Preliminary 2021 Great Southern Bancorp Inc Earnings Call

January 25, 2022

Okay.

Good day and thank you for standing by welcome to the Great Southern Bancorp, Inc. Fourth quarter 2021 conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone.

Please be advised that this call is being recorded.

You require any further assistance. Please press star zero I would now like to hand, the conference over to your host today, Kelly <unk> of Investor Relations, Matt maybe.

Yeah.

Good afternoon, and thank you for joining us for our fourth quarter 2021 earnings call. This is Kelly <unk> Investor Relations for Great Southern Bancorp. The purpose of this call today is to discuss the company's results for the quarter ending December 31 2021.

Before we begin I need to remind you that during the course of this call. We may make forward looking statements about future events and financial performance. These statements are subject to a number of factors that could cause actual results to differ materially from the results anticipated or projected for a list of some of these factors. Please see the.

And disclosure in our earnings release, and other public filings, President and CEO , Joe Turner, and Chief Financial Officer Rex Copeland are on the call with me today will get started right now and I will turn the call over to Joe.

Alright, Thanks Kelly.

Good afternoon, and thanks to all of you for joining us today.

We ended 2021 in a strong financial position and have good momentum as we enter 2022.

We're really pleased with our fourth quarter and full year earnings for 2021, and we believe they reflect our associates ongoing commitment and resilience and taking care of our customers and each other's during each other during a challenging time.

As is typical I'll provide some brief remarks about our performance and then turn the call over to Rex who will get into more detail on our financial results. Then we'll open it up for questions.

In the fourth quarter of 'twenty, one we earned $15 3 million or $1 14 per diluted share compared to $17 8 million or $1 28, a share during the same period in 2020.

Hopefully you've had a chance to look at our news release, we did highlight the fact that we had $5 3 million of unusual expenses $4 $1 million related to.

Money that we paid.

A consultant who was engaged to assist us in evaluating core and ancillary source software systems, and ultimately assisted us in negotiating pricing and contract terms.

For the contract that was ultimately signed.

At the end of 2021, the remaining $1 $2 million was related to that.

Contract termination fee for the for our current core and ancillary system provider.

We had some other significant income statement items that Rex will cover.

Earnings performance ratios for the quarter were solid with a return on assets of 113 and return on equity of 974, obviously those numbers if not for those unusual expenses would have been substantially higher probably.

At least 25% higher.

For the year are.

Or I am sorry.

Our loan production activity for the year was quite brisk, but obviously our loan growth was challenged by the significant payoffs we saw.

During the year, our multifamily portfolio alone was down $307 million.

But Luke loan originations were extremely strong.

During the year excluding.

To be sold mortgages.

<unk> to be sold in the secondary market, our originations were over $2 billion in 2021 and that is a <unk>.

Very strong year of production for us.

Our pipeline and this portends good things for the future of our pipeline of commitments and unfunded loans.

<unk> is extremely strong at this point it grew $270 million.

During the fourth quarter and is up $409 million.

From the end of 2020 as we've told you on past conference calls.

We are actively looking for two to three new loan production offices.

And I would just say.

We believe our our efforts are bearing fruit.

And hopefully we'll have more to talk about in the coming months on that.

As a status update with respect the paycheck protection program.

We did obviously the the first round loans are all fully forgiven.

Round, we did 650 loans $58 million in principal balance.

And we have received forgiveness on all but $10 million of those and we would expect to receive.

That forgiveness in the first quarter of 2022.

With respect to cares Act modifications.

We have no remaining modifications to commercial loans cares act modifications to commercial loans, we do have $1 $2 million of cares act modifications on consumer and mortgage loans.

Asset quality continues to be historically strong for us in 'twenty. One we ended the year with $116000 of net recoveries.

And our levels.

The levels of nonperforming assets, excluding FDIC assets are at $3 $8 million.

Down one 4 million from the.

The end of the third quarter, including FDIC assets were at $6 million.

Which would yield a nonperforming asset at the period end asset ratio of one 1%.

<unk> also continues to be very strong.

From the end of 2020, our common stockholders equity decreased by about $13 million.

$617 million.

That was because of our adoption of <unk>. So the dividends, we pay and also we did purchase a substantial amount of our repurchases a substantial amount of our common stock during the year.

Of course, those decreases were offset by <unk>.

Strong earnings.

