Great Southern Bancorp(GSBC) - 2025 Q2 - Quarterly Results

Financial Performance Overview Second Quarter 2025 Highlights The company reported strong Q2 2025 results with net income rising to $19.8 million, driven by higher net interest income and improved asset quality Q2 2025 vs. Q2 2024 Performance | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income | $19.8 million | $17.0 million | | Diluted EPS | $1.72 | $1.45 | | Annualized ROA | 1.34% | 1.17% | | Annualized ROE | 12.81% | 12.03% | | Annualized Net Interest Margin | 3.68% | 3.43% | - Net interest income for Q2 2025 increased by $4.2 million (8.9%) year-over-year to $51.0 million, mainly due to reduced interest expense on deposits and borrowings[3] - Asset quality improved, with non-performing assets decreasing to $8.1 million (0.14% of total assets) at June 30, 2025, down from $9.6 million at the end of 2024[3] - The company recorded an unusually large income of $1.1 million from its investments in tax credit partnerships during the quarter[3] CEO Commentary The CEO attributed strong performance to core banking fundamentals and outlined future priorities including cost control, credit quality, and funding mix optimization - The increase in net income was driven by strong growth in net interest income, which rose $4.2 million (8.9%) YoY, and a decrease in non-interest expense[4] - The loan portfolio saw a net reduction of $156 million in the quarter, partly due to a $30 million loan payoff, reflecting a balanced approach to growth and risk management[4] - Future priorities remain consistent: control costs, safeguard credit quality, and optimize the funding mix[5] - In Q2 2025, the company repurchased nearly 176,000 shares and redeemed all $75 million of its outstanding subordinated notes to avoid higher interest costs[5] Detailed Financial Analysis Net Interest Income Net interest income grew 8.9% YoY to $51.0 million, with the net interest margin expanding to 3.68% due to lower liability costs Net Interest Income and Margin | Metric | Q2 2025 | Q2 2024 | Q1 2025 | | :--- | :--- | :--- | :--- | | Net Interest Income | $50,963k | $46,818k | $49,334k | | Net Interest Margin | 3.68% | 3.43% | 3.57% | - The average rate paid on total interest-bearing liabilities decreased to 2.75% in Q2 2025 from 3.17% in Q2 2024, as market interest rates declined from late 2024[8] - The company will no longer benefit from income related to a terminated interest rate swap after Q3 2025, which contributed approximately $2.0 million to interest income in Q2 2025[10] - The company has significant time deposits maturing in the next 12 months, with replacement rates likely to be between 3.35% and 3.85% based on current market conditions[11] Non-Interest Income Non-interest income decreased to $8.2 million, primarily due to a non-recurring gain from a terminated agreement in the prior-year quarter - Other income decreased by $1.6 million YoY, mainly because Q2 2024 included a $2.7 million gain from the termination of a core banking platform conversion agreement[12] - In Q2 2025, the company recorded $1.1 million in income related to exits from its investments in tax credit partnerships[12] - Net gains on loan sales decreased by $234,000 due to a lower volume of fixed-rate single-family mortgage loans originated and sold[12] Non-Interest Expense Non-interest expense decreased by $1.4 million YoY to $35.0 million, significantly improving the efficiency ratio to 59.16% - The efficiency ratio improved to 59.16% for Q2 2025, compared to 64.27% for the same quarter in 2024[13] - Legal, audit, and other professional fees decreased by $935,000, as Q2 2024 included $902,000 in costs for a planned (but not completed) core systems conversion[16] - Net occupancy and equipment expenses increased by $594,000, primarily due to a $502,000 increase in computer license and support expenses for system upgrades[16] Income Taxes The effective tax rate remained stable at 18.5%, below the statutory rate, due to tax-advantaged investments and credits - The effective tax rate for Q2 2025 was 18.5%, the same as in Q2 2024[14] - The company expects its future effective tax rate to be approximately 18.0% to 20.0%[14] Balance Sheet and Asset Quality Loans Total net loans decreased by $156.1 million to $4.53 billion, though the unfunded commitment pipeline remains strong at over $1.1 billion - Total net loans decreased by $156.1 million (3.3%) to $4.53 billion at June 30, 2025, compared to year-end 2024[28] - The decrease was mainly driven by reductions in construction loans (-$79.1M), commercial real estate loans (-$56.1M), and one- to four-family residential loans (-$23.0M)[28] - The pipeline of unfunded loans and formal commitments was $1.11 billion at June 30, 2025, with the largest portion being $626.0 million in unfunded construction loans[29][30] Provision for Credit Losses and Allowance for Credit Losses The company recorded no provision expense for its loan portfolio in Q2 2025, with the ACL ratio increasing to 1.41% of total loans - No provision expense was recorded on the outstanding loan portfolio during Q2 2025[31] - The allowance for credit losses as a percentage of total loans was 1.41% at June 30, 2025, an increase from 1.36% at December 31, 2024[32] - A negative provision (credit) for losses on unfunded commitments of $110,000 was recorded for Q2 2025[31] Asset Quality Asset quality improved as non-performing assets decreased to $8.1 million, representing just 0.14% of total assets Asset Quality Metrics | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Non-performing assets | $8.1 million | $9.6 million | | NPAs as % of total assets | 0.14% | 0.16% | - Non-performing loans decreased by $1.4 million during Q2 2025 to a balance of $2.0 million, primarily due to payoffs