GSBC - Earnings call transcript Q2 2019 | Great Southern Bancorp, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Great Southern Bancorp Inc.

Second Quarter 2019 Earnings Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, today’s program may be recorded.

now Polonus introduce Investor would today’s host I Kelly program, Relations. now like your to for And Please go ahead.

Kelly Polonus

purpose is Good afternoon for Great The for Polonus, the Investor this and welcome, XX, this Southern is quarter ending Bancorp XXXX. company’s discuss the to Kelly June Relations of results call Inc.

financial remind Before could about statements make to during performance. course you and we begin I of the forward-looking future that need this we events call

as of should a statements, only results You could place which These to made. the on undue number results or materially differ that to date forward-looking any the statements not reliance factors cause subject are actual projected. anticipated from they speak are of

XXXX Chief these Joe list some of earnings please Financial a President quarter of factors, Turner, Copeland, and me. Officer, CEO, with our are here disclosure Rex and see For release. in second our

to the turn call now I’ll Turner. over Joe

Joe Turner

Okay. call. Thanks, you everybody. our thank afternoon, joining second I to want And also Kelly. Good quarter earnings for

provide about more detail As over who into go typical, turn the will to the Rex preliminary income call then and I’ll about statement. the is performance, Copeland, Company’s some remarks

excited are about up. the the wound We quarter way

a the you’ve that share earnings did If to seen loan per you’ve We and earn the release, $X.XX saw million. quarter. chance we $XX.X good had during review growth

during We quarter, which efficiency. our little provide We margin around. operational net further interest the on bit Rex improved did experience of a color will

loan very for highlight, that efficiency feel was our our return equity to X.XX%, on positive We margin That’s about I assets loans. was XX.XX%, metrics our on want XX.X%. ratio Some X.XX%, operating our return portfolio. was was our common and

far. in XXXX had We’ve growth so good

I end of funded loans from think, are so up growth last far. loan quarter, guess up $XX year think of are so in million balances each I our nice I – $XXX million the

million end from gross are of Our the XXXX. balances $XX loan

pipeline continues the same levels. about committed Our at to be

a it anecdotally, say to on bit. me strong seems to are things pipeline. have just just we I the a continue loan maybe like So starting will side to tighten

our pipeline significant. than seems I was more out maybe and becoming probably there even As still flow is deals slightly deal there slightly competition fewer is so but there strong, the be said, to less

Asset quality be strong. to continues

off first that We’re quality non-performing real our the lumpy can into other historically levels. $X.X quarter, you that to We’ve told relationship week coming second low has July, and kind asset of add fact transitioned of did during and before the be we relationship, in million a estate. during

had time X.XX%. and we’ve our it non-performing we’ve after But non-performing, total for our relatively still to ‘XX relationship low adding to at watching this that a books since our is assets been was on some credit but assets even this

capital position continues strong. Our to be

total or of assets. Our $XXX stockholders’ or equity is common capital million XX.X% total total

Our from book assets $XX.XX from at tangible last of to end equity of quarter. XX.X%. the value is $XX.XX strong increased ratio common The to tangible very

plus the hedge. We based portfolio on to do cash GAAP from on of mark-to-market equity, point it’s is out gain it’s equity, but unrealized our our available-for-sale flow gains derived $XX million on that it – want securities our

about So our to capital, out. as may or think that net you may part not want you

Rex concludes it quarter of declare Copeland quarterly after up share. turn a pleased per and presentation. over $X.XX remarks, to Rex second during completes were then regular for to That I’ll open his questions We the dividend prepared it my we’ll

Rex Copeland

you, thank right, Joe. All

of year second the X.XX% and in bit As The quarter the X.XX% margin second see Joe of stated quarter interest XXXX. little a year in earlier, compression first we compared in to was quarter in this of net our X.XX% did the margin. of this

mainly deposits and on XXXX was the deposits caused average LIBOR borrowings, but quarter. really margin the primarily just due rates loans yields bit rates our bit second So just to coming by first higher down it’s quarter, interest on compared a and in in slightly on lower to on the our compression little

The quarter. positive additional impact on our the continued yield in margin from net interest the accretion

second the this of quarters, of last and year, compare then each quarter accretion of first basis XX, quarter of and quarter you margin. year the added net our XX points second this If to respectively, XX those year, interest

year-ago the of quarter though of quarter net $XX.X Our year were most million. up of to last the million second net a income from then XXXX income about year. $XXX,XXX income recent to quarter. was in up dollars first increased interest the interest for second the from quarter of this quarter interest Net $X.X total And our and compared

our So income as interest in margin net a net we interest lower our in continue growth a but or to interest growth slightly percentage. dollars, net assets, see income

