Great Southern Bancorp Q4 2024 Earnings Call Transcript

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January 22, 2025
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Operator

Good day and thank you for standing by. Welcome to the Great Southern Bancorp, Inc. 4th Quarter 2024 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

Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, Zach McKeown. Please go ahead.

Zach McKeown
Zach McKeown
Moderator at Great Southern Bancorp

Good afternoon, and thank you for joining Bright SoftBank's 4th quarter 2024 earnings call. Today, we'll be discussing the company's results for the quarter and full year ending December 31, 2024. 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 Q4 earnings release and other public filings.

Zach McKeown
Zach McKeown
Moderator at Great Southern Bancorp

Joining me today are President and CEO, Joe Turner and Chief Financial Officer at Scotland. I'll now turn the call over to Joe. Andrew?

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

All right. Thanks, Zach, and good afternoon, everyone. We appreciate you joining us today for our Q4 earnings call. 2024 was a year of resilience and progress for Great Southern Bancorp. Despite facing a dynamic economic and banking environment, our team delivered solid results, reinforcing the strength of our business model and our long term commitment to execution.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

For the year, we reported $61,800,000 or $5.26 a share. While this represents a slight decline from the prior year, it reflects our proactive management during a period marked by rising funding costs and heightened competition for deposits. These results underscore our ability to adapt, prioritize profitability and continue creating value for our shareholders. In the Q4, we reported net income of $14,900,000 or $1.27 per diluted common share. Net interest margin was $3.49 for the quarter, reflecting an improvement from 3.3% in the Q4 of last year and 3.42% in the quarter ended September 30, 24.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

Annualized return on average assets for the quarter was 1%, which is up slightly from the prior year's quarter, while annualized ROE, our return on average common equity was 9.76%. As we did note in the earnings release, 4th quarter financial results were negatively impacted by non recurring non interest expense item. This expense reduced annualized return on average common equity by 103 basis points and annualized return on average assets by 10 basis points. Looking ahead, we are confident in our long term strategy and our ability to drive shareholder value and increase book value per share, while continuing to deliver strong consistent results. Our loan portfolio growth was driven by sustained demand in key segments with gross loans for the year increasing $100,500,000 Multifamily residential loans led the way reflecting robust growth, while the loan pipeline for construction loans remained strong.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

Loan payoffs due to borrower selling projects or refinancing debt were sporadic and somewhat muted in 2024 compared to previous years given the interest rate environment. For more information about our loan portfolio, please refer to our quarterly loan portfolio presentation available on our Investor Relations site under the Presentations link. The presentation provides helpful insights regarding our loan portfolio mix by type and geography. Our asset quality remained very strong with non performing assets of 0.16 percent. Of total assets at the end of the year.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

Non performing loans to period end loans fell to 0.07%. During the quarter ended December 31, 'twenty four, our provision for credit loss expense was $2,500,000 higher than during the same quarter last year. In the 2024 Q4, the company did not record a provision expense on its portfolio of outstanding loans compared to the $750,000 provision expense in the same period of 2023. In the 2024 Q4, the company recorded a provision expense of $1,600,000 on its unfunded loans, compared to a negative provision expense of $1,700,000 during Q4 of 2023. Our total net charge offs for the Q4 fell to $155,000 down from $833,000 in the prior year quarter.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

The allowance for credit losses as a percentage of total loans stood at 1.36% at twelvethirty onetwenty four. It was the same thing at the end of the 3rd quarter and 1.39% at the end of 2023. We strengthened our capital position, increasing stockholders' equity by $27,700,000 while strategically repurchasing our stock. I think we spent maybe $15,000,000 or so repurchasing our stock and about $18,000,000 on our dividend. And of course, we also had a change to the downside in our mark to market by about $12,000,000 I think.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

So our continued capital management enabled us to return significant values to our shareholders through dividends and share repurchases. As we look ahead to 2025, our focus remains on disciplined growth, prudent balance sheet management and sustainable value delivery for our shareholders. At Great Southern, we have consistently taken a long term view of everything we do. As a result, we are excited about the opportunities ahead. We are also confident in our ability to navigate any challenges that may arise.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

