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 September 30, 2016

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 and posted on its corporate Web site, if any, every Interactive Data file required to be submitted and posted 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 and post such files). Yes/X/   No /  /

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

Large accelerated filer /  /	Accelerated filer /X/	Non-accelerated filer /  /	Smaller reporting company /  /
		(Do not check if a smaller reporting company)

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

Yes /  /   No /X/

The number of shares outstanding of each of the registrant's classes of common stock: 13,927,660 shares of common stock, par value $.01, outstanding at November 2, 2016.

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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)

	SEPTEMBER 30,		DECEMBER 31,
	2016		2015
	(Unaudited)
ASSETS
Cash	$	117,684	$	115,198
Interest-bearing deposits in other financial institutions		136,885		83,985
Cash and cash equivalents		254,569		199,183
Available-for-sale securities		204,621		262,856
Held-to-maturity securities (fair value $261  – September 2016;
$384 - December 2015)		247		353
Mortgage loans held for sale		12,796		12,261
Loans receivable, net of allowance for loan losses of
$37,002 – September 2016; $38,149 - December 2015		3,686,507		3,340,536
FDIC indemnification asset		14,576		24,082
Interest receivable		10,675		10,930
Prepaid expenses and other assets		50,864		59,322
Other real estate owned, net		31,249		31,893
Premises and equipment, net		141,049		129,655
Goodwill and other intangible assets		12,913		5,758
Investment in Federal Home Loan Bank stock		12,275		15,303
Current and deferred income taxes		9,645		12,057
Total Assets	$	4,441,986	$	4,104,189
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits	$	3,561,784	$	3,268,626
Federal Home Loan Bank advances		31,476		263,546
Securities sold under reverse repurchase agreements with customers		139,044		116,182
Short-term borrowings		153,060		1,295
Subordinated debentures issued to capital trusts		25,774		25,774
Subordinated notes		73,499		—
Accrued interest payable		1,500		1,080
Advances from borrowers for taxes and insurance		9,153		4,681
Accounts payable and accrued expenses		24,567		24,778
Total Liabilities		4,019,857		3,705,962
Stockholders' Equity:
Capital stock
Serial preferred stock – $.01 par value; authorized 1,000,000 shares; issued      and outstanding September 2016 and December 2015 - -0- shares		—		—
Common stock, $.01 par value; authorized 20,000,000 shares; issued and outstanding September 2016  – 13,921,355 shares;
December 2015 - 13,887,932 shares		139		139
Additional paid-in capital		25,263		24,371
Retained earnings		392,826		368,053
Accumulated other comprehensive income		3,901		5,664
Total Stockholders' Equity		422,129		398,227
Total Liabilities and Stockholders' Equity	$	4,441,986	$	4,104,189

See Notes to Consolidated Financial Statements

2

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

	THREE MONTHS ENDED SEPTEMBER 30,
	2016			2015
	(Unaudited)
INTEREST INCOME
Loans	$	45,335		$	44,103
Investment securities and other		1,521			1,652
TOTAL INTEREST INCOME		46,856			45,755
INTEREST EXPENSE
Deposits		4,423			3,500
Federal Home Loan Bank advances		259			468
Short-term borrowings and repurchase agreements		450			14
Subordinated debentures issued to capital trusts		209			248
Subordinated notes		487			—
TOTAL INTEREST EXPENSE		5,828			4,230
NET INTEREST INCOME		41,028			41,525
PROVISION FOR LOAN LOSSES		2,500			1,703
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		38,528			39,822
NON-INTEREST INCOME
Commissions		245			400
Service charges and ATM fees		5,548			5,162
Net realized gains on sales of loans		1,217			1,079
Net realized gains on sales of available-for-sale securities		144			2
Late charges and fees on loans		435			371
Gain (loss) on derivative interest rate products		58			(133	)
Amortization of income/expense related to business acquisitions		(1,215	)		(3,326	)
Other income		658			1,565
TOTAL NON-INTEREST INCOME		7,090			5,120
NON-INTEREST EXPENSE
Salaries and employee benefits		15,062			15,078
Net occupancy and equipment expense		6,335			7,546
Postage		923			1,042
Insurance		961			837
Advertising		803			545
Office supplies and printing		575			328
Telephone		823			806
Legal, audit and other professional fees		748			586
Expense on foreclosed assets		1,298			616
Partnership tax credit investment amortization		420			420
Acquired deposit intangible asset amortization		464			437
Other operating expenses		2,245			1,773
TOTAL NON-INTEREST EXPENSE		30,657			30,014
INCOME BEFORE INCOME TAXES		14,961			14,928
PROVISION FOR INCOME TAXES		3,740			3,732
NET INCOME		11,221			11,196
Preferred stock dividends		—			145
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	11,221		$	11,051

