Great Southern Bancorp, Inc. (NASDAQ:GSBC) Q3 2021 Earnings Conference Call October 21, 2021 3:00 PM ET Company Participants Kelly Polonus - Investor Relations Joe Turner - President & Chief Executive Officer Rex Copeland - Chief Financial Officer Conference Call Participants Damon DelMonte - KBW Andrew Liesch - Piper Sandler John Rodis - Janney Operator Good day and thank you for standing by. Welcome to the Great Southern Bancorp Third Quarter 2021 Earnings Call. at this time, all participants are in a lis ...

GREAT SOUTHERN BANK LOAN PORTFOLIO September 30, 2021 Portfolio Diversification Legacy Loans [in thousands] 9.30.21 $4,029,711 6.30.21 $4,226,135 Consumer | --- | --- | --- | --- | --- | --- | |---------------------------------------------------------------|----------------------|----------------------------------------|-------|----------------------------------------------------------------------------|------------------------------------------| | Commercial Business $256,902 6% Const & Land Dev $660,453 1 ...

html GREAT SOUTHERN BANCORP, INC. INVESTOR PRESENTATION AUGUST 2021 Forward-Looking Statements When used in this presentation and in other documents filed or furnished by Great Southern Bancorp, Inc. (the "Company") with the SEC, in the Company's press releases or other public or stockholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases "may," "might," "could," "should," "will likely result," "are expected to," "will continue," "is ant ...

PART I FINANCIAL INFORMATION [Financial Statements](index=2&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS.) The company's financial statements show total assets increased to **$5.58 billion**, with Q2 2021 net income rising to **$20.1 million** due to a negative credit loss provision Consolidated Statement of Financial Condition (Unaudited) | | June 30, 2021 (In thousands) | December 31, 2020 (In thousands) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $681,804 | $563,729 | | Loans receivable, net | $4,214,267 | $4,296,804 | | Available-for-sale securities | $450,840 | $414,933 | | **Total Assets** | **$5,577,582** | **$5,526,420** | | **Liabilities & Equity** | | | | Deposits | $4,566,353 | $4,516,903 | | **Total Liabilities** | **$4,948,025** | **$4,896,679** | | **Total Stockholders' Equity** | **$629,557** | **$629,741** | | **Total Liabilities and Stockholders' Equity** | **$5,577,582** | **$5,526,420** | Consolidated Statement of Income (Unaudited) | | Three Months Ended June 30, 2021 (In thousands) | Three Months Ended June 30, 2020 (In thousands) | | :--- | :--- | :--- | | Net Interest Income | $44,684 | $43,455 | | Provision (Credit) for Credit Losses | $(1,307) | $6,000 | | Non-Interest Income | $9,585 | $8,261 | | Non-Interest Expense | $30,191 | $29,349 | | **Net Income** | **$20,114** | **$13,203** | | **Diluted Earnings Per Share** | **$1.46** | **$0.93** | Consolidated Statement of Income (Unaudited) | | Six Months Ended June 30, 2021 (In thousands) | Six Months Ended June 30, 2020 (In thousands) | | :--- | :--- | :--- | | Net Interest Income | $88,773 | $88,393 | | Provision (Credit) for Credit Losses | $(1,681) | $9,871 | | Non-Interest Income | $19,321 | $15,627 | | Non-Interest Expense | $60,512 | $60,163 | | **Net Income** | **$38,982** | **$28,071** | | **Diluted Earnings Per Share** | **$2.82** | **$1.98** | - The company adopted the CECL accounting standard on January 1, 2021, resulting in a **$14.2 million** after-tax decrease in retained earnings due to increased credit loss allowances and unfunded commitments liability[25](index=25&type=chunk)[40](index=40&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=47&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses the significant increase in net income driven by a negative credit loss provision, stable net interest income, and reduced COVID-19 loan modifications - Net income for Q2 2021 increased by **52.3%** to **$20.1 million**, primarily due to a **$7.3 million** decrease in the provision for credit losses[240](index=240&type=chunk) - The company will redeem **$75 million** of its 5.25% Fixed-to-Floating Rate Subordinated Notes on August 15, 2021, utilizing excess cash[230](index=230&type=chunk)[334](index=334&type=chunk) - COVID-19 related commercial loan modifications decreased to **$91 million** from **$233 million**, and consumer/mortgage modifications fell to **$0.876 million** from **$18 million** by June 30, 2021[201](index=201&type=chunk) - The company originated **$121 million** in first-round