GREAT SOUTHERN BANCORP, INC. - Quarter Report: 2022 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934

For the Quarterly Period Ended March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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 No.)

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

(417) 887-4400
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act.


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock,
par value $0.01 per share	GSBC	The NASDAQ Stock Market LLC

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 every Interactive Data file required to be submitted 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the 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 ☐	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: 12,663,887 shares of common stock, par value $.01 per share, outstanding at May 3, 2022.

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,
	2022		2021

	(Unaudited)
ASSETS
Cash	$	90,481	$	90,008
Interest-bearing deposits in other financial institutions		262,557		627,259
Cash and cash equivalents		353,038		717,267
Available-for-sale securities		461,375		501,032
Held-to-maturity securities		227,441		—
Mortgage loans held for sale		1,672		8,735
Loans receivable, net of allowance for credit losses of $60,797 – March 2022; $60,754 – December 2021		4,111,487		4,007,500
Interest receivable		12,458		10,705
Prepaid expenses and other assets		44,994		45,176
Other real estate owned and repossessions, net		1,720		2,087
Premises and equipment, net		131,742		132,733
Goodwill and other intangible assets		5,923		6,081
Federal Home Loan Bank stock and other interest-earning assets		6,564		6,655
Current and deferred income taxes		15,862		11,973
Total Assets	$	5,374,276	$	5,449,944

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Deposits	$	4,489,337	$	4,552,101
Securities sold under reverse repurchase agreements with customers		148,019		137,116
Short-term borrowings and other interest-bearing liabilities		2,942		1,839
Subordinated debentures issued to capital trust		25,774		25,774
Subordinated notes		74,058		73,984
Accrued interest payable		1,656		646
Advances from borrowers for taxes and insurance		7,325		6,147
Accrued expenses and other liabilities		33,178		25,956
Liability for unfunded commitments		9,436		9,629
Total Liabilities		4,791,725		4,833,192

Stockholders’ Equity:
Capital stock
Serial preferred stock - $.01 par value; authorized 1,000,000 shares; issued and outstanding March 2022 and December 2021 - - 0- shares		—		—
Common stock, $.01 par value; authorized 20,000,000 shares; issued and outstanding March 2022 – 12,760,972 shares; December 2021 – 13,128,493 shares		128		131
Additional paid-in capital		40,004		38,314
Retained earnings		533,736		545,548
Accumulated other comprehensive income		8,683		32,759
Total Stockholders’ Equity		582,551		616,752
Total Liabilities and Stockholders’ Equity	$	5,374,276	$	5,449,944

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,
	2022		2021

	(Unaudited)
INTEREST INCOME
Loans	$	43,065	$	47,709
Investment securities and other		3,608		2,924
TOTAL INTEREST INCOME		46,673		50,633

INTEREST EXPENSE
Deposits		2,173		4,222
Securities sold under reverse repurchase agreements		10		9
Short-term borrowings, overnight FHLBank borrowings and other interest-bearing liabilities		1		—
Subordinated debentures issued to capital trust		118		113
Subordinated notes		1,105		2,200
TOTAL INTEREST EXPENSE		3,407		6,544

NET INTEREST INCOME		43,266		44,089
PROVISION FOR CREDIT LOSSES ON LOANS		—		300
CREDIT FOR UNFUNDED COMMITMENTS		(193)		(674)
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES AND CREDIT FOR UNFUNDED COMMITMENTS		43,459		44,463

NON-INTEREST INCOME
Commissions		297		282
Overdraft and insufficient funds fees		1,865		1,444
Point-Of-Sale and ATM fee income and service charges		3,964		3,358
Net gains on loan sales		1,134		2,688
Net realized gain on sale of available-for-sale securities		7		—
Late charges and fees on loans		313		301
Gain on derivative interest rate products		152		474
Other income		1,444		1,189
TOTAL NON-INTEREST INCOME		9,176		9,736

NON-INTEREST EXPENSE
Salaries and employee benefits		18,080		17,120
Net occupancy and equipment expense		6,878		7,062
Postage		787		878
Insurance		794		760
Advertising		555		585
Office supplies and printing		218		277
Telephone		850		881
Legal, audit and other professional fees		805		647
Expense on other real estate and repossessions		163		268
Acquired deposit intangible asset amortization		158		289
Other operating expenses		1,980		1,554
TOTAL NON-INTEREST EXPENSE		31,268		30,321

INCOME BEFORE INCOME TAXES		21,367		23,878
PROVISION FOR INCOME TAXES		4,380		5,010
NET INCOME AND NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	16,987	$	18,868

Basic Earnings Per Common Share	$	1.31	$	1.38
Diluted Earnings Per Common Share	$	1.30	$	1.36

Dividends Declared Per Common Share	$	0.36	$	0.34

See Notes to Consolidated Financial Statements

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, except per share data)


	THREE MONTHS ENDED
	MARCH 31,
	2022		2021

	(Unaudited)
Net Income	$	16,987	$	18,868

Unrealized depreciation on available-for-sale securities, net of taxes (credit) of $(5,966) and $(4,109), for 2022 and 2021, respectively		(20,200)		(13,915)

Unrealized gain on securities transferred to held-to-maturity, net of taxes of $224 and $-0- for 2022 and 2021, respectively		759		—

Less: reclassification adjustment for gains included in net income, net of taxes of $2 and $-0- for 2022 and 2021, respectively		(5)		—

Amortization of realized gain on termination of cash flow hedge, net of taxes (credit) of $(456) and $(457), for 2022 and 2021, respectively		(1,547)		(1,546)

Change in value of active cash flow hedge, net of taxes (credit) of $(911) and $-0- for 2022 and 2021, respectively		(3,083)		—

Comprehensive Income (Loss)	$	(7,089)	$	3,407

See Notes to Consolidated Financial Statements

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except per share data)


	THREE MONTHS ENDED MARCH 31, 2021
							Accumulated
							Other
	Common		Additional		Retained		Comprehensive		Treasury
	Stock		Paid-in Capital		Earnings		Income (Loss)		Stock		Total

	(Unaudited)
Balance, January 1, 2021	$	138	$	35,004	$	541,448	$	53,151	$	—	$	629,741
Net income		—		—		18,868		—		—		18,868
Impact of ASU 2016-13 adoption		—		—		(14,175)		—		—		(14,175)
Stock issued under Stock Option Plan		—		657		—		—		263		920
Common dividends declared, $0.34 per share		—		—		(4,656)		—		—		(4,656)
Change in fair value of cash flow hedges		—		—		—		(1,546)		—		(1,546)
Change in unrealized loss on available-for-sale securities		—		—		—		(13,915)		—		(13,915)
Purchase of the Company’s common stock		—		—		—		—		(3,780)		(3,780)
Reclassification of treasury stock per Maryland law		(1)		—		(3,516)		—		3,517		—
Balance, March 31, 2021	$	137	$	35,661	$	537,969	$	37,690	$	—	$	611,457


	THREE MONTHS ENDED MARCH 31, 2022
							Accumulated
							Other
	Common		Additional		Retained		Comprehensive		Treasury
	Stock		Paid-in Capital		Earnings		Income (Loss)		Stock		Total

	(Unaudited)
Balance, January 1, 2022	$	131	$	38,314	$	545,548	$	32,759	$	—	$	616,752
Net income		—		—		16,987		—		—		16,987
Stock issued under Stock Option Plan		—		1,690		—		—		1,116		2,806
Common dividends declared, $0.36 per share		—		—		(4,599)		—		—		(4,599)
Change in fair value of cash flow hedges		—		—		—		(4,630)		—		(4,630)
Change in unrealized gain on held-to-maturity securities		—		—		—		759		—		759
Change in unrealized loss on available-for-sale securities		—		—		—		(20,205)		—		(20,205)
Purchase of the Company’s common stock		—		—		—		—		(25,319)		(25,319)
Reclassification of treasury stock per Maryland law		(3)		—		(24,200)		—		24,203		—
Balance, March 31, 2022	$	128	$	40,004	$	533,736	$	8,683	$	—	$	582,551

See Notes to Consolidated Financial Statements

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	THREE MONTHS ENDED
	MARCH 31,
	2022		2021

	(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	16,987	$	18,868
Proceeds from sales of loans held for sale		33,902		85,380
Originations of loans held for sale		(23,872)		(94,811)
Items not requiring (providing) cash:
Depreciation		2,227		2,411
Amortization		262		510
Compensation expense for stock option grants		350		298
Provision for credit losses on loans		—		300
Provision (credit) for unfunded commitments		(193)		(674)
Net gain on loan sales		(1,134)		(2,688)
Net loss on sale of premises and equipment		3		6
Net loss on sale/write-down of other real estate owned and repossessions		9		36
Net gain on sale of available-for-sale investments		(7)		—
Accretion of deferred income, premiums, discounts and other		(1,357)		(2,354)
Gain on derivative interest rate products		(152)		(474)
Deferred income taxes		203		970
Changes in:
Interest receivable		(1,753)		(234)
Prepaid expenses and other assets		533		13,662
Accrued expenses and other liabilities		2,362		312
Income taxes refundable/payable		3,019		3,014
Net cash provided by operating activities		31,389		24,532

CASH FLOWS FROM INVESTING ACTIVITIES
Net change in loans		(66,914)		14,623
Purchase of loans		(37,244)		(12,078)
Purchase of premises and equipment		(1,473)		(1,164)
Proceeds from sale of premises and equipment		11		10
Proceeds from sale of other real estate owned and repossessions		437		439
Proceeds from sale of available-for-sale securities		4,936		—
Proceeds from maturities and calls of available-for-sale securities		750		5,250
Principal reductions on mortgage-backed securities		26,146		14,786
Purchase of available-for-sale securities		(245,183)		(80,904)
Redemption of Federal Home Loan Bank stock and change in other interest-earning assets		91		3,151
Net cash used in investing activities		(318,443)		(55,887)

CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in certificates of deposit		(62,978)		(139,165)
Net increase in checking and savings deposits		214		249,198
Net increase (decrease) in short-term borrowings		12,006		(22,390)
Advances from borrowers for taxes and insurance		1,178		373
Dividends paid		(4,732)		(4,676)
Purchase of the Company’s common stock		(25,319)		(3,780)
Stock options exercised		2,456		622
Net cash provided by (used in) financing activities		(77,175)		80,182

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(364,229)		48,827
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		717,267		563,729
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	353,038	$	612,556

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 (“GAAP”) 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, changes in stockholders’ equity 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, 2022 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, 2021, 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 the year ended December 31, 2021 filed with the Securities and Exchange Commission (the “SEC”).

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. The Bank also originates commercial loans from lending offices in Atlanta, Chicago, Dallas, Denver, Omaha, Nebraska, Phoenix, and Tulsa, Oklahoma. The Company and the Bank are subject to regulation by 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 by 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 March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides relief for companies preparing for discontinuation of interest rates such as the London Interbank Offered Rate (“LIBOR”). LIBOR is a benchmark interest rate referenced in a variety of agreements that are used by numerous entities. After 2021, certain LIBOR rates may no longer be published. As a result, LIBOR is expected to be discontinued as a reference rate. Other interest rates used globally could also be discontinued for similar reasons. ASU 2020-04 provides optional expedients and exceptions to contracts, hedging relationships and other transactions affected by reference rate reform. The main provisions for contract modifications include optional relief by allowing the modification as a continuation of the existing contract without additional analysis and other optional expedients regarding embedded features. Optional expedients for hedge accounting permits changes to critical terms of hedging relationships and to the designated benchmark interest rate in a fair value hedge and also provides relief for assessing hedge effectiveness for cash flow hedges. Companies are able to apply ASU 2020-04 immediately; however, the guidance will only be available for a limited time (generally through December 31, 2022). The application of ASU 2020-04 has not had, and is not expected to have, a material impact on the Company’s consolidated financial statements.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope. ASU 2021-01 clarifies that certain optional expedients and exceptions in ASC 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. ASU 2021-01 also amends the expedients and exceptions in ASC 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. ASU 2021-01 was effective upon issuance and generally can be applied through December 31, 2022. ASU 2021-01 has not had, and is not expected to have, a material impact on the Company’s consolidated financial statements.

In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging – Portfolio Layer Method. ASU 2022-01 further clarifies certain targeted improvements to the optional hedge accounting model that were made under ASU 2017-12. ASU 2022-01 expands the last-of-layer method and renames this method to portfolio layer method to reflect this expansion, as well as expanding the scope of the portfolio layer method to include nonprepayable financial assets. It also specifies eligible hedging instruments and provides additional guidance on the accounting for and disclosure of hedge basis adjustments that are applicable to the portfolio layer method. ASU 2022-01 permits an entity to apply the same portfolio hedging method to both prepayable and nonprepayable financial assets, thereby allowing consistent accounting for similar hedges. ASU 2022-01 is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Early adoption is permitted for any entity that has adopted the amendments in ASU 2017-12 for the corresponding period. The application of ASU 2022-01 is not expected to have a material impact on the Company’s consolidated financial statements.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. ASU 2022-02 eliminates the troubled debt restructuring recognition and measurement guidance and, instead, requires that an entity evaluate whether the loan modification represents a new loan or a continuation of an existing loan. It also enhances existing disclosure requirements and introduces new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. The Company has previously adopted ASU 2016-13; therefore, ASU 2022-02 is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Early adoption is permitted for any entity that has adopted the amendments in ASU 2016-13. The application of ASU 2022-02 is not expected to have a material impact on the Company’s consolidated financial statements.

NOTE 4: EARNINGS PER SHARE


	Three Months Ended March 31,
	2022		2021

	(In Thousands, Except Per Share Data)
Basic:
Average common shares outstanding		12,971		13,716
Net income and net income available to common stockholders	$	16,987	$	18,868
Per common share amount	$	1.31	$	1.38

Diluted:
Average common shares outstanding		12,971		13,716
Net effect of dilutive stock options – based on the treasury stock method using average market price		117		112
Diluted common shares		13,088		13,828
Net income and net income available to common stockholders	$	16,987	$	18,868
Per common share amount	$	1.30	$	1.36

Options outstanding at March 31, 2022 and 2021, to purchase 376,237 and 352,488 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, 2022 and 2021, respectively.

NOTE 5: INVESTMENT SECURITIES

Held-to-maturity securities (“HTM”), which include any security for which the Company has both the positive intent and ability to hold until maturity, are carried at historical cost adjusted for amortization of premiums and accretion of discounts. Premiums and discounts are amortized and accreted, respectively, to interest income over the security’s estimated life. Prepayments are anticipated for certain mortgage-backed securities. Premiums on callable securities are amortized to their earliest call date.

Available-for-sale securities (“AFS”), which include any security for which the Company has no immediate plan to sell but which may be sold in the future, are carried at fair value. Realized gains and losses, based on specifically identified amortized cost of the individual security, are included in noninterest income. Unrealized gains and losses are recorded, net of related income tax effects, in stockholders’ equity. Premiums and discounts are amortized and accreted, respectively, to interest income over the estimated life of the security. Prepayments are anticipated for certain mortgage-backed and Small Business Administration (SBA) securities. Premiums on callable securities are amortized to their earliest call date.

During the three months ended March 31, 2022, the Company transferred, at fair value, $226.5 million of securities from the available-for-sale portfolio to the held-to-maturity portfolio. The related net unrealized gross gains were $1.0 million; $775,000 (net of income taxes) remained in accumulated other comprehensive income and will be amortized over the remaining life of the securities. No gains or losses on these securities were recognized at the time of transfer.

The amortized cost and fair values of securities were as follows:


	March 31, 2022
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value

	(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities	$	305,885	$	928	$	9,337	$	297,476
Agency collateralized mortgage obligations		78,199		73		5,263		73,009
States and political subdivisions		41,202		221		426		40,997
Small Business Administration securities		50,428		441		976		49,893
	$	475,714	$	1,663	$	16,002	$	461,375


	March 31, 2022
					Amortized		Gross		Gross
	Amortized		Fair Value		Carrying		Unrealized		Unrealized		Fair
	Cost		Adjustment		Value		Gains		Losses		Value

	(In Thousands)
HELD-TO-MATURITY SECURITIES:
Agency mortgage-backed securities	$	88,542	$	4,424	$	92,966	$	—	$	2,966	$	90,000
Agency collateralized mortgage obligations		131,638		(3,420)		128,218		—		4,023		124,195
States and political subdivisions		6,278		(21)		6,257		—		264		5,993
	$	226,458	$	983	$	227,441	$	—	$	7,253	$	220,188


	December 31, 2021
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value

	(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities	$	219,624	$	10,561	$	744	$	229,441
Agency collateralized mortgage obligations		204,332		2,443		2,498		204,277
States and political subdivisions		38,440		1,618		43		40,015
Small Business Administration securities		26,802		497		—		27,299
	$	489,198	$	15,119	$	3,285	$	501,032

No securities were classified as held-to-maturity at December 31, 2021.

The amortized cost and fair value of available-for-sale and held-to-maturity securities at March 31, 2022, 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.


	Available-for-Sale				Held-to-Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Carrying Value		Value

	(In Thousands)
One year or less	$	—	$	—	$	—	$	—
After one through two years		—		—		—		—
After two through three years		—		—		—		—
After three through four years		—		—		—		—
After four through five years		2,292		2,318		—		—
After five through fifteen years		13,081		13,208		2,575		2,440
After fifteen years		25,831		25,474		3,681		3,553
Securities not due on a single maturity date		434,510		420,375		221,185		214,195
	$	475,714	$	461,375	$	227,441	$	220,188

Certain available-for-sale investments in debt securities are reported in the financial statements at an amount less than their amortized cost. Total fair value of these investments at March 31, 2022 and December 31, 2021, was approximately $351.5 million and $173.9 million, respectively, which is approximately 76.2% and 34.7% of the Company’s total available-for-sale investment portfolio. A high percentage of the unrealized losses were related to the Company’s mortgage-backed securities, collateralized mortgage obligations and Small Business Administration securities, which are issued and guaranteed by U.S. government-sponsored entities and agencies. The Company’s state and political subdivisions securities are investments in insured fixed rate municipal bonds for which the issuers continue to make timely principal and interest payments under the contractual terms of the securities.

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 any declines in fair value for these debt securities are temporary.

The following table shows the Company’s available-for-sale and held-to-maturity securities 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, 2022 and December 31, 2021:


	March 31, 2022
	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)
AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities	$	244,661	$	(9,337)	$	—	$	—	$	244,661	$	(9,337)
Agency collateralized mortgage obligations		25,813		(1,177)		34,761		(4,086)		60,574		(5,263)
States and political subdivisions securities		17,527		(179)		3,976		(247)		21,503		(426)
Small Business Administration securities		24,804		(976)		—		—		24,804		(976)

	$	312,805	$	(11,669)	$	38,737	$	(4,333)	$	351,542	$	(16,002)


	March 31, 2022
	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)
HELD-TO-MATURITY SECURITIES:
Agency mortgage-backed securities	$	80,283	$	(2,662)	$	9,717	$	(304)	$	90,000	$	(2,966)
Agency collateralized mortgage obligations		70,764		(1,772)		53,431		(2,251)		124,195		(4,023)
States and political subdivisions securities		932		(58)		5,061		(206)		5,993		(264)

	$	151,979	$	(4,492)	$	68,209	$	(2,761)	$	220,188	$	(7,253)


	December 31, 2021
	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)
AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities	$	47,769	$	(388)	$	10,583	$	(356)	$	58,352	$	(744)
Agency collateralized mortgage obligations		92,727		(1,588)		16,298		(910)		109,025		(2,498)
States and political subdivisions securities		6,537		(43)		—		—		6,537		(43)

	$	147,033	$	(2,019)	$	26,881	$	(1,266)	$	173,914	$	(3,285)

Available-for-sale securities totaling $4.9 million were sold during the three months ended March 31, 2022. A gain of $7,000 resulting from the sale of this available-for-sale security was recognized during the three months ended March 31, 2022. There were no sales of available-for-sale securities during the three months ended March 31, 2021. Gains and losses on sales of securities are determined on the specific-identification method.

