Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

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Allowance for Credit Losses and Valuation of Foreclosed Assets

The Company believes that the determination of the allowance for credit losses involves a higher degree of judgment and complexity than its other significant accounting policies. The allowance for credit losses is calculated with the objective of maintaining an allowance level believed by management to be sufficient to absorb estimated credit losses. The allowance for credit losses is measured using an average historical loss model that incorporates relevant information about past events (including historical credit loss experience on loans with similar risk characteristics), current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the loans. The allowance for credit losses is measured on a collective (pool) basis. Loans are aggregated into pools based on similar risk characteristics, including borrower type, collateral and repayment types and expected credit loss patterns. Loans that do not share similar risk characteristics, primarily classified loans with a balance of $100,000 or more, are evaluated on an individual basis.

For loans evaluated for credit losses on a collective basis, average historical loss rates are calculated for each pool using the Company's historical net charge-offs (combined charge-offs and recoveries by observable historical reporting period) and outstanding loan balances during a lookback period. Lookback periods can be different based on the individual pool and represent management's credit expectations for the pool of loans over the remaining contractual life. In certain loan pools, if the Company's own historical loss rate is not reflective of the loss expectations, the historical loss rate is augmented by industry and peer data. The calculated average net charge-off rate is then adjusted for current conditions and reasonable and supportable forecasts. These adjustments increase or decrease the average historical loss rate to reflect expectations of future losses given economic forecasts of key macroeconomic variables including, but not limited to, unemployment rate, GDP, commercial real estate price index, consumer sentiment and construction spending. The adjustments are based on results from various regression models projecting the impact of the macroeconomic variables to loss rates. The forecast is used for a reasonable and supportable period before reverting to historical averages using a straight-line method. The forecast-adjusted loss rate is applied to the principal balance over the remaining contractual lives, adjusted for expected prepayments. The contractual term excludes expected extensions, renewals and modifications. Additionally, the allowance for credit losses considers other qualitative factors not included in historical loss rates or macroeconomic forecasts such as changes in portfolio composition, underwriting practices, or significant unique events or conditions.

See Note 6 "Loans and Allowance for Credit Losses" in the Notes to Consolidated Financial Statements included in this report for additional information regarding the allowance for credit losses. Inherent in this process is the evaluation and risk assessment of individual credit relationships. From time to time, certain credit relationships may deteriorate due to changes in payment performance, cash flow of the borrower, value of collateral, or other factors. Due to these changing circumstances, management may revise its loss estimates and assumptions for these specific credits. In some cases, losses may be realized; in other instances, the factors that led to the deterioration may improve or the credit may be refinanced elsewhere and allocated allowances may be released from the particular credit.

In addition, the Company considers that the determination of the valuation of foreclosed assets held for sale involves a high degree of judgment and complexity. The carrying value of foreclosed assets reflects management's best estimate of the amount to be realized from the sale of the assets. While the estimate is generally based on a valuation by an independent appraiser or recent sales of similar properties, the amount that the Company realizes from the sale of the assets could differ materially from the carrying value reflected in the financial statements, resulting in gains or losses that could materially impact earnings in future periods.

Goodwill and Intangible Assets

Goodwill and intangible assets that have indefinite useful lives are subject to an impairment test at least annually and more frequently if circumstances indicate their value may not be recoverable. Goodwill is tested for impairment using a process that estimates the fair value of each of the Company's reporting units compared with its carrying value. The Company defines reporting units as a level below each of its operating segments for which there is discrete financial information that is regularly reviewed. As of September 30, 2025, the Company had one reporting unit to which goodwill has been allocated - the Bank. If the fair value of a reporting unit exceeds its carrying value, then no impairment is recorded. If the carrying value exceeds the fair value of a reporting unit, further testing is completed comparing the implied fair value of the reporting unit's goodwill to its carrying value to measure the amount of impairment. Intangible assets that are not amortized are tested for impairment at least annually by comparing the fair values of those assets to their carrying values. At September 30, 2025, goodwill consisted of $5.4 million at the Bank reporting unit, which included goodwill of $4.2 million that was recorded during 2016 related to the acquisition of 12 branches and the assumption of related deposits in the St. Louis market. Other identifiable deposit intangible assets that are subject to amortization are amortized on a straight-line basis and are now fully amortized.

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In April 2022, the Company, through its subsidiary Great Southern Bank, entered into a naming rights agreement with Missouri State University related to the main arena on the university's campus in Springfield, Missouri. The terms of the agreement provide the naming rights to Great Southern Bank for a total cost of $5.5 million, to be paid over a period of seven years. The Company expects to amortize the naming rights intangible assets through non-interest expense over a period not to exceed 15 years.

At September 30, 2025, the amortizable intangible assets included the arena naming rights of $4.4 million, which are reflected in the table below. These amortizable intangible assets are reviewed for impairment if circumstances indicate their value may not be recoverable based on a comparison of fair value.

For purposes of testing goodwill for impairment, the Company uses a market approach to value its reporting unit. The market approach applies a market multiple, based on observed purchase transactions for each reporting unit, to the metrics appropriate for the valuation of the operating unit. Significant judgment is applied when goodwill is assessed for impairment. This judgment may include developing cash flow projections, selecting appropriate discount rates, identifying relevant market comparables and incorporating general economic and market conditions.

Our regular annual impairment assessment occurs in the third quarter of each year. The Company performed this annual review as of September 30, 2025 and concluded that no impairment of its goodwill or other intangible assets had occurred as of that date. While management believes no impairment existed as of September 30, 2025, different conditions or assumptions used to measure fair value of the reporting unit, or changes in cash flows or profitability, if significantly negative or unfavorable, could have a material adverse effect on the outcome of the Company's impairment evaluation in the future.

A summary of goodwill and intangible assets as of the dates indicated is as follows:

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Current Economic Conditions

Changes in economic conditions could cause the values of assets and liabilities recorded in the Company's financial statements to change rapidly, resulting in material future adjustments to asset values, the allowance for credit losses, or capital that could negatively affect the Company's ability to meet regulatory capital requirements and maintain sufficient liquidity. Following the housing and mortgage crisis and correction beginning in mid-2007, the United States entered an economic downturn. Unemployment rose from 4.7% in November 2007 to peak at 10.0% in October 2009. Economic conditions improved in the subsequent years, as indicated by higher consumer confidence levels, increased economic activity and low unemployment levels. The U.S. economy continued to operate at historically strong levels until the COVID-19 pandemic in March 2020, which severely affected tourism, labor markets, business travel, immigration, and the global supply chain, among other areas. The economy plunged into recession in the first quarter of 2020, as efforts to contain the spread of the coronavirus forced all but essential business activity, or any work that could not be done from home, to stop, shuttering factories, restaurants, entertainment, sporting events, retail shops, personal services, and more.

More than 22 million jobs were lost in March and April 2020 as businesses closed their doors or reduced their operations, sending employees home on furlough or layoffs. With uncertain incomes and limited buying opportunities, consumer spending plummeted. As a result, gross domestic product (GDP), the broadest measure of the nation's economic output, plunged. The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), a fiscal relief bill passed by Congress and signed by the President in March 2020, injected approximately $3 trillion into the economy through direct payments to individuals and loans to small businesses intended to help keep employees on their payroll, fueling a historic bounce-back in economic activity.

Total fiscal support to the economy throughout the pandemic, including the CARES Act, the American Rescue Plan of March 2021, and several smaller fiscal packages, totaled well over $5 trillion. The amount of this support was equal to almost 25% of pre-pandemic 2019 GDP and approximately three times the level of support provided during the global financial crisis of 2007-2008.

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Additionally, the Federal Reserve acted decisively by slashing its benchmark interest rate to near zero and ensuring credit availability to businesses, households, and municipal governments. The Federal Reserve's efforts largely insulated the financial system from the problems in the economy, a significant difference from the financial crisis of 2007-2008. Purchases of Treasury and agency mortgage-backed securities totaling $120 billion each month by the Federal Reserve commenced shortly after the pandemic began. In November 2021, the Federal Reserve began to taper its quantitative easing (QE), winding down its bond purchases with its final open market purchase conducted on March 9, 2022. The federal government deficit was $2.8 trillion in fiscal 2021, close to $1.4 trillion in fiscal 2022, and $1.7 trillion in fiscal 2023. The Federal Reserve aggressively raised the federal funds interest rates from early 2022 through mid - 2023, pushing the federal funds rate to more than 5.50%, its highest level in 22 years.The federal funds rate range was 5.25% to 5.50% until mid-September 2024.The range has steadily lowered since the high in mid-2023.The target range in 2025 until mid-September was 4.25% to 4.50%, at which point it was lowered to 4.00% to 4.25%. In late October 2025, the target range was lowered again, to 3.75% to 4.00%.

The Federal Reserve's actions were motivated by surging inflation in 2021 caused by pandemic-fueled spending, which outpaced the ability of producers to supply goods and services after having been impacted by COVID-related shutdowns and clogged transportation systems. The Federal Reserve made some headway in its attempt to force inflation down. The personal consumption expenditures (PCE) price index, the Federal Reserve's preferred measure of inflation, eased from its peak of 7.1% in June 2022 to 2.9% in December 2023. At September 30, 2025, Core PCE, which excludes food and energy prices, rose 3.0% from one year ago, above the Federal Reserve's target of 2%.

Based on Moody's U.S. Baseline Outlook and Alternative Scenarios Analysis dated September 2025, real GDP in 2025 is projected to rise 1.8% on an annual average basis; this is an increase to prior GDP forecasts for 2025, which anticipated growth of 1.1%. The new outlook on GDP growth for 2026 and 2027 is 1.4% and 1.7%, respectively, which is a slight decrease from the previous projection of 1.4% and 1.8%.

Employment

The national unemployment rate increased slightly to 4.3% for August 2025 compared to June 2025 at 4.1%.The number of unemployed individuals was 7.4 million as of August 2025. In August 2025, healthcare, social assistance, and nonfarm payroll employment contributed 69,000 of total job gains.

As of August 2025, the labor force participation rate (the share of working-age Americans employed or actively looking for a job) remained stable at 62.3%. The unemployment rate for the Midwest, where the Company conducts most of its business, was unchanged from the quarter ended June 2025 to the month ended August 2025 at 4.2%.Unemployment rates for August 2025 in the states where the Company has a branch or a loan production office were: Arizona at 4.1%, Arkansas at 3.8%, Colorado at 4.2%, Georgia at 3.4%, Illinois at 4.4%, Iowa at 3.8%, Kansas at 3.8%, Minnesota at 3.6%, Missouri at 4.1%, Nebraska at 3.0%, North Carolina at 3.7%, and Texas at 4.1%. These rates were relatively unchanged for a majority of the states compared to June 2025.

