UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





/X/ QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
ACT OF 1934





For the
Quarterly Period ended March 31, 2010





Commission
File Number 0-18082





GREAT
SOUTHERN BANCORP, INC.





(Exact
name of registrant as specified in its charter)





Maryland
            
            43-1524856(State
      of Incorporation)
            
            (IRS
      Employer Identification Number)1451
      E. Battlefield, Springfield, Missouri
            
            65804(Address
      of Principal Executive Offices)
            
            (Zip
      Code)(417)
      887-4400


(Registrant's
telephone number, including area code)





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 whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data file required to be
submitted and posted pursuant to Rule 405 of regulation S-T (§232.405 of this
chapter) during the proceeding 12 months (or for such shorter period that the
registrant was required to submit and post such
files). Yes/  /   No /  /





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
definition 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 /  /
            Smaller
      reporting company /  /(Do
      not check if a smaller
              reporting
      company)





Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes
/  /   No /X/





The
number of shares outstanding of each of the registrant's classes of common
stock: 13,430,209 shares of common stock, par value $.01,
outstanding at May 6, 2010.








1





PART I
FINANCIAL INFORMATION


ITEM 1.
FINANCIAL STATEMENTS.





GREAT
SOUTHERN BANCORP, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION


(In
thousands, except number of shares)





MARCH
      31,
            
            
            DECEMBER
      31,2010
            
            
            2009(Unaudited)ASSETSCash
            
            $
            329,953
            
            
            $
            242,723Interest-bearing
      deposits in other financial institutions
            
            
            236,198
            
            
            
            201,853Cash
      and cash equivalents
            
            
            566,151
            
            
            
            444,576Available-for-sale
      securities
            
            
            730,889
            
            
            
            764,291Held-to-maturity
      securities (fair value $16,451 – March 2010;$16,065 - December 2009)
            
            
            16,290
            
            
            
            16,290Mortgage
      loans held for sale
            
            
            6,611
            
            
            
            9,269Loans
      receivable, net of allowance for loan losses of$40,571 – March 2010; $40,101 - December 2009
            
            
            2,029,164
            
            
            
            2,082,125FDIC
      indemnification asset
            
            
            135,864
            
            
            
            141,484Interest
      receivable
            
            
            14,482
            
            
            
            15,582Prepaid
      expenses and other assets
            
            
            72,581
            
            
            
            66,020Foreclosed
      assets held for sale, net
            
            
            56,567
            
            
            
            41,660Premises
      and equipment, net
            
            
            43,363
            
            
            
            42,383Goodwill
      and other intangible assets
            
            
            5,992
            
            
            
            6,216Investment
      in Federal Home Loan Bank stock
            
            
            11,081
            
            
            
            11,223Total Assets
            
            $
            3,689,035
            
            
            $
            3,641,119LIABILITIES
      AND STOCKHOLDERS' EQUITYLiabilities:Deposits
            
            $
            2,795,171
            
            
            $
            2,713,961Securities
      sold under reverse repurchase agreements with customers
            
            
            309,478
            
            
            
            335,893Federal
      Home Loan Bank advances
            
            
            168,125
            
            
            
            171,603Short-term
      borrowings
            
            
            248
            
            
            
            289Structured
      repurchase agreements
            
            
            53,181
            
            
            
            53,194Subordinated
      debentures issued to capital trusts
            
            
            30,929
            
            
            
            30,929Accrued
      interest payable
            
            
            6,215
            
            
            
            6,283Advances
      from borrowers for taxes and insurance
            
            
            1,261
            
            
            
            1,268Accounts
      payable and accrued expenses
            
            
            9,246
            
            
            
            9,423Current
      and deferred income taxes
            
            
            14,137
            
            
            
            19,368Total Liabilities
            
            
            3,387,991
            
            
            
            3,342,211Stockholders'
      Equity:Capital
      stockSerial
      preferred stock, $.01 par value; authorized 1,000,000 shares; issued
              and outstanding
      58,000 shares
            
            
            56,131
            
            
            
            56,017Common
      stock, $.01 par value; authorized 20,000,000 shares;
              issued
      and outstanding March 2010 - 13,428,350 shares;December
      2009 - 13,406,403 shares
            
            
            134
            
            
            
            134Stock
      warrants; 909,091 shares
            
            
            2,452
            
            
            
            2,452Additional
      paid-in capital
            
            
            20,312
            
            
            
            20,180Retained
      earnings
            
            
            211,189
            
            
            
            208,625Accumulated
      other comprehensive gain
            
            
            10,826
            
            
            
            11,500Total Stockholders' Equity
            
            
            301,044
            
            
            
            298,908Total Liabilities and Stockholders' Equity
            
            $
            3,689,035
            
            
            $
            3,641,119


See Notes
to Consolidated Financial Statements





2


GREAT
SOUTHERN BANCORP, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF INCOME


(In
thousands, except per share data)


THREE
      MONTHS ENDED
              MARCH
      31,2010
            
            
            2009INTEREST
      INCOME
            
            (Unaudited)Loans
            
            $
            32,194
            
            
            $
            26,731Investment
      securities and other
            
            
            7,560
            
            
            
            7,569TOTAL
      INTEREST INCOME
            
            
            39,754
            
            
            
            34,300INTEREST
      EXPENSEDeposits
            
            
            10,657
            
            
            
            14,040Federal
      Home Loan Bank advances
            
            
            1,397
            
            
            
            945Short-term
      borrowings and repurchase agreements
            
            
            993
            
            
            
            1,532Subordinated
      debentures issued to capital trusts
            
            
            136
            
            
            
            253TOTAL
      INTEREST EXPENSE
            
            
            13,183
            
            
            
            16,770NET
      INTEREST INCOME
            
            
            26,571
            
            
            
            17,530PROVISION
      FOR LOAN LOSSES
            
            
            5,500
            
            
            
            5,000NET
      INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
            
            
            21,071
            
            
            
            12,530NON-INTEREST
      INCOMECommissions
            
            
            2,066
            
            
            
            1,861Service
      charges and ATM fees
            
            
            4,583
            
            
            
            3,355Net
      realized gains on sales of loans
            
            
            793
            
            
            
            605Net
      realized losses on sales and impairments ofavailable-for-sale
      securities
            
            
            --
            
            
            
            (3,985
            )Late
      charges and fees on loans
            
            
            204
            
            
            
            138Change
      in interest rate swap fair value net of change
              in
      hedged deposit fair value
            
            
            --
            
            
            
            847Initial
      gain recognized on business acquisition
            
            
            --
            
            
            
            43,876Accretion
      of income related to business acquisitions
            
            
            900
            
            
            
            --Other
      income
            
            
            451
            
            
            
            849TOTAL
      NON-INTEREST INCOME
            
            
            8,997
            
            
            
            47,546NON-INTEREST
      EXPENSESalaries
      and employee benefits
            
            
            11,036
            
            
            
            7,916Net
      occupancy and equipment expense
            
            
            3,489
            
            
            
            2,771Postage
            
            
            832
            
            
            
            566Insurance
            
            
            1,133
            
            
            
            954Advertising
            
            
            218
            
            
            
            216Office
      supplies and printing
            
            
            463
            
            
            
            179Telephone
            
            
            542
            
            
            
            345Legal,
      audit and other professional fees
            
            
            665
            
            
            
            669Expense
      on foreclosed assets
            
            
            2,167
            
            
            
            752Other
      operating expenses
            
            
            1,598
            
            
            
            287TOTAL
      NON-INTEREST EXPENSE
            
            
            22,143
            
            
            
            14,655INCOME
      BEFORE INCOME TAXES
            
            
            7,925
            
            
            
            45,421PROVISION
      FOR INCOME TAXES
            
            
            2,387
            
            
            
            16,246NET
      INCOME
            
            
            5,538
            
            
            
            29,175PREFERRED
      STOCK DIVIDENDS AND DISCOUNT ACCRETION
            
            
            839
            
            
            
            824NET
      INCOME AVAILABLE TO COMMON SHAREHOLDERS
            
            $
            4,699
            
            
            $
            28,351BASIC
      EARNINGS PER COMMON SHARE
            
            $
            0.35
            
            
            $
            2.12DILUTED
      EARNINGS PER COMMON SHARE
            
            $
            0.34
            
            
            $
            2.10DIVIDENDS
      DECLARED PER COMMON SHARE
            
            $
            .18
            
            
            $
            .18


See Notes
to Consolidated Financial Statements





3


GREAT
SOUTHERN BANCORP, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(In
thousands)


THREE
      MONTHS ENDED MARCH 31,2010
            
            
            2009(Unaudited)CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      income
            
            $
            5,538
            
            
            $
            29,175Proceeds
      from sales of loans held for sale
            
            
            33,441
            
            
            
            46,180Originations
      of loans held for sale
            
            
            (30,154
            )
            
            
            (45,488
            )Items
      not requiring (providing) cash:Depreciation
            
            
            788
            
            
            
            613Amortization
            
            
            264
            
            
            
            85Compensation
      expense for stock option grants
            
            
            112
            
            
            
            117Provision
      for loan losses
            
            
            5,500
            
            
            
            5,000Net
      gains on loan sales
            
            
            (793
            )
            
            
            (605
            )Net
      losses on sale or impairment of available-for-sale investment
      securities
            
            
            --
            
            
            
            3,985Net
      gains on sale of premises and equipment
            
            
            (5
            )
            
            
            (16
            )Loss
      on sale of foreclosed assets
            
            
            858
            
            
            
            130Gain
      on purchase of additional business units
            
            
            --
            
            
            
            (43,876
            )Amortization
      of deferred income, premiums and discounts
            
            
            (1,326
            )
            
            
            35Change
      in interest rate swap fair value net of change inhedged
      deposit fair value
            
            
            --
            
            
            
            (847
            )Deferred
      income taxes
            
            
            (285
            )
            
            
            8,175Changes
      in:Interest
      receivable
            
            
            1,100
            
            
            
            196Prepaid
      expenses and other assets
            
            
            (81
            )
            
            
            925Accounts
      payable and accrued expenses
            
            
            (249
            )
            
            
            (230
            )Income
      taxes refundable/payable
            
            
            (4,583
            )
            
            
            5,219Net
      cash provided by operating activities
            
            
            10,125
            
            
            
            8,773CASH
      FLOWS FROM INVESTING ACTIVITIESNet
      decrease in loans
            
            
            19,687
            
            
            
            2,850Purchase
      of loans
            
            
            (11,242
            )
            
            
            (2,959
            )Proceeds
      from sale of student loans
            
            
            17,527
            
            
            
            --Cash
      received from purchase of additional business units
            
            
            --
            
            
            
            123,051Purchase
      of premises and equipment
            
            
            (1,785
            )
            
            
            (6,227
            )Proceeds
      from sale of premises and equipment
            
            
            22
            
            
            
            50Proceeds
      from sale of foreclosed assets
            
            
            6,852
            
            
            
            2,246Capitalized
      costs on foreclosed assets
            
            
            (267
            )
            
            
            (152
            )Proceeds
      from sales of available-for-sale investment securities
            
            
            --
            
            
            
            46,569Proceeds
      from called investment securities
            
            
            2,110
            
            
            
            25,200Principal
      reductions on mortgage-backed securities
            
            
            38,750
            
            
            
            31,426Purchase
      of available-for-sale securities
            
            
            (9,992
            )
            
            
            (108,154
            )Redemption
      of Federal Home Loan Bank stock
            
            
            142
            
            
            
            --Net
      cash provided by investing activities
            
            
            61,804
            
            
            
            113,900CASH
      FLOWS FROM FINANCING ACTIVITIESNet
      increase (decrease) in certificates of deposit
            
            
            30,470
            
            
            
            (61,166
            )Net
      increase in checking and savings deposits
            
            
            51,656
            
            
            
            102,285Repayments
      of Federal Home Loan Bank advances
            
            
            (3,181
            )
            
            
            (157
            )Net
      increase (decrease) in short-term borrowings and structured
      repo
            
            
            (26,456
            )
            
            
            94,268Advances
      from borrowers for taxes and insurance
            
            
            (7
            )
            
            
            403Dividends
      paid
            
            
            (3,137
            )
            
            
            (2,972
            )Stock
      options exercised
            
            
            301
            
            
            
            --Net
      cash provided by financing activities
            
            
            49,646
            
            
            
            132,661INCREASE
      IN CASH AND CASH EQUIVALENTS
            
            
            121,575
            
            
            
            255,334CASH
      AND CASH EQUIVALENTS, BEGINNING OF PERIOD
            
            
            444,576
            
            
            
            167,920CASH
      AND CASH EQUIVALENTS, END OF PERIOD
            
            $
            566,151
            
            
            $
            423,254


See Notes
to Consolidated Financial Statements








4


GREAT
SOUTHERN BANCORP, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS





NOTE 1:
BASIS OF PRESENTATION





The
accompanying unaudited interim consolidated financial statements of Great
Southern Bancorp, Inc. (the "Company" or "Great Southern") have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial information and with the instructions to Form 10-Q
and Rule 10-01 of Regulation S-X. The financial statements presented herein
reflect all adjustments which are, in the opinion of management, necessary to
fairly present the financial condition, results of operations and cash flows of
the Company for the periods presented. Those adjustments consist only of normal
recurring adjustments. Operating results for the three months ended March 31,
2010 and 2009 are not necessarily indicative of the results that may be expected
for the full year. The consolidated statement of financial condition of the
Company as of December 31, 2009, has been derived from the audited consolidated
statement of financial condition of the Company as of that date.





Certain
information and note disclosures normally included in the Company's annual
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted. These
condensed consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Company's Annual Report on
Form 10-Kfor 2009 filed with the Securities and Exchange
Commission.





NOTE 2:
OPERATING SEGMENTS





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 deposits attracted from the
general public and correspondent account relationships, brokered deposits and
borrowings from the Federal Home Loan Bank ("FHLBank") 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.





5


NOTE 3:
COMPREHENSIVE INCOME





The
FASB’s Accounting Standards
Codification (“FASB ASC”) Topic 220 (Statement of Financial Accounting
Standards No. 130, Reporting
Comprehensive Income) requires the reporting of comprehensive income and
its components. Comprehensive income is defined as the change in equity from
transactions and other events and circumstances from non-owner sources, and
excludes investments by and distributions to owners. Comprehensive income
includes net income and other items of comprehensive income meeting the above
criteria. The Company's only component of other comprehensive income is the
unrealized gains and losses on available-for-sale securities.





Three
      Months Ended March 31,2010
            
            
            2009(In
      thousands)Net
      unrealized gain (loss) on
    available-for-sale securities
            
            $
            (602
            )
            
            $
            11,479Net unrealized
      loss on available-for-sale debt securities for which a portion
      of
              an other-than-temporary impairment has been recognized
            
            
            (435
            )
            
            
            (3,499
            )Less
      reclassification adjustment for loss included in net
      income
            
            
            —
            
            
            
            (486)Other
      comprehensive income (loss), before tax effect
            
            
            (1,037
            )
            
            
            8,466Tax
      expense (benefit)
            
            
            (363
            )
            
            
            2,963Change
      in unrealized gain (loss) on available-for-sale securities,
              net
      of income taxes
            
            $
            (674
            )
            
            $
            5,503





The
components of accumulated other comprehensive income, included in stockholders’
equity, are as follows:





At
      March 31,2010
            
            
            2009Net
      unrealized gain on available-for-sale securities
            
            $
            17,465
            
            
            $
            8,255Net
      unrealized loss on available-for-sale debt securities for which a
      portion
              of an other-than-temporary impairment has been recognized in
      income
            
            
            (810
            )
            
            
            —16,655
            
            
            
            8,255Tax
      expense
            
            
            5,829
            
            
            
            2,889Net-of-tax
      amount
            
            $
            10,826
            
            
            $
            5,366








NOTE 4:
RECENT ACCOUNTING PRONOUNCEMENTS





In
February 2010, the FASB issued Accounting Standards Update No. (ASU) 2010-09,
Subsequent
Events:  Amendments to Certain Recognition and Disclosure Requirements(FASB ASU 2010-09).  This Update eliminates the requirement for
an SEC filer to disclose the date through which subsequent events were reviewed
for both issued and revised financial statements.  This Update was
effective upon issuance for the Company and did not have a material impact on
its financial position or results of operations.





In
January 2010, the FASB issued Accounting Standards Update No. 2010-06, Improving Disclosures about Fair
Value Measurements(FASB ASU 2010-09), which amends FASB ASC Subtopic
820-10, Fair Value
Measurements and Disclosures.  This Update requires new
disclosures to show significant transfers in and out of Level 1 and Level 2 fair
value measurements as well as discussion regarding the reasons for the
transfers.  It also clarifies existing disclosures requiring fair
value measurement disclosures for each class of assets and
liabilities.  The Update describes a class as being a subset of assets
and liabilities within a line item on the statement of financial condition which
will require management judgment to designate.  Use of the terminology
“classes of assets and liabilities” represents an


6


amendment
from the previous terminology “major categories of assets and
liabilities”.  Clarification is also provided for disclosures of Level
2 and Level 3 recurring and nonrecurring fair value measurements requiring
discussion about the valuation techniques and inputs used.  These
provisions of the Update were effective for the Company’s financial statements
as of January 1, 2010 and did not have a material impact on the Company’s
financial position or results of operations.  Another new disclosure
requires an expanded reconciliation of activity in Level 3 fair value
measurements to present information about purchases, sales, issuances and
settlements on a gross basis rather than netting the amounts in one
number.  This requirement is effective for interim and annual
reporting periods beginning after December 15, 2010 and is not expected to have
a material impact on the Company’s financial position or results of
operations.





