SOUTHERN MISSOURI BANCORP, INC.

December 31, 2024

Cumulative Amount of Fair Value

Hedging Adj Included in

(dollars in thousands)

Hedged Assets

Carrying Amount of Hedged assets

1-4 Family interest rate swaps

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2024

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-23406


Southern Missouri Bancorp, Inc.
(Exact name of registrant as specified in its charter)

Missouri		43-1665523
(State or jurisdiction of incorporation)		(IRS employer id. no.)

2991 Oak Grove Road Poplar Bluff, MO		63901
(Address of principal executive offices)		(Zip code)

(573) 778-1800

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common	SMBC	NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


Yes	☒	No	☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data file required to be submitted pursuant to Rule 405 of regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).


Yes	☒	No	☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):


Large accelerated filer	☐	Accelerated filer	☒	Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12 b-2 of the Exchange Act)


Yes	☐	No	☒

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date:


Class		Outstanding at February 7, 2025
Common Stock, Par Value $.01		11,277,167 shares

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SOUTHERN MISSOURI BANCORP, INC.

FORM 10-Q

INDEX


PART I.	Financial Information	PAGE NO.

Item 1.	Condensed Consolidated Financial Statements	3

	- Condensed Consolidated Balance Sheets	3

	- Condensed Consolidated Statements of Income	4

	- Condensed Consolidated Statements of Comprehensive Income	5

	- Condensed Consolidated Statements of Stockholders’ Equity	6

	- Condensed Consolidated Statements of Cash Flows	7

	- Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	45

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	62

Item 4.	Controls and Procedures	65

PART II.	OTHER INFORMATION	66

Item 1.	Legal Proceedings	66

Item 1a.	Risk Factors	66

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66

Item 3.	Defaults upon Senior Securities	66

Item 4.	Mine Safety Disclosures	66

Item 5.	Other Information	66

Item 6.	Exhibits	67

	- Signature Page	69

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PART I: Item 1: Condensed Consolidated Financial Statements

SOUTHERN MISSOURI BANCORP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2024 AND JUNE 30, 2024


	December 31, 2024		June 30, 2024
(dollars in thousands)	(unaudited)

Assets
Cash and cash equivalents	$	145,834	$	60,904
Interest-bearing time deposits		244		491
Available for sale securities		468,060		427,903
Stock in FHLB of Des Moines		9,003		8,713
Stock in Federal Reserve Bank of St. Louis		9,096		9,089
Loans receivable, net of ACL of $54,740 and $52,516 at December 31, 2024 and June 30, 2024, respectively		3,972,239		3,797,287
Accrued interest receivable		28,080		23,826
Premises and equipment, net		96,418		95,952
Bank owned life insurance – cash surrender value		74,643		73,601
Goodwill		50,727		50,727
Other intangible assets, net		24,672		26,505
Prepaid expenses and other assets		28,658		29,318
Total assets	$	4,907,674	$	4,604,316

Liabilities and Stockholders' Equity
Deposits	$	4,210,627	$	3,943,059
Securities sold under agreements to repurchase		15,000		9,398
Advances from FHLB		107,070		102,050
Accounts payable and other liabilities		28,502		25,037
Accrued interest payable		10,922		12,868
Subordinated debt		23,182		23,156
Total liabilities		4,395,303		4,115,568

Commitments and contingencies

Common stock, $.01 par value; 25,000,000 shares authorized; 11,958,587 and 11,959,157 shares issued at December 31, 2024 and June 30, 2024, respectively		120		120
Additional paid-in capital		220,358		219,680
Retained earnings		333,297		311,376
Treasury stock of 681,420 and 681,420 shares at December 31, 2024 and June 30, 2024, respectively, at cost		(24,973)		(24,973)
Accumulated other comprehensive loss		(16,431)		(17,455)
Total stockholders' equity		512,371		488,748
Total liabilities and stockholders' equity	$	4,907,674	$	4,604,316

See Notes to Condensed Consolidated Financial Statements

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SOUTHERN MISSOURI BANCORP, INC

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE- AND SIX- MONTH PERIODS ENDED DECEMBER 31, 2024 AND 2023 (Unaudited)


	Three months ended				Six months ended
	December 31,				December 31,
(dollars in thousands except per share data)	2024		2023		2024		2023

Interest Income
Loans	$	63,082	$	55,137	$	124,835	$	108,111
Investment securities		1,483		1,776		3,105		3,489
Mortgage-backed securities		4,075		3,485		8,001		6,857
Other interest-earning assets		784		1,178		862		1,227
Total interest income		69,424		61,576		136,803		119,684
Interest Expense
Deposits		29,538		25,444		58,334		45,812
Securities sold under agreements to repurchase		226		127		386		199
Advances from FHLB		1,099		1,079		2,425		2,918
Subordinated debt		418		440		853		874
Total interest expense		31,281		27,090		61,998		49,803
Net Interest Income		38,143		34,486		74,805		69,881
Provision for Credit Losses		932		900		3,091		1,800
Net Interest Income After Provision for Credit Losses		37,211		33,586		71,714		68,081
Noninterest Income
Deposit account charges and related fees		2,237		1,784		4,421		3,574
Bank card interchange income		1,301		1,329		2,801		2,673
Loan late charges		—		146		—		259
Loan servicing fees		232		285		518		515
Other loan fees		944		644		2,007		1,001
Net realized gains on sale of loans		133		304		494		517
Net realized losses on sale of AFS securities		—		(682)		—		(682)
Earnings on bank owned life insurance		522		472		1,039		931
Insurance brokerage commissions		300		310		587		573
Wealth management fees		843		668		1,573		1,463
Other income		353		380		599		668
Total noninterest income		6,865		5,640		14,039		11,492
Noninterest Expense
Compensation and benefits		13,737		12,961		28,134		25,610
Occupancy and equipment, net		3,585		3,478		7,274		6,992
Data processing expense		2,224		2,382		4,395		4,690
Telecommunications expense		354		465		782		996
Deposit insurance premiums		588		598		1,060		1,147
Legal and professional fees		619		387		1,827		803
Advertising		442		392		988		857
Postage and office supplies		283		283		589		586
Intangibles amortization		897		1,018		1,794		2,035
Foreclosed property expenses/losses		73		44		85		36
Other operating expense		2,074		1,852		3,790		3,816
Total noninterest expense		24,876		23,860		50,718		47,568
Income Before Income Taxes		19,200		15,366		35,035		32,005
Total Income Taxes		4,547		3,173		7,925		6,660
Net Income	$	14,653	$	12,193	$	27,110	$	25,345

Basic earnings per share	$	1.30	$	1.08	$	2.40	$	2.24
Diluted earnings per share	$	1.30	$	1.07	$	2.40	$	2.23
Dividends paid per share	$	0.23	$	0.21	$	0.46	$	0.42

See Notes to Condensed Consolidated Financial Statements

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SOUTHERN MISSOURI BANCORP, INC

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE- AND SIX- MONTH PERIODS ENDED DECEMBER 31, 2024 AND 2023 (Unaudited)


	Three months ended				Six months ended
	December 31,				December 31,
(dollars in thousands)	2024		2023		2024		2023

Net Income	$	14,653	$	12,193	$	27,110	$	25,345
Other comprehensive income (loss):
Unrealized gains (losses) on securities available-for-sale		(7,519)		7,470		1,313		3,324
Less: reclassification adjustment for realized losses included in net income		—		(682)		—		(682)
Tax (expense) benefit		1,654		(1,794)		(289)		(881)
Total other comprehensive income (loss)		(5,865)		6,358		1,024		3,125
Comprehensive Income	$	8,788	$	18,551	$	28,134	$	28,470

See Notes to Condensed Consolidated Financial Statements

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SOUTHERN MISSOURI BANCORP, INC

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE- AND SIX- MONTH PERIODS ENDED DECEMBER 31, 2024 AND 2023 (Unaudited)


	For the three- and six- month periods ended December 31, 2024
			Additional						Accumulated Other		Total
	Common		Paid-In		Retained		Treasury			Comprehensive		Stockholders'
(dollars in thousands)	Stock		Capital		Earnings		Stock		Loss		Equity

BALANCE AS OF SEPTEMBER 30, 2024	$	120	$	219,808	$	321,240	$	(24,973)	$	(10,566)	$	505,629

Net Income						14,653						14,653
Change in unrealized loss on available for sale securities										(5,865)		(5,865)
Dividends paid on common stock ($.23 per share)						(2,596)						(2,596)
Stock option expense				90								90
Stock grant expense				460								460
BALANCE AS OF DECEMBER 31, 2024	$	120	$	220,358	$	333,297	$	(24,973)	$	(16,431)	$	512,371

BALANCE AS OF JUNE 30, 2024	$	120	$	219,680	$	311,376	$	(24,973)	$	(17,455)	$	488,748

Net Income						27,110						27,110
Change in unrealized loss on available for sale securities										1,024		1,024
Dividends paid on common stock ($.46 per share)						(5,189)						(5,189)
Stock option expense				179								179
Stock grant expense				499								499
BALANCE AS OF DECEMBER 31, 2024	$	120	$	220,358	$	333,297	$	(24,973)	$	(16,431)	$	512,371


	For the three- and six- month periods ended December 31, 2023
			Additional						Accumulated Other		Total
	Common		Paid-In		Retained		Treasury		Comprehensive		Stockholders'
(dollars in thousands)	Stock		Capital		Earnings		Stock		Loss		Equity

BALANCE AS OF SEPTEMBER 30, 2023	$	119	$	218,593	$	281,491	$	(21,116)	$	(25,158)	$	453,929

Net Income						12,193						12,193
Change in unrealized loss on available for sale securities										6,358		6,358
Dividends paid on common stock ($.21 per share)						(2,380)						(2,380)
Stock option expense				82								82
BALANCE AS OF DECEMBER 31, 2023	$	119	$	218,675	$	291,304	$	(21,116)	$	(18,800)	$	470,182

BALANCE AS OF JUNE 30, 2023	$	119	$	218,260	$	270,720	$	(21,116)	$	(21,925)	$	446,058

Net Income						25,345						25,345
Change in unrealized loss on available for sale securities										3,125		3,125
Dividends paid on common stock ($.42 per share)						(4,761)						(4,761)
Stock option expense				160								160
Stock grant expense				39								39
Stock options exercised				216								216
BALANCE AS OF DECEMBER 31, 2023	$	119	$	218,675	$	291,304	$	(21,116)	$	(18,800)	$	470,182

See Notes to Condensed Consolidated Financial Statements

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SOUTHERN MISSOURI BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX- MONTH PERIODS ENDED DECEMBER 31, 2024 AND 2023 (Unaudited)


	Six months ended
	December 31,
(dollars in thousands)	2024		2023

Cash Flows From Operating Activities:
Net Income	$	27,110	$	25,345
Items not requiring (providing) cash:
Depreciation		3,222		2,925
Loss on disposal of fixed assets		48		2
Stock option and stock grant expense		678		415
(Gain) loss on sale/write-down of foreclosed property		(19)		28
Amortization of intangible assets		1,794		2,035
Accretion of purchase accounting adjustments		(1,887)		(3,074)
Increase in cash surrender value of bank owned life insurance (BOLI)		(1,039)		(931)
Provision for credit losses		3,091		1,800
Loss realized on sale of AFS securities		—		682
Net accretion of premiums and discounts on securities		(844)		(237)
Originations of loans held for sale		(7,977)		(11,967)
Proceeds from sales of loans held for sale		9,089		11,653
Gain on sales of loans held for sale		(494)		(517)
Changes in:
Accrued interest receivable		(4,254)		(5,620)
Prepaid expenses and other assets		968		(1,099)
Accounts payable and other liabilities		2,573		3,700
Accrued interest payable		(1,929)		6,015
Net cash provided by operating activities		30,130		31,155
Cash Flows From Investing Activities:
Net increase in loans		(176,829)		(111,447)
Net change in interest-bearing deposits		248		496
Proceeds from maturities of available for sale securities		33,844		18,852
Proceeds from sales of available for sale securities		—		11,750
Net (purchases) redemptions of Federal Home Loan Bank stock		(290)		2,582
Purchases of Federal Reserve Bank of St. Louis stock		(7)		(4)
Purchases of available-for-sale securities		(71,844)		(26,893)
Purchases of long-term investment		(50)		(70)
Purchases of premises and equipment		(3,415)		(2,811)
Investments in state & federal tax credits		(1,934)		(6,275)
Proceeds from sale of foreclosed assets		2,115		961
Net cash used in investing activities		(218,162)		(112,859)
Cash Flows From Financing Activities:
Net increase (decrease) in demand deposits and savings accounts		41,536		(50,970)
Net increase in certificates of deposits		226,040		320,334
Net increase in securities sold under agreements to repurchase		5,602		—
Proceeds from Federal Home Loan Bank advances		260,000		271,000
Repayments of Federal Home Loan Bank advances		(255,027)		(291,526)
Dividends paid on common stock		(5,189)		(4,760)
Net cash provided by financing activities		272,962		244,078
Increase in cash and cash equivalents		84,930		162,374
Cash and cash equivalents at beginning of period		60,904		53,979
Cash and cash equivalents at end of period	$	145,834	$	216,353
Supplemental disclosures of cash flow information:
Noncash investing and financing activities:
Conversion of loans to foreclosed real estate	$	625	$	1,742
Conversion of loans to repossessed assets		44		137
Right of use assets obtained in exchange for lease obligations: Operating Leases		—		2,238

Cash paid during the period for:
Interest (net of interest credited)	$	4,240	$	4,387
Income taxes		4,038		1,032

See Notes to Condensed Consolidated Financial Statements

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SOUTHERN MISSOURI BANCORP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1: Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Securities and Exchange Commission (“SEC”) Regulation SX. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all material adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. The condensed consolidated balance sheet of the Company as of June 30, 2024, has been derived from the audited consolidated balance sheet of the Company as of that date. Operating results for the three- and six- month periods ended December 31, 2024, are not necessarily indicative of the results that may be expected for the entire fiscal year. For additional information, refer to the audited consolidated financial statements included in the Company’s June 30, 2024, Form 10-K, which was filed with the SEC.

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Certain amounts reported in prior periods have been reclassified to conform to the December 31, 2024 presentation. These reclassifications did not materially impact the Company’s consolidated financial statements.

Correction of an Immaterial Error in Prior Period Financial Statements:

Certain prior period amounts in the Consolidated Balance Sheets, Consolidated Statements of Income and Note 12: Fair Value Measurements have been corrected as discussed below. No other financial statements or notes were impacted by these corrections.

The Company has corrected its Consolidated Balance Sheet at June 30, 2024, the Consolidated Statement of Income for the three- and six- month periods ended December 31, 2023, and the Fair Value of Financial Instruments table at June 30, 2024 in Note 12: Fair Value Measurements, within this Quarterly Report on Form 10-Q for an error in classification between deposits and securities sold under agreements to repurchase.

The balance of securities sold under agreements to repurchase is now being presented as a separate line item on the Consolidated Balance Sheet and Fair Value of Financial Instruments table included in the notes to the financial statements. The Company had previously included the agreements with deposits. The interest expense associated with the securities is now being presented as a separate line on the Consolidated Statements of Income. Previously, the Company included this in deposits interest expense.

The Company assessed the materiality of this change in presentation on prior period consolidated financial statements in accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” (ASC Topic 250, Accounting Changes and Error Corrections). Based on this assessment, the Company concluded that these error corrections in its Consolidated Balance Sheets, Consolidated Statements of Income, and Notes to the Financial Statements are not material to any previously presented financial statements. The corrections had no impact on the Consolidated Statements of Comprehensive Income, Consolidated Statements of Stockholders’ Equity, or Consolidated Statement of Cash Flow, for any previously presented interim or annual financial statements. Accordingly, the Company corrected the previously reported immaterial errors for the year ended June 30, 2024 and the three- and six- month periods ended December 31, 2023 in this Quarterly Report on Form 10-Q.

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	Consolidated Balance Sheet
	June 30, 2024
	As Previously		Net
(dollars in thousands)	Presented		Change		As Corrected

Liabilities and Stockholders' Equity:
Deposits	$	3,952,457	$	(9,398)	$	3,943,059
Securities sold under agreements to repurchase		-		9,398		9,398


	Consolidated Statement of Income
	For the three- month period ended December 31, 2023
	As Previously		Net
(dollars in thousands)	Presented		Change		As Corrected

Interest expense:
Deposits	$	25,571	$	(127)	$	25,444
Securities sold under agreements to repurchase		-		127		127

	Consolidated Statement of Income
	For the six- month period ended December 31, 2023
	As Previously		Net
(dollars in thousands)	Presented		Change		As Corrected

Interest expense:
Deposits	$	46,011	$	(199)	$	45,812
Securities sold under agreements to repurchase		-		199		199


	Fair Value of Financial Instruments
	June 30, 2024
	As Previously		Net
(dollars in thousands)	Presented		Change		As Corrected

Carrying Amount:
Deposits	$	3,952,457	$	(9,398)	$	3,943,059
Securities sold under agreements to repurchase		-		9,398		9,398

Significant Other Observable Inputs (Level 2):
Securities sold under agreements to repurchase		-		9,398		9,398

Note 2: Organization and Summary of Significant Accounting Policies

Organization. Southern Missouri Bancorp, Inc., a Missouri corporation (the Company) was organized in 1994 and is the parent company of Southern Bank (the Bank). Substantially all of the Company’s consolidated revenues are derived from the operations of the Bank, and the Bank represents substantially all of the Company’s consolidated assets and liabilities. SB Real Estate Investments, LLC is a wholly-owned subsidiary of the Bank formed to hold Southern Bank Real Estate Investments, LLC. Southern Bank Real Estate Investments, LLC is a real estate investment trust (REIT) which is controlled by SB Real Estate Investments, LLC, and has other preferred shareholders in order to meet the requirements to be a REIT. At December 31, 2024, assets of the REIT were approximately $1.3 billion, and consisted primarily of real estate loan participations acquired from the Bank.

The Bank is primarily engaged in providing a full range of banking and financial services to individuals and corporate customers in its market areas. The Bank and Company are subject to competition from other financial institutions. The Bank and Company are subject to the regulation of certain federal and state agencies and undergo periodic examinations by those regulatory authorities.

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Basis of Financial Statement Presentation. The condensed consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America and general practices within the banking industry. In the normal course of business, the Company encounters two significant types of risk: economic and regulatory. Economic risk is comprised of interest rate risk, credit risk, and market risk. The Company is subject to interest rate risk to the degree that its interest-bearing liabilities reprice on a different basis than its interest-earning assets. Credit risk is the risk of default on the Company’s investment or loan portfolios resulting from the borrowers’ inability or unwillingness to make contractually required payments. Market risk reflects changes in the value of the investment portfolio, collateral underlying loans receivable, and the value of the Company’s investments in real estate.

Principles of Consolidation. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates. The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses.

Cash and Cash Equivalents. For purposes of reporting cash flows, cash and cash equivalents includes cash, due from depository institutions, interest-bearing deposits in other depository institutions, and securities purchased under agreements to resell with original maturities of three months or less. Interest-bearing deposits in other depository institutions were $84.5 million and $7.7 million at December 31, 2024 and June 30, 2024, respectively. Securities purchased under agreements to resell totaled $25.1 million and $0 at December 31, 2024 and June 30, 2024, respectively, and are included in these totals. Other correspondent deposits are held in various commercial banks with a total of $1.7 million and $2.3 million exceeding the FDIC’s deposit insurance limits at December 31, 2024 and June 30, 2024, respectively, as well as at the Federal Reserve and the Federal Home Loan Banks of Des Moines and Chicago.

Interest-bearing Time Deposits. Interest bearing time deposits in banks mature within three years and are carried at cost.

Available for Sale Securities. Available for sale securities (AFS), which include any security for which the Company has no immediate plan to sell but which may be sold in the future, are carried at fair value. Unrealized gains and losses, net of tax, are reported in accumulated other comprehensive loss, a component of stockholders’ equity. All securities have been classified as available for sale.

Premiums and discounts on debt securities are amortized or accreted as adjustments to income over the estimated life of the security using the level yield method. Realized gains or losses on the sale of securities is based on the specific identification method. The fair value of securities is based on quoted market prices or dealer quotes. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

The Company does not invest in collateralized mortgage obligations that are considered high risk.

For AFS securities with fair value less than amortized cost that management has no intent to sell and believes that it more likely than not will not be required to sell prior to recovery, only the credit loss component of the impairment is recognized in earnings, while the noncredit loss is recognized in accumulated other comprehensive loss. The credit loss component recognized in earnings is identified as the amount of principal cash flows not expected to be received over the remaining term of the security as projected based on cash flow projections, and is recorded to the Allowance for Credit Losses (“ACL”), by a charge to provision for credit losses. Accrued interest receivable is excluded from the estimate of credit losses. Both the ACL and the adjustment to net income may be reversed if conditions change. However, if the Company intends to sell an impaired AFS security, or, if it is more likely than not the Company will be required to sell such a security before recovering its amortized cost basis, the entire impairment amount would be

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recognized in earnings with a corresponding adjustment to the security’s amortized cost basis. Because the security’s amortized cost basis is adjusted to fair value, there is no ACL in this situation.

The Company evaluates impaired AFS securities at the individual level on a quarterly basis, and considers factors including, but not limited to: the extent to which the fair value of the security is less than the amortized cost basis; adverse conditions specifically related to the security, an industry, or geographic area; the payment structure of the security and likelihood of the issuer to be able to make payments that may increase in the future; failure of the issuer to make scheduled interest or principal payments; any changes to the rating of the security by a rating agency; and the ability and intent to hold the security until maturity. A qualitative determination as to whether any portion of the impairment is attributable to credit risk is acceptable. There were no credit-related factors underlying unrealized losses on AFS securities at December 31, 2024, or June 30, 2024.

