GREAT SOUTHERN BANCORP, INC. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-looking Statements When used in this Quarterly Report and in other documents filed or furnished by Great Southern Bancorp, Inc. (the “Company”) with the Securities and Exchange Commission (the “SEC”), in the Company’s press releases or other public or stockholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases “may,” “might,” “could,” “should,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “believe,” “estimate,” “project,” “intends” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements also include, but are not limited to, statements regarding plans, objectives, expectations or consequences of announced transactions, known trends and statements about future performance, operations, products and services of the Company. The Company’s ability to predict results or the actual effects of future plans or strategies is inherently uncertain, and the Company’s actual results could differ materially from those contained in the forward-looking statements. The novel coronavirus disease, or COVID-19, pandemic is adversely affecting the Company, its customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on the Company’s business, financial position, results of operations, liquidity, and prospects is uncertain. Continued deterioration in general business and economic conditions, including further increases in unemployment rates, or turbulence in domestic or global financial markets could adversely affect the Company’s revenues and the values of its assets and liabilities, reduce the availability of funding, lead to a tightening of credit, and further increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to, COVID-19, could affect the Company in substantial and unpredictable ways. Other factors that could cause or contribute to such differences include, but are not limited to: (i) expected revenues, cost savings, earnings accretion, synergies and other benefits from the Company’s merger and acquisition activities might not be realized within the anticipated time frames or at all, and costs or difficulties relating to integration matters, including but not limited to customer and employee retention, might be greater than expected; (ii) changes in economic conditions, either nationally or in the Company’s market areas; (iii) 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 credit 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) the ability to adapt successfully to technological changes to meet customers’ needs and developments in the marketplace; (ix) 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; (x) 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 Cut and Jobs Act; (xi) changes in accounting policies and practices or accounting standards; (xii) monetary and fiscal policies of the Federal Reserve Board and the U.S. Government and other governmental initiatives affecting the financial services industry; (xiii) results of examinations of the Company and Great Southern Bank by their regulators, including the possibility that the regulators may, among other things, require the Company to limit its business activities, change its business mix, increase its allowance for credit losses, write-down assets or increase its capital levels, or affect its ability to borrow funds or maintain or increase deposits, which could adversely affect its liquidity and earnings; (xiv) costs and effects of litigation, including settlements and judgments; (xv) competition; (xvi) uncertainty regarding the future of LIBOR; and (xvii) natural disasters, war, terrorist activities or civil unrest and their effects on economic and business environments in which the Company operates. The Company wishes to advise readers that the factors listed above and other risks described 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 to accounting principles generally accepted in the United States of America 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 36 ​ that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates. Allowance for Credit Losses and Valuation of Foreclosed Assets The Company believes that the determination of the allowance for credit losses involves a higher degree of judgment and complexity than its other significant accounting policies. The allowance for credit losses is calculated with the objective of maintaining an allowance level believed by management to be sufficient to absorb estimated credit losses. The allowance for credit losses is measured using an average historical loss model which incorporates relevant information about past events (including historical credit loss experience on loans with similar risk characteristics), current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the loans. The allowance for credit losses is measured on a collective (pool) basis. Loans are aggregated into pools based on similar risk characteristics including borrower type, collateral and repayment types and expected credit loss patterns. Loans that do not share similar risk characteristics, primarily classified and/or TDR loans with a balance greater than or equal to $100,000 which are classified or restructured troubled debt, are evaluated on an individual basis. For loans evaluated for credit losses on a collective basis, average historical loss rates are calculated for each pool using the Company’s historical net charge-offs (combined charge-offs and recoveries by observable historical reporting period) and outstanding loan balances during a lookback period. Lookback periods can be different based on the individual pool and represent management’s credit expectations for the pool of loans over the remaining contractual life. In certain loan pools, if the Company’s own historical loss rate is not reflective of the loss expectations, the historical loss rate is augmented by industry and peer data. The calculated average net charge-off rate is then adjusted for current conditions and reasonable and supportable forecasts. These adjustments increase or decrease the average historical loss rate to reflect expectations of future losses given economic forecasts of key macroeconomic variables including, but not limited to, unemployment rate, GDP, disposable income and market volatility. The adjustments are based on results from various regression models projecting the impact of the macroeconomic variables to loss rates. The forecast is used for a reasonable and supportable period before reverting back to historical averages using a straight-line method. The forecast adjusted loss rate is applied to the amortized cost of loans over the remaining contractual lives, adjusted for expected prepayments. The contractual term excludes expected extensions, renewals and modifications unless there is a reasonable expectation that a troubled debt restructuring will be executed. Additionally, the allowance for credit losses considers other qualitative factors not included in historical loss rates or macroeconomic forecast such as changes in portfolio composition, underwriting practices, or significant unique events or conditions. See Note 6 “Loans and Allowance for Credit Losses” included in Item 1 for additional information regarding the allowance for credit 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. Significant changes were made to management’s overall methodology for evaluating the allowance for credit losses during the periods presented in the financial statements of this report due to the adoption of ASU 2016-13. On January 1, 2021, the Company adopted the new accounting standard related to the Allowance for Credit Losses. For assets held at amortized cost basis, this standard eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. See Note 6 of the accompanying financial statements for additional information. In addition, the Company considers that the determination of the valuations of foreclosed assets held for sale involves a high degree of judgment and complexity. The carrying value of foreclosed assets reflects management’s best estimate of the amount to be realized from the sales of the assets. While the estimate is generally based on a valuation by an independent appraiser or recent sales of similar properties, the amount that the Company realizes from the sales of the assets could differ materially from the carrying value reflected in the financial statements, resulting in losses that could adversely impact earnings in future periods. 37 ​ 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, 2021, the Company had one reporting unit to which goodwill has been allocated – the Bank. If the fair value of a reporting unit exceeds its carrying value, then no impairment is recorded. If the carrying value exceeds the fair value of a reporting unit, further testing is completed comparing the implied fair value of the reporting unit’s goodwill to its carrying value to measure the amount of impairment, if any. 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, 2021, goodwill consisted of $5.4 million at the Bank reporting unit, which included goodwill of $4.2 million that was recorded during 2016 related to the acquisition of 12 branches and related deposits in the St. Louis, Mo., market. 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, 2021, the amortizable intangible assets consisted of core deposit intangibles of $1.3 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. For purposes of testing goodwill for impairment, the Company used a market approach to value its reporting unit. The market approach applies a market multiple, based on observed purchase transactions for each reporting unit, to the metrics appropriate for the valuation of the operating unit. Significant judgment is applied when goodwill is assessed for impairment. This judgment may include developing cash flow projections, selecting appropriate discount rates, identifying relevant market comparables and incorporating general economic and market conditions. Based on the Company’s goodwill impairment testing, management does not believe any of the Company’s goodwill or other intangible assets were impaired as of March 31, 2021. While management believes no impairment existed at March 31, 2021, different conditions or assumptions used to measure fair value of the reporting unit, or changes in cash flows or profitability, if significantly negative or unfavorable, could have a material adverse effect on the outcome of the Company’s impairment evaluation in the future. A summary of goodwill and intangible assets is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ December 31, ​ ​ 2021 ​ 2020 ​ ​ (In Thousands) ​ ​ ​ ​ ​ ​ ​ Goodwill – Branch acquisitions $ 5,396 $ 5,396 Deposit intangibles ​ ​ Boulevard Bank (March 2014) ​ — ​ 31 Valley Bank (June 2014) ​ 100 ​ 200 Fifth Third Bank (January 2016) ​ 1,159 ​ 1,317 ​ ​ 1,259 ​ 1,548 ​ ​ $ 6,655 ​ $ 6,944 ​ Current Economic Conditions Changes in economic conditions could cause the values of assets and liabilities recorded in the financial statements to change rapidly, resulting in material future adjustments in asset values, the allowance for credit losses, or capital that could negatively 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 an economic downturn. Unemployment rose from 4.7% in November 2007 to peak at 10.0% in October 2009. Economic conditions improved in the following years, as indicated by higher consumer confidence levels, increased economic activity and low unemployment levels. The U.S. economy continued to operate at historically strong levels until the impact of COVID-19 began to take its toll in March 2020. While U.S. economic trends have rebounded, the severity and extent of the coronavirus on the global, national and regional economies is still uncertain. The economy plunged into recession during the first quarter of 2020. Efforts to contain the spread of the coronavirus forced all but essential business activity, or any work that could not be done from home, to stop, shuttering factories, restaurants, entertainment and sports events, retail shops, personal services, and more. 38 ​ More than 22 million jobs were lost in March and April of 2020, as firms closed their doors or reduced their operations, sending employees home on furlough or layoffs. Hunkered down at home with uncertain incomes and limited buying opportunities, consumer spending plummeted. As a result, gross domestic product (GDP), the broadest measure of the nation’s economic output, plunged. Since that time, improvements in consumer spending, the GDP and employment have occurred. The CARES Act, a fiscal relief bill passed by Congress in March 2020, injected about $3 trillion into the economy through direct payments to individuals and grants to small businesses that would keep employees on their payrolls, fueling a historic bounce-back in economic activity. Also, as the crisis unfolded, the Federal Reserve acted decisively, employing a wide arsenal of tools including slashing its benchmark interest rate to zero and ensuring credit availability to businesses, households, and municipal governments. The Fed’s efforts have insulated the financial system from the problems in the economy, a significant difference than the financial crisis of 2007 and 2008. The Federal Reserve continues to maintain a highly accommodative monetary policy by maintaining short-term rates firmly at the zero lower bound and purchasing Treasury and agency mortgage-backed securities to keep long-term interest rates down. With consumer interest rates at record lows and with 30-year fixed-rate mortgages below 3%, the housing market has boomed. Home sales have been above their pre-pandemic levels, and construction activity has picked up in response. The Federal Reserve’s quantitative easing is expected to begin tapering in early 2022, while the