g-10k123108.htm

When used in this Annual Report and in future filings by the Company with the Securities and Exchange Commission (the "SEC"), in the Company's press releases or other public or shareholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "intends" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties, including, among other things, changes in economic conditions in the Company's market area, changes in policies by regulatory agencies, fluctuations in interest rates, the risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses, the Company's ability to access cost-effective funding, fluctuations in real estate values and both residential and commercial real estate market conditions, demand for loans and deposits in the Company's market area and competition, that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to advise readers that the factors listed above could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

The Company does not undertake-and specifically declines any obligation-to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Critical Accounting Policies, Judgments and Estimates

The accounting and reporting policies of the Company conform with accounting principles generally accepted in the United States and general practices within the financial services industry. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates.

The Company considers that the determination of the allowance for loan losses involves a higher degree of judgment and complexity than its other significant accounting policies. The allowance for loan losses is calculated with the objective of maintaining an allowance level believed by management to be sufficient to absorb estimated loan losses. Management's determination of the adequacy of the allowance is based on periodic evaluations of the loan portfolio and other relevant factors. However, this evaluation is inherently subjective as it requires material estimates, including, among others, expected default probabilities, loss once loans default, expected commitment usage, the amounts and timing of expected future cash flows on impaired loans, value of collateral, estimated losses, and general amounts for historical loss experience. The process also considers economic conditions, uncertainties in estimating losses and inherent risks in the loan portfolio. All of these factors may be susceptible to significant change. To the extent actual outcomes differ from management estimates, additional provisions for loan losses may be required that would adversely impact earnings in future periods. The Bank's latest annual regulatory examination was completed in October 2008.

Additional discussion of the allowance for loan losses is included in the Company's Annual Report on Form 10-K for the year ended December 31, 2008, under the section titled "Item 1. Business - Allowances for Losses on Loans and Foreclosed Assets." Judgments and assumptions used by management in the past have resulted in an overall allowance for loan losses that has been sufficient to absorb estimated loan losses. Inherent in this process is the evaluation of individual significant credit relationships. From time to time certain credit relationships may deteriorate due to payment performance, cash flow of the borrower, value of collateral, or other factors. In these instances, management may have to revise its loss estimates and assumptions for these specific credits due to changing circumstances. In some cases, additional losses may be realized; in other instances, the factors that led to the deterioration may improve or the credit may be refinanced elsewhere and allocated allowances may be released from the particular credit. For the periods included in these financial statements, management's overall methodology for evaluating the allowance for loan losses has not changed significantly.

In addition, the Company considers that the determination of the valuations of foreclosed assets held for sale involves a high degree of judgment and complexity. The carrying value of foreclosed assets reflects

management’s best estimate of the amount to be realized from the sales of the assets. While the estimate is generally based on a valuation by an independent appraiser or recent sales of similar properties, the amount that the Company realizes from the sales of the assets could differ materially in the near term from the carrying value reflected in these financial statements, resulting in losses that could adversely impact earnings in future periods.

Goodwill and Intangible Assets

Goodwill and intangibles assets that have indefinite useful lives are subject to an impairment test at least annually and more frequently if circumstances indicate their value may not be recoverable. Goodwill is tested for impairment using a process that estimates the fair value of each of the Company’s reporting units compared with its carrying value. The Company defines reporting units as a level below each of its operating segments for which there are discrete financial information that is regularly reviewed. As of December 31, 2008, the Company has two reporting units to which goodwill has been allocated – the Bank and the Travel division (which is a division of a subsidiary of the Bank). If the fair value of a reporting unit exceeds its carrying value, then no impairment is recorded. If the carrying value amount exceeds the fair value of a reporting unit, further testing is completed comparing the implied fair value of the reporting unit’s goodwill to its carrying value to measure the amount of impairment. Intangible assets that are not amortized will be tested for impairment at least annually by comparing the fair values to those assets to their carrying values. At December 31, 2008, goodwill consisted of $379,000 at the Bank reporting unit and $875,000 at the Travel reporting unit. Other identifiable intangible assets that are subject to amortization are amortized on a straight-line basis over periods ranging from three to seven years. At December 31, 2008, the amortizable intangible assets consisted of core deposit intangibles of $314,000 at the Bank reporting unit and $119,000 of non-compete agreements at the Travel reporting unit. These amortizable intangible assets are reviewed for impairment if circumstances indicate their value may not be recoverable based on a comparison of fair value. See Note 1 “Summary of Significant Accounting Policies” to the consolidated financial statements included in Item 8 for additional information.

For purposes of testing goodwill for impairment, the Company used a market approach to value its reporting units. The market approach applies a market multiple, based on observed purchase transactions for each reporting unit, to the metrics appropriate for the valuation of the operating unit. Significant judgment is applied when goodwill is assessed for impairment. This judgment may include developing cash flow projections, selecting appropriate discount rates, identifying relevant market comparables and incorporating general economic and market conditions.

Based on the Company’s goodwill impairment testing, management does not believe any of its goodwill or other intangible assets are impaired as of December 31, 2008. While the Company believes no impairment existed at December 31, 2008, different conditions or assumptions used to measure fair value of reporting units, or changes in cash flows or profitability, if significantly negative or unfavorable, could have a material adverse effect on the outcome of the Company’s impairment evaluation in the future.

Current Economic Conditions

The current economic environment presents financial institutions with unprecedented circumstances and challenges which in some cases have resulted in large declines in the fair values of investments and other assets, constraints on liquidity and significant credit quality problems, including severe volatility in the valuation of real estate and other collateral supporting loans. The financial statements have been prepared using values and information currently available to the Company.

Given the volatility of current economic conditions, the values of assets and liabilities recorded in the financial statements could change rapidly, resulting in material future adjustments in asset values, the allowance for loan losses, or capital that could negatively impact the Company’s ability to meet regulatory capital requirements and maintain sufficient liquidity.

General

The profitability of the Company and, more specifically, the profitability of its primary subsidiary, Great Southern Bank (the "Bank"), depends primarily on its net interest income. Net interest income is the difference between the interest income the Bank earns on its loans and investment portfolio, and the interest it pays on interest-bearing liabilities, which consists mainly of interest paid on deposits and borrowings. Net interest income is affected by the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on these balances. When interest-earning assets approximate or exceed interest-bearing liabilities, any positive interest rate spread will generate net interest income.

In the year ended December 31, 2008, Great Southern's net loans decreased $96.4 million, or 5.3%, from $1.81 billion at December 31, 2007, to $1.72 billion at December 31, 2008. As loan demand is affected by a variety of factors, including general economic conditions, and because of the competition we face, we cannot be assured that our loan growth will match or exceed the level of increases achieved in prior years. Based upon the current lending environment and economic conditions, the Company does not expect to grow the overall loan portfolio significantly, if at all, at this time. However, some loan categories have experienced increases. The main loan areas experiencing increases in 2008 were commercial real estate loans, one- to four-family and multifamily real estate loans and consumer loans, partially offset by lower balances in construction loans and commercial business loans. In the year ended December 31, 2008, outstanding residential and commercial construction loan balances decreased $142.1 million, to $543.9 million at December 31, 2008. In addition, the undisbursed portion of construction and land development loans decreased $180.7 million from $254.6 million at December 31, 2007, to $73.9 million at December 31, 2008. The Company's strategy continues to be focused on maintaining credit risk and interest rate risk at appropriate levels given the current credit and economic environments.

In addition, the level of non-performing loans and foreclosed assets may affect our net interest income and net income. While we have not had an overall high level of charge-offs on our non-performing loans prior to 2008, we do not accrue interest income on these loans and do not recognize interest income until the loan is repaid or interest payments have been made for a period of time sufficient to provide evidence of performance on the loans. Generally, the higher the level of non-performing assets, the greater the negative impact on interest income and net income. We expect loan loss provision, non-performing assets and foreclosed assets to remain elevated. In addition, expenses related to the credit resolution process should also remain elevated.

In the year ended December 31, 2008, Great Southern's available-for-sale securities increased $222.7 million, or 52.4%, from $425 million at December 31, 2007, to $648 million at December 31, 2008. The Company’s mix of securities changed in 2008 primarily in two categories. U.S. Government agency debt securities decreased $91.0 million primarily due to maturing short-term securities and longer term securities that were called at par by the issuing agency. The Company elected to replace these securities with U.S. Government agency mortgage-backed securities, which increased $302.1 million, to cover pledging requirements for public funds and customer repurchase agreements. Most of these agency mortgage-backed securities purchased in 2008 have interest rates that are fixed for a period of three to ten years and then adjust annually. Securities which provided the Company an acceptable yield were also purchased in 2008 to utilize the excess liquidity from loan repayments and the issuance of brokered deposits.

In addition, Great Southern had cash and cash equivalents of $168 million at December 31, 2008 compared to $81 million at December 31, 2007. Subsequent to December 31, 2008, additional customer deposits have been placed with Great Southern, resulting in cash and cash equivalents of $337 million at March 5, 2009. The Company could elect to utilize these funds by repaying some of its brokered deposits or purchasing additional investment securities, or it may maintain its cash equivalents.

The Company attracts deposit accounts through our retail branch network, correspondent banking and corporate services areas, and brokered deposits. The Company then utilizes these deposit funds, along with Federal Home Loan Bank (FHLBank) advances and other borrowings, to meet loan demand. In the year ended December 31, 2008, total deposit balances increased $144.9 million, or 8.2%. However, the mix of deposits continued to shift from checking deposits to certificates of deposit, primarily brokered CDs. Interest-bearing transaction accounts decreased $104.6 million while non-interest-bearing checking accounts decreased $27.5 million. Retail certificates of deposit decreased $34.6 million. There is a high level of competition for deposits in our markets. While it is our goal to gain checking account and certificate of deposit market share in our branch footprint, we cannot be assured of this in future periods. In 2007 and 2008, our non-interest-bearing checking account balances have decreased, primarily as a result of lower balances being kept in correspondent bank customers' accounts. These lower balances are due to the effects of the correspondent customers clearing checks through other avenues using electronic presentment, thus requiring lower compensating balances. Subsequent to December 31, 2008, correspondent balances have begun to increase again. A significant amount of the reduction in interest-bearing checking balances was the result of customers moving funds into customer reverse repurchase agreements.

Total brokered deposits were $974.5 million at December 31, 2008, up from $674.6 million at December 31, 2007. Included in these totals at December 31, 2008 and December 31, 2007, were Great Southern Bank customer deposits totaling $168.3 million and $88.8 million, respectively, that are part of the CDARS program which allows bank customers to maintain balances in an insured manner that would otherwise exceed the FDIC deposit insurance limit. The Company decided to increase the amount of longer-term brokered certificates of deposit in 2008 to provide liquidity for operations and to maintain in reserve its available secured funding lines with the Federal Home Loan Bank (FHLBank) and the Federal Reserve Bank. In 2008, the Company issued approximately $359 million of new brokered certificates which are fixed rate certificates with maturity terms of generally two to four years, which the Company (at its discretion) may redeem at par generally after six months. As market interest rates on these types of deposits have decreased in recent months, the Company has begun to redeem some of these deposits in 2009 in order to lock in cheaper funding rates or reduce excess cash balances. In addition in 2008, the Company issued approximately $137 million of new brokered certificates, which are fixed rate certificates with maturity terms of generally two to four years, which the Company may not redeem prior to maturity. There are no interest rate swaps associated with these brokered certificates.

These funding changes contributed to decreases in our net interest income and net interest margin. These longer-term certificates carry an interest rate that is approximately 150 basis points higher than the interest rate that the Company would have paid if it instead utilized short-term advances from the FHLBank. The Company decided the higher rate was justified by the longer term and the ability to keep committed funding lines available. The net interest margin was also negatively impacted as the Company originated some of the new certificates in advance of the anticipated terminations of the existing certificates, thereby causing the Company to have excess funds for a period of time. These excess funds were invested in short-term cash equivalents at rates that at times caused the Company to earn a negative spread. Partially offsetting the increase in brokered CDs, several existing brokered certificates were redeemed by the Company in 2008 as the related interest rate swaps were terminated by the swap counterparties. These redeemed certificates had effective interest rates through the interest rate swaps of approximately 90-day LIBOR. Interest rate swap notional amounts have decreased from $419 million at December 31, 2007, to $12 million at December 31, 2008.

Our ability to fund growth in future periods may also be dependent on our ability to continue to access brokered deposits and FHLBank advances. In times when our loan demand has outpaced our generation of new deposits, we have utilized brokered deposits and FHLBank advances to fund these loans. These funding sources have been attractive to us because we can create variable rate funding, if desired, which more closely matches the variable rate nature of much of our loan portfolio. While we do not currently anticipate that our ability to access these sources will be reduced or eliminated in future periods, if this should happen, the limitation on our ability to fund additional loans would adversely affect our business, financial condition and results of operations.

Our net interest income may be affected positively or negatively by market interest rate changes. A large portion of our loan portfolio is tied to the "prime" rate and adjusts immediately when this rate adjusts. We also have a portion of our liabilities that will reprice with changes to the federal funds rate or the three-month LIBOR rate. We

monitor our sensitivity to interest rate changes on an ongoing basis (see "Item 7A. Quantitative and Qualitative Disclosures About Market Risk").

Ongoing changes in the level and shape of the interest rate yield curve pose challenges for interest rate risk management. Beginning in the second half of 2004 and through September 30, 2006, the Board of Governors of the Federal Reserve System (the "FRB") increased short-term interest rates through steady increases to the Federal Funds rate. Other short-term rates, such as LIBOR and short-term U.S. Treasury rates, increased in conjunction with these increases by the FRB. By September 30, 2006, the FRB had raised the Federal Funds rates by 4.25% (from 1.00% in June 2004) and other short-term rates rose by corresponding amounts. However, there was not a parallel shift in the yield curve; intermediate and long-term interest rates did not increase at a corresponding pace. This caused the shape of the interest rate yield curve to become much flatter, which creates different issues for interest rate risk management. On September 18, 2007, the FRB decreased the Federal Funds rate by 50 basis points and many market interest rates began to fall in the following weeks. In the months following September 2007, the FRB has reduced the Federal Funds rate by an additional 450 basis points. The Federal Funds rate now stands at 0.25%. However, funding costs for most financial services companies have not declined in tandem with these reductions in the Federal Funds rate. Competition for deposits, the desire for longer term funding, elevated LIBOR interest rates and wide credit spreads have kept borrowing costs relatively high in the current environment.

Another factor that continues to negatively impact net interest income is the elevated level of LIBOR interest rates compared to Federal Funds rates as a result of credit and liquidity concerns in financial markets. These LIBOR interest rates were elevated approximately 50-75 basis points compared to historical averages versus the stated Federal Funds rate for much of 2008. In the latter portion of December 2008 and so far into 2009, LIBOR rates have decreased from their higher levels in comparison to the stated Federal Funds rate. While these LIBOR interest rates are still elevated compared to historical averages in relation to Federal Funds, they have decreased along with recent decreases in the Federal Funds rate. The Company has reduced the amount and percentage of interest rate swaps and other borrowings that are indexed to LIBOR. The Company does not find LIBOR-based interest rate swaps to be attractive at this time. Funding costs related to local market deposits and brokered certificates of deposit have also been elevated due to competition by issuers seeking to generate significant funding.

The FRB most recently cut interest rates on December 16, 2008. Great Southern has a significant portfolio of loans which are tied to a "prime rate" of interest. Some of these loans are tied to some national index of "prime," while most are indexed to "Great Southern prime." The Company has elected to leave its “Great Southern prime rate” of interest at 5.00% in light of the current highly competitive funding environment for deposits, including LIBOR rates that have been elevated. This does not affect a large number of customers as a majority of the loans indexed to “Great Southern prime” are already at interest rate floors which are provided for in individual loan documents. But for the interest rate floors, a rate cut by the FRB generally would have an anticipated immediate negative impact on the Company’s net interest income due to the large total balance of loans which generally adjust immediately as the Federal Funds rate adjusts. Because the Federal Funds rate is already very low, there may also be a negative impact on the Company's net interest income due to the Company's inability to lower its funding costs in the current environment. Usually any negative impact is expected to be offset over the following 60- to 120-day period, and subsequently is expected to have a positive impact, as the Company's interest rates on deposits, borrowings and interest rate swaps would normally also go down as a result of a reduction in interest rates by the FRB, assuming normal credit, liquidity and competitive loan and deposit pricing pressures. Any anticipated positive impact will likely be reduced by the change in the funding mix noted above, as well as retail deposit competition in the Company's market areas.

In addition, Great Southern's net interest margin has been negatively affected by certain characteristics of some of its loans, deposit mix, loan and deposit pricing by competitors, and timing of interest rate changes by the FRB as compared to interest rate changes in the financial markets. For the twelve months ended December 31, 2008, and 2007, interest income was reduced $1.2 million and $1.6 million, respectively, due to the reversal of accrued interest on loans which were added to non-performing status during the period. Partially offsetting this, the Company collected interest which was previously charged off in the amount of $227,000 and $183,000 in the twelve months ended December 31, 2008, and 2007, respectively, due to work-out efforts on non-performing assets. On a combined basis, this reduced net interest income and net interest margin. In addition, net interest income and net interest margin were negatively impacted by the effects of the accounting entries recorded for certain interest rate swaps (amortization of deposit broker origination fees). This amortization expense reduced net interest income by $3.1 million and $1.2 million in 2008 and 2007, respectively.

The negative impact of declining loan interest rates has been partially mitigated by the positive effects of the Company’s loans which have interest rate floors. At December 31, 2008, the Company had a portfolio of prime-based loans totaling approximately $969 million with rates that change immediately with changes to the prime rate of interest. Of this total, $779 million also had interest rate floors. These floors were at varying rates, with $182 million of these loans having floor rates of 7.0% or greater and another $548 million of these loans having floor rates between 5.0% and 7.0%. At December 31, 2008, $739 million of these loans were at their floor rates. During 2003 and 2004, the Company's loan portfolio had loans with rate floors that were much lower. However, since market interest rates were also much lower at that time, these loan rate floors went into effect and established a loan rate which was higher than the contractual rate would have otherwise been. This contributed to a loan yield for the entire portfolio which was approximately 139 and 55 basis points higher than the "prime rate of interest" at December 31, 2003 and 2004, respectively. As interest rates rose in the second half of 2004 and throughout 2005 and 2006, these interest rate floors were exceeded and the loans reverted back to their normal contractual interest rate terms. At December 31, 2005, the loan yield for the portfolio was approximately 8 basis points higher than the "prime rate of interest," resulting in lower interest rate margins. At December 31, 2006, the loan portfolio yield was approximately 5 basis points lower than the "prime rate of interest." During the latter portion of 2007 and throughout 2008, as the "prime rate of interest" has gone down, the Company's loan portfolio again has had loans with rate floors that went into effect and established a loan rate which was higher than the contractual rate would have otherwise been. This contributed to a loan yield for the entire portfolio which was approximately 33 basis points higher than the "prime rate of interest" at December 31, 2007. At December 31, 2008, the loan yield for the portfolio had increased to a level that was approximately 310 basis points higher than the national "prime rate of interest." While interest rate floors have had an overall positive effect on the Company’s results, they do subject the Company to the risk that borrowers will elect to refinance their loans with other lenders.

The Company's profitability is also affected by the level of its non-interest income and operating expenses. Non-interest income consists primarily of service charges and ATM fees, commissions earned by our travel, insurance and investment divisions, late charges and prepayment fees on loans, gains on sales of loans and available-for-sale investments and other general operating income. Non-interest income is also affected by the Company's interest rate hedging activities. Operating expenses consist primarily of salaries and employee benefits, occupancy-related expenses, expenses related to foreclosed assets, postage, insurance, advertising and public relations, telephone, professional fees, office expenses and other general operating expenses.

