XNAS:GSBC Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

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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, 2012

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)
 
(IRS 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 and posted on its corporate Web site, if any, every Interactive Data file required to be submitted and posted 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 and post such files). Yes/X/   No /  /
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
(Check one):
Large accelerated filer /  /
Accelerated filer /X/
Non-accelerated filer /  /
Smaller reporting company /  /
   
(Do not check if a smaller
reporting company) 
 
 
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 
Yes /  /   No /X/
 
The number of shares outstanding of each of the registrant's classes of common stock: 13,499,498 shares of common stock, par value $.01, outstanding at May 8, 2012.
 


 
 
 
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,
 
 
2012
 
2011
 
 
(Unaudited)
     
ASSETS
       
Cash
$
85,229
 
$
87,911
 
Interest-bearing deposits in other financial institutions
 
374,844
   
248,569
 
Federal funds sold
 
337
   
43,769
 
Cash and cash equivalents
 
460,410
   
380,249
 
Available-for-sale securities
 
874,273
   
875,411
 
Held-to-maturity securities (fair value $2,043 – March 2012;
           
     $2,101 - December 2011)
 
1,865
   
1,865
 
Mortgage loans held for sale
 
19,121
   
28,920
 
Loans receivable, net of allowance for loan losses of
           
     $41,532 – March 2012; $41,232 - December 2011
 
2,119,054
   
2,124,161
 
FDIC indemnification asset
 
84,087
   
108,004
 
Interest receivable
 
12,828
   
13,848
 
Prepaid expenses and other assets
 
106,007
   
85,175
 
Foreclosed assets held for sale, net
 
69,244
   
67,621
 
Premises and equipment, net
 
92,918
   
84,192
 
Goodwill and other intangible assets
 
6,633
   
6,929
 
Investment in Federal Home Loan Bank stock
 
11,965
   
12,088
 
Current and deferred income tax asset
 
--
   
1,549
 
          Total Assets
$
3,858,405
 
$
3,790,012
 
             
LIABILITIES AND STOCKHOLDERS' EQUITY
           
Liabilities:
           
Deposits
3,078,066
 
$
2,963,539
 
Federal Home Loan Bank advances
 
147,102
   
184,437
 
Securities sold under reverse repurchase agreements with customers
 
199,594
   
216,737
 
Short-term borrowings
 
522
   
660
 
Structured repurchase agreements
 
53,077
   
53,090
 
Subordinated debentures issued to capital trusts
 
30,929
   
30,929
 
Accrued interest payable
 
2,014
   
2,277
 
Advances from borrowers for taxes and insurance
 
2,460
   
1,572
 
Accounts payable and accrued expenses
 
12,721
   
12,184
 
Current and deferred income tax liability
 
297
   
--
 
          Total Liabilities
 
3,526,782
   
3,465,425
 
Stockholders' Equity:
           
Capital stock
           
Serial preferred stock – SBLF, $.01 par value; authorized 1,000,000 shares; issued
     and outstanding March 2012 and December 2011 - 57,943
 
57,943
   
57,943
 
Common stock, $.01 par value; authorized 20,000,000 shares;
issued and outstanding March 2012  – 13,498,873 shares;
           
December 2011 - 13,479,856 shares
 
134
   
134
 
Additional paid-in capital
 
17,391
   
17,183
 
Retained earnings
 
242,080
   
236,914
 
Accumulated other comprehensive gain
 
14,075
   
12,413
 
          Total Stockholders' Equity
 
331,623
   
324,587
 
          Total Liabilities and Stockholders' Equity
$
3,858,405
 
$
3,790,012
 
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,
 
 
 
2012
 
 
2011
 
INTEREST INCOME
 
(Unaudited)
 
Loans
 
$
37,897
 
 
$
42,084
 
Investment securities and other
 
 
6,780
 
 
 
6,956
 
TOTAL INTEREST INCOME
 
 
44,677
 
 
 
49,040
 
INTEREST EXPENSE
 
 
 
 
 
 
 
 
Deposits
 
 
5,784
 
 
 
7,486
 
Federal Home Loan Bank advances
 
 
1,274
 
 
 
1,297
 
Short-term borrowings and repurchase agreements
 
 
687
 
 
 
