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.
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Earnings Conference Call
Great Southern Bancorp Q3 2025
00:00 / 00:00

Transcript Sections

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Operator

Good day and thank you for standing by. Welcome to the Great Southern Bancorp Third Quarter 2025 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised today's conference is being recorded. I would like to hand the conference over to your speaker today, Christina Maldonado. Please go ahead.

Christina Maldonado
Christina Maldonado
Head of IR at Great Southern Bancorp

Good afternoon and thank you for joining Great Southern Bancorp's Third Quarter 2025 earnings call. Today, we'll be discussing the company's results for the quarter ending September 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. Joining me today are President and CEO Joe Turner and Chief Financial Officer Rex Copeland. I'll now turn the call over to Joe.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

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 remain strong, supported by disciplined expense management, prudent loan underwriting, and a stable deposit base. We reported net income of $17.8 million for the quarter, or $1.56 per diluted common share. That was up from $16.5 million 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.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

Net interest income totaled $50.8 million for the third quarter, an increase of $2.8 million, or 5.8% compared to the $48 million reported in the same period a year ago. Our annualized net interest margin improved to 3.72% from 3.42% a year ago, reflecting stable loan yields, 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 $4.54 billion, which was a decline of $223 million, or 4.7%, from December 31, 2023. The decrease primarily reflects elevated commercial real estate and multifamily loan payoffs, along with a reduction in outstanding construction loans as many projects were completed.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

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. Construction lending continues to show solid momentum with total unfunded construction commitments steady at approximately $600 million and monthly fundings of $30 million to $40 million. We remain focused on maintaining sound underwriting standards and disciplined credit practices demonstrated through exceptional asset quality and negligible loan charge-offs. On the funding side, total deposits decreased $77.5 million, 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 and deposit competition continue to evolve.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

At September 30, 2025, non-performing assets were $7.8 million, representing 0.14% of total assets and a $273,000 decrease from June 30, 2025. We did not record provision for credit losses on outstanding loans in the third quarter of 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 third quarter of 2025 was $36.1 million, up from $33.7 million in the year-ago quarter. 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 third quarter of 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.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

Even amidst ongoing 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.

Rex Copeland
Rex Copeland
CFO at Great Southern Bancorp

All right. Thank you, Joe, and good afternoon, everyone. I'll provide a little more detailed review of our third quarter of 2025 financial performance and how it compares to both the prior year period and the previous quarter. As mentioned, we reported net income of $17.8 million, or $1.56 per diluted common share in the third quarter of this year, compared to $16.5 million, or $1.41 per diluted common share in the third quarter of 2024, and $19.8 million, or $1.72 per diluted common share in the second quarter of 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.

Rex Copeland
Rex Copeland
CFO at Great Southern Bancorp

A couple of things in the second quarter of this year, we had a 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. We did have those good news items in Q2. Net interest income was $50.8 million compared to $48 million in the third quarter of 2024 and $51.0 million in the second quarter of 2025. The annualized net interest margin was 3.72% compared to 3.42% in the year-ago quarter and 3.68% for Q2 of 2025. Interest income totaled $79.1 million compared to $83.8 million in the third quarter of 2024 and $81.0 million in the second quarter of 2025.

Rex Copeland
Rex Copeland
CFO at Great Southern Bancorp

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 third quarter of 2025 was $28.3 million compared to $35.8 million in the prior year period and $30.0 million 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 2024 and September 2025. Interest expense also benefited from the absence of any interest on subordinated notes during the current quarter as those notes were redeemed in June 2025.

Rex Copeland
Rex Copeland
CFO at Great Southern Bancorp

The average rate paid on total interest-bearing liabilities decreased to 2.66% in the 2025 third quarter, down from 3.24% in the 2024 third quarter. The company recognized approximately $2 million in interest income related to the terminated interest rate swap during the third quarter of 2025. As a reminder, this benefit has now concluded following the swap's originally scheduled maturity date of October 6, 2025. For the third quarter of 2025, non-interest income totaled $7.1 million compared to $7.0 million in the third quarter of 2024 and $8.2 million in the second quarter of 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.

