Great Southern Bancorp, Inc. Price & Performance (GSBC)

Joining me today are President and CEO, Joe Turner and Chief Financial Officer, Rex Copeland. I'll now turn the call over to Joe. Okay. Thanks, Jeff, and good afternoon. I also would like to welcome all of you and thank you for joining us on our call today. Our first quarter results reflect the strength of our core banking franchise and the continued resilience of our earnings in a dynamic operating environment amid ongoing economic and financial sector challenges. We reported net income of $17,200,000 or $1.47 per diluted common share up from $13,400,000 or 1.13 share in the same quarter a year ago. The improvement in net income this quarter compared to the year ago quarter was primarily driven by higher net interest income reflecting stronger loan and investment yield and lower funding costs. Additionally, we recorded a negative provision for credit losses of $348,000 this quarter compared to a provision of $630,000 in the year ago quarter. This reflects the continued credit strength across our portfolio. Our disciplined approach to expense management and our commitment to maintaining stable diversified deposit base have further reinforced our financial foundation. Together, these results underscore the strength and resilience of our business model positioning us well to continue delivering long term value for our shareholders.

Net interest income totaled 49,300,000.0 in the first quarter of twenty twenty five compared to $44,800,000 in the first quarter of twenty twenty four, which was an increase of about 10%. Our net margin on a percentage basis remained solid at 3.5725 basis points higher than our year ago quarter. We continue to operate with a conservative credit posture and a focus on long term relationship banking which has enabled us to maintain margin stability despite ongoing deposit cost pressures and a more measured pace of growth. In terms of lending, our loan portfolio of remained essentially flat. It was at $4,760,000,000 at the end of the year. And roughly flat here up 2.2% from where we were at the end of the first quarter of twenty four. Within our portfolio, the largest categories continue to be multifamily at $1,590,000,000 and commercial real estate at 1,490,000,000.00 We've also remained focused on construction lending, totals $475,000,000 at the end of the first quarter. Outstanding construction loan balances may fluctuate quarter to quarter as projects move through various stages of the completion process. Importantly, we continue to maintain a healthy pipeline of unfunded balances on construction loans reflecting our continued presence in this segment.

On the funding side, deposits increased 3.3% from the end of twenty four to $4,760,000,000 with increases in brokered as well as inflows in our core checking balances. While some shifts from non interest bearing to interest bearing accounts have occurred, we've effectively managed total deposit costs while maintaining customer retention. Our balances of broker deposits fluctuate depending on our funding needs and the management of funding mix between core deposits broker deposits, and other wholesale funds based upon the relative interest rates and desired duration of funds. From a credit quality standpoint, our metrics remain very strong Non performing assets remain minimal, consistent with prior quarters and not net charge offs were negligible in the first quarter of 'twenty five. We did not record a provision for credit losses on outstanding loans. Representing an improvement of 500,000 from the first quarter of 'twenty four. Additionally, the company also recognized a negative provision on for losses on unfunded commitments of $348,000 in the first quarter compared to provision expense of 130,000 in the first quarter of twenty four. As we continue to drive operational efficiency, expense management remains a top priority. Non interest expenses were essentially flat in the first quarter year over year at $34,800,000 despite our investments this quarter in technology infrastructure, and personnel.

We also saw a reduction of legal and professional expenses that were elevated last year as we were supporting our core conversion efforts. We continue to maintain a favorable efficiency ratio reflecting our disciplined approach to cost control. As 2025 progresses, we remain focused on execution. Protecting margin, proactively managing credit, supporting relationship based loan growth, and investing strategically in our people, systems and communities. Despite some economic and market uncertainty, our balance sheet and capital levels are strong, and our team is committed to delivering value through all parts of the cycle. Let me now turn the call over to Rex for a detailed discussion of the financials. All right. Thank you, Joe, and good afternoon, I'll now provide a little more detail on our first quarter twenty five financial performance and how it compares to both the first quarter last year and the previous linked quarter. The quarter ended March 3125, we reported net income of $17,200,000 or $1.47 per diluted common share, compared to $13,400,000 or $1.13 per diluted common share in the twenty twenty four first quarter, and also up from $14,900,000 or $1.27 per diluted share in the fourth quarter of twenty four. Our net interest margin for the first quarter increased to 3.57% compared to 3.32% in the same period last year, and 3.49% in the fourth quarter of twenty twenty four.

