GREAT SOUTHERN BANCORP, INC. 
By Financial Highlights for the Fourth Quarter and Twelve Months of 2008:
* The Company's and Bank's regulatory capital levels increased, and both
entities remained "well capitalized" as defined by the Federal banking
agencies' capital-related regulations as of December 31, 2008. The
Company further strengthened capital levels through its voluntary
participation in the U.S. Treasury's Capital Purchase Program for
healthy institutions.
* The allowance for loan losses increased $3.7 million from December 31,
2007. The allowance as a percentage of total loans was 1.66% at
December 31, 2008, as compared to 1.63% at September 30, 2008, and
1.38% at December 31, 2007.
* Net loans decreased $96.4 million from December 31, 2007, primarily as
a result of a reduction in outstanding construction and land
development loan balances, which were down $142.1 million from year-end
2007. In addition, unfunded balances of construction and land
development loans decreased $195.3 million from $266.4 million at
December 31, 2007, to $71.1 million at December 31, 2008.
* Loan originations for both consumer and residential lending segments
increased from the year ended December 31, 2007. Consumer loan
originations increased $3.6 million, or 5.6%, to $68.1 million for the
full year 2008 as compared to 2007. Single-family residential loan
originations increased $18.0 million, or 14.1%, to $146.3 million for
the full year 2008 as compared to 2007. A significant portion of
originated residential loans are subsequently sold without recourse to
the secondary mortgage market.
* Non-interest income decreased 8.8% ($606,000) in the fourth quarter
2008, and declined 4.4% ($1.3 million) for the twelve months of 2008
over the comparable periods in 2007. For the fourth quarter 2008, the
decrease in non-interest income was primarily due to the $2.1 million
(pre-tax) impairment write-down of certain available-for-sale equity
investments and a decrease of $581,000 in commission revenue from the
Company's travel and investment divisions. The decrease was partially
offset by an increase of $1.7 million in income related to the change
in the fair value of certain interest rate swaps and the related change
in fair value of hedged deposits.
* As part of the Company's on-going expense management, excluding
foreclosure losses and credit-related expenses, operational expense
items were down $1.0 million in the fourth quarter 2008 compared to the
same period in 2007.
Preliminary earnings for the twelve months ended
For the three months ended
For the twelve months ended
Great Southern President and CEO
"As anticipated, net loans decreased for the fourth quarter and the year
with declines primarily in the construction and land development sector.
Importantly, loans to consumer lending customers and single-family residential
loan customers were up over year-end 2007 levels. Consumer and residential
loan originations increased compared to 2007 and totaled
"Credit quality and the efficient resolution of credit issues remains a
top priority. Non-performing assets remained elevated in 2008, but at
manageable levels. The allowance for loan losses increased
"The net interest margin experienced greater compression during the fourth quarter with a decline of 33 basis points to 2.80% as compared to fourth quarter 2007. Most of the decrease in the margin resulted from strategic efforts to maintain significant liquidity in these uncertain times. Longer- term brokered certificates of deposit were purchased during 2008 to provide liquidity and to maintain in reserve available secured funding lines with the Federal Home Loan Bank and the Federal Reserve Bank."
Turner added, "The Company's on-going expense management showed positive
signs in the quarter. Non-interest expense decreased
"We expect that 2009 will be another difficult year for the industry and the economy at-large, but we worked hard in 2008 to reposition the Company and its balance sheet to better manage through the current recession. Our associates are focused on doing what is right for our customers, our communities and shareholders. This focus will be the key to our success in positioning the Company for long-term growth and increasing long-term shareholder value."