756
 
Subordinated debentures issued to capital trusts
 
 
159
 
 
 
140
 
TOTAL INTEREST EXPENSE
 
 
7,904
 
 
 
9,679
 
NET INTEREST INCOME
 
 
36,773
 
 
 
39,361
 
PROVISION FOR LOAN LOSSES
 
 
10,077
 
 
 
8,200
 
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
 
 
26,696
 
 
 
31,161
 
 
 
 
 
 
 
 
 
 
NON-INTEREST INCOME
 
 
 
 
 
 
 
 
Commissions
 
 
2,626
 
 
 
2,437
 
Service charges and ATM fees
 
 
4,492
 
 
 
4,063
 
Net realized gains on sales of loans
 
 
1,150
 
 
 
907
 
Net realized gains on sales and impairments of available-for-sale securities
   
28
   
 
--
 
Late charges and fees on loans
 
 
173
 
 
 
122
 
Net change in interest rate swap fair value
   
96
     
--
 
Accretion (amortization) of income related to business acquisitions
 
 
(1,748
)
 
 
(9,754
)
Other income
 
 
1,648
 
 
 
453
 
TOTAL NON-INTEREST INCOME
 
 
8,465
 
 
 
(1,772
)
 
 
 
 
 
 
 
 
 
NON-INTEREST EXPENSE
 
 
 
 
 
 
 
 
Salaries and employee benefits
 
 
13,879
 
 
 
11,573
 
Net occupancy and equipment expense
 
 
4,959
 
 
 
3,690
 
Postage
 
 
827
 
 
 
755
 
Insurance
 
 
1,123
 
 
 
1,446
 
Advertising
 
 
369
 
 
 
275
 
Office supplies and printing
 
 
397
 
 
 
278
 
Telephone
 
 
767
 
 
 
625
 
Legal, audit and other professional fees
 
 
869
 
 
 
762
 
Expense on foreclosed assets
 
 
439
 
 
 
429
 
Other operating expenses
 
 
3,180
 
 
 
1,776
 
TOTAL NON-INTEREST EXPENSE
 
 
26,809
 
 
 
21,609
 
 
 
 
 
 
 
 
   
INCOME BEFORE INCOME TAXES
 
 
8,352
 
 
 
7,780
 
 
 
 
 
 
 
 
 
 
PROVISION FOR INCOME TAXES
 
 
855
 
 
 
1,887
 
 
 
 
 
 
 
 
 
 
NET INCOME
 
 
7,497
 
 
 
5,893
 
Preferred stock dividends and discount accretion
 
 
144
 
 
 
845
 
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS
 
$
7,353
 
 
$
5,048
 
BASIC EARNINGS PER COMMON SHARE
 
$
0.54
 
 
$
0.38
 
DILUTED EARNINGS PER COMMON SHARE
 
$
0.54
 
 
$
0.36
 
DIVIDENDS DECLARED PER COMMON SHARE
 
$
.18
 
 
$
.18
 
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,
 
   
2012
   
2011
 
       
             
Net Income
  $ 7,497     $ 5,893  
                 
Unrealized appreciation (depreciation) on available-for-sale securities, net of
               
taxes (credit) of $939 and $(949), for 2012 and 2011, respectively
    1,744       (1,763 )
                 
Non-credit component of unrealized gain (loss) on available-for-sale debt
               
securities for which a portion of an other-than-temporary impairment
               
has been recognized, net of taxes (credit) of $(34) and $47, for
               
2012 and 2011, respectively
    (64 )     87  
                 
Less reclassification adjustment for losses included in net income,
               
net of taxes (credit) of $(10) and $0 for 2012 and 2011, respectively
    (18 )     --  
                 
Comprehensive Income
  $ 9,159     $ 4,217  
                 
                 
                 
                 

See Notes to Consolidated Financial Statements

 
 
 
 
 
 
 
 
 
 
 
 

 


 
 
 
4
 
 
 

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
 
THREE MONTHS ENDED MARCH 31,
 
 
 
2012
 
 
2011
 
 
 
(Unaudited)
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
 
Net income
 
$
7,497
 
 
$
5,893
 
Proceeds from sales of loans held for sale
 
 
59,587
 
 
 
