SMBC 10-K & 10-Q changes, risk factors and insider trading

Risks Relating to Marco EconomicMarcoeconomic Conditions

Our business is directly affected by marketbroad conditions,macroeconomic and policy factors including, inflation or deflation, changes in monetary policy, interest rate volatility, trends in industry and finance, legislative and regulatory changes, and changes in governmental monetary and fiscal policies and inflation,policies, all of which are beyond our control. Future deterioration in economic conditions,conditions including declining employment, reduced consumer spending, business failures or adverse weather events, particularly within our primary market area in Missouri and northern Arkansas,area, could result in the following consequences, among others, any of which could hurt our business materially:

Inflation rose sharply beginning in late 2021 to levels not seen in more than 40 years before moderating in 2023 and 2024.higher Whilecosts for goods, services, labor and other operating expenses could adversely affect our customers and our business. Although inflationary pressures have eased,moderated inflationfrom remainsthe above pre-2021elevated levels andexperienced continuesin torecent createyears, the continued uncertainty forsurrounding inflation, interest rates and other economic conditions could affect consumer and business activity and the financial condition of our customers and for our operating costs.customers. Small and medium-sized businesses may be impacted more during periods of high inflation, as they are not able to leverage economies of scale to mitigate cost pressures compared to larger businesses. Consequently, the ability of our business customers to repay their loans may deteriorate, and in some cases this deterioration may occur quickly, which would adversely impact our results of operations and financial condition. Furthermore, aincreases prolongedin periodemployee ofcompensation inflationand couldbenefits causecosts, wagesoccupancy, technology, insurance and other operating costs to the Company to increase, which could adversely affectincrease our expenses and reduce our profitability. Any of these factors could have a material adverse effect on our business, results of operations and financial condition.

The Financial Accounting Standards Board (FASB), adopted Accounting Standards Update (ASU), 2016-132016 13 “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” on June 16, 2016, which changed previous allowance for loan losses methodology to consider current expected credit losses (CECL). This accounting pronouncement was applicable to us effective for our fiscal year beginning July 1, 2020. The federal banking regulators, including the Federal Reserve have adopted rules that gives a banking organization the option to phase in over a three-year or five-year period the day-one adverse effects of CECL on its regulatory capital. We elected the five-year period for our Company.

Our determination of the appropriate level of the ACL under CECL inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks and future trends, all of which may undergo material changes over timetime. If our estimates are incorrect, the ACL may not be sufficient to cover the expected losses in our loan portfolio, resulting in the need for increases in our ACL. Management also recognizes that significant new growth in loan portfolios, new loan products and the refinancing of existing loans can result in portfolios comprised of unseasoned loans that may not perform in a historical or projected manner and will increase the risk that our ACL may be insufficient to absorb losses without significant additional provisions.

Our construction loan portfolio, which totaled $332.4$310.0 million, or 8.2%7.1% of loans, net,loans at June 30, 2025,2026, includes residential and non-residential construction and development loans. Construction and development lending, especially non-residential construction and development lending, is generally considered to have more complex credit risks than traditional one-to-four-family residential lending because the principal is concentrated in a limited number of loans with repayment dependent on the successful completion and sale, leasing, or operation of the related real estate project. Consequently, these loans are often more sensitive to adverse conditions in the real estate market or the general economy than other real estate loans. These loans are generally less predictable and more difficult to evaluate and monitor and collateral may be difficult to dispose of in a market decline. Additionally, we may experience significant construction credit losses because independent appraisers or project engineers inaccurately estimate the cost or value of construction loan projects.

At June 30, 2025,2026, 55.9%55.8% of our loans, net,loans consisted of commercial real estate, excluding construction as previously mentioned above, and commercial business loans to small and mid-sized businesses, generally located in our primary market area, which are the types of businesses that have a heightened vulnerability to local economic conditions. At June 30, 2025,2026, our loan portfolio included $1.8$1.9 billion of commercial real estate loans and $510.3$552.6 million of commercial business loans. The credit risk related to these types of loans is considered to be greater than the risk related to one- to four-family residential loans because the repayment of commercial real estate loans and commercial business loans typically is dependent on the successful operation and income stream of the borrower’s business or the real estate securing the loans as collateral, which can be significantly affected by economic conditions. Additionally, commercial loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to residential real estate loans. If loans that are collateralized by real estate become troubled and the value of the real estate has been significantly impaired, then we may not be able to recover the full contractual amount of principal and interest that we anticipated at the time we originated the loan, which could require us to increase our provision for credit losses and adversely affect our operating results and financial condition. Commercial loans not collateralized by real estate are often secured by collateral that may depreciate over time, be difficult to appraise and fluctuate in value (such as accounts receivable, inventory and equipment).

Our agricultural real estate loans totaled $245.0$295.8 million, or 6.1%6.8% of our loan portfolio, net,portfolio at June 30, 2025.2026. Agricultural real estate lending involves a greater degree of risk and typically involves larger loans to single borrowers than lending on one-to-four-family residences. Payments on agricultural real estate loans are dependent on the profitable operation or management of the farm property securing the loan. The success of the farm may be affected by many factors outside the control of the farm borrower, including adverse weather conditions that prevent the planting of a crop or limit crop yields (such as hail, drought and floods), loss of livestock due to disease or other factors, declines in market prices for agricultural products (both domestically and internationally) and the impact of government regulations (including changes in price supports, subsidies, and environmental regulations). In addition, many farms are dependent on a limited number of key individuals whose injury or death may significantly affect the successful operation of the farm. If the cash flow from a farming operation is diminished, the borrower’s ability to repay the loan may be impaired. The primary agricultural activity in our market areas is livestock, dairy, poultry, rice, timber, soybeans, wheat, melons, corn, and cotton. Accordingly, adverse circumstances affecting these activities could have an adverse effect on our agricultural real estate loan portfolio.