Allowance for Credit Losses. On January 1, 2021, the Company began evaluating all securities quarterly to determine if any securities in a loss position require a provision for credit losses in accordance with ASC 326, Measurement of Credit Losses on Financial Instruments. All of the mortgage-backed, collateralized mortgage, and SBA securities held by the Company are issued by U.S. government-sponsored entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. Likewise, the Company has not experienced historical losses on these types of securities. Accordingly, no allowance for credit losses has been recorded for these securities.

Regarding securities issued by state and political subdivisions, management considers the following when evaluating these securities: (i) current issuer bond ratings, (ii) historical loss rates for given bond ratings, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, (iv) updated financial information of the issuer, (v) internal forecasts and (vi) whether such securities provide insurance or other credit enhancement or are pre-refunded by the issuers. These securities are highly rated by major rating agencies and have a long history of no credit losses. Likewise, the Company has not experienced historical losses on these types of securities. Accordingly, no allowance for credit losses has been recorded for these securities.

NOTE 6: LOANS AND ALLOWANCE FOR CREDIT LOSSES

The Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, effective January 1, 2021. The guidance replaces the incurred loss methodology with an expected loss methodology that is referred to as the CECL methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables. It also applies to off-balance sheet credit exposures not accounted for as insurance, including loan commitments, standby letters of credits, financial guarantees, and other similar instruments. The Company adopted ASC 326 using the modified retrospective method for loans and off-balance sheet credit exposures. The Company recorded a one-time cumulative-effect adjustment to the allowance for credit losses of $11.6 million. This adjustment brought the balance of the allowance for credit losses to $67.3 million as of January 1, 2021. In addition, the Company recorded an $8.7 million liability for unfunded commitments as of January 1, 2021. The after-tax effect decreased retained earnings by $14.2 million. The adjustment was based upon the Company’s analysis of then-current conditions, assumptions and economic forecasts at January 1, 2021.

The Company adopted ASC 326 using the prospective transition approach for financial assets purchased with credit deterioration (PCD) that were previously classified as purchased credit impaired (PCI) and accounted for under ASC 310-30. In accordance with the standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. On January 1, 2021, the amortized cost basis of the PCD assets were adjusted to reflect the addition of $1.9 million to allowance for credit losses.

The allowance for credit losses is measured using an average historical loss model which incorporates relevant information about past events (including historical credit loss experience on loans with similar risk characteristics), current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the loans. The allowance for credit losses is measured on a collective (pool) basis. Loans are aggregated into pools based on similar risk characteristics including borrower type, collateral and repayment types and expected credit loss patterns. Loans that do not share similar risk characteristics, primarily classified and/or TDR loans with a balance greater than or equal to $100,000, are evaluated on an individual basis.

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

ASU 2016-13 requires an allowance for off balance sheet credit exposures; unfunded lines of credit, undisbursed portions of loans, written residential and commercial commitments, and letters of credit. To determine the amount needed for allowance purposes, a utilization rate is determined either by the model or internally for each pool. Our loss model calculates the reserve on unfunded commitments based upon the utilization rate multiplied by the average loss rate factors in each pool with unfunded and committed balances. The liability for unfunded lending commitments utilizes the same model as the allowance for credit losses on loans; however, the liability for unfunded lending commitments incorporates assumptions for the portion of unfunded commitments that are expected to be funded.

Classes of loans at March 31, 2022 and December 31, 2021 were as follows:


	March 31,			December 31,
	2022			2021

	(In Thousands)
One- to four-family residential construction	$	26,840		$	28,302
Subdivision construction		27,187			26,694
Land development		46,789			47,827
Commercial construction		438,424			617,505
Owner occupied one- to four-family residential		608,560			561,958
Non-owner occupied one- to four-family residential		123,816			119,635
Commercial real estate		1,558,471			1,476,230
Other residential		849,720			697,903
Commercial business		290,381			280,513
Industrial revenue bonds		13,569			14,203
Consumer auto		45,069			48,915
Consumer other		37,964			37,902
Home equity lines of credit		114,484			119,965
		4,181,274			4,077,552
Allowance for credit losses		(60,797)			(60,754)
Deferred loan fees and gains, net		(8,990)			(9,298)
	$	4,111,487		$	4,007,500

Weighted average interest rate		4.13	%		4.26	%

The following tables present the classes of loans by aging.


	March 31, 2022
													Total Loans
					Over 90						Total		> 90 Days Past
	30-59 Days		60-89 Days		Days		Total Past				Loans		Due and
	Past Due		Past Due		Past Due		Due		Current		Receivable		Still Accruing

	(In Thousands)
One- to four-family residential construction	$	—	$	—	$	—	$	—	$	26,840	$	26,840	$	—
Subdivision construction		—		—		—		—		27,187		27,187		—
Land development		—		—		468		468		46,321		46,789		—
Commercial construction		—		—		—		—		438,424		438,424		—
Owner occupied one- to four-family residential		1,268		583		2,004		3,855		604,705		608,560		—
Non-owner occupied one- to four-family residential		—		—		—		—		123,816		123,816		—
Commercial real estate		38		—		1,773		1,811		1,556,660		1,558,471		—
Other residential		—		—		—		—		849,720		849,720		—
Commercial business		197		—		—		197		290,184		290,381		—
Industrial revenue bonds		—		—		—		—		13,569		13,569		—
Consumer auto		125		11		49		185		44,884		45,069		—
Consumer other		265		81		57		403		37,561		37,964		—
Home equity lines of credit		—		—		618		618		113,866		114,484		—

Total	$	1,893	$	675	$	4,969	$	7,537	$	4,173,737	$	4,181,274	$	—


	December 31, 2021
													Total Loans
					Over 90						Total		> 90 Days Past
	30-59 Days		60-89 Days		Days		Total Past				Loans		Due and
	Past Due		Past Due		Past Due		Due		Current		Receivable		Still Accruing

	(In Thousands)
One- to four-family residential construction	$	—	$	—	$	—	$	—	$	28,302	$	28,302	$	—
Subdivision construction		—		—		—		—		26,694		26,694		—
Land development		29		15		468		512		47,315		47,827		—
Commercial construction		—		—		—		—		617,505		617,505		—
Owner occupied one- to four-family residential		843		2		2,216		3,061		558,897		561,958		—
Non-owner occupied one- to four-family residential		—		—		—		—		119,635		119,635		—
Commercial real estate		—		—		2,006		2,006		1,474,224		1,476,230		—
Other residential		—		—		—		—		697,903		697,903		—
Commercial business		1,404		—		—		1,404		279,109		280,513		—
Industrial revenue bonds		—		—		—		—		14,203		14,203		—
Consumer auto		229		31		34		294		48,621		48,915		—
Consumer other		126		28		63		217		37,685		37,902		—
Home equity lines of credit		—		—		636		636		119,329		119,965		—

Total	$	2,631	$	76	$	5,423	$	8,130	$	4,069,422	$	4,077,552	$	—

Loans are placed on nonaccrual status at 90 days past due and interest is considered a loss unless the loan is well secured and in the process of collection. Payments received on nonaccrual loans are applied to principal until the loans are returned to accrual status. Loans are returned to accrual status when all payments contractually due are brought current, payment performance is sustained for a period of time, generally six months, and future payments are reasonably assured. With the exception of consumer loans, charge-offs on loans are recorded when available information indicates a loan is not fully collectible and the loss is reasonably quantifiable. Consumer loans are charged-off at specified delinquency dates consistent with regulatory guidelines.

Non-accruing loans are summarized as follows:


	March 31,		December 31,
	2022		2021

	(In Thousands)
One- to four-family residential construction	$	—	$	—
Subdivision construction		—		—
Land development		468		468
Commercial construction		—		—
Owner occupied one- to four-family residential		2,004		2,216
Non-owner occupied one- to four-family residential		—		—
Commercial real estate		1,773		2,006
Other residential		—		—
Commercial business		—		—
Industrial revenue bonds		—		—
Consumer auto		49		34
Consumer other		57		63
Home equity lines of credit		618		636
Total non-accruing loans	$	4,969	$	5,423

No interest income was recorded on these loans for the three months ended March 31, 2022 and 2021, respectively.

Nonaccrual loans for which there is no related allowance for credit losses as of March 31, 2022 had an amortized cost of $3.3 million. These loans are individually assessed and do not require an allowance due to being adequately collateralized under the collateral-dependent valuation method. A collateral-dependent loan is a financial asset for which the repayment is expected to be provided substantially through the operation or sale of the collateral when the borrower is experiencing financial difficulty based on the Company’s assessment as of the reporting date. Collateral-dependent loans are identified by either a classified risk rating or TDR status and a loan balance equal to or greater than $100,000, including, but not limited to, any loan in process of foreclosure or repossession.

The following tables present the activity in the allowance for credit losses by portfolio segment for the three months ended March 31, 2022 and 2021. During the three months ended March 31, 2022, the Company did not record a provision expense on its portfolio of outstanding loans, compared to a $300,000 provision expense recorded for the quarter ended March 31, 2021.


	One- to Four-
	Family
	Residential and		Other		Commercial		Commercial		Commercial
	Construction		Residential		Real Estate		Construction		Business		Consumer		Total

	(In Thousands)
Allowance for credit losses
Balance, December 31, 2020	$	4,536	$	9,375	$	33,707	$	3,521	$	2,390	$	2,214	$	55,743
CECL adoption		4,533		5,832		(2,531)		(1,165)		1,499		3,427		11,595
Balance, January 1, 2021		9,069		15,207		31,176		2,356		3,889		5,641		67,338
Provision (credit) charged to expense		—		—		300		—		—		—		300
Losses charged off		(6)		—		—		—		—		(649)		(655)
Recoveries		38		92		24		10		47		508		719
Balance, March 31, 2021	$	9,101	$	15,299	$	31,500	$	2,366	$	3,936	$	5,500	$	67,702

Allowance for credit losses
Balance, January 1, 2022	$	9,364	$	10,502	$	28,604	$	2,797	$	4,142	$	5,345	$	60,754
Provision (credit) charged to expense		—		—		—		—		—		—		—
Losses charged off		(36)		—		—		—		—		(401)		(437)
Recoveries		54		—		—		—		20		406		480
Balance, March 31, 2022	$	9,382	$	10,502	$	28,604	$	2,797	$	4,162	$	5,350	$	60,797

The following table presents the activity in the allowance for unfunded commitments by portfolio segment for the three months ended March 31, 2022 and 2021. The provision for losses on unfunded commitments for the three months ended March 31, 2022 was a credit (negative expense) to provision expense of $193,000, compared to a credit (negative expense) of $673,000 for the three months ended March 31, 2021. The level and mix of unfunded commitments resulted in a decrease in the required reserve for such potential losses in each of the three month periods presented.


	One- to Four-
	Family
	Residential and		Other		Commercial		Commercial		Commercial
	Construction		Residential		Real Estate		Construction		Business		Consumer		Total

	(In Thousands)
Allowance for unfunded commitments
Balance, December 31, 2020	$	—	$	—	$	—	$	—	$	—	$	—	$	—
CECL adoption		917		5,227		354		910		935		347		8,690
Balance, January 1, 2021		917		5,227		354		910		935		347		8,690
Provision (credit) charged to expense		40		(412)		103		(400)		21		(25)		(673)
Balance, March 31, 2021	$	957	$	4,815	$	457	$	510	$	956	$	322	$	8,017

Allowance for unfunded commitments
Balance, January 1, 2022	$	687	$	5,703	$	367	$	908	$	1,582	$	382	$	9,629
Provision (credit) charged to expense		512		(1,003)		56		161		36		45		(193)
Balance, March 31, 2022	$	1,199	$	4,700	$	423	$	1,069	$	1,618	$	427	$	9,436

The portfolio segments used in the preceding 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.

The following table presents the amortized cost basis of collateral-dependent loans by class of loans:


	March 31, 2022				December 31, 2021
	Principal		Specific		Principal		Specific
	Balance		Allowance		Balance		Allowance

	(In Thousands)
One- to four-family residential construction	$	—	$	—	$	—	$	—
Subdivision construction		—		—		—		—
Land development		468		—		468		—
Commercial construction		—		—		—		—
Owner occupied one- to four- family residential		1,900		17		1,980		18
Non-owner occupied one- to four-family residential		—		—		—		—
Commercial real estate		1,979		121		2,217		397
Other residential		—		—		—		—
Commercial business		—		—		—		—
Industrial revenue bonds		—		—		—		—
Consumer auto		—		—		—		—
Consumer other		160		80		160		80
Home equity lines of credit		371		—		377		—

Total	$	4,878	$	218	$	5,202	$	495

TDRs by class are presented below as of March 31, 2022 and December 31, 2021.


	March 31, 2022
	Accruing TDR Loans			Non-accruing TDR Loans			Total TDR Loans
	Number	Balance		Number	Balance		Number	Balance

	(In Thousands)
Construction and land development	1	$	12	—	$	—	1	$	12
One- to four-family residential	7		616	11		993	18		1,609
Other residential	—		—	—		—	—		—
Commercial real estate	—		—	2		1,774	2		1,774
Commercial business	—		—	—		—	—		—
Consumer	16		270	13		65	29		335
	24	$	898	26	$	2,832	50	$	3,730


	December 31, 2021
	Accruing TDR Loans			Non-accruing TDR Loans			Total TDR Loans
	Number	Balance		Number	Balance		Number	Balance

	(In Thousands)
Construction and land development	1	$	15	—	$	—	1	$	15
One- to four-family residential	10		579	12		1,059	22		1,638
Other residential	—		—	—		—	—		—
Commercial real estate	1		85	1		1,726	2		1,811
Commercial business	—		—	—		—	—		—
Consumer	26		323	13		64	39		387
	38	$	1,002	26	$	2,849	64	$	3,851

The following tables present newly restructured loans, which were considered TDRs, during the three months ended March 31, 2022 and 2021, respectively, by type of modification:


	Three Months Ended March 31, 2022
							Total
	Interest Only		Term		Combination		Modification

	(In Thousands)
Commercial real estate	$	—	$	—	$	247	$	247
Consumer		—		4		3		7
	$	—	$	4	$	250	$	254


	Three Months Ended March 31, 2021
							Total
	Interest Only		Term		Combination		Modification

	(In Thousands)
Commercial real estate	$	1,768	$	—	$	—	$	1,768
Consumer		—		21		—		21
	$	1,768	$	21	$	—	$	1,789

At March 31, 2022, of the $3.7 million in TDRs, $2.8 million were classified as substandard using the Company’s internal grading system, which is described below. The Company had one TDR that was modified in the previous 12 months and subsequently defaulted during the three months ended March 31, 2022.

At December 31, 2021, of the $3.9 million in TDRs, $2.9 million were classified as substandard using the Company’s internal grading system. The Company had no TDRs that were modified in the previous 12 months and subsequently defaulted during the year ended December 31, 2021.

During the three months ended March 31, 2022, $221,000 of loans met the criteria for placement back on accrual status. The criteria are generally a minimum of six months of consistent and timely payment performance under original or modified terms. During the three months ended March 31, 2021, four loans designated as TDRs, totaling $27,000, met the criteria for placement back on accrual status.

The Company utilizes an internal risk rating system comprised of a series of grades to categorize loans according to perceived risk associated with the expectation of debt repayment. The analysis of the borrower’s ability to repay considers specific information,

including but not limited to current financial information, historical payment experience, industry information, collateral levels and collateral types. A risk rating is assigned at loan origination and then monitored throughout the contractual term for possible risk rating changes.

Satisfactory loans range from Excellent to Moderate Risk, but generally are loans supported by strong recent financial statements. Character and capacity of borrower are strong, including reasonable project performance, good industry experience, liquidity and/or net worth. Probability of financial deterioration seems unlikely. Repayment is expected from approved sources over a reasonable period of time.

Watch loans are identified when the borrower has capacity to perform according to terms; however, elements of uncertainty exist. Margins of debt service coverage may be narrow, historical patterns of financial performance may be erratic, collateral margins may be diminished and the borrower may be a new and/or thinly capitalized company. Some management weakness may also exist, the borrower may have somewhat limited access to other financial institutions, and that ability may diminish in difficult economic times.

Special Mention loans have weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of repayment prospects or the Bank’s credit position at some future date. It is a transitional grade that is closely monitored for improvement or deterioration.

The Substandard rating is applied to loans where the borrower exhibits well-defined weaknesses that jeopardize its continued performance and are of a severity that the distinct possibility of default exists. Loans are placed on “non-accrual” when management does not expect to collect payments consistent with acceptable and agreed upon terms of repayment.

Doubtful loans have all the weaknesses inherent to those classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable. Loans considered loss are uncollectable and no longer included as an asset.

All loans are analyzed for risk rating updates regularly. For larger loans, rating assessments may be more frequent if relevant information is obtained earlier through debt covenant monitoring or overall relationship management. Smaller loans are monitored as identified by the loan officer based on the risk profile of the individual borrower or if the loan becomes past due related to credit issues. Loans rated Watch, Special Mention, Substandard or Doubtful are subject to quarterly review and monitoring processes. In addition to the regular monitoring performed by the lending personnel and credit committees, loans are subject to review by the credit review department, which verifies the appropriateness of the risk ratings for the loans chosen as part of its risk-based review plan.

The following tables present a summary of loans by risk category and past due status separated by origination and loan class as of March 31, 2022. The remaining accretable discount of $204,000 has not been included in this table. See Note 7 for further discussion of the FDIC-assisted acquired loans and related discount.


