Q1 2025 Great Southern Bancorp Inc Earnings Call
Speaker Change: To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised.
Speaker Change: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today. Jeff Trica, investor relations, please go ahead.
Speaker Change: Thank you. Good afternoon and thank you for joining Great Southern Bancorp's first quarter, 2025 earnings call. Today we will be discussing the company.
Speaker Change: These results for the quarter-ending March 31st, 2025. Before we begin, I'd like to remind everyone that during this call, forward-looking statements may be made regarding the company's future events and financial performance.
Speaker Change: These statements are subject to various factors that could cause actual results to differ materially from those anticipated or projected
Speaker Change: For a list of these factors, please refer to the forward-looking statements, disclosures in the first quarter earnings release and other public violins [inaudible]
Speaker Change: Joining me today are President and CEO Joe Turner and Chief Financial Officer Rex Copeland. I'll now turn the call over to Joe.
Joe Turner: Okay, thanks Jeff and good afternoon. I also would like to welcome all of you and and thank you for joining us on our call today
Joe Turner: Our first quarter results reflect the strength of our core banking franchise and the continued resilience of our earnings in a dynamic operating environment amid ongoing economic and financial sector challenges.
Joe Turner: We reported net income of $17.2 million or $1.47 for deluded comments chair up from $13.4 million or $1.13 per share in the same quarter a year ago
Joe Turner: The improvement in net income this quarter compared to the year ago quarter was primarily driven by higher added percent income, reflecting stronger loan and investment yield and lower funding costs.
Additionally
Joe Turner: We recorded a negative provision for credit losses, a 348,000 disc order compared to a provision of 630,000 in the year ago quarter.
Joe Turner: This reflects the continued credit strength across our portfolio, our discipline approach to expense management and our commitment maintaining a stable diversified deposit base that further reinforced our financial foundation.
Joe Turner: Together, these results underscore the strength and resilience of our business model positioning well to continue delivering long-term value for our shareholders.
Joe Turner: Then it first income total 49.3 million in the first quarter of 25 compared to 44.8 million in the first quarter, 24, which was an increase of about 10%.
Joe Turner: We continue to operate with a conservative credit posture and a focus on long-term relationship banking, which has enabled us to maintain margin stability despite ongoing deposit cost pressures and a more measured pace of growth.
Joe Turner: In terms of lending, our lump portfolio remained essentially flat, it was at 4.76 billion at the end of the year.
Joe Turner: and roughly flat here, up 2.2% from where we were at the end of the first quarter of
Joe Turner: Within our portfolio, the largest categories continue to be multifamily at 1.59 billion and commercial real estate at 1.49 billion. We've also remained focused on construction lending which total is 475 million at the end of the first quarter.
Joe Turner: Outstanding Construction Loan Balances may fluctuate quarter to quarter as projects move through various stages of the completion process. Importantly, we continue to maintain a healthy pipeline of unfunded balances on construction loans, reflecting our continued presence in this segment.
Joe Turner: on the funding side deposits increased 3.3% from the end of 24 to 4.76 billion with increases in brokerage, as well as inflows in our poor checking balances.
Joe Turner: While some shares from non-interest bearing to interest bearing accounts have occurred, we've effectively managed total of the cost while maintaining customer retention.
Joe Turner: Our balances of broker deposits fluctuate depending on our funding needs and the management of funding mixed between core deposits, broker deposits, and other wholesale funds based upon the relative interest rates and desired duration of funds.
Joe Turner: From a credit quality standpoint, our metrics remain very strong, non-performing assets remain minimal, consistent with prior quarters and not net charge or negligible in the first quarter of 25
Joe Turner: We did not record a provision for credit losses on outstanding loans, representing an improvement of 500,000 from the first quarter of 24.
Joe Turner: Additionally, the company also recognized the negative provision for losses on unfunded commitment to 348,000 in the first quarter compared to provision expense of 130,000 in the first quarter of 24 [inaudible]
Joe Turner: As we continue to drive operational efficiency, expense management remains a top priority. Non-impressed expenses were essentially flat in the first quarter year, year over year at $34.8 million, despite our investments in this quarter in technology, infrastructure and personnel.
Joe Turner: We also saw a reduction of legal and professional expenses that were elevated last year as we were supporting our court conversion efforts. We continue to maintain a favorable efficiency ratio reflecting our discipline approach to cost control.
Joe Turner: As 2025 progresses, we remain focused on execution, protecting margin, proactively managing credit, supporting relationship-based loan growth and investing strategically in our people systems and communities.