Our agricultural production and equipment loans totaled $206.1$219.2 million, or 5.09%,5.1%, of our loan portfolio, net,portfolio at June 30, 2025,2026, these loans. As with agricultural real estate loans, the repayment of operating loans is dependent on the successful operation or management of the farm property. The same risk applies to agricultural operating loans which are unsecured or secured by rapidly depreciating assets such as farm equipment or assets such as livestock or crops. Any repossessed collateral for a defaulted loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation to the collateral.

Our earnings and cash flows depend substantially upon our net interest income. Net interest income is the difference between interest income earned on interest-earning assets, such as loans and investment securities, and interest expense paid on interest-bearing liabilities, such as deposits and borrowed funds. Interest rates are sensitive to many factors that are beyond our control, including general economic conditions, competition and policies of various governmental and regulatory agencies and, in particular, the policies of the Federal Reserve Board. Changes in monetary policy, including changes in interest rates, could influence not only the interest we receive on loans and investment securities and the amount of interest we pay on deposits and borrowings, but these changes could also affect: (i) our ability to originate loans and obtain deposits; (ii) the fair value of our financial assets and liabilities, including our securities portfolio; and (iii) the average duration of our interest-earning assets. This also includes the risk that interest-earning assets may be more responsive to changes in interest rates than interest-bearing liabilities, or vice versa (repricing risk), the risk that the individual interest rates or rate indices underlying various interest-earning assets and interest-bearing liabilities may not change in the same degree over a given time period (basis risk), and the risk of changing interest rate relationships across the spectrum of interest-earning asset and interest-bearing liability maturities (yield curve risk), including a prolonged flat or inverted yield curve environment. Changes in interest rates may also affect the composition and stability of our deposit base, as customers may move funds among deposit products or from deposits to other investments, which could increase our funding costs and adversely affect our net interest margin. They could also move their funds out of the Bank into other investment products, which could result in an increase in funding costs to replace these funds. Any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on our financial condition and results of operations. See also, Part II, Item 7(a) “Interest Rate Sensitivity Analysis”.

The federal banking agencies have issued guidance on sound risk management practices for concentrations in commercial real estate lending (see “Government Supervision and Regulation – Guidance on Commercial Real Estate Concentrations”). For the purposes of this guidance, “commercial real estate” includes, among other types, construction and land development loans, multi-family residential loans, and non-owner occupied nonresidential loans, which have been a source of loan growth for the Company. A bank that has experienced rapid growth in commercial real estate lending, has notable exposure to a specific type of commercial real estate loan, or is approaching or exceeding the following supervisory criteria may be identified for further supervisory analysis with respect to real estate concentration risk: total loans for construction land development and other land representing 100% or more of the bank’s tier 1 regulatory capital plus the allowance for loancredit losses includable in total regulatory capital; or total commercial real estate loans (as defined in the guidance) that exceed 300% of the bank’s tier 1 regulatory capital plus the ACL includable in total regulatory capital and the bank’s commercial real estate portfolio has increased by 50% or more during the prior 36 months.

Climate change and related legislative and regulatory initiatives may materially affect our business and resultsthe value of operations.collateral securing our loans.

The Company relies on third-party vendors to provide products and services necessary to maintain day-to-day operations. For example, the Company outsources a portion of its information systems, communication, data management, and transaction processing to third parties. Accordingly, the Company is exposed to the risk that these vendors might not perform in accordance with the contracted arrangements or service level agreements for a number of reasons, including, but not limited to, changes in the vendor’s organizational structure, financial condition, support for existing products and services, or strategic focus. Such failure to perform could be disruptive to the Company’s operations, which could have a materially adverse impact on its business, results of operations and financial condition. These third parties are also sources of risk associated with operational errors, system interruptions or breaches and unauthorized disclosure of confidential information. If the vendors encounter any of these issues, the Company could be exposed to disruption of service, damage to reputation and litigation. Because the Company is an issuer of debit cards, it is periodically exposed to losses related to security breaches which occur at retailers that are unaffiliated with the Company (e.g., customer card data being compromised at retail stores). These losses include, but are not limited to, costs and expenses for card reissuance as well as losses resulting from fraudulent card transactions.

The market value of our common stock may also be affected by conditions affecting the financial markets in general, including price and trading fluctuations. These conditions may result in (i) volatility in the level of, and fluctuations in, the market prices of stocks generally and, in turn, our common stock and (ii) sales of substantial amounts of our common stock in the market, in each case that could be unrelated or disproportionate to changes in our operating performance. These broad market fluctuations may adversely affect the market value of our common stock. Currently, market prices of stocks issued by financial institutions have been negatively impacted by interest rates which are at historic lows and anticipated to remain there, and market expectations regarding elevated future credit losses resulting from the economic effects of the pandemic.

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.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 operations are significantly influenced by general economic conditionsconditions, 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 agenciesagencies, 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.

General. The Company experienced balance sheet growth in fiscal 2025,2026, with total assets of $5.0$5.2 billion at June 30, 2025,2026, reflecting an increase of $415.3$216.8 million, or 9.0%,4.3%, as compared to June 30, 2024.2025. AssetGrowth growthprimarily was attributable mainly toreflected increases in loans,net loans receivable and investments in tax credits in the other assets category, partially offset by decreases in cash equivalents and cashtime equivalents,deposits and available-for-sale (AFS) securities.

Cash equivalents and cashtime equivalents.deposits. Cash equivalents and cashtime equivalentsdeposits were $192.9$91.0 million at June 30, 2025,2026, ana increasedecrease of $132.0$102.1 million, or 216.7%,52.9%, as compared to June 30, 2024.2025. The increasedecrease was primarily autilized resultto offund organicloan generation that outpaced deposit growth, in addition to growth in brokered certificates of deposits, during the period, which was partially offset by earnings retained after the fundingpayment of loancash growth. Total deposits were $4.3 billion at June 30, 2025, an increase of $338.3 million, or 8.6% as compared to June 30, 2024.dividends.

