10-Q: Great Southern Bancorp Reports Strong Q3 2025 Earnings

Great Southern Bancorp, Inc. announced increased net income and improved net interest margin for the third quarter and first nine months of 2025, driven by lower interest expenses and effective interest rate risk management.

Summary

• Net income for the three months ended September 30, 2025, increased by 7.7% to $17.8 million, compared to $16.5 million for the same period in 2024.
• Net income for the nine months ended September 30, 2025, increased by 16.7% to $54.7 million, compared to $46.9 million for the same period in 2024.
• Basic earnings per common share rose to $1.57 for Q3 2025 (from $1.41 in Q3 2024) and $4.77 for 9M 2025 (from $4.01 in 9M 2024).
• Net interest income for Q3 2025 increased by 5.8% to $50.8 million, and for 9M 2025 increased by 8.2% to $151.1 million.
• Net interest margin expanded to 3.72% for Q3 2025 (up 30 basis points from 3.42% in Q3 2024) and to 3.66% for 9M 2025 (up 27 basis points from 3.39% in 9M 2024).
• No provision for credit losses on loans was recorded for both the three and nine months ended September 30, 2025, compared to $1.2 million and $1.7 million, respectively, in the prior year periods.
• Total assets decreased by $243.8 million, or 4.1%, to $5.74 billion at September 30, 2025, from $5.98 billion at December 31, 2024.
• Net outstanding loans decreased by $222.7 million to $4.47 billion at September 30, 2025, primarily in construction, other residential (multi-family), and oneto four-family residential loans.
• Total deposits decreased by $77.5 million, or 1.7%, to $4.53 billion at September 30, 2025, with retail certificates of deposit decreasing $52.1 million and brokered deposits decreasing $92.1 million.
• The Bank maintained strong capital ratios, exceeding 'well capitalized' thresholds with a Common Equity Tier 1 capital ratio of 13.4% and a Tier 1 leverage ratio of 11.5% at September 30, 2025.
• The Company repurchased $30.0 million of its common stock during the nine months ended September 30, 2025, and authorized a new program for up to one million additional shares.
• Dividends declared per common share were $0.43 for Q3 2025 and $1.23 for 9M 2025.

Sentiment

Score: 8

Explanation: The company demonstrated strong financial performance with significant increases in net income and expanded net interest margin, indicating effective management in a dynamic interest rate environment. The absence of a provision for credit losses on loans suggests robust asset quality, and capital ratios remain well above regulatory requirements. The ongoing stock repurchase program and increased dividends further enhance shareholder value. While loan and deposit balances saw some contraction, the overall profitability and capital strength present a compelling investment case.

Positives

• Net income increased by 7.7% for the three months and 16.7% for the nine months ended September 30, 2025, demonstrating strong profitability.
• Net interest margin expanded by 30 basis points for the quarter and 27 basis points for the nine months, indicating effective interest rate management and improved profitability from core lending activities.
• No provision for credit losses on loans was recorded for both the three and nine months ended September 30, 2025, suggesting stable asset quality and a favorable credit outlook.
• Non-performing assets decreased by $1.8 million to $7.8 million at September 30, 2025, reflecting improved loan portfolio health.
• The Bank remains 'well capitalized' with robust capital ratios (Common Equity Tier 1 of 13.4%, Tier 1 Risk-Based Capital of 13.4%, Total Risk-Based Capital of 14.6%, and Tier 1 Leverage of 11.5%), significantly exceeding regulatory minimums.
• A new stock repurchase program for up to one million additional shares was authorized, signaling confidence in the company's valuation and commitment to shareholder returns.
• Dividends declared per common share increased to $0.43 for Q3 2025 and $1.23 for 9M 2025, providing direct returns to shareholders.
• The completion of a new, next-generation banking center in Springfield, MO, indicates investment in customer experience and operational innovation.

