Great Southern Bancorp, Inc. Reports Preliminary Third Quarter Earnings of $0.96 Per Diluted Common Share
Great Southern Bancorp (NASDAQ:GSBC) reported preliminary Q3 2020 earnings of $0.96 per diluted share, down from $1.38 a year prior, with net income available to common shareholders at $13.5 million. Total gross loans increased by $229.6 million year-to-date but fell by $11.4 million in Q3. The net interest income decreased to $44.2 million, marking a 3.8% decline, with a net interest margin of 3.36%. Non-performing assets declined to $5.5 million, indicating improved asset quality. The company remains focused on employee well-being, issuing a second special bonus due to COVID-19.
- Total gross loans increased by $229.6 million since December 31, 2019.
- Non-performing assets decreased to $5.5 million, showing improved asset quality.
- Capital ratios remained strong, with Tier 1 Leverage Ratio at 10.7%.
- Earnings decreased from $1.38 to $0.96 per share year-over-year.
- Net interest income fell by $1.7 million compared to Q3 2019.
- Net interest margin decreased to 3.36%, down from 3.95% a year ago.
Preliminary Financial Results and Other Matters for the Quarter and Nine Months Ended September 30, 2020:
- Significant Unusual Income or Expense Items: During the three months ended September 30, 2020, Great Southern Bancorp, Inc. (the Company) recognized the following items:
- The Company recorded an increase in Salaries and Employee Benefits expense totaling
$1.1 million related to a special employee bonus paid by the Company to all current full-time and part-time employees in response to the ongoing COVID-19 pandemic. This is the second such bonus paid by the Company in response to the COVID-19 pandemic; the first (also totaling$1.1 million ) was approved in March 2020. While we have not terminated any employees or reduced pay for any employees as a result of the COVID-19 pandemic, it has caused disruption to our Company and our employees and their families. - The Company recorded other COVID-19-related expenses totaling approximately
$175,000 for various items such as cleaning services, supplies, equipment, costs to set up remote work sites and other items.
- The Company recorded an increase in Salaries and Employee Benefits expense totaling
- Total Loans: Total gross loans (including the undisbursed portion of loans), excluding FDIC-assisted acquired loans and mortgage loans held for sale, increased
$229.6 million , or4.7% , from December 31, 2019, to September 30, 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$21.1 million during the nine months ended September 30, 2020. Total gross loans decreased$11.4 million during the three months ended September 30, 2020. Outstanding net loan receivable balances increased$259.8 million , from$4.15 billion at December 31, 2019 to$4.41 billion at September 30, 2020, and increased$14.1 million in the three months ended September 30, 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
$9.1 million at September 30, 2020, a decrease of$2.5 million from$11.6 million at June 30, 2020 and a decrease of$3.5 million from$12.6 million at December 31, 2019. Non-performing assets at September 30, 2020 were$5.5 million (0.10% of total assets), a decrease of$2.1 million from$7.6 million (0.16% of total assets) at June 30, 2020 and a decrease of$2.7 million from$8.2 million (0.16% of total assets) at December 31, 2019. - Net Interest Income: Net interest income for the third quarter of 2020 decreased
$1.7 million (or approximately3.8% ) to$44.2 million compared to$45.9 million for the third quarter of 2019. Net interest income was$43.5 million for the second quarter of 2020. Net interest margin was3.36% for the quarter ended September 30, 2020, compared to3.95% for the third quarter of 2019 and3.39% for the quarter ended June 30, 2020. The decrease in net interest margin compared to the third quarter of 2019 was primarily the result of: (1) decreases in the average yield on loans and other interest-earning assets, due to significant decreases in market interest rates (primarily one-month LIBOR rates) compared to a year ago and (2) significant increases in cash equivalents, investment securities and PPP loans, all of which have much lower yields compared to the overall loan portfolio. The decrease in net interest margin compared to the second quarter of 2020 was primarily the result of interest expense on the subordinated notes issued by the Company in June 2020, partially offset by lower interest rates on deposits. The positive impact on net interest margin from the additional yield accretion on acquired loan pools was eight basis points for the quarter ended September 30, 2020, 19 basis points for the quarter ended September 30, 2019, and 12 basis points for the quarter ended June 30, 2020. Excluding the impact of the yield accretion, net interest margin was3.27% (including eight basis points of negative impact due to interest on the recently-issued subordinated debt),3.27% and3.75% for the three months ended September 30, 2020, June 30, 2020 and September 30, 2019, 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 September 30, 2020, the Company’s Tier 1 Leverage Ratio was
10.7% , Common Equity Tier 1 Capital Ratio was11.9% , Tier 1 Capital Ratio was12.4% , and Total Capital Ratio was16.7% .
SPRINGFIELD, Mo., Oct. 21, 2020 (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 September 30, 2020, were
Preliminary earnings for the nine months ended September 30, 2020, were
For the quarter ended September 30, 2020, annualized return on average common equity was
Great Southern President and CEO Joseph W. Turner commented, “Overall, we had a good operating quarter during this extraordinary time. As we navigate through the health crisis, our focus remains on the well-being of our associates, customers and communities. Our team of associates have done a spectacular job in taking care of our customers and each other. As such, in August, we provided special bonuses totaling
“As we expected, our earnings declined in the third quarter compared to the year ago quarter. The decrease in earnings was primarily driven by higher loan loss provision expense, lower net interest income, which included the impact of the subordinated notes we issued in June 2020, and higher non-interest expense. Still, we achieved very good earnings of
“The core net interest margin (excluding additional yield accretion on acquired loan pools) was
Turner continued, “Commercial lending production declined in the third quarter as activity in our markets has slowed somewhat. Total gross loans have increased
“Through September 30, 2020, credit quality metrics remained very strong. At September 30, 2020, non-performing assets were
“Capital remained very strong at September 30, 2020, and our book value per share was
COVID-19 Impact to Our Business and Response
Great Southern is actively monitoring and responding to the effects of the rapidly-changing COVID-19 pandemic. As always, the health, safety and well-being of our customers, associates and communities are the Company’s top priorities. Centers for Disease Control and Prevention (CDC) guidelines, as well as directives from federal, state and local officials, are being closely followed to make informed operational decisions.
During this unprecedented time, the Company is working diligently with its nearly 1,200 associates to enforce CDC-advised health, hygiene and social distancing practices. A significant number of non-frontline associates continue to work from home. Teams in nearly every operational department have been split, with part of each team working at an off-site disaster recovery facility to promote social distancing and to avoid service disruptions. To date, there have been no service disruptions or reductions in staffing. As a token of appreciation for our employees’ dedication over the past several months, and to help support some of the needs of our associates, in August 2020, the Company again rewarded all full-time and part-time associates with special pre-tax bonuses of
Taking care of customers and providing uninterrupted access to services are top priorities. As always, customers can conduct their banking business using the banking center network, online and mobile banking services, ATMs, Telephone Banking, and online account opening services. As health conditions in local markets dictate, Great Southern banking center lobbies are open following strict social distancing guidance from the CDC and local government officials. If customer lobbies are closed in a market area, then drive-thru service and in-person service by appointment are available.
As a resource to customers, a COVID-19 information center has been made available on the Company’s website, www.GreatSouthernBank.com. General information about the Company’s pandemic response, how to receive assistance, and how to avoid COVID-19 scams and fraud are included.
Impacts to Our Business Going Forward: The magnitude of the impact on the Company of the COVID-19 pandemic is not yet fully known, and will depend on the length and severity of the economic downturn brought on by the pandemic. The Company expects that the COVID-19 pandemic will impact our business in future periods in one or more of the following ways, among others. Each of these factors could, individually or collectively, result in reduced net income in future periods.
