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Great Southern Bancorp, Inc. Reports Preliminary First Quarter Earnings of $0.95 Per Diluted Common Share

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Great Southern Bancorp, Inc. Reports Preliminary First Quarter Earnings of $0.95 Per Diluted Common Share

PR Newswire

SPRINGFIELD, Mo., April 18, 2018 /PRNewswire/ --

Great Southern Bancorp logo. (PRNewsFoto/Great Southern Bancorp, Inc.)

Preliminary Financial Results and Other Matters for the Quarter Ended March 31, 2018:

  • Total Loans:  Total gross loans (including the undisbursed portion of loans), excluding FDIC-assisted acquired loans and mortgage loans held for sale, increased $80.3 million, or 1.8%, from December 31, 2017, to March 31, 2018.  This increase was primarily in construction loans and commercial real estate loans.  The FDIC-acquired loan portfolios had net decreases totaling $12.2 million during the quarter ended March 31, 2018, and consumer auto loans outstanding decreased $34.0 million during the quarter ended March 31, 2018.  Outstanding net loan receivable balances increased $35.4 million, from $3.73 billion at December 31, 2017 to $3.76 billion at March 31, 2018.
  • Asset QualityNon-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 $35.1 million at March 31, 2018, a decrease of $679,000 from $35.8 million at December 31, 2017.  Non-performing assets at March 31, 2018 were $27.4 million (0.62% of total assets), down $472,000 from $27.8 million (0.63% of total assets) at December 31, 2017. 
  • Capital:  The capital position of the Company continues to be strong, significantly exceeding the thresholds established by regulators.  On a preliminary basis, as of March 31, 2018, the Company's Tier 1 Leverage Ratio was 11.4%, Common Equity Tier 1 Capital Ratio was 11.0%, Tier 1 Capital Ratio was 11.5%, and Total Capital Ratio was 14.1%. 
  • Net Interest Income:  Net interest income for the first quarter of 2018 increased $737,000 to $39.4 million compared to $38.7 million for the first quarter of 2017.  Net interest income was $39.3 million for the fourth quarter of 2017.  Net interest margin was 3.93% for the quarter ended March 31, 2018, compared to 3.78% for the first quarter of 2017 and 3.75% for the quarter ended December 31, 2017.  The increase in net interest margin compared to both the prior year first quarter and the quarter ended December 31, 2017 is primarily due to increased yields in most loan categories and higher overall yields on investments and interest-earning deposits at the Federal Reserve Bank, partially offset by an increase in the average interest rate paid on deposits and other borrowings.  The positive impact on net interest margin from the additional yield accretion on acquired loan pools that was recorded during the period was 12, 18 and 7 basis points for the quarters ended March 31, 2018, March 31, 2017, and December 31, 2017, respectively.  For further discussion of the additional yield accretion of the discount on acquired loan pools, see "Net Interest Income."

Great Southern Bancorp, Inc. (NASDAQ:GSBC), the holding company for Great Southern Bank, today reported that preliminary earnings for the three months ended March 31, 2018, were $0.95 per diluted common share ($13.5 million available to common shareholders) compared to $0.81 per diluted common share ($11.5 million available to common shareholders) for the three months ended March 31, 2017. 

For the quarter ended March 31, 2018, annualized return on average common equity was 11.22%, return on average assets was 1.23%, and net interest margin was 3.93%, compared to 10.50%, 1.03% and 3.78%, respectively, for the quarter ended March 31, 2017. 

President and CEO Joseph W. Turner commented, "Our first quarter results were underscored by strong earnings supported by an expanded core margin, continued expense containment and a lower effective tax rate. Core net interest margin for the first quarter 2018 expanded to 3.81%, which was an increase of 22 and 13 basis points from the year ago quarter and most recent linked quarter, respectively. The primary driver of the margin expansion was increased yields in most of our loan categories.  In addition, with the enactment of the federal tax legislation, the Company's effective corporate tax rate significantly decreased. The effective tax rate was 16.4% for the first quarter 2018 as compared to 26.1% during the same period in 2017. 

Commercial real estate and construction loan production was relatively strong during the first quarter, as we are coming off of another year of more than $1 billion in loan originations throughout our franchise. Total gross loans, including the undisbursed portion of loans and excluding FDIC-assisted acquired loans and mortgages held for sale, increased $80.3 million, or 1.8%, from the end of 2017. Credit quality during the quarter was stable with small decreases in non-performing loans and potential problem loans."  

Turner continued, "With our strong earnings and capital levels, we were pleased to increase the quarterly dividend announced in March by $0.04 per common share to $0.28 per common share, representing a payout ratio of approximately 30%. We're proud that we have paid a dividend every quarter to our stockholders since going public in December 1989." 

