GREAT SOUTHERN BANCORP INC (Form: 10-Q, Received: 08/11/2014 15:22:50)

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, 2014

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: 13,689,550 shares of common stock, par value $.01, outstanding at August 7, 2014.

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,
	2014		2013
	(Unaudited)
ASSETS
Cash	$	130,760	$	96,167
Interest-bearing deposits in other financial institutions		69,838		131,758
Federal funds sold		22,628		—
Cash and cash equivalents		223,226		227,925
Available-for-sale securities		569,030		555,281
Held-to-maturity securities (fair value $504 – June 2014;
$912 - December 2013)		450		805
Mortgage loans held for sale		9,605		7,239
Loans receivable, net of allowance for loan losses of
$38,082 – June 2014; $40,116 - December 2013		2,790,774		2,439,530
FDIC indemnification asset		58,352		72,705
Interest receivable		11,685		11,408
Prepaid expenses and other assets		68,466		72,904
Other real estate owned, net		46,226		53,514
Premises and equipment, net		118,649		104,534
Goodwill and other intangible assets		8,385		4,583
Investment in Federal Home Loan Bank stock		8,054		9,822
Total Assets	$	3,912,902	$	3,560,250

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits	$	3,201,728	$	2,808,626
Federal Home Loan Bank advances		91,686		126,757
Securities sold under reverse repurchase agreements with customers		157,683		134,981
Short-term borrowings		1,158		1,128
Structured repurchase agreements		—		50,000
Subordinated debentures issued to capital trusts		30,929		30,929
Accrued interest payable		1,096		1,099
Advances from borrowers for taxes and insurance		7,026		3,721
Accounts payable and accrued expenses		16,230		18,502
Current and deferred income tax liability		5,815		3,809
Total Liabilities		3,513,351		3,179,552
Stockholders' Equity:
Capital stock
Serial preferred stock – $.01 par value; authorized 1,000,000 shares; issued and outstanding June 2014 and December 2013 - 57,943 shares, $1,000 liquidation amount		57,943		57,943
Common stock, $.01 par value; authorized 20,000,000 shares; issued and outstanding June 2014 – 13,684,680 shares;
December 2013 - 13,673,709 shares		137		137
Additional paid-in capital		20,093		19,567
Retained earnings		314,503		300,589
Accumulated other comprehensive income		6,875		2,462
Total Stockholders' Equity		399,551		380,698
Total Liabilities and Stockholders' Equity	$	3,912,902	$	3,560,250

See Notes to Consolidated Financial Statements

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

	THREE MONTHS ENDED JUNE 30,
	2014			2013
					Retrospectively Adjusted – Note 3
INTEREST INCOME	(Unaudited)
Loans	$	41,412		$	39,362
Investment securities and other		2,972			4,119
TOTAL INTEREST INCOME		44,384			43,481
INTEREST EXPENSE
Deposits		2,752			3,263
Federal Home Loan Bank advances		1,010			989
Short-term borrowings and repurchase agreements		512			588
Subordinated debentures issued to capital trusts		139			140
TOTAL INTEREST EXPENSE		4,413			4,980
NET INTEREST INCOME		39,971			38,501
PROVISION FOR LOAN LOSSES		1,462			3,671
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		38,509			34,830

NON-INTEREST INCOME
Commissions		344			350
Service charges and ATM fees		4,728			4,644
Net realized gains on sales of loans		608			1,628
Net realized gains on sales of available-for-sale securities		569			97
Late charges and fees on loans		265			201
Gain (loss) on derivative interest rate products		(130	)		347
Initial gain recognized on business acquisition		10,805			—
Accretion (amortization) of income/expense related to business acquisitions		(7,210	)		(5,694	)
Other income		652			754
TOTAL NON-INTEREST INCOME		10,631			2,327

NON-INTEREST EXPENSE
Salaries and employee benefits		13,470			13,078
Net occupancy and equipment expense		5,210			5,100
Postage		844			871
Insurance		953			957
Advertising		438			691
Office supplies and printing		367			323
Telephone		681			803
Legal, audit and other professional fees		908			948
Expense on foreclosed assets		1,342			1,355
Partnership tax credit investment amortization		427			632
Other operating expenses		9,759			1,954
TOTAL NON-INTEREST EXPENSE		34,399			26,712

INCOME BEFORE INCOME TAXES		14,741			10,445

PROVISION FOR INCOME TAXES		3,687			2,221

NET INCOME		11,054			8,224

Preferred stock dividends		145			145
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	10,909		$	8,079

	THREE MONTHS ENDED JUNE 30,
	2014		2013
BASIC EARNINGS PER COMMON SHARE	$	0.80	$	0.59
DILUTED EARNINGS PER COMMON SHARE	$	0.79	$	0.59
DIVIDENDS DECLARED PER COMMON SHARE	$	0.20	$	0.18

See Notes to Consolidated Financial Statements

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

	SIX MONTHS ENDED JUNE 30,
	2014			2013
					Retrospectively Adjusted – Note 3
INTEREST INCOME	(Unaudited)
Loans	$	80,721		$	82,140
Investment securities and other		5,958			8,697
TOTAL INTEREST INCOME		86,679			90,837
INTEREST EXPENSE
Deposits		5,413			6,789
Federal Home Loan Bank advances		1,984			1,963
Short-term borrowings and repurchase agreements		1,069			1,170
Subordinated debentures issued to capital trusts		275			281
TOTAL INTEREST EXPENSE		8,741			10,203
NET INTEREST INCOME		77,938			80,634
PROVISION FOR LOAN LOSSES		3,154			11,896
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		74,784			68,738

NON-INTEREST INCOME
Commissions		626			678
Service charges and ATM fees		8,896			9,071
Net realized gains on sales of loans		1,157			3,057
Net realized gains on sales of available-for-sale securities		642			131
Late charges and fees on loans		579			501
Gain (loss) on derivative interest rate products		(233	)		408
Initial gain recognized on business acquisition		10,805			—
Accretion (amortization) of income/expense related to business acquisitions		(13,598	)		(11,561	)
Other income		2,681			2,965
TOTAL NON-INTEREST INCOME		11,555			5,250

NON-INTEREST EXPENSE
Salaries and employee benefits		26,487			26,300
Net occupancy and equipment expense		10,614			10,235
Postage		1,637			1,664
Insurance		1,879			2,121
Advertising		1,169			1,166
Office supplies and printing		657			629
Telephone		1,417			1,490
Legal, audit and other professional fees		1,841			1,750
Expense on foreclosed assets		2,192			2,410
Partnership tax credit investment amortization		880			995
Other operating expenses		11,520			3,873
TOTAL NON-INTEREST EXPENSE		60,293			52,633

INCOME BEFORE INCOME TAXES		26,046			21,355

PROVISION FOR INCOME TAXES		6,174			4,737

NET INCOME		19,872			16,618

Preferred stock dividends		290			290
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	19,582		$	16,328

	SIX MONTHS ENDED JUNE 30,
	2014		2013
BASIC EARNINGS PER COMMON SHARE	$	1.43	$	1.20
DILUTED EARNINGS PER COMMON SHARE	$	1.42	$	1.19
DIVIDENDS DECLARED PER COMMON SHARE	$	0.40	$	0.36

See Notes to Consolidated Financial Statements

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

	THREE MONTHS ENDED JUNE 30,
	2014			2013
	(Unaudited)
Net Income	$	11,054		$	8,224

Unrealized appreciation (depreciation) on available-for-sale securities, net
of taxes (credit) of $1,145 and $(3,979), for 2014 and 2013, respectively		2,126			(7,389	)

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 $0 and $1, for
2014 and 2013, respectively		—			1

Reclassification adjustment for gains included in net income,
net of taxes of $(199) and $(34), for 2014 and 2013, respectively		(370	)		(63	)

Change in fair value of cash flow hedge, net of taxes (credit) of $(54)
and $0, for 2014 and 2013, respectively		(101	)		—

Comprehensive Income	$	12,709		$	773

	SIX MONTHS ENDED JUNE 30,
	2014			2013
	(Unaudited)
Net Income	$	19,872		$	16,618

Unrealized appreciation (depreciation) on available-for-sale securities, net of
taxes (credit) of $2,678 and $(4,051), for 2014 and 2013, respectively		4,973			(7,524	)

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 $0 and $(20), for
2014 and 2013, respectively		—			(37	)

Reclassification adjustment for gains included in net income,
net of taxes of $(225) and $(46), for 2014 and 2013, respectively		(417	)		(85	)

Change in fair value of cash flow hedge, net of taxes (credit) of $(77)
and $0, for 2014 and 2013, respectively		(143	)		—

Comprehensive Income	$	24,285		$	8,972

See Notes to Consolidated Financial Statements

GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	SIX MONTHS ENDED JUNE 30,
	2014			2013
	(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	19,872		$	16,618
Proceeds from sales of loans held for sale		47,922			125,536
Originations of loans held for sale		(49,089	)		(126,003	)
Items not requiring (providing) cash:
Depreciation		4,220			3,935
Amortization of other assets		1,525			3,536
Compensation expense for stock option grants		273			221
Provision for loan losses		3,154			11,896
Net gains on loan sales		(1,157	)		(3,057	)
Net gains on sale or impairment of available-for-sale investment securities		(642	)		(131	)
Net gains on sale of premises and equipment		(41	)		(17	)
Loss on sale of foreclosed assets		790			1,552
Initial gain recognized on business acquisition		(10,805	)		—
Amortization of deferred income, premiums, discounts
and fair value adjustments		11,605			14,659
(Gain) loss on derivative interest rate products		233			(408	)
Deferred income taxes		(371	)		(5,101	)
Changes in:
Interest receivable		761			418
Prepaid expenses and other assets		(288	)		(3,960	)
Accounts payable and accrued expenses		(3,492	)		2,550
Income taxes refundable/payable		—			(7,130	)
Net cash provided by operating activities		24,470			35,114
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans		(143,068	)		(23,202	)
Purchase of loans		(39,926	)		—
Cash received from acquisitions		189,437			—
Cash received from FDIC loss sharing reimbursements		5,894			16,092
Purchase of premises and equipment		(7,170	)		(5,748	)
Proceeds from sale of premises and equipment		197			1,204
Proceeds from sale of foreclosed assets		12,362			19,331
Capitalized costs on foreclosed assets		(40	)		(174	)
Proceeds from sales of available-for-sale investment securities		41,312			3,932
Proceeds from maturing investment securities		110			—
Proceeds from called investment securities		4,535			4,160
Principal reductions on mortgage-backed securities		53,996			126,294
Purchase of available-for-sale securities		(19,914	)		(87,487	)
Redemption (purchase) of Federal Home Loan Bank stock		1,768			(279	)
Net cash provided by investing activities		99,493			54,123
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in certificates of deposit		(102,932	)		(165,345	)
Net increase in checking and savings deposits		37,138			26,925
Proceeds from Federal Home Loan Bank advances		245,000			1,980
Repayments of Federal Home Loan Bank advances		(277,284	)		(145	)
Net increase in short-term borrowings		22,165			16,516
Repayments of structured repurchase agreements		(50,000	)		—
Advances from borrowers for taxes and insurance		2,677			2,248
Dividends paid		(5,490	)		(2,763	)
Purchase of company stock		(481	)		—
Stock options exercised		545			516
Net cash used in financing activities		(128,662	)		(120,068	)
DECREASE IN CASH AND CASH EQUIVALENTS		(4,699	)		(30,831	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		227,925			404,141
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	223,226		$	373,310

See Notes to Consolidated Financial Statements

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, 2014 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, 2013, 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 2013 filed with the Securities and Exchange Commission.

NOTE 2: NATURE OF OPERATIONS AND OPERATING SEGMENTS

The Company operates as a one-bank holding company. The Company’s business primarily consists of the operations of Great Southern Bank (the “Bank”), which provides a full range of financial services to customers primarily located in Missouri, Iowa, Kansas, Minnesota, Nebraska and Arkansas. In addition, the Company also operates commercial loan production offices in Dallas, Texas and Tulsa, Oklahoma. The Company and the Bank are subject to the regulation of certain federal and state agencies and undergo periodic examinations by those regulatory agencies.

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 attracting deposits from the general public, accepting brokered deposits and borrowing from the Federal Home Loan Bank and others. The operating results of this segment are regularly reviewed by management to make decisions about resource allocations and to assess performance. 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 January 2014, the FASB issued ASU No. 2014-01 to amend FASB ASC Topic 323, Investments – Equity Method and Joint Ventures . The objective of this Update is to provide guidance on accounting for investments by a reporting entity in flow-through limited liability entities that manage or invest in affordable housing projects that qualify for the low-income housing tax credit. The amendments in the Update permit reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit). The Update would be effective for the Company beginning January 1, 2015; however, early adoption was permitted. The Company elected to adopt this Update early, adopting it during the three months ended March 31, 2014. There was no material impact on the Company’s financial position or results of operations, except that the investment amortization expense which was previously included in Other Noninterest Expense in the Consolidated Statements of Income was moved from Other Noninterest Expense to Provision for Income Taxes in the Consolidated Statements of Income. For the three months ended June 30, 2013, $905,000 was moved from Other Noninterest Expense to Provision for Income Taxes. For the six months ended June 30, 2013, $1.9 million was moved from Other Noninterest Expense to Provision for Income Taxes. This had the effect of reducing Noninterest Expense and increasing Provision for Income Taxes, but did not have any impact on Net Income.

In January 2014, the FASB issued ASU No. 2014-04 to amend FASB ASC Topic 310, Receivables – Troubled Debt Restructurings by Creditors . The objective of the amendments in this Update is to reduce diversity by clarifying when an in substance repossession or foreclosure occurs, that is, when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be derecognized and the real estate property recognized. The amendments in this Update clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The Update will be effective for the Company beginning January 1, 2015, and is not expected to have a material impact on the Company’s financial position or results of operations.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 660): Summary and Amendments that Create Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs—Contracts with Customers (Subtopic 340-40) . The guidance in this update supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition , and most industry-specific guidance throughout the industry topics of the codification. For public companies, this update will be effective for interim and annual periods beginning after December 15, 2016 and early application is not permitted. The Company is currently assessing the impact that this guidance will have on its consolidated financial statements, but does not expect the guidance to 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 June 30,
	2014		2013
	(In Thousands, Except Per Share Data)
Basic:
Average shares outstanding		13,685		13,619
Net income available to common stockholders	$	10,909	$	8,079
Per share amount	$	0.80	$	0.59

Diluted:
Average shares outstanding		13,685		13,619
Net effect of dilutive stock options and warrants – based on the treasury
stock method using average market price		95		62
Diluted shares		13,780		13,681
Net income available to common stockholders	$	10,909	$	8,079
Per share amount	$	0.79	$	0.59

	Six Months Ended June 30,
	2014		2013
	(In Thousands, Except Per Share Data)
Basic:
Average shares outstanding		13,685		13,618
Net income available to common stockholders	$	19,582	$	16,328
Per share amount	$	1.43	$	1.20

Diluted:
Average shares outstanding		13,685		13,618
Net effect of dilutive stock options and warrants – based on the treasury
stock method using average market price		95		62
Diluted shares		13,780		13,680
Net income available to common stockholders	$	19,582	$	16,328
Per share amount	$	1.42	$	1.19

Options to purchase 182,275 and 341,950 shares of common stock were outstanding at June 30, 2014 and 2013, respectively, but were not included in the computation of diluted earnings per share for each of the three month and six month periods because the options’ exercise prices were greater than the average market prices of the common shares for the three and six months ended June 30, 2014 and 2013, respectively.

NOTE 6: INVESTMENT SECURITIES

	June 30, 2014
			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	$	—	$	1,179	$	18,821		2.00	%
Mortgage-backed securities		373,667		5,457		1,281		377,843		1.86
Collateralized mortgage obligations		39,746		6		2		39,750		2.72
States and political subdivisions		123,922		6,020		296		129,646		5.38
Equity securities		847		2,123		—		2,970		—
	$	558,182	$	13,606	$	2,758	$	569,030		2.70	%

HELD-TO-MATURITY SECURITIES:
States and political subdivisions	$	450	$	54	$	—	$	504		7.37	%

	December 31, 2013
			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	$	—	$	2,745	$	17,255		2.00	%
Mortgage-backed securities		365,020		4,824		2,266		367,578		2.04
Small Business Administration
loan pools		43,461		1,394		—		44,855		1.34
States and political subdivisions		122,113		2,549		1,938		122,724		5.47
Equity securities		847		2,022		—		2,869		—
	$	551,441	$	10,789	$	6,949	$	555,281		2.74	%

HELD-TO-MATURITY SECURITIES:
States and political subdivisions	$	805	$	107	$	—	$	912		7.37	%

The amortized cost and fair value of available-for-sale securities at June 30, 2014, 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	$	110	$	112
After one through five years		1,164		1,167
After five through ten years		8,233		8,550
After ten years		134,415		138,638
Securities not due on a single maturity date		413,413		417,593
Equity securities		847		2,970

	$	558,182	$	569,030

The held-to-maturity securities at June 30, 2014, 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 one through five years	$	450	$	504

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, 2014 and December 31, 2013, respectively, was approximately $187.0 million and $237.6 million, which is approximately 32.9% and 42.7% of the Company’s available-for-sale and held-to-maturity investment portfolio, respectively.

Based on an 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, 2014.

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, 2014 and December 31, 2013:

	June 30, 2014
	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)

U.S. government agencies	$	—	$	—		$	20,000	$	(1,179	)	$	20,000	$	(1,179	)
Mortgage-backed securities		41,280		(192	)		83,180		(1,089	)		124,460		(1,281	)
Collateralized mortgage
obligations		22,091		(2	)		—		—			22,091		(2	)
State and political
subdivisions		3,594		(16	)		16,834		(280	)		20,428		(296	)
	$	66,965	$	(210	)	$	120,014	$	(2,548	)	$	186,979	$	(2,758	)

	December 31, 2013
	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)

U.S. government agencies	$	20,000	$	(2,745	)	$	—	$	—		$	20,000	$	(2,745	)
Mortgage-backed securities		127,901		(1,871	)		39,255		(395	)		167,156		(2,266	)
State and political
subdivisions		50,401		(1,938	)		—		—			50,401		(1,938	)
	$	198,302	$	(6,554	)	$	39,255	$	(395	)	$	237,557	$	(6,949	)

Gross gains of $569,000 and $642,000 and gross losses of $-0- and $-0- resulting from sales of available-for-sale securities were realized for the three and six months ended June 30, 2014. Gross gains of $117,000 and $151,000 and gross losses of $20,000 and $20,000 resulting from sales of available-for-sale securities were realized for the three and six months ended June 30, 2013. Gains and losses on sales of securities are determined on the specific-identification method.

At June 30, 2014, investment securities included $88.5 million of securities acquired in the Valley Bank transaction. These securities were comprised of $39.8 million of government agency collateralized mortgage obligations, $47.8 million of government agency mortgage-backed securities and $978,000 of securities issued by states and political subdivisions. The Company sold these securities in July 2014 and recorded a gain of approximately $175,000. See Note 16 FDIC-Assisted Acquisition for further information on the Valley acquisition .

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 routinely 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.

During the three and six months ended June 30, 2014, 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, as well as due to other market factors, but are not otherwise other-than-temporarily impaired.

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, 2014	$	—
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 final principal payments		—

June 30, 2014	$	—

	Accumulated
	Credit Losses
	(In Thousands)
Credit losses on debt securities held
April 1, 2013	$	4,176
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 final principal payments		(4,176	)

June 30, 2013	$	—

	Accumulated
	Credit Losses
	(In Thousands)
Credit losses on debt securities held
January 1, 2014	$	—
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 final principal payments		—

June 30, 2014	$	—

	Accumulated
	Credit Losses
	(In Thousands)
Credit losses on debt securities held
January 1, 2013	$	4,176
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 final principal payments		(4,176	)

June 30, 2013	$	—

Amounts Reclassified Out of Accumulated Other Comprehensive Income. Amounts reclassified from accumulated other comprehensive income and the affected line items in the statements of income during the three and six months ended June 30, 2014 and 2013, were as follows:

	Amounts Reclassified from Other Comprehensive Income Three Months Ended June 30,
	2014			2013			Affected Line Item in the Statements of Income
	(In Thousands)

Unrealized gains (losses) on available-							Net realized gains on available-
for-sale securities	$	569		$	97		for-sale securities
							(Total reclassified amount before tax)
Income Taxes		(199	)		(34	)	Provision for income taxes
Total reclassifications out of accumulated
other comprehensive income	$	370		$	63

	Amounts Reclassified from Other Comprehensive Income Six Months Ended June 30,
	2014			2013			Affected Line Item in the Statements of Income
	(In Thousands)

Unrealized gains (losses) on available-							Net realized gains on available-
for-sale securities	$	642		$	131		for-sale securities
							(Total reclassified amount before tax)
Income Taxes		(225	)		(46	)	Provision for income taxes
Total reclassifications out of accumulated
other comprehensive income	$	417		$	85

NOTE 7: LOANS AND ALLOWANCE FOR LOAN LOSSES

	June 30,			December 31,
	2014			2013
	(In Thousands)

One- to four-family residential construction	$	39,505		$	34,662
Subdivision construction		36,627			40,409
Land development		63,437			57,841
Commercial construction		270,517			184,019
Owner occupied one- to four-family residential		95,806			89,133
Non-owner occupied one- to four-family residential		142,404			145,908
Commercial real estate		844,893			780,690
Other residential		342,969			325,599
Commercial business		330,608			315,269
Industrial revenue bonds		44,364			42,230
Consumer auto		206,135			134,717
Consumer other		79,913			82,260
Home equity lines of credit		59,684			58,283
FDIC-supported loans, net of discounts (TeamBank)		16,886			49,862
Acquired non-covered loans, net of discounts (TeamBank)		28,060			—
FDIC-supported loans, net of discounts (Vantus Bank)		49,661			57,920
FDIC-supported loans, net of discounts (Sun Security Bank)		58,400			64,843
FDIC-supported loans, net of discounts (InterBank)		210,334			213,539
Acquired loans not covered by FDIC loss sharing agreements, net of
discounts (Valley Bank) (“acquired non-covered loans”)		159,696			—
		3,079,899			2,677,184
Undisbursed portion of loans in process		(247,471	)		(194,544	)
Allowance for loan losses		(38,082	)		(40,116	)
Deferred loan fees and gains, net		(3,572	)		(2,994	)
	$	2,790,774		$	2,439,530

Weighted average interest rate		4.86	%		5.10	%

Classes of loans by aging were as follows:

	June 30, 2014
													Total Loans
					Past Due								> 90 Days
	30-59 Days		60-89 Days		90 Days		Total Past				Total Loans		Past Due and
	Past Due		Past Due		or More		Due		Current		Receivable		Still Accruing
	(In Thousands)
One- to four-family
residential construction	$	—	$	—	$	—	$	—	$	39,505	$	39,505	$	—
Subdivision construction		—		—		304		304		36,323		36,627		—
Land development		1,017		—		303		1,320		62,117		63,437		—
Commercial construction		—		—		—		—		270,517		270,517		—
Owner occupied one- to four-
family residential		179		160		2,370		2,709		93,097		95,806		194
Non-owner occupied one- to
four-family residential		45		289		543		877		141,527		142,404		—
Commercial real estate		1,278		489		7,030		8,797		836,096		844,893		—
Other residential		—		—		—		—		342,969		342,969		—
Commercial business		184		225		214		623		329,985		330,608		—
Industrial revenue bonds		—		—		1,827		1,827		42,537		44,364		—
Consumer auto		1,105		186		151		1,442		204,693		206,135		—
Consumer other		1,655		197		581		2,433		77,480		79,913		142
Home equity lines of credit		177		84		339		600		59,084		59,684		—
FDIC-supported loans, net of
discounts (TeamBank)		120		8		421		549		16,337		16,886		—
Acquired non-covered loans, net
of discounts (TeamBank)		—		—		63		63		27,997		28,060		—
FDIC-supported loans, net of
discounts (Vantus Bank)		100		75		1,883		2,058		47,603		49,661		—
FDIC-supported loans,
net of discounts
(Sun Security Bank)		603		467		3,625		4,695		53,705		58,400		—
FDIC-supported loans,
net of discounts
(InterBank)		426		1,433		14,617		16,476		193,858		210,334		—
Acquired non-covered loans,
net of discounts
(Valley Bank)		5,807		2,607		7,254		15,668		144,028		159,696		331
		12,696		6,220		41,525		60,441		3,019,458		3,079,899		667
Less FDIC-supported loans,
and acquired non-covered
loans, net of discounts		7,056		4,590		27,863		39,509		483,528		523,037		331

Total	$	5,640	$	1,630	$	13,662	$	20,932	$	2,535,930	$	2,556,862	$	336

	December 31, 2013
													Total Loans
					Past Due								> 90 Days
	30-59 Days		60-89 Days		90 Days		Total Past				Total Loans		Past Due and
	Past Due		Past Due		or More		Due		Current		Receivable		Still Accruing
	(In Thousands)
One- to four-family
residential construction	$	—	$	—	$	—	$	—	$	34,662	$	34,662	$	—
Subdivision construction		—		—		871		871		39,538		40,409		—
Land development		145		38		338		521		57,320		57,841		—
Commercial construction		—		—		—		—		184,019		184,019		—
Owner occupied one- to four-
family residential		1,233		344		3,014		4,591		84,542		89,133		211
Non-owner occupied one- to
four-family residential		1,562		171		843		2,576		143,332		145,908		140
Commercial real estate		2,856		131		6,205		9,192		771,498		780,690		—
Other residential		—		—		—		—		325,599		325,599		—
Commercial business		17		19		5,208		5,244		310,025		315,269		—
Industrial revenue bonds		—		—		2,023		2,023		40,207		42,230		—
Consumer auto		955		127		168		1,250		133,467		134,717		—
Consumer other		1,258		333		732		2,323		79,937		82,260		257
Home equity lines of credit		168		16		504		688		57,595		58,283		—
FDIC-supported loans, net of
discounts (TeamBank)		414		130		1,396		1,940		47,922		49,862		6
FDIC-supported loans, net of
discounts (Vantus Bank)		675		31		2,356		3,062		54,858		57,920		42
FDIC-supported loans,
net of discounts
(Sun Security Bank)		510		121		4,241		4,872		59,971		64,843		147
FDIC-supported loans, net of
discounts (InterBank)		6,024		1,567		16,768		24,359		189,180		213,539		20
		15,817		3,028		44,667		63,512		2,613,672		2,677,184		823
Less FDIC-supported loans,
net of discounts		7,623		1,849		24,761		34,233		351,931		386,164		215

Total	$	8,194	$	1,179	$	19,906	$	29,279	$	2,261,741	$	2,291,020	$	608

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

	June 30,		December 31,
	2014		2013
	(In Thousands)

One- to four-family residential construction	$	—	$	—
Subdivision construction		304		871
Land development		303		338
Commercial construction		—		—
Owner occupied one- to four-family residential		2,176		2,803
Non-owner occupied one- to four-family residential		543		703
Commercial real estate		7,030		6,205
Other residential		—		—
Commercial business		2,041		5,208
Industrial revenue bonds		—		2,023
Consumer auto		151		168
Consumer other		439		475
Home equity lines of credit		339		504

Total	$	13,326	$	19,298

The following table presents the activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2014. Also presented is the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of June 30, 2014:

	One- to Four-
	Family
	Residential and			Other			Commercial			Commercial			Commercial
	Construction			Residential			Real Estate			Construction			Business			Consumer			Total
	(In Thousands)
Allowance for loan losses
Balance April 1, 2014	$	4,638		$	1,998		$	18,443		$	7,071		$	2,341		$	3,784		$	38,275
Provision (benefit) charged to expense		915			(281	)		(1,629	)		1,110			979			368			1,462
Losses charged off		(505	)		(2	)		(338	)		(95	)		(738	)		(764	)		(2,442	)
Recoveries		25			8			—			163			—			591			787
Balance June 30, 2014	$	5,073		$	1,723		$	16,476		$	8,249		$	2,582		$	3,979		$	38,082

Balance January 1, 2014	$	6,235		$	2,678		$	16,939		$	4,464		$	6,451		$	3,349		$	40,116
Provision (benefit) charged to expense		367			(968	)		(134	)		3,693			(1,182	)		1,378			3,154
Losses charged off		(1,697	)		(2	)		(719	)		(130	)		(2,687	)		(1,784	)		(7,019	)
Recoveries		168			15			390			222			—			1,036			1,831
Balance June 30, 2014	$	5,073		$	1,723		$	16,476		$	8,249		$	2,582		$	3,979		$	38,082

Ending balance:
Individually evaluated for
impairment	$	1,623		$	—		$	1,507		$	1,531		$	606		$	231		$	5,498
Collectively evaluated for
impairment	$	3,450		$	1,703		$	14,625		$	6,700		$	1,966		$	3,708		$	32,152
Loans acquired and
accounted for under ASC 310-30	$	—		$	20		$	344		$	18		$	10		$	40		$	432


Loans
Individually evaluated for
impairment	$	11,560		$	10,586		$	30,744		$	7,600		$	5,834		$	1,361		$	67,685
Collectively evaluated for
impairment	$	302,782		$	332,383		$	814,149		$	326,354		$	369,138		$	344,371		$	2,489,177
Loans acquired and
accounted for under ASC 310-30	$	257,756		$	61,905		$	113,316		$	19,819		$	21,862		$	48,379		$	523,037

The following table presents the activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2013:

	One- to Four-
	Family
	Residential and			Other			Commercial			Commercial			Commercial
	Construction			Residential			Real Estate			Construction			Business			Consumer			Total
	(In Thousands)
Allowance for loan losses
Balance April 1, 2013	$	5,575		$	4,482		$	16,812		$	5,130		$	5,838		$	2,711		$	40,548
Provision (benefit) charged to expense		864			(329	)		1,671			882			135			448			3,671
Losses charged off		(322	)		(791	)		(2,187	)		(276	)		(352	)		(752	)		(4,680	)
Recoveries		8			11			123			53			43			408			646
Balance June 30, 2013	$	6,125		$	3,373		$	16,419		$	5,789		$	5,664		$	2,815		$	40,185

Balance January 1, 2013	$	6,822		$	4,327		$	17,441		$	3,938		$	5,096		$	3,025		$	40,649
Provision (benefit) charged to expense		526			1,702			5,262			2,122			1,870			414			11,896
Losses charged off		(1,240	)		(2,686	)		(6,530	)		(329	)		(1,370	)		(1,669	)		(13,824	)
Recoveries		17			30			246			58			68			1,045			1,464
Balance June 30, 2013	$	6,125		$	3,373		$	16,419		$	5,789		$	5,664		$	2,815		$	40,185

The following table presents the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of December 31, 2013:

	One- to Four-
	Family
	Residential and		Other		Commercial		Commercial		Commercial
	Construction		Residential		Real Estate		Construction		Business		Consumer		Total
	(In Thousands)
Allowance for loan losses
Individually evaluated for
impairment	$	2,501	$	—	$	90	$	473	$	4,162	$	218	$	7,444
Collectively evaluated for
impairment	$	3,734	$	2,678	$	16,845	$	3,991	$	2,287	$	3,131	$	32,666
Loans acquired and
accounted for under ASC 310-30	$	—	$	—	$	4	$	—	$	2	$	—	$	6

Loans
Individually evaluated for
impairment	$	13,055	$	10,983	$	31,591	$	12,628	$	8,755	$	1,389	$	78,401
Collectively evaluated for
impairment	$	297,057	$	314,616	$	791,329	$	229,232	$	306,514	$	273,871	$	2,212,619
Loans acquired and
accounted for under ASC 310-30	$	206,964	$	35,095	$	84,591	$	6,989	$	4,883	$	47,642	$	386,164

The portfolio segments used in the preceding two tables correspond to the loan classes used in all other tables in Note 7 as follows:

·	The one-to four-family residential and construction segment includes the one- to four-family residential construction, subdivision construction, owner occupied one- to four-family residential and non-owner occupied one- to four-family residential classes

·	The other residential segment corresponds to the other residential class

·	The commercial real estate segment includes the commercial real estate and industrial revenue bonds classes

·	The commercial construction segment includes the land development and commercial construction classes

·	The commercial business segment corresponds to the commercial business class

·	The consumer segment includes the consumer auto, consumer other and home equity lines of credit classes

A loan is considered impaired, in accordance with the impairment accounting guidance (FASB ASC 310-10-35-16), when based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include not only nonperforming loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties.

Impaired loans (excluding FDIC-supported loans, net of discount and acquired non-covered loans, net of discount), are summarized as follows:

	June 30, 2014
			Unpaid
	Recorded		Principal		Specific
	Balance		Balance		Allowance
	(In Thousands)

One- to four-family residential construction	$	170	$	170	$	—
Subdivision construction		1,707		1,783		585
Land development		7,600		8,024		1,531
Commercial construction		—		—		—
Owner occupied one- to four-family residential		5,149		5,490		581
Non-owner occupied one- to four-family residential		4,534		4,680		457
Commercial real estate		30,744		33,200		1,507
Other residential		10,586		10,586		—
Commercial business		2,183		2,203		606
Industrial revenue bonds		3,651		4,585		—
Consumer auto		187		215		28
Consumer other		738		856		111
Home equity lines of credit		436		460		92

Total	$	67,685	$	72,252	$	5,498

	Three Months Ended				Six Months Ended
	June 30, 2014				June 30, 2014
	Average				Average
	Investment		Interest		Investment		Interest
	in Impaired		Income		in Impaired		Income
	Loans		Recognized		Loans		Recognized
	(In Thousands)

One- to four-family residential construction	$	57	$	3	$	28	$	3
Subdivision construction		2,310		8		2,720		30
Land development		10,937		42		11,779		143
Commercial construction		—		—		—		—
Owner occupied one- to four-family residential		5,101		60		5,318		112
Non-owner occupied one- to four-family residential		4,140		69		3,930		110
Commercial real estate		29,958		360		30,541		690
Other residential		10,734		120		10,845		210
Commercial business		1,847		47		2,904		68
Industrial revenue bonds		2,933		303		2,815		303
Consumer auto		160		5		166		7
Consumer other		714		24		696		42
Home equity lines of credit		441		—		484		14

Total	$	69,332	$	1,041	$	72,226	$	1,732

	At or for the Year Ended December 31, 2013
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans		Interest Income Recognized
	(In Thousands)
One- to four-family residential construction	$	—	$	—	$	—	$	36	$	—
Subdivision construction		3,502		3,531		1,659		3,315		163
Land development		12,628		13,042		473		13,389		560
Commercial construction		—		—		—		—		—
Owner occupied one- to four-family residential		5,802		6,117		593		5,101		251
Non-owner occupied one- to four-family residential		3,751		4,003		249		4,797		195
Commercial real estate		31,591		34,032		90		42,242		1,632
Other residential		10,983		10,983		—		13,837		434
Commercial business		6,057		6,077		4,162		6,821		179
Industrial revenue bonds		2,698		2,778		—		2,700		27
Consumer auto		216		231		32		145		16
Consumer other		604		700		91		630		63
Home equity lines of credit		569		706		95		391		38

Total	$	78,401	$	82,200	$	7,444	$	93,404	$	3,558

	June 30, 2013
			Unpaid
	Recorded		Principal		Specific
	Balance		Balance		Allowance
	(In Thousands)

One- to four-family residential construction	$	286	$	286	$	—
Subdivision construction		4,683		4,687		729
Land development		15,610		16,010		1,135
Commercial construction		—		—		—
Owner occupied one- to four-family residential		4,612		4,962		408
Non-owner occupied one- to four-family residential		5,629		5,778		905
Commercial real estate		41,102		43,490		2,420
Other residential		11,597		11,598		265
Commercial business		7,309		8,795		3,373
Industrial revenue bonds		2,698		2,778		—
Consumer auto		99		115		15
Consumer other		639		721		95
Home equity lines of credit		266		278		50

Total	$	94,530	$	99,498	$	9,395

	Three Months Ended				Six Months Ended
	June 30, 2013				June 30, 2013
	Average				Average
	Investment		Interest		Investment		Interest
	in Impaired		Income		in Impaired		Income
	Loans		Recognized		Loans		Recognized
	(In Thousands)

One- to four-family residential construction	$	95	$	5	$	48	$	5
Subdivision construction		3,087		76		2,778		106
Land development		12,495		240		11,752		366
Commercial construction		—		—		—		—
Owner occupied one- to four-family residential		4,704		63		4,831		116
Non-owner occupied one- to four-family residential		4,662		100		5,251		161
Commercial real estate		46,102		364		46,164		740
Other residential		14,836		113		16,620		217
Commercial business		7,528		16		7,473		75
Industrial revenue bonds		2,702		14		2,703		14
Consumer auto		105		2		119		4
Consumer other		648		21		662		32
Home equity lines of credit		278		2		308		10

Total	$	97,242	$	1,016	$	98,709	$	1,846

At June 30, 2014, $24.5 million of impaired loans had specific valuation allowances totaling $5.5 million. At December 31, 2013, $18.0 million of impaired loans had specific valuation allowances totaling $7.4 million.

Included in certain loan categories in the impaired loans are troubled debt restructurings that were classified as impaired. Troubled debt restructurings are loans that are modified by granting concessions to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. The types of concessions made are factored into the estimation of the allowance for loan losses for troubled debt restructurings primarily using a discounted cash flows or collateral adequacy approach.

The following tables present newly restructured loans during the three and six months ended June 30, 2014 by type of modification:

	Three Months Ended June 30, 2014
							Total
	Interest Only		Term		Combination		Modification
	(In Thousands)

Mortgage loans on real estate:
One -to four- family residential	$	—	$	338	$	—	$	338
Commercial real estate		—		1,407		—		1,407
Commercial business		—		750		—		750
Industrial revenue bonds		—		1,150		—		1,150
Consumer		—		1		—		1

	$	—	$	3,646	$	—	$	3,646

	Six Months Ended June 30, 2014
							Total
	Interest Only		Term		Combination		Modification
	(In Thousands)

Mortgage loans on real estate:
Subdivision construction	$	—	$	250	$	—	$	250
One -to four- family residential		—		386		—		386
Commercial real estate		506		1,929		—		2,435
Commercial business		—		1,638		—		1,638
Industrial revenue bonds		—		1,150		—		1,150
Consumer		—		53		—		53

	$	506	$	5,406	$	—	$	5,912

At June 30, 2014, the Company had $54.3 million of loans that were modified in troubled debt restructurings and impaired, as follows: $8.7 million of construction and land development loans, $15.8 million of single family and multi-family residential mortgage loans, $25.9 million of commercial real estate loans, $3.6 million of commercial business loans and $315,000 of consumer loans. Of the total troubled debt restructurings at June 30, 2014, $47.6 million were accruing interest and $20.5 million were classified as substandard using the Company’s internal grading system, which is described below. In addition, as part of the Valley Bank FDIC-assisted acquisition, the Company acquired $31.2 million of Valley Bank loans that are identified as troubled debt restructurings. As of June 30, 2014, the Valley Bank acquired loans that were considered modified in troubled debt restructurings were as follows: $2.0 million of construction and land development loans, $17.6 million of single family and multi-family residential mortgage loans, $10.8 million of commercial real estate loans, $510,000 of commercial business loans and $282,000 of consumer loans. The Company had no troubled debt restructurings which were modified in the previous 12 months and subsequently defaulted during the six months ended June 30, 2014. When loans modified as troubled debt restructuring have subsequent payment defaults, the defaults are factored into the determination of the allowance for loan losses to ensure specific valuation allowances reflect amounts considered uncollectible. At December 31, 2013, the Company had $10.9 million of construction and land development loans, $16.6 million of single family and multi-family residential mortgage loans, $24.8 million of commercial real estate loans, $1.5 million of commercial business loans and $310,000 of consumer loans that were modified in troubled debt restructurings and impaired. Of the total troubled debt restructurings of $54.1 million at December 31, 2013, $49.6 million were accruing interest and $22.1 million were classified as substandard using the Company’s internal grading system.

During the three and six months ended June 30, 2014, loans designated as troubled debt restructurings totaling $679,000 met the criteria for placement back on accrual status. The $679,000 was made up of $591,000 of residential mortgage loans and $88,000 of commercial real estate loans.

The Company reviews the credit quality of its loan portfolio using an internal grading system that classifies loans as “Satisfactory,” “Watch,” “Special Mention,” “Substandard” and “Doubtful.” Substandard loans are characterized by the distinct possibility that the Bank will sustain some loss if certain deficiencies are not corrected. Doubtful loans are those having all the weaknesses inherent to those classified Substandard with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Special mention loans possess potential weaknesses that deserve management’s close attention but do not expose the Bank to a degree of risk that warrants substandard classification. Loans classified as watch are being monitored because of indications of potential weaknesses or deficiencies that may require future classification as special mention or substandard. Loans not meeting any of the criteria previously described are considered satisfactory. The FDIC-covered loans are evaluated using this internal grading system. These loans are accounted for in pools and are currently substantially covered through loss sharing agreements with the FDIC. Minimal adverse classification in the loan pools was identified as of June 30, 2014 and December 31, 2013, respectively. The acquired non-covered loans are also evaluated using this internal grading system. These loans are accounted for in pools and minimal adverse classification in the loan pools was identified as of June 30, 2014. See Note 8 for further discussion of the acquired loan pools and loss sharing agreements. The loan grading system is presented by loan class below:

	June 30, 2014
					Special
	Satisfactory		Watch		Mention		Substandard		Doubtful		Total
			(In Thousands)
One- to four-family residential
construction	$	39,335	$	—	$	—	$	170	$	—	$	39,505
Subdivision construction		35,191		21		—		1,415		—		36,627
Land development		52,361		5,000		—		6,076		—		63,437
Commercial construction		270,517		—		—		—		—		270,517
Owner occupied one- to four-
family residential		92,216		615		—		2,975		—		95,806
Non-owner occupied one- to four-
family residential		135,801		3,502		—		3,101		—		142,404
Commercial real estate		774,524		56,433		—		13,936		—		844,893
Other residential		326,992		14,021		—		1,956		—		342,969
Commercial business		328,874		471		—		1,263		—		330,608
Industrial revenue bonds		41,862		675		—		1,827		—		44,364
Consumer auto		205,955		—		—		180		—		206,135
Consumer other		79,337		4		—		572		—		79,913
Home equity lines of credit		59,248		—		—		436		—		59,684
FDIC-supported loans, net of
discounts (TeamBank)		16,866		—		—		20		—		16,886
Acquired non-covered loans,
net of discounts (TeamBank)		28,052		—		—		8		—		28,060
FDIC-supported loans, net of
discounts (Vantus Bank)		49,104		—		—		557		—		49,661
FDIC-supported loans, net of
discounts (Sun Security Bank)		57,768		—		—		632		—		58,400
FDIC-supported loans, net of
discounts (InterBank)		210,334		—		—		—		—		210,334
Acquired non-covered loans,
net of discounts (Valley Bank)		159,696		—		—		—		—		159,696

Total	$	2,964,033	$	80,742	$	—	$	35,124	$	—	$	3,079,899

	December 31, 2013
					Special
	Satisfactory		Watch		Mention		Substandard		Doubtful		Total
			(In Thousands)
One- to four-family residential
construction	$	34,364	$	298	$	—	$	—	$	—	$	34,662
Subdivision construction		36,524		706		—		3,179		—		40,409
Land development		45,606		1,148		—		11,087		—		57,841
Commercial construction		184,019		—		—		—		—		184,019
Owner occupied one- to four-
family residential		84,931		503		—		3,699		—		89,133
Non-owner occupied one- to four-
family residential		137,003		6,718		—		2,187		—		145,908
Commercial real estate		727,668		37,937		—		15,085		—		780,690
Other residential		311,320		12,323		—		1,956		—		325,599
Commercial business		307,540		1,803		—		3,528		2,398		315,269
Industrial revenue bonds		39,532		675		—		2,023		—		42,230
Consumer auto		134,516		—		—		201		—		134,717
Consumer other		81,769		6		—		485		—		82,260
Home equity lines of credit		57,713		—		—		570		—		58,283
FDIC-supported loans, net of
Discounts (TeamBank)		49,702		—		—		160		—		49,862
FDIC-supported loans, net of
discounts (Vantus Bank)		57,290		—		—		630		—		57,920
FDIC-supported loans, net of
discounts (Sun Security Bank)		63,360		—		—		1,483		—		64,843
FDIC-supported loans, net of
discounts (InterBank)		213,539		—		—		—		—		213,539

Total	$	2,566,396	$	62,117	$	—	$	46,273	$	2,398	$	2,677,184

NOTE 8: LOSS SHARING AGREEMENTS AND FDIC INDEMNIFICATION ASSETS

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 loans, commitments and foreclosed assets purchased in the TeamBank transaction are covered by a loss sharing agreement between the FDIC and Great Southern Bank. Under the loss sharing agreement, the Bank shares in the losses on assets covered under the agreement (referred to as covered assets). On losses up to $115.0 million, the FDIC agreed to reimburse the Bank for 80% of the losses. On losses exceeding $115.0 million, the FDIC agreed to reimburse the Bank for 95% of the losses. Realized losses covered by the loss sharing agreement include loan contractual balances (and related unfunded commitments that were acquired), accrued interest on loans for up to 90 days, the book value of foreclosed real estate acquired, and certain direct costs, less cash or other consideration received by the Bank. This agreement extends for ten years for 1-4 family real estate loans and for five years for other loans, which five-year period ended March 31, 2014. The value of this loss sharing agreement was considered in determining fair values of loans and foreclosed assets acquired. The loss sharing agreement is subject to the Bank following servicing procedures as specified in the agreement with the FDIC. The expected reimbursements under the loss sharing agreement were recorded as an indemnification asset at their preliminary estimated fair value on the acquisition date. Based upon the acquisition date fair values of the net assets acquired, no goodwill was recorded. A discount was recorded in conjunction with the fair value of the acquired loans and the amount accreted to yield during the three and six months ended June 30, 2014 was $-0-. The amount accreted to yield during the three and six months ended June 30, 2013 was $27,000 and $134,000, respectively.

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 loans, commitments and foreclosed assets purchased in the Vantus Bank transaction are covered by a loss sharing agreement between the FDIC and Great Southern Bank. Under the loss sharing agreement, the Bank shares in the losses on assets covered under the agreement (referred to as covered assets). On losses up to $102.0 million, the FDIC agreed to reimburse the Bank for 80% of the losses. On losses exceeding $102.0 million, the FDIC agreed to reimburse the Bank for 95% of the losses. Realized losses covered by the loss sharing agreement include loan contractual balances (and related unfunded commitments that were acquired), accrued interest on loans for up to 90 days, the book value of foreclosed real estate acquired, and certain direct costs, less cash or other consideration received by the Bank. This agreement extends for ten years for 1-4 family real estate loans and for five years for other loans, which five year period will end on September 4, 2014. The value of this loss sharing agreement was considered in determining fair values of loans and foreclosed assets acquired. The loss sharing agreement is subject to the Bank following servicing procedures as specified in the agreement with the FDIC. The expected reimbursements under the loss sharing agreement were recorded as an indemnification asset at their preliminary estimated fair value on the acquisition date. Based upon the acquisition date fair values of the net assets acquired, no goodwill was recorded. A discount was recorded in conjunction with the fair value of the acquired loans and the amount accreted to yield during the three and six months ended June 30, 2014 was $-0-. The amount accreted to yield during the three and six months ended June 30, 2013 was $33,000 and $80,000, respectively.

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 loans and foreclosed assets purchased in the Sun Security Bank transaction are covered by a loss sharing agreement between the FDIC and Great Southern Bank. Under the loss sharing agreement, the FDIC agreed to cover 80% of the losses on the loans (excluding approximately $4 million of consumer loans) and foreclosed assets purchased subject to certain limitations. Realized losses covered by the loss sharing agreement include loan contractual balances (and related unfunded commitments that were acquired), accrued interest on loans for up to 90 days, the book value of foreclosed real estate acquired, and certain direct costs, less cash or other consideration received by Great Southern. This agreement extends for ten years for 1-4 family real estate loans and for five years for other loans. The value of this loss sharing agreement was considered in determining fair values of loans and foreclosed assets acquired. The loss sharing agreement is subject to the Bank following servicing procedures as specified in the agreement with the FDIC. The expected reimbursements under the loss sharing agreement were recorded as an indemnification asset at their preliminary estimated fair value on the acquisition date. Based upon the acquisition date fair values of the net assets

acquired, no goodwill was recorded. A discount was recorded in conjunction with the fair value of the acquired loans and the amount accreted to yield during the three and six months ended June 30, 2014 was $21,000 and $105,000, respectively. The amount accreted to yield during the three and six months ended June 30, 2013 was $273,000 and $617,000, respectively.