During the year.

Specifically on the stock repurchase.

We repurchased 266000 shares of <unk>.

<unk> stock at an average price of $57 72.

During the fourth quarter and for the full year, we repurchased 715000 shares at an average price of $54 69. We currently have one 2 million shares available in our stock repurchase authorization that concludes my prepared remarks, I will turn the call over to Rex at this time.

Alright, Thank you Joe I'm going to start out talking about net interest income and in the fourth quarter of 2021 that decreased about $353000 to $44 2 million compared to $44 6 million in the fourth quarter of 2020, and then also in the third quarter of <unk>.

One our net interest income was about $44 9 million.

The income as Joe mentioned, our PPP loans, just a minute ago. Our income does include some accretion of net deferred fees. There in both 2020 and 2021 periods, we had about $1 $6 million.

Accretion income in 2021 fourth quarter versus about $1 million in there.

2024th quarter.

The amount of deferred fees that we recognized in income was $5 5 million and $2 million and the years ended December 31, 21, and 2020, respectively.

At the end of December 2021, we still have remaining net deferred fees of about just over $500000 and as Joe mentioned, we we believe that the majority of that $10 million of.

PPP loans that remained outstanding at the end of the year will.

Go through the forgiveness process, most likely most of it in the first quarter some of it will be a little bit up to the borrowers obviously, but we are trying to work with them and encourage them to to go ahead and get those things processed.

The net interest margin in the fourth quarter was 337% that was down slightly from 341% in the fourth quarter 2020.

<unk>.

The three months ended September 32021, net interest margin was $3 36, So we were up about one basis point.

Q3 versus Q4.

The.

Comparing the fourth quarter of 'twenty, one and 'twenty the average yield on loans decreased about seven basis points, while the average rate on interest bearing deposits declined by 35 basis points.

The 2021 net interest margin continued to be impacted by changes in our asset mix and while we had some additional liquidity in 2020 period, we had additional liquidity into 2021 period, and so our cash and cash equivalents increased by about $366 million on.

Average basis.

And our average investment securities increased about $26 million.

And that was offset by average loans decreasing by about $388 million.

Fourth quarter, 'twenty, one compared to fourth quarter of 'twenty.

So the additional liquidity definitely.

Without it we would have had higher net and net interest margin.

In the fourth quarter period, and also for the year.

One last thing I'll mention to the FDIC yield accretion that we've had for quite some time number of years.

Just about run through it and we.

The impact to our net interest margin was about six basis points less in Q4, 'twenty, one versus Q4 'twenty and at the end of the year, we've only got about $429000 remaining.

Accretion to take the interest income and we expect that that's all going to be recognized sometime during 2022.

Our overall funding costs continued to decline somewhat during the fourth quarter of 'twenty. One as time deposits continued to reprice lower at maturity. We may see our cost of time deposits decreased a little more but the magnitude of the rate decrease overall will be.

More muted than it has been.

Our recent new and renewed overall average time deposit rate has been about 35% to 40 basis points.

While our net interest margin percentage has been somewhat impacted by the the increased deposits and resulting change in our asset asset mix in terms of actual dollars net interest income was $177 9 million in 2021, and thats up slightly from $1 $77 one.

In the year 2020.

We had about $4 million left and FDIC accretion income.

In comparing those two years and then as I mentioned, we did recognize about $3 5 million more in deferred PPP loan fees in 2021 versus 2020.

Noninterest income decreased when looking at the fourth quarter of this year versus fourth quarter of 'twenty.

Noninterest income decreased $759000 to $9 2 million.

A lot of that decrease was from net gains on our loan sales of mortgage loans.

Down about $960000.

In the second half of 2020 and really the first half of 'twenty. One we had more significant originations of fixed rate single family loans, which we typically sell in the secondary market and those origination volumes in the second half of 2021 start to come down to more more.

Similar to historic averages for our company.

Other income decreased about 576000.

2021, Q4 versus 2020.

The difference there was related to.

Fee income that we generate on new interest rate swaps that we have with our customers and Counterparties. We just had less volume of that in the fourth quarter 'twenty, one versus 'twenty and then a positive thing or an increase in income was our point of sale and ATM fees increased $662000.

Compared to the prior year period that increase is really due to.

Somewhat of a reduction in customer usage in the fourth quarter of 2020.