PPP loans and **$58 million** in second-round loans, with most first-round loans already forgiven[198](index=198&type=chunk)[199](index=199&type=chunk) [Comparison of Financial Condition](index=64&type=section&id=Comparison%20of%20Financial%20Condition) Total assets increased to **$5.58 billion** driven by cash and securities, while net loans decreased, and deposits shifted towards transaction accounts Change in Assets (June 30, 2021 vs. Dec 31, 2020) | Asset Category | Change (in millions) | Percentage Change | | :--- | :--- | :--- | | Total Assets | $51.2 | 0.9% | | Cash and cash equivalents | $118.1 | 20.9% | | Available-for-sale securities | $35.9 | 8.7% | | Net loans | $(82.5) | (1.9)% | Change in Liabilities & Equity (June 30, 2021 vs. Dec 31, 2020) | Liability/Equity Category | Change (in millions) | Percentage Change | | :--- | :--- | :--- | | Total Liabilities | $51.3 | 1.0% | | Total Deposits | $49.5 | 1.1% | | - Transaction Accounts | $281.0 | 9.0% | | - Retail CDs | $(140.2) | (11.4)% | | Stockholders' Equity | $(0.2) | (0.03)% | - Stockholders' equity decreased slightly due to **$14.2 million** CECL adoption, **$10.9 million** AOCI decrease, **$9.3 million** in dividends, and **$7.5 million** in stock repurchases, partially offset by **$39.0 million** net income[239](index=239&type=chunk) [Results of Operations](index=66&type=section&id=Results%20of%20Operations) Q2 2021 net income increased to **$20.1 million**, driven by a negative credit loss provision, higher non-interest income, and a slight increase in net interest income Key Performance Metrics (Q2 2021 vs Q2 2020) | Metric | Q2 2021 | Q2 2020 | Change | | :--- | :--- | :--- | :--- | | Net Income | $20.1M | $13.2M | +52.3% | | Net Interest Income | $44.7M | $43.5M | +2.8% | | Net Interest Margin | 3.35% | 3.39% | -4 bps | | Provision (Credit) for Credit Losses | $(1.3)M | $6.0M | -$7.3M | | Non-interest Income | $9.6M | $8.3M | +16.0% | | Non-interest Expense | $30.2M | $29.3M | +2.9% | - The negative provision for credit losses in Q2 2021 reflects improved asset quality and economic forecasts, contrasting with the significant provision in Q2 2020 due to COVID-19's economic impact[277](index=277&type=chunk) - Net gains on loan sales increased by **$0.772 million** in Q2 2021, driven by higher originations and sales of fixed-rate single-family mortgage loans[296](index=296&type=chunk) - The company's efficiency ratio improved to **55.63%** in Q2 2021 from **56.75%** in Q2 2020, due to increased net interest and non-interest income[306](index=306&type=chunk) [Liquidity and Capital Resources](index=91&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with over **$1.3 billion** in available secured lines and capital levels well above regulatory requirements, alongside active share repurchases Available Liquidity (June 30, 2021) | Source | Amount (in millions) | | :--- | :--- | | Federal Home Loan Bank line | $944.3 | | Federal Reserve Bank line | $394.0 | | Cash and cash equivalents | $681.8 | | Unpledged securities | $251.9 | Regulatory Capital Ratios (June 30, 2021) | Ratio | Company | Bank | Well-Capitalized Minimum | | :--- | :--- | :--- | :--- | | Common Equity Tier 1 | 13.0% | 14.4% | 6.5% | | Tier 1 Capital | 13.6% | 14.4% | 8.0% | | Total Capital | 18.1% | 15.6% | 10.0% | | Tier 1 Leverage | 11.0% | 11.7% | 5.0% | - In Q2 2021, the company declared a **$0.34** per share cash dividend and repurchased **67,514** common shares at an average price of **$54.50** per share[337](index=337&type=chunk)[338](index=338&type=chunk) - The tangible common equity to tangible assets ratio was **11.19%** at June 30, 2021, a slight decrease from **11.28%** at December 31, 2020[344](index=344&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=97&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company primarily manages interest rate risk to maintain stable net interest income, with models indicating positive sensitivity to rising rates and most LIBOR-tied loans having interest rate floors - The company's most significant market risk is interest rate risk, concerning changes in interest rates and the ability to adapt[346](index=346&type=chunk) - As of June 30, 2021, interest rate risk models indicate a positive impact on net interest income from rising rates and a negative impact from declining rates[349](index=349&type=chunk) - As of June 30, 2021, **$1.94 billion** of the loan portfolio was tied to LIBOR, with **$1.93 billion** having interest rate floors, and an additional **$254 million** tied