Loans and Allowance for Credit Losses

3 Months Ended

Sep. 30, 2024

Loans and Allowance for Credit Losses

Loans and Allowance for Credit Losses

Note 4:  Loans and Allowance for Credit Losses

Classes of loans are summarized as follows:

(dollars in thousands)	September 30, 2024		June 30, 2024
1-4 residential real estate	$	942,916	$	925,397
Non-owner occupied commercial real estate		903,678		899,770
Owner occupied commercial real estate		438,030		427,476
Multi-family real estate		371,177		384,564
Construction and land development		351,481		290,541
Agriculture real estate		239,787		232,520
Total loans secured by real estate		3,247,069		3,160,268
Commercial and industrial		457,018		450,147
Agriculture production		200,215		175,968
Consumer		58,735		59,671
All other loans		3,699		3,981
Gross loans		3,966,736		3,850,035
Deferred loan fees, net		(218)		(232)
Allowance for credit losses		(54,437)		(52,516)
Net loans	$	3,912,081	$	3,797,287

The Company’s lending activities consist of originating loans secured by mortgages on one- to four-family residences and commercial and agricultural real estate, construction loans on residential and commercial properties, commercial and agricultural business loans and consumer loans. At September 30, 2024, the Bank had purchased participations in 78 loans totaling $208.5 million, as compared to 71 loans totaling $178.5 million at June 30, 2024.

1-4 Residential Real Estate Lending. The Company actively originates loans for the acquisition or refinance of one- to four-family residences. This category includes both fixed-rate and adjustable-rate mortgage (“ARM”) loans amortizing over periods of up to 30 years, and the properties securing such loans may be owner-occupied or non-owner-occupied. Single-family residential loans do not generally exceed 90% of the lower of the appraised value or purchase price of the secured property. Substantially all of the one- to four-family residential mortgage originations in the Company’s portfolio are located within the Company’s primary lending area. General risks related to one- to four-family residential lending include stability of borrower income and collateral values.

Home equity lines of credit (HELOCs) are secured with a deed of trust and are generally issued up to 90% of the appraised or estimated value of the property securing the line of credit, less the outstanding balance on the first mortgage and are typically issued for a term of ten years. Interest rates on HELOCs are generally adjustable. Interest rates are based upon the loan-to-value ratio of the property with better rates given to borrowers with more equity. Risks related to HELOC lending generally include the stability of borrower income and collateral values.

Non-Owner Occupied and Owner Occupied Commercial Real Estate Lending. The Company actively originates loans secured by owner- and non-owner-occupied commercial real estate including single- and multi-tenant retail properties, restaurants, hotels, land (improved and unimproved), nursing homes and other healthcare facilities, warehouses and distribution centers, convenience stores, automobile dealerships and other automotive-related services, and other businesses. These properties are typically owned and operated by borrowers headquartered within the Company’s primary lending area, however, the property may be located outside the Company’s primary lending area. Approximately $626.3 million of the Company’s $1.6 billion in commercial real estate loans are secured by properties located outside our primary lending area. Risks to owner-occupied commercial real estate lending generally include the continued profitable operation of the borrower’s enterprise, as well as general collateral values, and may be heightened by unique, specific uses of the property serving as collateral. Non-owner-occupied commercial real estate lending risks include tenant demand and performance, lease rates, and vacancies, as well as collateral values and borrower leverage. These factors may be influenced by general economic conditions in the region, or in the United States generally.

Most commercial real estate loans originated by the Company generally are based on amortization schedules of up to 25 years with monthly principal and interest payments. Generally, the interest rate received on these loans is fixed for a maturity for up to ten years, with a balloon payment due at maturity. Alternatively, for some loans, the interest rate adjusts at least annually after an initial period up to seven years. The Company typically includes an interest rate “floor” in the loan agreement. Generally, improved commercial real estate loan amounts do not exceed 80% of the lower of the appraised value or the purchase price of the secured property.

Multi-family Real Estate Lending. The Company originates loans secured by multi-family residential properties that are often located outside the Company’s primary lending area but made to borrowers who operate within the Company’s primary market area. The majority of the multi-family residential loans that are originated by the Company are amortized over periods generally up to 25 years, with balloon maturities typically up to ten years. Both fixed and adjustable interest rates are offered and it is typical for the Company to include an interest rate “floor” and “ceiling” in the loan agreement. Generally, multi-family residential loans do not exceed 85% of the lower of the appraised value or purchase price of the secured property. General risks related to multi-family residential lending include rental demand and supply, rental rates, and vacancies, as well as collateral values and borrower leverage.

