Great Southern Bancorp, Inc. Reports 2009 Fourth Quarter and Annual Earnings

Jan 29, 2010, 07:00 ET from Great Southern Bancorp, Inc.

SPRINGFIELD, Mo., Jan. 29 /PRNewswire-FirstCall/ --

Financial Highlights for the Fourth Quarter and Twelve Months of 2009:

  • Capital: The capital position of the Company continues to be strong, significantly exceeding the "well capitalized" thresholds established by regulators. As of December 31, 2009, on a preliminary basis, the Company's Tier 1 leverage ratio was 8.54%, Tier 1 risk-based capital ratio was 14.94%, and total risk-based capital ratio was 16.20%. At December 31, 2009, the Company's tangible common equity to total assets ratio was 6.50% as compared to 6.65% at December 31, 2008. The Company's tangible common equity to total risk-weighted assets ratio was 11.4% at December 31, 2009, as compared to 9.3% at December 31, 2008.
  • FDIC-assisted Acquisitions: In 2009, one-time non-interest income gains totaling $89.8 million (pre-tax) were recorded as a result of the FDIC-assisted acquisitions of TeamBank N.A. in March 2009 and Vantus Bank in September 2009. The gains were based upon the estimated fair value of the assets acquired and liabilities assumed. The integration of both institutions continues to go well with high deposit retention rates in each institution. Integration of the Vantus Bank operating system into Great Southern's operating system was completed in mid-December and most operational efficiencies should be realized beginning in the first quarter of 2010.  
  • Non-performing Assets:  Non-performing assets, excluding FDIC-covered non-performing assets, at December 31, 2009, were $65.0 million, a decrease of $860,000 from December 31, 2008. Non-performing assets, excluding FDIC-covered assets, as a percentage of total assets were 1.79% at December 31, 2009, as compared to 2.48% at December 31, 2008.
  • Loans: Total gross loans, including FDIC-covered loans, increased $376.1 million, or 21.5%, from December 31, 2008, and increased $11.2 million, or 0.50%, from September 30, 2009. Excluding FDIC-covered loans, construction and land development loans were down $222.9 million, or 41.0%, as compared to December 31, 2008, and down $93.3 million, or 22.5%, as compared to September 30, 2009. The ratio of allowance for loan losses to total loans, excluding FDIC-covered loans, was 2.35% as of December 31, 2009, compared to 2.28% as of September 30, 2009, and 1.66% at December 31, 2008.  
  • Deposits: Total deposits increased $805.9 million, or 42.2%, from December 31, 2008. The Company's deposit mix shifted significantly from December 31, 2008, with a decrease of $534.0 million, or 66.1%, in brokered deposits and an increase of $1.1 billion, or 123.3%, in certificates of deposit (CDs) and checking accounts. The FDIC-assisted acquisitions added $868.4 million in non-brokered deposits. Additional deposit increases were generated across the entire franchise, primarily in the original Great Southern footprint. The Company also experienced growth in CDARS® customer deposits during 2009 with an increase of $190.9 million, or 113.4%.  

(Explanations of above financial results are detailed in the body of this release below.)

Great Southern Bancorp, Inc. (Nasdaq: GSBC), the holding company for Great Southern Bank, today reported preliminary earnings for the quarter ended December 31, 2009, were $0.28 per diluted common share ($4.0 million) compared to the $0.25 per diluted common share ($3.3 million) the Company earned during the same quarter in the prior year. The effects of the Company's hedge accounting entries recorded increased earnings for the quarter ended December 31, 2008, by $684,000. The Company also recorded a $2.1 million (pre-tax) impairment write-down of certain available-for-sale equity investments in the fourth quarter of 2008.

Preliminary earnings for the twelve months ended December 31, 2009, were $4.44 per diluted common share ($61.7 million) compared to a loss of $0.35 per diluted common share ($4.7 million loss) the Company recorded during the prior year. The effects of the Company's hedge accounting entries recorded increased earnings by $514,000 for the twelve months ended December 31, 2009, and increased earnings for the same period in 2008 by $2.5 million. Annual 2009 results include a first quarter 2009 pre-tax gain of $43.9 million related to the FDIC-assisted acquisition of TeamBank N.A. (the first quarter 2009 preliminary gain of $28.8 million based on initial fair value estimates for the acquired assets and assumed liabilities was adjusted to $43.9 reflecting a final fair value calculation of the TeamBank loan portfolio, which is discussed later in this release) and a third quarter 2009 pre-tax gain of $45.9 million related to the FDIC-assisted acquisition of Vantus Bank, based upon the preliminary initial fair value estimate of the assets acquired and liabilities assumed. Partially offsetting these gains for the year were significant acquisition-related expenses. In 2008, the Company recorded a loan loss provision and related charge-off of $35 million, equal to $1.70 per diluted common share (after tax), in connection with a defaulted $30 million stock loan to the holding company of a failed Arkansas-based bank and the under-collateralized portion of other associated loans totaling $5 million (see the Company's Quarterly Report on Form 10-Q for March 31, 2008, for additional information). The twelve-month 2008 results were also negatively impacted by the write-down of the Company's investment in perpetual preferred stock of Fannie Mae and Freddie Mac equating to approximately $5.3 million (pre-tax) or $.26 per diluted common share.  

For the three months ended December 31, 2009, annualized return on average equity (ROAE) was 7.81%; annualized return on average assets (ROAA) was 0.52%; and annualized net interest margin (NIM) was 3.32%. For the twelve months ended December 31, 2009, ROAE was 29.72%; ROAA was 1.91%; and NIM was 3.03%.  

Great Southern President and CEO Joseph W. Turner commented, "The year 2009 was an historic year for us. The FDIC-assisted acquisitions of TeamBank and Vantus Bank have contributed much to our Company. Both organizations are fully integrated into Great Southern and we are very pleased with the quality of our new markets in terms of both customer relationships and our new associates. These acquisitions have generated additional deposits, liquidity and capital and we believe they will provide financial benefits to the Company in the near-term and well into the future.

"The Company continues to be in a strong capital position. Our earnings in 2009 contributed to increases in common stockholders' equity, our tangible common equity, and our regulatory capital ratios. We continue to participate in the U.S. Treasury's Capital Purchase Program (CPP). Our management team and Board of Directors regularly review our participation in the program. The Company would be in a strong "well capitalized" position without the CPP funds; however, we have no immediate plans to repay the funds at this time due to the continued uncertainty in the economy and potential opportunities for growth in the next 12 to 18 months. To date, we have paid the U.S. Treasury $2.7 million in preferred dividends and the value of the common warrants owned by the Treasury has increased significantly."

Turner continued, "The Company's liquidity position remains at historic high levels. We saw significant improvement in our deposit mix in 2009. Total deposits increased by 42% since December 31, 2008, primarily due to the FDIC-assisted acquisitions, and also due to strong core deposit growth in our original Great Southern footprint. The deposit mix shifted considerably with a 66% reduction in brokered deposits and an increase in demand deposit accounts and retail CDs by 106% and 149%, respectively.

"As expected, credit quality and the resolution of non-performing assets remain a focus for our Company. We have seen periodic increases and decreases in non-performing loans and foreclosed assets. Problem credits continue to migrate through the credit resolution process. Net charge-offs were $6.0 million in the three months ended December 31, 2009. To remain well reserved against inherent credit losses, we continued to build the allowance for loan and lease losses with a provision of $7.5 million during the quarter. While we are working through many of our problem credits and making progress, we expect non-performing assets, loan loss provisions and net charge-offs to continue to be elevated, but at manageable levels.

"Finally, we believe that the economic environment will remain challenging for the foreseeable future, but will offer opportunities for well-positioned institutions like Great Southern. We will continue to seek strategic opportunities that may become available."

