GlobeNewswire Inc | Oct 26, 2020 06:23PM EDT

October 26, 2020

Poplar Bluff, Missouri, Oct. 26, 2020 (GLOBE NEWSWIRE) -- Southern Missouri Bancorp, Inc. (Company) (NASDAQ: SMBC), the parent corporation of Southern Bank (Bank), today announced preliminary net income for the first quarter of fiscal 2021 of $10.0 million, an increase of $2.2 million, or 27.6%, as compared to the same period of the prior fiscal year. The increase was attributable to increases in net interest income and noninterest income, and a decrease in provision for loan losses, partially offset by increases in noninterest expense and provision for income taxes. Preliminary net income was $1.09 per fully diluted common share for the first quarter of fiscal 2021, an increase of $.24 as compared to the $.85 per fully diluted common share reported for the same period of the prior fiscal year.

Highlights for the first quarter of fiscal 2021:

-- Annualized return on average assets was 1.57%, while annualized return on average common equity was 15.6%, as compared to 1.40% and 13.0%, respectively, in the same quarter a year ago, and 1.10% and 10.8%, respectively, in the fourth quarter of fiscal 2020, the linked quarter. -- Earnings per common share (diluted) were $1.09, up $.24, or 28.2%, as compared to the same quarter a year ago, and up $.33, or 43.4%, from the fourth quarter of fiscal 2020, the linked quarter. -- Provision for loan losses was $774,000, a decrease of $122,000, or 13.6%, as compared to the same period of the prior year, and down $1.1 million, or 58.6%, as compared to the fourth quarter of fiscal 2020, the linked quarter. Nonperforming assets were $11.3 million, or 0.44% of total assets, at September 30, 2020, as compared to $11.2 million, or 0.44% of total assets, at June 30, 2020, and $17.9 million, or 0.80% of total assets, at September 30, 2019, one year prior. -- In what is usually the Companys strongest quarter of the year for loan growth, net loan growth for the first quarter of fiscal 2021 was $8.5 million, resulting from a relatively small increase of $18.0 million in gross loan balances receivable, partially offset by an increase of $9.5 million in our allowance for credit losses, as the Company adopted ASU 2016-13, Financial Instruments Credit Losses, effective with the beginning of our 2021 fiscal year. See further discussion below. -- Deposit balances decreased $16.8 million in the first quarter of fiscal 2021. Typically, the first quarter of the fiscal year is the weakest for the Companys deposit growth, and this weakness was somewhat more pronounced this year, as depositors had little appetite for certificates of deposit, and growth in nonmaturity balances slowed after significant increases in the final two quarters of the prior fiscal year. -- Net interest margin for the first quarter of fiscal 2021 was 3.73%, down from the 3.81% reported for the year ago period, and down from the 3.75% figure reported for the fourth quarter of fiscal 2020, the linked quarter. Discount accretion on acquired loan portfolios was slightly lower in the current quarter as compared to the linked quarter, and down more significantly as compared to the year ago period. Additionally, as compared to the linked and year-ago quarters, the Company noted reductions in interest income resulting from the resolution of loans that had been previously classified as nonaccrual. -- Noninterest income was up 41.6% for the first quarter of fiscal 2021, as compared to the year ago period, and was up 13.4% as compared to the fourth quarter of fiscal 2020, the linked quarter. The Company continues to realize significantly increased gains on sales of residential mortgage loans originated for that purpose. -- Noninterest expense was up 9.3% for the first quarter of fiscal 2021, as compared to the year ago period, and was down 13.0% from the fourth quarter of fiscal 2020, the linked quarter. The linked quarter included significant non-recurring charges related to the May 2020 acquisition of Central Federal Bancshares and its subsidiary, the Central Federal Savings and Loan Association of Rolla (the Central Federal Acquisition).

Dividend Declared:

The Board of Directors, on October 20, 2020, declared a quarterly cash dividend on common stock of $0.15, payable November 30, 2020, to stockholders of record at the close of business on November 13, 2020, marking the 106th consecutive quarterly dividend since the inception of the Company. The Board of Directors and management believe the payment of a quarterly cash dividend enhances stockholder value and demonstrates our commitment to and confidence in our future prospects.

