Resilient Growth
Building Long-Term Value
Annual Report
2024
Great Southern Bancorp, Inc. Annual Report 2024
2
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:
Investor Relations
Great Southern Bancorp, Inc.
P.O. Box 9009
Springfield, MO 65808
INVESTOR RELATIONS
Zack Mukewa
Great Southern Bank
P.O. Box 9009
Springfield, MO 65808
AUDITORS
Forvis Mazars, 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 Investor Services
P.O. Box 43006
Providence, RI 02940-3006
Overnight correspondence:
Computershare Investor Services
150 Royall St., Suite 101
Canton, MA 02021
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
CORPORATE HEADQUARTERS
1451 E. Battlefield
Springfield, MO 65804
800-749-7113
MAILING ADDRESS
P.O. Box 9009
Springfield, MO 65808
36th Annual Meeting
of Stockholders
May 7, 2025
Virtual Meeting
10 a.m. CDT
3
CORPORATE PROFILE
Great Southern Bank was founded in 1923 with a $5,000
investment, four employees, and 936 customers. Today, it
has grown to $6.0 billion in total assets, with more than 1,100
dedicated associates serving 130,000 households.
Headquartered in Springfield, Missouri, the Company operates
offices in 12 states, including 89 retail banking centers in
Missouri, Arkansas, Iowa, Kansas, Minnesota, and Nebraska
and seven loan production offices in the cities of Atlanta,
Charlotte, Chicago, Dallas, Denver, Omaha, and Phoenix.
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. 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 is through a banking center, digital banking,
an ATM/ITM, or by telephone.
STOCK INFORMATION
The Company’s common stock is listed on the NASDAQ
Global Select Market under the symbol “GSBC.”
As of December 31, 2024, there were 11,723,548 total shares
of common stock outstanding.
The last sale price of the Company’s Common Stock on
December 31, 2024 was $59.70.
2024
2023
2022
High
Low
High
Low
High
Low
First Quarter
$60.31
$48.19
$60.18
$49.04
$62.70
$56.94
Second Quarter
56.05
49.74
56.00
45.39
61.17
56.17
Third Quarter
65.90
52.70
57.72
45.66
63.95
50.30
Fourth Quarter
68.02
54.23
61.94
46.60
64.16
57.15
High/Low Stock Price
2024
2023
2022
First Quarter
$0.40
$0.40
$0.36
Second Quarter
0.40
0.40
0.40
Third Quarter
0.40
0.40
0.40
Fourth Quarter
0.40
0.40
0.40
Regular Dividend Declarations
Great Southern Bancorp, Inc. Annual Report 2024
4
As we reflect on the year 2024, we are proud of what Great
Southern has accomplished in an environment marked by
both complexity and opportunity. Our theme this year, Resilient
Growth: Building Long-Term Value, resonates deeply with our
journey—a year in which we navigated economic uncertainties
and heightened competition while remaining steadfast in our
mission to deliver sustainable value to our stakeholders.
Our financial performance in 2024 underscores the strength
of our business model and our commitment to disciplined
execution. We generated net income of $61.8 million, or $5.26
per diluted common share, reflecting our ability to adapt to
shifting market dynamics while maintaining a long-term focus
on growth and stockholder value creation. Our success is
grounded in a strong, customer-focused culture that fosters
innovation, operational excellence, and financial discipline.
RESILIENCE THROUGH ADAPTABILITY AND DISCIPLINE
Throughout 2024, resilience became our hallmark. Rising
deposit costs and fluctuations in interest rates presented
challenges, but through strategic balance sheet management
and proactive interest rate positioning, we stabilized earnings
and strengthened our capital base. Our net interest margin
improved to 3.49% in the fourth quarter, up from 3.30% in
the same period in 2023, showcasing our ability to navigate
pressures while optimizing yields and controlling funding
costs.
Our proactive approach to interest rate management played
a key role in offsetting the impacts of rising deposit rates.
As maturing deposits were repriced or replaced at higher
market rates, we strategically managed funding costs
while maintaining loan yield growth. We anticipate the
2024 Federal Reserve rate cuts will provide relief in 2025,
contributing to further margin stabilization. Additionally,
our proactive risk management contributed to continued
outstanding asset quality. Non-performing assets declined to
$9.6 million, representing just 0.16% of total assets, and net
charge-offs fell to $155,000 in the fourth quarter—testament
to our disciplined approach to lending and credit risk.
As a financial institution with a legacy of trust, we recognize
that resilience is built on a foundation of long-term planning,
strategic investments, and a customer-first approach. We
have taken decisive action to ensure that we are not only
weathering current economic headwinds but positioning
ourselves for future success through enhanced lending
strategies, careful liquidity management, and continued
Total Assets (in billions)
2020
2021
2022
2023
2024
0
$1B
$2B
$3B
$4B
$5B
$6B
Total Deposits (in billions)
2020
2021
2022
2023
2024
0
$1B
$2B
$3B
$4B
$5B
$6B
To our Stockholders,
Stakeholders, and Team Members,
William V. Turner Chairman of the Board
Joseph W. Turner President and Chief Executive Officer
5
operational efficiencies. By prioritizing capital preservation
and strategic reinvestment, we continue to create sustainable
financial strength for our stakeholders.
STRATEGIC GROWTH ACROSS KEY SEGMENTS
Targeted loan growth remained central to our strategy, with
gross loans increasing by $100.8 million during the year. Our
multi-family residential loan portfolio led this growth, driven by
sustained demand in key markets. Meanwhile, we managed
a strategic transition of construction loans to completed
multi-family residential and commercial projects, reflecting
our ability to balance growth opportunities with prudent risk
management.
We also recognize that banking is not just about numbers,
but about supporting the individuals, families, and businesses
that drive our local economies. Our small business lending
initiatives expanded in 2024, helping local entrepreneurs and
enterprises gain access to the capital they need to grow and
thrive. Whether it is through commercial real estate financing,
business lines of credit, or tailored banking solutions, we
remain committed to serving the diverse needs of our
customers.
Our loan pipeline remains strong, particularly in construction
and multi-family lending, ensuring we will have ample
opportunity to support our customers in 2025. We remain
focused on meeting market demand while maintaining sound
underwriting practices to ensure long-term portfolio stability.
Additionally, we are committed to leveraging relationships
within our communities to support small businesses, further
diversifying our portfolio and reinforcing our role as a trusted
financial partner. Through expanding financial literacy programs
and community partnerships, we are proactively engaging with
underserved segments, providing them with the tools needed
for financial success.
Total Loans (in billions)
2020
2021
2022
2023
2024
0
$1B
$2B
$3B
$4B
$5B
$6B
Book Value Per Common Share
2020
2021
2022
2023
2024
0
10
20
30
40
50
60
Net Income (in millions)
2020
2021
2022
2023
2024
0
10
20
30
40
50
60
70
80
The graph above 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, 2019 through December
31, 2024. The graph assumes that $100 was invested in GSBC Common Stock and in
each of the indices on December 31, 2019 and that all dividends were reinvested.
Source: S&P Global Market Intelligence © 2025
Great Southern Bancorp, Inc.
NASDAQ Composite Index
S&P U.S. BMI Banks - Midwest Region Index
$110.75
Total Return Five Year Cumulative
2019
2020
2021
2022
2023
2024
0
50
100
150
200
250
Great Southern Bancorp, Inc. Annual Report 2024
6
EXPENSE MANAGEMENT AND TECHNOLOGY INVESTMENTS
Our commitment to disciplined expense control allowed us to manage non-interest expenses
at $141.5 million in 2024, consistent with the previous year, even as we continued investing in
strategic initiatives. Our efficiency ratio was 64.40% in 2024, compared to 63.16% in 2023.
A key achievement in 2024 was working with our partners to identify opportunities to advance
various technologies and solutions. Many of these projects will be completed during 2025. This
large-scale technology transformation is more than an operational upgrade—it is a commitment
to enhancing customer experience, increasing efficiency, and providing greater security in our
banking services. With cybersecurity threats evolving, we have prioritized investments in cutting-
edge security infrastructure, ensuring that customer data remains protected while enhancing
digital banking capabilities.
In tandem with this reinvestment in core technologies, we are also implementing a
comprehensive refresh of our products and services lineup, ensuring a renewed focus on
addressing the evolving needs of both retail and business customers. By integrating advanced
digital solutions, expanding online banking capabilities, and enhancing in-branch services, we
are committed to providing seamless, secure, and convenient banking experiences.
RECOGNITION AND COMMUNITY COMMITMENT
In 2024, Great Southern Bancorp was honored to be recognized for our financial strength,
unwavering dedication to customer service, and deep-rooted commitment to the communities
we serve. These accolades reflect the dedication of our employees, the trust of our
customers, and the strong relationships we have built over decades of service. Among our key
recognitions:
7
• FORBES: AMERICA’S BEST BANKS A prestigious
ranking that underscores our continued financial stability,
customer-focused innovation, and responsible banking
practices.
• BANK DIRECTOR: TOP 25 US BANKS A testament to
our prudent management strategies, long-term vision,
and operational excellence in an ever-evolving financial
landscape.
Beyond these achievements, our commitment to corporate
citizenship remained at the core of our mission in 2024.
Through our Community Matters program, we took
deliberate steps to positively impact lives and strengthen the
communities we proudly serve. This year, our contributions
included:
• $2.1 MILLION+ IN CORPORATE DONATIONS AND
SPONSORSHIPS Supporting local initiatives, educational
programs, and organizations spurring economic
development that empowers and uplifts individuals and
businesses.
• SUPPORT FOR OVER 800 NONPROFIT AND CIVIC
ORGANIZATIONS Partnering with organizations
dedicated to providing essential services such as food
security, housing support, and healthcare access.
• NEARLY $59K IN ASSOCIATE DONATIONS
Encouraging a culture of giving within our organization,
where employees contribute their own funds to causes
they deeply care about.
• 7,400+ VOLUNTEER HOURS, VALUED AT MORE THAN
$200,000 Employees actively engaged in mentorship
programs, financial literacy workshops, environmental
sustainability efforts, and hands-on community service
projects.
Our investment in communities extends far beyond monetary
contributions—it is about creating opportunities, fostering
economic resilience, and ensuring that the places where
we live and work thrive for generations to come. We believe
that by working together with local leaders, businesses,
and nonprofit organizations, we can build a stronger, more
inclusive financial ecosystem that benefits all.
Through these efforts, we have solidified our role as a
responsible corporate citizen, strengthening relationships
and reinforcing our commitment to fostering economic and
social well-being across our footprint. We are immensely
proud of the work we have accomplished.
LOOKING AHEAD TO 2025
As we move into 2025, our strategy will remain grounded in
disciplined growth, prudent risk management, and forward-
looking investments. We will complete the construction of
a next-generation banking center in Springfield, Missouri,
which will integrate state-of-the-art technology and flexible
service models to elevate the customer experience.
Additionally, we will expand our digital capabilities to ensure
secure, intuitive, and efficient banking services tailored to
the needs of today’s customers.
We remain confident that our unwavering commitment to
innovation, community service, and customer satisfaction will
continue to define Great Southern Bancorp as an industry
leader. By prioritizing long-term sustainability, enhanced
financial inclusion, and operational excellence, we are not
only reinforcing our leadership in banking but also ensuring
a legacy of strength and prosperity for generations to come.
Sincerely,
William V. Turner
Joseph W. Turner
Chairman
President and CEO
Great Southern Bancorp, Inc. Annual Report 2024
8
Great Southern Bancorp, Inc. Directors
KEVIN R. AUSBURN
Board Member; Retired – Chairman
and CEO SMC Packaging Group
DEBRA MALLONEE (SHANTZ) HART
Board Member; Attorney; Owner,
Housing Plus, LLC and Sustainable
Housing Solutions
JULIE TURNER BROWN
Board Member; Shareholder,
Carnahan Evans, P.C.
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
AMELIA A. COUNTS
Board Member; Regional Vice
President of Sales, Wise F&I
WILLIAM V. TURNER
Chairman of the Board
Great Southern Bancorp, Inc.
STEVEN D. EDWARDS
Board Member; Retired –
CEO CoxHealth
JOSEPH W. TURNER
President and Chief Executive Officer
Great Southern Bancorp, Inc.
JOSEPH TURNER
President and Chief Executive Officer
REX COPELAND
Chief Financial Officer
MARK MAPLES
Chief Operations Officer
BRYAN TIEDE
Chief Risk Officer
ERIC JOHNSON
Chief Information Officer
JOHN BUGH
Chief Lending Officer
KEVIN BAKER
Chief Credit Officer
LAURA SMITH
Chief Retail Banking Officer
MATT SNYDER
Chief Human Resources Officer
TAMMY BAURICHTER
Controller
STACY FENDER
Director of Communications and Marketing
DEBBIE FLOWERS
Director of Credit Risk Administration
HENRY HEIMSOTH
Director of Commercial Lending
JEFF PATRICK
Director of Physical Operations
RYAN STOREY
Director of Loan Operations
Great Southern Leadership Team
9
Selected Financial Data
The following 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 Mazars, LLP. See Item 7. “Managements’ 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.
2024
2023
2022
2021
2020
Assets
$5,981,628
$5,812,402
$5,680,702
$5,449,944
$5,526,420
Loans receivable, net
4,697,330
4,595,469
4,511,647
4,016,235
4,314,584
Allowance for credit losses on loans
64,760
64,670
63,480
60,754
55,743
Available-for-sale securities
533,373
478,207
490,592
501,032
414,933
Held-to-maturity securities
187,433
195,023
202,495
—
—
Other real estate and repossessions, net
5,993
23
233
2,087
1,877
Deposits
4,605,549
4,721,708
4,684,910
4,552,101
4,516,903
Total borrowings and other interest-bearing liabilities
679,341
423,806
366,481
238,713
339,863
Stockholders’ equity
(retained earnings substantially restricted)
599,568
571,829
533,087
616,752
629,741
Common stockholders’ equity
599,568
571,829
533,087
616,752
629,741
Average loans receivable
4,716,533
4,631,856
4,386,042
4,274,176
4,399,259
Average total assets
5,886,214
5,719,196
5,519,790
5,502,356
5,323,426
Average deposits
4,681,660
4,754,310
4,607,363
4,539,740
4,330,271
Average stockholders’ equity
585,960
550,920
565,173
627,516
622,437
Number of deposit accounts
228,885
230,697
232,688
229,942
229,470
Number of full-service offices
89
90
92
93
94
Summary Statement of Financial Condition Information (dollars in thousands)
December 31,
Great Southern Bancorp, Inc. Annual Report 2024
10
2024
2023
2022
2021
2020
Interest income:
Loans
$ 297,176
$ 271,952
$ 205,751
$ 186,269
$ 204,964
Investment securities and other
27,522
24,883
21,226
12,404
12,739
324,698
296,835
226,977
198,673
217,703
Interest expense:
Deposits
109,705
88,757
20,676
13,102
32,431
Securities sold under reverse repurchase agreements
1,407
1,205
324
37
31
Short-term borrowings, overnight FHLBank borrowings
and other interest-bearing liabilities
18,222
7,500
1,066
—
644
Subordinated debentures issued to capital trust
1,798
1,736
875
448
628
Subordinated notes
4,423
4,422
4,422
7,165
6,831
135,555
103,620
27,363
20,752
40,565
Net interest income
189,143
193,215
199,614
177,921
177,138
Provision (credit) for credit losses on loans
1,700
2,250
3,000
(6,700)
15,871
Provision (credit) for unfunded commitments
1,016
(5,329)
3,187
939
—
Net interest income after provision (credit) for credit losses
and provision (credit) for unfunded commitments
186,427
196,294
193,427
183,682
161,267
Non-interest income:
Commissions
1,227
1,153
1,208
1,263
892
Overdraft and insufficient funds fees
5,140
7,617
7,872
6,686
6,481
POS and ATM fee income and service charges
13,586
14,346
15,705
15,029
12,203
Net gain on loan sales
3,779
2,354
2,584
9,463
8,089
Net realized gain (loss) on sales of available-for-sale securities
—
—
(130)
—
78
Late charges and fees on loans
512
786
1,182
1,434
1,419
Gain (loss) on derivative interest rate products
(58)
(337)
321
312
(264)
Other income
6,379
4,154
5,399
4,130
6,152
30,565
30,073
34,141
38,317
35,050
Non-interest expense:
Salaries and employee benefits
78,599
78,521
75,300
70,290
70,810
Net occupancy and equipment expense
32,118
30,834
28,471
29,163
27,582
Postage
3,329
3,590
3,379
3,164
3,069
Insurance
4,622
4,542
3,197
3,061
2,405
Advertising
3,124
3,396
3,261
3,072
2,631
Office supplies and printing
1,008
1,057
867
848
1,016
Telephone
2,772
2,730
3,170
3,458
3,794
Legal, audit and other professional fees
5,399
7,086
6,330
6,555
2,378
Expense (income) on other real estate and repossessions
(304)
311
359
627
2,023
Acquired intangible asset amortization
433
286
768
863
1,154
Other operating expenses
10,395
8,670
8,264
6,534
6,363
141,495
141,023
133,366
127,635
123,225
Income before income taxes
75,497
85,344
94,202
94,364
73,092
Provision for income taxes
13,690
17,544
18,254
19,737
13,779
Net income
$ 61,807
$ 67,800
$ 75,948
$ 74,627
$ 59,313
Summary Statement of Income Information (dollars in thousands)
For the Year Ended December 31,
11
2024
2023
2022
2021
2020
Per Common Share Data:
Basic earnings per common share
$ 5.28
$ 5.65
$ 6.07
$ 5.50
$ 4.22
Diluted earnings per common share
5.26
5.61
6.02
5.46
4.21
Cash dividends declared
1.60
1.60
1.56
1.40
2.36
Book value per common share
51.14
48.44
43.58
46.98
45.79
Average shares outstanding
11,695
11,992
12,517
13,558
14,043
Year-end actual shares outstanding
11,724
11,804
12,231
13,128
13,753
Average fully diluted shares outstanding
11,755
12,080
12,607
13,674
14,104
Earnings Performance Ratios:
Return on average assets(1)
1.05%
1.19%
1.38%
1.36%
1.11%
Return on average stockholders’ equity(2)
10.55
12.31
13.44
11.89
9.53
Non-interest income to average total assets
0.52
0.53
0.62
0.70
0.66
Non-interest expense to average total assets
2.40
2.47
2.42
2.32
2.31
Average interest rate spread(3)
2.76
2.97
3.59
3.22
3.23
Year-end interest rate spread
2.86
2.78
3.63
3.20
3.08
Net interest margin(4)
3.42
3.57
3.80
3.37
3.49
Efficiency ratio(5)
64.40
63.16
57.05
59.03
58.07
Net overhead ratio(6)
1.88
1.94
1.80
1.62
1.66
Common dividend pay-out ratio(7)
30.42
28.52
25.91
25.64
56.06
Asset Quality Ratios (8):
Allowance for credit losses/year-end loans
1.36%
1.39%
1.39%
1.49%
1.32%
Non-performing assets/year-end loans and foreclosed assets
0.20
0.25
0.08
0.15
0.09
Allowance for credit losses/non-performing loans
1,812.48
550.48
1,729.69
1,120.31
1,831.86
Net charge-offs/average loans
0.03
0.02
0.01
0.00
0.01
Gross non-performing assets/year-end assets
0.16
0.20
0.07
0.11
0.07
Non-performing loans/year-end loans
0.07
0.25
0.08
0.13
0.07
Balance Sheet Ratios:
Loans to deposits
101.99%
97.33%
96.30%
88.23%
95.52%
Average interest-earning assets as a percentage of average
interest-bearing liabilities
126.98
131.11
140.32
139.94
132.49
Capital Ratios:
Average common stockholders’ equity to average assets
10.0%
9.6%
10.2%
11.4%
11.7%
Year-end tangible common stockholders’ equity to tangible assets(9)
9.9
9.7
9.2
11.2
11.3
Great Southern Bancorp, Inc.:
Tier 1 capital ratio
12.8
12.4
11.0
13.4
12.7
Total capital ratio
15.4
15.2
13.5
16.3
17.2
Tier 1 leverage ratio
11.2
11.0
10.6
11.3
10.9
Common equity Tier 1 ratio
12.3
11.9
10.6
12.9
12.2
Great Southern Bank:
Tier 1 capital ratio
12.6
13.1
11.9
14.1
13.7
Total capital ratio
13.9
14.3
13.1
15.4
14.9
Tier 1 leverage ratio
11.0
11.6
11.5
11.9
11.8
Common equity Tier 1 ratio
12.6
13.1
11.9
14.1
13.7
Performance Data and Ratios (number of shares in thousands)
For the Year Ended December 31,
(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 interest-bearing liabilities.
(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 average total assets.
(7) Cash dividends per common share divided by earnings per common share.
(8) Prior to January 1, 2021, these ratios excluded FDIC-assisted acquired loans.
(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.
Great Southern Bancorp, Inc. Annual Report 2024
12
Recognition &
Community Impact
At Great Southern, our commitment to
innovation, customer service, and financial
strength drives exceptional banking
experiences. Our consistent performance across
key financial metrics reflects the value we
deliver and the trust we’ve earned, reinforcing
our position as a leading financial institution with
industry recognition. We are also pleased to be
recognized once again on national ranking lists
by Forbes and Bank Director.
BANK RECOGNITION
• Recognized as one of the top banks in
Iowa on Forbes’ America’s Best Banks in
Each State list.
• Recognized by Forbes for the 5th
consecutive year including the 2024
America’s Best Banks list, highlighting
our continued financial strength and
performance.
• Ranked 23rd on Bank Director’s 2024
Best U.S. Banks Top 25 list and 17th
among institutions with assets between $5
billion and $50 billion—marking our third
consecutive year in both rankings.
COMMUNITY MATTERS PROGRAM –
AN INITIATIVE OF GREAT SOUTHERN BANK
At Great Southern, we believe in making a lasting,
sustainable impact in the communities we serve. Through
our community engagement program, we provide financial
support, volunteer efforts, and strategic partnerships with
local nonprofits. Last year alone, our associates donated
nearly $59 thousand to community organizations making a
difference, while our corporate donations and sponsorships
reached more than $2.1 million.
Our commitment is guided by four key pillars: Lead, Do,
Give, and Teach. We also empower our Community Matters
Teams—local leaders who understand the unique needs
of their regions—to direct our efforts where they matter
most. Whether through grants, volunteering, or supporting
local initiatives, their leadership helps ensure we make a
meaningful impact, one community at a time.
•
Consistent Financial Strength GSBC has demonstrated
steady profitability through disciplined lending practices
and a conservative approach to risk management,
leveraging local expertise in residential, multifamily, and
commercial real estate.
•
Strategic Expansion and Efficiency The Company
effectively balances organic growth with selective
acquisitions, enhancing its market presence while
maintaining operational efficiency.
•
Commitment to Stockholder Value GSBC has a strong
track record of delivering long-term returns to investors
through reliable dividends, stable earnings growth, and
increased tangible book value per share.
•
Well-Diversified and Resilient Loan Portfolio With a
mix of geographically diverse commercial real estate,
multifamily, and residential lending, GSBC’s portfolio
is well-positioned to navigate a range of economic
conditions.
•
Sustainable Growth Approach The Company
emphasizes financial stability, disciplined capital
allocation, and measured expansion to ensure continued
success.
•
Solid Capital Position As of December 31, 2024, GSBC
reported a book value per common share of $51.14, up
from $48.44 at December 31, 2023, representing a year-
over-year increase of approximately 5.6%.
•
Share Repurchase Program GSBC has demonstrated its
strategic approach to returning capital to stockholders by
repurchasing approximately 450,000 shares in 2023 at
an average price of $51.38 per share, and approximately
285,000 shares in 2024 at an average price of $53.10 per
share. As of December 31, 2024, approximately 443,000
shares remained available for repurchase under the
current authorization.
Investment Thesis:
Great Southern Bancorp, Inc. (GSBC)
11.7M
5.4M
46%
171
3.3M
28%
Shares Outstanding
Shares Held by
Institutions
Institutional
ownership represents
approximately 46% of
outstanding shares
Institutional Holders
Approximately 3.3M
Retail Shares
Retail investors hold
approximately 28% of
outstanding shares
Ownership Summary as of December 31, 2024
13
15
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
Commission file number 0-18082
GREAT SOUTHERN BANCORP, INC.
(Exact name of registrant as specified in its charter)
Maryland
43-1524856
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
1451 E. Battlefield, Springfield, Missouri
65804
(Address of principal executive offices)
(Zip Code)
(417) 887-4400
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per share
GSBC
The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes տ No ց
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes տ No ց
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ց No տ
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files). Yes ց No տ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company” and “emerging growth
company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer տ Accelerated filer ց Non-accelerated filer տ Smaller reporting company տ Emerging growth company տ
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. տ
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ց
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in
the filing reflect the correction of an error to previously issued financial statements. տ
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). տ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes տ No Ⴈ
The aggregate market value of the common stock of the registrant held by non-affiliates of the Registrant on June 28, 2024, computed by reference to
the closing price of such shares on that date, was $470,740,114. At March 5, 2025, 11,597,951 shares of the Registrant’s common stock were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s proxy statement for its 2025 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-
K.
16
TABLE OF CONTENTS
Page
ITEM 1.
BUSINESS
17
ITEM 1A.
RISK FACTORS
60
ITEM 1B.
UNRESOLVED STAFF COMMENTS
73
ITEM 1C.
CYBERSECURITY
73
ITEM 2.
PROPERTIES.
74
ITEM 3.
LEGAL PROCEEDINGS.
74
ITEM 4.
MINE SAFETY DISCLOSURES.
74
ITEM 4A.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
74
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
75
ITEM 6.
[RESERVED]
76
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
76
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
112
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
117
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
175
ITEM 9A.
CONTROLS AND PROCEDURES.
175
ITEM 9B.
OTHER INFORMATION.
178
ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
178
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
178
ITEM 11.
EXECUTIVE COMPENSATION.
178
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
178
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
179
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
179
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
180
ITEM 16.
FORM 10-K SUMMARY
183
SIGNATURES
184
17
PART I
ITEM 1.
BUSINESS.
THE COMPANY
Great Southern Bancorp, Inc.
Great Southern Bancorp, Inc. (“Bancorp” or “Company”) is a bank holding company, a financial holding company and the parent of
Great Southern Bank (“Great Southern” or the “Bank”). Bancorp was incorporated under the laws of the State of Delaware in July
1989 as a unitary savings and loan holding company. The Company became a one-bank holding company on June 30, 1998, upon the
conversion of Great Southern to a Missouri-chartered trust company. In 2004, Bancorp was re-incorporated under the laws of the State
of Maryland.
As a Maryland corporation, the Company is authorized to engage in any activity that is permitted by the Maryland General
Corporation Law and not prohibited by law or regulatory policy. The Company currently conducts its business as a financial holding
company. Through the financial holding company structure, it is possible to expand the size and scope of the financial services offered
by the Company beyond those offered by the Bank, although the Company has not yet chosen to offer financial services beyond those
offered by the Bank. The financial holding company structure provides the Company with greater flexibility than the Bank has to
diversify its business activities, through existing or newly formed subsidiaries, or through acquisitions of or mergers with other
financial institutions as well as other companies. At December 31, 2024, Bancorp’s consolidated total assets were $5.98 billion,
consolidated net loans were $4.69 billion, consolidated deposits were $4.61 billion and consolidated total stockholders’ equity was
$599.6 million. For details about the Company’s assets, revenues and profits for each of the last five fiscal years, see Item 7.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The assets of the Company at the holding
company level consist primarily of the stock of Great Southern and cash.
Through the Bank and subsidiaries of the Bank, the Company primarily offers a variety of banking and banking-related services,
which are discussed further below. The activities of the Company are funded by retained earnings and through dividends from Great
Southern. Activities of the Company may also be funded through borrowings from third parties or sales of additional securities.
The executive offices of the Company are located at 1451 East Battlefield, Springfield, Missouri, 65804, and its telephone number at
that address is (417) 887-4400.
Great Southern Bank
Great Southern was formed as a Missouri-chartered mutual savings and loan association in 1923, and, in 1989, converted to a
Missouri-chartered stock savings and loan association. In 1994, Great Southern changed to a federal savings bank charter and then, on
June 30, 1998, changed to a Missouri-chartered trust company (the equivalent of a commercial bank charter). Headquartered in
Springfield, Missouri, Great Southern offers a broad range of banking services through its 89 banking centers located in southern and
central Missouri; the Kansas City, Missouri area; the St. Louis area; eastern Kansas; northwestern Arkansas; the Minneapolis area and
eastern, western and central Iowa. At December 31, 2024, the Bank had total assets of $5.98 billion, net loans of $4.70 billion,
deposits of $4.69 billion and equity capital of $616.3 million, or 10.3% of total assets. Its deposits are insured by the Deposit
Insurance Fund (“DIF”) to the maximum levels permitted by the Federal Deposit Insurance Corporation (“FDIC”).
The size and complexity of the Bank’s operations increased substantially in 2009 with the completion of two FDIC-assisted
transactions, and again in 2011, 2012 and 2014 with the completion of another FDIC-assisted transaction in each of those years. In
2009, the Bank entered into two separate purchase and assumption agreements (including loss sharing) with the FDIC to assume all of
the deposits (excluding brokered deposits) and certain liabilities and acquire certain assets of TeamBank, N.A. and Vantus Bank. In
these two transactions, we acquired assets with a fair value of approximately $499.9 million (approximately 18.8% of the Company’s
total consolidated assets at acquisition) and $294.2 million (approximately 8.8% of the Company’s total consolidated assets at
acquisition), respectively, and assumed liabilities with a fair value of $610.2 million (approximately 24.9% of the Company’s total
consolidated assets at acquisition) and $440.0 million (approximately 13.2% of the Company’s total consolidated assets at
acquisition), respectively. They also resulted in gains of $43.9 million and $45.9 million, respectively, which were included in Non-
interest Income in the Company’s Consolidated Statement of Income for the year ended December 31, 2009. Prior to these
acquisitions, the Company operated banking centers in Missouri with loan production offices in Arkansas and Kansas. These
18
acquisitions added 31 banking centers and expanded our footprint to cover five states – Iowa, Kansas, Missouri, Arkansas and
Nebraska.
In 2011, the Bank entered into a purchase and assumption agreement (including loss sharing) with the FDIC to assume all of the
deposits and certain liabilities and acquire certain assets of Sun Security Bank, which added locations in southern Missouri and St.
Louis. In this transaction, we acquired assets with a fair value of approximately $248.9 million (approximately 7.3% of the
Company’s total consolidated assets at acquisition) and assumed liabilities with a fair value of $345.8 million (approximately 10.1%
of the Company’s total consolidated assets at acquisition). It also resulted in a gain of $16.5 million, which was included in Non-
interest Income in the Company’s Consolidated Statement of Income for the year ended December 31, 2011.
In 2012, the Bank entered into a purchase and assumption agreement (including loss sharing) with the FDIC to assume all of the
deposits and certain liabilities and acquire certain assets of Inter Savings Bank, FSB (“InterBank”), which added four locations in the
greater Minneapolis area and represented a new market for the Company. In this transaction, we acquired assets with a fair value of
approximately $364.2 million (approximately 9.4% of the Company’s total consolidated assets at acquisition) and assumed liabilities
with a fair value of approximately $458.7 million (approximately 11.9% of the Company’s total consolidated assets at acquisition). It
also resulted in a gain of $31.3 million, which was included in Non-interest Income in the Company’s Consolidated Statement of
Income for the year ended December 31, 2012.
In 2014, the Bank entered into a purchase and assumption agreement (without loss sharing) with the FDIC to assume all of the
deposits and certain liabilities and acquire certain assets of Valley Bank (“Valley”), which added five locations in the Quad Cities area
of eastern Iowa and six locations in central Iowa, primarily in the Des Moines market area. These represented new markets for the
Company in eastern Iowa and enhanced our market presence in central Iowa. In this transaction, we acquired assets with a fair value
of approximately $378.7 million (approximately 10.0% of the Company’s total consolidated assets at acquisition) and assumed
liabilities with a fair value of approximately $367.9 million (approximately 9.8% of the Company’s total consolidated assets at
acquisition). It also resulted in a gain of $10.8 million, which was included in Non-interest Income in the Company’s Consolidated
Statement of Income for the year ended December 31, 2014.
Also in 2014, the Bank entered into a purchase and assumption agreement to acquire certain assets and depository accounts from
Neosho, Missouri-based Boulevard Bank (“Boulevard”), which added one location in the Neosho, Missouri market, where the
Company already operated a banking center. In this transaction, we acquired assets (primarily cash and cash equivalents) with a fair
value of approximately $92.5 million (approximately 2.6% of the Company’s total consolidated assets at acquisition) and assumed
liabilities (all deposits and related accrued interest) with a fair value of approximately $93.3 million (approximately 2.6% of the
Company’s total consolidated assets at acquisition). This acquisition resulted in recognition of $790,000 of goodwill.
The Company also opened commercial loan production offices in Dallas, and Tulsa, Oklahoma, during 2014. The primary products
offered in these offices are commercial real estate, commercial business and commercial construction loans. The Tulsa office was
closed in February 2024 after an analysis of lending priorities and operational efficiencies.
In 2015, the Company announced plans to consolidate operations of 16 of its banking centers into other nearby Great Southern
banking center locations. As part of an ongoing performance review of its entire banking center network, Great Southern evaluated
each location for a number of criteria, including access and availability of services to affected customers, the proximity of other Great
Southern banking centers, profitability and transaction volumes, and market dynamics. Subsequent to this announcement, the Bank
entered into separate definitive agreements to sell two of the 16 banking centers, including all of the associated deposits (totaling
approximately $20 million), to separate bank purchasers. One of those sale transactions was completed on February 19, 2016 and the
other was completed on March 18, 2016. The closing of the remaining 14 facilities, which resulted in the transfer of approximately
$127 million in deposits and banking center operations to other Great Southern locations, occurred at the close of business on
January 8, 2016.
Also in 2015, the Company announced that it entered into a purchase and assumption agreement to acquire 12 branches, including
related loans, and to assume related deposits in the St. Louis area from Cincinnati-based Fifth Third Bank. The acquisition was
completed at the close of business on January 29, 2016. The deposits assumed totaled approximately $228 million and the loans
acquired totaled approximately $159 million.
The loss sharing agreements related to the FDIC-assisted transactions in 2009, 2011 and 2012 added to the complexity of our
operations by creating the need for new employees and processes to ensure compliance with the loss sharing agreements and the
19
collection of problem assets acquired. The loss sharing agreements related to the 2009 and 2011 FDIC-assisted transactions were
terminated during 2016. The loss sharing agreements related to the 2012 FDIC-assisted transaction were terminated during 2017.
The Company opened a commercial loan production office in Chicago during 2017. The primary products offered in this office are
commercial real estate, commercial business and commercial construction loans.
In March 2018, the Bank entered into a definitive agreement to sell its four banking centers, including all of the associated deposits
(totaling approximately $56 million), in the Omaha, Nebraska market to Lincoln, Nebraska-based West Gate Bank. This sale
transaction was completed in July 2018.
The Company opened two commercial loan production offices – one in Denver and one in Atlanta – in late 2018. The primary
products offered in these offices are commercial real estate, commercial business and commercial construction loans.
In March 2019, the Company ceased operating its indirect automobile financing unit. Market forces, including strong rate competition
for well-qualified borrowers, made indirect lending through automobile dealerships a significant challenge to efficient and profitable
operations over the long term. In addition, indirect loan balances had significantly declined in 2018 and 2019 after tightened
underwriting guidelines were implemented by the Company in the latter part of 2016, in response to more challenging consumer credit
conditions. The Company continues to offer direct consumer loans through its banking center network.
In April 2019, the Company consolidated its Fayetteville, Arkansas, location into its Rogers, Arkansas, banking center. The Company
now operates one banking center in Arkansas. In September 2019, the Company consolidated its Ames, Iowa, banking center into its
North Ankeny, Iowa, office. The Company entered the Ames market with only one banking center through the Valley Bank FDIC-
assisted acquisition in 2014.
In April 2020, the Company was notified by its landlord that the Great Southern banking centers located inside the Hy-Vee stores at
2900 Devils Glen Rd in Bettendorf, Iowa, and 2351 W. Locust St. in Davenport, Iowa, had to permanently cease operations at those
locations due to store infrastructure changes. Customer accounts were transferred to nearby offices. Great Southern operates three
banking centers in the Quad Cities market area – two in Davenport and one in Bettendorf.
In August 2020, remodeling of the downtown office at 1900 Main in Parsons, Kansas, was completed, which included the addition of
drive-thru banking lanes. With this completion, the nearby drive-thru facility was consolidated into the downtown office, leaving one
location serving the Parsons market.
In September 2021, the Company opened a new banking center at 2801 E. 32nd Street in Joplin, Missouri, replacing a nearby leased
office. The Company currently has two banking centers serving the Joplin market.
In November 2021, the Company consolidated one banking center in the St. Louis region. The Westfall Plaza banking center was
consolidated into a Great Southern office less than three miles away.
In August 2022, the Company consolidated one banking center in the St. Louis region. The Clayton office was consolidated into the
nearby Brentwood banking center. The Company continues to operate commercial lending services from the Clayton office building.
The Company now operates 17 banking centers serving the greater St. Louis area.
Also in August 2022, a newly-constructed banking center opened in Kimberling City, Missouri. The new banking center replaced the
former facility located on the same property.
The Company opened two commercial loan production offices – one in Phoenix and one in Charlotte – in 2022. The primary products
offered in these offices are commercial real estate, commercial business and commercial construction loans.
In March 2023, a leased retail banking center office at 1232 S. Rangeline Road in Joplin, Missouri, was consolidated into a nearby
office at 2801 E. 32nd Street. One banking center now serves the Joplin market.
In September 2023, in Springfield, Missouri, the Company opened Great Southern Express, a modern four-lane drive-through center
using only interactive teller machine (ITM) technology to serve customers. This new facility at 1615 W. Sunshine replaced an
outdated razed banking office on the same property. ITMs, also known as video remote tellers, offer an ATM-like interface, but with
20
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 during extended business hours seven days a week. 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.
In January 2024, in Springfield, Missouri, a retail banking center at 600 W. Republic Road was consolidated into a banking center at
2945 W. Republic Road, a short distance away. For customers’ convenience, an on-site ITM is currently available at the closed
facility.
Great Southern is principally engaged in the business of originating commercial real estate loans, construction loans, other commercial
loans, other residential (multi-family) and single-family residential real estate loans and consumer loans and funding these loans by
attracting deposits from the general public, obtaining brokered deposits and through borrowings from the Federal Home Loan Bank of
Des Moines (the “FHLBank”) and others.
For many years, Great Southern has followed a strategy of emphasizing loan originations through residential, commercial and
consumer lending activities in its market areas. The goal of this strategy is to be one of the leading providers of financial services in
Great Southern’s market areas, while simultaneously diversifying assets and reducing interest rate risk by originating and holding
adjustable-rate loans and fixed-rate loans, primarily with terms of five years or less, in its portfolio and by selling longer-term fixed-
rate single-family mortgage loans in the secondary market. The Bank continues to emphasize real estate lending while also expanding
and increasing its originations of commercial business loans.
The corporate office of Great Southern is located at 218 S. Glenstone, Springfield, Missouri, 65802 and its telephone number at that
address is 417-887-4400.
Internet Website
Bancorp maintains a website at www.greatsouthernbank.com. The information contained on that website is not included as part of, or
incorporated by reference into, this Annual Report on Form 10-K. Bancorp currently makes available free of charge (other than a
user’s internet access charges) on or through its website Bancorp’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q
and Current Reports on Form 8-K and amendments, if any, to these reports as soon as reasonably practicable after Bancorp
electronically files such materials with, or furnishes them to, the Securities and Exchange Commission. These materials are also
available free of charge (other than a user’s internet access charges) on the Securities and Exchange Commission’s website at
www.sec.gov.
Market Areas
The Company currently operates 89 full-service retail banking offices, serving nearly 130,000 households in six states – Missouri,
Iowa, Kansas, Minnesota, Arkansas and Nebraska. The Company also operates commercial loan production offices in Atlanta;
Charlotte; Chicago; Dallas; Denver; Omaha; and Phoenix; and a mortgage lending office in Springfield, Missouri.
The Company regularly evaluates its banking center network and lines of business to ensure that it is serving customers in the best
way possible. The banking center network constantly evolves with changes in customer needs and preferences, emerging technology
and local market developments. In response to these changes, the Company opens banking centers and invests resources where
customer demand leads, and from time to time, consolidates banking centers when market conditions dictate.
Great Southern’s largest concentrations of deposits and loans are in the Springfield, Missouri, and St. Louis, market areas. Besides the
Springfield and St. Louis market areas, the Company has deposit and loan concentrations in the following market areas: Kansas City,
Missouri; Sioux City, Iowa; Des Moines, Iowa; Northwest Arkansas; Minneapolis; and Eastern Iowa in the area known as the “Quad
Cities.” Deposits and loans are also generated in banking centers in rural markets in Missouri, Iowa, and Kansas.
At December 31, 2024, the Company’s total deposits were $4.61 billion. At that date, the Company had deposits in Missouri of $3.06
billion, which included its two largest deposit concentrations, in the Springfield and St. Louis areas, with $2.08 billion and $544
million, respectively. At December 31, 2024, the Company also had deposits of $668 million in Iowa, $249 million in Kansas, $125
million in Minnesota, $24 million in Nebraska and $28 million in Arkansas.
21
The Company’s commercial loan production offices generate a significant percentage of the Company’s commercial loan production.
Commercial lending groups in our Kansas City, Des Moines, Minneapolis, Springfield, and St. Louis banking offices also generate a
significant percentage of the Company’s commercial loan production. Our largest concentrations of loans are in Missouri, Texas,
Minnesota, Colorado and Iowa. Additional information on lending activities is included in “Item 7. Management’s Discussion of
Financial Condition and Results of Operations – General -- Loans” in this Report.
Lending Activities
General
From its beginnings in 1923 through the early 1980s, Great Southern primarily made long-term, fixed-rate residential real estate loans
that it retained in its loan portfolio. Beginning in the early 1980s, Great Southern increased its efforts to originate short-term and
adjustable-rate loans. Beginning in the mid-1980s, Great Southern increased its efforts to originate commercial real estate and other
residential (multi-family) loans, primarily with adjustable rates or shorter-term fixed rates. In addition, some competitor banking
organizations merged with larger institutions and changed their business practices or moved operations away from the Springfield,
Missouri area, and others consolidated operations from the Springfield, Missouri area to larger cities. This provided Great Southern
expanded opportunities in residential and commercial real estate lending as well as in the origination of commercial business and
consumer loans in the Springfield, Missouri area.
In addition to originating loans, the Bank has expanded and enlarged its relationships with other banks of varying asset sizes to
purchase participations (at par, generally with no servicing costs) in loans these other banks originate but are unable to retain the entire
balance in their portfolios due to capital or borrower relationship size limitations. The Bank uses the same underwriting guidelines in
evaluating these participations as it does in its direct loan originations. At December 31, 2024, the balance of loan participations
purchased and held in the portfolio was $476.0 million, or 10.1% of the total loan portfolio. None of these loan participations were
included in non-performing loans at December 31, 2024. Of the $476.0 million of purchased participation loans outstanding at
December 31, 2024, the largest aggregate amount outstanding purchased from one institution was $100.4 million. This amount was
comprised of 13 loans, of which six were secured by warehouses, five were secured by hotels, one was secured by a commercial land
and development project in the St. Louis area and one was secured by a multi-family housing project in the St. Louis area.
One of the principal historical lending activities of Great Southern is the origination of fixed and adjustable-rate conventional
residential real estate loans to enable borrowers to purchase or refinance owner-occupied homes. Great Southern originates a variety
of conventional residential real estate mortgage loans, principally in compliance with Freddie Mac and Fannie Mae standards for
resale in the secondary market. Great Southern promptly sells most of the fixed-rate residential mortgage loans that it originates. To
date, Great Southern has not experienced difficulties selling these loans in the secondary market and has had minimal repurchase
requests. Depending on market conditions, the ongoing servicing of these loans is at times retained by Great Southern, but generally
servicing is released to the purchaser of the loan. Great Southern retains in its portfolio substantially all of the adjustable-rate
mortgage loans that it originates.
Another principal lending activity of Great Southern is the origination of commercial real estate, other residential (multi-family) and
multi-family and commercial construction loans. Since the early 1990s, commercial real estate, other residential (multi-family) and
multi-family and commercial construction loans have collectively represented the largest percentage of the loan portfolio. At
December 31, 2024, commercial real estate, other residential (multi-family) and multi-family and commercial construction loans
accounted for approximately 33%, 33% and 8%, respectively, of the total outstanding portfolio. In addition, at December 31, 2024,
one- to four-family residential loans accounted for approximately 18% of the total outstanding portfolio.
Great Southern in recent years has also increased its emphasis on the origination of other commercial loans and home equity loans,
and has issued letters of credit. Letters of credit are contingent obligations and are not included in the Bank’s loan portfolio. See “-
Other Commercial Lending,” “- Classified Assets,” and “Loan Delinquencies and Defaults” below.
The percentage of collateral value Great Southern will lend on real estate and other property varies based on factors including, but not
limited to, the type of property and its location and the borrower’s credit history. As a general rule, Great Southern will lend up to
95% of the appraised value on one-to four-family residential properties. Typically, private mortgage insurance is required for loan
amounts above the 80% level. At December 31, 2024 and 2023, loans secured by second liens on residential properties were $87.9
million, or 1.8%, and $87.2 million, or 1.9%, respectively, of our total loan portfolio. For commercial real estate and other residential
real property loans, Great Southern may loan up to 85% of the appraised value. The origination of loans secured by other property is
considered and determined on an individual basis by management with the assistance of any industry guides and other information
22
which may be available. Collateral values are reappraised or reassessed as loans are renewed or when significant events indicating
potential impairment occur. On a quarterly basis, management reviews individually evaluated loans to determine whether updated
appraisals or reassessments are necessary based on loan performance, collateral type and guarantor support. While not specifically
required by our policy, we seek to obtain cross-collateralization of loans to a borrower when it is available; this is most frequently
done on commercial real estate loans.
Loan applications are approved at various levels of authority, depending on the type, amount and loan-to-value ratio of the loan. These
authorities are reviewed annually and updated as needed throughout the year. This includes individual loans and aggregate exposures
that require loan committee approval. The loan committee is comprised of the Chief Executive Officer of the Bank, the Chief Credit
Officer (chairman of the committee), Chief Lending Officer, Director of Commercial Lending, Director of Credit Underwriting, and
other Regional Managing Directors of the Bank involved in lending activities. All loans, regardless of size or type, are required to
conform to certain minimum underwriting standards designed to assure portfolio quality. These standards and procedures include, but
are not limited to, an analysis of the borrower’s financial condition, collateral, repayment ability, inquiry and analysis of liquid assets
and credit history as required by loan type. It has been, and continues to be, our 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. Underwriting standards also include loan-to-value ratios which vary depending on collateral type, debt service coverage ratios or
debt payment to income ratios, where applicable, credit histories, use of guaranties and other recommended terms relating to equity
requirements, amortization, and maturity. Generally, deviations from approved underwriting standards may only be allowed when
doing so is not in violation of regulations or statutes and when appropriate lending authority is obtained. The loan committee reviews
all new loan originations in excess of lender approval authorities. For secured loans originated for portfolio, most lenders have
approval authorities of $250,000 or below while thirteen Senior Managers have approval authority of varying amounts up to $2
million. Lender approval authorities are also subject to loans-to-one borrower limits of $500,000 or below for most lenders and of
varying amounts up to $5 million for Senior Managers and Underwriters.
In general, state banking laws restrict loans to a single borrower and related entities to no more than 25% of a bank’s unimpaired
capital and unimpaired surplus, plus an additional 10% if the loan is collateralized by certain readily marketable collateral. Real estate
is not included in the definition of “readily marketable collateral.” As computed on the basis of the Bank’s unimpaired capital and
surplus at December 31, 2024, this limit was approximately $181 million. See “Government Supervision and Regulation.” At
December 31, 2024, the Bank was in compliance with the loans-to-one borrower limit. At December 31, 2024, the Bank’s largest
relationship for purposes of this limit consisted of twenty-four loans totaling $96.8 million. This amount represents the total
commitment for this relationship at December 31, 2024; the outstanding balance at that date totaled $81.3 million. Seven of these
loans had fully disbursed credit lines. The collateral for the loans consists of multiple real estate projects on which a full personal
guarantee from the principal owner of the borrowing entities was obtained. All loans included in this relationship were current at
December 31, 2024. Including this relationship, we had nine loan relationships that each equaled or exceeded $50 million at December
31, 2024. Our policy does not set a loans-to-one borrower limit that is below the legal limits described; however, we do recognize the
need to limit credit risk to any one borrower or group of related borrowers upon consideration of various risk factors. Extensions of
credit to borrowers whose past due loans were charged-off or whose loans are classified as substandard require special lending
approval.
Great Southern is permitted under applicable regulations to originate or purchase loans and loan participations secured by real estate
located in any part of the United States. In addition to the market areas where the Bank has offices, the Bank has made or purchased
loans, secured primarily by commercial real estate, in other states, primarily Florida, Tennessee, South Carolina, Michigan, Kentucky,
Indiana and Ohio. At December 31, 2024, loans in these states comprised approximately 9.5% combined of the total loan portfolio.
Loan Portfolio Composition
The following table sets forth information concerning the composition of the Bank’s loan portfolio in dollar amounts and in
percentages (before deductions for loans in process, deferred fees and discounts and allowance for credit losses) as of the dates
indicated. The table is based on information prepared in accordance with generally accepted accounting principles and is qualified by
reference to the Company’s Consolidated Financial Statements and the notes thereto contained in Item 8 of this report.
23
Great Southern Loan Portfolio Composition:
December 31,
2024
2023
2022
2021
2020(3)
Amount
%
Amount
%
Amount
%
Amount
%
Amount
%
(Dollars In Thousands)
Real Estate Loans:
One- to four- family(1)
$
839,684
17.6 % $
895,675
19.2 % $
908,214
19.8 % $
690,328
16.9 % $
661,859
15.1 %
Other residential
1,549,249
32.5
942,071
20.2
781,761
17.0
697,903
17.1
1,005,764
22.9
Commercial(2)
1,555,086
32.6
1,533,080
32.8
1,543,515
33.7
1,490,433
36.5
1,580,313
36.1
Residential construction:
One- to four- family
67,158
1.4
59,888
1.3
82,051
1.8
62,161
1.5
28,191
0.6
Other residential
210,676
4.4
562,112
12.1
518,407
11.3
480,474
11.8
374,188
8.5
Commercial construction
167,857
3.5
182,408
3.9
264,761
5.8
177,693
4.3
164,193
3.8
Total real estate loans
4,389,710
92.0
4,175,234
89.5
4,098,709
89.4
3,598,992
88.1
3,814,508
87.0
Other Loans:
Consumer loans:
Automobile, boat, etc.
52,443
1.1
57,489
1.2
70,236
1.5
86,074
2.1
126,364
3.0
Home equity and improvement
115,836
2.4
115,883
2.5
123,242
2.7
119,965
2.9
120,201
2.7
Other
1,849
0.1
540
—
777
—
743
—
1,582
—
Total consumer loans
170,128
3.6
173,912
3.7
194,255
4.2
206,782
5.0
248,147
5.7
Other commercial loans
208,947
4.4
318,050
6.8
293,228
6.4
280,513
6.9
320,860
7.3
Total other loans
379,075
8.0
491,962
10.5
487,483
10.6
487,295
11.9
569,007
13.0
Total loans
4,768,785
100.0 %
4,667,196
100.0 %
4,586,192
100.0 %
4,086,287
100.0 %
4,383,515
100.0 %
Less:
Deferred fees and discounts
6,695
7,058
11,065
9,298
13,188
Allowance for credit losses
64,760
64,670
63,480
60,754
55,743
Total loans receivable, net
$ 4,697,330
$ 4,595,468
$ 4,511,647
$ 4,016,235
$ 4,314,584
(1) Includes loans held for sale.
(2) Total commercial real estate loans included industrial revenue bonds of $11.3 million, $12.0 million, $12.9 million, $14.2 million,
and $15.1 million at December 31, 2024, 2023, 2022, 2021, and 2020.
(3) The portfolio composition table presented in the Bancorp Annual Report on Form 10-K for the year ended 2020 was divided into
legacy loans and loans accounted for under ASC 310-30. At December 31, 2021, 2022, 2023 and 2024, this information has been
consolidated into one table as Great Southern Loan Portfolio Composition.
24
The following table shows the fixed- and adjustable-rate composition of the Bank’s loan portfolio at the dates indicated. The table is
based on information prepared in accordance with generally accepted accounting principles. The portfolio composition by fixed and
adjustable rate table presented in the Bancorp Annual Report on Form 10-K for the year ended 2020 was divided into legacy loans and
loans accounted for under ASC 310-30. At December 31, 2021, 2022, 2023 and 2024, this information has been consolidated into one
table as Great Southern Loan Portfolio Composition.
Great Southern Loan Portfolio Composition by Fixed- and Adjustable-Rates:
December 31,
2024
2023
2022
2021
2020
Amount
%
Amount
%
Amount
%
Amount
%
Amount
%
(Dollars In Thousands)
Fixed-Rate Loans:
Real Estate Loans
One- to four- family
$
186,453
3.9 % $
191,232
4.1 % $
189,936
4.2 % $
161,077
3.9 % $
167,738
3.8 %
Other residential
432,443
9.1
352,055
7.5
311,181
6.8
328,726
8.1
342,884
7.8
Commercial
910,274
19.1
950,095
20.4
868,374
18.9
776,967
19.0
744,021
17.0
Residential construction:
One- to four- family
24,212
0.5
31,147
0.7
35,576
0.8
31,941
0.8
11,245
0.2
Other residential
13,564
0.3
45,901
1.0
79,571
1.7
59,214
1.5
52,261
1.2
Commercial construction
63,181
1.3
51,289
1.1
46,942
1.0
28,612
0.7
34,621
0.8
Total real estate loans
1,630,127
34.2
1,621,719
34.8
1,531,580
33.4
1,386,537
34.0
1,352,770
30.8
Consumer
48,688
1.0
52,571
1.1
62,558
1.4
78,643
1.9
120,007
2.8
Other commercial
101,197
2.1
142,959
3.1
128,604
2.8
144,196
3.5
221,995
5.1
Total fixed-rate loans
1,780,012
37.3
1,817,249
39.0
1,722,742
37.6
1,609,376
39.4
1,694,772
38.7
Adjustable-Rate Loans:
Real Estate Loans
One- to four- family
653,231
13.7
704,443
15.1
718,278
15.7
529,251
13.0
494,121
11.3
Other residential
1,116,806
23.5
590,016
12.6
470,580
10.3
369,177
9.0
662,880
15.1
Commercial
644,812
13.5
582,985
12.5
675,141
14.7
713,466
17.5
836,292
19.1
Residential construction:
One- to four- family
42,946
0.9
28,741
0.6
46,475
1.0
30,220
0.7
16,946
0.4
Other residential
197,112
4.1
516,211
11.1
438,836
9.6
421,260
10.3
321,927
7.3
Commercial construction
104,676
2.2
131,119
2.8
217,819
4.7
149,081
3.6
129,572
3.0
Total real estate loans
2,759,583
57.9
2,553,515
54.7
2,567,129
56.0
2,212,455
54.1
2,461,738
56.2
Consumer
121,440
2.5
121,341
2.6
131,697
2.8
128,139
3.1
128,140
2.9
Other commercial
107,750
2.3
175,091
3.7
164,624
3.6
136,317
3.4
98,865
2.2
Total adjustable-rate loans
2,988,773
62.7
2,849,947
61.0
2,863,450
62.4
2,476,911
60.6
2,688,743
61.3
Total Loans
4,768,785
100.0 %
4,667,196
100.0 %
4,586,192
100.0 %
4,086,287
100.0 %
4,383,515
100.0 %
Less:
Deferred fees and discounts
6,695
7,058
11,065
9,298
13,188
Allowance for credit losses
64,760
64,670
63,480
60,754
55,743
Total loans receivable, net
$ 4,697,330
$ 4,595,468
$ 4,511,647
$ 4,016,235
$ 4,314,584
25
The following table sets forth information as of December 31, 2024, regarding the loans in our portfolio based on their contractual
terms to maturity.
Great Southern Loan Portfolio Composition by Contractual Maturities:
One Year
After One Year
After Five Years
After Fifteen
or Less
through Five Years through Fifteen Years
Years
Total
(In Thousands)
Real Estate Loans:
Residential
One- to four- family
$
29,033
$
98,272
$
69,494
$ 642,885
$
839,684
Other residential
705,859
800,749
40,898
1,743
1,549,249
Commercial
485,823
985,654
81,957
1,652
1,555,086
Residential construction:
One- to four- family
23,732
42,533
111
782
67,158
Other residential
43,026
167,650
—
—
210,676
Commercial construction
39,541
128,072
244
—
167,857
Total real estate loans
1,327,014
2,222,930
192,704
647,062
4,389,710
Other Loans:
Consumer loans:
Automobile and other
12,042
31,095
11,019
136
54,292
Home equity and improvement
17,433
36,195
61,990
218
115,836
Total consumer loans
29,475
67,290
73,009
354
170,128
Other commercial loans
93,114
107,143
8,311
379
208,947
Total other loans
122,589
174,433
81,320
733
379,075
Total loans
$ 1,449,603
$
2,397,363
$
274,024
$ 647,795
$ 4,768,785
26
The following table presents loans due after December 31, 2025 with fixed and adjustable interest rates as of December 31, 2024.
Fixed Rates Adjustable Rates Total Loans
(In Thousands)
Real Estate Loans:
Residential
One- to four- family
$
163,151
$
647,500
$
810,651
Other residential
303,937
539,453
843,390
Commercial
722,709
346,554
1,069,263
Residential construction:
One- to four- family
18,296
25,130
43,426
Other residential
—
167,650
167,650
Commercial construction
56,027
72,289
128,316
Total real estate loans
1,264,120
1,798,576
3,062,696
Other Loans:
Consumer loans:
Automobile and other
41,272
978
42,250
Home equity and improvement
227
98,176
98,403
Total consumer loans
41,499
99,154
140,653
Other commercial loans
80,867
34,966
115,833
Total other loans
122,366
134,120
256,486
Total loans
$ 1,386,486
$
1,932,696
$ 3,319,182
At December 31, 2024, $87.9 million, or 1.8%, of total loans were secured by junior lien mortgages and $8.3 million, or 1.1% of
residential real estate loans, were interest only residential real estate loans. At December 31, 2023, $87.2 million, or 1.9%, of total
loans were secured by junior lien mortgages and $20.8 million, or 2.6% of residential real estate loans, were interest only residential
real estate loans. While high loan-to-value ratio mortgage loans are occasionally originated and held, they are typically either
considered low risk based on analyses performed or are required to have private mortgage insurance. The Company does not originate
or hold option ARM loans or significant amounts of loans with initial teaser rates or subprime loans in its residential real estate
portfolio.
To monitor and control risks related to concentrations of credit in the composition of the loan portfolio, management reviews the loan
portfolio by loan types, industries and market areas on a monthly basis for credit quality and known and anticipated market conditions.
