Great Southern Bancorp (GSBC) recently delivered solid all-around third quarter results, driven by strong loan growth, an expanding net interest margin, improving credit quality and a better efficiency ratio.
This prompted analysts to revise their estimates significantly higher for the company, sending it to a Zacks Rank #1 (Strong Buy). And while shares of Great Southern have soared following the Q3 report, the valuation picture still looks reasonable.
Great Southern Bancorp is the holding company for Great Southern Bank, which operates 108 retail banking centers in Missouri, Arkansas, Iowa, Kansas, Minnesota and Nebraska, and loan production offices in Overland Park, Kansas, Tulsa, Oklahoma, and Dallas, Texas.
Third Quarter Results
Great Southern delivered another strong earnings report on October 21. Earnings per share came in at $0.83, crushing the Zacks Consensus Estimate of $0.55. It was a 36% increase over the same quarter last year.
Net interest income increased 15% year-over-year, driven by strong loan growth and a higher net interest margin (which was boosted by the repayment of FHLB borrowings late in Q2). Growth was particularly strong in consumer and construction loans.
Meanwhile, credit quality continued to improve. Non-performing loans to total loans fell from 0.9% at the end of Q3 last year to 0.4%.
And the efficiency ratio improved too, falling from 66.4% to 64.1%.
Estimates Soaring
Analysts have unanimously raised their estimates for both 2014 and 2015 following strong Q3 results. This sent the stock to a Zacks Rank #1 (Strong Buy).
The 2014 Zacks Consensus Estimate is now $3.02, up from $2.53 before the Q3 report. And the 2015 consensus has increased from $2.40 to $2.73 over the same period.
You can see the big jump in estimates in the company’s “Price & Consensus” chart:
Reasonable Valuation
Shares of GSBC have soared since the Q3 report, but the valuation picture still looks reasonable. The stock trades at less than 15x 12-month forward earnings, which is in-line with the industry median.
The stock also trades at just 1.6x tangible book value, which is below the industry median of 1.9x.
The Bottom Line
With improving business trends, strong earnings momentum and reasonable valuation, Great Southern offers investors a lot to like.
Todd Bunton, CFA is a Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor and Surprise Trader services.
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