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 loans and foreclosed assets purchased in the InterBank transaction are covered by a loss sharing agreement between the FDIC and Great Southern Bank. Under the loss sharing agreement, the FDIC agreed to cover 80% of the losses on the loans (excluding approximately $60,000 of consumer loans) and foreclosed assets purchased subject to certain limitations. Realized losses covered by the loss sharing agreement include loan contractual balances (and related unfunded commitments that were acquired), accrued interest on loans for up to 90 days, the book value of foreclosed real estate acquired, and certain direct costs, less cash or other consideration received by Great Southern. This agreement extends for ten years for 1-4 family real estate loans and for five years for other loans. The value of this loss sharing agreement was considered in determining fair values of loans and foreclosed assets acquired. The loss sharing agreement is subject to the Bank following servicing procedures as specified in the agreement with the FDIC. The expected reimbursements under the loss sharing agreement were recorded as an indemnification asset at their preliminary estimated fair value on the acquisition date. Based upon the acquisition date fair values of the net assets acquired, no goodwill was recorded. A premium was recorded in conjunction with the fair value of the acquired loans and the amount amortized to yield during the three and six months ended June 30, 2014 was $139,000 and $284,000, respectively. The amount amortized to yield during the three and six months ended June 30, 2013 was $162,000 and $330,000, respectively.

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. This valuation of the acquired loans is a significant component leading to the valuation of the loss sharing assets recorded.

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. The Company continues to evaluate the fair value of the loans including cash flows expected to be collected. Increases in the Company’s cash flow expectations are recognized as increases to the accretable yield while decreases are recognized as impairments through the allowance for loan losses. During the three and six months ended June 30, 2014, increases in expected cash flows related to the acquired loan portfolios resulted in adjustments of $13.2 million and $20.0 million, respectively, to the accretable yield to be spread over the estimated remaining lives of the loans on a level-yield basis. During the three and six months ended June 30, 2013, similar such adjustments totaling $5.6 million and $14.9 million, respectively, were made to the accretable yield. The current year increases in expected cash flows also reduced the amount of expected reimbursements under the loss sharing agreements. During the three and six months ended June 30, 2014, this resulted in corresponding adjustments of $10.6 million and $16.0 million, respectively, to the indemnification assets to be amortized on a level-yield basis over the remainder of the loss sharing agreements or the remaining expected lives of the loan pools, whichever is shorter. During the three and six months ended June 30, 2013, corresponding adjustments of $4.5 million and $12.0 million, respectively, were made to the indemnification assets.

Because these adjustments will be recognized over the remaining lives of the loan pools and the remainder of the loss sharing agreements, respectively, they will impact future periods as well. The remaining accretable yield adjustment that will affect interest income is $33.3 million and the remaining adjustment to the indemnification assets, including the effects of the clawback liability related to Interbank, that will affect non-interest income (expense) is $(28.9) million. Of the remaining adjustments, we expect to recognize $13.6 million of interest income and $(11.4) million of non-interest income (expense) in the remainder of 2014. Additional adjustments may be recorded in future periods from the FDIC-assisted acquisitions, as the Company continues to estimate expected cash flows from the acquired loan pools.

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

	Three Months Ended				Three Months Ended
	June 30, 2014				June 30, 2013
	(In Thousands, Except Per Share Data
	and Basis Points Data)

Impact on net interest income/
net interest margin (in basis points)	$	9,085		107 bps	$	7,663		88 bps
Non-interest income		(7,469	)			(6,628	)
Net impact to pre-tax income	$	1,616			$	1,035
Net impact net of taxes	$	1,050			$	673
Impact to diluted earnings per common share	$	0.08			$	0.05

	Six Months Ended				Six Months Ended
	June 30, 2014				June 30, 2013
	(In Thousands, Except Per Share Data
	and Basis Points Data)

Impact on net interest income/
net interest margin (in basis points)	$	16,988		102 bps	$	18,096		103 bps
Non-interest income		(13,805	)			(14,963	)
Net impact to pre-tax income	$	3,183			$	3,133
Net impact net of taxes	$	2,069			$	2,036
Impact to diluted earnings per common share	$	0.15			$	0.15

The loss sharing asset is measured separately from the loan portfolio because it is not contractually embedded in the loans and is not transferable with the loans should the Bank choose to dispose of them. Fair value was estimated using projected cash flows available for loss sharing based on the credit adjustments estimated for each loan pool (as discussed above) and the loss sharing percentages outlined in the Purchase and Assumption Agreement with the FDIC. These cash flows were discounted to reflect the uncertainty of the timing and receipt of the loss sharing reimbursement from the FDIC. The loss sharing asset is also separately measured from the related foreclosed real estate.

The loss sharing agreement on the InterBank transaction includes a clawback provision whereby if credit loss performance is better than certain pre-established thresholds, then a portion of the monetary benefit is shared with the FDIC. The pre-established threshold for credit losses is $115.7 million for this transaction. The monetary benefit required to be paid to the FDIC under the clawback provision, if any, will occur shortly after the termination of the loss sharing agreement, which in the case of InterBank is 10 years from the acquisition date.

At June 30, 2014 and December 31, 2013, the Bank’s internal estimate of credit performance is expected to be better than the threshold set by the FDIC in the loss sharing agreement. Therefore, a separate clawback liability totaling $5.4 million and $3.7 million was recorded as of June 30, 2014 and December 31, 2013, respectively. As changes in the fair values of the loans and foreclosed assets are determined due to changes in expected cash flows, changes in the amount of the clawback liability will occur.

TeamBank FDIC Indemnification Asset. The following tables present the balances of the FDIC indemnification asset related to the TeamBank transaction at June 30, 2014 and December 31, 2013. Gross loan balances (due from the borrower) were reduced approximately $388.3 million since the transaction date because of $254.5 million of repayments from borrowers, $61.6 million in transfers to foreclosed assets and $72.2 million in charge-offs to customer loan balances. Based upon the collectability analyses performed during the acquisition, we expected certain levels of foreclosures and charge-offs and actual results have been better than our expectations. As a result, cash flows expected to be received from the acquired loan pools have increased, resulting in adjustments that were made to the related accretable yield as described above.

	June 30, 2014
				Foreclosed
	Loans			Assets
	(In Thousands)
Initial basis for loss sharing determination,
net of activity since acquisition date	$	47,851		$	159
Reclassification from nonaccretable discount to accretable discount
due to change in expected losses (net of accretion to date)		(2,171	)		—
Original estimated fair value of assets, net of activity since
acquisition date		(44,946	)		(153	)

Expected loss remaining		734			6
Assumed loss sharing recovery percentage		82	%		83	%

Estimated loss sharing value		605			5
Indemnification asset to be amortized resulting from
change in expected losses		239			—
Accretable discount on FDIC indemnification asset		—			—
FDIC indemnification asset	$	844		$	5

	December 31, 2013
				Foreclosed
	Loans			Assets
	(In Thousands)
Initial basis for loss sharing determination,
net of activity since acquisition date	$	53,553		$	664
Reclassification from nonaccretable discount to accretable discount
due to change in expected losses (net of accretion to date)		(2,882	)		—
Original estimated fair value of assets, net of activity since
acquisition date		(49,862	)		(647	)

Expected loss remaining		809			17
Assumed loss sharing recovery percentage		82	%		76	%

Estimated loss sharing value		665			13
Indemnification asset to be amortized resulting from
change in expected losses		593			—
Accretable discount on FDIC indemnification asset		(10	)		—
FDIC indemnification asset	$	1,248		$	13

Vantus Bank Indemnification Asset. The following tables present the balances of the FDIC indemnification asset related to the Vantus Bank transaction at June 30, 2014 and December 31, 2013. Gross loan balances (due from the borrower) were reduced approximately $280.5 million since the transaction date because of $234.5 million of repayments from borrowers, $16.4 million in transfers to foreclosed assets and $29.6 million in charge-offs to customer loan balances. Based upon the collectability analyses performed during the acquisition, we expected certain levels of foreclosures and charge-offs and actual results have been better than our expectations. As a result, cash flows expected to be received from the acquired loan pools have increased, resulting in adjustments that were made to the related accretable yield as described above.

	June 30, 2014
				Foreclosed
	Loans			Assets
	(In Thousands)
Initial basis for loss sharing determination,
net of activity since acquisition date	$	51,036		$	2,084
Reclassification from nonaccretable discount to accretable discount
due to change in expected losses (net of accretion to date)		(509	)		—
Original estimated fair value of assets, net of activity since
acquisition date		(49,661	)		(1,455	)

Expected loss remaining		866			629
Assumed loss sharing recovery percentage		75	%		—	%

Estimated loss sharing value (1)		646			—
Indemnification asset to be amortized resulting from
change in expected losses		330			—
Accretable discount on FDIC indemnification asset		(8	)		—
FDIC indemnification asset	$	968		$	—

(1)

Includes $503,000 impairment of indemnification asset for foreclosed assets. The Company does not expect resolution of certain items related to commercial foreclosed assets prior to the expiration of the non-single-family loss sharing agreement for Vantus Bank.

	December 31, 2013
				Foreclosed
	Loans			Assets
	(In Thousands)
Initial basis for loss sharing determination,
net of activity since acquisition date	$	60,011		$	1,986
Reclassification from nonaccretable discount to accretable discount
due to change in expected losses (net of accretion to date)		(1,202	)		—
Original estimated fair value of assets, net of activity since
acquisition date		(57,920	)		(1,092	)

Expected loss remaining		889			894
Assumed loss sharing recovery percentage		78	%		80	%

Estimated loss sharing value		690			716
Indemnification asset to be amortized resulting from
change in expected losses		919			—
Accretable discount on FDIC indemnification asset		(32	)		—
FDIC indemnification asset	$	1,577		$	716

Sun Security Bank Indemnification Asset. The following tables present the balances of the FDIC indemnification asset related to the Sun Security Bank transaction at June 30, 2014 and December 31, 2013 . Gross loan balances (due from the borrower) were reduced approximately $166.2 million since the transaction date because of $108.3 million of repayments by the borrower, $26.4 million in transfers to foreclosed assets and $31.5 million of charge-offs to customer loan balances. Based upon the collectability analyses performed during the acquisition, we expected certain levels of foreclosures and charge-offs and actual results have been better than our expectations. As a result, cash flows expected to be received from the acquired loan pools have increased, resulting in adjustments that were made to the related accretable yield as described above.

	June 30, 2014
				Foreclosed
	Loans			Assets
	(In Thousands)
Initial basis for loss sharing determination,
net of activity since acquisition date	$	68,269		$	1,782
Reclassification from nonaccretable discount to accretable discount due to change in expected losses (net of accretion to date)		(4,144	)		—
Original estimated fair value of assets, net of activity since
acquisition date		(58,400	)		(1,000	)

Expected loss remaining		5,725			782
Assumed loss sharing recovery percentage(1)		66	%		80	%

Estimated loss sharing value		3,796			625
Indemnification asset to be amortized resulting from
change in expected losses		3,312			—
Accretable discount on FDIC indemnification asset		(455	)		(63	)
FDIC indemnification asset	$	6,653		$	562

(1) $474,000 of the expected loss remaining is related to loans not covered by the loss sharing agreement.

	December 31, 2013
				Foreclosed
	Loans			Assets
	(In Thousands)
Initial basis for loss sharing determination,
net of activity since acquisition date	$	78,524		$	3,582
Non-credit premium/(discount), net of activity since acquisition date		(105	)		—
Reclassification from nonaccretable discount to accretable discount
due to change in expected losses (net of accretion to date)		(5,062	)		—
Original estimated fair value of assets, net of activity since
acquisition date		(64,843	)		(2,193	)

Expected loss remaining		8,514			1,389
Assumed loss sharing recovery percentage		70	%		80	%

Estimated loss sharing value		5,974			1,111
Indemnification asset to be amortized resulting from
change in expected losses		4,049			—
Accretable discount on FDIC indemnification asset		(680	)		(93	)
FDIC indemnification asset	$	9,343		$	1,018

InterBank Indemnification Asset. The following table presents the balances of the FDIC indemnification asset related to the InterBank transaction at June 30, 2014 . Gross loan balances (due from the borrower) were reduced approximately $124.8 million since the transaction date because of $94.8 million of repayments by the borrower, $10.2 million in transfers to foreclosed assets and $19.8 million of charge-offs to customer loan balances. Based upon the collectability analyses performed during the acquisition, we expected certain levels of foreclosures and charge-offs and actual results have been better than our expectations. As a result, cash flows expected to be received from the acquired loan pools have increased, resulting in adjustments that were made to the related accretable yield as described above.

	June 30, 2014
				Foreclosed
	Loans			Assets
	(In Thousands)
Initial basis for loss sharing determination,
net of activity since acquisition date	$	268,440		$	4,590
Non-credit premium/(discount), net of activity since acquisition date		1,622			—
Reclassification from nonaccretable discount to accretable discount
due to change in expected losses (net of accretion to date)		(26,512	)		—
Original estimated fair value of assets, net of activity since
acquisition date		(210,334	)		(3,474	)

Expected loss remaining		33,216			1,116
Assumed loss sharing recovery percentage		82	%		80	%

Estimated loss sharing value (1)		27,128			893
FDIC loss share clawback		3,825			—
Indemnification asset to be amortized resulting from
change in expected losses		21,209			—
Accretable discount on FDIC indemnification asset		(3,703	)		(33	)
FDIC indemnification asset	$	48,459		$	860

(1)	Includes $400,000 impairment of indemnification asset for loans

	December 31, 2013
				Foreclosed
	Loans			Assets
	(In Thousands)
Initial basis for loss sharing determination,
net of activity since acquisition date	$	284,975		$	6,543
Non-credit premium/(discount), net of activity since acquisition date		1,905			—
Reclassification from nonaccretable discount to accretable discount
due to change in expected losses (net of accretion to date)		(21,218	)		—
Original estimated fair value of assets, net of activity since
acquisition date		(213,539	)		(5,073	)

Expected loss remaining		52,123			1,470
Assumed loss sharing recovery percentage		82	%		80	%

Estimated loss sharing value		42,654			1,176
FDIC loss share clawback		2,893			—
Indemnification asset to be amortized resulting from
change in expected losses		16,974			—
Accretable discount on FDIC indemnification asset		(4,874	)		(33	)
FDIC indemnification asset	$	57,647		$	1,143

Changes in the accretable yield for acquired loan pools were as follows for the three months ended June 30, 2014 and 2013:

							Sun Security
	TeamBank			Vantus Bank			Bank			InterBank
	(In Thousands)

Balance, April 1, 2013	$	11,339		$	11,522		$	10,015		$	40,264
Accretion		(1,919	)		(2,362	)		(4,038	)		(6,360	)
Reclassification from nonaccretable yield (1)		(810	)		(513	)		4 ,078			1,063

Balance, June 30, 2013	$	8,610		$	8,647		$	10,055		$	34,967

Balance April 1, 2014	$	7,363		$	5,151		$	10,007		$	38,973
Accretion		(976	)		(1,000	)		(2,407	)		(10,038	)
Reclassification from nonaccretable yield (1)		1,047			427			1,827			12,173

Balance, June 30, 2014	$	7,434		$	4,578		$	9,427		$	41,108

(1)

Represents increases in estimated cash flows expected to be received from the acquired loan pools, primarily due to lower estimated credit losses. The numbers also include changes in expected accretion of the loan pools for TeamBank, Vantus Bank, Sun Security Bank and InterBank for the three months ended June 30, 2014, totaling $1.0 million, $427,000, $352,000 and $448,000, respectively, and for the three months ended June 30, 2013, totaling $0, $0, $3.0 million and $2.6 million, respectively.

Changes in the accretable yield for acquired loan pools were as follows for the six months ended June 30, 2014 and 2013:

							Sun Security
	TeamBank			Vantus Bank			Bank			InterBank
	(In Thousands)

Balance, January 1, 2013	$	12,128		$	13,538		$	11,259		$	42,574
Accretion		(5,600	)		(5,659	)		(8,226	)		(13,389	)
Reclassification from nonaccretable yield (1)		2,082			768			7 ,022			5,782

Balance, June 30, 2013	$	8,610		$	8,647		$	10,055		$	34,967

Balance January 1, 2014	$	7,402		$	5,725		$	11,113		$	40,095
Accretion		(2,282	)		(2,131	)		(5,224	)		(18,402	)
Reclassification from nonaccretable yield (1)		2,314			984			3 ,538			19,415

Balance, June 30, 2014	$	7,434		$	4,578		$	9,427		$	41,108

(1)

Represents increases in estimated cash flows expected to be received from the acquired loan pools, primarily due to lower estimated credit losses. The numbers also include changes in expected accretion of the loan pools for TeamBank, Vantus Bank, Sun Security Bank and InterBank for the six months ended June 30, 2014, totaling $2.2 million, $984,000, $1.4 million and $1.7 million, respectively, and for the six months ended June 30, 2013, totaling $2.1 million, $516,000, $4.7 million and $7.6 million, respectively.

NOTE 9: OTHER REAL ESTATE OWNED

Major classifications of other real estate owned were as follows:

	June 30,		December 31,
	2014		2013
	(In Thousands)
Foreclosed assets held for sale
One- to four-family construction	$	—	$	—
Subdivision construction		10,294		11,652
Land development		15,603		16,788
Commercial construction		2,132		2,132
One- to four-family residential		1,706		744
Other residential		3,712		5,900
Commercial real estate		4,062		4,135
Commercial business		58		77
Consumer		555		969
		38,122		42,397
FDIC-supported foreclosed assets, net of discounts		6,084		9,006

Foreclosed assets held for sale, net		44,206		51,403

Other real estate owned not acquired through
foreclosure		2,020		2,111

Other real estate owned	$	46,226	$	53,514

Other real estate owned not acquired through foreclosure includes 12 properties, 11 of which were branch locations that have been closed and are held for sale, and one of which is land which was acquired for a potential branch location.

Expenses applicable to foreclosed assets included the following:

	Three Months Ended June 30,
	2014			2013
	(In Thousands)
Net (gain) loss on sales of foreclosed assets	$	(203	)	$	(281	)
Valuation write-downs		1,019			614
Operating expenses, net of rental income		526			1,022

	$	1,342		$	1,355

	Six Months Ended June 30,
	2014			2013
	(In Thousands)
Net (gain) loss on sales of foreclosed assets	$	(54	)	$	(282	)
Valuation write-downs		1,199			1,056
Operating expenses, net of rental income		1,047			1,636

	$	2,192		$	2,410

NOTE 10: DEPOSITS

	June 30,		December 31,
	2014		2013
	(In Thousands)
Time Deposits:
0.00% - 0.99%	$	771,460	$	669,698
1.00% - 1.99%		253,663		251,118
2.00% - 2.99%		73,469		61,042
3.00% - 3.99%		10,266		9,413
4.00% - 4.99%		1,793		1,852
5.00% and above		429		819
Total time deposits (0.80% - 0.69%)		1,111,080		993,942
Non-interest-bearing demand deposits		550,976		522,805
Interest-bearing demand and savings deposits (0.20% - 0.20%)		1,539,672		1,291,879
Total Deposits	$	3,201,728	$	2,808,626

Included in the deposits assumed from Valley Bank on June 20, 2014, were $114.2 million of certificates of deposit which Valley had obtained through various Internet services. The Bank elected to reduce the rates paid on these types of deposits to current posted rates as allowed by the Purchase and Assumption Agreement. The Bank expects that most, if not all, of these deposits will be redeemed by the account holder as is their right in this situation. At June 30, 2014, the balance of these Internet deposits had been reduced to $96.9 million. Subsequent to June 30, 2014, the balance has further decreased to less than $50 million.

NOTE 11: ADVANCES FROM FEDERAL HOME LOAN BANK

Advances from the Federal Home Loan Bank at June 30, 2014 and December 31, 2013 consisted of the following:

	June 30, 2014					December 31, 2013
			Weighted					Weighted
			Average					Average
			Interest					Interest
Due In	Amount		Rate			Amount		Rate
	(In Thousands)		(In Thousands)			(In Thousands)

2014	$	50,063		0.23	%	$	2,315		1.02	%
2015		10,067		3.87			10,065		3.87
2016		73		5.06			25,070		3.81
2017		30,828		3.26			85,825		3.92
2018		70		5.06			81		5.06
2019 and thereafter		500		5.54			529		5.51

		91,601		1.76			123,885		3.85

Unamortized fair value adjustment		85					2,872

	$	91,686				$	126,757

Included in the Bank’s FHLB advances at June 30, 2014 and December 31, 2013, was a $10.0 million advance with a maturity date of October 26, 2015. The interest rate on this advance is 3.86%. The advance has a call provision that allows the Federal Home Loan Bank of Topeka to call the advance quarterly.

Included in the Bank’s FHLB advances at June 30, 2014 and December 31, 2013, was a $30.0 million advance with a maturity date of November 24, 2017. The interest rate on this advance is 3.20%. The advance has a call provision that allows the Federal Home Loan Bank of Des Moines to call the advance quarterly.

Included in the Bank’s FHLB advances at December 31, 2013, was a $25.0 million advance with a maturity date of December 7, 2016. The interest rate on this advance is 3.81%. This advance was repaid by the Bank in June 2014.

Included in the Bank’s FHLB advances at December 31, 2013, was a $30.0 million advance with a maturity date of March 29, 2017. The interest rate on this advance is 4.07%. This advance was repaid by the Bank in June 2014.

Included in the Bank’s FHLB advances at December 31, 2013, was a $25.0 million advance with a maturity date of June 20, 2017. The interest rate on this advance is 4.57%. This advance was repaid by the Bank in June 2014.

The Company prepaid $80 million of its Federal Home Loan Bank advances and $50 million of structured repurchase agreements (see Note 12 ) in the three months ended June 30, 2014 as part of a strategy to utilize the Bank's liquidity and improve net interest margin. As a result, the Company incurred one-time prepayment penalties totaling $7.4 million, which were included in other oprating expenses.

NOTE 12: STRUCTURED REPURCHASE AGREEMENTS

In September 2008, the Company entered into a structured repurchase borrowing transaction for a total of $50 million. This borrowing bears interest at a fixed rate of 4.34%, matures September 15, 2015, and had a call provision that allows the repurchase counterparty to call the borrowing quarterly. The Company pledged investment securities to collateralize this borrowing.

In June 2014, the Company elected to repay this structured repurchase borrowing.

NOTE 13: INCOME TAXES

Reconciliations of the Company’s effective tax rates to the statutory corporate tax rates were as follows:

	Three Months Ended June 30,
	2014			2013
Tax at statutory rate		35.0	%		35.0	%
Nontaxable interest and dividends		(3.1	)		(3.9	)
Tax credits		(9.2	)		(12.2	)
State taxes		1.6			1.9
Other		0.7			0.5

		25.0	%		21.3	%

	Six Months Ended June 30,
	2014			2013
Tax at statutory rate		35.0	%		35.0	%
Nontaxable interest and dividends		(3.4	)		(4.0	)
Tax credits		(9.6	)		(10.9	)
State taxes		1.4			1.6
Other		0.3			0.5

		23.7	%		22.2	%

The Company and its consolidated subsidiaries have not been audited recently by the Internal Revenue Service (IRS) or the state taxing authorities with respect to income or franchise tax returns, and as such, tax years through December 31, 2005, have been closed without audit. The Company, through one of its subsidiaries, is a partner in two partnerships currently under IRS examination for 2006 and 2007. As a result, the Company’s 2006 and subsequent tax years remain open for examination. The IRS audits of the two partnerships are ongoing. The IRS has raised questions about the validity of the allocation of a portion of the credits by one of the partnerships. At this time, the Company believes that the partnership has sufficient technical support for its allocation position regarding these credits and that it is more likely than not these allocations will ultimately be sustained; therefore, a reserve for uncertain tax positions is not required.

NOTE 14: FAIR VALUE MEASUREMENT

ASC Topic 820, Fair Value Measurements , defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Topic 820 also specifies a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Quoted prices in active markets for identical assets or liabilities (Level 1): Inputs that are quoted unadjusted prices in active markets for identical assets that the Company has the ability to access at the measurement date. An active market for the asset is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Other observable inputs (Level 2): Inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity including quoted prices for similar assets, quoted prices for securities in inactive markets and inputs derived principally from or corroborated by observable market data by correlation or other means.

·	Significant unobservable inputs (Level 3): Inputs that reflect assumptions of a source independent of the reporting entity or the reporting entity's own assumptions that are supported by little or no market activity or observable inputs.

Financial instruments are broken down as follows by recurring or nonrecurring measurement status. Recurring assets are initially measured at fair value and are required to be remeasured at fair value in the financial statements at each reporting date. Assets measured on a nonrecurring basis are assets that, due to an event or circumstance, were required to be remeasured at fair value after initial recognition in the financial statements at some time during the reporting period.

Recurring Measurements

				Fair value measurements using
				Quoted prices
				in active
				markets		Other		Significant
				for identical		observable		unobservable
				assets		inputs		inputs
	Fair value			(Level 1)		(Level 2)		(Level 3)
	(In Thousands)
June 30, 2014
U.S. government agencies	$	18,821		$	—	$	18,821	$	—
Mortgage-backed securities		377,843			—		377,843		—
Collateralized mortgage obligations		39,750			—		39,750		—
States and political subdivisions		129,646			—		129,646		—
Equity securities		2,970			—		2,970		—
Mortgage servicing rights		196			—		—		196
Interest rate derivative asset		2,184			—		—		2,184
Interest rate derivative liability		(1,711	)		—		—		(1,711	)

December 31, 2013
U.S. government agencies	$	17,255		$	—	$	17,255	$	—
Mortgage-backed securities		367,578			—		367,578		—
Small Business Administration loan pools		44,855			—		44,855		—
States and political subdivisions		122,724			—		122,724		—
Equity securities		2,869			—		2,869		—
Mortgage servicing rights		211			—		—		211
Interest rate derivative asset		2,544			—		—		2,544
Interest rate derivative liability		(1,613	)		—		—		(1,613	)

The following is a description of inputs and valuation methodologies used for assets recorded at fair value on a recurring basis and recognized in the accompanying statements of financial condition at June 30, 2014 and December 31, 2013, as well as the general classification of such assets pursuant to the valuation hierarchy. There have been no significant changes in the valuation techniques during the three-month period ended June 30, 2014 .

Securities Available for Sale. Investment securities available for sale are recorded at fair value on a recurring basis. The fair values used by the Company are obtained from an independent pricing service, which represent either quoted market prices for the identical asset or fair values determined by pricing models, or other model-based valuation techniques, that consider observable market data, such as interest rate volatilities, LIBOR yield curve, credit spreads and prices from market makers and live trading systems. Recurring Level 2 securities include U.S. government agency securities, mortgage-backed securities, Small Business Administration (SBA) loan pools, state and municipal bonds and equity securities. Inputs used for valuing Level 2 securities include observable data that may include dealer quotes, benchmark yields, market spreads, live trading levels and market consensus prepayment speeds, among other things. Additional inputs include indicative values derived from the independent pricing service’s proprietary computerized models. There were no Recurring Level 3 securities at June 30, 2014 or December 31, 2013.

Mortgage Servicing Rights. Mortgage servicing rights do not trade in an active, open market with readily observable prices. Accordingly, fair value is estimated using discounted cash flow models. Due to the nature of the valuation inputs, mortgage servicing rights are classified within Level 3 of the hierarchy.

Interest Rate Swaps. Interest rate swaps are recorded at fair value on a recurring basis. The fair values used by the Company are obtained from an independent valuation service, and are based on prevailing observable market data, such as the LIBOR swap curves and Overnight Index Swap “OIS” curves, and derived from proprietary models based on well recognized financial principles and reasonable estimates about future market conditions (which may include assumptions and estimates that are not readily observable in the marketplace). Included in the fair values are credit valuation adjustments which represent the consideration of credit risk (credit standing) of the counterparties to the transaction and the effect of any credit enhancements related to the transaction. Certain inputs to the credit valuation models may be based on assumptions and best estimates that are not readily observable in the marketplace.

The Company considers transfers between the levels of the hierarchy to be recognized at the end of related reporting periods. From December 31, 2013 to June 30, 2014, no assets for which fair value is measured on a recurring basis transferred between any levels of the hierarchy.

Level 3 Reconciliation

The following is a reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the accompanying balance sheet using significant unobservable (Level 3) inputs .

	Mortgage Servicing Rights
	2014			2013
	(In Thousands)

Balance, April 1	$	200		$	252
Additions		30			54
Amortization		(34	)		(60	)
Balance, June 30	$	196		$	246

	Mortgage Servicing Rights
	2014			2013
	(In Thousands)

Balance, January 1	$	211		$	152
Additions		53			191
Amortization		(68	)		(97	)
Balance, June 30	$	196		$	246

	Interest Rate Derivative Asset
	2014			2013
	(In Thousands)

Balance, April 1	$	1,741		$	1,928
Change in fair value through earnings		(19	)		(549	)
Balance, June 30	$	1,722		$	1,379

	Interest Rate Derivative Asset
	2014			2013
	(In Thousands)

Balance, January 1	$	1,859		$	2,112
Change in fair value through earnings		(137	)		(733	)
Balance, June 30	$	1,722		$	1,379

	Interest Rate Cap Derivative Asset Designated as Hedging Instrument
	2014			2013
	(In Thousands)

Balance, April 1	$	620		$	—
Additions		—			—
Change in fair value through other
comprehensive income		(158	)		—
Balance, June 30	$	462		$	—

	Interest Rate Cap Derivative Asset Designated as Hedging Instrument
	2014			2013
	(In Thousands)

Balance, January 1	$	685		$	—
Additions		—			—
Change in fair value through other
comprehensive income		(223	)		—
Balance, June 30	$	462		$	—

	Interest Rate Swap Liability
	2014		2013
	(In Thousands)

Balance, April 1	$	1,597	$	1,915
Change in fair value through earnings		114		(896	)
Balance, June 30	$	1,711	$	1,019

	Interest Rate Swap Liability
	2014		2013
	(In Thousands)

Balance, January 1	$	1,613	$	2,160
Change in fair value through earnings		98		(1,141	)
Balance, June 30	$	1,711	$	1,019

Nonrecurring Measurements

The following tables present the fair value measurements of assets measured at fair value during the periods presented on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2014 and December 31, 2013:

			Fair Value Measurements Using
			Quoted prices
			in active
			markets		Other		Significant
			for identical		observable		unobservable
			assets		inputs		inputs
	Fair value		(Level 1)		(Level 2)		(Level 3)
	(In Thousands)
June 30, 2014
Impaired loans
One- to four-family residential construction	$	—	$	—	$	—	$	—
Subdivision construction		22		—		—		22
Land development		2,960		—		—		2,960
Owner occupied one- to four-family residential		439		—		—		439
Non-owner occupied one- to four-family residential		92		—		—		92
Commercial real estate		6,464		—		—		6,464
Other residential		1,117		—		—		1,117
Commercial business		320		—		—		320
Consumer auto		57		—		—		57
Consumer other		442		—		—		442
Home equity lines of credit		246		—		—		246
Total impaired loans	$	12,159	$	—	$	—	$	12,159

Foreclosed assets held for sale	$	1,887	$	—	$	—	$	1,887

December 31, 2013
Impaired loans
One- to four-family residential construction	$	—	$	—	$	—	$	—
Subdivision construction		145		—		—		145
Land development		1,474		—		—		1,474
Owner occupied one- to four-family residential		349		—		—		349
Non-owner occupied one- to four-family residential		388		—		—		388
Commercial real estate		5,224		—		—		5,224
Other residential		1,440		—		—		1,440
Commercial business		61		—		—		61
Consumer auto		19		—		—		19
Consumer other		275		—		—		275
Home equity lines of credit		70		—		—		70
Total impaired loans	$	9,445	$	—	$	—	$	9,445

Foreclosed assets held for sale	$	2,169	$	—	$	—	$	2,169

The following is a description of valuation methodologies used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying statements of financial condition, as well as the general classification of such assets pursuant to the valuation hierarchy .

Loans Held for Sale. Mortgage loans held for sale are recorded at the lower of carrying value or fair value. The fair value of mortgage loans held for sale is based on what secondary markets are currently offering for portfolios with similar characteristics. As such, the Company classifies mortgage loans held for sale as Nonrecurring Level 2. Write-downs to fair value typically do not occur as the Company generally enters into commitments to sell individual mortgage loans at the time the loan is originated to reduce market risk. The Company typically does not have commercial loans held for sale. At June 30, 2014 and December 31, 2013, the aggregate fair value of mortgage loans held for sale exceeded their cost. Accordingly, no mortgage loans held for sale were marked down and reported at fair value.

Impaired Loans. A loan is considered to be impaired when it is probable that all of the principal and interest due may not be collected according to its contractual terms. Generally, when a loan is considered impaired, the amount of reserve required under FASB ASC 310, Receivables , is measured based on the fair value of the underlying collateral. The Company makes such measurements on all material loans deemed impaired using the fair value of the collateral for collateral dependent loans. The fair value of collateral used by the Company is determined by obtaining an observable market price or by obtaining an appraised value from an independent, licensed or certified appraiser, using observable market data. This data includes information such as selling price of similar properties and capitalization rates of similar properties sold within the market, expected future cash flows or earnings of the subject property based on current market expectations, and other relevant factors. All appraised values are adjusted for market-related trends based on the Company’s experience in sales and other appraisals of similar property types as well as estimated selling costs. Each quarter management reviews all collateral dependent impaired loans on a loan-by-loan basis to determine whether updated appraisals are necessary based on loan performance, collateral type and guarantor support. At times, the Company measures the fair value of collateral dependent impaired loans using appraisals with dates prior to one year from the date of review. These appraisals are discounted by applying current, observable market data about similar property types such as sales contracts, estimations of value by individuals familiar with the market, other appraisals, sales or collateral assessments based on current market activity until updated appraisals are obtained. Depending on the length of time since an appraisal was performed and the data provided through our reviews, these appraisals are typically discounted 10-40%. The policy described above is the same for all types of collateral dependent impaired loans.

The Company records impaired loans as Nonrecurring Level 3. If a loan’s fair value as estimated by the Company is less than its carrying value, the Company either records a charge-off of the portion of the loan that exceeds the fair value or establishes a reserve within the allowance for loan losses specific to the loan. Loans for which such charge-offs or reserves were recorded during the six months ended June 30, 2014 or the year ended December 31, 2013, are shown in the table above (net of reserves).

Foreclosed Assets Held for Sale. Foreclosed assets held for sale are initially recorded at fair value less estimated cost to sell at the date of foreclosure. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less estimated cost to sell. Foreclosed assets held for sale are classified as Level 3. The foreclosed assets represented in the table above have been re-measured during the six months ended June 30, 2014 or the year ended December 31, 2013, subsequent to their initial transfer to foreclosed assets.

The following disclosure relates to financial assets for which it is not practicable for the Company to estimate the fair value at June 30, 2014 and December 31, 2013.

FDIC Indemnification Asset : As part of the Purchase and Assumption Agreements, the Bank and the FDIC entered into loss sharing agreements. These agreements cover realized losses on loans and foreclosed real estate, subject to certain limitations which are more fully described in Note 8 .

Under the TeamBank agreement, the FDIC agreed to reimburse the Bank for 80% of the first $115 million in realized losses and 95% for realized losses that exceed $115 million. The indemnification asset was originally recorded at fair value on the acquisition date (March 20, 2009) and at June 30, 2014 and December 31, 2013, the carrying value was $849,000 and $1.3 million, respectively.

Under the Vantus Bank agreement, the FDIC agreed to reimburse the Bank for 80% of the first $102 million in realized losses and 95% for realized losses that exceed $102 million. The indemnification asset was originally recorded at fair value on the acquisition date (September 4, 2009) and at June 30, 2014 and December 31, 2013, the carrying value of the FDIC indemnification asset was $968,000 and $2.3 million, respectively.

Under the Sun Security Bank agreement, the FDIC agreed to reimburse the Bank for 80% of realized losses. The indemnification asset was originally recorded at fair value on the acquisition date (October 7, 2011) and at June 30, 2014 and December 31, 2013, the carrying value of the FDIC indemnification asset was $7.2 million and $10.4 million, respectively.

Under the InterBank agreement, the FDIC agreed to reimburse the Bank for 80% of realized losses. The indemnification asset was originally recorded at fair value on the acquisition date (April 27, 2013) and at June 30, 2014 and December 31, 2013, the carrying value of the FDIC indemnification asset was $49.3 million and $58.8 million, respectively.

From the dates of acquisition, each of the four agreements extend ten years for 1-4 family real estate loans and five years for other loans. The loss sharing assets are measured separately from the loan portfolios because they are not contractually embedded in the loans and are not transferable with the loans should the Bank choose to dispose of them. Fair values on the acquisition dates were estimated using projected cash flows available for loss sharing based on the credit adjustments estimated for each loan pool and the loss sharing percentages. These cash flows were discounted to reflect the uncertainty of the timing and receipt of the loss sharing reimbursements from the FDIC. The loss sharing assets are also separately measured from the related foreclosed real estate. Although the assets are contractual receivables from the FDIC, they do not have effective interest rates. The Bank will collect the assets over the next several years. The amount ultimately collected will depend on the timing and amount of collections and charge-offs on the acquired assets covered by the loss sharing agreements. While the assets were recorded at their estimated fair values on the acquisition dates, it is not practicable to complete fair value analyses on a quarterly or annual basis. Estimating the fair value of the FDIC indemnification asset would involve preparing fair value analyses of the entire portfolios of loans and foreclosed assets covered by the loss sharing agreements from all four acquisitions on a quarterly or annual basis.

Fair Value of Financial Instruments

The following methods were used to estimate the fair value of all other financial instruments recognized in the accompanying statements of financial condition at amounts other than fair value:

Cash and Cash Equivalents and Federal Home Loan Bank Stock. The carrying amount approximates fair value.

Loans and Interest Receivable. The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Loans with similar characteristics are aggregated for purposes of the calculations. The carrying amount of accrued interest receivable approximates its fair value.

Deposits and Accrued Interest Payable. The fair value of demand deposits and savings accounts is the amount payable on demand at the reporting date, i.e., their carrying amounts. The fair value of fixed maturity certificates of deposit is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities. The carrying amount of accrued interest payable approximates its fair value.

Federal Home Loan Bank Advances. Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate fair value of existing advances.

Short-Term Borrowings. The carrying amount approximates fair value.

Subordinated Debentures Issued to Capital Trusts. The subordinated debentures have floating rates that reset quarterly. The carrying amount of these debentures approximates their fair value.

Structured Repurchase Agreements. Structured repurchase agreements are collateralized borrowings from a counterparty. In addition to the principal amount owed, the counterparty also determines an amount that would be owed by either party in the event the agreement is terminated prior to maturity by the Company. The fair values of the structured repurchase agreements are estimated based on the amount the Company would be required to pay to terminate the agreement at the reporting date.

Commitments to Originate Loans, Letters of Credit and Lines of Credit. The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counterparties at the reporting date.

The following table presents estimated fair values of the Company’s financial instruments. The fair values of certain of these instruments were calculated by discounting expected cash flows, which method involves significant judgments by management and uncertainties. Fair value is the estimated amount at which financial assets or liabilities could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Because no market exists for certain of these financial instruments and because management does not intend to sell these financial instruments, the Company does not know whether the fair values shown below represent values at which the respective financial instruments could be sold individually or in the aggregate.

	June 30, 2014						December 31, 2013
	Carrying		Fair		Hierarchy		Carrying		Fair		Hierarchy
	Amount		Value		Level		Amount		Value		Level
Financial assets
Cash and cash equivalents	$	223,226	$	223,226		1	$	227,925	$	227,925		1
Held-to-maturity securities		450		504		2		805		912		2
Mortgage loans held for sale		9,605		9,605		2		7,239		7,239		2
Loans, net of allowance for loan losses		2,790,774		2,800,463		3		2,439,530		2,442,917		3
Accrued interest receivable		11,685		11,685		3		11,408		11,408		3
Investment in FHLB stock		8,054		8,054		3		9,822		9,822		3

Financial liabilities
Deposits		3,201,728		3,207,527		3		2,808,626		2,813,779		3
FHLB advances		91,686		92,912		3		126,757		131,281		3
Short-term borrowings		158,841		158,841		3		136,109		136,109		3
Structured repurchase agreements		—		—		3		50,000		53,485		3
Subordinated debentures		30,929		30,929		3		30,929		30,929		3
Accrued interest payable		1,096		1,096		3		1,099		1,099		3
Unrecognized financial instruments (net of
contractual value)
Commitments to originate loans		—		—		3		—		—		3
Letters of credit		39		39		3		76		76		3
Lines of credit		—		—		3		—		—		3

NOTE 15: DERIVATIVES AND HEDGING ACTIVITIES

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of its assets and liabilities. In the normal course of business, the Company may use derivative financial instruments (primarily interest rate swaps) from time to time to assist in its interest rate risk management. The Company has interest rate derivatives that result from a service provided to certain qualifying loan customers that are not used to manage interest rate risk in the Company’s assets or liabilities and are not designated in a qualifying hedging relationship. The Company manages a matched book with respect to its derivative instruments in order to minimize its net risk exposure resulting from such transactions. In addition, the Company has interest rate derivatives that are designated in a qualified hedging relationship.

Nondesignated Hedges

The Company has interest rate swaps that are not designated in qualifying hedging relationship. Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain loan customers, which the Company began offering during the fourth quarter of 2011. The Company executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting interest rate swaps that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. As of June 30, 2014, the Company had 27 interest rate swaps totaling $129.0 million in notional amount with commercial customers, and 27 interest rate swaps with the same notional amount with third parties related to this program. As of December 31, 2013, the Company had 24 interest rate swaps totaling $114.0 million in notional amount with commercial customers, and 24 interest rate swaps with the same notional amount with third parties related to this program. During the three months ended June 30, 2014 and 2013, the Company recognized a net loss of $130,000 and a net gain of $347,000, respectively, in noninterest income related to changes in the fair value of these swaps. During the six months ended June 30, 2014 and 2013, the Company recognized a net loss of $233,000 and a net gain of $408,000, respectively, in noninterest income related to changes in the fair value of these swaps.

Cash Flow Hedges

As a strategy to maintain acceptable levels of exposure to the risk of changes in future cash flows due to interest rate fluctuations, the Company entered into two interest rate cap agreements for a portion of its floating rate debt associated with its trust preferred securities. The agreement with a notional amount of $25 million states that the Company will pay interest on its trust preferred debt in accordance with the original debt terms at a rate of 3-month LIBOR + 1.60%. Should interest rates rise above a certain threshold, the counterparty will reimburse the Company for interest paid such that the Company will have an effective interest rate on that portion of its trust preferred securities no higher than 2.37%. The second agreement with a notional amount of $5 million states that the Company will pay interest on its trust preferred debt in accordance with the original debt terms at a rate of 3-month LIBOR + 1.40%. Should interest rates rise above a certain threshold, the counterparty will reimburse the Company for interest paid such that the Company will have an effective interest rate on that portion of its trust preferred securities no higher than 2.17%. The agreements were effective on August 1, 2013 and July 1, 2013, respectively, and each has a term of four years.

The effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Statements of Financial Condition:

	Location in	Fair Value
	Consolidated Statements	June 30,		December 31,
	of Financial Condition	2014		2013
		(In Thousands)
Derivatives designated as
hedging instruments

Interest rate caps	Prepaid expenses and other assets	$	462	$	685

Total derivatives designated
as hedging instruments		$	462	$	685

Derivatives not designated
as hedging instruments

Asset Derivatives
Interest rate products	Prepaid expenses and other assets	$	1,722	$	1,859

Total derivatives not designated
as hedging instruments		$	1,722	$	1,859

Liability Derivatives
Interest rate products	Accrued expenses and other liabilities	$	1,711	$	1,613

Total derivatives not designated
as hedging instruments		$	1,711	$	1,613

The following table presents the effect of derivative instruments on the statements of comprehensive income for the three and six months ended June 30, 2014 and 2013:

	Amount of Gain (Loss) Recognized in OCI
Cash Flow Hedges	Three Months Ended June 30,
Cash Flow Hedges	2014			2013

Interest rate cap	$	(100	)	$	—

	Amount of Gain (Loss) Recognized in OCI
Cash Flow Hedges	Six Months Ended June 30,
Cash Flow Hedges	2014			2013

Interest rate cap	$	(142	)	$	—

Agreements with Derivative Counterparties

The Company has agreements with its derivative counterparties. If the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations. If the Bank fails to maintain its status as a well capitalized institution, then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations under the agreements. Similarly, the Company could be required to settle its obligations under certain of its agreements if certain regulatory events occurred, such as the issuance of a formal directive, or if the Company’s credit rating is downgraded below a specified level.

As of June 30, 2014, the termination value of derivatives in a net liability position, which included accrued interest but excluded any adjustment for nonperformance risk, related to these agreements was $1.3 million. The Company has minimum collateral posting thresholds with its derivative counterparties. The Company’s activity with its derivative counterparties had previously met the level in which the minimum collateral posting thresholds take effect and the Company had posted $1.5 million of collateral to satisfy the agreements at June 30, 2014. If the Company had breached any of these provisions at June 30, 2014, it could have been required to settle its obligations under the agreements at the termination value.

NOTE 16: FDIC-ASSISTED ACQUISITION

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 (“Valley”), a full-service bank headquartered in Moline, IL, with significant operations in Iowa. The provisional fair values of the assets acquired and liabilities assumed in the transaction were as follows:

	June 20,
	2014
	(In Thousands)
Cash	$	2,729
Due from banks		106,680
Cash and cash equivalents		109,409

Investment securities		88,513
Loans receivable, net of discount on loans purchased of $30,102		165,098
Accrued interest receivable		1,004
Premises		10,850
Core deposit intangible		2,800
Other assets		1,060
Total assets acquired		378,734

Liabilities
Demand and savings deposits		186,902
Time deposits		179,125
Total deposits		366,027

Securities sold under reverse repurchase agreements with customers		567
Accounts payable		561
Accrued interest payable		182
Advances from borrowers for taxes and insurance		592
Total liabilities assumed		367,929

Gain recognized on business acquisition	$	10,805

Under the terms of the Purchase and Assumption Agreement, the FDIC agreed to transfer net assets to Great Southern at a discount of $37.5 million to compensate Great Southern for estimated losses related to the loans acquired. No premium was paid to the FDIC for the deposits, resulting in a net purchase discount of $37.5 million. Details related to the transfer are as follows:

	June 20,
	2014
	(In Thousands)

Net liabilities as determined by the FDIC	$	(21,897	)
Cash transferred by the FDIC		59,394
Discount per Purchase and Assumption Agreement		37,497

Purchase accounting adjustments
Loans		(28,088	)
Deposits		(399	)
Investments		(1,005	)
Core deposit intangible		2,800

Gain recognized on business acquisition	$	10,805

The acquisition of the net assets of Valley was determined to constitute a business acquisition in accordance with FASB ASC 805. FASB ASC 805 allows a measurement period of up to one year to adjust initial fair value estimates as of the acquisition date. Therefore, provisional measurements of assets acquired and liabilities assumed were recorded on a preliminary basis at fair value on the date of acquisition. Based upon the preliminary acquisition date fair values of the net assets acquired, no goodwill was recorded. The transaction resulted in a preliminary bargain purchase gain of $10.8 million for the three and six months ended June 30, 2014. The transaction also resulted in the recording of a deferred tax liability in the initial amount of $3.6 million.

The carrying amount of assets related to the Valley Bank transaction at June 20, 2014 (the acquisition date), consisted of impaired loans required to be accounted for in accordance with FASB ASC 310-30 and other loans not subject to the specific criteria of FASB ASC 310-30, but accounted for under the guidance of FASB ASC 310-30 (FASB ASC 310-30 by Policy Loans) as shown in the following table:

			FASB ASC
	FASB		310-30
	ASC		by
	310-30		Policy
	Loans		Loans			Total
	(In Thousands)

Loans	$	3,920	$	161,178	$	165,098

On the acquisition date, the preliminary estimate of the contractually required payments receivable for all FASB ASC 310-30 loans acquired was $5.7 million, the cash flows expected to be collected were $4.0 million including interest, and the estimated fair value of the loans was $3.9 million. These amounts were determined based upon the estimated remaining life of the underlying loans, which include the effects of estimated prepayments. At June 20, 2014, a majority of these loans were valued based on the liquidation value of the underlying collateral, because the expected cash flows were primarily based on the liquidation of underlying collateral and the timing and amount of the cash flows could not be reasonably estimated. Because of the short time period between the closing of the transaction and June 30, 2014, certain amounts related to the FASB ASC 310-30 loans are preliminary estimates. The Company has not yet finalized its analysis of these loans and, therefore, adjustments to the estimated recorded carrying values may occur.

