Great Southern Bancorp's Earnings Take a COVID-19 Detour: A Closer Look

April 20, 2020

In a world turned upside down by a pandemic, Great Southern Bancorp, Inc. (NASDAQ:GSBC) has reported preliminary earnings for the first quarter of 2020 that may not exactly fit the mold of what investors were hoping for. With an EPS of $1.04 per diluted common share, down from $1.23 a year prior, the news might not land as the hearty earnings surprise some had anticipated.

The EPS consensus had perhaps set expectations a touch higher, leaving some analysts scratching their heads. With $14.9 million available to common shareholders, it?s clear that the effects of the COVID-19 pandemic have begun to ripple through the financials of even the most stalwart institutions.

Financial Highlights: Shifts in the Numbers

The quarter ended March 31, 2020, was marked not just by a decline in earnings but also by notable shifts in operational expenses and loan dynamics. Among the headlines:

Total Loans: Gross loans increased by $54.5 million, or 1.1%. This uptick signals a resilience in lending, particularly in residential and commercial real estate sectors. Yet, it?s a muted victory, offset by declines in construction loans and consumer auto loans.
Asset Quality: Non-performing assets stood at $12.2 million, a slight decrease from the previous quarter. This suggests that while the storm is raging, Great Southern is managing to keep its ship relatively steady?at least for now.
Net Interest Income: A modest increase to $44.9 million compared to $44.6 million last year. However, the net interest margin slipped to 3.84%, down from 4.06%. It seems that interest rates are playing a game of limbo, with banks having to bend low in response to market pressures.

Operational Impacts: Navigating the New Normal

The pandemic has pushed the company to recognize unusual expenses totaling $1.1 million due to a special bonus for employees. This move underscores a commitment to workforce stability, but it also hints at the challenges ahead. Moreover, charitable contributions of $234,000 highlight a dedication to community support during these trying times.

Interestingly, Great Southern is taking a cautious approach with its accounting practices. The decision to delay the adoption of the new accounting standard for credit losses will allow the company to maintain a more favorable financial picture for now, but it may be kicking the can down the road.

Looking Ahead: A Crystal Ball Analysis

As we peer into the future, the revenue forecast for Great Southern remains an open question. The bank's solid capital ratios?Tier 1 Leverage Ratio at 12.3% and Total Capital Ratio at 15.7%?provide a cushion against the economic uncertainty. However, the real test will come as the full ramifications of the COVID-19 pandemic unfold.

The banking sector is bracing for increased loan defaults and a potential spike in non-performing loans. Investors will be keenly watching how Great Southern navigates this turbulent landscape, especially as it relates to its loan portfolios and asset quality.

While Great Southern has maintained a degree of resilience, the real question is whether this financial institution can turn its current challenges into future opportunities. For now, it?s a cautious optimism, but the road ahead remains bumpy.