KBRA affirms the senior unsecured debt rating of BBB, the subordinated debt rating of BBB-, and the short-term debt rating of K3 for Springfield, Missouri-based Great Southern Bancorp, Inc. (NASDAQ: GSBC) (“the company”). In addition, KBRA affirms the deposit and senior unsecured debt ratings of BBB+, the subordinated debt rating of BBB, and the short-term deposit and debt ratings of K2 for its subsidiary, Great Southern Bank (“the bank”). The Outlook for all long-term ratings is Stable.

The ratings are supported by GSBC’s earnings profile with an ROAA above 1% since 2015 (5-year average: 1.37%), driven by a favorable NIM reflective of earning asset yields though counterbalanced by elevated risk weighted density and overall balance sheet leverage. However, KBRA recognizes the limitations within the earnings mix as noninterest income has represented 15%-20% of total revenue for the last 5 years, slightly lower than peer averages. Additionally, the company also has a durable and defensible retail deposit franchise that benefits from a consistently sizeable NIB deposit component (~35% of total deposits), although at a somewhat higher cost than many regional peers as the total cost of deposits was 1.45% as of 1Q23. Since 2017, GSBC has exhibited sound asset quality metrics, highlighted by an improving NPA ratio, standing below 7 bps in 1Q23. The company’s credit management is considered conservative and recent credit trends have been generally positive, including declining levels of classified and criticized loans, accounting for nearly 1% of loans as of 1Q23. Additionally, GSBC’s loss absorbing capacity continues to be higher than many regional peers with reserve levels near 1.40% of loans, as dictated by CECL. The company has sustained a slightly below peer capital profile over time (10.9% CET1 as of 1Q23). KBRA views the need to retain capital as necessary given the elevated investor CRE exposure (411% at 1Q23), which exceeds regulatory guidance, as well as moderately elevated C&D exposure. Moreover, GSBC has a leading market share in legacy midwestern markets and is growing competitive positions in newer, economically diverse MSAs. The company reflects a favorable liquidity and contingency funding profile, highlighted by FHLB availability totaling ~15% of total assets alone, as well as other balance sheet liquidity including cash and unpledged securities, covering uninsured deposits by 3x. KBRA recognizes the highly experienced management team and its long track record of exceptional asset quality through credit cycles, reflecting disciplined underwriting and relatively conservative policy limits.

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Methodologies

Financial Institutions: Bank & Bank Holding Company Global Rating Methodology

ESG Global Rating Methodology

Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.

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