Selected Financial Data and Non-GAAP Reconciliation:
(Dollars in thousands)
Three Months Ended Twelve Months Ended
December 31, 2008 December 31, 2008
Effect Effect
of Excluding of Excluding
Hedge Hedge Hedge Hedge
Accounting Accounting Accounting Accounting
As Entries Entries As Entries Entries
Reported Recorded Recorded Reported Recorded Recorded
Net interest
income $17,242 $(639) $17,881 $71,583 $(3,111) $74,694
Provision for
loan losses 5,000 -- 5,000 52,200 -- 52,200
Non-interest
income 6,309 1,691 4,618 28,144 6,976 21,168
Non-interest
expense 13,383 -- 13,383 55,706 -- 55,706
Provision for
income taxes 1,399 (368) 1,031 (3,751) (1,353) (5,104)
Net income $3,769 $684 $3,085 $(4,428) $2,512 $(6,940)
Net income
available
to common
shareholders $3,527 $684 $2,843 $(4,670) $2,512 $(7,182)
Three Months Ended Twelve Months Ended
December 31, 2007 December 31, 2007
Effect Effect
of Excluding of Excluding
Accounting Accounting Accounting Accounting
Change for Change for Change for Change for
As Int. Rate Int. Rate As Int. Rate Int. Rate
Reported Swaps Swaps Reported Swaps Swaps
Net interest
income $17,799 $(523) $18,322 $71,405 $(1,172) $72,577
Provision
for loan
losses 1,350 -- 1,350 5,475 -- 5,475
Non-interest
income 6,915 687 6,228 29,419 1,695 27,724
Non-interest
expense 13,726 -- 13,726 51,707 -- 51,707
Provision
for income
taxes 3,199 (57) 3,142 14,343 (183) 14,160
Net income $6,439 $107 $6,332 $29,299 $340 $28,959
Selected Financial Data and Non-GAAP Reconciliation:
(Dollars in thousands)
Three Months Ended Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
Earnings Earnings Earnings Earnings
Dollars Per Dollars Per Dollars Per Dollars Per
(000) Share (000) Share (000) Share (000) Share
Reported
Earnings
(per
common
share) $3,527 $.26 $6,439 $.48 $(4,670) $(.35) $29,299 $2.15
Amortization
of deposit
broker
origination
fees (net
of taxes) 415 340 2,022 762
Net change
in fair
value of
interest
rate swaps
and related
deposits
(net of
taxes) (1,099) (447) (4,534) (1,102)
Earnings
excluding
impact
of hedge
accounting
entries $2,843 $6,332 $(7,182) $28,959
NET INTEREST INCOME
Including the impact of the accounting entries recorded for certain
interest rate swaps, net interest income for the fourth quarter of 2008
decreased
Most of the decrease in net interest margin resulted from the decision by
the Company to increase the amount of longer-term brokered certificates of
deposit during 2008 to provide liquidity for operations and to maintain in
reserve its available secured funding lines with the Federal Home Loan Bank
(FHLBank) and the Federal Reserve Bank. In 2008, the Company issued
approximately
Another factor that in 2008 negatively impacted net interest income was
the elevated level of LIBOR interest rates compared to Federal Funds rates as
a result of credit and liquidity concerns in financial markets. These LIBOR
interest rates were elevated approximately 50-75 basis points compared to
historical averages versus the stated Federal Funds rate for most of the three
months ended
The Federal Reserve most recently cut interest rates on
For the three months ended
Including the impact of the accounting entries recorded for certain
interest rate swaps, net interest income for the twelve months of 2008
increased
Excluding the impact of the accounting entries recorded for certain
interest rate swaps, economically, net interest income for the twelve months
of 2008 increased
Non-GAAP Reconciliation:
Three Months Ended Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
Dollars Dollars Dollars Dollars
(000) % (000) % (000) % (000) %
Net
Interest
Income/
Margin $17,242 2.80% $17,799 3.13% $71,583 3.01% $71,405 3.24%
Amortization
of deposit
broker
origination
fees 639 .10 523 .09 3,111 .13 1,172 .05
Net
interest
income/
margin
excluding
impact of
hedge
accounting
entries $17,881 2.90% $18,322 3.22% $74,694 3.14% $72,577 3.29%
For additional information on net interest income components, refer to "Average Balances, Interest Rates and Yields" tables in this release. This table is prepared including the impact of the accounting changes for interest rate swaps.
