GREAT SOUTHERN BANCORP INC
For the period ended Jun 30, 2024. Filed Aug 7, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 7, 2024
GSBC$80.76+0.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-04-30.
0001410578-24-000572
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0001410578-24-001169
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 212 previous paragraphs and 240 current paragraphs.
77 unchanged; 114 reworded; 35 added; 15 removed; 6 previous and 14 current paragraphs rearranged.
Tables are not compared: 10 previous and 13 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (35)
Current report
Allowance for Credit Losses and Valuation of Foreclosed Assets
Current report
In addition, the Company considers that the determination of the valuation of foreclosed assets held for sale involves a high degree of judgment and complexity. The carrying value of foreclosed assets reflects management's best estimate of the amount to be realized from the sale of the assets. While the estimate is generally based on a valuation by an independent appraiser or recent sales of similar properties, the amount that the Company realizes from the sale of the assets could differ materially from the carrying value reflected in the financial statements, resulting in gains or losses that could materially impact earnings in future periods.
Current report
The U.S. multi - family market experienced a healthy rebound in demand for the first half of 2024, driven by rising consumer confidence and diminishing recession fears. Despite the notable growth in demand in 2024, the influx of new supply continues to saturate the market. During the first quarter of 2024, 153,000 units were completed, with an estimated 163,000 units expected to be delivered in the second quarter. Most new supply additions are concentrated at the 4 and 5 Star price point, contributing to the weakest rent growth observed in this market. Consequently, the persistent imbalance between supply and demand is projected to increase the vacancy rate, which is expected to reach a record 7.9% by the end of June 2024.
Current report
The Midwest and Northeast have fared the best over the past two years seeing the most favorable rent growth. The Sun Belt market rent growth has been more sluggish, with numerous markets reporting negative year over year rent growth by the end of May 2024. Current projections indicate 533,000 completions for the year, reflecting a 9% decline from the record supply seen in 2023. At the same time, absorption is accelerating, offering the national market an opportunity to stabilize and possibly begin recovering by the end of 2024.
Current report
Absorption was positive in the second quarter of 2024 for the office industry, but supply additions held vacancy at 13.8%. Owner occupied, medical office users, and fewer high profile move-outs drove the uptick in occupancy, but persistently small leases and looming rollover exposure suggest the reprieve is likely temporary.
Current report
New leasing volume has hovered around 10% below the average amount from 2015-2019. Much of the decline in volume has been driven by average lease sizes 15-20% smaller than the 2015-2019 average. Market participants confirm that, while the leasing market is active, typical requirements are smaller, with pre-built spec suites attracting some of the strongest demand. In the traditional leasing market, however, there has been an ongoing adjustment in per-worker space needs, with new construction winning out. Buildings completed during the current decade have maintained positive net absorption but older properties have suffered from an extreme lack of demand.
Current report
As of June 2024, national office vacancy rates remained stable at 13.8% compared to March 2024, while our market areas reflected the following vacancy levels: Springfield, Missouri at 4.5%, St. Louis at 10.5%, Kansas City at 12.3%, Minneapolis at 11.5%, Dallas-Fort Worth at 18.2%, Chicago at 16.3%, Atlanta at 16.4%, Denver at 17.0%, Phoenix at 16.8% and Charlotte, North Carolina at 14.3%. The rates are higher for many of these cities compared to March 2024.
Current report
Results of Operations and Comparison for the Three and Six Months Ended June 30, 2024 and 2023
Current report
Net income was $30.4 million for the six months ended June 30, 2024 compared to $38.8 million for the six months ended June 30, 2023. This decrease of $8.4 million, or 21.6%, was primarily due to a decrease in net interest income of $9.7 million, or 9.6%, an increase in non-interest expense of $1.7 million, or 2.4%, and an increase in provision for credit losses on loans and unfunded commitments of $968,000, or 102.4%. The provision for credit losses on loans decreased $1.0 million, while the provision for credit losses on unfunded commitments increased $2.0 million. These items were partially offset by a decrease in income tax expense of $3.0 million, or 29.6%, and an increase in non-interest income of $981,000, or 6.3%.
Current report
Total interest income increased $13.2 million, or 9.1%, during the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase was due to a $12.5 million increase in interest income on loans and a $745,000 increase in interest income on investment securities and other interest-earning assets. Interest income from loans increased during the six months ended June 30,
Current report
During the six months ended June 30, 2024 compared to the six months ended June 30, 2023, interest income on loans increased $10.8 million due to higher average interest rates on loans. The average yield on loans increased from 5.80% during the six months ended June 30, 2023, to 6.25% during the six months ended June 30, 2024. This increase was primarily due to the repricing of floating rate loans due to higher market interest rates. Interest income on loans also increased $1.7 million as the result of higher average loan balances, which increased from $4.62 billion during the six months ended June 30, 2023, to $4.68 billion during the six months ended June 30, 2024.
Current report
Interest income on investments increased $371,000 in the six months ended June 30, 2024 compared to the six months ended June 30, 2023. Interest income increased $663,000 as a result of higher average interest rates from 2.86% during the six months ended June 30, 2023, to 3.05% during the six month period ended June 30, 2024. Partially offsetting that increase, interest income decreased $292,000 as a result of a decrease in average balances from $702.9 million during the six months ended June 30, 2023, to $683.0 million during the six months ended June 30, 2024. Average balances of securities decreased primarily due to normal monthly payments received related to the portfolio of U.S. Government agency mortgage-backed securities and collateralized mortgage obligations. Proceeds from repayment of securities were generally used to fund loan growth and, to a limited extent, purchase additional securities.
Current report
Interest income on other interest-earning assets increased $92,000 in the three months ended June 30, 2024 compared to the three months ended June 30, 2023. Interest income increased $88,000 as a result of higher average interest rates from 4.93% during the three months ended June 30, 2023, to 5.31% during the three months ended June 30, 2024. Interest income increased $4,000 as a result of a slight increase in average balances from $97.0 million during the three months ended June 30, 2023, to $97.3 million during the three months ended June 30, 2024.
Current report
Interest income on other interest-earning assets increased $374,000 in the six months ended June 30, 2024 compared to the six months ended June 30, 2023. Interest income increased $263,000 as a result of higher average interest rates from 4.73% during the six months ended June 30, 2023, to 5.26% during the six months ended June 30, 2024. Interest income increased $111,000 as a result of an increase in average balances from $94.4 million during the six months ended June 30, 2023, to $98.9 million during the six months ended June 30, 2024.
Current report
Total interest expense increased $22.9 million, or 52.4%, during the six months ended June 30, 2024, when compared with the six months ended June 30, 2023, due to an increase in interest expense on deposits of $19.0 million, or 52.1%, an increase in interest expense on short-term borrowings of $3.7 million, or 99.2%, an increase in interest expense on securities sold under reverse repurchase agreements of $164,000, or 29.1%, and an increase in interest expense on subordinated debentures issued to capital trusts of $89,000, or 10.9%.
Current report
Interest expense on brokered deposits increased $3.6 million, due to an increase in average balances from $547.7 million during the six months ended June 30, 2023 to $686.1 million during the six months ended June 30, 2024. Interest expense on brokered deposits increased $1.3 million due to average rates of interest that increased from 4.79% in the six months ended June 30, 2023 to 5.25% in the six months ended June 30, 2024. As noted above, brokered deposits added during 2023 and 2024 were at higher market rates than brokered deposits previously issued.
Current report
Interest expense on reverse repurchase agreements increased $252,000 due to higher average interest rates during the six months ended June 30, 2024 when compared to the six months ended June 30, 2023. The average rate of interest was 1.12% for the six months ended June 30, 2023 compared to 1.93% for the six months ended June 30, 2024, due to higher market interest rates. Partially offsetting this increase, interest expense on reverse repurchase agreements decreased $88,000 due to lower average balances. The average balance of repurchase agreements decreased $25.2 million from $100.9 million in the six months ended June 30, 2023 to $75.7 million in the six months ended June 30, 2024, due to changes in customers’ desire for this product.