Single Family Housing

Existing-home sales increased 1.5% in September 2025, compared to August 2025, to a seasonally adjusted annual rate of 4.06 million; year-over-year existing home sales increased 4.1%. In the Midwest, existing-home sales slowed to 2.1% in September 2025 at an annual rate of 940,000, up 2.2% from one year earlier.

The median existing-home sales price rose 2.1% from September 2024 to $415,200 in September 2025. The median price in the Midwest was $320,800, up 4.7% from September 2024. All regions reported median price increases when compared to the prior year.

Total housing inventory registered at the end of September 2025 was 1.55 million units, up 1.3% from August 2025 and 14.0% from one year ago. Unsold inventory sat at a 4.6-month supply at the end of September 2025, no change from August 2025, and up from 4.2 months at the end of September 2024.

New home construction dropped precipitously after the financial crisis of 2007-2008 and has yet to fully recover. Issues contributing to the country's current housing shortage include increasing labor and materials costs, availability of building materials, increased interest rates and tighter lending underwriting standards. Single-family housing starts in August 2025 were at a rate of 890,000, 7% below the revised figure for July 2025 of $957,000 but 11.7% below August 2024.

Sales of new single‐family houses in August 2025 were at a seasonally adjusted annual rate of 800,000 according to the U.S. Census Bureau and the Department of Housing and Urban Development. This was 20.5% above the July 2025 rate of 664,000 and 15.4% above the August 2024 rate of 693,000.

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The median sales price of new houses sold in August 2025 was $413,500, which is 4.7% above the July 2025 median price of $395,100. The seasonally‐adjusted estimate of new houses for sale at the end of August 2025 represented a supply of 7.4 months at the current sales rate.

According to Freddie Mac, the average commitment rate for a 30-year, fixed-rate mortgage was 6.19% as of October 23, 2025, down from 6.54% one year ago.

Other Residential (Multi-Family) Housing and Commercial Real Estate

According to CoStar, the U.S. apartment market's supply-demand balance is ready for a rebalancing. Annual absorption is projected to exceed net deliveries over the next year, for the first time since Q1 2022. This turning point in the supply/absorption balance should accelerate overall vacancy declines, supported by a shrinking construction pipeline and robust renter demand. However, vacancy compression appears to have stalled in 2025, with vacancy holding steady at its current rate of 8.2% since the beginning of the year. This stability reflects rising vacancy of lower quality segments offsetting declines in the higher quality, 4- and 5-Star apartment segment, where absorption has outpaced supply. As a result, vacancy for 4- and 5-Star apartments has declined from a peak of 11.8% to 10.9%, and is forecasted to continue falling through year-end.Large markets in the South and Southwest, such as Dallas and Atlanta, were absorption leaders.Absorption increases are also fueled by generational transitions - older members of Gen Z as well as Baby Boomers are making their way to rental properties rather than home ownership. Absorption in upcoming quarters is expected to gradually chip away at the nation's elevated overall vacancy rate, which is forecasted to fall to 8.1% by year-end and below 7.9% by the fourth quarter of 2026.

Quarterly net deliveries have fallen approximately 25% over the year to approximately 140,000 units in the third quarter of 2025. Fewer apartments are projected to reach completion over the remainder of the year, with the forecast expected to fall below 75,000 units by the fourth quarter of 2025 based on a thinning construction pipeline. Construction starts have fallen to a decade-plus low due to extended lease-up periods, higher capital costs, and stricter lending.

While overall vacancy is expected to decline, stabilized vacancy is forecasted to increase through 2027, reflecting ongoing efforts to absorb the supply overhang built up over the past two years. While vacancies have surged in the South and Southwest due to oversupply, most Midwest and Northeast markets have seen only moderate supply increases, leading to more favorable prospects for rent growth in those regions. In contrast, rents have fallen in markets across states in the South, Arizona, and Texas. Among the 50 largest markets, vacancy is highest in Memphis, Austin, and San Antonio. This variance of declining overall vacancy alongside persistently elevated stabilized vacancy suggests rent growth improvement will be gradual. Recent lease-up activity has helped reduce vacancy among 4- and 5-Star buildings, reinforcing the recovery in this segment. However, stabilized vacancy is projected to end the year above its starting point - in the upper 6% range - pointing to slow but stable rent growth, in line with the second quarter's 0.5%. In contrast to the high-end building segment, vacancies in mid and lower-quality buildings remain more limited. With U.S. wage growth running above average, there is room for rents to increase by 0.6% in 3 Star buildings and by 1.3% year-over-year in 1- and 2-Star buildings, both outpacing the overall average. Rent growth across all quality segments is forecasted to reach the mid-1% range by mid-year 2026 as vacancies continue to tighten.

Our market areas reflected the following apartment vacancy levels as of September 2025: Springfield, Missouri at 7.1%, St. Louis at 10.6%, Kansas City at 8.7%, Minneapolis at 6.6%, Dallas-Fort Worth at 11.8%, Chicago at 4.6%, Atlanta at 11.8%, Phoenix at 12.4%, Denver at 11.6% and Charlotte, North Carolina at 12.1%.

An uncertain economic outlook dampened the office sector's momentum through the first nine months of 2025.The national vacancy rate remained at its all-time high at 14.1% at September 30, 2025.On an encouraging note, supply growth has diminished to a historically low level. Also, positive absorption in the third quarter of 2025 and the re-entry of institutional buyers into the market suggest that a turning point may be near.

The demand recovery is complex and variable both across and within the country's major cities, according to CoStar. Only about half of major metro areas have posted occupancy gains in the past 12 months, a historically unique occurrence which indicates the fragmented nature of the market. One impediment to recovery is the stalling out of office-using job growth. The hiring slowdown has been mitigated somewhat by a meaningful increase in office attendance. However, much return-to-office momentum seems to be driven by an increase in in-office work by "hybrid" employees. These attendance and employment trends are now interacting with a lack of desirable new supply in many markets to bring availability meaningfully down. The overall availability rate for space is about 80 basis points below its peak at 16.5% in early 2024. Availability at four- and five-star buildings is down even more, with the current rate of 23.4% about 120 basis points below peak. The slowdown in construction means that tenants looking for large blocks of space have fewer options.

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CoStar reported that office asking rents have remained flat for nearly five years. A looming lack of available space in premium new buildings and an ongoing minimal amount of sublease inventory is expected to keep office asking rent growth nominally positive for the near future.

Through the first nine months of 2025, investment activity was up by approximately 36% from the same period last year. The acceleration was not just evident in sales volume. The number of office deals that traded during the first nine months of 2025 were 16% above last year's pace. Even as fundamentals remain fluid, investors are monitoring a potential change in leasing demand. The third quarter of 2025 posted the first positive net absorption since 2021, just as the national vacancy rate appears to be reaching its projected peak. With approximately $6 billion in acquisitions year-to-date, institutional capital has been more active in the first nine months of 2025 than what was observed in the same period of the prior two years. The next several quarters may prove to be a pivotal time for restoring confidence in the office market. If current projections play out, the market could witness the convergence of peaking vacancies, steady leasing activity, a trough in rent growth, and accelerating capital flows. At the same time, the climb in CMBS delinquency rates in recent years suggests that an office recovery may be in its early stages and require a multi-year period of incremental progress to fully regain its footing.

As of September 2025, national office vacancy rates remained stable at 14.1%, while our market areas reflected the following vacancy levels: Springfield, Missouri at 4.4%, St. Louis at 10.1%, Kansas City at 10.8%, Minneapolis at 11.7%, Dallas-Fort Worth at 17.8%, Chicago at 16.6%, Atlanta at 16.9%, Denver at 17.7%, Phoenix at 16.3% and Charlotte, North Carolina at 14.3%.

In 2025, the U.S. retail market has witnessed the highest level of store closures and bankruptcy filings since 2020. Significant competition from e-commerce retailers, rising costs, restricted access to capital and multiple years of below-average closures, have all contributed to the uptick in store closures. Bankruptcy filings are correlated to low home sales, which have weighed heavily on furniture, retail, appliance, and home improvement sales. While store closures weigh on net demand formation, they also provide much-needed supply for those tenants looking to expand. Market participants reported exceptionally strong demand to backfill spaces as they go dark, with some able to secure rent increases of 40% or more. Over half of the leases signed during the first half of the year were for spaces on the market for less than ten months, while 30% of leased spaces were on the market for less than five months.

Increased competition for space has been largely driven by the limited amount of space developed across the U.S. since 2010. From 2000 to 2009, approximately 300 million square feet of retail space was delivered annually, of which nearly 40% was available for lease.Just 85 million square feet of new retail space has been delivered annually since the start of 2020, with the vast majority comprised of build-to-suit projects. This has left minimal second-generation space for tenants looking to expand.Per CoStar, most tenants and brokerage reps continue to report substantial competition for quality available space, resulting in availabilities backfilling at the fastest pace in nearly 15 years.

During the third quarter of 2025, national retail vacancy rates remained steady at 4.3% while our market areas reflected the following vacancy levels: Springfield, Missouri at 2.3%, St. Louis at 3.8%, Kansas City at 4.1%, Minneapolis at 2.7%, Dallas-Fort Worth at 4.9%, Chicago at 4.9%, Atlanta at 4.2%, Phoenix at 4.7%, Denver at 4.3%, and Charlotte, North Carolina at 3.2%.

Current U.S. industrial market performance continues to favor the tenant, reporting a decade-long high vacancy rate of 7.5%.Deliveries continued to outpace net absorption in 2025 and impending supply additions should push vacancy higher, in conjunction with pressure from ongoing concerns regarding consumer spending.Industrial market weakness is directly impacted by 12-year lows in home sales, which lowered sales of furniture, building materials, and appliances, leading to large distribution center closures by tenants including Big Lots, Ashley Furniture, and Home Depot.The forecast is for weaker absorption and higher near-term vacancy reflecting a projected slowdown in U.S. retail spending growth, which Oxford Economics expects to remain positive but slow considerably in the remainder of 2025.

The U.S. industrial market may be nearing the end of a record development surge. Quarterly net supply additions are on pace to fall below the pre-pandemic three-year average in 2025 and continue declining into 2026 when supply growth is projected to hit an 11-year low. The gradual but persistent decline in speculative development completions has been underway for about 12 months. While new deliveries have peaked, several Sunbelt and Midwest markets with fewer constraints on new development are still in the midst of a record supply wave that could take tenants more than two years to fully absorb. Austin, Indianapolis, Phoenix, and San Antonio stand out as markets with risks of prolonged higher availability rates, particularly among logistics properties between 100,000 and 500,000 square feet. Most speculative construction has consisted of projects in this size range in recent years and these properties also face competition from projects larger than 500,000 square feet that can demise their space to broaden their list of potential tenants.

