Great Southern Bancorp, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Great Southern Bancorp, Inc., second quarter 2020 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask the question during this session, you will need to press star, then 1 on your telephone. If you require any further assistance, please press star, then 0. I would now like to hand the conference over to your speaker for today. Kelly Polonis, and Best of Relations. You may begin.

Thank you. Good afternoon and welcome. I hope that everyone on the call is well. The purpose of this call is to discuss the company's results for the quarter ending June 30, 2020. Before we begin, I need to remind you that during the course of this call, we may make forward-looking statements about future events and future financial performance. You should not place undue reliance on any forward-looking statements which speak only as to the date they are made. These statements are subject to a number of factors that could cause actual results to differ materially from the results anticipated or projected. For a list of some of these factors, please see the forward-looking statements disclosure in our second quarter 2020 earnings release. President and CEO Joe Turner and Chief Financial Officer Rex Copeland are on the call with me today. I'll now turn the call over to Joe Turner.

Well, good afternoon. Thanks, Kelly. And I want to thank everybody for joining us today. Hopefully, you've had a chance to review our second quarter earnings release. We're certainly proud of what we accomplished during the second quarter in a very difficult environment. As we continue to manage through the pandemic, as always, our primary concern is for the well-being of our associates, customers, and the communities we serve. I want to thank our nearly 1,200 Great Southern Associates for their tireless work and resilience during this difficult time. I'm so proud of our team and their response to this crisis. As we said last quarter, we are steadfast in following CDC health guidelines while providing our customers ready access to our products and services. We continue to actively work with our customers who may be experiencing financial hardships. The duration and severity of the pandemic remains unknown, creating great uncertainty and challenges to the U.S. economy. We are ready to respond to the challenges that are produced by the pandemic and are in a position of strength regarding capital earnings, liquidity, and credit quality. I'll provide some brief remarks about the company's performance during the quarter. and then I'll turn the call over to Kelly Colonis to talk about business initiatives and then Rex Copeland, our CFO, will talk about financial results. Then we'll open it up for questions. As expected in this operating climate, our earnings declined in the second quarter as compared to the year-ago quarter. The primary driver of the earnings decline was our loan loss provision expense, which was $4.4 million higher in the second quarter this year than in the year-ago quarter. Still, we achieved earnings of 93 cents for diluted common share. Pre-tax, pre-provision earnings were down about 1.3 million or 5.6% from the year-ago quarter. Rex will give a little more color on our earnings. Our annualized return on common equity during the quarter was 8.45%. Our return on assets was 0.98%, our net interest margin was 339, and our efficiency ratio was 56.75%. As far as loan production, loan production in the second quarter was solid and came from all areas of the franchise. Unscheduled loan payouts have certainly decreased since February-March timeframe of this year. Our outstanding loan balances increased $246 million from the end of the year, from $4.15 to $4.4 billion, and increased about $187 million from the end of the first quarter. About $120 million of the increase was with PPP. We saw increases in multifamily loans, commercial business loans, which is where the PPP loans would be housed, one to four family residential, and commercial real estate loans. Our committed pipeline continues to look good with about $1.3 billion. That's down about $91 million from the end of last quarter. The unfunded portion of our commercial construction loans is about $754 million, down about $56 million from the end of March. Our asset quality continues to be extremely strong. Our charge-offs for the quarter were 127,000. Our charge-offs for the year were 365,000. So very little charge-off activity, historically low levels of non-performing loans and ORE and classified loans as well. We do fully understand, though, that this difficult environment that we're in for an unforeseen period is going to produce hardship for some of our customers. In fact, we saw an increase of about $40 million in our watch customers from $34 million to $74 million, so about a $40 million increase. Still past credits, but credits with a little bit more concern than just a regular past credit would have. That's why we're increasing our allowance for loan losses. We increased that about 25% from $40 million to just under $50 million at the end of the quarter to account for more uncertainty in the loan portfolio. And I would remind you that we did not adopt CECL. And we have said that had we adopted CECL on January 1, we would have added $11 to $14 million to our allowance at that time. Loan modifications, our loan modifications totaled $1 billion. Our COVID-related loan modifications totaled $1 billion at the end of June. We modified 431 commercial loans with a principal balance of $931 million and 1,702 mortgage and consumer loans with a balance of $80 million As you may remember from our meeting last year, we granted modifications to virtually all customers who requested assistance. It wasn't based on need or credit concerns. And about three-fourths of the billion dollars of modified loans were modified to interest only for 90 days. In other words, we deferred the principal portion of their payment for 90 days. And based on discussions with our customer base, we do believe that a substantial portion of those that were modified will return to normal payment terms by the end of this summer. Our capital continues to be strong. Our stockholders' equity increased $24 million to $627 million from the beginning of the year. Our book value increased from $43.61 million to $44.50 during the second quarter and increased $2.21 during the first half of the year. Our ratio of tangible common equity to tangible assets continues to be strong at 11.1%. During the second quarter, we further enhanced our regulatory capital position with the issuance of $75 million of 5.5% fixed to floating rate subordinated notes due June 15, 2030. The notes will accrue interest at a fixed rate of 5.5% to June 15, 2025, and if we don't pay them off at that time, they will accrue interest at a floating rate. Also, during the quarter, we declared a regular cash dividend of 34 cents per common share, and we currently anticipate that our regular dividend can be maintained for the foreseeable future. That concludes the formal part of my remarks. I'll turn the meeting over to Kelly Flonis, our Director of Corporate Communications, who will talk about our business initiatives during this quarter.