- Significantly lower market interest rates will have a negative impact on our variable rate loans indexed to LIBOR and prime
- Certain fees for deposit and loan products may be waived or reduced
- Point-of-sale fee income may decline due to a decrease in spending by our debit card customers as they deal with state and local government requirements and other restrictions and may be adversely affected by reductions in their personal income and job losses
- Non-interest expenses may increase as we continue to deal with the effects of the COVID-19 pandemic, including cleaning costs, supplies, equipment and other items
- Banking center lobbies are open, but could be closed again if the pandemic situation worsens
- Additional loan modifications may occur and borrowers may default on their loans, which may necessitate further increases to the allowance for loan losses
- The contraction in economic activity may reduce demand for our loans and for our other products and services
Loan Modifications
At September 30, 2020, we had remaining 88 modified commercial loans with an aggregate principal balance outstanding of
Collateral Type | # of Loans Modified | $ of Loans Modified | Interest Only 3 Months | Interest Only 4-6 Months | Interest Only 7-12 Months | Full Payment Deferral 3 Months | Full Payment Deferral 6 Months | Weighted Average Loan to Value | |||||||
| Retail | 12 | $ | 47.8 | $ | — | $ | 5.3 | $ | 36.1 | $ | 2.9 | $ | 3.5 | 57 | % |
| Multifamily | 8 | 78.4 | 7.6 | 46.3 | 24.4 | 0.1 | — | 71 | % | ||||||
| Healthcare | 7 | 56.3 | — | 9.6 | 11.3 | — | 35.4 | 66 | % | ||||||
| Hotel/Motel | 13 | 105.4 | 20.8 | 34.6 | 10.5 | — | 39.5 | 68 | % | ||||||
| Office | 9 | 31.3 | — | 24.0 | 4.3 | 3.0 | — | 44 | % | ||||||
| Warehouse/Other | 10 | 15.7 | 3.7 | — | — | — | 12.0 | 61 | % | ||||||
| Restaurants | 9 | 15.2 | — | 3.7 | — | — | 11.5 | 55 | % | ||||||
| Commercial Business | 15 | 16.4 | 5.2 | — | 5.5 | — | 5.7 | ||||||||
| Land | 5 | 12.2 | 11.3 | — | 0.9 | — | — | ||||||||
| Total Commercial | 88 | 378.7 | 48.6 | 123.5 | 93.0 | 6.0 | 107.6 | ||||||||
| Residential Mortgage | 53 | 11.0 | — | — | — | 2.1 | 8.9 | 68 | % | ||||||
| Consumer | 354 | 5.8 | — | — | — | 0.2 | 5.6 | ||||||||
| Total Consumer | 407 | 16.8 | — | — | — | 2.3 | 14.5 | ||||||||
| Total | 495 | $ | 395.5 | $ | 48.6 | $ | 123.5 | $ | 93.0 | $ | 8.3 | $ | 122.1 | ||
During the quarter ended September 30, 2020, loans with an aggregate principal balance outstanding of
Selected Financial Data:
| (In thousands, except per share data) | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||
| Net interest income | $ | 44,168 | $ | 45,924 | $ | 132,561 | $ | 135,449 | ||||
| Provision for loan losses | 4,500 | 1,950 | 14,371 | 5,500 | ||||||||
| Non-interest income | 9,466 | 8,655 | 25,093 | 23,263 | ||||||||
| Non-interest expense | 31,988 | 28,725 | 92,151 | 85,602 | ||||||||
| Provision for income taxes | 3,692 | 4,172 | 9,607 | 11,890 | ||||||||
| Net income and net income available to | ||||||||||||
| common shareholders | $ | 13,454 | $ | 19,732 | $ | 41,525 | $ | 55,720 | ||||
| Earnings per diluted common share | $ | 0.96 | $ | 1.38 | $ | 2.93 | $ | 3.90 | ||||
NET INTEREST INCOME
Net interest income for the third quarter of 2020 decreased
Net interest income for the nine months ended September 30, 2020 decreased
In October 2018, the Company entered into an interest rate swap transaction as part of its ongoing interest rate management strategies to hedge the risk of its floating rate loans. The notional amount of the swap was
The Company’s net interest margin has been positively impacted by significant additional yield accretion recognized in conjunction with updated estimates of the fair value of the loan pools acquired in the FDIC-assisted transactions. For each of the loan portfolios acquired, the cash flow estimates increased during the current and prior periods presented below, based on payment histories and reduced credit loss expectations. This resulted in increased income that has been spread, on a level-yield basis, over the remaining expected lives of the loan pools (and, therefore, has decreased over time). Because the balance of these adjustments will be recognized generally over the remaining lives of the loan pools, they will impact future periods as well. The remaining accretable yield adjustment that will affect interest income is
The impact to income of adjustments on all portfolios acquired in FDIC-assisted transactions for the reporting periods presented is shown below:
| Three Months Ended | |||||||||
| September 30, 2020 | September 30, 2019 | ||||||||
| (In thousands, except basis points data) | |||||||||
| Impact on net interest income/ | |||||||||
| net interest margin (in basis points) | $ | 1,229 | 9 bps | $ | 2,251 | 20 bps | |||
| Nine Months Ended | |||||||||
| September 30, 2020 | September 30, 2019 | ||||||||
| (In thousands, except basis points data) | |||||||||
| Impact on net interest income/ | |||||||||
| net interest margin (in basis points) | $ | 4,632 | 12 bps | $ | 5,162 | 15 bps | |||
Excluding the impact of the additional yield accretion, net interest margin for the three and nine months ended September 30, 2020, was
For additional information on net interest income components, see the “Average Balances, Interest Rates and Yields” tables in this release.
NON-INTEREST INCOME
For the quarter ended September 30, 2020, non-interest income increased
- Net gains on loan sales: Net gains on loan sales increased
$1.9 million compared to the prior year quarter. The increase was due to an increase in originations of fixed-rate loans during the 2020 period compared to the 2019 period. Fixed rate single-family mortgage loans originated are generally subsequently sold in the secondary market. - Service charges, debit card and ATM fees: Service charges, debit card and ATM fees decreased
$927,000 compared to the prior year period. This decrease was primarily due to a decrease in overdraft and insufficient funds fees on customer accounts. This was due to both a reduction in usage by customers and a decision near the end of the first quarter of 2020 to waive (through August 31, 2020) certain fees for customers in response to the COVID-19 pandemic. The effects of that decision were felt during the second and third quarters of 2020. In addition, the Company recorded less in debit card and ATM fees due to a reduction in debit card and ATM usage between the periods. - Other income: Other income decreased
$442,000 compared to the prior year quarter. In the 2019 period, the Company recognized approximately$510,000 in income related to origination of interest rate swaps in the Company’s back-to-back swap program with loan customers and swap counterparties.
For the nine months ended September 30, 2020, non-interest income increased
- Net gains on loan sales: Net gains on loan sales increased
$3.7 million compared to the prior year period. The increase was due to an increase in originations of fixed-rate loans during the 2020 period compared to the 2019 period. As noted above, fixed rate single-family mortgage loans originated are generally subsequently sold in the secondary market. - Other income: Other income increased
$452,000 compared to the prior year period. In the 2020 period, the Company recognized approximately$658,000 of additional fee income related to newly-originated interest rate swaps in the Company’s back-to-back swap program with loan customers and swap counterparties when compared to 2019. The Company also recognized approximately$541,000 in income related to the exit of certain tax credit partnerships during the nine months ended September 30, 2020. In the 2019 period, the Company recognized gains totaling$677,000 from the sale of, or recovery of, receivables and assets that were acquired several years prior in FDIC-assisted transactions, with no similar sales or recoveries in the current period. - Service charges, debit card and ATM fees: Service charges, debit card and ATM fees decreased
$2.3 million compared to the prior year period. This decrease was primarily due to a decrease in overdraft and insufficient funds fees on customer accounts. As noted above, a decision to waive certain fees for customers was made in response to the COVID-19 pandemic. In addition, the Company recorded less in debit card and ATM fees due to a reduction in debit card and ATM usage between the periods. Also during the first quarter of 2020,$200,000 in additional expenses were netted against ATM fee income due to the conversion to a new debit card processing system. - Gain (loss) on derivative interest rate products: The net loss on derivative interest rate products increased
$255,000 compared to the net loss in the prior year period. In the 2020 period, the Company recognized a$424,000 decrease in the net fair value related to interest rate swaps in the Company’s back-to-back swap program with loan customers and swap counterparties compared to a$169,000 decrease in the 2019 period. As market interest rates fall this generally decreases the net fair value of these back-to-back swaps. This is a non-cash item as there was no required settlement of this amount between the Company and its swap counterparties.
