# SOUTHERN MISSOURI BANCORP, INC. (SMBC) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from SOUTHERN MISSOURI BANCORP, INC.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/916907/000155837024012781/smbc-20240630x10k.htm
Accession: 0001558370-24-012781
Filing date: 2024-09-13
Report date: 2024-06-30
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed section bleed.
Confidence: high

Company profile: /company/SMBC/
All MD&A years: /company/SMBC/mda/
Previous year: /company/SMBC/mda/fy2023/ (FY 2023)
Next year: /company/SMBC/mda/fy2025/ (FY 2025)

Item 7.​ ​Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion and analysis reviews our consolidated financial statements and other relevant statistical data and is intended to enhance your understanding of our financial condition and results of operations. The information in this section has been derived from the Consolidated Financial Statements and notes thereto, which are included in Item 8 of this Form 10-K. You should read the information in this section in conjunction with the business and financial information regarding us as provided in this Form 10-K.

SELECTED CONSOLIDATED FINANCIAL INFORMATION

​

The following tables set forth selected consolidated financial information and other financial data of the Company. The summary statement of financial condition information and statement of income information are derived from our consolidated financial statements, which have been audited by FORVIS MAZARS, LLP. See Item 8. “Financial Statements and Supplementary Data.”  Results for past periods are not necessarily indicative of results that may be expected for any future period.

​

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OVERVIEW

Southern Missouri Bancorp, Inc., is a Missouri corporation originally organized for the principal purpose of becoming the holding company of Southern Bank. The principal business of Southern Bank consists of attracting deposits from the communities it serves and investing those funds in loans secured by residential and commercial real estate, as well as commercial business and consumer loans. These funds have also been used to purchase municipal, corporate, and asset-backed investment securities, residential and commercial mortgage-backed securities (MBS) and collateralized mortgage obligations (CMOs), U.S. government and federal agency obligations and other permissible securities.

Southern Bank’s results of operations are primarily dependent on the levels of its net interest margin and noninterest income, and its ability to control operating expenses and net charge offs. Net interest margin is dependent primarily on the difference or spread between the average yield earned on interest-earning assets (including loans, mortgage-related securities, and investments) and the average rate paid on interest-bearing liabilities (including deposits, securities sold under agreements to repurchase, and borrowings), as well as the relative amounts of these assets and liabilities. Southern Bank is subject to interest rate risk to the degree that its interest-earning assets mature or reprice at different times, or on a varying basis, from its interest-bearing liabilities.

Southern Bank’s noninterest income consists primarily of fees charged on transaction and loan accounts, interchange income from customer debit and ATM card use, gains on sales of loans, trust and wealth management services, insurance brokerage commissions, and increased cash surrender value of bank owned life insurance (“BOLI”). Southern Bank’s operating expenses include: employee compensation and benefits, occupancy and data processing expenses, legal and professional fees, federal deposit insurance premiums, amortization of intangible assets, and other general and administrative expenses.

Southern Bank’s operations are significantly influenced by general economic conditions including monetary and fiscal policies of the U.S. government and the Federal Reserve Board. Additionally, Southern Bank is subject to policies and regulations issued by financial institution regulatory agencies including the Federal Reserve, the Missouri Division of Finance, and the Federal Deposit Insurance Corporation. Each of these factors may influence interest rates, loan demand, prepayment rates and deposit flows. Interest rates available on competing investments as well as general market interest rates influence the Bank’s cost of funds. Lending activities are affected by the demand for real estate and other types of loans, which in turn is affected by the interest rates at which such financing may be offered. Lending activities are funded through the attraction of deposit accounts consisting of checking accounts, passbook and statement savings accounts, money market deposit accounts, certificate of deposit accounts with terms of 60 months or less, securities sold under agreements to repurchase, advances from the Federal Home Loan Bank of Des Moines, and brokered deposits. The Bank intends to continue to focus on its lending programs for one- to four-family and multi-family residential real estate, commercial real estate, commercial business, and consumer financing on loans secured by properties or collateral located in its primary lending area or to borrowers who operate within that area.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Critical accounting estimates are those estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations of the registrant, and provide qualitative and quantitative information necessary to understand the estimation uncertainty and the impact the critical accounting estimate has had or is reasonably likely to have on financial condition or results of operations to the extent the information is material and reasonably available. This information should include why each critical accounting estimate is subject to uncertainty and, to the extent the information is material and reasonably available, how much each estimate and/or assumption has changed over a relevant period, and sensitivity of the reported amount to the methods, assumptions and estimates underlying its calculation.

The Company has established various accounting policies, which govern the application of accounting principles generally accepted in the United States of America in the preparation of our financial statements. Our significant accounting policies are described in Item 8 of this Form 10-K under the Notes to the Consolidated Financial

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Statements. Certain accounting policies involve significant judgments and assumptions by management that have a material impact on the carrying value of certain assets and liabilities; management considers such accounting policies to be critical accounting policies. The judgments and assumptions used by management are based on historical experience and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ from these judgments and estimates that could have a material impact on the carrying values of assets and liabilities and the results of operations of the Company.

Allowance for Credit Losses. The Company's allowance for credit losses (ACL) is its estimate of credit losses expected in the loan portfolio, on unfunded lending commitments, and held-to maturity securities over the expected life of those assets or in securities available-for-sale when credit loss is identified, which is limited to the difference in fair value and cost. While these estimates are based on substantive methods for determining the required allowance, actual outcomes may differ significantly from estimated results, especially when determining required allowances for larger, complex commercial credits or unfunded lending commitments to commercial borrowers. Consumer loans, including single family residential real estate, are individually smaller and generally behave in a similar manner, and loss estimates for these credits are considered more predictable. Additionally, the Company estimates the allowance for credit losses as a calculation of expected lifetime credit losses utilizing a forward-looking forecast of macroeconomic conditions, which may differ significantly from actual results. Further discussion of the methodology used in establishing the allowance is provided in Note 1 and Note 3 to the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K, and in the “Financial Condition – Loans” and “Allowance for Credit Losses” sections of this Item 7.

FINANCIAL CONDITION

General. The Company experienced balance sheet growth in fiscal 2024, with total assets of $4.6 billion at June 30, 2024, reflecting an increase of $244.1 million, or 5.6%, as compared to June 30, 2023. Asset growth was attributable mainly to increases in loans, available-for-sale (“AFS”) securities, and cash equivalents.

Cash and equivalents. Cash and cash equivalents were $61.4 million at June 30, 2024, an increase of $6.2 million, or 11.2%, as compared to June 30, 2023. The increase was primarily a result of organic deposit growth during the period, partially offset by the funding of loan growth. Total deposits were $4.0 billion at June 30, 2024, an increase of $226.9 million, or 6.1% as compared to June 30, 2023.