On the acquisition date, the preliminary estimate of the contractually required payments receivable for all FASB ASC 310-30 by Policy Loans acquired in the acquisition was $187.4 million, of which $28.4 million of cash flows were not expected to be collected, and the estimated fair value of the loans was $161.2 million. A majority of these loans were valued as of their acquisition dates based on the liquidation value of the underlying collateral, because the expected cash flows were primarily based on the liquidation of underlying collateral and the timing and amount of the cash flows could not be reasonably estimated.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

Forward-looking Statements

When used in this Quarterly Report on Form 10-Q and in other documents filed or furnished by the Company with the Securities and Exchange Commission (the "SEC"), in the Company's press releases or other public or stockholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "intends" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties, including, among other things, (i) non-interest expense reductions from the Great Southern banking center consolidation might be less than anticipated and the costs of the consolidation and impairment of the value of the affected premises might be greater than expected; (ii) expected cost savings, synergies and other benefits from the Company’s merger and acquisition activities, (including but not limited to the recently completed Valley Bank FDIC-assisted transaction), might not be realized within the anticipated time frames or at all, the amount of the gain the Company will ultimately recognize from the recently completed Valley Bank FDIC-assisted transaction might be materially different from the preliminary gain recorded, and costs or difficulties relating to integration matters, including but not limited to customer and employee retention, might be greater than expected; (iii) changes in economic conditions, either nationally or in the Company’s market areas; (iv) fluctuations in interest rates; (v) the risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses; (vi) the possibility of other-than-temporary impairments of securities held in the Company’s securities portfolio; (vii) the Company’s ability to access cost-effective funding; (viii) fluctuations in real estate values and both residential and commercial real estate market conditions; (ix) demand for loans and deposits in the Company’s market areas; (x) legislative or regulatory changes that adversely affect the Company’s business, including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act and its implementing regulations, and the overdraft protection regulations and customers’ responses thereto; (xi) monetary and fiscal policies of the Federal Reserve Board and the U.S. Government and other governmental initiatives affecting the financial services industry; (xii) results of examinations of the Company and Great Southern by their regulators, including the possibility that the regulators may, among other things, require the Company to increase its allowance for loan losses or to write-down assets; (xiii) the uncertainties arising from the Company’s participation in the Small Business Lending Fund program, including uncertainties concerning the potential future redemption by us of the U.S. Treasury’s preferred stock investment under the program, including the timing of, regulatory approvals for, and conditions placed upon, any such redemption; (xiv) costs and effects of litigation, including settlements and judgments; and (xv) competition. The Company wishes to advise readers that the factors listed above and other risks described from time to time in the Company’s other filings with the SEC could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

The Company does not undertake-and specifically declines any obligation- to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Critical Accounting Policies, Judgments and Estimates

The accounting and reporting policies of the Company conform with accounting principles generally accepted in the United States and general practices within the financial services industry. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates.

Allowance for Loan Losses and Valuation of Foreclosed Assets

The Company believes that the determination of the allowance for loan losses involves a higher degree of judgment and complexity than its other significant accounting policies. The allowance for loan losses is calculated with the objective of maintaining an allowance level believed by management to be sufficient to absorb estimated loan losses. Management's determination of the adequacy of the allowance is based on periodic evaluations of the loan portfolio and other relevant factors. However, this evaluation is inherently subjective as it requires material estimates of, among others, expected default probabilities, loss once loans default, expected commitment usage, the amounts and timing of expected future cash flows on impaired loans, value of collateral, estimated losses, and general amounts for historical loss experience.

The process also considers economic conditions, uncertainties in estimating losses and inherent risks in the loan portfolio. All of these factors may be susceptible to significant change. To the extent actual outcomes differ from management estimates, additional provisions for loan losses may be required which would adversely impact earnings in future periods. In addition, the Bank’s regulators could require additional provisions for loan losses as part of their examination process.

Additional discussion of the allowance for loan losses is included in "Item 1. Business - Allowances for Losses on Loans and Foreclosed Assets." Inherent in this process is the evaluation of individual significant credit relationships. From time to time certain credit relationships may deteriorate due to payment performance, cash flow of the borrower, value of collateral, or other factors. In these instances, management may have to revise its loss estimates and assumptions for these specific credits due to changing circumstances. In some cases, additional losses may be realized; in other instances, the factors that led to the deterioration may improve or the credit may be refinanced elsewhere and allocated allowances may be released from the particular credit. For the periods included in the financial statements contained in this report, management's overall methodology for evaluating the allowance for loan losses has not changed significantly.

In addition, the Company considers that the determination of the valuations of foreclosed assets held for sale involves a high degree of judgment and complexity. The carrying value of foreclosed assets reflects management’s best estimate of the amount to be realized from the sales of the assets. While the estimate is generally based on a valuation by an independent appraiser or recent sales of similar properties, the amount that the Company realizes from the sales of the assets could differ materially from the carrying value reflected in the financial statements, resulting in losses that could adversely impact earnings in future periods.

Carrying Value of Loans Acquired in FDIC-assisted Transactions and Indemnification Asset

The Company considers that the determination of the carrying value of loans acquired in the FDIC-assisted transactions and the carrying value of the related FDIC indemnification assets involve a high degree of judgment and complexity. The carrying value of the acquired loans and the FDIC indemnification assets reflect management’s best ongoing estimates of the amounts to be realized on each of these assets. The Company determined initial fair value accounting estimates of the assumed assets and liabilities in accordance with FASB ASC 805, Business Combinations . However, the amount that the Company realizes on these assets could differ materially from the carrying value reflected in its financial statements, based upon the timing of collections on the acquired loans in future periods. Because of the loss sharing agreements with the FDIC on certain of these assets, the Company should not incur any significant losses related to those assets. To the extent the actual values realized for the acquired loans are different from the estimates, the indemnification asset will generally be impacted in an offsetting manner due to the loss sharing support from the FDIC. Subsequent to the initial valuation, the Company continues to monitor identified loan pools and related loss sharing assets for changes in estimated cash flows projected for the loan pools, anticipated credit losses and changes in the accretable yield. Analysis of these variables requires significant estimates and a high degree of judgment. See Note 8 “Loss Sharing Agreements and FDIC Indemnification Assets” included in Item 1 for additional information regarding the TeamBank, Vantus Bank, Sun Security Bank and InterBank FDIC-assisted transactions.

Goodwill and Intangible Assets

Goodwill and intangible assets that have indefinite useful lives are subject to an impairment test at least annually and more frequently if circumstances indicate their value may not be recoverable. Goodwill is tested for impairment using a process that estimates the fair value of each of the Company’s reporting units compared with its carrying value. The Company defines reporting units as a level below each of its operating segments for which there is discrete financial information that is regularly reviewed. As of June 30, 2014, the Company has one reporting unit to which goodwill has been allocated – the Bank. If the fair value of a reporting unit exceeds its carrying value, then no impairment is recorded. If the carrying value amount exceeds the fair value of a reporting unit, further testing is completed comparing the implied fair value of the reporting unit’s goodwill to its carrying value to measure the amount of impairment. Intangible assets that are not amortized will be tested for impairment at least annually by comparing the fair values of those assets to their carrying values. At June 30, 2014, goodwill consisted of $1.2 million at the Bank reporting unit. Goodwill increased $792,000 during the six months ended June 30, 2014, due to the acquisition of certain loans, deposits and other assets of Boulevard Bank. Other identifiable intangible assets that are subject to amortization are amortized on a straight-line basis over a period of seven years. At June 30, 2014, the amortizable intangible assets consisted of core deposit intangibles of $7.2 million, including $2.8 million related to the Valley

Bank transaction in June 2014. These amortizable intangible assets are reviewed for impairment if circumstances indicate their value may not be recoverable based on a comparison of fair value.

While the Company believes no impairment existed at June 30, 2014, different conditions or assumptions used to measure fair value of reporting units, or changes in cash flows or profitability, if significantly negative or unfavorable, could have a material adverse effect on the outcome of the Company’s impairment evaluation in the future.

Current Economic Conditions

Changes in economic conditions could cause the values of assets and liabilities recorded in the financial statements to change rapidly, resulting in material future adjustments in asset values, the allowance for loan losses, or capital that could negatively impact the Company’s ability to meet regulatory capital requirements and maintain sufficient liquidity.

The previous economic downturn elevated unemployment levels and negatively impacted consumer confidence. It also had a detrimental impact on industry-wide performance nationally as well as the Company's Midwest market areas. Since 2012, improvement in several economic indicators have been noted, including increasing consumer confidence levels, increased economic activity and a continued decline in unemployment levels.

The national unemployment rate declined from 6.7% as of December 2013 to 6.1% in June 2014. Unemployment levels as of June 2014 decreased from the December 2013 levels in all but two of the states in which Great Southern has offices . All but two states boasted unemployment levels lower or equal to the national unemployment rate. Unemployment rates as of June 2014 follow: Missouri at 6.5%, Arkansas at 6.2%, Kansas at 4.9%, Iowa at 4.4%, Nebraska at 3.5%, Minnesota at 4.5%, Oklahoma at 4.5% and Texas at 5.1%. Four of these eight states had unemployment rates among the eleven lowest in the country. Of the larger metropolitan areas in which Great Southern does business (based on June 2014 information), the St. Louis market area continues to carry the highest level of unemployment at 7.0%, which is an increase from the 6.6% rate reported as of December of 2013. The unemployment rate at 5.7% for the Springfield market area was below national and state unemployment averages. Metropolitan areas in Iowa and Nebraska boasted unemployment levels ranging from 3.0% - 5.0%, ranking them among the lowest unemployment levels in the nation. Economists forecast an unemployment level of 5.6% by the end of 2015 with job growth of over 200,000 per month for the remainder of 2014.

The United States GDP shrank at an annual rate of 2.1% in the first quarter of 2014, according to the Bureau of Economic Analysis. GDP growth resumed in the second quarter of 2014 after the weak start. The advance estimate for GDP for the second quarter was 4.0%. According to the Economic Advisory Committee of the American Bankers Association, investment in businesses and homes – along with reduced fiscal drag – will spur the U.S. economy over the next two years. Still, growth in 2014 as a whole is projected at just 1.6%. If accurate, this year's growth would be the weakest since the Great Recession. Economists, however, are mostly optimistic about the rest of 2014 and largely attribute the negative first quarter GDP results to temporary factors, such as the long, harsh winter weather and a sharp slowdown in inventory restocking. As temporary factors subside, the underlying health of the economy will become more evident with increased business spending, increased employment and consumer confidence. Until that time, economists anticipate moderate consumer spending growth.

Inflation is anticipated to speed up near the Federal Reserve’s target levels by the end of 2015. Economists believe the Federal Reserve will keep policy rates unchanged until mid-2015. The Fed is expected to finish “tapering” asset purchases late this year, to begin the process of normalizing interest rates during the second half of 2015 and to end reinvestment of bond proceeds later that year.

Sales of new single-family houses in May 2014 were at a seasonally adjusted annual rate of 504,000 according to the U.S. Census Bureau and the Department of Housing and Urban Development. This is 18.6% above the April rate of 425,000 and is 16.9% above the May 2013 rate of 431,000.

The median sales price of new houses sold in May 2014 was $282,000; the average sales price was $319,200. The seasonally adjusted estimate of new houses for sale at the end of May was 189,000. This represented a supply of 4.5 months at the current sales rate.

Existing-home sales rose by 4.9% in May 2014 to an annual pace of 4.89 million units, according the National Association of Realtors. The rise in existing home sales is the largest monthly gain since August 2011. In the Midwest, existing home sales jumped 8.7% to 1.13 million in May 2014 but are still 7.4% below May 2013. The median price in the Midwest was $165,900, which is up 4% from a year ago.

Permit activity continues to be constrained at least partially due to smaller builders’ limited access to credit, builder concerns about the re-emergence of entry-level consumers to the market in the face of student debt and tighter credit underwriting standards and a general decline in affordability and purchase power over the last year. While tight inventories will help to sustain price growth, it also limits turnover and could further erode affordability. Without a stronger response from home builders, consumers may struggle with options and affordability if income growth cannot compensate.

The performance of commercial real estate markets also improved substantially in the Company’s market areas as shown by increased real estate sales activity and financing of those activities. According to real estate services firm CoStar Group, retail, office and industrial types of commercial real estate properties continue to show improvement in occupancy, absorption and rental income both nationally and in our market areas.

While current economic indicators for the Midwest show improvement in employment, housing starts and prices, commercial real estate occupancy, absorption and rental income, Bank management will continue to closely monitor regional, national and global economic conditions as these could have significant impacts on our market areas.

General

The profitability of the Company and, more specifically, the profitability of its primary subsidiary, Great Southern Bank (the "Bank"), depends primarily on its net interest income, as well as provisions for loan losses and the level of non-interest income and non-interest expense. Net interest income is the difference between the interest income the Bank earns on its loan and investment portfolios, and the interest it pays on interest-bearing liabilities, which consists mainly of interest paid on deposits and borrowings. Net interest income is affected by the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on these balances. When interest-earning assets approximate or exceed interest-bearing liabilities, any positive interest rate spread will generate net interest income.

In the six months ended June 30, 2014, Great Southern's total assets increased $352.7 million, or 9.9%, from $3.56 billion at December 31, 2013, to $3.91 billion at June 30, 2014. Full details of the current period changes in total assets are provided in the “Comparison of Financial Condition at June 30, 2014 and December 31, 2013” section of this Quarterly Report on Form 10-Q.

Loans. In the six months ended June 30, 2014, net loans increased $351.2 million, or 14.4 %, from $2.44 billion at December 31, 2013, to $2.79 billion at June 30, 2014. Partially offsetting the increases in loans were decreases of $22.8 million in the FDIC-covered loan portfolios. The net carrying value of the loans acquired in the Valley Bank transaction (acquired non-covered loans) was $159.7 million at June 30, 2014. Excluding acquired covered loans, acquired non-covered loans and mortgage loans held for sale, total loans increased $212.9 million from December 31, 2013 to June 30, 2014, with increases in several loan types. The increase was primarily due to the Valley Bank acquisition and partially due to the acquisition of loans totaling $11.0 million as part of the Boulevard Bank transaction in March 2014. The remainder of the increase was due to loan growth in our existing banking center network, as well as loans originated through the newly opened commercial loan production offices in Tulsa, Okla., and Dallas, Texas. As loan demand is affected by a variety of factors, including general economic conditions, and because of the competition we face and our focus on pricing discipline and credit quality, we cannot be assured that our loan growth will match or exceed the level of increases achieved in this period or prior years. The Company's strategy continues to be focused on maintaining credit risk and interest rate risk at appropriate levels.

While our policy allows us to lend up to 95% of the appraised value on single-family properties and up to 90% on two- to four-family residential properties, originations of loans with loan-to-value ratios at those levels are minimal. When they are made at those levels, private mortgage insurance is typically required for loan amounts above the 80% level unless our analysis determines minimal additional risk to be involved; therefore, these loans are not considered to have more risk to us than other residential loans. We consider these lending practices to be consistent

with, or more conservative than, what we believe to be the norm for banks our size. At June 30, 2014 and December 31, 2013, an estimated 0.3% and 0.4%, respectively, of total owner occupied one- to four-family residential loans had loan-to-value ratios above 100% at origination. At June 30, 2014 and December 31, 2013, an estimated 1.9% and 0.5%, respectively, of total non-owner occupied one- to four-family residential loans had loan-to-value ratios above 100% at origination.

At June 30, 2014, troubled debt restructurings totaled $54.3 million, or 1.8% of total loans, up $200,000 from $54.1 million, or 2.3% of total loans, at December 31, 2013. In addition, the Company acquired loans with a principal balance of $31.2 million, or 1.0% of loans, in the Valley Bank transaction that are classified as troubled debt restructurings. Concessions granted to borrowers experiencing financial difficulties may include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. While the types of concessions made have not changed as a result of the economic recession, the number of concessions granted has increased as reflected in the continued high level of troubled debt restructurings. During the three months ended June 30, 2014, one loan totaling $87,000 was restructured into multiple new loans. During the six months ended June 30, 2014, two loan totaling $337,000 were each restructured into multiple new loans. During the year ended December 31, 2013, four loans totaling $3.5 million were each restructured into multiple new loans. For further information on troubled debt restructurings, see Note 7 of the Notes to Consolidated Financial Statements contained in this report.

The loss sharing agreements with the FDIC are subject to limitations on the types of losses covered and the length of time losses are covered, and are conditioned upon the Bank complying with its requirements in the agreements with the FDIC, including requirements regarding servicing and other loan administration matters. The loss sharing agreements extend for ten years for single family real estate loans and for five years for other loans. At June 30, 2014, approximately five years remained on the loss sharing agreement for single family real estate loans acquired from TeamBank and the remaining loans have an estimated average life of two to ten years. At June 30, 2014, approximately five and one half years remained on the loss sharing agreement for single family real estate loans acquired from Vantus Bank and the remaining loans have an estimated average life of three to twelve years. At June 30, 2014, approximately seven and one half years remained on the loss sharing agreement for single family real estate loans acquired from Sun Security Bank and the remaining loans have an estimated average life of five to twelve years. At June 30, 2014, approximately eight years remained on the loss sharing agreement for single family real estate loans acquired from InterBank and the remaining loans have an estimated average life of five to fourteen years. The loss sharing agreement for non-single family loans acquired from TeamBank ended on June 30, 2014. Going forward, any additional losses in the non single-family TeamBank portfolio will not be eligible for loss sharing coverage. The remaining loans have an estimated average life of one to seven years and the non single-family portfolio totaled $28.1 million at June 30, 2014. At June 30, 2014, approximately three months remained on the loss sharing agreement for non-single family loans acquired from Vantus Bank and the remaining loans have an estimated average life of one to six years. At June 30, 2014, approximately two and one half years remained on the loss sharing agreement for non-single family loans acquired from Sun Security Bank and the remaining loans have an estimated average life of one to two years. At June 30, 2014, approximately three years remained on the loss sharing agreement for non-single family loans acquired from InterBank and the remaining loans have an estimated average life of two to five years. While the expected repayments for certain of the acquired loans extend beyond the terms of the loss sharing agreements, the Bank has identified and will continue to identify problem loans and will make every effort to resolve them within the time limits of the agreements. The Company may sell any loans remaining at the end of the loss sharing agreement subject to the approval of the FDIC. Acquired loans are currently included in the analysis and estimation of the allowance for loan losses. However, when the loss sharing agreements end, the allowance for loan losses related to any acquired loans retained in the portfolio may need to increase if additional weakness or losses are determined to be in the portfolio subsequent to the end of the loss sharing agreements. The loss sharing agreements and their related limitations are described in detail in Note 8 of the Notes to Consolidated Financial Statements contained in this report.

The level of non-performing loans and foreclosed assets affects our net interest income and net income. We generally do not accrue interest income on these loans and do not recognize interest income until the loans are repaid or interest payments have been made for a period of time sufficient to provide evidence of performance on the loans. Generally, the higher the level of non-performing assets, the greater the negative impact on interest income and net income.

Available-for-sale Securities. In the six months ended June 30, 2014, Great Southern's available-for-sale securities increased $13.7 million, or 2.5%, from $555.3 million at December 31, 2013, to $569.0 million at June 30, 2014. The increase was primarily due to $88.5 million of securities acquired in the Valley Bank transaction, offset by the sale of the Company’s Small Business Administration loan pools securities during the period and normal monthly payments received related to the portfolio of mortgage-backed securities. The Small Business Administration securities were sold at a gain of $569,000. The Valley Bank securities acquired were subsequently sold in July 2014 at a gain of approximately $175,000.

Cash and Cash Equivalents. Great Southern had cash and cash equivalents of $223.2 million at June 30, 2014, a decrease of $4.7 million, or 2.1%, from $227.9 million at December 31, 2013. The decrease in cash and cash equivalents during the period was primarily due to the repayment of $130 million of Federal Home Loan Bank (FHLBank) advances and structured repurchase agreements and the origination of new loans. Offsetting these decreases were increases of $109 million of cash and cash equivalents received in the Valley Bank FDIC- assisted acquisition in June 2014, $80 million of cash received related to the Boulevard Bank transaction in March 2014, and proceeds received from the sale of the Company’s Small Business Administration loan pool securities during the period.

Deposits. The Company attracts deposit accounts through its retail branch network, correspondent banking and corporate services areas, and brokered deposits. The Company then utilizes these deposit funds, along with Federal Home Loan Bank advances and other borrowings, to meet loan demand or otherwise fund its activities. In the six months ended June 30, 2014, total deposit balances increased $393.1 million, or 14.0%. Approximately $366 million of deposits were acquired in the FDIC-assisted acquisition of Valley Bank in June 2014. Approximately $92 million of deposits were acquired in the Boulevard Bank transaction in March 2014. Transaction account balances increased $276.0 million to $2.09 billion at June 30, 2014, up from $1.81 billion at December 31, 2013, while retail certificates of deposit increased $151.1 million to $1.02 billion at June 30, 2014, up from $867.6 million at December 31, 2013. In addition, at June 30, 2014 and December 31, 2013, Bank customer deposits totaling $42.3 million and $76.3 million, respectively, were part of the CDARS program which allows Bank customers to maintain balances in an insured manner that would otherwise exceed the FDIC deposit insurance limit. The FDIC counts these deposits as brokered, but these are deposit accounts that we generate with customers in our local markets.

Our deposit balances may fluctuate from time to time depending on customer preferences and our relative need for funding. We do not consider our retail certificates of deposit to be guaranteed long-term funding because customers can withdraw their funds at any time with minimal interest penalty. At times when loan demand trends upward, we can increase rates paid on deposits to increase deposit balances and may again utilize brokered deposits to provide necessary funding. Because the Federal Funds rate is already very low, there may be a negative impact on the Company’s net interest income due to the Company’s inability to lower its funding costs significantly in the current low interest rate environment, although interest rates on assets may decline further. The level of competition for deposits in our markets is high. While it is our goal to gain checking account and retail certificate of de posit market share in our branch footprint, we cannot be assured of this in future periods. In addition, while we have been generally lowering our deposit rates over the past several quarters, increasing rates paid on deposits can help to attract deposits if needed; however, this could negatively impact the Company’s net interest margin.

Our ability to fund growth in future periods may also depend on our ability to continue to access brokered deposits and FHLBank advances. In times when our loan demand has outpaced our generation of new deposits, we have utilized brokered deposits and FHLBank advances to fund these loans. These funding sources have been attractive to us because we can create either fixed or variable rate funding, if desired, which more closely matches the interest rate nature of much of our loan portfolio. While we do not currently anticipate that our ability to access these sources will be reduced or eliminated in future periods, if this should happen, the limitation on our ability to fund additional loans could have a material adverse effect on our business, financial condition and results of operations.

Net Interest Income and Interest Rate Risk Management. Our net interest income may be affected positively or negatively by changes in market interest rates. A large portion of our loan portfolio is tied to the "prime rate" and adjusts immediately when this rate adjusts (subject to the effect of loan interest rate floors, which are discussed below). We monitor our sensitivity to interest rate changes on an ongoing basis (see "Item 3. Quantitative and Qualitative Disclosures About Market Risk"). In addition, our net interest income may be impacted by changes in the

cash flows expected to be received from acquired loan pools. As described in Note 8 of the Notes to the Consolidated Financial Statements contained in this report , the Company’s evaluation of cash flows expected to be received from acquired loan pools is on-going and increases in cash flow expectations are recognized as increases in accretable yield through interest income. Decreases in cash flow expectations are recognized as impairments through the allowance for loan losses.

The current level and shape of the interest rate yield curve poses challenges for interest rate risk management. The FRB last changed interest rates on December 16, 2008. Great Southern has a significant portfolio of loans which are tied to a "prime rate" of interest. Most of these loans are tied to some national index of "prime," while some are indexed to "Great Southern prime." The Company has elected to leave its “Great Southern prime rate” of interest at 5.00%. This does not affect a large number of customers, as a majority of the loans indexed to “Great Southern prime” are already at interest rate floors which are provided for in individual loan documents. But for the interest rate floors, a rate cut by the FRB generally would have an anticipated immediate negative impact on the Company’s net interest income due to the large total balance of loans which generally adjust immediately as the Federal Funds rate adjusts. Loans at their floor rates are subject to the risk that borrowers will seek to refinance elsewhere at the lower market rate, however. Because the Federal Funds rate is already very low, there may also be a negative impact on the Company's net interest income due to the Company's inability to lower its funding costs significantly in the current environment, although interest rates on assets may decline further. Conversely, interest rate increases would normally result in increased interest rates on our prime-based loans. The interest rate floors in effect may limit the immediate increase in interest rates on these loans, until such time as rates rise above the floors. However, the Company may have to increase rates paid on deposits to maintain deposit balances and pay higher rates on borrowings. The impact of the low rate environment on our net interest margin in future periods is expected to be fairly neutral. As our time deposits mature in future periods, we expect to be able to continue to reduce rates somewhat as they renew. However, any margin gained by these rate reductions is likely to be offset by reduced yields from our investment securities as payments are made on our mortgage-backed securities and the proceeds are reinvested at lower rates. Similarly, interest rates on adjustable rate loans may reset lower according to their contractual terms and new loans may be originated at lower market rates. For further discussion of the processes used to manage our exposure to interest rate risk, see “Item 3. Quantitative and Qualitative Disclosures About Market Risk – How We Measure the Risks to Us Associated with Interest Rate Changes.”

The negative impact of declining loan interest rates has been mitigated by the positive effects of the Company’s loans which have interest rate floors. At June 30, 2014, the Company had a portfolio (excluding the loans acquired in the FDIC-assisted transactions) of prime-based loans totaling approximately $494 million with rates that change immediately with changes to the prime rate of interest. Of those loans, $467 million also had interest rate floors. These floors were at varying rates, with $16 million of these loans having floor rates of 7.0% or greater and another $255 million of these loans having floor rates between 5.0% and 7.0%. In addition, $197 million of these loans have floor rates between 3.25% and 5.0%. At June 30, 2014, all of these loans were at their floor rates. At June 30, 2014, the Company had a portfolio (excluding the loans acquired in the FDIC-assisted transactions) of GSB prime-based loans totaling approximately $221 million with rates that change immediately with changes to the GSB prime rate of interest. Of those loans, $208 million also had interest rate floors. At June 30, 2014, all of these loans were at their floor rates. The loan yield for the total loan portfolio was approximately 161 basis points and 185 basis points higher than the national "prime rate of interest" at June 30, 2014 and December 31, 2013, respectively, partly because of these interest rate floors. While interest rate floors have had an overall positive effect on the Company’s results during this period, they do subject the Company to the risk that borrowers will elect to refinance their loans with other lenders. To the extent economic conditions improve, the risk that borrowers will seek to refinance their loans increases.

Non-Interest Income and Operating Expenses. The Company's profitability is also affected by the level of its non-interest income and operating expenses. Non-interest income consists primarily of service charges and ATM fees, accretion income (net of amortization) related to the FDIC-assisted acquisitions, late charges and prepayment fees on loans, gains on sales of loans and available-for-sale investments and other general operating income. In 2014 and 2013, increases in the cash flows expected to be collected from the FDIC-covered loan portfolios resulted in amortization (expense) recorded relating to reductions of expected reimbursements under the loss sharing agreements with the FDIC, which are recorded as indemnification assets. Non-interest income may also be affected by the Company's interest rate hedging activities, if the Company chooses to implement hedges. See Note 15 “Derivatives and Hedging Activities” included in Item 1 for additional information regarding the Bank’s hedging activities.

Operating expenses consist primarily of salaries and employee benefits, occupancy-related expenses, expenses related to foreclosed assets, postage, FDIC deposit insurance, advertising and public relations, telephone, professional fees, office expenses and other general operating expenses. Details of the current period changes in non-interest income and non-interest expense are provided in the “Results of Operations and Comparison for the Three and Six Months Ended June 30, 2014 and 2013” section of this Quarterly Report on Form 10-Q.

Effect of Federal Laws and Regulations

General. Federal legislation and regulation significantly affect the operations of the Company and the Bank, and have increased competition among commercial banks, savings institutions, mortgage banking enterprises and other financial institutions. In particular, the capital requirements and operations of regulated banking organizations such as the Company and the Bank have been and will be subject to changes in applicable statutes and regulations from time to time, which changes could, under certain circumstances, adversely affect the Company or the Bank.

Significant Legislation Impacting the Financial Services Industry. On July 21, 2010, sweeping financial regulatory reform legislation entitled the “Dodd-Frank Wall Street Reform and Consumer Protection Act” (the “Dodd-Frank Act”) was signed into law. The Dodd-Frank Act implements far-reaching changes across the financial regulatory landscape, including provisions that, among other things, centralize responsibility for consumer financial protection by creating a new agency, the Consumer Financial Protection Bureau, with broad rulemaking authority for a wide range of consumer protection laws that apply to all banks, require new capital rules (discussed below), change the assessment base for federal deposit insurance, repeal the federal prohibitions on the payment of interest on demand deposits, amend the account balance limit for federal deposit insurance protection, and increase the authority of the Federal Reserve Board to examine the Company and its non-bank subsidiaries.

Many aspects of the Dodd-Frank Act are subject to rulemaking and will take effect over several years, making it difficult to anticipate the overall financial impact on the Company and the financial services industry more generally. Provisions in the legislation that affect deposit insurance assessments, and payment of interest on demand deposits could increase the costs associated with deposits. Provisions in the legislation that require revisions to the capital requirements of the Company and the Bank could require the Company and the Bank to seek additional sources of capital in the future.

A provision of the Dodd-Frank Act, commonly referred to as the “Durbin Amendment,” directed the FRB to analyze the debit card payments system and fix the interchange rates based upon their estimate of actual costs. The FRB has established the interchange rate for all debit transactions for issuers with over $10 billion in assets, effective October 1, 2011, at $0.21 per transaction. An additional five basis points of the transaction amount and an additional $0.01 may be collected by the issuer for fraud prevention and recovery, provided the issuer performs certain actions. Although the Bank is currently exempt from the provisions of the rule on the basis of asset size, there is some uncertainty about the long-term impact there will be on the interchange rates for issuers below the $10 billion level of assets.

New Capital Rules. The federal banking agencies have adopted new regulatory capital rules that substantially amend the risk-based capital rules applicable to the Bank and the Company. The new rules would implement the “Basel III” regulatory capital reforms and changes required by the Dodd-Frank Act. “Basel III” refers to various documents released by the Basel Committee on Banking Supervision. For the Company and the Bank, the general effective date of the new rules is January 1, 2015, and, for certain provisions, various phase-in periods and later effective dates apply. The chief features of the new rules are summarized below.

The new rules refine the definitions of what constitutes regulatory capital and add a new regulatory capital element, common equity Tier 1 capital. The minimum capital ratios are (i) a common equity Tier 1 risk-based capital ratio of 4.5%; (ii) a Tier 1 risk-based capital ratio of 6%; (iii) a total risk-based capital ratio of 8%; and (iv) a Tier 1 leverage ratio of 4%. In addition to the minimum capital ratios, the new rules include a capital conservation buffer, under which a banking organization must have capital more than 2.5% above each of its minimum risk-based capital ratios in order to avoid restrictions on paying dividends, engaging in share repurchases, and paying certain discretionary bonuses.

Effective January 1, 2015, the new rules also revise the prompt corrective action framework, which is designed to place restrictions on insured depository institutions if their capital levels show signs of weakness. Under the new prompt corrective action requirements, insured depository institutions would be required to meet the following in

order to qualify as “well capitalized:” (i) a common equity Tier 1 risk-based capital ratio of at least 6.5%; (ii) a Tier 1 risk-based capital ratio of at least 8%; (iii) a total risk-based capital ratio of at least 10%; and (iv) a Tier 1 leverage ratio of at least 5%.

Basel III also contains provisions on liquidity including complex criteria establishing a liquidity coverage ratio (“LCR”) and net stable funding ratio (“NSFR”). The purpose of the LCR is to ensure that a bank maintains adequate unencumbered, high quality liquid assets to meet its liquidity needs for 30 days under a severe liquidity stress scenario. The purpose of the NSFR is to promote more medium and long-term funding of assets and activities, using a one-year horizon. The federal banking agencies published proposed regulations on these provisions of Basel III on October 24, 2012. As proposed, these regulations will not apply to a bank holding company that has less than $50 billion of total consolidated assets and is not internationally active.

FDIC-Assisted Acquisition of Certain Assets and Liabilities

On June 20, 2014, Great Southern Bank entered into a purchase and assumption agreement with the FDIC to purchase, at a discount of approximately $37.5 million, 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 (“Valley”), a full-service bank headquartered in Moline, IL, with significant operations in Iowa. Valley Bank operated 13 locations – six locations in the Quad Cities market and seven in central Iowa, primarily in the Des Moines market area. Great Southern already operates six banking centers in the central Iowa/Des Moines region. Assets with a fair value of approximately $378.7 million were acquired, including $165.1 million of loans, $88.5 million of investment securities, $109.4 million of cash and cash equivalents, $10.9 million of premises and $2.1 million of accrued interest receivable and other assets. A core deposit intangible asset of $2.8 million was also recorded. Liabilities with a fair value of $367.9 million were assumed, including $366.0 million of deposits and $1.9 million of other liabilities.

Under the agreement with the FDIC, Great Southern assumed the deposits of Valley Bank at no premium. Additionally, Great Southern purchased the loans, a high percentage of which were performing, at an overall discount of approximately $37.5 million. The FDIC retained a portion of the loans and all of the other real estate owned of Valley in the transaction and there was no loss sharing agreement between the FDIC and Great Southern.

The Company recorded a preliminary one-time gain of $10.8 million (pre-tax) based upon the initial estimated fair value of the assets acquired and liabilities assumed in accordance with FASB ASC 805, Business Combinations, during the quarter ended June 30, 2014. FASB ASC 805 allows a measurement period of up to one year to adjust initial fair value estimates as of the acquisition date. The Company will continue to evaluate the fair value estimates and, if necessary, they may be adjusted during the measurement period. Additional income may be recognized in future periods as loans are collected from customers, but we cannot estimate the timing of this income due to the variables associated with this transaction. Based on the level of discounts and the nature of the loans acquired, none of the acquired Valley Bank loans are considered non-performing, as we have a reasonable expectation to recover both the discounted book balances of such loans as well as a yield on the discounted book balances.

A portion of the bargain purchase gain arose from the fair values estimated for the core deposit intangible ($2.8 million) and a premium recorded on the acquired loan portfolio related to the yield expected on the portfolio compared to current market rates for similar loan portfolios ($2.0 million). The core deposit intangible will be amortized to non-interest expense over seven years. The fair value yield adjustment will be amortized as a reduction to interest income over the estimated life of the various loan pools. Both of these will be non-cash expense items.

The former Valley Bank franchise is operating under the Great Southern name. The Company expects to convert the Valley Bank operational systems into Great Southern’s systems on October 24, 2014, which will allow all Great Southern and former Valley Bank customers to conduct business at any banking center throughout the Great Southern six-state retail franchise. Upon completion of the operational conversion, back office operations will be consolidated. The Company anticipates purchasing from the FDIC most of the real estate, furniture and fixtures of the former Valley branch locations currently being operated, but consolidation of part of the former Valley network is anticipated. The Company expects to close the Moline banking center and Altoona, Iowa, banking center prior to the systems conversion in October. In addition, the leased banking center in Ames, Iowa, will be relocated prior to systems conversion to a purchased former bank facility, which is expected to provide Ames customers better service and access. The exact cost of the real estate and personal property to be acquired as part of this transaction will be determined at a later date based on current appraisals, but the Company expects the cost to be in the range of $11-15 million ($10.9 million of which has already been paid by the Company).

Valley presented an attractive franchise for the Company to acquire because it provided the opportunity for expansion in the Company’s existing Des Moines/Central Iowa market and into a new complementary market in the Quad Cities through banking centers which, for the most part, held competitive market positions in both loans and deposits. These markets should provide new or enhanced opportunities for commercial and real estate lending. They are in areas that enjoy relatively low unemployment and significant business activity. While this transaction did not include loss sharing agreements with the FDIC, the Company was able to bid on certain loan pools and exclude certain loan pools from the transaction.

Business Initiatives

Several initiatives are underway related to the Company’s banking center network, including those referenced in the above “FDIC-assisted Acquisition” section. Two new banking centers were opened in June 2014. A new banking center began operating in Fayetteville, Ark., a part of the Northwest Arkansas region and home to the University of Arkansas. This opening represents the second office in Northwest Arkansas, the other located in nearby Rogers, Ark. A new office was also opened in Ferguson, Mo., representing the eighth banking center in the St. Louis metropolitan area.

As previously announced, in conjunction with our Neosho, Mo.–based Boulevard Bank transaction, one of our banking centers in Neosho, Mo., was closed in June and relocated directly across the street into a banking center acquired in the Boulevard Bank transaction. In September 2014, two other banking centers are expected to close - one each in Lamar, Mo., and Johnston, Iowa. Both of these offices were leased and were underutilized.

The Company recently purchased a former bank office building in Leawood, Johnson County, Kan., a suburb of the Kansas City metropolitan market area. Scheduled to be open for business in mid-2015, the office will house the commercial lending group, currently located in nearby Overland Park, Kan., and a retail banking center.

Comparison of Financial Condition at June 30, 2014 and December 31, 2013

During the six months ended June 30, 2014, the Company’s total assets increased by $352.7 million to $3.91 billion. Most of the increase was attributable to the FDIC-assisted acquisition of Valley. See Note 16 of the Notes to the Consolidated Financial Statements for details of the Valley acquisition.

Net loans increased $351.2 million from December 31, 2013, to $2.79 billion at June 30, 2014. Excluding acquired covered loans, acquired non-covered loans and mortgage loans held for sale, total loans increased $212.9 million from December 31, 2013, to June 30, 2014, with increases primarily in the areas of commercial real estate loans, consumer loans, construction loans, commercial business loans and other residential loans. Offsetting these increases were decreases in net loans acquired in the 2009, 2011 and 2012 FDIC-assisted transactions of $22.8 million, or 5.9%. The net carrying value of the loans acquired in the Valley transaction was $159.7 million at June 30, 2014. The Company's strategy continues to be focused on maintaining credit risk and interest rate risk at appropriate levels given the current credit and economic environments.

Cash and cash equivalents decreased $4.7 million as compared to December 31, 2013. The decrease resulted from the repayment of $130 million of Federal Home Loan Bank advances and structured repurchase agreements and the origination of new loans. Offsetting these decreases were increases of $109 million of cash and cash equivalents received in the Valley FDIC-assisted acquisition in June 2014, $80 million of cash received related to the Boulevard Bank transaction in March 2014, and proceeds received from the sale of the Company’s Small Business Administration loan pool securities during the period.

The Company's available-for-sale securities increased $13.7 million compared to December 31, 2013. The increase was due to $88.5 million of securities acquired in the Valley transaction, offset by the sale of the Company’s Small Business Administration loan pools securities during the period and normal monthly payments received related to the portfolio of mortgage-backed securities. The Small Business Administration securities were sold at a gain of $569,000. The Valley securities acquired were subsequently sold in July 2014 at a gain of approximately $175,000.

The FDIC indemnification asset decreased $14.4 million from December 31, 2013, partially due to the billing and collection of realized losses from the FDIC and primarily due to estimated improved cash flows to be collected from the loan obligors, resulting in reductions in payments expected to be received from the FDIC. The expected cash flows are further discussed in Note 8 of the Notes to Consolidated Financial Statements.

Total liabilities increased $333.8 million from $3.18 billion at December 31, 2013 to $3.51 billion at June 30, 2014. The increase was primarily attributable to increases in deposits, offset by decreases in Federal Home Loan Bank advances and structured repurchase agreements. Total deposits increased $393.1 million from December 31, 2013. Approximately $366 million of the increase was due to deposits acquired in the FDIC-assisted acquisition of Valley in June 2014. Approximately $92 million of the increase was due to the acquisition of deposits from Boulevard Bank in March 2014. Transaction account balances increased $276.0 million to $2.09 billion at June 30, 2014, up from $1.81 billion at December 31, 2013, while retail certificates of deposit increased $151.1 million to $1.02 billion at June 30, 2014, up from $867.6 million at December 31, 2013. In addition, at June 30, 2014 and December 31, 2013, Bank customer deposits totaling $42.3 million and $76.3 million, respectively, were part of the CDARS program which allows Bank customers to maintain balances in an insured manner that would otherwise exceed the FDIC deposit insurance limit. The FDIC counts these deposits as brokered, but these are deposit accounts that we generate with customers in our local markets. The Company did not actively try to grow CDARS customer deposits during the current period and decreased interest rates offered on these deposits during the six months ended June 30, 2014.

Federal Home Loan Bank advances decreased $35.1 million from $126.8 million at December 31, 2013 to $91.7 million at June 30, 2014. The decrease was due to $80 million of advances which were repaid by the Company in June of 2014, offset by $50 million of short-term borrowings from the Federal Home Loan Bank in June of 2014, which were used for liquidity purposes related to the timing of selling securities acquired in the Valley transaction.

Structured repurchase agreements decreased $50 million, from $50 million at December 31, 2013, to $0 at June 30, 2014, as the Company repaid these borrowings in June of 2014.

Securities sold under reverse repurchase agreements with customers increased $22.7 million from December 31, 2013, to June 30, 2014. These balances fluctuate over time based on customer demand for this product.

Total stockholders' equity increased $18.9 million from $380.7 million at December 31, 2013 to $399.6 million at June 30, 2014. The Company recorded net income of $19.9 million for the six months ended June 30, 2014, and common and preferred dividends declared were $5.8 million. Accumulated other comprehensive income increased $4.4 million due to increases in the fair value of available-for-sale investment securities. In addition, total stockholders’ equity increased $545,000 due to stock option exercises and decreased $481,000 due to re-purchases of the Company’s common stock.

Results of Operations and Comparison for the Three and Six Months Ended June 30, 2014 and 2013

General

Net income was $11.0 million for the three months ended June 30, 2014 compared to net income of $8.2 million for the three months ended June 30, 2013. This increase of $2.8 million, or 34.4%, was primarily due to a decrease in provision for loan losses of $2.2 million, or 60.2%, an increase in net interest income of $1.5 million, or 3.8%, and an increase in non-interest income of $8.3 million, or 356%, partially offset by an increase in non-interest expense of $7.7 million, or 28.8%, and an increase in income tax expense of $1.5 million, or 66.0%. Net income available to common stockholders was $10.9 million and $8.1 million for the three months ended June 30, 2014 and 2013, respectively.

Net income was $19.9 million for the six months ended June 30, 2014 compared to net income of $16.6 million for the three months ended June 30, 2013. This increase of $3.3 million, or 19.6%, was primarily due to a decrease in provision for loan losses of $8.7 million, or 73.5%, and an increase in non-interest income of $6.3 million, or 120%, partially offset by an increase in non-interest expense of $7.7 million, or 14.6%, a decrease in net interest income of $2.7 million, or 3.3%, and an increase in income tax expense of $1.4 million, or 30.3%. Net income available to common stockholders was $19.6 million and $16.3 million for the six months ended June 30, 2014 and 2013, respectively.

Total Interest Income

Total interest income increased $903,000, or 2.1%, during the three months ended June 30, 2014 compared to the three months ended June 30, 2013. The increase was due to a $2.1 million increase in interest income on loans, partially offset by a $1.1 million decrease in interest income on investments and other interest-earning assets. Interest income on loans increased for the three months ended June 30, 2014, due to higher average balances on loans, partially offset by lower average rates of interest. Total interest income decreased $4.2 million, or 4.6%, during the six months ended June 30, 2014 compared to the six months ended June 30, 2013. The decrease was due to a $2.7 million decrease in interest income on investments and other interest-earning assets and a $1.4 million decrease in interest income on loans. Interest income on loans decreased for the three months ended June 30, 2014 due to lower average rates of interest, partially offset by higher average balances. Interest income from investment securities and other interest-earning assets decreased during the three and six months ended June 30, 2014 compared to the same periods in 2013 primarily due to lower average balances. The lower average balances of investments were primarily due to the sale of the Company’s Small Business Administration loan pools securities and as a result of management’s decision to not reinvest mortgage-backed securities’ monthly cash flows back into investments. Prepayments on the mortgages underlying these securities resulted in amortization of premiums which also reduced yields.

Interest Income – Loans

During the three months ended June 30, 2014 compared to the three months ended June 30, 2013, interest income on loans increased due to higher average balances, partially offset by lower average interest rates.

Interest income increased $3.8 million as the result of higher average loan balances, which increased from $2.40 billion during the three months ended June 30, 2013, to $2.64 billion during the three months ended June 30, 2014. The higher average balances were primarily due to increases in commercial real estate loans, commercial business loans, other residential loans and consumer loans. The Company acquired $165.1 million in loans as part of the Valley FDIC-assisted transaction on June 20, 2014.

Interest income decreased $1.7 million as a result of lower average interest rates on loans. The average yield on loans decreased from 6.58% during the three months ended June 30, 2013, to 6.29% during the three months ended June 30, 2014. This decrease was due to lower overall loan rates, offset by a higher amount of accretion income in the current year period compared to the prior year period resulting from the increases in expected cash flows to be received from the FDIC-acquired loan pools as previously discussed in Note 8 of the Notes to Consolidated Financial Statements . On an on-going basis, the Company estimates the cash flows expected to be collected from the acquired loan pools. This cash flows estimate has increased, based on the payment histories and reduced loss expectations of the loan pools, resulting in adjustments to be spread on a level-yield basis over the remaining expected lives of the loan pools. The increases in expected cash flows also reduced the amount of expected reimbursements under the loss sharing agreements with the FDIC, which are recorded as indemnification assets. Therefore, the expected indemnification assets have also been reduced, resulting in adjustments to be amortized on a comparable basis over the remainder of the loss sharing agreements or the remaining expected life of the loan pools, whichever is shorter. For the three months ended June 30, 2014 and 2013, the adjustments increased interest income by $9.1 million and $7.7 million, respectively, and decreased non-interest income by $7.5 million and $6.6 million, respectively. The net impact to pre-tax income was $1.6 million and $1.0 million for the three months ended June 30, 2014 and 2013, respectively. As of June 30, 2014, the remaining accretable yield adjustment that will affect interest income is $33.3 million and the remaining adjustment to the indemnification assets, including the effects of the clawback liability related to InterBank, that will affect non-interest income (expense) is $(28.9 million). Of the remaining adjustments, we expect to recognize $13.6 million of interest income and $(11.4 million) of non-interest income (expense) in the remainder of 2014. Additional adjustments may be recorded in future periods from the FDIC-assisted transactions, as the Company continues to estimate expected cash flows from the acquired loan pools. Apart from the yield accretion, the average yield on loans was 4.91% for the three months ended June 30, 2014, down from 5.30% for the three months ended June 30, 2013, as a result of loan pay-offs and normal amortization of higher-rate loans and new loans that were made at current lower market rates.

During the six months ended June 30, 2014 compared to the six months ended June 30, 2013, interest income on loans decreased due to lower average interest rates, partially offset by higher average balances.

Interest income decreased $7.5 million as a result of lower average interest rates on loans. The average yield on loans decreased from 6.91% during the six months ended June 30, 2013, to 6.30% during the six months ended June 30, 2014. This decrease was due to a reduction in overall loan rates and a decrease in additional yield accretion recognized in conjunction with the fair value of the loan pools acquired in the FDIC-assisted transactions as discussed above for the three months ended June 30, 2014 and as previously discussed in Note 8 of the Notes to Consolidated Financial Statements . The adjustments increased interest income by $17.0 million and decreased non-interest income by $13.8 million during the six months ended June 30, 2014, for a net impact of $3.2 million to pre-tax income. The adjustments increased interest income by $18.1 million and decreased non-interest income by $15.0 million during the six months ended June 30, 2013, for a net impact of $3.1 million to pre-tax income. Apart from the yield accretion, the average yield on loans was 4.98% for the six months ended June 30, 2014, down from 5.39% for the six months ended June 30, 2013 for reasons discussed above.

Partially offsetting the decrease in interest income described above, interest income increased $6.1 million as the result of higher average loan balances, which increased from $2.40 billion during the six months ended June 30, 2013, to $2.58 billion during the six months ended June 30, 2014. The higher average balances were primarily due to increases in commercial real estate loans, commercial business loans, other residential loans and consumer loans. The Company acquired $165.1 million in loans as part of the Valley FDIC-assisted transaction on June 20, 2014.

Interest Income – Investments and Other Interest-earning Assets

Interest income on investments and other interest-earning assets decreased in the three months ended June 30, 2014 compared to the three months ended June 30, 2013. Interest income decreased $1.4 million as a result of a decrease in average balances from $1.12 billion during the three months ended June 30, 2013, to $779.5 million during the three months ended June 30, 2014. Average balances of securities decreased due primarily to the sale of the Company’s Small Business Administration loan pools securities in the current period, sales of other investment securities in previous periods and the normal monthly payments received on the portfolio of mortgage-backed securities, with proceeds being used to fund new loan originations. Interest income increased $242,000 due to an increase in average interest rates from 1.47% during the three months ended June 30, 2013, to 1.53% during the three months ended June 30, 2014.

Interest income on investments and other interest-earning assets decreased in the six months ended June 30, 2014 compared to the six months ended June 30, 2013. Interest income decreased $2.8 million as a result of a decrease in average balances from $1.16 billion during the six months ended June 30, 2013, to $779.0 million during the six months ended June 30, 2014. The reasons for these changes in the comparable six-month periods are the same as those described previously for the comparable three-month periods. Interest income increased $87,000 as a result of an increase in average interest rates from 1.52% during the six months ended June 30, 2013, to 1.55% during the six months ended June 30, 2014.

The Company’s interest-earning deposits and non-interest-earning cash equivalents currently earn very low or no yield and therefore negatively impact the Company’s net interest margin. At June 30, 2014, the Company had cash and cash equivalents of $223.2 million compared to $227.9 million at December 31, 2013. See "Net Interest Income" for additional information on the impact of this interest activity.

Total Interest Expense

Total interest expense decreased $567,000, or 11.4%, during the three months ended June 30, 2014, when compared with the three months ended June 30, 2013, due almost entirely to a decrease in interest expense on deposits of $511,000, or 15.7%.

Total interest expense decreased $1.5 million, or 14.3%, during the six months ended June 30, 2014, when compared with the three months ended June 30, 2013, due almost entirely to a decrease in interest expense on deposits of $1.4 million, or 20.3%.