Share Repurchase Program:

In November 2018, the Company announced a share repurchase plan under which it intended to repurchase up to 450,000, or 4.8% of the then-outstanding 9.3 million common shares. In March 2020, after having repurchased approximately 218,000 shares, the Company temporarily suspended activity under the repurchase program, as a result of the uncertainty triggered by the COVID-19 pandemic and its effect on the U.S. economy. On October 20, 2020, the Board of Directors approved the resumption of activity under the program. The shares will be purchased at prevailing market prices in the open market or in privately negotiated transactions, subject to availability and general market conditions. Repurchased shares will be held as treasury shares to be used for general corporate purposes.

Conference Call:

The Company will host a conference call to review the information provided in this press release on Tuesday, October 27, 2020, at 3:30 p.m., central time. The call will be available live to interested parties by calling 1-888-339-0709 in the United States (Canada: 1-855-669-9657, international: 1-412-902-4189). Participants should ask to be joined into the Southern Missouri Bancorp (SMBC) call. Telephone playback will be available beginning one hour following the conclusion of the call through November 9, 2020. The playback may be accessed by dialing 1-877-344-7529 (Canada: 1-855-669-9658, international: 1-412-317-0088), and using the conference passcode 10149525.

Balance Sheet Summary:

The Companys balance sheet was slightly lower at September 30, 2020, as compared to June 30, 2020, with total assets of $2.5 billion reflecting a decrease of $1.4 million, or 0.1%. Growth in net loan balances, accrued interest receivable, and other assets was offset by reductions in cash and cash equivalents, and available-for-sale (AFS) securities.

Cash equivalents and time deposits were a combined $42.9 million at September 30, 2020, a decrease of $12.4 million, or 22.4%, as compared to June 30, 2020. AFS securities were $175.5 million at September 30, 2020, a decrease of $1.0 million, or 0.6%, as compared to June 30, 2020.

Loans, net of the allowance for credit losses (ACL), were $2.2 billion at September 30, 2020, an increase of $8.5 million, or 0.4%, as compared to June 30, 2020. Gross loans increased by $18.0 million, or 0.8%, during the first three months of the fiscal year, while the ACL at September 30, 2020, reflected an increase of $9.5 million, as compared to the balance of our allowance for loan and lease losses (ALLL) at June 30, 2020. The Company adopted ASU 2016-13, Financial Instruments Credit Losses, also known as the current expected credit loss (CECL) standard, effective as of July 1, 2020, the beginning of our 2021 fiscal year. Adoption resulted in an $8.9 million increase in the ACL, relative to the ALLL as of June 30, 2020, while provisioning in excess of net charge offs during the first quarter of fiscal 2021 increased the ACL by an additional $612,000, as compared to July 1, 2020. The increase in loan balances in the portfolio was primarily attributable to commercial loans and residential real estate loans, partially offset by modest declines in commercial real estate loans and drawn construction loan balances. Residential real estate loans increased on growth in 1- to 4-family residential lending, partially offset by a modest decline in multifamily real estate loans. Commercial loan balances increased primarily as a result of seasonal agricultural loan draws, partially offset by a reduction in commercial and industrial loan types, and in total, commercial loan balances remained relatively high compared to recent periods as a result of the Small Business Administrations Paycheck Protection Program (PPP) loans, which totaled $133.7 million at September 30, 2020, as compared to $132.3 million at June 30, 2020. In early October, the Company began submitting applications to the SBA for forgiveness of the loans originated under the PPP program but, to date, relatively few have been submitted, and only a small percentage of those submitted have been processed by the SBA. Loans anticipated to fund in the next 90 days stood at $122.7 million at September 30, 2020, as compared to $86.6 million at June 30, 2020, and $101.7 million at September 30, 2019.

Nonperforming loans were $8.8 million, or 0.40% of gross loans, at September 30, 2020, as compared to $8.7 million, or 0.40% of gross loans at June 30, 2020, and $14.0 million, or 0.74% of gross loans at September 30, 2019. Nonperforming assets were $11.3 million, or 0.44% of total assets, at September 30, 2020, as compared to $11.2 million, or 0.44% of total assets, at June 30, 2020, and $17.9 million, or 0.80% of total assets, at September 30, 2019. The decrease in nonperforming loans over the previous twelve months was attributed primarily to the resolution of certain nonperforming loans acquired in the November 2018 acquisition of Gideon Bancshares and its subsidiary, First Commercial Bank (the Gideon Acquisition).