Investments. AFS securities were $427.9 million at June 30, 2024, an increase of $10.3 million, or 2.5%, as compared to June 30, 2023. The increase was primarily attributable to increased holdings of residential MBS and CMOs.

Loans. Loans, net of the ACL, were $3.8 billion at June 30, 2024, an increase of $226.2 million, or 6.3%, as compared to June 30, 2023. Gross loans increased by $230.9 million, while the ACL attributable to outstanding loan balances increased $4.7 million, or 9.8%, as compared to June 30, 2023.

The increase of $230.9 million in loan balances, net of fair value adjustments, was attributable to growth in non-owner occupied commercial real estate loans, residential real estate loans, agricultural revolving lines of credit, and drawn construction loan balances. This was partially offset by payoffs and paydowns in owner-occupied commercial real estate, commercial and industrial, multi-family, and agriculture real estate loans.

Nonperforming loans were $6.7 million, or 0.17% of gross loans, at June 30, 2024, as compared to $7.7 million, or 0.21% of gross loans, at June 30, 2023. Nonperforming assets were $10.6 million, or 0.23% of total assets, at June 30, 2024, as compared to $11.3 million, or 0.26% of total assets, at June 30, 2023.

Allowance for Credit Losses. ACL at June 30, 2024, totaled $52.5 million, representing 1.36% of gross loans and 786% of nonperforming loans, as compared to an ACL of $47.8 million, representing 1.32% of gross loans and 625% of nonperforming loans, at June 30, 2023. The Company has estimated its expected credit losses as of June 30, 2024, under ASC 326-20, and management believes the ACL as of that date is adequate based on that estimate. There remains, however, significant uncertainty as the Federal Reserve has tightened monetary policy to address inflation risks. Management continues to closely monitor, in particular, borrowers in the hotel industry that were slow to recover from

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the COVID-19 pandemic. See also, “Provision for Credit Losses, under Comparison of Operating Results for the Years Ended June 30, 2024 and 2023”.

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 holds no 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. For a summary of changes in the ACL during the current and prior fiscal years, and a breakdown of the ACL by loan category as of the current and prior fiscal year end, see Description of Business – Asset Quality, Allowance for Credit Losses, contained within Item 1 of this Form 10-K.

The estimate involves consideration of quantitative and qualitative factors relevant to the loans as segmented by the Company, and is based on an evaluation, at the reporting date, of historical loss experience and peer data, 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

​

Premises and Equipment. Premises and equipment increased to $96.0 million, up $3.6 million, or 3.8%, as compared to June 30, 2023. The increase was due primarily to an increase in premises, right-of-use assets, and furniture, fixtures, equipment, and software, partially offset by increased depreciation.

BOLI. The Bank has purchased “key person” life insurance policies (BOLI) on employees at various times since fiscal 2003, and has acquired additional BOLI in connection with certain mergers. At June 30, 2024, the cash surrender value of all such policies was $73.6 million, up $1.9 million, or 2.7%, as compared to June 30, 2023.

Intangible Assets. The July 2009 acquisition of the Southern Bank of Commerce resulted in goodwill of $126,000. The October 2013 acquisition of Ozarks Legacy Community Financial, Inc., resulted in goodwill of $1.5 million. The August 2014 acquisition of Peoples Service Company, Inc., and its subsidiary, Peoples Bank of the Ozarks (the “Peoples Acquisition”) resulted in goodwill of $3.0 million. The June 2017 acquisition of Tammcorp, Inc., and its subsidiary, Capaha Bank (the “Capaha Acquisition”) resulted in goodwill of $4.1 million and a $3.4 million core deposit intangible which is being amortized over a seven-year period using the straight-line method. The SMB-Marshfield Acquisition resulted in goodwill of $4.4 million and a $1.3 million core deposit intangible which is being amortized over a seven-year period using the straight-line method. The Gideon Acquisition resulted in goodwill of $1.0 million and a $4.1 million core deposit intangible which is being amortized over a seven-year period using the straight-line method. The May 2020 Central Federal Acquisition resulted in a bargain purchase gain of $123,000 and a $540,000 core deposit intangible which is being amortized over a six-year period using the straight-line method. The December 2021 Cairo acquisition resulted in goodwill of $442,000 and a $168,000 core deposit intangible which is being amortized over a seven-year period using the straight-line method. The February 2022 Fortune acquisition resulted in goodwill of $12.8 million and a $1.6 million core deposit intangible which is being amortized over a seven-year period using the straight-line method. The January 2023 Citizens merger resulted in goodwill of $23.5 million, as well as a $22.1 million core deposit intangible which is being amortized over a ten year period using the straight-line method, and a $2.6 million intangible related to the acquired trust and wealth management business line which is being amortized over a ten year

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period using the straight-line method. Goodwill from these acquisitions is not being amortized, but is tested for impairment at least annually.

Deposits. Deposits were $4.0 billion at June 30, 2024, an increase of $226.9 million, or 6.1%, as compared to June 30, 2023. The deposit portfolio saw increases in certificates of deposit and savings accounts, which were partially offset by decreases in money market deposit accounts, interest-bearing transaction accounts, and noninterest bearing transaction accounts.

Public unit balances totaled $594.6 million at June 30, 2024, an increase of $16.1 million compared to June 30, 2023. Brokered deposits, comprised of certificates and money market deposits, totaled $173.8 million at June 30, 2024, an increase of $14.2 million compared to June 30, 2023. Our discussion of brokered deposits excludes those deposits originated through reciprocal arrangements. We continued to utilize reciprocal deposit programs, and at June 30, 2024, we had placed deposits of $575.3 million through reciprocal programs, up from $524.1 million a year earlier. At June 30, 2024, $361.0 million of this total reflected deposits we had placed on behalf of our public unit depositors, up from $331.3 million a year ago. The average loan-to-deposit ratio for the fourth quarter of fiscal 2024 was 96.1%, as compared to 95.8% for the same period of the prior fiscal year.

Borrowings. FHLB advances were $102.1 million at June 30, 2024, a decrease of $31.5 million, or 23.6%, as compared to June 30, 2023. The decrease in FHLB advances resulted from deposit growth and earnings retention outpacing loan growth. FHLB advances at June 30, 2024, were comprised of $102.1 million in term advances and no overnight borrowings, as compared to $62.1 million in term advances and $33.5 million overnight borrowings at June 30, 2023.

