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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934



For the fiscal year ended December 31, 2002

Commission File Number 0-18082


GREAT SOUTHERN BANCORP, INC.
(Exact name of registrant as specified in its charter)

Delaware
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)


Securities registered pursuant to Section 12(b) of the Act: None

       Securities registered pursuant to Section 12(g) of the Act: Common Stock, Par Value $.01

       Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.       Yes /X/             No /    /

       Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K. /    /

       Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act .           Yes /X/            No /    /

       The aggregate market value of the common stock of the Registrant held by non-affiliates of the Registrant on June 28, 2002, computed by reference to the closing price of such shares on that date, was $226,328,750. At March 21, 2003, 6,860,329 shares of the Registrant's common stock were outstanding.



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TABLE OF CONTENTS

Page
PART I
ITEM 1.     BUSINESS 1
Great Southern Bancorp, Inc. 1
Great Southern Bank 1
Forward-Looking Statements 2
Internet Website 2
Primary Market Area 3
Lending Activities 3
Loan Portfolio Composition 5
Originations, Purchases, Sales and Servicing of Loans 12
Loan Delinquencies and Defaults 13
Classified Assets 15
Non-Performing Assets 16
Allowance for Loan Losses on Loans and Foreclosed Assets 17
Investment Activities 19
Sources of Funds 23
Subsidiaries 28
Competition 29
Employees 29
Government Supervision and Regulation 29
Federal and State Taxation 33
ITEM 2.     PROPERTIES 35
ITEM 3.     LEGAL PROCEEDINGS 37
ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 37
ITEM 4A.  EXECUTIVE OFFICERS OF THE REGISTRANT 37
PART II
ITEM 5.     MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
          STOCKHOLDER MATTERS 38
ITEM 6.     SELECTED CONSOLIDATED FINANCIAL DATA 39
ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
          FINANCIAL CONDITION AND RESULTS OF OPERATION 42
ITEM 7A.  QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
                       RISK

58
ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION 63
ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
          ON ACCOUNTING AND FINANCIAL DISCLOSURE 104
PART III
ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 104
ITEM 11.   EXECUTIVE COMPENSATION 106
ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
          AND MANAGEMENT 110
ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 112
ITEM 14.   CONTROLS AND PROCEDURES 113
PART IV
ITEM 15.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
          REPORTS ON FORM 8-K 114
SIGNATURES
INDEX TO EXHIBITS


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PART I

ITEM 1. BUSINESS.

THE COMPANY

Great Southern Bancorp, Inc.

       Great Southern Bancorp, Inc. ("Bancorp" or "Company") is a financial holding company which, as of December 31, 2002, owned directly all of the stock of Great Southern Bank ("Great Southern" or the "Bank") and other non-banking subsidiaries. Bancorp was incorporated under the laws of the State of Delaware in July 1989 as a unitary savings and loan holding company. After receiving the approval of the Federal Reserve Bank of St. Louis (the "Federal Reserve" or "FRB"), the Company became a one-bank holding company on June 30, 1998, upon the conversion of Great Southern to a Missouri-chartered trust company.

       As a Delaware corporation, the Company is authorized to engage in any activity that is permitted by the Delaware General Corporation Law and is not prohibited by law or regulatory policy. The Company currently conducts its business as a financial holding company. Through the financial holding company structure, it is possible to expand the size and scope of the financial services offered by the Company beyond those offered by the Bank. The financial holding company structure provides the Company with greater flexibility than the Bank would have to diversify its business activities, through existing or newly formed subsidiaries, or through acquisitions or mergers of other financial institutions as well as other companies. At December 31, 2002, Bancorp's consolidated assets were $1.40 billion, consolidated net loans were $998 million, consolidated deposits were $1.02 billion and consolidated stockholders' equity was $105 million. The assets of the Company consist primarily of the stock of Great Southern, the stock of other financial services companies, interests in a local trust company and a merchant banking company and cash.

       Through subsidiaries of the Bank, the Company offers insurance, travel, discount brokerage and related services, which are discussed further below. The activities of the Company are funded by retained earnings and through dividends from Great Southern and borrowings from third parties. Activities of the Company may also be funded through sales of additional securities or through income generated by other activities of the Company. The Company expects to finance its future activities in a similar manner.

       The executive offices of the Company are located at 1451 East Battlefield, Springfield, Missouri 65804, and its telephone number at that address is (417) 887-4400.

Great Southern Bank

       Great Southern was incorporated as a Missouri-chartered mutual savings and loan association in 1923, and, in 1989, was converted to a Missouri-chartered stock savings and loan association. In 1994, Great Southern changed to a federal savings bank charter and then, on June 30, 1998, changed to a Missouri-chartered trust company (the equivalent of a commercial bank charter). Headquartered in Springfield, Missouri, Great Southern offers a broad range of banking services through its 29 branches located in southwestern and central Missouri. At December 31, 2002, the Bank had total assets of $1.40 billion, deposits of $1.03 billion and stockholders' equity of $116 million, or 8.3% of total assets. Its deposits are insured by the Savings Association Insurance Fund ("SAIF") to the maximum levels permitted by the Federal Deposit Insurance Corporation ("FDIC").



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       Great Southern is principally engaged in the business of originating residential and commercial real estate loans, other commercial and consumer loans and funding these loans through attracting deposits from the general public, originating brokered deposits and borrowings from the Federal Home Loan Bank of Des Moines (the "FHLBank") and others.

       For many years, Great Southern has followed a strategy of emphasizing quality loan origination through residential, commercial and consumer lending activities in its local market area. The goal of this strategy has been to maintain its position as one of the leading providers of financial services in its market area, while simultaneously diversifying assets and reducing interest rate risk by originating and holding adjustable-rate loans in its portfolio and selling fixed-rate single-family mortgage loans in the secondary market. The Bank continues to place primary emphasis on residential mortgage and other real estate lending while also expanding and increasing its originations of commercial business and consumer loans.

       The corporate office of the Bank is located at 1451 East Battlefield, Springfield, Missouri 65804 and its telephone number at that address is (417) 887-4400.