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Due to elevated vacancy and spaces leasing at a slower pace, year-over-year rent growth has slowed to 1.4%, its lowest rate since 2012. Nevertheless, due to the record rent growth during the pandemic, many leases are still renewing at higher rates after being marked to market. This is much more easily achieved in the small bay industrial market, where, thanks to minimal recent development, vacancy remains near pre-pandemic record lows of 5%. In contrast, the stock of logistics buildings from 100,000 square feet to 500,000 square feet has grown by more than 14% over the past four years, and the vacancy rate among them stands at around 10%, hitting its highest level in over a decade.

Per CoStar, third-quarter 2025 transaction volume held steady compared to the previous quarter and the same period in 2024, suggesting a pause in momentum as investors digest the implications of the second quarter's negative net absorption for the first time since 2010. On the investment side, yields for stabilized, multi-tenant warehouses above $10 million bottomed in 2021 around the mid-4% range. Since then, cap rates have expanded roughly 150 basis points and now typically hover near 6%. Single-tenant deals, offering durable contractual income, may garner more attention from investors in the near term given the recent slowdown in leasing momentum. Looking ahead, pricing risk remains as the market will need to see an increase in leasing momentum and sales velocity to gain confidence about the near-term outlook. Once the current stint of uncertainty fades, capital should continue to favor industrial assets, supported by the sector's historically strong rent growth and predictable capital expenditures compared to other property types.

For the third quarter of 2025, national industrial vacancy was 7.5%. Our market areas reflected the following industrial vacancy levels for the third quarter of 2025: Springfield, Missouri at 1.8%, St. Louis at 4.6%, Kansas City at 5.9%, Minneapolis at 3.8%, Dallas-Fort Worth at 9.0%, Chicago at 5.9%, Atlanta at 8.7%, Phoenix at 12.2%, Denver at 8.5% and Charlotte, North Carolina at 9.9%.

Our management will continue to monitor regional, national, and global economic indicators such as unemployment, GDP, housing starts and prices, consumer sentiment, commercial real estate price index and commercial real estate occupancy, absorption and rental rates, as these could significantly affect customers in each of our market areas.

For discussion of the risk factors associated with multi-family and commercial real estate loans, see "Risk Factors - Risks Relating to Lending Activities - Our loan portfolio possesses increased risk due to our relatively high concentration of commercial and residential construction, commercial real estate, other residential (multi-family) and other commercial loans" and "Risk Factors - Risks Relating to Regulation - We currently exceed thresholds defined in interagency guidance on commercial real estate concentrations, and as such, we may incur additional expense or slow the growth of certain categories of commercial real estate lending" in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024.

General

The profitability of the Company and, more specifically, the profitability of its primary subsidiary, the Bank, depends primarily on its net interest income, as well as provisions for credit losses and the level of non-interest income and non-interest expense. Net interest income is the difference between the interest income the Bank earns on its loans and investment securities, and the interest it pays on interest-bearing liabilities, which consists mainly of interest paid on deposits and borrowings. Net interest income is affected by the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on these balances. When interest-earning assets approximate or exceed interest-bearing liabilities, any positive interest rate spread will generate net interest income.

Great Southern's total assets decreased $243.8 million, or 4.1%, from $5.98 billion at December 31, 2024, to $5.74 billion at September 30, 2025. Details of the current period changes in total assets are provided below, under "Comparison of Financial Condition at September 30, 2025 and December 31, 2024."

Loans. Net outstanding loans decreased $222.7 million from December 31, 2024, to $4.47 billion at September 30, 2025. The decrease was primarily in construction loans, other residential (multi-family) loans, one- to four- family residential loans and commercial real estate loans. As loan demand is affected by a variety of factors, including general economic conditions, and because of the competition we face and our focus on pricing discipline and credit quality, no assurance can be given that our loan growth will match or exceed the average level of growth achieved in prior years. The Company's strategy continues to be focused on maintaining credit risk and interest rate risk at appropriate levels.

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Over the past several years, growth has occurred in some loan types and in most of Great Southern's primary lending locations, including Springfield, St. Louis, Kansas City, Des Moines and Minneapolis, as well as our loan production offices in Atlanta, Charlotte, Chicago, Dallas, Denver, Omaha, and Phoenix. Certain minimum underwriting standards and monitoring help assure the Company's portfolio quality. All new loan originations that exceed lender approval authorities are subject to review and approval by Great Southern's loan committee. Generally, the Company considers commercial construction, consumer, other residential (multi-family) and commercial real estate loans to involve a higher degree of risk compared to some other types of loans, such as first mortgage loans on one- to four-family, owner-occupied residential properties. For other residential (multi-family), commercial real estate, commercial business and construction loans, the credits are subject to an analysis of the borrower's and guarantor's financial condition, credit history, verification of liquid assets, collateral, market analysis and repayment ability. It has been, and continues to be, Great Southern's practice to verify information from potential borrowers regarding assets, income or payment ability and credit ratings as applicable and as required by the authority approving the loan. To minimize construction risk, projects are monitored as construction draws are requested by comparison to budget and with progress verified through property inspections. The geographic and product diversity of collateral, equity requirements and limitations on speculative construction projects help to mitigate overall risk in these loans. Underwriting standards for all loans also include loan-to-value ratio limitations, which vary depending on collateral type, debt service coverage ratios or debt payment to income ratio guidelines, where applicable, credit histories, use of guaranties and other recommended terms relating to equity requirements, amortization, and maturity. Consumer loans, other than home equity loans, are primarily secured by new or used motor vehicles and these loans are subject to underwriting standards designed to assure portfolio quality. In 2019, the Company discontinued indirect auto loan originations.

While our policy allows us to lend up to 90% of the appraised value on one- to four-family residential properties, originations of loans with loan-to-value ratios at that level are minimal. Private mortgage insurance is typically required for loan amounts above the 80% level. Few exceptions occur and would be based on analyses which determined minimal transactional risk to be involved. We consider these lending practices to be consistent with or more conservative than what we believe to be the norm for banks our size. At both September 30, 2025 and December 31, 2024, 0.2% of our owner occupied one- to four-family residential loans had loan-to-value ratios above 100% at origination. At both September 30, 2025 and December 31, 2024, 0.4% of our non-owner occupied one- to four-family residential loans had loan-to-value ratios above 100% at origination.

The level of non-performing loans and foreclosed assets affects our net interest income and net income. We generally do not accrue interest income on these loans and do not recognize interest income until the loans are repaid or interest payments have been made for a period of time sufficient to provide evidence of improved repayment ability on the loans. Generally, the higher the level of non-performing assets, the greater the negative impact on interest income and net income.

Available-for-sale Securities. In the nine months ended September 30, 2025, available-for-sale securities decreased $2.0 million, or 0.4%, from $533.3 million at December 31, 2024, to $531.3 million at September 30, 2025 due to monthly principal payments on investment securities, partially offset by purchases of investment securities and increases in market value of the available-for-sale securities. For further information on investment securities, see Note 5 to the accompanying financial statements contained in this Report.

Held-to-maturity Securities. In the nine months ended September 30, 2025, held-to-maturity securities decreased $6.1 million, or 3.3%, from $187.4 million at December 31, 2024, to $181.3 million at September 30, 2025, due to principal payments on mortgage-backed securities and collateralized mortgage obligations.

Deposits. The Company attracts deposit accounts through its retail branch network, correspondent banking and corporate services areas, internet channels and brokered deposits. The Company then utilizes these deposit funds, along with FHLBank advances and other borrowings, to meet loan demand or otherwise fund its activities. In the nine months ended September 30, 2025, total deposit balances decreased $77.5 million, or 1.7%. Compared to December 31, 2024, transaction account balances increased $66.7 million, or 2.2%, to $3.12 billion at September 30, 2025, and retail certificates of deposit decreased $52.1 million, or 6.7%, to $723.7 million at September 30, 2025. The increase in transaction accounts was primarily a result of an increase in various money market accounts. Retail time deposits decreased due to a decrease in retail certificates generated or maintained through the banking center network. Competition for time deposits has been, and remains, significant in many of our markets. Brokered deposits, including IntraFi program purchased funds, were $680.0 million and $772.1 million at September 30, 2025 and December 31, 2024, respectively. The Company uses brokered deposits of select maturities from time to time to supplement its various funding channels and to manage interest rate risk.

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Our deposit balances may fluctuate depending on customer preferences and our relative need for funding. We do not consider our retail certificates of deposit to be guaranteed long-term funding because customers can withdraw their funds at any time with minimal interest penalty. When loan demand trends upward, we can increase rates paid on deposits to attract more deposits and utilize brokered deposits to generate additional funding. The level of competition for deposits in our markets is high. It is our goal to gain deposit market share, particularly checking accounts, in our branch footprint. To accomplish this goal, increasing rates to attract deposits may be necessary, which could negatively impact the Company's net interest margin.

Our ability to fund growth in future periods may also depend on our ability to continue to access brokered deposits and FHLBank advances. In times when our loan demand has outpaced our generation of new deposits, we have utilized brokered deposits and FHLBank advances to fund these loans. These funding sources have been attractive to us because we can create either fixed or variable rate funding, as desired, which more closely matches the interest rate nature of much of our loan portfolio. It also gives us greater flexibility in increasing or decreasing the duration of our funding. While we do not currently anticipate that our ability to access these sources will be reduced or eliminated in future periods, if this should happen, the limitation on our ability to fund additional loans could have a material adverse effect on our business, financial condition and results of operations. See "Results of Operations and Comparison for the Three and Nine Months Ended September 30, 2025 and 2024 - Liquidity" below for further information on funding sources.

Securities sold under reverse repurchase agreements with customers. Securities sold under reverse repurchase agreements with customers decreased $21.8 million from $64.4 million at December 31, 2024 to $42.6 million at September 30, 2025. These balances fluctuate over time based on customer demand for this product.

Short-term borrowings and other interest-bearing liabilities. Short term borrowings and other interest-bearing liabilities decreased $88.3 million from $514.2 million at December 31, 2024 to $425.9 million at September 30, 2025, primarily due to the repayment of borrowings under the Federal Reserve Bank BTFP funding program and the Company's utilization of brokered deposits as an alternative source of funding. The Company may, from time to time, utilize overnight borrowings, short-term FHLBank advances, and borrowings from the Federal Reserve Bank of St. Louis (FRBSTL), depending on relative interest rates. The Company's FHLBank term advances were $-0- at both September 30, 2025 and December 31, 2024. At September 30, 2025 and December 31, 2024, there was $425.0 million and $333.0 million, respectively, in overnight borrowings from the FHLBank, which were included in short term borrowings.

In January 2024, the Bank borrowed $180.0 million under the Federal Reserve Bank's Bank Term Funding Program (BTFP). The borrowing, which had a fixed interest rate of 4.83% and was secured primarily by the Bank's held-to-maturity investment securities, was repaid in full upon maturity in January 2025.