Subordinated Debt. In March 2004, $7.0 million of Floating Rate Capital Securities of Southern Missouri Statutory Trust I, with a liquidation value of $1,000 per share were issued. The securities bear interest at a floating rate based on SOFR, are now redeemable at par, and mature in 2034. In connection with its October 2013 acquisition of Ozarks Legacy, the Company assumed $3.1 million in floating rate junior subordinated debt securities. The debt securities had been issued in June 2005 by Ozarks Legacy in connection with the sale of trust preferred securities, bear interest at a floating rate based on SOFR, are redeemable at par, and mature in 2035. The carrying value of these debt securities was approximately $2.8 million at June 30, 2024, as compared to $2.7 million at June 30, 2023. In connection with the Peoples Acquisition, the Company assumed $6.5 million in floating rate junior subordinated debt securities. The debt securities had been issued in 2005 by Peoples, in connection with the sale of trust preferred securities, bear interest at a floating rate based on SOFR, are redeemable at par, and mature in 2035. The carrying value of these debt securities was approximately $5.6 million at June 30, 2024, as compared to $5.5 million at June 30, 2023. In connection with the Fortune acquisition, 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 June 30, 2024, as compared to $7.7 million at June 30, 2023.

Stockholders’ Equity. The Company’s stockholders’ equity was $488.7 million at June 30, 2024, an increase of $42.7 million, or 9.6%, as compared to June 30, 2023. The increase was attributable primarily to earnings retained after cash dividends paid, in combination with a $4.5 million reduction in accumulated other comprehensive losses (“AOCL”) primarily as a result of the market value of the Company’s investments appreciating during the fiscal year due to the decrease in market interest rates. The reduction in AOCL was also partially due to losses of $1.5 million which were recognized during the fiscal year on the sale of AFS securities. The AOCL totaled $17.4 million at June 30, 2024, as compared to $21.9 million at June 30, 2023. The Company does not hold any securities classified as held-to-maturity. The increase in stockholders’ equity was partially offset by $3.9 million being utilized to repurchase 92,795 shares of the Company’s common stock during fiscal 2024 at an average price of $41.56 per share.

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COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED JUNE 30, 2024 AND 2023

Net Income. The Company’s net income for the fiscal year ended June 30, 2024, was $50.2 million, an increase of $10.9 million, or 27.9%, as compared to the prior fiscal year.

Net Interest Income. Net interest income for fiscal 2024 was $139.5 million, an increase of $12.7 million, or 10.1%, when compared to the prior fiscal year. The increase was attributable to a 19.3% increase in the average balance of interest-earning assets, partially offset by a decrease in the net interest margin, from 3.54% to 3.27%. Average earning asset balance growth was due primarily to loan growth, increases in investment securities, and funds held with correspondent banks, which was attributable in part to the Citizens merger in January 2023. In addition to the increased cost of deposits, change in the interest-earning asset mix also contributed to the decline in net interest margin as higher yielding loans were a lower percentage of the mix compared to 2023.

Interest Income. Interest income for fiscal 2024 was $248.4 million, an increase of $72.0 million, or 40.8%, when compared to the prior fiscal year. The increase was due to an increase of $690.3 million, or 19.3%, in the average balance of interest-earning assets, combined with an 89-basis point increase in the average yield earned on interest-earning assets, from 4.93% in fiscal 2023, to 5.82% in fiscal 2024.

Interest income on loans receivable for fiscal 2024 was $222.5 million, an increase of $60.3 million, or 37.2%, when compared to the prior fiscal year. The increase was due to a $543.5 million, or 17.1%, increase in the average balance of loans receivable, combined with an 87-basis point increase in the average yield earned on loans receivable. The increase in the average yield was attributed to origination and repricing of loans and borrower refinancing as average market interest rates increased over the course of the fiscal year.

Interest income on the investment portfolio and other interest-earning assets was $25.9 million for fiscal 2024, an increase of $11.7 million, or 82.2%, when compared to the prior fiscal year. This increase was attributable to a 307-basis point increase in the yield on these assets, combined with a $146.9 million, or 36.5%, increase in the average balance of such assets. The increase in average yield was attributable to higher balances of variable-rate correspondent deposit balances, and the purchases and reinvestment at higher market interest rates of securities, the average balance of which were increasing over the course of the fiscal year.

Interest Expense. Interest expense was $108.9 million for fiscal 2024, an increase of $59.2 million, or 119.2%, when compared to the prior fiscal year. The increase was due to a 140-basis point increase in the average rate paid on interest-bearing liabilities, to 3.11% in fiscal 2024, from 1.72% in fiscal 2023, combined with an increase of $604.1 million, or 20.9%, in the average balance of interest-bearing liabilities.

Interest expense on deposits was $102.2 million for fiscal 2024, an increase of $57.8 million, or 130.1%, as compared to the prior fiscal year. The increase was due to a 144-basis point increase in the average rate paid on interest-bearing deposits, combined with the $592.1 million, or 21.5%, increase in the average balance of those deposits. The increase in the average rate paid on deposits was attributable primarily to higher market interest rates and a more competitive deposit environment over the course of fiscal 2024.

Interest expense on FHLB advances was $5.0 million for fiscal 2024, an increase of $1.4 million, or 37.7%, when compared to the prior fiscal year. The increase was due primarily to a $16.3 million, or 15.2%, increase in the average balance of these advances, combined with a 66-basis point increase in the average rate paid on advances. The increase in the average rate paid was attributable primarily to higher market interest rates over the course of the fiscal year, which impacted the costs of overnight borrowings and new term advances taken during the fiscal year.

Interest expense on subordinated debt was $1.7 million for fiscal year 2024, an increase of $303,000, or 21.1%, when compared to the prior fiscal year. The increase was due primarily to a 134-basis point increase in the average rate paid on subordinated debt. The increase in the average rate paid was attributable primarily to higher market interest rates over the course of the fiscal year, which impacted adjustable-rate debt.

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Provision for Credit Losses. The Company recorded a provision for credit losses (PCL) of $3.6 million for fiscal 2024, as compared to a PCL of $17.1 million for the prior fiscal year. In the prior period, the larger PCL was attributable in part to the $5.2 million charge required to fund the ACL for non-purchased credit deteriorated loans acquired in the Citizens merger, along with a $1.8 million charge to fund the allowance for off-balance sheet credit exposures acquired in the Citizens merger. Exclusive of the charges required as a result of the Citizens merger, the Company would have recorded a PCL of approximately $10.1 million for fiscal 2023, reflecting a $9.0 million increase in the Company’s required ACL on outstanding loans based on organic loan growth changes in the current expected credit losses on the portfolio, and a $1.1 million increase in the required allowance for off-balance sheet credit exposure. In 2024 the company had a $6.6 million PCL for on-balance sheet exposure for loan growth and charge-offs and a $3.0 negative PCL for off-balance sheet exposures, as construction draws reduced available credit and increased on-balance sheet exposure. In addition, the required PCL was lower in fiscal 2024 due to the company’s assessment of the economic outlook, which improved as compared to its assessment as of June 30, 2023, but reserves were modestly increased due to increased loan balances, qualitative factors, and individually evaluated credits, slightly expanding the ACL as a percentage of total loans.