Selected Financial Data and Non-GAAP Reconciliation

(Dollars in thousands)

    
    
                       Three Months Ended           Twelve Months Ended 
                       December 31, 2009             December 31, 2009
                             Effect   Excluding            Effect   Excluding
                            of Hedge    Hedge             of Hedge    Hedge
                           Accounting Accounting         Accounting Accounting
                      As    Entries    Entries      As    Entries    Entries
                   Reported Recorded   Recorded  Reported Recorded   Recorded
    Net
     interest
     income        $26,179    $ --    $26,179     $89,263   $(393)    $89,656
    Provision
     for loan
     losses          7,500      --      7,500      35,800      --      35,800
    Non-interest
     income          8,650      --      8,650     122,784   1,184     121,600
    Non-interest
     expense        20,875      --     20,875      78,195      --      78,195
    Provision for
     income taxes    1,629      --      1,629      33,005    (277)     32,728
      Net income    $4,825    $ --     $4,825     $65,047    $514     $64,533
    
      Net income
       available to 
       common
       shareholders $3,988    $ --     $3,988     $61,694    $514     $61,180
    
    
                        Three Months Ended           Twelve Months Ended 
                        December 31, 2008             December 31, 2008
                             Effect   Excluding            Effect   Excluding
                            of Hedge    Hedge             of Hedge    Hedge
                           Accounting Accounting         Accounting Accounting
                      As    Entries    Entries      As    Entries    Entries
                   Reported Recorded   Recorded  Reported Recorded   Recorded
    
    Net
     interest
     income        $17,242   $(639)   $17,881     $71,583  $(3,111)   $74,694
    Provision
     for loan
     losses          5,000      --      5,000      52,200       --     52,200
    Non-interest
     income          6,309   1,691      4,618      28,144    6,976     21,168
    Non-interest
     expense        13,383      --     13,383      55,706       --     55,706 
    Provision for
     income taxes    1,599    (368)     1,231      (3,751)  (1,353)    (5,104)
      Net income
       (loss)       $3,569    $684     $2,885     $(4,428)  $2,512    $(6,940)
    
      Net income
       (loss)
       available to
       common
       shareholders $3,327    $684     $2,643     $(4,670)  $2,512    $(7,182)
    
    
    
                                       Three Months Ended December 31,
                                        2009                      2008     
                                            Earnings                 Earnings
                                 Dollars    Per Share      Dollars   Per Share
    Reported Earnings (Loss)
     Per Common Share             $3,988       $0.28        $3,327      $0.25
    
    Amortization of deposit 
     broker origination fees
     (net of taxes)                   --                       415 
    
    Net change in fair value of
     interest rate swaps and
     related deposits (net
     of taxes)                        --                    (1,099)  
    
    Earnings excluding impact
     of hedge accounting entries  $3,988                    $2,643 
    
    
    
                                        Twelve Months Ended December 31, 
                                        2009                      2008     
                                           Earnings                  Earnings
                                 Dollars   Per Share       Dollars   Per Share
    
    Reported Earnings (Loss)
     Per Common Share            $61,694       $4.44       $(4,670)    $(0.35)
    
    Amortization of deposit 
     broker origination fees
     (net of taxes)                  256                     2,022
    
    Net change in fair value of
     interest rate swaps and
     related deposits (net
     of taxes)                      (770)                   (4,534) 
    
    Earnings excluding impact
     of hedge accounting entries $61,180                   $(7,182)     

FDIC-ASSISTED ACQUISITIONS

  • TeamBank N.A., Paola, Kan.- March 20, 2009. Great Southern Bank entered into a purchase and assumption agreement with loss share with the 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, Kan. The Company provided significant details about this transaction in its Current Report on Form 8-K/A filed on June 5, 2009. Since the March acquisition, customer deposits have remained stable with a high retention rate.

In the first quarter of 2009, the Company recorded a preliminary one-time gain of $28.8 million (pre-tax), based upon the initial estimated fair value of the assets acquired and liabilities assumed in accordance with FASB ASC 805 (SFAS No. 141 (R), Business Combinations). ASC 805 allows a measurement period of up to one year to adjust initial fair value estimates as of the acquisition date. Subsequent to the initial fair value estimate calculations in the first quarter of 2009, additional information was obtained about the fair value of assets acquired and liabilities assumed as of March 20, 2009, which resulted in adjustments to the initial fair value estimates. Most significantly, additional information (as of the acquisition date) was obtained on the credit quality of certain loans as of the acquisition date which resulted in increased fair value estimates of the acquired loan pools. The fair values of these loan pools were adjusted and the provisional fair values finalized. These adjustments resulted in a $15.1 million increase to the first quarter 2009 initial one-time gain of $28.8 million. Thus, the final first quarter 2009 gain was $43.9 million related to the fair value of the acquired assets and assumed liabilities.

  • Vantus Bank, Sioux City, Iowa – September 4, 2009.  Great Southern 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. The Company provided significant details about this transaction in its Current Report on Form 8-K/A filed on November 9, 2009.  

The Company converted Vantus Bank operational systems into Great Southern's systems on December 11, 2009, which allows all Great Southern and former Vantus Bank customers to conduct business at all banking centers throughout the Great Southern four-state franchise. With the completion of the operational conversion, back office support functions were consolidated with most anticipated operational efficiencies being realized in the first quarter of 2010 and in future periods. Since the acquisition, banking center customer deposits have remained stable with a high retention rate.

NET INTEREST INCOME

Net interest income for the fourth quarter of 2009 increased $9.0 million to $26.2 million compared to $17.2 million for the fourth quarter of 2008. Net interest margin was 3.32% in the quarter ended December 31, 2009, compared to 2.80% in the same period in 2008, an increase of 52 basis points, and 3.27% in the three months ended September 30, 2009, an increase of five basis points. The average interest rate spread was 3.26% in the three months ended December 31, 2009, compared to 2.56% in the three months ended December 31, 2008. The average interest rate spread decreased four basis points compared to the average interest rate spread of 3.30% in the three months ended September 30, 2009.

As noted above, the Company's net interest margin increased compared to the same quarter in the prior year and also increased compared to the September 30, 2009, quarter. In 2008, the Company decided to increase the amount of longer-term brokered certificates of deposit to provide additional liquidity for operations and to maintain in reserve its available secured funding lines with the Federal Home Loan Bank (FHLBank) and the Federal Reserve Bank. As market interest rates on these types of deposits decreased in 2009, the Company redeemed many of these certificates in order to reduce its cost of funds and some of its excess liquidity. In 2008 and 2009, excess funds were invested in short-term cash equivalents at rates that resulted in a negative spread.

The average balance of cash and cash equivalents in the three and twelve months ended December 31, 2009, was $521 million and $425 million, respectively. These cash levels are higher than our historical averages.

The Company's margin was also positively impacted by a change in the deposit mix. The addition of the TeamBank and Vantus Bank core deposits provided a relatively lower cost funding source, which allowed the Company to reduce some of its higher cost funds. The Company also had significant maturities in its retail certificate portfolio and renewed many of these certificates at significantly lower rates in many cases. 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 a result of all of these factors, the Company's net interest margin increased to 3.32% in the three months ended December 31, 2009, compared to 3.27% in the three months ended September 30, 2009, and 2.80% in the three months ended December 31, 2008.  

The Federal Reserve last 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 "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. At its most recent meeting on January 27, 2010, the Federal Reserve Board elected to leave the Federal Funds rate unchanged and did not indicate that rate changes are imminent.

Net interest income for the twelve months of 2009 increased $17.7 million to $89.3 million compared to $71.6 million for the twelve months of 2008. Net interest margin was 3.03% in the twelve months ended December 31, 2009, compared to 3.01% in 2008, an increase of two basis points.

Excluding the impact of the accounting entries recorded for certain interest rate swaps, economically, net interest income for the twelve months of 2009 increased $15.0 million to $89.7 million compared to $74.7 million for the twelve months of 2008. Net interest margin excluding the effects of the accounting change was 3.04% in the twelve months ended December 31, 2009, compared to 3.14% in the twelve months ended December 31, 2008, a decrease of 10 basis points.

