Great Southern Bancorp, Inc. Reports Preliminary Fourth Quarter and Annual Earnings of $0.83 and $3.21 Per Diluted Common Share

SPRINGFIELD, Mo., Jan. 22, 2017

Preliminary Financial Results and Other Matters for the Quarter and Year Ended December 31, 2016:

• Significant Unusual Income or Expense Items: During the three months ended December 31, 2016, the Company recorded the following unusual items. The Company incurred expenses totaling $566,000 in the fourth quarter of 2016 in connection with debit card and check fraud losses. These losses were $457,000 higher than those incurred in the 2015 fourth quarter. A portion of the increase related to debit card fraud resulting from a data security breach at a national retail merchant which operates stores in many of our markets. Several of our debit card customers who transacted business with the merchant were affected. The losses incurred by the Company resulted from regulatory requirements that banks reimburse debit card customers for unauthorized transactions. The Company received an annual fee income bonus of $270,000 for increased usage through its point-of-sale and debit card transaction networks. Insurance expense decreased approximately $425,000 in the quarter compared to the September 30, 2016 quarter primarily due to a reduction in FDIC insurance premiums resulting from a change in the FDIC insurance assessment rates during the quarter. Because the FDIC's deposit insurance fund hit a predetermined threshold, deposit insurance rates for many banks, including ours, will now be reduced. The ongoing benefit of this will be a decrease in our deposit insurance premiums of about $200,000 per quarter compared to previous quarters. The Company incurred various gains, losses and charge-downs on foreclosed and repossessed assets resulting in $340,000 of net losses.
• 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 $499.7 million, or 16.6%, from December 31, 2015, to December 31, 2016. The increases occurred across several loan types, primarily other residential (multi-family) loans, commercial real estate loans, one- to four-family residential loans, consumer loans and home equity lines of credit. Total gross loans increased $74.2 million, or 2.0%, in the three months ended December 31, 2016. Net decreases in the FDIC-acquired loan portfolios totaled $79.7 million in the year ended December 31, 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 $46.3 million at December 31, 2016, a decrease of $10.5 million from $56.8 million at December 31, 2015, and an increase of $2.5 million from $43.8 million at September 30, 2016. Non-performing assets at December 31, 2016 were $39.3 million (0.86% of total assets), down $4.7 million from $44.0 million (1.07% of total assets) at December 31, 2015 and up $2.7 million, or 7.6%, from $36.6 million (0.82% of total assets) at September 30, 2016.
• Capital: The capital position of the Company continues to be strong, significantly exceeding the thresholds established by regulators. On a preliminary basis, as of December 31, 2016, the Company's Tier 1 Leverage Ratio was 11.6%, 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 fourth quarter of 2016 decreased $0.5 million to $40.2 million compared to $40.7 million for the fourth quarter of 2015.  Net interest income was $41.0 million for the third quarter of 2016.  Net interest margin was 3.87% for the quarter ended December 31, 2016, compared to 4.34% for the fourth quarter of 2015 and 3.98% for the quarter ended September 30, 2016.  The decrease in the margin from the prior year fourth 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 and other borrowings 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 30, 60 and 38 basis points for the quarters ended December 31, 2016, December 31, 2015, and September 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 December 31, 2016, were $0.83 per diluted common share ($11.8 million available to common shareholders) compared to $0.81 per diluted common share ($11.5 million available to common shareholders) for the three months ended December 31, 2015. 

Preliminary earnings for the year ended December 31, 2016, were $3.21 per diluted common share ($45.3 million available to common shareholders) compared to $3.28 per diluted common share ($45.9 million available to common shareholders) for the year ended December 31, 2015. 

For the quarter ended December 31, 2016, annualized return on average common equity was 10.98%, annualized return on average assets was 1.05%, and annualized net interest margin was 3.87%, compared to 11.74%, 1.15% and 4.34%, respectively, for the quarter ended December 31, 2015.  For the year ended December 31, 2016, return on average common equity was 10.93%, return on average assets was 1.04%, and net interest margin was 4.05%, compared to 12.13%, 1.14% and 4.53%, respectively, for the year ended December 31, 2015. 

President and CEO Joseph W. Turner commented, "We are pleased with our overall performance in the fourth quarter of 2016. We had a few unusual items during the quarter, but in total these items did not significantly impact our results. Once again, we maintained strong company-wide loan production, which was somewhat offset by repayment headwinds, resulting in net loan growth of $74 million. Outstanding loan balances increased in several loan types with construction, multi-family and commercial real estate loan segments increasing by $64 million, $28 million and $20 million, respectively.  Loan commitments and the unfunded portion of loans remained strong during the fourth quarter.  For the full year, we achieved a significant milestone of generating more than $1 billion in commercial loans with good production coming from all of our commercial lending offices.

"Credit quality of the loan portfolio continues to be good; however, fluctuations in non-performing assets, loan loss provision and net charge-offs may occur from period to period. During the quarter, non-performing assets and potential problem loans, excluding FDIC-acquired loans, totaled $46.3 million at December 31, 2016, a decrease of $10.5 million from December 31, 2015, and an increase of $2.5 million from September 30, 2016. The increase in the fourth quarter was primarily related to the addition of one non-performing commercial real estate loan. This project dates back to 2005. Non-performing assets as a percentage of total assets were 0.86% at December 31, 2016, as compared to 1.07% at the end of 2015 and 0.82% at the end of the third quarter of 2016."