52,100
 
Originations of loans held for sale
 
 
(50,684
)
 
 
(36,831
)
Items not requiring (providing) cash:
 
 
 
 
 
 
 
 
Depreciation
 
 
1,596
 
 
 
1,206
 
Amortization of other assets
 
 
1,461
 
 
 
561
 
Compensation expense for stock option grants
   
111
     
119
 
Provision for loan losses
 
 
10,077
 
 
 
8,200
 
Net gains on loan sales
 
 
(1,150
)
 
 
(907
)
Net gains on sale or impairment of available-for-sale investment securities
   
(28
)
 
 
--
 
Net losses on sale of premises and equipment
 
 
189
 
 
 
168
 
(Gain) loss on sale of foreclosed assets
 
 
(1,013
)
 
 
266
 
Amortization (accretion) of deferred income, premiums, discounts
 
 
     
 
 
 
and fair value adjustments
 
 
(3,591
)
 
 
9,510
 
(Gain) loss on derivative interest rate products
   
(96
)
 
 
--
 
Deferred income taxes
 
 
(195
)
 
 
(4,245
)
Changes in:
 
 
 
 
 
 
 
 
Interest receivable
 
 
1,020
 
 
 
961
 
Prepaid expenses and other assets
 
 
18,237
 
 
 
4,988
 
Accounts payable and accrued expenses
 
 
216
 
 
 
(1,207
)
Income taxes refundable/payable
 
 
1,146
 
 
 
4,947
 
Net cash provided by operating activities
 
 
44,380
 
 
 
45,729
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
Net increase in loans
 
 
(16,929
)
 
 
(27,545
)
Purchase of loans
 
 
(12,107
)
 
 
--
 
Purchase of additional business units
   
--
   
 
(2
)
Purchase of premises and equipment
 
 
(10,519
)
 
 
(3,537
)
Proceeds from sale of premises and equipment
 
 
8
 
 
 
86
 
Proceeds from sale of foreclosed assets
 
 
9,352
 
 
 
4,635
 
Capitalized costs on foreclosed assets
 
 
(101
)
 
 
(164
)
Proceeds from sales of available-for-sale investment securities
   
1,224
   
 
--
 
Proceeds from maturing held-to-maturity investment securities
   
--
   
 
1,202
 
Proceeds from called investment securities
 
 
5,810
 
 
 
6,645
 
Principal reductions on mortgage-backed securities
 
 
30,355
 
 
 
32,999
 
Purchase of available-for-sale securities
 
 
(34,826
)
 
 
(112,823
)
Redemption of Federal Home Loan Bank stock
 
 
123
 
 
 
48
 
Net cash used in investing activities
 
 
(27,610
)
 
 
(98,456
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
 
 
 
 
Net increase in certificates of deposit
 
 
32,332
 
 
 
19,967
 
Net increase in checking and savings deposits
 
 
82,483
 
 
 
60,188
 
Repayments of Federal Home Loan Bank advances
 
 
(32,573
)
 
 
(1,059
)
Net increase (decrease) in short-term borrowings and structured repo
 
 
(17,281
)
 
 
8,922
 
Advances from borrowers for taxes and insurance
 
 
888
 
 
 
177
 
Dividends paid
 
 
(2,799
)
 
 
(3,146
)
Stock options exercised
 
 
341
 
 
 
4
 
Net cash provided by financing activities
 
 
63,391
 
 
 
85,053
 
INCREASE  IN CASH AND CASH EQUIVALENTS
 
 
80,161
 
 
 
32,326
 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
 
 
380,249
 
 
 
429,971
 
CASH AND CASH EQUIVALENTS, END OF PERIOD
 
$
460,410
 
 
 
462,297
 
See Notes to Consolidated Financial Statements
 


 
 
 
5
 
 

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 and cash flows of the Company for the periods presented. Those adjustments consist only of normal recurring adjustments. Operating results for the three months ended March 31, 2012 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, 2011, has been derived from the audited consolidated statement of financial condition of the Company as of that date.   Certain prior periodsamounts 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 2011 filed with the Securities and Exchange Commission.