	Term Loans by Origination Year
													Revolving
	2022 YTD		2021		2020		2019		2018		Prior		Loans		Total

	(In Thousands)
One- to four-family residential construction
Satisfactory (1-4)	$	3,214	$	18,939	$	3,816	$	867	$	—	$	4	$	—	$	26,840
Watch (5)		—		—		—		—		—		—		—		—
Special Mention (6)		—		—		—		—		—		—		—		—
Classified (7-9)		—		—		—		—		—		—		—		—
Total		3,214		18,939		3,816		867		—		4		—		26,840

Subdivision construction
Satisfactory (1-4)		727		24,125		943		209		144		1,027		—		27,175
Watch (5)		—		—		—		—		—		—		—		—
Special Mention (6)		—		—		—		—		—		—		—		—
Classified (7-9)		—		—		—		—		—		12		—		12
Total		727		24,125		943		209		144		1,039		—		27,187

Construction and land development
Satisfactory (1-4)		4,393		10,180		12,754		11,102		789		6,607		498		46,323
Watch (5)		—		—		—		—		—		—		—		—
Special Mention (6)		—		—		—		—		—		—		—		—
Classified (7-9)		—		—		—		—		—		—		468		468
Total		4,393		10,180		12,754		11,102		789		6,607		966		46,791

Other construction
Satisfactory (1-4)		10,124		146,013		219,022		63,265		—		—		—		438,424
Watch (5)		—		—		—		—		—		—		—		—
Special Mention (6)		—		—		—		—		—		—		—		—
Classified (7-9)		—		—		—		—		—		—		—		—
Total		10,124		146,013		219,022		63,265		—		—		—		438,424

One- to four-family residential
Satisfactory (1-4)		83,091		239,052		152,349		86,237		46,444		122,234		1,385		730,792
Watch (5)		—		—		—		—		91		263		66		420
Special Mention (6)		—		—		—		—		—		—		—		—
Classified (7-9)		—		—		—		128		—		1,151		47		1,326
Total		83,091		239,052		152,349		86,365		46,535		123,648		1,498		732,538

Other residential
Satisfactory (1-4)		16,003		124,361		202,360		169,732		170,735		150,466		12,690		846,347
Watch (5)		—		—		—		—		—		3,396		—		3,396
Special Mention (6)		—		—		—		—		—		—		—		—
Classified (7-9)		—		—		—		—		—		—		—		—
Total		16,003		124,361		202,360		169,732		170,735		153,862		12,690		849,743

Commercial real estate
Satisfactory (1-4)		119,339		168,776		100,003		211,453		224,534		692,189		13,712		1,530,006
Watch (5)		—		—		410		582		—		25,699		—		26,691
Special Mention (6)		—		—		—		—		—		—		—		—
Classified (7-9)		—		—		—		—		—		1,774		—		1,774
Total		119,339		168,776		100,413		212,035		224,534		719,662		13,712		1,558,471

Commercial business
Satisfactory (1-4)		10,056		69,215		34,822		16,964		15,613		75,122		82,120		303,912
Watch (5)		—		—		—		—		—		50		—		50
Special Mention (6)		—		—		—		—		—		—		—		—
Classified (7-9)		—		—		—		—		—		—		—		—
Total		10,056		69,215		34,822		16,964		15,613		75,172		82,120		303,962

Consumer
Satisfactory (1-4)		7,337		17,694		9,345		5,673		7,138		24,348		125,157		196,692
Watch (5)		—		—		—		—		19		168		28		215
Special Mention (6)		—		—		—		—		—		—		—		—
Classified (7-9)		—		—		2		—		18		281		314		615
Total		7,337		17,694		9,347		5,673		7,175		24,797		125,499		197,522

Combined
Satisfactory (1-4)		254,284		818,355		735,414		565,502		465,397		1,071,997		235,562		4,146,511
Watch (5)		—		—		410		582		110		29,576		94		30,772
Special Mention (6)		—		—		—		—		—		—		—		—
Classified (7-9)		—		—		2		128		18		3,218		829		4,195
Total	$	254,284	$	818,355	$	735,826	$	566,212	$	465,525	$	1,104,791	$	236,485	$	4,181,478

The following tables present a summary of loans by risk category and past due status separated by origination and loan class as of December 31, 2021. The remaining accretable discount of $429,000 has not been included in this table.


	Term Loans by Origination Year
														Revolving
	2021		2020		2019		2018		2017			Prior		Loans	Total

	(In Thousands)
One- to four-family residential construction
Satisfactory (1-4)	$	23,081	$	4,453	$	763	$	—	$	—	$	5	$	—	$	28,302
Watch (5)		—		—		—		—		—		—		—		—
Special Mention (6)		—		—		—		—		—		—		—		—
Classified (7-9)		—		—		—		—		—		—		—		—
Total		23,081		4,453		763		—		—		5		—		28,302

Subdivision construction
Satisfactory (1-4)		24,129		949		224		160		252		965		—		26,679
Watch (5)		—		—		—		—		—		—		—		—
Special Mention (6)		—		—		—		—		—		—		—		—
Classified (7-9)		—		—		—		—		—		15		—		15
Total		24,129		949		224		160		252		980		—		26,694

Construction and land development
Satisfactory (1-4)		9,968		15,965		11,115		2,591		3,013		4,184		527		47,363
Watch (5)		—		—		—		—		—		—		—		—
Special Mention (6)		—		—		—		—		—		—		—		—
Classified (7-9)		—		—		—		—		—		—		468		468
Total		9,968		15,965		11,115		2,591		3,013		4,184		995		47,831

Other construction
Satisfactory (1-4)		145,991		298,710		130,502		42,302		—		—		—		617,505
Watch (5)		—		—		—		—		—		—		—		—
Special Mention (6)		—		—		—		—		—		—		—		—
Classified (7-9)		—		—		—		—		—		—		—		—
Total		145,991		298,710		130,502		42,302		—		—		—		617,505

One- to four-family residential
Satisfactory (1-4)		237,498		169,765		93,648		49,618		14,707		113,059		1,662		679,957
Watch (5)		—		—		—		132		—		267		69		468
Special Mention (6)		—		—		—		—		—		—		—		—
Classified (7-9)		—		—		144		—		50		1,223		83		1,500
Total		237,498		169,765		93,792		49,750		14,757		114,549		1,814		681,925

Other residential
Satisfactory (1-4)		117,029		96,551		115,418		179,441		104,053		70,438		11,605		694,535
Watch (5)		—		—		—		—		—		3,417		—		3,417
Special Mention (6)		—		—		—		—		—		—		—		—
Classified (7-9)		—		—		—		—		—		—		—		—
Total		117,029		96,551		115,418		179,441		104,053		73,855		11,605		697,952

Commercial real estate
Satisfactory (1-4)		141,868		113,226		220,580		231,321		196,166		521,545		22,785		1,447,491
Watch (5)		—		410		582		—		—		25,742		—		26,734
Special Mention (6)		—		—		—		—		—		—		—		—
Classified (7-9)		—		—		—		—		—		2,006		—		2,006
Total		141,868		113,636		221,162		231,321		196,166		549,293		22,785		1,476,231

Commercial business
Satisfactory (1-4)		67,049		28,743		23,947		16,513		24,126		58,116		76,187		294,681
Watch (5)		—		—		—		—		—		58		—		58
Special Mention (6)		—		—		—		—		—		—		—		—
Classified (7-9)		—		—		—		—		—		—		—		—
Total		67,049		28,743		23,947		16,513		24,126		58,174		76,187		294,739

Consumer
Satisfactory (1-4)		20,140		11,138		7,154		9,065		4,175		24,280		130,111		206,063
Watch (5)		—		—		—		20		4		10		29		63
Special Mention (6)		—		—		—		—		—		—		—		—
Classified (7-9)		—		2		—		16		32		280		347		677
Total		20,140		11,140		7,154		9,101		4,211		24,570		130,487		206,803

Combined
Satisfactory (1-4)		786,753		739,500		603,351		531,011		346,492		792,592		242,877		4,042,576
Watch (5)		—		410		582		152		4		29,494		98		30,740
Special Mention (6)		—		—		—		—		—		—		—		—
Classified (7-9)		—		2		144		16		82		3,524		898		4,666
Total	$	786,753	$	739,912	$	604,077	$	531,179	$	346,578	$	825,610	$	243,873	$	4,077,982

NOTE 7: FDIC-ASSISTED ACQUIRED LOANS

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 related loss sharing agreement was terminated early, effective April 26, 2016, by mutual agreement of Great Southern Bank and the FDIC. 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 related loss sharing agreement was terminated early, effective April 26, 2016, by mutual agreement of Great Southern Bank and the FDIC. 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 related loss sharing agreement was terminated early, effective April 26, 2016, by mutual agreement of Great Southern Bank and the FDIC. 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 related loss sharing agreement was terminated early, effective June 9, 2017, by mutual agreement of Great Southern Bank and the FDIC. Based upon the acquisition date fair values of the net assets acquired, no goodwill was recorded.

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, 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.

The following table presents the balances of the acquired loans related to the various FDIC-assisted transactions at March 31, 2022 and December 31, 2021.


					Sun Security
	TeamBank		Vantus Bank		Bank		InterBank		Valley Bank

	(In Thousands)
March 31,2022
Gross loans receivable	$	3,357	$	4,966	$	8,862	$	30,797	$	22,476
Balance of accretable discount due to change in expected losses		(32)		(9)		(32)		(20)		(111)
Net carrying value of loans receivable	$	3,325	$	4,957	$	8,830	$	30,777	$	22,365

December 31, 2021
Gross loans receivable	$	3,613	$	5,304	$	9,405	$	32,645	$	23,632
Balance of accretable discount due to change in expected losses		(65)		(19)		(63)		(58)		(224)
Net carrying value of loans receivable	$	3,548	$	5,285	$	9,342	$	32,587	$	23,408

NOTE 8: OTHER REAL ESTATE OWNED AND REPOSSESSIONS

Major classifications of other real estate owned were as follows:


	March 31,		December 31,
	2022		2021

	(In Thousands)
Foreclosed assets held for sale and repossessions
One- to four-family construction	$	—	$	—
Subdivision construction		—		—
Land development		—		315
Commercial construction		—		—
One- to four-family residential		183		183
Other residential		—		—
Commercial real estate		—		—
Commercial business		—		—
Consumer		38		90

Foreclosed assets held for sale and repossessions		221		588

Other real estate owned not acquired through foreclosure		1,499		1,499

Other real estate owned and repossessions	$	1,720	$	2,087

At March 31, 2022 and December 31, 2021, other real estate owned not acquired through foreclosure included four properties, all of which were branch locations that were closed and held for sale.

At March 31, 2022, residential mortgage loans totaling $20,000 were in the process of foreclosure. At December 31, 2021, residential mortgage loans totaling $125,000 were in the process of foreclosure.

Expenses applicable to other real estate owned and repossessions included the following:


	Three Months Ended
	March 31,
	2022		2021

	(In Thousands)
Net gains on sales of other real estate owned and repossessions	$	(6)	$	(46)
Valuation write-downs		15		82
Operating expenses, net of rental income		154		232
	$	163	$	268

NOTE 9: PREMISES AND EQUIPMENT

Major classifications of premises and equipment, stated at cost, were as follows:


	March 31,		December 31,
	2022		2021

	(In Thousands)
Land	$	39,497	$	39,440
Buildings and improvements		101,501		101,207
Furniture, fixtures and equipment		58,415		57,982
Operating leases right of use asset		7,493		7,715
		206,906		206,344
Less: accumulated depreciation		75,164		73,611
	$	131,742	$	132,733

Leases. The Company adopted ASU 2016 02, Leases (Topic 842), on January 1, 2019, using the modified retrospective transition approach whereby comparative periods were not restated. The Company also elected certain relief options under the ASU, including the option not to recognize right of use asset and lease liabilities that arise from short-term leases (leases with terms of twelve months

or less). Adoption of this ASU resulted in the Company initially recognizing a right of use asset and corresponding lease liability of $9.5 million as of January 1, 2019. The amount of the right of use asset and corresponding lease liability will fluctuate based on the Company’s lease terminations, new leases and lease modifications and renewals. As of March 31, 2022, the lease right of use asset value was $7.5 million and the corresponding lease liability was $7.7 million. As of December 31, 2021, the lease right of use asset value was $7.7 million and the corresponding lease liability was $7.9 million. At March 31, 2022, expected lease terms range from 1.0 years to 16.7 years with a weighted-average lease term of 9.1 years. The weighted-average discount rate was 3.44%.

For the three months ended March 31, 2022 and 2021, lease expense was $369,000 and $374,000, respectively. The Company’s short-term leases related to offsite ATMs have both fixed and variable lease payment components, based on the number of transactions at the various ATMs. The variable portion of these lease payments is not material and the total lease expense related to ATMs for the three months ended March 31, 2022 and 2021 was $69,000 and $66,000, respectively.

The Company does not sublease any of its leased facilities; however, it does lease to other parties portions of facilities that it owns. In terms of being the lessor in these circumstances, all of these lease agreements are classified as operating leases. In the three months ended March 31, 2022 and 2021, income recognized from these lease agreements was $294,000 and $291,000, respectively, and was included in occupancy and equipment expense.


	March 31, 2022		December 31, 2021

	(In Thousands)
Statement of Financial Condition
Operating leases right of use asset	$	7,493	$	7,716
Operating leases liability	$	7,672	$	7,886

	For the Three Months Ended
	March 31, 2022		March 31, 2021

	(In Thousands)
Statement of Income
Operating lease costs classified as occupancy and equipment expense (includes short-term lease costs and amortization of right of use asset)	$	369	$	374

Supplemental Cash Flow Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	360	$	361

At March 31, 2022, future expected lease payments for leases with terms exceeding one year were as follows (In Thousands):


2022	$	842
2023		1,094
2024		1,013
2025		990
2026		923
2027		885
Thereafter		3,179

Future lease payments expected		8,926

Less: interest portion of lease payments		(1,254)

Lease liability	$	7,672

NOTE 10: DEPOSITS


	March 31,		December 31,
	2022		2021

	(In Thousands)
Time Deposits:
0.00% - 0.99%	$	777,469	$	825,217
1.00% - 1.99%		69,436		73,563
2.00% - 2.99%		46,139		55,509
3.00% and above		5,047		6,780
Total time deposits (weighted average rate 0.58% and 0.60%)		898,091		961,069
Non-interest-bearing demand deposits		1,176,285		1,209,822
Interest-bearing demand and savings deposits (weighted average rate 0.12% and 0.12%)		2,414,961		2,381,210
Total Deposits	$	4,489,337	$	4,552,101

NOTE 11: ADVANCES FROM FEDERAL HOME LOAN BANK

At March 31, 2022 and December 31, 2021, there were no outstanding term advances from the Federal Home Loan Bank of Des Moines (FHLBank advances). There were no overnight funds from the Federal Home Loan Bank of Des Moines as of March 31, 2022 or December 31, 2021.

NOTE 12: SECURITIES SOLD UNDER REVERSE REPURCHASE AGREEMENTS AND SHORT-TERM BORROWINGS


	March 31,		December 31,
	2022		2021

	(In Thousands)
Notes payable – Community Development Equity Funds	$	1,152	$	1,449
Other interest-bearing liabilities		1,790		390
Securities sold under reverse repurchase agreements		148,019		137,116
	$	150,961	$	138,955

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 being held by the Bank during the agreement period. All agreements are written on a term of one month or less.

At March 31, 2022 and December 31, 2021, other interest-bearing liabilities consisted of cash collateral held by the Company to satisfy minimum collateral posting thresholds with its derivative dealer counterparties representing the termination value of derivatives, which at such time were in a net asset position. Under the collateral agreements between the parties, either party may choose to provide cash or securities to satisfy its collateral requirements.

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


	March 31, 2022		December 31, 2021
	Overnight and		Overnight and
	Continuous		Continuous

	(In Thousands)
Mortgage-backed securities – GNMA, FNMA, FHLMC	$	148,019	$	137,116

NOTE 13: SUBORDINATED NOTES

On August 8, 2016, the Company completed the public offering and sale of $75.0 million of its subordinated notes. The notes were due August 15, 2026 and had a fixed interest rate of 5.25% until August 15, 2021, at which time the rate was to become floating at a rate equal to three-month LIBOR plus 4.087%. 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. Total debt issuance costs of approximately $1.5 million were deferred and amortized over the five-year expected life of the notes.

On August 15, 2021, in accordance with the terms of the notes, the Company redeemed all $75.0 million aggregate principal amount of the notes at a redemption price equal to 100% of their principal amount, plus accrued and unpaid interest.

On June 10, 2020, the Company completed the public offering and sale of $75.0 million of its subordinated notes. The notes are due June 15, 2030, and have a fixed interest rate of 5.50% until June 15, 2025, at which time the rate becomes floating at a rate expected to be equal to three-month term Secured Overnight Financing Rate (SOFR) plus 5.325%. The Company may call the notes at par beginning on June 15, 2025, 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. Total debt issuance costs of approximately $1.5 million were deferred and are being amortized over the expected life of the notes, which is five years.

Amortization of the debt issuance costs during the three months ended March 31, 2022 and 2021 of both subordinated notes offerings totaled $74,000 and $183,000, respectively. Amortization of the debt issuance costs is included in interest expense on subordinated notes in the consolidated statements of income, resulting in an imputed interest rate of 5.97%.

At March 31, 2022 and December 31, 2021, subordinated notes are summarized as follows:


	March 31, 2022		December 31, 2021

	(In Thousands)
Subordinated notes	$	75,000	$	75,000
Less: unamortized debt issuance costs		942		1,016
	$	74,058	$	73,984

NOTE 14: INCOME TAXES

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


	Three Months Ended March 31,
	2022		2021
Tax at statutory rate	21.0	%	21.0	%
Nontaxable interest and dividends	(0.4)		(0.3)
Tax credits	(1.7)		(1.9)
State taxes	1.5		1.3
Other	0.1		0.9
	20.5	%	21.0	%

The Company and its consolidated subsidiaries have not been audited recently by the Internal Revenue Service (IRS). As a result, federal tax years through December 31, 2017 are now closed.

The Company was previously under State of Missouri income and franchise tax examinations for its 2014 and 2015 tax years. The examinations concluded with one unresolved issue related to the exclusion of certain income in the calculation of Missouri income tax. The Missouri Department of Revenue denied the Company’s administrative protest regarding the 2014 and 2015 tax years’ examinations. In June 2021, the Company filed a formal protest with the Missouri Administrative Hearing Commission, which has special jurisdiction to hear tax matters and is similar to a trial court, to continue defending the Company’s rights and associated tax position. The Company has engaged legal and tax advisors and continues to believe it will ultimately prevail on the issue; however, if the Company does not prevail, the tax obligation to the State of Missouri could be up to a total of $4.0 million for these tax years and additional amounts could be levied for certain subsequent tax years.

The State of Illinois Department of Revenue recently began a tax examination of the Company's Illinois Business Income Tax for the 2018 and 2019 tax years.

NOTE 15: 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 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.

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 fell at March 31, 2022 and December 31, 2021:


			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, 2022
Available-for-sale securities
Agency mortgage-backed securities	$	297,476	$	—	$	297,476	$	—
Agency collateralized mortgage obligations		73,009		—		73,009		—
States and political subdivisions securities		40,997		—		40,997		—
Small Business Administration securities		49,893		—		49,893		—
Interest rate derivative asset		5,191		—		5,191		—
Interest rate derivative liability		(9,112)		—		(9,112)		—

December 31, 2021
Available-for-sale securities
Agency mortgage-backed securities	$	229,441	$	—	$	229,441	$	—
Agency collateralized mortgage obligations		204,277		—		204,277		—
States and political subdivisions securities		40,015		—		40,015		—
Small Business Administration securities		27,299		—		27,299		—
Interest rate derivative asset		2,816		—		2,816		—
Interest rate derivative liability		(2,895)		—		(2,895)		—

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, 2022 and December 31, 2021 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, 2022. 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, 2022 or December 31, 2021.

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 table presents 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, 2022 and December 31, 2021:


			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, 2022
Collateral-dependent loans	$	256	$	—	$	—	$	256

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

December 31, 2021
Collateral-dependent loans	$	1,712	$	—	$	—	$	1,712

Foreclosed assets held for sale	$	315	$	—	$	—	$	315

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, 2022 and December 31, 2021, the aggregate fair value of mortgage loans held for sale was not materially different than their cost. Accordingly, no mortgage loans held for sale were marked down and reported at fair value.

Collateral-Dependent Loans. The Company records collateral-dependent 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 credit losses specific to the loan. Loans for which such charge-offs or reserves were recorded during the three months ended March 31, 2022 or the year ended December 31, 2021, 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, 2022 or the year ended December 31, 2021, subsequent to their initial transfer to foreclosed assets.

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.

Held-to-Maturity Securities. Fair values for held-to-maturity securities are estimated based on quoted market prices of similar securities. For these securities, the Company obtains fair value measurements 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. These securities include U.S. government agency securities, mortgage-backed securities, state and municipal bonds and certain other investments.