Our ACL at September 30, 2020, totaled $34.6 million, representing 1.59% of gross loans and 394.9% of nonperforming loans, as compared to an ALLL of $25.1 million, representing 1.16% of gross loans and 290.4% of nonperforming loans at June 30, 2020, and an ALLL of $20.7 million, or 1.09% of gross loans and 147.7% of nonperforming loans, at September 30, 2019. The ACL at September 30, 2020, also represented 1.69% of gross loans excluding PPP loans. The Company has estimated its credit losses as of September 30, 2020, under ASC 320-20, and management believes the allowance for credit losses as of that date is adequate based on that estimate; however, there remains significant uncertainty regarding the possible length of the COVID-19 pandemic and the aggregate impact that it will have on global and regional economies, including uncertainty regarding the effectiveness of recent efforts by the U.S. government and Federal Reserve to respond to the pandemic and its economic impact. Management considered the impact of the pandemic on its consumer and business borrowers, particularly those business borrowers most affected by efforts to contain the pandemic, including our borrowers in the retail and multi-tenant retail industry, restaurants, and hotels.

As of September 30, 2020, loans for which payment deferrals and interest-only payment modifications remained in place included approximately 250 loans with balances totaling $93.6 million, as compared to approximately 900 loans with balances totaling $380.2 million with such deferrals or modifications in place at June 30, 2020. Details by loan type are included in the table at the conclusion of this document. These are loans that were otherwise current and performing prior to the COVID-19 pandemic, but for which borrowers anticipated difficulties due to impact of the pandemic. Approximately $67.2 million in loans which remain under a payment deferral or interest-only modification at September 30, 2020, are scheduled to complete their deferral or modification period by October 31, 2020. Generally, deferrals were granted for three-month periods, while interest-only modifications were for six-month periods. Some borrowers were granted additional periods of deferral or interest-only modifications. These deferrals and modifications were made in compliance with provisions of the CARES Act that allow financial institutions the option to temporarily suspend certain requirements under U.S. GAAP related to troubled debt restructurings (TDRs), and the Company did not account for these loans as TDRs. While management considers progress made by our borrowers in responding to the pandemic to be relatively strong, and the performance of our loan portfolio to be encouraging to date, we cannot predict with certainty the difficulties to be faced in coming months as various relief provisions expire, or as communities where our borrowers operate experience increases in COVID-19 cases and reductions in business activity or employee attendance, or may be required by local authorities to restrict activity.

Total liabilities were $2.3 billion at September 30, 2020, a decrease of $3.1 million, or 0.1%, as compared to June 30, 2020.

Deposits were $2.2 billion at September 30, 2020, a decrease of $16.8 million, or 0.8%, as compared to June 30, 2020. This decrease reflected a decrease in time deposits, partially offset by an increase in nonmaturity deposits, and was inclusive of decreases of $16.9 million in public unit funds and $2.3 million in brokered time deposits. Public unit balances were $288.3 million at September 30, 2020, as public unit depositors partially reversed growth noted over recent quarters. Brokered time deposits were $21.0 million, and brokered money market deposits were $20.0 million, at September 30, 2020. In total, deposit balances saw decreases in certificates of deposit and non-interest bearing transaction accounts, partially offset by increases in savings accounts, interest-bearing transaction accounts, and money market deposit accounts. The average loan-to-deposit ratio for the first quarter of fiscal 2021 was 99.1%, as compared to 99.2% for the same period of the prior fiscal year.

FHLB advances were $85.6 million at September 30, 2020, an increase of $15.6 million, or 22.3%, as compared to June 30, 2020, with the increase primarily attributable to the Companys use of overnight borrowings to fund increases in loans and outflows in deposits. The Company has continued to monitor the availability of the Federal Reserves PPP Lending Facility (PPPLF), but has not utilized it to date, given our improved liquidity position and the lack of attractive alternative investment options. Currently, the Company expects to process forgiveness applications for the majority of our outstanding PPP loans in the next several months, and will then assess the regulatory capital and liquidity considerations of the potential use of the PPPLF for any balances not forgiven and expected to remain outstanding for an additional 1.5 years or more.

