Great Southern Bancorp Annual Report 2022

Plain-text annual report

2022 ANNUAL R E PORT F OR STOC KHOL DE R S CORPORATE HEADQUARTERS 1451 E. Battleﬁeld Springﬁeld, MO 65804 800-749-7113 MAILING ADDRESS P.O. Box 9009 Springﬁeld, MO 65808 DIVIDEND REINVESTMENT For details on the automatic reinvestment of dividends in common stock of the Company, call Computershare at 800-368-5948, (outside of the U.S. 781-575-4223), or visit computershare.com. FORM 10-K The Annual Report on Form 10-K ﬁled with the Securities and Exchange Commission may be obtained from the Company’s website at GreatSouthernBank.com, the SEC website or without charge by request to: Kelly Polonus Great Southern Bancorp, Inc. P.O. Box 9009 Springﬁeld, MO 65808 INVESTOR RELATIONS Kelly Polonus Great Southern Bank P.O. Box 9009 Springﬁeld, MO 65808 AUDITORS FORVIS, LLP P.O. Box 1190 Springﬁeld, MO 65801-1190 LEGAL COUNSEL Silver, Freedman, Taff and Tiernan, LLP 3299 K St., N.W., Suite 100 Washington, DC 20007 Carnahan Evans, P.C. P.O. Box 10009 Springﬁeld, MO 65808 TRANSFER AGENT AND REGISTRAR Computershare Stockholder correspondence: Computershare P.O. Box 505000 Louisville, KY 40233-5000 Overnight correspondence: Computershare 462 S. 4th St., Suite 1600 Louisville, KY 40202 800-368-5948 781-575-4223 outside of the U.S. Hearing Impaired # TDD: 800-952-9245 Questions and inquiries via the website, computershare.com May 10, 2023 - Virtual Meeting – 10 am CDT 34th Annual Meeting of Stockholders CORPORATE PROFILE Great Southern Bank was founded in 1923 with a $5,000 investment, four employees and 936 customers. Today, it has grown to $5.7 billion in total assets, with more than 1,100 dedicated associates serving 134,000 households. With the understanding that convenient access to banking services is a top priority, customers can access the Bank when, where and how they prefer, whether it's through a banking center, digital banking, an ATM/ITM or by telephone. Headquartered in Springﬁeld, Missouri, the Company operates offices in 13 states, including 92 retail banking centers in Missouri, Arkansas, Iowa, Kansas, Minnesota and Nebraska and eight loan production offices in the cities of Atlanta, Charlotte, Chicago, Dallas, Denver, Omaha, Phoenix and Tulsa. Great Southern offers one-stop shopping with a comprehensive lineup of ﬁnancial services that give customers more choices for their money. Customers can choose from a wide variety of checking accounts, savings accounts and lending options. STOCK INFORMATION The Company’s common stock is listed on the NASDAQ Global Select Market under the symbol “GSBC.” As of December 31, 2022, there were 12,231,290 total shares of common stock outstanding and approximately 2,000 shareholders of record. The last sale price of the Company's Common Stock on December 31, 2022 was $59.49. HIGH/LOW STOCK PRICE First Quarter Second Quarter Third Quarter Fourth Quarter 2022 2021 High $62. 70 61. 17 63. 95 64. 16 Low $56. 94 56. 17 50. 30 57. 15 High $60. 55 58. 48 57. 01 59. 90 Low $47. 22 52. 81 49. 53 55. 00 2020 High $63. 55 46. 35 41. 42 50. 72 Low $32. 23 32. 62 34. 32 35. 79 REGULAR DIVIDEND DECLARATIONS First Quarter Second Quarter Third Quarter Fourth Quarter 2022 2021 2020 $.34 $.34 $.36 .40 .40 .40 .34 .36 .36 .34 .34 .34 SPECIAL DIVIDEND DECLARATIONS 2022 2021 2020 $1.00 First Quarter ---- ---- 2022 Results We are pleased to share that we ended 2022 in a conservative capital levels to allow for organic solid ﬁnancial position, giving us a good posture growth and other corporate initiatives and needs. for the economic headwinds we will likely face in We also look for opportunities to return capital to 2023. The Company ended the year with $5.7 our stockholders through dividends and carefully billion in assets, up from $5.4 billion in 2021. considered stock repurchases. During the year Earnings were $75.9 million, or $6.02 per diluted ended December 31, 2022, the Company declared common share, compared to $74.6 million, or regular quarterly cash dividends totaling $1.56 per $5.46 per diluted common share, for 2021. common share and repurchased approximately 1.0 Primarily as a result of a rapidly rising interest rate million shares of its common stock at an average environment, our primary source of income, net price of $59.25 to increase stockholder value. interest income, increased by $21.7 million, or approximately 12.2%, to $199.6 million compared to $177.9 million in 2021. Our net interest margin was 3.80% in 2022 compared to 3.37% for the previous year. For 2022, our return on average assets was 1.38%, return on average equity was 13.44% and our efficiency ratio was 57.05%. Since the end of 2021, total outstanding loans, excluding mortgage loans held for sale, increased by $499.3 million, or 12.5%. Our pipeline of loan commitments and the unfunded portion of loans at December 31, 2022, grew by about $402 million to $2.1 billion from the end of 2021. We continue to see growth in outstanding construction loan Our capital position remains strong and balances as the unfunded portion of those loans signiﬁcantly above regulatory well-capitalized already closed in prior periods are funded. For the thresholds. Total stockholders' equity and common seventh year in a row, our commercial lending stockholders' equity were each $533.1 million, or team originated more than $1 billion in loans - $1.8 9.4% of total assets, resulting in a book value of billion total. In 2022, we added two new loan $43.58 per common share. A primary objective for production offices (LPOs) to our footprint – one in our Company is always to maintain sufficient and Phoenix, Arizona and one in Charlotte, North William V. Turner Chairman of the Board Joseph W. Turner President and Chief Executive Officer To our fellow stockholders: We are pleased to share our 2022 Annual Report with you. It is only ﬁtting to begin this letter by thanking our more than 1,100 associates for their remarkable work this past year in serving our customers, communities, and each other. Our sharp focus on our customers' needs and our commitment to building long-term relationships in a challenging economic landscape were central to making 2022 an extraordinary year for our Company. 2023 marks 100 years of service for Great Southern, and in this report, you will ﬁnd information about our history and our journey forward. You will see that our past, present and future reﬂect our guiding principle of taking a longer view in how we operate our Company. This has been a key to our success for the past 100 years, requiring visionary thinking, sharp focus, and, sometimes, fortitude, and this philosophy will continue to pay dividends in the years to come. 2 We are also focusing on the prime reason for our 100-year success and what differentiates us from others – simply, it's our people. Our centennial theme is "100 years of support." We strive every day to provide support to our customers and communities. Customers can always count on us for expert advice, tailored solutions, and extensive resources. And the level of care our associates have for our customers is unmatched. We hear the stories regularly – whether it's associates looking for ways to make sure we have the best products and services available or dropping off groceries for a customer that is struggling, our associates listen to our customers and look for ways to make their lives easier. Not only are they some of the most caring people you will meet, their capability continually astounds. They are always ready and willing to roll up their sleeves and ﬁnd a way to move forward when presented with a challenge. Having that kind of determination and skill behind us can make strategic business decisions easier. Simply put, we have always bet on the people of Great Southern, and we have never lost. Carolina. While we experienced strong production in most of 2022, we saw a marked slowing of commercial loan origination activity during the fourth quarter of 2022, which we expect to continue in 2023. Despite signiﬁcant increases in market rates during 2022, our mortgage lenders produced their second-highest year in originations totaling approximately $443 million. Some residential loans were retained in the Company's loan portfolio, and some were sold in the secondary market. In late 2022, mortgage loan production decreased substantially, and this slower pace of production is expected to continue as long as market rates remain elevated. Credit quality metrics remained excellent in 2022 at year end. Non-performing assets were $3.7 million, a decrease of $2.3 million from the end of 2021. At December 31, 2022, loan delinquencies in our portfolio remained historically low. At the end of 2022, deposits totaled $4.7 billion, with our mix shifting somewhat with our non-time account balances trending lower and time deposit balances trending higher. The increased time deposits are a mix of shorter-term retail deposits, as well as ﬁxed-rate and variable-rate brokered deposits. Overall, our deposit mix continues to be a source of strength for our Company, with checking and savings accounts representing nearly 70% of the deposit portfolio and retail certiﬁcates of deposit making up about 22%. There is strong competition for deposits in all of our markets as deposit levels have decreased throughout the banking industry, coming off the signiﬁcant surge of deposits related to the COVID-19 pandemic. 100 Years of Support Our Company's centennial is a time for celebration and reﬂection. We remember our roots, the challenges we’ve faced, and the progress we’ve made. We honor and thank all associates who have worked at Great Southern throughout our 100-year history. And more importantly, we look to the future. To our associates, customers, and communities, we are grateful to you for allowing us to be a beacon of stability for 100 years – and counting. To you, our stockholders, we are proud of our history of providing a superior long-term return on our stockholders' investment in our Company, and we thank you for your support. We welcome your feedback at any time. William V. Turner Joseph W. Turner 2023 and Beyond We look to 2023 with guarded optimism but with mission of building winning relationships with all of energy and enthusiasm in our support of all of our our constituents. For our associates, we want to constituents. Our priorities will be maintaining a make our Company a great place to work and grow sharp focus on developing and expanding professionally. For our customers, it is our mission customer relationships, sustaining a solid credit to build winning and lasting relationships by discipline, mitigating interest rate risk, and driving providing the right products and services delivered operational efficiencies. We are well aware of the signiﬁcant uncertainty created by the current economic and geopolitical landscape. We are focused on ensuring that the Company is properly positioned for whatever may come our way, especially in the wake of the changing interest rate environment caused by how and when they prefer. We fully recognize that our customers choose who they want to do business with each and every day, and we are gratiﬁed that we continue to earn our customers' business and their trust. For our many communities, we strive to support causes and address needs to help them be even better places to live and work. continued inﬂationary pressures and other factors. And ﬁnally, for our stockholders, we desire to Mitigating the risks of ﬂuctuating interest rates is a provide a superior long-term return on their normal function of our asset and liability investment in our Company. We will continue management; the uniqueness of current economic operating the Company with a long-view conditions makes it more interesting and perspective. It is not realistic to expect our challenging. During 2023, the Great Southern team will be highly focused on implementing a new technology platform. The new core platform and ancillary systems will improve how we do business by offering even more capabilities to our customers and giving them better control of their ﬁnances. We are excited about launching our new platform and look forward to the ease of access it will afford our customers and associates alike. The future we create depends on our decisions and actions today. Starting with investing in our people to help them grow, investing in our technology to keep us competitive, and supporting our markets because we know we can only be as strong as the communities we serve. We understand that making those investments today will yield dividends for our Company in the future. Company, or any company, to signiﬁcantly increase earnings year after year. In any given year, we may be subject to competitive and economic forces, interest rate ﬂuctuations and other variables that may affect earnings. We will not be pressured into making short-sighted decisions, which could hurt the long-term prospects for our Company. All of our decisions keep our stockholders' long-term interests in mind as we go about our daily work. We owe a debt of gratitude to our Board of Directors for their guidance and support. We value the diversity of talent and knowledge they bring to the table. In 2022, we enthusiastically welcomed Steve Edwards to the Board. As the former CEO of CoxHealth, the largest employer in Southwest Missouri, Steve brings a wealth of knowledge. Directing a complex organization with more than 12,000 employees through the pandemic means he is no stranger to turbulent times, and we Moving forward, we pledge to keep in mind the appreciate the insight and leadership he is adding long-term interests of those we serve and fulﬁll our to our Board of Directors. 2022 Results We are pleased to share that we ended 2022 in a solid ﬁnancial position, giving us a good posture for the economic headwinds we will likely face in 2023. The Company ended the year with $5.7 billion in assets, up from $5.4 billion in 2021. Earnings were $75.9 million, or $6.02 per diluted common share, compared to $74.6 million, or $5.46 per diluted common share, for 2021. Primarily as a result of a rapidly rising interest rate environment, our primary source of income, net interest income, increased by $21.7 million, or approximately 12.2%, to $199.6 million compared to $177.9 million in 2021. Our net interest margin was 3.80% in 2022 compared to 3.37% for the previous year. For 2022, our return on average assets was 1.38%, return on average equity was 13.44% and our efficiency ratio was 57.05%. Our capital position remains strong and signiﬁcantly above regulatory well-capitalized thresholds. Total stockholders' equity and common stockholders' equity were each $533.1 million, or 9.4% of total assets, resulting in a book value of $43.58 per common share. A primary objective for our Company is always to maintain sufficient and conservative capital levels to allow for organic growth and other corporate initiatives and needs. We also look for opportunities to return capital to our stockholders through dividends and carefully considered stock repurchases. During the year ended December 31, 2022, the Company declared regular quarterly cash dividends totaling $1.56 per common share and repurchased approximately 1.0 million shares of its common stock at an average price of $59.25 to increase stockholder value. Since the end of 2021, total outstanding loans, excluding mortgage loans held for sale, increased by $499.3 million, or 12.5%. Our pipeline of loan commitments and the unfunded portion of loans at December 31, 2022, grew by about $402 million to $2.1 billion from the end of 2021. We continue to see growth in outstanding construction loan balances as the unfunded portion of those loans already closed in prior periods are funded. For the seventh year in a row, our commercial lending team originated more than $1 billion in loans - $1.8 billion total. In 2022, we added two new loan production offices (LPOs) to our footprint – one in Phoenix, Arizona and one in Charlotte, North OUR MISSION Building winning relationships customers, associates, with our stockholders communities. and 3 To our fellow stockholders: We are pleased to share our 2022 Annual Report with you. It is only ﬁtting to begin this letter by thanking our more than 1,100 associates for their remarkable work this past year in serving our customers, communities, and each other. Our sharp focus on our customers' needs and our commitment to building long-term relationships in a challenging economic landscape were central to making 2022 an extraordinary year for our Company. 2023 marks 100 years of service for Great Southern, and in this report, you will ﬁnd information about our history and our journey forward. You will see that our past, present and future reﬂect our guiding principle of taking a longer view in how we operate our Company. This has been a key to our success for the past 100 years, requiring visionary thinking, sharp focus, and, sometimes, fortitude, and this philosophy will continue to pay dividends in the years to come. We are also focusing on the prime reason for our 100-year success and what differentiates us from others – simply, it's our people. Our centennial theme is "100 years of support." We strive every day to provide support to our customers and communities. Customers can always count on us for expert advice, tailored solutions, and extensive resources. And the level of care our associates have for our customers is unmatched. We hear the stories regularly – whether it's associates looking for ways to make sure we have the best products and services available or dropping off groceries for a customer that is struggling, our associates listen to our customers and look for ways to make their lives easier. Not only are they some of the most caring people you will meet, their capability continually astounds. They are always ready and willing to roll up their sleeves and ﬁnd a way to move forward when presented with a challenge. Having that kind of determination and skill behind us can make strategic business decisions easier. Simply put, we have always bet on the people of Great Southern, and we have never lost. Carolina. While we experienced strong production in most of 2022, we saw a marked slowing of commercial loan origination activity during the fourth quarter of 2022, which we expect to continue in 2023. Despite signiﬁcant increases in market rates during 2022, our mortgage lenders produced their second-highest year in originations totaling approximately $443 million. Some residential loans were retained in the Company's loan portfolio, and some were sold in the secondary market. In late 2022, mortgage loan production decreased substantially, and this slower pace of production is expected to continue as long as market rates remain elevated. Credit quality metrics remained excellent in 2022 at year end. Non-performing assets were $3.7 million, a decrease of $2.3 million from the end of 2021. At December 31, 2022, loan delinquencies in our portfolio remained historically low. At the end of 2022, deposits totaled $4.7 billion, with our mix shifting somewhat with our non-time account balances trending lower and time deposit balances trending higher. The increased time deposits are a mix of shorter-term retail deposits, as well as ﬁxed-rate and variable-rate brokered deposits. Overall, our deposit mix continues to be a source of strength for our Company, with checking and savings accounts representing nearly 70% of the deposit portfolio and retail certiﬁcates of deposit making up about 22%. There is strong competition for deposits in all of our markets as deposit levels have decreased throughout the banking industry, coming off the signiﬁcant surge of deposits related to the COVID-19 pandemic. 100 Years of Support Our Company's centennial is a time for celebration and reﬂection. We remember our roots, the challenges we’ve faced, and the progress we’ve made. We honor and thank all associates who have worked at Great Southern throughout our 100-year history. And more importantly, we look to the future. To our associates, customers, and communities, we are grateful to you for allowing us to be a beacon of stability for 100 years – and counting. To you, our stockholders, we are proud of our history of providing a superior long-term return on our stockholders' investment in our Company, and we thank you for your support. We welcome your feedback at any time. William V. Turner Joseph W. Turner 2023 and Beyond We look to 2023 with guarded optimism but with mission of building winning relationships with all of energy and enthusiasm in our support of all of our our constituents. For our associates, we want to constituents. Our priorities will be maintaining a make our Company a great place to work and grow sharp focus on developing and expanding professionally. For our customers, it is our mission customer relationships, sustaining a solid credit to build winning and lasting relationships by discipline, mitigating interest rate risk, and driving providing the right products and services delivered operational efficiencies. We are well aware of the signiﬁcant uncertainty created by the current economic and geopolitical landscape. We are focused on ensuring that the Company is properly positioned for whatever may come our way, especially in the wake of the changing interest rate environment caused by how and when they prefer. We fully recognize that our customers choose who they want to do business with each and every day, and we are gratiﬁed that we continue to earn our customers' business and their trust. For our many communities, we strive to support causes and address needs to help them be even better places to live and work. continued inﬂationary pressures and other factors. And ﬁnally, for our stockholders, we desire to Mitigating the risks of ﬂuctuating interest rates is a provide a superior long-term return on their normal function of our asset and liability investment in our Company. We will continue management; the uniqueness of current economic operating the Company with a long-view conditions makes it more interesting and perspective. It is not realistic to expect our challenging. During 2023, the Great Southern team will be highly focused on implementing a new technology platform. The new core platform and ancillary systems will improve how we do business by offering even more capabilities to our customers and giving them better control of their ﬁnances. We are excited about launching our new platform and look forward to the ease of access it will afford our customers and associates alike. The future we create depends on our decisions and actions today. Starting with investing in our people to help them grow, investing in our technology to keep us competitive, and supporting our markets because we know we can only be as strong as the communities we serve. We understand that making those investments today will yield dividends for our Company in the future. Company, or any company, to signiﬁcantly increase earnings year after year. In any given year, we may be subject to competitive and economic forces, interest rate ﬂuctuations and other variables that may affect earnings. We will not be pressured into making short-sighted decisions, which could hurt the long-term prospects for our Company. All of our decisions keep our stockholders' long-term interests in mind as we go about our daily work. We owe a debt of gratitude to our Board of Directors for their guidance and support. We value the diversity of talent and knowledge they bring to the table. In 2022, we enthusiastically welcomed Steve Edwards to the Board. As the former CEO of CoxHealth, the largest employer in Southwest Missouri, Steve brings a wealth of knowledge. Directing a complex organization with more than 12,000 employees through the pandemic means he is no stranger to turbulent times, and we Moving forward, we pledge to keep in mind the appreciate the insight and leadership he is adding long-term interests of those we serve and fulﬁll our to our Board of Directors. 2022 Results We are pleased to share that we ended 2022 in a conservative capital levels to allow for organic solid ﬁnancial position, giving us a good posture growth and other corporate initiatives and needs. for the economic headwinds we will likely face in We also look for opportunities to return capital to 2023. The Company ended the year with $5.7 our stockholders through dividends and carefully billion in assets, up from $5.4 billion in 2021. considered stock repurchases. During the year Earnings were $75.9 million, or $6.02 per diluted ended December 31, 2022, the Company declared common share, compared to $74.6 million, or regular quarterly cash dividends totaling $1.56 per $5.46 per diluted common share, for 2021. common share and repurchased approximately 1.0 Primarily as a result of a rapidly rising interest rate million shares of its common stock at an average environment, our primary source of income, net price of $59.25 to increase stockholder value. interest income, increased by $21.7 million, or approximately 12.2%, to $199.6 million compared to $177.9 million in 2021. Our net interest margin was 3.80% in 2022 compared to 3.37% for the previous year. For 2022, our return on average assets was 1.38%, return on average equity was 13.44% and our efficiency ratio was 57.05%. Since the end of 2021, total outstanding loans, excluding mortgage loans held for sale, increased by $499.3 million, or 12.5%. Our pipeline of loan commitments and the unfunded portion of loans at December 31, 2022, grew by about $402 million to $2.1 billion from the end of 2021. We continue to see growth in outstanding construction loan Our capital position remains strong and balances as the unfunded portion of those loans signiﬁcantly above regulatory well-capitalized already closed in prior periods are funded. For the thresholds. Total stockholders' equity and common seventh year in a row, our commercial lending stockholders' equity were each $533.1 million, or team originated more than $1 billion in loans - $1.8 9.4% of total assets, resulting in a book value of billion total. In 2022, we added two new loan $43.58 per common share. A primary objective for production offices (LPOs) to our footprint – one in our Company is always to maintain sufficient and Phoenix, Arizona and one in Charlotte, North To our fellow stockholders: We are pleased to share our 2022 Annual Report with you. It is only ﬁtting to begin this letter by thanking our more than 1,100 associates for their remarkable work this past year in serving our customers, communities, and each other. Our sharp focus on our customers' needs and our commitment to building long-term relationships in a challenging economic landscape were central to making 2022 an extraordinary year for our Company. 2023 marks 100 years of service for Great Southern, and in this report, you will ﬁnd information about our history and our journey forward. You will see that our past, present and future reﬂect our guiding principle of taking a longer view in how we operate our Company. This has been a key to our success for the past 100 years, requiring visionary thinking, sharp focus, and, sometimes, fortitude, and this philosophy will continue to pay dividends in the years to come. We are also focusing on the prime reason for our 100-year success and what differentiates us from others – simply, it's our people. Our centennial theme is "100 years of support." We strive every day to provide support to our customers and communities. Customers can always count on us for expert advice, tailored solutions, and extensive resources. And the level of care our associates have for our customers is unmatched. We hear the stories regularly – whether it's associates looking for ways to make sure we have the best products and services available or dropping off groceries for a customer that is struggling, our associates listen to our customers and look for ways to make their lives easier. Not only are they some of the most caring people you will meet, their capability continually astounds. They are always ready and willing to roll up their sleeves and ﬁnd a way to move forward when presented with a challenge. Having that kind of determination and skill behind us can make strategic business decisions easier. Simply put, we have always bet on the people of Great Southern, and we have never lost. TOTAL ASSETS $5.68 BILLION TOTAL DEPOSITS $4.68 BILLION TOTAL LOANS $4.51 BILLION 0 $1B $2B $3B $4B $5B TOTAL LOAN PRODUCTION $2.39 BILLION 2022 2 0 2 1 2020 2 0 1 9 2 0 1 8 2022 2 0 2 1 2020 2 0 1 9 2 0 1 8 2022 2 0 2 1 2020 2 0 1 9 2 0 1 8 2022 2 0 2 1 2020 2 0 1 9 2 0 1 8 0 $1B $2B 4 Carolina. While we experienced strong production in most of 2022, we saw a marked slowing of commercial loan origination activity during the fourth quarter of 2022, which we expect to continue in 2023. Despite signiﬁcant increases in market rates during 2022, our mortgage lenders produced their second-highest year in originations totaling approximately $443 million. Some residential loans were retained in the Company's loan portfolio, and some were sold in the secondary market. In late 2022, mortgage loan production decreased substantially, and this slower pace of production is expected to continue as long as market rates remain elevated. Credit quality metrics remained excellent in 2022 at year end. Non-performing assets were $3.7 million, a decrease of $2.3 million from the end of 2021. At December 31, 2022, loan delinquencies in our portfolio remained historically low. At the end of 2022, deposits totaled $4.7 billion, with our mix shifting somewhat with our non-time account balances trending lower and time deposit balances trending higher. The increased time deposits are a mix of shorter-term retail deposits, as well as ﬁxed-rate and variable-rate brokered deposits. Overall, our deposit mix continues to be a source of strength for our Company, with checking and savings accounts representing nearly 70% of the deposit portfolio and retail certiﬁcates of deposit making up about 22%. There is strong competition for deposits in all of our markets as deposit levels have decreased throughout the banking industry, coming off the signiﬁcant surge of deposits related to the COVID-19 pandemic. 100 Years of Support Our Company's centennial is a time for celebration and reﬂection. We remember our roots, the challenges we’ve faced, and the progress we’ve made. We honor and thank all associates who have worked at Great Southern throughout our 100-year history. And more importantly, we look to the future. To our associates, customers, and communities, we are grateful to you for allowing us to be a beacon of stability for 100 years – and counting. To you, our stockholders, we are proud of our history of providing a superior long-term return on our stockholders' investment in our Company, and we thank you for your support. We welcome your feedback at any time. William V. Turner Joseph W. Turner 2023 and Beyond We look to 2023 with guarded optimism but with mission of building winning relationships with all of energy and enthusiasm in our support of all of our our constituents. For our associates, we want to constituents. Our priorities will be maintaining a make our Company a great place to work and grow sharp focus on developing and expanding professionally. For our customers, it is our mission customer relationships, sustaining a solid credit to build winning and lasting relationships by discipline, mitigating interest rate risk, and driving providing the right products and services delivered operational efficiencies. We are well aware of the signiﬁcant uncertainty created by the current economic and geopolitical landscape. We are focused on ensuring that the Company is properly positioned for whatever may come our way, especially in the wake of the changing interest rate environment caused by how and when they prefer. We fully recognize that our customers choose who they want to do business with each and every day, and we are gratiﬁed that we continue to earn our customers' business and their trust. For our many communities, we strive to support causes and address needs to help them be even better places to live and work. continued inﬂationary pressures and other factors. And ﬁnally, for our stockholders, we desire to Mitigating the risks of ﬂuctuating interest rates is a provide a superior long-term return on their normal function of our asset and liability investment in our Company. We will continue management; the uniqueness of current economic operating the Company with a long-view conditions makes it more interesting and perspective. It is not realistic to expect our challenging. During 2023, the Great Southern team will be highly focused on implementing a new technology platform. The new core platform and ancillary systems will improve how we do business by offering even more capabilities to our customers and giving them better control of their ﬁnances. We are excited about launching our new platform and look forward to the ease of access it will afford our customers and associates alike. The future we create depends on our decisions and actions today. Starting with investing in our people to help them grow, investing in our technology to keep us competitive, and supporting our markets because we know we can only be as strong as the communities we serve. We understand that making those investments today will yield dividends for our Company in the future. Company, or any company, to signiﬁcantly increase earnings year after year. In any given year, we may be subject to competitive and economic forces, interest rate ﬂuctuations and other variables that may affect earnings. We will not be pressured into making short-sighted decisions, which could hurt the long-term prospects for our Company. All of our decisions keep our stockholders' long-term interests in mind as we go about our daily work. We owe a debt of gratitude to our Board of Directors for their guidance and support. We value the diversity of talent and knowledge they bring to the table. In 2022, we enthusiastically welcomed Steve Edwards to the Board. As the former CEO of CoxHealth, the largest employer in Southwest Missouri, Steve brings a wealth of knowledge. Directing a complex organization with more than 12,000 employees through the pandemic means he is no stranger to turbulent times, and we Moving forward, we pledge to keep in mind the appreciate the insight and leadership he is adding long-term interests of those we serve and fulﬁll our to our Board of Directors. 2022 Results We are pleased to share that we ended 2022 in a conservative capital levels to allow for organic solid ﬁnancial position, giving us a good posture growth and other corporate initiatives and needs. for the economic headwinds we will likely face in We also look for opportunities to return capital to 2023. The Company ended the year with $5.7 our stockholders through dividends and carefully billion in assets, up from $5.4 billion in 2021. considered stock repurchases. During the year Earnings were $75.9 million, or $6.02 per diluted ended December 31, 2022, the Company declared common share, compared to $74.6 million, or regular quarterly cash dividends totaling $1.56 per $5.46 per diluted common share, for 2021. common share and repurchased approximately 1.0 Primarily as a result of a rapidly rising interest rate million shares of its common stock at an average environment, our primary source of income, net price of $59.25 to increase stockholder value. interest income, increased by $21.7 million, or approximately 12.2%, to $199.6 million compared to $177.9 million in 2021. Our net interest margin was 3.80% in 2022 compared to 3.37% for the previous year. For 2022, our return on average assets was 1.38%, return on average equity was 13.44% and our efficiency ratio was 57.05%. Since the end of 2021, total outstanding loans, excluding mortgage loans held for sale, increased by $499.3 million, or 12.5%. Our pipeline of loan commitments and the unfunded portion of loans at December 31, 2022, grew by about $402 million to $2.1 billion from the end of 2021. We continue to see growth in outstanding construction loan Our capital position remains strong and balances as the unfunded portion of those loans signiﬁcantly above regulatory well-capitalized already closed in prior periods are funded. For the thresholds. Total stockholders' equity and common seventh year in a row, our commercial lending stockholders' equity were each $533.1 million, or team originated more than $1 billion in loans - $1.8 9.4% of total assets, resulting in a book value of billion total. In 2022, we added two new loan $43.58 per common share. A primary objective for production offices (LPOs) to our footprint – one in our Company is always to maintain sufficient and Phoenix, Arizona and one in Charlotte, North To our fellow stockholders: We are pleased to share our 2022 Annual Report with you. It is only ﬁtting to begin this letter by thanking our more than 1,100 associates for their remarkable work this past year in serving our customers, communities, and each other. Our sharp focus on our customers' needs and our commitment to building long-term relationships in a challenging economic landscape were central to making 2022 an extraordinary year for our Company. 2023 marks 100 years of service for Great Southern, and in this report, you will ﬁnd information about our history and our journey forward. You will see that our past, present and future reﬂect our guiding principle of taking a longer view in how we operate our Company. This has been a key to our success for the past 100 years, requiring visionary thinking, sharp focus, and, sometimes, fortitude, and this philosophy will continue to pay dividends in the years to come. Carolina. While we experienced strong production in most of 2022, we saw a marked slowing of commercial loan origination activity during the fourth quarter of 2022, which we expect to continue in 2023. Despite signiﬁcant increases in market rates during 2022, our mortgage lenders produced their second-highest year in originations totaling approximately $443 million. Some residential loans were retained in the Company's loan portfolio, and some were sold in the secondary market. In late 2022, mortgage loan production decreased substantially, and this slower pace of production is expected to continue as long as market rates remain elevated. Credit quality metrics remained excellent in 2022 at year end. Non-performing assets were $3.7 million, a decrease of $2.3 million from the end of 2021. At December 31, 2022, loan delinquencies in our portfolio remained historically low. At the end of 2022, deposits totaled $4.7 billion, with our mix shifting somewhat with our non-time account balances trending lower and time deposit balances trending higher. The increased time deposits are a mix of shorter-term retail deposits, as well as ﬁxed-rate and variable-rate brokered deposits. Overall, our deposit mix continues to be a source of strength for our Company, with checking and savings accounts representing nearly 70% of the deposit portfolio and retail certiﬁcates of deposit making up about 22%. There is strong competition for deposits in all of our markets as deposit levels have decreased throughout the banking industry, coming off the signiﬁcant surge of deposits related to the COVID-19 pandemic. 100 Years of Support Our Company's centennial is a time for celebration and reﬂection. We remember our roots, the challenges we’ve faced, and the progress we’ve made. We honor and thank all associates who have worked at Great Southern throughout our 100-year history. And more importantly, we look to the future. BOOK VALUE PER COMMON SHARE $43.58 40 30 20 10 0 2018 2019 2020 2021 2022 2022 TOTAL NET INCOME $75.95 MILLION 70 60 50 40 30 20 10 0 2018 2019 2020 2021 2022 The graph at left compares the cumulative total stockholder return on GSBC Common Stock to the cumulative total returns on the NASDAQ Composite Index and the S&P U.S. BMI Banks – Midwest Region Index for the period December 31, 2017 through December 31, 2022. The graph assumes that $100 was invested in GSBC Common Stock and in each of the indices on December 31, 2017 and that all dividends were reinvested. Source: S&P Global Market Intelligence © 2023 We are also focusing on the prime reason for our 100-year success and what differentiates us from others – simply, it's our people. Our centennial theme is "100 years of support." We strive every day to provide support to our customers and communities. Customers can always count on us for expert advice, tailored solutions, and extensive resources. And the level of care our associates have for our customers is unmatched. We hear the stories regularly – whether it's associates looking for ways to make sure we have the best products and services available or dropping off groceries for a customer that is struggling, our associates listen to our customers and look for ways to make their lives easier. Not only are they some of the most caring people you will meet, their capability continually astounds. They are always ready and willing to roll up their sleeves and ﬁnd a way to move forward when presented with a challenge. Having that kind of determination and skill behind us can make strategic business decisions easier. Simply put, we have always bet on the people of Great Southern, and we have never lost. TOTAL RETURN 5 YEAR CUMULATIVE $135.52 Great Southern Bancorp, Inc. NASDAQ Composite Index S&P U.S. BMI Banks - Midwest Region Index 250 200 150 100 0 2017 2018 2019 2020 2021 2022 5 To our associates, customers, and communities, we are grateful to you for allowing us to be a beacon of stability for 100 years – and counting. To you, our stockholders, we are proud of our history of providing a superior long-term return on our stockholders' investment in our Company, and we thank you for your support. We welcome your feedback at any time. William V. Turner Joseph W. Turner 2023 and Beyond We look to 2023 with guarded optimism but with mission of building winning relationships with all of energy and enthusiasm in our support of all of our our constituents. For our associates, we want to constituents. Our priorities will be maintaining a make our Company a great place to work and grow sharp focus on developing and expanding professionally. For our customers, it is our mission customer relationships, sustaining a solid credit to build winning and lasting relationships by discipline, mitigating interest rate risk, and driving providing the right products and services delivered operational efficiencies. We are well aware of the signiﬁcant uncertainty created by the current economic and geopolitical landscape. We are focused on ensuring that the Company is properly positioned for whatever may come our way, especially in the wake of the changing interest rate environment caused by how and when they prefer. We fully recognize that our customers choose who they want to do business with each and every day, and we are gratiﬁed that we continue to earn our customers' business and their trust. For our many communities, we strive to support causes and address needs to help them be even better places to live and work. continued inﬂationary pressures and other factors. And ﬁnally, for our stockholders, we desire to Mitigating the risks of ﬂuctuating interest rates is a provide a superior long-term return on their normal function of our asset and liability investment in our Company. We will continue management; the uniqueness of current economic operating the Company with a long-view conditions makes it more interesting and perspective. It is not realistic to expect our challenging. During 2023, the Great Southern team will be highly focused on implementing a new technology platform. The new core platform and ancillary systems will improve how we do business by offering even more capabilities to our customers and giving them better control of their ﬁnances. We are excited about launching our new platform and look forward to the ease of access it will afford our customers and associates alike. The future we create depends on our decisions and actions today. Starting with investing in our people to help them grow, investing in our technology to keep us competitive, and supporting our markets because we know we can only be as strong as the communities we serve. We understand that making those investments today will yield dividends for our Company in the future. Company, or any company, to signiﬁcantly increase earnings year after year. In any given year, we may be subject to competitive and economic forces, interest rate ﬂuctuations and other variables that may affect earnings. We will not be pressured into making short-sighted decisions, which could hurt the long-term prospects for our Company. All of our decisions keep our stockholders' long-term interests in mind as we go about our daily work. We owe a debt of gratitude to our Board of Directors for their guidance and support. We value the diversity of talent and knowledge they bring to the table. In 2022, we enthusiastically welcomed Steve Edwards to the Board. As the former CEO of CoxHealth, the largest employer in Southwest Missouri, Steve brings a wealth of knowledge. Directing a complex organization with more than 12,000 employees through the pandemic means he is no stranger to turbulent times, and we Moving forward, we pledge to keep in mind the appreciate the insight and leadership he is adding long-term interests of those we serve and fulﬁll our to our Board of Directors. 2022 Results We are pleased to share that we ended 2022 in a conservative capital levels to allow for organic solid ﬁnancial position, giving us a good posture growth and other corporate initiatives and needs. for the economic headwinds we will likely face in We also look for opportunities to return capital to 2023. The Company ended the year with $5.7 our stockholders through dividends and carefully billion in assets, up from $5.4 billion in 2021. considered stock repurchases. During the year Earnings were $75.9 million, or $6.02 per diluted ended December 31, 2022, the Company declared common share, compared to $74.6 million, or regular quarterly cash dividends totaling $1.56 per $5.46 per diluted common share, for 2021. common share and repurchased approximately 1.0 Primarily as a result of a rapidly rising interest rate million shares of its common stock at an average environment, our primary source of income, net price of $59.25 to increase stockholder value. interest income, increased by $21.7 million, or approximately 12.2%, to $199.6 million compared to $177.9 million in 2021. Our net interest margin was 3.80% in 2022 compared to 3.37% for the previous year. For 2022, our return on average assets was 1.38%, return on average equity was 13.44% and our efficiency ratio was 57.05%. Since the end of 2021, total outstanding loans, excluding mortgage loans held for sale, increased by $499.3 million, or 12.5%. Our pipeline of loan commitments and the unfunded portion of loans at December 31, 2022, grew by about $402 million to $2.1 billion from the end of 2021. We continue to see growth in outstanding construction loan Our capital position remains strong and balances as the unfunded portion of those loans signiﬁcantly above regulatory well-capitalized already closed in prior periods are funded. For the thresholds. Total stockholders' equity and common seventh year in a row, our commercial lending stockholders' equity were each $533.1 million, or team originated more than $1 billion in loans - $1.8 9.4% of total assets, resulting in a book value of billion total. In 2022, we added two new loan $43.58 per common share. A primary objective for production offices (LPOs) to our footprint – one in our Company is always to maintain sufficient and Phoenix, Arizona and one in Charlotte, North To our fellow stockholders: We are pleased to share our 2022 Annual Report with you. It is only ﬁtting to begin this letter by thanking our more than 1,100 associates for their remarkable work this past year in serving our customers, communities, and each other. Our sharp focus on our customers' needs and our commitment to building long-term relationships in a challenging economic landscape were central to making 2022 an extraordinary year for our Company. 2023 marks 100 years of service for Great Southern, and in this report, you will ﬁnd information about our history and our journey forward. You will see that our past, present and future reﬂect our guiding principle of taking a longer view in how we operate our Company. This has been a key to our success for the past 100 years, requiring visionary thinking, sharp focus, and, sometimes, fortitude, and this philosophy will continue to pay dividends in the years to come. We are also focusing on the prime reason for our 100-year success and what differentiates us from others – simply, it's our people. Our centennial theme is "100 years of support." We strive every day to provide support to our customers and communities. Customers can always count on us for expert advice, tailored solutions, and extensive resources. And the level of care our associates have for our customers is unmatched. We hear the stories regularly – whether it's associates looking for ways to make sure we have the best products and services available or dropping off groceries for a customer that is struggling, our associates listen to our customers and look for ways to make their lives easier. Not only are they some of the most caring people you will meet, their capability continually astounds. They are always ready and willing to roll up their sleeves and ﬁnd a way to move forward when presented with a challenge. Having that kind of determination and skill behind us can make strategic business decisions easier. Simply put, we have always bet on the people of Great Southern, and we have never lost. Carolina. While we experienced strong production in most of 2022, we saw a marked slowing of commercial loan origination activity during the fourth quarter of 2022, which we expect to continue in 2023. Despite signiﬁcant increases in market rates during 2022, our mortgage lenders produced their second-highest year in originations totaling approximately $443 million. Some residential loans were retained in the Company's loan portfolio, and some were sold in the secondary market. In late 2022, mortgage loan production decreased substantially, and this slower pace of production is expected to continue as long as market rates remain elevated. Credit quality metrics remained excellent in 2022 at year end. Non-performing assets were $3.7 million, a decrease of $2.3 million from the end of 2021. At December 31, 2022, loan delinquencies in our portfolio remained historically low. At the end of 2022, deposits totaled $4.7 billion, with our mix shifting somewhat with our non-time account balances trending lower and time deposit balances trending higher. The increased time deposits are a mix of shorter-term retail deposits, as well as ﬁxed-rate and variable-rate brokered deposits. Overall, our deposit mix continues to be a source of strength for our Company, with checking and savings accounts representing nearly 70% of the deposit portfolio and retail certiﬁcates of deposit making up about 22%. There is strong competition for deposits in all of our markets as deposit levels have decreased throughout the banking industry, coming off the signiﬁcant surge of deposits related to the COVID-19 pandemic. 100 Years of Support Our Company's centennial is a time for celebration and reﬂection. We remember our roots, the challenges we’ve faced, and the progress we’ve made. We honor and thank all associates who have worked at Great Southern throughout our 100-year history. And more importantly, we look to the future. To our associates, customers, and communities, we are grateful to you for allowing us to be a beacon of stability for 100 years – and counting. To you, our stockholders, we are proud of our history of providing a superior long-term return on our stockholders' investment in our Company, and we thank you for your support. We welcome your feedback at any time. William V. Turner Joseph W. Turner 2023 and Beyond We look to 2023 with guarded optimism but with energy and enthusiasm in our support of all of our constituents. Our priorities will be maintaining a sharp focus on developing and expanding customer relationships, sustaining a solid credit discipline, mitigating interest rate risk, and driving operational efficiencies. We are well aware of the signiﬁcant uncertainty created by the current economic and geopolitical landscape. We are focused on ensuring that the Company is properly positioned for whatever may come our way, especially in the wake of the changing interest rate environment caused by continued inﬂationary pressures and other factors. Mitigating the risks of ﬂuctuating interest rates is a normal function of our asset and liability management; the uniqueness of current economic conditions makes it more interesting and challenging. During 2023, the Great Southern team will be highly focused on implementing a new technology platform. The new core platform and ancillary systems will improve how we do business by offering even more capabilities to our customers and giving them better control of their ﬁnances. We are excited about launching our new platform and look forward to the ease of access it will afford our customers and associates alike. The future we create depends on our decisions and actions today. Starting with investing in our people to help them grow, investing in our technology to keep us competitive, and supporting our markets because we know we can only be as strong as the communities we serve. We understand that making those investments today will yield dividends for our Company in the future. Moving forward, we pledge to keep in mind the long-term interests of those we serve and fulﬁll our mission of building winning relationships with all of our constituents. For our associates, we want to make our Company a great place to work and grow professionally. For our customers, it is our mission to build winning and lasting relationships by providing the right products and services delivered how and when they prefer. We fully recognize that our customers choose who they want to do business with each and every day, and we are gratiﬁed that we continue to earn our customers' business and their trust. For our many communities, we strive to support causes and address needs to help them be even better places to live and work. And ﬁnally, for our stockholders, we desire to provide a superior long-term return on their investment in our Company. We will continue operating the Company with a long-view perspective. It is not realistic to expect our Company, or any company, to signiﬁcantly increase earnings year after year. In any given year, we may be subject to competitive and economic forces, interest rate ﬂuctuations and other variables that may affect earnings. We will not be pressured into making short-sighted decisions, which could hurt the long-term prospects for our Company. All of our decisions keep our stockholders' long-term interests in mind as we go about our daily work. We owe a debt of gratitude to our Board of Directors for their guidance and support. We value the diversity of talent and knowledge they bring to the table. In 2022, we enthusiastically welcomed Steve Edwards to the Board. As the former CEO of CoxHealth, the largest employer in Southwest Missouri, Steve brings a wealth of knowledge. Directing a complex organization with more than 12,000 employees through the pandemic means he is no stranger to turbulent times, and we appreciate the insight and leadership he is adding to our Board of Directors. 6 2022 Results We are pleased to share that we ended 2022 in a conservative capital levels to allow for organic solid ﬁnancial position, giving us a good posture growth and other corporate initiatives and needs. for the economic headwinds we will likely face in We also look for opportunities to return capital to 2023. The Company ended the year with $5.7 our stockholders through dividends and carefully billion in assets, up from $5.4 billion in 2021. considered stock repurchases. During the year Earnings were $75.9 million, or $6.02 per diluted ended December 31, 2022, the Company declared common share, compared to $74.6 million, or regular quarterly cash dividends totaling $1.56 per $5.46 per diluted common share, for 2021. common share and repurchased approximately 1.0 Primarily as a result of a rapidly rising interest rate million shares of its common stock at an average environment, our primary source of income, net price of $59.25 to increase stockholder value. interest income, increased by $21.7 million, or approximately 12.2%, to $199.6 million compared to $177.9 million in 2021. Our net interest margin was 3.80% in 2022 compared to 3.37% for the previous year. For 2022, our return on average assets was 1.38%, return on average equity was 13.44% and our efficiency ratio was 57.05%. Since the end of 2021, total outstanding loans, excluding mortgage loans held for sale, increased by $499.3 million, or 12.5%. Our pipeline of loan commitments and the unfunded portion of loans at December 31, 2022, grew by about $402 million to $2.1 billion from the end of 2021. We continue to see growth in outstanding construction loan Our capital position remains strong and balances as the unfunded portion of those loans signiﬁcantly above regulatory well-capitalized already closed in prior periods are funded. For the thresholds. Total stockholders' equity and common seventh year in a row, our commercial lending stockholders' equity were each $533.1 million, or team originated more than $1 billion in loans - $1.8 9.4% of total assets, resulting in a book value of billion total. In 2022, we added two new loan $43.58 per common share. A primary objective for production offices (LPOs) to our footprint – one in our Company is always to maintain sufficient and Phoenix, Arizona and one in Charlotte, North To our fellow stockholders: We are pleased to share our 2022 Annual Report with you. It is only ﬁtting to begin this letter by thanking our more than 1,100 associates for their remarkable work this past year in serving our customers, communities, and each other. Our sharp focus on our customers' needs and our commitment to building long-term relationships in a challenging economic landscape were central to making 2022 an extraordinary year for our Company. 2023 marks 100 years of service for Great Southern, and in this report, you will ﬁnd information about our history and our journey forward. You will see that our past, present and future reﬂect our guiding principle of taking a longer view in how we operate our Company. This has been a key to our success for the past 100 years, requiring visionary thinking, sharp focus, and, sometimes, fortitude, and this philosophy will continue to pay dividends in the years to come. We are also focusing on the prime reason for our 100-year success and what differentiates us from others – simply, it's our people. Our centennial theme is "100 years of support." We strive every day to provide support to our customers and communities. Customers can always count on us for expert advice, tailored solutions, and extensive resources. And the level of care our associates have for our customers is unmatched. We hear the stories regularly – whether it's associates looking for ways to make sure we have the best products and services available or dropping off groceries for a customer that is struggling, our associates listen to our customers and look for ways to make their lives easier. Not only are they some of the most caring people you will meet, their capability continually astounds. They are always ready and willing to roll up their sleeves and ﬁnd a way to move forward when presented with a challenge. Having that kind of determination and skill behind us can make strategic business decisions easier. Simply put, we have always bet on the people of Great Southern, and we have never lost. Carolina. While we experienced strong production in most of 2022, we saw a marked slowing of commercial loan origination activity during the fourth quarter of 2022, which we expect to continue in 2023. Despite signiﬁcant increases in market rates during 2022, our mortgage lenders produced their second-highest year in originations totaling approximately $443 million. Some residential loans were retained in the Company's loan portfolio, and some were sold in the secondary market. In late 2022, mortgage loan production decreased substantially, and this slower pace of production is expected to continue as long as market rates remain elevated. Credit quality metrics remained excellent in 2022 at year end. Non-performing assets were $3.7 million, a decrease of $2.3 million from the end of 2021. At December 31, 2022, loan delinquencies in our portfolio remained historically low. At the end of 2022, deposits totaled $4.7 billion, with our mix shifting somewhat with our non-time account balances trending lower and time deposit balances trending higher. The increased time deposits are a mix of shorter-term retail deposits, as well as ﬁxed-rate and variable-rate brokered deposits. Overall, our deposit mix continues to be a source of strength for our Company, with checking and savings accounts representing nearly 70% of the deposit portfolio and retail certiﬁcates of deposit making up about 22%. There is strong competition for deposits in all of our markets as deposit levels have decreased throughout the banking industry, coming off the signiﬁcant surge of deposits related to the COVID-19 pandemic. 100 Years of Support Our Company's centennial is a time for celebration and reﬂection. We remember our roots, the challenges we’ve faced, and the progress we’ve made. We honor and thank all associates who have worked at Great Southern throughout our 100-year history. And more importantly, we look to the future. 2023 and Beyond We look to 2023 with guarded optimism but with mission of building winning relationships with all of energy and enthusiasm in our support of all of our our constituents. For our associates, we want to constituents. Our priorities will be maintaining a make our Company a great place to work and grow sharp focus on developing and expanding professionally. For our customers, it is our mission customer relationships, sustaining a solid credit to build winning and lasting relationships by discipline, mitigating interest rate risk, and driving providing the right products and services delivered operational efficiencies. We are well aware of the signiﬁcant uncertainty created by the current economic and geopolitical landscape. We are focused on ensuring that the Company is properly positioned for whatever may come our way, especially in the wake of the changing interest rate environment caused by how and when they prefer. We fully recognize that our customers choose who they want to do business with each and every day, and we are gratiﬁed that we continue to earn our customers' business and their trust. For our many communities, we strive to support causes and address needs to help them be even better places to live and work. continued inﬂationary pressures and other factors. And ﬁnally, for our stockholders, we desire to Mitigating the risks of ﬂuctuating interest rates is a provide a superior long-term return on their normal function of our asset and liability investment in our Company. We will continue management; the uniqueness of current economic operating the Company with a long-view conditions makes it more interesting and perspective. It is not realistic to expect our challenging. During 2023, the Great Southern team will be highly focused on implementing a new technology platform. The new core platform and ancillary systems will improve how we do business by offering even more capabilities to our customers and giving them better control of their ﬁnances. We are excited about launching our new platform and look forward to the ease of access it will afford our customers and associates alike. The future we create depends on our decisions and actions today. Starting with investing in our people to help them grow, investing in our technology to keep us competitive, and supporting our markets because we know we can only be as strong as the communities we serve. We understand that making those investments today will yield dividends for our Company in the future. Company, or any company, to signiﬁcantly increase earnings year after year. In any given year, we may be subject to competitive and economic forces, interest rate ﬂuctuations and other variables that may affect earnings. We will not be pressured into making short-sighted decisions, which could hurt the long-term prospects for our Company. All of our decisions keep our stockholders' long-term interests in mind as we go about our daily work. We owe a debt of gratitude to our Board of Directors for their guidance and support. We value the diversity of talent and knowledge they bring to the table. In 2022, we enthusiastically welcomed Steve Edwards to the Board. As the former CEO of CoxHealth, the largest employer in Southwest Missouri, Steve brings a wealth of knowledge. Directing a complex organization with more than 12,000 employees through the pandemic means he is no stranger to turbulent times, and we Moving forward, we pledge to keep in mind the appreciate the insight and leadership he is adding long-term interests of those we serve and fulﬁll our to our Board of Directors. To our associates, customers, and communities, we are grateful to you for allowing us to be a beacon of stability for 100 years – and counting. To you, our stockholders, we are proud of our history of providing a superior long-term return on our stockholders' investment in our Company, and we thank you for your support. We welcome your feedback at any time. William V. Turner Joseph W. Turner 7 GREAT SOUTHERN BANCORP, INC. DIRECTORS Kevin R. Ausburn Board Member; Chairman and CEO, SMC Packaging Group Julie Turner Brown Board Member; Shareholder, Carnahan Evans, P.C. Debra Mallonee (Shantz) Hart Board Member; Attorney; Owner, Housing Plus, LLC and Sustainable Housing Solutions Douglas M. Pitt Board Member; Owner, Pitt Technology Group, LLC and Pitt Development Group, LLC and Care to Learn Founder Thomas J. Carlson Board Member; President, Mid America Management, Inc. Earl A. Steinert, Jr. Board Member; Co-owner, EAS Investment Enterprises, Inc.; CPA Steven D. Edwards Board Member; Retired – CoxHealth Larry D. Frazier Board Member; Retired – White River Valley Electric Cooperative William V. Turner Chairman of the Board Great Southern Bancorp, Inc. Joseph W. Turner President and Chief Executive Officer Great Southern Bancorp, Inc. GREAT SOUTHERN LEADERSHIP TEAM Kevin Baker Chief Credit Officer Tammy Baurichter Controller John Bugh Chief Lending Officer Kris Conley Chief Retail Banking Officer Rex Copeland Chief Financial Officer Kelly Polonus Chief Communications and Marketing Officer Matt Snyder Chief Human Resources Officer Bryan Tiede Chief Risk Officer Joseph W. Turner President and Chief Executive Officer Debbie Flowers Director of Credit Risk Administration Henry Heimsoth Director of Commercial Lending Eric Johnson Chief Information Officer Mark Maples Chief Operations Officer Jeff Patrick Director of Physical Operations 8 SELECTED FINANCIAL DATA The following table sets forth selected consolidated financial information and other financial data of the Company. The summary statement of financial condition information and statement of income information are derived from our consolidated financial statements, which have been audited by FORVIS, LLP. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Item 8. “Financial Statements and Supplementary Information” in the Company’s Annual Report on Form 10-K. Results for past periods are not necessarily indicative of results that may be expected for any future period. Summary Statement of Financial Condition Information (Dollars in Thousands) Assets Loans receivable, net Allowance for credit losses on loans Available-for-sale securities Held-to-maturity securities Other real estate and repossessions, net Deposits Total borrowings and other interest-bearing liabilities Stockholders’ equity (retained earnings substantially restricted) Common stockholders’ equity Average loans receivable Average total assets Average deposits Average stockholders’ equity Number of deposit accounts Number of full-service offices December 31, 2022 2021 2020 2019 2018 $5,680,702 4,511,647 63,480 490,592 202,495 $5,449,944 4,016,235 60,754 501,032 — $5,526,420 4,314,584 55,743 414,933 — $5,015,072 4,163,224 40,294 374,175 — $4,676,200 3,990,651 38,409 243,968 — 233 4,684,910 2,087 4,552,101 1,877 4,516,903 5,525 3,960,106 8,440 3,725,007 366,481 238,713 339,863 412,374 397,594 533,087 533,087 4,386,042 5,519,790 4,607,363 565,173 232,688 92 616,752 616,752 4,274,176 5,502,356 4,539,740 627,516 229,942 93 629,741 629,741 4,399,259 5,323,426 4,330,271 622,437 229,470 94 603,066 603,066 4,155,780 4,855,007 3,889,910 571,637 228,247 97 531,977 531,977 3,910,819 4,503,326 3,556,240 498,508 227,240 99 9 Summary Statement of Income Information (in Thousands) Interest income: Loans Investment securities and other Interest expense: Deposits Federal Home Loan Bank advances Securities sold under reverse repurchase agreements Short-term borrowings, overnight FHLBank borrowings and other interest-bearing liabilities Subordinated debentures issued to capital trust Subordinated notes Net interest income Provision (credit) for credit losses on loans Provision for unfunded commitments For the Year Ended December 31, 2022 2021 2020 2019 2018 $ 205,751 $ 186,269 $ 204,964 $ 223,047 $ 198,226 21,226 12,404 12,739 11,947 7,723 226,977 198,673 217,703 234,994 205,949 20,676 13,102 32,431 45,570 — 324 1,066 875 4,422 — 37 — 448 — 31 644 628 7,165 6,831 — 19 3,616 1,019 4,378 27,363 20,752 40,565 54,602 27,957 3,985 31 734 953 4,097 37,757 199,614 177,921 177,138 180,392 168,192 3,000 3,187 (6,700 ) 15,871 6,150 7,150 939 — — — Net interest income after provision (credit) for credit losses and provision for unfunded commitments 193,427 183,682 161,267 174,242 161,042 Non-interest income: Commissions Overdraft and insufficient funds fees 1,208 7,872 1,263 6,686 892 6,481 Point-of-sale and ATM fee income and service charges 15,705 15,029 12,203 Net gain on loan sales Net realized gain (loss) on sales of available-for-sale securities Late charges and fees on loans Gain (loss) on derivative interest rate products Gain recognized on sale of business units Other income 2,584 (130 ) 1,182 321 — 9,463 8,089 — 1,434 312 — 78 1,419 (264 ) — 5,399 4,130 6,152 34,141 38,317 35,050 889 8,249 12,649 2,607 (62 ) 1,432 (104 ) — 5,297 30,957 1,137 8,688 13,007 1,788 2 1,622 25 7,414 2,535 36,218 Non-interest expense: Salaries and employee benefits Net occupancy and equipment expense Postage Insurance Advertising Office supplies and printing Telephone Legal, audit and other professional fees Expense on other real estate and repossessions Acquired deposit intangible asset amortization 75,300 28,471 70,290 29,163 70,810 27,582 63,224 26,217 60,215 25,628 3,379 3,197 3,261 867 3,170 6,330 359 768 3,164 3,061 3,072 848 3,458 6,555 627 863 3,069 2,405 2,631 1,016 3,794 2,378 2,023 1,154 6,363 3,198 2,015 2,808 1,077 3,580 2,624 2,184 1,190 7,021 3,348 2,674 2,460 1,047 3,272 3,423 4,919 1,562 6,762 Other operating expenses 8,264 6,534 Income before income taxes Provision for income taxes Net income 133,366 127,635 123,225 115,138 115,310 94,202 18,254 94,364 19,737 73,092 13,779 90,061 16,449 81,950 14,841 $ 75,948 $ 74,627 $ 59,313 $ 73,612 $ 67,109 10 (Number of shares in thousands) Per Common Share Data: Basic earnings per common share Diluted earnings per common share Cash dividends declared Book value per common share Average shares outstanding Year-end actual shares outstanding Average fully diluted shares outstanding Earnings Performance Ratios: Return on average assets(1) Return on average stockholders’ equity(2) Non-interest income to average total assets Non-interest expense to average total assets Average interest rate spread(3) Year-end interest rate spread Net interest margin(4) Efficiency ratio(5) Net overhead ratio(6) Common dividend pay-out ratio(7) At or For the Year Ended December 31, 2022 2021 2020 2019 2018 $ 6.07 6.02 1.56 43.58 12,517 12,231 12,607 $ 5.50 5.46 1.40 46.98 13,558 13,128 13,674 $ 4.22 4.21 2.36 45.79 14,043 13,753 14,104 $ 5.18 5.14 2.07 42.29 14,201 14,261 14,330 $ 4.75 4.71 1.20 37.59 14,132 14,151 14,260 1.38 % 1.36 % 13.44 0.62 2.42 3.59 3.63 3.80 57.05 1.80 25.91 11.89 0.70 2.32 3.22 3.20 3.37 59.03 1.62 25.64 1.11 % 9.53 0.66 2.31 3.23 3.08 3.49 58.07 1.66 56.06 1.52 % 1.49 % 12.88 0.64 2.37 3.62 3.28 3.95 54.48 1.73 40.27 13.46 0.80 2.56 3.75 3.60 3.99 56.41 1.76 25.48 Asset Quality Ratios (8): Allowance for credit losses/year-end loans Non-performing assets/year-end loans and foreclosed assets Allowance for credit losses/non-performing loans Net charge-offs/average loans Gross non-performing assets/year end assets Non-performing loans/year-end loans Balance Sheet Ratios: Loans to deposits Average interest-earning assets as a percentage of average interest-bearing liabilities 1.39 % 0.08 1,729.69 0.01 0.07 0.08 1.49 % 0.15 1,120.31 0.00 0.11 0.13 1.32 % 0.09 1,831.86 0.01 0.07 0.07 1.00 % 0.19 891.66 0.10 0.16 0.11 0.98 % 0.29 609.67 0.13 0.25 0.16 96.30 % 88.23 % 95.52 % 105.13 % 107.13 % 140.32 139.94 132.49 127.50 126.47 Capital Ratios: Average common stockholders’ equity to average assets Year-end tangible common stockholders’ equity to tangible assets(9) Great Southern Bancorp, Inc.: Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Common equity Tier 1 ratio Great Southern Bank: Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Common equity Tier 1 ratio 10.2 % 9.2 11.4 % 11.2 11.7 % 11.3 11.8 % 11.9 11.1 % 11.2 11.0 13.5 10.6 10.6 11.9 13.1 11.5 11.9 13.4 16.3 11.3 12.9 14.1 15.4 11.9 14.1 12.7 17.2 10.9 12.2 13.7 14.9 11.8 13.7 12.5 15.0 11.8 12.0 13.1 14.0 12.3 13.1 11.9 14.4 11.7 11.4 12.4 13.3 12.2 12.4 (1) Net income divided by average total assets. (2) Net income divided by average stockholders’ equity. (3) Yield on average interest-earning assets less rate on average (7) Cash dividends per common share divided by earnings per common share. (8) Prior to January 1, 2021, the ratio excluded the FDIC-assisted acquired interest-bearing liabilities. loans. (4) Net interest income divided by average interest-earning assets. (5) Non-interest expense divided by the sum of net interest income plus non-interest income. (6) Non-interest expense less non-interest income divided by (9) Non-GAAP Financial Measure. For additional information, including a reconciliation to GAAP, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures” in the Company’s Annual Report on Form 10-K. average total assets. 