In
December 2009, the FASB issued Accounting Standards Update No. 2009-17, Consolidations (Topic 810):
Improvements to Financial Reporting by Enterprises Involved with Variable
Interest Entities (FASB ASU 2009-17), which impacts FASB ASC 810 (FASB
Interpretation No. 46(R), Consolidation of Variable Interest
Entities).  The guidance was originally issued in June 2009 as
FASB Statement No. 167, Amendments to FASB Interpretation
No. 46(R), and changes how a company determines when an entity that is
insufficiently capitalized or is not controlled through voting (or similar
rights) should be consolidated. The determination of whether a company is
required to consolidate an entity is based on, among other things, an entity’s
purpose and design and a company’s ability to direct the activities of the
entity that most significantly impact the entity’s economic performance. The new
guidance requires additional disclosures about the reporting entity’s
involvement with variable-interest entities and any significant changes in risk
exposure due to that involvement as well as its effect on the entity’s financial
statements. The guidance was effective for the Company as of January 1,
2010 and did not have a material impact on the Company’s financial position or
results of operations.





In
December 2009, the FASB issued Accounting Standards Update No. 2009-16,
Transfers and Servicing (Topic
860): Accounting for Transfers of Financial Assets (FASB ASU 2009-16),
which amends FASB ASC 860 (SFAS No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities). The
guidance was originally issued in June 2009 as FASB Statement No. 166, Accounting for Transfers of
Financial Assets,to enhance reporting about transfers of financial
assets, including securitizations and situations where companies have continuing
exposure to the risks related to transferred financial assets. The new guidance
eliminates the concept of a “qualifying special-purpose entity” and changes the
requirements for derecognizing financial assets. It also requires additional
disclosures about all continuing involvements with transferred financial assets
including information about gains and losses resulting from transfers during the
period. This guidance was effective for the Company as of January 1, 2010
and did not have a material impact on the Company’s financial position or
results of operations.





In October 2009, the FASB issued Accounting Standards
Update No. 2009-15,Accounting for Own-Share Lending
Arrangements in Contemplation of Convertible Debt Issuance or Other Financing(FASB ASU 2009-15).  This Update
is a consensus of the FASB Emerging Issues Task Force.  This Update
amends guidance in FASB ASC 470,Debt,and FASB ASC 260,Earnings per Share, and clarifies how a corporate entity should (1)
account for a share-lending arrangement that is entered into in contemplation of
a convertible debt offering and (2) calculate earnings per share.This Update was effective for the Company as of January
1, 2010, and retrospective application was required for all arrangements
outstanding as of that date.The adoption of this Update did
not have a material impact on the Company’s financial position or results of
operations.





In June
2009, the FASB issued an Exposure Draft of a proposed guidance on disclosure
about the credit quality of financing receivables and the allowance for credit
losses. The purpose of the proposed guidance is to improve the quality of
financial reporting by providing disclosure information that allows financial
statement users to understand the nature of credit risk inherent in the
creditor’s portfolio of financing receivables; how that risk is analyzed and
assessed in arriving at the allowance for credit losses; and the changes, and
reasons for those changes, in both the receivables and the allowance for credit
losses. To achieve this objective, this guidance would require disclosure of a
creditor’s accounting policies for estimating the allowance for credit losses,
qualitative and quantitative information about the credit risk inherent in its
financing receivables portfolio, the methods used in determining the components
of the allowance for credit losses, and quantitative disaggregated information
about the change in receivables and the related allowance for credit losses. The
FASB continues to deliberate this proposed guidance at this time.





In May
2009, the FASB issued proposed guidance impacting FASB ASC 829 (FASB Staff
Position No. 157-f, Measuring
Liabilities under FASB Statement No. 157). This proposed guidance would
clarify the principles in FASB ASC 820 on the measurement of liabilities. This
guidance, if adopted as it is currently written, will be effective for the first
reporting period (including interim periods) beginning after issuance. In the
period of adoption, entities must


7


disclose
any change in valuation technique resulting from the application of this
guidance, and quantify its effect, if practicable. The FASB continues to
deliberate this proposed guidance at this time.





In June
2008, the FASB issued an Exposure Draft of proposed guidance on disclosure of
certain loss contingencies. This guidance would amend FASB ASC 450 (SFAS No. 5,
Accounting for
Contingencies) and FASB ASC 805 (SFAS 141(R)).  The purpose of
the proposed guidance is 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 FASB ASC 450 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 guidance would expand
disclosures about certain loss contingencies in the scope of FASB ASC 450 or
FASB ASC 805. The FASB continues to deliberate this proposed guidance at this
time.





NOTE 5:
STOCKHOLDERS' EQUITY





Previously,
the Company's stockholders approved the Company's
reincorporation to the State of Maryland. 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 cost of shares
purchased by the Company has been allocated to Common Stock and Retained
Earnings balances.





NOTE 6:
EARNINGS PER SHARE





Three
      Months EndedMarch
      31,2010
            
            
            2009(In
      Thousands)Basic:Average
      shares outstanding
            
            
            13,418
            
            
            
            13,381Net
      income available to common shareholders
            
            $
            4,699
            
            
            $
            28,351Per
      share amount
            
            $
            0.35
            
            
            $
            2.12Diluted:Average
      shares outstanding
            
            
            13,418
            
            
            
            13,381Net
      effect of dilutive stock options and warrants – based on the
      treasurystock
      method using average market price
            
            
            599
            
            
            
            140Diluted
      shares
            
            
            14,017
            
            
            
            13,521Net
      income available to common shareholders
            
            $
            4,699
            
            
            $
            28,351Per
      share amount
            
            $
            0.34
            
            
            $
            2.10




Options to
purchase 430,695 and 601,932 shares of common stock were outstanding during the
three months ended March 31, 2010 and 2009, respectively, but were not included
in the computation of diluted earnings per share for each period because the
options' exercise price was greater than the average market price of the common
shares.





8


NOTE 7:
INVESTMENT SECURITIES





March
      31, 2010Amortized
              Cost
            
            
            Gross
              Unrealized
              Gains
            
            
            Gross
              Unrealized
              Losses
            
            
            Fair
              Value
            
            Tax
              Equivalent
              Yield(Dollars
      in thousands)AVAILABLE-FOR-SALE
      SECURITIES:U.S.
      government agencies
            
            $
            15,510
            
            
            $
            208
            
            
            $
            ---
            
            
            $
            15,718
            
            3.99
            %Collateralized
      mortgage obligations
            
            
            46,583
            
            
            
            1,104
            
            
            
            1,057
            
            
            
            46,630
            
            4.77Mortgage-backed
      securities
            
            
            588,714
            
            
            
            17,316
            
            
            
            563
            
            
            
            605,467
            
            4.21Corporate
      bonds
            
            
            49
            
            
            
            10
            
            
            
            13
            
            
            
            46
            
            1.80States
      and political subdivisions
            
            
            62,011
            
            
            
            656
            
            
            
            1,911
            
            
            
            60,756
            
            6.17Equity
      securities
            
            
            1,368
            
            
            
            904
            
            
            
            ---
            
            
            
            2,272
            
            0.36Total
      available-for-sale securities
            
            $
            714,235
            
            
            $
            20,198
            
            
            $
            3,544
            
            
            $
            730,889
            
            4.41
            %HELD-TO-MATURITY
      SECURITIES:U.S.
      government agencies
            
            $
            15,000
            
            
            $
            ---
            
            
            $
            ---
            
            
            $
            15,000
            
            6.10
            %States
      and political subdivisions
            
            
            1,290
            
            
            
            161
            
            
            
            ---
            
            
            
            1,451
            
            7.48Total
      held-to-maturity securities
            
            $
            16,290
            
            
            $
            161
            
            
            $
            ---
            
            
            $
            16,451
            
            6.21
            %





December
      31, 2009Amortized
              Cost
            
            
            Gross
              Unrealized
              Gains
            
            
            Gross
              Unrealized
              Losses
            
            
            Fair
              Value
            
            
            Tax
              Equivalent
              Yield(Dollars
      in thousands)AVAILABLE-FOR-SALE
      SECURITIES:U.S.
      government agencies
            
            $
            15,931
            
            
            $
            28
            
            
            $
            ---
            
            
            $
            15,959
            
            
            
            3.86
            %Collateralized
      mortgage obligations
            
            
            51,221
            
            
            
            1,042
            
            
            
            527
            
            
            
            51,736
            
            
            
            4.82Mortgage-backed
      securities
            
            
            614,338
            
            
            
            18,508
            
            
            
            672
            
            
            
            632,174
            
            
            
            4.54Corporate
      bonds
            
            
            49
            
            
            
            21
            
            
            
            13
            
            
            
            57
            
            
            
            133.98States
      and political subdivisions
            
            
            63,686
            
            
            
            705
            
            
            
            1,904
            
            
            
            62,487
            
            
            
            6.16Equity
      securities
            
            
            1,374
            
            
            
            504
            
            
            
            ---
            
            
            
            1,878
            
            
            
            0.36Total
      available-for-sale securities
            
            $
            746,599
            
            
            $
            20,808
            
            
            $
            3,116
            
            
            $
            764,291
            
            
            
            4.69
            %HELD-TO-MATURITY
      SECURITIES:U.S.
      government agencies
            
            $
            15,000
            
            
            $
            ---
            
            
            $
            365
            
            
            $
            14,635
            
            
            
            6.10
            %States
      and political subdivisions
            
            
            1,290
            
            
            
            140
            
            
            
            ---
            
            
            
            1,430
            
            
            
            7.49Total
      held-to-maturity securities
            
            $
            16,290
            
            
            $
            140
            
            
            $
            365
            
            
            $
            16,065
            
            
            
            6.21
            %





The
amortized cost and fair value of
available-for-sale securities at March 31, 2010, 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.





Amortized
            
            
            FairCost
            
            
            Value(In
      Thousands)One
      year or less
            
            $
            576
            
            
            $
            578After
      one through five years
            
            
            6,966
            
            
            
            7,086After
      five through ten years
            
            
            19,804
            
            
            
            20,045After
      ten years
            
            
            50,225
            
            
            
            48,812Securities
      not due on a single maturity date
            
            
            635,296
            
            
            
            652,096Equity
      securities
            
            
            1,368
            
            
            
            2,272$
            714,235
            
            
            $
            730,889








9





The
held-to-maturity securities at March 31, 2010, 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.





Amortized
            
            
            FairCost
            
            
            Value(In
      Thousands)After
      one through five years
            
            $
            —
            
            
            $
            —After
      five through ten years
            
            
            1,190
            
            
            
            1,350After
      ten years
            
            
            15,100
            
            
            
            15,101$
            16,290
            
            
            $
            16,451





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 March 31, 2010 and December 31, 2009,
respectively, was approximately $111,207,000 and $139,985,000, which is
approximately 14.9% and 17.9% 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 at March 31, 2010.





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 March 31, 2010 and
December 31, 2009:





March
      31, 2010Less
      than 12 Months
            
            
            12
      Months or More
            
            
            TotalDescription
      of Securities
            
            Fair
      Value
            
            
            Unrealized
              Losses
            
            
            Fair
      Value
            
            
            Unrealized
              Losses
            
            
            Fair
      Value
            
            
            Unrealized
              Losses(In
      Thousands)Mortgage-backed
      securities
            
            $
            86,100
            
            
            $
            563
            
            
            $
            —
            
            
            $
            —
            
            
            $
            86,100
            
            
            $
            563Collateralized
      mortgage obligations
            
            
            5,489
            
            
            
            897
            
            
            
            1,281
            
            
            
            161
            
            
            
            6,770
            
            
            
            1,058State
      and political subdivisions
            
            
            9,858
            
            
            
            167
            
            
            
            8,474
            
            
            
            1,744
            
            
            
            18,332
            
            
            
            1,911Corporate
      bonds
            
            
            5
            
            
            
            12
            
            
            
            —
            
            
            
            —
            
            
            
            5
            
            
            
            12$
            101,452
            
            
            $
            1,639
            
            
            $
            9,755
            
            
            $
            1,905
            
            
            $
            111,207
            
            
            $
            3,544




December
      31, 2009Less
      than 12 Months
            
            
            12
      Months or More
            
            
            TotalDescription
      of Securities
            
            Fair
      Value
            
            
            Unrealized
              Losses
            
            
            Fair
      Value
            
            
            Unrealized
              Losses
            
            
            Fair
      Value
            
            
            Unrealized
              Losses(In
      Thousands)U.S.
      government agencies
            
            $
            14,635
            
            
            $
            365
            
            
            $
            —
            
            
            $
            —
            
            
            $
            14,635
            
            
            $
            365Mortgage-backed
      securities
            
            
            102,796
            
            
            
            672
            
            
            
            —
            
            
            
            —
            
            
            
            102,796
            
            
            
            672Collateralized
      mortgage obligations
            
            
            1,993
            
            
            
            385
            
            
            
            2,464
            
            
            
            142
            
            
            
            4,457
            
            
            
            527State
      and political subdivisions
            
            
            9,876
            
            
            
            156
            
            
            
            8,216
            
            
            
            1,748
            
            
            
            18,092
            
            
            
            1,904Corporate
      bonds
            
            
            5
            
            
            
            13
            
            
            
            —
            
            
            
            —
            
            
            
            5
            
            
            
            13$
            129,305
            
            
            $
            1,591
            
            
            $
            10,680
            
            
            $
            1,890
            
            
            $
            139,985
            
            
            $
            3,481





10







Gross
gains of $153,000 and gross losses of $107,000 resulting from sales of
available-for-sale securities wererealized for the three months
ended March 31, 2009.   No securities were sold during the
three months ended March 31, 2010, and therefore, no gains or losses were
realized.  Gains and losses on sales of securities are determined on
the specific-identification method.





Other-than-temporary
Impairment.Upon acquisition of a security, the Company
decides whether it is within the scope of the accounting guidance for beneficial
interests in securitized financial assets or will be evaluated for impairment
under the accounting guidance for investments in debt and equity
securities.





The
accounting guidance for beneficial interests in securitized financial assets
provides incremental impairment guidance for a subset of the debt securities
within the scope of the guidance for investments in debt and equity
securities.  For securities where the security is a beneficial
interest in securitized financial assets, the Company uses the beneficial
interests in securitized financial asset impairment model.  For
securities where the security is not a beneficial interest in securitized
financial assets, the Company uses debt and equity securities impairment
model.  The Company does not currently have securities within the
scope of this guidance for beneficial interests in securitized financial
assets.





The
Company routinely conducts periodic reviews to identify and evaluate each
investment security to determine whether an other-than-temporary impairment has
occurred.  The Company considers the length of time a security has
been in an unrealized loss position, the relative amount of the unrealized loss
compared to the carrying value of the security, the type of security and other
factors.  If certain criteria are met, the Company performs additional
review and evaluation using observable market values or various inputs in
economic models to determine if an unrealized loss is
other-than-temporary.  The Company uses quoted market prices for
marketable equity securities and uses broker pricing quotes based on observable
inputs for equity investments that are not traded on a stock
exchange.  For non-agency collateralized mortgage obligations, to
determine if the unrealized loss is other-than-temporary, the Company projects
total estimated defaults of the underlying assets (mortgages) and multiplies
that calculated amount by an estimate of realizable value upon sale in the
marketplace (severity) in order to determine the projected collateral
loss.  The Company also evaluates any current credit enhancement
underlying these securities to determine the impact on cash flows.  If
the Company determines that a given security position will be subject to a
write-down or loss, the Company records the expected credit loss as a charge to
earnings.





During
the three months ended March 31, 2009, an other-than-temporary impairment loss
of $4.0 million was recognized in the Company’s statement of
income.  Based on evaluations of investment securities during the
three months ended March 31, 2010, none were determined to be
other-than-temporarily impaired.





Credit Losses
Recognized on Investments.Certain debt securities have
experienced fair value deterioration due to credit losses, as well as due to
other market factors, but are not otherwise other-than-temporarily
impaired.





The
following table provides information about debt securities for which only a
credit loss was recognized in income and other losses are recorded in other
comprehensive income.




