UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

SECURITIES ACT OF 1934

For the Quarterly Period Ended March 31, 2019

Commission File Number 0-18082

GREAT SOUTHERN BANCORP, INC.

(Exact name of registrant as specified in its charter)

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

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

(417) 887-4400

(Registrant's telephone number, including area code)

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

Yes /X/ No / /

Indicate by check mark whether the registrant has submitted electronically every Interactive Data file required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes/X/ No / /

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

Large accelerated filer / /	Accelerated filer /X/
Non-accelerated filer / /	Smaller reporting company / /
	Emerging growth company / /

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

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

Yes / / No /X/

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

Title of Each Class		Trading Symbol		Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share		GSBC		The NASDAQ Stock Market LLC

The number of shares outstanding of each of the registrant's classes of common stock: 14,196,383 shares of common stock, par value $.01 per share, outstanding at May 6, 2019.

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(In thousands, except number of shares)

	MARCH 31,		DECEMBER 31,
	2019		2018
	(Unaudited)

ASSETS
Cash	$	95,347	$	110,108
Interest-bearing deposits in other financial institutions		110,743		92,634
Cash and cash equivalents		206,090		202,742
Available-for-sale securities		277,750		243,968
Mortgage loans held for sale		1,892		1,650
Loans receivable, net of allowance for loan losses of $38,651 – March 2019; $38,409 - December 2018		4,050,336		3,989,001
Interest receivable		14,550		13,448
Prepaid expenses and other assets		59,383		55,336
Other real estate owned and repossessions, net		8,772		8,440
Premises and equipment, net		141,754		132,424
Goodwill and other intangible assets		8,963		9,288
Federal Home Loan Bank stock		5,633		12,438
Current and deferred income taxes		3,097		7,465
Total Assets	$	4,778,220	$	4,676,200

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits	$	3,956,091	$	3,725,007
Securities sold under reverse repurchase agreements with customers		118,618		105,253
Short-term borrowings and other interest-bearing liabilities		22,219		192,725
Subordinated debentures issued to capital trust		25,774		25,774
Subordinated notes		73,951		73,842
Accrued interest payable		2,933		3,570
Advances from borrowers for taxes and insurance		7,864		5,092
Accrued expenses and other liabilities		27,135		12,960
Total Liabilities		4,234,585		4,144,223
Stockholders' Equity:
Capital stock
Serial preferred stock – $.01 par value; authorized 1,000,000 shares; issued and outstanding March 2019 and December 2018 - -0- shares		—		—
Common stock, $.01 par value; authorized 20,000,000 shares; issued and outstanding March 2019 –14,170,758 shares; December 2018 - 14,151,198 shares		142		142
Additional paid-in capital		30,916		30,121
Retained earnings		494,181		492,087
Accumulated other comprehensive income		18,396		9,627
Total Stockholders' Equity		543,635		531,977
Total Liabilities and Stockholders' Equity	$	4,778,220	$	4,676,200

See Notes to Consolidated Financial Statements

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

	THREE MONTHS ENDED MARCH 31,
	2019			2018
	(Unaudited)

INTEREST INCOME
Loans	$	54,556		$	45,165
Investment securities and other		2,802			1,717
TOTAL INTEREST INCOME		57,358			46,882

INTEREST EXPENSE
Deposits		10,470			5,584
Federal Home Loan Bank advances		—			605
Short-term borrowings and repurchase agreements		922			28
Subordinated debentures issued to capital trust		267			202
Subordinated notes		1,094			1,025
TOTAL INTEREST EXPENSE		12,753			7,444
NET INTEREST INCOME		44,605			39,438
Provision for Loan Losses		1,950			1,950
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		42,655			37,488

NON-INTEREST INCOME
Commissions		334			248
Service charges and ATM fees		4,958			5,244
Net gains on loan sales		248			462
Late charges and fees on loans		346			389
Net realized gains on sales of available-for-sale securities		10			—
Gain (loss) on derivative interest rate products		(25	)		37
Other income		1,579			555
TOTAL NON-INTEREST INCOME		7,450			6,935

NON-INTEREST EXPENSE
Salaries and employee benefits		15,640			14,623
Net occupancy and equipment expense		6,401			6,384
Postage		767			866
Insurance		666			670
Advertising		527			671
Office supplies and printing		259			233
Telephone		903			719
Legal, audit and other professional fees		712			809
Expense on other real estate and repossessions		620			1,141
Partnership tax credit investment amortization		91			302
Acquired deposit intangible asset amortization		325			412
Other operating expenses		1,584			1,482
TOTAL NON-INTEREST EXPENSE		28,495			28,312

INCOME BEFORE INCOME TAXES		21,610			16,111
Provision for Income Taxes		3,998			2,645
NET INCOME AND NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	17,612		$	13,466

Basic Earnings Per Common Share	$	1.24		$	0.95
Diluted Earnings Per Common Share	$	1.23		$	0.95
Dividends Declared Per Common Share	$	1.07		$	0.28

See Notes to Consolidated Financial Statements

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

	THREE MONTHS ENDED MARCH 31,
	2019			2018
	(Unaudited)

Net Income	$	17,612		$	13,466

Unrealized appreciation (depreciation) on available-for-sale securities, net of taxes (credit) of $879 and $(541), for 2019 and 2018, respectively		2,977			(1,881	)

Reclassification adjustment for gains included in net income, net of taxes of $2 and $0, for 2019 and 2018, respectively		(8	)		—

Change in fair value of cash flow hedge, net of taxes of $1,712 and $0, for 2019 and 2018, respectively		5,800			—

Comprehensive Income	$	26,381		$	11,585

See Notes to Consolidated Financial Statements

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except per share data)

								Accumulated
								Other
	Common		Additional		Retained			Comprehensive			Treasury
	Stock		Paid-in Capital		Earnings			Income (Loss)			Stock			Total
	(Unaudited)

Balance, January 1, 2018	$	141	$	28,203	$	442,077		$	1,241		$	—		$	471,662
Net income		—		—		13,466			—			—			13,466
Stock issued under Stock Option
Plan		—		421		—			—			283			704
Common dividends declared,		—		—		(3,951	)		—			—			(3,951	)
$0.28 per share
Reclassification of stranded tax
effects resulting from change in
Federal income tax rate		—		—		(272	)		272			—			—
Other comprehensive gain (loss)		—		—		—			(1,881	)		—			(1,881	)
Reclassification of treasury stock
per Maryland law		—		—		283			—			(283	)		—

Balance, March 31, 2018	$	141	$	28,624	$	451,603		$	(368	)	$	—		$	480,000

								Accumulated
								Other
	Common		Additional		Retained			Comprehensive		Treasury
	Stock		Paid-in Capital		Earnings			Income (Loss)		Stock			Total
	(Unaudited)

Balance, January 1, 2019	$	142	$	30,121	$	492,087		$	9,627	$	—		$	531,977
Net income		—		—		17,612			—		—			17,612
Stock issued under Stock Option
Plan		—		795		—			—		477			1,272
Common dividends declared,		—		—		(15,146	)		—		—			(15,146	)
$1.07 per share
Purchase of the Company’s
common stock		—		—		—			—		(849	)		(849	)
Other comprehensive gain		—		—		—			8,769		—			8,769
Reclassification of treasury stock
per Maryland law		—		—		(372	)		—		372			—

Balance, March 31, 2019	$	142	$	30,916	$	494,181		$	18,396	$	—		$	543,635

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	THREE MONTHS ENDED MARCH 31,
	2019			2018
	(Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	17,612		$	13,466
Proceeds from sales of loans held for sale		13,571			22,807
Originations of loans held for sale		(13,502	)		(18,926	)
Items not requiring (providing) cash:
Depreciation		2,264			2,226
Amortization		552			754
Compensation expense for stock option grants		220			177
Provision for loan losses		1,950			1,950
Net gains on loan sales		(248	)		(462	)
Net realized gains on sales of available-for-sale securities		(10	)		—
Net losses on sale of premises and equipment		8			38
Net losses on sale/write-down of other real estate owned and repossessions		120			389
Accretion of deferred income, premiums, discounts and other		(1,010	)		(707	)
(Gain) loss on derivative interest rate products		25			(37	)
Deferred income taxes		287			(6,355	)
Changes in:
Interest receivable		(1,102	)		194
Prepaid expenses and other assets		3,401			8,195
Accrued expenses and other liabilities		4,130			333
Income taxes refundable/payable		1,492			5,873
Net cash provided by operating activities		29,760			29,915
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in loans		(50,733	)		(29,488	)
Purchase of loans		(14,240	)		(13,000	)
Purchase of premises and equipment		(2,363	)		(4,292	)
Proceeds from sale of premises and equipment		83			11
Proceeds from sale of other real estate owned and repossessions		2,256			4,320
Proceeds from sales of available-for-sale securities		28,057			—
Proceeds from maturities and calls of available-for-sale securities		5,535			2,030
Principal reductions on mortgage-backed securities		3,159			4,810
Purchase of available-for-sale securities		(66,764	)		(1,859	)
Redemption of Federal Home Loan Bank stock		6,805			504
Net cash used in investing activities		(88,205	)		(36,964	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in certificates of deposit		163,455			(70,680	)
Net increase in checking and savings deposits		67,643			35,737
Proceeds from Federal Home Loan Bank advances		—			604,500
Repayments of Federal Home Loan Bank advances		—			(598,000	)
Net increase (decrease) in short-term borrowings		(157,141	)		14,339
Advances from borrowers for taxes and insurance		2,772			1,736
Dividends paid		(15,139	)		(3,381	)
Purchase of the Company’s common stock		(849	)		—
Stock options exercised		1,052			527
Net cash provided by (used in) financing activities		61,793			(15,222	)
INCREASES ( DECREASES) IN CASH AND CASH EQUIVALENTS		3,348			(22,271	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		202,742			242,253
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	206,090		$	219,982

See Notes to Consolidated Financial Statements

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: BASIS OF PRESENTATION

The accompanying unaudited interim consolidated financial statements of Great Southern Bancorp, Inc. (the "Company" or "Great Southern") have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The financial statements presented herein reflect all adjustments which are, in the opinion of management, necessary to fairly present the financial condition, results of operations, changes in stockholders’ equity and cash flows of the Company as of the dates and for the periods presented. Those adjustments consist only of normal recurring adjustments. Operating results for the three months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the full year. The consolidated statement of financial condition of the Company as of December 31, 2018, has been derived from the audited consolidated statement of financial condition of the Company as of that date. Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications had no effect on net income.

Certain information and note disclosures normally included in the Company's annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for 2018 filed with the Securities and Exchange Commission.

NOTE 2: NATURE OF OPERATIONS AND OPERATING SEGMENTS

The Company operates as a one-bank holding company. The Company’s business primarily consists of the operations of Great Southern Bank (the “Bank”), which provides a full range of financial services to customers primarily located in Missouri, Iowa, Kansas, Minnesota, Nebraska and Arkansas. The Bank also originates commercial loans from lending offices in Dallas, Texas, Tulsa, Okla., Chicago, Ill., Atlanta, Ga., Denver, Colo. and Omaha, Neb. 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 through attracting deposits from the general public, accepting brokered deposits and borrowing from the Federal Home Loan Bank and others. The operating results of this segment are regularly reviewed by management to make decisions about resource allocations and to assess performance. Selected information is not presented separately for the Company’s reportable segment, as there is no material difference between that information and the corresponding information in the consolidated financial statements.

NOTE 3: RECENT ACCOUNTING PRONOUNCEMENTS

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) and in July 2018 FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases. The amendments in this Update revise the accounting related to lessee accounting. Under the new guidance, lessees are required to recognize a lease liability and a right-of-use asset for all leases. The Update became effective for the Company on January 1, 2019. Adoption of the standard required the use of a modified retrospective transition approach for all periods presented at the time of adoption. Based on the Company’s leases outstanding at December 31, 2018, which totaled less than 20 leased properties and no significant leased equipment, the adoption of the new standard did not have a material impact on our consolidated statements of financial condition or our consolidated statements of income, although an increase to assets and liabilities occurred at the time of adoption. In the first quarter of 2019, the Company recognized a lease liability and a corresponding right-of-use asset for all leases of $9.5 million based on the lease portfolio at that time. Subsequent to December 31, 2018, the Company’s lease terminations, new leases and lease modifications and

renewals will impact the amount of lease liability and a corresponding right-of-use asset recognized. The Company’s leases are currently all “operating leases” as defined in the Update; therefore, no material change in the income statement presentation of lease expense occurred in the three months ended March 31, 2019. The Company’s lease activities are discussed further in Note 9 of the Notes to Consolidated Financial Statements contained in this report.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326). The Update amends guidance on reporting credit losses for assets held at amortized cost and available for sale debt securities. For assets held at amortized cost, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. This Update affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. For public companies, the update is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption will be permitted beginning after December 15, 2018. An entity will apply the amendments in this update on a modified retrospective basis, through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company previously formed a cross-functional committee to oversee the system, data, reporting and other considerations for purposes of meeting the requirements of this standard. Data and system needs were assessed. As a result, third-party software was acquired and implemented to manage the data. We have completed the upload of the necessary historical loan data to the software that will be used in meeting certain requirements of this standard. Our loss data covers multiple credit cycles back to 2003. Parallel testing of the new methodology compared to the current methodology commenced in 2019 and the Company continues to evaluate the impact of adopting the new guidance. We expect to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective for us (the three-month period ending March 31, 2020), but cannot yet determine the magnitude of any such one-time adjustment, or the overall impact of the new guidance on the Company’s consolidated financial statements.

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

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements on fair value measurements in Topic 820. The amendments in this update remove disclosures that no longer are considered cost beneficial, modify/clarify the specific requirements of certain disclosures, and add disclosure requirements identified as relevant. ASU 2018-13 is effective for period beginning after December 15, 2019, with early adoption permitted for certain removed and modified disclosures, and is not expected to have a significant impact on our financial statements.

NOTE 4: EARNINGS PER SHARE

	Three Months Ended March 31,
	2019		2018
	(In Thousands, Except Per Share Data)

Basic:
Average common shares outstanding		14,159		14,101
Net income and net income available to common stockholders	$	17,612	$	13,466
Per common share amount	$	1.24	$	0.95

Diluted:
Average common shares outstanding		14,159		14,101
Net effect of dilutive stock options – based on the treasury
stock method using average market price		108		131
Diluted common shares		14,267		14,232
Net income and net income available to common stockholders	$	17,612	$	13,466
Per common share amount	$	1.23	$	0.95

Options outstanding at March 31, 2019 and 2018, to purchase 413,719 and 252,911 shares of common stock, respectively, were not included in the computation of diluted earnings per common share for each of the three month periods because the exercise prices of such options were greater than the average market prices of the common stock for the three months ended March 31, 2019 and 2018, respectively.

NOTE 5: INVESTMENT SECURITIES

The amortized cost and fair values of securities classified as available-for-sale were as follows:

	March 31, 2019
			Gross		Gross				Tax
	Amortized		Unrealized		Unrealized		Fair		Equivalent
	Cost		Gains		Losses		Value		Yield
	(In Thousands)

AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities	$	178,170	$	3,587	$	1,561	$	180,196		3.05	%
Agency collateralized mortgage obligations		52,414		592		—		53,006		3.31
States and political subdivisions		42,955		1,593		—		44,548		4.92
	$	273,539	$	5,772	$	1,561	$	277,750		3.40	%

	December 31, 2018
			Gross		Gross				Tax
	Amortized		Unrealized		Unrealized		Fair		Equivalent
	Cost		Gains		Losses		Value		Yield
	(In Thousands)

AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities	$	154,557	$	1,272	$	2,571	$	153,258		2.83	%
Agency collateralized mortgage obligations		39,024		250		14		39,260		3.18
States and political subdivisions		50,022		1,428		—		51,450		4.81
	$	243,603	$	2,950	$	2,585	$	243,968		3.29	%

The amortized cost and fair value of available-for-sale securities at March 31, 2019, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized		Fair
	Cost		Value
	(In Thousands)

One year or less	$	—	$	—
After one through five years		859		934
After five through ten years		9,617		9,918
After ten years		32,479		33,696
Securities not due on a single maturity date		230,584		233,202

	$	273,539	$	277,750

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. Total fair value of these investments at March 31, 2019 and December 31, 2018, was approximately $67.1 million and $95.7 million, respectively, which is approximately 24.2% and 39.2% of the Company’s available-for-sale investment portfolio, respectively.

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

The following table shows the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2019 and December 31, 2018:

	March 31, 2019
	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)

Agency mortgage-backed securities	$	1,797	$	(8	)	$	65,335	$	(1,553	)	$	67,132	$	(1,561	)

	December 31, 2018
	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)

Agency mortgage-backed securities	$	11,255	$	(82	)	$	74,186	$	(2,489	)	$	85,441	$	(2,571	)
Agency collateralized mortgage obligations		9,725		(14	)		—		—			9,725		(14	)
State and political subdivisions		511		—			—		—			511		—
	$	21,491	$	(96	)	$	74,186	$	(2,489	)	$	95,677	$	(2,585	)

Gross gains of $226,000 and gross losses of $216,000 resulting from sales of available-for-sale securities were realized during the three months ended March 31, 2019. There were no sales of available-for-sale securities during the three months ended March 31, 2018. Gains and losses on sales of securities are determined on the specific-identification method.

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

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

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

During the three months ended March 31, 2019 and 2018, respectively, no securities were determined to have impairment that had become other-than-temporary.