Interest Expense – Deposits

Interest expense on demand deposits decreased $88,000 due to a decrease in average rates from 0.24% during the three months ended June 30, 2013, to 0.22% during the three months ended June 30, 2014. Average interest rates decreased due to lower overall market rates of interest in the 2014 period and because the Company continued to pay lower rates in line with the market during the three months ended June 30, 2014 when compared to the same period in 2013 . Market rates of interest on checking and money market accounts have decreased since late 2007 when the FRB began reducing short-term interest rates. Interest expense on demand deposits decreased $79,000 due to a decrease in average balances from $1.60 billion during the three months ended June 30, 2013, to $1.47 billion during the three months ended June 30, 2014. The decrease in average balances of interest-bearing demand deposits was primarily a result of the elimination of interest on certain deposit types and decreases in NOW accounts and money market accounts, including accounts with collateralized deposit balances. The actual balance of demand deposits increased during the quarter due to the assumption of $186.9 million of demand deposits from Valley, however, since that occurred on June 20, 2014, it affected the average balances for only a few days of the quarter. The average balance of non-interest-bearing demand deposit accounts increased $134.5 million, from $406.7 million for the three months ended June 30, 2013 to $541.2 million for the three months ended June 30, 2014.

Interest expense on demand deposits decreased $339,000 due to a decrease in average rates from 0.27% during the six months ended June 30, 2013, to 0.22% during the six months ended June 30, 2014. Interest expense on demand deposits decreased $241,000 due to a decrease in average balances from $1.62 billion during the six months ended June 30, 2013, to $1.42 billion during the six months ended June 30, 2014. The reasons for the decrease in interest rates in the comparable six-month periods are the same as those described previously for the comparable three-month periods.

Interest expense on time deposits decreased $191,000 due to a decrease in average balances of time deposits from $1.08 billion during the three months ended June 30, 2013, to $990.6 million during the three months ended June 30, 2014. The decrease in time deposit balances was primarily due to some customers choosing not to renew their deposits with us upon maturity due to lower rates offered by the Company. Also contributing to the decrease was the decrease in CDARS deposits of $24.9 million compared to June 30, 2013. Interest expense on time deposits decreased $153,000 as a result of a decrease in average rates of interest from 0.85% during the three months ended June 30, 2013, to 0.79% during the three months ended June 30, 2014 due to a reduction in market rates of interest. A large portion of the Company’s certificate of deposit portfolio matures within one to two years and therefore reprices fairly quickly; this is consistent with the portfolio over the past several years.

Interest expense on time deposits decreased $563,000 due to a decrease in average balances from $1.13 billion during the six months ended June 30, 2013, to $984.0 million during the six months ended June 30, 2014. Interest expense on time deposits decreased $233,000 due to a decrease in average rates from 0.83% during the six months ended June 30, 2013, to 0.79% during the six months ended June 30, 2014. The reasons for these changes in the comparable six-month periods are the same as those described previously for the comparable three-month periods.

Interest Expense – FHLBank Advances, Short-term Borrowings and Structured Repo Borrowings and Subordinated Debentures Issued to Capital Trusts

During the three months ended June 30, 2014 compared to the three months ended June 30, 2013, interest expense on FHLBank advances increased due to higher average balances, partially offset by lower average rates of interest. Interest expense on FHLBank advances increased $62,000 due to an increase in average balances from $126.8 million during the three months ended June 30, 2013, to $135.1 million during the three months ended June 30, 2014. This increase was primarily due to additional short-term FHLBank advances obtained by the Company during the three month period, though the Company repaid $80 million of FHLBank advances very close to the end of the three month period. Partially offsetting this increase was a decrease in interest expense on FHLBank advances of $41,000 due to a decrease in average interest rates from 3.13% in the three months ended June 30, 2013, to 3.00% in the three months ended June 30, 2014.

During the six months ended June 30, 2014 compared to the six months ended June 30, 2013, interest expense on FHLBank advances increased due to higher average balances, partially offset by lower average rates of interest. Interest expense on FHLBank advances increased $59,000 due to an increase in average balances from $126.7 million during the six months ended June 30, 2013, to $130.8 million during the six months ended June 30, 2014. Interest expense on FHLBank advances decreased $38,000 due to a decrease in average interest rates from 3.12% in the six months ended June 30, 2013, to 3.06% in the six months ended June 30, 2014. The reasons for these changes in the comparable six-month periods are the same as those described previously for the comparable three-month periods.

Interest expense on short-term and structured repo borrowings decreased $138,000 due to a decrease in average balances from $255.8 million during the three months ended June 30, 2013, to $199.6 million during the three months ended June 30, 2014. Interest expense on short-term and structured repo borrowings increased $62,000 due to an increase in average rates on short-term borrowings from 0.92% in the three months ended June 30, 2013, to 1.03% in the three months ended June 30, 2014. The decrease in balances of short-term borrowings in the three month period was primarily due to decreases in average securities sold under repurchase agreements with the Company’s deposit customers, which tend to fluctuate. In addition, $50 million of structured repurchase agreements were repaid by the Company very close to the end of the 2014 three month period. The reduced balance of these lower-rate securities sold under repurchase agreements led to the increase in average interest rates in this overall category.

Interest expense on short-term and structured repo borrowings decreased $264,000 due to a decrease in average balances from $257.9 million during the six months ended June 30, 2013, to $204.4 million during the six months ended June 30, 2014. Interest expense on short-term and structured repo borrowings increased $163,000 due to an increase in average rates on short-term borrowings from 0.92% in the six months ended June 30, 2013, to 1.06% in the six months ended June 30, 2014. The reasons for these changes in the comparable six-month periods are the same as those described previously for the comparable three-month periods.

During the three months and six months ended June 30, 2014, compared to the three and six months ended June 30, 2013, interest expense on subordinated debentures issued to capital trusts were almost unchanged. Average interest rates were 1.82% in the three months ended June 30, 2014, compared to 1.80% in the three months ended June 30, 2014. Average interest rates were 1.83% in the six months ended June 30, 2013 compared to 1.79% in the six months ended June 30, 2014. These are variable-rate debentures which bear interest at an average rate of three-month LIBOR plus 1.57%, adjusting quarterly.

Net Interest Income

Net interest income for the three months ended June 30, 2014 increased $1.5 million to $40.0 million compared to $38.5 million for the three months ended June 30, 2013. Net interest margin was 4.69% in the three months ended June 30, 2014, compared to 4.39% in the three months ended June 30, 2013, an increase of 30 basis points, or 6.8%. In both three-month periods, t he Company’s margin was positively impacted primarily by the increases in expected cash flows to be received from the FDIC-acquired loan pools and the resulting increase to accretable yield which were previously discussed in Note 8 of the Notes to Consolidated Financial Statements . The positive impact of these changes on the three months ended June 30, 2014 and 2013 were increases in interest income of $9.1 million and $7.7 million, respectively, and increases in net interest margin of 107 basis points and 88 basis points, respectively. Excluding the positive impact of the additional yield accretion, net interest margin increased 11 basis points when compared to the year-ago quarter. During 2013 and the first six months of 2014, market rates on checking and savings deposits remained very low and retail time deposits renewed at somewhat lower rates of interest. The positive impact from lower deposit rates has diminished as market rates for such deposits are no longer declining. The Company has also experienced decreases in yields on loans and investments, excluding the yield accretion income discussed above, when compared to the previous periods. Existing loans continue to repay, and in many cases new loans are originated at rates which are lower than the rates on those repaying loans and may be lower than existing average portfolio rates.

The Company's overall average interest rate spread increased 27 basis points, or 6.3%, from 4.31% during the three months ended June 30, 2013, to 4.58% during the three months ended June 30, 2014. The gross change was due to a 26 basis point increase in the weighted average yield on interest-earning assets and a one basis point decrease in the weighted average rate paid on interest-bearing liabilities. In comparing the two periods, the yield on loans decreased

29 basis points while the yield on investment securities and other interest-earning assets increased four basis points. The rate paid on deposits decreased four basis points, the rate paid on subordinated debentures issued to capital trusts decreased two basis points, the rate paid on FHLBank advances decreased 13 basis points, and the rate paid on short-term borrowings increased 11 basis points.

Net interest income for the six months ended June 30, 2014 decreased $2.7 million to $77.9 million compared to $80.6 million for the six months ended June 30, 2013. Net interest margin was 4.68% in the six months ended June 30, 2014, compared to 4.57% in the six months ended June 30, 2013, an increase of 11 basis points, or 2.4%. In both six-month periods, t he Company’s margin was positively impacted primarily by the increases in expected cash flows to be received from the FDIC-acquired loan pools and the resulting increase to accretable yield which were previously discussed in Note 8 of the Notes to Consolidated Financial Statements . The positive impact of these changes on the six months ended June 30, 2014 and 2013 were increases in interest income of $17.0 million and $18.1 million, respectively, and increases in net interest margin of 102 basis points and 103 basis points, respectively. Excluding the positive impact of the additional yield accretion, net interest margin increased 11 basis points when compared to the year-ago period.

The Company's overall interest rate spread increased seven basis points, or 1.6%, from 4.50% during the six months ended June 30, 2013, to 4.57% during the six months ended June 30, 2014. The gross change was due to a five basis point increase in the weighted average yield on interest-earning assets, and a two basis point decrease in the weighted average rate paid on interest-bearing liabilities. In comparing the two periods, the yield on loans decreased 61 basis points while the yield on investment securities and other interest-earning assets decreased three basis points. The rate paid on deposits decreased five basis points, the rate paid on subordinated debentures issued to capital trusts decreased four basis points, the rate paid on short-term borrowings increased 14 basis points and the rate paid on FHLBank advances decreased six basis points.

For additional information on net interest income components, refer to the "Average Balances, Interest Rates and Yields" table in this Quarterly Report on Form 10-Q.

Provision for Loan Losses and Allowance for Loan Losses

Management records a provision for loan losses in an amount it believes sufficient to result in an allowance for loan losses that will cover current net charge-offs as well as risks believed to be inherent in the loan portfolio of the Bank. The amount of provision charged against current income is based on several factors, including, but not limited to, past loss experience, current portfolio mix, actual and potential losses identified in the loan portfolio, economic conditions, and internal as well as external reviews. Based on the Company’s current assessment of these factors and their expected impact on the loan portfolio, management believes that provision expenses and net charge-offs for 2014 will likely continue to be less than those for 2013, or similar to the latter half of 2013. H owever, the levels of non-performing assets, potential problem loans, loan loss provisions and net charge-offs fluctuate from period to period and are difficult to predict.

Weak economic conditions, higher inflation or interest rates, or other factors may lead to increased losses in the portfolio and/or requirements for an increase in loan loss provision expense. Management long ago established various controls in an attempt to limit future losses, such as a watch list of possible problem loans, documented loan administration policies and a loan review staff to review the quality and anticipated collectability of the portfolio. Additional procedures provide for frequent management review of the loan portfolio based on loan size, loan type, delinquencies, on-going correspondence with borrowers and problem loan work-outs. Management determines which loans are potentially uncollectible, or represent a greater risk of loss, and makes additional provisions to expense, if necessary, to maintain the allowance at a satisfactory level.

The provision for loan losses for the three months ended June 30, 2014, decreased $2.2 million to $1.5 million when compared with the three months ended June 30, 2013. The provision for loan losses for the six months ended June 30, 2014, decreased $8.7 million to $3.2 million when compared with the six months ended June 30, 2013. At June 30, 2014, the allowance for loan losses was $38.1 million, a decrease of $2.0 million from December 31, 2013. Total net charge-offs were $1.6 million and $4.0 million for the three months ended June 30, 2014 and 2013, respectively. Two relationships made up $939,000 of the net charge-off total for the three months ended June 30, 2014. Total net charge-offs were $5.2 million and $12.4 million for the six months ended June 30, 2014 and 2013, respectively. The

decrease in net charge-offs and provision for loan losses in the three and six months ended June 30, 2014, were consistent with our expectations, as indicated in previous filings. General market conditions, and more specifically, real estate absorption rates and unique circumstances related to individual borrowers and projects also contributed to the level of provisions and charge-offs. As properties were categorized as potential problem loans, non-performing loans or foreclosed assets, evaluations were made of the values of these assets with corresponding charge-offs as appropriate.

Loans acquired in the 2009, 2011 and 2012 FDIC-assisted transactions are covered by loss sharing agreements between the FDIC and Great Southern Bank which afford Great Southern Bank at least 80% protection from losses in the acquired portfolio of loans. The FDIC loss sharing agreements are subject to limitations on the types of losses covered and the length of time losses are covered and are conditioned upon the Bank complying with its requirements in the agreements with the FDIC. These limitations are described in detail in Note 8 of the Notes to Consolidated Financial Statements. The acquired loans were grouped into pools based on common characteristics and were recorded at their estimated fair values, which incorporated estimated credit losses at the acquisition dates. These loan pools are systematically reviewed by the Company to determine the risk of losses that may exceed those identified at the time of the acquisition. Techniques used in determining risk of loss are similar to those used to determine the risk of loss for the legacy Bank portfolio, with most focus being placed on those loan pools which include the larger loan relationships and those loan pools which exhibit higher risk characteristics. Review of the acquired loan portfolio also includes meetings with customers, review of financial information and collateral valuations to determine if any additional losses are apparent. Former Valley loans are accounted for in pools and were recorded at their fair value at the time of the acquisition as of June 20, 2014; therefore, these loan pools are analyzed rather than the individual loans.

The loss sharing agreement for the non-single-family portion of the loans acquired in the TeamBank transaction ended on March 31, 2014. Any additional losses in that non single-family portfolio will not be eligible for loss sharing coverage. At this time, the Company does not expect any material losses in this non-single-family loan portfolio, which totaled $28.1 million at June 30, 2014.

The Bank’s allowance for loan losses as a percentage of total loans, excluding loans covered by the FDIC loss sharing agreements, was 1.54%, 1.92% and 2.08% at June 30, 2014, December 31, 2013, and June 30, 2013, respectively. Management considers the allowance for loan losses adequate to cover losses inherent in the Company’s loan portfolio at June 30, 2014, based on recent reviews of the Company’s loan portfolio and current economic conditions. If economic conditions were to deteriorate or management’s assessment of the loan portfolio were to change, it is possible that additional loan loss provisions would be required, thereby adversely affecting future results of operations and financial condition.

Non-performing Assets

Former TeamBank (portion of loans still covered by loss sharing agreement), Vantus Bank, Sun Security Bank and InterBank non-performing assets, including foreclosed assets, are not included in the totals or in the discussion of non-performing loans, potential problem loans and foreclosed assets below due to the respective loss sharing agreements with the FDIC, which cover at least 80% of principal losses that may be incurred in these portfolios for the applicable terms under the agreements. At June 30, 2014, there were no material non-performing assets that were previously covered, and are now not covered, under the TeamBank non-single-family loss sharing agreement. Former Valley Bank loans are also excluded from the totals and the discussion of non-performing loans, potential problem loans and foreclosed assets below, although they are not covered by a loss sharing agreement. Former Valley Bank loans are accounted for in pools and were recorded at their fair value at the time of the acquisition as of June 20, 2014; therefore, these loan pools are analyzed rather than the individual loans. In addition, FDIC-supported TeamBank, Vantus Bank, Sun Security Bank and InterBank assets were initially recorded at their estimated fair values as of their acquisition dates of March 20, 2009, September 4, 2009, October 7, 2011 and April 27, 2012, respectively. The overall performance of the FDIC-covered loan pools acquired in 2009, 2011 and 2012 has been better than original expectations as of the acquisition dates.

As a result of changes in balances and composition of the loan portfolio, changes in economic and market conditions that occur from time to time, and other factors specific to a borrower’s circumstances, the level of non-performing assets will fluctuate. Non-performing assets, excluding FDIC-covered non-performing assets and non-covered acquired assets, at June 30, 2014, were $51.8 million, a decrease of $10.5 million from $62.3 million at December 31, 2013. Non-performing assets, excluding FDIC-covered non-performing assets and non-covered acquired assets, as a percentage of total assets were 1.32% at June 30, 2014, compared to 1.75% at December 31, 2013.

Compared to December 31, 2013, non-performing loans decreased $6.2 million to $13.7 million and foreclosed assets decreased $4.3 million to $38.1 million. Commercial real estate loans comprised $7.0 million, or 51.4%, of the total $13.7 million of non-performing loans at June 30, 2014, an increase of $824,000 from December 31, 2013. Non-performing one-to four-family residential loans comprised $3.3 million, or 23.8%, of total non-performing loans at June 30, 2014, a decrease of $1.1 million from December 31, 2013. Non-performing other commercial loans decreased $5.2 million in the six months ended June 30, 2014, and were $2.0 million, or 14.9%, of total non-performing loans at June 30, 2014.

Non-performing Loans. Activity in the non-performing loans category during the six months ended June 30, 2014 was as follows:

	Beginning Balance, January 1		Additions to Non- Performing		Removed from Non- Performing			Transfers to Potential Problem Loans			Transfers to Foreclosed Assets			Charge- Offs			Payments			Ending Balance, June 30
	(In Thousands)
One- to four-family construction	$	—	$	—	$	—		$	—		$	—		$	—		$	—		$	—
Subdivision construction		871		1,301		—			—			(688	)		(914	)		(266	)		304
Land development		338		102		—			—			(45	)		(79	)		(13	)		303
Commercial construction		—		—		—			—			—			—			—			—
One- to four-family residential		4,361		2,355		(76	)		( 514	)		(1,802	)		(389	)		(683	)		3,252
Other residential		—		—		—			—			—			—			—			—
Commercial real estate		6,205		2,458		(1,200	)		—			—			(25	)		(409	)		7,029
Commercial business		7,231		111		(2,715	)		—			—			(1,967	)		(619	)		2,041
Consumer		900		467		(273	)		(44	)		—			(73	)		(244	)		733

Total	$	19,906	$	6,794	$	(4,264	)	$	(558	)	$	(2,535	)	$	(3,447	)	$	(2,234	)	$	13,662

At June 30, 2014, the non-performing commercial real estate category included 10 loans, four of which were added during the quarter. The largest relationship in this category, which was added in a previous period, totaled $2.7 million, or 37.9%, of the total category, and is collateralized by a hotel. The non-performing one- to four-family residential category included 42 loans, nine of which were added during the three months ended June 30, 2014. The non-performing commercial business category included eight loans, one of which was added during the three months ended June 30, 2014. The largest relationship in this category, which was added in 2013, totaled $1.8 million, or 89.5% of the total category, and is collateralized by an assignment of annual assessments generated by a Community Improvement District for the associated real estate.

Potential Problem Loans. Compared to December 31, 2013, potential problem loans decreased $6.4 million, or 23.9%. This decrease was due to $7.2 million in loans being removed from potential problem loans due to improvements in the credits, $2.6 million in loans transferred to the non-performing category, $886,000 in charge-offs, $417,000 in loans transferred to foreclosed assets, and $295,000 in payments from customers, partially offset by the addition of $5.0 million of loans to potential problem loans. Potential problem loans are loans which management has identified through routine internal review procedures as having possible credit problems that may cause the borrowers difficulty in complying with the current repayment terms. These loans are not reflected in non-performing assets, but are considered in determining the adequacy of the allowance for loan losses. Activity in the potential problem loans category during the six months ended June 30, 2014, was as follows:

	Beginning Balance, January 1		Additions to Potential Problem		Removed from Potential Problem			Transfers to Non- Performing			Transfers to Foreclosed Assets			Charge- Offs			Payments			Ending Balance, June 30
	(In Thousands)
One- to four-family construction	$	—	$	—	$	—		$	—		$	—		$	—		$	—		$	—
Subdivision construction		2,201		810		—			(1,303	)		—			(500	)		(11	)		1,197
Land development		10,857		—		(5,000	)		—			—			—			—			5,857
Commercial construction		—		—		—			—			—			—			—			—
One- to four-family residential		2,193		2,132		(250	)		(711	)		—			—			(37	)		3,327
Other residential		1,956		—		—			—			—			—			—			1,956
Commercial real estate		8,737		1,699		(1,905	)		(598	)		(417	)		(381	)		(228	)		6,907
Commercial business		860		231		(43	)		—			—			—			—			1,048
Consumer		183		106		—			(6	)		—			(5	)		(19	)		259

Total	$	26,987	$	4,978	$	(7,198	)	$	(2,618	)	$	(417	)	$	(886	)	$	(295	)	$	20,551

At June 30, 2014, the commercial real estate category of potential problem loans included six loans, three of which were added during the three months ended June 30, 2014. The largest relationship in this category, which was added during a previous period, had a balance of $4.9 million, or 71.5% of the total category. The relationship is collateralized by properties located near Branson, Missouri. The land development category of potential problem loans included three loans, all of which were added during previous periods. The largest relationship in this category totaled $3.8 million, or 65.6% of the total category, and is collateralized by property in the Branson, Mo. area. The one- to four-family residential category of potential problem loans included 29 loans, 13 of which were added during the three months ended June 30, 2014. Of the 13 new loans added during the current quarter, nine of those loans were to the same borrower. The other residential category of potential problem loans included one loan which was added in a previous period, and is collateralized by properties located in the Branson, Mo., area. The subdivision construction category of potential problem loans included eight loans, five of which were added during the three months ended June 30, 2014. The largest relationship in this category had a balance of $280,000, or 23.4% of the total category, as is collateralized by property in southwest Missouri. The commercial business category of potential problem loans included six loans, two of which were added in the three months ended June 30, 2014. The largest relationship in this category had a balance of $660,000, or 63.0% of the total category, and is collateralized by automobiles and land.

Foreclosed Assets. Of the total $46.2 million of other real estate owned at June 30, 2014, $6.1 million represents the fair value of foreclosed assets covered by FDIC loss sharing agreements and $2.0 million represents properties which were not acquired through foreclosure. The foreclosed assets covered by FDIC loss sharing agreements and the properties not acquired through foreclosure are not included in the following table and discussion of foreclosed assets. Because sales of foreclosed properties exceeded additions, total foreclosed assets decreased. Activity in foreclosed assets during the six months ended June 30, 2014, was as follows:

	Beginning Balance, January 1		Additions		ORE Sales			Capitalized Costs		ORE Write- Downs			Ending Balance, June 30
	(In Thousands)
One- to four-family construction	$	—	$	—	$	—		$	—	$	—		$	—
Subdivision construction		11,652		688		(2,028	)		—		(18	)		10,294
Land development		16,788		57		(268	)		—		(974	)		15,603
Commercial construction		2,132		—		—			—		—			2,132
One- to four-family residential		744		1,941		(979	)		—		—			1,706
Other residential		5,900		—		(2,228	)		40		—			3,712
Commercial real estate		4,135		418		(491	)		—		—			4,062
Commercial business		77		—		(4	)		—		(14	)		59
Consumer		969		1,503		(1,875	)		—		(42	)		555

Total	$	42,397	$	4,607	$	(7,873	)	$	40	$	(1,048	)	$	38,123

At June 30, 2014, the land development category of foreclosed assets included 30 properties, the largest of which was located in northwest Arkansas and had a balance of $2.3 million, or 14.7% of the total category. Of the total dollar amount in the land development category of foreclosed assets, 47.4% and 32.0% was located in northwest Arkansas and in the Branson, Mo., area, respectively, including the largest property previously mentioned. One property located in the Branson, Mo., area accounted for $940,000 of the write-downs for the land development category. The subdivision construction category of foreclosed assets included 33 properties, the largest of which was located in the St. Louis, Mo. metropolitan area and had a balance of $2.9 million, or 28.5% of the total category. Of the total dollar amount in the subdivision construction category of foreclosed assets, 19.2% and 14.7% is located in Branson, Mo. and Springfield, Mo., respectively. The commercial real estate category of foreclosed assets included 10 properties, the largest of which was located in the St. Louis, Mo. metropolitan area and had a balance of $1.4 million, or 34.5% of the total category. The other residential category of foreclosed assets included 15 properties, 12 of which were all part of the same condominium community, which was located in Branson, Mo. and had a balance of $2.2 million, or 59.6% of the total category. Of the total dollar amount in the other residential category of foreclosed assets, 81.1% was located in the Branson, Mo., area, including the largest properties previously mentioned.

Non-interest Income

For the three months ended June 30, 2014, non-interest income increased $8.3 million to $10.6 million when compared to the three months ended June 30, 2013 , primarily as a result of the following items:

Initial gain recognized on business acquisition: The Company recognized a preliminary one-time gain of $10.8 million (pre-tax) on the FDIC-assisted acquisition of Valley, which occurred on June 20, 2014.

Net realized gains on sales of available-for-sale securities: Gains on sales of available-for-sale securities increased $472,000 compared to the prior year quarter. This was primarily due to the sale of all of the Company’s Small Business Administration securities in June of 2014, which produced a gain of $569,000.

Partially offsetting the increase in non-interest income was a decrease in the following items:

Amortization of income related to business acquisitions : The net amortization expense related to business acquisitions was $7.2 million for the quarter ended June 30, 2014, compared to $5.7 million for the quarter ended June 30, 2013. The amortization expense for the quarter ended June 30, 2014 was made up of the following items: $7.5 million of amortization expense related to the changes in cash flows expected to be collected from the FDIC-covered loan portfolios, $423,000 of amortization of the clawback liability and $153,000 of impairment of the indemnification asset for Vantus Bank. The impairment was recorded because the Company does not expect resolution of certain items related to commercial foreclosed assets prior to the expiration of the non-sing-family loss sharing agreement for Vantus Bank. Partially offsetting the expense was income from the accretion of the discount related to the indemnification assets for all of the acquisitions of $416,000 and $419,000 of other loss share income items.

Gains on sales of single-family loans: Gains on sales of single-family loans decreased $1.0 million compared to the prior year quarter. This was due to a decrease in originations of fixed-rate loans due to higher fixed rates on these loans in the 2014 period which resulted in fewer loans being originated to refinance existing debt. Loans originated are subsequently sold in the secondary market.

Change in interest rate swap fair value: The Company recorded expense of $(130,000) during the 2014 quarter due to the decrease in the interest rate swap fair value related to its matched book interest rate derivatives program. The decrease was primarily due to decreases in market rates of interest. This compares to income of $347,000 recorded during the three months ended June 30, 2013.

For the six months ended June 30, 2014, non-interest income increased $6.3 million to $11.6 million when compared to the three months ended June 30, 2013 , primarily as a result of the following items:

Net realized gains on sales of available-for-sale securities: Gains on sales of available-for-sale securities increased $511,000 compared to the prior year period. This was primarily due to the sale of all of the Company’s Small Business Administration securities in June of 2014, which produced a gain of $569,000.

Partially offsetting the increase in non-interest income was a decrease in the following items:

Amortization of income related to business acquisitions : The net amortization expense related to business acquisitions was $13.6 million for the six months ended June 30, 2014, compared to $11.6 million for the six months ended June 30, 2013. The amortization expense for the six months ended June 30, 2014 was made up of the following items: $13.8 million of amortization expense related to the changes in cash flows expected to be collected from the FDIC-covered loan portfolios, $742,000 of amortization of the clawback liability and $503,000 of impairment of the indemnification asset for Vantus Bank. The impairment was recorded because the Company does not expect resolution of certain items related to commercial foreclosed assets prior to the expiration of the non-single-family loss sharing agreement for Vantus Bank. Offsetting the expense was income from the accretion of the discount related to the indemnification assets for all of the acquisitions of $1.4 million.

Gains on sales of single-family loans: Gains on sales of single-family loans decreased $1.9 million compared to the prior year period for the same reasons discussed above.

Change in interest rate swap fair value: The Company recorded expense of $(233,000) during the 2014 period due to the decrease in the interest rate swap fair value related to its matched book interest rate derivatives program. The decrease was primarily due to decreases in market rates of interest. This compares to income of $408,000 recorded during the six months ended June 30, 2013.

Non-interest Expense

For the three months ended June 30, 2014, non-interest expense increased $7.7 million to $34.4 million, when compared to the three months ended June 30, 2013, primarily as a result of the following items:

Other Operating Expenses: Other operating expenses increased $7.8 million, to $9.8 million, in the quarter ended June 30, 2014 compared to the prior year quarter primarily due to $7.4 million in prepayment penalties paid as the Company elected to repay $130 million of its FHLB advances and structured repo borrowings prior to their maturity. The interest cost related to these borrowings for the next twelve months would have been $4.7 million, with total interest cost to maturity of $9.4 million based on the remaining terms. The Company elected to utilize some of its existing liquidity, as well as liquid assets arising from the Valley transaction, and securities sales for the repayment of these borrowings.

Foreclosure-related expenses : Expenses on foreclosed assets were relatively unchanged for the three months ended June 30, 2014, when compared to the three months ended June 30, 2013. However, in the 2014 period the Company recorded a $940,000 write-down of the carrying value of one foreclosed asset. The 2013 period expenses were due primarily to increases in the write-downs of carrying values of foreclosed assets and losses on sales of assets.

Valley acquisition expenses: The Company incurred approximately $605,000 of additional expenses during the three months ended June 30, 2014, related to the FDIC-assisted acquisition of Valley. Those expenses included approximately $300,000 of compensation expense, approximately $120,000 of legal, audit and other professional fees expense, and approximately $150,000 of travel, meals and other expenses related to due diligence for the transaction and similar costs incurred from the June 20 closing date through the end of June.

For the six months ended June 30, 2014, non-interest expense increased $7.7 million to $60.3 million when compared to the six months ended June 30, 2013, primarily as a result of the following items:

Other Operating Expenses: Other operating expenses increased $7.7 million, to $11.5 million for the six months ended June 30, 2014. The reasons for the increase are the same as those described in the section above for the quarter ended June 30, 2014.

Foreclosure-related expenses : Expenses on foreclosed assets were relatively unchanged for the six months ended June 30, 2014, when compared to the six months ended June 30, 2013. The reasons for the level of expenses are the same as those described in the section above for the quarter ended June 30, 2014.

Valley acquisition expenses: The Company incurred approximately $605,000 of additional expenses during the six months ended June 30, 2014, related to the FDIC-assisted acquisition of Valley. The reasons for the level of expenses are the same as those described in the section above for the quarter ended June 30, 2014.

The Company’s efficiency ratio for the three months ended June 30, 2014, was 67.98% compared to 65.43% for the same period in 2013. The efficiency ratio for the six months ended June 30, 2014, was 67.37% compared to 61.28% for the same period in 2013. The increase in the ratio in the 2014 three and six month periods was primarily due to increases in non-interest expense, primarily due to the acquisition, foreclosed asset write-downs and the early repayment of certain borrowings previously described. There were partially offsetting increases in non-interest income resulting from the initial gain recognized on the Valley acquisition. The Company’s ratio of non-interest expense to average assets increased from 2.73% and 2.66% for the three and six months ended June 30, 2013, respectively, to 3.64% and 3.24% for the three and six months ended June 30, 2014, respectively. The increase in the current period ratios was primarily due to the increase in other operating expenses in the 2014 periods compared to the 2013 periods due to the penalties paid of $7.4 million for prepayment of borrowings and other non-interest expenses as discussed above. Average assets for the three months ended June 30, 2014 decreased $129 million, or 3.3%, from the three months ended June 30, 2013. Average assets for the six months ended June 30, 2014, decreased $232 million, or 5.9%, from the six months ended June 30, 2013. The decreases in average assets in the three and six month periods were primarily due to decreases in investment securities, interest earning deposits at the Federal Reserve Bank and FDIC indemnification assets, offset by increases in loans due to acquisitions and organic loan growth.

Provision for Income Taxes

In the three months ended March 31, 2014, the Company elected to early-adopt FASB ASU No. 2014-01, which amends FASB ASC Topic 323, Investments – Equity Method and Joint Ventures . This Update impacts the Company’s accounting for investments in flow-through limited liability entities which manage or invest in affordable housing projects that qualify for the low-income housing tax credit. The amendments in the Update permit reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit). The Company has significant investments in such qualified affordable housing projects that meet the required conditions. The Company’s adoption of this Update did not result in any material impact on the Company’s financial position or results of operations, except that the investment amortization expense, which previously was included in Other Non-interest Expense in the Consolidated Statements of Income, is now included in Provision for Income Taxes in the Consolidated Statements of Income presented. For the three and six months ended June 30, 2013, $905,000 and $1.9 million, respectively, was moved from Other Noninterest Expense to Provision for Income Taxes. As a result, there was no change in Net Income for the periods covered in this release. In addition, there was no cumulative effect adjustment to Retained Earnings.

For the six months ended June 30, 2014 and 2013, the Company's effective tax rate was 23.7% and 22.2%, respectively, which were both lower than the statutory federal tax rate of 35%, due primarily to the effects of the tax credits utilized and to tax-exempt investments and tax-exempt loans which reduced the Company’s effective tax rate. For the three months ended June 30, 2014 and 2013, the Company's effective tax rate was 25.0% and 21.3%, respectively. In future periods, the Company expects its effective tax rate typically will be 20-25% of pre-tax net income, assuming it continues to maintain or increase its use of investment tax credits. The Company’s effective tax rate may fluctuate as it is impacted by the level and timing of the Company’s utilization of tax credits and the level of tax-exempt investments and loans and the overall level of pretax income. At this time, the Company expects to utilize a larger amount of tax credits in 2014 than it did in 2013.

Average Balances, Interest Rates and Yields

The following table presents, for the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. Average balances of loans receivable include the average balances of non-accrual loans for each period. Interest income on loans includes interest received on non-accrual loans on a cash basis. Interest income on loans includes the amortization of net loan fees which were deferred in accordance with accounting standards. Fees included in interest income were $590,000 and $822,000 for the three months ended June 30, 2014 and 2013, respectively. Fees included in interest income were $1.2 million and $1.6 million for the six months ended June 30, 2014 and 2013, respectively. Tax-exempt income was not calculated on a tax equivalent basis. The table does not reflect any effect of income taxes.

	June 30, 2014 (2)			Three Months Ended June 30, 2014							Three Months Ended June 30, 2013
	Yield/ Rate			Average Balance			Interest		Yield/ Rate		Average Balance			Interest		Yield/ Rate
				(Dollars in thousands)
Interest-earning assets:
Loans receivable:
One- to four-family residential		4.79	%	$	456,554		$	10,236	8.99	%	$	479,566		$	7,859	6.57	%
Other residential		4.58			356,701			5,233	5.88			304,649			5,970	7.86
Commercial real estate		4.56			898,858			11,842	5.28			808,550			11,863	5.88
Construction		4.32			231,718			2,627	4.55			208,126			3,811	7.35
Commercial business		4.80			283,555			3,882	5.49			258,432			3,732	5.79
Other loans		5.64			365,441			6,947	7.63			288,170			5,463	7.60
Industrial revenue bonds (1)		5.50			46,762			645	5.53			50,503			664	5.27

Total loans receivable		4.86			2,639,589			41,412	6.29			2,397,996			39,362	6.58

Investment securities (1)		2.66			542,415			2,867	2.12			801,811			3,988	2.00
Other interest-earning assets		0.22			237,091			105	0.18			320,881			131	0.16

Total interest-earning assets		4.38			3,419,095			44,384	5.21			3,520,688			43,481	4.95
Non-interest-earning assets:
Cash and cash equivalents					88,038							85,306
Other non-earning assets					275,525							305,930
Total assets				$	3,782,658						$	3,911,924

Interest-bearing liabilities:
Interest-bearing demand and savings		0.20		$	1,468,150			806	0.22		$	1,604,920			973	0.24
Time deposits		0.80			990,641			1,946	0.79			1,084,494			2,290	0.85
Total deposits		0.45			2,458,791			2,752	0.45			2,689,414			3,263	0.49
Short-term borrowings and structured repurchase agreements		0.03			199,633			512	1.03			255,843			588	0.92
Subordinated debentures issued to capital trusts		1.79			30,929			139	1.80			30,929			140	1.82
FHLB advances		1.76			135,054			1,010	3.00			126,836			989	3.13

Total interest-bearing liabilities		0.49			2,824,407			4,413	0.63			3,103,022			4,980	0.64
Non-interest-bearing liabilities:
Demand deposits					541,222							406,674
Other liabilities					19,615							21,930
Total liabilities					3,385,244							3,531,626
Stockholders’ equity					397,414							380,298
Total liabilities and stockholders’ equity				$	3,782,658						$	3,911,924

Net interest income:
Interest rate spread		3.89%					$	39,971	4.58	%				$	38,501	4.31	%
Net interest margin*									4.69	%						4.39	%
Average interest-earning assets to average interest-bearing liabilities					121.1	%						113.5	%

_____________________

Defined as the Company’s net interest income divided by total interest-earning assets.

(1)		Of the total average balances of investment securities, average tax-exempt investment securities were $88.0 million and $78.6 million for the three months ended June 30, 2014 and 2013, respectively. In addition, average tax-exempt loans and industrial revenue bonds were $37.4 million and $38.6 million for the three months ended June 30, 2014 and 2013, respectively. Interest income on tax-exempt assets included in this table was $1.3 million and $1.2 million for the three months ended June 30, 2014 and 2013, respectively. Interest income net of disallowed interest expense related to tax-exempt assets was $1.3 million and $1.2 million for the three months ended June 30, 2014 and 2013, respectively.
(2)		The yield/rate on loans at June 30, 2014 does not include the impact of the accretable yield (income) on loans acquired in the FDIC-assisted transactions. See “Net Interest Income” for a discussion of the effect on results of operations for the three months ended June 30, 2014.

	June 30, 2014 (2)			Six Months Ended June 30, 2014							Six Months Ended June 30, 2013
	Yield/ Rate			Average Balance			Interest		Yield/ Rate		Average Balance			Interest		Yield/ Rate
				(Dollars in thousands)
Interest-earning assets:
Loans receivable:
One- to four-family residential		4.79	%	$	448,136		$	19,357	8.71	%	$	490,761		$	17,401	7.15	%
Other residential		4.58			356,293			10,550	5.97			311,531			12,195	7.89
Commercial real estate		4.56			884,700			23,722	5.41			796,587			25,031	6.34
Construction		4.32			221,454			5,232	4.76			207,956			8,219	7.97
Commercial business		4.80			277,331			7,466	5.43			248,885			7,269	5.89
Other loans		5.64			347,539			13,111	7.61			285,118			10,488	7.42
Industrial revenue bonds (1)		5.50			46,333			1,283	5.58			55,035			1,537	5.63

Total loans receivable		4.86			2,581,786			80,721	6.30			2,395,873			82,140	6.91

Investment securities (1)		2.66			550,525			5,775	2.12			811,528			8,471	2.10
Other interest-earning assets		0.22			228,448			183	0.16			347,300			226	0.13

Total interest-earning assets		4.38			3,360,759			86,679	5.20			3,554,701			90,837	5.15
Non-interest-earning assets:
Cash and cash equivalents					90,172							86,347
Other non-earning assets					272,729							314,765
Total assets				$	3,723,660						$	3,955,813

Interest-bearing liabilities:
Interest-bearing demand and savings		0.20		$	1,423,822			1,576	0.22		$	1,618,507			2,156	0.27
Time deposits		0.80			983,977			3,837	0.79			1,125,990			4,633	0.83
Total deposits		0.45			2,407,799			5,413	0.45			2,744,497			6,789	0.50
Short-term borrowings and structured repurchase agreements		0.03			204,416			1,069	1.06			257,909			1,170	0.92
Subordinated debentures issued to capital trusts		1.79			30,929			275	1.79			30,929			281	1.83
FHLB advances		1.76			130,779			1,984	3.06			126,716			1,963	3.12

Total interest-bearing liabilities		0.49			2,773,923			8,741	0.63			3,160,051			10,203	0.65
Non-interest-bearing liabilities:
Demand deposits					535,786							396,125
Other liabilities					20,846							21,449
Total liabilities					3,330,555							3,577,625
Stockholders’ equity					393,105							378,188
Total liabilities and stockholders’ equity				$	3,723,660						$	3,955,813

Net interest income:
Interest rate spread		3.89%					$	77,938	4.57	%				$	80,634	4.50	%
Net interest margin*									4.68	%						4.57	%
Average interest-earning assets to average interest-bearing liabilities					121.2	%						112.5	%

_____________________

Defined as the Company’s net interest income divided by total interest-earning assets.

(1)		Of the total average balances of investment securities, average tax-exempt investment securities were $88.6 million and $79.9 million for the six months ended June 30, 2014 and 2013, respectively. In addition, average tax-exempt loans and industrial revenue bonds were $37.0 million and $39.2 million for the six months ended June 30, 2014 and 2013, respectively. Interest income on tax-exempt assets included in this table was $2.6 million and $2.5 million for the six months ended June 30, 2014 and 2013, respectively. Interest income net of disallowed interest expense related to tax-exempt assets was $2.5 million and $2.4 million for the six months ended June 30, 2014 and 2013, respectively.
(2)		The yield/rate on loans at June 30, 2014 does not include the impact of the accretable yield (income) on loans acquired in the FDIC-assisted transactions. See “Net Interest Income” for a discussion of the effect on results of operations for the six months ended June 30, 2014.

Rate/Volume Analysis

The following tables present the dollar amounts of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities for the periods shown. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in rate (i.e., changes in rate multiplied by old volume) and (ii) changes in volume (i.e., changes in volume multiplied by old rate). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to volume and rate. Tax-exempt income was not calculated on a tax equivalent basis.

	Three Months Ended June 30,
	2014 vs. 2013
	Increase (Decrease) Due to

							Total Increase (Decrease)
	Rate			Volume			Total Increase (Decrease)
	(Dollars in thousands)
Interest-earning assets:
Loans receivable	$	(1,766	)	$	3,816		$	2,050
Investment securities		232			(1,353	)		(1,121	)
Other interest-earning assets		10			(36	)		(26	)
Total interest-earning assets		(1,524	)		2,427			903
Interest-bearing liabilities:
Demand deposits		(88	)		(79	)		(167	)
Time deposits		(153	)		(191	)		(344	)
Total deposits		(241	)		(270	)		(511	)
Short-term borrowings and structured repo		62			(138	)		(76	)
Subordinated debentures issued to capital trust		(1	)		—			(1	)
FHLBank advances		(41	)		62			21
Total interest-bearing liabilities		(221	)		(346	)		(567	)
Net interest income	$	(1,303	)	$	2,773		$	1,470

	Six Months Ended June 30,
	2014 vs. 2013
	Increase (Decrease) Due to

							Total Increase (Decrease)
	Rate			Volume			Total Increase (Decrease)
	(Dollars in thousands)
Interest-earning assets:
Loans receivable	$	(7,530	)	$	6,111		$	(1,419	)
Investment securities		42			(2,738	)		(2,696	)
Other interest-earning assets		45			(88	)		(43	)
Total interest-earning assets		(7,443	)		3,285			(4,158	)
Interest-bearing liabilities:
Demand deposits		(339	)		(241	)		(580	)
Time deposits		(233	)		(563	)		(796	)
Total deposits		(572	)		(804	)		(1,376	)
Short-term borrowings and structured repo		163			(264	)		(101	)
Subordinated debentures issued to capital trust		(6	)		—			(6	)
FHLBank advances		(38	)		59			21
Total interest-bearing liabilities		(453	)		(1,009	)		(1,462	)
Net interest income	$	(6,990	)	$	4,294		$	(2,696	)

Liquidity

Liquidity is a measure of the Company's ability to generate sufficient cash to meet present and future financial obligations in a timely manner through either the sale or maturity of existing assets or the acquisition of additional funds through liability management. These obligations include the credit needs of customers, funding deposit withdrawals, and the day-to-day operations of the Company. Liquid assets include cash, interest-bearing deposits with financial institutions and certain investment securities and loans. The Company manages its ability to generate liquidity primarily through liability funding in such a way that it believes it maintains overall liquidity sufficient to satisfy its depositors' requirements and meet its customers' credit needs. At June 30, 2014, the Company had commitments of approximately $161.6 million to fund loan originations, $400.6 million of unused lines of credit and unadvanced loans, and $23.9 million of outstanding letters of credit.

The Company's primary sources of funds are customer deposits, FHLBank advances, other borrowings, loan repayments, unpledged securities, proceeds from sales of loans and available-for-sale securities and funds provided from operations. The Company utilizes particular sources of funds based on the comparative costs and availability at the time. The Company has from time to time chosen not to pay rates on deposits as high as the rates paid by certain of its competitors and, when believed to be appropriate, supplements deposits with less expensive alternative sources of funds.

At June 30, 2014, the Company had these available secured lines and on-balance sheet liquidity:

Federal Home Loan Bank line	$587.3 million
Federal Reserve Bank line	$508.5 million
Cash and cash equivalents	$223.2 million
Unpledged securities	$71.3 million

Statements of Cash Flows . During both the six months ended June 30, 2014 and 2013, the Company had positive cash flows from operating activities and investing activities. Cash flows from financing activities were negative for both the six months ended June 30, 2014 and the six months ended June 30, 2013.

Cash flows from operating activities for the periods covered by the Statements of Cash Flows have been primarily related to changes in accrued and deferred assets, credits and other liabilities, the provision for loan losses, depreciation, impairments of investment securities, gains on sales of investment securities and the amortization of deferred loan origination fees and discounts (premiums) on loans and investments, all of which are non-cash or non-operating adjustments to operating cash flows. Net income adjusted for non-cash and non-operating items and the origination and sale of loans held for sale were the primary source of cash flows from operating activities. Operating activities provided cash flows of $24.5 million and $35.1 million during the six months ended June 30, 2014 and 2013, respectively.

During the six months ended June 30, 2014 and 2013, respectively, investing activities provided cash of $99.5 million and $54.1 million primarily due to the repayment of investment securities and sale of investment securities, partially offset by the net increase in loans for each of the six-month periods. In the 2014 period, the Company received cash of $80.0 million related to the Boulevard Bank transaction and $109.4 million related to the Valley Bank transaction.

Changes in cash flows from financing activities during the periods covered by the Statements of Cash Flows are due to changes in deposits after interest credited, changes in FHLBank advances, changes in short-term borrowings, and changes in structured repurchase agreements, as well as dividend payments to stockholders. Financing activities used cash of $128.7 million and $120.1 million during the six months ended June 30, 2014 and 2013, respectively. Financing activities in the future are expected to primarily include changes in deposits, changes in FHLBank advances, changes in short-term borrowings and dividend payments to stockholders.

Capital Resources

Management continuously reviews the capital position of the Company and the Bank to ensure compliance with minimum regulatory requirements, as well as to explore ways to increase capital either by retained earnings or other means.

At June 30, 2014, the Company's total stockholders' equity was $399.6 million, or 10.2% of total assets. At June 30, 2014, common stockholders' equity was $341.6 million, or 8.7% of total assets, equivalent to a book value of $24.96 per common share. Total stockholders’ equity at December 31, 2013, was $380.7 million, or 10.7%, of total assets. At December 31, 2013, common stockholders' equity was $322.8 million, or 9.1% of total assets, equivalent to a book value of $23.60 per common share.

At June 30, 2014, the Company’s tangible common equity to total assets ratio was 8.5%, compared to 8.9% at December 31, 2013. The Company’s tangible common equity to total risk-weighted assets ratio was 11.4% at June 30, 2014, compared to 12.3% at December 31, 2013.

Banks are required to maintain minimum risk-based capital ratios. These ratios compare capital, as defined by the risk-based regulations, to assets adjusted for their relative risk as defined by the regulations. Guidelines require banks to have a minimum Tier 1 risk-based capital ratio, as defined, of 4.00%, a minimum total risk-based capital ratio of 8.00%, and a minimum 4.00% Tier 1 leverage ratio. To be considered "well capitalized," banks must have a minimum Tier 1 risk-based capital ratio, as defined, of 6.00%, a minimum total risk-based capital ratio of 10.00%, and a minimum Tier 1 leverage ratio of 5.00%. On June 30, 2014, the Bank's Tier 1 risk-based capital ratio was 12.5%, total risk-based capital ratio was 13.8% and the Tier 1 leverage ratio was 9.7%. As of June 30, 2014, the Bank was "well capitalized" as defined by the Federal banking agencies' capital-related regulations. The Federal Reserve Board has established capital regulations for bank holding companies that generally parallel the capital regulations for banks. On June 30, 2014, the Company's Tier 1 risk-based capital ratio was 14.2%, total risk-based capital ratio was 15.4% and the Tier 1 leverage ratio was 11.0%. As of June 30, 2014, the Company was "well capitalized" under the capital ratios described above. These ratios are the current capital requirements. As discussed above in “Effect of Federal Laws and Regulations”, the Company and the Bank will be subject to new capital requirements due to the changes from “Basel III”, for which the provisions become effective beginning January 1, 2015.

On August 18, 2011, the Company entered into a Small Business Lending Fund-Securities Purchase Agreement (“Purchase Agreement”) with the Secretary of the Treasury, pursuant to which the Company sold 57,943 shares of the Company’s Senior Non-Cumulative Perpetual Preferred Stock, Series A (the “SBLF Preferred Stock”), to the Secretary of the Treasury for a purchase price of $57,943,000. The SBLF Preferred Stock was issued pursuant to Treasury’s SBLF program, a $30 billion fund established under the Small Business Jobs Act of 2010 that was created to encourage lending to small businesses by providing Tier 1 capital to qualified community banks and holding companies with assets of less than $10 billion. As required by the Purchase Agreement, the proceeds from the sale of the SBLF Preferred Stock were used to redeem the 58,000 shares of preferred stock, previously issued to the Treasury pursuant to the TARP Capital Purchase Program (the "CPP"), at a redemption price of $58.0 million plus the accrued dividends owed on the preferred shares.