Selected Financial Data:

(In thousands, except per share data)

Three Months Ended
March 31,


2018

2017

Net interest income

$         39,438

$         38,701

Provision for loan losses

1,950

2,250

Non-interest income

6,935

7,698

Non-interest expense

28,312

28,573

Provision for income taxes

2,645

4,058

Net income and net income available to

   common shareholders

$         13,466

$         11,518




Earnings per diluted common share

$              0.95

$              0.81




NET INTEREST INCOME

Net interest income for the first quarter of 2018 increased $737,000 to $39.4 million compared to $38.7 million for the first quarter of 2017.  Net interest margin was 3.93% in the first quarter of 2018, compared to 3.78% in the same period of 2017, an increase of 15 basis points.  For the three months ended March 31, 2018, the net interest margin increased 18 basis points compared to the net interest margin of 3.75% in the three months ended December 31, 2017.  The increase in the margin from the prior year first quarter was primarily the result of increased yields in most loan categories and higher overall yields on investments and interest-earning deposits at the Federal Reserve Bank, partially offset by an increase in the average interest rate on deposits and other borrowings and a reduction in the additional yield accretion recognized in conjunction with updated estimates of the fair value of the acquired loan pools compared to the prior year period.  The increase in the margin from the quarter ended December 31, 2017 to the quarter ended March 31, 2018 was primarily due to the same factors described above and an increase in the additional yield accretion recognized in conjunction with updated estimates of the fair value of the acquired loan pools.  The average interest rate spread was 3.74% for the three months ended March 31, 2018, compared to 3.63% for the three months ended March 31, 2017 and 3.58% for the three months ended December 31, 2017.

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 2009, 2011, 2012 and 2014 FDIC-assisted transactions. On an on-going basis, the Company estimates the cash flows expected to be collected from the acquired loan pools. 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). In the prior year period, the increases in expected cash flows also reduced the amount of expected reimbursements under the loss sharing agreements with the FDIC (when such agreements were in place), which were recorded as indemnification assets, with such reductions amortized on a comparable basis over the remainder of the terms of the loss sharing agreements or the remaining expected lives of the loan pools, whichever was shorter.  Additional estimated cash flows totaling approximately $1.8 million and $155,000 were recorded in the three months ended March 31, 2018 and 2017, respectively, related to all of these loan pools. 

The impact of adjustments on all portfolios acquired in FDIC-assisted transactions for the reporting periods presented is shown below:


Three Months Ended



March 31, 2018


March 31, 2017



(In thousands, except basis points data)

Impact on net interest income/
net interest margin (in basis points)

$              1,157

   12 bps


$              1,980

   19 bps


Non-interest income



(634)



Net impact to pre-tax income

$              1,157



$              1,346



Because 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 $3.2 million.  Of the remaining adjustments affecting interest income, we expect to recognize $2.0 million of interest income during the remainder of 2018.  Additional adjustments may be recorded in future periods from the FDIC-assisted transactions, as the Company continues to estimate expected cash flows from the acquired loan pools. 

Excluding the impact of the additional yield accretion, net interest margin for the three months ended March 31, 2018, increased 22 basis points when compared to the year-ago period.  The increase in net interest margin in the three month period is primarily due to increased yields in most loan categories and higher overall yields on investments and interest-earning deposits at the Federal Reserve Bank, partially offset by an increase in the average interest rate on deposits.

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 March 31, 2018, non-interest income decreased $763,000 to $6.9 million when compared to the quarter ended March 31, 2017, primarily as a result of the following items:

  • Amortization of income related to business acquisitions:  Because of the termination of the loss sharing agreements in previous years, the net amortization expense related to business acquisitions was $-0- for the quarter ended March 31, 2018, compared to $489,000 for the quarter ended March 31, 2017, which reduced non-interest income by that amount in the previous year.   
  • Late charges and fees on loans:  Late charges and fees on loans decreased $489,000 compared to the prior year quarter.  The decrease was due to fees on loan payoffs totaling $502,000 received on two large commercial loans during the 2017 quarter, with no similar large fees in the current year quarter.   
  • Net gains on loan sales:  Net gains on loan sales decreased $410,000 compared to the prior year quarter.  The decrease was due to a decrease in originations of fixed-rate loans during the 2018 period compared to the 2017 period.  Fixed rate single-family mortgage loans originated are generally subsequently sold in the secondary market. In 2018, the Company has originated more variable-rate single-family mortgage loans, which have been retained in the Company's portfolio.
  • Other income:  Other income decreased $341,000 compared to the prior year quarter.  This decrease was primarily due to final
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