GlobeNewswire Inc | Apr 26, 2021 07:11PM EDT

April 26, 2021

Poplar Bluff, Missouri, April 26, 2021 (GLOBE NEWSWIRE) -- Southern Missouri Bancorp, Inc. (Company) (NASDAQ: SMBC), the parent corporation of Southern Bank (Bank), today announced preliminary net income for the third quarter of fiscal 2021 of $11.5 million, an increase of $6.4 million, or 124.7%, as compared to the same period of the prior fiscal year. The increase was attributable to increases in net interest income, a decline in provision for credit losses, an increase in noninterest income, and a decline in noninterest expense, partially offset by an increase in provision for income taxes. Preliminary net income was $1.27 per fully diluted common share for the third quarter of fiscal 2021, an increase of $.72 as compared to the $.55 per fully diluted common share reported for the same period of the prior fiscal year.

Highlights for the third quarter of fiscal 2021:

-- Annualized return on average assets was 1.71%, while annualized return on average common equity was 16.9%, as compared to 0.88% and 8.1%, respectively, in the same quarter a year ago, and 1.87% and 18.3%, respectively, in the second quarter of fiscal 2021, the linked quarter. -- Earnings per common share (diluted) were $1.27, up $.72, or 130.9%, as compared to the same quarter a year ago, and down $.05, or 3.8%, from the second quarter of fiscal 2021, the linked quarter. -- Provision for credit losses represented a recovery of $409,000, all of which was due to a reduction in the Companys required allowance for off-balance sheet credit exposure, while the allowance for credit losses was unchanged aside from net charge offs of $244,000 recognized during the period. In the same quarter a year ago, provision for loan losses totaled $2.9 million, and provision for off-balance sheet credit exposure totaled $300,000. Nonperforming assets were $9.4 million, or 0.34% of total assets, at March 31, 2021, as compared to $11.1 million, or 0.42% of total assets, at December 31, 2020, and $14.9 million, or 0.63% of total assets, at March 31, 2020, one year prior. -- Net loans increased $13.5 million during the quarter, with balances of SBA Paycheck Protection Program (PPP) loans growing by $5.0 million, as new PPP originations slightly outpaced approximately $42 million in forgiveness payments received during the quarter. -- Deposit balances increased $103.7 million in the quarter, which is typically one of our stronger quarters for deposit growth, attributable in part this year to continued receipt by depositors of economic impact payments and PPP proceeds. Deposits continued to migrate away from certificates of deposit and to nonmaturity accounts, with most growth in transaction accounts. -- Net interest margin for the quarter was 3.68%, up from the 3.63% reported for the year ago period, and down from 3.92% reported for the second quarter of fiscal 2021, the linked quarter. Net interest income was increased significantly by accelerated accretion of deferred origination fees on PPP loans as those loans were repaid through SBA forgiveness. Discount accretion on acquired loan portfolios was also increased in the current quarter as compared to the linked and year ago periods. Margin was negatively impacted by increased average cash balances. -- Noninterest income was up 40.1% for the quarter, as compared to the year ago period, and was down 20.9% as compared to the second quarter of fiscal 2021, the linked quarter. Notable variances included nonrecurring benefits realized on bank-owned life insurance recognized during the linked quarter, without comparable items in the current period, an impairment of mortgage servicing rights recognized in the same quarter a year ago, and gains on sales of mortgage loans into the secondary market which were well above year ago levels, but down from the linked quarter. -- Noninterest expense was down 0.3% for the quarter, as compared to the year ago period, and was up 3.7% from the second quarter of fiscal 2021, the linked quarter. To conform with regulatory accounting requirements discussed below, the Company will be reporting provision for off-balance sheet credit exposures, which was a charge of $388,000 in the linked quarter, and a charge of $300,000 in the year ago period, as a component of its provision for credit losses beginning with the 2021 fiscal year. The charges reported in the current fiscal year to date have been reclassified to provision for credit losses, as well. In the current period, as noted above, a $409,000 recovery was recognized for off-balance sheet credit exposure as a negative provision for credit losses.

Dividend Declared:

The Board of Directors, on April 20, 2021, declared a quarterly cash dividend on common stock of $0.16, payable May 28, 2021, to stockholders of record at the close of business on May 14, 2021, marking the 108th 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.

