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GREAT SOUTHERN BANCORP, INC.

(GSBC)
  Report
Delayed Nasdaq  -  04:00 2022-09-26 pm EDT
59.56 USD   +0.05%
09/21Great Southern Bancorp Maintains Quarterly Dividend at $0.40 a Share, Payable Oct. 18 to Shareholders of Record Oct. 3
MT
09/21Great Southern Bancorp, Inc. announces quarterly dividend of $0.40 per common share
AQ
09/21Great Southern Bancorp, Inc. Declares Quarterly Dividend for the Third Quarter of the Year Ending December 31, 2022, Payable on October 18, 2022
CI
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GREAT SOUTHERN BANCORP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

08/08/2022 | 04:07pm EDT

Forward-looking Statements


When used in this Quarterly Report and in 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 has adversely
affected 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. While general business and economic conditions have improved,
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, and labor shortages might be greater
than expected; (ii) changes in economic conditions, either nationally or in the
Company's market areas; (iii) fluctuations in interest rates and the effects of
inflation, a potential recession or slower economic growth caused by changes in
energy prices or supply chain disruptions; (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 realized or unrealized
losses on securities held in the Company's investment 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; (xi) changes in accounting
policies and practices or accounting standards; (xii) 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 potential replacement indexes; 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.

                                       37

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
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" of the accompanying financial
statements 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 beginning in 2021 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 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.

                                       38

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 June 30, 2022, 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 June 30, 2022, goodwill consisted of $5.4 million at the Bank
reporting unit, which included goodwill of $4.2 million that was recorded during
2016 related to the acquisition of 12 branches and the assumption of related
deposits in the St. Louis market from Fifth Third Bank. Other identifiable
deposit intangible assets that are subject to amortization are amortized on a
straight-line basis over a period of seven years.

In April 2022, the Company, through its subsidiary Great Southern Bank, entered
into a naming rights agreement with Missouri State University related to the
main arena on the university's campus in Springfield, Missouri. The terms of the
agreement provide the naming rights to Great Southern Bank for a total cost of
$5.5 million, to be paid over a period of seven years. The Company expects to
amortize the intangible asset through non-interest expense over a period not to
exceed 15 years.

At June 30, 2022, the amortizable intangible assets included core deposit
intangibles of $369,000 and the arena naming rights of $5.5 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.

Management does not believe any of the Company's goodwill or other intangible
assets were impaired as of June 30, 2022. While management believes no
impairment existed at June 30, 2022, 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:


                                    June 30,     December 31,
                                      2022           2021

                                          (In Thousands)

Goodwill - Branch acquisitions $ 5,396 $ 5,396 Deposit intangibles Fifth Third Bank (January 2016)

           369              685

Arena Naming Rights (April 2022)        5,481                -
                                    $  11,246    $       6,081


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 subsequent years, as
indicated by higher consumer confidence levels, increased economic activity and
low unemployment levels. The U.S. economy continued to operate at historically
strong levels until the COVID-19 pandemic in March 2020. While U.S. economic
trends have rebounded since the onset of the pandemic, new COVID variants have
emerged and the severity and extent of the coronavirus on the global, national
and regional economies is still uncertain. Any long-term impact on the
performance of the financial sector remains indeterminable.

                                       39

The economy plunged into recession in the first quarter of 2020, as efforts to
contain the spread of the coronavirus forced all but essential business
activity, or any work that could not be done from home, to stop, shuttering
factories, restaurants, entertainment, sports events, retail shops, personal
services, and more.

More than 22 million jobs were lost in March and April 2020 as businesses closed
their doors or reduced their operations, sending employees home on furlough or
layoffs. 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. The
Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), a fiscal
relief bill passed by Congress and signed by the President in March 2020,
injected approximately $3 trillion into the economy through direct payments to
individuals and grants to small businesses that would keep employees on their
payroll, fueling a historic bounce-back in economic activity.

Total fiscal support to the economy throughout the pandemic, including the CARES
Act passed into law in March 2020, the American Rescue Plan of March 2021, and
several smaller fiscal packages, totals well over $5 trillion. The amount of
this support was equal to almost 25% of pre-pandemic 2019 GDP, approximately
three times that provided during the global financial crisis of 2007-2008.

Additionally, the Federal Reserve acted decisively by slashing its benchmark
interest rate to near zero and ensuring credit availability to businesses,
households, and municipal governments. The Federal Reserve's efforts largely
insulated the financial system from the problems in the economy, a significant
difference from the financial crisis of 2007-2008. Purchases of Treasury and
agency mortgage-backed securities totaling $120 billion each month by the
Federal Reserve commenced shortly after the pandemic began. In November 2021,
the Federal Reserve began to taper its quantitative easing (QE), winding down
its bond purchases with its final open market purchase conducted on March 9,
2022.

While initiatives by the Federal Reserve and Congress significantly improved
consumer spending, GDP, and employment, economic momentum began to level off in
first quarter of 2022 with a slowdown in inventory growth and a decline in net
exports. A 1.4% annualized decline was recorded in the first quarter of 2022,
the first pullback since the pandemic-related fall of 31.2% in the second
quarter of 2020. Consumer spending was supported by stimulus payments that were
sent to households during the pandemic, but has been slowing in 2022. With
demand now cooling, expectations of economic growth in the second quarter of
2022 have been lower, resulting in most analysts also downgrading their overall
annual growth estimates.

Prompting the Fed to take a more aggressive policy stance in 2022 is the surge
in inflation to a 40-year high, fueled in part by Russia's invasion of Ukraine
and causing oil and other commodity prices to spike. It has also fanned already
uncomfortably high inflation expectations. Adding to the pressure to act more
quickly is the strong economy, the rapid growth in jobs, and the decline in
unemployment. As of June 30, 2022, the economy was on track to return to full
employment in the next few months with unemployment in the low threes. In
response to rising prices, the Federal Reserve is engaging in an aggressive
tightening monetary program, raising the federal funds rate by 225 basis points
thus far in 2022.

Fears of a coming recession are mushrooming, as the Federal Reserve raises interest rates to rein in inflation that is spiraling higher at decades-long record rates. As a result, consumer sentiment has plunged and threatens to derail consumer spending, which supports roughly two-thirds of the economy.

Global oil prices have at times traded over $100 per barrel following the European Union's decision to sanction Russian oil. More than half of Russia's pre-invasion oil exports have now been sanctioned.

Persistent shortages of materials and labor and snags in supply chains have
caused prices to vault higher for months. Inflation as measured by the consumer
price index (CPI) rose by 1.3% in June 2022 over the prior month, an
acceleration of May's monthly pace of 1%. The increase was largely driven by
higher prices of gasoline, shelter, and food as the war in Ukraine rages on,
disrupting both Ukrainian and Russian commodity exports.

The Fed has indicated it will also continue to allow the assets on its balance
sheet, including $9 trillion in Treasury and mortgage-backed securities, to
mature and prepay. An average of nearly $100 billion in securities are expected
to run off monthly, although there is an increasing likelihood the Fed may begin
to actively sell its mortgage-backed securities.

Ten-year Treasury yields are close to 3%, as global bond investors digest the
implications of the weakening economy, contined labor shortages and supply chain
disruptions, high inflation, and the Fed's aggressive monetary actions. Ten-year
yields are expected to rise to near 3.5% by year-end 2022 and reach their
estimated long-run equilibrium of 4% by mid-decade. This is consistent with
expected nominal potential GDP growth.

                                       40

However, fiscal policy is turning quickly contractionary as the pandemic support
winds down. Total support in 2021 was nearly $1.9 trillion, and it is projected
to decline to $800 billion this year. The $550 billion, 10-year public
infrastructure package that passed into law last fall is not expected to have a
material impact on the thrust of fiscal policy this year, although it is
expected to modestly support growth from 2023 to 2025.

The federal government posted a deficit of $2.8 trillion in fiscal 2021 and is
on track to post a deficit of $1.2 trillion in fiscal 2022. The publicly traded
debt-to-GDP ratio has surged to near 100%. Lawmakers were appropriately not
focused on deficits during early stages of the pandemic given the need to
respond to the crisis, but addressing the nation's fragile fiscal situation
remains critical.

Employment

The national unemployment rate in June 2022 remained steady for the fourth month
in a row at 3.6%. The number of unemployed individuals remained essentially
unchanged at 5.9 million, recovering close to pre-pandemic levels as of February
2020, at which time the unemployment rate was 3.5% and unemployed persons
numbered 5.7 million. The U.S. economy added 372,000 jobs in June 2022 with
overall job growth averaging 375,000 per month in the second quarter of 2022.
While the average job growth is lower than the first quarter 2022 average of
539,000, decelerating job growth is a sign of a stabilizing labor market
recovering from a deep recession and quick turnaround in growth.

At June 30, 2022, private sector non-farm employment had fully recovered the
jobs lost in 2020 due to the coronavirus pandemic. This milestone happened years
earlier than in prior recoveries. Sectors with the fastest recoveries occurred
in industrial production sectors and consumer spending on goods, particularly
e-commerce. By contrast, sectors that became higher risk during the pandemic due
to their in-person work requirements and potentially lower wages, have not fully
recovered. The Labor Department reports unemployment claims are at a five month
high. Job cuts in technology and housing have occurred in recent months due to
concerns of a recession as the Federal Reserve aggressively tightens monetary
policy to quell inflation.

As of June 2022, the labor force participation rate (the share of working-age
Americans employed or actively looking for a job) remained little changed at
62.2%. The unemployment rate for the Midwest, where the Company conducts most of
its business, has decreased from 5.5% in June 2021 to 3.7% in June 2022.
Unemployment rates for June 2022 in the states where the Company has a branch or
loan production offices were Arizona at 3.3%, Arkansas at 3.2%, Colorado at
3.5%, Georgia at 3.0%, Illinois at 4.5%, Iowa at 2.9%, Kansas at 2.4%, Minnesota
at 2.1%, Missouri at 3.2%, Nebraska at 1.9%, North Carolina at 3.4%, Oklahoma at
2.7%, and Texas at 4.2%. Of the metropolitan areas in which the Company does
business, most are below the national unemployment rate of 3.6% for March 2022.

Single Family Housing


Sales of new single-family houses in June 2022 were at a seasonally adjusted
annual rate of 590,000, according to the U.S. Census Bureau and Department of
Housing and Urban Development estimates. This is 8.1% below the May 2022 rate of
642,000 and 17.4% below the June 2021 estimate of 714,000. Single-family housing
starts in June 2022 were at a rate of 982,000 which is a 2% drop from May 2022
and 6.3 % below the June 2021 rate of 1,664,000.

The median sales price of new houses sold in June 2022 was $402,400, up from
$374,700 in June 2021. The average sales price in June 2022 of $456,800 was up
from $431,900 in June 2021. The inventory of new homes for sale, at an estimated
444,000 at the end of May 2022, would support 9.3 months of sales at the current
sales rate, up from 5.8 months' supply at the end of June 2021.

Existing-home sales in June 2022 declined for the fifth straight month to a
seasonally adjusted annual rate of 5.12 million. Sales were down 5.4% from May
2022 and 14.2% from June 2021. The median existing-home sales price climbed
13.4% from $366,900 as of June 2021 to $416,000 as of June 2022, a record high.
The inventory of unsold existing homes rose to 1.26 million by the end of June
2022 an increase of 9.6% from May 2022 and a 2.4% rise from the previous year
(1.23 million). Unsold inventory in June 2022 sat at 3.0 months at the current
monthly sales pace, up from 2.6 months in May 2022 and 2.5 months in June 2021.

U.S. existing-home sales fell 14.2% from 5.97 million in June 2021 to 5.12 million in June 2022. Existing-home sales in the Midwest slid 1.6% from 1,250,000 in May 2022 to 1,230,000 in June 2022, and dropping 9.6% from June 2021 sales of 1,360,000 .

The U.S. median existing-home price for all housing types in June 2022 was
$416,000, up 13.4% from $366,900 in June 2021, as prices increased in all
regions. This marked 124 consecutive months of year-over-year increases, the
longest-running streak on record. The Midwest recorded an increase in sales
prices of 10.2%, with median prices increasing from $278,600 in June 2021 to
$306,900 in June 2022. Nationally, properties typically remained on the market
for 14 days in June 2022, down from 16 days in May 2022 and 17

                                       41

days in June 2021. Eighty-eight percent of homes sold in June 2022 were on the
market for less than a month. All-cash sales represented 25% of transactions in
June 2022, the same percentage as in May 2022 and up from 23% in June 2021.

