Great Southern Bancorp Q2 2025 Earnings Call Transcript

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July 17, 2025

Key Takeaways

  • Positive Sentiment: Net income rose to $19.8 M ($1.72/share) in Q2, driven by higher net interest income and one-time tax credit partnership gains, while net interest margin improved to 3.68%.
  • Positive Sentiment: Credit quality remained strong with a negative provision for loan losses, non-performing assets falling to 0.14% of assets, and net recoveries of $111 k supporting a disciplined credit posture.
  • Neutral Sentiment: Gross loans decreased 3.3% q/q to $4.6 B amid higher large-loan payoffs and a competitive origination environment, while total deposits dipped 1.6% q/q due to reduced brokered funding.
  • Positive Sentiment: Non-interest expenses declined 3.9% y/y to $35 M, leading to an improved efficiency ratio of ~59%, reflecting ongoing cost control despite technology investments.
  • Positive Sentiment: Capital strength supported shareholder returns via redemption of $75 M subordinated notes, ~176 k shares repurchased in Q2, and a $0.40 quarterly dividend, maintaining robust regulatory ratios.
AI Generated. May Contain Errors.
Earnings Conference Call
Great Southern Bancorp Q2 2025
00:00 / 00:00

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Operator

Good day, and thank you for standing by. Welcome to the Great Southern Bancorp, Inc. Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session.

Operator

To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jeff Treika, Investor Relations. Please go ahead.

Jeff Tryka
Managing Director at LAMBERT

Thank you, Daniel. Good afternoon, and thank you for joining Great Southern Bancorp's second quarter twenty twenty five earnings call. Today, we will be discussing the company's results for the quarter ended 06/30/2025. 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.

Jeff Tryka
Managing Director at LAMBERT

For a list of these factors, please refer to the forward looking statements disclosure in the second 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.

Joseph Turner
Director, President & CEO at Great Southern Bancorp

Okay. Thanks, Jeff, and good afternoon.

Joseph Turner
Director, President & CEO at Great Southern Bancorp

I want to thank everyone for joining us today. Our second quarter results reflect the continued strength of our core banking fundamentals and solid earnings despite dynamic operating environment. Credit and operating metrics remain sound supported by our disciplined expense management and relationship based approach to lending. We reported net income of $19,800,000 for the quarter or $1.72 per common share, up from $17,000,000 and $1.45 per 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 supported by consistent loan and investment yields alongside lower funding costs.

Joseph Turner
Director, President & CEO at Great Southern Bancorp

In addition to the net interest income growth, we also benefited from unusually large tax credit partnership income in the quarter. We recorded a negative provision for losses on unfunded commitments of $110,000 in the quarter compared to a negative provision of $607,000 in the year ago quarter. These results reflect the quality of our loan portfolio. Our disciplined expense management and stable diversified deposit base have further strengthened our financial position, underscoring the resilience of our business model and supporting long term shareholder value. We remain focused on prudent risk management.

Joseph Turner
Director, President & CEO at Great Southern Bancorp

Net interest income totaled $51,000,000 an improvement of about 8.9% compared to the $46,800,000 in the year ago quarter. Our annualized net interest margin improved to 3.68%, which is 25 basis points above the level from a year ago and 11 basis points higher than the first quarter of twenty twenty five. This improvement in net interest margin was underpinned by healthy loan yield and prudent funding cost management. Our loan portfolio continues to reflect our conservative credit posture and commitment to relationship based banking. In terms of lending, gross loans totaled $4,600,000,000 a decline of $157,000,000 or 3.3% from the $4,760,000,000 at end of the year.