Net Interest Income and Interest Rate Risk Management. Our net interest income may be affected positively or negatively by changes in market interest rates. A large portion of our loan portfolio is tied to one-month SOFR, three-month SOFR or the "prime rate" and adjusts immediately or shortly after the index rate adjusts (subject to the effect of contractual interest rate floors on some of the loans, which are discussed below). We monitor our sensitivity to interest rate changes on an ongoing basis (see "Quantitative and Qualitative Disclosures About Market Risk").

The current level and shape of the interest rate yield curve poses challenges for interest rate risk management. Prior to its increase of 0.25% on December 16, 2015, the FRB had last changed interest rates on December 16, 2008. This was the first rate increase since September 29, 2006. The FRB also implemented rate increases of 0.25% on eight additional occasions from December 14, 2016 through December 31, 2018, with the Federal Funds rate reaching as high as 2.50%. After December 2018, the FRB paused its rate increases and, in July, September and October 2019, implemented rate decreases of 0.25% on each of those occasions. At December 31, 2019, the Federal Funds rate stood at 1.75%. In response to the COVID-19 pandemic, the FRB decreased interest rates on two occasions in March 2020, a 0.50% decrease on March 3rd and a 1.00% decrease on March 16th. At December 31, 2021, the Federal Funds rate was 0.25%. In 2022, the FRB implemented rate increases of 0.25%, 0.50%, 0.75%, 0.75%, 0.75%, 0.75% and 0.50% in March, May, June, July, September, November and December 2022, respectively. At December 31, 2022, the Federal Funds rate was 4.50%. In 2023, the FRB implemented rate increases of 0.25%, 0.25%, 0.25% and 0.25% in February, March, May and July 2023, respectively. At December 31, 2023, the Federal Funds rate was 5.50%. In 2024, the FRB implemented rate decreases of 0.50%, 0.25% and 0.25% in September, November, and December, respectively. At December 31, 2024, the Federal Funds rate was 4.50%. In 2025, the FRB implemented a rate decrease of 0.25% in September, which brought the Federal Funds rate to 4.25% at September 30, 2025, and another rate decrease of 0.25% in October.

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Great Southern's loan portfolio includes loans ($1.54 billion at September 30, 2025) tied to various SOFR indexes that will be subject to adjustment at least once within 90 days after September 30, 2025. All of these loans have interest rate floors at various rates. Great Southern also has a portfolio of loans ($666.4 million at September 30, 2025) tied to a "prime rate" of interest that will adjust immediately or within 90 days of a change to the "prime rate" of interest. All of these loans had interest rate floors at various rates. In addition, Great Southern has a portfolio of loans ($10.6 million at September 30, 2025) tied to an AMERIBOR index that will adjust immediately or within 90 days of a change to the rate of interest on this index. All of these loans had interest rate floors at various rates. At September 30, 2025, nearly all of these SOFR, "prime rate" and AMERIBOR loans had fully-indexed rates that were at or above their floor rate and so are expected to move fully with future market interest rate increases, and most are expected to move fully with future market interest rate decreases as many of these loans have floor rates well below their current index rate.

A rate cut by the FRB generally would be expected to have an immediate negative impact on the Company's interest income on loans due to the large total balance of loans tied to the SOFR indexes or the "prime rate" index and will be subject to adjustment at least once within 90 days or loans which generally adjust immediately as the Federal Funds rate adjusts. Interest rate floors may at least partially mitigate the negative impact of interest rate decreases. Loans at their floor rates are, however, subject to the risk that borrowers will seek to refinance elsewhere at the lower market rate. This negative impact may partially be offset by the Company's ability to lower its funding costs in response to an FRB rate cut. However, the Company may be unable to significantly lower its funding costs due to a highly competitive rate environment for deposits. Conversely, market interest rate increases would normally result in increased interest rates on our SOFR-based, prime rate-based and AMERIBOR-based loans.

As of September 30, 2025, Great Southern's interest rate risk models indicate that, generally, rising interest rates are expected to have a modestly positive impact on the Company's net interest income, while declining interest rates are expected to have a mostly neutral impact on net interest income. Any negative impact of a falling Federal Funds rate and other market interest rates also falling could be more pronounced if we are not able to decrease non-maturity deposit rates accordingly. We model various interest rate scenarios for rising and falling rates, including both parallel and non-parallel shifts in rates. The results of our modeling indicate that net interest income is not likely to be significantly affected either positively or negatively in the first twelve months following relatively minor changes in interest rates because our portfolios are relatively well matched in a twelve-month horizon.

In a situation where market interest rates increase significantly in a short period of time, our net interest margin increase may be more pronounced in the very near term (first one to three months), due to fairly rapid increases in SOFR interest rates and "prime" interest rates. In a situation where market interest rates decrease significantly in a short period of time, as they did in March 2020, our net interest margin decrease may be more pronounced in the very near term (first one to three months), due to fairly rapid decreases in SOFR interest rates and "prime" interest rates. In the subsequent months, we would expect that net interest margin would stabilize and begin to improve, as renewal interest rates on maturing time deposits decrease.

Beginning in March 2022, market interest rates, including LIBOR interest rates, SOFR interest rates and "prime" interest rates, began to increase rapidly. This resulted in increasing loan yields and expansion of our net interest income and net interest margin throughout 2022 and into the first three months of 2023. In 2023, market interest rate increases moderated and loan yield increases moderated in line with market rates. However, there has been increased competition for deposits and other sources of funding, resulting in higher costs for those funds. This has been especially true since early March 2023. Deposit and other funding costs moderated a bit in late 2024 as the FRB cut the federal funds rate, but competition for deposits remains significant in 2025. For further discussion of the processes used to manage our exposure to interest rate risk, see "Item 3. Quantitative and Qualitative Disclosures About Market Risk - How We Measure the Risks to Us Associated with Interest Rate Changes."

Non-Interest Income and Non-Interest (Operating) Expenses. The Company's profitability is also affected by the level of its non-interest income and operating expenses. Non-interest income consists primarily of service charges and ATM fees, POS interchange fees, late charges and prepayment fees on loans, gains on sales of loans and available-for-sale investments and other general operating income. Non-interest income may also be affected by the Company's interest rate derivative activities. See Note 16 "Derivatives and Hedging Activities" in the Notes to Consolidated Financial Statements included in this report.

Operating expenses consist primarily of salaries and employee benefits, occupancy-related expenses, expenses related to foreclosed assets, postage, FDIC deposit insurance, advertising and public relations, telephone, professional fees, office expenses and other general operating expenses. Details of the current period changes in non-interest income and non-interest expense are provided below, under "Results of Operations and Comparison for the Three and Nine Months Ended September 30, 2025 and 2024."

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Effect of Federal Laws and Regulations

General. Federal legislation and regulation significantly affect the operations of the Company and the Bank, and have increased competition among commercial banks, savings institutions, mortgage banking enterprises and other financial institutions. In particular, the capital requirements and operations of regulated banking organizations such as the Company and the Bank have been and will be subject to changes in applicable statutes and regulations from time to time, which changes could, under certain circumstances, adversely affect the Company or the Bank.

Dodd-Frank Act. In 2010, sweeping financial regulatory reform legislation entitled the "Dodd-Frank Wall Street Reform and Consumer Protection Act" (the "Dodd-Frank Act") was signed into law. The Dodd-Frank Act implemented far-reaching changes across the financial regulatory landscape. Certain aspects of the Dodd-Frank Act have been affected by the more recently enacted Economic Growth Act, as defined and discussed below under "Economic Growth Act."

Capital Rules. The federal banking agencies have adopted regulatory capital rules that substantially amend the risk-based capital rules applicable to the Bank and the Company. The rules implement the "Basel III" regulatory capital reforms and changes required by the Dodd-Frank Act. "Basel III" refers to various documents released by the Basel Committee on Banking Supervision. For the Company and the Bank, the general effective date of the rules was January 1, 2015, and, for certain provisions, various phase-in periods and later effective dates apply. The chief features of these rules are summarized below.

The rules refine the definitions of what constitutes regulatory capital and add a new regulatory capital element, common equity Tier 1 capital. The minimum capital ratios are (i) a common equity Tier 1 ("CET1") risk-based capital ratio of 4.5%; (ii) a Tier 1 risk-based capital ratio of 6%; (iii) a total risk-based capital ratio of 8%; and (iv) a Tier 1 leverage ratio of 4%. In addition to the minimum capital ratios, the rules include a capital conservation buffer, under which a banking organization must have CET1 more than 2.5% above each of its minimum risk-based capital ratios in order to avoid restrictions on paying dividends, repurchasing shares, and paying certain discretionary bonuses. The capital conservation buffer became fully implemented on January 1, 2019.

These rules also revised the prompt corrective action framework, which is designed to place restrictions on insured depository institutions if their capital levels show signs of weakness. Under the revised prompt corrective action requirements, insured depository institutions are required to meet the following in order to qualify as "well capitalized:" (i) a common equity Tier 1 risk-based capital ratio of at least 6.5%, (ii) a Tier 1 risk-based capital ratio of at least 8%, (iii) a total risk-based capital ratio of at least 10% and (iv) a Tier 1 leverage ratio of 5%, and must not be subject to an order, agreement or directive mandating a specific capital level.

Economic Growth Act. In May 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (the "Economic Growth Act"), was enacted to modify or eliminate certain financial reform rules and regulations, including some implemented under the Dodd-Frank Act. While the Economic Growth Act maintains most of the regulatory structure established by the Dodd-Frank Act, it amends certain aspects of the regulatory framework for small depository institutions with assets of less than $10 billion and for large banks with assets of more than $50 billion. Many of these amendments could result in meaningful regulatory changes.

The Economic Growth Act, among other matters, expands the definition of qualified mortgages which may be held by a financial institution and simplifies the regulatory capital rules for financial institutions and their holding companies with total consolidated assets of less than $10 billion by instructing the federal banking regulators to establish a single "Community Bank Leverage Ratio" ("CBLR") of between 8 and 10 percent. Upon election, any qualifying depository institution or its holding company that exceeds the CBLR will be considered to have met generally applicable leverage and risk-based regulatory capital requirements and any qualifying depository institution that exceeds the CBLR will be considered "well-capitalized" under the prompt corrective action rules. Currently, the CBLR is 9.0%. To date, the Company and the Bank have chosen to not utilize the CBLR due to the Company's size and complexity, including its commercial real estate and construction lending concentrations and significant off-balance sheet funding commitments.

In addition, the Economic Growth Act includes regulatory relief in the areas of examination cycles, call reports, mortgage disclosures and risk weights for certain high-risk commercial real estate loans.

One Big Beautiful Bill Act. On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We are currently assessing its expected impact on our consolidated financial statements.