Investments. AFS securities were $460.8$450.8 million at June 30, 2025,2026, andown increase of $32.9$10.1 million, or 7.7%,2.2%, as compared to June 30, 2024. The increase was primarily attributable to increased holdings of residential and commercial mortgage-backed securities.2025.

Loans. Loans, net of the ACL, were $4.0$4.3 billion at June 30, 2025,2026, an increase of $251.7$287.9 million, or 6.6%,7.1%, as compared to June 30, 2024.2025. Gross loansloan balances increased by $250.7$291.2 million, or 7.1%, while the ACL attributable to outstanding loan balances decreasedincreased $887,000,$3.3 million, or 1.7%,6.4%, as compared to June 30, 2024.2025. See,See “Allowance for Credit Losses” below.

Allowance for Credit Losses. The ACL at June 30, 2025,2026, totaled $54.9 million, representing 1.25% of gross loans and 199% of nonperforming loans, as compared to an ACL of $51.6 million, representing 1.26% of gross loans and 224% of nonperforming loans, as compared to an ACL of $52.5 million, representing 1.36% of gross loans and 786% of nonperforming loans, at June 30, 2024.2025. The Company has estimated its expected credit losses as of June 30, 2025,2026, under ASC 326-20, and management believes the ACL as of that date was adequate based on that estimate. There remains, however, significantEconomic uncertainty ascontinues, borrowersincluding adjustthe topotential relativelyeffects highof marketelevated and uncertain interest rates, althoughas inflation remains above the Federal ReserveReserve's haslong-term reducedtarget, short-termand ratesevolving somewhatlabor duringmarket thisand fiscalbroader year.economic conditions. The decreaseincrease in the ACL was primarily attributable to net charge-offs, which reduced the requiredhigher reserves for individually evaluated loans, as well as a decline in certain qualitative adjustments relevant to assessing expected credit losses. This decrease was partially offset by higher required reserves for pooled loans, reflectingdriven management’slargely updatedby viewloan of a deteriorating economic outlookgrowth and the Bank’s annual ACL model update, which reflected an increase in modeled loss drivers compared to the prior assessment as of June 30, 2024. Additional provisions were also recorded to support loan growth2025, and overdraftincreased exposuresreserves duringon agriculture loans reflecting ongoing pressure in the agricultural sector. This was partially offset by net charge-offs. In the fiscal year 2025.ended June 30, 2026, net charge offs were $10.3 million due primarily to a $2.6 million partial charge-off of the agricultural production loan relationship which was placed on nonaccrual status during the fiscal year, a previously identified nonperforming commercial loan relationship that was transferred to OREO following foreclosure resulting in a charge-off of $1.2 million, and a $1.3 million net charge-off for a special purpose CRE relationship that was reserved for in the prior fiscal year. For fiscal year 2025,2026, net charge offs totaled $6.7 million, or 0.18%charge-offs as a percentage of average loans,loans were 0.18%, as compared to $1.9 million, or 0.05% as a percentage of average loans,0.17% for fiscal year 2024. The increase in net charge offs in fiscal 2025 were primarily attributable to a $3.8 million special-purpose CRE loan, a $987,000 agricultural credit relationship with suspected fraudulent activity, and a $742,000 commercial and industrial charge off related to a commercial contractor.2025. See also, “Provision for Credit Losses, under Comparison of Operating Results for the Years Ended June 30, 20252026 and 20242025” and Note 1 and Note 3 of the Notes to Consolidated Financial Statements, “Critical Accounting Policies”, “Financial Condition – Allowance for Credit Losses” in this Item 7, and “Asset Quality” in Item 1 of this Form 10-K.

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

●Quantified supported model adjustments and general imprecision adjustments Premises and Equipment. Premises and equipment remainedtotaled unchanged$93.2 million at $96.0June million,30, 2026, down $2.8 million as compared to $96.0 million at June 30, 2024.2025. IncreasesAn primarilyincrease in depreciation was partially offset by purchases of premises, furniture, fixtures, equipment, and right-of-use assets, were offset by depreciation.land.

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 was amortized over a seven-year period using the straight-line method. The February 2018 acquisition of SMB-Marshfield resulted in goodwill of $4.4 million and a $1.3 million core deposit intangible which was amortized over a seven-year period using the straight-line method. The November 2019 Gideon acquisition resulted in goodwill of $1.0 million and a $4.1 million core deposit intangible which is beingwas 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 beingwas 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 period using the straight-line method. Goodwill from these acquisitions is not being amortized, but is tested for impairment at least annually. Mortgage and SBA servicing rights totaling $2.8 million are also included in intangible assets.

Deposits. Deposits were $4.3$4.4 billion at June 30, 2025,2026, an increase of $338.3$126.5 million, or 8.6%,3.0%, as compared to June 30, 2024.2025. TheCertificate of deposit portfoliogrowth sawwas relatively balanced between brokered and non-brokered deposits. Nonmaturity deposit growth was primarily attributable to increases in certificatesnon-interest ofbearing deposit anddeposits, savings accounts, whichand werebrokered money market deposit accounts, partially offset by decreasesdeclines in interestNOW bearing transaction accounts, noninterest-bearing transaction accounts,accounts and non-brokered money market deposit accounts.

