GREAT SOUTHERN BANCORP, INC. (GSBC) Business

THE COMPANY

Great Southern Bancorp, Inc.

Great Southern Bancorp, Inc. ("Bancorp" or "Company") is a bank holding company, a financial holding company and the parent of Great Southern Bank ("Great Southern" or the "Bank"). Bancorp was incorporated under the laws of the State of Delaware in July 1989 as a unitary savings and loan holding company. The Company became a one-bank holding company on June 30, 1998, upon the conversion of Great Southern to a Missouri-chartered trust company. In 2004, Bancorp was re-incorporated under the laws of the State of Maryland.

As a Maryland corporation, the Company is authorized to engage in any activity that is permitted by the Maryland General Corporation Law and not prohibited by law or regulatory policy. The Company currently conducts its business as a financial holding company. Through the financial holding company structure, it is possible to expand the size and scope of the financial services offered by the Company beyond those offered by the Bank. The financial holding company structure provides the Company with greater flexibility than the Bank has to diversify its business activities, through existing or newly formed subsidiaries, or through acquisitions of or mergers with other financial institutions as well as other companies. At December 31, 2019, Bancorp's consolidated assets were $5.02 billion, consolidated net loans were $4.15 billion, consolidated deposits were $3.96 billion and consolidated total stockholders' equity was $603.1 million. For details about the Company’s assets, revenues and profits for each of the last five fiscal years, see Item 6. “Selected Financial Data.” The assets of the Company consist primarily of the stock of Great Southern and cash.

Through the Bank and subsidiaries of the Bank, the Company also offers insurance and related services, which are discussed further below. The activities of the Company are funded by retained earnings and through dividends from Great Southern. Activities of the Company may also be funded through borrowings from third parties, sales of additional securities or through income generated by other activities of the Company.

The executive offices of the Company are located at 1451 East Battlefield, Springfield, Missouri 65804, and its telephone number at that address is (417) 887-4400.

Great Southern Bank

Great Southern was formed as a Missouri-chartered mutual savings and loan association in 1923, and, in 1989, converted to a Missouri-chartered stock savings and loan association. In 1994, Great Southern changed to a federal savings bank charter and then, on June 30, 1998, changed to a Missouri-chartered trust company (the equivalent of a commercial bank charter). Headquartered in Springfield, Missouri, Great Southern offers a broad range of banking services through its 97 banking centers located in southern and central Missouri; the Kansas City, Missouri area; the St. Louis, Missouri area; eastern Kansas; northwestern Arkansas; the Minneapolis, Minnesota area and eastern, western and central Iowa. At December 31, 2019, the Bank had total assets of $5.01 billion, net loans of $4.16 billion, deposits of $4.02 billion and equity capital of $650.3 million, or 13.0% of total assets. Its deposits are insured by the Deposit Insurance Fund ("DIF") to the maximum levels permitted by the Federal Deposit Insurance Corporation ("FDIC").

The size and complexity of the Bank’s operations increased substantially in 2009 with the completion of two FDIC-assisted transactions, and again in 2011, 2012 and 2014 with the completion of another FDIC-assisted transaction in each of those years. In 2009, the Bank entered into two separate purchase and assumption agreements (including loss sharing) with the FDIC to assume all of the deposits (excluding brokered deposits) and certain liabilities and acquire certain assets of TeamBank, N.A. and Vantus Bank. In these two transactions we acquired assets with a fair value of approximately $499.9 million (approximately 18.8% of the Company’s total consolidated assets at acquisition) and $294.2 million (approximately 8.8% of the Company’s total consolidated assets at acquisition), respectively, and assumed liabilities with a fair value of $610.2 million (approximately 24.9% of the Company’s total consolidated assets at acquisition) and $440.0 million (approximately 13.2% of the Company’s total consolidated assets at acquisition), respectively. They also resulted in gains of $43.9 million and $45.9 million, respectively, which were included in Noninterest Income in the Company’s Consolidated Statement of Income for the year ended December 31, 2009. Prior to these acquisitions, the Company operated

banking centers in Missouri with loan production offices in Arkansas and Kansas. These acquisitions added 31 banking centers and expanded our footprint to cover five states – Iowa, Kansas, Missouri, Arkansas and Nebraska. In 2011, the Bank entered into a purchase and assumption agreement (including loss sharing) with the FDIC to assume all of the deposits and certain liabilities and acquire certain assets of Sun Security Bank, which added locations in southern Missouri and St. Louis. In this transaction we acquired assets with a fair value of approximately $248.9 million (approximately 7.3% of the Company’s total consolidated assets at acquisition) and assumed liabilities with a fair value of $345.8 million (approximately 10.1% of the Company’s total consolidated assets at acquisition). It also resulted in a gain of $16.5 million which was included in Noninterest Income in the Company’s Consolidated Statement of Income for the year ended December 31, 2011. In 2012, the Bank entered into a purchase and assumption agreement (including loss sharing) with the FDIC to assume all of the deposits and certain liabilities and acquire certain assets of Inter Savings Bank, FSB (“InterBank”), which added four locations in the greater Minneapolis, Minnesota area and represented a new market for the Company. In this transaction we acquired assets with a fair value of approximately $364.2 million (approximately 9.4% of the Company’s total consolidated assets at acquisition) and assumed liabilities with a fair value of approximately $458.7 million (approximately 11.9% of the Company’s total consolidated assets at acquisition). It also resulted in a gain of $31.3 million which was included in Noninterest Income in the Company’s Consolidated Statement of Income for the year ended December 31, 2012.

In 2014, the Bank entered into a purchase and assumption agreement (without loss sharing) with the FDIC to assume all of the deposits and certain liabilities and acquire certain assets of Valley Bank (“Valley”), which added five locations in the Quad Cities area of eastern Iowa and six locations in central Iowa, primarily in the Des Moines market area. These represented new markets for the Company in eastern Iowa and enhanced our market presence in central Iowa. In this transaction we acquired assets with a fair value of approximately $378.7 million (approximately 10.0% of the Company’s total consolidated assets at acquisition) and assumed liabilities with a fair value of approximately $367.9 million (approximately 9.8% of the Company’s total consolidated assets at acquisition). It also resulted in a gain of $10.8 million which was included in Noninterest Income in the Company’s Consolidated Statement of Income for the year ended December 31, 2014.

Also in 2014, the Bank entered into a purchase and assumption agreement to acquire certain assets and depository accounts from Neosho, Mo.-based Boulevard Bank (“Boulevard”), which added one location in the Neosho, Mo. market, where the Company already operated. In this transaction, which was completed in 2014, we acquired assets (primarily cash and cash equivalents) with a fair value of approximately $92.5 million (approximately 2.6% of the Company’s total consolidated assets at acquisition) and assumed liabilities (all deposits and related accrued interest) with a fair value of approximately $93.3 million (approximately 2.6% of the Company’s total consolidated assets at acquisition). This acquisition resulted in recognition of $790,000 of goodwill.

The Company also opened commercial loan production offices in Dallas, Texas and Tulsa, Oklahoma during 2014. The primary products offered in these offices are commercial real estate, commercial business and commercial construction loans.

In 2015, the Company announced plans to consolidate operations of 16 banking centers into other nearby Great Southern banking center locations. As part of an ongoing performance review of its entire banking center network, Great Southern evaluated each location for a number of criteria, including access and availability of services to affected customers, the proximity of other Great Southern banking centers, profitability and transaction volumes, and market dynamics. Subsequent to this announcement, the Bank entered into separate definitive agreements to sell two of the 16 banking centers, including all of the associated deposits (totaling approximately $20 million), to separate bank purchasers. One of those sale transactions was completed on February 19, 2016 and the other was completed on March 18, 2016. The closing of the remaining 14 facilities, which resulted in the transfer of approximately $127 million in deposits and banking center operations to other Great Southern locations, occurred at the close of business on January 8, 2016.

Also in 2015, the Company announced that it entered into a purchase and assumption agreement to acquire 12 branches, including related loans, and to assume related deposits in the St. Louis, Mo., area from Cincinnati-based Fifth Third Bank. The acquisition was completed at the close of business on January 29, 2016. The deposits assumed totaled approximately $228 million and had a weighted average rate of approximately 0.28%. The loans acquired totaled approximately $159 million and had a weighted average yield of approximately 3.92%.

The loss sharing agreements related to the FDIC-assisted transactions in 2009, 2011 and 2012 added to the complexity of our operations by creating the need for new employees and processes to ensure compliance with the loss sharing agreements and the collection of problem assets acquired. See Note 4 included in Item 8. “Financial Statements and Supplementary Information” for a more detailed discussion of these FDIC-assisted transactions and the loss sharing agreements. The loss

sharing agreements related to the 2009 and 2011 FDIC-assisted transactions were terminated during 2016. The loss sharing agreements related to the 2012 FDIC-assisted transaction were terminated during 2017. See “Loss Share Agreements” below for additional information regarding the termination of these agreements.

The Company opened a commercial loan production office in Chicago, Illinois during 2017. The primary products offered in this office are commercial real estate, commercial business and commercial construction loans.

In March 2018, the Bank entered into a definitive agreement to sell its four banking centers, including all of the associated deposits (totaling approximately $56 million), in the Omaha, Nebraska market to Lincoln, Nebraska-based West Gate Bank. This sale transaction was completed in July 2018.

The Company opened two commercial loan production offices – one in Denver, Colorado and one in Atlanta, Georgia – in late 2018. The primary products offered in these offices are commercial real estate, commercial business and commercial construction loans.

In March 2019, the Company ceased operating its indirect automobile financing unit. Market forces, including strong rate competition for well-qualified borrowers, made indirect lending through automobile dealerships a significant challenge to efficient and profitable operations over the long term. Indirect loan balances significantly declined in 2018 and 2019 after tightened underwriting guidelines were implemented in the latter part of 2016, in response to more challenging consumer credit conditions. The Company continues to offer direct consumer loans through its banking center network.

In April 2019, the Company consolidated its Fayetteville, Ark., location into its Rogers, Ark., banking center. The Company now operates one banking center in Arkansas. In September 2019, the Company consolidated its Ames, Iowa, banking center into its North Ankeny, Iowa office. The Company entered the Ames market with only one banking center through an FDIC-assisted acquisition in 2014.

Great Southern is principally engaged in the business of originating commercial real estate loans, construction loans, other commercial loans, residential real estate loans and consumer loans and funding these loans by attracting deposits from the general public, obtaining brokered deposits and through borrowings from the Federal Home Loan Bank of Des Moines (the "FHLBank") and others.

For many years, Great Southern has followed a strategy of emphasizing loan origination through residential, commercial and consumer lending activities in its market areas. The goal of this strategy is to be one of the leading providers of financial services in Great Southern’s market areas, while simultaneously diversifying assets and reducing interest rate risk by originating and holding adjustable-rate loans and fixed-rate loans, primarily with terms of five years or less, in its portfolio and by selling longer-term fixed-rate single-family mortgage loans in the secondary market. The Bank continues to emphasize real estate lending while also expanding and increasing its originations of commercial business loans.

The corporate office of the Bank is located at 1451 East Battlefield, Springfield, Missouri 65804 and its telephone number at that address is (417) 887-4400.

Internet Website

Bancorp maintains a website at www.greatsouthernbank.com. The information contained on that website is not included as part of, or incorporated by reference into, this Annual Report on Form 10-K. Bancorp currently makes available on or through its website Bancorp's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and amendments, if any, to these reports. These materials are also available free of charge (other than a user's regular internet access charges) on the Securities and Exchange Commission's website at www.sec.gov.

Market Areas

The Company currently operates 97 full-service retail banking offices, serving more than 151,000 households in six states – Missouri, Arkansas, Iowa, Kansas, Minnesota and Nebraska. The Company also operates commercial loan production offices in Atlanta, Chicago, Dallas, Denver, Omaha, Neb., and Tulsa, Okla., and a mortgage lending office in Springfield, Mo.

The Company regularly evaluates its banking center network and lines of business to ensure that it is serving customers in the best way possible. The banking center network constantly evolves with changes in customer needs and preferences, emerging technology and local market developments. In response to these changes, the Company opens banking centers and invests resources where customer demand leads, and from time to time, consolidates banking centers when market conditions dictate.

Great Southern's largest concentration of deposits and loans are in the Springfield, Mo., and St. Louis, Mo., market areas. In the last several years, the Company's deposit and loan portfolios have become more diversified because of its participation in five FDIC-assisted acquisitions and organic growth. The FDIC-assisted acquisitions significantly expanded the Company's geographic footprint, which prior to 2009 was primarily in southwest and central Missouri, by adding operations in Iowa, Kansas, Minnesota and Nebraska. In 2018, the Company sold four banking centers in the Omaha, Neb., metropolitan market to a Nebraska-based bank. A commercial loan production office remains in Omaha. In April 2019, the Fayetteville, Ark., banking center was consolidated into the Rogers, Ark., office, leaving one office in Arkansas. Besides the Springfield and St. Louis market areas, the Company has deposit and loan concentrations in the following market areas: Kansas City, Mo.; Sioux City, Iowa; Des Moines, Iowa; Northwest Arkansas; Minneapolis, Minn.; and Eastern Iowa in the area known as the "Quad Cities." Deposits and loans are also generated in banking centers in rural markets in Missouri, Iowa, and Kansas.

At December 31, 2019, the Company's total deposits were $3.96 billion. At that date, the Company had deposits in Missouri of $2.9 billion, including the two largest deposit concentrations in Springfield and St. Louis areas, with $1.6 billion and $525 million, respectively. The Company also had deposits of $559 million in Iowa, $245 million in Kansas, $236 million in Minnesota, $19 million in Nebraska and $19 million in Arkansas.

The Company also has commercial loan production offices in Atlanta, Chicago, Dallas, Denver, Omaha, Neb. and Tulsa, Okla. These offices generate a significant percentage of the Company’s commercial loan production. Commercial lending groups in our Kansas City, Mo., Des Moines, Iowa, Minneapolis, Minn., Springfield, Mo., and St. Louis, Mo., banking offices also generate a significant percentage of the Company’s commercial loan production.

Lending Activities

General

From its beginnings in 1923 through the early 1980s, Great Southern primarily made long-term, fixed-rate residential real estate loans that it retained in its loan portfolio. Beginning in the early 1980s, Great Southern increased its efforts to originate short-term and adjustable-rate loans. Beginning in the mid-1980s, Great Southern increased its efforts to originate commercial real estate and other residential loans, primarily with adjustable rates or shorter-term fixed rates. In addition, some competitor banking organizations merged with larger institutions and changed their business practices or moved operations away from the Springfield, Mo. area, and others consolidated operations from the Springfield, Mo. area to larger cities. This provided Great Southern expanded opportunities in residential and commercial real estate lending as well as in the origination of commercial business and consumer loans.

In addition to origination of these loans, the Bank has expanded and enlarged its relationships with smaller banks and other peer banks to purchase participations (at par, generally with no servicing costs) in loans these other banks originate but are unable to retain the entire balance in their portfolios due to capital or borrower relationship size limitations. The Bank uses the same underwriting guidelines in evaluating these participations as it does in its direct loan originations. At December 31, 2019, the balance of participation loans purchased and held in the portfolio, excluding FDIC-assisted acquired loans, was $264.1 million, or 6.5% of the total loan portfolio. All of these participation loans were performing at December 31, 2019, with the exception of one loan totaling $1.1 million.

One of the principal historical lending activities of Great Southern is the origination of fixed and adjustable-rate conventional residential real estate loans to enable borrowers to purchase or refinance owner-occupied homes. Great Southern originates a variety of conventional, residential real estate mortgage loans, principally in compliance with Freddie Mac and Fannie Mae standards for resale in the secondary market. Great Southern promptly sells most of the fixed-rate residential mortgage loans that it originates. To date, Great Southern has not experienced difficulties selling these loans in the secondary market and has had minimal requests for repurchase. Depending on market conditions, the ongoing servicing of these loans is at times retained by Great Southern, but generally servicing is released to the purchaser of the loan. Great Southern retains in its portfolio substantially all of the adjustable-rate mortgage loans that it originates.

Another principal lending activity of Great Southern is the origination of commercial real estate, other residential (multi-family) and commercial construction loans. Since the early 1990s, commercial real estate, other residential (multi-family) and commercial construction loans have represented the largest percentage of the loan portfolio. At December 31, 2019, commercial real estate, other residential multi-family) and commercial construction loans, excluding loans acquired in FDIC-assisted transactions, accounted for approximately 30%, 17% and 18%, respectively, of the total portfolio. Of the portfolio of acquired loans, commercial real estate loans (net of fair value discounts) accounted for approximately 1% of the total portfolio at December 31, 2019.

In addition, Great Southern in recent years has increased its emphasis on the origination of other commercial loans, home equity loans, and also issues letters of credit. Letters of credit are contingent obligations and are not included in the Bank's loan portfolio. See "-- Other Commercial Lending," "- Classified Assets," and "Loan Delinquencies and Defaults" below.

The percentage of collateral value Great Southern will loan on real estate and other property varies based on factors including, but not limited to, the type of property and its location and the borrower's credit history. As a general rule, Great Southern will loan up to 95% of the appraised value on one-to four-family residential properties. Typically, private mortgage insurance is required for loan amounts above the 80% level. At December 31, 2019 and 2018, loans secured by second liens on residential properties were $106.5 million, or 2.5%, and $118.5 million, or 2.9%, respectively, of our total loan portfolio. For commercial real estate and other residential real property loans, Great Southern may loan up to 85% of the appraised value. The origination of loans secured by other property is considered and determined on an individual basis by management with the assistance of any industry guides and other information which may be available. Collateral values are reappraised or reassessed as loans are renewed or when significant events indicating potential impairment occur. On a quarterly basis, management reviews impaired

loans to determine whether updated appraisals or reassessments are necessary based on loan performance, collateral type and guarantor support. While not specifically required by our policy, we seek to obtain cross-collateralization of loans to a borrower when it is available and it is most frequently done on commercial real estate loans.