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	THREE MONTHS ENDED SEPTEMBER 30,
	2016			2015
BASIC EARNINGS PER COMMON SHARE		$	0.81		$	0.80
DILUTED EARNINGS PER COMMON SHARE		$	0.80		$	0.79
DIVIDENDS DECLARED PER COMMON SHARE		$	0.22		$	0.22

See Notes to Consolidated Financial Statements

4

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

	NINE MONTHS ENDED SEPTEMBER 30,
	2016			2015
	(Unaudited)
INTEREST INCOME
Loans	$	133,460		$	133,999
Investment securities and other		4,779			5,396
TOTAL INTEREST INCOME		138,239			139,395
INTEREST EXPENSE
Deposits		12,480			9,794
Federal Home Loan Bank advances		955			1,331
Short-term borrowings and repurchase agreements		936			51
Subordinated debentures issued to capital trusts		573			560
Subordinated notes		487			—
TOTAL INTEREST EXPENSE		15,431			11,736
NET INTEREST INCOME		122,808			127,659
PROVISION FOR LOAN LOSSES		6,901			4,303
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		115,907			123,356
NON-INTEREST INCOME
Commissions		763			981
Service charges and ATM fees		16,201			14,833
Net realized gains on sales of loans		3,062			3,078
Net realized gains on sales of available-for-sale securities		2,881			2
Late charges and fees on loans		1,315			1,482
Gain (loss) on derivative interest rate products		(179	)		(112	)
Amortization of income/expense related to business acquisitions		(6,087	)		(15,380	)
Other income		3,025			3,638
TOTAL NON-INTEREST INCOME		20,981			8,522
NON-INTEREST EXPENSE
Salaries and employee benefits		45,671			44,261
Net occupancy and equipment expense		19,556			19,715
Postage		2,881			2,843
Insurance		2,944			2,672
Advertising		1,767			1,728
Office supplies and printing		1,435			1,043
Telephone		2,649			2,338
Legal, audit and other professional fees		2,399			1,873
Expense on foreclosed assets		3,083			1,319
Partnership tax credit investment amortization		1,260			1,260
Acquired deposit intangible asset amortization		1,497			1,312
Other operating expenses		6,242			4,841
TOTAL NON-INTEREST EXPENSE		91,384			85,205
INCOME BEFORE INCOME TAXES		45,504			46,673
PROVISION FOR INCOME TAXES		11,956			11,821
NET INCOME		33,548			34,852
Preferred stock dividends		—			435
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	33,548		$	34,417

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	NINE MONTHS ENDED SEPTEMBER 30,
	2016			2015
BASIC EARNINGS PER COMMON SHARE		$	2.41		$	2.49
DILUTED EARNINGS PER COMMON SHARE		$	2.39		$	2.46
DIVIDENDS DECLARED PER COMMON SHARE		$	0.66		$	0.64

See Notes to Consolidated Financial Statements

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GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

	THREE MONTHS ENDED SEPTEMBER 30,
	2016			2015
	(Unaudited)
Net Income	$	11,221		$	11,196
Unrealized appreciation (depreciation) on available-for-sale securities, net
of taxes (credit) of $(454) and $160, for 2016 and 2015, respectively		(798	)		281
Reclassification adjustment for gains included in net income,
net of (taxes) credit of $(53) and $(1), for 2016 and 2015, respectively		(91	)		(1	)
Change in fair value of cash flow hedge, net of taxes of $30
and $6, for 2016 and 2015, respectively		53			10
Comprehensive Income	$	10,385		$	11,486