NON-INTEREST EXPENSE
For the quarter ended September 30, 2020, non-interest expense increased
- Salaries and employee benefits: Salaries and employee benefits increased
$2.9 million from the prior year quarter. The increase was primarily due to annual employee compensation merit increases and increased incentives in the mortgage division, where we have added staff and variable compensation increased due to significant increases in new mortgage loan originations, much of which is sold in the secondary market as noted above. Additionally, in August 2020, the Company paid a special cash bonus to all employees totaling$1.1 million in response to the ongoing impacts of the COVID-19 pandemic. - Net occupancy expense: Net occupancy expense increased
$534,000 compared to the prior year quarter. This was primarily related to increased depreciation on new ATM/ITMs and ATM operating software upgrades implemented during the fourth quarter of 2019. Also included in net occupancy expense for the 2020 quarter are COVID-19-related expenses for various items such as cleaning services, equipment, costs to set up remote work sites and other items. - Insurance: Insurance expense increased
$414,000 compared to the prior year quarter. This increase was primarily due to an increase in FDIC deposit insurance premiums. In the 2019 period, the Bank had a credit with the FDIC for a portion of premiums previously paid to the deposit insurance fund. The deposit insurance fund balance was sufficient to cause no premium to be due for the three months ended September 30, 2019. - Expense on other real estate owned and repossessions: Expense on other real estate owned and repossessions decreased
$404,000 compared to the prior year period primarily due to sales of other assets and higher expenses related to certain foreclosed assets during the prior year period. During the 2019 period, expenses related to certain foreclosed assets totaled approximately$572,000 , while expenses in the 2020 period totaled approximately$278,000.
For the nine months ended September 30, 2020, non-interest expense increased
- Salaries and employee benefits: Salaries and employee benefits increased
$6.8 million in the nine months ended September 30, 2020 compared to the prior year period. The increase was primarily due to annual employee compensation merit increases and increased incentives in lending, including mortgage lending activities as noted above, and operations areas. Additionally, in March 2020, the Company approved a special cash bonus to all employees totaling$1.1 million in response to the COVID-19 pandemic. In August 2020, the Company paid a second special cash bonus to all employees totaling$1.1 million in response to the pandemic. - Net occupancy expense: Net occupancy expense increased
$1.2 million in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. This was primarily related to increased depreciation on new ATM/ITMs and ATM operating software upgrades implemented during the fourth quarter of 2019. Also included in net occupancy expense for the 2020 period are COVID-19-related expenses for various items such as cleaning services, equipment, costs to set up remote work sites and other items. - Advertising: Advertising expense decreased
$348,000 compared to the prior year period. This decrease was primarily due to activities related to sponsorship agreements being halted as a result of the COVID-19 pandemic. - Expense on other real estate owned and repossessions: Expense on other real estate owned and repossessions decreased
$696,000 compared to the prior year period primarily due to sales of other assets and higher valuation write-downs of certain foreclosed assets during the prior year period. During the 2019 period, valuation write-downs of certain foreclosed assets totaled approximately$724,000 , while valuation write-downs in the 2020 period totaled approximately$481,000.
The Company’s efficiency ratio for the quarter ended September 30, 2020, was
INCOME TAXES
For the three months ended September 30, 2020 and 2019, the Company's effective tax rate was
CAPITAL
As of September 30, 2020, total stockholders’ equity and common stockholders’ equity were each
Also included in stockholders’ equity at September 30, 2020, were realized gains (net of taxes) on the Company’s cash flow hedge (interest rate swap), which was terminated in March 2020, totaling
On a preliminary basis, as of September 30, 2020, the Company’s Tier 1 Leverage Ratio was
During the three months ended September 30, 2020, the Company repurchased 206,400 shares of its common stock at an average price of
The Company’s Board of Directors has approved a new stock repurchase program which authorizes the repurchase, from time to time, of up to one million additional shares of the Company’s common stock. The new stock repurchase program will take effect after we complete the repurchase of the approximately 75,111 shares remaining under our existing stock repurchase program.
LOANS
Total gross loans (including the undisbursed portion of loans), excluding FDIC-assisted acquired loans and mortgage loans held for sale, increased
Loan commitments and the unfunded portion of loans at the dates indicated were as follows (in thousands):
| September 2020 | June 2020 | March 2020 | December 2019 | December 2018 | December 2017 | |||||||
| Closed non-construction loans with unused | ||||||||||||
| available lines | ||||||||||||
| Secured by real estate (one- to four-family) | $ | 160,409 | $ | 158,687 | $ | 156,381 | $ | 155,831 | $ | 150,948 | $ | 133,587 |
| Secured by real estate (not one- to four-family) | 19,295 | 16,124 | 16,832 | 19,512 | 11,063 | 10,836 | ||||||
| Not secured by real estate - commercial business | 114,519 | 105,071 | 79,117 | 83,782 | 87,480 | 113,317 | ||||||
| Closed construction loans with unused | ||||||||||||
| available lines | ||||||||||||
| Secured by real estate (one-to four-family) | 33,359 | 37,789 | 50,101 | 48,213 | 37,162 | 20,919 | ||||||
| Secured by real estate (not one-to four-family) | 714,566 | 753,589 | 809,436 | 798,810 | 906,006 | 718,277 | ||||||
| Loan commitments not closed | ||||||||||||
| Secured by real estate (one-to four-family) | 94,203 | 112,769 | 141,432 | 69,295 | 24,253 | 23,340 | ||||||
| Secured by real estate (not one-to four-family) | 50,264 | 73,103 | 95,652 | 92,434 | 104,871 | 156,658 | ||||||
| Not secured by real estate - commercial business | 800 | 800 | — | — | 405 | 4,870 | ||||||
| $ | 1,187,415 | $ | 1,257,932 | $ | 1,348,951 | $ | 1,267,877 | $ | 1,322,188 | $ | 1,181,804 |
For further information about the Company’s loan portfolio, please see the quarterly loan portfolio presentation available on the Company’s Investor Relations website under “Presentations.”
PROVISION FOR LOAN LOSSES AND ALLOWANCE FOR LOAN LOSSES
In the first quarter of 2020, pursuant to the recently-enacted CARES Act and guidance from the SEC and FASB, we elected to delay adoption of the new accounting standard (CECL) related to accounting for credit losses. Our first, second and third quarter financial statements are prepared under the existing incurred loss methodology standard for accounting for loan losses.
Management records a provision for loan losses in an amount it believes is sufficient to result in an allowance for loan losses that will cover current net charge-offs as well as risks believed to be inherent in the loan portfolio of the Bank. The amount of provision charged against current income is based on several factors, including, but not limited to, past loss experience, current portfolio mix, actual and potential losses identified in the loan portfolio, economic conditions, and internal as well as external reviews. The levels of non-performing assets, potential problem loans, loan loss provisions and net charge-offs fluctuate from period to period and are difficult to predict.
