 2023 (See Non-GAAP Financial Measures below).

Included in stockholders’ equity at September 30, 2024 and December 31, 2023, were unrealized losses (net of taxes) on the Company’s available-for-sale investment securities totaling $29.1 million and $40.5 million, respectively.

This change in net unrealized losses during the nine months ended September 30, 2024, primarily resulted from decreasing intermediate-term market interest rates which generally increased the fair value of investment securities.

In addition, included in stockholders’ equity at September 30, 2024, were realized gains (net of taxes) on the Company’s terminated cash flow hedge (interest rate swap), totaling $6.4 million.

At March 31, 2025, the Company’s tangible common equity to tangible assets ratio was 10.1%, compared to 9.9% at December 31, 2024 (See Non-GAAP Financial Measures below).

Included in stockholders’ equity at March 31, 2025 and December 31, 2024, were unrealized losses (net of taxes) on the Company’s available-for-sale investment securities totaling $38.5 million and $46.1 million, respectively.

This change in net unrealized losses primarily resulted from decreased intermediate-term market interest rates in the three months ended March 31, 2025, which generally increased the fair value of the investment securities.

In addition, included in stockholders’ equity at March 31, 2025, were realized gains (net of taxes) on the Company’s terminated cash flow hedge (interest rate swap), totaling $3.3 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 September 30, 2024, the remaining pre-tax amount to be recorded in interest income was $8.3 million.

At March 31, 2025, the remaining pre-tax amount to be recorded in interest income was $4.2 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 September 30, 2024, was an unrealized loss (net of taxes) on the Company’s two outstanding cash flow hedges (interest rate swaps) totaling $6.4 million.

Also included in stockholders’ equity at March 31, 2025, was an unrealized loss (net of taxes) on the Company’s two outstanding cash flow hedges (interest rate swaps) totaling $8.6 million.

Increases in market interest rates since the inception of these hedges have caused their fair values to decrease.

The unrealized loss position on these swaps improved substantially in the three months ended September 30, 2024 due to a decline in market interest rates in that period.

As noted above, total stockholders’ equity increased $40.3 million, from $571.8 million at December 31, 2023 to $612.1 million at September 30, 2024.

Stockholders’ equity increased due to net income of $46.9 million in the nine months ended September 30, 2024, a $6.9 million increase in stockholders’ equity during that period due to stock option exercises and a decrease in accumulated other comprehensive loss of $13.1 million during that period primarily due to increases in the fair value of cash flow hedges and available-for-sale investment securities resulting from decreases in market interest rates.

Partially offsetting these changes were repurchases of

the Company’s common stock during the nine months ended September 30, 2024 totaling $12.5 million and dividends declared on common stock during that period of $14.0 million.

The Company also had unrealized losses on its portfolio of held-to-maturity investment securities, which totaled $19.2 million at September 30, 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 $14.6 million at September 30, 2024.

This amount was equal to 2.4% of total stockholders’ equity of $612.1 million at September 30, 2024.

The unrealized loss position on these swaps improved substantially in the three months ended March 31, 2025, due to a decline in market interest rates in that period.

As noted above, total stockholders’ equity increased $13.7 million, from $599.6 million at December 31, 2024 to $613.3 million at March 31, 2025.

Total stockholders’ equity increased due to net income of $17.2 million in the three months ended March 31, 2025, a $1.2 million increase in stockholders’ equity during that period due to stock option exercises and a decrease in accumulated other comprehensive loss of $10.2 million during that period primarily due to increases in the fair value of cash flow hedges and available-for-sale investment securities mainly because of a decrease in market interest rates.

Partially offsetting these changes were repurchases of the Company’s common stock during the three months ended March 31, 2025 totaling $10.2 million and dividends declared on common stock during that period of $4.6 million.

The Company had unrealized losses on its portfolio of held-to-maturity investment securities, which totaled $20.6 million and $24.7 million at March 31, 2025 and December 31, 2024 respectively, that were not included in its total capital balance.

If held-to-maturity unrealized losses were included in capital (net of taxes), at March 31, 2025, they would have decreased total stockholder’s equity at that date by $15.6 million.

This amount was equal to 2.5% of total stockholders’ equity of $613.3 million at March 31, 2025, compared to 3.1% of total stockholders’ equity of $599.6 million at December 31, 2024.

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%.

Under current guidelines, 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 September 30, 2024, the Bank’s common equity Tier 1 capital ratio was 12.9%, its Tier 1 risk-based capital ratio was 12.9%, its total risk-based capital ratio was 14.2% and its Tier 1 leverage ratio was 11.2%.

As a result, as of September 30, 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 risk-based capital ratio was 13.1%, its total risk-based capital ratio was 14.3% and its Tier 1 leverage ratio was 11.6%.

On March 31, 2025, the Bank’s common equity Tier 1 capital ratio was 12.7%, its Tier 1 capital ratio was 12.7%, its total capital ratio was 13.9% and its Tier 1 leverage ratio was 11.1%.