Lastly, I'd like to thank our team members for their dedication and our shareholders for their continued trust. Now I'll turn it over to Rex to provide more detail on our financial results. Thank you, Joe, and good afternoon, everyone. I'll provide a little deeper dive into some of our financial performance metrics here for the Q4 and the full year. I'll start with net interest income and margin.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

For the Q4, we delivered net interest income of $49,500,000 a 9.7% increase compared to $45,100,000 in the same quarter of 2023 and a 3.2% increase from $47,900,000 in the Q3 of 2024. This improvement was primarily driven by higher loan income and yields as well as strategic management of funding costs. For the full year, our net interest income totaled $189,100,000 reflecting a slight decline of 2.1% compared to the previous year. This decline reflects the impact of ongoing elevated deposit costs, which continue increasing until the latter part of 2024, but have now begun to decline. Our net interest margin for the 4th quarter increased to 3.49% compared to 3.30% in the same period last year and 3.42% in the Q3 of 2024.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

Our margin stability despite the challenging deposit rate environment underscores our disciplined approach to balance sheet management and strategic actions to effectively manage funding costs. For the full year, the margin stood at 3.42%, down from 3.57% in 2023, reflecting the impact of elevated funding costs. Average loan yields rose to 6.30 percent for the year, while the cost of interest bearing the liabilities increased to 3.11%. We do not currently see any significant catalyst to drive the net interest margin significantly higher or lower from the Q4 level in the coming 2 or 3 quarters. We have a significant amount of time deposits maturing in the Q1 of 2025, which we expect will renew at slightly lower rates than their current rate.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

However, as a reminder, we will lose the benefit of the terminated interest rate swap after the Q3 of 2025. We expect to continue realizing approximately $2,000,000 per quarter in interest income from the terminated swap through the 1st 3 quarters of 2025, after which the benefit to interest income will cease. Total deposits at December 31, 2024 were $4,610,000,000 down from $91,900,000 from the previous quarter. The decline was driven by reductions across multiple deposit categories, including interest bearing checking, brokered deposits and retail time deposits. These changes reflect the ongoing competitive environment for deposits, which we monitor closely to ensure stability and growth.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

Our liquidity position remains strong with $195,800,000 in cash and cash equivalents and access to additional funding lines through the Federal Home Loan Bank and the Federal Reserve totaling $1,600,000,000 We remain well positioned to address both current and future funding needs. We have successfully replaced broker deposits as they mature and expect this trend to continue for upcoming maturities. We've actively managed our funding sources to optimize costs and support long term stability. Earlier in the rate cycle as interest rates were rising, we replaced maturing lower rate time deposits with higher rate time deposits to remain competitive. However, with recent rate cuts in 2024, we are now replacing maturing higher rate time deposits with funding at comparatively lower rates.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

This transition reflects an important shift in the interest rate environment, allowing us to reduce overall funding costs. Time deposit markets market rates have begun to decline following the Federal Reserve's rate cuts in late 2024, which we anticipate will ease funding cost pressures somewhat moving forward. As mentioned before, loan growth remains strong with total net loans increasing over $100,000,000 or 2.2 percent year over year to $4,690,000,000 at year end. This growth was driven by $607,200,000 increase in multifamily residential loans, which offset declines in other categories, including a $358,700,000 decrease in outstanding construction loan balances as primarily multifamily projects in construction transitioned to completion. Importantly, our loan pipeline expanded in the 4th quarter, particularly in construction, signaling continued future demand.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

Asset quality mentioned somewhat previously before, but non performing assets declined 2,200,000 dollars during the year to $9,600,000 or 0.16 percent of total assets at year end 2024. We mentioned the net charge off levels already. And for the year for the quarter and for the year, net charge offs in 2024 were $1,600,000 up a little bit from $1,100,000 in 2023. And we also mentioned the allowance for credit losses was 1.36 percent of total loans. Foreclosed assets increased $6,000,000 from the end of 2023 as a single office real estate asset accounted for 100% of the total foreclosed real estate asset balance at December 31, 2024.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

