Great Southern Bancorp, Inc. Reports Preliminary Fourth Quarter Earnings of $1.27 Per Diluted Common Share

Preliminary Financial Results and Business Update for the Quarter Ended December 31, 2024

SPRINGFIELD, Mo., Jan. 21, 2025 (GLOBE NEWSWIRE) -- Great Southern Bancorp, Inc. (NASDAQ:GSBC), the holding company for Great Southern Bank, today reported that preliminary earnings for the three months ended December 31, 2024, were $1.27 per diluted common share ($14.9 million net income) compared to $1.11 per diluted common share ($13.1 million net income) for the three months ended December 31, 2023.

For the quarter ended December 31, 2024, annualized return on average common equity was 9.76%, annualized return on average assets was 1.00%, and annualized net interest margin was 3.49%, compared to 9.71%, 0.91% and 3.30%, respectively, for the quarter ended December 31, 2023.

Fourth Quarter 2024 Key Results:

• Net Interest Income: Net interest income for the fourth quarter of 2024 increased $4.4 million (or approximately 9.7%) to $49.5 million compared to $45.1 million for the fourth quarter of 2023 largely driven by higher interest income on loans. Annualized net interest margin was 3.49% for the quarter ended December 31, 2024, compared to 3.30% for the quarter ended December 31, 2023, and 3.42% for the quarter ended September 30, 2024.

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• Asset Quality: Non-performing assets and potential problem loans totaled $16.6 million at December 31, 2024, a decrease of $2.5 million from $19.1 million at December 31, 2023. At December 31, 2024, non-performing assets were $9.6 million (0.16% of total assets), a decrease of $2.2 million from $11.8 million (0.20% of total assets) at December 31, 2023.
• Liquidity: The Company had secured borrowing line availability at the FHLBank and Federal Reserve Bank of $1.06 billion and $346.4 million, respectively, at December 31, 2024. In addition, at December 31, 2024, the Company had unpledged securities with a market value totaling $354.9 million, which could be pledged as collateral for additional borrowing capacity at either the FHLBank or Federal Reserve Bank.
• Capital: The Company's capital position remained strong as of December 31, 2024, significantly exceeding the thresholds established by regulators. On a preliminary basis, as of December 31, 2024, the Company's Tier 1 Leverage Ratio was 11.4%, Common Equity Tier 1 Capital Ratio was 12.3%, Tier 1 Capital Ratio was 12.8%, and Total Capital Ratio was 15.4%. The Company's tangible common equity to tangible assets ratio was 9.9% at December 31, 2024.
• Significant or Non-Recurring Item: In the quarter ended December 31, 2024, the Company expensed $2.0 million due to developments related to a litigation/contract dispute matter. Additional discussion of this matter is contained in the "Business Initiatives” section of this release. The inclusion of this item during the quarter ended December 31, 2024, decreased annualized return on average common equity and annualized return on average assets by 103 basis points and 10 basis points, respectively, and decreased earnings per common share by $0.13.

Selected Financial Data:

Great Southern President and CEO Joseph W. Turner commented, "Our performance for the full year 2024 highlights the resilience of our business model and our disciplined approach to navigating a complex economic and banking environment. For the full year, we reported net income of $61.8 million, or $5.26 per diluted common share, compared to $67.8 million, or $5.61 per diluted common share, in 2023. While the year over year earnings reflect a modest decline, they underscore our ability to balance costs, maintain robust asset quality, and consistently deliver value to our shareholders.

"Our fourth-quarter earnings of $14.9 million, or $1.27 per diluted common share, surpassed the $13.1 million, or $1.11 per diluted common share, recorded in the same period of 2023. This improvement was primarily driven by increased net interest income and strategic loan portfolio growth. These results, achieved despite rising funding costs compared to the prior year, underscore the resilience of our balance sheet and the stability of our operations. During the fourth quarter of 2024, we also recorded above-normal non-interest expense due to a non-recurring expense item discussed later in this earnings release and recorded a larger provision for losses on unfunded commitments due to significant growth in those commitments during the fourth quarter.

"Net interest income for the year totaled $189.1 million, a slight decrease from $193.2 million for 2023, as higher deposit costs offset increases in loan and investment income. Our net interest margin for the year was 3.42%, down from 3.57% in 2023. While the upward pressure on deposit costs persists, our proactive asset-liability management strategy has enabled us to capitalize on higher yields in our loan and securities portfolios, partially mitigating these challenges.