Changes in loan portfolio composition may be made by management based on the performance of each area of business, known and
anticipated market conditions, credit demands, the deposit structure of the Bank and the expertise and/or depth of the lending staff.
Loan portfolio industry and market areas are monitored regularly for credit quality and trends. Reports detailed by industry and
geography are provided to the Board of Directors on a monthly and quarterly basis.
The composition of the Bank’s loan portfolio has changed over the past several years; speculative construction and land development
loan types have been limited, consumer lending for automobiles and boats has decreased significantly (the origination of indirect
automobile and boat lending was eliminated), commercial real estate loan types have been stabilized and diversified and emphasis has
been placed on increasing our other residential (multi-family) and commercial business loan portfolios.
Environmental Issues
Loans secured by real property, whether commercial, residential or other, may have a material, negative effect on the financial
position and results of operations of the lender if the collateral is environmentally contaminated. The result can be, but is not
necessarily limited to, liability for the cost of cleaning up the contamination imposed on the lender by certain federal and state laws, a
reduction in the borrower’s ability to pay because of the liability imposed upon it for any clean-up costs, a reduction in the value of the
collateral because of the presence of contamination or a subordination of security interests in the collateral to a super priority lien
securing the cleanup costs by certain state laws.
27
Management is aware of the risk that the Bank may be negatively affected by environmentally contaminated collateral and attempts to
control this risk through commercially reasonable methods, consistent with guidelines arising from applicable government or
regulatory rules and regulations, and to a more limited extent, publications of the lending industry. Management currently is unaware
(without, in many circumstances, specific inquiry or investigation of existing collateral, some of which was accepted as collateral
before risk controlling measures were implemented) of any environmental contamination of real property securing loans in the Bank’s
portfolio that would subject the Bank to any material risk. No assurance can be given, however, that the Bank will not be adversely
affected by environmental contamination.
Residential Real Estate Lending
At December 31, 2024 and 2023, loans secured by residential real estate, excluding that which is under construction, totaled $2.4
billion and $1.8 billion, respectively, and represented approximately 50.1% and 39.4%, respectively, of the Bank’s total loan portfolio.
The Bank’s one- to four-family residential real estate loan portfolio decreased during 2024 due to net loan repayments and was fairly
stable during 2023. For many years, other residential (multi-family) loan balances had increased as the Bank emphasized this type of
lending. The exception to this was in 2021, when loan balances decreased due to projects refinancing or being sold and paying off at a
faster pace. The Bank’s outstanding other residential (multi-family) loan portfolio increased by approximately 64.5% in 2024. This
increase was due to multi-family construction projects being completed and moved to the other residential loan category and
refinancings and early pay-offs on these types of loans continuing to be slow as interest rates remained high.
The Bank currently is originating one- to four-family adjustable-rate residential mortgage loans primarily with one-year adjustment
periods or with rates that are fixed for the first few years of the loan and then adjust annually. Rate adjustments on these loans are
generally based upon changes in prevailing rates for one-year U.S. Treasury securities. Rate adjustments are generally limited to a 2%
maximum annually as well as a maximum aggregate adjustment over the life of the loan. Accordingly, the interest rates on these loans
typically may not be as rate sensitive as is the Bank’s cost of funds. Generally, the Bank’s adjustable-rate mortgage loans are not
convertible into fixed-rate loans, do not permit negative amortization of principal and carry no prepayment penalty. The Bank also
currently is originating other residential (multi-family) mortgage loans with interest rates that are generally either adjustable with
changes to the prime rate of interest or a Secured Overnight Funding Rate (SOFR)-index interest rate, or initially fixed for short
periods of time (one to five years) and then adjust annually based on the prime rate of interest or a SOFR index interest rate.
Since the adjustable-rate mortgage loans currently held in the Bank’s portfolio have not been subject to an interest rate environment
which causes them to adjust to the maximum, these loans entail unquantifiable risks resulting from potential increased payment
obligations on the borrower as a result of upward repricing. Until 2022, the indices used by Great Southern for these types of loans
increased, but not significantly, at various times in the preceding ten years. One-year U.S. Treasury interest rates and SOFR-index
interest rates increased significantly throughout 2022 and during the first half of 2023. These interest rates declined slightly in the
fourth quarter of 2023, but remained above comparable interest rates in prior years. These interest rates remained stable in 2024 with
slight decreases in the third quarter of 2024, but remained above comparable interest rates in prior years. Compared to fixed-rate
mortgage loans, these loans are subject to increased risk of delinquency or default if a higher, fully-indexed rate of interest
subsequently comes into effect in replacement of a lower rate currently in effect. From 2008 through 2012, as a result of the
significant economic recession, including declines in residential real estate values, the Bank experienced a significant increase in
delinquencies in adjustable-rate mortgage loans. From 2013 through 2024, these delinquencies trended much lower.
In underwriting one- to four-family residential real estate loans, Great Southern evaluates the borrower’s ability to make monthly
payments and the value of the property securing the loan. It is the policy of Great Southern that generally all one- to four-family
residential loans in excess of 80% of the appraised value of the property be insured for the excess amount by a private mortgage
insurance company approved by Great Southern. In addition, Great Southern requires borrowers to obtain title and fire and casualty
insurance in an amount not less than the amount of the loan. Real estate loans originated by the Bank generally contain a “due on sale”
clause allowing the Bank to declare the unpaid principal balance due and payable upon the sale of the property securing the loan. The
Bank may enforce these due on sale clauses to the extent permitted by law.
Commercial Real Estate and Construction Lending
Commercial real estate lending has been a significant part of Great Southern’s business activities since the mid-1980s. Great Southern
engages in commercial real estate lending in order to increase the potential yield on, and the proportion of interest rate sensitive loans
in, its portfolio. At December 31, 2008, commercial real estate loans and commercial construction loans each made up about one
fourth of the total loan portfolio. The economic recession that began in 2008 resulted in reduced activity in the market caused by the
downturn in the economy and reduced real estate values. In response, Great Southern began limiting residential and commercial land
28
development lending to reduce the risk in the portfolio and began originating more commercial real estate loans. Since December 31,
2008, the commercial construction loan portfolio (including multi-family residential construction) has decreased from 32% of the loan
portfolio to 8% of the loan portfolio at December 31, 2024, while, overall, the percentage of commercial real estate loans in the total
loan portfolio has trended upward, and was about 33% of the total loan portfolio at December 31, 2024. The decrease in the
commercial construction loan portfolio (including multi-family residential construction) from December 31, 2023 to December 31,
2024 was due to loans moving from the construction category to the appropriate commercial real estate or other residential (multi-
family) category, as projects were completed. Over the last five years, commercial real estate loans made up approximately 32-37% of
the total loan portfolio while outstanding commercial construction loans (including multi-family residential construction) were 8-17%.
At December 31, 2024 and 2023, loans secured by commercial real estate, excluding that which is under construction, totaled $1.6
billion and $1.5 billion, respectively, or approximately 32.6% and 32.8%, respectively, of the Bank’s total loan portfolio. In addition,
at December 31, 2024 and 2023, construction loans secured by projects under construction and the land on which the projects are
located aggregated $445.7 million and $804.4 million, respectively, or 9.3% and 17.2%, respectively, of the Bank’s total loan
portfolio. A majority of the Bank’s commercial real estate loans have been originated with adjustable rates of interest, most of which
are tied either to the national prime rate or to SOFR interest rates or fixed rates of interest with short-term maturities. A large majority
of the Bank’s commercial real estate loans (both fixed and adjustable) mature in five years or less. Substantially all of these loans were
originated with loan commitments which did not exceed 80% of the appraised value of the properties securing the loans.
Beyond the outstanding balance of our construction loans, our loan portfolio possesses increased risk due to the unfunded portion of
commercial, residential and other residential (multi-family) loans for the purpose of construction. At December 31, 2024 and 2023, we
had $719.3 million and $695.4 million in the unfunded portion of loans originated with the purpose of construction that had been
closed, but were not yet fully funded. These balances are managed through the Bank’s various risk management processes.
Management considers both on-balance sheet and off-balance sheet transactions in its evaluation of the Company’s liquidity. The
nature of these commitments is such that the likelihood of funding them in the aggregate at any one time is low.
The Bank’s construction loans generally have a term of 18-24 months or less. The construction loan agreements for one- to four-
family projects generally require principal reductions as individual condominium units or single-family houses are built and sold to a
third party. This ensures that the remaining loan balance, as a proportion of the value of the remaining security, does not increase,
assuming that the value of the remaining security does not decrease. Loan proceeds are disbursed in increments as construction
progresses. Generally, the amount of each disbursement is based on the construction cost estimate, with inspections of the project
performed in connection with each disbursement request. Normally, Great Southern’s commercial real estate and other residential
construction loans are made either as the initial stage of a combination loan (i.e., with a commitment from the Bank to provide
permanent financing upon completion of the project) or with a commitment from a third party to provide permanent financing.
The Bank’s commercial real estate and construction loan portfolios consist of loans with diverse collateral types. The following table
sets forth loans that were secured by certain types of collateral at December 31, 2024. These collateral types represented the five
highest percentage concentrations of commercial real estate and construction loan types in the loan portfolio at that date.
Percentage of
Non-Performing
Total Loan
Loans at
Collateral Type
Loan Balance
Portfolio
December 31, 2024
(Dollars In Thousands)
Retail (Varied Projects)
$
348,609
7.4 % $
—
Warehouses
$
288,429
6.1 % $
—
Health Care Facilities
$
269,972
5.8 % $
—
Motels/Hotels
$
269,034
5.7 % $
—
Office Industry
$
196,108
4.2 % $
77
Commercial real estate lending and construction lending generally affords the Bank an opportunity to receive interest at rates higher
than those obtainable from residential mortgage lending and to receive higher origination and other loan fees. In addition, commercial
real estate loans and construction loans are generally made with adjustable rates of interest or, if made on a fixed-rate basis, for
relatively short terms. Commercial real estate lending does, however, entail significant additional risks as compared with residential
mortgage lending. Commercial real estate loans typically involve large loan balances to single borrowers or groups of related
borrowers. In addition, the payment experience on loans secured by commercial properties is typically dependent on the successful
29
operation of the related real estate project and thus may be subject, to a greater extent, to adverse conditions in the real estate market
or in the economy generally.
Construction loans involve additional risks attributable to the fact that loan funds are advanced based on the expected value of the
project under construction, which is uncertain prior to the completion of construction. Moreover, because of the uncertainties inherent
in estimating construction costs, delays arising from labor shortages and other problems, material shortages, and other unpredictable
contingencies, it is relatively difficult to evaluate accurately the total loan funds required to complete a project, and the related loan-to-
value ratios. See also the discussion under the headings “- Classified Assets” and “- Loan Delinquencies and Defaults” below.
The Company executes interest rate swaps with certain commercial banking customers to facilitate their respective risk management
strategies. The Company began offering this service during 2011. Those interest rate swaps are simultaneously hedged by offsetting
interest rate swaps that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from
such transactions. As the interest rate swaps associated with this program do not meet the strict hedge accounting requirements,
changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. As of December 31,
2024, the Company had five interest rate swaps totaling $86.7 million in notional amount with commercial customers, and five interest
rate swaps with the same notional amount with third parties related to this program. As of December 31, 2023, the Company had six
interest rate swaps totaling $82.2 million in notional amount with commercial customers, and six interest rate swaps with the same
notional amount with third parties related to this program. During the years ended December 31, 2024, 2023 and 2022, the Company
recognized net gains (losses) of $(58,000), $(337,000) and $321,000, respectively, in non-interest income related to changes in the fair
value of interest rate swaps.
Other Commercial Lending
At December 31, 2024 and 2023, Great Southern had $209 million and $318 million, respectively, in other commercial loans
outstanding, or 4.4% and 6.8%, respectively, of the Bank’s total loan portfolio. Great Southern’s other commercial lending activities
encompass loans with a variety of purposes and security, including loans to finance accounts receivable, inventory and equipment.
Great Southern expects to continue to originate loans in this category subject to market conditions and applicable regulatory
restrictions. See “Government Supervision and Regulation” below.
Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her
employment and other income and which are secured by real property, the value of which tends to be more easily ascertainable, other
commercial loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash
flow of the borrower’s business. Commercial loans are generally secured by business assets, such as accounts receivable, equipment
and inventory. As a result, the availability of funds for the repayment of other commercial loans may be substantially dependent on the
success of the business itself. Further, the collateral securing the loans may depreciate over time, may be difficult to appraise and may
fluctuate in value based on the success of the business.
The Bank’s management recognizes the generally increased risks associated with other commercial lending. Great Southern’s
commercial lending policy emphasizes complete credit file documentation and analysis of the borrower’s character, capacity to repay
the loan, the adequacy of the borrower’s capital and collateral as well as an evaluation of the industry conditions affecting the
borrower. Review of the borrower’s past, present and projected future cash flows is also an important aspect of Great Southern’s credit
analysis. In addition, the Bank generally obtains personal guarantees from the borrowers on these types of loans. Historically, the
majority of Great Southern’s commercial loans have been to borrowers in southwestern and central Missouri and the St. Louis,
Missouri area. With the FDIC-assisted acquisitions in 2009, 2011, 2012 and 2014, geographic concentrations for commercial loans
expanded to include the greater Kansas City, Missouri area, several areas in Iowa, and the Minneapolis-St. Paul area. Great Southern
has continued its commercial lending in all of these geographic areas and in the commercial loan production offices in Atlanta,
Charlotte, Chicago, Dallas, Denver, Omaha and Phoenix.As part of its commercial lending activities, Great Southern issues letters of
credit and receives fees averaging approximately 1% of the amount of the letter of credit per year. At December 31, 2024, Great
Southern had 52 letters of credit outstanding in the aggregate amount of $16.8 million. Approximately 37% of the aggregate dollar
amount of these letters of credit was secured, including 17 letters of credit totaling $6.3 million secured by real estate.
Consumer Lending
Consumer loans generally have short terms to maturity, thus reducing Great Southern’s exposure to changes in interest rates, and carry
higher rates of interest than do residential mortgage loans. In addition, Great Southern believes offering consumer loan products helps
expand and create stronger ties to its existing retail customer base.
30
Great Southern offers a variety of secured consumer loans, including automobile loans, boat loans, home equity loans and loans
secured by savings deposits. In addition, Great Southern also offers home improvement loans and unsecured consumer loans.
Consumer loans totaled $170.1 million and $174.0 million at December 31, 2024 and 2023, respectively, or 3.6% and 3.7%,
respectively, of the Bank’s total loan portfolio.
The underwriting standards employed by the Bank for consumer loans include a determination of the applicant’s payment history on
other debts and an assessment of ability to meet existing obligations and payments on the proposed loan. Although creditworthiness of
the applicant is of primary consideration, the underwriting process also includes a comparison of the value of the underlying collateral,
if any, in relation to the proposed loan amount.
Beginning in 1998, the Bank implemented indirect lending relationships, primarily with automobile dealerships. Through these dealer
relationships, the dealer completes the application with the consumer and then submits it to the Bank for credit approval. While the
Bank’s initial and ongoing concentrated effort was on automobiles, the program evolved for use from time to time with other tangible
products where financing of the product is provided through the seller, including, to a lesser extent, boats and manufactured homes.
Nearly a decade ago, in response to more challenging consumer credit conditions, the Company tightened its underwriting guidelines
on automobile lending. Management took this step in an effort to improve credit quality in the portfolio and lower delinquencies and
charge-offs. The changes in underwriting guidelines resulted in lower origination volume, and as such, outstanding consumer auto
loan balances decreased significantly since the end of 2016. Ultimately, the decision was made to exit this business line effective
March 2019. Market and financial forces, including strong rate competition for well-qualified borrowers, have made indirect
automobile lending less profitable for the Company over the long term. Direct consumer lending through the Company’s banking
center network has continued, however.
At December 31, 2024 and 2023, the Bank had $52.4 million and $57.5 million, respectively, of direct and indirect auto, boat,
modular home and recreational vehicle loans in its portfolio. Indirect consumer loans were only $7.4 million and $10.2 million at
December 31, 2024 and 2023, respectively.
Consumer loans may entail greater risk than do residential mortgage loans, particularly in the case of consumer loans that are
unsecured or secured by rapidly depreciable assets such as automobiles. In such cases, any repossessed collateral for a defaulted
consumer loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood
of damage, loss or depreciation. The remaining deficiency often does not warrant further substantial collection efforts against the
borrower. In addition, consumer loan collections are dependent on the borrower’s continuing financial strength, and thus are more
likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and
state laws, including federal and state consumer bankruptcy and insolvency laws, may limit the amount which can be recovered on
these loans. These loans may also give rise to claims and defenses by a consumer loan borrower against an assignee of these loans
such as the Bank, and a borrower may be able to assert against the assignee claims and defenses which it has against the seller of the
underlying collateral.
Originations, Purchases, Sales and Servicing of Loans
The Bank originates loans through internal loan production personnel located in the Bank’s main and branch offices, as well as loan
production offices. Walk-in customers and referrals from existing customers of the Company are also important sources of loan
originations.
Great Southern may also purchase whole loans and participation interests in loans (generally without recourse, except in cases of
breach of representation, warranty or covenant) from other banks, thrift institutions and life insurance companies (originators). The
purchase transaction is governed by a participation agreement entered into by the participant (Great Southern) and the originator
containing guidelines as to ownership, control and servicing rights, among others. The originator may retain all rights with respect to
enforcement, collection and administration of the loan. This may limit Great Southern’s ability to control its credit risk when it
purchases participations in these loans. Although the terms of participation agreements vary, generally Great Southern does not have
direct access to the borrower, and the institution administering the loan has some discretion in the administration of performing loans
and the collection of non-performing loans.
Over the years, a number of banks, both locally and regionally, have sought to diversify the risk in their portfolios. In order to take
advantage of this situation, Great Southern purchases participations in commercial real estate, commercial construction and other
commercial loans. Great Southern subjects these loans to its normal underwriting standards used for originated loans and rejects any
31
credits that do not meet those guidelines. The originating bank generally retains the servicing of these loans. The Bank purchased
$26.3 million and $400,000 of these loans in the fiscal years ended December 31, 2024 and 2023, respectively. These balances
represent the total loan amount, including the unfunded portion of loans purchased. At the time of purchase, none of these loans had
outstanding funded balances.
Lending activity declined significantly in late 2022 and throughout 2023. As interest rates and inflation rapidly increased, many
potential borrowers put projects on hold while waiting to see how the economy and real estate values would perform. In addition, the
banking industry generally experienced liquidity competition, with some banks experiencing liquidity crises leading to a few bank
failures. Commercial real estate lending generally increased across the banking industry in 2024, but competition for loans remained
significant and lenders and borrowers both proceeded cautiously with new projects.
From time to time, Great Southern also sells non-residential loan participations generally without recourse to private investors, such as
other banks, thrift institutions and life insurance companies (participants). The sales transaction is governed by a participation
agreement entered into by the originator (Great Southern) and participant containing guidelines as to ownership, control and servicing
rights, among others. Great Southern generally retains servicing rights for these participations sold.
Great Southern also sells whole residential real estate loans without recourse to Freddie Mac and Fannie Mae as well as to private
investors, such as other banks, thrift institutions, mortgage companies and life insurance companies. Whole real estate loans are sold
with a provision for repurchase upon breach of representation, warranty or covenant. These representations, warranties and covenants
include those regarding the compliance of loan originations with all applicable legal requirements, mortgage title insurance policies
when applicable, enforceable liens on collateral, collateral type, borrower creditworthiness, private mortgage insurance when required
and compliance with all applicable federal regulations. A minimal number of repurchase requests have been received to date based on
a breach of representations, warranties or covenants as outlined in the investor contracts. These loans are generally sold for cash in
amounts equal to the unpaid principal amount of the loans adjusted for current market yields to the buyer. The sale amounts generally
produce gains to the Bank and allow a margin for servicing income on loans when the servicing is retained by the Bank. However,
residential real estate loans sold in recent years have primarily been with Great Southern releasing control of the servicing of the loans.
The Bank sold one- to four-family whole real estate loans, SBA-guaranteed loans and loan participations in aggregate amounts of
$171.0 million, $154.9 million and $100.8 million during fiscal 2024, 2023 and 2022, respectively. The Bank typically sells long-term
fixed rate mortgages. Sales of whole real estate loans and participations in real estate loans can be beneficial to the Bank since these
sales generally generate income at the time of sale, produce future servicing income on loans where servicing is retained, provide
funds for additional lending and other investments, and increase liquidity.
Gains, losses and transfer fees on sales of loans and loan participations are recognized at the time of the sale. When real estate loans
and loan participations sold have an average contractual interest rate that differs from the agreed upon yield to the purchaser (less the
agreed upon servicing fee), resulting gains or losses are recognized in an amount equal to the present value of the differential over the
estimated remaining life of the loans. Any resulting discount or premium is accreted or amortized over the same estimated life using a
method approximating the level yield interest method. When real estate loans and loan participations are sold with servicing released,
as the Bank primarily does, an additional fee is received for the servicing rights. Net gains and transfer fees on sales of loans for the
years ended December 31, 2024, 2023 and 2022 were $3.8 million, $2.3 million and $2.6 million, respectively. These gains were
primarily from the sale of fixed-rate residential loans.
The Bank serviced loans owned by others totaling approximately $397.0 million and $439.9 million at December 31, 2024 and 2023,
respectively. Of the total loans serviced for others at December 31, 2024, $301.4 million related to commercial real estate, commercial
business and construction loans, portions of which were sold to other parties. The remaining $95.6 million of loans serviced for others
related to one- to four-family real estate loans which the Bank had originated and sold, but retained the obligation to service, or had
acquired the servicing rights through various FDIC-assisted transactions. The servicing of these loans generated fees (net of
amortization of the servicing rights) to the Bank for the years ended December 31, 2024, 2023 and 2022, of $228,000, $202,000 and
$185,000, respectively.
In addition to interest earned on loans and loan origination fees, the Bank receives fees for loan commitments, letters of credit,
prepayments, modifications, late payments, transfers of loans due to changes of property ownership and other miscellaneous services.
The fees vary from time to time, generally depending on the supply of funds and other competitive conditions in the market. Fees from
prepayments, commitments, letters of credit and late payments totaled $614,000, $898,000 and $1.3 million for the years ended
December 31, 2024, 2023 and 2022, respectively. Loan origination fees, net of related costs, are accounted for in accordance with
FASB ASC 310-20, Receivables – Nonrefundable Fees and Other Costs. Loan fees and certain direct loan origination costs are
32
deferred, and the net fee or cost is recognized in interest income using the level-yield method over the contractual life of the loan. For
further discussion of this matter, see Note 1 to the accompanying audited financial statements, included in Item 8 of this Report.
Loan Delinquencies and Defaults
When a borrower fails to make a required payment on a loan, the Bank attempts to cause the delinquency to be cured by contacting the
borrower. In the case of loans secured by residential real estate, a late notice is sent 15 days after the due date. If the delinquency is not
cured by the 30th day, a delinquent notice is sent to the borrower.
Additional written contacts are made with the borrower 45 and 60 days after the due date. If the delinquency continues for a period of
120 days, the Bank usually institutes appropriate action to foreclose on the collateral. The actual time it takes to foreclose on the
collateral varies depending on the circumstances and the applicable governing law. If foreclosed upon, the property is sold at public
auction and may be purchased by the Bank. Delinquent consumer loans are handled in a generally similar manner, except that initial
contacts are made when the payment is five days past due and appropriate action may be taken to collect any loan payment that is
delinquent for more than 15 days. The Bank’s procedures for repossession and sale of consumer collateral are subject to various
requirements under the applicable consumer protection laws as well as other applicable laws and the determination by the Bank that it
would be beneficial from a cost basis.
Delinquent commercial business loans and loans secured by commercial real estate are initially handled by the loan officer in charge
of the loan, who is responsible for contacting the borrower. Senior management also works with the commercial loan officers to see
that necessary steps are taken to collect delinquent loans and may reassign the loan relationship to the special assets group. In addition,
the Bank has a Problem Loan Committee which meets at least quarterly and reviews all classified assets, as well as other loans which
management feels present possible collection problems. If an acceptable workout of a delinquent commercial loan cannot be agreed
upon, the Bank may initiate foreclosure proceedings on any collateral securing the loan. However, in all cases, whether a commercial
or other loan, the prevailing circumstances may be such that management may determine it is in the best interest of the Bank not to
foreclose on the collateral.
The following tables set forth our loans by aging as of the dates indicated. The decrease in commercial real estate loans over 90 days
past due at December 31, 2024 is primarily due to the resolution of two unrelated loan relationships, both of which were added to non-
performing loans during 2023. One of the relationships was foreclosed upon, with the collateral assets transferred to Other Real Estate
in 2024, and the other relationship was paid in full in 2024. The increase in non-owner occupied 1-4 family residential loans over 90
days past due was attributable to two related loans totaling $1.2 million added to non-performing loans in 2024 and another unrelated
loan of $510,000 added to non-performing loans in 2024. For additional information, see “Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations— Results of Operations and Comparison for the Years Ended December
31, 2024 and 2023-Non-Performing Assets.”
33
December 31, 2024
Total
30-59 Days
60-89 Days
Over 90 Days
Loans
Past Due
Past Due
Past Due
Total Past Due
Current
Receivable
#
Amount
#
Amount
#
Amount
#
Amount
Amount
Amount
(Dollars In Thousands)
One- to four-family residential
construction
1
$
12
—
$
—
—
$
—
1
$
12
$
30,521
$
30,533
Subdivision construction
—
—
—
—
—
—
—
—
19,861
19,861
Land development
—
—
—
—
1
464
1
464
42,040
42,504
Commercial construction
—
—
—
—
—
—
—
—
352,793
352,793
Owner occupied one- to four-family
residential
13
1,704
4
816
4
950
21
3,470
706,976
710,446
Non-owner occupied one- to four-family
residential
1
642
—
—
3
1,681
4
2,323
120,578
122,901
Commercial real estate
—
—
—
—
4
77
4
77
1,543,665
1,543,742
Other residential
—
—
—
—
—
—
—
—
1,549,249
1,549,249
Commercial business
—
—
—
—
1
245
1
245
208,702
208,947
Industrial revenue bonds
—
—
—
—
1
139
1
139
11,205
11,344
Consumer auto
8
39
1
1
—
—
9
40
25,747
25,787
Consumer other
9
145
2
4
2
17
13
166
27,739
27,905
Home equity lines of credit
2
63
3
56
—
—
5
119
115,717
115,836
Total
34
$
2,605
10
$
877
16
$
3,573
60
$
7,055
$ 4,754,793
$ 4,761,848
December 31, 2023
Total
30-59 Days
60-89 Days
Over 90 Days
Loans
Past Due
Past Due
Past Due
Total Past Due
Current
Receivable
#
Amount
#
Amount
#
Amount
#
Amount
Amount
Amount
(Dollars In Thousands)
One- to four-family residential
construction
—
$
—
—
$
—
—
$
—
—
$
—
$
29,628
$
29,628
Subdivision construction
—
—
—
—
—
—
—
—
23,359
23,359
Land development
—
—
—
—
1
384
1
384
47,631
48,015
Commercial construction
—
—
—
—
—
—
—
—
703,407
703,407
Owner occupied one- to four-family
residential
20
2,778
3
125
3
722
26
3,625
765,635
769,260
Non-owner occupied one- to four-family
residential
—
—
—
—
—
—
—
—
121,275
121,275
Commercial real estate
1
187
1
92
6
10,552
8
10,831
1,510,201
1,521,032
Other residential
1
9,572
—
—
—
—
1
9,572
932,499
942,071
Commercial business
—
—
—
—
2
31
2
31
318,019
318,050
Industrial revenue bonds
—
—
—
—
—
—
—
—
12,047
12,047
Consumer auto
23
116
9
65
1
8
33
189
28,154
28,343
Consumer other
9
137
1
—
4
42
14
179
28,799
28,978
Home equity lines of credit
10
335
1
26
1
9
12
370
115,513
115,883
Total
64
$ 13,125
15
$
308
18
$ 11,748
97
$ 25,181
$ 4,636,167
$ 4,661,348
Classified Assets
Federal regulations provide for the classification of loans and other assets such as debt and equity securities considered to be of lesser
quality as “substandard,” “doubtful” or “loss” assets. The regulations require insured institutions to classify their own assets and to
establish prudent specific allocations for losses from assets classified “substandard” or “doubtful.” “Substandard” assets include those
characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Assets classified as
“doubtful,” have all the weaknesses inherent in those classified as “substandard” with the added characteristic that the weaknesses
present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and
improbable. For the portion of assets classified as “loss,” an institution is required to either establish specific allowances of 100% of
the amount classified or charge such amount off its books. Assets that do not currently expose the insured institution to sufficient risk
to warrant classification in one of the aforementioned categories but possess a potential weakness (referred to as “special mention”
assets), are required to be listed on the Bank’s watch list and monitored for further deterioration or improvement.
34
Following are the total classified assets at December 31, 2024 and 2023, per the Bank’s internal asset classification list. The
allowances for credit losses reflected below are the portions of the Bank’s total allowances for credit losses relating to these classified
loans. There were no significant off-balance sheet items classified at December 31, 2024 or December 31, 2023.
December 31, 2024
Total
Allowance
Asset Category
Substandard
Doubtful
Loss
Classified
for Losses
(In Thousands)
Investment securities
$
—
$
—
$
—
$
—
$
—
Loans
10,125
510
—
10,635
518
Foreclosed assets and repossessions
5,993
—
—
5,993
—
Total
$
16,118
$
510
$
—
$
16,628
$
518
December 31, 2023
Total
Allowance
Asset Category
Substandard
Doubtful
Loss
Classified
for Losses
(In Thousands)
Investment securities
$
—
$
—
$
—
$
—
$
—
Loans
19,122
—
—
19,122
1,229
Foreclosed assets and repossessions
23
—
—
23
—
Total
$
19,145
$
—
$
—
$
19,145
$
1,229
Loans classified as “Substandard” were $10.1 million and $19.1 million at December 31, 2024 and 2023, respectively. The largest
substandard relationship, which totaled $5.1 million, was added to substandard loans during the year ended December 31, 2024 and is
collateralized by three nursing care facilities located in southwest Missouri. The borrower’s business cash flow was negatively
impacted by a labor shortage and a decrease in Medicaid reimbursement during 2022-2023. Monthly payments continued to be made
prior to the transfer to this category. The $9.0 million decrease in substandard loans from December 31, 2023 to December 31, 2024
was primarily the result of $16.1 million in loans being transferred to foreclosed assets and $10.4 million in loans paid off, partially
offset by $21.0 million in loans being added to the “Substandard” category. Loans classified as “Doubtful” were $510,000 and $-0- at
December 31, 2024 and 2023, respectively. This single loan was downgraded from “Substandard” to “Doubtful” during the year
ended December 31, 2024 and is collateralized by 24 duplexes and two community buildings in Louisiana.
In addition to the classified loans in the table above, the Company has loans categorized as “Watch” and “Special Mention.” While
loans classified as “Special Mention” are not considered to be adversely classified, they are deserving of management’s close attention
to ensure repayment prospects and that the credit position of the assets does not deteriorate and expose the institution to elevated risk
which might warrant adverse classification at a future date. Loans rated as “Special Mention” were $1.5 million and $26.7 million at
December 31, 2024 and 2023, respectively, as two loan relationships totaling $7.2 million were upgraded to “Watch,” two loan
relationships totaling $14.3 million were downgraded to “Substandard” and a single $2.6 million loan was paid in full. In the year
ended December 31, 2024, two loan relationships were downgraded to “Special Mention” from “Satisfactory” and one loan
relationship was downgraded from “Watch.” The largest relationship consisted of one commercial business loans totaling $995,000 at
December 31, 2024 and is secured by business equipment.
Loans classified as “Watch” are being monitored due to indications of potential weaknesses or deficiencies that may require future
reclassification as ”Special Mention” or “Substandard.” Loans classified as “Watch” at December 31, 2024 and 2023 were $15.9
million and $8.3 million, respectively. This increase was primarily due to the addition of ten loans totaling $11.3 million, partially
offset by the payoff of a single $1.4 million loan and one loan relationship totaling $993,000, which was downgraded to “Special
Mention.” In the year ended December 31, 2024, five loan relationships were downgraded from “Satisfactory.” The largest
relationship consisted of one commercial real estate loan relationship totaling $4.8 million at December 31, 2024 that is secured by an
18-hole golf course, clubhouse and other related assets in Southwest Missouri.
Non-Performing Assets
The table below sets forth the amounts and categories of gross non-performing assets (classified loans which are not performing under
regulatory guidelines and all foreclosed assets, including assets acquired in settlement of loans) in the Bank’s loan portfolio as of the
35
dates indicated. Loans generally are placed on nonaccrual status when the loan becomes 90 days delinquent or when the collection of
principal, interest, or both, otherwise becomes doubtful.
Prior to the Company’s adoption of the Current Expected Credit Loss (“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. In the table below, FDIC-assisted acquired assets are included in their particular collateral
categories for the year-ends after December 31, 2020.
December 31,
2024
2023
2022
2021
2020
(In Thousands)
Nonaccruing loans:
One- to four-family residential
$ 2,631
$
722
$
722
$ 2,216
$ 1,571
One- to four-family construction
—
—
—
—
—
Land development
464
384
384
468
—
Other residential
—
—
—
—
—
Commercial real estate
77
10,552 (2)
1,579 (3)
2,006 (3)
587
Other commercial
384
31
586
—
114
Commercial construction and land development
—
—
—
—
—
Consumer
17
59
399
733
771
Total gross nonaccruing loans
3,573
11,748
3,670
5,423
3,043
Loans over 90 days delinquent still accruing interest:
One- to four-family residential
—
—
—
—
—
Commercial real estate
—
—
—
—
—
Other commercial
—
—
—
—
—
Commercial construction and land development
—
—
—
—
—
Consumer
—
—
—
—
—
Total loans over 90 days delinquent still accruing interest
—
—
—
—
—
Total gross non-performing loans
3,573
11,748
3,670
5,423
3,043
Foreclosed assets:
One- to four-family residential
—
—
—
183
111
One- to four-family construction
—
—
—
315
—
Other residential
—
—
—
—
—
Commercial real estate
5,960 (1)
—
—
—
—
Commercial construction and land development
—
—
—
—
513
Other commercial
—
—
—
—
—
Total foreclosed assets
5,960
—
—
498
624
Repossessions
33
23
50
90
153
Total gross non-performing assets
$ 9,566
$ 11,771
$ 3,720
$ 6,011
$ 3,820
Total gross non-performing assets as a percentage of average total assets
0.16 %
0.20 %
0.07 %
0.11 %
0.07 %
(1)
One relationship was all of this total at December 31, 2024.
(2)
Two relationships were $10.3 million of this total at December 31, 2023.
(3)
One relationship was $1.3 million and $1.7 million of this total at December 31, 2022 and 2021, respectively.
36
See Item 7. ”Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-performing Assets” for
further information.
Gross collateral-dependent loans totaled $9.8 million and $18.8 million at December 31, 2024 and 2023, respectively. See Note 3 to
the accompanying audited financial statements included in Item 8 for additional information, including further detail of nonaccruing
and collateral-dependent loans and details of modified loans. See also Note 14 of the accompanying audited financial statements
included in Item 8 for additional information, including further detail of the fair value of collateral-dependent loans.
For the year ended December 31, 2024, gross interest income which would have been recorded had the nonaccruing loans been current
in accordance with their original terms amounted to $681,000. No interest income was included on these loans for the year ended
December 31, 2024. For the year ended December 31, 2023, gross interest income which would have been recorded had the
nonaccruing loans been current in accordance with their original terms amounted to $509,000. No interest income was included on
these loans for the year ended December 31, 2023. For the year ended December 31, 2022, gross interest income which would have
been recorded had the nonaccruing loans been current in accordance with their original terms amounted to $292,000. No interest
income was included on these loans for the year ended December 31, 2022.
Modified Loans
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 (TDR) 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 disclosure requirements and introduces new disclosure requirements related to certain modifications of receivables
made to borrowers experiencing financial difficulty. Adoption of this ASU on January 1, 2023 did not have a material impact on the
Company’s results of operations, financial position or liquidity, but resulted in additional disclosure requirements related to gross
charge offs by vintage year and the removal of TDR disclosures, replaced by additional disclosures on the types of modifications of
loans to borrowers experiencing financial difficulties. The Company has adopted this update prospectively. Loan modifications are
reported if concessions have been granted to borrowers that are experiencing financial difficulty.
The estimate of lifetime expected losses utilized in the allowance for credit losses model is developed using average historical loss on
loans with similar risk characteristics, which includes losses from modifications of loans to borrowers experiencing financial
difficulty. As a result, a charge to the allowance for credit losses is generally not recorded upon modification. For modifications to
loans made to borrowers experiencing financial difficulty that are adversely classified, the Company determines the allowance for
credit losses on an individual basis, using the same process that it utilizes for other adversely classified loans. If collection efforts have
begun and the modified loan is subsequently deemed collateral-dependent, the loan is placed on nonaccrual status and the allowance
for credit losses is determined based on an individual evaluation. If necessary, the loan is charged down to fair market value less
estimated sales costs.
The following tables show, as of the date indicated, the composition of loan modifications made to loans to borrowers experiencing
financial difficulty, by the loan class and type of concessions granted. Each of the types of concessions granted comprised 2% or less
of their respective classes of loans at December 31, 2024 and December 31, 2023. During the year ended December 31, 2024,
principal forgiveness totaling $295,000 was completed on consumer loans and a land development loan, compared to principal
forgiveness totaling $563,000 that was completed on commercial business loans and consumer loans during the year ended December
31, 2023.
Year Ended December 31, 2024
Interest Rate
Term
Total
Reduction
Extension
Combination
Modifications
(In Thousands)
Construction and land development
$
—
$
—
$
—
$
—
One- to four-family residential
—
—
—
—
Other residential
—
2,709
—
2,709
Commercial real estate
—
70
—
70
Commercial business
—
—
—
—
Consumer
—
31
—
31
$
—
$
2,810
$
—
$
2,810
37
Year Ended December 31, 2023
Interest Rate
Term
Total
Reduction
Extension
Combination
Modifications
(In Thousands)
Construction and land development
$
—
$
—
$
1,553
$
1,553
One- to four-family residential
—
—
—
—
Other residential
—
2,750
—
2,750
Commercial real estate
—
77
20,365
20,442
Commercial business
—
—
—
—
Consumer
5
7
—
12
$
5
$
2,834
$
21,918
$
24,757
The Company closely monitors the performance of loans to borrowers experiencing financial difficulty that are modified to
understand the effectiveness of its modification efforts. The following tables depict the performance of loans (under modified terms)
at December 31, 2024 and 2023, respectively:
December 31, 2024
30-89 Days
Over 90 Days
Current
Past Due
Past Due
Total
(In Thousands)
Construction and land development
$
—
$
—
$
—
$
—
One- to four-family residential
—
—
—
—
Other residential
2,709
—
—
2,709
Commercial real estate
70
—
—
70
Commercial business
—
—
—
—
Consumer
31
—
—
31
$
2,810
$
—
$
—
$
2,810
December 31, 2023
30-89 Days
Over 90 Days
Current
Past Due
Past Due
Total
(In Thousands)
Construction and land development
$
1,553
$
—
$
—
$
1,553
One- to four-family residential
—
—
—
—
Other residential
2,750
—
—
2,750
Commercial real estate
12,384
—
8,058
20,442
Commercial business
—
—
—
—
Consumer
12
—
—
12
$
16,699
$
—
$
8,058
$
24,757
Allowance for Credit Losses
On January 1, 2021, the Company adopted the revised accounting standard related to the allowance for credit losses. 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 to the accompanying financial statements included in Item 8 of this Report for additional
information.
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 generally 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 loans with a balance of $100,000 or more, are evaluated on an individual basis.
38
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, 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 using a straight-line method. The forecast-adjusted loss rate is applied to the principal balance over the remaining contractual
lives, adjusted for expected prepayments. The contractual term excludes expected extensions, renewals and modifications.
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.
See Note 3 “Loans and Allowance for Credit Losses” to the accompanying financial statements contained in Item 8 of this Report for
additional information regarding the allowance for credit losses. Inherent in this process is the evaluation and risk assessment of
individual credit relationships. From time to time, certain credit relationships may deteriorate due to changes in payment performance,
cash flow of the borrower, value of collateral, or other factors. Due to these changing circumstances, management may revise its loss
estimates and assumptions for these specific credits. In some cases, 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.
At December 31, 2024, Great Southern had an allowance for credit losses of $64.8 million, of which $518,000 had been allocated to
specific loans. At December 31, 2023, Great Southern had an allowance for credit losses of $64.7 million, of which $1.2 million had
been allocated to specific loans. All loans with specific allowances were considered to be collateral-dependent loans. The allowance
and the activity within the allowance during 2024, 2023 and 2022 are discussed further in Note 3 “Loans and Allowance for Credit
Losses” of the accompanying audited financial statements and “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” contained in Item 8 and Item 7 of this Report, respectively.
The allocation of the allowance for losses on loans at the dates indicated is summarized as follows.
December 31,
2024
2023
2022
2021
2020
% of
% of
% of
% of
% of
Loans to
Loans to
Loans to
Loans to
Loans to
Total
Total
Total
Total
Total
Amount
Loans
Amount
Loans
Amount
Loans
Amount
Loans
Amount
Loans (1)
(Dollars In Thousands)
One- to four-family residential and
construction
$ 9,224
19.0 % $ 9,820
20.5 % $ 11,171
21.6 % $ 9,364
18.4 % $ 4,472
15.7 %
Other residential and construction
15,594
36.9
13,370
32.2
12,110
28.3
10,502
28.9
9,282
31.4
Commercial real estate
28,802
32.6
28,171
32.9
27,096
33.7
28,604
36.5
33,382
36.1
Commercial construction
2,735
3.5
2,844
3.9
2,865
5.8
2,797
4.3
3,378
3.8
Other commercial
4,656
4.4
6,935
6.8
5,822
6.4
4,142
6.9
2,345
7.3
Consumer and overdrafts
3,749
3.6
3,530
3.7
4,416
4.2
5,345
5.0
2,204
5.7
Acquired loans not covered by loss
sharing agreements
—
—
—
—
—
—
—
—
680
—
Total
$ 64,760
100.0 % $ 64,670
100.0 % $ 63,480
100.0 % $ 60,754
100.0 % $ 55,743
100.0 %
(1) Excludes loans acquired through FDIC-assisted transactions. For periods prior to the adoption of ASU 2016-13 in 2021, this table
was prepared using the previous GAAP incurred loss method.
39
The following table sets forth credit ratios as of December 31, 2024 and 2023.
December 31,
2024
2023
(Dollars In Thousands)
Allowance for Credit Losses
$
64,760
$
64,670
Total Loans
4,761,848
4,661,348
Ratio of Allowance for Credit Losses to Total Loans
1.36 %
1.39 %
Non-performing Loans
$
3,573
$
11,748
Total Loans
4,761,848
4,661,348
Ratio of Non-performing Loans to Total Loans
0.07 %
0.25 %
Ratio of Allowance for Credit Losses to Non-performing Loans
1,812.48 %
550.48 %
40
The following table sets forth an analysis of activity in the Bank’s allowance for credit losses showing the details of the activity by
types of loans.
December 31,
2024
2023
2022
2021
2020
(Dollars In Thousands)
Balance at beginning of period
$
64,670
$
63,480
$
60,754
$
55,743
$
40,294
CECL adoption adjustment:
One- to four-family residential
—
—
—
4,533
—
Other residential
—
—
—
5,832
—
Commercial real estate
—
—
—
(2,531)
—
Construction
—
—
—
(1,165)
—
Other commercial
—
—
—
1,499
—
Consumer, overdrafts and other loans
—
—
—
3,427
—
Total CECL adoption adjustment
—
—
—
11,595
—
Charge-offs:
One- to four-family residential
64
31
40
190
70
Other residential
—
—
—
—
—
Commercial real estate
1,300
—
44
142
43
Construction
101
—
84
154
1
Other commercial
243
1,037
51
81
28
Consumer, overdrafts and other loans
1,492
1,754
1,950
2,054
3,152
Total charge-offs
3,200
2,822
2,169
2,621
3,294
Recoveries:
One- to four-family residential
38
70
195
485
183
Other residential
—
—
110
92
180
Commercial real estate
—
145
1
48
73
Construction
194
6
—
20
204
Other commercial
490
241
240
334
149
Consumer, overdrafts and other loans
868
1,300
1,349
1,758
2,083
Total recoveries
1,590
1,762
1,895
2,737
2,872
Net charge-offs (recoveries)
1,610
1,060
274
(116)
422
Provision (credit) for losses on loans
1,700
2,250
3,000
(6,700)
15,871
Balance at end of period
$
64,760
$
64,670
$
63,480
$
60,754
$
55,743
Ratio of net charge-offs to average loans outstanding by loan category
One- to four-family residential
— %
— %
— %
(0.01)%
— %
Other residential
—
—
—
—
—
Commercial real estate
0.1
—
—
—
—
Construction
(0.1)
—
—
—
—
Other commercial
(0.1)
0.3
—
(0.01)
—
Consumer, overdrafts and other loans
0.4
0.3
0.01
0.01
0.02
Ratio of net charge-offs to average loans outstanding
0.03 %
0.02 %
0.01 %
— %
0.01 %
Investment Activities
Excluding securities issued by the United States Government, or its agencies, there were no investment securities in excess of 10% of
the Company’s stockholders’ equity at December 31, 2024, 2023 or 2022. Agencies, for this purpose, primarily include Freddie Mac,
Fannie Mae, Ginnie Mae, Small Business Administration and FHLBank.
As of December 31, 2024 and 2023, the Company held approximately $187.4 million and $195.0 million, respectively, in principal
amount of investment securities which the Company classified as held-to-maturity. In addition, as of December 31, 2024 and 2023,
the Company held approximately $533.4 million and $478.2 million, respectively, in fair value of investment securities which the
41
Company classified as available-for-sale. See Notes 1 and 2 to the accompanying audited financial statements included in Item 8 of
this Report.
The amortized cost and fair values of, and gross unrealized gains and losses on, investment securities at the dates indicated are
summarized as follows.
December 31, 2024
Gross
Gross
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities
$
346,712
$
69
$
40,874
$
305,907
Agency collateralized mortgage obligations
123,395
—
9,771
113,624
States and political subdivisions securities
58,608
69
2,729
55,948
Small Business Administration securities
65,849
—
7,955
57,894
$
594,564
$
138
$
61,329
$
533,373
December 31, 2024
Amortized
Gross
Gross
Amortized
Fair Value
Carrying
Unrealized
Unrealized
Fair
Cost
Adjustment
Value
Gains
Losses
Value
(In Thousands)
HELD-TO-MATURITY SECURITIES:
Agency mortgage-backed securities
$
71,065
$
1,864
$
72,929
$
—
$
8,523
$ 64,406
Agency collateralized mortgage obligations
110,493
(2,140)
108,353
—
15,495
92,858
States and political subdivisions
6,137
14
6,151
—
650
5,501
$ 187,695
$
(262)
$ 187,433
$
—
$ 24,668
$ 162,765
December 31, 2023
Gross
Gross
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities
$
316,114
$
7
$
35,890
$
280,231
Agency collateralized mortgage obligations
85,989
—
10,043
75,946
States and political subdivisions securities
59,141
527
1,531
58,137
Small Business Administration securities
70,648
—
6,755
63,893
$
531,892
$
534
$
54,219
$
478,207
December 31, 2023
Amortized
Gross
Gross
Amortized
Fair Value
Carrying
Unrealized
Unrealized
Fair
Cost
Adjustment
Value
Gains
Losses
Value
(In Thousands)
HELD-TO-MATURITY SECURITIES:
Agency mortgage-backed securities
$
72,495
$
2,436
$
74,931
$
—
$
8,686
$
66,245
Agency collateralized mortgage obligations
116,405
(2,502)
113,903
—
14,662
99,241
States and political subdivisions
6,188
1
6,189
—
482
5,707
$ 195,088
$
(65)
$ 195,023
$
—
$ 23,830
$ 171,193
42
December 31, 2022
Gross
Gross
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities
$
327,266
$
—
$
40,784
$
286,482
Agency collateralized mortgage obligations
90,205
—
11,731
78,474
States and political subdivisions securities
60,667
119
3,291
57,495
Small Business Administration securities
75,076
—
6,935
68,141
$
553,214
$
119
$
62,741
$
490,592
December 31, 2022
Amortized
Gross
Gross
Amortized
Fair Value
Carrying
Unrealized
Unrealized
Fair
Cost
Adjustment
Value
Gains
Losses
Value
(In Thousands)
HELD-TO-MATURITY SECURITIES:
Agency mortgage-backed securities
$ 73,891
$
3,015
$ 76,906
$
—
$
9,820
$
67,086
Agency collateralized mortgage obligations
122,247
(2,885)
119,362
—
14,129
105,233
States and political subdivisions
6,239
(12)
6,227
—
781
5,446
$ 202,377
$
118
$ 202,495
$
—
$ 24,730
$ 177,765
At December 31, 2024, the Company’s available-for-sale agency mortgage-backed securities portfolio consisted of FNMA securities
totaling $205.6 million, FHLMC securities totaling $98.5 million and GNMA securities totaling $1.8 million. At December 31, 2023,
the available-for-sale agency mortgage-backed securities portfolio consisted of FNMA securities totaling $190.9 million, FHLMC
securities totaling $86.4 million and GNMA securities totaling $2.9 million. At December 31, 2022, the 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, 2024, 2023 and 2022, all of the Company’s agency mortgage-backed
securities had fixed rates of interest.
At December 31, 2024, the Company’s available-for-sale agency collateralized mortgage-backed obligations portfolio consisted of
FNMA securities totaling $46.0 million, FHLMC securities totaling $63.0 million and GNMA securities totaling $4.6 million. At
December 31, 2023, the Company’s available-for-sale agency collateralized mortgage-backed obligations portfolio consisted of
FNMA securities totaling $4.1 million, FHLMC securities totaling $66.5 million and GNMA securities totaling $5.3 million. At
December 31, 2022, the Company’s available-for-sale agency collateralized mortgage-backed obligations portfolio consisted of
FNMA securities totaling $3.9 million, FHLMC securities totaling $67.8 million and GNMA securities totaling $6.7 million. At
December 31, 2024, 2023 and 2022, all of the Company’s agency collateralized mortgage-backed obligations had fixed rates of
interest.
The following tables present the contractual maturities and weighted average tax-equivalent yields of available-for-sale and held-to-
maturity securities at December 31, 2024. Expected maturities may differ from contractual maturities because issuers may have the
right to call or prepay obligations with or without call or prepayment penalties.
Amortized
Tax-Equivalent
Cost
Amortized Yield
Fair Value
(Dollars In Thousands)
AVAILABLE-FOR-SALE SECURITIES
One year or less
$
—
— $
—
After one through five years
1,230
4.65 %
1,232
After five through ten years
—
—
—
After ten years
57,378
3.46 %
54,716
Securities not due on a single maturity date
535,956
3.00 %
477,425
Total
$
594,564
3.05 % $
533,373
43
Amortized
Tax-Equivalent
Carrying Value
Amortized Yield
Fair Value
(Dollars In Thousands)
HELD-TO-MATURITY SECURITIES
One year or less
$
—
—
$
—
After one through five years
—
—
—
After five through ten years
1,037
5.90 %
936
After ten years
5,114
1.36 %
4,565
Securities not due on a single maturity date
181,282
2.65 %
157,264
Total
$
187,433
2.63 % $
162,765
Securities
Not Due
After One
After Five
After
on a Single
One Year
Through
Through
Ten
Maturity
or Less
Five Years Ten Years
Years
Date
Total
(In Thousands)
AVAILABLE-FOR-SALE SECURITIES
Agency mortgage-backed securities
$
— $
— $
— $
— $ 305,907 $ 305,907
Agency collateralized mortgage obligations
—
—
—
—
113,624
113,624
Small business administration securities
—
—
—
—
57,894
57,894
States and political subdivisions securities
—
1,232
—
54,716
—
55,948
$
—
$
1,232
$
—
$ 54,716
$ 477,425
$ 533,373
HELD-TO-MATURITY SECURITIES
Agency mortgage-backed securities
$
—
$
—
$
—
$
—
$
72,929
$
72,929
Agency collateralized mortgage obligations
—
—
—
—
108,353
108,353
States and political subdivisions securities
—
—
1,037
5,114
—
6,151
$
—
$
—
$
1,037
$
5,114
$ 181,282
$ 187,433
The following tables show our investments’ gross unrealized losses and fair values, aggregated by investment category and length of
time that individual securities have been in a continuous unrealized loss position at December 31, 2024, 2023 and 2022, respectively:
2024
Less than 12 Months
12 Months or More
Total
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
Description of Securities
Value
Losses
Value
Losses
Value
Losses
(In Thousands)
AVAILABLE-FOR-SALE SECURITIES
Agency mortgage-backed securities
$ 45,977
$ (1,008)
$ 253,971
$ (39,866)
$ 299,948
$ (40,874)
Agency collateralized mortgage obligations
50,720
(890)
62,903
(8,881)
113,623
(9,771)
Small Business Administration securities
7,229
(270)
50,665
(7,685)
57,894
(7,955)
States and political subdivisions securities
14,523
(343)
37,945
(2,386)
52,468
(2,729)
$ 118,449
$ (2,511)
$ 405,484
$ (58,818)
$ 523,933
$ (61,329)
HELD-TO-MATURITY SECURITIES
Agency mortgage-backed securities
$
—
$
—
$ 64,406
$ (8,523)
$ 64,406
$ (8,523)
Agency collateralized mortgage obligations
—
—
92,858
(15,495)
92,858
(15,495)
States and political subdivisions securities
—
—
5,501
(650)
5,501
(650)
$
—
$
—
$ 162,765
$ (24,668)
$ 162,765
$ (24,668)
44
2023
Less than 12 Months
12 Months or More
Total
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
Description of Securities
Value
Losses
Value
Losses
Value
Losses
(In Thousands)
AVAILABLE-FOR-SALE SECURITIES
Agency mortgage-backed securities
$
4,318
$
(9)
$ 274,801
$ (35,881)
$ 279,119
$ (35,890)
Agency collateralized mortgage obligations
9,080
(216)
66,866
(9,827)
75,946
(10,043)
Small Business Administration securities
7,782
(133)
56,111
(6,622)
63,893
(6,755)
States and political subdivisions securities
—
—
37,969
(1,531)
37,969
(1,531)
$ 21,180
$
(358)
$ 435,747
$ (53,861)
$ 456,927
$ (54,219)
HELD-TO-MATURITY SECURITIES
Agency mortgage-backed securities
$
—
$
—
$
66,245
$
(8,686)
$
66,245
$
(8,686)
Agency collateralized mortgage obligations
—
—
99,241
(14,662)
99,241
(14,662)
States and political subdivisions securities
—
—
5,707
(482)
5,707
(482)
$
—
$
—
$ 171,193
$ (23,830)
$ 171,193
$ (23,830)
2022
Less than 12 Months
12 Months or More
Total
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
Description of Securities
Value
Losses
Value
Losses
Value
Losses
(In Thousands)
AVAILABLE-FOR-SALE SECURITIES
Agency mortgage-backed securities
$ 221,562
$ (27,597)
$
64,918
$ (13,187)
$ 286,480
$ (40,784)
Agency collateralized mortgage obligations
28,537
(3,262)
40,642
(8,469)
69,179
(11,731)
Small Business Administration securities
60,473
(5,224)
7,667
(1,711)
68,140
(6,935)
States and political subdivisions securities
44,455
(2,913)
3,753
(378)
48,208
(3,291)
$ 355,027
$ (38,996)
$ 116,980
$ (23,745)
$ 472,007
$ (62,741)
HELD-TO-MATURITY SECURITIES
Agency mortgage-backed securities
$
59,218
$
(7,766)
$
7,868
$
(2,054)
$
67,086
$
(9,820)
Agency collateralized mortgage obligations
61,055
(6,411)
44,178
(7,718)
105,233
(14,129)
States and political subdivisions securities
900
(101)
4,546
(680)
5,446
(781)
$ 121,173
$ (14,278)
$
56,592
$ (10,452)
$ 177,765
$ (24,730)
Allowance for Credit Losses As of January 1, 2021, the Company began evaluating all securities quarterly to determine if any
securities in a loss position require a provision for credit losses in accordance with ASC 326, Measurement of Credit Losses on
Financial Instruments. All of the mortgage-backed, collateralized mortgage, and SBA securities held by the Company are issued by
U.S. government-sponsored entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S.
government, are highly rated by major rating agencies and have a long history of no credit losses. Likewise, the Company has not
experienced historical losses on these types of securities. Accordingly, no allowance for credit losses has been recorded for these
securities.
Regarding securities issued by state and political subdivisions, management considers the following when evaluating these securities:
(i) current issuer bond ratings, (ii) historical loss rates for given bond ratings, (iii) whether issuers continue to make timely principal
and interest payments under the contractual terms of the securities, (iv) updated financial information of the issuer, (v) internal
forecasts and (vi) whether such securities provide insurance or other credit enhancement or are pre-refunded by the issuers. These
securities are highly rated by major rating agencies and have a long history of no credit losses. Likewise, the Company historically has
not experienced losses on these types of securities. Accordingly, no allowance for credit losses has been recorded for these securities.
Sources of Funds
General. Deposit accounts have traditionally been the principal source of the Bank’s funds for use in lending and for other general
business purposes. In addition to deposits, the Bank obtains funds through advances from the Federal Home Loan Bank of Des Moines
(“FHLBank”) and other borrowings, loan repayments, loan sales, and cash flows generated from operations. Scheduled loan payments
45
are a relatively stable source of funds, while deposit inflows and outflows and the related costs of such funds have varied widely.
Borrowings such as FHLBank advances may be used on a short-term basis to compensate for seasonal reductions in deposits or
deposit inflows at less than projected levels and may be used on a longer-term basis to support expanded lending activities. The
availability of funds from loan sales is influenced generally by the level of interest rates, which in turn may impact the volume of
originations.
