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 June 30, 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 No.)

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

(417) 887-4400

(Registrant's telephone number, including area code)

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

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock,
par value $0.01 per share	GSBC	The NASDAQ Stock Market LLC

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, a 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/

The number of shares outstanding of each of the registrant's classes of common stock: 14,212,579 shares of common stock, par value $.01 per share, outstanding at August 5, 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)

	JUNE 30,		DECEMBER 31,
	2019		2018
	(Unaudited)

ASSETS
Cash	$	99,567	$	110,108
Interest-bearing deposits in other financial institutions		81,805		92,634
Cash and cash equivalents		181,372		202,742
Available-for-sale securities		305,649		243,968
Mortgage loans held for sale		11,106		1,650
Loans receivable, net of allowance for loan losses of $39,254 – June 2019; $38,409 - December 2018		4,112,455		3,989,001
Interest receivable		14,351		13,448
Prepaid expenses and other assets		76,241		55,336
Other real estate owned and repossessions, net		7,107		8,440
Premises and equipment, net		143,473		132,424
Goodwill and other intangible assets		8,675		9,288
Federal Home Loan Bank stock		11,093		12,438
Current and deferred income taxes		—		7,465
Total Assets	$	4,871,522	$	4,676,200

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits	$	3,888,536	$	3,725,007
Securities sold under reverse repurchase agreements with customers		98,632		105,253
Short-term borrowings and other interest-bearing liabilities		168,636		192,725
Subordinated debentures issued to capital trust		25,774		25,774
Subordinated notes		74,059		73,842
Accrued interest payable		4,209		3,570
Advances from borrowers for taxes and insurance		10,550		5,092
Accrued expenses and other liabilities		26,499		12,960
Current and deferred income taxes		2,318		—
Total Liabilities		4,299,213		4,144,223
Stockholders' Equity:
Capital stock
Serial preferred stock –$.01 par value; authorized 1,000,000 shares; issued and outstanding June 2019 and December 2018 - -0- shares		—		—
Common stock, $.01 par value; authorized 20,000,000 shares; issued and outstanding June 2019 –14,201,616 shares; December 2018 - 14,151,198 shares		142		142
Additional paid-in capital		31,603		30,121
Retained earnings		508,427		492,087
Accumulated other comprehensive income		32,137		9,627
Total Stockholders' Equity		572,309		531,977
Total Liabilities and Stockholders' Equity	$	4,871,522	$	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 JUNE 30,
	2019			2018
	(Unaudited)

INTEREST INCOME
Loans	$	55,771		$	48,219
Investment securities and other		2,952			1,724
TOTAL INTEREST INCOME		58,723			49,943

INTEREST EXPENSE
Deposits		11,582			6,123
Federal Home Loan Bank advances		—			1,166
Short-term borrowings and repurchase agreements		859			180
Subordinated debentures issued to capital trust		267			238
Subordinated notes		1,094			1,024
TOTAL INTEREST EXPENSE		13,802			8,731
NET INTEREST INCOME		44,921			41,212
Provision for Loan Losses		1,600			1,950
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		43,321			39,262

NON-INTEREST INCOME
Commissions		163			312
Service charges and ATM fees		5,309			5,488
Net gains on loan sales		376			559
Late charges and fees on loans		356			385
Gain (loss) on derivative interest rate products		(44	)		11
Other income		997			704
TOTAL NON-INTEREST INCOME		7,157			7,459

NON-INTEREST EXPENSE
Salaries and employee benefits		15,428			14,947
Net occupancy and equipment expense		6,449			6,298
Postage		784			834
Insurance		662			650
Advertising		842			632
Office supplies and printing		226			301
Telephone		839			792
Legal, audit and other professional fees		630			689
Expense on other real estate and repossessions		419			2,737
Partnership tax credit investment amortization		91			91
Acquired deposit intangible asset amortization		289			412
Other operating expenses		1,724			1,532
TOTAL NON-INTEREST EXPENSE		28,383			29,915