to the prime rate[350](index=350&type=chunk) - In March 2020, the company terminated a **$400 million** interest rate swap, receiving a **$45.9 million** payment, with the gain accreted to interest income through October 2025[358](index=358&type=chunk) [Controls and Procedures](index=101&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal control over financial reporting during the quarter - The Principal Executive Officer and Principal Financial Officer concluded that disclosure controls and procedures were effective as of June 30, 2021[360](index=360&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter ended June 30, 2021[361](index=361&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=101&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to various legal actions, but management believes their outcome will not materially affect financial condition or operations - The Company and its subsidiaries are subject to pending and threatened legal actions, which management believes will not materially adversely affect business, financial condition, or results of operations[363](index=363&type=chunk) [Risk Factors](index=101&type=page&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2020 - No material changes have occurred to the risk factors outlined in the Company's Annual Report on Form 10-K for the year ended December 31, 2020[364](index=364&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=101&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **67,514** shares in Q2 2021 under its active stock repurchase program, with **794,156** shares remaining available Common Stock Repurchases (Q2 2021) | Period | Total Shares Purchased | Average Price Per Share | Shares Remaining Under Plan | | :--- | :--- | :--- | :--- | | April 2021 | 0 | N/A | 861,670 | | May 2021 | 0 | N/A | 861,670 | | June 2021 | 67,514 | $54.50 | 794,156 | | **Total Q2** | **67,514** | **$54.50** | **794,156** | - The Board authorized a new repurchase program on October 21, 2020, for up to **1,000,000** shares, effective November 2020 with no expiration date[365](index=365&type=chunk)

Great Southern Bancorp, Inc. (NASDAQ:GSBC) Q2 2021 Earnings Conference Call July 22, 2021 3:00 PM ET Company Participants Kelly Polonus - Investor Relations Joe Turner - President & Chief Executive Officer Rex Copeland - Senior Vice President & Chief Financial Officer Conference Call Participants Andrew Liesch - Piper Sandler Damon DelMonte - KBW Operator Thank you for standing by and welcome to the Great Southern Bancorp Inc. Second Quarter Earnings Conference Call. At this time, all participants are in a ...

PART I FINANCIAL INFORMATION [Financial Statements](index=2&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS.) The unaudited consolidated financial statements for Q1 2021 reflect total assets of **$5.60 billion**, net income of **$18.9 million**, and the adoption of the CECL standard which reduced retained earnings by **$14.2 million** [Loans and Allowance for Credit Losses](index=11&type=section&id=NOTE%206%3A%20LOANS%20AND%20ALLOWANCE%20FOR%20CREDIT%20LOSSES) The company adopted the CECL methodology, increasing the allowance for credit losses to **$67.7 million** and leading to a rise in non-accruing loans to **$9.5 million** Loan Portfolio Composition (In Thousands) | Loan Class | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Commercial construction | $1,206,687 | $1,212,837 | | Commercial real estate | $1,588,771 | $1,553,677 | | Other residential | $1,055,395 | $1,021,145 | | Owner occupied one- to four-family | $510,343 | $470,436 | | Commercial business | $372,533 | $370,898 | | Other | $481,185 | $596,835 | | **Total Gross Loans** | **$5,216,114** | **$5,225,529** | Activity in Allowance for Credit Losses (ACL) - Q1 2021 (In Thousands) | Description | Amount | | :--- | :--- | | Balance, December 31, 2020 | $55,743 | | CECL adoption impact | $11,595 | | **Balance, January 1, 2021** | **$67,338** | | Provision charged to expense | $300 | | Charge-offs | ($655) | | Recoveries | $719 | | **Balance, March 31, 2021** | **$67,702** | - Total non-accruing loans increased to **$9.5 million** at March 31, 2021, primarily in owner-occupied residential and commercial real estate loans[49](index=49&type=chunk) - As of March 31, 2021, the company had **19 modified commercial loans** totaling **$141 million** and **92 modified consumer/mortgage loans** totaling **$5 million** under CARES Act guidance, not classified as TDRs[67](index=67&type=chunk) [Derivatives and Hedging