The housing market is beginning to feel the impact of sharply rising mortgage
rates and higher inflation on housing affordability. If consumer price inflation
continues to rise, mortgage rates can be expected to move higher. Additionally,
while home prices have consistently increased as supply was tight, demand was
high and interest rates were low, prices may decline as available inventory
increases due to lower demand.

First-time buyers accounted for 30% of sales in June 2022, up from 27% of sales in May 2022 and down from 31% in June 2021.

According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage was 5.52% in June 2022, up from 5.23% in May 2022. The average commitment rate for all of 2021 was 2.96%,

Other Residential (Multi-Family) Housing and Commercial Real Estate


There has been unprecedented demand for apartments, with the vacancy rate
hitting historic lows at the end of 2021 and continuing into 2022. Absorption of
units, however, did not keep pace with a mildly diminished demand resulting in a
slight uptick in the national multi-family vacancy rate of 20 basis points to
5.1% in June 2022. The tempering of demand in 2022 can be attributed to rising
inflation cutting into potential renter household budgets and additional
uncertainties created by COVID variants and the war in Ukraine. The overall
tight housing market in both single-family and rental apartment units continues
to keep rents well above the historical average. Rents nationally rose 11% in
2021, with the nation absorbing 714,000 units in 2021, twice the annual average
of the past five years. With demand and rent growth indicators surging,
investors have continued to show high interest for apartment assets, creating a
highly competitive acquisition environment. Upward pressure on the 10-year
Treasury rate caused concern that the average national cap rate would rise
during the 2nd quarter of 2022; however, cap rates held steady as spreads
compressed.

Our market areas reflected the following apartment vacancy levels as of June
2022: Springfield, Missouri at 3.1%, St. Louis at 7.7%, Kansas City at 6.4%,
Minneapolis at 5.9%, Tulsa, Oklahoma at 6.2%, Dallas-Fort Worth at 6.3 %,
Chicago at 4.9%, Atlanta at 7.1%, Phoenix at 7.7%, Denver at 6.1% and Charlotte,
North Carolina at 6.8%. Five of our market areas, Atlanta, Dallas-Fort Worth,
Denver, Minneapolis, and Phoenix, were in the top ten metropolitan areas for
current construction and 12 month deliveries to market.

After three consecutive quarters in positive territory, office demand weakened
again in the second quarter of 2022. On an annual basis, absorption remains
positive nationally in about half of all major markets. Even while demand is
expected to improve in coming quarters, leasing volume will remain below
pre-pandemic norms, making it difficult to offset the level of new supply and
the record amount of sublet space on the market. Office space utilization is
still just a fraction of pre-pandemic levels, and improvement has stalled in
recent months. While many firms are returning to the office, most are committed
to flexibility and hybrid workplace schedules are likely here to stay. It will
take some time for office-using tenants to assess space needs in this new
environment, and even longer for the full impact on office space demand to be
realized. In the meantime, upward pressure in national office vacancy rates can
be expected in the near term.

Rent growth as of June 30, 2022 was positive on a year-over year basis in most
major markets. Many office owners in the remaining market areas will continue to
find it difficult to increase rents until leasing activity returns to
pre-pandemic levels for an extended period of time.

As of June 30, 2022, national office vacancy rates remained about the same at
12.4% compared to March 31, 2022, while our market areas reflected the following
vacancy levels at June 30, 2022: Springfield, Missouri at 3.4%, St. Louis at
9.5%, Kansas City at 9.6%, Minneapolis at 10.5%, Tulsa, Oklahoma at 11.9%,
Dallas-Fort Worth at 17.7%, Chicago at 15.2%, Atlanta at 13.6%, Denver at 14.5%,
Phoenix at 14.5% and Charlotte, North Carolina at 11.6%.

The retail sector continued its positive momentum in the first half of 2022, as
consumers drove continued improvement in the sector. Retail sales have
accelerated briskly since mid-2021 due to the significant increase in consumers'
disposable income resulting from pandemic-related government transfers and
strong wage growth. With additional funds at their disposal, American consumers
pushed brick and mortar retail sales to record levels in 2021. With sales
sitting at record highs, some retailers have selectively turned back to
expansion mode. While demand for retail space is on the rise, construction
activity continues to fall. Over the past year, 46 million square feet of retail
space was delivered with over 75% pre-leased prior to delivery. Most recent
construction activity has consisted of single-tenant build-to-suits or smaller
ground floor spaces in mixed-use developments. Due to growing demand and minimal
new supply, vacancy rates declined across most retail segments in the second
quarter of 2022. Rents increased at their fastest clip, 4.2%, in over a decade
during the period from June 30, 2021 to June 30, 2022. Retail rent growth is
forecast to accelerate over the coming quarters due to the combination of a
strong retail sales environment and continued rising demand for space. Inflation
expectations will

                                       42

weigh on the real rate of rental growth though, likely keeping it in line with
or slightly below the average growth rate seen during the five years preceding
the pandemic.

During the second quarter of 2022, national retail vacancy rates moved slightly
higher to 4.4% while our market areas reflected the following vacancy levels:
Springfield, Missouri at 3.0%, St. Louis at 5.9%, Kansas City at 4.6%,
Minneapolis at 3.2%, Tulsa, Oklahoma at 3.1%, Dallas-Fort Worth at 4.8%, Chicago
at 5.8%, Atlanta at 4.0%, Phoenix at 5.8%, Denver at 4.6%, and Charlotte, North
Carolina at 3.4%.

The U.S. has been in the midst of a historic boom in household spending on
retail goods (both online and in store), all of which need to be stored in
logistics properties across the country before reaching the end consumer. Even
as inflation and interest rates have risen through spring and summer 2022, U.S.
industrial leasing has shown no sign of slowing and remained at a record high
level of 60% above pre-pandemic levels.

The consumer savings stockpile accumulated during the pandemic and wage growth
should help to support consumers if the U.S. enters a recession or inflation
continues its upward trajectory. This savings stockpile is one reason why key
industrial demand drivers, including consumer goods spending, and U.S. imports
have also held up far better in recent months than today's diminished consumer
confidence levels would suggest

U.S. industrial rent growth at 11.9% year over year continues to accelerate as the slowing macro economy has yet to move the retail space market in the tenants' favor.


The jump in groundbreakings for speculative logistics developments during the
latter half of the pandemic, combined with shortages of construction labor and
materials, has set the stage for a choppy but protracted period of record-level
completions of new industrial facilities in the U.S. during 2022 and 2023.

Meanwhile, the industrial market's largest tenant, Amazon, is slowing its
expansion of its distribution network and signs of weakness are emerging in
consumer confidence as well as in the U.S. housing market, all due to rising
inflation and interest rates. These are signals that the industrial market's
vacancy rate, at a record low of 4.0% as of second quarter 2022, may increase
over the next several quarters. The magnitude of the change is difficult to
gauge.

At June 30, 2022, national industrial vacancy rates sat at a record low of 4.0%
while our market areas reflected the following vacancy levels: Springfield,
Missouri at 1.5%, St. Louis at 2.7%, Kansas City at 4.4%, Minneapolis at 3.1%,
Tulsa, Oklahoma at 3.5%, Dallas-Fort Worth at 5.5%, Chicago at 4.5%, Atlanta at
3.4%, Phoenix at 4.2%, Denver at 5.1% and Charlotte, North Carolina at 4.8%.

Our management will continue to monitor regional, national, and global economic indicators such as unemployment, GDP, housing starts and prices, consumer sentiment, commercial real estate price index and commercial real estate occupancy, absorption and rental rates, as these could significantly affect customers in each of our market areas.

COVID-19 Impact to Our Business and Response

Great Southern continues to monitor and respond to the effects of the 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. 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, if necessary.

The Company continues to work diligently with its nearly 1,100 associates to
enforce the most current health, hygiene and social distancing practices. To
date, there have been no service disruptions or reductions in staffing.

As always, customers can conduct their banking business using our 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 continues to be 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.

                                       43

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 and early 2022,
such as lower unemployment rates, improving GDP levels and other measures of the
economy and increased vaccination rates. However, supply-chain issues continue
to negatively impact the economy and inflation has risen to a level
significantly above the long-run objectives of the FOMC. Over the previous two
years, the COVID-19 pandemic has impacted the Company's business in one or more
of the following ways, among others.

Consistently low market interest rates for a significant period of time have

? had a negative impact on our variable and fixed rate loans, resulting in

reduced net interest income. More recently, market interest rates have

increased, which has resulted in increased net interest income.

? Certain fees for deposit and loan products were waived or reduced for a period

of time.

? Non-interest expenses increased as we dealt with the effects of the COVID-19

pandemic, including cleaning costs, supplies, equipment and other items.

? Banking center lobbies were closed at various times, and may close again in

future periods if the pandemic situation worsens again.

? Loan modifications occurred in 2020 and 2021.

? A contraction in economic activity reduced demand for our loans and for our

other products and services in 2020 and 2021.



COVID-19 infection rates are relatively low, but beginning to rise again, in our
markets and the CDC has relaxed most restrictions that were previously in place.
In some cases those restrictions have been replaced with recommendations. Also,
states and local municipalities may restrict certain activities from time to
time. Our business is currently operating normally, similar to operations prior
to the onset of the COVID-19 pandemic. We continue to monitor infection rates
and other health and economic indicators to ensure we are prepared to respond to
future challenges, should they arise.

Paycheck Protection Program Loans

Great Southern actively participated in the PPP through the SBA. In total, we
originated approximately 3,250 PPP loans, totaling approximately $179 million.
SBA forgiveness was approved and processed, and full repayment proceeds were
received by us, for virtually all of these PPP loans during 2021 and early 2022.

Great Southern received fees from the SBA for originating PPP loans based on the
amount of each loan. At June 30, 2022, remaining net deferred fees related to
PPP loans totaled $35,000, and we expect these remaining net deferred fees will
accrete to interest income during the third quarter of 2022. The fees, net of
origination costs, are deferred in accordance with standard accounting practices
and accreted to interest income on loans over the contractual life of each loan.
In the three months ended June 30, 2022 and 2021, Great Southern recorded
approximately $54,000 and $1.1 million, respectively, of net deferred fees in
interest income on PPP loans. In the six months ended June 30, 2022 and 2021,
Great Southern recorded approximately $469,000 and $2.3 million, respectively,
of net deferred fees in interest income on PPP loans.

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 $102.1 million, or 1.9%, from $5.45 billion at December 31, 2021, to $5.55 billion at June 30, 2022. Details of the current period changes in total assets are provided in the "Comparison of Financial Condition at June 30, 2022 and December 31, 2021" section of this Quarterly Report on Form 10-Q.


                                       44

Loans. Net outstanding loans increased $354.1 million, or 8.8%, from $4.01
billion at December 31, 2021, to $4.36 billion at June 30, 2022. The increase
was primarily in other residential (multi-family) loans, commercial real estate
loans and one- to four family residential loans. These increases were partially
offset by a decrease in construction loans. 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, we
cannot be assured that our loan growth will match or exceed the average level of
growth achieved in prior years. The Company's strategy continues to be focused
on maintaining credit risk and interest rate risk at appropriate levels.

Recent growth has occurred in some loan types, primarily other residential
(multi-family), commercial real estate and one- to four family residential real
estate, 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, Phoenix 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, other
residential (multi-family) and commercial real estate loans to involve a higher
degree of risk compared to some other types of loans, such as first mortgage
loans on one- to four-family, owner-occupied residential properties. For other
residential (multi-family), commercial real estate, commercial business and
construction loans, the credits are subject to an analysis of the borrower's and
guarantor's financial condition, credit history, verification of liquid assets,
collateral, market analysis and repayment ability. It has been, and continues to
be, Great Southern's practice to verify information from potential borrowers
regarding assets, income or payment ability and credit ratings as applicable and
as required by the authority approving the loan. To minimize construction risk,
projects are monitored as construction draws are requested by comparison to
budget and with progress verified through property inspections. The geographic
and product diversity of collateral, equity requirements and limitations on
speculative construction projects help to mitigate overall risk in these loans.
Underwriting standards for all loans also include loan-to-value ratio
limitations which vary depending on collateral type, debt service coverage
ratios or debt payment to income ratio guidelines, where applicable, credit
histories, use of guaranties and other recommended terms relating to equity
requirements, amortization, and maturity. Consumer loans, other than home equity
loans, are primarily secured by new and used motor vehicles and these loans are
also subject to certain minimum underwriting standards to assure portfolio
quality. In 2019, the Company discontinued 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 June 30, 2022 and December
31, 2021, 0.2% and 0.3%, respectively, of our owner occupied one-to four-family
residential loans had loan-to-value ratios above 100% at origination. At both
June 30, 2022 and December 31, 2021, an estimated 0.2% of total non-owner
occupied one- to four-family residential loans had loan-to-value ratios above
100% at origination.