One mitigate we us management record strategy of that transaction kind with thing falling second have. loan interest rate to of ongoing that the year might rates in the late to help income did interest we any $XXX,XXX did to our related as we part quarter of interest rate swap issues note, last

So rate again, and is about swap, that, are then under on fixed rate paid of a which past month was we X.X%. or so. it live the this recently the rate terms pay we most reset The X.XX% of when a floating

do we are of. margin we that receiving – spread have benefit are there there a So the we that

negative what be then with the Like XXst on model various July in we interested us. rate do interest that Fed indicated and very do for rates their on scenarios and will shifts. parallel of up else past call, the in everybody and that down non-parallel rates believe filings decision. the We we’re modestly will We’ve falling

three-month, do re-priced are index next the primarily to of about within some tied that but $X.X XX based LIBOR, one-month they’ll We days. LIBOR loans on have billion almost

rate LIBOR. a do we have here So amount of is variable portfolio fair our tied to

funding some liability when the what side be to reduce as our the side We manage to balance in will market sheet. and the on do can rates cost work cost if of and we the able to of hard and fall

second related loans sales to ago and originated in gains we which fixed variable year fixed Non-interest portfolio. income in quarter rate left reductions we to for more market the to service sell a that our net in $XXX,XXX mortgages, we primarily and commissions some ATM the rate where fees, compared quarter decreased secondary charge, on generally the by then retain loan

with offset effective an in some card beginning decreases to did of became We related the income there at which increase new XXXX. debit contracts,

from So we income additional did derive some that.

operational Non-interest expenses, still and I tracking our containment think on well we’re expense efficiency.

of XX.X%. repossessions. $X.X As Non-interest related the earlier comparison owned second were our down last to driver about other was was lower efficiency and of million Joe at expenses mentioned, big estate expenses year. this real A from quarter ratio

of well we to decrease in foreclosed write-downs period was prior-year related on the by was little certain increase in of loan $XXX,XXX majority the year-ago a the some that as our benefits Atlanta, to quarter as Denver, had the offset production about additional other staffing salaries and areas. in decrease related bit increased compared and And areas offices just assets. in new The the as to various

remake work City, area. that that portion into other sort increased hotels we it of Center other Sioux other they’re that for doing cover that and The related businesses and a the to and Expo also, period XX-year that of that our in an commitment will made area majority expenses of some with then the $XXX,XXX. are for their downtown expand mentioned and going about we in market And operating release $XXX,XXX Iowa to earnings pledge

was efficiency our year, XX.X%. about mentioned the which I compares very quarter Again, the second was That of to ratio favorably ratio last XX.X%.

efficiency. expenses. we our those in continue to increase non-interest a revenues Along lines without So our of commensurate increase

late in little briefly office, just we consolidate been either also have our center about recently did got Fayetteville mention business fairly Rogers the a in things a talk third I’ll the quarter small, we September. Iowa our initiatives, in couple or Ankeny into close, locations couple Arkansas we’re Iowa earnings of our Arkansas release, but our banking that Ames, announced will that we to of and into will center that office banking has consolidated plans be –

of So, remarks. our concludes all think I prepared that

this open time, up at it can for we questions. So

Operator

comes O’Neill. Liesch Our [Operator of from line Instructions] first from Sandler the Andrew question

Your question please.

Andrew Liesch

Hi.

interest focus to the about looks cost first the and quarter. and in CDs deposit they I points or up on of what, know guess, here, X Internet added funding like X just I I like CDARs bearing you So basis this some quarter, wanted maybe cost

maybe that just up lowered the right Have now? the offered full-quarter cost, effect in do guys is you of pushing right effect you can So now of drop funding LIBOR? rates of but your mitigate what the kind that

Rex Copeland

lowered negotiating on We of we the CDs. majority is it working on have that. part also I’d rates haven’t of of the say, probably, things on some either some

ago. at four We’re levels negotiating three, two, we were maybe than months lower

of mindful what competition We’re doing as is well.