Credit Losses Recognized on Investments. During the three months ended March 31, 2019 and 2018, respectively, there were no debt securities that had experienced fair value deterioration due to credit losses, or due to other market factors, but were not otherwise other-than-temporarily impaired.

Amounts Reclassified Out of Accumulated Other Comprehensive Income. Amounts reclassified from accumulated other comprehensive income and the affected line items in the statements of income during the three months ended March 31, 2019 and 2018, are shown below. The FASB previously issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220). The amendment allows an entity to elect to reclassify the stranded tax effects resulting from the change in income tax rate from H.R.1, originally known as the “Tax Cuts and Jobs Act” (the “Tax Act”), from accumulated other comprehensive income to retained earnings. The Company chose to early adopt ASU 2018-02 effective January 1, 2018. The stranded tax amount related to unrealized gains and losses on available for sale securities, which was reclassified from accumulated other comprehensive income to retained earnings at the time of adoption, was $272,000. There were no other income tax effects related to the application of the Tax Act to be reclassified from AOCI to retained earnings.

	Amounts Reclassified from Accumulated Other
	Comprehensive Income Three Months Ended March 31,					Affected Line Item in the
	2019			2018		Statements of Income
	(In Thousands)

Unrealized gains on available-						Net realized gains on sales of
for-sale securities	$	10		$	--	available-for-sale securities
						(Total reclassified amount before tax)
Income Taxes		(2	)		--	Provision for income taxes
Total reclassifications out of accumulated
other comprehensive income	$	8		$	--

NOTE 6: LOANS AND ALLOWANCE FOR LOAN LOSSES

Classes of loans at March 31, 2019 and December 31, 2018 were as follows:

	March 31,			December 31,
	2019			2018
	(In Thousands)

One- to four-family residential construction	$	26,935		$	26,177
Subdivision construction		12,352			13,844
Land development		46,438			44,492
Commercial construction		1,328,853			1,417,166
Owner occupied one- to four-family residential		288,933			276,866
Non-owner occupied one- to four-family residential		118,258			122,438
Commercial real estate		1,388,678			1,371,435
Other residential		864,990			784,894
Commercial business		321,327			322,118
Industrial revenue bonds		13,702			13,940
Consumer auto		229,700			253,528
Consumer other		53,348			57,350
Home equity lines of credit		120,696			121,352
Loans acquired and accounted for under ASC 310-30, net of discounts		161,125			167,651
		4,975,335			4,993,251
Undisbursed portion of loans in process		(879,500	)		(958,441	)
Allowance for loan losses		(38,651	)		(38,409	)
Deferred loan fees and gains, net		(6,848	)		(7,400	)
	$	4,050,336		$	3,989,001

Weighted average interest rate		5.23	%		5.16	%

Classes of loans by aging were as follows:

	March 31, 2019
													Total Loans
											Total		> 90 Days
	30-59 Days		60-89 Days		Over		Total				Loans		Past Due and
	Past Due		Past Due		90 Days		Past Due		Current		Receivable		Still Accruing
	(In Thousands)

One- to four-family
residential construction	$	—	$	—	$	—	$	—	$	26,935	$	26,935	$	—
Subdivision construction		53		—		—		53		12,299		12,352		—
Land development		78		—		18		96		46,342		46,438		—
Commercial construction		—		—		—		—		1,328,853		1,328,853		—
Owner occupied one- to
four-family residential		2,390		248		949		3,587		285,346		288,933		—
Non-owner occupied one-
to four-family residential		135		36		164		335		117,923		118,258		—
Commercial real estate		714		1,950		847		3,511		1,385,167		1,388,678		—
Other residential		4,439		—		—		4,439		860,551		864,990		—
Commercial business		74		—		1,405		1,479		319,848		321,327		—
Industrial revenue bonds		—		—		—		—		13,702		13,702		—
Consumer auto		1,727		417		822		2,966		226,734		229,700		—
Consumer other		661		72		194		927		52,421		53,348		—
Home equity lines of credit		150		—		238		388		120,308		120,696		—
Loans acquired and
accounted for under
ASC 310-30, net of
discounts		3,461		76		3,540		7,077		154,048		161,125		—
		13,882		2,799		8,177		24,858		4,950,477		4,975,335		—
Less loans acquired and accounted for
under ASC 310-30, net		3,461		76		3,540		7,077		154,048		161,125		—

Total	$	10,421	$	2,723	$	4,637	$	17,781	$	4,796,429	$	4,814,210	$	—

	December 31, 2018
													Total Loans
											Total		> 90 Days Past
	30-59 Days		60-89 Days		Over 90		Total Past				Loans		Due and
	Past Due		Past Due		Days		Due		Current		Receivable		Still Accruing
	(In Thousands)

One- to four-family
residential construction	$	—	$	—	$	—	$	—	$	26,177	$	26,177	$	—
Subdivision construction		—		—		—		—		13,844		13,844		—
Land development		13		—		49		62		44,430		44,492		—
Commercial construction		—		—		—		—		1,417,166		1,417,166		—
Owner occupied one- to
four-family residential		1,431		806		1,206		3,443		273,423		276,866		—
Non-owner occupied one-
to four-family residential		1,142		144		1,458		2,744		119,694		122,438		—
Commercial real estate		3,940		53		334		4,327		1,367,108		1,371,435		—
Other residential		—		—		—		—		784,894		784,894		—
Commercial business		72		54		1,437		1,563		320,555		322,118		—
Industrial revenue bonds		3		—		—		3		13,937		13,940		—
Consumer auto		2,596		722		1,490		4,808		248,720		253,528		—
Consumer other		691		181		240		1,112		56,238		57,350		—
Home equity lines of credit		229		—		86		315		121,037		121,352		—
Loans acquired and
accounted for under
ASC 310-30, net of discounts		2,195		1,416		6,827		10,438		157,213		167,651		—
		12,312		3,376		13,127		28,815		4,964,436		4,993,251		—
Less loans acquired and accounted for under ASC 310-30, net		2,195		1,416		6,827		10,438		157,213		167,651		—

Total	$	10,117	$	1,960	$	6,300	$	18,377	$	4,807,223	$	4,825,600	$	—

Nonaccruing loans (excluding FDIC-assisted acquired loans, net of discount) are summarized as follows:

	March 31,		December 31,
	2019		2018
	(In Thousands)

One- to four-family residential construction	$	—	$	—
Subdivision construction		—		—
Land development		18		49
Commercial construction		—		—
Owner occupied one- to four-family residential		949		1,206
Non-owner occupied one- to four-family residential		164		1,458
Commercial real estate		847		334
Other residential		—		—
Commercial business		1,405		1,437
Industrial revenue bonds		—		—
Consumer auto		822		1,490
Consumer other		194		240
Home equity lines of credit		238		86

Total	$	4,637	$	6,300

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2019. Also presented are the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of March 31, 2019:

	One- to Four-
	Family
	Residential and			Other		Commercial		Commercial			Commercial
	Construction			Residential		Real Estate		Construction			Business			Consumer			Total
	(In Thousands)

Allowance for loan losses
Balance, January 1, 2019	$	3,122		$	4,713	$	19,803	$	3,105		$	1,568		$	6,098		$	38,409
Provision (benefit) charged to expense		358			723		1,163		(571	)		(152	)		429			1,950
Losses charged off		(455	)		—		—		(31	)		(74	)		(2,206	)		(2,766	)
Recoveries		11			—		15		12			142			878			1,058
Balance, March 31, 2019	$	3,036		$	5,436	$	20,981	$	2,515		$	1,484		$	5,199		$	38,651

Ending balance:
Individually evaluated for
impairment	$	382		$	—	$	946	$	—		$	246		$	327		$	1,901
Collectively evaluated for
impairment	$	2,615		$	5,404	$	19,819	$	2,463		$	1,226		$	4,841		$	36,368
Loans acquired and
accounted for under
ASC 310-30	$	39		$	32	$	216	$	52		$	12		$	31		$	382

Loans
Individually evaluated for
impairment	$	4,317		$	—	$	5,926	$	14		$	1,713		$	1,938		$	13,908
Collectively evaluated for
impairment	$	442,161		$	864,990	$	1,382,752	$	1,375,277		$	333,316		$	401,806		$	4,800,302
Loans acquired and
accounted for under
ASC 310-30	$	90,530		$	12,709	$	31,892	$	4,201		$	4,411		$	17,382		$	161,125

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2018:

	One- to Four-
	Family
	Residential and			Other			Commercial			Commercial			Commercial
	Construction			Residential			Real Estate			Construction			Business			Consumer			Total
	(In Thousands)

Allowance for loan losses
Balance, January 1, 2018	$	2,108		$	2,839		$	18,639		$	1,767		$	3,581		$	7,558		$	36,492
Provision (benefit) charged to expense		424			605			(486	)		362			482			563			1,950
Losses charged off		(14	)		(256	)		(102	)		(37	)		(409	)		(2,822	)		(3,640	)
Recoveries		84			24			11			96			41			1,252			1,508
Balance, March 31, 2018	$	2,602		$	3,212		$	18,062		$	2,188		$	3,695		$	6,551		$	36,310

The following table presents the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of December 31, 2018:

	One- to Four-
	Family
	Residential and		Other		Commercial		Commercial		Commercial
	Construction		Residential		Real Estate		Construction		Business		Consumer		Total
	(In Thousands)

Allowance for loan losses
Individually evaluated for
impairment	$	694	$	—	$	613	$	—	$	309	$	425	$	2,041
Collectively evaluated for
impairment	$	2,392	$	4,681	$	18,958	$	3,029	$	1,247	$	5,640	$	35,947
Loans acquired and
accounted for under
ASC 310-30	$	36	$	32	$	232	$	76	$	12	$	33	$	421

Loans
Individually evaluated for
impairment	$	6,116	$	—	$	3,501	$	14	$	1,844	$	2,464	$	13,939
Collectively evaluated for
impairment	$	433,209	$	784,894	$	1,367,934	$	1,461,644	$	334,214	$	429,766	$	4,811,661
Loans acquired and
accounted for under
ASC 310-30	$	93,841	$	12,790	$	33,620	$	4,093	$	4,347	$	18,960	$	167,651

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

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

•	The other residential segment corresponds to the other residential class

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

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

•	The commercial business segment corresponds to the commercial business class

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

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

Impaired loans (excluding FDIC-assisted loans, net of discount), are summarized as follows:

	At or for the Three Months Ended March 31, 2019
							Average
			Unpaid				Investment		Interest
	Recorded		Principal		Specific		in Impaired		Income
	Balance		Balance		Allowance		Loans		Recognized
	(In Thousands)

One- to four-family residential construction	$	—	$	—	$	—	$	—	$	—
Subdivision construction		283		314		103		305		2
Land development		14		18		—		14		—
Commercial construction		—		—		—		—		—
Owner occupied one- to four-
family residential		3,115		3,421		255		3,355		37
Non-owner occupied one- to four-
family residential		919		1,118		24		1,776		13
Commercial real estate		5,927		6,083		946		4,876		50
Other residential		—		—		—		—		—
Commercial business		1,713		2,125		246		1,775		32
Industrial revenue bonds		—		—		—		—		—
Consumer auto		1,261		1,518		226		1,391		24
Consumer other		415		639		62		464		11
Home equity lines of credit		261		276		39		218		7

Total	$	13,908	$	15,512	$	1,901	$	14,174	$	176

	At or for the Year Ended December 31, 2018
							Average
			Unpaid				Investment		Interest
	Recorded		Principal		Specific		in Impaired		Income
	Balance		Balance		Allowance		Loans		Recognized
	(In Thousands)

One- to four-family residential construction	$	—	$	—	$	—	$	—	$	—
Subdivision construction		318		318		105		321		17
Land development		14		18		—		14		1
Commercial construction		—		—		—		—		—
Owner occupied one- to four-
family residential		3,576		3,926		285		3,406		197
Non-owner occupied one- to four-
family residential		2,222		2,519		304		2,870		158
Commercial real estate		3,501		3,665		613		6,216		337
Other residential		—		—		—		1,026		20
Commercial business		1,844		2,207		309		2,932		362
Industrial revenue bonds		—		—		—		—		—
Consumer auto		1,874		2,114		336		2,069		167
Consumer other		479		684		72		738		59
Home equity lines of credit		111		128		17		412		28

Total	$	13,939	$	15,579	$	2,041	$	20,004	$	1,346

	At or for the Three Months Ended March 31, 2018
							Average
			Unpaid				Investment		Interest
	Recorded		Principal		Specific		in Impaired		Income
	Balance		Balance		Allowance		Loans		Recognized
	(In Thousands)

One- to four-family residential construction	$	—	$	—	$	—	$	—	$	—
Subdivision construction		343		363		112		370		6
Land development		15		18		—		15		—
Commercial construction		—		—		—		—		—
Owner occupied one- to four-
family residential		3,293		3,608		295		3,293		45
Non-owner occupied one- to four-
family residential		3,389		3,680		368		3,438		54
Commercial real estate		6,987		7,137		224		7,266		78
Other residential		1,025		1,025		—		2,411		10
Commercial business		4,187		4,840		2,176		3,691		31
Industrial revenue bonds		—		—		—		—		—
Consumer auto		2,463		2,655		444		2,461		41
Consumer other		904		1,011		136		868		19
Home equity lines of credit		560		601		86		567		19

Total	$	23,166	$	24,938	$	3,841	$	24,380	$	303

At March 31, 2019, $8.1 million of impaired loans had specific valuation allowances totaling $1.9 million. At December 31, 2018, $8.4 million of impaired loans had specific valuation allowances totaling $2.0 million.

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

The following tables present newly restructured loans during the three months ended March 31, 2019 and 2018, respectively, by type of modification:

	Three Months Ended March 31, 2019
							Total
	Interest Only		Term		Combination		Modification
	(In Thousands)

Consumer	$	—	$	27	$	—	$	27

	Three Months Ended March 31, 2018
							Total
	Interest Only		Term		Combination		Modification
	(In Thousands)

Mortgage loans on real estate:
One- to four-family residential	$	1,348	$	—	$	—	$	1,348
Consumer		—		152		—		152

	$	1,348	$	152	$	—	$	1,500

At March 31, 2019, the Company had $5.3 million of loans that were modified in troubled debt restructurings and impaired, as follows: $279,000 of construction and land development loans, $2.6 million of one- to four-family and other residential mortgage loans, $1.3 million of commercial real estate loans, $440,000 of commercial business loans and $673,000 of consumer loans. Of the total troubled debt restructurings at March 31, 2019, $4.2 million were accruing interest and $1.2 million were classified as substandard using the Company’s internal grading system, which is described below. The Company had no troubled debt restructurings which were modified in the previous 12 months and subsequently defaulted during the three months ended March 31, 2019. When loans modified as troubled debt restructurings have subsequent payment defaults, the defaults are factored into the determination of the allowance for loan losses to ensure specific valuation allowances reflect amounts considered uncollectible. At December 31, 2018, the Company had $6.9 million of loans that were modified in troubled debt restructurings and impaired, as follows: $283,000 of construction and land development loans, $3.9 million of one- to four-family and other residential mortgage loans, $1.3 million of commercial real estate loans, $548,000 of commercial business loans and $803,000 of consumer loans. Of the total troubled debt restructurings at December 31, 2018, $4.7 million were accruing interest and $2.5 million were classified as substandard using the Company’s internal grading system. The Company had no troubled debt restructurings which were modified in the previous 12 months and subsequently defaulted during the year ended December 31, 2018.

During the three months ended March 31, 2019, $49,000 of loans, all of which consisted of consumer loans, designated as troubled debt restructurings met the criteria for placement back on accrual status. The criteria is generally a minimum of six months of consistent and timely payment performance under original or modified terms. During the three months ended March 31, 2018, loans designated as troubled debt restructurings totaling $23,000, all of which consisted of consumer loans, met the criteria for placement back on accrual status.

The Company reviews the credit quality of its loan portfolio using an internal grading system that classifies loans as “Satisfactory,” “Watch,” “Special Mention,” “Substandard” and “Doubtful.” Loans classified as watch are being monitored because of indications of potential weaknesses or deficiencies that may require future classification as special mention or substandard. Special mention loans possess potential weaknesses that deserve management’s close attention but do not expose the Bank to a degree of risk that warrants substandard classification. Substandard loans are characterized by the distinct possibility that the Bank will sustain some loss if certain deficiencies are not corrected. Doubtful loans are those having all the weaknesses inherent to those classified Substandard with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Loans not meeting any of the criteria previously described are considered satisfactory. The FDIC-assisted acquired loans are evaluated using this internal grading system. These loans are accounted for in pools. Minimal adverse classification in these acquired loan pools was identified as of March 31, 2019 and December 31, 2018, respectively. See Note 7 for further discussion of the acquired loan pools and the termination of the loss sharing agreements.

The Company evaluates the loan risk internal grading system definitions and allowance for loan loss methodology on an ongoing basis. The general component of the allowance for loan losses is affected by several factors, including, but not limited to, average historical losses, average life of the loans, the current composition of the loan portfolio, current and expected economic conditions, collateral values and internal risk ratings. Management considers all these factors in determining the adequacy of the Company’s allowance for loan losses. In early 2018, we expanded our loan risk rating system to allow for further segregation of satisfactory credits. No significant changes were made to the allowance for loan loss methodology during the past year.