Public unit balances totaled $550.8$517.8 million at June 30, 2025,2026, a decrease of $43.8$33.0 million compared to June 30, 2024.2025, primarily due to competitive pricing dynamics on certain time deposits and normal fluctuations in operating account balances. Brokered deposits, comprised of certificates and money market deposits,deposits totaled $235.1$290.6 million at June 30, 2025,2026, an increase of $61.3$55.6 million as compared to June 30, 2024.2025, Ourprimarily discussionattributable to brokered certificates of brokered deposits excludes those deposits originated through reciprocal arrangements. We continued to utilize reciprocal deposit programs, and at June 30, 2025, we had placed deposits of $517.4 million through reciprocal programs, down from $575.3 million a year earlier. At June 30, 2025, $260.0 million of this total reflected deposits we had placed on behalf of our public unit depositors, down from $361.0 million a year ago.deposit. The average loan-to-deposit ratio for the fourth quarter of fiscal 20252026 was 94.5%,99.7%, as compared to 96.3%94.5% for the same period of the prior fiscal year.

Borrowings. FHLB advances were $104.1$130.4 million at June 30, 2025,2026, an increase of $2.0$26.4 million, or 2.0%,25.3%, as compared to June 30, 2024.2025. ForOutstanding bothFHLB periods,daily thereset borrowings consistedwere only$28.4 million as of termJune advances,30, with2026, noas overnightcompared borrowings.to none outstanding as of June 30, 2025.

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, 20252026 and at June 30, 2024.2025. 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 $5.7 million at June 30, 2026, and $5.6 million at June 30, 2025 and at June 30, 2024.2025. In connection with the February 2022 Fortune acquisition,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 willwere to bear interest thereafter at SOFR plus 3.77%. The notesCompany willretired bethis redeemable at par beginningdebt in May 2026,2026 andwhen maturethe innotes Maybecame 2031.redeemable. The carrying value of the notesnote was $0 at June 30, 2026 and approximately $7.5 million at June 30, 2025, as compared to $7.6 million at June 30, 2024.2025.

Stockholders’ Equity. The Company’s stockholders’ equity was $544.7$590.7 million at June 30, 2025,2026, an increase of $55.9$46.0 million, or 11.4%,8.4%, as compared to June 30, 2024.2025. The increase was attributable primarily to earnings retained after cash dividends paid, in combination with a $6.1$1.6 million reduction in accumulated other comprehensive losses (AOCL) as the market value of the Company’s investments appreciated due to tighter credit spreads and continued principal paydowns within the decreaseinvestment in market interest rates.portfolio. The AOCL totaled $9.8 million at June 30, 2026, as compared to $11.4 million at June 30, 2025, as compared to $17.5 million at June 30, 2024.2025. The Company does not hold any securities classified as held-to-maturity. The increase in stockholders’ equity was partially offset by $18.6 million utilized to repurchase 317,000 shares of the Company’s common stock during fiscal 2026 at an average price of $58.59 per share.

Interest expense on deposits was $115.8 million for fiscal 2025, an increase of $14.1 million, or 13.8%, as compared to the prior fiscal year. The increase was due to a 15-basis point increase in the average rate paid on interest-bearing deposits, combined with the $282.2 million, or 8.4%, increase in the average balance of those deposits. The increase in the average rate paid on deposits was attributable primarily to deposits rates, particularly certificates of depositsdeposit and savings accounts, adjusting up to higher market interest rates over the course of fiscal 2025, when compared to average rates in fiscal 2024.

Provision for Credit Losses. The Company recorded a provision for credit losses (PCL) of $6.5 million for fiscal 2025, as compared to a PCL of $3.6 million for the prior fiscal year. In fiscal 2025, the Company had a $5.8 million PCL for on-balance sheet exposure and a $676,000 PCL for off-balance sheet exposures. The increase was primarily attributable to providing for net charge-offs and to support loan growth, in addition to an increase in unfunded balances of loans and an increase in the expected funding rate on available credit.

For the fiscal year ended June 30, 2025,2026, Southern Missouri increased deposits by $338.3$126.5 million and FHLB advances by $2.0$26.4 million. During the prior fiscal year, the Bank increased deposits by $226.9$338.3 million, and decreasedincreased FHLB advances by $31.5$2.0 million. At June 30, 2025,2026, the Bank reported $1.5$1.6 billion of its single-family residential, home equity, and commercial real estate loan portfolios as eligible collateral to the FHLB for available credit of approximately $857.3$1.0 million,billion, of which $104.1$130.4 million was advanced, while $612,000$656,000 was encumbered in relation to residential real estate loans sold onto the secondary market through the FHLB. The Bank had also pledged $386.2$409.1 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 $334.8$355.4 million, as of June 30, 2025,2026, none of which was advanced. In addition, as of June 30, 2025,2026, 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 $2.2$2.3 billion as most recently reported by the FHLB as of June 30, 2025,2026, which means that an amount up to $2.1$2.2 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.

At June 30, 2025,2026, the Bank had $1.2$1.4 billion in CDs maturing within one year and $2.6$2.7 billion in non-maturity deposits, as compared to $1.1$1.2 billion in CDs maturing within one year and $2.6 billion in non-maturity deposits as of June 30, 2024.2025. Management believes that most maturing interest-bearing liabilities will be retained or replaced by new interest-bearing liabilities. Also, at June 30, 2025,2026, the Bank had no$28.4 million in overnight advances from the FHLB, $17.0$37.0 million in term FHLB advances maturing within one year, and $87.1$65.0 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.

At June 30, 2025,2026, the Company exceeded regulatory capital requirements with tier 1 capital, total risk-based capital, and common equity tier 1 capital of $517.8$562.9 million, $577.2$619.0 million and $502.2$547.2 million, respectively. The Company’s tier 1 capital represented 10.61%11.03% of total adjusted assets and 12.51%12.56% of total risk-weighted assets, while total risk-based capital was 13.95%13.81% of total risk-weighted assets, and common equity tier 1 capital was 12.14%12.20% 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%.

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.

The following table sets forth for the periods and atas of the datedates 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.