"Loan portfolio stability was a pivotal component of our 2024 performance. Gross loans grew by $100.5 million, or 2.2%, to $4.76 billion, with increases driven primarily by multi-family residential and commercial real estate lending. Our loan pipeline remains robust, reflecting continued demand across key markets.

"One of the standout achievements of 2024 was sustained strong asset quality. Non-performing assets declined by $2.2 million to $9.6 million, or 0.16% of total assets, at December 31, 2024, compared to 0.20% at December 31, 2023. This progress highlights the success of our proactive credit management practices and the benefits of a stable economic backdrop. At year-end, our allowance for credit losses remained strong at 1.36% of total loans.

"Our disciplined and strategic approach to expense management also contributed to our solid results. Non-interest expenses for the year were $141.5 million, consistent with 2023, even as we continued to invest in technology and operational efficiencies. These enhancements, coupled with our commitment to community-focused banking, have allowed us to deepen relationships with customers while ensuring operational excellence.

"In terms of capital management, stockholders' equity increased by $27.7 million year-over-year to $599.6 million at year-end, ending 2024 with a tangible common equity to tangible assets ratio of 9.9% and strong regulatory capital ratios. This solid capital base provides a foundation that enables us to invest in growth initiatives while continuing to deliver returns to stockholders through our consistent quarterly dividend.

"As we move into 2025, we remain committed to managing our business prudently with a long-term focus, in what we expect will be a challenging operating environment. While we anticipate funding costs to stay elevated, our strong liquidity position and credit quality, coupled with our disciplined approach to growth, provide a solid base for continued success. I want to express my gratitude to our team members for their dedication and hard work, which make these achievements possible, and to our stockholders for their trust and confidence in our Company.”

NET INTEREST INCOME

Net interest income for the fourth quarter of 2024 increased $4.4 million to $49.5 million, compared to $45.1 million for the fourth quarter of 2023. This year-over-year growth in net interest income was driven primarily by higher loan income and improved overall yields, as well as the strategic management of maturing/repricing brokered deposits and interest-bearing demand deposits. Compared to the linked quarter, net interest income in the fourth quarter of 2024 increased, reflecting the Company's effective management of maturing/repricing time deposits, brokered deposits and interest-bearing demand deposits, reducing overall deposit rates and associated interest expense. Net interest margin was 3.49% in the fourth quarter of 2024, compared to 3.30% in the same period of 2023 and 3.42% in the third quarter of 2024. Compared to the prior-year fourth quarter, the average yield earned on loans increased 31 basis points, the average yield on investment securities increased 22 basis points and the average yield on other interest earning assets decreased 83 basis points. The average rate paid on interest-bearing demand and savings deposits, time deposits and brokered deposits decreased 8 basis points, increased 2 basis points and decreased 35 basis points, respectively, in the three months ended December 31, 2024 compared to the three months ended December 31, 2023. The average interest rate spread was 2.87% for the three months ended December 31, 2024, compared to 2.65% for the three months ended December 31, 2023, and 2.74% for the three months ended September 30, 2024.

To mitigate exposure to the risk of fluctuations in future cash flows resulting from changes in interest rates, the Company has, from time to time, strategically utilized derivative financial instruments, primarily interest rate swaps, as part of its interest rate risk management strategy.

The following table presents the effect of cash flow hedge accounting included in interest income in the consolidated statements of income:

The Company entered into an interest rate swap in October 2018, which was terminated in March 2020. Upon termination, the Company received $45.9 million, inclusive of accrued but unpaid interest, from its swap counterparty. The net amount, after deducting accrued interest and deferred income taxes, is being accreted to interest income on loans monthly until the original termination date of October 6, 2025. After such date, the Company will no longer have the benefit of that income from the terminated swap. In 2025, the Company anticipates recording approximately $2.0 million in interest income from the terminated swap in each of the first three quarters, after which no further interest income will be realized.