Joe Turner: Despite some economic and market uncertainty, our balance sheet and capital levels are strong and our team is committed to delivering value through all parts of the cycle. Let me now turn the call over to Rex for a detailed discussion of the financials.
and Kelly Polonus. And we'll see you next time.
Rex Copeland: All right. Thank you, Joe. Good afternoon, everyone. I'll now provide a little more detail on our first quarter 25 financial performance and how it compares to both first quarter last year and the previous link quarter.
Rex Copeland: compared to $13.4 million or $1.13 per diluted common share in the 2024 first quarter and also up for $14.9 million or $1.27 per diluted share in the fourth quarter of [inaudible]
Rex Copeland: Our net interest margin for the first quarter increased to 3.57% compared to 3.32% in the same period last year and 3.49% in the fourth quarter of 2024
Rex Copeland: We did note some additional interest recovery in the March 2025 quarter that added about five basis points to our net interest margin
Rex Copeland: Despite the pressures from a challenging and competitive deposit rate environment, our margin performance reflects our careful balance sheet management and strategic approach to controlling funding costs.
Rex Copeland: That interest income for the quarter increased to $49.3 million, reflecting both higher interest income and reduced interest expense.
Rex Copeland: Interest income rose to $80.2 million, representing a 3.7% increase compared to the prior year of 1st quarter.
Rex Copeland: And that was supported by improved loan yields and continued growth in interest earning assets.
Rex Copeland: Interest expense declined to $30.9 million, a decrease of 5.1% year-over-year, driven primarily by a $3 million or 11% reduction in deposit-related costs.
Reflecting Lower Market Interest Rates and Discipline Funding Cost Management
Rex Copeland: This was partially offset by an increase in interest expense on short-term borrowings which rose $1.4 million due to changes in our funding mix.
Rex Copeland: As a reminder, we will lose the benefit of the terminated interest rate swap after the third quarter of 2025. We expect to continue realizing approximately $2 million per quarter in interest income from the terminated swap through the first three quarters of 2025 after which that benefit to interest income will cease.
Rex Copeland: Non-interest income for the quarter totaled $6.6 million, a decrease of $216,000 or 3.2% compared to the first quarter last year.
Rex Copeland: We experience small decreases in commissions, overdraft fees, and net gains on mortgage loan sales, partially offset by small increases in debit card usage income, and lake charges and fees on lowlands.
Rex Copeland: Compared to the fourth quarter of 2024, non-interest income decreased $344,000 primarily due to seasonal declines in overdraft fees, debit card usage income and net gains on mortgage loan sales.
Rex Copeland: While non-interest income may experience some fluctuations, the overall performance demonstrates our continued ability to generate revenue through these non-interest products and services.
Rex Copeland: Total non-interest expense for the quarter remained relatively consistent at $34.8 million, a small increase of $400,000 or 1.2% from the first quarter of last year, and down about $2.1 million or 5.8% for the fourth quarter of 2024.
Rex Copeland: This fourth quarter of 24 did include a $2 million non-recruiting item.
Rex Copeland: The change compared to the prior year first quarter was primarily due to increases in salaries and employee benefits and net occupancy and equipment expenses, which were partially offset by reductions in legal and professional fees.
Rex Copeland: salaries and benefits total $20.1 million, up approximately 473,000 or 2.4% from the first quarter of last year driven mostly by merit increases.
Rex Copeland: That occupancy and equipment expense was $8.5 million, an increase of $694,000 or $8.9% large due to ongoing investments in systems hardware and software infrastructure and higher expenses for snow removal in the first quarter of 2025.
Rex Copeland: Professional fees saw significant decline to $1.0 million, down from $1.7 million in the prior year first quarter, primarily due to discontinued use of consultants working on the proposed course systems conversion.
Rex Copeland: During the quarter, we also benefited from expense reimbursements related to our debit card activities of approximately $433,000, which effectively helped offset our overall marketing and advertising expenses in the quarter.
Rex Copeland: As a result, our efficiency ratio for the quarter ended March 31, 2025 was 62.27% and improvement compared to 66.68% recorded in the first quarter of 2024.
Rex Copeland: Overall, we remain committed to managing costs effectively through continuous optimization of our operations and streamlining of expenditures.
Rex Copeland: At the same time we are making strategic investments in key areas that will drive long-term growth and enhance our competitive position.
Rex Copeland: And then finally I'll turn to the balance sheets and items on that total assets into the quarter at 5.99 billion up from 5.78 billion one year ago and up slightly from 5.98 billion at December 31, 2024.
