Company Quick10K Filing
Quick10K
Great Southern Bancorp
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$57.44 14 $814
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-05-08 Shareholder Vote
8-K 2019-04-17 Regulation FD
8-K 2019-04-17 Earnings, Exhibits
8-K 2019-03-20 Other Events, Exhibits
8-K 2019-01-25 Other Events, Exhibits
8-K 2019-01-25 Other Events, Exhibits
8-K 2019-01-23 Other Events, Exhibits
8-K 2019-01-22 Earnings, Exhibits
8-K 2019-01-22 Regulation FD
8-K 2018-12-19 Other Events, Exhibits
8-K 2018-11-06 Regulation FD
8-K 2018-10-17 Earnings, Exhibits
8-K 2018-10-17 Regulation FD
8-K 2018-09-19 Other Events, Exhibits
8-K 2018-07-30 Regulation FD
8-K 2018-07-19 Regulation FD
8-K 2018-07-18 Earnings, Exhibits
8-K 2018-05-09 Officers, Shareholder Vote
8-K 2018-04-18 Earnings, Other Events, Exhibits
8-K 2018-03-20 Other Events
8-K 2018-01-29 Other Events, Exhibits
8-K 2018-01-23 Earnings, Exhibits
8-K 2018-01-03 Other Events, Exhibits
8-K 2017-09-20 Other Events, Exhibits
ICL Israel Chemicals 7,030
MAT Mattel 3,990
VBTX Veritex Holdings 1,410
FLWS 1 800 Flowers Com 1,250
NCS NCI Building Systems 781
SPN Superior Energy Services 488
VEC Vectrus 437
EAST Eastside Distilling 53
RIVEX Rivex Technology 0
MOBQ Mobiquity Technologies 0
GSBC 2019-03-31
Part I Financial Information
Item 1. Financial Statements.
Note 1: Basis of Presentation
Note 2: Nature of Operations and Operating Segments
Note 3: Recent Accounting Pronouncements
Note 4: Earnings per Share
Note 5: Investment Securities
Note 6: Loans and Allowance for Loan Losses
Note 7: Fdic-Acquired Loans
Note 8: Other Real Estate Owned and Repossessions
Note 9: Premises and Equipment
Note 10: Deposits
Note 11: Advances From Federal Home Loan Bank
Note 12: Securities Sold Under Reverse Repurchase Agreements and Short-Term Borrowings
Note 13: Subordinated Notes
Note 14: Income Taxes
Note 15: Disclosures About Fair Value of Financial Instruments
Note 16: Derivatives and Hedging Activities
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits and Financial Statement Schedules
EX-31.1 ex311.htm
EX-31.2 ex312.htm
EX-32 ex32.htm

Great Southern Bancorp Earnings 2019-03-31

GSBC 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 gs10q033119.htm QUARTERLY REPORT ON FORM 10-Q FOR PERIOD ENDED MARCH 31, 2019


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934

For the Quarterly Period Ended March 31, 2019

Commission File Number 0-18082

GREAT SOUTHERN BANCORP, INC.
(Exact name of registrant as specified in its charter)

Maryland
 
43-1524856
(State or other jurisdiction of incorporation
or organization)
 
(I.R.S. Employer Identification Number)
 
 
 
1451 E. Battlefield, Springfield, Missouri
 
65804
(Address of principal executive offices)
 
(Zip Code)
 
 
 
(417) 887-4400
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  
Yes /X/     No /  /
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data file required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes/X/   No /  /
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer /  /
Accelerated filer /X/
Non-accelerated filer /  /
Smaller reporting company /  /
 
Emerging growth company /  /

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. / /

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 
Yes /  /   No /X/

Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
   
Trading Symbol
   
Name of Each Exchange
on Which Registered
Common Stock,
par value $0.01 per share
 
GSBC
 
The NASDAQ Stock Market LLC

The number of shares outstanding of each of the registrant's classes of common stock: 14,196,383 shares of common stock, par value $.01 per share, outstanding at May 6, 2019.