Negatives

• Total assets decreased by $243.8 million, or 4.1%, from December 31, 2024, to September 30, 2025.
• Net outstanding loans decreased by $222.7 million, primarily in construction, other residential (multi-family), and oneto four-family residential loans, indicating a contraction in the loan portfolio.
• Total deposits decreased by $77.5 million, or 1.7%, with retail certificates of deposit decreasing $52.1 million and brokered deposits decreasing $92.1 million, highlighting funding challenges.
• Interest income on loans decreased by $4.4 million for the three months and $2.9 million for the nine months ended September 30, 2025, due to lower average yields and balances.
• Non-interest income decreased by $1.8 million for the nine months ended September 30, 2025, primarily due to a one-time gain in the prior year related to a contract termination.
• Non-interest expense increased by $2.4 million for the three months and $1.4 million for the nine months ended September 30, 2025, driven by higher occupancy, equipment, salaries, and legal fees.
• Unrealized losses on held-to-maturity investment securities totaled $17.7 million at September 30, 2025, which, if included in capital, would reduce total stockholders' equity by $13.4 million (net of taxes).
• Active interest rate swaps had a negative impact on net interest income, reducing it by $1.8 million for the three months and $5.3 million for the nine months ended September 30, 2025.

Risks

• Expected revenues, cost savings, earnings accretion, synergies, and other benefits from merger and acquisition activities might not be realized within anticipated time frames or at all, and integration costs or difficulties might be greater than expected.
• Changes in economic conditions, either nationally or in the company's market areas, could adversely affect financial performance.
• Fluctuations in interest rates, the effects of inflation or a potential recession, whether caused by Federal Reserve actions or otherwise, pose a significant risk to net interest income.
• The impact of bank failures or adverse developments at other banks and related negative press about the banking industry in general could negatively affect investor and depositor sentiment.
• Risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses.
• The possibility of realized or unrealized losses on securities held in the investment portfolio, particularly from mortgage-backed, collateralized mortgage, and SBA securities.
• The company's ability to access cost-effective funding and maintain sufficient liquidity, especially if brokered deposits and FHLBank advances become less accessible.
• Fluctuations in real estate values and both residential and commercial real estate market conditions, which could impact collateral values and loan performance.
• The ability to adapt successfully to technological changes to meet customers' needs and developments in the marketplace.
• The possibility that security measures implemented might not be sufficient to mitigate the risk of a cyber-attack or cyber theft, and that such security measures might not protect against systems failures or interruptions.
• Legislative or regulatory changes that adversely affect the company's business, including the ongoing assessment of the One Big Beautiful Bill Act (OBBBA).
• Changes in accounting policies and practices or accounting standards, such as new FASB ASUs, could impact financial reporting.
• Results of examinations by regulators, including the possibility of required business limitations, changes in business mix, increased allowance for credit losses, asset write-downs, or increased capital levels.
• Costs and effects of litigation, including settlements and judgments, could materially impact financial results.
• Competition from other financial institutions for loans and deposits could compress margins and limit growth.
• Natural disasters, war, terrorist activities, or civil unrest and their effects on economic and business environments.
• The loan portfolio possesses increased risk due to a relatively high concentration of commercial and residential construction, commercial real estate, other residential (multi-family), and other commercial loans.
• Exceeding thresholds defined in interagency guidance on commercial real estate concentrations may incur additional expense or slow the growth of certain categories of commercial real estate lending.

Future Outlook

Management expects the effective tax rate (combined federal and state) to be approximately 18.5% to 20.0% in future periods. Rising interest rates are generally expected to have a modestly positive impact on net interest income, while declining interest rates are expected to have a mostly neutral impact, though short-term effects could be more pronounced. The benefit from the accretion of interest income related to a terminated swap concluded after October 6, 2025. The U.S. apartment market is projected for a rebalancing, with annual absorption expected to exceed net deliveries, accelerating overall vacancy declines. The office market shows signs of a turning point with positive absorption in Q3 2025 and re-entry of institutional buyers, despite a complex demand recovery. The retail market is experiencing high store closures but strong demand to backfill spaces. The industrial market currently favors tenants with high vacancy, but supply growth is diminishing, and rent growth has slowed.

Management Comments

• Management believes the declines in fair value for the Company's available-for-sale debt securities are not credit related.
• Management considers the allowance for credit losses adequate to cover losses inherent in the Bank's loan portfolio at September 30, 2025.
• Management has historically utilized stock buy-back programs from time to time as long as management believed that repurchasing the Company's common stock would contribute to the overall growth of stockholder value.