Non-GAAP Reconciliation

(Dollars in thousands)

    
    
                       Three Months Ended           Twelve Months Ended 
                          December 31,                   December 31,
                      2009            2008           2009            2008
                Dollars    %    Dollars    %    Dollars    %    Dollars     %
    Net 
     Interest
     Income/
     Margin    $26,179  3.32%  $17,242  2.80%  $89,263  3.03%  $71,583   3.01%
    
    Amortization
     of deposit
     broker 
     origination
     fees           --    --       639   .10       393   .01     3,111   .13
    
    Net 
     interest
     income/
     margin
     excluding
     impact of
     hedge
     accounting
     entries   $26,179  3.32%  $17,881  2.90%  $89,656  3.04%  $74,694   3.14%

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

NON-INTEREST INCOME

Non-interest income increased to $8.7 million for the fourth quarter of 2009 compared to $6.3 million for the fourth quarter of 2008, primarily as a result of the following items:

  • Gain on loan sales:  Net realized gains on loan sales increased $531,000, or 184.4%, in the fourth quarter of 2009. The gain on loan sales was mainly due to a higher volume of fixed-rate residential mortgage loan originations, which the Company typically sells in the secondary market.
  • Securities gains, losses and impairments: Net realized gains on available-for-sale securities were $322,000 in the fourth quarter of 2009, compared to a net realized loss of $2.1 million in the fourth quarter of 2008. The $2.1 million loss recorded in the 2008 period related to an impairment write-down in value of certain available-for-sale equity investments. 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 $1.3 million, or 34.6%, in the three months ended December 31, 2009, compared to the same period in 2008. A large portion of this increase was the result of the customers added in the FDIC-assisted acquisitions as well as organic growth in the original Great Southern footprint.

Partially offsetting the above positive income items during the fourth quarter of 2009 versus 2008 was the following item:

  • 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 an increase of $1.7 million in the quarter ended December 31, 2008. 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. All of this charge has now been recovered. There was no impact in the fourth quarter of 2009 and there will be no impact in future quarters.

Non-interest income increased to $122.8 million for the year ended 2009 compared to $28.1 million for the year ended 2008, primarily as a result of the following items:  

  • FDIC-assisted acquisitions:  A total of $89.8 million of one-time pre-tax gains was recorded related to the fair value accounting estimates of the assets acquired and liabilities assumed of TeamBank and Vantus Bank, as discussed above. Additional income of $2.7 million was recorded due to the discount related to the FDIC indemnification assets booked in connection with these transactions. 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.
  • Gain on loan sales:  Net realized gains on loan sales increased $1.5 million, or 104.2%, in the twelve months of 2009 compared to 2008. The gain on loan sales was mainly due to a higher volume of fixed-rate residential mortgage loan originations, which the Company typically sells in the secondary market.
  • Securities gains, losses and impairments:  Net losses on securities sales and impairments in the twelve months ending December 31, 2009, were $1.5 million compared to net losses on securities sales and impairments in the twelve months ending December 31, 2008, of $7.3 million. The 2009 losses included a $2.9 million impairment related to a non-agency collateralized mortgage obligation, $530,000 related to the impairment of equity securities, and a $575,000 impairment on pooled trust preferred investments. These impairment losses were partially offset by gains on the sales of various investment securities throughout 2009. The losses in 2008 were primarily due to the impairment write-down of $5.3 million related to Fannie Mae and Freddie Mac preferred stock, which was discussed in the September 30, 2008, Quarterly Report on Form 10-Q. These equity investments were subsequently sold in 2009. An additional $2.1 million loss recorded in the 2008 period related to an impairment write-down in value of certain available-for-sale equity investments. 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 $2.3 million, or 15.1%, in the twelve months ended December 31, 2009, compared to 2008. This increase was mainly the result of the acquisition of former TeamBank and Vantus Bank customer accounts, as well as organic growth in the original Great Southern footprint.

Partially offsetting the above positive income items for 2009 as compared with 2008 were the following items:

  • 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 an increase of $1.2 million in the twelve months ended December 31, 2009, compared to an increase of $7.0 million in the twelve months ended December 31, 2008. This income was part of the 2005 accounting restatement described above.
  • Commission revenue: For the twelve months ended December 31, 2009, commission income from the Company's travel, insurance and investment divisions decreased $1.9 million, or 22.3%, compared to 2008. The decrease was primarily in the Company's travel division where customers have reduced their travel in light of current economic conditions. Another large portion of the decrease also occurred in the investment division as a result of the alliance formed in 2008 with Ameriprise Financial Services. As a result of this change, Great Southern now records most of its investment services activity on a net basis in non-interest income.

NON-INTEREST EXPENSE

Non-interest expense for the fourth quarter of 2009 was $20.9 million compared with $13.4 million for the fourth quarter of 2008, an increase of $7.5 million, or 56.0%. Non-interest expense for the twelve months of 2009 was $78.2 million compared with $55.7 million for the twelve months of 2008, an increase of $22.5 million, or 40.4%. The expense increases in both the three and twelve month periods were primarily related to the FDIC-assisted acquisitions. The following were key items related to the increases in non-interest expense in the three and twelve month periods:

  • TeamBank N.A. FDIC-assisted acquisition: A portion of the Company's increase in non-interest expense in the fourth quarter and full-year 2009 compared to the same periods in 2008 related to the FDIC-assisted acquisition of the former TeamBank and its ongoing operation. In the three months ended December 31, 2009, non-interest expenses related to the operations of the former TeamBank were $2.0 million. In the twelve months ended December 31, 2009, non-interest expenses related to the acquisition and ongoing operations of the former TeamBank were $10.0 million. In addition, this growth has led to other increased non-interest expenses related to TeamBank that have been absorbed in other pre-existing areas of the Company. In the twelve months ended December 31, 2009, the Company incurred costs related to the conversion of deposits and loans to its core computer processing systems and also incurred expenses related to retention and separation pay for employees whose positions were consolidated. The largest expense increases were in the areas of salaries and benefits and occupancy and equipment expenses.
  • Vantus Bank FDIC-assisted acquisition:  The Company's increase in non-interest expense in the fourth quarter and twelve months of 2009 compared to the same periods in 2008 also included expenses related to the acquisition and operations of Vantus Bank. In the three months ended December 31, 2009, non-interest expenses associated with Vantus Bank were $3.1 million. In the twelve months ended December 31, 2009, non-interest expenses were $4.9 million. 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. In the three and twelve months ended December 31, 2009, the Company incurred costs related to the conversion of deposit and loan information to its core computer processing systems and incurred expenses related to retention and separation pay for employees whose positions were consolidated. The largest expense increases were in the areas of salaries and benefits and occupancy and equipment expenses.
  • New banking centers: The Company's increase in non-interest expense in the fourth quarter and twelve months of 2009 compared to the same periods in 2008 also related to the continued internal growth of the Company. The Company opened its first retail banking center in Creve Coeur, Mo., in May 2009, and its second banking center in Lee's Summit, Mo., in late September 2009. In the three months ended December 31, 2009, compared to the three months ended December 31, 2008, non-interest expenses increased $261,000 associated with the ongoing operations of these locations. In the twelve months ended December 31, 2009, compared to the twelve months ended December 31, 2008, non-interest expenses increased $686,000 associated with the ongoing operations of these locations.  
  • FDIC insurance premiums:  In 2009, the FDIC significantly increased insurance premiums for all banks, nearly doubling the regular quarterly deposit insurance assessments. In addition, the FDIC imposed a special five basis point assessment on all insured depository institutions based on assets (minus Tier 1 capital) as of June 30, 2009. The Company recorded an expense of $1.7 million in the second quarter of 2009 for this special assessment. Due to growth of the Company and the increased assessment rates noted above, FDIC insurance expense (including the second quarter special assessment) increased from $561,000 in the three months ended December 31, 2008, to $1.1 million in the three months ended December 31, 2009, and increased from $2.2 million for the twelve months ended December 31, 2008, to $5.7 million for the twelve months ended December 31, 2009.