Loan applications are approved at various levels of authority, depending on the type, amount and loan-to-value ratio of the loan. Loan commitments of more than $750,000 (or loans exceeding the Freddie Mac loan limit in the case of fixed-rate, one- to four-family residential loans for resale) must be approved by Great Southern's loan committee. The loan committee is comprised of the Chief Executive Officer of the Bank, the Chief Credit Officer of the Bank (chairman of the committee), and other senior officers of the Bank involved in lending activities. All loans, regardless of size or type, are required to conform to certain minimum underwriting standards to assure portfolio quality. These standards and procedures include, but are not limited to, an analysis of the borrower’s financial condition, collateral, repayment ability, verification of liquid assets and credit history as required by loan type. It has been, and continues to be, our 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. Underwriting standards also include loan-to-value ratios which vary depending on collateral type, debt service coverage ratios or debt payment to income ratios, where applicable, credit histories, use of guaranties and other recommended terms relating to equity requirements, amortization, and maturity. Generally, deviations from approved underwriting standards may only be allowed when doing so is not in violation of regulations or statutes and when appropriate lending authority is obtained. The loan committee reviews all new loan originations in excess of lender approval authorities. For secured loans originated and held, most lenders have approval authorities of $250,000 or below while fourteen senior lenders have approval authority of varying amounts up to $1 million. Lender approval authorities are also subject to loans-to-one borrower limits of $500,000 or below for most lenders and of varying amounts up to $3 million for ten senior lenders. These standards, as well as our collateral requirements, have not significantly changed in recent years.

In general, state banking laws restrict loans to a single borrower and related entities to no more than 25% of a bank's unimpaired capital and unimpaired surplus, plus an additional 10% if the loan is collateralized by certain readily marketable collateral. (Real estate is not included in the definition of "readily marketable collateral.”) As computed on the basis of the Bank's unimpaired capital and surplus at December 31, 2019, this limit was approximately $162.6 million. See "Government Supervision and Regulation." At December 31, 2019, the Bank was in compliance with the loans-to-one borrower limit. At December 31, 2019, the Bank's largest relationship for purposes of this limit, which consists of three loans, totaled $56.1 million. This amount represents the total commitment for this relationship at December 31, 2019; the outstanding balance at that date was $31.0 million. The collateral for the loans consists of multiple apartment complexes. Some of the projects are currently under construction, so all funds have not been disbursed on these loans. In addition, we obtained personal guarantees from the principal owner of the borrowing entities for each of these loans. All loans included in this relationship were current at December 31, 2019. In addition at December 31, 2019, we had three other loan relationships that each exceeded $50 million. All loans included in these relationships were current at December 31, 2019. Our policy does not set a loans-to-one borrower limit that is below the legal limits described; however, we do recognize the need to limit credit risk to any one borrower or group of related borrowers upon consideration of various risk factors. Extensions of credit to borrowers whose past due loans were charged-off or whose loans are classified as substandard require special lending approval.

Great Southern is permitted under applicable regulations to originate or purchase loans and loan participations secured by real estate located in any part of the United States. In addition to the market areas where the Company has offices, the Bank has made or purchased loans, secured primarily by commercial real estate, in other states, primarily Arizona, Florida, Michigan, Tennessee and Wisconsin. At December 31, 2019, loans in these states comprised 2% or less each, respectively, of the total loan portfolio.

Loan Portfolio Composition

The following tables set forth information concerning the composition of the Bank's loan portfolio in dollar amounts and in percentages (before deductions for loans in process, deferred fees and discounts and allowance for loan losses) as of the dates indicated. The tables are based on information prepared in accordance with generally accepted accounting principles and are qualified by reference to the Company's Consolidated Financial Statements and the notes thereto contained in Item 8 of this report.

The loans acquired in the four FDIC-assisted transactions completed in 2009 through 2012, which were acquired at discounts and were previously covered by loss sharing agreements between the FDIC and the Bank, and the loans acquired in 2014 from the former Valley Bank, which were acquired at discounts and were never covered by a loss sharing agreement, are shown

combined below in tables separate from the legacy Great Southern portfolio. All of these acquired loan portfolios were initially recorded at their fair values at the acquisition date and are recorded by the Company at their discounted value. The following tables reflect the loan balances excluding discounts.

Legacy Great Southern Loan Portfolio Composition:

December 31, 2019 2018 2017 2016 2015 Amount % Amount % Amount % Amount % Amount % (Dollars In Thousands) Real Estate Loans: One- to four- family(1) $ 516,601 10.5 % $ 400,954 8.3 % $ 318,186 7.3 % $ 353,709 8.6 % $ 272,411 7.9 % Other residential 866,006 17.6 784,894 16.3 745,645 17.1 663,378 16.1 419,550 12.1 Commercial(2) 1,507,361 30.5 1,385,375 28.7 1,256,986 28.8 1,211,644 29.4 1,080,836 31.3 Residential construction: One- to four- family 21,948 0.4 26,683 0.5 23,266 0.5 26,764 0.6 36,430 1.1 Other residential 490,798 9.9 376,575 7.8 208,883 4.8 202,202 4.9 133,718 3.9 Commercial 900,597 18.3 1,098,420 22.8 919,029 21.1 641,195 15.6 551,115 16.0 Total real estate loans 4,303,311 87.2 4,072,901 84.4 3,471,995 79.6 3,098,892 75.2 2,494,060 72.3 Other Loans: Consumer loans: Automobile, boat, etc. 197,657 4.0 309,201 6.4 418,594 9.6 563,086 13.7 513,798 14.9 Home equity and improvement 118,988 2.4 121,352 2.5 115,439 2.7 108,753 2.6 83,966 2.4 Other 917 — 1,677 — 1,916 — 1,148 — 926 — Total consumer loans 317,562 6.4 432,230 8.9 535,949 12.3 672,987 16.3 598,690 17.3 Other commercial loans 313,209 6.4 322,119 6.7 353,553 8.1 348,955 8.5 357,581 10.4 Total other loans 630,771 12.8 754,349 15.6 889,502 20.4 1,021,942 24.8 956,271 27.7 Total loans 4,934,082 100.0 % 4,827,250 100.0 % 4,361,497 100.0 % 4,120,834 100.0 % 3,450,331 100.0 % Less: Loans in process 850,661 958,436 793,664 585,305 418,702 Deferred fees and discounts 7,104 7,400 6,500 4,869 3,528 Allowance for loan losses 39,633 37,988 36,033 36,775 36,646 Total legacy loans receivable, net $ 4,036,684 $ 3,823,426 $ 3,525,300 $ 3,493,885 $ 2,991,455

(1) Includes loans held for sale. (2) Total commercial real estate loans included industrial revenue bonds of $13.2 million, $13.9 million, $21.7 million, $24.7 million and $37.4 million at December 31, 2019, 2018, 2017, 2016 and 2015.

Loans Acquired and Accounted for Under ASC 310-30 Portfolio Composition:

December 31, 2019 2018 2017 2016 2015 Amount % Amount % Amount % Amount % Amount % (Dollars In Thousands) Real Estate Loans: Residential One- to four- family $ 79,830 58.5 % $ 102,153 55.4 % $ 132,432 57.1 % $ 169,541 54.7 % $ 213,317 52.3 % Other residential 5,726 4.2 13,396 7.3 15,501 6.7 30,605 9.9 38,487 9.4 Commercial(1) 29,886 21.9 34,853 18.9 41,218 17.8 56,548 18.2 79,461 19.5 Construction 3,625 2.7 5,588 3.0 5,509 2.4 4,508 1.5 11,087 2.7 Total real estate loans 119,067 87.3 155,990 84.6 194,660 84.0 261,202 84.3 342,352 83.9 Other Loans: Consumer loans: Student loans — — — — — — — — 481 0.1 Home equity and improvement 12,213 8.9 21,490 11.7 27,778 12.0 35,688 11.5 43,507 10.7 Other 1,557 1.1 2,110 1.1 3,367 1.4 4,739 1.5 6,578 1.6 Total consumer loans 13,770 10.0 23,600 12.8 31,145 13.4 40,427 13.0 50,566 12.4 Other commercial loans 3,738 2.7 4,861 2.6 6,016 2.6 8,448 2.7 15,331 3.7 Total other loans 17,508 12.7 28,461 15.4 37,161 16.0 48,875 15.7 65,897 16.1 Total loans(2) 136,575 100.0 % 184,451 100.0 % 231,821 100.0 % 310,077 100.0 % 408,249 100.0 % Less: Loans in process 5 5 5 8 17 Allowance for loan losses 661 421 459 625 1,503 Fair value discounts 9,369 16,800 22,152 26,918 45,387 Total loans receivable, net $ 126,540 $ 167,225 $ 209,205 $ 282,526 $ 361,342

(1) Total commercial real estate loans included industrial revenue bonds of $1.2 million, $1.4 million, $2.2 million, $2.5 million, and $3.2 million at December 31, 2019, 2018, 2017, 2016, and 2015, respectively. (2) At December 31, 2019, 2018 and 2017, none of these acquired loans were covered by an FDIC loss sharing agreement.

Based upon the collectability analyses performed at the time of the acquisitions, we expected certain levels of foreclosures and charge-offs, and actual results through December 31, 2019, related to the FDIC-assisted acquired portfolios, have been better than our expectations. As a result, cash flows expected to be received from the acquired loan pools have increased, resulting in adjustments that were made to the related accretable yield which are discussed in Note 4 of the accompanying audited financial statements, included in Item 8 of this Report.

The following tables show the fixed- and adjustable-rate composition of the Bank's loan portfolio at the dates indicated. Amounts shown for TeamBank, Vantus Bank, Sun Security Bank, InterBank and Valley Bank represent unpaid principal balances, before fair value discounts. The tables are based on information prepared in accordance with generally accepted accounting principles.

Legacy Great Southern Loan Portfolio Composition by Fixed- and Adjustable-Rates:

December 31, 2019 2018 2017 2016 2015 Amount % Amount % Amount % Amount % Amount % (Dollars In Thousands) Fixed-Rate Loans: Real Estate Loans One- to four- family $ 151,765 3.1 % $ 152,778 3.2 % $ 148,790 3.4 % $ 168,813 4.1 % $ 110,738 3.2 % Other residential 394,140 8.0 387,744 8.0 279,593 6.4 304,387 7.4 257,854 7.5 Commercial 763,209 15.5 686,832 14.2 603,183 13.8 589,354 14.3 522,924 15.2 Residential construction: One- to four- family 8,109 0.1 6,908 0.1 7,998 0.2 10,950 0.3 16,483 0.5 Other residential 39,223 0.8 19,165 0.4 6,636 0.2 26,487 0.6 21,548 0.6 Commercial construction 758,525 15.4 922,418 19.2 717,350 16.4 530,375 12.9 376,661 10.9 Total real estate loans 2,114,971 42.9 2,175,845 45.1 1,763,550 40.4 1,630,366 39.6 1,306,208 37.9 Consumer 190,698 3.9 301,627 6.2 411,068 9.4 553,800 13.4 506,574 14.7 Other commercial 174,180 3.5 186,030 3.9 203,388 4.7 194,431 4.7 195,602 5.6 Total fixed-rate loans 2,479,849 50.3 2,663,502 55.2 2,378,006 54.5 2,378,597 57.7 2,008,384 58.2 Adjustable-Rate Loans: Real Estate Loans One- to four- family 364,836 7.4 248,176 5.1 169,396 3.9 184,896 4.5 161,673 4.7 Other residential 471,866 9.6 397,150 8.3 466,052 10.7 358,991 8.7 161,696 4.7 Commercial 744,152 15.1 698,543 14.5 653,803 15.0 622,290 15.1 557,912 16.2 Residential construction: One- to four- family 13,839 0.3 19,775 0.4 15,268 0.4 15,814 0.4 19,947 0.5 Other residential 451,575 9.1 357,410 7.4 202,247 4.6 175,715 4.3 112,170 3.3 Commercial construction 142,072 2.9 176,002 3.6 201,679 4.6 110,820 2.7 174,454 5.0 Total real estate loans 2,188,340 44.4 1,897,056 39.3 1,708,445 39.2 1,468,526 35.7 1,187,852 34.4 Consumer 126,864 2.5 130,603 2.7 124,881 2.9 119,187 2.9 92,116 2.7 Other commercial 139,029 2.8 136,089 2.8 150,165 3.4 154,524 3.7 161,979 4.7 Total adjustable-rate loans 2,454,233 49.7 2,163,748 44.8 1,983,491 45.5 1,742,237 42.3 1,441,947 41.8 Total Loans 4,934,082 100.0 % 4,827,250 100.0 % 4,361,497 100.0 % 4,120,834 100.0 % 3,450,331 100.0 % Less: Loans in process 850,661 958,436 793,664 585,305 418,702 Deferred fees and discounts 7,104 7,400 6,500 4,869 3,528 Allowance for loan losses 39,633 37,988 36,033 36,775 36,646 Total legacy loans receivable, net $ 4,036,684 $ 3,823,426 $ 3,525,300 $ 3,493,885 $ 2,991,455

Loans Acquired and Accounted for Under ASC 310-30 Composition by Fixed- and Adjustable-Rates:

December 31, 2019 2018 2017 2016 2015 Amount % Amount % Amount % Amount % Amount % (Dollars In Thousands) Fixed-Rate Loans: Real Estate Loans One- to four- family $ 32,642 23.9 % $ 41,460 22.5 % $ 54,302 23.4 % $ 72,738 23.5 % $ 99,456 24.4 % Other residential 5,531 4.1 12,572 6.8 13,129 5.7 25,593 8.2 25,551 6.3 Commercial 25,177 18.4 27,194 14.7 25,973 11.2 29,043 9.4 32,255 7.9 Construction 3,303 2.4 4,598 2.5 4,297 1.9 2,176 0.7 5,858 1.4 Total real estate loans 66,653 48.8 85,824 46.5 97,701 42.2 129,550 41.8 163,120 40.0 Consumer 1,921 1.4 2,447 1.3 3,712 1.6 5,111 1.6 7,561 1.8 Other commercial 3,076 2.3 3,354 1.9 3,819 1.6 4,917 1.6 6,999 1.7 Total fixed-rate loans 71,650 52.5 91,625 49.7 105,232 45.4 139,578 45.0 177,680 43.5 Adjustable-Rate Loans: Real Estate Loans One- to four- family 47,188 34.6 60,693 32.9 78,130 33.7 96,803 31.2 113,861 27.9 Other residential 195 0.1 824 0.4 2,372 1.0 5,012 1.6 12,936 3.2 Commercial 4,709 3.4 7,659 4.2 15,245 6.6 27,505 8.9 47,206 11.6 Construction 322 0.3 990 0.5 1,212 0.5 2,332 0.8 5,229 1.3 Total real estate loans 52,414 38.4 70,166 38.0 96,959 41.8 131,652 42.5 179,232 44.0 Consumer 11,849 8.6 21,153 11.5 27,433 11.8 35,316 11.4 43,005 10.5 Other commercial 662 0.5 1,507 0.8 2,197 1.0 3,531 1.1 8,332 2.0 Total adjustable-rate loans 64,925 47.5 92,826 50.3 126,589 54.6 170,499 55.0 230,569 56.5 Total Loans 136,575 100.0 % 184,451 100.0 % 231,821 100.0 % 310,077 100.0 % 408,249 100.0 % Less: Loans in process 5 5 5 8 17 Allowance for loan losses 661 421 459 625 1,503 Fair value discounts 9,369 16,800 22,152 26,918 45,387 Total loans receivable, net $ 126,540 $ 167,225 $ 209,205 $ 282,526 $ 361,342

The following tables present the contractual maturities of loans at December 31, 2019. Amounts shown for acquired loans represent unpaid principal balances, before fair value discounts. The tables are based on information prepared in accordance with generally accepted accounting principles.

Legacy Great Southern Loan Portfolio Composition by Contractual Maturities:

Less Than One Year One to Five Years After Five Years Total (In Thousands) Real Estate Loans: Residential One- to four- family $ 26,134 $ 71,919 $ 418,548 $ 516,601 Other residential 325,291 481,649 59,066 866,006 Commercial 373,331 929,918 204,112 1,507,361 Residential construction: One- to four- family 14,423 4,561 2,964 21,948 Other residential 32,909 445,845 12,044 490,798 Commercial construction 748,451 120,763 31,383 900,597 Total real estate loans 1,520,539 2,054,655 728,117 4,303,311 Other Loans: Consumer loans: Automobile and other 24,452 143,733 30,389 198,574 Home equity and improvement 8,605 30,884 79,499 118,988 Total consumer loans 33,057 174,617 109,888 317,562 Other commercial loans 145,023 110,320 57,866 313,209 Total other loans 178,080 284,937 167,754 630,771 Total loans $ 1,698,619 $ 2,339,592 $ 895,871 $ 4,934,082

As of December 31, 2019, legacy loans due after December 31, 2020 with fixed interest rates totaled $1.3 billion and loans due after December 31, 2020 with adjustable rates totaled $1.9 billion.