A little bit more on non interest income and expenses. For the full year, non interest income totaled $30,600,000 largely unchanged from the prior year. In the 4th quarter, non interest income was 6 $900,000 up $371,000 compared to the prior year's Q4. This increase was primarily driven by increased net gains on loan sales and other income, partially offset by decreased overdraft fees. On the expense side, non interest expenses for the year were $141,500,000 which was consistent with 2023.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

For the Q4, non interest expenses totaled $36,900,000 which included the $2,000,000 expense that was mentioned previously. Excluding that item, our expenses reflected disciplined cost management and continued investment in technology and operational areas. For the years ended December 31, 2024 and 2023, the company's effective tax rate was 18.1% and 20.6%, respectively. These effective rates were below the statutory federal rate of 21%, primarily due to the utilization of certain investment tax credits and the company's tax exempt investments and loans, which reduced the company's effective tax rate. The company's current effective tax rate, both combined federal and state, is expected to range from approximately 18% to 20% in future periods, primarily due to the aforementioned investment tax credits that we began utilizing additional portions of in 2024.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

And I'll conclude with capital and stockholders return. From a capital perspective, our stockholders' equity increased by $27,700,000 to $599,600,000 at year end, which represents 10% of our total assets. This increase was primarily driven by net income of $61,800,000 and stock option exercises adding $11,900,000 to equity, partially offset by $18,700,000 in cash and declared cash dividends and $15,200,000 in share repurchases. Unrealized losses on investment securities and interest rate swaps decreased stockholders' equity by another $11,900,000 in 2024. Our tangible common equity ratio at the end of the year was 9.9%.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

That concludes my remarks. At this time, we are now ready for questions.

Operator

Thank Our first question today will be coming from the line of Andrew Liesch.

Andrew Liesch
Andrew Liesch
Analyst at Piper Sandler Companies

Hey, good afternoon. Thanks for taking the questions. Just wanted to talk on the margin commentary here. Kind of surprised that it's not a little more optimistic just given that we had a couple of rate cuts and it's not just the CDs where you saw improvement in cost of funding. So do you think that maybe the bias could be slightly higher for the next couple of quarters before the swap benefit rolls away?

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

There's a couple of things going on with it. I don't know that like I said, I think we said in here, we don't really see a big catalyst moving the number tremendously from the Q4 number. We will have some benefit, we believe, from CD maturities. And we should have a little bit of benefit, although it's not a large volume of fixed rate loans that will probably reprice and a lot of those should reprice a little bit higher for the most part as they do reprice. It's going to depend a lot, I think Andrew, on the deposit and funding mix and whether or not we have any runoff in non interest bearing checking and things of that nature.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

So I don't know that I've got a big bias in moving off the number a whole lot either way, frankly, but

Andrew Liesch
Andrew Liesch
Analyst at Piper Sandler Companies

Got it. I guess what are you seeing locally in deposit competition for interest bearing like demand and savings and money market accounts, because the rates on those accounts came down nicely this last quarter and with some more cuts in the Q4, I'm just curious if there's any market improvement there with demand?

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

I think, I mean, most of our markets are remaining fairly competitive and it's not like every bank across the board, but there's enough banks within each market that are moving rates a little bit or keeping rates a little bit higher. We've been able to reduce some of those rates and I think we have done so fairly prudently. With any additional rate cuts from the Fed, we do have some negotiated rates in there that we should be able to reduce. Absent that, we may be able to reduce a little, but not necessarily significantly. And some of the other products that are in there, they're just our more normal rates.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

We have been working those rates down a little bit, but some of the competition is kind of dictating a slow go on that.