Construction and Land Development Lending. The Company originates real estate loans secured by property or land that is under construction or development. Construction and land development loans originated by the Company are generally to finance the construction of owner occupied residential real estate, or to finance speculative construction of residential real estate, land development, or owner-operated or non-owner occupied commercial real estate. During construction, these loans typically require monthly interest-only payments, with single-family residential construction loans having maturities ranging from six to twelve months, while multi-family or commercial construction loans typically mature in 12 to 36 months. Once construction is completed, construction loans may be converted to permanent

financing with monthly payments using amortization schedules of up to 30 years on residential and generally up to 25 years on commercial real estate. Construction and land development lending risks generally include successful timely and on-budget completion of the project, followed by the sale of the property in the case of land development or non-owner-occupied real estate, or the long-term occupancy of the property by the builder in the case of owner-occupied construction. Changes in real estate values or other economic conditions may impact the ability of a borrower to sell property developed for that purpose.

While the Company typically utilizes relatively short maturity periods to closely monitor the inherent risks associated with construction loans for these loans, weather conditions, change orders, availability of materials and/or labor, and other factors may contribute to the lengthening of a project, thus necessitating the need to renew the construction loan at the balloon maturity. Such extensions are typically executed in incremental three month periods to facilitate project completion. During construction, loans typically require monthly interest only payments which may allow the Company an opportunity to monitor for early signs of financial difficulty should the borrower fail to make a required monthly payment. Additionally, during the construction phase, the Company typically performs interim inspections which further provide the Company an opportunity to assess risk.

Agriculture Production and Agriculture Real Estate Lending. Agriculture production and agriculture real estate loans are generally comprised on seasonal operating lines to farmers to plant crops and term loans to fund the purchase of equipment, farmland, or livestock. This segment of lending includes pastureland and row crop ground. The Company originates substantially all agriculture production and agriculture real estate lending to borrowers headquartered in the Company’s primary lending area. Specific underwriting standards have been established for agricultural-related loans including the establishment of projections for each operating year based on industry developed estimates of farm input costs and expected commodity yields and prices. Agriculture production operating lines are typically written for one year and secured by the crop. Agricultural real estate terms offered usually have amortization schedules of up to 25 years with an 80% loan-to-value ratio, or 30 years with a 75% loan-to-value ratio. Risks to agricultural lending include unique factors such as commodity prices, yields, input costs, and weather, as well as farmland and farm equipment values.

Commercial and Industrial Lending. The Company’s commercial and industrial lending activities encompass loans with a variety of purposes and security, including loans to finance accounts receivable, inventory, equipment and operating lines of credit. The Company offers both fixed and adjustable rate commercial and industrial loans. Generally, commercial loans secured by fixed assets are amortized over periods up to five years. Commercial and industrial lending risk is primarily driven by the borrower’s successful generation of cash flow from their business enterprise sufficient to service debt, and may be influenced by factors specific to the borrower and industry, or by general economic conditions in the region or in the United States generally.

Consumer Lending. The Company offers a variety of secured consumer loans, including home equity, direct and indirect automobile loans, second mortgages, recreational vehicle loans and loans secured by deposits. The Company originates substantially all of its consumer loans in its primary lending area. Usually, consumer loans are originated with fixed rates for terms of up to 66 months, with the exception of home equity lines of credit, which are variable, tied to the prime rate of interest and are for a period of ten years.

Automobile loans originated by the Company include both direct loans and a smaller amount of loans originated by auto dealers. Typically, automobile loans are made for terms of up to 66 months for new and used vehicles. Loans secured by automobiles have fixed rates and are generally made in amounts up to 100% of the purchase price of the vehicle. Risks to automobile and other consumer lending generally include the stability of borrower income and borrower willingness to repay.

Allowance for Credit Losses. The PCL for the three-month period ended September 30, 2024, was $2.2 million compared to $900,000 in the same period of the prior fiscal year. The current period PCL was the result of a $2.0 million provision attributable to the ACL for loan balances outstanding, and a $138,000 provision attributable to the allowance for off-balance sheet credit exposures. The Company has estimated its expected credit losses as of September 30, 2024, under ASC 326-20, and management believes the ACL as of that date was adequate based on that estimate. There remains, however, significant uncertainty as the Federal Reserve has tightened monetary policy to address inflation risks. Qualitative adjustments in the Company’s ACL model were slightly decreased compared to June 30, 2024. The Company increased the allowance attributable to classified hotel loans that have been slow to recover from

the COVID-19 pandemic. Additionally, PCL was required due to loan growth in the first quarter of fiscal year 2025 and a slight increase in modeled expected losses due to a modest increase in the unemployment rate expectations. As a percentage of average loans outstanding, the Company recorded net charge offs of 0.01% (annualized) during the current period, as compared to 0.03% for the same period of the prior fiscal year. Specifically, management considered the following primary qualitative items in its estimate of the ACL:

●  economic conditions and projections as provided by the Federal Open Market Committee (FOMC) were utilized in the Company’s estimate at September 30, 2024. Economic factors considered in the projections included national levels of unemployment using the high bound of the FOMC’s central tendency, and national rates of inflation-adjusted growth in the gross domestic product using the low bound of the FOMC’s central tendency. Economic conditions are considered to be a moderate and stable risk factor, relative to June 30, 2024;

● the pace of growth of the Company’s loan portfolio, exclusive of acquisitions, relative to overall economic growth. This measure is considered to be a moderate and slightly decreasing risk factor, relative to June 30, 2024;

● levels and trends for loan delinquencies nationally and in the region. This is considered to be a low and stable risk factor, relative to June 30, 2024;

● quantified supported model adjustments and general imprecision adjustments. This factor was added for the June 30, 2024, ACL estimate as certain model adjustments capture highly specific issues or events that are not adequately captured in model outcomes. General imprecision adjustments address other sources of imprecision that are not specifically identifiable or quantifiable to a particular loan portfolio and have not been captured by the model or by a specific model adjustment. The Company considers general imprecision in three dimensions; economic forecast imprecision, model imprecision, and process imprecision.

PCD Loans. In connection with the acquisition of Citizens Bancshares Co. (Citizens) on January 20, 2023, and Fortune Financial Corporation (Fortune) on February 25, 2022, the Company acquired loans both with and without evidence of credit quality deterioration since origination. Acquired loans are recorded at their fair value at the time of acquisition with no carryover from the acquired institution’s previously recorded allowance for loan and lease losses. Acquired loans are accounted for under ASC 326, Financial Instruments – Credit Losses.

The fair value of acquired loans recorded at the time of acquisition is based upon several factors, including the timing and payment of expected cash flows, as adjusted for estimated credit losses and prepayments, and then discounting these cash flows using comparable market rates. The resulting fair value adjustment is recorded in the form of a premium or discount to the unpaid principal balance of the respective loans. As it relates to acquired loans that, as of the date of acquisition, have experienced a more-than-insignificant deterioration in credit quality since origination, the net premium or net discount is adjusted to reflect the Company’s allowance for credit losses recorded for PCD loans at the time of acquisition, and the remaining fair value adjustment is accreted or amortized into interest income over the remaining life of the respective loans. As it relates to loans not classified as PCD (non-PCD) loans, the credit loss and yield components of their fair value adjustment are aggregated, and the resulting net premium or net discount is accreted or amortized into interest income over the remaining life of the respective loans. The Company records an ACL for non-PCD loans at the time of acquisition through provision expense, and therefore, no further adjustments are made to the net premium or net discount for non-PCD loans.

Loans that the Company acquired from Citizens and Fortune, that at the time of acquisition had more-than-insignificant deterioration of credit quality since origination, are classified as PCD loans and presented in the tables below at acquisition carrying value:

(dollars in thousands)	January 20, 2023
PCD Loans – Citizens
Purchase price of PCD loans at acquisition	$	27,481
Allowance for credit losses at acquisition		(1,121)
Fair value of PCD loans at acquisition	$	26,360

(dollars in thousands)	February 25, 2022
PCD Loans – Fortune
Purchase price of PCD loans at acquisition	$	15,055
Allowance for credit losses at acquisition		(120)
Fair value of PCD loans at acquisition	$	14,935

The following tables present the balance in the ACL based on portfolio segment as of September 30, 2024 and 2023, and activity in the ACL for the three-month periods ended September 30, 2024 and 2023:

	At period end and for the three months ended September 30, 2024
	Balance		Provision						Balance
	beginning		(benefit) charged		Losses				end
(dollars in thousands)	of period		to expense		charged off		Recoveries		of period
Allowance for credit losses on loans:
1-4 residential real estate	$	10,528	$	157	$	(48)	$	—	$	10,637
Non-owner occupied commercial real estate		19,055		1,673		—		—		20,728
Owner occupied commercial real estate		4,815		(1)		—		—		4,814
Multi-family real estate		5,447		(376)		—		47		5,118
Construction and land development		2,901		774		—		—		3,675
Agriculture real estate		2,107		(80)		—		—		2,027
Commercial and industrial		6,233		(85)		(39)		5		6,114
Agriculture production		835		(51)		—		—		784
Consumer		578		13		(72)		7		526
All other loans		17		(3)		—		—		14
Total	$	52,516	$	2,021	$	(159)	$	59	$	54,437