Loans Acquired and Accounted for Under ASC 310-30 Portfolio Composition by Contractual Maturities:

Less Than One Year One to Five Years After Five Years Total (In Thousands) Real Estate Loans: Residential One- to four- family $ 9,565 $ 14,603 $ 55,662 $ 79,830 Other residential 818 4,043 865 5,726 Commercial 11,545 15,074 3,267 29,886 Construction 288 3,065 272 3,625 Total real estate loans 22,216 36,785 60,066 119,067 Other Loans: Consumer loans: Home equity and improvement 3,881 7,203 1,129 12,213 Automobile and other 18 520 1,019 1,557 Total consumer loans 3,899 7,723 2,148 13,770 Other commercial loans 2,811 784 143 3,738 Total other loans 6,710 8,507 2,291 17,508 Total loans $ 28,926 $ 45,292 $ 62,357 $ 136,575

As of December 31, 2019, acquired loans due after December 31, 2020 with fixed interest rates totaled $49.7 million and loans due after December 31, 2020 with adjustable rates totaled $57.9 million.

At December 31, 2019, $106.5 million, or 2.5%, of total loans were secured by junior lien mortgages and $8.6 million, or 1.8% of residential real estate loans, were interest only residential real estate loans. At December 31, 2018, $118.5 million, or 2.9%, of total loans were secured by junior lien mortgages and $7.4 million, or 2.0% of residential real estate loans, were interest only residential real estate loans. While high loan-to-value ratio mortgage loans are occasionally originated and held, they are typically either considered low risk based on analyses performed or are required to have private mortgage insurance. The Company does not originate or hold option ARM loans or significant amounts of loans with initial teaser rates or subprime loans in its residential real estate portfolio.

To monitor and control risks related to concentrations of credit in the composition of the loan portfolio, management reviews the loan portfolio by loan types, industries and market areas on a monthly basis for credit quality and known and anticipated market conditions. Changes in loan portfolio composition may be made by management based on the performance of each area of business, known and anticipated market conditions, credit demands, the deposit structure of the Bank and the expertise and/or depth of the lending staff. Loan portfolio industry and market areas are monitored regularly for credit quality and trends. Reports detailed by industry and geography are provided to the Board of Directors on a monthly and quarterly basis.

In response to the economic recession that began in 2008, the composition of the Bank’s loan portfolio has changed over the past several years; speculative construction and land development loan types have been limited, commercial real estate loan types have been stabilized and diversified and emphasis has been placed on increasing our other residential (multi-family), commercial business and, prior to 2017, consumer loan portfolios.

Environmental Issues

Loans secured by real property, whether commercial, residential or other, may have a material, negative effect on the financial position and results of operations of the lender if the collateral is environmentally contaminated. The result can be, but is not necessarily limited to, liability for the cost of cleaning up the contamination imposed on the lender by certain federal and state laws, a reduction in the borrower's ability to pay because of the liability imposed upon it for any clean-up costs, a reduction in the value of the collateral because of the presence of contamination or a subordination of security interests in the collateral to a super priority lien securing the cleanup costs by certain state laws.

Management is aware of the risk that the Bank may be negatively affected by environmentally contaminated collateral and attempts to control this risk through commercially reasonable methods, consistent with guidelines arising from applicable government or regulatory rules and regulations, and to a more limited extent, publications of the lending industry. Management currently is unaware (without, in many circumstances, specific inquiry or investigation of existing collateral, some of which was accepted as collateral before risk controlling measures were implemented) of any environmental contamination of real property securing loans in the Bank's portfolio that would subject the Bank to any material risk. No assurance can be given, however, that the Bank will not be adversely affected by environmental contamination.

Residential Real Estate Lending

At December 31, 2019 and 2018, loans secured by residential real estate, excluding that which is under construction and excluding all FDIC-assisted acquired loans, totaled $1.4 billion and $1.2 billion, respectively, and represented approximately 27.3% and 23.7%, respectively, of the Bank's total loan portfolio. At December 31, 2019 and 2018, FDIC-assisted acquired loans (net of fair value discounts) secured by residential real estate totaled $86 million and $106 million, respectively, and represented approximately 1.7% and 2.1%, respectively, of the Bank’s total loan portfolio. The Bank's legacy residential real estate loan portfolio increased during 2019, due to organic loan growth in both single-family and other residential (multi-family) loans. For many years, other residential (multi-family) loan balances continued to increase as the Bank has emphasized this type of loan. The Bank's legacy other residential (multi-family) loan portfolio grew by about 10% and 5% in 2019 and 2018, respectively. In 2016, the Bank completed a non-FDIC-assisted acquisition of a portfolio of one- to four-family residential loans as part of the acquisition of branches and deposits in St. Louis, Mo. from Fifth Third Bank.

The Bank currently is originating one- to four-family adjustable-rate residential mortgage loans primarily with one-year adjustment periods or with rates that are fixed for the first few years of the loan and then adjust annually. Rate adjustments on loans originated prior to July 2001 are based upon changes in prevailing rates for one-year U.S. Treasury securities. Rate adjustments on loans originated since July 2001 are based upon changes in the average of interbank offered rates for twelve month U.S. Dollar-denominated deposits in the London Market (LIBOR) or changes in prevailing rates for one-year U.S. Treasury securities. Rate adjustments are generally limited to 2% maximum annually as well as a maximum aggregate adjustment over the life of the loan. Accordingly, the interest rates on these loans typically may not be as rate sensitive as is the Bank's cost of funds. Generally, the Bank's adjustable-rate mortgage loans are not convertible into fixed-rate loans, do not permit negative amortization of principal and carry no prepayment penalty. The Bank also currently is originating other residential (multi-family) mortgage loans with interest rates that are generally either adjustable with changes to the prime rate of interest or fixed for short periods of time (three to seven years).

The Bank's portfolio of adjustable-rate mortgage loans also includes a number of loans with different adjustment periods, without limitations on periodic rate increases and rate increases over the life of the loans, or which are tied to other short-term market indices. These loans were originated prior to the industry standardization of adjustable-rate loans. Since the adjustable-rate mortgage loans currently held in the Bank's portfolio have not been subject to an interest rate environment which causes them to adjust to the maximum, these loans entail unquantifiable risks resulting from potential increased payment obligations on the borrower as a result of upward repricing. The indices used by Great Southern for these types of loans have increased, but not significantly, in the past three years. Compared to fixed-rate mortgage loans, these loans are subject to increased risk of delinquency or default if a higher, fully-indexed rate of interest subsequently comes into effect in replacement of a lower rate currently in effect. From 2008 through 2012, as a result of the significant recession in the economy, including residential real estate, the Bank experienced a significant increase in delinquencies in adjustable-rate mortgage loans. In 2013 through 2019, these delinquencies trended lower.

In underwriting one- to four-family residential real estate loans, Great Southern evaluates the borrower's ability to make monthly payments and the value of the property securing the loan. It is the policy of Great Southern that generally all one- to four-family residential loans in excess of 80% of the appraised value of the property be insured by a private mortgage insurance company approved by Great Southern for the amount of the loan in excess of 80% of the appraised value. In addition, Great Southern requires borrowers to obtain title and fire and casualty insurance in an amount not less than the amount of the loan. Real estate loans originated by the Bank generally contain a "due on sale" clause allowing the Bank to declare the unpaid principal balance due and payable upon the sale of the property securing the loan. The Bank may enforce these due on sale clauses to the extent permitted by law.

Commercial Real Estate and Construction Lending

Commercial real estate lending has been a significant part of Great Southern's business activities since the mid-1980s. Great Southern does commercial real estate lending in order to increase the potential yield on, and the proportion of interest rate sensitive loans in, its portfolio. At December 31, 2008, commercial real estate loans and commercial construction loans each made up about one fourth of the total loan portfolio. The economic recession that began in 2008 resulted in reduced activity in the market caused by the downturn in the economy and reduced real estate values. In response, Great Southern began limiting residential and commercial land development lending to reduce the risk in the portfolio and began originating an increased amount of commercial real estate loans. Since December 31, 2008, the commercial construction loan portfolio has decreased from 32% of the loan portfolio to 17% of the loan portfolio at December 31, 2019, while, overall, commercial real estate loans have trended upward. The increase in commercial real estate loans in 2015-2019 reflects some economic improvement with increased investor activity in sales, purchases and refinancing of these types of properties. Both commercial real estate occupancy and rental rates show improvement in the Bank’s market areas. Excluding FDIC-assisted acquired loans, over the last three years, commercial real estate loans made up approximately 28-30% of the total loan portfolio while commercial construction loans were 15-22%. Great Southern expects to continue to limit lending on land development loans in 2020 with increases in commercial construction and commercial real estate loans anticipated as long as the economy continues to be strong. See "Government Supervision and Regulation" below.

At December 31, 2019 and 2018, loans secured by commercial real estate, excluding that which is under construction and excluding all FDIC-assisted acquired loans, totaled $1.5 billion and $1.4 billion, respectively, or approximately 29.7% and 27.7%, respectively, of the Bank's total loan portfolio. At December 31, 2019 and 2018, FDIC-assisted acquired loans (net of fair value discounts) secured by commercial real estate totaled $30 million and $34 million, respectively, and represented approximately 0.6% and 0.7%, respectively, of the Bank’s total loan portfolio. In addition, at December 31, 2019 and 2018, construction loans, excluding all FDIC-assisted acquired loans, secured by projects under construction and the land on which the projects are located aggregated $1.4 billion and $1.5 billion, respectively, or 27.4% and 30.1%, respectively, of the Bank's total loan portfolio. At December 31, 2019 and 2018, FDIC-assisted acquired construction loans (net of fair value discounts) totaled $4 million and $5 million, respectively, and represented approximately 0.1% and 0.1%, respectively, of the Bank’s total loan portfolio. A majority of the Bank's commercial real estate loans have been originated with adjustable rates of interest, most of which are tied to the national prime rate, or fixed rates of interest with short-term maturities. A large majority of the Bank’s commercial real estate loans (both fixed and adjustable) mature in five years or less. Substantially all of these loans were originated with loan commitments which did not exceed 80% of the appraised value of the properties securing the loans.

The Bank's construction loans generally have a term of eighteen months or less. The construction loan agreements for one- to four-family projects generally require principal reductions as individual condominium units or single-family houses are built and sold to a third party. This insures that the remaining loan balance, as a proportion of the value of the remaining security, does not increase, assuming that the value of the remaining security does not decrease. Loan proceeds are disbursed in increments as construction progresses. Generally, the amount of each disbursement is based on the construction cost estimate with inspections of the project performed in connection with each disbursement request. Normally, Great Southern's commercial real estate and other residential construction loans are made either as the initial stage of a combination loan (i.e., with a commitment from the Bank to provide permanent financing upon completion of the project) or with a commitment from a third party to provide permanent financing.

The Bank's commercial real estate and construction loan portfolios consist of loans with diverse collateral types. The following table sets forth loans that were secured by certain types of collateral at December 31, 2019, excluding FDIC-assisted acquired loans. These collateral types represent the five highest percentage concentrations of commercial real estate and construction loan types in the loan portfolio.

Collateral Type Loan Balance Percentage of Total Loan Portfolio Non-Performing Loans at December 31, 2019 (Dollars In Thousands) Retail (Varied Projects) $ 452,037 9.2 % $ 0 Health Care Facilities $ 298,799 6.1 % $ 0 Office Industry $ 296,011 6.0 % $ 530 Motels/Hotels $ 194,774 4.0 % $ 0 Warehouses $ 134,884 2.7 % $ 0

Commercial real estate lending and construction lending generally affords the Bank an opportunity to receive interest at rates higher than those obtainable from residential mortgage lending and to receive higher origination and other loan fees. In addition, commercial real estate loans and construction loans are generally made with adjustable rates of interest or, if made on a fixed-rate basis, for relatively short terms. Nevertheless, commercial real estate lending entails significant additional risks as compared with residential mortgage lending. Commercial real estate loans typically involve large loan balances to single borrowers or groups of related borrowers. In addition, the payment experience on loans secured by commercial properties is typically dependent on the successful operation of the related real estate project and thus may be subject, to a greater extent, to adverse conditions in the real estate market or in the economy generally.

Construction loans involve additional risks attributable to the fact that loan funds are advanced upon the value of the project under construction, which is of uncertain value prior to the completion of construction. Moreover, because of the uncertainties inherent in estimating construction costs, delays arising from labor problems, material shortages, and other unpredictable contingencies, it is relatively difficult to evaluate accurately the total loan funds required to complete a project, and the related loan-to-value ratios. See also the discussion under the headings "- Classified Assets" and "- Loan Delinquencies and Defaults" below.

The Company executes interest rate swaps with certain commercial banking customers to facilitate their respective risk management strategies. The Company began offering this service during 2011. Those interest rate swaps are simultaneously hedged by offsetting interest rate swaps that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. As of December 31, 2019, the Company had 19 interest rate swaps totaling $96.0 million in notional amount with commercial customers, and 19 interest rate swaps with the same notional amount with third parties related to this program. As of December 31, 2018, the Company had 18 interest rate swaps totaling $78.5 million in notional amount with commercial customers, and 18 interest rate swaps with the same notional amount with third parties related to this program. As part of the Valley Bank FDIC-assisted acquisition, the Company acquired seven loans with related interest rate swaps. Valley’s swap program differed from the Company’s in that Valley did not have back to back swaps with the customer and a counterparty. Five of the seven acquired loans with interest rate swaps have paid off. The notional amount of the two remaining Valley swaps is $689,000 at December 31, 2019. During the years ended December 31, 2019 and 2018, the Company recognized net gains (losses) of $(104,000) and $25,000 respectively, in noninterest income related to changes in the fair value of all of these interest rate swaps.

Other Commercial Lending

At December 31, 2019 and 2018, Great Southern had $313 million and $322 million, respectively, in other commercial loans outstanding, excluding all FDIC-assisted acquired loans, or 6.2% and 6.4%, respectively, of the Bank's total loan portfolio. At December 31, 2019 and 2018, FDIC-assisted acquired other commercial loans (net of fair value discounts) totaled $4 million and $4 million, respectively, and represented approximately 0.1% and 0.1%, respectively, of the Bank’s total loan portfolio. Great Southern's other commercial lending activities encompass loans with a variety of purposes and security, including loans to finance accounts receivable, inventory and equipment. Great Southern expects to continue to originate loans in this category subject to market conditions and applicable regulatory restrictions. See "Government Supervision and Regulation" below.

Unlike residential mortgage loans, which generally are made on the basis of the borrower's ability to make repayment from his or her employment and other income and which are secured by real property, the value of which tends to be more easily ascertainable, other commercial loans are of higher risk and typically are made on the basis of the borrower's ability to make repayment from the cash flow of the borrower's business. Commercial loans are generally secured by business assets, such as accounts receivable, equipment and inventory. As a result, the availability of funds for the repayment of other commercial loans may be substantially dependent on the success of the business itself. Further, the collateral securing the loans may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business.

The Bank's management recognizes the generally increased risks associated with other commercial lending. Great Southern's commercial lending policy emphasizes complete credit file documentation and analysis of the borrower's character, capacity to repay the loan, the adequacy of the borrower's capital and collateral as well as an evaluation of the industry conditions affecting the borrower. Review of the borrower's past, present and future cash flows is also an important aspect of Great Southern's credit analysis. In addition, the Bank generally obtains personal guarantees from the borrowers on these types of loans. Historically, the majority of Great Southern's commercial loans have been to borrowers in southwestern and central Missouri and the St. Louis, Mo. area. With the acquisitions in 2009, 2011, 2012 and 2014, geographic concentrations for commercial loans expanded to include the greater Kansas

City, Mo. area, several areas in Iowa, and the Minneapolis-St. Paul, Minn. area. Great Southern has continued its commercial lending in all of these geographic areas.

As part of its commercial lending activities, Great Southern issues letters of credit and receives fees averaging approximately 1% of the amount of the letter of credit per year. At December 31, 2019, Great Southern had 79 letters of credit outstanding in the aggregate amount of $26.3 million. Approximately 43% of the aggregate dollar amount of these letters of credit was secured, including 24 letter of credit totaling $11.4 million secured by real estate.

Consumer Lending

Consumer loans generally have short terms to maturity, thus reducing Great Southern's exposure to changes in interest rates, and carry higher rates of interest than do residential mortgage loans. In addition, Great Southern believes that the offering of consumer loan products helps to expand and create stronger ties to its existing customer base.

Great Southern offers a variety of secured consumer loans, including automobile loans, boat loans, home equity loans and loans secured by savings deposits. In addition, Great Southern also offers home improvement loans and unsecured consumer loans. Consumer loans, excluding all FDIC-assisted acquired loans, totaled $318 million and $432 million at December 31, 2019 and 2018, respectively, or 6.3% and 8.7%, respectively, of the Bank's total loan portfolio. At December 31, 2019 and 2018, FDIC-assisted acquired consumer loans (net of fair value discounts) totaled $14 million and $19 million, respectively, and represented approximately 0.3% and 0.4%, respectively, of the Bank’s total loan portfolio.

The underwriting standards employed by the Bank for consumer loans include a determination of the applicant's payment history on other debts and an assessment of ability to meet existing obligations and payments on the proposed loan. Although creditworthiness of the applicant is of primary consideration, the underwriting process also includes a comparison of the value of the underlying collateral, if any, in relation to the proposed loan amount.

Beginning in 1998, the Bank implemented indirect lending relationships, primarily with automobile dealerships. Through these dealer relationships, the dealer completes the application with the consumer and then submits it to the Bank for credit approval. While the Bank’s initial and ongoing concentrated effort was on automobiles, the program has evolved for use from time to time with other tangible products where financing of the product is provided through the seller, including, to a lesser extent, boats and manufactured homes. At December 31, 2019 and 2018, the Bank had $199 million and $311 million, respectively, of auto, boat, modular home and recreational vehicle loans in its portfolio, including FDIC-assisted acquired loans totaling $2 million and $2 million, respectively.