Activities](index=39&type=section&id=NOTE%2016%3A%20DERIVATIVES%20AND%20HEDGING%20ACTIVITIES) The company uses interest rate swaps for risk management and customer facilitation, with a terminated **$400 million** swap contributing **$2.0 million** to Q1 2021 interest income - In March 2020, the company terminated a **$400 million** interest rate swap, receiving a **$45.9 million** payment, with the gain accreted to interest income through October 2025[139](index=139&type=chunk) - The terminated swap's gain contributed **$2.0 million** to loan interest income in Q1 2021, compared to **$1.6 million** from an active swap in Q1 2020[138](index=138&type=chunk)[141](index=141&type=chunk) - A back-to-back swap program for commercial customers, not designated for hedge accounting, resulted in a net gain of **$0.47 million** in Q1 2021, contrasting with a net loss of **$0.41 million** in Q1 2020[135](index=135&type=chunk)[137](index=137&type=chunk) Consolidated Statements of Financial Condition (Balance Sheet) | Metric | March 31, 2021 (Unaudited) | December 31, 2020 | | :--- | :--- | :--- | | **Total Assets** | **$5,603,770** | **$5,526,420** | | Cash and cash equivalents | $612,556 | $563,729 | | Loans receivable, net | $4,285,737 | $4,296,804 | | **Total Liabilities** | **$4,992,313** | **$4,896,679** | | Deposits | $4,626,936 | $4,516,903 | | **Total Stockholders' Equity** | **$611,457** | **$629,741** | Consolidated Statements of Income | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net Interest Income | $44,089 | $44,938 | | Provision for Credit Losses on Loans | $300 | $3,871 | | Non-Interest Income | $9,736 | $7,367 | | Non-Interest Expense | $30,321 | $30,815 | | **Net Income** | **$18,868** | **$14,868** | | **Diluted EPS** | **$1.36** | **$1.04** | - The company adopted the CECL accounting standard on January 1, 2021, resulting in a one-time **$11.6 million** increase to the allowance for credit losses and a **$14.2 million** after-tax decrease in retained earnings[22](index=22&type=chunk)[36](index=36&type=chunk) [Management's Discussion and Analysis (MD&A)](index=44&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management reported a **26.9%** increase in Q1 2021 net income to **$18.9 million**, driven by lower credit loss provisions and higher non-interest income, despite net interest margin compression [Financial Condition Analysis](index=65&type=section&id=Comparison%20of%20Financial%20Condition%20at%20March%2031%2C%202021%20and%20December%2031%2C%202020) Total assets increased by **$77.4 million** to **$5.60 billion**, driven by cash and securities growth, while stockholders' equity decreased by **$18.3 million** due to CECL adoption and share repurchases - Total assets increased by **$77.4 million (1.4%)** to **$5.60 billion**, primarily from increases in cash and available-for-sale securities[199](index=199&type=chunk)[233](index=233&type=chunk) - Net loans decreased by **$11.1 million (0.3%)** to **$4.29 billion**, with declines in construction and consumer auto loans offset by multi-family and commercial real estate growth[200](index=200&type=chunk)[237](index=237&type=chunk) - Total deposits grew by **$110.0 million (2.4%)**, driven by a **$249.2 million** increase in transaction accounts, despite an **$80.9 million** decrease in retail certificates of deposit[210](index=210&type=chunk)[239](index=239&type=chunk) - Stockholders' equity decreased by **$18.3 million**, primarily due to the **$14.2 million** CECL adoption impact, a **$15.5 million** decrease in AOCI, **$3.8 million** in share repurchases, and **$4.7 million** in dividends, partially offset by **$18.9 million** in net income[241](index=241&type=chunk) [Results of Operations Analysis](index=67&type=section&id=Results%20of%20Operations%20and%20Comparison%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202021%20and%202020) Net income for Q1 2021 increased **26.9%** to **$18.9 million**, driven by a significant decrease in credit loss provisions and higher non-interest income, despite net interest margin compression Q1 2021 vs. Q1 2020 Performance Summary (In Thousands) | Metric | Q1 2021 | Q1 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Net Interest Income | $44,089 | $44,938 | (1.9%) | | Provision for Credit Losses | $300 | $3,871 | (92.2%) | | Non-Interest Income | $9,736 | $7,367 | 32.2% | | Non-Interest Expense | $30,321 | $30,815 | (1.6%) | | **Net Income** | **$18,868** | **$14,868** | **26.9%** | - The provision for credit losses on loans was significantly