NON-INTEREST INCOME
Non-interest income for the fourth quarter of 2008 was
Fourth quarter 2008 commission income from the Company's travel, insurance
and investment divisions decreased
A significant increase in non-interest income was due to the change in the
fair value of certain interest rate swaps and the related change in fair value
of hedged deposits, which resulted in an increase of
Excluding the securities losses and interest rate swap income discussed
above, non-interest income for the fourth quarter of 2008 was
Non-interest income for the year ended
For the year ended
A significant increase in non-interest income was due to the change in the
fair value of certain interest rate swaps and the related change in fair value
of hedged deposits, which resulted in an increase of
Excluding the securities losses and interest rate swap income discussed
above, non-interest income for the year ended
NON-INTEREST EXPENSE
Non-interest expense for the fourth quarter of 2008 was
Non-interest expense for the twelve months of 2008 was
In 2007, the Federal Deposit Insurance Corporation (FDIC) began to once
again assess insurance premiums on insured institutions. Under the new pricing
system, institutions in all risk categories, even the best rated, are charged
an FDIC premium. Great Southern received a deposit insurance credit as a
result of premiums previously paid. The Company's credit offset assessed
premiums for the first half of 2007, but premiums were owed by the Company in
the latter half of 2007 and into 2008. The Company incurred additional deposit
insurance expense of
Due to increases in the level of foreclosed assets, foreclosure-related
expenses in the fourth quarter of 2008 were higher than the comparable 2007
period by approximately
In addition to the expense increases noted above, the Company's increase
in non-interest expense in the year ended
Non-GAAP Reconciliation:
Three Months Ended December 31,
2008 2007
Non-Interest Revenue Non-Interest Revenue
Expense Dollars* Expense Dollars*
(000) (000) % (000) (000) %
Efficiency Ratio $13,383 $23,551 56.83% $13,726 $24,714 55.54%
Amortization of
deposit broker
origination fees -- 639 (1.61) -- 523 (1.18)
Net change in
fair value of
interest rate
swaps and
related deposits -- (1,691) 4.26 -- (687) 1.55
Efficiency ratio
excluding impact
of hedge
accounting
entries $13,383 $22,499 59.48% $13,726 $24,550 55.91%
* Net interest income plus non-interest income.
Twelve Months Ended December 31,
2008 2007
Non-Interest Revenue Non-Interest Revenue
Expense Dollars* Expense Dollars*
(000) (000) % (000) (000) %
Efficiency Ratio $55,706 $99,727 55.86% $51,707 $100,824 51.28%
Amortization of
deposit broker
origination fees -- 3,111 (1.81) -- 1,172 (.61)
Net change in
fair value of
interest rate
swaps and
related deposits -- (6,976) 4.06 -- (1,695) .88
Efficiency ratio
excluding impact
of hedge
accounting
entries $55,706 $ 95,862 58.11% $51,707 $100,301 51.55%
* Net interest income plus non-interest income.
INCOME TAXES
For the three months ended
CAPITAL
As of
On
Through its preferred stock investment, the Treasury will receive a
cumulative dividend of 5% per year for the first five years, or
PROVISION FOR LOAN LOSSES AND ALLOWANCE FOR LOAN LOSSES
The provision for loan losses increased
Management records a provision for loan losses in an amount it believes sufficient to result in an allowance for loan losses that will cover current net charge-offs as well as risks believed to be inherent in the loan portfolio of the Bank. The amount of provision charged against current income is based on several factors, including, but not limited to, past loss experience, current portfolio mix, actual and potential losses identified in the loan portfolio, economic conditions, regular reviews by internal staff and regulatory examinations.
