GREAT SOUTHERN BANCORP, INC. - Quarter Report: 2017 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES ACT OF 1934

For the Quarterly Period Ended March 31, 2017

Commission File Number 0-18082

GREAT SOUTHERN BANCORP, INC.

(Exact name of registrant as specified in its charter)

Maryland		43-1524856
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

1451 E. Battlefield, Springfield, Missouri		65804
(Address of principal executive offices)		(Zip Code)

(417) 887-4400

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☒

Non-accelerated filer ☐	(Do not check if a smaller reporting company)

Smaller reporting company ☐	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

The number of shares outstanding of each of the registrant's classes of common stock: 14,033,038 shares of common stock, par value $.01, outstanding at May 3, 2017.

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(In thousands, except number of shares)

	MARCH 31,		DECEMBER 31,
	2017		2016
	(Unaudited)
ASSETS
Cash	$	111,858	$	120,203
Interest-bearing deposits in other financial institutions		116,211		159,566
Cash and cash equivalents		228,069		279,769
Available-for-sale securities		203,686		213,872
Held-to-maturity securities (fair value $256 – March 2017; $258 - December 2016)		247		247
Mortgage loans held for sale		4,782		16,445
Loans receivable, net of allowance for loan losses of
$36,993 – March 2017; $37,400 - December 2016		3,727,641		3,759,966
FDIC indemnification asset		12,786		13,145
Interest receivable		11,032		11,875
Prepaid expenses and other assets		44,708		45,649
Other real estate owned, net		32,676		32,658
Premises and equipment, net		139,879		140,596
Goodwill and other intangible assets		12,088		12,500
Investment in Federal Home Loan Bank stock		6,740		13,034
Current and deferred income taxes		8,261		10,907
Total Assets	$	4,432,595	$	4,550,663

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits	$	3,688,663	$	3,677,230
Federal Home Loan Bank advances		31,429		31,452
Securities sold under reverse repurchase agreements with customers		144,345		113,700
Short-term borrowings		1,398		172,323
Subordinated debentures issued to capital trusts		25,774		25,774
Subordinated notes		73,575		73,537
Accrued interest payable		1,631		2,723
Advances from borrowers for taxes and insurance		6,431		4,643
Accounts payable and accrued expenses		19,497		19,475
Total Liabilities		3,992,743		4,120,857
Stockholders' Equity:
Capital stock
Serial preferred stock – $.01 par value; authorized 1,000,000 shares; issued and outstanding March 2017 and December 2016 - -0- shares		—		—
Common stock, $.01 par value; authorized 20,000,000 shares; issued and outstanding March 2017 – 14,009,325 shares;
December 2016 - 13,968,386 shares		140		140
Additional paid-in capital		26,564		25,942
Retained earnings		411,122		402,166
Accumulated other comprehensive income		2,026		1,558
Total Stockholders' Equity		439,852		429,806
Total Liabilities and Stockholders' Equity	$	4,432,595	$	4,550,663

See Notes to Consolidated Financial Statements

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

	THREE MONTHS ENDED MARCH 31,
	2017			2016
	(Unaudited)
INTEREST INCOME
Loans	$	43,744		$	44,048
Investment securities and other		1,669			1,698
TOTAL INTEREST INCOME		45,413			45,746
INTEREST EXPENSE
Deposits		4,964			3,934
Federal Home Loan Bank advances		255			438
Short-term borrowings and repurchase agreements		226			81
Subordinated debentures issued to capital trusts		242			174
Subordinated notes		1,025			—
TOTAL INTEREST EXPENSE		6,712			4,627
NET INTEREST INCOME		38,701			41,119
PROVISION FOR LOAN LOSSES		2,250			2,101
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		36,451			39,018

NON-INTEREST INCOME
Commissions		266			303
Service charges and ATM fees		5,268			5,279
Net realized gains on sales of loans		872			832
Net realized gains on sales of available-for-sale securities		—			3
Late charges and fees on loans		878			577
Gain (loss) on derivative interest rate products		7			(162	)
Amortization of income/expense related to business acquisitions		(489	)		(3,293	)
Other income		896			1,435
TOTAL NON-INTEREST INCOME		7,698			4,974

NON-INTEREST EXPENSE
Salaries and employee benefits		15,333			15,363
Net occupancy and equipment expense		6,316			6,842
Postage		933			1,001
Insurance		798			952
Advertising		413			441
Office supplies and printing		697			465
Telephone		810			922
Legal, audit and other professional fees		320			841
Expense on other real estate owned		575			911
Partnership tax credit investment amortization		278			420
Acquired deposit intangible asset amortization		412			543
Other operating expenses		1,688			2,219
TOTAL NON-INTEREST EXPENSE		28,573			30,920

INCOME BEFORE INCOME TAXES		15,576			13,072

PROVISION FOR INCOME TAXES		4,058			3,279

NET INCOME AND NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	11,518		$	9,793

BASIC EARNINGS PER COMMON SHARE	$	0.82	$	0.71
DILUTED EARNINGS PER COMMON SHARE	$	0.81	$	0.70
DIVIDENDS DECLARED PER COMMON SHARE	$	0.22	$	0.22

See Notes to Consolidated Financial Statements

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

	THREE MONTHS ENDED MARCH 31,
	2017		2016
	(Unaudited)
Net Income	$	11,518	$	9,793

Unrealized appreciation on available-for-sale securities, net
of taxes of $238 and $36, for 2017 and 2016, respectively		417		63

Reclassification adjustment for gains included in net income,
net of taxes (credit) of $0 and $(1), for 2017 and 2016, respectively		—		(2	)

Change in fair value of cash flow hedge, net of taxes (credit) of $29
and $(17), for 2017 and 2016, respectively		51		(30	)

Comprehensive Income	$	11,986	$	9,824

See Notes to Consolidated Financial Statements

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	THREE MONTHS ENDED MARCH 31,
	2017			2016
	(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	11,518		$	9,793
Proceeds from sales of loans held for sale		23,848			32,671
Originations of loans held for sale		(27,567	)		(26,076	)
Items not requiring (providing) cash:
Depreciation		2,352			1,336
Amortization		728			963
Compensation expense for stock option grants		137			116
Provision for loan losses		2,250			2,101
Net gains on loan sales		(872	)		(832	)
Net realized gains on sale of available-for-sale investment securities		—			(3	)
Net (gains) losses on sale of premises and equipment		8			(233	)
Gain on sale/write-down of other real estate owned		(242	)		(129	)
Gain on sale of business units		—			(368	)
Amortization of deferred income, premiums, discounts and other		(647	)		2,150
(Gain) loss on derivative interest rate products		(7	)		162
Deferred income taxes		(1,487	)		(931	)
Changes in:
Interest receivable		843			5
Prepaid expenses and other assets		(919	)		6,744
Accrued expenses and other liabilities		(809	)		(2,649	)
Income taxes refundable/payable		3,866			2,827
Net cash provided by operating activities		13,000			27,647
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in loans		79,740			(28,119	)
Purchase of loans		(41,035	)		(10,000	)
Cash received from purchase of additional business units		—			44,363
Cash received from FDIC loss sharing reimbursements		1,315			216
Cash paid for sale of business units		—			(17,821	)
Purchase of premises and equipment		(1,710	)		(4,370	)
Proceeds from sale of premises and equipment		67			933
Proceeds from sale of other real estate owned		9,230			5,434
Capitalized costs on other real estate owned		(117	)		—
Proceeds from sales of available-for-sale securities		—			23,900
Proceeds from maturities and calls of available-for-sale securities		5,345			6,580
Principal reductions on mortgage-backed securities		5,257			7,473
Purchase of available-for-sale securities		—			(24,858	)
Redemption of Federal Home Loan Bank stock		6,294			499
Net cash provided by investing activities		64,386			4,230
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in certificates of deposit		(19,265	)		217
Net increase (decrease) in checking and savings deposits		30,758			(10,170	)
Proceeds from Federal Home Loan Bank advances		—			1,793,000
Repayments of Federal Home Loan Bank advances		(19	)		(2,025,017	)
Net increase (decrease) in short-term borrowings		(140,280	)		233,896
Advances from borrowers for taxes and insurance		1,788			1,688
Dividends paid		(3,073	)		(3,055	)
Stock options exercised		1,005			112
Net cash used in financing activities		(129,086	)		(9,329	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(51,700	)		22,548
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		279,769			199,183
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	228,069		$	221,731

See Notes to Consolidated Financial Statements

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: BASIS OF PRESENTATION

The accompanying unaudited interim consolidated financial statements of Great Southern Bancorp, Inc. (the "Company" or "Great Southern") have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The financial statements presented herein reflect all adjustments which are, in the opinion of management, necessary to fairly present the financial condition, results of operations and cash flows of the Company as of the dates and for the periods presented. Those adjustments consist only of normal recurring adjustments. Operating results for the three months ended March 31, 2017 are not necessarily indicative of the results that may be expected for the full year. The consolidated statement of financial condition of the Company as of December 31, 2016, has been derived from the audited consolidated statement of financial condition of the Company as of that date. Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications had no effect on net income.

Certain information and note disclosures normally included in the Company's annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for 2016 filed with the Securities and Exchange Commission.

NOTE 2: NATURE OF OPERATIONS AND OPERATING SEGMENTS

The Company operates as a one-bank holding company. The Company's business primarily consists of the operations of Great Southern Bank (the "Bank"), which provides a full range of financial services to customers primarily located in Missouri, Iowa, Kansas, Minnesota, Nebraska and Arkansas. In addition, the Company operates commercial loan production offices in Dallas, Texas, Tulsa, Oklahoma and Chicago, Illinois. The Company and the Bank are subject to the regulations of certain federal and state agencies and undergo periodic examinations by those regulatory agencies.

The Company's banking operation is its only reportable segment. The banking operation is principally engaged in the business of originating residential and commercial real estate loans, construction loans, commercial business loans and consumer loans and funding these loans through attracting deposits from the general public, accepting brokered deposits and borrowing from the Federal Home Loan Bank and others. The operating results of this segment are regularly reviewed by management to make decisions about resource allocations and to assess performance. Selected information is not presented separately for the Company's reportable segment, as there is no material difference between that information and the corresponding information in the consolidated financial statements.

NOTE 3: RECENT ACCOUNTING PRONOUNCEMENTS

In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which deferred the effective date of ASU 2014-09. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606): Summary and Amendments that Create Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs—Contracts with Customers (Subtopic 340-40). The guidance in this Update supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition, and most industry-specific guidance throughout the industry topics of the codification. For public companies, the original Update was to be effective for interim and annual periods beginning after December 15, 2016. The current ASU states that the provisions of ASU 2014-09 should be applied to annual reporting periods, including interim periods, beginning after December 15, 2017. The Company does not expect the new standard to result in a material change to our accounting for revenue because the majority of our financial instruments are not within the scope of Topic 606, however, it may result in new disclosure requirements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall (Topic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The Update requires investments in equity securities, except for those under the equity method of accounting, to be measured at fair value with changes in fair value recognized

through net income. In addition, the Update requires separate presentation of financial assets and liabilities by measurement category, such as fair value through net income, fair value through other comprehensive income, or amortized cost on the balance sheet or in the notes to the financial statements. The Update also clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The Update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early application for public entities is permitted under some circumstances. The Company is currently assessing the impact that this guidance may have on its consolidated financial statements, but it is not expected to have a material impact.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The amendments in this Update revise the accounting related to lessee accounting. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases. The Update is effective for the Company beginning in the first quarter of 2019, with early adoption permitted. Adoption of the standard requires the use of a modified retrospective transition approach for all periods presented at the time of adoption. Based on the Company's leases outstanding at March 31, 2017, we do not expect the new standard to have a material impact on our consolidated statements of financial condition or our consolidated statements of income, although an increase to assets and liabilities will occur at the time of adoption. The Company's new leases and lease modifications and renewals prior to the implementation date could impact the level of materiality.

In March 2016, the FASB issued ASU No. 2016-09, Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The Update amends several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The Update was effective for the Company beginning January 1, 2017, and did not have a material effect on the Company's income taxes or the Company's consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326). The Update amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. This Update affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. For public companies, the update is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. All entities may adopt the amendments in this update earlier as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. An entity will apply the amendments in this update on a modified retrospective basis, through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company is assessing our data and system needs and is evaluating the impact of adopting the new guidance. We expect to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, but cannot yet determine the magnitude of any such one-time adjustment, or the overall impact of the new guidance on the Company's consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230). The Update provides guidance on how certain cash receipts and payments are presented and classified in the statement of cash flows. The amendments in the Update are to be applied retrospectively. The Update is effective for the Company for interim and annual periods beginning after December 15, 2017, and early adoption is permitted. This guidance is not expected to have a material impact on the Company's consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740). The Update provides guidance on the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Under this guidance, companies will be required to recognize the income tax consequences of an intra-entity asset transfer when the transfer occurs. The Update is effective for the Company for annual and interim periods beginning after December 15, 2017, with early adoption permitted. The Company is currently assessing the impact that this guidance will have on its consolidated financial statements, but it is not expected to have a material impact.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations - Clarifying the Definition of a Business (Topic 805). The amendments in this Update provide a more robust framework to use in determining when a set of assets and activities is a business. The amendments provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable. The amendments in this Update become effective for the Company for annual periods and interim periods beginning after December 15, 2017. The Company is currently evaluating the impact of adopting the new guidance on the consolidated financial statements, but it is not expected to have a material impact.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles: Goodwill and Other: Simplifying the Test for Goodwill Impairment (Topic 350). To simplify the subsequent measurement of goodwill, the amendments eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test should be performed by comparing the fair value of a reporting unit with its carrying amount and an impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the qualitative impairment test is necessary. The nature of and reason for the change in accounting principle should be disclosed upon transition. The amendments in this update should be adopted for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted on testing dates after January 1, 2017. We are currently evaluating the impact of adopting the new guidance, including consideration of early adoption, on the consolidated financial statements, but it is not expected to have a material impact.

In March 2017, the FASB issued ASU No. 2017-08, Premium Amortization on Purchased Callable Debt Securities. The amendment shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date, rather than the contractual life of the security, which is typically used under current GAAP. The new guidance does not change the accounting for purchased callable debt securities held at a discount; the discount continues to be amortized to maturity. The amendments in this Update were to become effective for the Company for interim and annual reporting periods beginning after December 15, 2018; however, early adoption is permitted, and the Company elected to early adopt the ASU effective January 1, 2017. The adoption of the ASU did not have a material impact on the Company's consolidated financial statements.

NOTE 4: EARNINGS PER SHARE

	Three Months Ended March 31,
	2017		2016
	(In Thousands, Except Per Share Data)
Basic:
Average shares outstanding		13,994		13,890
Net income available to common stockholders	$	11,518	$	9,793
Per common share amount	$	0.82	$	0.71

Diluted:
Average shares outstanding		13,994		13,890
Net effect of dilutive stock options – based on the treasury
stock method using average market price		171		128
Diluted shares		14,165		14,018
Net income available to common stockholders	$	11,518	$	9,793
Per common share amount	$	0.81	$	0.70

Options outstanding at March 31, 2017 and 2016, to purchase 120,250 and 127,100 shares of common stock, respectively, were not included in the computation of diluted earnings per common share for each of the three month periods because the exercise prices of such options were greater than the average market prices of the common stock for the three months ended March 31, 2017 and 2016, respectively.

NOTE 5: INVESTMENT SECURITIES

	March 31, 2017
			Gross		Gross				Tax
	Amortized		Unrealized		Unrealized		Fair		Equivalent
	Cost		Gains		Losses		Value		Yield
	(In Thousands)

AVAILABLE-FOR-SALE SECURITIES:
Mortgage-backed securities	$	141,012	$	1,095	$	965	$	141,142		2.21	%
States and political subdivisions		59,321		3,229		6		62,544		5.74
	$	200,333	$	4,324	$	971	$	203,686		3.25	%

HELD-TO-MATURITY SECURITIES:
States and political subdivisions	$	247	$	9	$	—	$	256		7.37	%

	December 31, 2016
			Gross		Gross				Tax
	Amortized		Unrealized		Unrealized		Fair		Equivalent
	Cost		Gains		Losses		Value		Yield
	(In Thousands)

AVAILABLE-FOR-SALE SECURITIES:
Mortgage-backed securities	$	146,491	$	1,045	$	1,501	$	146,035		2.03	%
States and political subdivisions		64,682		3,163		8		67,837		5.73
	$	211,173	$	4,208	$	1,509	$	213,872		3.16	%

HELD-TO-MATURITY SECURITIES:
States and political subdivisions	$	247	$	11	$	—	$	258		7.36	%

The amortized cost and fair value of available-for-sale securities at March 31, 2017, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized		Fair
	Cost		Value
	(In Thousands)

One year or less	$	—	$	—
After one through five years		1,387		1,397
After five through ten years		4,680		4,913
After ten years		53,254		56,234
Securities not due on a single maturity date		141,012		141,142

	$	200,333	$	203,686

The held-to-maturity securities at March 31, 2017, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized		Fair
	Cost		Value
	(In Thousands)

After one through five years	$	247	$	256

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. Total fair value of these investments at March 31, 2017 and December 31, 2016, respectively, was approximately $84.6 million and $104.5 million, which is approximately 41.5% and 48.8% of the Company's combined available-for-sale and held-to-maturity investment portfolio, respectively.

Based on an evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for these debt securities below their historical cost are temporary at March 31, 2017.

The following table shows the Company's gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2017 and December 31, 2016:

	March 31, 2017
	Less than 12 Months					12 Months or More				Total
	Fair		Unrealized			Fair		Unrealized		Fair		Unrealized
Description of Securities	Value		Losses			Value		Losses		Value		Losses
	(In Thousands)

Mortgage-backed securities	$	84,118	$	(965	)	$	—	$	—	$	84,118	$	(965	)
State and political
subdivisions		495		(6	)		—		—		495		(6	)
	$	84,613	$	(971	)	$	—	$	—	$	84,613	$	(971	)

	December 31, 2016
	Less than 12 Months					12 Months or More				Total
	Fair		Unrealized			Fair		Unrealized		Fair		Unrealized
Description of Securities	Value		Losses			Value		Losses		Value		Losses
	(In Thousands)

Mortgage-backed securities	$	102,296	$	(1,501	)	$	—	$	—	$	102,296	$	(1,501	)
State and political
subdivisions		2,164		(8	)		—		—		2,164		(8	)
	$	104,460	$	(1,509	)	$	—	$	—	$	104,460	$	(1,509	)

Gross gains of $-0- and $91,000 and gross losses of $-0- and $88,000 resulting from sales of available-for-sale securities were realized during the three months ended March 31, 2017 and 2016, respectively. Gains and losses on sales of securities are determined on the specific-identification method.

Other-than-temporary Impairment. Upon acquisition of a security, the Company decides whether it is within the scope of the accounting guidance for beneficial interests in securitized financial assets or will be evaluated for impairment under the accounting guidance for investments in debt and equity securities.

The accounting guidance for beneficial interests in securitized financial assets provides incremental impairment guidance for a subset of the debt securities within the scope of the guidance for investments in debt and equity securities. Where the security is a beneficial interest in securitized financial assets, the Company uses the beneficial interests in securitized

financial asset impairment model. Where the security is not a beneficial interest in securitized financial assets, the Company uses the debt and equity securities impairment model. The Company does not currently have securities within the scope of this guidance for beneficial interests in securitized financial assets.

The Company conducts periodic reviews to identify and evaluate each investment security to determine whether an other-than-temporary impairment has occurred. The Company considers the length of time a security has been in an unrealized loss position, the relative amount of the unrealized loss compared to the carrying value of the security, the type of security and other factors. If certain criteria are met, the Company performs additional reviews and evaluations using observable market values or various inputs in economic models to determine if an unrealized loss is other-than-temporary. The Company uses quoted market prices for marketable equity securities and uses broker pricing quotes based on observable inputs for equity investments that are not traded on a stock exchange. For non-agency collateralized mortgage obligations, to determine if the unrealized loss is other-than-temporary, the Company projects total estimated defaults of the underlying assets (mortgages) and multiplies that calculated amount by an estimate of realizable value upon sale in the marketplace (severity) in order to determine the projected collateral loss. The Company also evaluates any current credit enhancement underlying these securities to determine the impact on cash flows. If the Company determines that a given security position will be subject to a write-down or loss, the Company records the expected credit loss as a charge to earnings.

During the three months ended March 31, 2017, no securities were determined to have impairment that had become other than temporary.

Credit Losses Recognized on Investments. During the three months ended March 31, 2017, there were no debt securities that experienced fair value deterioration due to credit losses, or due to other market factors, that are not otherwise other-than-temporarily impaired.