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Business Initiatives

Technology initiatives and advancements continue with the Company's current core provider.Projects to improve customer-facing online services and deliver a full overhaul of the Company's treasury management services platform have moved, or are soon scheduled to move, to the trial phase, while foundational projects focused on fostering system efforts and innovations have launched.

Construction of the Company's new banking center at 723 N. Benton in Springfield, Mo., is complete, with a grand opening held in late October 2025. The new facility, designed as a next-generation banking center to replace a facility previously existing at that location, features customer-centered designs, tools and technology, and will allow the Company to test new processes and innovations. The location is one of 12 banking centers the Company operates in Springfield, in addition to a drive-thru Express Center.

Headquartered in Springfield, Missouri, Great Southern offers a broad range of banking services to customers. The Company operates 89 retail banking centers in Missouri, Iowa, Kansas, Minnesota, Arkansas and Nebraska and commercial lending offices in Atlanta, Charlotte, Chicago, Dallas, Denver, Omaha, and Phoenix. The common stock of Great Southern Bancorp, Inc. is listed on the Nasdaq Global Select Market under the symbol "GSBC."

Comparison of Financial Condition at September 30, 2025 and December 31, 2024

During the nine months ended September 30, 2025, the Company's total assets decreased by $243.8 million to $5.74 billion. The decrease was primarily due to a decrease in net loans.

Cash and cash equivalents were $196.2 million at September 30, 2025, an increase of $479,000, or 0.2%, from $195.8 million at December 31, 2024.

The Company's available-for-sale securities decreased $2.0 million, or 0.4%, compared to December 31, 2024. This decrease is related to monthly principal payments on investment securities, partially offset by purchases of investment securities and increases in market value of the available-for-sale securities. The available-for-sale securities portfolio was 9.3% of total assets at September 30, 2025 and 8.9% of total assets at December 31, 2024.

The Company's held-to-maturity securities decreased $6.1 million, or 3.3%, compared to December 31, 2024. This decrease was primarily due to normal monthly payments received related to the portfolio of mortgage-backed securities and collateralized mortgage obligations. The held-to-maturity securities portfolio was 3.2% of total assets at September 30, 2025 and 3.1% of total assets at December 31, 2024.

Net loans decreased $222.7 million from December 31, 2024, to $4.47 billion at September 30, 2025. This decrease was primarily in construction loans ($122.7 million decrease), other residential (multi-family) loans ($63.7 million decrease), one- to four-family residential loans ($36.6 million decrease) and commercial real estate loans ($12.8 million decrease). The decrease in construction loans primarily related to the completion of projects, with the loans then being paid off or retained by the Bank and moved to other loan categories. The decrease in other residential (multi-family) loans was primarily related to a few large loan payoffs in 2025. The pipeline of the unfunded portion of loans and formal loan commitments remained strong at September 30, 2025, with the largest portion of these unfunded balances represented by the unfunded portion of outstanding construction loans ($582.4 million).

Total liabilities decreased $277.1 million from December 31, 2024, to $5.10 billion at September 30, 2025. This decrease was primarily due to the repayment of the BTFP borrowings in January 2025, the repayment of subordinated notes in June 2025, and a decrease in the balance of time deposits, partially offset by an increase in transaction account deposits.

Total deposits decreased $77.5 million, or 1.7%, from $4.61 billion at December 31, 2024 to $4.53 billion at September 30, 2025. Transaction account balances increased $66.7 million, from $3.06 billion at December 31, 2024 to $3.12 billion at September 30, 2025. Total interest-bearing checking accounts and non-interest-bearing checking accounts increased $54.3 million and $12.4 million, respectively. Retail certificates of deposit decreased $52.1 million compared to December 31, 2024, to $723.7 million at September 30, 2025, due to competition for these types of deposits.

Brokered deposits decreased $92.1 million to $680.0 million at September 30, 2025, compared to $772.1 million at December 31, 2024. Brokered deposits were utilized to offset reductions in other deposit categories and to repay BTFP borrowings. The Company has the capacity to further expand its use of brokered deposits if it chooses to do so. Of the total brokered deposits at September 30, 2025, $300.0 million were floating rate deposits, which adjust daily, based on the effective federal funds rate index. The Company also utilized brokered deposits with maturities within six months as part of its interest rate risk management strategies.

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The Company's term FHLBank advances were $-0- at both September 30, 2025 and December 31, 2024. At September 30, 2025 and December 31, 2024, there were no borrowings from the FHLBank, other than overnight borrowings, which are included in the short-term borrowings category. The Company may utilize both overnight borrowings and short-term FHLBank advances depending on relative interest rates.

Short-term borrowings and other interest-bearing liabilities decreased $88.3 million from $514.2 million at December 31, 2024 to $425.9 million at September 30, 2025. At September 30, 2025, $425.0 million of this total was in overnight borrowings from the FHLBank, which were used to purchase investment securities and to offset decreases in time deposits and brokered deposits, compared to $333.0 million of overnight borrowings from the FHLBank at December 31, 2024. At September 30, 2025 and December 31, 2024, there was $-0- and $180.0 million, respectively, in BTFP borrowings. The BTFP borrowing, which had a fixed interest rate of 4.83%, was repaid in full upon maturity in January 2025.

Securities sold under reverse repurchase agreements with customers decreased $21.8 million, or 33.8%, from $64.4 million at December 31, 2024 to $42.6 million at September 30, 2025. These balances fluctuate over time based on customer demand for this product.

Total stockholders' equity increased $33.3 million, or 5.6%, from $599.6 million at December 31, 2024 to $632.9 million at September 30, 2025. Stockholders' equity increased due to net income of $54.7 million for the nine months ended September 30, 2025 and rose by $4.2 million due to stock option exercises during the period. Additionally, accumulated other comprehensive loss (a reduction in equity) decreased $18.5 million during the nine months ended September 30, 2025 (thereby increasing total stockholders' equity), primarily due to increases in the fair value of available-for-sale investment securities and the fair value of cash flow hedges, as a result of decreased market interest rates. Partially offsetting these changes were repurchases of the Company's common stock totaling $30.0 million and dividends declared on common stock of $14.0 million.

Comparison of Results of Operations for the Three and Nine Months Ended September 30, 2025 and 2024

General

Net income was $17.8 million for the three months ended September 30, 2025 compared to $16.5 million for the three months ended September 30, 2024. This increase of $1.3 million, or 7.7%, was primarily due to an increase in net interest income of $2.8 million, or 5.8%, a decrease in provisions for credit losses on loans and unfunded commitments of $1.5 million, or 133.3%, and an increase in non-interest income of $70,000, or 1.0%, partially offset by an increase in non-interest expense of $2.4 million, or 7.1%, and an increase in income tax expense of $723,000, or 20.0%.

Net income was $54.7 million for the nine months ended September 30, 2025 compared to $46.9 million for the nine months ended September 30, 2024. This increase of $7.8 million, or 16.7%, was primarily due to an increase in net interest income of $11.5 million, or 8.2%, and decreases in provisions for credit losses on loans and unfunded commitments of $2.0 million, or 172.2%, partially offset by an increase in income tax expense of $2.5 million, or 23.3%, an increase in non-interest expense of $1.4 million, or 1.3%, and a decrease in non-interest income of $1.8 million, or 7.5%.

Total Interest Income

Total interest income decreased $4.7 million, or 5.6%, during the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The decrease was due to a $4.4 million, or 5.8%, decrease in interest income on loans and a $320,000, or 4.3%, decrease in interest income on investment securities and other interest-earning assets. Interest income from loans decreased during the three months ended September 30, 2025 compared to the same period in 2024 due to lower average balances and average rates of interest. Interest income from investment securities and other interest-earning assets decreased during the three months ended September 30, 2025 compared to the same period in 2024 primarily due to lower average balances.

Total interest income decreased $1.8 million, or 0.8%, during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The decrease was due to a $2.9 million, or 1.3%, decrease in interest income on loans, partially offset by a $1.1 million, or 5.2%, increase in interest income on investment securities and other interest-earning assets. Interest income from loans decreased during the nine months ended September 30, 2025 compared to the same period in 2024 primarily due to lower average rates of interest. Interest income from investment securities increased during the nine months ended September 30, 2025 compared to the same period in 2024 due to both higher average rates of interest and higher average balances. Interest income from other interest-earning assets decreased during the nine months ended September 30, 2025 compared to the same period in 2024 primarily due to lower average rates of interest.

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Interest Income - Loans

During the three months ended September 30, 2025 compared to the three months ended September 30, 2024, interest income on loans decreased $4.4 million. Of the $4.4 million decrease in interest income on loans, $2.5 million was due to a decrease in average yield on loans, from 6.44% during the three months ended September 30, 2024 to 6.21% during the three months ended September 30, 2025. This decrease was primarily due to a reduction in the federal funds rate in the latter portion of 2024. The remaining decrease in interest income on loans of $1.9 million was due to lower average loan balances, which fell from $4.72 billion during the three months ended September 30, 2024, to $4.60 billion during the three months ended September 30, 2025. Since the end of 2022, loan originations and net loan growth have been muted; however, some loan growth has come as a result of the funding of previously approved but unfunded balances on construction loans. Loan payoffs increased in the second and third quarters of 2025.

During the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, interest income on loans decreased $2.9 million. Interest income on loans decreased $3.0 million due to a decrease in average interest rates on loans from 6.31% during the nine months ended September 30, 2024, to 6.23% during the nine months ended September 30, 2025. Partially offsetting that decrease, interest income on loans increased $101,000 due to higher average loan balances, which grew from $4.69 billion during the nine months ended September 30, 2024, to $4.70 billion during the nine months ended September 30, 2025.

In October 2018, the Company entered into an interest rate swap transaction which was terminated in March 2020. Upon termination, the Company received $45.9 million, inclusive of accrued but unpaid interest, from its swap counterparty. The net amount, after deducting accrued interest and deferred income taxes, was accreted to interest income on loans monthly until the originally scheduled termination date of October 6, 2025. After this date, the Company no longer has the benefit of that income from the terminated swap. The Company recorded interest income related to the interest rate swap of $2.0 million in each of the three months ended September 30, 2025 and 2024. The Company recorded interest income related to the interest rate swap of $6.1 million in each of the nine months ended September 30, 2025 and 2024, respectively.

In March 2022, the Company entered into another interest rate swap transaction as part of its ongoing interest rate management strategies to hedge the risk of its floating rate loans. The notional amount of the swap was $300 million, with a contractual termination date of March 1, 2024. Under the terms of the swap, the Company received a fixed rate of interest of 1.6725% and paid a floating rate of interest equal to one-month USD-LIBOR (or the equivalent replacement USD-SOFR rate once the USD-LIBOR rate ceased to be available). The floating rate was reset monthly and net settlements of interest due to/from the counterparty also occurred monthly. To the extent that the fixed rate exceeded one-month USD-LIBOR/SOFR, the Company received net interest settlements, which were recorded as loan interest income. If one-month USD-LIBOR/SOFR exceeded the fixed rate of interest, the Company paid net settlements to the counterparty and recorded those net payments as a reduction of interest income on loans. The Company recorded a reduction of loan interest income related to this swap transaction of $1.9 million in the nine months ended September 30, 2024. Since reaching its contractual termination date on March 1, 2024, there has been no further interest income impact related to this swap.