INCOME BEFORE INCOME TAXES		22,095			16,806
Provision for Income Taxes		3,720			2,967
NET INCOME AND NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	18,375		$	13,839

Basic Earnings Per Common Share	$	1.29		$	0.98
Diluted Earnings Per Common Share	$	1.28		$	0.97
Dividends Declared Per Common Share	$	0.32		$	0.28

See Notes to Consolidated Financial Statements

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

	SIX MONTHS ENDED JUNE 30,
	2019			2018
	(Unaudited)

INTEREST INCOME
Loans	$	110,327		$	93,384
Investment securities and other		5,754			3,442
TOTAL INTEREST INCOME		116,081			96,826

INTEREST EXPENSE
Deposits		22,052			11,706
Federal Home Loan Bank advances		—			1,772
Short-term borrowings and repurchase agreements		1,780			208
Subordinated debentures issued to capital trust		534			440
Subordinated notes		2,189			2,049
TOTAL INTEREST EXPENSE		26,555			16,175
NET INTEREST INCOME		89,526			80,651
Provision for Loan Losses		3,550			3,900
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		85,976			76,751

NON-INTEREST INCOME
Commissions		497			560
Service charges and ATM fees		10,268			10,732
Net gains on loan sales		623			1,021
Late charges and fees on loans		702			774
Net realized gains on sales of available-for-sale securities		10			—
Gain (loss) on derivative interest rate products		(68	)		48
Other income		2,575			1,259
TOTAL NON-INTEREST INCOME		14,607			14,394

NON-INTEREST EXPENSE
Salaries and employee benefits		31,068			29,570
Net occupancy and equipment expense		12,850			12,683
Postage		1,550			1,700
Insurance		1,328			1,321
Advertising		1,368			1,303
Office supplies and printing		485			534
Telephone		1,742			1,511
Legal, audit and other professional fees		1,342			1,498
Expense on other real estate and repossessions		1,039			3,878
Partnership tax credit investment amortization		182			393
Acquired deposit intangible asset amortization		613			825
Other operating expenses		3,310			3,012
TOTAL NON-INTEREST EXPENSE		56,877			58,228

INCOME BEFORE INCOME TAXES		43,706			32,917
Provision for Income Taxes		7,718			5,612
NET INCOME AND NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	35,988		$	27,305

Basic Earnings Per Common Share	$	2.54		$	1.93
Diluted Earnings Per Common Share	$	2.52		$	1.91
Dividends Declared Per Common Share	$	1.39		$	0.56

See Notes to Consolidated Financial Statements

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

	THREE MONTHS ENDED JUNE 30,
	2019		2018
	(Unaudited)

Net Income	$	18,375	$	13,839

Unrealized appreciation (depreciation) on available-for-sale securities, net of taxes (credit) of $1,540 and $(121), for 2019 and 2018, respectively		5,213		(420	)

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

Change in fair value of cash flow hedge, net of taxes of $2,519 and $0, for 2019 and 2018, respectively		8,528		—

Comprehensive Income	$	32,116	$	13,419

	SIX MONTHS ENDED JUNE 30,
	2019			2018
	(Unaudited)

Net Income	$	35,988		$	27,305

Unrealized appreciation (depreciation) on available-for-sale securities, net of taxes (credit) of $2,419 and $(662), for 2019 and 2018, respectively		8,190			(2,301	)

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 $4,231 and $0, for 2019 and 2018, respectively		14,328			—

Comprehensive Income	$	58,498		$	25,004

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, March 31, 2018	$	141	$	28,624	$	451,603		$	(368	)	$	—		$	480,000
Net income		—		—		13,839			—			—			13,839
Stock issued under Stock Option
Plan		—		510		—			—			299			809
Common dividends declared,
$0.28 per share		—		—		(3,957	)		—			—			(3,957	)
Other comprehensive gain (loss)		—		—		—			(420	)		—			(420	)
Reclassification of treasury stock
per Maryland law		—		—		299			—			(299	)		—