Worsening economic conditions from the COVID-19 pandemic, higher inflation or interest rates, or other factors may lead to increased losses in the portfolio and/or requirements for an increase in loan loss provision expense. Management maintains various controls in an attempt to limit future losses, such as a watch list of possible problem loans, documented loan administration policies and loan review staff to review the quality and anticipated collectability of the portfolio. Additional procedures provide for frequent management review of the loan portfolio based on loan size, loan type, delinquencies, financial analysis, on-going correspondence with borrowers and problem loan work-outs. Management determines which loans are potentially uncollectible, or represent a greater risk of loss, and makes additional provisions to expense, if necessary, to maintain the allowance at a satisfactory level.
The provision for loan losses for the quarter ended September 30, 2020 was
All FDIC-acquired loans were grouped into pools based on common characteristics and were recorded at their estimated fair values, which incorporated estimated credit losses at the acquisition date. These loan pools are systematically reviewed by the Company to determine the risk of losses that may exceed those identified at the time of the acquisition. Techniques used in determining risk of loss are similar to those used to determine the risk of loss for the legacy Great Southern Bank portfolio, with most focus being placed on those loan pools which include larger loan relationships and those loan pools which exhibit higher risk characteristics. Review of the acquired loan portfolio also includes review of financial information, collateral valuations and customer interaction to determine if additional reserves are warranted.
The Bank’s allowance for loan losses as a percentage of total loans, excluding FDIC-assisted acquired loans, was
ASSET QUALITY
Former TeamBank, Vantus Bank, Sun Security Bank, InterBank and Valley Bank non-performing assets, including foreclosed assets and potential problem loans, are not included in the totals or in the discussion of non-performing loans, potential problem loans and foreclosed assets below. These assets were initially recorded at their estimated fair values as of their acquisition dates and are accounted for in pools. Therefore, these loan pools are analyzed rather than the individual loans. The performance of the loan pools acquired in each of the five transactions has been better than expectations as of the acquisition dates. As a result of changes in balances and composition of the loan portfolio, changes in economic and market conditions and other factors specific to a borrower’s circumstances, the level of non-performing assets will fluctuate.
Non-performing assets, excluding all FDIC-assisted acquired assets, at September 30, 2020 were
Compared to December 31, 2019 and June 30, 2020, non-performing loans decreased
Compared to December 31, 2019 and June 30, 2020, potential problem loans decreased
Activity in the non-performing loans categories during the quarter ended September 30, 2020, was as follows:
| Beginning Balance, July 1 | Additions to Non- Performing | Removed from Non- Performing | Transfers to Potential Problem Loans | Transfers to Foreclosed Assets and Repossessions | Charge- Offs | Payments | Ending Balance, September 30 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||
| One- to four-family | |||||||||||||||||||||||||||
| construction | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||
| Subdivision construction | — | — | — | — | — | — | — | — | |||||||||||||||||||
| Land development | — | — | — | — | — | — | — | — | |||||||||||||||||||
| Commercial construction | — | — | — | — | — | — | — | — | |||||||||||||||||||
| One- to four-family | |||||||||||||||||||||||||||
| residential | 2,388 | 141 | — | (143 | ) | — | — | (226 | ) | 2,160 | |||||||||||||||||
| Other residential | — | — | — | — | — | — | — | — | |||||||||||||||||||
| Commercial real estate | 727 | — | — | — | — | — | (26 | ) | 701 | ||||||||||||||||||
| Commercial business | 1,182 | — | — | — | — | — | (1,042 | ) | 140 | ||||||||||||||||||
| Consumer | 992 | 94 | — | (85 | ) | (17 | ) | (16 | ) | (132 | ) | 836 | |||||||||||||||
| Total | $ | 5,289 | $ | 235 | $ | — | $ | (228 | ) | $ | (17 | ) | $ | (16 | ) | $ | (1,426 | ) | $ | 3,837 | |||||||
At September 30, 2020, the non-performing one- to four-family residential category included 29 loans, one of which was added during the current quarter. The largest relationship in the category totaled
Activity in the potential problem loans category during the quarter ended September 30, 2020, was as follows:
| Beginning Balance, July 1 | Additions to Potential Problem | Removed from Potential Problem | Transfers to Non- Performing | Transfers to Foreclosed Assets and Repossessions | Charge- Offs | Payments | Ending Balance, September 30 | |||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||
| One- to four-family construction | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
| Subdivision construction | 24 | — | — | — | — | — | (2 | ) | 22 | |||||||||||||||||
| Land development | — | — | — | — | — | — | — | — | ||||||||||||||||||
| Commercial construction | — | — | — | — | — | — | — | — | ||||||||||||||||||
| One- to four-family residential | 580 | 143 | — | — | — | — | (10 | ) | 713 | |||||||||||||||||
| Other residential | — | — | — | — | — | — | — | — | ||||||||||||||||||
| Commercial real estate | 2,947 | 559 | — | — | — | — | (1,151 | ) | 2,355 | |||||||||||||||||
| Commercial business | — | — | — | — | — | — | — | — | ||||||||||||||||||
| Consumer | 443 | 194 | — | — | (7 | ) | (32 | ) | (60 | ) | 538 | |||||||||||||||
| Total | $ | 3,994 | $ | 896 | $ | — | $ | — | $ | (7 | ) | $ | (32 | ) | $ | (1,223 | ) | $ | 3,628 | |||||||
At September 30, 2020, the commercial real estate category of potential problem loans included two loans, one of which was added during the current quarter. The largest relationship in this category (added during 2018), which totaled
Activity in foreclosed assets and repossessions during the quarter ended September 30, 2020, excluding
| Beginning Balance, July 1 | Additions | ORE and Repossession Sales | Capitalized Costs | ORE and Repossession Write-Downs | Ending Balance, September 30 | ||||||||||||
| (In thousands) | |||||||||||||||||
| One-to four-family construction | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||
| Subdivision construction | 350 | — | — | — | — | 350 | |||||||||||
| Land development | 1,358 | — | (50 | ) | — | (233 | ) | 1,075 | |||||||||
| Commercial construction | — | — | — | — | — | — | |||||||||||
| One- to four-family residential | 291 | — | (291 | ) | — | — | — | ||||||||||
| Other residential | — | — | — | — | — | — | |||||||||||
| Commercial real estate | — | — | — | — | — | — | |||||||||||
| Commercial business | — | — | — | — | — | — | |||||||||||
| Consumer | 340 | 273 | (417 | ) | — | — | 196 | ||||||||||
| Total | $ | 2,339 | $ | 273 | $ | (758 | ) | $ | — | $ | (233 | ) | $ | 1,621 | |||
At September 30, 2020, the land development category of foreclosed assets included two properties, the largest of which is located in the Branson, Mo. area and had a balance of
BUSINESS INITIATIVES
The Company’s banking center network continues to evolve. In August 2020, remodeling of the downtown office at 1900 Main in Parsons, Kansas, was completed, which included the addition of drive-thru banking lanes. With this completion, the nearby drive-thru facility was consolidated into the downtown office, leaving one location serving the Parsons market.
In the Joplin, Missouri, market, the Company purchased a banking facility in the fourth quarter of 2019 vacated by another financial institution, which included a contractual black-out period ending in April 2021. A third party vendor has been engaged by the Company to redesign this facility as a “bank of the future” prototype to incorporate evolving customer preferences. Variations of this prototype design may be utilized in other select banking centers in the Company’s footprint in the future. The Company expects the new office in Joplin to be completed in the second quarter of 2021, whereupon the nearby leased banking center at 1710 E. 32nd Street will be consolidated into this new office. There are two banking centers currently serving the Joplin market.
The Company’s Board of Directors recently approved a new stock repurchase program, which will succeed the existing repurchase program (authorized in April 2018) following the repurchase of the remaining approximately 75,111 available shares under the existing program. The new stock repurchase program authorizes the repurchase, from time to time, of up to one million additional shares of the Company’s common stock.
