Five Questions for Bank Boards

If you rank all of the publicly traded banks in the country by total all-time shareholder return, Great Southern Bancorp comes in fifth, with a lifetime total return of nearly 15,000 percent. There are a number of explanations for the success of the $4.6 billion asset bank based in Springfield, Missouri, but one is the substantial skin in the game Chairman Bill Turner and CEO Joe Turner have in the bank, with the Turner family owning more than a quarter of its outstanding common stock.

As Joe Turner explains below, in comments edited for brevity and flow, this plays a major role when it comes to maintaining discipline.

1. The three biggest banks in Missouri are controlled by two families, with UMB Financial Corp. and Commerce Bancshares controlled by the Kemper family, and Great Southern controlled by your family. What is it about banking in Missouri that lends itself to this dynamic?

We have found, and I’m sure the Kempers have found, that when you run a bank with a long-term perspective, it can be a very good investment. So as you think about selling out, you think “what else could I do that will be as good?” It’s hard to come up with a good answer to that.

2. Is there a connection between having skin in the game and having a long-term mindset?

Executives like to say they think like shareholders. Well, we are shareholders. Our dad turned a valuable asset over to me and my sister [a director at the bank], and my goal, when I’m finished, is to turn that over to my kids and have it be worth a lot more. It also gives us credibility with institutional investors. When we tell them we’re thinking long term, they believe us. We never meet with an investor that our family doesn’t own at least twice as much stock in the bank as they do.

3. When you talk about having a long-term mindset, what does that mean in practical terms?

It means having the discipline to take growth when and as it comes. One of our recent shareholder letters talks about this. We wrote that there will be times when we will be able to grow, and there will be times when, because of competition and the economy, we may not be able to grow. Over a long period of time we will be able to grow, but it’s unrealistic to expect that your growth is going to be consistent every year. It just doesn’t work that way.

The same is true with our stock price. Over the 29 years we’ve been public, we’ve produced phenomenal returns. But if you look at our returns over any two- or three-year period, they may not be that good. We don’t get hung up on that.

4. Your bank doesn’t issue guidance to analysts. Why is that?

There are two reasons. First, if you tell somebody your loan portfolio will grow, say, 12 percent a year, your judgment could be colored by that, which could lead you to reach for loan growth when it’s not there.

Second, it’s difficult to give accurate guidance on things like loan balances. We control what we can control. That’s to do all the right things-keep in touch with customers, open new offices, those sorts of things. But a big part of the equation when it comes to loan growth is what your competitors are doing. That’s something you can’t know ahead of time. If we have a high-quality, multi-family project and another bank offers our customer a deal where they can get their guarantee released, their equity back and their rate reduced, our customer is likely to take that deal. We have no control over that.

5. There’s a saying that once you’ve accumulated a bit of capital you switch from being concerned with the return on capital to being concerned with the return of capital. In light of your investment in Great Southern, would you say that’s accurate and, if so, does it filter into your mindset and help you maintain discipline?

I think so. Every company should be concerned with return of capital as well as return on capital. But certainly, when you basically have your whole net worth invested in a company, you’re concerned with making sure the value of that company doesn’t drop precipitously. You’re also interested in trying to grow it as well. So, it gives you a more balanced view.