Southern Missouri Bancorp, Inc. (Company) is a Missouri corporation and owns all of the outstanding stock of Southern Bank (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 DecemberMarch 31, 2025,2026, the Bank operated from its headquarters, 63 full-service branch offices, two limited-service branch offices, and three loan production offices. The Bank owns the office building and related land in which its headquarters are located, and 60 of its other branch offices. The remaining eight branches and offices are either leased or partially owned.

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 DecemberMarch 31, 2025,2026, and results of operations for the three- and six-monthnine-month periods ended DecemberMarch 31, 2025,2026, and 2024.2025.

During the first sixnine months of fiscal 2026, total assets increased by $74.8$121.9 million.million, or 2.4%. The increase was primarily attributable to an increase in net loans receivable, partially offset by decreases in cash and cash equivalents, and AFS securities. Loans, net of the ACL, increased $123.1$217.5 million; cash equivalents decreased by $58.8$99.8 million; and AFS securities decreased $15.9$21.7 million. Liabilities increased $52.1$93.0 million, or 2.1%, primarily attributable to increases in deposits of $27.0$59.5 million, accounts payable and other liabilities of $22.2$30.0 million,million and(including a $23.7 million increase in future capital contributions for investment tax credits), securities sold under agreements to repurchase of $5.0 million, and FHLB overnight advances of $3.0 million, partially offset by a decreasedecreases in accrued interest payable of $2.5 million and FHLB term advances of $2.0 million. Equity increased $22.7$28.8 million, or 5.3%, attributable primarily to earnings retained after cash dividends paid, in combination with a $2.7$2.3 million reduction in accumulated other comprehensive losses (AOCL) due to the market value of the Company’s investments appreciating as a result of the decrease in market interest rates, partially offset by the purchasere-purchase of treasuryCompany stock totaling $8.5$18.3 million. For more information, see “Comparison of Financial Condition at DecemberMarch 31, 2025,2026, and June 30, 2025.”

Net income for the first sixnine months of fiscal 2026 was $33.8$51.6 million, an increase of $6.7$8.8 million, or 24.7%20.5% as compared to the same period of the prior fiscal year. The increase was due primarily to an increase in net interest income and a decrease in noninterest expense,income, partially offset by increases in PCL andPCL, provision for income taxes, and noninterest expenses, and a decrease in noninterest income. For the six-monthnine-month period ended DecemberMarch 31, 2025,2026, fully-diluted net income per share available to common stockholders was $3.00,$4.59, up $0.60,$0.80, or 25.0%,21.1%, as compared to the same period a year ago. Our annualized return on average assets for the six-monthnine-month period ended DecemberMarch 31, 2025,2026, was 1.33%,1.35%, as compared to 1.14%1.19% for the same period of the prior fiscal year. Our annualized return on average common stockholders’ equity for the six-monthnine-month period ended DecemberMarch 31, 2025,2026, was 12.0%,12.2%, as compared to 10.7%11.2% in the same period of the prior fiscal year. For the first sixnine months of fiscal 2026, as compared to the same period of the prior fiscal year, net interest income increased $10.5$14.2 million, or 14.0%, and noninterest expense decreased $397,000, or 0.8%. These items were12.4%, partially offset by an increase in PCL of $3.1$4.2 million, or 100.0%,105.3%, an increase in provision for income taxes of $411,000,$453,000, or 5.2%,3.8%, an increase in noninterest expense of $436,000, or 0.6%, and a decrease in noninterest income of $690,000,$265,000, or 4.9%.1.3%. For more information see “Results of Operations – Comparison of the six-monthnine-month periods ended DecemberMarch 31, 2025,2026, and 20242025”.

Interest rates during the first sixnine months of fiscal 2026 remained relatively stable at the mid-point of the curve and moved lower at the shorter end and mid-point of the curve as employment slowed somewhat and inflation remained relatively stable but above target. Market expectations are for furtherthe reductionsFederal inReserve to maintain the federal funds rate overfor the nextnear year,term with potential modest easing later in 2026 or early 2027, while there are concerns that economic conditions could keep inflation somewhat elevated and above the FOMC target range, which has led to some steepening of the yield curve. At DecemberMarch 31, 2025,2026, the yield curve had a 7134 basis point positive slope between the two-year and ten-year treasury rates.rates, compared to 52 basis point positive slope at June 30, 2025.

As compared to the first sixnine months of the prior fiscal year, our average yield on earning assets decreased by three basis points, primarily attributable to decreased yields on AFS securities, and a higher percentage of earning assets in cash, while the percentage of earning assets in AFS securities declined and cash, partially offset by increased yields on loans receivable, as loans renewed and new loansreceivable were originated at higher market rates.unchanged. The cost of interest-bearing liabilities decreased by 3031 basis points due primarily to lower market rates. Driven by average interest-bearing liabilities repricing lower, the net interest spread increased 27by 28 basis pointspoints, from 2.76%2.81% to 3.03%3.09%, and the net interest margin increased by 23 basis pointspoints, from 3.34%3.37% to 3.57%3.60%, during the first sixnine months of fiscal 2026, as compared to the same period in fiscal 2025. In addition, net interest income benefitted from a 6.6%5.2% increase in average earnings assets, compared to the prior fiscal year period. The combination of a higher percentage of variable rate deposits compared to the prior fiscal year and lower short term rates, easing the pressure on interest expense, and loans repricing to higher market rates, has allowed the net interest spread and net interest margin to expand in the fiscal 2026 period.