At June 30, 2022, TDRs totaled $3.6 million, or 0.1% of total loans, a decrease
of $246,000 from $3.9 million, or 0.1% of total loans, at December 31, 2021.
Concessions granted to borrowers experiencing financial difficulties may include
a reduction in the interest rate on the loan, payment extensions, forgiveness of
principal, forbearance or other actions intended to maximize collection. For
TDRs occurring during the six months ended June 30, 2022, none were restructured
into multiple new loans. For TDRs occurring during the year ended December 31,
2021, one loan totaling $45,000 was restructured into multiple new loans. For
further information on TDRs, see Note 6 of the Notes to Consolidated Financial
Statements contained in this report.

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 use of interest
rates such as LIBOR. LIBOR is a benchmark interest rate referenced in a variety
of agreements 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 by June 2023. Other interest rates used
globally could be discontinued for similar reasons.

The Company has been regularly monitoring its portfolio of loans tied to LIBOR
since 2019, with specific groups of loans identified. The Company implemented
LIBOR fallback language for all commercial loan transactions near the end of
2018, with such language utilized for all commercial loan originations and
renewals/modifications since that time. The Company is monitoring the remaining
group of loans that were originated prior to the fourth quarter of 2018, and
have not been renewed or modified since that time. At June 30, 2022, this
represented approximately 47 commercial loans totaling approximately $122
million; however, only 29 of those loans,

                                       45

totaling $55 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 $381 million at June
30, 2022), and that portfolio is being monitored for potential changes that may
be facilitated by the mortgage industry. The vast majority of the loan portfolio
tied to LIBOR now includes LIBOR replacement language that identifies "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 substantially
similar to the previous LIBOR-based rate.

Available-for-sale Securities. In the six months ended June 30, 2022,
available-for-sale securities increased $18.4 million, or 3.7%, from $501.0
million at December 31, 2021, to $519.5 million at June 30, 2022. This increase
was primarily due to the purchase of U.S. Government agency fixed-rate
single-family and multi-family mortgage-backed securities and collateralized
mortgage obligations. The Company used excess liquid funds and loan repayments
to fund this increase in investment securities. The increase was mostly offset
by $226.5 million in available-for-sale securities being transferred to
held-to-maturity during the period and calls of municipal securities and normal
monthly payments received related to the portfolio of U.S. Government agency
mortgage-backed securities and collateralized mortgage obligations. In
determining securities that were elected to be transferred to the
held-to-maturity category, the Company reviewed all of its investment securities
purchased prior to 2022 and determined that certain of those securities, for
various reasons, would likely be held to their maturity or full repayment prior
to contractual maturity.

Held-to-maturity Securities. In the six months ended June 30, 2022, as noted
above, available-for-sale securities of $226.5 million were transferred to
held-to-maturity. This transfer included $220.2 million of mortgage-backed
securities and collateralized mortgage obligations and $6.3 million in municipal
securities. At June 30, 2022 the balance of held-to-maturity securities was
$215.4 million.

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 six months ended June 30, 2022, total deposit balances
decreased $35.9 million, or 0.8%. Compared to December 31, 2021, transaction
account balances decreased $90.2 million, or 2.5%, to $3.50 billion at June 30,
2022, while retail certificates of deposit decreased $151.8 million, or 17.0%,
to $741.8 million at June 30, 2022. The decrease in transaction accounts was
primarily a result of a decrease in non-interest-bearing accounts, partially
offset by increases in various money market accounts and NOW deposit accounts.
Interest-bearing transaction account balances were also negatively impacted by
one large customer that experienced net outflows of balances, which the Company
had been made aware of and anticipated and which had accumulated in 2020 and
2021 during the height of the COVID-19 pandemic. Their deposit balances are
returning to pre-COVID-19 levels. Retail time deposits decreased due to a
decrease in retail certificates generated through the banking center network and
decreases in national time deposits initiated through internet channels. Time
deposits initiated through internet channels experienced a planned decrease
($103.4 million in the six months ended June 30, 2022) due to increases in
overall liquidity levels in 2021 and to reduce the Company's cost of funds.
Brokered deposits were $273.5 million and $67.4 million at June 30, 2022 and
December 31, 2021, respectively. The Company uses brokered deposits of select
maturities from time to time to supplement its various funding channels.

Our deposit balances may fluctuate depending on customer preferences and our
relative need for funding. We do not consider our retail certificates of deposit
to be guaranteed long-term funding because customers can withdraw their funds at
any time with minimal interest penalty. When loan demand trends upward, we can
increase rates paid on deposits to attract more deposits and utilize brokered
deposits to obtain 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 increased $8.7 million
from $137.1 million at December 31, 2021 to $145.8 million at June 30, 2022.
These balances fluctuate over time based on customer demand for this product.

                                       46

Short-term borrowings and other interest-bearing liabilities. Short-term
borrowings and other interest-bearing liabilities increased $170.1 million from
$1.8 million at December 31, 2021 to $171.9 million at June 30, 2022. At June
30, 2022, $170.0 million of this total was overnight borrowings from the
FHLBank, which were utilized to fund growth in outstanding loans.

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").

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 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. In 2022 to date, the FRB increased interest rates on four separate
occasions, 0.25% on March 17, 0.50% on May 5, 0.75% on June 16 and 0.75% on July
27. At June 30, 2022, the Federal Funds rate stood at 2.50%. Financial markets
are anticipating further increases in interest rates in the remainder of 2022,
with up to 1.00% of additional cumulative rate hikes currently anticipated. A
substantial portion of Great Southern's loan portfolio ($1.24 billion at June
30, 2022) is tied to the one-month or three-month LIBOR index and will be
subject to adjustment at least once within 90 days after June 30, 2022. Of these
loans, $1.23 billion had interest rate floors. Great Southern also has a
portfolio of loans ($693 million at June 30, 2022) tied to a "prime rate" of
interest that will adjust immediately or within 90 days with changes to the
"prime rate" of interest. Of these loans, $596 million had interest rate floors
at various rates. At June 30, 2022, nearly all of these LIBOR and "prime rate"
loans had fully-indexed rates that were at or above their floor rate and so are
expected to move fully with future market interest rate increases.

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 or the "prime rate" 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 still 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, market interest rate
increases would normally result in increased interest rates on our LIBOR-based
and prime-based loans.

As of June 30, 2022, 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 relatively minor changes in market interest
rates because our portfolios are relatively well-matched in a twelve-month
horizon. In a situation where market interest rates increase significantly in a
short period of time, our net interest margin increase may be more pronounced in
the very near term (first one to three months), due to fairly rapid increases in
LIBOR interest rates and "prime" interest rates. In a situation where market
interest rates decrease significantly in a short period of time, as they did in
March 2020, our net interest margin decrease may be more pronounced in the very
near term (first one to three months), due to fairly rapid decreases in LIBOR
interest rates and "prime" 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 percentage due to 2.25% of Federal Fund
rate cuts during the nine month period of July 2019 through March 2020. Margin
compression primarily resulted from changes in the asset mix, mainly the
addition of lower-yielding assets and the issuance of subordinated notes during
2020 and the net interest margin remained lower than our historical average in
2021. LIBOR interest rates decreased significantly in 2020 and remained very low
in 2021, putting pressure on loan yields, and strong pricing competition for
loans and deposits remains in most of our markets. Beginning in March 2022,
market interest rates, including LIBOR interest rates and "prime" interest
rates, began to increase rapidly. This has resulted in increasing loan yields
and expansion of our net interest income and net interest margin in 2022. 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."

                                       47

Non-Interest Income and Non-Interest (Operating) Expenses. The Company's
profitability is also affected by the level of its non-interest income and
operating expenses. Non-interest income consists primarily of service charges
and ATM fees, POS interchange fees, late charges and prepayment fees on loans,
gains on sales of loans and available-for-sale investments and other general
operating income. 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 and Six
Months Ended June 30, 2022 and 2021" 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
certain aspects of the regulatory framework for small depository institutions
with assets of less than $10 billion and for large banks with assets of more
than $50 billion. Many of these amendments could result in meaningful regulatory
changes.

The Economic Growth Act, among other matters, expands the definition of
qualified mortgages which may be held by a financial institution and simplifies
the regulatory capital rules for financial institutions and their holding
companies with total consolidated assets of less than $10 billion by instructing
the federal banking regulators to establish a single "Community Bank Leverage
Ratio" ("CBLR") of between 8 and 10 percent. Any qualifying depository
institution or its holding company that exceeds the CBLR will be considered to
have met generally applicable leverage and risk-based regulatory capital
requirements and any qualifying depository

                                       48

institution that exceeds the new ratio will be considered "well-capitalized"
under the prompt corrective action rules. Effective January 1, 2020, the CBLR
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 CBLR requirement was a minimum of 8.5% for
calendar year 2021, and is 9% thereafter. The Company and the Bank have chosen
to not utilize the new CBLR due to the Company's size and complexity, including
its commercial real estate and construction lending concentrations and
significant off-balance sheet funding commitments.

In addition, the Economic Growth Act includes regulatory relief in the areas of examination cycles, call reports, mortgage disclosures and risk weights for certain high-risk commercial real estate loans.

Business Initiatives


Great Southern continues to monitor and respond to the effects of the 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. Centers for Disease Control and Prevention (CDC)
guidelines, as well as directives from federal, state and local officials, are
being followed to make informed operational decisions, if necessary.

During 2022, the high-performing banking center in Kimberling City, Missouri,
will be replaced with a newly constructed building on the same property at 14309
Highway 13. Customers are being served in a temporary building on the property
during construction. The new office is expected to open in the fourth quarter of
2022. Including this office, the Company operates three banking centers in the
Branson Tri-Lakes area of southwest Missouri.

In the St. Louis market, a banking center in the Clayton area is slated to be
consolidated into a nearby banking center at the close of business on August 19,
2022. This lobby-only office, located at 8235 Forsyth Boulevard, will be
consolidated into the Brentwood-area office, 2435 S. Brentwood, a short distance
away. The commercial lending team currently housed in the Clayton office
building will continue to serve customers from this location.

In June 2022, the Company opened a new commercial loan production office (LPO)
in Charlotte, North Carolina, which represents the eighth LPO in the Company's
franchise. A local and highly experienced lender was hired to manage this
office. The new LPO will provide a variety of commercial lending services,
including commercial real estate loans for new and existing properties and
commercial construction loans. An LPO in Phoenix, Arizona, was also opened in
February 2022.

Comparison of Financial Condition at June 30, 2022 and December 31, 2021

During the six months ended June 30, 2022, the Company's total assets increased by $102.1 million to $5.55 billion. The increase was primarily in loans and investment securities, partially offset by a decrease in cash equivalents.

Cash and cash equivalents were $195.7 million at June 30, 2022, a decrease of
$521.6 million, or 72.7%, from $717.3 million at December 31, 2021. Excess funds
held at the Federal Reserve Bank at December 31, 2021 were primarily the result
of increases in net loan repayments throughout 2021. In 2022, these excess funds
were used to fund the purchase of new investment securities and to fund loan
originations.

The Company's available-for-sale securities increased $18.4 million, or 3.7%,
compared to December 31, 2021. The increase was primarily related to the
purchase of U.S. Government agency fixed-rate single-family or multi-family
mortgage-backed securities and collateralized mortgage obligations, partially
offset by the transfer of $226.5 million in available-for-sale securities to
held-to-maturity during the period and by calls of municipal securities and
normal monthly payments received related to the portfolio of mortgage-backed
securities and collateralized mortgage obligations. The Company used excess
funds held at the Federal Reserve Bank and loan repayments to fund this increase
in investment securities. The available-for-sale securities portfolio was 9.4%
and 9.2% of total assets at June 30, 2022 and December 31, 2021, respectively.

Held-to-maturity securities were $215.4 million at June 30, 2022. During the six
months ended June 30, 2022, $226.5 million in available-for-sale securities were
transferred to held-to-maturity. This included $220.2 million of mortgage-backed
securities and collateralized mortgage obligations and $6.3 million in municipal
securities. In determining securities that were elected to be transferred to the
held-to-maturity category, the Company reviewed all of its investment securities
purchased prior to 2022 and determined that certain of those securities, for
various reasons, would likely be held to their maturity or full repayment prior
to contractual maturity. The held-to-maturity securities portfolio was 3.9% of
total assets at June 30, 2022.