11 A HISTORY of SUCCESS Great Southern Bank was established with a $5,000 investment and four employees in 1923. By 1974, we had 12 employees, and now today we have more than 1,100 dedicated associates serving customers across 13 states. While experiencing exponential growth, our Company has received many accolades for our successes through the years. Ranking on the ABA Journal’s “Banking’s Top Performers,” being recognized for producing the ﬁfth best total all-time shareholder return by Bank Director, and placement in the top ten on Forbes’ list of World’s Best Banks since 2020, are just some of our distinctions. Since 1923, our associates have worked diligently to provide a superior banking experience and these recognitions underscore their commitment. AND FORWARD 1923 March 1, 1923 Great Southern Savings & Loan Association was established. Early customers were served from the lobby of the Hotel Seville on historic Walnut Street in Springﬁeld, Missouri. 1950s Great Southern was a vital part of downtown Springﬁeld. 1974 William V. Turner joined Great Southern as the fourth president. His commercial banking background and philanthropic spirit led to a new operating philosophy for the Company. 1974 Great Southern opened a banking center in Branson – making it the second location and igniting the spark of a major expansion across The Ozarks. 1980 Our reach expanded to 15 banking centers and eight communities, along with the opportunity to offer new products, including checking accounts, consumer and commercial loans. 1976 Our continuing growth was reﬂected in a new larger headquarters, allowing us to expand our services to our customers. 1990 The Company changed charters and its name to Great Southern Savings Bank – signaling the emphasis on helping businesses and individuals alike with their ﬁnancial needs. 2000 The Company reached a major milestone with $1 billion in total assets. 2006 Great Southern Bancorp, Inc. gained inclusion in the new NASDAQ Global Select Market. 2014-2022 LPOs were opened in Dallas, Tulsa, Omaha, Chicago, Atlanta, Denver, Phoenix and Charlotte, expanding Great Southern’s reach beyond the Midwest. December 31, 2022 ASSETS $5.7 Billion LOANS $4.6 Billion DEPOSITS $4.7 Billion STOCKHOLDERS' EQUITY $533 Million 1989: Great Southern became a public company with an initial public offering of $9.00 per share ($0.75 per share – split-adjusted basis). 1999 Joseph W. Turner named CEO and president, making him the ﬁfth in the Company’s history. 2003 Great Southern opened its ﬁrst LPO in Kansas City, beginning a new era of commercial lending success. 2009-2015 While many banks were shrinking or closing in response to the Great Recession, we were growing and thriving. We acquired ﬁve banks through FDIC-assisted acquisitions, expanding our footprint into Iowa, Kansas, Minnesota and Nebraska, and purchased a total of 12 branch offices and deposits in Missouri from two ﬁnancial institutions. During this time, we welcomed thousands of new customers, fantastic associates and introduced ourselves to many new markets. March 1, 2023 Marks 100 years of supporting our customers in over 100 communities. Celebrating 100 Days of Financial Education We’ve always been a strong supporter of education because we understand that a solid foundation sets individuals up for a lifetime of success. That’s why our associates will make at least 100 ﬁnancial education presentations this year. Associate Engagement From testing their company knowledge to seeing their hidden talents, we are celebrating our centennial in many ways with our associates. A small committee from across the Company worked together to plan activities and prizes for everyone all year long. Customer Appreciation Our customers are the reason why we come to work each day, and we are excited to celebrate with them. Every location will host a customer appreciation month in late 2023. 100 Days of Giving No one knows our communities better than the associates who live there. Because they understand what really matters, each of our locations has been given $1,000 to donate where the need is greatest. Planting for the Future Working with the National Forest Service, we’ve committed to planting 2,023 trees where they are needed most. The seeds we sow today will allow our communities to reap the rewards for years to come. 14 EXPANDING our REACH 92 Banking Centers 1 Home Loan Office 8 Loan Production Offices 134,000+ Households 13 States A Strong Presence The Great Southern sun can be found rising and setting over offices in 13 states. From humble beginnings as a Savings and Loan Association focusing on mortgage loans, we’ve grown and expanded our services. Now offering a comprehensive lineup of products and serving individuals, families, businesses and developers big and small, we keep an eye out for the right opportunities for growth. Charlotte, NC Capitalizing on the success of our commercial lending offices, we expanded our footprint to the East, opening our eighth LPO in Charlotte in June of 2022. Charlotte is a dynamic market, and ﬁnding an individual with market familiarity was critical. Charles “Chip” Brinkman is using his in-market experience to ensure success of our newest commercial lending office. Phoenix, AZ We set our sights on the growing and vibrant Phoenix market to expand our commercial lending presence. In February of 2022, we opened our seventh LPO. We knew that selecting the right individual would be vital to the success of the new office. Justin Lutz is a Phoenix banking veteran bringing more than 17 years of lending experience to our Company. 15 DESIGNING for OUR FUTURE Great Southern Bank Express In January of 2023, we razed our Elﬁndale banking center to make way for a ﬁrst-of-its kind facility in Springﬁeld. Great Southern Express will feature four drive-up Interactive Teller Machines (ITMs), or video tellers, for extended banking access. Customers who utilize this new facility will have access to a live Teller from 7 a.m. – 7 p.m. Monday – Sunday and an ATM 24/7. ITMs merge the convenience of a drive-up teller window with the accessibility of an ATM. The Express center is expected to open later this year. Building our Modern Brand As part of our ongoing Branch Refresh Program, we completed a total rebuild of our Kimberling City banking center and welcomed customers into the new space in October. The banking center offers better functionality for our customers and associates with a sleek, modern design. Our Operations Center also received a fresh, contemporary look in 2022. The banking center followed a similar blueprint as previous banking center remodels, with a clean and simpliﬁed space for customers to complete their business. The new back-office workspaces feature colorful and inspiring designs. Providing a functional and welcoming environment for our current and prospective associates was a top priority. 16 2022 Financial Information CONTENTS 18 Management’s Discussion and Analysis of Financial Condition and Results of Operations 55 Quantitative and Qualitative Disclosures About Market Risk 62 Report of Independent Registered Public Accounting Firm 65 Consolidated Statements of Financial Condition 67 Consolidated Statements of Income 69 Consolidated Statements of Comprehensive Income 70 Consolidated Statements of Stockholders’ Equity 72 Consolidated Statements of Cash Flows 74 Notes to Consolidated Financial Statements 17 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-looking Statements When used in this Annual Report and in other 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. 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, and labor shortages might be greater than expected; (ii) changes in economic conditions, either nationally or in the Company's market areas; (iii) the remaining effects of the COVID-19 pandemic, including on our credit quality and business operations, as well as its impact on general economic and financial market conditions and other uncertainties resulting from the COVID-19 pandemic; (iv) fluctuations in interest rates and the effects of inflation, a potential recession or slower economic growth caused by changes in energy prices or supply chain disruptions; (v) the risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses; (vi) the possibility of realized or unrealized losses on securities held in the Company's investment portfolio; (vii) the Company's ability to access cost-effective funding; (viii) fluctuations in real estate values and both residential and commercial real estate market conditions; (ix) the ability to adapt successfully to technological changes to meet customers' needs and developments in the marketplace; (x) 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; (xi) legislative or regulatory changes that adversely affect the Company's business; (xii) changes in accounting policies and practices or accounting standards; (xiii) 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 in this report, including, without limitation, those described under “Item 1A. Risk Factors,” and from time to time in other documents filed or furnished by the Company with the SEC, could affect the Company’s financial performance and 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. 1 18 Critical Accounting Policies, Judgments and Estimates The accounting and reporting policies of the Company conform with accounting principles generally accepted in the United States and general practices within the financial services industry. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates. Allowance for Credit Losses and Valuation of Foreclosed Assets The Company believes that the determination of the allowance for credit losses involves a higher degree of judgment and complexity than its other significant accounting policies. The allowance for credit losses is calculated with the objective of maintaining an allowance level believed by management to be sufficient to absorb estimated credit losses. The allowance for credit losses is measured using an average historical loss model that incorporates relevant information about past events (including historical credit loss experience on loans with similar risk characteristics), current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the loans. The allowance for credit losses is measured on a collective (pool) basis. Loans are aggregated into pools based on similar risk characteristics, including borrower type, collateral and repayment types and expected credit loss patterns. Loans that do not share similar risk characteristics, primarily classified 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. For additional discussion of the allowance for credit losses, see “Item 1. Business – Allowance for Credit Losses and Foreclosed Assets” in the Company’s 2022 Annual Report on Form 10-K. 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 during the periods presented in the financial statements of this report 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 3 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. 2 19 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 December 31, 2022, the Company has one reporting unit to which goodwill has been allocated – the Bank. If the fair value of a reporting unit exceeds its carrying value, then no impairment is recorded. If the carrying value amount exceeds the fair value of a reporting unit, further testing is completed comparing the implied fair value of the reporting unit’s goodwill to its carrying value to measure the amount of impairment. Intangible assets that are not amortized will be tested for impairment at least annually by comparing the fair values of those assets to their carrying values. At December 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 related deposits in the St. Louis market. Other identifiable intangible assets that are subject to amortization are amortized on a straight-line basis over a period of seven years. In April 2022, the Company, through its subsidiary Great Southern Bank, entered into a naming rights agreement with Missouri State University related to the main arena on the university’s campus in Springfield, Missouri. The terms of the agreement provide the naming rights to Great Southern Bank for a total cost of $5.5 million, to be paid over a period of seven years. The Company expects to amortize the intangible asset through non-interest expense over a period not to exceed 15 years. At December 31, 2022, the amortizable intangible assets consisted of core deposit intangibles of $53,000 and the arena naming rights of $5.4 million. These amortizable intangible assets are reviewed for impairment if circumstances indicate their value may not be recoverable based on a comparison of fair value. See Note 1 of the accompanying audited financial statements for additional information. 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. Based on the Company’s goodwill impairment testing, management does not believe any of the Company’s goodwill or other intangible assets were impaired as of December 31, 2022. While management believes no impairment existed at December 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. 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 affect the Company’s ability to meet regulatory capital requirements and maintain sufficient liquidity. Following the housing and mortgage crisis and correction beginning in mid-2007, the United States entered an economic downturn. Unemployment rose from 4.7% in November 2007 to peak at 10.0% in October 2009. Economic conditions improved in the subsequent years, as indicated by higher consumer confidence levels, increased economic activity and low unemployment levels. The U.S. economy continued to operate at historically strong levels until the COVID-19 pandemic in March 2020, which severely affected tourism, labor markets, business travel, immigration and the global supply chain, among other areas. The economy plunged into recession in the first quarter of 2020, as efforts to contain the spread of the coronavirus forced all but essential business activity, or any work that could not be done from home, to stop, shuttering factories, restaurants, entertainment, sports events, retail shops, personal services, and more. Currently, the pandemic continues to recede and is thus becoming less disruptive to the U.S. and global economies. While there are likely to be future waves of the virus, governments, households and businesses are increasingly adept at adjusting to the virus. More than 22 million jobs in the U.S. 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. The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), a fiscal relief bill passed by Congress and signed by the President in March 2020, injected approximately $3 trillion into the economy through direct payments to individuals and loans to small businesses that would help keep employees on their payroll, fueling a historic bounce-back in economic activity. 3 20 Total fiscal support to the economy throughout the pandemic, including the CARES Act passed into law in March 2020, the American Rescue Plan of March 2021, and several smaller fiscal packages, totaled well over $5 trillion. The amount of this support was equal to almost 25% of pre-pandemic 2019 GDP and approximately three times that provided during the global financial crisis of 2007-2008. Additionally, the Federal Reserve slashed its benchmark interest rate to near zero and ensured credit availability to businesses, households, and municipal governments. The Federal Reserve’s efforts largely insulated the financial system from the problems in the economy, a significant difference from the financial crisis of 2007-2008. Purchases of Treasury and agency mortgage-backed securities totaling $120 billion each month by the Federal Reserve commenced shortly after the pandemic began. In November 2021, the Federal Reserve began to taper its quantitative easing (QE), winding down its bond purchases with its final open market purchase conducted on March 9, 2022. The Federal Reserve raised the federal funds interest rate 4.25% in 2022 and indicates that it expects to continue to further tighten monetary policy. Policymakers are strongly signaling they will raise rates further into 2023, and that they will allow the Fed’s balance sheet to shrink through quantitative tightening. The federal government deficit was $2.8 trillion in fiscal 2021, close to $1.4 trillion in fiscal 2022, and is expected to narrow to $850 billion in fiscal 2023. The publicly traded debt-to-GDP ratio is near 95%, up from 80% prior to the pandemic and 35% prior to the global financial crisis. Real gross domestic product (GDP) increased at an annual rate of 2.9% in the fourth quarter of 2022 according to the “advance” estimate released by the Bureau of Economic Analysis. In the third quarter of 2022, real GDP increased 3.2%. The increase in the fourth quarter of 2022 primarily reflected increases in inventory investment and consumer spending that were partly offset by a decrease in housing investment. Prompting the Fed to take such a hawkish policy stance is the painfully high inflation, prompted largely by pandemic-related disruptions to global supply chains and labor markets, and Russia’s invasion of Ukraine, which pushed up oil and other commodity prices. Adding to the pressure to act is the resilient growth in jobs, low unemployment in the mid-3s (consistent with full employment), and overly strong wage growth. The unemployment rate returned to its post-pandemic low of 3.5%, and it did so even as the labor force expanded by 439,000 and the participation rate edged higher to 62.3%. The unemployment rate was down or unchanged across most major demographic groups. However, the least educated workers saw an increase in joblessness from 4.4% to 5%. The Fed increased the fed funds rate by 50 basis points at the December 2022 meeting of the Federal Open Market Committee and by another 25 basis points at its meeting on January 31 – February 1, 2023. This brought the funds rate target to 4.5% to 4.75%. The Fed also continues to allow the assets on its balance sheet, including more than $8 trillion remaining in Treasury and mortgage- backed securities, to mature and prepay. Nearly $100 billion in securities are expected to run off monthly. Persistent shortages of materials and labor and snags in supply chains have caused prices to vault higher for months. The annual increase in the inflation rate as of December 2022 was 6.5% compared to December 2021 as measured by the consumer price index. The recently passed Inflation Reduction Act raises nearly $750 billion over the next decade through higher taxes on large corporations and wealthy individuals and lower Medicare prescription drug costs, to pay for nearly $450 billion in tax credits and deductions and additional government spending to address climate change and lower health insurance premiums for Americans who benefit from the Affordable Care Act. The remaining more than $300 billion is intended to go toward reducing future budget deficits. OPEC’s recent decision to cut its production quotas has pushed oil prices back up toward $100 per barrel. Prices had slumped to less than $90 per barrel on a weaker global economy and oil demand, the strong U.S. dollar, and the European Union’s slow implementation of sanctions on its imports of Russian oil. Ten-year Treasury yields are close to 4% as global bond investors digest the implications of the Fed’s aggressive monetary actions. Yields are consistent with their estimated long-run equilibrium, which is consistent with Moody’s Analytic’s estimate of nominal potential GDP growth of 4% (2% long-run inflation plus 2% real potential GDP growth). Employment The national unemployment rate edged down to 3.5% in December 2022, a decrease from 3.9% in December 2021. The number of unemployed individuals decreased to 5.7 million, with the economy adding 223,000 jobs in December 2022. The economy has added 4.5 million jobs for a total of more than 10.7 million new jobs over the past two years. Unemployment levels have now recovered to pre-pandemic levels as of February 2020 when the unemployment rate registered at 3.5% and there were 5.7 million unemployed individuals. 4 21 Notable job gains occurring in December 2022 were in the leisure and hospitality, healthcare, construction and social assistance sectors. Job cuts in technology and housing have occurred in recent months due to concerns of a recession as the Federal Reserve aggressively tightens monetary policy to quell inflation. As of December 2022, the labor force participation rate (the share of working-age Americans employed or actively looking for a job) remained little changed at 62.3%. The unemployment rate for the Midwest, where the Company conducts most of its business, has decreased from 4% in December 2021 to 3.6% in December 2022. Unemployment rates for December 2022 in the states where the Company has a branch or loan production offices were Arizona at 4.0%, Arkansas at 3.6%, Colorado at 3.3%, Georgia at 3.0%, Illinois at 4.7%, Iowa at 3.1%, Kansas at 2.9%, Minnesota at 2.5%, Missouri at 2.8%, Nebraska at 2.6%, North Carolina at 3.9%, Oklahoma at 3.4%, and Texas at 3.9%. Of the metropolitan areas in which the Company does business, most are below the national unemployment rate of 3.5% for December 2022, with the major outlier being Chicago at 4.2%. Single Family Housing Sales of new single-family houses in December 2022 were at a seasonally adjusted annual rate of 616,000, according to U.S. Census Bureau and Department of Housing and Urban Development estimates. This is 2.3% above the revised November 2022 rate of 602,000 but 28.6% below the December 2021 estimate of 839,000. An estimated 644,000 new homes were sold in 2022. This is 16.4% below the 2021 total of 771,000. The median new home sales price in December 2022 was $442,100, up from $410,000 in December 2021. The average sales price in December 2022 of $528,400 was up from $491,000 in December 2021. The inventory of new homes for sale, at an estimated 461,000 at the end of December 2022, would support 9.0 months of sales at the current sales rate. National existing-home sales in December 2022 declined for the eleventh consecutive month to a seasonally adjusted annual rate of 4.02 million. Sales were down 1.5% from November 2022 and 34.0% from December 2021. Existing–home sales in the Midwest slid 1.0% from November 2022 to an annual rate of 1.01 million in December 2022, falling 30.3% from December 2021 sales. The median existing-home sales price nationally as of December 30, 2022 climbed 2.3% to $366,900 from $358,800 as of December 2021. This marked 130 consecutive months of year-over-year increases, the longest running streak on record. The median price in the Midwest was $262,000, up 2.9% from the prior year median Midwest price. Nationally, properties on average remained on the market for 26 days in December 2022, up from 24 days in November 2022 and 19 days in December 2021. The inventory of unsold existing homes at the end of December 2022 was 970,000, which was down 13.4% from November 2022 but up 10.2% from December 2021. Unsold inventory in December 2022 represents 2.9 months’ supply at the current monthly sales pace, down from 3.3 months in November but up from 1.7 months in December 2021. The housing market continues to feel the impact of sharply rising mortgage rates and higher inflation on housing affordability. If consumer price inflation continues to remain at current levels, mortgage rates can be expected to move higher. Additionally, while home prices have consistently increased due to tight supply, prices may decline as available inventory increases due to lower demand. First-time buyers accounted for 31% of sales in December 2022, up from 28% in November 2022 and 30% in December 2021. According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.33% as of December 2022 which is up from 3.56% as of December 2021. The average for all of 2022 was 5.34%. Multi-Family Housing and Commercial Real Estate During 2021, multi-family demand significantly outpaced supply additions and drove rent growth to new records. In 2022, demand receded well below new deliveries as economic uncertainty held back household formations. With new deliveries outpacing demand, national year-over-year rent growth pulled back dramatically from 11.0% to 3.1% 5 22 Midwest and Northeast markets fared the best over the past 12 months, with rent growth down marginally. St. Louis and Kansas City registered 2022 annual rent growth of 5.7%, which remains significantly higher than their 5-year pre-pandemic average. The overall downward movement of rents may continue during 2023 as the risk of recession hangs over the economy, holding back multifamily demand. Nationally, absorption totaled only 141,000 units in 2022, well below the record totals posted in 2021 but also below average compared to pre-pandemic figures. This is a concern as the majority of demand occurred during the first two quarters of the year and trended much weaker in the second half of 2022. The tempering of demand was likely due to rising inflation cutting into potential renter households' budgets. The moderating absorption nationally conversely hit at an inopportune time, as 435,000 new units were delivered during the fourth quarter of 2022. The resulting supply/demand imbalance pushed the vacancy rate up to up to 6.5%. While no oversupply of multifamily exists nationally, there are several markets in which construction deliveries have outpaced recent demand growth. Vacancy rates in 1 & 2 Star and the 3 Star properties remain below the national 6.3% vacancy rate. On the other side of the price spectrum, 4 & 5 Star assets have recently been witnessing a vacancy rate increase after hitting an all-time low in the third quarter of 2021 of 6.4%. The 4 & 5 Star vacancy rate since then has increased to 8.3% at the end of 2022. As most new developments are luxury mid- and high-rise buildings, a slowing of demand at this price point will immediately impact overall vacancy rates. New developments at the luxury price point cannot readily increase demand for their units by trying to draw 3 Star households with large concession packages. Therefore, the potential demand for newly developed 4 & 5 Star properties remains dependent on an expanding pool of high-income renter households. Investment capital remained focused on the multifamily sector during the fourth quarter of 2022, as multifamily transaction activity topped the four major real estate sectors. However, the combination of rising interest rates, more expensive debt and lower pro-forma rents may lead to 4 and 5 Star cap rates rising during 2023. Some investors have already moved to the sidelines as they await further signaling on the direction of economic growth and the Federal Reserve's inflation fighting. As of December 31, 2022, national multifamily market vacancy rates increased to 6.4%. Our market areas reflected the following apartment vacancy levels as of December 2022: Springfield, Missouri at 3.1%, St. Louis at 8.7%, Kansas City at 6.7%, Minneapolis at 7.4%, Tulsa, Oklahoma at 8.1%, Dallas-Fort Worth at 8.2 %, Chicago at 5.4%, Atlanta at 9.0%, Phoenix at 9.2%, Denver at 7.7% and Charlotte, North Carolina at 8.8%. Job growth in major office-using industries turned negative at the end of 2022. The pace of layoffs accelerated, especially in the technology sector, which had previously been in an expansion mode. Uncertainty remains the prevailing theme, as firms continue to debate workplace schedules and assess real estate requirements. Multiple factors could stress both office leasing and sales activity and pricing in the office market going forward; including higher interest rates and subsequent cost of debt, slowing economic growth and a continued shift to remote and hybrid workplace schedules. The current oversupply of available space, both existing and forthcoming, point to downside risk with a full recovery in the office market likely a long-term proposition. As of December 31, 2022, national office vacancy rates increased to 12.7% from 12.5% as of September 30, 2022, while our market areas reflected the following vacancy levels at December 31, 2022: Springfield, Missouri at 4.3%, St. Louis at 10.2%, Kansas City at 10.6%, Minneapolis at 10.9%, Tulsa, Oklahoma at 11.3%, Dallas-Fort Worth at 17.7%, Chicago at 15.2%, Atlanta at 14.2%, Denver at 14.7%, Phoenix at 15.2% and Charlotte, North Carolina at 12.1%. The retail sector remains in expansion mode despite growing headwinds from inflation and rising interest rates. Overall, consumers continue to spend at a very healthy clip, though the increased cost of necessities such as food, gas, and housing are starting to weigh on the real growth of spending for non-essential goods. Leasing activity for smaller spaces is being overwhelmingly driven by growth in quick service restaurants and cellular service retailers. While demand for retail space is on the rise, construction activity continues to fall. Most recent construction activity has consisted of single-tenant build-to-suits or smaller ground floor spaces in mixed-use developments. Due to growing demand and minimal new supply, vacancy rates declined across most retail segments as of fourth quarter of 2022. Rents increased at 3.8% over the most recent 12 month period, with retail tenants appearing to shrug off concerns surrounding inflation, rising interest rates and a potential recession. However, rent growth has slowed in each of the past two quarters and is forecast to decelerate further over coming quarters due to above-average inflation. 6 23 During the fourth quarter of 2022, national retail vacancy rates declined slightly to 4.2% while our market areas reflected the following vacancy levels: Springfield, Missouri at 3.3%, St. Louis at 5.1%, Kansas City at 4.2%, Minneapolis at 3.1%, Tulsa, Oklahoma at 3.2%, Dallas-Fort Worth at 4.7%, Chicago at 5.4%, Atlanta at 3.8%, Phoenix at 5.2%, Denver at 4.0%, and Charlotte, North Carolina at 3.5 %. 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. U.S. industrial leasing has held up remarkably well despite rising interest rates and stubbornly high inflation rates eroding household purchasing power. Even when adjusted for inflation, consumer goods sales are still booming and coming in well above their pre-pandemic growth trend every month. The supply of U.S. industrial properties is set to grow by almost 4% in 2023, marking the fastest pace of supply growth the market has seen in more than three decades. Construction starts on new industrial projects peaked during the first three quarters of 2022. With typical construction times for these projects of about one year, deliveries look set to remain elevated throughout 2023. Amid increased concerns of rising interest rates causing values of newly-delivered projects to dip below replacement costs, developers pulled back 30-40% on construction starts during fourth quarter of 2022. This pullback signals that by spring 2024, the number of new projects completing construction each quarter will begin to slow. This slowdown will somewhat be mitigated by the planned opening of 18+ electric vehicle, battery and semiconductor plants across the U.S. during 2024-2025 which may result in millions of additional square footage leasing over that period. A decline in rent growth during 2024-25 is anticipated due the elevated deliveries with industrial rent growth already slowing heading into 2023, from the 3% quarterly gains recorded a year ago to 2% quarterly growth as of first quarter 2023. Increases in rent growth look unlikely in 2023, as landlords may be contending with a high number of speculative development projects completing at a time when 2022's sharp interest rate increases will likely still be weighing on the macro economy. At December 31, 2022, national industrial vacancy rates increased slightly to 4.2% over the previously recorded record low of 4.0% during third quarter 2022. Our market areas reflected the following vacancy levels: Springfield, Missouri at 1.2%, St. Louis at 4.2%, Kansas City at 3.3%, Minneapolis at 3.0%, Tulsa, Oklahoma at 4.2%, Dallas-Fort Worth at 5.7%, Chicago at 3.9%, Atlanta at 3.9%, Phoenix at 4.9%, Denver at 6.0% and Charlotte, North Carolina at 5.3%. Our management will continue to monitor regional, national, and global economic indicators such as unemployment, GDP, housing starts and prices, consumer sentiment, commercial real estate price index and commercial real estate occupancy, absorption and rental rates, as these could significantly affect customers in each of our market area. 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. Customers can conduct their banking business using our banking center network, online and mobile banking services, ATMs, Telephone Banking, and online account opening services. COVID-19 infection rates currently are relatively low in our markets and the CDC has relaxed most restrictions that were previously in place. In some cases those restrictions have been replaced with recommendations. Also, states and local municipalities may restrict certain activities from time to time. 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 actively participated in the Paycheck Protection Program (“PPP”) through the SBA. In total, we originated approximately 3,250 PPP loans, totaling approximately $179 million. SBA forgiveness was approved and processed, and full repayment proceeds were received by us, for virtually all of these PPP loans during 2021 and early 2022. 7 24 Great Southern received fees from the SBA for originating PPP loans based on the amount of each loan. At December 31, 2022, there were no material remaining net deferred fees related to PPP loans. The fees, net of origination costs, were deferred in accordance with standard accounting practices and accreted to interest income on loans over the contractual life of each loan. If loans are repaid prior to their contractual maturity date, remaining deferred fees are accreted to interest income at that time. In the years ended December 31, 2022 and 2021, Great Southern recorded approximately $502,000 and $5.5 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 its net interest income, as well as provisions for credit losses and the level of non-interest income and non-interest expense. Net interest income is the difference between the interest income the Bank earns on its loans and investment 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. In the year ended December 31, 2022, Great Southern’s total assets increased $230.8 million, or 4.2%, from $5.45 billion at December 31, 2021, to $5.68 billion at December 31, 2022. Full details of the current year changes in total assets are provided below, under “Comparison of Financial Condition at December 31, 2022 and December 31, 2021.” Loans. In the year ended December 31, 2022, Great Southern’s net loans increased $499.3 million, or 12.5%, from $4.01 billion at December 31, 2021, to $4.51 billion at December 31, 2022. This increase was primarily in one- to four-family residential loans, construction loans, other residential (multi-family) loans, and commercial real estate loans. As loan demand is affected by a variety of factors, including general economic conditions, and because of the competition we face and our focus on pricing discipline and credit quality, 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), commercial real estate and one- to four family residential 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, Charlotte, Chicago, Dallas, Denver, Omaha, Phoenix 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 discontinued indirect auto loan originations. Of the total loan portfolio at December 31, 2022 and 2021, 89.4% and 88.1%, respectively, was secured by real estate, as this is the Bank’s primary focus in its lending efforts. At December 31, 2022 and 2021, commercial real estate and commercial construction loans were 50.8% and 52.6% of the Bank’s total loan portfolio, respectively. Commercial real estate and commercial construction loans generally afford the Bank an opportunity to increase the yield on, and the proportion of interest rate sensitive loans in, its portfolio. They do, however, present somewhat greater risk to the Bank because they may be more adversely affected by conditions in the real estate markets or in the economy generally. At December 31, 2022, loans made in the Springfield, Missouri metropolitan statistical area (Springfield MSA) comprised 7% of the Bank’s total loan portfolio, compared to 8% at December 31, 2021. The Company’s headquarters are located in Springfield and we have operated in this market since 1923. Loans made in the St. Louis 8 25 metropolitan statistical area (St. Louis MSA) comprised 18% of the Bank’s total loan portfolio at December 31, 2022, compared to 19% at December 31, 2021. The Company’s expansion into the St. Louis MSA beginning in May 2009 has provided an opportunity to not only diversify from the Springfield MSA, but also has provided access to a larger economy with increased lending opportunities despite higher levels of competition. Loans made in the St. Louis MSA are primarily commercial real estate, commercial business and other residential (multi-family) loans, which are less likely to be impacted by the higher levels of unemployment rates, as mentioned above under “Current Economic Conditions,” than if the focus were on one- to four-family residential and consumer loans. For further discussions of the Bank’s loan portfolio, and specifically, commercial real estate and commercial construction loans, see “Item 1. Business – Lending Activities” in the Company’s 2022 Annual Report on Form 10-K. The percentage of fixed-rate loans in our loan portfolio has been as much as 44% in recent years and was 38% as of December 31, 2022. The majority of the increase in fixed rate loans over the past few years was in commercial real estate, which typically has short durations within our portfolio. Of the total amount of fixed rate loans in our portfolio as of December 31, 2022, approximately 78% mature within the next five years and therefore are not considered to create significant long-term interest rate risk for the Company. Fixed rate loans make up only a portion of our balance sheet and our overall interest rate risk strategy. As of December 31, 2022, our interest rate risk models indicated a one-year interest rate earnings sensitivity position that is moderately positive in an increasing rate environment. For further discussion of our interest rate sensitivity gap and the processes used to manage our exposure to interest rate risk, see “Quantitative and Qualitative Disclosures About Market Risk – How We Measure the Risks to Us Associated with Interest Rate Changes.” For discussion of the risk factors associated with interest rate changes, see “Risk Factors – We may be adversely affected by interest rate changes.” 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 December 31, 2022, 0.2% of our owner occupied one- to four-family residential loans had loan-to-value ratios above 100% at origination. At 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 December 31, 2022 and 2021, an estimated 0.2% and 0.2%, respectively, of total non-owner occupied one- to four-family residential loans had loan-to-value ratios above 100% at origination. At December 31, 2022, TDRs totaled $2.9 million, or 0.06% of total loans, a decrease of $902,000 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 year ended December 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 3 of accompanying audited financial statements. 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 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 LIBOR fallback language for all commercial loan transactions near the end of 2018, with such language utilized for all commercial loan originations and renewals/modifications since that time. The Company is 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 December 31, 2022, this represented approximately 29 commercial loans totaling approximately $49 million; however, only 24 of those loans, totaling $40 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 $359 million at December 31, 2022), and that portfolio is being monitored for potential changes that may be facilitated by the mortgage industry. The vast majority of the loan portfolio tied to LIBOR now includes LIBOR 9 26 replacement language that identifies “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 year ended December 31, 2022, available-for-sale securities decreased $10.4 million, or 2.1%, from $501.0 million at December 31, 2021, to $490.6 million at December 31, 2022. The decrease was primarily due to $226.5 million in available-for-sale securities being transferred to held-to-maturity during the year 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. 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 decrease was mostly offset with purchases 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. For further information on investment securities, see Note 2 of the accompanying audited financial statements. Held-to-maturity Securities. In the year ended December 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. At December 31, 2022 the balance of held-to-maturity securities was $202.5 million. Deposits. The Company attracts deposit accounts through its retail branch network, correspondent banking and corporate services areas, internet channels and brokered deposits. The Company then utilizes these deposit funds, along with FHLBank advances and other borrowings, to meet loan demand or otherwise fund its activities. In the year ended December 31, 2022, total deposit balances increased $132.8 million, or 2.9%. Transaction account balances decreased $338.9 million and retail certificates of deposit increased $127.6 million compared to December 31, 2021. The decrease in transaction accounts were primarily a result of decreased balances in non-interest accounts, money market deposit accounts and certain NOW account types. Balance decreases occurred in both individual and small business accounts, and appear to be the result of a partial runoff of “pandemic deposits” that increased significantly during 2020 and 2021. In addition, some accounts that carried higher balances may have chosen to move funds into different checking account types or time deposits that now have a higher rate of interest. Retail certificates of deposit increased due to retail certificates generated through the banking center network. Time deposits initiated through internet channels experienced a planned decrease as part of the Company’s balance sheet management between funding sources. Brokered deposits, including IntraFi program purchased funds, were $411.5 million at December 31, 2022, an increase of $344.1 million from $67.4 million at December 31, 2021. The Company uses brokered deposits of select maturities from time to time to supplement its various funding channels and to manage interest rate risk. 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 $39.7 million from $137.1 million at December 31, 2021 to $176.8 million at December 31, 2022. These balances fluctuate over time based on customer demand for this product. 10 27 Federal Home Loan Bank Advances and Short Term Borrowings. The Company’s FHLBank term advances were $-0- at both December 31, 2022 and December 31, 2021. At December 31, 2022 there was $88.5 million in overnight borrowings from the FHLBank, which are included in short term borrowings. At December 31, 2021 there were no overnight borrowings from the FHLBank. Short term borrowings and other interest-bearing liabilities increased $87.7 million from $1.8 million at December 31, 2021 to $89.6 million at December 31, 2022. The Company may utilize both overnight borrowings and short-term FHLBank advances depending on relative interest rates. 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 or SOFR, three-month LIBOR or SOFR or the “prime rate” and adjusts immediately or shortly after the index rate adjusts (subject to the effect of contractual interest rate floors on some of the loans, which are discussed below). We monitor our sensitivity to interest rate changes on an ongoing basis (see “Quantitative and Qualitative Disclosures About Market Risk”). The current level and shape of the interest rate yield curve poses challenges for interest rate risk management. Prior to its increase of 0.25% on December 16, 2015, the FRB had last changed interest rates on December 16, 2008. This was the first rate increase since September 29, 2006. The FRB also implemented rate 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 was 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. At December 31, 2021, the Federal Funds rate was 0.25%. In 2022, the FRB implemented rate increases of 0.25%, 0.50%, 0.75%, 0.75%, 0.75%, 0.75% and 0.50% in March, May, June, July, September, November and December 2022, respectively. At December 31, 2022, the Federal Funds rate was 4.50%, and currently is 4.75%. Financial markets expect further increases in Federal Funds interest rates in the first half of 2023, with 0.50-1.00% of additional cumulative rate hikes currently anticipated. A substantial portion of Great Southern’s loan portfolio ($958.8 million at December 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 December 31, 2022. Of these loans, $958.4 million had interest rate floors. Great Southern’s loan portfolio also includes loans ($501.2 million at December 31, 2022) tied to various SOFR indexes that will be subject to adjustment at least once within 90 days after December 31, 2022. Of these loans, $501.2 million had interest rate floors. Great Southern also has a portfolio of loans ($747.6 million at December 31, 2022) tied to a “prime rate” of interest that will adjust immediately or within 90 days of a change to the “prime rate” of interest. Of these loans, $734.6 million had interest rate floors at various rates. Great Southern also has a portfolio of loans ($6.7 million at December 31, 2022) tied to an AMERIBOR index that will adjust immediately or within 90 days of a change to the “prime rate” of interest. All of these loans had interest rate floors at various rates. At December 31, 2022, nearly all of these LIBOR/SOFR and “prime rate” loans had fully-indexed rates that were at or above their floor rate and so are expected to move fully with future market interest rate increases. 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, SOFR indices 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. There may also be a negative impact on the Company’s net interest income if the Company’s is unable to significantly lower its funding costs due to a highly 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, SOFR-based and prime-based loans. As of December 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, SOFR interest rates and “prime” interest rates. In a situation where market interest rates decrease significantly in a short period of time, as they did in March 2020, our net interest margin decrease may be more pronounced in the very near term (first one to three months), due to fairly rapid decreases in LIBOR interest rates, SOFR interest rates and “prime” interest rates. In the 11 28 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. Beginning in March 2022, market interest rates, including LIBOR interest rates, SOFR interest rates and “prime” interest rates, began to increase rapidly. This has resulted in increasing loan yields and expansion of our net interest income and net interest margin in 2022. For further discussion of the processes used to manage our exposure to interest rate risk, see “Quantitative and Qualitative Disclosures About Market Risk – How We Measure the Risks to Us Associated with Interest Rate Changes.” Non-Interest Income and 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. 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 under “Results of Operations and Comparison for the Years Ended December 31, 2022 and 2021.” Business Initiatives The Company’s 92 banking centers and its loan production offices are consistently reviewed to measure performance and to ensure responsiveness to changing customer needs and preferences. As such, the Company may open banking centers and loan production offices and invest resources where customer demand leads, and from time to time, consolidate banking centers or even exit markets when conditions dictate. Several banking center changes were initiated in 2022 and are planned for 2023:     In the St. Louis market, a low-transaction banking center inside an office building at 8235 Forsyth Boulevard in the Clayton area was consolidated into a nearby Brentwood-area office at 2435 S. Brentwood in August 2022. The commercial lending team continues to serve customers from the Clayton office location. Great Southern operates 17 banking centers in the St. Louis metro market. In Kimberling City, Missouri, a newly-constructed banking center opened in October 2022, replacing the former facility located on the same property at 14309 Highway 13. Including this office, the Company operates three banking centers in the Branson Tri- Lakes area of southwest Missouri. In Joplin, Missouri, a leased banking center at 1232 S. Rangeline Road is expected to be consolidated into a nearby office at 2801 E. 32nd Street in March 2023. After this consolidation, the Company will operate one full-service office in Joplin. In Springfield, Missouri, a banking center located at 1615 West Sunshine Street was razed in early 2023 to make way for a new Express Center, utilizing only interactive teller machine (ITM) technology to serve customers. The modern four-lane drive-up center is expected to open during the third quarter of 2023 and will be the first-of-its-kind in the Springfield market. ITMs, also known as video remote tellers, offer an ATM-like interface, but with the enhancement of a video screen that allows customers to speak directly to a service representative in real time and in a highly personal manner. Nearly any teller transaction that can be performed in the traditional drive-thru can be performed at an ITM, including cashing a check to the penny. ITMs provide convenience and enhanced access for customers, while creating greater operational efficiencies for the Bank. Commercial loan production offices (LPOs) continue to play a significant role in developing the commercial loan portfolio, providing a wide variety of the Bank’s commercial lending services, including commercial real estate loans for new and existing properties and commercial construction loans. Two LPOs were opened in 2022:  In February 2022, the Company opened an LPO in Phoenix. A local, highly experienced commercial lender was hired to develop commercial lending relationships in the Phoenix market area. 12 29  In June 2022, an LPO was opened in Charlotte, North Carolina, and is managed by a local commercial lending veteran. The Company now operates eight commercial LPOs, with other offices in Atlanta, Chicago, Dallas, Denver, Omaha, Nebraska, and Tulsa, Oklahoma. Other corporate initiatives occurred in 2022 or are planned in 2023:  In November 2022, the Company’s Board of Directors approved a new stock repurchase program, which will succeed the existing repurchase program (authorized in January 2022) following the repurchase of the existing program’s remaining available shares (approximately 177,000 shares as of December 31, 2022). The new stock repurchase program does not have an expiration date and authorizes the purchase, from time to time, of up to one million additional shares of the Company’s common stock.  To ensure the Company meets, or preferably exceeds, the expectations of our customers, it is imperative to have a modern and progressive information technology platform. In 2021, after a thorough evaluation of industry-leading core banking platforms and other information technology systems, the decision was made to replace the Company’s current core banking system and ancillary software with a more modern, futuristic and long-term solution. Since the end of 2021, the Company has been heavily focused on preparing for the systems conversion. This upgrade in the operational platform is expected to provide customers with a superior banking experience, both in-person and digitally. Great Southern associates will also benefit with the use of new and advanced tools and better access to more meaningful information to serve our customers.  In 2023, Great Southern Bank commemorates its 100th anniversary of serving customers with activities throughout the year. The Bank was originally founded in 1923 with four employees and operated as a savings and loan association in Springfield. Effect of Federal Laws and Regulations General. Federal legislation and regulation significantly affect the operations of the Company and the Bank, and have increased competition among commercial banks, savings institutions, mortgage banking enterprises and other financial institutions. In particular, the capital requirements and operations of regulated banking organizations such as the Company and the Bank have been and will be subject to changes in applicable statutes and regulations from time to time, which changes could, under certain circumstances, adversely affect the Company or the Bank. Dodd-Frank Act. In 2010, sweeping financial regulatory reform legislation entitled the “Dodd-Frank Wall Street Reform and Consumer Protection Act” (the “Dodd-Frank Act”) was signed into law. The Dodd-Frank Act implemented far-reaching changes across the financial regulatory landscape. Certain aspects of the Dodd-Frank Act have been affected by the more recently enacted Economic Growth Act, as defined and discussed below under “-Economic Growth Act.” Capital Rules. The federal banking agencies have adopted regulatory capital rules that substantially amend the risk-based capital rules applicable to the Bank and the Company. The rules implement the “Basel III” regulatory capital reforms and changes required by the Dodd-Frank Act. “Basel III” refers to various documents released by the Basel Committee on Banking Supervision. For the Company and the Bank, the general effective date of the rules was January 1, 2015, and, for certain provisions, various phase-in periods and later effective dates apply. The chief features of these rules are summarized below. The rules refine the definitions of what constitutes regulatory capital and add a new regulatory capital element, common equity Tier 1 capital. The minimum capital ratios are (i) a common equity Tier 1 (“CET1”) risk-based capital ratio of 4.5%; (ii) a Tier 1 risk-based capital ratio of 6%; (iii) a total risk-based capital ratio of 8%; and (iv) a Tier 1 leverage ratio of 4%. In addition to the minimum capital ratios, the rules include a capital conservation buffer, under which a banking organization must have CET1 more than 2.5% above each of its minimum risk-based capital ratios in order to avoid restrictions on paying dividends, repurchasing shares, and paying certain discretionary bonuses. The capital conservation buffer became fully implemented on January 1, 2019. These rules also revised the prompt corrective action framework, which is designed to place restrictions on insured depository institutions if their capital levels show signs of weakness. Under the revised prompt corrective action requirements, insured depository institutions are required to meet the following in order to qualify as “well capitalized:” (i) a common equity Tier 1 risk-based capital ratio of at least 6.5%, (ii) a Tier 1 risk-based capital ratio of at least 8%, (iii) a total risk-based capital ratio of at least 10% and (iv) a Tier 1 leverage ratio of 5%, and must not be subject to an order, agreement or directive mandating a specific capital level. 13 30 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. Currently, the CBLR is 9.0%. 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. Recent Accounting Pronouncements See Note 1 to the accompanying audited financial statements, for a description of recent accounting pronouncements including the respective dates of adoption and expected effects on the Company’s financial position and results of operations. Comparison of Financial Condition at December 31, 2022 and December 31, 2021 During the year ended December 31, 2022, total assets increased by $230.8 million to $5.68 billion. The increase was primarily attributable to increases in loans receivable and held-to-maturity securities, partially offset by decreases in cash and cash equivalents. Cash and cash equivalents were $168.5 million at December 31, 2022, a decrease of $548.7 million, or 76.5%, from $717.3 million at December 31, 2021. At December 31, 2021, the cash equivalents primarily related to excess funds held at the Federal Reserve Bank. The additional funds were primarily the result of increases in net loan repayments throughout 2021. In 2022, these excess funds were used to purchase new investment securities and originate loans. The Company’s available-for-sale securities decreased $10.4 million, or 2.1%, compared to December 31, 2021. The decrease was primarily related to the transfer of $226.5 million in available-for-sale securities to held-to-maturity during 2022 and by calls of municipal securities and normal monthly payments received related to the portfolio of mortgage-backed securities and collateralized mortgage obligations. This decrease 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 available-for-sale securities portfolio was 8.6% and 9.2% of total assets at December 31, 2022 and December 31, 2021, respectively. Held-to-maturity securities were $202.5 million at December 31, 2022. As indicated above, during the year ended December 31, 2022, $226.5 million in available-for-sale securities were transferred to held-to-maturity. This 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 3.6% of total assets at December 31, 2022. Net loans increased $499.3 million from December 31, 2021, to $4.51 billion at December 31, 2022. This increase was primarily in one- to four-family residential loans ($222 million increase), construction loans ($145 million increase), other residential (multi- family) loans ($84 million increase) and commercial real estate loans ($54 million increase). Loan origination volume in 2022 was similar to loan origination volume that occurred in 2020 and 2021; however, the pace of loan payoffs prior to maturity slowed in 2022 due to the increase in market rates of interest. Total liabilities increased $314.4 million from $4.83 billion at December 31, 2021 to $5.15 billion at December 31, 2022. The increase was primarily due to increases in short-term borrowings from FHLBank, increases in brokered deposits and increases in reverse repurchase agreements with customers. 14 31 Total deposits increased $132.8 million, or 2.9%, from $4.55 billion at December 31, 2021 to $4.68 billion at December 31, 2022. Transaction account balances decreased $338.9 million, from $3.59 billion at December 31, 2021 to $3.25 billion at December 31, 2022. Retail certificates of deposit increased $127.6 million compared to December 31, 2021, to $1.02 billion at December 31, 2022. Decreases in transaction account balances were primarily due to decreases in IntraFi Network Reciprocal Deposits and non-interest- bearing checking accounts. Total interest-bearing checking and demand deposit accounts decreased $192.8 million and $146.2 million, respectively. Customer retail time deposits initiated through our banking center network increased $308.9 million and time deposits initiated through our national internet network decreased $151.9 million. The increase in customer retail time deposits initiated through the banking center network was primarily due to targeted promotions that started in late June 2022. Customer deposits at December 31, 2022 and December 31, 2021 totaling $12.4 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 increased $344.1 million to $411.5 million at December 31, 2022, compared to $67.4 million at December 31, 2021. Brokered deposits were utilized to fund growth in outstanding loans and to offset reductions in balances in other deposit categories. The Company has the capacity to further expand its use of brokered deposits if it chooses to do so. Of the total brokered deposits at December 31, 2022, $150.0 million were floating rate deposits which adjust daily based on the effective federal funds rate index. The Company’s term Federal Home Loan Bank advances were $-0- at both December 31, 2022 and 2021. At December 31, 2022 there were no borrowings from the FHLBank, other than overnight borrowings, which are included in the short term borrowings category. At December 31, 2021 there were no borrowings from the FHLBank. The Company may utilize both overnight borrowings and short-term FHLBank advances depending on relative interest rates. Short term borrowings and other interest-bearing liabilities increased $87.7 million from $1.8 million at December 31, 2021 to $89.6 million at December 31, 2022. The short term borrowings included overnight FHLBank borrowings of $88.5 million at December 31, 2022. The short term borrowings included no overnight FHLBank borrowings at December 31, 2021. Securities sold under reverse repurchase agreements with customers increased $39.7 million, or 29.0%, from $137.1 million at December 31, 2021 to $176.8 million at December 31, 2022. These balances fluctuate over time based on customer demand for this product. Total stockholders' equity decreased $83.7 million, from $616.8 million at December 31, 2021 to $533.1 million at December 31, 2022. The Company recorded net income of $75.9 million for the year ended December 31, 2022. In addition, total stockholders’ equity increased $7.7 million due to issuance of the Company’s common stock upon stock option exercises. Total stockholders’ equity decreased $61.8 million due to repurchases of the Company’s common stock. Accumulated other comprehensive income decreased $86.1 million due to decreases in the fair value of available-for-sale investment securities and the fair value of cash flow hedges, as a result of increased market interest rates. Dividends declared on common stock, which decreased total stockholders’ equity, were $19.3 million. Results of Operations and Comparison for the Years Ended December 31, 2022 and 2021 General Net income increased $1.3 million, or 1.8%, during the year ended December 31, 2022, compared to the year ended December 31, 2021. Net income was $75.9 million for the year ended December 31, 2022 compared to $74.6 million for the year ended December 31, 2020. This increase was primarily due to an increase in net interest income of $21.7 million, or 12.2%, and a decrease in income tax expense of $1.5 million, or 7.5%, partially offset by an increase in provision for credit losses on loans and unfunded commitments of $11.9 million, or 207.4%, an increase in non-interest expense of $5.7 million, or 4.5%, and a decrease in non-interest income of $4.2 million, or 10.9%. Total Interest Income Total interest income increased $28.3 million, or 14.2%, during the year ended December 31, 2022 compared to the year ended December 31, 2021. The increase was due to a $19.5 million increase in interest income on loans and an $8.8 million increase in interest income on investment securities and other interest-earning assets. Interest income on loans increased for the year ended December 31, 2022 compared to the same period in 2021, primarily due to higher average rates of interest on loans and higher average loan balances. Interest income from investment securities and other interest-earning assets increased during the year ended December 15 32 31, 2022 compared to the same period in 2021, due to higher average balances of investment securities combined with higher average rates of interest on investment securities and other interest-earning assets. Interest Income – Loans During the year ended December 31, 2022 compared to the year ended December 31, 2021, interest income on loans increased due to higher average balances and average interest rates. Interest income increased $14.5 million as the result of higher average interest rates on loans. The average yield on loans increased from 4.36% during the year ended December 31, 2021 to 4.69% during the year ended December 31, 2022. This increase was primarily due to the repricing of floating rates and the origination of new loans at current market rates in 2022 as market interest rates began to increase significantly. In addition, interest income on loans increased $5.0 million as a result of higher average loan balances, which increased from $4.27 billion during the year ended December 31, 2021, to $4.39 billion during the year ended December 31, 2022. The Company continued to originate loans at a pace similar to prior periods, but overall loan repayments slowed in 2022 compared to the level of repayments in 2021. Additionally, the Company’s interest income on loans included accretion of net deferred fees related to PPP loans originated in 2020 and 2021. Net deferred fees recognized in interest income were $502,000 and $5.5 million in the years ended December 31, 2022 and December 31, 2021, respectively. 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 this swap prior to its contractual maturity. The Company was paid $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 the interest rate swap of $8.1 million in each of the years ended December 31, 2022 and December 31, 2021. At December 31, 2022, the Company expected 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 March 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 a contractual termination date of March 1, 2024. Under the terms of the swap, the Company receives a fixed rate of interest of 1.6725% and pays 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 exceeds 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, 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 a reduction of loan interest income related to this swap transaction of $941,000 in the year ended December 31, 2022. In July 2022, the Company entered into two additional interest rate swap transactions as part of its ongoing interest rate management strategies to hedge the risk of its floating rate loans. The notional amount of each swap is $200 million with an effective date of May 1, 2023 and a termination date of May 1, 2028. Under the terms of one swap, beginning in May 2023, the Company will receive a fixed rate of interest of 2.628% and will pay a floating rate of interest equal to one-month USD-SOFR OIS. Under the terms of the other swap, beginning in May 2023, the Company will receive a fixed rate of interest of 5.725% and will pay a floating rate of interest equal to one-month USD-Prime. In each case, the floating rate will be reset monthly and net settlements of interest due to/from the counterparty will also occur monthly. To the extent the fixed rate of interest exceeds the floating rate of interest, the Company will receive net interest settlements, which will be recorded as loan interest income. If the floating rate of interest exceeds the fixed rate of interest, 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. At December 31, 2022, the USD-Prime rate was 7.50% and the one-month USD-SOFR OIS rate was 4.06173%. 