The Company’s noninterest income for the six-monthnine-month period ended DecemberMarch 31, 2025,2026, was $13.3$20.4 million, a decrease of $690,000,$265,000, or 4.9%,1.3%, as compared to the same period of the prior fiscal year. The decrease was primarily attributable to decreases in loan fees resulting from a refinement of fee recognition in our application of ASC 310-20, “Receivables - Nonrefundable Fees and Other Costs”, and lowera reduced amount of realized gains on sales of loans, partially offset by increases in deposit account charges and related fees, bank card interchange income, earnings on bank owned life insurance, wealth management fees, insurance brokerage income, and earningsa gain on banksale ownedof lifea insurance.membership interest in a tax credit investment.

Noninterest expense for the six-monthnine-month period ended DecemberMarch 31, 2025,2026, was $50.3$76.5 million, aan decreaseincrease of $397,000,$436,000, or 0.8%,0.6%, as compared to the same period of the prior fiscal year. The decreaseincrease was attributable primarily to higher data processing expense, occupancy expense, advertising, and various minor increases across other expense categories, partially offset by lower compensation and benefits, legal and professional fees, intangible amortization, and telecommunication expenses. The decrease in compensation and benefits expense was primarily driven by a refinement of expense recognition in our applications of ASC 310-20. Legal and professional fees decreased from the prior-year period, which included $840,000 of costs related to a performance improvement project designed to enhance the Bank’s operations and revenue performance, while in the first sixnine months of fiscal 2026, legal and professional fees includeddid include $572,000 of consulting costs associated with the negotiation of a new contract with a key vendor. These decreases were partially offset by higher data processing expenses, occupancy expenses, advertising, deposit insurance premiums, and various minor increases across other expense categories.

Comparison of Financial Condition at DecemberMarch 31, 2025,2026, and June 30, 2025

The Company experienced balance sheet growth in the first sixnine months of fiscal 2026, with total assets of $5.1 billion at DecemberMarch 31, 2025,2026, reflecting an increase of $74.8$121.9 million, or 1.5%,2.4%, as compared to June 30, 2025. Growth primarily reflected an increaseincreases in net loans receivable,receivable and investments in tax credits in the other assets category, partially offset by decreases in cash equivalents and time deposits and available for sale (AFS) securities.

Cash equivalents and time deposits were a combined $134.3$93.3 million at DecemberMarch 31, 2025,2026, a decrease of $58.8$99.8 million, or 30.4%,51.7%, as compared to June 30, 2025. The decrease was primarily the result of loan growthgeneration that outpaced deposit generationgrowth during the period. AFS securities were $445.0$439.1 million at DecemberMarch 31, 2025,2026, down $15.9$21.7 million, or 3.4%,4.7%, as compared to June 30, 2025, reflecting normal principal amortization as well as early redemptions from callable securities, which accelerated portfolio runoff during the period.2025.

Loans, net of the ACL,allowance for credit losses (ACL), were $4.2$4.3 billion at DecemberMarch 31, 2025,2026, increasingan byincrease $123.1of $217.5 million, or 3.0%,5.4%, as compared to June 30, 2025. Gross loans increased by $221.8 million, while the ACL attributable to outstanding loan balances increased $4.3 million, as compared to June 30, 2025. The Company noted growth primarily in 1-4 family residential real estate, non-owner occupied commercial real estate, multi-family real estate, commercial and industrial, both non-owner and owner occupied commercial real estate, and agriculture real estate loan balances. This was somewhatpartially offset by decreases in construction and land developmentdevelopment, loans,consumer, and agricultural production loans,loan and consumer loans.balances.

Loans anticipated to fund in the next 90 days totaled $177.7 million at March 31, 2026, as compared to $159.1 million at December 31, 2025, asand compared to $224.1$163.3 million at June 30, 2025, and $172.5 million at DecemberMarch 31, 2024.2025.

The Bank’s concentration in non-owner occupied commercial real estate,estate as defined for regulatory purposes,loans is estimated at 289.4%291.2% of Tier 1 capital and ACL aton DecemberMarch 31, 2025,2026, as compared to 301.9% as of June 30, 2025, with these loans representing 39.4%39.2% of grosstotal loans at DecemberMarch 31, 2025.2026. Multi-family residential real estate, hospitality (hotels/restaurants), care facilities, strip centers, retail stand-alone, and storage units are the most common collateral types within the non-owner occupied commercial real estate loan portfolio. The Bank’s 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,centers whichthat can be defined as non-mall shopping centers with a variety of tenants. Non-owner-occupiedNon-owner occupied office property types included 35 loans totaling $21.1$14.6 million, or 0.50%0.34% of gross loans at DecemberMarch 31, 2025,2026, 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 $4.3 billion at DecemberMarch 31, 2025,2026, an increase of $27.0$59.5 million, or 0.63%,1.4%, as compared to June 30, 2025. The deposit portfolio saw year-to-date increases in nonmaturity deposit accounts primarily from seasonal ag and public unit deposit inflows,accounts, which was partially offset by a decrease in certificates of deposit. Nonmaturity deposit growth was primarily driven by savings, NOW, non-interest bearing, and non-interestbrokered bearingmoney market deposit accounts. The decrease in certificates of deposit was largely driven by a $54.1$28.3 million reduction in brokered certificates compared to June 30, 2025. Brokered deposits totaled $182.2$226.4 million at DecemberMarch 31, 2025,2026, a decrease of $52.9$8.7 million as compared to June 30, 2025. Public unit balances totaled $584.1$564.7 million at DecemberMarch 31, 2025,2026, an increase of $33.3$13.9 million compared to June 30, 2025.2025, primarily due to seasonal inflows. The average loan-to-deposit ratio for the secondthird quarter of fiscal 2026 was 96.7%,98.0%, as compared to 94.5% for the quarter ended June 30, 2025, and 96.4%94.2% for the same period of the prior fiscal year.

