Great Southern Bancorp, Inc.

Ladies and gentlemen, and thank you for standing by, welcome to the Great Southern Bancorp Incorporated Third Quarter 2022 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 a question during the session, you will need to press star 1 1 on your telephone keypad. At this time, I would like to turn the conference over to Ms. Kelly Polonis. Ma'am, please begin.

Thank you, Howard. Good afternoon and welcome. The purpose of this call is to discuss the company's results for the quarter ending September 30th, 2022. Before we begin, I need to remind you that during this call, we may make statements about future events and financial performance. Please do not place undue reliance on any forward-looking statements which speak only as of the date they are made. Please see our forward-looking statements disclosures and our third quarter 2022 earnings release for more information. 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.

Okay. Thanks, Kelly. Good afternoon, everyone. We appreciate you joining us today for our third quarter earnings call. Our third quarter earnings continue to be strong, continuing our momentum from the second quarter. We're focused on ensuring that our company is properly positioned, especially in light of the changing interest rate environment that we're in. As always, we are concentrating on building lasting relationships with our customers and making decisions that are in the best interest of all our constituents over the long term. Our great team of associates understands this and is working hard every day to fulfill this mission. I'm really proud of our team. As usual, I'll provide some brief remarks about the company's performance and then turn the call over to Rex Copeland, who will go into more detail on our financial results. Then we'll open it up for questions. In the third quarter of 2022, we earned $18.1 million, or $1.46 for diluted common share, compared to $20.4 million, or $1.49 for diluted common share for the same period in 2021. With a decrease of $2.3 million, from the prior year quarter, but how we got there was significantly different in both quarters, so I do want to go into a little bit more detail. First of all, in the third quarter of 22, we earned $8 million more in net interest income than we did in the same quarter a year ago, and this was even after earning $1.6 million in PPP fee accretion in the 2000-21 quarter. Another big driver, the biggest driver really, of the change between the quarters was the change of provision expense, which was, you know, we had $3.3 million in provision expense in this year's quarter versus the negative provision of $2.4 million in the year-ago quarter. So a swing of $5.7 million there. Non-interest income was about $1.8 million lower in the third quarter of this year. mainly as a result of lower gain on loan sales, gain on loans. Operating expenses were $3.4 million higher in the third quarter this year than they were in the third quarter last year. About $1.1 million of that related to professional fees regarding our data servicing conversion that we've talked about the last couple of quarters. We also had almost $400,000 of professional fees related to a swap that we entered into in the third quarter of 22. Our salary and employee benefits increased about $1.1 million in the third quarter of 22 over the third quarter of 21. About $300,000 of that increased related to the loan production offices we opened. So about $800,000 is related to maybe some additional staffing as well as probably higher comp levels given the kind of employment environment we're in. So if we look at reported pre-tax, pre-provision earnings, our pre-tax, pre-provision earnings were $26.1 million. in Q3 of 22 versus $23.4 million in Q3 of 21. So we were up $2.7 million. And this was with about a 9% lower share. I think our fully diluted shares in the 21 quarter were 13.6 million versus 12.4 million in this year's quarter. Our earnings ratios were strong, 13% return on equity. 130 return on assets. I'm talking about this quarter now, obviously. Our margin was 3.96% versus 3.36% in the year-ago quarter and 3.78% in the second quarter of 22. The Federal Reserve continues to signal that there will be additional rate increases. maybe 75 basis points coming soon, maybe another 50 basis points after that, maybe another quarter. I think as with, as is typical in, you know, rate increase cycles, probably most of the benefit, we still consider ourselves to be maybe moderately, maybe slightly to moderately asset sensitive. So we would anticipate that we might see some benefits to our margin from continued increases, but I think definitely the lion's share of the benefit that we'll see from the rate increases has already appeared in our margin. As far as loans go, during the quarter, loan production and activity in our markets continue to be strong in all our markets, including our newest markets. Our net loans have grown about $490 million. since the beginning of the year. Our pipeline has also grown over $400 million since the beginning of the year. So a very strong loan origination market for us. We do probably expect things to slow as interest rates are coming up, cap rates are coming up. So we expect the loan origination activity to slow. We're in a pretty good position though because we have $1.4 billion or really $2 billion in unfunded commitments, $1.4 billion of construction commitments that we'll continue to fund probably over the next 15 months or so. Our asset quality and credit quality metrics continue to be at historically good levels for us. Non-performing assets were $3.4 million at the end of the quarter, which is a decrease of $2.6 million. from the end of the year, 0.06% of total assets, so very low are levels of past dues, et cetera. Charge-offs are also at very low levels, so great credit metrics. Capital, we began the year in an extremely strong capital position, and I think continue to be in a very strong capital position. Our tangible common equity to tangible asset ratio is 8.8%, so down a little bit from the end of the year, but still very strong. In the third quarter, we declared a $0.40 per share of common dividend, and through the first nine months, we've declared $1.16 in dividends. We've purchased approximately 1 million shares of stock this year at $59.28. And at September 30, 2022, we have 222,000 shares still available in our stock repurchase authorization. That concludes my prepared remarks. Well, I might just go through capital. TCE, the dollar amount, is down pretty significantly from the beginning of the year. We started with $616 million in capital at January 1 of 2022. We basically spent about as much in buying stock back as we've had in net income. So our capital has reduced by the amount of our dividend, which is about, Rex, $14 million. And then there has been a pretty significant change, about $91 million, I think, change in our mark-to-market on our swaps and our available-for-sale portfolio. Our loan portfolio is largely very short. So the securities we buy and the swaps we enter into are supposed to be longer to balance our portfolio so that our company will be able to perform better as rates decline and we get into lower interest rate environments. So that's the purpose of that. Now I'll turn it over to our CFO, Rex Copeland.