	NINE MONTHS ENDED SEPTEMBER 30,
	2016			2015
	(Unaudited)
Net Income	$	33,548		$	34,852
Unrealized appreciation (depreciation) on available-for-sale securities, net
of taxes (credit) of $21 and $(221), for 2016 and 2015, respectively		35			(785	)
Reclassification adjustment for gains included in net income,
net of (taxes) credit of $(1,046) and $(1), for 2016 and 2015, respectively		(1,835	)		(1	)
Change in fair value of cash flow hedge, net of taxes (credit) of $21
and $(59), for 2016 and 2015, respectively		37			(95	)
Comprehensive Income	$	31,785		$	33,971

See Notes to Consolidated Financial Statements

7

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	NINE MONTHS ENDED SEPTEMBER 30,
	2016			2015
	(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	33,548		$	34,852
Proceeds from sales of loans held for sale		118,629			126,859
Originations of loans held for sale		(115,039	)		(122,166	)
Items not requiring (providing) cash:
Depreciation		7,416			8,088
Amortization of other assets		2,784			2,572
Compensation expense for stock option grants		348			395
Provision for loan losses		6,901			4,303
Net gains on loan sales		(3,062	)		(3,078	)
Net gains on sale of available-for-sale investment securities		(2,881	)		(2	)
Net gains on sale of premises and equipment		(248	)		(561	)
(Gain) loss on sale of foreclosed assets		38			(694	)
Gain on sale of business units		(368	)		—
Gain on redemption of trust preferred securities		—			(1,115	)
Amortization of deferred income, premiums, discounts
and fair value adjustments		4,797			8,711
Loss on derivative interest rate products		179			112
Deferred income taxes		(3,070	)		(7,357	)
Changes in:
Interest receivable		665			178
Prepaid expenses and other assets		10,284			8,370
Accounts payable and accrued expenses		(1,834	)		4,781
Income taxes refundable/payable		6,702			707
Net cash provided by operating activities		65,789			64,955
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans		(69,439	)		(139,782	)
Purchase of loans		(136,769	)		(95,720	)
Cash received from purchase of additional business units		44,363			—
Cash received from FDIC loss sharing reimbursements		533			2,390
Cash paid for sale of business units		(17,821	)		—
Purchase of premises and equipment		(8,221	)		(12,839	)
Proceeds from sale of premises and equipment		1,078			2,205
Proceeds from sale of foreclosed assets		19,923			17,888
Capitalized costs on foreclosed assets		(86	)		(20	)
Proceeds from sales of available-for-sale securities		49,615			56,167
Proceeds from maturing securities		—			110
Proceeds from called securities		28,016			6,143
Principal reductions on mortgage-backed securities		25,390			48,137
Purchase of available-for-sale securities		(45,661	)		(21,339	)
Redemption of Federal Home Loan Bank stock		3,028			5,449
Net cash used in investing activities		(106,051	)		(131,211	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in certificates of deposit		115,632			199,842
Net increase (decrease) in checking and savings deposits		(32,279	)		56,502
Proceeds from Federal Home Loan Bank advances		1,793,000			5,277,500
Repayments of Federal Home Loan Bank advances		(2,025,052	)		(5,384,548	)
Net increase (decrease) in short-term borrowings		174,627			(62,020	)
Advances from borrowers for taxes and insurance		4,472			3,078
Redemption of trust preferred securities		—			(3,885	)
Proceeds from issuance of subordinated notes		73,472			—
Dividends paid		(9,171	)		(8,976	)
Stock options exercised		947			2,760
Net cash provided by financing activities		95,648			80,253
INCREASE IN CASH AND CASH EQUIVALENTS		55,386			13,997
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		199,183			218,647
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	254,569		$	232,644

See Notes to Consolidated Financial Statements

8

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 and cash flows of the Company as of the dates ended and for the periods presented. Those adjustments consist only of normal recurring adjustments. Operating results for the three and nine months ended September 30, 2016 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, 2015, 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 2015 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.  In addition, the Company operates commercial loan production offices in Dallas, Texas and Tulsa, Oklahoma.  The Company and the Bank are subject to the regulations of 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 August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606):  Deferral of the Effective Date, which deferred the effective date of ASU 2014-09.  In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606): Summary and Amendments that Create Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs—Contracts with Customers (Subtopic 340-40). The guidance in this Update supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition, and most industry-specific guidance throughout the industry topics of the codification. For public companies, the original Update was to be effective for interim and annual periods beginning after December 15, 2016.  The current ASU states that the provisions of ASU 2014-09 should be applied to annual reporting periods, including interim periods, beginning after December 15, 2017.  The Company is currently assessing the impact that this guidance may have on its consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall (Topic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.  The Update requires investments in equity securities, except for those under the equity method of accounting, to be measured at fair value with changes in fair value recognized through net income.  In addition, the Update requires separate presentation of financial assets and liabilities by