Forward-Looking Statements

       When used in this Form 10-K 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" 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, demand for loans and deposits in the Company's market area and competition, that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to advise readers that the factors listed above could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

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

Internet Website

       Bancorp maintains a website at www.greatsouthernbank.com. The information contained on that website is not included as part of, or incorporated by reference into, this Annual Report on Form 10-K. Bancorp has not historically made available on or through its website Bancorp's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q or Current Reports on Form 8-K or amendments to these reports because its website has not been operationally compatible with providing such availability. Bancorp is currently in the process of upgrading its website for this purpose and expects to make such materials available on or through its website beginning on or before April 15, 2003. Until such time as these materials are available on or through its website, Bancorp will provide paper copies of these filings free of charge upon request. Requests should be made to: Rex A. Copeland, Treasurer, Great Southern Bancorp, Inc., 1451 E. Battlefield, Springfield, Missouri 65804; tel. no. (417) 887-4400. These materials are also available free of charge on the Securities and Exchange Commission's website at www.sec.gov.



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Primary Market Area

       Great Southern's primary market area encompasses 15 counties in southwestern and central Missouri. The Bank's branches and ATMs support deposit and lending activities throughout the region, serving such diversified markets as Springfield, Joplin, the resort areas of Branson and Lake of the Ozarks, and various smaller communities in the Bank's market area. Management believes that the Bank's share of the deposit and lending markets in its market area is approximately 10% and its affiliates have an even smaller percent, with the exception of the travel agency which has a larger percent of its respective business in its market area.

       Great Southern's largest concentration of loans and deposits is in the Greater Springfield area. With a population of approximately 325,000, the Greater Springfield area is the third largest metropolitan area in Missouri. Employment in this area is diversified, including small and medium-sized manufacturing concerns, service industries, especially in the resort and leisure activities sectors, agriculture, the federal government, and a major state university. Springfield is also a regional health care center. The unemployment rate in this area is, and has consistently been, below the national average.

       The next largest concentration of loans is in the Branson area. The region is a vacation and entertainment center, attracting tourists to its theme parks, resorts, country music and novelty shows and other recreational facilities. As a result of the rapid growth of the Branson area in the early 1990's, property values increased at unusually high rates. This growth also provided for increased loan demand and a more volatile lending market than had previously been present in that area. Due to overbuilding of commercial properties during the mid-1990's, property values had experienced downward pressure in the late 1990's. In recent years, commercial real estate values have stabilized. Reduced demand for residential properties in the 1990's similarly created downward pressure on one- to four-family and multi-family, primary and vacation residences in this area. In recent years, residential real estate demand and values have shown improvements.

       A significant portion of the Bank's loan originations have been secured by properties in the two county region that includes the Branson area. Approximately $162 million, or 15%, of the total loan portfolio at December 31, 2002, was secured by commercial real estate, commercial construction, other residential properties, one- to four-family residential properties, and one- to four-family construction properties, and consumer loans in the Branson area. Residential mortgages account for approximately $64 million of this total. Included in the Branson concentration totals are approximately $2.4 million of non-performing loans.

       In January 2003, the Bank opened a loan production office in Kansas City, Missouri. While the Bank has made loans in the Greater Kansas City area in the past from its Springfield office, this loan production office will likely result in higher balances of commercial real estate and commercial construction loans in the Kansas City area.

Lending Activities

       General

       From its beginnings in 1923 through the early 1980s, Great Southern primarily made long-term, fixed-rate residential real estate loans that it retained in its loan portfolio. Beginning in the early 1980s, Great Southern increased its efforts to originate short-term and adjustable-rate loans. Substantially all of the adjustable-rate mortgage loans originated by Great Southern are held for its own portfolio and substantially all of the long-term fixed-rate residential mortgage loans originated by Great Southern are sold in the secondary market.



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       Beginning in the mid-1980s, Great Southern increased its efforts to originate commercial real estate and other residential loans, primarily with adjustable rates or shorter-term fixed rates. In addition, some competitor banking organizations have merged with larger institutions and changed their business practices or moved operations away from the local area, and others have consolidated operations from the local area to larger cities. This has provided Great Southern expanded opportunity in these areas as well as in the origination of commercial business and consumer loans, primarily the indirect automobile area. In addition to origination of these loans, the Bank has expanded and enlarged its relationships with smaller banks to purchase participations (at par, generally with no servicing costs) in loans the smaller banks originate but are unable to retain in their portfolios due to capital limitations. The Bank uses the same underwriting guidelines in evaluating these participations as it does in its direct loan originations. At December 31, 2002, the balance of participation loans purchased was $67.3 million, or 6.3% of the total loan portfolio. Of these participation loans, one relationship totaling $7.3 million was non-performing at December 31, 2002.

       One of the principal historical lending activities of Great Southern is the origination of fixed and adjustable-rate conventional residential real estate loans to enable borrowers to purchase or refinance owner-occupied homes. Great Southern originates a variety of conventional, residential real estate mortgage loans, principally in compliance with Freddie Mac and Fannie Mae standards for resale in the secondary market. Great Southern promptly sells most of the fixed-rate residential mortgage loans that it originates. Depending on market conditions, the ongoing servicing of these loans is at times retained by Great Southern and at other times released to the purchaser of the loan. Great Southern retains substantially all of the adjustable-rate mortgage loans in its portfolio.

       Another principal lending activity of Great Southern, which has become more prevalent in recent years, is the origination of commercial real estate and construction loans. Since the early 1990s, this area of lending has been an increasing percentage of the loan portfolio and accounts for approximately 48% of the portfolio at December 31, 2002.

       In addition, Great Southern in recent years has increased its emphasis on the origination of other commercial loans, home equity loans, consumer loans and student loans, and is also an issuer of letters of credit. See "-- Other Commercial Lending," "- Classified Assets," and "Loan Delinquencies and Defaults" below. Letters of credit are contingent obligations and are not included in the Bank's loan portfolio.

       Great Southern has a policy of obtaining collateral for substantially all real estate loans. The percentage of collateral value Great Southern will loan on real estate and other property varies based on factors including, but not limited to, the type of property and its location and the borrower's credit history. As a general rule, Great Southern will loan up to 80% of the appraised value on one- to four-family residential property and will loan up to an additional 15% with private mortgage insurance for the loan amount above the 80% level. For commercial real estate and other residential real property loans, Great Southern generally loans up to a maximum of 80% of the appraised value. The origination of loans secured by other property is considered and determined on an individual basis by management with the assistance of any industry guides and other information which may be available.

       Loan applications are approved at various levels of authority, depending on the type, amount and loan-to-value ratio of the loan. Loan commitments of more than $500,000 (or loans exceeding the Freddie Mac loan limit in the case of fixed-rate one- to four-family residential loans for resale) must be approved by Great Southern's loan committee. The loan committee is comprised of the Chairman of the Bank, as chairman of the committee, and other senior officers of the Bank involved in lending activities.

