Good day and thank you for standing by. Welcome to the Great Southern Bank Third Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Zack Mukewa, Investor Relations. Please go ahead.

Thank you. Good afternoon and thank you for joining Great Southern Bank's Third Quarter 2024 Earnings Call. Today, we will be discussing the company's results for the quarter ending September 30, 2024. Before we begin, I'd like to remind everyone that during this call, forward-looking statements may be made regarding the company's future events and financial performance. These statements are subject to various factors that could cause actual results to differ materially from those anticipated or projected. For a list of these factors, please refer to the forward-looking statements disclosure in the third quarter earnings release and other public filings. Joining me today are President and Chief Executive Officer, Joe Turner; and Chief Financial Officer, Rex Copeland. I'll now hand the call over to Joe.

Okay. Thanks, Zack, and good afternoon, everyone. We appreciate you joining us today for our third quarter earnings call. Our financial results reflect solid performance and the continued resilience of our operations despite the challenges in today's economic environment particularly with fluctuating interest rates and broader macroeconomic pressures. We earned $1.41 per diluted common share or $16.5 million in net income for the third quarter of 2024. This compares to $1.33 per diluted common share last year in the same quarter and $1.45 in the second quarter of 2024. We also surpassed the $6 billion in asset mark during this quarter. These results, I think, demonstrate our ability to maintain solid earnings and a strong balance sheet. Regarding earnings performance, our annualized return on average assets was 1.11% during the quarter, and our annualized return on average equity was 11.1% during the quarter. Net interest income increased by $1.2 million or 2.6% to $48 million compared to $46.7 million in the year-ago quarter. Our net interest margin remained steady at 3.42% compared to 3.43% in the third quarter last year. The continued pressure on our margins is primarily due to elevated deposit costs reflecting the competitive landscape for deposits and higher interest rate environment we've been operating in. We have seen some relief from the Fed's recent rate cut. But I think it's important to note that changes to our deposit costs will likely take time or this rate cut will likely take time to fully impact our funding costs. As we move forward, we will closely monitor how these rate adjustments influence deposit pricing and loan demand in the broader economy. Though we expect these macroeconomic factors to present challenges, we are well prepared to navigate the current environment by focusing on disciplined asset and liability management. We maintained…

All right. Thank you, Joe, and good afternoon, everyone. I'll reiterate some of our financial results for the third quarter of 2024 and also provide more detail on performance and operational metrics. As mentioned before, net interest income for the third quarter of 2024 was $48 million, up $1.2 million or 2.6% from the same period last year. This increase was driven primarily by higher loan yields, which rose by 52 basis points year-over-year and increased average interest-earning assets. The total interest earned on loans and investment securities improved during the quarter offsetting the continued upward pressure on our deposit costs due to higher rates and changes in deposit mix compared to the prior year period. Our net interest margin, as mentioned, remained stable at 3.42%. That was compared to 3.43% in both the second quarter of 2024 and the third quarter of 2023. The stability of our margin despite the challenging deposit rate environment reflects our disciplined approach to balance sheet management, and proactive steps to manage the cost of funds. However, we continue to feel the impact of higher rates on interest-bearing liabilities with a 34 basis point increase in interest-bearing demand deposit costs compared to the third quarter of 2023. The time deposit costs also increased by 65 basis points compared to the prior year quarter. Year-to-date, net interest income totaled $139.6 million down from $148.1 million in the same period in 2023. This reflects the gradual compression in margins across the year as deposit and other funding costs rose faster than asset yields in the second half of 2023 and the first half of 2024. We anticipate this trend to moderate slightly as the Federal Reserve's recent rate cuts take effect, although the full impact will be felt over time. We have noted that since the…

[Operator Instructions] Our first question comes from Andrew Liesch with Piper Sandler. Your line is open.

Hey, everyone. Good afternoon.

Hi, Andrew.

I just wanted to touch on the margin here. So it sounds like you're getting some stabilization on the funding side. And I know in the past, maybe it's taken a quarter or two for rate changes that flow through to your margin. But the tone sounds like NII and the margin are pretty stable since the rate cuts? Or do you think there's an opportunity for expansion here in the fourth quarter? Or do you think we got to wait until 2025 for that?

I think we worked pretty hard throughout the year to try to get our maybe a little bit asset-sensitive position moderated to being more neutral. We looked at what we knew we had as far as variable rate loans that would reprice with cuts. And we have on our – on the other side of the balance sheet, we've got quite a bit of – we have some interest rate swaps. We've got some, as I mentioned, some floating rate broker deposits, and we've got some short-term home loan bank advances overnight advances, and that kind of thing. In addition to that, we've got some shorter maturing brokered deposits. And as I mentioned, a little over $500 million of combined retail and brokered CDs that will mature in the next three months. And so we feel like we've gotten things sort of matched off there, Andrew, more than we had before. I don't know that we're going to say we're going to get to a point where we can reprice the liabilities faster than the assets by much. So I think fairly neutral is kind of how we see it in the near term at least.