Amounts Reclassified Out of Accumulated Other Comprehensive Income. Amounts reclassified from accumulated other comprehensive income and the affected line items in the statements of income during the three months ended March 31, 2017 and 2016, were as follows:

	Amounts Reclassified from Accumulated Other Comprehensive Income Three Months Ended March 31,					Affected Line Item in the Statements of Income
	2017		2016			Affected Line Item in the Statements of Income
	(In Thousands)

Unrealized gains on available-						Net realized gains on sales of
for-sale securities	$	—	$	3		available-for-sale securities
						(Total reclassified amount before tax)
Income Taxes		—		(1	)	Provision for income taxes
Total reclassifications out of accumulated
other comprehensive income	$	—	$	2

NOTE 6: LOANS AND ALLOWANCE FOR LOAN LOSSES

	March 31,			December 31,
	2017			2016
	(In Thousands)

One- to four-family residential construction	$	23,874		$	21,737
Subdivision construction		18,030			17,186
Land development		52,445			50,624
Commercial construction		827,717			780,614
Owner occupied one- to four-family residential		189,465			200,340
Non-owner occupied one- to four-family residential		131,098			136,924
Commercial real estate		1,226,283			1,186,906
Other residential		668,997			663,378
Commercial business		344,103			348,628
Industrial revenue bonds		24,411			25,065
Consumer auto		463,015			494,233
Consumer other		66,068			70,001
Home equity lines of credit		107,163			108,753
Acquired FDIC-covered loans, net of discounts		123,902			134,356
Acquired loans no longer covered by FDIC loss sharing agreements,
net of discounts		67,123			72,569
Acquired non-covered loans, net of discounts		68,006			76,234
		4,401,700			4,387,548
Undisbursed portion of loans in process		(632,075	)		(585,313	)
Allowance for loan losses		(36,993	)		(37,400	)
Deferred loan fees and gains, net		(4,991	)		(4,869	)
	$	3,727,641		$	3,759,966

Weighted average interest rate		4.66	%		4.58	%

Classes of loans by aging were as follows:

	March 31, 2017
													Total Loans
					Past Due								> 90 Days
	30-59 Days		60-89 Days		90 Days		Total Past				Total Loans		Past Due and
	Past Due		Past Due		or More		Due		Current		Receivable		Still Accruing
	(In Thousands)
One- to four-family
residential construction	$	—	$	—	$	381	$	381	$	23,493	$	23,874	$	—
Subdivision construction		—		—		107		107		17,923		18,030		—
Land development		575		—		3,919		4,494		47,951		52,445		—
Commercial construction		235		—		—		235		827,482		827,717		—
Owner occupied one- to four-
family residential		1,276		—		1,019		2,295		187,170		189,465		—
Non-owner occupied one- to
four-family residential		6		—		388		394		130,704		131,098		—
Commercial real estate		2,442		6,376		2,914		11,732		1,214,551		1,226,283		306
Other residential		117		—		164		281		668,716		668,997		—
Commercial business		243		88		4,351		4,682		339,421		344,103		—
Industrial revenue bonds		—		—		—		—		24,411		24,411		—
Consumer auto		3,909		947		1,934		6,790		456,225		463,015		—
Consumer other		433		107		610		1,150		64,918		66,068		—
Home equity lines of credit		261		50		287		598		106,565		107,163		5
Acquired FDIC-covered
loans, net of discounts		5,621		161		6,392		12,174		111,728		123,902		—
Acquired loans no longer
covered by loss sharing
agreements, net of
discounts		881		184		1,088		2,153		64,970		67,123		43
Acquired non-covered loans,
net of discounts		373		122		1,849		2,344		65,662		68,006		—
		16,372		8,035		25,403		49,810		4,351,890		4,401,700		354
Less FDIC-supported loans,
and acquired non-covered
loans, net of discounts		6,875		467		9,329		16,671		242,360		259,031		43

Total	$	9,497	$	7,568	$	16,074	$	33,139	$	4,109,530	$	4,142,669	$	311

	December 31, 2016
													Total Loans
											Total		> 90 Days Past
	30-59 Days		60-89 Days		Over 90		Total Past				Loans		Due and
	Past Due		Past Due		Days		Due		Current		Receivable		Still Accruing
	(In Thousands)
One- to four-family
residential construction	$	—	$	—	$	—	$	—	$	21,737	$	21,737	$	—
Subdivision construction		—		—		109		109		17,077		17,186		—
Land development		413		584		1,718		2,715		47,909		50,624		—
Commercial construction		—		—		—		—		780,614		780,614		—
Owner occupied one- to four-
family residential		1,760		388		1,125		3,273		197,067		200,340		—
Non-owner occupied one- to
four-family residential		309		278		404		991		135,933		136,924		—
Commercial real estate		1,969		1,988		4,404		8,361		1,178,545		1,186,906		—
Other residential		4,632		—		162		4,794		658,584		663,378		—
Commercial business		1,741		24		3,088		4,853		343,775		348,628		—
Industrial revenue bonds		—		—		—		—		25,065		25,065		—
Consumer auto		8,252		2,451		1,989		12,692		481,541		494,233		—
Consumer other		1,103		278		649		2,030		67,971		70,001		—
Home equity lines of credit		136		158		433		727		108,026		108,753		—
Acquired FDIC-covered loans, net of discounts		4,476		1,201		8,226		13,903		120,453		134,356		301
Acquired loans no longer covered by FDIC loss sharing agreements,
net of discounts		1,356		552		1,401		3,309		69,260		72,569		222
Acquired non-covered loans, net of discounts		851		173		2,854		3,878		72,356		76,234		—
		26,998		8,075		26,562		61,635		4,325,913		4,387,548		523
Less FDIC-supported loans,
and acquired non-covered loans, net of discounts		6,683		1,926		12,481		21,090		262,069		283,159		523

Total	$	20,315	$	6,149	$	14,081	$	40,545	$	4,063,844	$	4,104,389	$	—

Nonaccruing loans (excluding FDIC-supported loans, net of discount and acquired non-covered loans, net of discount) are summarized as follows:

	March 31,		December 31,
	2017		2016
	(In Thousands)

One- to four-family residential construction	$	381	$	—
Subdivision construction		107		109
Land development		3,919		1,718
Commercial construction		—		—
Owner occupied one- to four-family residential		1,019		1,125
Non-owner occupied one- to four-family residential		388		404
Commercial real estate		2,608		4,404
Other residential		164		162
Commercial business		4,351		3,088
Industrial revenue bonds		—		—
Consumer auto		1,934		1,989
Consumer other		610		649
Home equity lines of credit		282		433

Total	$	15,763	$	14,081

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2017. Also presented are the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of March 31, 2017:

	One- to Four-
	Family
	Residential and			Other			Commercial			Commercial			Commercial
	Construction			Residential			Real Estate			Construction			Business			Consumer			Total
	(In Thousands)
Allowance for loan losses
Balance January 1, 2017	$	2,322		$	5,486		$	15,938		$	2,284		$	3,015		$	8,355		$	37,400
Provision (benefit) charged to expense		549			(1,751	)		(476	)		501			1,885			1,542			2,250
Losses charged off		(35	)		—			(1	)		(295	)		(275	)		(3,403	)		(4,009	)
Recoveries		21			55			26			7			46			1,197			1,352
Balance March 31, 2017	$	2,857		$	3,790		$	15,487		$	2,497		$	4,671		$	7,691		$	36,993

Ending balance:
Individually evaluated for
impairment	$	568		$	2		$	523		$	1,292		$	3,342		$	552		$	6,279
Collectively evaluated for
impairment	$	2,231		$	3,738		$	14,711		$	1,142		$	1,274		$	7,024		$	30,120
Loans acquired and
accounted for under ASC
310-30	$	58		$	50		$	253		$	63		$	55		$	115		$	594

Loans
Individually evaluated for
impairment	$	6,529		$	3,797		$	8,676		$	4,379		$	6,993		$	3,227		$	33,601
Collectively evaluated for
impairment	$	355,938		$	665,200		$	1,217,607		$	875,783		$	361,521		$	633,019		$	4,109,068
Loans acquired and
accounted for under ASC
310-30	$	144,219		$	24,110		$	47,188		$	4,880		$	5,952		$	32,682		$	259,031

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2016:

	One- to Four-
	Family
	Residential and				Other				Commercial				Commercial				Commercial
	Construction				Residential				Real Estate				Construction				Business				Consumer				Total
	(In Thousands)
Allowance for loan losses
Balance January 1, 2016		$	4,900			$	3,190			$	14,738			$	3,019			$	4,203			$	8,099			$	38,149
Provision (benefit) charged to expense			51				(582	)			1,288				129				(554	)			1,769				2,101
Losses charged off			(84	)			—				(2,309	)			(30	)			(19	)			(1,737	)			(4,179	)
Recoveries			16				13				11				8				47				860				955
Balance March 31, 2016		$	4,883			$	2,621			$	13,728			$	3,126			$	3,677			$	8,991			$	37,026

The following table presents the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of December 31, 2016:

	One- to Four-
	Family
	Residential and		Other		Commercial		Commercial		Commercial
	Construction		Residential		Real Estate		Construction		Business		Consumer		Total
	(In Thousands)
Allowance for loan losses
Individually evaluated for
impairment	$	570	$	—	$	2,209	$	1,291	$	1,295	$	997	$	6,362
Collectively evaluated for
impairment	$	1,628	$	5,396	$	13,507	$	953	$	1,681	$	7,248	$	30,413
Loans acquired and
accounted for under ASC
310-30	$	124	$	90	$	222	$	40	$	39	$	110	$	625

Loans
Individually evaluated for
impairment	$	6,015	$	3,812	$	10,507	$	6,023	$	4,539	$	3,385	$	34,281
Collectively evaluated for
impairment	$	370,172	$	659,566	$	1,176,399	$	825,215	$	369,154	$	669,602	$	4,070,108
Loans acquired and
accounted for under ASC
310-30	$	155,378	$	29,600	$	54,208	$	2,191	$	6,429	$	35,353	$	283,159

The portfolio segments used in the preceding three tables correspond to the loan classes used in all other tables in Note 6 as follows:

·	The one-to four-family residential and construction segment includes the one- to four-family residential construction, subdivision construction, owner occupied one- to four-family residential and non-owner occupied one- to four-family residential classes

·	The other residential segment corresponds to the other residential class

·	The commercial real estate segment includes the commercial real estate and industrial revenue bonds classes

·	The commercial construction segment includes the land development and commercial construction classes

·	The commercial business segment corresponds to the commercial business class

·	The consumer segment includes the consumer auto, consumer other and home equity lines of credit classes

A loan is considered impaired, in accordance with the impairment accounting guidance (FASB ASC 310-10-35-16), when based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include not only nonperforming loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties.

Impaired loans (excluding FDIC-supported loans, net of discount and acquired non-covered loans, net of discount), are summarized as follows:

	At or for the Three Months Ended March 31, 2017
							Average
			Unpaid				Investment in		Interest
	Recorded		Principal		Specific		Impaired		Income
	Balance		Balance		Allowance		Loans		Recognized
	(In Thousands)

One- to four-family residential construction	$	381	$	381	$	1	$	391	$	—
Subdivision construction		807		820		128		811		7
Land development		4,379		4,478		1,292		3,465		16
Commercial construction		—		—		—		—		—
Owner occupied one- to four-family residential		3,331		3,623		384		3,410		37
Non-owner occupied one- to four-family residential		2,010		2,277		55		1,933		22
Commercial real estate		8,676		9,803		523		11,329		58
Other residential		3,797		3,813		2		3,804		38
Commercial business		6,993		7,643		3,342		5,885		86
Industrial revenue bonds		—		—		—		—		—
Consumer auto		2,086		2,175		377		2,393		29
Consumer other		782		845		117		796		15
Home equity lines of credit		359		379		58		395		10

Total	$	33,601	$	36,237	$	6,279	$	34,612	$	318

	At or for the Year Ended December 31, 2016
							Average
			Unpaid				Investment		Interest
	Recorded		Principal		Specific		in Impaired		Income
	Balance		Balance		Allowance		Loans		Recognized
	(In Thousands)

One- to four-family residential construction	$	—	$	—	$	—	$	—	$	—
Subdivision construction		818		829		131		948		46
Land development		6,023		6,120		1,291		8,020		304
Commercial construction		—		—		—		—		—
Owner occupied one- to four-family
residential		3,290		3,555		374		3,267		182
Non-owner occupied one- to four-family
residential		1,907		2,177		65		1,886		113
Commercial real estate		10,507		12,121		2,209		23,928		984
Other residential		3,812		3,812		—		6,813		258
Commercial business		4,539		4,652		1,295		2,542		185
Industrial revenue bonds		—		—		—		—		—
Consumer auto		2,097		2,178		629		1,307		141
Consumer other		812		887		244		884		70
Home equity lines of credit		476		492		124		417		32

Total	$	34,281	$	36,823	$	6,362	$	50,012	$	2,315

	At or for the Three Months Ended March 31, 2016
							Average
			Unpaid				Investment in		Interest
	Recorded		Principal		Specific		Impaired		Income
	Balance		Balance		Allowance		Loans		Recognized
	(In Thousands)

One- to four-family residential construction	$	—	$	—	$	—	$	—	$	—
Subdivision construction		1,014		1,014		209		1,049		7
Land development		7,496		7,586		1,141		7,506		69
Commercial construction		—		—		—		—		—
Owner occupied one- to four-family residential		5,148		5,718		520		5,121		57
Non-owner occupied one- to four-family residential		—		—		—		—		—
Commercial real estate		31,654		34,773		1,900		33,088		224
Other residential		9,472		9,472		—		9,496		98
Commercial business		2,215		2,644		1,120		2,230		24
Industrial revenue bonds		—		—		—		—		—
Consumer auto		1,000		1,039		150		929		17
Consumer other		880		962		132		897		19
Home equity lines of credit		460		480		77		461		12

Total	$	59,339	$	63,688	$	5,249	$	60,777	$	527

At March 31, 2017, $19.3 million of impaired loans had specific valuation allowances totaling $6.3 million. At December 31, 2016, $18.1 million of impaired loans had specific valuation allowances totaling $6.4 million.

Included in certain loan categories in the impaired loans are troubled debt restructurings that were classified as impaired. Troubled debt restructurings are loans that are modified by granting concessions to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. The types of concessions made are factored into the estimation of the allowance for loan losses for troubled debt restructurings primarily using a discounted cash flows or collateral adequacy approach.

The following tables present newly restructured loans during the three months ended March 31, 2017 and 2016, respectively, by type of modification:

	Three Months Ended March 31, 2017
							Total
	Interest Only		Term		Combination		Modification
	(In Thousands)

Commercial business	$	—	$	—	$	274	$	274

	$	—	$	—	$	274	$	274

	Three Months Ended March 31, 2016
							Total
	Interest Only		Term		Combination		Modification
	(In Thousands)

Mortgage loans on real estate:
One -to four- family residential	$	429	$	—	$	—	$	429
Commercial		60		—		—		60
Construction and land development		2,946		—		—		2,946
Consumer		—		2		—		2

	$	3,435	$	2	$	—	$	3,437

At March 31, 2017, the Company had $21.2 million of loans that were modified in troubled debt restructurings and impaired, as follows: $5.0 million of construction and land development loans, $7.3 million of single family and multi-family residential mortgage loans, $7.1 million of commercial real estate loans, $1.5 million of commercial business loans and $279,000 of consumer loans. Of the total troubled debt restructurings at March 31, 2017, $15.3 million were accruing interest and $7.8 million were classified as substandard using the Company's internal grading system, which is described below. The Company had no troubled debt restructurings which were modified in the previous 12 months and subsequently defaulted during the three months ended March 31, 2017. When loans modified as troubled debt restructurings have subsequent payment defaults, the defaults are factored into the determination of the allowance for loan losses to ensure specific valuation allowances reflect amounts considered uncollectible. At December 31, 2016, the Company had $21.1 million of loans that were modified in troubled debt restructurings and impaired, as follows: $5.0 million of construction and land development loans, $7.4 million of single family and multi-family residential mortgage loans, $7.1 million of commercial real estate loans, $1.3 million of commercial business loans and $296,000 of consumer loans. Of the total troubled debt restructurings at December 31, 2016, $18.9 million were accruing interest and $7.9 million were classified as substandard using the Company's internal grading system.

During the three months ended March 31, 2017, $234,000 of loans, all of which consisted of one- to four-family residential loans, designated as troubled debt restructurings met the criteria for placement back on accrual status. The criteria is generally a minimum of six months of payment performance under original or modified terms. During the three months ended March 31, 2016, loans designated as troubled debt restructurings totaling $20,000 met the criteria for placement back on accrual status. The $20,000 consisted of consumer loans.

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." Substandard loans are characterized by the distinct possibility that the Bank will sustain some loss if certain deficiencies are not corrected. Doubtful loans are those having all the weaknesses inherent to those classified Substandard with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Special mention loans possess potential weaknesses that deserve management's close attention but do not expose the Bank to a degree of risk that warrants substandard classification. Loans classified as watch are being monitored because of indications of potential weaknesses or deficiencies that may require future classification as special mention or substandard. Loans not meeting any of the criteria previously described are considered satisfactory. The acquired FDIC-covered and previously covered loans are evaluated using this internal grading system. These loans are accounted for in pools and the loans acquired in the Inter Savings Bank FDIC transaction are currently substantially covered through loss sharing agreements with the FDIC. The acquired non-covered loans are also evaluated using this internal grading system, and are also accounted for in pools. Minimal adverse classification in these acquired loan pools was identified as of March 31, 2017 and December 31, 2016, respectively. See Note 7 for further discussion of the acquired loan pools and remaining loss sharing agreements.

The Company evaluates the loan risk internal grading system definitions and allowance for loan loss methodology on an ongoing basis. In the fourth quarter of 2014, the Company began using a three-year average of historical losses for the general component of the allowance for loan loss calculation. The Company had previously used a five-year average. For interim periods, the Company uses three full years plus the interim period's annualized average losses for the general component of the allowance for loan loss calculation. The Company believes that the three-year average provides a better

representation of the current risks in the loan portfolio. This change was made after consultation with our regulators and other third-party consultants, as well as a review of the practices used by the Company's peers. This change did not materially affect the level of the allowance for loan losses. The general component of the allowance for loan losses is affected by several factors, including, but not limited to, average historical losses, the current composition of the loan portfolio, current and expected economic conditions, collateral values and internal risk ratings. Management considers all these factors in determining the adequacy of the Company's allowance for loan losses. No other significant changes were made to the loan risk grading system definitions and allowance for loan loss methodology during the past year.

The loan grading system is presented by loan class below:

	March 31, 2017
					Special
	Satisfactory		Watch		Mention		Substandard		Doubtful		Total
	(In Thousands)
One- to four-family residential
construction	$	22,781	$	712	$	—	$	381	$	—	$	23,874
Subdivision construction		15,150		2,486		—		394		—		18,030
Land development		43,487		4,900		—		4,058		—		52,445
Commercial construction		827,717		—		—		—		—		827,717
Owner occupied one- to four-
family residential		187,975		—		—		1,490		—		189,465
Non-owner occupied one- to four-
family residential		129,992		460		—		646		—		131,098
Commercial real estate		1,202,417		18,738		—		5,128		—		1,226,283
Other residential		664,480		4,353		—		164		—		668,997
Commercial business		335,931		2,667		—		5,505		—		344,103
Industrial revenue bonds		24,411		—		—		—		—		24,411
Consumer auto		460,955		—		—		2,060		—		463,015
Consumer other		65,432		—		—		636		—		66,068
Home equity lines of credit		106,816		—		—		347		—		107,163
Acquired FDIC-covered loans,
net of discounts		123,902		—		—		—		—		123,902
Acquired loans no longer covered
by FDIC loss sharing
agreements, net of discounts		67,108		—		—		15		—		67,123
Acquired non-covered loans,
net of discounts		68,006		—		—		—		—		68,006

Total	$	4,346,560	$	34,316	$	—	$	20,824	$	—	$	4,401,700

	December 31, 2016
					Special
	Satisfactory		Watch		Mention		Substandard		Doubtful		Total
	(In Thousands)
One- to four-family residential
construction	$	20,771	$	966	$	—	$	—	$	—	$	21,737
Subdivision construction		14,059		2,729		—		398		—		17,186
Land development		39,925		5,140		—		5,559		—		50,624
Commercial construction		780,614		—		—		—		—		780,614
Owner occupied one- to-four-
family residential		198,835		67		—		1,438		—		200,340
Non-owner occupied one- to-
four-family residential		135,930		465		—		529		—		136,924
Commercial real estate		1,160,280		20,154		—		6,472		—		1,186,906
Other residential		658,846		4,370		—		162		—		663,378
Commercial business		342,685		2,651		—		3,292		—		348,628
Industrial revenue bonds		25,065		—		—		—		—		25,065
Consumer auto		492,165		—		—		2,068		—		494,233
Consumer other		69,338		—		—		663		—		70,001
Home equity lines of credit		108,290		—		—		463		—		108,753
Acquired FDIC-covered loans,
net of discounts		134,356		—		—		—		—		134,356
Acquired loans no longer covered
by FDIC loss sharing
agreements, net of discounts		72,552		—		—		17		—		72,569
Acquired non-covered loans,
net of discounts		76,234		—		—		—		—		76,234

Total	$	4,329,945	$	36,542	$	—	$	21,061	$	—	$	4,387,548

NOTE 7: ACQUIRED LOANS, LOSS SHARING AGREEMENTS AND FDIC INDEMNIFICATION ASSETS

On March 20, 2009, Great Southern Bank entered into a purchase and assumption agreement with loss share with the Federal Deposit Insurance Corporation (FDIC) to assume all of the deposits (excluding brokered deposits) and acquire certain assets of TeamBank, N.A., a full service commercial bank headquartered in Paola, Kansas.

The loans, commitments and foreclosed assets purchased in the TeamBank transaction were covered by a loss sharing agreement between the FDIC and Great Southern Bank. Under the loss sharing agreement, the Bank shared in the losses on assets covered under the agreement (referred to as covered assets). On losses up to $115.0 million, the FDIC agreed to reimburse the Bank for 80% of the losses. On losses exceeding $115.0 million, the FDIC agreed to reimburse the Bank for 95% of the losses. Realized losses covered by the loss sharing agreement included loan contractual balances (and related unfunded commitments that were acquired), accrued interest on loans for up to 90 days, the book value of foreclosed real estate acquired, and certain direct costs, less cash or other consideration received by the Bank. This agreement originally was to extend for ten years for 1-4 family real estate loans and for five years for other loans. The five-year period ended March 31, 2014 and the ten-year period was terminated early, effective April 26, 2016, by mutual agreement of Great Southern Bank and the FDIC. See "Loss Sharing Agreements" below. Based upon the acquisition date fair values of the net assets acquired, no goodwill was recorded.

On September 4, 2009, Great Southern Bank entered into a purchase and assumption agreement with loss share with the FDIC to assume all of the deposits and acquire certain assets of Vantus Bank, a full service thrift headquartered in Sioux City, Iowa.

The loans, commitments and foreclosed assets purchased in the Vantus Bank transaction were covered by a loss sharing agreement between the FDIC and Great Southern Bank. Under the loss sharing agreement, the Bank shared in the losses on assets covered under the agreement (referred to as covered assets). On losses up to $102.0 million, the FDIC agreed to reimburse the Bank for 80% of the losses. On losses exceeding $102.0 million, the FDIC agreed to reimburse the Bank for 95% of the losses. Realized losses covered by the loss sharing agreement included loan contractual balances (and related unfunded commitments that were acquired), accrued interest on loans for up to 90 days, the book value of foreclosed real

estate acquired, and certain direct costs, less cash or other consideration received by the Bank. This agreement originally was to extend for ten years for 1-4 family real estate loans and for five years for other loans. The five year period ended on September 30, 2014 and the ten-year period was terminated early, effective April 26, 2016, by mutual agreement of Great Southern Bank and the FDIC. See "Loss Sharing Agreements" below. Based upon the acquisition date fair values of the net assets acquired, no goodwill was recorded.

On October 7, 2011, Great Southern Bank entered into a purchase and assumption agreement with loss share with the FDIC to assume all of the deposits and acquire certain assets of Sun Security Bank, a full service bank headquartered in Ellington, Missouri.

The loans and foreclosed assets purchased in the Sun Security Bank transaction were covered by a loss sharing agreement between the FDIC and Great Southern Bank. Under the loss sharing agreement, the FDIC agreed to cover 80% of the losses on the loans (excluding approximately $4 million of consumer loans at the date of the acquisition) and foreclosed assets purchased subject to certain limitations. Realized losses covered by the loss sharing agreement included loan contractual balances (and related unfunded commitments that were acquired), accrued interest on loans for up to 90 days, the book value of foreclosed real estate acquired, and certain direct costs, less cash or other consideration received by Great Southern. This agreement originally was to extend for ten years for 1-4 family real estate loans and for five years for other loans but was terminated early, effective April 26, 2016, by mutual agreement of Great Southern Bank and the FDIC. See "Loss Sharing Agreements" below. Based upon the acquisition date fair values of the net assets acquired, no goodwill was recorded.

On April 27, 2012, Great Southern Bank entered into a purchase and assumption agreement with loss share with the FDIC to assume all of the deposits and acquire certain assets of Inter Savings Bank, FSB ("InterBank"), a full service bank headquartered in Maple Grove, Minnesota.

The loans and foreclosed assets purchased in the InterBank transaction are covered by a loss sharing agreement between the FDIC and Great Southern Bank. Under the loss sharing agreement, the FDIC agreed to cover 80% of the losses on the loans (excluding approximately $60,000 of consumer loans) and foreclosed assets purchased subject to certain limitations. Realized losses covered by the loss sharing agreement include loan contractual balances (and related unfunded commitments that were acquired), accrued interest on loans for up to 90 days, the book value of foreclosed real estate acquired, and certain direct costs, less cash or other consideration received by Great Southern. This agreement extends for ten years for 1-4 family real estate loans and for five years for other loans. The value of this loss sharing agreement was considered in determining fair values of loans and foreclosed assets acquired. The loss sharing agreement is subject to the Bank following servicing procedures as specified in the agreement with the FDIC. The expected reimbursements under the loss sharing agreement were recorded as an indemnification asset at their preliminary estimated fair value on the acquisition date. Based upon the acquisition date fair values of the net assets acquired, no goodwill was recorded. A premium was recorded in conjunction with the fair value of the acquired loans and the amount amortized to yield during the three months ended March 31, 2017 and 2016 was $76,000 and $98,000, respectively.

