Great Southern Bancorp in TARP's upper echelon

For months now, a Springfield-based bank has been camping out at the top of a widely cited index that ranks the performance of banks participating in the often-misconstrued Troubled Asset Relief Program.

When Ethisphere Institute - a New York-based nonpartisan international think tank - began publishing its weekly TARP Index report in mid-February, Great Southern Bancorp Inc. (Nasdaq: GSBC) was the second-best performing financial institution based on size. Of the more than 400 banks that had received taxpayer money through the U.S. Treasury's $700 billion rescue package at the time, Great Southern posted an estimated 35.3 percent gain of $20.4 million, according to the index.

And when the market took a turn for the worse the first week of March, Great Southern slipped into the top spot with an estimated gain of $11.1 million. That week, Ethisphere's TARP Index saw its single-biggest drop - an estimated $20.7 billion - after a third of all participating banks saw their value diminished by as much as 25 percent.

As of the last TARP Index report in mid-June, Great Southern was still holding on to its No. 2 spot among the best-performing banks with an estimated gain of $78 million since selling 58,000 shares of perpetual preferred stock to the Treasury for $58 million in early December. The bank also offered the Treasury 909,091 shares of common stock for $9.57 per share, or $8.7 million.

On the day Great Southern inked its agreement with the federal government, the bank's stock price closed at $8.15 a share. Since then, Great Southern has watched its stock climb as high as $22.89 a share in late May. At press time, the bank's stock was trading at $21.50 a share, with a 52-week range of $7.03 to $22.96.

Icing on the cake

Since the infusion of TARP capital late last year, Great Southern has acquired Kansas-based TeamBank, a failed bank seized by federal regulators in March, and joined the Russell 3000 Index, which measures the performance of the 3,000 largest U.S. companies based on total market capitalization. Great Southern's market cap was $287.8 million as of Aug. 5, according to Google Finance.

Great Southern officials said the bank's consistently favorable ranking in the Ethisphere TARP Index has been a welcome accolade on top of two strong quarters. And while Chief Financial Officer Rex Copeland couldn't speak to the accuracy of the index value assigned to his bank, he did say Great Southern's rank seems logical.

"I'm not sure where they're coming up with the dollar amount; the market value of our company has gone up more than that," he said. "But directionally it makes sense that we would be in a positive light from the standpoint of looking at this gain or loss (from) the TARP program."

Stefan Linssen, managing editor of Ethisphere magazine, said the Ethisphere Institute began compiling the index at the beginning of the year for two main reasons: professional curiosity and U.S. Sen. Judd Gregg's claim that TARP had turned an $8 billion profit in three months.

"We ran the numbers a dozen different ways and couldn't come up with that figure," Linssen said.

Tracking the performance of publicly traded banks receiving TARP money has been the easier part of the equation, Linssen said, noting that index values for those banks were largely influenced by average stock prices and market capitalization versus amount invested. Based on those indicators, Great Southern quickly rose to the top of the index and stayed there.

John Rodis, a St. Louis-based analyst with Howe Barnes Hoefer & Arnett Inc., said Great Southern outperformed expectations in several areas this year, including net interest margin, fee income and service charges. Rodis said Great Southern - bolstered by TARP - also was able to more easily acquire a troubled bank when the opportunity arose.

"I think without TARP on their balance sheet ... they might have had to go out and issue common stock, which could have been more dilutive to earnings," he said. "I think having (TARP money) around has kind of given them more flexibility to do deals like Team(Bank)."

Will TARP turn a profit?

According to Ethisphere's calculations, taxpayers have lost money on TARP, although the loss attributed to each household has decreased over time. As of mid-June, the index was down an estimated $148.2 billion, with each taxpaying household losing $1,233. Before 10 of the country's largest banks paid back their TARP money in June, each household was out $1,361, according to the index.

Whether the Treasury will lose money, break even or make a profit on TARP remains to be seen, Linssen said.

"I think the indirect benefit that is going to be hard to calculate is that it saved a larger collapse - that's the intangible," he said. "But it looks like they're going to get the majority of their money back. Whether or not they're going to turn the profit they wanted, that's debatable."

Debate over the program's success resurfaced again last week when Treasury Secretary Tim Geithner claimed on ABC's "This Week" that taxpayers had made a $6 billion profit on TARP. He was most likely referencing the Treasury's total income from quarterly 5 percent dividends paid out by TARP recipients as a condition of the program. After five years, banks still participating in TARP must pay the government a 9 percent quarterly dividend.

Great Southern's Copeland said there's no hard timeline for the bank's participation in TARP, and he said there are no plans to pay back the money in the near term. Despite its evolving parameters, the program has remained advantageous for Great Southern, he said.

"The financial industry seems to have stabilized, but we're not seeing any signs of growth yet," Copeland said. "So it may be prudent to keep it for a little bit longer, and see where the overall economy goes next."[[In-content Ad]]