The loan grading system is presented by loan class below:

	March 31, 2019
					Special
	Satisfactory		Watch		Mention		Substandard		Doubtful		Total
	(In Thousands)

One- to four-family residential
construction	$	26,904	$	31	$	—	$	—	$	—	$	26,935
Subdivision construction		12,334		—		—		18		—		12,352
Land development		41,938		4,500		—		—		—		46,438
Commercial construction		1,328,853		—		—		—		—		1,328,853
Owner occupied one- to four-
family residential		287,220		—		—		1,713		—		288,933
Non-owner occupied one- to
four-family residential		117,073		937		—		248		—		118,258
Commercial real estate		1,363,967		19,892		—		4,819		—		1,388,678
Other residential		864,491		499		—		—		—		864,990
Commercial business		315,063		4,858		—		1,406		—		321,327
Industrial revenue bonds		13,702		—		—		—		—		13,702
Consumer auto		228,600		94		—		1,006		—		229,700
Consumer other		52,908		154		—		286		—		53,348
Home equity lines of credit		120,294		151		—		251		—		120,696
Loans acquired and accounted
for under ASC 310-30,
net of discounts		161,107		—		—		18		—		161,125

Total	$	4,934,454	$	31,116	$	—	$	9,765	$	—	$	4,975,335

	December 31, 2018
					Special
	Satisfactory		Watch		Mention		Substandard		Doubtful		Total
	(In Thousands)

One- to four-family residential
construction	$	25,803	$	374	$	—	$	—	$	—	$	26,177
Subdivision construction		12,077		1,718		—		49		—		13,844
Land development		39,892		4,600		—		—		—		44,492
Commercial construction		1,417,166		—		—		—		—		1,417,166
Owner occupied one- to-four-
family residential		274,661		43		—		2,162		—		276,866
Non-owner occupied one- to-
four-family residential		119,951		941		—		1,546		—		122,438
Commercial real estate		1,357,987		11,061		—		2,387		—		1,371,435
Other residential		784,393		501		—		—		—		784,894
Commercial business		315,518		5,163		—		1,437		—		322,118
Industrial revenue bonds		13,940		—		—		—		—		13,940
Consumer auto		251,824		116		—		1,588		—		253,528
Consumer other		56,859		157		—		334		—		57,350
Home equity lines of credit		121,134		118		—		100		—		121,352
Loans acquired and accounted
for under ASC 310-30,
net of discounts		167,632		—		—		19		—		167,651

Total	$	4,958,837	$	24,792	$	—	$	9,622	$	—	$	4,993,251

NOTE 7: FDIC-ACQUIRED LOANS

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

The loans, commitments and foreclosed assets purchased in the TeamBank transaction were covered by a loss sharing agreement between the FDIC and Great Southern Bank. This agreement originally was to extend for ten years for 1-4 family real estate loans and for five years for other loans. The five-year period ended March 31, 2014 and the ten-year period was terminated early, effective April 26, 2016, by mutual agreement of Great Southern Bank and the FDIC. Based upon the acquisition date fair values of the net assets acquired, no goodwill was recorded.

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

The loans, commitments and foreclosed assets purchased in the Vantus Bank transaction were covered by a loss sharing agreement between the FDIC and Great Southern Bank. This agreement originally was to extend for ten years for 1-4 family real estate loans and for five years for other loans. The five year period ended September 30, 2014 and the ten-year period was terminated early, effective April 26, 2016, by mutual agreement of Great Southern Bank and the FDIC. Based upon the acquisition date fair values of the net assets acquired, no goodwill was recorded.

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

The loans and foreclosed assets purchased in the Sun Security Bank transaction were covered by a loss sharing agreement between the FDIC and Great Southern Bank. This agreement originally was to extend for ten years for 1-4 family real estate loans and for five years for other loans but was terminated early, effective April 26, 2016, by mutual agreement of Great Southern Bank and the FDIC. Based upon the acquisition date fair values of the net assets acquired, no goodwill was recorded.

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

The loans and foreclosed assets purchased in the InterBank transaction were covered by a loss sharing agreement between the FDIC and Great Southern Bank. This agreement originally was to extend for ten years for 1-4 family real estate loans and for five years for other loans but was terminated early, effective June 9, 2017, by mutual agreement of Great Southern Bank and the FDIC. Based upon the acquisition date fair values of the net assets acquired, no goodwill was recorded.

On June 20, 2014, Great Southern Bank entered into a purchase and assumption agreement with the FDIC to purchase a substantial portion of the loans and investment securities, as well as certain other assets, and assume all of the deposits, as well as certain other liabilities, of Valley Bank, a full-service bank headquartered in Moline, Illinois, with significant operations in Iowa. This transaction did not include a loss sharing agreement. Based upon the acquisition date fair values of the net assets acquired, no goodwill was recorded.

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

The following table presents the balances of the acquired loans related to the various FDIC-assisted transactions at March 31, 2019 and December 31, 2018.

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

March 31, 2019
Gross loans receivable	$	9,807		$	13,204		$	19,733		$	81,480		$	52,041
Balance of accretable discount due to change in expected losses		(157	)		(44	)		(252	)		(1,649	)		(742	)
Net carrying value to loans receivable		(9,555	)		(12,930	)		(18,946	)		(71,695	)		(47,894	)
Expected loss remaining	$	95		$	230		$	535		$	8,136		$	3,405


December 31, 2018
Gross loans receivable	$	10,602		$	14,097		$	21,171		$	85,205		$	53,470
Balance of accretable discount due to change in expected losses		(399	)		(58	)		(342	)		(1,695	)		(169	)
Net carrying value to loans receivable		(10,106	)		(13,809	)		(20,171	)		(74,436	)		(49,124	)
Expected loss remaining	$	97		$	230		$	658		$	9,074		$	4,177

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

The amount of the estimated cash flows expected to be received from the acquired loan pools in excess of the fair values recorded for the loan pools is referred to as the accretable yield. The accretable yield is recognized as interest income over the estimated lives of the loans. The Company continues to evaluate the fair value of the loans including cash flows expected to be collected. Increases in the Company’s cash flow expectations are recognized as increases to the accretable yield while decreases are recognized as impairments through the allowance for loan losses. During the three months ended March 31, 2019 and 2018, improvements in expected cash flows (reclassification of discounts from non-accretable to accretable) related to the acquired loan portfolios resulted in adjustments of $1.7 million and $1.8 million, respectively, to the accretable yield to be spread over the estimated remaining lives of the loans on a level-yield basis.

Because these adjustments to accretable yield will be recognized generally over the remaining lives of the loan pools, they will impact future periods as well. As of March 31, 2019, the remaining accretable yield adjustment that will affect interest income is $2.8 million. Of the remaining adjustments affecting interest income, we expect to recognize $1.7 million of interest income during the remainder of 2019. Additional adjustments to accretable yield may be recorded in future periods from the FDIC-assisted transactions, as the Company continues to estimate expected cash flows from the acquired loan pools.

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

	Three Months Ended			Three Months Ended
	March 31, 2019			March 31, 2018
	(In Thousands, Except Per Share Data
	and Basis Points Data)

Impact on net interest income/
net interest margin (in basis points)	$	1,512	13 bps	$	1,157	12 bps
Non-interest income		—			—
Net impact to pre-tax income	$	1,512		$	1,157
Net impact net of taxes	$	1,167		$	898
Impact to diluted earnings per share	$	0.08		$	0.06

Changes in the accretable yield for acquired loan pools were as follows for the three months ended March 31, 2019 and 2018:

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

Balance, January 1, 2019	$	1,356		$	1,432		$	2,242		$	4,994		$	3,063
Accretion		(434	)		(218	)		(441	)		(2,028	)		(854	)
Change in expected
accretable yield⁽¹⁾		477			88			643			4,982			2,120

Balance, March 31, 2019	$	1,399		$	1,302		$	2,444		$	7,948		$	4,329

Balance, January 1, 2018	$	2,071		$	1,850		$	2,901		$	5,074		$	2,695
Accretion		(227	)		(278	)		(430	)		(1,823	)		(1,130	)
Change in expected
accretable yield⁽¹⁾		(17	)		183			(402	)		3,653			1,851

Balance, March 31, 2018	$	1,827		$	1,755		$	2,069		$	6,904		$	3,416

(1)

Represents increases (decreases) in estimated cash flows expected to be received from the acquired loan pools, partially due to lower estimated credit losses. The amounts also include changes in expected accretion of the loan pools for TeamBank, Vantus Bank, Sun Security Bank, InterBank and Valley Bank for the three months ended March 31, 2019, totaling $477,000, $88,000, $583,000, $4.1 million and $1.3 million, respectively, and for the three months ended March 31, 2018, totaling $(17,000), $183,000, $(402,000), $2.4 million and $1.3 million, respectively.

	March 31, 2019		December 31, 2018
	(In Thousands)

Subordinated notes	$	75,000	$	75,000
Less: unamortized debt issuance costs		1,049		1,158
	$	73,951	$	73,842

NOTE 14: INCOME TAXES

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

	Three Months Ended March 31,
	2019			2018

Tax at statutory rate		21.0	%		21.0	%
Nontaxable interest and dividends		(0.5	)		(1.1	)
Tax credits		(4.5	)		(4.5	)
State taxes		1.4			1.2
Other		1.1			(0.2	)

		18.5	%		16.4	%

The Tax Act was signed into law on December 22, 2017, making several changes to U. S. corporate income tax laws, including reducing the corporate Federal income tax rate from 35% to 21% effective for tax years beginning on or after January 1, 2018. U. S. GAAP requires that the impact of the provisions of the Tax Act be accounted for in the period of enactment. The Company recognized the income tax effects of the Tax Act in its 2017 financial statements. The Tax Act is complex and required significant detailed analysis. During the preparation of the Company’s 2017 income tax returns in 2018, no additional adjustments related to enactment of the Tax Act were identified.

The Company and its consolidated subsidiaries have not been audited recently by the Internal Revenue Service (IRS) and, as such, tax years through December 31, 2005, have been closed without audit. The Company, through one of its subsidiaries, is a partner in two partnerships which have been under Internal Revenue Service examination for 2006 and 2007. As a result, the Company’s 2006 and subsequent tax years remain open for examination. The examinations of these partnerships advanced during 2016, 2017, and 2018. One of the partnerships has advanced to Tax Court and has entered a Motion for Entry of Decision with an agreed upon settlement. The other partnership examination was recently completed by the IRS with no change impacting the Company’s tax positions. The Company does not currently expect significant adjustments to its financial statements from the partnership matter at the Tax Court.

The Company is currently under State of Missouri income and franchise tax examinations for its 2014 through 2015 tax years. The Company does not currently expect significant adjustments to its financial statements from this state examination.

NOTE 15: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

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

•

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

•

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

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

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

The Company considers transfers between the levels of the hierarchy to be recognized at the end of related reporting periods. From December 31, 2018 to March 31, 2019, no assets for which fair value is measured on a recurring basis transferred between any levels of the hierarchy.

Recurring Measurements

The following table presents the fair value measurements of assets recognized in the accompanying statements of financial condition measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fell at March 31, 2019 and December 31, 2018:

				Fair value measurements using
				Quoted prices
				in active
				markets		Other			Significant
				for identical		observable			unobservable
				assets		inputs			inputs
	Fair value			(Level 1)		(Level 2)			(Level 3)
	(In Thousands)

March 31, 2019
Agency mortgage-backed securities	$	180,196		$	—	$	180,196		$	—
Agency collateralized mortgage obligations		53,006			—		53,006			—
States and political subdivisions		44,548			—		44,548			—
Interest rate derivative asset		20,338			—		20,338			—
Interest rate derivative liability		(768	)		—		(768	)		—

December 31, 2018
Agency mortgage-backed securities	$	153,258		$	—	$	153,258		$	—
Agency collateralized mortgage obligations		39,260			—		39,260			—
States and political subdivisions		51,450			—		51,450			—
Interest rate derivative asset		12,800			—		12,800			—
Interest rate derivative liability		(716	)		—		(716	)		—

The following is a description of inputs and valuation methodologies used for assets recorded at fair value on a recurring basis and recognized in the accompanying statements of financial condition at March 31, 2019 and December 31, 2018, as well as the general classification of such assets pursuant to the valuation hierarchy. There have been no significant changes in the valuation techniques during the three-month period ended March 31, 2019. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Available-for-Sale Securities. Investment securities available for sale are recorded at fair value on a recurring basis. The fair values used by the Company are obtained from an independent pricing service, which represent either quoted market prices for the identical asset or fair values determined by pricing models, or other model-based valuation techniques, that consider observable market data, such as interest rate volatilities, LIBOR yield curve, credit spreads and prices from market makers and live trading systems. Recurring Level 2 securities include U.S. government agency securities, mortgage-backed securities, state and municipal bonds and certain other investments. Inputs used for valuing Level 2 securities include observable data that may include dealer quotes, benchmark yields, market spreads, live trading levels and market consensus prepayment speeds, among other things. Additional inputs include indicative values derived from the independent pricing service’s proprietary computerized models. There were no recurring Level 3 securities at March 31, 2019 or December 31, 2018.

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

Nonrecurring Measurements

The following tables present the fair value measurements of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2019 and December 31, 2018:

			Fair Value Measurements Using
			Quoted prices
			in active
			markets		Other		Significant
			for identical		observable		unobservable
			assets		inputs		inputs
	Fair value		(Level 1)		(Level 2)		(Level 3)
	(In Thousands)

March 31, 2019
Impaired loans	$	1,212	$	—	$	—	$	1,212

Foreclosed assets held for sale	$	343	$	—	$	—	$	343

December 31, 2018
Impaired loans	$	2,805	$	—	$	—	$	2,805

Foreclosed assets held for sale	$	1,776	$	—	$	—	$	1,776

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

Loans Held for Sale. Mortgage loans held for sale are recorded at the lower of carrying value or fair value. The fair value of mortgage loans held for sale is based on what secondary markets are currently offering for portfolios with similar characteristics. As such, the Company classifies mortgage loans held for sale as Nonrecurring Level 2. Write-downs to fair value typically do not occur as the Company generally enters into commitments to sell individual mortgage loans at the time the loan is originated to reduce market risk. The Company typically does not have commercial loans held for sale. At March 31, 2019 and December 31, 2018, the aggregate fair value of mortgage loans held for sale exceeded their cost. Accordingly, no mortgage loans held for sale were marked down and reported at fair value.

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

The Company records impaired loans as Nonrecurring Level 3. If a loan’s fair value as estimated by the Company is less than its carrying value, the Company either records a charge-off of the portion of the loan that exceeds the fair value or establishes a reserve within the allowance for loan losses specific to the loan. Loans for which such charge-offs or reserves were recorded during the three months ended March 31, 2019 or the year ended December 31, 2018, are shown in the table above (net of reserves).

Foreclosed Assets Held for Sale. Foreclosed assets held for sale are initially recorded at fair value less estimated cost to sell at the date of foreclosure. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less estimated cost to sell. Foreclosed assets held for sale are classified within Level 3 of the fair value hierarchy. The foreclosed assets represented in the table above have been re-measured during the three months ended March 31, 2019 or the year ended December 31, 2018, subsequent to their initial transfer to foreclosed assets.

Fair Value of Financial Instruments

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

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

Loans and Interest Receivable. The fair value of loans is estimated on an exit price basis incorporating contractual cash flows, prepayments discount spreads, credit losses and liquidity premiums. Loans with similar characteristics were aggregated for purposes of the calculations. The carrying amount of accrued interest receivable approximates its fair value.

Deposits and Accrued Interest Payable. The fair value of demand deposits and savings accounts is the amount payable on demand at the reporting date, i.e., their carrying amounts. The fair value of fixed maturity certificates of deposit is estimated using a discounted cash flow calculation using the average advances yield curve from 11 districts of the FHLB for the as of date. The carrying amount of accrued interest payable approximates its fair value.

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

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

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

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

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

	March 31, 2019						December 31, 2018
	Carrying		Fair		Hierarchy		Carrying		Fair		Hierarchy
	Amount		Value		Level		Amount		Value		Level
	(In Thousands)

Financial assets
Cash and cash equivalents	$	206,090	$	206,090		1	$	202,742	$	202,742		1
Mortgage loans held for sale		1,892		1,892		2		1,650		1,650		2
Loans, net of allowance for loan losses		4,050,336		4,034,628		3		3,989,001		3,955,786		3
Accrued interest receivable		14,550		14,550		3		13,448		13,448		3
Investment in FHLBank stock		5,633		5,633		3		12,438		12,438		3

Financial liabilities
Deposits		3,956,091		3,952,867		3		3,725,007		3,717,899		3
Short-term borrowings		140,837		140,837		3		297,978		297,978		3
Subordinated debentures		25,774		25,774		3		25,774		25,774		3
Subordinated notes		73,951		75,750		2		73,842		75,188		2
Accrued interest payable		2,933		2,933		3		3,570		3,570		3

Unrecognized financial instruments (net of
contractual value)
Commitments to originate loans		—		—		3		—		—		3
Letters of credit		142		142		3		146		146		3
Lines of credit		—		—		3		—		—		3

NOTE 16: DERIVATIVES AND HEDGING ACTIVITIES

Risk Management Objective of Using Derivatives

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

Nondesignated Hedges

The Company has interest rate swaps that are not designated as qualifying hedging relationships. Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain loan customers, which the Company began offering during 2011. The Company executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting interest rate swaps that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings.