Deposits. The Bank attracts both short-term and long-term deposits from the general public by offering a wide variety of accounts and
rates and purchases brokered deposits from time to time. The Bank offers regular savings accounts, checking accounts, various money
market accounts, fixed-interest rate certificates with varying maturities, certificates of deposit in minimum amounts of $250,000
(“Jumbo” accounts), brokered certificates and individual retirement accounts. After the onset of the COVID-19 pandemic in 2020,
non-interest-bearing demand deposits increased $225 million in 2021, while interest-bearing demand and savings deposits increased
$240 million. During 2021, the Bank also decreased its total time deposits by approximately $430 million. Time deposits originated
through the Bank’s internet channel decreased by $200 million and brokered deposits, including IntraFi purchased funds, decreased
$91 million. The brokered deposits and deposits originated through the Bank’s internet channel were allowed to mature without
replacement as other deposit categories increased in 2021. In the latter half of 2022, some of the interest-bearing demand and savings
deposits and non-interest-bearing demand deposits decreased as some of the COVID-19 pandemic “surge deposits” flowed out of both
retail and business customer accounts. Total balances in these categories did not return to pre-pandemic levels, but they declined from
peak balance levels in 2021 and early 2022. Non-interest-bearing demand deposits decreased $146 million in 2022 and interest-
bearing demand and savings deposits, excluding brokered deposits, decreased $193 million. During 2022, in response to customer
demand in a rising interest rate environment, the Bank increased its total time deposits by approximately $322 million. Time deposits
originated through the Bank’s internet channel decreased by $152 million and brokered time deposits, including IntraFi purchased
funds, increased $194 million. The Bank’s retail time deposits originated through its banking center and corporate services network
increased $309 million. In 2023, non-interest-bearing demand deposits decreased $168 million and interest-bearing demand and
savings deposits, excluding brokered deposits, increased $28 million. During 2023, time deposits originated through the Bank’s
internet channel decreased by $35 million and brokered time deposits increased $100 million. The Bank’s retail time deposits
originated through its banking center and corporate services network decreased $35 million. Other brokered deposits increased $150.0
million in 2023. In 2024, non-interest-bearing demand deposits decreased $53 million and interest-bearing demand and savings
deposits, excluding brokered deposits, decreased $2 million. During 2024, the Bank’s retail time deposits originated through its
banking center and corporate services network decreased $162 million. Brokered deposits increased $111 million in 2024.
The following table sets forth the dollar amount of deposits, by interest rate range, in the various types of deposit programs offered by
the Bank at the dates indicated.
December 31,
2024
2023
2022
Percent of
Percent of
Percent of
Amount
Total
Amount
Total
Amount
Total
(Dollars In Thousands)
Time deposits:
0.00% - 0.99%
$
52,720
1.14 % $
86,831
1.84 % $
280,784
5.99 %
1.00% - 1.99%
75,938
1.65
22,485
0.48
125,951
2.69
2.00% - 2.99%
8,244
0.18
44,354
0.94
381,547
8.15
3.00% - 3.99%
89,967
1.95
46,304
0.98
228,131
4.87
4.00% - 4.99%
548,903
11.92
739,645
15.66
4,883
0.10
5.00% and above
—
—
8,583
0.18
—
—
Total time deposits
775,772
16.84
948,202
20.08
1,021,296
21.80
Non-interest-bearing demand deposits
842,931
18.30
895,496
18.97
1,063,588
22.70
Interest-bearing demand and savings deposits
(1.39% - 1.67% - 0.65%)
2,214,732
48.09
2,216,482
46.94
2,188,535
46.72
Brokered deposits (4.61% - 5.20% - 4.03%)
772,114
16.77
661,528
14.01
411,491
8.78
Total Deposits
$ 4,605,549
100.00 % $ 4,721,708
100.00 % $ 4,684,910
100.00 %
A table showing maturity information for the Bank’s time deposits as of December 31, 2024, is presented in Note 7 of the
accompanying audited financial statements, which are included in Item 8 of this Report.
46
The variety of deposit accounts offered by the Bank has allowed it to be competitive in obtaining funds and respond with flexibility to
changes in consumer demand. The Bank has become more susceptible to short-term fluctuations in deposit flows, as customers have
become more interest rate conscious and the Bank’s deposit mix may vary. The Bank manages the pricing of its deposits in keeping
with its asset/liability management, liquidity and profitability objectives. Based on its experience, management believes that the
Bank’s certificate accounts are relatively stable sources of deposits, while its checking accounts have proven to be more volatile. The
Bank’s ability to attract and retain deposits, and the rates paid on these deposits, has been and will continue to be significantly affected
by money market conditions.
The following table sets forth the time remaining until maturity of the Bank’s time deposits as of December 31, 2024. The table is
based on information prepared in accordance with GAAP.
Maturity
3 Months
Over 3 to 6
Over 6 to 12
Over
Or Less
Months
Months
12 Months
Total
(In Thousands)
Time deposits:
Less than $250,000
$ 304,042
$ 225,330
$ 93,318
$ 12,760
$
635,450
$250,000 or more
63,882
53,706
9,013
853
127,454
Brokered
402,413
70,000
151,506
148,195
772,114
Public funds(1)
3,953
7,110
1,805
—
12,868
Total
$ 774,290
$ 356,146
$ 255,642
$ 161,808
$ 1,547,886
(1)
Deposits from governmental and other public entities.
The following tables set forth the time remaining until maturity of the Bank’s uninsured time deposits as of December 31, 2024 and
December 31, 2023. The table is based on information prepared in accordance with GAAP.
Maturities as of December 31, 2024
3 Months
Over 3 to 6
Over 6 to 12
Over
Or Less
Months
Months
12 Months
Total
(In Thousands)
Uninsured Time Deposits
$
64,596
$
52,092
$
12,217
$
844
$ 129,749
Maturities as of December 31, 2023
3 Months
Over 3 to 6
Over 6 to 12
Over
Or Less
Months
Months
12 Months
Total
(In Thousands)
Uninsured Time Deposits
$
89,110
$
45,431
$
53,630
$
1,360
$ 189,531
In addition to the uninsured time deposits noted above, the uninsured deposits with no maturity date were $1.51 billion and $1.34
billion at December 31, 2024 and 2023, respectively, for total uninsured deposits at those dates of $1.64 billion and $1.53 billion,
respectively. These totals include deposit accounts of consolidated subsidiaries of the Company (which are eliminated from total
deposits shown in the consolidated financial statements of the Company) and collateralized deposits of unaffiliated entities, as
required by FDIC guidance. At December 31, 2024 and 2023, the total uninsured deposits reported here included $974.1 million and
$802.9 million, respectively, of deposit accounts of consolidated subsidiaries of the Company.
Brokered deposits. Brokered deposits are marketed through national brokerage firms to their customers in $1,000 increments. The
Bank maintains only one account for the total deposit amount while the detailed records of owners are maintained by the Depository
Trust Company under the name of CEDE & Co. The deposits are transferable just like a stock or bond investment and the customer
can open the account with a phone call or an online request. This provides a large deposit for the Bank at a lower operating cost since
the Bank only has one account to maintain versus several accounts with multiple interest and maturity dates. At December 31, 2024
and 2023, the Bank had approximately $772.1 million and $661.5 million in brokered deposits, respectively.
47
Included in the brokered deposits totals at both December 31, 2024 and 2023, were $300.0 million in IntraFi Funding accounts. IntraFi
Funding transactions represent a cost-effective source of funding without collateralization or credit limits for the Company. These
transactions help the Company obtain large blocks of funding while providing control over pricing and diversity of wholesale funding
options. At December 31, 2024 and 2023, all of these IntraFi deposits were at floating rates indexed to the effective fed funds rate.
Previously included in brokered deposits were IntraFi Network Deposit accounts. In 2018, the FDIC amended its regulations to
exclude these deposits from its definition of brokered deposits. IntraFi Network Deposit accounts are accounts that are just like any
other deposit account on the Company’s books, except that the account total exceeds the FDIC deposit insurance maximum. When a
customer places a large deposit with an IntraFi Network bank, that bank uses IntraFi to place the funds into deposit accounts issued by
other banks in the IntraFi Network. This occurs in increments of less than the standard FDIC insurance maximum, so that both
principal and interest are eligible for complete FDIC protection. Other Network members do the same thing with their customers’
funds. At December 31, 2024 and 2023, the Bank had approximately $5.0 million and $8.8 million in IntraFi Network Deposits,
respectively.
Unlike non-brokered certificates of deposit, which can be withdrawn (with a penalty) prior to maturity for any reason, including
increasing interest rates, a brokered deposit (excluding IntraFi Network Deposits) can only be withdrawn prior to maturity in the event
of the death, or court declared mental incompetence, of the depositor. This allows the Bank to better manage the maturity of its
deposits. Additionally, the Bank may issue brokered deposits which are callable at the Bank’s discretion prior to their stated maturity
date. Currently, the rates offered by the Bank for brokered deposits are comparable to those offered for retail certificates of deposit of
similar size and maturity. The Bank maintained increased liquidity during and after the economic recession that began in 2008. After
2009, we had gradually reduced the amount of brokered deposits (excluding IntraFi Network Deposits) utilized as we added deposits
from FDIC-assisted acquisitions. As loan demand began to increase starting in 2013, we gradually increased our usage of brokered
deposits again from time to time. During 2021, we decreased our usage of brokered deposits as we experienced growth in a variety of
non-time deposits that year. Since 2022, as loan demand has trended upward and as other deposit sources have declined, we again
have utilized brokered deposits to obtain additional funding.
The Company may use interest rate swaps from time to time to manage its interest rate risks from recorded financial liabilities. In the
past, the Company entered into interest rate swap agreements with the objective of economically hedging against the effects of
changes in the fair value of its liabilities for fixed rate brokered certificates of deposit caused by changes in market interest rates.
These interest rate swaps have allowed the Company to create funding of varying maturities at a variable rate that in the past has
approximated three-month SOFR. In February 2023, the Company entered into five new interest rate swap transactions. At December
31, 2023, the Company had $95.0 million in interest rate swaps on brokered deposits, which were accounted for as fair value hedges.
In January 2024, the Company elected to terminate these swaps prior to their contractual termination date in 2025. The Company
received a net settlement payment from the swap counterparty totaling $26,500 upon termination. The Company did not utilize these
types of interest rate swaps on brokered deposits in 2024 or 2022.
Borrowings. Great Southern’s other sources of funds include advances from the FHLBank, a Qualified Loan Review (“QLR”)
arrangement with the FRB, customer repurchase agreements and other borrowings.
As a member of the FHLBank, the Bank is required to own capital stock in the FHLBank and is authorized to apply for advances from
the FHLBank. Each FHLBank credit program has its own interest rate, which may be fixed or variable, and range of maturities. The
FHLBank may prescribe the acceptable uses for these advances, as well as other risks on availability, limitations on the size of the
advances and repayment provisions. At both December 31, 2024 and 2023, the Bank had no FHLBank term advances outstanding.
The Bank had outstanding overnight borrowings of $333.0 million and $251.0 million from the FHLBank at December 31, 2024 and
2023, respectively. Because they are overnight borrowings, any outstanding balances are included in short-term borrowings in the
Company’s financial statements. The Bank has in the past utilized, and may again utilize, FHLBank advances from time to time to
fund loan growth.
The Federal Reserve Bank of St. Louis (“FRBSTL”) has a QLR program where the Bank can borrow on a temporary basis using
commercial loans pledged to the FRBSTL. Under the QLR program, the Bank can borrow any amount up to a calculated collateral
value of the commercial loans pledged, for virtually any reason that creates a temporary cash need. Examples of this could be: (1) the
need to fund for late outgoing wires or cash letter settlements, (2) the need to disburse one or more loans but the permanent source of
funds will not be available for a few days; (3) a temporary spike in interest rates on other funding sources that are being used; or (4)
the need to purchase a security for collateral pledging purposes a few days prior to the funds becoming available on an existing
security that is maturing. The Bank had commercial, consumer and other loans pledged to the FRBSTL at December 31, 2024 that
48
would have allowed approximately $343.4 million to be borrowed under the QLR program. There were no outstanding borrowings
under the QLR program at December 31, 2024 or 2023 and the facility was not used during 2024 or 2023.
The FRBSTL also has a Bank Term Funding Program (“BTFP”), which was created in March 2023 to support American businesses
and households by making additional funding available to eligible depository institutions to help assure banks have the ability to meet
the needs of all their depositors. The BTFP offered loans of up to one year to depository institutions pledging any collateral eligible
for purchase by the Federal Reserve Banks in open market operations, such as U.S. Treasuries, U.S. agency securities, and U.S.
agency mortgage-backed securities. In January 2024, the Bank borrowed $180.0 million under the BTFP program. The BTFP
borrowing, which matured and was repaid in January 2025, had a fixed interest rate of 4.83%. The line was secured primarily by the
Bank’s held-to-maturity investment securities, with assets pledged totaling approximately $187.7 million at December 31, 2024. The
proceeds from these borrowings were primarily used to repay a portion of the Bank’s overnight borrowings from the FHLBank. Once
the BTFP borrowing was repaid, the securities pledged were released by the FRBSTL and most of these securities have now been
pledged as additional collateral for the FHLBank borrowing line.
The Bank enters into sales of securities under agreements to repurchase (reverse repurchase agreements). Reverse repurchase
agreements are treated as financings, and the obligations to repurchase securities sold are reflected as a liability in the statements of
financial condition. The dollar amount of securities underlying the agreements remains in the asset accounts. Securities underlying the
agreements are held by the Bank during the agreement period. The agreements generally are written on a term of one-month or less.
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 $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 6.43%
and 7.24% at December 31, 2024 and 2023, respectively.
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 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, 2024, 2023 and 2022, totaled $297,000, $297,000 and
$297,000, respectively, and is included in interest expense on subordinated notes in the consolidated statements of income, resulting in
an imputed interest rate of 5.90% at December 31, 2024.
The following tables set forth the maximum month-end balances, average daily balances and weighted average interest rates of other
borrowings during the years indicated.
Year Ended December 31, 2024
Weighted
Maximum
Average
Average
Balance
Balance
Interest Rate
(Dollars In Thousands)
Other Borrowings:
Securities sold under reverse repurchase agreements
$
78,777
$
75,575
1.86 %
Overnight borrowings – FHLBank
333,000
181,287
5.36
Short-term borrowings from Federal Reserve Bank
180,000
175,628
4.85
Other
1,610
1,347
—
Total
$
433,837
4.52 %
Total maximum month-end balance
578,691
49
Year Ended December 31, 2023
Weighted
Maximum
Average
Average
Balance
Balance
Interest Rate
(Dollars In Thousands)
Other Borrowings:
Securities sold under reverse repurchase agreements
$
181,476
$
82,218
1.47 %
Overnight borrowings – FHLBank
251,000
141,474
5.25
Other
1,610
1,392
—
Total
$
225,084
3.87 %
Total maximum month-end balance
410,573
Year Ended December 31, 2022
Weighted
Maximum
Average
Average
Balance
Balance
Interest Rate
(Dollars In Thousands)
Other Borrowings:
Securities sold under reverse repurchase agreements
$
176,843
$
132,595
0.24 %
Overnight borrowings – FHLBank
170,000
46,404
2.29
Collateral held for interest rate swap
3,250
967
0.38
Other
1,449
1,159
—
Total
$
181,125
0.77 %
Total maximum month-end balance
317,727
The following table sets forth year-end balances and weighted average interest rates of the Company’s other borrowings at the dates
indicated.
December 31,
2024
2023
2022
Weighted
Weighted
Weighted
Average
Average
Average
Interest
Interest
Interest
Balance
Rate
Balance
Rate
Balance
Rate
(Dollars In Thousands)
Other borrowings:
Securities sold under reverse repurchase agreements
$
64,444
1.38 %$
70,843
1.66 % $ 176,843
0.94 %
Overnight borrowings – FHLBank
333,000
4.62
251,000
5.64
88,500
4.60
Short-term borrowings from Federal Reserve Bank
180,000
4.83
—
—
—
—
Collateral held for interest rate swap
—
—
—
—
—
—
Other
1,247
—
1,610
—
1,083
—
Total
$ 578,691
4.32 %$ 323,453
4.76 % $ 266,426
2.16 %
The following table sets forth the maximum month-end balances, average daily balances and weighted average interest rates of
subordinated debentures issued to a capital trust during the years indicated.
Year Ended December 31,
2024
2023
2022
(Dollars In Thousands)
Subordinated debentures:
Maximum balance
$
25,774
$
25,774
$
25,774
Average balance
25,774
25,774
25,774
Weighted average interest rate
6.98 %
6.74 %
3.40 %
50
The following table sets forth certain information as to the Company’s subordinated debentures issued to a capital trust at the dates
indicated.
December 31,
2024
2023
2022
(Dollars In Thousands)
Subordinated debentures
$
25,774
$
25,774
$
25,774
Weighted average interest rate of subordinated debentures
6.43 %
7.24 %
6.04 %
The following table sets forth the maximum month-end balances, average daily balances and weighted average interest rates of
subordinated notes during the years indicated.
Year Ended December 31,
2024
2023
2022
(Dollars In Thousands)
Subordinated notes:
Maximum balance
$
74,876
$
74,579
$
74,281
Average balance
74,734
74,430
74,131
Weighted average interest rate
5.92 %
5.94 %
5.97 %
The following table sets forth certain information as to the Company’s subordinated notes at the dates indicated.
December 31,
2024
2023
2022
(Dollars In Thousands)
Subordinated notes
$
74,876
$
74,579
$
74,281
Weighted average interest rate of subordinated debentures
5.90 %
5.92 %
5.95 %
Subsidiaries
Great Southern. As a Missouri-chartered trust company, Great Southern may invest up to 3%, which was equal to $179.4 million at
December 31, 2024, of its assets in service corporations. At December 31, 2024, the Bank’s total investment in Great Southern Real
Estate Development Corporation (“Real Estate Development”) was $2.7 million. Real Estate Development was incorporated and
organized in 2003 under the laws of the State of Missouri. At December 31, 2024, the Bank’s total investment in Great Southern
Community Development Company, L.L.C. (“CDC”) and its subsidiary Great Southern CDE, L.L.C. (“CDE”) was $714,000. CDC
and CDE were formed in 2010 under the laws of the State of Missouri. At December 31, 2024, the Bank’s total investment in GS,
L.L.C. (“GSLLC”) was $34.6 million. GSLLC was formed in 2005 under the laws of the State of Missouri. At December 31, 2024,
the Bank’s total investment in GSSC, L.L.C. (“GSSCLLC”) was $21.1 million. GSSCLLC was formed in 2009 under the laws of the
State of Missouri. At December 31, 2024, the Bank’s total investment in GSRE Holding, L.L.C. (“GSRE Holding”) was $11.8
million. GSRE Holding was formed in 2009 under the laws of the State of Missouri. At December 31, 2024, the Bank’s total
investment in GSRE Holding II, L.L.C. (“GSRE Holding II”) was $960,000. GSRE Holding II was formed in 2009 under the laws of
the State of Missouri. At December 31, 2024, the Bank’s total investment in GSRE Holding III, L.L.C. (“GSRE Holding III”) was $-
0-. GSRE Holding III was formed in 2012 under the laws of the State of Missouri. At December 31, 2024, the Bank’s total investment
in GSTC Investments, L.L.C. (“GSTCLLC”) was $54.4 million. GSTCLLC was formed in 2016 under the laws of the State of
Missouri. These subsidiaries are primarily engaged in the activities described below. In addition, Great Southern has two other
subsidiary companies that are not considered service corporations, GSB One, L.L.C. and GSB Two, L.L.C. These companies are also
described below.
Great Southern Real Estate Development Corporation. Generally, the purpose of Real Estate Development is to hold real estate assets
which have been obtained through foreclosure by the Bank and which require ongoing operation of a business or completion of
construction. During 2024 and 2023, Real Estate Development did not hold any real estate assets related to foreclosed property. Real
Estate Development had net income of $-0- in each of the years ended December 31, 2024 and 2023.
Great Southern Community Development Company, L.L.C. and Great Southern CDE, L.L.C. Generally, the purpose of CDC is to
invest in community development projects that have a public benefit and are permissible under Missouri and Kansas law. These
51
include activities such as investing in real estate and investing in other community development entities. CDC also serves as parent to
subsidiary CDE which invests in limited liability entities for the purpose of acquiring federal tax credits to be utilized by Great
Southern. CDC had consolidated net loss of $1,000 and $-0- in the years ended December 31, 2024 and 2023, respectively.
GS, L.L.C. GSLLC was organized in 2005. GSLLC is a limited liability company that invests in multiple limited liability entities for
the purpose of acquiring state and federal tax credits which are utilized by Great Southern. GSLLC had net losses of $1,000 and
$34,000 in the years ended December 31, 2024 and 2023, respectively, which primarily resulted from the tax credits utilized by Great
Southern.
GSSC, L.L.C. GSSCLLC was organized in 2009. GSSCLLC is a limited liability company that invests in multiple limited liability
entities for the purpose of acquiring state tax credits which are utilized by Great Southern or sold to third parties. GSSCLLC had net
losses of $2,000 and $3,000 in the years ended December 31, 2024 and 2023, respectively.
GSRE Holding, L.L.C. Generally, the purpose of GSRE Holding is to hold real estate assets which have been obtained through
foreclosure by the Bank and which require ongoing operation of a business or completion of construction. At December 31, 2024,
GSRE Holding held cash of $5.9 million and real estate assets of $6.0 million. GSRE Holding had net income of $330,000 in the year
ended December 31, 2024 and a net loss of $2,000 in the year ended December 31, 2023.
GSRE Holding II, L.L.C. Generally, the purpose of GSRE Holding II is to hold real estate assets which have been obtained through
foreclosure by the Bank and which require ongoing operation of a business or completion of construction. In 2024 and 2023, GSRE
Holding II did not hold any significant real estate assets. GSRE Holding II had net losses of $2,000 in each of the years ended
December 31, 2024 and 2023.
GSRE Holding III, L.L.C. Generally, the purpose of GSRE Holding III is to hold real estate assets which have been obtained through
foreclosure by the Bank and which require ongoing operation of a business or completion of construction. In 2024 and 2023, GSRE
Holding III did not hold any significant real estate assets. GSRE Holding III had net income of $-0- in each of the years ended
December 31, 2024 and 2023.
GSTC Investments, L.L.C. GSTCLLC was organized in 2016. GSTCLLC is a limited liability company that invests in multiple limited
liability entities for the purpose of acquiring state and federal tax credits which are utilized by Great Southern. GSTCLLC had net
income of $-0- in each of the years ended December 31, 2024 and 2023.
GSB One, L.L.C. At December 31, 2024, the Bank’s total investment in GSB One, L.L.C. (“GSB One”) and GSB Two, L.L.C. (“GSB
Two”) was $2.36 billion. The capital contribution was made by transferring participations in loans to GSB Two. GSB One is a
Missouri limited liability company that was formed in 1998. Currently the only activity of this company is the ownership of GSB
Two.
GSB Two, L.L.C. This is a Missouri limited liability company that was formed in 1998. GSB Two is a real estate investment trust
(“REIT”). It holds interests in real estate mortgages transferred from the Bank. The Bank continues to service the loans in return for a
management and servicing fee from GSB Two. GSB Two had net income of $77.2 million and $72.6 million in the years ended
December 31, 2024 and 2023, respectively.
Competition
The banking industry in the Company’s market areas is highly competitive. In addition to competing with other commercial and
savings banks, the Company competes with credit unions, finance companies, leasing companies, mortgage companies, insurance
companies, brokerage and investment banking firms, financial technology “fintech” companies, and many other financial service
firms. Competition is based on a number of factors including, among others, customer service, quality and range of products and
services offered, price, reputation, interest rates on loans and deposits, lending limits and customer convenience. Our ability to
continue to compete effectively also depends in large part on our ability to attract new employees and retain and motivate our existing
employees, while managing compensation and other costs.
A substantial number of the commercial banks operating in most of the Company’s market areas are branches or subsidiaries of large
organizations affiliated with statewide, regional or national banking companies and as a result they may have greater resources with
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which to compete. Additionally, the Company faces competition from a large number of community banks, many of which have
senior management who were previously with other local banks or investor groups with strong local business and community ties.
The Company encounters strong competition in attracting deposits throughout its six-state retail footprint. The Company attracts a
significant amount of deposits through its branch offices primarily from the communities in which those branch offices are located. Of
our total branch offices at the end of 2024, approximately 76% of our deposit franchise dollars were located in Missouri, where our
total market share at June 30, 2024, was 1.4%, or tenth in the state (based on FDIC market share deposits). The financial institutions
with the top three market share positions in Missouri at June 30, 2024, were UMB Bank, U.S. Bank, and Bank of America, which had
a combined market share of 29.1% (based on FDIC market share deposits). We also have branch offices in the states of Iowa, Kansas,
Minnesota, Arkansas and Nebraska, which made up approximately 14%, 6%, 3%, less than 1%, and less than 1% of our total deposit
franchise dollars, respectively (based on FDIC market share deposits of June 30, 2024). The Company’s market share in its primary
metropolitan statistical areas was as follows at June 30, 2024:
Number of
Percentage of Total
Metropolitan Statistical Area
Branch Offices
Market Share
Rank
Institution with Leading Market Share Position
Springfield, MO
19
13.3%
1
Great Southern Bank
Sioux City, IA-NE-SD
6
6.9%
4
Security National Bank of Sioux City
Davenport/Moline/Rock Island, IA-IL
3
1.1%
20
Quad City Bank and Trust Co.
Des Moines/West Des Moines, IA
5
0.6%
25
Principal Bank
St. Louis, MO-IL
17
0.4%
40
U.S. Bank
Kansas City, MO-KS
8
0.3%
40
UMB Bank
Fayetteville/Springdale/Rogers, AR-MO
1
0.2%
33
Arvest Bank
Minneapolis/St. Paul/Bloomington, MN-WI
4
0.1%
82
U.S. Bank
Our most direct competition for deposits has historically come from other commercial banks, savings institutions and credit unions
located in our market areas. The Bank competes for these deposits by offering a variety of deposit accounts at competitive rates,
convenient business hours, and accessible branch, online, mobile and ATM services. In addition, some competitors located outside of
our market areas conduct business primarily over the Internet, which may enable them to realize certain savings and offer certain
deposit products and services at lower costs or at higher rates and with greater convenience to certain customers. Our ability to attract
and retain customer deposits depends on our ability to generally provide a rate of return, liquidity and risk comparable to that offered
by competing investment opportunities.
Competition in originating real estate loans comes primarily from other commercial banks, savings institutions and mortgage bankers
making loans secured by real estate located in the Bank’s market area. The specific institutions are similar to those discussed above in
regards to deposit market share. Commercial banks and finance companies provide vigorous competition in commercial and consumer
lending. The Bank competes for real estate and other loans principally on the basis of the interest rates and loan fees it charges, the
types of loans it originates, the quality of services it provides to borrowers and the locations of our branch office network and loan
production offices.
Many of our competitors have substantially greater resources, name recognition and market presence, which benefit them in attracting
business. In addition, larger competitors (including nationwide banks that have a significant presence in our market areas) may be able
to price loans and deposits more aggressively than we do because of their greater economies of scale. Smaller and newer competitors
may also be more aggressive than we are in terms of pricing loan and deposit products in order to obtain a larger share of the market.
In addition, some competitors located outside of our market areas conduct business primarily over the Internet, which may enable
them to realize certain savings and offer products and services at more favorable rates and with greater convenience to certain
customers.
We also depend, from time to time, on outside funding sources, including brokered deposits, where we experience nationwide
competition, and Federal Home Loan Bank advances. Some of the financial institutions and financial services organizations with
which we compete are not subject to the same degree of regulation as is imposed on insured depositary institutions and their holding
companies. As a result, these non-bank competitors have certain advantages over us in accessing funding and in providing various
services. From mid-2022 to mid-2024, the Company increased the interest rates it paid on many deposit products. In the second half of
2024, the Company began selectively lowering interest rates paid on deposit products. The Company has also utilized both fixed-rate
and floating-rate brokered deposits of varying terms, as well as overnight FHLBank borrowings.
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Despite the highly competitive environment and the challenges it presents to us, management believes the Company will continue to
be competitive because of its strong commitment to quality customer service, competitive products and pricing, convenient local
branches, online and mobile capabilities, and active community involvement.
Employees and Human Capital Resources
At December 31, 2024, the Company and its affiliates had a total of 1,108 employees, including 226 part-time employees. None of the
Company’s employees are represented by any collective bargaining agreement. Management considers its employee relations to be
good.
Our human capital objectives include attracting, training, motivating, rewarding and retaining our employees. We encourage and
support the growth and development of our employees and, wherever possible, seek to fill positions by promotion and transfer from
within the organization. Continual learning and career development are advanced through annual performance and development
conversations with employees, internally developed training programs, customized corporate training engagements and seminars,
conferences, and other training events employees are encouraged to attend in connection with their job duties.
Great Southern remains committed and focused on the health and safety of our associates, customers, and communities, especially as
COVID-19 and other viruses remain a threat. Company management continues to monitor information related to the COVID-19 and
other impactful viruses, using federal and state guidelines for public safety to manage the threat. The Company also remains focused
on the overall wellbeing of its associates and their family members with a comprehensive no cost benefit offered through the
Company’s employee assistance program.
Great Southern associates actively share their talents in their communities through leadership roles and volunteer activities in
education, economic development, human and health services, and community reinvestment. Our Community Matters program allows
each associate to be paid up to 32 hours per year, with supervisory approval, to volunteer for activities in their community during
normal work hours. During 2024 Great Southern associates found creative and meaningful ways to give back to their communities,
donating over 7,400 hours in support of more than 300 organizations. Each year, the Bill and Ann Turner Distinguished Community
Service Award is presented to a Great Southern associate who demonstrates excellence in volunteer service to their community. Every
year, all associates are encouraged to nominate coworkers for this award. An external panel of community leaders reviews the
nominees and determines the award winner. In addition to volunteerism, Great Southern associates generously supported their
communities in 2024 through monetary donations totaling nearly $59,000.
Government Supervision and Regulation
General
The Company and its subsidiaries are subject to supervision and examination by applicable federal and state banking agencies. The
earnings of the Company’s subsidiaries, and therefore the earnings of the Company, are affected by general economic conditions,
management policies, federal and state legislation, and actions of various regulatory authorities, including the Board of Governors of
the Federal Reserve System, often referred to as the Federal Reserve Board (the “FRB”), the Federal Deposit Insurance Corporation
(the “FDIC”) and the Missouri Division of Finance (the “MDF”). The following is a brief summary of certain aspects of the regulation
of the Company and the Bank and does not purport to fully discuss such regulation. Such regulation is intended primarily for the
protection of depositors and the DIF, and not for the protection of stockholders.
Significant Legislation Impacting the Financial Services Industry
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.”
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
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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.
Anti-Money Laundering and Anti-Terrorism Legislation. A major focus of governmental policy on financial institutions in recent
years has been aimed at combating money laundering and terrorist financing. The USA PATRIOT Act of 2001 (the “USA Patriot
Act”) substantially broadened the scope of United States anti-money laundering laws and regulations by imposing significant new
compliance and due diligence obligations, creating new crimes and penalties and expanding the extra-territorial jurisdiction of the
United States. The United States Treasury Department has issued, and in some cases proposed, a number of regulations that apply
various requirements of the USA Patriot Act to financial institutions. These regulations impose obligations on financial institutions to
maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and to
verify the identity of their customers. The regulations also impose specific due diligence requirements on financial institutions that
maintain correspondent or private banking relationships with non-U.S. financial institutions or persons. Failure of a financial
institution to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of
the relevant laws or regulations, could have serious financial, legal and reputational consequences for the institution and could block
or substantially delay a merger or other acquisition transaction.
The Anti-Money Laundering Act of 2020 (“AMLA”), which amends the Bank Secrecy Act of 1970 (“BSA”), was enacted in January
2021. The AMLA is intended to be a comprehensive reform and modernization to U.S. bank secrecy and anti-money laundering laws.
Among other things, it codifies a risk-based approach to anti-money laundering compliance for financial institutions; requires the U.S.
Department of the Treasury to promulgate priorities for anti-money laundering and countering the financing of terrorism policy;
requires the development of standards for evaluating technology and internal processes for BSA compliance; expands enforcement-
and investigation-related authority, including increasing available sanctions for certain BSA violations and expands BSA
whistleblower incentives and protections. Many of the statutory provisions in the AMLA will require additional rulemakings, reports
and other measures, and the impact of the AMLA will depend on, among other things, rulemaking and implementation guidance. In
June 2021, the Financial Crimes Enforcement Network, a bureau of the U.S. Department of the Treasury, issued the priorities for anti-
money laundering and countering the financing of terrorism policy required under the AMLA. The priorities, which were
subsequently updated by FinCEN in May 2024, include corruption, cybercrime, terrorist financing, fraud, transnational crime, drug
trafficking, human trafficking and proliferation financing.
Privacy Standards and Cybersecurity. Federal banking agencies, including the FDIC, have adopted guidelines for establishing
information security standards and cybersecurity programs for implementing safeguards under the supervision of the board of
directors. These guidelines, along with related regulatory materials, increasingly focus on risk management and processes related to
information technology and the use of third parties in the provision of financial services. These regulations require the Bank to
disclose its privacy policy, including informing consumers of its information sharing practices and informing consumers of their rights
to opt out of certain practices. In addition, the federal banking agencies have adopted a final rule providing for new notification
requirements for banking organizations and their service providers for significant cybersecurity incidents. Specifically, the new rule
requires a banking organization to notify its primary federal regulator as soon as possible, and no later than 36 hours after, the banking
organization determines that a “computer-security incident” rising to the level of a “notification incident” has occurred. Notification is
required for incidents that have materially affected or are reasonably likely to materially affect the viability of a banking
organization’s operations, its ability to deliver banking products and services, or the stability of the financial sector. Service providers
are required under the rule to notify affected banking organization customers as soon as possible when the provider determines that it
has experienced a computer-security incident that has materially affected or is reasonably likely to materially affect the banking
organization’s customers for four or more hours. Non-compliance with federal or similar state privacy and cybersecurity laws and
regulations could lead to substantial regulatory fines and penalties, damages from private causes of action and/or reputational harm.
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Bank Holding Company Regulation
The Company is a bank holding company that has elected to be treated as a financial holding company by the FRB. Financial holding
companies are subject to comprehensive regulation by the FRB under the Bank Holding Company Act and the regulations of the FRB.
The Company is required to file reports with the FRB and such additional information as the FRB may require, and is subject to
regular examinations by the FRB. The FRB also has extensive enforcement authority over financial holding companies, including,
among other things, the ability to assess civil money penalties, to issue cease and desist or removal orders and to require that a holding
company divest subsidiaries (including its bank subsidiaries). In general, enforcement actions may be initiated for violations of law
and regulations and unsafe or unsound practices.
Under FRB policy and the Dodd-Frank Act, a bank holding company must serve as a source of financial and managerial strength for
its subsidiary banks. Accordingly, the FRB may require, and has required in the past, that a bank holding company contribute
additional capital to an undercapitalized subsidiary bank.
Under the Bank Holding Company Act, a financial holding company must obtain FRB approval before: (i) acquiring, directly or
indirectly, ownership or control of any voting shares of another bank or bank holding company that is not a subsidiary if, after such
acquisition, it would own or control more than 5% of such shares; (ii) acquiring all or substantially all of the assets of another bank or
bank or financial holding company; or (iii) merging or consolidating with another bank or financial holding company.
The Bank Holding Company Act also prohibits a financial holding company generally from engaging directly or indirectly in
activities other than those involving banking, activities closely related to banking that are permitted for a bank holding company, and
certain securities, insurance and merchant banking activities. Certain investments greater than 5% in companies engaged in activities
not permitted for a bank holding company are prohibited.
Volcker Rule
The federal banking agencies have adopted regulations to implement the provisions of the Dodd-Frank Act known as the Volcker
Rule. Under the regulations, FDIC-insured depository institutions, their holding companies, subsidiaries and affiliates are generally
prohibited, subject to certain exemptions, from proprietary trading of securities and other financial instruments and from acquiring or
retaining an ownership interest in a “covered fund.” Effective July 22, 2019, a bank and its holding company are exempt from the
Volcker Rule if the bank and every company that controls it have consolidated assets of $10 billion or less and have total consolidated
trading assets and liabilities of 5% or less of its consolidated assets.
Interstate Banking and Branching
Federal law allows the FRB to approve an application of a bank holding company to acquire control of, or acquire all or substantially
all of the assets of, a bank located in a state other than such holding company’s home state, without regard to whether the transaction
is prohibited by the laws of any state. The FRB may not approve the acquisition of a bank that has not been in existence for the
minimum time period (not exceeding five years) specified by the statutory law of the host state. Federal law also prohibits the FRB
from approving such an application if the applicant (and its depository institution affiliates) controls or would control more than 10%
of the insured deposits in the United States or if the applicant would control 30% or more of the deposits in any state in which the
target bank maintains a branch and in which the applicant or any of its depository institution affiliates controls a depository institution
or branch immediately prior to the acquisition of the target bank. Federal law does not affect the authority of states to limit
the percentage of total insured deposits in the state which may be held or controlled by a bank or bank holding company to the extent
such limitation does not discriminate against out-of-state banks or bank holding companies. Individual states may also waive the 30%
state-wide concentration limit. Missouri law prohibits a bank holding company from acquiring a depository institution if total deposits
would exceed 13% of statewide deposits excluding bank certificates of deposit of $100,000 or more, deposits from sources outside the
United States and deposits of banks other than banks controlled by the bank holding company.
The federal banking agencies are generally authorized to approve interstate bank merger transactions and de novo branching without
regard to whether such transactions are prohibited by the law of any state. Interstate acquisitions of branches are generally permitted
only if the law of the state in which the branch is located permits such acquisitions.
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As required by federal law, federal regulations prohibit any out-of-state bank from using the interstate branching authority primarily
for the purpose of deposit production, including guidelines to ensure that interstate branches operated by an out-of-state bank in a host
state reasonably help to meet the credit needs of the communities they serve.
Certain Transactions with Affiliates and Other Persons
Transactions involving the Bank and its affiliates are subject to sections 23A and 23B of the Federal Reserve Act, and regulations
thereunder, which impose certain quantitative limits and collateral requirements on such transactions, and require all such transactions
to be on terms at least as favorable to the Bank as are available in transactions with non-affiliates.
All loans by the Bank to the principal stockholders, directors and executive officers of the Bank or any affiliate are subject to
regulations restricting loans and other transactions with insiders of the Bank and its affiliates. Transactions involving such persons
must be on terms and conditions as favorable to the bank as those that apply in similar transactions with non-insiders. A bank may
allow favorable rate loans to insiders pursuant to an employee benefit program available to bank employees generally. The Bank has
such a program.
Dividends
The FRB has issued a policy statement on the payment of cash dividends by bank holding companies, which expresses the FRB’s
view that a bank holding company should pay cash dividends only to the extent that its net income for the past year is sufficient to
cover both the cash dividends and a rate of earnings retention that is consistent with the holding company’s capital needs, asset quality
and overall financial condition. The FRB also indicated that it would be inappropriate for a company experiencing serious financial
problems to borrow funds to pay dividends. Furthermore, a bank holding company may be prohibited from paying any dividends if the
holding company’s bank subsidiary is not adequately capitalized, and dividends payable by a bank holding company and its
depository institutions subsidiaries can be restricted if the capital conservation buffer requirement is not met. See “Capital” below.
A bank holding company is required to give the FRB prior written notice of any purchase or redemption of its outstanding equity
securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such
purchases or redemptions during the preceding 12 months, is equal to 10% or more of the company’s consolidated net worth. The
FRB may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice
or would violate any law, regulation, FRB order, or any condition imposed by, or written agreement with, the FRB. This notification
requirement does not apply to any company that meets the well-capitalized standard for bank holding companies, is well-managed,
and is not subject to any unresolved supervisory issues. Under Missouri law, the Bank may pay dividends from certain undivided
profits and may not pay dividends if its capital is impaired. Dividends of the Company and the Bank may also be restricted under the
capital conservation buffer rules, as discussed below under “—Capital.”
Capital
The Company and the Bank are subject to capital regulations adopted by the FRB and the FDIC, which established minimum required
ratios for common equity Tier 1 (“CET1”) capital, Tier 1 capital and total capital and the minimum leverage ratio; set forth the risk-
weightings of assets and certain off-balance sheet items for purposes of the risk-based capital ratios; require an additional capital
conservation buffer over the required risk-based capital ratios, and define what qualifies as capital for purposes of meeting the capital
requirements.
Under the capital regulations, the minimum capital ratios are: (1) a CET1 capital ratio of 4.5% of risk-weighted assets; (2) a Tier 1
capital ratio of 6.0% of risk-weighted assets; (3) a total risk-based capital ratio of 8.0% of risk-weighted assets; and (4) a leverage ratio
(the ratio of Tier 1 capital to average total adjusted assets) of 4.0%. CET1 generally consists of common stock; retained earnings;
accumulated other comprehensive income (“AOCI”) unless an institution has elected to exclude AOCI from regulatory capital; and
certain minority interests; all subject to applicable regulatory adjustments and deductions. Tier 1 capital generally consists of CET1
and noncumulative perpetual preferred stock. Tier 2 capital generally consists of other preferred stock and subordinated debt meeting
certain conditions plus an amount of the allowance for loan and lease losses up to 1.25% of assets. Total capital is the sum of Tier 1
and Tier 2 capital.
Mortgage servicing and deferred tax assets over designated percentages of CET1 are deducted from capital. In addition, Tier 1 capital
includes AOCI, which includes all unrealized gains and losses on available-for-sale debt and equity securities. However, because of
57
our asset size, we were eligible to elect to permanently opt out of the inclusion of unrealized gains and losses on available-for-sale
debt and equity securities in our capital calculations. We elected this option.
For purposes of determining risk-based capital, assets and certain off-balance sheet items are risk-weighted from 0% to 1,250%,
depending on the risk characteristics of the asset or item. The risk weights include, for example, a 150% risk weight for certain high
volatility commercial real estate acquisition, development and construction loans and for non-residential mortgage loans that are
90 days past due or otherwise in nonaccrual status; a 20% credit conversion factor for the unused portion of a commitment with an
original maturity of one year or less that is not unconditionally cancellable; and a 250% risk weight for mortgage servicing and
deferred tax assets that are not deducted from capital.
In addition to the minimum CET1, Tier 1 and total capital ratios, the Company and the Bank must maintain a capital conservation
buffer consisting of additional CET1 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.
Under the FDIC’s prompt corrective action standards, in order to be considered well-capitalized, the Bank must have a ratio of CET1
capital to risk-weighted assets of 6.5%, a ratio of Tier 1 capital to risk-weighted assets of 8%, a ratio of total capital to risk-weighted
assets of 10%, and a leverage ratio of 5%; and must not be subject to any written agreement, order, capital directive, or prompt
corrective action directive to meet and maintain a specific capital level for any capital measure. In order to be considered adequately
capitalized, an institution must have the minimum capital ratios described above. As of December 31, 2024, the Bank was “well-
capitalized.” An institution that is not well-capitalized is subject to certain restrictions on brokered deposits and interest rates on
deposits.
The federal banking regulators are required to take prompt corrective action if an institution fails to satisfy the requirements to qualify
as adequately capitalized. All institutions, regardless of their capital levels, are restricted from making any capital distribution or
paying any management fees that would cause the institution to fail to satisfy the requirements to qualify as adequately capitalized. An
institution that is not at least adequately capitalized is: (i) subject to increased monitoring by the appropriate federal banking regulator;
(ii) required to submit an acceptable capital restoration plan (including certain guarantees by any company controlling the institution)
within 45 days; (iii) subject to asset growth limits; and (iv) required to obtain prior regulatory approval for acquisitions, branching and
new lines of business. Additional restrictions and appointment of a receiver or conservator, can apply, depending on the institution’s
capital level. The FDIC has jurisdiction over the Bank for purposes of prompt corrective action. When the FDIC as receiver liquidates
an institution, the claims of depositors and the FDIC as their successor (for deposits covered by FDIC insurance) have priority over
other unsecured claims against the institution, including claims of stockholders.
To be considered “well-capitalized,” a bank holding company must have, on a consolidated basis, a total risk-based capital ratio of
10.0% or greater and a Tier 1 risk-based capital ratio of 6.0% or greater and must not be subject to an individual order, directive or
agreement under which the FRB requires it to maintain a specific capital level. As of December 31, 2024, the Company was “well-
capitalized.”
The federal banking agencies consider concentrations of credit risk and risks from non-traditional activities, as well as an institution’s
ability to manage those risks, when determining the adequacy of an institution’s capital. This evaluation is generally made as part of
the institution’s regular safety and soundness examination. Under their regulations, the federal banking agencies also consider interest
rate risk (when the interest rate sensitivity of an institution’s assets does not match the sensitivity of its liabilities or its off-balance-
sheet position) in the evaluation of a bank’s capital adequacy. The banking agencies have issued guidance on evaluating interest rate
risk.
Although we continue to evaluate the impact that the capital rules have on the Company and the Bank, we anticipate that the Company
and the Bank will remain well-capitalized, and will continue to meet the capital conservation buffer requirement.
Insurance of Accounts and Regulation by the FDIC
Great Southern is a member of the DIF, which is administered by the FDIC. Deposits are insured up to the applicable limits by the
FDIC, backed by the full faith and credit of the United States Government. The general deposit insurance limit is $250,000 per deposit
relationship.
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The FDIC assesses deposit insurance premiums on all FDIC-insured institutions quarterly based on annualized rates. These premiums
are assessed on an institution’s total assets minus its tangible equity. Under these rules, assessment rates for an institution with total
assets of less than $10 billion are determined by weighted average CAMELS composite ratings and certain financial ratios, and range
from 5.0 to 32.0 basis points, subject to certain adjustments. In an emergency, the FDIC may also impose a special assessment. A
significant increase in insurance assessments could have a material adverse effect on our results of operations.
The FDIC is authorized to conduct examinations of and to require reporting by FDIC-insured institutions, and is the primary federal
banking regulator of state banks that are not members of the Federal Reserve, such as the Bank. The FDIC examines the Bank
regularly. The FDIC may prohibit any insured institution from engaging in any activity the FDIC determines by regulation or order to
pose a serious threat to the DIF. The FDIC also has the authority to take enforcement actions against banks and savings associations.
Guidance on Commercial Real Estate Concentrations
The federal banking agencies have issued guidance on sound risk management practices for concentrations in commercial real estate
lending. The particular focus is on exposure to commercial real estate loans that are dependent on the cash flow from the real estate
held as collateral and that are likely to be sensitive to conditions in the commercial real estate market (as opposed to real estate
collateral held as a secondary source of repayment or as an abundance of caution). The purpose of the guidance is not to limit a bank’s
commercial real estate lending but to guide banks in developing risk management practices and maintaining capital levels
commensurate with the level and nature of real estate concentrations. A bank that has experienced rapid growth in commercial real
estate lending, has notable exposure to a specific type of commercial real estate loan, or is approaching or exceeding the following
supervisory criteria may be identified for further supervisory analysis with respect to real estate concentration risk: total loans for
construction, land development, and other land represent 100% or more of the bank’s total capital; or total commercial real estate
loans (as defined in the guidance) greater than 300% of the Bank’s total capital and an increase in the bank’s commercial real estate
portfolio of 50% or more during the prior 36 months. At December 31, 2024 the total outstanding balance of loans for construction,
land development, and other land represented 74% of the Bank’s total capital, the total outstanding balance of commercial real estate
loans (including multi-family loans) represented 433% of the Bank’s total capital and the commercial real estate portfolio (including
multi-family loans) increased 22% during the prior 36 months.
Federal Reserve System
Banks are authorized to borrow from the FRB “discount window,” but FRB regulations only allow this borrowing for short periods of
time and generally require banks to exhaust other reasonable alternative sources of funds where practical, including FHLBank
advances, before borrowing from the FRB. See “Sources of Funds” above.
The Federal Reserve created the BTFP to support American businesses and households by making additional funding available to
eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors. The BTFP offered loans
of up to one year in length to banks and other eligible depository institutions pledging any collateral eligible for purchase by the
Federal Reserve Banks in open market operations, such as U.S. Treasuries, U.S. agency securities, and U.S. agency mortgage-backed
securities. These assets will be valued at par for collateral purposes. This program stopped accepting new borrowings after March 10,
2024.
Federal Home Loan Bank System
The Bank is a member of the FHLBank of Des Moines, which is one of 11 regional FHLBanks.
As a member, Great Southern is required to purchase and maintain stock in the FHLBank of Des Moines in an amount equal to the
greater of 1% of its outstanding home loans or 5% of its outstanding FHLBank advances. At December 31, 2024, Great Southern had
$18.5 million in FHLBank of Des Moines stock, which was in compliance with this requirement. In past years, the Bank has received
dividends on its FHLBank stock. Over the past five years, such dividends have averaged 7.07% annually and were 9.31% for the year
ended December 31, 2024.
Legislative and Regulatory Proposals
Any changes in the extensive regulatory scheme to which the Company or the Bank is and will be subject, whether by any of the
federal banking agencies or Congress, or the Missouri legislature or MDF, could have a material effect on the Company or the Bank,
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and the Company and the Bank cannot predict what, if any, future actions may be taken by legislative or regulatory authorities or what
impact such actions may have.
Federal and State Taxation
General
The following discussion contains a summary of certain federal and state income tax provisions applicable to the Company and the
Bank. It is not a comprehensive description of the federal or state income tax laws that may affect the Company and the Bank. The
following discussion is based upon current provisions of the Internal Revenue Code of 1986 (the “Code”) and Treasury and judicial
interpretations thereof.
The Company and its subsidiaries file a consolidated federal income tax return using the accrual method of accounting, with the
exception of GSB Two which files a separate return as a REIT. All corporations joining in the consolidated federal income tax return
are jointly and severally liable for taxes due and payable by the consolidated group. The following discussion primarily focuses upon
the taxation of the Bank, since the federal income tax law contains certain special provisions with respect to banks.
Financial institutions, such as the Bank, are subject, with certain exceptions, to the provisions of the Code generally applicable to
corporations.
Bad Debt Deduction
As of December 31, 2024 and 2023, 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 at both December 31, 2024 and December 31, 2023.
The Bank is required to follow the specific charge-off method which only allows a bad debt deduction equal to actual charge-offs, net
of recoveries, experienced during the fiscal year of the deduction. In a year where recoveries exceed charge-offs, the Bank would be
required to include the net recoveries in taxable income.
Interest Deduction
In the case of a financial institution, such as the Bank, no deduction is allowed for the pro rata portion of its interest expense which is
allocable to tax-exempt interest on obligations acquired after August 7, 1986. A limited class of tax-exempt obligations acquired after
August 7, 1986 will not be subject to this complete disallowance rule. For certain tax-exempt obligations issued in 2009 and 2010, an
amount of tax-exempt obligations that are not generally considered part of the “limited class of tax-exempt obligations” noted above
may be treated as part of the “limited class of tax-exempt obligations” to the extent of two percent of a financial institution’s total
assets. For tax-exempt obligations acquired after December 31, 1982 and before August 8, 1986 and for obligations acquired after
August 7, 1986 that are not subject to the complete disallowance rule, 80% of interest incurred to purchase or carry such obligations
will be deductible. No portion of the interest expense allocable to tax-exempt obligations acquired by a financial institution before
January 1, 1983, which is otherwise deductible, will be disallowed. The interest expense disallowance rules cited above have not
significantly impacted the Bank.
State Taxation
Missouri-based banks, such as the Bank, are subject to a franchise tax which is imposed on the bank’s taxable income at the rate of
4.48% of the taxable income (determined without regard for any net operating losses) - income-based calculation. Prior to 2020, this
rate was 7.00%. Missouri-based banks are entitled to a credit against the income-based franchise tax for all other state or local taxes on
banks, except taxes on real estate, unemployment taxes, bank tax, and taxes on tangible personal property owned by the Bank and held
for lease or rental to others.
The Company and all subsidiaries are subject to a Missouri income tax that is imposed on the corporation’s taxable income at the rate
of 4.00%. The return is filed on a consolidated basis by all members of the consolidated group, including the Bank but excluding GSB
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Two. As a REIT, GSB Two files a separate Missouri income tax return. Prior to 2020, the Missouri corporate income tax rate was
6.25%.
The Bank also has full-service offices in Iowa, Kansas, Minnesota, Nebraska and Arkansas, and has commercial loan production
offices in Arizona, Colorado, Georgia, Illinois, Nebraska, North Carolina and Texas. As a result, the Bank and/or the Company is
subject to franchise and income taxes that are imposed on the corporation’s taxable income attributable to those states. In addition, due
to lending activity, the Bank and/or the Company is subject to income taxes in additional jurisdictions.
As a Maryland corporation, the Company is required to file an annual report with and pay an annual fee to the State of Maryland.
Tax Credits and Related Investments
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, to develop and operate business and real estate projects
located in low-income communities or to complete certain federal historic rehabilitation projects. Through these partnerships, the
Company receives allocations of federal tax credits which are used to partially offset annual federal tax liabilities and reduce income
tax expense by the difference of the tax credits utilized less the amortization of the investment cost.
Examinations
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, 2020 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 (MoDOR) 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 previously filed a motion for summary decision with the MAHC and, on January 26, 2024,
the MAHC granted the motion in favor of the Company, upholding its position related to the exclusion of certain income in the
calculation of Missouri income tax. In February 2024, the MoDOR confirmed to the Company in writing that it would not exercise its
right to appeal this decision to the Missouri State Supreme Court.
No other state examinations are in progress at this time. As a result, tax years through December 31, 2020, with few exceptions, are
now closed.
ITEM 1A.
RISK FACTORS
An investment in the common stock of the Company is speculative in nature and is subject to certain risks inherent in the business of
the Company and the Bank. The material risks and uncertainties that management believes affect the Company and the Bank are
described below. You should carefully consider the risks described below, as well as the other information included in this Annual
Report on Form 10-K, before making an investment in the Company’s common stock. The risks described below are not the only ones
we face in our business. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may
also impair our business operations. If any of the following risks occur, our business, financial condition or operating results could be
materially harmed. In such an event, our common stock could decline in value.
References to “we,” “us,” and “our” in this “Risk Factors” section refer to the Company and its subsidiaries, including the Bank,
unless otherwise specified or unless the context otherwise requires.
Risks Relating to the Company and the Bank
Risks Relating to Macroeconomic Conditions
Economic conditions have adversely affected and could continue to adversely affect our business and financial performance.
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Our financial performance generally, and in particular the ability of borrowers to pay interest on and repay principal of outstanding
loans and the value of collateral securing those loans, as well as demand for loans and other products and services that we offer, is
highly dependent upon the business environment in the markets where we operate and in the United States as a whole. A favorable
business environment is generally characterized by, among other factors, economic growth, efficient capital markets, low inflation,
low unemployment, high business and investor confidence, and strong business earnings. Unfavorable or uncertain economic and
market conditions can be caused by declines in economic growth, business activity or investor or business confidence; limitations on
the availability or increases in the cost of credit and capital; increases in inflation or interest rates; high unemployment; political
uncertainty, both domestic and international, and other geopolitical events; natural disasters; wars; terrorist acts; pandemics or other
public health crises; or a combination of these or other factors. An economic downturn, sustained high unemployment levels, or stock
market volatility may negatively impact our operating results and have a negative effect on the ability of our borrowers to make timely
repayments of their loans, increasing the risk of loan defaults and losses.
Since our business is primarily concentrated in Missouri, Iowa, Kansas and Minnesota, a significant downturn in these state or
local economies, particularly in the St. Louis and Springfield, Missouri areas, may adversely affect our business. We also have
originated a significant dollar amount of loans in Texas through our commercial loan production office in Dallas. A significant
downturn in that state’s economy may adversely affect our business.
Our lending and deposit gathering activities historically were concentrated primarily in the Springfield and southwest Missouri areas.
Our success continues to depend heavily on general economic conditions in Springfield and the surrounding areas. Although we
believe the economy in these areas has recently been favorable relative to other areas, we do not know whether these conditions will
continue. Until the past several years, our greatest concentration of loans and deposits has traditionally been in the greater Springfield
area. With a population of approximately 491,000, the greater Springfield area is the third largest metropolitan area in Missouri. At
December 31, 2024, approximately $372.0 million, or 7.8%, of our loan portfolio consisted of loans to borrowers in or secured by
properties in the Springfield metropolitan area.
In addition to the concentrations in the southwest Missouri area, we now have our largest concentration of loans to borrowers in or
secured by properties in the St. Louis metropolitan area. At December 31, 2024, approximately $781.4 million, or 16.4%, of our loan
portfolio consisted of loans for apartments and other types of commercial real estate properties in the St. Louis metropolitan area.
Also, we have a significant amount of loans to borrowers in or secured by properties in Texas, primarily through our commercial loan
production office in Dallas. At December 31, 2024, approximately $586.4 million, or 12.3%, of our loan portfolio consisted of loans
primarily for various types of commercial real estate in Texas.
With the FDIC-assisted transactions that were completed in 2009-2014, we have additional concentrations of loans in the Minneapolis
metropolitan area and in Western, Eastern and Central Iowa. At December 31, 2024, approximately $354.7 million, or 7.4%, and
$355.3 million, or 7.4%, of our loan portfolio consisted of loans primarily for various types of commercial real estate in Minnesota
and Iowa, respectively. In recent years, we have opened commercial loan production offices in Atlanta, Chicago and Denver, and in
2022 we opened commercial loan production offices in Phoenix and Charlotte, North Carolina. We expect loans originated through
these offices to result in significant loan balances secured by properties located in Georgia, Illinois, Colorado, Arizona and North
Carolina.
Adverse changes in regional and general economic conditions could reduce our growth rate, impair our ability to collect payments on
loans, increase loan delinquencies, increase problem assets and foreclosures, increase claims and lawsuits, decrease demand for our
products and services, and decrease the value of collateral for loans, especially real estate, thereby having a material adverse effect on
our financial condition and results of operations. Real estate values can also be affected by governmental rules or policies and, as
noted below, natural disasters.
Inflationary pressures and rising or sustained high prices may affect our results of operations and financial condition.
Inflation rose sharply from the end of 2021 to mid-2024 to levels not seen in more than 40 years. In the second half of 2023 and into
2024, inflation measures moderated but were still higher than levels targeted by the FRB. Small to medium-sized businesses may be
impacted more during periods of high inflation, as they are not able to leverage economies of scale to mitigate cost pressures
compared to larger businesses. Consequently, the ability of our business customers to repay their loans may deteriorate, and in some
cases this deterioration may occur quickly, which would adversely impact our results of operations and financial condition.
Furthermore, a prolonged period of inflation could cause wages and other costs to the Company to increase, which could adversely
affect our results of operations and financial condition.
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The economic impact of new or continuing public health issues, or similar crises, could continue to adversely affect us.
New or continuing public health issues could adversely impact the global and national economy and certain industries and geographies
in which our customers reside and operate. Because of their potential ongoing and changing nature regarding severity and broad
coverage, it is difficult to predict the full impact of any such crises on the Company and its customers, employees and third-party
service providers. The extent of this impact will depend on future developments, which are highly uncertain. Additionally, the
responses of various governmental and nongovernmental authorities and consumers to any new or continuing public health issues may
have material long-term effects on the Company and its customers, which are difficult to quantify in the near-term or long-term.
We could be subject to a number of risks as the result of any such crises, which could have a material adverse effect on our business,
financial condition, liquidity and results of operations. These risks include, but are not limited to, changes in demand for our products
and services; increased loan losses or other impairments in our loan portfolios and increases in our allowance for loan losses; a decline
in collateral for our loans, especially real estate; unanticipated unavailability of employees; increased cyber security risks to the extent
employees work remotely; a prolonged weakness in economic conditions; and increased costs as we and our regulators, customers and
third-party service providers adapt to evolving conditions.
Severe weather and other natural disasters, acts of war or terrorism or other adverse external events could harm our business.
Severe weather and other natural disasters, acts of war or terrorism or other adverse external events could have a significant impact on
our ability to conduct business. Such events could harm our operations through interference with communications, including the
interruption or loss of our computer systems, which could prevent or impede us from gathering deposits, originating loans and
processing and controlling the flow of business, as well as through the destruction of our facilities and our operational, financial and
management information systems. There is no assurance that our business continuity and disaster recovery program can adequately
mitigate these risks. Such events could also affect the stability of our deposit base, cause significant property damage, adversely affect
our employees, adversely impact the values of collateral securing our loans and/or interfere with our borrowers’ abilities to repay their
debt obligations to us.
