XNAS:GSBC Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

XNAS:GSBC (): Fair Value Estimate
Premium
XNAS:GSBC (): Consider Buying
Premium
XNAS:GSBC (): Consider Selling
Premium
XNAS:GSBC (): Fair Value Uncertainty
Premium
XNAS:GSBC (): Economic Moat
Premium
XNAS:GSBC (): Stewardship
Premium
 
 
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 June 30, 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: 13,550,478 shares of common stock, par value $.01, outstanding at August 6, 2012.
 


 
 
 
 
 
 
 


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)


   
JUNE 30,
   
DECEMBER 31,
 
   
2012
   
2011
 
   
(Unaudited)
       
ASSETS
           
Cash
  $
89,435
    $
87,911
 
Interest-bearing deposits in other financial institutions
   
535,028
     
248,569
 
Federal funds sold
   
337
     
43,769
 
Cash and cash equivalents
   
624,800
     
380,249
 
Available-for-sale securities
   
819,191
     
875,411
 
Held-to-maturity securities (fair value $1,093 – June 2012;
               
     $2,101 - December 2011)
   
920
     
1,865
 
Mortgage loans held for sale
   
28,176
     
28,920
 
Loans receivable, net of allowance for loan losses of
               
     $40,722 - June 2012; $41,232 - December 2011
   
2,308,676
     
2,124,161
 
FDIC indemnification asset
   
148,618
     
108,004
 
Interest receivable
   
13,944
     
13,848
 
Prepaid expenses and other assets
   
78,358
     
85,175
 
Foreclosed assets held for sale, net
   
79,141
     
67,621
 
Premises and equipment, net
   
95,510
     
84,192
 
Goodwill and other intangible assets
   
7,318
     
6,929
 
Investment in Federal Home Loan Bank stock
   
11,077
     
12,088
 
Current and deferred income tax asset
   
     
1,549
 
          Total Assets
  $
4,215,729
    $
3,790,012
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
Liabilities:
               
Deposits
  $
3,392,957
    $
2,963,539
 
Federal Home Loan Bank advances
   
146,673
     
184,437
 
Securities sold under reverse repurchase agreements with customers
   
206,010
     
216,737
 
Short-term borrowings
   
522
     
660
 
Structured repurchase agreements
   
53,065
     
53,090
 
Subordinated debentures issued to capital trusts
   
30,929
     
30,929
 
Accrued interest payable
   
2,004
     
2,277
 
Advances from borrowers for taxes and insurance
   
2,970
     
1,572
 
Accounts payable and accrued expenses
   
17,358
     
12,184
 
Current and deferred income tax liability
   
10,420
     
--
 
          Total Liabilities
   
3,862,908
     
3,465,425
 
Stockholders' Equity:
               
Capital stock
               
Serial preferred stock – $.01 par value; authorized 1,000,000 shares; issued
     and outstanding June 2012 and December 2011 - 57,943 shares
   
57,943
     
57,943
 
Common stock, $.01 par value; authorized 20,000,000 shares;
issued and outstanding June 2012  – 13,506,400 shares;
               
December 2011 - 13,479,856 shares
   
134
     
134
 
Additional paid-in capital
   
17,524
     
17,183
 
Retained earnings
   
261,257
     
236,914
 
Accumulated other comprehensive gain
   
15,963
     
12,413
 
          Total Stockholders' Equity
   
352,821
     
324,587
 
          Total Liabilities and Stockholders' Equity
  $
4,215,729
    $
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
JUNE 30,
 
 
 
2012
 
 
2011
 
INTEREST INCOME
 
(Unaudited)
 
Loans
 
$
42,068
 
 
$
42,243
 
Investment securities and other
 
 
6,153
 
 
 
6,901
 
TOTAL INTEREST INCOME
 
 
48,221
 
 
 
49,144
 
INTEREST EXPENSE
 
 
 
 
 
 
 
 
Deposits
 
 
5,786
 
 
 
6,661
 
Federal Home Loan Bank advances
 
 
1,132
 
 
 
1,304
 
Short-term borrowings and repurchase agreements
 
 
672
 
 
 
747
 
Subordinated debentures issued to capital trusts
 
 
154
 
 
 
