Q2 2025 Great Southern Bancorp Inc Earnings Call
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Welcome to the Great Southern Bank Corp Inc. Second quarter 2025 earnings conference call.
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Speaker Change: I would now like to hand the conference over to your speaker today. Jeff trika and best relations, please go ahead.
Jeff Trika: Thank you, Daniel. Good afternoon, and thank you for joining Great, Southern Bank Corps. Second quarter, 2025 earnings call. Today, we will be discussing the company's results for the quarter ended. June 30th 2025.
Jeff Trika: 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. These statements are subject to various factors that could cause actual results to differ materially from those anticipated or projected.
Jeff Trika: For a list of these factors, please refer to the forward-looking statements disclosure in the second quarter earnings release and other public filings.
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
Jeff Trika: Jeff and good afternoon. I want to thank everyone for joining us today.
Jeff Trika: Our second quarter results, reflect the continued strength of our core banking fundamentals and solid earnings. Despite Dynamic a dynamic operating environment.
Jeff Trika: Credit and operating metrics remain sound supported by our disciplined expense management and relation, B, and relationship based approach to lending. We reported net income of 19.8 million for the quarter or a $1.72 per common share up from 17 million and a $145 per share in the same quarter. A year ago, the Improvement in net income this quarter uh, compared to the year of a quarter was primarily driven by higher net interest income supported by consistent loan and investment yields alongside lower funding costs.
Jeff Trika: In addition to the net interest income growth, we also benefited from unusually large tax, credit partnership income in the quarter.
Jeff Trika: We recorded a negative provision for losses on unfunded commitments of 110,000 in the quarter compared to a negative provision of 67,000 in the year ago quarter.
Jeff Trika: These results reflect the quality of our loan portfolio.
Our discipline expense management and stable Diversified deposit. Base. Have further, strengthened our financial position under scoring the resilience of our business model and supporting long-term shareholder value. We remain focused on prudent risk management, net interest income, totals 51 million, and Improvement of about 8.9%, compared to the 46.8% margin improved to 3.68% which is 25 basis points above the level from a year ago and 11 basis points higher than the first quarter of 2025 this Improvement in net interest, margin was underpinned by healthy loan yields and prudent funding cost management. Our loan portfolio continues to reflect our conservative credit posture and commitment to relationship based banking.
Jeff Trika: In terms of lending gross loans, total 4.6 billion of the crime of 157 million or 3.3% from the 4.76 billion at the end of the, at the end of the year, given our emphasis on balancing loan growth with appropriate pricing and Loan structure, we saw a net loan reduction in the quarter large loan. Payoffs tend to fluctuate but we did experience a higher level of such payoffs in the second quarter of 2025, including a 30 million payoff on the last day of the quarter.
Jeff Trika: Within our portfolio, the largest loan categories continue to be multi family and Commercial Real Estate lending, which were 1.58 and 1.49 respectively.
Jeff Trika: We have also remained focused on construction, lending with the total outstanding balance of 367 million, at June 3020, 2025, and an unfunded portion of construction, loans of 644 million.
Other funding side holds deposits, decreased 73.9 million, or 1.6% from the end of the first quarter 2025 to 4.68 billion. The decrease was mainly attributable to a 62.1 million reduction in broker deposits.
Compared to December 31 2024 total deposits, increased 78.6 million, with increases, in brokered deposits, and checking deposits. We continue to manage total deposit costs while maintaining focus on customer retention. Our broker deposit levels continue to vary based on funding needs and our approach to managing the overall funding mix in light of relative pricing and targeted duration.
Jeff Trika: At June 30th, 2025 non-performing assets, were 8.1, million representing 0.14% of total assets and a 1 and a half million dollar, decrease for March 312022. We experienced net, recoveries on loans of 111,000 in the second quarter of 2025.
Jeff Trika: We did not record a provision for credit losses on outstanding loans. In the second quarter of 2025. These results highlight, the strengths of our portfolio and our prudent risk management practices.