Climate change and related legislative and regulatory initiatives may result in operational changes and expenditures that
could significantly impact our business.
The current and anticipated effects of climate change are creating an increasing level of concern for the state of the global
environment. As a result, political and social attention to the issue of climate change has increased. In recent years, governments
across the world have entered into international agreements relating to climate change. The U.S. Congress, state legislatures and
federal and state regulatory agencies have continued to propose and advance numerous legislative and regulatory initiatives seeking to
mitigate the effects of climate change. Such initiatives are expected to continue, including potentially increasing supervisory
expectations with respect to banks’ risk management practices and credit portfolio concentrations based on climate-related factors, as
well as encouraging investment by banks in climate-related initiatives and lending to communities disproportionately impacted by the
effects of climate change. These measures may result in the imposition of taxes and fees and the implementation of operational
changes, each of which may require us to incur significant compliance, operating and other costs.
Risks Relating to Lending Activities
Our loan portfolio possesses increased risk due to our relatively high concentration of commercial and residential
construction, commercial real estate, other residential (multi-family) and other commercial loans.
Our commercial and other residential (multi-family) construction, commercial real estate, other residential (multi-family) and other
commercial loans accounted for approximately 78.8% of our total loan portfolio as of December 31, 2024. Generally, we consider
these types of loans to involve a higher degree of risk compared to first mortgage loans on one- to four-family, owner-occupied
residential properties. At December 31, 2024, including completed projects and those under construction, we had $1.75 billion of
loans secured by apartments, $348.6 million of loans secured by retail-related projects, $288.4 million of loans secured by warehouse
facilities, $270.0 million of loans secured by healthcare facilities, $269.0 million of loans secured by motels/hotels and $196.1 million
of loans secured by office facilities, which are particularly sensitive to certain risks, including the following:
x
large loan balances owed by a single borrower;
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x
payments that are dependent on the successful operation of the project; and
x
loans that are more directly impacted by adverse conditions in the real estate market or the economy generally.
The risks associated with construction lending include the borrower’s inability to complete the construction process on time and
within budget, the sale of the project within projected absorption periods, the economic risks associated with real estate collateral, and
the potential of a rising interest rate environment. This activity may involve financing land purchases, infrastructure development
(e.g., roads, utilities, etc.), as well as construction of residences or other residential (multi-family) dwellings for subsequent sale by the
developer/builder. Because the sale of developed properties is critical to the success of the developer’s business, loan repayment may
be especially subject to the volatility of real estate market sales activity. Management has established underwriting and monitoring
criteria to help minimize the inherent risks of commercial real estate construction lending. However, there is no guarantee that these
criteria will reduce losses on this type of lending.
Commercial real estate and other residential (multi-family) lending typically involves higher loan principal amounts and the
repayment of these loans generally is dependent, in large part, on the successful operation of the property securing the loan or the
business conducted on the property securing the loan. Other commercial loans are typically made on the basis of the borrower’s ability
to make repayment from the cash flow of the borrower’s business or investment. These loans may therefore be more adversely
affected by conditions in the real estate markets or in the economy generally. For example, if the cash flow from the borrower’s
project is reduced due to leases not being obtained or renewed, the borrower’s ability to repay the loan may be impaired. In addition,
many commercial and other residential (multi-family) loans are not fully amortized over the loan period, but have balloon payments
due at maturity. A borrower’s ability to make a balloon payment typically will depend on being able to either refinance the loan or
complete a timely sale of the underlying property.
We plan to continue to originate commercial real estate and construction loans based on economic and market conditions. From 2008
to 2013, there was not significant demand for these types of loans due to the economic downturn. In more recent years, demand for
these types of loans has increased and we expect to continue to originate these types of loans. Because of the increased risks related to
these types of loans, we may determine it necessary to increase the level of our provision for credit losses. Increased provisions for
credit losses would adversely impact our operating results. See “Item 1. Business-The Company-Lending Activities-Commercial Real
Estate and Construction Lending,” “-Other Commercial Lending,” “-Residential Real Estate Lending” and “-Allowance for Losses on
Loans and Foreclosed Assets” and “Item 7. Management’s Discussion of Financial Condition and Results of Operations – Non-
performing Assets” in this Report.
A slowdown in the residential or commercial real estate markets may adversely affect our earnings and liquidity position.
The overall credit quality of our construction loan portfolio is impacted by trends in real estate values. We continually monitor
changes in key regional and national economic factors because changes in these factors can impact our residential and commercial
construction loan portfolio and the ability of our borrowers to repay their loans. Across the United States for several years, the
residential real estate market experienced significant adverse trends, including accelerated price depreciation and rising delinquency
and default rates, and weaknesses arose in the commercial real estate market as well. The conditions in the residential real estate
market led to significant increases in loan delinquencies and credit losses as well as higher provisioning for credit losses, which in turn
had a negative effect on earnings for many banks across the country. Likewise, we also experienced delinquencies in our construction
loan portfolio from 2009 through 2012, almost entirely related to loans originated prior to 2009. Many of these older construction
projects were “build to sell” types of projects where repayment of the loans was reliant on the borrower completing the project and
then selling it. Conditions of both the residential and the commercial real estate markets could negatively impact real estate values and
the ability of our borrowers to liquidate properties. A lack of liquidity in the real estate market or tightening of credit standards within
the banking industry could diminish sales, further reducing our borrowers’ cash flows and weakening their ability to repay their debt
obligations to us, which could lead to material adverse impacts on our financial condition and results of operations.
Our allowance for credit losses may prove to be insufficient to absorb potential losses in our loan portfolio.
Lending money is a substantial part of our business. However, every loan we make carries a certain risk of non-payment. This risk is
affected by, among other things:
x
cash flows of the borrower and/or the project being financed;
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x
in the case of a collateralized loan, the changes and uncertainties as to the future value of the collateral;
x
the credit history of a particular borrower;
x
changes in economic and industry conditions; and
x
the duration of the loan.
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. 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. 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 modification 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.
In addition, bank regulators periodically review our allowance for credit losses and may require us to increase our provision for credit
losses or recognize further loan charge-offs. Any increase in our allowance for credit losses or loan charge-offs as required by these
regulatory authorities might have a material adverse effect on our financial condition and results of operations.
Risks Relating to Market Interest Rates
We may be adversely affected by interest rate changes.
Our earnings are largely dependent upon our net interest income. Net interest income is the difference between interest income earned
on interest-earning assets such as loans and investment securities and interest expense paid on interest-bearing liabilities such as
deposits and borrowed funds. Interest rates are highly sensitive to many factors that are beyond our control, including general
economic conditions and policies of various governmental and regulatory agencies, in particular, the FRB. Changes in monetary
policy, including changes in interest rates, could influence not only the interest we receive on loans and securities and the amount of
interest we pay on deposits and borrowings, but these changes could also affect our ability to originate loans and obtain deposits, the
fair values of our financial assets and liabilities and the average duration of our loan and mortgage-backed securities portfolios. If the
interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other
investments, our net interest income, and therefore earnings, could be adversely affected. In addition, a substantial portion of our loans
(approximately 63% of our total loan portfolio as of December 31, 2024) have adjustable rates of interest. While the higher payment
amounts we would receive on these loans in a rising interest rate environment may increase our interest income, some borrowers may
be less able to afford the higher payment amounts, which may result in a higher rate of default. Earnings could also be adversely
affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other
borrowings.
We generally seek to maintain a reasonably neutral position in terms of the volume of assets and liabilities that mature or re-price
during any period. As such, we have adopted asset and liability management strategies to attempt to minimize the potential adverse
effects of changes in interest rates on net interest income, primarily by altering the mix and maturity of fixed-rate and variable-rate
loans, investments and funding sources, including interest rate derivatives, so that we may reasonably maintain the Company’s net
interest income and net interest margin. However, interest rate fluctuations, the level and shape of the interest rate yield curve,
maintaining excess liquidity levels, loan prepayments, loan production and deposit flows are constantly changing and influence the
ability to maintain a neutral position. Accordingly, we may not be successful in maintaining a neutral position and, as a result, our net
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interest margin may be adversely impacted. For additional information, see Item 7A. “Quantitative and Qualitative Disclosures About
Market Risk.”
The fair value of our investment securities can fluctuate due to market conditions outside of our control.
Factors beyond our control can significantly influence the fair value of securities in our investment securities portfolio and can cause
potential adverse changes to the fair value of these securities. These factors include, but are not limited to, rating agency downgrades
of the securities, defaults by the issuer or with respect to the underlying securities, changes in market rates of interest and instability in
the credit markets. Any of these mentioned factors could cause an impairment of these assets, which would lead to accounting charges
which could have a material negative effect on our financial condition and/or results of operations.
Risks Relating to Liquidity
Conditions in the financial markets may limit our access to additional funding to meet our liquidity needs.
Liquidity is essential to our business, as we must maintain sufficient funds to respond to the needs of depositors and borrowers. An
inability to raise funds through deposits, borrowings, the sale or pledging as collateral of loans and other assets could have a
substantial adverse effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities could be
impaired by factors that affect us specifically or the financial services industry in general. Factors that could negatively affect our
access to liquidity sources include a decrease in the level of our business activity due to a market downturn or regulatory action
against us. Our ability to borrow could also be impaired by factors that are not specific to us, such as severe disruption of the financial
markets or negative news and expectations about the prospects for the financial services industry as a whole.
Our operations may depend upon our continued ability to access brokered deposits, Federal Home Loan Bank advances
and/or Federal Reserve Bank borrowings.
Due to the high level of competition for deposits in our markets, we have from time to time utilized a sizable amount of certificates of
deposit obtained through deposit brokers and advances from the FHLBank to help fund our asset base. Brokered deposits are marketed
through national brokerage firms that solicit funds from their customers for deposit in banks, including our bank. Brokered deposits
and FHLBank advances may generally be more sensitive to changes in interest rates and volatility in the capital markets than retail
deposits attracted through our branch network, and our reliance on these sources of funds increases the sensitivity of our portfolio to
these external factors. Our brokered deposits and term FHLBank advances totaled $772.1 million and $-0-, respectively, at December
31, 2024, compared with $661.5 million and $-0-, respectively, at December 31, 2023. We had overnight borrowings from the
FHLBank of $333.0 million and $251.0 million at December 31, 2024 and 2023, respectively. We expect to continue to utilize
FHLBank advances and overnight borrowings and brokered deposits from time to time as a supplemental funding source.
In January 2024, the Bank borrowed $180.0 million under the Federal Reserve Bank’s BTFP. The borrowing matured and was repaid
in January 2025. The line was secured primarily by the Bank’s held-to-maturity investment securities, with assets pledged totaling
approximately $188 million as of December 31, 2024.
Bank regulators can restrict our access to these sources of funds in certain circumstances. For example, if the Bank’s regulatory capital
ratios declined below the “well-capitalized” status, banking regulators would require the Bank to obtain their approval prior to
obtaining or renewing brokered deposits. The regulators might not approve our acceptance of brokered deposits in amounts that we
desire or at all. In addition, the availability of brokered deposits and the rates paid on these brokered deposits may be volatile as the
balance of the supply of and the demand for brokered deposits changes. Market credit and liquidity concerns may also impact the
availability and cost of brokered deposits. Similarly, FHLBank advances are only available to borrowers that meet certain conditions.
If Great Southern were to cease meeting these conditions, our access to FHLBank advances could be significantly reduced or
eliminated.
Certain Federal Home Loan Banks, including the Federal Home Loan Bank of Des Moines, have experienced lower earnings from
time to time and paid out lower dividends to their members. Future problems at the Federal Home Loan Banks may impact the
collateral necessary to secure borrowings and limit the borrowings extended to its member banks, as well as require additional capital
contributions by its member banks. If this occurs, our short-term liquidity needs could be negatively impacted. Should Great Southern
be restricted from using FHLBank advances due to weakness in the system or with the FHLBank of Des Moines, Great Southern may
be forced to find alternative funding sources. These alternative funding sources may include the utilization of existing lines of credit
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with third party banks or the Federal Reserve Bank along with seeking other lines of credit, borrowing under repurchase agreement
lines, increasing deposit rates to attract additional funds, accessing additional brokered deposits, or selling loans or investment
securities in order to maintain adequate levels of liquidity. At December 31, 2024, the Bank owned $18.5 million of stock in the
FHLBank of Des Moines, which declared and paid an annualized dividend approximating 9.50% during the fourth quarter of 2024.
The FHLBank of Des Moines may eliminate or reduce dividend payments at any time in the future in order for it to maintain or restore
its retained earnings, which would negatively affect our results of operations.
Risks Relating to Future Growth
Our strategy of pursuing acquisitions exposes us to financial, execution and operational risks that could adversely affect us.
We have in the past pursued, and may again in the future pursue, a strategy of supplementing internal growth by acquiring other
financial institutions or branches that we believe will help us fulfill our strategic objectives and enhance our earnings. There are risks
associated with this strategy, however, including the following:
x
We may be exposed to potential asset quality issues or unknown or contingent liabilities of the banks or businesses we
acquire. If these issues or liabilities exceed our estimates, our earnings and financial condition may be adversely affected;
x
Prices at which acquisitions can be made fluctuate with market conditions. We have experienced times during which
acquisitions could not be made in specific markets at prices our management considered acceptable and expect that we will
experience this condition in the future in one or more markets;
x
The acquisition of other entities generally requires integration of systems, procedures and personnel of the acquired entity in
order to make the transaction economically feasible. This integration process is complicated and time consuming and can be
disruptive to the customers of the acquired business. If the integration process is not conducted successfully and with
minimal effect on the acquired business and its customers, we may not realize the anticipated economic benefits of particular
acquisitions within the expected time frame or to the extent anticipated, and we may lose customers or employees of the
acquired business. We may also experience greater than anticipated customer losses even if the integration process is
successful;
x
To finance an acquisition, we may borrow funds, thereby increasing our leverage and diminishing our liquidity, or raise
additional capital, which could dilute the interests of our existing stockholders; and
x
We may not be able to continue to sustain our past rate of growth or to grow at all in the future. We completed two
acquisitions in 2009, one acquisition in 2011, one acquisition in 2012, one acquisition in 2014 and opened additional banking
offices and commercial loan production offices in recent years that enhanced our rate of growth. Also in 2014, we acquired
certain loans, deposits and branches from Boulevard Bank, and in 2016, we completed an acquisition of certain loans,
deposits and branches in St. Louis from Fifth Third Bank.
Our growth or future losses may require us to raise additional capital in the future, but that capital may not be available when
it is needed. If available, the cost of that capital may also be very high.
We are required by federal and state regulatory authorities to maintain adequate levels of capital to support our operations. In addition,
we may elect to raise additional capital to support the growth of our business or to finance acquisitions, if any, or we may elect to raise
additional capital for other reasons. Should we be required by regulatory authorities or otherwise elect to raise additional capital, we
may seek to do so through the issuance of, among other things, our common stock or securities convertible into our common stock,
which could dilute an existing stockholder’s ownership interest in the Company.
Our ability to raise additional capital, if needed or desired, will depend on conditions in the capital markets at that time, which are
outside our control, and on our financial condition and performance. Accordingly, we cannot make assurances of our ability to raise
additional capital if needed or desired, or on terms that will be acceptable to us. If we cannot raise additional capital when needed or
desired, our ability to further expand our operations through internal growth and acquisitions could be materially impaired and our
financial condition and liquidity could be materially adversely affected.
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Risks Relating to Competition
Our future success is dependent on our ability to compete effectively in the highly competitive banking industry.
We face substantial competition in all phases of our operations from a variety of different competitors. Our future growth and success
will depend on our ability to compete effectively in this highly competitive environment. To date, we have grown our business
successfully by focusing on our geographic market, expanding into complementary markets and emphasizing the high level of service
and responsiveness desired by our customers. We compete for loans, deposits and other financial services with other commercial
banks, thrifts, credit unions, consumer finance companies, insurance companies and brokerage firms. Many of our competitors offer
products and services that we do not offer, and many have substantially greater resources, name recognition and market presence that
benefit them in attracting business. In addition, larger competitors (including certain nationwide banks that have a significant presence
in our market areas) may be able to price loans and deposits more aggressively than we do, and smaller and newer competitors may be
more aggressive in terms of pricing loan and deposit products than us in order to obtain a larger share of the market. As we have
grown, we have become dependent from time to time on outside funding sources, including funds borrowed from the FHLBank and
brokered deposits, where we face nationwide competition. Some of the financial institutions and financial services organizations with
which we compete are not subject to the same degree of regulation as is imposed on insured depositary institutions and their holding
companies. As a result, these non-bank competitors have certain advantages over us in accessing funding and in providing various
services.
We also experience competition from a variety of institutions outside of our market areas. Some of these institutions conduct business
primarily over the Internet and may thus be able to realize certain cost savings and offer products and services at more favorable rates
and with greater convenience to the customer.
Risks Relating to Regulation
Our business may be adversely affected by the highly regulated environment in which we operate, including the various
capital adequacy guidelines we are required to meet.
We are subject to extensive federal and state legislation, regulation, examination and supervision. Recently enacted, proposed and
future legislation and regulations have had, will continue to have, or may have an adverse effect on our business and operations.
Our success depends on our continued ability to maintain compliance with the various regulations to which we are subject. Some of
these regulations may increase our costs and thus place other financial institutions in stronger, more favorable competitive positions.
We cannot predict what restrictions may be imposed upon us by future legislation. See “Item 1.-The Company -Government
Supervision and Regulation” in this Report.
The Company and the Bank are required to meet certain regulatory capital adequacy guidelines and other regulatory requirements
imposed by the FRB, the FDIC and the Missouri Division of Finance. If the Company or the Bank fails to meet these minimum capital
guidelines and other regulatory requirements, our financial condition and results of operations could be materially and adversely
affected and could compromise the status of the Company as a financial holding company. See “Item 1.-The Company -Government
Supervision and Regulation” in this Report.
We currently exceed thresholds defined in interagency guidance on commercial real estate concentrations, and as such, we
may incur additional expense or slow the growth of certain categories of commercial real estate lending.
The federal banking agencies have issued guidance on sound risk management practices for concentrations in commercial real estate
lending (see “Item 1. Business-- Government Supervision and Regulation-Guidance on Commercial Real Estate Concentrations”). For
purposes of this guidance, “commercial real estate” includes, among other types, other residential (multi-family) loans and non-owner
occupied nonresidential loans, two categories which have been a source of loan growth for the Company. A bank that has experienced
rapid growth in commercial real estate lending, has notable exposure to a specific type of commercial real estate loan, or is
approaching or exceeding the following supervisory criteria may be identified for further supervisory analysis with respect to real
estate concentration risk: total loans for construction land development and other land representing 100% or more of the bank’s tier 1
regulatory capital plus the allowance for loan losses includable in total regulatory capital; or total commercial real estate loans (as
defined in the guidance) that exceed 300% of the bank’s tier 1 regulatory capital plus the allowance for loan losses includable in total
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regulatory capital and the bank’s commercial real estate portfolio has increased by 50% or more during the prior 36 months. Our total
commercial real estate loans exceeded the 300% threshold at December 31, 2024.
We may see our non-owner occupied commercial real estate lending grow as a percentage of total regulatory capital, or we may slow
the growth of this type of lending activity. Should we continue to grow this category of our loan portfolio, we may incur additional
expense to meet increasing supervisory expectations related to this lending activity. If we slow the growth of commercial real estate
loans generally, or particular concentrations of borrowers or categories of properties within that definition, we may be negatively
impacted in terms of our asset growth, net interest margin and earnings, leverage, or other targets.
Risks Relating to Technology and Cybersecurity and Other Operational Matters
Our exposure to operational risks may adversely affect us.
Similar to other financial institutions, we are exposed to many types of operational risk, including reputational risk, legal and
compliance risk, the risk of fraud or theft by employees or outsiders, the risk that sensitive customer or Company data is
compromised, unauthorized transactions by employees or operational errors, including clerical or record-keeping errors. If any of
these risks occur, it could result in material adverse consequences for us.
We continually encounter technological change, and we may have fewer resources than many of our competitors to continue to
invest in technological improvements.
The financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven
products and services. Our future success will depend, in part, upon our ability to address the needs of our clients by using technology
to provide products and services that will satisfy client demands for convenience, as well as to create additional efficiencies in our
operations. Many of our competitors have substantially greater resources to invest in technological improvements. We may not be able
to effectively implement new technology-driven products and services or be successful in marketing these products and services to our
clients.
Our current and future uses of Artificial Intelligence (AI) and other emerging technologies may create additional risks.
The increasing adoption of AI in financial services presents significant opportunities but also introduces a range of risks that could
impact our operations, regulatory compliance, and customer trust. AI introduces model risk, where flawed algorithms or biased data
could result in inaccurate credit decisions, compliance violations, or discriminatory outcomes in lending or customer service.
Cybersecurity threats, such as data breaches, adversarial attacks, and data poisoning, pose significant challenges, particularly as these
systems handle large volumes of sensitive customer information. Additionally, the opaque nature of some AI models, often referred to
as “black-box” systems, raises regulatory compliance concerns, as regulators increasingly require transparency and explainability in
AI-driven decision-making.
Operational risks also arise from potential system failures, over-reliance on AI, and integration challenges with existing infrastructure.
Disruptions in AI systems could impact critical functions such as fraud detection, transaction monitoring, and customer support.
Ethical and reputational risks, including unintended consequences or perceived unfairness in AI-driven decisions, may erode customer
trust and expose us to regulatory scrutiny.
Mitigating these risks requires a robust governance framework, regularly testing and auditing of AI models, and strong human
oversight. Investments in cybersecurity, data privacy protections, and employee training are critical to managing these risks.
The Company is subject to significant risk if, in the future, it chooses to convert its core or other operating systems and may
encounter significant adverse developments.
If the Company replaces its core operating systems, including those for loans, deposits, financials and other ancillary systems
(collectively referred to as core system), such systems conversions entail significant operational risks. The core system is used to track
customer relationships and accounts and report financial information for the Company. The core system is integrated with various
other applications that are used to service customer requests by Bank personnel or directly by customers (such as online banking and
mobile applications). Changing the core system would subject the Company to operational risks during and after the conversion,
including disruptions to its technology systems, which may adversely impact our customers. The Company has plans, policies and
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procedures designed to prevent or limit the risks of a failure during or after the conversion of our core systems. However, there can be
no assurance that any such adverse developments will not occur or, if they do occur, that they will be timely and adequately
remediated. The ultimate impact of any adverse development could damage the Company’s reputation, result in a loss of customer
business, subject the Company to regulatory scrutiny, or expose it to civil litigation and possibly financial liability, any of which could
have a material effect on the Company’s business, financial condition, and results of operations.
We are also subject to security-related risks in connection with our use of technology, and our security measures may not be
sufficient to mitigate the risk of a cyber-attack or to protect us from systems failures or interruptions.
Communications and information systems are essential to the conduct of our business. We use such systems to manage our client
relationships, our general ledger and virtually all other aspects of our business. Our operations rely on the secure processing, storage,
and transmission of confidential and other information in our computer systems and networks. Although we take protective measures
and endeavor to modify them as circumstances warrant, the security of our computer systems, software, and networks may be
vulnerable to breaches, unauthorized access, misuse, computer viruses, or other malicious code and cyber-attacks that could have a
security impact. If one or more of these events occur, this could jeopardize our or our clients’ confidential and other information
processed and stored in, and transmitted through, our computer systems and networks, or otherwise cause interruptions or
malfunctions in our operations or the operations of our clients or counterparties. We may be required to expend significant additional
resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures, and we may be subject
to litigation and financial losses that are either not insured against or not fully covered through any insurance maintained by us. We
could also suffer significant reputational damage.
As a service to our clients, we currently offer an Internet PC banking product and a smartphone application for iPhone and Android
users. Use of these services involves the transmission of confidential information over public networks. We cannot be sure that
advances in computer capabilities, new discoveries in the field of cryptography or other developments will not result in a compromise
or breach in the commercially available encryption and authentication technology that we use to protect our clients’ transaction data. If
we were to experience such a breach or compromise, we could suffer losses and reputational damage and our results of operations
could be materially adversely affected.
While we have established policies and procedures to prevent or limit the impact of systems failures and interruptions, there can be no
assurance that such events will not occur or that they will be adequately addressed if they do. In addition, we outsource certain aspects
of our data processing and other operational functions to certain third-party providers. If our third-party providers encounter
difficulties, or if we have difficulty in communicating with them, our ability to adequately process and account for transactions could
be affected, and our business operations could be adversely impacted. Threats to information security also exist in the processing of
client information through various other vendors and their personnel.
The occurrence of any systems failure or interruption could damage our reputation and result in a loss of clients and business, or could
expose us to legal liability. Any of these occurrences could have a material adverse effect on our business, financial condition and
results of operations.
Our controls and procedures may be ineffective.
We regularly review and update our internal controls, disclosure controls and procedures and corporate governance policies and
procedures. As a result, we may incur increased costs to maintain and improve our controls and procedures. Any system of controls,
however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances
that the objectives of the system are met. Any failure or circumvention of our controls or procedures or failure to comply with
regulations related to controls and procedures could have a material adverse effect on our business, results of operations or financial
condition.
Risks Relating to Accounting Matters
Our accounting policies and methods impact how we report our financial condition and results of operations. Application of
these policies and methods may require management to make estimates about matters that are uncertain.
Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations.
Our management must exercise judgment in selecting and applying many of these accounting policies and methods so they comply
with generally accepted accounting principles and reflect management’s judgment of the most appropriate manner to report our
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financial condition and results of operations. In some cases, management must select the accounting policy or method to apply from
two or more alternatives, any of which might be reasonable under the circumstances yet might result in our reporting materially
different amounts than would have been reported under a different alternative. Our significant accounting policies are described
in Note 1 of the accompanying audited financial statements included in Item 8 of this Report. These accounting policies are critical to
presenting our financial condition and results of operations. They may require management to make difficult, subjective or complex
judgments about matters that are uncertain. Materially different amounts could be reported under different conditions or using
different assumptions.
Changes in accounting standards could materially impact our consolidated financial statements.
The accounting standard setters, including the Financial Accounting Standards Board, Securities and Exchange Commission and other
regulatory bodies, from time to time may change the financial accounting and reporting standards that govern the preparation of our
consolidated financial statements. These changes can be hard to predict and can materially impact how we record and report our
financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retroactively,
resulting in changes to previously reported financial results, or a cumulative charge to retained earnings.
Risks Relating to our Common Stock
The price of our common stock may fluctuate significantly, and this may make it difficult for you to resell our common stock
when you want or at prices you find attractive.
We cannot predict how our common stock will trade in the future. The market value of our common stock will likely continue to
fluctuate in response to a number of factors including the following, most of which are beyond our control, as well as the other factors
described in this “Risk Factors” section:
x
actual or anticipated quarterly fluctuations in our operating and financial results;
x
developments related to investigations, proceedings or litigation that involve us;
x
changes in financial estimates and recommendations by financial analysts;
x
dispositions, acquisitions and financings;
x
actions of our current stockholders, including sales of common stock by existing stockholders and our directors and executive
officers;
x
fluctuations in the stock price and operating results of our competitors;
x
regulatory developments; and
x
other developments related to the financial services industry.
The market value of our common stock may also be affected by conditions affecting the financial markets in general, including price
and trading fluctuations. These conditions may result in (i) volatility in the level of, and fluctuations in, the market prices of stocks
generally and, in turn, our common stock and (ii) sales of substantial amounts of our common stock in the market, in each case that
could be unrelated or disproportionate to changes in our operating performance. These broad market fluctuations may adversely affect
the market value of our common stock. Our common stock also has a low average daily trading volume relative to many other stocks,
which may limit an investor’s ability to quickly accumulate or divest themselves of large blocks of our stock. This can lead to
significant price swings even when a relatively small number of shares are being traded.
There may be future sales of additional shares of common stock or other dilution of our equity, which may adversely affect the
market price of our common stock.
We are not restricted from issuing additional common stock or preferred stock, including any securities that are convertible into or
exchangeable for, or that represent the right to receive, common stock or preferred stock or any substantially similar securities. The
71
market value of our common stock could decline as a result of sales by us of a large number of shares of common stock or preferred
stock or similar securities in the market or the perception that such sales could occur.
Our board of directors is authorized to cause us to issue additional shares of common stock, as well as classes or series of preferred
stock, generally without any action on the part of the stockholders. In addition, the board has the power, generally without stockholder
approval, to set the terms of any such classes or series of preferred stock that may be issued, including voting rights, dividend rights
and preferences over the common stock with respect to dividends or upon the liquidation, dissolution or winding-up of our business
and other terms. If we issue preferred stock in the future that has a preference over the common stock with respect to the payment of
dividends or upon liquidation, dissolution or winding-up, or if we issue preferred stock with voting rights that dilute the voting power
of the common stock, the rights of holders of the common stock or the market value of the common stock could be adversely affected.
Regulatory and contractual restrictions may limit or prevent us from paying dividends on and repurchasing our common
stock.
Great Southern Bancorp, Inc. is an entity separate and distinct from its principal subsidiary, Great Southern Bank, and derives
substantially all of its revenue in the form of dividends from that subsidiary. Accordingly, Great Southern Bancorp, Inc. is and will be
dependent upon dividends from the Bank to pay the principal of and interest on its indebtedness, to satisfy its other cash needs and to
pay dividends on its common stock. The Bank’s ability to pay dividends is subject to its ability to earn net income and to meet certain
regulatory requirements. In the event the Bank is unable to pay dividends to Great Southern Bancorp, Inc., Great Southern
Bancorp, Inc. may not be able to pay dividends on its common stock. Also, Great Southern Bancorp, Inc.’s right to participate in a
distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary’s creditors.
As described below in the next risk factor, the terms of our outstanding junior subordinated debt securities prohibit us from paying
dividends on or repurchasing our common stock at any time when we have elected to defer the payment of interest on such debt
securities or certain events of default under the terms of those debt securities have occurred and are continuing. These restrictions
could have a negative effect on the value of our common stock. Moreover, holders of our common stock are entitled to receive
dividends only when, as and if declared by our board of directors. Although we have historically paid cash dividends on our common
stock, we are not required to do so and our board of directors could reduce, suspend or eliminate our common stock cash dividend in
the future.
If we defer payments of interest on our outstanding junior subordinated debt securities or if certain defaults relating to those
debt securities occur, we will be prohibited from declaring or paying dividends or distributions on, and from making
liquidation payments with respect to, our common stock.
As of December 31, 2024, we had outstanding $25.8 million aggregate principal amount of junior subordinated debt securities issued
in connection with the sale of trust preferred securities by one of our subsidiaries that is a statutory business trust. We have also
guaranteed those trust preferred securities. The indenture governing the junior subordinated debt securities, together with the related
guarantee, prohibits us, subject to limited exceptions, from declaring or paying any dividends or distributions on, or redeeming,
repurchasing, acquiring or making any liquidation payments with respect to, any of our capital stock (including any preferred stock
and our common stock) at any time when (i) there shall have occurred and be continuing an event of default under the indenture or any
event, act or condition that with notice or lapse of time or both would constitute an event of default under the indenture; or (ii) we are
in default with respect to payment of any obligations under the related guarantee; or (iii) we have deferred payment of interest on the
junior subordinated debt securities. In that regard, we are entitled, at our option but subject to certain conditions, to defer payments of
interest on the junior subordinated debt securities from time to time for up to five years.
Events of default under the indenture generally consist of our failure to pay interest on the junior subordinated debt securities under
certain circumstances, our failure to pay any principal of or premium on the junior subordinated debt securities when due, our failure
to comply with certain covenants under the indenture, and certain events of bankruptcy, insolvency or liquidation relating to us or the
Bank.
As a result of these provisions, if we were to elect to defer payments of interest on the junior subordinated debt securities, or if any of
the other events described in clause (i) or (ii) of the first paragraph of this risk factor were to occur, we would be prohibited from
declaring or paying any dividends on our stock, from redeeming, repurchasing or otherwise acquiring any of our stock, and from
making any payments to holders of our stock in the event of our liquidation, which would likely have a material adverse effect on the
market value of our common stock. Moreover, without notice to or consent from our stockholders, we may issue additional series of
junior subordinated debt securities in the future with terms similar to those of our existing junior subordinated debt securities or enter
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into other financing agreements that limit our ability to purchase or to pay dividends or distributions on our capital stock, including
our common stock.
The voting limitation provision in our charter could limit your voting rights as a holder of our common stock.
Our charter provides that any person or group who acquires beneficial ownership of our common stock in excess of 10.0% of the
outstanding shares may not vote the excess shares. Accordingly, if you acquire beneficial ownership of more than 10.0% of the
outstanding shares of our common stock, your voting rights with respect to the common stock will not be commensurate with your
economic interest in the Company.
Anti-takeover provisions could adversely impact our stockholders.
Provisions in our charter and bylaws, the corporate law of the state of Maryland and federal regulations could delay or prevent a third
party from acquiring us, despite the possible benefit to our stockholders, or otherwise adversely affect the market price of any class of
our equity securities, including our common stock. These provisions include: a prohibition on voting shares of common stock
beneficially owned in excess of 10% of total shares outstanding, supermajority voting requirements for certain business combinations
with any person who beneficially owns 10% or more of our outstanding common stock; the election of directors to staggered terms of
three years; advance notice requirements for nominations for election to our board of directors and for proposing matters that
stockholders may act on at stockholder meetings, a requirement that only directors may fill a vacancy in our board of directors, and
supermajority voting requirements to remove any of our directors. Our charter also authorizes our board of directors to issue preferred
stock, and preferred stock could be issued as a defensive measure in response to a takeover proposal. In addition, because we are a
bank holding company, purchasers of 10% or more of our common stock may be required to obtain approvals under the Change in
Bank Control Act of 1978, as amended, or the Bank Holding Company Act of 1956, as amended (and in certain cases such approvals
may be required at a lesser percentage of ownership). Specifically, under regulations adopted by the Federal Reserve Board, (a) any
other bank holding company may be required to obtain the approval of the Federal Reserve Board to acquire or retain 5% or more of
our common stock and (b) any person other than a bank holding company may be required to obtain the approval of the Federal
Reserve Board to acquire or retain 10% or more of our common stock.
These provisions may discourage potential takeover attempts, discourage bids for our common stock at a premium over market price
or adversely affect the market price of, and the voting and other rights of the holders of, our common stock. These provisions also
could discourage proxy contests and make it more difficult for holders of our common stock to elect directors other than the
candidates nominated by our board of directors.
Three members of the Turner family may exert substantial influence over the Company through their board and management
positions and their ownership of the Company’s stock.
The Company’s Chairman of the Board, William V. Turner, and the Company’s Director, President and Chief Executive Officer,
Joseph W. Turner, are father and son, respectively. Julie Turner Brown, a director of the Company, is the sister of Joseph Turner and
the daughter of William Turner. These three Turner family members hold three of the Company’s ten Board positions. As of
December 31, 2024, they also collectively beneficially owned approximately 2,089,498 shares of the Company’s common stock
(excluding 82,402 shares underlying stock options exercisable as of or within 60 days after that date), representing approximately
17.8% of total shares outstanding, though they are subject to the voting limitation provision in our charter which precludes any person
or group with beneficial ownership in excess of 10% of total shares outstanding from voting shares in excess of that threshold.
Through their board and management positions and their ownership of the Company’s stock, these three members of the Turner
family may exert substantial influence over the direction of the Company and the outcome of Board and stockholder votes.
In addition to the Turner family members, we are aware of other beneficial owners of more than five percent of the
outstanding shares of our common stock. One of these beneficial owners is also a director of the Company.
As of December 31, 2024, one of the Company’s directors, Earl A. Steinert, beneficially owned 939,596 shares of our common stock
(excluding 4,000 shares underlying stock options exercisable as of or within 60 days after that date), representing approximately 8.0%
of total shares outstanding. The shares that can be voted by the Turner family members (1,172,355 shares as of December 31, 2024,
per the ten percent voting limitation in our charter) and the shares beneficially owned by Mr. Steinert (939,596) total 2,111,951,
representing approximately 18.0% of total shares outstanding. While they have no agreement to do so, to the extent they vote in the
same manner, these stockholders may be able to exercise influence over the management and business affairs of our Company. For
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example, using their collective voting power, these stockholders may be able to affect the outcome of director elections or block
significant transactions, such as a merger or acquisition, or any other matter that might otherwise be favored by other stockholders.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.
ITEM 1C.
CYBERSECURITY
Cybersecurity and Risk Management
The Company’s cybersecurity risk management processes are integrated into the overall risk management process managed by the
Chief Risk Officer through reporting of cyber risks to the Information Security Steering Committee (ISSC). The cybersecurity risk
management processes will be transitioned under the Chief Information Officer’s division for the 2025 year. The ISSC is chaired by
the Managing Director of Information Security, who has 18 years of information technology (IT) and information security experience
in the financial services industry. Key metrics are monitored on an ongoing basis by the IT Risk Management and IT Security teams,
with oversight by the ISSC. IT Risk Management performs regular information security-focused risk assessments, including but not
limited to assessments based on the Center for Information Security Controls Self-Assessment Tool and Ransomware Self-Assessment
Tool aligned to the Federal Financial Institutions Examination Council standards.
IT Risk Management maintains processes for prevention, detection, and mitigation of cybersecurity incidents. The Company
maintains an Incident Response Plan (IRP) that covers response and remediation processes for managing cybersecurity incidents. The
Incident Response Team (IRT) members include senior management and other relevant personnel, with defined roles and
responsibilities. IRP metrics related to monitoring and detection are presented to the ISSC and reported to the board. The IRT is
notified of all incidents, and incidents are elevated to the board when warranted.
Engagement of Third Parties
The Company utilizes third parties for some cybersecurity services, including but not limited to managed security services, external
and internal penetration testing, social engineering tests, third party risk reviews and tabletop exercises.
Oversight and Identification of Risks Associated with Third Parties
Third Party Risk Management, a component of IT Risk Management, reviews new vendors prior to onboarding to oversee and identify
potential risks and performs ongoing monitoring of emerging risks related to third-party service providers. Third-party service
provider reviews include completion of a standardized questionnaire and risk reviews for financial, reputation, information security,
cybersecurity, and business resiliency risk. These reviews are reported to the Information Technology Steering Committee (ITSC) for
approval of new applications. The ITSC is chaired by the Chief Information Officer, who has more than 20 years’ experience in IT
management and cybersecurity, predominantly in the financial services industry. IT Risk Management performs contract reviews for
security controls and notification processes. IT Risk Management also conducts annual IT risk assessments on critical and high risk
applications.
Risks from Cybersecurity Threats
In the last fiscal year, the Company did not experience any material cybersecurity incidents. For additional discussion of
cybersecurity-related risks facing the Company, see Item 1A. Risk Factors.
Board Oversight
In connection with the board’s oversight of risk management, cybersecurity updates are provided to the board at least quarterly,
including, but not limited to, the following materials: Annual Gramm-Leach-Bliley Act Information Security Program (ISP) Report,
IT Risk Management and IT Security Metrics, Penetration Testing and Tabletop Exercise updates, IT Risk Assessments, Disaster
Recovery Test Results, Third Party Risk Management Metrics, Incident Response Metrics, Security Awareness Training Metrics and
additional cybersecurity education topics.
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ITEM 2.
PROPERTIES.
The Company’s corporate offices and operations center are located in Springfield, Missouri. At December 31, 2024, the Company
operated 89 retail banking centers and over 200 automated teller machines (“ATMs”) in Missouri, Iowa, Minnesota, Kansas, Nebraska
and Arkansas. Of the 90 banking centers, the Company owns 86 of its locations and four were leased for various terms. The majority
of our banking center locations are in southwest and central Missouri, including the Springfield, Missouri metropolitan area, with
additional concentrations in the Sioux City, Iowa; Des Moines, Iowa; Quad Cities, Iowa; Minneapolis; St. Louis and Kansas City,
Missouri metropolitan areas. The ATMs are located at various banking centers and primarily convenience stores and retail centers
located throughout southwest and central Missouri. At December 31, 2024, the Company also operated seven commercial loan
production offices and one mortgage loan production office. The Company owns one of its loan production office locations and seven
locations are leased. All buildings that are owned are owned free of encumbrances or mortgages. In the opinion of management, the
Company’s facilities are adequate and suitable for the Company’s needs. The aggregate net book value of the Company’s premises
and equipment was $132.5 million and $138.6 million at December 31, 2024 and 2023, respectively. See also Note 5 of the
accompanying audited financial statements, which are included in Item 8 of this Report.
ITEM 3.
LEGAL PROCEEDINGS.
In the normal course of business, the Company and its subsidiaries are subject to pending and threatened legal actions, some of which
seek substantial relief or damages. While the ultimate outcome of such legal proceedings cannot be predicted with certainty, after
reviewing pending and threatened litigation with counsel, management currently believes that the outcome of such litigation will not
have a material adverse effect on the Company’s business, financial condition or results of operations.
Great Southern has previously reported certain issues and contractual disputes regarding its proposed conversion to a new core
banking platform to be delivered by a third-party vendor. This ultimately led to Great Southern terminating the Master Agreement
with the third-party vendor and initiating litigation against them, with the third-party vendor filing a counterclaim against Great
Southern.
In December 2024, an agreement in principle was reached between Great Southern and the third-party vendor whereby the Master
Agreement would be terminated and the parties’ card servicing agreement would be continued and expanded. Great Southern recorded
a $2.0 million accrued expense for 2024 in connection with these developments. However, at this time, no assurance can be given as
to when or whether final agreements will be executed and a full settlement of the matter will be achieved.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
ITEM 4A.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
Pursuant to General Instruction G(3) of Form 10-K and the instruction to Item 401 of Regulation S-K, the following information is
furnished in lieu of being included in the Registrant’s definitive proxy statement.
The following information as to the business experience during the past five years is supplied with respect to executive officers of the
Company and its subsidiaries who are not directors of the Company. There are no arrangements or understandings between the
persons named and any other person pursuant to which such officers were selected. The executive officers are elected annually and
serve at the discretion of the respective Boards of Directors of the Company and its subsidiaries. Unless specifically indicated, each
individual has held his current position for at least five years.
Kevin L Baker. Mr. Baker, age 57, is Vice President and Chief Credit Officer of the Bank. He joined the Bank in 2005 and is
responsible for the overall credit approval process, the commercial and consumer loan collection process and the loan documentation
and servicing processes. Prior to joining the Bank, Mr. Baker was a lending officer at a commercial bank.
John M. Bugh. Mr. Bugh, age 57, is Vice President and Chief Lending Officer of the Bank. He joined the Bank in 2011 and is in
charge of all loan production for the Bank, including commercial, residential and consumer loans. Prior to joining the Bank, Mr. Bugh
was a lending officer at other commercial banks and was an examiner for the FDIC.
75
Rex A. Copeland. Mr. Copeland, age 60, is Treasurer of the Company and Senior Vice President and Chief Financial Officer of the
Bank. He joined the Bank in 2000 and is responsible for the financial functions of the Company, including the internal and external
financial reporting of the Company and its subsidiaries. Mr. Copeland previously practiced as a Certified Public Accountant. Prior to
joining the Bank, Mr. Copeland served other financial services companies in the areas of corporate accounting, internal audit and
independent public accounting.
Mark A. Maples. Mr. Maples, age 61, is Assistant Secretary of the Company, Vice President and Chief Operations Officer of the
Bank, Bank Secrecy Act Officer. He joined the Bank in 2005 and is responsible for all operations functions of the Bank. Prior to
assuming his current responsibilities in 2021, Mr. Maples most recently served as the Managing Director of BSA and Loss Prevention
of the Bank since 2006. Prior to joining the Bank, Mr. Maples, who has been in the banking industry since 1982, held leadership roles
at other commercial financial institutions with experience in retail, data/item processing, compliance/risk management and deposit
operations.
PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
The Company’s common stock is listed on The NASDAQ Global Select Market under the symbol “GSBC.”
As of December 31, 2024, there were 11,723,548 total shares of common stock outstanding and approximately 2,000 stockholders of
record.
The Company’s ability to pay dividends is substantially dependent on the dividend payments it receives from the Bank. For a
description of the regulatory restrictions on the ability of the Bank to pay dividends to the Company, and the ability of the Company to
pay dividends to its stockholders, see “Item 1. Business – Government Supervision and Regulation – Dividends.”
Stock Repurchases
On December 21, 2022, the Company’s Board of Directors authorized management to repurchase up to 1,000,000 shares of the
Company’s outstanding common stock, under a program of open market purchases or privately negotiated transactions. This program
does not have an expiration date. The authorization of this program became effective in April 2023, upon completion of the previously
authorized repurchase program.
From time to time, the Company may utilize a pre-arranged trading plan pursuant to Rule 10b5-1 under the Securities Exchange Act
of 1934 to repurchase its shares under its repurchase programs.
As indicated below, the Company repurchased the following shares of its common stock during the three months ended December 31,
2024.
Total Number
Maximum
of Shares
Number of
Total Number
Average
Purchased as
Shares that May
of Shares
Price
Part of Publicly
Yet Be Purchased
Purchased
Per Share
Announced Program
Under the Program (1)
October 1, 2024 – October 31, 2024
4,100
$
56.325
4,100
483,679
November 1, 2024 – November 30, 2024
5,500
56.838
5,500
478,179
December 1, 2024 – December 31, 2024
34,950
61.814
34,950
443,229
44,550
60.694
44,550
(1) Amount represents the number of shares available to be repurchased under the then-current program as of the last calendar day of
the month shown.
76
ITEM 6.
RESERVED
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following 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 Mazars, LLP. See Item 8. “Financial Statements and Supplementary Information.” Results for past
periods are not necessarily indicative of results that may be expected for any future period.
December 31,
2024
2023
2022
2021
2020
(Dollars In Thousands)
Summary Statement of Financial Condition Information:
Assets
$ 5,981,628
$ 5,812,402
$ 5,680,702
$ 5,449,944
$ 5,526,420
Loans receivable, net
4,697,330
4,595,469
4,511,647
4,016,235
4,314,584
Allowance for credit losses on loans
64,760
64,670
63,480
60,754
55,743
Available-for-sale securities
533,373
478,207
490,592
501,032
414,933
Held-to-maturity securities
187,433
195,023
202,495
—
—
Other real estate and repossessions, net
5,993
23
233
2,087
1,877
Deposits
4,605,549
4,721,708
4,684,910
4,552,101
4,516,903
Total borrowings and other interest- bearing liabilities
679,341
423,806
366,481
238,713
339,863
Stockholders’ equity (retained earnings substantially
restricted)
599,568
571,829
533,087
616,752
629,741
Common stockholders’ equity
599,568
571,829
533,087
616,752
629,741
Average loans receivable
4,716,533
4,631,856
4,386,042
4,274,176
4,399,259
Average total assets
5,886,214
5,719,196
5,519,790
5,502,356
5,323,426
Average deposits
4,681,660
4,754,310
4,607,363
4,539,740
4,330,271
Average stockholders’ equity
585,960
550,920
565,173
627,516
622,437
Number of deposit accounts
228,885
230,697
232,688
229,942
229,470
Number of full-service offices
89
90
92
93
94
77
For the Year Ended December 31,
2024
2023
2022
2021
2020
(In Thousands)
Summary Statement of Income Information:
Interest income:
Loans
$ 297,176
$ 271,952
$ 205,751
$ 186,269
$ 204,964
Investment securities and other
27,522
24,883
21,226
12,404
12,739
324,698
296,835
226,977
198,673
217,703
Interest expense:
Deposits
109,705
88,757
20,676
13,102
32,431
Securities sold under reverse repurchase agreements
1,407
1,205
324
37
31
Short-term borrowings, overnight FHLBank borrowings and
other interest-bearing liabilities
18,222
7,500
1,066
—
644
Subordinated debentures issued to capital trust
1,798
1,736
875
448
628
Subordinated notes
4,423
4,422
4,422
7,165
6,831
135,555
103,620
27,363
20,752
40,565
Net interest income
189,143
193,215
199,614
177,921
177,138
Provision (credit) for credit losses on loans
1,700
2,250
3,000
(6,700)
15,871
Provision (credit) for unfunded commitments
1,016
(5,329)
3,187
939
—
Net interest income after provision (credit) for credit losses and
provision (credit) for unfunded commitments
186,427
196,294
193,427
183,682
161,267
Non-interest income:
Commissions
1,227
1,153
1,208
1,263
892
Overdraft and insufficient funds fees
5,140
7,617
7,872
6,686
6,481
POS and ATM fee income and service charges
13,586
14,346
15,705
15,029
12,203
Net gain on loan sales
3,779
2,354
2,584
9,463
8,089
Net realized gain (loss) on sales of available-for-sale securities
—
—
(130)
—
78
Late charges and fees on loans
512
786
1,182
1,434
1,419
Gain (loss) on derivative interest rate products
(58)
(337)
321
312
(264)
Other income
6,379
4,154
5,399
4,130
6,152
30,565
30,073
34,141
38,317
35,050
Non-interest expense:
Salaries and employee benefits
78,599
78,521
75,300
70,290
70,810
Net occupancy and equipment expense
32,118
30,834
28,471
29,163
27,582
Postage
3,329
3,590
3,379
3,164
3,069
Insurance
4,622
4,542
3,197
3,061
2,405
Advertising
3,124
3,396
3,261
3,072
2,631
Office supplies and printing
1,008
1,057
867
848
1,016
Telephone
2,772
2,730
3,170
3,458
3,794
Legal, audit and other professional fees
5,399
7,086
6,330
6,555
2,378
Expense (income) on other real estate and repossessions
(304)
311
359
627
2,023
Acquired intangible asset amortization
433
286
768
863
1,154
Other operating expenses
10,395
8,670
8,264
6,534
6,363
141,495
141,023
133,366
127,635
123,225
Income before income taxes
75,497
85,344
94,202
94,364
73,092
Provision for income taxes
13,690
17,544
18,254
19,737
13,779
Net income
$
61,807
$
67,800
$
75,948
$
74,627
$
59,313
78
At or For the Year Ended December 31,
2024
2023
2022
2021
2020
(Number of Shares In Thousands)
Performance Data and Ratios:
Per Common Share Data:
Basic earnings per common share
$
5.28
$
5.65
$
6.07
$
5.50
$
4.22
Diluted earnings per common share
5.26
5.61
6.02
5.46
4.21
Cash dividends declared
1.60
1.60
1.56
1.40
2.36
Book value per common share
51.14
48.44
43.58
46.98
45.79
Average shares outstanding
11,695
11,992
12,517
13,558
14,043
Year-end actual shares outstanding
11,724
11,804
12,231
13,128
13,753
Average fully diluted shares outstanding
11,755
12,080
12,607
13,674
14,104
Earnings Performance Ratios:
Return on average assets(1)
1.05 %
1.19 %
1.38 %
1.36 %
1.11 %
Return on average stockholders’ equity(2)
10.55
12.31
13.44
11.89
9.53
Non-interest income to average total assets
0.52
0.53
0.62
0.70
0.66
Non-interest expense to average total assets
2.40
2.47
2.42
2.32
2.31
Average interest rate spread(3)
2.76
2.97
3.59
3.22
3.23
Year-end interest rate spread
2.86
2.78
3.63
3.20
3.08
Net interest margin(4)
3.42
3.57
3.80
3.37
3.49
Efficiency ratio(5)
64.40
63.16
57.05
59.03
58.07
Net overhead ratio(6)
1.88
1.94
1.80
1.62
1.66
Common dividend pay-out ratio(7)
30.42
28.52
25.91
25.64
56.06
Asset Quality Ratios (8):
Allowance for credit losses/year-end loans
1.36 %
1.39 %
1.39 %
1.49 %
1.32 %
Non-performing assets/year-end loans and foreclosed assets
0.20
0.25
0.08
0.15
0.09
Allowance for credit losses/non-performing loans
1,812.48
550.48
1,729.69
1,120.31
1,831.86
Net charge-offs/average loans
0.03
0.02
0.01
0.00
0.01
Gross non-performing assets/year end assets
0.16
0.20
0.07
0.11
0.07
Non-performing loans/year-end loans
0.07
0.25
0.08
0.13
0.07
Balance Sheet Ratios:
Loans to deposits
101.99 %
97.33 %
96.30 %
88.23 %
95.52 %
Average interest-earning assets as a percentage of average interest-
bearing liabilities
126.98
131.11
140.32
139.94
132.49
Capital Ratios:
Average common stockholders’ equity to average assets
10.0 %
9.6 %
10.2 %
11.4 %
11.7 %
Year-end tangible common stockholders’ equity to tangible assets(9)
9.9
9.7
9.2
11.2
11.3
Great Southern Bancorp, Inc.:
Tier 1 capital ratio
12.8
12.4
11.0
13.4
12.7
Total capital ratio
15.4
15.2
13.5
16.3
17.2
Tier 1 leverage ratio
11.2
11.0
10.6
11.3
10.9
Common equity Tier 1 ratio
12.3
11.9
10.6
12.9
12.2
Great Southern Bank:
Tier 1 capital ratio
12.6
13.1
11.9
14.1
13.7
Total capital ratio
13.9
14.3
13.1
15.4
14.9
Tier 1 leverage ratio
11.0
11.6
11.5
11.9
11.8
Common equity Tier 1 ratio
12.6
13.1
11.9
14.1
13.7
(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 interest-bearing liabilities.
(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 average total assets.
(7)
Cash dividends per common share divided by earnings per common share.
(8)
Prior to January 1, 2021, these ratios excluded FDIC-assisted acquired loans.
(9)
Non-GAAP Financial Measure. For additional information, including a reconciliation to GAAP, see “– Non-GAAP Financial Measures.”
79
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, might be greater than expected; (ii) changes in economic conditions, either nationally or in the Company’s market
areas; (iii) the effects of any new or continuing public health issues on general economic and financial market conditions; (iv)
fluctuations in interest rates, the effects of inflation or a potential recession, whether caused by Federal Reserve actions or otherwise;
(v) the impact of bank failures or adverse developments at other banks and related negative press about the banking industry in general
on investor and depositor sentiment; (vi) slower economic growth caused by changes in energy prices, supply chain disruptions or
other factors; (vii) 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; (viii) the possibility of realized or unrealized
losses on securities held in the Company’s investment portfolio; (ix) the Company’s ability to access cost-effective funding and
maintain sufficient liquidity; (x) fluctuations in real estate values and both residential and commercial real estate market conditions;
(xi) the ability to adapt successfully to technological changes to meet customers’ needs and developments in the marketplace; (xii) 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; (xiii) legislative or regulatory changes that
adversely affect the Company’s business; (xiv) changes in accounting policies and practices or accounting standards; (xv) 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; (xvi) costs and effects of litigation, including settlements and judgments; (xvii) competition;
and (xviii) 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 the Company’s
most recent Annual Report on Form 10-K, including, without limitation, those described under “Item 1A. Risk Factors,” subsequent
Quarterly Reports on Form 10-Q and other documents filed or furnished from time to time by the Company with the SEC (which are
available on our website at www.greatsouthernbank.com and the SEC’s website at www.sec.gov), 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.
Critical Accounting Policies, Judgments and Estimates
The accounting and financial reporting policies of the Company conform to 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
On January 1, 2021, the Company adopted the new accounting standard related to the allowance for credit losses. This standard
eliminates the probable initial recognition threshold in GAAP and, instead, requires an entity to reflect its current estimate of all
80
expected credit losses. See Note 3 to the accompanying financial statements contained in Item 8 of this Report for additional
information.
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 loans with a
balance of $100,000 or more, 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, 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 using a straight-line method. The forecast-adjusted loss rate is applied to the principal balance over the remaining contractual
lives, adjusted for expected prepayments. The contractual term excludes expected extensions, renewals and modifications.
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.
See Note 3 “Loans and Allowance for Credit Losses” to the accompanying financial statements for additional information regarding
the allowance for credit losses. Inherent in this process is the evaluation and risk assessment of individual credit relationships. From
time to time, certain credit relationships may deteriorate due to changes in payment performance, cash flow of the borrower, value of
collateral, or other factors. Due to these changing circumstances, management may revise its loss estimates and assumptions for these
specific credits. In some cases, 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.
In addition, the Company recognizes that the determination of the valuation 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 sale 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 sale of the assets could differ materially from the carrying value reflected in
the financial statements, resulting in gains or losses that could materially impact earnings in future periods.
Goodwill and Intangible Assets
Goodwill and intangible assets that have indefinite useful lives are subject to an impairment test at least annually and more frequently
if circumstances indicate their value may not be recoverable. Goodwill is tested for impairment using a process that estimates the fair
value of each of the Company’s reporting units compared with its carrying value. The Company defines reporting units as a level
below each of its operating segments for which there is discrete financial information that is regularly reviewed. As of December 31,
2024, the Company had one reporting unit to which goodwill has been allocated – the Bank. If the fair value of a reporting unit
exceeds its carrying value, then no impairment is recorded. If the carrying value exceeds the fair value of a reporting unit, further
testing is completed comparing the implied fair value of the reporting unit’s goodwill to its carrying value to measure the amount of
impairment. Intangible assets that are not amortized are tested for impairment at least annually by comparing the fair values of those
assets to their carrying values. At December 31, 2024, goodwill consisted of $5.4 million at the Bank reporting unit, which included
goodwill of $4.2 million that was recorded during 2016 related to the acquisition of 12 branches and the assumption of related deposits
in the St. Louis market. Other identifiable deposit intangible assets that are subject to amortization are amortized on a straight-line
basis over a period of seven years and have been fully amortized.
81
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 naming rights intangible assets through non-interest expense over a period not to exceed 15 years.
At December 31, 2024, the amortizable intangible assets consisted of the arena naming rights of $4.7 million. The 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 to the accompanying audited financial statements for additional information.
Based on the Company’s qualitative goodwill impairment testing, management does not believe any of the Company’s goodwill or
other intangible assets were impaired as of December 31, 2024. While management believes no impairment existed at December 31,
2024, 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 Company’s financial statements to
change rapidly, resulting in material future adjustments to 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, sporting events, retail shops, personal services, and more.
More than 22 million jobs were lost in March and April 2020 as businesses closed their doors or reduced their operations, sending
employees home on furlough or layoffs. 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 intended to
help keep employees on their payroll, fueling a historic bounce-back in economic activity.
Total fiscal support to the economy throughout the pandemic, including the CARES Act, 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 the level of support provided during the global financial crisis of 2007-2008.
Additionally, the Federal Reserve acted decisively by slashing its benchmark interest rate to near zero and ensuring credit availability
to businesses, households, and municipal governments. The Federal Reserve’s efforts largely insulated the financial system from the
problems in the economy, a significant difference from the financial crisis of 2007-2008. Purchases of Treasury and agency mortgage-
backed securities totaling $120 billion each month by the Federal Reserve commenced shortly after the pandemic began. In November
2021, the Federal Reserve 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 government deficit was $2.8 trillion in fiscal 2021, close to $1.4 trillion in fiscal
2022, and $1.7 trillion in fiscal 2023. The Federal Reserve aggressively raised the federal funds interest rates from early 2022 through
mid-2023, pushing the federal funds rate to more than 5.50%, its highest level in 22 years.