AccumulatedCredit
      LossesCredit
      losses on debt securities heldJanuary
      1, 2010
            
            $
            2,983Additions
      related to other-than-temporary losses not previously
      recognized
            
            
            ---Reductions
      due to sales
            
            
            ---March
      31, 2010
            
            $
            2,983


11


NOTE 8:
LOANS AND ALLOWANCE FOR LOAN LOSSES





March
      31,
              2010
            
            
            December
      31,
              2009(In
      Thousands)One-to
      four-family residential mortgage loans
            
            $
            240,929
            
            
            $
            239,624Other
      residential mortgage loans
            
            
            191,815
            
            
            
            185,757Commercial
      real estate loans
            
            
            585,519
            
            
            
            572,404Other
      commercial loans
            
            
            146,366
            
            
            
            151,278Industrial
      revenue bonds
            
            
            54,210
            
            
            
            60,969Construction
      loans
            
            
            339,435
            
            
            
            357,041Installment,
      education and other loans
            
            
            163,260
            
            
            
            172,655Prepaid
      dealer premium
            
            
            13,966
            
            
            
            13,664FDIC-covered
      loans, net of discounts (TeamBank)
            
            
            181,191
            
            
            
            199,774FDIC-covered
      loans, net of discounts (Vantus Bank)
            
            
            207,580
            
            
            
            225,950Discounts
      on loans purchased
            
            
            (4
            )
            
            
            (4
            )Undisbursed
      portion of loans in process
            
            
            (52,225
            )
            
            
            (54,729
            )Allowance
      for loan losses
            
            
            (40,571
            )
            
            
            (40,101
            )Deferred
      loan fees and gains, net
            
            
            (2,307
            )
            
            
            (2,157
            )$
            2,029,164
            
            
            $
            2,082,125Weighted
      average interest rate
            
            
            6.02
            %
            
            
            6.25
            %





NOTE 9: LOSS SHARING AGREEMENTS AND FDIC INDEMNIFICATION
ASSET




On March 20, 2009, Great Southern Bank entered into a purchase and
assumption agreement with loss share with the Federal Deposit Insurance
Corporation (FDIC) to assume all of the deposits (excluding brokered deposits)
and acquire certain assets of TeamBank, N.A., a full service commercial bank
headquartered in Paola, Kansas.  A detailed discussion of this transaction is
included in the Company’sAnnual Report on Form 10-Kfor the year ended December 31, 2009, under the section titled
“Item 8. Financial Statements and Supplementary
Information.”




The loans, commitments and foreclosed assets purchased in the
TeamBank transaction are covered by a loss sharing agreement between the FDIC
and Great Southern Bank which affords the Bank significant protection. Under the
loss sharing agreement, the Bank will share in the losses on assets covered
under the agreement (referred to as covered assets). On losses up to $115.0
million, the FDIC has agreed to reimburse the Bank for 80% of the losses. On
losses exceeding $115.0 million, the FDIC has agreed to reimburse the Bank for
95% of the losses.  Realized losses covered by the loss sharing
agreement include loan contractual balances (and related unfunded commitments
that were acquired), accrued interest on loans for up to 90 days, the book
value of foreclosed real estate acquired, and certain direct costs, less cash or
other consideration received by Great Southern. This agreement extends for
ten years for 1-4 family real estate loans and for five years for other
loans. The value of this loss sharing agreement was considered in determining
fair values of loans and foreclosed assets acquired. The loss sharing agreement
is subject to the Bank following servicing procedures as specified in
the agreement with the FDIC. The expected reimbursements under the loss
sharing agreement were recorded as an indemnification asset at their preliminary
estimated fair value on the acquisition date.  A discount was recorded in conjunction with the fair value of the
acquired loans and the amount accreted to yield during the three months ended
March 31, 2010 was $300,000.  No reclassifications were made during
the three months ended March 31, 2010 from nonaccretable discount to
accretable discount.




On September 4, 2009, Great Southern Bank entered into a purchase
and assumption agreement with loss share with the FDIC to assume all of the
deposits and acquire certain assets of Vantus Bank, a full service thrift
headquartered in Sioux City, Iowa.  A detailed discussion of this
transaction is included in the Company’sAnnual Report on Form 10-Kfor the year ended December 31, 2009, under the section titled
“Item 8. Financial Statements and Supplementary
Information.”




The loans, commitments and foreclosed assets purchased in the Vantus
Bank transaction are covered by a loss sharing agreement between the FDIC and
Great Southern Bank which affords the Bank significant protection. Under the
loss sharing agreement, the Bank will share in the losses on assets covered
under the agreement (referred to as covered assets). On losses up to $102.0
million, the FDIC has agreed to reimburse the Bank for 80% of the losses. On
losses exceeding $102.0 million, the FDIC has agreed to reimburse the Bank for
95% of the losses. Realized losses covered by the loss sharing agreement include
loan contractual balances (and related unfunded commitments that
were


12


acquired), accrued interest on loans for up to 90 days, the
book value of foreclosed real estate acquired, and certain direct costs, less
cash or other consideration received by Great Southern. This agreement extends
for ten years for 1-4 family real estate loans and for five years for other
loans. The value of this loss sharing agreement was considered in determining
fair values of loans and foreclosed assets acquired. The loss sharing agreement
is subject to the Bank following servicing procedures as specified in the
agreement with the FDIC. The expected reimbursements under the loss sharing
agreement were recorded as an indemnification asset at their preliminary
estimated fair value on the acquisition date.  A discount was recorded in conjunction with the fair value of the
acquired loans and the amount accreted to yield during the three months ended
March 31, 2010 was $250,000.  No reclassifications were made during
the three months ended March 31, 2010 from nonaccretable discount to
accretable discount.




At the time of these acquisitions, the Company determined the fair
value of the loan portfolios based on several assumptions. Factors considered in
the valuations were projected cash flows for the loans, type of loan and related
collateral, classification status, fixed or variable interest rate, term of
loan, current discount rates and whether or not the loan was amortizing. Loans
were grouped together according to similar characteristics and were treated in
the aggregate when applying various valuation techniques. Management also
estimated the amount of credit losses that were expected to be realized for the
loan portfolios. The discounted cash flow approach was used to value each pool
of loans. For non-performing loans, fair value was estimated by calculating the
present value of the recoverable cash flows using a discount rate based on
comparable corporate bond rates. This valuation of the acquired loans is a
significant component leading to the valuation of the loss sharing assets
recorded.




The loss sharing asset is measured separately from the loan
portfolio because it is not contractually embedded in the loans and is not
transferable with the loans should the Bank choose to dispose of them. Fair
value was estimated using projected cash flows available for loss sharing based
on the credit adjustments estimated for each loan pool (as discussed above) and
the loss sharing percentages outlined in the Purchase and Assumption Agreement
with the FDIC. These cash flows were discounted to reflect the uncertainty of
the timing and receipt of the loss sharing reimbursement from the FDIC. The loss
sharing asset is also separately measured from the related foreclosed real
estate.




TeamBank FDIC Indemnification Asset.The following table presents the balance of the FDIC indemnification
asset related to the TeamBank transaction at March 31, 2010. Expected cash flows
and the present value of future cash flows related to these assets have not
changed materially since the analysis performed at acquisition on March 20,
2009. Gross loan balances (due from the borrower) were reduced
approximately $147.2 million since the transaction date through repayments by the
borrower, transfers to foreclosed assets or charge-offs to customer loan
balances.





March 31, 2010Loans
            
            
            Foreclosed
              Assets(In Thousands)Initial basis for loss sharing determination, net of activity
      since acquisition date
            
            $
            288,576
            
            
            $
            15,041Non-credit premium/(discount), net of activity since
      acquisition date
            
            
            (6,013
            )
            
            
            --Original estimated fair value of assets, net of activity since
      acquisition date
            
            
            (181,191
            )
            
            
            (3,079
            )Anticipated realized loss remaining
            
            
            101,372
            
            
            
            11,962Assumed loss sharing recovery percentage
            
            
            88
            %
            
            
            80
            %Estimated loss sharing value
            
            
            88,793
            
            
            
            9,440Accretable discount on FDIC indemnification
    asset
            
            
            (9,090
            )
            
            
            --FDIC indemnification asset
            
            $
            79,903
            
            
            $
            9,440





13





December
      31, 2009Loans
            
            
            Foreclosed
              Assets(In
      Thousands)Initial
      basis for loss sharing determination, net of activity since acquisition
      date
            
            $
            326,768
            
            
            $
            2,817Non-credit
      premium/(discount), net of activity since acquisition date
            
            
            (6,313
            )
            
            
            --Original
      estimated fair value of assets, net of activity since acquisition
      date
            
            
            (199,774
            )
            
            
            (2,467
            )Anticipated
      realized loss remaining
            
            
            120,681
            
            
            
            350Assumed
      loss sharing recovery percentage
            
            
            86
            %
            
            
            80
            %Estimated
      loss sharing value
            
            
            104,295
            
            
            
            280Accretable
      discount on FDIC indemnification asset
            
            
            (9,647
            )
            
            
            (43
            )FDIC
      indemnification asset
            
            $
            94,648
            
            
            $
            237





Vantus Bank Indemnification Asset.The following table presents the balance of the FDIC indemnification
asset related to the Vantus Bank transaction at March 31, 2010. Expected cash
flows and the present value of future cash flows related to these assets have
not changed materially since the analysis performed at acquisition on September
4, 2009. Gross loan balances (due from the borrower) were reduced
approximately $59.8 million since the transaction date through repayments by the
borrower, transfers to foreclosed assets or charge-downs to customer loan
balances.





March 31, 2010Loans
            
            
            Foreclosed
              Assets(In Thousands)Initial basis for loss sharing determination, net of activity
      since acquisition date
            
            $
            271,708
            
            
            $
            4,583Non-credit premium/(discount), net of activity since
      acquisition date
            
            
            (2,373
            )
            
            
            --Original estimated fair value of assets, net of activity since
      acquisition date
            
            
            (207,580
            )
            
            
            (445
            )Anticipated realized loss remaining
            
            
            61,755
            
            
            
            4,138Assumed loss sharing recovery percentage
            
            
            80
            %
            
            
            80
            %Estimated loss sharing value
            
            
            49,404
            
            
            
            3,310Accretable discount on FDIC indemnification
    asset
            
            
            (6,083
            )
            
            
            (109
            )FDIC indemnification asset
            
            $
            43,321
            
            
            $
            3,201





December
      31, 2009Loans
            
            
            Foreclosed
              Assets(In
      Thousands)Initial
      basis for loss sharing determination, net of activity since acquisition
      date
            
            $
            290,936
            
            
            $
            4,682Non-credit
      premium/(discount), net of activity since acquisition date
            
            
            (2,623
            )
            
            
            --Original
      estimated fair value of assets, net of activity since acquisition
      date
            
            
            (225,920
            )
            
            
            (682
            )Anticipated
      realized loss remaining
            
            
            62,363
            
            
            
            4,000Assumed
      loss sharing recovery percentage
            
            
            80
            %
            
            
            80
            %Estimated
      loss sharing value
            
            
            49,891
            
            
            
            3,200Accretable
      discount on FDIC indemnification asset
            
            
            (6,383
            )
            
            
            (109
            )FDIC
      indemnification asset
            
            $
            43,508
            
            
            $
            3,091





14


NOTE 10:
DEPOSITS





March
      31,
              2010
            
            
            December
      31,
              2009(In
      Thousands)Time
      Deposits:0.00%
      - 1.99%
            
            
            $
            901,325
            
            
            $
            781,5652.00%
      - 2.99%
            
            
            
            495,068
            
            
            
            513,8373.00%
      - 3.99%
            
            
            
            55,205
            
            
            
            103,2174.00%
      - 4.99%
            
            
            
            200,147
            
            
            
            222,1425.00%
      - 5.99%
            
            
            
            11,586
            
            
            
            12,9276.00%
      - 6.99%
            
            
            
            496
            
            
            
            5867.00%
      and above
            
            
            
            33
            
            
            
            33Total
      time deposits (2.14% - 2.33%)
            
            
            
            1,663,860
            
            
            
            1,634,307Non-interest-bearing
      demand deposits
            
            
            
            265,473
            
            
            
            258,792Interest-bearing
      demand and savings deposits (0.99% - 1.00%)
            
            
            
            865,838
            
            
            
            820,862Total
      Deposits
            
            
            $
            2,795,171
            
            
            $
            2,713,961





NOTE
11: FAIR VALUE MEASUREMENT





ASC
Topic 820, Fair Value
Measurements, defines fair value as the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.  Topic 820 also
specifies a fair value hierarchy which requires an entity to maximize the use of
observable inputs and minimize the use of unobservable inputs when measuring
fair value.  The standard describes three levels of inputs that may be
used to measure fair value:




·
            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.





The
following is a description of inputs and valuation methodologies used for assets
recorded at fair value on a recurring basis and recognized in the accompanying
balance sheets at March 31, 2010,as well
as the general classification of such assets pursuant to the valuation
hierarchy.





Securities
Available for Sale.Investment securities
available for sale are recorded at fair value on a recurring basis. The 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, corporate bonds and equity securities.Inputs used for
valuing Level 2 securities include observable data that may include dealer
quotes, benchmark yields, market spreads, live trading levels and market
consensus prepayment speeds, among other things.







15







Additional
inputs include indicative values derived from the independent pricing service’s
proprietary computerized models.No securities were included in thecategory of
Recurring Level 3 securities at or for the three months ended March 31,
2010.





Mortgage
Servicing Rights.Mortgage
servicing rights do not trade in an active, open market with readily observable
prices.  Accordingly, fair value is estimated using discounted cash
flow models.  Due to the nature of the valuation inputs, mortgage
servicing rights are classified within Level 3 of the hierarchy.







Fair
      value measurements at
              March
      31, 2010, usingFair
      value
              March
      31,
            
            
            Quoted
      prices
              in
      active
              markets
              for
      identical
              assets
            
            
            Other
              observable
              inputs
            
            
            Significant
              unobservable
              inputs2010
            
            
            (Level
      1)
            
            
            (Level
      2)
            
            
            (Level
      3)(Dollars
      in thousands)U.
      S. government agencies
            
            $
            15,718
            
            
            $
            -
            
            
            $
            15,718
            
            
            $
            -Collateralized
      mortgage obligations
            
            
            46,630
            
            
            
            -
            
            
            
            46,630
            
            
            
            -Mortgage-backed
      securities
            
            
            605,467
            
            
            
            -
            
            
            
            605,467
            
            
            
            -Corporate
      bonds
            
            
            46
            
            
            
            -
            
            
            
            46
            
            
            
            -States
      and political subdivisions
            
            
            60,756
            
            
            
            -
            
            
            
            60,756
            
            
            
            -Equity
      securities
            
            
            2,272
            
            
            
            706
            
            
            
            1,566
            
            
            
            -Mortgage
      servicing rights
            
            
            1,060
            
            
            
            -
            
            
            
            -
            
            
            
            1,060





The
Company considers transfers between the levels of the hierarchy to be recognized
at the end of related reporting periods.  From December 31, 2009 to
March 31, 2010, no assets for which fair value is measured on a recurring basis
transferred between any levels of the hierarchy.





The
following is a reconciliation of the beginning and ending balances of recurring
fair value measurements recognized in the accompanying balance sheet using
significant unobservable (Level 3) inputs.








MortgageServicingRightsBalance,
      January 1, 2010
            $
            1,132Additions,
      net of amortization
            
            (72
            )Balance,
      March 31, 2010
            $
            1,060








The following is a description of valuation
methodologies used for financial assets and liabilities measured at fair value
on a nonrecurring basis at March 31, 2010,as well as the general
classification of such assets pursuant to the valuation hierarchy.





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 FASB ASC 310, Receivables, (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


16


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 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 reserve within the allowance for loan losses
specific to the loan.  Loans for which such charge-offs or reserves
have been recorded are shown in the table below (net of reserves).In accordance with the provisions of FASB ASC 310 (SFAS No. 114),
impaired loans with a carrying value of $51.1 million, and an associated
valuation reserve of $8.2 million, were recorded at their fair value of
$42.9 million at March 31, 2010. Impaired loans of $4.7 million at
March 31, 2010, had no related allowance for loan losses assigned.  Losses
of $2.9 million and $4.3 million related to impaired loans were recognized in
earnings through the provision for loan losses during the three months
ended March 31, 2010 and 2009, respectively.At March 31, 2010, the Company had commercial loans of $990,000 that
were modified in troubled debt restructurings and performing in accordance with
their modified terms.





Foreclosed Assets
Held for Sale.Foreclosed assets held for sale are initially
recorded at fair value less estimated cost to sell at the date of
foreclosure.  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.  Foreclosed assets
held for sale are classified within Level 3 of the fair value
hierarchy.  The foreclosed assets represented in the table below have
been re-measured subsequent to their initial transfer to foreclosed
assets.





The
following table presents the fair value measurements of assets measured at fair
value on a nonrecurring basis and the level within the fair value hierarchy in
which the fair value measurements fall at March 31, 2010:





Fair Value Measurements UsingFair Value
              March 31,
              2010
            
            
            Quoted Prices in
              Active Markets
              for Identical
              Assets
              (Level 1)
            
            
            Significant Other
              Observable Inputs
              (Level 2)
            
            
            Significant
              Unobservable
              Inputs
              (Level 3)Loans held for sale
            
            $
            6,611
            
            
            $
            ---
            
            
            $
            6,611
            
            
            $
            ---Impaired loans
            
            
            38,241
            
            
            
            ---
            
            
            
            ---
            
            
            
            38,241Foreclosed assets held for sale
            
            
            9,922
            
            
            
            ---
            
            
            
            ---
            
            
            
            9,922





The
following methods were used to estimate the fair value of all other financial
instruments recognized in the accompanying balance sheet at amounts other than
fair value:





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.





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.


17





Subordinated
Debentures Issued to Capital Trusts.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.





