Great Southern Bancorp, Inc. Reports Preliminary Third Quarter Earnings of $0.80 Per Diluted Common Share

SPRINGFIELD, Mo., Oct. 19, 2016

Preliminary Financial Results and Other Matters for the Third Quarter and First Nine Months of 2016:

• Significant Unusual Income or Expense Items:  During the three months ended September 30, 2016, the Company recorded the following unusual items:  (1) the Company incurred expenses and loss on final disposition totaling approximately $320,000 related to one foreclosed property.  Throughout 2016 the Company had incurred operating losses on this property as it maintained some operations in order to make the property more marketable; (2) the Company implemented a company-wide multimedia  advertising campaign totaling approximately $300,000 that was tied to the Summer Olympics television broadcast; (3) the Company incurred expenses totaling $318,000 for new chip-enabled debit cards, which will be used for a mass replacement of customer swipe debit cards during the fourth quarter of 2016; and (4) the Company incurred expenses totaling $775,000 in the third quarter of 2016 for higher levels of debit card and check fraud losses.  These losses were $498,000 higher than those incurred in the 2015 third quarter.  The majority of the increase related to debit card fraud that resulted from a data security breach at a national retail merchant which operates stores in many of our markets, affecting some of our debit card customers who transacted business with the merchant.  The losses incurred by the Company resulted from regulatory requirements that banks reimburse their debit card customers for unauthorized transactions.  All of these additional expenses increased noninterest expense by approximately $1.4 million in the 2016 third quarter.  All of these items, collectively, after the effect of the full tax rate for the Company, negatively impacted earnings per common share by approximately $0.06.
• Total Loans:  Total gross loans, excluding previously acquired covered and non-covered loans and mortgage loans held for sale, but including the loans acquired from Fifth Third Bank, increased $403.4 million, or 13.4%, from December 31, 2015, to September 30, 2016.  The increases occurred across several loan types, primarily other residential loans, commercial real estate loans, one- to four-family residential loans, consumer loans and home equity lines of credit.  Total gross loans increased $47.8 million, or 1.4%, in the three months ended September 30, 2016.  Net decreases in the FDIC-acquired loan portfolios totaled $57.6 million in the nine months ended September 30, 2016.
• Asset Quality:  Non-performing assets and potential problem loans, excluding those currently or previously covered by FDIC loss sharing agreements and those acquired in the FDIC-assisted transaction with Valley Bank, which are not covered by a loss sharing agreement but are accounted for and analyzed as loan pools rather than individual loans, totaled $43.8 million at September 30, 2016, a decrease of $13.0 million from $56.8 million at December 31, 2015, and a decrease of $4.8 million from $48.6 million at June 30, 2016.  Non-performing assets at September 30, 2016 were $36.6 million (0.82% of total assets), down $7.4 million from $44.0 million (1.07% of total assets) at December 31, 2015 and up $2.8 million, or 8.0%, from $33.8 million (0.77% of total assets) at June 30, 2016. 
• Capital:  The capital position of the Company continues to be strong, significantly exceeding the thresholds established by regulators. During the quarter, the Company further enhanced its regulatory capital position with the issuance of $75.0 million of subordinated notes.  On a preliminary basis, as of September 30, 2016, the Company's Tier 1 Leverage Ratio was 11.4%, Common Equity Tier 1 Capital Ratio was 10.2%, Tier 1 Capital Ratio was 12.6%, and Total Capital Ratio was 13.5%. 
• Net Interest Income:  Net interest income for the third quarter of 2016 decreased $0.5 million to $41.0 million compared to $41.5 million for the third quarter of 2015.  Net interest income was $40.7 million for the second quarter of 2016.  Net interest margin was 3.98% for the quarter ended September 30, 2016, compared to 4.43% for the third quarter of 2015 and 4.10% for the quarter ended June 30, 2016.  The decrease in the margin from the prior year third quarter was primarily the result of decreases in average loan yields and a reduction in the additional yield accretion recognized in conjunction with updated estimates of the fair value of the acquired loan pools compared to the prior year quarter, partially offset by increased total average loans.  Increased average interest rates on deposits also contributed to lower net interest margin.  The positive impact on net interest margin from the additional yield accretion on acquired loan pools that was recorded during the period was 38, 71 and 39 basis points for the quarters ended September 30, 2016, September 30, 2015, and June 30, 2016, respectively.  For further discussion of the additional yield accretion of the discount on acquired loan pools, see "Net Interest Income."

Great Southern Bancorp, Inc. (NASDAQ:GSBC), the holding company for Great Southern Bank, today reported that preliminary earnings for the three months ended September 30, 2016, were $0.80 per diluted common share ($11.2 million available to common shareholders) compared to $0.79 per diluted common share ($11.1 million available to common shareholders) for the three months ended September 30, 2015. 

Preliminary earnings for the nine months ended September 30, 2016, were $2.39 per diluted common share ($33.5 million available to common shareholders) compared to $2.46 per diluted common share ($34.4 million available to common shareholders) for the nine months ended September 30, 2015. 

For the quarter ended September 30, 2016, annualized return on average common equity was 10.92%, annualized return on average assets was 1.01%, and net interest margin was 3.98%, compared to 11.53%, 1.10% and 4.43%, respectively, for the quarter ended September 30, 2015.  For the nine months ended September 30, 2016, annualized return on average common equity was 10.92%; annualized return on average assets was 1.03%; and net interest margin was 4.11% compared to 12.26%, 1.14% and 4.59%, respectively, for the nine months ended September 30, 2015. 

President and CEO Joseph W. Turner commented, "During the third quarter, we maintained strong company-wide loan production; however, this was partially offset by a few significant repayments, resulting in net loan growth of $48 million. Outstanding loan balances increased in several loan types with the multi-family and commercial real estate loan segments increasing by $117 million and $17 million, respectively. Outstanding loan balances for construction and commercial business loan segments decreased by $53 million and $24 million, respectively. Loan commitments and the unfunded portion of loans remained strong and were up slightly from totals at June 30, 2016.

"During the quarter, total classified assets decreased $4.8 million, from $48.6 million at June 30, 2016, to $43.8 million at September 30, 2016, as we remain focused on credit quality. We had some expected fluctuations in various segments of total classified assets, as we continue to work through the resolution process with certain relationships. As part of total classified assets, non-performing loans increased $7.4 million, to $13.2 million, primarily because of the transfer of two relationships from potential problem loans.  These loan relationships were originated prior to 2007. Assets acquired by foreclosure decreased during the quarter, resulting in a net increase in total non-performing assets of $2.8 million, to $36.6 million at September 30, 2016. Non-performing assets as a percentage of total assets were 0.82% at the end of September as compared to 1.07% at the end of 2015 and 0.77% at the end of the second quarter in 2016. While our goal is to keep non-performing assets, loan loss provisions and net charge-offs as low as possible, we expect these items to fluctuate from period to period."