The Federal Reserve’s actions were motivated by surging inflation in 2021 caused by pandemic-fueled spending, which outpaced the
ability of producers to supply goods and services after having been impacted by COVID-related shutdowns and clogged transportation
systems. The Federal Reserve made some headway in its attempt to force inflation down. The personal consumption expenditures
(PCE) price index, the Federal Reserve’s preferred measure of inflation, eased from its peak of 7.1% in June 2022 to 2.9% in
December 2023. Core PCE, which excludes food and energy prices, was 2.8% at December 31, 2024, above the Federal Reserve’s
target of 2%.
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Based on Moody’s U.S. Baseline Outlook and Alternative Scenarios Analysis dated January 2025, real GDP in 2025 is projected to be
2.2% on an annual average basis, which is unchanged from the projection in December 2024. GDP is projected to grow 1.7% in 2026
and 1.9% in 2027, before returning to trend in 2028. Consumer spending remained an important source of growth, along with exports,
nonresidential investment both federal and state, and local spending.
Employment
The national unemployment rate was unchanged compared to the previous quarter end at 4.1% for both December 2024 and
September 2024. The number of unemployed individuals was 6.9 million as of December 2024 with 256,000 jobs added in December
2024. In December 2024, the healthcare, retail trade, government, social assistance, and leisure and hospitality areas contributed to the
188,000 of total job gains.
As of December 2024, the labor force participation rate (the share of working-age Americans employed or actively looking for a job)
remained stable at 62.5%. The unemployment rate for the Midwest, where the Company conducts most of its business, increased from
3.6% in December 2023 to 4.1% in December 2024. Unemployment rates for December 2024 in the states where the Company has a
branch or a loan production office were: Arizona at 3.8%, Arkansas at 3.4%, Colorado at 4.4%, Georgia at 3.7%, Illinois at 5.2%,
Iowa at 3.2%, Kansas at 3.6%, Minnesota at 3.3%, Missouri at 3.7%, Nebraska at 2.8%, North Carolina at 3.7%, and Texas at 4.2%.
These rates are slightly higher for a majority of the states compared to September 2024.
Single Family Housing
Existing-home sales increased by 2.2% in December 2024 to a seasonally adjusted annual rate of 4.24 million, up 9.3% from the
previous year. In the Midwest, existing-home sales fell 1.0% in December 2024 to an annual rate of 990,000, up 6.5% from one year
earlier.
The median existing-home sales price rose 6.0% from December 2023 to $404,400 in December 2024, which is the 18th consecutive
month of year-over-year price increases. The median price in the Midwest was $298,600, up 9.0% from December 2023. All regions
reported median price increases when compared to the prior year.
Total housing inventory registered at the end of December 2024 was 1.15 million units, down 13.5% from November 2024 and up
16.2% from 1.0 million at the end of December 2023. Unsold inventory sat at a 3.3-month supply at the end of December 2024, up
from 3.1 months at the end of December 2023.
New home construction dropped precipitously after the financial crisis of 2007-2008 and has yet to fully recover. Issues contributing
to the country’s current housing shortage include increasing labor and materials costs, availability of building materials, increased
interest rates and tighter lending underwriting standards. Single-family housing starts in December 2024 were at a rate of 1.05 million;
3.3% above the revised November 2024 figure of 1.02 million.
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Census Bureau and the Department of Housing and Urban Development. This was 3.6% above the November 2024 rate of 674,000
and 6.7% above the December 2023 rate of 654,000.
The median sales price of new houses sold in December 2024 was $427,000, in line with the $428,600 reported in December 2023.
The average sales price in December 2024 of $513,600 was down from $514,000 in December 7KHVHDVRQDOO\ဨDGMXVWHGHVWLPDWH
of new houses for sale at the end of December 2024 was 494,000. This represented a supply of 8.5 months at the current sales rate.
According to Freddie Mac, the average commitment rate for a 30-year, fixed-rate mortgage was 6.95% as of January 31, 2025 which
was up from 6.63% one year ago.
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Other Residential (Multi-Family) Housing and Commercial Real Estate
The U.S. multi-family market experienced a continued strong recovery in demand through 2024, driven by stable economic growth
plus a continued slowing of renter households making the jump to ownership and creating fewer units to backfill. Despite the notable
growth in demand in 2024, the influx of new supply continued to saturate the market. The gap closed significantly in the second half
of 2024. In the fourth quarter of 2024, the supply/demand gap only totaled 24,000 units, the smallest amount since the end of 2021.
Most new supply additions are concentrated at the 4 and 5 Star price point, contributing to the weakest rent growth observed in this
level of the market. Consequently, the persistent imbalance between supply and demand stabilized the vacancy rate in the fourth
quarter of 2024 at 8%.
CoStar reported, nationally, absorption continued to accelerate in the fourth quarter of 2024, offering the market an opportunity to
stabilize and possibly begin recovering. The year ended December 31, 2024 saw 553,000 units absorbed, which was the strongest year
since 2021. Despite this demand, 677,000 new units were completed in 2024, which completes three years in a row in which supply
outpaced demand. Forecasts for 2025 show demand finally outpacing deliveries, which positions the market to see the vacancy rate
begin declining. The 4 & 5 Star segment exhibited the weakest performance, at 0.2%, a slight improvement from the negative or zero
year-over-year rent growth experienced over the past year due to increasing vacancies.
The Midwest and Northeast regions have fared the best over the past two years in terms of rent growth. Deliveries in the Midwest for
2024 were only 22,000 units higher than in 2019. This controlled increase in projected new supply is expected to keep Midwestern
markets more balanced, thereby avoiding the oversupply conditions that contributed to weaker rent growth in the Sun Belt. At the
market level, projections suggest that all but 2 major markets, Austin and San Antonio, will return to positive rent growth by the end
of 2025. Kansas City was one of the metropolitan areas with the most robust rent growth at the end of 2024.
The December 2024 national multi-family market vacancy rates were slightly higher than the previous quarter at 8%. Our market
areas reflected the following apartment vacancy levels as of December 2024: Springfield, Missouri at 5.9%, St. Louis at 9.9%, Kansas
City at 8.1%, Minneapolis at 7.6%, Dallas-Fort Worth at 11.2%, Chicago at 5.1%, Atlanta at 12.4%, Phoenix at 11.7%, Denver at
11.1% and Charlotte, North Carolina at 12.6%.
Absorption for the office industry was flat for 2024, and the vacancy rate has remained unchanged since September 2024 at 13.9%.
CoStar expects the vacancy rate to rise further before plateauing in 2026. Rents are expected to flatten out in the next 12 months
before beginning a recovery driven by stabilizing demand and a lack of relevant, competitive supply. Various indicators show office
attendance was still trending upward, albeit slowly. But while attendance was rising, office-using job growth had nearly stalled.
The stock of office space rose by about 25 million square feet in 2024 with a similar amount forecasted in 2025. The ongoing reset in
property values could lead to lower asking rates as more buildings transact at significant discounts to prior valuations. The national
trend showed a shrinking pipeline, as some cities, like Austin, TX, faced near-term supply pressure with only 3% of inventory
underway.
CoStar reported office asking rents have remained steady over the past four years, and said a combination of aggressive discounts by
new, low-basis owners, a looming lack of available space in premium new buildings, and an ongoing amount of sublease inventory is
expected to keep office asking rents flat for the next 12 to 18 months. With attendance rising only gradually and job growth stagnant,
there appears little likelihood of a dramatic change in demand conditions in the next 18-24 months.
As of December 2024, national office vacancy rates remained stable at 13.9% compared to September 2024, while our market areas
reflected the following vacancy levels: Springfield, Missouri at 4.2%, St. Louis at 9.7%, Kansas City at 11.2%, Minneapolis at 11.5%,
Dallas-Fort Worth at 18%, Chicago at 16.7%, Atlanta at 16.7%, Denver at 17.2%, Phoenix at 16.7% and Charlotte, North Carolina at
14.5%.
As of December 31, 2024, the U.S. retail market was in one of its firmest fundamental positions on record thanks to steadily rising
demand and limited new supply. However, there has been a sharp uptick in bankruptcies and store closures. At that date, there was just
501 million SF of space available for lease across the U.S., which was almost 125 million SF below the amount available for lease
during the height of the pandemic.
As transaction volumes trended higher, the rise in cap rates was settling down. Higher exit caps have made it more challenging for
developers to meet their proformas and an increasing number are choosing to hold instead of taking their assets to market. The shift in
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cap rates over the last two years was evident in the trend of single-tenant investment sales of net leased properties. Fewer buyers were
in the market, and investment opportunities continued to expand. Unanchored and open-air shopping centers have seen cap rates above
7%, occasionally climbing into the 8% to 9% range, depending on market specifics and the quality of the asset. However, the limited
new retail construction and historically low availability rates should limit any potential surge in vacancy rates in the event of a demand
pullback.
During the fourth quarter of 2024, national retail vacancy rates remained steady at 4.1% while our market areas reflected the following
vacancy levels: Springfield, Missouri at 2.0%, St. Louis at 4.2%, Kansas City at 3.8%, Minneapolis at 2.5%, Dallas-Fort Worth at
4.5%, Chicago at 4.6%, Atlanta at 3.8%, Phoenix at 4.9%, Denver at 3.8%, and Charlotte, North Carolina at 3.1%.
U.S. industrial market performance continued to downshift in the fourth quarter of 2024. While the national vacancy rate is not
expected to rise above its 20-year average of 7.0%, forecasts for 2025 could still prove challenging for the market. Net absorption has
remained positive but continued to lose steam, with early 2024 registering the lowest first quarter absorption tally since 2012. Net
absorption for 2024 was 101 million SF compared to 133 million SF for 2023. This weakness tied partly to recent 12-year lows in
home sales, which lowered sales of furniture, building materials, and appliances, leading to large distribution center closures by
tenants including Big Lots, Ashley Furniture, and Home Depot.
The prospect of escalating tariffs at home and abroad could make retailers hesitant to expand distribution networks until the threat of
additional trade barriers dissipates. Significant tariff increases would also force retailers to raise prices, decreasing the volume of
goods consumers are able to purchase. During November 2024, the CFO of Walmart, the third largest user of U.S. industrial space,
noted that tariffs “are inflationary for customers” and that “there probably will be cases where prices will go up for consumers.”
The U.S. industrial market is nearing the end of a record development surge. Higher interest rates have caused construction starts on
new industrial projects to fall over the past two years. Quarterly net supply additions are on pace to fall below the pre-pandemic three-
year average by mid-2025 and continue declining through at least 2026 when supply growth is set to hit an 11-year low. A gradual but
persistent decline in speculative development completions has already begun. As of December 31, 2024, the amount of vacant space
among existing Phoenix logistics properties 50,000 SF or larger has increased by 35 million SF, primarily due to speculative
development since 2019 pushing the vacancy rate among these buildings over 19%, while another 11 million SF worth of unleased
space remained under construction.
Nationally, year-over-year industrial rent growth decelerated over the past 12 months to 2.3%, a rate which was below the pre-
pandemic five-year average. In the near term, it is expected that rent growth will slow further in both the small bay and big box
logistics sectors. If net absorption can gradually increase, there is potential for rent growth to reaccelerate and return to the pre-
pandemic three-year average of 5.5% by 2026, given the limited amount of new supply that will likely be on track to be completed
during the year. However, big box logistics properties in markets most saturated with speculative development such as Austin,
Indianapolis, Greenville/Spartanburg, Phoenix, and San Antonio are most at risk of lagging in any developing rent recovery, either due
to slower asking rent increases or lingering, high levels of concessions.
For the fourth quarter of 2024, national industrial vacancy rates increased to 6.9%, from 6.8% for the third quarter of 2024. Our
market areas reflected the following industrial vacancy levels for the fourth quarter of 2024: Springfield, Missouri at 1.6%, St. Louis
at 4.0%, Kansas City at 5.2%, Minneapolis at 4.0%, Dallas-Fort Worth at 9.6%, Chicago at 5.5%, Atlanta at 8.1%, Phoenix at 12%,
Denver at 7.9% and Charlotte, North Carolina at 9.2%.
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 areas.
For discussion of the risk factors associated with multi-family and commercial real estate loans, see “Risk Factors – Risks Relating to
Lending Activities – Our loan portfolio possesses increased risk due to our relatively high concentration of commercial and residential
construction, commercial real estate, other residential (multi-family) and other commercial loans” and “Risk Factors – Risks Relating
to Regulation – We currently exceed thresholds defined in interagency guidance on commercial real estate concentrations, and as
such, we may incur additional expense or slow the growth of certain categories of commercial real estate lending.”
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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.
The Company’s total assets increased $169.2 million, or 2.9%, from $5.81 billion at December 31, 2023, to $5.98 billion at December
31, 2024. Full details of the current year changes in total assets are provided below, under “Comparison of Financial Condition at
December 31, 2024 and December 31, 2023.”
Loans. In the year ended December 31, 2024, the Company’s net loans increased $100.8 million, or 2.2%, from $4.59 billion at
December 31, 2023, to $4.69 billion at December 31, 2024. This increase was primarily in other residential (multi-family) loans
($607.2 million increase), which was partially offset by decreases in construction loans ($358.7 million decrease), commercial
business loans ($109.1 million decrease), and one- to four- family residential loans ($57.2 million decrease). The pipeline of loan
commitments remained strong at the end of 2024 and increased slightly compared to the end of 2023. The pipeline of the unfunded
portion of construction loans remained strong at the end of 2024 and decreased slightly compared to the end of 2023. As construction
projects were completed, the related loans were either paid off or moved from the construction category to the appropriate permanent
loan categories. As loan demand is affected by a variety of factors, including general economic conditions, and because of the
competition we face and our focus on pricing discipline and credit quality, no assurance can be given 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) loans 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, and Phoenix. Certain minimum underwriting standards and monitoring
help assure the Company’s portfolio quality. All new loan originations that exceed lender approval authorities are subject to review
and approval by Great Southern’s loan committee. 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 or used motor vehicles and these loans are subject to underwriting
standards designed to assure portfolio quality. In 2019, the Company discontinued indirect auto loan originations.
Of the total loan portfolio at December 31, 2024 and 2023, 92.1% and 89.5%, respectively, was secured by real estate, as this is the
Bank’s primary focus in its lending efforts. At December 31, 2024 and 2023, commercial real estate and commercial construction
loans (excluding multi-family loans) were 36.1% and 36.8% 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 both December 31, 2024 and 2023, loans made in the
Springfield, Missouri metropolitan statistical area (Springfield MSA) comprised 8% of the Bank’s total loan portfolio. The Company’s
headquarters are located in Springfield and we have operated in this market since 1923. Loans made in the St. Louis metropolitan
statistical area (St. Louis MSA) comprised 17% of the Bank’s total loan portfolio at both December 31, 2024 and 2023. 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
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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.”
The percentage of fixed-rate loans in our loan portfolio has been as much as 40% in recent years and was 37% as of December 31,
2024. 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, 2024, approximately 90%
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, 2024, our
interest rate risk models indicated a one-year interest rate earnings sensitivity position that is modestly 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, 2024 and 2023, 0.2% of our owner occupied one- to four-family residential loans had loan-to-value ratios above 100%
at origination. At December 31, 2024 and 2023, an estimated 0.4%, of total non-owner occupied one- to four-family residential loans
had loan-to-value ratios above 100% at origination.
The level of non-performing loans and foreclosed assets affects our net interest income and net income. We generally do not accrue
interest income on these loans and do not recognize interest income until the loans are repaid or interest payments have been made for
a period of time sufficient to provide evidence of performance on the loans. Generally, the higher the level of non-performing assets,
the greater the negative impact on interest income and net income.
Available-for-sale Securities. Available-for-sale securities increased $55.2 million, or 11.5%, from $478.2 million at December 31,
2023, to $533.4 million at December 31, 2024. The Company purchased some agency mortgage-backed securities in 2024 with
expected yields significantly in excess of the overall portfolio yield. For further information on investment securities, see Note 2 to the
accompanying financial statements contained in this Report.
Held-to-maturity Securities. Held-to-maturity securities decreased $7.6 million, or 3.9%, from $195.0 million at December 31, 2023,
to $187.4 million at December 31, 2024. For further information on investment securities, see Note 2 to the accompanying financial
statements contained in this Report.
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, 2024, total deposit balances
decreased $116.2 million, or 2.5%. Compared to December 31, 2023, transaction account balances decreased $54.3 million and retail
certificates of deposit decreased $172.4 million. The decrease in transaction accounts was primarily a result of a decrease in non-
interest-bearing accounts and various NOW accounts, as small businesses and individuals appear to be drawing down their balances to
pay for goods and services, or are seeking a higher-yielding alternative. Retail certificates of deposit decreased due to a decrease in
retail certificates generated through the banking center network and time deposits initiated through internet channels, which
experienced a planned decrease as part of the Company’s balance sheet management between funding sources. Brokered deposits,
including IntraFi program purchased funds, were $772.1 million at December 31, 2024, an increase of $110.6 million from $661.5
million at December 31, 2023. The Company uses brokered deposits of select maturities and interest rate characteristics 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 generate additional funding. The level of competition for deposits in our markets is high. It is our goal to gain deposit
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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 decreased $6.4 million, or 9.0%, from $70.8 million at December 31, 2023 to $64.4 million at December 31, 2024. These
balances fluctuate over time based on customer demand for this product.
Short-Term Borrowings and Other Interest-bearing Liabilities. The Company’s FHLBank term advances were $-0- at both
December 31, 2024 and December 31, 2023. At December 31, 2024 and 2023, overnight borrowings from the FHLBank were $333.0
million and $251.0 million, respectively, which are included in short-term borrowings.
Short-term borrowings and other interest-bearing liabilities increased $261.6 million from $252.6 million at December 31, 2023 to
$514.2 million at December 31, 2024. The Company may utilize overnight borrowings and short-term FHLBank advances, depending
on relative interest rates. In addition, in 2024, the Company utilized BTFP borrowings from FRBSTL.
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 SOFR, three-month 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 increases of 0.25% on eight additional occasions beginning December 14, 2016
and through December 31, 2018, with the Federal Funds rate reaching as high as 2.50%. After December 2018, the FRB paused its
rate increases and, in July, September and October 2019, implemented rate decreases of 0.25% on each of those occasions. At
December 31, 2019, the Federal Funds rate stood at 1.75%. In response to the COVID-19 pandemic, the FRB decreased interest rates
on two occasions in March 2020, a 0.50% decrease on March 3 and a 1.00% decrease on March 16. 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%. In 2023, the FRB implemented rate increases of 0.25%, 0.25%, 0.25% and 0.25% in February, March, May and July
2023, respectively. At December 31, 2023 the Federal Funds rate was 5.50%. In 2024, the FRB implemented rate decreases of 0.50%,
0.25%, and 0.25% in September, November and December, respectively. At December 31, 2024, the Federal Funds rate was 4.50%.
Financial markets now expect the possibility of further decreases in Federal Funds interest rates in 2025 to be likely, but possibly cuts
of only 0.50% at a methodical pace and with interest rate decisions being made at each FRB meeting based on economic data
available at the time.
Great Southern’s loan portfolio includes loans ($1.57 billion at December 31, 2024) tied to various SOFR indices that will be subject
to adjustment at least once within 90 days after December 31, 2024. All of these loans have interest rate floors at various rates. Great
Southern also has a portfolio of loans ($748.0 million at December 31, 2024) tied to a “prime rate” of interest that will adjust
immediately or within 90 days of a change to the “prime rate” of interest. Nearly all of these loans had interest rate floors at various
rates. In addition, Great Southern has a portfolio of loans ($8.6 million at December 31, 2024) tied to an AMERIBOR index that will
adjust immediately or within 90 days of a change to the rate of interest on this index. All of these loans had interest rate floors at
various rates. At December 31, 2024, nearly all of these SOFR, AMERIBOR 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, and most are expected to move
fully with future market interest rate decreases as many of these loans have floor rates well below their current index rate.
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A rate cut by the FRB generally would be expected to have an immediate negative impact on the Company’s interest income on loans
due to the large total balance of loans tied to the SOFR indexes or the “prime rate” index that 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 is unable to significantly lower its funding costs due to a highly competitive rate environment for
deposits, although interest rates on assets may decline further. Conversely, market interest rate increases would normally result in
increased interest rates on our SOFR-based, AMERIBOR-based and prime-based loans.
As of December 31, 2024, Great Southern’s interest rate risk models indicate that, generally, rising interest rates are expected to have
a modestly positive impact on the Company’s net interest income, while declining interest rates are expected to have a mostly neutral
impact on net interest income. Any negative impact of a falling Federal Funds rate and other market interest rates also falling could be
more pronounced if we are not able to decrease non-maturity deposit rates accordingly. We model various interest rate scenarios for
rising and falling rates, including both parallel and non-parallel shifts in rates. The results of our modeling indicate that net interest
income is not likely to be significantly affected either positively or negatively in the first twelve months following relatively minor
changes in interest rates because our portfolios are relatively well matched in a twelve-month horizon.
In a situation where market interest rates increase significantly in a short period of time, our net interest margin increase may be more
pronounced in the very near term (first one to three months), due to fairly rapid increases in 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
SOFR interest rates and “prime” interest rates. In the subsequent months, we would expect that net interest margin would stabilize and
begin to recover, as renewal interest rates on maturing time deposits decrease.
During 2020, we experienced some compression of our net interest margin due to 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 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 remained 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 resulted in increasing loan yields and expansion of our net interest income and net interest margin throughout
2022 and into the first three months of 2023. In 2023, market interest rate increases moderated and loan yield increases moderated in
line with market rates. However, there has been increased competition for deposits and other sources of funding, resulting in higher
costs for those funds. This has been especially true since early March 2023. Deposit and other funding costs moderated a bit in late
2024 as the FRB cut the federal funds rate, but competition for deposits remains significant. 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 Non - interest (Operating) Expenses. The Company’s profitability is also affected by the level of its non-
interest income and operating expenses. Non-interest income consists primarily of service charges and ATM fees, POS interchange
fees, late charges and prepayment fees on loans, gains on sales of loans and available-for-sale investments and other general operating
income. 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, 2024 and 2023.”
Business Initiatives
Great Southern has previously reported certain issues and contractual disputes regarding its proposed conversion to a new core
banking platform to be delivered by a third-party vendor. This ultimately led to Great Southern terminating the Master Agreement
with the third-party vendor and initiating litigation against them, with the third-party vendor filing a counterclaim against Great
Southern. In December 2024, an agreement in principle was reached between Great Southern and the third-party vendor whereby the
Master Agreement would be terminated and the parties’ card servicing agreement would be continued and expanded. Great Southern
recorded a $2.0 million accrued expense in 2024 in connection with these developments. However, at this time, no assurance can be
given as to when or whether final agreements will be executed and a full settlement of the matter will be achieved.
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The Company’s banking centers and loan production offices are consistently reviewed to measure performance and 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 offices or even exit markets when
conditions dictate.
The following changes were initiated in 2024 and early 2025:
x
In January 2024, in Springfield, Missouri, a retail banking center at 600 W. Republic Road was consolidated into another
banking center at 2945 W. Republic Road, a short distance away.
x
In February 2024, the Company closed its loan production office in Tulsa, Oklahoma after an analysis of lending priorities
and operational efficiencies. Loan clients served through this office were reassigned to other relationship managers.
x
In 2025, the Company plans to replace one banking center in Springfield, Mo. with a newly constructed building on the same
property at 723 N. Benton. The new facility, designed as a next-generation banking center, will allow for flexibility of new
designs, processes, technology and tools balanced with customer convenience. Construction on the new building is expected
to begin in the first quarter of 2025, with completion anticipated in the fourth quarter of 2025. During construction, customers
will be served in a temporary facility on the property. The Company also has 11 other banking centers and an Express Center
in Springfield.
Two long-term executive team members retired from the Company in 2024. Both announced their retirements at least a year in
advance to ensure an orderly leadership transition.
x
Chief Retail Banking Officer Kris Conley retired in December 2024 after a notable career at Great Southern Bank. He joined
the Company in 1998 and led the retail banking division since 2010. His successor, Laura Smith, joined Great Southern in
2003 and previously managed the Company’s investment services division.
x
Chief Communications & Marketing Officer Kelly Polonus retired in December 2024, concluding a distinguished 41-year
career in banking, including the last 22 years at Great Southern Bank. Succeeding Polonus is Stacy Fender, who joined Great
Southern in June 2024 after serving 18 years in communications and marketing roles at a regional healthcare system.
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%
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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.
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. Upon election, 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, which are included in Item 8 of this Report, 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, 2024 and December 31, 2023
During the year ended December 31, 2024, total assets increased by $169.2 million, or 2.9%, to $5.98 billion. The increase was
primarily attributable to increases in loans receivable and investment securities.
Cash and cash equivalents were $195.8 million at December 31, 2024, a decrease of $15.5 million, or 7.4%, from $211.3 million at
December 31, 2023. This decrease was primarily due to a $20.7 million decrease in interest-bearing deposits in the FRBSTL. In 2024,
these excess funds were used to purchase new investment securities and originate loans.
The Company’s available-for-sale securities increased $55.2 million, or 11.5%, compared to December 31, 2023. The increase was
primarily due to the purchase of agency fixed-rate multi-family mortgage-backed securities and agency collateralized mortgage
obligation securities, partially offset by normal monthly payments received related to the portfolio of mortgage-backed securities and
collateralized mortgage obligations. The available-for-sale securities portfolio was 8.9% and 8.2% of total assets at December 31,
2024 and 2023, respectively.
The Company’s held-to-maturity securities decreased $7.6 million, or 3.9%, compared to December 31, 2023. The decrease was
primarily due to normal monthly payments received related to the portfolio of mortgage-backed securities and collateralized mortgage
obligations. The held-to-maturity securities portfolio was 3.1% and 3.4% of total assets at December 31, 2024 and 2023, respectively.
Net loans increased $100.8 million, or 2.2%, from December 31, 2023, to $4.69 billion at December 31, 2024. This increase was
primarily in other residential (multi-family) loans of $607.2 million, partially offset by decreases in construction loans of $358.7
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million, commercial business loans of $109.1 million and one- to four-family residential loans of $57.2 million. The pipeline of loan
commitments and the unfunded portion of construction loans remained strong at December 31, 2024. As construction projects were
completed, the related loans were either paid off or moved from the construction category to the appropriate permanent loan
categories.
Total liabilities increased $141.5 million from $5.24 billion at December 31, 2023 to $5.38 billion at December 31, 2024. The increase
was primarily due to increases in short-term borrowings from FHLBank, borrowings under the FRBSTL BTFP program and increases
in brokered deposits, partially offset by a decrease in retail time deposits.
Total deposits decreased $116.2 million, or 2.5%, from $4.72 billion at December 31, 2023 to $4.61 billion at December 31, 2024.
Transaction account balances decreased $54.3 million, from $3.11 billion at December 31, 2023 to $3.06 billion at December 31,
2024. Retail certificates of deposit decreased $172.4 million compared to December 31, 2023, to $775.8 million at December 31,
2024. Decreases in transaction account balances were primarily in certain NOW account types and non-interest-bearing checking
accounts. Total interest-bearing checking decreased $1.7 million and non-interest-bearing demand deposit accounts decreased $52.6
million. Customer retail time deposits initiated through our banking center network decreased $158.1 million and time deposits
initiated through our national internet network decreased $10.6 million. Customer deposits at December 31, 2024 and December 31,
2023, totaling $5.0 million and $8.8 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
$110.6 million to $772.1 million at December 31, 2024, compared to $661.5 million at December 31, 2023. Brokered deposits were
utilized to fund growth in outstanding loans and investment securities 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, 2024, $300.0 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, 2024 and 2023. At December 31, 2024 and
2023, there were no borrowings from the FHLBank, other than overnight borrowings, which are included in the short-term borrowings
category. The Company maintains the flexibility to utilize both overnight borrowings and short-term FHLBank advances depending
on relative interest rates.
Short-term borrowings and other interest-bearing liabilities increased $261.6 million, or 103.6%, from $252.6 million at December 31,
2023 to $514.2 million at December 31, 2024. The short-term borrowings included overnight FHLBank borrowings of $333.0 million
at December 31, 2024, compared to $251.0 million at December 31, 2023. In January 2024, the Bank borrowed $180.0 million under
the Federal Reserve Bank’s Bank Term Funding Program (BTFP). The borrowing, which matured in January 2025 and had a fixed
interest rate of 4.83%, was repaid in full in January 2025. The line was secured primarily by the Bank’s held-to-maturity investment
securities. These short-term borrowings were primarily used to purchase new investment securities and originate loans.
Securities sold under reverse repurchase agreements with customers decreased $6.4 million, or 9.0%, from $70.8 million at December
31, 2023 to $64.4 million at December 31, 2024. These balances fluctuate over time based on customer demand for this product.
Total stockholders’ equity increased $27.8 million, or 4.9%, from $571.8 million at December 31, 2023 to $599.6 million at December
31, 2024. The Company recorded net income of $61.8 million for the year ended December 31, 2024. In addition, total stockholders’
equity increased $11.9 million due to the issuance of the Company’s common stock upon stock option exercises. Accumulated other
comprehensive income decreased $11.9 million due to decreases in the fair value of investment securities and the fair value of cash
flow hedges, as a result of increasing intermediate-term market interest rates which generally decreased the fair value of the
investment securities and interest rate swaps. Total stockholders’ equity decreased $15.2 million due to repurchases of the Company’s
common stock. Dividends declared on common stock, which also decreased total stockholders’ equity, were $18.7 million.
Results of Operations and Comparison for the Years Ended December 31, 2024 and 2023
General
Net income decreased $6.0 million, or 8.8%, during the year ended December 31, 2024, compared to the year ended December 31,
2023. Net income was $61.8 million for the year ended December 31, 2024 compared to $67.8 million for the year ended December
31, 2023. This decrease was primarily due to a decrease in net interest income of $4.1 million, or 2.1%, and an increase in provision
for credit losses on loans and unfunded commitments of $5.8 million, partially offset by a decrease in provision for income taxes of
$3.9 million, or 22.0%.
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Total Interest Income
Total interest income increased $27.9 million, or 9.4%, during the year ended December 31, 2024 compared to the year ended
December 31, 2023. The increase was due to a $25.2 million increase in interest income on loans and a $2.6 million increase in
interest income on investment securities and other interest-earning assets. Interest income on loans increased for the year ended
December 31, 2024 compared to the year ended December 31, 2023, primarily due to higher average rates of interest on loans and also
due to higher average loan balances. Interest income from investment securities and other interest-earning assets increased during the
year ended December 31, 2024 compared to the year ended December 31, 2023, due to higher average balances and average rates of
interest on investment securities.
Interest Income – Loans
During the year ended December 31, 2024 compared to the year ended December 31, 2023, interest income on loans increased $20.2
million as the result of higher average interest rates on loans. The average yield on loans increased from 5.87% during the year ended
December 31, 2023 to 6.30% during the year ended December 31, 2024. This increase was primarily due to the repricing of floating
rate loans in 2024 as market interest rates increased and the origination of new fixed-rate loans at higher market interest rates. In
addition, interest income on loans increased $5.0 million as a result of higher average loan balances, which increased from $4.63
billion during the year ended December 31, 2023, to $4.72 billion during the year ended December 31, 2024. Since the end of 2022,
loan originations and net loan growth have been muted; however, some loan growth has come as a result of the funding of previously
approved but unfunded balances on construction loans and a reduced level of loan repayments in 2024.
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, effective immediately. The Company was paid $45.9 million, including accrued but unpaid interest, 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 (AOCI) and is being accreted
to interest income on loans monthly through the original contractual termination date of October 6, 2025. This has had the effect of
reducing AOCI 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, 2024 and December 31, 2023. After October
6, 2025, the Company will no longer have the benefit of that income from the terminated swap. In 2025, the Company anticipates
recording approximately $2.0 million in interest income from the terminated swap in each of the first three quarterly periods, after
which no further interest income will be realized. At December 31, 2024, the Company expected to have a sufficient amount of
eligible variable rate loans to continue to accrete this interest income ratably in 2025. 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 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 was $300 million, with a contractual termination
date of March 1, 2024. Under the terms of the swap, the Company received a fixed rate of interest of 1.6725% and paid a floating rate
of interest equal to one-month USD-LIBOR (or the equivalent replacement USD-SOFR rate once the USD-LIBOR rate ceased to be
available). 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 exceeded one-month USD-LIBOR/SOFR, the Company received net interest settlements, which were
recorded as loan interest income. If one-month USD-LIBOR/SOFR exceeded the fixed rate of interest, the Company paid net
settlements to the counterparty and recorded 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 $1.9 million in the year ended December 31, 2024, compared to a
reduction of loan interest income related to this swap transaction of $10.4 million in the year ended December 31, 2023. As this
interest rate swap reached its contractual termination date of March 1, 2024, there was no further interest income impact related to this
swap after that date.
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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, the Company receives a fixed rate of interest of 2.628%
and pays a floating rate of interest equal to one-month USD-SOFR OIS. Under the terms of the other swap, the Company receives a
fixed rate of interest of 5.725% and pays a floating rate of interest equal to one-month USD-Prime. In each case, the floating rate
resets monthly and net settlements of interest due to/from the counterparty also occur monthly. To the extent the fixed rate of interest
exceeds the floating rate of interest, the Company receives net interest settlements, which are recorded as loan interest income. If the
floating rate of interest exceeds the fixed rate of interest, the Company pays net settlements to the counterparty and records those net
payments as a reduction of interest income on loans. The Company recorded a reduction of loan interest income related to these swap
transactions of $10.4 million and $7.2 million in the years ended December 31, 2024 and 2023, respectively. At December 31, 2024,
the USD-Prime rate was 7.50% and the one-month USD-SOFR OIS rate was 4.52766%.
If market interest rates remain near their current levels, the Company’s interest rate swaps will continue to have a negative impact on
net interest income.
Interest Income – Investments and Other Interest-earning Assets
Interest income on investments increased $2.6 million in the year ended December 31, 2024 compared to the year ended December
31, 2023. Interest income increased $1.5 million due to an increase in average interest rates from 2.91% during the year ended
December 31, 2023 to 3.13% during the year ended December 31, 2024. At December 31, 2024, the investment portfolio did not
include a material amount of adjustable rate securities. Interest income increased $1.0 million as a result of an increase in average
balances from $685.5 million during the year ended December 31, 2023, to $719.6 million during the year ended December 31, 2024.
Average balances and average rates of interest of securities increased primarily due to purchases in 2024 of agency multi-family
mortgage-backed securities that have a fixed rate of interest with expected lives of four to ten years, which fits with the Company’s
current asset/liability management strategies, partially offset by normal monthly payments received related to the portfolio of U.S.
Government agency mortgage-backed securities and collateralized mortgage obligations.
Interest income on other interest-earning assets increased $80,000 in the year ended December 31, 2024 compared to the year ended
December 31, 2023. Interest income increased $52,000 as a result of higher average interest rates from 5.04% during the year ended
December 31, 2023, to 5.09% during the year ended December 31, 2024. Interest income increased $28,000 as a result of an increase
in average balances from $98.0 million during the year ended December 31, 2023, to $98.6 million during the year ended December
31, 2024.
Total Interest Expense
Total interest expense increased $31.9 million, or 30.8%, during the year ended December 31, 2024, when compared with the year
ended December 31, 2023, due to an increase in interest expense on deposits of $20.9 million, or 23.6%, an increase in interest
expense on short-term borrowings of $10.7 million, or 143.0%, an increase in interest expense on securities sold under reverse
repurchase agreements of $202,000, or 16.8%, and an increase in interest expense on subordinated debentures issued to capital trusts
of $62,000, or 3.6%.
Interest Expense – Deposits
Interest expense on demand deposits increased $9.2 million due to an increase in average rates from 1.30% during the year ended
December 31, 2023, to 1.71% during the year ended December 31, 2024. Interest rates paid on demand deposits were higher in 2024
due to significant increases in overall market rates in 2023. Market interest rates peaked in early 2024 and generally declined in the
latter part of 2024, but not to the same degree as the increases that occurred in 2023. Interest on demand deposits increased $346,000
due to an increase in average balances from $2.20 billion in the year ended December 31, 2023, to $2.23 billion in the year ended
December 31, 2024. The Company experienced decreased balances in certain types of NOW accounts, mostly offset by increases in
money market accounts, which generally have higher rates of interest than NOW accounts.
Interest expense on time deposits increased $7.5 million as a result of an increase in average rates of interest from 2.97% during the
year ended December 31, 2023, to 3.93% during the year ended December 31, 2024. Partially offsetting this increase, interest expense
on time deposits decreased $2.9 million due to a decrease in the average balance of time deposits from $991.2 million during the year
ended December 31, 2023, to $866.5 million during the year ended December 31, 2024. A large portion of the Company’s certificate
of deposit portfolio matures within six to twelve months and therefore reprices fairly quickly, which is consistent with the portfolio
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over the past several years. Older certificates of deposit that renewed or were replaced with new deposits generally resulted in the
Company paying a higher rate of interest due to increases in market interest rates throughout 2023 and targeted rate promotions during
2023 and 2024. Average time deposit interest rates continued to increase into mid-year 2024 and trended somewhat lower in the latter
portion of 2024.
Interest expense on brokered deposits increased $6.0 million, due to an increase in average balances from $611.8 million during the
year ended December 31, 2023 to $729.3 million during the year ended December 31, 2024. Interest expense on brokered deposits
also increased $788,000 due to average rates of interest that increased from 5.02% in the year ended December 31, 2023 to 5.15% in
the year ended December 31, 2024. Brokered deposits added during 2024 were at higher market rates than brokered deposits
previously issued. The Company uses brokered deposits of select maturities and interest rate structures from time to time to
supplement its various funding channels and to manage interest rate risk.
The Company may use interest rate swaps from time to time to manage its interest rate risks from recorded financial liabilities,
primarily brokered deposits. These interest rate swaps have allowed the Company to create funding of varying maturities at a variable
rate that in the past has approximated three-month SOFR. In February 2023, the Company entered into five new interest rate swap
transactions totaling $95.0 million. The Company elected to terminate these swaps in 2024, prior to their contractual termination date
in February 2025. The Company received a net settlement payment from the swap counterparty totaling $26,500 upon termination.
The Company did not utilize these types of interest rate swaps on brokered deposits in 2024 or 2022.
As of December 31, 2024, time deposit maturities (including brokered deposits) over the next 12 months were as follows: within three
months -- $724.3 million with a weighted-average rate of 4.19%; within three to six months -- $306.1 million with a weighted-average
rate of 3.86%; and within six to twelve months -- $155.6 million with a weighted-average rate of 3.34%. Based on time deposit market
rates in February 2025, replacement rates for these maturing time deposits are likely to be approximately 3.50-4.00%.
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, 2024 and 2023. FHLBank overnight borrowings were
utilized in 2024 and 2023, and are included in short-term borrowings.
Interest expense on reverse repurchase agreements increased $288,000 due to an increase in average rates during the year ended
December 31, 2024 when compared to the year ended December 31, 2023. The average rate of interest was 1.86% for the year ended
December 31, 2024, compared to 1.47% during the year ended December 31, 2023. The average balance of repurchase agreements
decreased $6.6 million from $82.2 million in the year ended December 31, 2023 to $75.6 million in the year ended December 31,
2024, which was due to changes in customers’ desire for this product, which can fluctuate.
Interest expense on short-term borrowings (including overnight borrowings from the FHLBank and BTFP borrowings from FRBSTL)
and other interest-bearing liabilities increased $10.9 million due to an increase in average balances from $142.9 million during the
year ended December 31, 2023, to $358.3 million during the year ended December 31, 2024, which was primarily due to changes in
the Company’s funding needs for loans and investments and the mix of funding, which can fluctuate. Most of this increase was due to
the increased utilization of overnight borrowings from the FHLBank and BTFP borrowings from FRBSTL. Partially offsetting this
increase, interest expense on short-term borrowings, overnight FHLBank borrowings from the FHLBank and BTFP borrowings from
FRBSTL and other interest-bearing liabilities decreased $226,000 due to average rates that decreased from 5.25% in the year ended
December 31, 2023, to 5.09% in the year ended December 31, 2024. The decrease in the average rate of interest was primarily due to
2024 including the BTFP borrowing, which had a lower rate of interest at 4.83% than the FHLB overnight borrowings.
During the year ended December 31, 2024, compared to the year ended December 31, 2023, interest expense on subordinated
debentures issued to capital trusts increased $62,000 due to higher average interest rates. The average interest rate was 6.74% in 2023,
compared to 6.98% in 2024. The subordinated debentures are variable-rate debentures. There was no change in the average balance of
the subordinated debentures between 2023 and 2024.
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. These issuance costs are amortized over the expected life of the notes, which is five years from the issuance date, impacting
the overall interest expense on the notes. There was no material change in interest expense on subordinated notes between 2023 and
2024.
95
Net Interest Income
Net interest income for the year ended December 31, 2024 decreased $4.1 million, or 2.1%, to $189.1 million, compared to $193.2
million for the year ended December 31, 2023. Net interest margin was 3.42% for the year ended December 31, 2024, compared to
3.57% for the year ended December 31, 2023, a decrease of 15 basis points. The Company experienced increases in interest income on
both loans and investment securities and increases in interest expense on deposits, short-term borrowings, subordinated debentures
issued to capital trust and repurchase agreements.
The Company’s overall interest rate spread decreased 21 basis points, or 7.3%, from 2.97% during the year ended December 31, 2023,
to 2.76% during the year ended December 31, 2024. The decrease was due to a 60 basis point increase in the weighted average rate
paid on interest-bearing liabilities, partially offset by a 39 basis point increase in the weighted average yield on interest-earning assets.
In comparing the two years, the yield on loans increased 43 basis points, the yield on investment securities increased 22 basis points
and the yield on other interest-earning assets increased five basis points. The rate paid on deposits increased 54 basis points, the rate
paid on short-term borrowings and other interest-bearing liabilities decreased 16 basis points, the rate paid on subordinated debentures
issued to capital trusts increased 24 basis points and the rate paid on reverse repurchase agreements increased 39 basis points. Interest
rates earned on loans and paid on deposits are affected by the mix of the loan and deposit portfolios, the stated maturity of loans and
time deposits, the amount of fixed-rate and variable-rate loans and other repricing characteristics.
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
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 changes in underwriting standards, portfolio mix, delinquency level or term, as well as for changes in economic
conditions, including but not limited to, changes in the national unemployment rate, commercial real estate price index, consumer
sentiment, gross domestic product (GDP) and construction spending.
Challenging or worsening economic conditions from higher inflation or interest rates, COVID-19 and subsequent variant outbreaks or
similar events, global unrest 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, ongoing correspondence with borrowers and problem loan workouts.
Management determines which loans are non-homogeneous or 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, 2024, the Company recorded a provision expense of $1.7 million on its portfolio of outstanding
loans, compared to a provision expense of $2.3 million for the year ended December 31, 2023. The Company experienced net charge
offs of $1.6 million for the year ended December 31, 2024 compared to net charge offs of $1.1 million for the year ended December
31, 2023.
The Company recorded a provision for losses on unfunded commitments of $1.0 million for the year ended December 31, 2024,
compared to a negative provision of $5.3 million for the year ended December 31, 2023. The level of provisions for unfunded
commitments is primarily related to the increases and decreases in the balance of unfunded commitments.
The Bank’s allowance for credit losses as a percentage of total loans was 1.36% and 1.39% at December 31, 2024 and 2023,
respectively. Management considers the allowance for credit losses adequate to cover losses inherent in the Bank’s loan portfolio at
December 31, 2024, 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.
96
Non-performing Assets
As a result of changes in loan portfolio composition, changes in economic and market conditions and other factors specific to a
borrower’s circumstances, the level of non-performing assets will fluctuate.
Non-performing assets at December 31, 2024, were $9.6 million, a decrease of $2.2 million from $11.8 million at December 31, 2023.
Non-performing assets as a percentage of total assets were 0.16% at December 31, 2024, compared to 0.20% at December 31, 2023.
Compared to December 31, 2023, non-performing loans decreased $8.1 million to $3.6 million at December 31, 2024, and foreclosed
assets increased $6.0 million, to $6.0 million at December 31, 2024. The majority of the decrease in non-performing loans was in the
non-performing commercial real estate loans category, which decreased $10.5 million from December 31, 2023, primarily due to one
loan relationship, totaling $6.0 million, being transferred from non-performing loans to foreclosed assets held for sale in 2024.
Additionally, non-performing commercial real estate loans also decreased in 2024 due to payments on such loans of $3.7 million. One
other residential (multi-family) loan relationship, totaling $9.3 million, was added to non-performing loans, then transferred from non-
performing loans to foreclosed assets held for sale and sold for a gain, all during 2024.
Non-performing Loans. Activity in the non-performing loans category during the year ended December 31, 2024, was as follows:
Transfers to Transfers to
Beginning
Additions
Removed
Potential
Foreclosed
Ending
Balance,
to Non-
from Non-
Problem
Assets and
Charge-
Balance,
January 1 Performing Performing
Loans
Repossessions
Offs
Payments December 31
(In Thousands)
One- to four-family construction
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Subdivision construction
—
—
—
—
—
—
—
—
Land development
384
553
—
—
(133)
(101)
(239)
464
Commercial construction
—
—
—
—
—
—
—
—
One- to four-family residential
722
2,770
(673)
—
—
—
(188)
2,631
Other residential (multi-family)
—
9,572
—
—
(9,279)
—
(293)
—
Commercial real estate
10,552
859
—
—
(6,189)
(1,433)
(3,712)
77
Commercial business
31
384
—
—
—
(31)
—
384
Consumer
59
130
—
—
—
(103)
(69)
17
Total non-performing loans
$
11,748
$
14,268
$
(673)
$
—
$
(15,601) $
(1,668)
$
(4,501)
$
3,573
At December 31, 2024, the non-performing one-to four-family residential category included seven loans, six of which were added
during 2024. The largest relationship in this category, totaling $2.1 million and which was added during 2024, is collateralized by
three rental duplexes, a one-to four-family residential property and a condominium unit. The non-performing land development
category consisted of one loan, added in 2024, which totaled $464,000 and is collateralized by improved commercial land in the
Omaha, Nebraska area. The non-performing commercial business category consisted of two loans, both of which were added during
2024. The non-performing commercial real estate category consisted of two loans, one of which was added during 2024. During 2024,
a single commercial real estate loan totaling $6.0 million which had been collateralized by an office building in Clayton, Missouri was
transferred from the non-performing commercial real estate category to foreclosed assets. Prior to the transfer in 2024, the Company
collected payments of $1.1 million and charged down the loan balance by $1.2 million. Another relationship in the commercial real
estate category totaling $2.4 million at December 31, 2023, was collected in full during 2024. During 2024, one loan of $9.6 million
(discussed above), collateralized by a student housing project in Texas, was added to the other residential (multi-family) category. The
Company collected payments of $293,000 and subsequently transferred this non-performing loan to foreclosed assets, after which the
collateral was sold for a $300,000 gain.
Other Real Estate Owned and Repossessions. All of the total $6.0 million of other real estate owned and repossessions at December
31, 2024 were acquired through foreclosure.
97
Activity in foreclosed assets and repossessions during the year ended December 31, 2024, was as follows:
Beginning
Ending
Balance,
Capitalized
Balance,
January 1 Additions
Sales
Costs
Write-Downs December 31
(In Thousands)
One- to four-family construction
$
—
$
—
$
—
$
—
$
—
$
—
Subdivision construction
—
—
—
—
—
—
Land development
—
133
(133)
—
—
—
Commercial construction
—
—
—
—
—
—
One- to four-family residential
—
—
—
—
—
—
Other residential (multi-family)
—
9,279
(9,279)
—
—
—
Commercial real estate
—
6,189
(229)
—
—
5,960
Commercial business
—
—
—
—
—
—
Consumer
23
151
(141)
—
—
33
Total foreclosed assets and repossessions
$
23
$
15,752
$
(9,782)
$
—
$
—
$
5,993
At December 31, 2024, the commercial real estate category of foreclosed assets consisted of one office building located in Clayton,
Missouri that previously collateralized a $6.0 million loan that was transferred from non-performing loans during 2024 as described
above in the discussion of non-performing loans. The other residential (multi-family) category of foreclosed assets previously
included one property consisting of a student housing project in Texas, which was added and sold during 2024 as described previously
in the discussion of non-performing loans. Upon the sale of this asset, the Company realized a gain of $300,000. 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.
Potential Problem Loans. Potential problem loans decreased $312,000 during the year ended December 31, 2024, from $7.4 million at
December 31, 2023 to $7.1 million at December 31, 2024. Potential problem loans are loans which management has identified
through routine internal review procedures as having possible credit problems that may cause the borrowers difficulty in complying
with the current repayment terms. These loans are not reflected in non-performing assets.
Activity in the potential problem loans category during the year ended December 31, 2024, was as follows:
Removed
Transfers to
Beginning
Additions
from
Transfers
Foreclosed
Ending
Balance,
to Potential
Potential
to Non-
Assets and
Balance,
January 1 Problem
Problem Performing Repossessions Charge-Offs Payments December 31
(In Thousands)
One- to four-family construction
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Subdivision construction
—
—
—
—
—
—
—
—
Land development
—
—
—
—
—
—
—
—
Commercial construction
—
—
—
—
—
—
—
—
One- to four-family residential
158
1,234
(83)
(33)
—
—
(74)
1,202
Other residential (multi-family)
7,162
—
—
—
—
—
(7,162)
—
Commercial real estate
—
4,358
—
—
—
—
(27)
4,331
Commercial business
—
213
—
—
—
—
(213)
—
Consumer
54
1,705
(121)
—
(4)
(67)
(38)
1,529
Total potential problem loans
$ 7,374
$
7,510
$
(204)
$
(33)
$
(4)
$
(67)
$ (7,514)
$
7,062
At December 31, 2024, the commercial real estate category of potential problem loans included three loans totaling $4.3 million, all of
which are part of one relationship and were added in 2024. This relationship is collateralized by three nursing care facilities located in
southwest Missouri. The borrower’s business cash flow was negatively impacted by a reduction in labor participation and increased
operating costs as well as ongoing changes to the Missouri Medicaid reimbursement rate. Monthly payments were timely made prior
to the transfer to this category and have continued to be paid timely. At December 31, 2024, the one- to four-family residential
category of potential problem loans included 11 loans, 10 of which were added during 2024. The largest relationship in this category
totaled $234,000, or 19.5% of the total category. The consumer category includes one home equity loan totaling $748,000 related to
the nursing care facility relationship noted above. Another home equity loan totaling $642,000 is associated with the largest one- to
four-family residential relationship described above in the non-performing loans discussion. The decrease in the other residential
98
(multi-family) category of potential problem loans included the payment in full during 2024 of one $7.2 million loan relationship that
was collateralized by an apartment and retail project in Oklahoma. This was the only loan relationship in the category.
Loans Categorized as “Watch” and “Special Mention”
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.” Multiple loan reviews take place on a continuous basis by credit risk and
lending management. Reviews are focused on financial performance, occupancy trends, delinquency status, covenant compliance,
collateral support, economic considerations and various other factors. Loans classified as “Watch” are being monitored due to
indications of potential weaknesses or deficiencies that may require future reclassification as special mention or substandard. Loans
classified as “Watch” increased $7.6 million, from $8.3 million at December 31, 2023 to $15.9 million at December 31, 2024, due to
the addition of ten loans totaling $11.3 million, partially offset by payoffs of $1.6 million and loans totaling $1.4 million being
downgraded during 2024. While loans classified as “Special Mention” are not adversely classified, they are deserving of
management’s close attention to ensure repayment prospects or the credit position of the assets does not deteriorate and expose the
institution to elevated risk to warrant adverse classification at a future date. In the year ended December 31, 2024, loans classified as
“Special Mention” decreased $25.2 million, from $26.7 million at December 31, 2023 to $1.5 million at December 31, 2024. The $1.5
million balance consisted of two relationships which were added in 2024. Two loan relationships totaling $7.2 million were upgraded
to “Watch” and two loan relationships totaling $14.3 million were downgraded to “Substandard.” In addition, there were payments
collected on loans categorized as “Watch” totaling $5.1 million in 2024. See Note 3 for further discussion of the Company’s loan
grading system.
Non-Interest Income
Non-interest income for the year ended December 31, 2024 was $30.6 million compared to $30.1 million for the year ended
December 31, 2023. The increase of $492,000, or 1.6%, was primarily as a result of the following items:
Other income: Other income increased $2.2 million compared to the prior year. In 2024, the Company recorded $2.7 million of other
income, net of expenses and write-offs, related to the termination of the Master Agreement between the Company and a third-party
software vendor for the conversion of the Company’s core banking platform. This amount represented the elimination of certain
deferred credits and other liabilities, along with the write-off of certain capitalized hardware, software and other assets, that previously
had been recorded as part of the preparation to convert to the intended new core-banking platform. For additional information, see Part
I, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Initiatives.”
Net gains on loan sales: Net gains on loan sales increased $1.4 million compared to the prior year. The increase was partially due to an
increase in balance of fixed-rate single-family mortgage loans sold during 2024 compared to 2023. The Company also realized higher
premiums on the sale of loans in 2024, as market interest rates were more stable when compared to the prior year.
Overdraft and insufficient funds fees: Overdraft and insufficient funds fees decreased $2.5 million compared to the prior year. This
decrease was primarily due to the continuation of a multi-year trend whereby our customers are choosing to forego authorizing
payments of certain items which exceed their account balances, resulting in fewer overdrafts in checking accounts and related fees.
Point-of-sale and ATM fees: Point-of-sale and ATM fees decreased $760,000 compared to the prior year. This decrease was primarily
due to a portion of these transactions now being routed through channels with lower fees to the Company, which is expected to
continue in future periods, and certain increases in related processing costs during the transition to a new debit card processor.
Non-Interest Expense
Total non-interest expense increased $472,000, or 0.3%, from $141.0 million in the year ended December 31, 2023, to $141.5 million
in the year ended December 31, 2024. The Company’s efficiency ratio for the year ended December 31, 2024 was 64.40%, compared
to 63.16% for 2023. The Company’s ratio of non-interest expense to average assets was 2.40% for the year ended December 31, 2024
compared to 2.47% for the year ended December 31, 2023. Average assets for the year ended December 31, 2024, increased $167.0
million, or 2.9%, from the year ended December 31, 2023, primarily due to increases in average net loans receivable.
The following were significant items related to the increase in non-interest expense for the year ended December 31, 2024 as
compared to the year ended December 31, 2023:
99
Other operating expenses: Other operating expenses increased $1.7 million from the prior year. In 2024, the Company expensed $2.0
million due to developments related to a litigation/contract dispute matter. For additional information, see Part I, Item 7,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Initiatives.”
Net occupancy and equipment expense: Net occupancy expenses increased $1.3 million from the prior year. Various components of
computer license and support expenses collectively increased by $1.4 million in 2024 compared to 2023.
Legal, audit and other professional fees: Legal, audit and other professional fees decreased $1.7 million from the prior year, to $5.4
million. In 2023, the Company expensed a total of $4.1 million related to training and implementation costs for the intended core
systems conversion and professional fees to consultants engaged to support the Company’s proposed transition of core and ancillary
software and information technology systems, compared to $2.0 million expensed in 2024.
Expense on other real estate owned: Expense on other real estate owned decreased $615,000 when compared to 2023, to income of
$304,000 in 2024. In 2024, the Company recorded a gain on foreclosed asset sales of $495,000 compared to a $39,000 loss in 2023.
Provision for Income Taxes
For the years ended December 31, 2024 and 2023, the Company’s effective tax rate was 18.1% and 20.6%, 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 are analyzed. The
Company currently expects its effective tax rate (combined federal and state) will be approximately 18.0% to 20.0% in future periods,
primarily due to additional investment tax credits being utilized beginning in 2024.
Average Balances, Interest Rates and Yields
The following table presents, for the periods indicated, the total dollar amount of interest income from average interest-earning assets
and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and
the net interest margin. Average balances of loans receivable include the average balances of nonaccrual loans for each period. Interest
income on loans includes interest received on nonaccrual 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 $4.6 million,
$5.7 million and $6.3 million for 2024, 2023 and 2022, respectively. Tax-exempt income was not calculated on a tax equivalent basis.
The table does not reflect any effect of income taxes.
100
Dec. 31,
Year Ended
Year Ended
Year Ended
2024
December 31, 2024
December 31, 2023
December 31, 2022
Yield/
Average
Yield/
Average
Yield/
Average
Yield/
Rate
Balance
Interest Rate
Balance
Interest Rate
Balance
Interest Rate
(Dollars In Thousands)
Interest-earning assets:
Loans receivable:
One- to four-family residential
4.15 % $
866,735
$ 34,841
4.02 % $
905,102
$ 33,693
3.72 % $
811,896
$ 27,853
3.43 %
Other residential
6.91
1,213,729
88,364
7.28
822,955
56,274
6.84
837,582
43,174
5.15
Commercial real estate
6.08
1,514,012
94,094
6.21
1,493,130
87,670
5.87
1,551,541
73,164
4.72
Construction
6.94
694,724
52,841
7.61
908,558
65,999
7.26
679,524
37,370
5.50
Commercial business
5.76
244,419
15,800
6.46
308,049
18,310
5.94
292,825
14,615
4.99
Other loans
6.06
171,193
10,392
6.07
181,649
9,125
5.02
199,336
8,864
4.45
Industrial revenue bonds (1)
5.95
11,721
844
7.20
12,413
881
7.10
13,338
711
5.33
Total loans receivable
6.08
4,716,533
297,176
6.30
4,631,856
271,952
5.87
4,386,042
205,751
4.69
Investment securities (1)
3.07
719,553
22,501
3.13
685,496
19,942
2.91
675,571
19,170
2.84
Interest-earning deposits in other banks
4.36
98,594
5,021
5.09
98,049
4,941
5.04
195,817
2,056
1.05
Total interest-earning assets
5.68
5,534,680
324,698
5.87
5,415,401
296,835
5.48
5,257,430
226,977
4.32
Non-interest-earning assets:
Cash and cash equivalents
96,687
90,881
96,353
Other non-earning assets
254,847
212,914
166,007
Total assets
$ 5,886,214
$ 5,719,196
$ 5,519,790
Interest-bearing liabilities:
Interest-bearing demand and savings
1.39
$ 2,228,614
38,140
1.71
$ 2,202,242
28,579
1.30
$ 2,322,915
5,968
0.26
Time deposits
3.62
866,456
34,031
3.93
991,202
29,459
2.97
890,507
8,546
0.96
Brokered deposits
4.61
729,268
37,534
5.15
611,821
30,719
5.02
252,281
6,162
2.44
Total deposits
2.51
3,824,338
109,705
2.87
3,805,265
88,757
2.33
3,465,703
20,676
0.60
Securities sold under reverse repurchase agreements
1.38
75,575
1,407
1.86
82,218
1,205
1.47
132,595
324
0.24
Short-term borrowings, overnight FHLBank borrowings
and other interest-bearing liabilities
4.69
358,262
18,222
5.09
142,866
7,500
5.25
48,530
1,066
2.20
Subordinated debentures issued to capital trust
6.43
25,774
1,798
6.98
25,774
1,736
6.74
25,774
875
3.40
Subordinated notes
5.90
74,734
4,423
5.92
74,430
4,422
5.94
74,131
4,422
5.97
Total interest-bearing liabilities
2.82
4,358,683
135,555
3.11
4,130,553
103,620
2.51
3,746,733
27,363
0.73
Non-interest-bearing liabilities:
Demand deposits
857,322
949,045
1,141,660
Other liabilities
84,249
88,678
66,224
Total liabilities
5,300,254
5,168,276
4,954,617
Stockholders’ equity
585,960
550,920
565,173
Total liabilities and stockholders’ equity
$ 5,886,214
$ 5,719,196
$ 5,519,790
Net interest income:
Interest rate spread
2.86 %
$ 189,143
2.76 %
$ 193,215
2.97 %
$ 199,614
3.59 %
Net interest margin*
3.42 %
3.57 %
3.80 %
Average interest-earning assets to average interest- bearing
liabilities
127.0 %
131.1 %
140.3 %
*
Defined as the Company’s net interest income divided by total interest-earning assets.