Loans and Interest Receivable. The fair value of loans is estimated on an exit price basis incorporating contractual cash flows, prepayments, discount spreads, credit losses and liquidity premiums. Loans with similar characteristics were 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 through a discounted cash flow calculation using the average advances yield curve from 11 districts of the FHLB for the as of date. The carrying amount of accrued interest payable approximates its fair value.

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, 2022						December 31, 2021
	Carrying		Fair		Hierarchy	Carrying		Fair		Hierarchy
	Amount		Value		Level	Amount		Value		Level

	(In Thousands)
Financial assets
Cash and cash equivalents	$	353,038	$	353,038	1	$	717,267	$	717,267	1
Held-to-maturity securities		227,441		220,188	2		—		—	2
Mortgage loans held for sale		1,672		1,672	2		8,735		8,735	2
Loans, net of allowance for credit losses		4,111,487		4,088,157	3		4,007,500		4,001,362	3
Interest receivable		12,458		12,458	3		10,705		10,705	3
Investment in FHLBank stock and other assets		6,564		6,564	3		6,655		6,655	3

Financial liabilities
Deposits		4,489,337		4,482,961	3		4,552,101		4,552,202	3
Short-term borrowings		150,961		150,961	3		138,955		138,955	3
Subordinated debentures		25,774		25,774	3		25,774		25,774	3
Subordinated notes		74,058		77,250	2		73,984		81,000	2
Interest payable		1,656		1,656	3		646		646	3

Unrecognized financial instruments (net of contractual value)
Commitments to originate loans		—		—	3		—		—	3
Letters of credit		30		30	3		50		50	3
Lines of credit		—		—	3		—		—	3

NOTE 16: 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 as 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. Six of the seven acquired loans with interest rate swaps have paid off. The aggregate notional amount of the remaining Valley swaps was $468,000 and $482,000 at March 31, 2022 and December 31, 2021, respectively. At March 31, 2022, excluding the Valley Bank swaps, the Company had nine interest rate swaps and one interest rate cap totaling $94.2 million in notional amount with commercial customers, and nine interest rate swaps and one interest rate cap with the same aggregate notional amount with third parties related to its program. In addition, the Company has four participation loans purchased totaling $27.1 million, in which the lead institution has an interest rate swap with its customer and the economics of the counterparty swap are passed along to the Company through the loan participation. At December 31, 2021, excluding the Valley Bank swaps, the Company had 11 interest rate swaps and one interest rate cap totaling $93.9 million in notional amount with commercial customers, and 11 interest rate swaps and one interest rate cap with the same notional amount with third parties related to its program. During the three months ended March 31, 2022, the Company recognized net gains of $152,000, compared to net gains of $474,000 during the three months ended March 31, 2021, in noninterest income related to changes in the fair value of these swaps.

Cash Flow Hedges

Interest Rate Swap. As a strategy to maintain acceptable levels of exposure to the risk of changes in future cash flows due to interest rate fluctuations, in October 2018, the Company entered into an interest rate swap transaction as part of its ongoing interest rate management strategies to hedge the risk of its floating rate loans. The notional amount of the swap was $400 million with a termination date of October 6, 2025. Under the terms of the swap, the Company received a fixed rate of interest of 3.018% and paid a floating rate of interest equal to one-month USD-LIBOR. The floating rate was reset monthly and net settlements of interest due to/from the counterparty also occurred monthly. To the extent that the fixed rate of interest exceeded one-month USD-LIBOR, the Company received net interest settlements which were recorded as loan interest income. If USD-LIBOR exceeded the fixed rate of interest, the Company was required to pay net settlements to the counterparty and record those net payments as a reduction of interest income on loans.

In March 2020, the Company and its swap counterparty mutually agreed to terminate the $400 million interest rate swap prior to its contractual maturity. The Company received a payment of $45.9 million from its swap counterparty as a result of this termination. This $45.9 million, less the accrued interest portion and net of deferred income taxes, is reflected in the Company’s stockholders’ equity as Accumulated Other Comprehensive Income and a portion of it will be accreted to interest income on loans monthly through the original contractual termination date of October 6, 2025. This has the effect of reducing Accumulated Other Comprehensive Income and increasing Net Interest Income and Retained Earnings over the period. The Company currently expects to have a sufficient amount of eligible variable rate loans to continue to accrete this interest income in future periods. If this expectation changes and the amount of eligible variable rate loans decreases significantly, the Company may be required to recognize this interest income more rapidly.

In February 2022, the Company entered into an interest rate swap transaction as part of its ongoing interest rate management strategies to hedge the risk of its floating rate loans. The notional amount of the swap is $300 million with an effective date of March 1, 2022 and a termination date of March 1, 2024. Under the terms of the swap, the Company will receive a fixed rate of interest of 1.6725% and will pay a floating rate of interest equal to one-month USD-LIBOR (or the equivalent replacement rate if USD-LIBOR rate is not available). The floating rate will be reset monthly and net settlements of interest due to/from the counterparty will also occur monthly. The floating rate of interest was 0.2414% as of March 31, 2022. Therefore, in the near term, the Company will receive net interest settlements which will be recorded as loan interest income, to the extent that the fixed rate of interest continues to exceed one-month USD-LIBOR. If USD-LIBOR exceeds the fixed rate of interest in future periods, the Company will be required to pay net settlements to the counterparty and will record those net payments as a reduction of interest income on loans.

The Company recorded loan interest income of $2.0 million on the terminated interest rate swap during each of the three months ended March 31, 2022 and 2021. The Company recorded loan interest income of $370,000 on the active interest rate swap during the three months ended March 31, 2022.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 affected 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, 2022 and 2021, the Company recognized no noninterest income related to changes in the fair value of these derivatives. The Company currently expects to have an amount of eligible variable rate loans to continue to accrete this interest income in future periods. If this expectation changes and the amount of eligible variable rate loans decreases significantly, the Company may be required to recognize this interest income more rapidly.

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	2022		2021

		(In Thousands)
Derivatives designated as hedging instruments
Active interest rate swap	Accrued expenses and other liabilities	$	3,994	$	—

Total derivates designated as hedging instruments		$	3,994	$	—

Derivatives not designated as hedging instruments
Asset Derivatives
Interest rate products	Prepaid expenses and other assets	$	5,191	$	2,816

Total derivatives not designated as hedging instruments		$	5,191	$	2,816

Liability Derivatives
Interest rate products	Accrued expenses and other liabilities	$	5,118	$	2,895

Total derivatives not designated as hedging instruments		$	5,118	$	2,895

The following table presents the effect of cash flow hedge accounting on the statements of comprehensive income:


	Amount of Gain (Loss)
	Recognized in AOCI
	Three Months Ended March 31,
Cash Flow Hedges	2022		2021

	(In Thousands)
Terminated interest rate swap, net of income taxes	$	(1,547)	$	(1,546)
Active interest rate swap, net of income taxes		(3,083)		—
	$	(4,630)	$	(1,546)

The following table presents the effect of cash flow hedge accounting on the statements of income:


	Three Months Ended March 31,
Cash Flow Hedges	2022				2021
	Interest		Interest		Interest		Interest
	Income		Expense		Income		Expense

	(In Thousands)
Total Interest Income	$	46,673	$	—	$	47,709	$	—
Total Interest Expense		—		3,407		—		6,544
	$	46,673	$	3,407	$	47,709	$	6,544

Terminated interest rate swap	$	2,003	$	—	$	2,003	$	—
Active interest rate swap		370		—		—		—
	$	2,373	$	—	$	2,003	$	—

Agreements with Derivative Counterparties

The Company has agreements with its derivative counterparties. If the Company defaults on any of its indebtedness, including a 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 occur, such as the issuance of a formal directive, or if the Company’s credit rating is downgraded below a specified level.

At March 31, 2022, the termination value of derivatives with our derivative dealer counterparties (related to loan level swaps with commercial lending customers and an active interest rate swap to hedge risk related to the Company's variable rate loans) in an overall net liability position, which included accrued interest but excluded any adjustment for nonperformance risk, related to these agreements was $1.5 million. The Company has minimum collateral posting thresholds with its derivative dealer counterparties. At March 31, 2022, the Company had received cash collateral from another derivative counterparty of $1.8 million to cover its fair value position with us. At March 31, 2022, the Company did not have any activity with its derivative counterparties that met the level at which the Company’s minimum collateral posting thresholds take effect (requiring collateral to be given by the Company).

At December 31, 2021, the termination value of derivatives with our derivative dealer counterparties (related to loan level swaps with commercial lending customers) in a net liability position, which included accrued interest but excluded any adjustment for nonperformance risk, related to these agreements was $437,000. Additionally, the Company’s activity with one of its derivative counterparties met the level at which the Company’s minimum collateral posting thresholds take effect (requiring collateral to be given by the Company) and the Company posted collateral of $1.2 million to the derivative counterparty to satisfy the loan level agreements. Also at December 31, 2021, the Company had received cash collateral from another derivative counterparty of $390,000 to cover its fair value position with us.

If the Company had breached any of these provisions at March 31, 2022 or December 31, 2021, it could have been required to settle its obligations under the agreements at the termination value. Under the collateral agreements between the parties, either party may choose to provide cash or securities to satisfy its collateral requirements.

NOTE 17: SUBSEQUENT EVENT – ARENA NAMING RIGHTS

In April 2022, the Company, through its subsidiary Great Southern Bank, entered into a naming rights agreement with Missouri State University related to the main arena on the university’s campus in Springfield, Missouri. The terms of the agreement provide the naming rights to Great Southern Bank for a total cost of $5.5 million, to be paid over a period of seven years. The Company expects to record this transaction as an intangible asset, with a corresponding accrued liability for the full amount of the agreement. The Company further expects to amortize the intangible asset through non-interest expense over a period not to exceed 15 years.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-looking Statements

When used in this Quarterly Report and in documents filed or furnished by Great Southern Bancorp, Inc. (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 “may,” “might,” “could,” “should,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “believe,” “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. Forward-looking statements also include, but are not limited to, statements regarding plans, objectives, expectations or consequences of announced transactions, known trends and statements about future performance, operations, products and services of the Company. The Company’s ability to predict results or the actual effects of future plans or strategies is inherently uncertain, and the Company’s actual results could differ materially from those contained in the forward-looking statements. The novel coronavirus disease, or COVID-19, pandemic has adversely affected the Company, its customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on the Company’s business, financial position, results of operations, liquidity, and prospects is uncertain. While general business and economic conditions have improved, increases in unemployment rates, or turbulence in domestic or global financial markets could adversely affect the Company’s revenues and the values of its assets and liabilities, reduce the availability of funding, lead to a tightening of credit, and further increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to, COVID-19, could affect the Company in substantial and unpredictable ways.

Other factors that could cause or contribute to such differences include, but are not limited to: (i) expected revenues, cost savings, earnings accretion, synergies and other benefits from the Company’s 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; (ii) changes in economic conditions, either nationally or in the Company’s market areas; (iii) fluctuations in interest rates; (iv) the risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses; (v) the possibility of realized or unrealized losses on securities held in the Company's investment portfolio; (vi) the Company’s ability to access cost-effective funding; (vii) fluctuations in real estate values and both residential and commercial real estate market conditions; (viii) the ability to adapt successfully to technological changes to meet customers’ needs and developments in the marketplace; (ix) 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; (x) legislative or regulatory changes that adversely affect the Company’s business; (xi) changes in accounting policies and practices or accounting standards; (xii) results of examinations of the Company and Great Southern Bank by their regulators, including the possibility that the regulators may, among other things, require the Company to limit its business activities, change its business mix, increase its allowance for credit losses, write-down assets or increase its capital levels, or affect its ability to borrow funds or maintain or increase deposits, which could adversely affect its liquidity and earnings; (xiv) costs and effects of litigation, including settlements and judgments; (xv) competition; (xvi) uncertainty regarding the future of LIBOR and potential replacement indexes; and (xvii) natural disasters, war, terrorist activities or civil unrest and their effects on economic and business environments in which the Company operates. 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 to accounting principles generally accepted in the United States of America 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 Credit Losses and Valuation of Foreclosed Assets

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

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

See Note 6 “Loans and Allowance for Credit Losses” of the accompanying financial statements for additional information regarding the allowance for credit 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. Significant changes were made to management’s overall methodology for evaluating the allowance for credit losses beginning in 2021 due to the adoption of ASU 2016-13.

On January 1, 2021, the Company adopted the new accounting standard related to the Allowance for Credit Losses. For assets held at amortized cost basis, this standard eliminates the probable initial recognition threshold in GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. See Note 6 of the accompanying financial statements for additional information.

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.

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, 2022, the Company had one reporting unit to which goodwill has been allocated – the Bank. If the fair value of a reporting unit exceeds its carrying value, then no impairment is recorded. If the carrying value exceeds the fair value of a reporting unit, further testing is completed comparing the implied fair value of the reporting unit’s goodwill to its carrying value to measure the amount of impairment, if any. 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, 2022, goodwill consisted of $5.4 million at the Bank reporting unit, which included goodwill of $4.2 million that was recorded during 2016 related to the acquisition of 12 branches and the assumption of related deposits in the St. Louis market 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, 2022, the amortizable intangible assets consisted of core deposit intangibles of $527,000, which are reflected in the table below. These amortizable intangible assets are reviewed for impairment if circumstances indicate their value may not be recoverable based on a comparison of fair value.

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

Management does not believe any of the Company’s goodwill or other intangible assets were impaired as of March 31, 2022. While management believes no impairment existed at March 31, 2022, different conditions or assumptions used to measure fair value of the reporting unit, or changes in cash flows or profitability, if significantly negative or unfavorable, could have a material adverse effect on the outcome of the Company’s impairment evaluation in the future.

A summary of goodwill and intangible assets is as follows:


	March 31,		December 31,
	2022		2021

	(In Thousands)
Goodwill – Branch acquisitions	$	5,396	$	5,396
Deposit intangibles
Fifth Third Bank (January 2016)		527		685
	$	5,923	$	6,081

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 credit 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 an economic downturn. Unemployment rose from 4.7% in November 2007 to peak at 10.0% in October 2009. Economic conditions improved in the subsequent years, as indicated by higher consumer confidence levels, increased economic activity and low unemployment levels. The U.S. economy continued to operate at historically strong levels until the COVID-19 pandemic in March 2020. While U.S. economic trends have rebounded, new COVID variants have emerged and the severity and extent of the coronavirus on the global, national and regional economies is still uncertain. Any long-term impact on the performance of the financial sector remains indeterminable.

The economy plunged into recession in the first quarter of 2020, as efforts to contain the spread of the coronavirus forced all but essential business activity, or any work that could not be done from home, to stop, shuttering factories, restaurants, entertainment, sports events, retail shops, personal services, and more.

More than 22 million jobs were lost in March and April 2020 as businesses closed their doors or reduced their operations, sending employees home on furlough or layoffs. Hunkered down at home with uncertain incomes and limited buying opportunities, consumer spending plummeted. As a result, gross domestic product (GDP), the broadest measure of the nation's economic output, plunged. Since then, significant improvements in consumer spending, GDP, and employment have occurred, greatly supported by the actions described below.

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), a fiscal relief bill passed by Congress and signed by the President in March 2020, injected approximately $3 trillion into the economy through direct payments to individuals and grants to small businesses that would keep employees on their payroll, fueling a historic bounce-back in economic activity.

To help our customers navigate through the pandemic situation, we offered and supplied Paycheck Protection Program (PPP) loans and short-term modifications to loan terms. PPP loans and loan modifications were made in accordance with guidance from banking regulatory authorities. These modifications did not result in loans being classified as troubled debt restructurings, potential problem loans or non-performing loans. More severely impacted industries in our loan portfolio included retail, hotel and restaurants. Nearly all modified loans have returned to original terms.

The Federal Reserve acted decisively, employing a wide arsenal of tools, including slashing its benchmark interest rate to near zero and ensuring credit availability to businesses, households, and municipal governments. The Federal Reserve’s efforts largely insulated the financial system from the problems in the economy, a significant difference from the financial crisis of 2007-2008. Purchases of Treasury and agency mortgage-backed securities totaling $120 billion each month by the Federal Reserve commenced shortly after the pandemic began. In November 2021, the Federal Reserve decided to taper its quantitative easing (QE), winding down its bond purchases with its final open market purchase conducted on March 9, 2022. Additionally, Federal fund rates, which have been at zero lower bound since the pandemic began, increased 12 basis points in March 2022. Financial markets are anticipating an aggressive increase in interest rates in 2022, with three to six hikes anticipated. Several factors prompting the Federal Reserve to begin normalizing policy include: the strengthening economy, the recent surge in inflation, higher inflation expectations, upward trajectory of wages, reduced pandemic concerns and the strong housing market. However, the military hostilities in Ukraine have now created uncertainty regarding the world economy and the path of market interest rates, including the aggressiveness of Federal Reserve interest rate increases.

The “American Rescue Plan,” an economic relief fiscal measure of approximately $1.9 trillion with an emphasis on vaccination, individual and small business relief, was enacted early in 2021. Additionally, many of the climate-related policies in the “Build Back Better” package may be passed into law later this year to be paid for with higher corporate taxes and tax enforcement.

The federal government posted a deficit of $2.8 trillion in the 2021 fiscal year and is expected to post a deficit of $1.2 trillion in the 2022 fiscal year. While Congress has not been focused on deficits during the pandemic, it will likely face pressure to address the mounting fiscal debt.

Employment

The national unemployment rate dropped from 3.8% in February 2022 to 3.6% in March 2022, or 6 million unemployed individuals, compared to February 2020, just prior to the beginning of the COVID-19 pandemic, at which time the unemployment rate was 3.5% and unemployed persons numbered 5.7 million. The U.S. economy added 431,000 jobs in March 2022 with overall job growth averaging 562,000 per month in the first quarter of 2022, the same as the average monthly gain for 2021. The labor market remains tighter than headline unemployment data would indicate as companies are still competing for qualified workers. Wages and salaries grew 4.5% in 2021.

Across industries, the economic recovery remains uneven. Employment in the financial activities, professional and business services, retail and transportation and warehousing sectors are now above pre-pandemic levels; however, leisure and entertainment, healthcare and manufacturing remain under February 2020 employment levels. One of the largest employment sectors in the country, leisure and hospitality, although showing job increases, remains negatively impacted by the loss of 1.5 million jobs, or 8.7% of the workforce, since February 2020. Most jobs in the leisure and hospitality industry cannot be performed remotely, with many businesses closed or experiencing a sharp reduction in business at the onset of the health and economic crises.

As of March 2022, the labor force participation rate (the share of working-age Americans employed or actively looking for a job) was 62.4% which remains below the February 2020 reported rate of 63.4%. The unemployment rate for the Midwest, where the Company conducts most of its business, has decreased from 5.2% in March 2021 to 3.5% in March 2022. Unemployment rates for March 2022 in the states where the Company has a branch or loan production offices were Arizona at 3.3%, Arkansas at 3.1%, Colorado at 3.7%, Georgia at 3.1%, Illinois at 4.7%, Iowa at 3.3%, Kansas at 2.5%, Minnesota at 2.5%, Missouri at 3.6%, Nebraska at 2.0%, Oklahoma at 2.7%, and Texas at 4.4%. Of the metropolitan areas in which the Company does business, most are below the national unemployment rate of 3.6% for March 2022. Chicago leads our markets with a higher unemployment rate of 4.5%, followed by St. Louis at 3.7% and Denver at 3.6% in March 2022.