lower at **$0.3 million** in Q1 2021 compared to **$3.9 million** in Q1 2020, reflecting improved economic forecasts under the new CECL model[272](index=272&type=chunk) - Net interest margin decreased by **43 basis points** to **3.41%**, primarily due to changes in asset mix and the issuance of subordinated notes[264](index=264&type=chunk) - Non-interest income increased by **$2.4 million**, largely due to a **$2.1 million** increase in net gains on loan sales from higher fixed-rate mortgage origination and sale activity[287](index=287&type=chunk) [Credit Quality](index=75&type=section&id=Non-performing%20Assets) Non-performing assets increased to **$10.9 million (0.19% of total assets)**, primarily due to a **$2.7 million** rise in non-performing commercial real estate loans, while potential problem loans decreased to **$5.1 million** Non-Performing Assets (In Thousands) | Category | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Non-performing loans | $9,546 | $6,886 | | Foreclosed assets | $1,319 | $1,223 | | **Total Non-performing Assets** | **$10,865** | **$8,109** | | As a % of Total Assets | 0.19% | 0.15% | - The increase in non-performing loans was primarily driven by a **$2.5 million** increase in non-performing commercial real estate loans, including one new relationship totaling **$2.4 million**[277](index=277&type=chunk)[278](index=278&type=chunk) - Potential problem loans decreased by **$0.76 million** to **$5.1 million** at March 31, 2021[280](index=280&type=chunk) [Capital and Liquidity](index=88&type=section&id=Capital%20Resources) The company and its bank subsidiary remained well-capitalized, with the company's Tier 1 leverage ratio at **11.0%** and Total risk-based capital ratio at **17.8%**, while repurchasing **74,865 shares** for **$3.8 million** Regulatory Capital Ratios as of March 31, 2021 | Ratio | Company | Bank | Well-Capitalized Minimum | | :--- | :--- | :--- | :--- | | Common Equity Tier 1 (CET1) | 12.7% | 14.1% | 6.50% | | Tier 1 Capital | 13.2% | 14.1% | 8.00% | | Total Capital | 17.8% | 15.4% | 10.00% | | Tier 1 Leverage | 11.0% | 11.8% | 5.00% | - During Q1 2021, the company repurchased **74,865 shares** of common stock at an average price of **$50.50** per share[320](index=320&type=chunk) - A quarterly cash dividend of **$0.34** per common share was declared during Q1 2021[319](index=319&type=chunk) [Market Risk Disclosures](index=92&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company's primary market risk is interest rate risk, with models indicating positive sensitivity to rising rates and **$2.0 billion** of LIBOR-tied loans largely protected by interest rate floors - The company's primary market risk is interest rate risk, with models indicating a positive impact on net interest income from rising rates and a negative impact from declining rates[328](index=328&type=chunk)[330](index=330&type=chunk) - A significant portion of the loan portfolio, **$2.0 billion**, is tied to LIBOR, with **$1.97 billion** protected by interest rate floors to mitigate falling rate impacts[331](index=331&type=chunk) - The company is actively preparing for LIBOR discontinuation, having implemented robust fallback language in new and renewed commercial loan agreements since late 2018[207](index=207&type=chunk)[208](index=208&type=chunk) [Controls and Procedures](index=96&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) The company's disclosure controls and procedures were deemed effective as of March 31, 2021, with no material changes in internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective as of the end of the period[344](index=344&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter[345](index=345&type=chunk) PART II OTHER INFORMATION [Share Repurchases](index=98&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Under a board authorization for up to **1 million shares**, the company repurchased **74,865 shares** of common stock for **$3.8 million** during Q1 2021, with **0.86 million shares** remaining available Common Stock Repurchase Activity - Q1 2021 | Period | Total Shares Purchased | Average Price Per Share | | :--- | :--- | :--- | | January 2021 | 18,559 | $49.29 | | February 2021 | 55,853 | $50.87 | | March 2021 | 453 | $53.53 | | **Total Q1 2021** | **74,865** | **$50.50** | - The current share repurchase program, authorized in October 2020, allows for up to **1 million shares** and has no expiration date[349](index=349&type=chunk)