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 the fourth quarter of 2009, and 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 $1.5 million in the twelve months ended December 31, 2009, compared to the same period in 2008.  

The Company's efficiency ratio for the quarter ended December 31, 2009, was 59.94% compared to 56.83% in the same quarter in 2008. The Company's ratio of non-interest expense to average assets increased from 1.90% for the three months ended December 31, 2008, to 2.20% for the three months ended December 31, 2009. The efficiency ratio in the fourth quarter of 2009 was negatively impacted by TeamBank-related operating expenses, Vantus Bank acquisition-related and operating expenses, and increased expenses related to foreclosures and FDIC deposit insurance premiums. These increased expenses also contributed to the increase in the Company's ratio of non-interest expense to average assets.

The Company's efficiency ratio for the twelve months ended December 31, 2009, was 36.88% compared to 55.86% in 2008. The Company's ratio of non-interest expense to average assets increased from 2.07% for the twelve months ended December 31, 2008, to 2.15% for the twelve months ended December 31, 2009. The efficiency ratio in the twelve months of 2009 was positively impacted by the TeamBank and Vantus Bank-related one-time gains and negatively impacted by the investment securities impairment write-downs recorded by the Company in 2009 and the other expenses discussed above.

Non-GAAP Reconciliation:

(Dollars in thousands)

    
    
                                Three Months Ended December 31, 
                                 2009                        2008
                  Non-Interest   Revenue        Non-Interest  Revenue
                     Expense     Dollars*    %     Expense    Dollars*    %
    
    Efficiency
     Ratio           $20,875    $34,829   59.94%   $13,383   $23,551   56.83%
     
    Amortization of
     deposit broker                        
     origination fees     --         --      --         --       639   (1.61) 
    
    Net change in fair
     value of interest
     rate swaps and
     related deposits     --         --      --         --    (1,691)   4.26 
    
    Efficiency ratio
     excluding impact
     of hedge
     accounting
     entries         $20,875    $34,829   59.94%   $13,383   $22,499   59.48%
    
    * Net interest income plus non-interest income
    
    
                               Twelve Months Ended December 31, 
                                2009                          2008
                  Non-Interest  Revenue         Non-Interest  Revenue
                     Expense    Dollars*     %    Expense     Dollars*    %
    Efficiency
     Ratio           $78,195   $212,047   36.88%   $55,706   $99,727   55.86%
    
    Amortization of
     deposit broker                        
     origination fees     --        393    (.07)        --     3,111   (1.81) 
    
    Net change in fair
     value of interest
     rate swaps and
     related deposits     --     (1,184)    .20         --    (6,976)   4.06 
    
    Efficiency ratio
     excluding impact
     of hedge
     accounting
     entries         $78,195   $211,256   37.01%   $55,706   $95,862   58.11%
    
    * Net interest income plus non-interest income

INCOME TAXES

For the three months ended December 31, 2009, the Company's effective tax rate was 25.2%. The lower tax rate was due to additional tax-exempt investments and loans obtained in the acquisitions. For the twelve months ended December 31, 2009, the Company's effective tax rate was 33.7%. In future periods, the Company expects its effective tax rate generally to be 32-36%.

CAPITAL

As of December 31, 2009, total stockholders' equity was $298.9 million (8.2% of total assets). As of December 31, 2009, common stockholders' equity was $242.9 million (6.7% of total assets), equivalent to a book value of $18.12 per common share. Total stockholders' equity at December 31, 2008, was $234.1 million (8.8% of total assets). As of December 31, 2008, common stockholders' equity was $178.5 million (6.7% of total assets), equivalent to a book value of $13.34 per common share. Common stockholders' equity increased $64.4 million, or 36.1%, in the twelve months ended December 31, 2009.

At December 31, 2009, the Company's tangible common equity to total assets ratio was 6.5% as compared to 6.6% at December 31, 2008, due to increased assets from the FDIC-assisted acquisitions and increases in cash equivalents and investments. The Company's tangible common equity to total risk-weighted assets ratio was 11.4% at December 31, 2009.

As of December 31, 2009, the Company's and the Bank's regulatory capital levels were categorized as "well capitalized" as defined by the Federal banking agencies' capital-related regulations. On December 31, 2009, and on a preliminary basis, the Company's Tier 1 leverage ratio was 8.54%, Tier 1 risk-based capital ratio was 14.94%, and total risk-based capital ratio was 16.20%. On December 31, 2009, and on a preliminary basis, the Bank's Tier 1 leverage ratio was 7.35%, Tier 1 risk-based capital ratio was 12.86%, and total risk-based capital ratio was 14.12%.

On December 5, 2008, Great Southern Bancorp, Inc. became a participant in the U.S. Treasury's voluntary Capital Purchase Program (CPP), a part of the Emergency Economic Stabilization Act of 2008, designed to provide capital to healthy financial institutions to promote confidence and stabilization in the economy. At the time the Company was approved to participate in the CPP, it exceeded all "well-capitalized" regulatory benchmarks.  The Company issued to the U.S. Treasury 58,000 shares of the Company's newly authorized Fixed Rate Cumulative Perpetual Preferred Stock, Series A, for an aggregate purchase price of $58.0 million. Great Southern also issued to the U.S. Treasury a warrant to purchase 909,091 shares of common stock at $9.57 per share.

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 thereafter. The preferred shares are callable at 100% of the issue price, subject to the approval of the Company's primary federal regulator.

PROVISION FOR LOAN LOSSES AND ALLOWANCE FOR LOAN LOSSES

The provision for loan losses increased $2.5 million, from $5.0 million during the three months ended December 31, 2008, to $7.5 million during the three months ended December 31, 2009. The provision for loan losses decreased $16.4 million, from $52.2 million during the year ended December 31, 2008, to $35.8 million during the year ended December 31, 2009. See the Company's Quarterly Report on Form 10-Q for March 31, 2008, for additional information regarding the large provision for loan losses in the first quarter of 2008. The allowance for loan losses increased $10.9 million, or 37.5%, to $40.1 million at December 31, 2009, compared to $29.2 million at December 31, 2008. Net charge-offs were $6.0 million in the three months ended December 31, 2009, versus $5.2 million in the three months ended December 31, 2008. Five relationships were responsible for $3.3 million of the net charge-off total for the 2009 fourth quarter. Three of these relationships are included in non-performing loans, and two relationships are included in foreclosed assets at December 31, 2009. Net charge-offs were $24.9 million in the year ended December 31, 2009, versus $48.5 million in the year ended December 31, 2008. The amount of charge-offs for the twelve months ended December 31, 2008, was due principally to the $35 million which was provided for and charged off in the quarter ended March 31, 2008, related to the Company's loans to the Arkansas-based bank holding company and related loans to individuals described in the Company's Quarterly Report on Form 10-Q for March 31, 2008. In addition, general market conditions, and more specifically, housing supply, absorption rates and unique circumstances related to individual borrowers and projects also contributed to increased provisions in both 2008 and 2009. As properties were transferred into foreclosed assets, evaluations were made of the value of these assets with corresponding charge-offs as appropriate.

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 has 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.

The Bank's allowance for loan losses as a percentage of total loans, excluding loans supported by FDIC loss share agreements, was 2.35%, 2.28%, and 1.66% at December 31, 2009, September 30, 2009, and December 31, 2008, respectively. Management considers the allowance for loan losses adequate to cover losses inherent in the Company's loan portfolio at this time, based on recent internal and external 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 the Company's future results of operations and financial condition.

