Great Southern Bancorp, Inc. Reports Preliminary Fourth Quarter and Annual Earnings of $1.28 and $4.21 Per Diluted Common Share

Rhea-AI Summary

Great Southern Bancorp (NASDAQ:GSBC) reported preliminary financial results for the quarter and year ended December 31, 2020. Earnings per diluted share for Q4 were $1.28, up from $1.24 year-over-year. Annual earnings decreased to $4.21 per share from $5.14. Total loans rose by $202 million or 4.1%, but net interest income fell by 0.8% to $44.6 million. The bank plans to adopt the CECL accounting standard in 2021, anticipating an increase in reserves of $10-13 million. Capital ratios remain strong, exceeding regulatory thresholds.

Positive

• Q4 earnings per diluted share rose to $1.28 from $1.24 year-over-year.
• Total gross loans increased by $202 million (4.1%) from the previous year.
• Capital ratios exceed regulatory requirements, indicating strong financial health.

Negative

• Annual earnings per diluted share decreased to $4.21 from $5.14.
• Net interest income declined by $365,000 (0.8%) year-over-year.
• Anticipated one-time adjustment for CECL adoption could reduce retained earnings by $13-$15 million.

Preliminary Financial Results and Other Matters for the Quarter and Year Ended December 31, 2020:

• CECL Adoption: The recently-enacted COVID relief legislation, the Consolidated Appropriations Act, 2021, provides for an optional additional delay for certain bank holding companies to adopt the Current Expected Credit Loss (CECL) accounting standard. Great Southern Bancorp, Inc. (the Company) has elected to delay the initial adoption date of this standard to January 1, 2021, in accordance with guidance approved by the Securities and Exchange Commission. Therefore, the Company’s financial statements for the three months and year ended December 31, 2020, were prepared under the existing incurred loss accounting standard. The adoption of the CECL model during the first quarter of 2021 will require us to recognize a one-time cumulative adjustment to our allowance for loan losses and a liability for potential losses related to the unfunded portion of our loans and commitments in order to fully transition from the incurred loss model to the CECL model. We are currently finalizing our assessment of the impact to our financial statements upon initial adoption. We expect to increase the balance of our allowance for credit losses related to outstanding loans in a range of $10 million to $13 million and create an allowance for potential losses related to the unfunded portion of our loans and commitments in a range of $7 million to $8 million. The after-tax effect of this is expected to reduce our retained earnings by $13 million to $15 million.  
• Significant Notable Income and Expense Items: During the three months ended December 31, 2020, the Company recognized the following items:
  • The Company recorded valuation write-downs totaling $839,000 on three foreclosed commercial real estate properties and various former branch locations that were being offered for sale. Subsequent to the write-downs, one of the three commercial real estate properties was sold during the fourth quarter of 2020, leaving two remaining commercial properties valued at $513,000.
  • The Company recorded interest income of $1.0 million related to net deferred fee income accretion on Paycheck Protection Program (PPP) loans. Fees are accreted over the loan term with remaining deferred fees recorded in interest income when the loans pay off. During the fourth quarter of 2020, some of the loans were repaid by the Small Business Administration (SBA) in accordance with the borrower forgiveness terms of the PPP. We expect many of these PPP loans will repay in full during the first half of 2021. At December 31, 2020, remaining net deferred fees related to PPP loans totaled $2.0 million.
• Total Loans: Total gross loans (including the undisbursed portion of loans), excluding FDIC-assisted acquired loans and mortgage loans held for sale, increased $202.0 million, or 4.1%, from December 31, 2019, to December 31, 2020. This increase was primarily in other residential (multi-family) loans, commercial business loans, one- to four-family residential loans and commercial real estate loans. These increases were partially offset by decreases in construction loans and consumer auto loans. The FDIC-assisted acquired loan portfolios decreased $28.6 million during the year ended December 31, 2020. Total gross loans decreased $27.6 million during the three months ended December 31, 2020. Outstanding net loan receivable balances increased $142.8 million, from $4.15 billion at December 31, 2019 to $4.30 billion at December 31, 2020, and decreased $117.0 million in the three months ended December 31, 2020.
• Asset Quality: Non-performing assets and potential problem loans, excluding those acquired in FDIC-assisted transactions (which are accounted for and analyzed as loan pools rather than individual loans), totaled $8.1 million at December 31, 2020, a decrease of $943,000 from $9.1 million at September 30, 2020 and a decrease of $4.5 million from $12.6 million at December 31, 2019. Non-performing assets at December 31, 2020 were $3.8 million (0.07% of total assets), a decrease of $1.7 million from $5.5 million (0.10% of total assets) at September 30, 2020 and a decrease of $4.4 million from $8.2 million (0.16% of total assets) at December 31, 2019.
• Net Interest Income: Net interest income for the fourth quarter of 2020 decreased $365,000 (or approximately 0.8%) to $44.6 million compared to $44.9 million for the fourth quarter of 2019. Net interest income was $44.2 million for the third quarter of 2020. Net interest margin was 3.41% for the quarter ended December 31, 2020, compared to 3.82% for the fourth quarter of 2019 and 3.36% for the quarter ended September 30, 2020. The decrease in net interest margin compared to the fourth quarter of 2019 was primarily the result of changes in the asset mix, with average cash equivalents increasing $212 million and average investment securities increasing $63 million. The average yield on cash equivalents decreased 153 basis points between the two periods. Also, the additional subordinated notes issued in June 2020 resulted in eight basis points of margin compression. In addition, the yield accretion on FDIC-acquired loans was 12 basis points less during the fourth quarter of 2020 compared to the fourth quarter of 2019. The positive impact on net interest margin from the additional yield accretion on acquired loan pools was seven basis points for the quarter ended December 31, 2020, 11 basis points for the year ended December 31, 2020, and nine basis points for the quarter ended September 30, 2020. Excluding the impact of the yield accretion, net interest margin was 3.34%, 3.38% and 3.27% for the three months ended December 31, 2020, year ended December 31, 2020 and three months ended September 30, 2020, respectively. For further discussion of the additional yield accretion of the discount on acquired loan pools, see “Net Interest Income.”
• Capital: The capital position of the Company continues to be strong, significantly exceeding the thresholds established by regulators. On a preliminary basis, as of December 31, 2020, the Company’s Tier 1 Leverage Ratio was 10.9%, Common Equity Tier 1 Capital Ratio was 12.2%, Tier 1 Capital Ratio was 12.7%, and Total Capital Ratio was 17.2%.

SPRINGFIELD, Mo., Jan. 25, 2021 (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, 2020, were $1.28 per diluted common share ($17.8 million available to common shareholders) compared to $1.24 per diluted common share ($17.9 million available to common shareholders) for the three months ended December 31, 2019.

Preliminary earnings for the year ended December 31, 2020, were $4.21 per diluted common share ($59.3 million available to common shareholders) compared to $5.14 per diluted common share ($7

FAQ

What were the earnings per share for GSBC in Q4 2020?

Great Southern Bancorp reported Q4 2020 earnings of $1.28 per diluted share.

How did total loans change for GSBC in 2020?

Total gross loans increased by $202 million, or 4.1%, from December 31, 2019, to December 31, 2020.

What was the impact of CECL adoption for GSBC?

The adoption of CECL is expected to increase the loan loss allowance by $10-$13 million and reduce retained earnings by $13-$15 million.

What is the current capital position of GSBC?

As of December 31, 2020, GSBC's capital ratios were strong, with a Tier 1 Leverage Ratio of 10.9%.

How did GSBC's net interest income perform in Q4 2020?

Net interest income for Q4 2020 decreased by $365,000, or approximately 0.8%, compared to Q4 2019.