Indirect consumer loans decreased significantly in 2018 and 2019, primarily due to tightened underwriting guidelines on automobile lending implemented by the Company in the latter part of 2016, and were $110 million and $235 million at December 31, 2019 and 2018, respectively. The total indirect consumer loan portfolio at December 31, 2019 was comprised of the following types of loans: $107 million of used auto loans, $20 million of manufactured home loans, $2 million of new auto loans, and various other loans including loans for RVs, boats, ATVs and motorcycles.

The environment for providing indirect automobile lending services has been difficult over the last several years. In the latter part of 2016, in response to more challenging consumer credit conditions, the Company tightened its underwriting guidelines on automobile lending. Management took this step in an effort to improve credit quality in the portfolio and lower delinquencies and charge-offs. The changes in underwriting guidelines resulted in lower origination volume, and as such, outstanding consumer auto loan balances have decreased significantly since the end of 2016. After a review of the indirect automobile lending model, the decision was made to exit this business line effective March 31, 2019. Market and financial forces, including strong rate competition for well-qualified borrowers, have made indirect automobile lending less profitable over the long term. The Company will continue servicing indirect automobile loans made before March 31, 2019, until each loan agreement is satisfied. Direct consumer lending through the Company’s banking center network is expected to continue as normal.

Consumer loans may entail greater risk than do residential mortgage loans, particularly in the case of consumer loans that are unsecured or secured by rapidly depreciable assets such as automobiles. In such cases, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation. The remaining deficiency often does not warrant further substantial collection efforts against the borrower. In addition, consumer loan collections are dependent on the borrower's continuing financial strength, and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state consumer bankruptcy and insolvency laws, may limit the amount which can be recovered on

these loans. These loans may also give rise to claims and defenses by a consumer loan borrower against an assignee of these loans such as the Bank, and a borrower may be able to assert against the assignee claims and defenses which it has against the seller of the underlying collateral.

Originations, Purchases, Sales and Servicing of Loans

The Bank originates loans through internal loan production personnel located in the Bank's main and branch offices, as well as loan production offices. Walk-in customers and referrals from existing customers of the Company are also important sources of loan originations.

Great Southern may also purchase whole loans and participation interests in loans (generally without recourse, except in cases of breach of representation, warranty or covenant) from other banks, thrift institutions and life insurance companies (originators). The purchase transaction is governed by a participation agreement entered into by the originator and participant (Great Southern) containing guidelines as to ownership, control and servicing rights, among others. The originator may retain all rights with respect to enforcement, collection and administration of the loan. This may limit Great Southern's ability to control its credit risk when it purchases participations in these loans. For instance, the terms of participation agreements vary; however, generally Great Southern may not have direct access to the borrower, and the institution administering the loan may have some discretion in the administration of performing loans and the collection of non-performing loans.

Over the years, a number of banks, both locally and regionally, have sought to diversify the risk in their portfolios. In order to take advantage of this situation, Great Southern purchases participations in commercial real estate, commercial construction and other commercial loans. Great Southern subjects these loans to its normal underwriting standards used for originated loans and rejects any credits that do not meet those guidelines. The originating bank generally retains the servicing of these loans. Excluding all FDIC-assisted acquired loans, the Bank purchased $97.2 million and $128.0 million of these loans in the fiscal years ended December 31, 2019 and 2018, respectively. Of the total $264.1 million of purchased participation loans outstanding at December 31, 2019, the largest aggregate amount outstanding purchased from one institution was $37.9 million. This total was comprised of seven loans, four of which were secured by a hotel in St. Louis, Missouri, two were secured by a warehouse, and one was secured by the assignment of a note secured by retail real estate. One loan totaling $1.1 million was not performing at December 31, 2019. At December 31, 2019 and 2018, loans which were previously covered by loss sharing agreements with the FDIC but are no longer covered included purchased and participation loans of $7,000 and $136,000, respectively. At December 31, 2019 and 2018, FDIC-assisted acquired loans which were never covered by loss sharing agreements included purchased and participation loans of $8.4 million and $14.1 million, respectively. These amounts represent the undiscounted balance of these loans.

From time to time, Great Southern also sells non-residential loan participations generally without recourse to private investors, such as other banks, thrift institutions and life insurance companies (participants). The sales transaction is governed by a participation agreement entered into by the originator (Great Southern) and participant containing guidelines as to ownership, control and servicing rights, among others. Great Southern generally retains servicing rights for these participations sold. These participations are sold with a provision for repurchase upon breach of representation, warranty or covenant.

Great Southern also sells whole residential real estate loans without recourse to Freddie Mac and Fannie Mae as well as to private investors, such as other banks, thrift institutions, mortgage companies and life insurance companies. Whole real estate loans are sold with a provision for repurchase upon breach of representation, warranty or covenant. These representations, warranties and covenants include those regarding the compliance of loan originations with all applicable legal requirements, mortgage title insurance policies when applicable, enforceable liens on collateral, collateral type, borrower credit worthiness, private mortgage insurance when required and compliance with all applicable federal regulations. A minimal number of repurchase requests have been received to date based on a breach of representations, warranties or covenants as outlined in the investor contracts. These loans are generally sold for cash in amounts equal to the unpaid principal amount of the loans adjusted for current market yields to the buyer. The sale amounts generally produce gains to the Bank and allow a margin for servicing income on loans when the servicing is retained by the Bank. However, residential real estate loans sold in recent years have primarily been with Great Southern releasing control of the servicing of the loans.

The Bank sold one- to four-family whole real estate loans, SBA-guaranteed loans and loan participations in aggregate amounts of $128.4 million, $90.6 million and $135.5 million during fiscal 2019, 2018, and 2017, respectively. The Bank typically sells long-term fixed rate mortgages. Sales of whole real estate loans and participations in real estate loans can be beneficial to the Bank since these sales generally generate income at the time of sale, produce future servicing income on loans where servicing is retained, provide funds for additional lending and other investments, and increase liquidity.

Gains, losses and transfer fees on sales of loans and loan participations are recognized at the time of the sale. When real estate loans and loan participations sold have an average contractual interest rate that differs from the agreed upon yield to the purchaser (less the agreed upon servicing fee), resulting gains or losses are recognized in an amount equal to the present value of the differential over the estimated remaining life of the loans. Any resulting discount or premium is accreted or amortized over the same estimated life using a method approximating the level yield interest method. When real estate loans and loan participations are sold with servicing released, as the Bank primarily does, an additional fee is received for the servicing rights. Net gains and transfer fees on sales of loans for the years ended December 31, 2019, 2018 and 2017 were $2.6 million, $1.8 million and $3.2 million, respectively. These gains were primarily from the sale of fixed-rate residential loans, with a small amount resulting from the sale of SBA-guaranteed loans in 2019.

The Bank serviced loans owned by others totaling approximately $349.9 million and $260.2 million at December 31, 2019 and 2018, respectively. Of the total loans serviced at December 31, 2019, $283.0 million related to commercial real estate, commercial business and construction loans, portions of which were sold to other parties. The remaining $66.9 million of loans serviced for others related to one- to four-family real estate loans which the Bank had originated and sold, but retained the obligation to service, or had acquired the servicing through various FDIC-assisted transactions. The servicing of these loans generated fees (net of amortization of the servicing rights) to the Bank for the years ended December 31, 2019, 2018 and 2017, of $167,000, $185,000 and $206,000, respectively.

In addition to interest earned on loans and loan origination fees, the Bank receives fees for loan commitments, letters of credit, prepayments, modifications, late payments, transfers of loans due to changes of property ownership and other miscellaneous services. The fees vary from time to time, generally depending on the supply of funds and other competitive conditions in the market. Fees from prepayments, commitments, letters of credit and late payments totaled $1.7 million, $1.8 million and $2.4 million for the years ended December 31, 2019, 2018 and 2017, respectively. Loan origination fees, net of related costs, are accounted for in accordance with FASB ASC 310-20, Receivables – Nonrefundable Fees and Other Costs. Loan fees and certain direct loan origination costs are deferred, and the net fee or cost is recognized in interest income using the level-yield method over the contractual life of the loan. For further discussion of this matter, see Note 1 of the accompanying audited financial statements, included in Item 8 of this Report.

Loan Delinquencies and Defaults

When a borrower fails to make a required payment on a loan, the Bank attempts to cause the delinquency to be cured by contacting the borrower. In the case of loans secured by residential real estate, a late notice is sent 15 days after the due date. If the delinquency is not cured by the 30th day, a delinquent notice is sent to the borrower.

Additional written contacts are made with the borrower 45 and 60 days after the due date. If the delinquency continues for a period of 65 days, the Bank usually institutes appropriate action to foreclose on the collateral. The actual time it takes to foreclose on the collateral varies depending on the particular circumstances and the applicable governing law. If foreclosed upon, the property is sold at public auction and may be purchased by the Bank. Delinquent consumer loans are handled in a generally similar manner, except that initial contacts are made when the payment is five days past due and appropriate action may be taken to collect any loan payment that is delinquent for more than 15 days. The Bank's procedures for repossession and sale of consumer collateral are subject to various requirements under the applicable consumer protection laws as well as other applicable laws and the determination by the Bank that it would be beneficial from a cost basis.

Delinquent commercial business loans and loans secured by commercial real estate are initially handled by the loan officer in charge of the loan, who is responsible for contacting the borrower. Senior management also works with the commercial loan officers to see that necessary steps are taken to collect delinquent loans and may reassign the loan relationship to the special assets group. In addition, the Bank has a Problem Loan Committee which meets at least quarterly and reviews all classified assets, as well as other loans which management feels may present possible collection problems. If an acceptable workout of a delinquent commercial loan cannot be agreed upon, the Bank may initiate foreclosure proceedings on any collateral securing the loan. However, in all cases, whether a commercial or other loan, the prevailing circumstances may be such that management may determine it is in the best interest of the Bank not to foreclose on the collateral.

The following tables set forth our loans by aging category:

December 31, 2019 Total 30-59 Days 60-89 Days Over 90 Days Loans Past Due Past Due Past Due Total Past Due Current Receivable # Amount # Amount # Amount # Amount Amount Amount (Dollars In Thousands) One- to four-family residential construction — $ — — $ — — $ — — $ — $ 33,963 $ 33,963 Subdivision construction — — — — — — — — 16,088 16,088 Land development — — 1 27 — — 1 27 40,404 40,431 Commercial construction 1 15,085 — — — — 1 15,085 1,307,776 1,322,861 Owner occupied one- to four-family residential 18 1,453 14 1,631 19 1,198 51 4,282 382,734 387,016 Non-owner occupied one- to four-family residential 1 152 — — 4 181 5 333 120,010 120,343 Commercial real estate 1 549 1 119 4 632 6 1,300 1,492,872 1,494,172 Other residential 1 376 — — — — 1 376 865,630 866,006 Commercial business 2 60 — — 4 1,235 6 1,295 311,914 313,209 Industrial revenue bonds — — — — — — — — 13,189 13,189 Consumer auto 163 1,101 44 259 81 558 288 1,918 149,936 151,854 Consumer other 22 278 10 233 14 198 46 709 46,011 46,720 Home equity lines of credit 9 296 — — 16 517 25 813 118,175 118,988 Loans acquired and accounted for under ASC 310-30, net of discounts 32 2,177 11 709 78 6,191 121 9,077 118,129 127,206 250 21,527 81 2,978 220 10,710 551 35,215 5,016,831 5,052,046 Less loans acquired and accounted for under ASC 310-30, net of discounts 32 2,177 11 709 78 6,191 121 9,077 118,129 127,206 Total 218 $ 19,350 70 $ 2,269 142 $ 4,519 430 $ 26,138 $ 4,898,702 $ 4,924,840

December 31, 2018 Total 30-59 Days 60-89 Days Over 90 Days Loans Past Due Past Due Past Due Total Past Due Current Receivable # Amount # Amount # Amount # Amount Amount Amount (Dollars In Thousands) One- to four-family residential construction — $ — — $ — — $ — — $ — $ 26,177 $ 26,177 Subdivision construction — — — — — — — — 13,844 13,844 Land development 1 13 — — 3 49 4 62 44,430 44,492 Commercial construction — — — — — — — — 1,417,166 1,417,166 Owner occupied one- to four-family residential 19 1,431 12 806 16 1,206 47 3,443 273,423 276,866 Non-owner occupied one- to four-family residential 6 1,142 1 144 12 1,458 19 2,744 119,694 122,438 Commercial real estate 6 3,940 1 53 7 334 14 4,327 1,367,108 1,371,435 Other residential — — — — — — — — 784,894 784,894 Commercial business 4 72 2 54 7 1,437 13 1,563 320,555 322,118 Industrial revenue bonds 1 3 — — — — 1 3 13,937 13,940 Consumer auto 282 2,596 76 722 150 1,490 508 4,808 248,720 253,528 Consumer other 45 691 23 181 19 240 87 1,112 56,238 57,350 Home equity lines of credit 11 229 — — 7 86 18 315 121,037 121,352 Loans acquired and accounted for under ASC 310-30, net of discounts 33 2,195 10 1,416 79 6,827 122 10,438 157,213 167,651 408 12,312 125 3,376 300 13,127 833 28,815 4,964,436 4,993,251 Less loans acquired and accounted for underASC 310-30, net of discounts 33 2,195 10 1,416 79 6,827 122 10,438 157,213 167,651 Total 375 $ 10,117 115 $ 1,960 221 $ 6,300 711 $ 18,377 $ 4,807,223 $ 4,825,600

Classified Assets

Federal regulations provide for the classification of loans and other assets such as debt and equity securities considered to be of lesser quality as "substandard," "doubtful" or "loss" assets. The regulations require insured institutions to classify their own assets and to establish prudent specific allocations for losses from assets classified "substandard" or "doubtful." “Substandard” assets include those characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Assets classified as “doubtful,” have all the weaknesses inherent in those classified as “substandard” with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. For the portion of assets classified as "loss," an institution is required to either establish specific allowances of 100% of the amount classified or charge such amount off its books. Assets that do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess a potential weakness (referred to as “special mention” assets), are required to be listed on the Bank's watch list and monitored for further deterioration. In addition, a bank's regulators may require the establishment of a general allowance for losses based on the general quality of the asset portfolio of the bank. Following are the total classified assets at December 31, 2019 and 2018, per the Bank's internal asset classification list, excluding assets acquired through FDIC-assisted transactions. The allowances for loan losses reflected below are the portions of the Bank’s total allowances for loan losses relating to these classified loans. There were no significant off-balance sheet items classified at December 31, 2019 and 2018.

December 31, 2019 Asset Category Special Mention Substandard Doubtful Loss Total Classified Allowance for Losses (In Thousands) Investment securities $ — $ — $ — $ — $ — $ — Loans — 8,899 — — 8,899 929 Foreclosed assets and repossessions — 3,651 — — 3,651 — Total $ — $ 12,550 $ — $ — $ 12,550 $ 929

December 31, 2018 Asset Category Special Mention Substandard Doubtful Loss Total Classified Allowance for Losses (In Thousands) Investment securities $ — $ — $ — $ — $ — $ — Loans — 9,603 — — 9,603 2,041 Foreclosed assets and repossessions — 5,480 — — 5,480 — Total $ — $ 15,083 $ — $ — $ 15,083 $ 2,041

Non-Performing Assets

The table below sets forth the amounts and categories of gross non-performing assets (classified loans which are not performing under regulatory guidelines and all foreclosed assets, including assets acquired in settlement of loans) in the Bank's loan portfolio as of the dates indicated. Loans generally are placed on non-accrual status when the loan becomes 90 days delinquent or when the collection of principal, interest, or both, otherwise becomes doubtful.

Former TeamBank, Vantus Bank, Sun Security Bank and InterBank non-performing assets, including foreclosed assets, are not included in the totals of non-performing assets below as they were subject to loss sharing agreements with the FDIC, which substantially covered principal losses that may have been incurred in these portfolios for the applicable terms under the agreements. In addition, these assets were initially recorded at their estimated fair values as of their acquisition dates. Former Valley Bank loans are also excluded from the totals of non-performing assets below, although they were not covered by a loss sharing agreement. As in the previous FDIC-assisted acquisitions, former Valley Bank loans are accounted for in pools and were recorded at their fair value at the time of the acquisition as of June 20, 2014; therefore, these loan pools are analyzed rather than the individual loans. The overall performance of the FDIC-assisted acquired loan pools has been better than original expectations as of the acquisition dates. At December 31, 2019, there were no material non-performing assets in these acquired loan portfolios.