Non-interest income for 2008 decreased primarily as a result of the impairment write-down in value of the Company’s investments in available-for-sale Fannie Mae and Freddie Mac perpetual preferred stock and certain other available-for-sale equity investments and lower commission revenue from the Company's travel and investment divisions, partially offset by an increase in income related to the change in the fair value of certain interest rate swaps and the related change in fair value of hedged deposits. The impairment write-down totaled $7.4 million on a pre-tax basis (including $5.6 million related to Fannie Mae and Freddie Mac preferred stock, which was discussed in previous filings). These equity investments have experienced significant fair value declines over the past year. It is unclear if or when the values of these investment securities will improve, or whether such values will deteriorate further. Based on these developments, the Company recorded an other-than-temporary impairment. The Company continues to hold these securities in the available-for-sale category. The Company also recorded an impairment write-down of $1.1 million on a pre-tax basis in 2007.

The change in the fair value of certain interest rate swaps and the related change in fair value of hedged deposits resulted in an increase in non-interest income of $7.0 million in 2008, and an increase of $1.6 million in 2007. Income of this magnitude related to the change in the fair value of certain interest rate swaps and the related change in the fair value of hedged deposits should not be expected in future periods. This income is part of a 2005 accounting restatement in which approximately $3.4 million (net of taxes) was charged against retained earnings in 2005. This charge has been (and continues to be) recovered in subsequent periods as interest rate swaps matured or were terminated by the swap counterparty.

Total non-interest expense increased in 2008 compared to 2007 due to expenses related to problem loans and foreclosed assets, expenses related to FDIC insurance premiums and the continued growth of the Company. Due to the increase in the level of foreclosed assets, foreclosure-related expenses increased $3.3 million in 2008 compared to 2007. In 2007, the Federal Deposit Insurance Corporation (FDIC) began to once again assess insurance premiums on insured institutions. Under the new pricing system, institutions in all risk categories, even the best rated, are charged an FDIC premium. Great Southern received a deposit insurance credit as a result of premiums previously paid. The Company's credit offset assessed premiums for the first half of 2007, but premiums were owed by the Company in the latter half of 2007 and into 2008. The Company incurred additional deposit insurance

expense of $827,000 in 2008 compared to 2007. The Company expects significantly increased expense in 2009 as a result of the FDIC increasing regular insurance premiums for all banks. In addition, the FDIC has proposed a special assessment to be levied against all banks in 2009 -- see Item 1. "Business, Government Supervision and Regulations, Insurance of Accounts and Regulation by the FDIC."

In addition to the expense increases noted above, the Company's increase in non-interest expense in the year ended December 31, 2008, compared to 2007, related to the continued growth of the Company. Late in the first quarter of 2007, Great Southern completed its acquisition of a travel agency in St. Louis. In addition, since June 2007, the Company opened banking centers in Springfield, Mo. and Branson, Mo.

The operations of the Bank, and banking institutions in general, are significantly influenced by general economic conditions and related monetary and fiscal policies of regulatory agencies. Deposit flows and the cost of deposits and borrowings are influenced by interest rates on competing investments and general market rates of interest. Lending activities are affected by the demand for financing real estate and other types of loans, which in turn are affected by the interest rates at which such financing may be offered and other factors affecting loan demand and the availability of funds.

Business Initiatives

The Company is expanding its retail banking center network in the St. Louis and Kansas City metropolitan regions. This is part of the Company's overall long-term plan to open two to three banking centers per year as market conditions warrant. The Company's first retail banking center in the St. Louis market is expected to open in April 2009. Located in Creve Coeur, Mo., the full-service banking center will complement a loan production office and a Great Southern Travel office already in operation in this market. Construction will be underway soon on a second banking center in the Lee's Summit, Mo., market, a suburb of Kansas City. The banking center should be completed in late 2009 and will enhance access and service to Lee's Summit-area customers. Great Southern opened its first Lee's Summit retail location in 2006.

Great Southern is participating in the FDIC's Temporary Liquidity Guarantee Program (TLGP), which consists of two basic components: (1) the Transaction Account Guarantee Program and (2) the Debt Guarantee Program. Through the Transaction Account Guarantee Program, Great Southern is purchasing additional FDIC insurance coverage for its customers. Great Southern customers with noninterest-bearing deposit accounts, Lawyer's Trust Accounts, and NOW accounts paying interest at a rate less than 0.50 percent will be fully insured by the FDIC regardless of the account balance, through December 31, 2009. Coverage under the Transaction Account Guarantee Program is in addition to and separate from the coverage available under the FDIC's general deposit insurance rules, which was recently increased from $100,000 to $250,000 per depositor.

The Debt Guarantee Program, which guarantees newly issued senior unsecured debt of banks and thrifts, could be utilized by the Company in the future. At present, the Company has no senior unsecured debt outstanding.

Effect of Federal Laws and Regulations

Federal legislation and regulation significantly affect the banking operations of the Company and the Bank, and have increased competition among commercial banks, savings institutions, mortgage banking enterprises and other financial institutions. In particular, the capital requirements and operations of regulated depository institutions such as the Company and the Bank have been and will be subject to changes in applicable statutes and regulations from time to time, which changes could, under certain circumstances, adversely affect the Company or the Bank.

Recent Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141 (revised), Business Combinations. SFAS No. 141(revised) retains the fundamental requirements in Statement 141 that the acquisition method of accounting be used for business combinations, but broadens the scope of Statement 141 and contains improvements to the application of this method. The Statement requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date. Costs incurred to effect the acquisition are to be recognized separately from the acquisition. Assets and liabilities arising from contractual contingencies must be measured at fair value as of the acquisition date. Contingent consideration must also be measured at fair value as of the acquisition date. SFAS No. 141 (revised) applies to business

combinations occurring after January 1, 2009. Based on its current activities, the Company does not expect the adoption of this Statement will have a material effect on the Company’s financial position or results of operations.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an Amendment of ARB No. 51. SFAS No. 160 requires that a noncontrolling interest in a subsidiary be accounted for as equity in the consolidated statement of financial position and that net income include the amounts for both the parent and the noncontrolling interest, with a separate amount presented in the income statement for the noncontrolling interest share of net income. SFAS No. 160 also expands the disclosure requirements and provides guidance on how to account for changes in the ownership interest of a subsidiary. SFAS No. 160 is effective for the Company on January 1, 2009. Based on its current activities, the Company does not expect the adoption of this Statement will have a material effect on the Company’s financial position or results of operations.

In February 2008, the FASB issued FASB Staff Position No. 157-2. The staff position delays the effective date of SFAS No. 157, Fair Value Measurements (which was adopted by the Company on January 1, 2008) for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis. The delay was intended to allow additional time to consider the effect of various implementation issues with regard to the application of SFAS No. 157. This staff position deferred the effective date of SFAS No. 157 to January 1, 2009, for items within the scope of the staff position and is not expected to have a material effect on the Company's financial position or results of operations.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133, which requires enhanced disclosures about an entity’s derivative and hedging activities intended to improve the transparency of financial reporting. Under SFAS No. 161, entities will be required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company adopted SFAS No. 161 effective January 1, 2009. The adoption of this standard is not anticipated to have a material effect on the Company’s financial position or results of operations.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States (the GAAP hierarchy). The FASB concluded that the GAAP hierarchy should reside in the accounting literature established by the FASB and is issuing this Statement to achieve that result. SFAS No. 162 is effective sixty days following the Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411. The adoption of this standard is not anticipated to have a material effect on the Company’s financial position or results of operations.

In June 2008, the FASB issued an Exposure Draft of a proposed Statement of Financial Accounting Standards, Disclosure of Certain Loss Contingencies—an amendment of FASB Statements No. 5 and 141(R). The purpose of the proposed statement is intended to improve the quality of financial reporting by expanding disclosures required about certain loss contingencies. Investors and other users of financial information have expressed concerns that current disclosures required in SFAS No. 5, Accounting for Contingencies, do not provide sufficient information in a timely manner to assist users of financial statements in assessing the likelihood, timing, and amount of future cash flows associated with loss contingencies. If approved as written, this proposed Statement would expand disclosures about certain loss contingencies in the scope of SFAS No. 5 or SFAS No. 141 (revised 2007), Business Combinations, and would be effective for fiscal years ending after December 15, 2008, and interim and annual periods in subsequent fiscal years. The FASB continues to deliberate this proposed standard at this time.

Great Southern Bancorp, Inc.

Consolidated Statements of Financial Condition

December 31, 2008 and 2007

(In Thousands, Except Per Share Data)

Assets

	2008		2007

Cash	$	135,043	$	79,552

Interest-bearing deposits in other financial institutions		32,877		973

Cash and cash equivalents		167,920		80,525

Available-for-sale securities		647,678		425,028

Held-to-maturity securities		1,360		1,420

Mortgage loans held for sale		4,695		6,717

Loans receivable, net of allowance for loan losses of $29,163 and $25,459 at December 31, 2008 and 2007, respectively		1,716,996		1,813,394

Interest receivable		13,287		15,441

Prepaid expenses and other assets		14,179		14,904

Foreclosed assets held for sale, net		32,659		20,399

Premises and equipment, net		30,030		28,033

Goodwill and other intangible assets		1,687		1,909

Federal Home Loan Bank stock		8,333		13,557

Refundable income taxes		7,048		1,701

Deferred income taxes		14,051		8,704

Total assets	$	2,659,923	$	2,431,732

See Notes to Consolidated Financial Statements

103

Liabilities and Stockholders’ Equity

	2008			2007

Liabilities
Deposits	$	1,908,028		$	1,763,146
Federal Home Loan Bank advances		120,472			213,867
Securities sold under reverse repurchase agreements with customers		215,261			143,721
Structured repurchase agreements		50,000			—
Short-term borrowings		83,368			73,000
Subordinated debentures issued to capital trust		30,929			30,929
Accrued interest payable		9,225			6,149
Advances from borrowers for taxes and insurance		334			378
Accounts payable and accrued expenses		8,219			10,671

Total liabilities		2,425,836			2,241,861

Commitments and Contingencies		—			—

Stockholders’ Equity
Capital stock
Serial preferred stock, $.01 par value; authorized 1,000,000 shares; issued and outstanding December 2008 – 58,000 shares		55,580			—
Common stock, $.01 par value; authorized 20,000,000 shares; issued and outstanding 2008 – 13,380,969 shares, 2007 – 13,400,197 shares		134			134
Common stock warrants; December 2008 – 909,091 shares		2,452			—
Additional paid-in capital		19,811			19,342
Retained earnings		156,247			170,933
Accumulated other comprehensive loss
Unrealized loss on available-for-sale securities, net of income taxes of $(74) and $(290) at December 31, 2008 and 2007, respectively		(137	)		(538	)

Total stockholders’ equity		234,087			189,871

Total liabilities and stockholders’ equity	$	2,659,923		$	2,431,732

104

Great Southern Bancorp, Inc.

Consolidated Statements of Operations

Years Ended December 31, 2008, 2007 and 2006

(In Thousands, Except Per Share Data)

	2008			2007			2006
Interest Income
Loans	$	119,829		$	142,719		$	133,094
Investment securities and other		24,985			21,152			16,987
		144,814			163,871			150,081
Interest Expense
Deposits		60,876			76,232			65,733
Federal Home Loan Bank advances		5,001			6,964			8,138
Short-term borrowings and repurchase agreements		5,892			7,356			5,648
Subordinated debentures issued to capital trust		1,462			1,914			1,335
		73,231			92,466			80,854

Net Interest Income		71,583			71,405			69,227
Provision for Loan Losses		52,200			5,475			5,450
Net Interest Income After Provision for Loan Losses		19,383			65,930			63,777

Noninterest Income
Commissions		8,724			9,933			9,166
Service charges and ATM fees		15,352			15,153			14,611
Net gains on loan sales		1,415			1,037			944
Net realized gains (losses) on sales of available-for-sale securities		44			13			(1	)
Realized impairment of available-for-sale securities		(7,386	)		(1,140	)		—
Net gain on sale of fixed assets		191			48			167
Late charges and fees on loans		819			962			1,567
Change in interest rate swap fair value net of change in hedged deposit fair value		6,981			1,632			1,498
Other income		2,004			1,781			1,680
		28,144			29,419			29,632

Noninterest Expense
Salaries and employee benefits		31,081			30,161			28,285
Net occupancy expense		8,281			7,927			7,645
Postage		2,240			2,230			2,178
Insurance		2,223			1,473			876
Advertising		1,073			1,446			1,201
Office supplies and printing		820			879			931
Telephone		1,396			1,363			1,387
Legal, audit and other professional fees		1,739			1,247			1,127
Expense on foreclosed assets		3,431			608			119
Write-off of trust preferred securities issuance costs		—			—			783
Other operating expenses		3,422			4,373			4,275
		55,706			51,707			48,807

Income (Loss) Before Income Taxes		(8,179	)		43,642			44,602
Provision (Credit) for Income Taxes		(3,751	)		14,343			13,859
Net Income (Loss)		(4,428	)		29,299			30,743
Preferred Stock Dividends and Discount Accretion		242			—			—

Net Income (Loss) Available to Common Shareholders	$	(4,670	)	$	29,299		$	30,743

Earnings (Loss) Per Common Share
Basic	$	(.35	)	$	2.16		$	2.24
Diluted	$	(.35	)	$	2.15		$	2.22

See Notes to Consolidated Financial Statements

105

Great Southern Bancorp, Inc.

Consolidated Statements of Stockholders’ Equity

Years Ended December 31, 2008, 2007 and 2006

(In Thousands, Except Per Share Data)

																Accumulated
																Other
									Common		Additional					Comprehen- sive
	Income			Preferred		Common			Stock		Paid-in		Retained			Income			Treasury
	(Loss)			Stock		Stock			Warrants		Capital		Earnings			(Loss)			Stock			Total

Balance, December 31, 2005	$	—		$	—	$	137		$	—	$	17,781	$	138,921		$	(4,037	)	$	—		$	152,802
Net income		30,743			—		—			—		—		30,743			—			—			30,743
Stock issued under Stock Option Plan		—			—		—			—		700		—			—			1,052			1,752
Dividends declared, $.60 per share		—			—		—			—		—		(8,214	)		—			—			(8,214	)
Change in unrealized gain on available-for-sale securities, net of income taxes of $1,194		2,217			—		—			—		—		—			2,217			—			2,217
Company stock purchased		—			—		—			—		—		—			—			(3,722	)		(3,722	)
Reclassification of treasury stock per Maryland law		—			—		—			—		—		(2,670	)		—			2,670			—

Comprehensive income	$	32,960

Balance, December 31, 2006	$	—			—		137			—		18,481		158,780			(1,820	)		—			175,578
Net income		29,299			—		—			—		—		29,299			—			—			29,299
Stock issued under Stock Option Plan		—			—		—			—		861		—			—			812			1,673
Common dividends declared, $.68 per share		—			—		—			—		—		(9,205	)		—			—			(9,205	)
Change in unrealized loss on available-for-sale securities, net of income tax benefit of $690		1,282			—		—			—		—		—			1,282			—			1,282
Company stock purchased		—			—		—			—		—		—			—			(8,756	)		(8,756	)
Reclassification of treasury stock per Maryland law		—			—		(3	)		—		—		(7,941	)		—			7,944			—

Comprehensive income	$	30,581

Balance, December 31, 2007	$	—			—		134			—		19,342		170,933			(538	)		—			189,871
Net loss		(4,428	)		—		—			—		—		(4,428	)		—			—			(4,428	)
Preferred stock issued		—			55,548		—			—		—		—			—			—			55,548
Common stock warrants issued		—			—		—			2,452		—		—			—			—			2,452
Stock issued under Stock Option Plan		—			—		—			—		469		—			—			25			494
Common dividends declared, $.72 per share		—			—		—			—		—		(9,633	)		—			—			(9,633	)
Preferred stock discount accretion		—			32		—			—		—		(32	)		—			—			—
Preferred stock dividends accrued (5%)		—			—		—			—		—		(210	)		—			—			(210	)
Change in unrealized loss on available-for-sale securities, net of income tax benefit of $216		401			—		—			—		—		—			401			—			401
Company stock purchased		—			—		—			—		—		—			—			(408	)		(408	)
Reclassification of treasury stock per Maryland law		—			—		—			—		—		(383	)		—			383			—

Balance, December 31, 2008	$	(4,027	)	$	55,580	$	134		$	2,452	$	19,811	$	156,247		$	(137	)	$	0		$	234,087

See Notes to Consolidated Financial Statements

106

Great Southern Bancorp, Inc.

Consolidated Statements of Cash Flows

Years Ended December 31, 2008, 2007 and 2006

(In Thousands)

	2008			2007			2006

Operating Activities
Net income (loss)	$	(4,428	)	$	29,299		$	30,743
Proceeds from sales of loans held for sale		94,935			77,234			71,964
Originations of loans held for sale		(91,914	)		(73,035	)		(68,076	)
Items not requiring (providing) cash
Depreciation		2,446			2,706			2,932
Amortization		383			374			380
Write-off of trust preferred securities issuance costs		—			—			783
Provision for loan losses		52,200			5,475			5,450
Net gains on loan sales		(1,415	)		(1,037	)		(944	)
Net realized (gains) losses and impairment on available-for-sale securities		7,342			1,127			(1	)
Gain on sale of premises and equipment		(191	)		(48	)		(167	)
(Gain) loss on sale of foreclosed assets		1,456			(209	)		(184	)
Amortization of deferred income, premiums and discounts		(1,960	)		(3,918	)		(1,849	)
Change in interest rate swap fair value net of change in hedged deposit fair value		(6,983	)		(1,713	)		(1,908	)
Deferred income taxes		(5,562	)		2,978			(365	)
Changes in
Interest receivable		2,154			(1,854	)		(2,746	)
Prepaid expenses and other assets		(2,698	)		468			108
Accounts payable and accrued expenses		2,626			(10,453	)		14,036
Income taxes refundable/payable		(5,347	)		605			(3,012	)

Net cash provided by operating activities		43,044			27,999			47,144

See Notes to Consolidated Financial Statements

107

Great Southern Bancorp, Inc.

Consolidated Statements of Cash Flows

Years Ended December 31, 2008, 2007 and 2006

(In Thousands)

	2008			2007			2006

Investing Activities
Net change in loans	$	34,189		$	(168,183	)	$	(127,762	)
Purchase of loans		(12,030	)		(4,649	)		(47,508	)
Proceeds from sale of student loans		634			3,052			2,314
Purchase of additional business units		—			(730	)		(143	)
Purchase of premises and equipment		(4,686	)		(4,080	)		(4,094	)
Proceeds from sale of premises and equipment		434			106			2,177
Proceeds from sale of foreclosed assets		11,183			3,290			2,861
Capitalized costs on foreclosed assets		(567	)		(156	)		—
Proceeds from maturities, calls and repayments of held-to-maturity securities		60			50			40
Proceeds from sale of available-for-sale securities		85,242			4,415			26,679
Proceeds from maturities, calls and repayments of available-for-sale securities		206,902			482,153			295,188
Purchase of available-for-sale securities		(522,071	)		(565,819	)		(294,218	)
(Purchase) redemption of Federal Home Loan Bank stock		5,224			(3,078	)		1,378

Net cash used in investing activities		(195,486	)		(253,629	)		(143,088	)

See Notes to Consolidated Financial Statements

108

Great Southern Bancorp, Inc.