The SBLF Preferred Stock qualifies as Tier 1 capital. The holder of the SBLF Preferred Stock is entitled to receive non-cumulative dividends, payable quarterly, on each January 1, April 1, July 1 and October 1. The dividend rate, as a percentage of the liquidation amount, can fluctuate between one percent (1%) and five percent (5%) per annum on a quarterly basis during the first 10 quarters during which the SBLF Preferred Stock is outstanding, based upon changes in the level of “Qualified Small Business Lending” or “QSBL” (as defined in the Purchase Agreement) by the Bank over the adjusted baseline level calculated under the terms of the SBLF Preferred Stock ($201.4 million). Based upon the increase in the Bank’s level of QSBL over the adjusted baseline level, the dividend rate has been 1.0%. For the tenth calendar quarter through four and one half years after issuance, the dividend rate will be fixed at between one percent (1%) and seven percent (7%) based upon the level of qualifying loans. The Company has now reached the tenth calendar quarter and the dividend rate will be 1.0% until four and one half years after the issuance, which is March 2016. After four and one half years from issuance, the dividend rate will increase to 9% (including a quarterly lending incentive fee of 0.5%).

The SBLF Preferred Stock is non-voting, except in limited circumstances. In the event that the Company misses five dividend payments, whether or not consecutive, the holder of the SBLF Preferred Stock will have the right, but not the obligation, to appoint a representative as an observer on the Company’s Board of Directors. In the event that the Company misses six dividend payments, whether or not consecutive, and if the then outstanding aggregate liquidation amount of the SBLF Preferred Stock is at least $25,000,000, then the holder of the SBLF Preferred Stock will have the right to designate two directors to the Board of Directors of the Company.

The SBLF Preferred Stock may be redeemed at any time at the Company’s option, at a redemption price of 100% of the liquidation amount plus accrued but unpaid dividends to the date of redemption for the current period, subject to the approval of its federal banking regulator.

Dividends . During the three months ended June 30, 2014, the Company declared a common stock cash dividend of $0.20 per share, or 25% of net income per diluted common share for that three month period, and paid a common stock cash dividend of $0.20 per share (which was declared in March 2014). During the three months ended June 30, 2013, the Company declared a common stock cash dividend of $0.18 per share, or 31% of net income per diluted common share for that three month period, and paid a common stock cash dividend of $0.18 per share (which was declared in March 2013). During the six months ended June 30, 2014, the Company declared a common stock cash dividend of $0.40 per share, or 28% of net income per diluted common share for that six month period, and paid a common stock cash dividend of $0.38 per share. During the six months ended June 30, 2013, the Company declared a common stock cash dividend of $0.36 per share, or 30% of net income per diluted common share for that six month period, and paid a common stock cash dividend of $0.18 per share. The Board of Directors meets regularly to consider the level and the timing of dividend payments. The $0.20 per share dividend declared but unpaid as of June 30, 2014, was paid to stockholders on July 11, 2014. In addition, the Company paid preferred dividends as described below.

The terms of the SBLF Preferred Stock impose limits on the ability of the Company to pay dividends and repurchase shares of common stock. Under the terms of the SBLF Preferred Stock, no repurchases may be effected, and no dividends may be declared or paid on preferred shares ranking pari passu with the SBLF Preferred Stock, junior preferred shares, or other junior securities (including the common stock) during the current quarter and for the next three quarters following the failure to declare and pay dividends on the SBLF Preferred Stock, except that, in any such quarter in which the dividend is paid, dividend payments on shares ranking pari passu may be paid to the extent necessary to avoid any resulting material covenant breach.

Under the terms of the SBLF Preferred Stock, the Company may only declare and pay a dividend on the common stock or other stock junior to the SBLF Preferred Stock, or repurchase shares of any such class or series of stock, if, after payment of such dividend, or after giving effect to such repurchase, (i) the dollar amount of the Company’s Tier 1 Capital would be at least equal to the “Tier 1 Dividend Threshold” and (ii) full dividends on all outstanding shares of SBLF Preferred Stock for the most recently completed dividend period have been or are contemporaneously declared and paid. As of June 30, 2014, we satisfied this condition.

The “Tier 1 Dividend Threshold” means 90% of $272.7 million, which was the Company’s consolidated Tier 1 capital as of June 30, 2011, less the $58 million in TARP preferred stock then-outstanding and repaid on August 18, 2011, plus the $58 million in SBLF Preferred Stock issued and minus the net loan charge-offs by the Bank since August 18, 2011. The Tier 1 Dividend Threshold is subject to reduction, beginning on the first day of the eleventh dividend period following the date of issuance of the SBLF Preferred Stock, by $5.8 million (ten percent of the aggregate liquidation amount of the SBLF Preferred Stock initially issued, without regard to any subsequent partial redemptions) for each one percent increase in qualified small business lending from the adjusted baseline level under the terms of the SBLF preferred stock (i.e., $249.7 million) to the ninth dividend period.

Common Stock Repurchases and Issuances . The Company has been in various buy-back programs since May 1990. Our ability to repurchase common stock is currently limited, but allowed, under the terms of the SBLF preferred stock as noted above, under “-Dividends” and was previously generally precluded due to our participation in the CPP beginning in December 2008. During the three months ended June 30, 2014, the Company repurchased 17,000 shares of its common stock at an average price of $28.30 per share. During the three months ended June 30, 2013, the Company did not repurchase any shares of its common stock. During the six months ended June 30, 2014, the Company repurchased 17,000 shares of its common stock at an average price of $28.30 per share. During the six months ended June 30, 2013, the Company did not repurchase any shares of its common stock. During the three months ended June 30, 2014, the Company issued 10,085 shares of stock at an average price of $23.49 per share to cover stock option exercises. During the three months ended June 30, 2013, the Company issued 10,933 shares of stock at an average price of $19.48 per share to cover stock option exercises. During the six months ended June 30, 2014, the Company issued 27,971 shares of stock at an average price of $20.69 per share to cover stock option exercises. During the six months ended June 30, 2013, the Company issued 27,444 shares of stock at an average price of $18.86 per share to cover stock option exercises.

Management has historically utilized stock buy-back programs from time to time as long as management believed that repurchasing the stock would contribute to the overall growth of shareholder value. The number of shares of stock that will be repurchased at any particular time and the prices that will be paid are subject to many factors, several of which are outside of the control of the Company. The primary factors, however, are the number of shares available in the market from sellers at any given time, the price of the stock within the market as determined by the market and the projected impact on the Company’s earnings per share and capital.

Great Southern also announced that it will consider repurchasing its shares of common stock, from time to time in the open market or through privately negotiated transactions, pursuant to its existing repurchase plan. There are 379,562 remaining shares authorized to be repurchased under this plan.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Asset and Liability Management and Market Risk

A principal operating objective of the Company is to produce stable earnings by achieving a favorable interest rate spread that can be sustained during fluctuations in prevailing interest rates. The Company has sought to reduce its exposure to adverse changes in interest rates by attempting to achieve a closer match between the periods in which its interest-bearing liabilities and interest-earning assets can be expected to reprice through the origination of adjustable-rate mortgages and loans with shorter terms to maturity and the purchase of other shorter term interest-earning assets.

Our Risk When Interest Rates Change

The rates of interest we earn on assets and pay on liabilities generally are established contractually for a period of time. Market interest rates change over time. Accordingly, our results of operations, like those of other financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of our assets and liabilities. The risk associated with changes in interest rates and our ability to adapt to these changes is known as interest rate risk and is our most significant market risk.

How We Measure the Risk to Us Associated with Interest Rate Changes

In an attempt to manage our exposure to changes in interest rates and comply with applicable regulations, we monitor Great Southern's interest rate risk. In monitoring interest rate risk we regularly analyze and manage assets and liabilities based on their payment streams and interest rates, the timing of their maturities and their sensitivity to actual or potential changes in market interest rates.

The ability to maximize net interest income is largely dependent upon the achievement of a positive interest rate spread that can be sustained despite fluctuations in prevailing interest rates. Interest rate sensitivity is a measure of the difference between amounts of interest-earning assets and interest-bearing liabilities which either reprice or mature within a given period of time. The difference, or the interest rate repricing "gap," provides an indication of the extent to which an institution's interest rate spread will be affected by changes in interest rates. A gap is considered positive when the amount of interest-rate sensitive assets exceeds the amount of interest-rate sensitive liabilities repricing during the same period, and is considered negative when the amount of interest-rate sensitive liabilities exceeds the amount of interest-rate sensitive assets during the same period. Generally, during a period of rising interest rates, a negative gap within shorter repricing periods would adversely affect net interest income, while a positive gap within shorter repricing periods would result in an increase in net interest income. During a period of falling interest rates, the opposite would be true. As of June 30, 2014, Great Southern's internal interest rate risk models indicate that, generally, rising interest rates are expected to have a positive impact on the Company’s net interest income, while declining interest rates would have a negative impact on net interest income. We model various interest rate scenarios for rising and falling rates, including both parallel and non-parallel shifts in rates. The results of our modeling indicate that net interest income is not likely to be materially affected either positively or negatively in the first twelve months following a rate change, regardless of any changes in interest rates, because our portfolios are relatively well matched in a twelve-month horizon. The effects of interest rate changes, if any, are expected to be more impacting to net interest income in the 12 to 36 months following a rate change. In June 2014, $130 million of fixed rate borrowings were repaid. Excess liquidity and proceeds from the sale of certain investment securities were used to fund these repayments. The results of our net interest income modeling were not materially affected by these transactions. As the Federal Funds rate is now very low, the Company’s interest

rate floors have been reached on most of its “prime rate” loans. As discussed under “- General-Net Interest Income and Interest Rate Risk Management ,” at June 30, 2014 and December 31, 2013, there were $467 million and $502 million, respectively, of adjustable rate loans which were tied to a national prime rate of interest which had interest rate floors. In addition, Great Southern has elected to leave its “Great Southern Prime Rate” at 5.00% for those loans that are indexed to “Great Southern Prime” rather than a national prime rate of interest. At June 30, 2014 and December 31, 2013, there were $221 million and $248 million, respectively, of loans indexed to “Great Southern Prime.” While these interest rate floors and, to a lesser extent, the utilization of the “Great Southern Prime” rate have helped keep the rate on our loan portfolio higher in this very low interest rate environment, they will also reduce the positive effect to our loan rates when market interest rates, specifically the “prime rate,” begin to increase. The interest rate on these loans will not increase until the loan floors are reached. Also, a significant portion of our retail certificates of deposit mature in the next twelve months and we expect that they will be replaced with new certificates of deposit at somewhat lower interest rates.

Interest rate risk exposure estimates (the sensitivity gap) are not exact measures of an institution's actual interest rate risk. They are only indicators of interest rate risk exposure produced in a simplified modeling environment designed to allow management to gauge the Bank's sensitivity to changes in interest rates. They do not necessarily indicate the impact of general interest rate movements on the Bank's net interest income because the repricing of certain categories of assets and liabilities is subject to competitive and other factors beyond the Bank's control. As a result, certain assets and liabilities indicated as maturing or otherwise repricing within a stated period may in fact mature or reprice at different times and in different amounts and cause a change, which potentially could be material, in the Bank's interest rate risk.

In order to minimize the potential for adverse effects of material and prolonged increases and decreases in interest rates on Great Southern's results of operations, Great Southern has adopted asset and liability management policies to better match the maturities and repricing terms of Great Southern's interest-earning assets and interest-bearing liabilities. Management recommends and the Board of Directors sets the asset and liability policies of Great Southern which are implemented by the asset and liability committee. The asset and liability committee is chaired by the Chief Financial Officer and is comprised of members of Great Southern's senior management. The purpose of the asset and liability committee is to communicate, coordinate and control asset/liability management consistent with Great Southern's business plan and board-approved policies. The asset and liability committee establishes and monitors the volume and mix of assets and funding sources taking into account relative costs and spreads, interest rate sensitivity and liquidity needs. The objectives are to manage assets and funding sources to produce results that are consistent with liquidity, capital adequacy, growth, risk and profitability goals. The asset and liability committee meets on a monthly basis to review, among other things, economic conditions and interest rate outlook, current and projected liquidity needs and capital positions and anticipated changes in the volume and mix of assets and liabilities. At each meeting, the asset and liability committee recommends appropriate strategy changes based on this review. The Chief Financial Officer or his designee is responsible for reviewing and reporting on the effects of the policy implementations and strategies to the Board of Directors at their monthly meetings.

In order to manage its assets and liabilities and achieve the desired liquidity, credit quality, interest rate risk, profitability and capital targets, Great Southern has focused its strategies on originating adjustable rate loans, and managing its deposits and borrowings to establish stable relationships with both retail customers and wholesale funding sources.

At times, depending on the level of general interest rates, the relationship between long- and short-term interest rates, market conditions and competitive factors, we may determine to increase our interest rate risk position somewhat in order to maintain or increase our net interest margin.

The asset and liability committee regularly reviews interest rate risk by forecasting the impact of alternative interest rate environments on net interest income and market value of portfolio equity, which is defined as the net present value of an institution's existing assets, liabilities and off-balance sheet instruments, and evaluating such impacts against the maximum potential changes in net interest income and market value of portfolio equity that are authorized by the Board of Directors of Great Southern.

In the normal course of business, the Company may use derivative financial instruments (primarily interest rate swaps) from time to time to assist in its interest rate risk management. In the fourth quarter of 2011, the Company began executing interest rate swaps with commercial banking customers to facilitate their respective risk management

strategies. Those interest rate swaps are simultaneously hedged by offsetting interest rate swaps that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. Because the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. These interest rate derivatives result from a service provided to certain qualifying customers and, therefore, are not used to manage interest rate risk in the Company’s assets or liabilities. The Company manages a matched book with respect to its derivative instruments in order to minimize its net risk exposure resulting from such transactions.

In 2013, the Company entered into two interest rate cap agreements related to its floating rate debt associated with its trust preferred securities. The agreements provide that the counterparty will reimburse the Company if interest rates rise above a certain threshold, thus creating a cap on the effective interest rate paid by the Company. These agreements are classified as hedging instruments, and the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

For further information on derivatives and hedging activities, see Note 15 of the Notes to Consolidated Financial Statements contained in this report.

ITEM 4. CONTROLS AND PROCEDURES

We maintain a system of disclosure controls and procedures (as defined in Rule 13(a)-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")) that is designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file under the Exchange Act is recorded, processed, summarized and reported accurately and within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate. An evaluation of our disclosure controls and procedures was carried out as of June 30, 2014, under the supervision and with the participation of our principal executive officer, principal financial officer and several other members of our senior management. Our principal executive officer and principal financial officer concluded that, as of June 30, 2014, our disclosure controls and procedures were effective in ensuring that the information we are required to disclose in the reports we file or submit under the Act is (i) accumulated and communicated to our management (including the principal executive officer and principal financial officer) to allow timely decisions regarding required disclosure, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.

There were no changes in our internal control over financial reporting (as defined in Rule 13(a)-15(f) under the Act) that occurred during the quarter ended June 30, 2014, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We do not expect that our internal control over financial reporting will prevent all errors and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns in controls or procedures can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

In the normal course of business, the Company and its subsidiaries are subject to pending and threatened legal actions, some of which seek substantial relief or damages. While the ultimate outcome of such legal proceedings cannot be predicted with certainty, after reviewing pending and threatened litigation with counsel, management believes at this time that, except as noted below, the outcome of such litigation will not have a material adverse effect on the Company’s business, financial condition or results of operations.

On November 22, 2010, a suit was filed against the Bank in Missouri state court in Springfield by a customer alleging that the fees associated with the Bank’s automated overdraft program in connection with its debit card and ATM cards constitute unlawful interest in violation of Missouri’s usury laws. The suit seeks class-action status for Bank customers who have paid overdraft fees on their checking accounts. The Court denied a motion to dismiss filed by the Bank and litigation is ongoing. At this stage of the litigation, it is not possible for management of the Bank to determine the probability of a material adverse outcome or reasonably estimate the amount of any potential loss.

Item 1A. Risk Factors

There have been no material changes to the risk factors set forth in Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2013.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On November 15, 2006, the Company's Board of Directors authorized management to repurchase up to 700,000 shares of the Company's outstanding common stock, under a program of open market purchases or privately negotiated transactions. The plan does not have an expiration date. From the date we issued our CPP Preferred Stock (December 5, 2008) until the date we redeemed it in connection with our issuance of the SBLF Preferred Stock (August 18, 2011), we were generally precluded from purchasing shares of the Company’s stock without the Treasury's consent. Our participation in the SBLF program does not preclude us from purchasing shares of the Company’s stock, provided that after giving effect to such purchase, (i) the dollar amount of the Company’s Tier 1 capital would be at least equal to the “Tier 1 Dividend Threshold” under the terms of the SBLF Preferred Stock and (ii) full dividends on all outstanding shares of SBLF Preferred Stock for the most recently completed dividend period have been or are contemporaneously declared and paid, as described under “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources.”

Shares purchased during the three months ended June 30, 2014, are indicated below.

	Total Number of Shares Purchased		Average Price Per Share		Total Number of Shares Purchased As Part of Publicly Announced Plan		Maximum Number of Shares that May Yet Be Purchased Under the Plan(1)

April 1, 2014 – April 30, 2014		---	$	----		---		396,562
May 1, 2014 – May 31, 2014		17,000	$	28.30		17,000		379,562
June 1, 2014 – June 30, 2014		---	$	----		---		379,562
		17,000	$	----		17,000

_______________________
(1)	Amount represents the number of shares available to be repurchased under the November 2006 plan as of the last calendar day of the month shown.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None.

Item 6. Exhibits and Financial Statement Schedules

	a)	Exhibits
		See Exhibit Index.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Great Southern Bancorp, Inc.
	Registrant
Date: August 11, 2014	/s/ Joseph W. Turner
	Joseph W. Turner President and Chief Executive Officer (Principal Executive Officer)
Date: August 11, 2014	/s/ Rex A. Copeland
	Rex A. Copeland Treasurer (Principal Financial and Accounting Officer)

EXHIBIT INDEX

Exhibit No.	Description

(2)	Plan of acquisition, reorganization, arrangement, liquidation, or succession

	(i)	The Purchase and Assumption Agreement, dated as of March 20, 2009, among Federal Deposit Insurance Corporation, Receiver of TeamBank, N.A., Paola, Kansas, Federal Deposit Insurance Corporation and Great Southern Bank, previously filed with the Commission (File no. 000-18082) as Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed on March 26, 2009 is incorporated herein by reference as Exhibit 2.1(i).

	(ii)	The Purchase and Assumption Agreement, dated as of September 4, 2009, among Federal Deposit Insurance Corporation, Receiver of Vantus Bank, Sioux City, Iowa, Federal Deposit Insurance Corporation and Great Southern Bank, previously filed with the Commission (File no. 000-18082) as Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed on September 9, 2009 is incorporated herein by reference as Exhibit 2.1(ii).

	(iii)	The Purchase and Assumption Agreement, dated as of October 7, 2011, among Federal Deposit Insurance Corporation, Receiver of Sun Security Bank, Ellington, Missouri, Federal Deposit Insurance Corporation and Great Southern Bank , previously filed with the Commission (File no. 000-18082) as Exhibit 2.1(iii) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 is incorporated herein by reference as Exhibit 2(iii).

	(iv)	The Purchase and Assumption Agreement, dated as of April 27, 2012, among Federal Deposit Insurance Corporation, Receiver of Inter Savings Bank, FSB, Maple Grove, Minnesota, Federal Deposit Insurance Corporation and Great Southern Bank, previously filed with the Commission (File no. 000-18082) as Exhibit 2.1(iv) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 is incorporated herein by reference as Exhibit 2(iv)

	(v)	The Purchase and Assumption Agreement All Deposits, dated as of June 20, 2014, among Federal Deposit Insurance Corporation, Receiver of Valley Bank, Moline, Illinois, Federal Deposit Insurance Corporation and Great Southern Bank

(3)	Articles of incorporation and Bylaws

	(i)	The Registrant's Charter previously filed with the Commission as Appendix D to the Registrant's Definitive Proxy Statement on Schedule 14A filed on March 31, 2004 (File No. 000-18082), is incorporated herein by reference as Exhibit 3.1.

	(iA)	The Articles Supplementary to the Registrant's Charter setting forth the terms of the Registrant's Senior Non-Cumulative Perpetual Preferred Stock, Series A, previously filed with the Commission (File no. 000-18082) as Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed on August 18, 2011, are incorporated herein by reference as Exhibit 3(i).

	(ii)	The Registrant's Bylaws, previously filed with the Commission (File no. 000-18082) as Exhibit 3(ii) to the Registrant's Current Report on Form 8-K filed on October 23, 2007, is incorporated herein by reference as Exhibit 3.2.

(4)	Instruments defining the rights of security holders, including indentures

	The Company hereby agrees to furnish the SEC upon request, copies of the instruments defining the rights of the holders of each issue of the Registrant's long-term debt.

(9)	Voting trust agreement

	Inapplicable.

(10)	Material contracts

	The Registrant's 1997 Stock Option and Incentive Plan previously filed with the Commission (File no. 000-18082) as Annex A to the Registrant's Definitive Proxy Statement on Schedule 14A filed on September 18, 1997 is incorporated herein by reference as Exhibit 10.1. The Registrant's 2003 Stock Option and Incentive Plan previously filed with the Commission (File No. 000-18082) as Annex A to the Registrant's Definitive Proxy Statement on Schedule 14A filed on April 14, 2003, is incorporated herein by reference as Exhibit 10.2. The employment agreement dated September 18, 2002 between the Registrant and William V. Turner previously filed with the Commission (File no. 000-18082) as Exhibit 10.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2003, is incorporated herein by reference as Exhibit 10.3. The employment agreement dated September 18, 2002 between the Registrant and Joseph W. Turner previously filed with the Commission (File no. 000-18082) as Exhibit 10.4 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2003, is incorporated herein by reference as Exhibit 10.4. The form of incentive stock option agreement under the Registrant's 2003 Stock Option and Incentive Plan previously filed with the Commission as Exhibit 10.1 to the Registrant's Current Report on Form 8-K (File no. 000-18082) filed on February 24, 2005 is incorporated herein by reference as Exhibit 10.5. The form of non-qualified stock option agreement under the Registrant's 2003 Stock Option and Incentive Plan previously filed with the Commission as Exhibit 10.2 to the Registrant's Current Report on Form 8-K (File no. 000-18082) filed on February 24, 2005 is incorporated herein by reference as Exhibit 10.6. A description of the current salary and bonus arrangements for 2014 for the Registrant's named executive officers previously filed with the Commission as Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2013 is incorporated herein by reference as Exhibit 10.7. A description of the current fee arrangements for the Registrant's directors previously filed with the Commission as Exhibit 10.8 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2013 is incorporated herein by reference as Exhibit 10.8. Small Business Lending Fund – Securities Purchase Agreement, dated August 18, 2011, between the Registrant and the Secretary of the United States Department of the Treasury, previously filed with the Commission as Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on August 18, 2011, is incorporated herein by reference as Exhibit 10.9. The Registrant's 2013 Equity Incentive Plan previously filed with the Commission (File No. 000-18082) as Annex A to the Registrant's Definitive Proxy Statement on Schedule 14A filed on April 4, 2013, is incorporated herein by reference as Exhibit 10.10. The form of incentive stock option award agreement under the Registrant's 2013 Equity Incentive Plan previously filed with the Commission as Exhibit 10.2 to the Registrant's Registration Statement on Form S-8 (File no. 333-189497) filed on June 20, 2013 is incorporated herein by reference as Exhibit 10.11. The form of non-qualified stock option award agreement under the Registrant's 2013 Equity Incentive Plan previously filed with the Commission as Exhibit 10.3 to the Registrant's Registration Statement on Form S-8 (File no. 333-189497) filed on June 20, 2013 is incorporated herein by reference as Exhibit 10.12.

	The form of stock appreciation right award agreement under the Registrant's 2013 Equity Incentive Plan previously filed with the Commission as Exhibit 10.4 to the Registrant's Registration Statement on Form S-8 (File no. 333-189497) filed on June 20, 2013 is incorporated herein by reference as Exhibit 10.13.

	The form of restricted stock award agreement under the Registrant's 2013 Equity Incentive Plan previously filed with the Commission as Exhibit 10.5 to the Registrant's Registration Statement on Form S-8 (File no. 333-189497) filed on June 20, 2013 is incorporated herein by reference as Exhibit 10.14.

(11)	Statement re computation of per share earnings

	Included in Note 5 to the Consolidated Financial Statements.

(15)	Letter re unaudited interim financial information

	Inapplicable.

(18)	Letter re change in accounting principles

	Inapplicable.

(19)	Report furnished to securityholders.

	Inapplicable.

(22)	Published report regarding matters submitted to vote of security holders

	Inapplicable.

(23)	Consents of experts and counsel

	Inapplicable.

(24)	Power of attorney

	None.

(31.1)	Rule 13a-14(a) Certification of Chief Executive Officer

	Attached as Exhibit 31.1

(31.2)	Rule 13a-14(a) Certification of Treasurer

	Attached as Exhibit 31.2

(32)	Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)

	Attached as Exhibit 32.

(99)	Additional Exhibits

	None.

(101)	Attached as Exhibit 101 are the following financial statements from the Great Southern Bancorp, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, formatted in Extensive Business Reporting Language (XBRL): (i) consolidated statements of financial condition, (ii) consolidated statements of income, (iii) consolidated statements of cash flows and (iv) the notes to consolidated financial statements.

PURCHASE AND ASSUMPTION AGREEMENT

ALL DEPOSITS

AMONG

FEDERAL DEPOSIT INSURANCE CORPORATION,

RECEIVER OF VALLEY BANK,

MOLINE, ILLINOIS

FEDERAL . DEPOSIT INSURANCE. CORPORATION

AND

GREAT SOUTHERN BANK,

REEDS SPRING, MISSOURI

DATED AS OF

JUNE 20, 2014

PURCHASE AND ASSUMPTION AGREEMENT

TABLE OF CONTENTS

			6.1	Transfer of Records	33
			6.2	Transfer of Assigned Records	34
ARTICLE I. GENERAL		1	6.3	Preservation of Records	34
			6.4	Access to Records; Copies	34
1.1	Purpose	1	6.5	Right of Receiver or Corporation to Audit	35
1.2	Reserved	1	6.6	Agreement with Respect to Records of Valley
1.3	Defined Terms	2		Bank, Fort Lauderdale, Florida	35

ARTICLE II. ASSUMPTION OF LIABILITIES		10	ARTICLE VII. BID; INITIAL PAYMENT		35

2.1	Liabilities Assumed by Assuming Institution	10	ARTICLE VIII.. ADJUSTMENTS		35
2.2	Interest on Deposit Liabilities	12
2.3	Unclaimed Deposits	12	8.1	Pro Forma Statement	35
2.4	Employee Plans	13	8.2	Correction of Errors and Omissions; Other
				Liabilities	36
ARTICLE HI. PURCHASE OF ASSETS		13	8.3	Payments	36
			8.4	Interest	36
3.1	Assets Purchased by the Assuming Institution	13	8.5	Subsequent Adjustments	36
3.2	Asset Purchase Price	14
3.3	Manner of Conveyance; Limited Warranty;		ARTICLE IX. CONTINUING COOPERATION		37
	Nonrecourse; Etc.	15
3.4	Puts of Assets to the Receiver	16	9.1	General Matters	37
3.5	Assets Not Purchased by Assuming Institution	18	9.2	Additional Title Documents	37
3.6	Retention or Repurchase of Assets Essential to		9.3	Claims and Suits	37
	Receiver	20	9.4	Payment of Deposits	37
3.7	Receiver's Offer to Sell Withheld Loans	21	9.5	Withheld Payments	38
			9.6	Proceedings with Respect to Certain Assets and
ARTICLE IV, ASSUMPTION OF CERTAIN DUTIES				Liabilities	38
AND OBLIGATIONS		21	9.7	Information	39
			9.8	Tax Ruling	39
4.1	Continuation of Banking Business	21
4.2	Credit Card Business	22	ARTICLE X. CONDITION. PRECEDENT		39
4.3	Safe. Deposit Business	22
4.4	Safekeeping Business	22	ARTICLE XI. REPRESENTATIONS AND
4.5	Trust Business	22	WARRANTIES. OF THE ASSUMING. INSTITUTION		39
4.6	Bank Premises	23
4.7	Agreement with Respect to. Leased Data		11.1	Corporate Existence and Authority	39
	Management Equipment	27	11.2	Third Party Consent	39
4.8	Certain Existing Agreements	28	11.3	Execution and Enforceability	40
4.9	Informational Tax Reporting	29	11.4	Compliance with Law	40
4.10	Insurance	29	11.5	Insured or Guaranteed Loans	40
4.11	Office Space for Receiver and Corporation; Certain		11.6	Representations. Remain True	40
	Payments	29
4.12	Continuation of Group Health Plan Coverage for		11.7	No Reliance; Independent Advice	41
	Former Employees of the Failed Bank	30
4.13	Interim Asset Servicing	32	ARTICLE XII INDEMNIFICATION		41
4.14	Agreement with Respect to Valley. Bank, Fort
	Lauderdale, Florida	32	12,1	Indemnification of Indemnitees	41
			12.2	Conditions Precedent to Indemnification	44
ARTICLE V. DUTIES WITH RESPECT TO			12.3	No Additional Warranty	44
DEPOSITORS OF THE FAILED BANK		32	12.4	Indemnification of Receiver and Corporation	45
			12.5	Obligations Supplemental	45
5.1	Payment of Checks, Drafts, Orders and Deposits	32	12.6	Criminal Claims	45
5.2	Certain Agreements Related to. Deposits	32	12.7	Limited Guaranty of the Corporation	46
5.3	Notice to Depositors	32	12.8	Subrogation	46

ARTICLE VI.. RECORDS		33	ARTICLE XIII. MISCELLANEOUS		46

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L


13.1	Expenses	46	13.9	Governing Law	48
13.2.	Waiver of Jury Trial	46	13.10	Successors	48
13.3.	Consent; Determination or Discretion	46	13.11	Modification	48
13.4	Rights Cumulative	46	13.12	Manner of Payment	48
13.5	References	47	13.13	Waiver	49
13.6	Notice	47.	13.14	Severability	49
13.7	Entire Agreement	48.	13.15	Term of Agreement	49
13.8	Counterparts	48.	13.16	Survival of Covenants, Etc.	49

SCHEDULES ..

		Page
Excluded Deposit Liability Accounts	Schedule 2.1(a)	51
Acquired Subsidiaries	Schedule 3.1(h)	52
Acquired Assets in Optional Loan Pools	Schedule 3.1(n)	53
Other Real Estate	Schedule 3.1(o)	90
Purchase Price of Acquired Assets	Schedule 3.2	91
Excluded Securities	Schedule 3.5(1)	93
Excluded Assets and liabilities	Schedule 3.5(u).	95
Bank Premises in Underserved Areas	Schedule 4.1(b).	96
Data Retention Catalog	Schedule 6.3	97
Accounts Excluded from Calculation of Deposit Franchise Bid Premium	Schedule 7	99

EXHIBITS .

		Page
Final Legal Notice	Exhibit 2.3A	124
Affidavit of Mailing	Exhibit 2.3B	126
Valuation of Certain Qualified Financial Contracts	Exhibit 3.2(c)	127
Interim Asset Servicing Arrangement	Exhibit 4.13	129

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

iii

PURCHASE AND ASSUMPTION AGREEMENT

ALL DEPOSITS

THIS AGREEMENT, made and entered into as of the 20th day of June, 2014, by and among the FEDERAL DEPOSIT. INSURANCE CORPORATION, RECEIVER of VALLEY BANK, MOLINE, ILLINOIS (the "Receiver"), GREAT SOUTHERN BANK, organized under the laws of the State of Missouri, and having its principal place of business in REEDS SPRING, MISSOURI (the "Assuming Institution"), and the FEDERAL DEPOSIT INSURANCE CORPORATION, organized under the laws of the United. States of America and having its principal office in Washington, D.C., acting in its corporate capacity (the "Corporation").

RECITALS

A. On the Bank Closing Date, the Chartering Authority closed VALLEY BANK (the "Failed Bank") pursuant to applicable law and the Corporation was appointed Receiver thereof.

B. The Assuming Institution desires to purchase certain assets and assume certain deposits and other liabilities of the Failed. Bank on the terms and conditions set forth in this Agreement.

C. Pursuant to 12 U.S.C. § 1823(c)(2)(A), the Corporation may provide assistance to the Assuming Institution to facilitate the transactions contemplated by this Agreement, which assistance may include indemnification pursuant to Article XII.

D. The. Board of Directors of the Corporation (the "Board") has determined to provide assistance to the Assuming Institution on the terms and subject to the conditions set forth in this Agreement.

E. The Board has determined pursuant to 12 U.S.C. § 1823(c)(4)(A) that such assistance is necessary to meet the obligation of the Corporation to provide insurance coverage for the insured deposits in the Failed Bank and is the least costly to the deposit insurance fund of all possible methods for meeting such obligation.

NOW, THEREFORE, in consideration of the mutual promises herein set forth and other valuable consideration, the parties hereto agree as follows:

AGREEMENT

ARTICLE I. GENERAL .

1.1. Purpose. The purpose of this Agreement is to set forth requirements regarding, among other things, the terms and conditions on which the Assuming Institution purchases certain assets and assumes certain liabilities of the Failed Bank.

1.2. Reserved .

Basic P&A Agreement (VB. Illinois).		Valley Bank.
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1.3 Defined Terms. Capitalized terms used in this Agreement shall have the meanings set forth or referenced in this Section 1.3. As used herein, words imparting the singular include the plural and vice versa.

"Accounting Records" means the general ledger and subsidiary ledgers and supporting schedules which support the general ledger balances.

"Acquired Assets" means all assets of the Failed Bank purchased pursuant to this Agreement. Assets owned by Subsidiaries of the Failed Bank are not "Acquired Assets" within the meaning of this definition by virtue of being owned by such Subsidiaries.

"Acquired Subsidiary" or "Acquired Subsidiaries" means one or more, as applicable, Subsidiaries of the Failed Bank acquired pursuant to Section 3.1.

"Affiliate" of any Person means any director, officer, or employee of that Person and any other Person (i) who is directly or indirectly controlling, or controlled by, or under direct or indirect common control with, such Person, or (ii) who is an affiliate of such Person as the term "affiliate" is defined in § 2(k) of the Bank Holding Company. Act of 1956, as amended, 12 U.S.C. § 1841.

"Agreement" means this Purchase and Assumption Agreement by and among the Assuming Institution, the Corporation and the Receiver, as amended or otherwise modified from time to time.

"Assumed Deposits" means Deposits.

"Assuming Institution" has the meaning set forth in the introduction to this Agreement.

"Bank Closing Date" means the close of business of the. Failed Bank on the date on which the Chartering Authority. closed such institution.

"Bank Premises" means the banking buildings, drive-in banking facilities, teller facilities (staffed or automated), storage and service facilities, structures connecting remote facilities to banking houses, land on which the foregoing are located and unimproved land,. together with any adjacent parking, that are owned or leased by the Failed Bank and that have formerly been utilized, are currently. utilized, or as of the Bank Closing Date, are intended to be utilized in the future by the. Failed Bank as shown on the Failed Bank Records. and includes the property at _________________________

"Bank Premises Surrender Date" means, with respect to each specific Bank Premises, the date selected by the Assuming Institution to surrender such Bank Premises to the Receiver, which date shall be no later than the first day after the Receiver is satisfied that all of the conditions for surrender of such Bank Premises set forth in this Agreement have been met; provided that, unless otherwise provided in this Agreement, such date shall not be more than 150 days after the Bank Closing Date.

"Bid Amount" has the meaning set forth in Article VII.

"Bid Form" means Exhibit "A" to the bid instructions provided to the Assuming Institution.

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

"Bid Valuation Date" means April 14, 2014.

"Board" has the meaning set forth in Recital D.

"Book Value" means, with respect to any Acquired Asset and any Liability Assumed, the dollar amount thereof stated on the Failed Bank Records. The Book Value of any item shall be determined as of the Bank Closing Date after adjustments made by the Receiver for differences in accounts, suspense items, unposted debits and credits and other similar adjustments or corrections and for setoffs, whether voluntary or involuntary. The Book Value of an Acquired Subsidiary shall be determined from the investment in subsidiary and related accounts on the "bank only" (unconsolidated) balance sheet of the Failed Bank based on the Equity Method of Accounting. Without limiting the generality of the foregoing, (i) the Book Value of a Liability Assumed shall include all accrued and unpaid interest thereon as of the Bank Closing Date, and (ii) the Book Value of a Loan shall reflect adjustments for earned interest, or unearned interest (as it relates to the "rule of 78s" or add-on-interest loans, as applicable), if any, as of the Bank Closing Date, adjustments for the portion of earned or unearned loan-related credit life and/or disability insurance premiums, if any, attributable to the Failed Bank as of the Bank Closing Date, and adjustments for Failed Bank Advances, if any, in each case as determined for financial reporting purposes. The Book Value of an Acquired Asset shall not include any adjustment for loan premiums, discounts or any related deferred income, fees or expenses, or general or specific reserves on the Failed Bank Records.

"Business Day" means a day other than a Saturday, Sunday, Federal legal holiday or legal holiday under the laws of the State where the Failed Bank is located, or a day on which the principal office of the Corporation is closed.

"Chartering Authority" means (i) with respect to a national bank, a Federal savings association or savings bank, the Office of the Comptroller of the Currency, (ii) with respect to a bank or savings institution chartered by a State, the agency of such State charged with primary responsibility for regulating and/or closing banks or savings institutions, as the case may be, (iii) the Corporation in accordance with 12 U.S.C. § 1821(c)(4), with regard to self-appointment, or (iv) the appropriate Federal banking agency in accordance with 12 U.S.C. § 1821(c)(9).

"Commitment" means the unfunded portion of a line of credit or other commitment reflected on the Failed Bank Records to make an extension of credit (or additional advances with respect to a Loan) that was legally binding on the Failed Bank as of the Bank Closing Date, other than extensions of credit pursuant to the credit card business and overdraft protection plans of the Failed Bank, if any.

"Corporation" has the meaning set forth in the introduction to this Agreement.

"Counterclaim" has the meaning set forth in Section 12.1(b).

"Credit Documents" means the agreements, instruments, certificates or other documents at any time evidencing or otherwise relating to, governing or executed in connection with or as security for, a Loan, including without limitation notes, bonds, loan agreements, letter of credit applications, lease financing contracts, banker's acceptances, drafts, interest protection agreements, currency exchange agreements, repurchase agreements, reverse repurchase agreements, guarantees, deeds of trust, mortgages, assignments, security agreements, pledges,

Basic P&A Agreement (VB. Illinois).		Valley Bank.
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subordination or priority agreements, lien priority agreements, undertakings, security instruments, certificates, documents, legal opinions, participation agreements and intercreditor agreements, and all amendments, modifications, renewals, extensions, rearrangements, and substitutions with respect to any of the foregoing.

"Credit File" means all Credit Documents and all other credit, collateral or insurance documents in the possession or custody of the Assuming Institution, or any of its Subsidiaries or Affiliates, relating to an Acquired Asset or a Loan included in a Put Notice, or copies of any such documents.

"Deposit" means a deposit as defined in 12 U.S.C. § 1813(1), including without limitation, outstanding cashier's checks and other official checks and all uncollected items included in the depositors' balances and credited on the Failed Bank Records; provided that the term "Deposit" shall not include all or any portion of those deposit balances which, in the discretion of the Receiver or the Corporation, (1) may be required to satisfy it for any liquidated or contingent liability of any depositor arising from an unauthorized or unlawful transaction, or (ii) may be needed to provide payment of any liability of any depositor to the Failed Bank or the Receiver, including the liability of any depositor as a director or officer. of the Failed Bank, whether or not the amount of the liability is or can be determined as of the Bank Closing Date.

"Deposit Secured Loan" means a loan in which the only collateral securing the loan is Assumed Deposits or deposits at other insured depository institutions.

"Electronically Stored Information" means any system backup tapes, any electronic mail (whether on an exchange or other similar system), any data on personal computers and any data on server hard drives.

"Eligible Individuals" has the meaning set forth in Section 4.12.

"Eligible Overdraft" means an overdraft that (1) was in existence on the Bank Closing Date with (2) a balance of greater than $500 and (3) was not made pursuant to an overdraft protection plan or similar extension of credit.

"Equity Method of Accounting" means the carrying value of a bank's investment in a subsidiary. is originally. recorded at cost but is adjusted periodically to record as income the bank's proportionate share of the subsidiary's earnings or losses and decreased by the amount of cash dividends or similar distributions received from the subsidiary. Acquired Subsidiaries with negative equity will be restated to $1 pursuant to the Equity Method of Accounting.

"ERISA" has the meaning set forth in Section 4.12.

"Failed Bank" has the meaning set forth in Recital A.

"Failed Bank Advances" means the total sums paid by the Failed Bank to (i) protect its lien position, (ii) pay ad valorem taxes and hazard insurance and (iii) pay premiums for credit life insurance, accident and health insurance and vendor's single interest insurance.

"Failed Bank Assessment Area" means the most recent Community Reinvestment Act ("CRA") assessment area of the Failed Bank reflected in the Information Package.

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

"Failed Bank Records" means records as defined in 12 C.F.R. § 360.11(a)(3).

"Fair Market Value" means:

(a) "Market Value" as defined in the regulation prescribing the standards for real estate appraisals used in federally related transactions, 12 C.F.R. §. 323.2(g), and accordingly shall mean the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition are the assumed consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

(i) Buyer and seller are typically motivated;

(ii) Both parties are well informed or well advised, and acting in what they consider their own best interests;

(iii) A reasonable time is allowed for exposure in the open market;

(iv) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and

(v) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale;

as determined as of the Bank Closing Date by an appraiser chosen by the Receiver; any costs and fees associated with such determination shall be paid by the Receiver, and

with respect to Bank Premises (to the extent, if any, that Bank Premise& are purchased utilizing this valuation method), shall be determined not later than sixty (60) days after the Bank Closing Date by an appraiser selected by the Receiver within seven (7) days after the. Bank Closing Date, and with respect to Specialty Assets, shall be determined by an appraiser selected. by the Receiver within seven (7) days after the Bank Closing Date; or

(b) with respect to property other than Bank Premises and Specialty Assets purchased utilizing this valuation method, the price therefor as established by the Receiver, as determined in accordance with clause (a) above.

"FDIC Office Space" has the meaning set forth in Section 4.11.

"Final Legal Notice" has the meaning set forth in Section 2.3(a).

"Fixtures" means those leasehold improvements, additions, alterations and installations constituting all or a part of Bank Premises (including without limitation automated teller machines that are affixed to a Bank Premises and may be not removed without causing structural damage to such Bank Premises) and which were acquired, added, built, installed or purchased at the expense of the Failed Bank, regardless of the holder of legal title thereto as of the Bank Closing Date.

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

"Furniture and Equipment" means the furniture and equipment (other than Safe Deposit Boxes, Personal Computers, Owned Data Management Equipment, Specialty Assets and motor vehicles), leased or owned by the Failed Bank and reflected on the Failed Bank Records as of the Bank Closing Date and located on or at Bank Premises, including without limitation automated teller machines (to the extent they are not Fixtures), carpeting, furniture, office machinery, shelving, office supplies, telephone, surveillance and security systems, ancillary equipment and artwork. Furniture and equipment located at a storage facility not adjacent to a Bank Premises are excluded from this definition.

"GSE" means a government sponsored enterprise.

"Indemnitees" means, except as provided in Section 12.1(b)(xi), (i) the Assuming Institution, (ii) the Subsidiaries and Affiliates of the Assuming Institution other than any Subsidiaries or Affiliates of the Failed Bank that are or become Subsidiaries or Affiliates of the Assuming Institution and (iii) the directors, officers, employees and agents of the Assuming Institution and its Subsidiaries and Affiliates who are not also present or former directors, officers, employees or agents of the. Failed Bank or of any Subsidiary or Affiliate of the Failed Bank.

"Information Package" means the most recent compilation of financial and other data with respect to the Failed Bank, including any amendments or supplements thereto, provided to the Assuming Institution by the Corporation on the web site used by the Corporation to market the Failed Bank to potential acquirers.

"Initial Payment" means the payment made pursuant to Article VII (based on the best information available as of the Bank Closing Date), the amount of which shall be either (i) if the Bid Amount is positive, the aggregate Book Value of the Liabilities. Assumed minus the sum of the aggregate purchase price of the Acquired Assets (including any Bank Premises, Other Real Estate, Other Real Estate Subsidiaries, and Optional Loan Pools purchased via the Bid Form) as determined pursuant to Section 3.2 and the positive Bid Amount, or (ii) if the Bid Amount is negative, the sum of the aggregate. Book Value of the Liabilities Assumed and the negative Bid Amount minus the aggregate purchase price of the Acquired Assets (including any Bank Premises, Other Real Estate, Other Real Estate Subsidiaries, and Optional Loan Pools purchased via the Bid Form). The. Initial Payment shall be payable by the Corporation to the Assuming Institution if (i) the Liabilities Assumed are greater than the sum of the positive Bid Amount and the aggregate purchase price of the Acquired Assets, or if (ii) the sum of the. Liabilities Assumed and the negative Bid Amount are greater than the aggregate purchase price of the Acquired Assets. The Initial Payment shall be payable by the Assuming Institution to the Corporation if (i) the Liabilities. Assumed are less than the sum of the positive Bid Amount and the aggregate purchase price of the Acquired Assets, or if (ii) the sum of the Liabilities Assumed and the negative Bid Amount is less than the aggregate purchase price of the Acquired Assets. Such Initial Payment shall be subject to adjustment as provided in Article VIII.

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

"Leased Data Management Equipment" means any equipment, computer hardware, computer software (and the lease or licensing agreements related thereto), computer networking equipment, printers, fax machines, copiers, document scanners, data tape systems, data tapes, DVDs, CDs, flash drives, telecommunications and check processing equipment and any other electronic storage media leased by the Failed Bank at Bank Closing Date which is, was, or could have been used by the Failed Bank in connection with data management activities.

"Legal Balance" means the amount of indebtedness legally owed by an Obligor with respect to a Loan, including principal and accrued and unpaid interest, late fees, attorneys' fees and expenses, taxes, insurance premiums, and similar charges, if any.

"Liabilities Assumed" has the meaning provided in Section 2.1.

"Lien" means any mortgage, lien, pledge, charge, assignment for security purposes, security interest or encumbrance of any kind with respect to an Acquired Asset, including any conditional sale agreement or capital lease or other title retention agreement relating to such Acquired Asset.

"Loan" or "Loans" means, individually or collectively, all of the following owed to or held by the Failed Bank as of the Bank Closing Date:

(a) loans (including loans which have been charged off the Failed Bank Records in whole or in part prior to and including the Bid Valuation Date), participation agreements, interests in participations, overdrafts of customers (including but not limited to overdrafts made pursuant to an overdraft protection plan or similar extensions of credit in connection with a deposit account), revolving commercial lines of credit, home equity lines of credit, Commitments, United States and/or State-guaranteed student loans and lease financing contracts;

(b) all Liens, rights (including rights of set-off), remedies, powers, privileges, demands, claims, priorities, equities and benefits owned or held by, or accruing or to accrue to or for the benefit of, the holder of the obligations or instruments referred to in clause (a) above, including but not limited to those arising under or based upon Credit Documents, casualty insurance policies and binders, standby letters of credit, mortgagee title insurance policies and binders, payment bonds and performance bonds at any time and from time to time existing with respect to any of the obligations or instruments referred to in clause (a) above; and

"New Loan" means a Loan made by the Failed Bank after the Bid Valuation Date that is not a continuation, amendment, modification, renewal, extension, refinancing, restructuring or refunding of or for any then-existing Loan.

"Obligor" means each Person liable for the full or partial payment or performance of any Loan, whether such Person is obligated directly, indirectly, primarily, secondarily, jointly or severally.

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

"Optional Loan Pool" means a grouping of various assets owned by the Failed Bank and offered to the Assuming Institution, as referenced in the Bid Form and described in the Information Package. Any continuation, amendment, modification, renewal, extension, refinancing, restructuring or refunding of or for any asset that was part of an Optional Loan Pool will remain part of that Optional Loan Pool. No asset may be moved between Optional Loan Pools. An asset that had been collateral securing a Loan that is part of an Optional Loan Pool remains part of that Optional Loan Pool. Any name of, or designation for, any Optional Loan Pool is for convenient reference and may not reflect the quality or nature of the assets that are part of that Optional Loan Pool.

"Other Real Estate" means all interests in real estate (other than Bank Premises and Fixtures), including but not limited to mineral estates, leasehold rights, condominium and cooperative interests, easements, air rights, water rights, and development rights that are owned by the Failed Bank as of Bid Valuation Date.

"Other Real Estate Subsidiaries" means those Subsidiaries listed on the Bid Form, if any.