Single Family Housing

New home sales in the United States dropped 8.6% in March 2022 when compared to February 2022, to a seasonally adjusted annual rate of 763,000 in March of 2022, according to U.S. Census Bureau and Department of Housing and Urban Development estimates.

The median sales price of new houses sold in March 2022 was $436,700, up from $359,600 a year earlier. The average sales price in March 2022 of $523,900 was up from $414,700 in March 2021. The inventory of new homes for sale, at an estimated 406,000 at the end of March 2022, would support a 6.4 months’ supply at the current sales rate, up from 4.2 months’ supply at the end of March 2021.

The housing market is beginning to feel the impact of sharply rising mortgage rates and higher inflation on purchasing power. With rising mortgage rates, cash sales made up a larger percentage of transactions, climbing to its highest share since 2014.

Total existing-home sales dipped 2.7% from February 2022 to a seasonally adjusted annual rate of 5.77 million in March 2022. Year-over-year, sales fell 4.5% (6.05 million in March 2021). There were 950,000 previously owned homes on the market in March 2022, up 11.8% from February and down 9.5% from one year ago (1.05 million). With slower demand, the inventory of unsold existing homes increased to 590,000 as of the end of March 2022, which would support 2 months at the monthly sales pace up from 1.7 months in February 2022 and down from 2.1 months in March 2021.

The median existing-home sales price as of March 2022 was $375,300, up 15% from $326,300 at March 2021 as prices rose in each region. This marks 121 consecutive months of year-over-year increases, the longest-running streak on record. Home prices have consistently moved upward as supply remains tight; however, if and when demand subsides, easy-profit gains and multiple offers can be expected to decline. Properties typically remained on the market for 17 days in March 2022, down from 18 days in February 2022 and 18 days in March 2021. 87% of homes sold in March 2022 were on the market for less than a month. Year-over-year, prices increased in every region of the United States, with the Midwest showing an increase of 10.4%, with median prices increasing from $245,500 in March 2021 to $271,000 in March 2022.

First-time buyers accounted for 30% of sales in March 2022, up from 29% of sales in February 2022 and down from 32% in March 2021.

According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage was 4.17% in March 2022, up from 3.76% in February 2022. The average commitment rate for all of 2021 was 2.96%, down from 3.11% for 2020.

Multi-Family Housing and Commercial Real Estate

There has been unprecedented demand for apartments, with the vacancy rate hitting historic lows at the end of 2021 and continuing into 2022. The overall lack of available housing, both single-family and rental apartment units, has pricing on a significant upward trajectory, resulting in a vacancy rate of 4.9% for the first quarter of 2022. Rents nationally rose 11% in 2021 with the nation absorbing 714,000 units in 2021, twice the annual average of the past five years. With demand and rent growth indicators surging, investors have shown high interest for apartment assets, creating a highly competitive acquisition environment and driving the average national cap rate to an all-time low.

Our market areas reflected the following apartment vacancy levels as of March 31, 2022: Springfield, Missouri at 2.9%, St. Louis at 6.9%, Kansas City at 6.1%, Minneapolis at 6.1%, Tulsa, Oklahoma at 6.1%, Dallas-Fort Worth at 6.1%, Chicago at 5.7%, Atlanta at 6.5%, Phoenix at 6.2%, and Denver at 6.6%. Three of our market areas, Dallas-Fort Worth, Phoenix and Atlanta, were in the top ten metropolitan areas for current construction and 12 month deliveries to market.

The national office market is showing early signs of a recovery, but the sector still has a long way to go before it reaches pre-pandemic levels of performance. Remote and hybrid work structures instituted early on in the pandemic appear here to stay, at least to an extent, and it is likely that office-using companies will continue to reassess their physical footprints as their leases roll over. Office-using employment has bounced back quicker than the average for all employment sectors, and more office jobs could lead to stronger office leasing. However, leasing volume is still below pre-pandemic norms, and the amount of sublet space on the market remains near record highs. Furthermore, the national office market is contending with a glut of newly vacated space and a still-robust supply pipeline. These trends, combined with the looming prospect of firms exploring more permanent remote and flexible work setups, may continue to place upward pressure on the national office vacancy rate in the near term. Rent growth is flat on a year-over-year basis, and it will remain difficult for office owners to push asking rents until leasing activity returns to pre-pandemic levels for an extended period of time. Despite a still uncertain near-term outlook, office sales volume rebounded in the second half of 2021.

As of March 31, 2022, national office vacancy rates remained about the same at 12.3%, compared to December 31, 2021, while our market areas reflected the following vacancy levels at March 31, 2022: Springfield, Missouri at 2.8%, St. Louis at 9.0%, Kansas City at 9.5%, Minneapolis at 10.0%, Tulsa, Oklahoma at 12.2%, Dallas-Fort Worth at 17.6%, Chicago at 15.3%, Atlanta at 14.1% and Denver at 14.4%.

The retail sector continued its positive momentum into first quarter of 2022, as consumers drove continued improvement in the sector. Retail sales have accelerated briskly since mid-2021, due to the significant increase in consumers’ disposable income resulting from pandemic-related government transfers and strong wage growth. With additional funds at their disposal, American consumers pushed brick and mortar retail sales to record levels in 2021. With sales sitting at record highs, some retailers have selectively turned back to expansion mode. While demand for retail space is on the rise, construction activity continues to fall. Just over 13 million square feet of retail space was delivered during the first quarter of 2022, 80% of which was pre-leased. Most recent construction activity has consisted of single-tenant build-to-suits or smaller ground floor spaces in mixed-use developments. Thanks to growing demand and minimal new supply, vacancy rates declined across most retail segments in the first quarter of 2022, with exceptions still including regional and super-regional malls. Rents increased at their fastest clip, 3.8%, in over a decade during the period from March 31, 2021 to March 31, 2022. Retail rent growth is forecast to accelerate over the coming quarters due to the combination of a strong retail sales environment and continued rising demand for space. Inflation expectations will weigh on the real rate of rental growth though, likely keeping it in line with or slightly below the average growth rate seen during the five years preceding the pandemic.

At March 31, 2022, national retail vacancy rates remained level at 4.5% while our market areas reflected the following vacancy levels: Springfield, Missouri at 3.3%, St. Louis at 6.0%, Kansas City at 5.0%, Minneapolis at 3.2%, Tulsa, Oklahoma at 3.5%, Dallas-Fort Worth at 4.9%, Chicago at 5.9%, Atlanta at 4.2%, Phoenix at 6.0% and Denver at 4.6%.

The U.S. industrial market is experiencing a record level of new logistics facilities deliveries from late 2021 through the first quarter of 2022. The U.S. has been in the midst of a historic boom in household spending on retail goods (both online and in store), all of which need to be stored in logistics properties across the country before reaching the end consumer. Record savings accumulated during the pandemic and the strongest wage growth in more than 20 years will likely remain as tailwinds for elevated consumer spending over the next several months; however, rising gas prices and inflation risk partially eroding consumers’ purchasing power, causing real goods spending to slow from current levels. Signals are emerging that a gradual slowing in leasing and absorption is approaching, which should cause rent growth to slow given the active construction pipeline. Amazon announced early in 2022 that it would be slowing growth in its distribution network from its recent breakneck pace.

At March 31, 2022, national industrial vacancy rates sat at a record low of 4.1% while our market areas reflected the following vacancy levels: Springfield, Missouri at 1.4%, St. Louis at 2.9%, Kansas City at 4.4%, Minneapolis at 3.5%, Tulsa, Oklahoma at 3.7%, Dallas-Fort Worth at 5.7%, Chicago at 4.7%, Atlanta at 4.0%, Phoenix at 4.6% and Denver at 5.2%.

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

COVID-19 Impact to Our Business and Response

Great Southern continues to monitor and respond to the effects of the COVID 19 pandemic. As always, the health, safety and well-being of our customers, associates and communities, while maintaining uninterrupted service, are the Company’s top priorities. Centers for Disease Control and Prevention (CDC) guidelines, as well as directives from federal, state and local officials, are being closely followed to make informed operational decisions, if necessary.

The Company continues to work diligently with its nearly 1,100 associates to enforce the most current health, hygiene and social distancing practices. To date, there have been no service disruptions or reductions in staffing.

As always, customers can conduct their banking business using our banking center network, online and mobile banking services, ATMs, Telephone Banking, and online account opening services. As health conditions in local markets dictate, Great Southern banking center lobbies are open following social distancing and health protocols. Great Southern continues to work with customers experiencing hardships caused by the pandemic. As a resource to customers, a COVID-19 information center continues to be available on the Company’s website, www.GreatSouthernBank.com. General information about the Company’s pandemic response, how to receive assistance, and how to avoid COVID-19 scams and fraud are included.

Impacts to Our Business Going Forward: The magnitude of the impact on the Company of the COVID-19 pandemic continues to evolve and will ultimately depend on the remaining length and severity of the economic downturn brought on by the pandemic. Some positive economic signs have occurred in 2021 and early 2022, such as lower unemployment rates, improving gross domestic product (“GDP”) levels and other measures of the economy and increased vaccination rates. Over the previous two years, the COVID-19 pandemic has impacted the Company’s business in one or more of the following ways, among others.

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Consistently low market interest rates for a significant period of time have had a negative impact on our variable and fixed rate loans, resulting in reduced net interest income

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Certain fees for deposit and loan products were waived or reduced for a period of time

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Non-interest expenses increased as we dealt with the effects of the COVID-19 pandemic, including cleaning costs, supplies, equipment and other items

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Banking center lobbies were closed at various times, and may close again in future periods if the pandemic situation worsens again

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Loan modifications occurred

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A contraction in economic activity reduced demand for our loans and for our other products and services

Current COVID-19 infection rates are low in our markets and the CDC has relaxed most restrictions that were previously in place. Our business is currently operating normally, similar to operations prior to the onset of the COVID-19 pandemic. We continue to monitor infection rates and other health and economic indicators to ensure we are prepared to respond to future challenges, should they arise.

Paycheck Protection Program Loans

Great Southern has actively participated in the PPP through the SBA. In the first round of the PPP, we originated approximately 1,600 PPP loans, totaling approximately $121 million. SBA forgiveness was approved and processed, and full repayment proceeds were received by us, for all of these PPP loans during 2021. In the second round of the PPP, we funded approximately 1,650 PPP loans, totaling approximately $58 million. As of March 31, 2022, full forgiveness proceeds have been received by us from the SBA for 1,608 of these PPP loans, totaling approximately $57 million.

Great Southern received fees from the SBA for originating PPP loans based on the amount of each loan. At March 31, 2022, remaining net deferred fees related to PPP loans totaled $88,000, and we expect these remaining net deferred fees will accrete to interest income during the second quarter of 2022. The fees, net of origination costs, are deferred in accordance with standard accounting practices and accreted to interest income on loans over the contractual life of each loan. In the three months ended March 31, 2022 and 2021, Great Southern recorded approximately $415,000 and $1.2 million, respectively, of net deferred fees in interest income on PPP loans.

General

The profitability of the Company and, more specifically, the profitability of its primary subsidiary, the Bank, depend primarily on net interest income, as well as provisions for credit losses and the level of non-interest income and non-interest expense. Net interest income is the difference between the interest income the Bank earns on its loans and investment 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 $75.7 million, or 1.4%, from $5.45 billion at December 31, 2021, to $5.37 billion at March 31, 2022. Details of the current period changes in total assets are provided in the “Comparison of Financial Condition at March 31, 2022 and December 31, 2021” section of this Quarterly Report on Form 10-Q.

Loans. Net outstanding loans increased $104.0 million, or 2.5%, from $4.01 billion at December 31, 2021, to $4.11 billion at March 31, 2022. The increase was primarily in other residential (multi-family) loans, commercial real estate loans and one- to four family residential loans. These increases were partially offset by a decrease in construction loans. As loan demand is affected by a variety of factors, including general economic conditions, and because of the competition we face and our focus on pricing discipline and credit quality, we cannot be assured that our loan growth will match or exceed the average level of growth achieved in prior years. The Company’s strategy continues to be focused on maintaining credit risk and interest rate risk at appropriate levels.

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

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 both March 31, 2022 and December 31, 2021, 0.3% of our owner occupied one-to four-family residential loans had loan-to-value ratios above 100% at origination. At both March 31, 2022 and December 31, 2021, an estimated 0.2% of total non-owner occupied one- to four-family residential loans had loan-to-value ratios above 100% at origination.

At March 31, 2022, TDRs totaled $3.7 million, or 0.1% of total loans, a decrease of $121,000 from $3.9 million, or 0.1% of total loans, at December 31, 2021. 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 TDRs occurring during the three months ended March 31, 2022, none were restructured into multiple new loans. For TDRs occurring during the year ended December 31, 2021, one loan totaling $45,000 was restructured into multiple new loans. For further information on TDRs, see Note 6 of the Notes to Consolidated Financial Statements contained in this report.

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.

The Company continues its preparation for discontinuation of use of interest rates such as LIBOR. LIBOR is a benchmark interest rate referenced in a variety of agreements used by the Company, but by far the most significant area impacted by LIBOR is related to commercial and residential mortgage loans. After 2021, certain LIBOR rates may no longer be published and it is expected to eventually be discontinued as a reference rate by June 2023. Other interest rates used globally could also be discontinued for similar reasons.

The Company has been regularly monitoring its portfolio of loans tied to LIBOR since 2019, with specific groups of loans identified. The Company implemented robust LIBOR fallback language for all commercial loan transactions beginning near the end of 2018, with such language utilized for all new originations and renewed/modified commercial loans since that time. The Company is particularly monitoring the remaining group of loans that were originated prior to the fourth quarter of 2018, and have not been renewed or modified since that time. At March 31, 2022, this represented approximately 47 commercial loans totaling approximately $122 million; however, only 26 of those loans, totaling $22 million, mature after June 2023 (the date upon which the LIBOR indices used by the Company are expected to no longer be available). The Company also has a portfolio of residential mortgage loans tied to LIBOR indices with standard index replacement language included (approximately $410 million at March 31, 2022), and that portfolio is being monitored for potential changes that may be facilitated by the mortgage industry. As described, the vast majority of the loan portfolio tied to LIBOR now includes robust LIBOR replacement language which identifies appropriate “trigger” events for the cessation of LIBOR and the steps that the Company will take upon the occurrence of one or more of those events, including adjustments to any rate margin to ensure that the replacement interest rate on the loan is substantially similar to the previous LIBOR-based rate.

Available-for-sale Securities. In the three months ended March 31, 2022, available-for-sale securities decreased $39.7 million, or 7.9%, from $501.0 million at December 31, 2021, to $461.4 million at March 31, 2022. The decrease was primarily due to $226.5 million in available-for-sale securities being transferred to held-to-maturity during the period and calls of municipal securities and normal monthly payments received related to the portfolio of U.S. Government agency mortgage-backed securities and collateralized mortgage obligations. This was partially offset by the purchase of U.S. Government agency fixed-rate single-family and multi-family mortgage-backed securities and collateralized mortgage obligations. The Company used excess liquid funds and loan repayments to fund this increase in investment securities. In determining securities that were elected to be transferred to the held-to-maturity category, the Company reviewed all of its investment securities purchased prior to 2022 and determined that certain of those securities, for various reasons, would likely be held to their maturity or full repayment prior to contractual maturity.

Held-to-maturity Securities. In the three months ended March 31, 2022, as noted above, available-for-sale securities of $226.5 million were transferred to held-to-maturity. This transfer included $220.2 million of mortgage-backed securities and collateralized mortgage obligations and $6.3 million in municipal 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, 2022, total deposit balances decreased $62.8 million, or 1.4%. Compared to December 31, 2021, transaction account balances remained flat at $3.59 billion at March 31, 2022, while retail certificates of deposit decreased $63.0 million, or 7.1%, to $830.7 million at March 31, 2022. Increases in transaction accounts were primarily a result of increases in various money market accounts and NOW deposit accounts, offset by decreases in non-interest-bearing accounts. Retail time deposits decreased due to a decrease in retail certificates generated through the banking center network and decreases in national time deposits initiated through internet channels. Time deposits initiated through internet channels experienced a planned decrease due to increases in overall liquidity levels and to reduce the Company’s cost of funds. Brokered deposits were $67.4 million at both March 31, 2022 and December 31, 2021.

Our deposit balances may fluctuate depending on customer preferences and our relative need for funding. We do not consider our retail certificates of deposit to be guaranteed long-term funding because customers can withdraw their funds at any time with minimal interest penalty. When loan demand trends upward, we can increase rates paid on deposits to attract more deposits and utilize brokered

deposits to 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. It also gives us greater flexibility in increasing or decreasing the duration of our funding. While we do not currently anticipate that our ability to access these sources will be reduced or eliminated in future periods, if this should happen, the limitation on our ability to fund additional loans could have a material adverse effect on our business, financial condition and results of operations.

Securities sold under reverse repurchase agreements with customers. Securities sold under reverse repurchase agreements with customers increased $10.9 million from $137.1 million at December 31, 2021 to $148.0 million at March 31, 2022. These balances fluctuate over time based on customer demand for this product.

Net Interest Income and Interest Rate Risk Management. Our net interest income may be affected positively or negatively by changes in market interest rates. A large portion of our loan portfolio is tied to one-month LIBOR, three-month LIBOR or the “prime rate” and adjusts immediately or shortly after the index rate adjusts (subject to the effect of contractual interest rate floors on some of the loans, which are discussed below). We monitor our sensitivity to interest rate changes on an ongoing basis (see “Item 3. Quantitative and Qualitative Disclosures About Market Risk”).

The current level and shape of the interest rate yield curve poses challenges for interest rate risk management. Prior to its increase of 0.25% on December 16, 2015, the FRB had last changed interest rates on December 16, 2008. This was the first rate increase since September 29, 2006. The FRB also implemented rate change increases of 0.25% on eight additional occasions beginning December 14, 2016 and through December 31, 2018, with the Federal Funds rate reaching as high as 2.50%. After December 2018, the FRB paused its rate increases and, in July, September and October 2019, implemented rate decreases of 0.25% on each of those occasions. At December 31, 2019, the Federal Funds rate stood at 1.75%. In response to the COVID-19 pandemic, the FRB decreased interest rates on two occasions in March 2020, a 0.50% decrease on March 3 and a 1.00% decrease on March 16. In March 2022, the FRB increased interest rates 0.25%. At March 31, 2022, the Federal Funds rate stood at 0.50%. Financial markets are anticipating an aggressive increase in interest rates in 2022, with up to 2.00% of cumulative rate hikes currently anticipated. A substantial portion of Great Southern’s loan portfolio ($1.31 billion at March 31, 2022) is tied to the one-month or three-month LIBOR index and will be subject to adjustment at least once within 90 days after March 31, 2022. Of these loans, $1.30 billion had interest rate floors. Great Southern also has a portfolio of loans ($613 million at March 31, 2022) tied to a “prime rate” of interest and will adjust immediately or within 90 days with changes to the “prime rate” of interest. Of these loans, $592 million had interest rate floors at various rates. At March 31, 2022, $800 million in LIBOR and “prime rate” loans were at their floor rate. If interest rates were to increase 50 basis points, approximately $460 million of these loans would move above their floor rate.

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 tied to the one-month or three-month LIBOR index or the “prime rate” index and will be subject to adjustment at least once within 90 days or loans which generally adjust immediately as the Federal Funds rate adjusts. Interest rate floors may at least partially mitigate the negative impact of interest rate decreases. Loans at their floor rates are, however, subject to the risk that borrowers will seek to refinance elsewhere at the lower market rate. Because the Federal Funds rate is again very 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, market interest rate increases would normally result in increased interest rates on our LIBOR-based and prime-based loans.