Current report
Interest expense on short-term borrowings (including overnight borrowings from the FHLBank and BTFP borrowings from FRBSTL) and other interest-bearing liabilities increased $2.5 million during the three months ended June 30, 2024 when compared to the three months ended June 30, 2023 due to higher average balances. The average balance of short-term borrowings and other interest-bearing liabilities increased $190.7 million from $148.6 million in the three months ended June 30, 2023 to $339.3 million in the three months ended June 30, 2024, primarily due to changes in the Company’s deposits and the mix of funding, which can fluctuate. Partially offsetting this increase, interest expense on short-term borrowings (including overnight borrowings from the FHLBank and BTFP borrowings from FRBSTL) and other interest-bearing liabilities decreased $22,000 during the three months ended June 30, 2024 when compared to the three months ended June 30, 2023 due to lower average rates of interest. The average rate of interest was 5.24% for the three months ended June 30, 2023, compared to 5.18% for the three months ended June 30, 2024. The decrease in the average rate of interest was primarily due to the 2024 period including the BTFP borrowing, which had a lower rate of interest than the FHLB overnight borrowings.
Current report
During the six months ended June 30, 2024, compared to the six months ended June 30, 2023, interest expense on subordinated debentures issued to capital trusts increased $89,000 due to higher average interest rates. The average interest rate was 7.08% in the six months ended June 30, 2024 compared to 6.41% in the six months ended June 30, 2023. The subordinated debentures are variable-rate debentures, as stated above. There was no change in the average balance of the subordinated debentures between the 2023 and 2024 six-month periods.
Current report
Net interest income for the six months ended June 30, 2024 decreased $9.7 million to $91.6 million compared to $101.3 million for the six months ended June 30, 2023. Net interest margin was 3.38% in the six months ended June 30, 2024, compared to 3.77% in the six months ended June 30, 2023, a decrease of 39 basis points, or 10.3%. The Company experienced increases in interest income on both loans and investment securities. The Company experienced increases in interest expense on deposits, short-term borrowings, subordinated debentures issued to capital trust and securities sold under reverse repurchase agreements with customers.
Current report
Compared to December 31, 2023, non-performing loans decreased $765,000, to $11.0 million at June 30, 2024. The majority of this decrease was in the non-performing commercial real estate loans category, which decreased $788,000 from December 31, 2023.
Current report
For the three months ended June 30, 2024, non-interest income increased $2.1 million to $9.8 million when compared to the three months ended June 30, 2023, primarily as a result of the following items:
Current report
Other income: Other income increased $2.6 million compared to the prior year period. In the three months ended June 30, 2024, the Company recorded $2.7 million of other income, net of expenses and write-offs, related to the termination of the Master Agreement between the Company and a third-party software vendor for the conversion of the Company’s core banking platform. This termination was previously disclosed in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2024. This amount represented the elimination of certain deferred credits and other liabilities, along with the write-off of certain capitalized hardware, software and other assets, that previously had been recorded as part of the preparation to convert to the new core-banking platform.
Current report
Net gains on loan sales: Net gains on loan sales increased $418,000 compared to the prior year period. The increase was partially due to an increase in balance of fixed-rate single-family mortgage loans sold during the 2024 period compared to the 2023 period. Fixed rate single-family mortgage loans originated are generally subsequently sold in the secondary market. The Company realized higher
Current report
premiums on the sales of loans in the 2024 period compared to the 2023 period, as market interest rates were more stable in the first half of 2024 compared to the first half of 2023.
Current report
For the six months ended June 30, 2024, non-interest income increased $981,000 to $16.6 million when compared to the six months ended June 30, 2023, primarily as a result of the following items:
Current report
Other income: Other income increased $2.1 million compared to the prior year period, for the same reason noted in the quarterly comparison above.
Current report
Net gains on loan sales: Net gains on loan sales increased $706,000 compared to the prior year period, for the same reason noted in the quarterly comparison above.
Current report
For the three months ended June 30, 2024, non-interest expense increased $1.7 million to $36.4 million when compared to the three months ended June 30, 2023, primarily as a result of the following items:
Current report
Other operating expenses: Other operating expenses increased $466,000 from the prior year period, to $2.6 million. In the 2024 period, the Company recorded expenses totaling $600,000 related to ongoing compliance matters. The Company continually monitors its compliance programs, including matters that may arise from time to time, which could result in additional compliance expenses in future periods.
Current report
Net occupancy expenses: Net occupancy expenses increased $432,000 from the prior year period. Various components of computer license and support expenses collectively increased by $476,000 in the 2024 period compared to the 2023 period.
Current report
Several other non-interest expense categories increased $916,000 in total compared to the prior year period.
Current report
For the six months ended June 30, 2024, non-interest expense increased $1.7 million to $70.8 million when compared to the six months ended June 30, 2023, primarily as a result of the following items:
Current report
Net occupancy expenses: Net occupancy expenses increased $551,000 from the prior year period, for the same reason noted in the quarterly comparison above.
Current report
2024, increased $84.0 million, or 1.5%, compared to the six months ended June 30, 2023, primarily due to increases in net loans receivable and non-interest-earning assets.
Removed paragraphs (15)
Previous report
Allowance for Credit Losses
Previous report
Rising consumer sentiment and slowing inflation resulted in a strong demand rebound in 2023 for the U.S. multifamily market. New deliveries for 2023 were at a 40-year high of almost 583,000 units. Supply additions are projected to fall by 21% in 2024 to 460,000 units, as a higher interest rate environment, combined with a pullback in construction lending, has seen some developers unable to move forward on proposed projects. This suggests the beginning of a meaningful pause in deliveries towards the end of 2024 and into 2025, allowing overbuilt Sun Belt markets to absorb their current supply overhang and return to equilibrium more quickly. Until then, these markets may experience significant performance pressures, especially in the 4 & 5 Star segment, where most of the new supply is priced.
Previous report
The Midwest and Northeast fared the best in 2023 with nine out of the ten strongest rent growth markets in 2023 from one of those two regions. The Chicago market rents rose from 3.0% to 3.7% in 2023. Downward pressure on rent growth will likely continue in the first half of 2024. Per CoStar projections, markets in the South and luxury properties remain at the most risk for weakness due to oversupply conditions, while Midwest and Northeast locations and mid-priced 3 Star properties could outperform.
Previous report
Although factors such as declining household formations, rising supply deliveries, and weakening demand may present temporary obstacles, the long-term issue of a major housing shortage remains in our nation. Thus, rent growth is anticipated to rebound above historical averages.
Previous report
Shrinking demand continues to plague the U.S. office market so far in 2024, shooting vacancy up to a record 13.8% and bringing cumulative negative absorption to more than 200 million SF since the beginning of 2020. Deliveries in 2025 are expected to be the lowest in a decade, tapering off to a negligible amount afterward. This should tighten the market for desirable first-generation space.
Previous report
As of March 2024, the national office vacancy rate was 13.8%, while our market areas reflected the following vacancy levels at March 2024: Springfield, Missouri at 4.3%, St. Louis at 10.3%, Kansas City at 12.1%, Minneapolis at 10.9%, Dallas-Fort Worth at 18.1%, Chicago at 16.3%, Atlanta at 15.7%, Denver at 16.5%, Phoenix at 16.1% and Charlotte, North Carolina at 14.5%.
Previous report
A retail banking center in Springfield, Missouri, was consolidated into a nearby banking center in January 2024. The office at 600 W. Republic Road was consolidated into the Great Southern banking center located at 2945 W. Republic Road, a short distance away. The vacated property was subsequently sold in April 2024.
Previous report
The Company announced that its 2024 Annual Meeting of Stockholders will be held at 10 a.m. Central Time on May 8, 2024, and will be held in a virtual format. Stockholders will be able to attend the Annual Meeting via a live webcast. Holders of record of Great Southern Bancorp, Inc. common stock at the close of business on the record date, February 28, 2024, may vote during the live webcast of the Annual Meeting or by proxy. Please see the Company’s Notice of Annual Meeting and Proxy Statement available on the Company’s website, www.GreatSouthernBank.com, (click “About” then “Investor Relations”) for additional information about the virtual meeting.