our LIBOR, in at Loan bit. There tracking well, Bank borrowings all from the pretty Loan from this of overnight-type Home change borrowings most our with rates advance Our more the are borrowings of Home down much of time. a – along sort our are Bank

we’re manage it, now. So a to started or month two mean, seems think through the trying kind this transition process about ago. of like, really to I maybe you if It rates right

the part this that quarter deposits, filter yet, overall like quarter saw cost fourth we but slowing of think that even first I I second necessarily I’d as growth the the I that quarter, as are think through basis, of we the month-to-month year. change in in don’t all on it the is of and cost like to and compared of will say seeing far

Andrew Liesch

you make a couple in can deposits the quarter, comments just decline what then, of And in that? drove Okay. on the

Rex Copeland

seasonality, a lot CDs. has little some it I but was bit of retail mean it A of

and that. there. just down And non-time of say and non-time non-interest-bearing to [indiscernible] of competition deposits fluctuating continue of our have in deposits, We a deposits, specials of some CDs interest-bearing like people coming then some our I’d retail are then, things markets fluctuation non-interest-bearing with in some in some, running and lot but it’s

Andrew Liesch

control a Okay, or be a expense maybe a take have little the on just you the run that’s just million. the million good last a $XX.X helpful. it $XX could and the better years. back then, I consolidation? out good you, over If than And so guys job bit that to OREO bit done several costs, little Is rate branch with under that

Rex Copeland

The I Ames specifically at I’m going non-interest is is our I can’t branch expense mean, probably range. consolidation difference. the a make you huge to not $XX,XXX guessing month Ames, in a on to $XX,XXX but tell

mean, I right make the So I difference. on now. huge think that’s a to all right things going doing expense we’re control not

should trend think of balances decline. to I going the our So see continues do expense down, ORE with we ORE generally

our our a – little of probably automobile is better. what of I total portfolio quality Same is – getting shrinking remains quality thing I the of mean, the I think obviously and mean, our there, the automobile portfolio

reduce expenses. be So should whole I trends do in lot lines over think don’t can really somewhat time, that the a we I is down. there to more think

going Our be is Company better and expenses, so of sort we grow the will focus can maintain to that to gain where leverage.

Andrew Liesch

Okay. Thank Those questions. are my all you.

Operator

you. Thank

from next comes of from Michael Our question KBW. Perito the line

Your question please.

Michael Perito

questions. side Thanks Andrew’s I maybe my want things question. for for to up a of and the on follow expense second stick here taking

peers more expense heavily limited We’re invest growth seeing, and more and of in at plan whatnot, a years as almost technology least job seeing to guys that they and done of now. kind for I’m have keeping for obviously, growth three more leadership fairly start you nice your of and

bank? much kind a that And there’s to quite of have broader you that make expense account there to the budget do we some and is kind things making investments where limited Or still investments the that, there taken us doesn’t to of into curious basis? offset you’re really where be you XXXX yet, as it point need I I’m continue just think is there to out are on to grow growth a and mean, can into about sense not any

Joe Turner

Well, to have sure your Mike, technological to one I you of in good are that’s created with mean, that need offering, to the in bank your of have you all yes, offerings of to the attractive expense equal premise and customers. invest and expenses. people, then, that kind And you those make I attractive technological order that not that agree expense is question, need

surveyed are to we online are those. process though been but And our our and financial and platform actually banking improving and And we’re customers think our and mobile guessing, think just we like we honestly, in investing not customers surveyed our have too. I our improving customers platform to of upgrading other institution against I seemed going offerings, customers be we’ve do, the our we

Michael Perito

you doing same that the do So I mean, think million had next you the still little trends, think realistically there the this as expense of rate other mean, to what the in annually you’re out, industry I investment given do everything going year. now. I of today you mean, that Or an you offset guys run range almost $XXX on with Company? think room pasting kind three have a is year number for years plus corrections you’re within the higher? side maybe elsewhere on basically

Joe Turner

we I mean, offerings. technological to the I had on would think significantly our higher extent significant – costs

We’re to run that those But that’s not increase in offset rate. going to know, be Company. dramatically I Mike, don’t our else somewhere able going to the

reasons. mean, line expense think new think, I our reasonable to level probably expense each I we’ve year the every of to downward. technology because is, probably do has reason trended able Part it go non-interest expect that and for up non-interest of other our to ORE been and generally hold I

that’s helped to hold And us overall level. the

they I at our costs a look you think are where were from other things, So I employee ago. year think,

I our million probably would of to hold them your think do expenses will our means [indiscernible] what to investment think means I for up what it that if because So, of run because your were trend in at $XXX of growth. yes, I that think technology, we for I try mean, rate and kind people