Rex Copeland: Netloans held steady at 4.69 billion compared to the end of 2024 as loan demand remained relatively stable and we maintained our discipline approach to credit underwriting
Rex Copeland: Cash and Cash Equivalence at the end of March, total $217.2 million dollars.
Rex Copeland: The company also has access to additional funding lines through the Federal Home Lone Bank and the Federal Reserve Bank totaling $1.54 billion, reflecting enhanced liquidity management and prudent positioning in response to evolving market conditions and funding dynamics.
Rex Copeland: As a result, we remain well positioned to address both current and future funding needs.
Rex Copeland: Total deposits stood at $4.76 billion at the end of March, representing $152.5 million increase or 3.3% compared to December 31, 2024.
Rex Copeland: Procuring the period was driven by a $33.5 million increase in interest bearing checking balances, largely attributable to certain money market accounts
Non-interest-sparing deposits also rose by $9.7 million million dollars.
Rex Copeland: These gains reportedly offset by a $14.1 million decline in time deposits generated through our banking center and corporate services networks.
Rex Copeland: Meanwhile, broker deposits increased by 123.3 million, reflecting our ability to access and attract diversified funding sources versus other host cell funds in a competitive environment. The deposit makes continued to shift modestly away from retail CDs, toward broker and other host cell funding sources.
Rex Copeland: Asset quality also remains strong with non-performing assets of 0.16% of total assets at the corner end, non-performing loans to period end loans for 0.07%.
Rex Copeland: During the quarter ended March 31, 2025, the company did not record a provision for credit losses on its outstanding loan portfolio compared to $500,000 of expense recorded in the last year's first quarter.
Rex Copeland: As we mentioned, the company also recorded a negative provision for losses on unfunded commitments on unfunded commitments on unfunded commitments.
Rex Copeland: 348,000 in the first quarter of 25 compared to 130,000 provisioned expense recorded in the first quarter of 2024 and a $1.6 million provisioned expense recorded in the fourth quarter of 2024 on unfunded commitments.
Rex Copeland: Total net charge off for the 2025 first quarter fell to $56,000 down from $83,000 in the first in the prior year of first quarter [inaudible]
Rex Copeland: The allowance for credit losses as percentage of total loans stood at 1.36% at the end of March of 2025 and that was consistent with the ratio at the end of 2024.
Rex Copeland: Our capital position remains healthy with total shareholder equity increasing to $613 million from $600 million at December 31, 2024. At March 31, 2025, this represents 10.2% of total assets and a book value of $53.3 per
Rex Copeland: The increase was primarily driven by $17.2 million in net income and a $1.2 million increase from stock option exercises, partially offset by cash dividends declared on the company's common stock of $4.6 million and common stock repurchases at $10.2 million.
Rex Copeland: Our total capital also increased $10.2 million in the first quarter of 2025 as a result of increased market values that are available for sale, investment, security and interest rate
Rex Copeland: and tangible common equity stands at approximately 10.1% of total assets at the end of March. We continue to operate well above all regulatory capital requirements.
Rex Copeland: And finally, I'll also mention that our board of directors did approve a new stock repurchase authorization of up to another one million shares once our existing authorization is complete. We had approximately 270,000 shares remaining on that existing program at the end of March 2025.
Rex Copeland: Overall, we remain confident in the strength and resilience of our balance sheet, supported by strong capital, ample liquidity, a stable credit portfolio and a deposit strategy that remains responsive to the broader interest rate environment.
With that, we are now ready for your questions.
Rex Copeland: Thank you. As a reminder to ask a question, please press star 1-1 on your telephone and wait for your name to be announced.
To withdraw your question, please press star 1-1 again.
Please stand by when we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Andrew Liesch from Piper Sandler Companies.
Hey, good morning or good afternoon. I mean, um...
Speaker Change: The margin rose a little bit, the one-time benefits. How do you think it's going to, it should react here this quarter, without any changes to fed policy? There's no room.
for more expert, especially with benefits and funding site.
Significantly on some of those.
Speaker Change: We don't know that we have like lots of room on that. We do have the sureities of CDs coming up here and we've kind of pointed that out in the in the earnings release that we've got, you know, several million dollars it will be coming up in the next three months, six months, et cetera.
Speaker Change: and sort of the replacement rates that we anticipate right now based on what we're seeing in the market place today. You know, there might be a little benefit that could come our way on that, but it doesn't look like it's going to be substantial.
and they're on the…
Speaker Change: On the Loan side, on the Aftop side, we've got, you know, we do have...
Some fixed rate loans that continue to repay.
and those are typically at-
Speaker Change: Lower than current market rates. And so as those repay, you know, we are able to redeploy that into more current market yields.