As of March 31, 2022, 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 are expected to 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 significantly affected either positively or negatively in the first twelve months following relatively minor changes in market interest rates because our portfolios are relatively well-matched in a twelve-month horizon. In a situation where market interest rates increase significantly in a short period of time, our net interest margin increase may be more pronounced in the very near term (first one to three months), due to fairly rapid increases in LIBOR interest rates and “prime” interest rates. In a situation where market interest rates decrease significantly in a short period of time, as they did in March 2020, our net interest margin decrease may be more pronounced in the very near term (first one to three months), due to fairly rapid decreases in LIBOR interest rates and “prime” interest rates. In the subsequent months we expect that the net interest margin would stabilize and begin to improve, as renewal interest rates on maturing time deposits are expected to decrease

compared to the current rates paid on those products. During 2020, we did experience some compression of our net interest margin percentage due to 2.25% of Federal Fund rate cuts during the nine month period of July 2019 through March 2020. Margin compression primarily resulted from changes in the asset mix, mainly the addition of lower-yielding assets and the issuance of subordinated notes during 2020 and the net interest margin remained lower than our historical average in 2021. LIBOR interest rates decreased significantly in 2020 and remained very low in 2021, putting pressure on loan yields, and strong pricing competition for loans and deposits remains in most of our markets. For further discussion of the processes used to manage our exposure to interest rate risk, see “Item 3. Quantitative and Qualitative Disclosures About Market Risk – How We Measure the Risks to Us Associated with Interest Rate Changes.”

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

Operating expenses consist primarily of salaries and employee benefits, occupancy-related expenses, expenses related to foreclosed assets, postage, FDIC deposit insurance, advertising and public relations, telephone, professional fees, office expenses and other general operating expenses. Details of the current period changes in non-interest income and non-interest expense are provided in the “Results of Operations and Comparison for the Three Months Ended March 31, 2022 and 2021” section of this report.

Effect of Federal Laws and Regulations

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

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

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

The rules refine the definitions of what constitutes regulatory capital and add a new regulatory capital element, common equity Tier 1 capital. The minimum capital ratios are (i) a common equity Tier 1 (“CET1”) risk-based capital ratio of 4.5%; (ii) a Tier 1 risk-based capital ratio of 6%; (iii) a total risk-based capital ratio of 8%; and (iv) a Tier 1 leverage ratio of 4%. In addition to the minimum capital ratios, the rules include a capital conservation buffer, under which a banking organization must have CET1 more than 2.5% above each of its minimum risk-based capital ratios in order to avoid restrictions on paying dividends, repurchasing shares, and paying certain discretionary bonuses. The capital conservation buffer requirement began phasing in on January 1, 2016 when a buffer greater than 0.625% of risk-weighted assets was required, which amount increased an equal amount each year until the buffer requirement of greater than 2.5% of risk-weighted assets became fully implemented on January 1, 2019.

Effective January 1, 2015, these rules also revised the prompt corrective action framework, which is designed to place restrictions on insured depository institutions if their capital levels show signs of weakness. Under the revised prompt corrective action requirements, insured depository institutions are required to meet the following in order to qualify as “well capitalized:” (i) a common equity Tier 1 risk-based capital ratio of at least 6.5%, (ii) a Tier 1 risk-based capital ratio of at least 8%, (iii) a total risk-based capital ratio of at least 10% and (iv) a Tier 1 leverage ratio of 5%, and must not be subject to an order, agreement or directive mandating a specific capital level.

Economic Growth Act. In May 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Economic Growth Act”), was enacted to modify or eliminate certain financial reform rules and regulations, including some implemented under the Dodd-

Frank Act. While the Economic Growth Act maintains most of the regulatory structure established by the Dodd-Frank Act, it amends certain aspects of the regulatory framework for small depository institutions with assets of less than $10 billion and for large banks with assets of more than $50 billion. Many of these amendments could result in meaningful regulatory changes.

The Economic Growth Act, among other matters, expands the definition of qualified mortgages which may be held by a financial institution and simplifies the regulatory capital rules for financial institutions and their holding companies with total consolidated assets of less than $10 billion by instructing the federal banking regulators to establish a single “Community Bank Leverage Ratio” (“CBLR”) of between 8 and 10 percent. Any qualifying depository institution or its holding company that exceeds the CBLR will be considered to have met generally applicable leverage and risk-based regulatory capital requirements and any qualifying depository institution that exceeds the new ratio will be considered “well-capitalized” under the prompt corrective action rules. Effective January 1, 2020, the CBLR was 9.0%. In April 2020, pursuant to the CARES Act, the federal bank regulatory agencies announced the issuance of two interim final rules, effective immediately, to provide temporary relief to community banking organizations. Under the interim final rules, the CBLR requirement was a minimum of 8.5% for calendar year 2021, and is 9% thereafter. The Company and the Bank have chosen to not utilize the new CBLR due to the Company’s size and complexity, including its commercial real estate and construction lending concentrations and significant off-balance sheet funding commitments.

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

Business Initiatives

Great Southern continues to monitor and respond to the effects of the COVID-19 pandemic. As always, the health, safety and well-being of our customers, associates and communities, while maintaining uninterrupted service, are the Company’s top priorities. Centers for Disease Control and Prevention (CDC) guidelines, as well as directives from federal, state and local officials, are being followed to make informed operational decisions, if necessary.

The Company’s banking center network continues to be optimized. During 2022, the high-performing banking center in Kimberling City, Missouri, will be replaced with a newly constructed building on the same property at 14309 Highway 13. Customers will be served in a temporary building on the property during construction. The new office is expected to open in the fourth quarter of 2022. Including this office, the Company operates three banking centers in the Branson Tri-Lakes area of southwest Missouri.

In February 2022, the Company opened a new commercial loan production office (LPO) in Phoenix, Arizona, which represents the seventh LPO in the Company’s franchise. A local and highly-experienced lender was hired to manage the office. The new LPO provides a wide variety of commercial lending services, including commercial real estate loans for new and existing properties and commercial construction loans. The Company expects to continue looking for opportunities to open additional LPOs in other markets during 2022.

The Company announced that its 2022 Annual Meeting of Stockholders, to be held at 10 a.m. Central Time on May 11, 2022, will be a virtual meeting over the internet and will not be held at a physical location. Stockholders will be able to attend the Annual Meeting via a live webcast. Holders of record of Great Southern Bancorp, Inc. common stock at the close of business on the record date, March 2, 2022, may vote during the live webcast of the Annual Meeting or by proxy. Please see the Company’s Notice of Annual Meeting and Proxy Statement available on the Company’s website, www.GreatSouthernBank.com, (click “About” then “Investor Relations”) for additional information about the Annual Meeting.

Comparison of Financial Condition at March 31, 2022 and December 31, 2021

During the three months ended March 31, 2022, the Company’s total assets decreased by $75.7 million to $5.37 billion. The decrease was primarily in cash equivalents, and was partially offset by an increase in loans and investment securities.

Cash and cash equivalents were $353.0 million at March 31, 2022, a decrease of $364.2 million, or 50.8%, from $717.3 million at December 31, 2021. Excess funds held at the Federal Reserve Bank at December 31, 2021 were primarily the result of increases in net loan repayments throughout 2021. In 2022, these excess funds were used to fund the purchase of new investment securities and to fund loan originations.

The Company's available-for-sale securities decreased $39.7 million, or 7.9%, compared to December 31, 2021. The decrease was primarily due to the transfer of $226.5 million in available-for-sale securities to held-to-maturity during the period and by calls of municipal securities and normal monthly payments received related to the portfolio of mortgage-backed securities and collateralized mortgage obligations. This was mostly offset by the purchase of U.S. Government agency fixed-rate single-family or multi-family

mortgage-backed securities and collateralized mortgage obligations. The Company used excess funds held at the Federal Reserve Bank and loan repayments to fund this increase in investment securities. The available-for-sale securities portfolio was 8.6% and 9.2% of total assets at March 31, 2022 and December 31, 2021, respectively.

The transfer of $226.5 million in available-for-sale securities to held-to-maturity included $220.2 million of mortgage-backed securities and collateralized mortgage obligations and $6.3 million in municipal securities. In determining securities that were elected to be transferred to the held-to-maturity category, the Company reviewed all of its investment securities purchased prior to 2022 and determined that certain of those securities, for various reasons, would likely be held to their maturity or full repayment prior to contractual maturity. The held-to-maturity securities portfolio was 4.2% of total assets at March 31, 2022.

Net loans increased $104.0 million from December 31, 2021, to $4.11 billion at March 31, 2022. This increase was primarily in other residential (multi-family) loans ($152 million increase), commercial real estate loans ($82 million increase) and one- to four-family residential loans ($51 million increase). These increases were partially offset by a decrease in construction loans ($181 million decrease). Loan origination volume in the three months ended March 31, 2022 was similar to loan origination volume that occurred in 2020 and 2021.

Total liabilities decreased $41.5 million, from $4.83 billion at December 31, 2021 to $4.79 billion at March 31, 2022. The decrease was primarily attributable to a reduction in total deposits, primarily time deposits. Time deposits initiated through internet channels experienced a planned decrease due to increases in overall liquidity levels and to reduce the Company’s cost of funds.

Total deposits decreased $62.8 million, or 1.4%, to $4.49 billion at March 31, 2022. Transaction account balances were flat at $3.59 billion at March 31, 2022, while retail certificates of deposit decreased $63.0 million compared to December 31, 2021, to $830.7 million at March 31, 2022. Changes in transaction account balances were primarily a result of increases in NOW deposit accounts and money market accounts, offset by decreases in IntraFi Network Reciprocal Deposits and non-interest-bearing checking accounts. Total interest-bearing checking accounts increased $33.8 million while demand deposit accounts decreased $33.5 million. Customer retail time deposits initiated through our banking center network decreased $15.4 million and time deposits initiated through our national internet network decreased $44.7 million. Customer deposits at March 31, 2022 and December 31, 2021 totaling $38.9 million and $41.7 million, respectively, were part of the IntraFi Network Deposits program, which allows customers to maintain balances in an insured manner that would otherwise exceed the FDIC deposit insurance limit. Brokered deposits were $67.4 million at both March 31, 2022 and December 31, 2021.

Securities sold under reverse repurchase agreements with customers increased $10.9 million from $137.1 million at December 31, 2021 to $148.0 million at March 31, 2022. These balances fluctuate over time based on customer demand for this product.

Total stockholders' equity decreased $34.2 million, from $616.8 million at December 31, 2021 to $582.6 million at March 31, 2022. Accumulated other comprehensive income decreased $24.1 million during the three months ended March 31, 2022, primarily due to decreases in the fair value of available-for-sale investment securities. Stockholders’ equity also decreased due to repurchases of the Company’s common stock totaling $25.3 million and dividends declared on common stock of $4.6 million. The Company recorded net income of $17.0 million for the three months ended March 31, 2022. In addition, stockholders’ equity increased $2.8 million due to stock option exercises.

Results of Operations and Comparison for the Three Months Ended March 31, 2022 and 2021

General

Net income was $17.0 million for the three months ended March 31, 2022 compared to $18.9 million for the three months ended March 31, 2021. This decrease of $1.9 million, or 10.0%, was primarily due to an increase in noninterest expense of $947,000, or 3.1%, a decrease in net interest income of $823,000, or 1.9%, a decrease in noninterest income of $560,000, or 5.8%, and a smaller negative provision for credit losses on loans and unfunded commitments of $181,000, or 48.4%, partially offset by a decrease in income tax expense of $630,000, or 12.6%.

Total Interest Income

Total interest income decreased $4.0 million, or 7.8%, during the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The decrease was due to a $4.6 million decrease in interest income on loans, partially offset by a $684,000 increase in interest income on investment securities and other interest-earning assets. Interest income on loans decreased for the three months ended March 31, 2022 compared to the same period in 2021, primarily due to lower average loan balances, combined with lower average rates of interest. Interest income from investment securities and other interest-earning assets increased during the three

months ended March 31, 2022 compared to the same period in 2021 primarily due to higher average balances of investment securities and other interest-earning assets, partially offset by lower average rates of interest on investment securities.

Interest Income – Loans

During the three months ended March 31, 2022 compared to the three months ended March 31, 2021, interest income on loans decreased $3.0 million as the result of lower average loan balances, which decreased from $4.41 billion during the three months ended March 31, 2021, to $4.13 billion during the three months ended March 31, 2022. The lower average balances were primarily due to higher loan repayments during 2021. Interest income on loans also decreased $1.7 million as a result of lower average interest rates on loans. The average yield on loans decreased from 4.39% during the three months ended March 31, 2021, to 4.23% during the three months ended March 31, 2022. This decrease was primarily due to decreased yields in most loan categories as some loans with higher rates refinanced or repaid as a result of the sale of the financed project. In addition, some new loans originated after March 31, 2021, had an average contractual interest rate that was less than the average contractual interest rate for the portfolio at the time.

Additionally, the Company’s net interest income included accretion of net deferred fees related to PPP loans originated in 2020 and 2021. The amount of net deferred fees recognized in interest income was $416,000 in the three months ended March 31, 2022 compared to $1.2 million in the three months ended March 31, 2021 and $1.6 million in the three months ended December 31, 2021. At March 31, 2022, remaining net deferred fees related to PPP loans was $88,000.

In October 2018, the Company entered into an interest rate swap transaction as part of its ongoing interest rate management strategies to hedge the risk of its floating rate loans. The notional amount of the swap was $400 million with a contractual termination date in October 2025. As previously disclosed by the Company, in March 2020, the Company and its swap counterparty mutually agreed to terminate the $400 million interest rate swap prior to its contractual maturity. The Company received a payment of $45.9 million from its swap counterparty as a result of this termination. This $45.9 million, less the accrued to date interest portion and net of deferred income taxes, is reflected in the Company’s stockholders’ equity as Accumulated Other Comprehensive Income and is being accreted to interest income on loans monthly through the original contractual termination date of October 6, 2025. This has the effect of reducing Accumulated Other Comprehensive Income and increasing Net Interest Income and Retained Earnings over the periods. The Company recorded interest income related to this terminated interest rate swap of $2.0 million in each of the three months ended March 31, 2022 and 2021. The Company currently expects to have a sufficient amount of eligible variable rate loans to continue to accrete this interest income ratably in future periods. If this expectation changes and the amount of eligible variable rate loans decreases significantly, the Company may be required to recognize this interest income more rapidly.

In February 2022, the Company entered into an interest rate swap transaction as part of its ongoing interest rate management strategies to hedge the risk of its floating rate loans. The notional amount of the swap is $300 million with an effective date of March 1, 2022 and a termination date of March 1, 2024. Under the terms of the swap, the Company will receive a fixed rate of interest of 1.6725% and will pay a floating rate of interest equal to one-month USD-LIBOR (or the equivalent replacement rate if USD-LIBOR rate is not available). The floating rate resets monthly and net settlements of interest due to/from the counterparty also occur monthly. The initial floating rate of interest was set at 0.2414%. To the extent that the fixed rate of interest continues to exceed one-month USD-LIBOR, the Company will receive net interest settlements, which will be recorded as loan interest income. If one-month USD-LIBOR exceeds the fixed rate of interest in future periods, the Company will be required to pay net settlements to the counterparty and will record those net payments as a reduction of interest income on loans. The Company recorded loan interest income related to this swap transaction of $370,000 in the three months ended March 31, 2022.

Interest Income – Investments and Other Interest-earning Assets

Interest income on investments increased $593,000 in the three months ended March 31, 2022 compared to the three months ended March 31, 2021. Interest income increased $770,000 as a result of an increase in average balances from $414.7 million during the three months ended March 31, 2021, to $534.0 million during the three months ended March 31, 2022. Average balances of securities increased primarily due to purchases of agency multi-family mortgage-backed securities which have a fixed rate of interest with expected lives of four to ten years. These purchased securities fit with the Company’s current asset/liability management strategies. Partially offsetting that increase, interest income decreased $177,000 as a result of lower average interest rates from 2.75% during the three months ended March 31, 2021, to 2.59% during the three month period ended March 31, 2022.

Interest income on other interest-earning assets increased $91,000 in the three months ended March 31, 2022 compared to the three months ended March 31, 2021. Interest income increased $80,000 as a result of higher average interest rates from 0.10% during the three months ended March 31, 2021, to 0.18% during the three month period ended March 31, 2022. Interest income increased $11,000 as a result of an increase in average balances from $419.4 million during the three months ended March 31, 2021, to $458.6 million during the three months ended March 31, 2022. The increase in the average interest rates was due to the increase in the rate

paid on funds held at the Federal Reserve Bank. This rate was increased in March 2022 in conjunction with the increase in the Federal Funds target interest rate.

Total Interest Expense

Total interest expense decreased $3.1 million, or 47.9%, during the three months ended March 31, 2022, when compared with the three months ended March 31, 2021, due to a decrease in interest expense on deposits of $2.0 million, or 48.5% and a decrease in interest expense on subordinated notes of $1.1 million, or 49.8%.

Interest Expense – Deposits

Interest expense on demand deposits decreased $512,000 due to average rates of interest that decreased from 0.22% in the three months ended March 31, 2021 to 0.13% in the three months ended March 31, 2022. Interest rates paid on demand deposits were significantly lower in the 2022 period due to significant reductions in the federal funds rate of interest and other market interest rates since 2020. Partially offsetting this decrease, interest expense on demand deposits increased $95,000, due to an increase in average balances from $2.19 billion during the three months ended March 31, 2021 to $2.38 billion during the three months ended March 31, 2022. The Company experienced increased balances in various types of money market accounts and certain types of NOW accounts.

Interest expense on time deposits decreased $892,000 as a result of a decrease in average rates of interest from 0.94% during the three months ended March 31, 2021, to 0.61% during the three months ended March 31, 2022. Interest expense on time deposits also decreased $740,000 due to a decrease in average balances of time deposits from $1.31 billion during the three months ended March 31, 2021 to $931.1 million in the three months ended March 31, 2022. A large portion of the Company’s certificate of deposit portfolio matures within six to twelve months and therefore reprices fairly quickly; this is consistent with the portfolio over the past several years. Older certificates of deposit that renewed or were replaced with new deposits generally resulted in the Company paying a lower rate of interest due to market interest rate decreases throughout 2021 with rates only beginning to increase minimally during the three months ended March 31, 2022 due to increases in the Federal Funds rate. The decrease in average balances of time deposits was a result of decreases in retail customer time deposits obtained through the banking center network and retail customer time deposits obtained through on-line channels. On-line channel deposits were actively reduced by the Company during 2021 and 2022 as other deposit sources increased.

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

FHLBank advances and overnight borrowings from the FHLBank were not utilized during the three months ended March 31, 2022 and 2021.

Interest expense on repurchase agreements increased $1,000 during the three months ended March 31, 2022 when compared to the three months ended March 31, 2021. The average rate of interest was 0.03% for both the three months ended March 31, 2022 and the three months ended March 31, 2021. The average balance of repurchase agreements decreased $16.2 million from $144.5 million in the three months ended March 31, 2022 to $128.3 million in the three months ended March 31, 2022, which was due to changes in customers’ need for this product, which can fluctuate.

Interest expense on short-term borrowings and other interest-bearing liabilities increased $1,000 during the three months ended March 31, 2022 when compared to the three months ended March 31, 2021. The average rate of interest was 0.08% for the three months ended March 31, 2022, compared to 0.00% for the three months ended March 31, 2021. The average balance of short-term borrowings and other interest-bearing liabilities increased $1.9 million from $1.7 million in the three months ended March 31, 2021 to $3.6 million in the three months ended March 31, 2022, which was primarily due to cash collateral provided to the Company from one of its derivative counterparties to satisfy collateral pledging requirements.