Michael Perito

that Got to wanted just Thanks I color. secondly, Joe. ask on margin. helpful, it. Very the for And

but your As X.XX% quarters the X.XX% a first think of think were in core bit, loan go of doing loans and side. the I you’re some you mix I in excluding today, with few the some second the the little mix the I of like have changed mid-to-low quarter, the you low I trending, where in then the about has yielding if in ‘XX, quarter, purchase to back the accounting ‘XX, portfolio construction range, bigger on is kind higher obviously X.XX% first you’re mean, hedging stuff margin

up you core think get the benefiting or start your that last start the we cuts trend taking trend and outlook year, assuming to NIM NIM from next Fed the are funds? as after the move how quarters, is the about As few thinking over things accurate two one economic about moving the consensus into way account you’ve the where least could done, here rates other of but reasonably we in to at that some

Rex Copeland

right. All

core like XXXX and trended we right, you’re the go back here, looking schedule if into said, net we basis in So high of you and ‘XX on at X.XX%. I’m looking – were, our X.XX%, at Mike, margin you X.XX% a in and X.XX%, interest the down

think rates started kind quarters margins you you just and kind been earnings can quarter look yields for of I up think And average around this XXXX balanced again if see spreads We X.XX% to table here X.XX%. back and couple our bit have what to our in a we like. X.XX% year-to-date and and our at a and in drop there back of release, our what the at of and have peaked and little out I time for was

and again spread is time, X.XX%. was XX, June our this in at And a point

was the for our X.XX%. spread quarter, average So

but bit there include the little the that accretion that margin through lower, difference get does kind to and X.XX% in a to – going not of it’s is So income.

accretion whatever income excluding that’s we look. would So

Joe Turner

And the right? X.XX% does,

Rex Copeland

Right, That’s the does. right. X.XX%

roughly XX So for in basis so there that. points or

Joe Turner

and to time average average So the spreads in your the equal to by the where have liabilities to to your during think might spread rate you be. interest interest-earning when spread I that, I assets on what a average that the you for and your do which point margin, quarter earning other get take is, in from what to earning during your the normalize second multiply liability exceed our – our extent is quarter get words, saying Rex to roughly was think to is you

think, agree you in I what I that time what put margin is with you it’s you to calculate mean, – – think, the quarter. to that’s the you I that’s just Rex, rate best I that’s your think given think the point our I use probably as the have third going best together we’ve want during tool to and be guys is,

interest you is think think hurt dramatic, probably expected decrease to it’s don’t us Now, do I are be modestly and I hurtful us. that anybody told we that to but going I be probably, certainly not could we’ve what think mean helpful rate slightly. to

Michael Perito

Great.

Rex Copeland

asset down. of seen moving already LIBOR some pain We’ve the with on side the

So to going see lower some as anticipated down not. I few to like on said continue we yield what future you a will we’ve say kind of some or before far seen perhaps overall probably come so if more, – on depending the magnitude little some cuts cuts points LIBORs of down our basis cuts loan a they the portfolio our yield Fed but the go of and by as overall bit,

Michael Perito

Helpful. one, it. looked or rate the or few a be in that Got it’s the a little we that and to where quarters been quarter something something of the on tax lower. expense turn over last going going is of that kind thinking last the about? then And of we’ll Was just else nature or the pledging should forward result one-time there

Rex Copeland

No, in there generally impacted kind in this a particular able those. wasn’t flowing that in tax off credit income little the it the and activities there really investments to is utilize as being say, anything just I’d bit normal through it as credits is interest of step we tax-exempt by have writing quarter. – was that far

quarters, the our probably mean, rate ballpark look would I you to full I I said we like what if look the I mean, year the of the as of So get the at going that’s six-month next for rates in think what – we couple think. through rate,

Michael Perito

my you it. you appreciate guys. taking Great. questions. thank all I Got

Joe Turner

Okay. Thanks, Mike.

Operator

you. Thank

line Jenny in Our Rodis the Montgomery. of John next comes from question

question Your please.

John Rodis

Hey, Joe.

you’re see of that little a clarify maybe that trends, to the maybe talking were guess certain or bit? early when Could said is you So you demand. Is some you loan that across starting slowing in about I franchise signs just markets?

Joe Turner

I growth we would guess published for of I next that’s as say little a the anyway. is less just seems like I six hard flow franchise. share the feel like which just pretty And is it’s part I maybe It there pipeline, facts that a probably the press strong. over loan more – and bit so maybe little anecdotal. of and still feel bit deal pretty would higher across mean, months it’s the But our the what release are competition lion’s and every deal. the

That’s general my kind of feeling.