16 33 Interest Income - Investments and Other Interest-earning Assets Interest income on investments increased $7.5 million in the year ended December 31, 2022 compared to the year ended December 31, 2021. Interest income increased $6.4 million as a result of an increase in average balances from $447.9 million during the year ended December 31, 2021, to $675.6 million during the year ended December 31, 2022. Interest income increased $1.1 million due to an increase in average interest rates from 2.61% during the year ended December 31, 2021 to 2.84% during the year ended December 31, 2022, due to higher market rates of interest on investment securities purchased during 2022 compared to securities already in the portfolio. At December 31, 2022, the investment portfolio did not include a material amount of adjustable rate securities. Interest income on other interest-earning assets increased $1.3 million in the year ended December 31, 2022 compared to the year ended December 31, 2021. Interest income increased $1.5 million as a result of higher average interest rates from 0.13% during the year ended December 31, 2021, to 1.05% during the year ended December 31, 2022. Interest income decreased $134,000 as a result of a decrease in average balances from $552.1 million during the year ended December 31, 2021, to $195.8 million during the year ended December 31, 2022. The increase in the average interest rate was primarily due to the increase in the rate paid on funds held at the Federal Reserve Bank. This rate was increased multiple times in 2022 in conjunction with the increase in the Federal Funds target interest rate. Total Interest Expense Total interest expense increased $6.6 million, or 31.9%, during the year ended December 31, 2022, when compared with the year ended December 31, 2021, due to an increase in interest expense on deposits of $7.6 million, or 57.8%, an increase in interest expense on short-term borrowings of $1.1 million, or 100.0%, an increase in interest expense on subordinated debentures issued to capital trusts of $427,000, or 95.3%, and an increase in interest expense on securities sold under reverse repurchase agreements of $287,000, or 775.7%, partially offset by a decrease in interest expense on subordinated notes of $2.7 million, or 31.9%. Interest Expense - Deposits Interest expense on demand deposits increased $2.9 million due to an increase in average rates from 0.17% during the year ended December 31, 2021, to 0.30% during the year ended December 31, 2022. In addition, interest on demand deposits increased $52,000 due to an increase in average balances from $2.32 billion in the year ended December 31, 2021, to $2.35 billion in the year ended December 31, 2022. Interest rates paid on demand deposits increased due to significant increases in the federal funds rate of interest and other market interest rates during 2022. Interest expense on time deposits increased $5.0 million as a result of an increase in average rates of interest from 0.78% during the year ended December 31, 2021, to 1.23% during the year ended December 31, 2022. Partially offsetting that increase, interest expense on time deposits decreased $316,000 due to a decrease in the average balance of time deposits from $1.16 billion during the year ended December 31, 2021, to $1.12 billion during the year ended December 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 in the latter half of 2022 generally resulted in the Company paying a higher rate of interest due to market interest rate increases during 2022. The decrease in average balances of time deposits was a result of decreases in time deposits obtained through on-line channels. On-line channel time deposits were actively reduced by the Company as other deposit sources increased. The Company reduced its rates on these types of time deposits and allowed these deposits to mature without replacement during 2021 and 2022. Interest Expense - FHLBank Advances; Short-term Borrowings, Repurchase Agreements and Other Interest-bearing Liabilities; Subordinated Debentures Issued to Capital Trust and Subordinated Notes FHLBank term advances were not utilized during the years ended December 31, 2022 and 2021. FHLBank overnight borrowings were utilized in 2022, but were not utilized in 2021. Interest expense on reverse repurchase agreements increased $290,000 due to an increase in average rates during the year ended December 31, 2022 when compared to the year ended December 31, 2021. The average rate of interest was 0.24% for the year ended December 31, 2022, compared to 0.03% during the year ended December 31, 2021. The average balance of repurchase agreements decreased $11.2 million from $143.8 million in the year ended December 31, 2021 to $132.6 million in the year ended December 31, 2022, resulting in little change in interest expense. 17 34 Interest expense on short-term borrowings and other interest-bearing liabilities increased $676,000 due to an increase in average balances from $1.5 million during the year ended December 31, 2021, to $48.5 million during the year ended December 31, 2022, which was primarily due to changes in the Company’s funding needs and the mix of funding, which can fluctuate. Most of this increase was due to the utilization of overnight borrowings from the FHLBank. In addition to this increase, interest expense on short- term borrowings, overnight FHLBank borrowings and other interest-bearing liabilities increased $390,000 due to average rates that increased from 0.00% in the year ended December 31, 2021, to 2.20% in the year ended December 31, 2022. During the year ended December 31, 2022, compared to the year ended December 31, 2021, interest expense on subordinated debentures issued to capital trusts increased $427,000 due to higher average interest rates. The average interest rate was 1.74% in 2021, compared to 3.40% in 2022. The interest rate on the subordinated debentures is a floating rate indexed to the three-month LIBOR interest rate. There was no change in the average balance of the subordinated debentures between 2022 and 2021. In August 2016, the Company issued $75 million of 5.25% fixed-to-floating rate subordinated notes due August 15, 2026. The notes were sold at par, resulting in net proceeds, after underwriting discounts and commissions and other issuance costs, of approximately $73.5 million. 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, the issuance costs are amortized over the expected life of the notes, which is five years from the issuance date, and therefore impact the overall interest expense on the notes. In August 2021, the Company completed the redemption of all 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. Interest expense on subordinated notes decreased $2.7 million due to a decrease in average balances from $119.8 million during the year ended December 31, 2021 to $74.1 million during the year ended December 31, 2022, due to lower average balances resulting from the redemption of the subordinated notes maturing in 2026. Net Interest Income Net interest income for the year ended December 31, 2022 increased $21.7 million, or 12.2%, to $199.6 million, compared to $177.9 million for the year ended December 31, 2021. Net interest margin was 3.80% for the year ended December 31, 2022, compared to 3.37% for the year ended December 31, 2021, an increase of 43 basis points. The Company experienced increases in interest income on both loans and investment securities. The Company experienced increases in interest expense on deposits, short-term borrowings, subordinated debentures issued to capital trust and repurchase agreements, partially offset by a decrease in interest expense on subordinated notes. The Company's overall interest rate spread increased 37 basis points, or 11.5%, from 3.22% during the year ended December 31, 2021, to 3.59% during the year ended December 31, 2022. The increase was due to a 55 basis point increase in the weighted average yield on interest-earning assets and an 18 basis point increase in the weighted average rate paid on interest-bearing liabilities. In comparing the two years, the yield on loans increased 33 basis points, the yield on investment securities increased 23 basis points and the yield on other interest-earning assets increased 92 basis points. The rate paid on deposits increased 22 basis points, the rate paid on subordinated debentures issued to capital trusts increased 166 basis points, the rate paid on reverse repurchase agreements increased 21 basis points and the rate paid on subordinated notes decreased one basis point. In addition, the Company had outstanding overnight borrowings in the 2022 period, which had an average interest rate of 220 basis points compared to none in the 2021 period. During the year ended December 31, 2022, the mix of the Company’s assets shifted somewhat, with net increases in outstanding loan balances and investment securities. The Company used excess funds that were previously held on account at the Federal Reserve Bank to fund the increases in loans and investments. Loans increased $499.3 million and investment securities increased $192.1 million, while cash and cash equivalents decreased $548.7 million. Also, in the latter half of 2022, the mix of deposits changed somewhat, with non-time account balances trending lower and time deposit balances trending higher. The increased time deposits are a mix of shorter- term retail deposits, fixed-rate brokered deposits callable at the Company’s discretion and variable-rate brokered deposits. From time to time, the Company also utilized overnight borrowings from the FHLBank. For additional information on net interest income components, refer to the "Average Balances, Interest Rates and Yields" table in this Report. 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 replaced the incurred loss methodology with a lifetime “expected 18 35 Interest expense on short-term borrowings and other interest-bearing liabilities increased $676,000 due to an increase in average balances from $1.5 million during the year ended December 31, 2021, to $48.5 million during the year ended December 31, 2022, which was primarily due to changes in the Company’s funding needs and the mix of funding, which can fluctuate. Most of this increase was due to the utilization of overnight borrowings from the FHLBank. In addition to this increase, interest expense on short- term borrowings, overnight FHLBank borrowings and other interest-bearing liabilities increased $390,000 due to average rates that increased from 0.00% in the year ended December 31, 2021, to 2.20% in the year ended December 31, 2022. During the year ended December 31, 2022, compared to the year ended December 31, 2021, interest expense on subordinated debentures issued to capital trusts increased $427,000 due to higher average interest rates. The average interest rate was 1.74% in 2021, compared to 3.40% in 2022. The interest rate on the subordinated debentures is a floating rate indexed to the three-month LIBOR interest rate. There was no change in the average balance of the subordinated debentures between 2022 and 2021. In August 2016, the Company issued $75 million of 5.25% fixed-to-floating rate subordinated notes due August 15, 2026. The notes were sold at par, resulting in net proceeds, after underwriting discounts and commissions and other issuance costs, of approximately $73.5 million. 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, the issuance costs are amortized over the expected life of the notes, which is five years from the issuance date, and therefore impact the overall interest expense on the notes. In August 2021, the Company completed the redemption of all 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. Interest expense on subordinated notes decreased $2.7 million due to a decrease in average balances from $119.8 million during the year ended December 31, 2021 to $74.1 million during the year ended December 31, 2022, due to lower average balances resulting from the redemption of the subordinated notes maturing in 2026. Net Interest Income Net interest income for the year ended December 31, 2022 increased $21.7 million, or 12.2%, to $199.6 million, compared to $177.9 million for the year ended December 31, 2021. Net interest margin was 3.80% for the year ended December 31, 2022, compared to 3.37% for the year ended December 31, 2021, an increase of 43 basis points. The Company experienced increases in interest income on both loans and investment securities. The Company experienced increases in interest expense on deposits, short-term borrowings, subordinated debentures issued to capital trust and repurchase agreements, partially offset by a decrease in interest expense on subordinated notes. The Company's overall interest rate spread increased 37 basis points, or 11.5%, from 3.22% during the year ended December 31, 2021, to 3.59% during the year ended December 31, 2022. The increase was due to a 55 basis point increase in the weighted average yield on interest-earning assets and an 18 basis point increase in the weighted average rate paid on interest-bearing liabilities. In comparing the two years, the yield on loans increased 33 basis points, the yield on investment securities increased 23 basis points and the yield on other interest-earning assets increased 92 basis points. The rate paid on deposits increased 22 basis points, the rate paid on subordinated debentures issued to capital trusts increased 166 basis points, the rate paid on reverse repurchase agreements increased 21 basis points and the rate paid on subordinated notes decreased one basis point. In addition, the Company had outstanding overnight borrowings in the 2022 period, which had an average interest rate of 220 basis points compared to none in the 2021 period. During the year ended December 31, 2022, the mix of the Company’s assets shifted somewhat, with net increases in outstanding loan balances and investment securities. The Company used excess funds that were previously held on account at the Federal Reserve Bank to fund the increases in loans and investments. Loans increased $499.3 million and investment securities increased $192.1 million, while cash and cash equivalents decreased $548.7 million. Also, in the latter half of 2022, the mix of deposits changed somewhat, with non-time account balances trending lower and time deposit balances trending higher. The increased time deposits are a mix of shorter- term retail deposits, fixed-rate brokered deposits callable at the Company’s discretion and variable-rate brokered deposits. From time to time, the Company also utilized overnight borrowings from the FHLBank. For additional information on net interest income components, refer to the "Average Balances, Interest Rates and Yields" table in this Report. 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 replaced 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. Upon adoption of the CECL accounting standard, we increased the balance of our allowance for credit losses related to outstanding loans by $11.6 million and created a liability for potential losses related to the unfunded portion of our loans and commitments of approximately $8.7 million. The after-tax effect reduced our retained earnings by approximately $14.2 million. The adjustment was based upon the Company’s analysis of current conditions, assumptions and economic forecasts at January 1, 2021. 18 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 economic conditions, such as changes in the national unemployment rate, commercial real estate price index, housing price index, consumer sentiment, gross domestic product (GDP) and construction spending. Worsening economic conditions from COVID-19 and subsequent variant outbreaks 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 year ended December 31, 2022, the Company recorded a provision expense of $3.0 million on its portfolio of outstanding loans, compared to a negative provision of $6.7 million provision expense recorded for the year ended December 31, 2021. The negative provision for credit losses in 2021 reflected decreased outstanding total loans and continued positive trends in asset quality metrics, combined with an improved economic forecast. In 2021, the national unemployment rate continued to decrease and many measures of economic growth improved. The Company experienced net charge offs of $274,000 for the year ended December 31, 2022 compared to net recoveries of $116,000 for the year ended December 31, 2021. The provision for losses on unfunded commitments for the year ended December 31, 2022 was $3.2 million, compared to $939,000 for the year ended December 31, 2021. 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. The Bank’s allowance for credit losses as a percentage of total loans was 1.39% and 1.49% at December 31, 2022 and 2021, respectively. Management considers the allowance for credit losses adequate to cover losses inherent in the Bank’s loan portfolio at December 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 credit 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 that occur from time to time, and other factors specific to a borrower's circumstances, the level of non-performing assets will fluctuate. Non-performing assets at December 31, 2022, were $3.7 million, a decrease of $2.3 million from $6.0 million at December 31, 2021. Non-performing assets as a percentage of total assets were 0.07% at December 31, 2022, compared to 0.11% at December 31, 2021. Compared to December 31, 2021, non-performing loans decreased $1.7 million to $3.7 million at December 31, 2022, and foreclosed assets decreased $538,000 to $50,000 at December 31, 2022. Non-performing commercial real estate loans were $1.6 million, or 43.0%, of total non-performing loans at December 31, 2022. Non-performing one-to four-family residential loans were $722,000, or 19.6%, of the total non-performing loans at December 31, 2022. Non-performing commercial business loans were $586,000, or 16.0%, of total non-performing loans at December 31, 2022. Non-performing land development loans were $384,000, or 10.5%, of 36 19 total non-performing loans at December 31, 2022. Non-performing consumer loans were $399,000, or 10.9%, of the total non- performing loans at December 31, 2022. Non-performing Loans. Activity in the non-performing loans category during the year ended December 31, 2022, was as follows: Beginning Additions Balance, January 1 Performing Performing Loans to Non- Transfers to Transfers to Removed Potential from Non- Problem Foreclosed Assets and Repossessions Offs Charge- Ending Balance, Payments December 31 (In Thousands) One- to four-family construction Subdivision construction Land development Commercial construction One- to four-family residential Other residential Commercial real estate Commercial business Consumer $ — $ — 468 — 2,216 — 2,006 — 733 — $ — — — 519 — 238 586 168 Total non-performing loans $ 5,423 $ 1,511 $ — $ — — — (90) — — — — (90) $ — $ — — — (279) — — — (74) (353) $ — $ — (84) — (37) — — — (92) — $ — — — — — — — (9) (9) $ (213) $ (2,599) $ — $ — — — (1,607) — (665) — (327) — — 384 — 722 — 1,579 586 399 3,670 FDIC-assisted acquired loans included above $ 1,736 $ 272 $ — $ — $ — $ — $ (1,580) $ 428 At December 31, 2022, the non-performing commercial real estate category included three loans, one of which was added during 2022. The largest relationship in this category, which totaled $1.3 million, or 83.3% of the total category, was transferred from potential problem loans in 2021 and is collateralized by a mixed use commercial retail building. The non-performing one- to four- family residential category included 23 loans, four of which were added during 2022. The largest relationship in this category, totaled $158,000, or 21.8% of the total category. The non-performing land development category consisted of one loan, which totaled $384,000 and is collateralized by unimproved zoned vacant ground in southern Illinois. The non-performing commercial business category consisted of two loans that totaled $586,000 to a single borrower, both of which were added during the fourth quarter of 2022 and subsequently paid off with no loss in the first quarter of 2023. The non-performing consumer category included 23 loans, 11 of which were added during 2022. 20 37 Other Real Estate Owned and Repossessions. Of the total $233,000 of other real estate owned and repossessions at December 31, Other Real Estate Owned and Repossessions. Of the total $233,000 of other real estate owned and repossessions at December 31, 2022, $183,000 represents properties which were not acquired through foreclosure. 2022, $183,000 represents properties which were not acquired through foreclosure. Activity in foreclosed assets and repossessions during the year ended December 31, 2022, was as follows: Activity in foreclosed assets and repossessions during the year ended December 31, 2022, was as follows: One- to four-family construction One- to four-family construction Subdivision construction Subdivision construction Land development Land development Commercial construction Commercial construction One- to four-family residential One- to four-family residential Other residential Other residential Commercial real estate Commercial real estate Commercial business Commercial business Consumer Consumer Total foreclosed assets and repossessions Total foreclosed assets and repossessions Beginning Beginning Balance, Balance, January 1 Additions January 1 Additions Sales Sales Capitalized Capitalized Costs Costs Write- Write- Downs Downs (In Thousands) (In Thousands) Ending Ending Balance, Balance, December 31 December 31 $ $ $ $ — $ — $ — — 315 315 — — 183 183 — — — — — — 90 90 588 $ 588 $ — $ — $ — — — — — — — — — — — — — — 344 344 344 $ 344 $ — $ — $ — — (300) (300) — — (175) (175) — — — — — — (384) (384) (859) $ (859) $ — $ — $ — — — — — — — — — — — — — — — — — $ — $ — $ — $ — — (15) (15) — — (8) (8) — — — — — — — — (23) $ (23) $ — — — — — — — — — — — — — — — — 50 50 50 50 FDIC-assisted acquired assets included above FDIC-assisted acquired assets included above $ $ 498 $ 498 $ — $ — $ (475) $ (475) $ — $ — $ (23) $ (23) $ — — The Company sold its three remaining foreclosed real estate properties in 2022. The additions and sales in the consumer category were The Company sold its three remaining foreclosed real estate properties in 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. due to the volume of repossessions of automobiles, which generally are subject to a shorter repossession process. Potential Problem Loans. Potential problem loans decreased $402,000 during the year ended December 31, 2022, from $2.0 million at Potential Problem Loans. Potential problem loans decreased $402,000 during the year ended December 31, 2022, from $2.0 million at December 31, 2021 to $1.6 million at December 31, 2022. Potential problem loans are loans which management has identified December 31, 2021 to $1.6 million at December 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 through routine internal review procedures as having possible credit problems that may cause the borrowers difficulty in complying with current repayment terms. These loans are not reflected in non-performing assets. with current repayment terms. These loans are not reflected in non-performing assets. Activity in the potential problem loans category during the year ended December 31, 2022, was as follows: Activity in the potential problem loans category during the year ended December 31, 2022, was as follows: Removed Removed from from Transfers to Transfers to Beginning Additions Beginning Additions Balance, Balance, January 1 Problem Problem Performing Repossessions Offs January 1 Problem Problem Performing Repossessions Offs Transfers to Foreclosed Transfers to Foreclosed Assets and Assets and to Potential Potential to Potential Potential Non- Non- Charge- Charge- Ending Ending Balance, Balance, Payments December 31 Payments December 31 (In Thousands) (In Thousands) One- to four-family construction One- to four-family construction Subdivision construction Subdivision construction Land development Land development Commercial construction Commercial construction One- to four-family residential One- to four-family residential Other residential Other residential Commercial real estate Commercial real estate Commercial business Commercial business Consumer Consumer Total potential problem loans Total potential problem loans $ $ — $ — $ 15 15 — — — — 1,432 1,432 — — 210 210 — — 323 323 $ 1,980 $ $ 1,980 $ — $ — $ — — — — — — 279 279 — — — — — — 161 161 440 $ (333) $ 440 $ (333) $ — $ — $ — — — — — — (275) (275) — — — — — — (58) (58) — $ — $ — — — — — — — — — — — — — — (37) (37) (37) $ (37) $ — $ — $ — $ — $ — — — — — — — — — — — — — — — — — — — — (44) — (44) — — — — — (27) (9) (27) (9) (27) $ (53) $ (392) $ (27) $ (53) $ (392) $ — $ — $ (15) (15) — — — — (88) (88) — — (166) (166) — — (123) (123) — — — — — — — — 1,348 1,348 — — — — — — 230 230 1,578 1,578 FDIC-assisted acquired loans included above $ 1,004 $ FDIC-assisted acquired loans included above $ 1,004 $ — $ — $ — $ — $ — $ — $ — $ (44) $ (217) $ — $ (44) $ (217) $ 743 743 At December 31, 2022, the one- to four-family residential category of potential problem loans included 22 loans, one of which was At December 31, 2022, the one- to four-family residential category of potential problem loans included 22 loans, one of which was added during the year ended December 31, 2022. The largest relationship in this category totaled $159,000, or 11.8% of the total added during the year ended December 31, 2022. The largest relationship in this category totaled $159,000, or 11.8% of the total category. The consumer category of potential problem loans included 26 loans, 17 of which were added during the year ended category. The consumer category of potential problem loans included 26 loans, 17 of which were added during the year ended December 31, 2022. December 31, 2022. 21 21 38 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 year ended December 31, 2022, loans classified as “Watch” decreased $2.0 million, from $30.7 million at December 31, 2021 to $28.7 million at December 31, 2022 primarily due to loans being upgraded out of the “Watch” category, partially offset by loans being downgraded to the “Watch” category. See Note 3 of the accompanying audited financial statements, for further discussion of the Company’s loan grading system. Non-Interest Income Non-interest income for the year ended December 31, 2022 was $34.1 million compared with $38.3 million for the year ended December 31, 2021. The decrease of $4.2 million, or 10.9%, was primarily as a result of the following items: Net gains on loan sales: Net gains on loan sales decreased $6.9 million compared to the prior year. The decrease was due to a decrease in originations of fixed-rate single-family mortgage loans during 2022 compared to 2021. 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 moved higher beginning in the second quarter of 2022, mortgage refinance volume has decreased and fixed rate loan originations and related gains on sales of these loans have decreased substantially. The lower level of originations is expected to continue as long as market rates remain elevated. Other income: Other income increased $1.3 million compared to the prior year. In 2022, a gain of $1.0 million was recognized on sales of fixed assets. Also in 2022, the Company recorded a one-time bonus of $500,000 from its card processor for achieving certain benchmarks related to debit card activity. Overdraft and Insufficient funds fees: Overdraft and Insufficient funds fees increased $1.2 million compared to the prior year. It appears that consumers continued to spend significantly in 2022, but some may have lower account balances as prices for goods and services have increased and government stimulus payments received by consumers in 2020 and 2021 have been exhausted now. Point-of-sale and ATM fees: Point-of-sale and ATM fees increased $676,000 compared to the prior year. This increase was mainly due to increased customer debit card transactions in 2022 compared to 2021. In the latter half of 2021 and through 2022, debit card usage by customers rebounded and was back to historical levels, and in many cases, increased levels of activity. However, during the three months ended December 31, 2022, debit card usage and revenue to Great Southern decreased a bit compared to recent quarterly periods. It appears that debit card transaction volumes may have decreased and customers may be using credit cards for more transactions instead. Non-Interest Expense Total non-interest expense increased $5.7 million, or 4.5%, from $127.7 million in the year ended December 31, 2021, to $133.4 million in the year ended December 31, 2022. The Company’s efficiency ratio for the year ended December 31, 2022 was 57.05%, compared to 59.03% for 2021. The higher efficiency ratio in 2021 was primarily due to an increase in non-interest expense (primarily from the significant IT consulting expense and related contract termination liability incurred in December 2021), partially offset by an increase in total revenue. Excluding this consulting expense and contract termination liability, the Company’s efficiency ratio was 56.57% in 2021. In the year ended December 31, 2022, the improvement in the efficiency ratio was primarily due to an increase in net interest income, as a result of increased loan and investment balances and increased market interest rates compared to the year ended December 31, 2021, partially offset by increased non-interest expense. The Company’s ratio of non-interest expense to average assets was 2.42% for the year ended December 31, 2022 compared to 2.32% for the year ended December 31, 2021. Average assets for the year ended December 31, 2022, increased $17.4 million, or 0.3%, from the year ended December 31, 2021, primarily due to increases in net loans receivable and investment securities, partially offset by a decrease interest-bearing cash equivalents. The following were key items related to the increase in non-interest expense for the year ended December 31, 2022 as compared to the year ended December 31, 2021: 22 39 Salaries and employee benefits: Salaries and employee benefits increased $5.0 million from the prior year. A portion 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. Also, in the second quarter of 2022, the Company paid a special cash bonus to all employees totaling $1.1 million in response to the rapid and significant increases in prices for many goods and services. In addition, the Phoenix and Charlotte, North Carolina loan offices were opened in 2022, with the operation of these offices adding approximately $727,000 of salaries and benefits expense in the 2022 year. Other operating expenses: Other operating expenses increased $1.7 million from the prior year, to $8.3 million. Of this increase, $443,000 related to deposit account fraud losses and $219,000 related to charitable contributions. Provision for Income Taxes For the years ended December 31, 2022 and 2021, the Company's effective tax rate was 19.4% and 20.9%, 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 the Company’s 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 continually evolve as taxable income and apportionment between states is analyzed. Upon filing its federal and various state income tax returns for 2021 in the fourth quarter of 2022, the Company updated its combined tax rate applied to deferred tax items and also adjusted its current income taxes receivable/payable balances as a result of carryback claims. These adjustments to current and deferred taxes resulted in a reduction in income tax expense of $1.1 million in the fourth quarter of 2022.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. 23 40 Average Balances, Interest Rates and Yields Average Balances, Interest Rates and Yields The following table presents, for the periods indicated, the total dollar amount of interest income from average interest-earning assets The following table presents, for the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and 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. 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 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 amortization of net loan fees, which were deferred in accordance with accounting standards. Net fees included in interest income were $6.3 million, $11.2 million and $6.6 million for 2022, 2021 and 2020, respectively. Tax-exempt income was not calculated on a tax $6.3 million, $11.2 million and $6.6 million for 2022, 2021 and 2020, respectively. Tax-exempt income was not calculated on a tax equivalent basis. The table does not reflect any effect of income taxes. equivalent basis. The table does not reflect any effect of income taxes. Dec. 31, 2022 Dec. 31, 2022 Yield/ Rate Rate Yield/ Year Ended Year Ended December 31, 2022 December 31, 2022 Year Ended Year Ended December 31, 2021 December 31, 2021 Year Ended Year Ended December 31, 2020 December 31, 2020 Average Balance Average Balance Interest Interest Yield/ Yield/ Rate Rate Average Average Balance Balance Interest Interest Yield/ Rate Yield/ Rate Average Balance Average Balance Interest Interest Yield/ Rate Yield/ Rate Interest-earning assets: Interest-earning assets: Loans receivable: Loans receivable: One- to four-family residential One- to four-family residential Other residential Other residential Commercial real estate Commercial real estate Construction Construction Commercial business Commercial business Other loans Other loans Industrial revenue bonds (1) Industrial revenue bonds (1) (Dollars In Thousands) (Dollars In Thousands) 3.45 % $ 3.45 % $ 6.18 6.18 5.54 5.54 6.37 6.37 5.72 5.72 5.56 5.56 5.58 5.58 811,896 811,896 837,582 837,582 1,551,541 1,551,541 679,524 679,524 292,825 292,825 199,336 199,336 13,338 13,338 $ $ 27,853 27,853 43,174 43,174 73,164 73,164 37,370 37,370 14,615 14,615 8,864 8,864 711 711 3.43 % $ 3.43 % $ 5.15 5.15 4.72 4.72 5.50 5.50 4.99 4.99 4.45 4.45 5.33 5.33 678,900 678,900 922,739 922,739 1,541,095 1,541,095 616,899 616,899 279,232 279,232 220,783 220,783 14,528 14,528 $ $ 25,251 25,251 40,998 40,998 65,811 65,811 27,696 27,696 15,403 15,403 10,347 10,347 763 763 3.72 % $ 3.72 % $ 4.44 4.44 4.27 4.27 4.49 4.49 5.52 5.52 4.69 4.69 5.25 5.25 $ 652,096 652,096 930,529 930,529 1,526,618 1,526,618 665,546 665,546 325,397 325,397 283,678 283,678 15,395 15,395 Total loans receivable Total loans receivable 5.54 5.54 4,386,042 4,386,042 205,751 205,751 4.69 4.69 4,274,176 4,274,176 186,269 186,269 4.36 4.36 4,399,259 4,399,259 Investment securities (1) Investment securities (1) Interest-earning deposits in other banks Interest-earning deposits in other banks 2.74 4.34 2.74 4.34 675,571 195,817 675,571 195,817 19,170 19,170 2,056 2,056 2.84 2.84 1.05 1.05 447,943 447,943 552,094 552,094 11,689 11,689 715 715 2.61 0.13 2.61 0.13 426,383 246,110 426,383 246,110 Total interest-earning assets Total interest-earning assets Non-interest-earning assets: Cash and cash equivalents Other non-earning assets Non-interest-earning assets: Cash and cash equivalents Other non-earning assets Total assets Total assets Interest-bearing liabilities: Interest-bearing liabilities: Interest-bearing demand and savings Time deposits Total deposits Securities sold under reverse repurchase agreements Short-term borrowings, overnight FHLBank Interest-bearing demand and savings Time deposits Total deposits Securities sold under reverse repurchase agreements Short-term borrowings, overnight FHLBank borrowings and other interest-bearing liabilities Subordinated debentures issued to capital trust Subordinated notes Subordinated debentures issued to capital trust Subordinated notes borrowings and other interest-bearing liabilities Total interest-bearing liabilities Total interest-bearing liabilities Non-interest-bearing liabilities: Non-interest-bearing liabilities: Demand deposits Other liabilities Demand deposits Other liabilities Total liabilities Stockholders' equity Total liabilities Stockholders' equity 5.19 5.19 5,257,430 5,257,430 226,977 226,977 4.32 4.32 5,274,213 5,274,213 198,673 198,673 3.77 3.77 5,071,752 5,071,752 $ $ $ $ 96,353 96,353 166,007 166,007 5,519,790 5,519,790 2,346,546 2,346,546 1,119,157 1,119,157 3,465,703 3,465,703 132,595 132,595 48,530 25,774 74,131 48,530 25,774 74,131 0.90 2.30 1.39 0.94 0.90 2.30 1.39 0.94 4.60 6.04 5.95 4.60 6.04 5.95 96,989 96,989 131,154 131,154 $ 5,502,356 $ 5,502,356 93,832 93,832 157,842 157,842 $ 5,323,426 $ 5,323,426 6,938 6,938 13,738 13,738 20,676 20,676 324 324 1,066 1,066 875 875 4,422 4,422 0.30 0.30 1.23 1.23 0.60 0.60 0.24 0.24 2.20 2.20 3.40 3.40 5.97 5.97 $ 2,316,890 $ 2,316,890 1,161,134 1,161,134 3,478,024 3,478,024 143,757 143,757 4,023 4,023 9,079 9,079 13,102 13,102 37 37 0.17 $ 1,867,166 0.17 $ 1,867,166 0.78 0.78 1,636,205 1,636,205 0.38 0.38 3,503,371 3,503,371 0.03 0.03 140,938 140,938 1,529 1,529 25,774 25,774 119,780 119,780 — — 448 448 7,165 7,165 — — 1.74 1.74 5.98 5.98 42,560 25,774 115,335 42,560 25,774 115,335 1.56 1.56 3,746,733 3,746,733 27,363 27,363 0.73 0.73 3,768,864 3,768,864 20,752 20,752 0.55 0.55 3,827,978 3,827,978 1,141,660 1,141,660 66,224 66,224 4,954,617 4,954,617 565,173 565,173 5,519,790 5,519,790 1,061,716 1,061,716 44,260 44,260 4,874,840 4,874,840 627,516 627,516 $ 5,502,356 $ 5,502,356 826,900 826,900 46,111 46,111 4,700,989 4,700,989 622,437 622,437 $ 5,323,426 $ 5,323,426 Total liabilities and stockholders' equity Total liabilities and stockholders' equity $ $ $ 29,099 43,902 69,437 32,443 14,070 15,184 829 29,099 43,902 69,437 32,443 14,070 15,184 829 4.46 % 4.72 4.55 4.87 4.32 5.35 5.38 4.46 % 4.72 4.55 4.87 4.32 5.35 5.38 204,964 204,964 4.66 4.66 12,262 477 12,262 477 2.88 0.19 2.88 0.19 217,703 217,703 4.29 4.29 7,096 7,096 25,335 25,335 32,431 32,431 31 31 0.38 1.55 0.93 0.02 0.38 1.55 0.93 0.02 644 628 6,831 644 628 6,831 1.51 2.44 5.92 1.51 2.44 5.92 40,565 40,565 1.06 1.06 Net interest income: Interest rate spread Net interest margin* Average interest-earning assets to average interest- Net interest income: Interest rate spread Net interest margin* Average interest-earning assets to average interest- bearing liabilities bearing liabilities 3.63 % 3.63 % $ 199,614 $ 199,614 3.59 % 3.59 % 3.80 % 3.80 % $ 177,921 $ 177,921 3.22 % 3.37 % 3.22 % 3.37 % $ 177,138 $ 177,138 3.23 % 3.49 % 3.23 % 3.49 % 140.3 % 140.3 % 139.9 % 139.9 % 132.5 % 132.5 % * Defined as the Company’s net interest income divided by total interest-earning assets. * Defined as the Company’s net interest income divided by total interest-earning assets. (1) (1) Of the total average balance of investment securities, average tax-exempt investment securities were $54.0 million, $42.3 Of the total average balance of investment securities, average tax-exempt investment securities were $54.0 million, $42.3 million and $55.9 million for 2022, 2021 and 2020, respectively. In addition, average tax-exempt industrial revenue bonds million and $55.9 million for 2022, 2021 and 2020, respectively. In addition, average tax-exempt industrial revenue bonds were $16.4 million, $17.9 million and $20.0 million in 2022, 2021 and 2020, respectively. Interest income on tax-exempt were $16.4 million, $17.9 million and $20.0 million in 2022, 2021 and 2020, respectively. Interest income on tax-exempt assets included in this table was $2.2 million, $1.6 million and $2.2 million for 2022, 2021 and 2020, respectively. Interest assets included in this table was $2.2 million, $1.6 million and $2.2 million for 2022, 2021 and 2020, respectively. Interest income net of disallowed interest expense related to tax-exempt assets was $2.1 million, $1.6 million and $2.0 million for income net of disallowed interest expense related to tax-exempt assets was $2.1 million, $1.6 million and $2.0 million for 2022, 2021 and 2020, respectively. 2022, 2021 and 2020, respectively. 24 24 41 Rate/Volume Analysis The following table presents the dollar amount 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. Year Ended December 31, 2022 vs. December 31, 2021 Year Ended December 31, 2021 vs. December 31, 2020 Increase (Decrease) Due to Rate Volume Total Increase (Decrease) Increase (Decrease) Due to Rate Volume Total Increase (Decrease) (In Thousands) Interest-earning assets: Loans receivable Investment securities Interest-earning deposits in other banks Total interest-earning assets Interest-bearing liabilities: Demand deposits Time deposits Total deposits $ 14,512 $ 1,098 1,475 17,085 4,970 $ 6,383 (134) 11,219 2,863 4,975 7,838 290 52 (316) (264) 19,482 $ 7,481 1,341 28,304 2,915 4,659 7,574 (12,982) $ (1,173) (200) (14,355) (5,713) $ 600 438 (4,675) (18,695) (573) 238 (19,030) (4,497) (10,246) (14,743) 1,424 (6,010) (4,586) (3,073) (16,256) (19,329) Securities sold under reverse repurchase agreements Short-term borrowings, overnight FHLBank borrowings and other interest-bearing liabilities Subordinated debentures issued to capital trust Subordinated notes Total interest-bearing liabilities Net interest income $ (3) 287 6 — 6 390 427 (20) 8,925 8,160 $ 676 — (2,723) (2,314) 13,533 $ 1,066 427 (2,743) 6,611 (326) (180) 69 (15,174) (318) — 265 (4,639) 21,693 $ 819 $ (36) $ (644) (180) 334 (19,813) 783 Results of Operations and Comparison for the Years Ended December 31, 2021 and 2020 General Net income increased $15.3 million, or 25.8%, during the year ended December 31, 2021, compared to the year ended December 31, 2020. Net income was $74.6 million for the year ended December 31, 2021 compared to $59.3 million for the year ended December 31, 2020. This increase was due to a decrease in provision (credit) for credit losses and unfunded commitments of $21.6 million, or 136.3%, an increase in non-interest income of $3.3 million, or 9.3%, and an increase in net interest income of $783,000, or 0.4%, partially offset by an increase in income tax expenses of $6.0 million, or 43.2%, and an increase in non-interest expenses of $4.4 million, or 3.6%. Total Interest Income Total interest income decreased $19.0 million, or 8.7%, during the year ended December 31, 2021 compared to the year ended December 31, 2020. The decrease was due to an $18.7 million, or 9.1%, decrease in interest income on loans and a $335,000, or 2.6%, decrease in interest income on investment securities and other interest-earning assets. Interest income on loans decreased in 2021 compared to 2020 due to lower average rates of interest and lower average balances of loans. Interest income from investment securities and other interest-earning assets decreased during 2021 compared to 2020 due to lower average rates of interest, partially offset by higher average balances of investments and other interest-earning assets. Interest Income – Loans During the year ended December 31, 2021 compared to the year ended December 31, 2020, interest income on loans decreased due to lower average balances and lower average interest rates. Interest income decreased $13.0 million as the result of lower average interest rates on loans. The average yield on loans decreased from 4.66% during the year ended December 31, 2020 to 4.36% during the year ended December 31, 2021. The decreased yields in most loan categories were primarily a result of decreased LIBOR and Federal Funds interest rates. In addition, interest income on loans decreased $5.7 million as a result of lower average loan balances, 25 42 which decreased from $4.40 billion during the year ended December 31, 2020, to $4.27 billion during the year ended December 31, 2021. The lower average balances were primarily due to higher loan repayments during 2021. In 2020, the Company also originated $121 million of PPP loans, which have a much lower yield compared to the overall loan portfolio. These loans were largely repaid during 2021, contributing to the lower average balance in loans. On an on-going basis, the Company has estimated the cash flows expected to be collected from the FDIC-assisted acquired loan pools. For each of the loan portfolios acquired, the cash flow estimates have increased, based on the payment histories and the collection of certain loans, thereby reducing loss expectations of certain loan pools, resulting in adjustments to be spread on a level-yield basis over the remaining expected lives of the loan pools. The entire amount of the discount adjustment has been and will be accreted to interest income over time. For the years ended December 31, 2021 and 2020, the adjustments increased interest income and pre-tax income by $1.6 million and $5.6 million, respectively. As of December 31, 2021, the remaining accretable yield adjustment that will affect interest income was $429,000. We recognized the remaining $429,000 of interest income during 2022. We adopted the new accounting standard related to accounting for credit losses as of January 1, 2021. With the adoption of this standard, there is no reclassification of discounts from non-accretable to accretable subsequent to December 31, 2020. All adjustments made prior to December 31, 2020 will continue to be accreted to interest income. Apart from the yield accretion, the average yield on loans was 4.32% during the year ended December 31, 2021, compared to 4.53% during the year ended December 31, 2020, as a result of lower current market rates on adjustable rate loans and new loans originated during the year. 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 recorded loan interest income of $8.1 million and $7.7 million during the years ending December 31, 2021 and 2020, respectively, related to this interest rate swap. 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. Interest Income – Investments and Other Interest-earning Assets Interest income on investments decreased $573,000 in the year ended December 31, 2021 compared to the year ended December 31, 2020. Interest income decreased $1.2 million due to a decrease in average interest rates from 2.88% during the year ended December 31, 2020 to 2.61% during the year ended December 31, 2021, due to lower market rates of interest on investment securities purchased during 2021 compared to securities already in the portfolio. Interest income increased $600,000 as a result of an increase in average balances from $426.4 million during the year ended December 31, 2020, to $447.9 million during the year ended December 31, 2021. Interest income on other interest-earning assets increased $238,000 in the year ended December 31, 2021 compared to the year ended December 31, 2020. Interest income increased $438,000 as a result of an increase in average balances from $246.1 million during the year ended December 31, 2020, to $552.1 million during the year ended December 31, 2021. Average balances increased due to higher balances held at the Federal Reserve Bank as a result of the significant increase in deposits since March 31, 2020 and significant loan repayments in 2021. Interest income decreased $200,000 due to a decrease in average interest rates from 0.19% during the year ended December 31, 2020, to 0.13% during the year ended December 31, 2021. Market interest rates earned on balances held at the Federal Reserve Bank were significantly lower in 2020 due to significant reductions in the federal funds rate of interest and remained low in 2021. 26 43 Total Interest Expense Total interest expense decreased $19.8 million, or 48.8%, during the year ended December 31, 2021, when compared with the year ended December 31, 2020, due to a decrease in interest expense on deposits of $19.3 million, or 59.6%, a decrease in interest expense on short-term borrowings and repurchase agreements of $638,000, or 94.5%, and a decrease in interest expense on subordinated debentures issued to capital trust of $180,000, or 28.7%. Partially offsetting these decreases, interest expense on subordinated notes increased $334,000, or 4.9%. Interest Expense – Deposits Interest expense on demand deposits decreased $4.5 million due to a decrease in average rates from 0.38% during the year ended December 31, 2020, to 0.17% during the year ended December 31, 2021. Partially offsetting that decrease, interest on demand deposits increased $1.4 million due to an increase in average balances from $1.87 billion in the year ended December 31, 2020, to $2.32 billion in the year ended December 31, 2021. The decrease in average interest rates of interest-bearing demand deposits was primarily a result of decreased market interest rates on these types of accounts. Demand deposit balances increased substantially during the COVID-19 pandemic in 2020 and remained elevated during 2021. In 2020, many of our business and personal customers increased their average account balances with us (some through funds received from government entities) and we also added new accounts throughout the year. Much of these increased balances remained or grew in 2021; therefore, the average balances were higher in 2021 versus 2020. Interest expense on time deposits decreased $10.3 million as a result of a decrease in average rates of interest from 1.55% during the year ended December 31, 2020, to 0.78% during the year ended December 31, 2021. In addition, interest expense on time deposits decreased $6.0 million due to a decrease in average balance of time deposits from $1.64 billion during the year ended December 31, 2020, to $1.16 billion during the year ended December 31, 2021. 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 during 2020 and 2021. The decrease in average balances of time deposits was a result of decreases in retail customer time deposits obtained through the banking center network, retail customer time deposits obtained through on-line channels and decreases in brokered deposits. Brokered and on-line channel deposits were actively reduced by the Company as other deposit sources increased. The Company reduced its rates on these types of time deposits and allowed these deposits to mature without replacement during 2021. Interest Expense - FHLBank Advances, Short-term Borrowings, Repurchase Agreements and Other Interest-bearing Liabilities; Subordinated Debentures Issued to Capital Trust and Subordinated Notes FHLBank term advances were not utilized during the years ended December 31, 2021 and 2020. FHLBank overnight borrowings were utilized in the first quarter of 2020. Interest expense on repurchase agreements increased $6,000 due to an increase in average balances from $140.9 million during the year ended December 31, 2020, to $143.8 million during the year ended December 31, 2021. The increase in average balances was due to changes in customers’ need for this product, which can fluctuate. There was only a very minor change in the average interest rate on the repurchase agreements between 2021 and 2020. Interest expense on short-term borrowings, overnight FHLBank borrowings and other interest-bearing liabilities decreased $326,000 due to average rates that decreased from 1.51% in the year ended December 31, 2020, to 0.02% in the year ended December 31, 2021. In addition to this decrease, interest expense on short-term borrowings and other interest-bearing liabilities decreased $318,000 due to a decrease in average balances from $42.6 million during the year ended December 31, 2020, to $1.5 million during the year ended December 31, 2021. The decrease in average balances and rates was due to changes in the Company’s funding needs and the mix of funding, which can fluctuate. During the year ended December 31, 2021, compared to the year ended December 31, 2020, interest expense on subordinated debentures issued to capital trusts decreased $180,000 due to lower average interest rates. The average interest rate was 2.44% in 2020, compared to 1.74% in 2021. The interest rate on subordinated debentures is a floating rate indexed to the three-month LIBOR interest rate. There was no change in the average balance of the subordinated debentures between 2021 and 2020. 27 44 In August 2016, the Company issued $75 million of 5.25% fixed-to-floating rate subordinated notes due August 15, 2026. The notes were sold at par, resulting in net proceeds, after underwriting discounts and commissions and other issuance costs, of approximately $73.5 million. 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, the issuance costs are amortized over the expected life of the notes, which is five years from the issuance date, and therefore impact the overall interest expense on the notes. In August 2021, the Company completed the redemption of all 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. Interest expense on subordinated notes increased $265,000 due to an increase in average balances from $115.3 million during the year ended December 31, 2020 to $119.8 million during the year ended December 31, 2021 due to higher average balances resulting from the issuance of new notes in June 2020, slightly offset by the redemption of the subordinated notes maturing in 2026 during August 2021. Interest expense on the subordinated notes increased $69,000 due to average rates that increased from 5.92% in the year ended December 31, 2020, to 5.98% in the year ended December 31, 2021. Net Interest Income Net interest income for the year ended December 31, 2021 increased $783,000, or 0.4%, to $177.9 million, compared to $177.1 million for the year ended December 31, 2020. Net interest margin was 3.37% for the year ended December 31, 2021, compared to 3.49% for the year ended December 31, 2020, a decrease of 12 basis points. In both years, the Company’s net interest income and margin were positively impacted by the increases in expected cash flows from the FDIC-assisted acquired loan pools and the resulting increase to accretable yield, which was discussed previously in “Interest Income – Loans” and is discussed in Note 3 of the accompanying audited financial statements. The positive impact of these changes on the years ended December 31, 2021 and 2020 were increases in interest income of $1.6 million and $5.6 million, respectively, and increases in net interest margin of three basis points and 11 basis points, respectively. Excluding the positive impact of the additional yield accretion, net interest margin decreased four basis points during the year ended December 31, 2021. The decrease in net interest margin was due to significantly declining market interest rates, a change in asset mix with increases in lower-yielding investments and cash equivalents and the redemption of subordinated notes in 2021. The Company's overall interest rate spread decreased one basis point, or 0.5%, from 3.23% during the year ended December 31, 2020, to 3.22% during the year ended December 31, 2021. The decrease was due to a 52 basis point decrease in the weighted average yield on interest-earning assets, partially offset by a 51 basis point decrease in the weighted average rate paid on interest-bearing liabilities. In comparing the two years, the yield on loans decreased 30 basis points, the yield on investment securities decreased 27 basis points and the yield on other interest-earning assets decreased six basis points. The rate paid on deposits decreased 55 basis points, the rate paid on subordinated debentures issued to capital trust decreased 70 basis points, the rate paid on short-term borrowings decreased 34 basis points, and the rate paid on subordinated notes increased six basis points. For additional information on net interest income components, refer to the “Average Balances, Interest Rates and Yields” table in this Report. Provision for and Allowance for Credit Losses During the year ended December 31, 2021, the Company recorded a negative provision expense of $6.7 million on its portfolio of outstanding loans, compared to a $15.9 million provision expense recorded for the year ended December 31, 2020. The negative provision for credit losses in 2021 reflected decreased outstanding total loans and continued positive trends in asset quality metrics, combined with an improved economic forecast. In 2021, the national unemployment rate continued to decrease and many measures of economic growth improved. The Company experienced net recoveries of $116,000 for the year ended December 31, 2021 compared to net charge offs of $422,000 for the year ended December 31, 2020. The provision for losses on unfunded commitments for the year ended December 31, 2021 was $939,000. 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. In 2020, due to the COVID-19 pandemic and its effects on the overall economy and unemployment, the Company increased its provision for credit losses and increased its allowance for credit losses, even though actual realized net charge-offs were very low. The Bank’s allowance for credit losses as a percentage of total loans was 1.49% and 1.32% at December 31, 2021 and 2020, respectively. Prior to January 1, 2021, the ratio excluded the FDIC-assisted acquired loans. 28 45 Non-performing Assets Prior to adoption of the CECL accounting standard on January 1, 2021, FDIC-assisted acquired non-performing assets, including foreclosed assets and potential problem loans, were not included in the totals or in the discussion of non-performing loans, potential problem loans and foreclosed assets. These assets were initially recorded at their estimated fair values as of their acquisition dates and accounted for in pools. The loan pools were analyzed rather than the individual loans. The performance of the loan pools acquired in each of the Company’s five FDIC-assisted transactions has been better than expectations as of the acquisition dates; as a result, FDIC- assisted acquired assets are included in their particular collateral categories in the tables below and then the total FDIC-assisted acquired assets are subtracted from the total balances. Non-performing assets, including all FDIC-assisted acquired assets, at December 31, 2021, were $6.0 million, a decrease of $2.1 million from $8.1 million at December 31, 2020. Non-performing assets, including all FDIC-assisted acquired assets, as a percentage of total assets were 0.11% at December 31, 2021, compared to 0.15% at December 31, 2020. Compared to December 31, 2020, non-performing loans decreased $1.5 million to $5.4 million at December 31, 2021, and foreclosed assets decreased $635,000 to $588,000 at December 31, 2021. Non-performing one-to four-family residential loans comprised $2.2 million, or 40.9%, of the total non-performing loans at December 31, 2021. Non-performing commercial real estate loans comprised $2.0 million, or 37.0%, of total non-performing loans at December 31, 2021. Non-performing consumer loans comprised $733,000, or 13.5%, of the total non-performing loans at December 31, 2021. Non-performing land development loans comprised $468,000, or 8.6%, of total non-performing loans at December 31, 2021. Non-performing Loans. Activity in the non-performing loans category during the year ended December 31, 2021, was as follows: Beginning Additions Balance, to Non- January 1 Performing Performing Foreclosed Assets and Repossessions Offs Charge- Ending Balance, December 31 Payments Loans Transfers to Transfers to Removed Potential from Non- Problem $ One- to four-family construction Subdivision construction Land development Commercial construction One- to four-family residential Other residential Commercial real estate Commercial business Consumer Total non-performing loans Less: FDIC-assisted acquired loans — $ — — — 4,465 190 849 114 1,268 6,886 3,843 (In Thousands) — $ — 622 — 1,031 — 4,562 20 330 6,565 144 — $ — — — (1,236) (185) (330) — (232) (1,983) (1,149) — $ — — — — — — — — — — — $ — — — (183) — (191) — (83) (457) (373) — $ — (154) — (77) — — — (191) (422) (94) — $ — — — (1,784) (5) (2,884) (134) (359) (5,166) (635) — — 468 — 2,216 — 2,006 — 733 5,423 1,736 Total non-performing loans net of FDIC-assisted acquired loans $ 3,043 $ 6,421 $ (834) $ — $ (84) $ (328) $ (4,531) $ 3,687 At December 31, 2021, the non-performing one- to four-family residential category included 40 loans, eight of which were added during 2021. The largest relationship in this category is an FDIC-assisted acquired loan totaling $326,000, or 14.7% of the total category. The non-performing commercial real estate category included two loans, both of which were added during 2021. The largest relationship in this category, which totaled $1.7 million, or 86.0% of the total category, was transferred from potential problems and is collateralized by a mixed use commercial retail building. The previous largest non-performing commercial real estate relationship ($2.4 million) was paid off in 2021. The non-performing consumer category included 30 loans, seven of which were added during 2021. The non-performing land development category consisted of one loan added during 2021, which totaled $468,000 and is collateralized by unimproved zoned vacant ground in southern Illinois. Loans that were modified under the guidance provided by the CARES Act are not included as non-performing loans in the table above as they were current under their modified terms. 29 46 Other Real Estate Owned and Repossessions. Of the total $2.1 million of other real estate owned and repossessions at December 31, 2021, $1.5 million represents properties which were not acquired through foreclosure. Activity in foreclosed assets and repossessions during the year ended December 31, 2021, was as follows: Beginning Balance, January 1 Additions Sales Capitalized Costs Write- Downs Ending Balance, December 31 One- to four-family construction Subdivision construction Land development Commercial construction One- to four-family residential Other residential Commercial real estate Commercial business Consumer Total foreclosed assets and repossessions Less: FDIC-assisted acquired assets $ — $ 263 682 — 125 — — — 153 1,223 446 — $ — — — 183 — 192 — 759 1,134 375 (In Thousands) — $ (169) (250) — (125) — (192) — (822) (1,558) (206) — $ — — — — — — — — — — — $ (94) (117) — — — — — — (211) (117) — — 315 — 183 — — — 90 588 498 Total foreclosed assets and repossessions net of FDIC-assisted acquired assets $ 777 $ 759 $ (1,352) $ — $ (94) $ 90 At December 31, 2021, the land development category of foreclosed assets consisted of one property in central Iowa (this was an FDIC-assisted acquired asset), which was added prior to 2021. The one- to four-family residential category of foreclosed assets consisted of two properties (both of which were FDIC-assisted acquired assets), both of which were added during 2021. The amount of additions and sales in the consumer category are due to the volume of repossessions of automobiles, which generally are subject to a shorter repossession process. Potential Problem Loans. Potential problem loans decreased $3.8 million during the year ended December 31, 2021, from $5.8 million at December 31, 2020 to $2.0 million at December 31, 2021. As noted, we experienced an increased level of loan modifications in late March through June 2020; however, total loan modifications were much lower at December 31, 2020, and decreased further through December 31, 2021. In accordance with the CARES Act and guidance from the banking regulatory agencies, we made certain short-term modifications to loan terms to help our customers navigate through the pandemic situation. Although loan modifications were made, they did not automatically result in these loans being classified as TDRs, potential problem loans or non-performing loans. 30 47 Activity in the potential problem loans category during the year ended December 31, 2021, was as follows: Beginning Additions Balance, January 1 Problem to Potential Potential Removed from Transfers to Transfers to Foreclosed Assets and Non- Charge- Ending Balance, Problem Performing Repossessions Offs Payments December 31 (In Thousands) One- to four-family construction Subdivision construction Land development Commercial construction One- to four-family residential Other residential Commercial real estate Commercial business Consumer Total potential problem loans Less: FDIC-assisted acquired loans Total potential problem loans net of FDIC-assisted acquired loans $ — $ 21 — — 2,157 — 3,080 — 588 5,846 1,523 — $ — — — — — — — 158 158 — — $ — — — (314) — (1,070) — (21) (1,405) (314) — $ — — — (52) — (1,726) — (1) (1,779) — — $ — — — — — — — (95) (95) — — $ — — — — — — — (97) (97) — — $ (6) — — (359) — (74) — (209) (648) (205) — 15 — — 1,432 — 210 — 323 1,980 1,004 $ 4,323 $ 158 $ (1,091) $ (1,779) $ (95) $ (97) $ (443) $ 976 At December 31, 2021, the commercial real estate category of potential problem loans included one loan, which was added in a prior year. During 2021, within the commercial real estate category of potential problem loans, one at $536,000 was upgraded after six months of consecutive payments and one at $534,000 was paid off and removed from the potential problem loans category; both of these loans had been added to potential problem loans in 2020. One loan totaling $1.7 million was moved to the non-performing category. The one- to four-family residential category of potential problem loans included 25 loans, none of which were added during 2021. The largest relationship in this category totaled $171,000, or 12.0% of the category. The consumer category of potential problem loans included 27 loans, eight of which were added during 2021. 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. During 2021, loans classified as “Watch” decreased $34.0 million, from $64.8 million at December 31, 2020 to $30.7 million at December 31, 2021. This decrease was primarily due to loans being upgraded out of the “watch” category, which primarily included one $14.3 million relationship collateralized by a shopping center, one $10.6 million relationship collateralized by recreational facilities and other real estate and business assets, and one $3.9 million relationship collateralized by a shopping center and other real estate and business assets. Also, one $11.6 million relationship collateralized by a healthcare facility was paid in full during 2021. Partially offsetting those decreases, one $10.3 million relationship collateralized by a healthcare facility was downgraded and added to the “Watch” category. See Note 3 of the accompanying audited financial statements, for further discussion of the Company’s loan grading system. Non-Interest Income Non-interest income for the year ended December 31, 2021 was $38.3 million compared with $35.0 million for the year ended December 31, 2020. The increase of $3.3 million, or 9.3%, was primarily as a result of the following items: Point-of-sale and ATM fees: Point-of-sale and ATM fees increased $2.8 million compared to the year ended December 31, 2020. This increase was primarily due to a reduction in customer usage in 2020 as the COVID-19 pandemic caused many businesses to close or limit access for a period of time. In the year ended December 31, 2021, debit card and ATM usage by customers was back to normal levels, and in some cases, increased levels of activity. Net gains on loan sales: Net gains on loan sales increased $1.4 million compared to the year ended December 31, 2020. The increase was due to an increase in originations of fixed-rate single-family mortgage loans during 2021 compared to 2020. Fixed-rate single- family mortgage loans originated are generally subsequently sold in the secondary market. These loan originations increased 31 48 substantially when market interest rates decreased to historically low levels in the latter half of 2020 and the first half of 2021. As a result of the significant volume of refinance activity, and as market interest rates moved a bit higher in the latter half of 2021, mortgage refinance volume decreased and loan originations and related gains on sales of these loans returned to levels closer to historic averages. Gain (loss) on derivative interest rate products: In 2021, the Company recognized a gain of $312,000 on the change in fair value of its back-to-back interest rate swaps related to commercial loans. In 2020, the Company recognized a loss of $264,000 on the change in fair value of its back-to-back interest rate swaps related to commercial loans. Generally, as market interest rates increase, this creates a net increase in the fair value of these instruments. As market rates decrease, the opposite tends to occur. This is a non-cash item as there was no required settlement of this amount between the Company and its swap counterparties. Other income: Other income decreased $2.0 million compared to the year ended December 31, 2020. In 2020, the Company recognized approximately $1.5 million of fee income related to newly-originated interest rate swaps in the Company’s back-to-back swap program with loan customers and swap counterparties, with fewer of these transactions and related fee income generated in 2021. Non-Interest Expense Total non-interest expense increased $4.4 million, or 3.6%, from $123.2 million in the year ended December 31, 2020, to $127.6 million in the year ended December 31, 2021. The Company’s efficiency ratio for the year ended December 31, 2021 was 59.03%, an increase from 58.07% for 2020. The higher efficiency ratio in 2021 was primarily due to an increase in non-interest expense (primarily from the significant IT consulting expense and related contract termination liability incurred in December 2021), partially offset by an increase in total revenue. Excluding this consulting expense and contract termination liability, the Company’s efficiency ratio was 56.57% in 2021. In the year ended December 31, 2021, the Company’s efficiency ratio was negatively impacted by a decrease in interest income on loans and positively impacted by a decrease in interest expense on deposits. In the year ended December 31, 2020, the Company’s efficiency ratio was negatively impacted by an increase in salaries and employee benefits expense and positively impacted by an increase in income related to loan sales. The Company’s ratio of non-interest expense to average assets was 2.32% for the year ended December 31, 2021 compared to 2.31% for the year ended December 31, 2020. Average assets for the year ended December 31, 2021, increased $178.9 million, or 3.4%, from the year ended December 31, 2020, primarily due to increases in investment securities and interest-bearing cash equivalents, partially offset by a decrease in net loans receivable. The following were key items related to the increase in non-interest expense for the year ended December 31, 2021 as compared to the year ended December 31, 2020: Legal, Audit and Other Professional Fees: Legal, audit and other professional fees increased $4.2 million in the year ended December 31, 2021 when compared to the year ended December 31, 2020. In 2021, the Company expensed and paid $4.1 million in fees to consultants that were engaged to support the Company in its evaluation of core and ancillary software and information technology systems. The consultant’s support included assisting the Company in identifying various software options, helping identify positive and negative attributes of those software options and assisting in negotiating contract terms and pricing. Net Occupancy and Equipment Expense: Net occupancy and Equipment expense increased $1.6 million, to $29.2 million at December 31, 2021 when compared to the year ended December 31, 2020. In 2021, the Company expensed a $1.2 million contract termination fee related to the Company’s current core software and information technology system. Insurance: Insurance expense increased $656,000 in the year ended December 31, 2021 compared to the year ended December 31, 2020. This increase was primarily due to an increase in FDIC deposit insurance premiums. In 2020, the Company had a $482,000 credit with the FDIC for a portion of premiums previously paid to the deposit insurance fund. The remaining deposit insurance fund credit was utilized in 2020 in addition to $870,000 in premiums being due for the year ended December 31, 2020, while the premium expense was $1.4 million for the year ended December 31, 2021. Expense on other real estate owned and repossessions: Expense on other real estate owned and repossessions decreased $1.4 million in the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily due to sales of most foreclosed assets and a smaller amount of repossessed automobiles in 2021, plus higher valuation write-downs of certain foreclosed assets during 2020. During 2020, sales and valuation write-downs of certain foreclosed assets totaled a net expense of $963,000, while sales and valuation write-downs in 2021 totaled a net gain of $7,000. 