(1) Of the total average balance of investment securities, average tax-exempt investment securities were $56.9 million, $56.0 million
and $54.0 million for 2024, 2023 and 2022, respectively. In addition, average tax-exempt industrial revenue bonds were $10.6
million, $13.9 million and $16.4 million in 2024, 2023 and 2022, respectively. Interest income on tax-exempt assets included in
this table was $2.2 million, $2.4 million and $2.2 million for 2024, 2023 and 2022, respectively. Interest income net of disallowed
interest expense related to tax-exempt assets was $1.8 million, $2.1 million and $2.1 million for 2024, 2023 and 2022,
respectively.
101
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
Year Ended
December 31, 2024 vs.
December 31, 2023 vs.
December 31, 2023
December 31, 2022
Increase (Decrease)
Total
Increase (Decrease)
Total
Due to
Increase
Due to
Increase
Rate
Volume
(Decrease)
Rate
Volume
(Decrease)
(In Thousands)
Interest-earning assets:
Loans receivable
$
20,180
$
5,044
$
25,224
$
54,141
$
12,060
$
66,201
Investment securities
1,539
1,020
2,559
488
284
772
Interest-earning deposits in other banks
52
28
80
3,321
(436)
2,885
Total interest-earning assets
21,771
6,092
27,863
57,950
11,908
69,858
Interest-bearing liabilities:
Demand deposits
9,215
346
9,561
22,904
(293)
22,611
Time deposits
7,513
(2,941)
4,572
19,843
1,070
20,913
Brokered Deposits
788
6,027
6,815
10,449
14,108
24,557
Total deposits
17,516
3,432
20,948
53,196
14,885
68,081
Securities sold under reverse repurchase agreements
288
(86)
202
953
(72)
881
Short-term borrowings, overnight FHLBank borrowings and other
interest-bearing liabilities
(226)
10,948
10,722
2,684
3,750
6,434
Subordinated debentures issued to capital trust
62
—
62
861
—
861
Subordinated notes
(13)
14
1
(18)
18
—
Total interest-bearing liabilities
17,627
14,308
31,935
57,676
18,581
76,257
Net interest income
$
4,144
$
(8,216)
$
(4,072)
$
274
$
(6,673)
$
(6,399)
Results of Operations and Comparison for the Years Ended December 31, 2023 and 2022
General
Net income decreased $8.1 million, or 10.7%, during the year ended December 31, 2023, compared to the year ended December 31,
2022. Net income was $67.8 million for the year ended December 31, 2023 compared to $75.9 million for the year ended December
31, 2022. This decrease was primarily due to an increase in non-interest expense of $7.7 million, or 5.7%, a decrease in net interest
income of $6.4 million, or 3.2%, and a decrease in non-interest income of $4.1 million, or 11.9%, partially offset by a decrease in
provision for credit losses on loans and unfunded commitments of $9.3 million, and a decrease in provision for income taxes of
$710,000, or 3.9%.
Total Interest Income
Total interest income increased $69.9 million, or 30.8%, during the year ended December 31, 2023 compared to the year ended
December 31, 2022. The increase was due to a $66.2 million increase in interest income on loans and a $3.7 million increase in
interest income on investment securities and other interest-earning assets. Interest income on loans increased for the year ended
December 31, 2023 compared to the year ended December 31, 2022, 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 31, 2023 compared to the year ended December 31, 2022, due to higher average balances of investment securities
combined with higher average rates of interest on investment securities and other interest-earning assets, partially offset by a decrease
in the average balance on other interest-earning assets.
Interest Income – Loans
During the year ended December 31, 2023 compared to the year ended December 31, 2022, interest income on loans increased $54.1
million as the result of higher average interest rates on loans. The average yield on loans increased from 4.69% during the year ended
December 31, 2022 to 5.87% during the year ended December 31, 2023. This increase was primarily due to the repricing of floating
rate loans in 2023 as market interest rates increased significantly and the origination of new fixed-rate loans at higher market interest
102
rates. In addition, interest income on loans increased $12.1 million as a result of higher average loan balances, which increased from
$4.39 billion during the year ended December 31, 2022, to $4.63 billion during the year ended December 31, 2023. The Company
continued to originate loans at a pace similar to prior periods through the end of 2022, and overall loan repayments slowed in 2022
and 2023 compared to the level of repayments in 2021. During 2023, loan originations and net loan growth were muted; however,
some loan growth occurred in 2023 as a result of the funding of previously approved but unfunded balances on construction loans and
the slowed loan repayments in 2023.
Described above, in the comparison of the year ended December 31, 2024 to the year ended December 31, 2023, is an interest rate
swap with a notional amount of $400 million that was previously terminated. The Company recorded interest income related to this
interest rate swap of $8.1 million in each of the years ended December 31, 2023 and December 31, 2022.
Also described above, in the comparison of the year ended December 31, 2024 to the year ended December 31, 2023, is an interest
rate swap with a notional amount of $300 million that contractually terminated on March 1, 2024. The Company recorded a reduction
of loan interest income related to this swap transaction of $10.4 million in the year ended December 31, 2023, compared to a reduction
of loan interest income related to this swap transaction of $941,000 in the year ended December 31, 2022.
In addition, described above, in the comparison of the year ended December 31, 2024 to the year ended December 31, 2023, are two
additional interest rate swap transactions, each with a notional amount of $200 million, an effective date of May 1, 2023 and a
termination date of May 1, 2028. The Company recorded a reduction of loan interest income related to these swap transactions of $7.2
million in the year ended December 31, 2023.
Interest Income – Investments and Other Interest-earning Assets
Interest income on investments increased $772,000 in the year ended December 31, 2023 compared to the year ended December 31,
2022. Interest income increased $488,000 due to an increase in average interest rates from 2.84% during the year ended December 31,
2022 to 2.91% during the year ended December 31, 2023. At December 31, 2023, the investment portfolio did not include a material
amount of adjustable rate securities. Interest income increased $284,000 as a result of an increase in average balances from $675.6
million during the year ended December 31, 2022, to $685.5 million during the year ended December 31, 2023. Average balances of
securities increased primarily due to purchases of agency multi-family mortgage-backed securities that have a fixed rate of interest
with expected lives of four to ten years, which fits with the Company’s current asset/liability management strategies, partially offset
by normal monthly payments received related to the portfolio of U.S. Government agency mortgage-backed securities and
collateralized mortgage obligations.
Interest income on other interest-earning assets increased $2.9 million in the year ended December 31, 2023 compared to the year
ended December 31, 2022. Interest income increased $3.3 million as a result of higher average interest rates from 1.05% during the
year ended December 31, 2022, to 5.04% during the year ended December 31, 2023. Partially offsetting that increase, interest income
decreased $436,000 as a result of a decrease in average balances from $195.8 million during the year ended December 31, 2022, to
$98.0 million during the year ended December 31, 2023. The increase in average interest rates was due to the increase in the rate paid
on funds held at the Federal Reserve Bank. This rate was increased multiple times in 2022 and 2023 in conjunction with the increase
in the Federal Funds target interest rate. The decrease in average balances was due to utilization of these funds in loan originations and
securities purchases.
Total Interest Expense
Total interest expense increased $76.3 million, or 278.7%, during the year ended December 31, 2023, when compared with the year
ended December 31, 2022, due to an increase in interest expense on deposits of $68.1 million, or 329.3%, an increase in interest
expense on short-term borrowings of $6.4 million, or 603.6%, an increase in interest expense on securities sold under reverse
repurchase agreements of $881,000, or 271.9%, and an increase in interest expense on subordinated debentures issued to capital trusts
of $861,000, or 98.4%.
Interest Expense – Deposits
Interest expense on demand deposits increased $22.9 million due to an increase in average rates from 0.26% during the year ended
December 31, 2022, to 1.30% during the year ended December 31, 2023. Interest rates paid on demand deposits were higher in 2023
due to significant increases in overall market rates in the latter half of 2022 and all of 2023. Partially offsetting that increase, interest
103
on demand deposits decreased $293,000 due to a decrease in average balances from $2.32 billion in the year ended December 31,
2022, to $2.20 billion in the year ended December 31, 2023. The Company also experienced decreased balances in certain types of
NOW accounts and IntraFi Network Reciprocal Deposits, mostly offset by increases in money market accounts, which generally have
higher rates of interest than NOW accounts.
Interest expense on time deposits increased $19.8 million as a result of an increase in average rates of interest from 0.96% during the
year ended December 31, 2022, to 2.97% during the year ended December 31, 2023. Interest expense on time deposits increased $1.1
million due to an increase in the average balance of time deposits from $890.5 million during the year ended December 31, 2022, to
$991.2 million during the year ended December 31, 2023. 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 higher rate of
interest due to increases in market interest rates in the latter half of 2022 and throughout 2023 and targeted rate promotions during
2023.
Interest expense on brokered deposits increased $14.1 million, due to an increase in average balances from $252.3 million during the
year ended December 31, 2022 to $611.8 million during the year ended December 31, 2023. Interest expense on brokered deposits
also increased $10.4 million due to average rates of interest that increased from 2.44% in the year ended December 31, 2022 to 5.02%
in the year ended December 31, 2023. Brokered deposits added during 2023 were at higher market rates than brokered deposits
previously issued. The Company uses brokered deposits of select maturities and interest rate structures from time to time to
supplement its various funding channels and to manage interest rate risk.
At December 31, 2023, the Company had $95.0 million in interest rate swaps on brokered deposits, which were accounted for as fair
value hedges. Subsequent to December 31, 2023, the Company elected to terminate these swaps prior to their contractual termination
date in 2025. The Company received a net settlement payment from the swap counterparty totaling $26,500 upon termination. The
Company did not utilize these types of interest rate swaps on brokered deposits in 2022.
The Company’s net interest income was negatively impacted in 2023 by the high level of competition for deposits due to asset growth
across the industry and the lingering effects of liquidity events at several banks in March 2023. The Company also had a substantial
amount of time deposits maturing at relatively low rates in the second quarter of 2023, and these time deposits either renewed at
higher rates or left the Company, in turn requiring their replacement with other funding sources at then-current, higher market rates. In
addition, sporadically throughout 2023, the Company experienced a higher-than-normal reduction in balances of non-interest-bearing
deposits. Customer balances in both non-interest-bearing checking and interest-bearing checking accounts fluctuated during the year
ended December 31, 2023. As market interest rates for certain checking account types and time deposit accounts have increased, some
customers have chosen to reallocate funds into higher-rate accounts.
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, 2023 and 2022. FHLBank overnight borrowings were
utilized in 2023 and 2022.
Interest expense on reverse repurchase agreements increased $953,000 due to an increase in average rates during the year ended
December 31, 2023 when compared to the year ended December 31, 2022. The average rate of interest was 1.47% for the year ended
December 31, 2023, compared to 0.24% during the year ended December 31, 2022. The average balance of repurchase agreements
decreased $50.4 million from $132.6 million in the year ended December 31, 2022 to $82.2 million in the year ended December 31,
2023, which was due to changes in customers’ desire for this product, which can fluctuate.
Interest expense on short-term borrowings (including overnight borrowings from the FHLBank) and other interest-bearing liabilities
increased $3.8 million due to an increase in average balances from $48.5 million during the year ended December 31, 2022, to $142.9
million during the year ended December 31, 2023, 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 increased 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 $2.7 million due to average rates that increased from 2.20% in the year ended December 31, 2022, to 5.25% in the
year ended December 31, 2023. Short-term market interest rates increased sharply in the latter half of 2022 and throughout 2023.
104
During the year ended December 31, 2023, compared to the year ended December 31, 2022, interest expense on subordinated
debentures issued to capital trusts increased $861,000 due to higher average interest rates. The average interest rate was 3.40% in
2022, compared to 6.74% in 2023. The subordinated debentures are variable-rate debentures, as stated above. There was no change in
the average balance of the subordinated debentures between 2022 and 2023.
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. These issuance costs are amortized over the expected life of the notes, which is five years from the issuance date, impacting
the overall interest expense on the notes. There was no material change in interest expense on subordinated notes between 2022 and
2023.
Net Interest Income
Net interest income for the year ended December 31, 2023 decreased $6.4 million, or 3.2%, to $193.2 million, compared to $199.6
million for the year ended December 31, 2022. Net interest margin was 3.57% for the year ended December 31, 2023, compared to
3.80% for the year ended December 31, 2022, a decrease of 23 basis points. The Company experienced increases in interest income on
both loans and investment securities and increases in interest expense on deposits, short-term borrowings, subordinated debentures
issued to capital trust and repurchase agreements.
The Company’s overall interest rate spread decreased 62 basis points, or 17.1%, from 3.59% during the year ended December 31,
2022, to 2.97% during the year ended December 31, 2023. The decrease was due to a 178 basis point increase in the weighted average
rate paid on interest-bearing liabilities, partially offset by a 116 basis point increase in the weighted average yield on interest-earning
assets. In comparing the two years, the yield on loans increased 118 basis points, the yield on investment securities increased 7 basis
points and the yield on other interest-earning assets increased 399 basis points. The rate paid on deposits increased 173 basis points,
the rate paid on short-term borrowings and other interest-bearing liabilities increased 305 basis points, the rate paid on subordinated
debentures issued to capital trusts increased 334 basis points and the rate paid on reverse repurchase agreements increased 123 basis
points. Interest rates earned on loans and paid on deposits are affected by the mix of the loan and deposit portfolios, the stated maturity
of loans and time deposits, the amount of fixed-rate and variable-rate loans and other repricing characteristics. Throughout 2022,
competition for deposits was not as intense and market rates on deposits moved higher at a slower pace. In 2023, overall competition
for deposits intensified as a few banks experienced significant liquidity issues in March 2023 and market rates moved higher more
rapidly. Also, as market interest rates moved higher, some deposit holders chose to move funds into non-deposit investment products.
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, 2023, the Company recorded a provision expense of $2.3 million on its portfolio of outstanding
loans, compared to a provision expense of $3.0 million for the year ended December 31, 2022. The Company experienced net charge
offs of $1.1 million for the year ended December 31, 2023 compared to net charge offs of $274,000 for the year ended December 31,
2022. The Company recorded a negative provision for losses on unfunded commitments of $5.3 million for the year ended December
31, 2023, compared to provision expense of $3.2 million for the year ended December 31, 2022. General market conditions and
unique circumstances related to specific industries and individual projects contribute to the level of provisions and charge-offs.
The Bank’s allowance for credit losses as a percentage of total loans was 1.39% at both December 31, 2023 and 2022.
Non-performing Assets
Non-performing assets at December 31, 2023, were $11.8 million, an increase of $8.1 million from $3.7 million at December 31,
2022. Non-performing assets as a percentage of total assets were 0.20% at December 31, 2023, compared to 0.07% at December 31,
2022.
Compared to December 31, 2022, non-performing loans increased $8.1 million to $11.7 million at December 31, 2023, and foreclosed
assets decreased $27,000, to $23,000 at December 31, 2023. The majority of the increase in non-performing loans was in the non-
105
performing commercial real estate loans category, which increased $9.0 million from December 31, 2022, primarily due to one loan
relationship being added to the category in 2023.
Non-performing Loans. Activity in the non-performing loans category during the year ended December 31, 2023, was as follows:
Transfers to Transfers to
Beginning
Additions
Removed
Potential
Foreclosed
Ending
Balance,
to Non-
from Non-
Problem
Assets and
Charge-
Balance,
January 1
Performing
Performing
Loans
Repossessions
Offs
Payments
December 31
(In Thousands)
One- to four-family construction
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Subdivision construction
—
—
—
—
—
—
—
—
Land development
384
—
—
—
—
—
—
384
Commercial construction
—
—
—
—
—
—
—
—
One- to four-family residential
722
716
—
—
(21)
(31)
(664)
722
Other residential
—
—
—
—
—
—
—
—
Commercial real estate
1,579
10,991
—
—
—
—
(2,018)
10,552
Commercial business
586
47
—
—
—
—
(602)
31
Consumer
399
204
(11)
—
—
(123)
(410)
59
Total non-performing loans
$ 3,670
$
11,958
$
(11)
$
—
$
(21)
$ (154)
$ (3,694)
$
11,748
FDIC-assisted acquired loans included
above
$
428
$
2,298
$
—
$
—
$
(21)
$
(31)
$
(412)
$
2,262
At December 31, 2023, the non-performing commercial real estate category included four loans, two of which were added during the
year ended December 31, 2023. The largest relationship in this category, which totaled $8.1 million, or 76.4% of the total category,
was added to non-performing loans during the three months ended June 30, 2023 and was collateralized by an office building in
Missouri. The loan was classified due to a decline in occupancy resulting in a stressed cash flow. In 2023, occupancy improved
somewhat and lease income from the building continued, and the Company received some principal paydowns from the borrower.
Another significant relationship was added to the commercial real estate category in the three months ended December 31, 2023. This
relationship totaled $2.2 million and was collateralized by an assisted living facility in Wisconsin. The non-performing one- to four-
family residential category included three loans. The largest relationship in this category, which was added during 2023 and was
collateralized by a single-family home in the Kansas City metro area, totaled $543,000, or 75.2% of the total category. The non-
performing land development category consisted of one loan added in 2021, which totaled $384,000 and was collateralized by
unimproved zoned vacant ground in southern Illinois. The non-performing commercial business category consisted of two loans that
totaled $31,000 to a single borrower, both of which were added during 2023. The non-performing consumer category included six
loans, three of which were added during 2023.
Other Real Estate Owned and Repossessions. All of the total $23,000 of other real estate owned and repossessions at December 31,
2023 were acquired through foreclosure.
106
Activity in foreclosed assets and repossessions during the year ended December 31, 2023, was as follows:
Beginning
Ending
Balance,
Capitalized
Write-
Balance,
January 1
Additions
Sales
Costs
Downs
December 31
(In Thousands)
One- to four-family construction
$
—
$
—
$
—
$
—
$
—
$
—
Subdivision construction
—
—
—
—
—
—
Land development
—
—
—
—
—
—
Commercial construction
—
—
—
—
—
—
One- to four-family residential
—
21
(21)
—
—
—
Other residential
—
—
—
—
—
—
Commercial real estate
—
—
—
—
—
—
Commercial business
—
—
—
—
—
—
Consumer
50
88
(115)
—
—
23
Total foreclosed assets and repossessions
$
50
$
109
$
(136)
$
—
$
—
$
23
FDIC-assisted acquired assets included above
$
—
$
21
$
(21)
$
—
$
—
$
—
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.
Potential Problem Loans. Potential problem loans increased $5.8 million during the year ended December 31, 2023, from $1.6 million
at December 31, 2022 to $7.4 million at December 31, 2023.
Activity in the potential problem loans category during the year ended December 31, 2023, was as follows:
Removed
Transfers to
Beginning
Additions
from
Transfers to
Foreclosed
Ending
Balance,
to Potential
Potential
Non-
Assets and
Charge-
Balance,
January 1
Problem
Problem
Performing
Repossessions
Offs
Payments
December 31
(In Thousands)
One- to four-family construction
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Subdivision construction
—
—
—
—
—
—
—
—
Land development
—
—
—
—
—
—
—
—
Commercial construction
—
—
—
—
—
—
—
—
One- to four-family residential
1,348
167
(1,016)
(105)
—
—
(236)
158
Other residential
—
7,162
—
—
—
—
—
7,162
Commercial real estate
—
—
—
—
—
—
—
—
Commercial business
—
—
—
—
—
—
—
—
Consumer
230
60
(143)
(6)
(5)
(15)
(67)
54
Total potential problem loans
$ 1,578
$
7,389
$ (1,159)
$
(111)
$
(5)
$
(15)
$
(303)
$
7,374
FDIC-assisted acquired loans included
above
$
743
$
—
$
(639)
$
—
$
—
$
—
$
(4)
$
100
At December 31, 2023, the other residential (multi-family) category of potential problem loans included one loan, which totaled $7.2
million, and was added in 2023. This loan was collateralized by an apartment and retail project in Oklahoma City, OK. This loan was
added to potential problems loans due to a decline in occupancy resulting in a stressed cash flow. At December 31, 2023, the one- to
four-family residential category of potential problem loans included two loans. The largest relationship in this category totaled
$99,000, or 62.5% of the total category. The consumer category of potential problem loans included six loans.
Loans Categorized as “Watch” and “Special Mention”
Loans classified as “Watch” decreased $20.4 million, from $28.7 million at December 31, 2022 to $8.3 million at December 31, 2023,
primarily due to the combination of one large loan being upgraded to “Satisfactory,” one unrelated large loan being downgraded to
“Substandard” and added to non-performing loans, and one unrelated loan being downgraded to “Special Mention.” While loans
107
classified as “Special Mention” are not adversely classified, they are deserving of management’s close attention to ensure repayment
prospects or the credit position of the assets does not deteriorate and expose the institution to elevated risk to warrant adverse
classification at a future date. In the year ended December 31, 2023, loans classified as “Special Mention” increased $26.7 million as
four loan relationships were downgraded from “Satisfactory.” The largest relationship consisted of four commercial business loans
totaling $9.9 million at December 31, 2023 and were secured by business assets, equipment, accounts receivable and real estate. The
relationship was added to the “Special Mention” category during 2023 due to stressed cash flow associated with business expansion.
At December 31, 2023, a $9.6 million relationship was included in the “Special Mention” category. The balance represented a
participation in a loan collateralized by a student housing project in Texas. The Company was not the lead lender for this relationship.
The project suffered from rising debt service requirements and a decline in occupancy. A relationship totaling $4.4 million at
December 31, 2023 was added to the “Special Mention” category in 2023. This relationship was collateralized by three assisted care
facilities located in southwest Missouri. Business cash flow was negatively impacted by a labor shortage and a decrease in Medicaid
reimbursement during 2022-2023. Monthly payments continue to amortize the loan balance. See Note 3 for further discussion of the
Company’s loan grading system.
Non-Interest Income
Non-interest income for the year ended December 31, 2023 was $30.1 million compared to $34.1 million for the year ended December
31, 2022. The decrease of $4.0 million, or 11.9%, was primarily as a result of the following items:
Point-of-sale and ATM fees: Point-of-sale and ATM fees decreased $1.4 million compared to the prior year. This decrease was
primarily due to a portion of these transactions now being routed through channels with lower fees to the Company, which is expected
to continue in future periods, and certain increases in related processing costs during the transition to a new debit card processor.
Other income: Other income decreased $1.2 million compared to the prior year. In 2022, a gain of $1.1 million was recognized on
sales of fixed assets, with no similar transactions occurring in the current year.
Gain (loss) on derivative interest rate products: In 2023, the Company recognized a loss of $337,000 on the change in fair value of its
back-to-back interest rate swaps related to commercial loans and the change in fair value on interest rate swaps related to brokered
time deposits. In 2022, the Company recognized a gain of $321,000 on the change in fair value of its back-to-back interest rate swaps
related to commercial loans.
Non-Interest Expense
Total non-interest expense increased $7.6 million, or 5.7%, from $133.4 million in the year ended December 31, 2022, to $141.0
million in the year ended December 31, 2023. The Company’s efficiency ratio for the year ended December 31, 2023 was 63.16%,
compared to 57.05% for 2022. In the year ended December 31, 2023, the change in the efficiency ratio was primarily due to an
increase in non-interest expense, and decreases non-interest income and net interest income. The Company’s ratio of non-interest
expense to average assets was 2.47% for the year ended December 31, 2023 compared to 2.42% for the year ended December 31,
2022. Average assets for the year ended December 31, 2023, increased $199.4 million, or 3.6%, from the year ended December 31,
2022, primarily due to increases in average net loans receivable.
The following were key items related to the increase in non-interest expense for the year ended December 31, 2023 as compared to the
year ended December 31, 2022:
Salaries and employee benefits: Salaries and employee benefits increased $3.2 million from the prior year. A portion of this increase
related to normal annual merit increases in various lending and operations areas. In 2023, some of these increases were larger than in
previous years due to the current employment environment. Also, in the fourth quarter of 2023, the Company recorded expense
totaling $441,000 related to discretionary bonuses awarded to various associates who have been involved significantly in the software
and systems transition. In addition, compensation costs related to originated loans that are deferred under accounting rules decreased
by $1.3 million in 2023 compared to 2022 (resulting in higher expense in 2023), as the volume of loans originated in 2023 decreased
substantially compared to 2022.
Net occupancy expenses: Net occupancy expenses increased $2.4 million from the prior year. Various components of computer
license and support expenses increased by $1.4 million in 2023 compared to 2022. In addition, various repairs and maintenance
expenses increased by $252,000 in 2023 compared to 2022.
108
Insurance: Insurance expense increased $1.3 million from the prior year. The increase was primarily due to previously announced
increases in deposit insurance rates for the FDIC’s Deposit Insurance Fund.
Legal, Audit and Other Professional Fees: Legal, audit and other professional fees increased $756,000 from the prior year, to $7.1
million. In 2023, the Company expensed a total of $4.0 million, primarily related to training and implementation costs for the
upcoming core systems conversion and professional fees to consultants engaged to support the Company’s transition of core and
ancillary software and information technology systems, compared to $3.1 million expensed in 2022. In addition, in 2022, the
Company expensed $372,000 in fees related to the interest rate swaps initiated in July 2022, which was not repeated in 2023.
Provision for Income Taxes
For the years ended December 31, 2023 and 2022, the Company’s effective tax rate was 20.6% and 19.4%, respectively. These
effective rates were near 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.
Liquidity
Liquidity is a measure of the Company’s ability to generate sufficient cash to meet present and future financial obligations in a timely
manner through either the sale or maturity of existing assets or the acquisition of additional funds through liability management. These
obligations include the credit needs of customers, funding deposit withdrawals, and the day-to-day operations of the Company. Liquid
assets include cash, interest-bearing deposits with financial institutions and certain investment securities and loans. As a result of the
Company’s 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 December 31, 2024, the Company
had commitments of approximately $48.9 million to fund loan originations, $1.20 billion of unused lines of credit and unadvanced
loans, and $16.8 million of outstanding letters of credit.
Loan commitments and the unfunded portion of loans at the dates indicated were as follows (in thousands):
December 31,
December 31,
December 31,
December 31,
December 31,
2024
2023
2022
2021
2020
Closed non-construction loans with unused available lines
Secured by real estate (one- to four-family)
$
205,599
$
203,964
$
199,182
$
175,682
$
164,480
Secured by real estate (not one- to four-family)
—
—
—
23,752
22,273
Not secured by real estate - commercial business
106,621
82,435
104,452
91,786
77,411
Closed construction loans with unused available lines
Secured by real estate (one-to four-family)
94,501
101,545
100,669
74,501
42,162
Secured by real estate (not one-to four-family)
703,947
719,039
1,444,450
1,092,029
823,106
Loan commitments not closed
Secured by real estate (one-to four-family)
14,373
12,347
16,819
53,529
85,917
Secured by real estate (not one-to four-family)
53,660
48,153
157,645
146,826
45,860
Not secured by real estate - commercial business
22,884
11,763
50,145
12,920
699
$
1,201,585
$
1,179,246
$
2,073,362
$
1,671,025
$
1,261,908
109
The following table summarizes the Company’s fixed and determinable contractual obligations by payment date as of December 31,
2024. Additional information regarding these contractual obligations is discussed further in Notes 5, 7, 8, 9, 10, 11, 12 and 17 of the
accompanying audited financial statements, which are included in Item 8 of this Report.
Payments Due In:
One Year or
Over One to
Over Five
Less
Five Years
Years
Total
(In Thousands)
Deposits without a stated maturity
$ 3,057,663
$
—
$
—
$ 3,057,663
Time and brokered certificates of deposit
1,386,078
160,868
940
1,547,886
Short-term borrowings
578,691
—
—
578,691
Subordinated debentures
—
—
25,774
25,774
Subordinated notes
—
—
74,876
74,876
Operating leases
1,313
4,309
1,988
7,610
Dividends declared but not paid
4,692
—
—
4,692
$ 5,028,437
$ 165,177
$ 103,578
$ 5,297,192
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 some or all these sources of funds depending 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. In mid-2022, the
Company steadily began increasing the interest rates it paid on many deposit products until September 2024 when the Company
decreased the interest rates it paid on certain 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, 2024 and 2023, the Company had these available secured lines and on-balance sheet liquidity:
December 31, 2024
December 31, 2023
Federal Home Loan Bank line
$
1,058.8 million
$
919.1 million
Federal Reserve Bank line
346.4 million
448.7 million
Cash and cash equivalents
195.8 million
211.3 million
Unpledged securities – Available-for-sale
329.9 million
352.8 million
Unpledged securities – Held-to-maturity
25.0 million
191.7 million
Statements of Cash Flows. During each of the years ended December 31, 2024, 2023 and 2022, the Company experienced positive
cash flows from operating activities, negative cash flows from investing activities and positive cash flows from financing activities.
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 $44.1 million, $80.7 million and $84.8 million during the years ended December
31, 2024, 2023 and 2022, respectively.
During the years ended December 31, 2024, 2023 and 2022, investing activities used cash of $175.4 million, $88.2 million and $819.5
million, respectively, primarily due to the net increases and purchases of loans and investment securities and investments in tax credit
partnerships, partially offset by cash received from the proceeds of repayments from investment securities in each year.
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 FRB BTFP borrowings, purchases of the
Company’s common stock and dividend payments to stockholders. Financing activities provided cash flows of $115.8 million, $50.3
million and $186.0 million during the years ended December 31, 2024, 2023 and 2022, respectively, primarily due to net increases in
110
customer deposit balances (2023 and 2022) and net increases in various borrowings, partially offset by dividend payments to
stockholders and purchases of the Company’s common stock.
Capital Resources
Management continuously reviews the capital position of the Company and the Bank to ensure compliance with minimum regulatory
requirements, as well as to explore ways to increase capital either by retained earnings or other means.
At December 31, 2024, the Company’s total stockholders’ equity was $599.6 million, or 10.0% of total assets, equivalent to a book
value of $51.14 per common share. As of December 31, 2023, total stockholders’ equity was $571.8 million, or 9.8% of total assets,
equivalent to a book value of $48.44 per common share. At December 31, 2024, the Company’s tangible common equity to tangible
assets ratio was 9.9%, compared to 9.7% at December 31, 2023.
Included in stockholders’ equity at December 31, 2024 and 2023, were unrealized losses (net of taxes) on the Company’s available-
for-sale investment securities totaling $46.1 million and $40.5 million, respectively. This change in net unrealized losses during the
year ended December 31, 2024, primarily resulted from increasing intermediate-term market interest rates which generally decreased
the fair value of investment securities. Market interest rates fluctuated throughout 2024, resulting in fluctuations in the fair value of
investment securities. Intermediate-term market interest rates decreased during the period from June 30, 2024 through September 30,
2024 (which generally increased the fair value of investment securities). In the three months ended December 31, 2024, intermediate-
term market interest rates increased significantly (which once again generally decreased the fair value of investment securities).
In addition, included in stockholders’ equity at December 31, 2024, were realized gains (net of taxes) on the Company’s cash flow
hedge (interest rate swap), which was terminated in March 2020, totaling $4.8 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, 2024, the remaining pre-tax amount to be recorded in interest income was $6.2 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, 2024, were unrealized losses (net of taxes) on the Company’s two outstanding
cash flow hedges (two interest rate swaps totaling $400 million notional value) totaling $12.8 million. Increases in market interest
rates since the inception of these hedges have caused their fair values to decrease.
As noted above, total stockholders’ equity increased $27.8 million, from $571.8 million at December 31, 2023 to $599.6 million at
December 31, 2024. Stockholders’ equity increased due to the Company recording net income of $61.8 million for the year ended
December 31, 2024 and due to $11.9 million in stock option exercises during 2024. Partially offsetting these increases were
repurchases of the Company’s common stock totaling $15.2 million and dividends declared on common stock of $18.7 million. AOCI
(loss) increased $11.9 million (decrease to stockholders’ equity) during the year ended December 31, 2024, primarily due to changes
in the market value of available-for-sale securities and changes in the fair value of cash flow hedges.
The Company also had unrealized losses on its portfolio of held-to-maturity investment securities, which totaled $24.7 million at
December 31, 2024, that were not included in its total capital balance. If these held-to-maturity unrealized losses were included in
capital (net of taxes), this would have decreased total stockholder’s equity by $18.6 million at December 31, 2024. This amount was
equal to 3.1% of total stockholders’ equity of $599.6 million at that date.
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, 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, 2024, the Bank’s common equity Tier
1 capital ratio was 12.6%, its Tier 1 capital ratio was 12.6%, its total capital ratio was 13.9% and its Tier 1 leverage ratio was 11.0%.
As a result, as of December 31, 2024, the Bank was well capitalized, with capital ratios in excess of those required to qualify as such.
On December 31, 2023, the Bank’s common equity Tier 1 capital ratio was 13.1%, its Tier 1 capital ratio was 13.1%, its total capital
ratio was 14.3% and its Tier 1 leverage ratio was 11.6%. As a result, as of December 31, 2023, the Bank was well capitalized, with
capital ratios in excess of those required to qualify as such.
111
The FRB has established capital regulations for bank holding companies that generally parallel the capital regulations for banks. On
December 31, 2024, the Company’s common equity Tier 1 capital ratio was 12.3%, its Tier 1 capital ratio was 12.8%, its total capital
ratio was 15.4% and its Tier 1 leverage ratio was 11.2%. On December 31, 2023, the Company’s common equity Tier 1 capital ratio
was 11.9%, its Tier 1 capital ratio was 12.4%, its total capital ratio was 15.2% and its Tier 1 leverage ratio was 11.0%.
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, 2024 and 2023.
Dividends. During the year ended December 31, 2024, the Company declared common stock cash dividends of $1.60 per share
(30.4% of net income per common share) and paid common stock cash dividends of $1.60 per share. During the year ended December
31, 2023, the Company declared common stock cash dividends of $1.60 per share (28.5% of net income per common share) and paid
common stock cash dividends of $1.60 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, 2024, was paid to stockholders in January
2025.
Common Stock Repurchases and Issuances. The Company has been in various buy-back programs since May 1990. During the years
ended December 31, 2024 and 2023, the Company repurchased 284,483 shares of its common stock at an average price of $53.10 per
share and 449,622 shares of its common stock at an average price of $51.38 per share, respectively. During the years ended December
31, 2024 and 2023, the Company issued 203,601 shares of stock at an average price of $49.59 per share and 22,762 shares of stock at
an average price of $38.83 per share, respectively, to cover stock option exercises.
In December 2022, the Company’s Board of Directors authorized the purchase of up to one million shares of the Company’s
outstanding common stock, under a program of open market purchases or privately negotiated transactions. As of December 31, 2024,
a total of approximately 443,000 shares remained available in the Company’s stock repurchase authorization.
Management has historically utilized stock buy-back programs from time to time as long as management believed that repurchasing
the Company’s common stock would contribute to the overall growth of stockholder value. The number of shares that will be
repurchased at any particular time and the prices that will be paid are subject to many factors, several of which are outside of the
control of the Company. The primary factors typically include the number of shares available in the market from sellers at any given
time, the market price of the stock and the projected impact on the Company’s earnings per share and capital.
Non-GAAP Financial Measures
This document contains certain financial information determined by methods other than in accordance with accounting principles
generally accepted in the United States (“GAAP”). This non-GAAP financial information includes the tangible common equity to
tangible assets ratio.
In calculating the ratio of tangible common equity to tangible assets, we subtract period-end intangible assets from common equity
and from total assets. Management believes that the presentation of 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.
This non-GAAP financial measurement is supplemental and is 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.
112
Non-GAAP Reconciliation: Ratio of Tangible Common Equity to Tangible Assets
December 31,
December 31,
December 31,
December 31,
December 31,
2024
2023
2022
2021
2020
(Dollars In Thousands)
Common equity at period end
$
599,568
$
571,829
$
533,087
$
616,752
$
629,741
Less: Intangible assets at period end
10,094
10,527
10,813
6,081
6,944
Tangible common equity at period end (a)
$
589,474
$
561,302
$
522,274
$
610,671
$
622,797
Total assets at period end
$ 5,981,628
$ 5,812,402
$ 5,680,702
$ 5,449,944
$ 5,526,420
Less: Intangible assets at period end
10,094
10,527
10,813
6,081
6,944
Tangible assets at period end (b)
$ 5,971,534
$ 5,801,875
$ 5,669,889
$ 5,443,863
$ 5,519,476
Tangible common equity to tangible assets (a) / (b)
9.87 %
9.67 %
9.21 %
11.22 %
11.28 %
ITEM 7A.
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, 2024, Great Southern’s interest rate risk models indicated that, generally, rising interest rates are expected to
have a modestly positive impact on the Company’s net interest income, while declining interest rates are expected to have a mostly
neutral impact on net interest income. Any negative impact of a falling Federal Funds rate and other market interest rates also falling
could be more pronounced if we are not able to decrease non-maturity deposit rates accordingly. 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
113
relatively minor changes in interest rates because our portfolios are relatively well matched in a twelve-month horizon. In a situation
where market interest rates increase significantly in a short period of time, our net interest margin increase may be more pronounced
in the very near term (first one to three months), due to fairly rapid increases in SOFR interest rates (which replaced LIBOR interest
rates) and “prime” interest rates. In a situation where market interest rates decrease significantly in a short period of time, as they did
in March 2020, our net interest margin decrease may be more pronounced in the very near term (first one to three months), due to
fairly rapid decreases in SOFR interest rates and “prime” interest rates. In the subsequent months, we would expect that net interest
margin would stabilize and begin to recover, as renewal interest rates on maturing time deposits decrease compared to the then-current
rates paid on those products. During 2020, we experienced some compression of our net interest margin percentage due to the Federal
Funds rate being cut by 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 net interest margin remained
lower than our historical average in 2021. LIBOR/SOFR 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 remained
in most of our markets. After March 2022, market interest rates increased fairly rapidly. This increased loan yields and expanded our
net interest income and net interest margin in the latter half of 2022 and the first three months of 2023. 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, including changes in the funding mix, as experienced in the year ended December 31, 2023 and much of 2024. As of December
31, 2024, time deposit maturities over the next 12 months were as follows: within three months -- $724.3 million with a weighted-
average rate of 4.19%; within three to six months -- $306.1 million with a weighted-average rate of 3.86%; and within six to twelve
months -- $155.6 million with a weighted-average rate of 3.34%. Based on time deposit market rates in February 2025, replacement
rates for these maturing time deposits are likely to be approximately 3.50-4.00%.
The current level and shape of the interest rate yield curve poses challenges for interest rate risk management. Prior to its increase of
0.25% on December 16, 2015, the FRB had last changed interest rates on December 16, 2008. This was the first rate increase since
September 29, 2006. The FRB also implemented rate increases of 0.25% on eight additional occasions beginning December 14, 2016
and through December 31, 2018, with the Federal Funds rate reaching as high as 2.50%. After December 2018, the FRB paused its
rate increases and, in July, September and October 2019, implemented rate decreases of 0.25% on each of those occasions. At
December 31, 2019, the Federal Funds rate stood at 1.75%. In response to the COVID-19 pandemic, the FRB decreased interest rates
on two occasions in March 2020, a 0.50% decrease on March 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%. In 2023, the FRB implemented rate increases of 0.25%, 0.25%, 0.25% and 0.25% in February, March, May and July
2023, respectively. At December 31, 2023 the Federal Funds rate was 5.50%. In 2024, the FRB implemented rate decreases of 0.50%,
0.25%, and 0.25% in September, November and December, respectively. At December 31, 2024, the Federal Funds rate was 4.50%.
Financial markets now expect the possibility of further decreases in Federal Funds interest rates in 2025 to be likely, but possibly cuts
of only 0.50% at a methodical pace and with interest rate decisions being made at each FRB meeting based on economic data
available at the time.
Great Southern’s loan portfolio includes loans ($1.57 billion at December 31, 2024) tied to various SOFR indices that will be subject
to adjustment at least once within 90 days after December 31, 2024. All of these loans have interest rate floors at various rates. Great
Southern also has a portfolio of loans ($748.0 million at December 31, 2024) tied to a “prime rate” of interest that will adjust
immediately or within 90 days of a change to the “prime rate” of interest. Nearly all of these loans have interest rate floors at various
rates. In addition, Great Southern has a portfolio of loans ($8.6 million at December 31, 2024) tied to an AMERIBOR index that will
adjust immediately or within 90 days of a change to the rate of interest on this index. All of these loans have interest rate floors at
various rates. At December 31, 2024, nearly all of these SOFR, AMERIBOR 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, and most are expected to move
fully with future market interest rate decreases as many of these loans have floor rates well below their current index rate.
Interest rate risk exposure estimates (the sensitivity gap) are not exact measures of an institution’s actual interest rate risk. They are
only indicators of interest rate risk exposure produced in a simplified modeling environment designed to allow management to gauge
the Bank’s sensitivity to changes in interest rates. They do not necessarily indicate the impact of general interest rate movements on
the Bank’s net interest income because the repricing of certain categories of assets and liabilities is subject to competitive and other
factors beyond the Bank’s control. As a result, certain assets and liabilities indicated as maturing or otherwise repricing within a stated
period may in fact mature or reprice at different times and in different amounts and cause a change, which could be material, in the
Bank’s interest rate risk.
114
In order to minimize the potential for adverse effects of material and prolonged increases and decreases in interest rates on Great
Southern’s results of operations, Great Southern has adopted asset and liability management policies to better match the maturities and
repricing terms of Great Southern’s interest-earning assets and interest-bearing liabilities. Management recommends and the Board of
Directors sets the asset and liability policies of Great Southern which are implemented by the Asset and Liability Committee. The
Asset and Liability Committee is chaired by the Chief Financial Officer and is comprised of members of Great Southern’s senior
management. The purpose of the Asset and Liability Committee is to communicate, coordinate and control asset/liability management
consistent with Great Southern’s business plan and board-approved policies. The Asset and Liability Committee establishes and
monitors the volume and mix of assets and funding sources taking into account relative costs and spreads, interest rate sensitivity and
liquidity needs. The objectives are to manage assets and funding sources to produce results that are consistent with liquidity, capital
adequacy, growth, risk and profitability goals. The Asset and Liability Committee meets on a monthly basis to review, among other
things, economic conditions and interest rate outlook, current and projected liquidity needs and capital positions and anticipated
changes in the volume and mix of assets and liabilities. At each meeting, the Asset and Liability Committee recommends appropriate
strategy changes based on this review. The Chief Financial Officer or his designee is responsible for reviewing and reporting on the
effects of the policy implementations and strategies to the Board of Directors at their monthly meetings.
In order to manage its assets and liabilities and achieve the desired liquidity, credit quality, interest rate risk, profitability and capital
targets, Great Southern has focused its strategies on originating adjustable rate loans or loans with fixed rates that mature in less than
five years, and managing its deposits and borrowings to establish stable relationships with both retail customers and wholesale funding
sources.
At times, depending on the level of general interest rates, the relationship between long- and short-term interest rates, market
conditions and competitive factors, we may determine to increase our interest rate risk position somewhat in order to maintain or
increase our net interest margin.
The Asset and Liability Committee regularly reviews interest rate risk by forecasting the impact of alternative interest rate
environments on net interest income and market value of portfolio equity, which is defined as the net present value of an institution’s
existing assets, liabilities and off-balance sheet instruments, and evaluating such impacts against the maximum potential changes in
net interest income and market value of portfolio equity that are authorized by the Board of Directors of Great Southern.
In the normal course of business, the Company may use derivative financial instruments (primarily interest rate swaps) from time to
time to assist in its interest rate risk management. In 2011, the Company began executing interest rate swaps with commercial banking
customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting
interest rate swaps that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from
such transactions. Because the interest rate swaps associated with this program do not meet the strict hedge accounting requirements,
changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. These interest rate
derivatives result from a service provided to certain qualifying customers and, therefore, are not used to manage interest rate risk in
the Company’s assets or liabilities. The Company manages a matched book with respect to its derivative instruments in order to
minimize its net risk exposure resulting from such transactions.
In October 2018, the Company entered into an interest rate swap transaction as part of its ongoing interest rate management strategies
to hedge the risk of its floating rate loans. The notional amount of the swap was $400 million with a contractual termination date of
October 6, 2025. Under the terms of the swap, the Company received a fixed rate of interest of 3.018% and paid a floating rate of
interest equal to one-month USD-LIBOR (now SOFR). 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-SOFR 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 was $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 received a fixed rate of interest of
115
1.6725% and paid a floating rate of interest equal to one-month USD-LIBOR (now SOFR). The floating rate reset monthly and net
settlements of interest due to/from the counterparty also occurred monthly. The initial floating rate of interest was set at 0.24143%.
The Company received net interest settlements, which were recorded as loan interest income, to the extent that the fixed rate of
interest exceeded one-month USD-SOFR. If the USD-SOFR rate exceeded the fixed rate of interest, the Company paid net settlements
to the counterparty and recorded 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 receives a fixed rate of interest
of 2.628% and pays 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 receives a fixed rate of interest of 5.725% and pays a floating rate of interest equal to one-month USD-
Prime. In each case, the floating rate resets monthly and net settlements of interest due to/from the counterparty also occur monthly.
To the extent the fixed rate of interest exceeds the floating rate of interest, the Company receives net interest settlements, which are
recorded as loan interest income. If the floating rate of interest exceeds the fixed rate of interest (as it does currently), the Company
pays net settlements to the counterparty and records those net payments as a reduction of interest income on loans.
In February 2023, the Company entered into interest rate swap transactions as part of its ongoing interest rate management strategies
to hedge the risk of certain of its fixed rate brokered deposits. The total notional amount of the swaps was $95 million with a
termination date of February 28, 2025. Under the terms of the swaps, the Company received a fixed rate of interest of 4.65% and paid
a floating rate of interest equal to USD-SOFR-COMPOUND plus a spread. The floating rate 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 USD-SOFR-
COMPOUND plus the spread, the Company received net interest settlements, which were recorded as a reduction of deposit interest
expense. If USD-SOFR-COMPOUND plus the spread exceeded the fixed rate of interest, the Company was required to pay net
settlements to the counterparty and record those net payments as interest expense on deposits.
In January 2024, the Company elected to terminate the swaps related to brokered deposits prior to their contractual termination date in
2025. The Company received a net settlement payment from the swap counterparty totaling $26,500 upon termination. At the time of
the early termination, the Company recorded a market value adjustment to the brokered deposit of $163,000, which was amortized as
a reduction of interest expense from January 2024 through February 2025.
The Company’s interest rate derivatives and hedging activities are discussed further in Note 15 of the accompanying audited financial
statements, which are included in Item 8 of this Report.
116
The following tables illustrate the expected maturities and repricing, respectively, of the Bank’s financial instruments at December 31,
2024. 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
December 31,
December 31,
2024
2025
2026
2027
2028
2029
2030-2039
Thereafter
Total
Fair Value
(Dollars In Thousands)
Financial Assets:
Interest bearing deposits
$
86,390
—
—
—
—
—
—
$
86,390
$
86,390
Weighted average rate
4.36 %
—
—
—
—
—
—
4.36 %
Available-for-sale debt securities (1)
$
7,995
$
2,591
$
17,086
$
15,829
$
16,550
$ 215,386
$
257,936
$
533,373
$
533,373
Weighted average rate
4.10 %
1.94 %
1.55 %
3.88 %
2.75 %
3.07 %
3.07 %
3.05 %
Held-to-maturity securities (2)
—
$
515
—
$
32,182
$
11,978
$
61,123
$
81,635
$
187,433
$
162,765
Weighted average rate
—
1.49 %
—
3.49 %
2.92 %
2.35 %
2.47 %
2.63 %
Adjustable rate loans (3)
$ 1,056,077
$
603,878
$ 338,240
$
94,672
$ 148,690
$ 128,377
$
618,839
$
2,988,773
$
2,915,599
Weighted average rate
7.36 %
7.34 %
7.21 %
7.44 %
7.10 %
6.79 %
3.74 %
6.56 %
Fixed rate loans (3)
$
393,526
$
475,815
$ 327,590
$ 213,845
$ 194,633
$ 145,647
$
28,956
$
1,780,012
$
1,692,522
Weighted average rate
5.41 %
5.02 %
4.99 %
5.20 %
5.59 %
4.45 %
4.71 %
5.13 %
Federal Home Loan Bank stock and other interest earning assets
$
9,900
—
—
—
—
—
$
18,492
$
28,392
$
28,392
Weighted average rate
4.33 %
—
—
—
—
—
8.84 %
7.26 %
Total financial assets
$ 1,553,888
$ 1,082,799
$ 682,916
$ 356,528
$ 371,851
$ 550,533
$
1,005,858
$
5,604,373
Financial Liabilities:
Time deposits
$
762,159
$
8,381
$
2,761
$
947
$
584
$
940
—
$
775,772
$
772,295
Weighted average rate
3.67 %
0.79 %
0.70 %
0.67 %
1.34 %
1.19 %
—
3.62 %
Brokered funds
$
623,919
$
148,195
—
—
—
—
—
$
772,114
$
772,354
Weighted average rate
4.59 %
4.67 %
—
—
—
—
—
4.61 %
Interest-bearing demand
$ 2,214,732
—
—
—
—
—
—
$
2,214,732
$
2,214,732
Weighted average rate
1.39 %
—
—
—
—
—
—
1.39 %
Non-interest-bearing demand
$
842,931
—
—
—
—
—
—
$
842,931
$
842,931
Weighted average rate
—
—
—
—
—
—
—
—
Securities sold under reverse repurchase agreements
$
64,444
—
—
—
—
—
—
$
64,444
$
64,444
Weighted average rate
1.38 %
—
—
—
—
—
—
1.38 %
Short-term borrowings, overnight FHLB borrowings, and other liabilities
$
514,247
—
—
—
—
—
—
$
514,247
$
514,247
Weighted average rate
4.69 %
—
—
—
—
—
—
4.69 %
Subordinated notes
—
—
—
—
—
$
75,000
—
$
75,000
$
74,438
Weighted average rate
—
—
—
—
—
5.90 %
—
5.90 %
Subordinated debentures
—
—
—
—
—
$
25,774
—
$
25,774
$
25,774
Weighted average rate
—
—
—
—
—
6.43 %
—
6.43 %
Total financial liabilities
$ 5,022,432
$
156,576
$
2,761
$
947
$
584
$ 101,714
$
—
$
5,285,014
(1) Available-for-sale debt securities include approximately $477.4 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 $181.3 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) Fair value of loans is shown excluding the $64.8 million allowance for credit losses and $6.7 million of deferred loans fees to
correlate with the gross loan balances shown in the “Total” column.
117
Repricing
December 31,
December 31,
2024
2025
2026
2027
2028
2029
2030-2039 Thereafter
Total
Fair Value
(Dollars In Thousands)
Financial Assets:
Interest bearing deposits
$
86,390
—
—
—
—
—
—
$
86,390
$
86,390
Weighted average rate
4.36 %
—
—
—
—
—
—
4.36 %
Available-for-sale debt securities(1)
$
7,995
$
2,591
$
17,086
$
15,829
$
16,550
$ 215,386
$
257,936
$
533,373
$
533,373
Weighted average rate
4.10 %
1.94 %
1.55 %
3.88 %
2.75 %
3.07 %
3.07 %
3.05 %
Held-to-maturity securities (2)
—
515
$
—
32,182
$
11,978
$
61,123
$
81,635
$
187,433
$
162,765
Weighted average rate
—
1.49 %
—
3.49 %
2.92 %
2.35 %
2.47 %
2.63 %
Adjustable rate loans (3)
$
2,442,924
$
23,840
$
58,093
$
43,600
$
59,377
$ 360,939
—
$
2,988,773
$
2,915,599
Weighted average rate
7.16 %
3.35 %
3.84 %
3.99 %
4.61 %
3.74 %
—
6.56 %
Fixed rate loans (3)
$
393,526
$ 475,815
$ 327,590
$ 213,845
$ 194,633
$ 145,647
$
28,956
$
1,780,012
$
1,692,522
Weighted average rate
5.41 %
5.02 %
4.99 %
5.20 %
5.59 %
4.45 %
4.71 %
5.13 %
Federal Home Loan Bank stock and other interest earning assets
$
28,392
—
—
—
—
—
—
$
28,392
$
28,392
Weighted average rate
7.26 %
—
—
—
—
—
—
7.26 %
Total financial assets
$
2,959,227
$ 502,761
$ 402,769
$ 305,456
$ 282,538
$ 783,095
$
368,527
$
5,604,373
Financial Liabilities:
Time deposits
$
762,159
$
8,381
$
2,761
$
947
$
584
$
940
—
$
775,772
$
772,295
Weighted average rate
3.67 %
0.79 %
0.70 %
0.67 %
1.34 %
1.19 %
—
3.62 %
Brokered funds
$
723,919
$
48,195
—
—
—
—
—
$
772,114
$
772,354
Weighted average rate
4.59 %
4.90 %
—
—
—
—
—
4.61 %
Interest-bearing demand
$
2,214,732
—
—
—
—
—
—
$
2,214,732
$
2,214,732
Weighted average rate
1.39 %
—
—
—
—
—
—
1.39 %
Non-interest-bearing demand (4)
—
—
—
—
—
—
$
842,931
$
842,931
$
842,931
Weighted average rate
—
—
—
—
—
—
—
—
Securities sold under reverse repurchase agreements
$
64,444
—
—
—
—
—
—
$
64,444
$
64,444
Weighted average rate
1.38 %
—
—
—
—
—
—
1.38 %
Short-term borrowings, overnight FHLB borrowings, and other liabilities
$
514,247
—
—
—
—
—
—
$
514,247
$
514,247
Weighted average rate
4.69 %
—
—
—
—
—
—
4.69 %
Subordinated notes
$
75,000
—
—
—
—
—
—
$
75,000
$
74,438
Weighted average rate
5.90 %
—
—
—
—
—
—
5.90 %
Subordinated debentures
$
25,774
—
—
—
—
—
—
$
25,774
$
25,774
Weighted average rate
6.43 %
—
—
—
—
—
—
6.43 %
Total financial liabilities
$
4,380,275
$
56,576
$
2,761
$
947
$
584
$
940
$
842,931
$
5,285,014
Periodic repricing GAP
$ (1,421,048)
$ 446,185
$ 400,008
$ 304,509
$ 281,954
$ 782,155
$
(474,404)
$
319,359
Cumulative repricing GAP
$ (1,421,048)
$ (974,863)
$ (574,855)
$ (270,346)
$
11,608
$ 793,763
$
319,359
(1) Available-for-sale debt securities include approximately $477.4 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 $181.3 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) Fair value of loans is shown excluding the $64.8 million allowance for credit losses and $6.7 million of deferred loans fees to
correlate with the gross loan balances shown in the “Total” column.
(4) 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.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
118
Report of Independent Registered Public Accounting Firm
To the 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, 2024 and 2023, the related consolidated statements of income (loss), comprehensive income, stockholders’ equity,
and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively referred to
as the “consolidated 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, 2024 and 2023, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31, 2024, 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, 2024, 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 7, 2025, expressed an unqualified opinion thereon.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated 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.
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 consolidated 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 consolidated 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
consolidated 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 on Loans
The Company’s loan portfolio totaled $4.7 billion as of December 31, 2024, and the allowance for credit losses on loans was $64.8
million. This represents an estimate of expected losses inherent within the Company’s loan portfolio.
The Company bases its estimate of credit losses on three primary components: (1) quantitatively with estimates of expected losses that
exist in various segments of performing loans and leases over the remaining life of the loan portfolio based on historical loss rates; (2)
119
qualitatively with factors related to portfolio composition, underwriting practices, economic conditions with a reasonable and
supportable forecast and other relevant factors that address estimates of expected losses outside of the historical performance of the
loan portfolio; and (3) specifically identified losses in individually analyzed credits which are collateral dependent. The Company
measures the allowance for credit losses on loans on a collective (pool) basis. For loans evaluated for credit losses on a collective
basis, the average historical loss rates are calculated for each pool using the Company’s historical net charge-offs and outstanding loan
balances during a lookback period. The calculated average net charge-off rate is then adjusted for current conditions and reasonable
and supportable forecasts of macroeconomic variables.
We identified the valuation of the allowance for credit losses on loans as a critical audit matter. The principal considerations for our
determination of the allowance for credit losses on loans as a critical audit matter include the subjectivity and complexity involved in
management’s determination of credit loss estimates and assumptions, specifically the assumptions applied to the reasonable and
supportable forecasts. This required increased auditor effort, including specialized skill and knowledge, and a high degree of auditor
subjectivity in evaluating the estimated credit losses for the loan portfolio.
The primary procedures we performed to address this critical audit matter included the following:
x
Testing the design and operating effectiveness of controls, including those related to technology, over the allowance for credit
losses on loans, 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 management’s review and disclosure controls over the allowance for credit losses on loans;
x
Testing of completeness and accuracy of the information utilized in the allowance for credit losses on loans;
x
Testing the mathematical accuracy of the calculation of the allowance for credit losses on loans;
x
Evaluating the qualitative adjustments, including assessing the basis for the adjustments, the reasonableness of assumptions,
and completeness and accuracy of data inputs included in the qualitative adjustments;
x
Testing the loan review function and evaluating the accuracy of loan credit ratings;
x
Evaluating the disclosures in the consolidated financial statements.
/s/ Forvis Mazars, LLP
We have served as the Company’s auditor since 1975.
Springfield, Missouri
March 7, 2025
120
Great Southern Bancorp, Inc.