Andrew Liesch
Andrew Liesch
Analyst at Piper Sandler Companies

Got you. All right. That's helpful. And then just a quick question on expenses here, if I take out that $2,000,000 or right around $35,000,000 for the quarter, is that a good jumping off point for the Q1, maybe with some seasonally higher payroll taxes and bonus accruals than an uptick in the Q2 for merit increases? Is that the right way to look at the overall expense base?

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

Yes. I mean, there was nothing else that we called out in that in the earnings release. So I think that's reasonable. And then we will have a fair amount of just normal like you said, there's going to be the seasonal payroll tax matters and maybe some incentives and bonus things. But there will also be we have a lot of people that are on an annual merit increase and a lot of those occur at the beginning of the year.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

So there there'll be some things that will flow through the Q1 for that as well.

Andrew Liesch
Andrew Liesch
Analyst at Piper Sandler Companies

Got it. Thank you so much for taking the questions. I'll step

Andrew Liesch
Andrew Liesch
Analyst at Piper Sandler Companies

back.

Operator

Thank

Operator

you. And our next question will be coming from the line of Damon DelMonte.

Damon Delmonte
Analyst at Keefe, Bruyette & Woods (KBW)

Hey, good afternoon guys. Hope you're all doing well.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

Hi, David.

Damon Delmonte
Analyst at Keefe, Bruyette & Woods (KBW)

Hi. Just wanted to start off a little bit about loan growth.

Damon Delmonte
Analyst at Keefe, Bruyette & Woods (KBW)

There was no provision for loans this quarter. It was for unfunded commitments. So just wondering if you could talk a little bit about the closing activity during the quarter and kind of how you see that funding over the next 4 quarters or so?

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

You're talking about how the unfunded will fund?

Damon Delmonte
Analyst at Keefe, Bruyette & Woods (KBW)

Yes. Yes, exactly.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

I think generally our unfunded funds maybe between $50,000,000 $70,000,000 a month. So there will be $150,000,000 or so of that funds, but we generally will have repayments at that level or pretty close to it. So I don't know that our loan portfolio will necessarily grow a ton in 2025. And some of the more recent loans that we've closed, but there are construction deals or things like that, they won't start funding for a little while. But as Joe said, we've got stuff in the pipeline that is funding at some clip every month.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

But more recent stuff may take a couple of quarters maybe, maybe at least 1 or 1.5 years. Yes. I mean like the borrowers have to fund their equity first. So on most construction deals, we're getting enough equity that it takes maybe 7 months to 9 months of borrowers funding their equity before we'll fund anything on our loan.

Damon Delmonte
Analyst at Keefe, Bruyette & Woods (KBW)

Got it. Okay. So, I mean this last year you guys had around 2% little bit over 2% annualized growth. I mean do you think you could at least get to that level in 2025 of net debt? Yes.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

I mean we don't give as you know Damon, we don't give forward guidance as to loan growth. But I think that I think we aren't telling you anything any different this year about growth in our loan portfolio than we were telling you last year. And it will just depend also on if there's a big uptick in early repayments and things like that where people are refinancing projects or selling projects or things. So as you guys, we talked before, you guys know in 2024 that wasn't particularly robust. So there was it was kind of slow for repayment stuff like that.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

But depending on how people view 2025, if they want to get something done with their projects, there may be a little bit more of that. But right now, we don't I mean, we don't have any clarity to that right now.

Damon Delmonte
Analyst at Keefe, Bruyette & Woods (KBW)

Got you.

Damon Delmonte
Analyst at Keefe, Bruyette & Woods (KBW)

Okay. And then as far as kind of circling back to the margin, I think you had mentioned, Rex, about some fixed rate loans that would be repricing during the course of the year. Roughly, how much in the way of fixed rate loans would be repricing and what's kind of the pickup between current yields on those and then the reprice levels?

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

Some of it will be repriced. I don't really have a good breakdown of the dollar amount on that off top of my head. We do, Damon. We do have a good table on that. And I know in the 10 ks and do we have it in the Qs as well?