In July 2022, the Company entered into two additional interest rate swap transactions as part of its ongoing interest rate management strategies to hedge the risk of its floating rate loans. The notional amount of each swap is $200 million with an effective date of May 1, 2023 and a termination date of May 1, 2028. Under the terms of one swap, the Company receives a fixed rate of interest of 2.628% and pays a floating rate of interest equal to one-month USD-SOFR OIS. Under the terms of the other swap, the Company receives a fixed rate of interest of 5.725% and pays a floating rate of interest equal to one-month USD-Prime. In each case, the floating rate resets monthly and net settlements of interest due to/from the counterparty also occur monthly. To the extent the fixed rate of interest exceeds the floating rate of interest, the Company receives net interest settlements, which are recorded as loan interest income. If the floating rate of interest exceeds the fixed rate of interest, the Company pays net settlements to the counterparty and records those net payments as a reduction of interest income on loans. The Company recorded a reduction of loan interest income related to these swap transactions of $1.8 million and $2.7 million in the three months ended September 30, 2025 and 2024, respectively. The Company recorded a reduction of loan interest income related to these swap transactions of $5.3 million and $8.3 million in the nine months ended September 30, 2025 and 2024, respectively. At September 30, 2025, the USD-Prime rate was 7.25% and the one-month USD-SOFR OIS rate was 4.30757%.

If market interest rates remain near or above their current levels, the Company's interest rate swaps will continue to have a negative impact on net interest income. Market interest rate decreases will reduce the negative impact of these swaps.

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Interest Income - Investments and Other Interest-earning Assets

Interest income on investments decreased $11,000 in the three months ended September 30, 2025 compared to the three months ended September 30, 2024. Average balances decreased from $758.8 million during the three months ended September 30, 2024, to $722.9 million during the three months ended September 30, 2025, reducing interest income by $216,000. Average balances of securities decreased primarily due to normal monthly payments received related to the portfolio of U.S. Government agency mortgage-backed securities and collateralized mortgage obligations. Interest income on investments increased $205,000 as a result of higher average interest rates, from 3.19% during the three months ended September 30, 2024, to 3.34% during the three months ended September 30, 2025. Securities purchased in 2024 and 2025 had higher interest rates than the average rates for the portfolio.

Interest income on investments increased $1.8 million in the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. Interest income on investments increased $1.3 million as a result of higher average interest rates, from 3.10% during the nine months ended September 30, 2024, to 3.35% during the nine months ended September 30, 2025. Average balances increased from $708.4 million during the nine months ended September 30, 2024, to $729.4 million during the nine months ended September 30, 2025, increasing interest income by $493,000. Average balances of securities increased primarily due to investment securities purchases in 2024 and 2025, partially offset by normal monthly payments received related to the portfolio of U.S. Government agency mortgage-backed securities and collateralized mortgage obligations.

Interest income on other interest-earning assets decreased $309,000 in the three months ended September 30, 2025, compared to the three months ended September 30, 2024. Average interest rates decreased from 5.27% during the three months ended September 30, 2024, to 4.14% during the three months ended September 30, 2025, reducing interest income by $263,000. The decline in the average interest rate was directly attributable to the decrease in the federal funds rate in the latter portion of 2024 and during the three months ended September 30, 2025. Interest income decreased $46,000 as a result of a decrease in average balances from $96.6 million during the three months ended September 30, 2024, to $93.0 million during the three months ended September 30, 2025.

Interest income on other interest-earning assets decreased $753,000 in the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. Average interest rates fell from 5.26% during the nine months ended September 30, 2024, to 4.23% during the nine months ended September 30, 2025, resulting in a decrease of $766,000 in interest income. Partially offsetting this decrease, interest income increased $13,000 as a result of an increase in average balances, from $98.2 million during the nine months ended September 30, 2024, to $98.5 million during the nine months ended September 30, 2025.

Total Interest Expense

Total interest expense decreased $7.5 million, or 21.0%, during the three months ended September 30, 2025, when compared with the three months ended September 30, 2024. Interest expense on deposits decreased $4.5 million, or 15.8%, interest expense on short-term borrowings decreased $1.8 million, or 32.9%, interest expense on subordinated notes decreased $1.1 million, or 100.0%, interest expense on securities sold under reverse repurchase agreements decreased $88,000, or 22.9%, and interest expense on subordinated debentures issued to capital trusts decreased $49,000, or 10.7%.

Total interest expense decreased $13.3 million, or 13.0%, during the nine months ended September 30, 2025, when compared with the nine months ended September 30, 2024. Interest expense on deposits decreased $11.0 million, or 13.1%, interest expense on subordinated notes decreased $1.3 million, or 39.3%, interest expense on short-term borrowings decreased $763,000, or 6.0%, interest expense on subordinated debentures issued to capital trusts decreased $186,000, or 13.6%, and interest expense on securities sold under reverse repurchase agreements decreased $72,000, or 6.5%.

Interest Expense - Deposits

Interest expense on demand and savings deposits decreased $1.7 million during the three months ended September 30, 2025, when compared to the three months ended September 30, 2024. Average rates of interest decreased from 1.80% in the three months ended September 30, 2024 to 1.46% in the three months ended September 30, 2025, resulting in a $1.9 million decrease in interest expense. Interest rates paid on demand deposits were lower in the 2025 period due to the Company strategically lowering rates throughout the second half of 2024 and all of 2025, as market rates decreased. Partially offsetting this decrease, the average balances of demand and savings deposits increased from $2.21 billion in the three months ended September 30, 2024 to $2.26 billion in the three months ended September 30, 2025, resulting in an increase in interest expense on demand and savings deposits of $215,000.

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Interest expense on demand and savings deposits decreased $5.4 million during the nine months ended September 30, 2025 when compared to the nine months ended September 30, 2024. The average rates of interest decreased from 1.76% in the nine months ended September 30, 2024 to 1.43% in the nine months ended September 30, 2025, resulting in a $5.6 million decrease in interest expense. Partially offsetting this decrease, the average balances of demand and savings deposits increased from $2.22 billion in the nine months ended September 30, 2024, to $2.24 billion in the nine months ended September 30, 2025, resulting in an increase of $161,000 in interest expense.

Interest expense on time deposits decreased $2.4 million during the three months ended September 30, 2025 when compared to the three months ended September 30, 2024. The average balances of time deposits decreased from $856.4 million during the three months ended September 30, 2024 to $746.5 million in the three months ended September 30, 2025, resulting in a decrease in interest expense of $1.0 million. The average rates of interest on time deposits decreased from 4.02% in the three months ended September 30, 2024, to 3.34% in the three months ended September 30, 2025, resulting in a decrease in interest expense of $1.3 million. A large portion of the Company's certificate of deposit portfolio matures within six months and therefore reprices fairly quickly; this is consistent with the portfolio term over the past several years. Market interest rates decreased in the second half of 2024 and into 2025 as the FOMC reduced the federal funds rate. Competition for time deposits remains significant in our market areas, and upon maturity, a portion of these deposits may be redeemed by customers.

Interest expense on time deposits decreased $7.4 million during the nine months ended September 30, 2025 when compared to the nine months ended September 30, 2024. The average balances of time deposits decreased from $896.1 million during the nine months ended September 30, 2024 to $758.6 million in the nine months ended September 30, 2025, resulting in a decrease in interest expense of $3.8 million during the period. Interest expense on time deposits decreased $3.5 million as a result of a decrease in average rates of interest from 4.01% in the nine months ended September 30, 2024, to 3.44% in the nine months ended September 30, 2025. As noted above, a large portion of the Company's certificate of deposit portfolio matures within six months and therefore reprices fairly quickly. Older certificates of deposit that renewed or were replaced with new deposits generally resulted in the Company paying a lower rate of interest compared to the year-ago period.

Interest expense on brokered deposits decreased $406,000 during the three months ended September 30, 2025 when compared to the three months ended September 30, 2024. Interest expense on brokered deposits decreased $1.9 million due to average rates of interest that decreased from 5.23% in the three months ended September 30, 2024 to 4.51% in the three months ended September 30, 2025. Brokered deposits added in the second half of 2024 and throughout 2025 were at lower market rates than brokered deposits previously issued. The Company uses brokered deposits of select maturities and interest rate structures from time to time to supplement its various funding channels and to manage interest rate risk. A portion of the Company's brokered deposits are floating rate, and the rate resets with changes to the effective federal funds rate. Partially offsetting this decrease, the average balance of brokered deposits increased from $745.4 million during the three months ended September 30, 2024 to $826.0 million during the three months ended September 30, 2025, resulting in an increase in interest expense of $1.5 million during the period.

Interest expense on brokered deposits increased $1.8 million during the nine months ended September 30, 2025 when compared to the nine months ended September 30, 2024. Interest expense on brokered deposits increased $4.3 million due to an increase in average balances from $706.0 million during the nine months ended September 30, 2024 to $871.1 million during the nine months ended September 30, 2025. Partially offsetting this increase, interest expense on brokered deposits decreased $2.5 million due to average rates of interest that decreased from 5.24% in the nine months ended September 30, 2024 to 4.53% in the nine months ended September 30, 2025. As noted above, brokered deposits added during 2024 and 2025 were at lower market rates than brokered deposits previously issued.

Interest Expense - FHLBank Advances; Short-term Borrowings, Repurchase Agreements and Other Interest-bearing Liabilities; Subordinated Debentures Issued to Capital Trusts and Subordinated Notes

FHLBank term advances were not utilized during the three or nine months ended September 30, 2025 and 2024.

Interest expense on reverse repurchase agreements decreased $88,000 during the three months ended September 30, 2025 when compared to the three months ended September 30, 2024. The average balance of repurchase agreements decreased from $76.6 million in the three months ended September 30, 2024 to $56.8 million in the three months ended September 30, 2025, due to fluctuations in customers' desire for this product, resulting in a decrease in interest expense of $103,000 during the period. Interest expense on reverse repurchase agreements increased $15,000 due to higher average interest rates during the three months ended September 30, 2025 when compared to the three months ended September 30, 2024. The average rate of interest was 2.00% for the three months ended September 30, 2024 compared to 2.08% for the three months ended September 30, 2025, due to changes in the mix of customer balances in these products.