                                       49

Net loans increased $354.1 million from December 31, 2021, to $4.36 billion at
June 30, 2022. This increase was primarily in other residential (multi-family)
loans ($220 million increase), commercial real estate loans ($147 million
increase) and one- to four-family residential loans ($152 million increase).
These increases were partially offset by a decrease in construction loans ($170
million decrease). Loan origination volume in the six months ended June 30, 2022
was similar to loan origination volume that occurred in 2020 and 2021; however,
the pace of loan payoffs prior to maturity has slowed in 2022 due to the
increase in market rates of interest.

Total liabilities increased $169.2 million, from $4.83 billion at December 31,
2021 to $5.00 billion at June 30, 2022, primarily due to increases in short-term
borrowings from FHLBank and brokered deposits. This was partially offset by a
reduction in total deposits, primarily demand deposits and retail time deposits.
Time deposits initiated through internet channels experienced a planned decrease
due to increases in overall liquidity levels and to reduce the Company's cost of
funds.

Total deposits decreased $35.9 million, or 0.8%, to $4.52 billion at June 30,
2022. Transaction account balances decreased $90.2 million, from $3.59 billion
at December 31, 2021 to $3.50 billion at June 30, 2022. Retail certificates of
deposit decreased $151.8 million compared to December 31, 2021, to $741.8
million at June 30, 2022. Changes in transaction account balances were primarily
due to decreases in IntraFi Network Reciprocal Deposits and non-interest-bearing
checking accounts, offset by increases in NOW deposit accounts and money market
accounts. Total interest-bearing checking and demand deposit accounts decreased
$31.1 million and $59.1 million, respectively. Customer retail time deposits
initiated through our banking center network decreased $41.9 million and time
deposits initiated through our national internet network decreased $103.4
million. Customer deposits at June 30, 2022 and December 31, 2021 totaling $35.2
million and $41.7 million, respectively, were part of the IntraFi Network
Deposits program, which allows customers to maintain balances in an insured
manner that would otherwise exceed the FDIC deposit insurance limit. Brokered
deposits increased $206.1 million to $273.5 million at June 30, 2022, compared
to $67.4 million at December 31, 2021. Brokered deposits were utilized to fund
growth in outstanding loans and to offset reductions in balances in other
deposit categories.

Securities sold under reverse repurchase agreements with customers increased
$8.7 million from $137.1 million at December 31, 2021 to $145.8 million at June
30, 2022. These balances fluctuate over time based on customer demand for this
product.

Short-term borrowings and other interest-bearing liabilities increased $170.1
million from $1.8 million at December 31, 2021 to $171.9 million at June 30,
2022. At June 30, 2022, $170.0 million of this total was overnight borrowings
from the FHLBank.

Total stockholders' equity decreased $67.1 million, from $616.8 million at
December 31, 2021 to $549.6 million at June 30, 2022. Accumulated other
comprehensive income decreased $46.1 million during the six months ended June
30, 2022, primarily due to decreases in the fair value of available-for-sale
investment securities due to increasing market interest rates, and to decreases
in the fair value of certain the Company's cash flow hedges. Stockholders'
equity also decreased due to repurchases of the Company's common stock totaling
$50.4 million and dividends declared on common stock of $9.5 million. The
Company recorded net income of $35.2 million for the six months ended June 30,
2022. In addition, stockholders' equity increased $3.7 million due to stock
option exercises.

Results of Operations and Comparison for the Three and Six Months Ended June 30, 2022 and 2021


General

Net income was $18.2 million for the three months ended June 30, 2022 compared
to $20.1 million for the three months ended June 30, 2021. This decrease of $1.9
million, or 9.4%, was primarily due to an increase in provision for credit
losses on loans and unfunded commitments of $3.5 million, or 270.1%, an increase
in non-interest expense of $2.8 million, or 9.3%, and a decrease in non-interest
income of $266,000, or 2.8%, partially offset by an increase in net interest
income of $4.1 million, or 9.3%, and a decrease in income tax expense of
$572,000, or 10.9%.

Net income was $35.2 million for the six months ended June 30, 2022 compared to
$39.0 million for the six months ended June 30, 2021. This decrease of $3.8
million, or 9.7%, was primarily due to an increase in non-interest expense of
$3.8 million, or 6.2%, an increase in provision for credit losses on loans and
unfunded commitments of $3.7 million, or 220.8%, and a decrease in non-interest
income of $826,000, or 4.3%, partially offset by an increase in net interest
income of $3.3 million, or 3.7%, and a decrease in income tax expense of $1.2
million, or 11.7%.

Total Interest Income

Total interest income increased $2.2 million, or 4.5%, during the three months
ended June 30, 2022 compared to the three months ended June 30, 2021. The
increase was due to a $2.8 million increase in interest income on investment
securities and other interest- earning assets, partially offset by a $596,000
decrease in interest income on loans. Interest income from investment securities
and

                                       50
other interest-earning assets increased during the three months ended June 30,
2022 compared to the same period in 2021 primarily due to higher average
balances of investment securities and higher average rates of interest on
investment securities and other interest-earning assets. Interest income on
loans decreased for the three months ended June 30, 2022 compared to the same
period in 2021, primarily due to lower average loan balances, slightly offset by
higher average rates of interest.

Total interest income decreased $1.7 million, or 1.7%, during the six months
ended June 30, 2022 compared to the six months ended June 30, 2021. The decrease
was due to a $5.2 million decrease in interest income on loans, partially offset
by a $3.5 million increase in interest income on investment securities and other
interest-earning assets. Interest income on loans decreased for the six months
ended June 30, 2022 compared to the same period in 2021, primarily due to lower
average loan balances, combined with lower average rates of interest on loans.
Interest income from investment securities and other interest-earning assets
increased during the three months ended June 30, 2022 compared to the same
period in 2021, primarily due to higher average balances of investment
securities combined with higher average rates of interest on investment
securities and other interest-earning assets.

Interest Income - Loans


During the three months ended June 30, 2022 compared to the three months ended
June 30, 2021, interest income on loans decreased $639,000 as the result of
lower average loan balances, which decreased from $4.38 billion during the three
months ended June 30, 2021, to $4.32 billion during the three months ended June
30, 2022. The lower average balances were primarily due to higher loan
repayments during the latter half of 2021. Interest income on loans increased
$43,000 as a result of slightly higher average interest rates on loans. The
average yield on loans increased from 4.33% during the three months ended June
30, 2021, to 4.34% during the three months ended June 30, 2022. This increase
was primarily due to the repricing of higher floating rates in 2022 as market
interest rates began to increase.

During the six months ended June 30, 2022 compared to the six months ended June
30, 2021, interest income on loans decreased $3.6 million as the result of lower
average loan balances, which decreased from $4.39 billion during the six months
ended June 30, 2021, to $4.23 billion during the six months ended June 30, 2022.
The lower average balances were primarily due to higher loan repayments during
the latter half of 2021. Interest income on loans also decreased $1.6 million as
a result of lower average interest rates on loans. The average yield on loans
decreased from 4.36% during the six months ended June 30, 2021, to 4.29% during
the six months ended June 30, 2022. This decrease was primarily due to decreased
yields in most loan categories as some loans with higher rates refinanced or
repaid as a result of the sale of the financed project.

Additionally, the Company's interest income on loans included accretion of net
deferred fees related to PPP loans originated in 2020 and 2021. The amount of
net deferred fees recognized in interest income was $54,000 and $469,000 in the
three and six months ended June 30, 2022, respectively, compared to $1.1 million
and $2.3 million in the three and six months ended June 30, 2021, respectively.

In October 2018, the Company entered into an interest rate swap transaction as
part of its ongoing interest rate management strategies to hedge the risk of its
floating rate loans. The notional amount of the swap was $400 million with a
contractual termination date in October 2025. As previously disclosed by the
Company, in March 2020, the Company and its swap counterparty mutually agreed to
terminate 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 to date
interest portion and net of deferred income taxes, is reflected in the Company's
stockholders' equity as Accumulated Other Comprehensive Income and is being
accreted to interest income on loans monthly through the original contractual
termination date of October 6, 2025. This has the effect of reducing Accumulated
Other Comprehensive Income and increasing Net Interest Income and Retained
Earnings over the periods. The Company recorded interest income related to the
interest rate swap of $2.0 million in both the three months ended June 30, 2022
and the three months ended June 30, 2021. The Company recorded interest income
related to the interest rate swap of $4.0 million in both the six months ended
June 30, 2022 and the six months ended June 30, 2021. The Company currently
expects to have a sufficient amount of eligible variable rate loans to continue
to accrete this interest income ratably in future periods. If this expectation
changes and the amount of eligible variable rate loans decreases significantly,
the Company may be required to recognize this interest income more rapidly.

In February 2022, the Company entered into an interest rate swap transaction as
part of its ongoing interest rate management strategies to hedge the risk of its
floating rate loans. The notional amount of the swap is $300 million with an
effective date of March 1, 2022 and a termination date of March 1, 2024. Under
the terms of the swap, the Company will receive a fixed rate of interest of
1.6725% and will pay a floating rate of interest equal to one-month USD-LIBOR
(or the equivalent replacement rate if USD-LIBOR rate is not available). The
floating rate resets monthly and net settlements of interest due to/from the
counterparty also occur monthly. The initial floating rate of interest was set
at 0.2414%. To the extent that the fixed rate of interest continues to exceed
one-month USD-LIBOR, the Company will receive net interest settlements, which
will be recorded as loan interest income. If one-month USD-LIBOR exceeds the
fixed rate of interest in future periods, the Company will be required to pay
net settlements to the counterparty and will record

                                       51

those net payments as a reduction of interest income on loans. The Company recorded loan interest income related to this swap transaction of $668,000 and $1.0 million in the three and six months ended June 30, 2022.

In July 2022, the Company entered into two interest rate swap transactions as
part of its ongoing interest rate management strategies to hedge the risk of its
floating rate loans. The notional amount of each swap is $200 million with an
effective date of May 1, 2023 and a termination date of May 1, 2028. Under the
terms of one swap, beginning in May 2023, the Company will receive a fixed rate
of interest of 2.628% and will pay a floating rate of interest equal to
one-month USD-SOFR OIS. Under the terms of the other swap, beginning in May
2023, the Company will receive a fixed rate of interest of 5.725% and will pay a
floating rate of interest equal to one-month USD-Prime. In each case, the
floating rate will be reset monthly and net settlements of interest due to/from
the counterparty will also occur monthly. To the extent the fixed rate of
interest exceeds the floating rate of interest, the Company will receive net
interest settlements, which will be recorded as loan interest income. If the
floating rate of interest exceeds the fixed rate of interest, the Company will
be required to pay net settlements to the counterparty and will record those net
payments as a reduction of interest income on loans.

Interest Income - Investments and Other Interest-earning Assets


Interest income on investments increased $2.8 million in the three months ended
June 30, 2022 compared to the three months ended June 30, 2021. Interest income
increased $2.1 million as a result of an increase in average balances from
$460.0 million during the three months ended June 30, 2021, to $741.4 million
during the three months ended June 30, 2022. 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 increased $676,000 as a
result of higher average interest rates from 2.58% during the three months ended
June 30, 2021, to 3.09% during the three month period ended June 30, 2022.
During the three months ended June 30, 2022, the Company also recorded interest
income of $812,000 received due to the early repayment of one investment
security.

Interest income on investments increased $3.4 million in the six months ended
June 30, 2022 compared to the six months ended June 30, 2021. Interest income
increased $2.8 million as a result of an increase in average balances from
$437.5 million during the six months ended June 30, 2021, to $638.3 million
during the six months ended June 30, 2022. 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. In addition, interest income increased
$514,000 as a result of higher average interest rates from 2.66% during the six
months ended June 30, 2021, to 2.88% during the six month period ended June 30,
2022. As indicated above, during the six months ended June 30, 2022, the Company
also recorded interest income of $812,000 received due to the early repayment of
one investment security.

Interest income on other interest-earning assets increased $83,000 in the three
months ended June 30, 2022 compared to the three months ended June 30, 2021.
Interest income increased $95,000 as a result of higher average interest rates
from 0.10% during the three months ended June 30, 2021, to 0.74% during the
three month period ended June 30, 2022. Partially offsetting that increase,
interest income decreased $12,000 as a result of a decrease in average balances
from $514.7 million during the three months ended June 30, 2021, to $115.5
million during the three months ended June 30, 2022. The increase in the average
interest rates was due to the increase in the rate paid on funds held at the
Federal Reserve Bank. This rate was increased in March, May and June 2022 in
conjunction with the increase in the Federal Funds target interest rate.