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

No. Okay. It's not in it. But there should be a good table with exactly what you're looking for coming out at the beginning of March. And if you look at last year's 10 ks, there's 2 tables.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

There's a maturity table and a repricing table in there. The repricing table is probably what you want to look at mostly because that will show you what is projected to reprice in each of these coming years. And it tells you what the current rate is on it and you can sort of estimate what it will reprice to. So some of it is going to be that, the loans will stay on the books and just reprice. Other pieces of it will be that they'll pay off or pay down and we'll take those funds and either put them back into new loans, their fixed rate at a higher rate or put them into variable rate loans.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

So it's hard to tell you exactly what the net rate change would be depending on where we place those funds. But it should be for the most part, I would say, I think that overall fixed rate portfolio is the overall rate on that in its entirety is probably a little over 4% or something there. Yes. It should definitely be positive.

Damon Delmonte
Analyst at Keefe, Bruyette & Woods (KBW)

Got it. Okay. Great. I think, yes, that's all that I had. So thank you for taking my questions.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

Thanks.

Operator

Thank you. One moment for the next question. And our next question will be coming from the line of John Rodis. Your line is open.

John Rodis
Analyst at Janney Montgomery Scott

Hey guys, good afternoon.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

Hey John. Hey John.

John Rodis
Analyst at Janney Montgomery Scott

Hey. I guess most of

John Rodis
Analyst at Janney Montgomery Scott

my questions I guess most

John Rodis
Analyst at Janney Montgomery Scott

of my questions have been asked and answered. But just

John Rodis
Analyst at Janney Montgomery Scott

on the fee income side, the other line item was up, I guess, dollars 200,000, dollars 300,000 linked quarter. Anything unusual in that other line item?

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

Yes. John, I think we mentioned in there that we had a we do some a program where we have back to back swaps with loan customers. And in some of those cases, if we do those and the customer wants to do a swap, then we initiate that and then we get an upfront fee on that. And so that was the lion's share of that increase in the Q4. It's about $268,000 I believe.

John Rodis
Analyst at Janney Montgomery Scott

Okay. I see that in the

John Rodis
Analyst at Janney Montgomery Scott

text now. Sorry about that. Yes.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

So that's okay. That's a part of our business, but it's not something that happens all the time.

John Rodis
Analyst at Janney Montgomery Scott

Yes. Okay. And then either Joe or Rex, just can you add any more color, the one property here in Missouri that went to other real estate OREO, what market, anything like that?

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

Yes. We've covered that before, haven't we? I can't remember for sure if we have, but yes, I mean, it's an office property in St. Louis. It's specifically in Clayton.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

So it's although office generally is not strong, Clayton is probably the strongest in St. Louis. And it's a decent property, but I would think, John, it's going to take us a little while to sell it.

John Rodis
Analyst at Janney Montgomery Scott

Okay. Have you marketed it yet or probably not?

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

Yes. We're starting to market it. We're more getting our arms around the property and trying to figure out when is going to be the best time. I mean, we're not in a huge hurry to sell it. It's actually producing fair cash flow for us right now.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

So it's not a terrible problem at all. So we're trying it's kind of figuring out, okay, is this the right time to strike or should we wait and let things in office improve a little bit.

John Rodis
Analyst at Janney Montgomery Scott

Yes. No, you're right.

John Rodis
Analyst at Janney Montgomery Scott

Clayton is obviously a good market, so it makes sense. Okay.

John Rodis
Analyst at Janney Montgomery Scott

Thanks, guys.

Operator

Thank you. There are no more questions in the queue. And I would like to go ahead and turn the call back over to John excuse me, Joseph Turner for closing remarks. Please go ahead.

Joe Turner
Joe Turner
President and CEO at Great Southern Bancorp

All right. Well, thanks very much for joining us, and we'll look forward to talking to you after our Q1 'twenty five results come out. Thank you.

Operator

Thank you all for joining today's conference call. You may now disconnect.

Executives
    • Zach McKeown
      Zach McKeown
      Moderator
    • Joe Turner
      Joe Turner
      President and CEO
Analysts
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