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Interest expense on reverse repurchase agreements decreased $72,000 during the nine months ended September 30, 2025 when compared to the nine months ended September 30, 2024. The average balance of repurchase agreements decreased from $76.0 million in the nine months ended September 30, 2024 to $68.2 million in the nine months ended September 30, 2025, due to fluctuations in customers' desire for this product, resulting in a decrease in interest expense of $422,000. Interest expense on reverse repurchase agreements increased $350,000 due to higher average interest rates during the nine months ended September 30, 2025 when compared to the nine months ended September 30, 2024. The average rate of interest was 1.95% for the nine months ended September 30, 2024 compared to 2.04% for the nine months ended September 30, 2025, due to changes in the mix of customer balances in these products.

Interest expense on short-term borrowings (including overnight borrowings from the FHLBank and BTFP borrowings from FRBSTL) and other interest-bearing liabilities decreased $1.8 million during the three months ended September 30, 2025 when compared to the three months ended September 30, 2024. Interest expense on short-term borrowings (including overnight borrowings from the FHLBank and BTFP borrowings from FRBSTL) and other interest-bearing liabilities decreased $1.1 million due to lower average balances during the three months ended September 30, 2025 when compared to the three months ended September 30, 2024. The average balance of short-term borrowings and other interest-bearing liabilities decreased from $408.7 million in the three months ended September 30, 2024 to $315.4 million in the three months ended September 30, 2025. The Company chose to utilize more brokered deposits versus short-term borrowings in the 2025 period. The average rate of interest on short-term borrowings and other interest-bearing liabilities decreased from 5.24% for the three months ended September 30, 2024 to 4.55% for the three months ended September 30, 2025, resulting in a decrease in interest expense of $649,000 during the period. Interest rates on borrowings decreased after the federal funds rate was cut by 100 basis points from September to December 2024 and 25 basis points in September 2025.

Interest expense on short-term borrowings (including overnight borrowings from the FHLBank and BTFP borrowings from FRBSTL) and other interest-bearing liabilities decreased $763,000 during the nine months ended September 30, 2025 when compared to the nine months ended September 30, 2024. Interest expense on short-term borrowings and other interest-bearing liabilities decreased $1.7 million due to lower average rates of interest during the nine months ended September 30, 2025 when compared to the nine months ended September 30, 2024. The average rate of interest was 5.18% for the nine months ended September 30, 2024, compared to 4.58% for the nine months ended September 30, 2025. The average balance of short-term borrowings and other interest-bearing liabilities increased from $330.2 million in the nine months ended September 30, 2024 to $351.5 million in the nine months ended September 30, 2025, resulting in an increase in interest expense of $963,000 during the period.

During the three months ended September 30, 2025, compared to the three months ended September 30, 2024, interest expense on subordinated debentures issued to capital trusts decreased $49,000 due to lower average interest rates. The average interest rate was 7.04% in the three months ended September 30, 2024, compared to 6.26% in the three months ended September 30, 2025. The subordinated debentures are variable-rate debentures, which bear interest at an average rate of three-month SOFR (originally LIBOR), plus 1.60%, adjusted quarterly, which was 6.16% at September 30, 2025. There was no change in the average balance of the subordinated debentures between the 2024 and 2025 three-month periods.

During the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, interest expense on subordinated debentures issued to capital trusts decreased $186,000 due to lower average interest rates. The average interest rate was 7.07% in the nine months ended September 30, 2024 compared to 6.11% in the nine months ended September 30, 2025. The subordinated debentures are variable-rate debentures, as stated above. There was no change in the average balance of the subordinated debentures between the 2024 and 2025 nine-month periods.

In June 2020, the Company issued $75.0 million of 5.50% fixed-to-floating rate subordinated notes due June 15, 2030. The notes were sold at par, resulting in net proceeds, after underwriting discounts and commissions and other issuance costs, of approximately $73.5 million. These issuance costs were amortized over the expected life of the notes, which was five years from the issuance date, impacting the overall interest expense on the notes. On June 15, 2025, the Company redeemed all $75.0 million aggregate principal amount of these subordinated notes. Interest expense on subordinated notes decreased $1.1 million and $1.3 million, respectively, when compared to the prior-year three- and nine-month periods, due to the redemption of the subordinated notes.

Net Interest Income

Net interest income for the three months ended September 30, 2025 increased $2.8 million to $50.8 million, compared to $48.0 million for the three months ended September 30, 2024. Net interest margin was 3.72% in the three months ended September 30, 2025, compared to 3.42% in the three months ended September 30, 2024, an increase of 30 basis points, or 8.8%. The Company experienced decreases in all interest income and interest expense categories, with the total decreases in interest expense outpacing the declines in interest income, primarily due to decreases in market interest rates.

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Net interest income for the nine months ended September 30, 2025 increased $11.5 million to $151.1 million, compared to $139.6 million for the nine months ended September 30, 2024. Net interest margin was 3.66% in the nine months ended September 30, 2025, compared to 3.39% in the nine months ended September 30, 2024, an increase of 27 basis points, or 8.0%. The Company experienced an increase in interest income on investment securities and a decrease in interest income on loans. In the nine-month period, the Company experienced decreases in all interest expense categories, with the total decreases in interest expense outpacing the declines in interest income, primarily due to decreases in market interest rates.

The Company's overall average interest rate spread increased 39 basis points, or 14.2%, from 2.74% during the three months ended September 30, 2024 to 3.13% during the three months ended September 30, 2025, due to a 58 basis point decrease in the weighted average rate paid on interest-bearing liabilities, partially offset by a 19 basis point decrease in the weighted average yield earned on interest-earning assets. In comparing the two periods, the yield on loans decreased 23 basis points, the yield on investment securities increased 15 basis points and the yield on other interest-earning assets decreased 113 basis points. The rate paid on deposits decreased 49 basis points, the rate paid on reverse repurchase agreements increased 8 basis points, the rate paid on short-term borrowings and other interest-bearing liabilities decreased 69 basis points and the rate paid on subordinated debentures issued to capital trust decreased 78 basis points. Average interest rates earned on loans and paid on deposits are affected by the mix of the loan and deposit portfolios, the duration of loans and time deposits, the amount of fixed-rate and variable-rate loans and other repricing characteristics. In 2023, overall competition for deposits intensified as a few banks experienced significant liquidity issues in March and April 2023 and market rates moved higher more rapidly. Overall competition for deposits remained elevated in 2024 and market interest rates were higher in 2024, until the federal funds rate was reduced in late 2024. This resulted in lower market interest rates into 2025. The federal funds rate was further reduced by 0.25% in September 2025 and by 0.25% in October 2025.

The Company's overall average interest rate spread increased 36 basis points, or 13.2%, from 2.72% during the nine months ended September 30, 2024 to 3.08% during the nine months ended September 30, 2025. The increase was due to a 42 basis point decrease in the weighted average rate paid on interest-bearing liabilities, partially offset by a six basis point decrease in the weighted average yield earned on interest-earning assets. In comparing the two periods, the yield on loans decreased 8 basis points, the yield on investment securities increased 25 basis points and the yield on other interest-earning assets decreased 103 basis points. The rate paid on deposits decreased 41 basis points, the rate paid on reverse repurchase agreements increased 9 basis points, the rate paid on short-term borrowings and other interest-bearing liabilities decreased 60 basis points and the rate paid on subordinated debentures issued to capital trust decreased 96 basis points.

For additional information on net interest income components, refer to the "Average Balances, Interest Rates and Yields" tables in this Quarterly Report on Form 10-Q.

Provision for and Allowance for Credit Losses

Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as changes in underwriting standards, portfolio mix and delinquency level or term, as well as for changes in economic conditions, including but not limited to, changes in the national unemployment rate, commercial real estate price index, consumer sentiment, gross domestic product (GDP) and construction spending.

Challenging or worsening economic conditions from higher inflation or interest rates, COVID-19 and subsequent variant outbreaks or similar events, global unrest or other factors may lead to increased losses in the portfolio and/or requirements for an increase in provision expense. Management maintains various controls in an attempt to identify and limit future losses, such as a watch list of problem loans and potential problem loans, documented loan administration policies and loan review staff to review the quality and anticipated collectability of the portfolio. Additional procedures provide for frequent management review of the loan portfolio based on loan size, loan type, delinquencies, financial analysis, ongoing correspondence with borrowers and problem loan workouts. Management determines which loans are non-homogeneous or collateral-dependent, evaluates risk of loss and makes additional provisions to expense, if necessary, to maintain the allowance at a satisfactory level.

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During the three months ended September 30, 2025, the Company did not record a provision expense on its portfolio of outstanding loans, compared to a provision expense of $1.2 million recorded during the three months ended September 30, 2024 on its portfolio of outstanding loans.During the nine months ended September 30, 2025, the Company did not record a provision expense on its portfolio of outstanding loans, compared to a provision expense of $1.7 million during the nine months ended September 30, 2024 on its portfolio of outstanding loans. Net charge-offs were $66,000 for the three months ended September 30, 2025, compared to net charge-offs of $1.5 million in the three months ended September 30, 2024. Net charge-offs were $11,000 for the nine months ended September 30, 2025, compared to net charge-offs of $1.5 million in the nine months ended September 30, 2024. The provision for losses on unfunded commitments for the three months ended September 30, 2025 was a negative provision of $379,000, compared to a negative provision of $63,000 for the three months ended September 30, 2024. The provision for losses on unfunded commitments for the nine months ended September 30, 2025 was a negative provision of $837,000, compared to a negative provision of $540,000 for the nine months ended September 30, 2024. General market conditions and unique circumstances related to specific industries and individual projects contribute to the determination of the levels of provisions and charge-offs in each period.

The Bank's allowance for credit losses as a percentage of total loans was 1.43% and 1.36% at September 30, 2025 and December 31, 2024, respectively. Management considers the allowance for credit losses adequate to cover losses inherent in the Bank's loan portfolio at September 30, 2025, based on recent reviews of the Bank's loan portfolio and current economic conditions. However, if challenging economic conditions persist or worsen, or if management's assessment of the loan portfolio changes, additional provisions for credit loss may be required, which could adversely impact the Company's future results of operations and financial condition.

Non-performing Assets

As a result of changes in loan portfolio composition, changes in economic and market conditions and other factors specific to a borrower's circumstances, the level of non-performing assets will fluctuate.

At September 30, 2025, non-performing assets were $7.8 million, a decrease of $1.8 million from $9.6 million at December 31, 2024. Non-performing assets as a percentage of total assets were 0.14% and 0.16% at September 30, 2025 and December 31, 2024, respectively.

Compared to December 31, 2024, non-performing loans decreased $1.8 million, to $1.7 million at September 30, 2025. Compared to December 31, 2024, foreclosed assets increased $90,000 to $6.1 million at September 30, 2025.