       Although Great Southern is permitted under applicable regulations to originate or purchase loans and loan participations secured by real estate located in any part of the United States, the Bank has concentrated its lending efforts in Missouri and Northern Arkansas, with the largest concentration of its lending activity being in southwestern and central Missouri. In addition, the Bank has made some loans, secured primarily by commercial real estate, in other states, primarily Oklahoma, Kansas and other Midwestern states.



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Loan Portfolio Composition

       The following table sets forth information concerning the composition of the Bank's loan portfolio in dollar amounts and in percentages (before deductions for loans in process, deferred fees and discounts and allowance for loan losses) as of the dates indicated. The table is based on information prepared in accordance with generally accepted accounting principles and is qualified by reference to the Company's consolidated financial statements and the notes thereto contained in Item 8 of this report.

December 31,
2002
2001
2000
1999
1998
Amount
%
Amount
%
Amount
%
Amount
%
Amount
%
(Dollars in thousands)
Real Estate Loans:
  Residential
    One- to four- family $   172,142 16.0% $ 190,556 18.4% $226,136 23.6% $208,466 25.3% $217,120 29.2%
    Other residential 84,862 7.9    88,274 8.5    81,143 8.5    76,926 9.4    85,828 11.5   
  Commercial 401,941 37.4    351,037 34.0    328,432 34.3    251,338 30.5    261,201 35.1   
  Residential Construction:
    One- to four-family 68,416 6.4    49,306 4.8    47,241 4.9    39,795 4.8    33,292 4.4   
    Other residential 29,107 2.7    30,408 2.9    23,703 2.5    7,106 .9    6,553 .9   
  Commercial construction 115,148
10.7   
127,171
12.3   
73,398
7.7   
63,722
7.8   
19,952
2.7   
        Total real estate loans 871,616
81.1   
836,752
80.9
780,053
81.5   
647,353
78.7   
623,946
83.8   
Other Loans:
  Consumer loans:
    Guaranteed student loans 3,407 .3    3,818 .4    3,892 .5    4,067 .5    15,931 2.1   
    Automobile 74,160 6.9    67,909 6.6    67,356 7.0    55,625 6.8    37,152 5.0   
    Home equity and improvement 33,896 3.2    27,198 2.6    19,460 2.0    14,431 1.8    9,292 1.3   
    Other 980
.1   
630
.1   
491
.1   
255
--   
992
.1   
        Total Consumer loans 112,443 10.5    99,555 9.7    91,199 9.6    74,378 9.1    63,367 8.5   
Other commercial loans 91,123
8.4   
97,557
9.4   
85,334
8.9   
100,419
12.2   
57,179
7.7   
        Total other loans 203,566
18.9   
197,112
19.1   
176,533
18.5   
174,797
21.3   
120,546
16.2   
            Total loans 1,075,182 100.0%
1,033,864 100.0%
956,586 100.0%
822,150 100.0%
744,492 100.0%
Less:
  Loans in process 55,468 46,744 45,834 36,048 28,823
  Deferred fees and discounts 779 906 1,274 2,002 1,779
  Allowance for loan losses 21,288
21,328
18,694
17,293
16,928
Total loans receivable, net $   997,647
$ 964,886
$890,784
$766,807
$696,962


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       The following table shows the fixed- and adjustable-rate composition of the Bank's loan portfolio at the dates indicated. The table is based on information prepared in accordance with generally accepted accounting principles.

December 31,
2002
2001
2000
1999
1998
Amount
%
Amount
%
Amount
%
Amount
%
Amount
%
(Dollars in thousands)
Fixed-Rate Loans:
  Real Estate Loans
    Residential
      One- to four- family $     19,142 1.8% $     10,477 1.0% $    6,414 .7% $    5,960 .7% $  11,659 1.6%
      Other Residential 48,661 4.5    48,518 4.7    38,345 4.0    37,079 4.5    39,661 5.3   
    Commercial construction 82,760 7.7    50,039 4.8    40,102 4.2    37,636 4.6    60,757 8.2   
    Residential construction:
      One- to four- family 35,843 3.3    5,925 .6    1,130 .1    --- ---    --- ---   
      Other Residential 7,291 .7    --- ---    --- ---    --- ---    --- ---   
    Commercial construction 10,843
1.0   
---
---   
---
---   
---
---   
---
---   
      Total real estate loans 204,540 19.0    114,959 11.1    85,991 9.0    80,675 9.8    112,077 15.1   
    Consumer loans 80,544 7.5    67,496 6.5    66,751 7.0    54,829 6.7    37,080 5.0   
    Other commercial loans 14,977
1.4   
14,465
1.4   
10,526
1.1   
4,266
.5   
11,956
1.6   
      Total fixed-rate loans 300,061
27.9   
196,920
19.0   
163,268
17.1   
139,770
17.0   
161,113
21.7   
Adjustable-Rate Loans:
  Real Estate Loans
    Residential
      One- to four- family 153,000 14.2    180,079 17.4    219,722 23.0    202,506 24.6    205,461 27.6   
      Other Residential 36,201 3.4    39,756 3.9    42,798 4.5    39,847 4.9    46,167 6.2   
    Commercial 319,181 29.7    300,998 29.1    288,330 30.1    213,702 26.0    200,444 26.9   
    Residential construction:
      One- to four-family 32,573 3.0    43,381 4.2    46,111 4.8    39,795 4.8    33,292 4.4   
      Other residential 21,816 2.0    30,408 2.9    23,703 2.5    7,106 .9    6,553 .9   
    Commercial construction 104,305
9.7   
127,171
12.3   
73,398
7.7   
63,722
7.7   
19,952
2.7   
      Total real estate loans 667,076 62.0    721,793 69.8    694,062 72.6    566,678 68.9    511,869 68.7   
    Consumer loans 31,899 3.0    32,059 3.1    24,448 2.5    19,549 2.4    26,287 3.5   
    Other commercial loans 76,146
7.1   
83,092
8.1   
74,808
7.8   
96,153
11.7   
45,223
6.1   
      Total adjustable-rate loans 775,121
72.1   
836,944
81.0   
793,318
82.9   
682,380
83.0   
583,339
78.3   
        Total loans 1,075,182 100.0%
1,033,864 100.0%
956,586 100.0%
822,150 100.0%
744,492 100.0%
Less:
    Loans in process 55,468 46,744 45,834 36,048 28,823
    Deferred fees and discounts 779 906 1,274 2,002 1,779
    Allowance for loan losses 21,288
21,328
18,694
17,293
16,928
  Total loans receivable, net $   997,647
$   964,886
$890,784
$766,807
$696,962


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       The following table presents the contractual maturities of loans at December 31, 2002. The table is based on information prepared in accordance with generally accepted accounting principles.