As a result, as of March 31, 2025, the Bank was well capitalized, with capital ratios in excess of those required to qualify as such.

On December 31, 2024, the Bank’s common equity Tier 1 capital ratio was 12.6%, its Tier 1 capital ratio was 12.6%, its total capital ratio was 13.9% and its Tier 1 leverage ratio was 11.0%.

As a result, as of December 31, 2024, 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 September 30, 2024, the Company’s common equity Tier 1 capital ratio was 12.3%, its Tier 1 risk-based capital ratio was 12.8%, its total risk-based capital ratio was 15.5% 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 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 March 31, 2025, the Company’s common equity Tier 1 capital ratio was 12.4%, its Tier 1 capital ratio was 12.9%, its total capital ratio was 15.6% and its Tier 1 leverage ratio was 11.3%.

On December 31, 2024, the Company’s common equity Tier 1 capital ratio was 12.3%, its Tier 1 capital ratio was 12.8%, its total capital ratio was 15.4% and its Tier 1 leverage ratio was 11.2%.

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 September 30, 2024 and December 31, 2023, both the Company and the Bank had a capital conservation buffer that exceeded the required minimum levels.

During the three months ended September 30, 2024, the Company declared a common stock cash dividend of $0.40 per share, or 28% 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 June 2024).

During the three months ended September 30, 2023, the Company declared a common stock cash dividend of $0.40 per share, or 30% 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 June 2023).

During the nine months ended September 30, 2024, the Company declared common stock cash dividends totaling $1.20 per share, or 30% of net income per diluted common share for that nine month period, and paid common stock cash dividends of $1.20 per share.

During the nine months ended September 30, 2023, the Company declared common stock cash dividends totaling $1.20 per share, or 27% of net income per diluted common share for that nine month period, and paid common stock cash dividends of $1.20 per share.

At March 31, 2025 and December 31, 2024, both the Company and the Bank had a capital conservation buffer that exceeded the required minimum levels.

The total redemption price will be 100% of the aggregate principal amount of the Subordinated Notes, plus accrued and unpaid interest to, but excluding, the Redemption Date.

The Company will utilize excess cash on hand for the redemption payment.

The annual combined interest expense and amortization of deferred issuance costs on the Subordinated Notes has been approximately $4.4 million.

During the three months ended March 31, 2025, the Company declared a common stock cash dividend of $0.40 per share, or 27% 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 2024).

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).

The Board of Directors meets regularly to consider the level and timing of dividend payments.

The $0.40 per share dividend declared but unpaid as of September 30, 2024, was paid to stockholders in October 2024.

The $0.40 per share dividend declared but unpaid as of March 31, 2025, was paid to stockholders in April 2025.

Common Stock Repurchases and Issuances .

The Company has been in various buy-back programs since May 1990.

During the three months ended September 30, 2024, the Company repurchased 2,971 shares of its common stock at an average price of $53.04 per share and issued 101,333 shares of common stock at an average price of $50.07 per share to cover stock option exercises.

During the three months ended September 30, 2023, the Company repurchased 106,801 shares of its common stock at an average price of $50.52 per share and issued 1,640 shares of common stock at an average price of $33.71 per share to cover stock option exercises.

During the nine months ended September 30, 2024, the Company repurchased 239,933 shares of its common stock at an average price of $51.69 per share and issued 116,471 shares of common stock at an average price of $48.39 per share to cover stock option exercises.

During the nine months ended September 30, 2023, the Company repurchased 376,122 shares of its common stock at an average price of $51.97 per share and issued 9,195 shares of common stock at an average price of $33.78 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 September 30, 2024, approximately 488,000 shares remained available in our stock repurchase authorization.

During the three months ended March 31, 2025, the Company repurchased 173,344 shares of its common stock at an average price of $58.38 per share and issued 15,007 shares of common stock at an average price of $48.22 per share to cover stock option exercises.

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.

In November 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, 2025, approximately 270,000 shares remained available in this stock repurchase authorization.

In April 2025, the Company’s Board of Directors approved a new stock repurchase program, which will succeed the existing repurchase program (authorized in November 2022) following the repurchase of the existing program’s remaining available shares.

The new stock repurchase program authorizes the purchase, from time to time in open market or privately negotiated transactions, of up to one million additional shares of the Company’s common stock.

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 stockholder value.

2 unchanged sentences

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.

This document contains certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States (“GAAP”).

This non-GAAP financial information includes the tangible common equity to tangible assets ratio.

In calculating the ratio of tangible common equity to tangible assets, we subtract period-end intangible assets from common equity and from total assets.

6 unchanged sentences

Ratio of Tangible Common Equity to Tangible Assets

September 30, 2024

December 31, 2023

(Dollars in Thousands)

7 unchanged sentences

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 2. Management’s Discussion and Analysis