zero-interest-rate policy is expected to remain in place until the economy is near full employment and inflation is firmly above the Federal Reserve’s 2% inflation target, which is not expected until early 2023. To help our customers navigate through the pandemic situation, we offered and supplied PPP loans and short-term modifications to loan terms. PPP loans and modifications were made in accordance with guidance from banking regulatory authorities. These modifications were not classified troubled debt restructurings, potential problem loans or non-performing loans. More severely impacted industries in our loan portfolio included retail, hotel and restaurants. While the U.S. economic recovery began with a robust rebound in mid to late 2020 from the pandemic-induced recession, challenges remain with millions still out of work and many businesses still closed or operating under reduced hours or capacity. Vaccine distribution has enabled an easing of capacity and social distancing restrictions; however, COVID variants and the impact of ability of global and localized ability to control the virus are still variables. Early in 2021, the “American Rescue Plan”, an economic relief fiscal measure of approximately $1.9 trillion with an emphasis on vaccination, individual and small business relief, was passed. Later in 2021, the “Build Back Better” recovery package is expected to be pursued with an emphasis on infrastructure, research and development, education and green energy transition. Funding is expected to come at least partially from corporate tax changes and tax increases on wealthy individuals. In March 2021, employment rose by 916,000 jobs and the national unemployment rate edged down to 6.0%. The rate is down considerably from its recent high in April 2020 but is 2.5 percentage points higher than its pre-pandemic level in February 2020.These improvements in the labor market reflect the continued resumption of economic activity previously curtailed due to the COVID-19 pandemic. The recent widespread job growth was led by gains in leisure and hospitality, public and private education, and construction. Employment in leisure and hospitality increased by 280,000, as pandemic-related restrictions eased in many parts of the country, but is still down by 3.1 million (18.5%) since February 2020. Nearly two-thirds of the increase was in food services and drinking places (176 million). Employment also increased in both public and private education, reflecting the continued resumption of in-person learning and other school-related activities in many parts of the country, as well as in the construction sector; however, the employment rates in these industries are still below the February 2020 levels. The number of unemployed persons at 9.7 million continued to trend down in March 2020 but is 4.0 million higher than February 2020. In March 2021, the U.S. labor force participation rate (the share of working-age Americans employed or actively looking for a job) was 1.8 percentage points lower, at 61.5% than in February 2020 pre-COVID levels. The unemployment rate for the Midwest, where the Company conducts most of its business, decreased from 5.7% in December 2020 to 4.8% in March 2021. Unemployment rates for March 2021 were Arkansas at 4.4%, Colorado at 6.4%, Georgia at 4.5%, Illinois at 7.1%, Iowa at 3.7%, Kansas at 3.7%, Minnesota at 4.2%, Missouri at 4.2%, Nebraska at 2.9%, Oklahoma at 4.2%, and Texas at 6.9%. Of the metropolitan areas in which the Company does business, all but three were below the national unemployment rate of 6.6% for February 2021. Chicago leads with an 8.3% unemployment rate, with Denver and Dallas following at 6.9% and 6.8% respectfully. 39 ​ Housing Sales of new single-family homes in March 2021 were at a seasonally adjusted annual rate of 1,021,000 according to U.S. Census Bureau and the Department of Housing and Urban Development estimates. This is 20.7% above the revised February 2020 rate of 846,000 and is 66.8 percent above the March 2020 estimate of 612,000. The median sales price of new houses sold in March 2021 was $330,800, up slightly from $321,400 a year earlier, and the average sales price of $397,800 was up slightly from $375,300 a year ago in March 2020. The inventory of new homes for sale at the end of March 2021 would support 3.6 months’ supply at the current sales rate, down from 6.4 months in March 2020. Existing-home sales fell 3.7% in March 2021 from the prior month to a seasonally adjusted annual rate of 6.01 million as sales in all major regions declined, according to the National Association of Realtors (NAR), marking two consecutive months of declines. March 2021 sales are higher by 12.3% from one year ago when home sales first started to fall due to the pandemic, making record-high home prices and gains. While each of the four major U.S. regions experienced month-over-month drops, all four areas welcomed year-over-year gains in home sales. The median existing home price for all housing types in March 2021 was $329,100, up 17.2% from March 2020 at $280,700, as prices increased in every region. March’s national price jump marks the 109th straight month of year-over-year gains. Existing home sales in the Midwest declined 2.3% to an annual rate of 1,280,000 in March 2021, a 0.8% rise from a year ago. The Median price in the Midwest was $248,200, a 13.5% increase from March 2020. First-time buyers accounted for 32% of sales in March 2021, up from 31% in February 2021 and down from 34% in March 2020. According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage was 3.08% in March 2021, up from 2.81% in February 2021. The average commitment rate for all of 2020 was 3.11%, down from 4.54% for 2018. Commercial Real Estate Other Than Housing The COVID-19 pandemic upended the U.S. apartment sector in 2020, resulting in changing attitudes regarding working from home. Renters have sought more space and affordability; i.e. rents for two-bedroom units have held up better, with studios and downtown units experiencing the worst losses. CoStar estimates that demand for apartments neared the seasonal average totaling roughly 100,000 units in the first quarter of 2021. Renters continue to favor suburban locations, where demand continues to hit record levels and vacancies have fallen below pre-COVID lows. Demand at downtown locations has returned, however, with vacancy rates appearing to have peaked. Apartment rents rebounded in March 2021 with rents rising a full percentage point. If the level of growth so far in 2021 continues, this will effectively make up for the rent losses of 2020 and put rent growth back on the pre-COVID trajectory. Downtown areas in secondary markets are posting the largest gains this year thus far.Multifamily assets remain in demand among investors. As of March 31, 2021, national apartment vacancy rates had recovered to pre-COVID levels at 6.4% compared to 6.2% as of December 2019. Our market areas reflected the following vacancy levels as of March 31, 2021: Springfield, Mo. at 2.9%, St. Louis at 8.4%, Kansas City at 8.3%, Minneapolis at 7.2%, Tulsa, Okla. at 6.8%, Dallas-Fort Worth at 8.5%, Chicago at 7.8%, Atlanta at 7.7%, and Denver at 7.0%. Even before the disruption caused by the COVID-19 pandemic, the trend of slowing growth in the office industry was expected to continue in 2020 and linger through 2021. The office demand losses that characterized much of last year have carried into 2021. Office-using employment remained nearly one million jobs lower than the peak level from the first quarter of 2020. Absorption posted its worst quarter on record as tenants continue to downsize and adopt hybrid work models. While office-using job sectors have shown resilience, the office sector has about 800,000 fewer office jobs than the peak at the start of 2020. The current baseline forecast shows a steady, moderate acceleration with office-using job totals surpassing the prior peak by the end of this year; however, overall projected job growth may no longer closely correlate to office demand. At March 31, 2021, national office vacancy rates had increased slightly to 12.1% while our market areas reflected the following vacancy levels: Springfield, Mo. at 3.2%, St. Louis at 8.2%, Kansas City at 9.2%, Minneapolis at 9.4%, Tulsa, Okla. at 11.8%, Dallas-Fort Worth at 18.0%, Chicago at 14.0%, Atlanta at 13.8% and Denver at 13.7%. 40 ​ Retail sales activity surged in the first quarter of 2021, as focus on coordinated vaccine distribution and supporting strong consumer confidence bolstered leasing activity and overall economic growth. While e-commerce continues to expand, consumers have continued to visit physical stores for both their basic needs and discretionary purchases. Pockets of strength in the retail industry include discounters such as Dollar General, Dollar Tree, TJ Maxx, and Ross Dress for Less; general merchandisers such as Target and Walmart; pharmacies such as Walgreens; pet stores; and home improvement/tool retailers. While these essential-oriented tenant types remain a positive source of demand, several areas of the retail sector remain under financial strain. Ongoing capacity restraints for service-oriented retailers such as restaurants, together with reduced foot traffic for various indoor malls and retailer, continues to contribute to both bankruptcies and store closure announcements particularly concentrated throughout the restaurant, apparel and department store subtypes. High-quality properties with strong tenant mixes and essential-oriented anchors, in central location and growing demographics continue to trade. At March 31, 2021, national retail vacancy rates stayed the same at 5.1% while our market areas reflected the following vacancy levels: Springfield, Mo. at 3.7%, St. Louis at 4.9%, Kansas City at 5.7%, Minneapolis at 3.7%, Tulsa, Okla. at 3.7%, Dallas-Fort Worth at 6.2%, Chicago at 6.1%, Atlanta at 5.4% and Denver at 5.3%. The unprecedented rise in online shopping and quick delivery demands brought on by the pandemic have propelled industrial demand to all-time highs. Leasing activity in the industrial sector improved throughout the first quarter of 2021, primarily led by commitments from Amazon, power-grocers Walmart and Target, smaller healthcare and medical-oriented supply companies, food and beverage producers and manufacturers. Strong demand from a wide variety of business types and segments was enough to offset new supply and decrease vacancy rates. Persistent demand from e-commerce and third-party logistics (3PLs) companies continues to drive demand. Investors continue to aggressively pursue industrial acquisitions. At March 31, 2021, national industrial vacancy rates decreased slightly to 5.5% while our market areas reflected the following vacancy levels: Springfield, Mo. at 2.1%, St. Louis at 4.6%, Kansas City at 5.2%, Minneapolis at 4.0%, Tulsa, Okla. at 3.9%, Dallas-Fort Worth at 6.9%, Chicago at 6.2%, Atlanta at 4.7% and Denver at 6.9%. Our management will continue to monitor regional, national, and global economic indicators such as unemployment, GDP, housing starts and prices, commercial real estate occupancy, absorption and rental rates, as these could significantly affect customers in each of our market areas. COVID-19 Impact to Our Business and Response Great Southern is actively monitoring and responding to the effects of the COVID-19 pandemic, including the administration of vaccines in its local markets. As always, the health, safety and well-being of our customers, associates and communities, while maintaining uninterrupted service, are the Company’s top priorities. Centers for Disease Control and Prevention (CDC) guidelines, as well as directives from federal, state and local officials, are being closely followed to make informed operational decisions. The Company continues to work diligently with its nearly 1,200 associates to enforce the most current health, hygiene and social distancing practices. A significant number of non-frontline associates continue to work from home. Teams in nearly every operational department have been split, with part of each team working at an off-site disaster recovery facility to promote social distancing and to avoid service disruptions. To date, there have been no service disruptions or reductions in staffing. With the advent of COVID-19 vaccinations in the Company’s markets, plans are being considered to allow associates working from home or other sites to return to their normal workplace in the third quarter of 2021, dependent on health and safety conditions. Taking care of customers and providing uninterrupted access to services are top priorities. As always, customers can conduct their banking business using the banking center network, online and mobile banking services, ATMs, Telephone Banking, and online account opening services. As health conditions in local markets dictate, Great Southern banking center lobbies are open following social distancing and health protocols. Great Southern continues to work with customers experiencing hardships caused by the pandemic. As a resource to customers, a COVID-19 information center has been made available on the Company’s website, www.GreatSouthernBank.com. General information about the Company’s pandemic response, how to receive assistance, and how to avoid COVID-19 scams and fraud are included. 