Great Southern Bancorp Q3 2025 Earnings Call Transcript

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October 16, 2025

Key Takeaways

  • Positive Sentiment: Net income was $17.8 million, or $1.56 per diluted share, up year-over-year from $16.5 million ($1.41), reflecting consistent profitability in a competitive environment.
  • Positive Sentiment: Net interest income improved to $50.8 million and the annualized net interest margin rose to 3.72%, driven by stable loan yields and lower funding costs.
  • Negative Sentiment: The company recognized roughly $2.0 million of interest income from a terminated interest rate swap in Q3, but that benefit has concluded with the swap's scheduled maturity and will no longer bolster future quarters.
  • Negative Sentiment: Gross loans declined to $4.54 billion (down 4.7% from 12/31/2023) as commercial real estate, multifamily, and construction payoffs outpaced production, although unfunded construction commitments remain about $600 million with $30–40 million monthly fundings.
  • Positive Sentiment: Asset quality and capital remain strong—non-performing assets 0.14% of assets, no provision for credit losses in Q3, allowance for credit losses 1.43% of loans, tangible common equity 10.9%, plus ongoing share repurchases and an increased dividend.
AI Generated. May Contain Errors.
Earnings Conference Call
Great Southern Bancorp Q3 2025
00:00 / 00:00

There are 6 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Great Southern Bancorp Third Quarter twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised today's conference is being recorded.

Operator

I would now like to hand the conference over to your speaker today, Christina Maldonado. Please go ahead.

Speaker 1

Good afternoon, and thank you for joining Great Southern Bancorp's Third Quarter twenty twenty five Earnings Call. Today, we'll be discussing the company's results for the quarter ending 09/30/2025. Before we begin, I'd like to remind everyone that during this call, forward looking statements may be made regarding the company's future events and financial performance. These statements are subject to various factors that could cause actual results to differ materially from those anticipated or projected. For a list of these factors, please refer to the forward looking statements disclosure in the third quarter earnings release and other public filings.

Speaker 1

Joining me today are President and CEO, Joe Turner and Chief Financial Officer, Rex Copeland. I'll now turn the call over to Joe.

Speaker 2

All right. Thanks, Christina, and good afternoon to everyone. Thank you for joining us today. Our third quarter results reflect the continued strength and consistency of our core banking fundamentals and a solid earnings performance in what remains a competitive and dynamic environment. Core credit and operating results remained strong, supported by disciplined expense management, prudent loan underwriting and a stable deposit base.

Speaker 2

We reported net income of $17,800,000 for the quarter or $1.56 per diluted common share. That was up from $16,500,000 or $1.41 in the same period a year ago. The year over year increase in net income primarily reflects improved net interest income, no provision for credit losses and continued management of non interest expense. These results demonstrate our ability to deliver consistent profitability while carefully structuring the balance sheet and maintaining a conservative risk profile. Net interest income totaled $50,800,000 for the third quarter, an increase of $2,800,000 or 5.8% compared to the $48,000,000 reported in the same period a year ago.

Speaker 2

Our annualized net interest margin improved to 3.72 from 3.42% a year ago, reflecting stable loan yield, disciplined asset liability management and effective funding cost control in a highly competitive deposit environment. Core deposits held steady during the quarter, underscoring the strength of our customer relationships and the value of our community banking business. On the lending side, gross loans totaled $4,540,000,000 which was a decline of $223,000,000 or 4.7% from 12/31/2024. The decrease primarily reflects elevated commercial real estate and multifamily loan payoff along with a reduction in outstanding construction loans as many projects were completed. Given our emphasis on balancing loan growth with appropriate pricing and loan structure, loan production in the quarter only partially offset the heightened payoff activity.

Speaker 2

Construction lending continues to show solid momentum with total unfunded construction commitments steady at approximately $600,000,000 and monthly fundings of 30,000,000 to $40,000,000 We remain focused on maintaining sound underwriting standards and disciplined credit practices demonstrated through exceptional asset sound underwriting standards and disciplined credit practices, which have resulted in exceptional asset quality and negligible loan charge offs. On the funding side, total deposits decreased $77,500,000 almost exclusively in the brokered deposit area. The deposit market remains highly competitive with sustained rate pressure in both core and brokered deposit segments. We are proactively managing this dynamic by balancing rate discipline with customer retention, choosing to prioritize certain funding sources over others at times. Future repricing opportunities will be closely monitored as market rates competition continue to evolve.

Speaker 2

At 09/30/2025, nonperforming assets were $7,800,000 representing 0.14% of total assets and a $273,000 decrease from 06/30/2025. We did not record provision for credit losses on outstanding loans in the 2025. These results highlight the continued strength of our loan portfolio and judicious risk management practices. Expense management remains a top priority as well. Non interest expense for the 2025 was $36,100,000 up from $33,700,000 in the year ago quarter.