NOTE 2: OPERATING SEGMENTS
 
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 deposits attracted from the general public and correspondent account relationships, brokered deposits and borrowings from the Federal Home Loan Bank ("FHLBank") and others. The operating results of this segment are regularly reviewed by management to make decisions about resource allocations and to assess performance.
 
Revenue from segments below the reportable segment threshold is attributable to three operating segments of the Company. These segments include insurance services, travel services and investment services. 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 December 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-12 to amend FASB ASC Topic 220, Comprehensive Income.  The Update defers the effective date for amendments to the presentation of reclassifications of items out of accumulated other comprehensive income in ASU No. 2011-05.  The Update was effective for the Company January 1, 2012, and did not have a material impact on the Company’s financial position or results of operations.

In September 2011, the FASB issued ASU No. 2011-08 to amend FASB ASC Topic 350, Intangibles – Goodwill and Other:  Testing Goodwill for Impairment.  The purpose of the Update is to simplify how entities test goodwill for impairment.  The amendments allows entities the option of considering qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.  The results of this consideration are then used to determine whether the two-step goodwill impairment test described in Topic 350 must be performed.  The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent.  The Update was effective for the Company January 1, 2012.  While early adoption was permitted, the Company did not choose to do so.  The adoption of this Update did not have a material impact on the Company’s financial position or results of operations.

In June 2011, the FASB issued ASU No. 2011-05 to amend FASB ASC Topic 220, Comprehensive Income:  Presentation of Comprehensive Income.  The purpose of the Update is to improve the comparability, consistency and transparency of financial reporting related to other comprehensive income.  It eliminates the option to present the
 
 
 
6
 
 
 
 
components of other comprehensive income as part of the statement of stockholders’ equity.  Instead, the components of other comprehensive income must either be presented with net income in a single continuous statement of comprehensive income or as a separate but consecutive statement following the statement of income.  The Update was effective for the Company January 1, 2012, on a retrospective basis for interim and annual reporting periods.   The new required disclosures are included in the Consolidated Statements of Comprehensive Income, which follow the Consolidated Statements of Income.

In May 2011, the FASB issued ASU No. 2011-04 to amend FASB ASC Topic 820, Fair Value Measurement:  Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRSs.  The Update amends the GAAP requirements for measuring fair value and for disclosures about fair value measurements to improve consistency between GAAP and IFRSs by changing some of the wording used to describe the requirements, clarifying the intended application of certain requirements and changing certain principles.  The Update was effective for the Company January 1, 2012, on a prospective basis for interim and annual reporting periods, and did not have a material impact on the Company’s financial position or results of operations.


In April 2011, the FASB issued ASU No. 2011-03 to amend FASB ASC Topic 860, Transfers and Servicing.  ASC 860 outlines when the transfer of financial assets under a repurchase agreement may or may not be accounted for as a sale.  Whether the transferring entity maintains effective control over the transferred financial assets provides the basis for such a determination.  The previous requirement that the transferor must have the ability to repurchase or redeem the financial assets before the maturity of the agreement is removed from the assessment of effective control by this Update.  The Update was effective for the Company January 1, 2012, on a prospective basis for interim and annual reporting periods, and did not have a material impact on the Company’s financial position or results of operations.


NOTE 4: STOCKHOLDERS' EQUITY
 
Previously, the Company's stockholders approved the Company's reincorporation to the State of Maryland. Under Maryland law, there is no concept of "Treasury Shares." Instead, shares purchased by the Company constitute authorized but unissued shares under Maryland law. Accounting principles generally accepted in the United States of America state that accounting for treasury stock shall conform to state law. The cost of shares purchased by the Company has been allocated to Common Stock and Retained Earnings balances.


NOTE 5: EARNINGS PER SHARE

   
Three Months Ended March 31,
 
   
2012
   
2011
 
   
(In Thousands, Except
 
   
Per Share Data)
 
             
Basic:
           
Average shares outstanding
    13,491       13,454  
Net income available to common shareholders
  $ 7,353     $ 5,048  
Per share amount
  $ 0.54     $ 0.38  
                 
Diluted:
               
Average shares outstanding
    13,491       13,454  
Net effect of dilutive stock options and warrants – based on the treasury
               
stock method using average market price
    62       569  
Diluted shares
    13,553       14,023  
Net income available to common shareholders
  $ 7,353     $ 5,048  
Per share amount
  $ 0.54     $ 0.36  
                 
 
 
 
7
 
 
 

 
Options to purchase 465,067 and 498,535 shares of common stock were outstanding at March 31, 2012 and 2011, respectively, but were not included in the computation of diluted earnings per share for each period because the options’ exercise prices were greater than the average market prices of the common shares for the three months ended March 31, 2012 and 2011, respectively.