41 ​ Impacts to Our Business Going Forward : The magnitude of the impact on the Company of the COVID-19 pandemic continues to evolve, and will ultimately depend on the remaining length and severity of the economic downturn brought on by the pandemic. Some positive economic signs have occurred in 2021, such as lower unemployment rates, improving gross domestic product (“GDP”) levels and other measures of the economy and increased vaccination rates. The Company expects that the COVID-19 pandemic could still impact our business in one or more of the following ways, among others. Each of these factors could, individually or collectively, result in reduced net income in future periods. ● Consistently low market interest rates for a significant period of time may have a negative impact on our variable rate loans, resulting in reduced net interest income ● Certain fees for deposit and loan products may be waived or reduced ● Non-interest expenses may increase as we continue to deal with the effects of the COVID-19 pandemic, including cleaning costs, supplies, equipment and other items ● Banking center lobbies have been closed at various times, and may close again in future periods if the pandemic situation worsens again ● Additional loan modifications may occur and borrowers may default on their loans, which may necessitate further increases to the allowance for credit losses ● A contraction in economic activity may reduce demand for our loans and for our other products and services Paycheck Protection Program Loans Great Southern is actively participating in the Paycheck Protection Program (PPP) through the Small Business Administration (SBA). The PPP has been met with very high demand throughout the country, resulting in a second round of funding through an amendment to the CARES Act. In the earlier round of the PPP, we originated approximately 1,600 PPP loans totaling approximately $121 million. As of May 5, 2021, full forgiveness proceeds have been received from the SBA for 1,249 of these PPP loans totaling approximately $73 million. On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act authorized the reopening of the PPP for eligible first-draw and second-draw borrowers which began on January 19, 2021, and had an original expiration date of March 31, 2021. On March 30, 2021, the PPP Extension Act of 2021 was signed, extending the PPP an additional two months to May 31, 2021, and providing an additional 30-day period for the SBA to process applications that are still pending. Since the reopening period began in January 2021, the Company has funded 1,574 loans totaling approximately $56 million. Great Southern receives fees from the SBA for originating PPP loans based on the amount of each loan. At March 31, 2021, remaining net deferred fees related to PPP loans totaled $3.9 million. The fees, net of origination costs, are deferred in accordance with standard accounting practices and will be accreted to interest income on loans over the contractual life of each loan. These loans originated in 2020 generally have a contractual maturity of two years from origination date and those originated in 2021 generally have a contractual maturity of five years from the origination date, but may be repaid or forgiven (by the SBA) sooner. If these loans are repaid or forgiven prior to their contractual maturity date, the remaining deferred fee for such loan will be accreted to interest income on loans immediately. We expect a portion of these remaining net deferred fees will accrete to interest income in the second quarter of 2021. In the three months ended March 31, 2021, Great Southern recorded approximately $1.2 million of these net deferred fees in interest income on loans. Loan Modifications At March 31, 2021, the Company had remaining 19 modified commercial loans with an aggregate principal balance outstanding of $141 million and 92 modified consumer and mortgage loans with an aggregate principal balance outstanding of $5 million. These balances have decreased from $233 million and $18 million, respectively, for these loan categories at December 31, 2020. The loan modifications are within the guidance provided by the CARES Act, the federal banking regulatory agencies, the SEC and the Financial Accounting Standards Board (FASB); therefore, they are not considered TDRs. At March 31, 2021, the largest total modified loans by collateral type were in the following categories: hotel/motel - $69 million; healthcare - $28 million; retail - $22 million; multifamily - $11 million. A portion of the loans modified at March 31, 2021, may be further modified, and new loans may be modified, within the guidance provided by the CARES Act (and subsequent legislation enacted in December 2020), the federal banking regulatory agencies, the SEC and the FASB if a more severe or lengthier deterioration in economic conditions occurs in future periods. 42 ​ General The profitability of the Company and, more specifically, the profitability of its primary subsidiary, the Bank, depend primarily on net interest income, as well as provisions for credit losses and the level of non-interest income and non-interest expense. Net interest income is the difference between the interest income the Bank earns on its loans and investment portfolios, and the interest it pays on interest-bearing liabilities, which consists mainly of interest paid on deposits and borrowings. Net interest income is affected by the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on these balances. When interest-earning assets approximate or exceed interest-bearing liabilities, any positive interest rate spread will generate net interest income. Great Southern’s total assets increased $77.4 million, or 1.4%, from $5.53 billion at December 31, 2020, to $5.60 billion at March 31, 2021. Details of the current period changes in total assets are provided in the “Comparison of Financial Condition at March 31, 2021 and December 31, 2020” section of this Quarterly Report on Form 10-Q. Loans. Net outstanding loans decreased $11.1 million, or 0.3%, from $4.30 billion at December 31, 2020, to $4.29 billion at March 31, 2021. The net decrease in loans reflects reductions of $6.7 million in the FDIC-assisted acquired loan portfolios. This decrease was primarily in construction loans, home equity lines of credit, and consumer auto loans. This decrease was offset by increases in other residential (multi-family) loans and commercial real estate loans. Excluding FDIC-assisted acquired loans and mortgage loans held for sale, total gross loans decreased $2.7 million, or 0.1%, from December 31, 2020 to March 31, 2021. 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. We expect minimal loan growth for the foreseeable future due to the remaining uncertainty resulting from the COVID-19 pandemic. 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 other residential (multi-family) loans and commercial real estate loans and in most of Great Southern’s primary lending locations, including Springfield, St. Louis, Kansas City, Des Moines and Minneapolis, as well as our loan production offices in Atlanta, Chicago, Dallas, Denver, Omaha and Tulsa. Certain minimum underwriting standards and monitoring help assure the Company’s portfolio quality. Great Southern’s loan committee reviews and approves all new loan originations in excess of lender approval authorities. Generally, the Company considers commercial construction, consumer, 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. In 2019, the Company made the decision to discontinue indirect auto loan originations. 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 March 31, 2021, 0.1% of the owner occupied portfolio had loan-to-value ratios above 100% at origination, all of which were FDIC-acquired loans. At December 31, 2020, none of our owner occupied one- to four-family residential loans had loan-to-value ratios above 100% at origination. At March 31, 2021 and December 31, 2020, an estimated 0.6% of total non-owner occupied one- to four-family residential loans had loan-to-value ratios above 100% at origination. At March 31, 2021, TDRs, including FDIC-acquired loans, totaled $4.0 million, or 0.09% of total loans, an increase of $689,000 from $3.3 million, or 0.08% of total loans, at December 31, 2020. The December 31, 2020 amount excludes $1.7 million of FDIC-acquired loans accounted for under ASC 310-30. 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 43 ​ collection. For TDRs occurring during the three months ended March 31, 2021, none were restructured into multiple new loans. For TDRs occurring during the year ended December 31, 2020, five loans totaling $107,000 were restructured into multiple new loans. For further information on TDRs, see Note 6 of the Notes to Consolidated Financial Statements contained in this report. In accordance with the CARES Act and guidance from the banking regulatory agencies, we made certain short-term modifications to loan terms to help our customers navigate through the current pandemic situation. Although loan modifications were made, they did not result in these loans being classified as TDRs, potential problem loans or non-performing loans. As of March 31, 2021, $141 million of commercial loans and $5 million of residential and consumer loans were subject to such modifications. If more severe or lengthier negative impacts of the COVID-19 pandemic occur or the effects of the SBA loan programs and other loan and stimulus programs do not enable companies and individuals to completely recover financially, this could result in more and/or longer-term modifications, which may be deemed to be TDRs, additional potential problem loans and/or additional non-performing loans. The level of non-performing loans and foreclosed assets affects our net interest income and net income. We generally do not accrue interest income on these loans and do not recognize interest income until the loans are repaid or interest payments have been made for a period of time sufficient to provide evidence of performance on the loans. Generally, the higher the level of non-performing assets, the greater the negative impact on interest income and net income. The Company continues its preparation for discontinuation of interest rates such as LIBOR. LIBOR is a benchmark interest rate referenced in a variety of agreements that are used by the Company, but by far the most significant area impacted by LIBOR is related to commercial and residential mortgage loans. After 2021, certain LIBOR rates may no longer be published and it is expected to eventually be discontinued as a reference rate. Other interest rates used globally could also be discontinued for similar reasons. The Company has been monitoring its portfolio of loans tied to LIBOR on a regular frequency since 2019, with specific groups of loans identified. The Company implemented robust LIBOR fallback language for all commercial loan transactions beginning near the end of 2018, with such language implemented with all new originations and renewed/modified commercial loans since that time. The Company is particularly monitoring the remaining group of loans that originated prior to the fourth quarter of 2018, have not been renewed or modified, and do not mature prior to December 31, 2021. This represented approximately 100 commercial loans totaling approximately $500 million; however, only 40 of those loans, totaling $73 million, mature after June 2023 (the date upon which the LIBOR indices used by the Company are expected to no longer be available). The Company also has a portfolio of residential mortgage loans tied to LIBOR indices with standard index replacement language included (approximately $400 million), and that portfolio is being monitored for potential changes that may be facilitated by the mortgage industry. As described, the vast majority of the loan portfolio tied to LIBOR now includes robust LIBOR replacement language which identifies appropriate “trigger” events for the cessation of LIBOR and the steps that the Company will take upon the occurrence of one or more of those events, including adjustments to any rate margin to ensure that the replacement interest rate on the loan is equivalent to the previous LIBOR-based rate. Available-for-sale Securities. In the three months ended March 31, 2021, available-for-sale securities increased $42.7 million, or 10.3%, from $414.9 million at December 31, 2020, to $457.7 million at March 31, 2021. The increase was primarily due to the purchase of U.S. Government agency fixed-rate multi-family mortgage-backed securities and collateralized mortgage obligation securities, partially offset by calls of municipal securities and normal monthly payments received related to the portfolio of these U.S. Government agency 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, 2021, total deposit balances increased $110.0 million, or 2.4%. Transaction account balances increased $249.2 million, or 8.0%, to $3.38 billion at March 31, 2021, while retail certificates of deposit decreased $80.9 million, or 6.6%, to $1.15 billion at March 31, 2021. The increases in transaction accounts were primarily a result of increases in various money market accounts and NOW deposit accounts. Retail certificates of deposit decreased due to a decrease in retail certificates generated through the banking center network and decreases in National CDs initiated through internet channels. CDs initiated through internet channels experienced a planned decrease due to increases in overall liquidity levels and to reduce the Company’s cost of funds. Customer deposits at March 31, 2021 and December 31, 2020, totaling $36.5 million and $39.4 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 $100.4 million at March 31, 2021, a decrease of $58.3 million from $158.7 million at December 31, 2020. The brokered deposits were allowed to mature without replacement as other deposit categories increased and to reduce the Company’s cost of funds. 