Changes in the ACL are recorded as expense. Losses are charged against the ACL when management believes the uncollectability of an AFS debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

Federal Reserve Bank and Federal Home Loan Bank Stock. The Bank is a member of the Federal Reserve and the Federal Home Loan Bank (FHLB) systems. Capital stock of the Federal Reserve and the FHLB is a required investment of the Bank based upon a predetermined formula and is carried at cost.

Loans. Loans are generally stated at unpaid principal balances, less the ACL, any net deferred loan origination fees, and unamortized premiums or discounts on purchased loans.

Interest on loans is accrued based upon the principal amount outstanding. The accrual of interest on loans is discontinued when, in management’s judgment, the collectability of interest or principal in the normal course of business is doubtful. The Company complies with regulatory guidance which indicates that loans should be placed in nonaccrual status when 90 days past due, unless the loan is both well-secured and in the process of collection. A loan that is “in the process of collection” may be subject to legal action or, in appropriate circumstances, through other collection efforts reasonably expected to result in repayment or restoration to current status in the near future. A loan is considered delinquent when a payment has not been made by the contractual due date. Interest income previously accrued but not collected at the date a loan is placed on nonaccrual status is reversed against interest income. Cash receipts on a nonaccrual loan are applied to principal and interest in accordance with its contractual terms unless full payment of principal is not expected, in which case cash receipts, whether designated as principal or interest, are applied as a reduction of the carrying value of the loan. A nonaccrual loan is generally returned to accrual status when principal and interest payments are current, full collectability of principal and interest is reasonably assured, and a consistent record of performance has been demonstrated.

The ACL is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans, and is established through a provision for credit losses (PCL) charged to current earnings. The ACL is increased by the provision for credit losses on loans charged to expense and reduced by loans charged off, net of recoveries. Loans are charged off in the period deemed uncollectible, based on management’s analysis of expected cash flows (for non-collateral dependent loans) or collateral value (for collateral-dependent loans). Subsequent recoveries of loans previously charged off, if any, are credited to the allowance when received.

Management estimates the ACL using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Adjustments may be made to historical loss information for differences identified in current loan-specific risk characteristics, such as differences in underwriting standards or terms; lending review systems; experience, ability, or depth of lending management and staff; portfolio growth and mix; delinquency levels and trends; as well as for changes in environmental conditions, such as changes in economic activity or employment, agricultural economic conditions, property values, or other relevant factors. The Company generally incorporates a reasonable and supportable forecast period of four quarters, and a four-quarter, straight-line reversion period to return to long-term historical averages.

The ACL is measured on a collective (pool) basis when similar risk characteristics exist. For loans that do not share general risk characteristics with the collectively evaluated pools, the Company estimates credit losses on an individual

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loan basis, and these loans are excluded from the collectively evaluated pools. An ACL for an individually evaluated loan is recorded when the amortized cost basis of the loan exceeds the discounted estimated cash flows using the loan’s initial effective interest rate or the fair value, less estimated costs to sell, of the collateral for certain collateral dependent loans. For the collectively evaluated pools, the Company segments the loan portfolio primarily by loan purpose and collateral into 24 pools, which are homogeneous groups of loans that possess similar loss potential characteristics. The Company primarily utilizes the discounted cash flow (DCF) methodology for measurement of the required ACL. For a limited number of pools with a relatively small balance of unpaid principal, the Company utilizes the remaining life method. The DCF model implements probability of default (PD) and loss given default (LGD) calculations at the instrument level. PD and LGD are determined based on statistical analysis and correlation of historical losses with various economic factors over time. In general, the Company’s losses have not correlated well with economic factors, and the Company has utilized peer data where more appropriate. The Company defines a default to include an event of charge off, an adverse (substandard or worse) internal credit rating, becoming delinquent 90 days or more, or being placed on nonaccrual status. A PD/LGD estimate is applied to a projected model of the loan’s cashflow, including principal and interest payments, with consideration for prepayment speeds, principal curtailments, and recovery lag.

Loans acquired in a business combination that have experienced more-than-insignificant deterioration in credit quality since origination are considered purchased credit deteriorated (PCD) loans. At the acquisition date, an estimate of expected credit losses is made for groups of PCD loans with similar risk characteristics and individual PCD loans without similar risk characteristics. This initial ACL is allocated to individual PCD loans and added to the purchase price or acquisition date fair values to establish the initial amortized cost basis of the PCD loans. As the initial ACL is added to the purchase price, there is no credit loss expense recognized upon acquisition of a PCD loan. Any difference between the unpaid principal balance of PCD loans and the amortized cost basis is considered to relate to non-credit factors and results in a discount or premium. Discounts and premiums are recognized through interest income on a level-yield method over the life of the loans.

Loan fees and certain direct loan origination costs are deferred, and the net fee or cost is recognized as an adjustment to interest income using the interest method over the contractual life of the loans.

Off-Balance Sheet Credit Exposures. Off-balance sheet credit instruments include commitments to make loans, and commercial letters of credit, issued to meet customer financing needs. The Company’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded. The ACL for off-balance sheet credit exposures is estimated by loan pool on a quarterly basis under the current CECL model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur and is included in other liabilities on the Company’s consolidated balance sheets. The Company records an ACL on off-balance sheet credit exposures, unless the commitments to extend credit are unconditionally cancelable.

Foreclosed Real Estate. Real estate acquired by foreclosure or by deed in lieu of foreclosure is initially recorded at fair value less estimated selling costs, establishing a new cost basis. Any costs for development and improvement of the property that are warranted are capitalized.

Valuations are periodically performed by management, and an allowance for losses is established by a charge to operations if the carrying value of a property exceeds its estimated fair value, less estimated selling costs.

Loans to facilitate the sale of real estate acquired in foreclosure are discounted if made at less than market rates. Discounts are amortized over the fixed interest period of each loan using the interest method.

Premises and Equipment. Premises and equipment are stated at cost less accumulated depreciation and include expenditures for major betterments and renewals. Maintenance, repairs, and minor renewals are expensed as incurred. When property is retired or sold, the retired asset and related accumulated depreciation are removed from the accounts and the resulting gain or loss taken into income. The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such assets are considered to be impaired, the impairment loss recognized is measured by the amount by which the carrying amount exceeds the fair value of the assets.

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Depreciation is computed by use of straight-line and accelerated methods over the estimated useful lives of the assets. Estimated lives are generally seven to forty years for premises, three to seven years for equipment, and three years for software.

Bank Owned Life Insurance. Bank owned life insurance policies are reflected in the condensed consolidated balance sheets at the estimated cash surrender value. Changes in the cash surrender value of these policies, as well as a portion of the insurance proceeds received, are recorded in noninterest income in the condensed consolidated statements of income.

Goodwill. The Company’s goodwill is evaluated annually for impairment or more frequently if impairment indicators are present. A qualitative assessment is performed to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value is less than the carrying amount, including goodwill. If, based on the evaluation, it is determined to be more likely than not that the fair value is less than the carrying value, then goodwill is tested further for impairment. If the implied fair value of goodwill is lower than its carrying amount, a goodwill impairment is indicated and goodwill is written down to its implied fair value. Subsequent increases in goodwill value are not recognized in the financial statements. As of June 30, 2024, the date of the Company’s annual test, there was no impairment indicated, based on a qualitative assessment of goodwill, which considered: the market value of the Company’s common stock; concentrations of credit; profitability; nonperforming assets; capital levels; and results of recent regulatory examinations. There was no impairment of goodwill at December 31, 2024.

Intangible Assets. The Company’s intangible assets at December 31, 2024 included gross core deposit intangibles of $39.1 million with $19.5 million accumulated amortization, gross other identifiable intangibles of $6.4 million with accumulated amortization of $4.3 million, and mortgage and SBA servicing rights of $3.0 million. At June 30, 2024, the Company’s intangible assets included gross core deposit intangibles of $39.1 million with $17.8 million accumulated amortization, gross other identifiable intangibles of $6.4 million with accumulated amortization of $4.2 million, and mortgage and SBA servicing rights of $3.0 million. The Company’s core deposit and other intangible assets are being amortized using the straight line method, in accordance with ASC 350, over periods ranging from five to ten years, with amortization expense expected to be approximately $1.7 million in the remainder of fiscal 2025, $3.0 million in fiscal 2026, $2.7 million in fiscal 2027, $2.7 million in fiscal 2028, $2.6 million in fiscal 2029, and $8.8 million thereafter. As of December 31, 2024 and June 30, 2024, there was no impairment of other intangible assets indicated.

The Company records mortgage servicing rights (MSR) at fair value for all mortgage loans sold on a servicing retained basis with subsequent adjustments to fair value of MSR in accordance with FASB ASC 860. An estimate of the fair value of the Company’s MSR is determined utilizing assumptions about factors such as mortgage interest rates, discount rates, mortgage loan prepayment speeds, market trends and industry demand. Changes in the fair value of MSR are recorded in loan servicing fees in the consolidated statements of income.

Income Taxes. The Company accounts for income taxes in accordance with income tax accounting guidance (ASC 740, Income Taxes). The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

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The Company recognizes interest and penalties, if any, on income taxes as a component of income tax expense.

The Company files consolidated income tax returns with its subsidiaries, the Bank and SB Real Estate Investments, LLC, with a tax year ended June 30. Southern Bank Real Estate Investments, LLC files a separate REIT return for federal tax purposes, and also files state income tax returns, with a tax year ended December 31.

Derivative Financial Instruments and Hedging Activities. The Company enters into derivative financial instruments, primarily interest rate swaps, to manage interest rate risk, facilitate asset/liability management strategies and manage other exposures. Derivative instruments are accounted pursuant to ASC Topic 815, “Derivatives and Hedging”, which requires companies to recognize derivative instruments as either assets or liabilities in the consolidated balance sheet. All derivative financial instruments are recognized as other assets or other liabilities, as applicable, at estimated fair value. The change in each of these financial statement line items is included as operating cash flows in the accompanying consolidated statements of cash flows. The Company does not speculate using derivative instruments. Derivative financial instruments are more fully described in Note 13.

Incentive Plans. The Company accounts for its Equity Incentive Plan (EIP), and Omnibus Incentive Plan (OIP) in accordance with ASC 718, “Share-Based Payment.” Compensation expense is based on the market price of the Company’s stock on the date the shares are granted and is recorded over the vesting period. The difference between the grant-date fair value and the fair value on the date the shares are considered earned represents a tax benefit to the Company that is recorded as an adjustment to income tax expense.

Non-Employee Directors’ Retirement. The Bank entered into directors’ retirement agreements beginning in April 1994 for non-employee directors and continued to do so for new non-employee directors joining the Bank’s board through December 2014. These directors’ retirement agreements provide that each participating non-employee director (participant) shall receive, upon termination of service on the Board on or after age 60, other than termination for cause, a benefit in equal annual installments over a five year period. The benefit will be based upon the product of the participant’s vesting percentage and the total Board fees paid to the participant during the calendar year preceding termination of service on the Board. The vesting percentage shall be determined based upon the participant’s years of service on the Board.

In the event that the participant dies before collecting any or all of the benefits, the Bank shall pay the participant’s beneficiary. Benefits shall not be payable to anyone other than the beneficiary, and shall terminate on the death of the beneficiary.

Stock Options. Compensation cost is measured based on the grant-date fair value of the equity instruments issued, and recognized over the vesting period during which an employee provides service in exchange for the award.

Earnings Per Share. Basic earnings per share available to common stockholders is computed using the weighted-average number of common shares outstanding. Diluted earnings per share available to common stockholders includes the effect of all weighted-average dilutive potential common shares (stock options and restricted stock grants) outstanding during each period.

Comprehensive Income. Comprehensive income consists of net income and other comprehensive income (loss), net of applicable income taxes. Other comprehensive income (loss) includes unrealized depreciation on available-for-sale securities, unrealized depreciation on available-for-sale securities for which a portion of an other-than-temporary impairment has been recognized in income, and changes in the funded status of defined benefit pension plans.

Transfers Between Fair Value Hierarchy Levels. Transfers in and out of Level 1 (quoted market prices), Level 2 (other significant observable inputs) and Level 3 (significant unobservable inputs) are recognized on the period ending date.

Wealth Management Assets and Fees. Assets managed in fiduciary or investment management accounts by the Company are not included in the consolidated balance sheets since such items are not assets of the Company or its subsidiaries. Fees from fiduciary or investment management activities are recorded on a cash basis over the period in which the service is provided. Fees are generally a function of the market value of assets managed and administered, the volume of transactions, and fees for other services rendered, as set forth in the agreement between the customer and the

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Company. This revenue recognition involves the use of estimates and assumptions, including components that are calculated based on asset valuations and transaction volumes. Any out-of-pocket expenses or services not typically covered by the fee schedule for fiduciary activities are charged directly to the account on a gross basis as revenue is incurred. The Southern Wealth Management division, which is a division of the Bank, held fiduciary assets totaling $110.5 million and $100.9 million as of December 31, 2024 and June 30, 2024, respectively, and investment management assets totaling $520.7 million and $474.7 million as of December 31, 2024 and June 30, 2024, respectively.

New Accounting Pronouncements:

In January 2021, the FASB published ASU 2021-01, “Reference Rate Reform. (Topic 848)”. ASU 2021-01 clarified that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The ASU also amended the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. An entity may elect to apply the amendments in this update on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to new modifications from any date within an interim period that includes or is subsequent to the date of the issuance of a final update, up to the date that financial statements are available to be issued. If an entity elects to apply any of the amendments in this update for an eligible hedging relationship, any adjustments as a result of those elections must be reflected as of the date the entity applies the election. Originally, the amendments in this update did not apply to contract modifications made after December 31, 2022, new hedging relationships entered into after December 31, 2022, and existing hedging relationships evaluated for effectiveness in periods after December 31, 2022 except for hedging relationships existing as of December 31, 2022, that apply certain optional expedients in which the accounting effects are recorded through the end of the hedging relationship (including periods after December 31, 2022). With the issuance of ASU 2022-06 Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, the sunset date for adoption of ASU 2021-01 was extended from December 31, 2022 to December 31, 2024. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The amendments in this update improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses. The amendments in this update do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. The amendments of this ASU are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The Company is evaluating the accounting and disclosure of this ASU and does not expect it to have a material impact on the consolidated financial statements.

On December 14, 2023, the FASB published ASU 2023-02, “Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method.” This ASU permits reporting entities to elect to account for tax equity investments, regardless of the tax credit program for which the income tax credits are received, using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the income tax credits and other income tax benefits received and recognizes the net amortization and income tax credits and other income tax benefits in the income statement as a component of income tax expense. A reporting entity makes an accounting policy election to apply the proportional amortization method on a tax-credit-program-by-tax-credit-program basis rather than electing to apply the proportional amortization method at the reporting entity level or to individual investments. This ASU also requires specific disclosures of investments that generate income tax credits and other income tax benefits from a tax credit program for which the entity has elected to apply the proportional amortization method. The ASU was effective for fiscal years beginning after December 15, 2023, and was effective for the Company beginning July 1, 2024. The adoption of ASU 2023-02 did not have a material impact on the Company’s consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes - Improvements to Income Tax Disclosures (Topic 740)”. ASU 2023-09 was issued to address requests by investors and creditors for enhanced transparency and decision usefulness of income tax disclosures. Public business entities (PBEs) would be required to prepare an annual detailed, tabular tax rate reconciliation. All other entities would be required to provide qualitative disclosure on specific categories

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and individual jurisdictions that result in significant differences between the statutory and effective tax rates. All entities would be required to annually disclose taxes paid disaggregated by federal, state, and foreign taxes, as well as disaggregating taxes by individual jurisdiction if taxes paid exceed 5% of total income taxes paid. The ASU is effective for PBEs for fiscal years beginning after December 15, 2024. The Company is evaluating the accounting and disclosure of this ASU and does not expect it to have a material impact on the consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40)”. ASU 2024-03 was issued to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions (such as cost of sales, SG&A, and research and development). The ASU is effective for PBEs for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The Company does not expect adoption of ASU 2024-03 to have a material impact on its consolidated financial statements.

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Note 3: Available for Sale Securities

The amortized cost, gross unrealized gains, gross unrealized losses, ACL, and approximate fair value of securities available for sale consisted of the following:


	December 31, 2024
			Gross		Gross		Allowance		Estimated
	Amortized		Unrealized		Unrealized		for		Fair
(dollars in thousands)	Cost		Gains		Losses		Credit Losses		Value

Debt securities:
Obligations of states and political subdivisions	$	29,855	$	3	$	(2,133)	$	—	$	27,725
Corporate obligations		33,075		114		(1,156)		—		32,033
Asset-backed securities		40,962		995		(189)		—		41,768
Other securities		4,968		20		(66)		—		4,922
Total debt securities		108,860		1,132		(3,544)		—		106,448

Mortgage-backed securities (MBS) and collateralized mortgage obligations (CMOs):
Residential MBS issued by governmental sponsored enterprises (GSEs)		137,613		721		(6,566)		—		131,768
Commercial MBS issued by GSEs		64,937		201		(5,385)		—		59,753
CMOs issued by GSEs		177,676		87		(7,672)		—		170,091
Total MBS and CMOs		380,226		1,009		(19,623)		—		361,612
Total AFS securities	$	489,086	$	2,141	$	(23,167)	$	—	$	468,060


	June 30, 2024
			Gross		Gross		Allowance		Estimated
	Amortized		Unrealized		Unrealized		for		Fair
(dollars in thousands)	Cost		Gains		Losses		Credit Losses		Value

Debt securities:
Obligations of states and political subdivisions	$	29,960	$	4	$	(2,211)	$	—	$	27,753
Corporate obligations		32,998		60		(1,781)		—		31,277
Asset-backed securities		57,403		1,525		(249)		—		58,679
Other securities		5,387		20		(74)		—		5,333
Total debt securities		125,748		1,609		(4,315)		—		123,042

Mortgage-backed securities (MBS) and collateralized mortgage obligations (CMOs):
Residential MBS issued by governmental sponsored enterprises (GSEs)		110,918		692		(6,855)		—		104,755
Commercial MBS issued by GSEs		65,195		297		(5,746)		—		59,746
CMOs issued by GSEs		148,382		82		(8,104)		—		140,360
Total MBS and CMOs		324,495		1,071		(20,705)		—		304,861
Total AFS securities	$	450,243	$	2,680	$	(25,020)	$	—	$	427,903

The amortized cost and estimated fair value of available for sale securities, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.

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	December 31, 2024
	Amortized		Estimated
(dollars in thousands)	Cost		Fair Value
Within one year	$	1,444	$	1,442
After one year but less than five years		26,914		26,638
After five years but less than ten years		43,751		41,755
After ten years		36,751		36,613
Total investment securities		108,860		106,448
MBS and CMOs		380,226		361,612
Total AFS securities	$	489,086	$	468,060

The carrying value of marketable securities pledged as collateral to secure public deposits amounted to $274.2 million and $265.5 million at December 31, 2024 and June 30, 2024, respectively. The securities pledged consist of $146.4 million and $137.0 million of MBS, $100.8 million and $103.5 million of CMOs, $23.2 million and $20.8 million of Obligations of State and Political Subdivisions Obligations, and $3.9 million and $4.3 million of Other Securities at December 31, 2024 and June 30, 2024, respectively.

The following tables show the gross unrealized losses and fair value of the Company’s investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position for which an ACL has not been recorded at December 31, 2024 and June 30, 2024:


	December 31, 2024
	Less than 12 months				12 months or more				Total
			Unrealized				Unrealized				Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
(dollars in thousands)
Obligations of state and political subdivisions	$	7,789	$	166	$	17,649	$	1,967	$	25,438	$	2,133
Corporate obligations		981		3		20,575		1,153		21,556		1,156
Asset-backed securities		—		—		3,682		189		3,682		189
Other securities		33		—		4,302		66		4,335		66
MBS and CMOs		127,978		1,075		161,370		18,548		289,348		19,623
Total AFS securities	$	136,781	$	1,244	$	207,578	$	21,923	$	344,359	$	23,167


	June 30, 2024
	Less than 12 months				12 months or more				Total
			Unrealized				Unrealized				Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
(dollars in thousands)
Obligations of state and political subdivisions	$	3,720	$	38	$	21,762	$	2,173	$	25,482	$	2,211
Corporate obligations		—		—		25,295		1,781		25,295		1,781
Asset-backed securities		—		—		7,234		249		7,234		249
Other securities		4,404		31		287		43		4,691		74
MBS and CMOs		56,820		621		193,382		20,084		250,202		20,705
Total AFS securities	$	64,944	$	690	$	247,960	$	24,330	$	312,904	$	25,020

The following information pertaining to unrealized losses and ACL on securities, by security type, is presented as of December 31, 2024.

Obligations of state and political subdivisions. The unrealized losses on the Company’s investments in obligations of state and political subdivisions include 14 individual securities which have been in an unrealized loss position for less than 12 months and 40 individual securities which have been in an unrealized loss position for more than 12 months. The securities are performing and are of high credit quality. The unrealized losses were caused by increases in market interest rates since purchase or acquisition. Because the Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell these securities prior to recovery of their amortized cost basis, which may be maturity, the Company has not recorded an ACL on these securities.

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Corporate and Other Obligations. The unrealized losses on the Company’s investments in corporate obligations include three securities which have been in an unrealized loss position for less than 12 months and 15 individual securities which have been in an unrealized loss position for more than 12 months. The securities are performing and are of high credit quality. The unrealized losses were caused by increases in market interest rates since purchase or acquisition. Because the Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell these securities prior to recovery of their amortized cost basis, which may be maturity, the Company has not recorded an ACL on these securities.

Asset-Backed Securities. The unrealized losses on the Company’s investments in asset-backed securities include no individual securities which have been in an unrealized loss position for less than 12 months and four individual securities which have been in an unrealized loss position for more than 12 months. The securities are performing and are of high credit quality. The unrealized loss was caused by variations in market interest rates since purchase or acquisition. Because the Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell these securities prior to recovery of their amortized cost basis, which may be maturity, the Company has not recorded an ACL on these securities.