Pandemic related and things of that nature, and then in 'twenty. One we saw a higher level of debit card usage by our customers and that got us back to kind of more normal levels in some cases.

Increased levels of activity.

Noninterest expense.

Increased $4 7 million to $35 8 million when you compare.

Q4, 'twenty, one versus Q4 2020.

Joe already mentioned the $5 $3 million.

That was related to some one time expenses that we have there.

So partially offsetting those increases we did have about 924000 less in expenses on other real estate owned repossession.

The decrease was we did have some write downs and valuation allowances in the fourth quarter of 2020.

Leading up to the sale of some of our.

Foreclosed properties.

And didn't have that kind.

Kind of activity in the fourth quarter of 'twenty one.

The efficiency ratio for the fourth quarter was $66 nine 8% and that compared to $56 99, 8% in the same quarter in 2020, and if you exclude those $5 $3 million of.

One time expenses that we've talked about the efficiency ratio in the fourth quarter of 'twenty, one would have been about 57%.

I'll move on now to provision.

We did have.

Based on our assumptions, we did have a negative provision for loan losses or credit losses on our outstanding loan portfolio.

We are as Joe mentioned, our unfunded loan commitments and the unfunded portion of loans that we have already originated grew quite a bit during the year and so on.

Our reserve for those unfunded commitments went up by.

We added $1 $3 million of expense to that in the fourth quarter. So the net was.

<unk> have a negative one 7%.

$1 million in Q4 of 'twenty, one to credit related items.

For the full year.

Quite a bit different we had negative provision expense of about $6 7 million on our outstanding portfolio compared to $15 $9 million of provision expense recorded in 2020, obviously, we did add to our reserves.

In 2020 due to the pandemic.

But as Joe mentioned earlier, our net our credit has been very good throughout 'twenty one.

Net recoveries for the year.

Last thing I'll mention is income taxes, you can see that our effective tax rate in the fourth quarter of 'twenty, one was 21, 1% that.

That compared to 19% in the fourth quarter of 2020, and those things are impacted by.

The level of overall income that we have.

Also the level of tax exempt.

Best months in loans that we have and a lot of it relates to tax credit.

<unk> activity that we have and I would say in 'twenty, one that level was down some from from where it was in 2020. So we think going forward that we kind of expect our effective tax rate to be somewhere between 25% and 21, 5% in near term future periods.

So that concludes the remarks that I had today and at this time, we will entertain questions. So let me ask our operator to once again remind the attendees of how to queue in for questions.

And thank you.

As a reminder to ask a question you will need to press star one on your telephone withdraw your question press the pound key please standby, while we compile the Q&A roster and once again that is star one if you'd like to ask a question at.

First question comes from Andrew Liesch from Piper Sandler.

It is now open.

Hey, good afternoon everybody.

Hi, Andrew question question on the <unk>.

Potential LPL expansion, Joe can you remind us how you think about that like do you look for or do you look at different markets and think this is where you want to go and then you go find the lenders or are you examining several market and if you find the right team in one of those that title.

You are processing on the <unk> expansion that seem to work pretty well over the last several years.

We're examining a few different markets, but I think we mentioned on here before.

The.

A few markets that we're looking at is our Phoenix Charlotte.

Nashville, and Houston, and then we have different people within our company assigned to trying to we always try to.

Try to staff the office with a local lender.

So that's what we've done in the past and that's what we're doing.

Right now.

Got it okay.

That's helpful. Thank you for the.

For the reminder, there and then.

Rex on the margin, even with all that liquidity that come on over the last several quarters. We've done a really good job defending it since the fed cut rates in 2020.

So certainly getting some good deposit price improvement, but how how do you think the margin is going to react if we do start to see some rate hikes, assuming we are here later on this year.

Yes.

I mean, we've as we've said in our previous filings we.

We believe that we are asset sensitive.

And so it should help us.

Don't expect that we're going to see.

Cost of deposits, increasing substantially right off the bat.

We do have loans that are at summit for rates and so those will not reprice, maybe immediately either but.

I think throughout the course of.

Of the year, if we start getting rate hikes in March which it seems like.

The market's believing right now.

Those will be helpful moderately throughout the rest of this year.

If you get three rate hikes or whatever in 2022.

We would anticipate that that would really help for more so in 2023 and moving forward from there but.

It will be it should be positive for us.