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 44 ​ interest penalty. When loan demand trends upward, we can increase rates paid on deposits to attract more deposits and utilize brokered deposits to provide additional funding. The level of competition for deposits in our markets is high. It is our goal to gain deposit market share, particularly checking accounts, in our branch footprint. To accomplish this goal, increasing rates to attract deposits may be necessary, which could negatively impact the Company’s net interest margin. Our ability to fund growth in future periods may also depend on our ability to continue to access brokered deposits and FHLBank advances. In times when our loan demand has outpaced our generation of new deposits, we have utilized brokered deposits and FHLBank advances to fund these loans. These funding sources have been attractive to us because we can create either fixed or variable rate funding, as desired, which more closely matches the interest rate nature of much of our loan portfolio. It also gives us greater flexibility in increasing or decreasing the duration of our funding. While we do not currently anticipate that our ability to access these sources will be reduced or eliminated in future periods, if this should happen, the limitation on our ability to fund additional loans could have a material adverse effect on our business, financial condition and results of operations. Securities sold under reverse repurchase agreements with customers. Securities sold under reverse repurchase agreements with customers decreased $23.5 million from $164.2 million at December 31, 2020 to $140.7 million at March 31, 2021. These balances fluctuate over time based on customer demand for this product. 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, which are discussed below). 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 has been 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 has been on-going and increases in cash flow expectations have been recognized as increases in accretable yield through interest income. Decreases in cash flow expectations have been recognized as impairments through the allowance for credit 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 also implemented rate change increases of 0.25% on eight additional occasions beginning December 14, 2016 and through December 31, 2018, with the Federal Funds rate reaching as high as 2.50%. After December 2018, the FRB paused its rate increases and, in July, September and October 2019, implemented rate change decreases of 0.25% on each of those occasions. At December 31, 2019, the Federal Funds rate stood at 1.75%. In response to the COVID-19 pandemic, the FRB decreased interest rates on two occasions in March 2020, a 0.50% decrease on March 3 and a 1.00% decrease on March 16. At March 31, 2021, the Federal Funds rate stood at 0.25%. The FRB met in April 2021 and indicated they plan to keep the rates steady. A substantial portion of Great Southern’s loan portfolio ($2.00 billion at March 31, 2021) 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, 2021. Of these loans, $1.97 billion had interest rate floors. Great Southern also has a portfolio of loans ($246 million at March 31, 2021) tied to a “prime rate” of interest and will adjust immediately with changes to the “prime rate” of interest. A rate cut by the FRB generally would have an anticipated immediate negative impact on the Company’s net interest income due to the large total balance of loans tied to the one-month or three-month LIBOR index and will be subject to adjustment at least once within 90 days or loans which generally adjust immediately as the Federal Funds rate adjusts. Interest rate floors may at least partially mitigate the negative impact of interest rate decreases. Loans at their floor rates are, however, subject to the risk that borrowers will seek to refinance elsewhere at the lower market rate. Because the Federal Funds rate is again very 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, 2021, Great Southern’s interest rate risk models indicate that, generally, rising interest rates are expected to have a positive impact on the Company’s net interest income, while declining interest rates are expected to have a negative impact on net interest income. We model various interest rate scenarios for rising and falling rates, including both parallel and non-parallel shifts in rates. The results of our modeling indicate that net interest income is not likely to be significantly affected either positively or negatively in the first twelve months following a rate change, regardless of any changes in interest rates, because our portfolios are relatively well-matched in a twelve-month horizon. In a situation where market interest rates decrease significantly in a short period of time, as they did in March 2020, our net interest margin decrease may be more pronounced in the very near term (first one to three months), due to fairly rapid decreases in LIBOR interest rates. In the subsequent months we expect that the net interest margin would stabilize and begin to improve, as renewal interest rates on maturing time deposits are expected to decrease compared to the current rates paid on those products. During 2020, we did experience some compression of our net interest margin due to 2.25% of 45 ​ Federal Fund rate cuts during the nine month period of July 2019 through March 2020. Margin compression primarily resulted from changes in the asset mix, mainly the addition of lower-yielding asset and the issuance of subordinated notes during 2020. LIBOR interest rates have decreased, putting pressure on loan yields, and strong pricing competition for loans and deposits remains in most of our markets. 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, 2021 and 2020” 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. In 2010, sweeping financial regulatory reform legislation entitled the “Dodd-Frank Wall Street Reform and Consumer Protection Act” (the “Dodd-Frank Act”) was signed into law. The Dodd-Frank Act implemented far-reaching changes across the financial regulatory landscape. Certain aspects of the Dodd-Frank Act have been affected by the more recently enacted Economic Growth Act, as defined and discussed below under “-Economic Growth Act.” Capital Rules. The federal banking agencies have adopted regulatory capital rules that substantially amend the risk-based capital rules applicable to the Bank and the Company. The rules implement the “Basel III” regulatory capital reforms and changes required by the Dodd-Frank Act. “Basel III” refers to various documents released by the Basel Committee on Banking Supervision. For the Company and the Bank, the general effective date of the rules was January 1, 2015, and, for certain provisions, various phase-in periods and later effective dates apply. The chief features of these rules are summarized below. The rules refine the definitions of what constitutes regulatory capital and add a new regulatory capital element, common equity Tier 1 capital. The minimum capital ratios are (i) a common equity Tier 1 (“CET1”) risk-based capital ratio of 4.5%; (ii) a Tier 1 risk-based capital ratio of 6%; (iii) a total risk-based capital ratio of 8%; and (iv) a Tier 1 leverage ratio of 4%. In addition to the minimum capital ratios, the rules include a capital conservation buffer, under which a banking organization must have CET1 more than 2.5% above each of its minimum risk-based capital ratios in order to avoid restrictions on paying dividends, repurchasing shares, and paying certain discretionary bonuses. The capital conservation buffer 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 revised prompt corrective action requirements, insured depository institutions are required to meet the following in order to qualify as “well capitalized:” (i) a common equity Tier 1 risk-based capital ratio of at least 6.5%, (ii) a Tier 1 risk-based capital ratio of at least 8%, (iii) a total risk-based capital ratio of at least 10% and (iv) a Tier 1 leverage ratio of 5%, and must not be subject to an order, agreement or directive mandating a specific capital level. Economic Growth Act. In May 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Economic Growth Act”), was enacted to modify or eliminate certain financial reform rules and regulations, including some implemented under the Dodd-Frank Act. While the Economic Growth Act maintains most of the regulatory structure established by the Dodd-Frank Act, it amends 46 ​ certain aspects of the regulatory framework for small depository institutions with assets of less than $10 billion and for large banks with assets of more than $50 billion. Many of these amendments could result in meaningful regulatory changes. The Economic Growth Act, among other matters, expands the definition of qualified mortgages which may be held by a financial institution and simplifies the regulatory capital rules for financial institutions and their holding companies with total consolidated assets of less than $10 billion by instructing the federal banking regulators to establish a single “Community Bank Leverage Ratio” 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 “well-capitalized” under the prompt corrective action rules. Effective January 1, 2020, the Community Bank Leverage Ratio was 9.0%. In April 2020, pursuant to the CARES Act, the federal bank regulatory agencies announced the issuance of two interim final rules, effective immediately, to provide temporary relief to community banking organizations. Under the interim final rules, the Community Bank Leverage Ratio requirement is a minimum of 8.5% for calendar year 2021, and 9% thereafter. The Company and the Bank have chosen to not utilize the new Community Bank Leverage Ratio due to the Company’s size and complexity, including its commercial real estate and construction lending concentrations and significant off-balance sheet funding commitments. In addition, the Economic Growth Act includes regulatory relief in the areas of examination cycles, call reports, mortgage disclosures and risk weights for certain high-risk commercial real estate loans. Business Initiatives Great Southern is actively monitoring and responding to the effects of the evolving COVID-19 pandemic. As always, the health, safety and well-being of our customers, associates and communities while maintaining uninterrupted service are the Company’s top priorities. See the “COVID-19 Business Impact and Response” section of this report for further information, including the Company’s participation in the SBA’s PPP for small businesses. The Company’s banking center network continues to evolve. In the Joplin, Mo., market, the Company purchased a banking facility in late 2019 vacated by another financial institution, which included a contractual black-out period ending in April 2021. A third party vendor has been engaged by the Company to redesign this facility as a “bank of the future” prototype to incorporate evolving customer preferences. Variations of this prototype design may be utilized in other select banking centers in the Company’s footprint in the future. The Company expects the new office in Joplin to be completed in the third quarter of 2021, whereupon the nearby leased banking center at 1710 E. 32nd Street will be consolidated into this new office. There are two banking centers currently serving the Joplin market. Great Southern Bank has been recognized as part of Forbes’ annual list of the World’s Best Banks 2021. Great Southern was ranked first in the list of best banks in the United States. The World’s Best Banks list is comprised of the financial institutions that differentiate their services and build trustworthy relationships with their customers. Some 500 banks around the world are featured on the list, which was announced online on April 13, 2021, and can currently be viewed on the Forbes website. The study involved asking 43,000 bank customers from 28 countries to rate banks they are involved with on general satisfaction and key attributes like trust, terms and conditions, customer services, digital services and financial advice. The Company announced that its 2021 Annual Meeting of Stockholders, to be held at 10 a.m. Central Time on May 12, 2021, will be a virtual meeting over the internet and will not be held at a physical location. Stockholders will be able to attend the Annual Meeting via a live webcast. Holders of record of Great Southern Bancorp, Inc. common stock at the close of business on the record date, March 3, 2021, may vote during the live webcast of the Annual Meeting or by proxy. Please see the Company’s Notice of Annual Meeting and Proxy Statement available on the Company’s website, www.GreatSouthernBank.com, (click “About” then “Investor Relations”) for additional information about the virtual meeting. Comparison of Financial Condition at March 31, 2021 and December 31, 2020 During the three months ended March 31, 2021, the Company’s total assets increased by $77.4 million to $5.60 billion. The increase was primarily attributable to increases in available-for-sale investment securities and cash equivalents. Cash and cash equivalents were $612.6 million at March 31, 2021, an increase of $48.8 million, or 8.7%, from $563.7 million at December 31, 2020. These additional funds were held at the Federal Reserve Bank and primarily were the result of increases in deposits. 