The Company will host a conference call on Thursday, October 22, 2020, at 2:00 p.m. Central Time to discuss third quarter 2020 preliminary earnings. Individuals interested in listening to the conference call may dial 1.833.832.5121 and enter the passcode 6855367. The call will be available live or in a recorded version at the Company’s Investor Relations website, http://investors.greatsouthernbank.com.
Headquartered in Springfield, Mo., Great Southern offers a broad range of banking services to customers. The Company operates 94 retail banking centers in Missouri, Iowa, Kansas, Minnesota, Arkansas and Nebraska and commercial lending offices in Atlanta, Chicago, Dallas, Denver, Omaha, Neb., and Tulsa, Okla. The common stock of Great Southern Bancorp, Inc. is listed on the Nasdaq Global Select Market under the symbol "GSBC."
Forward-Looking Statements
When used in this press release and in other documents filed or furnished by Great Southern Bancorp, Inc. (the “Company”) with the SEC, in the Company's press releases or other public or stockholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases “may,” “might,” “could,” “should,” "will likely result," "are expected to," "will continue," "is anticipated," “believe,” "estimate," "project," "intends" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements also include, but are not limited to, statements regarding plans, objectives, expectations or consequences of announced transactions, known trends and statements about future performance, operations, products and services of the Company. The Company’s ability to predict results or the actual effects of future plans or strategies is inherently uncertain, and the Company’s actual results could differ materially from those contained in the forward-looking statements. The novel coronavirus disease, or COVID-19, pandemic is adversely affecting the Company, its customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on the Company’s business, financial position, results of operations, liquidity, and prospects is uncertain. Continued deterioration in general business and economic conditions, including further increases in unemployment rates, or turbulence in domestic or global financial markets could adversely affect the Company’s revenues and the values of its assets and liabilities, reduce the availability of funding, lead to a tightening of credit, and further increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to, COVID-19, could affect the Company in substantial and unpredictable ways.
Other factors that could cause or contribute to such differences include, but are not limited to: (i) expected revenues, cost savings, earnings accretion, synergies and other benefits from the Company's merger and acquisition activities might not be realized within the anticipated time frames or at all, and costs or difficulties relating to integration matters, including but not limited to customer and employee retention, might be greater than expected; (ii) changes in economic conditions, either nationally or in the Company's market areas; (iii) fluctuations in interest rates; (iv) the risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses; (v) the possibility of other-than-temporary impairments of securities held in the Company's securities portfolio; (vi) the Company's ability to access cost-effective funding; (vii) fluctuations in real estate values and both residential and commercial real estate market conditions; (viii) the ability to adapt successfully to technological changes to meet customers' needs and developments in the marketplace; (ix) the possibility that security measures implemented might not be sufficient to mitigate the risk of a cyber-attack or cyber theft, and that such security measures might not protect against systems failures or interruptions; (x) legislative or regulatory changes that adversely affect the Company's business, including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and its implementing regulations, the overdraft protection regulations and customers' responses thereto and the Tax Cut and Jobs Act; (xi) changes in accounting policies and practices or accounting standards, including Accounting Standards Update 2016-13, Credit Losses (Topic 326), “Measurement of Credit Losses on Financial Instruments,” commonly referenced as the Current Expected Credit Loss model, which, upon adoption, is expected to result in an increase in the Company’s allowance for credit losses; (xii) monetary and fiscal policies of the Federal Reserve Board and the U.S. Government and other governmental initiatives affecting the financial services industry; (xiii) results of examinations of the Company and Great Southern Bank by their regulators, including the possibility that the regulators may, among other things, require the Company to limit its business activities, change its business mix, increase its allowance for loan losses, write-down assets or increase its capital levels, or affect its ability to borrow funds or maintain or increase deposits, which could adversely affect its liquidity and earnings; (xiv) costs and effects of litigation, including settlements and judgments; (xv) competition; (xvi) uncertainty regarding the future of LIBOR; and (xvii) natural disasters, war, terrorist activities or civil unrest and their effects on economic and business environments in which the Company operates. The Company wishes to advise readers that the factors listed above and other risks described from time to time in documents filed or furnished by the Company with the SEC could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.
The Company does not undertake-and specifically declines any obligation- to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
The following tables set forth selected consolidated financial information of the Company at the dates and for the periods indicated. Financial data at all dates and for all periods is unaudited. In the opinion of management, all adjustments, which consist only of normal recurring accrual adjustments, necessary for a fair presentation of the results at and for such unaudited dates and periods have been included. The results of operations and other data for the three and nine months ended September 30, 2020 and 2019, and the three months ended June 30, 2020, are not necessarily indicative of the results of operations which may be expected for any future period.
| September 30, | December 31, | ||||
| 2020 | 2019 | ||||
| Selected Financial Condition Data: | (In thousands) | ||||
| Total assets | $ | 5,443,010 | $ | 5,015,072 | |
| Loans receivable, gross | 4,477,750 | 4,201,380 | |||
| Allowance for loan losses | 54,238 | 40,294 | |||
| Other real estate owned, net | 3,007 | 5,525 | |||
| Available-for-sale securities, at fair value | 445,940 | 374,175 | |||
| Deposits | 4,443,757 | 3,960,106 | |||
