GREAT SOUTHERN BANCORP INC

Previous wording

Since our business is primarily concentrated in Missouri, Iowa, Kansas and Minnesota, a significant downturn in these state or local economies, particularly in the St. Louis and Springfield, Missouri areas, may adversely affect our business. We also have originated a significant dollar amount of loans in Texas from our commercial loan production office in Dallas. A significant downturn in that state’s economy may adversely affect our business.

Current wording

Since our business is primarily concentrated in Missouri, Iowa, Kansas and Minnesota, a significant downturn in these state or local economies, particularly in the St. Louis and Springfield, Missouri areas, may adversely affect our business. We also have originated a significant dollar amount of loans in Texas through our commercial loan production office in Dallas. A significant downturn in that state’s economy may adversely affect our business.

Previous wording

Our lending and deposit gathering activities historically were concentrated primarily in the Springfield and southwest Missouri areas. Our success continues to depend heavily on general economic conditions in Springfield and the surrounding areas. Although we believe the economy in these areas has recently been favorable relative to other areas, we do not know whether these conditions will continue. Until the past few years, our greatest concentration of loans and deposits has traditionally been in the greater Springfield area. With a population of approximately 485,000, the greater Springfield area is the third largest metropolitan area in Missouri. At December 31, 2023, approximately $354.8 million, or 7.6%, of our loan portfolio consisted of loans to borrowers in or secured by properties in the Springfield metropolitan area.

Current wording

Our lending and deposit gathering activities historically were concentrated primarily in the Springfield and southwest Missouri areas. Our success continues to depend heavily on general economic conditions in Springfield and the surrounding areas. Although we believe the economy in these areas has recently been favorable relative to other areas, we do not know whether these conditions will continue. Until the past several years, our greatest concentration of loans and deposits has traditionally been in the greater Springfield area. With a population of approximately 491,000, the greater Springfield area is the third largest metropolitan area in Missouri. At December 31, 2024, approximately $372.0 million, or 7.8%, of our loan portfolio consisted of loans to borrowers in or secured by properties in the Springfield metropolitan area.

Previous wording

In addition to the concentrations in the southwest Missouri area, we now have our largest concentration of loans to borrowers in or secured by properties in the St. Louis metropolitan area. At December 31, 2023, approximately $788.6 million, or 16.9%, of our loan portfolio consisted of loans for apartments and other types of commercial real estate properties in the St. Louis metropolitan area.

Current wording

In addition to the concentrations in the southwest Missouri area, we now have our largest concentration of loans to borrowers in or secured by properties in the St. Louis metropolitan area. At December 31, 2024, approximately $781.4 million, or 16.4%, of our loan portfolio consisted of loans for apartments and other types of commercial real estate properties in the St. Louis metropolitan area.

Previous wording

Also, we have a significant amount of loans to borrowers in or secured by properties in Texas. At December 31, 2023, approximately $502.0 million, or 10.8%, of our loan portfolio consisted of loans primarily for various types of commercial real estate in Texas.

Current wording

Also, we have a significant amount of loans to borrowers in or secured by properties in Texas, primarily through our commercial loan production office in Dallas. At December 31, 2024, approximately $586.4 million, or 12.3%, of our loan portfolio consisted of loans primarily for various types of commercial real estate in Texas.

Previous wording

and Iowa, respectively. In recent years, we have opened commercial loan production offices in Atlanta, Chicago and Denver, and in 2022 we opened commercial loan production offices in Phoenix and Charlotte, North Carolina. We expect loans originated through these offices to result in significant loan balances secured by properties located in Georgia, Illinois, Colorado, Arizona and North Carolina.

Current wording

With the FDIC-assisted transactions that were completed in 2009-2014, we have additional concentrations of loans in the Minneapolis metropolitan area and in Western, Eastern and Central Iowa. At December 31, 2024, approximately $354.7 million, or 7.4%, and $355.3 million, or 7.4%, of our loan portfolio consisted of loans primarily for various types of commercial real estate in Minnesota and Iowa, respectively. In recent years, we have opened commercial loan production offices in Atlanta, Chicago and Denver, and in 2022 we opened commercial loan production offices in Phoenix and Charlotte, North Carolina. We expect loans originated through these offices to result in significant loan balances secured by properties located in Georgia, Illinois, Colorado, Arizona and North Carolina.