 
1





PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except number of shares)

   
MARCH 31,
   
DECEMBER 31,
 
   
2019
   
2018
 
   
(Unaudited)
       
             
ASSETS
           
Cash
 
$
95,347
   
$
110,108
 
Interest-bearing deposits in other financial institutions
   
110,743
     
92,634
 
Cash and cash equivalents
   
206,090
     
202,742
 
Available-for-sale securities
   
277,750
     
243,968
 
Mortgage loans held for sale
   
1,892
     
1,650
 
Loans receivable, net of allowance for loan losses of $38,651 – March 2019;
$38,409 - December 2018
   
4,050,336
     
3,989,001
 
Interest receivable
   
14,550
     
13,448
 
Prepaid expenses and other assets
   
59,383
     
55,336
 
Other real estate owned and repossessions, net
   
8,772
     
8,440
 
Premises and equipment, net
   
141,754
     
132,424
 
Goodwill and other intangible assets
   
8,963
     
9,288
 
Federal Home Loan Bank stock
   
5,633
     
12,438
 
Current and deferred income taxes
   
3,097
     
7,465
 
          Total Assets
 
$
4,778,220
   
$
4,676,200
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
Liabilities:
               
Deposits
 
$
3,956,091
   
$
3,725,007
 
Securities sold under reverse repurchase agreements with customers
   
118,618
     
105,253
 
Short-term borrowings and other interest-bearing liabilities
   
22,219
     
192,725
 
Subordinated debentures issued to capital trust
   
25,774
     
25,774
 
Subordinated notes
   
73,951
     
73,842
 
Accrued interest payable
   
2,933
     
3,570
 
Advances from borrowers for taxes and insurance
   
7,864
     
5,092
 
Accrued expenses and other liabilities
   
27,135
     
12,960
 
          Total Liabilities
   
4,234,585
     
4,144,223
 
Stockholders' Equity:
               
Capital stock
               
Serial preferred stock – $.01 par value; authorized 1,000,000 shares; issued
and outstanding March 2019 and December 2018 - -0- shares
   
     
 
Common stock, $.01 par value; authorized 20,000,000 shares;
issued and outstanding March 2019  –14,170,758 shares;
December 2018 - 14,151,198 shares
   
142
     
142
 
Additional paid-in capital
   
30,916
     
30,121
 
Retained earnings
   
494,181
     
492,087
 
Accumulated other comprehensive income
   
18,396
     
9,627
 
          Total Stockholders' Equity
   
543,635
     
531,977
 
          Total Liabilities and Stockholders' Equity
 
$
4,778,220
   
$
4,676,200
 


See Notes to Consolidated Financial Statements

2






GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
   
THREE MONTHS ENDED
MARCH 31,
 
   
2019
   
2018
 
   
(Unaudited)
 
             
INTEREST INCOME
           
Loans
 
$
54,556
   
$
45,165
 
Investment securities and other
   
2,802
     
1,717
 
TOTAL INTEREST INCOME
   
57,358
     
46,882
 
                 
INTEREST EXPENSE
               
Deposits
   
10,470
     
5,584
 
Federal Home Loan Bank advances
   
     
605
 
Short-term borrowings and repurchase agreements
   
922
     
28
 
Subordinated debentures issued to capital trust
   
267
     
202
 
Subordinated notes
   
1,094
     
1,025
 
TOTAL INTEREST EXPENSE
   
12,753
     
7,444
 
NET INTEREST INCOME
   
44,605
     
39,438
 
Provision for Loan Losses
   
1,950
     
1,950
 
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
   
42,655
     
37,488
 
                 
NON-INTEREST INCOME
               
Commissions
   
334
     
248
 
Service charges and ATM fees
   
4,958
     
5,244
 
Net gains on loan sales
   
248
     
462
 
Late charges and fees on loans
   
346
     
389
 
Net realized gains on sales of available-for-sale securities
   
10
     
 
Gain (loss) on derivative interest rate products
   
(25
)
   
37
 
Other income
   
1,579
     
555
 
TOTAL NON-INTEREST INCOME
   
7,450
     
6,935
 
                 
NON-INTEREST EXPENSE
               
Salaries and employee benefits
   
15,640
     
14,623
 
Net occupancy and equipment expense
   
6,401
     
6,384
 
Postage
   
767
     
866
 
Insurance
   
666
     
670
 
Advertising
   
527
     
671
 
Office supplies and printing
   
259
     
233
 
Telephone
   
903
     
719
 
Legal, audit and other professional fees
   
712
     
809
 
Expense on other real estate and repossessions
   
620
     
1,141
 
Partnership tax credit investment amortization
   
91
     
302
 
Acquired deposit intangible asset amortization
   
325
     
412
 
Other operating expenses
   
1,584
     
1,482
 
TOTAL NON-INTEREST EXPENSE
   
28,495
     
28,312
 
                 
INCOME BEFORE INCOME TAXES
   
21,610
     
16,111
 
Provision for Income Taxes
   
3,998
     
2,645
 
NET INCOME AND NET INCOME AVAILABLE TO COMMON STOCKHOLDERS
 
$
17,612
   
$
13,466
 
                 
Basic Earnings Per Common Share
 
$
1.24
   
$
0.95
 
Diluted Earnings Per Common Share
 
$
1.23
   
$
0.95
 
Dividends Declared Per Common Share
 
$
1.07
   
$
0.28
 

See Notes to Consolidated Financial Statements

3





GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)