MBS and CMOs. The unrealized losses on the Company’s investments in MBS and CMOs include 33 individual securities which have been in an unrealized loss position for less than 12 months, and 105 individual securities which have been in an unrealized loss position for 12 months or more. The securities are performing and are of high credit quality. The unrealized losses were caused by increases in market interest rates since purchase or acquisition. Because the Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell these securities prior to recovery of their amortized cost basis, which may be maturity, the Company has not recorded an ACL on these securities.

The Company does not believe that any individual unrealized loss as of December 31, 2024, is the result of a credit loss. However, the Company could be required to recognize an ACL in future periods with respect to its available for sale investment securities portfolio.

Credit Losses Recognized on Investments. There were no credit losses recognized in income and other losses or recorded in other comprehensive loss for the three- or six- month periods ended December 31, 2024 and 2023.

Note 4: Loans and Allowance for Credit Losses

Classes of loans are summarized as follows:


(dollars in thousands)	December 31, 2024		June 30, 2024

1-4 residential real estate	$	967,196	$	925,397
Non-owner occupied commercial real estate		882,484		899,770
Owner occupied commercial real estate		435,392		427,476
Multi-family real estate		376,081		384,564
Construction and land development		393,388		290,541
Agriculture real estate		239,912		232,520
Total loans secured by real estate		3,294,453		3,160,268

Commercial and industrial		484,799		450,147
Agriculture production		188,284		175,968
Consumer		56,017		59,671
All other loans		3,628		3,981
Gross loans		4,027,181		3,850,035

Deferred loan fees, net		(202)		(232)
Allowance for credit losses		(54,740)		(52,516)
Net loans	$	3,972,239	$	3,797,287

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The Company’s lending activities consist of originating loans secured by mortgages on one- to four-family residences and commercial and agricultural real estate, construction loans on residential and commercial properties, commercial and agricultural business loans and consumer loans. At December 31, 2024, the Bank had purchased participations in 75 loans totaling $220.5 million, as compared to 71 loans totaling $178.5 million at June 30, 2024.

1-4 Residential Real Estate Lending. The Company actively originates loans for the acquisition or refinance of one- to four-family residences. This category includes both fixed-rate and adjustable-rate mortgage (“ARM”) loans amortizing over periods of up to 30 years, and the properties securing such loans may be owner-occupied or non-owner-occupied. Single-family residential loans do not generally exceed 90% of the lower of the appraised value or purchase price of the secured property. Substantially all of the one- to four-family residential mortgage originations in the Company’s portfolio are located within the Company’s primary lending area. General risks related to one- to four-family residential lending include stability of borrower income and collateral values.

Home equity lines of credit (HELOCs) are secured with a deed of trust and are generally issued up to 90% of the appraised or estimated value of the property securing the line of credit, less the outstanding balance on the first mortgage and are typically issued for a term of ten years. Interest rates on HELOCs are generally adjustable. Interest rates are based upon the loan-to-value ratio of the property with better rates given to borrowers with more equity. Risks related to HELOC lending generally include the stability of borrower income and collateral values.

Non-Owner Occupied and Owner Occupied Commercial Real Estate Lending. The Company actively originates loans secured by owner- and non-owner-occupied commercial real estate including single- and multi-tenant retail properties, restaurants, hotels, land (improved and unimproved), nursing homes and other healthcare facilities, warehouses and distribution centers, convenience stores, automobile dealerships and other automotive-related services, and other businesses. These properties are typically owned and operated by borrowers headquartered within the Company’s primary lending area; however, the property may be located outside the Company’s primary lending area. Risks to owner-occupied commercial real estate lending generally include the continued profitable operation of the borrower’s enterprise, as well as general collateral values, and may be heightened by unique, specific uses of the property serving as collateral. Non-owner-occupied commercial real estate lending risks include tenant demand and performance, lease rates, and vacancies, as well as collateral values and borrower leverage. These factors may be influenced by general economic conditions in the region, or in the United States generally.

Most commercial real estate loans originated by the Company generally are based on amortization schedules of up to 25 years with monthly principal and interest payments. Generally, the interest rate received on these loans is fixed for a maturity for up to ten years, with a balloon payment due at maturity. Alternatively, for some loans, the interest rate adjusts at least annually after an initial period up to seven years. The Company typically includes an interest rate “floor” in the loan agreement. Generally, improved commercial real estate loan amounts do not exceed 80% of the lower of the appraised value or the purchase price of the secured property.

Multi-family Real Estate Lending. The Company originates loans secured by multi-family residential properties that are often located outside the Company’s primary lending area but made to borrowers who operate within the Company’s primary market area. The majority of the multi-family residential loans that are originated by the Company are amortized over periods generally up to 25 years, with balloon maturities typically up to ten years. Both fixed and adjustable interest rates are offered and it is typical for the Company to include an interest rate “floor” and “ceiling” in the loan agreement. Generally, multi-family residential loans do not exceed 85% of the lower of the appraised value or purchase price of the secured property. General risks related to multi-family residential lending include rental demand and supply, rental rates, and vacancies, as well as collateral values and borrower leverage.

Construction and Land Development Lending. The Company originates real estate loans secured by property or land that is under construction or development. Construction and land development loans originated by the Company are generally to finance the construction of owner occupied residential real estate, or to finance speculative construction of residential real estate, land development, or owner-operated or non-owner occupied commercial real estate. During construction, these loans typically require monthly interest-only payments, with single-family residential construction loans having maturities ranging from six to twelve months, while multi-family or commercial construction loans typically mature in 12 to 36 months. Once construction is completed, construction loans may be converted to permanent financing with monthly payments using amortization schedules of up to 30 years on residential and generally up to 25

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years on commercial real estate. Construction and land development lending risks generally include successful timely and on-budget completion of the project, followed by the sale of the property in the case of land development or non-owner-occupied real estate, or the long-term occupancy of the property by the builder in the case of owner-occupied construction. Changes in real estate values or other economic conditions may impact the ability of a borrower to sell property developed for that purpose.

While the Company typically utilizes relatively short maturity periods to closely monitor the inherent risks associated with construction loans for these loans, weather conditions, change orders, availability of materials and/or labor, and other factors may contribute to the lengthening of a project, thus necessitating the need to renew the construction loan at the balloon maturity. Such extensions are typically executed in incremental three month periods to facilitate project completion. During construction, loans typically require monthly interest only payments which may allow the Company an opportunity to monitor for early signs of financial difficulty should the borrower fail to make a required monthly payment. Additionally, during the construction phase, the Company typically performs interim inspections which further provide the Company an opportunity to assess risk.

Agriculture Production and Agriculture Real Estate Lending. Agriculture production and agriculture real estate loans are generally comprised on seasonal operating lines to farmers to plant crops and term loans to fund the purchase of equipment, farmland, or livestock. This segment of lending includes pastureland and row crop ground. The Company originates substantially all agriculture production and agriculture real estate lending to borrowers headquartered in the Company’s primary lending area. Specific underwriting standards have been established for agricultural-related loans including the establishment of projections for each operating year based on industry developed estimates of farm input costs and expected commodity yields and prices. Agriculture production operating lines are typically written for one year and secured by the crop. Agricultural real estate terms offered usually have amortization schedules of up to 25 years with an 80% loan-to-value ratio, or 30 years with a 75% loan-to-value ratio. Risks to agricultural lending include unique factors such as commodity prices, yields, input costs, and weather, as well as farmland and farm equipment values.

Commercial and Industrial Lending. The Company’s commercial and industrial lending activities encompass loans with a variety of purposes and security, including loans to finance accounts receivable, inventory, equipment and operating lines of credit. The Company offers both fixed and adjustable rate commercial and industrial loans. Generally, commercial loans secured by fixed assets are amortized over periods up to five years. Commercial and industrial lending risk is primarily driven by the borrower’s successful generation of cash flow from their business enterprise sufficient to service debt, and may be influenced by factors specific to the borrower and industry, or by general economic conditions in the region or in the United States generally.

Consumer Lending. The Company offers a variety of secured consumer loans, including home equity, direct and indirect automobile loans, second mortgages, recreational vehicle loans and loans secured by deposits. The Company originates substantially all of its consumer loans in its primary lending area. Usually, consumer loans are originated with fixed rates for terms of up to 66 months, with the exception of home equity lines of credit, which are variable, tied to the prime rate of interest and are for a period of ten years.

Automobile loans originated by the Company include both direct loans and a smaller amount of loans originated by auto dealers. Typically, automobile loans are made for terms of up to 66 months for new and used vehicles. Loans secured by automobiles have fixed rates and are generally made in amounts up to 100% of the purchase price of the vehicle. Risks to automobile and other consumer lending generally include the stability of borrower income and borrower willingness to repay.

Allowance for Credit Losses. The PCL for the three- and six- month periods ended December 31 2024, was $932,000 and $3.1 million, compared to $900,000 and $1.8 million in the same periods of the prior fiscal year. The PCL for the six- month period ended December 31, 2024 was the result of a $2.5 million provision attributable to the ACL for loan balances outstanding, combined with a provision of $569,000 attributable to the allowance for off-balance sheet credit exposures, compared to a $3.5 million provision attributable to the ACL for loan balances outstanding, and a $1.7 million benefit attributable to the allowance for off-balance sheet credit exposures for the same period of the prior fiscal year. The Company has estimated its expected credit losses as of December 31, 2024, under ASC 326-20, and management believes the ACL as of that date was adequate based on that estimate. There remains, however, significant uncertainty as the Federal Reserve has tightened monetary policy to address inflation risks. Qualitative adjustments in

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the Company’s ACL model were increased compared to June 30, 2024, due to various factors that are relevant to determining expected collectability of credit. The Company decreased the allowance attributable to classified hotel loans that have been slow to recover from the COVID-19 pandemic due to updated collateral appraisals, which provided a more favorable assessment than the Company’s prior period estimates. Additionally, PCL was required due to loan growth in the first six months of fiscal year 2025. As a percentage of average loans outstanding, the Company recorded net charge offs of 0.02% (annualized) during the six months ended December 31, 2024, as compared to 0.07% for the same period of the prior fiscal year. Specifically, management considered the following primary qualitative items in its estimate of the ACL:

● economic conditions and projections as provided by the Federal Open Market Committee (FOMC) were utilized in the Company’s estimate at December 31, 2024. Economic factors considered in the projections included national levels of unemployment using the high bound of the FOMC’s central tendency, and national rates of inflation-adjusted growth in the gross domestic product using the low bound of the FOMC’s central tendency. Economic conditions are considered to be a moderate and stable risk factor, relative to June 30, 2024;

● the pace of growth of the Company’s loan portfolio, exclusive of acquisitions, relative to overall economic growth. This measure is considered to be a moderate and slightly decreasing risk factor, relative to June 30, 2024;

● levels and trends for loan delinquencies nationally and in the region. This is considered to be a low and stable risk factor, relative to June 30, 2024;

● quantified supported model adjustments and general imprecision adjustments. This factor was added for the June 30, 2024, ACL estimate as certain model adjustments capture highly specific issues or events that are not adequately captured in model outcomes. General imprecision adjustments address other sources of imprecision that are not specifically identifiable or quantifiable to a particular loan portfolio and have not been captured by the model or by a specific model adjustment. The Company considers general imprecision in three dimensions; economic forecast imprecision, model imprecision, and process imprecision.

PCD Loans. In connection with the acquisition of Citizens Bancshares Co. (Citizens) on January 20, 2023, and Fortune Financial Corporation (Fortune) on February 25, 2022, the Company acquired loans both with and without evidence of credit quality deterioration since origination. Acquired loans are recorded at their fair value at the time of acquisition with no carryover from the acquired institution’s previously recorded allowance for loan and lease losses. Acquired loans are accounted for under ASC 326, Financial Instruments – Credit Losses.

The fair value of acquired loans recorded at the time of acquisition is based upon several factors, including the timing and payment of expected cash flows, as adjusted for estimated credit losses and prepayments, and then discounting these cash flows using comparable market rates. The resulting fair value adjustment is recorded in the form of a premium or discount to the unpaid principal balance of the respective loans. As it relates to acquired loans that, as of the date of acquisition, have experienced a more-than-insignificant deterioration in credit quality since origination, the net premium or net discount is adjusted to reflect the Company’s allowance for credit losses recorded for PCD loans at the time of acquisition, and the remaining fair value adjustment is accreted or amortized into interest income over the remaining life of the respective loans. As it relates to loans not classified as PCD (non-PCD) loans, the credit loss and yield components of their fair value adjustment are aggregated, and the resulting net premium or net discount is accreted or amortized into interest income over the remaining life of the respective loans. The Company records an ACL for non-PCD loans at the time of acquisition through provision expense, and therefore, no further adjustments are made to the net premium or net discount for non-PCD loans.

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The following tables present the balance in the ACL based on portfolio segment as of December 31, 2024 and 2023, and activity in the ACL for the three- and six- month periods ended December 31, 2024 and 2023:


	At period end and for the six months ended December 31, 2024
	Balance		Provision						Balance
	beginning		(benefit) charged		Losses				end
(dollars in thousands)	of period		to expense		charged off		Recoveries		of period
Allowance for credit losses on loans:
1-4 residential real estate	$	10,528	$	2,140	$	(50)	$	46	$	12,664
Non-owner occupied commercial real estate		19,055		(5,395)		—		—		13,660
Owner occupied commercial real estate		4,815		1,014		(122)		—		5,707
Multi-family real estate		5,447		231		—		47		5,725
Construction and land development		2,901		1,817		(1)		—		4,717
Agriculture real estate		2,107		410		—		—		2,517
Commercial and industrial		6,233		1,858		(65)		37		8,063
Agriculture production		835		225		—		—		1,060
Consumer		578		215		(201)		11		603
All other loans		17		7		—		—		24
Total	$	52,516	$	2,522	$	(439)	$	141	$	54,740


	At period end and for the three months ended December 31, 2024
	Balance		Provision						Balance
	beginning		(benefit) charged		Losses				end
(dollars in thousands)	of period		to expense		charged off		Recoveries		of period
Allowance for credit losses on loans:
1-4 residential real estate	$	10,637	$	1,983	$	(2)	$	46	$	12,664
Non-owner occupied commercial real estate		20,728		(7,068)		—		—		13,660
Owner occupied commercial real estate		4,814		1,015		(122)		—		5,707
Multi-family real estate		5,118		607		—		—		5,725
Construction and land development		3,675		1,043		(1)		—		4,717
Agriculture real estate		2,027		490		—		—		2,517
Commercial and industrial		6,114		1,943		(26)		32		8,063
Agriculture production		784		276		—		—		1,060
Consumer		526		202		(129)		4		603
All other loans		14		10		—		—		24
Total	$	54,437	$	501	$	(280)	$	82	$	54,740

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	At period end and for the six months ended December 31, 2023
	Balance		Provision						Balance
	beginning		(benefit) charged		Losses				end
(dollars in thousands)	of period		to expense		charged off		Recoveries		of period
Allowance for credit losses on loans:
1-4 residential real estate	$	9,474	$	108	$	(41)	$	33	$	9,574
Non-owner occupied commercial real estate		13,863		3,232		(496)		—		16,599
Owner occupied commercial real estate		5,168		(354)		—		—		4,814
Multi-family real estate		6,806		(521)		(97)		—		6,188
Construction and land development		3,414		496		(289)		18		3,639
Agriculture real estate		2,567		(188)		—		—		2,379
Commercial and industrial		5,235		794		(185)		6		5,850
Agriculture production		782		(212)		—		—		570
Consumer		490		141		(208)		31		454
All other loans		21		(4)		—		—		17
Balance, end of period	$	47,820	$	3,492	$	(1,316)	$	88	$	50,084


	At period end and for the three months ended December 31, 2023
	Balance		Provision						Balance
	beginning		(benefit) charged		Losses				end
(dollars in thousands)	of period		to expense		charged off		Recoveries		of period
Allowance for credit losses on loans:
1-4 residential real estate	$	9,371	$	209	$	(6)	$	—	$	9,574
Non-owner occupied commercial real estate		16,504		591		(496)		—		16,599
Owner occupied commercial real estate		4,879		(65)		—		—		4,814
Multi-family real estate		6,097		91		—		—		6,188
Construction and land development		3,545		272		(178)		—		3,639
Agriculture real estate		2,426		(47)		—		—		2,379
Commercial and industrial		5,134		894		(180)		2		5,850
Agriculture production		697		(127)		—		—		570
Consumer		453		103		(120)		18		454
All other loans		16		1		—		—		17
Balance, end of period	$	49,122	$	1,922	$	(980)	$	20	$	50,084

The following tables present the balance in the allowance for off-balance sheet credit exposure based on portfolio segment as of December 31, 2024 and 2023, and activity in the allowance for the three- and six- month periods ended December 31, 2024 and 2023:


	At period end and for the six months ended December 31, 2024
	Balance		Provision		Balance
	beginning		(benefit) charged		end
(dollars in thousands)	of period		to expense		of period
Allowance for off-balance sheet credit exposure:
1-4 residential real estate	$	140	$	89	$	229
Non-owner occupied commercial real estate		153		32		185
Owner occupied commercial real estate		136		33		169
Multi-family real estate		31		34		65
Construction and land development		1,912		53		1,965
Agriculture real estate		60		(6)		54
Commercial and industrial		782		250		1,032
Agriculture production		37		90		127
Consumer		12		(6)		6
All other loans		—		—		—
Total	$	3,263	$	569	$	3,832

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	At period end and for the three months ended December 31, 2024
	Balance		Provision		Balance
	beginning		(benefit) charged		end
(dollars in thousands)	of period		to expense		of period
Allowance for off-balance sheet credit exposure:
1-4 residential real estate	$	170	$	59	$	229
Non-owner occupied commercial real estate		175		10		185
Owner occupied commercial real estate		122		47		169
Multi-family real estate		34		31		65
Construction and land development		2,000		(35)		1,965
Agriculture real estate		52		2		54
Commercial and industrial		802		230		1,032
Agriculture production		34		93		127
Consumer		12		(6)		6
All other loans		—		—		—
Total	$	3,401	$	431	$	3,832


	At period end and for the six months ended December 31, 2023
	Balance		Provision		Balance
	beginning		(benefit) charged		end
(dollars in thousands)	of period		to expense		of period
Allowance for off-balance sheet credit exposure:
1-4 residential real estate	$	126	$	10	$	136
Non-owner occupied commercial real estate		154		(3)		151
Owner occupied commercial real estate		182		(7)		175
Multi-family real estate		16		(7)		9
Construction and land development		4,897		(1,718)		3,179
Agriculture real estate		50		(3)		47
Commercial and industrial		730		(2)		728
Agriculture production		107		50		157
Consumer		16		(2)		14
All other loans		10		(10)		—
Total	$	6,288	$	(1,692)	$	4,596


	At period end and for the three months ended December 31, 2023
	Balance		Provision		Balance
	beginning		(benefit) charged		end
(dollars in thousands)	of period		to expense		of period
Allowance for off-balance sheet credit exposure:
1-4 residential real estate	$	131	$	5	$	136
Non-owner occupied commercial real estate		154		(3)		151
Owner occupied commercial real estate		180		(5)		175
Multi-family real estate		15		(6)		9
Construction and land development		4,285		(1,106)		3,179
Agriculture real estate		39		8		47
Commercial and industrial		767		(39)		728
Agriculture production		23		134		157
Consumer		17		(3)		14
All other loans		7		(7)		—
Total	$	5,618	$	(1,022)	$	4,596

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The following tables present year-to-date gross charge-offs by loan class and year of origination for the six-month periods ended December 31, 2024 and 2023:


													Revolving
(dollars in thousands)	2025		2024		2023		2022		2021		Prior		loans		Total
December 31, 2024
1-4 residential real estate	$	—	$	—	$	—	$	—	$	—	$	50	$	—	$	50
Owner occupied commercial real estate		—		—		122		—		—		—		—		122
Construction and land development		—		—		—		—		1		—		—		1
Commercial and industrial		—		16		38		—		—		11		—		65
Consumer		—		98		65		35		3		—		—		201
Total gross charge-offs	$	—	$	114	$	225	$	35	$	4	$	61	$	—	$	439


													Revolving
(dollars in thousands)	2024		2023		2022		2021		2020		Prior		loans		Total
December 31, 2023
1-4 residential real estate	$	—	$	—	$	6	$	—	$	—	$	35	$	—	$	41
Non-owner occupied commercial real estate		—		496		—		—		—		—		—		496
Multi-family real estate		—		—		—		97		—		—		—		97
Construction and land development		—		100		78		111		—		—		—		289
Commercial and industrial		—		5		180		—		—		—		—		185
Consumer		6		97		79		20		—		6		—		208
Total gross charge-offs	$	6	$	698	$	343	$	228	$	—	$	41	$	—	$	1,316

Credit Quality Indicators. The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on all loans at origination and is updated on a quarterly basis for loans risk rated Watch, Special Mention, Substandard, or Doubtful. In addition, lending relationships of $4 million or more, exclusive of any consumer or owner-occupied residential loan, are subject to an annual credit analysis which is prepared by the loan administration department and presented to a loan committee with appropriate lending authority. A sample of lending relationships in excess of $1 million (exclusive of single-family residential real estate loans) are subject to an independent loan review annually, in order to verify risk ratings. The Company uses the following definitions for risk ratings:

Watch – Loans classified as watch exhibit weaknesses that require more than usual monitoring. Issues may include deteriorating financial condition, payments made after due date but within 30 days, adverse industry conditions or management problems.

Special Mention – Loans classified as special mention exhibit signs of further deterioration but still generally make payments within 30 days. This is a transitional rating and loans should typically not be rated Special Mention for more than 12 months.

Substandard – Loans classified as substandard possess weaknesses that jeopardize the ultimate collection of the principal and interest outstanding. These loans exhibit continued financial losses, ongoing delinquency, overall poor financial condition, and insufficient collateral. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

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Doubtful – Loans classified as doubtful have all the weaknesses of substandard loans, and have deteriorated to the level that there is a high probability of substantial loss.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be Pass rated loans.