Previous report
Interest income on other interest-earning assets increased $283,000 in the three months ended March 31, 2024 compared to the three months ended March 31, 2023. Interest income increased $177,000 as a result of higher average interest rates from 4.51% during the three months ended March 31, 2023, to 5.22% during the three months ended March 31, 2024. Interest income increased $106,000 as a result of an increase in average balances from $91.8 million during the three months ended March 31, 2023, to $100.5 million during the three months ended March 31, 2024.
Previous report
During the three months ended March 31, 2024, the Company recorded provision expense of $500,000 on its portfolio of outstanding loans, compared to a $1.5 million provision expense during the three months ended March 31, 2023. In the three months ended March 31, 2024 and 2023, the Company experienced net charge offs of $83,000 and net recoveries of $7,000, respectively. For the three months ended March 31, 2024, the Company recorded a provision for losses on unfunded commitments of $130,000, compared to a negative provision of $826,000 for the three months ended March 31, 2023. Total unfunded commitments decreased significantly during 2023, resulting in a lower required reserve, while total unfunded commitments did not change significantly in the three months
Previous report
For the three months ended March 31, 2024, non-interest income decreased $1.1 million to $6.8 million when compared to the three months ended March 31, 2023, primarily as a result of the following items:
Previous report
Other income: Other income decreased $465,000 compared to the prior year period. In the 2024 period, the Company recorded $404,000 related to activity incentives for debit card usage, compared to $799,000 in the 2023 period.
Previous report
For the three months ended March 31, 2024, non-interest expense decreased $41,000 to $34.4 million when compared to the three months ended March 31, 2023, primarily as a result of the following items:
Previous report
Advertising: Advertising expenses decreased $297,000 from the prior year period, to $350,000. In the 2024 period, the Company received an annual marketing and card expense reimbursement for qualifying expenditures from its debit card brand provider of $423,000; this was used to offset marketing and advertising costs that included this branding. In the previous year period, $321,000 of this annual reimbursement was applied to marketing and advertising expenses.
Previous report
Legal, Audit and Other Professional Fees: Legal, audit and other professional fees decreased $256,000 from the prior year period, to $1.7 million. In the 2023 period, the Company expensed a total of $1.3 million related to legal expenses and training and implementation costs for the core systems conversion and professional fees to consultants engaged to support the Company’s transition of core and ancillary software and information technology systems. In the 2024 period, this expense was $929,000.
Reworded paragraphs (114)
Previous wording
When used in this Quarterly Report on Form 10-Q and in other documents filed or furnished by Great Southern Bancorp, Inc. (the “Company”) with the Securities and Exchange Commission (the “SEC”), in the Company’s other press releases or other public or stockholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases “may,” “might,” “could,” “should,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “believe,” “estimate,” “project,” “intends” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements also include, but are not limited to, statements regarding plans, objectives, expectations or consequences of announced transactions, known trends and statements about future performance, operations, products and services of the Company. The Company’s ability to predict results or the actual effects of future plans or strategies is inherently uncertain, and the Company’s actual results could differ materially from those contained in the forward-looking statements.
Current wording
When used in this Quarterly Report on Form 10-Q and in other documents filed or furnished by Great Southern Bancorp, Inc. (the “Company”) with the Securities and Exchange Commission (the “SEC”), in the Company’s press releases or other public or stockholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases “may,” “might,” “could,” “should,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “believe,” “estimate,” “project,” “intends” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements also include, but are not limited to, statements regarding plans, objectives, expectations or consequences of announced transactions, known trends and statements about future performance, operations, products and services of the Company. The Company’s ability to predict results or the actual effects of future plans or strategies is inherently uncertain, and the Company’s actual results could differ materially from those contained in the forward-looking statements.
Previous wording
Goodwill and intangible assets that have indefinite useful lives are subject to an impairment test at least annually and more frequently, if circumstances indicate their value may not be recoverable. Goodwill is tested for impairment using a process that estimates the fair value of each of the Company’s reporting units compared with its carrying value. The Company defines reporting units as a level below each of its operating segments for which there is discrete financial information that is regularly reviewed. As of March 31, 2024, the Company had one reporting unit to which goodwill has been allocated – the Bank. If the fair value of a reporting unit exceeds its carrying value, then no impairment is recorded. If the carrying value exceeds the fair value of a reporting unit, further testing is completed comparing the implied fair value of the reporting unit’s goodwill to its carrying value to measure the amount of impairment. Intangible assets that are not amortized will be tested for impairment at least annually by comparing the fair values of those assets to their carrying values. At March 31, 2024, goodwill consisted of $5.4 million at the Bank reporting unit, which included goodwill of $4.2 million that was recorded during 2016 related to the acquisition of 12 branches and the assumption of related deposits in the St. Louis market. Other identifiable deposit intangible assets that are subject to amortization are amortized on a straight-line basis over a period of seven years.
Current wording
Goodwill and intangible assets that have indefinite useful lives are subject to an impairment test at least annually and more frequently if circumstances indicate their value may not be recoverable. Goodwill is tested for impairment using a process that estimates the fair value of each of the Company’s reporting units compared with its carrying value. The Company defines reporting units as a level below each of its operating segments for which there is discrete financial information that is regularly reviewed. As of June 30, 2024, the Company had one reporting unit to which goodwill has been allocated – the Bank. If the fair value of a reporting unit exceeds its carrying value, then no impairment is recorded. If the carrying value exceeds the fair value of a reporting unit, further testing is completed comparing the implied fair value of the reporting unit’s goodwill to its carrying value to measure the amount of impairment. Intangible assets that are not amortized will be tested for impairment at least annually by comparing the fair values of those assets to their carrying values. At June 30, 2024, goodwill consisted of $5.4 million at the Bank reporting unit, which included goodwill of $4.2 million that was recorded during 2016 related to the acquisition of 12 branches and the assumption of related deposits
Previous wording
naming rights to Great Southern Bank for a total cost of $5.5 million, to be paid over a period of seven years. The Company expects to amortize the intangible asset through non-interest expense over a period not to exceed 15 years.
Current wording
In April 2022, the Company, through its subsidiary Great Southern Bank, entered into a naming rights agreement with Missouri State University related to the main arena on the university’s campus in Springfield, Missouri. The terms of the agreement provide the naming rights to Great Southern Bank for a total cost of $5.5 million, to be paid over a period of seven years. The Company expects to amortize the intangible asset through non-interest expense over a period not to exceed 15 years.
Previous wording
At March 31, 2024, the amortizable intangible assets included the arena naming rights of $5.0 million, which are reflected in the table below. These amortizable intangible assets are reviewed for impairment if circumstances indicate their value may not be recoverable based on a comparison of fair value.
Current wording
At June 30, 2024, the amortizable intangible assets included the arena naming rights of $4.9 million, which are reflected in the table below. These amortizable intangible assets are reviewed for impairment if circumstances indicate their value may not be recoverable based on a comparison of fair value.
Previous wording
A summary of goodwill and intangible assets as of the dates indicated is as follows:
Current wording
A summary of goodwill and intangible assets as of the date indicated is as follows:
Previous wording
Additionally, the Federal Reserve acted decisively by slashing its benchmark interest rate to near zero and ensuring credit availability to businesses, households, and municipal governments. The Federal Reserve’s efforts largely insulated the financial system from the problems in the economy, a significant difference from the financial crisis of 2007-2008. Purchases of Treasury and agency mortgage-backed securities totaling $120 billion each month by the Federal Reserve commenced shortly after the pandemic began. In November 2021, the Federal Reserve began to taper its quantitative easing (QE), winding down its bond purchases with its final open market purchase conducted on March 9, 2022. The federal government deficit was $2.8 trillion in fiscal 2021, close to $1.4 trillion in fiscal 2022, and $1.7 trillion in fiscal 2023.
Current wording
problems in the economy, a significant difference from the financial crisis of 2007-2008. Purchases of Treasury and agency mortgage-backed securities totaling $120 billion each month by the Federal Reserve commenced shortly after the pandemic began. In November 2021, the Federal Reserve began to taper its quantitative easing (QE), winding down its bond purchases with its final open market purchase conducted on March 9, 2022. The federal government deficit was $2.8 trillion in fiscal 2021, close to $1.4 trillion in fiscal 2022, and $1.7 trillion in fiscal 2023.