Jeff Trika: Expense management, remains a top priority for us as well. Non-interest expenses for the second quarter, 2025 or 35 million down 1.4 million from the 3 6. 4 5,
Jeff Trika: This non-interest expense decline was led by 935,000 reduction in legal and professional expenses which were at an elevated level. Last year related to training and implementation costs for the intended. Corporate core systems conversion expenses on the on other real estate owned also decreased 453,000, partially offset by a modest increase in in in Tech modest increases in technology investment. In the second quarter of 2025. We had a favorable efficiency ratio of just over 59% reflecting our discipline focus on costs
As we enter the second half of 2025, we remain focused on maintaining strong credit quality and pursuing consistent relationship, driven loan growth that supports longer term stability. Even amongst on ongoing Market uncertainty, we are committed to maintaining strong Capital levels and delivering consistent value for our shareholders.
Jeff Trika: Let me now. Turn the call over to Rex Copeland for a detailed discussion of the financials.
Rex Copeland: All right. Thank you. Joe and good afternoon everyone. Uh, I'll now provide a little more detail on our, our second quarter financial performance and how it compares to both Q2 of last year and q1 of 2025.
Rex Copeland: Uh for the quarter end of June 3025, we reported net income of 19.8 million or 1.72 cents per diluted common share compared to 17.0 million dollars. Where 1.45 cents per diluted common share in the 2024 second quarter and also compared to 17.2 million or 1.47 cents per diluted common share in the first quarter of 2025.
Rex Copeland: Our annualized, net interest margin for the second quarter. This year, increased to 3.68% compared to 3.43% in the second quarter last year and 3.57% in the first quarter of 2025,
Rex Copeland: Despite the challenges of a challenges of a competitive deposit, pricing environment, our margin Improvement, reflects discipline, balance sheet strategy, and proactive, funding cost management of both deposits and borrowings.
Rex Copeland: That interest income for the quarter increased to 51.0 million, reflecting marginally higher interest, income and reduced interest expense interest income increased to 81.0 million representing a 0.1% increase compared to the prior year. Second quarter supported by improved yields on in improved, yields on investment Securities and continued growth in average interest earning assets.
Rex Copeland: we did note some additional interest, recoveries on non-accrual loans and other Cash basis assets, during the quarter of 434,000, which added about 3 basis points to our net, interest margin
Rex Copeland: It's important to note that though interest income recovery such as this may occur in future periods. We cannot anticipate the amount or timing of this income with certainty.
Interest expense declined to 30.0 million dollars down 12% from the year ago, quarter primarily due to a 3.4 million or 12.3% reduction in deposit related costs reflecting lower Market. Interest rates in our discipline management of funding strategies
Rex Copeland: And as a reminder, once again, 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 in interest income from the terminated swap in the third quarter of 2025, after which that benefit of interest income will cease
Rex Copeland: non-interest income for the quarter total of 8.2 million, a decrease of 1.6 million or 16.5% compared to the second quarter last year,
Rex Copeland: non-interest income was primarily impacted by 2 unusual items 1 in the second quarter of 2025 and the other occurring in the year ago quarter
Rex Copeland: included in the 2024, second quarter was 2.7 million in income from termination of the master agreement, with the third party software, vendor
Rex Copeland: The 2025 second quarter is non-interest income included, 1.1 million dollars in gains from exits and other activities associated with tax credit partnership Investments.
Rex Copeland: This type of tax credit partnership, income cannot be anticipated with certainty in terms of amount or timing.
Rex Copeland: Compared to the first quarter of 2025 non-interest income.
Rex Copeland: Increase, 1.6 million primarily driven by the previously discussed tax credit partnership investment activities and higher net. Gains from mortgage loan sales and debit card fees.
Rex Copeland: Total amount interest expense for the quarter remain relatively consistent at 35.0 million. A decrease of 1.4 million or 3.9% from the second quarter of last year and an increase of 183,000 from the first quarter of 2025,
Rex Copeland: The Improvement compared to the prior year. Second quarter was primarily driven by reductions in legal audit and other professional fees. Other operating expenses and expenses related to other real estate owned.