Our analysis right now.

Got it.

Alright. Thank you thanks for taking the questions I'll step back.

Thank you Andrew.

And thank you and our next question comes from Damon Delmonte from K B W. Your line is now open.

Hey, good afternoon, guys hope everybody is doing well today.

Hi, Dan.

Hi, So first question just regarding loan growth and the outlook for growth.

Obviously origination activity has been very strong for you guys.

Kind of wondering what your thoughts are on the pace of the pay Downs, you think thats going to slow.

Thus allow for net growth as we go into 2022.

Well.

That's a little bit hard to guess on.

Damon obviously, I think our multifamily portfolio dropped from 900 to 600.

So that's a 33% decrease.

It's going to in real terms, it's going to be hard for that portfolio to decline as much you would think.

But it's a bit of a guess there.

Still does seem to be a lot of demand out there for bye bye.

Banks to to acquire good assets. So I think it will continue to be a competitive environment.

But we like where we're at with our.

Our level of unfunded commitments that will be think will fund over the next year or 18 months and then.

As were expanding our territory that should that should help as well.

Got it okay.

That's good and then with regards to to your outlook for expenses.

Are you anticipating any cost savings from the contract renegotiations on the core processing.

They went through this past quarter from from current.

Current expense levels I don't think there will be.

I don't think there will really be savings I mean, we're going to have a what we believe is a much more robust system.

For us to use internally and.

We think it will be better for our customers as well.

So that's kind of the that's kind of where we were going its not theres not going to be a lot of expense saves there.

Got it got it okay.

I think it'll be it will still be under hey, David will still be under our existing contract all through 2022, so there's not going to be anything going on differently. There we expect to too.

Start this.

The new system.

In 2023, midway through the year or so.

Got it okay. So then as we look at like the <unk>.

Year over year change in expenses.

Do you feel like you could kind of keep it in a low single digit range for annual growth.

Okay.

Again, we don't give forward guidance.

I think we've done a fairly good job of controlling our expenses, particularly over the last I mean really historically, we have but that certainly over the last.

Five or six or eight years.

Our focus we have I will say.

One thing Thats challenging right now is.

On the employee side, there's just a real demand for employees and there does seem to be some wage inflation. So that may filter through our results.

2022, a little bit.

Okay Fair enough. Okay. That's all that I had for now thank you.

Alright, Thanks, Dan.

And thank you.

And our next question comes from John <unk> from Janney. Your line is now open.

Hey, good afternoon, guys, Hey, Jon.

Hope you guys are doing well.

Joe maybe just a question for you since we since the last quarter.

One of your local competitors G fed.

Announced plans to sell just wondering if you see any opportunities there going forward.

The.

I don't know that there will be a ton of opportunity I'm sure there will be some.

I think <unk>.

M&A typically does cause at least some dislocation.

Either.

Loan officer dislocation or customer dislocation.

So.

I wouldn't be surprised if there's some.

They are not may not be a ton there, but I would think there would be some probably.

And then as far as Quad cities was already in the market I mean would you characterize them as being pretty rational competition for you guys.

Yes, I would say so.

I think they do I think they do a pretty good job.

Okay. Okay, and then just as far as you mentioned you guys have been pretty aggressive buying back your own stock, which makes a lot of sense.

Do you think just as we look to.

For this year 2022, do you think from a capital management standpoint does.

Buying back stock, probably still make more sense versus looking to do.

External acquisitions.

Yes, I would say so for us John I mean the way.

As we've mentioned before we feel like were.

External acquisitions get hard is as you look out three and four and five years are you going to be able to grow the acquired franchise at the same clip as you're growing your your your business and.

Buying back stock buying back your stock you just don't have that kind of analysis, you don't have that kind of headwind.

So.

I think it.

We're able to buyback our stock at.

Whatever book in a quarter or whatever we're able to buy back more right now.

That's accretive.

All day long and I think Mike makes a lot lots of sense for us.

Yes, I agree with you okay. Thanks, everybody.

And thank you.

And I am showing no further questions I would now like to go ahead and turn the call back to Kelly <unk> for closing remarks.

Well. Thank you for joining us today, if you have further questions. Please feel free to reach out to us.

Do you have a great evening the next quarter.

This concludes today's call. Thank you for participating you may now disconnect.

Okay.

[music].