Consolidated Statements of Cash Flows

Years Ended December 31, 2008, 2007 and 2006

(In Thousands)

	2008			2007			2006

Financing Activities
Net increase (decrease) in certificates of deposit	$	285,044		$	(8,400	)	$	144,203
Net increase (decrease) in checking and savings accounts		(132,125	)		62,017			6,038
Proceeds from Federal Home Loan Bank advances		503,000			1,568,000			952,200
Repayments of Federal Home Loan Bank advances		(596,395	)		(1,533,303	)		(976,465	)
Net increase (decrease) in short-term borrowings		81,908			95,765			(12,602	)
Proceeds from issuance of structured repurchase agreement		50,000			—			—
Proceeds from issuance of preferred stock and related common stock warrants to U.S. Treasury		58,000			—			—
Proceeds from issuance of trust preferred debentures		—			5,000			25,000
Repayment of trust preferred debentures		—			—			(17,250	)
Advances to borrowers for taxes and insurance		(44	)		(10	)		155
Company stock purchased		(408	)		(8,756	)		(3,722	)
Dividends paid		(9,637	)		(8,981	)		(7,947	)
Stock options exercised		494			1,673			1,752

Net cash provided by financing activities		239,837			173,005			111,362

Increase (Decrease) in Cash and Cash Equivalents		87,395			(52,625	)		15,418

Cash and Cash Equivalents, Beginning of Year		80,525			133,150			117,732

Cash and Cash Equivalents, End of Year	$	167,920		$	80,525		$	133,150

See Notes to Consolidated Financial Statements

109

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Note 1: Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations and Operating Segments

Great Southern Bancorp, Inc. (GSBC or the “Company”) operates as a one-bank holding company. GSBC’s business primarily consists of the business of Great Southern Bank (the “Bank”), which provides a full range of financial services as well as travel and insurance services through the Bank’s other wholly owned subsidiaries to customers primarily in southwest and central Missouri. In addition, the Company serves the loan needs of customers through its loan origination offices in St. Louis and Kansas City, Missouri, and Rogers, Arkansas. Outside of Missouri, the states with the largest concentrations of loans by the Company are Arkansas and Kansas. The Company and the Bank are subject to the regulation of certain federal and state agencies and undergo periodic examinations by those regulatory agencies.

The Company’s banking operation is its only reportable segment. The banking operation is principally engaged in the business of originating residential and commercial real estate loans, construction loans, commercial business loans and consumer loans and funding these loans through attracting deposits from the general public, accepting brokered deposits and borrowing from the Federal Home Loan Bank and others. The operating results of this segment are regularly reviewed by management to make decisions about resource allocations and to assess performance. Revenue from segments below the reportable segment threshold is attributable to three operating segments of the Company. These segments include insurance services, travel services and investment services. Selected information is not presented separately for the Company’s reportable segment, as there is no material difference between that information and the corresponding information in the consolidated financial statements.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans. In connection with the determination of the allowance for loan losses and the valuation of foreclosed assets held for sale, management obtains independent appraisals for significant properties.

Principles of Consolidation

The consolidated financial statements include the accounts of Great Southern Bancorp, Inc., its wholly owned subsidiary, the Bank, and the Bank’s wholly owned subsidiaries, Great Southern Real Estate Development Corporation, GSB One LLC (including its wholly owned subsidiary, GSB Two LLC), Great Southern Financial Corporation, Great Southern Community Development Corporation, GS, LLC, GSSC, LLC, GS-RE Holding, LLC and GS-RE Holding II, LLC. All significant intercompany accounts and transactions have been eliminated in consolidation.

110

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Reclassifications

Certain prior periods’ amounts have been reclassified to conform to the 2008 financial statements presentation. These reclassifications had no effect on net income.

Federal Home Loan Bank Stock

Federal Home Loan Bank stock is a required investment for institutions that are members of the Federal Home Loan Bank system. The required investment in common stock is based on a predetermined formula.

Securities

Available-for-sale securities, which include any security for which the Company has no immediate plan to sell but which may be sold in the future, are carried at fair value. Unrealized gains and losses are recorded, net of related income tax effects, in other comprehensive income.

Held-to-maturity securities, which include any security for which the Company has the positive intent and ability to hold until maturity, are carried at historical cost adjusted for amortization of premiums and accretion of discounts.

Amortization of premiums and accretion of discounts are recorded as interest income from securities. Realized gains and losses are recorded as net security gains (losses). Gains and losses on sales of securities are determined on the specific-identification method.

Mortgage Loans Held for Sale

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or fair value in the aggregate. Write-downs to fair value are recognized as a charge to earnings at the time the decline in value occurs. Nonbinding forward commitments to sell individual mortgage loans are generally obtained to reduce market risk on mortgage loans in the process of origination and mortgage loans held for sale. Gains and losses resulting from sales of mortgage loans are recognized when the respective loans are sold to investors. Fees received from borrowers to guarantee the funding of mortgage loans held for sale and fees paid to investors to ensure the ultimate sale of such mortgage loans are recognized as income or expense when the loans are sold or when it becomes evident that the commitment will not be used.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding principal balances adjusted for any charge-offs, the allowance for loan losses, any deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans. Interest income is reported on the interest method and includes amortization of net deferred loan fees and costs over the loan term. Generally, loans are placed on nonaccrual status at 90 days past due and interest is considered a loss, unless the loan is well secured and in the process of collection.

111

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Discounts and premiums on purchased loans are amortized to income using the interest method over the remaining period to contractual maturity, adjusted for anticipated prepayments.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent.

Large groups of smaller balance homogenous loans are collectively evaluated for impairment. Accordingly, the Bank does not separately identify consumer and one-to-four family residential loans for impairment disclosures.

Foreclosed Assets Held for Sale

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less estimated cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in net expense on foreclosed assets.

112

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Premises and Equipment

Premises and equipment are stated at cost less accumulated depreciation. Depreciation is charged to expense using the straight-line and accelerated methods over the estimated useful lives of the assets. Leasehold improvements are capitalized and amortized using the straight-line and accelerated methods over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter.

Long-Lived Asset Impairment

The Company evaluates the recoverability of the carrying value of long-lived assets whenever events or circumstances indicate the carrying amount may not be recoverable. If a long-lived asset is tested for recoverability and the undiscounted estimated future cash flows expected to result from the use and eventual disposition of the asset is less than the carrying amount of the asset, the asset cost is adjusted to fair value and an impairment loss is recognized as the cmount by which the carrying amount of a long-lived asset exceeds its fair value.

No asset impairment was recognized during the years ended December 31, 2008 and 2007.

Goodwill and Intangible Assets

Goodwill is tested annually for impairment. If the implied fair value of goodwill is lower than its carrying amount, a goodwill impairment is indicated and goodwill is written down to its implied fair value. Subsequent increases in goodwill value are not recognized in the financial statements.

Intangible assets are being amortized on the straight-line basis over periods ranging from three to seven years. Such assets are periodically evaluated as to the recoverability of their carrying value.

A summary of goodwill and intangible assets is as follows:

	December 31,
	2008		2007
	(In Thousands)

Goodwill – Branch acquisitions	$	379	$	379
Goodwill – Travel agency acquisitions		875		875
Deposit intangibles		314		401
Noncompete agreements		119		254

	$	1,687	$	1,909

113

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Loan Servicing and Origination Fee Income

Loan servicing income represents fees earned for servicing real estate mortgage loans owned by various investors. The fees are generally calculated on the outstanding principal balances of the loans serviced and are recorded as income when earned. Loan origination fees, net of direct loan origination costs, are recognized as income using the level-yield method over the contractual life of the loan.

Stockholders’ Equity

At the 2004 Annual Meeting of Stockholders, the Company’s stockholders approved the Company’s reincorporation to the State of Maryland. This reincorporation was completed in June 2004. Under Maryland law, there is no concept of “Treasury Shares.” Instead, shares purchased by the Company constitute authorized but unissued shares under Maryland law. Accounting principles generally accepted in the United States of America state that accounting for treasury stock shall conform to state law. The Company’s consolidated statements of financial condition reflects this change. The cost of shares purchased by the Company has been allocated to common stock and retained earnings balances.

Earnings Per Share

Basic earnings per share is computed based on the weighted average number of shares outstanding during each year. Diluted earnings per share is computed using the weighted average common shares and all potential dilutive common shares outstanding during the period.

Earnings per share (EPS) were computed as follows:

	2008			2007		2006
	(In Thousands, Except Per Share Data)

Net income (loss)	$	(4,428	)	$	29,299	$	30,743

Net income (loss) available-to-common shareholders	$	(4,670	)	$	29,299	$	30,743

Average common shares outstanding		13,381			13,566		13,697

Average common share stock options and warrants outstanding		N/A			88		128

Average diluted common shares		13,381			13,654		13,825

Earnings (loss) per common share – basic	$	(0.35	)	$	2.16	$	2.24

Earnings (loss) per common share – diluted	$	(0.35	)	$	2.15	$	2.22

114

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Because of the Company’s loss from continuing operations, no potential options to purchase shares of common stock or common stock warrants were included in the calculation of diluted earnings per share for the year ended December 31, 2008. Options to purchase 386,015 and 318,695 shares of common stock were outstanding during the years ended December 31, 2007 and 2006, respectively, but were not included in the computation of diluted earnings per share for that year because the options’ exercise price was greater than the average market price of the common shares.

Stock Option Plans

The Company has stock-based employee compensation plans, which are described more fully in Note 19. On January 1, 2006, the Company adopted SFAS No. 123(R), Share Based Payment. SFAS No. 123(R) specifies the accounting for share-based payment transactions in which an entity receives employee services in exchange for (a) equity instruments of the entity or (b) liabilities that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of such equity instruments. SFAS No. 123(R) requires an entity to recognize as compensation expense within the income statement the grant-date fair value of stock options and other equity-based compensation granted to employees. As a result, compensation cost related to share-based payment transactions is now recognized in the Company’s consolidated financial statements using the modified prospective transition method provided for in the standard. For the years ended December 31, 2008, 2007 and 2006, share-based compensation expense totaling $468,000, $518,000 and $480,000, respectively, has been included in salaries and employee benefits expense in the consolidated statements of operations.

Prior to the adoption of SFAS No. 123(R), the Company accounted for stock compensation using the intrinsic value method permitted by APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. Prior to 2006, no stock-based employee compensation cost was reflected in the consolidated statements of operations, as all options granted had an exercise price at least equal to the market value of the underlying common stock on the grant date.

On December 31, 2005, the Board of Directors of the Company approved the accelerated vesting of certain outstanding out-of-the-money unvested options (Options) to purchase shares of the Company’s common stock held by the Company’s officers and employees. Options to purchase 183,935 shares which would otherwise have vested from time to time over the next five years became immediately exercisable as a result of this action. The accelerated Options had a weighted average exercise price of $31.49. The closing market price on December 30, 2005, was $27.61. The Company also placed a restriction on the sale or other transfer of shares (including pledging the shares as collateral) acquired through the exercise of the accelerated Options prior to the original vesting date. With the acceleration of these Options, the compensation expense, net of taxes, that was recognized in the Company’s income statements for 2006, 2007 and 2008 was reduced by approximately $267,000 for each year. The Company estimates that, with the acceleration of these Options, the compensation expense, net of taxes, that will be recognized in its income statement for 2009 and 2010, will be reduced by approximately $238,000 and $103,000, respectively. The accelerated Options represent approximately 41% of the unvested Company options and 27% of the total of all outstanding Company options.

115

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Cash Equivalents

The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. At December 31, 2008 and 2007, cash equivalents consisted of interest-bearing deposits in other financial institutions. At December 31, 2008, nearly all of the interest-bearing deposits were uninsured, with nearly all of these balances held at the Federal Home Loan Bank.

Income Taxes

Deferred tax assets and liabilities are recognized for the tax effects of differences between the financial statement and tax bases of assets and liabilities. A valuation allowance is established to reduce deferred tax assets if it is more likely than not that a deferred tax asset will not be realized.

Interest Rate Swaps

The Company enters into interest-rate swap derivatives, primarily as an asset/liability management strategy, in order to hedge the change in the fair value from recorded fixed rate liabilities (long-term fixed rate CDs). The terms of the swaps are carefully matched to the terms of the underlying hedged item and when the relationship is properly documented as a hedge and proven to be effective, it is designated as a fair value hedge. The fair market value of derivative financial instruments is based on the present value of future expected cash flows from those instruments discounted at market forward rates and are recognized in the statement of financial condition in the prepaid expenses and other assets or accounts payable and accrued expenses caption. Effective changes in the fair market value of the hedged item due to changes in the benchmark interest rate are similarly recognized in the statement of financial condition in the prepaid expenses and other assets or accounts payable and accrued expenses caption. Effective gains/losses are reported in interest expense and any ineffectiveness is recorded in income in the noninterest income caption. Gains and losses on early termination of the designated fair value derivative financial instruments are deferred and amortized as an adjustment to the yield on the related liability over the shorter of the remaining contract life or the maturity of the related asset or liability. If the related liability is sold or otherwise liquidated, the fair market value of the derivative financial instrument is recorded on the balance sheet as an asset or a liability (in prepaid expenses and other assets or accounts payable and accrued expenses) with the resultant gains and losses recognized in noninterest income.

Restriction on Cash and Due From Banks

The Bank is required to maintain reserve funds in cash and/or on deposit with the Federal Reserve Bank. The reserve required at December 31, 2008 and 2007, respectively, was $31,396,000 and $32,463,000.

116

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Recent Accounting Pronouncements

117

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

In June 2008, the FASB issued an Exposure Draft of a proposed Statement of Financial Accounting Standards, Accounting for Hedging Activities—an amendment of FASB Statement No. 133. The purpose of the proposed Statement is intended to simplify hedge accounting resulting in increased comparability of financial results for entities that apply hedge accounting. Specifically, the proposed statement would eliminate the multiple methods of hedge accounting currently being used for the same transaction. It also would require an entity to designate all risks as the hedged risk (with certain exceptions) in the hedged item or transaction, thus better reflecting the economics of such items and transactions in the financial statements. Additional objectives of the proposed Statement are to: simplify accounting for hedging activities; improve the financial reporting of hedging activities to make the accounting model and associated disclosures more useful and easier to understand for users of financial statements; resolve major practice issues related to hedge accounting that have arisen under Statement 133, Accounting for Derivative Instruments and Hedging Activities; and address differences resulting from recognition and measurement anomalies between the accounting for derivative instruments and the accounting for hedged items or transactions. If approved as written, the proposed Statement would require application of the amended hedging requirements for financial statements issued for fiscal years beginning after June 15, 2009, and interim periods within those fiscal years. The FASB continues to deliberate this proposed standard at this time.

In August 2008, the FASB issued an Exposure Draft of a proposed Statement of Financial Accounting Standards, Earnings per Share—an amendment of FASB Statement No. 128. The FASB is issuing this proposed Statement as part of a joint project with the International Accounting Standards Board (IASB). The FASB and the IASB undertook that project to eliminate differences between

118

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

FASB Statement No. 128, Earnings per Share, and IAS 33, Earnings per Share, in ways that also would clarify and simplify the earnings per share (EPS) computation. This proposed Statement proposes amendments to Statement 128 that would improve the comparability of EPS because the denominator used to compute EPS under Statement 128 would be the same as the denominator used to compute EPS under IAS 33, with limited exceptions. The FASB continues to deliberate this proposed standard at this time.

In October 2008, the FASB issued FASB Staff Position No. 157-3, Determining the Fair Value of an Asset When the Market for That Asset Is Not Active. FSP 157-3 clarifies how Statement of Financial Accounting Standards (SFAS) No. 157 “Fair Value Measurements” (SFAS 157) should be applied when valuing securities in markets that are not active and illustrates how an entity would determine fair value in this circumstance. The FSP states that an entity should not automatically conclude that a particular transaction price is determinative of fair value. In a dislocated market, judgment is required to evaluate whether individual transactions are forced liquidations or distressed sales. When relevant observable market information is not available, a valuation approach that incorporates management’s judgments about the assumptions that market participants would use in pricing the asset in a current sale transaction would be acceptable. The FSP also indicates that quotes from brokers or pricing services may be relevant inputs when measuring fair value, but are not necessarily determinative in the absence of an active market for the asset. The adoption of FSP 157-3, effective upon issuance, did not impact the Company’s financial position or results of operations.

In October 2008, the FASB issued an Exposure Draft of a proposed Statement of Financial Accounting Standards, Subsequent Events. The objective of this proposed Statement is to establish general standards of accounting for and disclosure of events that occur subsequent to the balance sheet date but before financial statements are issued or are available to be issued. In particular, this proposed Statement sets forth: (1) the period after the balance sheet date during which management of a reporting entity would evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; (2) the circumstances under which an entity would recognize events or transactions occurring after the balance sheet date in its financial statements; and (3) the disclosures that an entity would make about events or transactions that occurred after the balance sheet date. The FASB continues to deliberate this proposed standard at this time.

In December 2008, the FASB issued FASB Staff Position No. 140-4 and FIN 46(R)-8, Disclosure by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities. This FSP amends SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, to require public entities to provide additional disclosures about transfers of financial assets and amends FIN 46(R), Consolidation of Variable Interest Entities, to require public entities to provide additional disclosures about their involvement in variable interest entities and certain special purpose entities. This FSP was effective for the first reporting period ending after December 15, 2008. The Company has not engaged in these types of transfers of financial assets; therefore, no additional disclosures were required.

119

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

In January 2009, the FASB issued proposed FASB Staff Position No. 107-b and APB 28-a, Interim Disclosures about Fair Value of Financial Instruments. This proposed FSP would amend FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements. This FSP also would amend APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in all interim financial statements. This FSP, if adopted as it is currently written, is effective for interim and annual reporting periods ending after March 15, 2009.

In February 2009, the FASB decided to reexpose proposed FASB Staff Position No. 157-c, Measuring Liabilities under FASB Statement No. 157. This proposed FSP would clarify the principles in FASB Statement No. 157, Fair Value Measurements, on the measurement of liabilities. This FSP, if adopted as it is currently written, will be applied on a prospective basis effective on the beginning of the period that includes the issuance date of the FSP.

In March 2008, the FASB issued proposed FSP FAS 132(R)-a, Employers’ Disclosures about Postretirement Benefit Plan Assets. In December 2008, the FASB issued the final FSP FAS 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets. This FSP is the result of FASB’s redeliberations of that proposed FSP. The provisions of this FSP only apply to single-employer defined benefit plans; the Company participates in a multi-employer defined benefit pension plan. Therefore, the requirements of this FSP will not affect the consolidated financial condition or results of operations of the Company, or the related disclosures about plan assets.

Note 2: Investments in Debt and Equity Securities

The amortized cost and approximate fair values of securities classified as available-for-sale were as follows:

	December 31, 2008
			Gross		Gross		Approximate
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)

U.S. government agencies	$	34,968	$	32	$	244	$	34,756
Collateralized mortgage obligations		73,976		585		2,647		71,914
Mortgage-backed securities		480,349		6,029		1,182		485,196
States and political subdivisions		55,545		107		2,549		53,103
Corporate bonds		1,500		—		295		1,205
Equity securities		1,552		—		48		1,504

	$	647,890	$	6,753	$	6,965	$	647,678

120

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

	December 31, 2007
			Gross		Gross		Approximate
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)

U.S. government agencies	$	126,117	$	53	$	375	$	125,795
Collateralized mortgage obligations		39,769		214		654		39,329
Mortgage-backed securities		183,023		1,030		916		183,137
States and political subdivisions		62,572		533		453		62,652
Corporate bonds		1,501		—		25		1,476
Equity securities		12,874		4		239		12,639

	$	425,856	$	1,834	$	2,662	$	425,028

Additional details of the Company's collateralized mortgage obligations and mortgage-backed securities at December 31, 2008, are described as follows:

	December 31, 2008
			Gross		Gross		Approximate
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
Collaterialized Mortgage Obligations
FHLMC Fixed	$	12,691	$	403	$	113	$	12,981
GNMA Fixed		48,817		182		—		48,999
Total Agency		61,508		585		113		61,980

Nonagency		12,468		—		2,534		9,934

	$	73,976	$	585	$	2,647	$	71,914

121

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

			Gross		Gross		Approximate
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
Mortgage-backed securities:
FHLMC Fixed	$	53,137	$	1,279	$	5	$	54,411
FHLMC Hybrid ARM		188,545		1,559		369		189,735
Total FHLMC		241,682		2,838		374		244,146

FNMA Fixed		40,141		1,561		—		41,702
FNMA Hybrid ARM		175,410		1,583		616		176,378
Total FNMA		215,551		3,144		616		218,080

GNMA Fixed		14,441		30		—		14,471
GNMA Hybrid ARM		8,675		17		192		8,499
Total GNMA		23,116		47		192		22,970

	$	480,349	$	6,029	$	1,182	$	485,196


Total Fixed	$	107,719	$	2,870	$	5	$	110,584
Total Hybrid ARM		372,630		3,159		1,177		374,612

	$	480,349	$	6,029	$	1,182	$	485,196

The amortized cost and fair value of available-for-sale securities at December 31, 2008, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

			Approximate
	Amortized		Fair
	Cost		Value
	(In Thousands)

One year or less	$	—	$	—
After one through five years		924		931
After five through ten years		38,315		38,071
After ten years		52,774		50,062
Securities not due on a single maturity date		554,325		557,110
Equity securities		1,552		1,504

	$	647,890	$	647,678

122

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

The amortized cost and approximate fair values of securities classified as held-to-maturity were as follows:

December 31, 2008

Gross

Approximate

Amortized

Unrealized

Fair

Cost

Gains

Losses

Value

(In Thousands)

States and political subdivisions

1,360

1,422

December 31, 2007

Gross

Approximate

Amortized

Unrealized

Fair

Cost

Gains

Losses

Value

(In Thousands)

States and political subdivisions

1,420

1,508

The held-to-maturity securities at December 31, 2008, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

			Approximate
	Amortized		Fair
	Cost		Value
	(In Thousands)

After one through five years	$	—	$	—
After five through ten years		1,260		1,315
After ten years		100		107

	$	1,360	$	1,422

123

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

The amortized cost and approximate fair values of securities pledged as collateral was as follows at December 31, 2008 and 2007:

	2008				2007
			Approximate				Approximate
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In Thousands)

Public deposits	$	140,452	$	140,660	$	194,889	$	194,401
Collateralized borrowing accounts		222,307		220,755		163,989		163,941
Structured repurchase agreements		57,251		57,412		—		—
Federal Home Loan Bank advances		2,782		2,893		47,038		46,998
Interest rate swaps and treasury, tax and loan accounts		3,021		2,965		4,779		4,770

	$	425,813	$	424,685	$	410,695	$	410,110

Certain investments in debt and marketable equity securities are reported in the financial statements at an amount less than their historical cost. Total fair value of these investments at December 31, 2008 and 2007, respectively, was approximately $222,228,000 and $204,056,000 which is approximately 34.24% and 47.9% of the Company’s available-for-sale and held-to-maturity investment portfolio, respectively.

Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for these debt securities are temporary.

Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified. During 2008, the Company determined that the impairment of certain available-for-sale equity securities with an original cost of $8.4 million had become other than temporary. Consequently, the Company recorded a $7.4 million pre-tax charge to income during 2008. This total charge included $5.7 million related to Fannie Mae and Freddie Mac preferred stock. During 2007, the Company determined that the impairment of certain available-for-sale equity securities with an original cost of $5.3 million had become other than temporary. Consequently, the Company recorded a $1.1 million pre-tax charge to income during 2008.

124

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

The following table shows the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2008 and 2007:

	2008
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(In Thousands)

U.S. government agencies	$	29,756	$	(244	)	$	—	$	—		$	29,756	$	(244	)
Mortgage-backed securities		129,048		(1,010	)		8,479		(172	)		137,527		(1,182	)
Collateralized mortgage obligations		3,609		(232	)		10,063		(2,415	)		13,672		(2,647	)
State and political subdivisions		37,491		(1,739	)		2,124		(810	)		39,615		(2,549	)
Corporate bonds		440		(60	)		766		(235	)		1,206		(295	)
Equity securities		—		—			452		(48	)		452		(48	)

	$	200,344	$	(3,285	)	$	21,884	$	(3,680	)	$	222,228	$	(6,965	)

	2007
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(In Thousands)

U.S. government agencies	$	43,418	$	(80	)	$	13,524	$	(295	)	$	56,942	$	(375	)
Mortgage-backed securities		22,498		(100	)		62,817		(816	)		85,315		(916	)
Collateralized mortgage obligations		11,705		(154	)		18,238		(500	)		29,943		(654	)
State and political subdivisions		23,398		(421	)		2,216		(32	)		25,614		(453	)
Corporate bonds		1,476		(25	)		—		—			1,476		(25	)
Equity securities		4,766		(239	)		—		—			4,766		(239	)

	$	107,261	$	(1,019	)	$	96,795	$	(1,643	)	$	204,056	$	(2,662	)

125

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Note 3: Other Comprehensive Income (Loss)

	2008			2007			2006
	(In Thousands)

Unrealized gain (loss) on available-for-sale securities, net of income taxes of $(2,354) for December 31, 2008; $296 for December 31, 2007; $1,194 for December 31, 2006	$	(4,371	)	$	549		$	2,217

Less reclassification adjustment for gain (loss) included in net income, net of income taxes of $(2,570) for December 31, 2008; $(394) for December 31, 2007; $0 for December 31, 2006		(4,772	)		(733	)		—

Change in unrealized gain (loss) on available-for- sale securities, net of income taxes	$	401		$	1,282		$	2,217

Note 4: Loans and Allowance for Loan Losses

Categories of loans at December 31, 2008 and 2007, included:

	2008			2007
	(In Thousands)

One-to-four family residential mortgage loans	$	222,100		$	185,253
Other residential mortgage loans		127,122			87,177
Commercial real estate loans		477,551			471,573
Other commercial loans		139,591			207,059
Industrial revenue bonds		59,413			61,224
Construction loans		604,965			919,059
Installment, education and other loans		177,480			154,015
Prepaid dealer premium		13,917			10,759
Discounts on loans purchased		(4	)		(6	)
Undisbursed portion of loans in process		(73,855	)		(254,562	)
Allowance for loan losses		(29,163	)		(25,459	)
Deferred loan fees and gains, net		(2,121	)		(2,698	)

	$	1,716,996		$	1,813,394

126

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Transactions in the allowance for loan losses were as follows:

	2008			2007			2006
	(In Thousands)

Balance, beginning of year	$	25,459		$	26,258		$	24,549
Provision charged to expense		52,200			5,475			5,450
Loans charged off, net of recoveries of $4,531 for 2008, $2,595 for 2007 and $2,500 for 2006		(48,496	)		(6,274	)		(3,741	)

Balance, end of year	$	29,163		$	25,459		$	26,258

The weighted average interest rate on loans receivable at December 31, 2008 and 2007, was 6.35% and 7.58%, respectively.

Loans serviced for others are not included in the accompanying consolidated statements of financial condition. The unpaid principal balances of loans serviced for others were $87,104,000 and $66,013,000 at December 31, 2008 and 2007, respectively. In addition, available lines of credit on these loans were $31,463,000 and $25,815,000 at December 31, 2008 and 2007, respectively.

Gross impaired loans totaled approximately $45,569,000 and $35,475,000 at December 31, 2008 and 2007, respectively. An allowance for loan losses of $3,720,000 and $2,583,000 relates to impaired loans of $34,263,000 and $10,234,000 at December 31, 2008 and 2007, respectively. There were $11,306,000 of impaired loans at December 31, 2008, and $25,241,000 of impaired loans at December 31, 2007, without a related allowance for loan losses assigned.

Interest of approximately $1,122,000, $1,097,000 and $722,000 was received on average impaired loans of approximately $33,596,000, $31,757,000 and $22,630,000 for the years ended December 31, 2008, 2007 and 2006, respectively. Interest of approximately $2,874,000, $2,659,000 and $1,954,000 would have been recognized on an accrual basis during the years ended December 31, 2008, 2007 and 2006, respectively.

At December 31, 2008 and 2007, accruing loans delinquent 90 days or more totaled approximately $318,000 and $196,000, respectively. Nonaccruing loans at December 31, 2008 and 2007, were approximately $32,884,000 and $35,279,000, respectively.

Certain of the Bank’s real estate loans are pledged as collateral for borrowings as set forth in Notes 7 and 9.

127

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Certain directors and executive officers of the Company and the Bank are customers of and had transactions with the Bank in the ordinary course of business. Except for the interest rates on loans secured by personal residences, in the opinion of management, all loans included in such transactions were made on substantially the same terms as those prevailing at the time for comparable transactions with unrelated parties. Generally, residential first mortgage loans and home equity lines of credit to all employees and directors have been granted at interest rates equal to the Bank’s cost of funds, subject to annual adjustments in the case of residential first mortgage loans and monthly adjustments in the case of home equity lines of credit. At December 31, 2008 and 2007, loans outstanding to these directors and executive officers are summarized as follows:

	December 31,
	2008			2007
	(In Thousands)

Balance, beginning of year	$	28,879		$	20,205
New loans		21,465			24,114
Payments		(21,626	)		(15,440	)

Balance, end of year	$	28,718		$	28,879

Note 5: Premises and Equipment

Major classifications of premises and equipment, stated at cost, were as follows:

	December 31,
	2008		2007
	(In Thousands)

Land	$	10,933	$	8,475
Buildings and improvements		21,490		20,788
Furniture, fixtures and equipment		23,650		22,719
		56,073		51,982
Less accumulated depreciation		26,043		23,949

	$	30,030	$	28,033

128

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Note 6: Deposits

Deposits are summarized as follows:

	Weighted Average		December 31,
	Interest Rate		2008		2007
			(In Thousands, Except Interest Rates)

Noninterest-bearing accounts		—	$	138,701	$	166,231
Interest-bearing checking and savings accounts		1.18% - 2.75%		386,540		491,135

				525,241		657,366

Certificate accounts		0% - 1.99%		38,987		598
		2% - 2.99%		205,426		22,850
		3% - 3.99%		446,799		93,717
		4% - 4.99%		646,458		470,718
		5% - 5.99%		42,847		497,877
		6% - 6.99%		869		10,394
	7% and above			186		374

				1,381,572		1,096,528
Interest rate swap fair value adjustment				1,215		9,252

			$	1,908,028	$	1,763,146

The weighted average interest rate on certificates of deposit was 3.67% and 4.83% at December 31, 2008 and 2007, respectively.

The aggregate amount of certificates of deposit originated by the Bank in denominations greater than $100,000 was approximately $152,745,000 and $167,313,000 at December 31, 2008 and 2007, respectively. The Bank utilizes brokered deposits as an additional funding source. The aggregate amount of brokered deposits, which are primarily in denominations of $100,000 or more, was approximately $974,490,000 and $674,609,000 at December 31, 2008 and 2007, respectively.

129

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

At December 31, 2008, scheduled maturities of certificates of deposit were as follows (in thousands):

	Retail		Brokered		Total

2009	$	347,223	$	442,005	$	789,228
2010		47,436		260,256		307,692
2011		4,543		214,389		218,932
2012		3,491		36,249		39,740
2013		3,179		—		3,179
Thereafter		1,210		21,591		22,801

	$	407,082	$	974,490	$	1,381,572

A summary of interest expense on deposits is as follows:

	2008			2007			2006
	(In Thousands)

Checking and savings accounts	$	8,370		$	16,043		$	12,679
Certificate accounts		52,616			60,295			53,145
Early withdrawal penalties		(110	)		(106	)		(91	)

	$	60,876		$	76,232		$	65,733

Note 7:

Advances From Federal Home Loan Bank

Advances from the Federal Home Loan Bank consisted of the following:

	December 31, 2008				December 31, 2007
Due In	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate
	(In Thousands, Except Interest Rates)

2008	$	—		—%	$	93,395		4.29%
2009		24,821		1.29		24,821		5.10
2010		4,978		3.63		4,978		5.69
2011		2,239		6.29		2,239		6.29
2012		2,934		6.04		2,934		6.04
2013		225		5.81		225		5.81
2014 and thereafter		85,275		3.69		85,275		3.69

	$	120,472		3.30	$	213,867		4.22

130

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Included in the Bank’s FHLB advances is a $30,000,000 advance with a maturity date of March 29, 2017. The interest rate on this advance is 4.07%. The advance has a call provision that allows the Federal Home Loan Bank of Des Moines to call the advance quarterly.

Included in the Bank’s FHLB advances is a $25,000,000 advance with a maturity date of December 7, 2016. The interest rate on this advance is 3.81%. The advance has a call provision that allows the Federal Home Loan Bank of Des Moines to call the advance quarterly.

Included in the Bank’s FHLB advances is a $30,000,000 advance with a maturity date of November 24, 2017. The interest rate on this advance is 3.20%. The advance has a call provision that allows the Federal Home Loan Bank of Des Moines to call the advance quarterly.

The Bank has pledged FHLB stock, investment securities and first mortgage loans free of pledges, liens and encumbrances as collateral for outstanding advances. Investment securities with approximate carrying values of $2,893,000 and $46,998,000, respectively, were specifically pledged as collateral for advances at December 31, 2008 and 2007. Loans with carrying values of approximately $606,362,000 and $520,005,000 were pledged as collateral for outstanding advances at December 31, 2008 and 2007, respectively.

Note 8: Short-Term Borrowings

Short-term borrowings are summarized as follows:

	December 31,
	2008		2007
	(In Thousands)

Federal Reserve Term Auction Facility (see Note 9)	$	83,000	$	50,000
Note payable – Kansas City Equity Fund		368		—
Overnight borrowings		—		23,000
Short-term borrowings		83,368		73,000
Securities sold under reverse repurchase agreements		215,261		143,721

	$	298,629	$	216,721

The Bank enters into sales of securities under agreements to repurchase (reverse repurchase agreements). Reverse repurchase agreements are treated as financings, and the obligations to repurchase securities sold are reflected as a liability in the statements of financial condition. The dollar amount of securities underlying the agreements remains in the asset accounts. Securities underlying the agreements are being held by the Bank during the agreement period. All agreements are written on a one-month or less term.

131

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Short-term borrowings had weighted average interest rates of 1.35% and 3.75% at December 31, 2008 and 2007, respectively. Short-term borrowings averaged approximately $234,250,000 and $170,946,000 for the years ended December 31, 2008 and 2007, respectively. The maximum amounts outstanding at any month end were $298,262,000 and $216,721,000, respectively, during those same periods.

Note 9: Federal Reserve Bank Borrowings

The Bank has a potentially available $215,265,000 line of credit under a borrowing arrangement with the Federal Reserve Bank at December 31, 2008. The line is secured primarily by commercial loans.

In December 2007, the Federal Reserve established a temporary Term Auction Facility (TAF). Under the TAF program, the Federal Reserve auctions term funds to depository institutions against the collateral that can be used to secure loans at the discount window. All depository institutions that are judged to be in generally sound financial condition by their local Reserve Bank and that are eligible to borrow under the primary credit discount window program are eligible to participate in TAF auctions. All advances must be fully collateralized. Each TAF auction is for a fixed amount and a fixed maturity date, with the rate determined by the auction process.

TAF borrowing arrangements are summarized as follows:

	December 31,
	2008		2007
	(In Thousands)

TAF maturing 1/31/08 – rate 4.67%	$	—	$	50,000

TAF maturing 1/29/09 – rate .60%		58,000		—

TAF maturing 2/26/09 – rate .42%		25,000		—

	$	83,000	$	50,000

Note 10: Structure Repurchase Agreements

In September 2008, the Company entered into a structured repo borrowing transaction for $50 million. This borrowing bears interest at a fixed rate of 4.34% if three-month LIBOR remains at 2.81% or less on quarterly interest reset dates; if LIBOR is above the 2.81% rate on quarterly interest reset dates, then the Company’s borrowing rate decreases by 2.5 times the difference in LIBOR (up to 250 basis points). The Company pledges investment securities to collateralize this borrowing.

132

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Note 11: Subordinated Debentures Issued to Capital Trust

Great Southern Capital Trust I (Trust I), a Delaware statutory trust, issued 1,725,000 shares of unsecured 9.00% Cumulative Trust Preferred Securities at $10 per share in an underwritten public offering. The gross proceeds of the offering were used to purchase 9.00% Junior Subordinated Debentures from the Company totaling $17,784,000. The Company’s proceeds from the issuance of the Subordinated Debentures to Trust I, net of underwriting fees and offering expenses, were $16.3 million. The Subordinated Debentures were scheduled to mature in 2031; the Company elected to redeem the debentures (and as a result the Trust I securities) in November 2006. As a result of the redemption of the Trust I securities, approximately $510,000 (after tax) of related unamortized issuance costs were written off as a noncash expense in 2006. The Company entered into an interest rate swap agreement to effectively convert this fixed rate debt to variable rates of interest. The variable rate was three-month LIBOR plus 202 basis points, adjusting quarterly. The interest rate swap was terminated in November 2006 at no cost to the Company.

In November 2006, Great Southern Capital Trust II (Trust II), a statutory trust formed by the Company for the purpose of issuing the securities, issued a $25,000,000 aggregate liquidation amount of floating rate Cumulative Trust Preferred Securities. The Trust II securities bear a floating distribution rate equal to 90-day LIBOR plus 1.60%. The Trust II securities are redeemable at the Company’s option beginning in February 2012, and if not sooner redeemed, mature on February 1, 2037. The Trust II securities were sold in a private transaction exempt from registration under the Securities Act of 1933, as amended. The gross proceeds of the offering were used to purchase Junior Subordinated Debentures from the Company totaling $25,774,000. The initial interest rate on the Trust II debentures was 6.98%. The interest rate was 4.79% at December 31, 2008.

In July 2007, Great Southern Capital Trust III (Trust III), a statutory trust formed by the Company for the purpose of issuing the securities, issued a $5,000,000 aggregate liquidation amount of floating rate Cumulative Trust Preferred Securities. The Trust III securities bear a floating distribution rate equal to 90-day LIBOR plus 1.40%. The Trust III securities are redeemable at the Company’s option beginning October 2012, and if not sooner redeemed, mature on October 1, 2037. The Trust III securities were sold in a private transaction exempt from registration under the Securities Act of 1933, as amended. The gross proceeds of the offering were used to purchase Junior Subordinated Debentures from the Company totaling $5,155,000. The initial interest rate on the Trust III debentures was 6.76%. The interest rate was 5.28% at December 31, 2008.

Subordinated debentures issued to capital trust are summarized as follows:

	December 31,
	2008		2007
	(In Thousands)

Subordinated Debentures	$	30,929	$	30,929

133

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Note 12: Income Taxes

The Company files a consolidated federal income tax return. As of December 31, 2008 and 2007, retained earnings included approximately $17,500,000 for which no deferred income tax liability had been recognized. This amount represents an allocation of income to bad debt deductions for tax purposes only for tax years prior to 1988. If the Bank were to liquidate, the entire amount would have to be recaptured and would create income for tax purposes only, which would be subject to the then-current corporate income tax rate. The unrecorded deferred income tax liability on the above amount was approximately $6,475,000 at December 31, 2008 and 2007.

The provision (credit) for income taxes included these components:

	2008			2007		2006
	(In Thousands)
Taxes currently payable	$	1,811		$	11,365	$	14,224
Deferred income taxes		(5,562	)		2,978		(365	)
Income tax expense (credit)	$	(3,751	)	$	14,343	$	13,859

The tax effects of temporary differences related to deferred taxes shown on the statements of financial condition were:

	December 31,
	2008			2007
	(In Thousands)
Deferred tax assets
Allowance for loan losses	$	10,207		$	8,911
Interest on nonperforming loans		1,146			—
Accrued expenses		457			429
Excess of cost over fair value of net assets acquired		181			176
Unrealized loss and realized impairment on available- for-sale securities		2,659			946
Fair value of interest rate swaps and related deposits		414			593
Write-down of foreclosed assets		527			95
Other		1			10
		15,592			11,160
Deferred tax liabilities
Tax depreciation in excess of book depreciation		(254	)		(114	)
FHLB stock dividends		(227	)		(227	)
Bank franchise tax refund		(28	)		(28	)
Partnership tax credits		(157	)		(151	)
Prepaid expenses		(576	)		(518	)
Deferred broker fees on CDs		(137	)		(1,226	)
Other		(162	)		(192	)
		(1,541	)		(2,456	)

Net deferred tax asset	$	14,051		$	8,704

134

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Reconciliations of the Company’s effective tax rates to the statutory corporate tax rates were as follows:

	2008		2007		2006

Tax at statutory rate		(35.0)%		35.0%		35.0%
Nontaxable interest and dividends		(15.4)		(2.5)		(2.2)
Tax credits		—		—		(.9)
Other		4.5		.4		(.8)

		(45.9)%		32.9%		31.1%

Note 13: Disclosures About Fair Value of Financial Instruments

Effective January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements, which defines fair value and establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 has been applied prospectively as of the beginning of this fiscal year. The adoption of SFAS No. 157 did not have an impact on our financial statements except for the expanded disclosures noted below.