The Companys stockholders equity was $260.0 million at September 30, 2020, an increase of $1.6 million, or 0.6%, as compared to June 30, 2020. The increase was attributable primarily to earnings retained after cash dividends paid, partially offset by the one-time negative adjustment to retained earnings resulting from the adoption of the CECL standard.

Quarterly Income Statement Summary:

The Companys net interest income for the three-month period ended September 30, 2020, was $22.1 million, an increase of $2.5 million, or 12.8%, as compared to the same period of the prior fiscal year. The increase was attributable to a 15.2% increase in the average balance of interest-earning assets, partially offset by a decrease in net interest margin to 3.73% in the current three-month period, from 3.81% in the same period a year ago.

Loan discount accretion and deposit premium amortization related to the Companys August 2014 acquisition of Peoples Bank of the Ozarks (Peoples), the June 2017 acquisition of Capaha Bank (Capaha), the February 2018 acquisition of Southern Missouri Bank of Marshfield (SMB-Marshfield), the Gideon Acquisition, and the Central Federal Acquisition resulted in $339,000 in net interest income for the three-month period ended September 30, 2020, as compared to $508,000 in net interest income for the same period a year ago. The decline is attributable to expected reductions in discount accretion as additional time has elapsed since the loan portfolios were acquired and balances have declined, partially offset by the recent Central Federal acquisition, although the acquired loan book and resulting discount accretion from that acquisition is relatively small. The Company generally expects this component of net interest income will continue to decline over time, although volatility may occur to the extent we have periodic resolutions of specific credit impaired loans. Combined, these components of net interest income contributed six basis points to net interest margin in the three-month period ended September 30, 2020, as compared to a contribution of 10 basis points in the same period of the prior fiscal year, and as compared to the six basis point contribution in the linked quarter, ended June 30, 2020, when net interest margin was 3.75%. Additionally, in the year-ago and linked periods, the Company recognized additional interest income as a result of the resolution of a limited number of nonperforming loans, with no material contribution from similar resolutions in the current period. This recognition of $414,000 in interest income in the year-ago period, and $159,000 in the linked period, contributed eight and three basis points, respectively, to net interest margin in the year-ago and linked periods.

The provision for loan losses for the three-month period ended September 30, 2020, was $774,000, as compared to $896,000 in the same period of the prior fiscal year. The decrease as compared to the same quarter a year ago was attributable primarily to the current quarters relatively low loan growth and stable credit quality indicators quarter-over-quarter. While uncertainty remains regarding the economic environment resulting from the COVID-19 pandemic and the potential impact on the Companys borrowers, the Company assesses that the outlook is little changed as compared to the quarter ended June 30, 2020. As a percentage of average loans outstanding, the provision for loan losses in the current three-month period represented a charge of 0.14% (annualized), while the Company recorded net charge offs during the period of 0.03% (annualized). During the same period of the prior fiscal year, the provision for loan losses as a percentage of average loans outstanding represented a charge of 0.19% (annualized), while the Company recorded net charge offs of 0.02% (annualized).

The Companys noninterest income for the three-month period ended September 30, 2020, was $4.9 million, an increase of $1.5 million, or 41.6%, as compared to the same period of the prior fiscal year. In the current period, increases in gains realized on the sale of residential real estate loans originated for that purpose, other income, loan servicing fees, other loans fees, and bank card interchange income were partially offset by decreases in deposit account service charges. Gains realized on the sale of residential real estate loans originated for that purpose increased as origination of these loans more than tripled, remaining consistent with the linked quarter, while pricing improved slightly. Our portfolio of serviced loans increased by 16% during the quarter, which increased servicing income through fees received and the recognition of mortgage servicing rights at origination. Other income included a $187,000 non-recurring benefit related to a broker-dealer agreement to provide wealth management services in a new market area, with no comparable item in the year-ago period. Bank card interchange income increased as a result of an 8% increase in the number of bank card transactions and a 17% increase in bank card dollar volume.