| Total borrowings | 330,251 | 412,374 | |||
| Total common stockholders’ equity | 624,643 | 603,066 | |||
| Non-performing assets (excluding FDIC-assisted transaction assets) | 5,458 | 8,170 | |||
| Three Months Ended | Nine Months Ended | Three Months Ended | ||||||||||||
| September 30, | September 30, | June 30, | ||||||||||||
| 2020 | 2019 | 2020 | 2019 | 2020 | ||||||||||
| (In thousands) | ||||||||||||||
| Selected Operating Data: | ||||||||||||||
| Interest income | $ | 53,599 | $ | 60,187 | $ | 165,084 | $ | 176,267 | $ | 54,011 | ||||
| Interest expense | 9,431 | 14,263 | 32,523 | 40,818 | 10,556 | |||||||||
| Net interest income | 44,168 | 45,924 | 132,561 | 135,449 | 43,455 | |||||||||
| Provision for loan losses | 4,500 | 1,950 | 14,371 | 5,500 | 6,000 | |||||||||
| Non-interest income | 9,466 | 8,655 | 25,093 | 23,263 | 8,261 | |||||||||
| Non-interest expense | 31,988 | 28,725 | 92,151 | 85,602 | 29,349 | |||||||||
| Provision for income taxes | 3,692 | 4,172 | 9,607 | 11,890 | 3,164 | |||||||||
| Net income and net income available to common shareholders | $ | 13,454 | $ | 19,732 | $ | 41,525 | $ | 55,720 | $ | 13,203 | ||||
| At or For the Three Months Ended | At or For the Nine Months Ended | At or For the Three Months Ended | |||||||||||||||||
| September 30, | September 30, | June 30, | |||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | 2020 | |||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||||||
| Per Common Share: | |||||||||||||||||||
| Net income (fully diluted) | $ | 0.96 | $ | 1.38 | $ | 2.93 | $ | 3.90 | $ | 0.93 | |||||||||
| Book value | $ | 45.00 | $ | 41.98 | $ | 45.00 | $ | 41.98 | $ | 44.50 | |||||||||
| Earnings Performance Ratios: | |||||||||||||||||||
| Annualized return on average assets | 0.98 | % | 1.61 | % | 1.05 | % | 1.54 | % | 0.98 | % | |||||||||
| Annualized return on average common stockholders’ equity | 8.48 | % | 13.46 | % | 8.94 | % | 13.28 | % | 8.45 | % | |||||||||
| Net interest margin | 3.36 | % | 3.95 | % | 3.52 | % | 3.99 | % | 3.39 | % | |||||||||
| Average interest rate spread | 3.12 | % | 3.61 | % | 3.24 | % | 3.66 | % | 3.12 | % | |||||||||
| Efficiency ratio | 59.64 | % | 52.63 | % | 58.45 | % | 53.94 | % | 56.75 | % | |||||||||
| Non-interest expense to average total assets | 2.34 | % | 2.34 | % | 2.33 | % | 2.37 | % | 2.17 | % | |||||||||
| Asset Quality Ratios: | |||||||||||||||||||
| Allowance for loan losses to period-end loans | |||||||||||||||||||
| (excluding covered/previously covered loans) | 1.24 | % | 0.99 | % | 1.24 | % | 0.99 | % | 1.14 | % | |||||||||
| Non-performing assets to period-end assets | 0.10 | % | 0.18 | % | 0.10 | % | 0.18 | % | 0.14 | % | |||||||||
| Non-performing loans to period-end loans | 0.09 | % | 0.11 | % | 0.09 | % | 0.11 | % | 0.12 | % | |||||||||
| Annualized net charge-offs to average loans | 0.01 | % | 0.08 | % | 0.01 | % | 0.11 | % | 0.01 | % | |||||||||
| Great Southern Bancorp, Inc. and Subsidiaries Consolidated Statements of Financial Condition (In thousands, except number of shares) | |||||||||||
| September 30, 2020 | December 31, 2019 | June 30, 2020 | |||||||||
| (In thousands) | |||||||||||
| Assets | |||||||||||
| Cash | $ | 91,098 | $ | 99,299 | $ | 97,208 | |||||
| Interest-bearing deposits in other financial institutions | 247,168 | 120,856 | 376,437 | ||||||||
| Cash and cash equivalents | 338,266 | 220,155 | 473,645 | ||||||||
| Available-for-sale securities | 445,940 | 374,175 | 446,935 | ||||||||
| Mortgage loans held for sale | 23,973 | 9,242 | 20,188 | ||||||||
| Loans receivable (1), net of allowance for loan losses of | |||||||||||
| September 2020; | 4,413,764 | 4,153,982 | 4,399,645 | ||||||||
| Interest receivable | 14,139 | 13,530 | 14,759 | ||||||||
| Prepaid expenses and other assets | 44,671 | 74,984 | 47,688 | ||||||||
| Other real estate owned and repossessions (2), net | 3,007 | 5,525 | 4,435 | ||||||||
| Premises and equipment, net | 140,502 | 141,908 | 140,558 | ||||||||
| Goodwill and other intangible assets | 7,232 | 8,098 | 7,521 | ||||||||
| Federal Home Loan Bank stock and other interest earning assets | 11,036 | 13,473 | 11,276 | ||||||||
| Current and deferred income taxes | 480 | — | — | ||||||||
| Total Assets | $ | 5,443,010 | $ | 5,015,072 | $ | 5,566,650 | |||||
| Liabilities and Stockholders’ Equity | |||||||||||
| Liabilities | |||||||||||
| Deposits | $ | 4,443,757 | $ | 3,960,106 | $ | 4,512,158 | |||||
| Securities sold under reverse repurchase agreements with customers | 155,042 | 84,167 | 191,624 | ||||||||
| Short-term borrowings | 1,218 | 228,157 | 1,279 | ||||||||
| Subordinated debentures issued to capital trust | 25,774 | 25,774 | 25,774 | ||||||||
| Subordinated notes | 148,217 | 74,276 | 148,032 | ||||||||
| Accrued interest payable | 2,859 | 4,250 | 3,464 | ||||||||
| Advances from borrowers for taxes and insurance | 11,841 | 7,484 | 10,729 | ||||||||
| Accounts payable and accrued expenses | 29,659 | 24,904 | 33,520 | ||||||||
| Current and deferred income taxes | — | 2,888 | 13,342 | ||||||||
| Total Liabilities | 4,818,367 | 4,412,006 | 4,939,922 | ||||||||
| Stockholders’ Equity | |||||||||||
| Capital stock | |||||||||||
| Preferred stock, $.01 par value; authorized 1,000,000 shares; issued | |||||||||||
| and outstanding September 2020, December 2019 and June 2020 - 0- shares | — | — | — | ||||||||
| Common stock, $.01 par value; authorized 20,000,000 shares; | |||||||||||
| issued and outstanding September 2020 – 13,880,570 shares; December 2019 – 14,261,052 shares; June 2020 – 14,084,420 shares | 139 | 143 | 141 | ||||||||
| Additional paid-in capital | 34,539 | 33,510 | 34,230 | ||||||||
| Retained earnings | 534,331 | 537,167 | 533,346 | ||||||||
| Accumulated other comprehensive gain | 55,634 | 32,246 | 59,011 | ||||||||
| Total Stockholders’ Equity | 624,643 | 603,066 | 626,728 | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | 5,443,010 | $ | 5,015,072 | $ | 5,566,650 | |||||
(1) At September 30, 2020, December 31, 2019 and June 30, 2020, includes loans, net of discounts, totaling
(2) At September 30, 2020, December 31, 2019 and June 30, 2020, includes foreclosed assets, net of discounts, totaling
| Great Southern Bancorp, Inc. and Subsidiaries Consolidated Statements of Income (In thousands, except per share data) | |||||||||||||||
| Three Months Ended | Nine Months Ended | Three Months Ended | |||||||||||||
| September 30, | September 30, | June 30, | |||||||||||||
| 2020 | 2019 | 2020 | 2019 | 2020 | |||||||||||
| Interest Income | |||||||||||||||
| Loans | $ | 50,476 | $ | 57,226 | $ | 155,453 | $ | 167,552 | $ | 50,848 | |||||
| Investment securities and other | 3,123 | 2,961 | 9,631 | 8,715 | 3,163 | ||||||||||
| 53,599 | 60,187 | 165,084 | 176,267 | 54,011 | |||||||||||
| Interest Expense | |||||||||||||||