Great Now, the for production at got just got basically loan starting zero are and experienced just other side, on that Southern, we’ve offices we’ve there. lenders starting two and are they’re

So us will able, loans. grow grow help that able able and we’re as if to certainly we’re we’re offices those our

instance, would its which I say infancy. For still Chicago, in

I years of think something in and at million or it’s loans. are couple old a $XXX they

less that and that’s decreasing So paid that over that’s of Atlanta – going more our were a eventually that’s $X off. able down, couple portfolio have right quarter going million is or next $XX billion loan of stop because and loans and slow down the like obviously been of perform consumer those altogether, because to will loans month Denver growth years, to Also, going loans to the our there.

more a formed XX, XX positive perception things mean, it’s So statement the make I days. we’ve was to some about over just that’s my wanting been probably, perception general I got last it’s and too. a just

the just whatever, – summer me deal So slow now, result do it might feel is mean, to a bit I market to right is you or be if But vacation of I starting I it just asking being the seasonal. on starting could were like flow customers – slightly. new be a

John Rodis

That’s helpful. that’s for And quick great. mean, a question you securities just maybe I Joe, on then, the Rex portfolio. No,

the little up saw you securities a So portfolio bit. go

more of higher? guess, deposits I the especially, roughly plans if here, what plan go grow assets do forward guess sort from is you X% I don’t to much much Just trend of further going today, and down at and

Rex Copeland

we’ve securities, provided grow kind rate, ago help intermediate putting been trying types – decent mean, securities just in multifamily, to but in agency put type rate are yield. also bit of with more today. type, months term, that to I we’ve of we’ve little a a and mitigate we our of standpoint down it than the scenarios, a lot decent from fixed watch of several etc., was Yes, what try there of is there, The sort that yield just us been to the

presents far So bring as a do can, we’re in more rates decent if securities. market going to try go little securities, to to few and we – those as on yields But, year. as timing the pretty grown in so to but mean, going growth continue to last there, decently that dramatic. see I probably we’ll I think the don’t it’s think be over portfolio I that some we anything

in the same next the So think pace XX or I in be been that don’t growth will so. months the at six it’s last the months

John Rodis

And it probably assets, would I of XX% stays below assume?

Rex Copeland

Obviously.

John Rodis

Okay. Thanks guys.

Operator

you. Thank

of from comes question the from Stan next Our Westhoff Company. line Walthausen &

Your please. question

Stan Westhoff

guess. Hey, non-performing afternoon. on assets sheet, this get How I then just to over property guess? follow subsequent how you I big it and is profit do take you I little up just might long the did now, you guess bit marketable Good balance loan that got you to think to it I a wanted OREO and

Joe Turner

is and would Missouri of are I the is activity hard activity. It’s there we in one four pieces them do assets. I think think actually say Central Well, I level each to and property investment obviously there the indication area in mean, and exactly. is satisfy or all really three mean, it’s activity the our in certainly of that on Iowa at and

we going about feel now, where feel to we good not really are pretty good right are until they we’re actually So but sold. think I

Stan Westhoff

What afraid to actually years been it’s time real but we on somewhat pan the here mean, to for exactly didn’t I up it planned? got be have you looking your level [indiscernible] way hold happened developed your and entity, were over and the last but non-performing it and couple here bought it with back big got maybe estate time, property guys the normal out of actually strides down guess, Yes, a a just land, OREOs loans. to just not higher I this in than

Joe Turner

– release relationship the continued person I It try mean, it XX to go development a the on eventually the principal those just they and semi-annual was sell well and point and was that old. reached and resolution the insisting we pointed reductions there. market in It in the was either property to out customer didn’t to the we’ve Yes. didn’t earnings make just got as years been and reductions to interim the the maybe where we want

Operator

Thank you. This today’s I Turner does like program Joe to any conclude remarks. of the question-and-answer would back for session further the hand program. to

Joe Turner

No, further everybody appreciate I being Thank don’t next earnings to look and on being the have We any call. you. remarks. quarter’s here or forward call

Kelly Polonus

you. Thank

Operator

and ladies gentlemen program. participation This conference. you your in include does the today’s Thank for

may now day. You Good disconnect.

Great Southern Bancorp (GSBC) 18 Jul 192019 Q2 Earnings call transcript