As part of the Valley Bank FDIC-assisted acquisition, the Company acquired seven loans with related interest rate swaps. Valley’s swap program differed from the Company’s in that Valley did not have back to back swaps with the customer and a counterparty. Five of the seven acquired loans with interest rate swaps have paid off. The notional amount of the two remaining Valley swaps was $751,000 at March 31, 2019. At March 31, 2019, excluding the Valley Bank swaps, the Company had 18 interest rate swaps totaling $70.4 million in notional amount with commercial customers, and 18 interest rate swaps with the same notional amount with third parties related to its program. In addition, the Company has three participation loans purchased totaling $30.9 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 us through the loan participation. At December 31, 2018, excluding the Valley Bank swaps, the Company had 18 interest rate swaps totaling $78.5 million in notional amount with commercial customers, and 18 interest rate swaps with the same notional amount with third parties related to its program. During the three months ended March 31, 2019 and 2018, the Company recognized net gains (losses) of $(25,000) and $37,000, respectively, in noninterest income related to changes in the fair value of these swaps.

Cash Flow Hedges

Interest Rate Swap. As a strategy to maintain acceptable levels of exposure to the risk of changes in future cash flows due to interest rate fluctuations, in October 2018, the Company entered into an interest rate swap transaction as part of its ongoing interest rate management strategies to hedge the risk of its floating rate loans. The notional amount of the swap is $400 million with a termination date of October 6, 2025. Under the terms of the swap, the Company will receive a fixed rate of interest of 3.018% and will pay a floating rate of interest equal to one-month USD-LIBOR. The floating rate will be reset monthly and net settlements of interest due to/from the counterparty will also occur monthly. The floating rate of interest was 2.481% as of March 31, 2019. Therefore, in the near term, the Company will receive net interest settlements which will be recorded as loan interest income, to the extent that the fixed rate of interest continues to exceed one-month USD-LIBOR. If USD-LIBOR exceeds the fixed rate of interest in future periods, the Company will be required to pay net settlements to the counterparty and will record those net payments as a reduction of interest income on loans. The Company recorded interest income related to this swap transaction of $513,000 during the three months ended March 31, 2019. 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 three months ended March 31, 2019, the Company recognized $-0- in noninterest income related to changes in the fair value of this derivative.

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

	Location in	Fair Value
	Consolidated Statements	March 31,		December 31,
	of Financial Condition	2019		2018
		(In Thousands)

Derivatives designated as
hedging instruments
Interest rate swap	Prepaid expenses and other assets	$	19,618	$	12,106

Total derivatives designated
as hedging instruments		$	19,618	$	12,106

Derivatives not designated
as hedging instruments

Asset Derivatives
Interest rate products	Prepaid expenses and other assets	$	720	$	694

Total derivatives not designated
as hedging instruments		$	720	$	694

Liability Derivatives
Interest rate products	Accrued expenses and other liabilities	$	768	$	716

Total derivatives not designated
as hedging instruments		$	768	$	716

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

	Amount of Gain (Loss)
	Recognized in AOCI
	Three Months Ended March 31,
Cash Flow Hedges	2019		2018
	(In Thousands)

Interest rate swap, net of income taxes	$	5,800	$	—

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

	Three Months Ended March 31
Cash Flow Hedges	2019				2018

	Interest Income		Interest Expense		Interest Income		Interest Expense
	(In Thousands)

Interest rate swap	$	513	$	—	$	—	$	—

Agreements with Derivative Counterparties

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

As of March 31, 2019, the termination value of derivatives with our derivative dealer counterparties (related to loan level swaps with commercial lending customers) in a net liability position, which included accrued interest but excluded any adjustment for nonperformance risk, related to these agreements was $222,000. In addition, as of March 31, 2019, the termination value of derivatives with our derivative dealer counterparty (related to the balance sheet hedge commenced in October 2018) in a net asset position, which included accrued interest but excluded any adjustment for nonperformance risk, related to these agreements was $19.8 million. The Company has minimum collateral posting thresholds with its derivative dealer counterparties. At March 31, 2019, the Company’s activity with certain of its derivative counterparties met the level at which the minimum collateral posting thresholds take effect (collateral to be received by the Company) and the derivative counterparties had posted collateral of $260,000 to the Company to satisfy the loan level agreements and collateral of $20.6 million to the Company to satisfy the balance sheet hedge. Additionally, the Company’s activity with certain of its derivative counterparties met the level at which the minimum collateral posting thresholds take effect (collateral to be given by the Company) and the Company had posted collateral of $331,000 to the derivative counterparties to satisfy the loan level agreements. As of December 31, 2018, the termination value of derivatives with our derivative dealer counterparties (related to loan level swaps with commercial lending customers) in a net asset position, which included accrued interest but excluded any adjustment for nonperformance risk, related to these agreements was $396,000. In addition, as of December 31, 2018, the termination value of derivatives with our derivative dealer counterparty (related to the balance sheet hedge commenced in October 2018) in a net asset position, which included accrued interest but excluded any adjustment for nonperformance risk, related to these agreements was $12.3 million. The Company has minimum collateral posting thresholds with its derivative dealer counterparties. At December 31, 2018, the Company’s activity with certain of its derivative counterparties met the level at which the minimum collateral posting thresholds take effect (collateral to be received by the Company) and the derivative counterparties had posted collateral of $704,000 to the Company to satisfy the loan level agreements and collateral of $12.8 million to the Company to satisfy the balance sheet hedge.

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

Forward-looking Statements

When used in this Quarterly Report on Form 10-Q and 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 "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "intends" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties, including, among other things, (i) expected revenues, cost savings, earnings accretion, synergies and other benefits from the Company's merger and acquisition activities might not be realized within the anticipated time frames or at all, and costs or difficulties relating to integration matters, including but not limited to customer and employee retention, might be greater than expected; (ii) changes in economic conditions, either nationally or in the Company's market areas; (iii) fluctuations in interest rates; (iv) the risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses; (v) the possibility of other-than-temporary impairments of securities held in the Company's securities portfolio; (vi) the Company's ability to access cost-effective funding; (vii) fluctuations in real estate values and both residential and commercial real estate market conditions; (viii) demand for loans and deposits in the Company's market areas; (ix) the ability to adapt successfully to technological changes to meet customers' needs and developments in the marketplace; (x) the possibility that security measures implemented might not be sufficient to mitigate the risk of a cyber attack or cyber theft, and that such security measures might not protect against systems failures or interruptions; (xi) legislative or regulatory changes that adversely affect the Company's business, including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and its implementing regulations, the overdraft protection regulations and customers' responses thereto and the Tax Reform Legislation; (xii) changes in accounting principles, policies or guidelines; (xiii) monetary and fiscal policies of the Federal Reserve Board and the U.S. Government and other governmental initiatives affecting the financial services industry; (xiv) 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, changes its business mix, increase its allowance for loan 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; (xv) costs and effects of litigation, including settlements and judgments; and (xvi) competition. The Company wishes to advise readers that the factors listed above and other risks described from time to time in documents filed or furnished by the Company with the SEC could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

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

Critical Accounting Policies, Judgments and Estimates

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

Allowance for Loan Losses and Valuation of Foreclosed Assets

The Company believes that the determination of the allowance for loan losses involves a higher degree of judgment and complexity than its other significant accounting policies. The allowance for loan losses is calculated with the objective of maintaining an allowance level believed by management to be sufficient to absorb estimated loan losses. Management's determination of the adequacy of the allowance is based on periodic evaluations of the loan portfolio and other relevant factors. However, this evaluation is inherently subjective as it requires material estimates of, among other things, expected default probabilities, loss once loans default, expected commitment usage, the amounts and timing of expected future cash flows on impaired loans, value of collateral, estimated losses, and general amounts for historical loss experience.

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

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

In the three months ending March 31, 2020, the Company will adopt ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), which requires an entity to reflect its current estimate of all expected future credit losses. The Company previously formed a cross-functional committee to oversee the system, data, reporting and other considerations for purposes of meeting the requirements of this standard. Data and system needs were assessed. As a result, third-party software was acquired and implemented to manage the data. We have completed the upload of the necessary historical loan data to the software that will be used in meeting certain requirements of this standard. Our loss data covers multiple credit cycles back to 2003. Parallel testing of the new methodology compared to the current methodology commenced in 2019 and the Company continues to evaluate the impact of adopting the new guidance. The Company expects to recognize a one-time cumulative effect adjustment to the allowance for loan losses upon adoption, but cannot yet determine the magnitude of any such one-time adjustment, or the overall impact of the new guidance on the Company’s consolidated financial statements.

In addition, the Company considers that the determination of the valuations of foreclosed assets held for sale involves a high degree of judgment and complexity. The carrying value of foreclosed assets reflects management’s best estimate of the amount to be realized from the sales of the assets. While the estimate is generally based on a valuation by an independent appraiser or recent sales of similar properties, the amount that the Company realizes from the sales of the assets could differ materially from the carrying value reflected in the financial statements, resulting in losses that could adversely impact earnings in future periods.

Carrying Value of Loans Acquired in FDIC-assisted Transactions

The Company considers that the determination of the carrying value of loans acquired in the FDIC-assisted transactions involves a high degree of judgment and complexity. The carrying value of the acquired loans reflects management’s best ongoing estimates of the amounts to be realized on each of these assets. The Company has now terminated all loss sharing agreements with the FDIC and, accordingly, no longer has an indemnification asset. The Company determined initial fair value accounting estimates of the acquired assets and assumed liabilities in accordance with FASB ASC 805, Business Combinations. However, the amount that the Company realizes on its acquired loan assets could differ materially from the carrying value reflected in its financial statements, based upon the timing of collections on the acquired loans in future periods. Subsequent to the initial valuation, the Company

continues to monitor identified loan pools for changes in estimated cash flows projected for the loan pools, anticipated credit losses and changes in the accretable yield. Analysis of these variables requires significant estimates and a high degree of judgment. See Note 7 “FDIC-Acquired Loans” included in Item 1 for additional information regarding the TeamBank, Vantus Bank, Sun Security Bank, InterBank and Valley Bank FDIC-assisted transactions.

Goodwill and Intangible Assets

Goodwill and intangible assets that have indefinite useful lives are subject to an impairment test at least annually and more frequently if circumstances indicate their value may not be recoverable. Goodwill is tested for impairment using a process that estimates the fair value of each of the Company’s reporting units compared with its carrying value. The Company defines reporting units as a level below each of its operating segments for which there is discrete financial information that is regularly reviewed. As of March 31, 2019, 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 amount exceeds the fair value of a reporting unit, further testing is completed comparing the implied fair value of the reporting unit’s goodwill to its carrying value to measure the amount of impairment. Intangible assets that are not amortized will be tested for impairment at least annually by comparing the fair values of those assets to their carrying values. At March 31, 2019, goodwill consisted of $5.4 million at the Bank reporting unit, which included goodwill of $4.2 million that was recorded during 2016 related to the acquisition of 12 branches from Fifth Third Bank. Other identifiable intangible assets that are subject to amortization are amortized on a straight-line basis over a period of seven years. At March 31, 2019, the amortizable intangible assets consisted of core deposit intangibles of $3.6 million, which are reflected in the table below. These amortizable intangible assets are reviewed for impairment if circumstances indicate their value may not be recoverable based on a comparison of fair value.

While the Company believes no impairment of its goodwill or other intangible assets existed at March 31, 2019, different conditions or assumptions used to measure fair value of reporting units, or changes in cash flows or profitability, if significantly negative or unfavorable, could have a material adverse effect on the outcome of the Company’s impairment evaluation in the future.

A summary of goodwill and intangible assets is as follows:

	March 31, 2019		December 31, 2018
	(In Thousands)

Goodwill – Branch acquisitions	$	5,396	$	5,396
Deposit intangibles
InterBank		—		36
Boulevard Bank		244		275
Valley Bank		900		1,000
Fifth Third Bank		2,423		2,581
		3,567		3,892
	$	8,963	$	9,288

Current Economic Conditions

Changes in economic conditions could cause the values of assets and liabilities recorded in the financial statements to change rapidly, resulting in material future adjustments in asset values, the allowance for loan losses, or capital that could negatively impact the Company’s ability to meet regulatory capital requirements and maintain sufficient liquidity.

Following the housing and mortgage crisis and correction beginning in mid-2007, the United States entered a prolonged economic downturn. Unemployment rose from 4.7% in November 2007 to peak at 10.0% in October 2009. The elevated unemployment levels negatively impacted consumer confidence, which had a detrimental impact on industry-wide performance nationally as well as in the Company's Midwest market area. Economic conditions have significantly improved since then, as indicated by consumer confidence levels, increased economic activity and low unemployment levels.

The national unemployment rate remained steady at 3.8% in March 2019. The rate compares to a 4.1% rate in March 2018. After a lackluster performance in February 2019, the job market rebounded with 196,000 new jobs created in March 2019. Sectors seeing employment increases included health care, professional services and technical services. In March 2019, the U.S. labor force participation rate (the share of working-age Americans who are either employed or are actively looking for a job) was 63.0% and the employment population ratio was 60.7%, with both ratios changing little over the past few months. The unemployment rate for the Midwest, where most of the Company’s business is conducted, remained stable at 3.7% in March 2019. Unemployment rates for March 2019 were: Missouri at 3.3%, Arkansas at 3.7%, Kansas at 3.5%, Iowa at 2.4%, Minnesota at 3.2%, Illinois at 4.4%, Oklahoma at 3.3%, Texas at 3.8%, Georgia at 3.9% and Colorado at 3.5%. Of the metropolitan areas in which the Company does business, the Chicago area had the highest unemployment rate at 4.3% as of February 2019. This rate had improved significantly since the 4.9% rate reported as of December 2017. The unemployment rates for the Springfield and St. Louis market areas at 3.1% and 3.7%, respectively, were comparable to the national average. Metropolitan areas in Iowa, Missouri, Arkansas and Minnesota continued to boast unemployment levels amongst the lowest in the nation.

Sales of newly built single-family homes for March 2019 were at a seasonally adjusted annual rate of 692,000 according to U.S. Census Bureau and the Department of Housing and Urban Development estimates. This is 4.5% above the revised February 2019 seasonally adjusted annual rate of 662,000, and is 3% above the March 2018 seasonally adjusted annual rate of 672,000. The median sales price of new houses sold in March 2019 was $302,700, down from $335,400 a year earlier. The March 2019 average sales price of $376,000 was up slightly from $369,200 a year ago. The inventory of new homes for sale at the end of March 2019 would support 6.0 months’ supply at the current sales pace, up from 5.3 months in March 2018.

After a large jump in February 2019, existing home sales declined in March 2019, according to the National Association of Realtors (NAR). Total existing home sales decreased 5% to a seasonally adjusted rate of 5.21 million in March 2019. Total existing home inventory at the end of March 2019 increased to 1.68 million units, up slightly from 1.63 million existing homes available for sale in February 2019. Unsold inventory is at a 3.9 months’ supply at the current sales pace, up from 3.6 months a year ago.

The national median existing home price for all housing types in March 2019 was $259,400, up 3.8% from March 2018. March’s price increase marks the 85th straight month of year-over-year gains. The Midwest region existing home median sale price for March 2019 was $200,500, which is up 4.6% from last year. First-time buyers accounted for 33% of sales in March 2019, up slightly from 32% in February 2019 and 30% a year ago.

The multi-family sector rebounded in 2017 and 2018, with demand approaching the highest level on record. National vacancy rates were 5.9% at the end of March 2019, while our market areas reflected the following vacancy levels: Springfield at 5.7%, St. Louis at 8.9%, Kansas City at 7.0%, Minneapolis at 4.4%, Tulsa at 9.3%, Dallas-Fort Worth at 8.0% and Chicago at 6.2%. Rent growth picked up in recent months and demand has increased at a steady rate supported by the strong economy. Vacancy rates have increased in Tulsa, St. Louis and Dallas due to an increased number of units coming on-line. Developers continue to favor more expensive submarkets. Transaction volume has slowed, but pricing has remained on an upward trajectory. Cap rates are still at low levels. A continued increase in the homeownership rate is the largest risk to the apartment sector. Despite the decline in affordability and rigid mortgage origination standards, about two-thirds of consumers still believe now is a good time to buy a home, according to a recent University of Michigan consumer survey. The homeownership rate has risen by more than a percentage point since 2016, to 64.2% in March 2019. All of the Company’s market areas within the multi-family sector are in expansion phase with the exception of Denver and Atlanta, which are both currently in a hyper-supply phase.

Nationally, approximately 45% of the suburban office markets are in an expansion market cycle -- characterized by decreasing vacancy rates, moderate/high new construction, high absorption, moderate/high employment growth and medium/high rental rate growth. Signs of late-cycle conditions are currently spreading. Both central business district and suburban markets are being categorized as either in recession or in hyper-supply by about one in 10 market respondents. So while most markets are in recovery or expansion, they tilt toward risk in the coming years. The Company’s larger market areas in the suburban office expansion market cycle include Minneapolis, Dallas-Ft. Worth, and St. Louis. Tulsa, Okla. and Kansas City are currently in the recovery/expansion market cycle -- typified by decreasing vacancy rates, low new construction, moderate absorption, low/moderate employment growth and negative/low rental rate growth. Chicago is currently in a recession market cycle typified by increasing vacancies, low absorption and low new construction while Denver is in hyper-supply.

Approximately 70% of the retail sector is in the expansion phase of the market cycle, with another 20% in recovery mode and the remaining 10% in hyper-supply or recession. The Company’s larger market areas included in the retail expansion market segment are Chicago, Denver, Minneapolis, Kansas City, Dallas-Ft. Worth, and St. Louis, with Chicago and Minneapolis nearing hyper-supply. The Atlanta and Tulsa markets are each in recovery phase.

