Great Southern Bancorp, Inc. (GSBC) is a diversified financial services company that has established itself as a leading community bank, serving customers across the Midwest and Southeast regions of the United States. With a rich history spanning over seven decades, the company has demonstrated its ability to navigate various economic environments, adapting its strategies to ensure sustainable growth and profitability.

Company Overview

Headquartered in Springfield, Missouri, Great Southern Bancorp operates 89 retail banking centers across six states, as well as seven commercial lending offices in major metropolitan areas. The company's primary subsidiary, Great Southern Bank, offers a comprehensive suite of financial products and services, catering to both individual and business customers. This diverse portfolio has allowed Great Southern Bancorp to maintain a strong market presence and weathered the challenges posed by the ever-evolving financial landscape.

Historical Background

Great Southern Bank was originally founded in 1982 as a savings and loan association. Over the next two decades, the company embarked on an ambitious expansion strategy, growing through a series of strategic acquisitions. These included the purchases of TeamBank, N.A. in Paola, Kansas in 2009, Vantus Bank in Sioux City, Iowa in 2009, Sun Security Bank in Ellington, Missouri in 2011, Inter Savings Bank, FSB in Maple Grove, Minnesota in 2012, and Valley Bank in Moline, Illinois in 2014. These acquisitions significantly expanded Great Southern's branch network and customer base across the Midwest region.

During the 2007-2008 financial crisis, Great Southern Bancorp faced challenges similar to many other banks. However, the company's diversified loan portfolio and prudent risk management practices allowed it to navigate the crisis successfully. Emerging from this tumultuous period in a strong financial position, Great Southern continued to pursue both organic growth and strategic acquisitions.

Recent Developments

In 2020, Great Southern took a significant step to bolster its capital position by issuing $75 million of subordinated notes. This additional capital has provided support for the bank's growth and expansion initiatives. Recognizing the importance of staying competitive in the rapidly evolving banking landscape, the company has also made substantial investments in technology and digital capabilities in recent years to enhance the customer experience.

Financials

Great Southern Bancorp's financial performance has been consistent, with the company reporting net income of $67.8 million in 2023, a testament to its prudent risk management and disciplined approach to operations. The company's diversified loan portfolio, which includes commercial real estate, construction, and residential mortgages, has helped it navigate the changing economic landscape, with nonperforming assets accounting for just 0.20% of total assets as of the most recent quarter.

For the most recent fiscal year (2023), Great Southern Bancorp reported revenue of $223.29 million, net income of $67.80 million, operating cash flow of $80.70 million, and free cash flow of $73.40 million. In the most recent quarter (Q3 2024), the company achieved revenue of $54.97 million, net income of $16.49 million, operating cash flow of $16.63 million, and free cash flow of $18.95 million. Compared to the same quarter in the previous year, revenue increased by 10.8%, net income grew by 3.8%, operating cash flow decreased by 7.6%, and free cash flow increased by 16.1%. The increase in revenue and net income was primarily driven by higher interest rates and loan yields, while the decrease in operating cash flow was due to changes in working capital.

Great Southern Bancorp's loan portfolio is diverse and includes several key product segments. As of September 30, 2024, one- to four-family residential loans totaled $838.41 million, comprising 17.6% of the total loan portfolio with an average yield of 4.07%. Other residential multi-family loans amounted to $1.57 billion, representing 32.9% of total loans with an average yield of 7.32%. Commercial real estate loans stood at $1.55 billion, or 32.4% of total loans, with an average yield of 6.20%. Construction loans totaled $644.62 million, or 13.5% of total loans, with an average yield of 7.33%. Commercial business loans amounted to $230.96 million, or 4.8% of the total loan portfolio, with an average yield of 6.36%. Other loans, including industrial revenue bonds, consumer auto loans, consumer other loans, and home equity lines of credit, totaled $169.17 million, or 3.6% of total loans, with an average yield of 6.23%.

The company's net interest income increased 2.6% to $48.00 million in the third quarter of 2024 compared to the same period in 2023. This growth was driven by a 52 basis point increase in the average yield on loans, from 5.92% in Q3 2023 to 6.44% in Q3 2024. However, the net interest margin declined slightly from 3.43% in Q3 2023 to 3.42% in Q3 2024, as the 50 basis point increase in the weighted average rate paid on interest-bearing liabilities outpaced the 45 basis point increase in the weighted average yield on interest-earning assets.

Liquidity and Capital Position

The company's balance sheet remains strong, with a tangible common equity ratio of 10% as of September 30, 2024, up from 9.7% at the end of 2023. This solid capital position has enabled Great Southern Bancorp to maintain a flexible approach to capital allocation, allowing it to reinvest in its operations, pursue strategic initiatives, and reward shareholders through share repurchases and dividend payments.

As of September 30, 2024, Great Southern Bancorp reported a debt-to-equity ratio of 0.18 and held $208.37 million in cash. The company has access to substantial credit lines, including a $1.12 billion line from the Federal Home Loan Bank and a $305 million line from the Federal Reserve Bank. The current ratio and quick ratio both stand at 1.21, indicating strong short-term liquidity.

Resilience and Adaptability

In the face of recent economic uncertainties, Great Southern Bancorp has demonstrated its resilience. The company has proactively managed its interest rate risk, leveraging a mix of adjustable-rate and fixed-rate loans, as well as strategic funding sources, to maintain a relatively stable net interest margin. Additionally, the company's ongoing investments in technology and digital capabilities have positioned it to meet the evolving needs of its customer base, enhancing its competitiveness in the rapidly changing banking industry.

Great Southern Bancorp's credit quality has improved, with nonperforming assets decreasing to $7.7 million or 0.13% of total assets, down from 0.34% at June 30, 2024. The company's loan portfolio grew by $121.7 million for the year, with a $70 million increase in the quarter, primarily driven by growth in the other residential loan segment.

Future Outlook

Looking ahead, Great Southern Bancorp remains cautiously optimistic about the future. The company's management team has a proven track record of navigating challenging environments, and they are well-prepared to address the potential headwinds posed by factors such as rising interest rates, inflationary pressures, and economic volatility. With a strong balance sheet, disciplined risk management practices, and a focus on serving its local communities, Great Southern Bancorp is poised to continue its legacy of delivering value to its shareholders.

The company's loan pipeline of commitments and unfunded lines remained solid at $1.04 billion at the end of September 2024, positioning them to continue supporting customers and pursuing lending opportunities. While Great Southern Bancorp expects macroeconomic factors like interest rates and deposit costs to continue presenting challenges, they are well-prepared to navigate the current environment. The company also anticipates that the full benefits of the recent Federal Reserve rate cut will take time to materialize on their funding costs.

In conclusion, Great Southern Bancorp (GSBC) is a community bank with a rich history and a demonstrated ability to adapt to changing market conditions. Its diversified business model, prudent risk management, and commitment to innovation have positioned the company as a reliable financial partner in the Midwest and Southeast regions. As the company navigates the evolving landscape, investors can take comfort in its track record of consistent performance and its strategic focus on long-term growth and shareholder value creation.