Less Than
One Year
One to Five
Years
After Five
Years
Total
(Dollars in thousands)
Real Estate Loans:
    Residential
      One- to four- family $  10,028 $  14,144 $147,970 $   172,142
      Other residential 6,739 45,362 32,761 84,862
    Commercial 67,926 273,602 60,413 401,941
    Residential construction:
      One- to four- family 58,328 9,651 437 68,416
      Other residential 12,821 10,115 6,171 29,107
     Commercial construction 91,679
15,847
7,622
115,148
          Total real estate loans 247,521
368,721
255,374
871,616
Other Loans:
    Consumer loans:
      Guaranteed student loans 3,407 --- --- 3,407
      Automobile 4,261 62,561 7,338 74,160
      Home equity and improvement 510 2,898 30,488 33,896
      Other 980
---
---
980
          Total consumer loans 9,158
65,459
37,826
112,443
Other commercial loans 51,057
36,374
3,692
91,123
          Total other loans 60,215
101,833
41,518
203,566
               Total loans $307,736
$470,554
$296,892
$1,075,182

       As of December 31, 2002, loans due after December 31, 2003 with fixed interest rates totaled $220.7 million and loans due after December 31, 2003 with adjustable rates totaled $546.8 million.

       Environmental Issues

       Loans secured with real property, whether commercial, residential or other, may have a material, negative effect on the financial position and results of operations of the lender if the collateral is environmentally contaminated. The result can be, but is not necessarily limited to, liability for the cost of cleaning up the contamination imposed on the lender by certain federal and state laws, a reduction in the borrower's ability to pay because of the liability imposed upon it for any clean up costs, a reduction in the value of the collateral because of the presence of contamination or a subordination of security interests in the collateral to a super priority lien securing the clean up costs by certain state laws.

       Management of the Bank is aware of the risk that the Bank may be negatively affected by environmentally contaminated collateral and attempts to control such risk through commercially reasonable methods, consistent with guidelines arising from applicable government or regulatory rules and regulations, and to a more limited extent publications of the lending industry. Management currently is unaware (without, in many circumstances, specific inquiry or investigation of existing collateral, some of which was accepted as collateral before risk controlling measures were implemented) of any environmental


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contamination of real property securing loans in the Bank's portfolio that would subject the Bank to any material risk. No assurance can be made, however, that the Bank will not be adversely affected by environmental contamination.

       Residential Real Estate Lending

       At December 31, 2002 and 2001, loans secured by residential real estate totaled $257 million and $279 million, respectively, and represented approximately 23.9% and 26.9%, respectively, of the Bank's total loan portfolio. Compared to historical levels, market rates for fixed rate mortgages were low during the years ended December 31, 2002 and 2001. This caused a higher than normal level of refinancing of adjustable-rate loans into fixed-rate loans during both years, most of which were sold in the secondary market, and accounted for a decline in the Bank's residential real estate loan portfolio during 2002 and 2001.

       The Bank currently is originating one- to four-family adjustable-rate residential mortgage loans primarily with one-year adjustment periods. Rate adjustments on loans originated prior to July 2001 are based upon changes in prevailing rates for one-year U.S. Treasury securities. Rate adjustments on loans originated since July 2001 are based upon changes in the average of interbank offered rates for twelve months U.S. Dollar-denominated deposits in the London Market. Rate adjustments are generally limited to 2% maximum annual adjustments as well as a maximum aggregate adjustment over the life of the loan. Accordingly, the interest rates on these loans typically may not be as rate sensitive as is the Bank's cost of funds. Generally, the Bank's adjustable-rate mortgage loans are not convertible into fixed-rate loans, do not permit negative amortization of principal and carry no prepayment penalty. The Bank also currently is originating other residential (multi-family) mortgage loans with interest rates that are generally either adjustable with changes to the prime rate of interest or fixed for short periods of time (three to five years).

       The Bank's portfolio of adjustable-rate mortgage loans also includes a number of loans with different adjustment periods, without limitations on periodic rate increases and rate increases over the life of the loans, or which are tied to other short-term market indices. These loans were originated prior to the industry standardization of adjustable-rate loans. Since adjustable-rate mortgage loans have not been subject to an interest rate environment which causes them to adjust to the maximum, these loans entail unquantifiable risks resulting from potential increased payment obligations on the borrower as a result of upward repricing. Further, the adjustable-rate mortgages offered by Great Southern, as well as by many other financial institutions, sometimes provide for initial rates of interest below the rates which would prevail were the index used for pricing applied initially. Compared to fixed-rate mortgage loans, these loans are subject to increased risk of delinquency or default as the higher, fully-indexed rate of interest subsequently comes into effect in replacement of the lower initial rate. The Bank has not experienced a significant increase in delinquencies in adjustable-rate mortgage loans due to a relatively low interest rate environment in recent years.

       In underwriting one- to four-family residential real estate loans, Great Southern evaluates the borrower's ability to make monthly payments and the value of the property securing the loan. It is the policy of Great Southern that generally all loans in excess of 80% of the appraised value of the property be insured by a private mortgage insurance company approved by Great Southern for the amount of the loan in excess of 80% of the appraised value. In addition, Great Southern requires borrowers to obtain title and fire and casualty insurance in an amount not less than the amount of the loan. Real estate loans originated by the Bank generally contain a "due on sale" clause allowing the Bank to declare the unpaid principal balance due and payable upon the sale of the property securing the loan. The Bank may enforce these due on sale clauses to the extent permitted by law.



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       Commercial Real Estate and Construction Lending

       Commercial real estate lending has traditionally been a part of Great Southern's business activities. Since fiscal 1986, Great Southern has expanded its commercial real estate lending in order to increase the yield on, and the proportion of interest rate sensitive loans in, its portfolio. Great Southern expects to continue to maintain or increase the current percentage of commercial real estate loans in its total loan portfolio by originating loans secured by commercial real estate, subject to commercial real estate and other market conditions and to applicable regulatory restrictions. See "Government Supervision and Regulation" below.

       At December 31, 2002 and 2001, loans secured by commercial real estate totaled $402 million and $351 million, respectively, or approximately 37.4% and 34.0%, respectively, of the Bank's total loan portfolio. In addition, at December 31, 2002 and 2001, construction loans secured by projects under construction and the land on which the projects are located aggregated $213 million and $207 million, respectively, or 19.8% and 20.0%, respectively, of the Bank's total loan portfolio. The majority of the Bank's commercial real estate loans have been originated with adjustable rates of interest, most of which are tied to the Bank's prime rate. Substantially all of these loans were originated with loan commitments which did not exceed 80% of the appraised value of the properties securing the loans.