Good day and thank you for standing by welcome to the Great Southern Bancorp, Inc. Fourth quarter 2021 conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During this session you will need to press star one on your telephone please.

Be advised that this call is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your host today, Kevin Maloney of Investor Relations, Matt maybe.

We begin I need to remind you that during the course of this call. We may make forward looking statements about future events and financial performance. These statements are subject to a number of factors that could cause actual results to differ materially from the results anticipated or projected for a list of some of these factors. Please see the.

Disclosure in our earnings release and other public filings.

Resident and CEO , Joe Turner, and Chief Financial Officer, Rex Copeland are on the call with me today will get started right now and I will turn the call over to Joe.

Alright, Thanks Kelly.

Good afternoon, and thanks to all of you for joining us today.

We ended 2021 in a strong financial position and have good momentum as we enter 2022.

We're really pleased with our fourth quarter and full year earnings for 2021, and we believe they reflect our associate ongoing commitment and resilience and taking care of our customers and each other's during at each other during a challenging time.

As is typical I'll provide some brief remarks about our performance and then turn the call over to Rex who will get into more detail on our financial results. Then we'll open it up for questions.

In the fourth quarter of 'twenty, one we earned $15 3 million or $1 14 per diluted share compared to $17 8 million or $1 28, a share during the same period in 2020.

Hopefully you've had a chance to look at our news release, we did highlight the fact that we had $5 $3 million.

Unusual expenses $4 1 million related to <unk>.

Money that we paid.

A consultant who was engaged to assist us in evaluating core and ancillary source software systems, and ultimately assisted us in negotiating pricing and contract terms.

For the contract that was ultimately signed.

At the end of 2021, the remaining $1 $2 million was related to that.

Contract termination fee for this for our current core and ancillary system provider.

We had some other significant income statement items that Rex will cover.

Our earnings performance ratios for the quarter were solid with a return on assets of 113 and return on equity of 974, obviously those numbers if not for those unusual expenses would have been substantially higher probably about at least 25% higher.

For the year our.

Uh huh.

I am sorry.

Our loan production activity for the year was quite brisk.

Obviously, our loan growth was challenged by the significant payoffs we saw during.

During the year, our multifamily portfolio alone was down $307 million.

Loan originations were extremely strong.

During the year excluding.

To be sold mortgages mortgages to be sold in the secondary market. Our originations were over $2 billion in 2021 and that is a very strong year of production for us.

Our pipeline and this portends good things for the future our pipeline of commitments and unfunded loans also is extremely strong at this point it grew $270 million.

During the fourth quarter and is up $409 million.

From the end of 2020 as we've told you on past conference calls.

We are actively looking for.

Two to three new loan production offices.

And I would just say.

We believe our our efforts are bearing fruit.

And hopefully we'll have more to talk about in.

In the coming months on that.

As a status update with respect the paycheck protection program.

We did obviously the the first round loans are all fully forgiven second round, we did 650 loans $58 million in principal balance and we have received forgiveness on all but $10 million of those and we would expect to receive.

That forgiveness in the first quarter of 2022.

With respect to cares Act modifications.

We have no remaining modifications to commercial loans cares act modifications to commercial loan we do have $1 $2 million of cares act modifications on consumer and mortgage loans.

Asset quality continues to be historically strong for us in 'twenty. One we ended the year with $116000 net.

Net recoveries.

And our levels.

Levels of nonperforming assets, excluding the FDIC assets are at $3 $8 million.

Down $1 4 million from the.

The end of the third quarter, including FDIC assets were at $6 million.

Which would yield a nonperforming asset at the period end asset ratio of one 1%.

<unk> also continues to be very strong.

From the end of 2020, our common stockholders equity decreased by about $13 million.

$617 million.

Sure.

That was because of our adoption of <unk> so the <unk>.

Dividends, we pay and also we did purchase a substantial amount of our repurchases a substantial amount of our common stock during the year of.

Of course, those decreases were offset by <unk>.

Strong earnings.

During the year.

Specifically on the stock repurchase.

We repurchased 266000 shares of common stock at an average price of $57 72.

During the fourth quarter and for the full year, we repurchased 715000 shares at an average price of $54 69. We currently have $1 2 million shares are available in our stock repurchase authorization that concludes my prepared remarks, I will turn the call over to Rex at this time.

One our net interest income was about $44 9 million.