December 31, 2019 2018 2017 2016 2015 (In Thousands) Non-accruing loans: One- to four-family residential $ 1,379 $ 2,664 $ 2,662 $ 1,529 $ 1,060 One- to four-family construction — 49 98 109 — Other residential — — 1,877 (1) 162 — Commercial real estate 632 334 1,226 4,404 (2) 13,488 (3) Other commercial 1,235 (4) 1,437 (5) 2,063 (6) 3,088 (7) 288 Commercial construction and land development — — — 1,718 139 Consumer 1,273 1,816 3,233 3,071 1,594 Total gross non-accruing loans 4,519 6,300 11,159 14,081 16,569 Loans over 90 days delinquent still accruing interest: One- to four-family residential — — 58 — — Commercial real estate — — — — — Other commercial — — — — — Commercial construction and land development — — — — — Consumer — — 38 — — Total loans over 90 days delinquent still accruing interest — — 96 — — Other impaired loans — — — — — Total gross non-performing loans 4,519 6,300 11,255 14,081 16,569 Foreclosed assets: One- to four-family residential 601 269 112 1,217 1,375 One- to four-family construction — — — — — Other residential — — 140 954 2,150 Commercial real estate — — 1,694 3,841 3,608 Commercial construction and land development 2,505 4,283 12,642 17,246 19,149 Other commercial — — — — — Total foreclosed assets 3,106 4,552 14,588 23,258 26,282 Repossessions 545 928 1,987 1,991 1,109 Total gross non-performing assets $ 8,170 $ 11,780 $ 27,830 $ 39,330 $ 43,960 Total gross non-performing assets as a percentage of average total assets 0.16 % 0.26 % 0.62 % 0.90 % 1.08 %

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(1) One relationship was $1.9 million, the entire total of this category, at December 31, 2017. (2) The largest two relationships in this category were $1.7 million and $1.7 million, respectively, at December 31, 2016. (3) The largest two relationships in this category were $6.5 million and $3.7 million, respectively, at December 31, 2015. (4) One relationship was $1.1 million of this total at December 31, 2019. (5) One relationship was $1.1 million of this total at December 31, 2018. (6) One relationship was $1.5 million of this total at December 31, 2017. (7) One relationship was $3.0 million of this total at December 31, 2016.

See Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-performing Assets” for further information.

Gross impaired loans totaled $10.3 million at December 31, 2019 and $13.9 million at December 31, 2018. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled

payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. See Note 3 “Loans” of the accompanying audited financial statements included in Item 8 for additional information including further detail of non-accruing loans and impaired loans and details of troubled debt restructurings. See also Note 15 “Disclosures About Fair Value of Financial Instruments” of the accompanying audited financial statements included in Item 8 for additional information.

For the year ended December 31, 2019, gross interest income which would have been recorded had the non-accruing loans been current in accordance with their original terms amounted to $761,000. No interest income was included on these loans for the year ended December 31, 2019. For the year ended December 31, 2018, gross interest income which would have been recorded had the non-accruing loans been current in accordance with their original terms amounted to $1.0 million. No interest income was included on these loans for the year ended December 31, 2018. For the year ended December 31, 2017, gross interest income which would have been recorded had the non-accruing loans been current in accordance with their original terms amounted to $1.2 million. No interest income was included on these loans for the year ended December 31, 2017.

Restructured Troubled Debt

Included in impaired loans at December 31, 2019 and 2018, were loans modified in troubled debt restructurings as follows:

December 31, 2019 Restructured Restructured Accruing Troubled Debt Troubled Debt Interest Nonaccruing (In Thousands) Commercial real estate $ 412 $ 310 $ 102 One- to four-family residential 768 550 218 Other residential — — — Construction 251 251 — Commercial 156 51 105 Consumer 343 207 136 $ 1,930 $ 1,369 $ 561

December 31, 2018 Restructured Restructured Accruing Troubled Debt Troubled Debt Interest Nonaccruing (In Thousands) Commercial real estate $ 1,344 $ 1,238 $ 106 One- to four-family residential 3,892 2,299 1,593 Other residential — — — Construction 283 283 — Commercial 548 407 141 Consumer 803 428 375 $ 6,870 $ 4,655 $ 2,215

Allowances for Losses on Loans and Foreclosed Assets

Great Southern maintains an allowance for loan losses to absorb losses known and inherent in the loan portfolio based upon ongoing, monthly assessments of the loan portfolio. Our methodology for assessing the appropriateness of the allowance consists of several key elements, which include a formula allowance, specific allowances for identified problem loans and portfolio segments and economic conditions that may lead to a concern about the loan portfolio or segments of the loan portfolio.

The formula allowance is calculated by applying loss factors to outstanding loans based on the internal risk evaluation of such loans or pools of loans. Changes in risk evaluations of both performing and non-performing loans affect the amount of the formula allowance. Loss factors are based both on our historical loss experience and on significant factors that, in management's judgment, affect the

collectability of the portfolio as of the evaluation date. Loan loss factors for portfolio segments are representative of the credit risks associated with loans in those segments. The greater the credit risks associated with a particular segment, the greater the loss factor.

The appropriateness of the allowance is reviewed by management based upon its evaluation of then-existing economic and business conditions affecting our key lending areas. Other conditions that management considers in determining the appropriateness of the allowance include, but are not limited to, changes to our underwriting standards (if any), credit quality trends (including changes in non-performing loans expected to result from existing economic and other market conditions), trends in collateral values, loan volumes and concentrations, and recent loss experience in particular segments of the portfolio that existed as of the balance sheet date and the impact that such conditions were believed to have had on the collectability of those loans.

Senior management reviews these conditions regularly in discussions with our credit officers. To the extent that any of these conditions are evident in a specifically identifiable problem loan or portfolio segment as of the evaluation date, management's estimate of the effect of such condition may be reflected as a specific allowance applicable to such loan or portfolio segment. Where any of these conditions are not evident in a specifically identifiable problem loan or portfolio segment as of the evaluation date, management's evaluation of the loss related to these conditions is reflected in the general allowance associated with our loan portfolio. The evaluation of the inherent loss with respect to these conditions is subject to a higher degree of uncertainty because they are not identified with specific problem loans or portfolio segments.

The amounts actually observed in respect of these losses can vary significantly from the estimated amounts. Our methodology permits adjustments to any loss factor used in the computation of the formula allowances in the event that, in management's judgment, significant factors which affect the collectability of the portfolio, as of the evaluation date, are not reflected in the current loss factors. By assessing the estimated losses inherent in our loan portfolio on a monthly basis, we can adjust specific and inherent loss estimates based upon more current information.

On a quarterly basis, senior management presents a formal assessment of the adequacy of the allowance for loan losses to Great Southern's board of directors for the board's approval of the allowance. Assessing the adequacy of the allowance for loan losses is inherently subjective as it requires making material estimates including the amount and timing of future cash flows expected to be received on impaired loans or changes in the market value of collateral securing loans that may be susceptible to significant change. In the opinion of management, the allowance when taken as a whole is adequate to absorb reasonable estimated loan losses inherent in Great Southern's loan portfolio.

Allowances for estimated losses on foreclosed assets (real estate and other assets acquired through foreclosure) are charged to expense, when in the opinion of management, any significant and permanent decline in the market value of the underlying asset reduces the market value to less than the carrying value of the asset. Senior management assesses the market value of each foreclosed asset individually on a regular basis.

At December 31, 2019 and 2018, Great Southern had an allowance for losses on loans of $40.3 million and $38.4 million, respectively, of which $929,000 and $2.0 million, respectively, had been allocated to specific loans. All loans with specific allowances were considered to be impaired loans. The allowance and the activity within the allowance during 2019, 2018 and 2017 are discussed further in Note 3 “Loans and Allowance for Loan Losses” of the accompanying audited financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in Item 8 and Item 7 of this Report, respectively.

The allocation of the allowance for losses on loans at the dates indicated is summarized as follows.

December 31, 2019 2018 2017 2016 2015 Amount % of Loans to Total Loans (2) Amount % of Loans to Total Loans (2) Amount % of Loans to Total Loans (2) Amount % of Loans to Total Loans (2) Amount % of Loans to Total Loans (2) (Dollars In Thousands) One- to four-family residential and construction $ 4,171 11.3 % $ 3,086 9.1 % $ 2,077 8.0 % $ 2,198 9.2 % $ 4,195 9.4 % Other residential and construction 5,101 17.6 4,681 16.3 2,813 17.1 5,396 16.1 3,122 12.2 Commercial real estate 24,087 30.3 19,571 28.4 18,442 28.4 15,716 28.9 14,444 30.3 Commercial construction 2,940 27.7 3,029 30.3 1,690 25.6 2,244 20.3 2,961 19.2 Other commercial 1,319 6.6 1,556 7.0 3,509 8.6 2,976 9.1 3,977 11.5 Consumer and overdrafts 2,015 6.5 6,065 8.9 7,501 12.3 8,245 16.4 7,947 17.4 Loans covered by loss sharing agreements (1) — — — — — — 70 — 344 — Acquired loans not covered by loss sharing agreements 661 — 421 — 460 — 555 — 1,159 — Total $ 40,294 100.0 % $ 38,409 100.0 % $ 36,492 100.0 % $ 37,400 100.0 % $ 38,149 100.0 %

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(1) Associated with these allowances at December 31, 2019, 2018, 2017, 2016 and 2015, were receivables from the FDIC totaling $-0-, $-0-, $-0-, $56,000, and $275,000, respectively, under the loss sharing agreements which were in place at the time. (2) Excludes loans acquired through FDIC-assisted transactions.

The following table sets forth an analysis of activity in the Bank's allowance for losses on loans showing the details of the activity by types of loans.

December 31, 2019 2018 2017 2016 2015 (Dollars In Thousands) Balance at beginning of period $ 38,409 $ 36,492 $ 37,400 $ 38,149 $ 38,435 Charge-offs: One- to four-family residential 534 62 165 229 80 Other residential 189 525 488 16 2 Commercial real estate 144 102 1,656 5,653 2,584 Construction 101 87 420 31 329 Other commercial 371 1,155 1,489 589 1,202 Consumer, overdrafts and other loans 6,723 9,425 11,859 8,751 5,315 Total charge-offs 8,062 11,356 16,077 15,269 9,512 Recoveries: One- to four-family residential 126 334 109 58 97 Other residential 26 417 197 52 58 Commercial real estate 24 172 123 1,221 302 Construction 50 394 546 123 405 Other commercial 467 755 580 327 276 Consumer, overdrafts and other loans 3,104 4,051 4,514 3,458 2,569 Total recoveries 3,797 6,123 6,069 5,239 3,707 Net charge-offs 4,265 5,233 10,008 10,030 5,805 Provision for losses on loans 6,150 7,150 9,100 9,281 5,519 Balance at end of period $ 40,294 $ 38,409 $ 36,492 $ 37,400 $ 38,149 Ratio of net charge-offs to average loans outstanding 0.10 % 0.13 % 0.26 % 0.29 % 0.20 %

Investment Activities

Excluding securities issued by the United States Government, or its agencies, there were no investment securities in excess of 10% of the Company’s stockholders’ equity at December 31, 2019, 2018 and 2017, respectively. Agencies, for this purpose, primarily include Freddie Mac, Fannie Mae, Ginnie Mae, Small Business Administration and FHLBank.

As of December 31, 2019 and 2018, the Bank held no investment securities which the Bank intends to hold until maturity. In addition, as of December 31, 2019 and 2018, the Company held approximately $374.2 million and $244.0 million, respectively, in principal amount of investment securities which the Company classified as available-for-sale. See Notes 1 and 2 of the accompanying audited financial statements included in Item 8 of this Report.

The amortized cost and fair values of, and gross unrealized gains and losses on, investment securities at the dates indicated are summarized as follows.

December 31, 2019 Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value (In Thousands) AVAILABLE-FOR-SALE SECURITIES: Agency mortgage-backed securities $ 156,591 $ 8,716 $ 265 $ 165,042 Agency collateralized mortgage obligations 149,980 2,891 921 151,950 States and political subdivisions 33,757 1,368 — 35,125 Small business administration 22,132 — 74 22,058 $ 362,460 $ 12,975 $ 1,260 $ 374,175

December 31, 2018 Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value (In Thousands) AVAILABLE-FOR-SALE SECURITIES: Agency mortgage-backed securities $ 154,557 $ 1,272 $ 2,571 $ 153,258 Agency collateralized mortgage obligations 39,024 250 14 39,260 States and political subdivisions 50,022 1,428 — 51,450 $ 243,603 $ 2,950 $ 2,585 $ 243,968 December 31, 2017 Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value (In Thousands) AVAILABLE-FOR-SALE SECURITIES: Agency mortgage-backed securities $ 123,300 $ 871 $ 1,638 $ 122,533 States and political subdivisions 53,930 2,716 — 56,646 $ 177,230 $ 3,587 $ 1,638 $ 179,179 HELD-TO-MATURITY SECURITIES States and political subdivisions $ 130 $ 1 $ — $ 131

At December 31, 2019, the Company’s agency mortgage-backed securities portfolio consisted of FNMA securities totaling $147.6 million, FHLMC securities totaling $13.3 million and GNMA securities totaling $4.1 million. At December 31, 2019, agency collateralized mortgage obligations consisted of GNMA securities totaling $122.7 million, FNMA securities totaling $23.9 million and FHLMC securities totaling $5.4 million, all of which are commercial multi-family fixed rate securities. At December 31, 2019, $144.3 million of the Company’s agency mortgage-backed securities had fixed rates of interest and $20.7 million had variable rates of

interest. At December 31, 2019, $149.9 million of the Company’s agency collateralized mortgage obligations had fixed rates of interest and $2.1 million had variable rates of interest.

The following tables present the contractual maturities and weighted average tax-equivalent yields of available-for-sale securities at December 31, 2019. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Tax Equivalent Fair Cost Amortized Yield Value (Dollars In Thousands) One year or less $ — — $ — After one through five years — — — After five through ten years 9,253 4.61 % 9,547 After ten years 24,504 4.87 % 25,578 Securities not due on a single maturity date 328,703 2.99 % 339,050 Total $ 362,460 3.15 % $ 374,175

One Year or Less After One Through Five Years After Five Through Ten Years After Ten Years Securities Not Due on a Single Maturity Date Total (In Thousands) Agency mortgage-backed securities $ — $ — $ — $ — $ 165,042 $ 165,042 Agency collateralized mortgage obligations — — — — 151,950 151,950 Small business administration — — — — 22,058 22,058 States and political subdivisions — — 9,547 25,578 — 35,125 Total $ — $ — $ 9,547 $ 25,578 $ 339,050 $ 374,175

The following table shows our investments' gross unrealized losses and fair values, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2019, 2018 and 2017, respectively:

2019 Less than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized Description of Securities Value Losses Value Losses Value Losses (In Thousands) Agency mortgage-backed securities $ — $ — $ 24,762 $ (265 ) $ 24,762 $ (265 ) Agency collateralized mortgage obligations 69,372 (921 ) — — 69,372 (921 ) Small Business Administration 22,058 (74 ) — — 22,058 (74 ) States and political subdivisions — — — — — — $ 91,430 $ (995 ) $ 24,762 $ (265 ) $ 116,192 $ (1,260 )

2018 Less than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized Description of Securities Value Losses Value Losses Value Losses (In Thousands) Agency mortgage-backed securities $ 11,255 $ (82 ) $ 74,186 $ (2,489 ) $ 85,441 $ (2,571 ) Agency collateralized mortgage obligations 9,725 (14 ) — — 9,725 (14 ) States and political subdivisions 511 — — — 511 — $ 21,491 $ (96 ) $ 74,186 $ (2,489 ) $ 95,677 $ (2,585 )

2017 Less than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized Description of Securities Value Losses Value Losses Value Losses (In Thousands) Agency mortgage-backed securities $ 33,862 $ (384 ) $ 55,845 $ (1,254 ) $ 89,707 $ (1,638 ) States and political subdivisions — — — — — — $ 33,862 $ (384 ) $ 55,845 $ (1,254 ) $ 89,707 $ (1,638 )

On at least a quarterly basis, the Company evaluates the securities portfolio to determine if an other-than-temporary impairment (OTTI) needs to be recorded. For debt securities with fair values below carrying value, when the Company does not intend to sell a debt security, and it is more likely than not the Company will not have to sell the security before recovery of its cost basis, it recognizes the credit component of an OTTI of a debt security in earnings and the remaining portion in other comprehensive income. For held-to-maturity debt securities, the amount of an OTTI recorded in other comprehensive income for the noncredit portion of a previous OTTI is amortized prospectively over the remaining life of the security on the basis of the timing of future estimated cash flows of the security. During 2019, 2018 and 2017, no securities were determined to have impairment that had become other than temporary.

The Company’s consolidated statements of income as of December 31, 2019, 2018 and 2017, reflect the full impairment (that is, the difference between the security’s amortized cost basis and fair value) on debt securities that the Company intends to sell or would more likely than not be required to sell before the expected recovery of the amortized cost basis. For available-for-sale and held-to-maturity debt securities that management has no intent to sell and believes that it more likely than not will not be required to sell prior to recovery, only the credit loss component of the impairment is recognized in earnings, while the noncredit loss is recognized in accumulated other comprehensive income. The credit loss component recognized in earnings is identified as the amount of principal cash flows not expected to be received over the remaining term of the security as projected based on cash flow projections.

For equity securities, if any, when the Company has decided to sell an impaired available-for-sale security and the Company does not expect the fair value of the security to fully recover before the expected time of sale, the security is deemed other-than-temporarily impaired in the period in which the decision to sell is made. The Company recognizes an impairment loss when the impairment is deemed other than temporary even if a decision to sell has not been made.

Sources of Funds

General. Deposit accounts have traditionally been the principal source of the Bank's funds for use in lending and for other general business purposes. In addition to deposits, the Bank obtains funds through advances from the Federal Home Loan Bank of Des Moines ("FHLBank") and other borrowings, loan repayments, loan sales, and cash flows generated from operations. Scheduled loan payments are a relatively stable source of funds, while deposit inflows and outflows and the related costs of such funds have varied widely. Borrowings such as FHLBank advances may be used on a short-term basis to compensate for seasonal reductions in deposits or deposit inflows at less than projected levels and may be used on a longer-term basis to support expanded lending activities. The availability of funds from loan sales is influenced by general interest rates as well as the volume of originations.