Previous wording
The Federal Reserve aggressively raised the federal funds interest rates since early 2022 through mid-2023, pushing the federal funds rate to more than 5.50%, its highest level in 22 years. The Federal Reserve’s actions were motivated by surging inflation in 2021 caused by pandemic-fueled spending, which outpaced the ability of producers to supply goods and services after having been impacted by COVID-related shutdowns and clogged transportation systems. The Federal Reserve has made some headway in its attempt to force inflation down. The personal consumption expenditures (PCE) price index, the Federal Reserve's preferred measure of inflation, eased from its peak of 7.1% in June 2022 to 2.9% in December 2023, but core PCE, which excludes food and energy prices, has been slower to retreat and sat at 2.8% at March 2024, above the Federal Reserve's target of 2.0%.
Current wording
The Federal Reserve aggressively raised the federal funds interest rates from early 2022 through mid-2023, pushing the federal funds rate to more than 5.50%, its highest level in 22 years. The Federal Reserve’s actions were motivated by surging inflation in 2021 caused by pandemic-fueled spending, which outpaced the ability of producers to supply goods and services after having been impacted by COVID-related shutdowns and clogged transportation systems. The Federal Reserve has made some headway in its attempt to force inflation down. The personal consumption expenditures (PCE) price index, the Federal Reserve's preferred measure of inflation, eased from its peak of 7.1% in June 2022 to 2.9% in December 2023, but core PCE, which excludes food and energy prices, has been slower to retreat and sat at 2.6% at June 2024, still above the Federal Reserve's target of 2%.
Previous wording
Moody’s is projecting real GDP in 2024 to be higher than previously forecast, but the persistence of high interest rates may slow economic growth. Real GDP is projected to rise 2.6% in 2024 on an annual average basis, an upward revision of 0.1%, and is projected to grow 1.6% in 2025 and 1.9% in 2026.
Current wording
Moody’s is projecting real GDP in 2024 to be slightly lower than previously forecast, as the persistence of high interest rates continues to impact GDP growth rates. Real GDP is projected to rise 2.4% in 2024 on an annual average basis, a downward revision of 0.1%, and is projected to grow to 1.8% in 2025 and 1.9% in 2026. The actual real GDP quarterly increase in the first quarter of 2024 was 1.4% and the second quarter of 2024 advance estimate for real GDP was a quarterly increase of 2.8%.
Previous wording
The national unemployment rate has ranged from 3.4% to 3.8% since March 2022. The number of unemployed individuals also remained steady at 6.4 million as of March 2024 with 303,000 jobs added in March 2024. In March 2024, employment gains in health and private education, government, and leisure and hospitality contributed to 208,000 of the total job gains. Leisure and hospitality employment rebounded to its pre-pandemic level, with 49,000 of job gains in March 2024, partly boosted by the milder winter.
Current wording
The national unemployment rate was 4.1% as of June 2024 and has ranged from 3.4% to 4.1% since June 2022. The number of unemployed individuals remained steady at 6.8 million as of June 2024, with 206,000 jobs added in June 2024. In June 2024, employment gains in healthcare, government, and construction contributed to 153,000 of the total job gains.
Previous wording
As of March 2024, the labor force participation rate (the share of working-age Americans employed or actively looking for a job) remained stable at 62.7%. The unemployment rate for the Midwest, where the Company conducts most of its business, increased from 3.3% in March 2023 to 3.6% in March 2024. Unemployment rates for March 2024 in the states where the Company has a branch or a loan production office were Arizona at 3.8%, Arkansas at 3.5%, Colorado at 3.7%, Georgia at 3.1%, Illinois at 4.8%, Iowa at 2.9%, Kansas at 2.7%, Minnesota at 2.7%, Missouri at 3.3%, Nebraska at 2.4%, North Carolina at 3.5% and Texas at 3.9%. Of the metropolitan areas in which the Company does business, most are below the national unemployment rate for March 2024 of 3.8%, except for Chicago at 4.7%.
Current wording
As of June 2024, the labor force participation rate (the share of working - age Americans employed or actively looking for a job) remained stable at 62.6%. The unemployment rate for the Midwest, where the Company conducts most of its business, has increased from 3.4% in June 2023 to 3.8% in June 2024. Unemployment rates for June 2024 in the states where the Company has a branch or a loan production office were Arizona at 3.3%, Arkansas at 3.3%, Colorado at 3.8%, Georgia at 3.3%, Illinois at 5.0%, Iowa at 2.8%, Kansas at 3.1%, Minnesota at 2.9%, Missouri at 3.7%, Nebraska at 2.6%, North Carolina at 3.6%, and Texas at 4.0%. The rates are slightly higher for many of these states compared to March 2024. Of the metropolitan areas in which the Company does business, most are below the national unemployment rate for June 2024 of 4.1%.
Previous wording
Existing home sales decreased 4.3% in March 2024 from February 2024 to a seasonally adjusted annual rate of 4.19 million, down 3.7% from the previous year. In the Midwest, existing-home sales retracted 1.9% from February 2024 to an annual rate of 1.01 million in March 2024, down 1.0% from one year ago.
Current wording
Existing - home sales decreased to a seasonally adjusted annual rate of 3.89 million in June 2024, down 5.4% from the previous year. In the Midwest, existing - home sales declined to an annual rate of 920,000 in June 2024, down 6.1% from one year ago.
Previous wording
The median existing-home sales price rose 4.8% from March 2023 to $394,000 in March 2024. All four U.S. regions registered price gains. The median price in the Midwest was $292,000, up 7.5% from March 2023.
Current wording
The median existing - home sales price rose 4.1% from June 2023 to an all - time high of $426,900 in June 2024. All four U.S. regions registered price gains. The median price in the Midwest was $327,100, up 5.5% from June 2023.
Previous wording
Total housing inventory registered at the end of March 2024 was 1.1 million units, up 4.7% from February 2024 and up 14.4% from one year ago of 970,000. Unsold inventory sat at a supply of 3.2 months in March 2024, up from 2.9 months in February 2024 and 2.7 months in March 2023.
Current wording
Total housing inventory registered at the end of June 2024 was 1.32 million units, up 3.1% from May 2024 and up 23.4% from one year ago of 1.07 million units. Unsold inventory sat at a 4.1 - month supply in June 2024, up from 3.7 months in May 2024 and up from 3.1 months in June 2023.
Previous wording
Sales of new single‐family houses in March 2024 were at a seasonally adjusted annual rate of 693,000, according to the U.S. Census Bureau and the Department of Housing and Urban Development. This was 8.8% above the revised February 2024 rate of 637,000 and 8.3% above the March 2023 rate of 640,000.
Current wording
Sales of new single - family houses in June 2024 were at a seasonally adjusted annual rate of 617,000, according to the U.S. Census Bureau and the Department of Housing and Urban Development. This was 0.6% below the revised May 2024 rate of 621,000 and was 7.4% below the June 2023 rate of 666,000.
Previous wording
The median sales price of new houses sold in March 2024 was $431,000, down from $439,000 in March 2023. The average sales price in March 2024 of $525,000 was up from $520,000 in March 2023. The seasonally‐adjusted estimate of new houses for sale at the end of March 2024 was 477,000. This represented a supply of 8.3 months at the current sales rate.
Current wording
The median sales price of new houses sold in June 2024 was $417,300, up from $415,400 in June 2023. The average sales price in June 2024 of $487,200 was down from $494,700 in June 2023. The seasonally - adjusted estimate of new houses for sale at the end of June 2024 was 476,000. This represents a supply of 9.3 months at the current sales rate.
Previous wording
According to Freddie Mac, the average commitment rate for a 30-year, fixed-rate mortgage was 7.1% as of April 18, 2024 which is up 6.9% from the previous week and 6.4% from one year ago.
Current wording
According to Freddie Mac, the average commitment rate for a 30 - year, fixed - rate mortgage was 6.77% as of July 22, 2024, which is down from 6.89% for the previous week and down from 6.78% one year ago.