Industry Context

The broader economic environment is characterized by recent Federal Reserve interest rate cuts (late 2024 and 2025), with the Federal Funds rate lowered to 4.25% in September 2025 and further to 3.75%-4.00% in late October 2025. Inflation, as measured by Core PCE, remains above the Federal Reserve's 2% target at 3.0%. Real GDP in 2025 is projected to rise 1.8%, an increase from prior forecasts. The national unemployment rate increased slightly to 4.3% in August 2025. The single-family housing market saw existing-home sales increase, but new home construction dropped. The multi-family housing market is poised for rebalancing with projected vacancy declines, though rent growth is slow. The commercial office sector faces high vacancy but shows signs of recovery with positive absorption and increased investment activity. The industrial market currently favors tenants due to high vacancy, but new supply is decreasing, and rent growth has slowed.

Comparison to Industry Standards

• The company's lending practices are considered 'consistent with or more conservative than what we believe to be the norm for banks our size,' indicating a prudent approach to credit risk.
• The Bank's capital ratios (Common Equity Tier 1 of 13.4%, Tier 1 Risk-Based Capital of 13.4%, Total Risk-Based Capital of 14.6%, and Tier 1 Leverage of 11.5%) are significantly above the 'well capitalized' regulatory thresholds (6.5%, 8%, 10%, and 5% respectively), positioning it strongly compared to industry benchmarks.
• The filing references Moody's U.S. Baseline Outlook for GDP projections and CoStar for detailed analyses of various real estate markets (apartment, office, retail, industrial), indicating that the company monitors its performance and market conditions against broader industry trends and data.

Corporate Governance

Legal Proceedings

• One litigation matter in which the Bank is defendant, alleging a breach of fiduciary duty, was previously set for trial in Q3 2025 but was postponed and has not yet been rescheduled. The Bank believes it will prevail and that any loss should be indemnified or shared by others.

Stakeholder Impact

• Shareholders: Positive impact due to increased net income, higher EPS, increased dividends declared, and an active stock repurchase program, signaling strong financial health and commitment to shareholder returns.
• Customers: Potential for improved services with the completion of a new, next-generation banking center. Loan demand and deposit rates are influenced by market competition and economic conditions.
• Employees: Salaries and employee benefits increased due to annual merit increases, indicating ongoing investment in human capital.
• Creditors/Depositors: Enhanced security due to the Bank's 'well capitalized' status and ample liquidity sources, ensuring the ability to meet financial obligations.

Next Steps

• Assess the expected impact of the One Big Beautiful Bill Act (OBBBA) on consolidated financial statements, with provisions effective in 2025 and others through 2027.
• Continue to monitor regional, national, and global economic indicators such as unemployment, GDP, housing starts and prices, consumer sentiment, and commercial real estate metrics.
• The Board of Directors will continue to meet regularly to consider the level and timing of dividend payments.
• Continue the stock repurchase program, with approximately 929,000 shares remaining available under the latest authorization.
• Note that the accretion of interest income related to the $400 million terminated swap concluded after October 6, 2025, which will no longer contribute to interest income in future periods.

Key Dates

Recommendation

The company's strong financial performance, marked by significant increases in net income and net interest margin, demonstrates effective operational management in a challenging interest rate environment. The absence of a provision for credit losses on loans indicates robust asset quality and a stable credit outlook. Furthermore, the company maintains capital ratios well above regulatory requirements, reinforcing its financial stability. The ongoing stock repurchase program and increased dividends signal management's confidence and commitment to enhancing shareholder value. While there was some contraction in loan and deposit balances, the overall positive trends in profitability, asset quality, and capital strength make Great Southern Bancorp an attractive investment.

Keywords

Banking, Financial Services, Regional Bank, Commercial Real Estate, Residential Loans, Deposits, Net Interest Income, Net Interest Margin, Capital Ratios, SEC Filing, 10-Q, GSBC, Loan Portfolio, Credit Quality, Interest Rate Risk, Stock Repurchase, Dividends, Tax Credits, Asset Quality, Liquidity, Regulatory Compliance