   
THREE MONTHS ENDED
MARCH 31,
 
   
2019
   
2018
 
   
(Unaudited)
 
             
Net Income
 
$
17,612
   
$
13,466
 
                 
Unrealized appreciation (depreciation) on available-for-sale securities,
   net of taxes (credit) of $879 and $(541), for 2019 and 2018, respectively
   
2,977
     
(1,881
)
                 
Reclassification adjustment for gains included in net income,
   net of taxes of $2 and $0, for 2019 and 2018, respectively
   
(8
)
   
 
                 
Change in fair value of cash flow hedge, net of taxes of $1,712 and $0,
   for 2019 and 2018, respectively
   
5,800
     
 
                 
Comprehensive Income
 
$
26,381
   
$
11,585
 

See Notes to Consolidated Financial Statements



















4




GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except per share data)


                     
Accumulated
             
                     
Other
             
   
Common
   
Additional
   
Retained
   
Comprehensive
   
Treasury
       
   
Stock
   
Paid-in Capital
   
Earnings
   
Income (Loss)
   
Stock
   
Total
 
   
(Unaudited)
 
                                     
Balance, January 1, 2018
 
$
141
   
$
28,203
   
$
442,077
   
$
1,241
   
$
   
$
471,662
 
Net income
   
     
     
13,466
     
     
     
13,466
 
Stock issued under Stock Option
                                               
Plan
   
     
421
     
     
     
283
     
704
 
Common dividends declared,
   
     
     
(3,951
)
   
     
     
(3,951
)
$0.28 per share
                                               
Reclassification of stranded tax
                                               
effects resulting from change in
                                               
Federal income tax rate
   
     
     
(272
)
   
272
     
     
 
Other comprehensive gain (loss)
   
     
     
     
(1,881
)
   
     
(1,881
)
Reclassification of treasury stock
                                               
per Maryland law
   
     
     
283
     
     
(283
)
   
 
                                                 
Balance, March 31, 2018
 
$
141
   
$
28,624
   
$
451,603
   
$
(368
)
 
$
   
$
480,000
 
                                                 

                     
Accumulated
             
                     
Other
             
   
Common
   
Additional
   
Retained
   
Comprehensive
   
Treasury
       
   
Stock
   
Paid-in Capital
   
Earnings
   
Income (Loss)
   
Stock
   
Total
 
   
(Unaudited)
 
                                     
Balance, January 1, 2019
 
$
142
   
$
30,121
   
$
492,087
   
$
9,627
   
$
   
$
531,977
 
Net income
   
     
     
17,612
     
     
     
17,612
 
Stock issued under Stock Option
                                               
Plan
   
     
795
     
     
     
477
     
1,272
 
Common dividends declared,
   
     
     
(15,146
)
   
     
     
(15,146
)
$1.07 per share
                                               
Purchase of the Company’s
                                               
common stock
   
     
     
     
     
(849
)
   
(849
)
Other comprehensive gain
   
     
     
     
8,769
     
     
8,769
 
Reclassification of treasury stock
                                               
per Maryland law
   
     
     
(372
)
   
     
372
     
 
                                                 
Balance, March 31, 2019
 
$
142
   
$
30,916
   
$
494,181
   
$
18,396
   
$
   
$
543,635
 
                                                 






5





GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

   
THREE MONTHS ENDED
MARCH 31,
 
   
2019
   
2018
 
   
(Unaudited)
 
             
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net income
 
$
17,612
   
$
13,466
 
Proceeds from sales of loans held for sale
   
13,571
     
22,807
 
Originations of loans held for sale
   
(13,502
)
   
(18,926
)
Items not requiring (providing) cash:
               
Depreciation
   
2,264
     
2,226
 
Amortization
   
552
     
754
 
Compensation expense for stock option grants
   
220
     
177
 
Provision for loan losses
   
1,950
     
1,950
 
Net gains on loan sales
   
(248
)
   
(462
)
Net realized gains on sales of available-for-sale securities
   
(10
)
   
 
Net losses on sale of premises and equipment
   
8
     
38
 
Net losses on sale/write-down of other real estate owned and repossessions
   
120
     
389
 
Accretion of deferred income, premiums, discounts and other
   
(1,010
)
   