A periodic review of selected credits (based on loan size and type) is conducted to identify loans with heightened risk or probable losses and to assign risk grades. The primary responsibility for this review rests with loan administration personnel. This review is supplemented with periodic examinations of both selected credits and the credit review process by the Company’s internal audit function and applicable regulatory agencies. The information from these reviews assists management in the timely identification of problems and potential problems and provides a basis for deciding whether the credit continues to share similar risk characteristics with collectively evaluated loan pools, or whether credit losses for the loan should be evaluated on an individual loan basis.

The following table presents the credit risk profile of the Company’s loan portfolio (excluding deferred loan fees) based on rating category and fiscal year of origination as of December 31, 2024. This table includes PCD loans, which are reported according to risk categorization after acquisition based on the Company’s standards for such classification:

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													Revolving
(dollars in thousands)	2025		2024		2023		2022		2021		Prior		loans		Total
1-4 residential real estate
Pass	$	119,788	$	135,773	$	143,747	$	178,615	$	133,271	$	143,936	$	105,962	$	961,092
Watch		146		690		335		328		201		261		—		1,961
Special Mention		—		—		—		—		—		—		—		—
Substandard		954		494		30		682		565		1,170		248		4,143
Doubtful		—		—		—		—		—		—		—		—
Total 1-4 residential real estate	$	120,888	$	136,957	$	144,112	$	179,625	$	134,037	$	145,367	$	106,210	$	967,196

Non-owner occupied commercial real estate
Pass	$	51,464	$	98,905	$	224,508	$	283,746	$	84,796	$	80,202	$	8,198	$	831,819
Watch		5,071		1,770		15,454		202		1,510		1,378		—		25,385
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		42		25,238		—		—		—		25,280
Doubtful		—		—		—		—		—		—		—		—
Total Non-owner occupied commercial real estate	$	56,535	$	100,675	$	240,004	$	309,186	$	86,306	$	81,580	$	8,198	$	882,484

Owner occupied commercial real estate
Pass	$	37,467	$	56,609	$	87,988	$	84,846	$	79,371	$	54,046	$	20,179	$	420,506
Watch		606		1,071		6,614		1,151		148		1,156		500		11,246
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		1,802		—		930		—		425		483		3,640
Doubtful		—		—		—		—		—		—		—		—
Total Owner occupied commercial real estate	$	38,073	$	59,482	$	94,602	$	86,927	$	79,519	$	55,627	$	21,162	$	435,392

Multi-family real estate
Pass	$	44,151	$	19,603	$	147,791	$	77,287	$	71,706	$	14,418	$	1,125	$	376,081
Watch		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total Multi-family real estate	$	44,151	$	19,603	$	147,791	$	77,287	$	71,706	$	14,418	$	1,125	$	376,081

Construction and land development
Pass	$	113,678	$	82,003	$	157,946	$	27,040	$	2,322	$	2,375	$	1,892	$	387,256
Watch		4,949		—		—		124		—		69		—		5,142
Special Mention		—		—		—		—		—		—		—		—
Substandard		990		—		—		—		—		—		—		990
Doubtful		—		—		—		—		—		—		—		—
Total Construction and land development	$	119,617	$	82,003	$	157,946	$	27,164	$	2,322	$	2,444	$	1,892	$	393,388

Agriculture real estate
Pass	$	24,666	$	34,110	$	42,486	$	52,165	$	46,195	$	16,810	$	19,869	$	236,301
Watch		—		248		91		109		—		259		—		707
Special Mention		—		—		—		—		—		—		—		—
Substandard		35		2,312		281		—		276		—		—		2,904
Doubtful		—		—		—		—		—		—		—		—
Total Agriculture real estate	$	24,701	$	36,670	$	42,858	$	52,274	$	46,471	$	17,069	$	19,869	$	239,912

Commercial and industrial
Pass	$	98,595	$	86,134	$	50,804	$	37,339	$	20,757	$	8,098	$	174,451	$	476,178
Watch		3,988		200		847		37		255		16		804		6,147
Special Mention		—		—		—		—		—		—		—		—
Substandard		97		177		202		966		39		743		250		2,474
Doubtful		—		—		—		—		—		—		—		—
Total Commercial and industrial	$	102,680	$	86,511	$	51,853	$	38,342	$	21,051	$	8,857	$	175,505	$	484,799

Agriculture production
Pass	$	20,471	$	32,054	$	9,814	$	3,642	$	5,682	$	2,056	$	114,069	$	187,788
Watch		137		71		—		—		—		—		217		425
Special Mention		—		—		—		—		—		—		—		—
Substandard		38		—		4		—		17		12		—		71
Doubtful		—		—		—		—		—		—		—		—
Total Agriculture production	$	20,646	$	32,125	$	9,818	$	3,642	$	5,699	$	2,068	$	114,286	$	188,284

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Consumer
Pass	$	17,680	$	17,925	$	12,255	$	4,614	$	1,438	$	271	$	1,754	$	55,937
Watch		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—
Substandard		6		27		16		1		30		—		—		80
Doubtful		—		—		—		—		—		—		—		—
Total Consumer	$	17,686	$	17,952	$	12,271	$	4,615	$	1,468	$	271	$	1,754	$	56,017

All other loans
Pass	$	131	$	1,000	$	578	$	82	$	210	$	1,627	$	—	$	3,628
Watch		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total All other loans	$	131	$	1,000	$	578	$	82	$	210	$	1,627	$	—	$	3,628

Total Loans
Pass	$	528,091	$	564,116	$	877,917	$	749,376	$	445,748	$	323,839	$	447,499	$	3,936,586
Watch		14,897		4,050		23,341		1,951		2,114		3,139		1,521		51,013
Special Mention		—		—		—		—		—		—		—		—
Substandard		2,120		4,812		575		27,817		927		2,350		981		39,582
Doubtful		—		—		—		—		—		—		—		—
Total	$	545,108	$	572,978	$	901,833	$	779,144	$	448,789	$	329,328	$	450,001	$	4,027,181

The following table presents the credit risk profile of the Company’s loan portfolio (excluding deferred loan fees) based on rating category and fiscal year of origination as of June 30, 2024. This table includes PCD loans, which were reported according to risk categorization after acquisition based on the Company’s standards for such classification:


													Revolving
(dollars in thousands)	2024		2023		2022		2021		2020		Prior		loans		Total
1-4 residential real estate
Pass	$	167,734	$	157,530	$	195,002	$	142,721	$	66,292	$	92,728	$	99,365	$	921,372
Watch		877		289		87		396		98		23		—		1,770
Special Mention		—		—		—		—		—		—		—		—
Substandard		686		797		243		183		30		294		22		2,255
Doubtful		—		—		—		—		—		—		—		—
Total 1-4 residential real estate	$	169,297	$	158,616	$	195,332	$	143,300	$	66,420	$	93,045	$	99,387	$	925,397

Non-owner occupied commercial real estate
Pass	$	120,914	$	232,802	$	294,138	$	102,380	$	33,691	$	55,190	$	6,470	$	845,585
Watch		4,658		16,232		209		1,513		4,443		1,404		—		28,459
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		43		25,683		—		—		—		—		25,726
Doubtful		—		—		—		—		—		—		—		—
Total Non-owner occupied commercial real estate	$	125,572	$	249,077	$	320,030	$	103,893	$	38,134	$	56,594	$	6,470	$	899,770

Owner occupied commercial real estate
Pass	$	63,251	$	98,776	$	89,361	$	86,975	$	25,664	$	26,124	$	20,147	$	410,298
Watch		1,252		6,492		1,178		154		—		1,181		520		10,777
Special Mention		—		—		—		—		—		—		—		—
Substandard		3,233		—		2,199		—		—		428		541		6,401
Doubtful		—		—		—		—		—		—		—		—
Total Owner occupied commercial real estate	$	67,736	$	105,268	$	92,738	$	87,129	$	25,664	$	27,733	$	21,208	$	427,476

Multi-family real estate
Pass	$	36,518	$	157,471	$	86,171	$	77,545	$	21,438	$	5,341	$	80	$	384,564
Watch		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total Multi-family real estate	$	36,518	$	157,471	$	86,171	$	77,545	$	21,438	$	5,341	$	80	$	384,564

Construction and land development
Pass	$	104,162	$	143,538	$	27,524	$	4,379	$	3,887	$	679	$	1,518	$	285,687
Watch		652		2,906		131		—		—		—		—		3,689

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Special Mention		—		—		—		—		—		—		—		—
Substandard		1,129		36		—		—		—		—		—		1,165
Doubtful		—		—		—		—		—		—		—		—
Total Construction and land development	$	105,943	$	146,480	$	27,655	$	4,379	$	3,887	$	679	$	1,518	$	290,541

Agriculture real estate
Pass	$	39,491	$	46,387	$	56,407	$	49,334	$	9,947	$	9,238	$	18,003	$	228,807
Watch		281		100		197		—		259		—		—		837
Special Mention		—		—		—		—		—		—		—		—
Substandard		2,265		281		—		283		—		—		47		2,876
Doubtful		—		—		—		—		—		—		—		—
Total Agriculture real estate	$	42,037	$	46,768	$	56,604	$	49,617	$	10,206	$	9,238	$	18,050	$	232,520

Commercial and industrial
Pass	$	116,173	$	60,404	$	43,205	$	43,879	$	3,145	$	4,863	$	174,181	$	445,850
Watch		1,031		250		43		—		—		228		404		1,956
Special Mention		—		—		—		—		—		—		—		—
Substandard		272		275		859		—		116		769		50		2,341
Doubtful		—		—		—		—		—		—		—		—
Total Commercial and industrial	$	117,476	$	60,929	$	44,107	$	43,879	$	3,261	$	5,860	$	174,635	$	450,147

Agriculture production
Pass	$	40,980	$	11,288	$	4,115	$	6,159	$	1,965	$	229	$	110,396	$	175,132
Watch		170		37		204		—		—		127		217		755
Special Mention		—		—		—		—		—		—		—		—
Substandard		5		23		9		17		—		27		—		81
Doubtful		—		—		—		—		—		—		—		—
Total Agriculture production	$	41,155	$	11,348	$	4,328	$	6,176	$	1,965	$	383	$	110,613	$	175,968

Consumer
Pass	$	30,317	$	17,318	$	6,547	$	2,268	$	467	$	54	$	2,683	$	59,654
Watch		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		3		11		3		—		—		—		17
Doubtful		—		—		—		—		—		—		—		—
Total Consumer	$	30,317	$	17,321	$	6,558	$	2,271	$	467	$	54	$	2,683	$	59,671

All other loans
Pass	$	1,139	$	644	$	122	$	217	$	43	$	1,816	$	—	$	3,981
Watch		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total All other loans	$	1,139	$	644	$	122	$	217	$	43	$	1,816	$	—	$	3,981

Total Loans
Pass	$	720,679	$	926,158	$	802,592	$	515,857	$	166,539	$	196,262	$	432,843	$	3,760,930
Watch		8,921		26,306		2,049		2,063		4,800		2,963		1,141		48,243
Special Mention		—		—		—		—		—		—		—		—
Substandard		7,590		1,458		29,004		486		146		1,518		660		40,862
Doubtful		—		—		—		—		—		—		—		—
Total	$	737,190	$	953,922	$	833,645	$	518,406	$	171,485	$	200,743	$	434,644	$	3,850,035

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Past-due Loans. The following tables present the Company’s loan portfolio aging analysis (excluding deferred loan fees) as of December 31, 2024 and June 30, 2024. These tables include PCD loans, which are reported according to aging analysis after acquisition based on the Company’s standards for such classification:


	December 31, 2024
					Greater Than								Greater Than 90
	30-59 Days		60-89 Days		90 Days		Total				Total Loans		Days Past Due
(dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Receivable		and Accruing
1-4 residential real estate	$	841	$	1,777	$	2,863	$	5,481	$	961,715	$	967,196	$	—
Non-owner occupied commercial real estate		—		64		—		64		882,420		882,484		—
Owner occupied commercial real estate		1,225		89		143		1,457		433,935		435,392		—
Multi-family real estate		—		—		—		—		376,081		376,081		—
Construction and land development		299		31		—		330		393,058		393,388		—
Agriculture real estate		—		—		1,825		1,825		238,087		239,912		—
Commercial and industrial		1,221		541		1,676		3,438		481,361		484,799		—
Agriculture production		55		60		—		115		188,169		188,284		—
Consumer		456		112		74		642		55,375		56,017		—
All other loans		—		—		—		—		3,628		3,628		—
Total loans	$	4,097	$	2,674	$	6,581	$	13,352	$	4,013,829	$	4,027,181	$	—


	June 30, 2024
					Greater Than								Greater Than 90
	30-59 Days		60-89 Days		90 Days		Total				Total Loans		Days Past Due
(dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Receivable		and Accruing
1-4 residential real estate	$	890	$	2,087	$	664	$	3,641	$	921,756	$	925,397	$	—
Non-owner occupied commercial real estate		107		—		—		107		899,663		899,770		—
Owner occupied commercial real estate		305		—		1,060		1,365		426,111		427,476		—
Multi-family real estate		—		—		—		—		384,564		384,564		—
Construction and land development		251		377		—		628		289,913		290,541		—
Agriculture real estate		573		—		35		608		231,912		232,520		—
Commercial and industrial		641		83		1,335		2,059		448,088		450,147		—
Agriculture production		50		—		344		394		175,574		175,968		—
Consumer		311		74		14		399		59,272		59,671		—
All other loans		—		—		—		—		3,981		3,981		—
Total loans	$	3,128	$	2,621	$	3,452	$	9,201	$	3,840,834	$	3,850,035	$	—

At December 31, 2024, there were three PCD loans totaling $558,000 greater than 90 days past due, compared to one PCD loan totaling $560,000 that was greater than 90 days past due at June 30, 2024.

Loans that experience insignificant payment delays and payment shortfalls generally are not adversely classified or determined to not share similar risk characteristics with collectively evaluated pools of loans for determination of the ACL estimate. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Significant payment delays or shortfalls may lead to a determination that a loan should be individually evaluated for estimated credit losses.

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Collateral Dependent Loans. The following tables present the Company’s collateral dependent loans and related ACL at December 31, 2024, and June 30, 2024:



											Allowance on
(dollars in thousands)	Commercial		Residential		Construction and						Collateral
December 31, 2024	Real Estate		Real Estate		Land Development		Other		Total		Dependent Loans

1-4 residential real estate	$	—	$	784	$	—	$	—	$	784	$	103
Non-owner occupied commercial real estate		23,099		—		—		—		23,099		3,604
Owner occupied commercial real estate		543		—		—		—		543		208
Construction and land development		—		—		961		—		961		—
Commercial and industrial		—		—		—		2,386		2,386		827
Total loans	$	23,642	$	784	$	961	$	2,386	$	27,773	$	4,742



											Allowance on
(dollars in thousands)	Commercial		Residential		Construction and						Collateral
June 30, 2024	Real Estate		Real Estate		Land Development		Other		Total		Dependent Loans

1-4 residential real estate	$	—	$	797	$	—	$	—	$	797	$	116
Non-owner occupied commercial real estate		23,457		—		—		—		23,457		10,175
Commercial and industrial		—		—		—		2,705		2,705		635
Total loans	$	23,457	$	797	$	—	$	2,705	$	26,959	$	10,926

Nonaccrual Loans. The following table presents the Company’s amortized cost basis of nonaccrual loans segmented by class of loans at December 31, 2024, and June 30, 2024. The table excludes performing modifications to borrowers experiencing financial difficulty.



(dollars in thousands)	December 31, 2024		June 30, 2024
1-4 residential real estate	$	3,404	$	1,391
Owner occupied commercial real estate		281		1,102
Construction and land development		97		108
Agriculture real estate		1,825		1,896
Commercial and industrial		2,339		1,703
Agriculture production		286		461
Consumer		77		19
Total loans	$	8,309	$	6,680

At December 31, 2024, there were no nonaccrual loans individually evaluated for which no ACL was recorded. Interest income recognized on nonaccrual loans in the three- and six- month periods ended December 31, 2024 and 2023, was immaterial.

Modifications to Borrowers Experiencing Financial Difficulty. During the three- and six- month periods ended December 31, 2024, there were no loan modifications made for borrowers experiencing financial difficulty. During the three- and six- month periods ended December 31, 2023, two loan modifications, totaling $867,000, were made to commercial loans for borrowers experiencing financial difficulty. Loans classified as modifications to borrowers experiencing financial difficulty outstanding at December 31, 2023 are shown in the following table segregated by portfolio segment and type of modification. The percentage of amortized cost of loans that were modified compared to total outstanding loans is also presented below.

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	December 31, 2023
					Term		Interest		Total Class of
	Principal		Payment		Extension		Rate		Financing
	Forgiveness		Delays		Modifications		Reduction		Receivable
(dollars in thousands)
1-4 residential real estate	$	—	$	—	$	—	$	—	—	%
Non-owner occupied commercial real estate		—		—		—		—	—	%
Owner occupied commercial real estate		—		—		—		—	—	%
Multi-family real estate		—		—		—		—	—	%
Construction and land development		—		—		—		—	—	%
Agriculture real estate		—		—		—		—	—	%
Commercial and industrial		—		867		—		—	0.19	%
Agriculture production		—		—		—		—	—	%
Consumer		—		—		—		—	—	%
All other loans		—		—		—		—	—	%
Total	$	—	$	867	$	—	$	—	0.02	%

Both loan modifications made during fiscal 2024 were more than 90 days past due, and were classified as substandard, at December 31, 2023. Both of these loans defaulted in fiscal 2024. For modifications to loans made to borrowers experiencing financial difficulty that are adversely classified, the Company determines the allowance for credit losses on an individual basis, using the same process that it utilizes for other adversely classified loans.

Residential Real Estate Foreclosures. The Company may obtain physical possession of real estate collateralizing a residential mortgage loan or home equity loan via foreclosure or in-substance repossession. As of December 31, 2024 and June 30, 2024, the carrying value of foreclosed residential real estate properties as a result of obtaining physical possession was $0 and $74,000, respectively. In addition, as of December 31, 2024, and June 30, 2024, the Company had residential mortgage loans and home equity loans with a carrying value of $92,000 and $193,000, respectively, collateralized by residential real estate property for which formal foreclosure proceedings were in process.

Note 5: Premises and Equipment

Following is a summary of premises and equipment:



(dollars in thousands)	December 31, 2024		June 30, 2024
Land	$	15,389	$	15,376
Buildings and improvements		85,318		84,474
Construction in progress		1,992		829
Furniture, fixtures, equipment and software		28,677		27,850
Automobiles		112		112
Operating leases ROU asset		6,990		6,669
		138,478		135,310
Less accumulated depreciation		42,060		39,358
	$	96,418	$	95,952

Leases. The Company elected certain relief options under ASU 2016-02, Leases (Topic 842), including the option not to recognize right of use asset and lease liabilities that arise from short-term leases (leases with terms of twelve months or less). At December 31, 2024, the Company had ten leased properties, which included banking facilities, administrative offices and ground leases, and numerous office equipment lease agreements in which it was the lessee, with lease terms exceeding twelve months.

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All of the Company’s leases are classified as operating leases. These operating leases are included as a ROU asset in the premises and equipment line item on the Company’s consolidated balance sheets. The corresponding lease liability is included in the accounts payable and other liabilities line item on the Company’s consolidated balance sheets.

In the February 2022 acquisition of Fortune, the Company assumed a ground lease with an entity that is controlled by a Company insider. This property is in St. Louis County, MO and is in its fourth year of a twenty year term.

ASU 2016-02 also requires certain other accounting elections. The Company elected the short-term lease recognition exemption for all leases that qualify, meaning those with terms under twelve months. ROU assets or lease liabilities are not to be recognized for short-term leases. The calculated amount of the ROU assets and lease liabilities in the table below are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability. Regarding the discount rate, the ASU requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception over a similar term. The expected lease terms range from 18 months to 20 years.


	December 31, 2024		June 30, 2024
Consolidated Balance Sheet
Operating leases ROU asset	$	6,990	$	6,669
Operating leases liability	$	6,990	$	6,669


	For the three- month periods ended				For the six- month periods ended
	December 31,				December 31,
(dollars in thousands)	2024		2023		2024		2023
Consolidated Statement of Income
Operating lease costs classified as occupancy and equipment expense	$	297	$	307	$	595	$	586
(includes short-term lease costs)

Supplemental disclosures of cash flow information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	205	$	243	$	411	$	414
ROU assets obtained in exchange for operating lease obligations:	$	—	$	—	$	—	$	2,445

At December 31, 2024, future expected lease payments for leases with terms exceeding one year were as follows:


(dollars in thousands)
2025	$	421
2026		720
2027		714
2028		729
2029		748
Thereafter		8,298
Future lease payments expected	$	11,630

The Company leases facilities it owns or portions of facilities it owns to other third parties. The Company has determined that all of these lease agreements, in terms of being the lessor, are classified as operating leases. For the three- and six- month periods ended December 31, 2024, income recognized from these lessor agreements was $109,000

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and $224,000, respectively. For the three- and six- month periods ended December 31, 2023, income recognized from these lessor agreements was $76,000 and $133,000, respectively.

Note 6: Deposits

Deposits are summarized as follows:



(dollars in thousands)	December 31, 2024		June 30, 2024
Non-interest bearing accounts	$	514,199	$	514,107
NOW accounts		1,211,402		1,239,663
Money market deposit accounts		350,289		336,799
Savings accounts		573,291		517,084
Certificates		1,561,446		1,335,406
Total Deposit Accounts	$	4,210,627	$	3,943,059

Brokered certificates totaled $251.0 million at December 31, 2024, compared to $171.8 million at June 30, 2024.