       The Bank's construction loans generally have terms of one year or less. The construction loan agreements for one- to four-family projects generally provide that principal payments are required as individual condominium units or single-family houses are built and sold to a third party. This insures the remaining loan balance, as a proportion to the value of the remaining security, does not increase. Loan proceeds are disbursed in increments as construction progresses. Generally, the amount of each disbursement is based on the construction cost estimate of an independent architect, engineer or qualified fee inspector who inspects the project in connection with each disbursement request. Normally, Great Southern's commercial real estate and other residential construction loans are made either as the initial stage of a combination loan (i.e., with a commitment from the Bank to provide permanent financing upon completion of the project) or with a commitment from a third party to provide permanent financing.

       The Bank's commercial real estate and construction loan portfolio consists of loans with diverse collateral types. The following table sets forth loans that are secured by certain types of collateral at December 31, 2002. These collateral types represent the three highest percentage concentrations of commercial real estate and construction loan types to the total loan portfolio.

Collateral Type
Loan Balance
Percentage of
Total Loan
Portfolio

Non-Performing
Loans at
December 31, 2002

(Dollars in thousands)
Motels/Hotels $109,213 10.2% $   640
Health Care Facilities $  71,584 6.7% $     ---
Recreational Facilities $  42,043 3.9% $     ---


       The Bank's commercial real estate and construction loans generally involve larger principal balances than do its residential loans. In general, state banking laws restrict loans to a single borrower and related entities to no more than 25% of a bank's unimpaired capital and unimpaired surplus, plus an additional 10% if the loan is collateralized by certain readily marketable collateral. (Real estate is not included in the definition of "readily marketable collateral.") As computed on the basis of the Bank's unimpaired capital and


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surplus at December 31, 2002, this limit was approximately $33.7 million. See "Government Supervision and Regulation." At December 31, 2002, the Bank was in compliance with the loans-to-one borrower limit. At December 31, 2002, the Bank's largest relationship totaled $18.6 million. All loans included in this relationship were current at December 31, 2002.

       Commercial real estate and construction lending generally affords the Bank an opportunity to receive interest at rates higher than those obtainable from residential lending and to receive higher origination and other loan fees. In addition, commercial real estate and construction loans are generally made with adjustable rates of interest or, if made on a fixed-rate basis, for relatively short terms. Nevertheless, commercial real estate lending entails significant additional risks as compared with residential mortgage lending. Commercial real estate loans typically involve large loan balances to single borrowers or groups of related borrowers. In addition, the payment experience on loans secured by commercial properties is typically dependent on the successful operation of the related real estate project and thus may be subject, to a greater extent, to adverse conditions in the real estate market or in the economy generally.

       Construction loans also involve additional risks attributable to the fact that loan funds are advanced upon the security of the project under construction, which is of uncertain value prior to the completion of construction. Moreover, because of the uncertainties inherent in estimating construction costs, delays arising from labor problems, material shortages, and other unpredictable contingencies, it is relatively difficult to evaluate accurately the total loan funds required to complete a project, and the related loan-to-value ratios. See also the discussion under the headings "- Classified Assets" and "- Loan Delinquencies and Defaults" below.

       Other Commercial Lending

       At December 31, 2002 and 2001, respectively, Great Southern had $91.1 million and $97.6 million in other commercial loans outstanding, or 8.4% and 9.4%, respectively, of the Bank's total loan portfolio. Great Southern's other commercial lending activities encompass loans with a variety of purposes and security, including loans to finance accounts receivable, inventory and equipment.

       Great Southern expects to continue to maintain or increase the current percentage of other commercial loans in its total loan portfolio by originating loans, subject to market conditions and applicable regulatory restrictions. See "Government Supervision and Regulation" below.

       Unlike residential mortgage loans, which generally are made on the basis of the borrower's ability to make repayment from his or her employment and other income and which are secured by real property whose value tends to be more easily ascertainable, other commercial loans are of higher risk and typically are made on the basis of the borrower's ability to make repayment from the cash flow of the borrower's business. Commercial loans are generally secured by business assets, such as accounts receivable, equipment and inventory. As a result, the availability of funds for the repayment of other commercial loans may be substantially dependent on the success of the business itself. Further, the collateral securing the loans may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business.

       The Bank's management recognizes the generally increased risks associated with other commercial lending. Great Southern's commercial lending policy emphasizes complete credit file documentation and analysis of the borrower's character, capacity to repay the loan, the adequacy of the borrower's capital and collateral as well as an evaluation of the industry conditions affecting the borrower. Review of the borrower's past, present and future cash flows is also an important aspect of Great Southern's credit analysis. In addition, the Bank generally obtains personal guarantees from the borrowers on these types of loans. The


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majority of Great Southern's commercial loans have been to borrowers in southwestern and central Missouri. Great Southern intends to continue its commercial lending in this geographic area.

       As part of its commercial lending activities, Great Southern issues letters of credit and receives fees averaging approximately 1% of the amount of the letter of credit per year. At December 31, 2002, Great Southern had 94 letters of credit outstanding in the aggregate amount of $15.7 million. Approximately 82% of the aggregate amount of these letters of credit were secured, including one $7.4 million letter of credit, secured by real estate, which was issued to enhance the issuance of housing revenue refunding bonds.

       Consumer Lending

       Great Southern management views consumer lending as an important component of its business strategy. Specifically, consumer loans generally have short terms to maturity, thus reducing Great Southern's exposure to changes in interest rates, and carry higher rates of interest than do residential mortgage loans. In addition, Great Southern believes that the offering of consumer loan products helps to expand and create stronger ties to its existing customer base.

       Great Southern offers a variety of secured consumer loans, including automobile loans, home equity loans and loans secured by savings deposits. In addition, Great Southern also offers home improvement loans, guaranteed student loans and unsecured consumer loans. Consumer loans totaled $112.4 million and $99.6 million at December 31, 2002 and 2001, respectively, or 10.5% and 9.7%, respectively, of the Bank's total loan portfolio.

       The underwriting standards employed by the Bank for consumer loans include a determination of the applicant's payment history on other debts and an assessment of ability to meet existing obligations and payments on the proposed loan. Although creditworthiness of the applicant is of primary consideration, the underwriting process also includes a comparison of the value of the security, if any, in relation to the proposed loan amount.