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.





March
      31, 2010
            
            
            December
      31, 2009Carrying
            
            
            Fair
            
            
            Carrying
            
            
            FairAmount
            
            
            Value
            
            
            Amount
            
            
            Value(In
      Thousands)Financial
      assetsCash
      and cash equivalents
            
            $
            566,151
            
            
            $
            566,151
            
            
            $
            444,576
            
            
            $
            444,576Available-for-sale
      securities
            
            
            730,889
            
            
            
            730,889
            
            
            
            764,291
            
            
            
            764,291Held-to-maturity
      securities
            
            
            16,290
            
            
            
            16,451
            
            
            
            16,290
            
            
            
            16,065Mortgage
      loans held for sale
            
            
            6,611
            
            
            
            6,611
            
            
            
            9,269
            
            
            
            9,269Loans,
      net of allowance for loan losses
            
            
            2,029,164
            
            
            
            2,036,464
            
            
            
            2,082,125
            
            
            
            2,088,103Accrued
      interest receivable
            
            
            14,482
            
            
            
            14,482
            
            
            
            15,582
            
            
            
            15,582Investment
      in FHLB stock
            
            
            11,081
            
            
            
            11,081
            
            
            
            11,223
            
            
            
            11,223Mortgage
      servicing rights
            
            
            1,060
            
            
            
            1,060
            
            
            
            1,132
            
            
            
            1,132





March
      31, 2010
            
            
            December
      31, 2009Carrying
            
            
            Fair
            
            
            Carrying
            
            
            FairAmount
            
            
            Value
            
            
            Amount
            
            
            Value(In
      Thousands)Financial
      liabilitiesDeposits
            
            $
            2,795,171
            
            
            $
            2,796,561
            
            
            $
            2,713,961
            
            
            $
            2,716,841FHLB
      advances
            
            
            168,125
            
            
            
            172,943
            
            
            
            171,603
            
            
            
            177,725Short-term
      borrowings
            
            
            309,726
            
            
            
            309,726
            
            
            
            336,182
            
            
            
            336,182Structured
      repurchase agreements
            
            
            53,181
            
            
            
            59,446
            
            
            
            53,194
            
            
            
            59,092Subordinated
      debentures
            
            
            30,929
            
            
            
            30,929
            
            
            
            30,929
            
            
            
            30,929Accrued
      interest payable
            
            
            6,215
            
            
            
            6,215
            
            
            
            6,283
            
            
            
            6,283Unrecognized
      financial instruments (net
              of
      contractual value)Commitments
      to originate loans
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Letters
      of credit
            
            
            41
            
            
            
            41
            
            
            
            42
            
            
            
            42Lines
      of credit
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —








18







The
following disclosure relates to financial assets for which it is not practicable
for the Company to estimate the fair value at March 31, 2010.





FDIC
Indemnification Asset: As part of the 2009 Purchase and Assumption
Agreements, Great Southern and the FDIC entered into loss sharing agreements.
These agreements cover realized losses on loans and foreclosed real
estate.





Under the
first agreement (TeamBank), the FDIC will reimburse Great Southern for 80% of
the first $115 million in realized losses. The FDIC will reimburse Great
Southern 95% on realized losses that exceed $115 million. This agreement
extends for ten years for 1-4 family real estate loans and for five years
for other loans. This loss sharing asset is measured separately from the loan
portfolio because it is not contractually embedded in the loans and is not
transferable with the loans or foreclosed assets should Great Southern choose to
dispose of them. Fair value at the acquisition date (March 20, 2009) was
estimated using projected cash flows available for loss sharing based on the
credit adjustments estimated for each loan pool and the loss sharing
percentages. These cash flows were discounted to reflect the uncertainty of the
timing and receipt of the loss sharing reimbursement from the FDIC.  This
loss sharing asset is also separately measured from the related foreclosed real
estate.  At March 31, 2010, the carrying value of the FDIC indemnification
asset was $89.3 million. Although this asset is a contractual receivable from
the FDIC, there is no effective interest rate. The Company will collect this
asset over the next several years. The amount ultimately collected will depend
on the timing and amount of collections and charge-offs on the acquired assets
covered by the loss sharing agreement. While this asset was recorded at its
estimated fair value at March 20, 2009, it is not practicable to complete a fair
value analysis on a quarterly or annual basis. This would involve preparing a
fair value analysis of the entire portfolio of loans and foreclosed assets
covered by the loss sharing agreement on a quarterly basis in order to estimate
the fair value of the FDIC indemnification asset.





Under the
second agreement (Vantus Bank), the FDIC will reimburse Great Southern for 80%
of the first $102 million in realized losses. The FDIC will reimburse Great
Southern 95% on realized losses that exceed $102 million. This agreement
extends for ten years for 1-4 family real estate loans and for five years
for other loans. This loss sharing asset is measured separately from the loan
portfolio because it is not contractually embedded in the loans and is not
transferable with the loans or foreclosed assets should Great Southern choose to
dispose of them. Fair value at the acquisition date (March 4, 2009) was
estimated using projected cash flows available for loss sharing based on the
credit adjustments estimated for each loan pool and the loss sharing
percentages. These cash flows were discounted to reflect the uncertainty of the
timing and receipt of the loss sharing reimbursement from the FDIC.  This
loss sharing asset is also separately measured from the related foreclosed real
estate.  At March 31, 2010, the carrying value of the FDIC indemnification
asset was $46.5 million. Although this asset is a contractual receivable from
the FDIC, there is no effective interest rate. The Company will collect this
asset over the next several years. The amount ultimately collected will depend
on the timing and amount of collections and charge-offs on the acquired assets
covered by the loss sharing agreement. While this asset was recorded at its
estimated fair value at September 4, 2009, it is not practicable to complete a
fair value analysis on a quarterly or annual basis. This would involve preparing
a fair value analysis of the entire portfolio of loans and foreclosed assets
covered by the loss sharing agreement on a quarterly basis in order to estimate
the fair value of the FDIC indemnification asset.








ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS





Forward-Looking
Statements





When used
in this Quarterly Report on Form 10-Q 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, (i) expected cost savings,
synergies and other benefits from the Company’s merger and acquisition
activities might not be realized within the anticipated time frames or at all,
and costs or difficulties relating to integration matters, including but not
limited to customer and employee retention, might be greater than expected; (ii)
changes in economic conditions, either nationally or in the Company’s market
areas; (iii) fluctuations in interest rates; (iv) 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; (v) the possibility of other-than-temporary
impairments of securities held in the Company’s securities portfolio; (vi) the
Company’s ability to access cost-effective funding; (vii)


19







fluctuations
in real estate values and both residential and commercial real estate market
conditions; (viii) demand for loans and deposits in the Company’s market areas;
(ix) legislative or regulatory changes that adversely affect the Company’s
business; (x) monetary and fiscal policies of the Federal Reserve Board and the
U.S. Government and other governmental initiatives affecting the financial
services industry; (xi) results of examinations of the Company and Great
Southern by their regulators, including the possibility that the regulators may,
among other things, require the Company to increase its allowance for loan
losses or to write-down assets; (xii) the uncertainties arising from the
Company’s participation in the TARP Capital Purchase Program, including impacts
on employee recruitment and retention and other business and practices, and
uncertainties concerning the potential redemption by us of the U.S. Treasury’s
preferred stock investment under the program, including the timing of,
regulatory approvals for, and conditions placed upon, any such redemption;
(xiii) costs and effects of litigation, including settlements and judgments; and
(xiv) competition.  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.





Allowance for Loan Losses
and Valuation of Foreclosed Assets





The
Company believes 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 of, 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. In addition, the Bank’s
regulators could require additional provisions for loan losses as part of their
examination process.





Additional
discussion of the allowance for loan losses is included in the Company's Annual Report on Form 10-Kfor the year ended December 31, 2009, under the section titled "Item 1.
Business - Allowances for Losses on Loans and Foreclosed Assets." 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


20


of the
assets could differ materially from the carrying value reflected in the
financial statements, resulting in losses that could adversely impact earnings
in future periods.





Carrying Value of
FDIC-covered Loans and Indemnification Asset





The Company considers that the determination of the
carrying value of loans acquired in the March 20, 2009 and September 4, 2009,
FDIC-assisted transactions and the carrying value of the related FDIC
indemnification assets involve a high degree of judgment and complexity. The
carrying value of the acquired loans and the FDIC indemnification assets reflect
management’s best ongoing estimates of the amounts to be realized on each of
these assets. The Company determined initial fair value accounting
estimates of the assumed assets and liabilities in accordance with FASB ASC 805
(SFAS No. 141(R),Business Combinations). However, the amount that the Company realizes on
these assets could differ materially from the carrying value reflected in its
financial statements, based upon the timing of collections on the acquired loans
in future periods. Because of the loss sharing agreements with the FDIC on these
assets, the Company should not incur any significant losses. To the extent the
actual values realized for the acquired loans are different from the estimates,
the indemnification asset will generally be impacted in an offsetting manner due
to the loss sharing support from the FDIC.Subsequent to the
initial valuation, the Company continues to monitor identified loan pools and
related loss sharing assets for changes in estimated cash flows projected for
the loan pools, anticipated credit losses and changes in the accretable
yield.  Analysis of these variables requires significant estimates and
a high degree of judgment.  See Note 9 “Loss Sharing Agreements and
FDIC Indemnification Assets” included in Item 1 for additional
information.





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 is discrete financial
information that is regularly reviewed. As of March 31, 2010, 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 March 31, 2010, 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 March
31, 2010, the amortizable intangible assets consisted of core deposit
intangibles of $4.7 million at the Bank reporting unit and $12,000 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.





Based on
the Company’s goodwill impairment analysis, management does not believe any of
its goodwill or other intangible assets are impaired as of March 31, 2010. While
the Company believes no impairment existed at March 31, 2010, 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
Company's 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.





21


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, as well as provisions for loan losses and the level of
non-interest income and non-interest expense. 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
three months ended March 31, 2010, Great Southern's net loans decreased $53.0
million, or 2.5%, from $2.08 billion at December 31, 2009, to $2.03 billion at
March 31, 2010. A large portion of the decrease in net loans was due to a $37.0
million decrease in the loan portfolios acquired through the 2009 FDIC-assisted
transactions. Excluding the reductions in these acquired portfolios, loans
decreased by approximately $16.0 million, with a decrease in outstanding
construction loans of $17.6 million, or 4.9%, partially offset by an increase in
commercial real estate loans of $13.1 million, or 2.3%.  Some of these
changes relate to construction loans for which the projects have been completed
and the loans have moved to permanent financing, thereby reducing construction
loans and increasing commercial real estate loans.  Consumer loans
(excluding loans covered by loss sharing agreements with the FDIC)
also decreased $9.4 million, or 5.4%.  As loan demand is affected by a
variety of factors, including general economic conditions, and because of the
competition we face and our focus on pricing discipline and credit quality, 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. 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 generally do not
accrue interest income on these loans and do not recognize interest income until
the loans are 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 quarter ended March 31, 2010, Great Southern's
available-for-sale securities decreased $33.4 million, or 4.4%, from $764.3
million at December 31, 2009, to 730.9 million at March 31, 2010. The majority
of this decrease was in mortgage-backed securities which decreased $26.7
million, or 4.2%, due to principal reductions and the purchase of delinquent
loans from the underlying loan pools by the Federal Home Loan Mortgage
Corporation in March 2010. Collateralized mortgage obligations also decreased
$5.1 million, or 9.9% due to principal reductions.





Great
Southern had cash and cash equivalents of $566.1 million at March 31, 2010
compared to $444.6 million at December 31, 2009. Cash and cash equivalents
increased significantly in 2009 as a result of the FDIC-assisted transactions
involving certain TeamBank and Vantus Bank assets and liabilities. 
Subsequent to December 31, 2009, additional customer deposits were placed with
Great Southern and the Company received additional cash from loan and investment
securities payments, resulting in further increased liquidity. The Company could
elect to utilize these funds by purchasing additional investment securities, or
it may maintain its cash equivalents.  The Company expects to utilize a
portion of these funds by purchasing investment securities in the second and
third quarters of 2010.





The
Company attracts deposit accounts through its 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 three
months ended March 31, 2010, total deposit balances increased $81.2 million, or
3.0%. Interest-bearing transaction accounts increased $45.0 million while
non-interest-bearing checking accounts increased $6.7 million. Retail
certificates of deposit decreased $760,000 while total brokered deposits
increased $30.3 million. Great Southern Bank customer deposits totaling $379.6
million and $359.1 million, at March 31, 2010 and December 31, 2009,
respectively, were 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 FDIC considers these customer accounts to be
brokered deposits due to the fees paid in the CDARS program.  The
level of competition for deposits in our markets is high. 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.


22





Total
brokered deposits, excluding the CDARS accounts discussed above, were $279.0
million at March 31, 2010, up from $269.2 million at December 31, 2009. The
increase was the result of new brokered deposits issued by the Company,
offset in part by reductions in CDARS purchased funds. These new brokered
deposits will provide a low fixed rate of interest for the next three
years.  No interest rate swaps are associated with these brokered
certificates. The majority of the Company’s brokered certificates of deposit
have fixed rates of interest and mature in 2011 and 2012, except for $77 million
of CDARS purchased funds which mature in the next six months.





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 III. 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. 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. 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. Loans at their floor rates are subject to the risk that borrowers will
seek to refinance elsewhere at the lower market rate, however.  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 90- to 180-day period, and subsequently
is expected to have a positive impact, as the Company's interest rates on
deposits and borrowings 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.





The
negative impact of declining loan interest rates has been mitigated by the
positive effects of the Company’s loans which have interest rate floors. At
March 31, 2010, the Company had a portfolio (excluding the loans acquired in the
FDIC-assisted transactions) of prime-based loans totaling approximately $804
million with rates that change immediately with changes to the prime rate of
interest. Of this total, $704 million also had interest rate floors. These
floors were at varying rates, with $143 million of these loans having floor
rates of 7.0% or greater and another $495 million of these loans having floor
rates between 5.0% and 7.0%. At March 31, 2010, all 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 subsequent periods, as the "prime rate
of interest" decreased, the Company's loan portfolio again 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. The loan yield for the portfolio
had increased to a level that was approximately 300 and 310 basis points higher
than the national "prime rate of interest" at December 31,


23


2009 and
December 31, 2008, respectively. The loan yield for the portfolio declined to a
level that was approximately 277 basis points higher than the national "prime
rate of interest" at March 31, 2010. 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.  To the extent economic conditions improve, the risk that
borrowers will seek to refinance their loans increases.





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, accretion income related to the FDIC-assisted acquisitions, late
charges and prepayment fees on loans, gains on sales of loans and
available-for-sale investments and other general operating income. In 2009,
non-interest income was positively affected by the gains recognized on the
FDIC-assisted transactions.  On July 1, 2010, a federal rule will go
into effect which prohibits a financial institution from automatically enrolling
customers in overdraft protection programs, on ATM and one-time debit card
transactions, unless a consumer consents, or opts in, to the overdraft
service.  This new rule is likely to adversely affect the amount of
non-interest income we generate.  Operating expenses consist primarily
of salaries and employee benefits, occupancy-related expenses, expenses related
to foreclosed assets, postage, FDIC deposit insurance, advertising and public
relations, telephone, professional fees, office expenses and other general
operating expenses.





Total
non-interest income decreased $38.5 million in the three months ended March 31,
2010 when compared to the three months ended March 31, 2009. A significant
increase in non-interest income in the 2009 period resulted from the
one-time gain of $43.9 million recorded from the assets acquired and liabilities
assumed in the FDIC-assisted acquisition of TeamBank. This increase was
partially offset by the impairment write-down in value of certain investments
which totaled $4.0 million in the 2009 period.  During the 2010
period, no such one-time gains or impairment write-downs on investments were
recorded.  However, additional income of $900,000 was recorded due to
the accretion of the discount related to the FDIC indemnification assets booked
in connection with the 2009 acquisitions.  Additional income will be
recognized in future periods as loans are collected from customers and as
reimbursements of losses are collected from the FDIC, but we cannot estimate the
timing of this income due to the variables associated with these
transactions.  Deposit account charges also increased primarily as a result
of the TeamBank and Vantus Bank transactions.





Total
non-interest expense increased in the first three months of 2010 compared to the
same period in 2009 due primarily to the costs of operating the former TeamBank
and former Vantus Bank and their ongoing operations, including increased
salaries and benefits and occupancy and equipment expenses in
particular.  Due to the increase in the level of foreclosed assets,
foreclosure-related expenses have also increased significantly in 2010 compared
to the same period in 2009. In addition, non-interest expense increases related
to the continued growth of the Company. In 2009, the Company opened banking
centers in Creve Coeur, Mo. and Lee’s Summit, Mo.





In 2009, the FDIC significantly
increased insurance premiums for all banks. This resulted in increased expense
for the Company due to higher assessable deposits and a higher assessment rate.
Due to losses and projected losses to the deposit insurance fund, in addition to
the regular quarterly deposit insurance assessments, the FDIC has, at times,
imposed special assessments on all insured depository institutions.In November 2009, the FDIC amended its
assessment regulations to require insured depository institutions to prepay
their estimated quarterly regular risk-based assessments for all of 2010, 2011,
and 2012, on December 30, 2009.  The Company prepaid $13.2 million,
which is being expensed in the normal course of business throughout this
three-year period.