ASSET QUALITY

Former TeamBank and Vantus Bank non-performing assets, including foreclosed assets, are not included in the totals and non-performing loans, potential problem loans and foreclosed assets discussed below because losses from these assets are substantially covered under loss share agreements with the FDIC.  In addition, FDIC-supported assets were recorded at their estimated fair values as of March 20, 2009, and September 4, 2009, respectively. No material additional losses or changes to these estimated fair values have been identified as of December 31, 2009, other than the adjustment of the provisional fair value measurements of the former TeamBank loan portfolio discussed above.

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 December 31, 2009, were $65.0 million, a decrease of $860,000 from December 31, 2008.  Non-performing assets as a percentage of total assets were 1.79% at December 31, 2009, compared to 2.48% at December 31, 2008.  Compared to December 31, 2008, non-performing loans decreased $6.7 million to $26.5 million while foreclosed assets increased $5.9 million to $38.5 million.  Construction and land development loans comprised $8.7 million, or 33%, of the total $26.5 million of non-performing loans at December 31, 2009.

Non-performing Loans.  Despite improvement in non-performing loans since December 31, 2008, an increase of $3.1 million occurred since the September 30, 2009, non-performing loan total of $23.4 million.  The following are additions to non-performing loans during the three months ended December 31, 2009:

  • A $2.8 million relationship, secured by car dealerships in southwest Missouri.
  • A $1.9 million relationship, secured by a mini-storage facility, rental houses and equipment in southwest Missouri.  
  • A $1.6 million relationship, secured by an apartment complex and campground in the Branson, Mo. area.  
  • A $1.4 million relationship, secured by a subdivision and spec houses in the Branson, Mo. area.
  • A $1.4 million relationship secured by residential lots, a commercial building and complete and incomplete non-owner occupied houses located in southwest Missouri.  
  • A $1.0 million relationship secured by rental properties located at Lake Ozark, Mo.

Offsetting these increases was the transfer of two loan relationships to the Foreclosed Assets category and the return of one relationship to performing status.  The decreases were as follows:

  • A $2.3 million relationship, secured primarily by single family residences, duplexes and triplexes in the Joplin/Webb City, Mo. area. This relationship was charged down approximately $500,000 prior to foreclosure in the fourth quarter of 2009.
  • A $2.4 million relationship, secured by a partially-completed subdivision in Springfield, Mo. and improved commercial and residential land in Branson, Mo. This relationship was charged down approximately $1 million at foreclosure in the fourth quarter of 2009.  
  • A $1.5 million loan relationship, secured by an ownership in a closely-held corporation. Additional collateral, including a non-owner occupied residence and a debt service reserve, was obtained in the fourth quarter of 2009. Repayment is anticipated from the sale of the residence. As noted below, this loan was considered to be a potential problem loan at December 31, 2009.  

At December 31, 2009, the six significant relationships listed above accounted for $10.1 million of the total non-performing loan balance of $26.5 million. In addition to the six significant relationships noted above, one other significant relationship remains from the third quarter of 2009 and was previously described in the Company's September 30, 2009, Quarterly Report on Form 10-Q under "Non-performing Loans".  

Potential Problem Loans.  Potential problem loans increased $18.6 million during the three months ended December 31, 2009, from $31.9 million at September 30, 2009, to $50.5 million at December 31, 2009.  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 the non-performing assets. During the three months ended December 31, 2009, potential problem loans increased primarily due to the addition of six unrelated relationships totaling $26.2 million to the Potential Problem Loans category. These six additional relationships include:

  • A $9.6 million relationship secured by condominium units and a commercial lot located near Lake of the Ozarks, Mo.
  • A $5.6 million relationship secured by a residential complex located in St. Louis.  
  • A $5.5 million relationship secured by subdivisions and land in the Springfield, Mo., and Branson, Mo., areas.
  • A $2.0 million relationship secured by a hotel located in Springfield, Mo.
  • A $1.8 million relationship (previously the $1.5 million loan relationship described above in the Non-performing Loan category), secured by an ownership in a closely-held corporation.  
  • A $1.7 million loan secured by rental houses and lots located in southwest Missouri.  

Decreases totaling $9.3 million in the Potential Problem Loans category resulted primarily from six relationships described above which were moved to the Non-performing Loans category.

At December 31, 2009, the six significant relationships listed above accounted for $26.2 million of the total Potential Problem Loan balance of $50.5 million. In addition to the six significant relationships noted above, six other significant relationships remain from the third quarter of 2009 and were previously described in the Company's September 30, 2009, Quarterly Report on Form 10-Q under "Potential Problem Loans".  

Foreclosed Assets.  Foreclosed assets decreased a net $2.6 million during the three months ended December 31, 2009, from $41.1 million at September 30, 2009, to $38.5 million at December 31, 2009.  During the three months ended December 31, 2009, foreclosed assets decreased primarily due to the sale of a $4.2 million relationship consisting of a condominium and retail historic rehabilitation development in St. Louis and a $1.1 million relationship consisting of a six-unit townhouse complex located in Springfield, Mo. Increases consisted primarily of the addition of a $1.8 million relationship consisting of twenty-one residential investment properties in the Joplin, Mo. area and another $1.4 million relationship consisting of a partially completed subdivision in Springfield, Mo.  

At December 31, 2009, eight separate relationships comprised $20.4 million, or 55%, of the total foreclosed assets balance.  In addition to the two new relationships described above, six other of these relationships were previously described more fully in the Company's September 30, 2009, Quarterly Report on Form 10-Q under "Foreclosed Assets".

BUSINESS INITIATIVES

The Company plans to open two to three banking centers per year as market conditions warrant as part of its overall long-term strategic plan. Construction plans are underway to build full-service banking centers in 2010 in Forsyth, Mo., and Des Peres, Mo. Both banking centers have received necessary regulatory approvals.

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 region with three locations in Branson and one in Kimberling City, Mo. The banking center is expected to open later in 2010.

The 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 and is the Company's most successful banking center opening to date generating more than $88.9 million in core deposits. The Company also operates a loan production office and two Great Southern Travel offices in the St. Louis market. The banking center is expected to open in late 2010.    

Great Southern will continue its participation in the FDIC's Transaction Account Guarantee Program (a part of the Temporary Liquidity Guarantee Program), which was extended by the FDIC until June 30, 2010.  By participating in this program, Great Southern is purchasing additional FDIC insurance coverage for its customers. Great Southern customers with noninterest-bearing deposit accounts, Lawyer's Trust Accounts or IOLTA's, and NOW accounts paying interest at a rate less than 0.50 percent will be fully insured by the FDIC regardless of the account balance. Coverage under the Transaction Account Guarantee Program is in addition to and separate from the coverage available under the FDIC's general deposit insurance rules.

On December 21, 2009, Great Southern Bancorp was added to the NASDAQ OMX American Bankers Association (ABA) Community Bank Index (Nasdaq: ABQI). The Index is designed to track the performance of banks and thrifts, or their holding companies, listed on The NASDAQ Stock Market. The Index is intended to serve as a benchmark for investment products by including the larger and more liquid community banks. The NASDAQ OMX ABA Community Bank Index is reranked on a semi-annual basis.

Great Southern Bancorp, Inc. will hold its 21st Annual Meeting of Shareholders at 10:00 a.m. CDT on Wednesday, May 12, 2010, at the Great Southern Operations Center, 218 S. Glenstone, Springfield, Mo.  Holders of Great Southern Bancorp, Inc. common stock at the close of business on the record date, March 3, 2010, can vote at the annual meeting, either in person or by proxy. Material to be presented at the Annual Meeting will be available on the company's Web site, www.greatsouthernbank.com, prior to the start of the meeting.

The common stock of Great Southern Bancorp, Inc., is quoted on the NASDAQ Global Select Market System under the symbol "GSBC". The last reported sale price of GSBC stock in the quarter ended December 31, 2009, was $21.36.