32 49 Salaries and employee benefits: Salaries and employee benefits decreased $520,000 in the year ended December 31, 2021 compared to Salaries and employee benefits: Salaries and employee benefits decreased $520,000 in the year ended December 31, 2021 compared to the year ended December 31, 2020. In 2020, the Company approved two special cash bonuses to all employees totaling $2.2 million in the year ended December 31, 2020. In 2020, the Company approved two special cash bonuses to all employees totaling $2.2 million in response to the COVID-19 pandemic. Such bonuses were not repeated in the year ended December 31, 2021. response to the COVID-19 pandemic. Such bonuses were not repeated in the year ended December 31, 2021. Provision for Income Taxes Provision for Income Taxes For the years ended December 31, 2021 and 2020, the Company's effective tax rates were 20.9% and 18.9%, respectively. These For the years ended December 31, 2021 and 2020, the Company's effective tax rates were 20.9% and 18.9%, 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 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. and to tax-exempt investments and tax-exempt loans, which reduced the Company’s effective tax rate. Liquidity Liquidity Liquidity is a measure of the Company’s ability to generate sufficient cash to meet present and future financial obligations in a timely 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 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 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 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’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 Company maintains overall liquidity sufficient to satisfy its depositors’ requirements and meet its borrowers’ credit needs. At December 31, 2022, the Company had commitments of approximately $114.0 million to fund loan originations, $2.01 billion of December 31, 2022, the Company had commitments of approximately $114.0 million to fund loan originations, $2.01 billion of unused lines of credit and unadvanced loans, and $16.7 million of outstanding letters of credit. unused lines of credit and unadvanced loans, and $16.7 million of outstanding letters of credit. Loan commitments and the unfunded portion of loans at the dates indicated were as follows (in thousands): Loan commitments and the unfunded portion of loans at the dates indicated were as follows (in thousands): Closed non-construction loans with unused available lines Closed non-construction loans with unused available lines Secured by real estate (one- to four-family) Secured by real estate (one- to four-family) Secured by real estate (not one- to four-family) Secured by real estate (not one- to four-family) Not secured by real estate - commercial business Not secured by real estate - commercial business $ 199,182 $ $ 199,182 $ — — 104,452 104,452 175,682 $ 175,682 $ 23,752 23,752 91,786 91,786 164,480 $ 164,480 $ 22,273 22,273 77,411 77,411 155,831 $ 155,831 $ 19,512 19,512 83,782 83,782 150,948 150,948 11,063 11,063 87,480 87,480 December 31, December 31, 2022 2022 December 31, December 31, 2021 2021 December 31, December 31, 2020 2020 December 31, December 31, 2019 2019 December 31, December 31, 2018 2018 Closed construction loans with unused available lines Closed construction loans with unused available lines Secured by real estate (one-to four-family) Secured by real estate (one-to four-family) Secured by real estate (not one-to four-family) Secured by real estate (not one-to four-family) 100,669 100,669 1,444,450 1,444,450 74,501 74,501 1,092,029 1,092,029 42,162 42,162 823,106 823,106 48,213 48,213 798,810 798,810 37,162 37,162 906,006 906,006 Loan commitments not closed Loan commitments not closed Secured by real estate (one-to four-family) Secured by real estate (one-to four-family) Secured by real estate (not one-to four-family) Secured by real estate (not one-to four-family) Not secured by real estate - commercial business Not secured by real estate - commercial business 16,819 16,819 157,645 157,645 50,145 50,145 53,529 53,529 146,826 146,826 12,920 12,920 85,917 85,917 45,860 45,860 699 699 69,295 69,295 92,434 92,434 — — 24,253 24,253 104,871 104,871 405 405 $ 2,073,362 $ 1,671,025 $ 1,261,908 $ 1,267,877 $ 1,322,188 $ 2,073,362 $ 1,671,025 $ 1,261,908 $ 1,267,877 $ 1,322,188 33 33 50 The following table summarizes the Company’s fixed and determinable contractual obligations by payment date as of December 31, 2022. Additional information regarding these contractual obligations is discussed further in Notes 6, 8, 9, 10, 11, 12, 13 and 18 of the accompanying audited financial statements. Payments Due In: One Year or Over One to Less Five Years Over Five Years Total (In Thousands) Deposits without a stated maturity Time and brokered certificates of deposit Short-term borrowings Subordinated debentures Subordinated notes Operating leases Dividends declared but not paid — $ $ 3,402,123 $ 1,070,939 266,426 — — 1,199 4,893 211,013 — — — 4,323 — — $ 3,402,123 1,282,787 835 266,426 — 25,774 25,774 74,281 74,281 8,728 3,206 4,893 — $ 4,745,580 $ 215,336 $ 104,096 $ 5,065,012 The Company’s primary sources of funds are customer deposits, brokered deposits, short term borrowings at the FHLBank, 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. Since mid-2022, the Company has increased the interest rates it pays on many deposit products. The Company has also utilized both fixed-rate and floating-rate brokered deposits of varying terms, as well as overnight FHLBank borrowings. At December 31, 2022 and 2021, the Company had these available secured lines and on-balance sheet liquidity: Federal Home Loan Bank line Federal Reserve Bank line Cash and cash equivalents Unpledged securities – Available-for-sale Unpledged securities – Held-to-maturity December 31, 2022 $ 1,005.1 million $ 397.0 million 168.5 million 371.8 million 202.5 million December 31, 2021 756.5 million 352.4 million 717.3 million 406.8 million — Statements of Cash Flows. During the years ended December 31, 2022, 2021 and 2020, the Company had positive cash flows from operating activities. The Company experienced positive cash flows from investing activities during the year ended December 31, 2021, and negative cash flows from investing activities during the years ended December 31, 2022 and 2020. The Company experienced negative cash flows from financing activities during the year ended December 31, 2021, and positive cash flows from financing activities during the years ended December 31, 2022 and 2020. 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, realized gains on the sale of investment securities and loans, depreciation and amortization 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 sources of cash flows from operating activities. Operating activities provided cash flows of $66.6 million, $85.0 million and $46.0 million during the years ended December 31, 2022, 2021 and 2020, respectively. During the years ended December 31, 2022, 2021 and 2020, investing activities used cash of $801.3 million, provided cash of $190.7 million and used cash of $131.3 million, respectively, primarily due to the net increases and purchases of loans (2022 and 2020) and investment securities (2022, 2021 and 2020), partially offset by cash received for the termination of interest rate derivatives (2020). During 2021, investing activities provided cash as net loan repayments exceeded the purchase of loans and investment securities. 34 51 Changes in cash flows from financing activities during the periods covered by the Statements of Cash Flows are primarily due to changes in deposits after interest credited, changes in short-term borrowings, proceeds from the issuance of subordinated notes, redemption of subordinated notes, purchases of the Company’s common stock and dividend payments to stockholders. Financing activities provided cash flows of $186.0 million and $428.9 million during the years ended December 31, 2022 and 2020, respectively, primarily due to increases in customer deposit balances, net increases or decreases in various borrowings and proceeds from the issuance of subordinated notes (2020), partially offset by dividend payments to stockholders and purchases of the Company’s common stock. Financing activities used cash flows of $122.2 million during the year ended December 31, 2021, as dividend payments to stockholders, redemption of subordinated notes and purchases of the Company’s common stock exceeded the net increase in deposits. 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. As of December 31, 2022, total stockholders’ equity and common stockholders’ equity were each $533.1 million, or 9.4% of total assets, equivalent to a book value of $43.58 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 December 31, 2022, the Company’s tangible common equity to tangible assets ratio was 9.2%, compared to 11.2% at December 31, 2021. Included in stockholders’ equity at December 31, 2022 and 2021, were unrealized gains (losses) (net of taxes) on the Company’s available-for-sale investment securities totaling $(47.2 million) and $9.1 million, respectively. This change from a net unrealized gain to a net unrealized loss during 2022 primarily resulted from increasing market interest rates throughout 2022, which decreased the fair value of investment securities. In addition, included in stockholders’ equity at December 31, 2022, were realized gains (net of taxes) on the Company’s cash flow hedge (interest rate swap), which was terminated in March 2020, totaling $17.4 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 December 31, 2022, the remaining pre-tax amount to be recorded in interest income was $22.5 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 December 31, 2022, was an unrealized loss (net of taxes) on the Company’s three outstanding cash flow hedges (three interest rate swaps) totaling $23.6 million. Increases in market interest rates since the inception of these hedges have caused their fair values 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 December 31, 2022, the Bank's common equity Tier 1 capital ratio was 11.9%, its Tier 1 capital ratio was 11.9%, its total capital ratio was 13.1% and its Tier 1 leverage ratio was 11.5%. As a result, as of December 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 December 31, 2022, the Company's common equity Tier 1 capital ratio was 10.6%, its Tier 1 capital ratio was 11.0%, its total capital ratio was 13.5% and its Tier 1 leverage ratio was 10.6%. 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 December 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. 35 52 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. Both the Company and the Bank had a capital conservation buffer that exceeded the required minimum levels at December 31, 2022 and 2021. On August 15, 2021, the Company completed the redemption, at par, of all $75.0 million aggregate principal amount of its 5.25% fixed to floating rate subordinated notes due August 15, 2026. The total redemption price was 100% of the aggregate principal balance of the subordinated notes plus accrued and unpaid interest. The Company utilized cash on hand for the redemption payment. These subordinated notes were included as capital in the Company’s calculation of its total capital ratio. Dividends. During the year ended December 31, 2022, the Company declared common stock cash dividends of $1.56 per share (25.9% of net income per common share) and paid common stock cash dividends of $1.52 per share. During the year ended December 31, 2021, the Company declared common stock cash dividends of $1.40 per share (25.6% of net income per common share) and paid common stock cash dividends of $1.38 per share. The Board of Directors meets regularly to consider the level and the timing of dividend payments. The $0.40 per share dividend declared but unpaid as of December 31, 2022, was paid to stockholders in January 2023. Common Stock Repurchases and Issuances. The Company has been in various buy-back programs since May 1990. During the years ended December 31, 2022 and 2021, the Company repurchased 1,043,804 shares of its common stock at an average price of $59.25 per share and 715,397 shares of its common stock at an average price of $54.69 per share, respectively. During the years ended December 31, 2022 and 2021, the Company issued 146,601 shares of stock at an average price of $42.69 per share and 91,285 shares of stock at an average price of $40.53 per share, respectively, to cover stock option exercises. In January 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. At December 31, 2022, there were approximately 177,000 shares which could still be purchased under this authorization. In December 2022, the Company’s Board of Directors authorized the purchase of up to an additional one million shares of the Company’s outstanding common stock, under a program of open market purchases or privately negotiated transactions, resulting in a total of approximately 1.2 million shares currently available in our stock repurchase authorization. Management has historically utilized stock buy-back programs from time to time as long as management believed that repurchasing the stock would contribute to the overall growth of shareholder value. The number of shares of stock that will be repurchased at any particular time and the prices that will be paid are subject to many factors, several of which are outside of the control of the Company. The primary factors, however, are the number of shares available in the market from sellers at any given time, the price of the stock within the market as determined by the market and the projected impact on the Company’s earnings per share and capital. Non-GAAP Financial Measures This document contains certain financial information determined by methods other than in accordance with GAAP. These non-GAAP financial measures includes the efficiency ratio excluding consulting expense and related contract termination liability and tangible common equity to tangible assets ratio. We calculate the efficiency ratio excluding consulting expense and related contract termination liability by subtracting from the non- interest expense component of the ratio the consulting expense and contract termination fee we incurred during 2021 in connection with the evaluation of our core and ancillary software and information technology systems. We had no such expenses or fees during 2022. Management believes the efficiency ratio calculated in this manner better reflects our core operating performance and makes this ratio more meaningful when comparing our operating results to different periods. 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. 36 53 These non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP financial measures. Because not all companies use the same calculation of non-GAAP measures, this presentation may not be comparable to other similarly titled measures as calculated by other companies. Non-GAAP Reconciliation: Efficiency Ratio Excluding Consulting Expense and Related Contract Termination Liability Year Ended December 31, 2021 (Dollars in Thousands) Reported non-interest expense/ efficiency ratio $ 127,635 59.03 % Less: Impact of one-time consulting expense and related contract termination liability 5,318 2.46 Core non-interest expense/ efficiency ratio $ 122,317 56.57 % There were no non-GAAP adjustments to the efficiency ratio for years other than 2021. Non-GAAP Reconciliation: Ratio of Tangible Common Equity to Tangible Assets December 31, 2022 December 31, 2021 December 31, 2020 (Dollars In Thousands) December 31, 2019 December 31, 2018 Common equity at period end Less: Intangible assets at period end Tangible common equity at period end (a) $ 533,087 10,813 $ 522,274 $ 616,752 6,081 $ 610,671 $ 629,741 6,944 $ 622,797 $ 603,066 8,098 $ 594,968 $ 531,977 9,288 $ 522,689 Total assets at period end Less: Intangible assets at period end Tangible assets at period end (b) $ 5,680,702 10,813 $ 5,669,889 $ 5,449,944 6,081 $ 5,443,863 $ 5,526,420 6,944 $ 5,519,476 $ 5,015,072 8,098 $ 5,006,974 $ 4,676,200 9,288 $ 4,666,912 Tangible common equity to tangible assets (a) / (b) 9.21 % 11.22 % 11.28 % 11.88 % 11.20 % 37 54 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 December 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/SOFR 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/SOFR 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% from 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 and 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. Since March 2022, market interest rates have increased fairly rapidly and are expected to increase further in the first half of 2023. This increased loan yields and expanded our net interest income and net interest margin in 2022. While market interest rate increases are expected to result in increases to loan yields, we expect that much of this benefit will be offset by increased funding costs. Subsequent to December 31, 2022, cumulative time deposit maturities are as follows: within three months --$237 million; within six months -- $733 million; and within twelve months -- $1.07 billion. At December 31, 2022, the weighted average interest rates on these various cumulative maturities were 1.42%, 1.87% and 2.09%, respectively. 38 55 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 3rd and a 1.00% decrease on March 16th. At December 31, 2021, the Federal Funds rate was 0.25%. In 2022, the FRB implemented rate increases of 0.25%, 0.50%, 0.75%, 0.75%, 0.75%, 0.75% and 0.50% in March, May, June, July, September, November and December 2022, respectively. At December 31, 2022, the Federal Funds rate was 4.50%, and is 4.75% currently. Financial markets expect further increases in Federal Funds interest rates in the first half of 2023, with 0.50-1.00% of additional cumulative rate hikes currently anticipated. A substantial portion of Great Southern’s loan portfolio ($958.8 million at December 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 December 31, 2022. Of these loans, $958.4 million had interest rate floors. Great Southern’s loan portfolio also includes loans ($501.2 million at December 31, 2022) tied to various SOFR indexes that will be subject to adjustment at least once within 90 days after December 31, 2022. Of these loans, $501.2 million had interest rate floors. Great Southern also has a portfolio of loans ($747.6 million at December 31, 2022) tied to a “prime rate” of interest that will adjust immediately or within 90 days of a change to the “prime rate” of interest. Of these loans, $734.6 million had interest rate floors at various rates. Great Southern also has a portfolio of loans ($6.7 million at December 31, 2022) tied to an AMERIBOR index that will adjust immediately or within 90 days of a change to the “prime rate” of interest. Of these loans, $6.7 million had interest rate floors at various rates. At December 31, 2022, nearly all of these LIBOR/SOFR and “prime rate” loans had fully-indexed rates that were at or above their floor rate and so are expected to move fully with future market interest rate increases. 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 39 56 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. 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 was paid $45.9 million from its swap counterparty as a result of this termination. In March 2022, the Company entered into another interest rate swap transaction as part of its ongoing interest rate management strategies to hedge the risk of its floating rate loans. The notional amount of the swap 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. The floating rate will be reset monthly and net settlements of interest due to/from the counterparty will also occur monthly. The initial floating rate of interest was set at 0.24143%. The Company will receive net interest settlements which will be recorded as loan interest income, to the extent that the fixed rate of interest exceeds 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. In July 2022, the Company entered into two interest rate swap transactions as part of its ongoing interest rate management strategies to hedge the risk of its floating rate loans. The notional amount of each swap is $200 million with an effective date of May 1 2023 and a termination date of May 1, 2028. Under the terms of one swap, beginning in May 2023, the Company will receive a fixed rate of interest of 2.628% and will pay a floating rate of interest equal to one-month USD-SOFR OIS. Under the terms of the other swap, beginning in May 2023, the Company will receive a fixed rate of interest of 5.725% and will pay a floating rate of interest equal to one-month USD-Prime. In each case, the floating rate will be reset monthly and net settlements of interest due to/from the counterparty will also occur monthly. To the extent the fixed rate of interest exceeds the floating rate of interest, the Company will receive net interest settlements, which will be recorded as loan interest income. If the floating rate of interest exceeds the fixed rate of interest, 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 accompanying audited financial statements. 40 57 The following tables illustrate the expected maturities and repricing, respectively, of the Bank’s financial instruments at December 31, 2022. These schedules do not reflect the effects of possible prepayments or enforcement of due-on-sale clauses. The tables are based on information prepared in accordance with generally accepted accounting principles. Maturities Financial Assets: Interest bearing deposits Weighted average rate Available-for-sale debt securities (1) Weighted average rate Held-to-maturity securities (2) Weighted average rate Adjustable rate loans Weighted average rate Fixed rate loans Weighted average rate Federal Home Loan Bank stock and other interest earning assets Weighted average rate $ $ $ $ $ December 31, 2023 2024 2025 2026 2027 2028-2037 Thereafter Total (Dollars In Thousands) — — 3,667 — — $ 20,770 — — $ 184,690 — $ — $ 272,306 $ — $ — $ 279,450 1.76 % 532 1.58 % 1.43 % 2.75 % 2.73 % — $ 107,437 — $ 99,157 $ 218,402 2.81 % $ 94,526 2.43 % $ 688,853 $ 215,533 — — 6,906 4.10 % $ 63,258 4.34 % 2,253 4.55 % — — 897,043 7.24 % — — — $ — — — $ 465,012 7.07 % 6.90 % 7.10 % 6.63 % 5.83 % 3.24 % 210,435 $ 185,784 $ 291,763 $ 377,044 $ 271,921 $ 352,586 $ 33,209 4.61 % 4.33 % 4.54 % 3.92 % 4.55 % 3.91 % 4.30 % 20,710 4.33 % — — — — — — — — — $ — 10,104 4.49 % 63,258 4.34 % 490,592 2.70 % 202,495 2.63 % 2,863,450 4.23 % 1,722,742 4.26 % 30,814 4.38 % $ $ $ $ Total financial assets $ 1,193,699 $ 650,796 $ 578,119 $ 596,776 $ 391,848 $ 863,115 $ 1,098,998 $ 5,373,351 $ 1,070,939 $ 139,060 $ 65,454 $ 2,967 $ 3,532 $ Financial Liabilities: Time deposits Weighted average rate Interest-bearing demand Weighted average rate Non-interest-bearing demand Weighted average rate Securities sold under reverse repurchase agreements Weighted average rate Short-term borrowings, overnight FHLB 2.09 % $ 2,338,535 0.90 % $ 1,063,588 — $ 176,843 0.94 % borrowings, and other liabilities $ 89,583 Weighted average rate Subordinated notes Weighted average rate Subordinated debentures Weighted average rate 4.60 % — — — — 3.31 % — — — — 3.75 % — — — — 0.72 % — — — — — — — — — — — — — — — — — — — — — — — — — — — — 0.71 % — — — — — — — — — $ — — — 835 3.75 % — — — — — — — — 75,000 5.95 % — $ — — $ — — $ — — $ — 1,282,787 2.30 % 2,338,535 0.90 % 1,063,588 — — $ — 176,843 0.94 % — $ — — $ — 25,774 $ 6.04 % 89,583 4.60 % 75,000 5.95 % 25,774 6.04 % December 31, 2022 Fair Value $ $ $ $ $ $ $ $ $ $ $ $ $ 63,258 490,592 177,765 2,817,381 1,653,061 30,814 1,270,790 2,338,535 1,063,588 176,843 89,583 72,000 25,774 Total financial liabilities $ 4,739,488 $ 139,060 $ 65,454 $ 2,967 $ 3,532 $ 75,835 $ 25,774 $ 5,052,110 (1) Available-for-sale debt securities include approximately $417.5 million of mortgage-backed securities and collateralized mortgage obligations which pay interest and principal monthly to the Company. This table does not show the effect of these monthly repayments of principal. (2) Held-to-maturity debt securities include approximately $196.3 million of mortgage-backed securities and collateralized mortgage obligations which pay interest and principal monthly to the Company. This table does not show the effect of these monthly repayments of principal. 41 58 Repricing December 31, 2023 2024 2025 2026 2027 (Dollars In Thousands) 2028-2037 Thereafter Total Financial Assets: Interest bearing deposits Weighted average rate Available-for-sale debt securities (1) Weighted average rate Held-to-maturity securities (2) Weighted average rate Adjustable rate loans Weighted average rate Fixed rate loans Weighted average rate Federal Home Loan Bank stock and other interest earning assets Weighted average rate $ $ 63,258 4.34 % 2,253 4.55 % — — $ 2,198,489 $ $ 3.84 % 210,435 4.61 % 30,814 4.38 % $ $ — — — $ — — — 23,333 $ 4.01 % — — 6,906 $ 4.10 % — $ — 45,734 $ 3.91 % — — 3,667 — — 20,770 — — 184,690 $ — $ — $ 272,306 $ $ 1.76 % 532 1.58 % 32,935 $ 3.32 % 1.43 % — $ — 69,629 $ 3.72 % 2.81 % 493,330 3.50 % 2.75 % 2.73 % 107,437 $ 94,526 $ 202,495 2.43 % 2.63 % — $ 2,863,450 — 33,209 $ 1,722,742 6.08 % 63,258 4.34 % 490,592 2.70 % 185,784 $ 291,763 $ 377,044 $ 271,921 $ 352,586 $ 4.33 % 4.54 % 3.92 % 4.55 % 3.91 % 4.30 % 4.26 % — — — — — — — — — — — $ — 30,814 4.38 % Total financial assets $ 2,505,249 $ 209,117 $ 344,403 $ 414,178 $ 362,320 $ 1,138,043 $ 400,041 $ 5,373,351 Financial Liabilities: Time deposits Weighted average rate Interest-bearing demand Weighted average rate Non-interest-bearing demand (3) Weighted average rate Securities sold under reverse repurchase agreements Weighted average rate Short-term borrowings, overnight FHLB borrowings, and other liabilities Weighted average rate Subordinated notes Weighted average rate Subordinated debentures Weighted average rate $ 1,082,139 $ 127,860 $ 65,454 $ 2,967 $ 3,532 $ 2.09 % $ 2,338,535 0.90 % — — $ 176,843 0.94 % $ $ 89,583 4.60 % — — 25,774 6.04 % 3.34 % — — — — — — 3.75 % — — — — — — — — — $ — — — — — 75,000 5.95 % — — 0.72 % — — — — 0.71 % — — — — — — — — — — — — — — — — — — — — — $ 1,282,787 835 — 3.75 % — $ 2,338,535 — — — — $ 1,063,588 — — $ 1,063,588 — 2.30 % 0.90 % — — — — — — — — — $ — 176,843 0.94 % — $ — — $ — — $ — 89,583 4.60 % 75,000 5.95 % 25,774 6.04 % December 31, 2022 Fair Value $ $ $ $ $ $ $ $ $ $ $ $ $ 63,258 490,592 177,765 2,817,381 1,653,061 30,814 1,270,790 2,338,535 1,063,588 176,843 89,583 72,000 25,774 Total financial liabilities $ 3,712,874 $ 127,860 $ 140,454 $ 2,967 $ 3,532 $ 835 $ 1,063,588 $ 5,052,110 Periodic repricing GAP $ (1,207,625) $ 81,257 $ 203,949 $ 411,211 $ 358,788 $ 1,137,208 $ (663,547) $ 321,241 Cumulative repricing GAP $ (1,207,625) $(1,126,368) $ (922,419) $ (511,208) $ (152,420) $ 984,788 $ 321,241 (1) Available-for-sale debt securities include approximately $417.5 million of mortgage-backed securities and collateralized mortgage obligations which pay interest and principal monthly to the Company. This table does not show the effect of these monthly repayments of principal. (2) Held-to-maturity debt securities include approximately $196.3 million of mortgage-backed securities and collateralized mortgage obligations which pay interest and principal monthly to the Company. This table does not show the effect of these monthly repayments of principal. (3) Non-interest-bearing demand deposits are included in this table in the column labeled “Thereafter” since there is no interest rate related to these liabilities and therefore there is nothing to reprice. 42 59 Great Southern Bancorp, Inc. Auditor’s Report and Consolidated Financial Statements December 31, 2022 and 2021 60 Great Southern Bancorp, Inc. Auditor’s Report and Consolidated Financial Statements December 31, 2022 and 2021 61 Report of Independent Registered Public Accounting Firm Stockholders, Board of Directors, and Audit Committee Great Southern Bancorp, Inc. Springfield, Missouri Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated statements of financial condition of Great Southern Bancorp, Inc. (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three- year period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 13, 2023, expressed an unqualified opinion thereon. Adoption of New Accounting Standard As discussed in Notes 1 and 3 to the consolidated financial statements, the Company changed its method of accounting for the allowance for credit losses in 2021 due to the adoption of ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. 62 Stockholders, Board of Directors, and Audit Committee Great Southern Bancorp, Inc. Page 2 We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involves our especially challenging, subjective, or complex judgments. The communication of this critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Allowance for Credit Losses The Company’s loan portfolio totaled $4.6 billion as of December 31, 2022, and the allowance for credit losses on loans was $63.5 million. The Company’s unfunded loan commitments totaled $2.1 billion, with an allowance for credit loss of $12.8 million. Together these amounts represent the allowance for credit losses (ACL). The ACL on loans and unfunded commitments as defined by Topic 326 is an estimate of lifetime expected credit losses on loans and unfunded commitments. The ACL is measured on a collective basis based on pools of loans with similar risk characteristics. Average historical loss rates over a defined lookback period are analyzed for the segmented loan pools, and adjusted for significant factors that, in management’s judgment, reflect the impact of any current conditions and reasonable and supportable forecasts. Qualitative factors such as changes in economic conditions, concentrations of risk, and changes in portfolio risk are considered in determining the adequacy of the level of the ACL. The Company discloses that this determination involves a high degree of judgment and complexity and is inherently subjective. We identified the valuation of the ACL as a critical audit matter. Auditing the ACL involves a high degree of subjectivity in evaluating management’s estimates, such as evaluating management’s assessment of economic conditions and other qualitative or environmental factors, evaluating the adequacy of specifically identified losses on individually evaluated loans, and assessing the appropriateness of loan credit ratings. The primary procedures we performed to address this critical audit matter included:  Obtaining an understanding of the Company’s process for establishing the ACL;     Testing the design and operating effectiveness of controls, including those related to technology, over the ACL including data completeness and accuracy, classifications of loans by loan segment, verification of historical net loss data and calculated net loss rates, the establishment of qualitative adjustments, credit ratings, and risk classification of loans and establishment of specific reserves on individually evaluated loans, and management’s review and disclosure controls over the ACL; Testing of completeness and accuracy of the information utilized in the ACL; Testing the mathematical accuracy of the calculation of the ACL; Evaluating the qualitative adjustments, including assessing the basis for the adjustments and the reasonableness of significant assumptions; 63 Stockholders, Board of Directors, and Audit Committee Great Southern Bancorp, Inc. Page 3     Testing the loan review function and evaluating the accuracy of loan credit ratings; Evaluating the reasonableness of specific allowances on individually evaluated loans; Evaluating the overall reasonableness of assumptions used by management considering the past performance of the Company and evaluating trends identified within peer groups; Evaluating the disclosures in the consolidated financial statements. FORVIS, LLP (Formerly, BKD, LLP) We have served as the Company’s auditor since 1975. Springfield, Missouri March 13, 2023 Great Southern Bancorp, Inc. Great Southern Bancorp, Inc. Consolidated Statements of Financial Condition Consolidated Statements of Financial Condition December 31, 2022 and 2021 December 31, 2022 and 2021 (In Thousands, Except Per Share Data) (In Thousands, Except Per Share Data) Assets Assets Cash Cash Interest-bearing deposits in other financial institutions Interest-bearing deposits in other financial institutions Cash and cash equivalents Cash and cash equivalents Available-for-sale securities Available-for-sale securities Held-to-maturity securities Held-to-maturity securities Mortgage loans held for sale Mortgage loans held for sale Interest receivable Interest receivable Prepaid expenses and other assets Prepaid expenses and other assets Other real estate owned and repossessions, net Other real estate owned and repossessions, net Premises and equipment, net Premises and equipment, net Goodwill and other intangible assets Goodwill and other intangible assets 2022 2022 2021 2021 $ $ 105,262 105,262 $ $ 90,008 90,008 63,258 63,258 627,259 627,259 168,520 168,520 717,267 717,267 490,592 490,592 501,032 501,032 202,495 202,495 4,811 4,811 19,107 19,107 69,461 69,461 233 233 10,813 10,813 30,814 30,814 — — 8,735 8,735 10,705 10,705 45,176 45,176 2,087 2,087 6,081 6,081 6,655 6,655 141,070 141,070 132,733 132,733 Loans receivable, net of allowance for credit losses of $63,480 and $60,754 at Loans receivable, net of allowance for credit losses of $63,480 and $60,754 at December 31, 2022 and 2021, respectively December 31, 2022 and 2021, respectively 4,506,836 4,506,836 4,007,500 4,007,500 Federal Home Loan Bank stock and other interest earning assets Federal Home Loan Bank stock and other interest earning assets Current and deferred income taxes Current and deferred income taxes Total assets Total assets 35,950 35,950 11,973 11,973 $ $ 5,680,702 5,680,702 $ $ 5,449,944 5,449,944 64 See Notes to Consolidated Financial Statements See Notes to Consolidated Financial Statements Great Southern Bancorp, Inc. Great Southern Bancorp, Inc. Consolidated Statements of Financial Condition Consolidated Statements of Financial Condition December 31, 2022 and 2021 December 31, 2022 and 2021 (In Thousands, Except Per Share Data) (In Thousands, Except Per Share Data) Assets Assets Cash Cash 2022 2022 2021 2021 $ $ 105,262 105,262 $ $ 90,008 90,008 Interest-bearing deposits in other financial institutions Interest-bearing deposits in other financial institutions 63,258 63,258 627,259 627,259 Cash and cash equivalents Cash and cash equivalents 168,520 168,520 717,267 717,267 Available-for-sale securities Available-for-sale securities Held-to-maturity securities Held-to-maturity securities Mortgage loans held for sale Mortgage loans held for sale 490,592 490,592 501,032 501,032 202,495 202,495 4,811 4,811 — — 8,735 8,735 Loans receivable, net of allowance for credit losses of $63,480 and $60,754 at Loans receivable, net of allowance for credit losses of $63,480 and $60,754 at December 31, 2022 and 2021, respectively December 31, 2022 and 2021, respectively 4,506,836 4,506,836 4,007,500 4,007,500 Interest receivable Interest receivable Prepaid expenses and other assets Prepaid expenses and other assets Other real estate owned and repossessions, net Other real estate owned and repossessions, net Premises and equipment, net Premises and equipment, net Goodwill and other intangible assets Goodwill and other intangible assets Federal Home Loan Bank stock and other interest earning assets Federal Home Loan Bank stock and other interest earning assets Current and deferred income taxes Current and deferred income taxes 19,107 19,107 69,461 69,461 233 233 10,705 10,705 45,176 45,176 2,087 2,087 141,070 141,070 132,733 132,733 10,813 10,813 30,814 30,814 6,081 6,081 6,655 6,655 35,950 35,950 11,973 11,973 Total assets Total assets $ $ 5,680,702 5,680,702 $ $ 5,449,944 5,449,944 See Notes to Consolidated Financial Statements See Notes to Consolidated Financial Statements 65 Great Southern Bancorp, Inc. Great Southern Bancorp, Inc. Consolidated Statements of Financial Condition Consolidated Statements of Financial Condition December 31, 2022 and 2021 December 31, 2022 and 2021 (In Thousands, Except Per Share Data) (In Thousands, Except Per Share Data) Great Southern Bancorp, Inc. Consolidated Statements of Income Years Ended December 31, 2022, 2021 and 2020 (In Thousands, Except Per Share Data) Liabilities and Stockholders’ Equity Liabilities and Stockholders’ Equity Liabilities Liabilities Deposits Deposits Securities sold under reverse repurchase agreements with customers Securities sold under reverse repurchase agreements with customers Short-term borrowings and other interest-bearing liabilities Short-term borrowings and other interest-bearing liabilities Subordinated debentures issued to capital trust Subordinated debentures issued to capital trust Subordinated notes Subordinated notes Accrued interest payable Accrued interest payable Advances from borrowers for taxes and insurance Advances from borrowers for taxes and insurance Accrued expenses and other liabilities Accrued expenses and other liabilities Liability of unfunded commitments Liability of unfunded commitments Total liabilities Total liabilities Commitments and Contingencies Commitments and Contingencies Stockholders’ Equity Stockholders’ Equity Capital stock Capital stock $ $ 2022 2022 2021 2021 $ $ 4,684,910 4,684,910 176,843 176,843 89,583 89,583 25,774 25,774 74,281 74,281 3,010 3,010 6,590 6,590 73,808 73,808 12,816 12,816 4,552,101 4,552,101 137,116 137,116 1,839 1,839 25,774 25,774 73,984 73,984 646 646 6,147 6,147 25,956 25,956 9,629 9,629 5,147,615 5,147,615 4,833,192 4,833,192 — — — — Serial preferred stock, $.01 par value; authorized 1,000,000 shares; Serial preferred stock, $.01 par value; authorized 1,000,000 shares; issued and outstanding 2022 and 2021 – -0- shares issued and outstanding 2022 and 2021 – -0- shares Common stock, $.01 par value; authorized 20,000,000 shares; Common stock, $.01 par value; authorized 20,000,000 shares; issued and outstanding 2022 – 12,231,290 shares, issued and outstanding 2022 – 12,231,290 shares, 2021 – 13,128,493 shares 2021 – 13,128,493 shares Additional paid-in capital Additional paid-in capital Retained earnings Retained earnings Accumulated other comprehensive income (loss), net of income taxes Accumulated other comprehensive income (loss), net of income taxes of $(17,948) and $9,676 at December 31, 2022 and 2021, of $(17,948) and $9,676 at December 31, 2022 and 2021, respectively respectively Total stockholders’ equity Total stockholders’ equity — — — — 122 122 42,445 42,445 543,875 543,875 131 131 38,314 38,314 545,548 545,548 (53,355) (53,355) 32,759 32,759 533,087 533,087 616,752 616,752 Total liabilities and stockholders’ equity Total liabilities and stockholders’ equity $ $ 5,680,702 5,680,702 $ $ 5,449,944 5,449,944 Interest Income Loans Investment securities and other Interest Expense Deposits Securities sold under reverse repurchase agreements Short-term borrowings, overnight FHLBank borrowings and other interest-bearing liabilities Subordinated debentures issued to capital trust Subordinated notes Net Interest Income Provision (Credit) for Credit Losses on Loans Provision for Unfunded Commitments Net Interest Income After Provision (Credit) for Credit Losses and Provision for Unfunded Commitments Non-interest Income Commissions Overdraft and insufficient funds fees Point-of-sale and ATM fee income and service charges Net gain on loan sales Net realized gain (loss) on sales of available-for-sale securities Late charges and fees on loans Gain (loss) on derivative interest rate products Other income Non-interest Expense Salaries and employee benefits Net occupancy and equipment expense Postage Insurance Advertising Telephone Office supplies and printing Legal, audit and other professional fees Expense on other real estate and repossessions Acquired deposit intangible asset amortization Other operating expenses 2022 2021 2020 $ $ 205,751 21,226 226,977 $ 186,269 12,404 198,673 204,964 12,739 217,703 193,427 183,682 161,267 20,676 324 1,066 875 4,422 27,363 199,614 3,000 3,187 1,208 7,872 15,705 2,584 (130) 1,182 321 5,399 34,141 75,300 28,471 3,379 3,197 3,261 867 3,170 6,330 359 768 8,264 133,366 13,102 37 — 448 7,165 20,752 177,921 (6,700) 939 1,263 6,686 15,029 9,463 — 1,434 312 4,130 38,317 70,290 29,163 3,164 3,061 3,072 848 3,458 6,555 627 863 6,534 127,635 32,431 31 644 628 6,831 40,565 177,138 15,871 — 892 6,481 12,203 8,089 78 1,419 (264) 6,152 35,050 70,810 27,582 3,069 2,405 2,631 1,016 3,794 2,378 2,023 1,154 6,363 123,225 See Notes to Consolidated Financial Statements See Notes to Consolidated Financial Statements 2 2 See Notes to Consolidated Financial Statements 3 66 Great Southern Bancorp, Inc. Consolidated Statements of Financial Condition December 31, 2022 and 2021 (In Thousands, Except Per Share Data) Great Southern Bancorp, Inc. Consolidated Statements of Income Years Ended December 31, 2022, 2021 and 2020 (In Thousands, Except Per Share Data) Total liabilities 5,147,615 4,833,192 Liabilities and Stockholders’ Equity Liabilities Deposits Securities sold under reverse repurchase agreements with customers Short-term borrowings and other interest-bearing liabilities Subordinated debentures issued to capital trust Subordinated notes Accrued interest payable Advances from borrowers for taxes and insurance Accrued expenses and other liabilities Liability of unfunded commitments Commitments and Contingencies Stockholders’ Equity Capital stock Serial preferred stock, $.01 par value; authorized 1,000,000 shares; issued and outstanding 2022 and 2021 – -0- shares Common stock, $.01 par value; authorized 20,000,000 shares; issued and outstanding 2022 – 12,231,290 shares, Accumulated other comprehensive income (loss), net of income taxes of $(17,948) and $9,676 at December 31, 2022 and 2021, 2021 – 13,128,493 shares Additional paid-in capital Retained earnings respectively Total stockholders’ equity 2022 2021 $ 4,684,910 176,843 $ 4,552,101 137,116 89,583 25,774 74,281 3,010 6,590 73,808 12,816 — — 122 42,445 543,875 (53,355) 533,087 1,839 25,774 73,984 646 6,147 25,956 9,629 — — 131 38,314 545,548 32,759 616,752 Total liabilities and stockholders’ equity $ 5,680,702 $ 5,449,944 Interest Income Loans Investment securities and other Interest Expense Deposits Securities sold under reverse repurchase agreements Short-term borrowings, overnight FHLBank borrowings and other interest-bearing liabilities Subordinated debentures issued to capital trust Subordinated notes Net Interest Income Provision (Credit) for Credit Losses on Loans Provision for Unfunded Commitments Net Interest Income After Provision (Credit) for Credit Losses and Provision for Unfunded Commitments Non-interest Income Commissions Overdraft and insufficient funds fees Point-of-sale and ATM fee income and service charges Net gain on loan sales Net realized gain (loss) on sales of available-for-sale securities Late charges and fees on loans Gain (loss) on derivative interest rate products Other income Non-interest Expense Salaries and employee benefits Net occupancy and equipment expense Postage Insurance Advertising Office supplies and printing Telephone Legal, audit and other professional fees Expense on other real estate and repossessions Acquired deposit intangible asset amortization Other operating expenses 2022 2021 2020 $ $ 205,751 21,226 226,977 $ 186,269 12,404 198,673 204,964 12,739 217,703 20,676 324 1,066 875 4,422 27,363 199,614 3,000 3,187 13,102 37 — 448 7,165 20,752 177,921 (6,700) 939 32,431 31 644 628 6,831 40,565 177,138 15,871 — 193,427 183,682 161,267 1,208 7,872 15,705 2,584 (130) 1,182 321 5,399 34,141 75,300 28,471 3,379 3,197 3,261 867 3,170 6,330 359 768 8,264 133,366 1,263 6,686 15,029 9,463 — 1,434 312 4,130 38,317 70,290 29,163 3,164 3,061 3,072 848 3,458 6,555 627 863 6,534 127,635 892 6,481 12,203 8,089 78 1,419 (264) 6,152 35,050 70,810 27,582 3,069 2,405 2,631 1,016 3,794 2,378 2,023 1,154 6,363 123,225 See Notes to Consolidated Financial Statements 2 See Notes to Consolidated Financial Statements 3 67 Great Southern Bancorp, Inc. Consolidated Statements of Income Years Ended December 31, 2022, 2021 and 2020 (In Thousands, Except Per Share Data) Great Southern Bancorp, Inc. Consolidated Statements of Comprehensive Income Years Ended December 31, 2022, 2021 and 2020 (In Thousands) Income Before Income Taxes $ 94,202 $ 94,364 $ 73,092 Net Income $ 75,948 $ 74,627 $ 59,313 2022 2021 2020 2022 2021 2020 Provision for Income Taxes 18,254 19,737 13,779 Net Income Earnings Per Common Share Basic Diluted $ $ $ 75,948 $ 74,627 $ 59,313 6.07 $ 5.50 $ 6.02 $ 5.46 $ 4.22 4.21 Unrealized appreciation (depreciation) on available-for- sale securities, net of taxes (credit) of $(18,106), $(4,171) and $4,215 for 2022, 2021 and 2020, respectively Unrealized loss on securities transferred to held-to- maturity, net of taxes (credit) of $29, $-0- and $-0- for 2022, 2021 and 2020, respectively Less: reclassification adjustment for losses (gains) included in net income, net of taxes (credit) of $32, $0 and $18 for 2022, 2021 and 2020, respectively Amortization of realized gain on termination of cash flow hedge, net of taxes (credit) of $(1,852), $(1,852) and $(1,541), for 2022, 2021, and 2020, respectively Change in value of active cash flow hedges, net of taxes (credit) of $(7,695), $0 and $3,519 for 2022, 2021 and 2020, respectively (56,448) (14,121) 14,274 89 98 — — — (60) (6,271) (6,271) (5,223) Other comprehensive income (loss) (86,114) (20,392) (23,582) — 11,914 20,905 Comprehensive Income (Loss) $ (10,166) $ 54,235 $ 80,218 See Notes to Consolidated Financial Statements 4 See Notes to Consolidated Financial Statements 5 68 Great Southern Bancorp, Inc. Consolidated Statements of Income Years Ended December 31, 2022, 2021 and 2020 (In Thousands, Except Per Share Data) Great Southern Bancorp, Inc. Consolidated Statements of Comprehensive Income Years Ended December 31, 2022, 2021 and 2020 (In Thousands) Income Before Income Taxes $ 94,202 $ 94,364 $ 73,092 Net Income $ 75,948 $ 74,627 $ 59,313 2022 2021 2020 2022 2021 2020 Provision for Income Taxes 18,254 19,737 13,779 Earnings Per Common Share Net Income Basic Diluted $ $ $ 75,948 $ 74,627 $ 59,313 6.07 $ 5.50 $ 6.02 $ 5.46 $ 4.22 4.21 Unrealized appreciation (depreciation) on available-for- sale securities, net of taxes (credit) of $(18,106), $(4,171) and $4,215 for 2022, 2021 and 2020, respectively Unrealized loss on securities transferred to held-to- maturity, net of taxes (credit) of $29, $-0- and $-0- for 2022, 2021 and 2020, respectively Less: reclassification adjustment for losses (gains) included in net income, net of taxes (credit) of $32, $0 and $18 for 2022, 2021 and 2020, respectively Amortization of realized gain on termination of cash flow hedge, net of taxes (credit) of $(1,852), $(1,852) and $(1,541), for 2022, 2021, and 2020, respectively Change in value of active cash flow hedges, net of taxes (credit) of $(7,695), $0 and $3,519 for 2022, 2021 and 2020, respectively (56,448) (14,121) 14,274 89 98 — — — (60) (6,271) (6,271) (5,223) Other comprehensive income (loss) (86,114) (20,392) (23,582) — 11,914 20,905 Comprehensive Income (Loss) $ (10,166) $ 54,235 $ 80,218 See Notes to Consolidated Financial Statements 4 See Notes to Consolidated Financial Statements 5 69 Great Southern Bancorp, Inc. Consolidated Statements of Stockholders’ Equity Years Ended December 31, 2022, 2021 and 2020 (In Thousands, Except Per Share Data) Balance, January 1, 2020 Net income Stock issued under Stock Option Plan Common dividends declared, $2.36 per share Purchase of the Company’s common stock Other comprehensive gain Reclassification of treasury stock per Maryland law Balance, December 31, 2020 Net income Stock issued under Stock Option Plan Common dividends declared, $1.40 per share Impact of ASU 2016-13 adoption Purchase of the Company’s common stock Other comprehensive gain Reclassification of treasury stock per Maryland law Balance, December 31, 2021 Net income Stock issued under Stock Option Plan Common dividends declared, $1.56 per share Purchase of the Company’s common stock Other comprehensive loss Reclassification of treasury stock per Maryland law Balance, December 31, 2022 Common Stock $ $ 143 — — — — — (5) 138 — — — — — — (7) 131 — — — — — (9) 122 See Notes to Consolidated Financial Statements 70 Great Southern Bancorp, Inc. Consolidated Statements of Stockholders’ Equity Years Ended December 31, 2022, 2021 and 2020 (In Thousands, Except Per Share Data) Balance, January 1, 2020 Net income Stock issued under Stock Option Plan Common dividends declared, $2.36 per share Purchase of the Company’s common stock Other comprehensive gain Reclassification of treasury stock per Maryland law Balance, December 31, 2020 Net income Stock issued under Stock Option Plan Common dividends declared, $1.40 per share Impact of ASU 2016-13 adoption Purchase of the Company’s common stock Other comprehensive gain Reclassification of treasury stock per Maryland law Balance, December 31, 2021 Net income Stock issued under Stock Option Plan Common dividends declared, $1.56 per share Purchase of the Company’s common stock Other comprehensive loss Reclassification of treasury stock per Maryland law Common Stock $ 143 138 — — — — — (5) — — — — — — (7) — — — — — (9) 131 Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total $ $ $ 33,510 — 1,494 — — — — 35,004 — 3,310 — — — — — 38,314 — 4,131 — — — — 537,167 59,313 — (33,253) — — (21,779) 541,448 74,627 — (18,851) (14,175) — — (37,501) 545,548 75,948 — (19,347) — — (58,274) 32,246 — — — — 20,905 — 53,151 — — — — — (20,392) — 32,759 — — — — (86,114) — $ — $ — 320 — (22,104) — 21,784 — — 1,615 — — (39,123) — 37,508 — — 3,564 — (61,847) — 58,283 603,066 59,313 1,814 (33,253) (22,104) 20,905 — 629,741 74,627 4,925 (18,851) (14,175) (39,123) (20,392) — 616,752 75,948 7,695 (19,347) (61,847) (86,114) — Balance, December 31, 2022 $ 122 $ 42,445 $ 543,875 $ (53,355) $ — $ 533,087 See Notes to Consolidated Financial Statements 71 6 Great Southern Bancorp, Inc. Consolidated Statements of Cash Flows Years Ended December 31, 2022, 2021 and 2020 (In Thousands) Great Southern Bancorp, Inc. Consolidated Statements of Cash Flows Years Ended December 31, 2022, 2021 and 2020 (In Thousands) 2022 2021 2020 2022 2021 2020 Operating Activities Net income Proceeds from sales of loans held for sale Originations of loans held for sale Items not requiring (providing) cash Depreciation Amortization Compensation expense for stock option grants Provision (credit) for credit losses Provision for unfunded commitments Net gain on loan sales Net realized (gain) loss on available-for-sale securities Gain on sale of premises and equipment Loss (gain) on sale/write-down of other real estate and repossessions Accretion of deferred income, premiums, discounts and other Loss (gain) on derivative interest rate products Deferred income taxes Changes in Interest receivable Prepaid expenses and other assets Accrued expenses and other liabilities Income taxes refundable/payable $ 75,948 103,347 (95,007) $ 74,627 351,391 (332,289) $ 59,313 317,173 (316,125) 8,498 1,179 1,437 3,000 3,187 (2,584) 130 (1,023) (126) (7,719) (321) 2,485 (8,402) (24,248) 5,637 1,162 9,555 1,583 1,225 (6,700) 939 (9,463) — (1) (71) (10,262) (312) 3,712 2,088 3,257 (2,495) (1,808) 10,007 2,075 1,153 15,871 — (8,089) (78) (37) 840 (6,147) 264 (11,480) 362 (17,163) (612) (1,279) Net cash provided by operating activities 66,580 84,976 46,048 Net cash provided by (used in) investing activities (801,280) 190,713 (131,346) Investing Activities Net change in loans Purchase of loans Cash received for termination of interest rate derivative Purchase of premises and equipment Proceeds from sale of premises and equipment Proceeds from sale of other real estate and repossessions Capitalized costs on other real estate owned Proceeds from sale of available-for-sale securities Proceeds from repayments of held-to-maturity securities Proceeds from maturities, calls and repayments of available-for-sale securities Purchase of available-for-sale securities Redemption (purchase) of Federal Home Loan Bank stock and other interest-earning assets Financing Activities Net increase (decrease) in certificates of deposit Net increase (decrease) in checking and savings accounts Net increase (decrease) in short-term borrowings and other interest-bearing liabilities Advances from (to) borrowers for taxes and insurance Proceeds from issuance of subordinated notes Redemption of subordinated notes Purchase of the company’s common stock Dividends paid Stock options exercised Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents, Beginning of Year $ $ 448,599 (152,797) $ 72,149 (177,466) 76,248 (118,296) (24,159) 3,151 3,667 (134,344) (361,817) — (20,110) 3,980 2,351 — 18,375 23,821 51,348 (360,725) 321,718 (188,909) 127,471 443 — — (61,847) (19,181) 6,258 (548,747) 717,267 — (5,739) 586 2,230 — — — (429,723) 464,921 (26,737) (1,389) — (75,000) (39,123) (18,800) 3,700 153,538 563,729 (62,493) (92,099) 45,864 (8,224) 781 4,096 (126) 19,236 — (330,306) 887,114 (146,632) 73,513 52 — (22,104) (33,426) 661 428,872 343,574 220,155 Net cash provided by (used in) financing activities 185,953 (122,151) Cash and Cash Equivalents, End of Year $ 168,520 $ 717,267 $ 563,729 See Notes to Consolidated Financial Statements 7 See Notes to Consolidated Financial Statements 8 72 Great Southern Bancorp, Inc. Consolidated Statements of Cash Flows Years Ended December 31, 2022, 2021 and 2020 (In Thousands) Great Southern Bancorp, Inc. Consolidated Statements of Cash Flows Years Ended December 31, 2022, 2021 and 2020 (In Thousands) 2022 2021 2020 2022 2021 2020 Operating Activities Net income Proceeds from sales of loans held for sale Originations of loans held for sale Items not requiring (providing) cash Depreciation Amortization Compensation expense for stock option grants Provision (credit) for credit losses Provision for unfunded commitments Net gain on loan sales Net realized (gain) loss on available-for-sale securities Gain on sale of premises and equipment Loss (gain) on sale/write-down of other real estate Accretion of deferred income, premiums, discounts and repossessions and other Loss (gain) on derivative interest rate products Deferred income taxes Changes in Interest receivable Prepaid expenses and other assets Accrued expenses and other liabilities Income taxes refundable/payable $ 75,948 103,347 (95,007) $ 74,627 351,391 (332,289) $ 59,313 317,173 (316,125) 8,498 1,179 1,437 3,000 3,187 (2,584) 130 (1,023) (126) (7,719) (321) 2,485 (8,402) (24,248) 5,637 1,162 9,555 1,583 1,225 (6,700) 939 (9,463) — (1) (71) (10,262) (312) 3,712 2,088 3,257 (2,495) (1,808) 10,007 2,075 1,153 15,871 — (8,089) (78) (37) 840 (6,147) 264 (11,480) 362 (17,163) (612) (1,279) Net cash provided by operating activities 66,580 84,976 46,048 Investing Activities Net change in loans Purchase of loans Cash received for termination of interest rate derivative Purchase of premises and equipment Proceeds from sale of premises and equipment Proceeds from sale of other real estate and repossessions Capitalized costs on other real estate owned Proceeds from sale of available-for-sale securities Proceeds from repayments of held-to-maturity securities Proceeds from maturities, calls and repayments of available-for-sale securities Purchase of available-for-sale securities Redemption (purchase) of Federal Home Loan Bank stock and other interest-earning assets $ $ (134,344) (361,817) — (20,110) 3,980 2,351 — 18,375 23,821 51,348 (360,725) $ 448,599 (152,797) — (5,739) 586 2,230 — — — 72,149 (177,466) (62,493) (92,099) 45,864 (8,224) 781 4,096 (126) 19,236 — 76,248 (118,296) (24,159) 3,151 3,667 Net cash provided by (used in) investing activities (801,280) 190,713 (131,346) Financing Activities Net increase (decrease) in certificates of deposit Net increase (decrease) in checking and savings accounts Net increase (decrease) in short-term borrowings and other interest-bearing liabilities Advances from (to) borrowers for taxes and insurance Proceeds from issuance of subordinated notes Redemption of subordinated notes Purchase of the company’s common stock Dividends paid Stock options exercised 321,718 (188,909) 127,471 443 — — (61,847) (19,181) 6,258 (429,723) 464,921 (26,737) (1,389) — (75,000) (39,123) (18,800) 3,700 Net cash provided by (used in) financing activities 185,953 (122,151) Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents, Beginning of Year (548,747) 717,267 153,538 563,729 (330,306) 887,114 (146,632) 52 73,513 — (22,104) (33,426) 661 428,872 343,574 220,155 Cash and Cash Equivalents, End of Year $ 168,520 $ 717,267 $ 563,729 See Notes to Consolidated Financial Statements 7 See Notes to Consolidated Financial Statements 8 73 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Note 1: Nature of Operations and Summary of Significant Accounting Policies Federal Home Loan Bank Stock Nature of Operations and Operating Segments Great Southern Bancorp, Inc. (“GSBC” or the “Company”) operates as a one-bank holding company. GSBC’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; Charlotte, North Carolina; 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. Use of Estimates 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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans and fair values of financial instruments. In connection with the determination of the allowance for credit losses and the valuation of foreclosed assets held for sale, management obtains independent appraisals for significant properties. In addition, the Company considers that the determination of the carrying value of goodwill and intangible assets involves a high degree of judgment and complexity. Principles of Consolidation The consolidated financial statements include the accounts of Great Southern Bancorp, Inc., its wholly owned subsidiary, the Bank, and the Bank’s wholly owned subsidiaries, Great Southern Real Estate Development Corporation, GSB One LLC (including its wholly owned subsidiary, GSB Two LLC), Great Southern Financial Corporation, Great Southern Community Development Company, LLC (including its wholly owned subsidiary, Great Southern CDE, LLC), GS, LLC, GSSC, LLC, GSTC Investments, LLC, GS-RE Holding, LLC (including its wholly owned subsidiary, GS RE Management, LLC), GS-RE Holding II, LLC, GS-RE Holding III, LLC, VFP Conclusion Holding, LLC and VFP Conclusion Holding II, LLC. All significant intercompany accounts and transactions have been eliminated in consolidation. Federal Home Loan Bank common stock is a required investment for institutions that are members of the Federal Home Loan Bank system. The required investment in common stock is based on a predetermined formula, carried at cost and evaluated for impairment. Securities Available-for-sale securities, 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. Unrealized gains and losses are recorded, net of related income tax effects, in other comprehensive income. Held-to-maturity securities, which include any security for which the Company has the positive intent and ability to hold until maturity, are carried at historical cost adjusted for amortization of premiums and accretion of discounts. Amortization of premiums and accretion of discounts are recorded as interest income from securities. Realized gains and losses are recorded as net security gains (losses). Gains and losses on sales of securities are determined on the specific-identification method. The Company evaluates 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. The Company’s consolidated statements of income reflect the full impairment (that is, the difference between the security’s amortized cost basis and fair value) on debt securities that the Company intends to sell or would more likely than not be required to sell before the expected recovery of the amortized cost basis. For available-for-sale and held-to-maturity debt securities that management has no intent to sell and believes that it more likely than not will not be required to sell prior to recovery, only the credit loss component of the impairment is recognized in earnings, while the noncredit loss is recognized in accumulated other comprehensive income for available-for-sale securities. The credit loss component recognized in earnings through a provision for credit loss is identified as the amount of principal cash flows not expected to be received over the remaining term of the security based on cash flow projections. Mortgage Loans Held for Sale Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or fair value in the aggregate. Write-downs to fair value are recognized as a charge to earnings at the time the decline in value occurs. Nonbinding forward commitments to sell individual mortgage loans are generally obtained to reduce market risk on mortgage loans in the process of origination and mortgage loans held for sale. Gains and losses resulting from sales of mortgage loans are recognized when the respective loans are sold to investors. Fees received from borrowers to guarantee the funding of mortgage loans held for sale and fees paid to investors to ensure the ultimate sale of such mortgage loans are recognized as income or expense when the loans are sold or when it becomes evident that the commitment will not be used. Loans Originated by the Company Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding principal balances adjusted for any charge-offs, the allowance for credit losses, any deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans. Interest income is reported on the interest method and includes amortization of net deferred loan fees and costs over the loan term. Past due status is based on the contractual terms of a loan. Generally, 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 74 9 10 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Note 1: Nature of Operations and Summary of Significant Accounting Policies Federal Home Loan Bank Stock Nature of Operations and Operating Segments Great Southern Bancorp, Inc. (“GSBC” or the “Company”) operates as a one-bank holding company. GSBC’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; Charlotte, North Carolina; 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. Use of Estimates 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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans and fair values of financial instruments. In connection with the determination of the allowance for credit losses and the valuation of foreclosed assets held for sale, management obtains independent appraisals for significant properties. In addition, the Company considers that the determination of the carrying value of goodwill and intangible assets involves a high degree of judgment and complexity. Principles of Consolidation The consolidated financial statements include the accounts of Great Southern Bancorp, Inc., its wholly owned subsidiary, the Bank, and the Bank’s wholly owned subsidiaries, Great Southern Real Estate Development Corporation, GSB One LLC (including its wholly owned subsidiary, GSB Two LLC), Great Southern Financial Corporation, Great Southern Community Development Company, LLC (including its wholly owned subsidiary, Great Southern CDE, LLC), GS, LLC, GSSC, LLC, GSTC Investments, LLC, GS-RE Holding, LLC (including its wholly owned subsidiary, GS RE Management, LLC), GS-RE Holding II, LLC, GS-RE Holding III, LLC, VFP Conclusion Holding, LLC and VFP Conclusion Holding II, LLC. All significant intercompany accounts and transactions have been eliminated in consolidation. Federal Home Loan Bank common stock is a required investment for institutions that are members of the Federal Home Loan Bank system. The required investment in common stock is based on a predetermined formula, carried at cost and evaluated for impairment. Securities Available-for-sale securities, 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. Unrealized gains and losses are recorded, net of related income tax effects, in other comprehensive income. Held-to-maturity securities, which include any security for which the Company has the positive intent and ability to hold until maturity, are carried at historical cost adjusted for amortization of premiums and accretion of discounts. Amortization of premiums and accretion of discounts are recorded as interest income from securities. Realized gains and losses are recorded as net security gains (losses). Gains and losses on sales of securities are determined on the specific-identification method. The Company evaluates 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. The Company’s consolidated statements of income reflect the full impairment (that is, the difference between the security’s amortized cost basis and fair value) on debt securities that the Company intends to sell or would more likely than not be required to sell before the expected recovery of the amortized cost basis. For available-for-sale and held-to-maturity debt securities that management has no intent to sell and believes that it more likely than not will not be required to sell prior to recovery, only the credit loss component of the impairment is recognized in earnings, while the noncredit loss is recognized in accumulated other comprehensive income for available-for-sale securities. The credit loss component recognized in earnings through a provision for credit loss is identified as the amount of principal cash flows not expected to be received over the remaining term of the security based on cash flow projections. Mortgage Loans Held for Sale Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or fair value in the aggregate. Write-downs to fair value are recognized as a charge to earnings at the time the decline in value occurs. Nonbinding forward commitments to sell individual mortgage loans are generally obtained to reduce market risk on mortgage loans in the process of origination and mortgage loans held for sale. Gains and losses resulting from sales of mortgage loans are recognized when the respective loans are sold to investors. Fees received from borrowers to guarantee the funding of mortgage loans held for sale and fees paid to investors to ensure the ultimate sale of such mortgage loans are recognized as income or expense when the loans are sold or when it becomes evident that the commitment will not be used. Loans Originated by the Company Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding principal balances adjusted for any charge-offs, the allowance for credit losses, any deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans. Interest income is reported on the interest method and includes amortization of net deferred loan fees and costs over the loan term. Past due status is based on the contractual terms of a loan. Generally, 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 9 10 75 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 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. Allowance for Credit Losses The allowance for credit losses is measured using an average historical loss model that incorporates relevant information about past events (including historical credit loss experience on loans with similar risk characteristics), current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the loans. The allowance for credit losses is measured on a collective (pool) basis. Loans are aggregated into pools based on similar risk characteristics, including borrower type, collateral and repayment types and expected credit loss patterns. Classified loans and/or TDR loans with a balance greater than or equal to $100,000, which do not necessarily share similar risk characteristics, 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. Loans Acquired in Business Combinations Loans acquired in business combinations under ASC Topic 805, Business Combinations, required the use of the acquisition method of accounting. Therefore, such loans were initially recorded at fair value in accordance with the fair value methodology prescribed in ASC Topic 820, Fair Value Measurements and Disclosures. The Company’s historical acquisitions all occurred under previous US GAAP prior to the Company’s adoption of ASU 2016-13. No allowance for credit losses related to the acquired loans was recorded on the acquisition date as the fair value of the loans acquired incorporates assumptions regarding credit risk. Loans acquired are recorded at fair value in accordance with the fair value methodology prescribed in ASC Topic 820. The fair value estimates associated with the loans include estimates related to expected prepayments and the amount and timing of undiscounted expected principal, interest and other cash flows. For acquired loans not acquired in conjunction with an FDIC-assisted transaction that were not considered to be purchased credit-impaired loans, the Company evaluated those loans acquired in accordance with the provisions of ASC Topic 310-20, Nonrefundable Fees and Other Costs. The fair value discount on these loans is accreted into interest income over the weighted average life of the loans using a constant yield method. These loans are not considered to be impaired loans. The Company’s historical acquisitions all occurred under previous US GAAP prior to the Company’s adoption of ASU 2016-13. The Company evaluated purchased credit-impaired loans in accordance with the provisions of ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. Loans acquired in business combinations with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected were considered to be credit impaired. Evidence of credit quality deterioration as of the purchase dates may include information such as past-due and nonaccrual status, borrower credit scores and recent loan to value percentages. Acquired credit- impaired loans that are accounted for under the accounting guidance for loans acquired with deteriorated credit quality are initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loans. At the date of CECL adoption, the Company did not reassess whether purchased credit impaired (PCI) loans met the criteria of purchased with credit deterioration (PCD) loans. The Company evaluated all of its loans acquired in conjunction with its FDIC-assisted transactions in accordance with the provisions of ASC Topic 310-30. For purposes of applying ASC 310-30, loans acquired in FDIC-assisted business combinations are aggregated into pools of loans with common risk characteristics. All loans acquired in the FDIC transactions, both covered and not covered by loss sharing agreements, were deemed to be purchased credit-impaired loans as there is general evidence of credit deterioration since origination in the pools and there is some probability that not all contractually required payments will be collected. As a result, related discounts are recognized subsequently through accretion based on changes in the expected cash flows of these acquired loans. Prior to the adoption of ASU 2016-13, the expected cash flows of the acquired loan pools in excess of the fair values recorded, referred to as the accretable yield, was recognized in interest income over the remaining estimated lives of the loan pools for impaired loans accounted for under ASC Topic 310-30. Subsequent to acquisition date, the Company estimated cash flows expected to be collected on pools of loans sharing common risk characteristics, which are treated in the aggregate when applying various valuation techniques. Increases in the Company’s cash flow expectations have been recognized as increases to the accretable yield while decreases have been recognized as impairments through the allowance for credit losses. Other Real Estate Owned and Repossessions Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less estimated cost to sell at the date of foreclosure, establishing a new cost basis. 