The following definitions describe the fair value hierarchy of levels of inputs used in the Fair Value Measurements.

Quoted prices in active markets for identical assets or liabilities (Level 1): Inputs that are quoted unadjusted prices in active markets for identical assets that the Company has the ability to access at the measurement date. An active market for the asset is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Other observable inputs (Level 2): Inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity including quoted prices for similar assets, quoted prices for securities in inactive markets and inputs derived principally from or corroborated by observable market data by correlation or other means.

·	Significant unobservable inputs (Level 3): Inputs that reflect assumptions of a source independent of the reporting entity or the reporting entity's own assumptions that are supported by little or no market activity or observable inputs.

Financial instruments are broken down as follows by recurring or nonrecurring measurement status. Recurring assets are initially measured at fair value and are required to be remeasured at fair value in the financial statements at each reporting date. Assets measured on a nonrecurring basis are assets that, due to an event or circumstance, were required to be remeasured at fair value after initial recognition in the financial statements at some time during the reporting period.

135

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

The following is a description of valuation methodologies used for assets recorded at fair value on a recurring basis at December 31, 2008.

Securities Available for Sale. Investment securities available for sale are recorded at fair value on a recurring basis. The asset fair values used by the Company are obtained from an independent pricing service, which represent either quoted market prices for the identical asset or fair values determined by pricing models, or other model-based valuation techniques, that consider observable market data, such as interest rate volatilities, LIBOR yield curve, credit spreads and prices from market makers and live trading systems. Recurring Level 1 securities include exchange traded equity securities. Recurring Level 2 securities include U.S. government agency securities, mortgage-backed securities, collateralized mortgage obligations, state and municipal bonds and U.S. government agency equity securities. Recurring Level 3 securities include one corporate debt security.

			Fair Value Measurements Using
	Fair Value December 31, 2008		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In Thousands)
Available for sale securities
U.S government agencies	$	34,756	$	—	$	34,756	$	—
Collateralized mortgage obligations		71,914		—		71,914		—
Mortgage-backed securities		485,196		—		485,196		—
Corporate bonds		1,205		760		—		445
States and political subdivisions		53,103		—		53,103		—
Equity securities		1,504		716		788		—

Total available-for-sale
securities	$	647,678	$	1,476	$	645,757	$	445

136

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

The following is a reconciliation of activity for available-for-sale securities measured at fair value based on significant unobservable (Level 3) information. $10.0 million of U.S. government agency securities were reclassified from Level 3 to Level 2 due to a model-driven valuation with market observable inputs being utilized.

	Investment
	Securities
	(In Thousands)

Balance, January 1, 2008	$	10,450
Unrealized loss included in comprehensive income		(5	)
Transfer from Level 3 to Level 2		(10,000	)

Balance, December 31, 2008	$	445

Interest Rate Swap Agreements. The fair value is estimated by a third party using inputs that are observable or that can be corroborated by observable market data and, therefore, are classified within Level 2 of the valuation hierarchy. These fair value estimations include primarily market observable inputs, such as yield curves and option volatilities, and include the value associated with counterparty credit risk. Fair value estimates related to the Company’s hedged deposits are derived in the same manner. As of December 31, 2008, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its interest rate swap positions, and determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives.

			Fair Value Measurements Using
	Fair Value December 31, 2008		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In Thousands)

Interest rate swap agreements	$	31	$	—	$	31	$	—

The following is a description of valuation methodologies used for assets recorded at fair value on a nonrecurring basis at December 31, 2008.

Loans Held for Sale. Mortgage loans held for sale are recorded at the lower of carrying value or fair value. The fair value of mortgage loans held for sale is based on what secondary markets are currently offering for portfolios with similar characteristics. As such, the Company classifies mortgage loans held for sale as Nonrecurring Level 2. Write-downs to fair value typically do not occur as the Company generally enters into commitments to sell individual mortgage loans at the time the loan is originated to reduce market risk. The Company typically does not have commercial loans held for sale.

Impaired Loans. A loan is considered to be impaired when it is probable that all of the principal and interest due may not be collected according to its contractual terms. Generally, when a loan is considered impaired, the amount of reserve required under SFAS No. 114 is measured based on the fair value of the underlying collateral. The Company makes such measurements on all material loans deemed impaired using the fair value of the collateral for collateral dependent loans. The fair value of collateral used by the Company is determined by obtaining an observable market price or by obtaining an appraised value from an independent, licensed or certified appraiser, using observable market data. This data includes information such as selling price of similar properties and capitalization rates of similar properties sold within the market, expected future cash flows or

137

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

earnings of the subject property based on current market expectations, and other relevant factors. In addition, management may apply selling and other discounts to the underlying collateral value to determine the fair value. If an appraised value is not available, the fair value of the impaired loan is determined by an adjusted appraised value including unobservable cash flows.

The Company records impaired loans as Nonrecurring Level 3. If a loan’s fair value as estimated by the Company is less than its carrying value, the Company either records a charge-off of the portion of the loan that exceeds the fair value or establishes a specific reserve as part of the allowance for loan losses. In accordance with the provisions of SFAS No. 114, impaired loans with a carrying value of $45.6 million, with an associated valuation reserve of $3.7 million, were recorded at their fair value of $41.9 million at December 31, 2008. Losses of $51.7 million related to impaired loans were recognized in earnings through the provision for loan losses during the year ended December 31, 2008.

			Fair Value Measurements Using
	Fair Value December 31, 2008		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In Thousands)

Loans held for sale	$	4,695	$	—	$	4,695	$	—
Impaired loans		41,849		—		—		41,849

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

Cash and Cash Equivalents and Federal Home Loan Bank Stock

The carrying amount approximates fair value.

Loans and Interest Receivable

The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Loans with similar characteristics are aggregated for purposes of the calculations. The carrying amount of accrued interest receivable approximates its fair value.

138

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Deposits and Accrued Interest Payable

The fair value of demand deposits and savings accounts is the amount payable on demand at the reporting date, i.e., their carrying amounts. The fair value of fixed maturity certificates of deposit is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities. The carrying amount of accrued interest payable approximates its fair value.

Federal Home Loan Bank Advances

Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate fair value of existing advances.

Short-Term Borrowings

The carrying amount approximates fair value.

Subordinated Debentures Issued to Capital Trust

The subordinated debentures have floating rates that reset quarterly. The carrying amount of these debentures approximate their fair value.

Structured Repurchase Agreements

Structured repurchase agreements are collateralized borrowings from a counterparty. In addition to the principal amount owed, the counterparty also determines an amount that would be owed by either party in the event the agreement is terminated prior to maturity by the Company. The fair values of the structured repurchase agreements are estimated based on the amount the Company would be required to pay to terminate the agreement at the balance sheet date.

Commitments to Originate Loans, Letters of Credit and Lines of Credit

The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counterparties at the reporting date.

139

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

The following table presents estimated fair values of the Company’s financial instruments. The fair values of certain of these instruments were calculated by discounting expected cash flows, which method involves significant judgments by management and uncertainties. Fair value is the estimated amount at which financial assets or liabilities could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Because no market exists for certain of these financial instruments and because management does not intend to sell these financial instruments, the Company does not know whether the fair values shown below represent values at which the respective financial instruments could be sold individually or in the aggregate.

	December 31, 2008				December 31, 2007
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
	(In Thousands)
Financial assets
Cash and cash equivalents	$	167,920	$	167,920	$	80,525	$	80,525
Available-for-sale securities		647,678		647,678		425,028		425,028
Held-to-maturity securities		1,360		1,422		1,420		1,508
Mortgage loans held for sale		4,695		4,695		6,717		6,717
Loans, net of allowance for loan losses		1,716,996		1,732,758		1,813,394		1,825,886
Accrued interest receivable		13,287		13,287		15,441		15,441
Investment in FHLB stock		8,333		8,333		13,557		13,557
Interest rate swaps		31		31		3,293		3,293

Financial liabilities
Deposits	1,908,028	1,929,149	1,763,146	1,771,505
FHLB advances	120,472	123,895	213,867	214,498
Short-term borrowings	298,629	298,629	216,721	216,721
Structured repurchase agreements	50,000	56,674	—	—
Subordinated debentures	30,929	30,929	30,929	30,929
Accrued interest payable	9,225	9,225	6,149	6,149
Interest rate swaps	—	—	2,202	2,202
Unrecognized financial instruments (net of contractual value)
Commitments to originate loans	—	—	—	—
Letters of credit	45	45	69	69
Lines of credit	—	—	—	—

140

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Note 14: Operating Leases

The Company has entered into various operating leases at several of its locations. Some of the leases have renewal options.

At December 31, 2008, future minimum lease payments were as follows (in thousands):

2009	$	839
2010		507
2011		371
2012		354
2013		99
Thereafter		36

	$	2,206

Rental expense was $934,000, $866,000 and $718,000 for the years ended December 31, 2008, 2007 and 2006, respectively.

Note 15: Interest Rate Swaps

In the normal course of business, the Company uses derivative financial instruments (primarily interest rate swaps) to assist in its interest rate risk management. In accordance with SFAS 133, Accounting for Derivative Instruments and Hedging Activities, all derivatives are measured and reported at fair value on the Company’s consolidated statement of financial condition as either an asset or a liability. For derivatives that are designated and qualify as a fair value hedge, the gain or loss on the derivative, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk, are recognized in current earnings during the period of the change in the fair values. For all hedging relationships, derivative gains and losses that are not effective in hedging the changes in fair value of the hedged item are recognized immediately in current earnings during the period of the change. Similarly, the changes in the fair value of derivatives that do not qualify for hedge accounting under SFAS 133 are also reported currently in earnings in noninterest income.

The net cash settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense, based on the item being hedged. The net cash settlements on derivatives that do not qualify for hedge accounting are reported in noninterest income.

At the inception of the hedge and quarterly thereafter, a formal assessment is performed to determine whether changes in the fair values of the derivatives have been highly effective in offsetting the changes in the fair values of the hedged item and whether they are expected to be highly effective in the future. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking the hedge. This process includes identification of the hedging instrument, hedged item, risk being hedged and the method for assessing effectiveness and measuring ineffectiveness. In addition, on a quarterly basis, the Company assesses whether the derivative used in the hedging transaction is highly effective in offsetting changes in fair value of the hedged item and measures

141

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

and records any ineffectiveness. The Company discontinues hedge accounting prospectively when it is determined that the derivative is or will no longer be effective in offsetting changes in the fair value of the hedged item, the derivative expires, is sold or terminated or management determines that designation of the derivative as a hedging instrument is no longer appropriate.

The estimates of fair values of the Company’s derivatives and related liabilities are calculated by an independent third party using proprietary valuation models. The fair values produced by these valuation models are in part theoretical and reflect assumptions which must be made in using the valuation models. Small changes in assumptions could result in significant changes in valuation. The risks inherent in the determination of the fair value of a derivative may result in income statement volatility.

At December 31, 2008, the Company had three SFAS No. 133 designated swaps with Lehman Brothers Special Financing, Inc. (Lehman). One of these three interest rate swaps was terminated by Lehman (at no cost to the Company) subsequent to December 31, 2008. As a result, the Company terminated the related deposit account. On September 15, 2008, Lehman filed for bankruptcy protection and hedge accounting was immediately terminated. The fair market value of the underlying hedged items (certificates of deposit) through September 15, 2008, is being amortized over the remaining life of the hedge period on a straight-line basis. The fair market value of the swaps as of September 15, 2008, included both assets and liabilities totaling a net asset of $235,000. These swaps were valued using the income approach with observable Level 2 market expectations at the measurement date and standard valuation techniques to convert future amounts to a single discounted present amount. The Level 2 inputs are limited to quoted prices for similar assets or liabilities in active markets (specifically futures contracts on LIBOR for the first two years) and inputs other than quoted prices that are observable for the asset or liability (specifically LIBOR cash and swap rates, volatilities and credit risk at commonly quoted intervals). Mid-market pricing is used as a practical expedient for fair value measurements. The Company has a netting agreement with Lehman and the collectability of the net asset is uncertain at this time. The Company has a valuation allowance of $235,000 on the asset as of December 31, 2008.

The Company uses derivatives to modify the repricing characteristics of certain assets and liabilities so that changes in interest rates do not have a significant adverse effect on net interest income and cash flows and to better match the repricing profile of its interest bearing assets and liabilities. As a result of interest rate fluctuations, certain interest-sensitive assets and liabilities will gain or lose market value. In an effective fair value hedging strategy, the effect of this change in value will generally be offset by a corresponding change in value on the derivatives linked to the hedged assets and liabilities.

At December 31, 2008 and 2007, the Company’s fair value hedges include interest rate swaps to convert the economic interest payments on certain brokered CDs from a fixed rate to a floating rate based on LIBOR. At December 31, 2008, these fair value hedges were considered to be highly effective and any hedge ineffectiveness was deemed not material. The notional amounts of the liabilities being hedged were $11.5 million and $419.2 million at December 31, 2008 and 2007, respectively. At December 31, 2008, swaps in a net settlement receivable position totaled $11.5 million. There were no swaps in a net settlement payable position. At December 31, 2007, swaps in a net settlement receivable

142

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

position totaled $225.7 million and swaps in a net settlement payable position totaled $193.5 million. The net gains recognized in earnings on fair value hedges were $7.0 million, $1.6 million and $1.5 million for the years ended December 31, 2008, 2007 and 2006, respectively.

The maturities of interest rate swaps outstanding at December 31, 2008 and 2007, in terms of notional amounts and their average pay and receive rates were as follows:

	2008								2007
	Fixed To Variable		Average Pay Rate			Average Receive Rate			Fixed To Variable		Average Pay Rate			Average Receive Rate
	(In Millions)
Interest Rate Swaps(1) Expected Maturity Date
2008	$	—		—	%		—	%	$	109.2		4.68	%		5.16	%
2009		—		—			—			50.5		4.95			4.04
2010		—		—			—			23.8		4.90			4.01
2011(2)		4.6		1.77			4.00			31.1		4.95			4.12
2012		—		—			—			12.3		4.91			4.81
2013		—		—			—			42.0		4.85			4.52
2014		—		—			—			16.3		4.90			5.09
2015		—		—			—			29.0		4.84			4.84
2016		—		—			—			24.0		5.09			4.81
2017(2)		6.9		2.10			5.00			15.5		4.87			5.28
2019		—		—			—			44.3		4.90			4.88
2020		—		—			—			14.7		4.97			4.00
2023		—		—			—			6.5		5.10			5.10

	$	11.5		1.97			4.60		$	419.2		4.86			4.70

(1)	Interest rate swaps with Lehman Brothers Special Financing, Inc. are not included in this table.

(2)	This interest rate swap and the related deposit account were terminated subsequent to December 31, 2008.

Note 16: Commitments and Credit Risk

Commitments to Originate Loans

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since a significant portion of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property and equipment, commercial real estate and residential real estate.

143

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

At December 31, 2008 and 2007, the Bank had outstanding commitments to originate loans and fund commercial construction aggregating approximately $900,000 and $30,777,000, respectively. The commitments extend over varying periods of time with the majority being disbursed within a 30- to 180-day period.

Mortgage loans in the process of origination represent amounts that the Bank plans to fund within a normal period of 60 to 90 days, many of which are intended for sale to investors in the secondary market. Total mortgage loans in the process of origination amounted to approximately $7,516,000 and $905,000 at December 31, 2008 and 2007, respectively.

Letters of Credit

Standby letters of credit are irrevocable conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Financial standby letters of credit are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. Performance standby letters of credit are issued to guarantee performance of certain customers under nonfinancial contractual obligations. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loans to customers. Fees for letters of credit issued after December 31, 2002, are initially recorded by the Bank as deferred revenue and are included in earnings at the termination of the respective agreements. Should the Bank be obligated to perform under the standby letters of credit the Bank may seek recourse from the customer for reimbursement of amounts paid.

The Company had total outstanding standby letters of credit amounting to approximately $16,335,000 and $20,422,000 at December 31, 2008 and 2007, respectively, with $11,769,000 and $15,447,000, respectively, of the letters of credit having terms up to three years. The remaining $4,566,000 and $4,975,000 at December 31, 2008 and 2007, respectively, consisted of an outstanding letter of credit to guarantee the payment of principal and interest on a Multifamily Housing Refunding Revenue Bond Issue.

Lines of Credit

Lines of credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Lines of credit generally have fixed expiration dates. Since a portion of the line may expire without being drawn upon, the total unused lines do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property and equipment, commercial real estate and residential real estate. The Bank uses the same credit policies in granting lines of credit as it does for on-balance-sheet instruments.

144

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

At December 31, 2008, the Bank had granted unused lines of credit to borrowers aggregating approximately $106,909,000 and $45,714,000 for commercial lines and open-end consumer lines, respectively. At December 31, 2007, the Bank had granted unused lines of credit to borrowers aggregating approximately $318,321,000 and $43,915,000 for commercial lines and open-end consumer lines, respectively.

Credit Risk

The Bank grants collateralized commercial, real estate and consumer loans primarily to customers in the southwest and central portions of Missouri. Although the Bank has a diversified portfolio, loans aggregating approximately $214,042,000 and $215,708,000 at December 31, 2008 and 2007, respectively, are secured by motels, restaurants, recreational facilities, other commercial properties and residential mortgages in the Branson, Missouri, area. Residential mortgages account for approximately $85,843,000 and $79,628,000 of this total at December 31, 2008 and 2007, respectively.

In addition, loans aggregating approximately $218,529,000 and $250,205,000 at December 31, 2008 and 2007, respectively, are secured by apartments, condominiums, residential and commercial land developments, industrial revenue bonds and other types of commercial properties in the St. Louis, Missouri, area.

Note 17: Additional Cash Flow Information

	2008		2007		2006
	(In Thousands)
Noncash Investing and Financing Activities
Real estate acquired in settlement of loans	$	31,600	$	24,615	$	7,869
Sale and financing of foreclosed assets	$	7,268	$	5,759	$	1,019
Conversion of foreclosed assets to premises and equipment		—	$	300		—
Dividends declared but not paid	$	2,618	$	2,412	$	2,188

Additional Cash Payment Information
Interest paid	$	70,155	$	92,127	$	79,659
Income taxes paid	$	4,590	$	8,044	$	12,938
Income taxes refunded	$	172		—		—

145

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Note 18: Employee Benefits

The Company participates in a multiemployer defined benefit pension plan covering all employees who have met minimum service requirements. Effective July 1, 2006, this plan was closed to new participants. Employees already in the plan will continue to accrue benefits. The Company’s policy is to fund pension cost accrued. Employer contributions charged to expense for the years ended December 31, 2008, 2007 and 2006, were approximately $1.2 million, $1.1 million and $1.5 million, respectively. As a member of a multiemployer pension plan, disclosures of plan assets and liabilities for individual employers are not required or practicable.

The Company has a defined contribution retirement plan covering substantially all employees. In 2006, the Company matched 100% of the employee’s contribution on the first 3% of the employee’s compensation, and also matched 50% of the employee’s contribution on the next 2% of the employee’s compensation. Effective January 1, 2007, the Company matches 100% of the employee’s contribution on the first 4% of the employee’s compensation, and also matches 50% of the employee’s contribution on the next 2% of the employee’s compensation. Employer contributions charged to expense for the years ended December 31, 2008, 2007 and 2006, were approximately $673,000, $642,000 and $520,000, respectively.

Note 19: Stock Option Plan

The Company established the 1989 Stock Option and Incentive Plan for employees and directors of the Company and its subsidiaries. Under the plan, stock options or other awards could be granted with respect to 2,464,992 (adjusted for stock splits) shares of common stock. This plan has terminated; therefore, no new stock options or other awards may be granted under this plan. At December 31, 2008, there were 2,450 options outstanding under this plan.