Great Southern offers a broad range of banking, investment, insurance and travel services to customers and clients. Headquartered in Springfield, Mo., Great Southern operates 72 banking centers and more than 200 ATMs in Missouri, Iowa, Kansas and Nebraska. The Company also serves lending needs through a loan production office in Rogers, Ark.

www.greatsouthernbank.com

Forward-Looking Statements

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

The following tables set forth certain selected consolidated financial information of the company at and for the periods indicated.  Financial data for all periods is unaudited.  In the opinion of management, all adjustments, which consist only of normal recurring accruals, necessary for a fair presentation of the results for and at such unaudited periods have been included.  The results of operations and other data for the three and twelve months ended December 31, 2009, and 2008, are not necessarily indicative of the results of operations, which may be expected for any future period.  

    
    
    Selected Financial Condition   December 31,    December 31,  September 30,
     Data:                             2009            2008           2009
                                              (Dollars in thousands)
      Total assets                 $3,641,119      $2,659,923     $3,726,996
      Loans receivable, gross       2,122,226       1,746,159      2,111,073
      Allowance for loan losses        40,101          29,163         38,630
      Foreclosed assets, net           41,660          32,659         45,616
      Available-for-sale securities,
       at fair value                  764,291         647,648        728,598
      Deposits                      2,713,961       1,908,028      2,740,982
      Total borrowings                591,908         500,030        654,862
      Total stockholders' equity      298,908         234,087        286,260
      Common stockholders' equity     242,891         178,507        230,355
      Non-performing assets
       (excluding FDIC-supported
        assets                         65,001          65,861         64,575
    
    
                             Three Months       Twelve Months     Three Months
                                 Ended              Ended            Ended
                              December 31,       December 31,    September 30,
                             2009     2008      2009      2008        2009
    
    Selected Operating Data:                (Dollars in thousands)
    
      Interest income      $41,661  $35,786  $155,868  $144,814     $39,686
      Interest expense      15,482   18,544    66,605    73,231      15,911
      Net interest income   26,179   17,242    89,263    71,583      23,775
      Provision for loan
       losses                7,500    5,000    35,800    52,200      16,500
      Non-interest income    8,650    6,309   122,784    28,144      57,005
      Non-interest expense  20,875   13,383    78,195    55,706      22,657
      Provision (credit)
       for income taxes      1,629    1,599    33,005    (3,751)     14,058
        Net income
         (loss)             $4,825   $3,569   $65,047   $(4,428)    $27,565
        Net income
         (loss)
          available to
          common
          shareholders      $3,988   $3,327   $61,694   $(4,670)    $26,714
    
    
                             At or For The      At or For The   At or For The
                             Three Months       Twelve Months    Three Months
                                 Ended              Ended           Ended
                              December 31,       December 31,    September 30,
                             2009     2008      2009      2008       2009
    
    Per Common Share:
      Net income (loss)
       (fully diluted)        $.28     $.25     $4.44     $(.35)     $1.91
      Book value            $18.12   $13.34    $18.12    $13.34     $17.19
    
    Earnings Performance
     Ratios:
      Annualized return on
       average assets         0.52%    0.55%     1.91%    (0.18)%     3.17%
      Annualized return
       on average
       stockholders' equity   7.81%    8.32%    29.72%    (2.47)%    50.82%
      Net interest margin     3.32%    2.80%     3.03%     3.01%      3.27%
      Net interest margin
       excluding hedge
       acctg. entries         3.32%    2.90%     3.04%     3.14%      3.27%
      Average interest
       rate spread            3.26%    2.56%     2.98%     2.74%      3.30%
      Efficiency ratio       59.94%   56.83%    36.88%    55.86%     28.05%
      Non-interest expense
       to average total
       assets                 2.20%    1.90%     2.15%     2.07%      2.27%
    
    Asset Quality Ratios
     (excluding FDIC-
     supported assets):
      Allowance for loan
       losses to period-end
       loans                  2.35%    1.66%     2.35%     1.66%       2.28%
      Non-performing assets
       to period-end assets   1.79%    2.48%     1.79%     2.48%       1.73%
      Non-performing loans
       to period-end loans    1.24%    1.90%     1.24%     1.90%       1.11%
      Annualized net charge-
       offs to average loans  1.43%    1.16%     1.44%     2.63%       2.47%
    
    
    
                  GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                    (In thousands, except number of shares)
    
                                 December 31,   December 31,    September 30,
                                    2009           2008             2009
                                 ------------   ------------    -------------
                                 (Unaudited)                     (Unaudited)
    ASSETS
    Cash                             $242,723       $135,043         $362,942
    Interest-bearing deposits
     in other financial
     institutions                     201,853         32,877          189,124
                                   ----------     ----------       ----------
        Cash and cash equivalents     444,576        167,920          552,066
    Available-for-sale securities     764,291        647,678          728,598
    Held-to-maturity securities
     (fair value $16,065 –
     December 2009; $1,422 –
     December 2008)                    16,290          1,360           16,290
    Mortgage loans held for sale        9,269          4,695            8,557
    Loans receivable (1), net of
     allowance for loan losses of
     $40,101 – December 2009;
     $29,163 – December 2008        2,082,125      1,716,996        2,072,443
    FDIC indemnification asset        141,484             --          187,359
    Interest receivable                15,582         13,287           15,961
    Prepaid expenses and other
     assets                            66,020         14,179           40,575
    Foreclosed assets held for
     sale (2), net                     41,660         32,659           45,616
    Premises and equipment, net        42,383         30,030           38,272
    Goodwill and other intangible
     assets                             6,216          1,687            6,443
    Investment in Federal Home Loan
     Bank stock                        11,223          8,333           14,816
    Current and deferred income taxes      --         21,099               --
                                    ---------      ---------       ----------
        Total Assets               $3,641,119     $2,659,923       $3,726,996
                                   ==========     ==========       ==========
    
    
       LIABILITIES AND STOCKHOLDERS' EQUITY
    Liabilities:
    Deposits                       $2,713,961     $1,908,028       $2,740,982
    Securities sold under reverse
     repurchase agreements
     with customers                   335,893        215,261          335,990
    Federal Home Loan Bank advances   171,603        120,472          234,413
    Structured repurchase
     agreements                        53,194         50,000           53,211
    Short-term borrowings                 289         83,368              319
    Subordinated debentures
     issued to capital trust           30,929         30,929           30,929
    Accrued interest payable            6,283          9,225            7,630
    Advances from borrowers for
     taxes and insurance                1,268            334            2,031
    Accounts payable and accrued
     expenses                           9,423          8,219           26,532
    Current and deferred income
     taxes                             19,368             --            8,699
                                    ---------      ---------       ----------
        Total Liabilities           3,342,211      2,425,836        3,440,736
                                    ---------      ---------       ----------
    
    Stockholders' Equity:
    Capital stock
      Serial preferred stock, $.01
       par value; authorized 1,000,000
       shares; issued and outstanding
       December 2009 and December
       2008 - 58,000 shares            56,017         55,580           55,905
      Common stock, $.01 par value;
       authorized 20,000,000 shares;
       issued and outstanding December
       2009 – 13,406,403 shares;
       December 2008 – 13,380,969
       shares                             134            134              134
      Stock warrants; December 2009
       and December 2008 – 909,091
       shares                           2,452           2,452           2,452
    Additional paid-in capital         20,180         1 9,811          20,074
    Retained earnings                 208,625         156,247         196,685
    Accumulated other comprehensive
     income (loss)                     11,500            (137)         11,010
                                    ---------       ---------      ----------
        Total Stockholders' Equity    298,908         234,087         286,260
                                    ---------       ---------      ----------
        Total Liabilities and
         Stockholders' Equity      $3,641,119      $2,659,923      $3,726,996
                                   ==========      ==========      ==========
    
    (1) At December 31, 2009, includes loans net of discounts totaling $425.7 
        million, which are subject to significant FDIC support through loss 
        share agreements. 
    (2) At December 31, 2009, includes foreclosed assets net of discounts 
        totaling $3.1 million, which are subject to significant FDIC support 
        through loss share agreements. 
    