​

Our ACL at June 30, 2024, totaled $52.5 million, representing 1.36% of gross loans and 786% of nonperforming loans, as compared to an ACL of $47.8 million, representing 1.32% of gross loans and 624% of nonperforming loans, at June 30, 2023.  As a percentage of average loans outstanding, the Company recorded net charge offs of 0.05% during fiscal year 2024, as compared to net charge offs of 0.02% in the prior fiscal year. (See Note 1 and Note 3 of the Notes to Consolidated Financial Statements, “Critical Accounting Policies” and “Financial Condition – Allowance for Credit Losses” in this Item 7, and “Asset Quality” in Item 1 of this Form 10-K.)

​

Noninterest Income. Noninterest income was $24.8 million for fiscal 2024, a decrease of $1.4 million, or 5.2%, when compared to the prior fiscal year. Increases in bank card interchange income, wealth management fees, earnings on BOLI, and loan late charges, were more than offset by realized losses on sale of AFS securities, and lower other loan fees, other income, deposit account fees, loan servicing fees, and gains on sale of loans. Excluding the losses on sale of AFS securities, which the Company sold lower yielding securities and reinvested into higher yielding securities to improve interest income, non-interest income would have been slightly higher than the prior year. Interchange income increased due to higher card volume during the year to date, driving fee income growth. Wealth management benefitted from higher assets under management, and BOLI earnings improved due mostly to increased investments in policies, both attributable primarily to the Citizens merger and also due to asset appreciation. Also, BOLI earnings increased from higher crediting rates. These increases were more than offset by the realized losses in the investment portfolio; and inclusion in the prior-year period of a one-time gain on the sale of fixed assets of $317,000, resulting in lower other income in the current fiscal year. Other loan fees were down due to the decrease in loan origination volume, primarily in commercial and residential real estate loans, which resulted in declining recognition of new mortgage servicing rights. Deposit account charges and related fees also decreased due to changes adopted in July 2023 as to how fees are assessed on NSF items.

Noninterest Expense. Noninterest expense was $97.6 million for fiscal 2024, an increase of $11.2 million, or 12.9%, when compared to the prior fiscal year. The increase was primarily attributable to the full year impact of the Citizens merger in the current year with the largest increases realized in compensation and benefits, occupancy and equipment, intangible amortization from the Citizens merger, and data processing expenses, partially offset by lower legal and professional costs resulting from the prior year’s impact from the Citizens merger. The increase in compensation and benefits as compared to the prior year period was primarily due to increased headcount resulting from the Citizens merger, an increase in legacy employee headcount, as well as annual merit increases and inflation adjustments. Occupancy expenses increased primarily due to facilities added through the Citizens merger, and other equipment purchases. The Company’s increase in data processing costs related to the growing volume of transaction activity, increased costs of software licensing, and new programs for lending and wealth management.

Provision for Income Taxes. The Company recorded an income tax provision of $12.9 million for fiscal 2024, an increase of $2.7 million, or 26.4%, as compared to the prior fiscal year, which was attributable to higher pre-tax income and was partially offset by a decrease in the effective tax rate to 20.5% for fiscal 2024, as compared to 20.7% for fiscal 2023.

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COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED JUNE 30, 2023 AND 2022

Net Income. The Company’s net income for the fiscal year ended June 30, 2023, was $39.2 million, a decrease of $7.9 million, or 16.8%, as compared to the prior fiscal year.

Net Interest Income. Net interest income for fiscal 2023 was $126.7 million, an increase of $23.2 million, or 22.4%, when compared to the prior fiscal year. The increase, as compared to the prior fiscal year, was attributable to a 28.5% increase in the average balance of interest-earning assets, partially offset by a decrease in the net interest margin, from 3.72% to 3.54%. Average earning asset balance growth was due primarily to loan growth and increases in investment securities, attributable in part to the Citizens merger. Lower average cash and cash equivalent balances partially offset increases in other categories of average earning assets, and the change in the interest-earning asset mix also partially offset the decline in interest margin.

Interest Income. Interest income for fiscal 2023 was $176.4 million, an increase of $59.5 million, or 51.0%, when compared to the prior fiscal year. The increase was due to an increase of $794.0 million, or 28.5%, in the average balance of interest-earning assets, combined with a 73 basis point increase in the average yield earned on interest-earning assets, from 4.20% in fiscal 2022, to 4.93% in fiscal 2023.

Interest income on loans receivable for fiscal 2023 was $162.2 million, an increase of $50.7 million, or 45.5%, when compared to the prior fiscal year. The increase was due to a $749.9 million, or 30.9%, increase in the average balance of loans receivable, combined with a 51 basis point increase in the average yield earned on loans receivable. The increase in the average yield was attributed to origination and repricing of loans and borrower refinancing as average market interest rates increased over the course of the fiscal year, combined with the partial-year impact of the Citizens merger, in which the acquired loan portfolio was valued based on current market interest rates at the date of merger.

Interest income on the investment portfolio and other interest-earning assets was $14.2 million for fiscal 2023, an increase of $8.8 million, or 164.2%, when compared to the prior fiscal year. This increase was attributable to a 203-basis point increase in the yield on these assets, combined with a $44.1 million, or 12.3%, increase in the average balance of such assets. The increase in average yield was attributable to the partial-year impact of the Citizens merger, in which the acquired securities portfolio was valued based on current market interest rates at the date of merger, a change in the mix of such assets, as cash and cash equivalents decreased while investment and mortgage backed securities increased, and purchases and reinvestment at market interest rates which were increasing over the course of the fiscal year.

Interest Expense. Interest expense was $49.7 million for fiscal 2023, an increase of $36.4 million, or 273.5%, when compared to the prior fiscal year. The increase was due to a 113-basis point increase in the average rate paid on interest-bearing liabilities, to 1.72% in fiscal 2023, from 0.59% in fiscal 2022, combined with an increase of $654.0 million, or 29.2%, in the average balance of interest-bearing liabilities.

Interest expense on deposits was $44.4 million for fiscal 2023, an increase of $32.6 million, or 275.5%, as compared to the prior fiscal year. The increase was due to a 107-basis point increase in the average rate paid on interest-bearing deposits, combined with the $580.5 million, or 26.6%, increase in the average balance of those deposits. The increase in the average rate paid on deposits was attributable primarily to higher market interest rates over the course of fiscal 2023.

Interest expense on FHLB advances was $3.6 million for fiscal 2023, an increase of $2.8 million, or 358.0%, when compared to the prior fiscal year. The increase was due primarily to a $64.3 million, or 148.0%, increase in the average balance of these advances, combined with a 154-basis point increase in the average rate paid on advances. The increase in the average rate paid was attributable primarily to higher market interest rates over the course of the fiscal year, which impacted the costs of overnight borrowings and new term advances taken during the fiscal year.