Rex Copeland: Legal audit and other professional fees total 929,000, a decrease of 935,000 or 50% reflecting the absence of last year's uh training and implementation costs as mentioned before.
Rex Copeland: Expenses on other real estate owned also decreased as a result of rental income generated from these Assets in the 2025 period.
Rex Copeland: Total salary and employee benefits. Expense remain generally unchanged.
Rex Copeland: these reductions were partially offset by increases in net, occupancy and Equipment expense
Net occupancy and Equipment expense for the second quarter, Rose 595, 594,000, or 7.6% to 8.4 million reflecting various components of computer, license and support, and Hardware costs related to upgrades of core system capabilities.
Rex Copeland: as a result, our efficiency ratio for the quarter ended June, 30 2025 was 59.16% and improvement from 64.27% in the second quarter of 2024 and 62.27% in the first quarter between 2025,
we are focused on maintaining strong cost, discipline by continually refining, our operations and carefully controlling expenses at the same time. We're allocating resources, strategically to Priority initiatives designed to support, sustainable growth and strengthen our Market Market position over the long term.
Rex Copeland: Now, uh, make a few comments about the balance sheet. Uh, total assets ended the quarter at 5.85 billion dollars.
Rex Copeland: down from 5.98 billion dollars at the end of 2024 and 5.99 billion dollars at March 3120 2025
net loans, excluding mortgage loans held for sale decreased to 4.53 billion dollars at June 30th 2025 compared to 4.69 billion dollars at both December 3124 and March 31st 2025
Rex Copeland: Loan, demand has been somewhat constrained in the current economic environment and we remain committed to balancing loan growth with appropriate pricing and Loan structure.
Rex Copeland: As mentioned, we did experience a bit higher level of loan payoffs in the second quarter of 2025.
Cash and cash equivalents total of 245.9 million at June 30th 2025.
Rex Copeland: The company also has access to additional funding lines through the federal Home Loan Bank, and the Federal Reserve totaling 1.55 billion dollars reflecting, enhance liquidity and management and prudent positioning in response to evolving market conditions, and funding Dynamics.
Rex Copeland: Told deposits for 4.68 billion dollars. As of June 3020, 2025 reflecting an increase of 78.6 million or 1.7% compared to December, 31st 2024.
This increase was primarily driven by a 61.2 million increase in brokerage deposits of 35.5 million increase in checking accounts and an 18.0 million decline in retail CDs.
Rex Copeland: Of our Consolidated subsidiaries told approximately 703 million dollars. Representing about 15% of our total deposits.
Rex Copeland: Asset quality also remains strong this quarter with non-performing assets of 0.14% of total assets at quarter end.
Non-performing loans to period in loans were 0.04%.
Rex Copeland: During the quarter end of June 3020, the company did not record a provision for credit losses, on its outstanding loan portfolio. Consistent with last year's second quarter,
Rex Copeland: The company recorded a negative provision for losses on unfunded commitments of 110,000 in the GM quarter, uh, June 25th compared to a negative provision of 607,000 recorded during the second quarter of last year and a negative provision of 348,000 recorded in the first quarter of 2025.
Rex Copeland: The allowance for credit losses, as a percentage of total loans, stood at 1.41%. As of June 3020, 2025 a slight increase from 1.36% at March 31
Our Capital position remains healthy with total stockholders, Equity, increasing to 622.4 million up from 603 613.3 million at March, 31, 2025 and 599.6 million at December 31. 2024?
At June 302025, this represents 10.6% of total assets and the book value of 54.6 or 54.61 cents per common share.
The increase from March. 31, 2025 was primarily driven by 19.8 million dollars in net income and a 0.8 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 of 9.8 million.
Rex Copeland: Our total Capital will also increase 2.8 million in the second quarter of 2025 as a result of increased market, value of our available for sale investment Securities and interest rate swaps.