Balance, June 30, 2018	$	141	$	29,134	$	461,784		$	(788	)	$	—		$	490,271

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

Balance, March 31, 2019	$	142	$	30,916	$	494,181		$	18,396	$	—		$	543,635
Net income		—		—		18,375			—		—			18,375
Stock issued under Stock Option
Plan		—		687		—			—		415			1,102
Common dividends declared,
$0.32 per share		—		—		(4,544	)		—		—			(4,544	)
Purchase of the Company’s
common stock		—		—		—			—		—			—
Other comprehensive gain		—		—		—			13,741		—			13,741
Reclassification of treasury stock
per Maryland law		—		—		415			—		(415	)		—

Balance, June 30, 2019	$	142	$	31,603	$	508,427		$	32,137	$	—		$	572,309

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		—		—		27,305			—			—			27,305
Stock issued under Stock Option
Plan		—		931		—			—			582			1,513
Common dividends declared,
$0.56 per share		—		—		(7,908	)		—			—			(7,908	)
Reclassification of stranded tax
effects resulting from change in
Federal income tax rate		—		—		(272	)		272			—			—
Other comprehensive gain (loss)		—		—		—			(2,301	)		—			(2,301	)
Reclassification of treasury stock
per Maryland law		—		—		582			—			(582	)		—

Balance, June 30, 2018	$	141	$	29,134	$	461,784		$	(788	)	$	—		$	490,271

								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		—		—		35,988			—		—			35,988
Stock issued under Stock Option
Plan		—		1,482		—			—		892			2,374
Common dividends declared,
$1.39 per share		—		—		(19,691	)		—		—			(19,691	)
Purchase of the Company’s
common stock		—		—		—			—		(849	)		(849	)
Other comprehensive gain		—		—		—			22,510		—			22,510
Reclassification of treasury stock
per Maryland law		—		—		43			—		(43	)		—

Balance, June 30, 2019	$	142	$	31,603	$	508,427		$	32,137	$	—		$	572,309

See Notes to Consolidated Financial Statements

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	SIX MONTHS ENDED JUNE 30,
	2019			2018
	(Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	35,988		$	27,305
Proceeds from sales of loans held for sale		34,375			49,629
Originations of loans held for sale		(43,145	)		(45,218	)
Items not requiring (providing) cash:
Depreciation		4,631			4,569
Amortization		1,059			1,296
Compensation expense for stock option grants		443			357
Provision for loan losses		3,550			3,900
Net gains on loan sales		(623	)		(1,021	)
Net realized gains on sales of available-for-sale securities		(10	)		—
Net losses on sale of premises and equipment		21			94
Net losses on sale/write-down of other real estate owned and repossessions		161			2,184
Accretion of deferred income, premiums, discounts and other		(1,990	)		(1,287	)
(Gain) loss on derivative interest rate products		68			(48	)
Deferred income taxes		578			(6,544	)
Changes in:
Interest receivable		(903	)		(111	)
Prepaid expenses and other assets		(2,031	)		6,084
Accrued expenses and other liabilities		4,443			1,857
Income taxes refundable/payable		2,555			7,370
Net cash provided by operating activities		39,170			50,416
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in loans		(83,072	)		(101,884	)
Purchase of loans		(45,240	)		(42,179	)
Purchase of premises and equipment		(6,708	)		(6,054	)
Proceeds from sale of premises and equipment		113			23
Proceeds from sale of other real estate owned and repossessions		4,537			8,856
Capitalized costs on other real estate owned		—			(143	)
Proceeds from sales of available-for-sale securities		28,057			—
Proceeds from maturities and calls of held-to-maturity securities		—			130
Proceeds from maturities and calls of available-for-sale securities		7,870			2,031
Principal reductions on mortgage-backed securities		7,402			10,530
Purchase of available-for-sale securities		(94,558	)		(6,689	)
Redemption (purchase) of Federal Home Loan Bank stock		1,345			(4,496	)
Net cash used in investing activities		(180,254	)		(139,875	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in certificates of deposit		139,518			13,616
Net increase (decrease) in checking and savings deposits		24,040			(13,655	)
Proceeds from Federal Home Loan Bank advances		—			1,454,500
Repayments of Federal Home Loan Bank advances		—			(1,323,000	)
Net decrease in short-term borrowings		(30,710	)		(232	)
Advances from borrowers for taxes and insurance		5,458			2,638
Dividends paid		(19,674	)		(7,332	)
Purchase of the Company’s common stock		(849	)		—
Stock options exercised		1,931			1,156
Net cash provided by financing activities		119,714			127,691
INCREASES ( DECREASES) IN CASH AND CASH EQUIVALENTS		(21,370	)		38,232
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		202,742			242,253
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	181,372		$	280,485