During the three months ended March 31, 2022, compared to the three months ended March 31, 2021, interest expense on subordinated debentures issued to capital trusts increased $5,000 due to higher average interest rates. The average interest rate was 1.86% in the three months ended March 31, 2022 compared to 1.78% in the three months ended March 31, 2021. The subordinated debentures are variable-rate debentures which bear interest at an average rate of three-month LIBOR plus 1.60%, adjusting quarterly, which was 1.92% at March 31, 2022. There was no change in the average balance of the subordinated debentures between the 2021 and 2022 periods.

In August 2016, the Company issued $75.0 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. In June 2020, the Company issued $75.0 million of 5.50% fixed-to-floating rate subordinated notes due June 15, 2030. The notes were sold at par, resulting in net proceeds, after underwriting discounts and commissions and other issuance costs, of approximately $73.5 million. In both cases, these issuance costs are amortized over the expected life of the notes, which is five years from the issuance date, impacting the overall interest expense on the notes. On August 15, 2021, the Company completed the redemption of $75.0 million aggregate principal amount of its 5.25% subordinated notes due August 15, 2026. The notes were redeemed for cash by the Company at 100% of their principal amount, plus accrued and unpaid interest. During the three months ended March 31, 2022, compared to the three months ended March 31, 2021, interest expense on subordinated notes decreased $1.1 million due to lower average balances during the three months ended March 31, 2022 resulting from the redemption of the 5.25% subordinated notes due August 15, 2026. The average balance of subordinated notes was $74.0 million in the three months ended March 31, 2022 compared to $148.5 million in the three months ended March 31, 2021. Interest expense on subordinated notes increased $18,000 due to slightly higher weighted average interest rates. The average interest rate was 6.06% in the three months ended March 31, 2022 compared to 6.01% in the three months ended March 31, 2021.

Net Interest Income

Net interest income for the three months ended March 31, 2022 decreased $823,000 to $43.3 million compared to $44.1 million for the three months ended March 31, 2021. Net interest margin was 3.43% in the three months ended March 31, 2022, compared to 3.41% in the three months ended March 31, 2021, an increase of two basis points, or 0.6%. In the 2021 period compared to the 2022 period, the Company recorded a higher amount of interest income related to net deferred fees on PPP loans.

The Company's overall average interest rate spread increased eight basis points, or 2.5%, from 3.23% during the three months ended March 31, 2021 to 3.31% during the three months ended March 31, 2022. The increase was due to a 30 basis point decrease in the weighted average rate paid on interest-bearing liabilities, partially offset by a 22 basis point decrease in the weighted average yield on interest-earning assets. In comparing the two periods, the yield on loans decreased 16 basis points, the yield on investment securities decreased 16 basis points and the yield on other interest-earning assets increased eight basis points. The rate paid on deposits decreased 22 basis points, the rate paid on subordinated debentures issued to capital trusts increased eight basis points, and the rate paid on subordinated notes increased five basis points.

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

Provision for and Allowance for Credit Losses

The Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, effective January 1, 2021. The CECL methodology replaces the incurred loss methodology with a lifetime “expected credit loss” measurement objective for loans, held-to-maturity debt securities and other receivables measured at amortized cost at the time the financial asset is originated or acquired. This standard requires the consideration of historical loss experience and current conditions adjusted for reasonable and supportable economic forecasts.

Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in the national unemployment rate, commercial real estate price index, housing price index and national retail sales index.

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

During the three months ended March 31, 2022, the Company did not record a provision expense on its portfolio of outstanding loans, compared to a $300,000 provision expense recorded for the three months ended March 31, 2021. In the three months ended March 31, 2022 and 2021, the Company experienced net recoveries of $43,000 and $64,000, respectively. The negative provision for losses on

unfunded commitments for the three months ended March 31, 2022 was $193,000 compared to a negative provision of $674,000 for the three months ended March 31, 2021. The level and mix of unfunded commitments resulted in a decrease in the required reserve for such potential losses. General market conditions and unique circumstances related to specific industries and individual projects contributed to the level of provisions and charge-offs. Collateral and repayment evaluations of all assets categorized as potential problem loans, non-performing loans or foreclosed assets were completed with corresponding charge-offs or reserve allocations made as appropriate.

All FDIC-assisted 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 have been 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 review of financial information, collateral valuations and customer interaction to determine if additional reserves are warranted.

The Bank’s allowance for credit losses as a percentage of total loans was 1.46% and 1.49% at March 31, 2022 and December 31, 2021, respectively. Management considers the allowance for credit losses adequate to cover losses inherent in the Bank’s loan portfolio at March 31, 2022, based on recent reviews of the Bank’s loan portfolio and current economic conditions. If challenging economic conditions were to last longer than anticipated or deteriorate further or management’s assessment of the loan portfolio were to change, additional loan loss provisions could be required, thereby adversely affecting the Company’s future results of operations and financial condition.

Non-performing Assets

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

At March 31, 2022, non-performing assets were $5.2 million, a decrease of $821,000 from $6.0 million at December 31, 2021. Non-performing assets as a percentage of total assets were 0.10% at March 31, 2022, compared to 0.11% at December 31, 2021.

Compared to December 31, 2021, non-performing loans decreased $454,000, to $5.0 million at March 31, 2022, and foreclosed and repossessed assets decreased $367,000, to $221,000 at March 31, 2022. Non-performing one- to four-family residential loans comprised $2.0 million, or 40.3%, of the total non-performing loans at March 31, 2022, a decrease of $212,000 from December 31, 2021. Non-performing commercial real estate loans comprised $1.8 million, or 35.7%, of the total non-performing loans at March 31, 2022, a decrease of $233,000 from December 31, 2021. Non-performing consumer loans comprised $724,000, or 14.6%, of the total non-performing loans at March 31, 2022, a decrease of $9,000 from December 31, 2021. Non-performing construction and land development loans comprised $468,000, or 9.4%, of the total non-performing loans at March 31, 2022, unchanged from December 31, 2021.

Non-performing Loans. Activity in the non-performing loans category during the three months ended March 31, 2022 was as follows:


							Transfers to		Transfers to
	Beginning		Additions		Removed		Potential		Foreclosed						Ending
	Balance,		to Non-		from Non-		Problem		Assets and		Charge-				Balance,
	January 1		Performing		Performing		Loans		Repossessions		Offs		Payments		March 31

	(In Thousands)
One- to four-family construction	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Subdivision construction		—		—		—		—		—		—		—		—
Land development		468		—		—		—		—		—		—		468
Commercial construction		—		—		—		—		—		—		—		—
One- to four-family residential		2,216		—		—		(5)		—		(36)		(171)		2,004
Other residential		—		—		—		—		—		—		—		—
Commercial real estate		2,006		—		—		—		—		—		(233)		1,773
Commercial business		—		—		—		—		—		—		—		—
Consumer		733		32		—		(4)		—		(7)		(30)		724
Total non-performing loans	$	5,423	$	32	$	—	$	(9)	$	—	$	(43)	$	(434)	$	4,969

FDIC-assisted acquired loans included above	$	1,736	$	—	$	—	$	—	$	—	$	—	$	(84)	$	1,652

At March 31, 2022, the non-performing one- to four-family residential category included 34 loans, none of which were added during the three months ended March 31, 2022. The largest relationship in the category totaled $322,000, or 16.1% of the total category. The non-performing commercial real estate category includes two loans, neither of which were added during the three months ended March 31, 2022. The largest relationship in the category, which totaled $1.5 million, or 86.1% of the total category, was transferred from potential problems during the fourth quarter of 2021, and is collateralized by a mixed use commercial retail building. The non-performing land development category consisted of one loan added during the first quarter of 2021, which totaled $468,000 and is collateralized by unimproved zoned vacant ground in southern Illinois. The non-performing consumer category included 30 loans, four of which were added during the three months ended March 31, 2022.

Potential Problem Loans. Compared to December 31, 2021, potential problem loans decreased $117,000, or 5.9%, to $1.9 million at March 31, 2022. Potential problem loans are loans which management has identified through routine internal review procedures as having possible credit problems that may cause the borrowers difficulty in complying with the current repayment terms. These loans are not reflected in non-performing assets.

Activity in the potential problem loans categories during the three months ended March 31, 2022, was as follows:


					Removed				Transfers to
	Beginning		Additions		from		Transfers to		Foreclosed						Ending
	Balance,		to Potential		Potential		Non-		Assets and		Charge-				Balance,
	January 1		Problem		Problem		Performing		Repossessions		Offs		Payments		March 31

	(In Thousands)
One- to four-family construction	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Subdivision construction		15		—		—		—		—		—		(3)		12
Land development		—		—		—		—		—		—		—		—
Commercial construction		—		—		—		—		—		—		—		—
One- to four-family residential		1,432		5		—		—		—		—		(55)		1,382
Other residential		—		—		—		—		—		—		—		—
Commercial real estate		210		—		—		—		—		—		(5)		205
Commercial business		—		—		—		—		—		—		—		—
Consumer		323		12		—		—		(14)		(9)		(48)		264
Total potential problem loans	$	1,980	$	17	$	—	$	—	$	(14)	$	(9)	$	(111)	$	1,863

FDIC-assisted acquired loans included above	$	1,004	$	—	$	—	$	—	$	—	$	—	$	(17)	$	987

At March 31, 2022, the one- to four-family residential category of potential problem loans included 25 loans, one of which was added during the three months ended March 31, 2022. The largest relationship in this category totaled $168,000, or 12.2% of the total

category. The commercial real estate category of potential problem loans included one loan, which was added in a previous period. The consumer category of potential problem loans included 23 loans, four of which were added during the three months ended March 31, 2022.

Other Real Estate Owned and Repossessions. Of the total $1.7 million of other real estate owned and repossessions at March 31, 2022, $1.5 million represents properties which were not acquired through foreclosure.

Activity in other real estate owned and repossessions during the three months ended March 31, 2022, was as follows:


	Beginning										Ending
	Balance,						Capitalized		Write-		Balance,
	January 1		Additions		Sales		Costs		Downs		March 31

	(In Thousands)
One- to four-family construction	$	—	$	—	$	—	$	—	$	—	$	—
Subdivision construction		—		—		—		—		—		—
Land development		315		—		(300)		—		(15)		—
Commercial construction		—		—		—		—		—		—
One- to four-family residential		183		—		—		—		—		183
Other residential		—		—		—		—		—		—
Commercial real estate		—		—		—		—		—		—
Commercial business		—		—		—		—		—		—
Consumer		90		78		(130)		—		—		38
Total foreclosed assets and repossessions	$	588	$	78	$	(430)	$	—	$	(15)	$	221

FDIC-assisted acquired assets included above	$	498	$	—	$	(300)	$	—	$	(15)	$	183

At March 31, 2022, the one- to four-family residential category of foreclosed assets consisted of two properties (both of which were FDIC-assisted acquired assets). The land development category of foreclosed assets previously consisted of one property in central Iowa (this was an FDIC-assisted acquired asset) which was sold during the three months ended March 31, 2022. The additions and sales in the consumer category were due to the volume of repossessions of automobiles, which generally are subject to a shorter repossession process.

Loans Classified “Watch”

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.” 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. In the three months ended March 31, 2022, loans classified as “Watch” increased $33,000, from $30.7 million at December 31, 2021 to $30.8 million at March 31, 2022. See Note 6 for further discussion of the Company’s loan grading system.

Non-interest Income

For the three months ended March 31, 2022, non-interest income decreased $560,000 to $9.2 million when compared to the three months ended March 31, 2021, primarily as a result of the following items:

Net gains on loan sales: Net gains on loan sales decreased $1.6 million compared to the prior year period. The decrease was due to a decrease in originations of fixed-rate single-family mortgage loans during the 2022 period compared to the 2021 period. Fixed rate single-family mortgage loans originated are generally subsequently sold in the secondary market. These loan originations increased substantially when market interest rates decreased to historically low levels in 2020 and 2021. As a result of the significant volume of refinance activity in 2020 and 2021, and as market interest rates have moved higher in the first quarter of 2022, mortgage refinance volume has decreased and loan originations and related gains on sales of these loans have decreased substantially.

Point-of-sale and ATM fees: Point-of-sale and ATM fees increased $606,000 compared to the prior year period. This increase was almost entirely due to increased customer debit card transactions in the 2022 period compared to the 2021 period. In the latter half of 2021 and in the three months ended March 31, 2022, debit card usage by customers rebounded and was back to normal levels, and in many cases, increased levels of activity.

Other income: Other income increased $255,000 compared to the prior year period. In the 2022 period, the Company recorded a one-time bonus of $500,000 from its card processor as a result of achieving certain benchmarks related to debit card activity.

Non-interest Expense

For the three months ended March 31, 2022, non-interest expense increased $947,000 to $31.3 million when compared to the three months ended March 31, 2021, primarily as a result of the following item:

Salaries and employee benefits: Salaries and employee benefits increased $960,000 from the prior year period. A significant amount of this increase related to normal annual merit increases in various lending and operations areas. In 2022, many of these increases were larger than in previous years due to the current employment environment. In addition, the new Phoenix loan production office was opened in the first quarter of 2022. Lastly, certain loan origination compensation costs were deferred under accounting standards in the 2021 period that related primarily to the origination of PPP loans; therefore, more costs were deferred in the 2021 period versus the 2022 period.

Other expense categories experienced smaller changes compared to the prior year period, including a $186,000 increase in travel and entertainment expenses as there was very little in-person activity in the 2021 period due to COVID-19 restrictions; a $120,000 increase in professional fees related to the swap transaction completed in 2022; a $131,000 decrease in amortization of deposit intangibles due to the completion of the amortization for the 2014 acquisitions; and a $105,000 decrease in expenses on other real estate owned and repossessions due to fewer foreclosed properties and repossessed autos in the 2022 period.

The Company’s efficiency ratio for the three months ended March 31, 2022, was 59.62% compared to 56.33% for the same period in 2021. In the three-month period ended March 31, 2022, the higher efficiency ratio was primarily due to an increase in non-interest expense. The Company’s ratio of non-interest expense to average assets was 2.34% and 2.22% for the three months ended March 31, 2022 and 2021, respectively. Average assets for the three months ended March 31, 2022, decreased $121.8 million, or 2.2%, from the three months ended March 31, 2021, primarily due to a decrease in average net loans receivable, partially offset by increases in average investment securities and interest bearing cash equivalents.

Provision for Income Taxes

For the three months ended March 31, 2022 and 2021, the Company's effective tax rate was 20.5% and 21.0%, respectively. These effective rates were at or below the statutory federal tax rate of 21%, 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. The Company’s effective tax rate may fluctuate in future periods as it is impacted by the level and timing of the Company’s utilization of tax credits, the level of tax-exempt investments and loans, the amount of taxable income in various state jurisdictions and the overall level of pre-tax income. State tax expense estimates evolved throughout 2021 as taxable income and apportionment between states were analyzed. The Company's effective income tax rate is currently generally expected to remain near the statutory federal tax rate due primarily to the factors noted above. The Company currently expects its effective tax rate (combined federal and state) will be approximately 20.5% to 21.5% in future periods.

Average Balances, Interest Rates and Yields

The following tables present, for the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. Average balances of loans receivable include the average balances of 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. Net fees included in interest income were $1.7 million and $2.5 million for the three months ended March 31, 2022 and 2021, respectively. Tax-exempt income was not calculated on a tax equivalent basis. The table does not reflect any effect of income taxes.


	March 31,		Three Months Ended							Three Months Ended
	2022		March 31, 2022							March 31, 2021
	Yield/		Average					Yield/		Average					Yield/
	Rate		Balance			Interest		Rate		Balance			Interest		Rate

	(Dollars in Thousands)
Interest-earning assets:
Loans receivable:
One- to four-family residential	3.21	%	$	701,330		$	6,041	3.49	%	$	664,562		$	6,516	3.98	%
Other residential	4.14			759,622			8,417	4.49			999,094			10,927	4.44
Commercial real estate	4.07			1,489,762			15,346	4.18			1,562,689			16,584	4.30
Construction	4.19			668,220			7,529	4.57			604,382			6,731	4.52
Commercial business	3.95			289,230			3,326	4.66			323,429			3,887	4.87
Other loans	4.57			204,510			2,244	4.45			237,499			2,891	4.94
Industrial revenue bonds(1)	4.47			13,983			162	4.69			14,924			173	4.70

Total loans receivable	4.13			4,126,657			43,065	4.23			4,406,579			47,709	4.39

Investment securities(1)	2.54			533,976			3,410	2.59			414,696			2,817	2.75
Interest-earning deposits in other banks	0.39			458,643			198	0.18			419,426			107	0.10

Total interest-earning assets	3.73			5,119,276			46,673	3.70			5,240,701			50,633	3.92
Non-interest-earning assets:
Cash and cash equivalents				90,586							94,210
Other non-earning assets				136,701							133,443
Total assets			$	5,346,563						$	5,468,354

Interest-bearing liabilities:
Interest-bearing demand and savings	0.12		$	2,375,943			777	0.13		$	2,188,978			1,194	0.22
Time deposits	0.58			931,085			1,396	0.61			1,312,089			3,028	0.94
Total deposits	0.24			3,307,028			2,173	0.27			3,501,067			4,222	0.49
Securities sold under reverse repurchase agreements	0.03			128,264			10	0.03			144,487			9	0.03
Short-term borrowings, overnight FHLBank borrowings and other interest-bearing liabilities	0.33			3,628			1	0.08			1,661			—	—
Subordinated debentures issued to capital trusts	1.92			25,774			118	1.86			25,774			113	1.78
Subordinated notes	5.97			74,019			1,105	6.06			148,514			2,200	6.01

Total interest-bearing liabilities	0.36			3,538,713			3,407	0.39			3,821,503			6,544	0.69
Non-interest-bearing liabilities:
Demand deposits				1,160,013							983,120
Other liabilities				37,907							43,890
Total liabilities				4,736,633							4,848,513
Stockholders’ equity				609,930							619,841
Total liabilities and stockholders’ equity			$	5,346,563						$	5,468,354

Net interest income:
Interest rate spread	3.37	%				$	43,266	3.31	%				$	44,089	3.23	%
Net interest margin*								3.43	%						3.41	%
Average interest-earning assets to average interest- bearing liabilities				144.7	%						137.1	%

* 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 $37.2 million and $45.2 million for the three months ended March 31, 2022 and 2021, respectively. In addition, average tax-exempt loans and industrial revenue bonds were $16.9 million and $18.7 million for the three months ended March 31, 2022 and 2021, respectively. Interest

income on tax-exempt assets included in this table was $459,000 and $419,000 for the three months ended March 31, 2022 and 2021, respectively. Interest income net of disallowed interest expense related to tax-exempt assets was $452,000 and $403,000 for the three months ended March 31, 2022 and 2021, respectively.