We did note some additional interest recoveries in the March 2025 quarter that added about five basis points to our net interest margin. Despite the pressures from a challenging and competitive deposit rate environment, our margin performance reflects our careful balance sheet management and strategic approach to controlling funding costs. Net interest income for the quarter increased $49,300,000 reflecting both higher interest income and reduced interest expense. Interest income rose to $80,200,000 representing a 3.7% increase compared to the prior year first quarter. And that was supported by improved loan yields and continued growth in interest earning assets. Interest expense declined to $30,900,000 a decrease of 5.1% year over year. Driven primarily by a $3,000,000 or 11% reduction in deposit related costs. Reflecting lower market interest rates and disciplined funding cost management. This was partially offset by an increase in interest expense on short term borrowings, which rose $1,400,000 due to changes in our funding mix. As a reminder, we will lose the benefit of terminated interest rate swap after the third quarter of twenty twenty five. We expect to continue realizing approximately $2,000,000 per quarter in interest income from the terminated swap through the first three quarters twenty twenty five after which that benefit to interest income will cease.

Non interest income for the quarter totaled $6,600,000 a decrease of $216,000 or 3.2% compared to the first quarter last year. We experienced small decreases in commissions, overdraft fees, and net gains on mortgage loan sales. Partially offset by small increases in debit card usage income and late charges and fees on loans. Compared to the fourth quarter of twenty twenty four, non interest income decreased $344,000 primarily due to seasonal declines in overdraft fees debit card usage income, and net gains on mortgage loan sales. While non interest income may experience some fluctuations, the overall performance demonstrates our continued ability to generate revenue through these non interest products and services. Total non interest expense for the quarter remained relatively consistent at $34,800,000 a small increase of $400,000 or 1.2% from the first quarter of last year and down about 2,100,000.0 or 5.8% for the fourth quarter of twenty twenty four. The fourth quarter of twenty four did include a $2,000,000 non recurring item. The change compared to the prior year first quarter was primarily due to increases in salaries and employee benefits and net occupancy and equipment expenses which were partially offset by reductions in legal and professional fees.

Salaries and benefits totaled $20,100,000 up approximately $473,000 or 2.4% from the first quarter of last year driven mostly by merit increases. Net occupancy and equipment expense was $8,500,000 an increase of $694,000 or 8.9% largely due to ongoing investments in systems, hardware, and software infrastructure and higher expenses for snow removal in the first quarter of twenty twenty five. Professional fees saw significant decline to $1,000,000 down from $1,700,000 in the prior year first quarter primarily due to discontinued use of consultants working on the proposed core systems conversion. During the quarter, we also benefited from expense reimbursements related to our debit card activities at approximately $433,000 which effectively help offset our overall marketing and advertising expenses in the quarter. As a result, our efficiency ratio for the quarter ended 03/31/2025 was 62.27% an improvement compared to 66.68% recorded in the first quarter of twenty twenty four. Overall, we remain committed to managing costs effectively through continuous optimization of our operations and streamlining of expenditures. At the same time, we are making strategic investments in key areas that will drive long term growth and enhance our competitive position.

And then finally, I'll turn to the balance sheet, some items on that.

