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.
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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.
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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.
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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%
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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.
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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.
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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
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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
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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.
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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
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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 %
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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
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001CSN52F8 Annual Report