The industrial segment, once concentrated in manufacturing, is now epitomized by a dense network of warehousing, distribution, logistics, and R&D/Flex properties which is the conduit of the current global e-commerce revolution. All of the Company’s larger industrial market areas are categorized as being in the expansion cycle with prospects of continuing good economic growth. Two market areas, Chicago and Kansas City, are in the latter stages of the expansion cycle.

Occupancy, absorption and rental income levels of commercial real estate properties located throughout the Company’s market areas remain stable according to information provided by real estate services firm CoStar Group. Moderate real estate sales and financing activity is continuing to support loan growth.

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

General

The profitability of the Company and, more specifically, the profitability of its principal subsidiary, the Bank, depends primarily on its net interest income, as well as provisions for loan losses and the level of non-interest income and non-interest expense. Net interest income is the difference between the interest income the Bank earns on its loan and investment portfolios, and the interest it pays on interest-bearing liabilities, which consists mainly of interest paid on deposits and borrowings. Net interest income is affected by the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on these balances. When interest-earning assets approximate or exceed interest-bearing liabilities, any positive interest rate spread will generate net interest income.

Great Southern's total assets increased $102.0 million, or 2.2%, from $4.68 billion at December 31, 2018, to $4.78 billion at March 31, 2019. Full details of the current period changes in total assets are provided in the “Comparison of Financial Condition at March 31, 2019 and December 31, 2018” section of this Quarterly Report on Form 10-Q.

Loans. Net outstanding loans increased $61.3 million, or 1.5%, from $3.99 billion at December 31, 2018, to $4.05 billion at March 31, 2019. Included in the net increase in loans were reductions of $6.5 million in the FDIC-acquired loan portfolios. Increases primarily occurred in commercial construction loans, commercial real estate loans, one-to four-family residential mortgage loans and other residential (multi-family) loans. These increases were partially offset by decreases in consumer auto loans. The increases were primarily due to loan growth in our existing banking center network and our commercial loan production offices. Excluding FDIC-assisted acquired loans and mortgage loans held for sale, total gross loans decreased $11.4 million from December 31, 2018 to March 31, 2019. As loan demand is affected by a variety of factors, including general economic conditions, and because of the competition we face and our focus on pricing discipline and credit quality, no assurances can be made regarding our future loan growth. The Company's strategy continues to be focused on maintaining credit risk and interest rate risk at appropriate levels.

Recent loan growth has occurred in several loan types, primarily commercial construction loans, commercial real estate loans, other residential (multi-family) loans and one- to four-family residential mortgage loans and in most of Great Southern’s primary lending locations, including Springfield, St. Louis, Kansas City, Des Moines and Minneapolis, as well as the loan production offices in Chicago, Dallas, Omaha and Tulsa, and offices added recently in Atlanta and Denver. Certain minimum underwriting standards and monitoring help assure the Company’s portfolio quality. Great Southern’s loan committee reviews and approves all new loan originations in excess of lender approval authorities. Generally, the Company considers commercial construction, consumer, and commercial real estate loans to involve a higher degree of risk compared to some other types of loans, such as first mortgage loans on one- to four-family, owner-occupied residential properties. For commercial real estate, commercial

business and construction loans, the credits are subject to an analysis of the borrower’s and guarantor’s financial condition, credit history, verification of liquid assets, collateral, market analysis and repayment ability. It has been, and continues to be, Great Southern’s practice to verify information from potential borrowers regarding assets, income or payment ability and credit ratings as applicable and as required by the authority approving the loan. To minimize construction risk, projects are monitored as construction draws are requested by comparison to budget and with progress verified through property inspections. The geographic and product diversity of collateral, equity requirements and limitations on speculative construction projects help to mitigate overall risk in these loans. Underwriting standards for all loans also include loan-to-value ratio limitations, which vary depending on collateral type, debt service coverage ratios or debt payment to income ratio guidelines, where applicable, credit histories, use of guaranties and other recommended terms relating to equity requirements, amortization, and maturity. Consumer loans are primarily secured by new and used motor vehicles and these loans are also subject to certain minimum underwriting standards to assure portfolio quality. While Great Southern’s consumer underwriting and pricing standards have been fairly consistent since 2016, the Company tightened its underwriting guidelines on automobile lending beginning in the latter part of 2016. Management took this step in an effort to improve credit quality in the portfolio and reduce delinquencies and charge-offs. The underwriting standards employed by Great Southern for consumer loans include a determination of the applicant's payment history on other debts, credit scores, employment history and an assessment of ability to meet existing obligations and payments on the proposed loan. In 2019, the Company discontinued indirect auto loan originations. See “Item 1. Business – Lending Activities – General, – Commercial Real Estate and Construction Lending, and – Consumer Lending” in the Company’s December 31, 2018 Annual Report on Form 10-K.

While our policy allows us to lend up to 95% of the appraised value on one-to four-family residential properties, originations of loans with loan-to-value ratios at that level are minimal. Private mortgage insurance is typically required for loan amounts above the 80% level. Few exceptions occur and would be based on analyses which determined minimal transactional risk to be involved. We consider these lending practices to be consistent with or more conservative than what we believe to be the norm for banks our size. At each of March 31, 2019 and December 31, 2018, an estimated 0.1% of total owner occupied one- to four-family residential loans had loan-to-value ratios above 100% at origination. At each of March 31, 2019 and December 31, 2018, an estimated 0.9% of total non-owner occupied one- to four-family residential loans had loan-to-value ratios above 100% at origination.

At March 31, 2019, troubled debt restructurings totaled $5.3 million, or 0.1% of total loans, down $1.6 million from $6.9 million, or 0.2% of total loans, at December 31, 2018. Concessions granted to borrowers experiencing financial difficulties may include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. For troubled debt restructurings occurring during the three months ended March 31, 2019, no loans were restructured into multiple new loans. For troubled debt restructurings occurring during the year ended December 31, 2018, five loans totaling $31,000 were restructured into multiple new loans. For further information on troubled debt restructurings, see Note 6 of the Notes to Consolidated Financial Statements contained in this report.

Loans that were acquired through FDIC-assisted transactions, which are accounted for in pools, are currently included in the analysis and estimation of the allowance for loan losses. If expected cash flows to be received on any given pool of loans decreases from previous estimates, then a determination is made as to whether the loan pool should be charged down or the allowance for loan losses should be increased (through a provision for loan losses). Acquired loans are described in Note 7 of the Notes to Consolidated Financial Statements contained in this report. For acquired loan pools, the Company may allocate, and at March 31, 2019, has allocated, a portion of its allowance for loan losses related to these loan pools in a manner similar to how it allocates its allowance for loan losses to those loans which are collectively evaluated for impairment.

The level of non-performing loans and foreclosed assets affects our net interest income and net income. We generally do not accrue interest income on these loans and do not recognize interest income until the loans are repaid or interest payments have been made for a period of time sufficient to provide evidence of performance on the loans. Generally, the higher the level of non-performing assets, the greater the negative impact on interest income and net income.

Available-for-sale Securities. In the three months ended March 31, 2019, available-for-sale securities increased $33.8 million, or 13.8%, from $244.0 million at December 31, 2018, to $277.8 million at March 31, 2019. The increase was primarily due to the purchase of FNMA and GNMA fixed-rate multi-family mortgage-backed securities, partially offset by calls of municipal securities and normal monthly payments received related to the portfolio of mortgage-backed securities. The Company used increased deposits to fund this increase in investment securities.

Deposits. The Company attracts deposit accounts through its retail branch network, correspondent banking and corporate services areas, and brokered deposits. The Company then utilizes these deposit funds, along with FHLBank advances and other borrowings, to meet loan demand or otherwise fund its activities. In the three months ended March 31, 2019, total deposit balances increased $231.1 million, or 6.2%. Transaction account balances increased $67.6 million to $2.20 billion at March 31, 2019, while retail certificates of deposit increased $89.6 million, to $1.35 billion at March 31, 2019. The increases in transaction accounts were primarily a result of increases in money market and NOW deposit accounts. Retail certificates of deposit increased due to an increase in certificates opened through the Company’s internet deposit acquisition channels. In addition, at March 31, 2019 and December 31, 2018, customer deposits totaling $27.9 million and $27.9 million, respectively, were part of the CDARS program, which allows customers to maintain balances in an insured manner that would otherwise exceed the FDIC deposit insurance limit. Brokered deposits, including CDARS program purchased funds, were $400.8 million at March 31, 2019, an increase of $73.9 million from $326.9 million at December 31, 2018.

Our deposit balances may fluctuate depending on customer preferences and our relative need for funding. We do not consider our retail certificates of deposit to be guaranteed long-term funding because customers can withdraw their funds at any time with minimal interest penalty. When loan demand trends upward, we can increase rates paid on deposits to increase deposit balances and utilize brokered deposits to provide additional funding. The level of competition for deposits in our markets is high. It is our goal to gain deposit market share, particularly checking accounts, in our branch footprint. To accomplish this goal, increasing rates to attract deposits may be necessary, which could negatively impact the Company’s net interest margin.

Our ability to fund growth in future periods may also depend on our ability to continue to access brokered deposits and FHLBank advances. In times when our loan demand has outpaced our generation of new deposits, we have utilized brokered deposits and FHLBank advances to fund these loans. These funding sources have been attractive to us because we can create either fixed or variable rate funding, as desired, which more closely matches the interest rate nature of much of our loan portfolio. While we do not currently anticipate that our ability to access these sources will be reduced or eliminated in future periods, if this should happen, the limitation on our ability to fund additional loans could have a material adverse effect on our business, financial condition and results of operations.

Federal Home Loan Bank Advances and Short Term Borrowings. The Company’s Federal Home Loan Bank advances totaled $-0- at both March 31, 2019 and December 31, 2018. At March 31, 2019, there were no borrowings or overnight advances from the FHLBank. At December 31, 2018, there were no borrowings from the FHLBank, other than overnight advances, which are included in the short term borrowings category.

Short term borrowings and other interest-bearing liabilities decreased $170.5 million from $192.7 million at December 31, 2018 to $22.2 million at March 31, 2019. The short term borrowings included overnight FHLBank borrowings of $178.0 million at December 31, 2018. The Company utilizes both overnight borrowings and short-term FHLBank advances depending on relative interest rates.

Net Interest Income and Interest Rate Risk Management. Our net interest income may be affected positively or negatively by changes in market interest rates. A large portion of our loan portfolio is tied to one-month LIBOR, three-month LIBOR or the "prime rate" and adjusts immediately or shortly after the index rate adjusts (subject to the effect of contractual interest rate floors on some of the loans). We monitor our sensitivity to interest rate changes on an ongoing basis (see "Item 3. Quantitative and Qualitative Disclosures About Market Risk"). In addition, our net interest income may be impacted by changes in the cash flows expected to be received from acquired loan pools. As described in Note 7 of the Notes to the Consolidated Financial Statements contained in this report, the Company’s evaluation of cash flows expected to be received from acquired loan pools is on-going and increases in cash flow expectations are recognized as increases in accretable yield through interest income. Decreases in cash flow expectations are recognized as impairments through the allowance for loan losses.

The current level and shape of the interest rate yield curve poses challenges for interest rate risk management. Prior to its increase of 0.25% on December 16, 2015, the FRB had last changed interest rates on December 16, 2008. This was the first rate increase since September 29, 2006. The FRB has now also implemented rate increases of 0.25% on eight different occasions beginning December 14, 2016, with the Federal Funds rate now at 2.50%. A substantial portion of Great Southern’s loan portfolio ($1.54 billion at March 31, 2019) is tied to the one-month or three-month LIBOR index and will be subject to adjustment at least once within 90 days after March 31, 2019. Of these loans, $1.46 billion had interest rate floors. Great Southern also has a significant portfolio of loans ($242 million at March 31, 2019) tied to a "prime rate" of interest and will adjust immediately with changes to the “prime rate” of interest. But for the interest rate floors, a rate cut by the FRB generally would have an anticipated immediate negative impact on the Company’s net interest income due to the large total balance of loans which generally adjust immediately as the Federal Funds rate adjusts. Loans at their floor rates are, however, subject to the risk that borrowers will seek to refinance elsewhere at the lower market rate. Because the Federal Funds rate is still generally low, there may also be a negative impact on the Company's net interest income due to the Company's inability to significantly lower its funding costs in the current competitive rate environment, although interest rates on assets may decline further. Conversely, interest rate increases would normally result in increased interest rates on our LIBOR-based and prime-based loans. As of March 31, 2019, Great Southern's interest rate risk models indicate that, generally, rising interest rates are expected to have a positive impact on the Company's net interest income, while declining interest rates are expected to have a negative impact on net interest income. We model various interest rate scenarios for rising and falling rates, including both parallel and non-parallel shifts in rates. The results of our modeling indicate that net interest income is not likely to be materially affected either positively or negatively in the first twelve months following a rate change, regardless of any changes in interest rates, because our portfolios are relatively well matched in a twelve-month horizon. The effects of interest rate changes, if any, on net interest income are expected to be greater in the 12 to 36 months following a rate change. For further discussion of the processes used to manage our exposure to interest rate risk, see “Item 3. Quantitative and Qualitative Disclosures About Market Risk – How We Measure the Risks to Us Associated with Interest Rate Changes.”

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

Operating expenses consist primarily of salaries and employee benefits, occupancy-related expenses, expenses related to foreclosed assets, postage, FDIC deposit insurance, advertising and public relations, telephone, professional fees, office expenses and other general operating expenses. Details of the current period changes in non-interest income and non-interest expense are provided in the “Results of Operations and Comparison for the Three Months Ended March 31, 2019 and 20187” section of this report.

Effect of Federal Laws and Regulations

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

Dodd-Frank Act. On July 21, 2010, sweeping financial regulatory reform legislation entitled the “Dodd-Frank Wall Street Reform and Consumer Protection Act” (the “Dodd-Frank Act”) was signed into law. The Dodd-Frank Act implements far-reaching changes across the financial regulatory landscape, including provisions that, among other things, centralize responsibility for consumer financial protection by creating a new agency, the Consumer Financial Protection Bureau, with broad rulemaking authority for a wide range of consumer protection laws that apply to all banks, require new capital rules (discussed below), change the assessment base for federal deposit insurance, repeal the federal prohibitions on the payment of interest on demand deposits, amend the account balance limit for federal deposit insurance protection, and increase the authority of the FRB to examine the Company and its non-bank subsidiaries.

Certain aspects of the Dodd-Frank Act remain subject to rulemaking and take effect over a number of years. Provisions in the legislation that affect deposit insurance assessments and payment of interest on demand deposits could increase the costs associated with deposits. Provisions in the legislation that require revisions to the capital requirements of the Company and the Bank could require the Company and the Bank to seek additional sources of capital in the future.

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

Certain aspects of the Dodd-Frank Act have been affected by the EGRRCP Act, as defined and discussed below under “-EGRRCP 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 new rules was January 1, 2015, and, for certain provisions, various phase-in periods and later effective dates apply. The chief features of the new rules are summarized below.

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

Effective January 1, 2015, these rules also revised the prompt corrective action framework, which is designed to place restrictions on insured depository institutions if their capital levels show signs of weakness. Under the 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.

EGRRCP Act. In May 2018 the Economic Growth, Regulatory Relief and Consumer Protection Act (the “EGRRCCP Act”), was enacted to modify or remove certain financial reform rules and regulations, including some of those implemented under the Dodd-Frank Act. While the EGRRCP Act maintains most of the regulatory structure established by the Dodd-Frank Act, it amends certain aspects of the regulatory framework for depository institutions with assets of less than $10 billion and for banks with assets of more than $50 billion. Many of these changes could result in meaningful regulatory relief for community banks such as Great Southern.

The EGRRCP Act, among other matters, expands the definition of qualified mortgages that 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” of between 8 and 10 percent. Any qualifying depository institution or its holding company that exceeds the “community bank leverage ratio” 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 to be “well capitalized” under the prompt corrective action rules. In addition, the EGRRCP Act includes regulatory relief for community banks regarding regulatory examination cycles, call reports, the Volcker Rule (proprietary trading prohibitions), mortgage disclosures and risk weights for certain high-risk commercial real estate loans.

It is difficult at this time to predict when or how any new standards under the EGRRCP Act will ultimately be applied to the Company and the Bank or what specific impact the EGRRCP Act and the yet-to-be-written implementing rules and regulations will have on community banks.

Business Initiatives

During the first quarter of 2019, the Company upgraded its online account opening platform to provide a faster and easier customer experience. The online platform, available on GreatSouthernBank.com, allows customers within and beyond the Company’s geographic footprint to conveniently open certain depository accounts.

As part of the Company’s ongoing performance evaluation, the Company determined that it would cease operating its indirect automobile financing unit, effective March 31, 2019. 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. Indirect loan balances have significantly declined in the last two years since tightened underwriting guidelines were implemented in the latter part of 2016, in response to more challenging consumer credit conditions. The Company will continue servicing indirect automobile loans made before March 31, 2019, until each loan agreement is satisfied. The portfolio of indirect loans totaled approximately $180 million at March 31, 2019. The Company continues to offer direct consumer loans as normal through its extensive banking center network.

The Company’s retail banking center network continues to evolve. In April 2019, the Company consolidated its Fayetteville, Ark., location into its Rogers, Ark., banking center, approximately 20 miles away. The Fayetteville office opened in 2014 and did not meet performance expectations. The Company now operates one banking center in Arkansas.