Noninterest expense for the three-month period ended September 30, 2020, was $13.5 million, an increase of $1.1 million, or 9.3%, as compared to the same period of the prior fiscal year. The increase was attributable primarily to increases in compensation and benefits, provisioning for off-balance sheet credit exposure, deposit insurance premiums, data processing expenses, and occupancy, partially offset by a reduction in other expenses, which included a variety of relatively small items that trended lower, including the costs of providing rewards checking products, employee travel expenses, and customer entertainment. Included in compensation expense was $150,000 in non-recurring expense related to the hiring of an investment representative for the Companys wealth management group; otherwise, the increase over the prior year primarily reflected standard increases in compensation and an increase in employee headcount over the prior year, due in part to the Central Federal Acquisition, as well as a de novo branch opened early in the quarter. Data processing and occupancy expenses also increased in part due to the new facilities, while data processing expenses have also been higher since the implementation of a new data processing environment in the first half of fiscal 2020. Deposit insurance premiums reflected a return to a normalized level of premiums after the Company benefited from one-time assessment credits for much of the prior fiscal year. The efficiency ratio for the three-month period ended September 30, 2020, was 50.0%, as compared to 53.6% in the same period of the prior fiscal year, with the improvement attributable primarily to the current periods increase in noninterest income.

The income tax provision for the three-month period ended September 30, 2020, was $2.7 million, an increase of 39.0% as compared to the same period of the prior fiscal year, as higher pre-tax income combined with an increase in the effective tax rate, to 21.6%, as compared to 20.2% in the same period a year ago. While the Company generated higher levels of pre-tax income, investments in tax-advantaged assets were modestly reduced, resulting in a higher effective tax rate.

Forward-Looking Information:

Except for the historical information contained herein, the matters discussed in this press release may be deemed to be forward-looking statements that are subject to known and unknown risks, uncertainties, and other factors that could cause the actual results to differ materially from the forward-looking statements, including: potential adverse impacts to the economic conditions in the Companys local market areas, other markets where the Company has lending relationships, or other aspects of the Companys business operations or financial markets, generally, resulting from the ongoing COVID-19 pandemic and any governmental or societal responses thereto; expected cost savings, synergies and other benefits from our merger and acquisition activities might not be realized to the extent anticipated, within the anticipated time frames, or at all, and costs or difficulties relating to integration matters, including but not limited to customer and employee retention, might be greater than expected; the strength of the United States economy in general and the strength of the local economies in which we conduct operations; fluctuations in interest rates and in real estate values; monetary and fiscal policies of the FRB and the U.S. Government and other governmental initiatives affecting the financial services industry; the risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses; our ability to access cost-effective funding; the timely development of and acceptance of our new products and services and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors' products and services; fluctuations in real estate values and both residential and commercial real estate markets, as well as agricultural business conditions; demand for loans and deposits; legislative or regulatory changes that adversely affect our business; changes in accounting principles, policies, or guidelines; results of regulatory examinations, including the possibility that a regulator may, among other things, require an increase in our reserve for loan losses or write-down of assets; the impact of technological changes; and our success at managing the risks involved in the foregoing. Any forward-looking statements are based upon managements beliefs and assumptions at the time they are made. We undertake no obligation to publicly update or revise any forward-looking statements or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed might not occur, and you should not put undue reliance on any forward-looking statements.