140
 
TOTAL INTEREST EXPENSE
 
 
7,744
 
 
 
8,852
 
NET INTEREST INCOME
 
 
40,477
 
 
 
40,292
 
PROVISION FOR LOAN LOSSES
 
 
17,600
 
 
 
8,431
 
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
 
 
22,877
 
 
 
31,861
 
 
 
 
 
 
 
 
 
 
NON-INTEREST INCOME
 
 
 
 
 
 
 
 
Commissions
 
 
2,331
 
 
 
2,486
 
Service charges and ATM fees
 
 
4,881
 
 
 
4,473
 
Net realized gains on sales of loans
 
 
1,097
 
 
 
702
 
Net realized gains (losses) on sales and impairments of available-for-sale securities
   
1,251
   
 
(400
)
Late charges and fees on loans
 
 
238
 
 
 
162
 
Net change in interest rate swap fair value
   
(117
)
   
 
Initial gain recognized on business acquisition
   
31,312
     
 
Accretion (amortization) of income related to business acquisitions
 
 
(4,440
)
 
 
(10,296
)
Other income
 
 
1,400
 
 
 
714
 
TOTAL NON-INTEREST INCOME
 
 
37,953
 
 
 
(2,159
)
 
 
 
 
 
 
 
 
 
NON-INTEREST EXPENSE
 
 
 
 
 
 
 
 
Salaries and employee benefits
 
 
14,700
 
 
 
11,709
 
Net occupancy and equipment expense
 
 
5,237
 
 
 
3,639
 
Postage
 
 
840
 
 
 
811
 
Insurance
 
 
1,107
 
 
 
1,498
 
Advertising
 
 
468
 
 
 
408
 
Office supplies and printing
 
 
355
 
 
 
354
 
Telephone
 
 
740
 
 
 
513
 
Legal, audit and other professional fees
 
 
1,568
 
 
 
723
 
Expense on foreclosed assets
 
 
1,228
 
 
 
627
 
Other operating expenses
 
 
3,823
 
 
 
1,855
 
TOTAL NON-INTEREST EXPENSE
 
 
30,066
 
 
 
22,137
 
 
 
 
 
 
 
 
   
INCOME BEFORE INCOME TAXES
 
 
30,764
 
 
 
7,565
 
 
 
 
 
 
 
 
 
 
PROVISION FOR INCOME TAXES
 
 
9,108
 
 
 
1,675
 
 
 
 
 
 
 
 
 
 
NET INCOME
 
 
21,656
 
 
 
5,890
 
Preferred stock dividends and discount accretion
 
 
144
 
 
 
782
 
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS
 
$
21,512
 
 
$
5,108
 
BASIC EARNINGS PER COMMON SHARE
 
$
1.59
 
 
$
0.38
 
DILUTED EARNINGS PER COMMON SHARE
 
$
1.58
 
 
$
0.37
 
DIVIDENDS DECLARED PER COMMON SHARE
 
$
.18
 
 
$
.18
 
See Notes to Consolidated Financial Statements


 
3
 
 


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

 
 
SIX MONTHS ENDED
JUNE 30,
 
 
 
2012
 
 
2011
 
INTEREST INCOME
 
(Unaudited)
 
Loans
 
$
79,966
 
 
$
84,327
 
Investment securities and other
 
 
12,932
 
 
 
13,858
 
TOTAL INTEREST INCOME
 
 
92,898
 
 
 
98,185
 
INTEREST EXPENSE
 
 
 
 
 
 
 
 
Deposits
 
 
11,570
 
 
 
14,147
 
Federal Home Loan Bank advances
 
 
2,406
 
 
 
2,601
 
Short-term borrowings and repurchase agreements
 
 
1,358
 
 
 
1,503
 
Subordinated debentures issued to capital trusts
 
 
315
 
 
 
281
 
TOTAL INTEREST EXPENSE
 
 
15,649
 
 
 
18,532
 
NET INTEREST INCOME
 
 
77,249
 
 
 
79,653
 
PROVISION FOR LOAN LOSSES
 
 
27,677
 
 
 
16,631
 
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
 
 
49,572
 
 
 
63,022
 
 
 