47 ​ The Company’s available-for-sale securities increased $42.7 million, or 10.3%, compared to December 31, 2020. The increase was primarily due to the purchase of U.S. Government agency fixed-rate multi-family mortgage-backed securities and collateralized mortgage obligation securities, partially offset by calls of municipal securities and normal monthly payments received related to the portfolio of these U.S. Government agency securities. The available-for-sale securities portfolio was 8.2% and 7.5% of total assets at March 31, 2021 and December 31, 2020, respectively. Net loans decreased $11.1 million from December 31, 2020, to $4.29 billion at March 31, 2021. Excluding FDIC-assisted acquired loans and mortgage loans held for sale, total gross loans (including the undisbursed portion of loans) decreased $2.7 million, or 0.1%, from December 31, 2020 to March 31, 2021. This decrease was primarily in construction loans ($24 million), consumer auto loans ($13 million) and home equity lines of credit ($6 million). These decreases were partially offset by increases in other residential (multi-family) loans ($28 million) and commercial real estate loans ($12 million). Total liabilities increased $95.6 million, from $4.90 billion at December 31, 2020 to $4.99 billion at March 31, 2021. The increase was primarily attributable to an increase in deposits, partially offset by a decrease in securities sold under reverse repurchase agreements. Total deposits increased $110.0 million, or 2.4%, to $4.63 billion at March 31, 2021. Transaction account balances increased $249.2 million to $3.38 billion at March 31, 2021, while retail certificates of deposit decreased $80.9 million compared to December 31, 2020, to $1.15 billion at March 31, 2021. The increase in transaction accounts was primarily a result of increases in NOW deposit accounts, money market accounts and Insured Cash Sweep (ICS) reciprocal accounts. Interest-bearing checking accounts increased $172.2 million while demand deposit accounts increased $77.0 million. Customer retail certificates of deposit initiated through our banking center network decreased $27.0 million and certificates of deposit initiated through our national internet network decreased $51.0 million. Customer deposits at March 31, 2021 and December 31, 2020 totaling $36.5 million and $39.4 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 $100.4 million at March 31, 2021, a decrease of $58.3 million from $158.7 million at December 31, 2020. The brokered deposits were allowed to mature without replacement as other deposit categories increased. Securities sold under reverse repurchase agreements with customers decreased $23.5 million from $164.2 million at December 31, 2020 to $140.7 million at March 31, 2021. These balances fluctuate over time based on customer demand for this product. Total stockholders’ equity decreased $18.3 million from $629.7 million at December 31, 2020 to $611.5 million at March 31, 2021. The Company recorded net income of $18.9 million for the three months ended March 31, 2021. In addition, total stockholders’ equity increased $920,000 due to stock option exercises. Accumulated other comprehensive income decreased $15.5 million due to decreases in the fair value of available-for-sale investment securities and the termination value of the cash flow hedge. Stockholders’ equity also decreased due to dividends declared on common stock of $4.7 million and repurchases of the Company’s common stock totaling $3.8 million. In addition, the initial adoption of the CECL accounting standard for credit losses resulted in a decrease in stockholders’ equity of $14.2 million. Results of Operations and Comparison for the Three Months Ended March 31, 2021 and 2020 General Net income was $18.9 million for the three months ended March 31, 2021 compared to $14.9 million for the three months ended March 31, 2020. This increase of $4.0 million, or 26.9%, was primarily due to a decrease in the provision for credit losses on loans and unfunded commitments of $4.2 million, or 109.7%, an increase in noninterest income of $2.4 million, or 32.2%, and a decrease in noninterest expense of $494,000, or 1.6%, partially offset by an increase in income tax expense of $2.3 million, or 82.1%, and a decrease in net interest income of $849,000, or 1.9%. Total Interest Income Total interest income decreased $6.8 million, or 11.9%, during the three months ended March 31, 2021 compared to the three months ended March 31, 2020. The decrease was due to a $6.4 million decrease in interest income on loans and a $420,000 decrease in interest income on investments and other interest-earning assets. Interest income on loans decreased for the three months ended March 31, 2021 compared to the same period in 2020, due to lower average rates of interest on loans, partially offset by higher average balances. Interest income from investment securities and other interest-earning assets decreased during the three months 48 ​ ended March 31, 2021 compared to the same period in 2020 primarily due to lower average rates of interest, partially offset by higher average balances of investment securities and other interest-earning assets. Interest Income – Loans During the three months ended March 31, 2021 compared to the three months ended March 31, 2020, interest income on loans decreased $8.6 million as a result of lower average interest rates on loans. The average yield on loans decreased from 5.15% during the three months ended March 31, 2020, to 4.39% during the three months ended March 31, 2021. This decrease was primarily due to decreased yields in most loan categories as a result of decreased LIBOR and Federal Funds interest rates. Interest income on loans increased $2.2 million as the result of higher average loan balances, which increased from $4.23 billion during the three months ended March 31, 2020, to $4.41 billion during the three months ended March 31, 2021. The higher average balances were primarily due to organic loan growth in commercial business loans, other residential (multi-family) loans, commercial real estate loans and one- to four-family residential loans, partially offset by decreases in outstanding construction loans and consumer loans. On an on-going basis, the Company has estimated the cash flows expected to be collected from FDIC-acquired loan pools. For each of the loan portfolios acquired, the cash flow estimates have increased, based on the payment histories and the collection of certain loans, thereby reducing loss expectations of certain loan pools, resulting in adjustments to be spread on a level-yield basis over the remaining expected lives of the loan pools. The entire amount of the discount adjustment has been and will be accreted to interest income over time. For the three months ended March 31, 2021 and 2020, the adjustments increased interest income by $691,000 and $1.9 million, respectively. As of March 31, 2021, the remaining accretable yield adjustment that will affect interest income was $1.3 million. Of the remaining adjustments affecting interest income, we expect to recognize approximately $900,000 of interest income during the remainder of 2021. As discussed in Note 6 of the Notes to Consolidated Financial Statements contained in this report, we adopted the new accounting standard related to accounting for credit losses as of January 1, 2021. With the adoption of this standard, there is no further reclassification of discounts from non-accretable to accretable subsequent to December 31, 2020. All adjustments made prior to January 1, 2021, will continue to be accreted to interest income. Apart from the yield accretion, the average yield on loans was 4.33% during the three months ended March 31, 2021, compared to 4.97% during the three months ended March 31, 2020, as a result of lower current market rates on adjustable rate loans and new loans originated during the past year. In October 2018, the Company entered into an interest rate swap transaction as part of its ongoing interest rate management strategies to hedge the risk of its floating rate loans. The notional amount of the swap was $400 million with a contractual termination date in October 2025. Under the terms of the swap, the Company received a fixed rate of interest of 3.018% and paid a floating rate of interest equal to one-month USD-LIBOR. The floating rate reset monthly and net settlements of interest due to/from the counterparty also occurred monthly. To the extent that the fixed rate exceeded one-month USD-LIBOR, the Company received net interest settlements, which were recorded as interest income on loans. If one-month USD-LIBOR exceeded the fixed rate of interest, the Company was required to pay net settlements to the counterparty and record those net payments as a reduction of interest income on loans. The Company recorded interest income related to the swap of $2.0 million and $1.6 million, respectively, in the three months ended March 31, 2021 and 2020. In March 2020, the Company and its swap counterparty mutually agreed to terminate the $400 million interest rate swap prior to its contractual maturity. The Company received a payment of $45.9 million from its swap counterparty as a result of this termination. This $45.9 million, less the accrued interest portion and net of deferred income taxes, is reflected in the Company’s stockholders’ equity as Accumulated Other Comprehensive Income and a portion of it will be accreted to interest income on loans monthly through the original contractual termination date of October 6, 2025. This will have the effect of reducing Accumulated Other Comprehensive Income and increasing Net Interest Income and Retained Earnings over the period. In each quarterly period, until the original contract termination date, the Company expects to record loan interest income related to this swap transaction of approximately $2.0 million, based on the termination values of the swap. The Company currently expects to have an amount of eligible variable rate loans to continue to accrete this interest income in future periods. If this expectation changes and the amount of eligible variable rate loans decreases significantly, the Company may be required to recognize this interest income more rapidly. Interest Income – Investments and Other Interest-earning Assets Interest income on investments decreased $266,000 in the three months ended March 31, 2021 compared to the three months ended March 31, 2020. Interest income decreased $485,000 as a result of lower average interest rates from 3.22% during the three months ended March 31, 2020, to 2.75% during the three month period ended March 31, 2021. Partially offsetting that decrease, was an 49 ​ increase of $219,000 as a result of an increase in average balances from $385.0 million during the three months ended March 31, 2020, to $414.7 million during the three months ended March 31, 2021. 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 four to ten years. These purchased securities fit with the Company’s current asset/liability management strategies. Interest income on other interest-earning assets decreased $154,000 in the three months ended March 31, 2021 compared to the three months ended March 31, 2020. Interest income decreased $414,000 as a result of a decrease in average interest rates to 0.10% during the three months ended March 31, 2021 compared to 1.16% during the three months ended March 31, 2020. Market interest rates earned on balances held at the Federal Reserve Bank were significantly lower in the 2021 period due to significant reductions in the federal funds rate of interest. Partially offsetting this decrease, interest income increased $260,000 as a result of an increase in average balances from $90.1 million during the three months ended March 31, 2020, to $419.4 million during the three months ended March 31, 2021. Excess liquidity, after repayment of FHLBank borrowings, was maintained at the Federal Reserve Bank as a result of the significant increase in deposits since March 31, 2020. Total Interest Expense Total interest expense decreased $6.0 million, or 47.8%, during the three months ended March 31, 2021, when compared with the three months ended March 31, 2020, due to a decrease in interest expense on deposits of $6.4 million, or 60.1%, a decrease in interest expense on short-term borrowings and repurchase agreements of $640,000, or 98.6%, and a decrease in interest expense on subordinated debentures issued to capital trust of $103,000, or 47.7%, partially offset by an increase in interest expense on subordinated notes of $1.1 million, or 101.1%. Interest Expense – Deposits Interest expense on demand deposits decreased $1.6 million due to average rates of interest that decreased from 0.54% in the three months ended March 31, 2020 to 0.22% in the three months ended March 31, 2021. Partially offsetting this decrease, interest expense on demand deposits increased $632,000, due to an increase in average balances from $1.58 billion during the three months ended March 31, 2020 to $2.19 billion during the three months ended March 31, 2021. The Company experienced increased balances in various types of money market accounts and certain types of NOW accounts. Interest expense on time deposits decreased $3.8 million as a result of a decrease in average rates of interest from 1.99% during the three months ended March 31, 2020, to 0.94% during the three months ended March 31, 2021. Interest expense on time deposits also decreased $1.7 million due to a decrease in average balances of time deposits from $1.71 billion during the three months ended March 31, 2020 to $1.31 billion in the three months ended March 31, 2021. 