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. Revenue and expenses from operations and changes in the valuation allowance are included in net expense on foreclosed assets. Other real estate owned also includes bank premises formerly, but no longer, used for banking activities, as well as property originally acquired for future expansion but no longer intended to be used for that purpose. Premises and Equipment Premises and equipment are stated at cost less accumulated depreciation. Depreciation is charged to expense using the straight-line and accelerated methods over the estimated useful lives of the assets. Leasehold improvements are capitalized and amortized using the straight-line and accelerated methods over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter. Material lease obligations consist of leases for various loan offices and banking centers. All of our leases are classified as operating leases (as they were prior to January 1, 2019), and therefore were previously not recognized on the Company’s consolidated statements of financial condition. With the adoption of ASU 2016-02, these operating leases are now included as a right of use asset in the premises and equipment line item on the Company’s consolidated statements of financial condition. The corresponding lease liability is included in the accrued expenses and other liabilities line item on the Company’s consolidated statements of financial condition. The calculated amounts of the right of use assets and lease liabilities are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company’s lease agreements often include one or more options to renew extended term in the calculation of the right of use asset and lease liability. If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the right of use asset and lease liability. Regarding 76 11 12 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 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. Allowance for Credit Losses The allowance for credit losses is measured using an average historical loss model that incorporates relevant information about past events (including historical credit loss experience on loans with similar risk characteristics), current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the loans. The allowance for credit losses is measured on a collective (pool) basis. Loans are aggregated into pools based on similar risk characteristics, including borrower type, collateral and repayment types and expected credit loss patterns. Classified loans and/or TDR loans with a balance greater than or equal to $100,000, which do not necessarily share similar risk characteristics, 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. Loans Acquired in Business Combinations Loans acquired in business combinations under ASC Topic 805, Business Combinations, required the use of the acquisition method of accounting. Therefore, such loans were initially recorded at fair value in accordance with the fair value methodology prescribed in ASC Topic 820, Fair Value Measurements and Disclosures. The Company’s historical acquisitions all occurred under previous US GAAP prior to the Company’s adoption of ASU 2016-13. No allowance for credit losses related to the acquired loans was recorded on the acquisition date as the fair value of the loans acquired incorporates assumptions regarding credit risk. Loans acquired are recorded at fair value in accordance with the fair value methodology prescribed in ASC Topic 820. The fair value estimates associated with the loans include estimates related to expected prepayments and the amount and timing of undiscounted expected principal, interest and other cash flows. For acquired loans not acquired in conjunction with an FDIC-assisted transaction that were not considered to be purchased credit-impaired loans, the Company evaluated those loans acquired in accordance with the provisions of ASC Topic 310-20, Nonrefundable Fees and Other Costs. The fair value discount on these loans is accreted into interest income over the weighted average life of the loans using a constant yield method. These loans are not considered to be impaired loans. The Company’s historical acquisitions all occurred under previous US GAAP prior to the Company’s adoption of ASU 2016-13. The Company evaluated purchased credit-impaired loans in accordance with the provisions of ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. Loans acquired in business combinations with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected were considered to be credit impaired. Evidence of credit quality deterioration as of the purchase dates may include information such as past-due and nonaccrual status, borrower credit scores and recent loan to value percentages. Acquired credit- impaired loans that are accounted for under the accounting guidance for loans acquired with deteriorated credit quality are initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loans. At the date of CECL adoption, the Company did not reassess whether purchased credit impaired (PCI) loans met the criteria of purchased with credit deterioration (PCD) loans. The Company evaluated all of its loans acquired in conjunction with its FDIC-assisted transactions in accordance with the provisions of ASC Topic 310-30. For purposes of applying ASC 310-30, loans acquired in FDIC-assisted business combinations are aggregated into pools of loans with common risk characteristics. All loans acquired in the FDIC transactions, both covered and not covered by loss sharing agreements, were deemed to be purchased credit-impaired loans as there is general evidence of credit deterioration since origination in the pools and there is some probability that not all contractually required payments will be collected. As a result, related discounts are recognized subsequently through accretion based on changes in the expected cash flows of these acquired loans. Prior to the adoption of ASU 2016-13, the expected cash flows of the acquired loan pools in excess of the fair values recorded, referred to as the accretable yield, was recognized in interest income over the remaining estimated lives of the loan pools for impaired loans accounted for under ASC Topic 310-30. Subsequent to acquisition date, the Company estimated cash flows expected to be collected on pools of loans sharing common risk characteristics, which are treated in the aggregate when applying various valuation techniques. Increases in the Company’s cash flow expectations have been recognized as increases to the accretable yield while decreases have been recognized as impairments through the allowance for credit losses. Other Real Estate Owned and Repossessions Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less estimated cost to sell at the date of foreclosure, establishing a new cost basis. 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. Revenue and expenses from operations and changes in the valuation allowance are included in net expense on foreclosed assets. Other real estate owned also includes bank premises formerly, but no longer, used for banking activities, as well as property originally acquired for future expansion but no longer intended to be used for that purpose. Premises and Equipment Premises and equipment are stated at cost less accumulated depreciation. Depreciation is charged to expense using the straight-line and accelerated methods over the estimated useful lives of the assets. Leasehold improvements are capitalized and amortized using the straight-line and accelerated methods over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter. Material lease obligations consist of leases for various loan offices and banking centers. All of our leases are classified as operating leases (as they were prior to January 1, 2019), and therefore were previously not recognized on the Company’s consolidated statements of financial condition. With the adoption of ASU 2016-02, these operating leases are now included as a right of use asset in the premises and equipment line item on the Company’s consolidated statements of financial condition. The corresponding lease liability is included in the accrued expenses and other liabilities line item on the Company’s consolidated statements of financial condition. The calculated amounts of the right of use assets and lease liabilities are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company’s lease agreements often include one or more options to renew extended term in the calculation of the right of use asset and lease liability. If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the right of use asset and lease liability. Regarding 11 12 77 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 the discount rate, the Company uses the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception over a similar term. The discount rate utilized is the FHLBank borrowing rate for the term corresponding to the expected term of the lease. Long-Lived Asset Impairment The Company evaluates the recoverability of the carrying value of long-lived assets whenever events or circumstances indicate the carrying amount may not be recoverable. If a long-lived asset is tested for recoverability and the undiscounted estimated future cash flows expected to result from the use and eventual disposition of the asset is less than the carrying amount of the asset, the asset cost is adjusted to fair value and an impairment loss is recognized as the amount by which the carrying amount of a long-lived asset exceeds its fair value. No material asset impairment was recognized during the years ended December 31, 2022, 2021 and 2020. Goodwill and Intangible Assets Goodwill is evaluated annually for impairment or more frequently if impairment indicators are present. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount and an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. The Company still may perform a qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. Deposit intangible assets are being amortized on the straight-line basis generally over a period of seven years. Arena naming rights intangible assets are being amortized on the straight-line basis generally over a period of fifteen years. Such assets are periodically evaluated as to the recoverability of their carrying value. A summary of goodwill and intangible assets is as follows: Goodwill – Branch acquisitions Deposit intangibles Fifth Third Bank (January 2016) Arena Naming Rights (April 2022) December 31, 2022 2021 (In Thousands) $ 5,396 $ 5,396 53 5,364 5,417 685 — 685 $ 10,813 $ 6,081 Loan Servicing and Origination Fee Income Loan servicing income represents fees earned for servicing real estate mortgage loans owned by various investors. The fees are generally calculated on the outstanding principal balances of the loans serviced and are recorded as income when earned. Loan origination fees, net of direct loan origination costs, are recognized as income using the level-yield method over the contractual life of the loan. The Company is incorporated in the State of Maryland. Under Maryland law, there is no concept of “Treasury Shares.” Instead, shares purchased by the Company constitute authorized but unissued shares under Maryland law. Accounting principles generally accepted in the United States of America state that accounting for treasury stock shall conform to state law. The cost of shares purchased by the Company has been allocated to common Stockholders’ Equity stock and retained earnings balances. Earnings Per Common Share Basic earnings per common share are computed based on the weighted average number of common shares outstanding during each year. Diluted earnings per common share are computed using the weighted average common shares and all potential dilutive common shares outstanding during the period. Earnings per common share (EPS) were computed as follows: 2022 2021 2020 (In Thousands, Except Per Share Data) Net income and net income available to common shareholders $ 75,948 $ 74,627 $ 59,313 Average common shares outstanding 12,516 13,558 14,043 Average common share stock options outstanding 91 116 61 Average diluted common shares 12,607 13,674 14,104 Earnings per common share – basic Earnings per common share – diluted $ $ 6.07 6.02 $ $ 5.50 5.46 $ $ 4.22 4.21 Options outstanding at December 31, 2022, 2021 and 2020, to purchase 559,484, 383,338 and 758,901 shares of common stock, respectively, were not included in the computation of diluted earnings per common share for each of the years because the exercise prices of such options were greater than the average market prices of the common stock for the years ended December 31, 2022, 2021 and 2020, respectively. 78 13 14 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 the discount rate, the Company uses the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception over a similar term. The discount rate utilized is the FHLBank borrowing rate for the term corresponding to the expected term of the lease. Long-Lived Asset Impairment The Company evaluates the recoverability of the carrying value of long-lived assets whenever events or circumstances indicate the carrying amount may not be recoverable. If a long-lived asset is tested for recoverability and the undiscounted estimated future cash flows expected to result from the use and eventual disposition of the asset is less than the carrying amount of the asset, the asset cost is adjusted to fair value and an impairment loss is recognized as the amount by which the carrying amount of a long-lived asset exceeds its fair value. No material asset impairment was recognized during the years ended December 31, 2022, 2021 and 2020. Goodwill and Intangible Assets Goodwill is evaluated annually for impairment or more frequently if impairment indicators are present. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount and an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. The Company still may perform a qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. Deposit intangible assets are being amortized on the straight-line basis generally over a period of seven years. Arena naming rights intangible assets are being amortized on the straight-line basis generally over a period of fifteen years. Such assets are periodically evaluated as to the recoverability of their carrying value. A summary of goodwill and intangible assets is as follows: Deposit intangibles Fifth Third Bank (January 2016) Arena Naming Rights (April 2022) December 31, 2022 2021 (In Thousands) 53 5,364 5,417 685 — 685 $ 10,813 $ 6,081 Loan Servicing and Origination Fee Income Loan servicing income represents fees earned for servicing real estate mortgage loans owned by various investors. The fees are generally calculated on the outstanding principal balances of the loans serviced and are recorded as income when earned. Loan origination fees, net of direct loan origination costs, are recognized as income using the level-yield method over the contractual life of the loan. Stockholders’ Equity The Company is incorporated in the State of Maryland. Under Maryland law, there is no concept of “Treasury Shares.” Instead, shares purchased by the Company constitute authorized but unissued shares under Maryland law. Accounting principles generally accepted in the United States of America state that accounting for treasury stock shall conform to state law. The cost of shares purchased by the Company has been allocated to common stock and retained earnings balances. Earnings Per Common Share Basic earnings per common share are computed based on the weighted average number of common shares outstanding during each year. Diluted earnings per common share are computed using the weighted average common shares and all potential dilutive common shares outstanding during the period. Earnings per common share (EPS) were computed as follows: 2020 2021 2022 (In Thousands, Except Per Share Data) Net income and net income available to common shareholders $ 75,948 $ 74,627 $ 59,313 Average common shares outstanding 12,516 13,558 14,043 Average common share stock options outstanding 91 116 61 Goodwill – Branch acquisitions $ 5,396 $ 5,396 Average diluted common shares 12,607 13,674 14,104 Earnings per common share – basic Earnings per common share – diluted $ $ 6.07 6.02 $ $ 5.50 5.46 $ $ 4.22 4.21 Options outstanding at December 31, 2022, 2021 and 2020, to purchase 559,484, 383,338 and 758,901 shares of common stock, respectively, were not included in the computation of diluted earnings per common share for each of the years because the exercise prices of such options were greater than the average market prices of the common stock for the years ended December 31, 2022, 2021 and 2020, respectively. 13 14 79 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Stock Compensation Plans The Company has stock-based employee compensation plans, which are described more fully in Note 20. In accordance with FASB ASC 718, Compensation – Stock Compensation, compensation cost related to share-based payment transactions is recognized in the Company’s consolidated financial statements based on the grant-date fair value of the award using the modified prospective transition method. For the years ended December 31, 2022, 2021 and 2020, share-based compensation expense totaling $1.4 million, $1.2 million and $1.2 million, respectively, was included in salaries and employee benefits expense in the consolidated statements of income. Cash Equivalents The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. At December 31, 2022 and 2021, cash equivalents consisted of interest-bearing deposits in other financial institutions. At December 31, 2022, nearly all of the interest-bearing deposits were uninsured and held at the Federal Home Loan Bank or the Federal Reserve Bank. Income Taxes The Company accounts for income taxes in accordance with income tax accounting guidance (FASB ASC 740, Income Taxes). The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term “more likely than not” means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to management’s judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized. At December 31, 2022 and 2021, no valuation allowance was established. The Company recognizes interest and penalties on income taxes as a component of income tax expense. The Company files consolidated income tax returns with its subsidiaries. Derivatives and Hedging Activities FASB ASC 815, Derivatives and Hedging, provides the disclosure requirements for derivatives and hedging activities with the intent to provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments, (b) how the entity accounts for derivative instruments and related hedged items and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. Further, qualitative disclosures are required that explain the Company’s objectives and strategies for using derivatives, as well as quantitative disclosures about the fair value of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative instruments. For detailed disclosures on derivatives and hedging activities, see Note 16. As required by FASB ASC 815, the Company records all derivatives in the statement of financial condition at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. 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 permit changes to critical terms of hedging relationships and to the designated benchmark interest rate in a fair value hedge and also provide relief for assessing hedge effectiveness for cash flow hedges. ASU 2020-04 was effective upon issuance; however, the guidance was originally only available generally through December 31, 2022. Based upon amendments provided in ASU 2022-06 discussed below, provisions of ASU 2020-04 can now generally be applied through December 31, 2024. 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; however, the guidance was originally only available generally through December 31, 2022. Based upon amendments provided in ASU 2022-06 discussed below, provisions of ASU 2021-01 can now generally be applied through December 31, 2024. 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 the Company on January 1, 2023. The adoption 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. ASU 2022-02 is effective for the Company on January 1, 2023. The adoption of ASU 2022-02 is not expected to have a material impact on the Company’s consolidated financial statements. 80 15 16 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Stock Compensation Plans The Company has stock-based employee compensation plans, which are described more fully in Note 20. In accordance with FASB ASC 718, Compensation – Stock Compensation, compensation cost related to share-based payment transactions is recognized in the Company’s consolidated financial statements based on the grant-date fair value of the award using the modified prospective transition method. For the years ended December 31, 2022, 2021 and 2020, share-based compensation expense totaling $1.4 million, $1.2 million and $1.2 million, respectively, was included in salaries and employee benefits expense in the consolidated statements of income. The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. At December 31, 2022 and 2021, cash equivalents consisted of interest-bearing deposits in other financial institutions. At December 31, 2022, nearly all of the interest-bearing deposits were uninsured and held at the Federal Home Loan Bank or the Federal Reserve Bank. Cash Equivalents Income Taxes The Company accounts for income taxes in accordance with income tax accounting guidance (FASB ASC 740, Income Taxes). The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term “more likely than not” means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to management’s judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized. At December 31, 2022 and 2021, no valuation allowance was established. The Company recognizes interest and penalties on income taxes as a component of income tax expense. The Company files consolidated income tax returns with its subsidiaries. Derivatives and Hedging Activities FASB ASC 815, Derivatives and Hedging, provides the disclosure requirements for derivatives and hedging activities with the intent to provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments, (b) how the entity accounts for derivative instruments and related hedged items and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. Further, qualitative disclosures are required that explain the Company’s objectives and strategies for using derivatives, as well as quantitative disclosures about the fair value of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative instruments. For detailed disclosures on derivatives and hedging activities, see Note 16. As required by FASB ASC 815, the Company records all derivatives in the statement of financial condition at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. 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 permit changes to critical terms of hedging relationships and to the designated benchmark interest rate in a fair value hedge and also provide relief for assessing hedge effectiveness for cash flow hedges. ASU 2020-04 was effective upon issuance; however, the guidance was originally only available generally through December 31, 2022. Based upon amendments provided in ASU 2022-06 discussed below, provisions of ASU 2020-04 can now generally be applied through December 31, 2024. 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; however, the guidance was originally only available generally through December 31, 2022. Based upon amendments provided in ASU 2022-06 discussed below, provisions of ASU 2021-01 can now generally be applied through December 31, 2024. 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 the Company on January 1, 2023. The adoption 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. ASU 2022-02 is effective for the Company on January 1, 2023. The adoption of ASU 2022-02 is not expected to have a material impact on the Company’s consolidated financial statements. 15 16 81 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. ASU 2022-06 extends the period of time entities can utilize the reference rate reform relief guidance provided by ASU 2020-04 and ASU 2021-01, which are discussed above. ASU 2022-06 was effective upon issuance and defers the sunset date of this prior guidance to December 31, 2024, after which entities will no longer be permitted to apply the relief guidance in Topic 848. ASU 2022-06 has not had, and is not expected to have, a material impact on the Company’s consolidated financial statements. Note 2: Investments in 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 non-interest 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. As of December 31, 2022, the net unrealized gross gains remaining were $118,000; net of income taxes, these unrealized gains were $89,000. The amortized cost and fair values of securities were as follows: AVAILABLE-FOR-SALE SECURITIES: Agency mortgage-backed securities Agency collateralized mortgage obligations States and political subdivisions securities Small Business Administration securities Amortized Cost December 31, 2022 Gross Unrealized Gains Gross Unrealized Losses (In Thousands) Fair Value $ $ 327,266 90,205 60,667 75,076 $ — — 119 — $ 40,784 11,731 3,291 6,935 286,482 78,474 57,495 68,141 $ 553,214 $ 119 $ 62,741 $ 490,592 December 31, 2022 Gross Gross Amortized Fair Value Amortized Unrealized Unrealized Cost Adjustment Cost Gains Losses Fair Value (In Thousands) HELD-TO-MATURITY SECURITIES: Agency mortgage-backed securities $ 73,891 $ 3,015 $ 76,906 $ Agency collateralized mortgage obligations 122,247 States and political subdivisions securities 6,239 (2,885) 119,362 (12) 6,227 — — — $ 9,820 $ 67,086 14,129 105,233 781 5,446 $ 202,377 $ 118 $ 202,495 $ $ 24,730 $ 177,765 AVAILABLE-FOR-SALE SECURITIES: Agency collateralized mortgage obligations States and political subdivisions securities Small Business Administration securities Cost 219,624 204,332 38,440 26,802 Amortized Unrealized Unrealized December 31, 2021 Gross Gains Gross Losses (In Thousands) 2,443 1,618 497 2,498 43 — Agency mortgage-backed securities $ $ 10,561 $ 744 $ Fair Value 229,441 204,277 40,015 27,299 $ 489,198 $ 15,119 $ 3,285 $ 501,032 No securities were classified as held-to-maturity at December 31, 2021. At December 31, 2022, the Company’s available-for-sale agency mortgage-backed securities portfolio consisted of FNMA securities totaling $196.4 million, FHLMC securities totaling $90.1 million and GNMA securities totaling $78.5 million. At December 31, 2021, available-for-sale agency mortgage-backed securities portfolio consisted of FNMA securities totaling $180.5 million, FHLMC securities totaling $47.4 million and GNMA securities totaling $1.5 million. At December 31, 2022, all of the Company’s $286.5 million agency mortgage- backed securities had fixed rates of interest. At December 31, 2021, all of the Company’s $229.4 million available-for-sale agency mortgage-backed securities had fixed rates of interest. 82 17 18 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. ASU 2022-06 extends the period of time entities can utilize the reference rate reform relief guidance provided by ASU 2020-04 and ASU 2021-01, which are discussed above. ASU 2022-06 was effective upon issuance and defers the sunset date of this prior guidance to December 31, 2024, after which entities will no longer be permitted to apply the relief guidance in Topic 848. ASU 2022-06 has not had, and is not expected to have, a material impact on the Company’s consolidated financial statements. Note 2: Investments in 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 non-interest 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. As of December 31, 2022, the net unrealized gross gains remaining were $118,000; net of income taxes, these unrealized gains were $89,000. The amortized cost and fair values of securities were as follows: Amortized Unrealized Unrealized Cost Fair Value December 31, 2022 Gross Gains Gross Losses (In Thousands) AVAILABLE-FOR-SALE SECURITIES: Agency mortgage-backed securities $ 327,266 $ $ $ 286,482 Agency collateralized mortgage obligations States and political subdivisions securities Small Business Administration securities 90,205 60,667 75,076 — — 119 — 40,784 11,731 3,291 6,935 78,474 57,495 68,141 $ 553,214 $ 119 $ 62,741 $ 490,592 Amortized Cost Fair Value Adjustment December 31, 2022 Gross Amortized Unrealized Cost Gains (In Thousands) Gross Unrealized Losses Fair Value HELD-TO-MATURITY SECURITIES: $ 73,891 Agency mortgage-backed securities Agency collateralized mortgage obligations 122,247 6,239 States and political subdivisions securities $ 3,015 (2,885) (12) $ 76,906 119,362 6,227 $ — — — $ 9,820 14,129 781 $ 67,086 105,233 5,446 $ 202,377 $ 118 $ 202,495 $ $ 24,730 $ 177,765 Amortized Cost December 31, 2021 Gross Unrealized Gains Gross Unrealized Losses (In Thousands) Fair Value AVAILABLE-FOR-SALE SECURITIES: Agency mortgage-backed securities Agency collateralized mortgage obligations States and political subdivisions securities Small Business Administration securities $ $ 219,624 204,332 38,440 26,802 $ 10,561 2,443 1,618 497 744 2,498 43 — $ 229,441 204,277 40,015 27,299 $ 489,198 $ 15,119 $ 3,285 $ 501,032 No securities were classified as held-to-maturity at December 31, 2021. At December 31, 2022, the Company’s available-for-sale agency mortgage-backed securities portfolio consisted of FNMA securities totaling $196.4 million, FHLMC securities totaling $90.1 million and GNMA securities totaling $78.5 million. At December 31, 2021, available-for-sale agency mortgage-backed securities portfolio consisted of FNMA securities totaling $180.5 million, FHLMC securities totaling $47.4 million and GNMA securities totaling $1.5 million. At December 31, 2022, all of the Company’s $286.5 million agency mortgage- backed securities had fixed rates of interest. At December 31, 2021, all of the Company’s $229.4 million available-for-sale agency mortgage-backed securities had fixed rates of interest. 17 18 83 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 The amortized cost and fair value of available-for-sale and held-to-maturity securities at December 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. Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for these available-for-sale debt securities are temporary. Available-for-Sale Held-to-Maturity Amortized Cost Fair Value Amortized Carrying Value Fair 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 After five through fifteen years After fifteen years Securities not due on a single maturity date — — — — 245 6,671 53,661 492,547 $ — — — — 245 6,565 50,685 433,097 $ — — — — — 2,578 3,649 196,268 $ — — — — — 2,233 3,213 172,319 $ 553,214 $ 490,592 $ 202,495 $ 177,765 Administration securities 60,473 (5,224) (1,711) 68,140 (6,935) The amortized cost and fair values of securities pledged as collateral was as follows at December 31, 2022 and 2021: 2022 Amortized Cost Fair Value Amortized Cost (In Thousands) 2021 Fair Value Public deposits Collateralized borrowing accounts Other $ $ 15,402 210,330 4,018 229,750 $ $ 13,489 186,170 3,764 203,423 $ $ 4,742 133,242 6,257 144,241 $ $ 5,029 139,112 6,461 150,602 Available-for-sale investments in debt securities are reported in the financial statements at their fair value, which was $490.6 million and $501.0 million at December 31, 2022 and 2021, respectively. Total fair value of these investments for which the amortized cost exceeded the fair value at December 31, 2022 and 2021, was $472.0 million and $173.9 million, respectively, which is approximately 96.2% and 34.7%, respectively, of the Company’s 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 (SBA) 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. Held-to-maturity investments in debt securities are reported in the financial statements at their amortized cost, which was $202.5 million at December 31, 2022. Total fair value of these investments at December 31, 2022 was approximately $177.8 million. Total fair value of these investments for which the amortized cost exceeded the fair value at December 31, 2022 and 2021, was $177.8 million, which is 100.0% of the Company’s held-to-maturity investment portfolio. There were no held-to-maturity investment securities at December 31, 2021. Held-to-maturity investment securities are evaluated for potential losses under ASU 2016-13. The following table shows the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2022 and 2021: Less than 12 Months 12 Months or More Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses 2022 (In Thousands) $ 221,562 $ (27,597) $ 64,918 $ (13,187) $ 286,480 $ (40,784) 28,537 (3,262) 40,642 (8,469) 69,179 (11,731) subdivisions securities 44,455 (2,913) (378) 48,208 (3,291) $ 355,027 $ (38,996) $ 116,980 $ (23,745) $ 472,007 $ (62,741) 7,667 3,753 Less than 12 Months 12 Months or More Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses 2022 (In Thousands) $ 59,218 $ (7,766) $ 7,868 $ (2,054) $ 67,086 $ (9,820) 61,055 (6,411) 44,178 (7,718) 105,233 (14,129) 900 (101) 4,546 (680) 5,446 (781) $ 121,173 $ (14,278) $ 56,592 $ (10,452) $ 177,765 $ (24,730) Description of Securities AVAILABLE-FOR-SALE SECURITIES: Agency mortgage-backed securities Agency collateralized mortgage obligations Small Business States and political Description of Securities HELD-TO-MATURITY SECURITIES: Agency mortgage-backed securities Agency collateralized mortgage obligations States and political subdivisions securities 84 19 20 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 The amortized cost and fair value of available-for-sale and held-to-maturity securities at December 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. Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for these available-for-sale debt securities are temporary. Available-for-Sale Held-to-Maturity Amortized Cost Fair Value Amortized Carrying Value Fair 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 After five through fifteen years After fifteen years Securities not due on a single maturity date — — — — 245 6,671 53,661 492,547 — — — — 245 6,565 50,685 433,097 — — — — — 2,578 3,649 196,268 — — — — — 2,233 3,213 172,319 $ 553,214 $ 490,592 $ 202,495 $ 177,765 The amortized cost and fair values of securities pledged as collateral was as follows at December 31, 2022 and 2021: 2022 Amortized Cost Fair Value Amortized Cost (In Thousands) 2021 Fair Value Public deposits Collateralized borrowing accounts Other $ $ 15,402 210,330 4,018 229,750 $ $ 13,489 186,170 3,764 203,423 $ $ 4,742 133,242 6,257 144,241 $ $ 5,029 139,112 6,461 150,602 Available-for-sale investments in debt securities are reported in the financial statements at their fair value, which was $490.6 million and $501.0 million at December 31, 2022 and 2021, respectively. Total fair value of these investments for which the amortized cost exceeded the fair value at December 31, 2022 and 2021, was $472.0 million and $173.9 million, respectively, which is approximately 96.2% and 34.7%, respectively, of the Company’s 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 (SBA) 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. Held-to-maturity investments in debt securities are reported in the financial statements at their amortized cost, which was $202.5 million at December 31, 2022. Total fair value of these investments at December 31, 2022 was approximately $177.8 million. Total fair value of these investments for which the amortized cost exceeded the fair value at December 31, 2022 and 2021, was $177.8 million, which is 100.0% of the Company’s held-to-maturity investment portfolio. There were no held-to-maturity investment securities at December 31, 2021. Held-to-maturity investment securities are evaluated for potential losses under ASU 2016-13. The following table shows the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2022 and 2021: Description of Securities AVAILABLE-FOR-SALE SECURITIES: Agency mortgage-backed securities Agency collateralized mortgage obligations Small Business Less than 12 Months Fair Value Unrealized Losses 2022 12 Months or More Fair Value Unrealized Losses (In Thousands) Total Fair Value Unrealized Losses $ 221,562 $ (27,597) $ 64,918 $ (13,187) $ 286,480 $ (40,784) 28,537 (3,262) 40,642 (8,469) 69,179 (11,731) Administration securities 60,473 (5,224) States and political subdivisions securities 44,455 (2,913) 7,667 3,753 (1,711) 68,140 (6,935) (378) 48,208 (3,291) $ 355,027 $ (38,996) $ 116,980 $ (23,745) $ 472,007 $ (62,741) Description of Securities HELD-TO-MATURITY SECURITIES: Agency mortgage-backed securities Agency collateralized mortgage obligations States and political subdivisions securities Less than 12 Months Fair Value Unrealized Losses 2022 12 Months or More Fair Value Unrealized Losses (In Thousands) Total Fair Value Unrealized Losses $ 59,218 $ (7,766) $ 7,868 $ (2,054) $ 67,086 $ (9,820) 61,055 (6,411) 44,178 (7,718) 105,233 (14,129) 900 (101) 4,546 (680) 5,446 (781) $ 121,173 $ (14,278) $ 56,592 $ (10,452) $ 177,765 $ (24,730) 19 20 85 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ (910) (388) (910) (910) (388) (388) 26,881 10,583 58,352 47,769 10,583 10,583 26,881 26,881 47,769 47,769 (356) (3,285) (2,019) (356) (356) (3,285) (3,285) (2,019) (2,019) (1,266) (1,266) (1,266) 58,352 $ 58,352 109,025 Total Total Total 109,025 109,025 $ 173,914 $ 147,033 Fair Value $ 147,033 $ 147,033 Fair Fair Value Value $ 173,914 $ 173,914 $ States and political mortgage obligations mortgage obligations subdivisions securities subdivisions securities Unrealized Losses Unrealized Unrealized Losses Losses $ (744) $ (744) (744) (2,498) (2,498) (2,498) 92,727 92,727 92,727 (1,588) (1,588) (1,588) 16,298 16,298 16,298 securities securities Agency collateralized AVAILABLE-FOR-SALE AVAILABLE-FOR-SALE SECURITIES: Agency mortgage-backed 6,537 6,537 6,537 (43) (43) (43) — — — — — — 6,537 6,537 6,537 (43) (43) (43) AVAILABLE-FOR-SALE SECURITIES: SECURITIES: Agency mortgage-backed Agency mortgage-backed securities Agency collateralized Agency collateralized mortgage obligations States and political States and political subdivisions securities Great Southern Bancorp, Inc. Great Southern Bancorp, Inc. Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 December 31, 2022, 2021 and 2020 December 31, 2022, 2021 and 2020 Description of Securities Description of Securities Description of Securities Less than 12 Months Fair Value Less than 12 Months Less than 12 Months Unrealized Fair Unrealized Fair Unrealized Losses Losses Value Value Losses 2021 12 Months or More Fair Value 2021 2021 12 Months or More 12 Months or More Unrealized Fair Unrealized Unrealized Fair Losses Losses Value Losses Value (In Thousands) (In Thousands) (In Thousands) Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 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 the allowance for credit losses. Results for reporting periods prior to January 1, 2021, continue to be reported in accordance with previously applicable GAAP. Under the incurred loss model, the Company delayed recognition of losses until it was probable that a loss was incurred. The allowance for credit losses was established as losses were estimated to have occurred through a provision for credit losses charged to earnings. Credit losses were charged against the allowance when management believed the uncollectability of a loan balance was confirmed. The allowance for credit losses was evaluated on a regular basis by management and was based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. The allowance consisted of allocated and general components. The allocated component related to loans that were classified as impaired. For loans classified as impaired, an allowance was established when the present value of expected future cash flows (or collateral value or observable market price) of the impaired loan was lower than the carrying value of that loan. The general component covered non-classified loans and was based on historical charge-off experience and expected loss given default derived from the Company’s internal risk rating process. Results for reporting periods after December 31, 2020, include loans acquired and accounted for under ASC 310-30 net of discount within the loan classes, while for reporting periods prior to January 1, 2021, the loans acquired and accounted for under ASC 310-30 were shown separately. Beginning on January 1, 2021, 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, gross domestic product (“GDP”), commercial real estate price index, consumer sentiment and construction spending. The adjustments are based on results from various regression models projecting the impact of the macroeconomic variables to loss rates. The forecast is used for a reasonable and supportable period before reverting to historical averages. 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. No securities were classified as held-to-maturity at December 31, 2021. No securities were classified as held-to-maturity at December 31, 2021. No securities were classified as held-to-maturity at December 31, 2021. Allowance for Credit Losses Allowance for Credit Losses Allowance for Credit Losses On January 1, 2021, the Company began evaluating all securities quarterly to determine if any securities in a loss On January 1, 2021, the Company began evaluating all securities quarterly to determine if any securities in a loss 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 position require a provision for credit losses in accordance with ASC 326, Measurement of Credit Losses on 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 Financial Instruments. All of the mortgage-backed, collateralized mortgage, and SBA securities held by the 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 Company are issued by U.S. government-sponsored entities and agencies. These securities are either explicitly or 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 implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of 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. no credit losses. Likewise, the Company has not experienced historical losses on these types of securities. 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. Accordingly, no allowance for credit losses has been recorded for these 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 Regarding securities issued by state and political subdivisions, management considers the following when 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) evaluating these securities: (i) current issuer bond ratings, (ii) historical loss rates for given bond ratings, (iii) 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 whether issuers continue to make timely principal and interest payments under the contractual terms of the 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 securities, (iv) updated financial information of the issuer, (v) internal forecasts and (vi) whether such securities 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 provide insurance or other credit enhancement or are pre-refunded by the issuers. These securities are highly rated 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 by major rating agencies and have a long history of no credit losses. Likewise, the Company has not experienced 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 historical losses on these types of securities. Accordingly, no allowance for credit losses has been recorded for historical losses on these types of securities. Accordingly, no allowance for credit losses has been recorded for these securities. these securities. these securities. Note 3: Loans and Allowance for Credit Losses Note 3: Loans and Allowance for Credit Losses Note 3: 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 ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit 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 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 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 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 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 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 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. 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 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 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 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. analysis of then-current conditions, assumptions and economic forecasts at January 1, 2021. 86 21 21 21 22 Great Southern Bancorp, Inc. Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Description of Securities Description of Securities AVAILABLE-FOR-SALE AVAILABLE-FOR-SALE SECURITIES: SECURITIES: Agency mortgage-backed Agency mortgage-backed securities securities Agency collateralized Agency collateralized mortgage obligations mortgage obligations States and political States and political subdivisions securities subdivisions securities Less than 12 Months Less than 12 Months Fair Fair Value Value Unrealized Unrealized Losses Losses 2021 2021 12 Months or More 12 Months or More Fair Fair Value Value Unrealized Unrealized Losses Losses (In Thousands) (In Thousands) Total Total Fair Fair Value Value Unrealized Unrealized Losses Losses $ $ 47,769 47,769 $ $ (388) (388) $ $ 10,583 10,583 $ $ (356) (356) $ $ 58,352 58,352 $ $ (744) (744) 92,727 92,727 (1,588) (1,588) 16,298 16,298 (910) (910) 109,025 109,025 (2,498) (2,498) 6,537 6,537 (43) (43) — — — — 6,537 6,537 (43) (43) $ 147,033 $ 147,033 $ $ (2,019) (2,019) $ $ 26,881 26,881 $ $ (1,266) (1,266) $ 173,914 $ 173,914 $ $ (3,285) (3,285) No securities were classified as held-to-maturity at December 31, 2021. No securities were classified as held-to-maturity at December 31, 2021. Allowance for Credit Losses Allowance for Credit Losses On January 1, 2021, the Company began evaluating all securities quarterly to determine if any securities in a loss 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 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 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 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 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. 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. 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 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) 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 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 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 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 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 historical losses on these types of securities. Accordingly, no allowance for credit losses has been recorded for these securities. these securities. Note 3: Loans and Allowance for Credit Losses Note 3: Loans and Allowance for Credit Losses The Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit 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 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 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 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 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 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 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. 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 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 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 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. 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 the allowance for credit losses. Results for reporting periods prior to January 1, 2021, continue to be reported in accordance with previously applicable GAAP. Under the incurred loss model, the Company delayed recognition of losses until it was probable that a loss was incurred. The allowance for credit losses was established as losses were estimated to have occurred through a provision for credit losses charged to earnings. Credit losses were charged against the allowance when management believed the uncollectability of a loan balance was confirmed. The allowance for credit losses was evaluated on a regular basis by management and was based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. The allowance consisted of allocated and general components. The allocated component related to loans that were classified as impaired. For loans classified as impaired, an allowance was established when the present value of expected future cash flows (or collateral value or observable market price) of the impaired loan was lower than the carrying value of that loan. The general component covered non-classified loans and was based on historical charge-off experience and expected loss given default derived from the Company’s internal risk rating process. Results for reporting periods after December 31, 2020, include loans acquired and accounted for under ASC 310-30 net of discount within the loan classes, while for reporting periods prior to January 1, 2021, the loans acquired and accounted for under ASC 310-30 were shown separately. Beginning on January 1, 2021, 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, gross domestic product (“GDP”), commercial real estate price index, consumer sentiment and construction spending. The adjustments are based on results from various regression models projecting the impact of the macroeconomic variables to loss rates. The forecast is used for a reasonable and supportable period before reverting to historical averages. 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. 21 21 22 87 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 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 December 31, 2022 and 2021, included: $ $ $ $ — $ 33,849 $ 33,849 $ 2022 2021 (In Thousands) Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Classes of loans by aging were as follows as of the dates indicated: December 31, 2022 30-59 Days 60-89 Days Days Total Past Over 90 Past Due Past Due Past Due Due Current Receivable Still Accruing (In Thousands) Total Loans Total Loans > 90 Days Past Due and 2,568 — — — — — 196 — 8 — 100 288 234 — — — — 462 63 — — — — 34 114 38 — — 384 — 722 — — 586 — 14 111 274 — 384 — 32,067 41,229 32,067 41,613 757,690 757,690 3,752 774,781 778,533 1,579 1,775 1,528,888 1,530,663 63 124,807 124,870 — 594 — 148 513 546 781,761 781,761 292,634 293,228 12,852 37,133 33,219 12,852 37,281 33,732 122,696 123,242 — — — — — — — — — — — — — — — One- to four-family residential construction Subdivision construction Land development Commercial construction Owner occupied one- to four- family residential Non-owner occupied one- to four-family residential Commercial real estate Other residential Commercial business Industrial revenue bonds Consumer auto Consumer other Home equity lines of credit FDIC-assisted acquired loans included above Total $ 3,394 $ 711 $ 3,670 $ 7,775 $ 4,573,606 $ 4,581,381 $ $ 253 $ 4 $ 428 $ 685 $ 57,923 $ 58,608 $ One- to four-family residential construction Subdivision construction Land development Commercial construction Owner occupied one- to four-family residential Non-owner occupied one- to four-family residential Commercial real estate Other residential Commercial business Industrial revenue bonds Consumer auto Consumer other Home equity lines of credit Allowance for credit losses Deferred loan fees and gains, net $ 33,849 32,067 41,613 757,690 778,533 124,870 1,530,663 781,761 293,228 12,852 37,281 33,732 123,242 4,581,381 (63,480) (11,065) 4,506,836 $ $ 28,302 26,694 47,827 617,505 561,958 119,635 1,476,230 697,903 280,513 14,203 48,915 37,902 119,965 4,077,552 (60,754) (9,298) 4,007,500 $ 88 23 24 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 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 December 31, 2022 and 2021, included: One- to four-family residential construction $ $ Owner occupied one- to four-family residential Non-owner occupied one- to four-family residential 1,530,663 1,476,230 Subdivision construction Land development Commercial construction Commercial real estate Other residential Commercial business Industrial revenue bonds Consumer auto Consumer other Home equity lines of credit Allowance for credit losses Deferred loan fees and gains, net 2022 2021 (In Thousands) 33,849 32,067 41,613 757,690 778,533 124,870 781,761 293,228 12,852 37,281 33,732 28,302 26,694 47,827 617,505 561,958 119,635 697,903 280,513 14,203 48,915 37,902 119,965 123,242 4,581,381 (63,480) (11,065) 4,077,552 (60,754) (9,298) $ 4,506,836 $ 4,007,500 Great Southern Bancorp, Inc. Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 December 31, 2022, 2021 and 2020 Classes of loans by aging were as follows as of the dates indicated: Classes of loans by aging were as follows as of the dates indicated: December 31, 2022 December 31, 2022 Over 90 Over 90 30-59 Days 60-89 Days Days 30-59 Days 60-89 Days Days Past Due Past Due Past Due Past Due Past Due Past Due Total Past Total Past Due Due Total Loans Current Receivable Still Accruing Current Receivable Still Accruing Total Loans Total Loans > 90 Days Past > 90 Days Past Due and Due and Total Loans (In Thousands) (In Thousands) One- to four-family One- to four-family residential construction residential construction Subdivision construction Subdivision construction Land development Land development Commercial construction Commercial construction Owner occupied one- to four- Owner occupied one- to four- family residential family residential Non-owner occupied one- to Non-owner occupied one- to four-family residential four-family residential Commercial real estate Commercial real estate Other residential Other residential Commercial business Commercial business Industrial revenue bonds Industrial revenue bonds Consumer auto Consumer auto Consumer other Consumer other Home equity lines of credit Home equity lines of credit $ $ $ $ — — — — — — — — 2,568 2,568 — — 196 196 — — 8 8 — — 100 100 288 288 234 234 — — — — — — — — 462 462 63 63 — — — — — — — — 34 34 114 114 38 38 $ $ — — — — 384 384 — — 722 722 — — 1,579 1,579 — — 586 586 — — 14 14 111 111 274 274 Total Total $ $ 3,394 3,394 $ $ 711 711 $ 3,670 $ 3,670 $ $ FDIC-assisted acquired loans FDIC-assisted acquired loans included above included above $ $ 253 253 $ $ 4 4 $ $ 428 428 $ $ $ — $ — — — 384 384 — — $ $ 33,849 $ 33,849 $ 32,067 32,067 41,229 41,229 757,690 757,690 33,849 $ 33,849 $ 32,067 32,067 41,613 41,613 757,690 757,690 3,752 3,752 63 63 1,775 1,775 — — 594 594 — — 148 148 513 513 546 546 774,781 774,781 778,533 778,533 124,807 124,807 1,528,888 1,528,888 781,761 781,761 292,634 292,634 12,852 12,852 37,133 37,133 33,219 33,219 122,696 122,696 124,870 124,870 1,530,663 1,530,663 781,761 781,761 293,228 293,228 12,852 12,852 37,281 37,281 33,732 33,732 123,242 123,242 7,775 7,775 $ 4,573,606 $ 4,581,381 $ $ 4,573,606 $ 4,581,381 $ — — — — — — — — — — — — — — — — — — — — — — — — — — — — 685 685 $ $ 57,923 $ 57,923 $ 58,608 $ 58,608 $ — — 23 24 24 89 Great Southern Bancorp, Inc. Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 December 31, 2022, 2021 and 2020 December 31, 2021 December 31, 2021 Over 90 Over 90 30-59 Days 60-89 Days Days 30-59 Days 60-89 Days Days Past Due Past Due Past Due Past Due Past Due Past Due Total Past Total Past Due Due Total Loans Total Loans Total Loans Total Loans > 90 Days Past > 90 Days Past Due and Due and Current Receivable Still Accruing Current Receivable Still Accruing (In Thousands) (In Thousands) One- to four-family One- to four-family residential construction residential construction Subdivision construction Subdivision construction Land development Land development Commercial construction Commercial construction Owner occupied one- to four- Owner occupied one- to four- family residential Non-owner occupied one- to Non-owner occupied one- to four-family residential four-family residential family residential Commercial real estate Commercial real estate Other residential Other residential Commercial business Commercial business Industrial revenue bonds Industrial revenue bonds Consumer auto Consumer auto Consumer other Consumer other Home equity lines of credit Home equity lines of credit $ $ $ $ — — 29 — — — 29 — $ $ — — — — 15 15 — — — — — — 468 468 — — $ — $ $ — — — 512 512 — — $ 28,302 $ 28,302 $ 26,694 26,694 47,315 47,315 617,505 617,505 28,302 $ 28,302 $ 26,694 26,694 47,827 47,827 617,505 617,505 843 843 2 2 2,216 2,216 3,061 3,061 558,897 558,897 561,958 561,958 — — — — — — 1,404 1,404 — — 229 229 126 126 — — — — — — — — — — — — 31 31 28 28 — — — — 2,006 2,006 — — — — — — 34 34 63 63 636 636 — — 2,006 2,006 — — 1,404 1,404 — — 294 294 217 217 636 636 119,635 119,635 1,474,224 1,474,224 697,903 697,903 279,109 279,109 14,203 14,203 48,621 48,621 37,685 37,685 119,329 119,329 119,635 119,635 1,476,230 1,476,230 697,903 697,903 280,513 280,513 14,203 14,203 48,915 48,915 37,902 37,902 119,965 119,965 Total Total $ $ 2,631 2,631 $ $ 76 76 $ 5,423 $ 5,423 $ $ FDIC-assisted acquired loans FDIC-assisted acquired loans included above included above $ $ 433 433 $ $ — — $ 1,736 $ 1,736 $ $ 8,130 8,130 $ 4,069,422 $ 4,077,552 $ $ 4,069,422 $ 4,077,552 $ 2,169 2,169 $ $ 72,001 $ 72,001 $ 74,170 $ 74,170 $ — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 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: One- to four-family residential construction $ $ December 31, 2022 2021 (In Thousands) Owner occupied one- to four-family residential Non-owner occupied one- to four-family residential Subdivision construction Land development Commercial construction Commercial real estate Other residential Commercial business Industrial revenue bonds Consumer auto Consumer other Home equity lines of credit Total non-accruing loans 1,579 — — 384 — 722 — — 586 — 14 111 274 — — 468 — 2,216 — 2,006 — — — 34 63 636 5,423 1,736 FDIC-assisted acquired loans included above $ $ 3,670 428 $ $ No interest income was recorded on these loans for the years ended December 31, 2022 and 2021, respectively. Nonaccrual loans for which there is no related allowance for credit losses as of December 31, 2022 had an amortized cost of $2.1 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. 90 25 25 26 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 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: December 31, 2022 2021 (In Thousands) One- to four-family residential construction Subdivision construction Land development Commercial construction Owner occupied one- to four-family residential Non-owner occupied one- to four-family residential Commercial real estate Other residential Commercial business Industrial revenue bonds Consumer auto Consumer other Home equity lines of credit Total non-accruing loans FDIC-assisted acquired loans included above $ $ $ — — 384 — 722 — 1,579 — 586 — 14 111 274 3,670 428 $ $ $ — — 468 — 2,216 — 2,006 — — — 34 63 636 5,423 1,736 No interest income was recorded on these loans for the years ended December 31, 2022 and 2021, respectively. Nonaccrual loans for which there is no related allowance for credit losses as of December 31, 2022 had an amortized cost of $2.1 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. 91 26 Great Southern Bancorp, Inc. Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 The following table presents the activity in the allowance for credit losses by portfolio segment for the years The following table presents the activity in the allowance for credit losses by portfolio segment for the years ended December 31, 2022 and 2021. On January 1, 2021, the Company adopted the CECL methodology, which ended December 31, 2022 and 2021. On January 1, 2021, the Company adopted the CECL methodology, which added $11.6 million to the total Allowance for Credit Loss, including $1.9 million of remaining discount on loans added $11.6 million to the total Allowance for Credit Loss, including $1.9 million of remaining discount on loans that were previously accounted for as PCI. that were previously accounted for as PCI. December 31, 2022 December 31, 2022 One- to Four- One- to Four- Family Family Residential Residential and and Commercial Commercial Commercial Commercial Commercial Commercial Construction Residential Real Estate Construction Business Construction Residential Real Estate Construction Business Other Other Consumer Consumer Total Total Allowance for Credit Losses Allowance for Credit Losses Balance, January 1, 2022 Balance, January 1, 2022 Provision (credit) charged Provision (credit) charged $ $ 9,364 9,364 $ 10,502 $ 10,502 $ 28,604 $ 28,604 $ $ 2,797 2,797 $ $ 4,142 4,142 $ $ 5,345 5,345 $ $ 60,754 60,754 Balance, January 1, 2022 $ 687 $ 5,703 $ 367 $ 908 $ 1,582 $ 382 $ 9,629 (In Thousands) (In Thousands) to expense to expense Losses charged off Losses charged off Recoveries Recoveries Balance, Balance, December 31, 2022 December 31, 2022 1,652 1,652 (40) (40) 195 195 1,498 1,498 — — 110 110 (1,465) (1,465) (44) (44) 1 1 152 152 (84) (84) — — 1,491 1,491 (51) (51) 240 240 (328) (328) (1,950) (1,950) 1,349 1,349 3000 3000 (2,169) (2,169) 1,895 1,895 $ $ 11,171 11,171 $ 12,110 $ 12,110 $ 27,096 $ 27,096 $ $ 2,865 2,865 $ $ 5,822 5,822 $ $ 4,416 4,416 $ $ 63,480 63,480 December 31, 2021 December 31, 2021 One- to Four- One- to Four- Family Family Residential Residential and and Commercial Commercial Commercial Commercial Commercial Commercial Construction Residential Real Estate Construction Business Construction Residential Real Estate Construction Business Other Other Consumer Consumer Total Total The following table presents the activity in the allowance for unfunded commitments by portfolio segment for the years ended December 31, 2022 and 2021. On January 1, 2021, the Company adopted the CECL methodology, which created an $8.7 million allowance for unfunded commitments. One- to Four- Family Residential December 31, 2022 and Other Commercial Commercial Commercial Construction Residential Real Estate Construction Business Consumer Total (In Thousands) Allowance for Unfunded Commitments Provision (credit) charged to expense Balance, 49 2,921 49 (106) 152 122 3,187 December 31, 2022 $ 736 $ 8,624 $ 416 $ 802 $ 1,734 $ 504 $ 12,816 One- to Four- Family Residential December 31, 2021 Balance, December 31, 2020 $ $ — $ $ $ $ $ and Other Commercial Commercial Commercial Construction Residential Real Estate Construction Business Consumer Total — 917 917 (230) 5,227 5,227 476 (In Thousands) — 354 354 13 — 910 910 (2) — 935 935 647 — 347 347 35 — 8,690 8,690 939 Allowance for Unfunded Commitments CECL adoption Balance, January 1, 2021 Provision (credit) charged to expense Balance, December 31, 2021 $ 687 $ 5,703 $ 367 $ 908 $ 1,582 $ 382 $ 9,629 The following table presents the activity in the allowance for credit losses by portfolio segment for the year ended December 31, 2020 prepared using the previous GAAP incurred loss method prior to the adoption of ASU 2016-13. Also presented are the balance in the allowance for credit losses and the recorded investment in loans based on portfolio segment and impairment method as of the year ended December 31, 2020 prepared using the previous GAAP incurred loss method prior to the adoption of ASU 2016-13. $ $ 9,364 9,364 $ 10,502 $ 10,502 $ 28,604 $ 28,604 $ $ 2,797 2,797 $ $ 4,142 4,142 $ $ 5,345 5,345 $ $ 60,754 60,754 92 27 27 28 (In Thousands) (In Thousands) 4,536 4,536 4,533 4,533 9,069 9,069 $ $ 9,375 9,375 5,832 5,832 15,207 15,207 $ $ $ $ 33,707 33,707 (2,531) (2,531) 31,176 31,176 3,521 3,521 (1,165) (1,165) 2,356 2,356 $ $ $ $ 2,390 2,390 1,499 1,499 3,889 3,889 $ $ 2,214 3,427 5,641 2,214 3,427 5,641 55,743 11,595 67,338 55,743 11,595 67,338 — — (190) (190) 485 485 (4,797) (4,797) — — 92 92 (2,478) (2,478) (142) (142) 48 48 575 575 (154) (154) 20 20 — — (81) (81) 334 334 — — (2,054) (2,054) 1,758 1,758 (6,700) (6,700) (2,621) (2,621) 2,737 2,737 Allowance for Credit Losses Allowance for Credit Losses Balance, December 31, 2020 $ Balance, December 31, 2020 $ CECL adoption CECL adoption Balance, January 1, 2021 Balance, January 1, 2021 Provision (credit) charged Provision (credit) charged to expense to expense Losses charged off Losses charged off Recoveries Recoveries Balance, Balance, December 31, 2021 December 31, 2021 Other Other Consumer Consumer Total Total One- to Four- One- to Four- Family Family Residential Residential and and Commercial Commercial Commercial Commercial Commercial Commercial Construction Residential Real Estate Construction Business Construction Residential Real Estate Construction Business Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 December 31, 2022, 2021 and 2020 The following table presents the activity in the allowance for unfunded commitments by portfolio segment for the The following table presents the activity in the allowance for unfunded commitments by portfolio segment for the years ended December 31, 2022 and 2021. On January 1, 2021, the Company adopted the CECL methodology, years ended December 31, 2022 and 2021. On January 1, 2021, the Company adopted the CECL methodology, which created an $8.7 million allowance for unfunded commitments. which created an $8.7 million allowance for unfunded commitments. December 31, 2022 December 31, 2022 The following table presents the activity in the allowance for credit losses by portfolio segment for the years ended December 31, 2022 and 2021. On January 1, 2021, the Company adopted the CECL methodology, which added $11.6 million to the total Allowance for Credit Loss, including $1.9 million of remaining discount on loans that were previously accounted for as PCI. One- to Four- Family Residential December 31, 2022 and Other Commercial Commercial Commercial Construction Residential Real Estate Construction Business Consumer Total (In Thousands) Balance, January 1, 2022 $ 9,364 $ 10,502 $ 28,604 $ 2,797 $ 4,142 $ 5,345 $ 60,754 1,652 (40) 195 1,498 — 110 (1,465) 152 (44) 1 (84) — 1,491 (51) 240 (328) (1,950) 1,349 3000 (2,169) 1,895 Allowance for Credit Losses Provision (credit) charged to expense Losses charged off Recoveries Balance, December 31, 2022 $ 11,171 $ 12,110 $ 27,096 $ 2,865 $ 5,822 $ 4,416 $ 63,480 One- to Four- Family Residential December 31, 2021 and Other Commercial Commercial Commercial Construction Residential Real Estate Construction Business Consumer Total (In Thousands) 4,536 4,533 9,069 $ 9,375 5,832 $ 15,207 $ 33,707 (2,531) 31,176 $ 3,521 (1,165) 2,356 $ 2,390 1,499 3,889 $ 2,214 3,427 5,641 55,743 11,595 67,338 Allowance for Credit Losses Balance, December 31, 2020 $ CECL adoption Balance, January 1, 2021 Provision (credit) charged to expense Losses charged off Recoveries Balance, December 31, 2021 $ 9,364 $ 10,502 $ 28,604 $ 2,797 $ 4,142 $ 5,345 $ 60,754 Allowance for Unfunded Allowance for Unfunded Commitments Commitments Balance, January 1, 2022 Balance, January 1, 2022 Provision (credit) charged Provision (credit) charged to expense to expense Balance, Balance, December 31, 2022 December 31, 2022 $ $ 687 687 $ $ 5,703 5,703 $ 367 $ 367 $ $ 908 908 $ $ 1,582 1,582 $ $ 382 382 $ $ 9,629 9,629 49 49 2,921 2,921 49 49 (106) (106) 152 152 122 122 3,187 3,187 $ $ 736 736 $ $ 8,624 8,624 $ 416 $ 416 $ $ 802 802 $ $ 1,734 1,734 $ $ 504 504 $ $ 12,816 12,816 (In Thousands) (In Thousands) December 31, 2021 December 31, 2021 One- to Four- One- to Four- Family Family Residential Residential and and Commercial Commercial Commercial Commercial Commercial Commercial Construction Residential Real Estate Construction Business Construction Residential Real Estate Construction Business Other Other Consumer Consumer Total Total — (190) 485 (4,797) (2,478) 575 — 92 (142) 48 (154) 20 — (81) 334 — (2,054) 1,758 (6,700) (2,621) 2,737 Balance, Balance, December 31, 2021 December 31, 2021 $ $ 687 687 $ $ 5,703 5,703 $ 367 $ 367 $ $ 908 908 $ $ 1,582 1,582 $ $ 382 382 $ $ 9,629 9,629 Allowance for Unfunded Allowance for Unfunded Commitments Commitments Balance, December 31, 2020 $ Balance, December 31, 2020 $ CECL adoption CECL adoption Balance, January 1, 2021 Balance, January 1, 2021 Provision (credit) charged Provision (credit) charged $ $ — — 917 917 917 917 — — 5,227 5,227 5,227 5,227 $ $ to expense to expense (230) (230) 476 476 $ $ — — 354 354 354 354 13 13 $ $ — — 910 910 910 910 (2) (2) $ $ — — 935 935 935 935 647 647 $ $ — — 347 347 347 347 35 35 — — 8,690 8,690 8,690 8,690 939 939 (In Thousands) (In Thousands) The following table presents the activity in the allowance for credit losses by portfolio segment for the year ended The following table presents the activity in the allowance for credit losses by portfolio segment for the year ended December 31, 2020 prepared using the previous GAAP incurred loss method prior to the adoption of ASU 2016-13. December 31, 2020 prepared using the previous GAAP incurred loss method prior to the adoption of ASU 2016-13. Also presented are the balance in the allowance for credit losses and the recorded investment in loans based on Also presented are the balance in the allowance for credit losses and the recorded investment in loans based on portfolio segment and impairment method as of the year ended December 31, 2020 prepared using the previous portfolio segment and impairment method as of the year ended December 31, 2020 prepared using the previous GAAP incurred loss method prior to the adoption of ASU 2016-13. GAAP incurred loss method prior to the adoption of ASU 2016-13. 27 28 28 93 Other Other Consumer Consumer Total Total One- to Four- One- to Four- Family Family Residential Residential and and Commercial Commercial Commercial Commercial Commercial Commercial Construction Residential Real Estate Construction Business Construction Residential Real Estate Construction Business Great Southern Bancorp, Inc. Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 December 31, 2022, 2021 and 2020 December 31, 2020 December 31, 2020 Allowance for Loan Losses Allowance for Loan Losses Balance, January 1, 2020 Balance, January 1, 2020 Provision (benefit) Provision (benefit) charged to expense charged to expense Losses charged off Losses charged off Recoveries Recoveries Balance, Balance, December 31, 2020 December 31, 2020 Ending balance: Ending balance: Individually evaluated Individually evaluated for impairment for impairment Collectively evaluated Collectively evaluated for impairment for impairment Loans acquired and Loans acquired and accounted for under accounted for under ASC 310-30 ASC 310-30 Loans Loans Individually evaluated Individually evaluated for impairment for impairment Collectively evaluated Collectively evaluated for impairment for impairment Loans acquired and Loans acquired and accounted for under accounted for under ASC 310-30 ASC 310-30 (In Thousands) (In Thousands) $ $ 4,339 4,339 $ $ 5,153 5,153 $ $ 24,334 24,334 $ $ 3,076 3,076 $ $ 1,355 1,355 $ $ 2,037 2,037 $ $ 40,294 40,294 84 84 (70) (70) 183 183 4,042 4,042 — — 180 180 9,343 9,343 (43) (43) 73 73 242 242 (1) (1) 204 204 914 914 (28) (28) 149 149 1,246 1,246 (3,152) (3,152) 2,083 2,083 15,871 15,871 (3,294) (3,294) 2,872 2,872 $ $ 4,536 4,536 $ $ 9,375 9,375 $ 33,707 $ 33,707 $ $ 3,521 3,521 $ $ 2,390 2,390 $ $ 2,214 2,214 $ $ 55,743 55,743 $ $ $ $ 90 90 4,382 4,382 $ $ $ $ — — $ $ 445 445 $ $ — — $ $ 14 14 $ $ 164 164 $ $ 713 713 9,282 9,282 $ $ 32,937 32,937 $ $ 3,378 3,378 $ $ 2,331 2,331 $ $ 2,040 2,040 $ $ 54,350 54,350 $ $ 64 64 $ $ 93 93 $ $ 325 325 $ $ 143 143 $ $ 45 45 $ $ 10 10 $ $ 680 680 $ $ 3,546 3,546 $ $ — — $ $ 3,438 3,438 $ $ — — $ $ 167 167 $ $ 1,897 1,897 $ $ 9,048 9,048 $ $ 655,146 655,146 $ 1,021,145 $ 1,021,145 $ 1,550,239 $ 1,550,239 $ 1,266,847 $ 1,266,847 $ $ 384,734 384,734 $ $ 239,727 239,727 $ 5,117,838 $ 5,117,838 $ $ 57,113 57,113 $ $ 6,150 6,150 $ $ 24,613 24,613 $ $ 2,551 2,551 $ $ 2,549 2,549 $ $ 5,667 5,667 $ $ 98,643 98,643 The portfolio segments used in the preceding three tables correspond to the loan classes used in all other tables in The portfolio segments used in the preceding three tables correspond to the loan classes used in all other tables in Note 3 as follows: Note 3 as follows:  The one- to four-family residential and construction segment includes the one- to four-family residential  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 construction, subdivision construction, owner occupied one- to four-family residential and non-owner occupied one- to four-family residential classes. occupied one- to four-family residential classes.  