 
 
 
 
 
 
 
NON-INTEREST INCOME
 
 
 
 
 
 
 
 
Commissions
 
 
4,958
 
 
 
4,923
 
Service charges and ATM fees
 
 
9,372
 
 
 
8,535
 
Net realized gains on sales of loans
 
 
2,246
 
 
 
1,609
 
Net realized gains (losses) on sales and impairments of available-for-sale securities
   
1,280
     
(400
)
Late charges and fees on loans
 
 
411
 
 
 
284
 
Net change in interest rate swap fair value
   
(20
)
   
 
Initial gain recognized on business acquisition
   
31,312
     
 
Accretion (amortization) of income related to business acquisitions
 
 
(6,188
)
 
 
(20,049
)
Other income
 
 
3,048
 
 
 
1,168
 
TOTAL NON-INTEREST INCOME
 
 
46,419
 
 
 
(3,930
)
 
 
 
 
 
 
 
 
 
NON-INTEREST EXPENSE
 
 
 
 
 
 
 
 
Salaries and employee benefits
 
 
28,579
 
 
 
23,281
 
Net occupancy and equipment expense
 
 
10,196
 
 
 
7,329
 
Postage
 
 
1,668
 
 
 
1,566
 
Insurance
 
 
2,229
 
 
 
2,945
 
Advertising
 
 
837
 
 
 
683
 
Office supplies and printing
 
 
752
 
 
 
632
 
Telephone
 
 
1,507
 
 
 
1,139
 
Legal, audit and other professional fees
 
 
2,437
 
 
 
1,485
 
Expense on foreclosed assets
 
 
1,668
 
 
 
1,056
 
Other operating expenses
 
 
7,002
 
 
 
3,631
 
TOTAL NON-INTEREST EXPENSE
 
 
56,875
 
 
 
43,747
 
 
 
 
 
 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
 
39,116
 
 
 
15,345
 
 
 
 
 
 
 
 
 
 
PROVISION FOR INCOME TAXES
 
 
9,963
 
 
 
3,562
 
 
 
 
 
 
 
 
 
 
NET INCOME
 
 
29,153
 
 
 
11,783
 
PREFERRED STOCK DIVIDENDS AND DISCOUNT ACCRETION
 
 
290
 
 
 
1,628
 
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS
 
$
28,863
 
 
$
10,155
 
BASIC EARNINGS PER COMMON SHARE
 
$
2.14
 
 
$
0.75
 
DILUTED EARNINGS PER COMMON SHARE
 
$
2.12
 
 
$
0.73
 
DIVIDENDS DECLARED PER COMMON SHARE
 
$
.36
 
 
$
.36
 



 
4
 
 


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

   
Three Months Ended June 30,
 
   
2012
   
2011
 
       
             
Net Income
  $ 21,656     $ 5,890  
                 
Unrealized appreciation on available-for-sale securities, net of
               
taxes of $1,515 and $3,266, for 2012 and 2011, respectively
    2,814       6,066  
                 
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 of $31 and $200, for
               
2012 and 2011, respectively
    58       371  
                 
Other-than-temporary impairment loss recognized in earnings on
               
available for sale securities, net of taxes (credit) of $(92) and $(140),
               
for 2012 and 2011, respectively
    (170 )     (260 )
                 
Less: reclassification adjustment for gains included in net income,
               
net of taxes of $437 and $0 for 2012 and 2011, respectively
    814       --  
                 
Comprehensive Income
  $ 23,544     $ 12,067  
                 
                 

   
Six Months Ended June 30,
 
   
2012
   
2011
 
       
             
Net Income
  $ 29,153     $ 11,783  
                 
Unrealized appreciation on available-for-sale securities, net of
               
taxes of $2,454 and $2,317, for 2012 and 2011, respectively
    4,558       4,303  
                 
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 $(3) and $247, for
               
2012 and 2011, respectively
    (6 )     458  
                 
Other-than-temporary impairment loss recognized in earnings on
               
available for sale securities, net of taxes (credit) of $(92) and $(140),
               
for 2012 and 2011, respectively
    (170 )     (260 )
                 