Previous wording

Inflation has risen sharply since the end of 2021 to levels not seen in more than 40 years. In the second half of 2023, inflation measures moderated but are still higher than levels targeted by the FRB. Small to medium-sized businesses may be impacted more during periods of high inflation, as they are not able to leverage economics of scale to mitigate cost pressures compared to larger businesses. Consequently, the ability of our business customers to repay their loans may deteriorate, and in some cases this deterioration may occur quickly, which would adversely impact our results of operations and financial condition. Furthermore, a prolonged period of inflation could cause wages and other costs to the Company to increase, which could adversely affect our results of operations and financial condition.

Current wording

Inflation rose sharply from the end of 2021 to mid-2024 to levels not seen in more than 40 years. In the second half of 2023 and into 2024, inflation measures moderated but were still higher than levels targeted by the FRB. Small to medium-sized businesses may be impacted more during periods of high inflation, as they are not able to leverage economies of scale to mitigate cost pressures compared to larger businesses. Consequently, the ability of our business customers to repay their loans may deteriorate, and in some cases this deterioration may occur quickly, which would adversely impact our results of operations and financial condition. Furthermore, a prolonged period of inflation could cause wages and other costs to the Company to increase, which could adversely affect our results of operations and financial condition.

Previous wording

The economic impact of the COVID-19 pandemic, or similar crises, could continue to adversely affect us.

Current wording

The economic impact of new or continuing public health issues, or similar crises, could continue to adversely affect us.

Previous wording

The COVID-19 pandemic adversely impacted the global and national economy and certain industries and geographies in which our customers reside and operate. Because of its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 pandemic on the Company and its customers, employees and third-party service providers. The extent of this impact will depend on future developments, which are highly uncertain. Additionally, the responses of various governmental and nongovernmental authorities and consumers to the pandemic may have material long-term effects on the Company and its customers, which are difficult to quantify in the near-term or long-term.

Current wording

New or continuing public health issues could adversely impact the global and national economy and certain industries and geographies in which our customers reside and operate. Because of their potential ongoing and changing nature regarding severity and broad coverage, it is difficult to predict the full impact of any such crises on the Company and its customers, employees and third-party service providers. The extent of this impact will depend on future developments, which are highly uncertain. Additionally, the responses of various governmental and nongovernmental authorities and consumers to any new or continuing public health issues may have material long-term effects on the Company and its customers, which are difficult to quantify in the near-term or long-term.

Previous wording

We could be subject to a number of risks as the result of the COVID-19 pandemic, or other similar crises, any of which could have a material adverse effect on our business, financial condition, liquidity and results of operations. These risks include, but are not limited to, changes in demand for our products and services; increased loan losses or other impairments in our loan portfolios and increases in our allowance for loan losses; a decline in collateral for our loans, especially real estate; unanticipated unavailability of employees; increased cyber security risks to the extent employees work remotely; a prolonged weakness in economic conditions; and increased costs as we and our regulators, customers and third-party service providers adapt to evolving pandemic conditions.

Current wording

We could be subject to a number of risks as the result of any such crises, which could have a material adverse effect on our business, financial condition, liquidity and results of operations. These risks include, but are not limited to, changes in demand for our products and services; increased loan losses or other impairments in our loan portfolios and increases in our allowance for loan losses; a decline in collateral for our loans, especially real estate; unanticipated unavailability of employees; increased cyber security risks to the extent employees work remotely; a prolonged weakness in economic conditions; and increased costs as we and our regulators, customers and third-party service providers adapt to evolving conditions.

Previous wording

Severe weather and other natural disasters, acts of war or terrorism, new public health issues or other adverse external events could harm our business.

Current wording

Severe weather and other natural disasters, acts of war or terrorism or other adverse external events could harm our business.