Speaker 2

The year over year increase primarily was a result of higher legal and professional fees, upgrades in our core technologies and upgrades in our core technology system. In the 2025, we achieved an efficiency ratio of 62.45%. As we look ahead to the remainder of 2025, we remain focused on maintaining strong positions related to credit quality, capital and liquidity. Even competition and elevated funding costs, we are committed to delivering consistent long term value for our shareholders. Let me now turn the call over to Rex Copeland for a detailed discussion of our financials.

Speaker 2

Rex?

Speaker 3

All right. Thank you, Joe, good afternoon, everyone. I'll provide a little more detailed review of our third quarter twenty twenty five financial performance and how it compares to both the prior year period and the previous quarter. As mentioned, we reported net income of $17,800,000 or $1.56 per diluted common share in the third quarter of this year compared to $16,500,000 or 1.41 per diluted common share in the 2024 and $19,800,000 or $1.72 per diluted common share in the 2025. The decline compared to the prior quarter was primarily the result of a decrease in non interest income and a modest increase in non interest expense.

Speaker 3

A couple of things in the second quarter this year, we had significant non recurring income in the non interest income category and also about $450,000 I believe, of interest income that was on some unbooked items. And so we did have those good news items in Q2. Net interest income was $50,800,000 compared to $48,000,000 in the 2024 and $51,000,000 in the 2025. The annualized net interest margin was 3.72% compared to 3.42% in the year ago quarter and 3.68% for Q2 twenty twenty five. Interest income totaled $79,100,000 compared to $83,800,000 in the 2024 and $81,000,000 in the 2025.

Speaker 3

The year over year decrease reflects a slightly lower interest earning asset base, mainly due to a decrease in average loan balances, along with lower prime and SOFR market rates, which impacted interest rates on variable rate loans. The average yield on loans decreased 23 basis points to 6.21% from 6.44% in the prior year period. Interest expense for the 2025 was $28,300,000 compared to $35,800,000 in the prior year period and 30,000,000 in the linked quarter. The decrease from last year primarily reflects a lower cost of interest bearing deposits and various borrowings as a result of FOMC rate cuts in late twenty twenty four and September 2025. Interest expense also benefited from the absence of any interest on subordinated notes during the current quarter as those loans as those notes were redeemed in June 2025.

Speaker 3

The average rate paid on total interest bearing liabilities decreased to 2.66% in the twenty twenty five third quarter, down from 3.24 in the twenty twenty four third quarter. The company recognized approximately $2,000,000 in interest income related to the terminated interest rate swap during the 2025. And as a reminder, this benefit has now concluded following the swap's originally scheduled maturity date of 10/06/2025. For the 2025, noninterest income totaled $7,100,000 compared to $7,000,000 in the 2024 and $8,200,000 in the 2025. The improvement from the prior year period was primarily driven by improvements in commissions on annuity sales and fees on loans but was partially offset by reductions in debit card and ATM fee income.

Speaker 3

The largest individual change in the various non interest income categories compared to the year ago quarter was a $206,000 increase in commission income. Total non interest expense was $36,100,000 compared to $33,700,000 in the 2024 and $35,000,000 in the 2025. The year over year increase of $2,400,000 was primarily attributable to higher net occupancy and equipment expense, salaries and employee benefits, professional fees and expenses related to other real estate owned. A couple more comments on those things. Net occupancy and equipment expense increased $735,000 from the prior year quarter, largely due to higher computer licensing and support costs associated with enhancements to our core systems and disaster recovery infrastructure, which collectively increased by $637,000 compared to the 2024.

Speaker 3

Salaries and employee benefits rose $636,000 year over year, reflecting annual merit increases and staffing adjustments within our lending and operations areas. Legal, audit and other professional fees increased $439,000 from the 2024, primarily due to higher legal expenses related to corporate matters and loan collection activities. Expenses on other real estate owned increased $394,000 from the prior year quarter, primarily reflecting lower gains on sales of other real estate owned the twenty twenty five third quarter compared to some gains that we had in the 2024 period. Also, the prior period benefited from the gains on the property sales. Current quarter reflected net rental income from the office building added to foreclosed assets in the 2024.

Speaker 3

Our efficiency ratio was 62.45% in the 2025 compared to 61.34% in the 2024 and fifty nine point one six percent in the 2025. We continue to emphasize disciplined cost control and operational efficiency, while strategically investing in areas that enhance our capabilities and position the company for sustained growth in the future. Turning now to the balance sheet. Total assets ended the quarter at $5,740,000,000 down from $5,980,000,000 at the 2024 and $5,850,000,000 at 06/30/2025. Total net loans, excluding mortgage loans held for sale, decreased to $4,470,000,000 at 09/30/2025, compared to $4,690,000,000 at 12/31/2024 and $4,530,000,000 at 06/30/2025.