Joseph Turner
Director, President & CEO at Great Southern Bancorp

Given our emphasis on balancing loan growth with appropriate pricing and loan structure, we saw a net loan reduction in the quarter. Large loan payoffs tend to fluctuate, but we did experience a higher level of such payoffs in the second quarter of twenty twenty five, including a $30,000,000 payoff on the last day of the quarter. Within our portfolio, the largest loan categories continue to be multifamily and commercial real estate lending, which were one point five eight and one point four nine respectively. We have also remained focused on construction lending with a total outstanding balance of $367,000,000 at 06/30/2025 and an unfunded portion of construction loans of $644,000,000 On the funding side, total deposits decreased $73,900,000 or 1.6% from the end of the first quarter twenty twenty five to $4,680,000,000 The decrease was mainly attributable to a $62,100,000 reduction in brokered deposits. Compared to 12/31/2024, total deposits increased $78,600,000 with increases in brokered deposits and checking deposits.

Joseph Turner
Director, President & CEO at Great Southern Bancorp

We continue to manage total deposit costs while maintaining focus on customer retention. Our broker deposit levels continue to vary based on funding needs and our approach to managing the overall funding mix in light of relative pricing and targeted duration. At 06/30/2025, non performing assets were $8,100,000 representing 0.14% of total assets and a $1,500,000 decrease from 03/31/2025. We experienced net recoveries on loans of $111,000 in the second quarter of twenty twenty five. We did not record a provision for credit losses on outstanding loans in the second quarter of twenty twenty five.

Joseph Turner
Director, President & CEO at Great Southern Bancorp

These results highlight the strength of our portfolio in our prudent risk management practices. Expense management remains a top priority for us as well. Non interest expenses for the 2025 were $35,000,000 down $1,400,000 from the $36,400,000 in the year ago quarter, despite continued investments in infrastructure and personnel. This non interest expense decline was led by a $935,000 reduction in legal and professional expenses, which were at an elevated level last year related to training and implementation costs for the intended core systems conversion. Expenses on other real estate owned also decreased 453,000 partially offset by a modest increase in technology investment.

Joseph Turner
Director, President & CEO at Great Southern Bancorp

In the second quarter of twenty twenty five, we had a favorable efficiency ratio of just over 59%, reflecting our disciplined focus on costs. As we enter the second half of twenty twenty five, we remain focused on maintaining strong credit quality and pursuing consistent relationship driven loan growth that supports longer term stability. Even amidst ongoing market uncertainty, we are committed to maintaining strong capital levels and delivering consistent value for our shareholders. Let me now turn the call over to Rex Copeland for a detailed discussion of the financials.

Rex Copeland
Rex Copeland
SVP, CFO & Treasurer at Great Southern Bancorp

All right. Thank you, Joe, and good afternoon, everyone. I'll now provide a little more detail on our second quarter financial performance and how it compares to both Q2 of last year and Q1 of twenty twenty five. For the quarter ended 06/30/2025, we reported net income of $19,800,000 or $1.72 per diluted common share compared to $17,000,000 or $1.45 per diluted common share in the twenty twenty four second quarter and also compared to $17,200,000 or $1.47 per diluted common share in the first quarter of twenty twenty five. Our annualized net interest margin for the second quarter this year increased to 3.68% compared to 3.43% in the second quarter last year and 3.57% in the first quarter of twenty twenty five.

Rex Copeland
Rex Copeland
SVP, CFO & Treasurer at Great Southern Bancorp

Despite the challenges of a competitive deposit pricing environment, our margin improvement reflects disciplined balance sheet strategy and proactive funding cost management of both deposits and borrowings. Net interest income for the quarter increased to $51,000,000 reflecting marginally higher interest income and reduced interest expense. Interest income increased to $81,000,000 representing a 0.1% increase compared to the prior year second quarter, supported by improved yields on improved yields on investment securities and continued growth in average interest earning assets. We did note some additional interest recoveries on non accrual loans and other cash basis assets during the quarter of $434,000 which added about three basis points to our net interest margin. It's important to note that though interest income recoveries such as this may occur in future periods, we cannot anticipate the amount or timing of this income with certainty.