The Company established the 1997 Stock Option and Incentive Plan for employees and directors of the Company and its subsidiaries. Under the plan, stock options or other awards could be granted with respect to 1,600,000 (adjusted for stock splits) shares of common stock. Upon stockholders’ approval of the 2003 Stock Option and Incentive Plan, the 1997 Stock Option and Incentive Plan was frozen; therefore, no new stock options or other awards may be granted under this plan. At December 31, 2008, there were 113,112 options outstanding under this plan.

The Company established the 2003 Stock Option and Incentive Plan for employees and directors of the Company and its subsidiaries. Under the plan, stock options or other awards could be granted with respect to 1,196,448 (adjusted for stock splits) shares of common stock. At December 31, 2008, there were 584,835 options outstanding under the plan.

146

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Stock options may be either incentive stock options or nonqualified stock options, and the option price must be at least equal to the fair value of the Company’s common stock on the date of grant. Options are granted for a 10-year term and generally become exercisable in four cumulative annual installments of 25% commencing two years from the date of grant. The Stock Option Committee may accelerate a participant’s right to purchase shares under the plan.

Stock awards may be granted to key officers and employees upon terms and conditions determined solely at the discretion of the Stock Option Committee.

The table below summarizes transactions under the Company’s stock option plans:

							Weighted
	Available To Grant			Shares Under Option			Average Exercise Price


Balance, December 31, 2005		769,635			688,892		$	21.877
Granted		(94,720	)		94,720			30.600
Exercised		—			(89,192	)		(14.249	)
Forfeited from terminated plan(s)		—			(3,150	)		(16.752	)
Forfeited from current plan(s)		10,913			(10,913	)		(26.098	)

Balance, December 31, 2006		685,828			680,357			24.048
Granted		(99,710	)		99,710			25.459
Exercised		—			(65,609	)		(17.618	)
Forfeited from terminated plan(s)		—			(2,625	)		(16.457	)
Forfeited from current plan(s)		41,540			(41,540	)		(29.010	)

Balance, December 31, 2007		627,658			670,293			24.423
Granted		(72,030	)		72,030			8.516
Exercised		—			(1,972	)		(13.233	)
Forfeited from terminated plan(s)		—			(9,394	)		(16.229	)
Forfeited from current plan(s)		30,560			(30,560	)		(26.794	)

Balance, December 31, 2008		586,188			700,397		$	23.003

The Company’s stock option grants contain terms that provide for a graded vesting schedule whereby portions of the options vest in increments over the requisite service period. These options typically vest one-fourth at the end of years two, three, four and five from the grant date. As provided for under SFAS No. 123(R), the Company has elected to recognize compensation expense for options with graded vesting schedules on a straight-line basis over the requisite service period for the entire option grant. In addition, SFAS No. 123(R) requires companies to recognize compensation expense based on the estimated number of stock options for which service is expected to be rendered. Because the historical forfeitures of its share-based awards have not been material, the Company has not adjusted for forfeitures in its share-based compensation expensed under SFAS No. 123(R).

147

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

The fair value of each option award is estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions:

	December 31,			December 31,			December 31,
	2008			2007			2006

Expected dividends per share	$	0.72		$	0.68		$	0.59
Risk-free interest rate		2.05	%		4.21	%		4.71	%
Expected life of options	5 years			5 years			5 years
Expected volatility		46.93	%		21.89	%		23.19	%
Weighted average fair value of options granted during year	$	1.72		$	5.01		$	7.26

Expected volatilities are based on the historical volatility of the Company’s stock, based on the monthly closing stock price. The expected term of options granted is based on actual historical exercise behavior of all employees and directors and approximates the graded vesting period of the options. Expected dividends are based on the annualized dividends declared at the time of the option grant. The risk-free interest rate is based on the five-year treasury rate on the grant date of the options.

The following table presents the activity related to options under all plans for the year ended December 31, 2008.

						Weighted
				Weighted		Average
				Average		Remaining
				Exercise		Contractual
	Options			Price		Term

Options outstanding, January 1, 2008		670,293		$	24.423		5.68
Granted		72,030			8.516		—
Exercised		(1,972	)		13.233		—
Forfeited		(39,954	)		24.310		—
Options outstanding, December 31, 2008		700,397			23.003		6.21

Options exercisable, December 31, 2008		453,474			23.358		4.90

148

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

For the years ended December 31, 2008, 2007 and 2006, options granted were 72,030, 99,710 and 94,720, respectively. The total intrinsic value (amount by which the fair value of the underlying stock exceeds the exercise price of an option on exercise date) of options exercised during the years ended December 31, 2008, 2007 and 2006, was $7,000, $605,000 and $1.3 million, respectively. Cash received from the exercise of options for the years ended December 31, 2008, 2007 and 2006, was $26,000, $1.8 million and $1.3 million, respectively. The actual tax benefit realized for the tax deductions from option exercises totaled $182, $238,000 and $715,000 for the years ended December 31, 2008, 2007 and 2006, respectively.

The following table presents the activity related to nonvested options under all plans for the year ended December 31, 2008.

				Weighted		Weighted
				Average		Average
				Exercise		Grant Date
	Options			Price		Fair Value

Nonvested options, January 1, 2008		264,109		$	27.002	$	5.976
Granted		72,030			8.516		1.718
Vested this period		(72,201	)		24.860		5.681
Nonvested options forfeited		(17,015	)		25.338		5.724

Nonvested options, December 31, 2008		246,923			19.968		4.354

At December 31, 2008, there was $1.0 million of total unrecognized compensation cost related to nonvested options granted under the Company’s plans. This compensation cost is expected to be recognized through 2013, with the majority of this expense recognized in 2009 and 2010.

The following table further summarizes information about stock options outstanding at December 31, 2008:

		Options Outstanding
				Weighted			Options Exercisable
				Average	Weighted				Weighted
				Remaining	Average				Average
Range of		Number		Contractual	Exercise		Number		Exercise
Exercise Prices		Outstanding		Life	Price		Exercisable		Price

$	7.688 to $9.078		90,275	7.67 years	$	8.290		24,145	$	8.100
$	10.110 to $13.594		46,452	2.80 years	$	12.392		42,952	$	12.578
$	18.188 to $25.000		204,415	4.59 years	$	20.044		196,415	$	19.917
$	25.480 to $36.390		359,255	7.20 years	$	29.756		189,962	$	31.293

			700,397	6.21 years	$	23.003		453,474	$	23.358

149

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Note 20: Significant Estimates and Concentrations

Accounting principles generally accepted in the United States of America require disclosure of certain significant estimates and current vulnerabilities due to certain concentrations. Estimates related to the allowance for loan losses are reflected in the footnote regarding loans. Current vulnerabilities due to certain concentrations of credit risk are discussed in the footnotes on loans, deposits and on commitments and credit risk.

Other significant estimates not discussed in those footnotes include valuations of foreclosed assets held for sale. The carrying value of foreclosed assets reflects management’s best estimate of the amount to be realized from the sales of the assets. While the estimate is generally based on a valuation by an independent appraiser or recent sales of similar properties, the amount that the Company realizes from the sales of the assets could differ materially in the near term from the carrying value reflected in these financial statements.

Current Economic Conditions

The current economic environment presents financial institutions with unprecedented circumstances and challenges, which in some cases have resulted in large declines in the fair values of investments and other assets, constraints on liquidity and significantly credit quality problems, including severe volatility in the valuation of real estate and other collateral supporting loans. The financial statements have been prepared using values and information currently available to the Company.

Given the volatility of current economic conditions, the values of assets and liabilities recorded in the financial statements could change rapidly, resulting in material future adjustments in asset values, the allowance for loan losses or capital that could negatively impact the Company’s ability to meet regulatory capital requirements and maintain sufficient liquidity.

Note 21: Regulatory Matters

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct and material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

150

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of Total and Tier I Capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I Capital (as defined) to adjusted tangible assets (as defined). Management believes, as of December 31, 2008, that the Bank meets all capital adequacy requirements to which it is subject.

As of December 31, 2008, the most recent notification from the Bank’s regulators categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain minimum total risk-based, Tier I risk-based and Tier 1 leverage capital ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank’s category.

The Company’s and the Bank’s actual capital amounts and ratios are presented in the following table. No amount was deducted from capital for interest-rate risk.

											To Be Well
											Capitalized Under
						For Capital					Prompt Corrective
	Actual					Adequacy Purposes					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
						(In Thousands)

As of December 31, 2008
Total risk-based capital
Great Southern Bancorp, Inc.	$	286,332		15.1	%	$	³151,806		³8.0	%		N/A		N/A
Great Southern Bank	$	226,091		11.9	%	$	³151,543		³8.0	%	$	³189,429		³10.0	%

Tier I risk-based capital
Great Southern Bancorp, Inc.	$	262,545		13.8	%	$	³75,903		³4.0	%		N/A		N/A
Great Southern Bank	$	202,345		10.7	%	$	³75,772		³4.0	%	$	³113,657		³6.0	%

Tier I leverage capital
Great Southern Bancorp, Inc.	$	262,545		10.1	%	$	³104,471		³4.0	%		N/A		N/A
Great Southern Bank	$	202,345		7.8	%	$	³104,336		³4.0	%	$	³130,420		³5.0	%

As of December 31, 2007
Total risk-based capital
Great Southern Bancorp, Inc.	$	243,777		11.9	%	$	³164,465		³8.0	%		N/A		N/A
Great Southern Bank	$	239,568		11.7	%	$	³164,161		³8.0	%	$	³205,201		³10.0	%

Tier I risk-based capital
Great Southern Bancorp, Inc.	$	218,318		10.6	%	$	³82,233		³4.0	%		N/A		N/A
Great Southern Bank	$	214,109		10.4	%	$	³82,080		³4.0	%	$	³123,120		³6.0	%

Tier I leverage capital
Great Southern Bancorp, Inc.	$	218,318		9.1	%	$	³95,603		³4.0	%		N/A		N/A
Great Southern Bank	$	214,109		9.0	%	$	³95,410		³4.0	%	$	³119,263		³5.0	%

151

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

The Company and the Bank are subject to certain restrictions on the amount of dividends that may be declared without prior regulatory approval. At December 31, 2008 and 2007, the Company and the Bank exceeded their minimum capital requirements. The entities may not pay dividends which would reduce capital below the minimum requirements shown above.

Note 22: Litigation Matters

In the normal course of business, the Company and its subsidiaries are subject to pending and threatened legal actions, some for which the relief or damages sought are substantial. After reviewing pending and threatened litigation with counsel, management believes at this time that the outcome of such litigation will not have a material adverse effect on the results of operations or stockholders’ equity. We are not able to predict at this time whether the outcome or such actions may or may not have a material adverse effect on the results of operations in a particular future period as the timing and amount of any resolution of such actions and its relationship to the future results of operations are not known.

Note 23: Summary of Unaudited Quarterly Operating Results

Following is a summary of unaudited quarterly operating results for the years 2008, 2007 and 2006:

	2008
	Three Months Ended
	March 31			June 30		September 30			December 31
	(In Thousands, Except Per Share Data)

Interest income	$	38,340		$	35,664	$	35,024		$	35,786
Interest expense		20,497			17,533		16,657			18,544
Provision for loan losses		37,750			4,950		4,500			5,000
Net realized gains (losses) and impairment on available-for-sale securities		6			1		(5,293	)		(2,056	)
Noninterest income		10,182			9,864		1,789			6,309
Noninterest expense		14,116			13,557		14,650			13,383
Provision (credit) for income taxes		(8,688	)		3,156		182			1,599
Net income (loss)		(15,153	)		6,332		824			3,569
Net income (loss) available to common shareholders		(15,153	)		6,332		824			3,327
Earnings (loss) per common share – diluted		(1.13	)		.47		.06			.25

152

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

	2007
	Three Months Ended
	March 31		June 30		September 30		December 31
	(In Thousands, Except Per Share Data)

Interest income	$	39,458	$	41,703	$	41,976	$	40,733
Interest expense		22,272		23,215		24,044		22,934
Provision for loan losses		1,350		1,425		1,350		1,350
Net realized gains (losses) and impairment on available-for-sale securities		—		—		4		(1,131	)
Noninterest income		6,965		7,927		7,610		6,915
Noninterest expense		11,918		12,742		13,320		13,726
Provision for income taxes		3,548		4,041		3,555		3,199
Net income		7,335		8,207		7,317		6,439
Earnings per common share – diluted		.53		.60		.54		.48

	2006
	Three Months Ended
	March 31		June 30			September 30		December 31
	(In Thousands, Except Per Share Data)

Interest income	$	34,197	$	37,228		$	39,204	$	39,452
Interest expense		17,565		20,105			21,339		21,845
Provision for loan losses		1,325		1,425			1,350		1,350
Net realized gains (losses) on available-for-sale securities		—		(29	)		28		—
Noninterest income		7,123		7,441			7,090		7,978
Noninterest expense		11,750		12,115			12,288		12,654
Provision for income taxes		3,484		3,500			3,287		3,588
Net income		7,196		7,524			8,030		7,993
Earnings per common share – diluted		.52		.54			.58		.58

153

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Note 24: Condensed Parent Company Statements

The condensed statements of financial condition at December 31, 2008 and 2007, and statements of operations and cash flows for the years ended December 31, 2008, 2007 and 2006, for the parent company, Great Southern Bancorp, Inc., were as follows:

	December 31,
	2008		2007
	(In Thousands)

Statements of Financial Condition

Assets
Cash	$	60,943	$	4,335
Available-for-sale securities		1,359		2,335
Investment in subsidiary bank		203,870		215,602
Income taxes receivable		656		91
Deferred income taxes		17		59
Premises and equipment		12		134
Prepaid expenses		13		18
Other assets		1,164		1,172

	$	268,034	$	223,746

Liabilities and Stockholders’ Equity
Accounts payable and accrued expenses	$	3,018		$	2,946
Subordinated debentures issued to capital trust		30,929			30,929
Preferred stock		55,580			—
Common stock		134			134
Common stock warrants		2,452			—
Additional paid-in capital		19,811			19,342
Retained earnings		156,247			170,933
Unrealized loss on available-for-sale securities, net		(137	)		(538	)

	$	268,034		$	223,746

154

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

	2008			2007			2006
	(In Thousands)
Statements of Operations
Income
Dividends from subsidiary bank	$	40,000		$	10,000		$	10,000
Interest and dividend income		114			8			47
Net realized losses on impairments of available-for-sale securities		(1,718	)		—			—
Other income		145			1			1
		38,541			10,009			10,048

Expense
Provision for loan losses		29,579			—			—
Operating expenses		1,091			1,109			1,779
Interest expense		1,462			1,914			1,334
		32,132			3,023			3,113

Income before income tax and equity in undistributed earnings of subsidiaries		6,409			6,986			6,935
Credit for income taxes		(11,716	)		(972	)		(981	)

Income before equity in earnings of subsidiaries		18,125			7,958			7,916

Equity in undistributed earnings of subsidiaries		(22,553	)		21,341			22,827

Net income (loss)	$	(4,428	)	$	29,299		$	30,743

155

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

	2008			2007			2006
	(In Thousands)
Statements of Cash Flows
Operating Activities
Net income (loss)	$	(4,428	)	$	29,299		$	30,743
Items not requiring (providing) cash
Equity in undistributed earnings of subsidiary		22,553			(21,341	)		(22,827	)
Depreciation		7			10			9
Amortization		—			—			806
Provision for loan losses		29,579			—			—
Net realized gains on sale of fixed assets		(151	)		—			—
Net realized losses on impairments of available-for-sale securities		1,718			—			—
Net realized (gains) losses on other investments		8			(1	)		(1	)
Changes in
Prepaid expenses and other assets		5			(3	)		(1	)
Accounts receivable		—			—			113
Accounts payable and accrued expenses		(134	)		189			198
Income taxes		(565	)		(12	)		(39	)
Net cash provided by operating activities		48,592			8,141			9,001

Investing Activities
Investment in subsidiaries		(10,500	)		—			—
Purchase of fixed assets		(34	)		—			—
Proceeds from sale of fixed assets		300			—			—
Purchase of loans		(30,000	)		—			—
Net change in loans		421			—			—
Purchase of available-for-sale securities		(620	)		(2,006	)		(500	)
Net cash used in investing activities		(40,433	)		(2,006	)		(500	)

Financing Activities
Proceeds from issuance of preferred stock and related common stock warrants		58,000			—			—
Proceeds from issuance of trust preferred debentures		—			5,000			25,000
Repayment of trust preferred debentures		—			—			(17,250	)
Dividends paid		(9,637	)		(8,981	)		(7,947	)
Stock options exercised		494			1,673			1,752
Company stock purchased		(408	)		(8,756	)		(3,722	)
Net cash provided by (used in) financing activities		48,449			(11,064	)		(2,167	)

Increase (Decrease) in Cash		56,608			(4,929	)		6,334

Cash, Beginning of Year		4,335			9,264			2,930

Cash, End of Year	$	60,943		$	4,335		$	9,264

Additional Cash Payment Information
Interest paid	$	1,559		$	1,751		$	1,136

156

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Note 25: Preferred Stock and Common Stock Warrant

On December 5, 2008, as part of the Troubled Asset Relief Program (TARP) Capital Purchase Program of the United States Department of the Treasury (Treasury), the Company entered into a Letter Agreement and Securities Purchase Agreement (collectively, the “Purchase Agreement”) with Treasury, pursuant to which the Company (i) sold to Treasury 58,000 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the “Series A Preferred Stock”), having a liquidation preference amount of $1,000 per share, for a purchase price of $58.0 million in cash and (ii) issued to Treasury a ten-year warrant (the “Warrant”) to purchase 909,091 shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), at an exercise price of $9.57 per share.

The Series A Preferred Stock will qualify as Tier 1 capital and will pay cumulative dividends on the liquidation preference amount on a quarterly basis at a rate of 5% per annum for the first five years, and 9% per annum thereafter. Pursuant to the Purchase Agreement, subject to the prior approval of the Board of Governors of the Federal Reserve System, the Series A Preferred Stock is redeemable at the option of the Company in whole or in part at a redemption price of 100% of the liquidation preference amount plus any accrued and unpaid dividends, provided that the Series A Preferred Stock may be redeemed prior to the first dividend payment date falling after the third anniversary of the issue date (December 5, 2011) only if (i) the Company has raised aggregate gross proceeds in one or more Qualified Equity Offerings of at least $14.5 million and (ii) the aggregate redemption price does not exceed the aggregate net proceeds from such Qualified Equity Offerings. A “Qualified Equity Offering” is defined as the sale for cash by the Company of preferred stock or common stock that qualifies as Tier 1 capital. These provisions have been modified as discussed below.

The exercise price of and number of shares of Common Stock underlying the Warrant are subject to customary anti-dilution adjustments. Treasury may not transfer a portion or portions of the Warrant with respect to, and/or exercise the Warrant for more than one-half of, the 909,091 shares of Common Stock underlying the Warrant until the earlier of (i) the date on which the Company has received aggregate gross proceeds of at least $58.0 million from one or more Qualified Equity Offerings and (ii) December 31, 2009. If the Company completes one or more Qualified Equity Offerings on or prior to December 31, 2009, that result in the Company receiving aggregate gross proceeds of at least $58.0 million, then the number of the shares of Common Stock underlying the Warrant will be reduced to 50% of the original number of shares of Common Stock underlying the Warrant. Treasury has agreed not to exercise voting power with respect to any shares of Common Stock issued to it upon exercise of the Warrant.

The enactment of the American Recovery and Reinvestment Act of 2009 on February 17, 2009, permits the Company to repay the Treasury without penalty and without the need to raise new capital, subject to the Treasury’s consultation with the recipient’s appropriate regulatory agency. Additionally, upon repayment the Treasury will liquidate all outstanding warrants at their current market value.