Great Southern Bancorp, Inc. (NASDAQ:GSBC) Q1 2021 Earnings Conference Call April 22, 2021 3:00 PM ET Company Participants Kelly Polonus - Investor Relations Joe Turner - President & Chief Executive Officer Rex Copeland - Senior Vice President & Chief Financial Officer Conference Call Participants Andrew Liesch - Piper Sandler Damon DelMonte - KBW John Rodis - Janney Operator Good day, and thank you for standing by. Welcome to the Great Southern Bancorp, Inc. First Quarter 2021 Earnings Conference Call. At ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 Commission file number 0-18082 GREAT SOUTHERN BANCORP, INC. (Exact name of registrant as specified in its charter) | Maryland | | 43-1524856 | | --- | --- | --- | | (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) | | 1451 E. Ba ...

Great Southern Bancorp, Inc. (NASDAQ:GSBC) Q4 2020 Earnings Conference Call January 26, 2021 3:00 PM ET Company Participants Kelly Polonus - IR Joe Turner - President & CEO Rex Copeland - SVP & CFO Conference Call Participants Michael Schiavone - KBW Andrew Liesch - Piper Sandler John Rodis - Janney Operator Ladies and gentlemen, thank you for standing by, and welcome to the Great Southern Bancorp’s Fourth Quarter 2020 Earnings Call. [Operator Instructions] I would now like to hand the conference over to ...

PART I [Financial Statements](index=2&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS.) This section presents Great Southern Bancorp's unaudited consolidated financial statements for Q3 and nine months ended September 30, 2020, covering financial condition, income, comprehensive income, equity, and cash flows [Consolidated Statements of Financial Condition](index=2&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20FINANCIAL%20CONDITION) Total assets increased to **$5.44 billion** by September 30, 2020, from **$5.02 billion** at year-end 2019, driven by loan and cash growth, with liabilities and equity also rising Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | **Total Assets** | **$5.44 billion** | **$5.02 billion** | | Cash and cash equivalents | $338.3 million | $220.2 million | | Loans receivable, net | $4.41 billion | $4.15 billion | | **Total Liabilities** | **$4.82 billion** | **$4.41 billion** | | Deposits | $4.44 billion | $3.96 billion | | Short-term borrowings | $1.2 million | $228.2 million | | Subordinated notes | $148.2 million | $74.3 million | | **Total Stockholders' Equity** | **$624.6 million** | **$603.1 million** | [Consolidated Statements of Income](index=3&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20INCOME) Net income for Q3 2020 decreased to **$13.5 million** from **$19.7 million** in Q3 2019, and for the nine months, it fell to **$41.5 million** from **$55.7 million**, primarily due to increased loan loss provisions Q3 2020 vs Q3 2019 Performance (in thousands, except per share data) | Metric | Q3 2020 | Q3 2019 | | :--- | :--- | :--- | | Net Interest Income | $44.2 million | $45.9 million | | Provision for Loan Losses | $4.5 million | $2.0 million | | **Net Income** | **$13.5 million** | **$19.7 million** | | Diluted EPS | $0.96 | $1.38 | Nine Months 2020 vs 2019 Performance (in thousands, except per share data) | Metric | Nine Months 2020 | Nine Months 2019 | | :--- | :--- | :--- | | Net Interest Income | $132.6 million | $135.4 million | | Provision for Loan Losses | $14.4 million | $5.5 million | | **Net Income** | **$41.5 million** | **$55.7 million** | | Diluted EPS | $2.93 | $3.90 | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) Comprehensive income decreased to **$10.1 million** in Q3 2020 from **$28.6 million** in Q3 2019, and to **$64.9 million** for the nine months from **$87.1 million**, mainly due to lower net income Comprehensive Income (in thousands) | Period | 2020 | 2019 | | :--- | :--- | :--- | | **Three Months Ended Sep 30** | | | | Net Income | $13.5 million | $19.7 million | | Comprehensive Income | $10.1 million | $28.6 million | | **Nine Months Ended Sep 30** | | | | Net Income | $41.5 million | $55.7 million | | Comprehensive Income | $64.9 million | $87.1 million | [Consolidated Statements of Stockholders' Equity](index=6&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS%27%20EQUITY) Stockholders' equity increased to **$624.6 million** by September 30, 2020, driven by **$41.5 million** in net income and **$23.4 million** in other comprehensive income, partially offset by dividends and repurchases - Key drivers for the change in stockholders' equity during the first nine months of 2020 were net income (**$41.5 million**), dividends declared (**-$28.6 million**), stock repurchases (**-$15.9 million**), and an increase in other comprehensive income (**$23.4 million**)[16](index=16&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Cash and cash equivalents increased by **$118.1 million** for the nine months ended September 30, 2020, with **$35.8 million** from operations, **$278.9 million** used in investing, and **$361.2 million** provided by financing Cash Flow Summary - Nine Months Ended Sep 30 (in thousands) | Cash Flow Category | 2020 | 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $35.8 million | $64.2 million | | Net cash used in investing activities | ($278.9 million) | ($264.5 million) | | Net cash provided by financing activities | $361.2 million | $188.5 million | | **Increase (Decrease) in Cash** | **$118.1 million** | **($11.9 million)** | [Notes to Consolidated Financial Statements](index=9&type=section&id=NOTES%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section details accounting policies and financial statement items, including CECL adoption delay, investment securities, loan portfolio analysis, FDIC-assisted loans, fair value measurements, and derivatives - The company elected to delay the adoption of the new CECL accounting standard for credit losses, as permitted by the CARES Act. The financial statements are prepared under the existing incurred loss methodology[25](index=25&type=chunk) - Upon eventual adoption of CECL in Q4 2020, the company expects to increase its allowance for credit losses by **$11-$14 million** and create a liability for unfunded commitments of **$7-$10 million**, resulting in an after-tax decrease to retained earnings of **$14-$18 million**[26](index=26&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=42&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses the company's financial condition and operations, emphasizing the COVID-19 pandemic's impact on net income, loan loss provisions, net interest margin, and the company's response including PPP and loan modifications - Net income for Q3 2020 decreased **31.8%** YoY to **$13.5 million**, primarily due to a **130.8%** increase in the provision for loan losses and a **3.8%** decrease in net interest income[237](index=237&type=chunk) - The company is actively participating in the Paycheck Protection Program (PPP), originating approximately **1,600** loans totaling **$121 million** as of September 30, 2020, and receiving **$4.7 million** in SBA fees[183](index=183&type=chunk) - In response to the COVID-19 pandemic, the company has provided extensive loan modifications. As of September 30, 2020, **495** commercial and consumer loans with an aggregate balance of **$395.5 million** remained in modified status[184](index=184&type=chunk)[186](index=186&type=chunk) [Comparison of Financial Condition](index=56&type=section&id=Comparison%20of%20Financial%20Condition) Total assets grew by **$427.9 million** (8.5%) to **$5.44 billion** in the first nine months of 2020, primarily driven by increases in net loans and cash, funded by deposits and subordinated notes - Net loans increased by **$259.8 million** (6.3%) since year-end 2019, primarily in other residential (multi-family), commercial business (including **$121 million** of PPP loans), and one- to four-family residential loans[194](index=194&type=chunk) - Total deposits increased by **$483.7 million** (12.2%), with transaction accounts growing by **$694.3 million** while certificates of deposit decreased by **$81.8 million**[231](index=231&type=chunk) [Results of Operations](index=57&type=section&id=Results%20of%20Operations) Net income for Q3 2020 decreased to **$13.5 million** from **$19.7 million** in Q3 2019, primarily due to lower net interest income, increased loan loss provisions, and higher non-interest expenses - Net interest margin for Q3 2020 was **3.36%**, a **59 basis point** decrease from **3.95%** in Q3 2019, primarily due to lower yields on loans and other interest-earning assets caused by lower market interest rates[268](index=268&type=chunk) - The provision for loan losses increased to **$4.5 million** in Q3 2020 from **$2.0 million** in Q3 2019, reflecting worsening economic conditions from the COVID-19 pandemic[277](index=277&type=chunk) - Non-interest expense increased by **$3.3 million** in Q3 2020, driven by a **$2.9 million** rise in salaries and benefits, which included a **$1.1 million** special cash bonus to employees related to the pandemic[301](index=301&type=chunk) [Non-performing