	At period end and for the three months ended September 30, 2023
	Balance		Provision						Balance
	beginning		(benefit) charged		Losses				end
(dollars in thousands)	of period		to expense		charged off		Recoveries		of period
Allowance for credit losses on loans:
1-4 residential real estate	$	9,474	$	(101)	$	(35)	$	33	$	9,371
Non-owner occupied commercial real estate		13,863		2,641		—		—		16,504
Owner occupied commercial real estate		5,168		(289)		—		—		4,879
Multi-family real estate		6,806		(612)		(97)		—		6,097
Construction and land development		3,414		224		(111)		18		3,545
Agriculture real estate		2,567		(141)		—		—		2,426
Commercial and industrial		5,235		(100)		(4)		3		5,134
Agriculture production		782		(85)		—		—		697
Consumer		490		38		(88)		13		453
All other loans		21		(5)		—		—		16
Total	$	47,820	$	1,570	$	(335)	$	67	$	49,122

The following tables present the balance in the allowance for off-balance sheet credit exposure based on portfolio segment as of September 30, 2024 and 2023, and activity in the allowance for the three-month periods ended September 30, 2024 and 2023:

	At period end and for the three months ended September 30, 2024
	Balance		Provision		Balance
	beginning		(benefit) charged		end
(dollars in thousands)	of period		to expense		of period
Allowance for off-balance sheet credit exposure:
1-4 residential real estate	$	140	$	30	$	170
Non-owner occupied commercial real estate		153		22		175
Owner occupied commercial real estate		136		(14)		122
Multi-family real estate		31		3		34
Construction and land development		1,912		88		2,000
Agriculture real estate		60		(8)		52
Commercial and industrial		782		20		802
Agriculture production		37		(3)		34
Consumer		12		—		12
All other loans		—		—		—
Total	$	3,263	$	138	$	3,401

	At period end and for the three months ended September 30, 2023
	Balance		Provision		Balance
	beginning		(benefit) charged		end
(dollars in thousands)	of period		to expense		of period
Allowance for off-balance sheet credit exposure:
1-4 residential real estate	$	126	$	5	$	131
Non-owner occupied commercial real estate		154		—		154
Owner occupied commercial real estate		182		(2)		180
Multi-family real estate		16		(1)		15
Construction and land development		4,897		(612)		4,285
Agriculture real estate		50		(11)		39
Commercial and industrial		730		37		767
Agriculture production		107		(84)		23
Consumer		16		1		17
All other loans		10		(3)		7
Total	$	6,288	$	(670)	$	5,618

The following tables present gross charge-offs by loan class and year of origination for the three-month periods ended September 30, 2024 and 2023:

													Revolving
(dollars in thousands)	2025		2024		2023		2022		2021		Prior		loans		Total
September 30, 2024
1-4 residential real estate	$	—	$	—	$	—	$	—	$	—	$	48	$	—	$	48
Commercial and industrial		—		—		28		—		—		11		—		39
Consumer		—		37		21		11		3		—		—		72
Total gross charge-offs	$	—	$	37	$	49	$	11	$	3	$	59	$	—	$	159

													Revolving
(dollars in thousands)	2025		2024		2023		2022		2021		Prior		loans		Total
September 30, 2023
1-4 residential real estate	$	—	$	—	$	—	$	—	$	—	$	35	$	—	$	35
Multi-family real estate		—		—		—		97		—		—		—		97
Construction and land development		—		—		—		111		—		—		—		111
Commercial and industrial		—		4		—		—		—		—		—		4
Consumer		6		41		26		10		—		5		—		88
Total gross charge-offs	$	6	$	45	$	26	$	218	$	—	$	40	$	—	$	335

Credit Quality Indicators. The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on all loans at origination and is updated on a quarterly basis for loans risk rated Watch, Special Mention, Substandard, or Doubtful. In addition, lending relationships of $3 million or more, exclusive of any consumer or owner-occupied residential loan, are subject to an annual credit analysis which is prepared by the loan administration department and presented to a loan committee with appropriate lending authority. A sample of lending relationships in excess of $1 million (exclusive of single-family residential real estate loans) are subject to an independent loan review annually, in order to verify risk ratings. The Company uses the following definitions for risk ratings:

Watch – Loans classified as watch exhibit weaknesses that require more than usual monitoring. Issues may include deteriorating financial condition, payments made after due date but within 30 days, adverse industry conditions or management problems.