Weak economic conditions, higher inflation or interest rates, or other factors may lead to increased losses in the portfolio and/or requirements for an increase in loan loss provision expense. Management has long ago established various controls in an attempt to limit future losses, such as a watch list of possible problem loans, documented loan administration policies and a loan review staff to review the quality and anticipated collectability of the portfolio. More recently, additional procedures have been implemented to provide for more frequent management review of the loan portfolio based on loan size, loan type, delinquencies, on-going correspondence with borrowers, and problem loan work-outs. Management determines which loans are potentially uncollectible, or represent a greater risk of loss, and makes additional provisions to expense, if necessary, to maintain the allowance at a satisfactory level.
The Bank's allowance for loan losses as a percentage of total loans was
1.66%, 1.63% and 1.38% at
ASSET QUALITY
As a result of changes in balances and composition of the loan portfolio,
changes in economic and market conditions that occur from time to time, and
other factors specific to a borrower's circumstances, the level of non-
performing assets will fluctuate. Non-performing assets at
Non-performing Loans. Compared to
* An $8.3 million loan relationship, which is secured primarily by
multiple subdivisions in the St. Louis area. This relationship was
charged down $2 million upon transfer to non-performing loans. The
$8.3 million balance represents the Company's total exposure, but only
55% of the total borrowers' liability, with 45% participated to other
banks. This relationship has been with Great Southern since 2005 and
lot sales have slowed.
* A $1.6 million loan relationship, which is secured primarily by eleven
houses for sale in Northwest Arkansas. Four of the houses are either
under contract or have contracts pending, but none of these sales have
been completed at this time.
Partially offsetting these increases in non-performing loans were the
following decreases to non-performing loans during the three months ended
* A $2.5 million loan relationship, which is secured primarily by an
office and residential historic rehabilitation project in St. Louis,
was assumed by a new borrower upon the sale of the collateral.
* A $3.0 million loan relationship, which is secured primarily by a
condominium development in Kansas City, was reduced to $2.5 million
through a principal reduction. This relationship was previously charged
down approximately $285,000 upon transfer to non-performing loans.
* A portion of the primary collateral underlying a $1.2 million loan
relationship, lots, houses and duplexes for resale in the Joplin, Mo.,
area, was sold during the fourth quarter of 2008. The remaining
properties, totaling $325,000, were foreclosed during the fourth
quarter of 2008.
* The primary collateral underlying a $0.7 million loan relationship,
anticipated tax refunds, was paid off in the three months ended
December 31, 2008, by receipt of these tax refunds. In addition, the
Company recovered $760,000 into the allowance for loan losses.
* A $9.2 million loan relationship, which is secured by a condominium and
retail historic rehabilitation development in St. Louis, was reduced to
$7.7 million due to receipt of Tax Increment Financing funds.
At
* A $7.7 million loan relationship, which is secured by a condominium and
retail historic rehabilitation development in St. Louis. The original
relationship has been reduced through the receipt of Tax Increment
Financing funds and a portion of the Federal and State historic tax
credits expected to be received by the Company in 2008. Upon receipt of
the remaining Federal and State tax credits, the Company expects to
reduce the balance of this relationship to approximately $5.0 million,
the value of which is substantiated by a recent appraisal. The Company
expects to remove this relationship from loans and hold it as a real
estate asset once the tax credit process is completed. To date, six of
the ten residential units are leased. The retail space is not leased at
this time. This relationship was updated above and described more fully
in the Company's 2007 Annual Report on Form 10-K under "Non-performing
Assets."
* A $2.5 million loan relationship, which is secured primarily by a
condominium development in Kansas City. This relationship was updated
above and previously described in the Company's September 30, 2008
Quarterly Report on Form 10-Q under "Non-performing Assets."
* A $2.3 million loan relationship, which is secured primarily by
commercial land to be developed into commercial lots in Northwest
Arkansas. This relationship was previously described in the Company's
September 30, 2008 Quarterly Report on Form 10-Q under "Non-performing
Assets."
* A $1.4 million loan relationship, which is secured primarily by a
residential subdivision development and developed lots in various
subdivisions in Springfield, Mo. This relationship was charged down
approximately $413,000 in the fourth quarter of 2008 upon receipt of
updated appraisals to establish the value of the collateral.