Previous wording
As of March 31, 2024, the national multi-family market vacancy rate was 7.8%. Our market areas reflected the following apartment vacancy levels as of March 2024: Springfield, Missouri at 4.9%, St. Louis at 10.5%, Kansas City at 8.9%, Minneapolis at 8.3%, Tulsa, Dallas-Fort Worth at 10.8%, Chicago at 5.6%, Atlanta at 12.2%, Phoenix at 10.6%, Denver at 9.0% and Charlotte, North Carolina at 11.6%.
Current wording
The June 2024 national multi-family market vacancy rates remained consistent with the previous quarter at 7.8%. Our market areas reflected the following apartment vacancy levels as of June 2024: Springfield, Missouri at 5.3%, St. Louis at 9.5%, Kansas City at 7.7%, Minneapolis at 7.3%, Dallas-Fort Worth at 10.6%, Chicago at 5.6%, Atlanta at 12.3%, Phoenix at 11.0%, Denver at 9.6% and Charlotte, North Carolina at 12.3%. The rates are slightly higher for some of these cities compared to March 2024.
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Higher vacancy and deteriorating rents have severe implications for property values, with further cap rate expansion expected to exacerbate the situation. On average, values are down around 20% since the end of 2021. An additional value correction over the next 12-18 months is expected as a steady stream of low-rate loans maturing into a high rate environment provides motivation for repricing.
Current wording
The 89.1 million SF under construction is the lowest amount since 2013, and the 20 million SF in construction starts over the past year is the lowest amount on record for a 12-month period. Net deliveries are expected to taper off to a negligible amount by the end of 2025, which should tighten the market for desirable existing space. Asking rental rates are still expected to dip as basis resets. An additional value correction over the next 12-18 months is expected as a steady stream of low rate loans maturing into a high-rate environment provides motivation for repricing.
Previous wording
Office users are continuing to respond to stable attendance and slowing employment growth by shrinking their footprints, resulting in ongoing occupancy losses. Tenants gave back another 20 million SF in the first quarter of 2024, bringing the market's losing streak to eight consecutive quarters. Shrinking overall demand has produced a negative-sum game in the market for leased space. There currently appears to be little likelihood of a dramatic change in demand conditions in the next 18-24 months, during which about 25% of leases executed before 2020 are set to expire. Thus, the outlook is for a continued rise in vacancy, which is expected to approach, if not exceed, 16% by the end of 2025.
Current wording
During the next 18-24 months, about 25% of square footage leased before April 2020 is set to expire. Thus, the outlook is for a continued rise in vacancy, which is expected to increase approximately 1.5% by early 2026.
Previous wording
The U.S. retail market is in one of its firmest fundamental positions on record thanks to steadily rising demand, a significant reduction in tenant bankruptcies and store closures, and limited new supply. Demand for retail space has increased by nearly 42 million SF during the past 12 months and over 200 million SF since the start of 2021. While the increase in demand for space has been driven by growth from numerous sources, the most significant gains are from tenants in the food and beverage, discount, off-price, and experiential sectors, which combined accounted for over half of all new leasing activity over the past year. Only 4.8% of retail space is currently available for lease, the lowest level on record.
Current wording
The U.S. retail market is in one of its firmest fundamental positions on record thanks to steadily rising demand, a significant reduction in tenant bankruptcies and store closures, and limited new supply. Demand for retail space has increased by 40.1 million SF during the past 12 months and over 212 million SF since the start of 2021. While the increase in demand for space has been driven by growth from numerous sources, the most significant gains are from tenants in the food and beverage, discount, off-price, and experiential sectors, which combined accounted for over half of all new leasing activity over the past year.
Previous wording
While demand for space continues to rise, new retail development activity remains minimal. Approximately 62 million SF of new retail space was delivered across the U.S. over the past year, more than 40% below the prior 10-year average. Most retail construction activity comprises single-tenant build-to-suits or smaller ground-floor spaces in mixed-use developments. Over 155 million SF of space has been demolished over the past five years, the vast majority of which was attached to, or within, underperforming malls. Given the structural downshift in activity coupled with the fact that over three-quarters of new deliveries during the past five years have had a tenant in place at delivery, the U.S. retail market has faced virtually no threat from new supply. This looks to continue for
Current wording
While demand for space continues to rise, new retail development activity remains minimal. Approximately 36.5 million SF of new retail space was delivered across the U.S. over the past 12 months, which is half of the prior 10-year average. Most retail construction activity comprises single-tenant build-to-suits or smaller ground-floor spaces in mixed-use developments. Given the structural downshift in activity coupled with the fact that over three years of new deliveries have typically had a tenant in place at delivery, the
Previous wording
the foreseeable future, as retail construction starts fell to new historic lows and higher interest rates challenge the feasibility of many potential new retail developments at current rent levels.
Current wording
U.S. retail market has faced virtually no threat from new supply. This looks to continue for the foreseeable future, as retail construction starts fell to new historic lows as higher interest rates challenge the feasibility of many new potential retail developments at current rent levels. Rents continue to rise due to minimal availability and the significant boost in retail sales coming out of the pandemic. Asking rents for retail spaces have increased by 2.4% over the past year to a new record high of $25.00 per SF.
Previous wording
During the first quarter of 2024, national retail vacancy rates remained steady at 4.1% while our market areas reflected the following vacancy levels: Springfield, Missouri at 2.8%, St. Louis at 4.5%, Kansas City at 4.0%, Minneapolis at 2.6%, Dallas-Fort Worth at 4.5%, Chicago at 4.9%, Atlanta at 3.6%, Phoenix at 4.7%, Denver at 3.9%, and Charlotte, North Carolina at 2.7%.
Current wording
During the second quarter of 2024, national retail vacancy rates remained steady at 4.1% while our market areas reflected the following vacancy levels: Springfield, Missouri at 2.2%, St. Louis at 4.2%, Kansas City at 3.9%, Minneapolis at 2.5%, Dallas-Fort Worth at 4.5%, Chicago at 4.8%, Atlanta at 3.6%, Phoenix at 4.8%, Denver at 3.7%, and Charlotte, North Carolina at 2.6%. The rates are slightly lower for many of these cities compared to March 2024.
Previous wording
U.S. industrial market performance continued to downshift as 2024 kicked off. While the national vacancy rate is not expected to rise well above its 20-year average of 7.1%, the next 6-12 months could still prove to be the market's most challenging period over the next five years. Net absorption has remained positive but continued to lose steam, with early 2024 registering the lowest first quarter absorption tally since 2012. This weakness tied partly to recent 12-year lows in home sales, which has lowered sales of furniture, building materials, and appliances, leading to large distribution center closures by tenants including Bed Bath & Beyond, Ashley Furniture, and Home Depot. Third-party distributors that leased ahead of their long-term space needs during the pandemic have also been closing facilities they opened during 2020-2022.
Current wording
U.S. industrial market performance continued to downshift in the second quarter of 2024. While the national vacancy rate is not expected to rise well above its 20-year average of 7.1%, the next 6-12 months could still prove to be the market's most challenging period over the next five years. Net absorption has remained positive but continued to lose steam, with the first quarter of 2024 registering the lowest first quarter absorption tally since 2012. This weakness partly reflects recent 12-year lows in home sales, which has lowered sales of furniture, building materials, and appliances, leading to large distribution center closures by tenants including Bed Bath & Beyond, Ashley Furniture, and Home Depot. Third-party distributors that leased ahead of their long-term space needs during the pandemic have also been closing facilities they opened during 2020-2022.
Previous wording
Overall growth in real consumer goods spending has been re-accelerating since last spring even as inflation persists. Large distribution center expansions by companies that sell necessities consumers are still purchasing in high volume despite inflation, including Burlington Coat Factory, TJX Companies, Chuck and Dwight, and Nestle USA, which have all signed new leases larger than 700,000 SF this year.
Current wording
Overall growth in real consumer goods spending has been re-accelerating since last spring as inflation gradually subsides. Large distribution center expansions by companies that sell necessities consumers are still purchasing in high volume, including Burlington Coat Factory, TJX Companies, Chuck and Dwight, and Nestle USA, which have all signed new leases larger than 700,000 SF this year.