Speaker Change: But I would say that's a pretty slow process, you know, as far as repayments and maturity to occur. There are some that happen, you know, month by month, but it's not, you know, big chunks that move the needle immediately for sure.
Yeah, I would point out on that sheet.
Speaker Change: Andrew, we might look at the 10K, because there is a good disclosure in there about.
you know, repricing.
Lounds, and you don't be able to see that the
Speaker Change: The yields on loans that are going to reprise, and you can sort of, you know, make assumptions as to what the, you know, how far that we reprise upward, and you could, you could, you could, uh,
Speaker Change: You know, you could do a lot of that work yourself and probably get pretty close [inaudible]
Speaker Change: Got it. And then can you remind us how the balance sheet should react if we do any rate cuts from the Fed here in a second half of the year?
Speaker Change: Yeah, I think we're I think we feel like our overall interest rate risk posture, we're pretty neutral. Now, you know, I do think.
Speaker Change: Yeah, if there was like a 50 basis point rate, I think immediately it could be a little bit negative, but we should
Speaker Change: 6 back up pretty quickly. I don't think it would be dramatically negative, it might just be a little bit negative.
Speaker Change: We've got made many times in the ballpark of a couple of billion dollars of loans that are going to you know be tied to prime or so far and and would would move within you know immediately or within a month of a repricing event like that from the Fed
Speaker Change: We've got the interest rates wafted, it would move, and that's on the other side, yeah, on the liability side. And we've got a couple billion dollars of...
Speaker Change: I mean, I think we feel like we're pretty well balanced. I think that's what we saw. You know, it's very beginning down. [inaudible]
Makes sense.
Speaker Change: And then on the on the loan side, has there been any commentary from your customer's back to you?
Speaker Change: pausing investments with respect to the economic uncertainty, anything that they're cautious on right now or this just more studies should go on production. Thank you very much.
Speaker Change: I think activity is maybe down a little bit, you know, and-
You know, there is.
Speaker Change: Quite a bit of competition among banks for, you know, what loans there are. And so, but there's not a lot of loans to start with. And as I said, quite a bit of competition for the few loans there are.
Speaker Change: It's not a lending environment where we would expect a lot of growth at all
Got it. Very hot. Thanks for taking the questions. I'll step back.
Thank you, one moment for our next question.
Speaker Change: Our next question comes to the line of Damon DelMonte from KBW Thank you.
Speaker Change: Yeah, it's actually the beginning of the fourth quarter so we'll still get the benefit through Q2 and all of Q3 and then like the first week and Q4 is when that drops off.
Okay, got it.
Speaker Change: Great. Okay. Thank you. And then, you know, just kind of curious, you know, with growth being somewhat a tepid in the strong capital and the balance you guys have and
Speaker Change: quarterly growth and capital. You know, you guys bought back, I think 173,000 shares this quarter. You made a comment about the new authorization. I just, just kind of wondering your thoughts on the buyback here going forward with growth being kind of slowed. You know, can we expect you to stay pretty active with the buyback?
Speaker Change: Yeah, I think we would expect it. I mean, maybe not more active than what we've been but we feel like we've been fairly active.
Speaker Change: It depends on the price and the number of shares that are available out there, of course, but, you know
Speaker Change: where we're trading at the day is not much different than both [inaudible]
Yep.
Lastly, on expenses,
Speaker Change: You know, obviously a strong focus on controlling expenses and balancing where you spend money and where you can save money You know, is it reasonable to think kind of I know you don't give guidance but like kind of you know modest growth off of this first quarter number without any
Speaker Change: Material planned expenditures here coming in the next couple quarters, are there?
Speaker Change: No, not really. I mean, you know, we didn't have the, it happens every year, but it happened in the first quarter. You know, we had the 400,000.
Speaker Change: We had the 400,000 benefit to expenses in the first quarter and we won't have that in the second quarter [inaudible]
Speaker Change: But you know, other than that, you know, we're not we're we didn't really highlight anything it's being unusual or so I mean I think that's a fair assumption.
Speaker Change: Got it. Okay. That's all that I had. Thank you very much.
All right. Thanks, Damon.
Speaker Change: Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced.
To withdraw your question, please press star 1-1 again.
Speaker Change: At this time, I would now like to turn the conference back over to Joseph Turner for closing remarks.
Joseph Turner: Okay, well again, we want to thank everybody for being on our call today and we'll look forward to talking to you at the end of the second quarter. Thank you for joining us today.
Speaker Change: This concludes today's conference call. Thank you for participating. You may now disconnect.