Rex Copeland
Rex Copeland
SVP, CFO & Treasurer at Great Southern Bancorp

Interest expense declined to $30,000,000 down 12% from the year ago quarter, primarily due to a $3,400,000 or 12.3 reduction in deposit related costs, reflecting lower market interest rates and our disciplined management of funding strategies. The average rate paid on total interest bearing liabilities decreased to 2.75% in the twenty twenty five second quarter, down from 3.17% in the twenty twenty four second quarter. And as a reminder, once again, we will lose the benefit of the terminated interest rate swap after the third quarter of twenty twenty five. We expect to continue realizing approximately $2,000,000 in interest income from the terminated swap in the third quarter of twenty twenty five, after which that benefit of interest income will cease. Non interest income for the quarter totaled $8,200,000 a decrease of $1,600,000 or 16.5% compared to the second quarter last year.

Rex Copeland
Rex Copeland
SVP, CFO & Treasurer at Great Southern Bancorp

Non interest income was primarily impacted by two unusual items, one occurring in the 2025 and the other occurring in the year ago quarter. Included in the twenty twenty four second quarter was $2,700,000 in income from termination of the master agreement with the third party software vendor. The twenty twenty five second quarter's non interest income included $1,100,000 in gains from exits and other activities associated with tax credit partnership investments. This type of tax credit partnership income cannot be anticipated with certainty in terms of amount or timing. Compared to the first quarter of twenty twenty five, non interest income increased $1,600,000 primarily driven by the previously discussed tax credit partnership investment activities and higher net gains from mortgage loan sales and debit card fees.

Rex Copeland
Rex Copeland
SVP, CFO & Treasurer at Great Southern Bancorp

Total non interest expense for the quarter remained relatively consistent at $35,000,000 a decrease of $1,400,000 or 3.9% from the second quarter of last year, an increase of $183,000 from the first quarter of twenty twenty five. The improvement compared to the prior year second quarter was primarily driven by reductions in legal audit and other professional fees, other operating expenses, and expenses related to other real estate owned. Legal audit and other professional fees totaled 929,000, a decrease of 935,000 or 50%, reflecting the absence of last year's training and implementation costs as mentioned before. Expenses on other real estate owned also decreased as a result of rental income generated from these assets in the 2025 period. Total salary and employee benefits expense remain generally unchanged.

Rex Copeland
Rex Copeland
SVP, CFO & Treasurer at Great Southern Bancorp

These reductions were partially offset by increases in net occupancy and equipment expense. Net occupancy and equipment expense for the second quarter rose and $94,000 or 7.6% to $8,400,000 reflecting various components of computer license and support and hardware costs related to upgrades of core system capabilities. As a result, our efficiency ratio for the quarter ended 06/30/2025 was 59.16%, an improvement from 64.27% in the 2024 and sixty two point two 7% in the first quarter of twenty twenty five. We are focused on maintaining strong cost discipline by continually refining our operations and carefully controlling expenses. At the same time, we're allocating resources strategically to priority initiatives designed to support sustainable growth and strengthen our market position over the long term.

Rex Copeland
Rex Copeland
SVP, CFO & Treasurer at Great Southern Bancorp

Now, make a few comments about the balance sheet. Total assets ended the quarter at $5,850,000,000 down from $5,980,000,000 at the 2024 and $5,990,000,000 at 03/31/2025. Net loans excluding mortgage loans held for sale decreased to $4,530,000,000 at 06/30/2025, compared to $4,690,000,000 at both December 3124 and 03/31/2025. Loan demand has been somewhat constrained in the current economic environment, and we remain committed to balancing loan growth with appropriate pricing and loan structure. As mentioned, we did experience a bit higher level of loan payoffs in the second quarter of twenty twenty five.

Rex Copeland
Rex Copeland
SVP, CFO & Treasurer at Great Southern Bancorp

Cash and cash equivalents totaled $245,900,000 at 06/30/2025. The company also has access to additional funding lines through the Federal Home Loan Bank and the Federal Reserve totaling $1,550,000,000 reflecting enhanced liquidity management and prudent positioning in response to revolving market conditions and funding dynamics. Total deposits were $4,680,000,000 as of 06/30/2025, reflecting an increase of 78,600,000.0 or 1.7% compared to 12/31/2024. This increase was primarily driven by a sixty one point two million dollars increase in brokered deposits, a $35,500,000 increase in checking accounts, and an $18,000,000 decline in retail CDs. As of as of June end, we estimated that uninsured deposits excluding those of our consolidated subsidiaries totaled approximately $7.00 $3,000,000 representing about 15% of our total deposits.