Note 7: Repurchase Agreements

Securities sold under agreements to repurchase totaled $15.0 million at December 31, 2024, an increase of $5.6 million from $9.4 million at June 30, 2024. The following table sets forth the outstanding amounts and interest rates as of December 31, 2024 and June 30, 2024:


	December 31,			June 30,
(dollars in thousands)	2024			2024
Period-end balance	$	15,000		$	9,398
Average balance during the period		13,661			9,398
Maximum month-end balance during the period		15,000			9,398
Average interest during the period		5.65	%		5.39	%
Period-end interest rate		5.11	%		5.39	%

The repurchase agreements mature daily and the following sets forth the collateral pledged by class for repurchase agreements:


	December 31,		June 30,
(dollars in thousands)	2024		2024
Mortgage-backed securities (MBS)	$	15,709	$	9,981

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Note 8: Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share:


	Three- month periods ended				Six- month periods ended
	December 31,				December 31,
(dollars in thousands except per share data)	2024		2023		2024		2023


Net income	$	14,653	$	12,193	$	27,110	$	25,345
Less: distributed earnings allocated to participating securities		(11)		(10)		(24)		(21)
Less: undistributed earnings allocated to participating securities		(50)		(43)		(99)		(90)
Net income available to common shareholders	$	14,592	$	12,140	$	26,987	$	25,234

Denominator for basic earnings per share
Weighted-average shares outstanding		11,230,514		11,286,786		11,225,779		11,286,399
Effect of dilutive securities stock options or awards		29,463		14,695		23,820		11,803
Denominator for diluted earnings per share		11,259,977		11,301,481		11,249,599		11,298,202

Basic earnings per share available to common stockholders	$	1.30	$	1.08	$	2.40	$	2.24
Diluted earnings per share available to common stockholders	$	1.30	$	1.07	$	2.40	$	2.23

Certain option and restricted stock awards were excluded from the computation of diluted earnings per share because they were anti-dilutive, based on the average market prices of the Company’s common stock for these periods. Outstanding options and shares of restricted stock totaling 0 and 51,500 were excluded from the computation of diluted earnings per share for the three- and six- month periods ended December 31, 2024, respectively, while outstanding options and shares of restricted stock totaling 55,000 were excluded from the computation of diluted earnings per share for each of the three- and six- month periods ended December 31, 2023, respectively.

Note 9: Income Taxes

The Company and its subsidiaries file income tax returns in the U.S. Federal jurisdiction and various states. The Company is no longer subject to federal examinations by tax authorities for tax years ending June 30, 2019 and before. The Company’s Missouri income tax returns for the fiscal years ending June 30, 2016 through 2018 are under audit by the Missouri Department of Revenue. The Company recognized no interest or penalties related to income taxes for the periods presented.

The Company’s income tax provision is comprised of the following components:


	For the three-month periods ended				For the six-month periods ended
(dollars in thousands)	December 31, 2024		December 31, 2023		December 31, 2024		December 31, 2023
Income taxes
Current	$	4,547	$	3,173	$	7,925	$	6,660
Deferred		—		—		—		—
Total income tax provision	$	4,547	$	3,173	$	7,925	$	6,660

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The components of net deferred tax assets (included in other assets on the condensed consolidated balance sheet) are summarized as follows:


(dollars in thousands)	December 31, 2024		June 30, 2024
Deferred tax assets:
Provision for losses on loans	$	12,830	$	12,159
Accrued compensation and benefits		930		1,063
NOL carry forwards acquired		27		30
Low income housing tax credit carry forward		198		396
Unrealized loss on other real estate		304		949
Unrealized loss on available for sale securities		4,626		4,915
Total deferred tax assets		18,915		19,512

Deferred tax liabilities:
Purchase accounting adjustments		2,537		2,452
Depreciation		4,097		4,519
FHLB stock dividends		120		120
Prepaid expenses		582		705
Other		681		529
Total deferred tax liabilities		8,017		8,325
Net deferred tax asset	$	10,898	$	11,187

As of December 31, 2024, the Company had approximately $124,000 in federal net operating loss carryforwards, which were acquired in the July 2009 Southern Bank of Commerce merger. The amount reported is net of the IRC Sec. 382 limitation, or state equivalent, related to utilization of net operating loss carryforwards of acquired corporations. Unless otherwise utilized, the net operating losses will begin to expire in 2030.

A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax expense is shown below:


	For the three-month periods ended				For the six-month periods ended
(dollars in thousands)	December 31, 2024		December 31, 2023		December 31, 2024		December 31, 2023
Tax at statutory rate	$	4,032	$	3,227	$	7,357	$	6,721
Increase (reduction) in taxes resulting from:
Nontaxable municipal income		(76)		(117)		(182)		(225)
State tax, net of Federal benefit		199		131		284		295
Cash surrender value of Bank-owned life insurance		(110)		(99)		(218)		(195)
Tax credit benefits		(3)		(4)		(27)		(7)
Other, net		505		35		711		71
Actual provision	$	4,547	$	3,173	$	7,925	$	6,660

For the three- and six- month periods ended December 31, 2024 and 2023, income tax expense at the statutory rate was calculated using a 21% annual effective tax rate (AETR).

Tax credit benefits are recognized under the deferral method of accounting for investments in tax credits.

Note 10: 401(k) Retirement Plan

The Bank has a 401(k) retirement plan that covers substantially all eligible employees. The Bank made “safe harbor” matching contributions to the Plan of up to 4% of eligible compensation, depending upon the percentage of eligible pay deferred into the plan by the employee, and also made additional, discretionary profit-sharing contributions for fiscal 2024. For fiscal 2025, the Company has maintained the safe harbor matching contribution of up to 4%, and expects to continue to make additional, discretionary profit-sharing contributions. During the three- and six- month periods ended

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December 31, 2024, retirement plan expenses recognized for the Plan totaled approximately $661,000 and $1.4 million, as compared to $678,000 and $1.4 million for the same periods of the prior fiscal year. Employee deferrals and safe harbor contributions are fully vested. Profit-sharing or other contributions vest over a period of five years.

Note 11: Subordinated Debt

In March 2004, the Company established Southern Missouri Statutory Trust I as a statutory business trust, to issue Floating Rate Capital Securities (the “Trust Preferred Securities”). The securities mature in 2034, became redeemable after five years, and bear interest at a floating rate based on SOFR. The securities represent undivided beneficial interests in the trust, which was established by the Company for the purpose of issuing the securities. The Trust Preferred Securities were sold in a private transaction exempt from registration under the Securities Act of 1933, as amended (the “Act”) and have not been registered under the Act. The securities may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. Southern Missouri Statutory Trust I used the proceeds from the sale of the Trust Preferred Securities to purchase Junior Subordinated Debentures (the “Debentures”) of the Company which have terms identical to the Trust Preferred Securities. At December 31, 2024, the Debentures carried an interest rate of 7.36%. The balance of the Debentures outstanding was $7.2 million at both December 31, 2024 and June 30, 2024. The Company used its net proceeds for working capital and investment in its subsidiaries.

In connection with the October 2013 Ozarks Legacy Community Financial, Inc. (OLCF) merger, the Company assumed $3.1 million in floating rate junior subordinated debt securities. The debt securities had been issued in June 2005 by OLCF in connection with the sale of trust preferred securities, bear interest at a floating rate based on SOFR, are now redeemable at par, and mature in 2035. At December 31, 2024, the current rate was 7.07%. The carrying value of the debt securities was approximately $2.8 million at both December 31, 2024 and June 30, 2024.

In connection with the August 2014 Peoples Service Company, Inc. (PSC) merger, the Company assumed $6.5 million in floating rate junior subordinated debt securities. The debt securities had been issued in 2005 by PSC’s subsidiary bank holding company, Peoples Banking Company, in connection with the sale of trust preferred securities, bear interest at a floating rate based on SOFR, are now redeemable at par, and mature in 2035. At December 31, 2024, the current rate was 6.42%. The carrying value of the debt securities was approximately $5.6 million at both December 31, 2024 and June 30, 2024.

The Company’s investment at a face amount of $505,000 in these trusts is included with Prepaid Expenses and Other Assets in the consolidated balance sheets, and is carried at a value of $469,000 and $467,000 at December 31, 2024 and June 30, 2024, respectively.

In connection with the February 2022 Fortune merger, the Company assumed $7.5 million in fixed-to-floating rate subordinated notes. The notes had been issued in May 2021 by Fortune to a multi-lender group, bear interest through May 2026 at a fixed rate of 4.5% and will bear interest thereafter at SOFR plus 3.77%. The notes will be redeemable at par beginning in May 2026, and mature in May 2031. The carrying value of the notes was approximately $7.6 million at both December 31, 2024 and June 30, 2024.

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Note 12: Fair Value Measurements

ASC Topic 820, Fair Value Measurements, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Topic 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1 Quoted prices in active markets for identical assets or liabilities

Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in active markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

Level 3 Unobservable inputs supported by little or no market activity that are significant to the fair value of the assets or liabilities

Recurring Measurements. The following table presents the fair value measurements recognized in the accompanying condensed consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2024 and June 30, 2024:


	Fair Value Measurements at December 31, 2024, Using:
			Quoted Prices in
			Active Markets for		Significant Other		Significant
			Identical Assets		Observable Inputs		Unobservable Inputs
(dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
Assets:
Obligations of state and political subdivisions	$	27,725	$	—	$	27,725	$	—
Corporate obligations		32,033		—		32,033		—
Asset backed securities		41,768		—		41,768		—
Other securities		4,922		—		4,922		—
MBS and CMOs		361,612		—		361,612		—
Mortgage servicing rights		2,392		—		—		2,392
Derivative financial instruments		102		—		102		—
Liabilities:
Derivative financial instruments		81		—		81		—


	Fair Value Measurements at June 30, 2024, Using:
			Quoted Prices in
			Active Markets for		Significant Other		Significant
			Identical Assets		Observable Inputs		Unobservable Inputs
(dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
Assets:
Obligations of state and political subdivisions	$	27,753	$	—	$	27,753	$	—
Corporate obligations		31,277		—		31,277		—
Asset backed securities		58,679		—		58,679		—
Other securities		5,333		—		5,333		—
MBS and CMOs		304,861		—		304,861		—
Mortgage servicing rights		2,448						2,448
Derivative financial instruments		20		—		20		—
Liabilities:
Derivative financial instruments		15		—		15		—

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. There have been no significant changes in the valuation techniques during the three months ended December 31, 2024.

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Available-for-sale Securities. When quoted market prices are available in an active market, securities are classified within Level 1. If quoted market prices are not available, then fair values are estimated using pricing models, or quoted prices of securities with similar characteristics. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

Derivative financial instruments. The Company’s derivative financial instruments consist of interest rate swaps on loans accounted for as fair value hedges. The fair value of interest rate swaps was determined by discounting the expected cash flows of the interest rate swaps. This valuation reflects the contractual terms of the interest rate swaps, including the period to maturity, and uses observable market-based inputs. The inputs used to value the Company’s interest rate swaps fall within Level 2 of the fair value hierarchy and, as a result, the interest rate swaps were categorized as Level 2 within the fair value hierarchy. There were no transfers between levels of the fair value hierarchy during the period ended December 31, 2024. See information regarding the Company’s derivative financial agreements in Note 13: Derivative Financial Instruments of these Notes to Consolidated Financial Statements.

Mortgage servicing rights. The Company records MSR at fair value on a recurring basis with subsequent remeasurement of MSR based on change in fair value. An estimate of the fair value of the Company’s MSR is determined by utilizing assumptions about factors such as mortgage interest rates, discount rates, mortgage loan prepayment speeds, market trends and industry demand. All of the Company’s MSR are classified as Level 3.

Nonrecurring Measurements. The following tables present the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the ASC 820 fair value hierarchy in which the fair value measurements fell at December 31, 2024 and June 30, 2024:


	Fair Value Measurements at December 31, 2024, Using:
			Quoted Prices in
			Active Markets for		Significant Other		Significant
			Identical Assets		Observable Inputs		Unobservable Inputs
(dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
Foreclosed and repossessed assets held for sale	$	951	$	—	$	—	$	951
Collateral dependent loans		21,042		—		—		21,042


	Fair Value Measurements at June 30, 2024, Using:
			Quoted Prices in
			Active Markets for		Significant Other		Significant
			Identical Assets		Observable Inputs		Unobservable Inputs
(dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
Foreclosed and repossessed assets held for sale	$	759	$	—	$	—	$	759
Collateral dependent loans		12,994		—		—		12,994

The following table presents losses recognized on assets measured on a non-recurring basis for the six -month periods ended December 31, 2024 and 2023:


	For the six months ended
(dollars in thousands)	December 31, 2024		December 31, 2023
Foreclosed and repossessed assets held for sale	$	91	$	664
Total losses on assets measured on a non-recurring basis	$	91	$	664

The following is a description of valuation methodologies and inputs used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification

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

Foreclosed and Repossessed Assets Held for Sale. Foreclosed and repossessed assets held for sale are valued at the time the loan is foreclosed upon or collateral is repossessed and the asset is transferred to foreclosed or repossessed assets held for sale. The value of the asset is based on third party or internal appraisals, less estimated costs to sell and appropriate discounts, if any. The appraisals are generally discounted based on current and expected market conditions that may impact the sale or value of the asset and management’s knowledge and experience with similar assets. Such discounts typically may be significant and result in a Level 3 classification of the inputs for determining fair value of these assets. Foreclosed and repossessed assets held for sale are continually evaluated for additional impairment and are adjusted accordingly if impairment is identified.

Unobservable (Level 3) Inputs. The following tables present quantitative information about unobservable inputs used in nonrecurring Level 3 fair value measurements at December 31, 2024 and June 30, 2024.

Range

Fair value at

Valuation

Unobservable

Weighted-average

(dollars in thousands)

December 31, 2024

technique

inputs

inputs applied

Nonrecurring Measurements

Foreclosed and repossessed assets

951

Third party appraisal

Marketability discount

18.6 - 31.3

27.0

Collateral dependent loans

21,042

Collateral value

Marketability discount

13.1 - 48.4

16.8

Range

Fair value at

Valuation

Unobservable

Weighted-average

(dollars in thousands)

June 30, 2024

technique

inputs

inputs applied

Nonrecurring Measurements

Foreclosed and repossessed assets

759

Third party appraisal

Marketability discount

17.9 - 44.9

20.3

Collateral dependent loans

12,994

Collateral value

Marketability discount

14.5 - 52.3

43.7

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Fair Value of Financial Instruments. The following table presents estimated fair values of the Company’s financial instruments not reported at fair value and the level within the fair value hierarchy in which the fair value measurements fell at December 31, 2024 and June 30, 2024.


	December 31, 2024
			Quoted Prices
			in Active				Significant
			Markets for		Significant Other		Unobservable
	Carrying		Identical Assets		Observable Inputs		Inputs
(dollars in thousands)	Amount		(Level 1)		(Level 2)		(Level 3)
Financial assets
Cash and cash equivalents	$	145,834	$	145,834	$	—	$	—
Interest-bearing time deposits		244		—		244		—
Stock in FHLB		9,003		—		9,003		—
Stock in Federal Reserve Bank of St. Louis		9,096		—		9,096		—
Loans receivable, net		3,972,239		—		—		3,843,978
Accrued interest receivable		28,080		—		28,080		—
Mortgage servicing assets		2,392						2,392
Derivative financial instruments		102		—		102		—
Financial liabilities
Deposits		4,210,627		2,649,640		—		1,559,521
Securities sold under agreements to repurchase		15,000		—		15,000		—
Advances from FHLB		107,070		—		107,111		—
Accrued interest payable		10,922		—		10,922		—
Subordinated debt		23,182		—		—		21,657
Derivative financial instruments		81		—		81		—

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	June 30, 2024
			Quoted Prices
			in Active				Significant
			Markets for		Significant Other		Unobservable
	Carrying		Identical Assets		Observable Inputs		Inputs
(dollars in thousands)	Amount		(Level 1)		(Level 2)		(Level 3)
Financial assets
Cash and cash equivalents	$	60,904	$	60,904	$	—	$	—
Interest-bearing time deposits		491		—		491		—
Stock in FHLB		8,713		—		8,713		—
Stock in Federal Reserve Bank of St. Louis		9,089		—		9,089		—
Loans receivable, net		3,797,287		—		—		3,639,657
Accrued interest receivable		23,826		—		23,826		—
Mortgage servicing assets		2,448		—		—		2,448
Derivative financial instruments		20		—		20		—
Financial liabilities
Deposits		3,943,059		2,607,653		—		1,338,215
Securities sold under agreements to repurchase		9,398		—		9,398		—
Advances from FHLB		102,050		—		100,468		—
Accrued interest payable		12,868		—		12,868		—
Subordinated debt		23,156		—		—		20,576
Derivative financial instruments		15		—		15		—

Note 13: Derivative Financial Instruments

The Company enters into derivative financial instruments, primarily interest rate swaps, to convert certain long term fixed rate loans to floating rates to manage interest rate risk, facilitate asset/liability management strategies and manage other exposures. The fair value of derivative positions outstanding is included in other assets and other liabilities in the accompanying consolidated balance sheets and in the net change in each of these line items in the operating section of the accompanying consolidated statements of cash flows. The unrealized gains and losses, representing the change in fair value of the derivative, are being recorded in interest income in the consolidated statements of income. The ineffective portions of the unrealized gains or losses, if any, are recorded in interest income and interest expense in the consolidated statements of income.

The Company executed one interest rate swap, with an original notional amount of $10.0 million, during the first quarter of fiscal 2025, and executed two interest rate swaps, with original notional amounts of $20.0 million each, during the fourth quarter of fiscal 2024, for a total of $50.0 million, designated as fair value hedges, to convert certain long-term fixed rate 1-4 family loans to floating rates to hedge interest rate risk exposure. The portfolio layer method is being used, which allows the Company to designate a stated amount of the assets that are not expected to be affected by prepayments, defaults or other factors that could affect the timing and amount of the cash flow, as the hedged item. The effect of the swaps on loan interest income in the income statement during the three- and six- month periods ended December 31, 2024, totaled $83,000 and $261,000, and none in each of the same periods of the prior year.

The notional amounts and estimated fair values of the Company’s interest rate swaps at December 31, 2024 and June 30, 2024 are presented in the tables below:

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	December 31, 2024
			Fair Value
		Notional	Other		Other
(dollars in thousands)		Amount	Assets		Liabilities

1-4 Family interest rate swaps	$	50,000	$	102	$	81


	June 30, 2024
			Fair Value
		Notional	Other		Other
(dollars in thousands)		Amount	Assets		Liabilities

1-4 Family interest rate swaps	$	40,000	$	20	$	15

The carrying amount of the hedged assets, included in loans receivable, net and cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged assets at December 31, 2024 and June 30, 2024 are presented in the tables below:

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PART I: Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

SOUTHERN MISSOURI BANCORP, INC.

General

Southern Missouri Bancorp, Inc. (Southern Missouri or Company) is a Missouri corporation and owns all of the outstanding stock of Southern Bank (the Bank). The Company’s earnings are primarily dependent on the operations of the Bank. As a result, the following discussion relates primarily to the operations of the Bank. The Bank’s deposit accounts are generally insured up to a maximum of $250,000 by the Deposit Insurance Fund (DIF), which is administered by the Federal Deposit Insurance Corporation (FDIC). At December 31, 2024, the Bank operated from its headquarters, 62 full-service branch offices, two limited-service branch offices, and two loan production offices. The Bank owns the office building and related land in which its headquarters are located, and 59 of its other branch offices. The remaining seven branches and offices are either leased or partially owned.

The significant accounting policies followed by Southern Missouri and its wholly owned subsidiaries for interim financial reporting are consistent with the accounting policies followed for annual financial reporting. All adjustments, which are of a normal recurring nature and are in the opinion of management necessary for a fair statement of the results for the periods reported, have been included in the accompanying consolidated financial statements.

The consolidated balance sheet of the Company as of June 30, 2024, has been derived from the audited consolidated balance sheet of the Company as of that date. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission.

Management’s discussion and analysis of financial condition and results of operations is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited condensed consolidated financial statements and accompanying notes. The following discussion reviews the Company’s condensed consolidated financial condition at December 31, 2024, and results of operations for the three- and six- month periods ended December 31, 2024 and 2023.

Forward Looking Statements

This document contains statements about the Company and its subsidiaries which we believe are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may include, without limitation, statements with respect to anticipated future operating and financial performance, growth opportunities, interest rates, cost savings and funding advantages expected or anticipated to be realized by management. Words such as “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan” and similar expressions are intended to identify these forward-looking statements. Forward-looking statements by the Company and its management are based on beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions of management and are not guarantees of future performance. The important factors we discuss below, as well as other factors discussed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and identified in this filing and in our other filings with the SEC and those presented elsewhere by our management from time to time, could cause actual results to differ materially from those indicated by the forward-looking statements made in this document:

●

expected cost savings, synergies and other benefits from our merger and acquisition activities, including our recently completed acquisitions, might not be realized within the anticipated time frames, to the extent anticipated, or at all, and costs or difficulties relating to integration matters, including but not limited to customer and employee retention and labor shortages, might be greater than expected and goodwill impairment charges might be incurred;

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●

potential adverse impacts to economic conditions in our local market areas, other markets where the Company has lending relationships, or other aspects of the Company’s business operations or financial markets, including, without limitation, as a result of employment levels, labor shortages and the effects of inflation, a potential recession or slowed economic growth;

●

the strength of the United States economy in general and the strength of the local economies in which we conduct operations;

●

fluctuations in interest rates and inflation, including the effects of a potential recession whether caused by Federal Reserve actions or otherwise or slowed economic growth caused by changes in oil prices or supply chain disruptions;

●

the impact of monetary and fiscal policies of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) and the U.S. Government and other governmental initiatives affecting the financial services industry;

●

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;

●

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 on loans;

●

our ability to access cost-effective funding and maintain sufficient liquidity;

●

the timely development of and acceptance of our new products and services and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors’ products and services;

●

fluctuations in real estate values and both residential and commercial real estate markets, as well as agricultural business conditions;

●

demand for loans and deposits;

●

the impact of a federal government shutdown;

●

legislative or regulatory changes that adversely affect our business;

●

the effects of climate change, severe weather events, other natural disasters, war, terrorist activities or civil unrest and their effects on economic and business environments in which the Company operates;

●

changes in accounting principles, policies, or guidelines;

●

results of examinations of us by our regulators, including the possibility that our regulators may, among other things, require an increase in our reserve for credit losses on loans or a write-down of assets;

●

the impact of technological changes and an inability to keep pace with the rate of technological advances;

●

cyber threats, such as phishing, ransomware, and insider attacks, can lead to financial loss, reputational damage, and regulatory penalties if sensitive customer data and critical infrastructure are not adequately protected; and

●

our success at managing the risks involved in the foregoing.