On June 20, 2014, Great Southern Bank entered into a purchase and assumption agreement with the FDIC to purchase a substantial portion of the loans and investment securities, as well as certain other assets, and assume all of the deposits, as well as certain other liabilities, of Valley Bank ("Valley"), a full-service bank headquartered in Moline, Illinois, with significant operations in Iowa. This transaction did not include a loss sharing agreement.

Based upon the acquisition date fair values of the net assets acquired, no goodwill was recorded. A premium was recorded in conjunction with the fair value of the acquired loans and the amount amortized to yield during the three months ended March 31, 2017 and 2016 was $80,000 and $148,000, respectively.

Loss Sharing Agreements. On April 26, 2016, Great Southern Bank executed an agreement with the FDIC to terminate the loss sharing agreements for Team Bank, Vantus Bank and Sun Security Bank, effective immediately. The agreement required the FDIC to pay $4.4 million to settle all outstanding items related to the terminated loss sharing agreements. As a result of entering into the agreement, assets that were covered by the terminated loss sharing agreements, including covered loans in the amount of $61.5 million and covered other real estate owned in the amount of $468,000 as of March 31, 2016, were reclassified as non-covered assets effective April 26, 2016. In anticipation of terminating the loss sharing agreements, an impairment of the related indemnification assets was recorded during the three months ended March 31, 2016 in the amount of $584,000. On the date of the termination, the indemnification asset balances (and certain other

receivables from the FDIC) related to Team Bank, Vantus Bank and Sun Security Bank, which totaled $4.4 million, net of impairment, at March 31, 2016, became $0 as a result of the receipt of funds from the FDIC as outlined in the termination agreement. There will be no future effects on non-interest income (expense) related to adjustments or amortization of the indemnification assets for Team Bank, Vantus Bank or Sun Security Bank; however, adjustments and amortization related to the InterBank indemnification asset and loss sharing agreement will continue. The remaining accretable yield adjustments that affect interest income were not changed by the termination agreement and will continue to be recognized for all FDIC-assisted transactions in the same manner as they have been previously.

The termination of the loss sharing agreements for the TeamBank, Vantus Bank and Sun Security Bank transactions have no impact on the yields for the loans that were previously covered under these agreements. All post-termination recoveries, gains, losses and expenses related to these previously covered assets are recognized entirely by Great Southern Bank since the FDIC no longer shares in such gains or losses. Accordingly, the Company's earnings are positively impacted to the extent the Company recognizes gains on any sales or recoveries in excess of the carrying value of such assets. Similarly, the Company's future earnings will be negatively impacted to the extent the Company recognizes expenses, losses or charge-offs related to such assets.

Fair Value and Expected Cash Flows. At the time of these acquisitions, the Company determined the fair value of the loan portfolios based on several assumptions. Factors considered in the valuations were projected cash flows for the loans, type of loan and related collateral, classification status, fixed or variable interest rate, term of loan, current discount rates and whether or not the loan was amortizing. Loans were grouped together according to similar characteristics and were treated in the aggregate when applying various valuation techniques. Management also estimated the amount of credit losses that were expected to be realized for the loan portfolios. The discounted cash flow approach was used to value each pool of loans. For non-performing loans, fair value was estimated by calculating the present value of the recoverable cash flows using a discount rate based on comparable corporate bond rates. This valuation of the acquired loans is a significant component leading to the valuation of the loss sharing assets recorded.

The amount of the estimated cash flows expected to be received from the acquired loan pools in excess of the fair values recorded for the loan pools is referred to as the accretable yield. The accretable yield is recognized as interest income over the estimated lives of the loans. The Company continues to evaluate the fair value of the loans including cash flows expected to be collected. Increases in the Company's cash flow expectations are recognized as increases to the accretable yield while decreases are recognized as impairments through the allowance for loan losses. During the three months ended March 31, 2017, improvements in expected cash flows related to the acquired loan portfolios resulted in adjustments of $155,000 to the accretable yield to be spread over the estimated remaining lives of the loans on a level-yield basis. During the three months ended March 31, 2016, similar such adjustments totaling $4.8 million were made to the accretable yield. The increases in expected cash flows also reduced the amount of expected reimbursements under the loss sharing agreements, when applicable. During the three months ended March 31, 2017, this resulted in corresponding adjustments of $-0- to the indemnification assets to be amortized on a level-yield basis over the remainder of the loss sharing agreement or the remaining expected lives of the loan pools, whichever is shorter. During the three months ended March 31, 2016, corresponding adjustments of $1.9 million were made to the indemnification assets.

Because these adjustments will be recognized generally over the remaining lives of the loan pools and, in the case of loans acquired in the InterBank transaction, the remainder of the loss sharing agreement (unless the loss sharing period ends earlier), respectively, they will impact future periods as well. The remaining accretable yield adjustment that will affect interest income is $4.5 million and the remaining adjustment to the indemnification asset related to InterBank, including the effects of the clawback liability, that will affect non-interest income (expense) is $(1.9) million. The $4.5 million of accretable yield adjustment relates to Team Bank, Vantus Bank, Sun Security Bank, InterBank and Valley Bank. The amortization of indemnification asset, as noted, is only related to InterBank, as there is no longer, nor will there be in the future, indemnification asset amortization related to Team Bank, Vantus Bank, or Sun Security Bank due to the early termination of the related loss sharing agreements for those transactions in April 2016. Of the remaining adjustments, we expect to recognize $2.5 million of interest income and $(1.0 million) of non-interest income (expense) during the remainder of 2017. Additional adjustments may be recorded in future periods from the FDIC-assisted transactions, as the Company continues to estimate expected cash flows from the acquired loan pools.

The impact of adjustments on the Company's financial results is shown below:

	Three Months Ended				Three Months Ended
	March 31, 2017				March 31, 2016
	(In Thousands, Except Per Share Data
	and Basis Points Data)

Impact on net interest income/
net interest margin (in basis points)	$	1,980		19 bps	$	5,382		56 bps
Non-interest income		(634	)			(2,934	)
Net impact to pre-tax income	$	1,346			$	2,448
Net impact net of taxes	$	857			$	1,559
Impact to diluted earnings per common share	$	0.06			$	0.11

The loss sharing asset is measured separately from the loan portfolio because it is not contractually embedded in the loans and is not transferable with the loans should the Bank choose to dispose of them. Fair value was estimated using projected cash flows available for loss sharing based on the credit adjustments estimated for each loan pool (as discussed above) and the loss sharing percentages outlined in the applicable Purchase and Assumption Agreement with the FDIC. These cash flows were discounted to reflect the uncertainty of the timing and receipt of the loss sharing reimbursement from the FDIC. The loss sharing asset is also separately measured from the related foreclosed real estate.

The loss sharing agreement on the InterBank transaction includes a clawback provision whereby if credit loss performance is better than certain pre-established thresholds, then a portion of the monetary benefit is shared with the FDIC. The pre-established threshold for credit losses is $115.7 million for this transaction. The monetary benefit required to be paid to the FDIC under the clawback provision, if any, will occur shortly after the termination of the loss sharing agreement, which in the case of InterBank is 10 years from the acquisition date.

At March 31, 2017 and December 31, 2016, the Bank's internal estimate of credit performance was expected to be better than the threshold set by the FDIC in the loss sharing agreement. Therefore, a separate clawback liability totaling $6.6 million was recorded in accounts payable and accrued expenses at both March 31, 2017 and December 31, 2016. As changes in the fair values of the loans and foreclosed assets are determined due to changes in expected cash flows, changes in the amount of the clawback liability will occur.

TeamBank Loans and Foreclosed Assets. The following tables present the balances of the acquired loans and foreclosed assets related to the TeamBank transaction at March 31, 2017 and December 31, 2016. Gross loan balances (due from the borrower) were reduced by approximately $419.8 million since the transaction date because of $287.0 million of repayments from borrowers, $61.7 million in transfers to foreclosed assets and $71.1 million in charge-offs to customer loan balances. Based upon the collectability analyses performed during the acquisition, we expected certain levels of foreclosures and charge-offs and actual results have been better than our expectations in this regard. As a result, cash flows expected to be received from the acquired loan pools have increased, resulting in adjustments that were made to the related accretable yield as described above.

	March 31, 2017
				Foreclosed
	Loans			Assets
	(In Thousands)
Initial basis for loss sharing determination,
net of activity since acquisition date	$	16,319		$	14
Reclassification from nonaccretable discount to accretable discount
due to change in expected losses (net of accretion to date)		(766	)		—
Original estimated fair value of assets, net of activity since
acquisition date		(15,394	)		(14	)

Expected loss remaining	$	159		$	—

	December 31, 2016
				Foreclosed
	Loans			Assets
	(In Thousands)
Initial basis for loss sharing determination,
net of activity since acquisition date	$	18,838		$	14
Reclassification from nonaccretable discount to accretable discount
due to change in expected losses (net of accretion to date)		(846	)		—
Original estimated fair value of assets, net of activity since
acquisition date		(17,833	)		(14	)

Expected loss remaining	$	159		$	—

Vantus Bank Loans and Foreclosed Assets. The following tables present the balances of the acquired loans and foreclosed assets related to the Vantus Bank transaction at March 31, 2017 and December 31, 2016. Gross loan balances (due from the borrower) were reduced by approximately $309.2 million since the transaction date because of $263.4 million of repayments from borrowers, $16.7 million in transfers to foreclosed assets and $29.1 million in charge-offs to customer loan balances. Based upon the collectability analyses performed during the acquisition, we expected certain levels of foreclosures and charge-offs and actual results have been better than our expectations in this regard. As a result, cash flows expected to be received from the acquired loan pools have increased, resulting in adjustments that were made to the related accretable yield as described above.

	March 31, 2017
				Foreclosed
	Loans			Assets
	(In Thousands)
Initial basis for loss sharing determination,
net of activity since acquisition date	$	22,317		$	15
Reclassification from nonaccretable discount to accretable discount
due to change in expected losses (net of accretion to date)		(203	)		—
Original estimated fair value of assets, net of activity since
acquisition date		(21,877	)		(15	)

Expected loss remaining	$	237		$	—

	December 31, 2016
				Foreclosed
	Loans			Assets
	(In Thousands)
Initial basis for loss sharing determination,
net of activity since acquisition date	$	23,712		$	15
Reclassification from nonaccretable discount to accretable discount
due to change in expected losses (net of accretion to date)		(239	)		—
Original estimated fair value of assets, net of activity since
acquisition date		(23,232	)		(15	)

Expected loss remaining	$	241		$	—

Sun Security Bank Loans and Foreclosed Assets. The following tables present the balances of the acquired loans and foreclosed assets related to the Sun Security Bank transaction at March 31, 2017 and December 31, 2016. Gross loan balances (due from the borrower) were reduced by approximately $202.7 million since the transaction date because of $143.4 million of repayments from borrowers, $28.4 million in transfers to foreclosed assets and $30.9 million of charge-offs to customer loan balances. Based upon the collectability analyses performed during the acquisition, we expected certain levels of foreclosures and charge-offs and actual results have been better than our expectations in this regard. As a result, cash flows expected to be received from the acquired loan pools have increased, resulting in adjustments that were made to the related accretable yield as described above.

	March 31, 2017
				Foreclosed
	Loans			Assets
	(In Thousands)
Initial basis for loss sharing determination,
net of activity since acquisition date	$	31,733		$	400
Reclassification from nonaccretable discount to accretable discount due to change in expected losses (net of accretion to date)		(890	)		—
Original estimated fair value of assets, net of activity since
acquisition date		(29,846	)		(321	)

Expected loss remaining	$	997		$	79

	December 31, 2016
				Foreclosed
	Loans			Assets
	(In Thousands)
Initial basis for loss sharing determination,
net of activity since acquisition date	$	33,579		$	365
Reclassification from nonaccretable discount to accretable discount due to change in expected losses (net of accretion to date)		(1,086	)		—
Original estimated fair value of assets, net of activity since
acquisition date		(31,499	)		(286	)

Expected loss remaining	$	994		$	79

InterBank Loans, Foreclosed Assets and Indemnification Asset. The following table presents the balances of the acquired loans, foreclosed assets and FDIC indemnification asset related to the InterBank transaction at March 31, 2017 and December 31, 2016. Gross loan balances (due from the borrower) were reduced by approximately $254.5 million since the transaction date because of $213.6 million of repayments by the borrower, $18.0 million in transfers to foreclosed assets and $22.9 million of charge-offs to customer loan balances. Based upon the collectability analyses performed during the acquisition, we expected certain levels of foreclosures and charge-offs and actual results have been better than our expectations in this regard. As a result, cash flows expected to be received from the acquired loan pools have increased, resulting in adjustments that were made to the related accretable yield as described above.

	March 31, 2017
				Foreclosed
	Loans			Assets
	(In Thousands)
Initial basis for loss sharing determination,
net of activity since acquisition date	$	138,766		$	2,875
Non-credit premium/(discount), net of activity since acquisition date		467			—
Reclassification from nonaccretable discount to accretable discount
due to change in expected losses (net of accretion to date)		(1,366	)		—
Original estimated fair value of assets, net of activity since
acquisition date		(123,902	)		(2,875	)

Expected loss remaining		13,965			—
Assumed loss sharing recovery percentage		84	%		—

Estimated loss sharing value		11,727			—
FDIC loss share clawback		813			—
Indemnification asset to be amortized resulting from
change in expected losses		1,092			—
Accretable discount on FDIC indemnification asset		(846	)		—
FDIC indemnification asset	$	12,786		$	—

	December 31, 2016
				Foreclosed
	Loans			Assets
	(In Thousands)
Initial basis for loss sharing determination,
net of activity since acquisition date	$	149,657		$	1,417
Non-credit premium/(discount), net of activity since acquisition date		543			—
Reclassification from nonaccretable discount to accretable discount
due to change in expected losses (net of accretion to date)		(1,984	)		—
Original estimated fair value of assets, net of activity since
acquisition date		(134,355	)		(1,417	)

Expected loss remaining		13,861			—
Assumed loss sharing recovery percentage		84	%		—

Estimated loss sharing value		11,644			—
FDIC loss share clawback		953			—
Indemnification asset to be amortized resulting from
change in expected losses		1,586			—
Accretable discount on FDIC indemnification asset		(1,038	)		—
FDIC indemnification asset	$	13,145		$	—

Valley Bank Loans and Foreclosed Assets. The following tables present the balances of the acquired loans and foreclosed assets related to the Valley Bank transaction at March 31, 2017 and December 31, 2016. Gross loan balances (due from the borrower) were reduced by approximately $118.2 million since the transaction date because of $106.6 million of repayments by the borrower, $3.8 million in transfers to foreclosed assets and $7.8 million of charge-offs to customer loan balances. The Valley Bank transaction did not include a loss sharing agreement; however, the loans were recorded at a discount, which is accreted to yield over the life of the loans. Based upon the collectability analyses performed during the acquisition, we expected certain levels of foreclosures and charge-offs and actual results have been better than our expectations in this regard. As a result, cash flows expected to be received from the acquired loan pools have increased, resulting in adjustments that were made to the related accretable yield as described above.

	March 31, 2017
				Foreclosed
	Loans			Assets
	(In Thousands)

Initial basis, net of activity since acquisition date	$	74,986		$	2,309
Non-credit premium/(discount), net of activity since acquisition date		148			—
Reclassification from nonaccretable discount to accretable discount
due to change in expected losses (net of accretion to date)		(1,225	)		—
Original estimated fair value of assets, net of activity since
acquisition date		(68,003	)		(2,307	)

Expected loss remaining	$	5,906		$	2

	December 31, 2016
				Foreclosed
	Loans			Assets
	(In Thousands)

Initial basis, net of activity since acquisition date	$	84,283		$	1,973
Non-credit premium/(discount), net of activity since acquisition date		228			—
Reclassification from nonaccretable discount to accretable discount
due to change in expected losses (net of accretion to date)		(2,121	)		—
Original estimated fair value of assets, net of activity since
acquisition date		(76,231	)		(1,952	)

Expected loss remaining	$	6,159		$	21

Changes in the accretable yield for acquired loan pools were as follows for the three months ended March 31, 2017 and 2016:

							Sun Security
	TeamBank			Vantus Bank			Bank			InterBank			Valley Bank
	(In Thousands)

Balance, January 1, 2016	$	3,805		$	3,360		$	5,924		$	16,347		$	8,316
Accretion		(480	)		(489	)		(1,072	)		(4,641	)		(3,146	)
Change in expected accretable yield⁽¹⁾		161			365			471			2,849			3,062

Balance, March 31, 2016	$	3,486		$	3,236		$	5,323		$	14,555		$	8,232

Balance January 1, 2017	$	2,477		$	2,547		$	4,277		$	8,512		$	4,797
Accretion		(655	)		(356	)		(622	)		(2,278	)		(1,925	)
Change in expected accretable yield⁽¹⁾		674			163			140			676			1,528

Balance, March 31, 2017	$	2,496		$	2,354		$	3,795		$	6,910		$	4,400

(1)

Represents increases in estimated cash flows expected to be received from the acquired loan pools, partially due to lower estimated credit losses. The amounts also include changes in expected accretion of the loan pools for TeamBank, Vantus Bank, Sun Security Bank, InterBank and Valley Bank for the three months ended March 31, 2017, totaling $674,000, $158,000, $140,000, $676,000 and $1.4 million, respectively, and for the three months ended March 31, 2016, totaling $161,000, $365,000, $304,000, $690,000 and $612,000, respectively.

NOTE 8: OTHER REAL ESTATE OWNED

Major classifications of other real estate owned were as follows:

	March 31,		December 31,
	2017		2016
	(In Thousands)
Foreclosed assets held for sale
One- to four-family construction	$	—	$	—
Subdivision construction		6,313		6,360
Land development		10,692		10,886
Commercial construction		—		—
One- to four-family residential		1,210		1,217
Other residential		810		954
Commercial real estate		3,210		3,841
Commercial business		—		—
Consumer		2,668		1,991
		24,903		25,249
FDIC-supported foreclosed assets, net of discounts		2,875		1,426
Acquired foreclosed assets no longer covered by FDIC loss sharing
agreements, net of discounts		351		316
Acquired foreclosed assets not covered by FDIC loss sharing
agreements, net of discounts		2,307		1,952

Foreclosed assets held for sale, net		30,436		28,943

Other real estate owned not acquired through foreclosure		2,240		3,715

Other real estate owned	$	32,676	$	32,658

Other real estate owned not acquired through foreclosure includes 14 properties, 13 of which were branch locations that have been closed and are held for sale, and one of which is land which was acquired for a potential branch location. During the three months ended March 31, 2017, three former branch locations were sold at a gain of $269,000, which is included in the gain on sales of other real estate owned amount in the table below.

At March 31, 2017, residential mortgage loans totaling $1.4 million were in the process of foreclosure, $1.3 million of which were acquired loans. Of the $1.3 million of acquired loans, $818,000 was covered by a loss sharing agreement as of March 31, 2017 (relating to the InterBank transaction) and $413,000 was acquired in the Valley Bank transaction.

Expenses applicable to other real estate owned included the following:

	Three Months Ended
	March 31,
	2017			2016
	(In Thousands)

Net gain on sales of other real estate owned	$	(311	)	$	(98	)
Valuation write-downs		60			374
Operating expenses, net of rental income		826			635

	$	575		$	911

NOTE 9: DEPOSITS

	March 31,		December 31,
	2017		2016
	(In Thousands)
Time Deposits:
0.00% - 0.99%	$	593,392	$	695,738
1.00% - 1.99%		817,670		737,649
2.00% - 2.99%		51,741		48,777
3.00% - 3.99%		1,221		1,119
4.00% - 4.99%		1,104		1,171
5.00% and above		272		272
Total time deposits (1.05% - 1.01%)		1,465,400		1,484,726
Non-interest-bearing demand deposits		631,895		653,288
Interest-bearing demand and savings deposits (0.28% - 0.26%)		1,591,368		1,539,216
Total Deposits	$	3,688,663	$	3,677,230

NOTE 10: ADVANCES FROM FEDERAL HOME LOAN BANK

Advances from the Federal Home Loan Bank (FHLBank advances) at March 31, 2017 and December 31, 2016 consisted of the following:

	March 31, 2017					December 31, 2016
			Weighted					Weighted
			Average					Average
			Interest					Interest
Due In	Amount		Rate			Amount		Rate
	(In Thousands)					(In Thousands)

2017	$	30,827		3.26	%	$	30,826		3.26	%
2018		83		5.14			81		5.14
2019		7		5.14			28		5.14
2020		—		—			—		—
2021		—		—			—		—
2022 and thereafter		500		5.54			500		5.54

		31,417		3.30			31,435		3.30

Unamortized fair value adjustment		12					17

	$	31,429				$	31,452

Included in the Bank's FHLBank advances at March 31, 2017 and December 31, 2016, was a $30.0 million advance with a maturity date of November 24, 2017. The interest rate on this advance is 3.20%. The advance has a call provision that allows the Federal Home Loan Bank of Des Moines to call the advance quarterly.

NOTE 11: SECURITIES SOLD UNDER REVERSE REPURCHASE AGREEMENTS AND SHORT-TERM BORROWINGS

	March 31, 2017		December 31, 2016
	(In Thousands)

Notes payable – Community Development
Equity Funds	$	1,398	$	1,323
Overnight borrowings from the Federal Home Loan Bank		—		171,000
Securities sold under reverse repurchase agreements		144,345		113,700

	$	145,743	$	286,023

The Bank enters into sales of securities under agreements to repurchase (reverse repurchase agreements). Reverse repurchase agreements are treated as financings, and the obligations to repurchase securities sold are reflected as a liability in the statements of financial condition. The dollar amount of securities underlying the agreements remains in the asset accounts. Securities underlying the agreements are held by the Bank during the agreement period. All agreements are written on a term of one-month or less.

The following table represents the Company's securities sold under reverse repurchase agreements, by collateral type and remaining contractual maturity.

	March 31, 2017		December 31, 2016
	Overnight and		Overnight and
	Continuous		Continuous
	(In Thousands)

FHLBank CD	$	26,119	$	16,202
Mortgage-backed securities – GNMA, FNMA, FHLMC		118,226		97,498
	$	144,345	$	113,700

NOTE 12: SUBORDINATED NOTES

On August 8, 2016, the Company completed the public offering and sale of $75.0 million of its subordinated notes. The notes are due August 15, 2026, and have a fixed interest rate of 5.25% until August 15, 2021, at which time the rate becomes floating at a rate equal to three-month LIBOR plus 4.087%. The Company may call the notes at par beginning on August 15, 2021, and on any scheduled interest payment date thereafter. The notes were sold at par, resulting in net proceeds, after underwriting discounts and commissions, legal, accounting and other professional fees, of approximately $73.5 million. The debt issuance costs, totaling approximately $1.5 million, were deferred and are being amortized over the expected life of the notes, which is 10 years. Amortization of the debt issuance costs during the three months ended March 31, 2017 totaled $38,000, and is included in interest expense on subordinated notes in the consolidated statements of income, resulting in an imputed interest rate of 5.47%.

At March 31, 2017 and December 31, 2016, Subordinated Notes are summarized as follows:

	March 31, 2017		December 31, 2016
	(In Thousands)

Subordinated notes	$	75,000	$	75,000
Less: unamortized debt issuance costs		1,425		1,463
	$	73,575	$	73,537

NOTE 13: INCOME TAXES

Reconciliations of the Company's effective tax rates to the statutory corporate tax rates were as follows:

	Three Months Ended March 31,
	2017			2016
Tax at statutory rate		35.0	%		35.0	%
Nontaxable interest and dividends		(1.9	)		(2.8	)
Tax credits		(6.4	)		(8.7	)
State taxes		1.1			1.1
Other		(1.7	)		0.5

		26.1	%		25.1	%

The Company and its consolidated subsidiaries have not been audited recently by the Internal Revenue Service (IRS) and, as such, tax years through December 31, 2005, have been closed without audit. The Company, through one of its subsidiaries, is a partner in two partnerships currently under IRS examination for 2006 and 2007. As a result, the Company's 2006 and subsequent tax years remain open for examination. The examinations of the partnerships have been advanced during 2016 and 2017. One of the partnerships has advanced to Tax Court and has entered a Motion for Entry of Decision with an agreed upon settlement. The other partnership is at the IRS appeals level. The Company does not currently expect significant adjustments to its financial statements from these partnership examinations.