157

Great Southern Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

The proceeds from the TARP Capital Purchase Program were allocated between the Series A Preferred Stock and the Warrant based on relative fair value, which resulted in an initial carrying value of $55.5 million for the Series A Preferred Shares and $2.5 million for the Warrant. The resulting discount to the Series A Preferred Shares of $2.5 million will accrete on a level yield basis over five years ending December 2013 and is being recognized as additional preferred stock dividends. The fair value assigned to the Series A Preferred Shares was estimated using a discounted cash flow model. The discount rate used in the model was based on yields on comparable publicly traded perpetual preferred stocks. The fair value assigned to the warrant was based on a Black Scholes option-pricing model using several inputs, including risk-free rate, expected stock price volatility and expected dividend yield.

The Series A Preferred Stock and the Warrant were issued in a private placement exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”). In accordance with the Purchase Agreement, the Company subsequently registered the Series A Preferred Stock, the Warrant and the shares of Common Stock underlying the Warrant under the Securities Act.

Note 26: Subsequent Event

In addition to the regular quarterly deposit insurance assessments, due to losses and projected losses attributed to failed institutions, on February 27, 2009, the FDIC adopted a rule, effective April 1, 2009, imposing on every insured institution a special assessment equal to 20 basis points of its assessment base as of June 30, 2009, to be collected on September 30, 2009. There is a proposal under discussion, under which the FDIC’s line of credit with the U.S. Treasury would be increased and the FDIC would reduce the special assessment to 10 basis points. There can be no assurance whether the proposal will become effective. The special assessment rule also authorizes the FDIC to impose additional special assessments if the reserve ratio of the DIF is estimated to fall to a level that the FDIC’s board believes would adversely affect public confidence or that is close to zero or negative. Any additional special assessment would be in amount up to 10 basis points on the assessment base for the quarter in which it is imposed and would be collected at the end of the following quarter.

158

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A.

CONTROLS AND PROCEDURES.

We maintain a system of disclosure controls and procedures (as defined in Rule 13(a)-15(e) under the Securities Exchange Act (the "Exchange Act")) that is designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file under the Exchange Act is recorded, processed, summarized and reported accurately and within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate. An evaluation of our disclosure controls and procedures was carried out as of December 31, 2008, under the supervision and with the participation of our principal executive officer, principal financial officer and several other members of our senior management. Our principal executive officer and principal financial officer concluded that, as of December 31, 2008, our disclosure controls and procedures were effective in ensuring that the information we are required to disclose in the reports we file or submit under the Act is (i) accumulated and communicated to our management (including the principal executive officer and principal financial officer) to allow timely decisions regarding required disclosure, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Act) that occurred during the quarter ended December 31, 2008, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. The annual report of management on the effectiveness of internal control over financial reporting and the attestation report thereon issued by our independent registered public accounting firm are set forth below under "Management's Report on Internal Control Over Financial Reporting" and "Report of the Independent Registered Public Accounting Firm."

We do not expect that our internal control over financial reporting will prevent all errors and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns in controls or procedures can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

MANAGEMENT'S REPORT ON INTERNAL CONTROL

OVER FINANCIAL REPORTING

The management of Great Southern Bancorp, Inc. (the "Company") is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. The Company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of

159

unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2008, based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on that assessment, management concluded that, as of December 31, 2008, the Company's internal control over financial reporting was effective.

Management's assessment of the effectiveness of the Company's internal control over financial reporting as of December 31, 2008, has been audited by BKD, LLP, an independent registered public accounting firm. Their attestation report on management's assessment and on the effectiveness of the Company's internal control over financial reporting as of December 31, 2008 is set forth below.

160

Report of Independent Registered Public Accounting Firm

Audit Committee, Board of Directors and Stockholders

Great Southern Bancorp, Inc.

Springfield, Missouri

We have audited Great Southern Bancorp, Inc.’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

161

Audit Committee, Board of Directors and Stockholders

Great Southern Bancorp, Inc.

Page 2

In our opinion, Great Southern Bancorp, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of Great Southern Bancorp, Inc. and our report dated March 16, 2009, expressed an unqualified opinion thereon.

/s/BKD, LLP

Springfield, Missouri

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Directors and Executive Officers. The information concerning our directors and executive officers required by this item is incorporated herein by reference from our definitive proxy statement for our 2009 Annual Meeting of Stockholders, a copy of which will be filed with the Securities and Exchange Commission not later than 120 days after the end of our fiscal year.

Section 16(a) Beneficial Ownership Reporting Compliance. The information concerning compliance with the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934 by our directors, officers and ten percent stockholders required by this item is incorporated herein by reference from our definitive proxy statement for our 2009 Annual Meeting of Stockholders, a copy of which will be filed with the Securities and Exchange Commission not later than 120 days after the end of our fiscal year.

Code of Ethics. We have adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer, and persons performing similar functions, and to all of our other employees and our directors. A copy of our code of ethics was filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2007.

ITEM 11.

EXECUTIVE COMPENSATION.

The information concerning compensation and other matters required by this item is incorporated herein by reference from our definitive proxy statement for our 2009 Annual Meeting of Stockholders, a copy of which will be filed with the Securities and Exchange Commission not later than 120 days after the end of our fiscal year.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND

MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The information concerning security ownership of certain beneficial owners and management required by this item is incorporated herein by reference from our definitive proxy statement for our 2009 Annual Meeting of Stockholders, a copy of which will be filed with the Securities and Exchange Commission not later than 120 days after the end of our fiscal year.

163

The following table sets forth information as of December 31, 2008 with respect to compensation plans under which shares of our common stock may be issued:

Equity Compensation Plan Information
Plan Category	Number of Shares to be issued upon Exercise of Outstanding Options, Warrants and Rights	Weighted Average Exercise Price of Outstanding Options, Warrants and Rights	Number of Shares Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Shares Reflected in the First Column)
Equity compensation plans approved by stockholders	700,397	$23,003	586,188(1)
Equity compensation plans not approved by stockholders	N/A	N/A	N/A
Total	700,397	$23,003	586,188(1)

_________________________

(1) Under the Company's 2003 Stock Option and Incentive Plan, all remaining shares could be issued to plan participants as restricted stock.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

The information concerning certain relationships and related transactions and director independence required by this item is incorporated herein by reference from our definitive proxy statement for our 2009 Annual Meeting of Stockholders, a copy of which will be filed with the Securities and Exchange Commission not later than 120 days after the end of our fiscal year.

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information concerning principal accountant fees and services is incorporated herein by reference from our definitive proxy statement for our 2009 Annual Meeting of Stockholders, a copy of which will be filed not later than 120 days after the end of our fiscal year.

164

PART IV

ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a)	List of Documents Filed as Part of This Report

	(1)	Financial Statements

	The Consolidated Financial Statements and Independent Accountants' Report are included in Item 8.

	(2)	Financial Statement Schedules

		Inapplicable.

	(3)	List of Exhibits

	Exhibits incorporated by reference below are incorporated by reference pursuant to Rule 12b-32.


	(2)	Plan of acquisition, reorganization, arrangement, liquidation, or succession

		Inapplicable.

	(3)	Articles of incorporation and Bylaws

		(i)	The Registrant's Charter previously filed with the Commission as Appendix D to the Registrant's Definitive Proxy Statement on Schedule 14A filed on March 31, 2004 (File No. 000-18082), is incorporated herein by reference as Exhibit 3.1.

		(iA)	The Articles Supplementary to the Registrant's Charter setting forth the terms of the Registrant's Fixed Rate Cumulative Perpetual Preferred Stock, Series A, previously filed with the Commission as Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed on December 9, 2008, are incorporated herein by reference as Exhibit 3(i).

		(ii)	The Registrant's Bylaws, previously filed with the Commission (File no. 000-18082) as Exhibit 3.2 to the Registrant's Current Report on Form 8-K filed on October 19, 2007, are incorporated herein by reference as Exhibit 3.2.

	(4)	Instruments defining the rights of security holders, including indentures

		The Company hereby agrees to furnish the SEC upon request, copies of the instruments defining the rights of the holders of each issue of the Registrant's long-term debt.

		The warrant to purchase shares of the Registrant's common stock dated December 5, 2008, previously filed with the Commission as Exhibit 4.2 to the Registrant's Current Report on Form 8-K filed on December 9, 2008, is incorporated herein by reference as Exhibit 4(i).

	(9)	Voting trust agreement

		Inapplicable.

	(10)	Material contracts

		The Registrant's 1989 Stock Option and Incentive Plan previously filed with the Commission (File no. 000-18082) as Exhibit 10.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1990, is incorporated herein by reference as Exhibit 10.1. The Registrant's 1997 Stock Option and Incentive Plan previously filed with the Commission (File no. 000-18082) as Annex A to the Registrant's Definitive Proxy Statement on Schedule 14A filed on September 18, 1997, for the fiscal, is incorporated herein by reference as Exhibit 10.2.

Maryland	43-1524856
(State of Incorporation)	(IRS Employer Identification Number)

1451 E. Battlefield, Springfield, Missouri	65804
(Address of Principal Executive Offices)	(Zip Code)

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share	The NASDAQ Stock Market LLC

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.	Yes [ ] No [X]
Indicated by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.	Yes [ ] No [X]
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.	Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K. [ ]
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of "accelerated filer," "large accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ] Accelerated filer [X] Non-accelerated filer [ ](Do not check if a smaller reporting company) Smaller reporting company [ ]
Indicated by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).	Yes [ ] No [X]
The aggregate market value of the common stock of the Registrant held by non-affiliates of the Registrant on June 30, 2008, computed by reference to the closing price of such shares on that date, was $81,582,321. At March 13, 2009, 13,380,969 shares of the Registrant's common stock were outstanding.

		Page
ITEM 1.	BUSINESS	1
Great Southern Bancorp, Inc.		1
Great Southern Bank		1
Forward-Looking Statements		2
Internet Website		2
Primary Market Area		2
Lending Activities		3
Loan Portfolio Composition		5
	Environmental Issues	7
	Residential Real Estate Lending	8
	Commercial Real Estate and Construction Lending	8
	Other Commercial Lending	10
	Consumer Lending	10
Originations, Purchases, Sales and Servicing of Loans		11
Loan Delinquencies and Defaults		13
Classified Assets		14
Non-Performing Assets		14
Allowances for Losses on Loans and Foreclosed Assets		16
Investment Activities		18
Sources of Funds		24
Subsidiaries		31
Competition		32
Employees		33
Government Supervision and Regulation		33
Federal and State Taxation		37
ITEM 1A.	RISK FACTORS	38
ITEM 1B.	UNRESOLVED STAFF COMMENTS	48
ITEM 2.	PROPERTIES.	49
ITEM 3.	LEGAL PROCEEDINGS.	52
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.	52
ITEM 4A.	EXECUTIVE OFFICERS OF THE REGISTRANT.	52
ITEM 5.	MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	53
ITEM 6.	SELECTED CONSOLIDATED FINANCIAL DATA	55
ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION	60
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	97
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION	102

	December 31,
	2008					2007					2006					2005					2004
	Amount		%			Amount		%			Amount		%			Amount		%			Amount		%
	(Dollars in thousands)
Real Estate Loans:
Residential
One- to four- family	$	226,796		12.4	%	$	191,970		9.1	%	$	176,630		9.1	%	$	173,135		9.7	%	$	171,197		11.6	%
Other residential (multi-family)		127,122		7.0			87,177		4.1			73,366		3.8			105,845		6.0			117,755		8.0
Commercial and industrial revenue bonds		536,963		29.4			532,797		25.3			529,046		27.4			553,195		31.2			526,776		35.6
Residential Construction:
One- to four-family		230,862		12.6			318,131		15.1			347,287		18.0			246,912		13.9			160,161		10.8
Other residential		64,903		3.6			83,720		4.0			69,077		3.6			72,262		4.1			40,587		2.7
Commercial construction		309,200		16.9			517,208		24.6			443,286		22.9			382,651		21.6			230,103		15.5

Total real estate loans		1,495,846		81.9			1,731,003		82.2			1,638,692		84.8			1,534,000		86.5			1,246,579		84.2

Other Loans:
Consumer loans:
Guaranteed student loans		7,066		.4			3,342		.2			3,592		.2			3,345		.2			2,976		.2
Automobile, boat, etc.		132,344		7.2			112,984		5.4			96,242		5.0			84,092		4.7			80,517		5.4
Home equity and improvement		50,672		2.8			44,287		2.1			42,824		2.2			48,992		2.8			45,703		3.1
Other		1,315		.1			4,161		.2			2,152		.1			1,371		.1			1,318		.1

Total consumer loans		191,397		10.5			164,774		7.9			144,810		7.5			137,800		7.8			130,514		8.8
Other commercial loans		139,592		7.6			207,059		9.9			149,593		7.7			102,034		5.7			103,635		7.0

Total other loans		330,989		18.1			371,833		17.8			294,403		15.2			239,834		13.5			234,149		15.8

Total loans		1,826,835		100.0	%		2,102,836		100.0	%		1,933,095		100.0	%		1,773,834		100.0	%		1,480,728		100.0	%

Less:
Loans in process		73,855					254,562					229,794					233,213					121,677
Deferred fees and discounts		2,126					2,704					2,425					1,902					1,054
Allowance for loan losses		29,163					25,459					26,258					24,549					23,489

Total loans receivable, net	$	1,721,691				$	1,820,111				$	1,674,618				$	1,514,170				$	1,334,508

	Less Than One Year		One to Five Years		After Five Years		Total
	(Dollars in thousands)
Real Estate Loans:
Residential
One- to four- family	$	54,731	$	33,287	$	138,778	$	226,796
Other residential		70,008		40,841		16,273		127,122
Commercial		161,686		265,051		110,226		536,963
Residential construction:
One- to four- family		178,329		44,155		8,378		230,862
Other residential		44,084		17,888		2,931		64,903
Commercial construction		243,803		54,468		10,929		309,200
Total real estate loans		752,641		455,690		287,515		1,495,846
Other Loans:
Consumer loans:
Guaranteed student loans		7,066		---		---		7,066
Automobile		18,835		41,674		71,835		132,344
Home equity and improvement		3,910		15,450		31,312		50,672
Other		1,315		---		---		1,315
Total consumer loans		31,126		57,124		103,147		191,397
Other commercial loans		73,235		39,192		27,165		139,592
Total other loans		104,361		96,316		130,312		330,989
Total loans	$	857,002	$	552,006	$	417,827	$	1,826,835

Collateral Type	Loan Balance	Percentage of Total Loan Portfolio	Non-Performing Loans at December 31, 2008
	(Dollars in thousands)

Apartments	$164,711	9.0%	$ 817
Health Care Facilities	$159,757	8.8%	$ 0
Retail (Varied Projects)	$121,930	6.7%	$1,709
Motels/Hotels	$119,627	6.6%	$ 248
Subdivisions	$110,462	6.1%	$1,401
Condominiums	$ 89,693	4.9%	$8,203

	Loans Delinquent for 30-89 Days
	Number		Amount		Percent of Total Delinquent Loans
	(Dollars in thousands)
Real Estate:
One- to four-family		99	$	8,166		33	%
Other residential		3		1,624		7
Commercial		6		2,371		10
Construction or development		17		8,360		34
Consumer and overdrafts		907		3,780		16
Other commercial		4		62		---
Total		1,036	$	24,363		100	%

Asset Category	Substandard	Doubtful	Loss	Total Classified	Allowance for Losses
	(Dollars in thousands)

Investment securities	$ ---	$---	$ ---	$ ---	$ ---
Loans	50,776	---	---	50,776	29,163
Foreclosed assets	27,752	---	---	27,752	---
Total	$78,528	$---	$ ---	$78,528	$29,163

	December 31, 2008
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Approximate Fair Value
	(Dollars in thousands)

AVAILABLE-FOR-SALE SECURITIES:
U.S. government agencies	$	34,968	$	32	$	244	$	34,756
Collateralized mortgage obligations		73,976		585		2,647		71,914
Mortgage-backed securities		480,349		6,029		1,182		485,196
Corporate bonds		1,500		---		295		1,205
States and political subdivisions		55,545		107		2,549		53,103
Equity securities		1,552		---		48		1,504

Total available-for-sale securities	$	647,890	$	6,753	$	6,965	$	647,678

HELD-TO-MATURITY SECURITIES:
States and political subdivisions	$	1,360	$	62	$	---	$	1,422

Total held-to-maturity securities	$	1,360	$	62	$	---	$	1,422

	December 31, 2006
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Approximate Fair Value
	(Dollars in thousands)

AVAILABLE-FOR-SALE SECURITIES:
U.S. government agencies	$	59,494	$	---	$	798	$	58,696
Collateralized mortgage obligations		30,536		1		453		30,084
Mortgage-backed securities		191,282		221		3,027		188,476
Corporate bonds		3,355		101		---		3,456
States and political subdivisions		51,128		870		31		51,967
Equity securities		11,196		317		---		11,513

Total available-for-sale securities	$	346,991	$	1,510	$	4,309	$	344,192

HELD-TO-MATURITY SECURITIES:
States and political subdivisions	$	1,470	$	99	$	---	$	1,569

Total held-to-maturity securities	$	1,470	$	99	$	---	$	1,569

	Cost		Tax-Equivalent Amortized Yield			Approximate Fair Value
	(Dollars in thousands)
One year or less	$	---		---	%	$	---
After one through five years		924		5.85	%		931
After five through ten years		38,315		6.38	%		38,071
After ten years		52,774		6.26	%		50,062
Securities not due on a single maturity date		554,325		5.11	%		557,110
Equity securities		1,552		2.79	%		1,504

Total	$	647,890		5.27	%	$	647,678

	One Year or Less	After One Through Five Years	After Five Through Ten Years	After Ten Years	Securities Not Due on a Single Maturity Date	Equity Securities	Total
	(Dollars in thousands)

U.S. government agencies	$ ---	$ ---	$ 34,968	$ ---	$ ---	$ ---	$ 34,968
Collateralized mortgage obligations	---	---	---	---	73,976	---	73,976
Mortgage-backed securities	---	---	---	---	480,349	---	480,349
States and political subdivisions	---	924	3,347	51,274	---	---	55,545
Corporate bonds	---	---	---	1,500	---	---	1,500
Equity securities	---	---	---	---	---	1,552	1,552

Total	$ ---	$ 924	$ 38,315	$52,774	$554,325	$ 1,552	$647,890

	A.	If it is probable that the issuer of the security will be unable to pay all amounts due according to the contractual terms of the debt security, then the security is written down to fair value as an OTTI due to the credit concern of the issuer.

	B.	If the Company plans to sell the security and does not expect to recover the loss before the anticipated sale date, then the security is written down to fair value as an OTTI.

	C.	If the security does not meet criteria A or B and is in a loss position, the Company determines if the magnitude and duration of the loss require a further review for OTTI. Further review is performed for securities that have been in a loss position for greater than six months and at a current loss of 10% or more, or for other securities as deemed appropriate by the Company.

	Maturity
	3 Months or Less		Over 3 Months to 6 Months		Over 6 to 12 Months		Over 12 Months		Total
	(Dollars in thousands)

Time deposits:
Less than $100,000	$	82,283	$	55,069	$	74,647	$	40,967	$	252,966
$100,000 or more		61,350		26,098		41,082		15,887		144,417
Brokered		218,778		97,134		126,093		532,485		974,490
Public funds(1)		3,440		2,248		1,006		3,005		9,699

Total	$	365,851	$	180,549	$	242,828	$	592,344	$	1,381,572
______________ (1) Deposits from governmental and other public entities.