"Owned Data Management Equipment" means any equipment, computer hardware, computer software, computer networking equipment, printers, fax machines, copiers, document scanners, data tape systems, data tapes, DVDs, CDs, flash drives, telecommunications and check processing equipment and any other electronic storage media owned by the Failed Bank at Bank Closing Date which is, was, or could have been used by the Failed Bank in connection with data management activities.

"Payment Date" means the first Business Day after the Bank Closing Date.

"Person" means any individual, corporation, partnership, joint venture, association, limited liability company, limited liability partnership, joint-stock company, trust, unincorporated organization, or government or any agency or political subdivision thereof, excluding the Corporation.

"Personal Computer(s)" means computers based on a microprocessor generally designed to be used by one person at a time and which usually store informational data on that computer's internal hard drive or attached peripheral, and associated peripherals (such as keyboard, mouse, etc.). A personal computer can be found in various configurations such as laptops, net books, and desktops.

"Primary Indemnitor" means any Person (other than the Assuming Institution or any of its. Affiliates) who is obligated to indemnify or insure, or otherwise make payments (including. payments on account of claims made against) to or on behalf of any Person in connection with the claims covered under Article XII, including without limitation any insurer issuing any directors and officers liability. policy or any Person issuing a financial institution bond or banker's blanket bond.

"Pro Forma" means a balance sheet that reflects a reasonably accurate financial statement of the Failed Bank through the Bank Closing Date and serves as a basis for the opening entries of both the Assuming Institution and the Receiver.

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

"Proprietary Software" means computer software developed for and owned by the Failed Bank for its own purpose and use.

"Put Date" has the meaning set forth in Section 3.4(d).

"Put Notice" has the meaning set forth in Section 3.4(c).

"Qualified Beneficiaries" has the meaning set forth in Section 4.12.

"Qualified Financial Contract" means a qualified financial contract as defined in 12. U.S.C. § 1821(e)(8)(D).

"Receiver" has the meaning set forth in the introduction to this Agreement.

"Related Liability" with respect to any Acquired Asset means any liability existing and reflected on the Failed Bank Records as of the Bank Closing Date for (i) indebtedness secured by mortgages, deeds of trust, chattel mortgages, security interests or other liens on or affecting such Acquired Asset, (ii) ad valorem taxes applicable to such Acquired Asset and (iii) any other obligation determined by the Receiver to be directly related to such Acquired Asset.

"Related Liability Amount" with respect to any Related Liability on the books of the Assuming Institution, means the amount of such Related Liability as stated on the Failed Bank Records of the Assuming Institution (as maintained in accordance with generally accepted accounting principles) as of the date as of which the Related Liability Amount is being determined. With respect to a liability that relates to more than one Acquired Asset, the amount of such Related Liability shall be allocated among such Acquired Assets for the purpose of determining the Related Liability Amount with respect to any one of such Acquired Assets.

Such allocation shall be made by specific allocation, where determinable, and otherwise shall be pro rata based upon the dollar amount of such Acquired Assets stated on the Failed Bank Records of the entity. that owns such Acquired Asset.

"Repurchase Price" means, with respect to any Acquired Asset, first taking the Book Value of the Acquired Asset at the Bank Closing Date and either subtracting the pro rata Acquired Asset discount or adding the pro rata Acquired Asset premium, and subsequently adjusting that amount (i) for any advances and interest on such Acquired Asset after the Bank Closing Date, (ii) by subtracting the total amount received by the Assuming Institution for such Acquired Asset after the Bank Closing Date, regardless of how applied and (iii) by adding total disbursements of principal made by the Receiver not otherwise included in the Book Value. For (x) Deposit Secured Loans and Eligible Overdrafts put back to the Receiver pursuant to Section. 3.4 or (y) Acquired Assets sold pursuant to Section 3.7 and repurchased by the Receiver pursuant to Section 3.6, the Repurchase Price shall not take into account the pro rata Acquired Asset discount or premium. The Repurchase Price for Eligible Overdrafts shall include adjustments for credits or deposits received after the Bank Closing Date and prior to the date of put back.

"Safe Deposit Boxes" means the safe deposit boxes of the Failed Bank, if any, including the removable safe deposit boxes and safe deposit stacks in the Failed Bank's vault(s), all rights and benefits under rental agreements with respect to such safe deposit boxes, and all keys and combinations thereto.

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

"Settlement Date" means the first Business Day immediately prior to the day which is three hundred sixty-five (365) days after the Bank Closing Date, or such other date prior thereto as may be agreed upon by the Receiver and the Assuming Institution. The Receiver, in its discretion, may extend the Settlement Date.

"Settlement Interest Rate" means, for the first calendar quarter or portion thereof during which interest accrues, the rate determined by the Receiver to be equal to the investment rata on twenty-six (26)-week United States Treasury Bills as published on the Bank Closing Date by the United States Treasury on the TreasuryDirect.gov website; provided, that if no such Investment Rate is published the week of the Bank Closing Date, the investment rate for such Treasury Bills most recently published by the United States Treasury on TreasuryDirect.gov prior to the Bank Closing Date shall be used. Thereafter, the rate shall be adjusted to the rate determined by the Receiver to be equal to the Investment Rate on such Treasury Bills in effect as of the first day of each succeeding calendar quarter during which interest accrues as published by the United States Treasury on the TreasuryDirect.gov website.

"Specialty Assets" means assets that have a greater value than more traditional furniture and equipment owned by the Failed Bank and reflected on the Failed Bank Records as of the Bank Closing Date and located on or at Bank Premises, including without limitation fine art and high end decorative art; classic and antique motor vehicles; rare books; rare coins; airplanes; boats; jewelry; collectible firearms; cultural artifacts; sculptures; Proprietary Software; and any other items that typically cannot be appraised by a Furniture and. Equipment appraiser. Specialty Assets does not include any repossessed collateral.

"Subsequently Occupied Space" has the meaning set forth in Section 4.6(f).

"Subsidiary" has the meaning set forth in § 3(0(4) of the Federal Deposit Insurance Act, 12 U.S.C. § 1813(w)(4), as amended.

"Underserved Area" means a census track designated as an underserved middle-income nonmetropolitan track on the most recent List of Middle-Income Non-Metropolitan Distressed or. Underserved Geographies as published by the Federal Financial Institutions Examination Council ("FFIEC") on the FFIEC website. A list of Bank Premises, if any, located in an Underserved Market is attached as Schedule 4.1(b).

ARTICLE II. ASSUMPTION OF LIABILITIES .

2.1. Liabilities Assumed by Assuming Institution. The Assuming Institution expressly assumes at Book Value (subject to adjustment pursuant to Article VIII) and agrees to pay, perform and discharge, all of the following liabilities of the Failed Bank as of the Bank Closing Date, except as otherwise provided in this Agreement (such liabilities referred to as "Liabilities Assumed"):

(a) Assumed Deposits, except those Deposits specifically listed on Schedule 2.1(a) ; provided, that as to any Deposits of public money which are Assumed Deposits,. the Assuming Institution agrees to properly secure such Deposits with such Acquired Assets as appropriate which, prior to the Bank Closing Date, were pledged as security by the Failed Bank,

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

or with assets of the Assuming Institution, if such securing Acquired Assets, if any, are insufficient to properly secure such Deposits;

(b) liabilities for indebtedness incurred by the Failed Bank, reflected on the Accounting Records of the Failed Bank on the Bank Closing Date, and secured by any perfected Lien (other than a Lien in favor of any Federal Reserve Bank or any Federal. Home Loan Bank) on or affecting any Acquired Asset; provided, that the amount of any liability assumed pursuant to this Section 2.1(b) (x) shall be limited to the market value (as determined by the Receiver) of the. Acquired Assets securing such liability. and (y) is not subject to adjustment pursuant to Article VIII;

(c) overdrafts, debit balances, service charges, reclamations and adjustments to accounts with the Federal Reserve Banks as reflected on the books and records of any such Federal Reserve Bank within ninety (90) days after the Bank Closing Date, if any;

(d) ad valorem taxes (prorated through the Bank Closing Date), whether or not reflected on the Failed Bank Records, applicable to any Acquired Asset; provided, that the assumption of any ad valorem taxes pursuant to this Section 2.1(d) shall be limited to an amount equal to the market value of the. Acquired Asset to which such taxes apply as determined by the Receiver;

(e) liabilities, if any, for federal funds purchased, repurchase agreements and overdrafts in accounts maintained with other depository institutions (including any accrued and unpaid interest thereon computed to and including the Bank Closing Date); provided, that the assumption of any liability pursuant to this Section 2.1(e) shall be limited to the market value of the Acquired Assets securing such liability as determined by the Receiver;

(f) United States Treasury tax and loan note option accounts, if any;

(g) liabilities for any acceptance or commercial letter of credit provided, that the assumption of any liability pursuant to this Section 2.1(g) shall be limited to the market value of the Acquired Assets securing such liability as determined by the Receiver;

(h) liabilities for any "standby letters of credit" as defined in 12 C.F.R. § 337.2(a) issued by the Failed Bank in connection with an Acquired Asset, but excluding any other standby letters of credit;

(i) duties and obligations assumed pursuant to this Agreement including without limitation those relating to the Failed Bank Records, credit card business, debit card business, stored value and gift card business, overdraft protection plans, safe deposit business, safekeeping business and trust business, if any;

(j) liabilities, if any, for Commitments with respect to Loans that are purchased pursuant to this Agreement;

(k) liabilities, if any, for amounts owed to any Acquired Subsidiary;

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

(l) reserved;

(m) liabilities, if any, under. any contract pursuant to which loan servicing is provided to the Failed Bank by others; and

(n) any deferred revenue, income or fees recorded on the general ledger of the Failed Bank as of the Bank Closing Date attributable to any business assumed pursuant to Section 4.2, 4.3, 4.4, or 4.5 of this Agreement, excluding any deferred income or revenue relative to FASB 91 — Loan Fees and Costs associated with originating or acquiring Loans and initial direct costs of leases.

2.2. Interest on Deposit Liabilities. The Assuming Institution agrees that from and after the Bank Closing Date, it will accrue and pay interest on Assumed Deposits pursuant to Section 2.1 at a rate(s) it shall determine; provided, that for non-transaction Deposit liabilities such rate(s) shall not be less than the lowest rate offered by the Assuming Institution to its depositors for non-transaction deposit accounts. The Assuming Institution shall permit each depositor to withdraw, without penalty for early withdrawal, all or any portion of such depositor's Deposit, whether or not the Assuming Institution elects to pay interest in accordance with any deposit agreement formerly existing between the Failed Bank and such depositor; and further provided, that if such Deposit has been pledged to secure an obligation of the depositor or other party, any withdrawal thereof shall be subject to the terms of the agreement governing such pledge. The Assuming Institution shall give notice to such depositors as provided in Section 5.3 of the rate(s) of interest which it has determined to pay and of such withdrawal rights.

2.3. Unclaimed Deposits.

(a) Final Legal Notice. Fifteen (15) months following the Bank Closing Date, the Assuming Institution will provide the Receiver a listing of all deposit accounts, including the type of account, not claimed by the depositor. The Receiver will review the list and authorize the Assuming Institution to act on behalf of the Receiver to send a Final Legal Notice in a form substantially similar to Exhibit 2.3A (the "Final Legal Notice") to the owner(s) of the unclaimed deposits reminding them of the need to claim or arrange to continue their account(s) with the Assuming Institution. The Assuming Institution will send the Final Legal Notice to the depositors within thirty (30) days following notification of the Receiver's authorization. The Assuming Institution will prepare an Affidavit of Mailing in a form substantially similar to Exhibit 2.3B and will forward the Affidavit of Mailing to the Receiver after mailing out the Final Legal Notice to the owner(s) of unclaimed deposit accounts.

(b) Unclaimed Deposits. If, within eighteen (18) months after the Bank Closing Date, any depositor of the Failed Bank does not claim or arrange to continue such depositor's Assumed Deposits at the Assuming Institution, the Assuming Institution shall, within fifteen (15) Business Days after the end of such eighteen (18) month period, (i) refund to the Receiver the full amount of each such Deposit (without reduction for service charges), (ii) provide to the Receiver a schedule of all such refunded Deposits in such form as may be prescribed by the Receiver, and (iii) assign, transfer, convey, and deliver to the Receiver, all right, title and interest of the Assuming Institution in and to the Failed Bank Records previously transferred to the Assuming Institution and other records generated or maintained by the Assuming Institution pertaining to such Deposits. During such eighteen (18) month period, at

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

the request of the Receiver, the Assuming Institution promptly shall provide to the Receiver schedules of unclaimed Deposits in such form as may be prescribed by the Receiver.

2.4. Employee Plans. Except as provided in Section 4.12, the Assuming Institution shall have no liabilities, obligations or responsibilities under the Failed Bank's health care, bonus, vacation, pension, profit sharing, deferred compensation, 401k or stock purchase plans or similar plans, if any, unless the Receiver and the Assuming Institution agree otherwise subsequent to the date of this Agreement.

ARTICLE III. PURCHASE OF ASSETS .

3.1. Assets Purchased by Assuming Institution . Subject to Sections 3.5 and 3.6, the Assuming Institution hereby purchases from the Receiver, and the Receiver hereby sells, assigns, transfers, conveys, and delivers to the Assuming Institution, all right, title, and interest of the Receiver in and to all of the following:

(a) cash and receivables from depository institutions (including Federal Reserve. Banks and Federal Home Loan Banks), including cash items in the process of collection, plus any accrued interest thereon computed to and including Bank Closing Date;

(b) securities (other than the capital stock of Subsidiaries of the Failed Bank and those securities referred to in Section 3.5(1), if any), plus any accrued interest thereon computed to and including Bank Closing Date;

(c) federal funds sold and repurchase agreements, if any, including any accrued interest thereon computed to and including Bank Closing Date;

(d) Owned Data Management Equipment and Personal Computers;

(e) Deposit Secured Loans, if any (including any such Deposit Secured Loan that the Failed Bank charged-off in whole or in part during the period from the date after the Bid Valuation Date and up to and including Bank Closing Date);

(f) any credit card business (including all outstanding extensions of credit), Safe Deposit Boxes and related business, safekeeping business and trust business, subject to Section 4.2, 4.3, 4.4 or 4.5, respectively;

(g) Failed Bank Records and other documents as provided in Section 6.1;

(h) reserved;

(i) amounts owed to the Failed Bank by any Acquired Subsidiary;

(i) assets securing Deposits of public money, to the extent not otherwise purchased hereunder;

(k) overdrafts of customers (including but not limited to overdrafts made pursuant to an overdraft protection plan or similar extensions of credit in connection with a deposit account);

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

(l) reserved;

(m) rights of the Failed Bank to have loan servicing provided to the Failed Bank by others and related contracts;

(n) the Loans and other assets in the. Optional Loan Pools listed on Schedule 3.1(n);

(o) reserved; and

(p) any asset that was fully charged-off by the Failed Bank prior to the Bid Valuation Date (including any subsequent judgments arising therefrom) that was secured by collateral that was (i) foreclosed upon by the Failed Bank and (ii) is an Acquired Asset.

The Assuming Institution purchases all Acquired Assets subject to all liabilities for indebtedness collateralized by. Liens affecting such Acquired Assets to the extent provided in Section 2.1.

3.2. Asset Purchase Price .

(a) Determination of Asset Purchase Price. All Acquired Assets and assets of the Failed Bank subject to an option to purchase by the Assuming Institution shall be purchased for the amount, or the amount resulting from the method specified for determining the amount,. as specified on Schedule 3.2, except as otherwise may be provided herein. Any Acquired Asset for which no purchase price is specified on Schedule 3.2 or otherwise herein shall be purchased at its Book Value. The purchase price for Acquired Subsidiaries shall be adjusted pursuant to Section 4.6(i)(iv), if applicable.

(b) Purchase. Price for Securities. The purchase price for any security (other than the capital stock of any Acquired Subsidiary and Federal Home Loan. Bank stock) purchased under Section 3.1 by the Assuming Institution shall consist of the market price (as defined below) of the security as of the Bank Closing Date, multiplied by the bank's ownership interest in the security (see Calculation of Purchase Price below) and shall include accrued interest, where applicable, as noted below.

(i) Definition of Market Price: The market price for any security shall be (i) the market price for that security quoted at the close of the trading day. effective on the Bank Closing Date as published electronically by Bloomberg, L.P., or alternatively, at the discretion of the Receiver, by IDC/Financial Times (FT) Interactive Data; (ii) provided that if such market price is not available for such security, the Assuming Institution will submit a written purchase price bid for such security within three days of notification/bid request by the Receiver (unless a different time period is agreed to by the Assuming Institution and the Receiver) and the Receiver, in its sole and absolute discretion, will accept or reject each such purchase. price bid; (iii) further provided that in the absence of an acceptable bid from the Assuming Institution, or in the event that a security is deemed essential to the Receiver as determined by the Receiver in its discretion (see Section 3.6 Retention or Repurchase of Assets Essential to the Receiver) such security shall not pass to the Assuming Institution and shall be deemed to be an excluded asset hereunder and listed on Schedule 3.5(1).

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

(ii) Calculation of Purchase Price. The bank's ownership interest in a security will be quantified one of two ways: (i) number of shares or other units, as applicable (in the case of equity securities) or (ii) par value or notational amount, as applicable (in the case of non-equity securities). As a result, the purchase price (except where determined pursuant to clause (ii) of the preceding paragraph) shall be calculated one of two ways, depending on whether or not the security is an equity security: (i) the purchase price for an equity security shall be calculated by multiplying the number of shares or other units by the applicable market price per unit; and (ii) the purchase price for a non-equity security shall be an amount equal to the applicable market price (expressed as a decimal), multiplied by the par value for such security (based on the payment factor most recently widely. available). The purchase price also shall include accrued interest as calculated below (see Calculation of Accrued Interest), except to the extent the parties may otherwise expressly agree, pursuant to clause (ii) of the preceding paragraph. If the factor used to determine the par value of any security for purposes of calculating the purchase price, is not for the period in which the Bank Closing Date occurs, then the purchase price for that security shall be subject to adjustment post-closing based on a "cancel and correct" procedure. Under this procedure, after such current factor becomes publicly available, the Receiver will recalculate the purchase price utilizing the current factor and related interest rate, and will notify the Assuming Institution of any difference and of the applicable amount due from one party to the other. Such amount will then be paid as part of the settlement process pursuant to Article VIII.

(iii) Calculation of Accrued Interest for Securities: Accrued interest shall be calculated for a non-equity security by multiplying the interest rate (expressed as a decimal point) paid on the security as then most recently publicly available, by the most recent par value (or notational amount, as applicable) of that security, multiplied by the number of days from and including the first interest day of the accrual period in which the Bank Closing Date occurs, through the Bank Closing Date.

(c) Purchase Price for Qualified Financial Contracts . Qualified Financial Contracts, if any, shall be purchased at market value determined in accordance with the terms of Exhibit 3.2(c). Any costs associated with such valuation shall be shared equally by the Receiver and the Assuming Institution.

3.3. Manner of Conveyance; Limited. Warranty;. Nonrecourse; Etc. THE CONVEYANCE OF ALL ACQUIRED ASSETS, INCLUDING REAL AND PERSONAL PROPERTY INTERESTS, PURCHASED. BY THE ASSUMING INSTITUTION UNDER THIS AGREEMENT SHALL BE MADE, AS NECESSARY, BY RECEIVER'S DEED OR RECEIVER'S BILL OF SALE, "AS IS", "WHERE IS", WITHOUT RECOURSE AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN THIS AGREEMENT, WITHOUT ANY WARRANTIES WHATSOEVER WITH RESPECT TO SUCH ACQUIRED ASSETS, EXPRESS OR IMPLIED, WITH RESPECT TO TITLE, VALUE, COLLECTIBILITY, GENUINENESS, ENFORCEABILITY, DOCUMENTATION, CONDITION OR FREEDOM FROM LIENS OR ENCUMBRANCES (IN WHOLE OR IN PART), OR ANY OTHER MATTERS.

3.4. Puts of Assets to the Receiver.

(a) Puts Within 30 Days or 40 Days. After the Bank Closing Date .

(i) During the thirty. (30)-day period following the. Bank Closing Date (which thirty (30)-day period may be extended in writing in the sole and absolute discretion of the Receiver for any Loan), in accordance with this Section 3.4, the Assuming Institution may require the Receiver to purchase any Deposit Secured Loan transferred to the Assuming Institution pursuant to Section 3.1 which is not fully secured by Assumed Deposits or deposits at other insured depository institutions due to either insufficient Assumed Deposit or deposit collateral or deficient documentation regarding such collateral; provided that, the Assuming Institution may not require the purchase of a Deposit Secured Loan that is secured by an Assumed Deposit until any Deposit setoff determination, whether voluntary or involuntary, has been made.

(ii) During the forty (40)-day period following the Bank Closing Date, the Assuming Institution may require the Receiver to purchase, any Eligible Overdraft transferred to the Assuming Institution pursuant to Section 3.1 which existed on the thirtieth (30th) day following the Bank Closing. Date.

(iii) Notwithstanding the foregoing, the Assuming Institution may not require the Receiver to purchase any Loan pursuant to Section 3.4(a) if (x) the Obligor with respect to such Loan is an Acquired Subsidiary or (y) the Assuming Institution has:

(A) made any advance in accordance with the terms of a Commitment or otherwise with respect to such Loan;

(B) taken any action that caused an increase in the amount of a Related Liability with respect to such Loan;

(C) created or permitted to be created any Lien on such Loan which secures indebtedness for money borrowed or which constitutes a conditional sales agreement, capital lease or other title retention agreement;

(D) entered into, agreed to make, grant or permit, or made, granted or permitted any modification or amendment to, any waiver or extension with respect to, or any renewal, refinancing or refunding of, such Loan or related Credit Documents or collateral, including, without limitation, any act or omission which diminished such collateral; or

(E) sold, assigned or transferred all or a portion of such Loan to a third party (whether with or without recourse).

(b) Puts Prior to the Settlement Date. During the period from the Bank Closing Date to and including the Business Day immediately preceding the Settlement Date, the Assuming Institution may require the Receiver to purchase any Acquired Asset which the Assuming Institution can establish is evidenced by forged or stolen instruments as of the. Bank Closing Date; provided that the Assuming Institution may not require the Receiver to purchase any Acquired Asset with respect to which the Assuming Institution has taken any action referred

Basic P&A Agreement (VB. Illinois).		Valley Bank.
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to in Section 3.4(a)(iii) with respect to such Acquired Asset. the Assuming Institution shall transfer all such Acquired Assets to the Receiver without recourse, and shall indemnify the Receiver against any and all claims of any Person claiming by, through or under the Assuming Institution with respect to any such Acquired Asset, as provided in Section 12.4.

(c) Notices to the Receiver. If the Assuming Institution elects to require the Receiver to purchase one or more Acquired. Assets pursuant to this Section 3.4, the Assuming. Institution shall deliver to the Receiver a notice ("Put Notice") which shall include:

(i) a list of all Acquired Assets that the Assuming Institution requires the Receiver to purchase;

(ii) a list of all Related Liabilities with respect to the Acquired Assets identified in the Put Notice; and

(iii) a statement of the estimated Repurchase Price of each Acquired Asset identified in the Put Notice as of the applicable Put Date (defined below).

The Put Notice shall be in the form prescribed by the Receiver or such other form to which the Receiver has consented. As provided in Section 9.6, the Assuming Institution shall deliver to the Receiver all documents, Credit Files and additional information relating to the subject matter of the Put Notice as the Receiver may request and shall provide the Receiver with full access to all other relevant books and records.

(d) Purchase by Receiver. The Receiver shall purchase Acquired Assets that are specified in the Put Notice and shall assume Related Liabilities with respect to such Acquired Assets. The transfer of such Acquired Assets and Related Liabilities shall be effective as of a date determined by the Receiver, which date shall not be later than thirty (30) days after receipt by the Receiver of the Put Notice (the "Put Date").

(e) Purchase Price and Payment Date. Each Acquired Asset purchased by the Receiver pursuant to this Section 3.4 shall be purchased at a price equal to the Repurchase Price of such Acquired Asset minus the Related Liability. Amount applicable to such Acquired Asset, in each case determined as of the applicable Put Date. If the difference between the Repurchase Price and the Related Liability Amount is positive, then the Receiver shall pay to the Assuming Institution the amount of the difference; if the difference between such amounts is negative, then the Assuming Institution shall pay to the Receiver the amount of the difference. The Assuming Institution or the Receiver, as the case may be, shall pay the amount determined pursuant to this Section 3.4 not later than the twentieth (20th) Business Day following the applicable Put Date, together with interest on such amount at the Settlement Interest Rate for the period from and including such Put Date to and including the day preceding the date on which payment is made.

(f) Servicing. The Assuming Institution shall administer and manage any Acquired Asset subject to purchase by the Receiver in accordance with usual and prudent banking standards and business practices until the Receiver purchases such Acquired Asset.

(g) Reversals. If the Receiver purchases an Acquired Asset (and assumes the Related Liability) that it is not required to purchase pursuant to this Section 3.4, the Assuming

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Institution shall repurchase such Acquired Asset (and assume such Related Liability) from the Receiver at a price computed so as to achieve the same economic result as would apply if the Receiver had never. purchased such Acquired Asset pursuant to this Section 3.4.

(h) Transfer to Receiver without Recourse. The Assuming Institution shall transfer any Acquired Asset pursuant to this. Section 3.4 to the Receiver without recourse and shall indemnify the Receiver against any and all claims of any Person claiming by, through or under the Assuming Institution with respect to any such Acquired Asset, as provided in Section 12.4.

3.5. Assets Not Purchased by Assuming Institution . The Assuming Institution does not purchase, acquire or assume, or (except as otherwise expressly provided in this Agreement) obtain an option to purchase, acquire or assume under this Agreement:

(a) any financial institution bonds, banker's blanket bonds, or public liability, fire, extended coverage insurance policy, bank owned life insurance or any other insurance policy of the Failed Bank, or premium refund, unearned premium derived from cancellation, or any proceeds payable with respect to any of the foregoing;

(b) any interest, right, action, claim, or judgment against (i) any officer, director, employee, accountant, attorney, or any other Person employed or retained by the Failed Bank or any Subsidiary of the Failed Bank on or prior to the Bank Closing Date arising out of any act or omission of such Person in such capacity, (ii) any underwriter of financial institution bonds, banker's blanket bonds or any other insurance policy of the Failed Bank, (iii) any shareholder or holding company of the Failed Bank, or (iv) any other Person whose action or inaction may be related to any loss (exclusive of any loss resulting from such Person's failure to pay on a Loan made by the Failed Bank) incurred by the Failed Bank; provided that for the purposes hereof, the acts, omissions or other events giving rise to any such claim shall have occurred on or before the Bank Closing Date, regardless of when any such claim is discovered and regardless of whether any such claim is made with respect to a financial institution bond, banker's blanket bond, or any other insurance policy of the Failed Bank in force as of the Bank Closing Date;

(d) legal or equitable interests in tax receivables of the Failed Bank, if any, including any claims arising as a result of the Failed Bank having entered into any agreement or otherwise being joined with another Person with respect to the filing of tax returns or the payment of taxes;

(e) amounts reflected on the Failed Bank Records as of the Bank Closing Date as a general or specific loss reserve or contingency account, if any;

(f) leased or owned Bank Premises and leased or owned Fixtures, Proprietary Software, Furniture and Equipment located on leased or owned Bank Premises, and Specialty Assets located on leased or owned Bank Premises, if any; provided that the Assuming Institution does obtain an option under Sections 4.6, 4.7 or 4.8, as the case may be, with respect thereto;

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

(g) owned Bank Premises which the Receiver, in its discretion, determines may contain environmentally hazardous substances;

(h) any "goodwill," as such term is defined in the instructions to the report of condition prepared by banks examined by the Corporation in accordance with 12 C.F.R. § 304.3, and other intangibles (other than intellectual property);

(i) any criminal restitution or forfeiture orders issued in favor of the Failed Bank;

(j) any and all prepaid fees or any other income as shown on the Failed Bank Records, but not taken into income as of the Bank Closing Date, associated with a line of business of the Failed Bank which is not assumed pursuant to this Agreement;

(k) assets essential to the Receiver in accordance with Section 3.6;

(1) any banker's bank stock, and the securities listed on the attached Schedule 3.5(1);

(m) reserved;

(n) prepaid accounts associated with any contract or agreement that the Assuming Institution either. does not directly. assume pursuant to the terms of this Agreement nor has an option to assume under Section 4.8;

(o) any contract pursuant to which the Failed Bank provides loan servicing for others;

(p) all assets that were fully charged-off by the Failed Bank prior to the Bid Valuation Date, including any subsequent judgments arising therefrom, other than any asset that was secured by collateral that was (i) foreclosed upon by the Failed Bank and (ii) is an Acquired Asset;

(q) any Loan that was secured by collateral that is an asset retained by the Receiver under this Agreement; and

(r) all assets related to any plan of the Failed Bank described in Section 2.4 or any plan of the type described in Section 2.4 under which the Failed Bank has any liability, obligation or responsibility, unless the Assuming Institution assumes liability, obligations or responsibilities under such plan subsequent to the date of this Agreement;

(s) any asset not shown on the Failed Bank Records as of the Bank Closing Date and discovered after the Settlement Date;

(t) New Loans; and,

(u) Assets and liabilities listed on Schedule 3.5(u)

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

3.6. Retention or Repurchase of Assets Essential to Receiver .

(a) The Receiver may refuse to sell to the Assuming Institution, or the Assuming Institution agrees, at the request of the Receiver set forth in a written notice to the Assuming Institution, to sell, assign, transfer, convey, and deliver to the Receiver, all of the Assuming Institution's right, title and interest in and to, any Acquired Asset or asset essential to the Receiver as determined by the Receiver in its discretion (together with all Credit Documents evidencing or pertaining thereto), which may include any Acquired Asset or asset that the Receiver determines to be:

(i) made to an officer, director, or other Person engaging in the affairs of the Failed Bank, its Subsidiaries or Affiliates or any related entities of any of the foregoing;

(ii) the subject of any investigation relating to any claim with respect to any item described in Section 3.5(a) or (b), or the subject of, or potentially the subject of, any legal proceedings;

(iii) made to a Person who is an Obligor on a loan owned by the Receiver or the Corporation in its corporate capacity or its capacity as receiver of any institution;

(iv) secured by collateral which also secures any asset owned by the Receiver; or

(v) related to any asset of the Failed Bank not purchased by the Assuming Institution under this Article III or any liability of the Failed Bank not assumed by the Assuming Institution under Article. II.

(b) Each such Acquired Asset or asset purchased by the Receiver shall be purchased at a price equal to the Repurchase Price thereof less the Related Liability Amount with respect to any Related Liabilities related to such Acquired Asset or asset, in each case determined as of the date of the notice provided by the Receiver pursuant to Section 3.6(a). The Receiver shall pay the Assuming Institution not later than the twentieth (20th) Business Day following receipt of related Credit Documents and Credit Files together with interest on such amount at the Settlement Interest Rate for the period from and including the date of receipt of such documents to and including the day. preceding the day on which payment is made.. The Assuming Institution agrees to administer and manage each such Acquired Asset or asset in accordance with usual and prudent banking standards and business practices until each such Acquired Asset or asset is purchased by the Receiver. All transfers with respect to Acquired Asset or assets under this Section 3.6 shall be made as provided in Section 9.6. The Assuming Institution shall transfer all such Acquired Assets or assets and Related Liabilities to the Receiver without recourse, and shall indemnify the Receiver against any and all claims of any Person claiming by, through or under the Assuming Institution with respect to any such Acquired Asset or asset, as provided in Section 12.4.

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

3.7. Receiver's Offer to Sell Withheld Loans. For the period of thirty (30) days commencing the day after the. Bank Closing Date, the Receiver may, in its sole and absolute discretion, sell any Loan withheld from sale pursuant to Section 3.5. or Section 3.6 of this Agreement that the Assuming Institution desires to purchase. Any Loan sold pursuant to this section will, at the sole and absolute discretion of the Receiver, either (x) be treated as if initially sold pursuant to Section 3.1 of this Agreement, or (y) sold pursuant to the standard loan sale agreement used by the Receiver for the sale of loan pools.

(a) If treated as if initially sold pursuant to Section 3.1 of this Agreement, the purchase price for such Loan shall be the Book Value as of the Bank Closing Date, adjusted (i) for any advances and interest on such Loan after the Bank Closing. Date, (ii) by subtracting the total amount received by the Assuming Institution for such Loan after the Bank Closing Date, and (iii) by adding total disbursements of principal made by the Receiver and not otherwise included in the Book Value. The sale will be subject to all applicable terms of this Agreement, except that any Loan purchased pursuant to this Section 3.7 shall not be included in the calculation of the pro rata Acquired Asset discount or pro rata Acquired Asset premium utilized for the repurchase of other Acquired Assets Payment for any such Loan will be handled through the settlement process pursuant to Article VIII.

(b) Any Loan sold pursuant to the standard loan sale agreement shall be governed by and paid for in accordance with that document

ARTICLE. IV. ASSUMPTION OF CERTAIN DUTIES AND OBLIGATIONS .

4.1. Continuation of Banking Business .

(a) Full Service Banking. For the period commencing on the first Business Day after the Bank Closing Date and ending on the first anniversary of the Bank Closing Date, the Assuming Institution will provide full service banking in the Failed Bank Assessment Area. At the option of the Assuming Institution, it may provide such full service banking at one or more Bank Premises or Assuming Institution branches located within such Failed Bank Assessment Area. The Assuming Institution may close or sell any Bank Premises during this period with the prior written consent of the Receiver (which consent may be withheld in Receiver's sole discretion) and after receipt of all necessary regulatory approvals, provided that the Assuming Institution (or its successors) continues to provide full service banking in the Failed Bank Assessment Area for the period required to comply with this Section 4.1(a).

(b) Bank Premises Located in an Underserved Area. If a currently utilized Bank Premises is located in an Underserved Area, the Receiver will not consent to the Assuming Institution's closing or selling such Bank Premises, unless the Assuming Institution provides full service banking at one or more Bank Premises or Assuming Institution branches located within in the same Underserved Area.

(c) Failure to Exercise Option to Purchase Bank Premises. If a currently-utilized owned Bank Premises is located in an Underserved Area and the Assuming Institution. does not exercise its option under Section 4.6(a) with respect to that Bank Premises, the Receiver will continue to rent any such owned Bank Premises to the Assuming Institution for the amount provided in Section 4.6(e) in order to comply with Section 4.1(a).

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

(d) Sale of Bank Premises. The Assuming Institution will pay to the Receiver, upon the sale of any Bank Premises within twelve months following the Bank Closing Date, fifty percent (50%) of the amount by which (a) the proceeds of such sale attributable to any franchise or deposit premium (without deducting any expenses related to such sale) exceed (b) the deposit premium paid by the Assuming Institution with respect to each Bank Premises sold.

4.2. Credit Card Business. The Assuming Institution agrees to honor and perform, from and after the Bank Closing Date, all duties and obligations with respect to the Failed Bank's credit card business (including issuer or merchant acquirer) debit card business, stored value and gift card business, and/or processing related to credit cards, if any, and assumes all extensions of credit or balances outstanding as of the Bank Closing Date with respect to these lines of business. The obligations undertaken pursuant to this Section do not include loyalty, reward, affinity, or other similar programs related to the credit and debit card businesses.

4.3. Safe Deposit Business. The Assuming Institution assumes and agrees to discharge, from and after the Bank Closing Date, in the usual course of conducting a banking business, the duties and obligations of the Failed Bank with respect to all Safe Deposit Boxes, if any, of the Failed Bank and to maintain all of the necessary facilities for the use of such boxes by the renters thereof during the period for which such boxes have been rented and the rent therefor paid to the Failed Bank, subject to the provisions of the rental agreements between the Failed Bank and the respective renters of such boxes; provided, that the Assuming Institution may relocate the Safe Deposit Boxes of the Failed Bank to any office of the Assuming Institution located in the Failed Bank Assessment Area in which such Safe Deposit Boxes were located. The Safe Deposit Boxes shall be located and maintained in such Failed Bank Assessment Area for a minimum of one year from the Bank Closing Date.

4.4. Safekeeping Business. The Receiver transfers, conveys and delivers to the Assuming Institution and the Assuming Institution accepts all securities and other items, if any, held by the Failed Bank in safekeeping for its customers as of the Bank Closing Date. The Assuming Institution assumes and agrees to honor and discharge, from and after the Bank Closing Date, the duties and obligations of the Failed Bank with respect to such securities and items held in safekeeping. The Assuming Institution shall provide to the Receiver written verification of all assets held by the Failed Bank for safekeeping within sixty (60) days after the Bank Closing Date. The assets held for safekeeping by the Failed Bank shall be held and maintained by the Assuming Institution in the Failed Bank Assessment Area for a minimum of one year from the Bank Closing Date, At the option of the Assuming Institution, the safekeeping business may be provided at any or all of the Bank Premises, or at other premises within the Failed Bank Assessment Area. The Assuming Institution shall be entitled to all rights and benefits which accrue after the Bank Closing Date with respect to securities and other items held in safekeeping.

4.5. Trust Business.

(a) Assuming Institution as Successor. The Assuming Institution shall, without further transfer, substitution, act or deed, to the full extent permitted by law, succeed to the rights, obligations, properties, assets, investments, deposits, agreements, and trusts of the Failed Bank under trusts, executorships, administrations, guardianships, and agencies, and other fiduciary or representative capacities, all to the same extent as though the Assuming Institution

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

had assumed the same from the Failed Bank prior to the Bank Closing Date; provided, that any liability based on the misfeasance, malfeasance or nonfeasance of the Failed Bank, its directors, officers, employees or agents with respect to the trust business is not assumed hereunder.

(b) Wills and Appointments. The Assuming Institution shall, to the full extent permitted by law, succeed to, and be entitled to take and execute, the appointment to all executorships, trusteeships, guardianships and other fiduciary or representative capacities to which the Failed Bank is or may be named in wills, whenever probated, or to which the Failed Bank is or may be named or appointed by any other instrument.

(c) Transfer of Trust Business. In the event additional proceedings of any kind are necessary to accomplish the transfer of such trust business, the Assuming Institution agrees that, at its own expense, it will take whatever action is necessary to accomplish such transfer. The Receiver agrees to use reasonable efforts to assist the Assuming Institution in accomplishing such transfer.

(d) Verification of Assets. The Assuming Institution shall provide to the Receiver written verification of the assets held in connection with the Failed Bank's trust business within sixty (60) days after the Bank Closing Date.

4.6. Bank Premises .

(a) Option to Purchase . Subject to Section 3.5, the Receiver hereby grants to the Assuming Institution an exclusive option for the period of sixty (60) days commencing the day after the Bank Closing Date with respect to Bank Premises for which the Assuming Institution declined its option to purchase at a fixed price as shown on the Bid Form, and for a period of ninety (90) days commencing the day after the Bank Closing Date with respect to all other owned Bank Premises to purchase any or all owned Bank Premises, including all Fixtures and all Furniture and Equipment located on or at the Bank Premises. The Assuming Institution shall give written notice to the Receiver within the option period of its election to purchase or not to purchase any of the owned Bank Premises. Any purchase of such Bank Premises shall be effective as of the date of the Bank Closing Date and such purchase shall be consummated as soon as practicable thereafter, and in no event later than the Settlement Date.

(b) Option to Lease . The Receiver hereby grants to the Assuming Institution. an exclusive option for the period of sixty (60) days commencing the day after the Bank Closing Date to cause the Receiver to assign to the Assuming Institution any or all leases for leased Bank Premises, if any, to the extent such leases can be assigned; provided that the exercise of this option with respect to any lease must be as to all premises or other property subject to such lease. To the extent the lease payments provided for in any assigned lease are minimal in relation to the current market rate, and the value of that difference is not otherwise reflected in the purchase of the associated Fixtures, the Assuming Institution shall pay the Receiver the. Fair Market Value of the Receiver's interest in any such assigned lease. The Assuming Institution shall give notice to the Receiver within the option period of its election to accept or not to accept an assignment of any or all leases (or enter into new leases in lieu thereof). The Assuming Institution shall assume all leases assigned (or enter into new leases in lieu thereof) pursuant to this Section 4.6.

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

(c) Facilitation . The Receiver shall facilitate the assumption, assignment or sublease of leases or the negotiation of new leases by the Assuming Institution; provided that neither the Receiver nor the Corporation shall be obligated to engage in litigation, make payments to the Assuming Institution or to any third party in connection with facilitating any such assumption, assignment, sublease or negotiation or commit to any other obligations to third parties.

(d) Notice of Surrender of Bank Premises . The Assuming Institution shall give the Receiver at least fifteen (15) days prior written notice of its intent to surrender to the Receiver any Bank Premises with respect to which the Assuming Institution has not exercised the options provided in Sections 4.6(a) and 4.6(b). Any such notice shall designate the intended Bank Premises Surrender Date and shall terminate the Assuming Institution's option with respect to such Bank Premises.

(e) Occupancy Costs .

(i) The Assuming Institution shall pay to the Receiver, or to appropriate third parties at the direction of the Receiver, for the period from the Bank Closing Date to the Bank Premises. Surrender Date, the following amounts: (A) for owned. Bank Premises, the market rental value, as determined by the appraiser selected in accordance with the definition of Fair Market Value, and all operating costs, and (B) for leased Bank Premises, all operating costs with respect thereto. The Assuming Institution shall comply with the terms of applicable leases on leased Bank Premises, including without limitation the timely payment of all rent. Operating costs include, without limitation, all taxes, fees, charges, maintenance, utilities, insurance and assessments, to the extent not included in the rental value or rent. If the Assuming Institution elects to purchase any owned Bank Premises in accordance with Section 4.6(a), the amount of any rent paid (and taxes paid to the Receiver which have not been paid to the taxing authority and for which the Assuming Institution assumes liability) by the Assuming Institution with respect thereto shall be applied as an offset against the purchase price thereof.

(ii) The Assuming Institution shall pay to the Receiver rent for all owned or leased Furniture and Equipment, all owned or leased Fixtures and all Specialty Assets located on or at the Bank Premises for the period from the Bank Closing Date to the Bank Premises Surrender Date. Rent for such property owned by the Failed Bank shall be the market rental value thereof, as determined by the Receiver within sixty (60) days after the Bank Closing Date. Rent for such property leased by the Failed Bank shall be an amount equal to any and all rent and other amounts which the Receiver incurs or accrues as an obligation or is obligated to pay for such period pursuant to all leases and contracts with respect to such property. If the Assuming Institution purchases any owned Furniture and Equipment, owned Fixtures or Specialty Assets in accordance with Sections 4.6(f), 4.6(h) or 4.6(j), the amount of any rents paid by the Assuming Institution with respect thereto shall be applied as an offset against the purchase price thereof.

(iii) Subject to Section 4.1, if the Assuming Institution gives notice of its election not to accept an assignment of a lease for one or more of the leased Bank Premises, or not to purchase one or more of the owned Bank Premises, within two Business Days of the Bank Closing Date, and the Receiver is satisfied that all of the

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

conditions for surrender of such Bank Premises set forth in this Agreement have been met within fifteen (15) days of the Bank Closing Date, then, notwithstanding any other provision of this Agreement to the contrary, the Assuming Institution shall not be liable for any of the costs imposed by this Section 4.6(e).

(f) Certain Requirements as to Fixtures,. Furniture and Equipment and Certain Specialty Assets. If the Assuming Institution purchases owned Bank Premises (including any Bank Premises purchased at the fixed price shown on the Bid Form) or accepts an assignment of the lease (or enters into a sublease or a new lease in lieu thereof) for leased Bank Premises as provided in Section 4.6(a) or 4.6(b), or if the Assuming Institution does not exercise either such option, but within twelve (12) months following the Bank Closing Date obtains the right to occupy all or any portion of such Bank Premises (the "Subsequently Occupied Space"), whether by assignment, lease, sublease, purchase or otherwise, other than in accordance with Section 4.6(a) or 4.6(b), the Assuming Institution shall (i) effective as of the Bank Closing Date, purchase from the Receiver all Fixtures, all Furniture and Equipment, and all Specialty Assets with an appraised value (as determined in accordance with Section 4.6(j)) of less than $10,000 owned by the Failed Bank and located on or at the Subsequently Occupied Space as of the. Bank Closing Date at Fair Market Value, (ii) accept an assignment or a sublease of the leases or negotiate new leases for all Fixtures and Furniture and Equipment leased by the Failed Bank and located on or at the Subsequently Occupied Space, and (iii) if applicable, accept an assignment or a sublease of any ground lease or negotiate a new ground lease with respect to any land on which the Subsequently Occupied Space is located; provided that the Receiver has not previously disposed of such Fixtures or Furniture and Equipment or Specialty Assets or repudiated the leases referred to in clause (ii) or (iii).

(g) Surrendering Bank Premises.

(i) If the Assuming Institution elects not to purchase any owned Bank Premises, the notice of such election in accordance with Section 4.6(a) shall specify the Bank Premises Surrender Date. The Assuming Institution shall be responsible for promptly relinquishing and releasing to the Receiver such Bank Premises and the Fixtures, the Furniture and Equipment and the Specialty Assets located thereon which existed at the time of the Bank Closing Date, in the same condition as at the Bank Closing Date, and at the Bank Premises where they were inventoried at the. Bank Closing Date, normal wear and tear excepted. Any of the aforementioned which is missing will be charged to the Assuming Institution at the item's Fair Market Value as determined in accordance with this Agreement. By remaining in any such Bank Premises more than 150 days after the Bank Closing Date (unless the Assuming Institution must do so to comply with Section 4.1 and has made appropriate arrangements with the Receiver and all applicable lessors), the Assuming Institution shall, at the Receiver's option, (x) be deemed to have agreed to purchase such Bank Premises, and to assume all leases, obligations and liabilities with respect to leased Furniture and Equipment and leased Fixtures located thereon and any ground lease with respect to the land on which such Bank Premises are located, and (y) be required to purchase all Fixtures and all Furniture and Equipment owned by the Failed Bank and located on or at the Bank Premises as of the Bank Closing Date.

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

(ii) If the Assuming Institution elects not to accept an assignment of the lease or sublease of any leased Bank Premises, the notice of such election in accordance with Section 4.6(b) shall specify. the Bank Premises Surrender Date. The Assuming Institution shall be responsible for promptly relinquishing and releasing to the Receiver such Bank Premises and the Fixtures, the Furniture and Equipment and the Specialty Assets located thereon which existed at the time of the Bank Closing Date, in the same condition as at the Bank Closing Date, and at the Bank Premises where they were inventoried at the Bank Closing Date, normal wear and tear excepted. Any of the aforementioned which is missing will be charged to the Assuming Institution at the item's Fair Market Value as determined in accordance with this Agreement. By failing to provide notice of its intention to surrender such Bank Premises prior to the expiration of the option period specified in Section 4.6(b), or by remaining in any such Bank Premises more than 150 days after the Bank Closing Date (unless the Assuming Institution must do so to comply with Section 4.1 and has made appropriate arrangements with the Receiver and all applicable lessors), the Assuming Institution shall, at the Receiver's option, (x) be deemed to have assumed all leases, obligations and liabilities with respect to such Bank Premises (including any ground lease with respect to the land on which such Bank Premises are located), and leased Furniture and Equipment and leased Fixtures located thereon in accordance with this Section 4.6 (unless the Receiver previously repudiated any such lease), and (y) be required to purchase all Fixtures and all Furniture and Equipment owned by the Failed Bank at Fair Market Value and located on or at the Bank Premises as of the Bank Closing Date.

(h) Furniture and Equipment and Certain Other Equipment. The Receiver hereby grants to the Assuming Institution an option to purchase all Furniture and Equipment owned by the Failed Bank at Fair Market Value and located at any leased or owned Bank Premises (A) that the Assuming Institution does not elect to purchase pursuant to Section 4.6(a) or (b) for which Assuming Institution does not elect to take assignment of its lease pursuant to Section 4.6(b); provided that, the Assuming Institution shall give the Receiver notice of its election to purchase such Furniture and Equipment at the time it gives notice of its intention to surrender such Bank Premises.

(i) Option to Put Bank Premises and Related Fixtures, Furniture and Equipment.

(i) For a period of ninety (90) days following the Bank Closing Date, the Assuming Institution shall be entitled to require the Receiver to purchase any Bank Premises that is owned, directly or indirectly, by an Acquired Subsidiary and the purchase price paid by the Receiver shall be the Fair Market Value of the Bank Premises.

(ii) If the Assuming Institution elects to require the Receiver to purchase any Bank Premises that is owned, directly or indirectly, by an Acquired Subsidiary, the Assuming Institution shall also have the option, exercisable within the same ninety (90) day time period, to require the Receiver to purchase any Fixtures, any Furniture and Equipment and any Specialty Assets that are owned, directly or indirectly, by an Acquired Subsidiary and are located on or at such Bank Premises and were utilized by the Failed Bank for banking purposes. The purchase price paid by the Receiver shall

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

be the Fair Market Value of the Fixtures, Furniture and Equipment and Specialty Assets purchased.