The Company is currently under State of Missouri income and franchise tax examinations for its 2013 through 2015 tax years and is in administrative appeals with the State of Kansas for its 2010 through 2012 tax years. The Company protested the initial assessment of the State of Kansas and is having ongoing discussions with the Kansas Department of Revenue. The Company does not currently expect significant adjustments to its financial statements from these state examinations.

NOTE 14: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

ASC Topic 820, Fair Value Measurements, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Topic 820 also specifies a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Quoted prices in active markets for identical assets or liabilities (Level 1): Inputs that are quoted unadjusted prices in active markets for identical assets that the Company has the ability to access at the measurement date. An active market for the asset is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Other observable inputs (Level 2): Inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity including quoted prices for similar assets, quoted prices for securities in inactive markets and inputs derived principally from or corroborated by observable market data by correlation or other means.

·	Significant unobservable inputs (Level 3): Inputs that reflect assumptions of a source independent of the reporting entity or the reporting entity's own assumptions that are supported by little or no market activity or observable inputs.

Financial instruments are broken down as follows by recurring or nonrecurring measurement status. Recurring assets are initially measured at fair value and are required to be remeasured at fair value in the financial statements at each reporting date. Assets measured on a nonrecurring basis are assets that, due to an event or circumstance, were required to be remeasured at fair value after initial recognition in the financial statements at some time during the reporting period.

The Company considers transfers between the levels of the hierarchy to be recognized at the end of related reporting periods. From December 31, 2016 to March 31, 2017, no assets for which fair value is measured on a recurring basis transferred between any levels of the hierarchy.

Recurring Measurements

The following table presents the fair value measurements of assets recognized in the accompanying statements of financial condition measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2017 and December 31, 2016:

				Fair value measurements using
				Quoted prices
				in active
				markets		Other			Significant
				for identical		observable			unobservable
				assets		inputs			inputs
	Fair value			(Level 1)		(Level 2)			(Level 3)
	(In Thousands)
March 31, 2017
Mortgage-backed securities	$	141,142		$	—	$	141,142		$	—
States and political subdivisions		62,544			—		62,544			—
Interest rate derivative asset		1,393			—		1,393			—
Interest rate derivative liability		(1,430	)		—		(1,430	)		—

December 31, 2016
Mortgage-backed securities	$	146,035		$	—	$	146,035		$	—
States and political subdivisions		67,837			—		67,837			—
Interest rate derivative asset		1,663			—		1,663			—
Interest rate derivative liability		(1,699	)		—		(1,699	)		—

The following is a description of inputs and valuation methodologies used for assets recorded at fair value on a recurring basis and recognized in the accompanying statements of financial condition at March 31, 2017 and December 31, 2016, as well as the general classification of such assets pursuant to the valuation hierarchy. There have been no significant changes in the valuation techniques during the three-month period ended March 31, 2017. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Available-for-Sale Securities. Investment securities available for sale are recorded at fair value on a recurring basis. The fair values used by the Company are obtained from an independent pricing service, which represent either quoted market prices for the identical asset or fair values determined by pricing models, or other model-based valuation techniques, that consider observable market data, such as interest rate volatilities, LIBOR yield curve, credit spreads and prices from market makers and live trading systems. Recurring Level 2 securities include U.S. government agency securities, mortgage-backed securities, state and municipal bonds and certain other investments. Inputs used for valuing Level 2 securities include observable data that may include dealer quotes, benchmark yields, market spreads, live trading levels and market consensus prepayment speeds, among other things. Additional inputs include indicative values derived from the independent pricing service's proprietary computerized models. There were no recurring Level 3 securities at March 31, 2017 or December 31, 2016.

Interest Rate Derivatives. The fair value is estimated using forward-looking interest rate curves and is determined using observable market rates and, therefore, are classified within Level 2 of the valuation hierarchy.

Nonrecurring Measurements

The following tables present the fair value measurements of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2017 and December 31, 2016:

			Fair Value Measurements Using
			Quoted prices
			in active
			markets		Other		Significant
			for identical		observable		unobservable
			assets		inputs		inputs
	Fair value		(Level 1)		(Level 2)		(Level 3)
	(In Thousands)
March 31, 2017
Impaired loans	$	1,962	$	—	$	—	$	1,962

Foreclosed assets held for sale	$	17	$	—	$	—	$	17

December 31, 2016
Impaired loans	$	8,280	$	—	$	—	$	8,280

Foreclosed assets held for sale	$	1,604	$	—	$	—	$	1,604

The following is a description of valuation methodologies used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying statements of financial condition, as well as the general classification of such assets pursuant to the valuation hierarchy. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Loans Held for Sale. Mortgage loans held for sale are recorded at the lower of carrying value or fair value. The fair value of mortgage loans held for sale is based on what secondary markets are currently offering for portfolios with similar characteristics. As such, the Company classifies mortgage loans held for sale as Nonrecurring Level 2. Write-downs to fair value typically do not occur as the Company generally enters into commitments to sell individual mortgage loans at the time the loan is originated to reduce market risk. The Company typically does not have commercial loans held for sale. At March 31, 2017 and December 31, 2016, the aggregate fair value of mortgage loans held for sale exceeded their cost. Accordingly, no mortgage loans held for sale were marked down and reported at fair value.

Impaired Loans. A loan is considered to be impaired when it is probable that all of the principal and interest due may not be collected according to its contractual terms. Generally, when a loan is considered impaired, the amount of reserve required under FASB ASC 310, Receivables, is measured based on the fair value of the underlying collateral. The Company makes such measurements on all material loans deemed impaired using the fair value of the collateral for collateral dependent loans. The fair value of collateral used by the Company is determined by obtaining an observable market price or by obtaining an appraised value from an independent, licensed or certified appraiser, using observable market data. This data includes information such as selling price of similar properties and capitalization rates of similar properties sold within the market, expected future cash flows or earnings of the subject property based on current market expectations, and other relevant factors. All appraised values are adjusted for market-related trends based on the Company's experience in sales and other appraisals of similar property types as well as estimated selling costs. Each quarter management reviews all collateral dependent impaired loans on a loan-by-loan basis to determine whether updated appraisals are necessary based on loan performance, collateral type and guarantor support. At times, the Company measures the fair value of collateral dependent impaired loans using appraisals with dates prior to one year from the date of review. These appraisals are discounted by applying current, observable market data about similar property types such as sales contracts, estimations of value by individuals familiar with the market, other appraisals, sales or collateral assessments based on current market activity until updated appraisals are obtained. Depending on the length of time since an appraisal was performed and the data provided through our reviews, these appraisals are typically discounted 10-40%. The policy described above is the same for all types of collateral dependent impaired loans.

The Company records impaired loans as Nonrecurring Level 3. If a loan's fair value as estimated by the Company is less than its carrying value, the Company either records a charge-off of the portion of the loan that exceeds the fair value or establishes a reserve within the allowance for loan losses specific to the loan. Loans for which such charge-offs or reserves were recorded during the three months ended March 31, 2017 or the year ended December 31, 2016, are shown in the table above (net of reserves).

Foreclosed Assets Held for Sale. Foreclosed assets held for sale are initially recorded at fair value less estimated cost to sell at the date of foreclosure. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less estimated cost to sell. Foreclosed assets held for sale are classified within Level 3 of the fair value hierarchy. The foreclosed assets represented in the table above have been re-measured during the three months ended March 31, 2017 or the year ended December 31, 2016, subsequent to their initial transfer to foreclosed assets.

The following disclosure relates to financial assets for which it is not practicable for the Company to estimate the fair value at March 31, 2017 and December 31, 2016.

FDIC Indemnification Asset: As part of certain Purchase and Assumption Agreements, the Bank and the FDIC entered into loss sharing agreements. These agreements cover realized losses on loans and foreclosed real estate, subject to certain limitations, which are more fully described in Note 7. Certain of these loss sharing agreements (related to TeamBank, Vantus Bank and Sun Security Bank) were mutually terminated by agreement between the Company and the FDIC in April 2016.

Due to the termination of those loss sharing agreements, the carrying value of the indemnification asset for each of those transactions was $-0- at March 31, 2017 and December 31, 2016.

Under the InterBank agreement, the FDIC agreed to reimburse the Bank for 80% of realized losses. The indemnification asset was originally recorded at fair value on the acquisition date (April 27, 2013) and at March 31, 2017 and December 31, 2016, the carrying value of the FDIC indemnification asset was $12.8 million and $13.1 million, respectively.

From the dates of acquisition, each of the four loss sharing agreements were scheduled to extend ten years for 1-4 family real estate loans and five years for other loans. The loss sharing assets are measured separately from the loan portfolios because they are not contractually embedded in the loans and are not transferable with the loans should the Bank choose to dispose of them. Fair values on the acquisition dates were estimated using projected cash flows available for loss sharing based on the credit adjustments estimated for each loan pool and the loss sharing percentages. These cash flows were discounted to reflect the uncertainty of the timing and receipt of the loss sharing reimbursements from the FDIC. The loss sharing assets are also separately measured from the related foreclosed real estate. Although the assets are contractual receivables from the FDIC, they do not have effective interest rates. The Bank will collect the assets over the next several years. The amount ultimately collected will depend on the timing and amount of collections and charge-offs on the acquired assets covered by the loss sharing agreements. While the assets were recorded at their estimated fair values on the acquisition dates, it is not practicable to complete fair value analyses on a quarterly or annual basis. Estimating the fair value of the FDIC indemnification asset would involve preparing fair value analyses of the entire portfolios of loans and foreclosed assets covered by the loss sharing agreements from all four acquisitions on a quarterly or annual basis. The loss sharing agreements for Team Bank, Vantus Bank and Sun Security Bank were terminated on April 26, 2016, and the carrying value of the related indemnification assets became $-0-. The termination of the loss sharing agreements is discussed in Note 7.

Fair Value of Financial Instruments

The following methods were used to estimate the fair value of all other financial instruments recognized in the accompanying statements of financial condition at amounts other than fair value.

Cash and Cash Equivalents and Federal Home Loan Bank Stock. The carrying amount approximates fair value.

Loans and Interest Receivable. The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Loans with similar characteristics are aggregated for purposes of the calculations. The carrying amount of accrued interest receivable approximates its fair value.

Deposits and Accrued Interest Payable. The fair value of demand deposits and savings accounts is the amount payable on demand at the reporting date, i.e., their carrying amounts. The fair value of fixed maturity certificates of deposit is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities. The carrying amount of accrued interest payable approximates its fair value.

Federal Home Loan Bank Advances. Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate the fair value of existing advances.

Short-Term Borrowings. The carrying amount approximates fair value.

Subordinated Debentures Issued to Capital Trusts. The subordinated debentures have floating rates that reset quarterly. The carrying amount of these debentures approximates their fair value.

Subordinated Notes. The fair values used by the Company are obtained from independent sources and are derived from quoted market prices of the Company's subordinated notes and quoted market prices of other subordinated debt instruments with similar characteristics.

Commitments to Originate Loans, Letters of Credit and Lines of Credit. The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counterparties at the reporting date.

The following table presents estimated fair values of the Company's financial instruments not recorded at fair value on the statements of financial condition. The fair values of certain of these instruments were calculated by discounting expected cash flows, which method involves significant judgments by management and uncertainties. Fair value is the estimated amount at which financial assets or liabilities could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Because no market exists for certain of these financial instruments and because management does not intend to sell these financial instruments, the Company does not know whether the fair values shown below represent values at which the respective financial instruments could be sold individually or in the aggregate.

	March 31, 2017						December 31, 2016
	Carrying		Fair		Hierarchy		Carrying		Fair		Hierarchy
	Amount		Value		Level		Amount		Value		Level
	(In Thousands)

Financial assets
Cash and cash equivalents	$	228,069	$	228,069		1	$	279,769	$	279,769		1
Held-to-maturity securities		247		256		2		247		258		2
Mortgage loans held for sale		4,782		4,782		2		16,445		16,445		2
Loans, net of allowance for loan losses		3,727,641		3,740,781		3		3,759,966		3,766,709		3
Accrued interest receivable		11,032		11,032		3		11,875		11,875		3
Investment in FHLBank stock		6,740		6,740		3		13,034		13,034		3

Financial liabilities
Deposits		3,688,663		3,695,330		3		3,677,230		3,683,751		3
FHLBank advances		31,429		32,163		3		31,452		32,379		3
Short-term borrowings		145,743		145,743		3		286,023		286,023		3
Subordinated debentures		25,774		25,774		3		25,774		25,774		3
Subordinated notes		73,575		75,750		2		73,537		76,031		2
Accrued interest payable		1,631		1,631		3		2,723		2,723		3
Unrecognized financial instruments (net of
contractual value)
Commitments to originate loans		—		—		3		—		—		3
Letters of credit		85		85		3		92		92		3
Lines of credit		—		—		3		—		—		3

NOTE 15: DERIVATIVES AND HEDGING ACTIVITIES

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of its assets and liabilities. In the normal course of business, the Company may use derivative financial instruments (primarily interest rate swaps) from time to time to assist in its interest rate risk management. The Company has interest rate derivatives that result from a service provided to certain qualifying loan customers that are not used to manage interest rate risk in the Company's assets or liabilities and are not designated in a qualifying hedging relationship. The Company manages a matched book with respect to its derivative instruments in order to minimize its net risk exposure resulting from such transactions. In addition, the Company has interest rate derivatives that are designated in a qualified hedging relationship.

Nondesignated Hedges

The Company has interest rate swaps that are not designated in qualifying hedging relationships. Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain loan customers, which the Company began offering during 2011. The Company executes interest rate swaps with commercial banking

customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting interest rate swaps that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings.

As part of the Valley Bank FDIC-assisted acquisition, the Company acquired seven loans with related interest rate swaps. Valley's swap program differed from the Company's in that Valley did not have back to back swaps with the customer and a counterparty. Two of the seven acquired loans with interest rate swaps have paid off. The notional amount of the five remaining Valley swaps is $3.7 million at March 31, 2017. As of March 31, 2017, the Company had 25 interest rate swaps totaling $104.1 million in notional amount with commercial customers, and 25 interest rate swaps with the same notional amount with third parties related to its program. As of December 31, 2016, the Company had 26 interest rate swaps totaling $110.7 million in notional amount with commercial customers, and 26 interest rate swaps with the same notional amount with third parties related to its program. During the three months ended March 31, 2017 and 2016, the Company recognized a net gain of $7,000 and a net loss of $162,000, respectively, in noninterest income related to changes in the fair value of these swaps.

Cash Flow Hedges

As a strategy to maintain acceptable levels of exposure to the risk of changes in future cash flows due to interest rate fluctuations, the Company entered into an interest rate cap agreement for a portion of its floating rate debt associated with its trust preferred securities. The agreement, with a notional amount of $25 million, states that the Company will pay interest on its trust preferred debt in accordance with the original debt terms at a rate of 3-month LIBOR + 1.60%. Should interest rates rise above a certain threshold, the counterparty will reimburse the Company for interest paid such that the Company will have an effective interest rate on that portion of its trust preferred securities no higher than 2.37%. The agreement became effective on August 1, 2013, and has a term of four years.

The effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. During each of the three months ended March 31, 2017 and 2016, the Company recognized $-0- in noninterest income related to changes in the fair value of these derivatives. During the three months ended March 31, 2017 and 2016, the Company recognized $88,000 and $40,000, respectively, in interest expense related to the amortization of the cost of these interest rate caps.

The table below presents the fair value of the Company's derivative financial instruments as well as their classification on the Consolidated Statements of Financial Condition:

	Location in		Fair Value
	Consolidated Statements		March 31,		December 31,
	of Financial Condition		2017		2016
			(In Thousands)
Derivatives designated as
hedging instruments

Interest rate caps		Prepaid expenses and other assets	$	32	$	40

Total derivatives designated
as hedging instruments			$	32	$	40

Derivatives not designated
as hedging instruments

Asset Derivatives
Interest rate products		Prepaid expenses and other assets	$	1,361	$	1,623

Total derivatives not designated
as hedging instruments			$	1,361	$	1,623

Liability Derivatives
Interest rate products		Accrued expenses and other liabilities	$	1,430	$	1,699

Total derivatives not designated
as hedging instruments			$	1,430	$	1,699

The following table presents the effect of derivative instruments on the statements of comprehensive income for the three months ended March 31, 2017 and 2016:

	Amount of Gain (Loss) Recognized in AOCI
	Three Months Ended March 31,
Cash Flow Hedges	2017		2016
	(In Thousands)

Interest rate cap, net of income taxes	$	51	$	(30	)

Agreements with Derivative Counterparties

The Company has agreements with its derivative counterparties. If the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations. If the Bank fails to maintain its status as a well-capitalized institution, then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations under the agreements. Similarly, the Company could be required to settle its obligations under certain of its agreements if certain regulatory events occurred, such as the issuance of a formal directive, or if the Company's credit rating is downgraded below a specified level.

As of March 31, 2017, the termination value of derivatives in a net liability position, which included accrued interest but excluded any adjustment for nonperformance risk, related to these agreements was $1.4 million. The Company has minimum collateral posting thresholds with its derivative counterparties. At March 31, 2017, the Company's activity with its derivative counterparties had met the level in which the minimum collateral posting thresholds take effect and the Company had posted $4.6 million of collateral to satisfy the agreements. As of December 31, 2016, the termination value

of derivatives in a net liability position, which included accrued interest but excluded any adjustment for nonperformance risk, related to these agreements was $1.6 million. At December 31, 2016, the Company's activity with its derivative counterparties had met the level in which the minimum collateral posting thresholds take effect and the Company had posted $6.0 million of collateral to satisfy the agreements. If the Company had breached any of these provisions at March 31, 2017 or December 31, 2016, it could have been required to settle its obligations under the agreements at the termination value.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

Forward-looking Statements

When used in this Quarterly Report on Form 10-Q and other documents filed or furnished by the Company with the Securities and Exchange Commission (the "SEC"), in the Company's press releases or other public or stockholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "intends" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties, including, among other things, (i) non-interest expense reductions from Great Southern's banking center consolidations might be less than anticipated and the costs of the consolidation and impairment of the value of the affected premises might be greater than expected; (ii) expected revenues, cost savings, earnings accretion, synergies and other benefits from the Fifth Third Bank branch acquisition and the Company's other merger and acquisition activities might not be realized within the anticipated time frames or at all, and costs or difficulties relating to integration matters, including but not limited to customer and employee retention, might be greater than expected; (iii) changes in economic conditions, either nationally or in the Company's market areas; (iv) fluctuations in interest rates; (v) the risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses; (vi) the possibility of other-than-temporary impairments of securities held in the Company's securities portfolio; (vii) the Company's ability to access cost-effective funding; (viii) fluctuations in real estate values and both residential and commercial real estate market conditions; (ix) demand for loans and deposits in the Company's market areas; (x) the ability to adapt successfully to technological changes to meet customers' needs and developments in the marketplace; (xi) the possibility that security measures implemented might not be sufficient to mitigate the risk of a cyber attack or cyber theft, and that such security measures might not protect against systems failures or interruptions; (xii) legislative or regulatory changes that adversely affect the Company's business, including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act and its implementing regulations, and the overdraft protection regulations and customers' responses thereto; (xiii) changes in accounting principles, policies or guidelines; (xiv) monetary and fiscal policies of the Federal Reserve Board and the U.S. Government and other governmental initiatives affecting the financial services industry; (xv) results of examinations of the Company and Great Southern by their regulators, including the possibility that the regulators may, among other things, require the Company to increase its allowance for loan losses or to write-down assets; (xvi) costs and effects of litigation, including settlements and judgments; and (xvii) competition. The Company wishes to advise readers that the factors listed above and other risks described from time to time in documents filed or furnished by the Company with the SEC could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

The Company does not undertake-and specifically declines any obligation- to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Critical Accounting Policies, Judgments and Estimates

The accounting and reporting policies of the Company conform with accounting principles generally accepted in the United States and general practices within the financial services industry. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates.

Allowance for Loan Losses and Valuation of Foreclosed Assets

The Company believes that the determination of the allowance for loan losses involves a higher degree of judgment and complexity than its other significant accounting policies. The allowance for loan losses is calculated with the objective of maintaining an allowance level believed by management to be sufficient to absorb estimated loan losses. Management's determination of the adequacy of the allowance is based on periodic evaluations of the loan portfolio and other relevant

factors. However, this evaluation is inherently subjective as it requires material estimates of, among other things, expected default probabilities, loss once loans default, expected commitment usage, the amounts and timing of expected future cash flows on impaired loans, value of collateral, estimated losses, and general amounts for historical loss experience.

The process also considers economic conditions, uncertainties in estimating losses and inherent risks in the loan portfolio. All of these factors may be susceptible to significant change. To the extent actual outcomes differ from management estimates, additional provisions for loan losses may be required which would adversely impact earnings in future periods. In addition, the Bank's regulators could require additional provisions for loan losses as part of their examination process.

See Note 6 "Loans and Allowance for Loan Losses" included in Item 1 for additional information regarding the allowance for loan losses. Inherent in this process is the evaluation of individual significant credit relationships. From time to time certain credit relationships may deteriorate due to payment performance, cash flow of the borrower, value of collateral, or other factors. In these instances, management may revise its loss estimates and assumptions for these specific credits due to changing circumstances. In some cases, additional 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. No significant changes were made to management's overall methodology for evaluating the allowance for loan losses during the periods presented in the financial statements of this report.

In addition, the Company considers that the determination of the valuations 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 sales 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 sales of the assets could differ materially from the carrying value reflected in the financial statements, resulting in losses that could adversely impact earnings in future periods.

Carrying Value of Loans Acquired in FDIC-assisted Transactions and Indemnification Asset

The Company considers that the determination of the carrying value of loans acquired in the FDIC-assisted transactions and the carrying value of the related FDIC indemnification asset involves a high degree of judgment and complexity. The carrying value of the acquired loans and the FDIC indemnification asset reflect management's best ongoing estimates of the amounts to be realized on each of these assets. The Company determined initial fair value accounting estimates of the acquired assets and assumed liabilities in accordance with FASB ASC 805, Business Combinations. However, the amount that the Company realizes on these assets could differ materially from the carrying value reflected in its financial statements, based upon the timing of collections on the acquired loans in future periods. Because of the loss sharing agreements with the FDIC on certain of these assets, the Company should not incur any significant losses related to these assets. To the extent the actual values realized for the acquired loans are different from the estimates, the indemnification asset will generally be impacted in an offsetting manner due to the loss sharing support from the FDIC. Subsequent to the initial valuation, the Company continues to monitor identified loan pools and related loss sharing assets for changes in estimated cash flows projected for the loan pools, anticipated credit losses and changes in the accretable yield. Analysis of these variables requires significant estimates and a high degree of judgment. See Note 7 "Acquired Loans, Loss Sharing Agreements and FDIC Indemnification Assets" included in Item 1 for additional information regarding the TeamBank, Vantus Bank, Sun Security Bank, InterBank and Valley Bank FDIC-assisted transactions.