       Beginning in fiscal year June 30, 1998, the Bank implemented indirect lending relationships, primarily with automobile dealerships. Through these dealer relationships, the dealer completes the application with the consumer and then submits it to the Bank for credit approval. At December 31, 2002, the Bank had $58.4 million of indirect auto, boat and recreational vehicle loans in its portfolio. While the Bank's initial concentrated effort has been on automobiles, the program is available for use with most tangible products where financing of the product is provided through the seller.

       Student loans are underwritten in compliance with the regulations of the U.S. Department of Education for the Federal Family Education Loan Programs ("FFELP"). The FFELP loans are administered and guaranteed by the Missouri Coordinating Board for Higher Education as long as the Bank complies with the regulations. The Bank has contracted with the Missouri Higher Education Loan Authority (the "MOHELA") to originate and service these loans and to purchase these loans during the grace period immediately prior to the loans beginning their repayment period. This repayment period is generally at the time the student graduates or does not maintain the required hours of enrollment.

       Consumer loans may entail greater risk than do residential mortgage loans, particularly in the case of consumer loans that are unsecured or secured by rapidly depreciable assets such as automobiles. In such cases, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation. The remaining deficiency often does not warrant further substantial collection efforts against the borrower. In addition, consumer loan collections are dependent on the borrower's continuing financial


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strength, and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state consumer bankruptcy and insolvency laws, may limit the amount which can be recovered on these loans. These loans may also give rise to claims and defenses by a consumer loan borrower against an assignee of these loans such as the Bank, and a borrower may be able to assert against the assignee claims and defenses which it has against the seller of the underlying collateral.

Originations, Purchases, Sales and Servicing of Loans

       The Bank originates loans through internal loan production personnel located in the Bank's main and branch offices. Walk-in customers and referrals from real estate brokers and builders are also important sources of loan originations.

       Management does not expect the high level of originations experienced during the past five years to continue. However, as long as the lower interest rate environment continues, there is a higher level of financing and refinancing expected than would exist in a higher rate environment.

       Great Southern may also purchase whole real estate loans and participation interests in real estate loans from private investors, such as other banks, thrift institutions and life insurance companies. This may limit Great Southern's ability to control its credit risk when it purchases participations in these loans. For instance, the terms of participation agreements vary; however, generally Great Southern may not have direct access to the borrower or information about the borrower, and the institution administering the loan may have some discretion in the administration of performing loans and the collection of non-performing loans.

       A number of banks, both locally and regionally, do not have the capital to handle large commercial credits or are seeking diversification of risk in their portfolios. In order to take advantage of this situation, beginning in fiscal June 30, 1998, Great Southern increased the number and amount of participations purchased in commercial real estate and commercial business loans. Great Southern subjects these loans to its normal underwriting standards used for originated loans and rejects any credits that do not meet those guidelines. The originating bank retains the servicing of these loans. The Bank purchased $21.2 million of these loans in the fiscal year ended December 31, 2002 and $34.3 million in the fiscal year ended December 31, 2001. Of the total $67.3 million of purchased participation loans outstanding at December 31, 2002, $20.9 million was purchased from one other institution, all of which was secured by property located in northern Arkansas. None of these loans were non-performing at December 31, 2002.

       There have been no whole loan purchases by the Bank in the last five years. At December 31, 2002 and 2001, approximately $1.7 million, or .2% and $1.9 million, or .2%, respectively, of the Bank's total loan portfolio consisted of purchased whole loans.

       Great Southern also sells whole real estate loans and participation interests in real estate loans to Freddie Mac as well as private investors, such as other banks, thrift institutions, mortgage companies and life insurance companies. These loans and loan participations are generally sold without recourse and for cash in amounts equal to the unpaid principal amount of the loans or loan participations determined using present value yields to the buyer. The sale amounts generally produce gains to the Bank and allow a margin for servicing income on loans when the servicing is retained by the Bank. However, loan participations sold in recent years have primarily been with Great Southern releasing control of the servicing of the loan.

       The Bank sold one- to four-family whole real estate loans and loan participations in aggregate amounts of $105.1 million, $103.4 million and $35.0 million during fiscal 2002, 2001 and 2000, respectively. Sales of whole real estate loans and participations in real estate loans can be beneficial to the Bank since


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these sales generally generate income at the time of sale, produce future servicing income on loans where servicing is retained, provide funds for additional lending and other investments, and increase liquidity.

       Great Southern also sells guaranteed student loans to the MOHELA at the time the borrower is scheduled to begin making repayments on the loans. These loans are generally sold with limited recourse and for cash in amounts equal to the unpaid principal amount of the loans and a premium based on average borrower indebtedness. The premium is based on a sliding scale with a higher premium paid for a larger average borrower indebtedness and a lower premium paid for a smaller average borrower indebtedness.

       The Bank sold guaranteed student loans in aggregate amounts of $10.8 million, $11.7 million and $12.4 million during fiscal 2002, 2001 and 2000, respectively. Sales of guaranteed student loans generally can be beneficial to the Bank since these sales remove the burdensome servicing requirements of these types of loans once the borrower begins repayment.

       Gains, losses and transfer fees on sales of loans and loan participations are recognized at the time of the sale. When real estate loans and loan participations sold have an average contractual interest rate that differs from the agreed upon yield to the purchaser (less the agreed upon servicing fee), resulting gains or losses are recognized in an amount equal to the present value of the differential over the estimated remaining life of the loans. Any resulting discount or premium is accreted or amortized over the same estimated life using a method approximating the level yield interest method. When real estate loans and loan participations are sold with servicing released, as the Bank primarily does, an additional fee is received for the servicing rights. Net gains and transfer fees on sales of loans for fiscal 2002, 2001 and 2000 were $1.6 million, $1.8 million and $570,000, respectively. Of these amounts, $186,000, $179,000 and $103,000, respectively, were gains from the sale of guaranteed student loans and $1.4 million, $1.6 million and $467,000, respectively, were gains from the sale of fixed-rate residential loans.

       Although most loans currently sold by the Bank are sold with servicing released, the Bank had the servicing rights for approximately $36.8 million and $39.5 million at December 31, 2002 and 2001, respectively, of loans owned by others. The servicing of these loans generated net servicing fees to the Bank for the years ended December 31, 2002 and 2001, of $57,000 and $164,000, respectively.