Interest income on other interest-earning assets increased $174,000 in the six
months ended June 30, 2022 compared to the six months ended June 30, 2021.
Interest income increased $221,000 as a result of higher average interest rates
from 0.10% during the six months ended June 30, 2021, to 0.29% during the six
month period ended June 30, 2022. Interest income decreased $47,000 as a result
of a decrease in average balances from $467.3 million during the six months
ended June 30, 2021, to $286.1 million during the six months ended June 30,
2022. The increase in the average interest rates was due to the increase in the
rate paid on funds held at the Federal Reserve Bank. As noted above, this rate
was increased in March, May and June 2022 in conjunction with the increase in
the Federal Funds target interest rate.

Total Interest Expense


Total interest expense decreased $1.9 million, or 33.0%, during the three months
ended June 30, 2022, when compared with the three months ended June 30, 2021,
due to a decrease in interest expense on deposits of $1.1 million, or 31.8%, and
a decrease in interest expense on subordinated notes of $1.1 million, or 49.5%,
partially offset by an increase in interest expense on short-term borrowings of
$236,000 and an increase in interest expense on subordinated debentures issued
to capital trusts of $46,000, or 40.7%.

                                       52

Total interest expense decreased $5.0 million, or 40.9%, during the six months
ended June 30, 2022, when compared with the six months ended June 30, 2021, due
to a decrease in interest expense on deposits of $3.1 million, or 41.0%, and a
decrease in interest expense on subordinated notes of $2.2 million, or 49.6%,
partially offset by an increase in interest expense on short-term borrowings of
$237,000 and an increase in interest expense on subordinated debentures issued
to capital trusts of $51,000, or 22.6%.

Interest Expense - Deposits

Interest expense on demand deposits decreased $241,000 due to average rates of
interest that decreased from 0.18% in the three months ended June 30, 2021 to
0.14% in the three months ended June 30, 2022. Interest rates paid on demand
deposits were lower in the 2022 period due to significant reductions in the
federal funds rate of interest and other market interest rates since 2020.
Partially offsetting this decrease, interest expense on demand deposits
increased $33,000, due to an increase in average balances from $2.31 billion
during the three months ended June 30, 2021 to $2.39 billion during the three
months ended June 30, 2022. The Company experienced increased balances in
various types of money market accounts and certain types of NOW accounts.

Interest expense on demand deposits decreased $749,000 due to average rates of
interest that decreased from 0.20% in the six months ended June 30, 2021 to
0.14% in the six months ended June 30, 2022. Interest rates paid on demand
deposits were lower in the 2022 period due to significant reductions in the
federal funds rate of interest and other market interest rates since 2020.
Partially offsetting this decrease, interest expense on demand deposits
increased $124,000, due to an increase in average balances from $2.25 billion
during the six months ended June 30, 2021 to $2.38 billion during the six months
ended June 30, 2022. The Company experienced increased balances in various types
of money market accounts and certain types of NOW accounts.

Interest expense on time deposits decreased $537,000 due to a decrease in
average balances of time deposits from $1.21 billion during the three months
ended June 30, 2021 to $914.6 million in the three months ended June 30, 2022.
Interest expense on time deposits also decreased $354,000 as a result of a
decrease in average rates of interest from 0.80% during the three months ended
June 30, 2021, to 0.67% during the three months ended June 30, 2022. A large
portion of the Company's certificate of deposit portfolio matures within six to
twelve months and therefore reprices fairly quickly; this is consistent with the
portfolio over the past several years. Older certificates of deposit that
renewed or were replaced with new deposits generally resulted in the Company
paying a lower rate of interest due to market interest rate decreases throughout
2021 with rates only beginning to increase minimally during the three months
ended June 30, 2022 due to increases in market interest rates. The decrease in
average balances of time deposits was a result of decreases in retail customer
time deposits obtained through the banking center network and retail customer
time deposits obtained through on-line channels. On-line channel deposits were
actively reduced by the Company during 2021 and 2022 as other deposit sources
increased.

Interest expense on time deposits decreased $1.3 million as a result of a
decrease in average rates of interest from 0.87% during the six months ended
June 30, 2021, to 0.64% during the six months ended June 30, 2022. Interest
expense on time deposits also decreased $1.3 million due to a decrease in
average balances of time deposits from $1.26 billion during the six months ended
June 30, 2021 to $922.8 million in the six months ended June 30, 2022. A large
portion of the Company's certificate of deposit portfolio matures within six to
twelve months and therefore reprices fairly quickly; this is consistent with the
portfolio over the past several years. Older certificates of deposit that
renewed or were replaced with new deposits generally resulted in the Company
paying a lower rate of interest due to market interest rate decreases throughout
2021 with rates only beginning to increase minimally during the six months ended
June 30, 2022 due to increases in market interest rates. The decrease in average
balances of time deposits was a result of decreases in retail customer time
deposits obtained through the banking center network and retail customer time
deposits obtained through on-line channels. On-line channel deposits were
actively reduced by the Company during 2021 and 2022 as other deposit sources
increased.

Interest Expense - FHLBank Advances; Short-term Borrowings, Repurchase Agreements and Other Interest-bearing Liabilities; Subordinated Debentures Issued to Capital Trusts and Subordinated Notes

FHLBank advances were not utilized during the three and six months ended June 30, 2022 and 2021.

Interest expense on repurchase agreements decreased $2,000 during the three
months ended June 30, 2022 when compared to the three months ended June 30,
2021. The average rate of interest was 0.03% for the three months ended June 30,
2022 compared to 0.02% for the three months ended June 30, 2021. The average
balance of repurchase agreements decreased $6.4 million from $142.0 million in
the three months ended June 30, 2022 to $135.5 million in the three months ended
June 30, 2022, which was due to changes in customers' need for this product,
which can fluctuate.

Interest expense on repurchase agreements decreased $1,000 during the six months
ended June 30, 2022 when compared to the six months ended June 30, 2021. The
average rate of interest was 0.03% for both the six months ended June 30, 2022
and the six months

                                       53

ended June 30, 2021. The average balance of repurchase agreements decreased $11.3 million from $143.2 million in the six months ended June 30, 2021 to $131.9 million in the six months ended June 30, 2022.


Interest expense on short-term borrowings (including overnight borrowings from
the FHLBank) and other interest-bearing liabilities increased $186,000 during
the three months ended June 30, 2022 when compared to the three months ended
June 30, 2021 due to higher average balances. The average balance of short-term
borrowings and other interest-bearing liabilities increased $71.7 million from
$1.6 million in the three months ended June 30, 2021 to $73.3 million in the
three months ended June 30, 2022, which is primarily due to changes in the
Company's funding needs and the mix of funding, which can fluctuate. Most of
this increase was due to the utilization of overnight borrowings from the
FHLBank. Interest expense on short-term borrowings (including overnight
borrowings from the FHLBank) and other interest-bearing liabilities increased
$50,000 during the three months ended June 30, 2022 when compared to the three
months ended June 30, 2021 due to higher average rates of interest. The average
rate of interest was 1.29% for the three months ended June 30, 2022, compared to
-0-% for the three months ended June 30, 2021.

Interest expense on short-term borrowings (including overnight borrowings from
the FHLBank) and other interest-bearing liabilities increased $158,000 during
the six months ended June 30, 2022 when compared to the six months ended June
30, 2021 due to higher average balances. The average balance of short-term
borrowings and other interest-bearing liabilities increased $37.0 million from
$1.6 million in the six months ended June 30, 2021 to $38.7 million in the six
months ended June 30, 2022, which is primarily due to changes in the Company's
funding needs and the mix of funding, which can fluctuate. Most of this increase
was due to the utilization of overnight borrowings from the FHLBank. Interest
expense on short-term borrowings (including overnight borrowings from the
FHLBank) and other interest-bearing liabilities increased $79,000 during the six
months ended June 30, 2022 when compared to the six months ended June 30, 2021
due to higher average rates of interest. The average rate of interest was 1.24%
for the six months ended June 30, 2022, compared to -0-% for the six months
ended June 30, 2021.

During the three months ended June 30, 2022, compared to the three months ended
June 30, 2021, interest expense on subordinated debentures issued to capital
trusts increased $46,000 due to higher average interest rates. The average
interest rate was 2.47% in the three months ended June 30, 2022 compared to
1.76% in the three months ended June 30, 2021. 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 2.89% at June 30, 2022. There
was no change in the average balance of the subordinated debentures between the
2021 and 2022 periods.

During the six months ended June 30, 2022, compared to the six months ended June
30, 2021, interest expense on subordinated debentures issued to capital trusts
increased $51,000 due to higher average interest rates. The average interest
rate was 2.17% in the six months ended June 30, 2022 compared to 1.77% in the
six months ended June 30, 2021. There was no change in the average balance of
the subordinated debentures between the 2021 and 2022 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. On August 15, 2021, the Company completed
the redemption of $75.0 million aggregate principal amount of its 5.25%
subordinated notes due August 15, 2026. The notes were redeemed for cash by the
Company at 100% of their principal amount, plus accrued and unpaid interest.
During the three months ended June 30, 2022, compared to the three months ended
June 30, 2021, interest expense on subordinated notes decreased $1.1 million due
to lower average balances during the three months ended June 30, 2022 resulting
from the redemption of the 5.25% subordinated notes due August 15, 2026. The
average balance of subordinated notes was $74.1 million in the three months
ended June 30, 2022 compared to $148.7 million in the three months ended June
30, 2021. Interest expense on subordinated notes increased $32,000 due to
slightly higher weighted average interest rates. The average interest rate was
5.99% in the three months ended June 30, 2022 compared to 5.90% in the three
months ended June 30, 2021.

During the six months ended June 30, 2022, compared to the six months ended June
30, 2021, interest expense on subordinated notes decreased $2.2 million due to
lower average balances, for the reasons discussed above. The average interest
rate increased slightly from 5.95% in the six months ended June 30, 2021 to
6.02% in the six months ended June 30, 2022.

Net Interest Income

Net interest income for the three months ended June 30, 2022 increased $4.1
million to $48.8 million compared to $44.7 million for the three months ended
June 30, 2021. Net interest margin was 3.78% in the three months ended June
30,
2022, compared to 3.35% in

                                       54

the three months ended June 30, 2021, an increase of 43 basis points, or 12.8%.
The Company experienced increases in interest income on investment securities
and decreases in interest expense on deposits and subordinated notes. Interest
income on loans decreased as the Company recorded a higher amount of interest
income related to net deferred fees on PPP loans in the 2021 period.

Net interest income for the six months ended June 30, 2022 increased $3.3
million to $92.1 million compared to $88.8 million for the six months ended June
30, 2021. Net interest margin was 3.61% in the six months ended June 30, 2022,
compared to 3.38% in the six months ended June 30, 2021, an increase of 23 basis
points, or 6.8%. The Company experienced increases in interest income on
investment securities and decreases in interest expense on deposits and
subordinated notes. Interest income on loans decreased as the Company recorded a
higher amount of interest income related to net deferred fees on PPP loans in
the 2021 period.

The Company's overall average interest rate spread increased 47 basis points, or
14.8%, from 3.18% during the three months ended June 30, 2021 to 3.65% during
the three months ended June 30, 2022. The increase was due to a 30 basis point
increase in the weighted average yield on interest-earning assets and a 17 basis
point decrease in the weighted average rate paid on interest-bearing
liabilities. In comparing the two periods, the yield on loans increased one
basis point, the yield on investment securities increased 51 basis points and
the yield on other interest-earning assets increased 64 basis points. The rate
paid on deposits decreased ten basis points, the rate paid on subordinated
debentures issued to capital trusts increased 71 basis points, and the rate paid
on subordinated notes increased nine basis points. In addition, the Company had
outstanding overnight borrowings in the 2022 period, which had an average
interest rate increase of 129 basis points.

The Company's overall average interest rate spread increased 28 basis points, or
8.8%, from 3.20% during the six months ended June 30, 2021 to 3.48% during the
six months ended June 30, 2022. The increase was due to a 24 basis point
decrease in the weighted average rate paid on interest-bearing liabilities and a
four basis point increase in the weighted average yield on interest-earning
assets. In comparing the two periods, the yield on loans decreased seven basis
points, the yield on investment securities increased 22 basis points and the
yield on other interest-earning assets increased 19 basis points. The rate paid
on deposits decreased 16 basis points, the rate paid on subordinated debentures
issued to capital trusts increased 40 basis points, and the rate paid on
subordinated notes increased seven basis points. In addition, the Company had
outstanding overnight borrowings in the 2022 period, which had an average
interest rate increase of 124 basis points.

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

Provision for 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.

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 economic conditions,
such as changes in the national unemployment rate, commercial real estate price
index, housing price index, consumer sentiment, gross domestic product (GDP) and
construction spending.