Southern Missouri Bancorp, Inc.UNAUDITED CONDENSED CONSOLIDATED FINANCIAL INFORMATION Summary Balance Sep. 30, June 30, Mar. 31, Dec. 31, Sep. 30, Sheet Data as of: (dollarsin thousands, 2020 2020 2020 2019 2019 except per sharedata) Cash equivalents $ 42,850 $ 55,219 $ 57,078 $ 42,015 $ 32,394 and time depositsAvailable for sale 175,528 176,524 180,592 175,843 171,006 (AFS) securitiesFHLB/FRB membership 11,956 10,753 13,054 12,522 12,083 stockLoans receivable, 2,185,113 2,167,067 1,991,328 1,943,599 1,895,207 gross Allowance for 34,650 25,138 23,508 20,814 20,710 loan lossesLoans receivable, 2,150,463 2,141,929 1,967,820 1,922,785 1,874,497 netBank-owned life 43,644 43,363 39,095 38,847 38,593 insuranceIntangible assets 21,582 21,789 21,573 22,423 22,889 Premises and 64,430 65,106 64,705 65,006 65,480 equipmentOther assets 30,281 27,474 30,531 32,408 34,265 Total assets $ 2,540,734 $ 2,542,157 $ 2,374,448 $ 2,311,849 $ 2,251,207 Interest-bearing $ 1,861,051 $ 1,868,799 $ 1,738,379 $ 1,691,010 $ 1,663,874 depositsNoninterest-bearing 307,023 316,048 233,268 223,604 208,646 depositsFHLB advances 85,637 70,024 123,361 114,646 103,327 Note payable 3,000 3,000 3,000 - -Other liabilities 11,880 13,797 11,469 15,627 15,030 Subordinated debt 15,168 15,142 15,118 15,093 15,068 Total 2,280,759 2,283,810 2,124,595 2,062,980 2,008,945 liabilities Totalstockholders' 259,975 258,347 249,853 248,869 242,262 equity Totalliabilities and $ 2,540,734 $ 2,542,157 $ 2,374,448 $ 2,311,849 $ 2,251,207 stockholders'equity Equity to assets 10.23 % 10.16 % 10.52 % 10.76 % 10.76 % ratio Common shares 9,126,625 9,127,390 9,128,290 9,206,783 9,201,783 outstanding Less:Restricted common 27,260 28,025 28,925 24,900 25,975 shares not vestedCommon shares forbook value 9,099,365 9,099,365 9,099,365 9,181,883 9,175,808 determination Book value per $ 28.57 $ 28.39 $ 27.46 $ 27.10 $ 26.40 common shareClosing market 23.58 24.30 24.27 38.36 36.43 price Nonperforming asset Sep. 30, June 30, Mar. 31, Dec. 31, Sep. 30, data as of: (dollars 2020 2020 2020 2019 2019 in thousands) Nonaccrual loans $ 8,775 $ 8,657 $ 11,428 $ 10,419 $ 14,021 Accruing loans 90 days or more past - - - 1 - due Total 8,775 8,657 11,428 10,420 14,021 nonperforming loansOther real estate 2,466 2,561 3,401 3,668 3,820 owned (OREO)Personal property repossessed 9 9 38 26 71 Totalnonperforming $ 11,250 $ 11,227 $ 14,867 $ 14,114 $ 17,912 assets Total nonperformingassets to total 0.44 % 0.44 % 0.63 % 0.61 % 0.80 % assetsTotal nonperformingloans to gross 0.40 % 0.40 % 0.57 % 0.54 % 0.74 % loansAllowance for loanlosses to 394.87 % 290.38 % 205.71 % 199.75 % 147.71 % nonperforming loansAllowance for loanlosses to gross 1.59 % 1.16 % 1.18 % 1.07 % 1.09 % loans Performing troubleddebt restructurings $ 7,923 $ 8,580 $ 14,196 $ 14,814 $ 12,432 ^(1) ^(1) Nonperforming troubled debt restructurings are included withnonaccrual loans or accruing loans 90 days or more past due.

For the three-month period endedQuarterly Average Sep. 30, June 30, Mar. 31, Dec. 31, Sep. 30, Balance Sheet Data: (dollars 2020 2020 2020 2019 2019 in thousands) Interest-bearing $ 19,768 $ 10,380 $ 7,363 $ 6,322 $ 7,001 cash equivalentsAFS securities and 181,535 188,497 184,389 183,748 179,623 membership stockLoans receivable, 2,162,125 2,127,181 1,950,887 1,903,230 1,865,344 gross Totalinterest-earning 2,363,428 2,326,058 2,142,639 2,093,300 2,051,968 assetsOther assets 174,574 194,651 180,981 184,028 184,415 Total assets $ 2,538,002 $ 2,520,709 $ 2,323,620 $ 2,277,328 $ 2,236,383 Interest-bearing $ 1,865,637 $ 1,838,606 $ 1,729,327 $ 1,674,198 $ 1,660,994 depositsSecurities sold under agreements to - - - - 329 repurchaseFHLB advances 70,272 83,130 83,916 99,728 82,192 Note payable 1,187 3,000 3,000 3,000 -Subordinated debt 15,155 15,130 15,105 15,080 15,055 Totalinterest-bearing 1,951,064 1,938,053 1,831,348 1,792,006 1,761,570 liabilitiesNoninterest-bearing 316,996 311,555 223,865 222,187 218,755 depositsOthernoninterest-bearing 14,672 15,937 17,634 17,533 16,014 liabilities Total 2,282,732 2,265,545 2,072,847 2,031,726 1,996,339 liabilities Totalstockholders' 255,270 255,164 250,773 245,602 240,044 equity Totalliabilities and $ 2,538,002 $ 2,520,709 $ 2,323,620 $ 2,277,328 $ 2,236,383 stockholders'equity