Deposits. The Bank attracts both short-term and long-term deposits from the general public by offering a wide variety of accounts and rates and also purchases brokered deposits from time to time. The Bank offers regular savings accounts, checking accounts, various money market accounts, fixed-interest rate certificates with varying maturities, certificates of deposit in minimum amounts of $100,000 ("Jumbo" accounts), brokered certificates and individual retirement accounts. In 2017, the Bank increased its interest-bearing demand and savings deposits and non-interest-bearing demand deposits through internal growth. Additionally in 2017, the Bank decreased its brokered deposits by $64 million and decreased its time deposits in denominations of $100,000 or more by $36 million. In 2018, the Bank increased its deposits primarily through internal growth in time deposits and growth in brokered deposits, partially offset by a decrease in interest-bearing demand and savings deposits. In 2018, the Bank increased its brokered deposits by $101 million. Also in 2018, the Bank sold deposits totaling approximately $56 million. In 2019, the Bank increased its interest-bearing demand and savings deposits and non-interest-bearing demand deposits through internal growth. In 2019, the Bank increased its total time deposits by approximately $130 million. Time deposits originated through the Bank’s internet channel increased by $127 million and brokered deposits, including Certificate of Deposit Account Registry Service (CDARS) purchased funds, increased $45 million. The deposit growth and funds from borrowings were used to fund the Bank’s loan growth and increases in investment securities.

The following table sets forth the dollar amount of deposits, by interest rate range, in the various types of deposit programs offered by the Bank at the dates indicated.

December 31, 2019 2018 2017 Percent of Percent of Percent of Amount Total Amount Total Amount Total (Dollars In Thousands) Time deposits: 0.00% - 0.99% $ 122,649 3.10 % $ 150,656 4.05 % $ 254,502 7.07 % 1.00% - 1.99% 523,816 13.23 511,873 13.74 1,006,373 27.98 2.00% - 2.99% 1,053,914 26.61 857,973 23.03 106,888 2.97 3.00% - 3.99% 19,849 0.50 69,793 1.87 701 0.02 4.00% - 4.99% 881 0.02 1,116 0.03 1,108 0.03 5.00% and above — — — — 272 0.01 Total time deposits 1,721,109 43.46 1,591,411 42.72 1,369,844 38.08 Non-interest-bearing demand deposits 687,068 17.35 661,061 17.75 661,589 18.39 Interest-bearing demand and savings deposits (0.55% - 0.46% - 0.32%) 1,551,929 39.19 1,472,535 39.53 1,565,711 43.53 Total Deposits $ 3,960,106 100.00 % $ 3,725,007 100.00 % $ 3,597,144 100.00 %

A table showing maturity information for the Bank's time deposits as of December 31, 2019, is presented in Note 8 of the accompanying audited financial statements, which are included in Item 8 of this Report.

The variety of deposit accounts offered by the Bank has allowed it to be competitive in obtaining funds and has allowed it to respond with flexibility to changes in consumer demand. The Bank has become more susceptible to short-term fluctuations in deposit flows, as customers have become more interest rate conscious and the Bank’s deposit mix has changed to a smaller percentage of time deposits. The Bank manages the pricing of its deposits in keeping with its asset/liability management and profitability objectives. Based on its experience, management believes that its certificate accounts are relatively stable sources of deposits, while its checking accounts have proven to be more volatile. The ability of the Bank to attract and maintain deposits, and the rates paid on these deposits, has been and will continue to be significantly affected by money market conditions.

The following table sets forth the time remaining until maturity of the Bank's time deposits as of December 31, 2019. The table is based on information prepared in accordance with generally accepted accounting principles.

Maturity 3 Months Or Less Over 3 to 6 Months Over 6 to 12 Months Over 12 Months Total (In Thousands) Time deposits: Less than $100,000 $ 157,558 $ 117,911 $ 161,179 $ 81,229 $ 517,877 $100,000 or more 221,133 152,684 262,240 187,977 824,034 Brokered 183,336 80,966 40,000 67,399 371,701 Public funds(1) 710 3,133 3,142 512 7,497 Total $ 562,737 $ 354,694 $ 466,561 $ 337,117 $ 1,721,109

(1) Deposits from governmental and other public entities.

Brokered deposits. Brokered deposits are marketed through national brokerage firms to their customers in $1,000 increments. The Bank maintains only one account for the total deposit amount while the detailed records of owners are maintained by the Depository Trust Company under the name of CEDE & Co. The deposits are transferable just like a stock or bond investment and the customer can open the account with only a phone call or an online request. This provides a large deposit for the Bank at a lower operating cost

since the Bank only has one account to maintain versus several accounts with multiple interest and maturity dates. At December 31, 2019 and 2018, the Bank had approximately $371.7 million and $326.9 million in brokered deposits, respectively.

Included in the brokered deposits total at December 31, 2019 and 2018, was $209.1 million and $109.3 million, respectively, in CDARS purchased funds accounts. CDARS purchased funds transactions represent an easy, cost-effective source of funding without collateralization or credit limits for the Company. Purchased funds transactions help the Company obtain large blocks of funding while providing control over pricing and diversity of wholesale funding options. Purchased funds transactions are obtained through a bid process that occurs weekly, with varying maturity terms.

Previously included in brokered deposits were CDARS reciprocal customer deposit accounts. In 2018, the FDIC amended its regulations to exclude these deposits from its definition of brokered deposits. CDARS reciprocal customer deposit accounts are accounts that are just like any other deposit account on the Company’s books, except that the account total exceeds the FDIC deposit insurance maximum. When a customer places a large deposit with a CDARS Network bank, that bank uses CDARS to place the funds into deposit accounts issued by other banks in the CDARS Network. This occurs in increments of less than the standard FDIC insurance maximum, so that both principal and interest are eligible for complete FDIC protection. Other Network members do the same thing with their customers' funds. At December 31, 2019 and 2018, the Bank had approximately $35.3 million and $27.9 million in CDARS reciprocal deposits, respectively.

Unlike non-brokered deposits where the deposit amount can be withdrawn prior to maturity with a penalty for any reason, including increasing interest rates, a brokered deposit (excluding CDARS purchased funds) can only be withdrawn in the event of the death, or court declared mental incompetence, of the depositor. This allows the Bank to better manage the maturity of its deposits. Currently, the rates offered by the Bank for brokered deposits are similar to those offered for retail certificates of deposit of similar size and maturity. Because the Bank had kept higher levels of liquidity since the economic recession began in 2008, we had gradually reduced the amount of brokered deposits (excluding CDARS purchased funds) utilized since December 31, 2008. As loan demand began to increase since 2013, we began to gradually increase our usage of brokered deposits again from time to time.

The Company may use interest rate swaps from time to time to manage its interest rate risks from recorded financial liabilities. In the past, the Company entered into interest rate swap agreements with the objective of economically hedging against the effects of changes in the fair value of its liabilities for fixed rate brokered certificates of deposit caused by changes in market interest rates. These interest rate swaps allowed the Company to create funding of varying maturities at a variable rate that in the past has approximated three-month LIBOR. The Company did not utilize these types of interest rate swaps in 2019, 2018 or 2017.

Borrowings. Great Southern's other sources of funds include advances from the FHLBank, a Qualified Loan Review ("QLR") arrangement with the FRB, customer repurchase agreements and other borrowings.

As a member of the FHLBank, the Bank is required to own capital stock in the FHLBank and is authorized to apply for advances from the FHLBank. Each FHLBank credit program has its own interest rate, which may be fixed or variable, and range of maturities. The FHLBank may prescribe the acceptable uses for these advances, as well as other risks on availability, limitations on the size of the advances and repayment provisions. At both December 31, 2019 and 2018, the Bank had no FHLBank term advances outstanding. Additionally, the Bank had outstanding overnight borrowings from the FHLBank of $196.0 million and $178.0 million at December 31, 2019 and 2018, respectively. Because they are overnight borrowings, the outstanding balances are included in short-term borrowings in the Company’s financial statements. The Bank utilized FHLBank advances from time to time to fund loan growth during 2019 and 2018.

The Federal Reserve Bank of St. Louis (“FRBSL”) has a QLR program where the Bank can borrow on a temporary basis using commercial loans pledged to the FRBSL. Under the QLR program, the Bank can borrow any amount up to a calculated collateral value of the commercial loans pledged, for virtually any reason that creates a temporary cash need. Examples of this could be: (1) the need to fund for late outgoing wires or cash letter settlements, (2) the need to disburse one or several loans but the permanent source of funds will not be available for a few days; (3) a temporary spike in interest rates on other funding sources that are being used; or (4) the need to purchase a security for collateral pledging purposes a few days prior to the funds becoming available on an existing security that is maturing. The Bank had commercial, consumer and other loans pledged to the FRBSL at December 31, 2019 that would have allowed approximately $367.8 million to be borrowed under the above arrangement. There were no outstanding borrowings from the FRBSL at December 31, 2019 or 2018 and the facility was not used during 2019 or 2018.

The Bank enters into sales of securities under agreements to repurchase (reverse repurchase agreements). Reverse repurchase agreements are treated as financings, and the obligations to repurchase securities sold are reflected as a liability in the statements of financial condition. The dollar amount of securities underlying the agreements remains in the asset accounts. Securities underlying the agreements are being held by the Bank during the agreement period. The agreements generally are written on a term of one-month or less.

In November 2006, Great Southern Capital Trust II ("Trust II"), a statutory trust formed by the Company for the purpose of issuing the securities, issued $25.0 million aggregate liquidation amount of floating rate cumulative trust preferred securities. The Trust II securities bear a floating distribution rate equal to 90-day LIBOR plus 1.60%. The Trust II securities became redeemable at the Company's option in February 2012, and if not sooner redeemed, mature on February 1, 2037. The Trust II securities were sold in a private transaction exempt from registration under the Securities Act of 1933, as amended. The gross proceeds of the offering were used to purchase Junior Subordinated Debentures from the Company totaling $25.8 million and bearing an interest rate identical to the distribution rate on the Trust II securities. The initial interest rate on the Trust II debentures was 6.98%. The interest rate was 3.51% and 4.14% at December 31, 2019 and 2018, respectively.

In 2013, the Company entered into an interest rate cap agreement for a portion of its Junior Subordinated Debentures associated with its trust preferred securities described above. The term of this agreement was four years with a termination date in August 2017. Under the agreement, with a notional amount of $25.0 million, the Company paid interest on its Junior Subordinated Debentures in accordance with the original terms at a floating rate based on LIBOR. Should the interest rate have risen above a certain threshold, the counterparty was to reimburse the Company for interest paid such that the Company would have an effective interest rate on the portion of its Junior Subordinated Debentures no higher than 2.37%. The effective portion of the gain or loss on the derivative was reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The fair value of the interest rate cap at December 31, 2017 was $-0-.

On August 8, 2016, the Company completed the public offering and sale of $75.0 million of its subordinated notes. The notes are due August 15, 2026, and have a fixed interest rate of 5.25% until August 15, 2021, at which time the rate becomes floating at a rate equal to three-month LIBOR plus 4.087%. The Company may call the notes at par beginning on August 15, 2021, and on any scheduled interest payment date thereafter. The notes were sold at par, resulting in net proceeds, after underwriting discounts and commissions, legal, accounting and other professional fees, of approximately $73.5 million. Total debt issuance costs of approximately $1.5 million were deferred and are being amortized over the expected life of the notes, which is five years. Amortization of the debt issuance costs during the years ended December 31, 2019 and 2018, totaled $434,000 and $154,000, respectively, and is included in interest expense on subordinated notes in the consolidated statements of income, resulting in an imputed interest rate of 5.89% at December 31, 2019.

The following table sets forth the maximum month-end balances, average daily balances and weighted average interest rates of FHLBank advances during the periods indicated. In December 2018, the Company began utilizing FHLBank overnight borrowings instead of term FHLBank Advances. The FHLBank overnight advances are included in other borrowings below.

Year Ended December 31, 2019 2018 2017 (Dollars In Thousands) FHLBank Advances: Maximum balance $ — $ 259,000 $ 174,000 Average balance — 190,245 93,524 Weighted average interest rate — % 2.09 % 1.62 %

The following table sets forth certain information as to the Company's FHLBank advances at the dates indicated.

December 31, 2019 2018 2017 (Dollars In Thousands) FHLBank Advances: $ — $ — $ 127,500 Weighted average interest rate of FHLBank advances — % — % 1.53 %

The following tables set forth the maximum month-end balances, average daily balances and weighted average interest rates of other borrowings during the periods indicated.

Year Ended December 31, 2019 Maximum Balance Average Balance Weighted Average Interest Rate (Dollars In Thousands) Other Borrowings: Securities sold under reverse repurchase agreements $ 119,024 $ 102,615 0.02 % Overnight borrowings -- FHLBank 222,000 129,542 2.36 Collateral held for interest rate swap 40,020 26,517 2.12 Other 1,625 1,350 — Total $ 260,024 1.40 % Total maximum month-end balance 346,935

Year Ended December 31, 2018 Maximum Balance Average Balance Weighted Average Interest Rate (Dollars In Thousands) Other Borrowings: Securities sold under reverse repurchase agreements $ 123,731 $ 104,512 0.03 % Overnight borrowings -- FHLBank 178,000 30,346 2.34 Collateral held for interest rate swap 13,100 993 2.24 Other 1,625 1,406 — Total $ 137,257 0.56 % Total maximum month-end balance 297,978

Year Ended December 31, 2017 Maximum Balance Average Balance Weighted Average Interest Rate (Dollars In Thousands) Other Borrowings: Securities sold under reverse repurchase agreements $ 150,703 $ 120,475 0.04 % Overnight borrowings -- FHLBank 184,000 64,448 1.09 Other 1,665 1,441 — Total $ 186,364 0.40 % Total maximum month-end balance 297,357

The following tables set forth year-end balances and weighted average interest rates of the Company's other borrowings at the dates indicated.

December 31, 2019 2018 2017 Balance Weighted Average Interest Rate Balance Weighted Average Interest Rate Balance Weighted Average Interest Rate (Dollars In Thousands) Other borrowings: Securities sold under reverse repurchase agreements $ 84,167 0.02 % $ 105,253 0.02 % $ 80,531 0.05 % Overnight borrowings -- FHLBank 196,000 1.73 178,000 2.63 15,000 1.63 Collateral held for interest rate swap 30,890 1.57 13,100 2.30 — — Other 1,267 — 1,625 — 1,604 — Total $ 312,324 1.25 % $ 297,978 1.68 % $ 97,135 0.30 %

The following table sets forth the maximum month-end balances, average daily balances and weighted average interest rates (2017 includes cost of related interest rate caps) of subordinated debentures issued to capital trusts during the periods indicated.

Year Ended December 31, 2019 2018 2017 (Dollars In Thousands) Subordinated debentures: Maximum balance $ 25,774 $ 25,774 $ 25,774 Average balance 25,774 25,774 25,774 Weighted average interest rate 3.95 % 3.70 % 3.68 %

The following table sets forth certain information as to the Company's subordinated debentures issued to capital trusts at the dates indicated.

December 31, 2019 2018 2017 (Dollars In Thousands) Subordinated debentures $ 25,774 $ 25,774 $ 25,774 Weighted average interest rate of subordinated debentures 3.51 % 4.14 % 2.98 %

The following table sets forth the maximum month-end balances, average daily balances and weighted average interest rates of subordinated notes during the periods indicated.

Year Ended December 31, 2019 2018 2017 (Dollars In Thousands) Subordinated notes: Maximum balance $ 74,276 $ 73,842 $ 73,688 Average balance 74,070 73,772 73,613 Weighted average interest rate 5.91 % 5.55 % 5.57 %

The following table sets forth certain information as to the Company's subordinated notes at the dates indicated.

December 31, 2019 2018 2017 (Dollars In Thousands) Subordinated notes $ 74,276 $ 73,842 $ 73,688 Weighted average interest rate of subordinated debentures 5.89 % 5.55 % 5.57 %

Subsidiaries

Great Southern. As a Missouri-chartered trust company, Great Southern may invest up to 3%, which was equal to $150.5 million at December 31, 2019, of its assets in service corporations. At December 31, 2019, the Bank's total investment in Great Southern Real Estate Development Corporation ("Real Estate Development") was $2.7 million. Real Estate Development was incorporated and organized in 2003 under the laws of the State of Missouri. At December 31, 2019, the Bank's total investment in Great Southern Financial Corporation ("GSFC") was $6.2 million. GSFC is incorporated under the laws of the State of Missouri, and has not had any business activity since November 30, 2012, when it sold Great Southern Insurance and Great Southern Travel, two divisions of Great Southern that were operated through GSFC. At December 31, 2019, the Bank's total investment in Great Southern Community Development Company, L.L.C. (“CDC”) and its subsidiary Great Southern CDE, L.L.C. ("CDE") was $715,000. CDC and CDE were formed in 2010 under the laws of the State of Missouri. At December 31, 2019, the Bank's total investment in GS, L.L.C. ("GSLLC") was $34.2 million. GSLLC was formed in 2005 under the laws of the State of Missouri. At December 31, 2019, the Bank's total investment in GSSC, L.L.C. ("GSSCLLC") was $21.0 million. GSSCLLC was formed in 2009 under the laws of the State of Missouri. At December 31, 2019, the Bank's total investment in GSRE

Holding, L.L.C. ("GSRE Holding") was $2.5 million. GSRE Holding was formed in 2009 under the laws of the State of Missouri. At December 31, 2019, the Bank's total investment in GSRE Holding II, L.L.C. ("GSRE Holding II") was $968,000. GSRE Holding II was formed in 2009 under the laws of the State of Missouri. At December 31, 2019, the Bank's total investment in GSRE Holding III, L.L.C. ("GSRE Holding III") was $-0-. GSRE Holding III was formed in 2012 under the laws of the State of Missouri. At December 31, 2019, the Bank's total investment in GSTC Investments, L.L.C. ("GSTCLLC") was $6.5 million. GSTCLLC was formed in 2016 under the laws of the State of Missouri. These subsidiaries are primarily engaged in the activities described below. In addition, Great Southern has four other subsidiary companies that are not considered service corporations, GSB One, L.L.C., GSB Two, L.L.C., VFP Conclusion Holding, L.L.C. and VFP Conclusion Holding II, L.L.C. These companies are also described below.