Worsening economic conditions from the COVID-19 pandemic or similar events,
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 identify and
limit future losses, such as a watch list of problem loans and potential problem
loans, documented loan administration policies and loan review staff to review
the quality and anticipated collectability of the portfolio. Additional
procedures provide for frequent management review of the loan portfolio based on
loan size, loan type, delinquencies, financial analysis, on-going correspondence
with borrowers and problem loan work-outs. Management determines which loans are
collateral-dependent, evaluates risk of loss and makes additional provisions to
expense, if necessary, to maintain the allowance at a satisfactory level.

During the three months ended June 30, 2022, the Company did not record a
provision expense on its portfolio of outstanding loans, compared to a negative
provision expense of $1.0 million recorded for the three months ended June 30,
2021. During the six months ended June 30, 2022, the Company did not record a
provision expense on its portfolio of outstanding loans, compared to a negative

                                       55

provision expense of $700,000 recorded for the six months ended June 30, 2021.
The Company considers the current allowance for credit losses adequate to cover
losses inherent in the Bank's loan portfolio at June 30, 2022, based on recent
reviews of the Bank's loan portfolio and current economic conditions. The
negative provision for credit losses in the 2021 periods reflected positive
trends in asset quality metrics, combined with an improved economic forecast.
The positive trends in asset quality metrics continued in the 2022 periods. In
the three months ended June 30, 2022 and 2021, the Company experienced net
recoveries of $261,000 and net charge offs of $100,000, respectively. In the six
months ended June 30, 2022 and 2021, the Company experienced net recoveries of
$304,000 and net charge offs of $36,000, respectively. The provision for losses
on unfunded commitments for the three months ended June 30, 2022 was $2.2
million compared to a negative provision of $307,000 for the three months ended
June 30, 2021. The provision for losses on unfunded commitments for the six
months ended June 30, 2022 was $2.0 million compared to a negative provision of
$981,000 for the six months ended June 30, 2021. The level and mix of unfunded
commitments resulted in an increase in the required reserve for such potential
losses. General market conditions and unique circumstances related to specific
industries and individual projects contribute to the level of provisions and
charge-offs.

All FDIC-assisted 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. 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 primary focus being placed on
those loan pools which exhibit higher risk characteristics. Review of the
acquired loan portfolio 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 1.38%
and 1.49% at June 30, 2022 and December 31, 2021, respectively. Management
considers the allowance for credit losses adequate to cover losses inherent in
the Bank's loan portfolio at June 30, 2022, based on recent reviews of the
Bank's loan portfolio and current economic conditions. If challenging economic
conditions were to continue or deteriorate, or if 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 June 30, 2022, non-performing assets were $4.3 million, a decrease of $1.7
million from $6.0 million at December 31, 2021. Non-performing assets as a
percentage of total assets were 0.08% at June 30, 2022, compared to 0.11% at
December 31, 2021.

Compared to December 31, 2021, non-performing loans decreased $1.2 million, to
$4.2 million at June 30, 2022, and foreclosed and repossessed assets decreased
$544,000, to $44,000 at June 30, 2022. Non-performing commercial real estate
loans comprised $1.8 million, or 43.4%, of the total non-performing loans at
June 30, 2022, a decrease of $174,000 from December 31, 2021. Non-performing
one- to four-family residential loans comprised $1.5 million, or 35.6%, of the
total non-performing loans at June 30, 2022, a decrease of $714,000 from
December 31, 2021. Non-performing construction and land development loans
comprised $468,000, or 11.1%, of the total non-performing loans at June 30,
2022, unchanged from December 31, 2021. Non-performing consumer loans comprised
$418,000, or 9.9%, of the total non-performing loans at June 30, 2022, a
decrease of $315,000 from December 31, 2021.

                                       56

Non-performing Loans. Activity in the non-performing loans category during the six months ended June 30, 2022 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      June 30

                                                                                                   (In Thousands)
One- to four-family construction               $         -    $         -  
 $           -    $           -    $            -    $       -    $        -    $        -
Subdivision construction                                 -              -                -                -                 -            -             -             -
Land development                                       468              -                -                -                 -            -             -           468
Commercial construction                                  -              -                -                -                 -            -             -             -
One- to four-family residential                      2,216             54  
             -            (279)                 -         (36)         (453)         1,502
Other residential                                        -              -                -                -                 -            -             -             -
Commercial real estate                               2,006             58                -                -                 -            -         (232)         1,832
Commercial business                                      -              -                -                -                 -            -             -             -
Consumer                                               733             74                -             (71)               (9)         (17)         (292)           418
Total non-performing loans                     $     5,423    $       186    $           -    $       (350)    $          (9)    $    (53)    $    

(977) $ 4,220

FDIC-assisted acquired loans included above $ 1,736 $ -

  $           -    $           -    $            -    $       -    $    

(574) $ 1,162



At June 30, 2022, the non-performing one- to four-family residential category
included 30 loans, one of which was added during the six months ended June 30,
2022. The largest relationship in the category totaled $316,000, or 21.0% of the
total category. The non-performing commercial real estate category includes
three loans, one of which was added during the six months ended June 30, 2022.
The largest relationship in the category, which totaled $1.6 million, or 85.4%
of the total category, was transferred from potential problem loans during the
fourth quarter of 2021, and is collateralized by a mixed-use commercial retail
building. The non-performing land development category consisted of one loan
added during the first quarter of 2021, which totaled $468,000 and is
collateralized by unimproved zoned vacant ground in southern Illinois. The
non-performing consumer category included 23 loans, eight of which were added
during the six months ended June 30, 2022.

Potential Problem Loans. Compared to December 31, 2021, potential problem loans
increased $172,000, or 8.7%, to $2.2 million at June 30, 2022. Potential problem
loans are loans which management has identified through routine internal review
procedures as having possible credit problems that may cause the borrowers
difficulty in complying with the current repayment terms. These loans are not
reflected in non-performing assets.

Activity in the potential problem loans categories during the six months ended June 30, 2022, 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 June 30


                                                                                                    (In Thousands)
One- to four-family construction               $         -    $           
-    $         -    $            -    $            -    $       -    $        -    $        -
Subdivision construction                                15                 -              -                 -                 -            -           (5)            10
Land development                                         -                 -              -                 -                 -            -             -             -
Commercial construction                                  -                 -              -                 -                 -            -             -             -
One- to four-family residential                      1,432               279              -                 -                 -            -          (86)         1,625
Other residential                                        -                 -              -                 -                 -            -             -             -
Commercial real estate                                 210                 -              -                 -                 -            -          (10)           200
Commercial business                                      -                 -              -                 -                 -            -             -             -
Consumer                                               323               120              -              (37)              (14)          (9)          (66)           317
Total potential problem loans                  $     1,980    $          399    $         -    $         (37)    $         (14)    $     (9)    $    (167)    $    2,152
FDIC-assisted acquired loans included above    $     1,004    $            -    $         -    $            -    $            -    $       -    $    

(36) $ 968

At June 30, 2022, the one- to four-family residential category of potential
problem loans included 27 loans, four of which were added during the six months
ended June 30, 2022. The largest relationship in this category totaled $165,000,
or 10.1% of the total category. The commercial real estate category of potential
problem loans included one loan, which was added in a previous period. The
consumer category of potential problem loans included 32 loans, 17 of which were
added during the six months ended June 30, 2022.

                                       57

Other Real Estate Owned and Repossessions. Of the total $329,000 of other real
estate owned and repossessions at June 30, 2022, $285,000 represents properties
which were not acquired through foreclosure.

Activity in foreclosed assets and repossessions during the six months ended June
30, 2022, was as follows:

                                                 Beginning                                                             Ending
                                                 Balance,                                 Capitalized     Write-      Balance,
                                                 January 1      Additions      Sales         Costs         Downs      June 30

                                                                                (In Thousands)
One- to four-family construction                $         -    $         - 
  $     -    $           -    $     -    $        -
Subdivision construction                                  -              -          -                -          -             -
Land development                                        315              -      (300)                -       (15)             -
Commercial construction                                   -              -          -                -          -             -
One- to four-family residential                         183              - 
    (175)                -        (8)             -
Other residential                                         -              -          -                -          -             -
Commercial real estate                                    -              -          -                -          -             -
Commercial business                                       -              -          -                -          -             -
Consumer                                                 90            158      (204)                -          -            44
Total foreclosed assets and repossessions       $       588    $       158    $ (679)    $           -    $  (23)    $       44

FDIC-assisted acquired assets included above    $       498    $         -    $ (475)    $           -    $  (23)    $        -


The one remaining property in the land development category of foreclosed assets
was sold during the three months ended March 31, 2022. The two remaining
properties in the one- to four-family residential category of foreclosed assets
were sold during the three months ended June 30, 2022. The additions and sales
in the consumer category were due to the volume of repossessions of automobiles,
which generally are subject to a shorter repossession process.

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 six
months ended June 30, 2022, loans classified as "Watch" decreased $10.6 million,
from $30.7 million at December 31, 2021 to $20.1 million at June 30, 2022
primarily due to loans being upgraded out of the "Watch" category. See Note 6
for further discussion of the Company's loan grading system.

Non-interest Income


For the three months ended June 30, 2022, non-interest income decreased $266,000
to $9.3 million when compared to the three months ended June 30, 2021, primarily
as a result of the following items:

Net gains on loan sales: Net gains on loan sales decreased $2.1 million compared
to the prior year period. The decrease was due to a decrease in originations of
fixed-rate single-family mortgage loans during the 2022 period compared to the
2021 period. Fixed rate single-family mortgage loans originated are generally
subsequently sold in the secondary market. These loan originations increased
substantially when market interest rates decreased to historically low levels in
2020 and 2021. As a result of the significant volume of refinance activity in
2020 and 2021, and as market interest rates have moved higher in the second
quarter of 2022, mortgage refinance volume has decreased and fixed rate loan
originations and related gains on sales of these loans have decreased
substantially.

Gain (loss) on derivative interest rate products: In the 2022 period, the
Company recognized a gain of $145,000 on the change in fair value of its
back-to-back interest rate swaps related to commercial loans. In the 2021
period, the Company recognized a loss of $179,000 on the change in fair value of
its back-to-back interest rate swaps related to commercial loans. Generally, as
market interest rates increase, this creates a net increase in the fair value of
these instruments. 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 increased $1.0 million compared to the prior year
period. In the 2022 period, a gain of $1.1 million was recognized on sales
of
fixed assets.

                                       58

For the six months ended June 30, 2022, non-interest income decreased $826,000
to $18.5 million when compared to the six months ended June 30, 2021, primarily
as a result of the following items:

Net gains on loan sales: Net gains on loan sales decreased $3.7 million compared
to the prior year period. The decrease was due to a decrease in originations of
fixed-rate single-family mortgage loans during the 2022 period compared to the
2021 period for the same reasons noted above.

Point-of-sale and ATM fees: Point-of-sale and ATM fees increased $739,000
compared to the prior year period. This increase was almost entirely due to
increased customer debit card transactions in the 2022 period compared to the
2021 first quarter. In the latter half of 2021 and in the first half of 2022,
debit card usage by customers rebounded and was back to normal levels, and in
many cases, increased levels of activity.

Overdraft and insufficient funds fees: Overdraft and insufficient funds fees
increased $781,000 compared to the prior year period. It appears that consumers
have continued to spend significantly in 2022, but some may have lower account
balances as prices for goods and services have increased and government stimulus
payments received by consumers in 2020 and 2021 have now been exhausted.

Other income: Other income increased $1.3 million compared to the prior year
period. In the 2022 period, a gain of $1.1 million was recognized on sales of
fixed assets. Also in the 2022 period, the Company recorded a one-time bonus of
$500,000 from its card processor as a result of achieving certain benchmarks
related to debit card activity.

Non-interest Expense


For the three months ended June 30, 2022, non-interest expense increased $2.8
million to $33.0 million when compared to the three months ended June 30, 2021,
primarily as a result of the following item:

Salaries and employee benefits: Salaries and employee benefits increased $1.5
million from the prior year period. Most significantly contributing to the
increase, in June 2022, the Company paid a special cash bonus to all employees
totaling $1.1 million in response to the rapid and significant increases in
prices for many goods and services. A portion of this increase also related to
normal annual merit increases in various lending and operations areas. In 2022,
many of these increases were larger than in previous years due to the current
employment environment. In addition, the new Phoenix loan office was opened in
the first quarter of 2022 and the new Charlotte, North Carolina loan office was
opened in the second quarter of 2022. Lastly, certain loan origination
compensation costs were deferred under accounting standards that related
primarily to the origination of PPP loans; therefore, more costs were deferred
in the 2021 period versus the 2022 period.