The Company disclaims any obligation to update or revise any forward-looking statements based on the occurrence of future events, the receipt of new information, or otherwise.

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Critical Accounting Policies

Accounting principles generally accepted in the United States of America are complex and require management to apply significant judgments to various accounting, reporting and disclosure matters. Management of the Company must use assumptions and estimates to apply these principles where actual measurement is not possible or practical. For a complete discussion of the Company’s significant accounting policies, see “Note 1 of the Consolidated Financial Statements” in the Company’s 2024 Annual Report on Form 10-K and “Note 2 of the Notes to the Consolidated Financial Statements” in the Form 10-Q. Certain policies are considered critical because they are highly dependent upon subjective or complex judgments, assumptions and estimates. Changes in such estimates may have a significant impact on the financial statements. Management has reviewed the application of these policies with the Audit Committee of the Company’s Board of Directors. For a discussion of applying critical accounting policies, see “Critical Accounting Policies and Estimates” beginning on page 62 in the Company’s 2024 Annual Report.

Executive Summary

Our results of operations depend primarily on our net interest margin, which is directly impacted by the interest rate environment. The net interest margin represents interest income earned on interest-earning assets (primarily real estate loans, commercial and agricultural loans, and the investment portfolio), less interest expense paid on interest-bearing liabilities (primarily interest-bearing transaction accounts, certificates of deposit, savings and money market deposit accounts, and borrowed funds), as a percentage of average interest-earning assets. Net interest margin is directly impacted by the spread between long-term interest rates and short-term interest rates, as our interest-earning assets, particularly those with initial terms to maturity or repricing greater than one year, generally price off longer term rates while our interest-bearing liabilities generally price off shorter term interest rates. This difference in longer term and shorter term interest rates is often referred to as the steepness of the yield curve. A steep yield curve – in which the difference in interest rates between short term and long term periods is relatively large – could be beneficial to our net interest income, as the interest rate spread between our interest-earning assets and interest-bearing liabilities would be larger. Conversely, a flat or flattening yield curve, in which the difference in rates between short term and long term periods is relatively small or shrinking, or an inverted yield curve, in which short term rates exceed long term rates, could have an adverse impact on our net interest income, as our interest rate spread could decrease.

Our results of operations may also be affected significantly by general and local economic and competitive conditions, particularly those with respect to changes in market interest rates, government policies and actions of regulatory authorities.

During the first six months of fiscal 2025, total assets increased by $303.4 million. The increase was primarily attributable to an increase in net loans receivable, cash and cash equivalents, and AFS securities. Net loans receivable increased by $175.0 million; cash and cash equivalents increased by $84.9 million; and AFS securities increased by $40.2 million. Liabilities increased $279.7 million, which was primarily attributable to an increase in deposits of $267.6 million. Equity increased $23.6 million, attributable primarily to earnings retained after cash dividends paid, in combination with a $1.0 million reduction in accumulated other comprehensive losses (AOCL) as the market value of the Company’s investments appreciated due to the decrease in market interest rates. For more information, see “Comparison of Financial Condition at December 31, 2024 and June 30, 2024.”

Net income for the first six months of fiscal 2025 was $27.1 million, an increase of $1.8 million, or 7.0% as compared to the same period of the prior fiscal year. Compared to the year-ago period, the Company’s increase in net income was attributable to increases in net interest income and noninterest income, which were partially offset by increases in provision for credit losses (PCL), noninterest expense, and provision for income taxes. Diluted net income was $2.40 per common share for the first six months of fiscal 2025, as compared to $2.23 per common share for the same period of the prior fiscal year. For the first six months of fiscal 2025, as compared to the same period of the prior fiscal year, net interest income increased $4.9 million or 7.0%; PCL increased $1.3 million, or 71.7%; noninterest income increased $2.5 million, or 22.2%; noninterest expense increased $3.2 million, or 6.6%; and income before income taxes increased $3.0 million, or 9.5%. During the second quarter of fiscal 2024, the Bank sold bonds with a book value of $12.4 million, realizing a loss of $682,000 which was recognized in noninterest income. Recognition of this loss during the quarter reduced after-tax net income by $541,000. For more information see “Results of Operations.”

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Interest rates during the first six months of fiscal 2025 remained volatile and moved lower at the shorter end of the curve due to Federal Open Market Committee federal funds rate cuts totaling 100 basis points during the fiscal year. Market expectations are for slight reductions in the federal funds rate over the next year, while concerns that economic conditions could keep inflation somewhat elevated and above the FOMC target range, yields on the longer end of the curve increased. As a result, the yield curve uninverted, with 33 basis points positive slope between the two-year and ten-year treasury rates. At December 31, 2024, as compared to June 30, 2024, the yield on two-year treasuries decreased from 4.72% to 4.24%; the yield on five-year treasuries increased from 4.33% to 4.38%; the yield on ten-year treasuries increased from 4.34% to 4.57%; and the yield on 30-year treasuries increased from 4.50% to 4.79%.

As compared to the first six months of the prior fiscal year, our average yield on earning assets increased by 43 basis points, primarily attributable to increased yields on loans receivable, as well as available for sale securities, as compared to year-ago levels. Our cost of interest-bearing liabilities increased by 45 basis points, as certificates of deposit and savings balances increased to higher market rates. Special deposit rates and some brokered CD funding was utilized to increase balance sheet liquidity in the first six months of fiscal 2025 to support loan growth and AFS security purchases. Despite a decrease of one basis point in the net interest spread, to 2.78%, the net interest margin increased by three basis points to 3.37% during the first six months of fiscal 2025, as compared to the same period in fiscal 2024. The increase in the net interest margin was due to a higher composition of higher yielding assets, primarily loans and securities, and a lower balance of lower yielding cash and cash equivalents, compared to the prior fiscal year period. In addition, net interest income benefitted from a 6.3% increase in average earnings assets, compared to the prior fiscal year period. The 100 basis points of federal funds rate cuts, from September 2024 to December 2024, a higher percentage of variable rate deposits compared to the prior fiscal year, and relatively stable price competition for deposits have eased the pressure on the net interest spread, which has increased in the second quarter of fiscal 2025, compared to the linked quarter and the second quarter of fiscal 2024.

The Company’s net income is also affected by the level of its noninterest income and noninterest expense. Noninterest income generally consists primarily of deposit account service charges, bank card interchange income, loan-related fees, earnings on bank-owned life insurance, gains on sales of loans, and other general operating income. Noninterest expense consists primarily of compensation and employee benefits, occupancy-related expenses, data processing expense, telecommunications expense, deposit insurance assessments, professional fees, advertising, postage and office expenses , amortization of intangible assets, and other general operating expenses.

The Company’s noninterest income for the six- month period ended December 31, 2024, was $14.0 million, an increase $2.5 million, or 22.2%, as compared to the same period of the prior fiscal year. In the current period, the increase was primarily attributable to increases in other loan fees, deposit account charges and related fees, bank card interchange income, wealth management fees, earnings on bank owned life insurance, and the absence of a net realized loss on sale of AFS securities. These increases were partially offset by lower loan late charges, other noninterest income, and lower net realized gain on sale of loans. Other noninterest income decreased primarily due to modest losses on the disposal of fixed assets, which were comprised of various equipment.

Noninterest expense for the six-month period ended December 31, 2024, was $50.7 million, an increase of $3.2 million, or 6.6%, as compared to the same period of the prior fiscal year. In the current period, this increase in noninterest expense was attributable primarily to increases in compensation and benefits, legal and professional fees, occupancy and equipment, and advertising expenses. The increase in compensation and benefits expense was primarily due to a trend increase in employee headcount, as well as annual merit increases. Legal and professional expenses increased primarily due to a one-time expense associated with a performance improvement project that started during the first quarter of fiscal 2025. This expense was fully realized in the September quarter, with only modest reimbursables remaining to be recognized in the second quarter of fiscal 2025. Occupancy and equipment expenses increased primarily due to depreciation on recent capitalized expenditures, including buildings, equipment, and signage. Increased advertising activity grew marketing expenses compared to the prior period.

We expect, over time, to continue to grow our assets through the origination and occasional purchase of loans, and purchases of investment securities. The primary funding for this asset growth is expected to come through deposits from retail and commercial clients, as well as public units. In addition, we will utilize brokered funding and short- and long-

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term FHLB borrowings. We have grown and intend to continue to grow deposits by offering desirable deposit products for our current customers and by attracting new depository relationships. We will also continue to explore strategic expansion opportunities in market areas that we believe will be attractive to our business model.

Comparison of Financial Condition at December 31, 2024 and June 30, 2024

The Company experienced balance sheet growth in the first six months of fiscal 2025, with total assets of $4.9 billion at December 31, 2024, reflecting an increase of $303.4 million, or 6.6%, as compared to June 30, 2024. Growth primarily reflected increases in net loans receivable, cash and cash equivalents, and AFS securities.

Cash and cash equivalents were $145.8 million at December 31, 2024, an increase of $84.9 million, or 139.4%, as compared to June 30, 2024. The increase was primarily the result of strong deposit generation that outpaced loan growth (on a percentage basis) and AFS securities purchases during the period. AFS securities were $468.1 million at December 31, 2024, up $40.2 million, or 9.4%, as compared to June 30, 2024.

Loans, net of the allowance for credit losses (ACL), were $4.0 billion at December 31, 2024, increasing by $175.0 million, or 4.6%, as compared to June 30, 2024. The Company noted growth primarily in drawn construction, 1-4 family residential, commercial and industrial, agricultural production loan draws, owner occupied commercial real estate, and agriculture real estate loan balances. This was somewhat offset by a decrease in loans secured by non-owner occupied commercial real estate, multi-family property, and consumer loans. For more information see “Note 4: Loans and Allowance for Credit Losses.”

Loans anticipated to fund in the next 90 days totaled $172.5 million at December 31, 2024, as compared to $157.1 million at June 30, 2024, and $140.5 million at December 31, 2023.

The Bank’s concentration in non-owner occupied commercial real estate, as defined for regulatory purposes, is estimated at 316.9% of Tier 1 capital and ACL at December 31, 2024, as compared to 317.5% as of June 30, 2024, with these loans representing 41.0% of gross loans at December 31, 2024. Multi-family residential real estate, hospitality (hotels/restaurants), care facilities, retail stand-alone, and strip centers are the most common collateral types within the non-owner occupied commercial real estate loan portfolio. The multi-family residential real estate loan portfolio commonly includes loans collateralized by properties currently in the low-income housing tax credit (LIHTC) program or that have exited the program. The hospitality and retail stand-alone segments include primarily franchised businesses; care facilities consisting mainly of skilled nursing and assisted living centers; and strip centers, which can be defined as non-mall shopping centers with a variety of tenants. Non-owner-occupied office property types included 33 loans totaling $24.2 million, or 0.60% of gross loans at December 31, 2024, none of which were adversely classified, and are generally comprised of smaller spaces with diverse tenants. The Company continues to monitor its commercial real estate concentration and the individual segments closely.

Deposits were $4.2 billion at December 31, 2024, an increase of $267.6 million, or 6.8%, as compared to June 30, 2024. The deposit portfolio saw year-to-date increases primarily in certificates of deposit and savings accounts, as customers continued to move balances into high yield savings accounts and special rate time deposits in the relatively high-rate environment. Public unit balances totaled $565.9 million at December 31, 2024, a decrease of $28.7 million compared to June 30, 2024, but an increase of $55.4 million as compared to $510.5 million at September 30, 2024. Public unit balances increased compared to September 30, 2024, the linked quarter, due to seasonal inflows, but decreased year-to-date due to the loss of a large local public unit depositor. Brokered deposits totaled $254.0 million at December 31, 2024, an increase of $80.3 million as compared to June 30, 2024, but a decrease of $19.1 million compared to September 30, 2024, the linked quarter. Fiscal year-to-date, the Company increased brokered deposits due to more attractive pricing for brokered certificates of deposit relative to local market rates and the need to meet seasonal loan demand, and to build on-balance sheet liquidity. The average loan-to-deposit ratio for the second quarter of fiscal 2025 was 96.4%, as compared to 96.3% for the quarter ended June 30, 2024, and 94.3% for the same period of the prior fiscal year. The loan-to-deposit ratio at period end December 31, 2024, was 95.6%.

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FHLB advances were $107.1 million at December 31, 2024, an increase of $5.0 million, or 4.9%, as compared to June 30, 2024.

The Company’s stockholders’ equity was $512.4 million at December 31, 2024, an increase of $23.6 million, or 4.8%, as compared to June 30, 2024. The increase was attributable primarily to earnings retained after cash dividends paid, in combination with a $1.0 million reduction in accumulated other comprehensive losses (AOCL) as the market value of the Company’s investments appreciated due to the decrease in market interest rates. The AOCL totaled $16.4 million at December 31, 2024 compared $17.5 million at June 30, 2024. The Company does not hold any securities classified as held-to-maturity.

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Average Balance Sheet, Interest, and Average Yields and Rates for the Three- and Six- Month Periods Ended

December 31, 2024 and 2023

The tables below present certain information regarding our financial condition and net interest income for the three- and six- month periods ended December 31, 2024 and 2023. The tables present the annualized average yield on interest-earning assets and the annualized average cost of interest-bearing liabilities. We derived the yields and costs by dividing annualized income or expense by the average balance of interest-earning assets and interest-bearing liabilities, respectively, for the periods shown. Yields on tax-exempt obligations were not computed on a tax equivalent basis.


	Three-month period ended							Three-month period ended
	December 31, 2024							December 31, 2023
(dollars in thousands)	Average			Interest and		Yield/		Average			Interest and		Yield/
	Balance			Dividends		Cost (%)		Balance			Dividends		Cost (%)
Interest-earning assets:
Mortgage loans ⁽¹⁾	$	3,193,767		$	48,059	6.02		$	2,991,354		$	41,900	5.60
Other loans ⁽¹⁾		795,876			15,023	7.55			700,232			13,237	7.56
Total net loans		3,989,643			63,082	6.32			3,691,586			55,137	5.97
Mortgage-backed securities		348,580			4,075	4.68			295,667			3,485	4.72
Investment securities ⁽²⁾		131,053			1,483	4.53			172,831			1,776	4.11
Other interest-earning assets		64,976			784	4.83			89,123			1,178	5.29
TOTAL INTEREST- EARNING ASSETS ⁽¹⁾		4,534,252			69,424	6.12			4,249,207			61,576	5.80
Other noninterest-earning assets ⁽³⁾		291,217			—				301,415			—
TOTAL ASSETS	$	4,825,469		$	69,424			$	4,550,622		$	61,576

Interest-bearing liabilities:
Savings accounts	$	558,211		$	3,760	2.69		$	344,504		$	1,622	1.88
NOW accounts		1,150,961			5,557	1.93			1,237,532			6,357	2.05
Money market accounts		338,526			2,430	2.87			418,336			3,318	3.17
Certificates of deposit		1,568,069			17,791	4.54			1,340,849			14,147	4.23
TOTAL INTEREST- BEARING DEPOSITS		3,615,767			29,538	3.27			3,341,221			25,444	3.05
Borrowings:
Securities sold under agreements to repurchase		15,000			226	6.03			9,398			127	5.39
FHLB advances		107,054			1,099	4.11			113,519			1,079	3.80
Junior subordinated debt		23,175			418	7.22			23,124			440	7.60
TOTAL INTEREST- BEARING LIABILITIES		3,760,996			31,281	3.33			3,487,262			27,090	3.11
Noninterest-bearing demand deposits		524,878			—				572,101			—
Other liabilities		31,442			—				31,807			—
TOTAL LIABILITIES		4,317,316			31,281				4,091,170			27,090
Stockholders’ equity		508,153			—				459,452			—
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	4,825,469		$	31,281			$	4,550,622		$	27,090

Net interest income				$	38,143						$	34,486
Interest rate spread ⁽⁴⁾						2.79	%						2.69	%
Net interest margin ⁽⁵⁾						3.36	%						3.25	%
Ratio of average interest-earning assets to average interest-bearing liabilities		120.56	%						121.85	%

(1)	Calculated net of deferred loan fees, loan discounts and unfunded commitments on construction loans. Non-accrual loans are not included in average loans.

(2)	Includes FHLB and Federal Reserve Bank of St. Louis membership stock and related cash dividends.

(3)	Includes average balances for fixed assets and BOLI of $96.0 million and $74.3 million, respectively, for the three-month period ended December 31, 2024, as compared to $94.3 million and $72.3 million, respectively, for the same period of the prior fiscal year.

(4)	Interest rate spread represents the difference between the average rate on interest-earning assets and the average cost of interest-bearing liabilities.

(5)	Net interest margin represents annualized net interest income divided by average interest-earning assets.

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	Six-month period ended							Six-month period ended
	December 31, 2024							December 31, 2023
(dollars in thousands)	Average			Interest and		Yield/		Average			Interest and		Yield/
	Balance			Dividends		Cost (%)		Balance			Dividends		Cost (%)
Interest-earning assets:
Mortgage loans ⁽¹⁾	$	3,152,280		$	94,217	5.98		$	2,964,651		$	81,590	5.50
Other loans ⁽¹⁾		787,411			30,618	7.78			703,716			26,521	7.54
Total net loans		3,939,691			124,835	6.34			3,668,367			108,111	5.89
Mortgage-backed securities		335,292			8,001	4.77			292,890			6,857	4.68
Investment securities ⁽²⁾		134,619			3,105	4.61			172,731			3,489	4.04
Other interest-earning assets		35,261			862	4.89			47,301			1,227	5.19
TOTAL INTEREST- EARNING ASSETS ⁽¹⁾		4,444,863			136,803	6.16			4,181,289			119,684	5.72
Other noninterest-earning assets ⁽³⁾		287,137			—				293,131			—
TOTAL ASSETS	$	4,732,000		$	136,803			$	4,474,420		$	119,684

Interest-bearing liabilities:
Savings accounts	$	547,335		$	7,780	2.84		$	316,085		$	2,290	1.45
NOW accounts		1,143,663			11,417	2.00			1,237,769			12,281	1.98
Money market accounts		335,816			5,097	3.04			437,889			6,717	3.07
Certificates of deposit		1,489,445			34,040	4.57			1,240,269			24,524	3.95
TOTAL INTEREST- BEARING DEPOSITS		3,516,259			58,334	3.32			3,232,012			45,812	2.83
Borrowings:
Securities sold under agreements to repurchase		13,661			386	5.65			9,398			199	4.23
FHLB advances		115,388			2,425	4.20			140,678			2,918	4.15
Junior subordinated debt		23,169			853	7.36			23,117			874	7.56
TOTAL INTEREST- BEARING LIABILITIES		3,668,477			61,998	3.38			3,405,205			49,803	2.93
Noninterest-bearing demand deposits		528,412			—				586,152			—
Other liabilities		32,590			—				28,180			—
TOTAL LIABILITIES		4,229,479			61,998				4,019,537			49,803
Stockholders’ equity		502,521			—				454,883			—
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	4,732,000		$	61,998			$	4,474,420		$	49,803

Net interest income				$	74,805						$	69,881
Interest rate spread ⁽⁴⁾						2.78	%						2.79	%
Net interest margin ⁽⁵⁾						3.37	%						3.34	%
Ratio of average interest-earning assets to average interest-bearing liabilities		121.16	%						122.79	%

(1)	Calculated net of deferred loan fees, loan discounts and unfunded commitments on construction loans. Non-accrual loans are not included in average loans.

(2)	Includes FHLB and Federal Reserve Bank of St. Louis membership stock and related cash dividends.

(3)	Includes average balances for fixed assets and BOLI of $95.8 million and $74.1 million, respectively, for the six-month period ended December 31, 2024, as compared to $93.3 million and $72.1 million, respectively, for the same period of the prior fiscal year.

(4)	Interest rate spread represents the difference between the average rate on interest-earning assets and the average cost of interest-bearing liabilities.

(5)	Net interest margin represents annualized net interest income divided by average interest-earning assets.

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Rate/Volume Analysis

The following tables set forth the effects of changing rates and volumes on the Company’s net interest income for the three- and six- month periods ended December 31, 2024, compared to the three- and six- month periods ended December 31, 2023. Information is provided with respect to (i) effects on interest income and expense attributable to changes in volume (changes in volume multiplied by the prior rate), (ii) effects on interest income and expense attributable to change in rate (changes in rate multiplied by prior volume), and (iii) changes in rate/volume (change in rate multiplied by change in volume).


	Three-month period ended December 31, 2024
	Compared to three-month period ended December 31, 2023
	Increase (Decrease) Due to
					Rate/
(dollars in thousands)	Rate		Volume		Volume		Net
Interest-earning assets:
Loans receivable ⁽¹⁾	$	3,233	$	4,452	$	260	$	7,945
Mortgage-backed securities		(29)		624		(5)		590
Investment securities ⁽²⁾		180		(429)		(44)		(293)
Other interest-earning deposits		(103)		(319)		28		(394)
Total net change in income on interest-earning assets		3,281		4,328		239		7,848

Interest-bearing liabilities:
Deposits		1,040		2,331		723		4,094
Securities sold under agreements to repurchase		15		75		9		99
FHLB advances		85		(61)		(4)		20
Note payable		—		—		—		—
Subordinated debt		(22)		1		(1)		(22)
Total net change in expense on interest-bearing liabilities		1,118		2,346		727		4,191
Net change in net interest income	$	2,163	$	1,982	$	(488)	$	3,657

(1)	Does not include interest on loans placed on nonaccrual status.