    
    
                  GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (In thousands)
    
    
                                THREE MONTHS    TWELVE MONTHS     THREE MONTHS
                                    ENDED           ENDED            ENDED
                                 December 31,    December 31,    September 30,
                               2009     2008    2009      2008       2009
                              ------   ------  ------    ------     ------
                                (Unaudited)  (Unaudited)          (Unaudited)
    
    INTEREST INCOME
      Loans                  $33,554  $28,436  $123,463  $119,829  $31,346
      Investment securities
       and other               8,107    7,350    32,405    24,985    8,340
                             -------  -------   -------   -------  -------
        TOTAL INTEREST
         INCOME               41,661   35,786   155,868   144,814   39,686
                             -------  -------   -------   -------  -------
    INTEREST EXPENSE
      Deposits                12,432   15,405    54,087    60,876   12,641
      Federal Home
       Loan Bank
       advances                1,463    1,138     5,352     5,001    1,452
      Short-term borrowings
       and repurchase
       agreements              1,440    1,636     6,393     5,892    1,647
      Subordinated debentures
       issued to capital trust   147      365       773     1,462      171
                             -------  -------   -------   -------  -------
        TOTAL INTEREST
         EXPENSE              15,482   18,544    66,605    73,231   15,911
                             -------  -------   -------   -------  -------
    NET INTEREST INCOME       26,179   17,242    89,263    71,583   23,775
    PROVISION FOR LOAN
     LOSSES                    7,500    5,000    35,800    52,200   16,500
                             -------  -------   -------   -------  -------
    NET INTEREST INCOME
     AFTER PROVISION
     FOR LOAN LOSSES          18,679   12,242    53,463    19,383    7,275
                             -------  -------   -------   -------  -------
    NON-INTEREST INCOME 
      Commissions              1,566    1,687     6,775     8,724    1,596
      Service charges and
       ATM fees                5,045    3,749    17,669    15,352    4,730
      Net realized gains on
       sales of loans            819      288     2,889     1,415      729
      Net realized gains
       (losses) on sales and
       impairments of 
       available-for-sale
       securities                322   (2,056)   (1,521)   (7,342)   1,966
      Net gain (loss) on sales
       of fixed assets            --       16        --       191       --
      Late charges and fees
       on loans                  159      188       672       819      202
      Change in interest rate
       swap fair value net of
       change in hedged deposit
       fair value                 --    1,695     1,184     6,981       --
      Initial gain recognized
       on business acquisitions   --       --    89,795        --   45,919
      Accretion of income
       related to business
       acquisitions               --       --     2,733        --    1,367
      Other income               739      742     2,588     2,004      496
                             -------  -------   -------   -------  -------
        TOTAL NON-INTEREST
         INCOME                8,650    6,309   122,784    28,144   57,005
                             -------  -------   -------   -------  -------
    NON-INTEREST EXPENSE  
      Salaries and employee
       benefits               11,321    7,273    40,450    31,081   11,077
      Net occupancy and
       equipment expense       3,498    2,069    12,506     8,281    3,509
      Postage                    792      551     2,789     2,240      755
      Insurance                1,149      561     5,716     2,223    1,041
      Advertising                482      206     1,488     1,073      365
      Office supplies and
       printing                  401      166     1,195       820      318
      Telephone                  520      343     1,828     1,396      512
      Legal, audit and other
       professional fees         587      504     2,778     1,739      850
      Expense (income) on
       foreclosed assets         674      947     4,959     3,431    2,935
      Other operating expenses 1,451      763     4,486     3,422    1,295
                             -------  -------   -------   -------  -------
        TOTAL NON-INTEREST
         EXPENSE              20,875   13,383    78,195    55,706   22,657
                             -------  -------   -------   -------  -------
    INCOME (LOSS) BEFORE
     INCOME TAXES              6,454    5,168    98,052    (8,179)  41,623
    PROVISION (CREDIT) FOR
     INCOME TAXES              1,629    1,599    33,005    (3,751)  14,058
                             -------  -------   -------   -------  -------
    NET INCOME (LOSS)         $4,825   $3,569   $65,047   $(4,428) $27,565
                             -------  -------   -------   -------  -------
    PREFERRED STOCK DIVIDENDS
     AND DISCOUNT ACCRETION      837      242     3,353       242      851
                             -------  -------   -------   -------  -------
    NET INCOME (LOSS)
     AVAILABLE TO COMMON
     SHAREHOLDERS             $3,988   $3,327   $61,694   $(4,670) $26,714
                             =======  =======   =======   =======  =======
    BASIC EARNINGS PER
     COMMON SHARE               $.30     $.25     $4.61    $(0.35)   $1.99
                                 ===      ===      ====      ====     ====
    DILUTED EARNINGS PER
     COMMON SHARE               $.28     $.25     $4.44    $(0.35)   $1.91
                                 ===      ===      ====      ====     ====
    DIVIDENDS DECLARED PER
     COMMON SHARE               $.18     $.18      $.72      $.72     $.18
                                 ===      ===      ====      ====     ====

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 $437,000 and $491,000 for the three months ended December 31, 2009, and 2008, respectively. Fees included in interest income were $1.8 million and $2.5 million for the twelve months ended December 31, 2009, and 2008, respectively. Tax-exempt income was not calculated on a tax equivalent basis.  The table does not reflect any effect of income taxes.

    
    
                                                                   
                                 December 31,      Three Months Ended
                                    2009            December 31, 2009
                                 ------------------------------------------
                                    Yield/    Average                Yield/
                                     Rate     Balance     Interest   Rate
                                 ------------------------------------------
                                             (Dollars in thousands)
    Interest-earning
     assets:
       Loans receivable:
         One- to four-
          family
          residential                 5.87%    $329,959     $5,099     6.13%
         Other residential            6.03      166,402      2,665     6.35
         Commercial real
          estate                      6.21      655,524     10,945     6.62
         Construction                 5.80      504,407      6,827     5.37
         Commercial
          business                    5.68      180,981      2,980     6.53
         Other loans                  6.88      231,852      3,947     6.75
         Industrial revenue
          bonds                       6.12       68,190      1,091     6.35
                                      ----       ------      -----     ----
    
              Total loans
               receivable             6.25    2,137,315     33,554     6.23
    
    Investment
     securities and
     other interest-
     earning assets                   4.68      995,009      8,107     3.23
                                      ----      -------      -----     ----
    
    Total interest-
     earning assets                   5.47    3,132,324     41,661     5.27
                                      ----                  ------     ----
    Non-interest-
     earning assets:
         Cash and cash
          equivalents                           286,981
         Other non-earning
          assets                                259,347
                                                -------
              Total assets                   $3,678,652
                                             ==========
    
    Interest-bearing
     liabilities:
         Interest-bearing
          demand and
          savings                     1.00     $697,709      1,963     1.12
         Time deposits                2.33    1,745,118     10,469     2.38
                                      ----    ---------     ------     ----
              Total deposits          1.88    2,442,827     12,432     2.02
    Short-term
     borrowings and
     structured repo                  1.20      396,628      1,440     1.44
    Subordinated
     debentures issued
       to capital
       trust                          1.85       30,929        147     1.89
    FHLB advances                     4.00      177,968      1,463     3.26
                                      ----      -------      -----     ----
    
              Total interest-
               bearing
               Liabilities            1.91    3,048,352     15,482     2.01
                                      ----                  ------     ----
    Non-interest-
     bearing
     liabilities:
         Demand deposits                        300,215
         Other liabilities                       27,036
                                                 ------
              Total liabilities               3,375,603
    Stockholders'
     equity                                     303,049
                                                -------
              Total liabilities
               and
               stockholders'
               equity                        $3,678,652
                                             ==========
    
    Net interest
     income:
         Interest rate
          spread                      3.56%                $26,179     3.26%
                                      ====                 =======     ====
         Net interest
          margin*                                                      3.32%
                                                                       ====
    Average interest-
     earning assets to
     average interest-
     bearing
     liabilities                                  102.8%
                                                  =====
    