Less: reclassification adjustment for gains included in net income,
               
net of taxes of $447 and $0 for 2012 and 2011, respectively
    832       --  
                 
Comprehensive Income
  $ 32,703     $ 16,284  
                 
See Notes to Consolidated Financial Statements
 
               
 
 
 
5
 
 

 
GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
 
SIX MONTHS ENDED JUNE 30,
 
 
 
2012
 
 
2011
 
 
 
(Unaudited)
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
 
Net income
 
$
29,153
 
 
$
11,783
 
Proceeds from sales of loans held for sale
 
 
117,055
 
 
 
86,449
 
Originations of loans held for sale
 
 
(116,480
)
 
 
(71,913
)
Items not requiring (providing) cash:
 
 
 
 
 
 
 
 
Depreciation
 
 
3,359
 
 
 
2,416
 
Amortization of other assets
 
 
2,964
 
 
 
1,121
 
Compensation expense for stock option grants
   
214
     
239
 
Provision for loan losses
 
 
27,677
 
 
 
16,631
 
Net gains on loan sales
 
 
(2,246
)
 
 
(1,609
)
Net (gains) losses on sale or impairment of available-for-sale investment securities
   
(1,280
)
 
 
400
 
Net losses on sale of premises and equipment
 
 
177
 
 
 
150
 
(Gain) loss on sale of foreclosed assets
 
 
(349
)
 
 
(536
)
Gain on purchase of additional business units
   
(31,312
)
 
 
 
Amortization of deferred income, premiums, discounts
 
 
     
 
 
 
and fair value adjustments
 
 
2,585
 
 
 
17,998
 
(Gain) loss on derivative interest rate products
   
20
 
 
 
 
Deferred income taxes
 
 
9,737
 
 
 
(7,453
)
Changes in:
 
 
 
 
 
 
 
 
Interest receivable
 
 
1,576
 
 
 
938
 
Prepaid expenses and other assets
 
 
62,344
 
 
 
4,377
 
Accounts payable and accrued expenses
 
 
1,538
 
 
 
(1,256
)
Income taxes refundable/payable
 
 
320
 
 
 
432
 
Net cash provided by operating activities
 
 
107,052
 
 
 
60,167
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
Net (increase) decrease in loans
 
 
40,781
 
 
 
(70,154
)
Purchase of loans
 
 
(12,107
)
 
 
(150
)
Proceeds from sale of student loans
   
     
798
 
Cash received from purchase of additional business units
   
75,328
   
 
 
Purchase of additional business units
   
   
 
(1
)
Purchase of premises and equipment
 
 
(15,008
)
 
 
(8,587
)
Proceeds from sale of premises and equipment
 
 
154
 
 
 
140
 
Proceeds from sale of foreclosed assets
 
 
24,460
 
 
 
7,167
 
Capitalized costs on foreclosed assets
 
 
(95
)
 
 
(198
)
Proceeds from sales of available-for-sale investment securities
   
74,699
   
 
 
Proceeds from maturing investment securities
   
1,830
   
 
1,202
 
Proceeds from called investment securities
 
 
26,835
 
 
 
6,745
 
Principal reductions on mortgage-backed securities
 
 
68,006
 
 
 
61,963
 
Purchase of available-for-sale securities
 
 
(75,433
)
 
 
(126,423
)
Purchase of held-to-maturity investment securities
   
     
(840
)
Redemption of Federal Home Loan Bank stock
 
 
1,596
 
 
 
331
 
Net cash provided by (used in) investing activities
 
 
211,046
 
 
 
(128,007
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
 
 
 
 
Net decrease in certificates of deposit
 
 
(105,078
)
 
 
(67,281
)
Net increase in checking and savings deposits
 
 
78,625
 
 
 
94,698
 
Repayments of Federal Home Loan Bank advances
 
 
(32,710
)
 
 
(1,228
)
Net decrease in short-term borrowings and structured repo
 
 
(10,865
)
 
 
(27,605
)
Advances from borrowers for taxes and insurance
 
 
1,387
 
 
 
910
 
Dividends paid
 
 
(5,373
)
 
 
(6,293
)
Stock options exercised
 
 
467
 
 
 
93
 
Net cash used in financing activities
 
 
(73,547
)
 
 
(6,706
)
INCREASE  IN CASH AND CASH EQUIVALENTS
 
 
244,551
 
 
 
(74,546
)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
 
 
380,249
 
 
 
429,971
 
CASH AND CASH EQUIVALENTS, END OF PERIOD
 
$
624,800
 
 
 
355,425
 
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 and cash flows of the Company for the periods presented. Those adjustments consist only of normal recurring adjustments. Operating results for the three and six months ended June 30, 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 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 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.