Previous wording

Severe weather and other natural disasters, acts of war or terrorism, new public health issues or other adverse external events could have a significant impact on our ability to conduct business. Such events could harm our operations through interference with communications, including the interruption or loss of our computer systems, which could prevent or impede us from gathering deposits, originating loans and processing and controlling the flow of business, as well as through the destruction of our facilities and our operational, financial and management information systems. There is no assurance that our business continuity and disaster recovery program can adequately mitigate these risks. Such events could also affect the stability of our deposit base, cause significant property damage, adversely affect our employees, adversely impact the values of collateral securing our loans and/or interfere with our borrowers’ abilities to repay their debt obligations to us.

Current wording

Severe weather and other natural disasters, acts of war or terrorism or other adverse external events could have a significant impact on our ability to conduct business. Such events could harm our operations through interference with communications, including the interruption or loss of our computer systems, which could prevent or impede us from gathering deposits, originating loans and processing and controlling the flow of business, as well as through the destruction of our facilities and our operational, financial and management information systems. There is no assurance that our business continuity and disaster recovery program can adequately mitigate these risks. Such events could also affect the stability of our deposit base, cause significant property damage, adversely affect our employees, adversely impact the values of collateral securing our loans and/or interfere with our borrowers’ abilities to repay their debt obligations to us.

Previous wording

Our commercial and other residential (multi-family) construction, commercial real estate, other residential (multi-family) and other commercial loans accounted for approximately 77.1% of our total loan portfolio as of December 31, 2023. Generally, we consider these types of loans to involve a higher degree of risk compared to first mortgage loans on one- to four-family, owner-occupied residential properties. At December 31, 2023, including completed projects and those under construction, we had $1.50 billion of loans secured by apartments, $319.2 million of loans secured by retail-related projects, $291.8 million of loans secured by warehouse facilities, $287.3 million of loans secured by healthcare facilities, $254.6 million of loans secured by motels/hotels and $215.0 million of loans secured by office facilities, which are particularly sensitive to certain risks, including the following:

Current wording

Our commercial and other residential (multi-family) construction, commercial real estate, other residential (multi-family) and other commercial loans accounted for approximately 78.8% of our total loan portfolio as of December 31, 2024. Generally, we consider these types of loans to involve a higher degree of risk compared to first mortgage loans on one- to four-family, owner-occupied residential properties. At December 31, 2024, including completed projects and those under construction, we had $1.75 billion of loans secured by apartments, $348.6 million of loans secured by retail-related projects, $288.4 million of loans secured by warehouse facilities, $270.0 million of loans secured by healthcare facilities, $269.0 million of loans secured by motels/hotels and $196.1 million of loans secured by office facilities, which are particularly sensitive to certain risks, including the following:

Previous wording

these types of loans, we may determine it necessary to increase the level of our provision for credit losses. Increased provisions for credit losses would adversely impact our operating results. See “Item 1. Business-The Company-Lending Activities-Commercial Real Estate and Construction Lending,” “-Other Commercial Lending,” “-Residential Real Estate Lending” and “-Allowance for Losses on Loans and Foreclosed Assets” and “Item 7. Management’s Discussion of Financial Condition and Results of Operations – Non-performing Assets” in this Report.

Current wording

We plan to continue to originate commercial real estate and construction loans based on economic and market conditions. From 2008 to 2013, there was not significant demand for these types of loans due to the economic downturn. In more recent years, demand for these types of loans has increased and we expect to continue to originate these types of loans. Because of the increased risks related to these types of loans, we may determine it necessary to increase the level of our provision for credit losses. Increased provisions for credit losses would adversely impact our operating results. See “Item 1. Business-The Company-Lending Activities-Commercial Real Estate and Construction Lending,” “-Other Commercial Lending,” “-Residential Real Estate Lending” and “-Allowance for Losses on Loans and Foreclosed Assets” and “Item 7. Management’s Discussion of Financial Condition and Results of Operations – Non-performing Assets” in this Report.