Comparison of Financial Condition at March 31, 2019 and December 31, 2018

During the three months ended March 31, 2019, the Company’s total assets increased by $102.0 million to $4.78 billion. The increase was primarily attributable to an increase in loans receivable and available-for-sale investment securities.

Cash and cash equivalents were $206.1 million at March 31, 2019, an increase of $3.4 million, or 1.7%, from $202.7 million at December 31, 2018.

The Company's available-for-sale securities increased $33.8 million, or 13.8%, compared to December 31, 2018. The increase was primarily due to the purchase of FNMA and GNMA fixed-rate multi-family mortgage-backed securities, partially offset by calls of municipal securities and normal monthly payments received related to the portfolio of mortgage-backed securities. The available-for-sale securities portfolio was 5.8% and 5.2% of total assets at March 31, 2019 and December 31, 2018, respectively.

Net loans increased $61.3 million from December 31, 2018, to $4.05 billion at March 31, 2019. Excluding FDIC-assisted acquired loans and mortgage loans held for sale, total gross loans (including the undisbursed portion of loans) decreased $11.4 million, or 0.2%, from December 31, 2018 to March 31, 2019. Increases in outstanding loan totals primarily occurred in commercial construction loans, commercial real estate loans, other residential (multi-family) loans and one- to four-family residential mortgage loans. Partially offsetting the increases in these loans were reductions of $24 million in consumer auto loans and $7 million in the FDIC-acquired loan portfolios.

Other real estate owned and repossessions were $8.8 million at March 31, 2019, an increase of $332,000, or 3.9%, from $8.4 million at December 31, 2018. Activity in other real estate owned and repossessions during the period is discussed in more detail in the Non-performing Assets section below.

Premises and equipment totaled $141.8 million at March 31, 2019, an increase of $9.4 million, or 7.0%, from $132.4 million at December 31, 2018. This increase is primarily related to the recording of a right-of-use asset for leased premises and assets under the new lease accounting standard adopted January 1, 2019. The right-of-use asset totaled $9.3 million at March 31, 2019.

Total liabilities increased $90.4 million, from $4.14 billion at December 31, 2018 to $4.23 billion at March 31, 2019. The increase was primarily attributable to an increase in deposits and securities sold under reverse repurchase agreements with customers, partially offset by a decrease in short-term borrowings.

Total deposits increased $231.1 million, or 6.2%, to $3.96 billion at March 31, 2019. Transaction account balances increased $67.6 million to $2.20 billion at March 31, 2019, while retail certificates of deposit increased $89.6 million compared to December 31, 2018, to $1.35 billion at March 31, 2019. The increase in transaction accounts was primarily a result of increases in money market and NOW deposit accounts. Retail certificates of deposit increased due to an increase in certificates opened through the Company’s internet deposit acquisition channels. In addition, at March 31, 2019 and December 31, 2018, customer deposits totaling $27.9 million and $27.9 million, respectively, were part of the CDARS program, which allows customers to maintain balances in an insured manner that would otherwise exceed the FDIC deposit insurance limit. Brokered deposits, including CDARS program purchased funds, were $400.8 million at March 31, 2019, an increase of $73.9 million from $326.9 million at December 31, 2018.

The Company’s FHLBank advances totaled $-0- at both March 31, 2019 and December 31, 2018. At March 31, 2019, there were no borrowings or overnight advances from the FHLBank. At December 31, 2018, there were no borrowings from the FHLBank, other than overnight advances, which are included in the short term borrowings category.

Short term borrowings and other interest-bearing liabilities decreased $170.5 million from $192.7 million at December 31, 2018 to $22.2 million at March 31, 2019. Short term borrowings at December 31, 2018, included overnight FHLBank borrowings of $178.0 million. The Company utilizes both overnight borrowings and short-term FHLBank advances depending on relative interest rates.

Securities sold under reverse repurchase agreements with customers increased $13.3 million from $105.3 million at December 31, 2018 to $118.6 million at March 31, 2019. These balances fluctuate over time based on customer demand for this product.

Total stockholders' equity increased $11.6 million from $532.0 million at December 31, 2018 to $543.6 million at March 31, 2019. The Company recorded net income of $17.6 million for the three months ended March 31, 2019, and dividends declared on common stock were $15.1 million. Accumulated other comprehensive income increased $8.8 million due to increases in the fair value of available-for-sale investment securities and the fair value of cash flow hedges. In addition, total stockholders’ equity increased $1.3 million due to stock option exercises. These increases were partially offset by repurchases of the Company’s common stock totaling $849,000.

Results of Operations and Comparison for the Three Months Ended March 31, 2019 and 2018

General

Net income was $17.6 million for the three months ended March 31, 2019 compared to $13.5 million for the three months ended March 31, 2018. This increase of $4.1 million, or 30.8%, was primarily due to an increase in net interest income of $5.2 million, or 13.1%, and an increase in non-interest income of $515,000, or 7.4%, partially offset by an increase in income tax expense of $1.4 million, or 51.2%, and an increase in non-interest expense of $183,000, or 0.6%.

Total Interest Income

Total interest income increased $10.5 million, or 22.3%, during the three months ended March 31, 2019 compared to the three months ended March 31, 2018. The increase was due to a $9.4 million increase in interest income on loans and a $1.1 million increase in interest income on investments and other interest-earning assets. Interest income on loans increased for the three months ended March 31, 2019 compared to the same period in 2018, due to higher average rates of interest on loans and higher average balances. Interest income from investment securities and other interest-earning assets increased during the three months ended March 31, 2019 compared to the same period in 2018 due to higher average rates of interest and higher average balances of investment securities.

Interest Income – Loans

During the three months ended March 31, 2019 compared to the three months ended March 31, 2018, interest income on loans increased $5.7 million as a result of higher average interest rates on loans. The average yield on loans increased from 4.84% during the three months ended March 31, 2018, to 5.42% during the three months ended March 31, 2019. This increase was primarily due to increased yields in most loan categories as a result of increased LIBOR and Federal Funds interest rates. Interest income on loans increased $3.7 million as the result of higher average loan balances, which increased from $3.78 billion during the three months ended March 31, 2018, to $4.08 billion during the three months ended March 31, 2019. The higher average balances were primarily due to organic loan growth in commercial construction loans, commercial real estate loans and other residential (multi-family) loans, partially offset by decreases in consumer loans.

On an on-going basis, the Company estimates the cash flows expected to be collected from the acquired loan pools. For each of the loan portfolios acquired, the cash flow estimates have increased, based on the payment histories and the collection of certain loans, thereby reducing loss expectations of certain loan pools, resulting in adjustments to be spread on a level-yield basis over the remaining expected lives of the loan pools. For the three months ended March 31, 2019 and 2018, the adjustments increased interest income by $1.5 million and $1.2 million, respectively.

As of March 31, 2019, the remaining accretable yield adjustment that will affect interest income is $2.8 million. Of the remaining adjustments affecting interest income, we expect to recognize $1.7 million of interest income during the remainder of 2019. Additional adjustments may be recorded in future periods from the FDIC-assisted transactions, as the Company continues to estimate expected cash flows from the acquired loan pools. Apart from the yield accretion, the average yield on loans was 5.27% during the three months ended March 31, 2019, compared to 4.72% during the three months ended March 31, 2018, as a result of higher current market rates on adjustable rate loans and new loans originated during the year.

In October 2018, the Company entered into an interest rate swap transaction as part of its ongoing interest rate management strategies to hedge the risk of its floating rate loans. The notional amount of the swap is $400 million with a termination date in October 2025. Under the terms of the swap, the Company receives a fixed rate of interest of 3.018% and pays a floating rate of interest equal to one-month USD-LIBOR. The floating rate resets monthly and net settlements of interest due to/from the counterparty also occur monthly. To the extent that the fixed rate continues to exceed one-month USD-LIBOR, the Company will receive net interest settlements, which will be recorded as loan interest income. If one-month USD-LIBOR exceeds the fixed rate of interest in future periods, the Company will be required to pay net settlements to the counterparty and will record those net payments as a reduction of interest income on loans. The Company recorded loan interest income related to this swap transaction of $513,000 in the three months ended March 31, 2019.

Interest Income – Investments and Other Interest-earning Assets

Interest income on investments increased in the three months ended March 31, 2019 compared to the three months ended March 31, 2018. Interest income increased $716,000 as a result of an increase in average balances from $187.0 million during the three months ended March 31, 2019, to $278.5 million during the three months ended March 31, 2019. Average balances of securities increased primarily due to purchases of agency multi-family mortgage-backed securities which have a fixed rate of interest with expected lives of six to ten years. These purchased securities fit with the Company’s current asset/liability management strategies. Interest income increased $226,000 due to an increase in average interest rates from 2.84% during the three months ended March 31, 2018, to 3.28% during the three months ended March 31, 2019, primarily due to higher market rates of interest on investment securities and a decrease in the volume of prepayments on mortgage-backed securities.

Interest income on other interest-earning assets increased in the three months ended March 31, 2019 compared to the three months ended March 31, 2018. Interest income increased $161,000 due to an increase in average interest rates from 1.67% during the three months ended March 31, 2018, to 2.37% during the three months ended March 31, 2019, primarily due to higher market rates of interest on other interest-bearing deposits in financial institutions. Partially offsetting that increase, interest income decreased $18,000 as a result of a decrease in average balances from $99.1 million during the three months ended March 31, 2019, to $94.4 million during the three months ended March 31, 2018.

Total Interest Expense

Total interest expense increased $5.3 million, or 71.3%, during the three months ended March 31, 2019, when compared with the three months ended March 31, 2018, due to an increase in interest expense on deposits of $4.9 million, or 87.5%, an increase in interest expense on short-term borrowing and repurchase agreements of $894,000, or 3,192.9%, an increase in interest expense on subordinated debentures issued to capital trust of $65,000, or 32.2%, and an increase in interest expense on subordinated notes of $69,000, or 6.7%, partially offset by a decrease in interest expense on FHLBank advances of $605,000, or 100.0%.

Interest Expense – Deposits

Interest expense on demand deposits increased $525,000 due to average rates of interest that increased from 0.34% in the three months ended March 31, 2018 to 0.49% in the three months ended March 31, 2019. Partially offsetting that increase, interest expense on demand deposits decreased $72,000, due to a decrease in average balances from $1.56 billion during the three months ended March 31, 2018 to $1.47 billion during the three months ended March 31, 2019.

Interest expense on time deposits increased $3.1 million as a result of an increase in average rates of interest from 1.30% during the three months ended March 31, 2018, to 2.11% during the three months ended March 31, 2019. Interest expense on time deposits increased $1.3 million due to an increase in average balances of time deposits from $1.33 billion during the three months ended March 31, 2018, to $1.67 billion during the three months ended March 31, 2019. A large portion of the Company’s certificate of deposit portfolio matures within six to eighteen months and therefore reprices fairly quickly; this is consistent with the portfolio over the past several years. 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 market interest rate increases during 2018 and 2019. The increase in average balances of time deposits was a result of increases in both retail customer time deposits and in brokered deposits added through the CDARS program purchased funds.

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

During the three months ended March 31, 2019 compared to the three months ended March 31, 2018, interest expense on FHLBank advances decreased $605,000 due to a decrease in average balances from $145.5 million during the three months ended March 31, 2018 to $-0- during the three months ended March 31, 2019. This decrease was primarily due to an overall decrease in term borrowings from the FHLBank. Instead, the Company utilized overnight borrowings from the FHLBank, primarily due to slightly lower rates compared to term borrowings. These overnight FHLBank borrowings are included in short-term borrowings and repurchase agreements.

Interest expense on short-term borrowings and repurchase agreements increased $787,000 due to an increase in average rates from 0.11% in the three months ended March 31, 2018 to 1.45% in the three months ended March 31, 2019. The increase was due to an increase in market interest rates during the period and the higher interest rate charged on overnight FHLBank borrowings as compared to customer repurchase agreements. Interest expense on short-term borrowings and repurchase agreements increased $107,000 due to an increase in average balances from $99.5 million during the three months ended March 31, 2018 to $258.2 million during the three months ended March 31, 2019, which was primarily due to changes in the Company’s funding needs and the mix of funding, which can fluctuate. In the three months ended March 31, 2019, more overnight FHLBank borrowings were utilized.

During the three months ended March 31, 2019, compared to the three months ended March 31, 2018, interest expense on subordinated debentures issued to capital trusts increased $65,000 due to higher average interest rates. The average interest rate was 3.18% in the three months ended March 31, 2018 compared to 4.20% in the three months ended March 31, 2019. The subordinated debentures are variable-rate debentures which bear interest at an average rate of three-month LIBOR plus 1.60%, adjusting quarterly, which was 4.34% at March 31, 2019. There was no change in the average balance of the subordinated debentures between the 2019 and the 2018 periods.

In August 2016, the Company issued $75 million of 5.25% fixed-to-floating rate subordinated notes due August 15, 2026. The notes were sold at par, resulting in net proceeds, after underwriting discounts and commissions and other issuance costs, of approximately $73.5 million. Interest expense on the subordinated notes for the three months ended March 31, 2019 increased $66,000 due to deferred issuance cost amortization.

Net Interest Income

Net interest income for the three months ended March 31, 2019 increased $5.2 million to $44.6 million compared to $39.4 million for the three months ended March 31, 2018. Net interest margin was 4.06% in the three months ended March 31, 2019, compared to 3.93% in the three months ended March 31, 2018, an increase of 13 basis points, or 3.3%. In both three month periods, the Company’s net interest income and margin were positively impacted by the increases in expected cash flows from the FDIC-acquired loan pools and the resulting increase to accretable yield, which were previously discussed in Note 7 of the Notes to Consolidated Financial Statements. The positive impact of these changes in the three months ended March 31, 2019 and 2018 were increases in interest income of $1.5 million and $1.2 million, respectively, and increases in net interest margin of 13 basis points and 12 basis points, respectively. Excluding the positive impact of the additional yield accretion, net interest margin increased 12 basis points when compared to the year-ago three month period. The increase was primarily due to increased yields in most loan categories and higher overall yields on investments and interest-earning deposits at the Federal Reserve Bank, partially offset by an increase in the average interest rate on deposits and borrowings.

The Company's overall average interest rate spread increased one basis point, or 0.3%, from 3.74% during the three months ended March 31, 2018 to 3.75% during the three months ended March 31, 2019. The increase was due to a 55 basis point increase in the weighted average yield on interest-earning assets, partially offset by a 54 basis point increase in the weighted average rate paid on interest-bearing liabilities. In comparing the two periods, the yield on loans increased 58 basis points, the yield on investment securities increased 44 basis points and the yield on other interest-earning assets increased 70 basis points. The rate paid on deposits increased 57 basis points, the rate paid on short-term borrowings and repurchase agreements increased 134 basis points, the rate paid on subordinated debentures issued to capital trusts increased 102 basis points, the rate paid on subordinated notes increased 36 basis points and the rate paid on FHLBank advances decreased 169 basis points.

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

Provision for Loan Losses and Allowance for Loan Losses

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

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

The provision for loan losses for the three months ended March 31, 2019, was unchanged at $2.0 million compared with $2.0 million for the three months ended March 31, 2018. At March 31, 2019 and December 31, 2018, the allowance for loan losses was $38.7 million and $38.4 million, respectively. Total net charge-offs were $1.7 million and $2.1 million for the three months ended March 31, 2019 and 2018, respectively. During the three months ended March 31, 2019, $934,000 of the $1.7 million of net charge-offs were in the consumer auto category. In addition, one commercial loan relationship amounted to $371,000 of the total charge-offs during the 2019 first three months. In response to a more challenging consumer credit environment, the Company tightened its underwriting guidelines on automobile lending in the latter part of 2016. Management took this step in an effort to improve credit quality in the portfolio and lower delinquencies and charge-offs. This action also resulted in a lower level of origination volume and, as such, the outstanding balance of the Company's automobile loans continued to decline in the three months ended March 31, 2019. We expect to see more rapid reductions in the automobile loan outstanding balance as we determined in February 2019 to cease providing indirect lending services to automobile dealerships. At March 31, 2019, indirect automobile loans totaled approximately $184 million. We expect this total balance will be largely paid off in the next two to four years. General market conditions and unique circumstances related to individual borrowers and projects contributed to the level of provisions and charge-offs. As assets were categorized as potential problem loans, non-performing loans or foreclosed assets, evaluations were made of the values of these assets with corresponding charge-offs as appropriate.

All acquired loans were grouped into pools based on common characteristics and were recorded at their estimated fair values, which incorporated estimated credit losses at the acquisition date. These loan pools are systematically reviewed by Management to determine the risk of losses that may exceed those identified at the time of the acquisition. Techniques used in determining risk of loss are similar to those used to determine the risk of loss for the legacy Great Southern Bank portfolio, with most focus being placed on those loan pools which include the larger loan relationships and those loan pools which exhibit higher risk characteristics. Review of the acquired loan portfolio also includes monitoring of payment performance, review of financial information and credit scores, collateral valuations and customer interaction to determine if any additional reserves are warranted.

The Bank’s allowance for loan losses as a percentage of total loans, excluding FDIC-acquired loans, was 0.97% and 0.98% at March 31, 2019 and December 31, 2018, respectively. Management considers the allowance for loan losses adequate to cover losses inherent in the Bank’s loan portfolio at March 31, 2019, based on recent reviews of the Bank’s loan portfolio and current economic conditions. If economic conditions were to deteriorate or management’s assessment of the loan portfolio were to change, it is possible that additional loan loss provisions would be required, thereby adversely affecting future results of operations and financial condition.