(707
)
(Gain) loss on derivative interest rate products
   
25
     
(37
)
Deferred income taxes
   
287
     
(6,355
)
Changes in:
               
Interest receivable
   
(1,102
)
   
194
 
Prepaid expenses and other assets
   
3,401
     
8,195
 
Accrued expenses and other liabilities
   
4,130
     
333
 
Income taxes refundable/payable
   
1,492
     
5,873
 
Net cash provided by operating activities
   
29,760
     
29,915
 
CASH FLOWS FROM INVESTING ACTIVITIES
               
Net change in loans
   
(50,733
)
   
(29,488
)
Purchase of loans
   
(14,240
)
   
(13,000
)
Purchase of premises and equipment
   
(2,363
)
   
(4,292
)
Proceeds from sale of premises and equipment
   
83
     
11
 
Proceeds from sale of other real estate owned and repossessions
   
2,256
     
4,320
 
Proceeds from sales of available-for-sale securities
   
28,057
     
 
Proceeds from maturities and calls of available-for-sale securities
   
5,535
     
2,030
 
Principal reductions on mortgage-backed securities
   
3,159
     
4,810
 
Purchase of available-for-sale securities
   
(66,764
)
   
(1,859
)
Redemption of Federal Home Loan Bank stock
   
6,805
     
504
 
Net cash used in investing activities
   
(88,205
)
   
(36,964
)
CASH FLOWS FROM FINANCING ACTIVITIES
               
Net increase (decrease) in certificates of deposit
   
163,455
     
(70,680
)
Net increase in checking and savings deposits
   
67,643
     
35,737
 
Proceeds from Federal Home Loan Bank advances
   
     
604,500
 
Repayments of Federal Home Loan Bank advances
   
     
(598,000
)
Net increase (decrease) in short-term borrowings
   
(157,141
)
   
14,339
 
Advances from borrowers for taxes and insurance
   
2,772
     
1,736
 
Dividends paid
   
(15,139
)
   
(3,381
)
Purchase of the Company’s common stock
   
(849
)
   
 
Stock options exercised
   
1,052
     
527
 
Net cash provided by (used in) financing activities
   
61,793
     
(15,222
)
INCREASES ( DECREASES) IN CASH AND CASH EQUIVALENTS
   
3,348
     
(22,271
)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
   
202,742
     
242,253
 
CASH AND CASH EQUIVALENTS, END OF PERIOD
 
$
206,090
   
$
219,982
 

See Notes to Consolidated Financial Statements

6





GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: BASIS OF PRESENTATION

The accompanying unaudited interim consolidated financial statements of Great Southern Bancorp, Inc. (the "Company" or "Great Southern") have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The financial statements presented herein reflect all adjustments which are, in the opinion of management, necessary to fairly present the financial condition, results of operations, changes in stockholders’ equity and cash flows of the Company as of the dates and for the periods presented. Those adjustments consist only of normal recurring adjustments. Operating results for the three months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the full year. The consolidated statement of financial condition of the Company as of December 31, 2018, has been derived from the audited consolidated statement of financial condition of the Company as of that date.  Certain prior period amounts have been reclassified to conform to the current period presentation.  These reclassifications had no effect on net income.

Certain information and note disclosures normally included in the Company's annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for 2018 filed with the Securities and Exchange Commission.


NOTE 2: NATURE OF OPERATIONS AND OPERATING SEGMENTS

The Company operates as a one-bank holding company.  The Company’s business primarily consists of the operations of Great Southern Bank (the “Bank”), which provides a full range of financial services to customers primarily located in Missouri, Iowa, Kansas, Minnesota, Nebraska and Arkansas.  The Bank also originates commercial loans from lending offices in Dallas, Texas, Tulsa, Okla., Chicago, Ill., Atlanta, Ga., Denver, Colo. and Omaha, Neb.  The Company and the Bank are subject to regulation by certain federal and state agencies and undergo periodic examinations by those regulatory agencies.

The Company’s banking operation is its only reportable segment.  The banking operation is principally engaged in the business of originating residential and commercial real estate loans, construction loans, commercial business loans and consumer loans and funding these loans through attracting deposits from the general public, accepting brokered deposits and borrowing from the Federal Home Loan Bank and others.  The operating results of this segment are regularly reviewed by management to make decisions about resource allocations and to assess performance.  Selected information is not presented separately for the Company’s reportable segment, as there is no material difference between that information and the corresponding information in the consolidated financial statements.