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 and/or the Bank.





Business
Initiatives





As part
of our overall long-term strategic plan, the Company plans to open two to three
banking centers per year as market conditions warrant. In May, the Company
expects to open its first full-service retail banking center in Rogers, Ark. The
banking center would operate from the same office building as the Company’s
existing loan production office and Great Southern Travel
agency.


24


Two other
banking centers are expected to open later in 2010. The Company will build its
first facility in Forsyth, which is part of the Branson, Mo., market area. The
facility, located at 15695 Highway 160 and east of Branson, will complement the
Company’s four banking centers operating in this area.





A
full-service banking center in Des Peres will be the Company’s second location
in the St. Louis metropolitan area. The Des Peres location at 11689 Manchester
is approximately seven miles from the Company’s Creve Coeur, Mo., banking
center, which opened in May 2009. The Company also operates a loan production
office and two Great Southern Travel offices in the St. Louis
market.





Great
Southern decided to continue its participation in the FDIC’s Transaction
Account Guarantee (TAG) program (a part of the Temporary Liquidity Guarantee
Program), in light of the FDIC’s recent announcement to extend the program to
December 31, 2010 (subject to further extension by the FDIC to December 31,
2011). In the extended program, Great Southern is purchasing additional FDIC
insurance coverage for its customers with noninterest-bearing transaction
accounts. These accounts will be fully insured by the FDIC regardless of the
account balance. Coverage under the TAG program is in addition to and separate
from the coverage available under the FDIC’s general deposit insurance
rules.





Comparison
of Financial Condition at March 31, 2010 and December 31,
2009





During
the three months ended March 31, 2010, the Company increased total assets by
$47.9 million to $3.69 billion. Most of the increase was attributable to cash
and cash equivalents and foreclosed assets, partially offset by decreases in net
loans and securities available for sale.  Cash and cash equivalents
increased $121.6 million as compared to December 31, 2009 due to increases in
deposits and repayments of loans and investment securities, creating excess
funding.  In some instances, the Company invested these excess funds
in short-term cash equivalents that caused the Company to earn a small positive
or a negative spread. While the Company generally earned a positive spread on
securities purchased, it was sometimes much smaller than the Company's overall
net interest spread, having the effect of increasing net interest income but
negatively affecting net interest margin in 2009 and 2010. The Company expects
that it may maintain a higher level of cash and cash equivalents for the time
being as excess liquidity in these uncertain times for the U.S. economy and the
banking industry, subject to funding activities which are discussed below, and
recognizing that this will continue to have the effect of suppressing net
interest margin and net interest income.  Foreclosed assets also
increased $14.9 million as compared to December 31, 2009.  For
discussion on the increase in foreclosed assets, see “Non-performing assets –
foreclosed assets.”  Net loans decreased $53.0 million as compared to
December 31, 2009, due in large part to a $37.0 million decrease in the acquired
loan portfolios.  Excluding loans covered in FDIC-assisted
transactions, outstanding construction loans and consumer loans decreased $17.6
million and $9.4 million, respectively, offset in part by a $13.1 million
increase in commercial real estate loans.  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. Aside
from any potential future acquisitions, the Company does not expect to grow the
loan portfolio significantly at this time. Securities available for sale
decreased $33.4 million as compared to December 31, 2009 primarily because of
principal reductions in the Company’s mortgage-backed securities. While there is
no specifically stated goal, the available-for-sale securities portfolio has in
recent quarters been approximately 15% to 20% of total assets. The
available-for-sale securities portfolio was 19.8% and 21.0% of total assets at
March 31, 2010 and December 31, 2009, respectively.  These levels are
on the high-side of recent averages because of the 2009 FDIC-assisted
transactions and because of the Company’s efforts to maintain excess liquidity
during uncertain economic times as discussed above in regard to cash and cash
equivalents.





Total liabilities increased $45.8 million from December
31, 2009 to $3.39 billion at March 31, 2010.  The increase was
attributable to increases in deposits and was partially offset by decreases in
securities sold under repurchase agreements with customers.  Total
deposits increased $81.2 million from December 31, 2009. Checking account
balances totaled $1.13 billion at March 31, 2010, up from $1.08 billion at
December 31, 2009. Interest-bearing checking accounts (mainly money market
accounts) increased $45.0 million and non-interest bearing checking accounts
increased $6.7 million. Total brokered deposits (excluding CDARS customer
account balances) were $279.0million at
March 31, 2010, compared to $269.1 million at December 31, 2009.  The
Company issued $25.0 million in new brokered certificates during the 2010 period
which was partially offset by a decrease in CDARS purchased funds of $15.1
million.  In addition, at March 31, 2010 and December 31, 2009, there
were Great Southern Bank customer deposits totaling $379.6 million and $359.1
million, respectively, which 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 FDIC counts these deposits as brokered,
but these are deposit accounts that we generate with customers in our local
markets. Securities sold under reverse repurchase agreements with customers
decreased $26.4 million from December 31, 2009 as these balances fluctuate over
time. FHLBank advances balances decreased slightly from
the


25


December
31, 2009 level. The level of FHLBank advances also fluctuates depending on
growth in the Company's loan portfolio and other funding needs and
sources available to the Company. Most of the Company’s FHLBank
advances are fixed-rate advances that cannot be repaid prior to maturity without
incurring significant penalties.





Total
stockholders' equity increased $2.1 million from $298.9 million at December 31,
2009 to $301.0 million at March 31, 2010. The Company recorded net income of
$5.5 million for the three months ended March 31, 2010, common and preferred
dividends declared were $3.1 million and accumulated other
comprehensive gain decreased $674,000.  The decrease in
accumulated other comprehensive gain resulted from decreases in the fair
value of the Company's available-for-sale investment securities.  In
addition, total stockholders’ equity increased $301,000 due to stock option
exercises.





Our
participation in the Capital Purchase Program ("CPP") of the U.S. Department of
the Treasury (the "Treasury") currently precludes us from purchasing shares of
the Company’s stock or redeeming trust preferred securities without the
Treasury's consent until the earlier of December 5, 2011 or our repayment of the
CPP funds or the transfer by the Treasury to third parties of all of the shares
of preferred stock we issued to the Treasury pursuant to the CPP. Management has
historically utilized stock buy-back programs from time to time as long as
repurchasing the stock contributed to the overall growth of shareholder value.
The number of shares of stock repurchased and the price paid is the result of
many factors, several of which are outside of the control of the Company. The
primary factors, however, are the number of shares available in the market from
sellers at any given time and the price of the stock within the market as
determined by the market.





Results
of Operations and Comparison for the Three Months Ended March 31, 2010 and
2009





General





Net
income was $5.5 million for the quarter ended March 31, 2010 compared to net
income of $29.2 million for the quarter ended March 31, 2009. This decrease of
$23.7 million was primarily due to a decrease in non-interest income of $38.5
million, or 81.1% and an increase in non-interest expense of $7.5 million, or
51.1%, partially offset by an increase in net interest income of $9.0 million,
or 51.6%, and a decrease in provision for income taxes of $13.9 million, or
85.3%. Net income available to common shareholders was $4.7 million and $28.4
million for the quarters ended March 31, 2010 and 2009,
respectively.





Total
Interest Income





Total interest income increased $5.5 million, or 15.9%,
during the quarter ended March 31, 2010 compared to the quarter ended March 31,
2009. The increase was due to increased interest income on loans while interest
income on investments and other interest-earning assets was nearly unchanged.
Interest income on investment securities and other interest-earning assets
was consistent because of higher average balances which were offset by lower
average rates of interest. The higher average balances were primarily a result
of increased levels of securities and interest-earning deposits held for the
purpose of liquidity and the securities and cash equivalents added from
the FDIC-assisted transactions in the first and third quarters of
2009. Interest income for loans increased due to higher average balances and
higher average rates of interest. The higher averagebalances andaverage rateswere primarily a result of the discounted loans added through the
FDIC-assisted transactions in the first and third quarters of 2009 and the
related yields earned.





Interest
Income - Loans





During the three months ended March 31, 2010 compared to
the three months ended March 31, 2009, interest income on loans increased due to
higher average interest rates and higher average balances. Interest income
increased $4.7 million as the result of higher average loan balances which
increased from $1.8 billion during the quarter ended March 31, 2009 to $2.1
billion during the quarter ended March 31, 2010.The higher average
balance resulted principally from the loans added at their fair market value
from the FDIC-assisted transactions and increases in average balances in
commercial real estate loans, other residential loans and one- to four-family
mortgage loans, partially offset by lower average balances in construction
loans.  The Bank's one- to four-family residential loan portfolio
balance increased in 2009 and 2010 due to increased production by the Bank’s
mortgage division. The Bank generally sells fixed-rate one- to four-family
residential loans in the secondary market. The Bank’s outstanding construction
loan balance has decreased significantly in recent periods as many projects have
been completed in the past 12-18 months and demand for new construction loans
has declined.





Interest
income increased $795,000 as a result of higher average interest rates on
loans.  The average yield on loans increased slightly from 6.00%
during the three months ended March 31, 2009, to 6.18% during the three
months


26


ended
March 31, 2010.  The average yield on the Company’s loan portfolio
increased primarily due to the loans added at their fair market value from the
FDIC-assisted transactions. Average loan rates were very similar in 2009
compared to 2010, as a result of market rates of interest, primarily the "prime
rate" of interest remaining flat during this period. During 2008, the “prime
rate” decreased 4.00% to a rate of 3.25% at December 31, 2008, where the prime
rate now remains. A large portion of the Bank's loan portfolio adjusts with
changes to the "prime rate" of interest. The Company has a portfolio of
prime-based loans which have interest rate floors. Beginning in 2008, the
declining interest rates put these loan rate floors in effect and established a
loan rate which was higher than the contractual rate would have otherwise been.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 “prime rate” of interest at 5.00% in light of the current highly
competitive funding environment for deposits and wholesale funds. 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. In the
three months ended March 31, 2010, the average yield on loans was 6.18% versus
an average prime rate for the period of 3.25%, or a difference of a positive 293
basis points. In the three months ended March 31, 2009, the average yield on
loans was 6.00% versus an average prime rate for the period of 3.25%, or a
difference of a positive 275 basis points.





Interest
Income - Investments and Other Interest-earning Assets





Interest
income on investments and other interest-earning assets was nearly unchanged in
the three months ended March 31, 2010 compared to the three months ended March
31, 2009. Interest income increased $2.4 million as a result of an increase in
average balances from $724 million during the three months ended March 31, 2009,
to $994 million during the three months ended March 31, 2010. This increase was
primarily in interest-earning deposits and available-for-sale mortgage-backed
securities, where securities were needed for liquidity and pledging against
deposit accounts under customer repurchase agreements and public fund
deposits.  Interest income decreased by $2.4 million as a result of a
decrease in average interest rates from 4.24% during the three months ended
March 31, 2009, to 3.08% during the three months ended March 31, 2010. The
balance of available-for-sale mortgage-backed securities increased from $561.3
million at March 31, 2009 to $605.5 million at March 31, 2010.  In
previous years, as principal balances on mortgage-backed securities were paid
down through prepayments and normal amortization, the Company replaced a large
portion of these securities with variable-rate mortgage-backed securities
(primarily one-year and hybrid ARMs). As these securities reached interest rate
reset dates in 2007, their rates typically increased along with market interest
rate increases. As market interest rates (primarily treasury rates and LIBOR
rates) generally declined in 2008 and 2009, the interest rates on those
securities that repriced in 2009 decreased at their 2009 interest rate reset
dates. The majority of the securities added in 2009 were backed by hybrid ARMs
which will have fixed rates of interest for a period of time (generally one to
ten years) and then will adjust annually. The actual amount of securities that
will reprice and the actual interest rate changes on these securities are
subject to the level of prepayments on these securities and the changes that
actually occur in market interest rates (primarily treasury rates and LIBOR
rates). These mortgage-backed securities are also subject to reduced yields due
to more rapid prepayments in the underlying mortgages. As a result, premiums on
these securities may be amortized against interest income more quickly, thereby
reducing the yield recorded. In March 2010, the Federal Home Loan Mortgage
Corporation purchased approximately $30 million of delinquent loans in
mortgage-backed securities pools owned by the Company.  This reduced
the Company’s income (through higher premium amortization levels) by
$400,000.  On March 20, 2009 and September 4, 2009, the Company also
acquired approximately $112 million and $23 million, respectively, of investment
securities as part of two FDIC-assisted transactions.  These
investments were recorded at their fair values at the dates of acquisition with
related market yields at that time.





In
addition to the increase in securities, the Company has also
increased interest-earning deposits and non-interest-earning cash
equivalents, as additional liquidity was maintained in 2009 and 2010
due to uncertainty in the financial system and low loan demand. These
deposits and cash equivalents earn very low (or no) yield and therefore
negatively impact the Company’s net interest margin. At March 31, 2010, the
Company had cash and cash equivalents of $566.2 million compared to $444.6
million at December 31, 2009. For the three months ended March 31, 2010,
compared to the same period in 2009, the average balance of investment
securities and other interest-earning assets increased by approximately $270.3
million, due to excess funds for liquidity and the purchase of investment
securities to pledge against public funds deposits, customer repurchase
agreements and structured repo borrowings. While the Company earned a positive
spread on these securities (leading to higher net interest income), it was much
smaller than the Company's overall net interest spread, having the effect of
decreasing net interest margin. See "Net Interest Income" for additional
information on the impact of this interest activity.





27


Total
Interest Expense





Total
interest expense decreased $3.6 million, or 21.4%, during the three months ended
March 31, 2010, when compared with the three months ended March 31, 2009,
primarily due to a decrease in interest expense on deposits of $3.4 million, or
24.1%, a decrease in interest expense on short-term and structured repo
borrowings of $539,000, or 35.2%, and a decrease in interest expense on
subordinated debentures issued to capital trusts of $117,000, or 46.3%,
partially offset by an increase in interest expense on FHLBank advances of
$452,000, or 47.8%.





Interest
Expense – Deposits





Interest
expense on demand deposits increased $872,000 due to an increase in average
balances from $499 million during the three months ended March 31, 2009, to $849
million during the three months ended March 31, 2010. Average
noninterest-bearing demand balances increased from $144 million in the three
months ended March 31, 2009, to $249 million in the three months ended March 31,
2010. The increase in average balances on all types of deposits is primarily a
result of the FDIC-assisted transactions completed in March and September of
2009, as well as organic growth in the Company’s deposit base, particularly in
interest-bearing checking accounts. Interest expense on demand deposits
decreased $205,000 due to a decrease in average rates from 1.13% during the
three months ended March 31, 2009, to 0.98% during the three months ended March
31, 2010. The average interest rates decreased due to lower overall market rates
of interest throughout 2009 and the first three months of 2010. Market rates of
interest on checking and money market accounts have been decreasing since late
2007 when the FRB began reducing short-term interest rates.





Interest expense on deposits decreased $6.4 million as a
result of a decrease in average rates of interest on time deposits from 3.72%
during the three months ended March 31, 2009, to 2.08% during the three months
ended March 31, 2010. Interest expense on deposits increased $2.4 million due to
an increase in average balances of time deposits from $1.38 billion during the
three months ended March 31, 2009, to $1.68 billion during the three months
ended March 31, 2010. Market rates of interest on new certificates have been
decreasing since late 2007 when the FRB began reducing short-term interest
rates.  A large portion of the Company’s certificate of deposit
portfolio matures within one year; this is consistent with the portfolio over
the past several years. The increase in average balances on certificates
of deposit is primarily a result of the FDIC-assisted transactions completed in
March and September of 2009, as well as organic growth in the Company’s deposit
base.





Interest
Expense - FHLBank Advances, Short-term Borrowings and Structured Repo Borrowings
and Subordinated Debentures Issued to Capital Trusts





During the three months ended March 31, 2010 compared to
the three months ended March 31, 2009, interest expense on FHLBank advances
increased due to higher average balances and higher average interest rates.
Interest expense on FHLBank advances increased $307,000 due to an increase in
average balances from $130 million during the three months ended March 31, 2009,
to $169 million during the three months ended March 31, 2010. Interest expense
on FHLBank advances increased $145,000 due to an increase in average interest
rates from 2.95% in the three months ended March 31, 2009, to 3.36% in the three
months ended March 31, 2010. Average balances and rates on advances increasedbecause of the addition of advances assumed in the FDIC-assisted
transaction completed in March of 2009.Most of the remaining advances are fixed-rate and are
subject to penalty if paid off prior to maturity.





Interest
expense on short-term and structured repo borrowings decreased $519,000 due to a
decrease in average rates on short-term borrowings from 1.63% in the three
months ended March 31, 2009, to 1.07% in the three months ended March 31, 2010.
The average interest rates decreased due to lower overall market rates of
interest in the first quarter of 2010 compared to the same period in 2009.
Market rates of interest on short-term borrowings have trended downward since
the fourth quarter of 2007 as the FRB decreased short-term interest rates and
maintained the rates at historically low levels. Interest expense on short-term
and structured repo borrowings decreased $20,000 due to a decrease in average
balances from $382 million during the three months ended March 31, 2009, to $377
million during the three months ended March 31, 2010. The decrease in balances
of short-term borrowings was primarily due to decreases in securities sold under
repurchase agreements with the Company's deposit customers which tend to
fluctuate.