NOTE 6: INVESTMENT SECURITIES
 
   
March 31, 2012
 
         
Gross
   
Gross
         
Tax
 
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
   
Equivalent
 
   
Cost
   
Gains
   
Losses
   
Value
   
Yield
 
   
(In Thousands)
 
                               
AVAILABLE-FOR-SALE SECURITIES:
                         
U.S. government agencies
  $ 20,000     $ 21     $     $ 20,021       1.12 %
Collateralized mortgage obligations
    5,187       230       332       5,085       5.24  
Mortgage-backed securities
    633,867       14,314       277       647,904       3.01  
Small Business Administration
                                       
loan pools
    53,618       1,221             54,839       1.78  
States and political subdivisions
    138,668       5,995       858       143,805       5.69  
Corporate bonds
    49       246             295       47.36  
Equity securities
    1,230       1,094             2,324        
    $ 852,619     $ 23,121     $ 1,467     $ 874,273       3.34 %
                                         
HELD-TO-MATURITY SECURITIES:
                                 
States and political subdivisions
  $ 1,865     $ 178     $     $ 2,043       4.40 %

   
December 31, 2011
 
         
Gross
   
Gross
         
Tax
 
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
   
Equivalent
 
   
Cost
   
Gains
   
Losses
   
Value
   
Yield
 
   
(In Thousands)
 
                               
AVAILABLE-FOR-SALE SECURITIES:
                         
U.S. government agencies
  $ 20,000     $ 60     $     $ 20,060       1.12 %
Collateralized mortgage obligations
    5,220             380       4,840       5.53  
Mortgage-backed securities
    628,729       13,728       802       641,655       3.12  
Small Business Administration
                                       
loan pools
    55,422       1,070             56,492       1.68  
States and political subdivisions
    145,663       5,478       903       150,238       5.72  
Corporate bonds
    50       245             295       39.65  
Equity securities
    1,230       601             1,831        
    $ 856,314     $ 21,182     $ 2,085     $ 875,411       3.44 %
                                         
HELD-TO-MATURITY SECURITIES:
                                 
States and political subdivisions
  $ 1,865     $ 236     $     $ 2,101       4.39 %


 
8
 
 


The amortized cost and fair value of available-for-sale securities at March 31, 2012, 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
  $ 1,209     $ 1,208  
After one through five years
    1,445       1,465  
After five through ten years
    12,151       12,545  
After ten years
    197,530       203,742  
Securities not due on a single maturity date
    639,054       652,989  
Equity securities
    1,230       2,324  
                 
    $ 852,619     $ 874,273  
                 

The held-to-maturity securities at March 31, 2012, by contractual maturity, are shown below.  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.
 
   
Amortized
   
Fair
 
   
Cost
   
Value
 
   
(In Thousands)
 
             
One year or less
  $ 840     $ 840  
After five through ten years
    1,025       1,203  
                 
    $ 1,865     $ 2,043  

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, 2012 and December 31, 2011, respectively, was approximately $150.1 million and $172.6 million, which is approximately 17.1% and 19.7% of the Company’s available-for-sale and held-to-maturity investment portfolio, respectively.
 
Based on 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 at March 31, 2012.