For the three-month period ended

Quarterly SummaryIncome Statement Sep. 30, June 30, Mar. 31, Dec. 31, Sep. 30, Data: (dollarsin thousands, except 2020 2020 2020 2019 2019 per share data) Interest income: Cash equivalents $ 41 $ 18 $ 33 $ 31 $ 46 AFS securities 1,024 1,146 1,218 1,194 1,236 and membership stock Loans receivable 25,907 26,099 24,969 25,421 25,640 Total 26,972 27,263 26,220 26,646 26,922 interest incomeInterest expense: Deposits 4,390 4,923 6,135 6,448 6,578 FHLB advances 380 398 439 573 522 Note payable - 11 31 34 37 Subordinated 138 151 197 214 225 debt Total 4,908 5,483 6,802 7,269 7,362 interest expenseNet interest income 22,064 21,780 19,418 19,377 19,560 Provision for loan 774 1,868 2,850 388 896 lossesNoninterest income: Deposit accountcharges and related 1,339 1,087 1,538 1,632 1,423 fees Bank card 830 954 719 651 751 interchange income Loan late 141 157 149 121 146 charges Loan servicing 310 248 (285 ) 103 130 fees Other loan fees 327 290 370 354 243 Net realizedgains on sale of 1,206 977 178 203 273 loans Earnings on bank 280 266 247 253 254 owned life insurance Other 508 380 313 357 270 noninterest income Total 4,941 4,359 3,229 3,674 3,490 noninterest incomeNoninterest expense: Compensation and 7,720 7,698 7,521 6,993 7,125 benefits Occupancy and 1,970 1,887 1,780 1,769 1,852 equipment, net Data processing 1,062 2,084 974 878 885 expense

Telecommunications 315 314 309 320 320 expense Deposit 201 155 insurance premiums - - - Legal and 198 318 229 239 184 professional fees Advertising 230 391 244 283 309 Postage and 193 219 224 178 183 office supplies Intangible 380 448 441 441 441 amortization Foreclosed 50 636 282 property expenses 25 48 Provision foroff-balance sheet 226 132 300 362 (146 ) credit exposure Other 953 1,226 1,265 1,537 1,149 noninterest expense Total 13,498 15,508 13,569 13,025 12,350 noninterest expense Net income 12,733 8,763 6,228 9,638 9,804 before income taxesIncome taxes 2,747 1,861 1,129 1,921 1,976 Net income 9,986 6,902 5,099 7,717 7,828 Less:distributed earnings to participating 4 - - - -securities Less: undistributed earnings to 26 - - - - participating securitiesNet income availableto common $ 9,956 $ 6,902 $ 5,099 $ 7,717 $ 7,828 shareholders Basic earnings per $ 1.09 $ 0.76 $ 0.55 $ 0.84 $ 0.85 common shareDiluted earnings per 1.09 0.76 0.55 0.84 0.85 common shareDividends per common 0.15 0.15 0.15 0.15 0.15 share Average common shares outstanding: Basic 9,100,000 9,128,000 9,197,000 9,202,000 9,232,000 Diluted 9,101,000 9,130,000 9,205,000 9,213,000 9,244,000 Return on average 1.57 % 1.10 % 0.88 % 1.36 % 1.40 % assetsReturn on averagecommon stockholders' 15.6 % 10.8 % 8.1 % 12.6 % 13.0 % equity Net interest margin 3.73 % 3.75 % 3.63 % 3.70 % 3.81 % Net interest spread 3.55 % 3.56 % 3.40 % 3.47 % 3.58 % Efficiency ratio 50.0 % 59.3 % 59.9 % 56.5 % 53.6 %