Non-performing Assets

Non-performing assets acquired through FDIC-assisted transactions, including foreclosed assets and potential problem loans, are not included in the totals or in the discussion of non-performing loans, potential problem loans and foreclosed assets below. These assets were initially recorded at their estimated fair values as of their acquisition dates and are accounted for in pools; therefore, these loan pools are analyzed rather than the individual loans. The overall performance of the loan pools acquired in each of the five FDIC-assisted transactions has been better than original expectations as of the acquisition dates.

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

Non-performing assets, excluding all FDIC-assisted acquired assets, at March 31, 2019 were $10.3 million, a decrease of $1.5 million from $11.8 million at December 31, 2018. Non-performing assets, excluding all FDIC-assisted acquired assets, as a percentage of total assets were 0.22% at March 31, 2019, compared to 0.25% at December 31, 2018.

Compared to December 31, 2018, non-performing loans decreased $1.7 million to $4.6 million at March 31, 2019, and foreclosed assets increased $214,000 to $5.7 million at March 31, 2019. Non-performing commercial business loans comprised $1.4 million, or 30.3%, of the total $4.6 million of non-performing loans at March 31, 2019, a decrease of $32,000 from December 31, 2018. Non-performing consumer loans comprised $1.3 million, or 27.0%, of the total non-performing loans at March 31, 2019, a decrease of $562,000 from December 31, 2018. Non-performing one- to four-family residential loans comprised $1.1 million, or 24.0%, of the total non-performing loans at March 31, 2019, a decrease of $1.6 million from December 31, 2018. The decrease in this category was primarily due to the transfer to foreclosed assets and related charge-downs of one relationship consisting of multiple properties previously in this category of non-performing loans. Non-performing commercial real estate loans comprised $847,000, or 18.2%, of the total non-performing loans at March 31, 2019, an increase of $513,000 from December 31, 2018. Non-performing construction and land development loans comprised $18,000, or 0.4%, of the total non-performing loans at March 31, 2019, a decrease of $31,000 from December 31, 2018.

Non-performing Loans. Activity in the non-performing loans category during the three months ended March 31, 2019 was as follows:

	Beginning Balance, January 1		Additions to Non- Performing		Removed from Non- Performing		Transfers to Potential Problem Loans			Transfers to Foreclosed Assets and Repossessions			Charge- Offs			Payments			Ending Balance, March 31
	(In Thousands)
One- to four-family construction	$	—	$	—	$	—	$	—		$	—		$	—		$	—		$	—
Subdivision construction		—		—		—		—			—			—			—			—
Land development		49		—		—		—			—			(31	)		—			18
Commercial construction		—		—		—		—			—			—			—			—
One- to four-family residential		2,664		334		—		—			(1,250	)		(454	)		(181	)		1,113
Other residential		—		—		—		—			—			—			—			—
Commercial real estate		334		621		—		—			—			—			(108	)		847
Commercial business		1,437		50		—		—			—			(24	)		(58	)		1,405
Consumer		1,816		604		—		(84	)		(117	)		(705	)		(260	)		1,254

Total	$	6,300	$	1,609	$	—	$	(84	)	$	(1,367	)	$	(1,214	)	$	(607	)	$	4,637

At March 31, 2019, the non-performing commercial business category included six loans, one of which was added during the current quarter. The largest relationship in this category, which was added during 2018, totaled $1.1 million, or 78.7% of the total category. This relationship is collateralized by an assignment of an interest in a real estate project. The non-performing one- to four-family residential category included 17 loans, three of which were added during the current quarter. One relationship in this category, which included nine loans which were collateralized by residential rental homes in the Springfield, Mo. area, was charged down $371,000 during the current quarter and the remaining balance of $793,000 was transferred to foreclosed assets. The non-performing consumer category included 129 loans, 39 of which were added during the current quarter, and the majority of which are indirect used automobile loans.

Potential Problem Loans. Compared to December 31, 2018, potential problem loans increased $1.8 million, or 54.7%, to $5.1 million. This increase was due to the addition of $2.0 million of loans to potential problem loans, partially offset by $154,000 in payments and $69,000 in loans transferred to non-performing loans. Potential problem loans are loans which management has identified through routine internal review procedures as having possible credit problems that may cause the borrowers difficulty in complying with the current repayment terms. These loans are not reflected in non-performing assets, but are considered in determining the adequacy of the allowance for loan losses.

Activity in the potential problem loans category during the three months ended March 31, 2019, was as follows:

	Beginning Balance, January 1		Additions to Potential Problem		Removed from Potential Problem		Transfers to Non- Performing			Transfers to Foreclosed Assets and Repossessions		Charge- Offs		Payments			Ending Balance, March 31
	(In Thousands)
One- to four-family construction	$	—	$	—	$	—	$	—		$	—	$	—	$	—		$	—
Subdivision construction		—		—		—		—			—		—		—			—
Land development		—		—		—		—			—		—		—			—
Commercial construction		—		—		—		—			—		—		—			—
One- to four-family residential		1,044		—		—		(67	)		—		—		(128	)		849
Other residential		—		—		—		—			—		—		—			—
Commercial real estate		2,053		1,931		—		—			—		—		(12	)		3,972
Commercial business		—		—		—		—			—		—		—			—
Consumer		206		98		—		(2	)		—		—		(14	)		288

Total	$	3,303	$	2,029	$	—	$	(69	)	$	—	$	—	$	(154	)	$	5,109

At March 31, 2019, the commercial real estate category of potential problem loans included three loans, one of which was added during the current quarter. The largest relationship in the category (added during the current quarter), which totaled $1.9 million, or 48.6% of the total category, is collateralized by a commercial retail building. Payments became past due during the three months ended March 31, 2019, but were current in April 2019. The second largest relationship in this category, which totaled $1.9 million, or 48.3% of the total category, is collateralized by a mixed use commercial retail building. The one- to four-family residential category of potential problem loans included 16 loans, all of which were added in prior periods. The consumer category of potential problem loans included 29 loans, 12 of which were added during the current quarter.

Other Real Estate Owned and Repossessions. Of the total $8.8 million of other real estate owned and repossessions at March 31, 2019, $1.6 million represents the fair value of foreclosed and repossessed assets related to loans acquired in FDIC-assisted transactions and $1.5 million represents properties which were not acquired through foreclosure. The foreclosed and other assets acquired in the FDIC-assisted transactions and the properties not acquired through foreclosure are not included in the following table and discussion of other real estate owned and repossessions.

Activity in other real estate owned and repossessions during the three months ended March 31, 2019, was as follows:

	Beginning Balance, January 1		Additions		Sales			Capitalized Costs		Write- Downs			Ending Balance, March 31
	(In Thousands)
One- to four-family construction	$	—	$	—	$	—		$	—	$	—		$	—
Subdivision construction		1,092		—		(68	)		—		(53	)		971
Land development		3,191		—		—			—		(150	)		3,041
Commercial construction		—		—		—			—		—			—
One- to four-family residential		269		1,286		(570	)		—		—			985
Other residential		—		—		—			—		—			—
Commercial real estate		—		—		—			—		—			—
Commercial business		—		—		—			—		—			—
Consumer		928		1,181		(1,412	)		—		—			697

Total	$	5,480	$	2,467	$	(2,050	)	$	—	$	(203	)	$	5,694

At March 31, 2019, the land development category of foreclosed assets included seven properties, the largest of which was located in the Branson, Mo. area and had a balance of $913,000, or 30.0% of the total category. Of the total dollar amount in the land development category of foreclosed assets, 65.1% was located in the Branson, Mo. area, including the largest property previously mentioned. The subdivision construction category of foreclosed assets included six properties, the largest of which was located in the Branson, Mo. area and had a balance of $350,000, or 36.0% of the total category. Of the total dollar amount in the subdivision construction category of foreclosed assets, 65.1% is located in Branson, Mo., including the largest property previously mentioned. The one- to four-family category of foreclosed assets included 14 properties. Thirteen properties were added in the three months ended March 31, 2019, with 10 of those being related to each other and remaining at March 31, 2019. The largest relationship in this category, this newly added relationship, consisted of 10 properties in the Springfield, Mo., area and had a balance of $675,000, or 65.8% of the total category. The amount of additions and sales under consumer loans are due to a higher volume of repossessions of automobiles, which generally are subject to a shorter repossession process. The Company experienced increased levels of delinquencies and repossessions in indirect and used automobile loans throughout 2016 and 2017. The level of delinquencies and repossessions in indirect and used automobile loans decreased in 2018 and to date in 2019.

Non-interest Income

For the three months ended March 31, 2019, non-interest income increased $515,000 to $7.5 million when compared to the three months ended March 31, 2018, primarily as a result of the following items:

Other income: Other income increased $1.0 million compared to the prior year period. This increase was primarily due to gains totaling $677,000 from the sale of, or recovery of, receivables and assets that were acquired several years ago in FDIC-assisted transactions. In addition, the Company recognized approximately $293,000 more in income from new debit card contracts than was recognized in the prior year period.

Service charges and ATM fees: Service charges and ATM fees decreased $286,000 compared to the prior year period. This decrease was primarily due to a decrease in overdraft and insufficient funds fees on customer accounts.

Net gains on loan sales: Net gains on loan sales decreased $214,000 compared to the prior year period. The decrease was due to a decrease in originations of fixed-rate loans during the 2019 period compared to the 2018 period. Fixed rate single-family mortgage loans originated are generally subsequently sold in the secondary market. In 2019, the Company has originated more hybrid ARM single-family mortgage loans, which have been retained in the Company’s portfolio.

Non-interest Expense

For the three months ended March 31, 2019, non-interest expense increased $183,000 to $28.5 million when compared to the three months ended March 31, 2018, primarily as a result of the following items:

Salaries and employee benefits: Salaries and employee benefits increased $1.0 million from the prior year period. The increase was due to staffing additions in the new loan production offices opened in Atlanta and Denver in late 2018, and due to annual employee compensation increases.

Expense on other real estate and repossessions: Expense on other real estate and repossessions decreased $521,000 compared to the prior year period primarily due to higher valuation write-downs of certain foreclosed assets during the prior year period and higher levels of expense related to consumer repossessions in the prior year period. During the 2018 period, valuation write-downs of certain foreclosed assets totaled approximately $617,000, while valuation write-downs in the 2019 period totaled approximately $247,000.

Partnership tax credit investment amortization: Partnership tax credit expense decreased $211,000 in the three months ended March 31, 2019 compared to the prior year period. The Company periodically invests in certain tax credits and amortizes those investments over the period that the tax credits are used. The tax credit period for certain of these credits ended in 2018; therefore, the final amortization of the investment in those credits also ended in 2018.

The Company’s efficiency ratio for the three months ended March 31, 2019, was 54.74% compared to 61.05% for the same period in 2018. The improvement in the ratio in the 2019 three month period was primarily due to an increase in net interest income. The Company’s ratio of non-interest expense to average assets decreased from 2.59% for the three months ended March 31, 2018, to 2.41% for the three months ended March 31, 2019. The decrease in the current three month period ratio was due to an increase in average assets in the 2019 period compared to the 2018 period. Average assets for the three months ended March 31, 2019, increased $354.1 million, or 8.1%, from the three months ended March 31, 2018, primarily due to increases in loans receivable and investment securities.

Provision for Income Taxes

On December 22, 2017, H.R.1, originally known as the Tax Cuts and Jobs Act (the “TJC Act”), was signed into law. Among other things, the TJC Act permanently lowered the corporate federal income tax rate to 21% from the prior maximum rate of 35%, effective for tax years including or commencing January 1, 2018. The Company currently expects its effective tax rate (combined federal and state) to be approximately 17.5% to 19.0% in future years, mainly as a result of the TJC Act.

For the three months ended March 31, 2019 and 2018, the Company's effective tax rate was 18.5% and 16.4%, respectively. These effective rates were lower than the statutory federal tax rates of 21%, due primarily to the utilization of certain investment tax credits and to tax-exempt investments and tax-exempt loans which reduced the Company’s effective tax rate. The Company’s effective tax rate may fluctuate in future periods as it is impacted by the level and timing of the Company’s utilization of tax credits and the level of tax-exempt investments and loans and the overall level of pre-tax income. The Company's effective income tax rate is currently expected to continue to be less than the statutory rate due primarily to the factors noted above.

Average Balances, Interest Rates and Yields

The following table presents, for the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. Average balances of loans receivable include the average balances of non-accrual loans for each period. Interest income on loans includes interest received on non-accrual loans on a cash basis. Interest income on loans includes the amortization of net loan fees which were deferred in accordance with accounting standards. Net fees included in interest income were $1.0 million and $813,000 for the three months ended March 31, 2019 and 2018, respectively. Tax-exempt income was not calculated on a tax equivalent basis. The table does not reflect any effect of income taxes.

	March 31, 2019⁽²⁾			Three Months Ended March 31, 2019								Three Months Ended March 31, 2018
	Yield/ Rate			Average Balance			Interest		Yield/ Rate			Average Balance			Interest		Yield/ Rate
	(Dollars in Thousands)
Interest-earning assets:
Loans receivable:
One- to four-family residential		4.26	%	$	497,129		$	6,388		5.21	%	$	431,121		$	5,183		4.88	%
Other residential		5.15			811,084			10,990		5.50			738,722			8,839		4.85
Commercial real estate		4.97			1,387,423			17,696		5.17			1,245,462			14,358		4.68
Construction		5.49			667,625			10,173		6.18			518,976			6,488		5.07
Commercial business		5.26			264,179			3,392		5.21			284,736			3,343		4.76
Other loans		5.99			436,979			5,704		5.29			541,449			6,597		4.94
Industrial revenue bonds⁽¹⁾		4.92			15,205			213		5.68			23,715			357		6.11

Total loans receivable		5.23			4,079,624			54,556		5.42			3,784,181			45,165		4.84

Investment securities⁽¹⁾		3.41			278,536			2,251		3.28			187,007			1,309		2.84
Other interest-earning assets		2.49			94,374			551		2.37			99,080			408		1.67

Total interest-earning assets		5.04			4,452,534			57,358		5.22			4,070,268			46,882		4.67
Non-interest-earning assets:
Cash and cash equivalents					90,804								102,368
Other non-earning assets					180,876								197,441
Total assets				$	4,724,214							$	4,370,077

Interest-bearing liabilities:
Interest-bearing demand and savings		0.50		$	1,472,959			1,763		0.49		$	1,564,610			1,310		0.34
Time deposits		2.18			1,672,677			8,707		2.11			1,331,474			4,274		1.30
Total deposits		1.40			3,145,636			10,470		1.35			2,896,084			5,584		0.78
Short-term borrowings, repurchase agreements and other interest-bearing liabilities		0.37			258,183			922		1.45			99,489			28		0.11
Subordinated debentures issued to capital trusts		4.34			25,774			267		4.20			25,774			202		3.18
Subordinated notes		5.92			73,900			1,094		6.00			73,713			1,025		5.64
FHLBank advances		—			—			—		—			145,517			605		1.69

Total interest-bearing liabilities		1.47			3,503,493			12,753		1.47			3,240,577			7,444		0.93
Non-interest-bearing liabilities:
Demand deposits					658,409								630,530
Other liabilities					25,467								18,820
Total liabilities					4,187,369								3,889,927
Stockholders’ equity					536,845								480,150
Total liabilities and stockholders’ equity				$	4,724,214							$	4,370,077

Net interest income:
Interest rate spread		3.57	%				$	44,605		3.75	%				$	39,438		3.74	%
Net interest margin*										4.06	%							3.93	%
Average interest-earning assets to average interest-bearing liabilities					127.1	%							125.6	%

_______________________
*	Defined as the Company’s net interest income divided by total average interest-earning assets.
(1)	Of the total average balances of investment securities, average tax-exempt investment securities were $47.9 million and $55.6 million for the three months ended March 31, 2019 and 2018, respectively. In addition, average tax-exempt loans and industrial revenue bonds were $21.7 million and $27.1 million for the three months ended March 31, 2019 and 2018, respectively. Interest income on tax-exempt assets included in this table was $636,000 and $873,000 for the three months ended March 31, 2019 and 2018, respectively. Interest income net of disallowed interest expense related to tax-exempt assets was $575,000 and $830,000 for the three months ended March 31, 2019 and 2018, respectively.
(2)	The yield on loans at March 31, 2019 does not include the impact of the accretable yield (income) on loans acquired in the FDIC-assisted transactions. See “Net Interest Income” for a discussion of the effect on results of operations for the three months ended March 31, 2019.

Rate/Volume Analysis

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

	Three Months Ended March 31,
	2019 vs. 2018
	Increase
	(Decrease)					Total
	Due to					Increase
	Rate		Volume			(Decrease)
	(Dollars in Thousands)
Interest-earning assets:
Loans receivable	$	5,698	$	3,693		$	9,391
Investment securities		226		716			942
Other interest-earning assets		161		(18	)		143
Total interest-earning assets		6,085		4,391			10,476
Interest-bearing liabilities:
Demand deposits		525		(72	)		453
Time deposits		3,139		1,294			4,433
Total deposits		3,664		1,222			4,886
Short-term borrowings		787		107			894
Subordinated debentures issued to capital trust		65		—			65
Subordinated notes		66		3			69
FHLBank advances		—		(605	)		(605	)
Total interest-bearing liabilities		4,582		727			5,309
Net interest income	$	1,503	$	3,664		$	5,167

Liquidity

Liquidity is a measure of the Company's ability to generate sufficient cash to meet present and future financial obligations in a timely manner through either the sale or maturity of existing assets or the acquisition of additional funds through liability management. These obligations include the credit needs of customers, funding deposit withdrawals, and the day-to-day operations of the Company. Liquid assets include cash, interest-bearing deposits with financial institutions and certain investment securities and loans. As a result of the Company’s management of the ability to generate liquidity primarily through liability funding, management believes that the Company maintains overall liquidity sufficient to satisfy its depositors' requirements and meet its customers’ credit needs. At March 31, 2019, the Company had commitments of approximately $171.6 million to fund loan originations, $1.16 billion of unused lines of credit and unadvanced loans, and $28.8 million of outstanding letters of credit.