NOTE 3: RECENT ACCOUNTING PRONOUNCEMENTS

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) and in July 2018 FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases.  The amendments in this Update revise the accounting related to lessee accounting.  Under the new guidance, lessees are required to recognize a lease liability and a right-of-use asset for all leases.  The Update became effective for the Company on January 1, 2019.  Adoption of the standard required the use of a modified retrospective transition approach for all periods presented at the time of adoption.  Based on the Company’s leases outstanding at December 31, 2018, which totaled less than 20 leased properties and no significant leased equipment, the adoption of the new standard did not have a material impact on our consolidated statements of financial condition or our consolidated statements of income, although an increase to assets and liabilities occurred at the time of adoption.  In the first quarter of 2019, the Company recognized a lease liability and a corresponding right-of-use asset for all leases of $9.5 million based on the lease portfolio at that time.  Subsequent to December 31, 2018, the Company’s lease terminations, new leases and lease modifications and

7





renewals will impact the amount of lease liability and a corresponding right-of-use asset recognized.  The Company’s leases are currently all “operating leases” as defined in the Update; therefore, no material change in the income statement presentation of lease expense occurred in the three months ended March 31, 2019. The Company’s lease activities are discussed further in Note 9 of the Notes to Consolidated Financial Statements contained in this report.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326).  The Update amends guidance on reporting credit losses for assets held at amortized cost and available for sale debt securities. For assets held at amortized cost, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. This Update affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash.  For public companies, the update is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption will be permitted beginning after December 15, 2018. An entity will apply the amendments in this update on a modified retrospective basis, through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company previously formed a cross-functional committee to oversee the system, data, reporting and other considerations for purposes of meeting the requirements of this standard.  Data and system needs were assessed.  As a result, third-party software was acquired and implemented to manage the data.  We have completed the upload of the necessary historical loan data to the software that will be used in meeting certain requirements of this standard.  Our loss data covers multiple credit cycles back to 2003.  Parallel testing of the new methodology compared to the current methodology commenced in 2019 and the Company continues to evaluate the impact of adopting the new guidance.  We expect to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective for us (the three-month period ending March 31, 2020), but cannot yet determine the magnitude of any such one-time adjustment, or the overall impact of the new guidance on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles: Goodwill and Other: Simplifying the Test for Goodwill Impairment (Topic 350). To simplify the subsequent measurement of goodwill, the amendments eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test should be performed by comparing the fair value of a reporting unit with its carrying amount and an impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value.  An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the qualitative impairment test is necessary.  The nature of and reason for the change in accounting principle should be disclosed upon transition. The amendments in this update should be adopted for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted on testing dates after January 1, 2017.  We are currently evaluating the impact of adopting the new guidance, including consideration of early adoption, on the consolidated financial statements, but it is not expected to have a material impact.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements on fair value measurements in Topic 820. The amendments in this update remove disclosures that no longer are considered cost beneficial, modify/clarify the specific requirements of certain disclosures, and add disclosure requirements identified as relevant. ASU 2018-13 is effective for period beginning after December 15, 2019, with early adoption permitted for certain removed and modified disclosures, and is not expected to have a significant impact on our financial statements.

8





NOTE 4: EARNINGS PER SHARE

   
Three Months Ended March 31,
 
   
2019
   
2018
 
   
(In Thousands, Except Per Share Data)
 
             
Basic:
           
Average common shares outstanding
   
14,159
     
14,101
 
Net income and net income available to common stockholders
 
$
17,612
   
$
13,466
 
Per common share amount
 
$
1.24
   
$
0.95
 
                 
Diluted:
               
Average common shares outstanding
   
14,159
     
14,101
 
Net effect of dilutive stock options – based on the treasury
               
stock method using average market price
   
108
     
131
 
Diluted common shares
   
14,267
     
14,232
 
Net income and net income available to common stockholders
 
$
17,612
   
$
13,466
 
Per common share amount
 
$
1.23
   
$
0.95
 

Options outstanding at March 31, 2019 and 2018, to purchase 413,719 and 252,911 shares of common stock, respectively, were not included in the computation of diluted earnings per common share for each of the three month periods because the exercise prices of such options were greater than the average market prices of the common stock for the three months ended March 31, 2019 and 2018, respectively.