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 lower rate of interest due to market interest rate decreases throughout 2020. Market interest rates remained low during the first three months of 2021. The decrease in average balances of time deposits was a result of decreases in both retail customer time deposits obtained through on-line channels and decreases in brokered deposits, primarily those 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 FHLBank advances were not utilized during the three months ended March 31, 2021 and 2020. Overnight borrowings from the FHLBank also were not utilized during the three months ended March 31, 2021 and 2020. Interest expense on short-term borrowings and repurchase agreements decreased $438,000 due to a decrease in average rates from 0.99% in the three months ended March 31, 2020 to 0.03% in the three months ended March 31, 2021. The decrease was due to a decrease in market interest rates during the period. Interest expense on short-term borrowings and repurchase agreements also decreased $202,000 due to a decrease in average balances from $265.1 million during the three months ended March 31, 2020 to $146.1 million during the three months ended March 31, 2021, which was primarily due to changes in the Company’s funding needs and the mix of funding, which can fluctuate. During the three months ended March 31, 2021, compared to the three months ended March 31, 2020, interest expense on subordinated debentures issued to capital trusts decreased $103,000 due to lower average interest rates. The average interest rate was 50 ​ 1.78% in the three months ended March 31, 2021 compared to 3.37% in the three months ended March 31, 2020. 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 1.81% at March 31, 2021. There was no change in the average balance of the subordinated debentures between the 2020 and the 2021 periods. In August 2016, the Company issued $75.0 million of 5.25% fixed-to-floating rate subordinated notes due August 15, 2026. The notes were sold at par, resulting in net proceeds, after underwriting discounts and commissions and other issuance costs, of approximately $73.5 million. In June 2020, the Company issued $75.0 million of 5.50% fixed-to-floating rate subordinated notes due June 15, 2030. The notes were sold at par, resulting in net proceeds, after underwriting discounts and commissions and other issuance costs, of approximately $73.5 million. In both cases, these issuance costs are amortized over the expected life of the notes, which is five years from the issuance date, impacting the overall interest expense on the notes. During the three months ended March 31, 2021, compared to the three months ended March 31, 2020, interest expense on subordinated notes increased $1.1 million due to higher average balances resulting from the issuance of new notes in the three months ended June 30, 2020. Interest expense on subordinated notes increased $16,000 due to slightly higher average interest rates. The average interest rate was 6.01% in the three months ended March 31, 2021 compared to 5.92% in the three months ended March 31, 2020. Net Interest Income Net interest income for the three months ended March 31, 2021 decreased $849,000 to $44.1 million compared to $44.9 million for the three months ended March 31, 2020. Net interest margin was 3.41% in the three months ended March 31, 2021, compared to 3.84% in the three months ended March 31, 2020, a decrease of 43 basis points, or 11.2%. 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-assisted 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, 2021 and 2020 were increases in interest income of $691,000 and $1.9 million, respectively, and increases in net interest margin of five basis points and 16 basis points, respectively. Excluding the positive impact of the additional yield accretion, in the three months ended March 31, 2021, net interest margin decreased 33 basis points when compared to the year-ago three month period. Most of the net interest margin decrease resulted from changes in the asset mix, with average cash equivalents increasing $329 million and average investment securities increasing $30 million. The average yield on cash equivalents decreased 106 basis points between the 2021 and 2020 periods. Also in comparing the 2021 and 2020 periods, the average yield on loans decreased 76 basis points while the average rate on deposits declined 80 basis points. This change in asset mix represents approximately 24 basis points of the decrease, with the additional subordinated notes issued in June 2020 representing eight basis points. The Company’s overall average interest rate spread decreased 31 basis points, or 8.7%, from 3.54% during the three months ended March 31, 2020 to 3.23% during the three months ended March 31, 2021. The decrease was due to a 100 basis point decrease in the weighted average yield on interest-earning assets, partially offset by a 69 basis point decrease in the weighted average rate paid on interest-bearing liabilities. In comparing the two periods, the yield on loans decreased 76 basis points, the yield on investment securities decreased 47 basis points and the yield on other interest-earning assets decreased 106 basis points. The rate paid on deposits decreased 80 basis points, the rate paid on short-term borrowings and repurchase agreements decreased 96 basis points, the rate paid on subordinated debentures issued to capital trusts decreased 159 basis points, and the rate paid on subordinated notes increased nine 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 and Allowance for Credit Losses The Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, effective January 1, 2021. The CECL methodology replaces the incurred loss methodology with a lifetime “expected credit loss” measurement objective for loans, held-to-maturity debt securities and other receivables measured at amortized cost at the time the financial asset is originated or acquired. This standard requires the consideration of historical loss experience and current conditions adjusted for reasonable and supportable economic forecasts. Our 2020 financial statements are prepared under the incurred loss methodology standard. Upon adoption of the CECL accounting standard, we increased the balance of our allowance for credit losses related to outstanding loans by $11.6 million and created a liability for potential losses related to the unfunded portion of our loans and commitments of approximately $8.7 million. The after-tax effect reduced our retained earnings by approximately $14.2 million. The adjustment was based upon the Company’s analysis of current conditions, assumptions and economic forecasts at 51 ​ January 1, 2021. ASC 326 requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses as well as the credit quality and underwriting standards of a company’s portfolio. Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in the national unemployment rate, commercial real estate price index, housing price index and national retail sales index. Worsening economic conditions from the COVID-19 pandemic, higher inflation or interest rates, or other factors may lead to increased losses in the portfolio and/or requirements for an increase in provision expense. Management maintains various controls in an attempt to 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 credit losses on loans for the three months ended March 31, 2021 was $300,000 compared with $3.9 million for the three months ended March 31, 2020. In the three months ended March 31, 2021, the Company experienced net recoveries of $64,000. Total net charge-offs were $237,000 for the three months ended March 31, 2020. The provision for losses on unfunded commitments for the quarter ended March 31, 2021 was a credit of $674,000, as the level and mix of unfunded commitments resulted in a decrease in the required reserve for such potential losses. We have seen and expect to continue to see rapid reductions in the outstanding automobile loan balance as we determined in February 2019 to cease providing indirect lending services to automobile dealerships. At March 31, 2021, indirect automobile loans totaled approximately $38 million. General market conditions and unique circumstances related to specific industries and individual projects contributed to the level of provisions and charge-offs. Collateral and repayment evaluations of all assets categorized as potential problem loans, non-performing loans or foreclosed assets were completed with corresponding charge-offs or reserve allocations made as appropriate. All FDIC-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 have been systematically reviewed by the Company 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 review of financial information, collateral valuations and customer interaction to determine if additional reserves are warranted. The Bank’s allowance for credit losses as a percentage of total loans was 1.56% and 1.32% at March 31, 2021 and December 31, 2020, respectively. Prior to January 1, 2021, the ratio excluded the FDIC-assisted acquired loans. Management considers the allowance for credit losses adequate to cover losses inherent in the Bank’s loan portfolio at March 31, 2021, based on recent reviews of the Bank’s loan portfolio and current economic conditions. If challenging economic conditions were to last longer than anticipated or deteriorate further or management’s assessment of the loan portfolio were to change, additional loan loss provisions could be required, thereby adversely affecting the Company’s future results of operations and financial condition. Non-performing Assets As a result of changes in balances and composition of the loan portfolio, changes in economic and market conditions and other factors specific to a borrower’s circumstances, the level of non-performing assets will fluctuate. At March 31, 2021, non-performing assets, including FDIC-acquired assets, were $10.9 million, an increase of $2.8 million from $8.1 million at December 31, 2020. Non-performing assets as a percentage of total assets were 0.19% at March 31, 2021 and 0.15% at December 31, 2020. At March 31, 2021, non-performing assets, excluding all FDIC-acquired assets, were $6.7 million, an increase of $2.9 million from $3.8 million at December 31, 2020. Excluding all FDIC-acquired assets, non-performing assets as a percentage of total assets were 0.12% at March 31, 2021, compared to 0.07% at December 31, 2020. 52 ​ Compared to December 31, 2020, and excluding all FDIC-acquired loans, non-performing loans increased $3.0 million to $6.0 million at March 31, 2021, and foreclosed assets decreased $73,000 to $704,000 at March 31, 2021. Including all FDIC-acquired loans, when compared to December 31, 2020, non-performing loans increased $2.7 million to $9.5 million at March 31, 2021, and foreclosed assets increased $96,000 to $1.3 million at March 31, 2021. Non-performing one- to four-family residential loans comprised $4.2 million, or 44.2%, of the total non-performing loans at March 31, 2021, a decrease of $242,000 from December 31, 2020. The majority of the non-performing FDIC-acquired loans are in the one- to four-family category. Non-performing commercial real estate loans comprised $3.4 million, or 35.6%, of the total non-performing loans at March 31, 2021, an increase of $2.5 million from December 31, 2020. Non-performing consumer loans comprised $1.0 million, or 10.7%, of the total non-performing loans at March 31, 2021, a decrease of $252,000 from December 31, 2020. Non-performing construction and land development loans comprised $622,000, or 6.5%, of the total non-performing loans at March 31, 2021, all of which was added during the three months ended March 31, 2021. Non-performing commercial business loans comprised $106,000, or 1.1%, of the total non-performing loans at March 31, 2021, a decrease of $8,000 from December 31, 2020. Non-performing Loans. Activity in the non-performing loans category during the three months ended March 31, 2021 was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Transfers to ​ Transfers to ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Beginning ​ Additions ​ Removed ​ Potential ​ Foreclosed ​ ​ ​ ​ ​ ​ ​ Ending ​ ​ Balance, ​ to Non- ​ from Non- ​ Problem ​ Assets and ​ Charge- ​ ​ ​ ​ Balance, ​ ​ January 1 ​ Performing ​ Performing ​ Loans ​ Repossessions ​ Offs ​ Payments ​ March 31 ​ (In Thousands) One- to four-family construction $ — $ — $ — $ — $ — $ — $ — $ — Subdivision construction ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ — Land development ​ — ​ 622 ​ — ​ — ​ — ​ — ​ — ​ 622 Commercial construction ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ — One- to four-family residential ​ 4,465 ​ 359 ​ — ​ — ​ (183) ​ (5) ​ (413) ​ 4,223 Other residential ​ 190 ​ — ​ — ​ — ​ — ​ — ​ (5) ​ 185 Commercial real estate ​ 849 ​ 2,556 ​ — ​ — ​ — ​ — ​ (11) ​ 3,394 Commercial business ​ 114 ​ — ​ — ​ — ​ — ​ — ​ (8) ​ 106 Consumer ​ 1,268 ​ 189 ​ (179) ​ — ​ (28) ​ (113) ​ (121) ​ 1,016 Total non-performing loans ​ 6,886 ​ 3,726 ​ (179) ​ — ​ (211) ​ (118) ​ (558) ​ 9,546 Less: FDIC-acquired loans ​ 3,843 ​ 85 ​ — ​ — ​ (183) ​ (65) ​ (104) ​ 3,576 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total non-performing loans net of FDIC-acquired loans ​ $ 3,043 ​ $ 3,641 ​ $ (179) ​ $ — ​ $ (28) ​ $ (53) ​ $ (454) ​ $ 5,970 ​ ​ ​ At March 31, 2021, the non-performing one- to four-family residential category included 65 loans, four of which were added during 2021. The largest relationship in the category totaled $344,000, or 8.1% of the total category. The non-performing commercial real estate category included six loans, two of which were added during 2021. The largest relationship in the category was added during the period and totaled $2.4 million, or 69.4% of the total category. It is collateralized by a medical office building in the Chicago, Ill., area. The non-performing consumer category included 60 loans, 16 of which were added in 2021, and the majority of which are indirect and used automobile loans. The non-performing land development category consisted of one loan, which totaled $622,000 and was added during 2021, and is collateralized by unimproved zoned vacant ground in southern Illinois. In the table above, loans that were modified under the guidance provided by the CARES Act are not non-performing loans as they are current under their modified terms. For additional information about these loan modifications, see the “Loan Modifications” section of this report. Potential Problem Loans. Compared to December 31, 2020, and excluding all FDIC-acquired loans, potential problem loans decreased $720,000 to $3.6 million at March 31, 2021. Compared to December 31, 2020, potential problem loans, including the FDIC-assisted acquired loans, decreased $757,000, or 12.9%, to $5.1 million at March 31, 2021. This decrease was primarily due to payments of $123,000 on potential problem loans, $576,000 in loans upgraded and removed from the potential problem loan category, $34,000 in loans transferred to foreclosed assets and repossessions, and $44,000 in loan write-downs, partially offset by $21,000 in loans added to potential problem 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. 