(iii) If the Assuming Institution elects to exercise its options under this Section 4.6(1), the Assuming Institution shall pay to the Receiver occupancy costs as described in Section 4.6(e) and shall surrender the Bank Premises in accordance with Section 4.6(g)(i).

(iv) Regardless of whether the Assuming Institution exercises any of its options under this Section 4.6(i), the purchase price for the Acquired Subsidiary shall be adjusted by the difference between the Fair Market Value of the Bank Premises, the Fixtures, the Furniture and Equipment and the Specialty Assets utilized by the Failed Bank for banking purposes and their respective Book Value as reflected on the books and records of the Acquired Subsidiary. Such adjustment shall be made in accordance with Article VIII of this Agreement.

(j) Option to Purchase Specialty Assets. The Receiver hereby grants. to the Assuming Institution an exclusive option for the period of thirty (30) days commencing the day after the Receiver provides the Assuming Institution the appropriate appraisal to purchase at Fair Market Value all, some or none of the Specialty Assets.

(k) Data Removal. The Assuming Institution shall, prior to returning any automated teller machine to Receiver and unless otherwise requested by the Receiver, (i) remove all data from that automated teller machine and (ii) provide a written statement to the Receiver that all data has been removed in a manner that renders it unrecoverable.

4.7. Agreement with Respect to Leased Data Management Equipment .

(a) Option . The Receiver hereby grants to the Assuming Institution an exclusive option for the period of ninety (90) days commencing the day after Bank Closing Date to accept an assignment from the Receiver of all Leased Data Management Equipment.

(b) Notices Regarding Leased Data Management Equipment . The Assuming Institution shall (i) give written notice to the Receiver within the option period specified in Section 4.7(a) of its intent to accept or decline an assignment or sublease of all Leased Data Management Equipment and promptly accept an assignment or sublease of such Leased Data Management Equipment, and (ii) give written notice to the appropriate lessor(s) that it has accepted an assignment or sublease of any such Leased Data Management Equipment that is subject to a lease.

(c) Facilitation by Receiver . The Receiver agrees to facilitate the assignment or sublease of Leased Data Management Equipment or the negotiation of new leases or license agreements by the Assuming Institution; provided, that neither the Receiver nor the Corporation shall be obligated to engage in litigation, make payments to the Assuming Institution or to any third party in connection with facilitating any such assumption, assignment, sublease or negotiation or commit to any other obligations to third parties.

(d) Operating Costs . the Assuming Institution agrees, during its period of use of any Leased Data Management Equipment and ending on the date which is thirty (30) days

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

after the Assuming Institution has given notice to the Receiver of its election not to assume such lease, to pay to the Receiver or to appropriate third parties at the direction of the Receiver all operating costs with respect thereto and to comply with all relevant terms of any existing Leased Data Management Equipment leases entered into by the Failed Bank, including without limitation the timely payment of all rent, taxes, fees, charges, maintenance, utilities, insurance and assessments.

(e) Assuming Institution's Obligation . The Assuming Institution shall, not later than fifty (50) days after giving the notice provided in Section 4.7(b), (i) relinquish and release to the Receiver or, at the direction of the Receiver, to a third party, all Leased Data Management Equipment, in the same condition as at Bank Closing Date, normal wear and tear excepted, or (ii) accept an assignment or a sublease of any existing Leased Data Management lease or negotiate a new lease or license agreement under this Section 4.7 with respect to Leased Data Management Equipment.

(f) Data Removal . The Assuming Institution shall, prior to returning any Leased Data Management Equipment, and unless otherwise requested by the Receiver, (i) remove all data from the Leased Data Management Equipment and (ii) provide a written statement to the Receiver that all data has been removed in a manner that renders it unrecoverable.

4.8. Certain Existing Agreements .

(a) Assumption of Agreements. Subject to the provisions of Section 4.8(b), with respect to agreements existing as of the. Bank Closing Date which provide for the rendering of services by or to the Failed Bank, within ninety (90) days after the Bank Closing Date, the Assuming Institution shall give the Receiver written notice specifying whether it elects to assume or not to assume each such agreement. Except as may be otherwise provided in this Article IV, the Assuming Institution agrees to comply with the terms of each such agreement for a period commencing on the day after the Bank Closing Date and ending on (i) in the case of an agreement that provides for the rendering of services by the Failed Bank, the date which is ninety (90) days after the Bank Closing Date, and (ii) in the case of an agreement that provides for the rendering of services to the Failed Bank, the date which is thirty (30). days after the Assuming Institution has given notice to the Receiver of its election not to assume such agreement; provided that the Receiver can reasonably make such service agreements available to the Assuming Institution. The Assuming Institution shall be deemed by the Receiver to have assumed agreements for which no notification is timely given. The Receiver agrees to assign, transfer, convey and deliver to the Assuming Institution all right, title and interest of the Receiver, if any, in and to agreements the Assuming Institution assumes hereunder. In the event the Assuming Institution elects not to accept an assignment of any lease (or sublease) or negotiate a new lease for leased Bank Premises under Section 4.6 and does not otherwise occupy such premises, the provisions of this. Section 4.8(a) shall not apply to service agreements related to such premises. The Assuming Institution agrees, during the period it has the use or benefit of any such agreement, promptly to pay. to the Receiver or to appropriate third parties at the direction of the Receiver all operating costs with respect thereto and to comply with all relevant terms of such agreement.

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

(b) Excluded Agreements. The provisions of Section 4.8(a) regarding the Assuming Institution's election to assume or not assume certain agreements shalt not apply to (i) agreements pursuant to which the Failed Bank provides loan servicing for others or loan servicing is provided to the Failed Bank by others, (ii) agreements maintained between the Failed Bank and MERSCORP, Inc., or its wholly owned subsidiary, Mortgage Electronic Registration Systems, Inc., (iii) agreements that are subject to Sections 4.1 through 4.7 and any insurance policy or bond referred to in Section 3.5(a) or other agreement specified in Section 3.5, (iv) consulting, management or employment agreements, if any, between the Failed Bank and its employees or other Persons, and (v) any contract or agreement under which the Failed Bank is the lessor of Bank Premises or Other Real Estate. Except as otherwise expressly set forth elsewhere in this Agreement, the Assuming Institution does not assume any liabilities or acquire any rights under any of the agreements described in this Section 4.8(b).

4.9. Informational Tax Reporting . The Assuming Institution agrees to perform all obligations of the Failed Bank with respect to Federal and State income tax informational reporting related to (i) the Acquired Assets and the Liabilities Assumed, (ii) deposit accounts that were closed and loans that were paid off or collateral obtained with respect thereto prior to the Bank Closing Date, (iii) miscellaneous. payments made to vendors of the Failed Bank, and (iv) any other asset or liability of the Failed Bank, including, without limitation, loans not purchased and Deposits not assumed by the Assuming Institution, as may be required by the Receiver.

4.10. Insurance .

(a) Assuming Institution to Insure. The Assuming Institution will obtain and maintain insurance coverage acceptable to the Receiver (including public liability, fire, and extended coverage insurance) naming the Assuming Institution as the insured and the Receiver as additional insured, effective from and after the Bank Closing. Date, with respect to all (i) Bank Premises, and (ii) Fixtures, Furniture and Equipment, Specialty Assets and Leased Data Management Equipment located on or at those Bank Premises. The Assuming Institution's obligation to insure and to maintain the Receiver as an additional insured on Bank Premises insurance coverage shall cease upon either: (x) Bank Premises Surrender Date or (y) the date the Assuming Institution receives a deed from the Receiver for owned Bank Premises or assumes the lease for leased Bank Premises.

(b) Rights of Receiver. If the Assuming Institution at any time from or after Bank Closing Date fails to (i) obtain or maintain any of the insurance policies required by Section 4.10(a), (ii) pay any premium in whole or in part related to those insurance policies, or (iii) provide evidence of those insurance policies acceptable to the Receiver, then the Receiver may in its sole and absolute discretion, without notice, and without waiving or releasing any obligation or liability of the Assuming Institution, obtain and maintain insurance policies, pay. insurance premiums and take any other actions with respect to the insurance coverage as the Receiver deem advisable. The Assuming Institution will reimburse the Receiver for all sums disbursed in connection with this Section 4.10(b).

4.11. Office Space for Receiver and Corporation; Certain Payments .

(a) FDIC Office Space. For the period commencing on the day following the Bank Closing Date and ending on the one hundred fiftieth (150th) day following the Bank

Basic P&A Agreement (VB. Illinois).		Valley Bank.
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Closing Date, the Assuming Institution will provide to the Receiver and the Corporation, without charge, adequate and suitable office space (including parking facilities and vault space), furniture, equipment (including photocopying and telecopying machines), email accounts, network access and technology resources (such as shared drive), and utilities (including local telephone service and fax machines) (collectively, "FDIC Office Space") at the Bank Premises occupied by the Assuming Institution for the Receiver and the Corporation to use in the discharge of their respective functions with respect to the Failed Bank.

(b) Receiver's Right to Extend. Upon written notice by the Receiver or the Corporation, for the period commencing on the one hundred fifty-first (151st) day. following the Bank Closing Date and ending no later than the three hundred and sixty-fifth (365th). day following the Bank Closing Date, the Assuming Institution will continue to provide to the Receiver and the Corporation FDIC Office Space at the Bank Premises. During the period from the 151st day. following the Bank Closing Date until the day the FDIC and the Corporation vacate FDIC Office Space, the Receiver and the Corporation will pay to the Assuming Institution their respective pro rata share (based on square footage occupied) of (A) the market rental value for the applicable owned Bank Premises or (B) actual rent paid for applicable leased Bank Premises.

(c) Receiver's Relocation Right. If the Receiver or the. Corporation determine that the space provided by the Assuming Institution is inadequate or unsuitable, the Receiver and the Corporation may relocate to other quarters having adequate and suitable FDIC Office Space and the costs of relocation shall be borne by the Assuming Institution and any rental and utility costs for the balance of the period of occupancy by the Receiver and the Corporation shall paid in accordance with 4.11(b).

(d) Expenditures. The Assuming Institution will pay such bills and invoices on behalf of the Receiver and the Corporation as the Receiver or the Corporation may direct for the period beginning on the date of the Bank Closing Date and ending on Settlement Date. The Assuming Institution shall submit its requests for reimbursement of such expenditures pursuant to Article VIII of this. Agreement.

4.12. Continuation of Group Health Plan Coverage for Former Employees of the Failed Bank.

(a) Continuation Coverage. The Assuming Institution agrees to assist the Receiver, as provided in this Section 4.12, in offering individuals who were employees or former employees of the Failed Bank, or any of its Subsidiaries, and who, immediately prior to the Bank Closing Date, were receiving, or were eligible to receive, health insurance coverage or health insurance continuation coverage from the Failed Bank ("Eligible Individuals"), the opportunity to obtain health insurance coverage in the Corporation's Federal Insurance Administration Continuation Coverage Plan which provides for health insurance continuation coverage to such Eligible Individuals and other persons who are qualified beneficiaries of the Failed Bank ("Qualified Beneficiaries") as defined in the Employee Retirement Income Security Act of 1974, as amended ("ERISA") § 607, 29 U.S.C. § 1167. The Assuming Institution shall consult with the Receiver and not later than five (5) Business Days after the Bank Closing Date shall provide written notice to the Receiver of the number (if available), identity (if available) and addresses (if available) of the Eligible Individuals who are Qualified Beneficiaries of the Failed

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Bank and for whom a "qualifying event" (as defined in ERISA § 603, 29 U.S.C. § 1163) has occurred and with respect to whom the Failed Bank's obligations under Part 6 of Subtitle B of Title I of ERISA,. 29. U.S.C. §§. 1161-1169 have not been satisfied in full, and such other information as the Receiver may reasonably require. The Receiver shall cooperate with the Assuming Institution in order to permit it to prepare such notice and shall provide to the Assuming Institution such data in its possession as may be reasonably required for purposes of preparing such notice.

(b) Qualified Beneficiaries; Expenses. The Assuming Institution shall take such further action to assist the Receiver in offering the Eligible Individuals who are Qualified Beneficiaries of the Failed Bank the opportunity to obtain health insurance coverage in the Corporation's Federal Insurance Administration Continuation Coverage Plan as the Receiver may direct. All expenses incurred and paid by the Assuming Institution (i) in connection with the obligations of the Assuming Institution under this Section 4.12, and (ii) in providing health insurance continuation coverage to any Eligible Individuals who are hired by the Assuming Institution and such employees' Qualified Beneficiaries shall be borne by the Assuming Institution.

(c) Failed Bank Employees. Unless otherwise agreed by the Receiver and the Assuming Institution, the Assuming Institution shall be responsible for all salaries and payroll costs, including benefits, for all Failed Bank employees from the time of the closing of the Failed Bank until the Assuming Institution makes a final determination as to whether such employee is to be retained by the Assuming Institution. The Assuming Institution shall offer to the Failed Bank employees it retains employment benefits comparable to those the Assuming Institution, offers its current employees. In the event the Receiver utilizes the services of any Failed Bank employee, the Receiver shall reimburse the Assuming Institution for such cost through the settlement process described in Article VIII.

(d) No Third Party Beneficiaries. This Section 4.12 is for the sole and exclusive benefit of the parties to this Agreement, and for the benefit of no other Person (including any former employee of the Failed Bank or any Subsidiary thereof, Eligible Individual or Qualified Beneficiary of such former employee). Nothing in this Section 4.12 is intended by the parties, or shall be construed, to give any Person (including any former employee of the Failed Bank or any Subsidiary thereof, Eligible Individual or Qualified Beneficiary of such former employee) other than the Corporation, the Receiver and the Assuming Institution, any legal or equitable right, remedy. or claim under or with respect to the provisions of this Section 4.12.

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

4.13. Interim Asset Servicing. At any time after the Bank Closing Date, the Receiver may establish on its books an asset pool(s) and may transfer to such asset pool(s) by means of accounting entries on the books of the Receiver) all or any assets and liabilities of the Failed Bank which are not acquired by the Assuming Institution, including, without limitation, wholly unfunded Commitments and assets and liabilities which may be acquired, funded or originated by the Receiver subsequent to the Bank Closing Date. The Receiver may remove assets (and liabilities) from or add assets (and liabilities) to such pool(s) at any time in its discretion. At the option of the Receiver, the Assuming Institution agrees to service, administer and collect such pool assets in accordance with, and for the term set forth in, Exhibit 4.13 .

4.14. Agreement with Respect to Valley Bank, Fort Lauderdale, Florida. The Assuming Institution will provide operational support to the assuming institution of Valley Bank, Fort Lauderdale, Florida (the "Florida Al"), and the FDIC as receiver of Valley Bank, Fort Lauderdale, Florida (the "Florida Receiver"), including support for core banking applications and loan servicing, and all other applications as may be required to support infrastructure in the normal course of business, until a transition of these systems can be accomplished, but in any event not more than 180 days from the Bank Closing Date. The Assuming Institution will also provide operational and all other necessary support to the. Florida AI to enable the Florida AI to perform interim asset servicing under its Interim Asset Servicing Arrangement with the Florida Receiver for a period of up to 180 days. after. the Bank Closing Date.

ARTICLE V. DUTIES WITH RESPECT TO DEPOSITORS OF THE FAILED BANK .

5.1. Payment of Checks, Drafts, Orders and Deposits. Subject to Section 9.5, the Assuming Institution agrees to pay all properly drawn checks, drafts, withdrawal orders and Assumed Deposits of depositors of the Failed Bank presented for payment, whether drawn on the check or draft forms provided by the Failed Bank or by the Assuming Institution, to the extent that the Deposit balances to the credit of the respective makers or drawers assumed by the Assuming Institution under this Agreement are sufficient to permit the payment thereof, and in all other respects to discharge, in the usual course of conducting a banking business, the duties and obligations of the. Failed Bank with respect to the Deposit balances due and owing to the depositors of the. Failed Bank assumed by the Assuming Institution under this Agreement.

5.2. Certain Agreements Related to Deposits . Except as may be modified pursuant to Section 2.2, the Assuming Institution agrees to honor the terms and conditions of any written escrow or loan servicing agreement or other similar agreement relating to a Deposit liability assumed by the Assuming Institution pursuant to this. Agreement.

5.3. Notice to Depositors.

(a) Assumption of Deposits. Within seven (7) days after the Bank Closing Date, the Assuming Institution shall give notice by mail to each depositor of the Failed Bank of (i) the assumption of the Deposit liabilities of the Failed Bank, and (ii) the procedures to claim Deposits (the Receiver shall provide item (ii) to Assuming Institution). The Assuming Institution shall also publish notice of its assumption of the Deposit liabilities of the Failed Bank in a newspaper of general circulation in the county or counties in which the Failed Bank was located.

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

(b) Notice to Depositors. Within seven (7) days after the Bank Closing Date, the Assuming Institution shall give notices by mail to each depositor of the Failed Bank, as required under Section 2.2.

(c) Fee Schedule. If the Assuming Institution proposes to charge fees different from those fees formerly charged by the Failed Bank, the Assuming Institution shall include its fee schedule in its mailed notice.

(d) Approval of Notices and Publications. The Assuming Institution shall obtain approval of all notices and publications required by this Section 5.3 from counsel for the Receiver prior to mailing or publication.

(e) Validation. To validate the notice requirements outlined in Section 5.3, the Assuming Institution shall provide the Receiver (i) an Affidavit of Publication to meet the publication requirements outlined in Section 5.3(a) and (ii) the Assuming Institution will prepare an Affidavit of Mailing in a form substantially. similar to Exhibit 2.3B after mailing the seven (7) day Notice to Depositors as required under Section 5.3(b)..

ARTICLE VI. FAILED. BANK RECORDS .

6.1. Transfer of Failed Bank Records . In accordance with Sections 2.1 and 3.1, the Receiver assigns, transfers, conveys and delivers to the Assuming Institution, whether located on Bank Premises occupied or not occupied by the Assuming Institution or at any other location, the following:

(a) all Failed Bank Records pertaining to the Assumed Deposits, but not limited to, the following:

(i) signature cards, orders, contracts between the Failed Bank and its depositors and Failed Bank Records of similar character;

(ii) passbooks of depositors held by the Failed Bank, deposit slips, cancelled checks and withdrawal orders representing charges to accounts of depositors; and

(b) all Failed Bank Records pertaining to the Acquired Assets, including, but not limited to, the following:

(i) Failed Bank Records of deposit balances carried with other banks, bankers or trust companies;

(ii) Loan and collateral Failed Bank Records and Credit Files and other documents;

(iii) deeds, mortgages, abstracts, surveys, and other instruments or records of title pertaining to real estate or real estate mortgages;

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(iv) signature cards, agreements and Failed Bank Records pertaining to Safe Deposit Boxes, if any; and

(vi) Failed Bank Records. pertaining to the credit card business, trust business or safekeeping business of the Failed Bank, if any.

6.2. Transfer of Assigned Failed Bank Records. The Receiver shall transfer to the Assuming Institution all Failed Bank Records described in Section 6.1 as soon as practicable on or after the date of this Agreement..

6.3. Preservation of Failed Bank Records.

(a) Assuming Institution Failed Bank Records Retention. the Assuming Institution agrees that it will preserve and maintain, at its sole expense, for the joint benefit of the Receiver, the Corporation and the Assuming Institution, all Failed Bank Records except those Failed Bank Records which the Receiver, in its sole and absolute discretion, chooses to physically take. The Assuming Institution shall have the primary responsibility to respond to subpoenas, discovery requests, and other similar official inquiries and customer requests for lien releases with respect to the Failed Bank Records of which it has custody. With respect to its obligations under this Section 63 regarding Electronically Stored Information, the Assuming Institution will complete the Data Retention Catalog attached hereto as Schedule 6.3 and submit it to the Receiver within thirty (30) days following the Bank Closing Date. With respect to Electronically Stored Information, the Assuming Institution must maintain those Failed Bank Records in an easily accessible and useable format. If such Failed Bank Records are maintained by a third party vendor, the Assuming Institution is responsible for ensuring that the third party complies with this Article.

(b) Destruction of Certain Failed Bank Records. With regard to all Failed Bank Records of which it has custody which are at least ten (10) years old as of the date of the appointment of the Receiver, the Assuming Institution agrees to request written permission to destroy such Failed Bank Records by submitting a written request to destroy, specifying precisely which Failed Bank Records are included in the request, to DRR— Records Manager, CServiceFDICDAL@FDIC.gov.

(c) Destruction of Failed Bank Records After Six Years. With regard to all Failed Bank Records of which it has custody which have been maintained in the custody of the Assuming Institution after six (6) years from the date of the appointment of the Receiver, the Assuming Institution agrees to request written permission to destroy such Failed Bank Records by submitting a written request to destroy, specifying precisely which Failed. Bank Records are included in the request, to DRR—Records Manager, CServiceFDICDAL@FDIC.gov.

6.4. Access to Failed Bank Records; Copies The Assuming Institution agrees to permit the Receiver and the Corporation access to all Failed Bank Records of which the Assuming Institution has custody and to use, inspect, make extracts from or request copies of any such Failed Bank Records in the manner and to the extent requested, and to duplicate, in the discretion of the Receiver or the Corporation, any Failed Bank Record pertaining to Deposit account relationships; provided that in the event that the Failed Bank maintained one or more duplicate copies of such Failed Bank Records, the Assuming Institution hereby assigns, transfers,

Basic P&A Agreement (VB. Illinois).		Valley Bank.
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and conveys to the Corporation one such duplicate copy of each such Failed Bank Record without cost to the Corporation, and agrees to deliver to the Corporation all Failed Bank Records assigned and transferred to the Corporation under this Article VI as soon as practicable on or after the date of this Agreement. The party requesting a copy of any Failed Bank Record shall bear the cost (based on standard accepted industry charges to the extent applicable, as determined by the Receiver) for providing such duplicate Failed Bank Record. A copy of each Failed Bank Record requested shall be provided as soon as practicable by the party having custody thereof. If the Receiver or Corporation is seeking access to a Failed Bank Record from the Assuming Institution, the Receiver or Corporation need not provide a subpoena to obtain access to the Failed Bank Records in the Assuming Institution's custody.

6.5. Right of Receiver or Corporation to Audit. The Receiver or the Corporation, their respective agents, contractors and employees, may (but are not required to) perform an audit to determine the Assuming Institution's compliance with this Agreement at any time, by providing not less than ten (10) Business Days prior notice. The scope and duration of any such audit shall be at the discretion of the Receiver or the Corporation, as the case may be. The Receiver or the Corporation, as the case may be, shall bear the expense of any such audit. In the event that any corrections are necessary as a result of such an audit, the Assuming Institution and the Receiver shall make such accounting adjustments, payments and withholdings as may be necessary to give retroactive effect to such corrections.

6.6. Agreement with Respect to Records of Valley Bank, Fort Lauderdale, Florida. the Assuming Institution will cooperate with the Florida AI and the Florida Receiver for the transfer of the records and property of Valley Bank, Fort. Lauderdale, Florida, to the Florida AI and the Florida Receiver.

ARTICLE. VII. BID; INITIAL PAYMENT .

The Assuming Institution has submitted to the Receiver a Deposit premium bid of 0% (the "Bid Amount"). The Deposit premium bid will be applied to the total of all Assumed Deposits except for brokered, CDARS ® , and any market place or similar subscription services Deposits as reflected on Schedule 7. On the Payment Date, the Assuming Institution will pay to the Corporation, or the Corporation will pay to the Assuming Institution, as the case may be, the Initial Payment, together with interest on such amount (if the. Payment Date is not the day following the Bank Closing Date) from and including the day following the Bank Closing Date to and including the day preceding the Payment Date at the Settlement Interest. Rate.

ARTICLE VIII. ADJUSTMENTS; SETTLEMENT PROCESS .

8.1. Pro Forma Statement. the Receiver, as soon as practicable after the Bank Closing Date, in accordance with the best information then available, shall provide to the Assuming Institution a Pro Forma statement reflecting any adjustments of such liabilities and assets as may be necessary. Such Pro Forma statement shall take into account, to the extent possible, (a) liabilities and assets of a nature similar to those contemplated by Section 2.1 or Section 3.1, respectively, which on the Bank Closing Date were carried in the Failed Bank's suspense accounts, (b) accruals as of the Bank Closing Date for all income related to the assets and business of the Failed Bank acquired by the Assuming Institution hereunder, whether or not such accruals were reflected on the Failed Bank Records in the normal course of its operations,

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and (c) adjustments to determine the Book Value of any investment in an Acquired Subsidiary and related accounts on the "bank only" (unconsolidated) balance sheet of the Failed Bank based on the Equity Method of Accounting, whether or not the Failed Bank used the Equity Method of Accounting for investments in subsidiaries, except that the resulting amount cannot be less than the Acquired Subsidiary's recorded equity as of the Bank Closing Date as reflected on the Failed Bank Records of the Acquired Subsidiary. Acquired Subsidiaries with negative equity will be restated to $1 pursuant to the Equity Method of Accounting. Any Acquired Asset purchased by the Assuming Institution or any asset of an Acquired Subsidiary purchased by the Assuming Institution pursuant to Section 3.1 which was partially or wholly charged off during the period beginning the day after the Bid Valuation Date to the date of the Bank Closing Date shall be deemed not to be charged off for the purposes of the Pro Forma statement, and the purchase price shall be determined pursuant to Section 3.2.

8.2. Correction of Errors and Omissions; Other Liabilities .

(a) Adjustments to Correct Errors. In the event any bookkeeping omissions or errors are discovered in preparing any Pro Forma statement or in completing the transfers and assumptions contemplated hereby, the parties hereto agree to correct such errors and omissions, it being understood that, as far. as practicable, all adjustments will be made consistent with the judgments, methods, policies or accounting principles utilized by the Failed Bank in preparing and maintaining Failed Bank Records, except that adjustments made pursuant to this Section 8.2(a) are not intended to bring the Failed Bank Records into accordance with generally accepted accounting principles.

(b) Receiver's. Rights. Regarding Other Liabilities. If the Receiver discovers at any time subsequent to the date of this Agreement that any claim exists against the Failed Bank which is of such a nature that it would have been included in the liabilities assumed under. Article II had the existence of such claim or the facts giving rise thereto been known as of the. Bank Closing Date, the Receiver may, in its discretion, at any time, require that such claim be assumed by the Assuming Institution in a manner consistent with the intent of this Agreement. The Receiver will make appropriate adjustments to the Pro Forma statement provided by the Receiver to the Assuming Institution pursuant to Section 8.1 as may be necessary.

8.3. Payments. The Receiver agrees to cause to be paid to the Assuming Institution, or the Assuming Institution agrees to pay to the Receiver, as the case may be, on the Settlement Date, a payment in an amount which reflects net adjustments (including any costs, expenses and fees associated with determinations of value as provided in this Agreement) made pursuant to Section 8.1 or Section 8.2, plus interest as provided in Section 8.4. The Receiver and the Assuming Institution agree to effect on the Settlement Date any further transfer of assets to or assumption of liabilities or claims by the Assuming Institution as may be necessary in accordance with Section 8.1 or Section 8.2.

8.4. Interest. Any amounts paid under Section 8.3 or Section 8.5 shall bear interest for the period from and including the day following the Bank Closing Date to and including the day preceding the payment at the. Settlement Interest Rate.

8.5. Subsequent Adjustments. In the event that the Assuming Institution or the Receiver discovers any errors or omissions as contemplated by Section 8.2 or any error with

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respect to the payment made under Section 8.3 after the Settlement Date, the Assuming Institution and the Receiver agree to promptly correct any such errors or omissions, make any payments and effect any transfers or assumptions as may be necessary to reflect any such correction plus interest as provided in. Section 8.4.

ARTICLE. IX. CONTINUING COOPERATION .

9.1. General Matters. The parties hereto will, in good faith and with their best efforts, cooperate with each other to carry out the transactions contemplated by this Agreement and to effect the purposes hereof.

9.2. Additional Title Documents. The Receiver, the Corporation and the Assuming Institution each shall, at any time, and from time to time, upon the request of any party hereto, execute and deliver such additional instruments and documents of conveyance as shall be reasonably necessary to vest in the appropriate party its full legal or equitable title in and to the property transferred pursuant to this Agreement or to be transferred in accordance herewith. The Assuming Institution shall prepare such instruments and documents of conveyance (in form and substance satisfactory to the Receiver) as shall be necessary to vest title to the Acquired Assets in the Assuming Institution. The Assuming Institution shall be responsible for recording such instruments and documents of conveyance at its own expense.

9.3. Claims and Suits.

(a) Defense and Settlement. The Receiver shall have the right, in its discretion, to (i) defend or settle any claim or suit against the Assuming Institution with respect to which the Receiver has indemnified the Assuming Institution in the same manner and to the same extent as provided in Article XII, and (ii) defend or settle any claim or suit against the Assuming Institution with respect to any Liability Assumed, which claim or suit may result in a loss to the Receiver arising out of or related to this Agreement, or which existed against the Failed Bank on or before the Bank Closing Date. The exercise by the Receiver of any rights under this Section 9.3(a) shall not release the Assuming Institution with respect to any of its obligations under this Agreement.

(b) Removal of Actions. In the event any action at law or in equity shall be instituted by any Person against the Receiver and the Corporation as codefendants with respect to any asset of the Failed Bank retained or acquired pursuant to this Agreement by the Receiver, the Receiver agrees, at the request of the. Corporation, to join with the Corporation in a petition to remove the action to the United States District Court for the proper district. The Receiver agrees to institute, with or without joinder of the Corporation as co-plaintiff, any action with respect to any such retained or acquired asset or any matter connected therewith whenever notice requiring such action shall be given by the Corporation to the Receiver.

9.4. Payment of Deposits. In the event any depositor does not accept the obligation of the Assuming Institution to pay any Deposit liability of the Failed Bank assumed by the Assuming Institution pursuant to this Agreement and asserts a claim against the Receiver for all or any portion of any such Deposit liability, the Assuming Institution agrees on demand to provide to the Receiver funds sufficient to pay such claim in an amount not in excess of the Deposit liability reflected on the books of the Assuming Institution at the time such claim is

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made. Upon payment by the Assuming Institution to the Receiver of such amount, the Assuming Institution shall be discharged from any further obligation under this Agreement to pay to any such depositor the amount of such Deposit liability paid to the Receiver.

9.5. Withheld Payments . At any time, the Receiver or the Corporation may, in its discretion, determine that all or any portion of any deposit balance assumed by the Assuming Institution pursuant to this Agreement does not constitute a "Deposit" (or otherwise, in its discretion, determine that it is the best interest of the Receiver or Corporation to withhold all or any portion of any deposit), and may direct the Assuming Institution to withhold payment of all or any portion of any such deposit balance. Upon such direction, the Assuming Institution agrees to hold such deposit and not to make any payment of such deposit balance to or on behalf of the depositor, or to itself, whether by way of transfer, set-off or otherwise. The Assuming Institution agrees to maintain the "withheld payment" status of any such deposit balance until directed in writing by the Receiver or the Corporation as to its disposition. At the direction of the Receiver or the Corporation, the Assuming Institution shall return all or any portion of such deposit balance to the Receiver or the Corporation, as appropriate, and thereupon the Assuming Institution shall be discharged from any further liability to such depositor with respect to such returned deposit balance. If such deposit balance has been paid to the depositor prior to a demand for return by the Corporation or the Receiver, and payment of such deposit balance had not been previously withheld pursuant to this Section 9.5, the Assuming Institution shall not be obligated to return such deposit balance to the Receiver or the Corporation. The Assuming Institution shall be obligated to reimburse the Corporation or the Receiver, as the case may be, for the amount of any deposit balance or portion thereof paid by the Assuming Institution in contravention of any previous direction to withhold payment of such deposit balance or return such deposit balance the payment of which was withheld pursuant to this Section 9.5.

9.6. Proceedings with Respect to Certain Assets and Liabilities.

(a) Cooperation by Assuming Institution. In connection with any investigation, proceeding or other. matter with respect to any asset or liability of the Failed Bank retained by the Receiver, or any asset of the Failed Bank acquired by the Receiver pursuant to this Agreement, the Assuming Institution shall cooperate to the extent reasonably required by the Receiver.

(b) Access to Records. In addition to its obligations under Section 6.4, the Assuming Institution shall provide representatives of the Receiver access at reasonable times and locations without other limitation or qualification to (i) its directors, officers, employees and agents and those of the Acquired Subsidiaries, and (ii) its books and records, the books and records of such Acquired Subsidiaries and all Credit Files, and copies thereof. Copies of books, records, and Credit Files shall be provided by the Assuming Institution as requested by the Receiver and the costs of duplication thereof shall be borne by the Receiver.

(c) Loan Documents. Not later than ten (10) days after the Put Notice pursuant to Section 3.4 or the date of the notice of transfer of any Loan by the Assuming Institution to the Receiver pursuant to Section 3.6, the Assuming. Institution shall deliver to the Receiver such documents with respect to such Loan as the Receiver may request, including without limitation the following: (i) all related Credit Documents (other than certificates, notices and other ancillary documents), (ii) a certificate setting forth the principal amount on the date of

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the transfer and the amount of interest, fees and other charges then accrued and unpaid thereon, and any restrictions on transfer to which any such Loan is subject, and (iii) all Credit Files, and all documents, microfiche, microfilm and computer records (including but not limited to magnetic tape, disc storage, card forms and printed copy) maintained by, owned by, or in the possession of the Assuming Institution or any Affiliate of the Assuming Institution relating to the transferred Loan.

9.7. Information. The Assuming Institution promptly shall provide to the Corporation such other information, including financial statements and computations, relating to the performance of the provisions of this Agreement as the Corporation or the Receiver may request from time to time, and, at the request of the Receiver, make available employees of the Failed Bank employed or retained by the Assuming Institution to assist in preparation of the Pro Forma statement pursuant to Section 8.1.

9.8. Tax Ruling. The Assuming Institution shall not at any time, without the Corporation's prior consent, seek a private letter ruling or other determination from the Internal Revenue Service or otherwise seek to qualify for any special tax treatment or benefits associated with any payments made by the Receiver or Corporation pursuant to this Agreement.

ARTICLE X. CONDITION PRECEDENT .

The obligations of the parties to this Agreement are subject to the Receiver and the Corporation having received at or before the Bank Closing Date evidence reasonably satisfactory to each of any necessary approval, waiver, or other action by any governmental authority, the board of directors of the Assuming Institution, or other third party, with respect to this Agreement and the transactions contemplated hereby, the closing of the Failed Bank and the appointment of the Receiver, the chartering of the Assuming Institution, and any agreements, documents, matters or proceedings contemplated hereby or thereby.

ARTICLE XI. REPRESENTATIONS AND WARRANTIES OF THE ASSUMING INSTITUTION

The Assuming Institution represents and warrants to the Corporation and the Receiver as follows:

11.1. Corporate Existence and Authority. The Assuming Institution (a) is duly organized, validly existing and in good standing under the laws of its Chartering Authority and has full power and authority to own and operate its properties and to conduct its business as now conducted by it, and (b) has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The Assuming Institution has taken all necessary corporate (or other applicable governance) action to authorize the execution, delivery and performance of this Agreement and the performance of the transactions contemplated hereby.

11.2 Third Party Consents. No governmental authority or other third party consents (including but not limited to approvals, licenses, registrations or declarations) are required in connection with the execution, delivery or performance by the Assuming Institution of this Agreement, other than such consents as have been duly obtained and are in full force and effect.

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

11.3 Execution and Enforceability. This Agreement has been duly executed and delivered by the Assuming Institution and when this Agreement has been duly authorized, executed and delivered by the Corporation and the Receiver, this Agreement will constitute the legal, valid and binding obligation of the Assuming Institution, enforceable in accordance with its terms.

11.4. Compliance with Law .

(a) No Violations. Neither the Assuming Institution nor any of its Subsidiaries is in violation of any statute, regulation, order, decision, judgment or decree of, or any restriction imposed by, the United States of America, any State, municipality or other political subdivision or any agency of any of the foregoing, or any court or other tribunal having jurisdiction over the Assuming Institution or any of its Subsidiaries or any assets of any such Person, or any foreign government or agency thereof having such jurisdiction, with respect to the conduct of the business of the Assuming Institution or of any of its Subsidiaries, or the ownership of the properties of the Assuming Institution or any of its Subsidiaries, which, either individually or in the aggregate with all other such violations, would materially and adversely affect the business, operations or condition (financial or otherwise) of the Assuming Institution or the ability of the Assuming Institution to perform, satisfy or observe any obligation or condition under this Agreement.

(b) No Conflict. Neither the execution and delivery nor the performance by the Assuming Institution of this Agreement will result in any violation by the Assuming Institution of, or be in conflict with, any provision of any applicable law or regulation, or any order, writ or decree of any court or governmental authority.

11.5. Insured or Guaranteed Loans If any Loans being transferred pursuant to this Agreement are insured or guaranteed by any department or agency of any governmental unit, federal, state or local, Assuming Institution represents that Assuming Institution has been approved by such agency and is an approved lender or mortgagee, as appropriate, if such approval is required. The Assuming Institution further assumes full responsibility for determining whether or not such insurance or guarantees are in full force and effect on the date of this Agreement and with respect to those Loans whose insurance or guaranty is in full force and effect on the date of this Agreement, Assuming Institution assumes full responsibility for doing all things necessary to insure such insurance or guarantees remain in full force and effect. Assuming Institution agrees to assume all of the obligations under the contract(s) of insurance or guaranty and agrees to cooperate with the Receiver where necessary to complete forms required by the insuring or guaranteeing department or agency to effect or complete the transfer to Assuming Institution.

11.6. Representations Remain True. The Assuming Institution represents and warrants that it has executed and delivered to the. Corporation a Purchaser Eligibility Certification and Confidentiality Agreement and that all information provided and representations made by or on behalf of the Assuming Institution in connection with this Agreement and the transactions contemplated hereby, including, but not limited to, the Purchaser Eligibility Certification and Confidentiality Agreement (which are affirmed and ratified hereby) are and remain true and correct in all material respects and do not fail to state any fact required to make the information contained therein not misleading.

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

11.7 No Reliance; Independent Advice. The Assuming Institution is not relying on the Receiver or the Corporation for any business, legal, tax, accounting, investment or other advice in connection with this Agreement and the Exhibits hereto and documents delivered in connection with the foregoing, and has had adequate opportunity to consult with advisors of its choice in connection therewith.

ARTICLE XII INDEMNIFICATION .

12.1 Indemnification of Indemnitees. From and after the Bank Closing Date and subject to the limitations set forth in this Section 12.1 and Section 12.6 and compliance by the Indemnitees with Section 12.2, the Receiver agrees to indemnify and hold harmless the Indemnitees against any and all costs, losses, liabilities, expenses (including attorneys'. fees) incurred prior to the assumption of defense by the Receiver pursuant to Section 12.2(d), judgments, fines and amounts paid in settlement actually and reasonably. incurred in connection with claims against any Indemnitee. based on liabilities of the Failed Bank that are not assumed by the Assuming Institution pursuant to this Agreement or subsequent to the execution hereof by the Assuming Institution or any Subsidiary or Affiliate of the Assuming Institution for which indemnification is provided:

(a) hereunder in this Section 12.1, subject to certain exclusions as provided in Section 12.1(b):

(i) claims based on the rights of any shareholder or former shareholder as such of (A) the Failed Bank, or (B) any Subsidiary or Affiliate of the Failed Bank;

(ii) claims based on the rights of any creditor as such of the Failed Bank, or any creditor as such of any director, officer, employee or agent of the Failed Bank, with respect to any indebtedness or other obligation of the Failed Bank arising prior to the Bank Closing Date;

(iii) claims based on the rights of any present or former director, officer, employee or agent as such of the Failed Bank or of any Subsidiary or Affiliate of the Failed Bank:

(iv) claims based on any action or inaction prior to the Bank Closing Date of the Failed Bank, its directors, officers, employees or agents as such, or any Subsidiary or Affiliate of the Failed Bank, or the directors, officers, employees or agents as such of such Subsidiary or Affiliate;

(v) claims based on any malfeasance, misfeasance or nonfeasance of the Failed Bank, its directors, officers, employees or agents with respect to the trust business of the Failed Bank, if any;

(vi) claims based on any failure or alleged failure (not in violation of law) by the Assuming Institution to continue to perform any service or activity previously performed by the Failed Bank which the Assuming Institution is not required to perform pursuant to this Agreement or which arise under any contract to which the Failed Bank was a party which the Assuming Institution elected not to assume in accordance with this

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Agreement and which neither the Assuming Institution nor any Subsidiary or Affiliate of the Assuming Institution has assumed subsequent to the execution hereof;

(vii) claims arising from any action or inaction of any Indemnitee, including for purposes of this Section 12.1(a)(vii) the former officers or employees of the Failed Bank or of any Subsidiary or Affiliate of the Failed Bank that is taken upon the specific written direction of the Corporation or the Receiver, other than any action or inaction taken in a manner constituting bad faith, gross negligence or willful misconduct; and

(viii) claims based on the rights of any depositor of the Failed Bank whose deposit has been accorded "withheld payment" status and/or returned to the Receiver or Corporation in accordance with Section 9.5 and/or has become an "unclaimed deposit" or has been returned to the. Corporation or the Receiver in accordance with Section 2.3;

(b) provided that with respect to this Agreement, except for Section 12.1(a)(vii) and (viii), no indemnification will be provided under this Agreement for any:

(i) judgment or fine against, or any amount paid in settlement (without the written approval of the Receiver) by, any Indemnitee in connection with any action that seeks damages against any Indemnitee (a "Counterclaim") arising with respect to any Acquired Asset and based on any action or inaction of either the Failed Bank, its directors, officers, employees or agents as such prior to the Bank Closing Date, unless any such judgment, fine or amount paid in settlement exceeds the greater of (A). the. Repurchase Price of such Acquired Asset, or (B) the monetary recovery sought on such Acquired Asset by the Assuming Institution in the cause of action from which the Counterclaim arises; and in such event the Receiver will provide indemnification only in the amount of such excess; and no indemnification will be provided for any costs or expenses other than any costs or expenses (including attorneys' fees) which, in the determination of the Receiver, have been actually and reasonably incurred by such Indemnitee in connection with the defense of any such Counterclaim; and it is expressly agreed that the Receiver. reserves the right to intervene, in its discretion, on its behalf and/or on behalf of the Receiver, in the defense of any such Counterclaim;

(ii) claims with respect to any liability or obligation of the Failed Bank that is expressly assumed by the Assuming Institution pursuant to this Agreement or subsequent to the execution hereof by the Assuming Institution or any Subsidiary or Affiliate of the Assuming Institution;

(iii) claims with respect to any liability of the Failed Bank to any present or former employee as such of the Failed Bank or of any Subsidiary or Affiliate of the Failed Bank, which liability is expressly assumed by the Assuming Institution pursuant to this Agreement or subsequent to the execution hereof by the Assuming Institution or any Subsidiary or Affiliate of the Assuming Institution;

(iv) claims based on the failure of any Indemnitee to seek recovery of damages from the Receiver for any claims based upon any action or inaction of the Failed

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Bank, its directors, officers, employees or agents as fiduciary, agent or custodian prior to the Bank Closing Date;

(v) claims based on any violation or alleged violation by any Indemnitee of the antitrust, branching, banking or bank holding company or securities laws of the United States of America or any State thereof;

(vi) claims based on the rights of any present or former creditor, customer, or supplier as such of the Assuming Institution or any Subsidiary or Affiliate of the Assuming Institution;

(vii) claims based on the rights of any present or former shareholder as such of the Assuming Institution or any Subsidiary or Affiliate of the Assuming Institution regardless of whether any such present or former shareholder is also a present or former shareholder of the Failed Bank;

(viii) claims, if the Receiver determines that the effect of providing such indemnification would be to (A) expand or alter the provisions of any warranty or disclaimer thereof provided in Section 3.3 or any other provision of this Agreement, or (B) create any warranty not expressly provided under this Agreement;

(ix) claims which could have been enforced against any Indemnitee had the Assuming Institution not entered into this Agreement;

(x) claims based on any liability for taxes or fees assessed with respect to the consummation of the transactions contemplated by this Agreement, including without limitation any subsequent transfer of any Acquired Assets or Liabilities Assumed to any Subsidiary or Affiliate of the Assuming Institution;

(xi) except as expressly provided in this Article XII, claims based on any action or inaction of any Indemnitee, and nothing in this Agreement shall be construed to provide indemnification for (i) the Failed Bank, (ii) any Subsidiary or Affiliate of the Failed Bank, or (iii) any present or former director, officer, employee or agent of the Failed Bank or its Subsidiaries or Affiliates; provided that the Receiver, in its sole and absolute discretion, may provide indemnification hereunder for any present or former director, officer, employee or agent of the Failed Bank or its Subsidiaries or Affiliates who is also or becomes a director, officer, employee or agent of the Assuming Institution or its Subsidiaries or Affiliates;

(xii) claims or actions which constitute a breach by the Assuming Institution of the representations and warranties contained in Article XI;

(xiii) claims arising out of or relating to the condition of or generated by an Acquired Asset arising from or relating to the presence, storage or release of any hazardous. or toxic substance, or any pollutant or contaminant, or condition of such Acquired Asset which violate any applicable Federal, State or local law or regulation concerning environmental protection; and

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

(xiv) claims based on, related to or arising from any asset, including a loan, acquired or liability assumed by the Assuming Institution, other than pursuant to this Agreement.

12.2. Conditions Precedent to. Indemnification. It shall be a condition precedent to the obligation of the Receiver to indemnify any Person pursuant to this Article XII that such Person shall, with respect to any claim made or threatened against such Person for which such Person is or may be entitled to indemnification hereunder:

(a) give written notice to the Regional Counsel (Litigation Branch) of the Corporation in the manner and at the address provided in Section 13.6 of such claim as soon as practicable after such claim is made or threatened; provided that notice must be given on or before the date which is six (6) years from the date of this Agreement;

(b) provide to the Receiver such information and cooperation with respect to such claim as the Receiver may reasonably require;

(c) cooperate and take all steps, as the Receiver may reasonably require, to preserve and protect any defense to such claim;

(d) in the event suit is brought with respect to such claim, upon reasonable prior notice, afford to the Receiver the right, which the Receiver may exercise in its sole and absolute discretion, to conduct the investigation, control the defense and effect settlement of such claim, including without limitation the right to designate counsel and to control all negotiations, litigation, arbitration, settlements, compromises and appeals of any such claim, all of which shall be at the expense of the Receiver; provided that the Receiver shalt have notified the Person claiming indemnification in writing that such claim is a claim with respect to which such Person is entitled to indemnification under this Article XII;

(e) not incur any costs or expenses in connection with any response or suit with respect to such claim, unless such costs or expenses were incurred upon the written direction of the Receiver; provided that the Receiver shall not be obligated to reimburse the amount of any such costs or expenses unless such costs or expenses were incurred upon the written direction of the Receiver;

(f) not release or settle such claim or make any payment or admission with respect thereto, unless the Receiver consents thereto; provided that the Receiver shall not be obligated to reimburse the amount of any such settlement or payment unless such settlement or payment was effected upon the written direction of the Receiver; and

(g) take such reasonable action as the Receiver may request in writing as necessary to preserve, protect or enforce the rights of the Indemnitee against any Primary Indemnitor.

12.3. No Additional. Warranty. Nothing in this Article XII shall be construed or deemed to (a) expand or otherwise alter any warranty or disclaimer thereof provided under Section 3.3 or any other provision of this Agreement with respect to, among other matters, the title, value, collectability, genuineness, enforceability, documentation, condition or freedom from liens or encumbrances, of any (i) Acquired Asset, or (ii) asset of the Failed Bank purchased by

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

the Assuming. Institution subsequent to the execution of this Agreement by the Assuming Institution or any Subsidiary or Affiliate of the Assuming Institution, or (b) create any warranty not expressly provided under this Agreement with respect thereto.

12.4. Indemnification of Receiver and Corporation. From and after the Bank Closing Date, the Assuming Institution agrees to indemnify and hold harmless the Corporation and the Receiver and their respective directors, officers, employees and agents from and against any and all costs, losses, liabilities, expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with any of the following:

(a) claims based on any and all liabilities or obligations of the Failed Bank assumed by the Assuming Institution pursuant to this Agreement or subsequent to the execution hereof by the Assuming Institution or any Subsidiary or Affiliate of the Assuming Institution, whether or not any such liabilities subsequently are sold and/or transferred, other than any claim based upon any action or inaction of any Indemnitee as provided in Section 12.1(a)(vii) or (viii);

(b) claims based on any act or omission of any Indemnitee (including but not limited to claims of any Person claiming any right or title by or through the Assuming Institution with respect to Acquired Assets transferred to the Receiver pursuant to Section 3.4 or Section 3.6), other than any action or inaction of any Indemnitee as provided in (vii). or (viii) of Section 12.1(a); and

12.5. Obligations Supplemental, The obligations of the Receiver, and the Corporation as guarantor in accordance with Section 12.7, to provide indemnification under this Article XII are to supplement any amount payable by any Primary Indemnitor to the Person indemnified under this Article. XII. Consistent with that intent, the Receiver agrees only to make payments pursuant to such indemnification to the extent not payable by a Primary Indemnitor. If the aggregate amount of payments by the Receiver, or the Corporation as guarantor in accordance with Section 12.7, and all Primary Indemnitors with respect to any item of indemnification under this Article XII exceeds the amount payable with respect to such item, such Person being indemnified shall notify the Receiver thereof and, upon the request of the Receiver, shall promptly pay to the Receiver, or the Corporation as appropriate, the amount of the Receiver's (or Corporation's) payments to the extent of such excess.

