Great Southern Bancorp(GSBC) - 2019 Q3 - Quarterly Report

Financial Performance - Net income for the three months ended September 30, 2019 was $19.7 million, a decrease of $2.8 million or 12.4% compared to the same period in 2018 [219]. - Net income for the nine months ended September 30, 2019 was $55.7 million, an increase of $5.9 million or 11.8% compared to the same period in 2018 [220]. - Total interest income increased by $7.2 million or 13.6% during the three months ended September 30, 2019 compared to the same period in 2018 [221]. - Total interest income increased by $26.5 million or 17.7% during the nine months ended September 30, 2019 compared to the same period in 2018 [223]. - Non-interest income decreased by $5.9 million to $8.7 million for the three months ended September 30, 2019, primarily due to the prior year's gain on the sale of business units [278]. - Non-interest income decreased by $5.7 million to $23.3 million for the nine months ended September 30, 2019, primarily due to the gain on sale of business units in the prior year [282]. - Non-interest expense increased by $416,000 to $28.7 million for the three months ended September 30, 2019, mainly due to increased salaries and employee benefits [286]. - The efficiency ratio for the three months ended September 30, 2019, was 52.63%, up from 49.16% in the same period in 2018 [293]. Asset and Liability Management - Total assets increased by $296.0 million, or 6.3%, from $4.68 billion at December 31, 2018, to $4.97 billion at September 30, 2019 [174]. - Total liabilities increased by $231.2 million to $4.38 billion at September 30, 2019, primarily due to an increase in deposits [211]. - Total deposit balances increased by $210.1 million, or 5.6%, reaching $3.96 billion at September 30, 2019 [183]. - Net outstanding loans increased by $167.7 million, or 4.2%, from $3.99 billion at December 31, 2018, to $4.16 billion at September 30, 2019 [175]. - Total loans receivable rose to $4,196,375 thousand, with an average yield of 5.11% and net interest income of $57,226 thousand for the same period [299]. - Total interest-earning assets increased to $4,617,996 thousand with a net interest income of $60,187 thousand, reflecting a net interest margin of 4.90% for the three months ended September 30, 2019 [299]. Capital and Equity - Total stockholders' equity increased by $64.8 million from $532.0 million at December 31, 2018 to $596.8 million at September 30, 2019 [218]. - As of September 30, 2019, the Company had total stockholders' equity of $596.8 million, representing 12.0% of total assets, with a book value of $41.98 per common share [316]. - The tangible common equity to tangible assets ratio as of September 30, 2019, was 11.85%, compared to 11.20% as of December 31, 2018 [329]. - The Bank's common equity Tier 1 capital ratio was 12.8% as of September 30, 2019, indicating it was well capitalized [318]. - The Company declared a common stock cash dividend of $0.34 per share for the three months ended September 30, 2019, representing 25% of net income per diluted common share for that period [322]. - During the nine months ended September 30, 2019, the Company declared common stock cash dividends of $1.73 per share, or 44% of net income per diluted common share for that period [322]. Economic Conditions - The national unemployment rate declined to 3.5% in September 2019, the lowest since December 1969, indicating improved economic conditions [161]. - The Midwest unemployment rate was stable at 3.6% in September 2019, aligning with the national average [161]. - Sales of newly built single-family homes in September 2019 were at a seasonally adjusted annual rate of 701,000, which is 15.5% higher than the same month in 2018 [162]. - The median existing home price in September 2019 was $272,100, marking a 5.9% increase from September 2018, continuing a trend of year-over-year gains for 91 consecutive months [164]. - The homeownership rate rose to 64.2% in 2019, an increase of more than one percentage point since 2016 [166]. Regulatory Environment - The company is subject to regulatory changes under the Dodd-Frank Act, which could affect capital requirements and operational costs [194]. - The minimum capital ratios established include a CET1 risk-based capital ratio of 4.5%, a Tier 1 risk-based capital ratio of 6%, a total risk-based capital ratio of 8%, and a Tier 1 leverage ratio of 4% [199]. - The capital conservation buffer requires CET1 to be more than 2.5% above each minimum risk-based capital ratio to avoid restrictions on dividends and share repurchases [199]. - The prompt corrective action framework mandates a CET1 risk-based capital ratio of at least 6.5% for institutions to qualify as "well capitalized" [200]. - The EGRRCP Act modifies certain financial reform rules, providing regulatory relief for community banks with assets under $10 billion and banks over $50 billion [201]. - The EGRRCP Act establishes a "Community Bank Leverage Ratio" of between 8% and 10% for qualifying institutions [202]. - Institutions exceeding the community bank leverage ratio will be considered "well capitalized" under prompt corrective action rules [202]. - The specific impact of the EGRRCP Act on community banks remains uncertain at this time [204]. Loan Portfolio and Credit Quality - The allowance for loan losses is determined based on periodic evaluations of the loan portfolio, which are inherently subjective and may require additional provisions if actual outcomes differ from estimates [150]. - The Company’s regulators may require additional provisions for loan losses, which could adversely impact earnings and liquidity [159]. - Non-performing assets, excluding FDIC-assisted acquired assets, decreased to $9.0 million at September 30, 2019 from $11.8 million at December 31, 2018 [268]. - Non-performing loans decreased by $1.6 million to $4.7 million as of September 30, 2019, compared to December 31, 2018 [269]. - Potential problem loans increased by $1.1 million, or 34.4%, to $4.4 million, primarily due to the addition of $2.2 million in loans [273]. - The provision for loan losses for the three months ended September 30, 2019 was $2.0 million compared to $1.3 million for the same period in 2018 [261].