NOTE 5: INVESTMENT SECURITIES

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

   
March 31, 2019
 
         
Gross
   
Gross
         
Tax
 
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
   
Equivalent
 
   
Cost
   
Gains
   
Losses
   
Value
   
Yield
 
   
(In Thousands)
 
                               
AVAILABLE-FOR-SALE SECURITIES:
                             
Agency mortgage-backed securities
 
$
178,170
   
$
3,587
   
$
1,561
   
$
180,196
     
3.05
%
Agency collateralized mortgage obligations
   
52,414
     
592
     
     
53,006
     
3.31
 
States and political subdivisions
   
42,955
     
1,593
     
     
44,548
     
4.92
 
   
$
273,539
   
$
5,772
   
$
1,561
   
$
277,750
     
3.40
%

   
December 31, 2018
 
         
Gross
   
Gross
         
Tax
 
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
   
Equivalent
 
   
Cost
   
Gains
   
Losses
   
Value
   
Yield
 
   
(In Thousands)
 
                               
AVAILABLE-FOR-SALE SECURITIES:
                             
Agency mortgage-backed securities
 
$
154,557
   
$
1,272
   
$
2,571
   
$
153,258
     
2.83
%
Agency collateralized mortgage obligations
   
39,024
     
250
     
14
     
39,260
     
3.18
 
States and political subdivisions
   
50,022
     
1,428
     
     
51,450
     
4.81
 
   
$
243,603
   
$
2,950
   
$
2,585
   
$
243,968
     
3.29
%

9





The amortized cost and fair value of available-for-sale securities at March 31, 2019, by contractual maturity, are shown below.  Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

   
Amortized
   
Fair
 
   
Cost
   
Value
 
   
(In Thousands)
 
             
One year or less
 
$
   
$
 
After one through five years
   
859
     
934
 
After five through ten years
   
9,617
     
9,918
 
After ten years
   
32,479
     
33,696
 
Securities not due on a single maturity date
   
230,584
     
233,202
 
                 
   
$
273,539
   
$
277,750
 

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. Total fair value of these investments at March 31, 2019 and December 31, 2018, was approximately $67.1 million and $95.7 million, respectively, which is approximately 24.2% and 39.2% of the Company’s available-for-sale investment portfolio, respectively.

Based on an evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for these debt securities are temporary.

The following table shows the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2019  and December 31, 2018:

   
March 31, 2019
 
   
Less than 12 Months
   
12 Months or More
   
Total
 
   
Fair
   
Unrealized
   
Fair
   
Unrealized
   
Fair
   
Unrealized
 
Description of Securities
 
Value
   
Losses
   
Value
   
Losses
   
Value
   
Losses
 
   
(In Thousands)
 
                                     
Agency mortgage-backed securities
 
$
1,797
   
$
(8
)
 
$
65,335
   
$
(1,553
)
 
$
67,132
   
$
(1,561
)
   

   


 

   


 

   



   
December 31, 2018
 
   
Less than 12 Months
   
12 Months or More
   
Total
 
   
Fair
   
Unrealized
   
Fair
   
Unrealized
   
Fair
   
Unrealized
 
Description of Securities
 
Value
   
Losses
   
Value
   
Losses
   
Value
   
Losses
 
   
(In Thousands)
 
                                     
Agency mortgage-backed securities
 
$
11,255
   
$
(82
)
 
$
74,186
   
$
(2,489
)
 
$
85,441
   
$
(2,571
)
Agency collateralized mortgage obligations
   
9,725
     
(14
)
   
     
     
9,725
     
(14
)
State and political subdivisions
   
511
     
     
     
     
511
     
 
   
$
21,491
   
$
(96
)
 
$
74,186
   
$
(2,489
)
 
$
95,677
   
$
(2,585
)

10





Gross gains of $226,000 and gross losses of $216,000 resulting from sales of available-for-sale securities were realized during the three months ended March 31, 2019.  There were no sales of available-for-sale securities during the three months ended March 31, 2018.  Gains and losses on sales of securities are determined on the specific-identification method.

Other-than-temporary Impairment.  Upon acquisition of a security, the Company decides whether it is within the scope of the accounting guidance for beneficial interests in securitized financial assets or will be evaluated for impairment under the accounting guidance for investments in debt and equity securities.

The accounting guidance for beneficial interests in securitized financial assets provides incremental impairment guidance for a subset of the debt securities within the scope of the guidance for investments in debt and equity securities.  For securities where the security is a beneficial interest in securitized financial assets, the Company uses the beneficial interests in securitized financial asset impairment model.  For securities where the security is not a beneficial interest in securitized financial assets, the Company uses the debt and equity securities impairment model.  The Company does not currently have securities within the scope of this guidance for beneficial interests in securitized financial assets.