Special Mention – Loans classified as special mention exhibit signs of further deterioration but still generally make payments within 30 days. This is a transitional rating and loans should typically not be rated Special Mention for more than 12 months.

Substandard – Loans classified as substandard possess weaknesses that jeopardize the ultimate collection of the principal and interest outstanding. These loans exhibit continued financial losses, ongoing delinquency, overall poor financial condition, and insufficient collateral. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful – Loans classified as doubtful have all the weaknesses of substandard loans, and have deteriorated to the level that there is a high probability of substantial loss.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be Pass rated loans.

A periodic review of selected credits (based on loan size and type) is conducted to identify loans with heightened risk or probable losses and to assign risk grades. The primary responsibility for this review rests with loan administration personnel. This review is supplemented with periodic examinations of both selected credits and the credit review process by the Company’s internal audit function and applicable regulatory agencies. The information from these reviews assists management in the timely identification of problems and potential problems and provides a basis for deciding whether the credit continues to share similar risk characteristics with collectively evaluated loan pools, or whether credit losses for the loan should be evaluated on an individual loan basis.

The following table presents the credit risk profile of the Company’s loan portfolio (excluding deferred loan fees) based on rating category and fiscal year of origination as of September 30, 2024. This table includes PCD loans, which are reported according to risk categorization after acquisition based on the Company’s standards for such classification:

													Revolving
(dollars in thousands)	2025		2024		2023		2022		2021		Prior		loans		Total
1-4 residential real estate
Pass	$	59,431	$	152,857	$	148,199	$	185,830	$	138,617	$	153,107	$	99,379	$	937,420
Watch		60		809		287		238		391		118		—		1,903
Special Mention		—		—		—		—		—		—		—		—
Substandard		960		758		623		326		176		750		—		3,593
Doubtful		—		—		—		—		—		—		—		—
Total 1-4 residential real estate	$	60,451	$	154,424	$	149,109	$	186,394	$	139,184	$	153,975	$	99,379	$	942,916
Non-owner occupied commercial real estate
Pass	$	20,261	$	106,090	$	242,653	$	291,892	$	99,987	$	84,799	$	7,178	$	852,860
Watch		5,071		207		13,206		206		1,510		5,202		—		25,402
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		43		25,373		—		—		—		25,416
Doubtful		—		—		—		—		—		—		—		—
Total Non-owner occupied commercial real estate	$	25,332	$	106,297	$	255,902	$	317,471	$	101,497	$	90,001	$	7,178	$	903,678
Owner occupied commercial real estate
Pass	$	26,210	$	58,846	$	90,859	$	86,849	$	83,070	$	55,857	$	20,518	$	422,209
Watch		587		629		6,663		1,164		150		1,169		519		10,881
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		3,318		—		625		—		425		572		4,940
Doubtful		—		—		—		—		—		—		—		—
Total Owner occupied commercial real estate	$	26,797	$	62,793	$	97,522	$	88,638	$	83,220	$	57,451	$	21,609	$	438,030
Multi-family real estate
Pass	$	15,824	$	24,791	$	156,181	$	81,520	$	73,648	$	18,832	$	381	$	371,177
Watch		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total Multi-family real estate	$	15,824	$	24,791	$	156,181	$	81,520	$	73,648	$	18,832	$	381	$	371,177
Construction and land development
Pass	$	51,908	$	97,383	$	159,720	$	27,195	$	2,463	$	4,388	$	1,794	$	344,851
Watch		4,949		275		—		128		—		85		—		5,437
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		1,161		32		—		—		—		—		1,193
Doubtful		—		—		—		—		—		—		—		—
Total Construction and land development	$	56,857	$	98,819	$	159,752	$	27,323	$	2,463	$	4,473	$	1,794	$	351,481
Agriculture real estate
Pass	$	13,804	$	37,392	$	44,730	$	55,391	$	47,698	$	18,522	$	18,484	$	236,021
Watch		—		252		121		192		—		259		—		824
Special Mention		—		—		—		—		—		—		—		—
Substandard		35		2,265		316		—		279		—		47		2,942
Doubtful		—		—		—		—		—		—		—		—
Total Agriculture real estate	$	13,839	$	39,909	$	45,167	$	55,583	$	47,977	$	18,781	$	18,531	$	239,787
Commercial and industrial
Pass	$	31,499	$	100,314	$	56,216	$	40,472	$	41,221	$	9,206	$	173,034	$	451,962
Watch		1,906		201		257		43		8		209		286		2,910
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		201		259		859		—		752		75		2,146
Doubtful		—		—		—		—		—		—		—		—
Total Commercial and industrial	$	33,405	$	100,716	$	56,732	$	41,374	$	41,229	$	10,167	$	173,395	$	457,018
Agriculture production
Pass	$	13,323	$	37,828	$	10,533	$	3,926	$	5,851	$	2,114	$	126,123	$	199,698
Watch		128		68		2		3		—		—		217		418
Special Mention		—		—		—		—		—		—		—		—
Substandard		42		—		5		9		17		26		—		99
Doubtful		—		—		—		—		—		—		—		—
Total Agriculture production	$	13,493	$	37,896	$	10,540	$	3,938	$	5,868	$	2,140	$	126,340	$	200,215