 
9
 
 


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, 2012 and December 31, 2011:
 
   
March 31, 2012
 
   
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)
 
                                     
Collateralized mortgage
                                   
obligations
  $     $     $ 1,094     $ (332 )   $ 1,094     $ (332 )
Mortgage-backed securities
    74,622       (163 )     46,839       (114 )     121,461       (277 )
States and political
                                               
subdivisions
    23,345       (313 )     4,205       (545 )     27,550       (858 )
    $ 97,967     $ (476 )   $ 52,138     $ (991 )   $ 150,105     $ (1,467 )

   
December 31, 2011
 
   
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)
 
                                     
Collateralized mortgage
                                   
obligations
  $ 3,760     $ (110 )   $ 1,460     $ (270 )   $ 5,220     $ (380 )
Mortgage-backed securities
    61,720       (365 )     91,824       (437 )     153,544       (802 )
States and political
                                               
subdivisions
    6,436       (44 )     7,381       (859 )     13,817       (903 )
    $ 71,916     $ (519 )   $ 100,665     $ (1,566 )   $ 172,581     $ (2,085 )

Gross gains of $28,000 and $0 and gross losses of $0 and $0 resulting from sales of available-for-sale securities were realized for the three months ended March 31, 2012 and 2011, respectively.  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 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.

 
 
10
 
 
 
 
During the three months ended March 31, 2012 and 2011, no securities were determined to have impairment that was other-than-temporary.

Credit Losses Recognized on Investments.  Certain debt securities have experienced fair value deterioration due to credit losses.

The following table provides information about debt securities for which only a credit loss was recognized in income and other losses are recorded in other comprehensive income.
 
   
Accumulated
 
   
Credit Losses
 
   
(In Thousands)
 
Credit losses on debt securities held
     
January 1, 2012
  $ 3,598  
Additions related to other-than-temporary losses not previously recognized
     
Additions related to increases in credit losses on debt securities for which
       
other-than-temporary impairment losses were previously recognized
     
Reductions due to sales
     
         
March 31, 2012
  $ 3,598  

 
   
Accumulated
 
   
Credit Losses
 
   
(In Thousands)
 
Credit losses on debt securities held
     
January 1, 2011
  $ 2,983  
Additions related to other-than-temporary losses not previously recognized
     
Reductions due to sales
     
         
March 31, 2011
  $ 2,983  


 
11
 
 


NOTE 7: LOANS AND ALLOWANCE FOR LOAN LOSSES
 
   
March 31,
   
December 31,
 
   
2012
   
2011
 
   
(In Thousands)
 
             
One- to four-family residential construction
  $ 23,958     $ 23,976  
Subdivision construction
    54,550       61,140  
Land development
    69,707       68,771  
Commercial construction
    117,341       119,589  
Owner occupied one- to four-family residential
    92,636       91,994  
Non-owner occupied one- to four-family residential
    146,482       145,781  
Commercial real estate
    655,402       639,857  
Other residential
    270,831       243,742  
Commercial business
    221,926       236,384  
Industrial revenue bonds
    58,972       59,750  
Consumer auto
    62,266       59,368  
Consumer other
    79,330       77,540  
Home equity lines of credit
    46,362       47,114  
FDIC-supported loans, net of discounts (TeamBank)
    110,799       128,875  
FDIC-supported loans, net of discounts (Vantus Bank)
    114,104       123,036  
FDIC-supported loans, net of discounts (Sun Security Bank)
    128,157       144,626  
      2,252,823       2,271,543  
Undisbursed portion of loans in process
    (89,483 )     (103,424 )
Allowance for loan losses
    (41,532 )     (41,232 )
Deferred loan fees and gains, net
    (2,754 )     (2,726 )
    $ 2,119,054     $ 2,124,161  
                 
Weighted average interest rate
    5.81 %     5.86 %


 
12
 
 


Classes of loans by aging were as follows:

   
March 31, 2012
 
                                       
Total Loans
 
   
30-59 Days
   
60-89 Days
   
Over 90
   
Total Past
         
Total Loans
   
> 90 Days and
 
   
Past Due
   
Past Due
   
Days
   
Due
   
Current
   
Receivable
   
Still Accruing
 
   
(In Thousands)
 