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.



 
7
 
 


NOTE 5: EARNINGS PER SHARE

   
Three Months Ended June 30,
 
   
2012
   
2011
 
   
(In Thousands, Except
 
   
Per Share Data)
 
             
Basic:
           
Average shares outstanding
    13,501       13,457  
Net income available to common shareholders
  $ 21,512     $ 5,108  
Per share amount
  $ 1.59     $ 0.38  
                 
Diluted:
               
Average shares outstanding
    13,501       13,457  
Net effect of dilutive stock options and warrants – based on the treasury
               
stock method using average market price
    98       498  
Diluted shares
    13,599       13,955  
Net income available to common shareholders
  $ 21,512     $ 5,108  
Per share amount
  $ 1.58     $ 0.37  
                 

   
Six Months Ended June 30,
 
   
2012
   
2011
 
   
(In Thousands, Except
 
   
Per Share Data)
 
             
Basic:
           
Average shares outstanding
    13,501       13,457  
Net income available to common shareholders
  $ 28,863     $ 10,155  
Per share amount
  $ 2.14     $ 0.75  
                 
Diluted:
               
Average shares outstanding
    13,501       13,457  
Net effect of dilutive stock options and warrants – based on the treasury
               
stock method using average market price
    98       531  
Diluted shares
    13,599       13,988  
Net income available to common shareholders
  $ 28,863     $ 10,155  
Per share amount
  $ 2.12     $ 0.73  
                 

Options to purchase 289,922 and 529,160 shares of common stock were outstanding at June 30, 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 six months ended June 30, 2012 and 2011, respectively.



 
8
 
 


NOTE 6: INVESTMENT SECURITIES
 
   
June 30, 2012
 
         
Gross
   
Gross
         
Tax
 
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
   
Equivalent
 
   
Cost
   
Gains
   
Losses
   
Value
   
Yield
 
   
(In Thousands)
 
                               
AVAILABLE-FOR-SALE SECURITIES:
                         
U.S. government agencies
  $ 30,000     $ 18     $     $ 30,018       1.25 %
Collateralized mortgage obligations
    4,858       154       239       4,773       5.29  
Mortgage-backed securities
    585,327       14,904       75       600,156       2.75  
Small Business Administration
                                       
loan pools
    53,027       723       11       53,739       1.83  
States and political subdivisions
    120,141       7,644             127,785       5.66  
Corporate bonds
    49       245             294       42.08  
Equity securities
    1,230       1,196             2,426        
    $ 794,632     $ 24,884     $ 325     $ 819,191       3.09 %
                                         
HELD-TO-MATURITY SECURITIES:
                                 
States and political subdivisions
  $ 920     $ 173     $     $ 1,093       7.37 %

   
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 %


The amortized cost and fair value of available-for-sale securities at June 30, 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
  $ 1,120     $ 1,120  
After one through five years
    975       993  
After five through ten years
    10,556       10,986  
After ten years
    190,566       198,737  
Securities not due on a single maturity date
    590,185       604,929  
Equity securities
    1,230       2,426  
                 
    $ 794,632     $ 819,191  
                 
 
 
 
9
 
 
 

 
The held-to-maturity securities at June 30, 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)
 
             
After five through ten years
  $ 920     $ 1,093  

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 June 30, 2012 and December 31, 2011, respectively, was approximately $42.6 million and $172.6 million, which is approximately 5.2% 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 June 30, 2012.

During the three and six months ended June 30, 2012, the Company determined that the impairment of a non-agency collateralized mortgage obligation with a book value of $962,000 had become other than temporary.  Consequently, the Company recorded a $262,000 pre-tax charge to income.  During the three and six months ended June 30, 2011, the Company determined that the impairment of a non-agency collateralized mortgage obligation with a book value of $1.8 million had become other than temporary.  Consequently, the Company recorded a $400,000 pre-tax charge to income.