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 March 31, 2017, the Company has 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 amount 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 will be tested for impairment at least annually by comparing the fair values of those assets to their carrying values. At March 31, 2017, 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 from Fifth Third Bank. Other identifiable intangible assets that are subject to amortization are amortized on a straight-line basis over a period of seven years. At March 31, 2017, the amortizable intangible assets consisted of core deposit intangibles of $6.7 million, including $3.7 million related to the Fifth Third Bank transaction in January 2016. These amortizable intangible assets are reviewed for impairment if circumstances indicate their value may not be recoverable based on a comparison of fair value.

While the Company believes no impairment existed at March 31, 2017, different conditions or assumptions used to measure fair value of reporting units, 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 is as follows:


	March 31, 2017		December 31, 2016
	(In Thousands)

Goodwill – Branch acquisitions	$	5,396	$	5,396
Deposit intangibles
TeamBank		—		—
Vantus Bank		—		—
Sun Security Bank		526		613
InterBank		291		327
Boulevard Bank		488		519
Valley Bank		1,700		1,800
Fifth Third Bank		3,687		3,845
		6,692		7,104

	$	12,088	$	12,500

Current Economic Conditions

Changes in economic conditions could cause the values of assets and liabilities recorded in the financial statements to change rapidly, resulting in material future adjustments in asset values, the allowance for loan losses, or capital that could negatively impact 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 into a significant prolonged economic downturn. Unemployment rose from 4.7% in November 2007 to peak at 10.0% in October 2009. The elevated unemployment levels negatively impacted consumer confidence, which had a detrimental impact on industry-wide performance nationally as well as in the Company's Midwest market area. Economic conditions have improved considerably over the past few years as indicated by increasing consumer confidence levels, increased economic activity and low unemployment levels.

The national unemployment rate decreased from 4.7% as of December 2016 to 4.5% as of March 2017, the lowest level in almost a decade. The U.S. labor force participation rate (the share of working-age Americans who are either employed or are actively looking for a job) remained level at 63%. The economy added 98,000 jobs in March 2017, fewer than half the monthly number for January and February. Manufacturing continued to add jobs in March; however, payrolls in the retail sector declined further, shedding tens of thousands of jobs. Job growth totaled 2.2 million in 2016, which was less than the 2.7 million recorded in 2015. As of March 31, 2017, the unemployment rate for the Midwest, where most of the Company's business is conducted, was at 3.9%, significantly lower than the 4.5% U.S. rate. Unemployment rates at March 31, 2017, were: Missouri at 3.9%, Arkansas at 3.6%, Kansas at 3.8%, Iowa at 3.1%, Nebraska at 3.1%, Minnesota at 3.8%, Oklahoma at 4.3% and Texas at 5.0%. The Texas unemployment rate rose slightly in March 2017 to reach 5%, while local rates dropped somewhat. The Texas economy expanded in March with the addition of 9,500 seasonally adjusted nonfarm jobs with employment in the professional and business services industry recording the

largest private industry gain over the month with 13,200 jobs added. Mining and logging employment grew by 4,800 jobs in March, while construction employment expanded by 4,000 jobs. Of the metropolitan areas in which Great Southern Bank does business, the Tulsa market area had the highest unemployment level at 5.0% as of March 2017. The unemployment rate at 4.2 % for the Springfield market area was below the national average reported as of March 31, 2017. Metropolitan areas in Arkansas, Iowa, Nebraska and Minnesota boasted unemployment levels among the lowest in the nation.

Sales of newly built, single-family homes were at a seasonally adjusted annual rate of 621,000 units in March 2017, according to the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. This represents a 5.8% increase since February 2017 and a 15.6% increase above the March 2016 estimate of 537,000. The median sales price of new houses sold in March 2017 was $315,100, with an average sales price of $388,200. The seasonally adjusted estimate of new houses for sale at the end of March 2017 was 268,000, which represented a supply of 5.2 months at the current sales rate. Sales of existing single-family homes closed out 2016 as the best year in a decade, and accelerated in March to their highest pace in over 10 years. Severe supply shortages resulted in the typical home's days on market much less than in February 2017 and a year ago. Only the West Region saw a decline in sales activity in March. In March 2017, existing sales increased 4.4% to a seasonally adjusted annual rate of 5.71 million from 5.47 million in February 2017. March's sales pace is 5.9% above a year ago and is the strongest month of sales since February 2007 at 5.79 million. Existing home sales in March 2017 were led by hefty gains in the Northeast and Midwest. First-time buyers made up 32% of those transactions, the biggest share in four years, easing concerns that a shortage of affordable houses has been pushing entry-level buyers out of the market. The median existing-home price for all housing types in March was $236,400, up 6.8% from March 2016 ($221,400). March's price increase marks the 61^st consecutive month of year-over-year gains. Total housing inventory at the end of March increased 5.8% to 1.83 million existing homes available for sale, which is still 6.6% lower than a year ago (1.96 million) and has fallen year-over-year for 22 straight months. Unsold inventory is at a 3.8 month supply at the current sales pace.

Distressed sales, which include foreclosures and short sales, comprised 6% of all sales in March 2017, down from 8% a year ago. Foreclosures sold for an average discount of 16% below market value, while short sales were discounted 14%.

Occupancy, absorption and rental income levels of commercial real estate properties located throughout the Company's market areas remain stable according to information provided by real estate services firm CoStar Group. There continues to be significant real estate sales and financing activity.

While current economic indicators show improvement nationally in employment, housing starts and prices, commercial real estate occupancy, absorption and rental income, our management will continue to closely monitor regional, national and global economic conditions, as these could significantly impact our market areas.

Loss Sharing Agreements

On April 26, 2016, Great Southern Bank executed an agreement with the FDIC to terminate the loss sharing agreements for Team Bank, Vantus Bank and Sun Security Bank, effective immediately. The agreement required the FDIC to pay $4.4 million to settle all outstanding items related to the terminated loss sharing agreements. As a result of entering into the agreement, assets that were covered by the terminated loss sharing agreements, including covered loans in the amount of $61.5 million and covered other real estate owned in the amount of $468,000 as of March 31, 2016, were reclassified as non-covered assets effective April 26, 2016. In anticipation of terminating the loss sharing agreements, an impairment of the related indemnification assets was recorded during the three months ended March 31, 2016 in the amount of $584,000. On the date of the termination, the indemnification asset balances (and certain other receivables from the FDIC) related to Team Bank, Vantus Bank and Sun Security Bank, which totaled $4.4 million, net of impairment, at March 31, 2016, became $0 as a result of the receipt of funds from the FDIC as outlined in the termination agreement. There will be no future effects on non-interest income (expense) related to adjustments or amortization of the indemnification assets for Team Bank, Vantus Bank or Sun Security Bank; however, adjustments and amortization related to the InterBank indemnification asset and loss sharing agreement will continue. The remaining accretable yield adjustments that affect interest income are not changed by this transaction and will continue to be recognized for all FDIC-assisted transactions in the same manner as they have been previously.

General

The profitability of the Company and, more specifically, the profitability of its principal subsidiary, the Bank, depends primarily on its net interest income, as well as provisions for loan 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 loan and investment portfolios, 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 $118.1 million, or 2.6%, from $4.55 billion at December 31, 2016, to $4.43 billion at March 31, 2017. Full details of the current period changes in total assets are provided in the "Comparison of Financial Condition at March 31, 2017 and December 31, 2016" section of this Quarterly Report on Form 10-Q.

Loans. Net loans decreased $32.3 million, or 0.9%, from $3.76 billion at December 31, 2016, to $3.73 billion at March 31, 2017. Included in the decreases in loans were reductions of $24.1 million in the FDIC-acquired loan portfolios. In addition, there were higher than usual unscheduled significant paydowns on loans during the three months ended March 31, 2017. Loan paydowns in excess of $1.0 million totaled $206.1 million for the three months ended March 31, 2017. Excluding previously acquired covered and non-covered loans and mortgage loans held for sale, but including the loans acquired from Fifth Third Bank, total gross loans increased $38.3 million from December 31, 2016 to March 31, 2017. Increases primarily occurred in commercial real estate loans, construction loans and other residential (multi-family) real estate loans. These increases were partially offset by decreases in consumer loans, one-to four-family residential loans and commercial business loans. The increases were primarily due to loan growth in our existing banking center network and our commercial loan production offices. 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 assurances can be made regarding our future loan growth. The Company's strategy continues to be focused on maintaining credit risk and interest rate risk at appropriate levels.

Recent loan growth has occurred in several 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 the loan production offices in Dallas and Tulsa. While most of the loan growth has been organic, in 2016 it was also partially due to the loans acquired from Fifth Third Bank. Certain minimum underwriting standards and monitoring help assure the Company's portfolio quality. Great Southern's loan committee reviews and approves all new loan originations in excess of lender approval authorities. Generally, the Company considers commercial construction, consumer, 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 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 are primarily secured by new and used motor vehicles and these loans are also subject to certain minimum underwriting standards to assure portfolio quality. Great Southern's consumer underwriting and pricing standards have been fairly consistent over the past several years. The underwriting standards employed by Great Southern for consumer loans include a determination of the applicant's payment history on other debts, credit scores, employment history and an assessment of ability to meet existing obligations and payments on the proposed loan. See "Item 1. Business – Lending Activities – General, – Commercial Real Estate and Construction Lending, and – Consumer Lending" in the Company's December 31, 2016 Annual Report on Form 10-K.

While our policy allows us to lend up to 95% 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 March 31, 2017 and December 31, 2016, an estimated 0.1% and 0.2%, respectively, of total owner occupied one- to four-family residential loans had loan-to-value ratios above 100% at origination. At March 31, 2017 and December 31, 2016, an estimated 1.4% and 1.3%, respectively, of total non-owner occupied one- to four-family residential loans had loan-to-value ratios above 100% at origination.

At March 31, 2017, troubled debt restructurings totaled $21.2 million, or 0.6% of total loans, up $124,000 from $21.1 million, or 0.6% of total loans, at December 31, 2016. Concessions granted to borrowers experiencing financial difficulties may include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. For troubled debt restructurings occurring during the three months ended March 31, 2017 and the year ended December 31, 2016, no loans were restructured into multiple new loans. For further information on troubled debt restructurings, see Note 6 of the Notes to Consolidated Financial Statements contained in this report.

The loss sharing agreement for InterBank with the FDIC is subject to limitations on the types of losses covered and the length of time losses are covered, and is conditioned upon the Bank complying with its requirements in the agreement with the FDIC, including requirements regarding servicing and other loan administration matters. The original terms of the loss sharing agreement extends for ten years for single family real estate loans and for five years for other loans. As noted above, the loss sharing agreements for Team Bank, Vantus Bank and Sun Security Bank were terminated on April 26, 2016.

At March 31, 2017, approximately five years remained on the loss sharing agreement for single family real estate loans acquired from InterBank and the remaining loans had an estimated average life of three to twelve years. At March 31, 2017, approximately three months remained on the loss sharing agreement for non-single-family loans acquired from InterBank and the remaining loans had an estimated average life of one to two years. While the expected repayments for certain of the acquired loans extend beyond the terms of the loss sharing agreement, the Bank has identified and will continue to identify problem loans and will make every effort to resolve them within the time limits of the agreement. The Company may sell any loans remaining at the end of the loss sharing agreement subject to the approval of the FDIC.

Loans that were acquired through FDIC-assisted transactions, which are accounted for in pools, are currently included in the analysis and estimation of the allowance for loan losses. If expected cash flows to be received on any given pool of loans decreases from previous estimates, then a determination is made as to whether the loan pool should be charged down or the allowance for loan losses should be increased (through a provision for loan losses). This is true of all acquired loan pools regardless of whether or not they are covered by a loss sharing agreement. If a charge down occurs to a loan pool that is covered by the loss sharing agreement, the full amount of the charge down will be reflected in the allowance for loan losses and a separate asset will be recorded for the amount to be recovered from the FDIC. The loss sharing agreements (both current and terminated) and their related limitations are described in detail in Note 7 of the accompanying financial statements. For acquired loan pools that currently are not covered by loss sharing agreements, the Company may allocate, and at March 31, 2017, has allocated, a portion of its allowance for loan losses related to these loan pools in a manner similar to how it allocates its allowance for loan losses to those loans which are collectively evaluated for impairment.

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 performance 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. The Company's available-for-sale securities totaled $203.7 million at March 31, 2017, a decrease of $10.2 million, or 4.8%, compared to $213.9 million at December 31, 2016. The decrease was primarily due to calls of municipal securities, and normal monthly payments received related to the portfolio of mortgage-backed securities.

Deposits. The Company attracts deposit accounts through its retail branch network, correspondent banking and corporate services areas, 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 three months ended March 31, 2017, total deposit balances increased $11.4 million, or 0.3%. Transaction account balances increased $30.8 million to $2.22 billion at March 31, 2017, from $2.19 billion at December 31, 2016, while retail certificates of deposit decreased $3.9 million to $1.16 billion at March 31, 2017, compared to December 31, 2016. The increases in transaction accounts were primarily a result of organic growth in retail and commercial deposits at existing banking centers. Retail certificates of deposit decreased due to a decrease in national certificates, partially offset by an increase in other retail certificates. In addition, at March 31, 2017 and December 31, 2016, customer deposits totaling $13.9 million and $14.0 million, respectively, were part of the CDARS program, which allows customers to maintain balances in an insured manner that would otherwise exceed the FDIC deposit insurance limit. The FDIC counts these deposits as brokered, but these are deposit accounts that we generate with customers in our local markets. Brokered deposits, including CDARS program purchased funds, were $294.9 million at March 31, 2017, a decrease of $15.4 million from $310.3 million at December 31, 2016.

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 increase deposit balances and utilize brokered deposits to provide 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. 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.

Short-term Borrowings. Short-term borrowings decreased by $170.9 million, from $172.3 million at December 31, 2016 to $1.4 million at March 31, 2017. The overnight fed funds borrowings were repaid during the three month period due to reduced funding needs due to lower balances of loans, increases in securities sold under reverse repurchase agreements with customers and less need for cash and cash equivalents to be maintained on balance sheet.

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 portion of our loan portfolio is tied to the "prime rate" and adjusts immediately when this rate adjusts (subject to the effect of loan interest rate floors, which are discussed below). We monitor our sensitivity to interest rate changes on an ongoing basis (see "Item 3. Quantitative and Qualitative Disclosures About Market Risk"). In addition, our net interest income may be impacted by changes in the cash flows expected to be received from acquired loan pools. As described in Note 7 of the Notes to the Consolidated Financial Statements contained in this report, the Company's evaluation of cash flows expected to be received from acquired loan pools is on-going and increases in cash flow expectations are recognized as increases in accretable yield through interest income. Decreases in cash flow expectations are recognized as impairments through the allowance for loan losses.

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 Federal Reserve Bank (the "FRB") had last changed interest rates on December 16, 2008. This was the first rate increase since June 29, 2006. The FRB has now also implemented rate increases of 0.25% on December 14, 2016 and 0.25% on March 15, 2017. Great Southern has a substantial portfolio of its loan portfolio ($1.10 billion at March 31, 2017) which is tied to the one-month LIBOR index and will adjust at least once within 90 days after March 31, 2017. Of these loans, $590 million had interest rate floors. Great Southern also has a significant portfolio of loans ($365 million at March 31, 2017) which are tied to a "prime rate" of interest and will adjust immediately with changes to the "prime rate" of interest. Most of these loans are tied to some national index of "prime,"

while some are indexed to "Great Southern Bank prime" (GSB prime). The Company had elected to leave its GSB prime rate at 5.00%, but increased this rate to 5.25% in December 2015 following the FRB rate increase. The GSB prime rate was not changed following the FRB rate increase in December 2016, but was increased to 5.50% following the FRB rate increase in March 2017. This does not affect a large number of customers, as there is no longer a significant portion of the loan portfolio indexed to the GSB prime rate. But for the interest rate floors, a rate cut by the FRB generally would have an anticipated immediate negative impact on the Company's net interest income due to the large total balance of loans which generally adjust immediately as the Federal Funds rate adjusts. Loans at their floor rates are, however, subject to the risk that borrowers will seek to refinance elsewhere at the lower market rate. Because the Federal Funds rate is generally low, there may also be a negative impact on the Company's net interest income due to the Company's inability to significantly lower its funding costs in the current competitive rate environment, although interest rates on assets may decline further. Conversely, interest rate increases would normally result in increased interest rates on our LIBOR-based and prime-based loans. The interest rate floors in effect may limit the immediate increase in interest rates on certain of these loans, until such time as rates rise above the floors. However, the Company may have to increase rates paid on deposits to maintain deposit balances and pay higher rates on borrowings. The impact of the low rate environment on our net interest margin in future periods is expected to be fairly neutral. Any margin gained by rate increases on loans may be somewhat offset by reduced yields from our investment securities and our existing loan portfolio as payments are made and the proceeds are potentially reinvested at lower rates. Interest rates on certain adjustable rate loans may reset lower according to their contractual terms and index rate to which they are tied and new loans may be originated at lower market rates than the overall portfolio rate. 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."

The negative impact of declining loan interest rates had been mitigated by the positive effects of the Company's loans which have interest rate floors. At March 31, 2017, the Company had a portfolio (excluding the loans acquired in the FDIC-assisted transactions) of prime-based loans totaling approximately $365 million with rates that change immediately with changes to the prime rate of interest. Of those loans, $296 million also had interest rate floors greater than 0.0% and $69 million had interest rate floors of 0.0%. The $296 million of loans with floors were at varying rates, with $2 million of these loans having floor rates of 7.0% or greater and another $69 million of these loans having floor rates between 5.0% and 7.0%. In addition, $203 million of these loans have floor rates between 2.5% and 5.0% and another $22 million of these loans have floor rates between 0.0% and 2.5%. At March 31, 2017, $78 million of these loans were at their floor rates. Also included in these prime-based loans at March 31, 2017, the Company had a portfolio (excluding the loans acquired in the FDIC-assisted transactions) of GSB prime-based loans totaling approximately $55 million with rates that change immediately with changes to the GSB prime rate of interest. Of those loans, $53 million also had interest rate floors. At March 31, 2017, $9 million of the $53 million GSB prime rate loans with interest rate floors were at their floor rates. The loan yield for the total loan portfolio was approximately 66 basis points and 83 basis points higher than the national "prime rate of interest" at March 31, 2017 and December 31, 2016, respectively, partly because of these interest rate floors. While interest rate floors have had an overall positive effect on the Company's results during this period, they do subject the Company to the risk that borrowers will elect to refinance their loans with other lenders. To the extent economic conditions improve, the risk that borrowers will seek to refinance their loans increases.

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, accretion income (net of amortization) related to the FDIC-assisted acquisitions, late charges and prepayment fees on loans, gains on sales of loans and available-for-sale investments and other general operating income. In early 2016 and all of 2015, increases in the cash flows expected to be collected from the FDIC-covered loan portfolios resulted in amortization (expense) recorded relating to reductions of expected reimbursements under the loss sharing agreements with the FDIC, which are recorded as indemnification assets. This is no longer the case for the TeamBank, Vantus Bank and Sun Security Bank transactions, subsequent to April 26, 2016 (due to the termination of the related loss sharing agreements effective as of that date). It is still the case for InterBank loans. Non-interest income may also be affected by the Company's interest rate derivative activities, if the Company chooses to implement derivatives. See Note 15 "Derivatives and Hedging Activities" in the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q for additional information regarding the Bank's hedging activities.

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 in the "Results of Operations and Comparison for the Three Months ended March 31, 2017 and 2016" section of this Quarterly Report on Form 10-Q.

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.

Significant Legislation Impacting the Financial Services Industry. On July 21, 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 implements far-reaching changes across the financial regulatory landscape, including provisions that, among other things, centralize responsibility for consumer financial protection by creating a new agency, the Consumer Financial Protection Bureau, with broad rulemaking authority for a wide range of consumer protection laws that apply to all banks, require new capital rules (discussed below), change the assessment base for federal deposit insurance, repeal the federal prohibitions on the payment of interest on demand deposits, amend the account balance limit for federal deposit insurance protection, and increase the authority of the Federal Reserve Board to examine the Company and its non-bank subsidiaries.

Many aspects of the Dodd-Frank Act are subject to rulemaking and will take effect over a number of years, making it difficult to anticipate the overall financial impact on the Company and the financial services industry more generally. Provisions in the legislation that affect deposit insurance assessments and payment of interest on demand deposits could increase the costs associated with deposits. Provisions in the legislation that require revisions to the capital requirements of the Company and the Bank could require the Company and the Bank to seek additional sources of capital in the future.

A provision of the Dodd-Frank Act, commonly referred to as the "Durbin Amendment," directed the FRB to analyze the debit card payments system and fix the interchange rates based upon their estimate of actual costs. The FRB has established the interchange rate for all debit transactions for issuers with over $10 billion in assets at $0.21 per transaction. An additional five basis points of the transaction amount and an additional $0.01 may be collected by the issuer for fraud prevention and recovery, provided the issuer performs certain actions. The Bank is currently exempt from the rule on the basis of asset size.

New Capital Rules. The federal banking agencies have adopted new regulatory capital rules that substantially amend the risk-based capital rules applicable to the Bank and the Company. The new 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 new rules was January 1, 2015, and, for certain provisions, various phase-in periods and later effective dates apply. The chief features of the new rules are summarized below.

The new 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 new 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 new capital conservation buffer requirement began phasing in beginning on January 1, 2016 when a buffer greater than 0.625% of risk-weighted assets was required, which amount will increase an equal amount each year until the buffer requirement of greater than 2.5% of risk-weighted assets is fully implemented on January 1, 2019.

Effective January 1, 2015, the new 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 new 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.

Business Initiatives

In January 2017, two leased banking centers in the Omaha, Neb., metropolitan market area were replaced by two new owned offices. A leased office at 1902 Harlan Drive in Bellevue, Neb., was replaced by a newly constructed banking center at Cornhusker and US 75 Highway in Bellevue. The leased office at 7001 S. 36th Street in Bellevue was replaced by a former bank building purchased in 2015, located at 9775 Q Street in Omaha. Both new locations offer better convenience and access to area customers. Great Southern operates four offices in the Omaha market area.

A person-to-person (P2P) electronic payment service, called Send Money, was implemented for retail customers in late February 2017. Available through the Company's smartphone mobile banking applications, the P2P service allows Great Southern debit card customers to send one-time transfers to recipients at any financial institution.

A commercial loan production office opened in April 2017 in downtown Chicago in a leased office at 2 North Riverside Plaza in the West Loop. In early 2017, a 30-year banking veteran in the Chicago area, Rick Percifield, was hired to manage this office. The Company also operates commercial loan production offices in Tulsa, Okla., and Dallas.

The Company's chief lending officer, Steve Mitchem, retired from the Company on April 7, 2017. Mitchem joined Great Southern in 1990. During his tenure, the Company's loan portfolio grew from $360 million primarily in the southwest Missouri region to $3.8 billion operating in nine states. Mitchem announced his retirement more than a year ago to ensure a smooth management transition. At that time, the Company restructured the lending division's organizational structure to better reflect the Company's size and scope. The lending division now has two separate areas of responsibility – loan production led by John Bugh and credit administration led by Kevin Baker. Bugh and Baker are long-term Great Southern lenders, who each have more than 27 years of banking experience.

Great Southern Bancorp, Inc. will hold its 28th Annual Meeting of Shareholders at 10:00 a.m. CDT on Tuesday, May 9, 2017, at the Great Southern Operations Center, 218 S. Glenstone, Springfield, Mo. Holders of Great Southern Bancorp, Inc. common stock at the close of business on the record date, February 28, 2017, can vote at the annual meeting, either in person or by proxy.

Comparison of Financial Condition at March 31, 2017 and December 31, 2016

During the three months ended March 31, 2017, the Company's total assets decreased by $118.1 million to $4.43 billion. The decrease was attributable to a decrease in cash and cash equivalents, net loans and mortgage loans held for sale, available-for-sale investment securities and Federal Home Loan Bank stock.