The income as Joe mentioned.

<unk> loans, just a minute ago. Our income does include some accretion to net deferred fees. There in both 2020 and 2021 periods, we had about $1 $6 million.

Accretion income.

For 2021 fourth quarter versus about $1 million in the 2024th quarter.

The amount of deferred fees that we recognized in income was $5 5 million and $2 million and the years ended December 31, 21, and 2020, respectively.

At the end of December 2021, we still have remaining net deferred fees of about just over $500000 and as Joe mentioned, we believe that the majority of that $10 million of.

PPP loans that remained outstanding at the end of the year will.

We go through the forgiveness process, most likely most of it in the first quarter. Some of it will be a little bit up to the borrowers obviously, but we are trying to work with them and encourage them to to go ahead and get those things processed.

The net interest margin in the fourth quarter was 337% that was down slightly from 341% in the fourth quarter 2020.

<unk>.

The three months ended September 32021, net interest margin was $3 36. So we were up about what we were at one basis point.

Q3 versus Q4.

The.

Average basis.

And our average investment securities increased about $26 million.

And that was offset by average loans decreasing by about $388 million.

Fourth quarter, 'twenty, one compared to fourth quarter of 'twenty.

So the additional liquidity definitely.

Without it we would have had higher net and net interest margin.

In the fourth quarter period, and also for the year.

One last thing I'll mention to the FDIC yield accretion that we've had for quite some time a number of years.

Just about <unk> and we.

The impact to our net interest margin was about six basis points less in Q4, 'twenty, one versus Q4 'twenty and at the end of the year, we've only got about $429000 remaining.

Accretion to take the interest income and we expect that that's all going to be recognized sometime during 2022.

Our recent new and renewed overall average time deposit rate has been about 35% to 40 basis points.

Yeah.

We had about $4 million left and FDIC accretion income.

In comparing those two years and then as I mentioned, we did recognize about $3 5 million more in deferred PPP loan fees in 2021 versus 2020.

Noninterest income decreased when looking at the fourth quarter of this year versus fourth quarter of 'twenty.

Noninterest income decreased $759000 to $9 2 million.

A lot of that decrease was from net gains on our loan sales of mortgage loans.

It's down about $960000.

Similar to historic averages for our company.

Other income decreased about 576000.

2021, Q4 versus 2020.

The difference there was related to.

Compared to the prior year period that increase is really due to.

Somewhat of a reduction in customer usage in the fourth quarter of 2020.

Pandemic related and things of that nature, and then in 'twenty. One we saw a higher level of debit card usage by our customers and that got us back to kind of more normal levels in some cases.

Increased levels of activity.

Noninterest expense.

<unk> increased $4 7 million to $35 8 million when you compare.

Q4, 'twenty, one versus Q4 2020.

Joe already mentioned the $5 $3 million.

That was related to some one time expenses that we have there.

So partially offsetting those increases we did have about 924000 less in expenses on other real estate owned repossession.

The decrease was we did have some write downs and valuation allowances in the fourth quarter of 2020.

Leading up to the sale of some of our.

Foreclosed properties.

And didn't have that kind.

Kind of activity in the fourth quarter of 'twenty one.

The efficiency ratio for the fourth quarter was $66 nine 8% and that compared to $56 90, 898% in the same quarter in 2020, and if you exclude those $5 $3 million of.

One time expenses that we talked about the efficiency ratio in the fourth quarter of 'twenty, one would have been about 57%.

I'll move on now to the provision.

We did have.

Based on our assumptions, we did have a negative provision for loan losses or credit losses on our outstanding loan portfolio.

But as Joe mentioned, our unfunded loan.

<unk> and the unfunded portion of loans that we have already originated grew quite a bit during the year and so.

Our reserve for those unfunded commitments went up by.

We added $1 $3 million of expense to that in the fourth quarter. So the net was.

In fact of a negative one 7%.

$1 million in Q4 of 'twenty, one to credit related items.

For the full year.

In 2020 due to the pandemic.

But as Joe mentioned earlier, our net our credit has been very good throughout 'twenty one.

Amount of net recoveries for the year.

Last thing I'll mention is income taxes.

Can see that our effective tax rate in the fourth quarter of 'twenty, one was 21, 1% that.

That compared to 19% in the fourth quarter of 2020, and those things are impacted by.

The level of overall income that we have.