Great Southern Real Estate Development Corporation. Generally, the purpose of Real Estate Development is to hold real estate assets which have been obtained through foreclosure by the Bank and which require ongoing operation of a business or completion of construction. During 2019 and 2018, Real Estate Development did not hold any real estate assets related to foreclosed property. Real Estate Development had net income of $-0- in each of the years ended December 31, 2019 and 2018.

Great Southern Community Development Company, L.L.C. and Great Southern CDE, L.L.C. Generally, the purpose of CDC is to invest in community development projects that have a public benefit, and are permissible under Missouri and Kansas law. These include such activities as investing in real estate and investing in other community development entities. It also serves as parent to subsidiary CDE which invests in limited liability entities for the purpose of acquiring federal tax credits to be utilized by Great Southern. CDC had consolidated net income of $-0- and $10,000 in the years ended December 31, 2019 and 2018, respectively.

GS, L.L.C. GSLLC was organized in 2005. GSLLC is a limited liability company that invests in multiple limited liability entities for the purpose of acquiring state and federal tax credits which are utilized by Great Southern. GSLLC had net income (loss) of $115,000 and $(194,000) in the years ended December 31, 2019 and 2018, respectively, which primarily resulted from the cost to acquire tax credits. These losses were offset by the tax credits utilized by Great Southern.

GSSC, L.L.C. GSSCLLC was organized in 2009. GSSCLLC is a limited liability company that invests in multiple limited liability entities for the purpose of acquiring state tax credits which are utilized by Great Southern or sold to third parties. GSSCLLC had net income (loss) of $(2,000) and $88,000 in the years ended December 31, 2019 and 2018, respectively.

GSRE Holding, L.L.C. Generally, the purpose of GSRE Holding is to hold real estate assets which have been obtained through foreclosure by the Bank and which require ongoing operation of a business or completion of construction. At December 31, 2019, GSRE Holding held cash of $2.4 million and real estate assets of 69,000. GSRE Holding had net income (loss) of $(86,000) and $82,000 in the years ended December 31, 2019 and 2018, respectively.

GSRE Holding II, L.L.C. Generally, the purpose of GSRE Holding II is to hold real estate assets which have been obtained through foreclosure by the Bank and which require ongoing operation of a business or completion of construction. In 2019 and 2018, GSRE Holding II did not hold any significant real estate assets. GSRE Holding II had net income (loss) of ($32,000) and $-0- in the years ended December 31, 2019 and 2018, respectively.

GSRE Holding III, L.L.C. Generally, the purpose of GSRE Holding III is to hold real estate assets which have been obtained through foreclosure by the Bank and which require ongoing operation of a business or completion of construction. In 2019 and 2018, GSRE Holding III did not hold any significant real estate assets. GSRE Holding III had net income of $-0- in each of the years ended December 31, 2019 and 2018.

GSTC Investments, L.L.C. GSTCLLC was organized in 2016. GSTCLLC is a limited liability company that invests in multiple limited liability entities for the purpose of acquiring state and federal tax credits which are utilized by Great Southern. GSTCLLC had net income of $-0- in each of the years ended December 31, 2019 and 2018.

GSB One, L.L.C. At December 31, 2019, the Bank's total investment in GSB One, L.L.C. ("GSB One") and GSB Two, L.L.C. ("GSB Two") was $2.09 billion. The capital contribution was made by transferring participations in loans to GSB Two. GSB One is a Missouri limited liability company that was formed in 1998. Currently the only activity of this company is the ownership of GSB Two.

GSB Two, L.L.C. This is a Missouri limited liability company that was formed in 1998. GSB Two is a real estate investment trust ("REIT"). It holds participations in real estate mortgages from the Bank. The Bank continues to service the loans in return for a management and servicing fee from GSB Two. GSB Two had net income of $67.5 million and $52.0 million in the years ended December 31, 2019 and 2018, respectively.

VFP Conclusion Holding, L.L.C. VFP Conclusion Holding, L.L.C. (“VFP”) is a Missouri limited liability company that was formed in 2011. Generally, the purpose of VFP is to hold real estate assets which have been obtained through foreclosure by the Bank. The real estate assets obtained through foreclosure were formerly collateral for a participation loan sold by the Bank. The Bank has a 50 percent interest in VFP and at December 31, 2019 its investment totaled $4.2 million. Two other entities also have interests in VFP as a result of their participation in the loan sold by the Bank. At December 31, 2019, the only asset of VFP was cash. VFP had net income of $-0- in each of the years ended December 31, 2019 and 2018.

VFP Conclusion Holding II, L.L.C. VFP Conclusion Holding II, L.L.C. (“VFP II”) is a Missouri limited liability company that was formed in 2012. Generally, the purpose of VFP II is to hold real estate assets which have been obtained through foreclosure by the Bank. The real estate assets obtained through foreclosure were formerly collateral for a participation loan sold by the Bank. The Bank has a 50 percent interest in VFP II and at December 31, 2019 its investment totaled $2.2 million. One other entity also has an interest in VFP II as a result of its participation in the loan sold by the Bank. At December 31, 2019, the only asset of VFP II was cash. VFP II had net income of $-0- for each of the years ended December 31, 2019 and 2018.

Competition

The banking industry in the Company's market areas is highly competitive. In addition to competing with other commercial and savings banks, the Company competes with credit unions, finance companies, leasing companies, mortgage companies, insurance companies, brokerage and investment banking firms and many other financial service firms. Competition is based on a number of factors including, among others, customer service, quality and range of products and services offered, price, reputation, interest rates on loans and deposits, lending limits and customer convenience. Our ability to continue to compete effectively also depends in large part on our ability to attract new employees and retain and motivate our existing employees, while managing compensation and other costs.

A substantial number of the commercial banks operating in most of the Company's market areas are branches or subsidiaries of large organizations affiliated with statewide, regional or national banking companies and as a result they may have greater resources with which to compete. Additionally, the Company faces competition from a large number of community banks, many of which have senior management who were previously with other local banks or investor groups with strong local business and community ties.

The Company encounters strong competition in attracting deposits throughout its six-state retail footprint. The Company attracts a significant amount of deposits through its branch offices primarily from the communities in which those branch offices are located. Of our total 97 branch offices at the end of 2019, 72.6% of our deposit franchise dollars were located in Missouri, where our total market share at June 30, 2019, was 1.7%, or seventh in the state (based on FDIC market share deposits). The financial institutions with the top three market share positions in Missouri at June 30, 2019, were Bank of America, U.S. Bank, and UMB Bank, which had a combined market share of 28.8%. We also have branch offices in the states of Iowa, Kansas, Minnesota, Nebraska and Arkansas, which made up 13.9%, 6.6%, 5.9%, 0.5%, and 0.5% of our total deposit franchise dollars, respectively (based on our total deposits as of December 31, 2019). The Company's market share in its primary metropolitan statistical areas was as follows at June 30, 2019:

Metropolitan Statistical Area Number of Branch Offices Percentage of Total Market Share Rank Institution with Leading Market Share Position Springfield, MO 19 16.0% 1 Great Southern Bank Sioux City, IA-NE-SD 6 7.0% 4 Security National Bank of Sioux City Davenport/Moline/Rock Island, IA-IL 5 1.2% 21 Quad City Bank and Trust Co. Des Moines/West Des Moines, IA 5 0.8% 21 Principal Bank St. Louis, MO-IL 19 0.6% 27 Stifel Bank and Trust Kansas City, MO-KS 8 0.3% 34 UMB Bank Fayetteville/Springdale/Rogers, AR-MO 1 0.2% 29 Arvest Bank Minneapolis/St. Paul/Bloomington, MN-WI 4 0.1% 40 US Bank NA

Our most direct competition for deposits has historically come from other commercial banks, savings institutions and credit unions located in our market areas. The Bank competes for these deposits by offering a variety of deposit accounts at competitive rates, convenient business hours, and convenient branch, online, mobile and ATM services. In addition, some competitors located outside of our market areas conduct business primarily over the Internet, which may enable them to realize certain savings and offer certain

deposit products and services at lower rates and with greater convenience to certain customers. Our ability to attract and retain customer deposits depends on our ability to generally provide a rate of return, liquidity and risk comparable to that offered by competing investment opportunities.

Competition in originating real estate loans comes primarily from other commercial banks, savings institutions and mortgage bankers making loans secured by real estate located in the Bank's market area. The specific institutions are similar to those discussed above in regards to deposit market share. Commercial banks and finance companies provide vigorous competition in commercial and consumer lending. The Bank competes for real estate and other loans principally on the basis of the interest rates and loan fees it charges, the types of loans it originates, the quality of services it provides to borrowers and the locations of our branch office network and loan production offices.

Many of our competitors have substantially greater resources, name recognition and market presence, which benefit them in attracting business. In addition, larger competitors (including nationwide banks that have a significant presence in our market areas) may be able to price loans and deposits more aggressively than we do because of their greater economies of scale. Smaller and newer competitors may also be more aggressive than we are in terms of pricing loan and deposit products in order to obtain a larger share of the market. In addition, some competitors located outside of our market areas conduct business primarily over the Internet, which may enable them to realize certain savings and offer products and services at more favorable rates and with greater convenience to certain customers.

We also depend, from time to time, on outside funding sources, including brokered deposits, where we experience nationwide competition, and Federal Home Loan Bank advances. Some of the financial institutions and financial services organizations with which we compete are not subject to the same degree of regulation as is imposed on insured depositary institutions and their holding companies. As a result, these non-bank competitors have certain advantages over us in accessing funding and in providing various services.

Despite the highly competitive environment and the challenges it presents to us, management believes the Company will continue to be competitive because of its strong commitment to quality customer service, competitive products and pricing, convenient local branches, online and mobile capabilities, and active community involvement.

Employees

At December 31, 2019, the Company and its affiliates had a total of 1,191 employees, including 279 part-time employees. None of the Company’s employees are represented by any collective bargaining agreement. Management considers its employee relations to be good.

Government Supervision and Regulation

General

The Company and its subsidiaries are subject to supervision and examination by applicable federal and state banking agencies. The earnings of the Company’s subsidiaries, and therefore the earnings of the Company, are affected by general economic conditions, management policies, federal and state legislation, and actions of various regulatory authorities, including the Board of Governors of the Federal Reserve System, often referred to as the Federal Reserve Board (the “FRB”), the Federal Deposit Insurance Corporation (the "FDIC") and the Missouri Division of Finance (the “MDF”). The following is a brief summary of certain aspects of the regulation of the Company and the Bank and does not purport to fully discuss such regulation. Such regulation is intended primarily for the protection of depositors and the Deposit Insurance Fund (the “DIF”), and not for the protection of stockholders.

Significant Legislation Impacting the Financial Services Industry

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.

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” of between 8 and 10 percent. Any qualifying depository institution or its holding company that exceeds the “Community Bank Leverage Ratio” will be considered to have met generally applicable leverage and risk-based regulatory capital requirements and any qualifying depository institution that exceeds the new ratio will be considered “well-capitalized” under the prompt corrective action rules. Effective January 1, 2020, the Community Bank Leverage Ratio is 9.0%. For additional information regarding the Community Bank Leverage Ratio, see “—Capital.”

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.

It is difficult at this time to predict when or how any new standards under the Economic Growth Act will ultimately be applied to us or what specific impact the Economic Growth Act and the forthcoming implementing rules and regulations will have on us.

Bank Holding Company Regulation

The Company is a bank holding company that has elected to be treated as a financial holding company by the FRB. Financial holding companies are subject to comprehensive regulation by the FRB under the Bank Holding Company Act and the regulations of the FRB. The Company is required to file reports with the FRB and such additional information as the FRB may require, and is subject to regular examinations by the FRB. The FRB also has extensive enforcement authority over financial holding companies, including, among other things, the ability to assess civil money penalties, to issue cease and desist or removal orders and to require that a holding company divest subsidiaries (including its bank subsidiaries). In general, enforcement actions may be initiated for violations of law and regulations and unsafe or unsound practices.

Under FRB policy and the Dodd-Frank Act, a bank holding company must serve as a source of strength for its subsidiary banks. Accordingly, the FRB may require, and has required in the past, that a bank holding company contribute additional capital to an undercapitalized subsidiary bank.

Under the Bank Holding Company Act, a financial holding company must obtain FRB approval before: (i) acquiring, directly or indirectly, ownership or control of any voting shares of another bank or bank holding company that is not a subsidiary if, after such acquisition, it would own or control more than 5% of such shares; (ii) acquiring all or substantially all of the assets of another bank or bank or financial holding company; or (iii) merging or consolidating with another bank or financial holding company.

The Bank Holding Company Act also prohibits a financial holding company generally from engaging directly or indirectly in activities other than those involving banking, activities closely related to banking that are permitted for a bank holding company, and certain securities, insurance and merchant banking activities. Certain investments greater than 5% in companies engaged in activities not permitted for a bank holding company are prohibited.

Volcker Rule

The federal banking agencies have adopted regulations to implement the provisions of the Dodd-Frank Act known as the Volcker Rule. Under the regulations, FDIC-insured depository institutions, their holding companies, subsidiaries and affiliates are generally prohibited, subject to certain exemptions, from proprietary trading of securities and other financial instruments and from acquiring or retaining an ownership interest in a “covered fund.” Effective July 22, 2019, a bank and its holding company are exempt from the Volcker Rule if the bank and every company that controls it have consolidated assets of $10 billion or less and have total consolidated trading assets and liabilities of 5% or less of its consolidated assets.

Interstate Banking and Branching

Federal law allows the FRB to approve an application of a bank holding company to acquire control of, or acquire all or substantially all of the assets of, a bank located in a state other than such holding company's home state, without regard to whether the transaction is prohibited by the laws of any state. The FRB may not approve the acquisition of a bank that has not been in existence for the

minimum time period (not exceeding five years) specified by the statutory law of the host state. Federal law also prohibits the FRB from approving such an application if the applicant (and its depository institution affiliates) controls or would control more than 10% of the insured deposits in the United States or if the applicant would control 30% or more of the deposits in any state in which the target bank maintains a branch and in which the applicant or any of its depository institution affiliates controls a depository institution or branch immediately prior to the acquisition of the target bank. Federal law does not affect the authority of states to limit the percentage of total insured deposits in the state which may be held or controlled by a bank or bank holding company to the extent such limitation does not discriminate against out-of-state banks or bank holding companies. Individual states may also waive the 30% state-wide concentration limit. Missouri law prohibits a bank holding company from acquiring a depository institution if total deposits would exceed 13% of statewide deposits excluding bank certificates of deposit of $100,000 or more.

The federal banking agencies are generally authorized to approve interstate bank merger transactions and de novo branching without regard to whether such transactions are prohibited by the law of any state. Interstate acquisitions of branches are generally permitted only if the law of the state in which the branch is located permits such acquisitions.

As required by federal law, federal regulations prohibit any out-of-state bank from using the interstate branching authority primarily for the purpose of deposit production, including guidelines to ensure that interstate branches operated by an out-of-state bank in a host state reasonably help to meet the credit needs of the communities which they serve.

Certain Transactions with Affiliates and Other Persons

Transactions involving the Bank and its affiliates are subject to sections 23A and 23B of the Federal Reserve Act, and regulations thereunder, which impose certain quantitative limits and collateral requirements on such transactions, and require all such transactions to be on terms at least as favorable to the Bank as are available in transactions with non-affiliates.

All loans by the Bank to the principal stockholders, directors and executive officers of the Bank or any affiliate are subject to regulations restricting loans and other transactions with insiders of the Bank and its affiliates. Transactions involving such persons must be on terms and conditions as favorable to the bank as those that apply in similar transactions with non-insiders. A bank may allow favorable rate loans to insiders pursuant to an employee benefit program available to bank employees generally. The Bank has such a program.

Dividends

The FRB has issued a policy statement on the payment of cash dividends by bank holding companies, which expresses the FRB's view that a bank holding company should pay cash dividends only to the extent that its net income for the past year is sufficient to cover both the cash dividends and a rate of earnings retention that is consistent with the holding company's capital needs, asset quality and overall financial condition. The FRB also indicated that it would be inappropriate for a company experiencing serious financial problems to borrow funds to pay dividends. Furthermore, a bank holding company may be prohibited from paying any dividends if the holding company's bank subsidiary is not adequately capitalized, and dividends payable by a bank holding company and its depository institutions subsidiaries can be restricted if the capital conservation buffer requirement is not met. See “Capital” below.

A bank holding company is required to give the FRB prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of the company's consolidated net worth. The FRB may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, FRB order, or any condition imposed by, or written agreement with, the FRB. This notification requirement does not apply to any company that meets the well-capitalized standard for bank holding companies, is well-managed, and is not subject to any unresolved supervisory issues. Under Missouri law, the Bank may pay dividends from certain undivided profits and may not pay dividends if its capital is impaired. Dividends of the Company and the Bank may also be restricted under the capital conservation buffer rules, as discussed below under “—Capital.”