53 ​ Due to the continued economic uncertainty associated with COVID-19, it is possible that we could experience an increase in potential problem loans during the remainder of 2021. As noted, we experienced an increased level of loan modifications in late March through June 2020; however, loan modifications have continued to trend down through March 31, 2021. In accordance with the CARES Act and guidance from the banking regulatory agencies, we made certain short-term modifications to loan terms to help our customers navigate through the current pandemic situation. Although loan modifications were made, they did not result in these loans being classified as TDRs, potential problem loans or non-performing loans. If more severe or lengthier negative impacts of the COVID-19 pandemic occur or the effects of the SBA loan programs and other loan and stimulus programs do not enable companies and individuals to completely recover financially, this could result in longer-term modifications, which may be deemed to be TDRs, additional potential problem loans and/or additional non-performing loans. Further actions on our part, including additions to the allowance for credit losses, could result. Activity in the potential problem loans categories during the three months ended March 31, 2021, was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Removed ​ ​ Transfers to ​ ​ ​ ​ ​ ​ ​ ​ Beginning ​ Additions ​ from ​ Transfers to ​ Foreclosed ​ ​ ​ ​ ​ ​ ​ Ending ​ ​ Balance, ​ to Potential ​ Potential ​ Non- ​ Assets and ​ Charge- ​ ​ ​ ​ Balance, ​ ​ January 1 ​ Problem ​ Problem ​ Performing ​ Repossessions ​ Offs ​ Payments ​ March 31 ​ ​ (In Thousands) One- to four-family construction ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — Subdivision construction ​ 21 ​ — ​ — ​ — ​ — ​ — ​ (2) ​ 19 Land development ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ — Commercial construction ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ — One- to four-family residential ​ 2,157 ​ — ​ — ​ — ​ — ​ — ​ (48) ​ 2,109 Other residential ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ — Commercial real estate ​ 3,080 ​ — ​ (554) ​ — ​ — ​ — ​ (12) ​ 2,514 Commercial business ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ — Consumer ​ 588 ​ 21 ​ (22) ​ (1) ​ (34) ​ (44) ​ (61) ​ 447 Total potential problem loans ​ 5,846 ​ 21 ​ (576) ​ (1) ​ (34) ​ (44) ​ (123) ​ 5,089 Less: FDIC-acquired loans ​ 1,523 ​ — ​ — ​ — ​ — ​ — ​ (37) ​ 1,486 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total potential problem loans net of FDIC-acquired loans ​ $ 4,323 ​ $ 21 ​ $ (576) ​ $ (1) ​ $ (34) ​ $ (44) ​ $ (86) ​ $ 3,603 ​ At March 31, 2021, the commercial real estate category of potential problem loans included three loans, none of which were added during 2021. The largest relationship in this category (added during 2018), which totaled $1.8 million, or 70.3% of the total category, is collateralized by a mixed use commercial retail building in St. Louis, Mo. Payments were current on this relationship at March 31, 2021. A single loan of $554,000 in the commercial real estate category of potential problem loans was upgraded to performing after six months of consecutive payments. The one- to four-family residential category of potential problem loans included 33 loans, none of which were added during 2021. The largest relationship in this category totaled $320,000, or 14.8% of the total category. The consumer category of potential problem loans included 36 loans, five of which were added during 2021, the majority of which are indirect and used automobile loans. Other Real Estate Owned and Repossessions. Of the total $1.9 million of other real estate owned and repossessions at March 31, 2021, $532,000 represents properties which were not acquired through foreclosure. 54 ​ Activity in other real estate owned and repossessions during the three months ended March 31, 2021, was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Beginning ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ending ​ ​ Balance, ​ ​ ​ ​ ​ ​ ​ Capitalized ​ Write- ​ Balance, ​ ​ January 1 ​ Additions ​ Sales ​ Costs ​ Downs ​ March 31 ​ (In Thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ One- to four-family construction $ — $ — $ — $ — $ — $ — Subdivision construction ​ 263 ​ — ​ — ​ — ​ (94) ​ 169 Land development ​ 682 ​ — ​ — ​ — ​ — ​ 682 Commercial construction ​ — ​ — ​ — ​ — ​ — ​ — One- to four-family residential ​ 125 ​ 182 ​ (14) ​ — ​ — ​ 293 Other residential ​ — ​ — ​ — ​ — ​ — ​ — Commercial real estate ​ — ​ — ​ — ​ — ​ — ​ — Commercial business ​ — ​ — ​ — ​ — ​ — ​ — Consumer ​ 153 ​ 263 ​ (241) ​ — ​ — ​ 175 Total foreclosed assets and repossessions ​ 1,223 ​ 445 ​ (255) ​ — ​ (94) ​ 1,319 Less: FDIC acquired assets ​ 446 ​ 183 ​ (14) ​ — ​ — ​ 615 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total foreclosed assets and repossessions net of FDIC-acquired assets ​ $ 777 ​ $ 262 ​ $ (241) ​ $ — ​ $ (94) ​ $ 704 ​ At March 31, 2021, the land development category of foreclosed assets included two properties, with one located in the Camdenton, Mo., area and the other in Pleasant Hill, Iowa (this was an FDIC-acquired asset). The subdivision construction category of foreclosed assets included one property, located in the Branson, Mo., area, and had a balance of $169,000 after a valuation write-down during the period. The one- to four-family residential category of foreclosed assets included three properties. Two properties were added during the three months ended March 31, 2021 (both of which were FDIC-acquired assets). The amount of additions and sales in the consumer category are due to the volume of repossessions of automobiles, which generally are subject to a shorter repossession process. Loans Classified “Watch” The Company reviews the credit quality of its loan portfolio using an internal grading system that classifies loans as “Satisfactory,” “Watch,” “Special Mention,” “Substandard” and “Doubtful.” Loans classified as “Watch” are being monitored because of indications of potential weaknesses or deficiencies that may require future classification as special mention or substandard. In the three months ended March 31, 2021, loans classified as “Watch” decreased $20.0 million, from $64.8 million at December 31, 2020 to $44.8 million at March 31, 2021. This decrease was primarily due to loans being upgraded out of the “watch” category, which primarily included one $14.3 million relationship collateralized by a shopping center and one $3.9 million relationship collateralized by a shopping center and other real estate and business assets. See Note 6 for further discussion of the Company’s loan grading system. Non-interest Income For the three months ended March 31, 2021, non-interest income increased $2.4 million to $9.7 million when compared to the three months ended March 31, 2020, primarily as a result of the following items: Net gains on loan sales : Net gains on loan sales increased $2.1 million compared to the prior year period. The increase was due to an increase in originations of fixed-rate loans during the 2021 period compared to the 2020 period. Fixed rate single-family mortgage loans originated are generally subsequently sold in the secondary market. Fixed-rate mortgage loan originations increased substantially when market interest rates decreased to historically low levels in 2020. Gain (loss) on derivative interest rate products : The net gain on derivative interest rate products increased $881,000 compared to the net loss in the prior year period. In the 2021 period, the Company recognized a $474,000 increase in the net fair value related to interest rate swaps in the Company’s back-to-back swap program with loan customers and swap counterparties. As market interest 55 ​ rates increase, this generally increases the net fair value of these back-to-back swaps. This is a non-cash item as there was no required settlement of this amount between the Company and its swap counterparties. Other income : Other income decreased $616,000 compared to the prior year period. In the 2020 period, the Company recognized approximately $486,000 of fee income related to newly-originated interest rate swaps in the Company’s back-to-back swap program with loan customers and swap counterparties, with no such fee income generated in the current period. In the 2020 period, the Company also recognized more income related to the exit of certain tax credit partnerships. Non-interest Expense For the three months ended March 31, 2021, non-interest expense decreased $494,000 to $30.3 million when compared to the three months ended March 31, 2020, primarily as a result of the following items: Salaries and employee benefits : Salaries and employee benefits decreased $1.0 million from the prior year period. In March 2020, the Company approved a special cash bonus to all employees totaling $1.1 million in response to the COVID-19 pandemic. This bonus was not repeated in the first quarter of 2021. Insurance : Insurance expense increased $378,000 compared to the prior year period. This increase was primarily due to an increase in FDIC deposit insurance premiums. In the three months ended March 31, 2020, the Company had a credit with the FDIC for a portion of premiums previously paid to the deposit insurance fund. The deposit insurance fund balance was sufficient to result in no premium being due for the three months ended March 31, 2020, while the premium expense was $357,000 in the three months ended March 31, 2021. Expense on other real estate owned and repossessions : Expense on other real estate owned and repossessions decreased $211,000 compared to the prior year period primarily due to higher valuation write-downs of certain foreclosed assets during the 2020 period. During the 2020 period, expenses related to certain foreclosed assets totaled approximately $414,000, while such expenses in the 2021 period totaled approximately $23,000. The Company’s efficiency ratio for the three months ended March 31, 2021, was 56.33% compared to 58.91% for the same period in 2020. In the three months ended March 31, 2021, the improved efficiency ratio was due to an increase in non-interest income and a decrease in non-interest expense. The Company’s ratio of non-interest expense to average assets was 2.22% and 2.48% for the three months ended March 31, 2021 and 2020, respectively. The decrease in the current three-month period ratio was primarily due to an increase in average assets. Average assets for the three months ended March 31, 2021, increased $504.8 million, or 10.2%, from the three months ended March 31, 2020, primarily due to increases in net loans receivable, investment securities and interest bearing cash equivalents. Provision for Income Taxes For the three months ended March 31, 2021 and 2020, the Company’s effective tax rate was 21.0% and 15.6%, respectively. These effective rates were at or below the statutory federal tax rate of 21%, due primarily to the utilization of certain investment tax credits and 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, the level of tax-exempt investments and loans, the amount of taxable income in various state jurisdictions and the overall level of pre-tax income. The higher effective tax rate in the 2021 period was due to higher overall income, lower levels of low income housing tax credits and less tax-exempt interest income compared to prior periods. The Company’s effective income tax rate is currently generally expected to remain at or below the statutory federal tax rate due primarily to the factors noted above. The Company currently expects its effective tax rate (combined federal and state) to be approximately 19.5% to 20.5% in future periods. 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 56 ​ $2.5 million and $1.1 million for the three months ended March 31, 2021 and 2020, respectively. Tax-exempt income was not calculated on a tax equivalent basis. The table does not reflect any effect of income taxes. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ Three Months Ended ​ Three Months Ended ​ ​ 2021 (2) ​ March 31, 2021 ​ March 31, 2020 ​ ​ Yield/ ​ Average ​ ​ ​ ​ Yield/ ​ Average ​ ​ ​ ​ Yield/ ​ ​ Rate ​ Balance ​ Interest ​ Rate ​ Balance ​ Interest ​ Rate ​ ​ (Dollars in Thousands) Interest-earning assets: ​ ​ ​ ​ ​ Loans receivable: ​ ​ ​ ​ ​ One- to four-family residential 3.51 % $ 664,562 ​ $ 6,516 3.98 % $ 603,872 ​ $ 7,138 4.75 % Other residential 4.19 ​ 999,094 ​ 10,927 4.44 ​ 826,431 ​ 10,755 5.23 ​ Commercial real estate 4.15 ​ 1,562,689 ​ 16,584 4.30 ​ 1,489,790 ​ 18,581 5.02 ​ Construction 4.13 ​ 604,382 ​ 6,731 4.52 ​ 709,974 ​ 9,722 5.51 ​ Commercial business 3.74 ​ 323,429 ​ 3,887 4.87 ​ 269,160 ​ 3,192 4.77 ​ Other loans 5.04 ​ 237,499 ​ 2,891 4.94 ​ 317,437 ​ 4,533 5.74 ​ Industrial revenue bonds(1) 4.40 ​ 14,924 ​ 173 4.70 ​ 10,274 ​ 209 8.17 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total loans receivable 4.30 ​ 4,406,579 ​ 47,709 4.39 ​ 4,226,938 ​ 54,130 5.15 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment securities(1) 2.63 ​ 414,696 ​ 2,817 2.75 ​ 385,003 ​ 3,083 3.22 ​ Other interest-earning assets 0.25 ​ 419,426 ​ 107 0.10 ​ 90,122 ​ 261 1.16 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total interest-earning assets 3.76 ​ 5,240,701 ​ 50,633 3.92 ​ 4,702,063 ​ 57,474 4.92 ​ Non-interest-earning assets: ​ ​ ​ ​ ​ Cash and cash equivalents ​ ​ ​ 94,210 ​ ​ 90,780 ​ ​ Other non-earning assets ​ ​ ​ 133,443 ​ ​ 170,673 ​ ​ Total assets ​ ​ ​ $ 5,468,354 ​ ​ $ 4,963,516 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ Interest-bearing demand and savings 0.19 ​ $ 2,188,978 ​ 1,194 0.22 ​ $ 1,575,511 ​ 2,117 0.54 ​ Time deposits 0.83 ​ 1,312,089 ​ 3,028 0.94 ​ 1,712,901 ​ 8,460 1.99 ​ Total deposits 0.41 ​ 3,501,067 ​ 4,222 0.49 ​ 3,288,412 ​ 10,577 1.29 ​ Short-term borrowings, repurchase agreements and other interest-bearing liabilities 0.03 ​ 146,148 ​ 9 0.03 ​ 265,054 ​ 649 0.99 ​ Subordinated debentures issued to capital trusts 1.81 ​ 25,774 ​ 113 1.78 ​ 25,774 ​ 216 3.37 ​ Subordinated notes 5.92 ​ 148,514 ​ 2,200 6.01 ​ 74,335 ​ 1,094 5.92 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total interest-bearing liabilities 0.62 ​ 3,821,503 ​ 6,544 0.69 ​ 3,653,575 ​ 12,536 1.38 ​ Non-interest-bearing liabilities: ​ ​ ​ ​ ​ Demand deposits ​ ​ ​ 983,120 ​ ​ 675,984 ​ ​ Other liabilities ​ ​ ​ 43,890 ​ ​ 34,946 ​ ​ Total liabilities ​ ​ ​ 4,848,513 ​ ​ 4,364,505 ​ ​ Stockholders’ equity ​ ​ ​ 619,841 ​ ​ 599,011 ​ ​ Total liabilities and stockholders’ equity ​ ​ ​ $ 5,468,354 ​ ​ $ 4,963,516 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income: ​ ​ ​ ​ ​ Interest rate spread 3.14 % ​ ​ ​ $ 44,089 3.23 % ​ ​ ​ $ 44,938 3.54 % Net interest margin* ​ ​ ​ ​ ​ ​ ​ ​ 3.41 % ​ 3.84 % Average interest-earning assets to average interest- bearing liabilities ​ ​ ​ 137.1 % ​ 128.7 % ​ ​ * Defined as the Company’s net interest income divided by total average interest-earning assets. 57 ​ (1) Of the total average balances of investment securities, average tax-exempt investment securities were $45.2 million and $32.6 million for the three months ended March 31, 2021 and 2020, respectively. In addition, average tax-exempt loans and industrial revenue bonds were $18.7 million and $21.0 million for the three months ended March 31, 2021 and 2020, respectively. Interest income on tax-exempt assets included in this table was $419,000 and $524,000 for the three months ended March 31, 2021 and 2020, respectively. Interest income net of disallowed interest expense related to tax-exempt assets was $403,000 and $478,000 for the three months ended March 31, 2021 and 2020, respectively. (2) The yield on loans at March 31, 2021 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, 2021. 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, ​ ​ 2021 vs. 2020 ​ ​ Increase (Decrease) ​ Total ​ ​ Due to ​ Increase ​ ​ Rate ​ Volume ​ (Decrease) ​ ​ (Dollars in Thousands) Interest-earning assets: ​ ​ ​ Loans receivable ​ $ (8,576) ​ $ 2,155 ​ $ (6,421) Investment securities ​ (485) ​ 219 ​ (266) Other interest-earning assets ​ (414) ​ 260 ​ (154) Total interest-earning assets ​ (9,475) ​ 2,634 ​ (6,841) Interest-bearing liabilities: ​ ​ ​ Demand deposits ​ (1,555) ​ 632 ​ (923) Time deposits ​ (3,766) ​ (1,666) ​ (5,432) Total deposits ​ (5,321) ​ (1,034) ​ (6,355) Short-term borrowings ​ (438) ​ (202) ​ (640) Subordinated debentures issued to capital trust ​ (103) ​ — ​ (103) Subordinated notes ​ 16 ​ 1,090 ​ 1,106 Total interest-bearing liabilities ​ (5,846) ​ (146) ​ (5,992) Net interest income ​ $ (3,629) ​ $ 2,780 ​ $ (849) ​ 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 borrowers’ credit needs. At 58 ​ March 31, 2021, the Company had commitments of approximately $147.2 million to fund loan originations, $1.18 billion of unused lines of credit and unadvanced loans, and $16.0 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, December 31, December 31, December 31, December 31, ​ ​ 2021 ​ 2020 ​ 2019 ​ 2018 ​ 2017 Closed non-construction loans with unused available lines ​ ​ ​ ​ ​ Secured by real estate (one- to four-family) ​ $ 170,353 ​ $ 164,480 ​ $ 155,831 ​ $ 150,948 ​ $ 133,587 Secured by real estate (not one- to four-family) ​ 25,754 ​ 22,273 ​ 19,512 ​ 11,063 ​ 10,836 Not secured by real estate - commercial business ​ 71,132 ​ 77,411 ​ 83,782 ​ 87,480 ​ 113,317 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Closed construction loans with unused available lines ​ ​ ​ ​ ​ Secured by real estate (one-to four-family) ​ 52,653 ​ 42,162 ​ 48,213 ​ 37,162 ​ 20,919 Secured by real estate (not one-to four-family) ​ 812,111 ​ 823,106 ​ 798,810 ​ 906,006 ​ 718,277 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loan Commitments not closed ​ ​ ​ ​ ​ Secured by real estate (one-to four-family) ​ 93,229 ​ 85,917 ​ 69,295 ​ 24,253 ​ 23,340 Secured by real estate (not one-to four-family) ​ 50,883 ​ 45,860 ​ 92,434 ​ 104,871 ​ 156,658 Not secured by real estate - commercial business ​ 3,119 ​ 699 ​ — ​ 405 ​ 4,870 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 1,279,234 ​ $ 1,261,908 ​ $ 1,267,877 ​ $ 1,322,188 ​ $ 1,181,804 ​ 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, 2021, the Company had these available secured lines and on-balance sheet liquidity: ​ ​ ​ ​ Federal Home Loan Bank line $ 1,002.0 million Federal Reserve Bank line ​ $ 444.8 million Cash and cash equivalents ​ $ 612.5 million Unpledged securities ​ $ 270.7 million ​ Statements of Cash Flows. During both the three months ended March 31, 2020 and 2019, the Company had positive cash flows from operating activities, negative cash flows from investing activities and positive cash flows from financing activities. Cash flows from operating activities for the periods covered by the Statements of Cash Flows have been primarily related to changes in accrued and deferred assets, credits and other liabilities, the provision for credit losses, 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 $24.5 million and $17.7 million during the three months ended March 31, 2021 and 2020, respectively. During the three months ended March 31, 2021, investing activities used cash of $55.9 million, primarily due to the purchase of investment securities and the purchase of loans, partially offset by the net repayment of loans and payments received on investment securities. Investing activities in the 2020 period used cash of $4.3 million, primarily due to the net origination of loans, the purchase of investment securities and the purchase of equipment, partially offset by the cash proceeds from the termination of interest rate derivatives and the 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 and changes in short-term borrowings, as well as advances from borrowers for taxes and insurance, 59 ​ dividend payments to stockholders, purchases of the Company’s common stock and the exercise of common stock options. Financing activities provided cash of $80.2 million and $7.0 million during the three months ended March 31, 2021 and 2020, respectively. In the 2021 three-month period, financing activities provided cash primarily as a result of net increases in checking account balances, partially offset by decreases in time deposits, decreases in short-term borrowings, dividends paid to stockholders and the purchase of the Company’s common stock. In the 2020 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, dividends paid to stockholders and the purchase of the Company’s common stock. Capital Resources Management continuously reviews the capital position of the Company and the Bank to ensure compliance with minimum regulatory requirements, as well as to explore ways to increase capital either by retained earnings or other means. At March 31, 2021, the Company’s total stockholders’ equity and common stockholders’ equity were each $611.5 million, or 10.9% of total assets, equivalent to a book value of $44.65 per common share. As of December 31, 2020, total stockholders’ equity and common stockholders’ equity were each $629.7 million, or 11.4% of total assets, equivalent to a book value of $45.79 per common share. At March 31, 2021, the Company’s tangible common equity to tangible assets ratio was 10.8%, compared to 11.3% at December 31, 2020 (See Non-GAAP Financial Measures below). Included in stockholders’ equity at March 31, 2021 and December 31, 2020, were unrealized gains (net of taxes) on the Company’s available-for-sale investment securities totaling $9.3 million and $23.3 million, respectively. This decrease in unrealized gains primarily resulted from rising market interest rates, which decreased the fair value of the investment securities. Also included in stockholders’ equity at March 31, 2021, were realized gains (net of taxes) on the Company’s cash flow hedge (interest rate swap), which was terminated in March 2020, totaling $28.3 million. This amount, plus associated deferred taxes, is expected to be accreted to interest income over the remaining term of the original interest rate swap contract, which was to end in October 2025. At March 31, 2021, the remaining pre-tax amount to be recorded in interest income was $36.7 million. The net effect on total stockholders’ equity over time will be no impact as the reduction of this realized gain will be offset by an increase in retained earnings (as the interest income flows through pre-tax income). 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, 2021, the Bank’s common equity Tier 1 capital ratio was 14.1%, its Tier 1 capital ratio was 14.1%, its total capital ratio was 15.4% and its Tier 1 leverage ratio was 11.8%. As a result, as of March 31, 2021, the Bank was well capitalized, with capital ratios in excess of those required to qualify as such. On December 31, 2020, the Bank’s common equity Tier 1 capital ratio was 13.7%, its Tier 1 capital ratio was 13.7%, its total capital ratio was 14.9% and its Tier 1 leverage ratio was 11.8%. As a result, as of December 31, 2020, 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, 2021, the Company’s common equity Tier 1 capital ratio was 12.7%, its Tier 1 capital ratio was 13.2%, its total capital ratio was 17.8% and its Tier 1 leverage ratio was 11.0%. 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, 2021, the Company was considered well capitalized, with capital ratios in excess of those required to qualify as such. On December 31, 2020, the Company’s common equity Tier 1 capital ratio was 12.2%, its Tier 1 capital ratio was 12.7%, its total capital ratio was 17.2% and its Tier 1 leverage ratio was 10.9%. As of December 31, 2020, 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. At March 31, 2021, the Company and the Bank both had additional common equity Tier 1 capital in excess of the buffer amount. 60 ​ 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, 2020. Dividends . During the three months ended March 31, 2021, the Company declared a common stock cash dividend of $0.34 per share, or 25% of net income per diluted common share for that three month period, and paid a common stock cash dividend of $0.34 per share (which was declared in December 2020). During the three months ended March 31, 2020, the Company declared common stock cash dividends of $1.34 per share, or 129% of net income per diluted common share for that three month period, and paid common stock cash dividends of $1.34 per share ($0.34 of which was declared in December 2019). The dividends declared and paid during the three months ended March 31, 2020 included a special cash dividend of $1.00 per share in addition to the regular cash dividend of $0.34 per share. The Board of Directors meets regularly to consider the level and the timing of dividend payments. The $0.34 per share dividend declared but unpaid as of March 31, 2021, was paid to stockholders in April 2021. Common Stock Repurchases and Issuances . The Company has been in various buy-back programs since May 1990. During the three months ended March 31, 2021, the Company issued 15,904 shares of stock at an average price of $39.09 per share to cover stock option exercises and repurchased 74,865 shares of its common stock at an average price of $50.50 per share. During the three months ended March 31, 2020, the Company issued 6,475 shares of stock at an average price of $37.58 per share to cover stock option exercises and repurchased 183,707 shares of its common stock at an average price of $44.36 per share. 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. On October 21, 2020, the Company’s Board of Directors authorized management to repurchase up to one million additional shares of the Company’s common stock under a program of open market purchases or privately negotiated transactions. The authorization of this program became effective in November 2020 and does not have an expiration date. 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”). These non-GAAP financial measures include the ratio of tangible common equity to tangible assets. 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. These non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP financial measures. Because not all companies use the same calculation of non-GAAP measures, this presentation may not be comparable to similarly titled measures as calculated by other companies. 61 ​ Non-GAAP Reconciliation: Ratio of Tangible Common Equity to Tangible Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, December 31, ​ ​ 2021 ​ 2020 ​ ​ (Dollars in Thousands) ​ ​ ​ ​ ​ ​ ​ ​ Common equity at period end ​ $ 611,457 ​ $ 629,741 ​ Less: Intangible assets at period end ​ 6,655 ​ 6,944 ​ Tangible common equity at period end (a) ​ $ 604,802 ​ $ 622,797 ​ ​ ​ ​ ​ ​ ​ ​ ​ Total assets at period end ​ $ 5,603,770 ​ $ 5,526,420 ​ Less: Intangible assets at period end ​ 6,655 ​ 6,944 ​ Tangible assets at period end (b) ​ $ 5,597,115 ​ $ 5,519,476 ​ ​ ​ ​ ​ ​ ​ ​ ​ Tangible common equity to tangible assets (a) / (b) ​ 10.81 % 11.28 % ​ ​ ​ ​ ​ 62 ​