Previous wording

Our earnings are largely dependent upon our net interest income. Net interest income is the difference between interest income earned on interest-earning assets such as loans and investment securities and interest expense paid on interest-bearing liabilities such as deposits and borrowed funds. Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies, in particular, the FRB. Changes in monetary policy, including changes in interest rates, could influence not only the interest we receive on loans and securities and the amount of interest we pay on deposits and borrowings, but these changes could also affect our ability to originate loans and obtain deposits, the fair values of our financial assets and liabilities and the average duration of our loan and mortgage-backed securities portfolios. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore earnings, could be adversely affected. In addition, a substantial portion of our loans (approximately 61% of our total loan portfolio as of December 31, 2023) have adjustable rates of interest. While the higher payment amounts we would receive on these loans in a rising interest rate environment may increase our interest income, some borrowers may be less able to afford the higher payment amounts, which may result in a higher rate of default. Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings.

Current wording

Our earnings are largely dependent upon our net interest income. Net interest income is the difference between interest income earned on interest-earning assets such as loans and investment securities and interest expense paid on interest-bearing liabilities such as deposits and borrowed funds. Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies, in particular, the FRB. Changes in monetary policy, including changes in interest rates, could influence not only the interest we receive on loans and securities and the amount of interest we pay on deposits and borrowings, but these changes could also affect our ability to originate loans and obtain deposits, the fair values of our financial assets and liabilities and the average duration of our loan and mortgage-backed securities portfolios. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore earnings, could be adversely affected. In addition, a substantial portion of our loans (approximately 63% of our total loan portfolio as of December 31, 2024) have adjustable rates of interest. While the higher payment amounts we would receive on these loans in a rising interest rate environment may increase our interest income, some borrowers may be less able to afford the higher payment amounts, which may result in a higher rate of default. Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings.

Previous wording

Our operations may depend upon our continued ability to access brokered deposits, Federal Home Loan Bank advances and Federal Reserve Bank borrowings.

Current wording

Our operations may depend upon our continued ability to access brokered deposits, Federal Home Loan Bank advances and/or Federal Reserve Bank borrowings.

Previous wording

Due to the high level of competition for deposits in our markets, we have from time to time utilized a sizable amount of certificates of deposit obtained through deposit brokers and advances from the FHLBank to help fund our asset base. Brokered deposits are marketed through national brokerage firms that solicit funds from their customers for deposit in banks, including our bank. Brokered deposits and FHLBank advances may generally be more sensitive to changes in interest rates and volatility in the capital markets than retail deposits attracted through our branch network, and our reliance on these sources of funds increases the sensitivity of our portfolio to these external factors. Our brokered deposits and term FHLBank advances totaled $661.5 million and $-0- at December 31, 2023, compared with $411.5 million and $-0- at December 31, 2022. We had overnight borrowings from the FHLBank of $251.0 million and $88.5 million at December 31, 2023 and 2022, respectively. We expect to continue to utilize FHLBank advances and overnight borrowings and brokered deposits from time to time as a supplemental funding source.

Current wording

Due to the high level of competition for deposits in our markets, we have from time to time utilized a sizable amount of certificates of deposit obtained through deposit brokers and advances from the FHLBank to help fund our asset base. Brokered deposits are marketed through national brokerage firms that solicit funds from their customers for deposit in banks, including our bank. Brokered deposits and FHLBank advances may generally be more sensitive to changes in interest rates and volatility in the capital markets than retail deposits attracted through our branch network, and our reliance on these sources of funds increases the sensitivity of our portfolio to these external factors. Our brokered deposits and term FHLBank advances totaled $772.1 million and $-0-, respectively, at December 31, 2024, compared with $661.5 million and $-0-, respectively, at December 31, 2023. We had overnight borrowings from the FHLBank of $333.0 million and $251.0 million at December 31, 2024 and 2023, respectively. We expect to continue to utilize FHLBank advances and overnight borrowings and brokered deposits from time to time as a supplemental funding source.

Previous wording

Additionally, we have approved collateralized borrowing lines with the FRBSTL. In January 2024, the Bank borrowed $180.0 million under the Federal Reserve Bank’s BTFP. The borrowing, which matures in January 2025 and has a fixed interest rate of 4.83%, may be repaid in full or in part without penalty prior to its stated maturity date. The line is secured primarily by the Bank’s held-to-maturity investment securities, with assets pledged totaling approximately $191 million.