Interest
expense on subordinated debentures issued to capital trusts decreased $117,000
due to decreases in average rates from 3.32% in the three months ended March 31,
2009, to 1.79% in the three months ended March 31, 2010. As LIBOR rates
decreased from the same period a year ago, the interest rates on these
instruments also adjusted lower. The average rate of interest on these
subordinated debentures decreased in 2010 as these liabilities pay a variable
rate


28


of
interest that is indexed to LIBOR. These debentures are not subject to an
interest rate swap; however, they are variable-rate debentures and bear interest
at an average rate of three-month LIBOR plus 1.57%, adjusting
quarterly.





Net
Interest Income





Net
interest income for the three months ended March 31, 2010 increased $9.1 million
to $26.6 million compared to $17.5 million for the three months ended March 31,
2009. Net interest margin was 3.47% in the three months ended March 31, 2010,
compared to 2.81% in the three months ended March 31, 2009, an
increase of 66 basis points. The average interest rate spread was 3.47% in
the three months ended March 31, 2010, compared to 2.69% in the three months
ended March 31, 2009.





The
Company’s margin was positively impacted primarily by a change in the deposit
mix. The addition of the TeamBank and Vantus Bank core deposits during 2009
provided a relatively lower cost funding source, which allowed the Company to
reduce some of its higher cost funds. In the latter quarters of 2009, the
Company redeemed brokered deposits or replaced them with lower rate deposits and
as retail certificates of deposit matured they were renewed or replaced with
retail certificates of deposit with lower market rates of interest. In addition,
the TeamBank and Vantus Bank loans were recorded at their fair value at
acquisition, which provided a current market yield on the
portfolio.  As compared to March 31, 2009, the yield on loans
increased 18 basis points in addition to an increase in the average balance of
the loan portfolio of $306 million.  This combination of lower rates
being paid on deposits as they reprice and growth in both the loan portfolio and
yield on loans compared to the year-ago quarter resulted in the increased net
interest margin at March 31, 2010.





The
national “prime rate” of interest was 3.25% during the three months ended March
31, 2010 and 2009 as the FRB has not decreased the “prime rate” since December
of 2008. The Company’s average interest rate on its loan portfolio was 6.18%.
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 "prime rate" of interest at 5.00% in light of the current
highly competitive funding environment for deposits and wholesale funds. This
has not affected 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. At its most recent meeting on April 28, 2010,
the Federal Reserve Board elected to leave the Federal Funds rate unchanged and
did not indicate that rate changes are imminent.





The
Company's overall interest rate spread increased 78 basis points from 2.69%
during the three months ended March 31, 2009, to 3.47% during the three months
ended March 31, 2010. The gross change was due to a 109 basis point decrease in
the weighted average rate paid on interest-bearing liabilities, partially offset
by a 31 basis point decrease in the weighted average yield on interest-earning
assets. The Company's overall net interest margin increased 66 basis points, or
23.5%, from 2.81% for the three months ended March 31, 2009, to 3.47% for the
three months ended March 31, 2010. In comparing the two periods, the yield on
loans increased 18 basis points while the yield on investment securities and
other interest-earning assets decreased 116 basis points. The rate paid on
deposits decreased 132 basis points, the rate paid on FHLBank advances increased
41 basis points, the rate paid on short-term borrowings decreased 56 basis
points, and the rate paid on subordinated debentures issued to capital trusts
decreased 153 basis points.





For
additional information on net interest income components, refer to "Average
Balances, Interest Rates and Yields" table in this Quarterly Report on Form
10-Q. This table is prepared including the impact of the accounting
changes for interest rate swaps.





Provision
for Loan Losses and Allowance for Loan Losses





The
provision for loan losses increased $500,000, from $5.0 million during the three
months ended March 31, 2009, to $5.5 million during the three months ended March
31, 2010. The allowance for loan losses increased $470,000, or 1.2%, to $40.6
million at March 31, 2010, compared to $40.1 million at December 31, 2009. Net
charge-offs were $5.0 million in the three months ended March 31, 2010, versus
$4.0 million in the three months ended March 31, 2009. Five relationships
accounted for $2.5 million of the net charge-off total for the quarter ended
March 31, 2010. Two of these relationships are included in non-performing loans,
and one relationship is included in foreclosed assets.  General market
conditions, and more specifically, housing supply, absorption rates and unique
circumstances related to individual borrowers and projects contributed to
increased provisions in both 2009 and 2010. As properties were transferred into
non-performing loans or foreclosed assets, evaluations were made of the value of
these assets with corresponding charge-offs as appropriate.


29





Management
records a provision for loan losses in an amount it believes sufficient to
result in an allowance for loan losses that will cover current net charge-offs
as well as risks believed to be inherent in the loan portfolio of the Bank. The
amount of provision charged against current income is based on several factors,
including, but not limited to, past loss experience, current portfolio mix,
actual and potential losses identified in the loan portfolio, economic
conditions, regular reviews by internal staff and regulatory
examinations.





Weak
economic conditions, higher inflation or interest rates, or other factors may
lead to increased losses in the portfolio and/or requirements for an increase in
loan loss provision expense. Management long ago established various controls in
an attempt to limit future losses, such as a watch list of possible problem
loans, documented loan administration policies and a loan review staff to review
the quality and anticipated collectability of the portfolio. More recently,
additional procedures have been implemented to provide for more frequent
management review of the loan portfolio based on loan size, loan type,
delinquencies, on-going correspondence with borrowers, and problem loan
work-outs. Management determines which loans are potentially uncollectible, or
represent a greater risk of loss, and makes additional provisions to expense, if
necessary, to maintain the allowance at a satisfactory level.





Loans
acquired in the March 20, 2009 and September 4, 2009, FDIC-assisted transactions
are covered by loss sharing agreements between the FDIC and Great Southern Bank
which afford Great Southern Bank significant protection from losses in the
acquired portfolio of loans. The acquired loans were recorded at their estimated
fair value, which incorporated estimated credit losses at the acquisition date.
These loans are systematically reviewed by the Company to
determine the risk of losses that may exceed those identified at the time
of the acquisition. Techniques used in determining risk of loss are similar to
the legacy Great Southern Bank portfolio, with most focus being placed on those
loan pools which include the larger loan relationships and those loan pools
which exhibit higher risk characteristics. Review of the acquired loan portfolio
also includes meetings with customers, review of financial information and
collateral valuations to determine if any additional losses are
apparent.





The
Bank's allowance for loan losses as a percentage of total loans, excluding loans
covered by the FDIC loss sharing agreements, was 2.40% and 2.35% at March 31,
2010 and December 31, 2009, respectively. Management considers the allowance for
loan losses adequate to cover losses inherent in the Company's loan portfolio at
March 31, 2010, based on recent reviews of the Company's loan portfolio and
current economic conditions. If economic conditions remain weak or deteriorate
significantly, it is possible that additional loan loss provisions would be
required, thereby adversely affecting future results of operations and financial
condition.





Non-performing
Assets





Former
TeamBank and Vantus Bank non-performing assets, including foreclosed assets, are
not included in the totals and in the discussion of non-performing loans,
potential problem loans and foreclosed assets below because losses from these
assets are substantially covered under loss sharing agreements with the FDIC. In
addition, FDIC-covered assets were recorded at their estimated fair values as of
March 20, 2009, and September 4, 2009, respectively.





As a
result of changes in balances and composition of the loan portfolio, changes in
economic and market conditions that occur from time to time, and other factors
specific to a borrower's circumstances, the level of non-performing assets will
fluctuate.





Non-performing
assets, excluding FDIC-covered non-performing assets, at March 31, 2010, were
$80.0 million, an increase of $15.0 million from $65.0 million December 31,
2009. Non-performing assets, excluding FDIC-covered assets, as a percentage of
total assets were 2.17% at March 31, 2010, compared to 1.79% at December 31,
2009. Compared to December 31, 2009, non-performing loans increased $428,000 to
$26.9 million while foreclosed assets increased $14.5 million to $53.0 million.
Construction and land development loans comprised $8.0 million, or 30%, of the
total $26.9 million of non-performing loans at March 31, 2010.





Non-performing Loans.As of March 31, 2010 the total dollar
amount of non-performing loans changed little from December 31, 2009, increasing
$428,000 to $26.9 million.  The following are significant additions to
non-performing loans during the three months ended March 31, 2010:





·
            A $2.1 million loan relationship
      secured by a motel located in Springfield, Mo.  The motel is
      operating but experiencing low occupancy rates and cash flow difficulties,
      which have led to payment
delinquencies.


30





·
              A $1.4 million loan relationship
      secured by spec houses and lots located in Southwest
      Missouri.  Property sales have been slow, and in an attempt to
      generate cash flow, the borrower has rented several of the
      properties.  These slow property sales led to payment delinquencies
      on portions of the
relationship.
  Offsetting
these increases were the transfers of the following two significant loan
relationships to the Foreclosed Assets category:





·
            A
      $2.8 million loan relationship secured by the real estate of three car
      dealerships in Southwest Missouri.  This relationship was
      charged down approximately $273,000 prior to foreclosure of the real
      estate of two of the three car dealerships totaling $1.7 million in the
      first quarter of 2010.





·
            A
      $1.4 million loan relationship secured by a subdivision and spec houses in
      the Branson, Mo. area.  This relationship was charged down
      approximately $138,000 prior to foreclosure in the first quarter of
      2010.





At March
31, 2010, four other significant loan relationships totaling $9.3 million
remained in the non-performing loans category from December 31,
2009.  These relationships were described in the Company’s December
31, 2009 Annual Report on Form
10-Kunder “Non-performing Loans”.  During the quarter ended
March 31, 2010, the activity for these four relationships included $395,000 in
charge-offs, $400,000 in additions to the category and $474,000 in transfers to
the foreclosed assets category.  At March 31, 2010, six significant
relationships totaled $12.8 million or 47.4% of the non-performing loans
category.





Foreclosed Assets.Foreclosed assets increased a net $14.5 million
during the three months ended March 31, 2010, from $38.5 million at December 31,
2009, to $53.0 million at March 31, 2010.  During the three months
ended March 31, 2010, foreclosed assets increased primarily due to the addition
of four relationships totaling $16.9 million which are described
below:





·
            An
      $8.2 million relationship (discussed below as a $9.6 million relationship
      prior to being charged down) consisting of condominium units and
      commercial land located near Lake of the Ozarks,
  Mo.





·
            A $5.7 million relationship
      consisting of condominium units located near Lake of the Ozarks,
      Mo.





·
            A $1.7 relationship (discussed
      above as a $2.8 million relationship prior to being charged down)
      consisting of the real estate of two car dealerships in Southwest
      Missouri.





·
            A
      $1.3 million relationship (discussed above as a $1.4 million relationship
      prior to being charged down) consisting of a residential subdivision, a
      commercial subdivision, lots and spec houses in the Branson, Mo.
      area.





At March
31, 2010, twelve separate relationships comprised $36.6 million, or 68.9%, of
the total foreclosed assets balance.  In addition to the four new
relationships described above, eight other of these relationships were
previously described more fully in the Company’s December 31, 2009, Annual Report on Form 10-Kunder “Foreclosed Assets”.  During the quarter ended March 31,
2010, the activity for these eight relationships included $1.1 million in sales
and $400,000 in charge-offs, partially offsetting the increases discussed
above.





Potential Problem Loans.Potential problem loans decreased $13.0 million
during the three months ended March 31, 2010, from $50.5 million at
December31, 2009, to $37.5 million at
March 31, 2010.  Potential problem loans are loans which management
has identified as having possible credit problems that may cause the borrowers
difficulty in complying with current repayment terms. These loans are not
reflected in non-performing assets. During the three months ended March 31,
2010, potential problem loans decreased primarily due to the transfer of three
unrelated relationships totaling $13.4 million to non-performing asset
categories. These three relationships include:





·
            A $9.6 million relationship
      (discussed above as an $8.2 million relationship) secured by condominium
      units and commercial land located near Lake of the Ozarks, Mo., which was
      transferred to non-performing assets and subsequently to foreclosed
      assets.  The relationship was charged-down approximately $1.4
      million at foreclosure, resulting in a transfer balance of $8.2
      million.





·
            A $2.1 million relationship
      (discussed above) secured by a motel located in Springfield, Mo., which
      was transferred to non-performing
loans.





·
            A
      $1.7 million relationship (discussed above as a $1.4 million relationship)
      secured by spec houses and lots located in Southwest Missouri which was
      also transferred to non-performing loans.  During the first
      quarter of


31







2010,
      one loan included in this relationship was paid off due to the sale of the
      collateral, reducing the relationship $170,000, and a charge-off of
      $164,000 was also recorded.





Offsetting
these decreases was the addition of one significant relationship totaling $2.0
million which is secured by condominium units and land in Branson,
Mo.





At March
31, 2010, ten significant relationships accounted for $31.7 million of the
total Potential Problem Loan balance of $37.5 million, including the
relationship mentioned above. The other nine relationships remain from
December 31, 2009 and were previously described in the Company’s December 31,
2009, Annual Report on Form
10-K under “Potential Problem Loans”.





Non-interest
Income





Non-interest
income decreased to $9.0 million for the first quarter of 2010 compared to $47.5
million for the first quarter of 2009, primarily as a result of the following
items:





FDIC-assisted
acquisition:In the first quarter of 2009, a
one-time gain of $43.9 million was recorded related to the fair value accounting
estimate of the TeamBank assets acquired and liabilities assumed from the FDIC
on March 20, 2009.  No similar transactions occurred during the current
quarter.





Interest rate
swaps:  The change in the fair value of certain interest rate
swaps and the related change in fair value of hedged deposits resulted in
$847,000 of income in the first quarter of 2009.  This income was part
of a 2005 accounting restatement in which approximately $3.4 million (net of
taxes) was charged against retained earnings in 2005.  This charge was
recovered in subsequent periods as interest rate swaps matured or were
terminated by the swap counterparty.  There was no impact in the first
quarter of 2010 and there will be no impact in future quarters.





Partially
offsetting the above positive income items recognized during the first quarter
of 2009 were the following increases during the first quarter of
2010:





Securities
gains, losses and impairments:During the first quarter of 2010, no
securities were sold and therefore, no gains or losses were
recognized.  Also, based on analyses of the securities portfolio, no
impairment write-downs were necessary.  During the first quarter of
2009, a $4.0 million loss was recorded as a result of an impairment write-down
in the value of certainavailable-for-sale equity investments,
investments in bank trust preferred securities and an investment in a non-agency
CMO.The Company continues
to hold the majority of these securities in the available-for-sale
category.





Deposit account
charges: Deposit account charges and ATM and debit card usage fees
increased $1.2 million, or 36.6%, in the three months ended March 31, 2010,
compared to the same period in 2009. A large portion of this increase was the
result of the customers added in the 2009 FDIC-assisted acquisitions as
well as organic growth in the legacy Great Southern footprint.





Accretion of income related
to 2009 acquisitions: Additional income of $900,000 was recorded due to
the discount on the FDIC indemnification assets booked in connection with the
2009 acquisitions.  Additional income will be recognized in future
periods as loans are collected from customers and as reimbursements of losses
are collected from the FDIC, but we cannot estimate the timing of this income
due to the variables associated with these transactions.





Non-interest
Expense





Non-interest
expense for the first quarter of 2010 was $22.1 million compared with $14.7
million for the first quarter of 2009, or an increase of $7.4 million, or 51.1%.
The expense increase in the 2010 period was primarily related to the Company’s
FDIC-assisted acquisitions and general growth of the Company. The following were
key items related to the increases in non-interest expense in the 2010
period:





TeamBank
FDIC-assisted acquisition:A portion of the Company’s increase in non-interest expense in the first quarter
of 2010 compared to the same period in 2009 related to the FDIC-assisted
acquisition of the former TeamBank and its ongoing operation. In the three
months ended March 31, 2010, non-interest expenses related to the operations of
the former TeamBank were $2.2 million.The largest expense increases were in
the areas of salaries and benefits and occupancy and equipment
expenses.In addition, this growth has led to
other increased non-interest expenses related to TeamBank, primarily in lending
and support and operational functions, that have been absorbed in other
pre-existing areas of the Company.





Vantus Bank FDIC-assisted
acquisition:The
Company’s increase in non-interest expense in the first quarter of 2010 compared
to the same period in 2009 also included expenses related to the FDIC-assisted
acquisition of former Vantus


32


Bank and its ongoing operation. In the
three months ended March 31, 2010, non-interest expenses associated with Vantus
Bank were $2.4 million. The largest expense increases were in the areas of
salaries and benefits and occupancy and equipment expenses.  In
addition, other non-interest expenses related to the operation of other areas of
the former Vantus Bank, such as lending and certain support functions, were
absorbed in other pre-existing areas of the Company, resulting in increased
non-interest expense.