Cash and cash equivalents were $228.1 million at March 31, 2017, a decrease of $51.7 million, or 18.5%, from $279.8 million at December 31, 2016. During the three months ended March 31, 2017, cash and cash equivalents decreased primarily due to the repayment of short-term borrowings during the period, partially offset by an increase in deposits, an increase in securities sold under reverse repurchase agreements with customers, and a decrease in available for sale securities.

Net loans decreased $32.3 million from December 31, 2016, to $3.73 billion at March 31, 2017. Included in these decreases were reductions in net loans acquired in the FDIC-assisted transactions of $24.1 million during the three month period. Excluding previously acquired covered and non-covered loans, and mortgage loans held for sale, but including the loans acquired from Fifth Third Bank in January 2016, total loans increased $38.3 million from December 31, 2016 to March 31, 2017. The increases were primarily in commercial real estate loans, construction loans and other residential (multi-family) real estate loans. These increases were partially offset by decreases in consumer loans, one-to four-family residential loans and commercial business loans.

Mortgage loans held for sale decreased $11.6 million from December 31, 2016, to $4.8 million at March 31, 2017, due to decreased origination activity of long-term fixed rate mortgage loans.

The Company's available-for-sale securities decreased $10.2 million compared to December 31, 2016. The decrease was primarily due to calls of municipal securities, and normal monthly payments received related to the portfolio of mortgage-backed securities.

FHLBank stock decreased $6.3 million from December 31, 2016, to $6.7 million at March 31, 2017, due to decreased outstanding FHLBank advances.

Total liabilities decreased $128.1 million from $4.12 billion at December 31, 2016 to $3.99 billion at March 31, 2017. The decrease was primarily attributable to a decrease in short-term borrowings, offset by an increase in securities sold under reverse repurchase agreements with customers and deposits.

Total deposits increased $11.4 million from December 31, 2016. Deposits increased due to growth in the Company's interest-bearing checking and retail certificates of deposit, partially offset by decreases in internet-acquired deposits and non-interest-bearing checking deposits. Transaction account balances increased $30.8 million to $2.22 billion at March 31, 2017, from $2.19 billion at December 31, 2016, while retail certificates of deposit decreased $3.9 million to $1.16 billion at March 31, 2017, compared to December 31, 2016, primarily due to decreases in time deposits opened through the Company's internet deposit acquisition channels.

Short-term borrowings decreased $170.9 million from $172.3 million at December 31, 2016 to $1.4 million at March 31, 2017. These short-term borrowings, which were primarily overnight fed funds borrowings through the FHLBank, were repaid due to decreased funding needs for loans and utilization of excess cash and cash equivalents.

Securities sold under reverse repurchase agreements with customers increased $30.6 million from $113.7 million at December 31, 2016 to $144.3 million at March 31, 2017. These balances fluctuate over time based on customer demand for this product.

Total stockholders' equity increased $10.1 million from $429.8 million at December 31, 2016 to $439.9 million at March 31, 2017. The Company recorded net income of $11.5 million for the three months ended March 31, 2017, and dividends declared on common stock were $3.1 million. Accumulated other comprehensive income increased $468,000 due to the changes in the fair value of available-for-sale investment securities and the changes in the fair value of cash flow hedges. In addition, total stockholders' equity increased $1.0 million due to stock option exercises.

Results of Operations and Comparison for the Three Months Ended March 31, 2017 and 2016

General

Net income and net income available to common shareholders was $11.5 million for the three months ended March 31, 2017 compared to $9.8 million for the three months ended March 31, 2016. This increase of $1.7 million, or 17.6%, was primarily due to an increase in non-interest income of $2.7 million, or 54.8%, and a decrease in non-interest expense of $2.3 million, or 7.6%, which was partially offset by a decrease in net interest income of $2.4 million, or 5.9%, an increase in income tax expense of $779,000, or 23.8%, and an increase in provision for loan losses of $149,000, or 7.1%.

Total Interest Income

Total interest income decreased $333,000, or 0.7%, during the three months ended March 31, 2017 compared to the three months ended March 31, 2016. The decrease was due to a $304,000 decrease in interest income on loans and a $29,000 decrease in interest income on investments and other interest-earning assets. Interest income on loans decreased for the three months ended March 31, 2017 compared to the same period in 2016, due to lower average rates of interest, partially offset by higher average balances on loans. Interest income from investment securities and other interest-earning assets decreased during the three months ended March 31, 2017 compared to the same period in 2016 due to lower average balances, partially offset by higher average rates of interest.

Interest Income – Loans

During the three months ended March 31, 2017 compared to the three months ended March 31, 2016, interest income on loans decreased due to lower average interest rates, partially offset by higher average balances.

Interest income decreased $3.7 million as a result of lower average interest rates on loans. The average yield on loans decreased from 5.07% during the three months ended March 31, 2016, to 4.68% during the three months ended March 31, 2017. This decrease was primarily due to a lower amount of accretion income in the current year period compared to the prior year period resulting from the increases in expected cash flows to be received from the FDIC-acquired loan pools as previously discussed in Note 7 of the Notes to Consolidated Financial Statements. Interest income increased $3.4 million as the result of higher average loan balances, which increased from $3.50 billion during the three months ended March 31, 2016, to $3.79 billion during the three months ended March 31, 2017. The higher average balances were primarily due to organic loan growth.

On an on-going basis, the Company estimates the cash flows expected to be collected from the acquired loan pools. This cash flows estimate has increased, based on the payment histories and the collection of certain loans, thereby reducing loss expectations of certain loan pools, resulting in adjustments to be spread on a level-yield basis over the remaining expected lives of the loan pools. The loss sharing agreements for the Team Bank, Vantus Bank and Sun Security Bank transactions were terminated in April 2016, and the related indemnification assets were reduced to $-0- at that time. The Valley Bank transaction does not include a loss sharing agreement with the FDIC. Therefore, for these four acquisition transactions, there is no related indemnification asset. The entire amount of the discount adjustment has been and will be accreted to interest income over time with no offsetting impact to non-interest income. For the loan pools acquired in the InterBank transaction, the increases in expected cash flows also reduce the amount of expected reimbursements under the loss sharing agreement with the FDIC, which is recorded as an indemnification asset. Therefore, the expected indemnification asset has also been reduced, resulting in adjustments to be amortized on a comparable basis over the remainder of the loss sharing agreement or the remaining expected life of the loan pools, whichever is shorter. For the three months ended March 31, 2017 and 2016, the adjustments increased interest income by $1.9 million and $5.4 million, respectively, and decreased non-interest income by $634,000 and $2.9 million, respectively. The net impact to pre-tax income was $1.3 million and $2.4 million, respectively, for the three months ended March 31, 2017 and 2016.

As of March 31, 2017, the remaining accretable yield adjustment that will affect interest income is $4.5 million and the remaining adjustment to the indemnification assets related to InterBank, including the effects of the clawback liability, that will affect non-interest income (expense) is $(1.9) million. The $4.5 million of accretable yield adjustment relates to Team Bank, Vantus Bank, Sun Security Bank, InterBank and Valley Bank. The amortization of indemnification asset, as noted, is only related to InterBank, as there is no longer, nor will there be in the future, expense related to Team Bank, Vantus Bank, or Sun Security Bank due to the termination of the related loss sharing agreements for those transactions in April 2016. Of the remaining adjustments, we expect to recognize $2.5 million of interest income and $(1.0) million of non-interest income (expense) during the remainder of 2017. Additional adjustments may be recorded in future periods from the FDIC-assisted transactions, as the Company continues to estimate expected cash flows from the acquired loan pools. Apart from the yield accretion, the average yield on loans was 4.48% for the three months ended March 31, 2017, up from 4.45% for the three months ended March 31, 2016, as a result of higher current market rates on adjustable rate loans.

Interest Income – Investments and Other Interest-earning Assets

Interest income on investments and other interest-earning assets decreased slightly in the three months ended March 31, 2017 compared to the three months ended March 31, 2016. Interest income decreased $282,000 as a result of a decrease in average balances from $382.1 million during the three months ended March 31, 2016, to $360.0 million during the three months ended March 31, 2017. Average balances of securities decreased primarily due to certain municipal securities being called and the normal monthly payments received on the portfolio of mortgage-backed securities. Interest income increased $253,000 due to an increase in average interest rates from 1.79% during the three months ended March 31, 2016, to 1.88% during the three months ended March 31, 2017 due to a higher portion of the investment portfolio in tax-exempt municipal bonds and higher market rates of interest on other interest-bearing deposits in financial institutions.

Total Interest Expense

Total interest expense increased $2.1 million, or 45.1%, during the three months ended March 31, 2017, when compared with the three months ended March 31, 2016, due to interest on the newly issued subordinated notes of $1.0 million, an increase in interest expense on deposits of $1.0 million, or 26.2%, an increase in interest expense on short-term borrowing and repurchase agreements of $145,000, or 179.0%, and an increase in interest expense on subordinated debentures issued to capital trust of $68,000, or 39.1%, partially offset by a decrease in interest expense on FHLBank advances of $183,000, or 41.8%.

Interest Expense – Deposits

Interest expense on demand deposits increased $140,000 due to average rates of interest that increased from 0.25% in the three months ended March 31, 2016 to 0.29% in the three months ended March 31, 2017. Interest expense on demand deposits increased $50,000 due to an increase in average balances from $1.47 billion during the three months ended March 31, 2016, to $1.56 billion during the three months ended March 31, 2017. The increase in average balances of interest-bearing demand deposits was primarily a result of increased balances in money market accounts.

Interest expense on time deposits increased $442,000 as a result of an increase in average rates of interest from 0.92% during the three months ended March 31, 2016, to 1.05% during the three months ended March 31, 2017. Interest expense on time deposits increased $398,000 due to an increase in average balances of time deposits from $1.32 billion during the three months ended March 31, 2016, to $1.49 billion during the three months ended March 31, 2017. The increase in average balances of time deposits was primarily a result of organic growth of retail deposits and time deposits opened through the Company's internet deposit acquisition channels. A large portion of the Company's certificate of deposit portfolio matures within six to eighteen months and therefore reprices fairly quickly; this is consistent with the portfolio over the past several years.

Interest Expense – FHLBank Advances, Short-term Borrowings and Repurchase Agreements, Subordinated Debentures Issued to Capital Trusts and Subordinated Notes

During the three months ended March 31, 2017 compared to the three months ended March 31, 2016, interest expense on FHLBank advances decreased due to lower average balances, partially offset by higher average rates of interest. Interest expense on FHLBank advances decreased $578,000 due to a decrease in average balances from $179.7 million during the three months ended March 31, 2016, to $31.4 million during the three months ended March 31, 2017. This decrease was primarily due to the paydown and partial replacement of short-term FHLBank advances with overnight fed funds borrowings from the FHLBank, which were done at slightly cheaper rates than short-term advances. Those overnight fed funds were subsequently substantially paid down during the three months ended March 31, 2017. Partially offsetting the decrease due to reduced average balances was an increase in interest expense of $395,000 due to an increase in average interest rates from 0.98% in the three months ended March 31, 2016, to 3.29% in the three months ended March 31, 2017. The increase in the average rate was due to a change in the mix of advances compared to the prior year period. Short-term advances with very low interest rates were utilized more significantly in the prior year period, which caused the overall average rate to be lower. In the current year period, the category was made up primarily of the remaining fixed-rate term FHLBank advances, which are at a higher rate.

Interest expense on short-term borrowings and repurchase agreements increased $130,000 due to average rates that increased from 0.16% in the three months ended March 31, 2016, to 0.39% in the three months ended March 31, 2017. The increase was due to a change in the mix of borrowings in the current period, during which overnight fed funds borrowings from the FHLBank were increased, which are at a higher interest rate than repurchase agreements. Interest expense on short-term borrowings and repurchase agreements increased $15,000 due to an increase in average balances from $204.9 million during the three months ended March 31, 2016, to $237.5 million during the three months ended March 31, 2017, which is primarily due to an increase in overnight borrowings from the FHLBank. The average balance of these overnight borrowings was higher during the period, although the balance was paid down prior to March 31, 2017, with a remaining balance at the end of the period of $1.4 million.

During the three months ended March 31, 2017, compared to the three months ended March 31, 2016, interest expense on subordinated debentures issued to capital trusts increased $68,000 due to higher average interest rates. The average

interest rate was 2.71% in the three months ended March 31, 2016, compared to 3.81% in the three months ended March 31, 2017. The actual interest rate on the subordinated debentures during the three months ended March 31, 2017 was 2.63%, up from 2.22% during the three months ended March 31, 2016. The amortization of the cost of the interest rate caps the Company purchased in 2013 to limit the interest rate risk from rising LIBOR rates related to the Company's subordinated debentures issued to capital trusts effectively increased the rates for each period. The average interest rate will continue to be higher than this until the third quarter of 2017 as a result of the amortization of the cost of the interest rate cap. There was no change in the average balance of the subordinated debentures between the 2017 and the 2016 period. The subordinated debentures are variable-rate debentures which bear interest at an average rate of three-month LIBOR plus 1.60%, adjusting quarterly.

In August 2016, the Company issued $75 million of 5.25% fixed-to-floating rate subordinated notes due August 15, 2026. The notes were sold at par, resulting in net proceeds, after underwriting discounts and commissions and other issuance costs, of approximately $73.5 million. Interest expense on the subordinated notes for the three months ended March 31, 2017, was $1.0 million.

Net Interest Income

Net interest income for the three months ended March 31, 2017 decreased $2.4 to $38.7 million compared to $41.1 million for the three months ended March 31, 2016. Net interest margin was 3.78% in the three months ended March 31, 2017, compared to 4.26% in the three months ended March 31, 2016, a decrease of 48 basis points, or 11.3%. In both three month periods, the Company's net interest income and margin were positively impacted by the increases in expected cash flows to be received from the FDIC-acquired loan pools and the resulting increase to accretable yield, which were previously discussed in Note 7 of the Notes to Consolidated Financial Statements. The positive impact of these changes in the three months ended March 31, 2017 and 2016 were increases in interest income of $1.9 million and $5.4 million, respectively, and increases in net interest margin of 19 basis points and 56 basis points, respectively. Excluding the positive impact of the additional yield accretion, net interest margin decreased 12 basis points when compared to the year-ago period. The decrease was primarily due to the interest expense associated with the issuance of $75.0 million of subordinated notes in the third quarter of 2016 and an increase in the average interest rate on deposits and other borrowings.

The Company's overall average interest rate spread decreased 53 basis points, or 12.7%, from 4.16% during the three months ended March 31, 2016, to 3.63% during the three months ended March 31, 2017. The decrease was due to a 31 basis point decrease in the weighted average yield on interest-earning assets and a 22 basis point increase in the weighted average rate paid on interest-bearing liabilities. In comparing the two periods, the yield on loans decreased 39 basis points while the yield on investment securities and other interest-earning assets increased 9 basis points. The rate paid on deposits increased 9 basis points, the rate paid on FHLBank advances increased 231 basis points, the rate paid on short-term borrowings and repurchase agreements increased 23 basis points, and the rate paid on subordinated debentures issued to capital trusts increased 110 basis points. In addition, the average interest rate on the new subordinated notes was 565 basis points.

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

Provision for Loan Losses and Allowance for Loan Losses

Management records a provision for loan losses in an amount it believes sufficient to result in an allowance for loan losses that will cover current net charge-offs as well as risks believed to be inherent in the loan portfolio of the Bank. The amount of provision charged against current income is based on several factors, including, but not limited to, past loss experience, current portfolio mix, actual and potential losses identified in the loan portfolio, economic conditions, and internal as well as external reviews. The levels of non-performing assets, potential problem loans, loan loss provisions and net charge-offs fluctuate from period to period and are difficult to predict.

Weak economic conditions, higher inflation or interest rates, or other factors may lead to increased losses in the portfolio and/or requirements for an increase in loan loss provision expense. Management maintains various controls in an attempt to limit future losses, such as a watch list of possible problem loans, documented loan administration policies and a 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, on-going correspondence with borrowers and problem loan work-outs. Management determines which loans are potentially uncollectible, or represent a greater risk of loss, and makes additional provisions to expense, if necessary, to maintain the allowance at a satisfactory level.

The provision for loan losses for the three months ended March 31, 2017, increased $149,000, to $2.3 million, when compared with the three months ended March 31, 2016. At March 31, 2017 and December 31, 2016, the allowance for loan losses was $37.0 million and $37.4 million, respectively. Total net charge-offs were $2.7 million and $3.2 million for the three months ended March 31, 2017 and 2016, respectively. During the three months ended March 31, 2017, $1.8 million of the $2.7 million of net charge-offs were in the consumer auto category. In response to a more challenging consumer credit environment, the Company tightened its underwriting guidelines on automobile lending in the latter part of 2016. Management took this step in an effort to improve credit quality in the portfolio and lower delinquencies and charge-offs in the remainder of 2017. This action also resulted in a lower level of origination volume and, as such, the Company's automobile loan totals declined approximately $31 million in the three months ended March 31, 2017. We expect to see further declines in the automobile loan totals through the balance of 2017 as well. General market conditions and unique circumstances related to individual borrowers and projects contributed to the level of provisions and charge-offs. As assets were categorized as potential problem loans, non-performing loans or foreclosed assets, evaluations were made of the values of these assets with corresponding charge-offs as appropriate.

At March 31, 2017, loans acquired in the InterBank FDIC-assisted transaction were covered by a loss sharing agreement between the FDIC and Great Southern Bank, which affords Great Southern Bank at least 80% protection from losses in the acquired portfolio of loans. The FDIC loss sharing agreement is subject to limitations on the types of losses covered and the length of time losses are covered and is conditioned upon the Bank complying with its requirements in the agreement with the FDIC. These limitations are described in detail in Note 7 of the accompanying Notes to the Financial Statements. In April 2016, the loss sharing agreements for Team Bank, Vantus Bank and Sun Security Bank were terminated. Loans acquired from the FDIC related to Valley Bank did not have a loss sharing agreement. All acquired loans were grouped into pools based on common characteristics and were recorded at their estimated fair values, which incorporated estimated credit losses at the acquisition date. These loan pools are systematically reviewed by the Company to determine the risk of losses that may exceed those identified at the time of the acquisition. Techniques used in determining risk of loss are similar to those used to determine the risk of loss for the legacy Great Southern Bank portfolio, with most focus being placed on those loan pools which include the larger loan relationships and those loan pools which exhibit higher risk characteristics. Review of the acquired loan portfolio also includes meetings with customers, review of financial information and collateral valuations to determine if any additional losses are apparent.

The Bank's allowance for loan losses as a percentage of total loans, excluding acquired loans that are covered or were previously covered by the FDIC loss sharing agreements, was 1.03% and 1.04% at March 31, 2017 and December 31, 2016, respectively. Management considers the allowance for loan losses adequate to cover losses inherent in the Bank's loan portfolio at March 31, 2017, based on recent reviews of the Bank's loan portfolio and current economic conditions. If economic conditions were to deteriorate or management's assessment of the loan portfolio were to change, it is possible that additional loan loss provisions would be required, thereby adversely affecting future results of operations and financial condition.

Non-performing Assets

Former TeamBank, Vantus Bank, Sun Security Bank and InterBank non-performing assets, including foreclosed assets and potential problem loans, are not included in the totals or in the discussion of non-performing loans, potential problem loans and foreclosed assets below as they are, or were, subject to loss sharing agreements with the FDIC, which cover at least 80% of principal losses that may be incurred in these portfolios for the applicable terms under the agreements. In addition, these assets were initially recorded at their estimated fair values as of their acquisition dates. The overall performance of the loan pools acquired in 2009, 2011 and 2012 in FDIC-assisted transactions has been better than original expectations as of the acquisition dates. Former Valley Bank loans are also excluded from the totals and the discussion of non-performing loans, potential problem loans and foreclosed assets below, although they are not covered by a loss sharing agreement. Former Valley Bank loans are accounted for in pools and were recorded at their fair value at the time of the acquisition; therefore, these loan pools are analyzed rather than the individual loans. The performance of the loan pools acquired in the Valley Bank transaction have also been better than expectations at the acquisition date.

As previously discussed, the remaining loss sharing agreements for Team Bank, Vantus Bank and Sun Security Bank transactions were terminated in April 2016. Loss sharing agreements covering single-family loans, non-single family loans and foreclosed assets related to the Inter Savings Bank FDIC-assisted acquisition are still in place in accordance with their contractual terms.

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

Non-performing assets, excluding FDIC-covered and formerly covered non-performing assets and other FDIC-assisted acquired assets, at March 31, 2017, were $41.0 million, an increase of $1.7 million from $39.3 million at December 31, 2016. Non-performing assets, excluding all FDIC-assisted acquired assets, as a percentage of total assets, were 0.92% at March 31, 2017, compared to 0.86% at December 31, 2016.

Compared to December 31, 2016, non-performing loans increased $2.0 million to $16.1 million at March 31, 2017, and foreclosed assets decreased $346,000 to $24.9 million at March 31, 2017. Non-performing commercial business loans were $4.4 million, or 27.1%, of the total $16.1 million of non-performing loans at March 31, 2017, a decrease of $414,000 from December 31, 2016. Non-performing construction and land development loans comprised $4.4 million, or 27.4%, of the total non-performing loans at March 31, 2017, an increase of $2.6 million from December 31, 2016. Activity in this category during the three months ended March 31, 2017 included one loan totaling $3.8 million was transferred from potential problem loans and one loan totaling $1.6 million was paid off. Non-performing commercial real estate loans comprised $2.9 million, or 18.1%, of the total non-performing loans at March 31, 2017, an increase of $187,000 from December 31, 2016. Non-performing consumer loans decreased $94,000 in the three months ended March 31, 2017, and were $2.5 million, or 15.8%, of total non-performing loans at March 31, 2017. Non-performing one- to four-family residential loans comprised $1.7 million, or 10.5%, of the total non-performing loans at March 31, 2017, a decrease of $268,000 from December 31, 2016.

Non-performing Loans. Activity in the non-performing loans category during the three months ended March 31, 2017 was as follows:

	Beginning Balance, January 1		Additions to Non- Performing		Removed from Non- Performing			Transfers to Potential Problem Loans			Transfers to Foreclosed Assets			Charge- Offs			Payments			Ending Balance, March 31
	(In Thousands)
One- to four-family construction	$	—	$	381	$	—		$	—		$	—		$	—		$	—		$	381
Subdivision construction		109		—		—			—			—			—			(2	)		107
Land development		1,718		3,842		—			—			—			—			(1,641	)		3,919
Commercial construction		—		—		—			—			—			—			—			—
One- to four-family residential		1,962		369		—			(320	)		(192	)		(27	)		(98	)		1,694
Other residential		162		2		—			—			—			—			—			164
Commercial real estate		2,727		306		—			—			(98	)		(1	)		(20	)		2,914
Commercial business		4,765		37		—			—			(7	)		(248	)		(196	)		4,351
Consumer		2,638		1,370		(133	)		(60	)		(416	)		(382	)		(473	)		2,544

Total	$	14,081	$	6,307	$	(133	)	$	(380	)	$	(713	)	$	(658	)	$	(2,430	)	$	16,074

Commercial real estate collateral that secured one relationship, totaling $1.7 million, was either transferred to foreclosed assets or sold; therefore, the remaining balance was reclassified from commercial real estate to commercial business in the Beginning Balance, January 1 presentation in the table above.