Previous wording
New deliveries will likely remain elevated for the next six to nine months, driving the national vacancy rate higher. Higher interest rates have caused construction starts on new industrial projects to halt. Given the average construction time of 14 months for large industrial projects, this recent pullback in starts suggests that by late 2024, the number of new projects completing construction may begin to decline. This may set the stage for vacancies to stabilize or begin tightening again in late 2024, and for rent growth to accelerate thereafter.
Current wording
The trend of slowing absorption and rising space availability rates has been broad-based across major U.S. markets. Higher interest rates have caused construction starts on new industrial projects to halt. Given the average construction time of 14 months for large industrial projects, this recent pullback in starts signals that by late 2024, the number of new projects completing construction should continue to decline.
Previous wording
For the first quarter of 2024, national industrial vacancy rates increased to 6.2% from 4.5% as of March 31, 2023. Our market areas reflected the following industrial vacancy levels as of March 2024: Springfield, Missouri at 1.6%, St. Louis at 4.6%, Kansas City at 5.3%, Minneapolis at 4.0%, Dallas-Fort Worth at 9.5%, Chicago at 5.5%, Atlanta at 6.6%, Phoenix at 9.9%, Denver at 7.7% and Charlotte, North Carolina at 7.1%.
Current wording
For the second quarter of 2024, national industrial vacancy rates increased to 6.6%, from 6.2% for the first quarter of 2024. Our market areas reflected the following industrial vacancy levels: Springfield, Missouri at 1.7%, St. Louis at 4.5%, Kansas City at 5.5%, Minneapolis at 4.4%, Dallas-Fort Worth at 9.6%, Chicago at 5.3%, Atlanta at 7.5%, Phoenix at 10.5%, Denver at 8.4% and Charlotte, North Carolina at 7.7%.
Previous wording
The profitability of the Company and, more specifically, the profitability of its primary subsidiary, the Bank, depend primarily on its net interest income, as well as provisions for credit losses and the level of non-interest income and non-interest expense. Net interest income is the difference between the interest income the Bank earns on its loans and investment portfolios, and the interest it pays on interest-bearing liabilities, which consists mainly of interest paid on deposits and borrowings. Net interest income is affected by the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on these balances. When interest-earning assets approximate or exceed interest-bearing liabilities, any positive interest rate spread will generate net interest income.
Current wording
The profitability of the Company and, more specifically, the profitability of its primary subsidiary, the Bank, depends primarily on its net interest income, as well as provisions for credit losses and the level of non-interest income and non-interest expense. Net interest income is the difference between the interest income the Bank earns on its loans and investment portfolios, and the interest it pays on interest-bearing liabilities, which consists mainly of interest paid on deposits and borrowings. Net interest income is affected by the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on these balances. When interest-earning assets approximate or exceed interest-bearing liabilities, any positive interest rate spread will generate net interest income.
Previous wording
Great Southern’s total assets decreased $35.2 million, or 0.6%, from $5.81 billion at December 31, 2023, to $5.78 billion at March 31, 2024. Details of the current period changes in total assets are provided below, under “Comparison of Financial Condition at March 31, 2024 and December 31, 2023.”
Current wording
Great Southern’s total assets increased $146.4 million, or 2.5%, from $5.81 billion at December 31, 2023, to $5.96 billion at June 30, 2024. Details of the current period changes in total assets are provided below, under “Comparison of Financial Condition at June 30, 2024 and December 31, 2023.”
Previous wording
Loans. Net outstanding loans decreased $3.4 million, or 0.1%, from $4.59 billion at December 31, 2023, to $4.59 billion at March 31, 2024. This decrease was primarily in commercial business loans, commercial real estate loans, construction loans and one- to four-family residential loans, significantly offset by an increase in other residential (multi-family) loans. As loan demand is affected by a variety of factors, including general economic conditions, and because of the competition we face and our focus on pricing discipline and credit quality, we cannot be assured that our loan growth will match or exceed the average level of growth achieved in prior years. The Company’s strategy continues to be focused on maintaining credit risk and interest rate risk at appropriate levels.
Current wording
Loans. Net outstanding loans increased $44.0 million, or 1.0%, from $4.59 billion at December 31, 2023, to $4.63 billion at June 30, 2024. The increase was primarily in other residential (multi-family) loans and was partially offset by decreases in construction loans and commercial business loans. As loan demand is affected by a variety of factors, including general economic conditions, and because of the competition we face and our focus on pricing discipline and credit quality, we cannot be assured that our loan growth will match or exceed the average level of growth achieved in prior years. The Company’s strategy continues to be focused on maintaining credit risk and interest rate risk at appropriate levels.
Previous wording
While our policy allows us to lend up to 95% of the appraised value on one-to four-family residential properties, originations of loans with loan-to-value ratios at that level are minimal. Private mortgage insurance is typically required for loan amounts above the 80% level. Few exceptions occur and would be based on analyses that determined minimal transactional risk to be involved. We consider these lending practices to be consistent with or more conservative than what we believe to be the norm for banks our size. At March 31, 2024 and December 31, 2023, 0.2% of our owner occupied one-to four-family residential loans had loan-to-value ratios above 100% at origination. At March 31, 2024 and December 31, 2023, an estimated 0.4% and 0.4% of total non-owner occupied one- to four-family residential loans had loan-to-value ratios above 100% at origination.
Current wording
While our policy allows us to lend up to 95% of the appraised value on one-to four-family residential properties, originations of loans with loan-to-value ratios at that level are minimal. Private mortgage insurance is typically required for loan amounts above the 80% level. Few exceptions occur and would be based on analyses which determined minimal transactional risk to be involved. We consider these lending practices to be consistent with or more conservative than what we believe to be the norm for banks our size. At both June 30, 2024 and December 31, 2023, 0.2% of our owner occupied one-to four-family residential loans had loan-to-value ratios above 100% at origination and an estimated 0.4% of our non-owner occupied one- to four-family residential loans had loan-to-value ratios above 100% at origination.
Previous wording
Available-for-sale Securities. In the three months ended March 31, 2024, available-for-sale securities decreased $12.9 million, or 2.7%, from $478.2 million at December 31, 2023, to $465.3 million at March 31, 2024.
Current wording
Available-for-sale Securities. In the six months ended June 30, 2024, available-for-sale securities increased $70.9 million, or 14.8%, from $478.2 million at December 31, 2023, to $549.1 million at June 30, 2024. In the three months ended June 30, 2024, the Company elected to purchase some fixed rate securities similar to ones already in its portfolio, to provide interest rate protection if market interest rates should fall in future periods. These securities are expected to yield over 5.00%.
Previous wording
Held-to-maturity Securities. In the three months ended March 31, 2024, held-to-maturity securities decreased $1.6 million, or 0.8%, from $195.0 million at December 31, 2023, to $193.4 million at March 31, 2024. SeeNote 5 “Investment Securities” in the Notes to Consolidated Financial Statements included in this report for additional information.
Current wording
Held-to-maturity Securities. In the six months ended June 30, 2024, held-to-maturity securities decreased $3.8 million, or 1.9%, from $195.0 million at December 31, 2023, to $191.2 million at June 30, 2024. SeeNote 5 “Investment Securities” in the Notes to Consolidated Financial Statements included in this report for additional information.