    
                                        Three Months Ended
                                         December 31, 2008
                                ---------------------------------
                                   Average                 Yield/
                                   Balance     Interest     Rate
                                ---------------------------------
                                        (Dollars in thousands)
    Interest-earning
     assets:
       Loans receivable:
         One- to four-
          family
          residential               $215,201     $3,354     6.20%
         Other residential           121,956      1,875     6.12
         Commercial real
          estate                     479,296      8,007     6.65
         Construction                587,770      9,106     6.16
         Commercial
          business                   133,965      2,047     6.08
         Other loans                 192,275      3,049     6.31
         Industrial revenue
          bonds                       61,528        998     6.45
                                      ------        ---     ----
    
              Total loans
               receivable          1,791,991     28,436     6.31
    
    Investment
     securities and
     other interest-
     earning assets                  659,333      7,350     4.43
                                     -------      -----     ----
                                     
    
    Total interest-
     earning assets                2,451,324     35,786     5.81
                                                 ------     ----
    Non-interest-
     earning assets:
         Cash and cash
          equivalents                 81,768
         Other non-earning
          assets                      80,358
                                      ------
              Total assets        $2,613,450
                                  ==========
    
    Interest-bearing
     liabilities:
         Interest-bearing
          demand and
          savings                   $388,461      1,251     1.28
         Time deposits             1,415,323     14,154     3.98
                                   ---------     ------     ----
              Total deposits       1,803,784     15,405     3.40
    Short-term
     borrowings and
     structured repo                 314,328      1,636     2.07
    Subordinated
     debentures issued
       to capital
       trust                          30,929        365     4.69
    FHLB advances                    122,255      1,138     3.70
                                     -------      -----     ----
    
              Total interest-
               bearing
               Liabilities         2,271,296     18,544     3.25
                                                 ------     ----
    Non-interest-
     bearing
     liabilities:
         Demand deposits             142,361
         Other liabilities            11,271
                                      ------
              Total liabilities    2,424,928
    Stockholders'
     equity                          188,522
                                     -------
              Total liabilities
               and
               stockholders'
               equity             $2,613,450
                                  ==========
    
    Net interest
     income:
         Interest rate
          spread                                $17,242     2.56%
                                                =======     ====
         Net interest
          margin*                                           2.80%
                                                            ====
    Average interest-
     earning assets to
     average interest-
     bearing
     liabilities                       107.9%
                                       =====
    
    --------------------------
    * Defined as the Company's net interest income divided by total
       interest-earning assets.
    
    
    
    
                                   December 31,        Twelve Months Ended
                                       2009            December 31, 2009
                                   ------------------------------------------
                                      Yield/     Average               Yield/
                                       Rate      Balance     Interest   Rate
                                   ------------------------------------------
                                               (Dollars in thousands)
    Interest-earning
     assets:
       Loans receivable:
         One- to four-
          family
          residential                   5.87%   $292,409     $17,224    5.89%
         Other residential              6.03     136,668       8,528    6.24
         Commercial real
          estate                        6.21     605,149      39,066    6.46
         Construction                   5.80     567,405      31,269    5.51
         Commercial
          business                      5.68     156,236      10,044    6.43
         Other loans                    6.88     205,768      13,033    6.33
         Industrial revenue
          bonds                         6.12      64,432       4,299    6.67
                                        ----      ------       -----    ----
    
              Total loans
               receivable               6.25   2,028,067     123,463    6.09
    
    Investment
     securities and
     other interest-
     earning assets                     4.68     917,843      32,405    3.53
                                        ----     -------      ------    ----
    
    Total interest-
     earning assets                     5.47   2,945,910     155,868    5.29
                                        ----                 -------    ----
    Non-interest-
     earning assets:
         Cash and cash
          equivalents                            250,422
         Other non-earning
          assets                                 206,727
                                                 -------
              Total assets                    $3,403,059
                                              ==========
    
    Interest-bearing
     liabilities:
         Interest-bearing
          demand and
          savings                       1.00    $611,136       6,600    1.08
         Time deposits                  2.33   1,650,913      47,487    2.88
                                        ----   ---------      ------    ----
              Total deposits            1.88   2,262,049      54,087    2.39
    Short-term
     borrowings and
     structured repo                    1.20     399,587       6,393    1.60
    Subordinated
     debentures issued
     to capital trust                   1.85      30,929         773    2.50
    FHLB advances                       4.00     190,903       5,352    2.80
                                        ----     -------       -----    ----
    
              Total interest-
               bearing
               liabilities              1.91   2,883,468      66,605    2.31
                                        ----                  ------    ----
    Non-interest-
     bearing
     liabilities:
         Demand deposits                         221,215
         Other liabilities                        23,692
                                                  ------
              Total liabilities                3,128,375
    Stockholders'
     equity                                      274,684
                                                 -------
              Total liabilities
               and stockholders'
               equity                         $3,403,059
                                              ==========
    
    Net interest
     income:
         Interest rate
          spread                        3.56%                $89,263    2.98%
                                        ====                 =======    ====
         Net interest
          margin*                                                       3.03%
                                                                        ====
    Average interest-
     earning assets to
     average interest-
     bearing
     liabilities                                   102.2%
                                                   =====
    
    
                                        Twelve Months Ended
                                         December 31, 2008
                                    -----------------------------
                                    Average                Yield/
                                    Balance     Interest   Rate
                                    -----------------------------
                                        (Dollars in thousands)
    Interest-earning
     assets:
       Loans receivable:
         One- to four-
          family
          residential                $206,299    $13,290     6.44%
         Other residential            109,348      7,214     6.60
         Commercial real
          estate                      479,347     32,250     6.73
         Construction                 649,037     41,448     6.39
         Commercial
          business                    162,512     10,013     6.16
         Other loans                  179,731     11,871     6.60
         Industrial revenue
          bonds                        55,728      3,743     6.72
                                       ------      -----     ----
    
              Total loans
               receivable           1,842,002    119,829     6.51
    
    Investment
     securities and
     other interest-
     earning assets                   533,567     24,985     4.68
                                      -------     ------     ----
    
    Total interest-
     earning assets                 2,375,569    144,814     6.10
                                                 -------     ----
    Non-interest-
     earning assets:
         Cash and cash
          equivalents                  71,989
         Other non-earning
          assets                       74,446
                                       ------
              Total assets         $2,522,004
                                   ==========
    
    Interest-bearing
     liabilities:
         Interest-bearing
          demand and
          savings                    $484,490      8,370     1.73
         Time deposits              1,268,941     52,506     4.14
                                    ---------     ------     ----
              Total deposits        1,753,431     60,876     3.47
    Short-term
     borrowings and
     structured repo                  262,004      5,892     2.25
    Subordinated
     debentures issued
     to capital trust                  30,929      1,462     4.73
    FHLB advances                     133,477      5,001     3.75
                                      -------      -----     ----
    
              Total interest-
               bearing
               liabilities          2,179,841     73,231     3.36
                                                  ------     ----
                                                  
    Non-interest-
     bearing
     liabilities:
         Demand deposits              147,665
         Other liabilities             10,823
                                       ------
              Total liabilities     2,338,329
    Stockholders'
     equity                           183,675
                                      -------
              Total liabilities
               and stockholders'
               equity              $2,522,004
                                   ==========
    
    Net interest
     income:
         Interest rate
          spread                                 $71,583     2.74%
                                                 =======     ====
         Net interest
          margin*                                            3.01%
                                                             ====
    Average interest-
     earning assets to
     average interest-
     bearing
     liabilities                        109.0%
                                        =====
    --------------------------
    * Defined as the Company's net interest income divided by total 
      interest-earning assets.

SOURCE Great Southern Bancorp, Inc.



RELATED LINKS

http://www.greatsouthernbank.com