Great Southern Bancorp (NASDAQ:GSBC) reported third-quarter 2026 preliminary net income of $14.0 million, or $1.27 per diluted share, as a non-cash hedge accounting adjustment reduced reported earnings. Excluding that item, the company said operating, non-GAAP net income was $16.5 million, or $1.50 per diluted share.
The reported result compared with net income of $17.8 million, or $1.56 per diluted share, in the third quarter of 2025 and $15.8 million, or $1.43 per diluted share, in the second quarter of 2026.
President and CEO Joe Turner said the quarter reflected the durability of the company’s core banking franchise, citing balance-sheet management, credit discipline and expense control. “Net interest income generation remains an ongoing priority,” Turner said, while adding that credit and pricing discipline would govern the company’s approach to long-term value creation.
Hedge Accounting Adjustment Affected Earnings
Chief Financial Officer Rex Copeland said the company identified historical periods when variable-rate loan balances qualifying for cash-flow hedge accounting were insufficient to support the full designated notional amounts of its interest-rate swaps. As a result, portions of those swaps were not eligible for hedge accounting during those periods.
The review resulted in a one-time, non-cash pre-tax charge of about $3.5 million. The amount included a $4.1 million reduction in non-interest income, partly offset by a $504,000 increase in interest income. The net pre-tax impact was $3.3 million, or about $2.5 million after tax and $0.23 per diluted share. Copeland said the adjustment had no impact on total stockholders’ equity or cash balances.
Following the reclassification, the company adopted ASU 2025-09 and redesignated its two existing interest-rate swaps. The redesignation added $279,000 to third-quarter interest income, and Copeland said it is expected to contribute about $170,000 per month through April 2028. The company expects the future interest income to fully recover the third-quarter charge over the remaining life of the redesignated swaps.
Net Interest Income Rose Sequentially as Securities Portfolio Expanded
Net interest income totaled $50.3 million, compared with $50.8 million a year earlier and $49.5 million in the prior quarter. The year-over-year decline largely reflected the absence of about $2 million in quarterly interest income from a previously terminated swap that ended in October 2025.
Net interest margin was 3.75%, up from 3.72% in the year-earlier period and slightly below 3.76% in the second quarter.
During the quarter, Great Southern purchased about $400 million in fixed-rate agency mortgage-backed securities and collateralized mortgage obligations. The investments carry expected weighted-average yields between 4.80% and 5.0%, with an expected effective duration of roughly five to six years. The purchases were funded primarily through variable-rate Federal Home Loan Bank borrowings.
Copeland said the trade is expected to provide positive net interest income and downside protection if market rates decline substantially, though its narrower spread relative to core earning assets is expected to modestly reduce reported net interest margin in future quarters. In response to analyst questions, he said the company had no current plans for additional securities purchases.
During the question-and-answer session, Copeland said a net interest margin in the range of 3.65% to 3.70% appeared reasonable, reflecting the impact of the securities purchases and offsetting accretion income from the redesignated swaps.
Loan Balances Declined Amid Repayments and Refinancing
Total net loans, excluding mortgage loans held for sale, stood at $4.25 billion at Sept. 30, down $59.3 million from the end of the second quarter and down $108.4 million from Dec. 31, 2025. Over the first nine months of the year, commercial real estate balances declined by $95.8 million and multifamily balances fell by $105.6 million, partly offset by an $83 million increase in construction balances.
Turner said elevated payoff activity in commercial real estate and multifamily loans continued to influence loan balances. He told analysts that refinancings often involve larger borrowing amounts, reduced guarantees and lower rates that do not fit the bank’s preferred lending structure. Other loans are repaid when completed projects are sold, he said.
The company’s pipeline remained sizable, with total commitments reaching $1.2 billion at quarter-end, including $640.8 million in unfunded construction commitments on already closed loans.
Credit metrics remained low. Nonperforming assets were $10.5 million, or 0.18% of total assets, compared with 0.17% at June 30. Nonperforming loans were $1.19 million, or 0.03% of total loans. Net charge-offs totaled $397,000, equivalent to an annualized 0.04% of average loans. Great Southern did not record a provision for credit losses on outstanding loans, though it recorded a $674,000 provision for unfunded commitments as its commitment pipeline grew.
Branch Consolidation Expected to Lower Costs
Total deposits declined $232.1 million during the quarter to about $4.07 billion, driven primarily by the intentional runoff of $211.8 million in higher-cost brokered deposits. The company instead used lower-cost FHLB borrowings, while non-brokered deposits remained relatively stable, according to management.
Non-interest expense was $36.3 million, compared with $38.2 million in the second quarter, when the company recorded a $2.1 million branch-consolidation and severance charge. Great Southern completed the consolidation of nine banking centers and eliminated 66 positions across the company as of Oct. 1.
Management expects the actions to generate approximately $4.4 million to $4.8 million of non-interest expense savings beginning in the fourth quarter. After considering expected deposit attrition and replacement funding costs, the company expects annual pre-tax income improvement of about $2.3 million to $2.7 million beginning in the fourth quarter.
Turner said some costs related to technology upgrades could continue, while Copeland said management generally expects fourth-quarter expenses to decline despite potential offsets.
Great Southern ended the quarter with $612.5 million in stockholders’ equity, equal to 10.5% of total assets, and a book value of $56.97 per common share. During the first nine months of 2026, the company repurchased 542,000 shares at an average price of $68.67. Its board approved a new authorization to repurchase 1 million shares after the existing authorization is completed and also declared a quarterly cash dividend of $0.43 per share.
About Great Southern Bancorp (NASDAQ:GSBC)
Great Southern Bancorp, Inc is the bank holding company for Great Southern Bank, a full-service financial institution headquartered in Springfield, Missouri. The company provides banking and financial services to individuals, families, businesses and institutions through a network of banking centers and other delivery channels.
Great Southern Bank offers deposit products, residential and commercial real estate lending, construction and development financing, commercial business loans, consumer loans and mortgage services.