At March 31, 2017, the non-performing commercial business category included five loans. The largest loan in this category, which was added during 2016, totaled $2.8 million, or 64.4% of the total category, and is secured by the borrower's interest in a condo project in Branson, Mo. The Bank's lending involvement with this project dates back to 2005. This project had experienced some performance difficulties in the past and a new borrower became involved in this project during 2013. The second largest relationship totaled $1.5 million, or 34.8% of the total category. This relationship was previously collateralized by commercial real estate which has been foreclosed, and a portion of which has been sold. We are currently pursuing collection efforts against the guarantors of the credit relationship. The Bank's

lending involvement with this project dates back to 2006. The non-performing land development category included two loans. The largest loan in this category, which was transferred from potential problem loans during the three months ended March 31, 2017, totaled $3.8 million, or 98.0% of the total category, and is collateralized by land in the Branson, Mo. area. The Bank's lending involvement with this project dates back to 2007. The $1.6 million in payments in the land development category were all related to one loan, which paid off the remaining balance of that loan. The non-performing commercial real estate category included eight loans, two of which were added in the three months ended March 31, 2017. The largest relationship in this category, which was added prior to 2016, totaled $1.7 million, or 58.3% of the total category, and is collateralized by a theatre property in Branson, Mo. The non-performing one- to four-family residential category included 36 loans, six of which were added during the three months ended March 31, 2017. The non-performing consumer category included 200 loans, 114 of which were added during the three months ended March 31, 2017, and the majority of which are indirect used automobile loans. Compared to previous years, in 2016 and 2017 the Company experienced increased levels of delinquencies and repossessions in consumer loans, primarily indirect used automobile loans.

Potential Problem Loans. Compared to December 31, 2016, potential problem loans decreased $1.9 million, or 27.5%. This decrease was due to $3.9 million in loans transferred to the non-performing category, $46,000 in payments from customers and $1,000 in charge-offs, partially offset by the addition of $2.0 million of loans to potential problem loans. 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, but are considered in determining the adequacy of the allowance for loan losses.

Activity in the potential problem loans category during the three months ended March 31, 2017, was as follows:

	Beginning Balance, January 1		Additions to Potential Problem		Removed from Potential Problem		Transfers to Non- Performing			Transfers to Foreclosed Assets		Charge- Offs			Payments			Ending Balance, March 31
	(In Thousands)
One- to four-family construction	$	—	$	—	$	—	$	—		$	—	$	—		$	—		$	—
Subdivision construction		—		—		—		—			—		—			—			—
Land development		4,135		139		—		(3,842	)		—		—			—			432
Commercial construction		—		—		—		—			—		—			—			—
One- to four-family residential		439		294		—		—			—		—			(5	)		728
Other residential		—		—		—		—			—		—			—			—
Commercial real estate		2,062		464		—		—			—		—			(11	)		2,515
Commercial business		204		970		—		—			—		—			(19	)		1,155
Consumer		122		117		—		(11	)		—		(1	)		(11	)		216

Total	$	6,962	$	1,984	$	—	$	(3,853	)	$	—	$	(1	)	$	(46	)	$	5,046

At March 31, 2017, the commercial real estate category of potential problem loans included five loans, one of which was added during the three months ended March 31, 2017. The largest relationship in this category contains three loans with a total balance of $1.8 million, or 70.2% of the commercial real estate category. This relationship is collateralized by commercial entertainment property and other property in Branson, Mo. The commercial business category of potential problem loans included eight loans, one of which was added during the three months ended March 31, 2017. The largest relationship in this category, which included one loan added during the three months ended March 31, 2017, totaled $970,000, or 84.0% of the total category, and is collateralized by the business assets of an entity in the St. Louis, Mo. area. The land development category of potential problem loans decreased from December 31, 2016 due to the transfer of one loan totaling $3.8 million to the non-performing loans category, which is discussed above.

Other Real Estate Owned. Of the total $32.7 million of other real estate owned at March 31, 2017, $2.9 million represents the fair value of foreclosed assets covered by FDIC loss sharing agreements, $351,000 represents the fair value of foreclosed assets previously covered by FDIC loss sharing agreements, $2.3 million represents the fair value of foreclosed assets acquired related to Valley Bank and not covered by a loss sharing agreement, and $2.2 million represents properties which were not acquired through foreclosure. The acquired loss share covered and non-covered foreclosed and other assets acquired in the FDIC-assisted transactions and the properties not acquired through foreclosure are not included in the following table and discussion of other real estate owned.

Activity in foreclosed assets during the three months ended March 31, 2017, was as follows:

	Beginning Balance, January 1		Additions		Sales			Capitalized Costs		Write- Downs			Ending Balance, March 31
	(In Thousands)
One- to four-family construction	$	—	$	—	$	—		$	—	$	—		$	—
Subdivision construction		6,360		—		(47	)		—		—			6,313
Land development		10,886		—		(181	)		—		(13	)		10,692
Commercial construction		—		—		—			—		—			—
One- to four-family residential		1,217		192		(190	)		—		(9	)		1,210
Other residential		954		—		(261	)		117		—			810
Commercial real estate		3,841		98		(729	)		—		—			3,210
Commercial business		—		—		—			—		—			—
Consumer		1,991		6,850		(6,173	)		—		—			2,668

Total	$	25,249	$	7,140	$	(7,581	)	$	117	$	(22	)	$	24,903

At March 31, 2017, the land development category of foreclosed assets included 20 properties, the largest of which was located in northwest Arkansas and had a balance of $1.4 million, or 12.9% of the total category. Of the total dollar amount in the land development category of foreclosed assets, 39.8% and 33.7% was located in the Branson, Mo. and the northwest Arkansas areas, respectively, including the largest property previously mentioned. The subdivision construction category of foreclosed assets included 27 properties, the largest of which was located in the Springfield, Mo. metropolitan area and had a balance of $1.2 million, or 19.5% of the total category. Of the total dollar amount in the subdivision construction category of foreclosed assets, 29.5% and 19.5% is located in Branson, Mo. and Springfield, Mo., respectively, including the largest property previously mentioned. The commercial real estate category of foreclosed assets included five properties. The largest relationship in the commercial real estate category, which was added during 2016, totaled $1.3 million, or 39.9% of the total category, and is a hotel located in the western United States. The second largest relationship in the commercial real estate category totaling $935,000, or 29.1% of the total category, is a retail property located in Georgia. Another property associated with this relationship and located in Texas was sold during the three months ended March 31, 2017. The one-to four-family residential category of foreclosed assets included 13 properties, four of which were added in the three months ended March 31, 2017. The largest relationship in this category, with one property in the southwest Missouri area, had a balance of $421,000, or 34.8% of the total category. Of the total dollar amount in the one-to four-family category of foreclosed assets, 44.7% is located in the Branson, Mo, area. The other residential category of foreclosed assets included four properties, all of which are part of the same condominium community, located in Branson, Mo. and had a balance of $810,000, or 100.0% of the total category. One property in the category, which was located in southwest Missouri and had a previous balance of $260,000 was sold during the three months ended March 31, 2017. The larger amount of additions and sales under consumer loans are due to a higher volume of repossessions of automobiles, which generally are subject to a shorter repossession process. Compared to previous years, in 2016 and 2017 the Company experienced increased levels of delinquencies and repossessions in consumer loans, primarily indirect used automobile loans.

Non-interest Income

For the three months ended March 31, 2017, non-interest income increased $2.7 million to $7.7 million when compared to the three months ended March 31, 2017, primarily as a result of the following items:

Amortization of income related to business acquisitions: The net amortization expense related to business acquisitions was $489,000 for the three months ended March 31, 2017, compared to $3.3 million for the three months ended March 31, 2016. The amortization expense for the three months ended March 31, 2017, consisted of the following items: $507,000 of amortization expense related to the changes in cash flows expected to be collected from the FDIC-covered loan portfolio acquired from InterBank and $140,000 of amortization of the clawback liability. Partially offsetting the expense was income from the accretion of the discount related to the indemnification asset for the InterBank acquisition of $158,000.

Late charges and fees on loans: Late charges and fees on loans increased $301,000 compared to the prior year three month period. The increase was primarily due to fees on loan payoffs totaling $502,000 received on two large commercial loans, partially offset by a lower amount of additional fees received on loan payoffs in the prior year period.

Other income: Other income decreased $539,000 compared to the prior year three month period. During the 2016 period, the Company recognized a $257,000 gain on the sale of the Thayer, Mo., branch and deposits and a $110,000 gain on the sale of the Buffalo, Mo., branch and deposits. In addition, a gain of $238,000 was recognized on sales of fixed assets unrelated to the branch sales during the 2016 period.

Non-interest Expense

For the three months ended March 31, 2017, non-interest expense decreased $2.3 million to $28.6 million when compared to the three months ended March 31, 2016, primarily as a result of the following items:

Net occupancy and equipment expense: Net occupancy and equipment expense decreased $526,000 in the three months ended March 31, 2017 compared to the same period in 2016. Computer license and support expense decreased $170,000 from the prior year period, which was primarily due to one-time expenses of $279,000 in the 2016 period related to the Fifth Third Bank acquisition. Repair and maintenance expenses decreased $150,000 from the prior year period, due to unusually high expenses in the 2016 period, as was noted in the Company's 2016 first quarter earnings release. Rent expense decreased $100,000 from the prior year period.

Other operating expenses: Other operating expenses decreased $531,000 in the three months ended March 31, 2017 compared to the same period in 2016. This decrease was primarily due to one-time expenses in the 2016 period of $436,000 in charges to replace former Fifth Third Bank customer checks with Great Southern Bank checks.

Legal, audit and other professional fees: Legal, audit and other professional fees decreased $521,000 from the prior year period. In the 2016 period, the Company incurred $319,000 of legal, audit and other professional fees expense related to the acquisition of Fifth Third Bank branches. In the three months ended March 31, 2017, the Company received some large recoveries of legal fees on loans totaling $72,000. In addition, the Company had higher overall legal fees related to loan collection in the 2016 period compared to the 2017 period, due to a higher level of activity.

Expense on other real estate owned: Expense on other real estate owned decreased $336,000 in the three months ended March 31, 2017 compared to the same period in 2016. The decrease was primarily due to valuation write-downs of foreclosed assets during the 2016 period totaling approximately $407,000 primarily on two properties, and other expenses related to the maintenance and resolution of foreclosed properties.

Insurance expense: Insurance expense decreased $154,000 in the three months ended March 31, 2017 compared to the prior year period primarily due to a reduction in FDIC insurance premiums resulting from a change in the FDIC insurance assessment rates, which went into effect during the fourth quarter of 2016. Because the FDIC's deposit insurance fund hit a predetermined threshold, deposit insurance rates for many banks, including ours, have been reduced.

Office supplies and printing: Office supplies and printing expense increased $232,000 from the prior year three month period due to supplies, printing and other costs totaling $373,000 related to the replacement of the remaining portion of the Bank's existing debit cards with chip-enabled cards.

The Company's efficiency ratio for the three months ended March 31, 2017, was 61.58% compared to 67.08% for the same period in 2016. The improvement in the ratio in the 2017 three month period was primarily due to the increase in non-interest income and the decrease in non-interest expense, partially offset by the decrease in net interest income. The Company's ratio of non-interest expense to average assets decreased from 2.93% for the three months ended March 31, 2016, to 2.55% for the three months ended March 31, 2017. The decrease in the current three month period ratio was due to the decrease in non-interest expense and the increase in average assets in the 2017 period compared to the 2016 period. Average assets for the three months ended March 31, 2017, increased $259.4 million, or 6.1%, from the three months ended March 31, 2016, primarily due to organic loan growth, partially offset by decreases in investment securities and other interest-earning assets.

Provision for Income Taxes

For the three months ended March 31, 2017 and 2016, the Company's effective tax rate was 26.1% and 25.1%, respectively. These effective rates were lower than the statutory federal tax rate of 35%, due primarily to the utilization of certain investment tax credits and to tax-exempt investments and tax-exempt loans which reduced the Company's effective tax rate. In future periods, the Company expects its effective tax rate typically will be 26-28% of pre-tax net income, assuming it continues to maintain or increase its use of investment tax credits and maintain or increase its pre-tax net income. The Company's effective tax rate may fluctuate as it is impacted by the level and timing of the Company's utilization of tax credits and the level of tax-exempt investments and loans and the overall level of pre-tax income.

Average Balances, Interest Rates and Yields

The following table presents, 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 non-accrual loans for each period. Interest income on loans includes interest received on non-accrual loans on a cash basis. Interest income on loans includes the amortization of net loan fees which were deferred in accordance with accounting standards. Fees included in interest income were $1.2 million and $1.2 million for the three months ended March 31, 2017 and 2016, respectively. Tax-exempt income was not calculated on a tax equivalent basis. The table does not reflect any effect of income taxes.

	March 31, 2017⁽²⁾			Three Months Ended March 31, 2017								Three Months Ended March 31, 2016
	Yield/ Rate			Average Balance			Interest		Yield/ Rate			Average Balance			Interest		Yield/ Rate
				(Dollars in Thousands)
Interest-earning assets:
Loans receivable: ⁽¹⁾
One- to four-family residential		4.20	%	$	484,139		$	6,095		5.11	%	$	535,652		$	7,604		5.71	%
Other residential		4.17			679,465			7,526		4.49			442,029			5,676		5.16
Commercial real estate		4.26			1,216,632			13,529		4.51			1,078,321			12,613		4.70
Construction		4.00			401,601			4,376		4.42			412,526			4,827		4.71
Commercial business		4.47			294,563			3,814		5.25			321,666			4,278		5.35
Other loans		5.96			689,195			8,030		4.72			666,068			8,488		5.13
Industrial revenue bonds		5.27			27,366			374		5.54			40,062			562		5.65

Total loans receivable		4.66			3,792,961			43,744		4.68			3,496,324			44,048		5.07

Investment securities⁽¹⁾		3.19			220,363			1,415		2.60			272,415			1,559		2.30
Other interest-earning assets		0.72			139,634			254		0.74			109,645			139		0.51

Total interest-earning assets		4.47			4,152,958			45,413		4.43			3,878,384			45,746		4.74
Non-interest-earning assets:
Cash and cash equivalents					107,815								103,918
Other non-earning assets					224,533								243,586
Total assets				$	4,485,306							$	4,225,888

Interest-bearing liabilities:
Interest-bearing demand and savings		0.28		$	1,555,350			1,095		0.29		$	1,474,103			905		0.25
Time deposits		1.05			1,488,266			3,869		1.05			1,319,434			3,029		0.92
Total deposits		0.65			3,043,616			4,964		0.66			2,793,537			3,934		0.57
Short-term borrowings and structured repurchase agreements		0.03			237,513			226		0.39			204,906			81		0.16
Subordinated debentures issued to capital trusts		2.63			25,774			242		3.81			25,774			174		2.71
Subordinated notes		5.57			73,552			1,025		5.65			—			—		—
FHLBank advances		3.30			31,438			255		3.29			179,652			438		0.98

Total interest-bearing liabilities		0.77			3,411,893			6,712		0.80			3,203,869			4,627		0.58
Non-interest-bearing liabilities:
Demand deposits					608,151								589,103
Other liabilities					26,432								27,499
Total liabilities					4,046,476								3,820,471
Stockholders' equity					438,830								405,417
Total liabilities and stockholders' equity				$	4,485,306							$	4,225,888

Net interest income:
Interest rate spread		3.70	%				$	38,701		3.63	%				$	41,119		4.16	%
Net interest margin*										3.78	%							4.26	%
Average interest-earning assets to average interest-bearing liabilities					121.7	%							121.1	%

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

(1)	Of the total average balances of investment securities, average tax-exempt investment securities were $66.2 million and $75.7 million for the three months ended March 31, 2017 and 2016, respectively. In addition, average tax-exempt loans and industrial revenue bonds were $29.6 million and $34.5 million for the three months ended March 31, 2017 and 2016, respectively. Interest income on tax-exempt assets included in this table was $867,000 and $1.1 million for the three months ended March 31, 2017 and 2016, respectively. Interest income net of disallowed interest expense related to tax-exempt assets was $829,000 and $1.0 million for the three months ended March 31, 2017 and 2016, respectively.
(2)	The yield on loans at March 31, 2017 does not include the impact of the accretable yield (income) on loans acquired in the FDIC-assisted transactions. See "Net Interest Income" for a discussion of the effect on results of operations for the three months ended March 31, 2017.

Rate/Volume Analysis

The following tables present the dollar amounts of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities for the periods shown. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in rate (i.e., changes in rate multiplied by old volume) and (ii) changes in volume (i.e., changes in volume multiplied by old rate). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to volume and rate. Tax-exempt income was not calculated on a tax equivalent basis.

	Three Months Ended March 31,
	2017 vs. 2016
	Increase (Decrease) Due to

									Total Increase (Decrease)
	Rate				Volume				Total Increase (Decrease)
	(Dollars in Thousands)
Interest-earning assets:
Loans receivable		$	(3,669	)		$	3,365			$	(304	)
Investment securities			182				(326	)			(144	)
Other interest-earning assets			71				44				115
Total interest-earning assets			(3,416	)			3,083				(333	)
Interest-bearing liabilities:
Demand deposits			140				50				190
Time deposits			442				398				840
Total deposits			582				448				1,030
Short-term borrowings			130				15				145
Subordinated debentures issued to capital trust			68				—				68
Subordinated notes			—				1,025				1,025
FHLBank advances			395				(578	)			(183	)
Total interest-bearing liabilities			1,175				910				2,085
Net interest income		$	(4,591	)		$	2,173			$	(2,418	)

Liquidity

Liquidity is a measure of the Company's ability to generate sufficient cash to meet present and future financial obligations in a timely manner through either the sale or maturity of existing assets or the acquisition of additional funds through liability management. These obligations include the credit needs of customers, funding deposit withdrawals, and the day-to-day operations of the Company. Liquid assets include cash, interest-bearing deposits with financial institutions and certain investment securities and loans. As a result of the Company's management of the ability to generate liquidity primarily through liability funding, management believes that the Company maintains overall liquidity sufficient to satisfy its depositors' requirements and meet its customers' credit needs. At March 31, 2017, the Company had commitments of approximately $86.4 million to fund loan originations, $835.1 million of unused lines of credit and unadvanced loans, and $24.2 million of outstanding letters of credit.

Loan commitments and the unfunded portion of loans at the dates indicated were as follows (in thousands):

	March 31, 2017		December 31, 2016		December 31, 2015		December 31, 2014
Closed loans with unused available lines
Secured by real estate (one- to four-family)	$	127,527	$	123,433	$	105,390	$	92,286
Secured by real estate (not one- to four-family)		22,234		26,062		21,857		23,909
Not secured by real estate - commercial business		93,541		79,937		63,865		63,381

Closed construction loans with unused available lines
Secured by real estate (one-to four-family)		8,419		10,047		14,242		17,564
Secured by real estate (not one-to four-family)		583,396		542,326		385,969		356,913

Loan Commitments not closed
Secured by real estate (one-to four-family)		20,252		15,884		13,411		12,700
Secured by real estate (not one-to four-family)		61,543		119,126		120,817		54,643
Not secured by real estate - commercial business		4,558		7,022		—		—

	$	921,470	$	923,837	$	725,551	$	621,396

The Company's primary sources of funds are customer deposits, FHLBank advances, other borrowings, loan repayments, unpledged securities, proceeds from sales of loans and available-for-sale securities and funds provided from operations. The Company utilizes particular sources of funds based on the comparative costs and availability at the time. The Company has from time to time chosen not to pay rates on deposits as high as the rates paid by certain of its competitors and, when believed to be appropriate, supplements deposits with less expensive alternative sources of funds.

At March 31, 2017, the Company had these available secured lines and on-balance sheet liquidity:

Federal Home Loan Bank line	$708.1 million
Federal Reserve Bank line	$584.0 million
Cash and cash equivalents	$228.1 million
Unpledged securities	$51.9 million

Statements of Cash Flows. During both the three months ended March 31, 2017 and 2016, the Company had positive cash flows from operating activities and investing activities. Cash flows from financing activities were negative for both the three months ended March 31, 2017 and 2016.

Cash flows from operating activities for the periods covered by the Statements of Cash Flows have been primarily related to changes in accrued and deferred assets, credits and other liabilities, the provision for loan losses, depreciation, impairments of investment securities, gains on sales of investment securities and the amortization of deferred loan origination fees and discounts (premiums) on loans and investments, all of which are non-cash or non-operating adjustments to operating cash flows. Net income adjusted for non-cash and non-operating items and the origination and sale of loans held for sale were the primary source of cash flows from operating activities. Operating activities provided cash flows of $13.0 million and $27.6 million during the three months ended March 31, 2017 and 2016, respectively.

During the three months ended March 31, 2017, investing activities provided cash of $64.4 million, primarily due to the net decrease in loans, the sale of other real estate owned, payments received on investment securities and the redemption of FHLBank stock, partially offset by the purchase of loans. Investing activities in the 2016 period provided cash of $4.2 million and included cash received of $44.4 million related to business acquisitions and cash paid of $17.8 million related to business divestitures. Additionally, investing activities were impacted by the net increase in loans and payments received on investment securities.

Changes in cash flows from financing activities during the periods covered by the Statements of Cash Flows are due to changes in deposits after interest credited, changes in FHLBank advances and changes in short-term borrowings, as well as dividend payments to stockholders and the exercise of common stock options. Financing activities used cash of $129.1 million and $9.3 million during the three months ended March 31, 2017 and 2016, respectively, due primarily to the reduction in short term borrowings during the current three month period. Financing activities in the future are expected to primarily include changes in deposits, changes in FHLBank advances, changes in short-term borrowings and dividend payments to stockholders.

Capital Resources

Management continuously reviews the capital position of the Company and the Bank to ensure compliance with minimum regulatory requirements, as well as to explore ways to increase capital either by retained earnings or other means.

At March 31, 2017, the Company's total stockholders' equity and common stockholders' equity were $439.9 million, or 9.9% of total assets, equivalent to a book value of $31.40 per common share. At December 31, 2016, total stockholders' equity and common stockholders' equity were $429.8 million, or 9.4% of total assets, equivalent to a book value of $30.77 per common share. At March 31, 2017, the Company's tangible common equity to tangible assets ratio was 9.7%, compared to 9.2% at December 31, 2016. (See Non-GAAP Financial Measures below).

Banks are required to maintain minimum risk-based capital ratios. These ratios compare capital, as defined by the risk-based regulations, to assets adjusted for their relative risk as defined by the regulations. Under current guidelines, which became effective January 1, 2015, banks must have a minimum common equity Tier 1 capital ratio of 4.50%, a minimum Tier 1 risk-based capital ratio of 6.00%, a minimum total risk-based capital ratio of 8.00%, and a minimum Tier 1 leverage ratio of 4.00%. To be considered "well capitalized," banks must have a minimum common equity Tier 1 capital ratio of 6.50%, a minimum Tier 1 risk-based capital ratio of 8.00%, a minimum total risk-based capital ratio of 10.00%, and a minimum Tier 1 leverage ratio of 5.00%. On March 31, 2017, the Bank's common equity Tier 1 capital ratio was 12.0%, its Tier 1 capital ratio was 12.0%, its total capital ratio was 12.9% and its Tier 1 leverage ratio was 11.0%. As a result, as of March 31, 2017, the Bank was well capitalized, with capital ratios in excess of those required to qualify as such. On December 31, 2016, the Bank's common equity Tier 1 capital ratio was 11.8%, its Tier 1 capital ratio was 11.8%, its total capital ratio was 12.7% and its Tier 1 leverage ratio was 11.0%. As a result, as of December 31, 2016, the Bank was well capitalized, with capital ratios in excess of those required to qualify as such.