Consolidated Statements of Financial Condition
December 31, 2024 and 2023
(In Thousands, Except Per Share Data)
2024
2023
Assets
Cash
$
109,366
$
102,529
Interest-bearing deposits in other financial institutions
86,390
108,804
Cash and cash equivalents
195,756
211,333
Available-for-sale securities
533,373
478,207
Held-to-maturity securities
187,433
195,023
Mortgage loans held for sale
6,937
5,849
Loans receivable, net of allowance for credit losses of $64,760 and $64,670 at December 31,
2024 and 2023, respectively
4,690,393
4,589,620
Interest receivable
20,430
21,206
Prepaid expenses and other assets
136,594
106,225
Other real estate owned and repossessions, net
5,993
23
Premises and equipment, net
132,466
138,591
Goodwill and other intangible assets
10,094
10,527
Federal Home Loan Bank stock and other interest-earning assets
28,392
26,313
Current and deferred income taxes
33,767
29,485
Total assets
$
5,981,628
$
5,812,402
Liabilities and Stockholders’ Equity
Liabilities
Deposits
$
4,605,549
$
4,721,708
Securities sold under reverse repurchase agreements with customers
64,444
70,843
Short-term borrowings and other interest-bearing liabilities
514,247
252,610
Subordinated debentures issued to capital trust
25,774
25,774
Subordinated notes
74,876
74,579
Accrued interest payable
12,761
6,225
Advances from borrowers for taxes and insurance
5,272
4,946
Accrued expenses and other liabilities
70,634
76,401
Liability for unfunded commitments
8,503
7,487
Total liabilities
5,382,060
5,240,573
Commitments and Contingencies
—
—
Stockholders’ Equity
Capital stock
Serial preferred stock, $.01 par value; authorized 1,000,000 shares; issued and outstanding
2024 and 2023 – -0- shares
—
—
Common stock, $.01 par value; authorized 20,000,000 shares; issued and outstanding 2024 –
11,723,548 shares, 2023 – 11,804,430 shares
117
118
Additional paid-in capital
50,336
44,320
Retained earnings
603,477
569,872
Accumulated other comprehensive income (loss), net of income taxes (credit) of $(17,896) and
$(14,211) at December 31, 2024 and 2023, respectively
(54,362)
(42,481)
Total stockholders’ equity
599,568
571,829
Total liabilities and stockholders’ equity
$
5,981,628
$
5,812,402
See Notes to Accompanying Financial Statements
121
Great Southern Bancorp, Inc.
Consolidated Statements of Income
Years Ended December 31, 2024, 2023 and 2022
(In Thousands, Except Per Share Data)
2024
2023
2022
Interest Income
Loans
$
297,176
$
271,952
$
205,751
Investment securities and other
27,522
24,883
21,226
324,698
296,835
226,977
Interest Expense
Deposits
109,705
88,757
20,676
Securities sold under reverse repurchase agreements
1,407
1,205
324
Short-term borrowings, overnight FHLBank borrowings and other interest-bearing liabilities
18,222
7,500
1,066
Subordinated debentures issued to capital trust
1,798
1,736
875
Subordinated notes
4,423
4,422
4,422
135,555
103,620
27,363
Net Interest Income
189,143
193,215
199,614
Provision for Credit Losses on Loans
1,700
2,250
3,000
Provision (Credit) for Unfunded Commitments
1,016
(5,329)
3,187
Net Interest Income After Provision (Credit) for Credit Losses and Provision (Credit) for
Unfunded Commitments
186,427
196,294
193,427
Non-interest Income
Commissions
1,227
1,153
1,208
Overdraft and insufficient funds fees
5,140
7,617
7,872
Point-of-sale and ATM fee income and service charges
13,586
14,346
15,705
Net gain on loan sales
3,779
2,354
2,584
Net realized loss on sales of available-for-sale securities
—
—
(130)
Late charges and fees on loans
512
786
1,182
Gain (loss) on derivative interest rate products
(58)
(337)
321
Other income
6,379
4,154
5,399
30,565
30,073
34,141
Non-interest Expense
Salaries and employee benefits
78,599
78,521
75,300
Net occupancy and equipment expense
32,118
30,834
28,471
Postage
3,329
3,590
3,379
Insurance
4,622
4,542
3,197
Advertising
3,124
3,396
3,261
Office supplies and printing
1,008
1,057
867
Telephone
2,772
2,730
3,170
Legal, audit and other professional fees
5,399
7,086
6,330
Expense (income) on other real estate and repossessions
(304)
311
359
Acquired intangible asset amortization
433
286
768
Other operating expenses
10,395
8,670
8,264
141,495
141,023
133,366
Income Before Income Taxes
75,497
85,344
94,202
Provision for Income Taxes
13,690
17,544
18,254
Net Income
$
61,807
$
67,800
$
75,948
Earnings Per Common Share
Basic
$
5.28
$
5.65
$
6.07
Diluted
$
5.26
$
5.61
$
6.02
See Notes to Accompanying Financial Statements
122
Great Southern Bancorp, Inc.
Consolidated Statements of Comprehensive Income
Years Ended December 31, 2024, 2023 and 2022
(In Thousands)
2024
2023
2022
Net Income
$
61,807
$
67,800
$
75,948
Unrealized appreciation (depreciation) on available-for-sale securities, net of taxes
(credit) of $(1,846), $2,199 and $(18,106) for 2024, 2023 and 2022, respectively
(5,660)
6,738
(56,448)
Unrealized loss (gain) on securities transferred to held-to-maturity, net of taxes
(credit) of $(48), $(45) and $29 for 2024, 2023 and 2022, respectively
(149)
(138)
89
Less: reclassification adjustment for loss included in net income, net of taxes of $-0-,
$-0- and $32 for 2024, 2023 and 2022, respectively
—
—
98
Amortization of realized gain on termination of cash flow hedge, net of credit of
$(1,859), $(1,855) and $(1,852), for 2024, 2023, and 2022, respectively
(6,286)
(6,267)
(6,271)
Change in value of active cash flow hedges, net of taxes (credit) of $69, $3,441 and
$(7,695) for 2024, 2023 and 2022, respectively
214
10,541
(23,582)
Other comprehensive income (loss)
(11,881)
10,874
(86,114)
Comprehensive Income (Loss)
$
49,926
$
78,674
$
(10,166)
See Notes to Accompanying Financial Statements
123
Great Southern Bancorp, Inc.
Consolidated Statements of Stockholders’ Equity
Years Ended December 31, 2024, 2023 and 2022
(In Thousands, Except Per Share Data)
Accumulated
Additional
Other
Common
Paid-in
Retained
Comprehensive
Treasury
Stock
Capital
Earnings
Income (Loss)
Stock
Total
Balance, January 1, 2022
$
131
$ 38,314
$ 545,548
$
32,759 $
—
$ 616,752
Net income
—
—
75,948
—
—
75,948
Stock issued under Stock Option Plan
—
4,131
—
—
3,564
7,695
Common cash dividends declared [1]
—
—
(19,347)
—
—
(19,347)
Repurchase of the Company’s common stock
—
—
—
—
(61,847)
(61,847)
Other comprehensive loss
—
—
—
(86,114)
—
(86,114)
Reclassification of treasury stock per Maryland law
(9)
—
(58,274)
—
58,283
—
Balance, December 31, 2022
122
42,445
543,875
(53,355)
—
533,087
Net income
—
—
67,800
—
—
67,800
Stock issued under Stock Option Plan
—
1,875
—
—
630
2,505
Common cash dividends declared [2]
—
—
(19,111)
—
—
(19,111)
Repurchase of the Company’s common stock
—
—
—
—
(23,326)
(23,326)
Other comprehensive income
—
—
—
10,874
—
10,874
Reclassification of treasury stock per Maryland law
(4)
—
(22,692)
—
22,696
—
Balance, December 31, 2023
118
44,320
569,872
(42,481)
—
571,829
Net income
—
—
61,807
—
—
61,807
Stock issued under Stock Option Plan
—
6,016
—
—
5,850
11,866
Common cash dividends declared [3]
—
—
(18,678)
—
—
(18,678)
Retained Earnings effect of ASU 2023-02 adoption
—
—
(223)
—
—
(223)
Repurchase of the Company’s common stock
—
—
—
—
(15,152)
(15,152)
Other comprehensive loss
—
—
—
(11,881)
—
(11,881)
Reclassification of treasury stock per Maryland law
(1)
—
(9,301)
—
9,302
—
Balance, December 31, 2024
$
117
$ 50,336
$ 603,477
$
(54,362) $
—
$ 599,568
[1]
$1.56 per share total dividends.
[2] $1.60 per share total dividends.
[3] $1.60 per share total dividends.
See Notes to Accompanying Financial Statements
124
Great Southern Bancorp, Inc.
Consolidated Statements of Cash Flows
Years Ended December 31, 2024, 2023 and 2022
(In Thousands)
2024
2023
2022
Operating Activities
Net income
$
61,807
$
67,800
$
75,948
Proceeds from sales of loans held for sale
174,759
157,213
103,347
Originations of loans held for sale
(171,757)
(155,995)
(95,007)
Items not requiring (providing) cash
Depreciation
8,238
8,723
8,498
Amortization
712
589
1,179
Compensation expense for stock option grants
1,770
1,621
1,437
Provision for credit losses
1,700
2,250
3,000
Provision (credit) for unfunded commitments
1,016
(5,329)
3,187
Net gain on loan sales
(3,779)
(2,354)
(2,584)
Net realized loss on available-for-sale securities
—
—
130
Loss (gain) on sale of premises and equipment
(43)
26
(1,023)
Loss (gain) on sale/write-down of other real estate and repossessions
(496)
39
(126)
Accretion of deferred income, premiums, discounts and other
(14,337)
(13,774)
(15,842)
Loss (gain) on derivative interest rate products
58
337
(321)
Net non-cash gain recorded on contract termination
(2,762)
—
—
Deferred income taxes
457
2,985
2,485
Changes in
Interest receivable
776
(2,099)
(8,402)
Prepaid expenses and other assets
(178)
(4,543)
2,141
Accrued expenses and other liabilities
(12,847)
23,470
5,637
Income taxes refundable/payable
(1,030)
(259)
1,162
Net cash provided by operating activities
44,064
80,700
84,846
Investing Activities
Net change in loans
(78,098)
(79,096)
(134,344)
Purchase of loans
(26,251)
(400)
(361,817)
Purchase of premises and equipment
(4,924)
(7,300)
(20,110)
Proceeds from sale of premises and equipment
164
254
3,980
Proceeds from sale of other real estate and repossessions
1,706
313
2,351
Proceeds from sale of available-for-sale securities
—
—
18,375
Proceeds from repayments of held-to-maturity securities
7,318
7,228
23,821
Proceeds from maturities, calls and repayments of available-for-sale securities
31,470
26,888
51,348
Purchase of available-for-sale securities
(92,631)
(5,436)
(360,725)
Investment in tax credit partnerships
(12,069)
(35,160)
(18,266)
Redemption (purchase) of Federal Home Loan Bank stock and other interest-earning assets
(2,079)
4,501
(24,159)
Net cash used in investing activities
(175,394)
(88,208)
(819,546)
Financing Activities
Net increase (decrease) in certificates of deposit
(61,732)
26,806
321,718
Net increase (decrease) in checking and savings accounts
(54,315)
9,856
(188,909)
1HWLQFUHDVHLQVKRUWဩWHUPERUURZLQJVDQGRWKHr interest-bearing liabilities
75,238
57,027
127,471
Proceeds from borrowing under Federal Reserve Bank Term Funding Program
180,000
—
—
Advances from (to) borrowers for taxes and insurance
326
(1,644)
443
Purchase of the company’s common stock
(15,152)
(23,326)
(61,847)
Dividends paid
(18,708)
(19,282)
(19,181)
Stock options exercised
10,096
884
6,258
Net cash provided by financing activities
115,753
50,321
185,953
Increase (Decrease) in Cash and Cash Equivalents
(15,577)
42,813
(548,747)
Cash and Cash Equivalents, Beginning of Year
211,333
168,520
717,267
Cash and Cash Equivalents, End of Year
$
195,756
$
211,333
$
168,520
See Notes to Accompanying Financial Statements
125
Note 1: Nature of Operations and Summary of Significant Accounting Policies
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; and Phoenix. 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 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, and GS-RE Holding III, LLC. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Federal Home Loan Bank Stock
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.
126
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 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. Loans that do not share similar risk
characteristics, primarily classified loans with balances 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 principal balance over the remaining contractual lives, adjusted for
expected prepayments. The contractual term excludes expected extensions, renewals and modifications. 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.
127
In addition, the Company is required to record an allowance for off balance sheet credit exposures, including unfunded lines of credit,
undisbursed portions of loans, written residential and commercial loan 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.
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 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.
128
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 for
an 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 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, 2024, 2023 and 2022.
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.
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:
December 31,
2024
2023
(In Thousands)
Goodwill – Branch acquisitions
$
5,396
$
5,396
Arena Naming Rights (April 2022)
4,698
5,131
$
10,094
$
10,527
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
129
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 year.
Earnings per common share (EPS) were computed as follows:
2024
2023
2022
(In Thousands, Except Per Share Data)
Net income and net income available to common shareholders
$
61,807
$
67,800
$
75,948
Average common shares outstanding
11,695
11,992
12,516
Average common share stock options outstanding
60
88
91
Average diluted common shares
11,755
12,080
12,607
Earnings per common share – basic
$
5.28
$
5.65
$
6.07
Earnings per common share – diluted
$
5.26
$
5.61
$
6.02
Options outstanding at December 31, 2024, 2023 and 2022, to purchase 861,661, 749,833 and 559,484 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, 2024, 2023
and 2022, respectively.
Stock Compensation Plans
The Company has stock-based employee compensation plans, which are described more fully in Note 19. 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, 2024, 2023 and 2022, share-based compensation expense totaling $1.8 million, $1.6
million and $1.4 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,
2024 and 2023, cash equivalents consisted of interest-bearing deposits in other financial institutions. At December 31, 2024, nearly all
of the interest-bearing deposits were uninsured and held at the Federal Home Loan Bank or the Federal Reserve Bank.
130
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, 2024 and 2023, 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 15.
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,
Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, provisions of ASU 2020-04 were extended to be
applied through December 31, 2024. The application of ASU 2020-04 did not have a material impact on the Company’s consolidated
financial statements.
131
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, Reference Rate Reform (Topic 848): Deferral of the Sunset
Date of Topic 848, provisions of ASU 2021-01 were extended to be applied through December 31, 2024. The application of ASU
2021-01 did not 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 became
effective for the Company on January 1, 2023. The adoption of ASU 2022-01 did not 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 a 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 became effective for the Company on January 1, 2023. The adoption of
ASU 2022-02 did not have a material impact on the Company’s consolidated financial statements. The adoption of this ASU did,
however, require changes in disclosures related to certain loan modifications.
In March 2023, the FASB issued ASU 2023-02, Investments – Equity Method and Joint Ventures (Topic 323): Accounting for
Investments in Tax Credit Structures Using the Proportional Amortization Method. ASU 2023-02 is intended to improve the
accounting and disclosures for investments in tax credit structures. ASU 2023-02 allows entities to elect to account for qualifying tax
equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits.
Previously, this method was only available for qualifying tax equity investments in low-income housing tax credit structures.
Currently, the Company does not have a material amount of tax credit structures, other than low-income housing tax credit structures.
The adoption of ASU 2023-02 did not have a material impact on the Company’s consolidated financial statements and resulted in a
reduction of retained earnings of $223,000 upon adoption on January 1, 2024.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment
Disclosures. ASU 2023-07 expands reportable segment disclosure requirements through enhanced disclosures about significant
segment expenses. ASU 2023-07 implements a new requirement to disclose significant segment expenses regularly provided to the
chief operating decision maker, expands certain annual disclosures to interim periods, clarifies that single reportable segment entities
must apply Topic 280 in its entirety and permits more than one measure of segment profit or loss to be reported under certain
conditions. ASU 2023-07 became effective for the Company for our annual financial statements in 2024 and will be effective for
interim periods within fiscal years beginning in 2025. See Note 26 – Operating Segments for application of this ASU.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU
2023-09 is focused on additional income tax disclosures and requires public business entities, on an annual basis, to disclose specific
categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold (if the
effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income by the
applicable statutory income tax rate). ASU 2023-09 is effective for the Company for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2024. While the Company is currently assessing the impact applying this standard will have
on its income tax disclosures, the adoption of ASU 2023-09 is currently not expected to have a material impact on the Company’s
consolidated financial statements when it is applied in 2025.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense
Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2024-03 requires disaggregated
disclosure of income statement expenses for public business entities. ASU 2024-03 requires new financial statement disclosures in
132
tabular format, disaggregating information about prescribed categories underlying any relevant income statement expense caption. The
prescribed categories include, among other things, employee compensation, depreciation, and intangible asset amortization.
Additionally, entities must disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of
selling expenses. ASU 2024-03 is effective for us, on a prospective basis, for annual periods beginning after December 15, 2026, and
interim periods beginning after December 15, 2027, although early adoption and retrospective application is permitted. ASU 2024-03
is currently 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 are being 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, 2024, the net unrealized gross losses
remaining were $262,000; net of income taxes, these unrealized losses were $198,000.
The amortized cost and fair values of securities were as follows:
December 31, 2024
Gross
Gross
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities
$ 346,712
$
69
$
40,874
$ 305,907
Agency collateralized mortgage obligations
123,395
—
9,771
113,624
States and political subdivisions securities
58,608
69
2,729
55,948
Small Business Administration securities
65,849
—
7,955
57,894
$ 594,564
$
138
$
61,329
$ 533,373
December 31, 2024
Amortized
Gross
Gross
Amortized
Fair Value
Carrying
Unrealized
Unrealized
Fair
Cost
Adjustment
Value
Gains
Losses
Value
(In Thousands)
HELD-TO-MATURITY SECURITIES:
Agency mortgage-backed securities
$
71,065
$
1,864
$
72,929
$
—
$
8,523
$ 64,406
Agency collateralized mortgage obligations
110,493
(2,140)
108,353
—
15,495
92,858
States and political subdivisions
6,137
14
6,151
—
650
5,501
$ 187,695
$
(262)
$ 187,433
$
—
$ 24,668
$ 162,765
133
December 31, 2023
Gross
Gross
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities
$ 316,114
$
7
$
35,890
$ 280,231
Agency collateralized mortgage obligations
85,989
—
10,043
75,946
States and political subdivisions securities
59,141
527
1,531
58,137
Small Business Administration securities
70,648
—
6,755
63,893
$ 531,892
$
534
$
54,219
$ 478,207
December 31, 2023
Amortized
Gross
Gross
Amortized
Fair Value
Carrying
Unrealized
Unrealized
Fair
Cost
Adjustment
Value
Gains
Losses
Value
(In Thousands)
HELD-TO-MATURITY SECURITIES:
Agency mortgage-backed securities
$
72,495
$
2,436
$
74,931
$
—
$
8,686
$
66,245
Agency collateralized mortgage obligations
116,405
(2,502)
113,903
—
14,662
99,241
States and political subdivisions
6,188
1
6,189
—
482
5,707
$ 195,088
$
(65)
$ 195,023
$
—
$ 23,830
$ 171,193
At December 31, 2024, the Company’s available-for-sale agency mortgage-backed securities portfolio consisted of FNMA securities
totaling $205.6 million, FHLMC securities totaling $98.5 million and GNMA securities totaling $1.8 million. At December 31, 2023,
available-for-sale agency mortgage-backed securities portfolio consisted of FNMA securities totaling $190.9 million, FHLMC
securities totaling $86.4 million and GNMA securities totaling $2.9 million. At December 31, 2024 and 2023, all of the Company’s
available - for - sale agency mortgage-backed securities totaled $305.9 million and $280.2 million, respectively, and had fixed rates of
interest.
At December 31, 2024, the Company’s available-for-sale agency collateralized mortgage-backed securities portfolio consisted of
FNMA securities totaling $46.0 million, FHLMC securities totaling $63.0 million and GNMA securities totaling $4.6 million. At
December 31, 2023, available-for-sale agency collateralized mortgage-backed obligations portfolio consisted of FNMA securities
totaling $4.1 million, FHLMC securities totaling $66.5 million and GNMA securities totaling $5.3 million. At December 31, 2024 and
2023, all of the Company’s available - for - sale agency collateralized mortgage-backed obligations totaled $113.6 million and $75.9
million, respectively, and had fixed rates of interest.
The amortized cost and fair value of available-for-sale and held-to-maturity securities at December 31, 2024, by contractual maturity,
are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay
obligations with or without call or prepayment penalties.
Available-for-Sale
Held-to-Maturity
Amortized
Fair
Amortized
Fair
Cost
Value
Carrying Value
Value
(In Thousands)
One year or less
$
—
$
—
$
—
$
—
After one through two years
—
—
—
—
After two through three years
245
245
—
—
After three through four years
985
987
—
—
After four through five years
—
—
—
—
After five through fifteen years
10,615
10,313
3,245
2,913
After fifteen years
46,763
44,403
2,906
2,588
Securities not due on a single maturity date
535,956
477,425
181,282
157,264
$ 594,564
$ 533,373
$
187,433
$ 162,765
134
The amortized cost and fair values of securities pledged as collateral were as follows at December 31, 2024 and 2023:
2024
2023
Amortized
Fair
Amortized
Fair
Cost
Value
Cost
Value
(In Thousands)
Public deposits
$
13,880
$
11,801
$
17,412
$
15,225
Collateralized borrowing accounts
86,561
76,871
123,220
109,660
FHLBank borrowing account
91,900
90,544
—
—
Federal Reserve Bank’s Bank Term Funding Program
186,836
161,620
—
—
Other
3,572
3,270
3,815
3,507
$ 382,749
$ 344,106
$ 144,447
$ 128,392
Available-for-sale investments in debt securities are reported in the financial statements at their fair value, which was $533.4 million
and $478.2 million at December 31, 2024 and 2023, respectively. Total fair value of these investments for which the amortized cost
exceeded the fair value at December 31, 2024 and 2023, was $523.9 million and $456.9 million, respectively, which is approximately
98.2% and 95.5%, 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 $187.4 million and $195.0 million at December 31, 2024 and
2023, respectively. Total fair value of these investments at December 31, 2024 and 2023 was approximately $162.8 million and
$171.2 million, respectively. Total fair value of these investments for which the amortized cost exceeded the fair value at December
31, 2024 and 2023, was $162.8 million and $171.2 million, which is 100.0% of the Company’s held-to-maturity investment portfolio.
Held -to-maturity investment securities are evaluated for potential losses under ASU 2016-13. The Company continually assesses its
liquidity sources, both on-balance sheet and off-balance sheet, and believes that at December 31, 2024, it had ample liquidity sources
to fund its ongoing operations without selling investment securities in its portfolio.
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 the Company’s available-for-sale debt securities
are not credit related.
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, 2024 and 2023:
2024
Less than 12 Months
12 Months or More
Total
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
Description of Securities
Value
Losses
Value
Losses
Value
Losses
(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities
$
45,977
$
(1,008)
$ 253,971
$ (39,866)
$ 299,948
$ (40,874)
Agency collateralized mortgage obligations
50,720
(890)
62,903
(8,881)
113,623
(9,771)
Small Business Administration securities
7,229
(270)
50,665
(7,685)
57,894
(7,955)
States and political subdivisions securities
14,523
(343)
37,945
(2,386)
52,468
(2,729)
$ 118,449
$
(2,511)
$ 405,484
$ (58,818)
$ 523,933
$ (61,329)
HELD-TO-MATURITY SECURITIES:
Agency mortgage-backed securities
$
—
$
—
$
64,406
$
(8,523)
$
64,406
$
(8,523)
Agency collateralized mortgage obligations
—
—
92,858
(15,495)
92,858
(15,495)
States and political subdivisions securities
—
—
5,501
(650)
5,501
(650)
$
—
$
—
$ 162,765
$ (24,668)
$ 162,765
$ (24,668)
135
2023
Less than 12 Months
12 Months or More
Total
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
Description of Securities
Value
Losses
Value
Losses
Value
Losses
(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities
$
4,318
$
(9)
$ 274,801
$ (35,881)
$ 279,119
$ (35,890)
Agency collateralized mortgage obligations
9,080
(216)
66,866
(9,827)
75,946
(10,043)
Small Business Administration securities
7,782
(133)
56,111
(6,622)
63,893
(6,755)
States and political subdivisions securities
—
—
37,969
(1,531)
37,969
(1,531)
$ 21,180
$
(358)
$ 435,747
$ (53,861)
$ 456,927
$ (54,219)
HELD-TO-MATURITY SECURITIES:
Agency mortgage-backed securities
$
—
$
—
$
66,245
$
(8,686)
$
66,245
$
(8,686)
Agency collateralized mortgage obligations
—
—
99,241
(14,662)
99,241
(14,662)
States and political subdivisions securities
—
—
5,707
(482)
5,707
(482)
$
—
$
—
$ 171,193
$ (23,830)
$ 171,193
$ (23,830)
Allowance for Credit Losses On January 1, 2021, the Company began evaluating all securities quarterly to determine if any securities
in a loss position require a provision for credit losses in accordance with ASC 326, Measurement of Credit Losses on Financial
Instruments. All of the mortgage-backed, collateralized mortgage, and SBA securities held by the Company are issued by U.S.
government-sponsored entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are
highly rated by major rating agencies and have a long history of no credit losses. Likewise, the Company has not experienced
historical losses on these types of securities. Accordingly, no allowance for credit losses has been recorded for these securities.
Regarding securities issued by state and political subdivisions, management considers the following when evaluating these securities:
(i) current issuer bond ratings, (ii) historical loss rates for given bond ratings, (iii) whether issuers continue to make timely principal
and interest payments under the contractual terms of the securities, (iv) updated financial information of the issuer, (v) internal
forecasts and (vi) whether such securities provide insurance or other credit enhancement or are pre-refunded by the issuers. These
securities are highly rated by major rating agencies and have a long history of no credit losses. Likewise, the Company has not
experienced historical losses on these types of securities. Accordingly, no allowance for credit losses has been recorded for these
securities.
Note 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.
136
Classes of loans at December 31, 2024 and 2023, included:
December 31,
December 31,
2024
2023
(In Thousands)
One- to four-family residential construction
$
30,533 $
29,628
Subdivision construction
19,861
23,359
Land development
42,504
48,015
Commercial construction
352,793
703,407
Owner occupied one- to four-family residential
710,446
769,260
Non-owner occupied one- to four-family residential
122,901
121,275
Commercial real estate
1,543,742
1,521,032
Other residential
1,549,249
942,071
Commercial business
208,947
318,050
Industrial revenue bonds
11,344
12,047
Consumer auto
25,787
28,343
Consumer other
27,905
28,978
Home equity lines of credit
115,836
115,883
4,761,848
4,661,348
Allowance for credit losses
(64,760)
(64,670)
Deferred loan fees and gains, net
(6,695)
(7,058)
$
4,690,393
$
4,589,620
Classes of loans by aging were as follows as of the dates indicated:
December 31, 2024
Total Loans
Over 90
Total
> 90 Days Past
30-59 Days
60-89 Days
Days
Total Past
Loans
Due and
Past Due Past Due Past Due
Due
Current
Receivable
Still Accruing
(In Thousands)
One- to four-family residential
construction
$
12
$
—
$
—
$
12
$
30,521
$
30,533
$
—
Subdivision construction
—
—
—
—
19,861
19,861
—
Land development
—
—
464
464
42,040
42,504
—
Commercial construction
—
—
—
—
352,793
352,793
—
Owner occupied one- to four- family
residential
1,704
816
950
3,470
706,976
710,446
—
Non-owner occupied one- to four-family
residential
642
—
1,681
2,323
120,578
122,901
—
Commercial real estate
—
—
77
77
1,543,665
1,543,742
—
Other residential
—
—
—
—
1,549,249
1,549,249
—
Commercial business
—
—
245
245
208,702
208,947
—
Industrial revenue bonds
—
—
139
139
11,205
11,344
—
Consumer auto
39
1
—
40
25,747
25,787
—
Consumer other
145
4
17
166
27,739
27,905
—
Home equity lines of credit
63
56
—
119
115,717
115,836
—
Total
$
2,605
$
877
$
3,573
$
7,055
$ 4,754,793
$ 4,761,848
$
—
137
December 31, 2023
Total Loans
Over 90
Total
> 90 Days Past
30-59 Days
60-89 Days
Days
Total Past
Loans
Due and
Past Due Past Due Past Due
Due
Current
Receivable
Still Accruing
(In Thousands)
One- to four-family residential
construction
$
—
$
—
$
—
$
—
$
29,628
$
29,628
$
—
Subdivision construction
—
—
—
—
23,359
23,359
—
Land development
—
—
384
384
47,631
48,015
—
Commercial construction
—
—
—
—
703,407
703,407
—
Owner occupied one- to four- family
residential
2,778
125
722
3,625
765,635
769,260
—
Non-owner occupied one- to four-family
residential
—
—
—
—
121,275
121,275
—
Commercial real estate
187
92
10,552
10,831
1,510,201
1,521,032
—
Other residential
9,572
—
—
9,572
932,499
942,071
—
Commercial business
—
—
31
31
318,019
318,050
—
Industrial revenue bonds
—
—
—
—
12,047
12,047
—
Consumer auto
116
65
8
189
28,154
28,343
—
Consumer other
137
—
42
179
28,799
28,978
—
Home equity lines of credit
335
26
9
370
115,513
115,883
—
Total
$ 13,125
$
308
$ 11,748
$ 25,181
$ 4,636,167
$ 4,661,348
$
—
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.
Nonaccruing loans are summarized as follows:
December 31,
December 31,
2024
2023
(In Thousands)
One- to four-family residential construction
$
—
$
—
Subdivision construction
—
—
Land development
464
384
Commercial construction
—
—
Owner occupied one- to four-family residential
950
722
Non-owner occupied one- to four-family residential
1,681
—
Commercial real estate
77
10,552
Other residential
—
—
Commercial business
245
31
Industrial revenue bonds
139
—
Consumer auto
—
8
Consumer other
17
42
Home equity lines of credit
—
9
Total nonaccruing loans
$
3,573
$
11,748
No interest income was recorded on these loans for the years ended December 31, 2024 and 2023, respectively.
Nonaccrual loans for which there is no related allowance for credit losses as of December 31, 2024 had an amortized cost of $2.2
million. These loans are individually assessed and do not require an allowance due to being adequately collateralized under the
138
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 primarily by a classified risk rating with
a loan balance equal to or greater than $100,000, including, but not limited to, any loan in process of foreclosure or repossession.
The following table presents the activity in the allowance for credit losses by portfolio segment for the years ended December 31,
2024, 2023 and 2022.
One- to Four-
Family
Residential
and
Other
Commercial
Commercial
Commercial
Construction Residential Real Estate Construction
Business Consumer
Total
(In Thousands)
Allowance for credit losses
Balance, January 1, 2024
$
9,820
$ 13,370
$ 28,171
$
2,844
$
6,935
$ 3,530
$ 64,670
Provision (credit) charged to expense
(570)
2,224
1,931
(202)
(2,526)
843
1,700
Losses charged off
(64)
—
(1,300)
(101)
(243)
(1,492)
(3,200)
Recoveries
38
—
—
194
490
868
1,590
Balance, December 31, 2024
$
9,224
$ 15,594
$ 28,802
$
2,735
$
4,656
$ 3,749
$ 64,760
Allowance for credit losses
Balance, January 1, 2023
$
11,171
$ 12,110
$ 27,096
$
2,865
$
5,822
$ 4,416
$ 63,480
Provision (credit) charged to expense
(1,390)
1,260
930
(27)
1,909
(432)
2,250
Losses charged off
(31)
—
—
—
(1,037)
(1,754)
(2,822)
Recoveries
70
—
145
6
241
1,300
1,762
Balance, December 31, 2023
$
9,820
$ 13,370
$ 28,171
$
2,844
$
6,935
$ 3,530
$ 64,670
Allowance for credit losses
Balance, January 1, 2022
$
9,364
$ 10,502
$ 28,604
$
2,797
$
4,142
$ 5,345
$ 60,754
Provision (credit) charged to expense
1,652
1,498
(1,465)
152
1,491
(328)
3,000
Losses charged off
(40)
—
(44)
(84)
(51)
(1,950)
(2,169)
Recoveries
195
110
1
—
240
1,349
1,895
Balance, December 31, 2022
$
11,171
$ 12,110
$ 27,096
$
2,865
$
5,822
$ 4,416
$ 63,480
139
The following table presents the activity in the allowance for unfunded commitments by portfolio segment for the years ended
December 31, 2024, 2023 and 2022.
One- to Four-
Family
Residential
and
Other
Commercial
Commercial
Commercial
Construction Residential Real Estate Construction
Business
Consumer
Total
(In Thousands)
Allowance for unfunded commitments
Balance, January 1, 2024
$
706
$
4,006
$
619
$
741
$
959
$
456
$
7,487
Provision (credit) charged to expense
(87)
827
34
(245)
509
(22)
1,016
Balance, December 31, 2024
$
619
$
4,833
$
653
$
496
$
1,468
$
434
$
8,503
Allowance for unfunded commitments
Balance, January 1, 2023
$
736
$
8,624
$
416
$
802
$
1,734
$
504
$ 12,816
Provision (credit) charged to expense
(30)
(4,618)
203
(61)
(775)
(48)
(5,329)
Balance, December 31, 2023
$
706
$
4,006
$
619
$
741
$
959
$
456
$
7,487
Allowance for unfunded commitments
Balance, January 1, 2022
$
687
$
5,703
$
367
$
908
$
1,582
$
382
$
9,629
Provision (credit) charged to expense
49
2,921
49
(106)
152
122
3,187
Balance, December 31, 2022
$
736
$
8,624
$
416
$
802
$
1,734
$
504
$ 12,816
The portfolio segments used in the preceding tables correspond to the loan classes used in all other tables in Note 3 as follows:
x
The one- to four-family residential and construction segment includes the one- to four-family residential construction,
subdivision construction, owner occupied one- to four-family residential and non-owner occupied one- to four-family
residential classes.
x
The other residential (multi-family) segment corresponds to the other residential (multi-family) class.
x
The commercial real estate segment includes the commercial real estate and industrial revenue bonds classes.
x
The commercial construction segment includes the land development and commercial construction classes.
x
The commercial business segment corresponds to the commercial business class.
x
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, 2024 and 2023, was 6.08% and 6.25%, respectively.
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, 2024, was $397.0 million, consisting of $301.4 million of commercial loan
participations sold to other financial institutions and $95.6 million of residential mortgage loans sold. The unpaid principal balance of
loans serviced for others at December 31, 2023, was $439.9 million, consisting of $334.6 million of commercial loan participations
sold to other financial institutions and $105.3 million of residential mortgage loans sold. In addition, available lines of credit on these
loans were $34.0 million and $123.6 million at December 31, 2024 and 2023, respectively.
140
The following tables present the amortized cost basis of collateral-dependent loans by class of loans at the dates indicated:
December 31, 2024
Principal
Specific
Balance
Allowance
(In Thousands)
One- to four-family residential construction
$
—
$
—
Subdivision construction
—
—
Land development
464
12
Commercial construction
—
—
Owner occupied one- to four-family residential
1,677
—
Non-owner occupied one- to four-family residential
1,681
261
Commercial real estate
4,253
—
Other residential
—
—
Commercial business
245
245
Industrial revenue bonds
139
—
Consumer auto
—
—
Consumer other
—
—
Home equity lines of credit
1,390
—
Total
$
9,849
$
518
December 31, 2023
Principal
Specific
Balance
Allowance
(In Thousands)
One- to four-family residential construction
$
—
$
—
Subdivision construction
—
—
Land development
384
—
Commercial construction
—
—
Owner occupied one- to four-family residential
691
29
Non-owner occupied one- to four-family residential
—
—
Commercial real estate
10,548
1,200
Other residential
7,162
—
Commercial business
—
—
Industrial revenue bonds
—
—
Consumer auto
—
—
Consumer other
—
—
Home equity lines of credit
—
—
Total
$
18,785
$
1,229
For loans that were nonaccruing, interest of approximately $681,000, $509,000 and $292,000 would have been recognized on an
accrual basis during the years ended December 31, 2024, 2023 and 2022, respectively.
Modified Loans. 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 (TDR) 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 disclosure requirements and introduces new disclosure requirements related to certain modifications of
receivables made to borrowers experiencing financial difficulty. Adoption of this ASU on January 1, 2023 did not have a material
impact on the Company’s results of operations, financial position or liquidity, but resulted in additional disclosure requirements
related to gross charge offs by vintage year and the removal of TDR disclosures, replaced by additional disclosures on the types of
modifications of loans to borrowers experiencing financial difficulties. The Company has adopted this update prospectively. Loan
modifications are reported if concessions have been granted to borrowers that are experiencing financial difficulty.
141
The estimate of lifetime expected losses utilized in the allowance for credit losses model is developed using average historical loss on
loans with similar risk characteristics, which includes losses from modifications of loans to borrowers experiencing financial
difficulty. As a result, a charge to the allowance for credit losses is generally not recorded upon modification. For modifications to
loans made to borrowers experiencing financial difficulty that are adversely classified, the Company determines the allowance for
credit losses on an individual basis, using the same process that it utilizes for other adversely classified loans. If collection efforts have
begun and the modified loan is subsequently deemed collateral-dependent, the loan is placed on nonaccrual status and the allowance
for credit losses is determined based on an individual evaluation. If necessary, the loan is charged down to fair market value less
estimated sales costs.
The following tables show, as of the dates indicated, the composition of loan modifications made to loans to borrowers experiencing
financial difficulty, by the loan class and type of concessions granted. Each of the types of concessions granted comprised 2% or less
of their respective classes of loan portfolios at December 31, 2024 and December 31, 2023. During the year ended December 31,
2024, principal forgiveness of $295,000 was completed on consumer loans and a land development loan, compared to principal
forgiveness of $563,000 completed on commercial business loans and consumer loans during the year ended December 31, 2023.
Amortized Cost Basis at December 31, 2024
Interest Rate
Term
Total
Reduction
Extension
Combination
Modifications
(In Thousands)
Construction and land development
$
—
$
—
$
—
$
—
One- to four-family residential
—
—
—
—
Other residential
—
2,709
—
2,709
Commercial real estate
—
70
—
70
Commercial business
—
—
—
—
Consumer
—
31
—
31
$
—
$
2,810
$
—
$
2,810
Amortized Cost Basis at December 31, 2023
Interest Rate
Term
Total
Reduction
Extension
Combination
Modifications
(In Thousands)
Construction and land development
$
—
$
—
$
1,553
$
1,553
One- to four-family residential
—
—
—
—
Other residential
—
2,750
—
2,750
Commercial real estate
—
77
20,365
20,442
Commercial business
—
—
—
—
Consumer
5
7
—
12
$
5
$
2,834
$
21,918
$
24,757
142
The Company closely monitors the performance of loans to borrowers experiencing financial difficulty that are modified to
understand the effectiveness of its modification efforts. The following table depicts the performance of loans (under modified terms)
at December 31, 2024 and at December 31, 2023, respectively:
December 31, 2024
30-89 Days
Over 90 Days
Current
Past Due
Past Due
Total
(In Thousands)
Construction and land development
$
—
$
—
$
—
$
—
One- to four-family residential
—
—
—
—
Other residential
2,709
—
—
2,709
Commercial real estate
70
—
—
70
Commercial business
—
—
—
—
Consumer
31
—
—
31
$
2,810
$
—
$
—
$
2,810
December 31, 2023
30-89 Days
Over 90 Days
Current
Past Due
Past Due
Total
(In Thousands)
Construction and land development
$
1,553
$
—
$
—
$
1,553
One- to four-family residential
—
—
—
—
Other residential
2,750
—
—
2,750
Commercial real estate
12,384
—
8,058
20,442
Commercial business
—
—
—
—
Consumer
12
—
—
12
$
16,699
$
—
$
8,058
$
24,757
Loan Risk Ratings. 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 and
collateral levels and 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. The
character and capacity of the borrower are solid, including reasonable project performance, good industry experience, liquidity and/or
net worth. The probability of financial deterioration seems unlikely. Repayment is expected from approved sources over a reasonable
period of time.
Watch loans are identified when the borrower has capacity to perform according to terms; however, elements of uncertainty exist.
Margins of debt service coverage may be narrow, historical patterns of financial performance may be erratic, collateral margins may
be diminished or the borrower may be a new and/or thinly capitalized company. Some management weakness on the part of the
borrower may also exist, the borrower may have somewhat limited access to other financial institutions, and that access may diminish
in difficult economic times.
Special Mention loans have weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses
may result in deterioration of repayment prospects or the Bank’s credit position at some future date. This is a transitional grade closely
monitored for improvement or deterioration.
The Substandard rating is applied to loans where the borrower exhibits well-defined weaknesses that jeopardize its continued
performance and are of a severity that the distinct possibility of default exists. Loans are placed on “nonaccrual” when management
does not expect to collect payments consistent with acceptable and agreed upon terms of repayment.
Doubtful loans have all the weaknesses inherent to those classified Substandard with the added characteristic that the weaknesses
make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.
143
The Loss category is used when loans are considered uncollectable and no longer included as an asset.
All loans are analyzed for risk rating updates regularly. For larger loans, rating assessments may be more frequent if relevant
information is obtained earlier through debt covenant monitoring or overall relationship management. Smaller loans are monitored as
identified by the loan officer based on the risk profile of the individual borrower or if the loan becomes past due related to credit
issues. Loans rated Watch, Special Mention, Substandard or Doubtful are subject to formal quarterly review and continuous
monitoring processes. In addition to the regular monitoring performed by the lending personnel and credit committees, loans are
subject to review by the credit review department, which verifies the appropriateness of the risk ratings for the loans chosen as part of
its risk-based review plan.
144
The following tables present a summary of loans by category and risk rating separated by origination and loan class as of December
31, 2024 and December 31, 2023.
Term Loans by Origination Year
Revolving
December 31, 2024
2024
2023
2022
2021
2020
Prior
Loans
Total
(In Thousands)
One- to four-family residential construction
Satisfactory (1-4)
$
11,750
$
8,961
$
822
$
—
$
—
$
—
$
9,000
$
30,533
Watch (5)
—
—
—
—
—
—
—
—
Special Mention (6)
—
—
—
—
—
—
—
—
Classified (7-9)
—
—
—
—
—
—
—
—
Total
11,750
8,961
822
—
—
—
9,000
30,533
Current Period Gross Charge Offs
—
—
—
—
—
—
—
—
Subdivision construction
Satisfactory (1-4)
711
182
136
17,609
29
205
989
19,861
Watch (5)
—
—
—
—
—
—
—
—
Special Mention (6)
—
—
—
—
—
—
—
—
Classified (7-9)
—
—
—
—
—
—
—
—
Total
711
182
136
17,609
29
205
989
19,861
Current Period Gross Charge Offs
—
—
—
—
—
—
—
—
Construction and land development
Satisfactory (1-4)
18,282
6,112
2,722
5,210
3,105
4,236
2,373
42,040
Watch (5)
—
—
—
—
—
—
—
—
Special Mention (6)
—
—
—
—
—
—
—
—
Classified (7-9)
—
—
—
—
464
—
—
464
Total
18,282
6,112
2,722
5,210
3,569
4,236
2,373
42,504
Current Period Gross Charge Offs
—
—
—
—
—
101
—
101
Other construction
Satisfactory (1-4)
78,337
52,046
189,389
33,021
—
—
—
352,793
Watch (5)
—
—
—
—
—
—
—
—
Special Mention (6)
—
—
—
—
—
—
—
—
Classified (7-9)
—
—
—
—
—
—
—
—
Total
78,337
52,046
189,389
33,021
—
—
—
352,793
Current Period Gross Charge Offs
—
—
—
—
—
—
—
—
One- to four-family residential
Satisfactory (1-4)
42,931
59,973
304,054
176,759
91,238
153,392
426
828,773
Watch (5)
—
—
—
—
145
597
—
742
Special Mention (6)
—
—
—
—
—
—
—
—
Classified (7-9)
—
628
387
129
—
1,178
1,510
3,832
Total
42,931
60,601
304,441
176,888
91,383
155,167
1,936
833,347
Current Period Gross Charge Offs
—
49
—
—
—
16
—
65
Other residential (multi-family)
Satisfactory (1-4)
66,028
92,268
552,183
506,902
179,094
146,712
3,352
1,546,539
Watch (5)
—
—
—
—
—
2,710
—
2,710
Special Mention (6)
—
—
—
—
—
—
—
—
Classified (7-9)
—
—
—
—
—
—
—
—
Total
66,028
92,268
552,183
506,902
179,094
149,422
3,352
1,549,249
Current Period Gross Charge Offs
—
—
—
—
—
—
—
—
Commercial real estate
Satisfactory (1-4)
97,512
81,282
320,442
217,049
96,246
682,549
35,937
1,531,017
Watch (5)
—
—
—
—
—
7,879
—
7,879
Special Mention (6)
—
—
—
—
—
438
—
438
Classified (7-9)
—
—
—
77
—
4,331
—
4,408
Total
97,512
81,282
320,442
217,126
96,246
695,197
35,937
1,543,742
Current Period Gross Charge Offs
—
—
54
10
—
1,236
—
1,300
Commercial business
Satisfactory (1-4)
21,179
29,846
28,678
20,301
7,646
44,908
62,015
214,573
Watch (5)
—
—
1,005
3,296
—
—
—
4,301
Special Mention (6)
—
—
995
—
38
—
—
1,033
Classified (7-9)
—
245
—
—
—
139
—
384
Total
21,179
30,091
30,678
23,597
7,684
45,047
62,015
220,291
Current Period Gross Charge Offs
—
—
—
4
27
164
48
243
Consumer
Satisfactory (1-4)
17,391
9,234
6,147
2,618
1,151
10,478
120,653
167,672
Watch (5)
—
—
5
—
4
194
107
310
Special Mention (6)
—
—
—
—
—
—
—
—
Classified (7-9)
1
9
11
20
—
53
1,452
1,546
Total
17,392
9,243
6,163
2,638
1,155
10,725
122,212
169,528
Current Period Gross Charge Offs
13
105
122
32
4
1,161
54
1,491
Combined
Satisfactory (1-4)
354,121
339,904
1,404,573
979,469
378,509
1,042,480
234,745
4,733,801
Watch (5)
—
—
1,010
3,296
149
11,380
107
15,942
Special Mention (6)
—
—
995
—
38
438
—
1,471
Classified (7-9)
1
882
398
226
464
5,701
2,962
10,634
Total
$
354,122
$
340,786
$
1,406,976
$
982,991
$
379,160
$
1,059,999
$
237,814
$
4,761,848
Current Period Gross Charge Offs
$
13
$
154
$
176
$
46
$
31
$
2,678
$
102
$
3,200
145
Term Loans by Origination Year
Revolving
December 31, 2023
2023
2022
2021
2020
2019
Prior
Loans
Total
(In Thousands)
One- to four-family residential construction
Satisfactory (1-4)
$
12,528
$
9,878
$
41
$
—
$
—
$
—
$
7,181
$
29,628
Watch (5)
—
—
—
—
—
—
—
—
Special Mention (6)
—
—
—
—
—
—
—
—
Classified (7-9)
—
—
—
—
—
—
—
—
Total
12,528
9,878
41
—
—
—
7,181
29,628
Current Period Gross Charge Offs
—
—
—
—
—
—
—
—
Subdivision construction
Satisfactory (1-4)
532
1,022
21,333
43
64
365
—
23,359
Watch (5)
—
—
—
—
—
—
—
—
Special Mention (6)
—
—
—
—
—
—
—
—
Classified (7-9)
—
—
—
—
—
—
—
—
Total
532
1,022
21,333
43
64
365
—
23,359
Current Period Gross Charge Offs
—
—
—
—
—
—
—
—
Construction and land development
Satisfactory (1-4)
14,860
12,564
5,658
3,682
5,458
4,531
878
47,631
Watch (5)
—
—
—
—
—
—
—
—
Special Mention (6)
—
—
—
—
—
—
—
—
Classified (7-9)
—
—
—
—
—
—
384
384
Total
14,860
12,564
5,658
3,682
5,458
4,531
1,262
48,015
Current Period Gross Charge Offs
—
—
—
—
—
—
—
—
Other construction
Satisfactory (1-4)
60,895
422,727
203,918
15,867
—
—
—
703,407
Watch (5)
—
—
—
—
—
—
—
—
Special Mention (6)
—
—
—
—
—
—
—
—
Classified (7-9)
—
—
—
—
—
—
—
—
Total
60,895
422,727
203,918
15,867
—
—
—
703,407
Current Period Gross Charge Offs
—
—
—
—
—
—
—
—
One- to four-family residential
Satisfactory (1-4)
66,733
330,489
203,781
108,232
60,288
118,570
483
888,576
Watch (5)
—
—
—
—
171
862
46
1,079
Special Mention (6)
—
—
—
—
—
—
—
—
Classified (7-9)
—
—
543
148
—
189
—
880
Total
66,733
330,489
204,324
108,380
60,459
119,621
529
890,535
Current Period Gross Charge Offs
—
—
—
—
—
11
20
31
Other residential (multi-family)
Satisfactory (1-4)
18,795
108,389
391,516
180,916
108,173
111,462
3,335
922,586
Watch (5)
—
—
—
—
—
—
—
—
Special Mention (6)
—
—
—
—
—
12,322
—
12,322
Classified (7-9)
—
—
—
—
—
7,163
—
7,163
Total
18,795
108,389
391,516
180,916
108,173
130,947
3,335
942,071
Current Period Gross Charge Offs
—
—
—
—
—
—
—
—
Commercial real estate
Satisfactory (1-4)
53,158
284,738
237,822
103,393
161,680
624,515
35,276
1,500,582
Watch (5)
—
—
—
—
154
5,348
—
5,502
Special Mention (6)
—
—
—
—
—
4,396
—
4,396
Classified (7-9)
—
—
—
—
—
10,552
—
10,552
Total
53,158
284,738
237,822
103,393
161,834
644,811
35,276
1,521,032
Current Period Gross Charge Offs
—
—
—
—
—
—
—
—
Commercial business
Satisfactory (1-4)
58,551
92,224
30,361
15,371
10,043
55,044
57,177
318,771
Watch (5)
—
—
—
—
—
1,369
—
1,369
Special Mention (6)
—
1,186
3,840
—
—
—
4,900
9,926
Classified (7-9)
—
—
4
27
—
—
—
31
Total
58,551
93,410
34,205
15,398
10,043
56,413
62,077
330,097
Current Period Gross Charge Offs
—
7
—
—
—
1,030
—
1,037
Consumer
Satisfactory (1-4)
16,629
12,010
6,163
2,811
828
12,089
122,166
172,696
Watch (5)
—
3
21
6
3
201
154
388
Special Mention (6)
—
—
—
—
—
—
8
8
Classified (7-9)
—
42
12
—
—
49
9
112
Total
16,629
12,055
6,196
2,817
831
12,339
122,337
173,204
Current Period Gross Charge Offs
4
135
24
3
18
1,493
77
1,754
Combined
Satisfactory (1-4)
302,681
1,274,041
1,100,593
430,315
346,534
926,576
226,496
4,607,236
Watch (5)
—
3
21
6
328
7,780
200
8,338
Special Mention (6)
—
1,186
3,840
—
—
16,718
4,908
26,652
Classified (7-9)
—
42
559
175
—
17,953
393
19,122
Total
$
302,681
$
1,275,272
$
1,105,013
$
430,496
$
346,862
$
969,027
$
231,997
$
4,661,348
Current Period Gross Charge Offs
$
4
$
142
$
24
$
3
$
18
$
2,534
$
97
$
2,822
146
Certain of the Bank’s real estate loans are pledged as collateral for borrowings as set forth in Notes 8 and 10.
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, 2024 and
2023, loans outstanding to these directors and executive officers, and their related interests, are summarized as follows:
2024
2023
(In Thousands)
Balance, beginning of year
$
16,026
$
7,950
New loans
7,446
10,694
Payments
(15,127)
(2,618)
Balance, end of year
$
8,345
$
16,026
Note 4: Other Real Estate Owned and Repossessions
Major classifications of other real estate owned at December 31, 2024 and 2023, were as follows:
2024
2023
(In Thousands)
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
5,960
—
Commercial business
—
—
Consumer
33
23
Foreclosed assets held for sale and repossessions
5,993
23
Other real estate owned not acquired through foreclosure
—
—
Other real estate owned and repossessions
$
5,993
$
23
At December 31, 2024 and 2023, there was no other real estate owned not acquired through foreclosure.
At December 31, 2024 and 2023, residential mortgage loans totaling $12,000 and $-0-, respectively, were in the process of
foreclosure.
147
Expense (income) applicable to other real estate owned and repossessions for the years ended December 31, 2024, 2023 and 2022,
included the following:
2024
2023
2022
(In Thousands)
Net gains on sales of other real estate owned and repossessions
$
(496)
$
(42)
$
(149)
Valuation write-downs
—
81
23
Operating expenses, net of rental income
192
272
485
$
(304)
$
311
$
359
Note 5: Premises and Equipment
Major classifications of premises and equipment at December 31, 2024 and 2023, stated at cost, were as follows:
2024
2023
(In Thousands)
Land
$
39,340
$
39,617
Buildings and improvements
107,525
107,602
Furniture, fixtures and equipment
69,916
70,162
Operating leases right of use asset
6,390
6,621
223,171
224,002
Less accumulated depreciation
90,705
85,411
$ 132,466
$ 138,591
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, 2024, the lease right of use asset value was $6.4 million and the corresponding lease liability was $6.6
million. As of December 31, 2023, the lease right of use asset value was $6.6 million and the corresponding lease liability was $6.9
million. At December 31, 2024, expected lease terms ranged from 2.6 years to 13.9 years with a weighted-average lease term of 6.9
years. The weighted-average discount rate was 4.03%.
For the years ended December 31, 2024, 2023 and 2022, lease expense was $1.7 million, $1.7 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 $343,000, $317,000 and $307,000 for the years ended December 31, 2024, 2023 and 2022, 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, 2024, 2023 and 2022, income recognized from these lease agreements was $1.3 million, $1.3 million, and $1.2
million respectively, and was included in occupancy and equipment expense.
148
At or For the Year Ended
December 31, 2024 December 31, 2023
(In Thousands)
Statement of Financial Condition
Operating leases right of use asset
$
6,390
$
6,621
Operating leases liability
$
6,621
$
6,870
Statement of Income
Operating lease costs classified as occupancy and equipment expense
$
1,735
$
1,740
(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
$
1,717
$
1,681
Right of use assets obtained in exchange for lease obligations:
Operating leases
$
814
$
296
At December 31, 2024, future expected lease payments for leases with terms exceeding one year were as follows (in thousands):
2025
$
1,313
2026
1,338
2027
1,289
2028
1,019
2029
663
Thereafter
1,988
Future lease payments expected
7,610
Less interest portion of lease payments
(989)
Lease liability
$
6,621
Note 6: Investments in Limited Partnerships
Investments in Affordable Housing Partnerships
Periodically, 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
(“Affordable Housing Partnerships”). At December 31, 2024, the Company had 23 such investments, with a net carrying value of
$98.8 million. At December 31, 2023, the Company had 22 such investments, with a net carrying value of $66.3 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 $106.1 million as of December 31, 2024,
assuming no tax credit recapture events occur and all projects currently under construction are completed as planned. Amortization of
the investments in partnerships is expected to be approximately $95.7 million, assuming all projects currently under construction are
completed and funded as planned.
The Company’s usage of federal affordable housing tax credits approximated $11.4 million, $7.7 million and $4.9 million during
2024, 2023 and 2022, respectively. Investment amortization was $10.2 million, $7.2 million and $4.4 million for the years ended
December 31, 2024, 2023 and 2022, respectively.
149
Investments in Community Development Entities
From time to time, the Company has invested in certain limited partnerships that were formed to develop and operate business and real
estate projects located in low-income communities. At December 31, 2024, the Company had one such investment, with a net carrying
value of $199,000. At December 31, 2023, the Company had one such investment, with a net carrying value of $361,000. Due to the
Company’s inability to exercise any significant influence over any of the investments in qualified Community Development Entities,
they are all accounted for using the proportional amortization method. Each of the partnerships provides federal New Market Tax
Credits over a seven-year credit allowance period. In each of the first three years, credits totaling five percent of the original
investment are allowed on the credit allowance dates and for the final four years, credits totaling six percent of the original investment
are allowed on the credit allowance dates. Each of the partnerships must be invested in a qualified Community Development Entity on
each of the credit allowance dates during the seven-year period to utilize the tax credits. If the Community Development Entities cease
to qualify during the seven-year period, the credits may be denied for any credit allowance date and a portion of the credits previously
taken may be subject to recapture with interest. 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 $120,000, $100,000 and $100,000 during 2024, 2023 and
2022, respectively. Investment amortization amounted to $75,000, $83,000 and $83,000 for the years ended December 31, 2024, 2023
and 2022, respectively. Upon adoption of ASU 2023-02 on January 1, 2024, the Company recorded a reduction in the investment in
these New Market Tax Credits, with a corresponding reduction in retained earnings, of $62,000.
Investments in Limited Partnerships for Federal Rehabilitation/Historic Tax Credits
From time to time, the Company has also invested in certain limited partnerships that were formed to provide certain federal
rehabilitation/historic tax credits. At December 31, 2024, the Company had no such investments, with the previous investment fully
amortizing during 2024. At December 31, 2023 the Company had one such investment, with a net carrying value of $415,000. Under
prior tax law, the Company utilized these credits in their entirety in the year the project was placed in service and the impact to the
Consolidated Statements of Income was not material. Currently, such partnerships provide federal rehabilitation/historic tax credits
over a five-year credit allowance period.
The Company’s usage of certain federal rehabilitation/historic tax credits approximated $305,000, $258,000 and $258,000 during
2024, 2023 and 2022, respectively. Investment amortization amounted to $254,000, $214,000 and $214,000 for the years ended
December 31, 2024, 2023 and 2022, respectively. Upon adoption of ASU 2023-02 on January 1, 2024, the Company recorded a
reduction in the investment in these Rehabilitation/Historic Tax Credits, with a corresponding reduction in retained earnings, of
$161,000.
Investments in Limited Partnerships for State Tax Credits
On occasion, the Company has invested in certain limited partnerships that were formed to provide certain state tax credits. The
Company has primarily syndicated these tax credits and the impact to the Consolidated Statements of Income has not been material.
150
Note 7: Deposits
Deposits at December 31, 2024 and 2023, are summarized as follows:
Weighted Average
Interest Rate
2024
2023
(In Thousands, Except Interest Rates)
Non-interest-bearing accounts
—
$
842,931
$
895,496
Interest-bearing checking and savings accounts
1.39% and 1.67%
2,214,732
2,216,482
3,057,663
3,111,978
Certificate accounts
0.00% - 0.99%
52,720
86,831
1.00% - 1.99%
75,938
22,485
2.00% - 2.99%
8,244
44,354
3.00% - 3.99%
89,967
46,304
4.00% - 4.99%
548,903
739,645
5.00% and above
—
8,583
775,772
948,202
Brokered deposits
4.61% and 5.20%
772,114
661,528
772,114
661,528
$
4,605,549
$
4,721,708
The weighted average interest rate on certificates of deposit was 3.62% and 3.79% at December 31, 2024 and 2023, respectively.
The Bank utilizes brokered deposits as an additional funding source. The aggregate amount of brokered deposits was approximately
$772.1 million and $661.5 million at December 31, 2024 and December 31, 2023, respectively. At both December 31, 2024 and 2023,
brokered deposits included $300.0 million of purchased funds through the IntraFi Financial network. These IntraFi Financial deposits
have a rate of interest that floats daily with an index of effective federal funds rate plus a spread. At December 31, 2024,
approximately 36% of the Company’s total deposits were uninsured, when including deposit accounts of consolidated subsidiaries of
the Company and collateralized deposits of unaffiliated entities. Excluding deposit accounts of the Company’s consolidated
subsidiaries, approximately 15% of the Company’s total deposits were uninsured at December 31, 2024.