(2)	Does not include dividends earned on equity securities.


	Six-month period ended December 31, 2024
	Compared to six-month period ended December 31, 2023
	Increase (Decrease) Due to
					Rate/
(dollars in thousands)	Rate		Volume		Volume		Net
Interest-earning assets:
Loans receivable ⁽¹⁾	$	7,862	$	8,318	$	544	$	16,724
Mortgage-backed securities		132		993		19		1,144
Investment securities ⁽²⁾		495		(770)		(109)		(384)
Other interest-earning deposits		(71)		(312)		18		(365)
Total net change in income on interest-earning assets		8,418		8,229		472		17,119

Interest-bearing liabilities:
Deposits		6,058		4,097		2,367		12,522
Securities sold under agreements to repurchase		67		90		30		187
FHLB advances		38		(525)		(6)		(493)
Note payable		—		—		—		—
Subordinated debt		(24)		2		1		(21)
Total net change in expense on interest-bearing liabilities		6,139		3,664		2,392		12,195
Net change in net interest income	$	2,279	$	4,565	$	(1,920)	$	4,924

(1)	Does not include interest on loans placed on nonaccrual status.

(2)	Does not include dividends earned on equity securities.

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Results of Operations – Comparison of the three-month periods ended December 31, 2024 and 2023

General. Net income for the three-month period ended December 31, 2024, was $14.7 million, an increase of $2.5 million, or 20.2%, as compared to the same period of the prior fiscal year. The increase was attributable to increases in net interest income and noninterest income, partially offset by increases in provision for income taxes, noninterest expense and provision for credit losses.

For the three-month period ended December 31, 2024, fully-diluted net income per share available to common shareholders was $1.30, up $0.23, or 21.5%, as compared to the same quarter a year ago. Our annualized return on average assets for the three-month period ended December 31, 2024, was 1.21%, as compared to 1.07% for the same period of the prior fiscal year. Our return on average common stockholders’ equity for the three-month period ended December 31, 2024, was 11.5%, as compared to 10.6% in the same period of the prior fiscal year.

Net Interest Income. Net interest income for the three-month period ended December 31, 2024, was $38.1 million, an increase of $3.7 million, or 10.6%, as compared to the same period of the prior fiscal year. The increase was attributable to a 6.7% increase in the average balance of interest-earning assets and an 11-basis point increase in the net interest margin, from 3.25% to 3.36%, as the 32-basis point increase in the yield on interest-earning assets was partially offset by a 22-basis point increase in cost of interest-bearing liabilities. The increase in average earning asset yields was primarily attributable to renewals and new loan originations, in addition to AFS security purchases, at higher market rates.

Loan discount accretion and deposit premium amortization related to the May 2020 acquisition of Central Federal Savings & Loan Association, the February 2022 merger of FortuneBank, and the January 2023 acquisition of Citizens Bank & Trust resulted in $987,000 in net interest income for the three-month period ended December 31, 2024, as compared to $1.5 million in net interest income for the same period a year ago. Combined, this component of net interest income contributed nine basis points to net interest margin in the three-month period ended December 31, 2024, compared to 14 basis points during the same period of the prior fiscal year, when the net interest margin was 3.25%.

Provision for Credit Losses. The Company recorded a PCL of $932,000 in the three-month period ended December 31, 2024, as compared to a PCL of $900,000 in the same period of the prior fiscal year. The current period PCL was the result of a $501,000 provision attributable to the ACL for loan balances outstanding and a $431,000 provision attributable to the allowance for off-balance sheet credit exposures. As a percentage of average loans outstanding, the Company recorded net charge offs of 0.02% (annualized) during the current period, as compared to 0.10% for the same period of the prior fiscal year. (See “Critical Accounting Policies”, “Allowance for Credit Loss Activity” and “Nonperforming Assets”).

Noninterest Income. Noninterest income for the three-month period ended December 31, 2024, was $6.9 million, an increase of $1.2 million, or 21.7%, as compared to the same period of the prior fiscal year. The increase was primarily attributable to the Company’s realization of a $682,000 loss on sale of AFS securities in the year-ago period, as well as increases in deposit account charges and related fees, other loan fees, and wealth management fees. These increases were partially offset by lower net realized gains on sale of loans, which were primarily driven by a reduction in gains on sale of Small Business Administration (SBA) loans, and lower loan late charges.

Noninterest Expense. Noninterest expense for the three-month period ended December 31, 2024, was $24.9 million, an increase of $1.0 million, or 4.3%, as compared to the same period of the prior fiscal year. The increase was attributable primarily to increases in compensation and benefits, legal and professional fees, other operating expense, and occupancy expenses. The increase in compensation and benefits expense was primarily due to a trend increase in employee headcount, as well as annual merit increases. Legal and professional fees were elevated due to consulting fees tied to internal projects, recruiter costs, and the settlement of a legal matter. Other operating expense increased due to increased expenses associated with SBA loans and costs for employee travel and training. Lastly, occupancy and equipment expenses increased primarily due to depreciation on recent capitalized expenditures, including buildings, equipment, and signage. Partially offsetting these increases from the prior year period were lower data processing and telecommunication expenses, and a reduction in intangible amortization, as the core deposit intangible recognized from a prior period merger was fully amortized in the prior quarter.

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Income Taxes. The income tax provision for the three-month period ended December 31, 2024, was $4.5 million, an increase of $1.4 million, or 43.3%, as compared to the same period of the prior fiscal year. The current period effective tax rate was 23.7%, as compared to 20.6% in the same quarter of the prior fiscal year. The effective tax rate for the December 31, 2024, quarter was elevated due a $380,000 adjustment of tax accruals attributable to completed merger activity.

Results of Operations – Comparison of the six-month periods ended December 31, 2024 and 2023

General. Net income for the six-month period ended December 31, 2024, was $27.1 million, an increase of $1.8 million, or 7.0% as compared to the same period of the prior fiscal year. Compared to the year-ago period, the Company’s increase in net income was attributable to increases in net interest income and noninterest income, partially offset by increases in PCL, noninterest expense, and provision for income taxes.

For the six-month period ended December 31, 2024, fully-diluted net income per share available to common shareholders was $2.40, as compared to $2.23 for the same period of the prior fiscal year, an increase of $0.17, or 7.6%. Our annualized return on average assets for the six-month period ended December 31, 2024, was 1.15%, as compared to 1.20% for the same period of the prior fiscal year. Our return on average common stockholders’ equity for the six-month period ended December 31, 2024, was 10.8%, as compared to 11.7% in the same period of the prior fiscal year.

Net Interest Income. Net interest income for the six-month period ended December 31, 2024, was $74.8 million, an increase of $4.9 million, or 7.0%, as compared to the same period of the prior fiscal year. The increase was attributable to a 6.3% increase in the average balance of interest-earning assets and an increase in the net interest margin to 3.37%, as compared to 3.34% in the same period a year ago. The increase in the net interest margin was due to a higher composition of higher yielding assets, primarily loans and securities, and a lower balance of lower yielding cash and cash equivalents, compared to the prior year.

Loan discount accretion and deposit premium amortization related to the November 2018 acquisition of First Commercial Bank, the May 2020 acquisition of Central Federal Savings & Loan Association, the February 2022 merger of FortuneBank, and the January 2023 acquisition of Citizens Bank & Trust resulted in $2.0 million in net interest income for the six-month period ended December 31, 2024, as compared to $3.2 million in net interest income for the same period a year ago. Combined, this component of net interest income contributed nine basis points to net interest margin in the six-month period ended December 31, 2024, as compared to a 15 basis point contribution for the same period of the prior fiscal year.

Provision for Credit Losses. The PCL for the six-month period ended December 31, 2024, was a charge of $3.1 million, an increase of $1.3 million from the same period of the prior fiscal year. The current period PCL was the result of a $2.5 million provision attributable to the ACL for loan balances outstanding and a $569,000 provision attributable to the allowance for off-balance sheet credit exposures. As a percentage of average loans outstanding, the Company recorded net charge offs of two basis points (annualized) during the current period, compared to seven basis points during the same period of the prior fiscal year. (See “Critical Accounting Policies”, “Allowance for Credit Loss Activity” and “Nonperforming Assets”).

Noninterest Income. Noninterest income for the six-month period ended December 31, 2024, was $14.0 million, an increase of $2.5 million, or 22.2%, as compared to the same period of the prior fiscal year. In the current period, the increase was primarily attributable to increases in other loan fees, deposit account charges and related fees, bank card interchange income, wealth management fees, earnings on bank owned life insurance, and the absence of a net realized loss on sale of AFS securities. These increases were partially offset by lower loan late charges, other noninterest income, and lower net realized gain on sale of loans. Other noninterest income decreased primarily due to modest losses on the disposal of fixed assets, which were comprised of various equipment. The lower gain on sale of loans was primarily attributable to lower gain on sale of residential loans.

Noninterest Expense. Noninterest expense for the six-month period ended December 31, 2024, was $50.7 million, an increase of $3.2 million, or 6.6%, as compared to the same period of the prior fiscal year. In the current period, this increase in noninterest expense was attributable primarily to increases in compensation and benefits, legal and

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professional fees, occupancy and equipment, and advertising expenses. The increase in compensation and benefits expense was primarily due to a trend increase in employee headcount, as well as annual merit increases. Legal and professional expenses increased primarily due to a one-time expense associated with a performance improvement project that started during the first fiscal quarter of 2025. This expense was fully realized in the September quarter, with only modest reimbursables remaining to be recognized in the second quarter of fiscal 2025. Occupancy and equipment expenses increased primarily due to depreciation on recent capitalized expenditures, including buildings, equipment, and signage. Increased advertising activity grew marketing expenses compared to the prior period.

Income Taxes. The income tax provision for the six-month period ended December 31, 2024, was $7.9 million, an increase of $1.3 million, or 19.0%, as compared to the same period of the prior fiscal year, due primarily to increased pre-tax income and a $380,000 adjustment of tax accruals attributable to completed merger & acquisition activity. The effective tax rate increased to 22.6% as compared to 20.8% over the same period last year.

Allowance for Credit Loss Activity

The Company regularly reviews its ACL and makes adjustments to its balance based on management’s estimate of (1) the total expected losses included in the Company’s financial assets held at amortized cost, which is limited to the Company’s loan portfolio, and (2) any credit deterioration in the Company’s available-for-sale securities as of the balance sheet date. The Company does not hold any securities classified as held-to-maturity.

Although the Company maintains its ACL at a level that it considers sufficient to provide for losses, there can be no assurance that future losses will not exceed internal estimates. In addition, the amount of the ACL is subject to review by regulatory agencies, which can order the Company to record additional allowances. The required ACL has been estimated based upon the guidelines in ASC Topic 326, Financial Instruments – Credit Losses.

The estimate involves consideration of quantitative and qualitative factors relevant to the loan portfolio as segmented by the Company, and is based on an evaluation, at the reporting date, of historical loss experience, coupled with qualitative adjustments to address current economic conditions and credit quality, and reasonable and supportable forecasts. Specific qualitative factors considered include, but may not be limited to:

•Changes in lending policies and/or loan review system

•National, regional, and local economic trends and/or conditions

•Changes and/or trends in the nature, volume, or terms of the loan portfolio

•Experience, ability, and depth of lending management and staff

•Levels and/or trends of delinquent, non-accrual, problem assets, or charge offs and recoveries

•Concentrations of credit

•Changes in collateral values

•Agricultural economic conditions

•Risks from regulatory, legal, or competitive factors

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The following table summarizes changes in the ACL over the three- and six- month periods ended December 31, 2024 and 2023:


	For the three months ended				For the six months ended
	December 31,				December 31,
(dollars in thousands)	2024		2023		2024		2023
Balance, beginning of period	$	54,437	$	49,122	$	52,516	$	47,820
Loans charged off:
1-4 residential real estate		(2)		(6)		(50)		(41)
Non-owner occupied commercial real estate		—		(496)		—		(496)
Owner occupied commercial real estate		(122)		—		(122)		—
Multi-family real estate		—		—		—		(97)
Construction and land development		(1)		(178)		(1)		(289)
Agriculture real estate		—		—		—		—
Commercial and industrial		(26)		(180)		(65)		(185)
Agriculture production		—		—		—		—
Consumer		(129)		(120)		(201)		(208)
All other loans		—		—		—		—
Gross charged off loans		(280)		(980)		(439)		(1,316)
Recoveries of loans previously charged off:
1-4 residential real estate		46		—		46		33
Non-owner occupied commercial real estate		—		—		—		—
Owner occupied commercial real estate		—		—		—		—
Multi-family real estate		—		—		47		—
Construction and land development		—		—		—		18
Agriculture real estate		—		—		—		—
Commercial and industrial		32		2		37		6
Agriculture production		—		—		—		—
Consumer		4		18		11		31
All other loans		—		—		—		—
Gross recoveries of charged off loans		82		20		141		88
Net charge offs		(198)		(960)		(298)		(1,228)
Provision charged to expense		501		1,922		2,522		3,492
Balance, end of period	$	54,740	$	50,084	$	54,740	$	50,084

Our ACL at December 31, 2024, totaled $54.7 million, representing 1.36% of gross loans and 659% of NPLs, as compared to an ACL of $52.5 million, representing 1.36% of gross loans and 786% of NPLs, at June 30, 2024. The Company has estimated its expected credit losses as of December 31, 2024, under ASC 326-20, and management believes the ACL as of that date was adequate based on that estimate. There remains, however, significant uncertainty as borrowers adjust to relatively high market interest rates, despite the Federal Reserve having reduced short-term rates somewhat during this fiscal year. Qualitative adjustments in the Company’s ACL model were increased compared to June 30, 2024, due to various factors that are relevant to determining expected collectability of credit. The Company decreased the allowance attributable to classified hotel loans that have been slow to recover from the COVID-19 pandemic as a result of updated collateral appraisals, which provided a more favorable assessment than the Company’s prior period estimates. Additionally, PCL was required due to loan growth in fiscal year 2025 to date. As a percentage of average loans outstanding, the Company recorded net charge offs of two basis points (annualized) during the current period, compared to seven basis points during the same period of the prior fiscal year.

At December 31, 2024, the Company had accrued within other liabilities an allowance for off-balance sheet credit exposures of $3.8 million, as compared to $3.3 million at June 30, 2024. The increase reflects the component of the PCL attributable to off-balance sheet credit exposures. This amount is maintained as a separate liability account to cover estimated credit losses associated with off-balance sheet credit instruments such as off-balance sheet loan commitments, standby letters of credit, and guarantees. The $569,000 increase in the estimated allowance for off-balance sheet credit exposures was primarily the result of an expected increase in credit utilization based on historical usage of these off-balance sheet credit exposures.

The following table sets forth the sum of the amounts of the ACL attributable to individual loans within each category, or the loan categories in general, and the percentage of the ACL that is attributable to each category, as of the reporting date. The table also reflects the percentage of loans in each category to the total loan portfolio, as of the reporting date.

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			% of				% of
	ACL as of		total		ACL as of		total
	December 31, 2024		ACL		June 30, 2024		ACL

1-4 residential real estate	$	12,664	23.1	%	$	10,528	20.0	%
Non-owner occupied commercial real estate		13,660	25.0	%		19,055	36.3	%
Owner occupied commercial real estate		5,707	10.4	%		4,815	9.2	%
Multi-family real estate		5,725	10.5	%		5,447	10.4	%
Construction and land development		4,717	8.6	%		2,901	5.5	%
Agriculture real estate		2,517	4.6	%		2,107	4.0	%
Commercial and industrial		8,063	14.8	%		6,233	11.9	%
Agriculture production		1,060	1.9	%		835	1.6	%
Consumer		603	1.1	%		578	1.1	%
All other loans		24	—	%		17	—	%
	$	54,740	100.0	%	$	52,516	100.0	%

For loans that do not exhibit similar risk characteristics, the Company evaluates the loan on an individual basis. Loans that are classified with an adverse internal credit rating or identified as modifications to borrowers experiencing financial difficulty are most commonly considered for individual evaluation. The ACL for individually evaluated loans may be estimated based on the fair value of the underlying collateral, or based on the present value of expected cash flows.

At December 31, 2024, the Company had loans of $39.6 million, or 0.98% of total loans, adversely classified ($39.6 million classified “substandard”; none classified “doubtful”), as compared to loans of $40.9 million, or 1.06% of total loans, adversely classified ($40.9 million classified “substandard”; none classified “doubtful”) at June 30, 2024, and $39.3 million, or 1.05% of total loans, adversely classified ($39.3 million classified “substandard”; none classified “doubtful”), at December 31, 2023. Classified loans were generally comprised of loans secured by agriculture, commercial, and residential real estate, and other commercial purpose collateral. All of these loans were classified due to concerns as to the borrowers’ ability to continue to generate sufficient cash flows to service the debt. Of our classified loans, the Company had ceased recognition of interest on loans with a carrying value of $8.3 million at December 31, 2024. The Company’s total past due loans increased from $9.2 million at June 30, 2024, to $13.4 million at December 31, 2024. This increase was primarily from loans collateralized by 1-4 family real estate and agricultural real estate. Total past due loans were $8.3 million at December 31, 2023. See “Note 4 – Loans and Allowance for Credit Losses – Past Due Loans” in the “Notes to Consolidated Financial Statements.”

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Nonperforming Assets

The ratio of nonperforming assets to total assets and nonperforming loans to net loans receivable is another measure of asset quality. Nonperforming assets of the Company include nonaccruing loans, accruing loans delinquent/past maturity 90 days or more, and assets which have been acquired as a result of foreclosure or deed-in-lieu of foreclosure. The table below summarizes changes in the Company’s level of nonperforming assets over selected time periods:



	December 31, 2024		June 30, 2024		December 31, 2023

Nonaccruing loans:
1-4 residential real estate	$	3,404	$	1,391	$	974
Non-owner occupied commercial real estate		—		—		43
Owner occupied commercial real estate		281		1,102		374
Multi-family real estate		—		—		—
Construction and land development		97		108		81
Agriculture real estate		1,825		1,896		2,776
Commercial and industrial		2,339		1,703		1,465
Agriculture production		286		461		169
Consumer		77		19		40
All other loans		—		—		—
Total		8,309		6,680		5,922

Loans 90 days past due accruing interest:
1-4 residential real estate		—		—		—
Non-owner occupied commercial real estate		—		—		—
Owner occupied commercial real estate		—		—		—
Multi-family real estate		—		—		—
Construction and land development		—		—		—
Agriculture real estate		—		—		—
Commercial and industrial		—		—		—
Agriculture production		—		—		—
Consumer		—		—		—
All other loans		—		—		—
Total		—		—		—

Total nonperforming loans		8,309		6,680		5,922
Nonperforming investments		—		—		—
Foreclosed assets held for sale:
Real estate owned		2,423		3,865		3,814
Other nonperforming assets		37		23		40
Total nonperforming assets	$	10,769	$	10,568	$	9,776

The Company adopted ASU No. 2022-02 in fiscal 2024, which eliminates the accounting guidance for troubled debt restructurings (TDRs), while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. At December 31, 2024, modifications to borrowers experiencing financial difficulty totaled $24.9 million, of which $843,000 was considered nonperforming and included in the nonaccrual loan total above. The remaining $24.1 million in modified loans have complied with the modified terms for a reasonable period of time and are therefore considered by the Company to be accrual status loans. On the basis of guidance under ASU No. 2022-02, in general, these loans were subject to classification as modifications due to payment delays and term extensions given to borrowers experiencing financial difficulty at December 31, 2024. At June 30, 2024, these modifications totaled $25.5 million, of which $895,000 was considered nonperforming and included in the nonaccrual loan total above. The remaining $24.6 million in modifications at June 30, 2024, had complied with the modified terms for a reasonable period of time and were therefore considered by the Company to be accrual status loans.

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At December 31, 2024, nonperforming assets totaled $10.8 million, as compared to $10.6 million at June 30, 2024, and $9.8 million at December 31, 2023. The rise in the nonperforming assets, compared to June 30,2024, reflects an increase in nonperforming loans, which was largely offset by a reduction in other real estate owned due to property sales. The increase in nonperforming loans was primarily attributable to the addition of three unrelated loans collateralized by single-family residential property, totaling $1.4 million.

Liquidity Resources

The term “liquidity” refers to our ability to generate adequate amounts of cash to fund loan originations, loans purchases, deposit withdrawals and operating expenses. Our primary sources of funds include deposit growth, FHLB advances, brokered deposits, amortization and prepayment of loan principal and interest, investment maturities and sales, and funds provided by our operations. While the scheduled loan repayments and maturing investments are relatively predictable, deposit flows, FHLB advance redemptions, and loan and security prepayment rates are significantly influenced by factors outside of the Bank’s control, including interest rates, general and local economic conditions and competition in the marketplace. The Bank relies on FHLB advances and brokered deposits as additional sources for funding cash or liquidity needs.

The Company uses its liquid resources principally to satisfy its ongoing cash requirements, which include funding loan commitments, funding maturing certificates of deposit and deposit withdrawals, maintaining liquidity, funding maturing or called FHLB advances, purchasing investments, and meeting operating expenses.