Consumer
Pass	$	12,468	$	21,875	$	14,664	$	5,448	$	1,785	$	361	$	2,032	$	58,633
Watch		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		34		52		12		4		—		—		102
Doubtful		—		—		—		—		—		—		—		—
Total Consumer	$	12,468	$	21,909	$	14,716	$	5,460	$	1,789	$	361	$	2,032	$	58,735
All other loans
Pass	$	4	$	1,128	$	597	$	82	$	214	$	1,674	$	—	$	3,699
Watch		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total All other loans	$	4	$	1,128	$	597	$	82	$	214	$	1,674	$	—	$	3,699
Total Loans
Pass	$	244,732	$	638,504	$	924,352	$	778,605	$	494,554	$	348,860	$	448,923	$	3,878,530
Watch		12,701		2,441		20,536		1,974		2,059		7,042		1,022		47,775
Special Mention		—		—		—		—		—		—		—		—
Substandard		1,037		7,737		1,330		27,204		476		1,953		694		40,431
Doubtful		—		—		—		—		—		—		—		—
Total	$	258,470	$	648,682	$	946,218	$	807,783	$	497,089	$	357,855	$	450,639	$	3,966,736

At September 30, 2024, PCD loans comprised $41.9 million of credits rated “Pass”; $8.3 million of credits rated “Watch”; none rated “Special Mention”; $3.2 million of credits rated “Substandard”; and none rated “Doubtful”.

The following table presents the credit risk profile of the Company’s loan portfolio (excluding deferred loan fees) based on rating category and fiscal year of origination as of June 30, 2024. This table includes PCD loans, which were reported according to risk categorization after acquisition based on the Company’s standards for such classification:

													Revolving
(dollars in thousands)	2024		2023		2022		2021		2020		Prior		loans		Total
1-4 residential real estate
Pass	$	167,734	$	157,530	$	195,002	$	142,721	$	66,292	$	92,728	$	99,365	$	921,372
Watch		877		289		87		396		98		23		—		1,770
Special Mention		—		—		—		—		—		—		—		—
Substandard		686		797		243		183		30		294		22		2,255
Doubtful		—		—		—		—		—		—		—		—
Total 1-4 residential real estate	$	169,297	$	158,616	$	195,332	$	143,300	$	66,420	$	93,045	$	99,387	$	925,397
Non-owner occupied commercial real estate
Pass	$	120,914	$	232,802	$	294,138	$	102,380	$	33,691	$	55,190	$	6,470	$	845,585
Watch		4,658		16,232		209		1,513		4,443		1,404		—		28,459
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		43		25,683		—		—		—		—		25,726
Doubtful		—		—		—		—		—		—		—		—
Total Non-owner occupied commercial real estate	$	125,572	$	249,077	$	320,030	$	103,893	$	38,134	$	56,594	$	6,470	$	899,770
Owner occupied commercial real estate
Pass	$	63,251	$	98,776	$	89,361	$	86,975	$	25,664	$	26,124	$	20,147	$	410,298
Watch		1,252		6,492		1,178		154		—		1,181		520		10,777
Special Mention		—		—		—		—		—		—		—		—
Substandard		3,233		—		2,199		—		—		428		541		6,401
Doubtful		—		—		—		—		—		—		—		—
Total Owner occupied commercial real estate	$	67,736	$	105,268	$	92,738	$	87,129	$	25,664	$	27,733	$	21,208	$	427,476
Multi-family real estate
Pass	$	36,518	$	157,471	$	86,171	$	77,545	$	21,438	$	5,341	$	80	$	384,564
Watch		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total Multi-family real estate	$	36,518	$	157,471	$	86,171	$	77,545	$	21,438	$	5,341	$	80	$	384,564