Rex Copeland: Tangible common Equity stands at approximately 10.5% of total assets, and we continue to operate well above all regulatory Capital requirements.
Rex Copeland: In June 2025, we redeemed all the companies outstanding 5 and a half percent fixed to floating rate, subordinated notes at par with an aggregate. Principal balance of 75 million in advance of a step up in rate and save considerable future interest costs.
I'd also note that last quarter our board of directors approved a new stock repurchase authorization for an additional 1 million shares which will take effect. Once the current authorization is fully utilized
during the 2025 second quarter, we repurchased nearly 176,000 shares of our common stock, reducing the remaining balance under the existing program to approximately 94,000 shares as of, June, 30 2025,
Rex Copeland: through the first 6 months of 2025, we have repurchased nearly 350,000 shares of our common stock
Additionally, we declared cash dividends on our common stock of 40 cents per share. And each of the first 2 quarters of 2025,
Rex Copeland: more broadly. We remain confident in the strength and resilience of our balance sheet supported by solid Capital levels. Ample liquidity discipline credit quality and a deposit strategy that remains responsive to a competitive rate environment.
With that, we are now ready to open up for questions.
Rex Copeland: As a reminder to ask a question. Please press star, 1 1 1 on your telephone, and wait, for your name to be announced.
To withdraw your question. Please press star 1 1 1 again.
Rex Copeland: Please stand by while we compile the Q&A roster.
Our first question comes from Damon, Delonte with KBW, your line is open.
Hey, good afternoon, guys. Hope everybody's, uh, doing well today. And thanks for taking my questions. Um, first question, just on the the loan growth, um, outlook here in the back half of the year. Um, you know, Joe just wondering if if you have a little bit more optimism at this point than you did 90 days ago. Um, you know, do you feel like the origination activities can kind of pick up, you know, some of those, um, unfunded construction loans, maybe hitting the books or kind of just, what, what's your, what's your broader? Thoughts are on the, on the outlook for loan growth.
Rex Copeland: I wouldn't expect from an origination standpoint anything, you know, in the near term, I wouldn't expect it to be too much different than than, you know what? What we've seen in the first 6 months of of 25.
How about from like a payoff perspective? Do you guys have any line of sight on expected? Payoffs, I know you noted, there was a thousand loan that paid off in the last day of the month. I mean, do you, do you have any others that are scheduled to pay off that you're kind of aware it?
Rex Copeland: Pay off a, with the kind of lending. We do Damon our lumpy and our hard to predict, um, you know. Um, so I, you know, I don't know that we have a lot of visibility on that.
Rex Copeland: Um, you know, we we we like to try to keep track of it as best we can, but what we find is that, you know, maybe pay off the customers are expecting to have get pushed and and you know, maybe there's a payoff that comes in that that that wasn't expected. So, you know, I'm sure we're going to continue to have some payoff activity, but but but trying to pin it down is pretty tough.
Speaker Change: Got it. Okay. And then, on the expense front, um Rex, you know, good quarter of expense control. I mean anything, uh, kind of um, going to kind of disrupt that that Trend, you know, do you think you can kind of hold expenses on the, you know, limited growth here in the back half of the year? Or, or do you see some additional expense spend kind of creeping in
Speaker Change: Uh, I think generally it, it's going to be fairly consistent there. There may be a little bit of stuff in the back half some additional, um, you know, technology things that will that will come online. That will have a little bit more expense related to, but I don't think it's going to be anything truly significant. Um, we do have I think um,
Speaker Change: There may be some, some compensation cost that will be adjusted a little bit. There's there's some in in a couple of our states. I think there's some minimum wage requirements, things, and things of that nature. So I think there could be some slight adjustments on some of that kind of stuff, but I don't think of anything really large that I can think of right now, that that would change the numbers dramatically, right? And it's not that we necessarily have a lot of employees at minimum wage. But once once those salaries start getting adjusted, it can sort of affect you up the line. So,
Speaker Change: Got it. Okay. Um let's all very helpful. Thank you very much.
