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Great Southern Bancorp, Inc., (the “Company”), through the Company’s wholly owned subsidiary, Great Southern Bank (the “Bank”), acquired certain assets and assumed all of the deposits of Maple Grove, Minn.-based Inter Savings Bank through a Federal Deposit Insurance Corporation (“FDIC”)-assisted transaction in 2012.  In conjunction with this transaction, the Bank entered into a loss sharing agreement with the FDIC such that the Bank and the FDIC would share in the losses on assets covered under such agreements (“covered assets”).

 

On June 9, 2017, the Company issued a press release reporting that an agreement had been reached with the FDIC regarding the early termination of this loss sharing agreement.  Pursuant to the termination agreement, the FDIC will pay $15.0 million to the Bank to settle all outstanding items related to the terminated loss sharing agreements.  All rights and obligations of the Bank and the FDIC under the terminated loss sharing agreements, including the settlement of all existing loss sharing and expense reimbursement claims, have been resolved and terminated.  A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

As a result of entering into the termination agreement, assets that were covered by the terminated loss sharing arrangements, including covered loans in the amount of $138.8 million and covered other real estate owned in the amount of $2.9 million as of March 31, 2017, have been reclassified as non-covered assets effective June 9, 2017.

 

The termination of the loss sharing agreements for the Inter Savings Bank transaction will have no impact on the yields for the loans that were previously covered under this agreement. All future recoveries, gains, losses and expenses related to these previously covered assets will now be recognized entirely by Great Southern Bank since the FDIC will no longer be sharing in such gains or losses. Accordingly, the Company's future earnings will be positively impacted to the extent the Company recognizes gains on any sales or recoveries in excess of the carrying value of such assets. Similarly, the Company's future earnings will be negatively impacted to the extent the Company recognizes expenses, losses or charge-offs related to such assets.  At June 9, 2017, the Company has discounts related to the loan pools totaling approximately $14.0 million which are available to absorb charge-offs.  Any future charge-offs exceeding that aggregate amount would impact the Company's allowance for loan losses.

 

 

 

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