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

	March 31, 2019		December 31, 2018		December 31, 2017		December 31, 2016		December 31, 2015
Closed loans with unused available lines
Secured by real estate (one- to four-family)	$	154,400	$	150,948	$	133,587	$	123,433	$	105,390
Secured by real estate (not one- to four-family)		10,450		11,063		10,836		26,062		21,857
Not secured by real estate - commercial business		83,520		87,480		113,317		79,937		63,865

Closed construction loans with unused available lines
Secured by real estate (one-to four-family)		33,818		37,162		20,919		10,047		14,242
Secured by real estate (not one-to four-family)		831,155		906,006		718,277		542,326		385,969

Loan Commitments not closed
Secured by real estate (one-to four-family)		36,945		24,253		23,340		15,884		13,411
Secured by real estate (not one-to four-family)		134,607		104,871		156,658		119,126		120,817
Not secured by real estate - commercial business		—		405		4,870		7,022		—

	$	1,284,895	$	1,322,188	$	1,181,804	$	923,837	$	725,551

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

At March 31, 2019, the Company had these available secured lines and on-balance sheet liquidity:

Federal Home Loan Bank line	$981.9 million
Federal Reserve Bank line	$428.5 million
Cash and cash equivalents	$206.1 million
Unpledged securities	$114.8 million

Statements of Cash Flows. During both the three months ended March 31, 2019 and 2018, the Company had positive cash flows from operating activities. The Company experienced negative cash flows from investing activities during both the three months ended March 31, 2019 and 2018. The Company experienced positive cash flows from financing activities during the three months ended March 31, 2019 and negative cash flows from financing activities during the three months ended March 31, 2018.

Cash flows from operating activities for the periods covered by the Statements of Cash Flows have been primarily related to changes in accrued and deferred assets, credits and other liabilities, the provision for loan losses, depreciation and amortization, realized gains on sales of loans and the amortization of deferred loan origination fees and discounts (premiums) on loans and investments, all of which are non-cash or non-operating adjustments to operating cash flows. Net income adjusted for non-cash and non-operating items and the origination and sale of loans held for sale were the primary source of cash flows from operating activities. Operating activities provided cash flows of $29.8 million and $29.9 million during the three months ended March 31, 2019 and 2018, respectively.

During the three months ended March 31, 2019, investing activities used cash of $88.2 million, primarily due to the purchase of loans and the net origination of loans, the purchase of investment securities and the purchase of equipment, partially offset by the sale of other real estate owned, the sale of investment securities and payments received on investment securities. Investing activities in the 2018 period used cash of $37.0 million, primarily due to the net increase in loans and the purchase of equipment, partially offset by the sale of other real estate owned and payments received on investment securities.

Changes in cash flows from financing activities during the periods covered by the Statements of Cash Flows are due to changes in deposits after interest credited, changes in FHLBank advances and changes in short-term borrowings, as well as dividend payments to stockholders, purchases of the Company’s common stock and the exercise of common stock options. Financing activities provided cash of $61.8 million and used cash of $15.2 million during the three months ended March 31, 2019 and 2018, respectively. In the 2019 three-month period, financing activities provided cash primarily as a result of net increases in checking account balances and certificates of deposit, partially offset by decreases in short-term borrowings. Net cash used during the 2018 three-month period was due primarily to the decrease in certificates of deposit. Financing activities in the future are expected to primarily include changes in deposits, changes in FHLBank advances, changes in short-term borrowings and dividend payments to stockholders.

Capital Resources

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

At March 31, 2019, the Company's total stockholders' equity and common stockholders’ equity were each $543.6 million, or 11.4% of total assets, equivalent to a book value of $38.36 per common share. At December 31, 2018, total stockholders' equity and common stockholders’ equity were each $532.0 million, or 11.4% of total assets, equivalent to a book value of $37.59 per common share. At both March 31, 2019 and December 31, 2018, the Company’s tangible common equity to tangible assets ratio was 11.2%. (See Non-GAAP Financial Measures below).

Banks are required to maintain minimum risk-based capital ratios. These ratios compare capital, as defined by the risk-based regulations, to assets adjusted for their relative risk as defined by the regulations. Under current guidelines banks must have a minimum common equity Tier 1 capital ratio of 4.50%, a minimum Tier 1 risk-based capital ratio of 6.00%, a minimum total risk-based capital ratio of 8.00%, and a minimum Tier 1 leverage ratio of 4.00%. To be considered "well capitalized," banks must have a minimum common equity Tier 1 capital ratio of 6.50%, a minimum Tier 1 risk-based capital ratio of 8.00%, a minimum total risk-based capital ratio of 10.00%, and a minimum Tier 1 leverage ratio of 5.00%. On March 31, 2019, the Bank's common equity Tier 1 capital ratio was 12.5%, its Tier 1 capital ratio was 12.5%, its total capital ratio was 13.4% and its Tier 1 leverage ratio was 12.1%. As a result, as of March 31, 2019, the Bank was well capitalized, with capital ratios in excess of those required to qualify as such. On December 31, 2018, the Bank's common equity Tier 1 capital ratio was 12.4%, its Tier 1 capital ratio was 12.4%, its total capital ratio was 13.3% and its Tier 1 leverage ratio was 12.2%. As a result, as of December 31, 2018, the Bank was well capitalized, with capital ratios in excess of those required to qualify as such.

The FRB has established capital regulations for bank holding companies that generally parallel the capital regulations for banks. On March 31, 2019, the Company's common equity Tier 1 capital ratio was 11.3%, its Tier 1 capital ratio was 11.8%, its total capital ratio was 14.3% and its Tier 1 leverage ratio was 11.5%. To be considered well capitalized, a bank holding company must have a Tier 1 risk-based capital ratio of at least 6.00% and a total risk-based capital ratio of at least 10.00%. As of March 31, 2019, the Company was considered well capitalized, with capital ratios in excess of those required to qualify as such. On December 31, 2018, the Company's common equity Tier 1 capital ratio was 11.4%, its Tier 1 capital ratio was 11.9%, its total capital ratio was 14.4% and its Tier 1 leverage ratio was 11.7%. As of December 31, 2018, the Company was considered well capitalized, with capital ratios in excess of those required to qualify as such.

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

For additional information, see “Item 1. Business--Government Supervision and Regulation-Capital” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Dividends. During the three months ended March 31, 2019, the Company declared common stock cash dividends of $1.07 per share, or 87% of net income per diluted common share for that three month period, and paid a common stock cash dividend of $0.32 per share (which was declared in December 2018). The total dividends declared consisted of a regular cash dividend of $0.32 per share and a special cash dividend of $0.75 per share. During the three months ended March 31, 2018, the Company declared a common stock cash dividend of $0.28 per share, or 29% of net income per diluted common share for that three month period, and paid a common stock cash dividend of $0.24 per share (which was declared in December 2017). The Board of Directors meets regularly to consider the level and the timing of dividend payments. The $0.32 per share dividend declared but unpaid as of March 31, 2019, was paid to stockholders in April 2019.

Common Stock Repurchases and Issuances. The Company has been in various buy-back programs since May 1990. During the three months ended March 31, 2019, the Company issued 35,600 shares of stock at an average price of $29.56 per share to cover stock option exercises and repurchased 16,040 shares of its common stock at an average price of $52.93 per share. During the three months ended March 31, 2018, the Company did not repurchase any shares of its common stock. During the three months ended March 31, 2018, the Company issued 23,609 shares of stock at an average price of $23.17 per share to cover stock option exercises.

On April 18, 2018, the Company's Board of Directors authorized management to repurchase up to 500,000 shares of the Company's outstanding common stock, under a program of open market purchases or privately negotiated transactions. The plan does not have an expiration date. Management has historically utilized stock buy-back programs from time to time as long as management believed that repurchasing the stock would contribute to the overall growth of shareholder value. The number of shares of stock that will be repurchased at any particular time and the prices that will be paid are subject to many factors, several of which are outside of the control of the Company. The primary factors, however, are the number of shares available in the market from sellers at any given time, the price of the stock within the market as determined by the market and the projected impact on the Company’s earnings per share and capital.

Non-GAAP Financial Measures

This document contains certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States (“GAAP”), consisting of 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 measure 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.

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

	March 31,			December 31,
	2019			2018
	(Dollars in Thousands)

Common equity at period end	$	543,635		$	531,977
Less: Intangible assets at period end		8,963			9,288
Tangible common equity at period end (a)	$	534,672		$	522,689

Total assets at period end	$	4,778,220		$	4,676,200
Less: Intangible assets at period end		8,963			9,288
Tangible assets at period end (b)	$	4,769,257		$	4,666,912

Tangible common equity to tangible assets (a) / (b)		11.21	%		11.20	%

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Asset and Liability Management and Market Risk

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

Our Risk When Interest Rates Change

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

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

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

The ability to maximize net interest income is largely dependent upon the achievement of a positive interest rate spread that can be sustained despite fluctuations in prevailing interest rates. Interest rate sensitivity is a measure of the difference between amounts of interest-earning assets and interest-bearing liabilities which either reprice or mature within a given period of time. The difference, or the interest rate repricing "gap," provides an indication of the extent to which an institution's interest rate spread will be affected by changes in interest rates. A gap is considered positive when the amount of interest-rate sensitive assets exceeds the amount of interest-rate sensitive liabilities repricing during the same period, and is considered negative when the amount of interest-rate sensitive liabilities exceeds the amount of interest-rate sensitive assets during the same period. Generally, during a period of rising interest rates, a negative gap within shorter repricing periods would adversely affect net interest income, while a positive gap within shorter repricing periods would result in an increase in net interest income. During a period of falling interest rates, the opposite would be true. As of March 31, 2019, Great Southern's interest rate risk models indicate that, generally, rising interest rates are expected to have a positive impact on the Company's net interest income, while declining interest rates are expected to have a negative impact on net interest income. We model various interest rate scenarios for rising and falling rates, including both parallel and non-parallel shifts in rates. The results of our modeling indicate that net interest income is not likely to be materially affected either positively or negatively in the first twelve months following a rate change, regardless of any changes in interest rates, because our portfolios are relatively well matched in a twelve-month horizon. The effects of interest rate changes, if any, on net interest income are expected to be greater in the 12 to 36 months following a rate change.

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

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

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

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

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

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

In October 2018, the Company entered into an interest rate swap transaction as part of its ongoing interest rate management strategies to hedge the risk of its floating rate loans. The notional amount of the swap is $400 million with a termination date of October 6, 2025. Under the terms of the swap, the Company will receive a fixed rate of interest of 3.018% and will pay a floating rate of interest equal to one-month USD-LIBOR. The floating rate will be reset monthly and net settlements of interest due to/from the counterparty will also occur monthly. The floating rate of interest was 2.481% as of March 31, 2019. The Company will receive net interest settlements which will be recorded as loan interest income, to the extent that the fixed rate of interest continues to exceed one-month USD-LIBOR. If USD-LIBOR exceeds the fixed rate of interest in future periods, the Company will be required to pay net settlements to the counterparty and will record those net payments as a reduction of interest income on loans. The 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.

The Company’s interest rate derivatives and hedging activities are discussed further in Note 16 of the Notes to Consolidated Financial Statements contained in this report.

ITEM 4. CONTROLS AND PROCEDURES

We maintain a system of disclosure controls and procedures (as defined in Rule 13(a)-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")) that is designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file under the Exchange Act is recorded, processed, summarized and reported accurately and within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate. An evaluation of our disclosure controls and procedures was carried out as of March 31, 2019, under the supervision and with the participation of our principal executive officer, principal financial officer and several other members of our senior management. Our principal executive officer and principal financial officer concluded that, as of March 31, 2019, our disclosure controls and procedures were effective in ensuring that the information we are required to disclose in the reports we file or submit under the Act is (i) accumulated and communicated to our management (including the principal executive officer and principal financial officer) to allow timely decisions regarding required disclosure, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.

There were no changes in our internal control over financial reporting (as defined in Rule 13(a)-15(f) under the Act) that occurred during the quarter ended March 31, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

There have been no material changes to the risk factors set forth in Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2018.

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

As indicated below, the Company repurchased the following shares of its common stock during the three months ended March 31, 2019.

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

January 1, 2019 – January 31, 2019		11,937	$	52.92		11,937		470,521
February 1, 2019 – February 28, 2019		4,103		52.95		4,103		466,418
March 1, 2019 – March 31, 2019		--		--		--		466,418
		16,040	$	52.93		16,040

_______________________
(1)	Amount represents the number of shares available to be repurchased under the April 2018 plan as of the last calendar day of the month shown.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None.

Item 6. Exhibits and Financial Statement Schedules

Exhibits

Exhibit No.	Description

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

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

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

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

	(iv)	The Purchase and Assumption Agreement, dated as of April 27, 2012, among Federal Deposit Insurance Corporation, Receiver of Inter Savings Bank, FSB, Maple Grove, Minnesota, Federal Deposit Insurance Corporation and Great Southern Bank, previously filed with the Commission (File no. 000-18082) as Exhibit 2.1(iv) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 is incorporated herein by reference as Exhibit 2(iv).

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

(3)	Articles of incorporation and Bylaws

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

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

	(ii)	The Registrant's Bylaws, previously filed with the Commission (File no. 000-18082) as Exhibit 3(ii) to the Registrant's Current Report on Form 8-K filed on October 19, 2007, is incorporated herein by reference as Exhibit 3.2.

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

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


(9)	Voting trust agreement

	Inapplicable.

(10)	Material contracts

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

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

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

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

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

	A description of the current salary and bonus arrangements for 2019 for the Registrant's executive officers previously filed with the Commission as Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2018 is incorporated herein by reference as Exhibit 10.7.

	A description of the current fee arrangements for the Registrant's directors previously filed with the Commission as Exhibit 10.8 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2018 is incorporated herein by reference as Exhibit 10.8.

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

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

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

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

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

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

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

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

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

(15)	Letter re unaudited interim financial information

	Inapplicable.

(18)	Letter re change in accounting principles

	Inapplicable.

(23)	Consents of experts and counsel

	Inapplicable.

(24)	Power of attorney

	None.

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

	Attached as Exhibit 31.1

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

	Attached as Exhibit 31.2

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

	Attached as Exhibit 32.

(99)	Additional Exhibits

	None.

(101)	Attached as Exhibit 101 are the following financial statements from the Great Southern Bancorp, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, formatted in Extensive Business Reporting Language (XBRL): (i) consolidated statements of financial condition, (ii) consolidated statements of income, (iii) consolidated statements of comprehensive income, (iv) consolidated statements of cash flows and (v) notes to consolidated financial statements.

SIGNATURES

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

	Great Southern Bancorp, Inc.
	Registrant
Date: May 8, 2019	/s/ Joseph W. Turner
	Joseph W. Turner President and Chief Executive Officer (Principal Executive Officer)
Date: May 8, 2019	/s/ Rex A. Copeland
	Rex A. Copeland Treasurer (Principal Financial and Accounting Officer)

	March 31,		December 31,
	2019		2018
	(In Thousands)

Land	$	40,571	$	40,508
Buildings and improvements		95,253		95,039
Furniture, fixtures and equipment		54,805		54,327
Operating leases right of use asset		9,323		—
		199,952		189,874
Less accumulated depreciation		58,198		57,450

	$	141,754	$	132,424

	At or For the
	Three Months Ended
	March 31, 2019
	(In Thousands)
Statement of Financial Condition
Operating leases right of use asset	$	9,323
Operating leases liability	$	9,349

Statement of Income
Operating lease costs classified as occupancy and equipment expense	$	376
(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	$	350
Right of use assets obtained in exchange for lease obligations:
Operating leases	$	9,538

2019	$	835
2020		1,132
2021		1,148
2022		1,131
2023		1,082
2024		956
Thereafter		5,026

Future lease payments expected		11,310

Less interest portion of lease payments		(1,961	)

Lease liability	$	9,349

	March 31,		December 31,
	2019		2018
	(In Thousands)

Time Deposits:
0.00% - 0.99%	$	133,918	$	150,656
1.00% - 1.99%		369,417		511,873
2.00% - 2.99%		1,176,121		857,973
3.00% - 3.99%		74,283		69,793
4.00% - 4.99%		1,112		1,116
Total time deposits (2.18% - 1.98%)		1,754,851		1,591,411
Non-interest-bearing demand deposits		668,829		661,061
Interest-bearing demand and savings deposits (0.50% - 0.46%)		1,532,411		1,472,535
Total Deposits	$	3,956,091	$	3,725,007

	March 31, 2019		December 31, 2018
	Overnight and		Overnight and
	Continuous		Continuous
	(In Thousands)

Mortgage-backed securities – GNMA, FNMA, FHLMC	$	118,618	$	105,253