FDIC-ASSISTED ACQUIRED LOANS

3 Months Ended

Mar. 31, 2021

FDIC-ASSISTED ACQUIRED LOANS

FDIC-ASSISTED ACQUIRED LOANS

NOTE 7: FDIC-ASSISTED ACQUIRED LOANS

On March 20, 2009, Great Southern Bank entered into a purchase and assumption agreement with loss share with the Federal Deposit Insurance Corporation (FDIC) to assume all of the deposits (excluding brokered deposits) and acquire certain assets of TeamBank, N.A., a full service commercial bank headquartered in Paola, Kansas. The related loss sharing agreement was terminated early, effective April 26, 2016, by mutual agreement of Great Southern Bank and the FDIC. Based upon the acquisition date fair values of the net assets acquired, no goodwill was recorded.

On September 4, 2009, Great Southern Bank entered into a purchase and assumption agreement with loss share with the FDIC to assume all of the deposits and acquire certain assets of Vantus Bank, a full service thrift headquartered in Sioux City, Iowa. The related loss sharing agreement was terminated early, effective April 26, 2016, by mutual agreement of Great Southern Bank and the FDIC. Based upon the acquisition date fair values of the net assets acquired, no goodwill was recorded.

On October 7, 2011, Great Southern Bank entered into a purchase and assumption agreement with loss share with the FDIC to assume all of the deposits and acquire certain assets of Sun Security Bank, a full service bank headquartered in Ellington, Missouri. The related loss sharing agreement was terminated early, effective April 26, 2016, by mutual agreement of Great Southern Bank and the FDIC. Based upon the acquisition date fair values of the net assets acquired, no goodwill was recorded.

On April 27, 2012, Great Southern Bank entered into a purchase and assumption agreement with loss share with the FDIC to assume all of the deposits and acquire certain assets of Inter Savings Bank, FSB (“InterBank”), a full service bank headquartered in Maple Grove, Minnesota. The related loss sharing agreement was terminated early, effective June 9, 2017, by mutual agreement of Great Southern Bank and the FDIC. Based upon the acquisition date fair values of the net assets acquired, no goodwill was recorded.

On June 20, 2014, Great Southern Bank entered into a purchase and assumption agreement with the FDIC to purchase a substantial portion of the loans and investment securities, as well as certain other assets, and assume all of the deposits, as well as certain other liabilities, of Valley Bank, a full-service bank headquartered in Moline, Illinois, with significant operations in Iowa. This transaction did not include a loss sharing agreement. Based upon the acquisition date fair values of the net assets acquired, no goodwill was recorded.

The following table presents the balances of the acquired loans related to the various FDIC-assisted transactions at March 31, 2021 and December 31, 2020.

					Sun Security
	TeamBank		Vantus Bank		Bank		InterBank		Valley Bank
	(In Thousands)
March 31, 2021
Gross loans receivable	$	5,070	$	6,786	$	11,913	$	41,278	$	28,201
Balance of accretable discount due to change in expected losses		(88)		(31)		(124)		(614)		(457)
Net carrying value of loans receivable	$	4,982	$	6,755	$	11,789	$	40,664	$	27,744
December 31, 2020
Gross loans receivable	$	5,393	$	8,052	$	13,395	$	44,215	$	31,515
Balance of accretable discount due to change in expected losses		(97)		(35)		(180)		(1,079)		(612)
Expected loss remaining		(30)		(13)		(104)		(1,079)		(699)
Net carrying value of loans receivable	$	5,266	$	8,004	$	13,111	$	42,057	$	30,204

Fair Value and Expected Cash Flows. At the time of these acquisitions, the Company determined the fair value of the loan portfolios based on several assumptions. Factors considered in the valuations were projected cash flows for the loans, type of loan and related collateral, classification status, fixed or variable interest rate, term of loan, current discount rates and whether or not the loan was amortizing. Loans were grouped together according to similar characteristics and were treated in the aggregate when applying various valuation techniques. Management also estimated the amount of credit losses that were expected to be realized for the loan portfolios. The discounted cash flow approach was used to value each pool of loans. For non-performing loans, fair value was estimated by calculating the present value of the recoverable cash flows using a discount rate based on comparable corporate bond rates.

The amount of the estimated cash flows expected to be received from the acquired loan pools in excess of the fair values recorded for the loan pools is referred to as the accretable yield. The accretable yield is recognized as interest income over the estimated lives of the loans. Because the balance of these adjustments to accretable yield will be recognized generally over the remaining lives of the loan pools, they will impact future periods as well. As of March 31, 2021, the remaining accretable yield adjustment that will affect interest income is $1.3 million. Of the remaining adjustments affecting interest income, we expect to recognize approximately $900,000 of interest income during the remainder of 2021. As of January 1, 2021, we adopted the new accounting standard related to accounting for credit losses. With the adoption of this standard, there will be no further reclassification of discounts from non-accretable to accretable. All adjustments made prior to January 1, 2021 will continue to be accreted to interest income.

The impact to income of adjustments on the Company’s financial results is shown below:

	Three Months Ended			Three Months Ended
	March 31, 2021			March 31, 2020
	(In Thousands, Except Per Share Data and Basis Points Data)
Impact on net interest income/
net interest margin (in basis points)	$	691	5 bps	$	1,866	16 bps
Net impact to pre-tax income	$	691		$	1,866
Net impact net of taxes	$	533		$	1,441
Impact to diluted earnings per share	$	0.04		$	0.10