Dan: All right. Thanks Dan.
Dan: Thank you again to ask a question. Please press star, 1, 1 1 on your telephone again, that is star 1, 1 1 to ask a question,
Dan: Our next question comes from John Rodas with Janie, your line is open.
John Rodas: Hey, good afternoon, guys.
Speaker Change: Hi Johnson.
Speaker Change: Hey, the uh just back to the your comment on expenses, the the rental income, this quarter um, was up, but it's a function of the uh the larger Oreo balance.
Speaker Change: All things equal would you expect? Would you expect that rental income number was there any like
Speaker Change: Catch up or anything in the quarter, or, you know, if that property is still around, should we expect that level? And the third and fourth quarter?
Speaker Change: Um, I don't see any catching up in there before you compared to the year ago quarter though, we didn't have that property in or we had some expenses related maybe to it and some other things. So I think we had net expense um, in Q2 2024 and I believe we had a little bit of um, you know, negative expense or or income related to or and the the second quarter this year. So, that was kind of the big difference. We had expense last year and a little bit of income this year, but I don't think that in the, in Q2, I don't remember anything. Being a catch up or anything, I think it was fairly consistent with what's what's in there.
Speaker Change: Okay. So I mean, but if if that property stays on the balance sheet for a little while, then you'll continue to see that sort of that level of rental income, correct?
Speaker Change: The only the only hesitation I have John. I don't know that Rex and I are are, you know, are fully aware of the rent roll and when when leases might be expiring or whatever. So, you know, I mean, that could affect that number some, um, and I just don't have that. I don't have that in my head. But but yeah, I mean I think generally the the income we had in the in the second quarter was from that building and so long as as we have that building, we should have similar rental income unless we would have a a lease row off or something.
Speaker Change: interest recoveries from the first and second quarter, you know, I sort of get a, a core margin, this quarter of around 365 and then you should have what a maybe a 100 200 thousand dollar net benefit from the
Speaker Change: Subnet. Redemption Redemption. Um, so maybe a little bit of improvement there in the third quarter and then
Speaker Change: termination of the swap in the fourth quarter. Um, all things equal. Do you think you can sort of hold this level of the margin, excluding the spot termination.
Speaker Change: I think you've identified the the sort of the variables there John, I mean, I can't think of
Speaker Change: of of necessarily anything else, you know, we are going to continue to have some fixed rate loans that are that, you know,
Speaker Change: Are pretty low rate, you know, mature and and you know probably get redone at a little higher rates, you know. So I mean
I don't know Rick. Yeah, we've got a little bit of that, so there's normal. They're just normal repayment on some of those loans. And then, there are some that pay off periodically. And so, you know, we could redeploy those funds, hopefully into higher, yielding assets. And then we do have, we mentioned that I think in the release that we've got, um, a fairly substantial amount of, um, time deposits that are going to mature in the next.
Speaker Change: quarter to 6 months and
You know, it's hard to know exactly, because of the mix of how that's all going to play out. But um, you know, we're hopeful that we'll be able to renew that at a, it won't be a lot less, but maybe a little bit less rate. Um, that we're currently have to pay on on what's in the on the books right now. So you know, there may be a little bit of positive that comes from that. Yeah, um, yeah, I guess I guess the way to characterize it John is probably
Speaker Change: Pretty neutral as to what's happening with maybe a slight Tailwind, but it, it wouldn't be a real real brick 1 until Q4, and then we got to Edwin. But yeah, that's right. Termination going on. So, and we've talked about that. You guys were aware of it, but, um, you know, so I I think you, for obviously, we're we're going to lose some some interest income from that all things being equal. So,
Yep. Okay, thanks guys.
Speaker Change: Thank you. I'm showing no further questions at this time. I would now like to turn it back to Joe Turner for closing remarks.
All right, we appreciate everybody for joining us today and we'll look forward to talking to you, in October.
Speaker Change: Thank you.
This concludes today's conference call.
Speaker Change: Thank you for participating. You may now. Disconnect