Great Southern Bancorp, Inc. Q2 FY2025 earnings call

• Core banking fundamentals remain strong despite a dynamic environment. Net income improvement driven by higher net interest income and tax credit partnership income.
• Net interest margin improved due to healthy loan yields and prudent funding cost management.
• Loan portfolio is conservative with gross loans down due to payoffs. Deposits managed with focus on costs.
• Nonperforming assets low, and noninterest expenses reduced with disciplined expense management.

Net income for the second quarter was $19.8 million ($1.72 per common share), up from $17 million ($1.45) in the same quarter last year. Net interest income totaled $51 million, an improvement of about 8.9% compared to $46.8 million in the year-ago quarter, with an annualized net interest margin of 3.68%. Gross loans were $4.6 billion, a decline of $157 million from the end of the previous year. The largest loan categories were multifamily ($1.58 billion) and commercial real estate ($1.49 billion). Total deposits decreased $73.9 million to $4.68 billion. Nonperforming assets were $8.1 million, 0.14% of total assets. Noninterest expenses were $35 million, down $1.4 million from the year-ago quarter, with an efficiency ratio of just over 59%.

• Long-term optimism but near-term loan growth cautious due to competitive market.
• Expect some technology expenses in the back half, but generally expenses expected to be consistent.
• Hopeful to redeploy funds from maturing loans into higher-yielding assets, but swap termination in Q4 will impact interest income.

• Competitive deposit pricing environment.
• Uncertainty in loan payoffs and rental income from OREO.
• Potential adjustments in expenses due to minimum wage requirements in some states.

Q: Just on the loan growth outlook here in the back half of the year. Do you have more optimism than 90 days ago?

A: I am optimistic over the long term, but right now the loan market is competitive with fewer opportunities, so no major near-term change expected.

Q: How about from like a payoff perspective? Any line of sight on expected payoffs?

A: Payoffs are lumpy and hard to predict; we don't have much visibility on specific scheduled payoffs.

Q: On the expense front, anything to disrupt the trend?

A: Generally expenses expected to be consistent, but some slight adjustments possible due to minimum wage requirements and technology expenses.

Q: Your comment on expenses, the rental income this quarter was up, but it's a function of the larger OREO balance. Should we expect that level in the third and fourth quarter?

A: Depends on lease expirations and rent roll; if the property stays, likely similar rental income unless there's a lease roll off.