in the one- to four-family residential and land development categories[34][36] - Potential problem loans decreased by $246,000 during Q2 2025 to a balance of $7.2 million[37] - Foreclosed assets and repossessions remained stable at approximately $6.0 million, dominated by a single $6.0 million office building asset[38][43] Capital and Liquidity Management Capital The company maintained a strong capital position, with a Tangible Common Equity ratio of 10.5%, while actively managing capital through buybacks and debt redemption Preliminary Capital Ratios (June 30, 2025) | Ratio | Percentage | | :--- | :--- | | Tier 1 Leverage Ratio | 11.5% | | Common Equity Tier 1 Capital Ratio | 13.0% | | Tier 1 Capital Ratio | 13.5% | | Total Capital Ratio | 14.7% | | Tangible Common Equity Ratio | 10.5% | - On June 15, 2025, the company redeemed all of its outstanding $75 million subordinated notes, utilizing excess cash[20] - During Q2 2025, the company repurchased 175,998 shares at an average price of $55.11, and a new stock repurchase program for up to one million additional shares was approved[22][23] Liquidity and Deposits The company maintains sufficient liquidity with over $1.5 billion in available borrowing capacity, despite a managed decrease in total deposits Available Liquidity at June 30, 2025 | Source | Amount (millions) | | :--- | :--- | | FHLBank Line | $1,216.1 | | Federal Reserve Bank Line | $338.9 | | Cash and cash equivalents | $245.9 | | Unpledged securities | $349.3 | - Total deposits decreased by $73.9 million during Q2 2025, which included a $62.1 million decrease in brokered deposits[26] - As of June 30, 2025, estimated uninsured deposits were approximately $703.6 million, representing 15% of total deposits[27] Business and Corporate Information Business Initiatives Key initiatives include ongoing technology upgrades, the installation of new ITMs, and the construction of a next-generation banking center - Technology projects with the current core provider are ongoing, with completions expected to begin in Q3 2025 and continue into 2026[39] - Ten Interactive Teller Machines (ITMs) were installed in the St. Louis market, offering live teller services and extended banking hours[40] - Construction of a new, next-generation banking center in Springfield, MO, is on track for completion in Q4 2025[41] Forward-Looking Statements The report includes forward-looking statements, with actual results subject to risks like economic changes and interest rate fluctuations - The report contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995[45] - Factors that could cause results to differ include economic conditions, interest rate fluctuations, inflation, bank failures, credit losses, and legislative or regulatory changes[46] - The Company does not undertake an obligation to publicly release revisions to any forward-looking statements[47] Financial Statements and Data Selected Financial Data This section provides a high-level summary of the company's consolidated financial condition and operating results Selected Financial Condition Data (in thousands) | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total assets | $5,854,672 | $5,981,628 | | Loans receivable, gross | $4,604,943 | $4,761,848 | | Deposits | $4,684,126 | $4,605,549 | | Total stockholders' equity | $622,368 | $599,568 | Selected Operating Data - Q2 2025 (in thousands) | Metric | Amount | | :--- | :--- | | Net interest income | $50,963 | | Non-interest income | $8,212 | | Non-interest expense | $35,005 | | Net income | $19,786 | Consolidated Statements of Financial Condition The detailed balance sheet shows total assets of $5.85 billion and total equity of $622.4 million as of June 30, 2025 Assets at June 30, 2025 (in thousands) | Asset Category | Amount | | :--- | :--- | | Cash and cash equivalents | $245,913 | | Available-for-sale securities | $527,543 | | Loans receivable, net | $4,534,287 | | Total Assets | $5,854,672 | Liabilities and Equity at June 30, 2025 (in thousands) | Category | Amount | | :--- | :--- | | Deposits | $4,684,126 | | Total borrowings | $450,483 | | Total Liabilities | $5,232,304 | | Total Stockholders' Equity | $622,368 | | Total Liabilities and Equity | $5,854,672 | Consolidated Statements of Income The detailed income statement shows Q2 2025 net income of $19.8 million, an increase from $17.0 million in Q2 2024 Income Statement Summary - Q2 2025 vs Q2 2024 (in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Interest Income | $50,963 | $46,818 | | Provision for Credit Losses | $(110) | $(607) | | Non-interest Income | $8,212 | $9,833 | | Non-interest Expense | $35,005 | $36,409 | | Net Income | $19,786 | $16,988 | Average Balances, Interest Rates and Yields The analysis shows an interest rate spread of 3.08% for Q2 2025, driven by a lower cost of funds Yield/Rate Analysis - Three Months Ended June 30 | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Avg. Yield on Total Loans | 6.16% | 6.37% | | Avg. Yield on Total Interest-Earning Assets | 5.74% | 5.94% | | Avg. Rate on Total Deposits | 2.47% | 2.93% | | Avg. Rate on Total Interest-Bearing Liabilities | 2.66% | 3.17% | | Interest Rate Spread | 3.08% | 2.77% | Non-GAAP Financial Measures Reconciliation of Tangible Common Equity to Tangible Assets This non-GAAP reconciliation shows the tangible common equity ratio improved to 10.48% at the end of Q2 2025 - Management believes this non-GAAP measure is helpful for understanding the company's financial condition, capital strength, and for comparison with peers[64] Tangible Common Equity to Tangible Assets Ratio | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Tangible common equity (a) | $612,491k | $589,474k | | Tangible assets (b) | $5,844,795k | $5,971,534k | | Ratio (a) / (b) | 10.48% | 9.87% |