The Company's net interest income in the fourth quarter of 2024 increased 9.7% compared to net interest income in the fourth quarter of 2023, and increased 3.2% compared to net interest income in the third quarter of 2024. The cost of deposits has been negatively impacted over several quarters by the high level of competition for deposits across the industry and the lingering effects of liquidity events at several banks in March and April 2023. After the second quarter of 2023, the Company had a significant amount of time deposits maturing at relatively low interest rates. These deposits were either renewed at higher rates or withdrawn, requiring the Company to replace the withdrawn deposits with other funding sources at the prevailing higher market rates. Market rates for time deposits have recently declined as the FOMC cut the federal funds rate by 100 basis points in 2024 and signaled further rate cuts may occur. As of December 31, 2024, time deposit maturities over the next 12 months were as follows: within three months -- $724 million, with a weighted-average rate of 4.19%; within three to six months -- $306 million, with a weighted-average rate of 3.86%; and within six to twelve months -- $156 million, with a weighted-average rate of 3.34%. Based on time deposit market rates in December 2024, replacement rates for these maturing time deposits are likely to be approximately 3.50-4.00%.

NON-INTEREST INCOME

For the quarter ended December 31, 2024, non-interest income increased $371,000 to $6.9 million when compared to the quarter ended December 31, 2023, primarily as a result of the following items:

• Net gains on loan sales: Net gains on loan sales increased $427,000 compared to the prior-year quarter. The increase was partially due to an increase in the amount of fixed-rate single-family mortgage loans sold during the fourth quarter of 2024 compared to the fourth quarter of 2023. The Company also realized higher premiums on the sale of loans in the 2024 fourth quarter, as market interest rates were more stable when compared to the prior-year period.
• Other income: Other income increased $286,000 compared to the prior-year quarter. In the 2024 period, the Company recognized $268,000 in income related to interest rate swaps in the Company's back-to-back swap program with loan customers and swap counterparties.
• Overdraft and insufficient funds fees: Overdraft and insufficient funds fees decreased $401,000 compared to the prior-year quarter. This decrease was primarily due to the continuation of a multi-year trend whereby our customers are choosing to forego authorizing payments of certain items which exceed their account balances, resulting in fewer overdrafts in checking accounts and related fees.

NON-INTEREST EXPENSE

For the quarter ended December 31, 2024, non-interest expense increased $662,000 to $36.9 million when compared to the quarter ended December 31, 2023, primarily as a result of the following items:

• Other operating expenses: Other operating expenses increased $1.7 million from the prior-year quarter. In the quarter ended December 31, 2024, the Company expensed $2.0 million due to developments related to a litigation/contract dispute matter. See the "Business Initiatives” section of this release.
• Legal, Audit and Other Professional Fees: Legal, audit and other professional fees decreased $608,000 from the prior-year quarter, to $1.0 million. In the quarter ended December 31, 2023, the Company expensed a total of $918,000 related to training and implementation costs for the intended core systems conversion and professional fees to consultants engaged to support the Company's proposed transition of core and ancillary software and information technology systems, with no such costs expensed in the quarter ended December 31, 2024.
• Salaries and employee benefits: Salaries and employee benefits decreased $458,000 from the prior-year quarter. In the fourth quarter of 2023, the Company recorded an expense totaling $441,000 related to discretionary bonuses awarded to various associates who were involved significantly in the intended software and systems transition; this was not repeated in the 2024 fourth quarter. Compensation costs related to originated loans (that are deferred under accounting rules) increased by $154,000 in the 2024 period compared to the 2023 period (resulting in lower expense in the 2024 period), as the volume of loans originated in the fourth quarter of 2024 increased compared to the fourth quarter of 2023.

The Company's efficiency ratio for the quarter ended December 31, 2024, was 65.43% compared to 70.17% for the same quarter in 2023. The Company's ratio of non-interest expense to average assets was 2.46% for the three months ended December 31, 2024, compared to 2.52% for the three months ended December 31, 2023. Average assets for the three months ended December 31, 2024, increased $248.8 million, or 4.3%, compared to the three months ended December 31, 2023, primarily due to growth in net loans receivable and available-for-sale securities.

INCOME TAXES

For the three months ended December 31, 2024 and 2023, the Company's effective tax rate was 16.9% and 19.7%, respectively. These effective rates were below the statutory federal tax rate of 21%, due primarily to the utilization of certain investment tax credits and the Company's tax-exempt investments and tax-exempt loans, which reduced the Company's effective tax rate. The Company's effective tax rate may fluctuate in future periods as it is impacted by the level and timing of the Company's utilization of tax credits, the level of tax-exempt investments and loans, the amount of taxable income in various state jurisdictions and the overall level of pre-tax income. State tax expense estimates continually evolve as taxable income and apportionment between states are analyzed. The Company currently expects its effective tax rate (combined federal and state) will be approximately 18.0% to 20.0% in future periods.

CAPITAL