Great Southern Bancorp(US:GSBC)2021-08-05 20:21PART I FINANCIAL INFORMATION Financial Statements 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 liability2540 Management's Discussion and Analysis of Financial Condition and Results of Operations 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 losses240 - The company will redeem $75 million of its 5.25% Fixed-to-Floating Rate Subordinated Notes on August 15, 2021, utilizing excess cash230334 - 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, 2021201 - The company originated $121 million in first-round PPP loans and $58 million in second-round loans, with most first-round loans already forgiven198199 Comparison of Financial Condition 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 income239 Results of Operations 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 impact277 - 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 loans296 - 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 income306 Liquidity and Capital Resources 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 share337338 - The tangible common equity to tangible assets ratio was 11.19% at June 30, 2021, a slight decrease from 11.28% at December 31, 2020344 Quantitative and Qualitative Disclosures About Market Risk 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 adapt346 - 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 rates349 - 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 rate350 - 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 2025358 Controls and Procedures 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, 2021360 - No material changes to internal control over financial reporting occurred during the quarter ended June 30, 2021361 PART II. OTHER INFORMATION Legal Proceedings 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 operations363 Risk Factors 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, 2020364 Unregistered Sales of Equity Securities and Use of Proceeds 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 date365