Also the level of tax exempt.

Best months in loans that we have and a lot of it relates to tax credit.

So that concludes the remarks that I had today and at this time, we will entertain questions. So let me ask our operator to once again remind the attendees of how to queue in for questions.

And thank you.

As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key please standby, while we compile the Q&A roster and once again that is star one if you would like to ask the question and our first question comes from Andrew Liesch from Piper Sandler. Your line is now open.

Hey, good afternoon everybody.

Hi, Andrew Good question question on the.

Potential <unk> expansion, Joe can you remind us how you think about that like do you look for or do you look at different markets and think this is where you want to go and then you go find the lenders or are you examining several market and if you find the right team in one of those that's how you choose to.

This process on the <unk> expansion that seem to work pretty well over the last several years.

We're examining a few different markets I think we mentioned on here before.

<unk>.

A few markets that we're looking at is our Phoenix Charlotte.

Bill in Houston, and then we have different people within our company assigned to trying to we always try to.

Try to staff the office with a local lender.

So that's what we've done in the past and that's what we're doing.

Right now.

Got it okay. That's helpful. Thank you for the.

For the remainder there and then.

Rex on the margin, even with all that liquidity that come on over the last several quarters, you've done a really good job defending it since the fed cut rates from 2020.

So certainly getting some good deposit price improvement, but how how do you think the margin is going to react if we do start to see some rate hikes, assuming we are Dr. Lei.

Later on this year.

Yes.

I mean, we've as we've said in our previous filings, we believe that we are asset sensitive.

So it should help us.

I don't expect that we're going to see.

Cost of deposits, increasing substantially right off the bat.

We do have loans that are at summit for rates and so those will not reprice, maybe immediately either but.

I think throughout the course of.

The year, if we start getting rate hikes in March which it seems like there is what the markets, believing right now.

Those will be helpful moderately throughout the rest of this year.

If you get three rate hikes or whatever in 2022.

We would anticipate that that would really help for more so in 2023 and moving forward from there, but it will be it should be positive for us.

Our analysis right now.

Got it alright.

Alright. Thank you thanks for taking the questions I'll step back.

Thanks, Andrew.

And thank you and our next question comes from Damon Delmonte from K B W. Your line is now open.

Hey, good afternoon, guys hope everybody is doing well today.

Hi, Dan.

So first question just regarding loan growth and the outlook for growth.

Obviously origination activity has been very strong for you guys.

Kind of wondering what your thoughts are on the pace of the pay down do you think that that is going to slow.

Thus allow for net growth as we go into 2022.

Well.

That's a little bit hard to guess on.

Damon obviously, I think our multifamily portfolio dropped from 900 to 600.

So that's a 33% decrease.

It's going to in real terms, it's going to be hard for that portfolio to decline as much you would think.

But it's a bit of a guess there.

Still does seem to be a lot of demand out there for bi.

Banks to to acquire good assets. So I think it will continue to be a competitive environment.

But we like where we're at with our.

Our level of unfunded commitments that will be think will fund over the next year or 18 months and then.

As were expanding our territory that should that should help as well.

Got it okay.

That's good and then with regards to.

So your outlook for expenses.

Are you anticipating any cost savings from the contract renegotiations on the core processing.

They went through this past quarter.

From current.

From current expense levels I don't think there will be.

I don't think there will really be savings I mean, we're going to have a what we believe is a much more robust system for to use internally and.

We think it will be better for our customers as well.

So that's kind of the that's kind of where we were going its not theres not going to be a lot of expense saves there.

Got it got it okay.

I think it will be I will still be under hey, David we will still be under our existing contract all through 2022, so there's not going to be anything going on differently. There we'd expect two two.

To start this.

The new system.

In 2023, midway through the year or so.

Got it okay. So then as we look at the year over year change in expenses.

Do you feel like you could kind of keeping in the low single digit range for annual growth.

Again, we don't give forward guidance.

I think we've done a fairly good job of controlling our expenses, particularly over the last I mean really historically, we have but that certainly over the last.

Five or six or eight years.

Our focus we have I will say.

One thing Thats challenging right now is.

On the employee side, there's just a real demand for employees and there does seem to be some wage inflation. So that may filter through our results.

2022, a little bit.

Okay fair enough okay.

Preliminary 2021 Great Southern Bancorp Inc Earnings Call

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