Total assets ended the quarter at 5,990,000,000.00 up from $5,780,000,000 one year ago and up slightly from 5,980,000,000.00 at December 31. 2024. Net loans held steady at 4,690,000,000.00 compared to the end of twenty twenty four, as loan demand remained relatively stable and we maintained our disciplined approach to credit underwriting. Cash and cash equivalents at the March totaled $217,200,000 The company also has access to additional funding lines through the Federal Home Loan Bank and the Federal Reserve Bank totaling $1,540,000,000. Reflecting enhanced liquidity management and prudent positioning in response to evolving market conditions and funding dynamics. As a result, remain well positioned to address both current and future funding needs. Total deposits stood at 4,760,000,000.00 at the March, representing $152,500,000 increase or 3.3% compared to 12/31/2024. Growth during the period was driven by a $33,500,000 increase interest bearing checking balances largely attributable to certain money market accounts. Non interest bearing deposits also rose by $9,700,000. These gains were partially offset by $14,100,000 decline in time deposits generated through our banking center and corporate services networks. Meanwhile, brokered deposits increased by a hundred and 23,300,000.0 reflecting our ability to access and attract diversified funding sources versus other wholesale funds in a competitive environment.

Deposit mix continued to shift modestly away from retail CDs forward brokered and other wholesale funding sources. Asset quality also remains strong with non performing assets of 0.16% of total assets at quarter end. Non performing loans to period end loans were 0.07%. During the quarter ended 03/31/2025, the company did not record a provision for credit losses on its outstanding loan portfolio. Compared to 500,000 of expense recorded in last year's first quarter. As I mentioned, the company also recorded a negative provision for losses on unfunded commitments, of $348,000 in the first quarter of twenty five compared to $130,000 provision expense recorded in the first quarter of twenty twenty four and a $1,600,000 provision expense recorded in the fourth quarter of twenty twenty four on unfunded commitments. Total net charge offs for the twenty twenty five first quarter fell to $56,000 down from 83,000 in the first in the prior year first quarter. The allowance for credit losses as a percentage of total loans stood at 1.36% at the March, of 2025. And that was consistent with the ratio at the end of twenty twenty four. Our capital position remains healthy with total shares shareholder equity increasing to $613,000,000 from 600,000,000 at 12/31/2024.

At 03/31/2025, this represents 10.2% of total assets and the book value of $53.3 per common share. The increase was primarily driven by $17,200,000 in net income and a $1,200,000 increase from stock option exercises partially offset by cash dividends declared on the company's common stock of $4,600,000 and common stock repurchases of $10,200,000 Our total capital also increased $10,000,000 in the first quarter of twenty twenty five as a result of increased market values of our available for sale investment securities and interest rate swaps. And tangible common equity stands at at approximately 10.1% of total assets at the March, We continue to operate well above all regulatory capital requirements. And finally, I'll also mention that our board of directors did approve a new stock repurchase authorization of up to another 1,000,000 shares once our existing authorization is complete. We had approximately 270,000 shares remaining on that existing program at the March 2025. Overall, we remain confident in the strength and resilience of our balance sheet supported by strong capital, ample liquidity, a stable credit portfolio, and a deposit strategy that remains responsive to the broader interest rate environment. With that, we are now ready for your questions.

Thank you. As a reminder to ask a question, please press 11 on your telephone and wait for your name to be announced. 11 again. Our first question comes from the line of Andrew Liesch. From Piper Sandler Companies.

Hey, good morning or good afternoon, I mean. [indiscernible] margin rose a little bit [indiscernible] the one time benefit. How do you think it's going it should react here this quarter without any changes to the Fed policy. There still room? For more especially with benefits funding side. I'll start off on that one. I'd say on the funding side, you know, on the non non time accounts, we've reduced rates fairly significantly on some of those. Don't know that we have like lots of room on that. We do have maturities of CDs coming up here and we kind of pointed that out in the earnings release that we've got several million dollars. It will be coming up in the next three months, six months, etc. And sort of the replacement rates that we anticipate right now based on what we're seeing in the marketplace today You know, there might be a little benefit that could come our way on that, but it doesn't look like it's going to be substantial. [indiscernible] on the loan side, on the asset side, we've got we do have some fixed rate loans that continue to repay and those are typically at lower than current market rates.