12.6. Criminal Claims. Notwithstanding any provision of this Article XII to the contrary, in the event that any Person being indemnified under this Article XII shall become involved in any criminal action, suit or proceeding, whether judicial, administrative or investigative, the Receiver shall have no obligation hereunder to indemnify such Person for liability with respect to any criminal act or to the extent any costs or expenses are attributable to the defense against the allegation of any criminal act, unless (a) the Person is successful on the merits or otherwise in the defense against any such action, suit or proceeding, or (b) such action, suit or proceeding is terminated without the imposition of liability on such Person.

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

12.7. Limited Guaranty of the Corporation. The Corporation hereby guarantees performance of the Receiver's obligation to indemnify the Assuming Institution as set forth in this Article XII. It is a condition to the Corporation's obligation hereunder that the Assuming Institution shall comply in all respects with the applicable provisions of this Article XII. The Corporation shall be liable hereunder only for such amounts, if any, as the Receiver is obligated to pay under the terms of this Article XII but shall fail to pay. Except as otherwise provided above in this Section 12.7, nothing in this Article XII is intended or shall be construed to create any liability or obligation on the part of the Corporation, the United States of America or any department or agency thereof under or with respect to this Article XII, or any provision hereof, it being the intention of the parties hereto that the obligations undertaken by the Receiver under this Article XII are the sole and exclusive responsibility of the Receiver and no other Person or entity.

12.8. Subrogation. Upon payment by the Receiver, or the Corporation as guarantor in accordance with Section 12.7, to any Indemnitee for any claims indemnified by the Receiver under this Article XII, the Receiver, or the Corporation as appropriate, shall become subrogated to all rights of the Indemnitee against any other Person to the extent of such payment.

ARTICLE XIII. MISCELLANEOUS.

13.1. Costs, Fees, and. Expenses. All fees, costs and expenses incurred by a party in connection with this Agreement (including the performance of any obligations or the exercise of any rights hereunder) shall be borne by such party unless expressly otherwise provided; provided that the Assuming Institution shall pay all fees, costs and expenses (other than attorneys' fees incurred by the Receiver) incurred in connection with the transfer to it of any Acquired Assets or Liabilities Assumed hereunder or in accordance herewith. Further, the Assuming Institution shall be responsible for the payment of MFRS routine transaction charges.

13.2. WAIVER OF JURY TRIAL. EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, ALL RIGHT TO TRIAL BY JURY IN OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT OF OR RELATING TO OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

13.3. Consent; Determination or Discretion. When the consent or approval of a party is required under this Agreement, such consent or approval shall be obtained in writing and unless expressly otherwise provided, shall not be unreasonably withheld or delayed. When a determination or decision is to be made by a party under this Agreement, that party shall make such determination or decision in its reasonable discretion unless expressly otherwise provided.

13.4. Rights Cumulative. Except as expressly otherwise provided herein, the rights of each of the parties under this Agreement are cumulative, may be exercised as often as any party considers appropriate and are in addition to each such party's rights under this Agreement, any of the agreements related thereto or under applicable law. Any failure to exercise or any delay in exercising any of such rights, or any partial or defective exercise of such rights, shall not operate as a waiver or variation of that or any other such right, unless expressly otherwise provided.

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

13.5. References. References in this Agreement to Recitals, Articles, Sections, Schedules and Exhibits are to Recitals, Articles, Sections, Schedules and Exhibits of this Agreement, respectively. References to parties are to the parties to this Agreement. Unless expressly otherwise provided, references to days and months are to calendar days and months respectively. In any case where a notice or other action is due on a day which is not a Business Day, such notice or other action may be delayed until the next-succeeding Business Day. Article and Section headings are for convenient reference and shall not affect the meaning of this Agreement. References to the singular shall include the plural, as the context may require, and vice versa.

13.6. Notice .

(a) Form of Notices. All notices shall be given in writing and provided in accordance with the provisions of this Section 13.6, unless expressly otherwise provided.

(b) Notice to the Receiver or the. Corporation. With respect to a notice under this Agreement:

Federal. Deposit Insurance Corporation 1601 Bryan Street

Dallas, Texas 75201

Attention: Settlement Agent

In addition, with respect to notices under Section 4.6, with a copy to:

___________________________________

In addition, with respect to notice under Article XII:

Regional. Counsel (Litigation Branch)

1601 Bryan Street

Dallas, TX . 75201

In addition, with respect to communications under Exhibit 4.13, a copy. to:

Attention:.. Interim Servicing Manager,

____________________________________

Great Southern Bank

218 South. Glenstone

Springfield, Missouri 65802

Attention: Joseph W. Turner, President, CEO

with a copy to: Bryan S. Tiede, Director of Risk Management

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

13.7. Entire Agreement. This Agreement, including the Schedules and Exhibits hereto and thereto, embody the entire agreement of the parties hereto in relation to the subject matter herein and supersede all prior understandings or agreements, oral or written, between the parties.

13.8. Counterparts. This Agreement may be executed in any number of counterparts and by the duly authorized representative of a different party hereto on separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same. Agreement.

13.9. GOVERNING. LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE FEDERAL LAW OF THE UNITED. STATES OF AMERICA, AND IN THE ABSENCE OF CONTROLLING FEDERAL LAW, IN ACCORDANCE WITH THE LAWS OF THE STATE IN WHICH THE MAIN OFFICE OF THE FAILED BANK IS LOCATED.

13.10. Successors and Assigns.

(a) Binding on Successors and Assigns; Assignment . All terms and conditions of this Agreement shall be binding on the successors and assigns of the Receiver, the Corporation and the Assuming Institution. The Receiver may assign or otherwise transfer this Agreement and the rights and obligations of the Receiver hereunder (in whole or in part) to the Corporation in its corporate capacity without the consent of Assuming Institution. Notwithstanding anything to the contrary contained in this Agreement, the Assuming Institution may not assign or otherwise transfer this Agreement or any of the Assuming Institution's rights or obligations hereunder (in whole or in part) without the prior written consent of the Receiver, which consent may be granted or withheld by the Receiver in its sole and absolute discretion.

(b) No Third Party Beneficiaries . Except as provided in Sections 4.14 and 6.6, nothing expressed or referred to in this Agreement is intended or shall be construed to give any Person other than the Receiver, the Corporation and the Assuming Institution any legal or equitable right, remedy or claim under or with respect to this Agreement or any provisions contained herein, it being the intention of the parties hereto that this Agreement, the obligations and statements of responsibilities hereunder, and all other conditions and provisions hereof are for the sole and exclusive benefit of the Receiver, the Corporation and the Assuming Institution and for the benefit of no other Person.

13.11. Modification. No amendment or other modification,. rescission or release of any part of this Agreement, shall be effective except pursuant to a written agreement subscribed by the duly authorized representatives of the parties.

13.12. Manner of Payment. All payments due under this Agreement shall be in lawful money of the United States of America in immediately available funds as each party hereto may specify to the other parties; provided that in the event the Receiver or the Corporation is obligated to make any payment hereunder in the amount of $25,000.00 or less, such payment may be made by check.

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

13.13. Waiver . Each of the Receiver, the Corporation and the Assuming Institution may waive its respective rights, powers or privileges under this Agreement, provided that such waiver shall be in writing; and further provided that no failure or delay on the part of the Receiver, the Corporation or the Assuming Institution to exercise any right, power or privilege under this Agreement shall operate as a waiver thereof, nor will any single or partial exercise of any right, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, power or privilege by the Receiver, the Corporation or the Assuming Institution under this Agreement, nor will any such waiver operate or be construed as a future waiver of such right, power or privilege under this Agreement.

13.14. Severability. If any provision of this Agreement is declared invalid or unenforceable, then, to the extent possible, all of the remaining provisions of this Agreement shall remain in full force and effect and shall be binding upon the parties hereto.

13.15. Term of Agreement. This Agreement shall continue in full force and effect until the sixth (6th) anniversary of the Bank Closing Date; provided that the provisions of Sections 6.3. and 6.4 shall survive the expiration of the term of this Agreement; and provided further that the receivership of the Failed Bank may be terminated prior to the expiration of the term of this Agreement, and in such event, the guaranty of the Corporation, as provided in and in accordance with the provisions of Section 12.7, shall be in effect for the remainder of the term of this Agreement. Expiration of the term of this Agreement shall not affect any claim or liability of any party with respect to any (a) amount which is owing at the time of such expiration, regardless of when such amount becomes payable, and (b) breach of this Agreement occurring prior to such expiration, regardless of when such breach is discovered.

13.16. Survival of Covenants, Etc. The covenants, representations, and warranties in this Agreement shall survive the execution of this Agreement and the consummation of the transactions contemplated hereunder.

[Signature Page Follows]

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the date first above written.

	FEDERAL DEPOSIT INSURANCE CORPORATION, RECEIVER OF VALLEY BANK MOLINE, ILLINOIS

	BY:	/s/ MICHAEL W. LAMB
		MICHAEL W. LAMB RECEIVER-IN-CHARGE

Attest:


	FEDERAL DEPOSIT INSURANCE CORPORATION

	BY:	/s/ MICHAEL W. LAMB
		MICHAEL W. LAMB RECEIVER-IN-CHARGE

Attest:


	GREAT SOUTHERN BANK REEDS SPRING, MISSOURI

	BY:	/s/ JOSEPH W. TURNER
		JOSEPH W. TURNER PRESIDENT, CEO

Attest:

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

SCHEDULE 2.1(a)

EXCLUDED DEPOSIT LIABILITY ACCOUNTS

Accounts Excluded from P&A Transaction

Valley Bank

Moline, Illinois

Valley Bank, Moline, Illinois did not have any deposits associated with the Depository Organization (DO) Cede & Co as Nominee for DTC as of April 14, 2014. DO accounts do not pass to the Assuming Bank and are excluded from the transaction as described in section 2.1 of the P&A Agreement. This schedule will be updated post closing with data as of Bank Closing date.

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

SCHEDULE 3.1(h)

ACQUIRED SUBSIDIARIES

NONE

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

SCHEDULE 3.1(n)

ACQUIRED ASSETS IN OPTIONAL LOAN POOLS.

Pool	Account Number	Current Balance	* Loans
100			1
100			2
100			3
100			4
100			5
100			6
100			7
100			8
100.			9
100			10
100			11
100			12
100			13
100			14
100			15
100			16
100			17
100			18
100			19 ,-
100			20
100			20
		$680,749.90

Pool	Account Number	Current Balance	* Loans
200			1
200.			2
200			3
200			4
200.			5
200.			6
200.			7
200			8
200			9
200			10
200			11
200			12
200.			13.
200			14

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
200			15
200			16
200			17
200			18
200			19
200			20
200			21
200			22
200.			23
200			24
200			25
200			26
200			27
200			28
200			29
200			30
200			31
200			32
200			33 ,-
200			34
200			34
200			35
200.			36
200			37
200			38
200.			39
200.			40
200.			41
200			42
200			43
200			44
200			45
200			46
200.			47
200			48
200			49
200			50
200			51
200			52
200			53
200			54
200			55

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
200			56
200			57
200			58
200			59
200			60
200			61
200			62
200			63
200.			64
200			65
200			66
200			67
200			68
200			69
200			70
200			71
200			72
200			73
200			74 ,-
200			75
200			75
200			76
200.			77
200			78
200			79
200.			80
200.			81
200.			82
200			83
200			84
200			85
200			86
200			87
200.			88
200			89
200			90
200			91
200			92
200			93
200			94
200			96
200			96

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
200			97
200			98
200			99
200			100
200			101
200			102
200			103
200			104
200.			105
200			106
200			107
200			108
200			109
200			110
200			111
200			112
200			113
200			114
200			115 ,-
200			116
200			116
200			117
200.			118
200			119
200			120
200.			121
200.			122
200.			123
200			124
200			125
200			126
200			127
200			128
200.			129
200			130
200			131
200			132
200			133
200			134
200			135
200			136
200			137

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
200			138
200			139
200			140
200			141
200			142
200			143
200			144
200			145
200.			146
200			147
200			148
200			149
200			150
200			151
200			152
200			153
200			154
200			155
200			157
200			158
200			159
200			160
200			161
200.			162
200			163
200			164
200.			165
200.			166
200.			167
200			168
200			169
200			170
200			171
200			172
200.			173
200			174
200			175
200			176
200			177
200			178

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
200			179
200			180
200			181
200			182
200			183
200			184
200			185
200			186
200.			187
200			188
200			189
200			190
200			191
200			192
200			193
200			194
200			195
200			196
200			197
200			198
200			199
200			200
200			201
200.			202
200			203
200			204
200.			205
200.			206
200.			207
200			208
200			209
200			210
200			211
200			212
200.			213
200			214
200			215
200			216
200			217
200			218
200			219

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
200			220
200			221
200			222
200			223
200			224
200			225
200			226
200			227
200.			228
200			229
200			230
200			231
200			232
200			233
200			234
200			235
200			236
200			237
200			238
200			239
200			240
200			241
200			242
200.			243
200			244
200			245
200.			246
200.			247
200.			248
200			249
200			250
200			252
200			252
200			253
200.			254
200			255
200			256
200			257
200			258
200			259
200			260

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
200			261
200			262
200			263
200			264
200			265
200			266
200			267
200			268
200.			269
200			270
200			271
200			272
200			273
200			274
200			275
200			276
200			277
200			278
200			279
200			280
200			281
200			282
200			283
200.			284
200			285
200			286
200.			287
200.			288
200.			289
200			290
200			291
200			292
200			293
200			294
200.			295
200			296
200			297
200			298
200			299
200			300
200			301

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
200			302
200			303
200			304
200			305
200			306
200			307
200			308
200			309
200.			310
200			311
200			312
200			313
200			314
200			315
200			316
200			317
200			318
200			319
200			320
200			321
200			322
200			323
200			324
200.			325
200			326
200			327
200.			328
200.			329
200.			330
200			331
200			332
200			333
200			334
200			335
200.			336
200			337
200			338
200			339
200			340
200			341
200			342

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
200			343
200			344
200			345
200			346
200			347
200			348
200			349
200			350
200.			351
200			352
200			353
200			354
200			355
200			356
200			357
200			358
200			359
200			360
200			361
200			362
200			363
200			364
200			365
200.			366
200			367
200			368
200.			369
200.			370
200.			371
200			372
200			373
200			374
200			375
200			376
200.			377
200			378
200			379
200			380
200			381
200			382
200			383

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
200			384
200			385
200			386
200			387
200			388
200			389
200			390
200			391
200.			392
200			393
200			394
200			395
200			396
200			397
200			398
200			399
200			400
200			401
200			402
200			403
200			404
200			405
200			406
200.			407
200			408
200			409
200.			410
200.			411
200.			412
200			413
200			414
200			415
200			416
200			417
200.			418
200			419
200			420
200			421
200			422
200			423
200			424

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
200			425
200			426
200			427
200			428
200			429
200			430
200			431
200			432
200.			433
200			434
200			435
200			436
200			437
200			438
200			439
200			440
200			441
200			442
200			443
200			444
200			445
200			446
200			447
200.			448
200			449
200			450
200.			451
200.			452
200.			453
200			454
200			455
200			456
200			457
200			458
200.			459
200			460
200			461
200			462
200			463
200			464
200			465

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
200			466
200			467
200			468
200			469
200			470
200			471
200			472
200			473
200.			474
200			475
200			476
200			477
200			478
200			479
200			480
200			481
200			482
200			483
200			484
200			485
200			486
200			487
200			488
200.			489
200			490
200			491
200.			492
200.			493
200.			494
200			495
200			496
200			497
200			498
200			499
200.			500
200			501
200			502
200			503
200			504
200			505
200			506

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
200			507
200			508
200			509
200			510
200			511
200			512
200			513
200			514
200.			515
200			516
200			517
200			518
200			519
200			520
200			521
200			522
200			523
200			524
200			525
200			526
200			527
200			528
200			529
200.			530
200			531
200			532
200.			533
200.			534
200.			535
200			536
200			537
200			538
200			539
200			540
200.			541
200			542
200			543
200			544
200			545
200			546
200			547

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
200			548
200			549
200			550
200			551
200			552
200			553
200			554
200			555
200.			556
200			557
200			558
200			559
200			560
200			561
200			562
200			563
200			564
200			565
200			566
200			567
200			568
200			569
200			570
200.			571
200			572
200			573
200.			574
200.			575
200.			576
200			577
200			578
200			579
200			580
200			581
200.			582
200			583
200			584
200			585
200			586
200			587
200			588

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
200			589
200			590
200			591
200			592
200			593
200			594
200			595
200			596
200.			597
200			598
200			599
200			600
200			601
200			602
200			603
200			604
200			605
200			606
200			607
200			608
200			609
200			610
200			611
200.			612
200			613
200			614
200.			615
200.			616
200.			617
200			618
200			619
200			620
200			621
200			622
200.			623
200			624
200			625
200			626
200			627
200			628
200			629

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
200			630
200			631
200			632
200			633
200			634
200			635
200			636
200			637
200.			638
200			639
200			640
200			641
200			642
200			643
200			644
200			645
200			646
200			647
200			648
200			649
200			650
200			651
200			652
200.			653
200			654
200			655
200.			656
200.			657
200.			658
200			659
200			660
200			661
200			662
200			663
200.			664
200			665
200			666
200			667
200			668
200			669
200			670

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
200			671
200			672
200			673
200			674
200			675
200			676
200			677
200			678
200.			679
200			680
200			681
200			682
200			683
200			684
200			685
200			686
200			687
200			688
200			689
200			690
200			691
200			692
200			693
200.			694
200			695
200			696
200.			697
200.			698
200.			699
200			700
200			701
200			702
200			703
200			704
200.			705
200			706
200			707
200			708
200			709
200			710
200			711

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
200			712
200			713
200			714
200			715
200			716
200			717
200			718
200			719
		$53,081,234.24

Pool	Account Number	Current Balance	* Loans
300			1
300			2
300			3
300			4
300			5
300			6
300			7
300			8
300			9
300			10
300			11
300			12
300			13
300			14
300.			15
300			16
300			17
300.			18
300.			19
300.			20
300			21
300			22
300			23
300			24
300			25
300.			26
300			27
300			28
300			29
300			30

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
300			31
300			32
300			33
300			34
300			35
300			36
300			37
300			38
300.			39
300			40
300			41
300			42
300			43
300			44
300			45
300			46
300			47
300			48
300			49
300			50
300			51
300			52
300			53
300.			54
300			55
300			56
300.			57
		$7,665,371.49

Pool	Account Number	Current Balance	* Loans
400			1
400			2
400			3
400			4
400			5
400.			6
400			7
400			8
400			9
400			10
400			11

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
400			12
400			13
400			14
400			15
400			16
400			17
400			18
400			19
400.			20
400			21
400			22
400			23
400			24
400			25
400			26
400			27
400			28
400			29
400			30
400			31
400			32
400			33
400			34
400.			35
400			36
400			37
400.			38
400.			39
400.			40
400			41
400			42
400			43
400			44
400			45
400.			46
400			47
400			48
400			49
400			50
400			51
400			52

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
400			53
400			54
400			55
400			56
400			57
400			58
400			59
400			60
400.			61
400			62
400			63
400			64
400			65
400			66
400			67
400			68
400			69
400			70
400			71
400			72
400			73
400			74
400			75
400.			76
400			77
400			78
400.			79
400.			80
400.			81
400			82
400			83
400			84
400			85
400			86
400.			87
400			88
400			89
400			90
400			91
400			92
400			93

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
400			94
400			95
400			96
400			97
400			98
400			99
400			100
400			101
400.			102
400			103
400			104
400			105
400			106
400			107
400			108
400			109
400			110
400			111
400			112
400			113
400			114
400			115
400			116
400.			117
400			118
400			119
400.			120
400.			121
400.			122
400			123
400			124
400			125
400			126
400			127
400.			128
400			129
400			130
400			131
400			132
400			133
400			134

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
400			135
400			136
400			137
400			138
400			139
400			140
400			141
400			142
400.			143
400			144
400			145
400			146
400			147
400			148
400			149
400			150
400			151
400			152
400			153
400			154
400			155
400			156
400			157
400.			158
400			159
400			160
400.			161
400.			162
400.			163
400			164
		$64,403,065.37

Pool	Account Number	Current Balance	* Loans
410			1
410			2
410.			3
410			4
410			5
410			6
410			7
410			8

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

		$5,612,088.57

Pool	Account Number	Current Balance	* Loans
500			1
500			2
500			3
500			4
500			5
500			6
500			7
500			8
500.			9
500			10
500			11
500			12
500			13
500			14
500			15
500			16
500			17
500			18
500			19
500			19
500			20
500.			21
500			22
500			23
500.			24
500.			25
500.			26
500			27
500			28
500			29
500			30
500			31
500.			32
500			33
500			34
500			35
500			36
500			37
500			38

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

500			39
500			40
500			41
500			42
500			43
500			44
500			45
500			46
500			47
500			48
		$28,749,152.46

Pool	Account Number	Current Balance	* Loans
600			1
600			2
600			3
600			4
600			5
600			6
600			7
600			8
600			9
600			10
600			11
600			12
600			13
600			14
600			15
600			16
600			17
600			18
600			19
600			20
600			21
600			22
		$2,325,752.58

Pool	Account Number	Current Balance	* Loans
700			1
700			2
700			3

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
700			4
700			5
700			6
700			7
700			8
700			9
700			10
700			11
700.			12
700			13
700			14
700			15
700			16
700			17
700			18
700			19
700			20
700			21
700			22
700			23
700			24
700			25
700			26
700.			27
700			28
700			29
700.			30
700.			31
700.			32
700			33
700			34
700			35
700			36
700			37
700.			38
700			39
700			40
700			41
700			42
700			43
700			44

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
700			45
700			46
700			47
700			48
700			49
700			50
700			51
700			52
700			53
700			54
700			55
700			56
700			57
700			58
700			59
700			60
700			61
700			62
700			63
700			64
700			65
700			66
700			67
700			68
700			69
700			70
700			71
700			72
700			73
700			74
700			75
700			76
700			77
700			78
700			79
700			80
700			81
700			82
700			83
700			84
700			85

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
700			86
700			87
700			88
700			89
700			90
700			91
700			92
700			93
700			94
700			95
700			96
700			97
700			98
700			99
700			100
700			101
700			102
700			103
700			104
700			105
700			106
700			107
700			108
700			109
700			110
700			111
700			112
700			113
700			114
700			115
700			116
700			117
700			118
700			119
700			120
700			121
700			122
700			123
700			124
700			125
700			126

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
700			127
700			128
700			129
700			130
700			131
700			132
700			133
700			134
700			135
700			136
700			137
700			138
700			139
700			140
700			141
700			142
700			143
700			144
700			145
700			146
700			147
700			148
700			149
700			150
700			151
700			152
700			153
700			154
700			155
700			156
700			157
700			158
700			159
700			160
700			161
700			162
700			163
700			164
700			165
700			166
700			167

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
700			168
700			169
700			170
700			171
700			172
700			173
700			174
700			175
700			176
700			177
700			178
700			179
700			180
700			181
700			182
700			183
700			184
700			185
700			186
700			187
700			188
700			189
700			190
700			191
700			192
700			193
700			194
700			195
700			196
700			197
700			198
700			199
700			200
700			201
700			202
700			203
700			204
700			205
700			206
700			207
700			208

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
700			209
700			210
700			211
700			212
700			213
700			214
700			215
700			216
700			217
700			218
700			219
700			220
700			221
700			222
700			223
700			224
700			225
700			226
700			227
700			228
700			229
700			230
700			231
700			232
700			233
700			234
700			235
700			236
700			237
700			238
700			239
700			240
700			241
700			242
700			243
700			244
700			245
700			246
700			247
700			248
700			249

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
700			250
700			251
700			252
700		$44,574,888.38
700
Pool	Account Number	Current Balance	* Loans
800			1
800			2
800			3
800			4
800			5
800			6
800			7
800			8
800			9
800			10
800			11
800			12
800			13
800			14
800			15
800			16
800			17
800			18
800			19
800			20
800			21
800			22
800			23
800			24
800			25
800			26
800			27
800			28
800			29
800			30
800			31
800			32
800			33
800			34
800			35

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
800			36
800			37
800			38
800			39
800			40
800			41
800			42
800			43
800			44
800			45
800			46
800			47
800			48
800			49
800			50
800			51
800			52
800			53
800			54
800			55
800			56
800			57
800			58
800			59
800			60
800			61
800			62
800			63
800			64
800			65
800			66
800			67
800			68
800			69
800			70
800			71
800			72
800			73
800			74
800			75
800			76

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
800			77
800			78
800			79
800			80
800			81
800			82
800			83
800			84
800			85
800			86
800			87
800			88
800			89
800			90
800			91
800			92
800			93
800			94
800			95
800			96
800			97
800			98
800			99
800			100
800			101
800			102
800			103
800			104
800			105
800			106
800			107
800			108
800			109
800			110
800			111
800			112
800			113
800			114
800			115
800			116
800			117

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
800			118
800			119
800			120
800			121
800			122
800			123
800			124
800			125
800			126
800			127
800			128
800			129
800			130
800			131
800			132
800			133
800			134
800			135
800			136
800			137
800			138
800			139
800			140
800			141
800			142
800			143
800			144
800			145
800			146
800			147
800			148
800			149
800			150
800			151
800			152
800			153
800			154
800			155
800			156
800			157
800			158

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Pool	Account Number	Current Balance	* Loans
800			159
800			160
800			161
800			162
800			163
800			164
800			165
800			166
800			167
800			168
800			169
800			170
800			171
800			172
800			173
800			174
800			175
800			176
800			177
800			178
800			179
800			180
800			181
800			182
800			183
800			184
800			185
800			186
800			187
800			188
800			189
800			190
800			191
800			192
		$4,906,023.18

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

SCHEDULE 3.1(o)

OTHER REAL ESTATE

NONE

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

SCHEDULE 3.2

PURCHASE PRICE OF ACQUIRED ASSETS

(a)	cash and receivables from depository institutions, including cash items in the process of collection, plus interest thereon:	Book Value

(b)	securities (exclusive of the capital stock of Acquired Subsidiaries and FHLB stock), plus interest thereon:	As provided in Section 3.2(b)

(c)	federal funds sold and repurchase agreements, if any, including interest thereon:	Book Value

(d)	Loans, other than those in Optional Loan Pools:	Book Value

(e)	credit card business:	Book Value

(f)	safe deposit business, safekeeping business and trust business, if any:	Book Value

(g)	Failed Bank Records and other documents:	Book Value

(h)	Other Real Estate and Loans in Optional Loan Pools:	As set forth on the Bid Form

(i)	all repossessed collateral, such as boats, motor vehicles, aircraft, trailers, and fire arms	Book Value

(j)	capital stock of any Acquired Subsidiaries (subject to Section 3.2(b), and FHLB stock:	Book Value

(k)	amounts owed to the. Failed Bank by any Acquired Subsidiaries:	Book Value.

(1)	assets securing. Deposits of public money, to the extent not otherwise purchased hereunder:	Book Value

(m)	overdrafts of customers:	Book Value

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

(n)	rights, if any, with respect to Qualified Financial Contracts:	As provided in Section 3.2(c)

(o)	rights of the Failed Bank to have loan servicing provided to the Failed Bank by others and related contracts:	Book Value

(p)	Personal Computers and Owned Data Management Equipment:	Fair. Market Value

(q)	Safe Deposit Boxes	Fair Market Value





Assets subject to an option to purchase:

(a)	Bank Premises with a fixed price:	As set forth in the Bid Form

	All other Bank Premises	Fair Market Value

(b)	Furniture and Equipment:	Fair Market Value

(c)	Fixtures:	Fair Market Value

(d)	Other Equipment:	Fair Market Value

(e)	Specialty Assets	Fair Market Value

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

SCHEDULE 3.5(l)

EXCLUDED SECURITIES

CUSIP	ASSET NAME/DESCRIPTION	ORIGINAL FACE/PAB	CURRENT PAR VALUE	3/31/2014 BOOK VALUE

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

CUSIP	ASSET NAME/DESCRIPTION	ORIGINAL FACE/PAB	CURRENT PAR VALUE	3/31/2014 BOOK VALUE









	Total Excluded			$34,960,582.00

This schedule will be updated post closing with data as of Bank Closing date.

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

SCHEDULE 3.5(u)

EXCLUDED ASSETS AND LIABILITIES.

To the extent not otherwise excluded under, and notwithstanding the language of Section 3.1. of the Purchase and Assumption Agreement, the following assets are excluded:.

Prepaid expenses and cash collateral on deposit with the following counterparties: FHKMC Cash. Collateral referenced in GL Acct# __________, Advance Payments for Taxes and Insurance referenced in GL. Acct# __________ and Mortgage. Appraisals referenced in GL Acct# __________;

Any and all assets referenced in GL Acct# __________, Other Assets;

Any investments in. Subsidiaries including but not limited the investment in ________________ referenced in GL Acct# __________ and investment in ____________________ referenced in GL Acct# __________;

Receivable from Secondary MKT referenced in GL Acct# __________ and the Mortgage Receivable referenced in GL Acct# __________;

The "Core Deposit Intangible _____________ in GL Acct# __________;

Any membership and/or activity-based stock of any FHLB owned by the Failed Bank:

To the extent not otherwise excluded under, and notwithstanding the language of Section 2.1 of the Purchase and Assumption Agreement, the following liabilities are excluded:

Borrowings, advances and liabilities under repurchase agreements, including all obligations referenced in. GL Acct# __________, Repurchase Agreements, provided however that the Assuming Institution is assuming the obligations under the Master Repurchase Agreement, dated February 28, 2008, with _______________ and the Master Repurchase Agreement, dated as of November 12, 2004 with _________________.

Borrowings, advances and liabilities to any FHLB, including the liabilities referenced in GL Acct# __________, Federal. Home Loan Bank.

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

SCHEDULE 4.1(b)

BANK PREMISES IN UNDERSERVED AREAS

NONE

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

SCHEDULE 6.3

DATA RETENTION CATALOG

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

SCHEDULE 7

Accounts Excluded from Calculation of Deposit Franchise Bid Premium

Valley Bank

Moline, Illinois

The accounts identified below will pass to the Assuming Institution (unless otherwise noted). When calculating the premium to be paid on. Assumed Deposits in a purchase and assumption transaction, the FDIC will exclude the following categories of deposit accounts:

Category	Description	Amount
I	Non-DO Brokered Deposits	$ 255,136.78
II	CDARS	$0.00
III.	Market Place Deposits	$87,391,475.30
	Total deposits excluded from calculation of premium as of 3/14/14	$87,646,612.08

Category Description

I. Brokered Deposits

Brokered deposit accounts are accounts for which the "depositor of record" is an agent, nominee or custodian who deposits funds for a principal or principals. to whom "pass-through" deposit insurance coverage may be extended. The FDIC separates brokered deposit accounts into two categories: 1) Depository Organization (DO) Brokered Deposits and 2) Non-Depository Organization (Non-DO) Brokered Deposits. This distinction is made by the FDIC to facilitate. our role as Receiver and Insurer. These terms. will not appear on other "brokered deposit". reports generated by Valley Bank.

Non-DO Brokered Deposits pass to the Assuming Institution, but are excluded from Assumed Deposits when the deposit premium is calculated. Please see the attached "Schedule 7 — Non-DO Broker Deposit Detail Report" for a listing of these accounts. This list will be updated post closing with balances as of the Bank Closing Date.

If Valley Bank had any DO Brokered Deposits (Cede & Co as Nominee for DTC), they are excluded from Assumed Deposits in the Purchase and. Assumption Agreement.

IL CDARS .

CDARS deposits pass to the Assuming Institution, but are excluded from Assumed Deposits when the deposit premium is calculated.

Valley Bank did not participate in the CDARS. program as of the date of the deposit download. If CDARS deposits are taken between the date of the deposit download and the Bank Closing Date, they will be identified post closing and made part of Schedule 7 to the Purchase and Assumption Agreement.

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

III. Market Place. Deposits

"Market Place Deposits" is a description given to deposits that may have been solicited via a money desk, internet subscription service (for example, QwickRate ® ),. or similar programs.

Valley Bank does have QwickRate ® deposits as identified above. The QwickRate ® deposits are reported as time deposits in the Call Report. Please see the attached "Schedule 7 QwickRate ® Deposit Detail Report" for a listing of these accounts as of April 14, 2014. This list will be updated post closing with balances as of the Bank Closing Date.

This schedule provides account categories and balances as of the date of the deposit download, or as indicated. The deposit franchise bid premium will be calculated using account categories. and balances as of the Bank Closing Date that are reflected in the general ledger or subsystem as described above. The final numbers for Schedule 7. will be provided post closing.

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

SCHEDULE 7 -- Accounts Excluded from Calculation of Deposit Franchise Bid Premium

Non-DO Broker Deposits Valley Bank Cert # 10450

Account Number	Statement Name	Insured Amount	XX Amount	PH Amount







Totals		$0.00	$0.00	$255,136.78

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

Schedule 7 -- QwickRate® Deposit. Detail. Report

Market Place Deposits

Account Number	GL Code	Current Balance	Accrued Interest	FL Type	Interest Rate	Branch




























752		87,365,000.00	26,475.30

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

100

EXHIBIT 2.3A

FINAL LEGAL NOTICE

Claiming Requirements for Deposits

Under 12 U.S.C. 1822(e)

[Date]

[Name of Unclaimed Depositor]

[Address of Unclaimed Depositor]

[Anytown, USA]

Subject: [XXXXX — Name of Bank

City, State] — In Receivership

Dear [Sir/Madam]:

As you may know, on [Date:. Closing Date] , the [Name of Bank ("The Bank")] was closed and the Federal Deposit Insurance. Corporation ("FDIC") transferred [The Bank's] accounts. to [Name of Assuming Institution] .

According to federal law under 12 U.S.C. 1822(e), on [Date: eighteen months from the Closing Date] , [Name of Assuming Institution] must transfer the funds in your account(s) back to the FDIC if you have not claimed your account(s) with [Name of Assuming Institution] . Based on the records recently supplied to us by [Name of Assuming Institution] , your account(s) currently fall into this category.

This letter is your formal Legal Notice that you have until [Date: eighteen months from the. Closing Date] , to claim or arrange to continue your account(s) with [Name of Assuming Institution] . There are several ways that you can claim your account(s) at [Name of Assuming Institution] . It is only necessary for you to take any one of the following actions in order for your account(s) at [Name of Assuming Institution] to be deemed claimed. In addition, if you have more than one account, your claim to one account will automatically claim all accounts:

Write to [Name of Assuming Institution] and notify them that you wish to keep your account(s) active. with them... Please be sure to include the name of the account(s), the account number(s), the signature of an authorized signer on the account(s),. name, and address. [Name of Assuming Institution] address is:

[123 Main Street

Anytown, USA]

2.	Execute a new signature card on your account(s), enter into a new deposit agreement with [Name of Assuming Institution] , change the ownership on your account(s), or renegotiate the terms of your certificate of deposit account(s) (if any).

3.	Provide [Name of Assuming Institution] with a change of address form.

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

101

4.	Make a deposit to or withdrawal from your account(s). This includes writing a check on any account or having an automatic direct deposit credited to or an automatic withdrawal debited from an account.

If you do not want to continue your account(s) with [Name of Assuming Institution] for any reason, you can withdraw your funds and close. your account(s). Withdrawing funds from one or more of your account(s) satisfies the federal law. claiming requirement. If you have time deposits, such as certificates of deposit, [Name of Assuming Institution] can advise you how. to withdraw. them without being charged an interest penalty. for early withdrawal.

If you do not claim ownership of your account(s) at [Name of Assuming Institution by Date:. eighteen months from the. Closing Date] federal law requires [Name of Assuming Institution] to return your deposits to the FDIC, which will deliver them as unclaimed property. to the. State indicated in your address in the. Failed Institution's records. If your address is outside of the United States, the. FDIC will deliver the deposits to the State in which the Failed Institution had its main office. 12 U.S.C. §. 1822(e). If the State accepts custody. of your deposits, you will have 10 years from the date of delivery to claim your deposits from the State. After 10 years you will be permanently barred from claiming your deposits. However, if the State refuses to take custody of your deposits, you will be able to claim them from the FDIC until the receivership is terminated. If you have not claimed your insured deposits before the receivership is terminated, and a receivership may be terminated at any time, all of your rights in those deposits will be barred.

If you have any questions or concerns about these items, please contact [Bank Employee] at [Name of Assuming Institution] by phone at [(XXX) XXX-XXXX] .

Sincerely,

[Name of Claims. Specialist]

[Title]

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

102

EXHIBIT 2.3B

AFFIDAVIT OF MAILING

State of

COUNTY OF

I am employed as a [Title of Office] by the [Name of Assuming Institution] .

This will attest that on [Date of mailing] , I caused a true and correct copy of the Final Legal Notice, attached hereto, to owners of unclaimed deposits of [Name of Failed Bank] , City, State, to be prepared for deposit in the mail of the. United States of America on behalf of the Federal Deposit Insurance Corporation. A list of depositors to whom the notice was mailed is attached. This notice was mailed to the depositor's last address as reflected on the books and records of the [Name of Failed Bank] as of the date of failure.

[Name]

[Title of Office]

[Name of Assuming Institution]

Subscribed and sworn to before me this _______ day. of [Month, Year].

My commission expires:


		[Name], Notary. Public

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

103

EXHIBIT 3.2(c)

VALUATION OF CERTAIN

QUALIFIED FINANCIAL CONTRACTS

A. Scope

Interest Rate Contracts - All interest rate swaps, forward rate agreements, interest rate futures, caps, collars and floors, whether purchased or written.

Option Contracts - All put and call option contracts, whether purchased or written, on marketable securities, financial futures, foreign currencies, foreign exchange or foreign exchange futures contracts.

Foreign Exchange Contracts. All contracts for future purchase or sale of foreign currencies, foreign currency or cross currency swap contracts, or foreign exchange futures. contracts.

B. Exclusions

All financial contracts used to hedge assets and liabilities that are acquired by the Assuming Institution but are not subject to adjustment from Book Value.

C. Adjustment

The difference between the Book Value and market value as of the Bank Closing Date.

D.. Methodology

The price at which the Assuming Institution sells or disposes of Qualified Financial Contracts will be deemed to be the fair. market value of such contracts, if such sale or disposition occurs at prevailing market rates within a predefined timetable as agreed upon by the Assuming Institution and the Receiver.

In valuing all other Qualified Financial Contracts, the following principles will apply:

(i)

All known cash flows under swaps or forward exchange contracts shall be

present valued to the swap zero coupon interest rate curve.

(ii)

All valuations. shall employ. prices and interest rates based on the actual.

frequency of rate reset or payment.

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

104

(iii)

Each tranche of amortizing contracts shall be separately valued. The total value of such amortizing contract shalt be the sum of the values of its component tranches.

(iv)

For regularly traded contracts, valuations shall be at the midpoint of the bid and ask prices quoted by customary sources (e.g., The Wall Street Journal, Telerate, Reuters or other similar source) or regularly traded exchanges.

(v)

For all other Qualified Financial Contracts where published market quotes are unavailable, the adjusted price shall be the average of the bid and ask price quotes from three (3) securities dealers acceptable to the Receiver and Assuming Institution as of the Bank Closing Date. If quotes from securities dealers cannot be obtained, an appraiser acceptable to the Receiver and the Assuming Institution will perform a valuation based on modeling, correlation analysis, interpolation or other techniques, as appropriate.

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

105

EXHIBIT 4.13

INTERIM ASSET SERVICING ARRANGEMENT

This Interim Asset Servicing Arrangement is made pursuant to and as of the date of that certain Purchase and Assumption Agreement (the "Purchase and Assumption Agreement" ) among the Receiver, the Assuming Institution and the Corporation, to which this Arrangement is attached. Capitalized terms used and not otherwise defined in this Exhibit 4.13 shall have the meanings assigned to such terms in the Agreement.

(a) With respect to each asset or liability designated from time to time by the Receiver to be serviced by the Assuming Institution pursuant to this Interim. Asset Servicing Arrangement (the "Arrangement" ), including any assets or liabilities sold or conveyed by the Receiver to any party other than the Assuming Institution (any such party, a "Successor Owner" ) but with respect to which the Receiver has an obligation to service or provide servicing support (such assets and liabilities, the "Pool Assets" ), for certain loans (the "Loans" ). during the term of this Arrangement the Assuming Institution shall service or provide servicing support to the Pool Assets as described in this Exhibit 4.13.

If the Assuming Institution is an approved or qualified servicer for any government sponsored entity (each, a "GSE" ) and if any of the Loans are owned by a GSE, the Assuming Institution shall service or provide servicing support for the. Loans owned by a GSE in accordance with the guidelines promulgated by and its agreements with the applicable GSE. If the Assuming Institution is not an approved or qualified servicer for a GSE or the Loans are not owned by a GSE, then the Assuming Institution shall service or provide servicing support for the Loans in accordance with the following:

(i) promptly. post and apply. payments. received to the applicable system of record;

(ii) reverse and return insufficient funds checks;

(iii) pay (A) participation payments to participants in Loans, as and when received; (B) tax and insurance bills, as they come due, out of any escrow funds maintained for such purposes; and (C) unfunded commitments and protective advances out of any escrow funds created for such purposes;

(iv) process funding draws under Loans and protective advances in connection with collateral and acquired property, in each case, as and to the extent authorized and funded by the Receiver;

(v) maintain in use all data processing equipment and systems and other systems of record on which any activity with respect to any Pool Assets are, or prior to the Bank Closing Date, were, recorded, and maintain all historical data on any such systems as of the Bank Closing Date and not, without the express consent of the Receiver (which consent must be

Basic P&A Agreement (VB. Illinois).		Valley Bank.
Version 6..2P — PURCHASE AND ASSUMPTION AGREEMENT		Moline, 1L

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sought at least sixty (60) days prior to taking any action), deconvert, remove, transfer or otherwise discontinue use of any of the Failed Bank's systems of record with respect to any Pool Asset;

(vi). maintain accurate records reflecting (A) payments received by the Assuming Institution, (B) information received by the Assuming Institution concerning changes in the address or identity of any Obligor and (C) other servicing actions taken by the Assuming Institution, including checks returned for insufficient funds;

(vii) send (A) billing statements to Obligors on Pool Assets (to the extent that such statements were sent by the Failed Bank or as are requested by the Receiver) and (B) notices to. Obligors who are in default on Loans (in the same manner as the Failed Bank or as are requested by the Receiver);

(viii) employ a sufficient number of qualified employees to provide the services required to be provided by the Assuming Institution pursuant to this Arrangement (with the number and qualifications of such employees to be not less than the number and qualifications of employees employed by the Failed Bank to perform such functions as of the Bank Closing Date);

(ix) hold in trust any Credit Files and any servicing files in the possession or on the premises of the Assuming Institution for the Receiver or the Successor Owner (as. applicable) and segregate from the other books and records of the Assuming Institution and appropriately mark such Credit Files and servicing files to clearly reflect the ownership interest of the Receiver or the successor owner (as applicable);

(x) send to the Receiver (indicating closed bank name and number), Attn: Interim Servicing Manager, at the email address provided in Section 116 of the. Purchase and Assumption Agreement, or to such other person at such address as the Receiver may designate, via overnight delivery (A) on a weekly basis, weekly reports, including, without limitation, reports reflecting collections and trial balances, and (B) any other reports, copies or information as may be requested from time to time by the Receiver, including, if requested, copies of (1) checks or other remittances received, (2) insufficient funds checks returned, (3) checks or other remittances for payment to participants or for taxes, insurance, funding advances and protective advances, (4) pay-off requests, and (5) notices to defaulted Obligors;

(xi) remit on a weekly basis to the Receiver (indicating closed bank name and number), Attn: DRR Cashier Unit, Business Operations Support Branch, in the same manner as provided in paragraph (a)(x), via wire transfer to the account designated by the Receiver, or to such other person at such other address and/or account as the Receiver may designate, all payments received;

(xii) prepare and timely file all information reports with appropriate tax. authorities, and, if requested by the Receiver, prepare and file tax returns and remit taxes due on or before the due date;

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(xiii) provide and furnish such other services, operations or functions, including, without limitation, with regard to any business, enterprise or agreement which is a Pool Asset, as may be requested by the Receiver;

(xiv) establish a custodial account for the Receiver and for each successor owner at the Assuming Institution, each of which shall be interest bearing, titled in the name of Assuming Institution, in trust for the Receiver or the successor owner (as applicable), in each case as the owner, and segregate and hold all funds collected and received with respect to the Pool Assets separate and apart from any of the Assuming Institution's own funds and general assets; and

(xv) no later than the end of the second Business Day following receipt thereof, deposit into the applicable custodial account and retain therein all funds collected and received with respect to the Pool Assets.

Notwithstanding anything to the contrary in this Exhibit, the Assuming Institution shall not be required to initiate litigation or other collection proceedings against any Obligor or any collateral with respect to any defaulted Loan. The Assuming Institution shall promptly notify the Receiver, at the address referred to above in paragraph (a)(x), of any claims or legal actions regarding any Pool Asset.

(b) In consideration for the provision of the services provided pursuant to this Arrangement, the Receiver agrees to reimburse the Assuming. Institution for the actual, reasonable and necessary expenses incurred in connection with the performance of its duties pursuant to this Arrangement, including shared services of photocopying, postage, express mail, core data processing (allocated on a per loan basis based on historical actual costs) and amounts paid for employee services (based upon the number of hours spent performing servicing duties).

(c) The Assuming Institution shall provide the services described herein for a term of up to three hundred sixty-five (365) days after the. Bank Closing Date. The Receiver may terminate the Arrangement at any time upon not less than sixty (60) days notice to the Assuming Institution without any liability or cost to the Receiver other than the fees and expenses due to the Assuming Institution as of the termination date pursuant to paragraph (b) above.

(d) At any time during the term of this Arrangement, the Receiver may, upon not less than thirty (30) days prior written notice to the Assuming Institution, remove one or more Pool Assets, and at the time of such removal the Assuming Institution's responsibility with respect thereto shall terminate.

(e) At the expiration of this Arrangement or upon the termination of the Assuming Institution's responsibility with respect to any Pool Asset pursuant to paragraph (d) hereof, the Assuming Institution shall:

(i) deliver to the Receiver (or its designee) all of the Credit Documents and records relating to the Pool Assets; and

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(ii) cooperate with the Receiver to facilitate the orderly transition of managing the Pool Assets to the Receiver or its designees (including, without limitation, its contractors and persons to which any Pool Assets are conveyed).

(f) At the request of the Receiver, the Assuming Institution shall perform such transitional services with regard to the Pool Assets as the Receiver may request. Transitional services may include, without limitation, assisting in any due diligence process deemed necessary by the Receiver and providing to the Receiver and its designees (including, without limitation, its contractors and any actual or potential successor owners) (i) information and data regarding the Pool Assets, including, without limitation, system reports and data downloads sufficient to transfer the Pool Assets to another system or systems and to facilitate due diligence by actual and potential successor owners, and (ii) access to employees of the Assuming Institution involved in the management of, or otherwise familiar with, the Pool Assets.

(g) Until such time as the Arrangement expires or is terminated, without limitation of its obligations set forth above or in the Purchase and Assumption Agreement and without any additional consideration (other than that set forth in paragraph (b) above), the Assuming Institution shall provide the Receiver and its designees (including, without limitation, its contractors and actual and potential successor owners) with the following, as the same may be requested:

(i) access to and the ability to obtain assistance and information from personnel of the Assuming Institution, including former personnel of the Failed Bank and personnel of third party consultants;

(ii) access to and the ability to use and download information from data processing systems and other systems of record on which information regarding Pool Assets or any assets transferred to or liabilities assumed by the Assuming Institution is stored or maintained (regardless of whether information with respect to other assets or liabilities is also stored or maintained thereon); and

(iii) access to and the ability to use and occupy office space (including parking facilities and vault space), facilities, utilities (including local telephone service and facsimile machines), furniture, equipment (including photocopying and facsimile machines), and technology and connectivity (including email accounts, network access and technology resources such as shared drives) in the Bank Premises occupied by the Assuming Institution.

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Exhibit 31.1

CERTIFICATIONS


I, Joseph W. Turner, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Great Southern Bancorp, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

	a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 11, 2014

/s/ Joseph W. Turner

Joseph W. Turner

President and Chief Executive Officer

Exhibit 31.2

CERTIFICATIONS

I, Rex A. Copeland, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Great Southern Bancorp, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

	a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 11, 2014

/s/ Rex A. Copeland

Rex A. Copeland

Treasurer

Exhibit 32

SECTION 1350 CERTIFICATIONS

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned hereby certifies in his capacity as an officer of GREAT SOUTHERN BANCORP, INC. (the "Company") that the quarterly report of the Company on Form 10-Q for the quarter ended June 30, 2014 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the financial statements included in such report.

Dated: August 11, 2014	/s/ Joseph W. Turner Joseph W. Turner President and Chief Executive Officer

Dated: August 11, 2014	/s/ Rex A. Copeland Rex A. Copeland Treasurer