	December 31,
	2008					2007					2006					2005					2004
	Amount		%			Amount		%			Amount		%			Amount		%			Amount		%
	(Dollars in thousands)
Fixed-Rate Loans:
Real Estate Loans
Residential
One- to four- family	$	71,990		3.9	%	$	48,790		2.3	%	$	33,378		1.7	%	$	22,269		1.3	%	$	25,266		1.7	%
Other residential		44,436		2.4			34,798		1.7			31,575		1.6			38,473		2.2			65,646		4.4
Commercial		185,631		10.2			158,223		7.5			117,701		6.1			130,316		7.3			110,414		7.5
Residential construction:
One- to four- family		22,054		1.2			17,872		.8			9,740		.5			18,224		1.0			83,306		5.6
Other residential		7,977		.5			4,040		.2			10,946		.6			16,166		.9			11,880		.8
Commercial construction		22,897		1.3			12,483		.6			8,495		.4			13,980		.8			24,391		1.7

Total real estate loans		354,985		19.5			276,206		13.1			211,835		10.9			239,428		13.5			320,903		21.7
Consumer loans		142,848		7.8			123,232		5.9			104,789		5.4			91,639		5.2			87,868		5.9
Other commercial loans		27,653		1.5			33,903		1.6			26,173		1.4			20,374		1.1			36,660		2.5

Total fixed-rate loans		525,486		28.8			433,341		20.6			342,797		17.7			351,441		19.8			445,431		30.1

Adjustable-Rate Loans:
Real Estate Loans
Residential
One- to four- family		154,806		8.5			143,180		6.8			143,252		7.4			150,866		8.5			145,931		9.9
Other residential		82,686		4.6			52,379		2.5			41,791		2.2			67,372		3.8			52,109		3.5
Commercial		351,332		19.2			374,574		17.8			411,346		21.3			422,879		23.8			416,362		28.1
Residential construction:
One- to four-family		208,808		11.4			300,259		14.3			337,547		17.4			228,688		12.9			76,855		5.2
Other residential		56,926		3.1			79,680		3.8			58,131		3.0			56,096		3.2			28,707		1.9
Commercial construction		286,303		15.6			504,725		24.0			434,791		22.5			368,671		20.8			205,712		13.9

Total real estate loans		1,140,861		62.4			1,454,797		69.2			1,426,858		73.8			1,294,572		73.0			925,676		62.5
Consumer loans		48,549		2.7			41,542		2.0			40,020		2.1			46,161		2.6			42,646		2.9
Other commercial loans		111,939		6.1			173,156		8.2			123,420		6.4			81,660		4.6			66,975		4.5

Total adjustable-rate loans		1,301,349		71.2			1,669,495		79.4			1,590,298		82.3			1,422,393		80.2			1,035,297		69.9

Total loans		1,826,835		100.0	%		2,102,836		100.0	%		1,933,095		100.0	%		1,773,834		100.0	%		1,480,728		100.0	%
Less:

	Year Ended December 31,
	2008			2007			2006
	(Dollars in thousands)

FHLBank Advances:
Maximum balance	$	198,273		$	213,867		$	263,984
Average balance		133,477			144,773			180,414
Weighted average interest rate		3.75	%		4.81	%		4.51	%

	Year Ended December 31, 2008
	Maximum Balance		Average Balance		Weighted Average Interest Rate
	(Dollars in thousands)
Other Borrowings:
Overnight borrowings	$	60,900	$	4,291		3.12	%
Federal Reserve term auction facility		85,000		63,682		2.35
Securities sold under reverse repurchase agreements		229,274		179,117		2.02
Other		367		159		---

Total			$	247,249		2.12	%
Total maximum month-end balance	$	298,262

	Year Ended December 31, 2007
	Maximum Balance		Average Balance		Weighted Average Interest Rate
	(Dollars in thousands)
Other Borrowings:
Overnight borrowings	$	30,000	$	7,820		5.24	%
Securities sold under reverse repurchase agreements		184,214		162,346		4.26
Federal Reserve term auction facility		50,000		779		4.86
Other		4		1		---

Total			$	170,946		4.30	%
Total maximum month-end balance	$	216,721

	Year Ended December 31, 2006
	Maximum Balance		Average Balance		Weighted Average Interest Rate
	(Dollars in thousands)
Other Borrowings:
Overnight borrowings	$	37,000	$	6,831		5.26	%
Securities sold under reverse repurchase agreements		153,819		122,688		4.31
Other		3		4		---

Total			$	129,523		4.36	%
Total maximum month-end balance	$	186,688

	December 31, 2008
	Balance		Weighted Average Interest Rate
	(Dollars in thousands)
Other borrowings:
Federal Reserve term auction facility	$	83,000		0.55	%
Securities sold under reverse repurchase agreements		215,261		1.67
Other		368		---

Total	$	298,629		1.35	%

	·	actual or anticipated quarterly fluctuations in our operating and financial results;
	·	developments related to investigations, proceedings or litigation that involve us;

	·	changes in financial estimates and recommendations by financial analysts;
	·	dispositions, acquisitions and financings;

	·	actions of our current stockholders, including sales of common stock by existing stockholders and our directors and executive officers;
	·	fluctuations in the stock price and operating results of our competitors;

	·	regulatory developments; and
	·	developments related to the financial services industry.

Location		Year Opened	Owned or Leased	Lease Expiration (Including any Renewal Option)

CORPORATE HEADQUARTERS AND BANK:
1451 E. Battlefield	Springfield, Missouri	1976	Owned	N/A

OPERATIONS CENTER AND BRANCH OFFICE:
218 S. Glenstone	Springfield, Missouri	2004	Owned	N/A
218A S. Glenstone	Springfield, Missouri	2004	Owned	N/A

BRANCH OFFICES:
430 South Avenue	Springfield, Missouri	1983	Leased	2043
1607 W. Kearney	Springfield, Missouri	1976	Leased*	2022
1615 W. Sunshine	Springfield, Missouri	2001	Owned	N/A
2562 N. Glenstone	Springfield, Missouri	2003	Owned	N/A
1955 S. Campbell	Springfield, Missouri	1979	Leased*	2020
3961 S. Campbell	Springfield, Missouri	1998	Leased	2028
2609 A E. Sunshine	Springfield, Missouri	2001	Owned	N/A
2735 W. Chestnut	Springfield, Missouri	2002	Owned	N/A
1580 W. Battlefield	Springfield, Missouri	1985	Leased*	2017
723 N. Benton	Springfield, Missouri	1985	Owned	N/A
507 E. Kearney	Springfield, Missouri	2004	Owned	N/A
2945 W. Republic Road	Springfield, Missouri	2007	Owned	N/A
1500 S. Elliot	Aurora, Missouri	2003	Owned	N/A
102 N. Jefferson	Ava, Missouri	1982	Owned	N/A
110 W. Hensley	Branson Missouri	1982	Owned	N/A
1729 W. Highway 76	Branson, Missouri	1983	Owned	N/A
1510 State Highway 248	Branson, Missouri	2008	Owned	N/A
919 W. Dallas	Buffalo Missouri	1976	Owned	N/A
527 Ozark	Cabool, Missouri	1989	Leased	2026
398 E. State Highway 54	Camdenton, Missouri	2005	Owned	N/A
8736 N. State Highway 5	Camdenton, Missouri	2005	Owned	N/A
14411 State Highway 7	Climax Springs, Missouri	2005	Owned	N/A
1710 E. 32nd Street	Joplin, Missouri	1989	Leased*	2031
1232 S. Rangeline	Joplin, Missouri	1998	Leased	2018
2711 N. Rangeline(2)	Joplin, Missouri	2004	Owned	N/A
Highway 00 and 13	Kimberling City, Missouri	1984	Owned	N/A
528 S. Jefferson	Lebanon, Missouri	1978	Leased*	2028
300 S.W. Ward Street	Lee's Summit, Missouri	2006	Owned	N/A
714 S. Neosho Boulevard	Neosho, Missouri	1991	Owned	N/A
717 W. Mt. Vernon	Nixa, Missouri	1995	Owned	N/A
1391 N. Main Street	Nixa, Missouri	2003	Owned	N/A

*	Building owned with land leased.
(1)	In 2003, the Company purchased land on West Highway NN for a second branch location in Ozark, Missouri. In 2004 and 2005, nearby properties became available on West Highway J and were purchased by the Company. The land on West Highway NN and one parcel on Highway J are currently being marketed for sale. The new facility on West Highway J is owned by the Company and was opened in 2006.
(2)	In 2004, the Company purchased land on North Rangeline for a possible third branch location in Joplin, Missouri. This land is currently being marketed for sale.
(3)	In 2008, the Company leased space in the office of a local realtor for the purpose of generating mortgage loans.
(4)	In 2009, the Company leased space for the purpose of generating mortgage loans.

	December 31, 2008	December 31, 2007	December 31, 2006

First Quarter	$.180	$.160	$.140
Second Quarter	.180	.170	.150
Third Quarter	.180	.170	.150
Fourth Quarter	.180	.180	.160

	Total Number of Shares Purchased	Average Price Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plan	Maximum Number of Shares that May Yet Be Purchased Under the Plan (1)

October 1, 2008 - October 31, 2008	---	$ ---	---	396,562
November 1, 2008 - November 30, 2008	---	---	---	396,562
December 1, 2008 - December 31, 2008	---	---	---	396,562

	---	$ ---	---

__________________
(1)	Amount represents the number of shares available to be repurchased under the November 2006 plan as of the last calendar day of the month shown.

	For the Year Ended December 31,
	2008			2007			2006			2005			2004
	(Dollars in thousands)
Summary Statement of Operations Information :
Interest income:
Loans	$	119,829		$	142,719		$	133,094		$	98,129		$	74,162
Investment securities and other		24,985			21,152			16,987			16,366			12,897
		144,814			163,871			150,081			114,495			87,059
Interest expense:
Deposits		60,876			76,232			65,733			42,269			28,952
Federal Home Loan Bank advances		5,001			6,964			8,138			7,873			6,091
Short-term borrowings and repurchase agreements		5,892			7,356			5,648			4,969			1,580
Subordinated debentures issued to capital trust		1,462			1,914			1,335			986			610
		73,231			92,466			80,854			56,097			37,233
Net interest income		71,583			71,405			69,227			58,398			49,826
Provision for loan losses		52,200			5,475			5,450			4,025			4,800
Net interest income after provision for loan losses		19,383			65,930			63,777			54,373			45,026
Noninterest income:
Commissions		8,724			9,933			9,166			8,726			7,793
Service charges and ATM fees		15,352			15,153			14,611			13,309			12,726
Net realized gains on sales of loans		1,415			1,037			944			983			992
Net realized gains (losses) on sales
of available-for-sale securities		44			13			(1	)		85			(373	)
Realized impairment of available-for-sale securities		(7,386	)		(1,140	)		---			(734	)		---
Net gain (loss) on sale of fixed assets		191			48			167			30			403
Late charges and fees on loans		819			962			1,567			1,430			872
Change in interest rate swap fair value net of
change in hedged deposit fair value		6,981			1,632			1,498			---			---
Change in interest rate swap fair value		---			---			---			(6,600	)		1,136
Interest rate swap net settlements		---			---			---			3,408			8,881
Other income		2,004			1,781			1,680			922			879
		28,144			29,419			29,632			21,559			33,309
Noninterest expense:
Salaries and employee benefits		31,081			30,161			28,285			25,355			22,007
Net occupancy expense		8,281			7,927			7,645			7,589			7,247
Postage		2,240			2,230			2,178			1,954			1,784
Insurance		2,223			1,473			876			883			761
Advertising		1,073			1,446			1,201			1,025			794
Office supplies and printing		820			879			931			903			811
Telephone		1,396			1,363			1,387			1,068			903
Legal, audit and other professional fees		1,739			1,247			1,127			1,410			1,309
Expense on foreclosed assets		3,431			608			119			268			485
Write-off of trust preferred securities issuance costs		---			---			783			---			---
Other operating expenses		3,422			4,373			4,275			3,743			3,160
		55,706			51,707			48,807			44,198			39,261
Income (loss) before income taxes		(8,179	)		43,642			44,602			31,734			39,074
Provision (credit) for income taxes		(3,751	)		14,343			13,859			9,063			12,675
Net income (loss)	$	(4,428	)	$	29,299		$	30,743		$	22,671		$	26,399
Preferred stock dividends and discount accretion	$	242		$	---		$	---		$	---		$	---
Net income (loss) available to common shareholders	$	(4,670	)	$	29,299		$	30,743		$	22,671		$	26,399

	At or For the Year Ended December 31,
	2008			2007			2006			2005			2004
	(Dollars in thousands, except per share data)
Per Common Share Data:
Basic earnings per common share	$	(0.35	)	$	2.16		$	2.24		$	1.65		$	1.93
Diluted earnings per common share		(0.35	)		2.15			2.22			1.63			1.89
Cash dividends declared		0.72			0.68			0.60			0.52			0.44
Book value per common share		13.34			14.17			12.84			11.13			10.28
Average shares outstanding		13,381			13,566			13,697			13,713			13,702
Year-end actual shares outstanding		13,381			13,400			13,677			13,723			13,699
Year-end fully diluted shares outstanding		13,381			13,654			13,825			13,922			13,995

Earnings Performance Ratios:
Return on average assets(1)		(0.18	)%		1.25	%		1.41	%		1.14	%		1.55	%
Return on average stockholders' equity(2)		(2.47	)		15.78			18.54			15.11			20.21
Non-interest income to average total assets		1.12			1.25			1.36			1.08			1.95
Non-interest expense to average total assets		2.07			2.18			2.23			2.21			2.27
Average interest rate spread(3)		2.74			2.71			2.83			2.73			2.81
Year-end interest rate spread		3.02			3.00			2.95			3.05			2.63
Net interest margin(4)		3.01			3.24			3.39			3.13			3.10
Efficiency ratio(5)		55.86			51.28			49.37			55.28			47.23
Net overhead ratio(6)		1.09			0.95			0.88			1.14			0.35
Common dividend pay-out ratio		N/A			31.63			27.03			31.90			23.28

Asset Quality Ratios:
Allowance for loan losses/year-end loans		1.66	%		1.38	%		1.54	%		1.59	%		1.73	%
Non-performing assets/year-end loans and foreclosed assets		3.69			2.99			1.46			1.09			0.48
Allowance for loan losses/non-performing loans		87.84			71.77			129.71			151.44			524.43
Net charge-offs/average loans		2.63			0.35			0.23			0.20			0.17
Gross non-performing assets/year end assets		2.48			2.30			1.12			0.81			0.35
Non-performing loans/year-end loans		1.90			1.92			1.19			1.05			0.33

Balance Sheet Ratios:
Loans to deposits		90.23	%		103.23	%		98.29	%		97.67	%		102.76	%
Average interest-earning assets as a percentage of average interest-bearing liabilities		108.98			112.71			114.26			113.05			112.56

Capital Ratios:
Average common stockholders' equity to average assets		7.1	%		7.9	%		7.6	%		7.6	%		7.7	%
Year-end tangible common stockholders' equity to assets		6.7			7.7			7.8			7.2			7.6
Great Southern Bancorp, Inc.:
Tier 1 risk-based capital ratio		13.8			10.6			10.7			10.2			10.8
Total risk-based capital ratio		15.1			11.9			11.9			11.4			12.0
Tier 1 leverage ratio		10.1			9.1			9.2			8.4			8.5
Great Southern Bank:
Tier 1 risk-based capital ratio		10.7			10.4			10.2			10.1			10.7
Total risk-based capital ratio		11.9			11.7			11.5			11.3			11.9
Tier 1 leverage ratio		7.8			9.0			8.9			8.3			8.5
Ratio of Earnings to Fixed Charges: (7)
Including deposit interest		0.89	x		1.47	x		1.55	x		1.57	x		2.05	x
Excluding deposit interest		0.34	x		3.69	x		3.95	x		3.29	x		5.72	x

____________________
(1)	Net income divided by average total assets.
(2)	Net income divided by average stockholders' equity.
(3)	Yield on average interest-earning assets less rate on average interest-bearing liabilities.
(4)	Net interest income divided by average interest-earning assets.
(5)	Non-interest expense divided by the sum of net interest income plus non-interest income.
(6)	Non-interest expense less non-interest income divided by average total assets.
(7)	In computing the ratio of earnings to fixed charges: (a) earnings have been based on income before income taxes and fixed charges, and (b) fixed charges consist of interest and amortization of debt discount and expense including amounts capitalized and the estimated interest portion of rents.

	Year Ended December 31
	2008				2007
	$		%		$		%

Reported Net Interest Income/Margin	$	71,583	3.01	%	$	71,405	3.24	%

Amortization of deposit broker origination fees		3,111	.13			1,172	.05


Net interest income/margin excluding impact of hedge accounting entries	$	74,694	3.14	%	$	72,577	3.29	%

Non-GAAP Reconciliation (Dollars in thousands)

	Year Ended December 31, 2008
	As Reported		Effect of Hedge Accounting Entries Recorded		Excluding Hedge Accounting Entries Recorded
Non-interest income --
Net change in fair value of interest rate swaps and related deposits	$	28,144	$	6,976	$	21,168

	Year Ended December 31, 2007
	As Reported		Effect of Hedge Accounting Entries Recorded		Excluding Hedge Accounting Entries Recorded
Non-interest income --
Net change in fair value of interest rate swaps and related deposits	$	29,419	$	1,695	$	27,724

	December 31, 2008				Year Ended December 31, 2008								Year Ended December 31, 2007								Year Ended December 31, 2006
	Yield/Rate			Average Balance			Interest		Yield/Rate			Average Balance			Interest		Yield/Rate			Average Balance			Interest		Yield/Rate
Interest-earning assets:	(Dollars in thousands)
Loans receivable:
One- to four-family residential		6.22	%	$	206,299		$	13,290		6.44	%	$	180,797		$	12,714		7.03	%	$	177,040		$	12,031		6.80	%
Other residential		6.54			109,348			7,214		6.60			81,568			6,914		8.48			86,251			7,078		8.21
Commercial real estate		6.46			479,347			32,250		6.73			456,377			37,614		8.24			464,710			37,958		8.17
Construction		5.98			649,037			41,448		6.39			673,576			55,993		8.31			586,343			49,792		8.49
Commercial business		5.91			162,512			10,013		6.16			171,902			14,160		8.24			111,742			9,587		8.58
Other loans		7.32			179,731			11,871		6.60			153,421			11,480		7.48			142,877			10,560		7.39
Industrial revenue bonds(1)		6.38			55,728			3,743		6.72			56,612			3,844		6.79			84,199			6,088		7.23

Total loans receivable		6.35			1,842,002			119,829		6.51			1,774,253			142,719		8.04			1,653,162			133,094		8.05

Investment securities and other interest- earning assets(1)		5.00			533,567			24,985		4.68			430,874			21,152		4.91			387,110			16,987		4.39

Total interest-earning assets		5.97			2,375,569			144,814		6.10			2,205,127			163,871		7.43			2,040,272			150,081		7.36

Noninterest-earning assets:
Cash and cash equivalents					71,989								84,668								98,210
Other non-earning assets					74,446								50,648								40,710

Total assets				$	2,522,004							$	2,340,443							$	2,179,192
Interest-bearing liabilities:
Interest-bearing demand and savings		1.18		$	484,490			8,370		1.73		$	480,756			16,043		3.34		$	421,201			12,678		3.01
Time deposits		3.67			1,268,941			52,506		4.14			1,131,825			60,189		5.32			1,035,685			53,055		5.12
Total deposits		3.13			1,753,431			60,876		3.47			1,612,581			76,232		4.73			1,456,886			65,733		4.51
Short-term borrowings		1.78			262,004			5,892		2.25			170,946			7,356		4.30			129,523			5,648		4.36
Subordinated debentures issued to capital trust		4.87			30,929			1,462		4.73			28,223			1,914		6.78			18,739			1,335		7.12
FHLB advances		3.30			133,477			5,001		3.75			144,773			6,964		4.81			180,414			8,138		4.51

Total interest- bearing liabilities		2.95			2,179,841			73,231		3.36			1,956,523			92,466		4.72			1,785,562			80,854		4.53

Noninterest-bearing liabilities:
Demand deposits					147,665								171,479								189,484
Other liabilities					10,873								26,716								38,352

Total liabilities					2,338,379								2,154,718								2,013,398

Stockholders’ equity					183,625								185,725								165,794

Total liabilities and stockholders' equity				$	2,522,004							$	2,340,443							$	2,179,192

Net interest income:
Interest rate spread		3.02	%				$	71,583		2.74	%				$	71,405		2.71	%				$	69,227		2.83	%
Net interest margin*										3.01	%							3.24	%							3.39	%

Average interest-earning assets to average interest-bearing liabilities					109.0	%							112.7	%							114.3	%