Conference Call:

The Company will host a conference call to review the information provided in this press release on Tuesday, April 27, 2021, 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 May 10, 2021. 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 10155753.

Balance Sheet Summary:

The Company experienced balance sheet growth in the first nine months of fiscal 2021, with total assets of $2.7 billion at March 31, 2021, reflecting an increase of $189.9 million, or 7.5%, as compared to June 30, 2020. Growth primarily reflected increases in cash and cash equivalents and available-for-sale (AFS) securities, partially offset by a decrease in net loans receivable.

Cash equivalents and time deposits were a combined $237.9 million at March 31, 2021, an increase of $182.7 million, or 330.8%, as compared to June 30, 2020. The increase was primarily a result of rapid deposit growth. AFS securities were $190.4 million at March 31, 2021, an increase of $13.9 million, or 7.9%, as compared to June 30, 2020.

Loans, net of the allowance for credit losses (ACL), were $2.1 billion at March 31, 2021, a decrease of $7.0 million, or 0.3%, as compared to June 30, 2020. Gross loans increased by $3.0 million, or 0.1%, during the first nine months of the fiscal year, while the ACL at March 31, 2021, reflected an increase of $10.1 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 a $9.3 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 nine months of fiscal 2021 increased the ACL by an additional $755,000, as compared to July 1, 2020. The increase in loan balances in the portfolio was primarily attributable to increases in residential real estate loans, drawn construction loan balances, and commercial real estate loans, partially offset by decreases in commercial loans and consumer loans. Residential real estate loans increased primarily due to growth in 1- to 4-family residential lending, as well as increases in multifamily loans. Due to its liquidity position, the Company retained some single-family residential loans which it typically would have sold on the secondary market. Commercial real estate loans increased primarily due to loans secured by owner-occupied nonresidential property. Commercial loan balances decreased primarily as a result of forgiveness of PPP loans, which declined by $31.7 million in the fiscal year to date, but increased by $5.0 million in the quarter ended March 31, 2021, to stand at $100.5 million. Second draw PPP loans under the program re-opened by the SBA in January 2021, and funding of these loans more than offset forgiveness payments received during the March quarter. Management expects continued growth of second draw loans to be limited as the program draws to a close in May 2021, and we would expect forgiveness payments to pick up in the next several quarters for larger balance loans originated under the first round of activity and for forgiveness payments to begin to be received for the second round of loans. Loans anticipated to fund in the next 90 days totaled $145.8 million at March 31, 2021, as compared to $85.1 million at December 31, 2020, and $76.6 million at March 31, 2020. The pipeline figures did not include PPP loans, and the amount of PPP loans that were in process at March 31, 2021 was immaterial.

Nonperforming loans were $6.8 million, or 0.31% of gross loans, at March 31, 2021, as compared to $8.7 million, or 0.40% of gross loans at June 30, 2020, and $11.4 million, or 0.57% of gross loans at March 31, 2020. Nonperforming assets were $9.4 million, or 0.34% of total assets, at March 31, 2021, as compared to $11.2 million, or 0.44% of total assets, at June 30, 2020, and $14.9 million, or 0.63% of total assets, at March 31, 2020. 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 March 31, 2021, totaled $35.2 million, representing 1.62% of gross loans and 521.3% 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 $23.5 million, or 1.18% of gross loans and 205.7% of nonperforming loans, at March 31, 2020. The ACL at March 31, 2021, also represented 1.70% of gross loans excluding PPP loans. The Company has estimated its credit losses as of March 31, 2021, 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 time before economic activity fully recovers from the COVID-19 pandemic, 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, most notably including our borrowers in the hotel industry.