At December 31, 2024, scheduled maturities of certificates of deposit and brokered deposits were as follows:
Retail
Brokered
Total
(In Thousands)
2025
$ 762,159
$ 623,919
$ 1,386,078
2026
8,381
148,195
156,576
2027
2,761
—
2,761
2028
947
—
947
2029
584
—
584
Thereafter
940
—
940
$ 775,772
$ 772,114
$ 1,547,886
151
A summary of interest expense on deposits for the years ended December 31, 2024, 2023 and 2022, is as follows:
2024
2023
2022
(In Thousands)
Checking and savings accounts
$ 38,140
$ 28,579
$
5,968
Certificate accounts
34,262
29,796
8,788
Brokered deposits
37,537
30,719
6,162
Early withdrawal penalties
(234)
(337)
(242)
$ 109,705
$ 88,757
$ 20,676
Note 8: Advances From Federal Home Loan Bank
At December 31, 2024 and 2023, there were no outstanding term advances from the Federal Home Loan Bank of Des Moines. At
December 31, 2024 and 2023, 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 or borrowings. Investment securities with carrying values of approximately $110.4 million and $-
0-, respectively, were pledged as collateral for FHLB borrowings at December 31, 2024 and 2023. Loans with carrying values of
approximately $2.12 billion and $1.74 billion were pledged as collateral for outstanding advances or borrowings at December 31,
2024 and 2023, respectively. The Bank had $1.06 billion remaining available on its line of credit under a borrowing arrangement with
the FHLB of Des Moines at December 31, 2024.
Note 9: Short-Term Borrowings
Short-term borrowings at December 31, 2024 and 2023, are summarized as follows:
2024
2023
(In Thousands)
Notes payable – Community Development Equity Funds
$
1,247
$
1,610
Securities sold under reverse repurchase agreements
64,444
70,843
Short-term borrowings from Federal Reserve Bank
180,000
—
Overnight borrowings from the Federal Home Loan Bank
333,000
251,000
$ 578,691
$ 323,453
Short-term borrowings from the Federal Reserve Bank at December 31, 2024, were part of the Federal Reserve Bank’s Bank Term
Funding Program (BTFP). The BTFP borrowing, which matured in January 2025 and had a fixed interest rate of 4.83%, could be
repaid in full or in part without penalty prior to its stated maturity date. The line was secured primarily by the Bank’s held-to-maturity
investment securities, with assets pledged totaling approximately $187.7 million as of December 31, 2024. This BTFP borrowing was
repaid in January 2025.
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.
Short-term borrowings had weighted average interest rates of 4.32% at December 31, 2024, compared to 4.76% at December 31,
2023. Short-term borrowings averaged approximately $433.8 million and $225.1 million for the years ended December 31, 2024 and
2023, respectively. The maximum amounts outstanding at any month end were $578.7 million and $410.6 million, respectively,
during those same years.
152
The following table represents the Company’s securities sold under reverse repurchase agreements, which contractually mature daily,
at December 31, 2024 and 2023:
2024
2023
(In Thousands)
Mortgage-backed securities – GNMA, FNMA, FHLMC
$
64,444
$
70,843
Note 10: Federal Reserve Bank Borrowings
At December 31, 2024 and 2023, the Bank had $343.4 million and $452.0 million, respectively, available under a primary 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, 2024 or 2023.
As discussed in Note 9, in January 2024, the Bank borrowed $180.0 million under the Federal Reserve Bank’s BTFP, which was
repaid upon maturity in January 2025.
Note 11: 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 bore a floating distribution rate equal to 90-day LIBOR plus 1.60% through June 30, 2023. After June 30, 2023, the Trust II
securities bear a floating distribution rate equal to three-month CME Term SOFR, plus a spread adjustment for the change from
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 6.43% and 7.24% at December 31, 2024 and 2023,
respectively.
At December 31, 2024 and 2023, subordinated debentures issued to capital trusts were as follows:
2024
2023
(In Thousands)
Subordinated debentures
$
25,774 $
25,774
Note 12: Subordinated Notes
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 each of the years ended December 31, 2024 and 2023, totaled $297,000 and is included
in interest expense on subordinated notes in the consolidated statements of income, resulting in an imputed interest rate of 5.90 % and
5.92%, respectively.
153
At December 31, 2024 and 2023, subordinated notes are summarized as follows:
2024
2023
(In Thousands)
Subordinated notes
$
75,000
$
75,000
Less: unamortized debt issuance costs
124
421
$
74,876
$
74,579
Note 13: Income Taxes
The Company files a consolidated federal income tax return. As of December 31, 2024 and 2023, 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 at both December 31, 2024
and 2023.
During the years ended December 31, 2024, 2023 and 2022, the provision for income taxes included these components:
2024
2023
2022
(In Thousands)
Taxes currently payable
$ 13,233
$ 14,559
$ 15,769
Deferred income taxes
457
2,985
2,485
Income taxes
$ 13,690
$ 17,544
$ 18,254
154
The tax effects of temporary differences related to deferred taxes shown on the statements of financial condition were:
December 31,
2024
2023
(In Thousands)
Deferred tax assets
Allowance for credit losses
$
15,933
$
15,911
Liability for unfunded commitments
2,092
1,842
Interest on nonperforming loans
93
71
Accrued expenses and other
2,123
1,676
Capital loss carryforward
158
150
Unrealized loss on available-for-sale securities
15,055
13,208
Unrealized loss on securities transferred to held-to-maturity securities
64
16
Unrealized loss on active cash flow derivatives
4,186
4,255
Income recognized for tax in excess of book related to terminated cash flow derivatives
1,528
3,532
Deferred income
100
124
Difference in basis for acquired assets and liabilities
—
353
41,332
41,138
Deferred tax liabilities
Tax depreciation in excess of book depreciation
(6,654)
(7,697)
FHLB stock dividends
—
(337)
Partnership tax credits
(1,899)
(998)
Prepaid expenses
(781)
(1,373)
Difference in basis for acquired assets and liabilities
(31)
—
Unrealized gain on terminated cash flow derivatives
(1,528)
(3,532)
Other
(263)
(277)
(11,156)
(14,214)
Net deferred tax asset
$
30,176
$
26,924
Reconciliations of the Company’s effective tax rates, for the years indicated, from continuing operations to the statutory corporate tax
rates were as follows:
2024
2023
2022
Tax at statutory rate
21.0 %
21.0 %
21.0 %
Nontaxable interest and dividends
(0.5)
(0.5)
(0.5)
Tax credits
(4.4)
(2.7)
(1.6)
State taxes
1.7
1.7
1.8
Deferred tax rate change benefit
—
—
(0.6)
Other
0.3
1.1
(0.7)
18.1 %
20.6 %
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, 2020 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 previously filed a motion for summary decision with the MAHC and, on January 26, 2024, the
MAHC granted the motion in favor of the Company, upholding the Company’s position related to the exclusion of certain income in
the calculation of Missouri income tax. In February 2024, the Missouri Department of Revenue confirmed to the Company in writing
that it would not exercise its right to appeal the decision to the Missouri State Supreme Court.
155
Note 14: Disclosures About Fair Value of Financial Instruments
ASC Topic 820, Fair Value Measurements, defines fair value as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. Topic 820 also specifies a fair value hierarchy
which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair
value. The standard describes three levels of inputs that may be used to measure fair value:
x
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.
x
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.
x
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.
156
Recurring Measurements
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 measurements fell at December 31, 2024
and 2023:
Fair Value Measurements Using
Quoted Prices
in Active
Markets
Other
Significant
for Identical
Observable
Unobservable
Assets
Inputs
Inputs
Fair Value
(Level 1)
(Level 2)
(Level 3)
(In Thousands)
December 31, 2024
Available-for-sale securities
Agency mortgage-backed securities
$
305,907
$
—
$
305,907
$
—
Agency collateralized mortgage obligations
113,624
—
113,624
—
States and political subdivisions securities
55,948
—
55,948
—
Small Business Administration securities
57,894
—
57,894
—
Interest rate derivative asset
8,065
—
8,065
—
Interest rate derivative liability
(25,000)
—
(25,000)
—
December 31, 2023
Available-for-sale securities
Agency mortgage-backed securities
$
280,231
$
—
$
280,231
$
—
Agency collateralized mortgage obligations
75,946
—
75,946
—
States and political subdivisions securities
58,137
—
58,137
—
Small Business Administration securities
63,893
—
63,893
—
Interest rate derivative asset
8,205
—
8,205
—
Interest rate derivative liability
(25,336)
—
(25,336)
—
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, 2024 and 2023, as well as the general classification
of such assets pursuant to the valuation hierarchy. There were no significant changes in the valuation techniques during the year ended
December 31, 2024.
Available-for-Sale Securities. Investment securities available-for-sale are recorded at fair value on a recurring basis. The fair values
used by the Company are obtained from an independent pricing service, which represent either quoted market prices for the identical
asset or fair values determined by pricing models, or other model-based valuation techniques, that consider observable market data,
such as interest rate volatilities, SOFR yield curve, credit spreads and prices from market makers and live trading systems. Recurring
Level 2 securities include U.S. government agency securities, mortgage-backed securities, state and municipal bonds and certain other
investments. Inputs used for valuing Level 2 securities include observable data that may include dealer quotes, benchmark yields,
market spreads, live trading levels and market consensus prepayment speeds, among other things. Additional inputs include indicative
values derived from the independent pricing service’s proprietary computerized models. There were no recurring Level 3 securities at
December 31, 2024 or December 31, 2023.
Interest Rate Derivatives. The fair value is estimated using forward-looking interest rate curves and is determined using observable
market rates and, therefore, are classified within Level 2 of the valuation hierarchy.
157
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 fell at December 31, 2024 and 2023:
Fair Value Measurements Using
Quoted
Prices
in Active
Markets
Other
Significant
for Identical
Observable
Unobservable
Assets
Inputs
Inputs
Fair Value
(Level 1)
(Level 2)
(Level 3)
(In Thousands)
December 31, 2024
Collateral-dependent loans
$
701
$
—
$
—
$
701
December 31, 2023
Collateral-dependent loans
$
7,372
$
—
$
—
$
7,372
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, 2024 and 2023, the aggregate fair value of
mortgage loans held for sale was not materially different than their cost. Accordingly, no mortgage loans held for sale were marked
down and reported at fair value.
Collateral-Dependent Loans. The Company records collateral-dependent loans as Nonrecurring Level 3. If a loan’s fair value as
estimated by the Company is less than its carrying value, the Company either records a charge-off of the portion of the loan that
exceeds the fair value or establishes a reserve within the allowance for credit losses specific to the loan. Loans for which such charge-
offs or reserves were recorded during the years ended December 31, 2024 and December 31, 2023, 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. There were no foreclosed assets held for sale at December 31, 2024 or 2023.
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, 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.
158
Loans and Interest Receivable. The fair value of loans is estimated on an exit price basis incorporating contractual cash flows,
prepayment 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 based on 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.
December 31, 2024
December 31, 2023
Carrying
Fair
Hierarchy
Carrying
Fair
Hierarchy
Amount
Value
Level
Amount
Value
Level
(Dollars in Thousands)
Financial assets
Cash and cash equivalents
$
195,756
$
195,756
1
$
211,333
$
211,333
1
Held-to-maturity securities
187,433
162,765
2
195,023
171,193
2
Mortgage loans held for sale
6,937
6,937
2
5,849
5,849
2
Loans, net of allowance for credit losses
4,690,393
4,529,729
3
4,589,620
4,402,314
3
Interest receivable
20,430
20,430
3
21,206
21,206
3
Investment in FHLB stock and other assets
28,392
28,392
3
26,313
26,313
3
Financial liabilities
Deposits
4,605,549
4,602,312
3
4,721,708
4,714,624
3
Short-term borrowings
578,691
578,691
3
323,453
323,453
3
Subordinated debentures
25,774
25,774
3
25,774
25,774
3
Subordinated notes
74,876
74,438
2
74,579
71,625
2
Interest payable
12,761
12,761
3
6,225
6,225
3
Unrecognized financial instruments (net of
contractual value)
Commitments to originate loans
—
—
3
—
—
3
Letters of credit
72
72
3
78
78
3
Lines of credit
—
—
3
—
—
3
159
Note 15: Derivatives and Hedging Activities
Risk Management Objective of Using Derivatives
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally
manages its exposures to a wide variety of business and operational risks through management of its core business activities. The
Company manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and
duration of its assets and liabilities. In the normal course of business, the Company may use derivative financial instruments (primarily
interest rate swaps) from time to time to assist in its interest rate risk management. The Company has interest rate derivatives that
result from a service provided to certain qualifying loan customers that are not used to manage interest rate risk in the Company’s
assets or liabilities and are not designated in a qualifying hedging relationship. The Company manages a matched book with respect to
its derivative instruments in order to minimize its net risk exposure resulting from such transactions. In addition, the Company has
interest rate derivatives that have been designated in a qualified hedging relationship.
Nondesignated Hedges
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 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 rate swaps that the Company executes with a third party, such that the Company
minimizes its net risk exposure resulting from such transactions. As the interest rate swaps associated with this program do not meet
the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized
directly in earnings.
At December 31, 2024, the Company had five interest rate swaps, totaling $86.7 million in notional amount, with commercial
customers, and five interest rate swaps with the same notional amount with third parties related to its program. In addition, at
December 31, 2024, the Company had one participation loan purchased totaling $8.4 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, 2023, the Company had six interest rate swaps totaling $82.2 million in notional amount with
commercial customers, and six interest rate swaps with the same notional amount with third parties related to its program. In addition,
at December 31, 2023, the Company had one participation loan purchased totaling $8.6 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, 2024, 2023 and 2022, the Company recognized net gains (losses) of $(58,000),
$(337,000) and $321,000, respectively, in non-interest income related to changes in the fair value of these swaps.
Fair Value Hedges
Interest Rate Swaps. As a strategy to maintain acceptable levels of exposure to the risk of changes in future cash flows due to interest
rate fluctuations, in February 2023, the Company entered into interest rate swap transactions as part of its ongoing interest rate
management strategies to hedge the risk of certain of its fixed rate brokered deposits. The total notional amount of the swaps was $95
million with a termination date of February 28, 2025. Under the terms of the swaps, the Company received a fixed rate of interest of
4.65% and paid a floating rate of interest equal to USD-SOFR-COMPOUND plus a spread. The floating rate reset monthly and net
settlements of interest due to/from the counterparty occurred monthly. To the extent that the fixed rate of interest exceeded USD-
SOFR-COMPOUND plus the spread, the Company received net interest settlements, which were recorded as a reduction of deposit
interest expense. If USD-SOFR-COMPOUND plus the spread exceeded the fixed rate of interest, the Company was required to pay
net settlements to the counterparty and record those net payments as interest expense on deposits.
In January 2024, the Company elected to terminate these swaps prior to their contractual termination date in 2025. The Company
received a net settlement payment from the swap counterparty totaling $26,500 upon termination. At the time of the early termination,
the Company recorded a market value adjustment to the brokered deposits of $163,000, which was amortized as a reduction of interest
expense from January 2024 through February 2025.
160
Cash Flow Hedges
Interest Rate Swaps. 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 part
of Accumulated Other Comprehensive Income (AOCI) 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 related to this terminated swap in each of the years ended December 31, 2024, 2023 and 2022, respectively. At
December 31, 2024, 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 was $300 million, with a termination date of March 1, 2024.
Under the terms of the swap, the Company received a fixed rate of interest of 1.6725% and paid a floating rate of interest equal
to one-month USD-LIBOR (or the equivalent replacement USD-SOFR rate once the USD-LIBOR rate ceased to be available). The
floating rate reset monthly and net settlements of interest due to/from the counterparty also occurred monthly. To the extent the
floating rate of interest 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. If the fixed rate of interest exceeded the floating rate of interest,
the Company received net interest settlements, which were recorded as loan interest income. As this interest rate swap reached its
contractual termination date of March 1, 2024, there has been no further interest income impact related to this swap after the three
months ended March 31, 2024. The Company recorded a reduction of loan interest income related to this swap transaction of $1.9
million and $10.4 million for the years ended December 31, 2024 and December 31, 2023, respectively.
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, the Company receives a fixed rate of interest of 2.628%
and pays a floating rate of interest equal to one-month USD-SOFR OIS. Under the terms of the other swap, the Company receives a
fixed rate of interest of 5.725% and pays a floating rate of interest equal to one-month USD-Prime. In each case, the floating rate
resets monthly and net settlements of interest due to/from the counterparty also occur monthly. To the extent the fixed rate of interest
exceeds the floating rate of interest, the Company receives net interest settlements, which is recorded as loan interest income. If the
floating rate of interest exceeds the fixed rate of interest, the Company pays net settlements to the counterparty and records those net
payments as a reduction of interest income on loans. At December 31, 2024, the USD-Prime rate was 7.50% and the one-month USD-
SOFR OIS rate was 4.52766%. The Company recorded a reduction of loan interest income related to the two July 2022 interest rate
swaps of $10.4 million and $7.2 million for the year ended December 31, 2024 and 2023.
The effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified
into earnings in the same period or periods during which the hedged transaction affected earnings. Gains and losses on the derivative
representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in
current earnings. During the years ended December 31, 2024 and 2023, the Company recognized no non-interest income related to
changes in the fair value of these derivatives.
161
The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the
Consolidated Statements of Financial Condition:
Location in
Fair Value
Consolidated Statements
December 31,
December 31,
of Financial Condition
2024
2023
(In Thousands)
Derivatives designated as hedging instruments
Derivative Liabilities
Active interest rate swaps
Accrued expenses and other liabilities $
17,014
$
17,296
Total derivatives designated as hedging instruments
$
17,014
$
17,296
Derivatives not designated as hedging instruments
Derivative Assets
Interest rate products
Prepaid expenses and other assets
$
8,065
$
8,205
Total derivatives not designated as hedging instruments
$
8,065
$
8,205
Derivative Liabilities
Interest rate products
Accrued expenses and other liabilities $
7,986
$
8,040
Total derivatives not designated as hedging instruments
$
7,986
$
8,040
The following table presents the effect of cash flow hedge accounting through AOCI on the statements of comprehensive income:
Amount of Gain (Loss)
Recognized in AOCI
Year Ended December 31,
Cash Flow Hedges
2024
2023
2022
(In Thousands)
Terminated interest rate swaps, net of income taxes
$
(6,286)
$
(6,267)
$
(6,271)
Active interest rate swaps, net of income taxes
214
10,541
(23,582)
$
(6,072)
$
4,274
$
(29,853)
The following table presents the effect of cash flow hedge accounting on the statements of income:
Year Ended December 31,
Cash Flow Hedges
2024
2023
2022
Interest
Interest
Interest
Interest
Interest
Interest
Income
Expense
Income
Expense
Income
Expense
(In Thousands)
Terminated interest rate swaps
$
8,145
$
—
$
8,122
$
—
$
8,123
$
—
Active interest rate swaps
(12,281)
—
(17,618)
—
(941)
—
$
(4,136)
$
—
$
(9,496)
$
—
$
7,182
$
—
162
Agreements with Derivative Counterparties
The Company has agreements with its derivative counterparties. If the Company defaults on any of its indebtedness, including a
default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in
default on its derivative obligations. If the Bank fails to maintain its status as a well-capitalized institution, then the counterparty could
terminate the derivative positions and the Company would be required to settle its obligations under the agreements. Similarly, the
Company could be required to settle its obligations under certain of its agreements if certain regulatory events occur, such as the
issuance of a formal directive, or if the Company’s credit rating is downgraded below a specified level.
At December 31, 2024, the termination value of derivatives with our derivative dealer counterparties (related to loan level swaps with
commercial lending customers and interest rate swaps to hedge risk related to the Company’s variable rate loans) in an overall net
asset position, which included accrued interest but excluded any adjustment for nonperformance risk, related to these agreements was
$79,000. The Company has minimum collateral posting thresholds with its derivative dealer counterparties. At December 31, 2024,
the Company had given cash collateral to one derivative counterparty of $9.9 million to cover its net fair value position. This
counterparty position included collateral from the counterparty of $8.1 million for commercial lending swaps and collateral from the
Company of $17.7 million for interest rate swaps related to variable rate loans.
At December 31, 2023, the termination value of derivatives with our derivative dealer counterparties (related to loan level swaps with
commercial lending customers and interest rate swaps to hedge risk related to the Company’s variable rate loans) in an overall net
asset position, which included accrued interest but excluded any adjustment for nonperformance risk, related to these agreements was
$137,000. The Company has minimum collateral posting thresholds with its derivative dealer counterparties. At December 31, 2023,
the Company had given cash collateral to one derivative counterparty of $11.6 million to cover its net fair value position. This
counterparty position included collateral from the counterparty of $8.2 million for commercial lending swaps, collateral from the
Company of $19.2 million for interest rate swaps related to variable rate loans and collateral from the Company of $44,000 for swaps
related to brokered deposits.
If the Company had breached any of these provisions at December 31, 2024 or December 31, 2023, it could have been required to
settle its obligations under the agreements at the termination value. Under the collateral agreements between the parties, either party
may choose to provide cash or securities to satisfy its collateral requirements.
Note 16: 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, 2024 and 2023, the Bank had outstanding commitments to originate loans and fund commercial construction loans
aggregating approximately $34.5 million and $1.6 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 $14.4 million and $12.3 million at December 31, 2024 and 2023, 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
163
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 $16.8 million and $16.5 million at December
31, 2024 and 2023, 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, 2024, the Bank had granted unused lines of credit to borrowers aggregating approximately $993.8 million and
$205.6 million for commercial lines and open-end consumer lines, respectively. At December 31, 2023, the Bank had granted unused
lines of credit to borrowers aggregating approximately $1.0 billion and $204.0 million for commercial lines and open-end consumer
lines, respectively.
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 FDIC-assisted acquired loans) aggregating approximately $781.4 million and $788.6
million at December 31, 2024 and 2023, 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 17: Additional Cash Flow Information
Year Ended December 31,
2024
2023
2022
(In Thousands)
Noncash Investing and Financing Activities
Real estate acquired in settlement of loans
$
15,771
$
142
$
371
Sale and financing of foreclosed assets
9,585
—
—
Transfer of available-for-sale securities to held-to-maturity
—
—
226,500
Conversion of premises and equipment to foreclosed assets
994
—
—
Increase in unfunded portion of investments in tax credit partnerships and
corresponding liability for future funding upon accounting standard adoption
30,555
—
—
Dividends declared but not paid
4,692
4,722
4,893
Additional Cash Payment Information
Interest paid
129,019
100,405
24,999
Income taxes paid
3,653
7,888
10,258
Note 18: Employee Benefits
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, 2024, 2023 and 2022, were approximately $1.5
million, $1.7 million and $1.5 million, respectively. The Company’s contributions to the Pentegra DB Plan were not more than 5% of
164
the total contributions to the plan. The funded status of the plan as of July 1, 2024 and 2023, was 93.4% and 94.4%, respectively. The
funded status was calculated by taking the market value of plan assets, which reflected contributions received through June 30, 2024
and 2023, 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, 2024, 2023 and 2022, were approximately $1.8 million, $1.8 million and $1.7 million, respectively.
Note 19: Stock Compensation Plans
The Company established the 2013 Equity Incentive Plan (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, 2024,
124,676 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, 2024, 492,658 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 900,000 (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, 2024, 589,987 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 Compensation
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 Compensation Committee.
165
The table below summarizes transactions under the Company’s stock compensation plans, all of which related to stock options granted
under such plans:
Shares
Weighted
Available
Under
Average
to be Granted
Option
Exercise Price
Balance, January 1, 2022
86,672
1,033,303
$
50.528
Granted from 2018 Plan
(2,500)
2,500
61.550
Forfeited from terminated plan(s)
39,235
(39,235)
52.523
Termination of 2018 Plan
(123,407)
—
—
Available to be granted from 2022 Plan
900,000
—
—
Granted from 2022 Plan
(205,900)
205,900
61.505
Exercised
—
(136,801)
42.149
Forfeited from current plan(s)
750
(750)
61.550
Balance, December 31, 2022
694,850
1,064,917
53.671
Forfeited from terminated plan(s)
—
(9,100)
51.123
Granted from 2022 Plan
(210,300)
210,300
53.166
Exercised
—
(22,762)
38.830
Forfeited from current plan(s)
3,050
(3,050)
61.550
Balance, December 31, 2023
487,600
1,240,305
53.857
Forfeited from terminated plan(s)
—
(15,634)
51.289
Granted from 2022 Plan
(214,800)
214,800
61.706
Exercised
—
(203,601)
49.586
Forfeited from current plan(s)
28,549
(28,549)
57.483
Balance, December 31, 2024
301,349
1,207,321
$
55.921
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.
166
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, 2024, 2023 and 2022:
2024
2023
2022
Expected dividends per share
$
1.60
$
1.60
$
1.60
Risk-free interest rate
4.31 %
4.51 %
3.77 %
Expected life of options
6 years
6 years
6 years
Expected volatility
25.48 %
23.69 %
23.70 %
Weighted average fair value of options granted during year
$
15.01
$
11.69
$
13.46
Expected volatilities are based on the historical volatility of the Company’s stock price over the measured period. 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. 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.
The following table presents the activity related to options under all plans for the year ended December 31, 2024:
Weighted
Weighted
Average
Average
Remaining
Exercise
Contractual
Options
Price
Term
Options outstanding, January 1, 2024
1,240,305
$
53.857
6.74 years
Granted
214,800
61.706
Exercised
(203,601)
49.586
Forfeited
(44,183)
55.291
Options outstanding, December 31, 2024
1,207,321
55.921
6.80 years
Options exercisable, December 31, 2024
539,611
$
53.798
4.63 years
For the years ended December 31, 2024, 2023 and 2022, options granted were 214,800, 210,300, and 208,400, 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, 2024, 2023 and 2022, was $2.7 million, $354,000 and $2.6 million,
respectively. Cash received from the exercise of options for the years ended December 31, 2024, 2023 and 2022, was $10.1 million,
$884,000 and $6.3 million, respectively. The actual tax benefit realized for the tax deductions from option exercises totaled $2.5
million, $212,000 and $2.3 million for the years ended December 31, 2024, 2023 and 2022, respectively. The total intrinsic value of
options outstanding at December 31, 2024, 2023 and 2022, was $5.4 million, $7.4 million and $6.7 million, respectively. The total
intrinsic value of options exercisable at December 31, 2024, 2023 and 2022, was $3.3 million, $4.5 million and $4.1 million,
respectively.
The following table presents the activity related to nonvested options under all plans for the year ended December 31, 2024.
Weighted
Weighted
Average
Average
Exercise
Grant Date
Options
Price
Fair Value
Nonvested options, January 1, 2024
668,815
$
55.711
$
11.640
Granted
214,800
61.706
15.013
Vested this period
(176,580)
55.582
11.002
Nonvested options forfeited
(39,325)
56.320
12.113
Nonvested options, December 31, 2024
667,710
$
57.638
$
12.866
167
For the years ended December 31, 2024, 2023 and 2022, compensation expense for stock option grants was $1.8 million, $1.6 million
and $1.4 million, respectively. At December 31, 2024, there was $8.1 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 2030, with the
majority of this expense recognized in 2025 and 2026.
The following table further summarizes information about stock options outstanding at December 31, 2024:
Options Outstanding
Weighted
Options Exercisable
Average
Weighted
Weighted
Remaining
Average
Average
Number
Contractual
Exercise
Number
Exercise
Range of Exercise Prices
Outstanding
Term
Price
Exercisable
Price
$41.300 to 41.740
149,610
4.74 years
$ 41.632
113,686
$ 41.598
$50.710 to 59.750
551,814
6.24 years
54.831
270,205
55.046
$60.150 to 61.790
505,897
8.02 years
61.336
155,720
60.537
1,207,321
6.80 years
$ 55.921
539,611
$ 53.798
Note 20: 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 21: Accumulated Other Comprehensive Income
The components of accumulated other comprehensive income (AOCI), included in stockholders’ equity, are as follows:
2024
2023
(In Thousands)
Net unrealized loss on available-for-sale securities
$ (61,191)
$ (53,685)
Net unrealized loss on held-to-maturity securities
(262)
(65)
Net unrealized loss on active derivatives used for cash flow hedges
(17,014)
(17,296)
Net unrealized gain on terminated derivatives used for cash flow hedges
6,209
14,354
(72,258)
(56,692)
Tax effect
17,896
14,211
Net-of-tax amount
$ (54,362)
$ (42,481)
168
Amounts reclassified from AOCI and the affected line items in the statements of income during the years ended December 31, 2024,
2023 and 2022, were as follows:
Amounts Reclassified
from AOCI
Affected Line Item in the
2024
2023
2022
Statements of Income
(In Thousands)
Unrealized loss on available-for-sale securities
$
—
$
—
$
(130)
Net realized loss on
available-for-sale securities (total
reclassified amount before tax)
Change in fair value of cash flow hedge
8,145
8,122
8,123
Amortization of realized gain on
termination of cash flow hedge (total
reclassification amount before tax)
Income taxes
(1,859)
(1,855)
(1,820)
Provision for income taxes
Total reclassifications out of AOCI
$
6,286
$
6,267
$
6,173
Note 22: 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, 2024) 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, 2024, that the Bank met all capital adequacy
requirements to which it was then subject.
As of December 31, 2024, 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, 2024, 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, 2024 and 2023, 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 below. 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.
169
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.
To Be Well
Capitalized Under
For Capital
Prompt Corrective
Actual
Adequacy Purposes
Action Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
(Dollars In Thousands)
As of December 31, 2024
Total capital
Great Southern Bancorp, Inc.
$ 809,221
15.4 % $ 419,108
8.0 %
N/A
N/A
Great Southern Bank
$ 725,974
13.9 % $ 418,985
8.0 % $ 523,732
10.0 %
Tier I capital
Great Southern Bancorp, Inc.
$ 668,639
12.8 % $ 314,331
6.0 %
N/A
N/A
Great Southern Bank
$ 660,411
12.6 % $ 314,239
6.0 % $ 418,985
8.0 %
Tier I leverage capital
Great Southern Bancorp, Inc.
$ 668,639
11.2 % $ 239,536
4.0 %
N/A
N/A
Great Southern Bank
$ 660,411
11.0 % $ 239,487
4.0 % $ 299,359
5.0 %
Common equity Tier I capital
Great Southern Bancorp, Inc.
$ 643,639
12.3 % $ 235,748
4.5 %
N/A
N/A
Great Southern Bank
$ 660,411
12.6 % $ 235,679
4.5 % $ 340,426
6.5 %
As of December 31, 2023
Total capital
Great Southern Bancorp, Inc.
$ 770,885
15.2 % $ 406,994
8.0 %
N/A
N/A
Great Southern Bank
$ 728,113
14.3 % $ 406,744
8.0 % $ 508,430
10.0 %
Tier I capital
Great Southern Bancorp, Inc.
$ 632,279
12.4 % $ 305,246
6.0 %
N/A
N/A
Great Southern Bank
$ 664,545
13.1 % $ 305,058
6.0 % $ 406,744
8.0 %
Tier I leverage capital
Great Southern Bancorp, Inc.
$ 632,279
11.0 % $ 229,992
4.0 %
N/A
N/A
Great Southern Bank
$ 664,545
11.6 % $ 229,692
4.0 % $ 287,115
5.0 %
Common equity Tier I capital
Great Southern Bancorp, Inc.
$ 607,279
11.9 % $ 228,934
4.5 %
N/A
N/A
Great Southern Bank
$ 664,545
13.1 % $ 228,794
4.5 % $ 330,480
6.5 %
Note 23: 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.
The Company previously reported certain issues and contractual disputes regarding its proposed conversion to a new core banking
platform to be delivered by a third-party vendor. These issues and disputes ultimately led to the Company terminating the Master
Agreement with the third-party vendor and initiating litigation against them, with the third-party vendor filing a counterclaim against
the Company.
In December 2024, an agreement in principle was reached between the Company and the third-party vendor whereby the Master
Agreement would be terminated and the parties’ card servicing agreement would be continued and expanded. The Company recorded
170
a $2.0 million accrued expense in 2024 in connection with these developments. However, at this time, no assurance can be given as to
when or whether final agreements will be executed and a full settlement of the matter will be achieved.
Note 24: Summary of Unaudited Quarterly Operating Results
Following is a summary of unaudited quarterly operating results for the years 2024, 2023 and 2022:
2024
Three Months Ended
March 31
June 30
September 30 December 31
(In Thousands, Except Per Share Data)
Interest income
$
77,390
$
80,927
$
83,796
$
82,585
Interest expense
32,574
34,109
35,821
33,051
Provision for credit losses on loans
500
—
1,200
—
Provision (credit) for unfunded commitments
130
(607)
(63)
1,556
Net realized gain (loss) on available-for-sale securities
—
—
—
—
Non-interest income
6,806
9,833
6,992
6,934
Non-interest expense
34,422
36,409
33,717
36,947
Provision for income taxes
3,163
3,861
3,623
3,043
Net income available to common shareholders
13,407
16,988
16,490
14,922
Earnings per common share – diluted
1.13
1.45
1.41
1.27
2023
Three Months Ended
March 31
June 30
September 30 December 31
(In Thousands, Except Per Share Data)
Interest income
$
71,463
$
73,618
$
75,272
$
76,482
Interest expense
18,271
25,480
28,534
31,335
Provision for credit losses on loans
1,500
—
—
750
Provision (credit) for unfunded commitments
(826)
(1,619)
(1,195)
(1,689)
Net realized gain (loss) on available-for-sale securities
—
—
—
—
Non-interest income
7,889
7,769
7,852
6,563
Non-interest expense
34,463
34,718
35,557
36,285
Provision for income taxes
5,488
4,488
4,349
3,219
Net income available to common shareholders
20,456
18,320
15,879
13,145
Earnings per common share – diluted
1.67
1.52
1.33
1.11
2022
Three Months Ended
March 31
June 30
September 30 December 31
(In Thousands, Except Per Share Data)
Interest income
$
46,673
$
52,698
$
59,657
$
67,949
Interest expense
3,407
3,867
6,759
13,330
Provision (credit) for credit losses on loans
—
—
2,000
1,000
Provision (credit) for unfunded commitments
(193)
2,223
1,315
(159)
Net realized gain (loss) on available-for-sale securities
7
—
31
(168)
Non-interest income
9,176
9,319
7,984
7,661
Non-interest expense
31,268
33,004
34,758
34,336
Provision for income taxes
4,380
4,699
4,676
4,499
Net income available to common shareholders
16,987
18,224
18,133
22,604
Earnings per common share – diluted
1.30
1.44
1.46
1.84
171
Note 25: Condensed Parent Company Statements
The condensed statements of financial condition at December 31, 2024 and 2023, and statements of income, comprehensive income
and cash flows for the years ended December 31, 2024, 2023 and 2022, for the parent company, Great Southern Bancorp, Inc., were as
follows:
December 31,
2024
2023
(In Thousands)
Statements of Financial Condition
Assets
Cash
$
87,621
$
47,048
Investment in subsidiary bank
616,340
629,096
Deferred and accrued income taxes
618
641
Prepaid expenses and other assets
898
877
$
705,477
$
677,662
Liabilities and Stockholders’ Equity
Accounts payable and accrued expenses
$
5,259
$
5,480
Subordinated debentures issued to capital trust
25,774
25,774
Subordinated notes
74,876
74,579
Common stock
117
118
Additional paid-in capital
50,336
44,320
Retained earnings
603,477
569,872
Accumulated other comprehensive income (loss)
(54,362)
(42,481)
$
705,477
$
677,662
2024
2023
2022
(In Thousands)
Statements of Income
Income
Dividends from subsidiary bank
$
70,000
$
65,000
$
60,000
Other income
—
—
—
70,000
65,000
60,000
Expense
Operating expenses
3,280
2,780
2,550
Interest expense
6,221
6,158
5,298
9,501
8,938
7,848
Income before income tax and equity in undistributed earnings of subsidiaries
60,499
56,062
52,152
Credit for income taxes
(1,960)
(1,932)
(1,608)
Income before equity in earnings of subsidiaries
62,459
57,994
53,760
Equity in undistributed earnings of subsidiaries
(652)
9,806
22,188
Net income
$
61,807
$
67,800
$
75,948
172
2024
2023
2022
(In Thousands)
Statements of Cash Flows
Operating Activities
Net income
$
61,807
$
67,800
$
75,948
Items not requiring (providing) cash
Equity in undistributed earnings of subsidiary
652
(9,806)
(22,188)
Compensation expense for stock option grants
1,770
1,621
1,437
Amortization of interest rate derivative and deferred costs on subordinated notes
297
298
297
Changes in
Prepaid expenses and other assets
(21)
5
(14)
Accounts payable and accrued expenses
(191)
250
69
Income taxes
23
(493)
(54)
Net cash provided by operating activities
64,337
59,675
55,495
Investing Activities
Net cash provided by investing activities
—
—
—
Financing Activities
Purchases of the Company’s common stock
(15,152)
(23,326)
(61,847)
Dividends paid
(18,708)
(19,282)
(19,181)
Stock options exercised
10,096
884
6,258
Net cash used in financing activities
(23,764)
(41,724)
(74,770)
Increase (Decrease) in Cash
40,573
17,951
(19,275)
Cash, Beginning of Year
47,048
29,097
48,372
Cash, End of Year
$
87,621
$
47,048
$
29,097
Additional Cash Payment Information
Interest paid
$
6,247
$
6,107
$
5,115
2024
2023
2022
(In Thousands)
Statements of Comprehensive Income
Net Income
$
61,807
$
67,800
$
75,948
Comprehensive income (loss) of subsidiaries
(11,881)
10,874
(86,114)
Comprehensive Income (Loss)
$
49,926
$
78,674
$
(10,166)
173
Note 26: Operating Segments
The Company’s banking operation is its only operating 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. The parent holding company does not have any significant operations other than ownership of
the Bank, and the parent holding company’s only income is equity in the earnings of the Bank.
Our chief executive officer is our chief operating decision maker. Our chief executive officer reviews actual net income versus
budgeted net income, as well as comparison to other comparable financial reporting periods, to assess performance on a monthly basis
and to make decisions about allocating capital and personnel.
174
Financial results by operating segment (all attributed to the banking segment), including significant expense categories provided to the
chief operating decision maker, are detailed below at December 31, 2024, 2023 and 2022.
2024
2023
2022
(In Thousands)
Interest income
$
324,698
$
296,835
$
226,977
Interest expense
135,555
103,620
27,363
Net interest income
189,143
193,215
199,614
Credit loss expense
2,716
(3,079)
6,187
Net interest income after credit loss expense
186,427
196,294
193,427
Non-interest Income
Commissions
1,227
1,153
1,208
Overdraft and insufficient funds fees
5,140
7,617
7,872
Point-of-sale and ATM fee income and service charges
13,586
14,346
15,705
Net gain on loan sales
3,779
2,354
2,584
Net realized loss on sales of available-for-sale securities
—
—
(130)
Late charges and fees on loans
512
786
1,182
Fees from debit card contracts
1,804
2,579
2,304
Other income
4,517
1,238
3,416
30,565
30,073
34,141
Non-interest Expense
Salaries and incentives
63,954
63,641
61,091
Employee benefits
14,645
14,880
14,209
Net occupancy expense
12,430
12,357
11,963
Technology, furniture and equipment expense
19,688
18,477
16,508
Postage
3,329
3,590
3,379
Insurance
4,622
4,542
3,197
Advertising
3,124
3,396
3,261
Office supplies and printing
1,008
1,057
867
Telephone
2,772
2,730
3,170
Legal, audit and other professional fees
5,399
7,086
6,330
Expense (income) on other real estate and repossessions
(304)
311
359
Acquired intangible asset amortization
433
286
768
Travel meals and entertainment
2,066
2,076
1,827
Other operating expenses
8,329
6,594
6,437
141,495
141,023
133,366
Income Before Income Taxes
75,497
85,344
94,202
Provision for Income Taxes
13,690
17,544
18,254
Net Income
$
61,807
$
67,800
$
75,948
The measure of segment assets is based on total assets as reported on the consolidated statements of financial condition. For the years
ended December 31, 2024 and 2023, there were no adjustments or reconciling items between the banking segment total assets and
total assets as presented on the consolidated statements of financial condition.
175
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None.
ITEM 9A.
CONTROLS AND PROCEDURES.
We maintain a system of disclosure controls and procedures (as defined in Rule 13(a)-15(e) under the Securities Exchange Act of
1934 (the “Exchange Act”)) that is designed to provide reasonable assurance that information required to be disclosed by us in the
reports that we file under the Exchange Act is recorded, processed, summarized and reported accurately and within the time periods
specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including
our principal executive officer and principal financial officer, as appropriate. An evaluation of our disclosure controls and procedures
was carried out as of December 31, 2024, under the supervision and with the participation of our principal executive officer, principal
financial officer and several other members of our senior management. Our principal executive officer and principal financial officer
concluded that, as of December 31, 2024, our disclosure controls and procedures were effective in ensuring that the information we
are required to disclose in the reports we file or submit under the Act is (i) accumulated and communicated to our management
(including the principal executive officer and principal financial officer) to allow timely decisions regarding required disclosure, and
(ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Act) that occurred
during the quarter ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting. The annual report of management on the effectiveness of internal control over financial reporting and
the attestation report thereon issued by our independent registered public accounting firm are set forth below under “Management’s
Report on Internal Control Over Financial Reporting” and “Report of the Independent Registered Public Accounting Firm.”
We do not expect that our internal control over financial reporting will prevent all errors and all fraud. A control procedure, no matter
how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are
met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities
that judgments in decision-making can be faulty, and that breakdowns in controls or procedures can occur because of simple error or
mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by
management override of the control. The design of any control procedure also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential
future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the
policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to
error or fraud may occur and not be detected.
176
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Great Southern Bancorp, Inc. (the “Company”) is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company’s internal control over
financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of the financial statements for external purposes in accordance with accounting principles generally accepted in the United
States of America. The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the
Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets
that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. All internal
control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the
circumvention of overriding controls. Accordingly, even effective internal control over financial reporting can provide only reasonable
assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024, based on
the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-
Integrated Framework (2013). Based on that assessment, management concluded that, as of December 31, 2024, the Company’s
internal control over financial reporting was effective.
The Company’s internal control over financial reporting as of December 31, 2024, has been audited by Forvis Mazars, LLP, an
independent registered public accounting firm. Their attestation report on the effectiveness of the Company’s internal control over
financial reporting as of December 31, 2024 is set forth below.
177
Report of Independent Registered Public Accounting Firm
To the Stockholders, Board of Directors, and Audit Committee
Great Southern Bancorp, Inc.
Springfield, Missouri
Opinion on the Internal Control over Financial Reporting
We have audited Great Southern Bancorp, Inc.’s (the “Company”) internal control over financial reporting as of December 31, 2024,
based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated
Framework: (2013) issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated financial statements of the Company as of December 31, 2024 and 2023, and for each of the three years in
the period ended December 31, 2024, and our report dated March 7, 2025, expressed an unqualified opinion on those consolidated
financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control
Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting
based on our audit.
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.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also
included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definitions and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions or that the degree of compliance with the policies or procedures may deteriorate.
/s/Forvis Mazars, LLP
Springfield, Missouri
March 7, 2025
178
ITEM 9B.
OTHER INFORMATION.
Trading Plans
During the three months ended December 31, 2024, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the
Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is
defined in Item 408(a) of Regulation S-K.
ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
Not applicable.
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Directors and Executive Officers. The information concerning our directors and executive officers and corporate governance matters
required by this item is incorporated herein by reference from our definitive proxy statement for our 2025 Annual Meeting of
Stockholders, a copy of which will be filed with the Securities and Exchange Commission not later than 120 days after the end of our
fiscal year.
Delinquent Section 16(a) Reports. Any information concerning compliance with the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934 by our directors, officers and ten percent stockholders required by this item is incorporated herein by
reference from our definitive proxy statement for our 2025 Annual Meeting of Stockholders, a copy of which will be filed with the
Securities and Exchange Commission not later than 120 days after the end of our fiscal year.
Insider Trading Policy. The information concerning our insider trading policy required by this item is incorporated herein by reference
from our definitive proxy statement for our 2025 Annual Meeting of Stockholders, a copy of which will be filed with the Securities
and Exchange Commission not later than 120 days after the end of our fiscal year. A copy of our insider trading policy is filed as
Exhibit 19 to this Form 10-K.
Code of Ethics. We have adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal
accounting officer, and persons performing similar functions, and to all of our other employees and our directors. Our code of ethics is
available on our website, at https://investors.greatsouthernbank.com/corporate-governance/documents.
ITEM 11.
EXECUTIVE COMPENSATION.
The information concerning compensation and other matters required by this item is incorporated herein by reference from our
definitive proxy statement for our 2025 Annual Meeting of Stockholders, a copy of which will be filed with the Securities and
Exchange Commission not later than 120 days after the end of our fiscal year.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.
The information concerning security ownership of certain beneficial owners and management required by this item is incorporated
herein by reference from our definitive proxy statement for our 2025 Annual Meeting of Stockholders, a copy of which will be filed
with the Securities and Exchange Commission not later than 120 days after the end of our fiscal year.
179
The following table sets forth information as of December 31, 2024 with respect to compensation plans under which shares of our
common stock may be issued:
Equity Compensation Plan Information
Number of Shares
to be issued upon
Weighted Average
Number of Shares
Exercise of
Exercise Price of
Remaining Available for Future Issuance
Outstanding
Outstanding
Under Equity Compensation
Options, Warrants
Options, Warrants
Plans (Excluding Shares
Plan Category
and Rights
and Rights
Reflected in the First Column)
Equity compensation plans approved by stockholders
1,207,321
$
55.921
301,349 (1)
Equity compensation plans not approved by stockholders
N/A
N/A
N/A
Total
1,207,321
$
55.921
301,349
(1)
Represents shares available for future awards under the Company’s 2022 Omnibus Incentive Plan. Awards in the form of
restricted stock, restricted stock units, performance shares and performance units will reduce the number of shares available under
the Company’s 2022 Omnibus Incentive Plan on a 2.5-to-1 basis.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The information concerning certain relationships and related transactions and director independence required by this item is
incorporated herein by reference from our definitive proxy statement for our 2025 Annual Meeting of Stockholders, a copy of which
will be filed with the Securities and Exchange Commission not later than 120 days after the end of our fiscal year.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The information concerning principal accounting fees and services required by this item is incorporated herein by reference from our
definitive proxy statement for our 2025 Annual Meeting of Stockholders, a copy of which will be filed not later than 120 days after the
end of our fiscal year.
180
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) List of Documents Filed as Part of This Report
(1)
Financial Statements
The Consolidated Financial Statements and Independent Auditor’s Report are included in Item 8.
(2)
Financial Statement Schedules
Inapplicable.
(3)
List of Exhibits
Exhibits incorporated by reference below are incorporated by reference pursuant to Rule 12b-32.
Exhibit
No.
Exhibit
(2)
Plan of acquisition, reorganization, arrangement, liquidation, or succession
(i)
The Purchase and Assumption Agreement, dated as of March 20, 2009, among Federal Deposit Insurance Corporation,
Receiver of TeamBank, N.A., Paola, Kansas, Federal Deposit Insurance Corporation and Great Southern Bank, previously
filed with the Commission (File no. 000-18082) as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on
March 26, 2009 is incorporated herein by reference as Exhibit 2(i).
(ii)
The Purchase and Assumption Agreement, dated as of September 4, 2009, among Federal Deposit Insurance Corporation,
Receiver of Vantus Bank, Sioux City, Iowa, Federal Deposit Insurance Corporation and Great Southern Bank, previously
filed with the Commission (File no. 000-18082) as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on
September 11, 2009 is incorporated herein by reference as Exhibit 2(ii).
(iii)
The Purchase and Assumption Agreement, dated as of October 7, 2011, among Federal Deposit Insurance Corporation,
Receiver of Sun Security Bank, Ellington, Missouri, Federal Deposit Insurance Corporation and Great Southern Bank,
previously filed with the Commission (File no. 000-18082) as Exhibit 2.1(iii) to the Registrant’s Quarterly Report on Form
10-Q for the quarter ended September 30, 2011 is incorporated herein by reference as Exhibit 2(iii).
(iv)
The Purchase and Assumption Agreement, dated as of April 27, 2012, among Federal Deposit Insurance Corporation,
Receiver of Inter Savings Bank, FSB, Maple Grove, Minnesota, Federal Deposit Insurance Corporation and Great Southern
Bank, previously filed with the Commission (File no. 000-18082) as Exhibit 2.1(iv) to the Registrant’s Quarterly Report on
Form 10-Q for the quarter ended March 31, 2012 is incorporated herein by reference as Exhibit 2(iv).
(v)
The Purchase and Assumption Agreement All Deposits, dated as of June 20, 2014, among Federal Deposit Insurance
Corporation, Receiver of Valley Bank, Moline, Illinois, Federal Deposit Insurance Corporation and Great Southern Bank,
previously filed with the Commission (File no. 000-18082) as Exhibit 2.1(iv) to the Registrant’s Quarterly Report on Form
10-Q for the quarter ended June 30, 2014 is incorporated herein by reference as Exhibit 2(v)
(3)
Articles of incorporation and Bylaws
(i)
The Registrant’s Charter previously filed with the Commission as Appendix D to the Registrant’s Definitive Proxy
Statement on Schedule 14A filed on March 31, 2004 (File No. 000-18082), is incorporated herein by reference as Exhibit
3.1.
(ii)
The Registrant’s Bylaws, previously filed with the Commission (File no. 000-18082) as Exhibit 3.2 to the Registrant’s
Current Report on Form 8-K filed on October 19, 2007, are incorporated herein by reference as Exhibit 3.2.
181
(4)
Instruments defining the rights of security holders, including indentures
The description of the Registrant’s securities registered pursuant to Section 12 of the Securities Exchange Act of 1934,
previously filed with the Commission (File no. 000-18082) as Exhibit 4 to the Registrant’s Annual Report on Form 10-K
for the year ended December 31, 2019, is incorporated herein by reference.
The Indenture, dated June 12, 2020, between the Registrant and U.S. Bank National Association, as Trustee, previously
filed with the Commission (File no. 000-18082) as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on
June 12, 2020, is incorporated herein by reference as Exhibit 4.1.
The First Supplemental Indenture, dated June 12, 2020, between the Registrant and U.S. Bank National Association, as
Trustee (relating to the Registrant’s 5.50% Fixed-to-Floating Rate Subordinated Notes due June 15, 2030), including the
form of subordinated note included therein, previously filed with the Commission (File no. 000-18082) as Exhibit 4.2 to the
Registrant’s Current Report on Form 8-K filed on June 12, 2020, is incorporated herein by reference as Exhibit 4.2.
The Registrant hereby agrees to furnish the SEC upon request, copies of the instruments defining the rights of the holders
of each other issue of the Registrant’s long-term debt.
(9)
Voting trust agreement
Inapplicable.
(10)
Material contracts
The Amended and Restated Employment Agreement, dated November 4, 2019, between the Registrant and William V.
Turner previously filed with the Commission (File no. 000-18082) as Exhibit 10.3 to the Registrant’s Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 2019, is incorporated herein by reference as Exhibit 10.3.*
Amendment No. 1, dated as of November 17, 2021, to the Amended and Restated Employment Agreement, dated as of
November 4, 2019, between the Registrant and William V. Turner, previously filed with the Commission (File no. 000-
18082) as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on November 22, 2021, is incorporated herein
by reference as Exhibit 10.3A.*
The Amended and Restated Employment Agreement, dated November 4, 2019, between the Registrant and Joseph W.
Turner previously filed with the Commission (File no. 000-18082) as Exhibit 10.4 to the Registrant’s Quarterly Report on
Form 10-Q for the quarterly period fiscal year ended September 30, 2019, is incorporated herein by reference as Exhibit
10.4.*
Amendment No. 1, dated as of March 5, 2020, to the Amended and Restated Employment Agreement, dated as of
November 4, 2019, between the Registrant and Joseph W. Turner, previously filed with the Commission (File no. 000-
18082) as Exhibit 10.4A to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2019, is
incorporated herein by reference as Exhibit 10.4A.*
Amendment No. 2, dated as of November 17, 2021, to the Amended and Restated Employment Agreement, dated as of
November 4, 2019, between the Registrant and Joseph W. Turner, previously filed with the Commission (File no. 000-
18082) as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on November 22, 2021, is incorporated herein
by reference as Exhibit 10.4B.*
A description of the current salary and bonus arrangements for the Registrant’s executive officers for 2025 is attached as
Exhibit 10.7.*
A description of the current fee arrangements for the Registrant’s directors is attached as Exhibit 10.8.*
The Registrant’s 2013 Equity Incentive Plan previously filed with the Commission (File No. 000-18082) as Appendix A to
the Registrant’s Definitive Proxy Statement on Schedule 14A filed on April 4, 2013, is incorporated herein by reference as
Exhibit 10.10.*
182
The form of incentive stock option award agreement under the Registrant’s 2013 Equity Incentive Plan previously filed
with the Commission as Exhibit 10.2 to the Registrant’s Registration Statement on Form S-8 (No. 333-189497) filed on
June 20, 2013 is incorporated herein by reference as Exhibit 10.11.*
The form of non-qualified stock option award agreement under the Registrant’s 2013 Equity Incentive Plan previously filed
with the Commission as Exhibit 10.3 to the Registrant’s Registration Statement on Form S-8 (No. 333-189497) filed on
June 20, 2013 is incorporated herein by reference as Exhibit 10.12.*
The Registrant’s 2018 Omnibus Incentive Plan previously filed with the Commission (File No. 000-18082) as Appendix A
to the Registrant’s Definitive Proxy Statement on Schedule 14A filed on March 27, 2018, is incorporated herein by
reference as Exhibit 10.15.*
The form of incentive stock option award agreement under the Registrant’s 2018 Omnibus Incentive Plan previously filed
with the Commission as Exhibit 10.2 to the Registrant’s Registration Statement on Form S-8 (File no. 333-225665) filed on
June 15, 2018 is incorporated herein by reference as Exhibit 10.16.*
The form of non-qualified stock option award agreement under the Registrant’s 2018 Omnibus Incentive Plan previously
filed with the Commission as Exhibit 10.3 to the Registrant’s Registration Statement on Form S-8 (File no. 333-225665)
filed on June 15, 2018 is incorporated herein by reference as Exhibit 10.17.*
The Registrant’s 2022 Omnibus Incentive Plan previously filed with the Commission (File No. 000-18082) as Appendix A
to the Registrant’s Definitive Proxy Statement on Schedule 14A filed on March 31, 2022, is incorporated herein by
reference as Exhibit 10.18.*
The form of incentive stock option award agreement under the Registrant’s 2022 Omnibus Incentive Plan previously filed
with the Commission as Exhibit 99.2 to the Registrant’s Registration Statement on Form S-8 (File no. 333-265683) filed on
June 17, 2022 is incorporated herein by reference as Exhibit 10.19.*
The form of non-qualified stock option award agreement under the Registrant’s 2022 Omnibus Incentive Plan previously
filed with the Commission as Exhibit 99.3 to the Registrant’s Registration Statement on Form S-8 (File no. 333-265683)
filed on June 17, 2022 is incorporated herein by reference as Exhibit 10.20.*
The form of Executive Officer Stock Option Alternative Cash Payment Election Form previously filed with the
Commission as Exhibit 10.21 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September
30, 2023, is incorporated herein by reference as Exhibit 10.21.*
(13)
Annual report to security holders, Form 10-Q or quarterly report to security holders
Inapplicable.
(14)
Code of Ethics
Available on the investor relations page of the Registrant’s website, at
https://investors.greatsouthernbank.com/corporate-governance/documents.
(16)
Letter re change in certifying accountant
Inapplicable.
(18)
Letter re change in accounting principles
Inapplicable.
(19)
Insider trading policies and procedures
A copy of the Registrant’s insider trading policy is attached hereto as Exhibit 19.
(21)
Subsidiaries of the registrant
183
A list of the Registrant’s subsidiaries is attached hereto as Exhibit 21.
(22)
Published report regarding matters submitted to vote of security holders
Inapplicable.
(23)
Consents of experts and counsel
The consent of Forvis Mazars, LLP (PCAOB ID 686) to the incorporation by reference into the Registration Statements on
Form S-8 (File nos. 333-189497, 333-225665 and 333-265683) previously filed with the Commission of their reports
included in this Form 10-K, is attached hereto as Exhibit 23.
(24)
Power of attorney
Included as part of signature page.
(31.1)
Rule 13a-14(a) Certification of Chief Executive Officer
Attached as Exhibit 31.1
(31.2)
Rule 13a-14(a) Certification of Treasurer
Attached as Exhibit 31.2
(32)
Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
Attached as Exhibit 32.
(97)
Great Southern Bancorp, Inc. Compensation Recovery Policy
Attached as Exhibit 97.
(101)
Attached as Exhibit 101 are the following financial statements from the Great Southern Bancorp, Inc. Annual Report on
Form 10-K for the year ended December 31, 2024, formatted in Extensive Business Reporting Language (XBRL): (i)
consolidated statements of financial condition, (ii) consolidated statements of income, (iii) consolidated statements of cash
flows and (iv) the notes to consolidated financial statements.
(104)
Cover Page Interactive Data File formatted in Inline XBRL (contained in Exhibit 101).
* Management contract or compensatory plan or arrangement.
ITEM 16.
FORM 10-K SUMMARY
None.
184
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
GREAT SOUTHERN BANCORP, INC.
Date: March 7, 2025
By: /s/ Joseph W. Turner
Joseph W. Turner
President and Chief Executive Officer
(Duly Authorized Representative)
185
POWER OF ATTORNEY
We, the undersigned officers and directors of Great Southern Bancorp, Inc., hereby severally and individually constitute and appoint
Joseph W. Turner and Rex A. Copeland, and each of them, the true and lawful attorneys and agents of each of us to execute in the
name, place and stead of each of us (individually and in any capacity stated below) any and all amendments to this Annual Report on
Form 10-K and all instruments necessary or advisable in connection therewith and to file the same with the Securities and Exchange
Commission, each of said attorneys and agents to have the power to act with or without the other and to have full power and authority
to do and perform in the name and on behalf of each of the undersigned every act whatsoever necessary or advisable to be done in the
premises as fully and to all intents and purposes as any of the undersigned might or could do in person, and we hereby ratify and
confirm our signatures as they may be signed by our said attorneys and agents or each of them to any and all such amendments and
instruments.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
Signature
Capacity in Which Signed
Date
/s/ Joseph W. Turner
President, Chief Executive Officer and Director
March 7, 2025
Joseph W. Turner
(Principal Executive Officer)
/s/ William V. Turner
Chairman of the Board
March 7, 2025
William V. Turner
/s/ Rex A. Copeland
Treasurer (Principal Financial Officer and
March 7, 2025
Rex A. Copeland
Principal Accounting Officer)
/s/ Kevin R. Ausburn
Director
March 7, 2025
Kevin R. Ausburn
/s/ Julie T. Brown
Director
March 7, 2025
Julie T. Brown
/s/ Thomas J. Carlson
Director
March 7, 2025
Thomas J. Carlson
/s/ Amelia A. Counts
Director
March 7, 2025
Amelia A. Counts
/s/ Steven D. Edwards
Director
March 7, 2025
Steven D. Edwards
/s/ Debra Mallonee (Shantz) Hart
Director
March 7, 2025
Debra Mallonee (Shantz) Hart
/s/ Douglas M. Pitt
Director
March 7, 2025
Douglas M. Pitt
/s/ Earl A. Steinert, Jr.
Director
March 7, 2025
Earl A. Steinert, Jr.
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