Speaker 3

The decrease compared to the previous year end was primarily driven by decreases in construction loans, many of which were completed and moved to multifamily or commercial real estate categories, multifamily loans and one to four family residential loans. While overall loan balances are expected to remain relatively stable through year end, the unfunded portion of construction and commercial loan commitments remain strong and reflecting steady borrower activity within our markets. The bank's on balance sheet liquidity remains consistent with cash and cash equivalents totaling $196,200,000 at 09/30/2025. The company also has access to additional funding lines through the Federal Home Loan Bank and Federal Reserve Bank, totaling 1,470,000,000 This availability reflects disciplined liquidity management amidst evolving market conditions and challenging funding cost dynamics. Total deposits were $4,530,000,000 as of 09/30/2025, reflecting a decrease of $77,500,000 or 1.7% compared to 12/31/2024.

Speaker 3

The decrease was primarily driven by a decrease in brokered deposits of $92,100,000 and non brokered time deposits, which decreased by $52,100,000 This was partially offset by a $54,300,000 increase in interest bearing checking deposits and an increase of $12,400,000 in non interest bearing checking deposits. As of 09/30/2025, we estimated that uninsured deposits, excluding those of our consolidated subsidiaries, totaled approximately $742,000,000 representing roughly 16% of total deposits. Asset quality remained healthy in the third quarter with nonperforming assets representing 0.14% of total assets and nonperforming loans representing 0.04% of period end loans. Both ratios were generally consistent with the prior quarter and the year ago period. During the quarter ended 09/30/2025, the company did not record a provision for credit losses on its portfolio of outstanding loans compared to a provision expense of $1,200,000 recorded in the 2024.

Speaker 3

The company recorded a negative provision for unfunded commitments of $379,000 in the 2025 compared to a negative provision of $63,000 in the same quarter last year. The allowance for credit losses as a percentage of total loans stood at 1.43% as of 09/30/2025, a slight increase from 1.41% at June 30. Our capital position remains strong with total stockholders' equity increasing to $632,900,000 at 09/30/2025, compared to $599,600,000 at 12/31/2024. This represents 11% of total assets and a book value of $56.18 per common share. The $33,300,000 increase from year end twenty twenty four was primarily driven by a $54,700,000 in net income and a $4,200,000 increase from stock option exercises, partially offset by $14,000,000 in cash dividends declared and $30,000,000 in common stock repurchases.

Speaker 3

The increase in stockholders' equity was also aided by an $18,500,000 improvement in accumulated comprehensive losses on our available for sale investments and interest rate swaps. Our tangible common equity ratio improved to 10.9% at the end of the third quarter, up from 9.9% at 12/31/2024, reflecting the combined benefit of retained earnings and reduced unrealized losses on available for sale investment securities and interest rate swaps. We continue to operate from a position of strength, maintaining capital levels that are well in excess of regulatory requirements and supportive of our long term growth and shareholder return objectives. As we shared on the last quarter's call, our Board of Directors approved a new stock repurchase authorization for up to 1,000,000 additional shares, which became effective during the third quarter following the completion of our previous program. As of 09/30/2025, approximately 929,000 shares remained available for purchase under this most recent authorization.

Speaker 3

During the 2025, we repurchased 165,000 shares of our common stock at an average price of $60.33 per share. Through the first September of twenty twenty five, we repurchased 514,000 shares of our common stock at an average price of $57.89 Our Board of Directors also declared a regular quarterly cash dividend of $0.43 per common share, representing an increase of $03 from the previous quarter. For the nine months ended 09/30/2025, the Board declared regular quarterly dividends totaling $1.23 per common share. Overall, our balance sheet remains strong and well positioned for the current environment, underpinned by solid capital levels, healthy liquidity and consistent credit performance, providing support for long term shareholder value. That concludes my remarks today.

Speaker 3

We are now ready to take your questions.

Operator

Thank you. Our first question comes from Damon DelMonte with KBW. Your line is open.

Speaker 4

Hey, good afternoon guys. I hope you're all doing well and thanks for taking my questions. First question is kind of on the loan growth outlook. I think the comment was you hope to keep balances steady for the remainder of the year. Could you guys just talk a little bit about where you're seeing the best opportunities across your footprint, maybe which regions are showing the most optimism for growth and maybe compare that against some of the slower ones?

Speaker 2

Damon, I mean, I think there's opportunities really in kind of every pocket of our footprint. We're still seeing opportunities in Texas, Atlanta, certainly our St. Louis, Kansas City, our core markets, those would be some that I would highlight. Although I think we're having origination requests kind of across the franchise. It's just that payoffs are elevated as well.