Interest expense on subordinated debt was $1.4 million for fiscal year 2023, an increase of $753,000, or 109.8%, when compared to the prior fiscal year. The increase was due primarily to a 242-basis point increase in the average rate paid on subordinated debt, combined with a $5.1 million, or 27.8%, increase in the average balance of

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subordinated debt. The increase in the average rate paid was attributable primarily to higher market interest rates over the course of the fiscal year, which impacted adjustable rate debt, while the increase in the average balance was attributable primarily to the mid-fiscal 2022 assumption of subordinated debt in the Fortune merger.

Provision for Credit Losses. The Company recorded a provision for credit losses (PCL) of $17.1 million for fiscal 2023, as compared to a PCL of $1.5 million for the prior fiscal year. In the current period, the PCL was attributable in part to the $5.2 million charge required to fund the ACL for non-purchased credit deteriorated loans acquired in the Citizens merger, along with a $1.8 million charge to fund to the allowance for off-balance sheet credit exposures acquired in the Citizens merger. Exclusive of the charges required as a result of the Citizens merger, the Company would have recorded a PCL of approximately $10.1 million in the current year, reflecting an $9.0 million increase in the Company’s required ACL on outstanding loan balances based on organic loan growth and changes in the current expected credit losses on the portfolio, and a $1.1 million increase in the required allowance for off-balance sheet credit exposure based on increased anticipated draws of available credit and changes in the mix of loan types anticipated to be funded.

Our ACL at June 30, 2023, totaled $47.8 million, representing 1.32% of gross loans and 634% of nonperforming loans, as compared to an ACL of $33.2 million, representing 1.22% of gross loans and 806% of nonperforming loans at June 30, 2022.  As a percentage of average loans outstanding, the Company recorded net charge offs of 0.02% during fiscal year 2023, as compared to net charge offs of less than one basis point in the prior fiscal year. (See Note 1 and Note 3 of the Notes to Consolidated Financial Statements, “Critical Accounting Policies” and “Financial Condition – Allowance for Credit Losses” in this Item 7, and “Asset Quality” in Item 1 of this Form 10-K.)

Noninterest Income. Noninterest income was $26.2 million for fiscal 2023, an increase of $5.0 million, or 23.6%, when compared to the prior fiscal year. Increases in deposit service charges, bank card interchange income, income on non-deposit investment products, loan servicing fees, other loan fees, and earnings on BOLI contributed to the year-over year increase, partially offset by a decrease in gains on sale of residential loans originated for sale into the secondary market. Most categories of noninterest income increased due to the impact of the January 2023 Citizens merger and the February 2022 Fortune merger.

Noninterest Expense. Noninterest expense was $86.4 million for fiscal 2023, an increase of $23.0 million, or 36.4%, when compared to the prior fiscal year. The increase included $4.9 million in charges related to merger and acquisition activity, which was primarily attributable to legal and professional fees, data processing and telecommunications, and team member compensation and expenses. In total, the increase in noninterest expense was attributable primarily to compensation and benefits, legal and professional fees, occupancy expenses, data processing expenses, amortization of intangibles, deposit insurance premiums, and other noninterest expenses. The increase in compensation and benefits as compared to the prior year period primarily reflected increased headcount for part of the fiscal year resulting from recent merger activity, compensation adjustments over the prior year, one-time compensation attributable to the Citizens merger, and a continued trend of increasing legacy employee headcount. Compensation adjustments over the last several fiscal years have exceeded historical trends. Data processing expenses increased primarily as a result of data conversion charges associated with the Citizens merger, and also reflected continued investments in new software and systems. Occupancy expenses increased primarily due to facilities added through the Citizens merger. Other noninterest expenses increased due to miscellaneous acquisition-related expenses, expenses related to loan originations, and expenses related to employee travel and training.

Provision for Income Taxes. The Company recorded an income tax provision of $10.2 million for fiscal 2023, a decrease of $2.5 million, or 19.7%, as compared to the prior fiscal year, which was attributable to lower pre-tax income and a decrease in the effective tax rate to 20.7% for fiscal 2023, as compared to 21.3% for fiscal 2022.

LIQUIDITY AND CAPITAL RESOURCES

Southern Missouri’s primary potential sources of funds include deposit growth, FHLB advances, amortization and prepayment of loan principal, investment maturities and sales, and capital generated from ongoing operations. While scheduled repayments on loans and securities as well as the maturity of short-term investments are a relatively predictable source of funding, deposit flows, FHLB advance redemptions and loan and security prepayment rates are

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significantly influenced by factors outside of the Bank’s control, including general economic conditions and market competition. The Bank has relied on FHLB advances as a source for funding cash or liquidity needs.

Southern Missouri uses its liquid assets as well as other funding sources to meet ongoing commitments, to fund loan demand, to repay maturing certificates of deposit and FHLB advances, to make investments, to fund other deposit withdrawals, and to meet operating expenses. At June 30, 2024, the Bank had outstanding commitments to extend credit of $898.6 million (including $689.6 million in unused lines of credit). Total commitments to originate fixed-rate loans with terms in excess of one year were $159.3 million at rates ranging from 4.95% to 9.0%, with a weighted-average rate of 7.04%. Management anticipates that current funding sources will be adequate to meet foreseeable liquidity needs.

For the fiscal year ended June 30, 2024, Southern Missouri increased deposits by $226.9 million, and decreased FHLB advances by $31.5 million. During the prior fiscal year, Southern Missouri increased deposits by $910.5 million, and increased FHLB advances by $95.6 million. The deposit increase in 2023 was primarily attributable to the Citizens merger increasing deposits by $851.1 million, net of fair value adjustments. At June 30, 2024, the Bank reported $1.4 billion of its single-family residential and commercial real estate loan portfolios as eligible collateral to the FHLB for available credit of approximately $845.1 million, of which $102.1 million was advanced, while $461,000 was encumbered in relation to residential real estate loans sold onto the secondary market through the FHLB. The Bank had also pledged $383.6 million of its agricultural real estate and agricultural operating and equipment loans to the Federal Reserve Bank of St. Louis’s discount window for available credit of approximately $323.4 million, as of June 30, 2024, none of which was advanced. In addition, as of June 30, 2024, the Bank had other assets available to pledge to the FHLB and Federal Reserve to access additional liquidity. In total, FHLB borrowings are limited to 45% of Bank assets, or approximately $2.1 billion as most recently reported by the FHLB as of June 30, 2024, which means that an amount up to $2.0 billion may still be eligible to be borrowed from the FHLB, subject to available collateral. Along with the ability to borrow from the FHLB and Federal Reserve Bank of St. Louis, management believes its liquid resources will be sufficient to meet the Company’s liquidity needs.