The Company routinely conducts periodic reviews to identify and evaluate each investment security to determine whether an other-than-temporary impairment has occurred.  The Company considers the length of time a security has been in an unrealized loss position, the relative amount of the unrealized loss compared to the carrying value of the security, the type of security and other factors.  If certain criteria are met, the Company performs additional review and evaluation using observable market values or various inputs in economic models to determine if an unrealized loss is other-than-temporary.  The Company uses quoted market prices for marketable equity securities and uses broker pricing quotes based on observable inputs for equity investments that are not traded on a stock exchange.  For non-agency collateralized mortgage obligations, to determine if the unrealized loss is other than temporary, the Company projects total estimated defaults of the underlying assets (mortgages) and multiplies that calculated amount by an estimate of realizable value upon sale in the marketplace (severity) in order to determine the projected collateral loss.  The Company also evaluates any current credit enhancement underlying these securities to determine the impact on cash flows.  If the Company determines that a given security position will be subject to a write-down or loss, the Company records the expected credit loss as a charge to earnings.

During the three months ended March 31, 2019 and 2018, respectively, no securities were determined to have impairment that had become other-than-temporary.

Credit Losses Recognized on Investments.  During the three months ended March 31, 2019 and 2018, respectively, there were no debt securities that had experienced fair value deterioration due to credit losses, or due to other market factors, but were not otherwise other-than-temporarily impaired.

Amounts Reclassified Out of Accumulated Other Comprehensive Income.  Amounts reclassified from accumulated other comprehensive income and the affected line items in the statements of income during the three months ended March 31, 2019 and 2018, are shown below.  The FASB previously issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220). The amendment allows an entity to elect to reclassify the stranded tax effects resulting from the change in income tax rate from H.R.1, originally known as the “Tax Cuts and Jobs Act” (the “Tax Act”), from accumulated other comprehensive income to retained earnings.  The Company chose to early adopt ASU 2018-02 effective January 1, 2018.  The stranded tax amount related to unrealized gains and losses on available for sale securities, which was reclassified from accumulated other comprehensive income to retained earnings at the time of adoption, was $272,000.  There were no other income tax effects related to the application of the Tax Act to be reclassified from AOCI to retained earnings.

11






   
Amounts Reclassified from
Accumulated Other
   
   
Comprehensive Income
Three Months Ended March 31,
 
Affected Line Item in the
   
2019
   
2018
 
Statements of Income
   
(In Thousands)
   
                  
Unrealized gains on available-
           
Net realized gains on sales of
for-sale securities
 
$
10
   
$
--
 
available-for-sale securities
                 
(Total reclassified amount before tax)
Income Taxes
   
(2
)
   
--
 
Provision for income taxes
Total reclassifications out of accumulated
                   
other comprehensive income
 
$
8
   
$
--
   


NOTE 6: LOANS AND ALLOWANCE FOR LOAN LOSSES

Classes of loans at March 31, 2019 and December 31, 2018 were as follows:

   
March 31,
   
December 31,
 
   
2019
   
2018
 
   
(In Thousands)
 
             
One- to four-family residential construction
 
$
26,935
   
$
26,177
 
Subdivision construction
   
12,352
     
13,844
 
Land development
   
46,438
     
44,492
 
Commercial construction
   
1,328,853
     
1,417,166
 
Owner occupied one- to four-family residential
   
288,933
     
276,866
 
Non-owner occupied one- to four-family residential
   
118,258
     
122,438
 
Commercial real estate
   
1,388,678
     
1,371,435
 
Other residential
   
864,990
     
784,894
 
Commercial business
   
321,327
     
322,118
 
Industrial revenue bonds
   
13,702
     
13,940
 
Consumer auto
   
229,700
     
253,528
 
Consumer other
   
53,348
     
57,350
 
Home equity lines of credit
   
120,696
     
121,352
 
Loans acquired and accounted for under ASC 310-30, net of discounts
   
161,125
     
167,651
 
     
4,975,335
     
4,993,251
 
Undisbursed portion of loans in process
   
(879,500
)
   
(958,441
)
Allowance for loan losses
   
(38,651
)
   
(38,409
)
Deferred loan fees and gains, net
   
(6,848
)
   
(7,400
)
   
$
4,050,336
   
$
3,989,001
 
                 
Weighted average interest rate
   
5.23
%
   
5.16
%






12





Classes of loans by aging were as follows:

   
March 31, 2019
 
                                       
Total Loans
 
                                 
Total
   
> 90 Days
 
   
30-59 Days
   
60-89 Days
   
Over
   
Total
         
Loans
   
Past Due and
 
   
Past Due
   
Past Due
   
90 Days
   
Past Due
   
Current
   
Receivable
   
Still Accruing
 
   
(In Thousands)
 