Rex Copeland
Rex Copeland
CFO at Great Southern Bancorp

The largest individual change in the various non-interest income categories compared to the year-ago quarter was the $206,000 increase in commission income. Total non-interest expense was $36.1 million compared to $33.7 million in the third quarter of 2024 and $35.0 million in the second quarter of 2025. The year-over-year increase of $2.4 million 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 third quarter of 2024. Salaries and employee benefits rose $636,000 year over year, reflecting annual merit increases and staffing adjustments within our lending and operations areas.

Rex Copeland
Rex Copeland
CFO at Great Southern Bancorp

Legal, audit, and other professional fees increased $439,000 from the third quarter of 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 in the 2025 third quarter compared to some gains that we had in the 2024 period. The prior period benefited from the gains on the property sales. The current quarter reflected net rental income from the office building added to foreclosed assets in the fourth quarter of 2024. Our efficiency ratio was 62.45% in the third quarter of 2025 compared to 61.34% in the third quarter of 2024 and 59.16% in the second quarter of 2025.

Rex Copeland
Rex Copeland
CFO at Great Southern Bancorp

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 $5.74 billion, down from $5.98 billion at the end of 2024 and $5.85 billion at June 30, 2025. Total net loans, excluding mortgage loans held for sale, decreased to $4.47 billion at September 30, 2025, compared to $4.69 billion at December 31, 2024, and $4.53 billion at June 30, 2025. 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.

Rex Copeland
Rex Copeland
CFO at Great Southern Bancorp

While overall loan balances are expected to remain relatively stable through year-end, the unfunded portion of construction and commercial loan commitments remains strong and reflects steady borrower activity within our markets. The bank's on-balance sheet liquidity remains consistent, with cash and cash equivalents totaling $196.2 million at September 30, 2025. The company also has access to additional funding lines through the Federal Home Loan Bank and Federal Reserve Bank, totaling $1.47 billion. This availability reflects disciplined liquidity management amidst evolving market conditions and challenging funding cost dynamics. Total deposits were $4.53 billion as of September 30, 2025, reflecting a decrease of $77.5 million or 1.7% compared to December 31, 2024. The decrease was primarily driven by a decrease in brokered deposits of $92.1 million and non-brokered time deposits, which decreased by $52.1 million.

Rex Copeland
Rex Copeland
CFO at Great Southern Bancorp

This was partially offset by a $54.3 million increase in interest-bearing checking deposits and an increase of $12.4 million in non-interest-bearing checking deposits. As of September 30, 2025, we estimated that uninsured deposits, excluding those of our consolidated subsidiaries, totaled approximately $742 million, representing roughly 16% of total deposits. Asset quality remained healthy in the third quarter, with non-performing assets representing 0.14% of total assets and non-performing 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 September 30, 2025, the company did not record a provision for credit losses on its portfolio of outstanding loans compared to a provision expense of $1.2 million recorded in the third quarter of 2024.

Rex Copeland
Rex Copeland
CFO at Great Southern Bancorp

The company recorded a negative provision for unfunded commitments of $379,000 in the third quarter of 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 September 30, 2025, a slight increase from 1.41% at June 30. Our capital position remains strong, with total stockholders' equity increasing to $632.9 million at September 30, 2025, compared to $599.6 million at December 31, 2024. This represents 11% of total assets and a book value of $56.18 per common share. The $33.3 million increase from year-end 2024 was primarily driven by $54.7 million in net income and a $4.2 million increase from stock option exercises, partially offset by $14.0 million in cash dividends declared and $30.0 million in common stock repurchases.

Rex Copeland
Rex Copeland
CFO at Great Southern Bancorp

The increase in stockholders' equity was also aided by an $18.5 million 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 December 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 million additional shares, which became effective during the third quarter following the completion of our previous program.

Rex Copeland
Rex Copeland
CFO at Great Southern Bancorp

As of September 30, 2025, approximately 929,000 shares remain available for purchase under this most recent authorization. During the third quarter of 2025, we repurchased 165,000 shares of our common stock at an average price of $60.33 per share. Through the first nine months of 2025, 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 $0.03 from the previous quarter. For the nine months ended September 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. We are now ready to take your questions.

Operator

Thank you. Once again, ladies and gentlemen, if you have a question or a comment at this time, please press *11 on your telephone. If your question has been answered or you wish to move yourself from the queue, please press star one one again. We'll pause for a moment while we compile our Q&A roster. Our first question comes from Damon DelMonte with KBW. Your line is open.