Provisions of the CARES Act and subsequent legislation allow financial institutions the option to temporarily suspend certain requirements under U.S. GAAP related to troubled debt restructurings (TDRs) for certain loans that were otherwise current and performing prior to the COVID-19 pandemic, but for which borrowers experienced or expected difficulties due to the impact of the pandemic. Initially, deferrals under this program were generally granted for three-month periods, while interest-only modifications were generally for six-month periods. Some borrowers were granted additional periods of deferral or interest-only modifications. The Company did not account for these loans as TDRs. As of March 31, 2021, loans for which COVID-related payment deferrals and interest-only payment modifications remained in place included approximately 18 loans with balances totaling $40.4 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. For borrowers whose payment terms have not returned to the original terms under their loan agreement, the Company has generally classified the credit as a watch or special mention status credit. Loans remaining under a COVID-related payment deferral or interest-only modification which have been placed on watch or special mention status total $39.5 million. 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. Communities where our borrowers operate could experience increases in COVID-19 cases and reductions in business activity or employee attendance, and borrowers could be required by local authorities to restrict activity.

Total liabilities were $2.5 billion at March 31, 2021, an increase of $175.3 million, or 7.7%, as compared to June 30, 2020.

Deposits were $2.4 billion at March 31, 2021, an increase of $183.9 million, or 8.4%, as compared to June 30, 2020. This increase primarily reflected an increase in interest-bearing transaction accounts, noninterest-bearing transaction accounts, savings accounts, and money market deposit accounts, partially offset by a decrease in time deposits. The increase included a $27.0 million increase in public unit funds, and was net of a $13.3 million decrease in brokered deposits. Public unit balances were $332.2 million at March 31, 2021, while brokered time deposits totaled $10.0 million, and brokered money market deposits were $20.1 million. Depositors continue to hold unusually high balances in the uncertain environment. The average loan-to-deposit ratio for the third quarter of fiscal 2021 was 92.4%, as compared to 99.9% for the same period of the prior fiscal year.

FHLB advances were $62.8 million at March 31, 2021, a decrease of $7.2 million, or 10.3%, as compared to June 30, 2020, as the Companys deposit inflows outpaced loan demand or desired investment portfolio growth. 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.

The Companys stockholders equity was $272.9 million at March 31, 2021, an increase of $14.6 million, or 5.6%, as compared to March 31, 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 and repurchases of the Companys common stock. Since re-starting the repurchase program in October 2020, the Company has repurchased 184,384 common shares for $6.0 million through March 31, 2021, at an average price of $32.76.

Quarterly Income Statement Summary:

The Companys net interest income for the three-month period ended March 31, 2021, was $23.1 million, an increase of $3.7 million, or 19.2%, as compared to the same period of the prior fiscal year. The increase was attributable to a 17.4% increase in the average balance of interest-earning assets, combined with an increase in net interest margin to 3.68% in the current three-month period, from 3.63% in the same period a year ago. As a material amount of PPP loans were forgiven and therefore repaid ahead of their scheduled maturity, the Company recognized accelerated accretion of interest income from deferred origination fees on these loans. In the current quarter, this component of interest income totaled $1.2 million, adding 18 basis points to the net interest margin, with no comparable item in the year ago period. In the linked quarter, ended December 31, 2020, accelerated accretion of deferred origination fees on PPP loans totaled $968,000, adding 16 basis points to the net interest margin.

Loan discount accretion and deposit premium amortization related to the Companys August 2014 acquisition of Peoples Bank of the Ozarks, the June 2017 acquisition of Capaha Bank, the February 2018 acquisition of Southern Missouri Bank of Marshfield, the Gideon Acquisition, and the May 2020 acquisition of Central Federal Savings & Loan Association of Rolla (the Central Federal Acquisition), resulted in $614,000 in net interest income for the three-month period ended March 31, 2021, as compared to $410,000 in net interest income for the same period a year ago. 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 loans. Combined, these components of net interest income contributed ten basis points to net interest margin in the three-month period ended March 31, 2021, as compared to a contribution of eight basis points in the same period of the prior fiscal year, and as compared to the nine basis point contribution in the linked quarter, ended December 31, 2020, when net interest margin was 3.92%.