New banking
centers:  The Company’s increase in non-interest expense in the
first quarter of 2010 compared to the same period in 2009 also related to the
continued internal growth of the Company. The Company opened its first retail
banking center in the St. Louis market, in Creve Coeur, Mo., in May 2009 and its
second banking center in Lee’s Summit, Mo., in late September 2009. In the
quarter ended March 31, 2010, compared to the quarter ended March 31, 2009,
non-interest expenses increased $243,000 associated with the ongoing operations
of these locations.





FDIC insurance
premiums:In the first
quarter of 2010, the Company incurred deposit insurance expense of $947,000
compared to $799,000 in the first quarter of 2009.In 2009, the FDIC significantly increased insurance
premiums for all banks, nearly doubling the regular quarterly deposit insurance
assessments. On November 12, 2009, the FDIC adopted a final rule amending the
assessment regulations to require insured depository institutions to prepay
their estimated quarterly regular risk-based assessments for all of 2010, 2011
and 2012 on December 30, 2009.  The Company prepaid $13.2 million,
which will be expensed in the normal course of business throughout this
three-year period.





Foreclosure-related
expenses: Due to the increase in levels of foreclosed assets,
foreclosure-related expenses increased $1.4 million (net of income received on
foreclosed assets) in the three months ended March 31, 2010, compared to the
same period in 2009. The Company expects that expenses on foreclosed assets and
expenses related to the credit resolution process will remain
elevated.





The
Company’s efficiency ratio for the quarter ended March 31, 2010, was 62.26%
compared to 22.52% for the same quarter in 2009. The efficiency ratio in the
first quarter of 2010 was negatively impacted by expenses related to the
operations of the acquired banking centers and other operational areas of
TeamBank and Vantus Bank, increased expenses related to foreclosures and loan
collections and FDIC deposit insurance premiums.  The efficiency ratio
in the first quarter of 2009 was significantly positively impacted by the
TeamBank-related one-time gain and negatively impacted by the investment
securities impairment write-downs recorded by the Company.  The
Company’s ratio of non-interest expense to average assets increased from 1.97%
for the three months ended March 31, 2009, to 2.17% for the three months ended
March 31, 2010 as a result of the increased expenses mentioned
above.





Provision
for Income Taxes





The
Company’s effective tax rate (as compared to the statutory federal tax rate of
35.0%) was 30.1% for the three months ended March 31, 2010 due to additional
tax-exempt investments and tax-exempt loans obtained in the acquisitions. This
tax-exempt income was slightly higher relative to overall taxable income
compared to other reporting periods.  The Company’s effective tax rate
was 35.8% for the three months ended March 31, 2009 due to significantly higher
taxable income as a result of the gain recorded on the FDIC-assisted
transaction.  For future periods, the Company expects the effective
tax rate to be in the range of 32-36% of pre-tax income.





Average
Balances, Interest Rates and Yields





The following table presents, for the
periods indicated, the total dollar amount of interest income from average
interest-earning assets and the resulting yields, as well as the interest
expense on average interest-bearing liabilities, expressed both in dollars and
rates, and the net interest margin. Average balances of loans receivable include
the average balances of non-accrual loans for each period. Interest income on
loans includes interest received on non-accrual loans on a cash basis. Interest
income on loans includes the amortization of net loan fees, which were deferred
in accordance with accounting standards. Fees included in interest income were
$423,000 and $438,000 for the three months ended March 31, 2010 and 2009,
respectively. Tax-exempt income was not calculated on a tax equivalent basis.
The table does not reflect any effect of income taxes.


33





March
      31, 2010
            
            
            Three
      Months Ended
              March
      31, 2010
            
            Three
      Months Ended
              March
      31, 2009Yield/
              Rate
            
            
            Average
              Balance
            
            
            Interest
            
            Yield/
              Rate
            
            Average
              Balance
            
            
            Interest
            
            Yield/
              Rate(Dollars
      in thousands)Interest-earning
      assets:Loans
      receivable:One-
      to four-family residential
            
            
            5.82
            %
            
            $
            347,039
            
            
            $
            5,148
            
            6.02
            %
            $
            240,419
            
            
            $
            3,577
            
            6.03
            %Other
      residential
            
            
            5.88
            
            
            
            216,743
            
            
            
            3,285
            
            6.14
            
            
            126,371
            
            
            
            1,865
            
            5.98Commercial
      real estate
            
            
            6.19
            
            
            
            714,677
            
            
            
            11,208
            
            6.36
            
            
            502,779
            
            
            
            7,695
            
            6.21Construction
            
            
            5.68
            
            
            
            353,785
            
            
            
            4,867
            
            5.58
            
            
            552,717
            
            
            
            7,731
            
            5.67Commercial
      business
            
            
            5.73
            
            
            
            169,149
            
            
            
            2,870
            
            6.88
            
            
            131,172
            
            
            
            2,038
            
            6.30Other
      loans
            
            
            7.57
            
            
            
            239,636
            
            
            
            3,752
            
            6.35
            
            
            191,842
            
            
            
            2,845
            
            6.02Industrial
      revenue bonds
            
            
            6.07
            
            
            
            70,573
            
            
            
            1,064
            
            6.11
            
            
            60,224
            
            
            
            980
            
            6.60Total
      loans receivable
            
            
            6.02
            
            
            
            2,111,602
            
            
            
            32,194
            
            6.18
            
            
            1,805,524
            
            
            
            26,731
            
            6.00Investment
      securities and other
              interest-earning assets
            
            
            4.43
            
            
            
            994,457
            
            
            
            7,560
            
            3.08
            
            
            724,155
            
            
            
            7,569
            
            4.24Total
      interest-earning assets
            
            
            5.15
            
            
            
            3,106,059
            
            
            
            39,754
            
            5.19
            
            
            2,529,679
            
            
            
            34,300
            
            5.50Non-interest-earning
      assets:Cash
      and cash equivalents
            
            
            
            
            
            
            302,663
            
            
            
            
            
            
            
            
            224,845Other
      non-earning assets
            
            
            
            
            
            
            270,460
            
            
            
            
            
            
            
            
            71,251Total
      assets
            
            
            
            
            
            $
            3,679,182
            
            
            
            
            
            
            
            $
            2,825,775Interest-bearing
      liabilities:Interest-bearing
      demand and savings
            
            
            0.99
            
            
            $
            849,029
            
            
            
            2,058
            
            0.98
            
            $
            498,969
            
            
            
            1,391
            
            1.13Time
      deposits
            
            
            2.14
            
            
            
            1,675,336
            
            
            
            8,599
            
            2.08
            
            
            1,379,692
            
            
            
            12,649
            
            3.72Total
      deposits
            
            
            1.75
            
            
            
            2,524,365
            
            
            
            10,657
            
            1.71
            
            
            1,878,661
            
            
            
            14,040
            
            3.03Short-term
      borrowings and structured
              repo
            
            
            0.96
            
            
            
            377,453
            
            
            
            993
            
            1.07
            
            
            382,189
            
            
            
            1,532
            
            1.63Subordinated
      debentures issued to
              capital trusts
            
            
            1.82
            
            
            
            30,929
            
            
            
            136
            
            1.79
            
            
            30,929
            
            
            
            253
            
            3.32FHLB
      advances
            
            
            4.07
            
            
            
            168,517
            
            
            
            1,397
            
            3.36
            
            
            129,975
            
            
            
            945
            
            2.95Total
      interest-bearing liabilities
            
            
            1.78
            
            
            
            3,101,264
            
            
            
            13,183
            
            1.72
            
            
            2,421,754
            
            
            
            16,770
            
            2.81Non-interest-bearing
      liabilities:Demand
      deposits
            
            
            
            
            
            
            249,052
            
            
            
            
            
            
            
            
            144,395Other
      liabilities
            
            
            
            
            
            
            23,017
            
            
            
            
            
            
            
            
            19,820Total
      liabilities
            
            
            
            
            
            
            3,373,333
            
            
            
            
            
            
            
            
            2,585,969Stockholders’
      equity
            
            
            
            
            
            
            305,849
            
            
            
            
            
            
            
            
            239,806Total
      liabilities and stockholders’ equity
            
            
            
            
            
            $
            3,679,182
            
            
            
            
            
            
            
            $
            2,825,775Net
      interest income:Interest
      rate spread
            
            
            3.37
            %
            
            
            
            
            
            $
            26,571
            
            3.47
            %
            
            
            
            
            $
            17,530
            
            2.69
            %Net
      interest margin*
            
            
            
            
            
            
            
            
            
            
            
            
            3.47
            %
            
            
            
            
            
            
            
            2.81
            %Average
      interest-earning assets to
              average interest-bearing liabilities
            
            
            
            
            
            
            100.2
            %
            
            
            
            
            
            
            
            104.5
            %_____________________*
            Defined
      as the Company's net interest income divided by total interest-earning
      assets.





(1)
            
            Of
      the total average balances of investment securities, average tax-exempt
      investment securities were $63.2 million and $59.2 million for the three
      months ended March 31, 2010 and 2009, respectively. In addition,
      average tax-exempt loans and industrial revenue bonds were $46.7 million
      and $40.0 million for the three months ended March 31, 2010 and 2009,
      respectively. Interest income on tax-exempt assets included in this table
      was $1.3 million and $1.4 million for the three months ended March
      31, 2010 and 2009, respectively. Interest income net of disallowed
      interest expense related to tax-exempt assets was $1.1 million and $1.1
      million for the three months ended March 31, 2010 and 2009,
      respectively.








34


Rate/Volume
Analysis





The
following table presents the dollar amount of changes in interest income and
interest expense for major components of interest-earning assets and
interest-bearing liabilities for the periods shown. For each category of
interest-earning assets and interest-bearing liabilities, information is
provided on changes attributable to (i) changes in rate (i.e., changes in rate
multiplied by old volume) and (ii) changes in volume (i.e., changes in volume
multiplied by old rate). For purposes of this table, changes attributable to
both rate and volume, which cannot be segregated, have been allocated
proportionately to volume and rate. Tax-exempt income was not calculated on a
tax equivalent basis.





Three
      Months Ended March 31,2010
      vs. 2009Increase
              (Decrease)
              Due
      toTotal
              Increase
              (Decrease)Rate
            
            
            Volume(Dollars
      in thousands)Interest-earning
      assets:Loans
      receivable
            
            $
            795
            
            
            $
            4,668
            
            
            $
            5,463Investment
      securities and other interest-earning assets
            
            
            (2,422
            )
            
            
            2,413
            
            
            
            (9
            )Total
      interest-earning assets
            
            
            (1,627
            )
            
            
            7,081
            
            
            
            5,454Interest-bearing
      liabilities:Demand
      deposits
            
            
            (205
            )
            
            
            872
            
            
            
            667Time
      deposits
            
            
            (6,420
            )
            
            
            2,370
            
            
            
            (4,050
            )Total
      deposits
            
            
            (6,625
            )
            
            
            3,242
            
            
            
            (3,383
            )Short-term
      borrowings and structured repo
            
            
            (519
            )
            
            
            (20
            )
            
            
            (539
            )Subordinated
      debentures issued to capital trust
            
            
            (117
            )
            
            
            --
            
            
            
            (117
            )FHLBank
      advances
            
            
            145
            
            
            
            307
            
            
            
            452Total
      interest-bearing liabilities
            
            
            (7,116
            )
            
            
            3,529
            
            
            
            (3,587
            )Net
      interest income
            
            $
            5,489
            
            
            $
            3,552
            
            
            $
            9,041








35


Liquidity
and Capital Resources





Liquidity
is a measure of the Company's ability to generate sufficient cash to meet
present and future financial obligations in a timely manner through either the
sale or maturity of existing assets or the acquisition of additional funds
through liability management. These obligations include the credit needs of
customers, funding deposit withdrawals, and the day-to-day operations of the
Company. Liquid assets include cash, interest-bearing deposits with financial
institutions and certain investment securities and loans. As a result of the
Company's management of the ability to generate liquidity primarily through
liability funding, management believes that the Company maintains overall
liquidity sufficient to satisfy its depositors' requirements and meet its
customers' credit needs. At March 31, 2010, the Company had commitments of
approximately $31.1 million to fund loan originations, $156.7 million of unused
lines of credit and unadvanced loans, and $15.8 million of outstanding letters
of credit.





At March
31, 2010, the Company anticipates purchasing the real estate and furniture and
fixtures of a majority of the branch locations currently being operated as a
result of the FDIC-assisted transactions which took place during 2009 for an
estimated $21.3 million.





At March
31, 2010, the Company had committed to purchase a total of $8.1 million of
federal low income tax credits related to the construction of houses or
apartments as part of two unrelated projects. The Company will invest $5.9
million to acquire these credits. One of the principal developers of one of
the projects is a director of the Company.  The Company’s investment
to acquire these credits is consistent with pricing the Company has paid to
acquire other tax credits from non-related parties.





Management
continuously reviews the capital position of the Company and the Bank to ensure
compliance with minimum regulatory requirements, as well as to explore ways to
increase capital either by retained earnings or other means.





At March
31, 2010, the Company's total stockholders' equity was $301.0 million, or 8.2%
of total assets. At March 31, 2010, common stockholders' equity was $244.9
million, or 6.6% of total assets, equivalent to a book value of $18.24 per
common share. Total stockholders’ equity at December 31, 2009, was $298.9
million, or 8.2% of total assets. At December 31, 2009, common stockholders'
equity was $242.9 million, or 6.7% of total assets, equivalent to a book value
of $18.12 per common share. Common stockholders’ equity increased $2.0 million,
or 0.8%, in the three months ended March 31, 2010.





At March
31, 2010 and December 31, 2009, the Company’s tangible common equity to total
assets ratio was 6.5%. The Company’s tangible common equity to total
risk-weighted assets ratio was 11.6% at March 31, 2010.





Banks are
required to maintain minimum risk-based capital ratios. These ratios compare
capital, as defined by the risk-based regulations, to assets adjusted for their
relative risk as defined by the regulations. Guidelines require banks to have a
minimum Tier 1 risk-based capital ratio, as defined, of 4.00%, a minimum total
risk-based capital ratio of 8.00%, and a minimum 4.00% Tier 1 leverage ratio. To
be considered "well capitalized," banks must have a minimum Tier 1 risk-based
capital ratio, as defined, of 6.00%, a minimum total risk-based capital ratio of
10.00%, and a minimum Tier 1 leverage ratio of 5.00%. On March 31, 2010, the
Bank's Tier 1 risk-based capital ratio was 12.95%, total risk-based capital
ratio was 14.19% and the Tier 1 leverage ratio was 7.38%. As of March 31, 2010,
the Bank was "well capitalized" as defined by the Federal banking agencies'
capital-related regulations. The Federal Reserve Board has established
capital regulations for bank holding companies that generally parallel the
capital regulations for banks. On March 31, 2010, the Company's Tier 1
risk-based capital ratio was 15.01%, total risk-based capital ratio was 16.26%
and the leverage ratio was 8.56%. As of March 31, 2010, the Company was "well
capitalized" as defined by the Federal banking agencies' capital-related
regulations.





On
December 5, 2008, the Company completed a transaction to participate in the U.S.
Treasury's voluntary Capital Purchase Program. The Capital Purchase Program
(CPP), a part of the Emergency Economic Stabilization Act of 2009, is designed
to provide capital to healthy financial institutions, thereby increasing
confidence in the banking industry and increasing the flow of financing to
businesses and consumers. The Company received $58.0 million from the U.S.
Treasury through the sale of 58,000 shares of the Company's newly authorized
Fixed Rate Cumulative Perpetual Preferred Stock, Series A. The
Company also issued to the U.S. Treasury a warrant to purchase 909,091
shares of common stock at $9.57 per share. The amount of preferred shares sold
represents approximately 3% of the Company's risk-weighted assets as of
September 30, 2008. Through its preferred stock investment, the Treasury will
receive a cumulative dividend of 5% per year for the first five years, or $2.9
million per year, and 9% per year


36


thereafter.
The preferred shares are callable at 100% of the issue price, subject to
consultation by the U.S. Treasury with the Company's primary federal regulator.
In addition, for a period of the earlier of three years or until these preferred
shares have been redeemed by the Company or divested by the Treasury, the
Company has certain limitations on dividends that may be declared on its common
or preferred stock and is prohibited from repurchasing shares of its common or
other capital stock or any trust preferred securities issued by the Company
without the Treasury’s consent.





At March
31, 2010, the held-to-maturity investment portfolio included $161,000 of gross
unrealized gains and no gross unrealized losses.





The
Company's primary sources of funds are customer deposits, FHLBank advances,
other borrowings, loan repayments, unpledged securities, proceeds from sales of
loans and available-for-sale securities and funds provided from operations. The
Company utilizes particular sources of funds based on the comparative costs and
availability at the time. The Company has from time to time chosen not to pay
rates on deposits as high as the rates paid by certain of its competitors and,
when believed to be appropriate, supplements deposits with less expensive
alternative sources of funds.





At March
31, 2010, the Company had these available secured lines and on-balance sheet
liquidity:





Federal
      Home Loan Bank line
            $236.6
      millionFederal
      Reserve Bank line
            $267.6
      millionInterest-Bearing
      and Non-Interest-Bearing Deposits
            $566.2
      millionUnpledged
      Securities
            $1.8
      million





Statements of Cash Flows.
During the three months ended March 31, 2010 and 2009, respectively, the Company
had positive cash flows from operating activities, investing activities and
financing activities.