FHLB advances were $102.0$105.0 million at DecemberMarch 31, 2025,2026, aan decreaseincrease of $2.0 million,$981,000, or 1.9%,0.94%, as compared to June 30, 2025,2025. dueOutstanding toFHLB maturingovernight advances whichborrowings were not$3.0 renewed.million Foras theof quarter ended DecemberMarch 31, 2025,2026, theas Company continuedcompared to have no FHLB overnight borrowings at the endas of theJune period.30, 2025.

The Company’s stockholders’ equity was $567.4$573.5 million at DecemberMarch 31, 2025,2026, an increase of $22.7$28.8 million, or 4.2%,5.3%, as compared to June 30, 2025. The increase was attributable primarily to earnings retained after cash dividends paid, in combination with a $2.7$2.3 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 $8.6$9.1 million at DecemberMarch 31, 20252026 compared to $11.4 million at June 30, 2025. The Company does not hold any securities classified as held-to-maturity. The increase in stockholders’ equity was partially offset by $8.5$18.3 million utilized for theto repurchase of 156,000313,000 shares of the Company’s common stock year-to-date at an average price of $54.34$58.45 per share.

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

DecemberMarch 31, 2025,2026, and 20242025

The table below presents certain information regarding our financial condition and net interest income for the three- and six-monthnine-month periods ended DecemberMarch 31, 2025,2026, and 2024.2025. The table presents 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.

The following table sets forth the effects of changing rates and volumes on the Company’s net interest income for the three- and six-monthnine-month periods ended DecemberMarch 31, 2025,2026, compared to the three- and six-monthnine-month periods ended DecemberMarch 31, 2024.2025. 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).

Results of Operations – Comparison of the three-month periods ended DecemberMarch 31, 2025,2026, and 20242025

General. Net income for the three-month period ended DecemberMarch 31, 2025,2026, was $18.2$17.8 million, an increase of $3.5$2.1 million or 23.9%,13.3%, as compared to the same period of the prior fiscal year. The increase was primarily attributable to an increase in net interest income and an increase in noninterest income, partially offset by increases in PCL andPCL, noninterest expense, and aprovision decreasefor inincome noninterest income.taxes.

For the three-month period ended DecemberMarch 31, 2025,2026, fully-diluted net income per share available to common stockholders was $1.62,$1.60, up $0.32,$0.21, or 24.6%,15.1%, as compared to the same quarter a year ago. Our annualized return on average assets for the three-month period ended DecemberMarch 31, 2025,2026 was 1.42%,1.41%, as compared to 1.20%1.29% for the same period of the prior fiscal year. Our annualized return on average common stockholders’ equity for the three-month period ended DecemberMarch 31, 2025,2026, was 12.8%,12.6%, as compared to 11.4%12.2% in the same period of the prior fiscal year.

Net Interest Income. Net interest income for the three-month period ended DecemberMarch 31, 2025,2026, was $42.9$43.2 million, an increase of $4.7$3.7 million, or 12.4%,9.3%, as compared to the same period of the prior fiscal year. The increaseincrease, as compared to the same period a year ago, was attributable to an increase of 23 basis points in the net interest margin, from 3.44% to 3.67%, coupled with a 5.0%2.5% increase in the average balance of interest-earning assetsassets. andThe aprimary 23-basisdriver point increase inof the net interest margin,margin fromexpansion, 3.34%compared to 3.57%,the asyear ago period, was a decrease in the cost of interest-bearing liabilities decreasedof by 3332 basis points, partially offset by a five-basisdecrease pointof decreasesix basis points in the yield earned on interest earninginterest-earning assets.

Loan discount accretion and liability 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 $1.5$352,000 million ofin net interest income for the six-monththree-month period ended DecemberMarch 31, 2025,2026, as compared to $2.0$1.5 million ofin net interest income for the same period a year ago. Combined, this component of net interest income contributed sixthree basis points to net interest margin in the six-monththree-month period ended DecemberMarch 31, 2025,2026, as compared to a nine-basis13-basis point contribution for the same period of the prior fiscal year.year, and as compared to a five-basis point contribution in the linked quarter, ended December 31, 2025, when the net interest margin was 3.57%.

Provision for Credit Losses. The Company recorded a PCL of $6.2$2.1 million in the six-monththree-month period ended DecemberMarch 31, 2025,2026, as compared to a PCL of $3.1 million$932,000 in the same period of the prior fiscal year. The current period PCL was the result of a $5.8$1.8 million provision attributable to the ACL for loan balances outstanding and a $359,000$234,000 provision attributable to the allowance for off-balance sheet credit exposures. The factors considered when estimating a required ACL and PCL for loan balances outstanding is detailed belowabove underin the “Allowance for Credit Loss Activity” and the PCL for off-balance sheet credit exposure was primarily attributable to an increase in unfunded balances and an increase in required reserves for pooled loans..

Income Taxes. The income tax provision for the six-monththree-month period ended DecemberMarch 31, 2025,2026, was $8.3$4.2 million, an increase of $411,000, or 5.2%,1.0% as compared to the same period of the prior fiscal year, primarily due to the increase in net income before income taxes.taxes, partially offset by a lower effective tax rate. The effective tax rate for the fiscal year to date was 19.8%,19.1% as compared to 22.6%20.9% in the same periodquarter of the prior fiscal year. The lower rate was due to the absence of merger-related tax accrual adjustments that elevated the samecurrent period ofbenefited the prior fiscal year’s rate, combined with the impact offrom lower state tax rates and a revised apportionment methodology, inas thewell currentas period.ongoing The current period also benefitedbenefits from the recognition of tax credits under the proportional amortization method in accordance with ASC 2023-02.2023-02, and a catch up in recognition of tax-exempt interest income.