Liquidity management is an ongoing responsibility of the Bank’s management. The Bank adjusts its investment in liquid assets based upon a variety of factors including (i) expected loan demand and deposit flows, (ii) anticipated investment and FHLB advance maturities, (iii) the impact on profitability, and (iv) asset/liability management objectives.

At June 30, 2024, the Bank had $1.1 billion in CDs maturing within one year and $2.6 billion in non-maturity deposits, as compared to $690.5 million in CDs maturing within one year and $2.7 billion in non-maturity deposits as of June 30, 2023. Management believes that most maturing interest-bearing liabilities will be retained or replaced by new interest-bearing liabilities. Also, at June 30, 2024, the Bank had no overnight advances from the FHLB, $8.0 million in term FHLB advances maturing within one year, and $94.1 million in FHLB advances with a maturity date in excess of one year. Of the advances with maturity dates in excess of one year, none was eligible for early redemption by the lender within one year.

We also incur capital expenditures on an ongoing basis to expand and improve our product offerings, enhance and modernize our technology infrastructure, and to introduce new technology-based products to compete effectively in our markets. We evaluate capital expenditure projects based on a variety of factors, including expected strategic impacts (such as forecasted impact on revenue growth, productivity, expenses, service levels and customer retention) and our expected return on investment. The amount of capital investment is influenced by, among other things, current and projected demand for our services and products, cash flow generated by operating activities, cash required for other purposes and regulatory considerations. At June 30, 2024, we had other future obligations and accrued expenses of $19.9 million. Based on our current capital allocation objectives, during fiscal 2025 we project expending approximately $7.0 million to $10.0 million of cash for capital investment in technology, property, plant and equipment. In addition, for the fiscal year ending June 30, 2025, we project that our fixed commitments will include (i) $1.5 million of operating and finance lease and other fixed payments and (ii) $1.7 million of scheduled interest payments on subordinate notes. We believe that our liquid assets combined with the available lines of credit provide adequate liquidity to meet our current financial obligations for at least the next 12 months.

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REGULATORY CAPITAL

Federally insured financial institutions are required to maintain minimum levels of regulatory capital. Federal Reserve regulations establish capital requirements, including a tier 1 leverage (or core capital) requirement and risk-based capital requirements. The Federal Reserve Board is also authorized to impose capital requirements in excess of these standards on individual institutions on a case-by-case basis.

At June 30, 2024, the Bank exceeded regulatory capital requirements with tier 1 capital, total risk-based capital, and common equity tier 1 capital of $447.2 million, $496.1 million and $447.2 million, respectively. The Bank’s tier 1 capital represented 9.79% of total adjusted assets and 11.43% of total risk-weighted assets, while total risk-based capital was 12.68% of total risk-weighted assets, and common equity tier 1 capital was 11.43% of total risk-weighted assets. To be considered adequately capitalized under the FDIC Prompt Corrective Action (PCA) guidelines, the Bank must maintain tier 1 capital levels of at least 4.0% of adjusted total assets and 6.0% of risk-weighted assets, total risk-based capital of 8.0% of risk-weighted assets, and common equity tier 1 capital of 4.5% of risk-weighted assets. To be considered well capitalized, the Bank must maintain tier 1 capital levels of at least 5.0% of adjusted total assets and 8.0% of risk-weighted assets, total risk-based capital of 10.0% of risk-weighted assets, and common equity tier 1 capital of 6.5% of risk-weighted assets.

At June 30, 2024, the Company exceeded regulatory capital requirements with tier 1 capital, total risk-based capital, and common equity tier 1 capital of $467.0 million, $524.0 million and $451.5 million, respectively. The Company’s tier 1 capital represented 10.19% of total adjusted assets and 11.79% of total risk-weighted assets, while total risk-based capital was 13.23% of total risk-weighted assets, and common equity tier 1 capital was 11.39% of total risk-weighted assets. Under 12 CFR Part 217 -- Capital Adequacy of Bank Holding Companies, Savings and Loan Holding Companies, and State Member Banks (Regulation Q), the Company is subject to the following minimum regulatory capital requirements: common equity tier 1 capital ratio of 4.5%, tier 1 capital ratio of 6%, total capital ratio of 8% of risk-weighted assets, and leverage ratio of 4%.

See Item 1 – Business – Regulation, and Note 11 of the Notes to the Consolidated Financial Statements contained in Item 8 of this Form 10-K for additional detail on the Company’s capital requirements.

IMPACT OF INFLATION

The consolidated financial statements and related data presented herein have been prepared in accordance with U.S. generally accepted accounting principles, which require the measurement of financial position and operating results in historical dollars without considering changes in the relative purchasing power of money over time due to inflation. The primary impact of inflation on the operations of the Company is reflected in increased operating costs. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, changes in interest rates generally have a more significant impact on a financial institution’s performance than does inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services. In the current interest rate environment, liquidity and maturity structure of the Company’s assets and liabilities are critical to the maintenance of acceptable performance levels.

AVERAGE BALANCE, INTEREST AND AVERAGE YIELDS AND RATES

The following table sets forth certain information relating to the Company’s average interest-earning assets and interest-bearing liabilities and reflects the average yield on assets and the average cost of liabilities for the periods indicated. These yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the years indicated. Nonaccrual loans are included with other noninterest-earning assets.

The table also presents information with respect to the difference between the weighted-average yield earned on interest-earning assets and the weighted-average rate paid on interest-bearing liabilities, or interest rate spread, which financial institutions have traditionally used as an indicator of profitability. Another indicator of an institution’s net interest income is its net yield (or net interest margin) on interest-earning assets, which is its net interest income divided by the average balance of interest-earning assets. Net interest income is affected by the interest rate spread and by the