Non-performing Loans.Activity in the non-performing loans category during the ninemonths ended September 30, 2025 was as follows:

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At September 30, 2025, the non-performing one- to four-family residential category included six loans, two of which were added in the nine months ended September 30, 2025. The largest relationship in the category totaled $614,000, or 36.0% of the category at September 30, 2025. This relationship was added to non-performing loans in 2024 and is collateralized by a single-family residential property in the Sarasota, Florida area. During the nine months ended September 30, 2025, non-performing one- to four-family residential loans experienced four loan pay-offs totaling $1.4 million. Additionally, the only loan in the non-performing land development category at the beginning of the period paid off. The non-performing consumer category included four loans at September 30, 2025.

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Potential Problem Loans.Potential problem loans decreased $5.7 million, to $1.4 million at September 30, 2025 from $7.1 million at December 31, 2024. Potential problem loans are loans which management has identified through routine internal review procedures as having possible credit problems that may cause the borrowers difficulty in complying with the current repayment terms. These loans are not reflected in non-performing assets.

Activity in the potential problem loans category during the ninemonths ended September 30, 2025 was as follows:

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At September 30, 2025, the one- to four-family residential category of potential problem loans included 13 loans, six of which were added to potential problem loans in the nine months ended September 30, 2025. The largest relationship in this category totaled $225,000, or 19.4% of the total category. During the nine months ended September 30, 2025, one loan relationship in the one- to four-family category ($963,000), which was reclassified from the consumer category earlier in 2025, was upgraded from the substandard category to non-classified, removing it from the potential problem loan list. This relationship is collateralized by multiple single-family residential properties in Indiana and Florida. During the nine months ended September 30, 2025, one loan relationship in the commercial real estate ($4.3 million) and consumer ($784,000) categories was upgraded from the substandard category to the special mention category, removing it from the potential problem loan list. This relationship is collateralized by three nursing care facilities located in southwest Missouri. The consumer category of potential problem loans included 14 loans, seven of which were added during the nine months ended September 30, 2025.

Other Real Estate Owned and Repossessions.All of the $6.1 million of other real estate owned and repossessions at September 30, 2025 were acquired through foreclosure.

Activity in foreclosed assets and repossessions during the ninemonths ended September 30, 2025 was as follows:

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At September 30, 2025, the commercial real estate category of foreclosed assets consisted of two foreclosed properties, the largest of which, totaling $6.0 million, was an office building located in Clayton, Missouri. This asset was foreclosed upon in the fourth quarter of 2024. The additions and sales in the consumer category were due to the volume of repossessions of automobiles, which generally are subject to a shorter repossession process.

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Loans Classified "Watch" and "Special Mention"

The Company reviews the credit quality of its loan portfolio using an internal grading system that classifies loans as "Satisfactory," "Watch," "Special Mention," "Substandard" and "Doubtful." Multiple loan reviews take place on a continuous basis by credit risk and lending management. Reviews are focused on financial performance, occupancy trends, delinquency status, covenant compliance, collateral support, economic considerations and various other factors. Loans classified as "Watch" are being monitored due to indications of potential weaknesses or deficiencies that may require future reclassification as special mention or substandard. Loans classified as "Watch" increased $9.5 million, from $15.9 million at December 31, 2024 to $25.4 million at September 30, 2025, primarily due to the addition of one loan totaling $10.5 million that is secured by a nursing care facility located in southwest Florida. The loan was downgraded due to the borrower's financial performance and delinquent taxes (which have since been paid). While loans classified as "Special Mention" are not adversely classified, they are deserving of management's close attention to ensure repayment prospects and that the credit positions of the assets do not deteriorate and expose the institution to elevated risk, which might warrant adverse classification at a future date. In the nine months ended September 30, 2025, loans classified as "Special Mention" increased $3.7 million, to $5.2 million, primarily due to one loan relationship, totaling $5.2 million, being upgraded from substandard, partially offset by the repayment in full of two loans totaling $1.4 million. See Note 6 "Loans and Allowance for Credit Losses" in the Notes to Consolidated Financial Statements included in this report for further discussion of the Company's loan grading system.

Non-interest Income

For the three months ended September 30, 2025, non-interest income increased $70,000, to $7.1 million, when compared to the three months ended September 30, 2024. The largest individual change in the various non-interest income categories in comparing the two periods was an increase of $206,000 in commission income.

For the nine months ended September 30, 2025, non-interest income decreased $1.8 million, to $21.9 million, when compared to the nine months ended September 30, 2024, primarily as a result of the following items:

Other income: Other income decreased $1.7 million, or 31.2%, compared to the prior-year period. In the 2024 nine-month period, the Company recorded $2.7 million of other income, net of expenses and write-offs, related to the termination of the master agreement between the Company and a third-party software vendor for the intended conversion of the Company's core banking platform. Separately, in the nine months ended September 30, 2025, the Company recorded income of $1.1 million related to exits from, and other activities of, its investments in tax credit partnerships.

Net gains on loan sales: Net gains on loan sales decreased $470,000, or 16.3%, compared to the prior-year period. The decrease was due to a decrease in balance of fixed-rate single-family mortgage loans originated and sold during the 2025 period compared to the 2024 period. Fixed rate single-family mortgage loans originated are generally subsequently sold in the secondary market.

Late charges and fees on loans: Late charges and fees on loans increased $392,000 compared to the prior-year period. This increase was primarily due to prepayment fees on a few large commercial real estate loans which paid off in the 2025 period.

Non-interest Expense

For the three months ended September 30, 2025, non-interest expense increased $2.4 million, to $36.1 million, when compared to the three months ended September 30, 2024, primarily as a result of the following items:

Net occupancy and equipment expenses: Net occupancy and equipment expenses increased $735,000, or 9.0%, from the prior-year period. This was mainly due to a collective increase of $637,000 in various components of computer license and support expenses related to upgrades of core systems capabilities and disaster recovery site.

Salaries and employee benefits: Salaries and employee benefits increased $636,000, or 3.3%, from the prior-year period. Much of this increase related to annual merit increases in various lending and operations areas.

Legal, audit and other professional fees: Legal, audit and other professional fees increased $439,000, or 54.3%, from the prior-year period, to $1.2 million. Of this total, legal fees increased $355,000 compared to the prior year period. In the three months ended September 30, 2025, the Company incurred increased legal expenses related to certain corporate matters along with loan collection activities.

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Expense (income) on other real estate owned: Expenses on other real estate owned increased $394,000, or 73.5%, from the prior-year period. In the three months ended September 30, 2024, the Company recorded gains on sales of other real estate owned totaling $452,000, with no such gains in the 2025 period. In the three months ended September 30, 2025, the Company recorded a total of $133,000 in rental income in excess of expense from other real estate owned, compared to $76,000 in the three months ended September 30, 2024. The increase in rental income in the 2025 period related to the $6.0 million office building that was added to other real estate owned in the fourth quarter of 2024.

For the nine months ended September 30, 2025, non-interest expense increased $1.4 million, to $105.9 million, when compared to the nine months ended September 30, 2024, primarily as a result of the following items:

Net occupancy and equipment expenses: Net occupancy and equipment expenses increased $2.0 million, or 8.5%, from the prior-year period. This increase was primarily related to various components of computer license and support expenses in connection with upgrades of core systems capabilities and collectively increased by $1.3 million in the nine months ended September 30, 2025 compared to the same period in 2024. In addition, parking lot maintenance expenses, primarily related to above-normal snow removal activity, collectively increased by $242,000 in the nine months ended September 30, 2025 compared to the same period in 2024.

Salaries and employee benefits: Salaries and employee benefits increased $1.2 million, or 2.1%, in the nine months ended September 30, 2025 compared to the prior-year period. Much of this increase related to annual merit increases in various lending and operations areas.

Other operating expenses: Other operating expenses decreased $442,000, or 7.1%, from the prior-year period. In the 2024 period, the Company recorded expenses totaling $600,000 related to the resolution of compliance matters, with no similar expenses recorded in the current-year period.

Legal, audit and other professional fees: Legal, audit and other professional fees decreased $1.2 million, or 26.9%, from the prior-year period, to $3.2 million. In the 2024 period, the Company expensed a total of $2.0 million related to training and implementation costs for the intended core systems conversion and professional fees to consultants engaged to support the Company's proposed transition of core and ancillary software and information technology systems, compared to $105,000 expensed in the 2025 period. This decrease in expense was partially offset by an increase in legal fees related to certain corporate matters along with loan collection activities.

The Company's efficiency ratio for the three months ended September 30, 2025, was 62.45% compared to 61.34% for the same period in 2024. The Company's efficiency ratio for the nine months ended September 30, 2025, was 61.26% compared to 64.05% for the same period in 2024. The Company's ratio of non-interest expense to average assets was 2.50% and 2.40% for the three- and nine-months ended September 30, 2025, respectively, compared to 2.27% and 2.38% for the three- and nine-months ended September 30, 2024, respectively. Average assets for the three months ended September 30, 2025, decreased $185.3 million, or 3.1%, compared to the three months ended September 30, 2024, and average assets for the nine months ended September 30, 2025, increased $32.5 million, or 0.6%, compared to the nine months ended September 30, 2024. The decrease in average assets in the three months ended September 30, 2025, was primarily due to a net decrease in average balances of outstanding loans. The small increase in average assets in the nine months ended September 30, 2025, was primarily due to a small increase in average balances of investment securities, along with no material change in average balances of outstanding loans.

Provision for Income Taxes

For the three months ended September 30, 2025 and 2024, the Company's effective tax rate was 19.7% and 18.0%, respectively. For the nine months ended September 30, 2025 and 2024, the Company's effective tax rate was 19.4% and 18.5%, respectively. These effective rates were below the statutory federal tax rate of 21.0%, due primarily to the utilization of certain investment tax credits and the Company's tax-exempt investments and tax-exempt loans. The Company's effective tax rate may fluctuate in future periods as it is impacted by the level and timing of the Company's utilization of tax credits, the level of tax-exempt investments and loans, the amount of taxable income in various state jurisdictions and the overall level of pre-tax income. State tax expense estimates continually evolve as taxable income and apportionment between states are analyzed. The Company currently expects its effective tax rate (combined federal and state) will be approximately 18.5% to 20.0% in future periods.

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Average Balances, Interest Rates and Yields

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The following tables present, for the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. Average balances of loans receivable include the average balances of nonaccrual loans for each period. Interest income on loans includes interest received on nonaccrual loans on a cash basis. Interest income on loans also includes the amortization of net loan fees, which were deferred in accordance with accounting standards. Net loan fees included in interest income were $1.0 and $1.1 million for the three months ended September 30, 2025 and 2024, respectively. Net loan fees included in interest income were $3.1 million and $3.4 million for the nine months ended September 30, 2025 and 2024, respectively. Tax-exempt income was not calculated on a tax equivalent basis. The tables do not reflect any effect of income taxes.

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* Defined as the Company's net interest income divided by total average interest-earning assets.

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