Potential Problem Loans. Potential problem loans increased
Foreclosed Assets. Foreclosed assets decreased
At
BUSINESS INITIATIVES
The Company is expanding its retail banking center network in the
Great Southern is participating in the FDIC's Temporary Liquidity
Guarantee Program (TLGP), which consists of two basic components: (1) the
Transaction Account Guarantee Program and (2) the Debt Guarantee Program.
Through the Transaction Account Guarantee Program, Great Southern is
purchasing additional FDIC insurance coverage for its customers. Great
Southern customers with noninterest-bearing deposit accounts, Lawyer's Trust
Accounts, and NOW accounts paying interest at a rate less than 0.50 percent
will be fully insured by the FDIC regardless of the account balance, through
The Debt Guarantee Program, which guarantees newly issued senior unsecured debt of banks and thrifts, could be utilized by the Company in the future. At present, the Company has no senior unsecured debt currently outstanding.
The common stock of Great Southern Bancorp, Inc., is quoted on the Nasdaq
Global Select Market System under the symbol "GSBC". The last reported sale
price of GSBC stock in the quarter ended
Great Southern offers a broad range of banking, investment, insurance and
travel services to customers and clients. Headquartered in
http://www.greatsouthernbank.com
Forward-Looking Statements
When used in future filings by the Company with the Securities and Exchange Commission (the "SEC"), in the Company's press releases or other public or shareholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases "will likely result" "are expected to," "will continue," "is anticipated," "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. Such statements are subject to certain risks and uncertainties, including, among other things, changes in economic conditions in the Company's market area, changes in policies by regulatory agencies, fluctuations in interest rates, the risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write- offs and changes in estimates of the adequacy of the allowance for loan losses, the Company's ability to access cost-effective funding, fluctuations in real estate values and both residential and commercial real estate market conditions, demand for loans and deposits in the Company's market area and competition, that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to advise readers that the factors listed above could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.
The Company does not undertake-and specifically declines any obligation- to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
The following tables set forth certain selected consolidated financial
information of the company at and for the periods indicated. Financial data
for all periods is unaudited. In the opinion of management, all adjustments,
which consist only of normal recurring accruals, necessary for a fair
presentation of the results for and at such unaudited periods have been
included. The results of operations and other data for the three and twelve
months ended
Selected Financial Condition Data:
December 31, December 31, September 30,
2008 2007 2008
(Dollars in thousands)
Total assets $2,659,923 $2,431,732 $2,527,912
Loans receivable, gross 1,746,159 1,838,853 1,795,962
Allowance for loan losses 29,163 25,459 29,379
Foreclosed assets, net 32,659 20,399 32,810
Available-for-sale securities,
at fair value 647,648 425,028 505,715
Deposits 1,908,028 1,763,146 1,854,474
Total borrowings 500,030 461,517 485,569
Total stockholders' equity 234,087 189,871 168,784
Common stockholders' equity 178,507 189,871 168,784
Non-performing assets 65,861 55,874 66,035
Three Months Ended Twelve Months Ended Three Months Ended
December 31, December 31, September 30,
2008 2007 2008 2007 2008
Selected Operating
Data: (Dollars in thousands)
Interest
income $35,786 $40,733 $144,814 $163,871 $35,024
Interest
expense 18,544 22,934 73,231 92,466 16,657
Net interest
income 17,242 17,799 71,583 71,405 18,367
Provision for
loan losses 5,000 1,350 52,200 5,475 4,500
Non-interest
income 6,309 6,915 28,144 29,419 1,789
Non-interest
expense 13,383 13,726 55,706 51,707 14,650
Provision
(credit) for
income taxes 1,399 3,199 (3,751) 14,343 182
Net income
(loss) $3,769 $6,439 $(4,428) $29,299 $824
Net income
(loss)
available to
common
shareholders $3,527 $6,439 $(4,670) $29,299 $824
At or For The At or For The At or For The
Three Months Ended Twelve Months Ended Three Months Ended
December 31, December 31, September 30,
2008 2007 2008 2007 2008
Per Common Share:
Net income (loss)
(fully diluted) $.26 $.48 $(.35) $2.15 $.06
Book value $13.34 $14.17 $13.34 $14.17 $12.61
Earnings
Performance
Ratios:
Annualized return
on average
assets 0.58% 1.08% (0.18)% 1.25% .13%
Annualized
return on
average
stockholders'
equity 8.80% 13.47% (2.47)% 15.78% 1.90%
Net interest
margin 2.80% 3.13% 3.01% 3.24% 3.13%
Net interest
margin excluding
hedge acctg.