The provision for credit losses for the three-month period ended March 31, 2021, was a recovery of $409,000, as compared to a charge of $2.9 million in the same period of the prior fiscal year. The full amount of the recovery in the current period was due to a reduction in the Companys required allowance for off-balance sheet credit exposure, while the allowance for credit losses was unchanged during the three-month period ended March 31, 2021, aside from net charge offs of $244,000 recognized during the period. The Company assesses that the outlook has generally improved as compared to the quarter ended June 30, 2020. As a percentage of average loans outstanding, the provision for credit losses in the current three-month period represented a recovery of 0.08% (annualized), while the Company recorded net charge offs during the period of 0.05% (annualized). During the same period of the prior fiscal year, the provision represented a charge of 0.58% (annualized), while the Company recorded net charge offs of 0.03% (annualized). Also in the prior period, a separate provision for off-balance sheet credit exposure was recognized for $300,000, and previously classified as noninterest expense, whereas under updated regulatory accounting guidelines, that figure will be combined with the provision for credit losses for current fiscal year and going forward. The charges reported in the current fiscal year to date have been reclassified to provision for credit losses, as well.

The Companys noninterest income for the three-month period ended March 31, 2021, was $4.5 million, an increase of $1.3 million, or 40.1%, 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, loan servicing income, bank card interchange income, and a gain on sale of AFS securities were partially offset by decreases in deposit account service charges and other loan fees. Gains realized on the sale of residential real estate loans originated for that purpose increased as origination of these loans was up 180% as compared to the year ago period, while pricing was improved. Gains declined from the linked quarter, as the Company chose to retain some mortgage loans that were fully underwritten for sale on the secondary market, due to its liquidity position. Loan servicing income increased primarily due to recognition of a $395,000 impairment charge on mortgage servicing rights in the year ago period, as well as due to continued high levels of originations and an increase in the balance of serviced loans. Bank card interchange income increased due to a 15.5% increase in the number of bank card transactions and a 30.1% increase in bank card dollar volume, as compared to the same quarter a year ago. Deposit service charges decreased primarily due to a reduction in NSF activity.

Noninterest expense for the three-month period ended March 31, 2021, was $13.5 million, a decrease of $41,000, or 0.3%, as compared to the same period of the prior fiscal year. The decrease was attributable primarily to the inclusion in the year ago period of a $300,000 provision for off-balance sheet credit exposure, which, as noted above, will be combined with the provision for credit losses for the current fiscal year and going forward. Additionally, in the year ago period, the Company reported $76,000 in expenses related to the Central Federal Acquisition, with no comparable charges in the current period. Otherwise, a reduction in charges related to foreclosed property and a reduction in charges to amortize core deposit intangibles were offset by increases in compensation and benefits, occupancy expenses, deposit insurance premiums, and data processing expense. The increase in compensation and benefits as compared to the prior year primarily reflected standard increases in compensation and benefits over the prior year. Occupancy expenses increased due in part to additional locations, as well as replacement of some ATMs with ITMs with video teller capability, and timing differences in maintenance expenses and purchases of smaller equipment items not capitalized. 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. Data processing expenses increased primarily due to licensing of updated productivity, mobility, and security software. The efficiency ratio for the three-month period ended March 31, 2021, was 49.0%, as compared to 59.9% in the same period of the prior fiscal year, with the improvement attributable primarily to the current periods increases in net interest income and noninterest income, while noninterest expenses were little changed in total.

The income tax provision for the three-month period ended March 31, 2021, was $3.1 million, an increase of $2.0 million, or 174.2% 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 21.3%, as compared to 18.1% in the same period a year ago. The higher effective tax rate was attributable primarily to the significant increase in pre-tax income, without corresponding increases in tax-advantaged investments.