Construction and land development
Pass	$	104,162	$	143,538	$	27,524	$	4,379	$	3,887	$	679	$	1,518	$	285,687
Watch		652		2,906		131		—		—		—		—		3,689
Special Mention		—		—		—		—		—		—		—		—
Substandard		1,129		36		—		—		—		—		—		1,165
Doubtful		—		—		—		—		—		—		—		—
Total Construction and land development	$	105,943	$	146,480	$	27,655	$	4,379	$	3,887	$	679	$	1,518	$	290,541
Agriculture real estate
Pass	$	39,491	$	46,387	$	56,407	$	49,334	$	9,947	$	9,238	$	18,003	$	228,807
Watch		281		100		197		—		259		—		—		837
Special Mention		—		—		—		—		—		—		—		—
Substandard		2,265		281		—		283		—		—		47		2,876
Doubtful		—		—		—		—		—		—		—		—
Total Agriculture real estate	$	42,037	$	46,768	$	56,604	$	49,617	$	10,206	$	9,238	$	18,050	$	232,520
Commercial and industrial
Pass	$	116,173	$	60,404	$	43,205	$	43,879	$	3,145	$	4,863	$	174,181	$	445,850
Watch		1,031		250		43		—		—		228		404		1,956
Special Mention		—		—		—		—		—		—		—		—
Substandard		272		275		859		—		116		769		50		2,341
Doubtful		—		—		—		—		—		—		—		—
Total Commercial and industrial	$	117,476	$	60,929	$	44,107	$	43,879	$	3,261	$	5,860	$	174,635	$	450,147
Agriculture production
Pass	$	40,980	$	11,288	$	4,115	$	6,159	$	1,965	$	229	$	110,396	$	175,132
Watch		170		37		204		—		—		127		217		755
Special Mention		—		—		—		—		—		—		—		—
Substandard		5		23		9		17		—		27		—		81
Doubtful		—		—		—		—		—		—		—		—
Total Agriculture production	$	41,155	$	11,348	$	4,328	$	6,176	$	1,965	$	383	$	110,613	$	175,968
Consumer
Pass	$	30,317	$	17,318	$	6,547	$	2,268	$	467	$	54	$	2,683	$	59,654
Watch		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		3		11		3		—		—		—		17
Doubtful		—		—		—		—		—		—		—		—
Total Consumer	$	30,317	$	17,321	$	6,558	$	2,271	$	467	$	54	$	2,683	$	59,671
All other loans
Pass	$	1,139	$	644	$	122	$	217	$	43	$	1,816	$	—	$	3,981
Watch		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total All other loans	$	1,139	$	644	$	122	$	217	$	43	$	1,816	$	—	$	3,981
Total Loans
Pass	$	720,679	$	926,158	$	802,592	$	515,857	$	166,539	$	196,262	$	432,843	$	3,760,930
Watch		8,921		26,306		2,049		2,063		4,800		2,963		1,141		48,243
Special Mention		—		—		—		—		—		—		—		—
Substandard		7,590		1,458		29,004		486		146		1,518		660		40,862
Doubtful		—		—		—		—		—		—		—		—
Total	$	737,190	$	953,922	$	833,645	$	518,406	$	171,485	$	200,743	$	434,644	$	3,850,035

At June 30, 2024, PCD loans comprised $40.9 million of credits rated “Pass”; $8.4 million of credits rated “Watch”, none rated “Special Mention”, $3.1 million of credits rated “Substandard” and none rated “Doubtful”.

Past-due Loans. The following tables present the Company’s loan portfolio aging analysis (excluding deferred loan fees) as of September 30, 2024 and June 30, 2024. These tables include PCD loans, which are reported according to aging analysis after acquisition based on the Company’s standards for such classification:

	September 30, 2024
					Greater Than								Greater Than 90
	30-59 Days		60-89 Days		90 Days		Total				Total Loans		Days Past Due
(dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Receivable		and Accruing
1-4 residential real estate	$	1,688	$	3,196	$	1,713	$	6,597	$	936,319	$	942,916	$	—
Non-owner occupied commercial real estate		106		—		—		106		903,572		903,678		—
Owner occupied commercial real estate		135		—		1,173		1,308		436,722		438,030		—
Multi-family real estate		—		—		—		—		371,177		371,177		—
Construction and land development		176		—		187		363		351,118		351,481		—
Agriculture real estate		27		—		1,859		1,886		237,901		239,787		—
Commercial and industrial		1,042		210		1,257		2,509		454,509		457,018		—
Agriculture production		—		66		26		92		200,123		200,215		—
Consumer		251		139		99		489		58,246		58,735		—
All other loans		—		—		—		—		3,699		3,699		—
Total loans	$	3,425	$	3,611	$	6,314	$	13,350	$	3,953,386	$	3,966,736	$	—