| Deposits | 7,094 | 11,792 | 26,712 | 33,844 | 9,041 | ||||||||||
| Short-term borrowings and repurchase agreements | 8 | 1,123 | 667 | 2,904 | 10 | ||||||||||
| Subordinated debentures issued to capital trust | 128 | 253 | 511 | 787 | 167 | ||||||||||
| Subordinated notes | 2,201 | 1,095 | 4,633 | 3,283 | 1,338 | ||||||||||
| 9,431 | 14,263 | 32,523 | 40,818 | 10,556 | |||||||||||
| Net Interest Income | 44,168 | 45,924 | 132,561 | 135,449 | 43,455 | ||||||||||
| Provision for Loan Losses | 4,500 | 1,950 | 14,371 | 5,500 | 6,000 | ||||||||||
| Net Interest Income After Provision for Loan Losses | 39,668 | 43,974 | 118,190 | 129,949 | 37,455 | ||||||||||
| Noninterest Income | |||||||||||||||
| Commissions | 318 | 173 | 760 | 670 | 176 | ||||||||||
| Service charges, debit card and ATM fees | 4,692 | 5,619 | 13,590 | 15,887 | 4,140 | ||||||||||
| Net gains on loan sales | 2,878 | 1,021 | 5,308 | 1,645 | 1,841 | ||||||||||
| Late charges and fees on loans | 352 | 364 | 1,175 | 1,066 | 468 | ||||||||||
| Net realized gains on sales of available-for-sale securities | — | — | 78 | 10 | 78 | ||||||||||
| Gain (loss) on derivative interest rate products | 89 | (101 | ) | (424 | ) | (169 | ) | (106 | ) | ||||||
| Other income | 1,137 | 1,579 | 4,606 | 4,154 | 1,664 | ||||||||||
| 9,466 | 8,655 | 25,093 | 23,263 | 8,261 | |||||||||||
| Noninterest Expense | |||||||||||||||
| Salaries and employee benefits | 18,701 | 15,827 | 53,699 | 46,895 | 16,830 | ||||||||||
| Net occupancy and equipment expense | 7,147 | 6,613 | 20,619 | 19,462 | 6,707 | ||||||||||
| Postage | 748 | 792 | 2,294 | 2,342 | 777 | ||||||||||
| Insurance | 753 | 339 | 1,668 | 1,667 | 534 | ||||||||||
| Advertising | 757 | 794 | 1,814 | 2,162 | 437 | ||||||||||
| Office supplies and printing | 271 | 258 | 806 | 743 | 301 | ||||||||||
| Telephone | 987 | 904 | 2,904 | 2,645 | 1,005 | ||||||||||
| Legal, audit and other professional fees | 582 | 681 | 1,844 | 2,023 | 664 | ||||||||||
| Expense on other real estate and repossessions | 199 | 603 | 946 | 1,642 | 268 | ||||||||||
| Partnership tax credit investment amortization | — | 91 | — | 274 | — | ||||||||||
| Acquired deposit intangible asset amortization | 289 | 289 | 866 | 902 | 289 | ||||||||||
| Other operating expenses | 1,554 | 1,534 | 4,691 | 4,845 | 1,537 | ||||||||||
| 31,988 | 28,725 | 92,151 | 85,602 | 29,349 | |||||||||||
| Income Before Income Taxes | 17,146 | 23,904 | 51,132 | 67,610 | 16,367 | ||||||||||
| Provision for Income Taxes | 3,692 | 4,172 | 9,607 | 11,890 | 3,164 | ||||||||||
| Net Income and Net Income Available to Common Shareholders | $ | 13,454 | $ | 19,732 | $ | 41,525 | $ | 55,720 | $ | 13,203 | |||||
| Earnings Per Common Share | |||||||||||||||
| Basic | $ | 0.96 | $ | 1.39 | $ | 2.94 | $ | 3.93 | $ | 0.94 | |||||
| Diluted | $ | 0.96 | $ | 1.38 | $ | 2.93 | $ | 3.90 | $ | 0.93 | |||||
| Dividends Declared Per Common Share | $ | 0.34 | $ | 0.34 | $ | 2.02 | $ | 1.73 | $ | 0.34 | |||||
Average Balances, Interest Rates and Yields
The following table presents, for the periods indicated, the total dollar amounts of interest income from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. Average balances of loans receivable include the average balances of non-accrual loans for each period. Interest income on loans includes interest received on non-accrual loans on a cash basis. Interest income on loans includes the amortization of net loan fees, which were deferred in accordance with accounting standards. Net fees included in interest income were
| September 30, 2020(1) | Three Months Ended September 30, 2020 | Three Months Ended September 30, 2019 | |||||||||||||||||||
| Average | Yield/ | Average | Yield/ | ||||||||||||||||||
| Yield/Rate | Balance | Interest | Rate | Balance | Interest | Rate | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||
| Loans receivable: | |||||||||||||||||||||
| One- to four-family residential | 3.72 | % | $ | 680,452 | $ | 7,379 | 4.31 | % | $ | 542,892 | $ | 7,153 | 5.23 | % | |||||||
| Other residential | 4.22 | 989,574 | 11,301 | 4.54 | 814,326 | 11,074 | 5.40 | ||||||||||||||
| Commercial real estate | 4.17 | 1,545,358 | 16,850 | 4.34 | 1,471,431 | 19,236 | 5.19 | ||||||||||||||
| Construction | 4.28 | 649,985 | 7,450 | 4.56 | 730,027 | 10,814 | 5.88 | ||||||||||||||
| Commercial business | 3.70 | 356,505 | 3,663 | 4.09 | 253,225 | 3,316 | 5.20 | ||||||||||||||
| Other loans | 5.24 | 270,136 | 3,645 | 5.37 | 369,704 | 5,423 | 5.82 | ||||||||||||||
| Industrial revenue bonds | 4.45 | 15,345 | 188 | 4.87 | 14,770 | 210 | 5.64 | ||||||||||||||
| Total loans receivable | 4.28 | 4,507,355 | 50,476 | 4.46 | 4,196,375 | 57,226 | 5.41 | ||||||||||||||
| Investment securities | 2.99 | 449,383 | 3,060 | 2.71 | 342,277 | 2,534 | 2.94 | ||||||||||||||
| Other interest-earning assets | 0.24 | 270,509 | 63 | 0.09 | 79,344 | 427 | 2.13 | ||||||||||||||
| Total interest-earning assets | 3.96 | 5,227,247 | 53,599 | 4.08 | 4,617,996 | 60,187 | 5.17 | ||||||||||||||
| Non-interest-earning assets: | |||||||||||||||||||||
| Cash and cash equivalents | 92,244 | 93,293 | |||||||||||||||||||
| Other non-earning assets | 147,084 | 202,361 | |||||||||||||||||||
| Total assets | $ | 5,466,575 | $ | 4,913,650 | |||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||
| Interest-bearing demand and savings | 0.29 | $ | 1,962,023 | 1,650 | 0.33 | $ | 1,501,697 | 2,030 | 0.54 | ||||||||||||
| Time deposits | 1.19 | 1,602,981 | 5,444 | 1.35 | 1,728,620 | 9,762 | 2.24 | ||||||||||||||
| Total deposits | 0.67 | 3,565,004 | 7,094 | 0.79 | 3,230,317 | 11,792 | 1.45 | ||||||||||||||
| Short-term borrowings and repurchase agreements | 0.02 | 159,373 | 8 | 0.02 | 289,222 | 1,123 | 1.54 | ||||||||||||||
| Subordinated debentures issued to capital trust | 1.85 | 25,774 | 128 | 1.98 | 25,774 | 253 | 3.90 | ||||||||||||||
| Subordinated notes | 5.85 | 148,113 | 2,201 | 5.91 | 74,119 | 1,095 | 5.86 | ||||||||||||||
| Total interest-bearing liabilities | 0.85 | 3,898,264 | 9,431 | 0.96 | 3,619,432 | 14,263 | 1.56 | ||||||||||||||
| Non-interest-bearing liabilities: | |||||||||||||||||||||
| Demand deposits | 888,568 | 670,158 | |||||||||||||||||||
| Other liabilities | 45,123 | 37,754 | |||||||||||||||||||
| Total liabilities | 4,831,955 | 4,327,344 | |||||||||||||||||||
| Stockholders’ equity | 634,620 | 586,306 | |||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 5,466,575 | $ | 4,913,650 | |||||||||||||||||
| Net interest income: | |||||||||||||||||||||
| Interest rate spread | 3.11 | % | $ | 44,168 | 3.12 | % | $ | 45,924 | 3.61 | % | |||||||||||
| Net interest margin* | 3.36 | % | 3.95 | % | |||||||||||||||||
| Average interest-earning assets to average interest-bearing liabilities | 134.1 | % | 127.6 | % | |||||||||||||||||
______________
*Defined as the Company’s net interest income divided by average total interest-earning assets.