Rex Copeland
Rex Copeland
SVP, CFO & Treasurer at Great Southern Bancorp

Asset quality also remained strong this quarter with non performing assets of 0.14% of total assets at quarter end. Non performing loans to period end loans were 0.04%. During the quarter ended 06/30/2025, the company did not record a provision for credit losses on its outstanding loan portfolio, consistent with last year's second quarter. The company recorded a negative provision for losses on unfunded commitments of $110,000 in the June, June, compared to a negative provision of $607,000 recorded during the second quarter last year, and a negative provision of $348,000 recorded in the first quarter of twenty twenty five. The allowance for credit losses as a percentage of total loans stood at 1.41% as of 06/30/2025, a slight increase from 1.36% at March 31.

Rex Copeland
Rex Copeland
SVP, CFO & Treasurer at Great Southern Bancorp

Our capital position remains healthy with total stockholders' equity increasing to $622,400,000 up from $613,300,000 at 03/31/2025, and $599,600,000 at 12/31/2024. At 06/30/2025, this represents 10.6% of total assets and a book value of $50.54.61 dollars per common share. The increase from 03/31/2025 was primarily driven by $19,800,000 in net income and a $800,000 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 $9,800,000 Our total capital also increased $2,800,000 in the second quarter of twenty twenty five, as a result of increased market value of our available for sale, investment securities and interest rate swaps. Tangible common equity stands at approximately 10.5% of total assets, and we continue to operate well above all regulatory capital requirements. In June 2025, we redeemed all the company's outstanding 5.5 fixed to floating rate subordinated notes at par with an aggregate principal balance of $75,000,000 in advance of a step up in rate that saved considerable future interest costs.

Rex Copeland
Rex Copeland
SVP, CFO & Treasurer at Great Southern Bancorp

I'd also note that last quarter, our Board of Directors approved a new stock repurchase authorization for an additional 1,000,000 shares, which will take effect once the current authorization is fully utilized. During the twenty twenty five second quarter, we repurchased nearly 176,000 shares of our common stock, reducing the remaining balance under the existing program to approximately 94,000 shares as of 06/30/2025. Through the first six months of twenty twenty five, we have repurchased nearly 350,000 shares of our common stock. Additionally, we declared cash dividends on our common stock of $0.40 per share in each of the first two quarters of twenty twenty five. More broadly, we remain confident in the strength and resilience of our balance sheet supported by solid capital levels, ample liquidity, disciplined credit quality, and a deposit strategy that remains responsive to a competitive rate environment.

Rex Copeland
Rex Copeland
SVP, CFO & Treasurer at Great Southern Bancorp

With that, we are now ready to open up for questions.

Operator

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

Damon Delmonte
Managing Director at Keefe, Bruyette & Woods (KBW)

Hey, good afternoon guys. Hope everybody is doing well today and thanks for taking my questions. First question just on the loan growth outlook here in the back half of the year. Joe, just wondering if you have a little bit more optimism at this point than you did ninety days ago. Do you feel like the origination activities can kind of pick up some of those unfunded construction loans maybe hitting the books or kind of just what your broader thoughts are on the outlook for loan growth?

Joseph Turner
Director, President & CEO at Great Southern Bancorp

Well, I mean, I am optimistic over the long term. I would say right now though, it's a pretty competitive environment, Damon. There's not a lot of opportunity out there, less opportunity maybe than we've seen in bigger years. And so the landscape is the loan market is pretty competitive for the fewer deals that there are. So I wouldn't expect from an origination standpoint anything.

Joseph Turner
Director, President & CEO at Great Southern Bancorp

In the near term. I wouldn't expect it to be too much different than what we've seen in the first six months of 'twenty five.