	June 30, 2024
					Greater Than								Greater Than 90
	30-59 Days		60-89 Days		90 Days		Total				Total Loans		Days Past Due
(dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Receivable		and Accruing
1-4 residential real estate	$	890	$	2,087	$	664	$	3,641	$	921,756	$	925,397	$	—
Non-owner occupied commercial real estate		107		—		—		107		899,663		899,770		—
Owner occupied commercial real estate		305		—		1,060		1,365		426,111		427,476		—
Multi-family real estate		—		—		—		—		384,564		384,564		—
Construction and land development		251		377		—		628		289,913		290,541		—
Agriculture real estate		573		—		35		608		231,912		232,520		—
Commercial and industrial		641		83		1,335		2,059		448,088		450,147		—
Agriculture production		50		—		344		394		175,574		175,968		—
Consumer		311		74		14		399		59,272		59,671		—
All other loans		—		—		—		—		3,981		3,981		—
Total loans	$	3,128	$	2,621	$	3,452	$	9,201	$	3,840,834	$	3,850,035	$	—

At September 30, 2024, there were three PCD loans totaling $558,000 greater than 90 days past due, compared to one PCD loan totaling $560,000 that was greater than 90 days past due at June 30, 2024.

Loans that experience insignificant payment delays and payment shortfalls generally are not adversely classified or determined to not share similar risk characteristics with collectively evaluated pools of loans for determination of the ACL estimate. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Significant payment delays or shortfalls may lead to a determination that a loan should be individually evaluated for estimated credit losses.

Collateral Dependent Loans. The following tables present the Company’s collateral dependent loans and related ACL at September 30, 2024, and June 30, 2024:

											Allowance on
(dollars in thousands)	Commercial		Residential		Construction and						Collateral
September 30, 2024	Real Estate		Real Estate		Land Development		Other		Total		Dependent Loans
1-4 residential real estate	$	—	$	790	$	—	$	—	$	790	$	108
Non-owner occupied commercial real estate		23,204		—		—		—		23,204		12,079
Owner occupied commercial real estate		500		—		—		—		500		164
Construction and land development		—		—		1,161		—		1,161		161
Commercial and industrial		—		—		—		1,671		1,671		614
Total loans	$	23,704	$	790	$	1,161	$	1,671	$	27,326	$	13,126

											Allowance on
(dollars in thousands)	Commercial		Residential		Construction and						Collateral
June 30, 2024	Real Estate		Real Estate		Land Development		Other		Total		Dependent Loans
1-4 residential real estate	$	—	$	797	$	—	$	—	$	797	$	116
Non-owner occupied commercial real estate		23,457		—		—		—		23,457		10,175
Commercial and industrial		—		—		—		2,705		2,705		635
Total loans	$	23,457	$	797	$	—	$	2,705	$	26,959	$	10,926

Nonaccrual Loans. The following table presents the Company’s amortized cost basis of nonaccrual loans segmented by class of loans at September 30, 2024, and June 30, 2024. The table excludes performing modifications to borrowers experiencing financial difficulty.

(dollars in thousands)	September 30, 2024		June 30, 2024
1-4 residential real estate	$	2,502	$	1,391
Owner occupied commercial real estate		1,326		1,102
Construction and land development		250		108
Agriculture real estate		1,940		1,896
Commercial and industrial		1,673		1,703
Agriculture production		412		461
Consumer		103		19
Total loans	$	8,206	$	6,680

At September 30, 2024, there were no nonaccrual loans individually evaluated for which no ACL was recorded. Interest income recognized on nonaccrual loans in the three-month periods ended September 30, 2024 and 2023, was immaterial.

Modifications to Borrowers Experiencing Financial Difficulty. The Company adopted ASU 2022-02, “Financial Instruments – Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures,” effective July 1, 2023. The amendments in ASU 2022-02 eliminated the recognition and measurement of TDRs and enhanced disclosures for loan modifications to borrowers experiencing financial difficulty.

During the three-month periods ended September 30, 2024 and 2023, there were no loan modifications made for borrowers experiencing financial difficulty.

Residential Real Estate Foreclosures. The Company may obtain physical possession of real estate collateralizing a residential mortgage loan or home equity loan via foreclosure or in-substance repossession. As of September 30, 2024 and June 30, 2024, the carrying value of foreclosed residential real estate properties as a result of obtaining physical

possession was $74,000. In addition, as of September 30, 2024, and June 30, 2024, the Company had residential mortgage loans and home equity loans with a carrying value of $553,000 and $193,000, respectively, collateralized by residential real estate property for which formal foreclosure proceedings were in process.