(1) The yield on loans at September 30, 2020, does not include the impact of the adjustments to the accretable yield (income) on loans acquired in the FDIC-assisted transactions. See “Net Interest Income” for a discussion of the effect on results of operations for the three months ended September 30, 2020.
| September 30, 2020(1) | Nine Months Ended September 30, 2020 | Nine Months Ended September 30, 2019 | |||||||||||||||||||
| Average | Yield/ | Average | Yield/ | ||||||||||||||||||
| Yield/Rate | Balance | Interest | Rate | Balance | Interest | Rate | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||
| Loans receivable: | |||||||||||||||||||||
| One- to four-family residential | 3.72 | % | $ | 645,662 | $ | 21,949 | 4.54 | % | $ | 518,758 | $ | 20,097 | 5.18 | % | |||||||
| Other residential | 4.22 | 917,778 | 32,997 | 4.80 | 815,008 | 33,334 | 5.47 | ||||||||||||||
| Commercial real estate | 4.17 | 1,522,825 | 52,820 | 4.63 | 1,424,595 | 55,235 | 5.18 | ||||||||||||||
| Construction | 4.28 | 665,567 | 24,785 | 4.97 | 704,074 | 31,573 | 6.00 | ||||||||||||||
| Commercial business | 3.70 | 318,657 | 10,215 | 4.28 | 259,021 | 10,066 | 5.20 | ||||||||||||||
| Other loans | 5.24 | 293,582 | 12,068 | 5.49 | 403,176 | 16,576 | 5.50 | ||||||||||||||
| Industrial revenue bonds | 4.45 | 15,453 | 619 | 5.35 | 14,970 | 671 | 5.99 | ||||||||||||||
| Total loans receivable | 4.28 | 4,379,524 | 155,453 | 4.74 | 4,139,602 | 167,552 | 5.41 | ||||||||||||||
| Investment securities | 2.99 | 422,696 | 9,226 | 2.92 | 310,227 | 7,201 | 3.10 | ||||||||||||||
| Other interest-earning assets | 0.24 | 227,506 | 405 | 0.24 | 87,193 | 1,514 | 2.32 | ||||||||||||||
| Total interest-earning assets | 3.96 | 5,029,726 | 165,084 | 4.38 | 4,537,022 | 176,267 | 5.19 | ||||||||||||||
| Non-interest-earning assets: | |||||||||||||||||||||
| Cash and cash equivalents | 93,493 | 92,208 | |||||||||||||||||||
| Other non-earning assets | 155,233 | 191,296 | |||||||||||||||||||
| Total assets | $ | 5,278,452 | $ | 4,820,526 | |||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||
| Interest-bearing demand and savings | 0.29 | $ | 1,792,492 | 5,629 | 0.42 | $ | 1,491,255 | 5,723 | 0.51 | ||||||||||||
| Time deposits | 1.19 | 1,701,383 | 21,083 | 1.66 | 1,711,692 | 28,121 | 2.20 | ||||||||||||||
| Total deposits | 0.67 | 3,493,875 | 26,712 | 1.02 | 3,202,947 | 33,844 | 1.41 | ||||||||||||||
| Short-term borrowings and repurchase agreements | 0.02 | 195,459 | 667 | 0.46 | 264,111 | 2,904 | 1.47 | ||||||||||||||
| Subordinated debentures issued to capital trust | 1.85 | 25,774 | 511 | 2.65 | 25,774 | 787 | 4.08 | ||||||||||||||
| Subordinated notes | 5.85 | 104,256 | 4,633 | 5.94 | 74,012 | 3,283 | 5.93 | ||||||||||||||
| Total interest-bearing liabilities | 0.85 | 3,819,364 | 32,523 | 1.14 | 3,566,844 | 40,818 | 1.53 | ||||||||||||||
| Non-interest-bearing liabilities: | |||||||||||||||||||||
| Demand deposits | 799,594 | 661,446 | |||||||||||||||||||
| Other liabilities | 39,983 | 32,620 | |||||||||||||||||||
| Total liabilities | 4,658,941 | 4,260,910 | |||||||||||||||||||
| Stockholders’ equity | 619,511 | 559,616 | |||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 5,278,452 | $ | 4,820,526 | |||||||||||||||||
| Net interest income: | |||||||||||||||||||||
| Interest rate spread | 3.11 | % | $ | 132,561 | 3.24 | % | $ | 135,449 | 3.66 | % | |||||||||||
| Net interest margin* | 3.52 | % | 3.99 | % | |||||||||||||||||
| Average interest-earning assets to average interest-bearing liabilities | 131.7 | % | 127.2 | % | |||||||||||||||||
______________
*Defined as the Company’s net interest income divided by average total interest-earning assets.
(1) The yield on loans at September 30, 2020, does not include the impact of the adjustments to the accretable yield (income) on loans acquired in the FDIC-assisted transactions. See “Net Interest Income” for a discussion of the effect on results of operations for the nine months ended September 30, 2020.
NON-GAAP FINANCIAL MEASURES
This document contains certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States (“GAAP”). These non-GAAP financial measures include core net interest income, core net interest margin and the tangible common equity to tangible assets ratio.
We calculate core net interest income and core net interest margin by subtracting the impact of adjustments regarding changes in expected cash flows related to pools of loans we acquired through FDIC-assisted transactions from reported net interest income and net interest margin. Management believes that core net interest income and core net interest margin are useful in assessing the Company’s core performance and trends, in light of the fluctuations that can occur related to updated estimates of the fair value of the loan pools acquired in the 2009, 2011, 2012 and 2014 FDIC-assisted transactions.
In calculating the ratio of tangible common equity to tangible assets, we subtract period-end intangible assets from common equity and from total assets. Management believes that the presentation of this measure excluding the impact of intangible assets provides useful supplemental information that is helpful in understanding our financial condition and results of operations, as it provides a method to assess management’s success in utilizing our tangible capital as well as our capital strength. Management also believes that providing a measure that excludes balances of intangible assets, which are subjective components of valuation, facilitates the comparison of our performance with the performance of our peers. In addition, management believes that this is a standard financial measure used in the banking industry to evaluate performance.
These non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP financial measures. Because not all companies use the same calculation of non-GAAP measures, this presentation may not be comparable to other similarly titled measures as calculated by other companies.
Non-GAAP Reconciliation: Core Net Interest Income and Core Net Interest Margin
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||
| Reported net interest income/margin | $ | 44,168 | 3.36 | % | $ | 45,924 | 3.95 | % | $ | 132,561 | 3.52 | % | $ | 135,449 | 3.99 | % | ||||||||
| Less: Impact of FDIC-assisted acquired loan accretion adjustments | 1,229 | 0.09 | 2,251 | 0.20 | 4,632 | 0.12 | 5,162 | 0.15 | ||||||||||||||||
| Core net interest income/margin | $ | 42,939 | 3.27 | % | $ | 43,673 | 3.75 | % | $ | 127,929 | 3.40 | % | $ | 130,287 | 3.84 | % | ||||||||
| Three Months Ended | |||||||||||
| June 30, | |||||||||||
| 2020 | 2019 | ||||||||||
| (Dollars in thousands) | |||||||||||
| Reported net interest income/margin | $ | 43,455 | 3.39 | % | $ | 44,921 | 3.97 | % | |||
| Less: Impact of FDIC-assisted acquired loan accretion adjustments | 1,537 | 0.12 | 1,399 | 0.12 | |||||||
| Core net interest income/margin | $ | 41,918 | 3.27 | % | $ | 43,522 | 3.85 | % | |||
Non-GAAP Reconciliation: Ratio of Tangible Common Equity to Tangible Assets
| September 30, | December 31, | ||||||
| 2020 | 2019 | ||||||
| (Dollars in thousands) | |||||||
| Common equity at period end | $ | 624,643 | $ | 603,066 | |||
| Less: Intangible assets at period end | 7,232 | 8,098 | |||||
| Tangible common equity at period end (a) | $ | 617,411 | $ | 594,968 | |||
| Total assets at period end | $ | 5,443,010 | $ | 5,015,072 | |||
| Less: Intangible assets at period end | 7,232 | 8,098 | |||||
| Tangible assets at period end (b) | $ | 5,435,778 | $ | 5,006,974 | |||
| Tangible common equity to tangible assets (a) / (b) | 11.36 | % | 11.88 | % | |||
FAQ
What were the Q3 2020 earnings for Great Southern Bancorp (GSBC)?
How did the total gross loans for GSBC change in Q3 2020?
What is the net interest margin for GSBC in Q3 2020?
What was the status of non-performing assets at GSBC as of September 30, 2020?
How did GSBC's capital position fare at the end of Q3 2020?