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

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Years Ended June 30,"],["\u200b","\u200b","2024","\u200b","2023","\u200b","2022"],["(dollars in thousands)","","Average","","Interest and","","Yield/","","Average","","Interest and","","Yield/","","Average","","Interest and","","Yield/"],["\u200b","\u200b","Balance","\u200b","Dividends","\u200b","Cost","","Balance","\u200b","Dividends","\u200b","Cost","","Balance","\u200b","Dividends","\u200b","Cost"],["Interest-earning assets:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Mortgage loans (1)","\u200b","$","3,009,263","\u200b","$","168,894","\u200b","5.61","%","$","2,585,065","\u200b","$","126,315","\u200b","4.89","%","$","1,953,460","\u200b","$","90,522","\u200b","4.63","%"],["Other loans (1)","\u200b","\u200b","708,881","\u200b","\u200b","53,618","\u200b","7.56","\u200b","\u200b","589,625","\u200b","\u200b","35,909","\u200b","6.09","\u200b","\u200b","471,350","\u200b","\u200b","20,973","\u200b","4.45","\u200b"],["Total net loans","\u200b","","3,718,144","\u200b","","222,512","","5.98","\u200b","","3,174,690","\u200b","","162,224","","5.11","\u200b","","2,424,810","\u200b","","111,495","","4.60","\u200b"],["Mortgage-backed securities","\u200b","\u200b","304,778","\u200b","\u200b","14,631","\u200b","4.80","\u200b","\u200b","241,642","\u200b","\u200b","6,967","\u200b","2.88","\u200b","\u200b","152,280","\u200b","\u200b","2,738","\u200b","1.80","\u200b"],["Investment securities (2)","\u200b","\u200b","165,307","\u200b","\u200b","6,877","\u200b","4.16","\u200b","\u200b","118,386","\u200b","\u200b","5,324","\u200b","4.50","\u200b","\u200b","77,996","\u200b","\u200b","2,197","\u200b","2.82","\u200b"],["Other interest-earning assets","\u200b","\u200b","79,116","\u200b","\u200b","4,355","\u200b","5.50","\u200b","\u200b","42,287","\u200b","\u200b","1,901","\u200b","4.50","\u200b","\u200b","127,958","\u200b","\u200b","437","\u200b","0.34","\u200b"],["TOTAL INTEREST- EARNING ASSETS (1)","\u200b","","4,267,345","\u200b","","248,375","","5.82","\u200b","","3,577,005","\u200b","","176,416","","4.93","\u200b","","2,783,044","\u200b","","116,867","","4.20","\u200b"],["Other noninterest-earning assets (3)","\u200b","\u200b","290,952","\u200b","\u200b","\u2014","\u200b","\u2014","\u200b","\u200b","234,047","\u200b","\u200b","\u2014","\u200b","\u2014","\u200b","\u200b","181,973","\u200b","\u200b","\u2014","\u200b","\u2014","\u200b"],["TOTAL ASSETS","\u200b","$","4,558,297","\u200b","\u200b","248,375","","\u2014","\u200b","$","3,811,052","\u200b","\u200b","176,416","","\u2014","\u200b","$","2,965,017","\u200b","\u200b","116,867","","\u2014","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Interest-bearing liabilities:","\u200b","","","\u200b","","","","","\u200b","","","\u200b","","","","","\u200b","","","\u200b","","","","","\u200b"],["Savings accounts","\u200b","$","382,713","\u200b","\u200b","8,176","\u200b","2.14","\u200b","$","286,959","\u200b","\u200b","1,623","\u200b","0.57","\u200b","$","253,651","\u200b","\u200b","672","\u200b","0.26","\u200b"],["NOW accounts","\u200b","\u200b","1,265,325","\u200b","\u200b","26,528","\u200b","2.10","\u200b","\u200b","1,280,134","\u200b","\u200b","17,756","\u200b","1.39","\u200b","\u200b","1,062,913","\u200b","\u200b","5,164","\u200b","0.49","\u200b"],["Money market accounts","\u200b","\u200b","403,170","\u200b","\u200b","12,596","\u200b","3.12","\u200b","\u200b","382,032","\u200b","\u200b","7,846","\u200b","2.05","\u200b","\u200b","276,579","\u200b","\u200b","928","\u200b","0.34","\u200b"],["Certificates of deposit","\u200b","\u200b","1,300,561","\u200b","\u200b","54,857","\u200b","4.22","\u200b","\u200b","810,570","\u200b","\u200b","17,167","\u200b","2.12","\u200b","\u200b","586,017","\u200b","\u200b","5,058","\u200b","0.86","\u200b"],["TOTAL INTEREST- BEARING DEPOSITS","\u200b","","3,351,769","\u200b","","102,157","","3.05","\u200b","","2,759,695","\u200b","","44,392","","1.61","\u200b","","2,179,160","\u200b","","11,822","","0.54","\u200b"],["Borrowings:","\u200b","","","\u200b","","","","","\u200b","","","\u200b","","","","","\u200b","","","\u200b","","","","","\u200b"],["Securities sold under agreements to repurchase","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u2014","\u200b","\u200b","4,148","\u200b","\u200b","213","\u200b","5.13","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u2014","\u200b"],["FHLB advances","\u200b","\u200b","123,986","\u200b","\u200b","4,993","\u200b","4.03","\u200b","\u200b","107,661","\u200b","\u200b","3,627","\u200b","3.37","\u200b","\u200b","43,410","\u200b","\u200b","792","\u200b","1.83","\u200b"],["Junior subordinated debt","\u200b","\u200b","23,130","\u200b","\u200b","1,742","\u200b","7.53","\u200b","\u200b","23,253","\u200b","\u200b","1,439","\u200b","6.19","\u200b","\u200b","18,189","\u200b","\u200b","686","\u200b","3.77","\u200b"],["TOTAL INTEREST- BEARING LIABILITIES","\u200b","","3,498,885","\u200b","","108,892","","3.11","\u200b","","2,894,757","\u200b","","49,671","","1.72","\u200b","","2,240,759","\u200b","","13,300","","0.59","\u200b"],["Noninterest-bearing demand deposits","\u200b","\u200b","561,004","\u200b","\u200b","\u2014","\u200b","\u2014","\u200b","\u200b","522,159","\u200b","\u200b","\u2014","\u200b","\u2014","\u200b","\u200b","408,148","\u200b","\u200b","\u2014","\u200b","\u2014","\u200b"],["Other liabilities","\u200b","\u200b","31,366","\u200b","\u200b","\u2014","\u200b","\u2014","\u200b","\u200b","16,484","\u200b","\u200b","\u2014","\u200b","\u2014","\u200b","\u200b","10,651","\u200b","\u200b","\u2014","\u200b","\u2014","\u200b"],["TOTAL LIABILITIES","\u200b","","4,091,255","\u200b","","108,892","","\u2014","\u200b","","3,433,400","\u200b","","49,671","","\u2014","\u200b","","2,659,558","\u200b","","13,300","","\u2014","\u200b"],["Stockholders\u2019 equity","\u200b","","467,042","\u200b","","\u2014","","\u2014","\u200b","","377,652","\u200b","","\u2014","","\u2014","\u200b","","305,459","\u200b","","\u2014","","\u2014","\u200b"],["TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY","\u200b","$","4,558,297","\u200b","\u200b","108,892","","\u2014","\u200b","$","3,811,052","\u200b","\u200b","49,671","","\u2014","\u200b","$","2,965,017","\u200b","\u200b","13,300","","\u2014","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Net interest income","\u200b","","","\u200b","$","139,483","","","\u200b","","","\u200b","$","126,745","","","\u200b","","","\u200b","$","103,567","","","\u200b"],["Interest rate spread (4)","\u200b","","","\u200b","","","","2.71","%","","","\u200b","","","","3.21","%","","","\u200b","","","","3.61","%"],["Net interest margin (5)","\u200b","","","\u200b","","","","3.27","%","","","\u200b","","","","3.54","%","","","\u200b","","","","3.72","%"],["Ratio of average interest-earning assets to average interest-bearing liabilities","\u200b","","121.96","%","","","","","\u200b","","123.57","%","","","","","\u200b","","124.20","%","","","","","\u200b"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Calculated net of deferred loan fees, loan discounts and unfunded commitments on construction loans. Nonaccrual loans are not included in average loans."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(2)","Includes FHLB membership stock, Federal Reserve membership stock, and related cash dividends."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(3)","Includes equity securities and related cash dividends."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(4)","Represents the difference between the average rate on interest-earning assets and the average cost of interest-bearing liabilities."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(5)","Represents net interest income divided by average interest-earning assets."]]
[[/GREPCENT_TABLE]]