9

measurement category, such as fair value through net income, fair value through other comprehensive income, or amortized cost on the balance sheet or in the notes to the financial statements.  The Update also clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities.  The Update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  Early application for public entities is permitted under some circumstances.  The Company is currently assessing the impact that this guidance may have, if any, on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842).  The amendments in this Update revise the accounting related to lessee accounting.  Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases.  The Update is effective for the Company beginning in the first quarter of 2019, with early adoption permitted.  Adoption of the standard requires the use of a modified retrospective transition approach for all periods presented at the time of adoption.  The Company is currently assessing the impact this guidance may have on its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.  The Update amends several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows.  The Update is effective for the Company for interim and annual periods beginning after December 15, 2016.  The Company is currently assessing the impact this guidance may have on its consolidated financial statements.

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 basis and available for sale debt securities. For assets held at amortized cost basis, 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. All entities may adopt the amendments in this update earlier as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. 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 is currently assessing the impact that this guidance will have on its consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230).  The Update provides guidance on how certain cash receipts and payments are presented and classified in the statement of cash flows.  The amendments in the Update are to be applied retrospectively.  The Update is effective for the Company for interim and annual periods beginning after December 15, 2017, and early adoption is permitted.  The Company is currently assessing the impact that this guidance will have on its consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740).  The Update provides guidance on the accounting for the income tax consequences of intra-entity transfers of assets other than inventory.  Under this guidance, companies will be required to recognize the income tax consequences of an intra-entity asset transfer when the transfer occurs.  The Update is effective for the Company for annual and interim periods beginning after December 15, 2017, with early adoption permitted.  The Company is currently assessing the impact that this guidance will have on its consolidated financial statements.

10

NOTE 4: EARNINGS PER SHARE

	Three Months Ended September 30,
	2016		2015
	(In Thousands, Except Per Share Data)
Basic:
Average shares outstanding		13,914		13,840
Net income available to common stockholders	$	11,221	$	11,051
Per common share amount	$	0.81	$	0.80
Diluted:
Average shares outstanding		13,914		13,840
Net effect of dilutive stock options – based on the treasury
stock method using average market price		140		178
Diluted shares		14,054		14,018
Net income available to common stockholders	$	11,221	$	11,051
Per common share amount	$	0.80	$	0.79

	Nine Months Ended September 30,
	2016		2015
	(In Thousands, Except Per Share Data)
Basic:
Average shares outstanding		13,906		13,815
Net income available to common stockholders	$	33,548	$	34,417
Per common share amount	$	2.41	$	2.49
Diluted:
Average shares outstanding		13,906		13,815
Net effect of dilutive stock options – based on the treasury
stock method using average market price		140		178
Diluted shares		14,046		13,993
Net income available to common stockholders	$	33,548	$	34,417
Per common share amount	$	2.39	$	2.46

Options outstanding at September 30, 2016 and 2015, to purchase 111,425 and 7,250 shares of common stock, respectively, were not included in the computation of diluted earnings per common share for each of the three and nine month periods because the exercise prices of such options were greater than the average market prices of the common stock for the three and nine months ended September 30, 2016 and 2015, respectively.

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NOTE 5: INVESTMENT SECURITIES

	September 30, 2016
			Gross		Gross				Tax
	Amortized		Unrealized		Unrealized		Fair		Equivalent
	Cost		Gains		Losses		Value		Yield
	(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
Mortgage-backed securities	$	133,202	$	1,587	$	70	$	134,719		1.93	%
States and political subdivisions		64,963		4,939		—		69,902		5.67
	$	198,165	$	6,526	$	70	$	204,621		3.16	%
HELD-TO-MATURITY SECURITIES:
States and political subdivisions	$	247	$	14	$	—	$	261		7.37	%