Current wording

In January 2024, the Bank borrowed $180.0 million under the Federal Reserve Bank’s BTFP. The borrowing matured and was repaid in January 2025. The line was secured primarily by the Bank’s held-to-maturity investment securities, with assets pledged totaling approximately $188 million as of December 31, 2024.

Previous wording

Certain Federal Home Loan Banks, including the Federal Home Loan Bank of Des Moines, have experienced lower earnings from time to time and paid out lower dividends to their members. Future problems at the Federal Home Loan Banks may impact the collateral necessary to secure borrowings and limit the borrowings extended to its member banks, as well as require additional capital contributions by its member banks. If this occurs, our short-term liquidity needs could be negatively impacted. Should Great Southern be restricted from using FHLBank advances due to weakness in the system or with the FHLBank of Des Moines, Great Southern may be forced to find alternative funding sources. These alternative funding sources may include the utilization of existing lines of credit with third party banks or the Federal Reserve Bank along with seeking other lines of credit, borrowing under repurchase agreement lines, increasing deposit rates to attract additional funds, accessing additional brokered deposits, or selling loans or investment securities in order to maintain adequate levels of liquidity. At December 31, 2023, the Bank owned $14.7 million of stock in the FHLBank of Des Moines, which declared and paid an annualized dividend approximating 8.50% during the fourth quarter of 2023. The FHLBank of Des Moines may eliminate or reduce dividend payments at any time in the future in order for it to maintain or restore its retained earnings, which would negatively affect our results of operations.

Current wording

Certain Federal Home Loan Banks, including the Federal Home Loan Bank of Des Moines, have experienced lower earnings from time to time and paid out lower dividends to their members. Future problems at the Federal Home Loan Banks may impact the collateral necessary to secure borrowings and limit the borrowings extended to its member banks, as well as require additional capital contributions by its member banks. If this occurs, our short-term liquidity needs could be negatively impacted. Should Great Southern be restricted from using FHLBank advances due to weakness in the system or with the FHLBank of Des Moines, Great Southern may be forced to find alternative funding sources. These alternative funding sources may include the utilization of existing lines of credit with third party banks or the Federal Reserve Bank along with seeking other lines of credit, borrowing under repurchase agreement lines, increasing deposit rates to attract additional funds, accessing additional brokered deposits, or selling loans or investment securities in order to maintain adequate levels of liquidity. At December 31, 2024, the Bank owned $18.5 million of stock in the FHLBank of Des Moines, which declared and paid an annualized dividend approximating 9.50% during the fourth quarter of 2024. The FHLBank of Des Moines may eliminate or reduce dividend payments at any time in the future in order for it to maintain or restore its retained earnings, which would negatively affect our results of operations.

Previous wording

The Company plans to convert its core operating systems and may encounter significant adverse developments.

Current wording

The Company is subject to significant risk if, in the future, it chooses to convert its core or other operating systems and may encounter significant adverse developments.

Previous wording

The Company plans to replace its core operating systems, including those for loans, deposits, financials and other ancillary systems (collectively referred to as core system). The core system is used to track customer relationships and accounts and report financial information for the Company. The core system is integrated with various other applications that are used to service customer requests by Bank personnel or directly by customers (such as online banking and mobile applications). Changing the core system will subject the Company to operational risks during and after the conversion, including disruptions to its technology systems, which may adversely impact our customers. The Company has plans, policies and procedures designed to prevent or limit the risks of a failure during or after the conversion of our core system. However, there can be no assurance that any such adverse developments will not occur or, if they do occur, that they will be timely and adequately remediated. The ultimate impact of any adverse development could damage the Company’s reputation, result in a loss of customer business, subject the Company to regulatory scrutiny, or expose it to civil litigation and possibly financial liability, any of which could have a material effect on the Company’s business, financial condition, and results of operations.