At December 31, 2024, the Company had outstanding commitments and approvals to extend credit of approximately $894.7 million (including $595.5 million in unused lines of credit) in mortgage and non-mortgage loans. These commitments and approvals are expected to be funded through existing cash balances, cash flow from normal operations and, if needed, advances from the FHLB or the Federal Reserve’s discount window. At December 31, 2024, the Bank had pledged $1.5 billion of its single-family residential, home equity, and commercial real estate loan portfolios to the FHLB for available credit of approximately $858.1 million, of which $107.1 million was advanced, while $499,000 was encumbered by residential real estate loans sold onto the secondary market through the FHLB, and none was utilized as collateral for the issuance of letters of credit to secure public unit deposits. The Bank has the ability to pledge other assets, including, for example, additional unpledged real estate loans held by the Bank or the Bank’s REIT, and the unpledged securities in the Bank’s portfolio, which could provide additional collateral for additional borrowings. In total, FHLB borrowings are generally limited to 45% of bank assets, or approximately $2.1 billion, subject to available collateral. Also, at December 31, 2024, the Bank had pledged a total of $412.2 million in loans secured by farmland and agricultural production loans to the Federal Reserve, providing access to $357.3 million in primary credit borrowings from the Federal Reserve’s discount window, none of which was advanced at December 31, 2024. In addition, the Bank has other assets available to pledge to the Federal Reserve, such as commercial loans, which could provide additional collateral for additional borrowings. Management believes its liquid resources will be sufficient to meet the Company’s liquidity needs.

Regulatory Capital

The Company and Bank are subject to various regulatory capital requirements administered by the Federal banking agencies. Failure to meet minimum capital requirements can result in certain mandatory – and possibly additional discretionary – actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Bank must meet specific capital guidelines that involve quantitative measures of the Company and the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under U.S. GAAP, regulatory reporting requirements and regulatory capital standards. The Company and Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Furthermore, the Company and Bank’s regulators could require adjustments to regulatory capital not reflected in the consolidated financial statements.

Quantitative measures established by regulatory capital standards to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the table below) of total capital, Tier 1 capital (as

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defined), and common equity Tier 1 capital (as defined) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average total assets (as defined). Additionally, to make distributions or discretionary bonus payments, the Company and Bank must maintain a capital conservation buffer of 2.5% of risk-weighted assets. Management believes, as of December 31, 2024 and June 30, 2024, that the Company and the Bank met all capital adequacy requirements to which they are subject.

In August 2020, the Federal banking agencies adopted a final rule updating a December 2018 rule regarding the impact on regulatory capital of adoption of the CECL standard. The rule allows institutions that adopted the CECL standard in 2020 a five-year transition period to recognize the estimated impact of adoption on regulatory capital. The Company and the Bank elected to exercise the option to recognize the impact of adoption over the five-year period.

As of December 31, 2024, the most recent notification from the Federal banking agencies categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based, common equity Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table below. There are no conditions or events since that notification that management believes have changed the Bank’s category.

The tables below summarize the Company’s and Bank’s actual and required regulatory capital at the dates indicated:


									To Be Well Capitalized
					For Capital				Under Prompt Corrective
	Actual				Adequacy Purposes				Action Provisions
As of December 31, 2024	Amount		Ratio		Amount		Ratio		Amount	Ratio
(dollars in thousands)
Total Capital (to Risk-Weighted Assets)
Consolidated	$	548,523	13.29	%	$	330,186	8.00	%	n/a	n/a
Southern Bank		518,886	12.73	%		326,074	8.00	%	407,593	10.00	%
Tier I Capital (to Risk-Weighted Assets)
Consolidated		489,299	11.86	%		247,640	6.00	%	n/a	n/a
Southern Bank		467,872	11.48	%		244,556	6.00	%	326,074	8.00	%
Tier I Capital (to Average Assets)
Consolidated		489,299	10.42	%		187,787	4.00	%	n/a	n/a
Southern Bank		467,872	9.80	%		191,000	4.00	%	238,750	5.00	%
Common Equity Tier I Capital (to Risk-Weighted Assets)
Consolidated		473,693	11.48	%		185,730	4.50	%	n/a	n/a
Southern Bank		467,872	11.48	%		183,417	4.50	%	264,936	6.50	%


									To Be Well Capitalized
					For Capital				Under Prompt Corrective
	Actual				Adequacy Purposes				Action Provisions
As of June 30, 2024	Amount		Ratio		Amount		Ratio		Amount	Ratio
(dollars in thousands)
Total Capital (to Risk-Weighted Assets)
Consolidated	$	524,023	13.23	%	$	316,979	8.00	%	n/a	n/a
Southern Bank		496,105	12.68	%		312,877	8.00	%	391,097	10.00	%
Tier I Capital (to Risk-Weighted Assets)
Consolidated		467,027	11.79	%		237,734	6.00	%	n/a	n/a
Southern Bank		447,192	11.43	%		234,658	6.00	%	312,877	8.00	%
Tier I Capital (to Average Assets)
Consolidated		467,027	10.19	%		183,262	4.00	%	n/a	n/a
Southern Bank		447,192	9.79	%		182,723	4.00	%	228,403	5.00	%
Common Equity Tier I Capital (to Risk-Weighted Assets)
Consolidated		451,474	11.39	%		178,300	4.50	%	n/a	n/a
Southern Bank		447,192	11.43	%		175,993	4.50	%	254,213	6.50	%

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PART I: Item 3: Quantitative and Qualitative Disclosures About Market Risk

SOUTHERN MISSOURI BANCORP, INC.

Asset and Liability Management and Market Risk

The goal of the Company’s asset/liability management strategy is to manage the interest rate sensitivity of both interest-earning assets and interest-bearing liabilities in order to maximize net interest income without exposing the Company to an excessive level of interest rate risk. The Company employs various strategies intended to manage the potential effect that changing interest rates may have on future operating results. The primary asset/liability management strategy has been to focus on matching the anticipated repricing intervals of interest-earning assets and interest-bearing liabilities. At times, however, depending on the level of general interest rates, the relationship between long- and short-term interest rates, market conditions and competitive factors, the Company may increase its interest rate risk position in order to maintain its net interest margin.

In an effort to manage the interest rate risk resulting from fixed rate lending, the Company has at times utilized longer term (up to 10 year maturities), fixed-rate FHLB advances, which may be subject to early redemption, to offset interest rate risk. Other elements of the Company’s current asset/liability strategy include: (i) increasing originations of commercial real estate loans, commercial business loans, agricultural real estate loans, and agricultural operating lines, which typically provide higher yields and shorter repricing periods, but inherently increase credit risk, (ii) limiting the price volatility of the investment portfolio by maintaining a relatively short weighted average maturity, (iii) actively soliciting less rate-sensitive nonmaturity deposits, and (iv) offering competitively priced money market accounts and CDs with maturities of up to five years. The degree to which each segment of the strategy is achieved will affect profitability and exposure to interest rate risk.

The Company continues to originate long-term, fixed-rate residential loans. During the first six months of fiscal year 2025, fixed rate 1-to 4-family residential loan production totaled $67.8 million (of which $8.0 million was originated for sale into the secondary market), as compared to $62.5 million during the same period of the prior fiscal year (of which $6.4 million was originated for sale into the secondary market). At December 31, 2024, the fixed rate 1-4 family residential loan portfolio was $631.3 million with a weighted average maturity of 168 months, as compared to $606.5 million at December 31, 2023, with a weighted average maturity of 182 months. The Company originated $26.8 million in adjustable-rate 1- to 4-family residential loans during the six-month period ended December 31, 2024, as compared to $29.4 million during the same period of the prior fiscal year. The Company originated $197.5 million in fixed rate commercial and commercial real estate loans during the six-month period ended December 31, 2024, as compared to $151.4 million during the same period of the prior fiscal year. The Company also originated $62.9 million in adjustable rate commercial and commercial real estate loans during the six-month period ended December 31, 2024, as compared to $82.8 million during the same period of the prior fiscal year. At December 31, 2024, adjustable-rate home equity lines of credit increased to $82.1 million, as compared to $69.8 million at December 31, 2023. At December 31, 2024, all fixed rate loans with remaining maturities in excess of 10 years totaled $361.7 million, or 9.1% of net loans receivable, as compared to $368.3 million, or 10.0% of net loans receivable at December 31, 2023. At December 31, 2024, the Company’s investment portfolio had a weighted-average life of 5.4 years, compared to 5.3 years at December 31, 2023, while the effective duration of the portfolio declined to 2.5% per 100 basis points movement in market rates at December 31, 2024, as compared to 2.7% at December 31, 2023. Management continues to focus on customer retention, customer satisfaction, and offering new products to customers in order to increase the Company’s amount of less rate-sensitive deposit accounts.

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Interest Rate Sensitivity Analysis

The following table sets forth as of December 31, 2024 and June 30, 2024, management’s estimates of the projected changes in net portfolio value (NPV) in the event of 100, 200, and 300 basis point (bp) instantaneous, permanent, and parallel increases, and 100, 200, and 300 basis point instantaneous, permanent, and parallel decreases in market interest rates. Dollar amounts are expressed in thousands.


December 31, 2024
						NPV as Percentage of
	Net Portfolio					PV of Assets
Change in Rates	Value		Change		% Change	NPV Ratio	Change

	(Dollars in thousands)					(%)	(basis points)
+300 bp	$	438,095	$	(103,669)	(19)	9.67	(163)
+200 bp		480,082		(61,683)	(11)	10.38	(91)
+100 bp		515,949		(25,815)	(5)	10.95	(35)
0 bp		541,764		—	—	11.30	—
‑100 bp		563,035		21,270	4	11.53	24
‑200 bp		575,259		33,495	6	11.59	29
‑300 bp		573,213		31,448	6	11.37	8


June 30, 2024
						NPV as Percentage of
	Net Portfolio					PV of Assets
Change in Rates	Value		Change		% Change	NPV Ratio	Change

	(Dollars in thousands)					(%)	(basis points)
+300 bp	$	355,100	$	(117,925)	(23)	8.49	(211)
+200 bp		398,386		(74,640)	(15)	9.32	(129)
+100 bp		438,278		(34,748)	(7)	10.03	(57)
0 bp		473,026		—	—	10.60	—
‑100 bp		502,260		29,235	6	11.03	43
‑200 bp		517,334		44,308	9	11.16	55
‑300 bp		512,487		39,461	8	10.89	28

Computations of prospective effects of hypothetical interest rate changes are based on an internally generated model using actual maturity and repricing schedules for the Bank’s loans and deposits, and are based on numerous assumptions, including relative levels of market interest rates, loan repayments and deposit run-offs, and should not be relied upon as indicative of actual results. Further, the computations do not contemplate any actions the Bank may undertake in response to changes in interest rates.

Management cannot predict future interest rates or their effect on the Bank’s NPV in the future. Certain shortcomings are inherent in the method of analysis presented in the computation of NPV. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in differing degrees to changes in market interest rates. Additionally, certain assets, such as adjustable-rate loans, have an initial fixed rate period typically from one to seven years and over the remaining life of the asset changes in the interest rate are restricted. In addition, the proportion of adjustable-rate loans in the Bank’s portfolios could decrease in future periods due to refinancing activity if market interest rates remain steady in the future. Further, in the event of a change in interest rates, prepayment and early withdrawal levels could deviate significantly from those assumed in the table. Finally, the ability of many borrowers to service their adjustable-rate debt may decrease in the event of an interest rate increase.

The Company’s growth strategy has included origination of fixed-rate loans, as discussed under “Quantitative and Qualitative Disclosures About Market Risk,” above. Our fixed rate loan portfolio and the behavior of fixed-rate borrowers in a higher interest rate environment, especially over the course of fiscal 2023 and 2024, pressured our NPV. Since June 30, 2024, market interest rates at the longer end of the curve have increased, negatively impacting the modeled value of our longer-term fixed rate loans at December 31, 2024. The rise in rates had an inverse impact on liabilities, primarily attributable to the improved modeled value of the deposit portfolio. The Company’s sensitivity has also decreased in this period due to an increase in cash balances, a slight decrease in the percentage of total fixed rate

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loans, and an increase in the percentage of variable rate securities. In addition to these on-balance sheet changes, the Company also increased the notional amount of its pay-fixed/receive-floating interest rate swaps, designed to hedge the residential loan portfolio against the risk of rising interest rates, to $50 million at December 31, 2024, as compared to $40 million in similar interest rate swaps outstanding at June 30, 2024. The Company continues to manage its balance sheet to maximize earnings through interest rate cycles, while maintaining safe and sound risk management practices. Over time, the Company has worked to limit its exposure to rising rates by increasing the share of funding on its balance sheet obtained through lower cost non-maturity transaction accounts and retail time deposits, and by limiting short-term FHLB borrowings.

The Bank’s board of directors is responsible for reviewing the Bank’s asset and liability policies. The Bank’s Asset/Liability Committee meets monthly to review interest rate risk and trends, as well as liquidity and capital ratios and requirements. The Bank’s management is responsible for administering the policies and determinations of the board of directors with respect to the Bank’s asset and liability goals and strategies.

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PART I: Item 4: Controls and Procedures

SOUTHERN MISSOURI BANCORP, INC.

An evaluation of Southern Missouri’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities and Exchange Act of 1934, as amended, (the “Act”)) as of December 31, 2024 was carried out under the supervision and with the participation of our Chief Executive Officer, our Chief Administrative Officer, our Chief Financial Officer, and several other members of our senior management. Our Chief Executive Officer, our Chief Administrative Officer, and our Chief Financial Officer concluded that, as of December 31, 2024, the Company’s disclosure controls and procedures were effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Act is (i) accumulated and communicated to management (including our Chief Executive Officer, our Chief Administrative Officer and our Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Act) that occurred during the quarter ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The Company does not expect that its disclosures and procedures will prevent all errors and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

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PART II: Other Information

SOUTHERN MISSOURI BANCORP, INC.

Item 1: Legal Proceedings

In the opinion of management, the Company is not a party to any pending claims or lawsuits that are expected to have a material effect on the Company’s financial condition or operations. Periodically, there have been various claims and lawsuits involving the Company mainly as a defendant, such as claims to enforce liens, condemnation proceedings on properties in which the Company holds security interests, claims involving the making and servicing of real property loans and other issues incident to the Bank’s business. Aside from such pending claims and lawsuits, which are incident to the conduct of the Company’s ordinary business, the Company is not a party to any material pending legal proceedings that would have a material effect on the financial condition or operations of the Company.

Item 1a: Risk Factors

There have been no material changes to the risk factors set forth in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended June 30, 2024.

Item 2: Unregistered Sales of Equity Securities, Use of Proceeds, Issuer Purchases of Equity Securities

On May 20, 2021, the Company announced its intention to repurchase up to 445,000 shares of its common stock, or approximately 5.0% of its 8.9 million then-outstanding common shares. The shares will be purchased at prevailing market prices in the open market or in privately negotiated transactions, subject to availability and general market conditions. Repurchased shares will be held as treasury shares to be used for general corporate purposes.

The following table summarizes the Company’s stock repurchase activity for each month during the three months ended December 31, 2024.


				Total # of Shares
		Average		Purchased as Part of a	Maximum Number
	Total #	Price		Publicly	of Shares That
	of Shares	Paid Per		Announced	May Yet Be
	Purchased	Share		Program	Purchased ⁽¹⁾
10/01/24 - 10/31/24 period	—	$	—	—	213,580
11/01/24 - 11/30/24 period	—		—	—	213,580
12/01/24 - 12/31/24 period	—		—	—	213,580

(1)

Represents the remaining shares available for purchase as of the last calendar day of the month shown.

Item 3: Defaults upon Senior Securities

Not applicable

Item 4: Mine Safety Disclosures

Not applicable

Item 5: Other Information

a. None

b. None

c. Trading Plans. During the quarter ended December 31, 2024, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated a “Rule 10b5-1 trading arrangement,” or “non-rule 10b5-1 trading arrangement, as each term is defined in Item 408(a) of Regulation S-K.

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Item 6: Exhibits


Exhibit Number	Document
3.1(i)	Articles of Incorporation of the Registrant (filed as an exhibit to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended June 30, 1999 and incorporated herein by reference)
3.1(i)A	Amendment to Articles of Incorporation of Southern Missouri increasing the authorized capital stock of Southern Missouri (filed as an exhibit to Southern Missouri’s Current Report on Form 8-K filed on November 21, 2016 and incorporated herein by reference)
3.1(i)B	Amendment to Articles of Incorporation of Southern Missouri increasing the authorized capital stock of Southern Missouri (filed as an exhibit to Southern Missouri’s Current Report on Form 8-K filed on November 8, 2018 and incorporated herein by reference)
3.1(ii)	Certificate of Designation for the Registrant’s Senior Non-Cumulative Perpetual Preferred Stock, Series A (filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on July 26, 2011 and incorporated herein by reference)
3.2	Bylaws of the Registrant (filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on December 6, 2007 and incorporated herein by reference)
4	Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (filed as an exhibit to the Registrant’s Annual Report on Form 10-K for the year ended June 30, 2020 and incorporated herein by reference).
10	Material Contracts:
	1.	Registrant’s 2017 Omnibus Incentive Plan (attached to the Registrant’s definitive proxy statement filed on September 26, 2017, and incorporated herein by reference)
	2.	2008 Equity Incentive Plan (attached to the Registrant’s definitive proxy statement filed on September 19, 2008 and incorporated herein by reference)
	3.	2003 Stock Option and Incentive Plan (attached to the Registrant’s definitive proxy statement filed on September 17, 2003 and incorporated herein by reference)
	4.	1994 Stock Option and Incentive Plan (attached to the Registrant’s definitive proxy statement filed on October 21, 1994 and incorporated herein by reference)
	5.	Management Recognition and Development Plan (attached to the Registrant’s definitive proxy statement filed on October 21, 1994 and incorporated herein by reference)
	6.	Employment Agreements
		(i)	Employment Agreement with Greg A. Steffens (filed as an exhibit to the Registrant’s Annual Report on Form 10-KSB for the year ended June 30, 2019 and incorporated herein by reference)
		(ii)	Amended and Restated Employment Agreement with Greg A. Steffens (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, and incorporated herein by reference)
	7.	Director’s Retirement Agreements
		(i)	Director’s Retirement Agreement with Sammy A. Schalk (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended December 31, 2000 and incorporated herein by reference)
		(ii)	Director’s Retirement Agreement with L. Douglas Bagby (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended December 31, 2000 and incorporated herein by reference)
		(iii)	Director’s Retirement Agreement with Rebecca McLane Brooks (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended December 31, 2004 and incorporated herein by reference)
		(iv)	Director’s Retirement Agreement with Charles R. Love (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended December 31, 2004 and incorporated herein by reference)
		(v)	Director’s Retirement Agreement with Charles R. Moffitt (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended December 31, 2004 and incorporated herein by reference)
		(vi)	Director’s Retirement Agreement with Dennis C. Robison (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2008 and incorporated herein by reference)
		(vii)	Director’s Retirement Agreement with David J. Tooley (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2011 and incorporated herein by reference)

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			(viii)	Director’s Retirement Agreement with Todd E. Hensley (filed as an exhibit to the Registrant’s Annual Report on Form 10-K for the year ended June 30, 2014 and incorporated herein by reference)
	8.		Tax Sharing Agreement (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 and incorporated herein by reference)
	9.		Change-in-Control Agreements
			(i)	Change-in-control Agreement with Kimberly A. Capps (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 and incorporated herein by reference)
			(ii)	Change-in -Control Agreement with Matthew Funke (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 and incorporated herein by reference)
			(iii)	Change-in-control Agreement with Justin G. Cox (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 and incorporated herein by reference)
			(iv)	Change-in-control Agreement with Rick A. Windes (filed as an exhibit to the Registrant’s Current Report on Form 8-K for the event on March 25, 2022 and incorporated herein by reference)
			(v)	Change-in -Control Agreement with Mark Hecker (filed as an exhibit to the Registrant’s Current Report on Form 8-K for the event on April 20, 2021 and incorporated herein by reference)
			(vi)	Change-in -Control Agreement with Brett Dorton (filed as an exhibit to the Registrant’s Current Report on Form 8-K for the event on March 25, 2022 and incorporated herein by reference)
			(vii)	Change-in-Control Agreement with Lance Greunke (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 and incorporated herein by reference)
	10.	Named Executive Officer Salary and Bonus Arrangements for 2023 (filed as an exhibit to Registrant’s Annual Report on Form 10-K for the year ended June 30, 2023 and incorporated herein by reference)
	11. Director Fee Arrangements for 2023 (filed as an exhibit to Registrant’s Annual Report on Form 10-K for the year ended June 30, 2023 and incorporated herein by reference)
14	Code of Conduct and Ethics (filed as an exhibit to the Registrant’s Annual Report on Form 10-K for the year ended June 30, 2016 and incorporated herein by reference)
21	Subsidiaries of the Registrant (filed as an exhibit to Registrant’s Annual Report on Form 10-K for the year ended June 30, 2023 and incorporated herein by reference)
31.1	Rule 13a-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a) Certification of Chief Administrative Officer
31.3	Rule 13a-14(a) Certification of Chief Financial Officer
32	Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
101	Includes the following financial and related information from Southern Missouri Bancorp, Inc.’s Quarterly Report on Form 10-Q as of and for the quarter ended December 31, 2024, formatted in Inline Extensible Business Reporting Language (iXBRL): (1) the Consolidated Balance Sheets, (2) the Consolidated Statements of Income, (3) the Consolidated Statements of Comprehensive Income, (4) the Consolidated Statements of Changes in Stockholders’ Equity, (5) the Consolidated Statements of Cash Flows, and (6) Notes to Consolidated Financial Statements.
104	The cover page from this Quarterly Report on Form 10-Q, formatted in Inline XBRL.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		SOUTHERN MISSOURI BANCORP, INC.
		Registrant

Date: February 10, 2025		/s/ Greg A. Steffens
		Greg A. Steffens
		Chairman & Chief Executive Officer
		(Principal Executive Officer)

Date: February 10, 2025		/s/ Matthew T. Funke
		Matthew T. Funke
		President & Chief Administrative Officer

Date: February 10, 2025		/s/ Stefan Chkautovich
		Stefan Chkautovich
		Executive Vice President & Chief Financial Officer (Principal Financial Officer)

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