       In addition to interest earned on loans and loan origination fees, the Bank receives fees for loan commitments, letters of credit, prepayments, modifications, late payments, transfers of loans due to changes of property ownership and other miscellaneous services. The fees vary from time to time, generally depending on the supply of funds and other competitive conditions in the market. Fees from prepayments, commitments, letters of credit and late payments totaled $855,000, $784,000 and $610,000 for the years ended December 31, 2002, 2001 and 2000, respectively. Loan origination fees, net of related costs, are accounted for in accordance with Statement of Financial Accounting Standards No. 91 "Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases." Loan fees and certain direct loan origination costs are deferred, and the net fee or cost is recognized in interest income using the level-yield method over the contractual life of the loan. For further discussion of this matter see Note 1 of the Notes to Consolidated Financial Statements.

Loan Delinquencies and Defaults

       When a borrower fails to make a required payment on a loan, the Bank attempts to cause the delinquency to be cured by contacting the borrower. In the case of loans secured by residential real estate, a late notice is sent 15 days after the due date. If the delinquency is not cured by the 30th day, a delinquent notice is sent to the borrower. Additional written contacts are made with the borrower 45 and 60 days after the due date. If the delinquency continues for a period of 65 days, the Bank usually institutes appropriate


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action to foreclose on the collateral. The actual time it takes to foreclose on the collateral varies depending on the particular circumstances and the applicable governing law. If foreclosed, the property is sold at public auction and may be purchased by the Bank. Delinquent consumer loans are handled in a generally similar manner, except that initial contacts are made when the payment is five days past due and appropriate action may be taken to collect any loan payment that is delinquent for more than 15 days. The Bank's procedures for repossession and sale of consumer collateral are subject to various requirements under the applicable consumer protection laws as well as other applicable laws and the determination by the Bank that it would be beneficial from a cost basis.

       Delinquent commercial business loans and loans secured by commercial real estate are initially handled by the loan officer in charge of the loan, who is responsible for contacting the borrower. The President and Senior Lending Officer also work with the commercial loan officers to see that necessary steps are taken to collect delinquent loans. In addition, the Bank has a Problem Loan Committee which meets at least monthly and reviews all classified assets, as well as other loans which management feels may present possible collection problems. If an acceptable workout of a delinquent commercial loan cannot be agreed upon, the Bank may initiate foreclosure proceedings on any collateral securing the loan. However, in all cases, whether a commercial or other loan, the prevailing circumstances may be such that management may determine it is in the best interest of the Bank not to foreclose on the collateral.

       The following table sets forth our loans delinquent 30 - 89 days by type, number, amount and percentage of type at December 31, 2002.

Loans Delinquent for 30-89 Days
Number
Amount
Percent of
Total
Delinquent
Loans

(Dollars in thousands)
Real Estate:
One- to four-family 42 $  2,720 13%   
Other residential 4 820 4      
Commercial 18 11,744 57      
Construction or development 12 929 4      
Consumer and overdrafts 780 3,299 16      
Other commercial 10
1,162
6      
Total 866
$20,674
100%   


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Classified Assets

       Federal regulations provide for the classification of loans and other assets such as debt and equity securities considered to be of lesser quality as "substandard," "doubtful" or "loss" assets. The regulations require insured institutions to classify their own assets and to establish prudent general allowances for losses from assets classified "substandard" or "doubtful." For the portion of assets classified as "loss," an institution is required to either establish specific allowances of 100% of the amount classified or charge such amount off its books. Assets that do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess a potential weakness, are required to be designated "special mention" by management. In addition, a bank's regulators may require the establishment of a general allowance for losses based on assets classified as "substandard" and "doubtful" or based on the general quality of the asset portfolio of the bank. Following are the total classified assets per the Bank's internal asset classification list. There were no significant off- balance sheet items classified at December 31, 2002.

Asset Category
Substandard
Doubtful
Loss
Total
Classified

Allowance
for Losses

(Dollars in thousands)
Loans $27,720 $--- $--- $27,720 $21,288
Foreclosed assets 4,328
---
---
4,328
---
Total $32,048
$---
$---
$32,048
$21,288


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Non-Performing Assets

       The table below sets forth the amounts and categories of gross non-performing assets (classified loans which are not performing under regulatory guidelines and all foreclosed assets, including assets acquired in settlement of loans) in the Bank's loan portfolio as of the dates indicated. Loans generally are placed on non-accrual status when the loan becomes 90 days delinquent or when the collection of principal, interest, or both, otherwise becomes doubtful. For all years presented, the Bank has not had any troubled debt restructurings, which involve forgiving a portion of interest or principal on any loans or making loans at a rate materially less than that of market rates.

December 31,
2002
2001
2000
1999
1998
(Dollars in thousands)
Non-accruing loans:
  One- to four-family residential $  1,999 $  1,333 $  2,171 $     880 $     137
  One- to four-family construction --- --- --- 1 ---
  Other residential --- --- --- 1,002 2,554
  Commercial real estate 1,619 3,407 4,112 4,371 2,496
  Other commercial 1,353 1,021 1,236 444 1,061
  Commercial construction 8,353 2,844 4,858 2,377 1,137
  Consumer 173
393
109
146
33
  Total gross non-accruing loans 13,497
8,998
12,486
9,221
7,418
Loans over 90 days delinquent
   still accruing interest:
  One- to four-family residential --- --- --- 49 2,243
  Commercial real estate 640 489 --- --- ---
  Other commercial --- --- --- --- 241
  Commercial construction --- 59 --- --- ---
  Consumer 384
---
---
---
244
  Total over 90 days delinquent still
    accruing loans

1,024


548


---


49


2,728

Other impaired loans ---
---
---
---
---
  Total gross non-performing loans 14,521
9,546
12,486
9,270
10,146
Foreclosed assets:
  One- to four-family residential 565 460 165 167 438
  One- to four-family construction 160 468 508 --- ---
  Other residential --- --- --- --- 1,075
  Commercial real estate 1,844 1,280 1,645 650 1,297
  Commercial construction 495
---
---
---
---
Total foreclosed assets 3,064
2,208
2,318
817
2,810
Repossessions 1,264
849
370
---
---
Total gross non-performing assets $18,849
$12,603
$15,174
$10,087
$12,956
Total gross non-performing assets as a
  percentage of average total assets

1.40%


1.06%


1.50%


1.09%


1.61%



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       Gross impaired loans totaled $14.5 million at December 31, 2002 and $9.0 million at December 31, 2001.

       For the year ended December 31, 2002, gross interest income which would have been recorded had the non-accruing loans been current in accordance with their original terms amounted to $1.8 million. The amount that was included in interest income on these loans was $828,000 for the year ended December 31, 2002.