entries 2.90% 3.22% 3.14% 3.29% 3.15%
Average interest
rate spread 2.56% 2.62% 2.74% 2.71% 2.87%
Efficiency
ratio 56.83% 55.54% 55.86% 51.28% 72.68%
Non-interest
expense to
average total
assets 1.90% 2.24% 2.07% 2.18% 2.07%
Asset Quality
Ratios:
Allowance for
loan losses to
period-end
loans 1.66% 1.38% 1.66% 1.38% 1.63%
Non-performing
assets to
period-end
assets 2.48% 2.30% 2.48% 2.30% 2.61%
Non-performing
loans to
period-end
loans 1.90% 1.92% 1.90% 1.92% 1.84%
Annualized net
charge-offs to
average loans 1.16% .44% 2.63% .35% .51%
GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except number of shares)
December 31, December 31, September 30,
2008 2007 2008
------------- ------------ ------------
(Unaudited) (Unaudited)
ASSETS
Cash $135,043 $79,552 $56,020
Interest-bearing deposits in
other financial institutions 32,877 973 67,008
---------- ---------- ----------
Cash and cash equivalents 167,920 80,525 123,028
Available-for-sale securities 647,678 425,028 505,715
Held-to-maturity securities
(fair value $1,422 - December
2008; $1,508 - December 2007) 1,360 1,420 1,360
Mortgage loans held for sale 4,695 6,717 5,184
Loans receivable, net of
allowance for loan losses of
$29,163 - December 2008;
$25,459 - December 2007 1,716,996 1,813,394 1,766,583
Interest receivable 13,287 15,441 12,103
Prepaid expenses and other
assets 14,179 14,904 17,666
Foreclosed assets held for
sale, net 32,659 20,399 32,810
Premises and equipment, net 30,030 28,033 29,954
Goodwill and other intangible
assets 1,687 1,909 1,737
Investment in Federal Home
Loan Bank stock 8,333 13,557 8,448
Refundable income taxes 7,048 1,701 7,252
Deferred income taxes 14,051 8,704 16,072
--------- --------- ----------
Total Assets $2,659,923 $2,431,732 $2,527,912
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $1,908,028 $1,763,146 $1,854,474
Securities sold under reverse
repurchase agreements with
customers 215,261 143,721 229,274
Federal Home Loan Bank
advances 120,472 213,867 122,847
Structured repurchase
agreements 50,000 -- 50,000
Short-term borrowings 83,368 73,000 52,519
Subordinated debentures issued
to capital trust 30,929 30,929 30,929
Accrued interest payable 9,225 6,149 8,882
Advances from borrowers for
taxes and insurance 334 378 1,232
Accounts payable and accrued
expenses 8,219 10,671 8,971
--------- --------- ----------
Total Liabilities 2,425,836 2,241,861 2,359,128
--------- --------- ----------
Stockholders' Equity:
Capital stock
Serial preferred stock,
$.01 par value; authorized
1,000,000 shares; issued
and outstanding December
2008 - 58,000 shares 55,580 -- --
Common stock, $.01 par value;
authorized 20,000,000 shares;
issued and outstanding
December 2008 - 13,380,969
shares; December 2007 -
13,400,197 shares 134 134 134
Stock warrants; December
2008 - 909,091 shares 2,452 -- --
Additional paid-in capital 19,81