The other residential segment corresponds to the other residential (multi-family) class.  The other residential segment corresponds to the other residential (multi-family) class.  The commercial real estate segment includes the commercial real estate and industrial revenue bonds  The commercial real estate segment includes the commercial real estate and industrial revenue bonds classes. classes.  The commercial construction segment includes the land development and commercial construction classes.  The commercial construction segment includes the land development and commercial construction classes.  The commercial business segment corresponds to the commercial business class.  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 consumer segment includes the consumer auto, consumer other and home equity lines of credit classes. The weighted average interest rate on loans receivable at December 31, 2022 and 2021, was 5.54% and 4.26%, The weighted average interest rate on loans receivable at December 31, 2022 and 2021, was 5.54% and 4.26%, respectively. respectively. 94 29 29 30 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Loans serviced for others are not included in the accompanying consolidated statements of financial condition. The unpaid principal balance of loans serviced for others at December 31, 2022, was $540.2 million, consisting of $422.3 million of commercial loan participations sold to other financial institutions and $117.9 million of residential mortgage loans sold. The unpaid principal balance of loans serviced for others at December 31, 2021, was $385.8 million, consisting of $249.5 million of commercial loan participations sold to other financial institutions and $136.3 million of residential mortgage loans sold. In addition, available lines of credit on these loans were $104.1 million and $130.9 million at December 31, 2022 and 2021, respectively. The following tables presents the amortized cost basis of collateral-dependent loans by class of loans: December 31, 2022 Principal Balance Specific Allowance (In Thousands) One- to four-family residential construction $ $ Owner occupied one- to four-family residential Non-owner occupied one- to four-family residential Subdivision construction Land development Commercial construction Commercial real estate Other residential Commercial business Industrial revenue bonds Consumer auto Consumer other Home equity lines of credit Total $ 4,473 $ 245 December 31, 2021 Principal Balance Specific Allowance (In Thousands) One- to four-family residential construction $ $ Owner occupied one- to four-family residential Non-owner occupied one- to four-family residential Subdivision construction Land development Commercial construction Commercial real estate Other residential Commercial business Industrial revenue bonds Consumer auto Consumer other Home equity lines of credit Total $ 5,202 $ 495 — — 384 — 1,637 — 1,571 — 586 — — 160 135 — — 468 — 1,980 — 2,217 — — — — 160 377 — — — — 40 — — — — — 80 — 125 397 — — — — 18 — — — — — 80 — Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Loans serviced for others are not included in the accompanying consolidated statements of financial condition. The unpaid principal balance of loans serviced for others at December 31, 2022, was $540.2 million, consisting of $422.3 million of commercial loan participations sold to other financial institutions and $117.9 million of residential mortgage loans sold. The unpaid principal balance of loans serviced for others at December 31, 2021, was $385.8 million, consisting of $249.5 million of commercial loan participations sold to other financial institutions and $136.3 million of residential mortgage loans sold. In addition, available lines of credit on these loans were $104.1 million and $130.9 million at December 31, 2022 and 2021, respectively. The following tables presents the amortized cost basis of collateral-dependent loans by class of loans: December 31, 2022 Principal Balance Specific Allowance (In Thousands) $ $ One- to four-family residential construction Subdivision construction Land development Commercial construction Owner occupied one- to four-family residential Non-owner occupied one- to four-family residential Commercial real estate Other residential Commercial business Industrial revenue bonds Consumer auto Consumer other Home equity lines of credit — — 384 — 1,637 — 1,571 — 586 — — 160 135 Total $ 4,473 $ — — — — 40 — — — 125 — — 80 — 245 December 31, 2021 Principal Balance Specific Allowance (In Thousands) $ $ One- to four-family residential construction Subdivision construction Land development Commercial construction Owner occupied one- to four-family residential Non-owner occupied one- to four-family residential Commercial real estate Other residential Commercial business Industrial revenue bonds Consumer auto Consumer other Home equity lines of credit — — 468 — 1,980 — 2,217 — — — — 160 377 Total $ 5,202 $ — — — — 18 — 397 — — — — 80 — 495 95 30 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Prior to adoption of ASU 2016-13, a loan was considered impaired, in accordance with the impairment accounting guidance (FASB ASC 310 10 35 16) when, based on then-current information and events, it was probable the Company would be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans included not only nonperforming loans but also loans modified in troubled debt restructurings where concessions had been granted to borrowers experiencing financial difficulties. The following table presents information pertaining to impaired loans as of December 31, 2020 and 2019, respectively, in accordance with previous GAAP prior to the adoption of ASU 2016 13. December 31, 2020 Year Ended December 31, 2020 Average Recorded Balance Unpaid Principal Balance Specific Allowance (In Thousands) Investment in Impaired Loans Interest Income Recognized One- to four-family residential construction Subdivision construction Land development Commercial construction Owner occupied one- to four-family $ residential Non-owner occupied one- to four-family residential Commercial real estate Other residential Commercial business Industrial revenue bonds Consumer auto Consumer other Home equity lines of credit $ $ — 20 — — $ — 20 — — 3,457 69 3,438 — 166 — 865 403 630 3,776 106 3,472 — 551 — 964 552 668 — — — — 90 — 445 — 14 — 140 19 5 $ — 115 — — 2,999 309 3,736 — 800 — 932 298 550 Total $ 9,048 $ 10,109 $ 713 $ 9,739 $ At December 31, 2020, $4.8 million of impaired loans had specific valuation allowances totaling $713,000. For loans that were non-accruing, interest of approximately $292,000, $432,000 and $579,000 would have been recognized on an accrual basis during the years ended December 31, 2022, 2021 and 2020, respectively. TDRs are loans that are modified by granting concessions to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. The types of concessions made are factored into the estimation of the allowance for credit losses for TDRs primarily using a discounted cash flows or collateral adequacy approach — 3 — — 169 18 135 — 34 — 91 47 36 533 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 TDRs by class are presented below as of December 31, 2022 and 2021. Construction and land development $ $ $ Accruing TDR Loans Non-accruing TDR Loans Total TDR Loans Number Balance Number Balance Number Balance December 31, 2022 (In Thousands) $ 10 $ 1,711 $ 2,949 Accruing TDR Loans Non-accruing TDR Loans Total TDR Loans Number Balance Number Balance Number Balance December 31, 2021 (In Thousands) — 13 — — — 13 26 1 10 — 1 — 26 38 — 1,028 — — — 210 1,238 15 579 — 85 — 323 1,002 — 3 — 2 — 5 — 12 — 1 — 13 26 — 98 — — 42 1,571 — 1,059 — 1,726 — 64 — 16 — 2 — 18 36 1 22 — 2 — 39 64 — 1,126 — 1,571 — 252 15 1,638 — 1,811 — 387 $ $ 2,849 $ 3,851 One- to four-family residential Other residential Commercial real estate Commercial business Consumer One- to four-family residential Other residential Commercial real estate Commercial business Consumer Construction and land development $ $ $ 96 31 32 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Prior to adoption of ASU 2016-13, a loan was considered impaired, in accordance with the impairment accounting guidance (FASB ASC 310 10 35 16) when, based on then-current information and events, it was probable the Company would be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans included not only nonperforming loans but also loans modified in troubled debt restructurings where concessions had been granted to borrowers experiencing financial difficulties. The following table presents information pertaining to impaired loans as of December 31, 2020 and 2019, respectively, in accordance with previous GAAP prior to the adoption of ASU 2016 13. December 31, 2020 Recorded Balance Unpaid Principal Balance Specific Allowance (In Thousands) Year Ended December 31, 2020 Average Investment in Impaired Interest Income Loans Recognized — 20 — — 3,457 69 3,438 — 166 — 865 403 630 — 20 — — 3,776 106 3,472 — 551 — 964 552 668 — — — — 90 — 445 — 14 — 140 19 5 — 115 — — 2,999 309 3,736 — 800 — 932 298 550 — 3 — — 169 18 135 — 34 — 91 47 36 Subdivision construction Land development Commercial construction Owner occupied one- to four-family Non-owner occupied one- to four-family residential residential Commercial real estate Other residential Commercial business Industrial revenue bonds Consumer auto Consumer other Home equity lines of credit Total $ 9,048 $ 10,109 $ 713 $ 9,739 $ 533 At December 31, 2020, $4.8 million of impaired loans had specific valuation allowances totaling $713,000. For loans that were non-accruing, interest of approximately $292,000, $432,000 and $579,000 would have been recognized on an accrual basis during the years ended December 31, 2022, 2021 and 2020, respectively. TDRs are loans that are modified by granting concessions to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. The types of concessions made are factored into the estimation of the allowance for credit losses for TDRs primarily using a discounted cash flows or collateral adequacy approach Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 TDRs by class are presented below as of December 31, 2022 and 2021. Accruing TDR Loans Balance Number December 31, 2022 Non-accruing TDR Loans Number Balance Total TDR Loans Balance Number Construction and land development One- to four-family residential Other residential Commercial real estate Commercial business Consumer — 13 — — — 13 26 $ $ — 1,028 — — — 210 1,238 (In Thousands) — 3 — 2 — 5 10 $ $ — 98 — 1,571 — 42 1,711 — 16 — 2 — 18 36 $ $ — 1,126 — 1,571 — 252 2,949 One- to four-family residential construction $ $ $ $ $ Accruing TDR Loans Balance Number December 31, 2021 Non-accruing TDR Loans Number Balance Total TDR Loans Balance Number Construction and land development One- to four-family residential Other residential Commercial real estate Commercial business Consumer 1 10 — 1 — 26 38 $ $ 15 579 — 85 — 323 1,002 (In Thousands) — 12 — 1 — 13 26 $ $ — 1,059 — 1,726 — 64 2,849 1 22 — 2 — 39 64 $ $ 15 1,638 — 1,811 — 387 3,851 31 32 97 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 The following table presents newly restructured loans during the years ended December 31, 2022, 2021, and 2020 by type of modification: $ $ $ $ Interest Only Term Combination Modification (In Thousands) Residential one-to-four family Commercial real estate Commercial business Consumer — — — — — $ $ 2022 — — — 4 4 $ $ 2021 $ 2020 — — 259 461 — — — 16 16 32 247 — 3 282 $ $ — — 11 145 $ Total 32 247 — 7 286 Total 367 1,768 — 270 2,405 Total 1,030 559 22 1,967 3,578 Interest Only Term Combination Modification (In Thousands) Residential one-to-four family $ 31 $ 202 $ 134 $ Commercial real estate Commercial business Consumer 1,768 — — $ 1,799 $ Interest Only Term Combination Modification (In Thousands) Residential one-to-four family Commercial real estate Commercial business Consumer — — — — — $ $ $ 1,030 $ 559 22 1,951 3,562 $ $ At December 31, 2022, of the $2.9 million in TDRs, $1.7 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, 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. The Company utilizes an internal risk rating system comprised of a series of grades to categorize loans according Great Southern Bancorp, Inc. 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 Notes to Consolidated Financial Statements Great Southern Bancorp, Inc. experience, industry information, collateral levels and collateral types. A risk rating is assigned at loan origination December 31, 2022, 2021 and 2020 and then monitored throughout the contractual term for possible risk rating changes. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Satisfactory loans range from Excellent to Moderate Risk, but generally are loans supported by strong recent good industry experience, liquidity and/or net worth. Probability of financial deterioration seems unlikely. financial statements. Character and capacity of borrower are strong, including reasonable project performance, Repayment is expected from approved sources over a reasonable period of time. good industry experience, liquidity and/or net worth. Probability of financial deterioration seems unlikely. Watch loans are identified when the borrower has capacity to perform according to terms; however, elements of Repayment is expected from approved sources over a reasonable period of time. uncertainty exist. Margins of debt service coverage may be narrow, historical patterns of financial performance 33 Watch loans are identified when the borrower has capacity to perform according to terms; however, elements of may be erratic, collateral margins may be diminished and the borrower may be a new and/or thinly capitalized uncertainty exist. Margins of debt service coverage may be narrow, historical patterns of financial performance company. Some management weakness may also exist, the borrower may have somewhat limited access to other may be erratic, collateral margins may be diminished and the borrower may be a new and/or thinly capitalized financial institutions, and that ability may diminish in difficult economic times. company. Some management weakness may also exist, the borrower may have somewhat limited access to other Special Mention loans have weaknesses that deserve management’s close attention. If left uncorrected, these financial institutions, and that ability may diminish in difficult economic times. potential weaknesses may result in deterioration of repayment prospects or the Bank’s credit position at some Special Mention loans have weaknesses that deserve management’s close attention. If left uncorrected, these future date. It is a transitional grade that is closely monitored for improvement or deterioration. potential weaknesses may result in deterioration of repayment prospects or the Bank’s credit position at some The Substandard rating is applied to loans where the borrower exhibits well-defined weaknesses that jeopardize future date. It is a transitional grade that is closely monitored for improvement or deterioration. its continued performance and are of a severity that the distinct possibility of default exists. Loans are placed on The Substandard rating is applied to loans where the borrower exhibits well-defined weaknesses that jeopardize “non-accrual” when management does not expect to collect payments consistent with acceptable and agreed upon its continued performance and are of a severity that the distinct possibility of default exists. Loans are placed on terms of repayment. “non-accrual” when management does not expect to collect payments consistent with acceptable and agreed upon Doubtful loans have all the weaknesses inherent to those classified Substandard with the added characteristic that terms of repayment. the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable Doubtful loans have all the weaknesses inherent to those classified Substandard with the added characteristic that and improbable. Loans considered loss are uncollectable and no longer included as an asset. the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable All loans are analyzed for risk rating updates regularly. For larger loans, rating assessments may be more frequent and improbable. Loans considered loss are uncollectable and no longer included as an asset. if relevant information is obtained earlier through debt covenant monitoring or overall relationship management. All loans are analyzed for risk rating updates regularly. For larger loans, rating assessments may be more frequent Smaller loans are monitored as identified by the loan officer based on the risk profile of the individual borrower or if relevant information is obtained earlier through debt covenant monitoring or overall relationship management. if the loan becomes past due related to credit issues. Loans rated Watch, Special Mention, Substandard or Smaller loans are monitored as identified by the loan officer based on the risk profile of the individual borrower or Doubtful are subject to quarterly review and monitoring processes. In addition to the regular monitoring if the loan becomes past due related to credit issues. Loans rated Watch, Special Mention, Substandard or performed by the lending personnel and credit committees, loans are subject to review by the credit review Doubtful are subject to quarterly review and monitoring processes. In addition to the regular monitoring department, which verifies the appropriateness of the risk ratings for the loans chosen as part of its risk-based performed by the lending personnel and credit committees, loans are subject to review by the credit review review plan. department, which verifies the appropriateness of the risk ratings for the loans chosen as part of its risk-based The following table presents a summary of loans by category and risk rating separated by origination and loan review plan. The following table presents a summary of loans by category and risk rating separated by origination and loan class as of December 31, 2022. class as of December 31, 2022. 34 34 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 The following table presents newly restructured loans during the years ended December 31, 2022, 2021, and 2020 by type of modification: 2022 Interest Only Term Combination (In Thousands) Total Modification Residential one-to-four family Commercial real estate Commercial business Consumer $ $ — — — — — $ $ — — — 4 4 $ $ 2021 32 247 — 3 282 $ $ 32 247 — 7 286 Interest Only Term Combination (In Thousands) Total Modification Residential one-to-four family Commercial real estate Commercial business Consumer $ $ 31 1,768 — — 1,799 $ $ 202 — — 259 461 $ $ 2020 134 — — 11 145 $ $ 367 1,768 — 270 2,405 Interest Only Term Combination (In Thousands) Total Modification Residential one-to-four family Commercial real estate Commercial business Consumer $ $ — — — — — $ $ — — — 16 16 $ $ 1,030 559 22 1,951 3,562 $ $ 1,030 559 22 1,967 3,578 At December 31, 2022, of the $2.9 million in TDRs, $1.7 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, 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. 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, 98 33 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 The following table presents newly restructured loans during the years ended December 31, 2022, 2021, and 2020 by type of modification: Interest Only Term Combination Modification (In Thousands) Residential one-to-four family Commercial real estate Commercial business Consumer — — — — — $ $ 2022 — — — 4 4 $ $ 2021 $ 2020 — — 259 461 — — — 16 16 32 247 — 3 282 $ $ — — 11 145 $ Total 32 247 — 7 286 Total 367 1,768 — 270 2,405 Total 1,030 559 22 1,967 3,578 Interest Only Term Combination Modification (In Thousands) Residential one-to-four family $ 31 $ 202 $ 134 $ Commercial real estate Commercial business Consumer 1,768 — — $ 1,799 $ Interest Only Term Combination Modification (In Thousands) Residential one-to-four family Commercial real estate Commercial business Consumer — — — — — $ $ $ 1,030 $ 559 22 1,951 3,562 $ $ At December 31, 2022, of the $2.9 million in TDRs, $1.7 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, 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. $ $ $ $ 33 Great Southern Bancorp, Inc. 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 Notes to Consolidated Financial Statements Great Southern Bancorp, Inc. 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 December 31, 2022, 2021 and 2020 Notes to Consolidated Financial Statements and then monitored throughout the contractual term for possible risk rating changes. December 31, 2022, 2021 and 2020 Satisfactory loans range from Excellent to Moderate Risk, but generally are loans supported by strong recent good industry experience, liquidity and/or net worth. Probability of financial deterioration seems unlikely. financial statements. Character and capacity of borrower are strong, including reasonable project performance, Repayment is expected from approved sources over a reasonable period of time. good industry experience, liquidity and/or net worth. Probability of financial deterioration seems unlikely. Watch loans are identified when the borrower has capacity to perform according to terms; however, elements of Repayment is expected from approved sources over a reasonable period of time. uncertainty exist. Margins of debt service coverage may be narrow, historical patterns of financial performance Watch loans are identified when the borrower has capacity to perform according to terms; however, elements of may be erratic, collateral margins may be diminished and the borrower may be a new and/or thinly capitalized uncertainty exist. Margins of debt service coverage may be narrow, historical patterns of financial performance company. Some management weakness may also exist, the borrower may have somewhat limited access to other may be erratic, collateral margins may be diminished and the borrower may be a new and/or thinly capitalized financial institutions, and that ability may diminish in difficult economic times. company. Some management weakness may also exist, the borrower may have somewhat limited access to other Special Mention loans have weaknesses that deserve management’s close attention. If left uncorrected, these financial institutions, and that ability may diminish in difficult economic times. potential weaknesses may result in deterioration of repayment prospects or the Bank’s credit position at some Special Mention loans have weaknesses that deserve management’s close attention. If left uncorrected, these future date. It is a transitional grade that is closely monitored for improvement or deterioration. potential weaknesses may result in deterioration of repayment prospects or the Bank’s credit position at some The Substandard rating is applied to loans where the borrower exhibits well-defined weaknesses that jeopardize future date. It is a transitional grade that is closely monitored for improvement or deterioration. its continued performance and are of a severity that the distinct possibility of default exists. Loans are placed on The Substandard rating is applied to loans where the borrower exhibits well-defined weaknesses that jeopardize “non-accrual” when management does not expect to collect payments consistent with acceptable and agreed upon its continued performance and are of a severity that the distinct possibility of default exists. Loans are placed on terms of repayment. “non-accrual” when management does not expect to collect payments consistent with acceptable and agreed upon Doubtful loans have all the weaknesses inherent to those classified Substandard with the added characteristic that terms of repayment. the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable Doubtful loans have all the weaknesses inherent to those classified Substandard with the added characteristic that and improbable. Loans considered loss are uncollectable and no longer included as an asset. the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable All loans are analyzed for risk rating updates regularly. For larger loans, rating assessments may be more frequent and improbable. Loans considered loss are uncollectable and no longer included as an asset. if relevant information is obtained earlier through debt covenant monitoring or overall relationship management. All loans are analyzed for risk rating updates regularly. For larger loans, rating assessments may be more frequent Smaller loans are monitored as identified by the loan officer based on the risk profile of the individual borrower or if relevant information is obtained earlier through debt covenant monitoring or overall relationship management. if the loan becomes past due related to credit issues. Loans rated Watch, Special Mention, Substandard or Smaller loans are monitored as identified by the loan officer based on the risk profile of the individual borrower or Doubtful are subject to quarterly review and monitoring processes. In addition to the regular monitoring if the loan becomes past due related to credit issues. Loans rated Watch, Special Mention, Substandard or performed by the lending personnel and credit committees, loans are subject to review by the credit review Doubtful are subject to quarterly review and monitoring processes. In addition to the regular monitoring department, which verifies the appropriateness of the risk ratings for the loans chosen as part of its risk-based performed by the lending personnel and credit committees, loans are subject to review by the credit review review plan. department, which verifies the appropriateness of the risk ratings for the loans chosen as part of its risk-based The following table presents a summary of loans by category and risk rating separated by origination and loan review plan. class as of December 31, 2022. The following table presents a summary of loans by category and risk rating separated by origination and loan class as of December 31, 2022. 99 34 34 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 The following table presents newly restructured loans during the years ended December 31, 2022, 2021, and 2020 by type of modification: Interest Only Term Combination Modification (In Thousands) Residential one-to-four family Commercial real estate Commercial business Consumer — — — — — $ $ Interest Only Term Combination Modification (In Thousands) Residential one-to-four family $ 31 $ 202 $ 134 $ Commercial real estate Commercial business Consumer 1,768 — — $ 1,799 $ Interest Only Term Combination Modification (In Thousands) Residential one-to-four family Commercial real estate Commercial business Consumer — — — — — $ $ $ 1,030 $ 559 22 1,951 3,562 $ $ At December 31, 2022, of the $2.9 million in TDRs, $1.7 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, 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. 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, 32 247 — 3 282 $ $ — — 11 145 $ 2022 — — — 4 4 $ $ 2021 $ 2020 — — 259 461 — — — 16 16 Total 32 247 — 7 286 Total 367 1,768 — 270 2,405 Total 1,030 559 22 1,967 3,578 33 $ $ $ $ Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 2022 2021 2020 2019 2018 Prior Revolving Loans Total Term Loans by Origination Year The following table presents a summary of loans by category and risk rating 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. One- to four-family residential construction Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Subdivision construction Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Land development construction Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Other Construction Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total One- to four-family residential Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Other residential Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Commercial real estate Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Commercial business Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Consumer Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Combined Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total (In Thousands) $ — $ — $ 21,885 — — — 21,885 $ 7,265 — — — 7,265 $ 1,391 — — — 1,391 — — — — 4,478 — — — 4,478 25,864 — — — 25,864 800 — — — 800 203 — — — 203 — — — — 134 — — — 134 $ — — — — — $ 3,308 $ 33,849 — — — 3,308 — — — 33,849 588 — — — 588 — — — — — 32,067 — — — 32,067 16,749 — — — 16,749 6,914 — — — 6,914 4,866 — — — 4,866 7,338 — — — 7,338 762 — — — 762 3,990 — — 613 — — 41,229 — — — 3,990 384 997 384 41,613 113,512 — — — 113,512 446,125 — — — 446,125 176,340 — — — 176,340 21,713 — — — 21,713 — — — — — — — — — — — — — — — 757,690 — — — 757,690 340,886 219,504 128,509 — — — — — — 73,162 179 — — 340,886 — 219,504 158 128,667 — 73,341 39,685 888 — — 39,773 97,236 1,341 — 1,832 100,409 687 57 — 79 823 899,669 1,665 — 2,069 903,403 83,822 — — — 83,822 133,648 — — — 133,648 168,232 — — — 168,232 142,630 — — — 142,630 122,614 — — — 122,614 123,538 3,338 — — 126,876 3,939 — — — 3,939 778,423 3,338 — — 781,761 221,341 — — — 221,341 171,484 — — — 171,484 109,939 — — — 109,939 203,426 — — — 203,426 185,682 — — — 185,682 577,216 23,338 — 1,579 602,133 36,658 — — — 36,658 1,505,746 23,338 — 1,579 1,530,663 45,349 — — — 45,349 66,258 — — — 66,258 39,645 — — — 39,645 15,505 — — — 15,505 9,309 — — — 9,309 65,307 34 — 394 65,735 64,088 — — 191 64,279 305,461 34 — 585 306,080 21,309 — — — 21,309 11,168 28 — 11 11,207 5,711 — — 9 5,720 2,708 7 — — 2,715 3,263 — — 2 3,265 16,380 160 — 248 16,788 132,792 100 — 359 133,251 193,331 295 — 629 194,255 869,328 — — — $ 869,328 1,088,230 28 — 11 $ 1,088,269 635,433 — — 168 $ 635,600 466,685 186 — — $ 466,871 361,449 88 — 2 $ 361,539 884,255 28,211 — 4,053 $ 916,519 242,085 157 — 1,013 $ 243,255 4,547,465 28,670 — 5,246 $ 4,581,381 100 35 2021 2020 2019 2018 2017 Prior Revolving Loans Total Term Loans by Origination Year One- to four-family residential construction $ 23,081 $ 4,453 $ 763 $ — $ — $ 5 $ — $ 28,302 — — — — — — — — — — — — 23,081 4,453 — — 763 224 (In Thousands) — — — — — — — — 5 965 — — — — — — — — — — Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Subdivision construction Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Land development construction One- to four-family residential Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Other Construction Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Other residential Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Commercial real estate Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Commercial business Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Consumer Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Combined Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total — — 28,302 26,679 — — 47,363 — — 47,831 617,505 — — 617,505 679,957 468 — 24,129 — — — 24,129 949 — — — 949 — — — 224 160 — — — 160 252 — — — 252 15 980 15 26,694 527 — — 995 — — — — 1,662 69 — 9,968 — — 15,965 — — 11,115 — — 2,591 — — 3,013 — — 4,184 — — — — — — — — 468 468 9,968 15,965 11,115 2,591 3,013 4,184 145,991 298,710 130,502 42,302 — — — — — — — — 145,991 298,710 130,502 42,302 — — — — — — — — 237,498 169,765 — — — — 93,648 — — 49,618 132 — 14,707 113,059 — 237,498 — 169,765 144 93,792 — 49,750 50 14,757 1,223 114,549 83 1,814 1,500 681,925 — — — — — — — — — — 267 — 117,029 96,551 115,418 179,441 104,053 — — — — — — — — — — 70,438 3,417 — 11,605 — — 694,535 3,417 — — — — — — — — — 117,029 96,551 115,418 179,441 104,053 73,855 11,605 697,952 141,868 113,226 220,580 231,321 196,166 — — 410 — 582 — — — — — 521,545 25,742 — 22,785 — — 1,447,491 26,734 — — — — — — 141,868 113,636 221,162 231,321 196,166 2,006 549,293 — 2,006 22,785 1,476,231 67,049 — — 28,743 — — 23,947 16,513 24,126 58,116 76,187 294,681 — — — — — — 58 — — — 58 — — — — — — — — — 67,049 28,743 23,947 16,513 24,126 58,174 76,187 294,739 20,140 11,138 — — 12 — 7,154 — — 9,065 20 — 4,175 4 — 24,280 130,111 206,063 10 — 29 — — 2 — 16 32 280 347 20,140 11,140 7,154 9,101 4,211 24,570 130,487 63 — 677 206,803 786,753 739,500 603,351 531,011 346,492 — — 410 — 582 — 152 — 4 — 792,592 29,494 — 242,877 98 — 4,042,576 30,740 — — $ 786,753 2 $ 739,912 144 $ 604,077 16 $ 531,179 82 $ 346,578 3,524 $ 825,610 898 $ 243,873 4,666 $ 4,077,982 36 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 — — — 588 — — 588 3,990 — — 3,990 — — — — Term Loans by Origination Year 2022 2021 2020 2019 2018 Prior (In Thousands) Revolving Loans Total One- to four-family residential construction Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Subdivision construction Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Land development construction $ 21,885 $ 7,265 $ 1,391 $ — $ — $ — $ 3,308 $ 33,849 — — — — — — 21,885 7,265 1,391 — — — — — — — — — — 3,308 33,849 — — — — — — — — 4,478 — — — 4,478 25,864 — — — 25,864 800 — — — 800 203 — — — 203 134 — — — 134 — — — — — — 32,067 — — — 32,067 One- to four-family residential Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Other Construction Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Other residential Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Commercial real estate Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Commercial business Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Consumer Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Combined Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total 762 — — 762 — — — — 16,749 — — 16,749 6,914 — — 6,914 4,866 — — 7,338 — — 4,866 7,338 — — — — — — 384 384 113,512 446,125 176,340 21,713 — — — — — — — — — 113,512 — — — — — — — 446,125 176,340 21,713 340,886 219,504 128,509 — — — — — — 73,162 179 — 39,685 888 — 97,236 1,341 — — 340,886 — 219,504 158 128,667 — 73,341 — 39,773 1,832 100,409 79 2,069 83,822 133,648 168,232 142,630 122,614 — — — — — — — — — — 123,538 3,338 — 3,939 — — — — — — — — — — 83,822 133,648 168,232 142,630 122,614 126,876 3,939 781,761 221,341 171,484 109,939 203,426 185,682 — — — — — — — — — — 577,216 23,338 — 36,658 — — 1,505,746 23,338 — — — — — — 221,341 171,484 109,939 203,426 185,682 1,579 602,133 — 1,579 36,658 1,530,663 613 — — 997 — — — — 687 57 — 823 41,229 — — 41,613 757,690 — — 757,690 899,669 1,665 — 903,403 778,423 3,338 — 45,349 — — 66,258 — — 39,645 15,505 — — — — 9,309 — — 65,307 64,088 305,461 34 — — — 34 — — — — — — 394 191 585 45,349 66,258 39,645 15,505 9,309 65,735 64,279 306,080 21,309 11,168 — — 28 — 5,711 — — 2,708 7 — 3,263 — — 16,380 132,792 193,331 160 — 100 — 295 — — 11 9 — 2 21,309 11,207 5,720 2,715 3,265 248 16,788 359 133,251 629 194,255 869,328 1,088,230 635,433 466,685 361,449 — — 28 — — — 186 — 88 — 884,255 28,211 — 242,085 157 — 4,547,465 28,670 — — $ 869,328 11 $ 1,088,269 168 $ 635,600 — $ 466,871 2 $ 361,539 4,053 $ 916,519 1,013 $ 243,255 5,246 $ 4,581,381 35 The following table presents a summary of loans by category and risk rating 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 2021 2020 2019 2018 2017 Prior (In Thousands) Revolving Loans Total One- to four-family residential construction Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Subdivision construction Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Land development construction Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Other Construction Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total One- to four-family residential Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Other residential Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Commercial real estate Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Commercial business Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Consumer Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total Combined Satisfactory (1-4) Watch (5) Special Mention (6) Classified (7-9) Total $ 23,081 — — — 23,081 $ 4,453 — — — 4,453 24,129 — — — 24,129 949 — — — 949 $ 763 — — — 763 224 — — — 224 $ — $ — $ 5 — — — — — — — — — — — 5 $ — — — — — $ 28,302 — — — 28,302 160 — — — 160 252 — — — 252 965 — — 15 980 — — — — — 26,679 — — 15 26,694 9,968 — — — 9,968 15,965 — — — 15,965 11,115 — — — 11,115 2,591 — — — 2,591 3,013 — — — 3,013 4,184 — — 527 — — 47,363 — — — 4,184 468 995 468 47,831 145,991 — — — 145,991 298,710 — — — 298,710 130,502 — — — 130,502 42,302 — — — 42,302 — — — — — — — — — — — — — — — 617,505 — — — 617,505 237,498 169,765 — — — — 93,648 — — 49,618 132 — — 237,498 — 169,765 144 93,792 — 49,750 14,707 — — 50 14,757 113,059 267 — 1,223 114,549 1,662 69 — 83 1,814 679,957 468 — 1,500 681,925 117,029 — — — 117,029 96,551 — — — 96,551 115,418 — — — 115,418 179,441 — — — 179,441 104,053 — — — 104,053 70,438 3,417 — — 73,855 11,605 — — — 11,605 694,535 3,417 — — 697,952 141,868 — — — 141,868 113,226 410 — — 113,636 220,580 582 — — 221,162 231,321 — — — 231,321 196,166 — — — 196,166 521,545 25,742 — 2,006 549,293 22,785 — — — 22,785 1,447,491 26,734 — 2,006 1,476,231 67,049 — — — 67,049 28,743 — — — 28,743 23,947 — — — 23,947 16,513 — — — 16,513 24,126 — — — 24,126 58,116 58 — — 58,174 76,187 — — — 76,187 294,681 58 — — 294,739 20,140 — — — 20,140 11,138 12 — 2 11,140 7,154 — — — 7,154 9,065 20 — 16 9,101 4,175 4 — 32 4,211 24,280 10 — 280 24,570 130,111 29 — 347 130,487 206,063 63 — 677 206,803 786,753 — — — $ 786,753 739,500 410 — 2 $ 739,912 603,351 582 — 144 $ 604,077 531,011 152 — 16 $ 531,179 346,492 4 — 82 $ 346,578 792,592 29,494 — 3,524 $ 825,610 242,877 98 — 898 $ 243,873 4,042,576 30,740 — 4,666 $ 4,077,982 36 101 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Certain of the Bank’s real estate loans are pledged as collateral for borrowings as set forth in Notes 9 and 11. Illinois, with significant operations in Iowa. This transaction did not include a loss sharing agreement. Based upon Certain directors and executive officers of the Company and the Bank, and their affiliates, are customers of and had transactions with the Bank in the ordinary course of business. Except for the interest rates on loans secured by personal residences, in the opinion of management, all loans included in such transactions were made on substantially the same terms as those prevailing at the time for comparable transactions with unrelated parties. Generally, residential first mortgage loans and home equity lines of credit to all employees and directors have been granted at interest rates equal to the Bank’s cost of funds, subject to annual adjustments in the case of residential first mortgage loans and monthly adjustments in the case of home equity lines of credit. At December 31, 2022 and 2021, loans outstanding to these directors and executive officers, and their related interests, are summarized as follows: 2022 2021 (In Thousands) Balance, beginning of year New loans Payments Balance, end of year $ $ 10,097 3,079 (5,226) 7,950 $ $ 13,468 629 (4,000) 10,097 Note 4: 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, 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 December 31, 2022 and 2021. TeamBank Vantus Bank Sun Security Bank (In Thousands) InterBank Valley Bank $ 2,703 $ 3,983 $ 7,221 $ 24,402 $ 12,750 $ $ — 2,703 3,613 (65) $ $ — — — — 3,983 $ 7,221 $ 24,402 $ 12,750 5,304 $ 9,405 $ 32,645 $ 23,632 (19) (63) (58) (224) December 31, 2022 Gross loans receivable Balance of accretable discount due to change in expected losses Net carrying value of loans receivable December 31, 2021 Gross loans receivable Balance of accretable discount due to change in expected losses Net carrying value of loans receivable $ 3,548 $ 5,285 $ 9,342 $ 32,587 $ 23,408 Fair Value and Expected Cash Flows At the time of these acquisitions, the Company determined the fair value of the loan portfolios based on several assumptions. Factors considered in the valuations were projected cash flows for the loans, type of loan and related collateral, classification status, fixed or variable interest rate, term of loan, current discount rates and whether or not the loan was amortizing. Loans were grouped together according to similar characteristics and were treated in the aggregate when applying various valuation techniques. Management also estimated the amount of credit losses that were expected to be realized for the loan portfolios. The discounted cash flow approach was used to value each pool of loans. For non-performing loans, fair value was estimated by calculating the present value of the recoverable cash flows using a discount rate based on comparable corporate bond rates. The amount of the estimated cash flows expected to be received from the acquired loan pools in excess of the fair values recorded for the loan pools is referred to as the accretable yield. The accretable yield is recognized as interest income over the estimated lives of the loans. As of January 1, 2021, we adopted the new accounting standard related to accounting for credit losses. With the adoption of this standard, discounts are no longer reclassified from non-accretable to accretable. All adjustments made prior to January 1, 2021 continue to be accreted to interest income. The adjustments to accretable yield made prior to 2021, impacted the Company’s Consolidated Statements of Income by $429,000, $1.6 million and $5.6 million for the years ended December 31, 2022, 2021 and 2020, respectively. As of December 31, 2022, there was no remaining accretable yield adjustment that will affect interest income. 102 37 38 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Certain of the Bank’s real estate loans are pledged as collateral for borrowings as set forth in Notes 9 and 11. Certain directors and executive officers of the Company and the Bank, and their affiliates, are customers of and had transactions with the Bank in the ordinary course of business. Except for the interest rates on loans secured by personal residences, in the opinion of management, all loans included in such transactions were made on substantially the same terms as those prevailing at the time for comparable transactions with unrelated parties. Generally, residential first mortgage loans and home equity lines of credit to all employees and directors have been granted at interest rates equal to the Bank’s cost of funds, subject to annual adjustments in the case of residential first mortgage loans and monthly adjustments in the case of home equity lines of credit. At December 31, 2022 and 2021, loans outstanding to these directors and executive officers, and their related interests, are summarized as follows: 2022 2021 (In Thousands) Balance, beginning of year New loans Payments Balance, end of year $ $ 10,097 3,079 (5,226) 7,950 $ $ 13,468 629 (4,000) 10,097 Note 4: 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 December 31, 2022 and 2021. TeamBank Vantus Bank Sun Security Bank (In Thousands) InterBank Valley Bank $ 2,703 $ 3,983 $ 7,221 $ 24,402 $ 12,750 $ $ — 2,703 3,613 (65) $ $ — — — — 3,983 $ 7,221 $ 24,402 $ 12,750 5,304 $ 9,405 $ 32,645 $ 23,632 (19) (63) (58) (224) December 31, 2022 Gross loans receivable Balance of accretable discount due to change in expected losses Net carrying value of loans receivable December 31, 2021 Gross loans receivable Balance of accretable discount due to change in expected losses Net carrying value of loans receivable $ 3,548 $ 5,285 $ 9,342 $ 32,587 $ 23,408 Fair Value and Expected Cash Flows At the time of these acquisitions, the Company determined the fair value of the loan portfolios based on several assumptions. Factors considered in the valuations were projected cash flows for the loans, type of loan and related collateral, classification status, fixed or variable interest rate, term of loan, current discount rates and whether or not the loan was amortizing. Loans were grouped together according to similar characteristics and were treated in the aggregate when applying various valuation techniques. Management also estimated the amount of credit losses that were expected to be realized for the loan portfolios. The discounted cash flow approach was used to value each pool of loans. For non-performing loans, fair value was estimated by calculating the present value of the recoverable cash flows using a discount rate based on comparable corporate bond rates. The amount of the estimated cash flows expected to be received from the acquired loan pools in excess of the fair values recorded for the loan pools is referred to as the accretable yield. The accretable yield is recognized as interest income over the estimated lives of the loans. As of January 1, 2021, we adopted the new accounting standard related to accounting for credit losses. With the adoption of this standard, discounts are no longer reclassified from non-accretable to accretable. All adjustments made prior to January 1, 2021 continue to be accreted to interest income. The adjustments to accretable yield made prior to 2021, impacted the Company’s Consolidated Statements of Income by $429,000, $1.6 million and $5.6 million for the years ended December 31, 2022, 2021 and 2020, respectively. As of December 31, 2022, there was no remaining accretable yield adjustment that will affect interest income. 37 38 103 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Note 5: Other Real Estate Owned and Repossessions Note 6: Premises and Equipment Major classifications of other real estate owned at December 31, 2022 and 2021, were as follows: Major classifications of premises and equipment at December 31, 2022 and 2021, stated at cost, were as follows: Foreclosed assets held for sale and repossessions One- to four-family construction Subdivision construction Land development Commercial construction One- to four-family residential Other residential Commercial real estate Commercial business Consumer Foreclosed assets held for sale and repossessions Other real estate owned not acquired through foreclosure Other real estate owned and repossessions 2022 2021 (In Thousands) — — — — — — — — 50 50 183 233 $ — — 315 — 183 — — — 90 588 1,499 $ 2,087 $ $ At December 31, 2022, other real estate owned not acquired through foreclosure included two properties, both of which were branch locations that were closed and held for sale. During the year ended December 31, 2022, two former branch location were sold. During the year ended December 31, 2022, no additional valuation write-downs were recorded on branch locations that were closed and held for sale. At 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. During the year ended December 31, 2021, one former branch location was added to this category for $1.2 million. During the year ended December 31, 2021, no additional valuation write-downs were recorded on branch locations that were closed and held for sale. At December 31, 2022 and 2021, residential mortgage loans totaling $173,000 and $125,000, respectively, were in the process of foreclosure. Expenses applicable to other real estate owned and repossessions for the years ended December 31, 2022, 2021 and 2020, included the following: 2022 2021 (In Thousands) 2020 Net gains on sales of other real estate owned and repossessions Valuation write-downs Operating expenses, net of rental income $ (149) $ 23 485 (282) $ 211 698 (480) 1,320 1,183 $ 359 $ 627 $ 2,023 Land Buildings and improvements Furniture, fixtures and equipment Operating leases right of use asset Less accumulated depreciation 2022 2021 (In Thousands) $ $ 39,622 105,096 67,505 7,397 219,620 78,550 39,440 101,207 57,982 7,715 206,344 73,611 $ 141,070 $ 132,733 Leases. In 2019, the Company adopted ASU 2016-02, Leases (Topic 842). Adoption of this ASU resulted in the Company initially recognizing a right of use asset and corresponding lease liability of $9.5 million. 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 December 31, 2022, the lease right of use asset value was $7.4 million and the corresponding lease liability was $7.6 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 December 31, 2022, expected lease terms ranged from 0.3 years to 15.9 years with a weighted-average lease term of 8.2 years. The weighted-average discount rate was 3.42%. For the years ended December 31, 2022, 2021 and 2020, lease expense was $1.6 million, $1.5 million and $1.6 million, 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 was $ 307,000, $307,000 and $275,000 for the years ended December 31, 2022, 2021 and 2020, respectively. The Company does not sublease any of its leased facilities; however, it does lease to other third 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 years ended December 31, 2022, 2021, and 2020, income recognized from these lease agreements was $1.2 million, $1.2 million, and $1.2 million respectively, and was included in occupancy and equipment expense. 104 39 40 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Note 5: Other Real Estate Owned and Repossessions Note 6: Premises and Equipment Major classifications of other real estate owned at December 31, 2022 and 2021, were as follows: Major classifications of premises and equipment at December 31, 2022 and 2021, stated at cost, were as follows: Foreclosed assets held for sale and repossessions One- to four-family construction Subdivision construction Land development Commercial construction One- to four-family residential Other residential Commercial real estate Commercial business Consumer Foreclosed assets held for sale and repossessions Other real estate owned not acquired through foreclosure 2022 2021 (In Thousands) $ $ — — — — — — — — 50 50 183 233 — — 315 — 183 — — — 90 588 1,499 Other real estate owned and repossessions $ $ 2,087 At December 31, 2022, other real estate owned not acquired through foreclosure included two properties, both of which were branch locations that were closed and held for sale. During the year ended December 31, 2022, two former branch location were sold. During the year ended December 31, 2022, no additional valuation write-downs were recorded on branch locations that were closed and held for sale. At 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. During the year ended December 31, 2021, one former branch location was added to this category for $1.2 million. During the year ended December 31, 2021, no additional valuation write-downs were recorded on branch locations that were closed and held for sale. At December 31, 2022 and 2021, residential mortgage loans totaling $173,000 and $125,000, respectively, were in the process of foreclosure. and 2020, included the following: Expenses applicable to other real estate owned and repossessions for the years ended December 31, 2022, 2021 Net gains on sales of other real estate owned and repossessions $ (149) $ (282) $ Valuation write-downs Operating expenses, net of rental income 2022 2021 2020 (In Thousands) 23 485 211 698 (480) 1,320 1,183 $ 359 $ 627 $ 2,023 Land Buildings and improvements Furniture, fixtures and equipment Operating leases right of use asset Less accumulated depreciation 2022 2021 (In Thousands) $ $ 39,622 105,096 67,505 7,397 219,620 78,550 39,440 101,207 57,982 7,715 206,344 73,611 $ 141,070 $ 132,733 Leases. In 2019, the Company adopted ASU 2016-02, Leases (Topic 842). Adoption of this ASU resulted in the Company initially recognizing a right of use asset and corresponding lease liability of $9.5 million. 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 December 31, 2022, the lease right of use asset value was $7.4 million and the corresponding lease liability was $7.6 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 December 31, 2022, expected lease terms ranged from 0.3 years to 15.9 years with a weighted-average lease term of 8.2 years. The weighted-average discount rate was 3.42%. For the years ended December 31, 2022, 2021 and 2020, lease expense was $1.6 million, $1.5 million and $1.6 million, 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 was $ 307,000, $307,000 and $275,000 for the years ended December 31, 2022, 2021 and 2020, respectively. The Company does not sublease any of its leased facilities; however, it does lease to other third 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 years ended December 31, 2022, 2021, and 2020, income recognized from these lease agreements was $1.2 million, $1.2 million, and $1.2 million respectively, and was included in occupancy and equipment expense. 39 40 105 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Statement of Financial Condition Operating leases right of use asset Operating leases liability Statement of Income Operating lease costs classified as occupancy and equipment expense (includes short-term lease costs and amortization of right of use asset) Supplemental Cash Flow Information Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases Right of use assets obtained in exchange for lease obligations: Operating leases thousands): At or For the Year Ended December 31, 2022 December 31, 2021 (In Thousands) $ $ $ $ $ 7,397 7,599 1,579 1,547 618 $ $ $ $ $ 7,715 7,886 1,529 1,483 74 At December 31, 2022, future expected lease payments for leases with terms exceeding one year were as follows (in 2022 2024 2025 2026 2027 Thereafter $ 1,199 1,146 1,126 1,064 987 3,206 8,728 Future lease payments expected Less interest portion of lease payments (1,129) Lease liability $ 7,599 Note 7: Investments in Limited Partnerships Investments in Affordable Housing Partnerships The Company has invested in certain limited partnerships that were formed to develop and operate apartments and single-family houses designed as high-quality affordable housing for lower income tenants throughout Missouri and contiguous states. At December 31, 2022 the Company had 19 such investments, with a net carrying value of $38.4 million. At December 31, 2021 the Company had 16 such investments, with a net carrying value of $25.1 million. Due to the Company’s inability to exercise any significant influence over any of the investments in Affordable Housing Partnerships, they all are accounted for using the proportional amortization method. Each of Great Southern Bancorp, Inc. the partnerships must meet the regulatory requirements for affordable housing for a minimum 15-year compliance period to fully utilize the tax credits. If the partnerships cease to qualify during the compliance period, the credits Notes to Consolidated Financial Statements Great Southern Bancorp, Inc. may be denied for any period in which the projects are not in compliance and a portion of the credits previously taken may be subject to recapture with interest. December 31, 2022, 2021 and 2020 Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 The remaining federal affordable housing tax credits to be utilized through 2034 were $83.2 million as of are completed as planned. Amortization of the investments in partnerships is expected to be approximately $75.0 December 31, 2022, assuming no tax credit recapture events occur and all projects currently under construction million, assuming all projects currently under construction are completed and funded as planned. The Company’s are completed as planned. Amortization of the investments in partnerships is expected to be approximately $75.0 usage of federal affordable housing tax credits approximated $4.9 million, $4.9 million and $6.6 million during million, assuming all projects currently under construction are completed and funded as planned. The Company’s 2022, 2021 and 2020, respectively. Investment amortization was $4.4 million, $4.2 million and $5.5 million for usage of federal affordable housing tax credits approximated $4.9 million, $4.9 million and $6.6 million during the years ended December 31, 2022, 2021 and 2020, respectively. 2022, 2021 and 2020, respectively. Investment amortization was $4.4 million, $4.2 million and $5.5 million for 41 the years ended December 31, 2022, 2021 and 2020, respectively. Investments in Community Development Entities The Company has invested in certain limited partnerships that were formed to develop and operate business and Investments in Community Development Entities real estate projects located in low-income communities. At December 31, 2022 the Company had one such The Company has invested in certain limited partnerships that were formed to develop and operate business and investment, with a net carrying value of $465,000. At December 31, 2021, the Company had one such investment, real estate projects located in low-income communities. At December 31, 2022 the Company had one such with a net carrying value of $481,000. Due to the Company’s inability to exercise any significant influence over investment, with a net carrying value of $465,000. At December 31, 2021, the Company had one such investment, any of the investments in qualified Community Development Entities, they are all accounted for using the cost with a net carrying value of $481,000. Due to the Company’s inability to exercise any significant influence over method. Each of the partnerships provides federal New Market Tax Credits over a seven-year credit allowance any of the investments in qualified Community Development Entities, they are all accounted for using the cost period. In each of the first three years, credits totaling five percent of the original investment are allowed on the method. Each of the partnerships provides federal New Market Tax Credits over a seven-year credit allowance credit allowance dates and for the final four years, credits totaling six percent of the original investment are period. In each of the first three years, credits totaling five percent of the original investment are allowed on the allowed on the credit allowance dates. Each of the partnerships must be invested in a qualified Community credit allowance dates and for the final four years, credits totaling six percent of the original investment are Development Entity on each of the credit allowance dates during the seven-year period to utilize the tax credits. If allowed on the credit allowance dates. Each of the partnerships must be invested in a qualified Community the Community Development Entities cease to qualify during the seven-year period, the credits may be denied for Development Entity on each of the credit allowance dates during the seven-year period to utilize the tax credits. If any credit allowance date and a portion of the credits previously taken may be subject to recapture with interest. the Community Development Entities cease to qualify during the seven-year period, the credits may be denied for The investments in the Community Development Entities cannot be redeemed before the end of the seven-year any credit allowance date and a portion of the credits previously taken may be subject to recapture with interest. period. The investments in the Community Development Entities cannot be redeemed before the end of the seven-year period. The Company’s usage of federal New Market Tax Credits approximated $100,000, $100,000 and $100,000 during 2022, 2021 and 2020, respectively. Investment amortization amounted to $83,000, $86,000 and $80,000 for the The Company’s usage of federal New Market Tax Credits approximated $100,000, $100,000 and $100,000 during years ended December 31, 2022, 2021 and 2020, respectively. 2022, 2021 and 2020, respectively. Investment amortization amounted to $83,000, $86,000 and $80,000 for the years ended December 31, 2022, 2021 and 2020, respectively. Investments in Limited Partnerships for Federal Rehabilitation/Historic Tax Credits From time to time, the Company has invested in certain limited partnerships that were formed to provide certain Investments in Limited Partnerships for Federal Rehabilitation/Historic Tax Credits federal rehabilitation/historic tax credits. At December 31, 2022 the Company had one such investment, with a net From time to time, the Company has invested in certain limited partnerships that were formed to provide certain carrying value of $629,000. At December 31, 2021 the Company had one such investment, with a net carrying federal rehabilitation/historic tax credits. At December 31, 2022 the Company had one such investment, with a net value of $642,000. Under prior tax law, the Company utilized these credits in their entirety in the year the project carrying value of $629,000. At December 31, 2021 the Company had one such investment, with a net carrying was placed in service and the impact to the Consolidated Statements of Income has not been material. Currently, value of $642,000. Under prior tax law, the Company utilized these credits in their entirety in the year the project such partnerships provide federal rehabilitation/historic tax credits over a five-year credit allowance period. was placed in service and the impact to the Consolidated Statements of Income has not been material. Currently, such partnerships provide federal rehabilitation/historic tax credits over a five-year credit allowance period. Investments in Limited Partnerships for State Tax Credits From time to time, the Company has invested in certain limited partnerships that were formed to provide certain Investments in Limited Partnerships for State Tax Credits state tax credits. The Company has primarily syndicated these tax credits and the impact to the Consolidated From time to time, the Company has invested in certain limited partnerships that were formed to provide certain Statements of Income has not been material. state tax credits. The Company has primarily syndicated these tax credits and the impact to the Consolidated Statements of Income has not been material. 42 42 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Statement of Financial Condition Operating leases right of use asset Operating leases liability Statement of Income Operating lease costs classified as occupancy and equipment expense (includes short-term lease costs and amortization of right of use asset) Supplemental Cash Flow Information Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases Right of use assets obtained in exchange for lease obligations: Operating leases At or For the Year Ended December 31, 2022 December 31, 2021 (In Thousands) $ $ $ $ $ 7,397 7,599 1,579 1,547 618 $ $ $ $ $ 7,715 7,886 1,529 1,483 74 At December 31, 2022, future expected lease payments for leases with terms exceeding one year were as follows (in thousands): 2022 2024 2025 2026 2027 Thereafter Future lease payments expected $ 1,199 1,146 1,126 1,064 987 3,206 8,728 Less interest portion of lease payments (1,129) Lease liability $ 7,599 Note 7: Investments in Limited Partnerships Investments in Affordable Housing Partnerships The Company has invested in certain limited partnerships that were formed to develop and operate apartments and single-family houses designed as high-quality affordable housing for lower income tenants throughout Missouri and contiguous states. At December 31, 2022 the Company had 19 such investments, with a net carrying value of $38.4 million. At December 31, 2021 the Company had 16 such investments, with a net carrying value of $25.1 million. Due to the Company’s inability to exercise any significant influence over any of the investments in Affordable Housing Partnerships, they all are accounted for using the proportional amortization method. Each of the partnerships must meet the regulatory requirements for affordable housing for a minimum 15-year compliance period to fully utilize the tax credits. If the partnerships cease to qualify during the compliance period, the credits may be denied for any period in which the projects are not in compliance and a portion of the credits previously taken may be subject to recapture with interest. The remaining federal affordable housing tax credits to be utilized through 2034 were $83.2 million as of December 31, 2022, assuming no tax credit recapture events occur and all projects currently under construction 106 41 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Statement of Financial Condition Operating leases right of use asset Operating leases liability Statement of Income Operating lease costs classified as occupancy and equipment expense (includes short-term lease costs and amortization of right of use asset) Supplemental Cash Flow Information Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases Right of use assets obtained in exchange for lease obligations: Operating leases thousands): At or For the Year Ended December 31, 2022 December 31, 2021 (In Thousands) $ $ $ $ $ 7,397 7,599 1,579 1,547 618 $ $ $ $ $ 7,715 7,886 1,529 1,483 74 At December 31, 2022, future expected lease payments for leases with terms exceeding one year were as follows (in 2022 2024 2025 2026 2027 Thereafter $ 1,199 1,146 1,126 1,064 987 3,206 8,728 Future lease payments expected Less interest portion of lease payments (1,129) Lease liability $ 7,599 Note 7: Investments in Limited Partnerships Investments in Affordable Housing Partnerships The Company has invested in certain limited partnerships that were formed to develop and operate apartments and single-family houses designed as high-quality affordable housing for lower income tenants throughout Missouri and contiguous states. At December 31, 2022 the Company had 19 such investments, with a net carrying value of $38.4 million. At December 31, 2021 the Company had 16 such investments, with a net carrying value of $25.1 million. Due to the Company’s inability to exercise any significant influence over any of the investments in Affordable Housing Partnerships, they all are accounted for using the proportional amortization method. Each of Great Southern Bancorp, Inc. the partnerships must meet the regulatory requirements for affordable housing for a minimum 15-year compliance Notes to Consolidated Financial Statements Great Southern Bancorp, Inc. period to fully utilize the tax credits. If the partnerships cease to qualify during the compliance period, the credits may be denied for any period in which the projects are not in compliance and a portion of the credits previously December 31, 2022, 2021 and 2020 Notes to Consolidated Financial Statements taken may be subject to recapture with interest. December 31, 2022, 2021 and 2020 The remaining federal affordable housing tax credits to be utilized through 2034 were $83.2 million as of are completed as planned. Amortization of the investments in partnerships is expected to be approximately $75.0 December 31, 2022, assuming no tax credit recapture events occur and all projects currently under construction million, assuming all projects currently under construction are completed and funded as planned. The Company’s are completed as planned. Amortization of the investments in partnerships is expected to be approximately $75.0 usage of federal affordable housing tax credits approximated $4.9 million, $4.9 million and $6.6 million during 41 million, assuming all projects currently under construction are completed and funded as planned. The Company’s 2022, 2021 and 2020, respectively. Investment amortization was $4.4 million, $4.2 million and $5.5 million for the years ended December 31, 2022, 2021 and 2020, respectively. usage of federal affordable housing tax credits approximated $4.9 million, $4.9 million and $6.6 million during 2022, 2021 and 2020, respectively. Investment amortization was $4.4 million, $4.2 million and $5.5 million for the years ended December 31, 2022, 2021 and 2020, respectively. Investments in Community Development Entities The Company has invested in certain limited partnerships that were formed to develop and operate business and Investments in Community Development Entities real estate projects located in low-income communities. At December 31, 2022 the Company had one such The Company has invested in certain limited partnerships that were formed to develop and operate business and investment, with a net carrying value of $465,000. At December 31, 2021, the Company had one such investment, real estate projects located in low-income communities. At December 31, 2022 the Company had one such with a net carrying value of $481,000. Due to the Company’s inability to exercise any significant influence over investment, with a net carrying value of $465,000. At December 31, 2021, the Company had one such investment, any of the investments in qualified Community Development Entities, they are all accounted for using the cost with a net carrying value of $481,000. Due to the Company’s inability to exercise any significant influence over method. Each of the partnerships provides federal New Market Tax Credits over a seven-year credit allowance any of the investments in qualified Community Development Entities, they are all accounted for using the cost period. In each of the first three years, credits totaling five percent of the original investment are allowed on the method. Each of the partnerships provides federal New Market Tax Credits over a seven-year credit allowance credit allowance dates and for the final four years, credits totaling six percent of the original investment are period. In each of the first three years, credits totaling five percent of the original investment are allowed on the allowed on the credit allowance dates. Each of the partnerships must be invested in a qualified Community credit allowance dates and for the final four years, credits totaling six percent of the original investment are Development Entity on each of the credit allowance dates during the seven-year period to utilize the tax credits. If allowed on the credit allowance dates. Each of the partnerships must be invested in a qualified Community the Community Development Entities cease to qualify during the seven-year period, the credits may be denied for Development Entity on each of the credit allowance dates during the seven-year period to utilize the tax credits. If any credit allowance date and a portion of the credits previously taken may be subject to recapture with interest. the Community Development Entities cease to qualify during the seven-year period, the credits may be denied for The investments in the Community Development Entities cannot be redeemed before the end of the seven-year any credit allowance date and a portion of the credits previously taken may be subject to recapture with interest. period. The investments in the Community Development Entities cannot be redeemed before the end of the seven-year period. The Company’s usage of federal New Market Tax Credits approximated $100,000, $100,000 and $100,000 during 2022, 2021 and 2020, respectively. Investment amortization amounted to $83,000, $86,000 and $80,000 for the The Company’s usage of federal New Market Tax Credits approximated $100,000, $100,000 and $100,000 during years ended December 31, 2022, 2021 and 2020, respectively. 2022, 2021 and 2020, respectively. Investment amortization amounted to $83,000, $86,000 and $80,000 for the years ended December 31, 2022, 2021 and 2020, respectively. Investments in Limited Partnerships for Federal Rehabilitation/Historic Tax Credits From time to time, the Company has invested in certain limited partnerships that were formed to provide certain Investments in Limited Partnerships for Federal Rehabilitation/Historic Tax Credits federal rehabilitation/historic tax credits. At December 31, 2022 the Company had one such investment, with a net From time to time, the Company has invested in certain limited partnerships that were formed to provide certain carrying value of $629,000. At December 31, 2021 the Company had one such investment, with a net carrying federal rehabilitation/historic tax credits. At December 31, 2022 the Company had one such investment, with a net value of $642,000. Under prior tax law, the Company utilized these credits in their entirety in the year the project carrying value of $629,000. At December 31, 2021 the Company had one such investment, with a net carrying was placed in service and the impact to the Consolidated Statements of Income has not been material. Currently, value of $642,000. Under prior tax law, the Company utilized these credits in their entirety in the year the project such partnerships provide federal rehabilitation/historic tax credits over a five-year credit allowance period. was placed in service and the impact to the Consolidated Statements of Income has not been material. Currently, such partnerships provide federal rehabilitation/historic tax credits over a five-year credit allowance period. Investments in Limited Partnerships for State Tax Credits From time to time, the Company has invested in certain limited partnerships that were formed to provide certain Investments in Limited Partnerships for State Tax Credits state tax credits. The Company has primarily syndicated these tax credits and the impact to the Consolidated From time to time, the Company has invested in certain limited partnerships that were formed to provide certain Statements of Income has not been material. state tax credits. The Company has primarily syndicated these tax credits and the impact to the Consolidated Statements of Income has not been material. 