	December 31, 2015
			Gross		Gross				Tax
	Amortized		Unrealized		Unrealized		Fair		Equivalent
	Cost		Gains		Losses		Value		Yield
	(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
U.S. government agencies	$	20,000	$	—	$	219	$	19,781		2.00	%
Mortgage-backed securities		159,777		2,038		601		161,214		2.09
States and political subdivisions		72,951		5,081		1		78,031		5.71
Other securities		847		2,983		—		3,830		—
	$	253,575	$	10,102	$	821	$	262,856		3.12	%
HELD-TO-MATURITY SECURITIES:
States and political subdivisions	$	353	$	31	$	—	$	384		7.37	%

The amortized cost and fair value of available-for-sale securities at September 30, 2016, 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		630		644
After five through ten years		7,612		7,938
After ten years		56,721		61,320
Securities not due on a single maturity date		133,202		134,719
	$	198,165	$	204,621

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The held-to-maturity securities at September 30, 2016, by contractual maturity, are shown below.  Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized		Fair
	Cost		Value
	(In Thousands)
After one through five years	$	247	$	261

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 September 30, 2016 and December 31, 2015, respectively, was approximately $13.8 million and $76.0 million, which is approximately 6.7% and 28.9% of the Company's combined available-for-sale and held-to-maturity 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 below their historical cost are temporary at September 30, 2016.

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 September 30, 2016 and December 31, 2015:

	September 30, 2016
	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)
Mortgage-backed securities	$	13,768	$	(70	)	$	—	$	—	$	13,768	$	(70	)

	December 31, 2015
	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)
U.S. government agencies	$	20,000	$	(219	)	$	—	$	—		$	20,000	$	(219	)
Mortgage-backed securities		45,494		(348	)		9,635		(253	)		55,129		(601	)
State and political
subdivisions		—		—			910		(1	)		910		(1	)
	$	65,494	$	(567	)	$	10,545	$	(254	)	$	76,039	$	(821	)

Gross gains of $158,000 and $3.0 million and gross losses of $15,000 and $103,000 resulting from sales of available-for-sale securities were realized during the three and nine months ended September 30, 2016. Gross gains of $503,000 and $503,000 and gross losses of $501,000 and $501,000 resulting from sales of available-for-sale securities were realized during the three and nine months ended September 30, 2015.  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.  Where

13

the security is a beneficial interest in securitized financial assets, the Company uses the beneficial interests in securitized financial asset impairment model.  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 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 reviews and evaluations 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 and nine months ended September 30, 2016, no securities were determined to have impairment that had become other than temporary.

Credit Losses Recognized on Investments.  There were no debt securities that have experienced fair value deterioration due to credit losses, as well as due to other market factors, but are 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 and nine months ended September 30, 2016 and 2015, were as follows:

	Amounts Reclassified from Accumulated Other Comprehensive Income Three Months Ended September 30,						Affected Line Item in the Statements of Income
	2016			2015
	(In Thousands)
Unrealized gains on available-							Net realized gains on sales of
for-sale securities	$	144		$	2		available-for-sale securities
							(Total reclassified amount before tax)
Income Taxes		(53	)		(1	)	Provision for income taxes
Total reclassifications out of accumulated
other comprehensive income	$	91		$	1

14

	Amounts Reclassified from Accumulated Other Comprehensive Income Nine Months Ended September 30,						Affected Line Item in the Statements of Income
	2016			2015
	(In Thousands)
Unrealized gains on available-							Net realized gains on sales of
for-sale securities	$	2,881		$	2		available-for-sale securities
							(Total reclassified amount before tax)
Income Taxes		(1,046	)		(1	)	Provision for income taxes
Total reclassifications out of accumulated
other comprehensive income	$	1,835		$	1

NOTE 6: LOANS AND ALLOWANCE FOR LOAN LOSSES

	September 30,			December 31,
	2016			2015
	(In Thousands)
One- to four-family residential construction	$	26,540		$	23,526
Subdivision construction		16,947			38,504
Land development		53,585			58,440
Commercial construction		700,232			600,794
Owner occupied one- to four-family residential		215,301			110,277
Non-owner occupied one- to four-family residential		137,500			149,874
Commercial real estate		1,172,522			1,043,474
Other residential		643,110			419,549
Commercial business		347,369			357,580
Industrial revenue bonds		25,215			37,362
Consumer auto		498,098			439,895
Consumer other		70,399			74,829
Home equity lines of credit		104,014			83,966
Acquired FDIC-covered loans, net of discounts		144,420			236,071
Acquired loans no longer covered by FDIC loss sharing agreements,
net of discounts		78,885			33,338
Acquired non-covered loans, net of discounts		81,986			93,436
		4,316,123			3,800,915
Undisbursed portion of loans in process		(588,114	)		(418,702	)
Allowance for loan losses		(37,002	)		(38,149	)
Deferred loan fees and gains, net		(4,500	)		(3,528	)
	$	3,686,507		$	3,340,536
Weighted average interest rate		4.54	%		4.56	%