One- to four-family
                                         
residential construction
  $     $     $ 3,231     $ 3,231     $ 20,727     $ 23,958     $  
Subdivision construction
    197       95       4,844       5,136       49,414       54,550       197  
Land development
    127             1,634       1,761       67,946       69,707        
Commercial construction
                1,062       1,062       116,279       117,341        
Owner occupied one- to four-
                                                       
family residential
    1,209       866       2,478       4,553       88,083       92,636       323  
Non-owner occupied one- to
                                                       
four-family residential
          41       1,212       1,253       145,229       146,482        
Commercial real estate
    2,641       1,300       6,244       10,185       645,217       655,402        
Other residential
    638                   638       270,193       270,831        
Commercial business
    110             735       845       221,081       221,926        
Industrial revenue bonds
                2,110       2,110       56,862       58,972        
Consumer auto
    261       27       159       447       61,819       62,266       11  
Consumer other
    653       597       508       1,758       77,572       79,330       158  
Home equity lines of credit
                142       142       46,220       46,362        
FDIC-supported loans, net of
                                                       
discounts (TeamBank)
    279       79       22,019       22,377       88,422       110,799        
FDIC-supported loans, net of
                                                       
discounts (Vantus Bank)
    574       1,209       8,097       9,880       104,224       114,104        
FDIC-supported loans,
                                                       
net of discounts
                                                       
(Sun Security Bank)
    2,807       893       112       3,812       124,345       128,157        
      9,496       5,107       54,587       69,190       2,183,633       2,252,823       689  
Less FDIC-supported loans,
                                                       
net of discounts
    3,660       2,181       30,228       36,069       316,991       353,060        
                                                         
Total
  $ 5,836     $ 2,926     $ 24,359     $ 33,121     $ 1,866,642     $ 1,899,763     $ 689  


 
13
 
 



   
December 31, 2011
 
                                       
Total Loans
 
   
30-59 Days
   
60-89 Days
   
Over 90
   
Total Past
         
Total Loans
   
> 90 Days and
 
   
Past Due
   
Past Due
   
Days
   
Due
   
Current
   
Receivable
   
Still Accruing
 
   
(In Thousands)
 
One- to four-family
                                         
residential construction
  $ 2,082     $ 342     $ 186     $ 2,610     $ 21,366     $ 23,976     $  
Subdivision construction
    4,014       388       6,661       11,063       50,077       61,140        
Land development
          4       2,655       2,659       66,112       68,771        
Commercial construction
                            119,589       119,589        
Owner occupied one- to four-
                                                       
family residential
    833             3,888       4,721       87,273       91,994       40  
Non-owner occupied one- to
                                                       
four-family residential
    117             3,425       3,542       142,239       145,781        
Commercial real estate
    6,323       535       6,204       13,062       626,795       639,857        
Other residential
                            243,742       243,742        
Commercial business
    426       10       1,362       1,798       234,586       236,384        
Industrial revenue bonds
                2,110       2,110       57,640       59,750        
Consumer auto
    455       56       117       628       58,740       59,368       10  
Consumer other
    1,508       641       715       2,864       74,676       77,540       356  
Home equity lines of credit
    45       29       174       248       46,866       47,114        
FDIC-supported loans, net of
                                                       
discounts (TeamBank)
    2,422       862       19,215       22,499       106,376       128,875        
FDIC-supported loans, net of
                                                       
discounts (Vantus Bank)
    562       57       5,999       6,618       116,418       123,036       5  
FDIC-supported loans,
                                                       
net of discounts
                                                       
(Sun Security Bank)
    5,628       6,851       40,299       52,778       91,848       144,626       150  
      24,415       9,775       93,010       127,200       2,144,343       2,271,543       561  
Less FDIC-supported loans,
                                                       
net of discounts
    8,612       7,770       65,513       81,895       314,642       396,537       155  
                                                         
Total
  $ 15,803     $ 2,005     $ 27,497     $ 45,305     $ 1,829,701     $ 1,875,006     $ 406  


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

   
March 31,
   
December 31,
 
   
2012
   
2011
 
   
(In Thousands)
 
             
One- to four-family residential construction
  $ 3,231     $ 186  
Subdivision construction
    4,647       6,661  
Land development
    1,634       2,655  
Commercial construction
    1,062        
Owner occupied one- to four-family residential
    2,155       3,848  
Non-owner occupied one- to four-family residential
    1,212       3,425  
Commercial real estate
    6,244       6,204  
Other residential
           
Commercial business
    735       1,362  
Industrial revenue bonds
    2,110       2,110  
Consumer auto
    148       107  
Consumer other
    350       359  
Home equity lines of credit
    142       174