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,
	2022 vs. 2021
	Increase (Decrease)				Total
	Due to				Increase
	Rate		Volume		(Decrease)

	(Dollars in Thousands)
Interest-earning assets:
Loans receivable	$	(1,683)	$	(2,961)	$	(4,644)
Investment securities		(177)		770		593
Interest-earning deposits in other banks		80		11		91
Total interest-earning assets		(1,780)		(2,180)		(3,960)
Interest-bearing liabilities:
Demand deposits		(512)		95		(417)
Time deposits		(892)		(740)		(1,632)
Total deposits		(1,404)		(645)		(2,049)
Securities sold under reverse repurchase agreements		1		—		1
Short-term borrowings, overnight FHLBank borrowings and other interest-bearing liabilities		1		—		1
Subordinated debentures issued to capital trust		5		—		5
Subordinated notes		18		(1,113)		(1,095)
Total interest-bearing liabilities		(1,379)		(1,758)		(3,137)
Net interest income	$	(401)	$	(422)	$	(823)

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 borrowers’ credit needs. At March

31, 2022, the Company had commitments of approximately $271.1 million to fund loan originations, $1.55 billion of unused lines of credit and unadvanced loans, and $11.9 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,		December 31,		December 31,		December 31,		December 31,
	2022		2021		2020		2019		2018
Closed non-construction loans with unused available lines
Secured by real estate (one- to four-family)	$	185,101	$	175,682	$	164,480	$	155,831	$	150,948
Secured by real estate (not one- to four-family)		—		23,752		22,273		19,512		11,063
Not secured by real estate - commercial business		89,252		91,786		77,411		83,782		87,480

Closed construction loans with unused available lines
Secured by real estate (one-to four-family)		75,214		74,501		42,162		48,213		37,162
Secured by real estate (not one-to four-family)		1,089,844		1,092,029		823,106		798,810		906,006

Loan commitments not closed
Secured by real estate (one-to four-family)		109,472		53,529		85,917		69,295		24,253
Secured by real estate (not one-to four-family)		212,264		146,826		45,860		92,434		104,871
Not secured by real estate - commercial business		8,223		12,920		699		—		405

	$	1,769,370	$	1,671,025	$	1,261,908	$	1,267,877	$	1,322,188

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, 2022 and December 31, 2021, the Company had these available secured lines and on-balance sheet liquidity:


	March 31, 2022		December 31, 2021
Federal Home Loan Bank line	$	844.5 million	$	756.5 million
Federal Reserve Bank line	$	357.2 million	$	352.4 million
Cash and cash equivalents	$	353.0 million	$	717.3 million
Unpledged securities – Available-for-sale	$	404.3 million	$	406.8 million
Unpledged securities – Held-to-maturity	$	92.7 million	$	—

Statements of Cash Flows. During the three months ended March 31, 2022 and 2021, the Company had positive cash flows from operating activities and negative cash flows from investing activities. The Company had negative cash flows from financing activities during the three months ended March 31, 2022 and positive cash flows from financing activities during the three months ended March 31, 2021.

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 credit losses, depreciation and amortization, realized gains on sales of loans 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 $31.4 million and $24.5 million during the three months ended March 31, 2022 and 2021, respectively.

During the three months ended March 31, 2022 and 2021, investing activities used cash of $318.4 million and $55.9 million, respectively. Investing activities in the 2022 period used cash primarily due to the purchase of investment securities, the purchases of loans and the net origination of loans, partially offset by payments received on investment securities. Investing activities in the 2021 period used cash primarily due to the purchase of investment securities and the purchases of loans, partially offset by payments received on investment securities and the net repayments of loans.

Changes in cash flows from financing activities during the periods covered by the Statements of Cash Flows were due to changes in deposits after interest credited and changes in short-term borrowings, as well as advances from borrowers for taxes and insurance, dividend payments to stockholders, repurchases of the Company’s common stock and the exercise of common stock options. Financing activities used cash of $77.2 million during the three months ended March 31, 2022 and provided cash of $80.2 million during the three months ended March 31, 2021. In the 2022 three-month period, financing activities used cash primarily as a result of decreases in time deposits, dividends paid to stockholders and the repurchase of the Company’s common stock, partially offset by net increases in short-term borrowings. In the 2021 three-month period, financing activities provided cash primarily as a result of net increases in checking account balances, partially offset by decreases in time deposits, decreases in short-term borrowings, dividends paid to stockholders and the purchase of the Company’s common stock.

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, 2022, the Company's total stockholders' equity and common stockholders’ equity were each $582.6 million, or 10.8% of total assets, equivalent to a book value of $45.65 per common share. As of December 31, 2021, total stockholders’ equity and common stockholders’ equity were each $616.8 million, or 11.3% of total assets, equivalent to a book value of $46.98 per common share. At March 31, 2022, the Company’s tangible common equity to tangible assets ratio was 10.7%, compared to 11.2% at December 31, 2021 (See Non-GAAP Financial Measures below).

Included in stockholders’ equity at March 31, 2022 and December 31, 2021, were unrealized gains (losses) (net of taxes) on the Company’s available-for-sale investment securities totaling $(11.1 million) and $9.1 million, respectively. This decrease in unrealized gains primarily resulted from rising market interest rates, which decreased the fair value of investment securities. Also included in stockholders’ equity at March 31, 2022, were unrealized gains (net of taxes) on the Company’s held-to-maturity investment securities totaling $759,000. Approximately $227 million of investment securities which were previously included in available-for-sale were transferred to held-to-maturity during the first quarter of 2022.

In addition, included in stockholders’ equity at March 31, 2022, were realized gains (net of taxes) on the Company’s terminated cash flow hedge (interest rate swap), totaling $22.1 million. This amount, plus associated deferred taxes, is expected to be accreted to interest income over the remaining term of the original interest rate swap contract, which was to end in October 2025. At March 31, 2022, the remaining pre-tax amount to be recorded in interest income was $28.6 million. The net effect on total stockholders’ equity over time will be no impact as the reduction of this realized gain will be offset by an increase in retained earnings (as the interest income flows through pre-tax income).

Also included in stockholders’ equity at March 31, 2022, was an unrealized loss (net of taxes) on the Company’s outstanding cash flow hedge (interest rate swap) totaling $3.1 million. Anticipated higher market interest rates have caused the fair value of this interest rate swap to decrease.

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, 2022, the Bank's common equity Tier 1 capital ratio was 13.3%, its Tier 1 capital ratio was 13.3%, its total capital ratio was 14.6% and its Tier 1 leverage ratio was 12.0%. As a result, as of March 31, 2022, the Bank was well capitalized, with capital ratios in excess of those required to qualify as such. On December 31, 2021, the Bank's common equity Tier 1 capital ratio was 14.1%, its Tier 1 capital ratio was 14.1%, its total capital ratio was 15.4% and its Tier 1 leverage ratio was 11.9%. As a result, as of December 31, 2021, 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, 2022, the Company's common equity Tier 1 capital ratio was 12.0%, its Tier 1 capital ratio was 12.5%, its total capital ratio was 15.3% and its Tier 1 leverage ratio was 11.2%. 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, 2022, the Company was considered well capitalized, with capital ratios in excess of those required to qualify as such. On December 31, 2021, the Company's common equity Tier 1 capital ratio was 12.9%, its Tier 1 capital ratio was 13.4%, its total capital ratio was 16.3% and its

Tier 1 leverage ratio was 11.3%. As of December 31, 2021, 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 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. At March 31, 2022, the Company and the Bank both had additional common equity Tier 1 capital in excess of the buffer amount.

On August 15, 2021, the Company completed the redemption, at par, of all $75.0 million aggregate principal amount of its 5.25% subordinated notes due August 15, 2026. The Company utilized cash on hand for the redemption payment. The annual combined interest expense and amortization of deferred issuance costs on these subordinated notes was approximately $4.3 million. These subordinated notes were included as capital in the Company’s calculation of its total capital ratio.

Dividends. During the three months ended March 31, 2022, the Company declared a common stock cash dividend of $0.36 per share, or 28% of net income per diluted common share for that three month period, and paid a common stock cash dividend of $0.36 per share (which was declared in December 2021). During the three months ended March 31, 2021, the Company declared a common stock cash dividend of $0.34 per share, or 25% of net income per diluted common share for that three month period, and paid a common stock cash dividend of $0.34 per share (which was declared in December 2020). The Board of Directors meets regularly to consider the level and the timing of dividend payments. The $0.36 per share dividend declared but unpaid as of March 31, 2022, was paid to stockholders in April 2022.

Common Stock Repurchases and Issuances. The Company has been in various buy-back programs since May 1990. During the three months ended March 31, 2022, the Company repurchased 419,215 shares of its common stock at an average price of $60.40 per share and issued 51,694 shares of common stock at an average price of $47.49 per share to cover stock option exercises. During the three months ended March 31, 2021, the Company repurchased 74,865 shares of its common stock at an average price of $50.50 per share and issued 15,904 shares of common stock at an average price of $39.09 per share to cover stock option exercises.

On January 19, 2022, the Company's Board of Directors authorized management to purchase up to one million shares of the Company's outstanding common stock, under a program of open market purchases or privately negotiated transactions. This program does not have an expiration date. The authorization of this program became effective upon completion of the previous repurchase program authorized in October 2020. As of May 3, 2022, a total of approximately 700,000 shares were available in the Company’s stock repurchase authorization.

Management has historically utilized stock buy-back programs from time to time as long as management believed that repurchasing the Company’s common stock would contribute to the overall growth of shareholder value. The number of shares 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 typically include the number of shares available in the market from sellers at any given time, the market price of the stock 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 the ratio of tangible common equity to tangible assets.

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 this measure excluding the impact of intangible assets provides useful supplemental information that is helpful in understanding our financial condition and results of operations, as it provides a method to assess management’s success in utilizing our tangible capital as well as our capital strength. Management also believes that providing a measure that excludes 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 this is a standard financial measure 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 similarly titled measures as calculated by other companies.

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


	March 31, 2022			December 31, 2021

	(Dollars in Thousands)

Common equity at period end	$	582,551		$	616,752
Less: Intangible assets at period end		5,923			6,081
Tangible common equity at period end (a)	$	576,628		$	610,671

Total assets at period end	$	5,374,276		$	5,449,944
Less: Intangible assets at period end		5,923			6,081
Tangible assets at period end (b)	$	5,368,353		$	5,443,863

Tangible common equity to tangible assets (a) / (b)		10.74	%		11.22	%

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, 2022, 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 are expected to 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 significantly affected either positively or negatively in the first twelve months following relatively minor changes in interest rates because our portfolios are relatively well matched in a twelve-month horizon. In a situation where market interest rates increase significantly in a short period of time, our net interest margin increase may be more pronounced in the very near term (first one to three months), due to fairly rapid increases in LIBOR interest rates (or their replacement rates) and “prime” interest rates. In a situation where market interest rates decrease significantly in a short period of time, as they did in March 2020, our net interest margin decrease may be more pronounced in the very near term (first one to three months), due to fairly rapid decreases in LIBOR interest rates (or their replacement rates) and “prime” interest rates. In the subsequent months we expect that the net interest margin would stabilize and begin to improve, as renewal interest rates on maturing time deposits are expected to decrease compared to the then-current rates paid on those products. During 2020, we did experience some compression of our net interest margin percentage due to the Federal Fund rate being cut by a total of 2.25% during the nine month period of July 2019 through March 2020. Margin compression primarily resulted from changes in the asset mix, mainly the addition of lower-yielding assets and the issuance of subordinated notes during 2020 and the net interest margin remained lower than our historical average in 2021. LIBOR interest rates decreased in 2020 and remained very low in 2021and into the first three months of 2022, putting pressure on loan yields, and strong pricing competition for loans and deposits remains in most of our markets. Subsequent to March 31, 2022, cumulative time deposit maturities are as follows: within three months --$265 million; within six months -- $465 million; and within twelve months -- $735 million. At March 31, 2022, the weighted average interest rates on these various cumulative maturities were 0.45%, 0.49% and 0.52%, respectively.

The current level and shape of the interest rate yield curve poses challenges for interest rate risk management. Prior to its increase of 0.25% on December 16, 2015, the FRB had last changed interest rates on December 16, 2008. This was the first rate increase since September 29, 2006. The FRB also implemented rate increases of 0.25% on eight additional occasions beginning December 14, 2016 and through December 31, 2018, with the Federal Funds rate reaching as high as 2.50%. After December 2018, the FRB paused its rate increases and, in July, September and October 2019, implemented rate decreases of 0.25% on each of those occasions. At December 31, 2019, the Federal Funds rate stood at 1.75%. In response to the COVID-19 pandemic, the FRB decreased interest rates on two occasions in March 2020, a 0.50% decrease on March 3rd and a 1.00% decrease on March 16th. On March 17, 2022, the FRB implemented an increase of 0.25%. Financial markets are currently anticipating aggressive increases to market interest rates in 2022. If aggressive interest rate increases do occur, we anticipate that our net interest income and net interest margin will be positively impacted. At March 31, 2022, the Federal Funds rate stood at 0.50%. A substantial portion of Great Southern’s loan portfolio ($1.31 billion at March 31, 2022) is tied to the one-month or three-month LIBOR index and will be subject to adjustment at least once within 90 days after March 31, 2022. Of these loans, $1.30 billion had interest rate floors at various rates. Great Southern also has a portfolio of loans ($613 million at March 31, 2022) tied to a “prime rate” of interest and will adjust immediately with changes to the “prime rate” of interest. Of these loans, $592 million had interest rate floors at various rates. At March 31, 2022, $800 million in LIBOR and “prime rate” loans were at their floor rate. If interest rates were to increase 50 basis points, approximately $460 million of these loans would move above their floor rate.

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 or loans with fixed rates that mature in less than five years, 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 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.

In October 2018, the Company entered into an interest rate swap transaction as part of its ongoing interest rate management strategies to hedge the risk of its floating rate loans. The notional amount of the swap was $400 million with a contractual termination date of October 6, 2025. Under the terms of the swap, the Company received a fixed rate of interest of 3.018% and paid a floating rate of interest equal to one-month USD-LIBOR. The floating rate reset monthly and net settlements of interest due to/from the counterparty also occurred monthly. Due to lower market interest rates, the Company received net interest settlements which were recorded as loan interest income. If USD-LIBOR exceeded the fixed rate of interest, the Company was required to pay net settlements to the counterparty and record those net payments as a reduction of interest income on loans. The effective portion of the gain or loss on the derivative was reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affected 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.

the near term, the Company will receive net interest settlements which will be recorded as loan interest income, to the extent that the fixed rate of interest continues to exceed one-month USD-LIBOR. If USD-LIBOR exceeds the fixed rate of interest in future periods, the Company will be required to pay net settlements to the counterparty and will record those net payments as a reduction of interest income on loans.

The Company’s interest rate derivatives and hedging activities are discussed further in Note 16 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, 2022, 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, 2022, 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 Exchange 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 13a-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2022, 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 the outcome of such litigation will not have a material adverse effect on the Company’s business, financial condition or results of operations.

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, 2021.

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

On October 21, 2020, the Company’s Board of Directors authorized management to repurchase up to 1,000,000 shares of the Company’s outstanding common stock, under a program of open market purchases or privately negotiated transactions. This program, which became effective in November 2020 and did not have an expiration date, was completed during the three months ended March 31, 2022.

On January 19, 2022, the Company's Board of Directors authorized management to repurchase up to 1,000,000 shares of the Company's outstanding common stock, under a program of open market purchases or privately negotiated transactions. This program does not have an expiration date. The authorization of this program became effective during the three months ended March 31, 2022, upon completion of the repurchase program authorized in October 2020 discussed above.

From time to time, the Company may utilize a pre-arranged trading plan pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934 to repurchase its shares under its repurchase programs.

The following table reflects the Company’s repurchase activity during the three months ended March 31, 2022.


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

January 1, 2022 – January 31, 2022	79,927	$	58.79	79,927	141,211
February 1, 2022 – February 28, 2022	189,288		60.64	189,288	951,923
March 1, 2022 – March 31, 2022	150,000		60.95	150,000	801,923
	419,215	$	60.40	419,215

(1)	Amount represents the number of shares available to be repurchased under the then-current program 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

Exhibits

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, 2009 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, 2009 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, 2011 is incorporated herein by reference as Exhibit 2(iii).

	(iv)	The Purchase and Assumption Agreement, dated as of April 27, 2012, 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, 2012 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 June 20, 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 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 3.2 to the Registrant’s Current Report on Form 8-K filed on October 19, 2007, are incorporated herein by reference as Exhibit 3.2.

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

	The Indenture, dated June 12, 2020, between the Registrant and U.S. Bank National Association, as Trustee, previously filed with the Commission (File No. 000-18082) as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on June 12, 2020, is incorporated herein by reference as Exhibit 4.1.

	The First Supplemental Indenture, dated June 12, 2020, between the Registrant and U.S. Bank National Association, as Trustee (relating to the Registrant’s 5.50% Fixed-to-Floating Rate Subordinated Notes due June 15, 2030), including the form of subordinated note included therein, previously filed with the Commission (File No. 000-18082) as Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on June 12, 2020, is incorporated herein by reference as Exhibit 4.2.

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

(9)	Voting trust agreement

	Inapplicable.

(10)	Material contracts

	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 Amended and Restated Employment Agreement, dated November 4, 2019, between the Registrant and William V. Turner previously filed with the Commission (File No. 000-18082) as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2019, is incorporated herein by reference as Exhibit 10.3.*

	Amendment No. 1, dated as of November 17, 2021, to the Amended and Restated Employment Agreement, dated as of November 4, 2019, between the Registrant and William V. Turner, previously filed with the Commission (File No. 000-18082) as Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on November 22, 2021, is incorporated herein by reference as Exhibit 10.3A.*

	The Amended and Restated Employment Agreement, dated November 4, 2019, between the Registrant and Joseph W. Turner previously filed with the Commission (File No. 000-18082) as Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period fiscal year ended September 30, 2019, is incorporated herein by reference as Exhibit 10.4.*

	Amendment No. 1, dated as of March 5, 2020, to the Amended and Restated Employment Agreement with Joseph W. Turner previously filed with the Commission (File No. 000-18082) as Exhibit 10.4A to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2021 is incorporated herein by reference as Exhibit 10.4A.*

	Amendment No. 2, dated as of November 17, 2021, to the Amended and Restated Employment Agreement, dated as of November 4, 2019, between the Registrant and Joseph W. Turner, previously filed with the Commission (File No. 000-18082) as Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed on November 22, 2021, is incorporated herein by reference as Exhibit 10.4B.*

	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 2022 for the Registrant’s 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, 2021 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, 2021 is incorporated herein by reference as Exhibit 10.8.*

	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 Registrant’s 2018 Omnibus Incentive Plan previously filed with the Commission (File No. 000-18082) as Appendix A to the Registrant’s Definitive Proxy Statement on Schedule 14A filed on March 27, 2018, is incorporated herein by reference as Exhibit 10.15.*

	The form of incentive stock option award agreement under the Registrant’s 2018 Omnibus Incentive Plan previously filed with the Commission as Exhibit 10.2 to the Registrant’s Registration Statement on Form S-8 (File No. 333-225665) filed on June 15, 2018 is incorporated herein by reference as Exhibit 10.16.*

	The form of non-qualified stock option award agreement under the Registrant’s 2018 Omnibus Incentive Plan previously filed with the Commission as Exhibit 10.3 to the Registrant’s Registration Statement on Form S-8 (File No. 333-225665) filed on June 15, 2018 is incorporated herein by reference as Exhibit 10.17.*

(15)	Letter re unaudited interim financial information

	Inapplicable.

(18)	Letter re change in accounting principles

	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, 2022, 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.

(104)	Cover Page Interactive Data File formatted in Inline XBRL (contained in Exhibit 101).

	* Management contract or compensatory plan or arrangement.

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.

Date: May 6, 2022	/s/ Joseph W. Turner
	Joseph W. Turner President and Chief Executive Officer (Principal Executive Officer)

Date: May 6, 2022	/s/ Rex A. Copeland
	Rex A. Copeland Treasurer (Principal Financial and Accounting Officer)