Legal, Audit and Other Professional Fees: Legal, audit and other professional
fees increased $665,000 from the prior year period, to $1.2 million. In the 2022
period, the Company expensed a total of $580,000 related to training and
implementation costs for the upcoming core systems conversion and professional
fees to consultants engaged to support the Company's transition of core and
ancillary software and information technology systems.

For the six months ended June 30, 2022, non-interest expense increased $3.8 million to $64.3 million when compared to the six months ended June 30, 2021, primarily as a result of the following item:

Salaries and employee benefits: Salaries and employee benefits increased $2.5 million from the prior year period, for the same reasons noted above.


Legal, Audit and Other Professional Fees: Legal, audit and other professional
fees increased $823,000 from the prior year period, to $2.0 million, for the
same reason noted above.

The Company's efficiency ratio for the three months ended June 30, 2022, was
56.76% compared to 55.63% for the same period in 2021. The Company's efficiency
ratio for the six months ended June 30, 2022, was 58.12% compared to 55.98% for
the same period in 2021. In the three- and six-month periods ended June 30,
2022, the higher efficiency ratio was primarily due to an increase in
non-interest expense, for the reasons noted above. The Company's ratio of
non-interest expense to average assets was 2.43% and 2.16% for the three months
ended June 30, 2022 and 2021, respectively. The Company's ratio of non-interest
expense to average assets was 2.39% and 2.19% for the six months ended June 30,
2022 and 2021, respectively. Average assets for the three months ended June 30,
2022, decreased $153.2 million, or 2.7%, from the three months ended June 30,
2021, primarily due to decreases in interest-bearing cash equivalents and net
loans receivable, partially offset by an increase in investment securities.
Average assets for the six months ended June 30, 2022, decreased $137.6 million,
or 2.5%, from the six months ended June 30, 2021, primarily due to decreases in
interest-bearing cash equivalents and net loans receivable, partially offset by
an increase in investment securities.

                                       59

Provision for Income Taxes

For the three months ended June 30, 2022 and 2021, the Company's effective tax
rate was 20.5% and 20.8%, respectively. For the six months ended June 30, 2022
and 2021, the Company's effective tax rate was 20.5% and 20.9%, respectively.
These effective rates were at or below the statutory federal tax rate of 21%,
due primarily to the utilization of certain investment tax credits and the
Company's tax-exempt investments and tax-exempt loans, which reduced the
Company's effective tax rate. The Company's effective tax rate may fluctuate in
future periods as it is impacted by the level and timing of the Company's
utilization of tax credits, the level of tax-exempt investments and loans, the
amount of taxable income in various state jurisdictions and the overall level of
pre-tax income. State tax expense estimates continually evolve as taxable income
and apportionment between states is analyzed. The Company's effective income tax
rate is currently generally expected to remain near the statutory federal tax
rate due primarily to the factors noted above. The Company currently expects its
effective tax rate (combined federal and state) will be approximately 20.5% to
21.5% in future periods.

Average Balances, Interest Rates and Yields


The following tables present, 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 also includes the
amortization of net loan fees which were deferred in accordance with accounting
standards. Net fees included in interest income were $1.3 million and $2.5
million for the three months ended June 30, 2022 and 2021, respectively. Net
fees included in interest income were $3.1 million and $5.0 million for the six
months ended June 30, 2022 and 2021, respectively. Tax-exempt income was not
calculated on a tax equivalent basis. The table does not reflect any effect
of
income taxes.

                                       60

                                                       June 30,              Three Months Ended                        Three Months Ended
                                                         2022                  June 30, 2022                             June 30, 2021
                                                        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                            3.24 %  $   772,326    $     6,534        3.39 %  $   675,562    $     6,361        3.78 %
Other residential                                          4.50        851,031          9,637        4.54      1,017,578         11,216        4.42
Commercial real estate                                     4.37      1,576,285         17,120        4.36      1,580,335         16,857        4.28
Construction                                               4.55        623,117          7,722        4.97        580,277          6,529        4.51
Commercial business                                        4.45        288,452          3,371        4.69        291,902          3,545        4.87
Other loans                                                4.91       

198,543 2,217 4.48 222,004 2,644 4.78 Industrial revenue bonds(1)

                                4.80         13,345            163        4.89         14,509            208        5.74

Total loans receivable                                     4.37      

4,323,099 46,764 4.34 4,382,167 47,360 4.33


Investment securities(1)                                   2.69        

741,401 5,720 3.09 459,959 2,961 2.58 Interest-earning deposits in other banks

                   1.64        115,456            214        0.74        514,681            131        

0.10


Total interest-earning assets                              4.10      5,179,956         52,698        4.08      5,356,807         50,452        3.78
Non-interest-earning assets:
Cash and cash equivalents                                               95,819                                    99,333
Other non-earning assets                                               155,822                                   128,702
Total assets                                                       $ 5,431,597                               $ 5,584,842

Interest-bearing liabilities:
Interest-bearing demand and savings                        0.14    $ 2,389,086            830        0.14    $ 2,312,284          1,038        0.18
Time deposits                                              0.82        914,556          1,528        0.67      1,212,900          2,419        0.80
Total deposits                                             0.35     

3,303,642 2,358 0.29 3,525,184 3,457 0.39 Securities sold under reverse repurchase agreements 0.04 135,536

              8        0.02        141,971             10        

0.03

Short-term borrowings, overnight FHLBank borrowings and other interest-bearing liabilities

                     1.73         73,337            236        1.29          1,600              -           -
Subordinated debentures issued to capital trusts           2.89         25,774            159        2.47         25,774            113        1.76
Subordinated notes                                         5.96         74,098          1,106        5.99        148,676          2,188        5.90

Total interest-bearing liabilities                         0.52      3,612,387          3,867        0.43      3,843,205          5,768        0.60
Non-interest-bearing liabilities:
Demand deposits                                                      1,188,967                                 1,071,441
Other liabilities                                                       57,027                                    43,402
Total liabilities                                                    4,858,381                                 4,958,048
Stockholders' equity                                                   573,216                                   626,794
Total liabilities and stockholders' equity                         $ 5,431,597                               $ 5,584,842

Net interest income:
Interest rate spread                                       3.58 %                 $    48,831        3.65 %                 $    44,684        3.18 %
Net interest margin*                                                                                 3.78 %                                    3.35 %
Average interest-earning assets to average
interest- bearing liabilities                                            143.4 %                                   139.4 %


* Defined as the Company's net interest income divided by total average interest-earning assets.

Of the total average balances of investment securities, average tax-exempt

investment securities were $53.3 million and $40.9 million for the three

months ended June 30, 2022 and 2021, respectively. In addition, average

tax-exempt loans and industrial revenue bonds were $15.8 million and $17.9 (1) million for the three months ended June 30, 2022 and 2021, respectively.

Interest income on tax-exempt assets included in this table was $394,000 and

$428,000 for the three months ended June 30, 2022 and 2021, respectively.

Interest income net of disallowed interest expense related to tax-exempt

    assets was $386,000 and $419,000 for the three months ended June 30, 2022 and
    2021, respectively.


                                       61

                                    June 30,             Six Months Ended                       Six Months Ended
                                      2022                 June 30, 2022                          June 30, 2021
                                    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         3.24 %  $   737,024    $  12,575   
   3.44 %  $   670,092    $  12,878       3.88 %
Other residential                       4.50        805,579       18,054       4.52      1,008,387       22,143       4.43
Commercial real estate                  4.37      1,533,263       32,466       4.27      1,571,561       33,441       4.29
Construction                            4.55        645,544       15,251       4.76        592,263       13,259       4.51
Commercial business                     4.45        288,839        6,697       4.68        307,579        7,433       4.87
Other loans                             4.91        201,510        4,461       4.46        229,709        5,535       4.86
Industrial revenue bonds(1)             4.80         13,662          325   
   4.78         14,715          380       5.21

Total loans receivable                  4.37      4,225,421       89,829       4.29      4,394,306       95,069       4.36
Investment securities(1)                2.69        638,262        9,131       2.88        437,452        5,778       2.66
Interest-earning deposits in
other banks                             1.64        286,102          412   

0.29 467,317 238 0.10

Total interest-earning assets           4.10      5,149,785       99,372       3.89      5,299,075      101,085       3.85
Non-interest-earning assets:
Cash and cash equivalents                            93,217                                 96,786
Other non-earning assets                            146,313                                131,059
Total assets                                    $ 5,389,315                            $ 5,526,920

Interest-bearing liabilities:
Interest-bearing demand and
savings                                 0.14    $ 2,382,551        1,607       0.14    $ 2,250,972        2,232       0.20
Time deposits                           0.82        922,775        2,925       0.64      1,262,220        5,447       0.87
Total deposits                          0.35      3,305,326        4,532       0.28      3,513,192        7,679       0.44
Securities sold under reverse
repurchase agreements                   0.04        131,920           18       0.03        143,222           19       0.03
Short-term borrowings, overnight
FHLBank borrowings and other
interest-bearing liabilities            1.73         38,675          237       1.24          1,630            -          -
Subordinated debentures issued
to capital trusts                       2.89         25,774          277       2.17         25,774          226       1.77
Subordinated notes                      5.96         74,059        2,211       6.02        148,595        4,388       5.95

Total interest-bearing
liabilities                             0.52      3,575,754        7,275       0.41      3,832,413       12,312       0.65
Non-interest-bearing
liabilities:
Demand deposits                                   1,174,570                              1,027,525
Other liabilities                                    47,519                                 43,645
Total liabilities                                 4,797,843                              4,903,583
Stockholders' equity                                591,472                                623,337
Total liabilities and
stockholders' equity                            $ 5,389,315                            $ 5,526,920

Net interest income:
Interest rate spread                    3.58 %                 $  92,097       3.48 %                 $  88,773       3.20 %
Net interest margin*                                                           3.61 %                                 3.38 %
Average interest-earning assets
to average interest-bearing
liabilities                                           144.0 %                                138.3 %

* Defined as the Company's net interest income divided by total average interest-earning assets.

Of the total average balances of investment securities, average tax-exempt

investment securities were $45.3 million and $43.0 million for the six months

ended June 30, 2022 and 2021, respectively. In addition, average tax-exempt

loans and industrial revenue bonds were $16.3 million and $18.3 million for (1) the six months ended June 30, 2022 and 2021, respectively. Interest income on

tax-exempt assets included in this table was $854,000 and $846,000 for the

six months ended June 30, 2022 and 2021, respectively. Interest income net of

disallowed interest expense related to tax-exempt assets was $838,000 and

    $822,000 for the six months ended June 30, 2022 and 2021, respectively.


                                       62

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 June 30,
                                                                    2022 vs. 2021
                                                         Increase (Decrease)          Total
                                                                Due to               Increase
                                                          Rate         Volume       (Decrease)

                                                                (Dollars in Thousands)
Interest-earning assets:
Loans receivable                                       $       43     $   (639)    $      (596)
Investment securities                                         676         2,083           2,759
Interest-earning deposits in other banks                       95          (12)              83
Total interest-earning assets                                 814         1,432           2,246
Interest-bearing liabilities:
Demand deposits                                             (241)            33           (208)
Time deposits                                               (354)         (537)           (891)
Total deposits                                              (595)         (504)         (1,099)
Securities sold under reverse repurchase agreements           (2)             -             (2)

Short-term borrowings, overnight FHLBank borrowings and other interest-bearing liabilities

                         50           186             236
Subordinated debentures issued to capital trust                46             -              46
Subordinated notes                                             32       (1,114)         (1,082)
Total interest-bearing liabilities                          (469)       (1,432)         (1,901)
Net interest income                                    $    1,283     $   2,864    $      4,147


                                                              Six Months Ended June 30,
                                                                    2022 vs. 2021
                                                         Increase (Decrease)         Total
                                                               Due to               Increase
                                                          Rate        Volume       (Decrease)

                                                               (Dollars in Thousands)
Interest-earning assets:
Loans receivable                                       $  (1,630)    $ (3,610)    $    (5,240)
Investment securities                                         514        2,839           3,353
Interest-earning deposits in other banks                      221         (47)             174
Total interest-earning assets                               (895)        (818)         (1,713)
Interest-bearing liabilities:
Demand deposits                                             (749)          124           (625)
Time deposits                                             (1,253)      (1,269)         (2,522)
Total deposits                                            (2,002)      (1,145)         (3,147)
Securities sold under reverse repurchase agreements             -          (1)             (1)

Short-term borrowings, overnight FHLBank borrowings and other interest-bearing liabilities

                         79          158             237
Subordinated debentures issued to capital trust                51            -              51
Subordinated notes                                             49      (2,226)         (2,177)
Total interest-bearing liabilities                        (1,823)      (3,214)         (5,037)
Net interest income                                    $      928    $   2,396    $      3,324


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

                                       63

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 June 30, 2022, the Company
had commitments of approximately $173.4 million to fund loan originations, $1.82
billion of unused lines of credit and unadvanced loans, and $13.8 million of
outstanding letters of credit.