The following table summarizes changes in the ACL over the three- and six-monthnine-month periods ended DecemberMarch 31, 2025,2026, and 20242025:

The ACL at DecemberMarch 31, 2025,2026, totaled $54.5$55.9 million, representing 1.29% of gross loans and 184%186% of nonperforming loans, as compared to an ACL of $51.6 million, representing 1.26% of gross loans and 224% of nonperforming loans at June 30, 2025. The Company has estimated its expected credit losses as of DecemberMarch 31, 2025,2026, under ASC 326-20, and management believes the ACL as of that date was adequate based on that estimate. There remains, however, significant economic uncertainty despite recent reductions in short-term interest rates as labor market conditions soften, whileand inflation remains above target. The increase in the ACL was primarily attributable to management’s assessment of reserve adequacy amid an evolving economic environment, additions to individually reviewed loans, slightly higher reserves required for pooled loans, driven largely by increased reserves on agriculture loans reflecting ongoing pressure in the agricultural sector, and loan growth. This was partially offset by net charge-offs. As a percentage of average loans outstanding, the Company recorded net recoveriescharge-offs of 0.07%0.04% (annualized) during the current quarter, as compared to net charge-offs of 0.02%0.11% for the same quarter of the prior fiscal year. For the nine-month period ended March 31, 2026, year-to-date net charge-offs were 0.11% (annualized), as compared to 0.05% for the same period ofin the prior fiscal year. In the three-monthnine-month period ended DecemberMarch 31, 2025,2026, net recoveriescharge offs were $704,000,$3.4 million, which was primarily attributable to a $2.0$2.8 million recoverycharge-off associated with onea ofspecial-purpose theCRE loan modifications to borrowers experiencing financial difficulty,relationship, which was reserved for in the fourth quarter ofprior fiscal 2025 and charged off in the first quarter of fiscal 2026. At December 31, 2025, the Company had accrued within other liabilities an allowance for off-balance sheet credit exposures of $4.3 million, as compared to $3.9 million at June 30, 2025. 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 $359,000 increase in the estimated allowance for off-balance sheet credit exposures was primarily the result of an increase in unfunded balances and an increase in required reserves for pooled loans.year.

At DecemberMarch 31, 2025,2026, the Company had adversely classified loans of $58.8$55.5 million, or 1.39%1.28% of total loans, adversely classified ($58.2$54.9 million classified “substandard”; $599,000$594,000 classified “doubtful”), as compared to adversely classified loans of $49.6 million, or 1.21% of total loans, adversely classified ($49.6 million classified “substandard”; none classified “doubtful”) at June 30, 2025, and $39.6$48.8 million, or 0.98%1.21% of total loans, adversely classified ($39.6$48.8 million classified “substandard”; none classified “doubtful”), at DecemberMarch 31, 2024.2025. Classified loans were generally comprised of loans secured by commercial and residential real estate, and other commercial purpose collateral. All 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 $25.9$27.1 million at DecemberMarch 31, 2025.2026. The Company’s total past due loans increased from $25.6 million at June 30, 2025, to $32.0 million at DecemberMarch 31, 2025.2026. The increase in classified loans and past dues was primarily attributable to twothree borrower relationships: one commercial relationship consisting of two related loans collateralized by commercial real estate; one consisting of multiple loans collateralized by commercial real estate and equipment; and the other,one consisting of two related agricultural production loans secured by crops and equipment,equipment. These increases were partially offset by improvement in previously nonperforming loans and net charge-offs. BothAll relationships noted were placed on nonaccrual status duringprior to the secondthird quarter of fiscal 2026. See Note 4 – “Loans and Allowance for Credit Losses” in the Notes to Consolidated Financial Statements. For additional information on the increase in substandard loans, see “Non-Performing Assets” within Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

At DecemberMarch 31, 2025,2026, modifications to borrowers experiencing financial difficulty totaled $32.8$32.4 million, of which $793,000$770,000 was considered nonperforming and included in the nonaccrual loan total above. The remaining $32.0$31.7 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, $25.3$24.9 million of these loans were subject to classification as modifications due to interest rate reductions, $1.6 million due to term extensions, $4.4 million due to payment delays, and $1.5 million due to principal forgiveness given to borrowers experiencing financial difficulty at December 31, 2025. At June 30, 2025, these modifications totaled $28.2 million, of which $1.6 million was considered nonperforming and included in the nonaccrual loan total above. The remaining $26.6 million in modifications at June 30, 2025, had complied with the modified terms for a reasonable period of time and were therefore considered by the Company to be accrual status loans.

At DecemberMarch 31, 2025,2026, nonperforming assets totaled $31.2$31.7 million, as compared to $23.7 million at June 30, 2025, and $10.8$23.8 million at DecemberMarch 31, 2024.2025. The increase in nonperforming assets, compared to June 30, 2025, primarily reflects an increase in NPLs. The increase in NPLs compared to June 30, 2025, was due to the previously mentioned increase in classified loans and past dues.

At DecemberMarch 31, 2025,2026, the Company had outstanding commitments and approvals to extend credit of approximately $981.2$1.0 millionbillion (including $654.1$682.5 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 DecemberMarch 31, 2025,2026, the Bank had pledged $1.4$1.5 billion of its single-family residential, home equity, and commercial real estate loan portfolios to the FHLB for available credit of approximately $854.7$974.2 million, of which $102.1$102.0 million was advanced, while $626,000$630,000 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. In total, FHLB borrowings are generally limited to 45% of Bank assets, or approximately $2.2$2.3 billion, subject to available collateral. Also, at DecemberMarch 31, 2025,2026, the Bank had pledged a total of $410.6$356.4 million in loans secured by farmland and agricultural production loans to the Federal Reserve, providing access to $360.0$307.7 million in primary credit borrowings from the Federal Reserve’s discount window, none of which was advanced at DecemberMarch 31, 2025.2026. 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.

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 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 DecemberMarch 31, 2025,2026, and June 30, 2025, that the Company and the Bank met all capital adequacy requirements to which they are subject.

As of DecemberMarch 31, 2025,2026, 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.