107 42 42 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Statement of Financial Condition Operating leases right of use asset Operating leases liability Statement of Income Operating lease costs classified as occupancy and equipment expense (includes short-term lease costs and amortization of right of use asset) Supplemental Cash Flow Information Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases Right of use assets obtained in exchange for lease obligations: Operating leases thousands): At or For the Year Ended December 31, 2022 December 31, 2021 (In Thousands) $ $ $ $ $ 7,397 7,599 1,579 1,547 618 $ $ $ $ $ 7,715 7,886 1,529 1,483 74 At December 31, 2022, future expected lease payments for leases with terms exceeding one year were as follows (in 2022 2024 2025 2026 2027 Thereafter $ 1,199 1,146 1,126 1,064 987 3,206 8,728 Future lease payments expected Less interest portion of lease payments (1,129) Lease liability $ 7,599 Note 7: Investments in Limited Partnerships Investments in Affordable Housing Partnerships The Company has invested in certain limited partnerships that were formed to develop and operate apartments and single-family houses designed as high-quality affordable housing for lower income tenants throughout Missouri and contiguous states. At December 31, 2022 the Company had 19 such investments, with a net carrying value of $38.4 million. At December 31, 2021 the Company had 16 such investments, with a net carrying value of $25.1 million. Due to the Company’s inability to exercise any significant influence over any of the investments in Affordable Housing Partnerships, they all are accounted for using the proportional amortization method. Each of the partnerships must meet the regulatory requirements for affordable housing for a minimum 15-year compliance period to fully utilize the tax credits. If the partnerships cease to qualify during the compliance period, the credits may be denied for any period in which the projects are not in compliance and a portion of the credits previously taken may be subject to recapture with interest. The remaining federal affordable housing tax credits to be utilized through 2034 were $83.2 million as of December 31, 2022, assuming no tax credit recapture events occur and all projects currently under construction 41 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Note 8: Deposits Deposits at December 31, 2022 and 2021, are summarized as follows: Non-interest-bearing accounts Interest-bearing checking and savings accounts Certificate accounts Weighted Average Interest Rate 2022 2021 (In Thousands, Except Interest Rates) — $ 1,063,588 $ 1,209,822 0.90% and 0.12% 0% - 0.99% 1% - 1.99% 2% - 2.99% 3% - 3.99% 4% - 4.99% 5% and above 2,338,535 3,402,123 280,784 125,951 452,123 267,231 156,698 — 1,282,787 2,381,210 3,591,032 825,217 73,563 55,509 6,780 — — 961,069 $ 4,684,910 $ 4,552,101 The weighted average interest rate on certificates of deposit was 2.30% and 0.60% at December 31, 2022 and 2021, respectively. The aggregate amount of certificates of deposit originated by the Bank in denominations greater than $250,000 was approximately $217.4 million and $88.0 million at December 31, 2022 and 2021, respectively. The Bank utilizes brokered deposits as an additional funding source. The aggregate amount of brokered deposits was approximately $411.5 million and $67.4 million at December 31, 2022 and 2021, respectively. The December 31, 2022 brokered deposits total of $411.5 million included $150.0 million of purchased funds through the IntraFi Financial network. These deposits are included above in interest-bearing checking and savings accounts. At December 31, 2022, scheduled maturities of certificates of deposit were as follows: 2023 2024 2025 2026 2027 Thereafter Retail Brokered (In Thousands) Total $ 958,115 42,099 13,748 2,967 3,532 835 $ 112,824 96,961 51,706 — — — $ 1,070,939 139,060 65,454 2,967 3,532 835 $ 1,021,296 $ 261,491 $ 1,282,787 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 A summary of interest expense on deposits for the years ended December 31, 2022, 2021 and 2020, is as follows: 2022 2021 (In Thousands) 2020 Checking and savings accounts $ $ $ 6,938 13,980 (242) 4,023 9,139 (60) 7,096 25,453 (118) Certificate accounts Early withdrawal penalties $ 20,676 $ 13,102 $ 32,431 Note 9: Advances From Federal Home Loan Bank At December 31, 2022 and 2021, there were no outstanding term advances from the Federal Home Loan Bank of Des Moines. At December 31, 2022, there were outstanding overnight borrowings from the Federal Home Loan Bank of Des Moines, which are included in Short-Term Borrowings. The Bank has pledged FHLB stock, investment securities and first mortgage loans free of other pledges, liens and encumbrances as collateral for outstanding advances. No investment securities were specifically pledged as collateral for advances at December 31, 2022 and 2021. Loans with carrying values of approximately $1.62 billion and $1.19 billion were pledged as collateral for outstanding advances at December 31, 2022 and 2021, respectively. The Bank had $1.01 billion remaining available on its line of credit under a borrowing arrangement with the FHLB of Des Moines at December 31, 2022. Note 10: Short-Term Borrowings Short-term borrowings at December 31, 2022 and 2021, are summarized as follows: Notes payable – Community Development Equity Funds $ $ Other interest-bearing liabilities Securities sold under reverse repurchase agreements Overnight borrowings from the Federal Home Loan Bank 2022 2021 (In Thousands) 1,083 — 176,843 88,500 1,449 390 137,116 — $ 266,426 $ 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 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. At December 31, 2022, the Company posted cash collateral to its derivative dealer counterparties as the derivatives were in a net liability position. 108 43 44 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 A summary of interest expense on deposits for the years ended December 31, 2022, 2021 and 2020, is as follows: Checking and savings accounts Certificate accounts Early withdrawal penalties 2022 2021 (In Thousands) 2020 $ $ $ 6,938 13,980 (242) $ 4,023 9,139 (60) 7,096 25,453 (118) 20,676 $ 13,102 $ 32,431 Note 9: Advances From Federal Home Loan Bank At December 31, 2022 and 2021, there were no outstanding term advances from the Federal Home Loan Bank of Des Moines. At December 31, 2022, there were outstanding overnight borrowings from the Federal Home Loan Bank of Des Moines, which are included in Short-Term Borrowings. The Bank has pledged FHLB stock, investment securities and first mortgage loans free of other pledges, liens and encumbrances as collateral for outstanding advances. No investment securities were specifically pledged as collateral for advances at December 31, 2022 and 2021. Loans with carrying values of approximately $1.62 billion and $1.19 billion were pledged as collateral for outstanding advances at December 31, 2022 and 2021, respectively. The Bank had $1.01 billion remaining available on its line of credit under a borrowing arrangement with the FHLB of Des Moines at December 31, 2022. Note 10: Short-Term Borrowings Short-term borrowings at December 31, 2022 and 2021, are summarized as follows: 2022 2021 (In Thousands) Notes payable – Community Development Equity Funds Other interest-bearing liabilities Securities sold under reverse repurchase agreements Overnight borrowings from the Federal Home Loan Bank $ $ 1,083 — 176,843 88,500 1,449 390 137,116 — $ 266,426 $ 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 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. At December 31, 2022, the Company posted cash collateral to its derivative dealer counterparties as the derivatives were in a net liability position. 109 44 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Short-term borrowings had weighted average interest rates of 2.16% at December 31, 2022, compared to 0.02% at December 31, 2021. Short-term borrowings averaged approximately $181.1 million and $145.3 million for the years ended December 31, 2022 and 2021, respectively. The maximum amounts outstanding at any month end were $317.7 million and $184.2 million, respectively, during those same periods. The following table represents the Company’s securities sold under reverse repurchase agreements, which contractually mature daily, at December 31, 2022 and 2021: 2022 Overnight and Continuous 2021 Overnight and Continuous (In Thousands) Mortgage-backed securities – GNMA, FNMA, FHLMC $ 176,843 $ 137,116 Note 11: Federal Reserve Bank Borrowings At December 31, 2022 and 2021, the Bank had $397.0 million and $352.4 million, respectively, available under a line-of-credit borrowing arrangement with the Federal Reserve Bank. The line is secured primarily by consumer and commercial loans. There were no amounts borrowed under this arrangement at December 31, 2022 or 2021. Note 12: Subordinated Debentures Issued to Capital Trusts In November 2006, Great Southern Capital Trust II (Trust II), a statutory trust formed by the Company for the purpose of issuing the securities, issued a $25.0 million aggregate liquidation amount of floating rate cumulative trust preferred securities. The Trust II securities bear a floating distribution rate equal to 90-day LIBOR plus 1.60%. The Trust II securities became redeemable at the Company’s option in February 2012, and if not sooner redeemed, mature on February 1, 2037. The Trust II securities were sold in a private transaction exempt from registration under the Securities Act of 1933, as amended. The gross proceeds of the offering were used to purchase Junior Subordinated Debentures from the Company totaling $25.8 million and bearing an interest rate identical to the distribution rate on the Trust II securities. The initial interest rate on the Trust II debentures was 6.98%. The interest rate was 6.04% and 1.73% at December 31, 2022 and 2021, respectively. At December 31, 2022 and 2021, subordinated debentures issued to capital trusts were as follows: Subordinated debentures $ 25,774 $ 25,774 2022 2021 (In Thousands) 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 years ended December 31, 2022 and 2021, totaled $293,000 and $587,000, respectively, and is included in interest expense on subordinated notes in the consolidated statements of income, resulting in an imputed interest rate of 5.95% and 5.97%, respectively. At December 31, 2022 and 2021, subordinated notes are summarized as follows: Subordinated notes Less: unamortized debt issuance costs Note 14: Income Taxes 2022 2021 (In Thousands) $ $ 75,000 719 74,281 $ $ 75,000 1,016 73,984 The Company files a consolidated federal income tax return. As of December 31, 2022 and 2021, retained earnings included approximately $17.5 million for which no deferred income tax liability had been recognized. This amount represents an allocation of income to bad debt deductions for tax purposes only for tax years prior to 1988. If the Bank were to liquidate, the entire amount would have to be recaptured and would create income for tax purposes only, which would be subject to the then-current corporate income tax rate. The unrecorded deferred income tax liability on the above amount was approximately $4.3 million and $3.9 million at December 31, 2022 and 2021, respectively. components: During the years ended December 31, 2022, 2021 and 2020, the provision for income taxes included these 2022 2021 (In Thousands) 2020 Taxes currently payable Deferred income taxes (benefit) 15,769 2,485 $ 16,025 3,712 $ 25,259 (11,480) Income taxes 18,254 $ 19,737 $ 13,779 $ $ 110 45 46 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Short-term borrowings had weighted average interest rates of 2.16% at December 31, 2022, compared to 0.02% at December 31, 2021. Short-term borrowings averaged approximately $181.1 million and $145.3 million for the years ended December 31, 2022 and 2021, respectively. The maximum amounts outstanding at any month end were $317.7 million and $184.2 million, respectively, during those same periods. The following table represents the Company’s securities sold under reverse repurchase agreements, which contractually mature daily, at December 31, 2022 and 2021: 2022 Overnight and Continuous 2021 Overnight and Continuous (In Thousands) Mortgage-backed securities – GNMA, FNMA, FHLMC $ 176,843 $ 137,116 Note 11: Federal Reserve Bank Borrowings At December 31, 2022 and 2021, the Bank had $397.0 million and $352.4 million, respectively, available under a line-of-credit borrowing arrangement with the Federal Reserve Bank. The line is secured primarily by consumer and commercial loans. There were no amounts borrowed under this arrangement at December 31, 2022 or 2021. Note 12: Subordinated Debentures Issued to Capital Trusts In November 2006, Great Southern Capital Trust II (Trust II), a statutory trust formed by the Company for the purpose of issuing the securities, issued a $25.0 million aggregate liquidation amount of floating rate cumulative trust preferred securities. The Trust II securities bear a floating distribution rate equal to 90-day LIBOR plus 1.60%. The Trust II securities became redeemable at the Company’s option in February 2012, and if not sooner redeemed, mature on February 1, 2037. The Trust II securities were sold in a private transaction exempt from registration under the Securities Act of 1933, as amended. The gross proceeds of the offering were used to purchase Junior Subordinated Debentures from the Company totaling $25.8 million and bearing an interest rate identical to the distribution rate on the Trust II securities. The initial interest rate on the Trust II debentures was 6.98%. The interest rate was 6.04% and 1.73% at December 31, 2022 and 2021, respectively. At December 31, 2022 and 2021, subordinated debentures issued to capital trusts were as follows: Subordinated debentures $ 25,774 $ 25,774 2022 2021 (In Thousands) 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 years ended December 31, 2022 and 2021, totaled $293,000 and $587,000, respectively, and is included in interest expense on subordinated notes in the consolidated statements of income, resulting in an imputed interest rate of 5.95% and 5.97%, respectively. At December 31, 2022 and 2021, subordinated notes are summarized as follows: Subordinated notes Less: unamortized debt issuance costs Note 14: Income Taxes 2022 2021 (In Thousands) $ $ 75,000 719 74,281 $ $ 75,000 1,016 73,984 The Company files a consolidated federal income tax return. As of December 31, 2022 and 2021, retained earnings included approximately $17.5 million for which no deferred income tax liability had been recognized. This amount represents an allocation of income to bad debt deductions for tax purposes only for tax years prior to 1988. If the Bank were to liquidate, the entire amount would have to be recaptured and would create income for tax purposes only, which would be subject to the then-current corporate income tax rate. The unrecorded deferred income tax liability on the above amount was approximately $4.3 million and $3.9 million at December 31, 2022 and 2021, respectively. During the years ended December 31, 2022, 2021 and 2020, the provision for income taxes included these components: 2022 2021 (In Thousands) 2020 Taxes currently payable Deferred income taxes (benefit) Income taxes $ $ 15,769 2,485 $ 16,025 3,712 $ 25,259 (11,480) 18,254 $ 19,737 $ 13,779 45 46 111 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 The tax effects of temporary differences related to deferred taxes shown on the statements of financial condition were: Deferred tax assets Allowance for credit losses Liability for unfunded commitments Interest on nonperforming loans Accrued expenses Write-down of foreclosed assets Write-down of fixed assets Unrealized loss on available-for-sale securities Unrealized loss on active cash flow derivatives Income recognized for tax in excess of book related to terminated cash flow derivatives Deferred income Difference in basis for acquired assets and liabilities Deferred tax liabilities Tax depreciation in excess of book depreciation FHLB stock dividends Partnership tax credits Prepaid expenses Unrealized gain on securities transferred to held-to- maturity securities Unrealized gain on available-for-sale securities Unrealized gain on terminated cash flow derivatives Other December 31, 2022 2021 (In Thousands) $ $ 15,618 3,153 66 1,341 — 67 15,407 7,695 13,854 2,196 98 1,227 35 62 — — 5,530 290 686 49,853 6,978 298 893 25,641 (8,210) (337) (668) (1,196) (29) — (5,530) (235) (16,205) (5,681) (313) (251) (883) — (2,698) (6,978) (328) (17,132) Net deferred tax asset $ 33,648 $ 8,509 Reconciliations of the Company’s effective tax rates from continuing operations to the statutory corporate tax rates were as follows: Tax at statutory rate Nontaxable interest and dividends Tax credits State taxes Deferred tax rate change benefit Other 2022 2021 2020 21.0% (0.5) (1.6) 1.8 (0.6) (0.7) 19.4% 21.0% (0.3) (1.8) 1.3 — 0.7 20.9% 21.0% (0.5) (3.8) 1.4 — 0.8 18.9% 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, 2018 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 (MAHC), 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 subsequent tax years. The MAHC received documents from each party but no hearings have occurred to date. The State of Illinois Department of Revenue recently completed a tax examination of the Company’s Illinois Business Income Tax for the 2018 and 2019 tax years. There were no proposed material changes to the returns. 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. or observable inputs.  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 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. The Company considers transfers between the levels of the hierarchy to be recognized at the end of related reporting periods. 112 47 48 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 The tax effects of temporary differences related to deferred taxes shown on the statements of financial condition were: December 31, 2022 2021 (In Thousands) $ $ terminated cash flow derivatives 5,530 6,978 Deferred tax assets Allowance for credit losses Liability for unfunded commitments Interest on nonperforming loans Accrued expenses Write-down of foreclosed assets Write-down of fixed assets Unrealized loss on available-for-sale securities Unrealized loss on active cash flow derivatives Income recognized for tax in excess of book related to Deferred income Difference in basis for acquired assets and liabilities Deferred tax liabilities Tax depreciation in excess of book depreciation FHLB stock dividends Partnership tax credits Prepaid expenses maturity securities Unrealized gain on securities transferred to held-to- Unrealized gain on available-for-sale securities Unrealized gain on terminated cash flow derivatives Other Net deferred tax asset $ 33,648 $ 8,509 Reconciliations of the Company’s effective tax rates from continuing operations to the statutory corporate tax rates were as follows: 2022 2021 2020 Tax at statutory rate Nontaxable interest and dividends Tax credits State taxes Other Deferred tax rate change benefit 21.0% (0.5) (1.6) 1.8 (0.6) (0.7) 19.4% 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, 2018 are now closed. 15,618 3,153 66 1,341 — 67 15,407 7,695 290 686 49,853 (8,210) (337) (668) (1,196) (29) — (5,530) (235) (16,205) 21.0% (0.3) (1.8) 1.3 — 0.7 20.9% 13,854 2,196 98 1,227 35 62 — — 298 893 25,641 (5,681) (313) (251) (883) — (2,698) (6,978) (328) (17,132) 21.0% (0.5) (3.8) 1.4 — 0.8 18.9% 47 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 (MAHC), 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 subsequent tax years. The MAHC received documents from each party but no hearings have occurred to date. The State of Illinois Department of Revenue recently completed a tax examination of the Company’s Illinois Business Income Tax for the 2018 and 2019 tax years. There were no proposed material changes to the returns. 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. The Company considers transfers between the levels of the hierarchy to be recognized at the end of related reporting periods. 113 48 Great Southern Bancorp, Inc. Great Southern Bancorp, Inc. Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 December 31, 2022, 2021 and 2020 December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Recurring Measurements Recurring Measurements Recurring Measurements Interest Rate Derivatives The following table presents the fair value measurements of assets recognized in the accompanying balance sheets The following table presents the fair value measurements of assets recognized in the accompanying balance sheets The following table presents the fair value measurements of assets recognized in the accompanying balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2022 and 2021: measurements fall at December 31, 2022 and 2021: measurements fall at December 31, 2022 and 2021: Fair Value Measurements Using Fair Value Measurements Using Fair Value Measurements Using Quoted Prices Quoted Prices Quoted Prices in Active in Active in Active Markets Markets Markets for Identical for Identical for Identical Assets Assets Assets (Level 1) (Level 1) (Level 1) Other Other Other Observable Observable Observable Inputs Inputs Inputs (Level 2) (Level 2) (Level 2) (In Thousands) (In Thousands) (In Thousands) Significant Significant Significant Unobservable Unobservable Unobservable Inputs Inputs Inputs (Level 3) (Level 3) (Level 3) Fair Value Fair Value Fair Value December 31, 2022 December 31, 2022 December 31, 2022 Available-for-sale securities Available-for-sale securities Available-for-sale securities Agency mortgage-backed securities Agency mortgage-backed securities Agency mortgage-backed securities Agency collateralized mortgage obligations Agency collateralized mortgage obligations Agency collateralized mortgage obligations States and political subdivisions securities States and political subdivisions securities States and political subdivisions securities Small Business Administration securities Small Business Administration securities Small Business Administration securities Interest rate derivative asset Interest rate derivative asset Interest rate derivative asset Interest rate derivative liability Interest rate derivative liability Interest rate derivative liability December 31, 2021 December 31, 2021 December 31, 2021 Available-for-sale securities Available-for-sale securities Available-for-sale securities Agency mortgage-backed securities Agency mortgage-backed securities Agency mortgage-backed securities Agency collateralized mortgage obligations Agency collateralized mortgage obligations Agency collateralized mortgage obligations States and political subdivisions securities States and political subdivisions securities States and political subdivisions securities Small Business Administration securities Small Business Administration securities Small Business Administration securities Interest rate derivative asset Interest rate derivative asset Interest rate derivative asset Interest rate derivative liability Interest rate derivative liability Interest rate derivative liability $ $ $ $ 286,482 $ 286,482 $ 286,482 78,474 78,474 78,474 57,495 57,495 57,495 68,141 68,141 68,141 11,061 11,061 11,061 (42,097) (42,097) (42,097) $ $ $ $ 229,441 $ 229,441 $ 229,441 204,277 204,277 204,277 40,015 40,015 40,015 27,299 27,299 27,299 2,816 2,816 2,816 (2,895) (2,895) (2,895) $ $ $ $ $ $ — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — $ $ $ 286,482 286,482 286,482 78,474 78,474 78,474 57,495 57,495 57,495 68,141 68,141 68,141 11,061 11,061 11,061 (42,097) (42,097) (42,097) $ $ $ 229,441 229,441 229,441 204,277 204,277 204,277 40,015 40,015 40,015 27,299 27,299 27,299 2,816 2,816 2,816 (2,895) (2,895) (2,895) — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — The following is a description of inputs and valuation methodologies used for assets recorded at fair value on a The following is a description of inputs and valuation methodologies used for assets recorded at fair value on a 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 December 31, 2022 and recurring basis and recognized in the accompanying statements of financial condition at December 31, 2022 and recurring basis and recognized in the accompanying statements of financial condition at December 31, 2022 and 2021, as well as the general classification of such assets pursuant to the valuation hierarchy. There have been no 2021, as well as the general classification of such assets pursuant to the valuation hierarchy. There have been no 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 year ended December 31, 2022. significant changes in the valuation techniques during the year ended December 31, 2022. significant changes in the valuation techniques during the year ended December 31, 2022. Available-for-Sale Securities Available-for-Sale Securities Available-for-Sale Securities Investment securities available-for-sale are recorded at fair value on a recurring basis. The fair values used by the Investment securities available-for-sale are recorded at fair value on a recurring basis. The fair values used by the 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 Company are obtained from an independent pricing service, which represent either quoted market prices for 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 identical asset or fair values determined by pricing models, or other model-based valuation techniques, that 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/SOFR yield curve, credit spreads and consider observable market data, such as interest rate volatilities, LIBOR/SOFR yield curve, credit spreads and consider observable market data, such as interest rate volatilities, LIBOR/SOFR yield curve, credit spreads and prices from market makers and live trading systems. Recurring Level 2 securities include U.S. government agency prices from market makers and live trading systems. Recurring Level 2 securities include U.S. government agency 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 securities, mortgage-backed securities, state and municipal bonds and certain other investments. Inputs used for 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 valuing Level 2 securities include observable data that may include dealer quotes, benchmark yields, market 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 spreads, live trading levels and market consensus prepayment speeds, among other things. Additional inputs 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 include indicative values derived from the independent pricing service’s proprietary computerized models. There include indicative values derived from the independent pricing service’s proprietary computerized models. There were no recurring Level 3 securities at December 31, 2022 or December 31, 2021. were no recurring Level 3 securities at December 31, 2022 or December 31, 2021. were no recurring Level 3 securities at December 31, 2022 or December 31, 2021. 114 49 49 49 50 The fair value is estimated using forward-looking interest rate curves and is determined using observable market rates and, therefore, are classified within Level 2 of the valuation hierarchy. Nonrecurring Measurements The following tables present the fair value measurement 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 December 31, 2022 and 2021: Fair Value Measurements Using Quoted Prices in Active Markets Assets (Level 1) for Identical Observable Unobservable Other Significant Inputs (Level 2) Inputs (Level 3) (In Thousands) — — — — $ $ $ $ — — — — $ $ $ $ 785 — 1,712 312 Fair Value $ $ $ $ 785 — 1,712 315 $ $ $ $ December 31, 2022 Collateral-dependent loans Foreclosed assets held for sale December 31, 2021 Collateral-dependent loans Foreclosed assets held for sale Following is a description of the 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 December 31, 2022 and 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 When the Company has a specific expectation to initiate, or has initiated, foreclosure proceedings, and when the repayment of a loan is expected to be substantially dependent on the liquidation of underlying collateral, the relationship is deemed collateral-dependent. The fair value of collateral used by the Company was determined by obtaining an observable market price or by obtaining an appraised value from an independent, licensed or certified appraiser, using observable market data. This data included information such as selling price of similar properties and capitalization rates of similar properties sold within the market, expected future cash flows or earnings of the Great Southern Bancorp, Inc. Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Recurring Measurements Recurring Measurements Interest Rate Derivatives The following table presents the fair value measurements of assets recognized in the accompanying balance sheets The following table presents the fair value measurements of assets recognized in the accompanying balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2022 and 2021: measurements fall at December 31, 2022 and 2021: Fair Value Measurements Using Fair Value Measurements Using Quoted Prices Quoted Prices in Active in Active Markets Markets Assets Assets (Level 1) (Level 1) for Identical for Identical Observable Observable Unobservable Unobservable Other Other Significant Significant Inputs Inputs (Level 2) (Level 2) Inputs Inputs (Level 3) (Level 3) (In Thousands) (In Thousands) Fair Value Fair Value Agency mortgage-backed securities Agency mortgage-backed securities $ 286,482 $ 286,482 $ $ $ $ 286,482 286,482 $ $ December 31, 2022 December 31, 2022 Available-for-sale securities Available-for-sale securities Agency collateralized mortgage obligations Agency collateralized mortgage obligations States and political subdivisions securities States and political subdivisions securities Small Business Administration securities Small Business Administration securities Interest rate derivative asset Interest rate derivative asset Interest rate derivative liability Interest rate derivative liability December 31, 2021 December 31, 2021 Available-for-sale securities Available-for-sale securities Agency collateralized mortgage obligations Agency collateralized mortgage obligations States and political subdivisions securities States and political subdivisions securities Small Business Administration securities Small Business Administration securities Interest rate derivative asset Interest rate derivative asset Interest rate derivative liability Interest rate derivative liability 78,474 78,474 57,495 57,495 68,141 68,141 11,061 11,061 (42,097) (42,097) 204,277 204,277 40,015 40,015 27,299 27,299 2,816 2,816 (2,895) (2,895) — — — — — — — — — — — — — — — — — — — — — — — — 78,474 78,474 57,495 57,495 68,141 68,141 11,061 11,061 (42,097) (42,097) 229,441 229,441 204,277 204,277 40,015 40,015 27,299 27,299 2,816 2,816 (2,895) (2,895) — — — — — — — — — — — — — — — — — — — — — — — — Agency mortgage-backed securities Agency mortgage-backed securities $ 229,441 $ 229,441 $ $ $ $ $ $ The following is a description of inputs and valuation methodologies used for assets recorded at fair value on a 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 December 31, 2022 and recurring basis and recognized in the accompanying statements of financial condition at December 31, 2022 and 2021, as well as the general classification of such assets pursuant to the valuation hierarchy. There have been no 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 year ended December 31, 2022. significant changes in the valuation techniques during the year ended December 31, 2022. Available-for-Sale Securities Available-for-Sale Securities Investment securities available-for-sale are recorded at fair value on a recurring basis. The fair values used by the 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 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 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/SOFR yield curve, credit spreads and consider observable market data, such as interest rate volatilities, LIBOR/SOFR yield curve, credit spreads and prices from market makers and live trading systems. Recurring Level 2 securities include U.S. government agency 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 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 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 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 include indicative values derived from the independent pricing service’s proprietary computerized models. There were no recurring Level 3 securities at December 31, 2022 or December 31, 2021. were no recurring Level 3 securities at December 31, 2022 or December 31, 2021. The fair value is estimated using forward-looking interest rate curves and is determined using observable market rates and, therefore, are classified within Level 2 of the valuation hierarchy. Nonrecurring Measurements The following tables present the fair value measurement 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 December 31, 2022 and 2021: Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1) Fair Value Other Significant Observable Unobservable Inputs (Level 2) Inputs (Level 3) December 31, 2022 Collateral-dependent loans Foreclosed assets held for sale December 31, 2021 Collateral-dependent loans Foreclosed assets held for sale (In Thousands) $ $ $ $ 785 — 1,712 315 $ $ $ $ — — — — $ $ $ $ — — — — $ $ $ $ 785 — 1,712 312 Following is a description of the 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 December 31, 2022 and 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 When the Company has a specific expectation to initiate, or has initiated, foreclosure proceedings, and when the repayment of a loan is expected to be substantially dependent on the liquidation of underlying collateral, the relationship is deemed collateral-dependent. The fair value of collateral used by the Company was determined by obtaining an observable market price or by obtaining an appraised value from an independent, licensed or certified appraiser, using observable market data. This data included information such as selling price of similar properties and capitalization rates of similar properties sold within the market, expected future cash flows or earnings of the 49 49 50 115 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 subject property based on current market expectations, and other relevant factors. All appraised values were adjusted for market-related trends based on the Company’s experience in sales and other appraisals of similar property types as well as estimated selling costs. Each quarter, management reviewed all collateral-dependent impaired loans on a loan-by-loan basis to determine whether updated appraisals were necessary based on loan performance, collateral type and guarantor support. At times, the Company measured the fair value of collateral- dependent impaired loans using appraisals with dates more than one year prior to the date of review. These appraisals were discounted by applying current, observable market data about similar property types such as sales contracts, estimations of value by individuals familiar with the market, other appraisals, sales or collateral assessments based on current market activity until updated appraisals are obtained. Depending on the length of time since an appraisal was performed and the data provided through our reviews, these appraisals were typically discounted 10-40%. The policy described above was the same for all types of 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 years ended December 31, 2022 and 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 years ended December 31, 2022 and 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/SOFR 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 flow, prepayments discount spreads, credit loss and liquidity premiums. Loans with similar characteristics are aggregated for purposes of the calculations. The carrying amount of accrued interest receivable approximates its fair value. Deposits and Accrued Interest Payable The fair value of demand deposits and savings accounts is the amount payable on demand at the reporting date, i.e., their carrying amounts. The fair value of fixed maturity certificates of deposit is estimated using a discounted cash flow calculation 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 approximates their fair value. Subordinated Notes The subordinated debentures have floating rates that reset quarterly. The carrying amount of these debentures 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 in the financial statements. 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. 116 51 52 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 subject property based on current market expectations, and other relevant factors. All appraised values were adjusted for market-related trends based on the Company’s experience in sales and other appraisals of similar property types as well as estimated selling costs. Each quarter, management reviewed all collateral-dependent impaired loans on a loan-by-loan basis to determine whether updated appraisals were necessary based on loan performance, collateral type and guarantor support. At times, the Company measured the fair value of collateral- dependent impaired loans using appraisals with dates more than one year prior to the date of review. These appraisals were discounted by applying current, observable market data about similar property types such as sales contracts, estimations of value by individuals familiar with the market, other appraisals, sales or collateral assessments based on current market activity until updated appraisals are obtained. Depending on the length of time since an appraisal was performed and the data provided through our reviews, these appraisals were typically discounted 10-40%. The policy described above was the same for all types of 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 years ended December 31, 2022 and 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 years ended December 31, 2022 and 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/SOFR 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 flow, prepayments discount spreads, credit loss and liquidity premiums. Loans with similar characteristics are aggregated for purposes of the calculations. The carrying amount of accrued interest receivable approximates its fair value. Deposits and Accrued Interest Payable The fair value of demand deposits and savings accounts is the amount payable on demand at the reporting date, i.e., their carrying amounts. The fair value of fixed maturity certificates of deposit is estimated using a discounted cash flow calculation 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 in the financial statements. 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. 51 52 117 Great Southern Bancorp, Inc. Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 December 31, 2022, 2021 and 2020 December 31, 2022 December 31, 2022 December 31, 2021 December 31, 2021 Carrying Carrying Amount Amount Fair Fair Value Value Hierarchy Hierarchy Level Level (Dollars in Thousands) (Dollars in Thousands) Carrying Carrying Amount Amount Fair Fair Value Value Hierarchy Hierarchy Level Level Financial assets Financial assets Cash and cash equivalents Cash and cash equivalents Held-to-maturity securities Held-to-maturity securities Mortgage loans held for sale Mortgage loans held for sale Loans, net of allowance for Loans, net of allowance for credit losses credit losses Interest receivable Interest receivable Investment in FHLB stock and Investment in FHLB stock and other assets other assets Financial liabilities Financial liabilities Deposits Deposits Short-term borrowings Short-term borrowings Subordinated debentures Subordinated debentures Subordinated notes Subordinated notes Interest Payable Interest Payable $ $ 168,520 168,520 202,495 202,495 4,811 4,811 $ $ 168,520 168,520 177,765 177,765 4,811 4,811 4,506,836 4,506,836 19,107 19,107 4,391,084 4,391,084 19,107 19,107 30,814 30,814 30,814 30,814 4,684,910 4,684,910 266,426 266,426 25,774 25,774 74,281 74,281 3,010 3,010 4,672,913 4,672,913 266,426 266,426 25,774 25,774 72,000 72,000 3,010 3,010 Unrecognized financial instruments Unrecognized financial instruments (net of contractual value) (net of contractual value) Commitments to originate loans Commitments to originate loans Letters of credit Letters of credit Lines of credit Lines of credit — — 73 73 — — — — 73 73 — — Note 16: Derivatives and Hedging Activities Note 16: Derivatives and Hedging Activities Risk Management Objective of Using Derivatives Risk Management Objective of Using Derivatives 1 1 2 2 3 3 3 3 3 3 3 3 3 3 3 3 2 2 3 3 3 3 3 3 3 3 $ $ 717,267 717,267 — — 8,735 8,735 $ $ 717,267 717,267 — — 8,735 8,735 4,007,500 4,007,500 10,705 10,705 4,001,362 4,001,362 10,705 10,705 6,655 6,655 6,655 6,655 4,552,101 4,552,101 138,955 138,955 25,774 25,774 73,984 73,984 646 646 4,552,202 4,552,202 138,955 138,955 25,774 25,774 81,000 81,000 646 646 — — 50 50 — — — — 50 50 — — 1 1 2 2 2 2 3 3 3 3 3 3 3 3 3 3 3 3 2 2 3 3 3 3 3 3 3 3 The Company is exposed to certain risks arising from both its business operations and economic conditions. The 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 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, 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 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) 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 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 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 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 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 were designated in a resulting from such transactions. In addition, the Company has interest rate derivatives that were designated in a qualified hedging relationship. qualified hedging relationship. Nondesignated Hedges Nondesignated Hedges The Company has interest rate swaps that are not designated in a qualifying hedging relationship. Derivatives not The Company has interest rate swaps that are not designated in a qualifying hedging relationship. Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain loan designated as hedges are not speculative and result from a service the Company provides to certain loan customers. The Company executes interest rate swaps with commercial banking customers to facilitate their customers. 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 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 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 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 hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. recognized directly in earnings. 118 53 53 Great Southern Bancorp, Inc. Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 December 31, 2022, 2021 and 2020 At December 31, 2022, the Company had six interest rate swaps and one interest rate cap totaling $107.0 million in notional amount with commercial customers, and six interest rate swaps and one interest rate cap with the same At December 31, 2022, the Company had six interest rate swaps and one interest rate cap totaling $107.0 million notional amount with third parties related to its program. In addition, at December 31, 2022, the Company had in notional amount with commercial customers, and six interest rate swaps and one interest rate cap with the same one participation loan purchased totaling $8.8 million, in which the lead institution has an interest rate swap with notional amount with third parties related to its program. In addition, at December 31, 2022, the Company had their customer and the economics of the counterparty swap are passed along to the Company through the loan one participation loan purchased totaling $8.8 million, in which the lead institution has an interest rate swap with participation. At December 31, 2021, the Company had 11 interest rate swaps and one interest rate cap totaling their customer and the economics of the counterparty swap are passed along to the Company through the loan $93.9 million in notional amount with commercial customers, and 11 interest rate swaps and one interest rate cap participation. At December 31, 2021, the Company had 11 interest rate swaps and one interest rate cap totaling with the same notional amount with third parties related to its program. In addition, at December 31, 2021, the $93.9 million in notional amount with commercial customers, and 11 interest rate swaps and one interest rate cap Company had four participation loans purchased totaling $27.2 million, in which the lead institution has an with the same notional amount with third parties related to its program. In addition, at December 31, 2021, the interest rate swap with their customer and the economics of the counterparty swap are passed along to the Company had four participation loans purchased totaling $27.2 million, in which the lead institution has an Company through the loan participation. During the years ended December 31, 2022, 2021 and 2020, the interest rate swap with their customer and the economics of the counterparty swap are passed along to the Company recognized net gains (losses) of $321,000, $312,000 and $(264,000), respectively, in non-interest Company through the loan participation. During the years ended December 31, 2022, 2021 and 2020, the income related to changes in the fair value of these swaps. Company recognized net gains (losses) of $321,000, $312,000 and $(264,000), respectively, in non-interest income related to changes in the fair value of these swaps. Cash Flow Hedges 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 Interest Rate Swap. As a strategy to maintain acceptable levels of exposure to the risk of changes in future cash flows its ongoing interest rate management strategies to hedge the risk of its floating rate loans. The notional amount of the due to interest rate fluctuations, in October 2018, the Company entered into an interest rate swap transaction as part of swap was $400 million with a termination date of October 6, 2025. Under the terms of the swap, the Company received its ongoing interest rate management strategies to hedge the risk of its floating rate loans. The notional amount of the a fixed rate of interest of 3.018% and paid a floating rate of interest equal to one-month USD-LIBOR. The floating rate swap was $400 million with a termination date of October 6, 2025. Under the terms of the swap, the Company received was reset monthly and net settlements of interest due to/from the counterparty also occurred monthly. To the extent that a fixed rate of interest of 3.018% and paid a floating rate of interest equal to one-month USD-LIBOR. The floating rate the fixed rate of interest exceeded one-month USD-LIBOR, the Company received net interest settlements which were was reset monthly and net settlements of interest due to/from the counterparty also occurred monthly. To the extent that recorded as loan interest income. If USD-LIBOR exceeded the fixed rate of interest, the Company was required to pay the fixed rate of interest exceeded one-month USD-LIBOR, the Company received net interest settlements which were net settlements to the counterparty and record those net payments as a reduction of interest income on loans. recorded as loan interest income. If USD-LIBOR exceeded the fixed rate of interest, the Company was required to pay In March 2020, the Company and its swap counterparty mutually agreed to terminate the $400 million interest rate net settlements to the counterparty and record those net payments as a reduction of interest income on loans. swap prior to its contractual maturity. The Company was paid $45.9 million from its swap counterparty as a result In March 2020, the Company and its swap counterparty mutually agreed to terminate the $400 million interest rate of this termination. This $45.9 million, less the accrued interest portion and net of deferred income taxes, was swap prior to its contractual maturity. The Company was paid $45.9 million from its swap counterparty as a result reflected in the Company’s stockholders’ equity as Accumulated Other Comprehensive Income and a portion of it of this termination. This $45.9 million, less the accrued interest portion and net of deferred income taxes, was is being accreted to interest income on loans monthly through the original contractual termination date of reflected in the Company’s stockholders’ equity as Accumulated Other Comprehensive Income and a portion of it October 6, 2025. This has the effect of reducing Accumulated Other Comprehensive Income and increasing Net is being accreted to interest income on loans monthly through the original contractual termination date of Interest Income and Retained Earnings over the period. The Company recorded interest income of $8.1 million, October 6, 2025. This has the effect of reducing Accumulated Other Comprehensive Income and increasing Net $8.1 million and $7.7 million on this interest rate swap during the years ended December 31, 2022, 2021 and Interest Income and Retained Earnings over the period. The Company recorded interest income of $8.1 million, 2020, respectively. At December 31, 2022, the Company expected to have a sufficient amount of eligible variable $8.1 million and $7.7 million on this interest rate swap during the years ended December 31, 2022, 2021 and rate loans to continue to accrete this interest income in future periods. If this expectation changes and the amount 2020, respectively. At December 31, 2022, the Company expected to have a sufficient amount of eligible variable of eligible variable rate loans decreases significantly, the Company may be required to recognize this interest rate loans to continue to accrete this interest income in future periods. If this expectation changes and the amount income more rapidly. of eligible variable rate loans decreases significantly, the Company may be required to recognize this interest income more rapidly. In March 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 In March 2022, the Company entered into an interest rate swap transaction as part of its ongoing interest rate million, with a termination date of March 1, 2024. Under the terms of the swap, the Company receives a fixed rate management strategies to hedge the risk of its floating rate loans. The notional amount of the swap is $300 of interest of 1.6725% and pays a floating rate of interest equal to one-month USD-LIBOR (or the equivalent million, with a termination date of March 1, 2024. Under the terms of the swap, the Company receives a fixed rate replacement rate if USD-LIBOR rate is not available). The floating rate resets monthly and net settlements of of interest of 1.6725% and pays a floating rate of interest equal to one-month USD-LIBOR (or the equivalent interest due to/from the counterparty also occur monthly. The floating rate of interest was 4.142% as of December replacement rate if USD-LIBOR rate is not available). The floating rate resets monthly and net settlements of 31, 2022. To the extend the floating rate of interest exceeds the fixed rate of interest, the Company will be interest due to/from the counterparty also occur monthly. The floating rate of interest was 4.142% as of December required to pay net settlements to the counterparty and will record those net payments as a reduction of interest 31, 2022. To the extend the floating rate of interest exceeds the fixed rate of interest, the Company will be income on loans. If the fixed rate of interest exceeds the floating rate of interest, the Company will receive net required to pay net settlements to the counterparty and will record those net payments as a reduction of interest interest settlements, which will be recorded as loan interest income. The Company recorded a reduction of loan income on loans. If the fixed rate of interest exceeds the floating rate of interest, the Company will receive net interest income related to this swap transaction of $941,000 for the year ended December 31, 2022. interest settlements, which will be recorded as loan interest income. The Company recorded a reduction of loan interest income related to this swap transaction of $941,000 for the year ended December 31, 2022. In July 2022, the Company entered into two additional interest rate swap transactions as part of its ongoing interest rate management strategies to hedge the risk of its floating rate loans. The notional amount of each swap In July 2022, the Company entered into two additional interest rate swap transactions as part of its ongoing is $200 million with an effective date of May 1, 2023 and a termination date of May 1, 2028. Under the terms of interest rate management strategies to hedge the risk of its floating rate loans. The notional amount of each swap is $200 million with an effective date of May 1, 2023 and a termination date of May 1, 2028. Under the terms of 54 54 Great Southern Bancorp, Inc. Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 December 31, 2022, 2021 and 2020 December 31, 2022 December 31, 2022 December 31, 2021 December 31, 2021 Carrying Carrying Amount Amount Fair Fair Value Value Hierarchy Hierarchy Level Level Carrying Carrying Amount Amount (Dollars in Thousands) (Dollars in Thousands) Fair Fair Value Value Hierarchy Hierarchy Level Level Financial assets Financial assets Cash and cash equivalents Cash and cash equivalents Held-to-maturity securities Held-to-maturity securities Mortgage loans held for sale Mortgage loans held for sale Loans, net of allowance for Loans, net of allowance for credit losses credit losses Interest receivable Interest receivable Investment in FHLB stock and Investment in FHLB stock and other assets other assets Financial liabilities Financial liabilities Deposits Deposits Short-term borrowings Short-term borrowings Subordinated debentures Subordinated debentures Subordinated notes Subordinated notes Interest Payable Interest Payable Unrecognized financial instruments Unrecognized financial instruments (net of contractual value) (net of contractual value) Commitments to originate loans Commitments to originate loans Letters of credit Letters of credit Lines of credit Lines of credit $ $ 168,520 168,520 202,495 202,495 4,811 4,811 $ $ 168,520 168,520 177,765 177,765 4,811 4,811 $ $ 717,267 717,267 $ $ 717,267 717,267 — — 8,735 8,735 — — 8,735 8,735 4,506,836 4,506,836 19,107 19,107 4,391,084 4,391,084 19,107 19,107 4,007,500 4,007,500 10,705 10,705 4,001,362 4,001,362 10,705 10,705 30,814 30,814 30,814 30,814 6,655 6,655 6,655 6,655 4,684,910 4,684,910 266,426 266,426 25,774 25,774 74,281 74,281 3,010 3,010 4,672,913 4,672,913 266,426 266,426 25,774 25,774 72,000 72,000 3,010 3,010 4,552,101 4,552,101 138,955 138,955 25,774 25,774 73,984 73,984 646 646 4,552,202 4,552,202 138,955 138,955 25,774 25,774 81,000 81,000 646 646 — — 73 73 — — — — 73 73 — — — — 50 50 — — — — 50 50 — — 1 1 2 2 3 3 3 3 3 3 3 3 3 3 3 3 2 2 3 3 3 3 3 3 3 3 1 1 2 2 2 2 3 3 3 3 3 3 3 3 3 3 3 3 2 2 3 3 3 3 3 3 3 3 Note 16: Derivatives and Hedging Activities Note 16: Derivatives and Hedging Activities Risk Management Objective of Using Derivatives Risk Management Objective of Using Derivatives The Company is exposed to certain risks arising from both its business operations and economic conditions. The 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 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, 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 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) 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 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 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 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 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 were designated in a resulting from such transactions. In addition, the Company has interest rate derivatives that were designated in a qualified hedging relationship. qualified hedging relationship. Nondesignated Hedges Nondesignated Hedges The Company has interest rate swaps that are not designated in a qualifying hedging relationship. Derivatives not The Company has interest rate swaps that are not designated in a qualifying hedging relationship. Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain loan designated as hedges are not speculative and result from a service the Company provides to certain loan customers. The Company executes interest rate swaps with commercial banking customers to facilitate their customers. 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 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 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 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 hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. recognized directly in earnings. 53 53 Great Southern Bancorp, Inc. Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 December 31, 2022, 2021 and 2020 At December 31, 2022, the Company had six interest rate swaps and one interest rate cap totaling $107.0 million in notional amount with commercial customers, and six interest rate swaps and one interest rate cap with the same At December 31, 2022, the Company had six interest rate swaps and one interest rate cap totaling $107.0 million notional amount with third parties related to its program. In addition, at December 31, 2022, the Company had in notional amount with commercial customers, and six interest rate swaps and one interest rate cap with the same one participation loan purchased totaling $8.8 million, in which the lead institution has an interest rate swap with notional amount with third parties related to its program. In addition, at December 31, 2022, the Company had their customer and the economics of the counterparty swap are passed along to the Company through the loan one participation loan purchased totaling $8.8 million, in which the lead institution has an interest rate swap with participation. At December 31, 2021, the Company had 11 interest rate swaps and one interest rate cap totaling their customer and the economics of the counterparty swap are passed along to the Company through the loan $93.9 million in notional amount with commercial customers, and 11 interest rate swaps and one interest rate cap participation. At December 31, 2021, the Company had 11 interest rate swaps and one interest rate cap totaling with the same notional amount with third parties related to its program. In addition, at December 31, 2021, the $93.9 million in notional amount with commercial customers, and 11 interest rate swaps and one interest rate cap Company had four participation loans purchased totaling $27.2 million, in which the lead institution has an with the same notional amount with third parties related to its program. In addition, at December 31, 2021, the interest rate swap with their customer and the economics of the counterparty swap are passed along to the Company had four participation loans purchased totaling $27.2 million, in which the lead institution has an Company through the loan participation. During the years ended December 31, 2022, 2021 and 2020, the interest rate swap with their customer and the economics of the counterparty swap are passed along to the Company recognized net gains (losses) of $321,000, $312,000 and $(264,000), respectively, in non-interest Company through the loan participation. During the years ended December 31, 2022, 2021 and 2020, the income related to changes in the fair value of these swaps. Company recognized net gains (losses) of $321,000, $312,000 and $(264,000), respectively, in non-interest income related to changes in the fair value of these swaps. Cash Flow Hedges 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 Interest Rate Swap. As a strategy to maintain acceptable levels of exposure to the risk of changes in future cash flows its ongoing interest rate management strategies to hedge the risk of its floating rate loans. The notional amount of the due to interest rate fluctuations, in October 2018, the Company entered into an interest rate swap transaction as part of swap was $400 million with a termination date of October 6, 2025. Under the terms of the swap, the Company received its ongoing interest rate management strategies to hedge the risk of its floating rate loans. The notional amount of the a fixed rate of interest of 3.018% and paid a floating rate of interest equal to one-month USD-LIBOR. The floating rate swap was $400 million with a termination date of October 6, 2025. Under the terms of the swap, the Company received was reset monthly and net settlements of interest due to/from the counterparty also occurred monthly. To the extent that a fixed rate of interest of 3.018% and paid a floating rate of interest equal to one-month USD-LIBOR. The floating rate the fixed rate of interest exceeded one-month USD-LIBOR, the Company received net interest settlements which were was reset monthly and net settlements of interest due to/from the counterparty also occurred monthly. To the extent that recorded as loan interest income. If USD-LIBOR exceeded the fixed rate of interest, the Company was required to pay the fixed rate of interest exceeded one-month USD-LIBOR, the Company received net interest settlements which were net settlements to the counterparty and record those net payments as a reduction of interest income on loans. recorded as loan interest income. If USD-LIBOR exceeded the fixed rate of interest, the Company was required to pay In March 2020, the Company and its swap counterparty mutually agreed to terminate the $400 million interest rate net settlements to the counterparty and record those net payments as a reduction of interest income on loans. swap prior to its contractual maturity. The Company was paid $45.9 million from its swap counterparty as a result In March 2020, the Company and its swap counterparty mutually agreed to terminate the $400 million interest rate of this termination. This $45.9 million, less the accrued interest portion and net of deferred income taxes, was swap prior to its contractual maturity. The Company was paid $45.9 million from its swap counterparty as a result reflected in the Company’s stockholders’ equity as Accumulated Other Comprehensive Income and a portion of it of this termination. This $45.9 million, less the accrued interest portion and net of deferred income taxes, was is being accreted to interest income on loans monthly through the original contractual termination date of reflected in the Company’s stockholders’ equity as Accumulated Other Comprehensive Income and a portion of it October 6, 2025. This has the effect of reducing Accumulated Other Comprehensive Income and increasing Net is being accreted to interest income on loans monthly through the original contractual termination date of Interest Income and Retained Earnings over the period. The Company recorded interest income of $8.1 million, October 6, 2025. This has the effect of reducing Accumulated Other Comprehensive Income and increasing Net $8.1 million and $7.7 million on this interest rate swap during the years ended December 31, 2022, 2021 and Interest Income and Retained Earnings over the period. The Company recorded interest income of $8.1 million, 2020, respectively. At December 31, 2022, the Company expected to have a sufficient amount of eligible variable $8.1 million and $7.7 million on this interest rate swap during the years ended December 31, 2022, 2021 and rate loans to continue to accrete this interest income in future periods. If this expectation changes and the amount 2020, respectively. At December 31, 2022, the Company expected to have a sufficient amount of eligible variable of eligible variable rate loans decreases significantly, the Company may be required to recognize this interest rate loans to continue to accrete this interest income in future periods. If this expectation changes and the amount income more rapidly. of eligible variable rate loans decreases significantly, the Company may be required to recognize this interest income more rapidly. In March 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 In March 2022, the Company entered into an interest rate swap transaction as part of its ongoing interest rate million, with a termination date of March 1, 2024. Under the terms of the swap, the Company receives a fixed rate management strategies to hedge the risk of its floating rate loans. The notional amount of the swap is $300 of interest of 1.6725% and pays a floating rate of interest equal to one-month USD-LIBOR (or the equivalent million, with a termination date of March 1, 2024. Under the terms of the swap, the Company receives a fixed rate replacement rate if USD-LIBOR rate is not available). The floating rate resets monthly and net settlements of of interest of 1.6725% and pays a floating rate of interest equal to one-month USD-LIBOR (or the equivalent interest due to/from the counterparty also occur monthly. The floating rate of interest was 4.142% as of December replacement rate if USD-LIBOR rate is not available). The floating rate resets monthly and net settlements of 31, 2022. To the extend the floating rate of interest exceeds the fixed rate of interest, the Company will be interest due to/from the counterparty also occur monthly. The floating rate of interest was 4.142% as of December required to pay net settlements to the counterparty and will record those net payments as a reduction of interest 31, 2022. To the extend the floating rate of interest exceeds the fixed rate of interest, the Company will be income on loans. If the fixed rate of interest exceeds the floating rate of interest, the Company will receive net required to pay net settlements to the counterparty and will record those net payments as a reduction of interest interest settlements, which will be recorded as loan interest income. The Company recorded a reduction of loan income on loans. If the fixed rate of interest exceeds the floating rate of interest, the Company will receive net interest income related to this swap transaction of $941,000 for the year ended December 31, 2022. interest settlements, which will be recorded as loan interest income. The Company recorded a reduction of loan interest income related to this swap transaction of $941,000 for the year ended December 31, 2022. In July 2022, the Company entered into two additional interest rate swap transactions as part of its ongoing interest rate management strategies to hedge the risk of its floating rate loans. The notional amount of each swap In July 2022, the Company entered into two additional interest rate swap transactions as part of its ongoing is $200 million with an effective date of May 1, 2023 and a termination date of May 1, 2028. Under the terms of interest rate management strategies to hedge the risk of its floating rate loans. The notional amount of each swap is $200 million with an effective date of May 1, 2023 and a termination date of May 1, 2028. Under the terms of 119 54 54 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 At December 31, 2022, the Company had six interest rate swaps and one interest rate cap totaling $107.0 million in notional amount with commercial customers, and six interest rate swaps and one interest rate cap with the same notional amount with third parties related to its program. In addition, at December 31, 2022, the Company had one participation loan purchased totaling $8.8 million, in which the lead institution has an interest rate swap with their customer and the economics of the counterparty swap are passed along to the Company through the loan participation. At December 31, 2021, 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. In addition, at December 31, 2021, the Company had four participation loans purchased totaling $27.2 million, in which the lead institution has an interest rate swap with their customer and the economics of the counterparty swap are passed along to the Company through the loan participation. During the years ended December 31, 2022, 2021 and 2020, the Company recognized net gains (losses) of $321,000, $312,000 and $(264,000), respectively, in non-interest 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 was paid $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, was reflected in the Company’s stockholders’ equity as Accumulated Other Comprehensive Income and a portion of it 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 period. The Company recorded interest income of $8.1 million, $8.1 million and $7.7 million on this interest rate swap during the years ended December 31, 2022, 2021 and 2020, respectively. At December 31, 2022, the Company expected 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 March 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 a termination date of March 1, 2024. Under the terms of the swap, the Company receives a fixed rate of interest of 1.6725% and pays 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 floating rate of interest was 4.142% as of December 31, 2022. To the extend the floating rate of interest exceeds the fixed rate of interest, the Company will be Great Southern Bancorp, Inc. required to pay net settlements to the counterparty and will record those net payments as a reduction of interest Notes to Consolidated Financial Statements income on loans. If the fixed rate of interest exceeds the floating rate of interest, the Company will receive net interest settlements, which will be recorded as loan interest income. The Company recorded a reduction of loan Great Southern Bancorp, Inc. December 31, 2022, 2021 and 2020 interest income related to this swap transaction of $941,000 for the year ended December 31, 2022. Notes to Consolidated Financial Statements In July 2022, the Company entered into two additional interest rate swap transactions as part of its ongoing one swap, beginning in May 2023, the Company will receive a fixed rate of interest of 2.628% and will pay a December 31, 2022, 2021 and 2020 interest rate management strategies to hedge the risk of its floating rate loans. The notional amount of each swap floating rate of interest equal to one-month USD-SOFR OIS. Under the terms of the other swap, beginning in May is $200 million with an effective date of May 1, 2023 and a termination date of May 1, 2028. Under the terms of 2023, the Company will receive a fixed rate of interest of 5.725% and will pay a floating rate of interest equal to one swap, beginning in May 2023, the Company will receive a fixed rate of interest of 2.628% and will pay a one-month USD-Prime. In each case, the floating rate will be reset monthly and net settlements of interest due 54 floating rate of interest equal to one-month USD-SOFR OIS. Under the terms of the other swap, beginning in May to/from the counterparty will also occur monthly. To the extent the fixed rate of interest exceeds the floating rate 2023, the Company will receive a fixed rate of interest of 5.725% and will pay a floating rate of interest equal to of interest, the Company will receive net interest settlements, which will be recorded as loan interest income. If one-month USD-Prime. In each case, the floating rate will be reset monthly and net settlements of interest due the floating rate of interest exceeds the fixed rate of interest, the Company will be required to pay net settlements to/from the counterparty will also occur monthly. To the extent the fixed rate of interest exceeds the floating rate to the counterparty and will record those net payments as a reduction of interest income on loans. At December of interest, the Company will receive net interest settlements, which will be recorded as loan interest income. If 31, 2022, the USD-Prime rate was 7.50% and the one-month USD-SOFR OIS rate was 4.06173%. the floating rate of interest exceeds the fixed rate of interest, 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. At December The effective portion of the gain or loss on the derivative is reported as a component of other comprehensive 31, 2022, the USD-Prime rate was 7.50% and the one-month USD-SOFR OIS rate was 4.06173%. 