Today’s Top Pick for 2014 is a regional Midwestern bank that came through the banking crisis and recession well-capitalized and profitable.
Great Southern Bank (GSBC)
from Positive Patterns
I believe this is the year that the small/regional banks will shine. As the banking industry shrinks (with less branches around), and with many Banks ‘gone’ & very few new banks being formed – we are likely to see even more consolidation/acquisitions in the next 24 months. I would note: new tax laws in place for financial institutions may spur some of this acquisition activity.
One bank I like that is particularly attractive here is Great Southern Bank (GSBC). They could be a take-out candidate, but I like the story without that, as GSBC can stand just fine on its own. GSBC has a market cap of about $420 Million and 107 branches—the biggest number in southwest Missouri and Arkansas. GSBC sells for about 1.25 times ‘Book’—cheap in my mind’s eye.
GSBC came through the recent bank mess with flying colors. Ninety-five percent of the banks were forced to cut their dividend; GSBC did not. Many banks were forced to retreat and shrink, but GSBC bought three different banks from Uncle Sam (FDIC) at bargain prices and opened new branches ‘on the cheap’. While most banks retreated, the good banks advanced. Many banks were forced to sell stock/or/preferred to raise their capital ratios. GSBC did not.
GSBC has active insider ownership (the Turner family owns about 33% and they don’t sell stock much either!). Now shareholders should reap the rewards of having wise management onboard, a seemingly rare thing in recent years in the banking industry.
GSBC is a solid, trouble-free bank. Even now—five years after the smash—most big banks are still licking their wounds and dealing with legacy issues. On the other hand, GSBC has a clear runway, is well-capitalized, and can look forward to a bright future. I would also add that the southwest Missouri economy is doing just fine. All in all, GSBC appears to us to be a bargain here, especially at the $28-32 area.
Bob Howard, Positive Patterns, P.O. Box 310, Turners, MO 65765, 417-887-4486, December 24, 2013