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 Mar. 31, Dec. 31, Sep. 30, June 30, Mar. 31, Sheet Data as of:(dollars inthousands, except 2021 2020 2020 2020 2020 per share data) Cash equivalents $ 237,873 $ 150,496 $ 42,850 $ 55,219 $ 57,078 and time depositsAvailable for sale 190,409 181,146 175,528 176,524 180,592 (AFS) securitiesFHLB/FRB membership 11,181 11,004 11,956 10,753 13,054 stockLoans receivable, 2,170,112 2,156,870 2,185,547 2,167,068 1,991,328 grossAllowance for loan 35,227 35,471 35,084 25,139 23,508 lossesLoans receivable, 2,134,885 2,121,399 2,150,463 2,141,929 1,967,820 netBank-owned life 43,539 43,268 43,644 43,363 39,095 insuranceIntangible assets 21,168 21,453 21,582 21,789 21,573 Premises and 63,908 63,970 64,430 65,106 64,705 equipmentOther assets 29,094 30,262 30,281 27,474 30,531 Total assets $ 2,732,057 $ 2,622,998 $ 2,540,734 $ 2,542,157 $ 2,374,448 Interest-bearing $ 1,981,345 $ 1,927,351 $ 1,861,051 $ 1,868,799 $ 1,738,379 depositsNoninterest-bearing 387,416 337,736 307,023 316,048 233,268 depositsFHLB advances 62,781 63,286 85,637 70,024 123,361 Note payable ? ? ? ? 3,000 Other liabilities 12,358 11,743 11,880 13,797 11,469 Subordinated debt 15,218 15,193 15,168 15,142 15,118 Total liabilities 2,459,118 2,355,309 2,280,759 2,283,810 2,124,595 Total stockholders? 272,939 267,689 259,975 258,347 249,853 equity Total liabilitiesand stockholders? $ 2,732,057 $ 2,622,998 $ 2,540,734 $ 2,542,157 $ 2,374,448 equity Equity to assets 9.99 % 10.21 % 10.23 % 10.16 % 10.52 %ratio Common shares 8,959,296 9,035,232 9,126,625 9,127,390 9,128,290 outstandingLess: Restrictedcommon shares not 31,845 25,410 27,260 28,025 28,925 vestedCommon shares forbook value 8,927,451 9,009,822 9,099,365 9,099,365 9,099,365 determination Book value per $ 30.57 $ 29.71 $ 28.57 $ 28.39 $ 27.46 common shareClosing market 39.42 30.44 23.58 24.30 24.27 price

Nonperformingasset data as Mar. 31, Dec. 31, Sep. 30, June 30, Mar. 31, of:(dollars in 2021 2020 2020 2020 2020 thousands) Nonaccrual $ 6,757 $ 8,330 $ 8,775 $ 8,657 $ 11,428 loansAccruing loans90 days or ? ? ? ? ? more past dueTotalnonperforming 6,757 8,330 8,775 8,657 11,428 loansOther realestate owned 2,651 2,707 2,466 2,561 3,401 (OREO)Personalproperty ? 44 9 9 38 repossessedTotalnonperforming $ 9,408 $ 11,081 $ 11,250 $ 11,227 $ 14,867 assets Totalnonperforming 0.34 % 0.42 % 0.44 % 0.44 % 0.63 %assets tototal assetsTotalnonperforming 0.31 % 0.39 % 0.40 % 0.40 % 0.57 %loans to grossloansAllowance forloan losses to 521.34 % 425.82 % 399.82 % 290.39 % 205.71 %nonperformingloansAllowance forloan losses to 1.62 % 1.64 % 1.61 % 1.16 % 1.18 %gross loans Performingtroubled debt $ 7,092 $ 7,897 $ 7,923 $ 8,580 $ 14,196 restructurings^(1)

(1)Nonperforming troubled debt restructurings are included with nonaccrual loans or accruing loans 90 days or more past due.