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 The effective portion of the gain or loss on the derivative is reported as a component of other comprehensive excluded from the assessment of effectiveness are recognized in current earnings. 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 The table below presents the fair value of the Company’s derivative financial instruments as well as their excluded from the assessment of effectiveness are recognized in current earnings. classification on the Consolidated Statements of Financial Condition: The table below presents the fair value of the Company’s derivative financial instruments as well as their Fair Value classification on the Consolidated Statements of Financial Condition: December 31, Location in Consolidated Statements of Financial Condition Location in Consolidated Statements of Financial Condition 2022 December 31, 2021 Fair Value (In Thousands) December 31, 2022 December 31, 2021 (In Thousands) Accrued expenses and other liabilities $ 31,277 $ Accrued expenses and other liabilities $ $ 31,277 31,277 $ $ $ 31,277 $ — — — — Prepaid expenses and other assets $ 11,061 $ 2,816 Derivatives designated as hedging instruments Derivatives designated Derivative Assets as hedging instruments Active interest rate swap Derivative Assets Total derivatives designated as hedging instruments Active interest rate swap Derivatives not designated as hedging instruments Total derivatives designated as hedging instruments Derivatives not designated Derivative Assets as hedging instruments Interest rate products Derivative Assets Total derivatives not designated Interest rate products as hedging instruments Prepaid expenses and other assets $ $ 11,061 11,061 $ $ 2,816 2,816 Derivative Liabilities Total derivatives not designated Interest rate products as hedging instruments Accrued expenses and other liabilities $ $ 11,061 10,820 $ $ 2,816 2,895 Derivative Liabilities Total derivatives not designated Interest rate products as hedging instruments Accrued expenses and other liabilities $ $ 10,820 10,820 $ $ 2,895 2,895 Total derivatives not designated as hedging instruments $ 10,820 $ 2,895 120 55 55 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 The following table presents the effect of cash flow hedge accounting on the statements of comprehensive income: Cash Flow Hedges 2021 2020 2019 Amount of Gain (Loss) Recognized in AOCI Year Ended December 31 (In Thousands) Terminated interest rate swaps, net of income taxes Active interest rate swaps, net of income taxes $ $ (6,271) (23,582) (29,853) $ $ (6,271) — (6,271) $ $ 6,691 — 6,691 The following table presents the effect of cash flow hedge accounting on the statements of operations: Cash Flow Hedges 2022 2021 2020 Year Ended December 31 Interest Income Interest Expense Interest Income Interest Expense Interest Income Interest Expense (In Thousands) Terminated interest rate swaps Active interest rate swaps $ 8,123 $ — $ 8,123 $ — $ 7,676 $ — (941) — — — — — $ 7,182 $ — $ 8,123 $ — $ 7,676 $ — 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 occurred, such as the issuance of a formal directive, or if the Company’s credit rating is downgraded below a specified level. At December 31, 2022, the termination value of derivatives with our derivative dealer counterparties (related to loan level swaps with commercial lending customers) in a net asset position, which included accrued interest but excluded any adjustment for nonperformance risk, related to these agreements was $242,000. Additionally, the Company’s activity with one of its derivative counterparties met the level at which the minimum collateral posting thresholds take effect (collateral to be given by the Company) and the Company had posted collateral of $20.7 million to the derivative counterparty to satisfy the loan level agreements. 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 minimum collateral posting thresholds take effect (collateral to be given by the Company) and the Company had posted collateral of $1.2 million to the derivative counterparties to satisfy the loan level agreements. The Bank also 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 December 31, 2022 or December 31, 2021, it could have been required to settle its obligations under the agreements at the termination value. 56 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements Great Southern Bancorp, Inc. December 31, 2022, 2021 and 2020 Notes to Consolidated Financial Statements one swap, beginning in May 2023, the Company will receive a fixed rate of interest of 2.628% and will pay a December 31, 2022, 2021 and 2020 floating rate of interest equal to one-month USD-SOFR OIS. Under the terms of the other swap, beginning in May 2023, the Company will receive a fixed rate of interest of 5.725% and will pay a floating rate of interest equal to one swap, beginning in May 2023, the Company will receive a fixed rate of interest of 2.628% and will pay a one-month USD-Prime. In each case, the floating rate will be reset monthly and net settlements of interest due floating rate of interest equal to one-month USD-SOFR OIS. Under the terms of the other swap, beginning in May to/from the counterparty will also occur monthly. To the extent the fixed rate of interest exceeds the floating rate 2023, the Company will receive a fixed rate of interest of 5.725% and will pay a floating rate of interest equal to of interest, the Company will receive net interest settlements, which will be recorded as loan interest income. If one-month USD-Prime. In each case, the floating rate will be reset monthly and net settlements of interest due the floating rate of interest exceeds the fixed rate of interest, the Company will be required to pay net settlements to/from the counterparty will also occur monthly. To the extent the fixed rate of interest exceeds the floating rate to the counterparty and will record those net payments as a reduction of interest income on loans. At December of interest, the Company will receive net interest settlements, which will be recorded as loan interest income. If 31, 2022, the USD-Prime rate was 7.50% and the one-month USD-SOFR OIS rate was 4.06173%. the floating rate of interest exceeds the fixed rate of interest, 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. At December The effective portion of the gain or loss on the derivative is reported as a component of other comprehensive 31, 2022, the USD-Prime rate was 7.50% and the one-month USD-SOFR OIS rate was 4.06173%. 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 The effective portion of the gain or loss on the derivative is reported as a component of other comprehensive excluded from the assessment of effectiveness are recognized in current earnings. 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 The table below presents the fair value of the Company’s derivative financial instruments as well as their excluded from the assessment of effectiveness are recognized in current earnings. classification on the Consolidated Statements of Financial Condition: The table below presents the fair value of the Company’s derivative financial instruments as well as their Location in Fair Value classification on the Consolidated Statements of Financial Condition: Consolidated Statements December 31, December 31, Consolidated Statements December 31, December 31, of Financial Condition Location in of Financial Condition 2022 2022 2021 2021 (In Thousands) Fair Value (In Thousands) Accrued expenses and other liabilities $ 31,277 $ Accrued expenses and other liabilities $ $ 31,277 31,277 $ $ $ 31,277 $ Prepaid expenses and other assets $ 11,061 $ 2,816 Interest rate products as hedging instruments Prepaid expenses and other assets $ $ 11,061 11,061 $ $ 2,816 2,816 Interest rate products as hedging instruments Accrued expenses and other liabilities $ $ 11,061 10,820 $ $ 2,816 2,895 Interest rate products as hedging instruments Accrued expenses and other liabilities $ $ 10,820 10,820 $ $ 2,895 2,895 $ 10,820 $ 2,895 Derivatives designated as hedging instruments Derivatives designated Derivative Assets as hedging instruments Active interest rate swap Derivative Assets Total derivatives designated Active interest rate swap as hedging instruments Derivatives not designated Total derivatives designated as hedging instruments as hedging instruments Derivatives not designated Derivative Assets as hedging instruments Interest rate products Derivative Assets Total derivatives not designated Derivative Liabilities Total derivatives not designated Derivative Liabilities Total derivatives not designated Total derivatives not designated as hedging instruments — — — — 55 55 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 The following table presents the effect of cash flow hedge accounting on the statements of comprehensive income: Cash Flow Hedges 2021 Amount of Gain (Loss) Recognized in AOCI Year Ended December 31 2020 (In Thousands) 2019 Terminated interest rate swaps, net of income taxes Active interest rate swaps, net of income taxes $ $ (6,271) (23,582) (29,853) $ $ (6,271) — (6,271) $ $ 6,691 — 6,691 The following table presents the effect of cash flow hedge accounting on the statements of operations: Cash Flow Hedges 2022 Year Ended December 31 2021 2020 Interest Income Interest Expense Interest Income (In Thousands) Interest Expense Interest Income Interest Expense Terminated interest rate swaps Active interest rate swaps $ 8,123 $ — $ 8,123 $ — $ 7,676 $ — (941) — — — — — $ 7,182 $ — $ 8,123 $ — $ 7,676 $ — 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 occurred, such as the issuance of a formal directive, or if the Company’s credit rating is downgraded below a specified level. At December 31, 2022, the termination value of derivatives with our derivative dealer counterparties (related to loan level swaps with commercial lending customers) in a net asset position, which included accrued interest but excluded any adjustment for nonperformance risk, related to these agreements was $242,000. Additionally, the Company’s activity with one of its derivative counterparties met the level at which the minimum collateral posting thresholds take effect (collateral to be given by the Company) and the Company had posted collateral of $20.7 million to the derivative counterparty to satisfy the loan level agreements. 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 minimum collateral posting thresholds take effect (collateral to be given by the Company) and the Company had posted collateral of $1.2 million to the derivative counterparties to satisfy the loan level agreements. The Bank also 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 December 31, 2022 or December 31, 2021, it could have been required to settle its obligations under the agreements at the termination value. 121 56 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Note 17: Commitments and Credit Risk Commitments to Originate Loans Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since a significant portion of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property and equipment, commercial real estate and residential real estate. At December 31, 2022 and 2021, the Bank had outstanding commitments to originate loans and fund commercial construction loans aggregating approximately $97.1 million and $159.7 million, respectively. The commitments extend over varying periods of time with the majority being disbursed within a 30- to 180-day period. Mortgage loans in the process of origination represent amounts that the Bank plans to fund within a normal period of 60 to 90 days, many of which are intended for sale to investors in the secondary market. Total mortgage loans in the process of origination amounted to approximately $16.8 million and $53.5 million at December 31, 2022 and 2021, respectively. Letters of Credit Standby letters of credit are irrevocable conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Financial standby letters of credit are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. Performance standby letters of credit are issued to guarantee performance of certain customers under nonfinancial contractual obligations. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loans to customers. Fees for letters of credit issued are initially recorded by the Bank as deferred revenue and are included in earnings at the termination of the respective agreements. Should the Bank be obligated to perform under the standby letters of credit, the Bank may seek recourse from the customer for reimbursement of amounts paid. The Company had total outstanding standby letters of credit amounting to approximately $16.7 million and $13.4 million at December 31, 2022 and 2021, respectively, with no letters of credit having terms over five years. Lines of Credit Lines of credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Lines of credit generally have fixed expiration dates. Since a portion of the line may expire without being drawn upon, the total unused lines do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property and equipment, commercial real estate and residential real estate. The Bank uses the same credit policies in granting lines of credit as it does for on-balance-sheet instruments. At December 31, 2022, the Bank had granted unused lines of credit to borrowers aggregating approximately $1.8 billion and $199.2 million for commercial lines and open-end consumer lines, respectively. At December 31, 2021, the Bank had granted unused lines of credit to borrowers aggregating approximately $1.3 billion and $175.7 million for commercial lines and open-end consumer lines, respectively. Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Credit Risk The Bank grants collateralized commercial, real estate and consumer loans primarily to customers in its market areas. Although the Bank has a diversified portfolio, loans (including the FDIC-assisted acquired loans) aggregating approximately $814.1 million and $743.5 million at December 31, 2022 and 2021, respectively, were secured primarily by apartments, condominiums, residential and commercial land developments, industrial revenue bonds and other types of commercial properties in the St. Louis area. Note 18: Additional Cash Flow Information Noncash Investing and Financing Activities Real estate acquired in settlement of loans Transfer of available-for-sale securities to held-to-maturity Sale and financing of foreclosed assets Conversion of premises and equipment to foreclosed assets Dividends declared but not paid Additional Cash Payment Information Interest paid Income taxes paid Note 19: Employee Benefits Year Ended December 31, 2021 2020 2019 (In Thousands) $ 371 $ 1,154 $ 1,707 226 — — 4,893 — — 1,215 4,727 — 625 80 4,676 24,999 10,258 22,700 12,959 42,221 18,755 The Company participates in the Pentegra Defined Benefit Plan for Financial Institutions (Pentegra DB Plan), a multiemployer defined benefit pension plan covering all employees who have met minimum service requirements. Effective July 1, 2006, this plan was closed to new participants. Employees already in the plan continue to accrue benefits. The Pentegra DB Plan’s Employer Identification Number is 13-5645888 and the Plan Number is 333. The Company’s policy is to fund pension cost accrued. Employer contributions charged to expense for this plan for the years ended December 31, 2022, 2021 and 2020, were approximately $1.5 million, $2.1 million and $2.1 million, respectively. The Company’s contributions to the Pentegra DB Plan were not more than 5% of the total contributions to the plan. The funded status of the plan as of July 1, 2022 and 2021, was 100.0% and 112.4%, respectively. The funded status was calculated by taking the market value of plan assets, which reflected contributions received through June 30, 2022 and 2021, respectively, divided by the funding target. No collective bargaining agreements are in place that require contributions to the Pentegra DB Plan. The Company has a defined contribution retirement plan covering substantially all employees. The Company matches 100% of the employee’s contribution on the first 3% of the employee’s compensation and also matches an additional 50% of the employee’s contribution on the next 2% of the employee’s compensation. Employer contributions charged to expense for this plan for the years ended December 31, 2022, 2021 and 2020, were approximately $1.7 million, $1.7 million and $1.6 million, respectively. 122 57 58 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Note 17: Commitments and Credit Risk Commitments to Originate Loans Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since a significant portion of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property and equipment, commercial real estate and residential real estate. At December 31, 2022 and 2021, the Bank had outstanding commitments to originate loans and fund commercial construction loans aggregating approximately $97.1 million and $159.7 million, respectively. The commitments extend over varying periods of time with the majority being disbursed within a 30- to 180-day period. Mortgage loans in the process of origination represent amounts that the Bank plans to fund within a normal period of 60 to 90 days, many of which are intended for sale to investors in the secondary market. Total mortgage loans in the process of origination amounted to approximately $16.8 million and $53.5 million at December 31, 2022 and 2021, respectively. Letters of Credit Standby letters of credit are irrevocable conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Financial standby letters of credit are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. Performance standby letters of credit are issued to guarantee performance of certain customers under nonfinancial contractual obligations. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loans to customers. Fees for letters of credit issued are initially recorded by the Bank as deferred revenue and are included in earnings at the termination of the respective agreements. Should the Bank be obligated to perform under the standby letters of credit, the Bank may seek recourse from the customer for reimbursement of amounts paid. The Company had total outstanding standby letters of credit amounting to approximately $16.7 million and $13.4 million at December 31, 2022 and 2021, respectively, with no letters of credit having terms over five years. Lines of Credit Lines of credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Lines of credit generally have fixed expiration dates. Since a portion of the line may expire without being drawn upon, the total unused lines do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property and equipment, commercial real estate and residential real estate. The Bank uses the same credit policies in granting lines of credit as it does for on-balance-sheet instruments. At December 31, 2022, the Bank had granted unused lines of credit to borrowers aggregating approximately $1.8 billion and $199.2 million for commercial lines and open-end consumer lines, respectively. At December 31, 2021, the Bank had granted unused lines of credit to borrowers aggregating approximately $1.3 billion and $175.7 million for commercial lines and open-end consumer lines, respectively. Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Credit Risk The Bank grants collateralized commercial, real estate and consumer loans primarily to customers in its market areas. Although the Bank has a diversified portfolio, loans (including the FDIC-assisted acquired loans) aggregating approximately $814.1 million and $743.5 million at December 31, 2022 and 2021, respectively, were secured primarily by apartments, condominiums, residential and commercial land developments, industrial revenue bonds and other types of commercial properties in the St. Louis area. Note 18: Additional Cash Flow Information 2021 Year Ended December 31, 2020 (In Thousands) 2019 Noncash Investing and Financing Activities Real estate acquired in settlement of loans Transfer of available-for-sale securities to held-to-maturity Sale and financing of foreclosed assets Conversion of premises and equipment to foreclosed assets Dividends declared but not paid $ 371 226 — — 4,893 $ 1,154 — — 1,215 4,727 $ 1,707 — 625 80 4,676 Additional Cash Payment Information Interest paid Income taxes paid Note 19: Employee Benefits 24,999 10,258 22,700 12,959 42,221 18,755 The Company participates in the Pentegra Defined Benefit Plan for Financial Institutions (Pentegra DB Plan), a multiemployer defined benefit pension plan covering all employees who have met minimum service requirements. Effective July 1, 2006, this plan was closed to new participants. Employees already in the plan continue to accrue benefits. The Pentegra DB Plan’s Employer Identification Number is 13-5645888 and the Plan Number is 333. The Company’s policy is to fund pension cost accrued. Employer contributions charged to expense for this plan for the years ended December 31, 2022, 2021 and 2020, were approximately $1.5 million, $2.1 million and $2.1 million, respectively. The Company’s contributions to the Pentegra DB Plan were not more than 5% of the total contributions to the plan. The funded status of the plan as of July 1, 2022 and 2021, was 100.0% and 112.4%, respectively. The funded status was calculated by taking the market value of plan assets, which reflected contributions received through June 30, 2022 and 2021, respectively, divided by the funding target. No collective bargaining agreements are in place that require contributions to the Pentegra DB Plan. The Company has a defined contribution retirement plan covering substantially all employees. The Company matches 100% of the employee’s contribution on the first 3% of the employee’s compensation and also matches an additional 50% of the employee’s contribution on the next 2% of the employee’s compensation. Employer contributions charged to expense for this plan for the years ended December 31, 2022, 2021 and 2020, were approximately $1.7 million, $1.7 million and $1.6 million, respectively. 57 58 123 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Note 20: Stock Compensation Plans The table below summarizes transactions under the Company’s stock compensation plans, all of which related to stock options granted under such plans: The Company established the 2003 Stock Option and Incentive Plan (the “2003 Plan”) for employees and directors of the Company and its subsidiaries. Under the plan, stock options or other awards could be granted with respect to 598,224 shares of common stock. On May 15, 2013, the Company’s stockholders approved the Great Southern Bancorp, Inc. 2013 Equity Incentive Plan (the “2013 Plan”). Upon the stockholders’ approval of the 2013 Plan, the Company’s 2003 Plan was frozen. As a result, no new stock options or other awards may be granted under the 2003 Plan; however, existing outstanding awards under the 2003 Plan were not affected. At December 31, 2022, 300 options were outstanding under the 2003 Plan. The Company established the 2013 Plan for employees and directors of the Company and its subsidiaries. Under the plan, stock options or other awards could be granted with respect to 700,000 shares of common stock. On May 9, 2018, the Company’s stockholders approved the Great Southern Bancorp, Inc. 2018 Omnibus Incentive Plan (the “2018 Plan”). Upon the stockholders’ approval of the 2018 Plan, the 2013 Plan was frozen. As a result, no new stock options or other awards may be granted under the 2013 Plan; however, existing outstanding awards under the 2013 Plan were not affected. At December 31, 2022, 229,501 options were outstanding under the 2013 Plan. The Company established the 2018 Plan for employees and directors of the Company and its subsidiaries. Under the plan, stock options or other awards could be granted with respect to 800,000 shares of common stock. On May 11, 2022, the Company’s stockholders approved the Great Southern Bancorp, Inc. 2022 Omnibus Incentive Plan (the “2022 Plan”). Upon the stockholders’ approval of the 2022 Plan, the 2018 Plan was frozen. As a result, no new stock options or other awards may be granted under the 2018 Plan; however, existing outstanding awards under the 2018 Plan were not affected. At December 31, 2022, 629,966 options were outstanding under the 2018 Plan. The 2022 Plan provides for the grant from time to time to directors, emeritus directors, officers, employees and advisory directors of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and performance units. The number of shares of common stock available for awards under the 2022 Plan is 800,000 (the “2022 Plan Limit”). Shares utilized for awards other than stock options and stock appreciation rights will be counted against the 2022 Plan Limit on a 2.5-to-1 basis. At December 31, 2022, 205,150 options were outstanding under the 2022 Plan. Stock options may be either incentive stock options or nonqualified stock options, and the option price must be at least equal to the fair value of the Company’s common stock on the date of grant. Options generally are granted for a 10-year term and generally become exercisable in four cumulative annual installments of 25% commencing two years from the date of grant. The Stock Option Committee has discretion to accelerate a participant’s right to exercise an option. Stock awards may be granted upon terms and conditions determined solely at the discretion of the Stock Option Committee. Available to Shares Under Average Grant Option Exercise Price Weighted 49.139 41.740 33.805 38.849 57.513 48.079 57.980 40.532 44.563 52.256 50.528 61.550 52.523 — — 61.505 42.149 61.550 53.671 Balance, January 1, 2020 Granted from 2018 Plan Exercised Forfeited from terminated plan(s) Forfeited from current plan(s) Balance, December 31, 2020 Granted from 2018 Plan Exercised Forfeited from terminated plan(s) Forfeited from current plan(s) Balance, December 31, 2021 Granted from 2018 Plan Forfeited from terminated plan(s) Termination of 2018 Plan Available to Grant from 2022 Plan Granted from 2022 Plan Exercised 436,900 (196,350 ) 807,868 $ 196,350 (21,436 ) (6,875 ) 4,800 (4,800 ) 245,350 971,107 (202,700 ) — — — — 44,022 (44,022 ) 86,672 1,033,303 202,700 (91,285 ) (5,197 ) 2,500 (39,235 ) — — 205,900 (136,801 ) (2,500 ) 39,235 (123,407 ) 800,000 (205,900 ) — Forfeited from current plan(s) 750 (750 ) Balance, December 31, 2022 594,850 1,064,917 $ The Company’s stock option grants contain terms that provide for a graded vesting schedule whereby portions of the options vest in increments over the requisite service period. These options typically vest one-fourth at the end of each of years two, three, four and five from the grant date. As provided for under FASB ASC 718, the Company has elected to recognize compensation expense for options with graded vesting schedules on a straight- line basis over the requisite service period for the entire option grant. In addition, ASC 718 requires companies to recognize compensation expense based on the estimated number of stock options for which service is expected to be rendered. The Company’s historical forfeitures of its share-based awards have not been significant. Forfeitures are estimated annually based on historical information. The fair value of each option award is estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions for the years ended December 31, 2022, 2021 and 2020: Expected dividends per share Risk-free interest rate Expected life of options Expected volatility Weighted average fair value of options granted during year 2022 2021 2020 $ 1.60 3.77% 6 years 23.70% $ 1.44 1.24% 5 years 28.33% $ 1.36 0.35% 5 years 29.32% $ 13.46 $ 11.56 $ 7.30 124 59 60 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Note 20: Stock Compensation Plans The Company established the 2003 Stock Option and Incentive Plan (the “2003 Plan”) for employees and directors of the Company and its subsidiaries. Under the plan, stock options or other awards could be granted with respect to 598,224 shares of common stock. On May 15, 2013, the Company’s stockholders approved the Great Southern Bancorp, Inc. 2013 Equity Incentive Plan (the “2013 Plan”). Upon the stockholders’ approval of the 2013 Plan, the Company’s 2003 Plan was frozen. As a result, no new stock options or other awards may be granted under the 2003 Plan; however, existing outstanding awards under the 2003 Plan were not affected. At December 31, 2022, 300 options were outstanding under the 2003 Plan. The Company established the 2013 Plan for employees and directors of the Company and its subsidiaries. Under the plan, stock options or other awards could be granted with respect to 700,000 shares of common stock. On May 9, 2018, the Company’s stockholders approved the Great Southern Bancorp, Inc. 2018 Omnibus Incentive Plan (the “2018 Plan”). Upon the stockholders’ approval of the 2018 Plan, the 2013 Plan was frozen. As a result, no new stock options or other awards may be granted under the 2013 Plan; however, existing outstanding awards under the 2013 Plan were not affected. At December 31, 2022, 229,501 options were outstanding under the 2013 Plan. Plan. The Company established the 2018 Plan for employees and directors of the Company and its subsidiaries. Under the plan, stock options or other awards could be granted with respect to 800,000 shares of common stock. On May 11, 2022, the Company’s stockholders approved the Great Southern Bancorp, Inc. 2022 Omnibus Incentive Plan (the “2022 Plan”). Upon the stockholders’ approval of the 2022 Plan, the 2018 Plan was frozen. As a result, no new stock options or other awards may be granted under the 2018 Plan; however, existing outstanding awards under the 2018 Plan were not affected. At December 31, 2022, 629,966 options were outstanding under the 2018 The 2022 Plan provides for the grant from time to time to directors, emeritus directors, officers, employees and advisory directors of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and performance units. The number of shares of common stock available for awards under the 2022 Plan is 800,000 (the “2022 Plan Limit”). Shares utilized for awards other than stock options and stock appreciation rights will be counted against the 2022 Plan Limit on a 2.5-to-1 basis. At December 31, 2022, 205,150 options were outstanding under the 2022 Plan. Stock options may be either incentive stock options or nonqualified stock options, and the option price must be at least equal to the fair value of the Company’s common stock on the date of grant. Options generally are granted for a 10-year term and generally become exercisable in four cumulative annual installments of 25% commencing two years from the date of grant. The Stock Option Committee has discretion to accelerate a participant’s right to Stock awards may be granted upon terms and conditions determined solely at the discretion of the Stock Option exercise an option. Committee. The table below summarizes transactions under the Company’s stock compensation plans, all of which related to stock options granted under such plans: Available to Grant Shares Under Option Weighted Average Exercise Price Balance, January 1, 2020 Granted from 2018 Plan Exercised Forfeited from terminated plan(s) Forfeited from current plan(s) Balance, December 31, 2020 Granted from 2018 Plan Exercised Forfeited from terminated plan(s) Forfeited from current plan(s) Balance, December 31, 2021 Granted from 2018 Plan Forfeited from terminated plan(s) Termination of 2018 Plan Available to Grant from 2022 Plan Granted from 2022 Plan Exercised Forfeited from current plan(s) 436,900 (196,350 ) — — 4,800 807,868 $ 196,350 (21,436 ) (6,875 ) (4,800 ) 245,350 (202,700 ) — — 44,022 86,672 (2,500 ) 39,235 (123,407 ) 800,000 (205,900 ) — 750 971,107 202,700 (91,285 ) (5,197 ) (44,022 ) 1,033,303 2,500 (39,235 ) — — 205,900 (136,801 ) (750 ) Balance, December 31, 2022 594,850 1,064,917 $ 49.139 41.740 33.805 38.849 57.513 48.079 57.980 40.532 44.563 52.256 50.528 61.550 52.523 — — 61.505 42.149 61.550 53.671 The Company’s stock option grants contain terms that provide for a graded vesting schedule whereby portions of the options vest in increments over the requisite service period. These options typically vest one-fourth at the end of each of years two, three, four and five from the grant date. As provided for under FASB ASC 718, the Company has elected to recognize compensation expense for options with graded vesting schedules on a straight- line basis over the requisite service period for the entire option grant. In addition, ASC 718 requires companies to recognize compensation expense based on the estimated number of stock options for which service is expected to be rendered. The Company’s historical forfeitures of its share-based awards have not been significant. Forfeitures are estimated annually based on historical information. The fair value of each option award is estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions for the years ended December 31, 2022, 2021 and 2020: Expected dividends per share Risk-free interest rate Expected life of options Expected volatility Weighted average fair value of options granted during year 2022 2021 2020 $ 1.60 3.77% 6 years 23.70% $ 1.44 1.24% 5 years 28.33% $ 1.36 0.35% 5 years 29.32% $ 13.46 $ 11.56 $ 7.30 59 60 125 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Expected volatilities are based on the historical volatility of the Company’s stock, based on the monthly closing stock price. The expected life of options granted is based on actual historical exercise behavior of all employees and directors and approximates the graded vesting period of the options. Expected dividends are based on the annualized dividends declared at the time of the option grant. For 2022, the risk-free interest rate is based on the average of the five-year treasury rate and the seven-year treasury rate on the grant date of the options. For 2021 and 2020, the risk-free interest rate is based on the five-year treasury rate on the grant date of the options. The following table presents the activity related to options under all plans for the year ended December 31, 2022: Options outstanding, January 1, 2022 Granted Exercised Forfeited Options outstanding, December 31, 2022 Weighted Average Exercise Price $ 50.528 61.506 42.149 52.692 53.671 Options 1,033,303 208,400 (136,801) (39,985) 1,064,917 Options exercisable, December 31, 2022 428,073 $ 50.098 Weighted Average Remaining Contractual Term 7.05 years 7.13 years 5.00 years For the years ended December 31, 2022, 2021 and 2020, options granted were 208,400, 202,700, and 196,350, respectively. The total intrinsic value (amount by which the fair value of the underlying stock exceeds the exercise price of an option on exercise date) of options exercised during the years ended December 31, 2022, 2021 and 2020, was $2.6 million, $1.4 million and $371,000, respectively. Cash received from the exercise of options for the years ended December 31, 2022, 2021 and 2020, was $6.3 million, $3.7 million and $661,000, respectively. The actual tax benefit realized for the tax deductions from option exercises totaled $2.3 million, $1.2 million and $257,000 for the years ended December 31, 2022, 2021 and 2020, respectively. The total intrinsic value of options outstanding at December 31, 2022, 2021 and 2020, was $6.7 million, $9.2 million and $4.5 million, respectively. The total intrinsic value of options exercisable at December 31, 2022, 2021 and 2020, was $4.1 million, $5.3 million and $2.9 million, respectively. The following table presents the activity related to nonvested options under all plans for the year ended December 31, 2022. Nonvested options, January 1, 2022 Granted Vested this period Nonvested options forfeited Weighted Average Exercise Price $ 53.091 61.506 52.100 53.125 Weighted Average Grant Date Fair Value $ 9.768 13.317 9.148 9.798 Options 611,956 208,400 (147,716) (35,796) Nonvested options, December 31, 2022 636,844 $ 56.073 $ 11.117 126 61 For the years ended December 31, 2022, 2021 and 2020, compensation expense for stock option grants was $1.4 million, $1.2 million and $1.2 million, respectively. At December 31, 2022, there was $6.5 million of total unrecognized compensation cost related to nonvested options granted under the Company’s plans. This compensation cost is expected to be recognized through 2028, with the majority of this expense recognized in 2023 and 2024. The following table further summarizes information about stock options outstanding at December 31, 2022: Options Outstanding Weighted Average Remaining Average Weighted Options Exercisable Weighted Average Exercise Range of Number Contractual Exercise Number Exercise Prices Outstanding Term Price Exercisable Price $23.860 to 29.640 $32.590 to 38.610 $41.300 to 41.740 $50.710 to 59.750 $60.150 to 62.010 9,977 27,981 210,423 467,102 349,434 0.85 years 1.96 years 6.80 years 6.61 years 8.61 years $ 28.714 33.289 41.630 55.388 60.972 9,977 27,981 86,383 234,308 69,424 1,064,917 7.13 years 53.671 428,073 $ 28.714 33.289 41.473 53.218 60.150 50.098 Note 21: Significant Estimates and Concentrations GAAP requires disclosure of certain significant estimates and current vulnerabilities due to certain concentrations. Estimates related to the allowance for credit losses are reflected in Note 3. Current vulnerabilities due to certain concentrations of credit risk are discussed in the footnotes on loans, deposits and on commitments and credit risk. Note 22: Accumulated Other Comprehensive Income The components of accumulated other comprehensive income (AOCI), included in stockholders’ equity, are as follows: 2022 2021 (In Thousands) Net unrealized gain (loss) on available-for-sale securities $ (62,622) $ 11,834 Net unrealized gain on held-to-maturity securities 118 Net unrealized gain (loss) on active derivatives used for cash flow hedges (31,277) Net unrealized gain on terminated derivatives used for cash flow hedges 22,478 (71,303) 17,948 Tax effect Net-of-tax amount $ (53,355) $ 32,759 — — 30,601 42,435 (9,676) 62 Expected volatilities are based on the historical volatility of the Company’s stock, based on the monthly closing stock price. The expected life of options granted is based on actual historical exercise behavior of all employees and directors and approximates the graded vesting period of the options. Expected dividends are based on the annualized dividends declared at the time of the option grant. For 2022, the risk-free interest rate is based on the average of the five-year treasury rate and the seven-year treasury rate on the grant date of the options. For 2021 and 2020, the risk-free interest rate is based on the five-year treasury rate on the grant date of the options. The following table presents the activity related to options under all plans for the year ended December 31, 2022: Options outstanding, January 1, 2022 $ 50.528 7.05 years Granted Exercised Forfeited Options outstanding, December 31, 2022 Weighted Average Exercise Price 61.506 42.149 52.692 53.671 Options 1,033,303 208,400 (136,801) (39,985) 1,064,917 Weighted Average Remaining Contractual Term 7.13 years 5.00 years Options exercisable, December 31, 2022 428,073 $ 50.098 For the years ended December 31, 2022, 2021 and 2020, options granted were 208,400, 202,700, and 196,350, respectively. The total intrinsic value (amount by which the fair value of the underlying stock exceeds the exercise price of an option on exercise date) of options exercised during the years ended December 31, 2022, 2021 and 2020, was $2.6 million, $1.4 million and $371,000, respectively. Cash received from the exercise of options for the years ended December 31, 2022, 2021 and 2020, was $6.3 million, $3.7 million and $661,000, respectively. The actual tax benefit realized for the tax deductions from option exercises totaled $2.3 million, $1.2 million and $257,000 for the years ended December 31, 2022, 2021 and 2020, respectively. The total intrinsic value of options outstanding at December 31, 2022, 2021 and 2020, was $6.7 million, $9.2 million and $4.5 million, respectively. The total intrinsic value of options exercisable at December 31, 2022, 2021 and 2020, was $4.1 million, $5.3 million and $2.9 million, respectively. The following table presents the activity related to nonvested options under all plans for the year ended December 31, 2022. Nonvested options, January 1, 2022 Granted Vested this period Nonvested options forfeited Weighted Average Exercise Price $ 53.091 61.506 52.100 53.125 Weighted Average Grant Date Fair Value $ 9.768 13.317 9.148 9.798 Options 611,956 208,400 (147,716) (35,796) Nonvested options, December 31, 2022 636,844 $ 56.073 $ 11.117 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 For the years ended December 31, 2022, 2021 and 2020, compensation expense for stock option grants was $1.4 million, $1.2 million and $1.2 million, respectively. At December 31, 2022, there was $6.5 million of total unrecognized compensation cost related to nonvested options granted under the Company’s plans. This compensation cost is expected to be recognized through 2028, with the majority of this expense recognized in 2023 and 2024. The following table further summarizes information about stock options outstanding at December 31, 2022: Range of Exercise Prices $23.860 to 29.640 $32.590 to 38.610 $41.300 to 41.740 $50.710 to 59.750 $60.150 to 62.010 Options Outstanding Weighted Average Remaining Contractual Term Weighted Average Exercise Options Exercisable Weighted Average Exercise Number Price Exercisable Price Number Outstanding 9,977 27,981 210,423 467,102 349,434 0.85 years 1.96 years 6.80 years 6.61 years 8.61 years $ 28.714 33.289 41.630 55.388 60.972 9,977 27,981 86,383 234,308 69,424 $ 28.714 33.289 41.473 53.218 60.150 1,064,917 7.13 years 53.671 428,073 50.098 Note 21: Significant Estimates and Concentrations GAAP requires disclosure of certain significant estimates and current vulnerabilities due to certain concentrations. Estimates related to the allowance for credit losses are reflected in Note 3. Current vulnerabilities due to certain concentrations of credit risk are discussed in the footnotes on loans, deposits and on commitments and credit risk. Note 22: Accumulated Other Comprehensive Income The components of accumulated other comprehensive income (AOCI), included in stockholders’ equity, are as follows: 2022 2021 (In Thousands) Net unrealized gain (loss) on available-for-sale securities $ (62,622) $ 11,834 Net unrealized gain on held-to-maturity securities 118 Net unrealized gain (loss) on active derivatives used for cash flow hedges (31,277) Net unrealized gain on terminated derivatives used for cash flow hedges Tax effect 22,478 (71,303) 17,948 — — 30,601 42,435 (9,676) Net-of-tax amount $ (53,355) $ 32,759 61 62 127 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Amounts reclassified from AOCI and the affected line items in the statements of income during the years ended December 31, 2022, 2021 and 2020, were as follows: The Company’s and the Bank’s actual capital amounts and ratios are presented in the following table. No amount was deducted from capital for interest-rate risk. Amounts Reclassified from AOCI 2021 (In Thousands) 2022 2020 Unrealized gains/(losses) on available-for-sale securities $ (130) $ — $ 78 Change in fair value of cash flow hedge 8,123 8,123 6,764 Affected Line Item in the Statements of Income Net realized gains (losses) on available- for-sale securities (total reclassified amount before tax) Amortization of realized gain on termination of cash flow hedge (total reclassification amount before tax) Income taxes (1,820) (1,852) (1,559) Tax (expense) benefit Total reclassifications out of AOCI $ 6,173 $ 6,271 $ 5,283 Note 23: Regulatory Matters The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct and material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities and certain off-balance-sheet items as calculated under GAAP, regulatory reporting practices, and regulatory capital standards. The Company’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Quantitative measures established by regulatory reporting standards to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below as of December 31, 2022) of Total and Tier I Capital (as defined) to risk-weighted assets (as defined), of Tier I Capital (as defined) to adjusted tangible assets (as defined) and of Common Equity Tier 1 Capital (as defined) to risk-weighted assets (as defined). Management believes, as of December 31, 2022, that the Bank met all capital adequacy requirements to which it was then subject. As of December 31, 2022, the most recent notification from the Bank’s regulators categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized as of December 31, 2022, the Bank must have maintained minimum Total capital, Tier I capital, Tier 1 Leverage capital and Common Equity Tier 1 capital ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank’s category. The Company and the Bank are subject to certain restrictions on the amount of dividends that may be declared without prior regulatory approval. At December 31, 2022 and 2021, the Company and the Bank exceeded their minimum capital requirements then in effect. The entities may not pay dividends which would reduce capital below the minimum requirements shown above. In addition to the minimum capital ratios, the capital rules include a capital conservation buffer, under which a banking organization must have Common Equity Tier 1 capital 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 net unrealized gain or loss on securities is not included in computing regulatory capital. 63 128 Actual Amount Ratio For Capital Adequacy Purposes Amount Ratio (Dollars In Thousands) To Be Well Capitalized Under Prompt Corrective Action Provisions Amount Ratio $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Great Southern Bancorp, Inc. Great Southern Bank 746,287 721,616 13.5% $ 13.1% $ 440,767 440,683 8.0% N/A 8.0% $ 550,854 N/A 10.0% Great Southern Bancorp, Inc. Great Southern Bank 607,807 658,136 11.0% $ 11.9% $ 330,575 330,512 6.0% N/A 6.0% $ 440,683 N/A 8.0% 607,807 658,136 10.6% $ 11.5% $ 228,673 228,511 4.0% N/A 4.0% $ 285,638 N/A 5.0% 582,807 658,136 10.6% $ 11.9% $ 247,932 247,884 4.5% N/A 4.5% $ 358,055 N/A 6.5% As of December 31, 2022 Total capital Tier I capital Tier I leverage capital Great Southern Bancorp, Inc. Great Southern Bank Common equity Tier I capital Great Southern Bancorp, Inc. Great Southern Bank As of December 31, 2021 Total capital Great Southern Bancorp, Inc. Great Southern Bank 745,641 701,215 16.3% $ 15.4% $ 365,120 365,048 8.0% N/A 8.0% $ 456,310 N/A 10.0% Tier I capital Great Southern Bancorp, Inc. Great Southern Bank 613,544 644,134 13.4% $ 14.1% $ 273,840 273,786 6.0% N/A 6.0% $ 365,048 N/A 8.0% Tier I leverage capital Great Southern Bancorp, Inc. Great Southern Bank Common equity Tier I capital Great Southern Bancorp, Inc. Great Southern Bank Note 24: Litigation Matters 613,544 644,134 11.3% $ 11.9% $ 217,264 217,209 4.0% N/A 4.0% $ 271,511 N/A 5.0% 588,544 644,134 12.9% $ 14.1% $ 205,380 205,340 4.5% N/A 4.5% $ 296,602 N/A 6.5% 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. 64 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Amounts reclassified from AOCI and the affected line items in the statements of income during the years ended December 31, 2022, 2021 and 2020, were as follows: The Company’s and the Bank’s actual capital amounts and ratios are presented in the following table. No amount was deducted from capital for interest-rate risk. Amounts Reclassified from AOCI 2022 2021 2020 (In Thousands) Affected Line Item in the Statements of Income Unrealized gains/(losses) on available-for-sale securities $ (130) $ — $ 78 amount before tax) Net realized gains (losses) on available- for-sale securities (total reclassified Change in fair value of cash flow hedge 8,123 8,123 6,764 reclassification amount before tax) Amortization of realized gain on termination of cash flow hedge (total Income taxes (1,820) (1,852) (1,559) Tax (expense) benefit Total reclassifications out of AOCI $ 6,173 $ 6,271 $ 5,283 Note 23: Regulatory Matters The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct and material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities and certain off-balance-sheet items as calculated under GAAP, regulatory reporting practices, and regulatory capital standards. The Company’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Quantitative measures established by regulatory reporting standards to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below as of December 31, 2022) of Total and Tier I Capital (as defined) to risk-weighted assets (as defined), of Tier I Capital (as defined) to adjusted tangible assets (as defined) and of Common Equity Tier 1 Capital (as defined) to risk-weighted assets (as defined). Management believes, as of December 31, 2022, that the Bank met all capital adequacy requirements to which it was then subject. As of December 31, 2022, the most recent notification from the Bank’s regulators categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized as of December 31, 2022, the Bank must have maintained minimum Total capital, Tier I capital, Tier 1 Leverage capital and Common Equity Tier 1 capital ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank’s category. The Company and the Bank are subject to certain restrictions on the amount of dividends that may be declared without prior regulatory approval. At December 31, 2022 and 2021, the Company and the Bank exceeded their minimum capital requirements then in effect. The entities may not pay dividends which would reduce capital below the minimum requirements shown above. In addition to the minimum capital ratios, the capital rules include a capital conservation buffer, under which a banking organization must have Common Equity Tier 1 capital 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 net unrealized gain or loss on securities is not included in computing regulatory capital. 63 Actual Amount Ratio Adequacy Purposes Amount Ratio For Capital (Dollars In Thousands) To Be Well Capitalized Under Prompt Corrective Action Provisions Ratio Amount As of December 31, 2022 Total capital Great Southern Bancorp, Inc. Great Southern Bank $ 746,287 $ 721,616 13.5% $ 13.1% $ 440,767 440,683 8.0% 8.0% $ N/A 550,854 N/A 10.0% Tier I capital Great Southern Bancorp, Inc. Great Southern Bank $ 607,807 $ 658,136 11.0% $ 11.9% $ 330,575 330,512 6.0% 6.0% $ N/A 440,683 N/A 8.0% Tier I leverage capital Great Southern Bancorp, Inc. Great Southern Bank $ 607,807 $ 658,136 10.6% $ 11.5% $ 228,673 228,511 4.0% 4.0% $ N/A 285,638 N/A 5.0% Common equity Tier I capital Great Southern Bancorp, Inc. Great Southern Bank As of December 31, 2021 Total capital $ 582,807 $ 658,136 10.6% $ 11.9% $ 247,932 247,884 4.5% 4.5% $ N/A 358,055 N/A 6.5% Great Southern Bancorp, Inc. Great Southern Bank $ 745,641 $ 701,215 16.3% $ 15.4% $ 365,120 365,048 8.0% 8.0% $ N/A 456,310 N/A 10.0% Tier I capital Great Southern Bancorp, Inc. Great Southern Bank $ 613,544 $ 644,134 13.4% $ 14.1% $ 273,840 273,786 6.0% 6.0% $ N/A 365,048 N/A 8.0% Tier I leverage capital Great Southern Bancorp, Inc. Great Southern Bank $ 613,544 $ 644,134 11.3% $ 11.9% $ 217,264 217,209 4.0% 4.0% $ N/A 271,511 N/A 5.0% Common equity Tier I capital Great Southern Bancorp, Inc. Great Southern Bank $ 588,544 $ 644,134 12.9% $ 14.1% $ 205,380 205,340 4.5% 4.5% $ N/A 296,602 N/A 6.5% Note 24: Litigation Matters 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. 129 64 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 December 31, 2022, 2021 and 2020 Note 25: Summary of Unaudited Quarterly Operating Results Note 26: Condensed Parent Company Statements Note 26: Condensed Parent Company Statements Following is a summary of unaudited quarterly operating results for the years 2022, 2021 and 2020: 2022 Three Months Ended March 31 June 30 September 30 December 31 (In Thousands, Except Per Share Data) Interest income Interest expense Provision (credit) for credit losses on loans Provision (credit) for unfunded commitments Net realized gain (loss) on available-for-sale securities Non-interest income Non-interest expense Provision for income taxes Net income available to common shareholders Earnings per common share – diluted $ 46,673 3,407 — (193) 7 9,176 31,268 4,380 16,987 1.30 $ 52,698 3,867 — 2,223 — 9,319 33,004 4,699 18,224 1.44 $ 59,657 6,759 2,000 1,315 31 7,984 34,758 4,676 18,133 1.46 $ 67,949 13,330 1,000 (159) (168) 7,661 34,336 4,499 22,604 1.84 Interest income Interest expense Provision (credit) for credit losses on loans Provision (credit) for unfunded commitments Non-interest income Non-interest expense Provision for income taxes Net income available to common shareholders Earnings per common share – diluted Interest income Interest expense Provision for credit losses on loans Net realized gains on available-for-sale securities Non-interest income Non-interest expense Provision for income taxes Net income available to common shareholders Earnings per common share – diluted 2021 Three Months Ended March 31 June 30 September 30 December 31 (In Thousands, Except Per Share Data) $ 50,633 6,5444 300 (674) 9,736 30,321 5,010 18,868 1.36 $ 50,452 5,768 (1,000) (307) 9,585 30,191 5,271 20,114 1.46 $ 49,640 4,717 (3,000) 643 9,798 31,339 5,375 20,364 1.49 $ 47,948 3,723 (3,000) 1,277 9,198 35,784 4,081 15,281 1.14 2020 Three Months Ended March 31 June 30 September 30 December 31 (In Thousands, Except Per Share Data) $ 57,474 12,536 3,871 — 7,367 30,815 2,751 14,868 1.04 130 $ 54,011 10,556 6,000 78 8,261 29,349 3,164 13,203 0.93 $ 53,599 9,431 4,500 — 9,466 31,988 3,692 13,454 0.96 $ 52,619 8,042 1,500 — 9,956 31,073 4,172 17,788 1.28 65 The condensed statements of financial condition at December 31, 2022 and 2021, and statements of income, The condensed statements of financial condition at December 31, 2022 and 2021, and statements of income, comprehensive income and cash flows for the years ended December 31, 2022, 2021 and 2020, for the parent comprehensive income and cash flows for the years ended December 31, 2022, 2021 and 2020, for the parent company, Great Southern Bancorp, Inc., were as follows: company, Great Southern Bancorp, Inc., were as follows: Statements of Financial Condition Statements of Financial Condition Assets Assets Cash Cash Investment in subsidiary bank Investment in subsidiary bank Deferred and accrued income taxes Deferred and accrued income taxes Prepaid expenses and other assets Prepaid expenses and other assets Liabilities and Stockholders’ Equity Liabilities and Stockholders’ Equity Accounts payable and accrued expenses Accounts payable and accrued expenses Subordinated debentures issued to capital trust Subordinated debentures issued to capital trust Subordinated notes Subordinated notes Common stock Common stock Additional paid-in capital Additional paid-in capital Retained earnings Retained earnings Accumulated other comprehensive income (loss) Accumulated other comprehensive income (loss) $ $ $ $ 5,401 5,401 25,774 25,774 74,281 74,281 122 122 42,445 42,445 543,875 543,875 (53,355) (53,355) December 31, December 31, 2022 2022 2021 2021 (In Thousands) (In Thousands) $ $ $ $ 29,097 29,097 608,416 608,416 148 148 882 882 $ $ 638,543 638,543 $ $ 721,676 721,676 48,372 48,372 672,342 672,342 94 94 868 868 5,166 5,166 25,774 25,774 73,984 73,984 131 131 38,314 38,314 545,548 545,548 32,759 32,759 $ $ 638,543 638,543 $ $ 721,676 721,676 66 66 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 December 31, 2022, 2021 and 2020 Note 25: Summary of Unaudited Quarterly Operating Results Note 26: Condensed Parent Company Statements Note 26: Condensed Parent Company Statements Following is a summary of unaudited quarterly operating results for the years 2022, 2021 and 2020: The condensed statements of financial condition at December 31, 2022 and 2021, and statements of income, The condensed statements of financial condition at December 31, 2022 and 2021, and statements of income, comprehensive income and cash flows for the years ended December 31, 2022, 2021 and 2020, for the parent comprehensive income and cash flows for the years ended December 31, 2022, 2021 and 2020, for the parent company, Great Southern Bancorp, Inc., were as follows: company, Great Southern Bancorp, Inc., were as follows: Statements of Financial Condition Statements of Financial Condition Assets Assets Cash Cash Investment in subsidiary bank Investment in subsidiary bank Deferred and accrued income taxes Deferred and accrued income taxes Prepaid expenses and other assets Prepaid expenses and other assets Liabilities and Stockholders’ Equity Liabilities and Stockholders’ Equity Accounts payable and accrued expenses Accounts payable and accrued expenses Subordinated debentures issued to capital trust Subordinated debentures issued to capital trust Subordinated notes Subordinated notes Common stock Common stock Additional paid-in capital Additional paid-in capital Retained earnings Retained earnings Accumulated other comprehensive income (loss) Accumulated other comprehensive income (loss) December 31, December 31, 2022 2022 2021 2021 (In Thousands) (In Thousands) $ $ $ $ 29,097 29,097 608,416 608,416 148 148 882 882 48,372 48,372 672,342 672,342 94 94 868 868 $ $ 638,543 638,543 $ $ 721,676 721,676 $ $ $ $ 5,401 5,401 25,774 25,774 74,281 74,281 122 122 42,445 42,445 543,875 543,875 (53,355) (53,355) 5,166 5,166 25,774 25,774 73,984 73,984 131 131 38,314 38,314 545,548 545,548 32,759 32,759 $ $ 638,543 638,543 $ $ 721,676 721,676 131 66 66 2022 Three Months Ended March 31 June 30 September 30 December 31 (In Thousands, Except Per Share Data) $ 46,673 $ 52,698 $ 59,657 Interest income Interest expense Provision (credit) for credit losses on loans Provision (credit) for unfunded commitments Net realized gain (loss) on available-for-sale securities Non-interest income Non-interest expense Provision for income taxes Net income available to common shareholders Earnings per common share – diluted 3,407 — (193) 7 9,176 31,268 4,380 16,987 1.30 Interest income Interest expense Provision (credit) for credit losses on loans Provision (credit) for unfunded commitments Non-interest income Non-interest expense Provision for income taxes Net income available to common shareholders Earnings per common share – diluted Interest income Interest expense Provision for credit losses on loans Net realized gains on available-for-sale securities Non-interest income Non-interest expense Provision for income taxes Net income available to common shareholders Earnings per common share – diluted $ 50,633 6,5444 300 (674) 9,736 30,321 5,010 18,868 1.36 12,536 3,871 — 7,367 30,815 2,751 14,868 1.04 3,867 2,223 — — 9,319 33,004 4,699 18,224 1.44 5,768 (1,000) (307) 9,585 30,191 5,271 20,114 1.46 10,556 6,000 78 8,261 29,349 3,164 13,203 0.93 2021 Three Months Ended March 31 June 30 September 30 December 31 (In Thousands, Except Per Share Data) $ 50,452 $ 49,640 $ 47,948 2020 Three Months Ended March 31 June 30 September 30 December 31 (In Thousands, Except Per Share Data) $ 57,474 $ 54,011 $ 53,599 $ 52,619 6,759 2,000 1,315 31 7,984 34,758 4,676 18,133 1.46 4,717 (3,000) 643 9,798 31,339 5,375 20,364 1.49 9,431 4,500 — 9,466 31,988 3,692 13,454 0.96 $ 67,949 13,330 1,000 (159) (168) 7,661 34,336 4,499 22,604 1.84 3,723 (3,000) 1,277 9,198 35,784 4,081 15,281 1.14 8,042 1,500 — 9,956 31,073 4,172 17,788 1.28 65 Great Southern Bancorp, Inc. Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 December 31, 2022, 2021 and 2020 Statements of Income Income Statements of Income Income Dividends from subsidiary bank Other income Dividends from subsidiary bank Other income Expense Expense Operating expenses Operating expenses Interest expense Interest expense Income before income tax and Income before income tax and equity in undistributed earnings of subsidiaries Credit for income taxes equity in undistributed earnings of subsidiaries Credit for income taxes Income before equity in earnings Income before equity in earnings of subsidiaries of subsidiaries Equity in undistributed earnings of Equity in undistributed earnings of subsidiaries subsidiaries 2022 2022 2021 (In Thousands) 2021 (In Thousands) 2020 2020 $ $ 60,000 60,000 — — $ $ 74,000 74,000 — — $ $ 40,000 40,000 5 5 60,000 60,000 74,000 74,000 40,005 40,005 2,550 5,298 2,550 5,298 7,848 7,848 2,121 7,613 2,121 7,613 9,734 9,734 2,197 7,459 2,197 7,459 9,656 9,656 52,152 (1,608) 52,152 (1,608) 64,266 (1,850) 64,266 (1,850) 30,349 (1,800) 30,349 (1,800) 53,760 53,760 66,116 66,116 32,149 32,149 22,188 22,188 8,511 8,511 27,164 27,164 Net income Net income $ $ 75,948 75,948 $ $ 74,627 74,627 $ $ 59,313 59,313 132 67 67 68 68 Statements of Cash Flows Statements of Cash Flows Operating Activities Operating Activities Net income Net income Items not requiring (providing) cash Items not requiring (providing) cash Equity in undistributed earnings of subsidiary Equity in undistributed earnings of subsidiary Compensation expense for stock option grants Compensation expense for stock option grants Amortization of interest rate derivative and deferred Amortization of interest rate derivative and deferred costs on subordinated notes costs on subordinated notes Changes in Changes in Prepaid expenses and other assets Prepaid expenses and other assets Accounts payable and accrued expenses Accounts payable and accrued expenses Income taxes Income taxes 2022 2022 2021 2021 2020 2020 (In Thousands) (In Thousands) $ $ 75,948 75,948 $ $ 74,627 74,627 $ $ 59,313 59,313 (22,188) (22,188) 1,437 1,437 297 297 (14) (14) 69 69 (54) (54) (8,511) (8,511) 1,225 1,225 587 587 15 15 (1,661) (1,661) 63 63 66,345 66,345 (27,164) (27,164) 1,153 1,153 608 608 (15) (15) 31 31 (46) (46) 33,880 33,880 Net cash provided by operating activities Net cash provided by operating activities 55,495 55,495 Investing Activities Investing Activities Net cash provided by investing activities Net cash provided by investing activities — — — — — — Financing Activities Financing Activities Purchases of the Company’s common stock Purchases of the Company’s common stock Proceeds from issuance of subordinated notes Proceeds from issuance of subordinated notes Redemption of subordinated notes Redemption of subordinated notes Dividends paid Dividends paid Stock options exercised Stock options exercised Net cash provided by (used in) financing activities Net cash provided by (used in) financing activities — — (75,000) (75,000) — — (61,847) (61,847) — — (19,181) (19,181) 6,258 6,258 (74,770) (74,770) (39,123) (39,123) — — (18,800) (18,800) 3,700 3,700 (129,223) (129,223) (22,104) (22,104) 73,513 73,513 (33,426) (33,426) 661 661 18,644 18,644 Increase (Decrease) in Cash Increase (Decrease) in Cash (19,275) (19,275) (62,878) (62,878) 52,524 52,524 Cash, Beginning of Year Cash, Beginning of Year Cash, End of Year Cash, End of Year Additional Cash Payment Information Additional Cash Payment Information Interest paid Interest paid 48,372 48,372 111,250 111,250 58,726 58,726 $ $ 29,097 29,097 $ $ 48,372 48,372 $ $ 111,250 111,250 $ $ 5,115 5,115 $ $ 9,103 9,103 $ $ 7,349 7,349 Statements of Comprehensive Income Statements of Comprehensive Income 2022 2022 2021 2021 2020 2020 (In Thousands) (In Thousands) Net Income Net Income $ 75,948 $ 75,948 $ 74,627 $ 74,627 $ 59,313 $ 59,313 Comprehensive income (loss) of subsidiaries Comprehensive income (loss) of subsidiaries (86,114) (86,114) (20,392) (20,392) 20,905 20,905 Comprehensive Income Comprehensive Income $ $ (10,166) (10,166) $ $ 54,235 54,235 $ $ 80,218 80,218 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Great Southern Bancorp, Inc. Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 December 31, 2022, 2021 and 2020 Dividends from subsidiary bank $ $ $ 40,000 Statements of Income Income Other income Expense Operating expenses Interest expense 2022 2021 (In Thousands) 2020 60,000 — 60,000 2,550 5,298 7,848 74,000 — 74,000 2,121 7,613 9,734 5 40,005 2,197 7,459 9,656 Income before income tax and equity in undistributed earnings of subsidiaries Credit for income taxes Income before equity in earnings of subsidiaries Equity in undistributed earnings of subsidiaries Net income 52,152 (1,608) 64,266 (1,850) 30,349 (1,800) 53,760 66,116 32,149 22,188 8,511 27,164 $ 75,948 $ 74,627 $ 59,313 Statements of Cash Flows Statements of Cash Flows Operating Activities Operating Activities Net income Items not requiring (providing) cash Net income Items not requiring (providing) cash Equity in undistributed earnings of subsidiary Equity in undistributed earnings of subsidiary Compensation expense for stock option grants Compensation expense for stock option grants Amortization of interest rate derivative and deferred Amortization of interest rate derivative and deferred costs on subordinated notes costs on subordinated notes Changes in Changes in Prepaid expenses and other assets Prepaid expenses and other assets Accounts payable and accrued expenses Accounts payable and accrued expenses Income taxes Income taxes Net cash provided by operating activities Net cash provided by operating activities 2022 2022 2021 (In Thousands) 2021 (In Thousands) 2020 2020 $ $ 75,948 75,948 $ $ 74,627 74,627 $ $ 59,313 59,313 (22,188) (22,188) 1,437 1,437 (8,511) 1,225 (8,511) 1,225 (27,164) (27,164) 1,153 1,153 297 297 587 587 608 608 (14) (14) 69 69 (54) (54) 55,495 55,495 15 15 (1,661) (1,661) 63 63 66,345 66,345 (15) (15) 31 31 (46) (46) 33,880 33,880 Investing Activities Investing Activities Net cash provided by investing activities Net cash provided by investing activities — — — — — — Financing Activities Financing Activities Purchases of the Company’s common stock Purchases of the Company’s common stock Proceeds from issuance of subordinated notes Proceeds from issuance of subordinated notes Redemption of subordinated notes Redemption of subordinated notes Dividends paid Dividends paid Stock options exercised Stock options exercised Net cash provided by (used in) financing activities Net cash provided by (used in) financing activities (61,847) (61,847) — — — — (19,181) (19,181) 6,258 6,258 (74,770) (74,770) (39,123) (39,123) — — (75,000) (75,000) (18,800) (18,800) 3,700 3,700 (129,223) (129,223) (22,104) 73,513 — (22,104) 73,513 — (33,426) (33,426) 661 661 18,644 18,644 Increase (Decrease) in Cash Increase (Decrease) in Cash (19,275) (19,275) (62,878) (62,878) 52,524 52,524 Cash, Beginning of Year Cash, Beginning of Year Cash, End of Year Cash, End of Year 48,372 48,372 111,250 111,250 58,726 58,726 $ $ 29,097 29,097 $ $ 48,372 48,372 $ $ 111,250 111,250 Additional Cash Payment Information Additional Cash Payment Information Interest paid Interest paid $ $ 5,115 5,115 $ $ 9,103 9,103 $ $ 7,349 7,349 2022 2022 2021 (In Thousands) 2021 (In Thousands) 2020 2020 Statements of Comprehensive Income Statements of Comprehensive Income Net Income Net Income $ 75,948 $ 75,948 $ 74,627 $ 74,627 $ 59,313 $ 59,313 Comprehensive income (loss) of subsidiaries Comprehensive income (loss) of subsidiaries (86,114) (86,114) (20,392) (20,392) 20,905 20,905 Comprehensive Income Comprehensive Income $ $ (10,166) (10,166) $ $ 54,235 54,235 $ $ 80,218 80,218 67 68 68 133 Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 Investing Activities Net cash provided by investing activities — — — Statements of Cash Flows Operating Activities Net income Items not requiring (providing) cash Equity in undistributed earnings of subsidiary Compensation expense for stock option grants Amortization of interest rate derivative and deferred costs on subordinated notes Changes in Prepaid expenses and other assets Accounts payable and accrued expenses Income taxes Net cash provided by operating activities Financing Activities Purchases of the Company’s common stock Proceeds from issuance of subordinated notes Redemption of subordinated notes Dividends paid Stock options exercised Net cash provided by (used in) financing activities Increase (Decrease) in Cash 2022 2021 (In Thousands) 2020 $ 75,948 $ 74,627 $ 59,313 (22,188) 1,437 297 (14) 69 (54) 55,495 (61,847) — (19,181) 6,258 (74,770) (19,275) 48,372 (8,511) 1,225 587 (1,661) 15 63 66,345 (39,123) — (18,800) 3,700 (129,223) (62,878) 111,250 (27,164) 1,153 608 (15) 31 (46) 33,880 (22,104) 73,513 (33,426) 661 18,644 52,524 58,726 — (75,000) — Additional Cash Payment Information Interest paid $ Great Southern Bancorp, Inc. Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 29,097 5,115 $ $ $ 48,372 $ 111,250 9,103 $ 7,349 Cash, Beginning of Year Cash, End of Year Statements of Comprehensive Income Statements of Cash Flows Operating Activities Net Income Net income Items not requiring (providing) cash Comprehensive income (loss) of subsidiaries Equity in undistributed earnings of subsidiary Compensation expense for stock option grants Amortization of interest rate derivative and deferred Comprehensive Income Changes in costs on subordinated notes Prepaid expenses and other assets Accounts payable and accrued expenses Income taxes Net cash provided by operating activities 2022 2022 2021 (In Thousands) 2021 (In Thousands) 2020 2020 $ 75,948 $ 75,948 $ $ 74,627 74,627 $ $ 59,313 59,313 (22,188) 1,437 (86,114) (8,511) (20,392) 1,225 (27,164) 20,905 1,153 $ (10,166) 297 $ 54,235 587 $ 80,218 608 (14) 69 (54) 55,495 15 (1,661) 63 66,345 (15) 31 (46) 33,880 Investing Activities 68 Net cash provided by investing activities — — — Financing Activities Purchases of the Company’s common stock Proceeds from issuance of subordinated notes Redemption of subordinated notes Dividends paid Stock options exercised Net cash provided by (used in) financing activities Increase (Decrease) in Cash Cash, Beginning of Year Cash, End of Year Additional Cash Payment Information Interest paid (61,847) — — (19,181) 6,258 (74,770) (19,275) 48,372 29,097 5,115 $ $ (39,123) — (75,000) (18,800) 3,700 (129,223) (62,878) 111,250 (22,104) 73,513 — (33,426) 661 18,644 52,524 58,726 $ $ 48,372 $ 111,250 9,103 $ 7,349 2022 2021 (In Thousands) 2020 Statements of Comprehensive Income Net Income $ 75,948 $ 74,627 $ 59,313 Comprehensive income (loss) of subsidiaries (86,114) (20,392) 20,905 Comprehensive Income $ (10,166) $ 54,235 $ 80,218 134 68 GreatSouthernBank.com Please recycle. 001CSN52F8 Annual Report

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