Damon Delmonte
Managing Director at Keefe, Bruyette & Woods (KBW)

How about from a payoff perspective? Do you guys have any line of sight on expected payoffs? I know you noted there was a $30,000,000 loan that paid off in the last day of the month. I mean, do you do you have any others that are scheduled to pay off that you're kind of aware of?

Joseph Turner
Director, President & CEO at Great Southern Bancorp

It it payoff us with the kind of lending we do, Damon, are lumpy and are hard to predict. So I don't know that we have a lot of visibility on that. We like to try to keep track of it as best we can. But what we find is that maybe pay off that customers are expecting to have get pushed and maybe there's a payoff that comes in that wasn't expected. I'm sure we're going to continue to have some payoff activity, trying to pin it down is pretty tough.

Damon Delmonte
Managing Director at Keefe, Bruyette & Woods (KBW)

Got it. Okay. And then on the expense front, Rex, good quarter of expense control. I mean, kind of going to kind of disrupt that trend? Do you think you can kind of hold expenses on the limited growth here in the back half of the year?

Damon Delmonte
Managing Director at Keefe, Bruyette & Woods (KBW)

Or do you see some additional expense spend kind of creeping in?

Rex Copeland
Rex Copeland
SVP, CFO & Treasurer at Great Southern Bancorp

I think, generally, it's going to be fairly consistent. There may be a little bit of stuff in the back half, some additional technology things that will come online that will have a little bit more expense related to, but I don't think it's gonna be anything truly significant. We do have, I think there may be some compensation costs that will be adjusted a little bit. Some in couple of our states. I think there's some minimum wage requirement things and things of that nature.

Rex Copeland
Rex Copeland
SVP, CFO & Treasurer at Great Southern Bancorp

So I think there could be some slight adjustments on some of that kind of stuff. But I don't think of anything really large that I can think of right now that that would change the numbers dramatically.

Joseph Turner
Director, President & CEO at Great Southern Bancorp

Right.

Joseph Turner
Director, President & CEO at Great Southern Bancorp

And it's not that we necessarily have a lot of employees at minimum wage, but once once those salaries start getting adjusted, it can sort of affect you up the line.

Damon Delmonte
Managing Director at Keefe, Bruyette & Woods (KBW)

Got it. Okay. That's very helpful. Thank you very much.

Joseph Turner
Director, President & CEO at Great Southern Bancorp

Alright. Thanks, Aaron.

Operator

Thank you. Our next question comes from John Rodis with Janney. Your line is open.

John Rodis
Director - Banks & Thrifts at Janney Montgomery Scott

Hey, good afternoon guys.

Joseph Turner
Director, President & CEO at Great Southern Bancorp

Hi, Jonathan.

John Rodis
Director - Banks & Thrifts at Janney Montgomery Scott

The just back to the your comment on expenses, the rental income this quarter was up, but it's a function of the larger OREO balance. Things equal, you expect that rental income number? Was there any like catch up or anything in the quarter? Or if that property is still around, should we expect that level in the third and fourth quarter?

Rex Copeland
Rex Copeland
SVP, CFO & Treasurer at Great Southern Bancorp

I don't think there's anything catching up in there. So when you compare it to the year ago quarter, though, we didn't have that property in ORE. We had some expenses related maybe to hit some other things. So I think we had net expense in Q2 twenty twenty four and I believe we had a little bit of negative expense or income related to ORE in the second quarter this year. So that was kind of the big difference.

Rex Copeland
Rex Copeland
SVP, CFO & Treasurer at Great Southern Bancorp

We had expense last year and a little bit of income this year, but I don't think that in Q2, I don't remember anything being a catch up or anything. I think it was fairly consistent with what's in there.

John Rodis
Director - Banks & Thrifts at Janney Montgomery Scott

Okay. So I mean, but if if that property stays on the balance sheet for a little while, then you'll continue to see that sort of that level of rental income. Correct?

Joseph Turner
Director, President & CEO at Great Southern Bancorp

The only the only hesitation I have, John, I don't know that Rex and I are are, fully aware of the rent roll and when leases might be expiring or whatever. So mean, that could affect that number some.