Got it. That's very helpful. On the expense front, it's kind of add back the gains that you had on the foreclosed assets and then take up some of the other one-timers in the prior quarter, it looks like expenses were down by about $1 million to $34.25 million. Is that a good run rate going forward? Or do you think maybe they rise a little bit from there? This seems a little bit low to me.

Yes. I mean it was lower probably than what the expectations were. For sure, the cost that we have been incurring in previous quarters related to the proposed system conversion. That was about $900,000 or so a quarter, and those are not in there and shouldn't be going forward. We probably had – I mean we – in other categories we might have had $200,000 or $300,000 of other kind of good news kind of things that happened in the quarter. They were all pretty small individually. I mean, not to give total guidance, but I think that we were pretty much on the low side on expenses in Q3 probably.

Got it. Very helpful. Thanks for taking the questions. I'll step back.

Thank you. [Operator Instructions] Our next question comes from Damon DelMonte with KBW. Your line is open.

Hey. Good afternoon, guys. Hope you're all doing well today.

Hi, Damon.

Good afternoon. The first question, just regarding credit, nice to see the cleanup of couple of credits and you're down to NPAs of, call it, 16 basis points of loans in OREO. How do we think about the reserve at this point? There was some release this quarter, but that was probably tied directly to those couple of loans that you moved off the books. Do you feel like kind of a reserve in the mid-130s is good? Or do you feel like you still have adequate excess reserves there that could kind of bleed out over the coming quarters?

I mean I feel like the ratios we're looking at are pretty good ratios for us. I wouldn't expect to see a lot of bleed out over the coming quarters.

And some of it will also depend on the level of loan growth that we have as well because we've got a reserve – if we grow, we've got to reserve for that upfront as it happens. So I – like Joe, I think our reserve ratio has been fairly consistent and probably going to remain somewhat in that area.

Okay. Great. And that kind of ties into the next question there about loan growth that you just mentioned there. The last couple of quarters where I think this quarter was 6.5%, maybe 4% linked quarter annualized in the second quarter. The year started off kind of slow. Do you think that you finished the year kind of in the range of what we saw the last couple of quarters based on your pipelines? Or do you think you just had some pent-up demand that kind of hit the books in the middle part of the year, and it's going to kind of be a minimal growth here to end the year?

Again, we don't give guidance as to what loan growth for is going to be just because a lot of it is beyond our control. We don't completely – we have a projection of what payoffs are going to be, but they can always surprise you a little bit Damon. I mean, I think probably something that if you just look at the nine months and kind of look at how we've grown thus far, that would probably be the best projection of what we might do to end up the year.

Got it. Okay. That's helpful. That's all that I had. Thank you.

Okay. Thanks, Damon.

Thank you. And our next question comes from John Rodis with Janney. Your line is now open.

Hey guys, good afternoon.

Hi, John.

Joe, a question, I guess, on the buyback. You only bought back roughly 3,000 shares this quarter. Was that more a function of price? Or I mean, capital continues…

Yes. I mean, I think the price for the most part this quarter was a little higher. So I think that's probably it – although our book value now has moved up. And so there may be opportunity to buyback more here as we go forward.

Good problems to have though.

Yes. We also thought it made some sense to take the opportunity to build up our capital a little bit to just have a little stronger capital position, right?

Okay. That makes sense, Rex.

And we do – as we mentioned, we have the sub debt that's repricing in June, and we're going to be in a cash position to just pay that off if we want to. So kind of like we said last quarter, John, we've got good uses for capital in lots of areas in lots of ways.

Joe, maybe just sort of big picture, your thoughts, any new markets that could be on the horizon for loan offices or your thoughts on M&A in the current environment? You guys obviously haven't done anything in a while?

Yes. I mean, as far as loan production offices, we don't have anything necessarily on the drawing board. But we're – our guys are in contact with banks and good lenders kind of across the country. And so if we saw a situation that made sense in a market that we were interested in, we could do that very fairly easily. M&A, we're just not big open bank M&A people. I mean we see the struggles in when banks buy other banks maintaining the revenue producers, and it seems like you sort of wind up competing to keep the business that you pay for. And so never say never if the right situation came up, we would be interested, but we're going to be pretty selective about it, I would say.

Okay. That makes sense, Joe. I hear you. So thanks guys.

All right. Thanks, John.

Thank you. I'm showing no further questions at this time. I would now like to turn it back to Joe Turner, Chief Executive Officer, for closing remarks.

All right. Well, thanks, everybody, for joining our call today, and we look forward to talking to you after the end of the year. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.