Capital

The Company and the Bank are subject to new capital regulations adopted by the FRB and the FDIC, which established minimum required ratios for common equity Tier 1 (“CET1”) capital, Tier 1 capital and total capital and the minimum leverage ratio; set forth the risk-weightings of assets and certain off-balance sheet items for purposes of the risk-based capital ratios; require an additional capital conservation buffer over the required risk-based capital ratios, and define what qualifies as capital for purposes of meeting the capital requirements.

Under the capital regulations, the minimum capital ratios are: (1) a CET1 capital ratio of 4.5% of risk-weighted assets; (2) a Tier 1 capital ratio of 6.0% of risk-weighted assets; (3) a total risk-based capital ratio of 8.0% of risk-weighted assets; and (4) a leverage ratio (the ratio of Tier 1 capital to average total adjusted assets) of 4.0%. CET1 generally consists of common stock; retained earnings; accumulated other comprehensive income (“AOCI”) unless an institution has elected to exclude AOCI from regulatory capital; and certain minority interests; all subject to applicable regulatory adjustments and deductions. Tier 1 capital generally consists of CET1 and noncumulative perpetual preferred stock. Tier 2 capital generally consists of other preferred stock and subordinated debt meeting certain conditions plus an amount of the allowance for loan and lease losses up to 1.25% of assets. Total capital is the sum of Tier 1 and Tier 2 capital.

Mortgage servicing and deferred tax assets over designated percentages of CET1 are deducted from capital. In addition, Tier 1 capital includes AOCI, which includes all unrealized gains and losses on available for sale debt and equity securities. However, because of our asset size, we were eligible to elect to permanently opt out of the inclusion of unrealized gains and losses on available for sale debt and equity securities in our capital calculations. We elected this option.

For purposes of determining risk-based capital, assets and certain off-balance sheet items are risk-weighted from 0% to 1,250%, depending on the risk characteristics of the asset or item. The risk weights include, for example, a 150% risk weight for certain high volatility commercial real estate acquisition, development and construction loans and for non-residential mortgage loans that are 90 days past due or otherwise in nonaccrual status; a 20% credit conversion factor for the unused portion of a commitment with an original maturity of one year or less that is not unconditionally cancellable; and a 250% risk weight for mortgage servicing and deferred tax assets that are not deducted from capital.

In addition to the minimum CET1, Tier 1 and total capital ratios, the Company and the Bank must maintain a capital conservation buffer consisting of additional CET1 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.

The Financial Accounting Standards Board has adopted a new accounting standard for US Generally Accepted Accounting Principles that became effective for us on January 1, 2020. This standard, referred to as Current Expected Credit Loss, or CECL, requires FDIC-insured institutions and their holding companies (banking organizations) to recognize credit losses expected over the life of certain financial assets. CECL covers a broader range of assets than the current method of recognizing credit losses and generally results in earlier recognition of credit losses. Upon adoption of CECL, a banking organization must record a one-time adjustment to its credit loss allowances as of the beginning of the fiscal year of adoption equal to the difference, if any, between the amount of credit loss allowances under the current methodology and the amount required under CECL. For a banking organization, implementation of CECL is generally likely to reduce retained earnings, and to affect other items, in a manner that reduces its regulatory capital. The federal banking regulators (the Federal Reserve, the OCC and the FDIC) have adopted a rule that gives a banking organization the option to phase in over a three-year period the day-one adverse effects of CECL on its regulatory capital.

Under the FDIC’s prompt corrective action standards, in order to be considered well-capitalized, the Bank must have a ratio of CET1 capital to risk-weighted assets of 6.5%, a ratio of Tier 1 capital to risk-weighted assets of 8%, a ratio of total capital to risk-weighted assets of 10%, and a leverage ratio of 5%; and must not be subject to any written agreement, order, capital directive, or prompt corrective action directive to meet and maintain a specific capital level for any capital measure. In order to be considered adequately capitalized, an institution must have the minimum capital ratios described above. As of December 31, 2019, the Bank was “well-capitalized.” An institution that is not well-capitalized is subject to certain restrictions on brokered deposits and interest rates on deposits.

The federal banking regulators are required to take prompt corrective action if an institution fails to satisfy the requirements to qualify as adequately capitalized. All institutions, regardless of their capital levels, are restricted from making any capital distribution or paying any management fees that would cause the institution to fail to satisfy the requirements to qualify as adequately capitalized. An institution that is not at least adequately capitalized is: (i) subject to increased monitoring by the appropriate federal banking regulator; (ii) required to submit an acceptable capital restoration plan (including certain guarantees by any company controlling the institution) within 45 days; (iii) subject to asset growth limits; and (iv) required to obtain prior regulatory approval for acquisitions, branching and new lines of business. Additional restrictions and appointment of a receiver or conservator, can apply, depending on the institution's capital level. The FDIC has jurisdiction over the Bank for purposes of prompt corrective action. When the FDIC as receiver liquidates an institution, the claims of depositors and the FDIC as their successor (for deposits covered by FDIC insurance) have priority over other unsecured claims against the institution, including claims of stockholders.

To be considered "well-capitalized," a bank holding company must have, on a consolidated basis, a total risk-based capital ratio of 10.0% or greater and a Tier 1 risk-based capital ratio of 6.0% or greater and must not be subject to an individual order, directive or agreement under which the FRB requires it to maintain a specific capital level. As of December 31, 2019, the Company was "well-capitalized."

The federal banking agencies consider concentrations of credit risk and risks from non-traditional activities, as well as an institution's ability to manage those risks, when determining the adequacy of an institution's capital. This evaluation is generally made as part of the institution's regular safety and soundness examination. Under their regulations, the federal banking agencies also consider interest rate risk (when the interest rate sensitivity of an institution's assets does not match the sensitivity of its liabilities or its off-balance-sheet position) in the evaluation of a bank's capital adequacy. The banking agencies have issued guidance on evaluating interest rate risk.

Although we continue to evaluate the impact that the capital rules have on the Company and the Bank, we anticipate that the Company and the Bank will remain well-capitalized, and will continue to meet the capital conservation buffer requirement.

Effective January 1, 2020, a bank that elects to use the Community Bank Leverage Ratio will generally be considered well-capitalized and to have met the risk-based and leverage capital requirements of the capital regulations if it has a leverage ratio greater than 9.0%. To be eligible to elect the Community Bank Leverage Ratio, the bank also must have total consolidated assets of less than $10 billion, off-balance sheet exposures of 25% or less of its total consolidated assets, and trading assets and trading liabilities of 5.0% or less of its total consolidated assets, all as of the end of the most recent quarter. Similarly, effective January 1, 2020, a bank holding company that elects to use the Community Bank Leverage Ratio will generally be considered to have met the risk-based and leverage capital requirements of the capital regulations if it has a leverage ratio greater than 9.0% if it elects the Community Bank Leverage Ratio based on the same eligibility criteria as described for the bank. We do not intend to elect the Community Bank Leverage Ratio for either the Company or the Bank in their March 31, 2020 regulatory reports.

Insurance of Accounts and Regulation by the FDIC

Great Southern is a member of the DIF, which is administered by the FDIC. Deposits are insured up to the applicable limits by the FDIC, backed by the full faith and credit of the United States Government. The general deposit insurance limit is $250,000.

The FDIC assesses deposit insurance premiums on all FDIC-insured institutions quarterly based on annualized rates. These premiums are assessed on an institution’s total assets minus its tangible equity. Under these rules, assessment rates for an institution with total assets of less than $10 billion are determined by weighted average CAMELS composite ratings and certain financial ratios, and range from 3.0 to 30.0 basis points, subject to certain adjustments. In an emergency, the FDIC may also impose a special assessment.

Through March 2019, the FDIC also assessed insured institutions to service the debt on bonds issued during the 1980s to resolve the thrift bailout. For the final quarter for which assessments were made, the assessment rate was 0.12 basis points applied to the same assessment base as is used for deposit insurance assessments.

The Dodd-Frank Act establishes 1.35% as the minimum reserve ratio. The FDIC adopted a plan to meet this ratio, which was achieved on September 30, 2018, ahead of the September 30, 2020 statutory deadline. In addition to the statutory minimum ratio, the FDIC has the authority to establish a reserve ratio known as the designated reserve ratio or DRR, which may exceed the statutory minimum. The FDIC has established 2.0% as the DRR. The Dodd-Frank Act requires the FDIC to offset the effect on institutions with assets less than $10 billion of the increase in the statutory minimum reserve ratio to 1.35% from the former statutory minimum of 1.15%. To implement the offset requirement, the FDIC imposed a surcharge on institutions with assets of $10 billion or more during a temporary period that ended on September 30, 2018. Smaller institutions will receive credits against their deposit insurance assessments which will reduce regular assessments by 2.0 basis points for quarters when the reserve ratio is at least 1.38%.

The FDIC is authorized to conduct examinations of and to require reporting by FDIC-insured institutions, and is the primary federal banking regulator of state banks that are not members of the Federal Reserve, such as the Bank. The FDIC examines the Bank regularly. The FDIC may prohibit any insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious threat to the DIF. The FDIC also has the authority to take enforcement actions against banks and savings associations.

Federal Reserve System

The FRB requires all depository institutions to maintain reserves against their transaction accounts (primarily NOW and Super NOW checking accounts) and non-personal time deposits. At December 31, 2019, the Bank was in compliance with these reserve requirements.

Banks are authorized to borrow from the FRB "discount window," but FRB regulations only allow this borrowing for short periods of time and generally require banks to exhaust other reasonable alternative sources of funds where practical, including FHLBank advances, before borrowing from the FRB. See "Sources of Funds Borrowings" above.

Federal Home Loan Bank System

The Bank is a member of the FHLBank of Des Moines, which is one of 11 regional FHLBanks.

As a member, Great Southern is required to purchase and maintain stock in the FHLBank of Des Moines in an amount equal to the greater of 1% of its outstanding home loans or 5% of its outstanding FHLBank advances. At December 31, 2019, Great Southern had $13.5 million in FHLBank of Des Moines stock, which was in compliance with this requirement. In past years, the Bank has received dividends on its FHLBank stock. Over the past five years, such dividends have averaged 4.31% and were 5.75% for the year ended December 31, 2019.

Legislative and Regulatory Proposals

Any changes in the extensive regulatory scheme to which the Company or the Bank is and will be subject, whether by any of the federal banking agencies or Congress, or the Missouri legislature or MDF, could have a material effect on the Company or the Bank, and the Company and the Bank cannot predict what, if any, future actions may be taken by legislative or regulatory authorities or what impact such actions may have.

Federal and State Taxation

General

The following discussion contains a summary of certain federal and state income tax provisions applicable to the Company and the Bank. It is not a comprehensive description of the federal or state income tax laws that may affect the Company and the Bank. The following discussion is based upon current provisions of the Internal Revenue Code of 1986 (the "Code") and Treasury and judicial interpretations thereof.

The Company and its subsidiaries file a consolidated federal income tax return using the accrual method of accounting, with the exception of GSB Two which files a separate return as a REIT. All corporations joining in the consolidated federal income tax return are jointly and severally liable for taxes due and payable by the consolidated group. The following discussion primarily focuses upon the taxation of the Bank, since the federal income tax law contains certain special provisions with respect to banks.

Financial institutions, such as the Bank, are subject, with certain exceptions, to the provisions of the Code generally applicable to corporations.

Bad Debt Deduction

As of December 31, 2019 and 2018, retained earnings included approximately $17.5 million for which no deferred income tax liability has been recognized. This amount represents an allocation of income to bad debt deductions for tax purposes only for tax years prior to 1988. If the Bank were to liquidate, the entire amount would have to be recaptured and would create income for tax purposes only, which would be subject to the then-current corporate income tax rate. The unrecorded deferred income tax liability on the above amount was approximately $3.9 million at both December 31, 2019 and 2018.

The Bank is required to follow the specific charge-off method which only allows a bad debt deduction equal to actual charge-offs, net of recoveries, experienced during the fiscal year of the deduction. In a year where recoveries exceed charge-offs, the Bank would be required to include the net recoveries in taxable income.

Interest Deduction

In the case of a financial institution, such as the Bank, no deduction is allowed for the pro rata portion of its interest expense which is allocable to tax-exempt interest on obligations acquired after August 7, 1986. A limited class of tax-exempt obligations acquired after August 7, 1986 will not be subject to this complete disallowance rule. For certain tax exempt obligations issued in 2009 and 2010, an amount of tax-exempt obligations that are not generally considered part of the “limited class of tax-exempt obligations” noted above may be treated as part of the “limited class of tax-exempt obligations” to the extent of two percent of a financial institutions total assets. For tax-exempt obligations acquired after December 31, 1982 and before August 8, 1986 and for obligations acquired after August 7, 1986 that are not subject to the complete disallowance rule, 80% of interest incurred to purchase or carry such obligations will be deductible. No portion of the interest expense allocable to tax-exempt obligations acquired by a financial institution before January 1, 1983, which is otherwise deductible, will be disallowed. The interest expense disallowance rules cited above have not significantly impacted the Bank.

FDIC-Assisted Bank Transactions

During 2009, 2011 and 2012, the Bank acquired assets and liabilities of four unrelated failed institutions in transactions with the FDIC. As part of these transactions, the Bank and the FDIC entered into loss sharing agreements whereby the FDIC agreed to share losses incurred associated with the assets purchased by the Bank. In 2014, the Bank acquired assets and liabilities of an unrelated failed institution in a transaction with the FDIC. The Bank and the FDIC did not enter into a loss sharing agreement on this transaction.

The Bank recognized financial statement gains associated with these transactions. The ultimate tax treatment of these transactions is similar to the financial statement treatment; however, the approaches to valuing the acquired assets and liabilities is different, and results in carrying value differences in the underlying assets and liabilities, for tax purposes. In addition, any gain recognized on the transactions for tax purposes is recognized over a six year period.

During 2016, the Bank and the FDIC reached an agreement to terminate the loss sharing agreements associated with the 2009 and 2011 acquisition transactions. During 2017, the Bank and the FDIC reached an agreement to terminate the loss sharing agreements associated with the 2012 acquisition transaction.

Alternative Minimum Tax

Through 2017, corporations generally were subject to a 20% corporate alternative minimum tax ("AMT"). A corporation must pay the AMT to the extent it exceeds that corporation's regular federal income tax liability The AMT is imposed on "alternative minimum taxable income," defined as taxable income with certain adjustments and tax preference items, less any available exemption. Such adjustments and items include, but are not limited to, (i) net interest received on certain tax-exempt bonds issued after August 7, 1986; and (ii) 75% of the difference between adjusted current earnings and alternative minimum taxable income, as otherwise determined with certain adjustments. Net operating loss carryovers may be utilized, subject to adjustment, to offset up to 90% of the alternative minimum taxable income, as otherwise determined. Any AMT paid may be credited against future regular federal income tax liabilities to the extent the regular federal income tax liability exceeds the AMT liability. In addition, certain credits may be used to reduce AMT obligations. The Company has invested in certain partnerships that generate tax credits (low-income housing and rehabilitation tax credits) that may be used to reduce their AMT.

State Taxation

Missouri-based banks, such as the Bank, are subject to a franchise tax which is imposed on the bank's taxable income at the rate of 7% of the taxable income (determined without regard for any net operating losses) - income-based calculation. Missouri-based banks are entitled to a credit against the income-based franchise tax for all other state or local taxes on banks, except taxes on real estate, unemployment taxes, bank tax, and taxes on tangible personal property owned by the Bank and held for lease or rental to others. Beginning in 2020, the Missouri franchise tax rate is reduced to 4.48%.

The Company and all subsidiaries are subject to a Missouri income tax that is imposed on the corporation's taxable income at the rate of 6.25%. The return is filed on a consolidated basis by all members of the consolidated group including the Bank, but excluding GSB Two. As a REIT, GSB Two files a separate Missouri income tax return. Beginning in 2020, the Missouri corporate income tax rate is reduced to 4.00%.

The Bank also has full service offices in Kansas, Iowa, Minnesota, Nebraska and Arkansas, and has commercial loan production offices in Texas, Oklahoma, Nebraska, Illinois, Colorado and Georgia. As a result, the Bank is subject to franchise and income taxes that are imposed on the corporation's taxable income attributable to those states.

As a Maryland corporation, the Company is required to file an annual report with and pay an annual fee to the State of Maryland.

Examinations

The Company and its consolidated subsidiaries have not been audited recently by the Internal Revenue Service (IRS) except as described here. The Company, through one of its subsidiaries, is a partner in two partnerships which were under IRS examination for 2006 and 2007. As a result, the Company’s 2006 and subsequent tax years remained open for examination. The examinations of these partnerships were completed during 2019. The completion of these examinations did not result in significant changes to the Company’s tax position. As a result, federal tax years through December 31, 2015 are now closed.

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

Tax Reform

In the fourth quarter of 2017 the Company re-measured its deferred tax assets and liabilities as a result of the enactment of the new tax law “H.R.1,” originally known as the “Tax Cuts and Jobs Act” (the “Tax Reform Legislation”). Enactment occurred on December 22, 2017. The Tax Reform Legislation became effective January 1, 2018 and modifies the tax law in many ways. The centerpiece of the Tax Reform Legislation is the reduction of the federal corporate income tax rate from 35% to 21%. All deferred tax items as of December 22, 2017 needed to be re-valued using the new federal corporate income tax rate of 21%. As a result, income tax expense decreased $2.1 million in 2017 associated with re-valuing the deferred tax asset.

The SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Reform Legislation. The Company recognized the provisional tax impact related to the revaluation of deferred tax assets and liabilities and included these amounts in its consolidated financial statements for the year ended December 31, 2017. The ultimate impact may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the Tax Reform Legislation. The Company completed its accounting during 2018 without any significant adjustments from the provisional amounts.