Forthethree-monthperiodendedQuarterly SummaryIncome Statement Mar. 31, Dec. 31, Sep. 30, June 30, Mar. 31,Data:(dollars inthousands, except 2021 2020 2020 2020 2020 per share data) Interest income: Cash equivalents $ 70 $ 48 $ 41 $ 18 $ 33 AFS securities and 1,025 997 1,024 1,146 1,218 membership stockLoans receivable 26,005 26,826 25,907 26,099 24,969 Total interest 27,100 27,871 26,972 27,263 26,220 incomeInterest expense: Deposits 3,494 3,863 4,390 4,923 6,135 FHLB advances 325 347 380 398 439 Note payable ? ? ? 11 31 Subordinated debt 132 134 138 151 197 Total interest 3,951 4,344 4,908 5,483 6,802 expenseNet interest income 23,149 23,527 22,064 21,780 19,418 Provision for credit (409 ) 1,000 1,000 1,868 2,850 lossesNoninterest income: Deposit accountcharges and related 1,275 1,360 1,339 1,087 1,538 feesBank card 1,004 836 830 954 719 interchange incomeLoan late charges 118 138 141 157 149 Loan servicing fees 217 368 310 248 (285 )Other loan fees 266 305 327 290 370 Net realized gains 853 1,390 1,206 977 178 on sale of loansNet realized gains 90 ? ? ? ? on AFS securitiesEarnings on bank 270 974 280 266 247 owned life insuranceOther noninterest 431 349 508 380 313 incomeTotal noninterest 4,524 5,720 4,941 4,359 3,229 incomeNoninterest expense: Compensation and 7,739 7,545 7,720 7,698 7,521 benefitsOccupancy and 1,990 1,866 1,970 1,887 1,780 equipment, netData processing 1,253 1,175 1,062 2,084 974 expenseTelecommunications 317 308 315 314 309 expenseDeposit insurance 174 218 201 155 ? premiumsLegal and 256 236 198 318 229 professional feesAdvertising 240 219 230 391 244 Postage and office 198 195 193 219 224 suppliesIntangible 338 338 380 448 441 amortizationForeclosed property 48 38 50 636 282 expensesProvision foroff-balance sheet ? ? ? 132 300 credit exposureOther noninterest 975 908 953 1,226 1,265 expenseTotal noninterest 13,528 13,046 13,272 15,508 13,569 expenseNet income before 14,554 15,201 12,733 8,763 6,228 income taxesIncome taxes 3,096 3,153 2,747 1,861 1,129 Net income 11,458 12,048 9,986 6,902 5,099 Less: Distributedand undistributed earnings allocatedto participating 41 34 30 ? ? securitiesNet income availableto common $ 11,417 $ 12,014 $ 9,956 $ 6,902 $ 5,099 shareholders Basic earnings per $ 1.27 $ 1.33 $ 1.09 $ 0.76 $ 0.55 common shareDiluted earnings per 1.27 1.32 1.09 0.76 0.55 common shareDividends per common 0.16 0.15 0.15 0.15 0.15 shareAverage common shares outstanding:Basic 8,972,000 9,064,000 9,100,000 9,128,000 9,197,000 Diluted 8,976,000 9,067,000 9,102,000 9,130,000 9,205,000

Forthethree-monthperiodended Quarterly Average Mar. 31, Dec. 31, Sep. 30, June 30, Mar. 31, Balance Sheet Data:(dollars in 2021 2020 2020 2020 2020 thousands) Interest-bearing $ 171,403 $ 40,915 $ 19,768 $ 10,380 $ 7,363 cash equivalentsAFS securities and 197,984 184,828 181,535 188,497 184,389 membership stockLoans receivable, 2,146,364 2,177,989 2,162,125 2,127,181 1,950,887 grossTotalinterest-earning 2,515,751 2,403,732 2,363,428 2,326,058 2,142,639 assetsOther assets 170,475 170,158 174,574 194,651 180,981 Total assets $ 2,686,226 $ 2,573,890 $ 2,538,002 $ 2,520,709 $ 2,323,620 Interest-bearing $ 1,965,191 $ 1,886,883 $ 1,865,636 $ 1,838,606 $ 1,729,327 depositsFHLB advances 63,068 69,991 70,272 83,130 83,916 Note payable ? ? ? 1,187 3,000 Subordinated debt 15,205 15,180 15,155 15,130 15,105 Totalinterest-bearing 2,043,464 1,972,054 1,951,063 1,938,053 1,831,348 liabilitiesNoninterest-bearing 357,746 325,091 316,996 311,555 223,865 depositsOthernoninterest-bearing 14,563 13,021 14,673 15,937 17,634 liabilitiesTotal liabilities 2,415,773 2,310,166 2,282,732 2,265,545 2,072,847 Total stockholders? 270,453 263,724 255,270 255,164 250,773 equity Total liabilitiesand stockholders? $ 2,686,226 $ 2,573,890 $ 2,538,002 $ 2,520,709 $ 2,323,620 equity Return on average 1.71 % 1.87 % 1.57 % 1.10 % 0.88 %assetsReturn on averagecommon stockholders? 16.9 % 18.3 % 15.6 % 10.8 % 8.1 %equity Net interest margin 3.68 % 3.92 % 3.73 % 3.75 % 3.63 %Net interest spread 3.54 % 3.76 % 3.55 % 3.56 % 3.40 % Efficiency ratio 49.0 % 44.6 % 49.1 % 59.3 % 59.9 %