Damon DelMonte
Damon DelMonte
Managing Director and Equity Research Analyst at KBW

Hey, good afternoon, guys. I hope you're all doing well, and thanks for taking my questions. My 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?

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

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

Damon DelMonte
Damon DelMonte
Managing Director and Equity Research Analyst at KBW

Got it. Okay. Your credit quality has been exceptional. 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?

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

No, I don't really, I couldn't say that we're seeing anything 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. 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.

Damon DelMonte
Damon DelMonte
Managing Director and Equity Research Analyst at KBW

Got it. Okay. Appreciate that, caller. Then kind of along the lines of credit and outlook, we talk about provision a little bit. You know, 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. Is that a reasonable way to look at it, Rex?

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

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

Damon DelMonte
Damon DelMonte
Managing Director and Equity Research Analyst at KBW

Right. Got it. Okay. I guess if I squeeze one more in there, just kind of on the rate sensitivity, we just, you know, we saw a rate cut last month and just kind of your thoughts on if we see another 25 basis points or a couple 25 basis point cuts going into the latter part of the year, you know, kind of how the margins position for that. Thanks.

Rex Copeland
Rex Copeland
CFO at Great Southern Bancorp

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 has not so far really impacted us. I mean, we've been pretty steady on net interest income and margin since that. You know, rate cuts generally, if they're pretty moderate and spaced out a little bit, shouldn't be harmful, I 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. Overall, I don't think that minor and spaced-out rate cuts would really be too impactful, probably.

Rex Copeland
Rex Copeland
CFO at Great Southern Bancorp

Now, I mean, remember, we know we're going to have the $2 million per quarter that we had been enjoying for a long time on that terminated swap is now over. We obviously have that factored into the fourth quarter here and beyond.

Damon DelMonte
Damon DelMonte
Managing Director and Equity Research Analyst at KBW

Right. Got that covered. Okay. Great. That's all that I had. Thanks so much for taking my questions.

Rex Copeland
Rex Copeland
CFO at Great Southern Bancorp

Thanks, Damon.

Operator

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

John Rodis
John Rodis
Director and Equity Research Analyst at Janney

Hey, guys. Good afternoon.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

Hey.

Rex Copeland
Rex Copeland
CFO at Great Southern Bancorp

Good.

John Rodis
John Rodis
Director and Equity Research Analyst at Janney

Rex, just on operating expenses, net interest in or yeah, operating expenses, do you think you can sort of keep them around this $36 million level, or how should we sort of think about that?

Rex Copeland
Rex Copeland
CFO at Great Southern Bancorp

Yeah. I think some of the things in the occupancy category and equipment category I mentioned 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. I don't know.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

Yeah. I think we try to highlight, John, anything that we think is unusual. As Rex said, we did kind of have a higher level than normal of legal fees. I don't think we would characterize any of the higher spend in equipment expense or occupancy expense as unusual. I think it was a pretty normal quarter from a non-interest expense standpoint. We will have normal merit increases and so forth for employees kind of throughout the year, and those are usually a couple of percent. That's going to probably be some growth.

John Rodis
John Rodis
Director and Equity Research Analyst at Janney

Okay. That makes sense. I don't know, Joe or Rex, 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. Is this a new level, or how should we think about commissions going forward?

Rex Copeland
Rex Copeland
CFO at Great Southern Bancorp

Yeah. I mean, it's not a huge dollar amount. I mean, it's what, $566,000 in the quarter, so it's not a super large item, but it is larger than we kind of have historically been. We've had it elevated maybe a little bit here the last couple of quarters. It's hard to know for sure, John, because it's just kind of individual customer-related kind of stuff. To the extent that people are interested in the products, you know, maybe it stays at that level. I don't know that there's not like any kind of big program per se that we're focused on to try to drive additional income or anything there. 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.

John Rodis
John Rodis
Director and Equity Research Analyst at Janney

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

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

All right. Thanks, John.

Operator

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.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

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.

Executives
    • Joe Turner
      Joe Turner
      President and CEO
    • Christina Maldonado
      Christina Maldonado
      Head of IR
    • Rex Copeland
      Rex Copeland
      CFO
Analysts
    • John Rodis
      Director and Equity Research Analyst at Janney
    • Damon DelMonte
      Managing Director and Equity Research Analyst at KBW
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