Speaker 4

Got it. Okay. And then your credit quality has been exceptional. Kind of more broadly speaking in the industry, we've seen some kind of one offs apparently that are popping up for a bunch of folks. Are there any segments of your portfolio where you might be seeing some signs of weakness?

Speaker 2

No, I don't really I couldn't say that we're seeing anything that broadly enough that you would say we're seeing general weakness. I mean, we do from time to time see a project, maybe it's a multifamily, maybe it's a retail, that leases up slowly. So, but I would say, I would call that more idiosyncratic to that specific project as opposed to broader weakness. The two events that I saw, I don't know if it's what you're talking about, but a company that had significant factoring relationships and then a subprime lender, and we're not involved in those sectors at all. We sort of stick to our knitting on the credit side.

Speaker 4

Got it. Okay. Appreciate that color. And then kind of along the lines of credit and outlook and we talked about provision a little bit. With the modest outlook for loan growth, it's probably fair to assume just a minimal provision just to kind of provide for any net growth that you do have.

Speaker 4

Is that a reasonable way to look at it, Rex?

Speaker 2

I think so. I guess if there was a net charge off of some sort, we would probably cover that as well. Right.

Speaker 4

Got it. Okay. I guess if I squeeze one more in there, just kind of on the rate sensitivity. We saw a rate cut last month. And just kind of your thoughts on if we see another 25 basis points or a couple of 25 basis point cuts going into the latter part of the year, kind of how the margin is positioned for that?

Speaker 3

I mean, from the margin perspective, I think we feel like we're pretty well positioned with that. The rate cut that happened in September then has not so far really impacted us. I mean, we've been pretty steady on net interest income and margin since that. Rate cuts generally, if they're pretty moderate and spaced out a little bit, shouldn't be harmful, don't think. If you recall back several years ago when rates fell dramatically and went way down, that's when everybody, including us, kind of had some issues maybe with losing some margin there for a while, took a while to gain it back.

Speaker 3

But overall, I don't think that minor and spaced out rate cuts would really be too impactful probably. Let me remember, we know we're going to have the $2,000,000 per quarter that we had been enjoying for a long time on that terminated swap is now over. So we obviously have that factored into the fourth quarter here and beyond.

Speaker 4

Right. Yes. Got that covered. Okay, great. That's all that I had.

Speaker 4

Thanks so much for taking my questions.

Speaker 2

Thanks, Damon.

Operator

One moment for our next question. Our next question comes from John Rodis with Janney. Your line is open.

Speaker 5

Hey guys, good afternoon. Good. Rex, just on operating expenses, net interest yes, operating expenses. Do you think you can sort of keep them around this $36,000,000 level? Or how should we sort of think about that?

Speaker 3

Yes. I mean, I think some of the things in the occupancy category and equipment category I mentioned, those are probably kind of built in now as we've made some enhancements to systems and things of that nature. Some of the other things that are related to maybe the legal and professional fees, hopefully, those are kind of peak there and maybe come back down a little bit in future periods.

Speaker 2

Think you're we try to highlight, John, anything that we think is unusual. And as Rex said, we did kind of have a higher level than normal of legal fees. I mean, I don't think we would characterize any of the higher spend in equipment expense, occupancy expense. We wouldn't characterize any of that as unusual. So I mean, I think it was a pretty normal quarter from a non interest expense standpoint.

Speaker 2

We will have normal merit increases and so forth for employees kind of throughout the year. And those are usually a couple of percent. So that's going to be probably be some growth.

Speaker 5

Okay, okay. That makes sense. Don't know, Joe or Rex, just to you guys sort of highlighted in your comments the commission line item in fee income. I've never seen that commission line item that high before. Just is this a new level?

Speaker 5

Or how should we think about commissions going forward?

Speaker 3

Yes. I mean it's not a huge dollar amount. I mean it's, what, dollars 566,000 in the quarter. So it's not super large item, but it is larger than we kind of historically been. And we've had it's been elevated maybe a little bit here the last couple of quarters.

Speaker 3

So I it's hard to know for sure, John, because it's just kind of individual customer related kind of stuff. So to the extent that people are interested in the products, maybe stays at that level. But I don't know if there's not like any kind of big program per se that we're like focused on that to try to drive additional income or anything there. So I would say we're sort of at a higher level like you said than we've been for a while. And whether that can be sustained, I can't honestly tell you that for sure.

Speaker 5

Okay, okay. Okay, guys. Thanks. Have a good day.

Speaker 2

All right. Thanks, John.

Operator

And I'm not showing any further questions at this time. I'd like to turn the call back over to Joe for any further remarks.

Speaker 2

All right. Thanks, everybody. Thanks for being on our call today, and we'll look forward to talking to you again in January. Thank you.

Operator

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.

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