Previous wording
Deposits. The Company attracts deposit accounts through its retail branch network, correspondent banking and corporate services areas, internet channels and brokered deposits. The Company then utilizes these deposit funds, along with FHLBank advances and other borrowings, to meet loan demand or otherwise fund its activities. In the three months ended March 31, 2024, total deposit balances increased $51.7 million, or 1.1%. Compared to December 31, 2023, transaction account balances increased $60.4 million, or 1.9%, to $3.17 billion at March 31, 2024, and retail certificates of deposit decreased $32.7 million, or 3.5%, to $915.5 million at March 31, 2024. The increase in transaction accounts was primarily a result of an increase in various money market accounts as customers sought accounts paying a higher rate of interest. Retail time deposits decreased due to a decrease in retail certificates
Current wording
Deposits. The Company attracts deposit accounts through its retail branch network, correspondent banking and corporate services areas, internet channels and brokered deposits. The Company then utilizes these deposit funds, along with FHLBank advances and other borrowings, to meet loan demand or otherwise fund its activities. In the six months ended June 30, 2024, total deposit balances decreased $106.4 million, or 2.3%. Compared to December 31, 2023, transaction account balances decreased $50.7 million, or 1.6%, to $3.06 billion at June 30, 2024, and retail certificates of deposit decreased $64.2 million, or 6.8%, to $884.0 million at June 30,
Previous wording
generated through the banking center network. Competition for time deposits remains significant in many of our markets. Brokered deposits, including IntraFi program purchased funds, were $685.5 million and $661.5 million at March 31, 2024 and December 31, 2023, respectively. The Company uses brokered deposits of select maturities and interest rate characteristics from time to time to supplement its various funding channels and to manage interest rate risk.
Current wording
The decrease in transaction accounts was primarily a result of a decrease in non-interest-bearing accounts and various NOW accounts, as small businesses and individuals appear to be drawing down their balances to pay for goods and services, or are seeking a higher-yielding alternative. Retail time deposits decreased due to a decrease in retail certificates generated through the banking center network. Competition for time deposits remains significant in many of our markets. Brokered deposits, including IntraFi program purchased funds, were $670.0 million and $661.5 million at June 30, 2024 and December 31, 2023, respectively. The Company uses brokered deposits of select maturities from time to time to supplement its various funding channels and to manage interest rate risk.
Previous wording
Our ability to fund growth in future periods may also depend on our ability to continue to access brokered deposits and FHLBank advances. In times when our loan demand has outpaced our generation of new deposits, we have utilized brokered deposits and FHLBank advances to fund these loans. These funding sources have been attractive to us because we can create either fixed or variable rate funding, as desired, which more closely matches the interest rate nature of much of our loan portfolio. It also gives us greater flexibility in increasing or decreasing the duration of our funding. While we do not currently anticipate that our ability to access these sources will be reduced or eliminated in future periods, if this should happen, the limitation on our ability to fund additional loans could have a material adverse effect on our business, financial condition and results of operations. See “Results of Operations and Comparison for the Three Months Ended March 31, 2024 and 2023 – Liquidity” for further information on funding sources.
Current wording
Our ability to fund growth in future periods may also depend on our ability to continue to access brokered deposits and FHLBank advances. In times when our loan demand has outpaced our generation of new deposits, we have utilized brokered deposits and FHLBank advances to fund these loans. These funding sources have been attractive to us because we can create either fixed or variable rate funding, as desired, which more closely matches the interest rate nature of much of our loan portfolio. It also gives us greater flexibility in increasing or decreasing the duration of our funding. While we do not currently anticipate that our ability to access these sources will be reduced or eliminated in future periods, if this should happen, the limitation on our ability to fund additional loans could have a material adverse effect on our business, financial condition and results of operations. See “Results of Operations and Comparison for the Three and Six Months Ended June 30, 2024 and 2023 – Liquidity” below for further information on funding sources.
Previous wording
Securities sold under reverse repurchase agreements with customers. Securities sold under reverse repurchase agreements with customers increased $1.9 million from $70.9 million at December 31, 2023 to $72.8 million at March 31, 2024. These balances fluctuate over time based on customer demand for this product.
Current wording
Securities sold under reverse repurchase agreements with customers. Securities sold under reverse repurchase agreements with customers increased $3.4 million from $70.8 million at December 31, 2023 to $74.2 million at June 30, 2024. These balances fluctuate over time based on customer demand for this product.
Previous wording
Short-term borrowings and other interest-bearing liabilities. The Company’s FHLBank term advances were $-0- at both March 31, 2024 and December 31, 2023. At March 31, 2024, there were no overnight borrowings from the FHLBank. At December 31, 2023, there were $251.0 million in overnight borrowings from the FHLBank. In January 2024, the Bank borrowed $180.0 million under the Federal Reserve Bank’s Bank Term Funding Program (BTFP). The BTFP borrowing, which matures in January 2025 and has a fixed interest rate of 4.83%, may be repaid in full or in part without penalty prior to its stated maturity date. The line is secured primarily by the Bank’s held-to-maturity investment securities, with assets pledged totaling approximately $193 million at March 31, 2024. These funds were primarily used to repay a portion of the Bank’s overnight borrowings from the FHLBank.
Current wording
Short-term borrowings and other interest-bearing liabilities. Short term borrowings and other interest-bearing liabilities increased $223.7 million from $252.6 million at December 31, 2023 to $476.3 million at June 30, 2024. The Company may, from time to time, utilize overnight borrowings, short-term FHLBank advances, and BTFP borrowings from the Federal Reserve Bank of St. Louis (FRBSTL), depending on relative interest rates. The Company’s FHLBank term advances were $-0- at both June 30, 2024 and December 31, 2023. At June 30, 2024 and December 31, 2023, there was $295.0 million and $251.0 million, respectively, in overnight borrowings from the FHLBank, which were included in short term borrowings. In January 2024, the Bank borrowed $180.0 million under the BTFP program. The BTFP borrowing, which matures in January 2025 and has a fixed interest rate of 4.83%, may be repaid in full or in part without penalty prior to its stated maturity date. The line is secured primarily by the Bank’s held-to-maturity investment securities, with assets pledged totaling approximately $191.3 million at June 30, 2024. These funds were primarily used to repay a portion of the Bank’s overnight borrowings from the FHLBank.
Previous wording
The current level and shape of the interest rate yield curve poses challenges for interest rate risk management. Prior to its increase of 0.25% on December 16, 2015, the FRB had last changed interest rates on December 16, 2008. This was the first rate increase since September 29, 2006. The FRB also implemented rate change increases of 0.25% on eight additional occasions beginning December 14, 2016 and through December 31, 2018, with the Federal Funds rate reaching as high as 2.50%. After December 2018, the FRB paused its rate increases and, in July, September and October 2019, implemented rate decreases of 0.25% on each of those occasions. At December 31, 2019, the Federal Funds rate stood at 1.75%. In response to the COVID-19 pandemic, the FRB decreased interest rates on two occasions in March 2020, a 0.50% decrease on March 3 and a 1.00% decrease on March 16. At December 31, 2021, the Federal Funds rate was 0.25%. In 2022, the FRB implemented rate increases of 0.25%, 0.50%, 0.75%, 0.75%, 0.75%, 0.75% and 0.50% in March, May, June, July, September, November and December 2022, respectively. At December 31, 2022, the Federal Funds rate was 4.50%. In 2023, the FRB implemented rate increases of 0.25%, 0.25%, 0.25% and 0.25% in February, March, May and July 2023, respectively. At March 31, 2024, the Federal Funds rate was 5.50%. Financial markets now expect the possibility of significant further increases in Federal Funds interest rates in 2024 to be unlikely, with interest rate decisions being made at each FRB meeting based on economic data available at the time. However, the FRB has further indicated, and financial markets now have begun to price in, that it is likely that the Federal Funds interest rate will remain near this peak level for several months before any rate cuts occur.