​

72

Table of Contents

YIELDS EARNED AND RATES PAID

The following table sets forth for the periods and at the date indicated, the weighted average yields earned on the Company’s assets, the weighted average interest rates paid on the Company’s liabilities, together with the net yield on interest-earning assets.

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","At June 30,","\u200b","For The Year Ended June 30,"],["\u200b","","2024","","2024","","2023","","2022"],["Weighted-average yield on loan portfolio","","6.15","%","5.98","%","5.11","%","4.60","%"],["Weighted-average yield on mortgage-backed securities","","4.99","","4.80","","2.88","","1.80","\u200b"],["Weighted-average yield on investment securities (1)","","4.15","","4.16","","4.50","","2.82","\u200b"],["Weighted-average yield on other interest-earning assets","","4.87","","5.50","","4.50","","0.34","\u200b"],["Weighted-average yield on all interest-earning assets","","6.00","","5.82","","4.93","","4.20","\u200b"],["Weighted-average rate paid on interest-bearing deposits","","3.34","","3.05","","1.61","","0.54","\u200b"],["Weighted-average rate paid on FHLB advances","","3.82","","4.03","","3.37","","1.83","\u200b"],["Weighted-average rate paid on subordinated debt","","7.44","","7.53","","6.19","","3.77","\u200b"],["Weighted-average rate paid on all interest-bearing liabilities","","3.38","","3.11","","1.72","","0.59","\u200b"],["Interest rate spread (spread between weighted average rate on all interest-earning assets and all interest- bearing liabilities)","","2.62","","2.71","","3.21","","3.61","\u200b"],["Net interest margin (net interest income as a percentage of average interest-earning assets)","","3.21","","3.27","","3.54","","3.72","\u200b"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Includes Federal Home Loan Bank and Federal Reserve Bank stock."]]
[[/GREPCENT_TABLE]]

RATE/VOLUME ANALYSIS

The following table sets forth the effects of changing rates and volumes on net interest income of the Company. Information is provided with respect to (i) effects on interest income attributable to changes in volume (changes in volume multiplied by prior rate), (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume), and (iii) changes in rate/volume (change in rate multiplied by change in volume).

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Years Ended June 30,","\u200b","Years Ended June 30,"],["\u200b","\u200b","2024 Compared to 2023","\u200b","2023 Compared to 2022"],["\u200b","\u200b","Increase (Decrease) Due to","\u200b","Increase (Decrease) Due to"],["\u200b","\u200b","\u200b","\u200b","","\u200b","\u200b","","Rate/","","\u200b","\u200b","\u200b","\u200b","\u200b","","\u200b","\u200b","","Rate/","","\u200b","\u200b"],["(dollars in thousands)","","Rate","\u200b","Volume","\u200b","Volume","\u200b","Net","","Rate","\u200b","Volume","\u200b","Volume","\u200b","Net"],["Interest-earning assets:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Loans receivable (1)","\u200b","$","27,460","\u200b","$","27,991","\u200b","$","4,837","\u200b","$","60,288","\u200b","$","12,664","\u200b","$","34,531","\u200b","$","3,534","\u200b","$","50,729"],["Mortgage-backed securities","\u200b","","4,633","\u200b","","1,820","\u200b","","1,211","\u200b","","7,664","\u200b","","1,653","\u200b","","1,607","\u200b","","969","\u200b","","4,229"],["Investment securities (2)","\u200b","","(399)","\u200b","","2,110","\u200b","","(158)","\u200b","","1,553","\u200b","","1,311","\u200b","","1,138","\u200b","","678","\u200b","","3,127"],["Other interest-earning deposits","\u200b","","426","\u200b","","1,656","\u200b","","373","\u200b","","2,455","\u200b","","5,315","\u200b","","(293)","\u200b","","(3,558)","\u200b","","1,464"],["Total net change in income on interest-earning assets","\u200b","","32,120","\u200b","","33,577","\u200b","","6,263","\u200b","","71,960","\u200b","","20,943","\u200b","","36,983","\u200b","","1,623","\u200b","","59,549"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Interest-bearing liabilities:","\u200b","","","\u200b","","","\u200b","","","\u200b","","","\u200b","","","\u200b","","","\u200b","","","\u200b"],["Deposits","\u200b","","34,703","\u200b","","11,149","\u200b","","11,914","\u200b","","57,766","\u200b","","22,447","\u200b","","3,435","\u200b","","6,688","\u200b","","32,570"],["Securities sold under agreements to repurchase","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","(213)","\u200b","\u200b","(213)","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","213","\u200b","\u200b","213"],["FHLB advances","\u200b","","708","\u200b","\u200b","550","\u200b","","108","\u200b","","1,366","\u200b","","670","\u200b","\u200b","1,173","\u200b","","992","\u200b","","2,835"],["Subordinated debt","\u200b","","312","\u200b","","(8)","\u200b","","(1)","\u200b","","303","\u200b","","440","\u200b","","191","\u200b","","122","\u200b","","753"],["Total net change in expense on interest-bearing liabilities","\u200b","","35,723","\u200b","","11,691","\u200b","","11,808","\u200b","","59,222","\u200b","","23,557","\u200b","","4,799","\u200b","","8,015","\u200b","","36,371"],["Net change in net interest income","\u200b","$","(3,603)","\u200b","$","21,886","\u200b","$","(5,545)","\u200b","$","12,738","\u200b","$","(2,614)","\u200b","$","32,184","\u200b","$","(6,392)","\u200b","$","23,178"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Does not include interest on loans placed on nonaccrual status."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(2)","Does not include dividends earned on equity securities."]]
[[/GREPCENT_TABLE]]

73

Table of Contents