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 and six months ended June 30, 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 by attracting deposits from the general public, accepting brokered deposits and borrowing from the Federal Home Loan Bank and others. The operating results of this segment are regularly reviewed by management to make decisions about resource allocations and to assess performance. Selected information is not presented separately for the Company’s reportable segment, as there is no material difference between that information and the corresponding information in the consolidated financial statements.

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 and six months ended June 30, 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. 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 has been performed throughout 2019 and the Company continues to evaluate the impact of adopting the new guidance. We have engaged a third party to perform validation of the accuracy of our inputs into the model. This review is currently in process. 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 exact amount of any such one-time adjustment, or the overall impact of the new guidance on the Company’s consolidated financial statements. Based on the current modeling results, we anticipate that the one-time cumulative effect adjustment will be less than five percent of total stockholders’ equity.

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 periods 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 June 30,
	2019		2018
	(In Thousands, Except Per Share Data)

Basic:
Average common shares outstanding		14,192		14,125
Net income and net income available to common stockholders	$	18,375	$	13,839
Per common share amount	$	1.29	$	0.98

Diluted:
Average common shares outstanding		14,192		14,125
Net effect of dilutive stock options – based on the treasury
stock method using average market price		122		153
Diluted common shares		14,314		14,278
Net income and net income available to common stockholders	$	18,375	$	13,839
Per common share amount	$	1.28	$	0.97

	Six Months Ended June 30,
	2019		2018
	(In Thousands, Except Per Share Data)

Basic:
Average common shares outstanding		14,176		14,113
Net income and net income available to common stockholders	$	35,988	$	27,305
Per common share amount	$	2.54	$	1.93

Diluted:
Average common shares outstanding		14,176		14,113
Net effect of dilutive stock options – based on the treasury
stock method using average market price		122		153
Diluted common shares		14,298		14,266
Net income and net income available to common stockholders	$	35,988	$	27,305
Per common share amount	$	2.52	$	1.91

Options outstanding at June 30, 2019 and 2018, to purchase 309,000 and 161,400 shares of common stock, respectively, were not included in the computation of diluted earnings per common share for each of the three and six month periods because the exercise prices of such options were greater than the average market prices of the common stock for the three and six months ended June 30, 2019 and 2018, respectively.

NOTE 5: INVESTMENT SECURITIES

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

	June 30, 2019
			Gross		Gross				Tax
	Amortized		Unrealized		Unrealized		Fair		Equivalent
	Cost		Gains		Losses		Value		Yield
	(In Thousands)

AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities	$	184,302	$	7,898	$	623	$	191,577		3.01	%
Agency collateralized mortgage obligations		69,761		2,098		52		71,807		3.24
States and political subdivisions		40,622		1,643		—		42,265		4.88
	$	294,685	$	11,639	$	675	$	305,649		3.32	%

	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 June 30, 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			869			947
After five through ten years			10,133			10,495
After ten years			29,620			30,823
Securities not due on a single maturity date			254,063			263,384