John Rodis
Director - Banks & Thrifts at Janney Montgomery Scott

Okay.

Joseph Turner
Director, President & CEO at Great Southern Bancorp

And I just don't have that. I don't have that in my head.

Joseph Turner
Director, President & CEO at Great Southern Bancorp

But yes, I mean, think generally, the income we had in the second quarter was from that building. And so long as we have that building, we should have similar rental income unless we would have lease roll off or something.

John Rodis
Director - Banks & Thrifts at Janney Montgomery Scott

Okay, makes sense. One other question, just on the margin, you saw a nice expansion. And if you back out the interest recoveries from the first and second quarter, I sort of get a core margin this quarter of around 3.65. And then you should have what, maybe 100,200 thousand dollars net benefit from the sub debt redemption redemption. So maybe a little bit of improvement there in the third quarter and then termination of the swap in the fourth quarter.

John Rodis
Director - Banks & Thrifts at Janney Montgomery Scott

All things equal, do you think you can sort of hold this level of the margin excluding the swap termination?

Joseph Turner
Director, President & CEO at Great Southern Bancorp

I think you've identified the sort of the variables there, John. I mean, can't think of necessarily anything else. We are going to continue to have some fixed rate loans that are pretty low rates, mature and you know, probably get redone at a little higher rates, you know, so I mean, I don't know, Rick.

Rex Copeland
Rex Copeland
SVP, CFO & Treasurer at Great Southern Bancorp

Yeah, we've got a little bit of that. So there's normal there's just normal repayment on some of those loans and then there are some that pay off periodically and so, you know, we can redeploy those funds hopefully into higher yielding assets. And then we do have, we mentioned that I think in the release that we've got a fairly substantial amount of time deposits that are going to mature in the next quarter to six months. And, you know, it's hard to know exactly because of the mix of how that's all gonna play out, but, you know, we're hopeful that we'll be able to renew that at a it won't be a lot less, but maybe a little bit less rate than we're currently have to pay on on what's in the on the books right now.

Rex Copeland
Rex Copeland
SVP, CFO & Treasurer at Great Southern Bancorp

So, you know, there may be a little bit of positive that comes from that.

Joseph Turner
Director, President & CEO at Great Southern Bancorp

Yeah. Yeah. I guess I guess the way to characterize it, John, is probably pretty neutral as to what's happening with maybe a slight tailwind, but it it wouldn't be a real real brisk one.

Rex Copeland
Rex Copeland
SVP, CFO & Treasurer at Great Southern Bancorp

Until q four and then we got a headwind.

Joseph Turner
Director, President & CEO at Great Southern Bancorp

Yeah.

Rex Copeland
Rex Copeland
SVP, CFO & Treasurer at Great Southern Bancorp

That's a lot of termination going on.

Joseph Turner
Director, President & CEO at Great Southern Bancorp

Right.

Rex Copeland
Rex Copeland
SVP, CFO & Treasurer at Great Southern Bancorp

So and you we've talked about that.

Rex Copeland
Rex Copeland
SVP, CFO & Treasurer at Great Southern Bancorp

You guys are aware of it, but, you know, so I I think Q4, obviously, we're we're gonna lose some some interest income from that, all things being equal.

John Rodis
Director - Banks & Thrifts at Janney Montgomery Scott

Yep. Okay. Thanks, guys.

Operator

Thank you. I'm showing no further questions at this time. I would now like to turn it back to Joe Turner for closing remarks.

Joseph Turner
Director, President & CEO at Great Southern Bancorp

All right. We appreciate everybody for joining us today. We'll look forward to talking to you in October. Thank you.

Operator

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

Executives
    • Rex Copeland
      Rex Copeland
      SVP, CFO & Treasurer
Analysts
    • Jeff Tryka
      Managing Director at LAMBERT
    • Joseph Turner
      Director, President & CEO at Great Southern Bancorp
    • Damon Delmonte
      Managing Director at Keefe, Bruyette & Woods (KBW)
    • John Rodis
      Director - Banks & Thrifts at Janney Montgomery Scott
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