15

Classes of loans by aging were as follows:

	September 30, 2016
													Total Loans
					Past Due								> 90 Days
	30-59 Days		60-89 Days		90 Days		Total Past				Total Loans		Past Due and
	Past Due		Past Due		or More		Due		Current		Receivable		Still Accruing
	(In Thousands)
One- to four-family
residential construction	$	—	$	—	$	—	$	—	$	26,540	$	26,540	$	—
Subdivision construction		—		—		111		111		16,836		16,947		—
Land development		5		40		1,715		1,760		51,825		53,585		—
Commercial construction		—		—		—		—		700,232		700,232		—
Owner occupied one- to four-
family residential		89		636		951		1,676		213,625		215,301		14
Non-owner occupied one- to
four-family residential		—		—		347		347		137,153		137,500		—
Commercial real estate		59		122		7,054		7,235		1,165,287		1,172,522		—
Other residential		178		—		—		178		642,932		643,110		—
Commercial business		93		22		455		570		346,799		347,369		—
Industrial revenue bonds		—		—		—		—		25,215		25,215		—
Consumer auto		4,217		1,353		1,522		7,092		491,006		498,098		1
Consumer other		644		273		680		1,597		68,802		70,399		3
Home equity lines of credit		308		1		338		647		103,367		104,014		—
Acquired FDIC-covered
loans, net of discounts		358		1,890		8,241		10,489		133,931		144,420		117
Acquired loans no longer
covered by loss sharing
agreements, net of
discounts		118		105		2,277		2,500		76,385		78,885		—
Acquired non-covered loans,
net of discounts		556		11		4,406		4,973		77,013		81,986		592
		6,625		4,453		28,097		39,175		4,276,948		4,316,123		727
Less FDIC-supported loans,
and acquired non-covered
loans, net of discounts		1,032		2,006		14,924		17,962		287,329		305,291		709
Total	$	5,593	$	2,447	$	13,173	$	21,213	$	3,989,619	$	4,010,832	$	18

16

	December 31, 2015
													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	$	649	$	—	$	—	$	649	$	22,877	$	23,526	$	—
Subdivision construction		—		—		—		—		38,504		38,504		—
Land development		2,245		148		139		2,532		55,908		58,440		—
Commercial construction		1		—		—		1		600,793		600,794		—
Owner occupied one- to four-
family residential		1,217		345		715		2,277		108,000		110,277		—
Non-owner occupied one- to
four-family residential		—		—		345		345		149,529		149,874		—
Commercial real estate		1,035		471		13,488		14,994		1,028,480		1,043,474		—
Other residential		—		—		—		—		419,549		419,549		—
Commercial business		1,020		9		288		1,317		356,263		357,580		—
Industrial revenue bonds		—		—		—		—		37,362		37,362		—
Consumer auto		3,351		891		721		4,963		434,932		439,895		—
Consumer other		943		236		576		1,755		73,074		74,829		—
Home equity lines of credit		212		123		297		632		83,334		83,966		—
Acquired FDIC-covered loans, net of discounts		7,936		603		9,712		18,251		217,820		236,071		—
Acquired loans no longer covered by FDIC loss sharing agreements,
net of discounts		989		39		33		1,061		32,277		33,338		—
Acquired non-covered loans, net of discounts		1,081		638		5,914		7,633		85,803		93,436		—
		20,679		3,503		32,228		56,410		3,744,505		3,800,915		—
Less FDIC-supported loans,
and acquired non-covered loans, net of discounts		10,006		1,280		15,659		26,945		335,900		362,845		—
Total	$	10,673	$	2,223	$	16,569	$	29,465	$	3,408,605	$	3,438,070	$	—

Nonaccruing loans (excluding FDIC-supported loans, net of discount and acquired non-covered loans, net of discount) are summarized as follows:

	September 30,		December 31,
	2016		2015
	(In Thousands)
One- to four-family residential construction	$	—	$	—
Subdivision construction		111		—
Land development		1,715		139
Commercial construction		—		—
Owner occupied one- to four-family residential		937		715
Non-owner occupied one- to four-family residential		347		345
Commercial real estate		7,054		13,488
Other residential		—		—
Commercial business		455		288
Industrial revenue bonds		—		—
Consumer auto		1,521		721
Consumer other		677		576
Home equity lines of credit		338		297
Total	$	13,155	$	16,569

17

The following table presents the activity in the allowance for loan losses by portfolio segment for the three and nine months ended September 30, 2016.  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 September 30, 2016:

	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 July 1, 2016	$	4,184		$	3,698	$	16,157		$	3,013		$	3,531		$	7,550		$	38,133
Provision (benefit) charged to expense		(738	)		1,702		1,130			(1,238	)		(425	)		2,069			2,500
Losses charged off		(38	)		—		(1,815	)		(1	)		(191	)		(2,548	)		(4,593	)
Recoveries		23			15		17			80			33			794			962
Balance September 30, 2016	$	3,431		$	5,415	$	15,489		$	1,854		$	2,948		$	7,865		$	37,002
Ending balance:
Balance January 1, 2016	$	4,900		$	3,190	$	14,738		$	3,019		$	4,203		$	8,099		$	38,149
Provision (benefit) charged to expense		(1,387	)		2,186		5,114			(1,252	)		(1,093	)		3,333			6,901
Losses charged off		(129	)		—		(5,546	)		(31	)		(383	)		(6,047	)		(12,136	)
Recoveries		47			39		1,183			118			221			2,480			4,088
Balance September 30, 2016	$	3,431		$	5,415	$	15,489		$	1,854		$	2,948		$	7,865		$	37,002
Ending balance:
Individually evaluated for
impairment	$	566		$	—	$	2,280		$	1,079		$	1,046		$	441		$	5,412
Collectively evaluated for
impairment	$	2,258		$	5,317	$	13,015		$	731		$	1,804		$	7,254		$	30,379
Loans acquired and
accounted for under ASC
310-30	$	607		$	98	$	194		$	44		$	98		$	170		$	1,211
Loans
Individually evaluated for
impairment	$	5,887		$	3,977	$	13,369		$	9,051		$	2,326		$	2,900		$	37,510
Collectively evaluated for
impairment	$	390,401		$	639,133	$	1,159,153		$	744,766		$	370,258		$	669,611		$	3,973,322
Loans acquired and
accounted for under ASC
310-30	$	166,733		$	31,678	$	57,240		$	3,741		$	7,706		$	38,193		$	305,291

18

The following table presents the activity in the allowance for loan losses by portfolio segment for the three and nine months ended September 30, 2015:

	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 April 1, 2015	$	3,886		$	3,342		$	20,191		$	3,288		$	3,992		$	4,999		$	39,698
Provision (benefit) charged to expense		515			162			(284	)		(158	)		728			740			1,703
Losses charged off		—			—			(803	)		(132	)		(193	)		(1,312	)		(2,440	)
Recoveries		36			12			32			81			45			711			917
Balance September 30, 2015	$	4,437		$	3,516		$	19,136		$	3,079		$	4,572		$	5,138		$	39,878
Balance January 1, 2015	$	3,455		$	2,941		$	19,773		$	3,562		$	3,679		$	5,025		$	38,435
Provision (benefit) charged to expense		961			546			(45	)		(348	)		1,618			1,571			4,303
Losses charged off		(66	)		(2	)		(807	)		(329	)		(968	)		(3,394	)		(5,566	)
Recoveries		87			31			215			194			243			1,936			2,706
Balance September 30, 2015	$	4,437		$	3,516		$	19,136		$	3,079		$	4,572		$	5,138		$	39,878

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, 2015:

	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	$	731	$	—	$	2,556	$	1,391	$	1,115	$	300	$	6,093
Collectively evaluated for
impairment	$	3,464	$	3,122	$	11,888	$	1,570	$	2,862	$	7,647	$	30,553
Loans acquired and
accounted for under ASC
310-30	$	705	$	68	$	294	$	58	$	226	$	152	$	1,503
Loans
Individually evaluated for
impairment	$	6,129	$	9,533	$	34,629	$	7,555	$	2,365	$	1,950	$	62,161
Collectively evaluated for