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


                                   June 30,       March 31,      December 

31, December 31, December 31, December 31,

                                     2022           2022             2021              2020              2019              2018
Closed non-construction loans
with unused available lines
Secured by real estate (one- to
four-family)                      $   190,637    $   185,101    $      175,682    $      164,480    $      155,831    $      150,948
Secured by real estate (not one-
to four-family)                             -              -            23,752            22,273            19,512            11,063
Not secured by real estate -
commercial business                    87,556         89,252            91,786            77,411            83,782            87,480

Closed construction loans with
unused available lines
Secured by real estate (one-to
four-family)                           93,892         75,214            74,501            42,162            48,213            37,162
Secured by real estate (not
one-to four-family)                 1,331,986      1,089,844         1,092,029           823,106           798,810           906,006

Loan commitments not closed
Secured by real estate (one-to
four-family)                           88,153        109,472            53,529            85,917            69,295            24,253
Secured by real estate (not
one-to four-family)                   134,600        212,264           146,826            45,860            92,434           104,871
Not secured by real estate -
commercial business                    14,335          8,223            12,920               699                 -               405

                                  $ 1,941,159    $ 1,769,370    $    1,671,025    $    1,261,908    $    1,267,877    $    1,322,188


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 June 30, 2022 and December 31, 2021, the Company had these available secured lines and on-balance sheet liquidity:

                                              June 30, 2022      December 31, 2021
Federal Home Loan Bank line                  $ 727.4 million    $     756.5 million
Federal Reserve Bank line                    $ 374.6 million    $     352.4 million
Cash and cash equivalents                    $ 195.7 million    $     717.3 million

Unpledged securities - Available-for-sale $ 328.7 million $ 406.8 million Unpledged securities - Held-to-maturity $ 196.0 million $

-



Statements of Cash Flows. During the six months ended June 30, 2022 and 2021,
the Company had positive cash flows from operating activities and positive cash
flows from financing activities. The Company had negative cash flows from
investing activities during the six months ended June 30, 2022 and positive cash
flows from investing activities during the six months ended June 30, 2021.

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 $36.8 million and $54.8 million during the six months ended June 30, 2022 and
2021, respectively.

During the six months ended June 30, 2022 and 2021, investing activities used
cash of $647.2 million and provided cash of $33.5 million, respectively.
Investing activities in the 2022 period used cash primarily due to the purchase
of investment securities, the purchases of loans and the net origination of
loans, partially offset by payments received on investment securities. Investing
activities in the 2021 period provided cash primarily due to the payments
received on investment securities and the net repayments of loans, partially
offset by the purchase of investment securities and the purchases of loans.

Changes in cash flows from financing activities during the periods covered by the Statements of Cash Flows were due to changes in deposits after interest credited and changes in short-term borrowings, as well as advances from borrowers for taxes and insurance, dividend payments to stockholders, repurchases of the Company's common stock and the exercise of common stock options.


                                       64

Financing activities provided cash of $88.9 million and $29.8 million during the
six months ended June 30, 2022 and 2021, respectively. In the 2022 six-month
period, financing activities provided cash primarily as a result of net
increases in short-term borrowings and increases in time deposits, partially
offset by decreases in checking and savings deposits, the repurchase of the
Company's common stock and dividends paid to stockholders. In the 2021 six-month
period, financing activities provided cash primarily as a result of net
increases in checking and savings 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.

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 June 30, 2022, the Company's total stockholders' equity and common
stockholders' equity were each $549.6 million, or 9.9% of total assets,
equivalent to a book value of $44.53 per common share. As of December 31, 2021,
total stockholders' equity and common stockholders' equity were each $616.8
million, or 11.3% of total assets, equivalent to a book value of $46.98 per
common share. At June 30, 2022, the Company's tangible common equity to tangible
assets ratio was 9.7%, compared to 11.2% at December 31, 2021 (See Non-GAAP
Financial Measures below).

Included in stockholders' equity at June 30, 2022 and December 31, 2021, were
unrealized gains (losses) (net of taxes) on the Company's available-for-sale
investment securities totaling $(28.4 million) and $9.1 million, respectively.
This decrease in unrealized gains primarily resulted from rising market interest
rates, which decreased the fair value of investment securities. Also included in
stockholders' equity at June 30, 2022, were unrealized gains (net of taxes) on
the Company's held-to-maturity investment securities totaling $249,000.
Approximately $227 million of investment securities which were previously
included in available-for-sale were transferred to held-to-maturity during the
first quarter of 2022.

In addition, included in stockholders' equity at June 30, 2022, were realized
gains (net of taxes) on the Company's terminated cash flow hedge (interest rate
swap), totaling $20.5 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 June
30, 2022, the remaining pre-tax amount to be recorded in interest income was
$26.6 million. The net effect on total stockholders' equity over time will be no
impact, as the reduction of this realized gain will be offset by an increase in
retained earnings (as the interest income flows through pre-tax income).

Also included in stockholders' equity at June 30, 2022, was an unrealized loss
(net of taxes) on the Company's outstanding cash flow hedge (interest rate swap)
totaling $5.7 million. Anticipated higher market interest rates have caused the
fair value of this interest rate swap to decrease.

As noted above, total stockholders' equity decreased $67.2 million, from $616.8
million at December 31, 2021 to $549.6 million at June 30, 2022. Accumulated
other comprehensive income decreased $46.1 million during the six months ended
June 30, 2022, primarily due to decreases in the fair value of
available-for-sale investment securities and the fair value of cash flow hedges.
Stockholders' equity also decreased due to repurchases of the Company's common
stock totaling $50.4 million and dividends declared on common stock of $9.5
million. The Company recorded net income of $35.2 million for the six months
ended June 30, 2022. In addition, stockholders' equity increased $3.7 million
due to stock option exercises.

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,
which became effective January 1, 2015, 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 June 30, 2022, the Bank's common
equity Tier 1 capital ratio was 12.2%, its Tier 1 capital ratio was 12.2%, its
total capital ratio was 13.4% and its Tier 1 leverage ratio was 11.7%. As a
result, as of June 30, 2022, the Bank was well capitalized, with capital ratios
in excess of those required to qualify as such. On December 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
11.9%. As a result, as of December 31, 2021, 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 June 30, 2022, the
Company's common equity Tier 1 capital ratio was 10.8%, its Tier 1 capital ratio
was 11.3%, its total capital ratio was 13.9% and its Tier 1 leverage ratio was
10.7%. To be considered well capitalized, a bank holding company must have
a
Tier 1

                                       65

risk-based capital ratio of at least 6.00% and a total risk-based capital ratio
of at least 10.00%. As of June 30, 2022, the Company was considered well
capitalized, with capital ratios in excess of those required to qualify as such.
On December 31, 2021, the Company's common equity Tier 1 capital ratio was
12.9%, its Tier 1 capital ratio was 13.4%, its total capital ratio was 16.3% and
its Tier 1 leverage ratio was 11.3%. As of December 31, 2021, 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 June 30, 2022, the Company and the
Bank both had additional common equity Tier 1 capital in excess of the buffer
amount.

On August 15, 2021, the Company completed the redemption, at par, of all $75.0
million aggregate principal amount of its 5.25% subordinated notes due August
15, 2026. The Company utilized cash on hand for the redemption payment. The
annual combined interest expense and amortization of deferred issuance costs on
these subordinated notes was approximately $4.3 million. These subordinated
notes were included as capital in the Company's calculation of its total capital
ratio.

Dividends. During the three months ended June 30, 2022, the Company declared a
common stock cash dividend of $0.40 per share, or 28% of net income per diluted
common share for that three month period, and paid a common stock cash dividend
of $0.36 per share (which was declared in March 2022). During the three months
ended June 30, 2021, the Company declared a common stock cash dividend of $0.34
per share, or 23% 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 March 2021). During the six months ended June 30, 2022, the Company
declared common stock cash dividends totaling $0.76 per share, or 28% of net
income per diluted common share for that six month period, and paid common stock
cash dividends of $0.70 per share. During the six months ended June 30, 2021,
the Company declared common stock cash dividends of $0.68 per share, or 24% of
net income per diluted common share for that six month period, and paid common
stock cash dividends of $0.68 per share. The Board of Directors meets regularly
to consider the level and the timing of dividend payments. The $0.40 per share
dividend declared but unpaid as of June 30, 2022, was paid to stockholders in
July 2022.

Common Stock Repurchases and Issuances. The Company has been in various buy-back
programs since May 1990. During the three months ended June 30, 2022, the
Company repurchased 430,100 shares of its common stock at an average price of
$58.27 per share and issued 12,577 shares of common stock at an average price of
$40.74 per share to cover stock option exercises. During the three months ended
June 30, 2021, the Company repurchased 67,514 shares of its common stock at an
average price of $54.50 per share and issued 33,227 shares of stock at an
average price of $44.36 per share to cover stock option exercises. During the
six months ended June 30, 2022, the Company repurchased 849,315 shares of its
common stock at an average price of $59.32 per share and issued 64,271 shares of
common stock at an average price of $46.17 per share to cover stock option
exercises. During the six months ended June 30, 2021, the Company repurchased
142,379 shares of its common stock at an average price of $52.39 per share and
issued 49,131 shares of stock at an average price of $42.66 per share to cover
stock option exercises.

On January 19, 2022, the Company's Board of Directors authorized management to
purchase up to one million shares of the Company's outstanding common stock,
under a program of open market purchases or privately negotiated transactions.
The authorization of this program became effective during the three months ended
March 31, 2022 and does not have an expiration date.

Management has historically utilized stock buy-back programs from time to time
as long as management believed that repurchasing the Company's common stock
would contribute to the overall growth of shareholder value. The number of
shares that will be repurchased at any particular time and the prices that will
be paid are subject to many factors, several of which are outside of the control
of the Company. The primary factors typically include the number of shares
available in the market from sellers at any given time, the market price of the
stock and the projected impact on the Company's earnings per share and capital.

Non-GAAP Financial Measures

This document contains certain financial information determined by methods other
than in accordance with accounting principles generally accepted in the United
States ("GAAP"), specifically, 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

                                       66

comparison of our performance with the performance of our peers. In addition, management believes that this is a standard financial measure used in the banking industry to evaluate performance.

This non-GAAP financial measurement is supplemental and is not a substitute for
any analysis based on GAAP financial measures. Because not all companies use the
same calculation of non-GAAP measures, this presentation may not be comparable
to similarly titled measures as calculated by other companies.

Non-GAAP Reconciliation: Ratio of Tangible Common Equity to Tangible Assets
                                                 June 30, 2022      December 31, 2021

                                                        (Dollars in Thousands)

Common equity at period end                     $       549,644    $           616,752
Less: Intangible assets at period end                    11,246            

6,081

Tangible common equity at period end (a) $ 538,398 $

610,671

Total assets at period end                      $     5,551,996    $       

5,449,944

Less: Intangible assets at period end                    11,246            

6,081

Tangible assets at period end (b)               $     5,540,750    $       

5,443,863


Tangible common equity to tangible assets
(a) / (b)                                                  9.72 %          

11.22 %

© Edgar Online, source Glimpses

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Analyst Recommendations on GREAT SOUTHERN BANCORP, INC.
More recommendations
Financials (USD)
Sales 2022 225 M - -
Net income 2022 74,3 M - -
Net Debt 2022 - - -
P/E ratio 2022 10,1x
Yield 2022 2,62%
Capitalization 734 M 734 M -
Capi. / Sales 2022 3,26x
Capi. / Sales 2023 3,10x
Nbr of Employees 1 100
Free-Float 73,9%
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Technical analysis trends GREAT SOUTHERN BANCORP, INC.
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Income Statement Evolution
Consensus
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Mean consensus HOLD
Number of Analysts 3
Last Close Price 59,56 $
Average target price 64,33 $
Spread / Average Target 8,01%
EPS Revisions
Managers and Directors
Joseph W. Turner President, Chief Executive Officer & Director
William V. Turner Chairman
Larry D. Frazier Independent Director
Thomas J. Carlson Independent Director
Earl A. Steinert Independent Director
Sector and Competitors