		$	294,685		$	305,649

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 June 30, 2019 and December 31, 2018, was approximately $61.6 million and $95.7 million, respectively, which is approximately 20.1% 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 June 30, 2019 and December 31, 2018:

	June 30, 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	$	1,734	$	(1	)	$	56,205	$	(622	)	$	57,939	$	(623	)
Agency collateralized mortgage obligations		3,624		(52	)		—		—			3,624		(52	)
	$	5,358	$	(53	)	$	56,205	$	(622	)	$	61,563	$	(675	)

	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	)

There were no sales of available-for-sale securities during the three months ended June 30, 2019. Gross gains of $226,000 and gross losses of $216,000 resulting from sales of available-for-sale securities were realized during the six months ended June 30, 2019. There were no sales of available-for-sale securities during the three and six months ended June 30, 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 and six months ended June 30, 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 June 30, 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 and six months ended June 30, 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 June 30,				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	$	--	$	--	available-for-sale securities
					(Total reclassified amount before tax)
Income Taxes		--		--	Provision for income taxes
Total reclassifications out of accumulated
other comprehensive income	$	--	$	--

	Amounts Reclassified from Accumulated Other
	Comprehensive Income Six Months Ended June 30,					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 June 30, 2019 and December 31, 2018 were as follows:

	June 30,			December 31,
	2019			2018
	(In Thousands)

One- to four-family residential construction	$	30,255		$	26,177
Subdivision construction		12,973			13,844
Land development		46,032			44,492
Commercial construction		1,391,158			1,417,166
Owner occupied one- to four-family residential		322,207			276,866
Non-owner occupied one- to four-family residential		122,858			122,438
Commercial real estate		1,446,166			1,371,435
Other residential		796,341			784,894
Commercial business		312,965			322,118
Industrial revenue bonds		13,643			13,940
Consumer auto		201,061			253,528
Consumer other		52,077			57,350
Home equity lines of credit		120,102			121,352
Loans acquired and accounted for under ASC 310-30, net of discounts		151,694			167,651
		5,019,532			4,993,251
Undisbursed portion of loans in process		(861,054	)		(958,441	)
Allowance for loan losses		(39,254	)		(38,409	)
Deferred loan fees and gains, net		(6,769	)		(7,400	)
	$	4,112,455		$	3,989,001

Weighted average interest rate		5.25	%		5.16	%

Classes of loans by aging were as follows:

	June 30, 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	$	—	$	—	$	—	$	—	$	30,255	$	30,255	$	—
Subdivision construction		44		—		—		44		12,929		12,973		—
Land development		—		72		3,556		3,628		42,404		46,032		—
Commercial construction		—		—		—		—		1,391,158		1,391,158		—
Owner occupied one- to
four-family residential		726		189		999		1,914		320,293		322,207		—
Non-owner occupied one-
to four-family residential		170		293		533		996		121,862		122,858		—
Commercial real estate		1,121		954		3,675		5,750		1,440,416		1,446,166		—
Other residential		422		—		—		422		795,919		796,341		—
Commercial business		194		36		1,359		1,589		311,376		312,965		—
Industrial revenue bonds		—		—		—		—		13,643		13,643		—
Consumer auto		1,601		436		661		2,698		198,363		201,061		—
Consumer other		288		38		252		578		51,499		52,077		—
Home equity lines of credit		284		59		353		696		119,406		120,102		—
Loans acquired and accounted for under
ASC 310-30, net of discounts		983		340		6,612		7,935		143,759		151,694		—
		5,833		2,417		18,000		26,250		4,993,282		5,019,532		—
Less loans acquired and accounted for under
ASC 310-30, net		983		340		6,612		7,935		143,759		151,694		—

Total	$	4,850	$	2,077	$	11,388	$	18,315	$	4,849,523	$	4,867,838	$	—

December 31, 2018

Total Loans

Total

> 90 Days Past

30-59 Days

60-89 Days

Over 90