AsofMarch 31,2021 AsofDecember 31,2020Loan portfoliobalances and CARES Balance Payment Interest-only Payment Interest-onlyAct modifications(dollars in Outstanding Deferrals Modifications Deferrals Modificationsthousands) 1? to 4?family $ 449,378 $ 98 $ ? $ ? $ 138residential loansMultifamily 206,422 ? 10,581 ? 10,581residential loansTotal residential 655,800 98 10,581 ? 10,719loans1? to 4?familyowner-occupied 20,733 ? ? ? ?construction loans1? to 4?familyspeculative 11,161 ? ? ? ?construction loansMultifamily 58,915 ? ? ? ?construction loansOther construction 31,933 ? ? ? ?loansTotal constructionloan balances 122,742 ? ? ? ?drawnAgricultural real 182,009 ? ? ? ?estate loansLoans for vacantland - developed, 52,869 ? ? ? ?undeveloped, andother purposesOwner-occupiedcommercial real estate loans to:Churches and 21,296 ? 621 ? 634nonprofitsNon-professional 18,686 ? 151 ? ?servicesRetail 26,306 ? ? ? ?Automobile 15,395 ? ? ? ?dealershipsHealthcare 7,529 ? ? ? ?providersRestaurants 47,183 ? ? ? ?Convenience stores 20,955 ? ? ? ?Automotive 6,310 ? ? ? ?servicesManufacturing 11,908 ? ? ? ?Professional 13,182 ? ? ? ?servicesWarehouse/ 5,235 ? ? ? ?distributionGrocery 5,366 ? ? ? ?Other 44,475 ? 816 ? 816Totalowner-occupied 243,826 ? 1,588 ? 1,450commercial realestate loansNon-owner-occupiedcommercial real estate loans to:Care facilities 35,283 ? ? ? ?Non-professional 12,716 ? ? ? ?servicesRetail 25,825 ? ? ? ?Healthcare 15,433 ? ? ? ?providersRestaurants 45,603 ? ? ? ?Convenience stores 15,930 ? ? ? ?Automotive 5,368 ? ? ? ?servicesHotels 85,525 ? 28,092 ? 28,092Manufacturing 5,106 ? ? ? ?Storage units 13,942 ? ? ? ?Professional 6,870 ? ? ? ?servicesMulti-tenant 73,413 ? ? ? ?retailWarehouse/ 25,185 ? ? ? ?distributionOther 52,547 ? ? ? ?Totalnon-owner-occupied 418,746 ? 28,092 ? 28,092commercial realestate loansTotal commercial 897,450 ? 29,680 ? 29,542real estate

AsofMarch 31,2021 AsofDecember 31,2020Loan portfoliobalances and Balance Payment Interest-only Payment Interest-onlyCARES Actmodifications(continued,dollars in Outstanding Deferrals Modifications Deferrals Modificationsthousands) Home equity 38,243 ? ? ? ?lines of creditDeposit-secured 4,298 ? ? ? ?loansAll other 33,806 29 ? ? ?consumer loansTotal consumer 76,347 29 ? ? ?loansAgriculturalproduction and 89,943 ? ? ? ?equipment loansLoans tomunicipalities 8,573 ? ? ? ?or other publicunitsCommercial andindustrial ? ? ? ? ?loans to:Forestry,fishing, and 10,817 ? ? ? ?huntingConstruction 18,045 ? ? ? ?Finance and 53,505 ? ? ? ?insuranceReal estaterental and 18,020 ? ? ? ?leasingHealthcare andsocial 22,649 ? ? ? ?assistanceAccommodationsand food 18,797 ? ? ? ?servicesManufacturing 11,277 ? ? ? ?Retail trade 41,045 ? ? ? ?Transportation 29,676 ? ? ? 11and warehousingProfessional 3,929 ? ? ? ?servicesAdministrativesupport and 8,214 ? ? ? ?wastemanagementArts,entertainment, 3,469 ? ? ? ?and recreationOthercommercial 83,866 ? 12 ? ?loansTotalcommercial and 323,309 ? 12 ? 11industrialloansTotalcommercial 421,825 ? 12 ? 11loansTotal grossloansreceivable, $ 2,174,164 $ 127 $ 40,273 $ ? $ 40,272excludingdeferred loanfees



Matt Funke, CFO573-778-1800