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 June 30, 2012 and December 31, 2011:
 
   
June 30, 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
  $     $     $ 1,124     $ (239 )   $ 1,124     $ (239 )
Mortgage-backed securities
    13,973       (29 )     17,629       (46 )     31,602       (75 )
Small Business
                                               
Administration loan pools
    9,876       (11 )                 9,876       (11 )
    $ 23,849     $ (40 )   $ 18,753     $ (285 )   $ 42,602     $ (325 )

   
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 $2.1 million and gross losses of $559,000 resulting from sales of available-for-sale securities were realized for the three and six months ended June 30, 2012.  No securities were sold during the three and six months ended June 30, 2011, and therefore, no gains or losses on sales were realized.  Gains and losses on sales of securities are determined on the specific-identification method.
 
 
 
10
 
 
 

 
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.


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
     
April 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
    262  
Reductions due to sales
     
         
June 30, 2012
  $ 3,860  

 
   
Accumulated
 
   
Credit Losses
 
   
(In Thousands)
 
Credit losses on debt securities held
     
April 1, 2011
  $ 2,983  
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
    400  
Reductions due to sales
     
         
June 30, 2011
  $ 3,383  
 
 
 
11
 
 
 

 
   
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
    262  
Reductions due to sales
     
         
June 30, 2012
  $ 3,860  

   
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
     
Additions related to increases in credit losses on debt securities for which
       
other-than-temporary impairment losses were previously recognized
    400  
Reductions due to sales
     
         
June 30, 2011
  $ 3,383  


NOTE 7: LOANS AND ALLOWANCE FOR LOAN LOSSES
 
   
June 30,
   
December 31,
 
   
2012
   
2011
 
   
(In Thousands)
 
             
One- to four-family residential construction
  $ 27,183     $ 23,976  
Subdivision construction
    40,555       61,140  
Land development
    68,533       68,771  
Commercial construction
    102,640       119,589  
Owner occupied one- to four-family residential
    89,881       91,994  
Non-owner occupied one- to four-family residential
    148,024       145,781  
Commercial real estate
    620,023       639,857  
Other residential
    286,076       243,742  
Commercial business
    232,650       236,384  
Industrial revenue bonds
    45,337       59,750  
Consumer auto
    65,812       59,368  
Consumer other
    81,210       77,540  
Home equity lines of credit
    49,205       47,114  
FDIC-supported loans, net of discounts (TeamBank)
    91,407       128,875  
FDIC-supported loans, net of discounts (Vantus Bank)
    107,485       123,036  
FDIC-supported loans, net of discounts (Sun Security Bank)
    110,478       144,626  
FDIC-supported loans, net of discounts (InterBank)
    276,976        
      2,443,475       2,271,543  
Undisbursed portion of loans in process
    (91,639 )     (103,424 )
Allowance for loan losses
    (40,722 )     (41,232 )
Deferred loan fees and gains, net
    (2,438 )     (2,726 )
    $ 2,308,676     $ 2,124,161  
                 
Weighted average interest rate
    5.60 %     5.86 %


 
12
 
 


Classes of loans by aging were as follows:
   
June 30, 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
  $     $     $     $     $ 27,183     $ 27,183     $  
Subdivision construction
    79             1,501       1,580       38,975       40,555        
Land development
    12             2,514       2,526       66,007       68,533        
Commercial construction
                1,691       1,691       100,949       102,640        
Owner occupied one- to four-
                                                       
family residential
    509       716       2,080       3,305       86,576       89,881       139  
Non-owner occupied one- to
                                                       
four-family residential
    1,946             4,600       6,546       141,478       148,024        
Commercial real estate
    11,576       323       1,640       13,539       606,484       620,023        
Other residential
                2,950       2,950       283,126       286,076        
Commercial business
    316       379       2,913       3,608       229,042       232,650        
Industrial revenue bonds
                2,110       2,110       43,227       45,337        
Consumer auto
    499       23       106       628       65,184       65,812       4  
Consumer other
    1,122