And so as those repay we are able to redeploy that into more current market yields. But I would say that's a pretty slow process as far as repayments and maturities that occur. There are some that happen month by month, but it's not big chunks that move the needle immediately for sure.

Yeah, I would point out on that [indiscernible] Andrew. We might look at the 10 k because there is a good disclosure in there about repricing loans, and you'll be able to see yield on loans that are going to reprice, and you can sort of make assumptions as to what the how far they're repriced upward and could you could you could do a lot of that work yourself and probably get pretty close.

Got it. And then can you remind us how the balance sheet should react if we do any rate cuts from the Fed here in the second half of the year?

Yeah, I think we're I think we feel like our overall interest rate risk posture were pretty neutral.

Now, you know, I do think if there was like a 50 basis point rate cut, I think immediately it could be a little bit negative but we should pick back up pretty quickly.

I don't think it I don't even think immediately it would be dramatically negative. It would might just be a little bit negative. Got maybe 10 in the ballpark of a couple of billion dollars of loans that are gonna be tied to prime or so for and would move within immediately or within a month. Of a repricing event like that from the Fed. We've got the interest rate swaps that would move and so That's on the other side. The other Yeah. On the liability side or Yeah. We've got a couple billion dollars of interest bearing checking that some of a lot of which would move. So I mean, I think we like we're pretty well balanced. I think that's what we saw as rates came down.

Makes sense. And then on the loan side, has there been any commentary from your customers back to pausing investments or with respect to the uncertainty, anything that they're cautious on right now? Or is this just more steady as she goes on production? I think activity is maybe down a little bit.

You know, and and you know, there there is quite a bit of competition among banks for what loans there are. And so But there's not a lot of loans to start with. And as I said, quite a bit of competition for the few loans there are. So it's not a lending environment where we would expect a lot of growth at all.

Got it. Very hot. Thanks for taking the questions. I'll step back.

Thank you. One moment for our next question. Our next question comes from the line of Damon DelMonte from KBW.

Hey, good afternoon, guys. Hope you're both doing well. Just wanted to circle back on margin. I think Rex, you had said the benefit from the swap termination expires in the third quarter. Is that correct? And you said that's about a $2,000,000 per quarter benefit? It's actually at the beginning of the fourth quarter. So we'll still get the benefit through Q2 and all of Q3 And then, like, the first week in Q4 is when it drops off.

Okay. Got it.

Great. Okay, thank you. And then, just kind of curious with growth being somewhat tepid, strong capital on the balance sheet you guys have and the quarterly growth in capital. You guys bought back I think 173,000 shares this quarter. You made a comment about the new authorization. I just guess wondering your thoughts on the buyback here going forward with growth being kind of slowed. Can we expect you to stay pretty active with the buyback?

Yes, I think we would expect to I mean, maybe not more active than what we've been, but feel like we've been fairly active. It depends on the price and the number of shares that are available out there, of course, but where we're trading at today is not not much different than book.

Yep. Okay.

And then lastly on expenses, obviously a strong focus on controlling expenses and balancing where you spend money and where you can save money. Is it reasonable to think kind of I know you don't give guidance, but like kind of modest growth off of this first quarter number without any there's no like material planned expenditures here coming in the next couple of quarters, are there?

No. Not really.

I mean, you know, the the we did have the the it happens every year, but it happens in first quarter. We had the 400,000 [indiscernible] to expenses in the first quarter, we won't have that in the second quarter.

But other than that, you know, I we're not we're we didn't really highlight anything as being unusual or so. I mean, I think that's a fair assumption.

Got it. Okay. That's all that I had. Thank you very much.

Alright. Thanks, David.

Thank you. As a reminder, to ask a question, please press and wait for your name to be announced. To withdraw your question, please press 11 again. At this time, I would now like to turn the conference back over to Joseph Turner for closing remarks.

Okay. Well, again, we want to thank everybody for being on our call today and look forward to talking to you at the end of the quarter. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.