Cash
flows from operating activities for the periods covered by the Statements of
Cash Flows have been primarily related to changes in accrued and deferred
assets, credits and other liabilities, the provision for loan losses,
depreciation, impairments of investment securities, gains on the purchase of
additional business units and the amortization of deferred loan origination fees
and discounts (premiums) on loans and investments, all of which are non-cash or
non-operating adjustments to operating cash flows. Net income adjusted for
non-cash and non-operating items and the origination and sale of loans held for
sale were the primary source of cash flows from operating activities. Operating
activities provided cash flows of $10.1 million and $8.8 million during the
three months ended March 31, 2010 and 2009, respectively.





During the three months ended March 31,
2010, investing activities provided cash of $61.8 million primarily due to the
net decrease of investment securities and loans in this
period.  During the three months ended March 31, 2009, investing
activities provided cash of $113.9 million primarily due to the cash received
from the purchase of an additional business unit and sales and maturities of
investment securities.





Changes
in cash flows from financing activities during the periods covered by the
Statements of Cash Flows are due to changes in deposits after interest credited,
changes in FHLBank advances, changes in short-term borrowings, and changes in
structured repurchase agreements, as well as dividend payments to stockholders.
Financing activities provided $49.6 million during the three months ended March
31, 2010, and provided $132.7 million during the three months ended March 31,
2009. Financing activities in the future are expected to primarily include
changes in deposits, changes in FHLBank advances, changes in short-term
borrowings and dividend payments to stockholders.





37


Dividends. During the three
months ended March 31, 2010, the Company declared a common stock cash dividend
of $0.18 per share, or 53% of net income per common diluted share for that three
month period, and paid a common stock cash dividend of $0.18 per share (which
was declared in December 2009). During the three months ended March 31, 2009,
the Company declared a common stock cash dividend of $0.18 per share (which was
paid in April 2009), and paid a common stock cash dividend of $0.18 per share
(which was declared in December 2008). The Board of Directors meets regularly to
consider the level and the timing of dividend payments.  The dividend
declared but unpaid as of March 31, 2010, was paid to shareholders on April 14,
2010.  In addition, the Company paid preferred dividends as described
below.





Our
participation in the CPP currently precludes us from increasing our common stock
cash dividend above $0.18 per share per quarter without the consent of the
Treasury until the earlier of December 5, 2011 or our repayment of the CPP funds
or the transfer by the Treasury to third parties of all of the shares of
preferred stock we issued to the Treasury pursuant to the CPP.  As a
result of the issuance of preferred stock to the Treasury pursuant to the CPP in
December 2008, the Company also paid a preferred stock cash dividend of $564,000
on February 17, 2009, and paid a preferred stock cash dividend of $725,000 on
February 16, 2010. Additional preferred stock cash dividends were paid
throughout 2009. Quarterly payments of $725,000 will be due through February 15,
2014, as long as the preferred stock is outstanding.  Thereafter, for as
long as the preferred stock remains outstanding, the preferred stock quarterly
dividend payment will increase to $1.3 million.





Common Stock Repurchases and
Issuances. The Company has been in various buy-back programs since May
1990. During the three months ended March 31, 2010 and 2009, respectively, the
Company did not repurchase any shares of its common stock. During the three
months ended March 31, 2010, the company issued 21,947 shares of stock at an
average price of $13.72 per share to cover stock option
exercises.  During the three months ended March 31, 2009, the Company
did not issue any shares of stock to cover stock option exercises.





Our
participation in the CPP currently precludes us from purchasing shares of the
Company’s stock without the Treasury's consent until the earlier of December 5,
2011 or our repayment of the CPP funds or the transfer by the Treasury to third
parties of all of the shares of preferred stock we issued to the Treasury
pursuant to the CPP. Management has historically utilized stock buy-back
programs from time to time as long as repurchasing the stock contributed to the
overall growth of shareholder value. The number of shares of stock repurchased
and the price paid is the result of many factors, several of which are outside
of the control of the Company. The primary factors, however, are the number of
shares available in the market from sellers at any given time and the price of
the stock within the market as determined by the market.





ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Asset and
Liability Management and Market Risk





A
principal operating objective of the Company is to produce stable earnings by
achieving a favorable interest rate spread that can be sustained during
fluctuations in prevailing interest rates. The Company has sought to reduce its
exposure to adverse changes in interest rates by attempting to achieve a closer
match between the periods in which its interest-bearing liabilities and
interest-earning assets can be expected to reprice through the origination of
adjustable-rate mortgages and loans with shorter terms to maturity and the
purchase of other shorter term interest-earning assets. Since the Company uses
laddered brokered deposits and FHLBank advances to fund a portion of its loan
growth, the Company's assets tend to reprice more quickly than its
liabilities.





Our Risk
When Interest Rates Change





The rates
of interest we earn on assets and pay on liabilities generally are established
contractually for a period of time. Market interest rates change over time.
Accordingly, our results of operations, like those of other financial
institutions, are impacted by changes in interest rates and the interest rate
sensitivity of our assets and liabilities. The risk associated with changes in
interest rates and our ability to adapt to these changes is known as interest
rate risk and is our most significant market risk.





How We
Measure the Risk to Us Associated with Interest Rate Changes





In an
attempt to manage our exposure to changes in interest rates and comply with
applicable regulations, we monitor Great Southern's interest rate risk. In
monitoring interest rate risk we regularly analyze and manage assets
and


38


liabilities
based on their payment streams and interest rates, the timing of their
maturities and their sensitivity to actual or potential changes in market
interest rates.





The
ability to maximize net interest income is largely dependent upon the
achievement of a positive interest rate spread that can be sustained despite
fluctuations in prevailing interest rates. Interest rate sensitivity is a
measure of the difference between amounts of interest-earning assets and
interest-bearing liabilities which either reprice or mature within a given
period of time. The difference, or the interest rate repricing "gap," provides
an indication of the extent to which an institution's interest rate spread will
be affected by changes in interest rates. A gap is considered positive when the
amount of interest-rate sensitive assets exceeds the amount of interest-rate
sensitive liabilities repricing during the same period, and is considered
negative when the amount of interest-rate sensitive liabilities exceeds the
amount of interest-rate sensitive assets during the same period. Generally,
during a period of rising interest rates, a negative gap within shorter
repricing periods would adversely affect net interest income, while a positive
gap within shorter repricing periods would result in an increase in net interest
income. During a period of falling interest rates, the opposite would be true.
As of March 31, 2010, Great Southern's internal interest rate risk models
indicate a one-year interest rate sensitivity gap that is negative. Generally, a
rate increase by the FRB would be expected to have an immediate negative impact
on Great Southern’s net interest income. As the Federal Funds rate is now very
low, the Company’s interest rate floors have been reached on most of its “prime
rate” loans. In addition, Great Southern has elected to leave its “Great
Southern Prime Rate” at 5.00% for those loans that are indexed to “Great
Southern Prime” rather than “Wall Street Journal Prime.” While these interest
rate floors and prime rate adjustments have helped keep the rate on our loan
portfolio higher in this very low interest rate environment, they will also
reduce the positive effect to our loan rates when market interest rates,
specifically the “prime rate,” begin to increase. The interest rate on these
loans will not increase until the loan floors are reached and the “Wall Street
Journal Prime” interest rate exceeds 5.00%. The operating environment has not
been normal as interest costs for deposits and borrowings have been and continue
to be elevated because of abnormal credit, liquidity and competitive pricing
pressures; therefore, we expect the net interest margin will continue to be
somewhat compressed. However, if rates remain generally unchanged in the
short-term, we expect that our cost of funds will continue to decrease as we
have redeemed some of our brokered deposits. In addition, a significant portion
of our retail certificates of deposit mature in the next few months and we
expect that they will be replaced with new certificates of deposit at lower
interest rates.





Interest
rate risk exposure estimates (the sensitivity gap) are not exact measures of an
institution's actual interest rate risk. They are only indicators of interest
rate risk exposure produced in a simplified modeling environment designed to
allow management to gauge the Bank's sensitivity to changes in interest rates.
They do not necessarily indicate the impact of general interest rate movements
on the Bank's net interest income because the repricing of certain categories of
assets and liabilities is subject to competitive and other factors beyond the
Bank's control. As a result, certain assets and liabilities indicated as
maturing or otherwise repricing within a stated period may in fact mature or
reprice at different times and in different amounts and cause a change, which
potentially could be material, in the Bank's interest rate risk.





In order
to minimize the potential for adverse effects of material and prolonged
increases and decreases in interest rates on Great Southern's results of
operations, Great Southern has adopted asset and liability management policies
to better match the maturities and repricing terms of Great Southern's
interest-earning assets and interest-bearing liabilities. Management recommends
and the Board of Directors sets the asset and liability policies of Great
Southern which are implemented by the asset and liability committee. The asset
and liability committee is chaired by the Chief Financial Officer and is
comprised of members of Great Southern's senior management. The purpose of the
asset and liability committee is to communicate, coordinate and control
asset/liability management consistent with Great Southern's business plan and
board-approved policies. The asset and liability committee establishes and
monitors the volume and mix of assets and funding sources taking into account
relative costs and spreads, interest rate sensitivity and liquidity needs. The
objectives are to manage assets and funding sources to produce results that are
consistent with liquidity, capital adequacy, growth, risk and profitability
goals. The asset and liability committee meets on a monthly basis to review,
among other things, economic conditions and interest rate outlook, current and
projected liquidity needs and capital positions and anticipated changes in the
volume and mix of assets and liabilities. At each meeting, the asset and
liability committee recommends appropriate strategy changes based on this
review. The Chief Financial Officer or his designee is responsible for reviewing
and reporting on the effects of the policy implementations and strategies to the
Board of Directors at their monthly meetings.





In order
to manage its assets and liabilities and achieve the desired liquidity, credit
quality, interest rate risk, profitability and capital targets, Great Southern
has focused its strategies on originating adjustable rate loans,
and


39


managing
its deposits and borrowings to establish stable relationships with both retail
customers and wholesale funding sources.





At times,
depending on the level of general interest rates, the relationship between long-
and short-term interest rates, market conditions and competitive factors, we may
determine to increase our interest rate risk position somewhat in order to
maintain or increase our net interest margin.





The asset
and liability committee regularly reviews interest rate risk by forecasting the
impact of alternative interest rate environments on net interest income and
market value of portfolio equity, which is defined as the net present value of
an institution's existing assets, liabilities and off-balance sheet instruments,
and evaluating such impacts against the maximum potential changes in net
interest income and market value of portfolio equity that are authorized by the
Board of Directors of Great Southern.





40


ITEM 4.
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 March 31, 2010, 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 March 31, 2010, 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 March 31,
2010, that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.





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.


41


PART II.
OTHER INFORMATION





Item 1.
Legal Proceedings





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 of 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.





Item 1A.
Risk Factors





There
have been no material changes to the risk factors set forth in Part I, Item 1A
of the Company's Annual Report
on Form 10-Kfor the year ended December 31, 2009.





Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds





On
November 15, 2006, the Company's Board of Directors authorized management to
repurchase up to 700,000 shares of the Company's outstanding common stock, under
a program of open market purchases or privately negotiated transactions. The
plan does not have an expiration date. However, our participation in the CPP
precludes us from purchasing shares of the Company’s stock without the prior
consent of the Treasury until the earlier of December 5, 2011 or our repayment
of the CPP funds or the transfer by the Treasury to third parties of all of the
shares of preferred stock we issued to the Treasury pursuant to the CPP. As
indicated below, no shares were purchased during the first quarter of
2010.





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)January
      1, 2010 –
              January
      31, 2010
            
            
            ---
            
            
            $
            ----
            
            
            
            ---
            
            
            
            396,562February
      1, 2010 –
              February
      28, 2010
            
            
            ---
            
            
            $
            ----
            
            
            
            ---
            
            
            
            396,562March
      1, 2010 –
              March
      31, 2010
            
            
            ---
            
            
            $
            ----
            
            
            
            ---
            
            
            
            396,562---
            
            
            $
            ----
            
            
            
            ---





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





Item 3.
Defaults Upon Senior Securities





None.





Item 4.
Reserved











42


Item 5.
Other Information





None.





Item 6.
Exhibits and Financial Statement Schedules





a)
            ExhibitsSee
      Exhibit Index.





SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.





Great
      Southern Bancorp, Inc.RegistrantDate:
      May 7, 2010
            /s/
      Joseph W. TurnerJoseph
      W. Turner
              President
      and Chief Executive Officer
              (Principal
      Executive Officer)Date:
      May 7, 2010
            /s/
      Rex A. CopelandRex
      A. Copeland
              Treasurer
              (Principal
      Financial and Accounting Officer)











43





EXHIBIT
INDEX





Exhibit
No.                                                                Description





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





(i)
            The
      Purchase and Assumption Agreement, dated as of March 20, 2009, among
      Federal Deposit Insurance Corporation, Receiver of TeamBank, N.A., Paolo,
      Kansas, Federal Deposit Insurance Corporation and Great Southern Bank,
      previously filed with the Commission (File no. 000-18082) as Exhibit 2.1
      to the Registrant's Current Report on Form 8-K filed on March 26, 2009 is
      incorporated herein by reference as Exhibit
  2.1.





(ii)
            The
      Purchase and Assumption Agreement, dated as of September 4, 2009, among
      Federal Deposit Insurance Corporation, Receiver of Vantus Bank, Sioux
      City, Iowa, Federal Deposit Insurance Corporation and Great Southern Bank,
      previously filed with the Commission (File no. 000-18082) as Exhibit 2.1
      to the Registrant's Current Report on Form 8-K filed on September 11, 2009
      is incorporated herein by reference as Exhibit
  2.1.





(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 Rated Cumulative Perpetual Preferred Stock,
      Series A, previously filed with the Commission (File no. 000-18082) 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(ii) to the Registrant's Current
      Report on Form 8-K filed on October 23, 2007, is 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 (File no. 000-18082) 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.








44





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 is incorporated herein by
reference as Exhibit 10.2.





The
Registrant's 2003 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 April 14, 2003, is incorporated herein by
reference as Exhibit 10.3.





The
employment agreement dated September 18, 2002 between the Registrant and William
V. Turner 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
December 31, 2003, is incorporated herein by reference as Exhibit
10.4.





The
employment agreement dated September 18, 2002 between the Registrant and Joseph
W. Turner previously filed with the Commission (File no. 000-18082) as Exhibit
10.4 to the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 2003, is incorporated herein by reference as Exhibit
10.5.





The form
of incentive stock option agreement under the Registrant's 2003 Stock Option and
Incentive Plan previously filed with the Commission as Exhibit 10.1 to the
Registrant's Current Report on Form 8-K (File no. 000-18082) filed on February
24, 2005 is incorporated herein by reference as Exhibit 10.6.





The form
of non-qualified stock option agreement under the Registrant's 2003 Stock Option
and Incentive Plan previously filed with the Commission as Exhibit 10.2 to the
Registrant's Current Report on Form 8-K (File no. 000-18082) filed on February
24, 2005 is incorporated herein by reference as Exhibit 10.7.





A
description of the current salary and bonus arrangements for 2010 for the
Registrant's named executive officers previously filed with the Commission as
Exhibit 10.8 to the Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 2009 is incorporated herein by reference as Exhibit
10.8.





A
description of the current fee arrangements for the Registrant's directors
previously filed with the Commission as Exhibit 10.9 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 2009 is incorporated
herein by reference as Exhibit 10.9.





The
Letter Agreement, including Schedule A, and Securities Purchase Agreement, dated
December 5, 2008, between the Registrant and the United States Department of the
Treasury, previously filed with the Commission (File no. 000-18082) as Exhibit
10.1 to the Registrant's Current Report on Form 8-K filed on December 8, 2008,
is incorporated herein by reference as Exhibit 10.10.





The form
of Compensation Modification Agreement and Waiver, executed by each of William
V. Turner, Joseph W. Turner, Rex A. Copeland, Steven G. Mitchem, Douglas W.
Marrs and Linton J. Thomason, previously filed with the Commission (File no.
000-18082) as Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed
on December 8, 2008, is incorporated herein by reference as Exhibit
10.11.





(11)
            Statement
      re computation of per share
earnings





Included
in Note 6 to the Consolidated Financial Statements.





(15)
            Letter
      re unaudited interim financial
information





Inapplicable.








45








(18)
            Letter
      re change in accounting principles





Inapplicable.





(19)
            Report
      furnished to securityholders.





Inapplicable.





(22)
            Published
      report regarding matters submitted to vote of security
    holders





Inapplicable.





(23)
            Consents
      of experts and counsel





Inapplicable.





(24)
            Power
      of attorney





None.





(31.1)
            Rule
      13a-14(a) Certification of Chief Executive
  Officer





Attached
as Exhibit 31.1





(31.2)
            Rule
      13a-14(a) Certification of
Treasurer





Attached
as Exhibit 31.2





(32)
            Certification
      pursuant to Section 906 of Sarbanes-Oxley Act of 2002 (18 U.S.C. Section
      1350)





Attached
as Exhibit 32.





(99)
            Additional
      Exhibits





None.








46