Current wording
The current level and shape of the interest rate yield curve poses challenges for interest rate risk management. Prior to its increase of 0.25% on December 16, 2015, the FRB had last changed interest rates on December 16, 2008. This was the first rate increase since September 29, 2006. The FRB also implemented rate change increases of 0.25% on eight additional occasions beginning December 14, 2016 and through December 31, 2018, with the Federal Funds rate reaching as high as 2.50%. After December 2018, the FRB paused its rate increases and, in July, September and October 2019, implemented rate decreases of 0.25% on each of those occasions. At December 31, 2019, the Federal Funds rate stood at 1.75%. In response to the COVID-19 pandemic, the FRB decreased interest rates on two occasions in March 2020, a 0.50% decrease on March 3rd and a 1.00% decrease on March 16th. At December 31, 2021, the Federal Funds rate was 0.25%. In 2022, the FRB implemented rate increases of 0.25%, 0.50%, 0.75%, 0.75%, 0.75%, 0.75% and 0.50% in March, May, June, July, September, November and December 2022, respectively. At December 31, 2022, the Federal Funds rate was 4.50%. In 2023, the FRB implemented rate increases of 0.25%, 0.25%, 0.25% and 0.25% in February, March, May and July 2023, respectively. At December 31, 2023, the Federal Funds rate was 5.50%. To date in 2024, the FRB has not implemented any rate changes and at June 30, 2024, the Federal Funds rate was 5.50%. Financial markets now expect the possibility of significant further increases in Federal Funds interest rates in 2024 to be unlikely, with interest rate decisions being made at each FRB meeting based on
Previous wording
Great Southern’s loan portfolio includes loans ($1.28 billion at March 31, 2024) tied to various SOFR indices that will be subject to adjustment at least once within 90 days after March 31, 2024. All of these loans have interest rate floors at various rates. Great Southern also has a portfolio of loans ($826.7 million at March 31, 2024) tied to a “prime rate” of interest that will adjust immediately or within 90 days of a change to the “prime rate” of interest. Of these loans, $814.5 million had interest rate floors at various rates. In addition, Great Southern has a portfolio of loans ($6.7 million at March 31, 2024) tied to an AMERIBOR index that will adjust immediately or within 90 days of a change to the “prime rate” of interest. All of these loans had interest rate floors at various rates. At March 31, 2024, nearly all of these SOFR and “prime rate” loans had fully indexed rates that were at or above their floor rate and so are expected to move fully with future market interest rate increases.
Current wording
Great Southern’s loan portfolio includes loans ($1.41 billion at June 30, 2024) tied to various SOFR indexes that will be subject to adjustment at least once within 90 days after June 30, 2024. All of these loans have interest rate floors at various rates. Great Southern also has a portfolio of loans ($826 million at June 30, 2024) tied to a “prime rate” of interest that will adjust immediately or within 90 days of a change to the “prime rate” of interest. All of these loans had interest rate floors at various rates. In addition, Great Southern has a portfolio of loans ($7 million at June 30, 2024) tied to an AMERIBOR index that will adjust immediately or within 90 days of a change to the “prime rate” of interest. All of these loans had interest rate floors at various rates. At June 30, 2024, nearly all of these SOFR and “prime rate” loans had fully-indexed rates that were at or above their floor rate and so are expected to move fully with future market interest rate increases.
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in the St. Louis market. Other identifiable deposit intangible assets that are subject to amortization are amortized on a straight-line basis over a period of seven years.
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Additionally, the Federal Reserve acted decisively by slashing its benchmark interest rate to near zero and ensuring credit availability to businesses, households, and municipal governments. The Federal Reserve’s efforts largely insulated the financial system from the
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economic data available at the time. However, the FRB has further indicated, and financial markets now have begun to price in, that it is likely that the Federal Funds interest rate will remain near this peak level for a few more months before any rate cuts occur, possibly as early as September 2024.
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2024 compared to the same period in 2023 due to higher average balances and higher average rates of interest. Interest income from investment securities and other interest-earning assets increased during the six months ended June 30, 2024 compared to the same period in 2023 due to higher average rates of interest, partially offset by slightly lower average balances of investment securities.
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payments as a reduction of interest income on loans. The Company recorded a reduction of loan interest income related to these swap transactions of $2.8 million in the three months ended June 30, 2024, compared to a $1.7 million reduction of interest income in the three months ended June 30, 2023. The Company recorded a reduction of loan interest income related to these swap transactions of $5.5 million in the six months ended June 30, 2024, compared to a $1.7 million reduction of interest income in the the six months ended June 30, 2023. At June 30, 2024, the USD-Prime rate was 8.50% and the one-month USD-SOFR OIS rate was 5.33643%.
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Interest expense on demand and savings deposits increased $2.8 million due to average rates of interest that increased from 1.25% in the three months ended June 30, 2023 to 1.76% in the three months ended June 30, 2024. Interest rates paid on demand deposits were
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higher in the 2024 period due to significant increases in overall market rates and competition for deposits. Interest expense on demand deposits increased $127,000, due to an increase in average balances from $2.19 billion during the three months ended June 30, 2023, to $2.23 billion during the three months ended June 30, 2024. The Company also experienced increased balances in various types of money market accounts due to the increase in average rates on these accounts.
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Interest expense on time deposits increased $7.0 million as a result of an increase in average rates of interest from 2.46% during the six months ended June 30, 2023, to 4.00% during the six months ended June 30, 2024. Partially offsetting this increase, interest expense on time deposits decreased $948,000 due to a decrease in average balances of time deposits from $1.00 billion during the six months ended June 30, 2023 to $916.1 million in the six months ended June 30, 2024. As noted above, a large portion of the Company’s certificate of deposit portfolio matures within six to twelve months and therefore reprices fairly quickly. Older certificates of deposit that renewed or were replaced with new deposits generally resulted in the Company paying a higher rate of interest compared to the year-ago period due to increases in market interest rates and targeted promotions during 2023 and into 2024.
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The Company’s overall average interest rate spread decreased 53 basis points, or 16.4%, from 3.24% during the six months ended June 30, 2023 to 2.71% during the six months ended June 30, 2024. The decrease was due to a 96 basis point increase in the weighted average rate paid on interest-bearing liabilities, partially offset by a 43 basis point increase in the weighted average yield earned on interest-earning assets. In comparing the two periods, the yield on loans increased 45 basis points, the yield on investment securities increased 19 basis points and the yield on other interest-earning assets increased 53 basis points. The rate paid on deposits increased 95 basis points, the rate paid on reverse repurchase agreements increased 81 basis points, the rate paid on short-term borrowings and other interest-bearing liabilities increased 14 basis points and the rate paid on subordinated debentures issued to capital trust increased 67 basis points.
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anticipated collectability of the portfolio. Additional procedures provide for frequent management review of the loan portfolio based on loan size, loan type, delinquencies, financial analysis, ongoing correspondence with borrowers and problem loan workouts. Management determines which loans are collateral-dependent, evaluates risk of loss and makes additional provisions to expense, if necessary, to maintain the allowance at a satisfactory level.
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Overdraft and insufficient funds fees: Overdraft and insufficient funds fees decreased $1.4 million compared to the prior year period, for the same reason noted in the quarterly comparison above.
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Defined as the Company’s net interest income divided by total average interest-earning assets.
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which are non-cash or non-operating adjustments to operating cash flows. Net income adjusted for non-cash and non-operating items and the origination and sale of loans held for sale were the primary source of cash flows from operating activities. Operating activities provided cash of $16.6 million and $59.0 million during the six months ended June 30, 2024 and 2023, respectively.
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control of the Company. The primary factors typically include the number of shares available in the market from sellers at any given time, the market price of the stock and the projected impact on the Company’s earnings per share and capital.
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In April 2022, the Company, through its subsidiary Great Southern Bank, entered into a naming rights agreement with Missouri State University related to the main arena on the university’s campus in Springfield, Missouri. The terms of the agreement provide the
Previous report — wording carried elsewhere
Short-term borrowings and other interest-bearing liabilities decreased $71.3 million from $252.6 million at December 31, 2023 to $181.3 million at March 31, 2024. The Company may utilize overnight borrowings, short-term FHLBank advances, and BTFP borrowings from FRBSTL depending on relative interest rates.
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Results of Operations and Comparison for the Three Months Ended March 31, 2024 and 2023
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During the three months ended March 31, 2024, compared to the three months ended March 31, 2023, interest expense on subordinated debentures issued to capital trusts increased $61,000 due to higher average interest rates. The average interest rate was
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The Company reviews the credit quality of its loan portfolio using an internal grading system that classifies loans as “Satisfactory,” “Watch,” “Special Mention,” “Substandard” and “Doubtful.” Multiple loan reviews take place on a continuous basis by credit risk and
Previous report — wording carried elsewhere
2024 and 2023, respectively. Average assets for the three months ended March 31, 2024, increased $57.8 million, or 1.0%, from the three months ended March 31, 2023, primarily due to an increase in net loans receivable and interest bearing cash equivalents, partially offset by a decrease in investment securities.