Great Southern Bancorp Reports Decline in Fourth Quarter Earnings
Published: Jan 24, 2024 02:55PM ET
Great Southern Bancorp (NASDAQ: GSBC) reported a decline in its fourth-quarter earnings for 2023, citing a challenging operating environment for the banking sector. The company’s earnings per share dropped to $1.11, totaling $13.1 million, a decrease from $1.84 or $22.6 million in the same quarter of the previous year. Despite the downturn, Great Southern Bancorp’s capital position strengthened, with stockholders’ equity seeing an approximate $40 million increase. The earnings call highlighted several factors impacting the results, including increased deposit costs, competition for deposits, a decline in loan origination volume, lower noninterest income, and rising expenses.
Key Takeaways
- Earnings per share for Q4 2023 stood at $1.11, down from $1.84 in Q4 2022.
- Total deposits remained strong at over $4.7 billion despite a decrease of $130 million in the quarter.
- Net interest margin declined to 3.30%, affected by changing deposit and funding mixes and climbing interest rates.
- Noninterest income fell by $1.1 million, mainly due to reduced point of sale and ATM fees.
- Noninterest expenses increased by $1.9 million, reaching $36.3 million.
- The company’s loan portfolio and credit quality metrics remained robust.
Company Outlook
- Replacement rates for January 2023 are projected to be between 4% to 4.5%.
- The effective tax rate for 2024 is anticipated to range from 20.5% to 21.5%.
- Loan growth outlook is uncertain, influenced by competitive factors and customer project interest.
- Discussions are ongoing with a third-party vendor regarding systems conversion, with related expenses expected to persist.
Bearish Highlights
- Increased competition and customer preferences have led to lower loan origination volumes.
- Noninterest income has suffered from lower service charges, specifically point of sale and ATM fees.
- The efficiency ratio worsened, standing at 70.17% in Q4 2023 compared to 55.13% in Q4 2022.
Bullish Highlights
- Stockholders’ equity increased by approximately $40 million, indicating a stronger capital position.
- The company maintains substantial liquidity with funding sources of $2.1 billion.
- Credit quality remains solid, with favorable metrics and a manageable increase in potential problem loans in the residential sector.
Misses
- Total deposits decreased by $130 million in the three months leading up to December 31, 2023.
- Noninterest expenses rose, driven by higher salaries, employee benefits, insurance, and occupancy costs.
Q&A Highlights
- Average yield on new loan production in the last quarter was not specified, but rates are expected to stabilize.
- One-time expenses, such as bonuses and higher fraud losses, were highlighted, with the expectation that such costs may not recur in subsequent quarters.
- The decrease in fee income was attributed to transitional issues and decreased usage.
- The company is cautious about predicting loan growth due to market competition and customer interest.
Great Southern Bancorp concluded the earnings call with an acknowledgment of the challenging environment and a forward-looking statement, expressing readiness to discuss further developments in the next call scheduled for April. Confidence in the company’s solid credit quality and robust capital position remains strong, and the outlook for loan growth and profitability will continue to be monitored closely.
Analyst comment
Negative: Great Southern Bancorp Reports Decline in Fourth Quarter Earnings
As an analyst, the market may react negatively to this news as the company’s earnings per share have decreased and total deposits have also seen a decrease. However, the company’s stockholders’ equity has strengthened and credit quality remains solid. The market will closely monitor loan growth and profitability in the next earnings call scheduled for April.