                                           
One- to four-family
                                         
residential construction
 
$
   
$
   
$
   
$
   
$
26,935
   
$
26,935
   
$
 
Subdivision construction
   
53
     
     
     
53
     
12,299
     
12,352
     
 
Land development
   
78
     
     
18
     
96
     
46,342
     
46,438
     
 
Commercial construction
   
     
     
     
     
1,328,853
     
1,328,853
     
 
Owner occupied one- to
                                                       
four-family residential
   
2,390
     
248
     
949
     
3,587
     
285,346
     
288,933
     
 
Non-owner occupied one-
                                                       
to four-family residential
   
135
     
36
     
164
     
335
     
117,923
     
118,258
     
 
Commercial real estate
   
714
     
1,950
     
847
     
3,511
     
1,385,167
     
1,388,678
     
 
Other residential
   
4,439
     
     
     
4,439
     
860,551
     
864,990
     
 
Commercial business
   
74
     
     
1,405
     
1,479
     
319,848
     
321,327
     
 
Industrial revenue bonds
   
     
     
     
     
13,702
     
13,702
     
 
Consumer auto
   
1,727
     
417
     
822
     
2,966
     
226,734
     
229,700
     
 
Consumer other
   
661
     
72
     
194
     
927
     
52,421
     
53,348
     
 
Home equity lines of credit
   
150
     
     
238
     
388
     
120,308
     
120,696
     
 
Loans acquired and
                                                       
accounted for under
                                                       
ASC 310-30, net of
                                                       
discounts
   
3,461
     
76
     
3,540
     
7,077
     
154,048
     
161,125
     
 
     
13,882
     
2,799
     
8,177
     
24,858
     
4,950,477
     
4,975,335
     
 
Less loans acquired and accounted for
                                                       
under ASC 310-30, net
   
3,461
     
76
     
3,540
     
7,077
     
154,048
     
161,125
     
 
                                                         
Total
 
$
10,421
   
$
2,723
   
$
4,637
   
$
17,781
   
$
4,796,429
   
$
4,814,210
   
$
 





13





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


Nonaccruing loans (excluding FDIC-assisted acquired loans, net of discount) are summarized as follows:

   
March 31,
   
December 31,
 
   
2019
   
2018
 
   
(In Thousands)
 
             
One- to four-family residential construction
 
$
   
$
 
Subdivision construction
   
     
 
Land development
   
18
     
49
 
Commercial construction
   
     
 
Owner occupied one- to four-family residential
   
949
     
1,206
 
Non-owner occupied one- to four-family residential
   
164
     
1,458
 
Commercial real estate
   
847
     
334
 
Other residential
   
     
 
Commercial business
   
1,405
     
1,437
 
Industrial revenue bonds
   
     
 
Consumer auto
   
822
     
1,490
 
Consumer other
   
194
     
240
 
Home equity lines of credit
   
238
     
86
 
                 
Total
 
$
4,637
   
$
6,300
 

14





The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2019.  Also presented are the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of March 31, 2019:

   
One- to Four-
                                     
   
Family
                                     
   
Residential and
   
Other
   
Commercial
   
Commercial
   
Commercial
             
   
Construction
   
Residential
   
Real Estate
   
Construction
   
Business
   
Consumer
   
Total
 
   
(In Thousands)
 
                                           
Allowance for loan losses
                                         
Balance, January 1, 2019
 
$
3,122
   
$
4,713
   
$
19,803
   
$
3,105
   
$
1,568
   
$
6,098
   
$
38,409
 
Provision (benefit) charged to expense
   
358
     
723
     
1,163
     
(571
)
   
(152
)
   
429
     
1,950
 
Losses charged off
   
(455
)
   
     
     
(31
)
   
(74
)
   
(2,206
)
   
(2,766
)
Recoveries
   
11
     
     
15
     
12
     
142
     
878
     
1,058
 
 Balance, March 31, 2019
 
$
3,036
   
$
5,436
   
$
20,981
   
$
2,515
   
$
1,484
   
$
5,199
   
$
38,651
 
                                                         
Ending balance:
                                                       
Individually evaluated for
                                                       
impairment
 
$
382
   
$
   
$
946
   
$
   
$
246
   
$
327
   
$
1,901
 
Collectively evaluated for
                                                       
impairment
 
$
2,615
   
$
5,404
   
$
19,819
   
$
2,463
   
$
1,226
   
$
4,841
   
$
36,368
 
Loans acquired and
                                                       
accounted for under
                                                       
ASC 310-30
 
$
39
   
$
32
   
$
216
   
$
52
   
$
12
   
$
31
   
$