As of September 30, 2020 As of June 30, 2020Loan portfoliobalances and CARES Balance Payment Interest-only Payment Interest-onlyAct modifications

(dollars in Outstanding Deferrals Modifications Deferrals Modificationsthousands) 1- to 4-family $ 438,496 $ 1,171 $ 8,805 $ 13,385 $ 21,194residential loansMultifamily 196,997 12,278 1,912 28,101residential loans - Total 635,493 1,171 21,083 15,297 49,295residential loans1- to 4-family owner-occupied 25,053 - - - -construction loans1- to 4-family speculative 11,961 - - - -construction loansMultifamily construction loans 39,102 - - - 31Other construction 4,367 4,367 290loans 30,229 - Total construction loan 106,345 4,367 - 4,367 321balances drawnAgricultural real 182,602 1,967 1,415 2,803 5,537estate loansLoans for vacantland - developed, 1,203 106 4,196undeveloped, and 58,015 -other purposesOwner-occupiedcommercial real estate loans to:Churches and 1,449 4,213nonprofits 19,900 - -Non-professional 2,106 333 3,160services 16,826 - Retail 1,257 3,285 3,960 25,337 -Automobile 3,977dealerships 21,544 - - -Healthcare 330 334providers 7,869 - -Restaurants 5,694 22,988 10,745 46,161 -Convenience stores 1,303 14,817 22,550 - -Automotive 244 1,509services 7,428 - -Manufacturing 7,262 4,938 3,140 18,669 -Professional 354 248 719services 14,113 -Warehouse/ 485 distribution 4,516 - - - Grocery 5,548 - 26 - 26Other 551 2,417 21,813 - -Totalowner-occupied 232,274 20,576 32,277 49,017commercial real -estate loansNon-owner-occupiedcommercial real estate loans to:Care facilities 15,943 33,246 - - -Non-professional 3,864 3,864services 14,442 - -Retail 545 525 3,125 1,537 33,471Healthcare 442 1,489providers 19,633 - -Restaurants 413 17,418 5,839 47,875 -Convenience stores 1,285 8,983 - - -Automotive services 7,173 - - - -Hotels 3,495 39,622 26,092 80,947 -Manufacturing 2,011 5,170 - - -Storage units 404 3,711 14,210 - -Professional 460 723services 12,084 - -Multi-tenant 14,872 21,817 35,791retail 77,428 -Warehouse/ 2,953 141 3,809distribution 26,146 -Other 4,218 8,055 30,927 - -Totalnon-owner-occupied 411,735 545 31,646 82,123 110,149commercial realestate loans Totalcommercial real 884,626 2,512 54,840 117,309 168,899estate

As of September 30, 2020 As of June 30, 2020Loan portfoliobalances andCARES Act Balance Payment Interest-only Payment Interest-onlymodifications,continued

(dollars in Outstanding Deferrals Modifications Deferrals Modificationsthousands) Home equity 42,523 lines of credit - - 91 -Deposit-secured 4,803 loans - 1 45 1All other 33,580 83 92 1,319 199consumer loans Total 80,906 83 93 1,455 200consumer loansAgriculturalproduction and 121,298 351 84 400 586equipment loansLoans tomunicipalities 10,087 or other public - - - -unitsCommercial and industrial loans - - - to:Forestry, fishing, and 14,621 - 364 50 612huntingConstruction 29,100 125 148 - -Finance and 49,984 20 20insurance - -Real estate rental and 27,198 - 54 - 1,299leasingHealthcare and social 38,230 - - - 1,576assistanceAccommodations and food 31,772 - 707 175 2,595servicesManufacturing 15,801 3,097 3,271 - -Retail trade 46,488 874 1,189 1,512 -Transportation 37,787 3,071 194 5,636and warehousing -Professional 8,762 - 12 12services -Administrative support and 9,164 - - - 1,962waste managementArts,entertainment, 4,274 585 27 732 27and recreationOther commercial 37,016 238 179 741loans 8Total commercialand industrial 350,197 593 8,464 2,644 19,411loans Total 481,582 944 8,548 3,044 19,997commercial loans

Total grossloansreceivable, $ 2,188,952 $ 9,077 $ 84,564 $ 141,472 $ 238,712excludingdeferred loanfees



Matt Funke, CFO573-778-1800