Current wording

If the Company replaces its core operating systems, including those for loans, deposits, financials and other ancillary systems (collectively referred to as core system), such systems conversions entail significant operational risks. The core system is used to track customer relationships and accounts and report financial information for the Company. The core system is integrated with various other applications that are used to service customer requests by Bank personnel or directly by customers (such as online banking and mobile applications). Changing the core system would subject the Company to operational risks during and after the conversion, including disruptions to its technology systems, which may adversely impact our customers. The Company has plans, policies and procedures designed to prevent or limit the risks of a failure during or after the conversion of our core systems. However, there can be no assurance that any such adverse developments will not occur or, if they do occur, that they will be timely and adequately remediated. The ultimate impact of any adverse development could damage the Company’s reputation, result in a loss of customer business, subject the Company to regulatory scrutiny, or expose it to civil litigation and possibly financial liability, any of which could have a material effect on the Company’s business, financial condition, and results of operations.

Previous wording

The Company’s Chairman of the Board, William V. Turner, and the Company’s Director, President and Chief Executive Officer, Joseph W. Turner, are father and son, respectively. Julie Turner Brown, a director of the Company, is the sister of Joseph Turner and the daughter of William Turner. These three Turner family members hold three of the Company’s nine Board positions. As of December 31, 2023, they also collectively beneficially owned approximately 2,108,835 shares of the Company’s common stock (excluding 85,876 shares underlying stock options exercisable as of or within 60 days after that date), representing approximately 17.9% of total shares outstanding, though they are subject to the voting limitation provision in our charter which precludes any person or group with beneficial ownership in excess of 10% of total shares outstanding from voting shares in excess of that threshold. Through their board and management positions and their ownership of the Company’s stock, these three members of the Turner family may exert substantial influence over the direction of the Company and the outcome of Board and stockholder votes.

Current wording

The Company’s Chairman of the Board, William V. Turner, and the Company’s Director, President and Chief Executive Officer, Joseph W. Turner, are father and son, respectively. Julie Turner Brown, a director of the Company, is the sister of Joseph Turner and the daughter of William Turner. These three Turner family members hold three of the Company’s ten Board positions. As of December 31, 2024, they also collectively beneficially owned approximately 2,089,498 shares of the Company’s common stock (excluding 82,402 shares underlying stock options exercisable as of or within 60 days after that date), representing approximately 17.8% of total shares outstanding, though they are subject to the voting limitation provision in our charter which precludes any person or group with beneficial ownership in excess of 10% of total shares outstanding from voting shares in excess of that threshold. Through their board and management positions and their ownership of the Company’s stock, these three members of the Turner family may exert substantial influence over the direction of the Company and the outcome of Board and stockholder votes.

Previous wording

As of December 31, 2023, one of the Company’s directors, Earl A. Steinert, beneficially owned 939,596 shares of our common stock (excluding 7,000 shares underlying stock options exercisable as of or within 60 days after that date), representing approximately 8.0% of total shares outstanding. The shares that can be voted by the Turner family members (1,180,443 shares as of December 31, 2023, per the ten percent voting limitation in our charter) and the shares beneficially owned by Mr. Steinert (939,596) total 2,120,039, representing approximately 18.0% of total shares outstanding. While they have no agreement to do so, to the extent they vote in the same manner, these stockholders may be able to exercise influence over the management and business affairs of our Company. For example, using their collective voting power, these stockholders may be able to affect the outcome of director elections or block significant transactions, such as a merger or acquisition, or any other matter that might otherwise be favored by other stockholders.

Current wording

As of December 31, 2024, one of the Company’s directors, Earl A. Steinert, beneficially owned 939,596 shares of our common stock (excluding 4,000 shares underlying stock options exercisable as of or within 60 days after that date), representing approximately 8.0% of total shares outstanding. The shares that can be voted by the Turner family members (1,172,355 shares as of December 31, 2024, per the ten percent voting limitation in our charter) and the shares beneficially owned by Mr. Steinert (939,596) total 2,111,951, representing approximately 18.0% of total shares outstanding. While they have no agreement to do so, to the extent they vote in the same manner, these stockholders may be able to exercise influence over the management and business affairs of our Company. For example, using their collective voting power, these stockholders may be able to affect the outcome of director elections or block significant transactions, such as a merger or acquisition, or any other matter that might otherwise be favored by other stockholders.