The FRB has established capital regulations for bank holding companies that generally parallel the capital regulations for banks. On March 31, 2017, the Company's common equity Tier 1 capital ratio was 10.4%, its Tier 1 capital ratio was 11.1%, its total capital ratio was 13.8% and its Tier 1 leverage ratio was 10.1%. To be considered well capitalized, a bank holding company must have a Tier 1 risk-based capital ratio of at least 6.00% and a total risk-based capital ratio of at least 10.00%. As of March 31, 2017, the Company was considered well capitalized, with capital ratios in excess of those required to qualify as such. On December 31, 2016, the Company's common equity Tier 1 capital ratio was 10.2%, its Tier 1 capital ratio was 10.8%, its total capital ratio was 13.6% and its Tier 1 leverage ratio was 9.9%. As of December 31, 2016, the Company was considered well capitalized, with capital ratios in excess of those required to qualify as such.

In addition to the minimum common equity Tier 1 capital ratio, Tier 1 risk-based capital ratio and total risk-based capital ratio, the Company and the Bank will have to maintain a capital conservation buffer consisting of additional common equity Tier 1 capital greater than 2.5% of risk-weighted assets above the required minimum levels in order to avoid limitations on paying dividends, repurchasing shares, and paying discretionary bonuses. The new capital conservation buffer requirement began phasing in on January 1, 2016 when a buffer greater than 0.625% of risk-weighted assets was required, which amount increased by an additional 0.625% as of January 1, 2017, and will continue to increase an equal amount each year until the buffer requirement of greater than 2.5% of risk-weighted assets is fully implemented on January 1, 2019.

For additional information, see "Item 1. Business—Government Supervision and Regulation-Capital" in the Company's Annual Report on Form 10-K for the year ended December 31, 2016.

Dividends. During the three months ended March 31, 2017, the Company declared a common stock cash dividend of $0.22 per share, or 27% of net income per diluted common share for that three month period, and paid a common stock cash dividend of $0.22 per share (which was declared in December 2016). During the three months ended March 31, 2016, the Company declared a common stock cash dividend of $0.22 per share, or 31% of net income per diluted common share for that three month period, and paid a common stock cash dividend of $0.22 per share (which was declared in December 2015). The Board of Directors meets regularly to consider the level and the timing of dividend payments. The $0.22 per share dividend declared but unpaid as of March 31, 2017, was paid to stockholders in April 2017.

Common Stock Repurchases and Issuances. The Company has been in various buy-back programs since May 1990. Our ability to repurchase common stock was limited, but allowed, under the terms of the SBLF preferred stock as noted above, under "-Dividends," and was previously generally precluded due to our participation in the CPP from December 2008 through August 2011. During the three month periods ended March 31, 2017 and 2016, respectively, the Company did not repurchase any shares of its common stock. During the three months ended March 31, 2017, the Company issued 40,939 shares of stock at an average price of $24.86 per share to cover stock option exercises. During the three months ended March 31, 2016, the Company issued 4,196 shares of stock at an average price of $26.94 per share to cover stock option exercises.

Management has historically utilized stock buy-back programs from time to time as long as management believed that repurchasing the stock would contribute to the overall growth of shareholder value. The number of shares of stock that will be repurchased at any particular time and the prices that will be paid are subject to many factors, several of which are outside of the control of the Company. The primary factors, however, are the number of shares available in the market from sellers at any given time, the price of the stock within the market as determined by the market and the projected impact on the Company's earnings per share and capital.

Non-GAAP Financial Measures

This document contains certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States ("GAAP"). These non-GAAP financial measures include tangible common equity to tangible assets ratio.

In calculating the ratio of tangible common equity to tangible assets, we subtract period end intangible assets from common equity and from total assets. Management believes that the presentation of these measures excluding the impact of intangible assets provides useful supplemental information that is helpful in understanding our financial condition and results of operations, as they provide a method to assess management's success in utilizing our tangible capital as well as our capital strength. Management also believes that providing measures that exclude balances of intangible assets, which are subjective components of valuation, facilitates the comparison of our performance with the performance of our peers. In addition, management believes that these are standard financial measures used in the banking industry to evaluate performance.

These non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP financial measures. Because not all companies use the same calculation of non-GAAP measures, this presentation may not be comparable to other similarly titled measures as calculated by other companies.

Non-GAAP Reconciliation: Ratio of Tangible Common Equity to Tangible Assets

	March 31,			December 31,
	2017			2016
	(Dollars in Thousands)

Common equity at period end	$	439,852		$	429,806
Less: Intangible assets at period end		12,088			12,500
Tangible common equity at period end (a)	$	427,764		$	417,306

Total assets at period end	$	4,432,595		$	4,550,663
Less: Intangible assets at period end		12,088			12,500
Tangible assets at period end (b)	$	4,420,507		$	4,538,163

Tangible common equity to tangible assets (a) / (b)		9.68	%		9.20	%

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Asset and Liability Management and Market Risk

A principal operating objective of the Company is to produce stable earnings by achieving a favorable interest rate spread that can be sustained during fluctuations in prevailing interest rates. The Company has sought to reduce its exposure to adverse changes in interest rates by attempting to achieve a closer match between the periods in which its interest-bearing liabilities and interest-earning assets can be expected to reprice through the origination of adjustable-rate mortgages and loans with shorter terms to maturity and the purchase of other shorter term interest-earning assets.

Our Risk When Interest Rates Change

The rates of interest we earn on assets and pay on liabilities generally are established contractually for a period of time. Market interest rates change over time. Accordingly, our results of operations, like those of other financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of our assets and liabilities. The risk associated with changes in interest rates and our ability to adapt to these changes is known as interest rate risk and is our most significant market risk.

How We Measure the Risk to Us Associated with Interest Rate Changes

In an attempt to manage our exposure to changes in interest rates and comply with applicable regulations, we monitor Great Southern's interest rate risk. In monitoring interest rate risk we regularly analyze and manage assets and liabilities based on their payment streams and interest rates, the timing of their maturities and their sensitivity to actual or potential changes in market interest rates.

The ability to maximize net interest income is largely dependent upon the achievement of a positive interest rate spread that can be sustained despite fluctuations in prevailing interest rates. Interest rate sensitivity is a measure of the difference between amounts of interest-earning assets and interest-bearing liabilities which either reprice or mature within a given period of time. The difference, or the interest rate repricing "gap," provides an indication of the extent to which an institution's interest rate spread will be affected by changes in interest rates. A gap is considered positive when the amount of interest-rate sensitive assets exceeds the amount of interest-rate sensitive liabilities repricing during the same period, and is considered negative when the amount of interest-rate sensitive liabilities exceeds the amount of interest-rate sensitive assets during the same period. Generally, during a period of rising interest rates, a negative gap within shorter

repricing periods would adversely affect net interest income, while a positive gap within shorter repricing periods would result in an increase in net interest income. During a period of falling interest rates, the opposite would be true. As of March 31, 2017, Great Southern's interest rate risk models indicate that, generally, rising interest rates are expected to have a positive impact on the Company's net interest income, while declining interest rates would have a negative impact on net interest income. 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 materially affected either positively or negatively in the first twelve months following a rate change, regardless of any changes in interest rates, because our portfolios are relatively well matched in a twelve-month horizon. The effects of interest rate changes, if any, are expected to be more impacting to net interest income in the 12 to 36 months following a rate change.

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 Federal Reserve Bank (the "FRB") had last changed interest rates on December 16, 2008. This was the first rate increase since June 29, 2006. The FRB has now also implemented rate increases of 0.25% on December 14, 2016 and 0.25% on March 15, 2017. A substantial portion of Great Southern's loan portfolio ($1.10 billion at March 31, 2017) is tied to the one-month LIBOR index and will adjust at least once within 90 days after March 31, 2017. Of these loans, $590 million as of March 31, 2017 had interest rate floors. Great Southern also has a significant portfolio of loans ($365 million at March 31, 2017) which are tied to a "prime rate" of interest and will adjust immediately with changes to the "prime rate" if interest.

As discussed under "General-Net Interest Income and Interest Rate Risk Management," at March 31, 2017 and December 31, 2016, there were $365 million and $387 million, respectively, of adjustable rate loans which were tied to a prime rate of interest which had interest rate floors. In previous years, when the market rates of interest began to fall, Great Southern had elected to leave its GSB prime at 5.00% for those loans that are indexed to GSB prime rather than a national prime rate of interest. This current rate for GSB prime loans is 5.50%. At March 31, 2017 and December 31, 2016, there were $55 million and $60 million, respectively, of loans indexed to GSB prime. While these interest rate floors and, to a lesser extent, the utilization of the GSB prime rate have helped keep the rate on our loan portfolio higher in this very low interest rate environment, they also reduce the positive effect on our loan rates when market interest rates, specifically the "prime rate," increase. The interest rate on these loans will not increase until the loan floors are reached. Also, a significant portion of our retail certificates of deposit mature in the next twelve months and we expect that they generally will be replaced with new certificates of deposit at similar or higher interest rates to those that are maturing.

Interest rate risk exposure estimates (the sensitivity gap) are not exact measures of an institution's actual interest rate risk. They are only indicators of interest rate risk exposure produced in a simplified modeling environment designed to allow management to gauge the Bank's sensitivity to changes in interest rates. They do not necessarily indicate the impact of general interest rate movements on the Bank's net interest income because the repricing of certain categories of assets and liabilities is subject to competitive and other factors beyond the Bank's control. As a result, certain assets and liabilities indicated as maturing or otherwise repricing within a stated period may in fact mature or reprice at different times and in different amounts and cause a change, which potentially could be material, in the Bank's interest rate risk.

In order to minimize the potential for adverse effects of material and prolonged increases and decreases in interest rates on Great Southern's results of operations, Great Southern has adopted asset and liability management policies to better match the maturities and repricing terms of Great Southern's interest-earning assets and interest-bearing liabilities. Management recommends and the Board of Directors sets the asset and liability policies of Great Southern which are implemented by the Asset and Liability Committee. The Asset and Liability Committee is chaired by the Chief Financial Officer and is comprised of members of Great Southern's senior management. The purpose of the Asset and Liability Committee is to communicate, coordinate and control asset/liability management consistent with Great Southern's business plan and board-approved policies. The Asset and Liability Committee establishes and monitors the volume and mix of assets and funding sources taking into account relative costs and spreads, interest rate sensitivity and liquidity needs. The objectives are to manage assets and funding sources to produce results that are consistent with liquidity, capital adequacy, growth, risk and profitability goals. The Asset and Liability Committee meets on a monthly basis to review, among other things, economic conditions and interest rate outlook, current and projected liquidity needs and capital positions and anticipated changes in the volume and mix of assets and liabilities. At each meeting, the Asset and Liability Committee recommends appropriate strategy changes based on this review. The Chief Financial Officer or his designee is responsible for reviewing and reporting on the effects of the policy implementations and strategies to the Board of Directors at their monthly meetings.

In order to manage its assets and liabilities and achieve the desired liquidity, credit quality, interest rate risk, profitability and capital targets, Great Southern has focused its strategies on originating adjustable rate loans, and managing its deposits and borrowings to establish stable relationships with both retail customers and wholesale funding sources.

At times, depending on the level of general interest rates, the relationship between long- and short-term interest rates, market conditions and competitive factors, we may determine to increase our interest rate risk position somewhat in order to maintain or increase our net interest margin.

The Asset and Liability Committee regularly reviews interest rate risk by forecasting the impact of alternative interest rate environments on net interest income and market value of portfolio equity, which is defined as the net present value of an institution's existing assets, liabilities and off-balance sheet instruments, and evaluating such impacts against the maximum potential changes in net interest income and market value of portfolio equity that are authorized by the Board of Directors of Great Southern.

In the normal course of business, the Company may use derivative financial instruments (primarily interest rate swaps) from time to time to assist in its interest rate risk management. In the fourth quarter of 2011, the Company began executing interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting interest rate swaps that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. Because the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. These interest rate derivatives result from a service provided to certain qualifying customers and, therefore, are not used to manage interest rate risk in the Company's assets or liabilities. The Company manages a matched book with respect to its derivative instruments in order to minimize its net risk exposure resulting from such transactions.

The Company entered into an interest rate cap agreement related to its floating rate debt associated with its trust preferred securities. The agreement provides that the counterparty will reimburse the Company if interest rates rise above a certain threshold, thus creating a cap on the effective interest rate paid by the Company. This agreement is classified as a hedging instrument, and the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

For further information on derivatives and hedging activities, see Note 15 of the Notes to Consolidated Financial Statements contained in this report.

ITEM 4. CONTROLS AND PROCEDURES

We maintain a system of disclosure controls and procedures (as defined in Rule 13(a)-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")) that is designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file under the Exchange Act is recorded, processed, summarized and reported accurately and within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate. An evaluation of our disclosure controls and procedures was carried out as of March 31, 2017, under the supervision and with the participation of our principal executive officer, principal financial officer and several other members of our senior management. Our principal executive officer and principal financial officer concluded that, as of March 31, 2017, our disclosure controls and procedures were effective in ensuring that the information we are required to disclose in the reports we file or submit under the Act is (i) accumulated and communicated to our management (including the principal executive officer and principal financial officer) to allow timely decisions regarding required disclosure, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.

There were no changes in our internal control over financial reporting (as defined in Rule 13(a)-15(f) under the Act) that occurred during the quarter ended March 31, 2017, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We do not expect that our internal control over financial reporting will prevent all errors and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns in controls or procedures can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

In the normal course of business, the Company and its subsidiaries are subject to pending and threatened legal actions, some of which seek substantial relief or damages. While the ultimate outcome of such legal proceedings cannot be predicted with certainty, after reviewing pending and threatened litigation with counsel, management believes at this time that, except as noted below, the outcome of such litigation will not have a material adverse effect on the Company's business, financial condition or results of operations.

On November 22, 2010, a suit was filed against the Bank in the Circuit Court of Greene County, Missouri by a customer alleging that the fees associated with the Bank's automated overdraft program in connection with its debit cards and ATM cards constitute unlawful interest in violation of Missouri's usury laws. The Court has certified a class of Bank customers who have paid overdraft fees on their checking accounts pursuant to the Bank's automated overdraft program. The Bank intends to contest this case vigorously. A judgment was issued by the Circuit Court of Jackson County, Missouri in favor of a defendant bank in a similar lawsuit where the lawsuit alleged that overdraft fees violate Missouri's usury laws. The Greene County Circuit Court has entered a Stay in the Bank's litigation pending a decision on appeal in the other usury litigation. On April 18, 2017, the Missouri Court of Appeals, Western District, affirmed the Jackson County Circuit Court decision in favor of the defendant bank in a similar lawsuit. At this time, the Greene County Circuit Court's Stay in the Bank's litigation matter is still in place. At this stage of the litigation, it is not possible for management of the Bank to determine the probability of a material adverse outcome or reasonably estimate the amount of any potential loss.

Item 1A. Risk Factors

There have been no material changes to the risk factors set forth in Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2016.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On November 15, 2006, the Company's Board of Directors authorized management to repurchase up to 700,000 shares of the Company's outstanding common stock, under a program of open market purchases or privately negotiated transactions. The plan does not have an expiration date.

On April 21, 2014, Great Southern reiterated that it will consider repurchasing its shares of common stock, from time to time in the open market or through privately negotiated transactions, pursuant to its existing repurchase plan.

As indicated below, no shares were purchased during the three months ended March 31, 2017.

	Total Number of Shares Purchased		Average Price Per Share		Total Number of Shares Purchased As Part of Publicly Announced Plan		Maximum Number of Shares that May Yet Be Purchased Under the Plan(1)

January 1, 2017 – January 31, 2017		—	$	—		—		378,562
February 1, 2017 – February 28, 2017		—		—		—		378,562
March 1, 2017 – March 31, 2017		—		—		—		378,562
		—	$	—		—

_______________________
(1)	Amount represents the number of shares available to be repurchased under the November 2006 plan as of the last calendar day of the month shown.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None.

Item 6. Exhibits and Financial Statement Schedules

	a)	Exhibits
		See Exhibit Index.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Great Southern Bancorp, Inc.
	Registrant
Date: May 5, 2017	/s/ Joseph W. Turner
	Joseph W. Turner President and Chief Executive Officer (Principal Executive Officer)
Date: May 5, 2017	/s/ Rex A. Copeland
	Rex A. Copeland Treasurer (Principal Financial and Accounting Officer)

EXHIBIT INDEX

Exhibit No.	Description

(2)	Plan of acquisition, reorganization, arrangement, liquidation, or succession

	(i)	The Purchase and Assumption Agreement, dated as of March 20, 2009, among Federal Deposit Insurance Corporation, Receiver of TeamBank, N.A., Paola, Kansas, Federal Deposit Insurance Corporation and Great Southern Bank, previously filed with the Commission (File no. 000-18082) as Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed on March 26, 2011 is incorporated herein by reference as Exhibit 2.1(i).

	(ii)	The Purchase and Assumption Agreement, dated as of September 4, 2009, among Federal Deposit Insurance Corporation, Receiver of Vantus Bank, Sioux City, Iowa, Federal Deposit Insurance Corporation and Great Southern Bank, previously filed with the Commission (File no. 000-18082) as Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed on September 11, 2011 is incorporated herein by reference as Exhibit 2.1(ii).

	(iii)	The Purchase and Assumption Agreement, dated as of October 7, 2011, among Federal Deposit Insurance Corporation, Receiver of Sun Security Bank, Ellington, Missouri, Federal Deposit Insurance Corporation and Great Southern Bank, previously filed with the Commission (File no. 000-18082) as Exhibit 2.1(iii) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 is incorporated herein by reference as Exhibit 2(iii).

	(iv)
		The Purchase and Assumption Agreement, dated as of April 27, 2013, among Federal Deposit Insurance Corporation, Receiver of Inter Savings Bank, FSB, Maple Grove, Minnesota, Federal Deposit Insurance Corporation and Great Southern Bank, previously filed with the Commission (File no. 000-18082) as Exhibit 2.1(iv) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 is incorporated herein by reference as Exhibit 2(iv)

	(v)	The Purchase and Assumption Agreement All Deposits, dated as of June 20, 2014, among Federal Deposit Insurance Corporation, Receiver of Valley Bank, Moline, Illinois, Federal Deposit Insurance Corporation and Great Southern Bank, previously filed with the Commission (File no. 000-18082) as Exhibit 2.1(v) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2014 is incorporated herein by reference as Exhibit 2(v)

(3)	Articles of incorporation and Bylaws

	(i)	The Registrant's Charter previously filed with the Commission as Appendix D to the Registrant's Definitive Proxy Statement on Schedule 14A filed on March 31, 2004 (File No. 000-18082), is incorporated herein by reference as Exhibit 3.1.

	(iA)	The Articles Supplementary to the Registrant's Charter setting forth the terms of the Registrant's Senior Non-Cumulative Perpetual Preferred Stock, Series A, previously filed with the Commission (File no. 000-18082) as Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed on August 18, 2011, are incorporated herein by reference as Exhibit 3(i).

	(ii)	The Registrant's Bylaws, previously filed with the Commission (File no. 000-18082) as Exhibit 3(ii) to the Registrant's Current Report on Form 8-K filed on October 23, 2007, is incorporated herein by reference as Exhibit 3.2.

(4)	Instruments defining the rights of security holders, including indentures

	The Company hereby agrees to furnish the SEC upon request, copies of the instruments defining the rights of the holders of each issue of the Registrant's long-term debt.


(9)	Voting trust agreement

	Inapplicable.

(10)	Material contracts

	The Registrant's 1997 Stock Option and Incentive Plan previously filed with the Commission (File no. 000-18082) as Annex A to the Registrant's Definitive Proxy Statement on Schedule 14A filed on September 18, 1997 is incorporated herein by reference as Exhibit 10.1.

	The Registrant's 2003 Stock Option and Incentive Plan previously filed with the Commission (File No. 000-18082) as Annex A to the Registrant's Definitive Proxy Statement on Schedule 14A filed on April 14, 2003, is incorporated herein by reference as Exhibit 10.2.

	The employment agreement dated September 18, 2002 between the Registrant and William V. Turner previously filed with the Commission (File no. 000-18082) as Exhibit 10.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2003, is incorporated herein by reference as Exhibit 10.3.

	The employment agreement dated September 18, 2002 between the Registrant and Joseph W. Turner previously filed with the Commission (File no. 000-18082) as Exhibit 10.4 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2003, is incorporated herein by reference as Exhibit 10.4.

	The form of incentive stock option agreement under the Registrant's 2003 Stock Option and Incentive Plan previously filed with the Commission as Exhibit 10.1 to the Registrant's Current Report on Form 8-K (File no. 000-18082) filed on February 24, 2005 is incorporated herein by reference as Exhibit 10.5.

	The form of non-qualified stock option agreement under the Registrant's 2003 Stock Option and Incentive Plan previously filed with the Commission as Exhibit 10.2 to the Registrant's Current Report on Form 8-K (File no. 000-18082) filed on February 24, 2005 is incorporated herein by reference as Exhibit 10.6.

	A description of the current salary and bonus arrangements for 2017 for the Registrant's named executive officers previously filed with the Commission as Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2016 is incorporated herein by reference as Exhibit 10.7.

	A description of the current fee arrangements for the Registrant's directors previously filed with the Commission as Exhibit 10.8 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2016 is incorporated herein by reference as Exhibit 10.8.

	Small Business Lending Fund – Securities Purchase Agreement, dated August 18, 2011, between the Registrant and the Secretary of the United States Department of the Treasury, previously filed with the Commission as Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on August 18, 2011, is incorporated herein by reference as Exhibit 10.9.

	The Registrant's 2013 Equity Incentive Plan previously filed with the Commission (File No. 000-18082) as Annex A to the Registrant's Definitive Proxy Statement on Schedule 14A filed on April 4, 2013, is incorporated herein by reference as Exhibit 10.10.

	The form of incentive stock option award agreement under the Registrant's 2013 Equity Incentive Plan previously filed with the Commission as Exhibit 10.2 to the Registrant's Registration Statement on Form S-8 (File no. 333-189497) filed on June 20, 2013 is incorporated herein by reference as Exhibit 10.11.

	The form of non-qualified stock option award agreement under the Registrant's 2013 Equity Incentive Plan previously filed with the Commission as Exhibit 10.3 to the Registrant's Registration Statement on Form S-8 (File no. 333-189497) filed on June 20, 2013 is incorporated herein by reference as Exhibit 10.12.

	The form of stock appreciation right award agreement under the Registrant's 2013 Equity Incentive Plan previously filed with the Commission as Exhibit 10.4 to the Registrant's Registration Statement on Form S-8 (File no. 333-189497) filed on June 20, 2013 is incorporated herein by reference as Exhibit 10.13.

	The form of restricted stock award agreement under the Registrant's 2013 Equity Incentive Plan previously filed with the Commission as Exhibit 10.5 to the Registrant's Registration Statement on Form S-8 (File no. 333-189497) filed on June 20, 2013 is incorporated herein by reference as Exhibit 10.14.

(11)	Statement re computation of per share earnings

	Included in Note 4 to the Consolidated Financial Statements.

(15)	Letter re unaudited interim financial information

	Inapplicable.

(18)	Letter re change in accounting principles

	Inapplicable.

(19)	Report furnished to securityholders.

	Inapplicable.

(22)	Published report regarding matters submitted to vote of security holders

	Inapplicable.

(23)	Consents of experts and counsel

	Inapplicable.

(24)	Power of attorney

	None.

(31.1)	Rule 13a-14(a) Certification of Chief Executive Officer

	Attached as Exhibit 31.1

(31.2)	Rule 13a-14(a) Certification of Treasurer

	Attached as Exhibit 31.2

(32)	Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)

	Attached as Exhibit 32.

(99)	Additional Exhibits

	None.

(101)	Attached as Exhibit 101 are the following financial statements from the Great Southern Bancorp, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, formatted in Extensive Business Reporting Language (XBRL): (i) consolidated statements of financial condition, (ii) consolidated statements of income, (iii) consolidated statements of comprehensive income, (iv) consolidated statements of cash flows and (v) notes to consolidated financial statements.