Assets](index=64&type=section&id=Non-performing%20Assets) Non-performing assets (excluding FDIC-assisted) decreased by **$2.7 million** to **$5.5 million** at September 30, 2020, from **$8.2 million** at year-end 2019, driven by reductions in non-performing loans and foreclosed assets Non-Performing Assets (excluding FDIC-assisted) | Category | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Non-performing loans | $3.8 million | $4.5 million | | Foreclosed assets | $1.6 million | $3.7 million | | **Total Non-performing assets** | **$5.5 million** | **$8.2 million** | | % of Total Assets | 0.10% | 0.16% | [Liquidity and Capital Resources](index=73&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with over **$1.5 billion** in available secured lines and remains 'well capitalized', with stockholders' equity increasing to **$624.6 million** despite dividends and repurchases, further bolstered by a **$75.0 million** subordinated note issuance - The company has significant available liquidity, including a **$1.13 billion** line with the Federal Home Loan Bank and a **$431.5 million** line with the Federal Reserve Bank[327](index=327&type=chunk) - As of September 30, 2020, both the Company and the Bank were considered 'well capitalized' with all capital ratios significantly exceeding regulatory requirements. The Bank's Tier 1 leverage ratio was **11.5%**[339](index=339&type=chunk)[340](index=340&type=chunk) - During Q3 2020, the company repurchased **206,400** shares of its common stock at an average price of **$37.39** per share[345](index=345&type=chunk)[378](index=378&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=78&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company's primary market risk is interest rate risk, managed by its Asset and Liability Committee, with **$2.10 billion** of its loan portfolio tied to LIBOR, partially mitigated by interest rate floors - The company's most significant market risk is interest rate risk, managed by the Asset and Liability Committee[355](index=355&type=chunk)[361](index=361&type=chunk) - As of September 30, 2020, **$2.10 billion** of the loan portfolio is tied to one-month or three-month LIBOR, with **$2.08 billion** of that amount having interest rate floors[359](index=359&type=chunk) - In March 2020, the company terminated a **$400 million** notional interest rate swap, receiving a payment of **$45.9 million**. This was part of its interest rate risk management strategy[368](index=368&type=chunk) [Controls and Procedures](index=80&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were effective as of September 30, 2020, with no material changes to internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that as of September 30, 2020, the company's disclosure controls and procedures were effective[369](index=369&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter ended September 30, 2020[371](index=371&type=chunk) PART II [Legal Proceedings](index=81&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal actions, but management believes their outcomes will not materially adversely affect its financial condition or operations - The company states that pending legal actions are not expected to have a material adverse effect on its business or financial condition[373](index=373&type=chunk) [Risk Factors](index=81&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for 2019 or Q2 2020 Form 10-Q were reported - No material changes to risk factors were reported for the quarter[374](index=374&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=81&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q3 2020, the company repurchased **206,400** shares at **$37.39** per share, with **76,311** shares remaining under the current plan, and a new **1 million** share repurchase program authorized for October 2020 Share Repurchases - Q3 2020 | Month | Shares Purchased | Average Price Per Share | | :--- | :--- | :--- | | July 2020 | — | $— | | August 2020 | 7,600 | $38.82 | | September 2020 | 198,800 | $37.34 | | **Total Q3** | **206,400** | **$37.39** | - On October 21, 2020, the Board of Directors authorized a new stock repurchase program for up to **1,000,000** additional shares[379](index=379&type=chunk) [Exhibits](index=83&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and Treasurer certifications required by Sarbanes-Oxley Act, and incorporates various corporate documents by reference - The report includes CEO and CFO certifications pursuant to Sarbanes-Oxley Act Rules 13a-14(a) and Section 906[409](index=409&type=chunk)