       The level of non-performing assets is primarily attributable to the Bank's commercial real estate, commercial construction, commercial business and one- to four-family residential lending activities. Commercial activities generally involve significantly greater credit risks than single-family residential lending. The level of non-performing assets increased at a rate greater than that of the Bank's commercial lending portfolio in the years ended December 31, 2002 and 2000, and at a rate less than that of the Bank's commercial lending portfolio in the years ended December 31, 2001 and 1999, and in the six months ended December 31, 1998. For a discussion of significant non-performing assets, see "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Allowances for Losses on Loans and Foreclosed Assets

        Management periodically reviews Great Southern's allowance for loan losses, considering numerous factors, including, but not necessarily limited to, general economic conditions, loan portfolio composition, prior loss experience, and independent appraisals. Further allowances are established when management determines that the value of the collateral is less than the amount of the unpaid principal of the related loan plus estimated costs of the acquisition and sale or when management determines a borrower of an unsecured loan will be unable to make full repayment. Allowances for estimated losses on foreclosed assets (real estate and other assets acquired through foreclosure) are charged to expense, when in the opinion of management, any significant and permanent decline in the market value of the underlying asset reduces the market value to less than the carrying value of the asset.

       The Bank has maintained a strong lending presence in the Branson area during recent years, primarily due to the substantial growth in the area. While management believes the loans it has funded have been originated pursuant to sound underwriting standards, and individually have no unusual credit risk, the relatively short period of time in which the Branson area has grown, the reduction in values of real estate and the lower than expected increase in tourists visiting the area during recent years, causes some concern as to the credit risk associated with the Branson area as a whole. Due to this concern and the overall growth of the loan portfolio, and due more specifically to the growth of the commercial business, consumer and commercial real estate loan portfolios, and the related inherent risks, management provided increased levels of loan loss allowances over the past few years.

       The allowances for losses on loans and foreclosed assets are maintained at an amount management considers adequate to provide for potential losses. Although management believes that it uses the best information available to make such determinations, future adjustments to the allowance for losses on loans and foreclosed assets may be necessary, and net income could be significantly affected, if circumstances differ substantially from the assumptions used in making the initial determinations.

       At December 31, 2002 and 2001, Great Southern had an allowance for losses on loans of $21.3 million and $21.3 million, respectively, of which $3.5 million and $4.0 million, respectively, had been allocated as an allowance for specific loans, and $1.9 million and $1.2 million, respectively, had been allocated for impaired loans. The allowance is discussed further in Note 3 of the Notes to Consolidated Financial Statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations."



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       The allocation of the allowance for losses on loans at the dates indicated is summarized as follows. The table is based on information prepared in accordance with generally accepted accounting principles.

December 31,
2002
2001
2000
1999
1998
Amount
% of
Loans to
Total
Loans

Amount
% of
Loans to
Total
Loans

Amount
% of
Loans to
Total
Loans

Amount
% of
Loans to
Total
Loans

Amount
% of
Loans to
Total
Loans

(Dollars in thousands)
One- to four-family residential and
 construction
 $  1,449 22.4%  $  1,388 23.2% $     1,164 28.5% $     798 30.1% $ 1,254 33.4%
Other residential and construction 45 10.6    182 11.4    444 11.0    375 10.3    613 12.4   
Commercial real estate and construction
 and other commercial
16,332 56.5    15,480 55.7    12,647 50.9    12,003 50.5    9,719 45.7   
Consumer and overdrafts 2,506 10.5    2,335 9.7    2,236 9.6    1,567 9.1    1,211 8.5   
Other 956
---   
1,943
---   
    2,203
---   
    2,550
---   
4,131
---   
Total $21,288
100.0%
$21,328
100.0%
$18,694
100.0%
$17,293
100.0%
$16,928
100.0%


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       The following table sets forth an analysis of the Bank's allowance for losses on loans showing the details of the allowance by types of loans and the allowance balance by loan type. The table is based on information prepared in accordance with generally accepted accounting principles.

December 31,
2002
2001
2000
1999
1998
(Dollars in thousands)
Balance at beginning of period $21,328
$18,694
$17,293
$16,928
$16,373
Charge-offs:
 One- to four-family residential 211 338 254 114 ---
 Other residential --- --- --- --- 187
 Commercial real estate 572 961 260 131 185
 Construction 3,426 171 218 375 ---
 Consumer, overdrafts and other loans 2,770 2,473 2,116 1,870 1,077
 Other commercial 735
958
303
316
50
 Total charge-offs 7,714
4,901
3,151
2,806
1,499
Recoveries:
 One- to four-family residential 19 30 66 33 147
 Other residential --- --- --- --- ---
 Commercial real estate and construction 92 692 166 64 ---
 Consumer, overdrafts and other loans 1,561 1,270 1,019 793 552
 Other commercial 202
343
195
219
64
 Total recoveries 1,874
2,335
1,446
1,109
763
Net charge-offs 5,840 2,566 1,705 1,697 736
Provision for losses on loans 5,800
5,200
3,106
2,062
1,291
Balance at end of period $21,288
$21,328
$18,694
$17,293
$16,928
Ratio of net charge-offs to average loans
 outstanding

0.58%


0.27%


0.20%


0.23%


0.23%


Investment Activities

        Excluding those issued by the United States Government, or its agencies, there were no investment securities in excess of 10% of the Bank's retained earnings at December 31, 2002. The Bank's investment securities portfolio at December 31, 2001 contained one security with an aggregate book value in excess of 10% of the Bank's retained earnings, excluding those issued by the United States Government, or its agencies. This security was issued by The Missouri Development Finance Board and had an aggregate book and market value of approximately $10,000,000 at December 31, 2001.

       As of December 31, 2002 and 2001, the Bank held approximately $52.6 million and $37.5 million, respectively, in principal amount of investment securities which the Bank intends to hold until maturity. As of such dates, these securities had market values of approximately $55.9 million and $40.7 million, respectively. In addition, as of December 31, 2002 and 2001, the Company held approximately $236.2 million and $233.8 million, respectively, in principal amount of investment securities which the Company classified as available-for-sale. See Notes 1 and 2 of the Notes to Consolidated Financial Statements.



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       The amortized cost and approximate fair values of, and gross unrealized gains and losses on, investment securities at the dates indicated are summarized as follows. The table is based on information prepared in accordance with generally accepted accounting principles.

December 31, 2002
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Approximate
Fair
Value
(Dollars in thousands)
AVAILABLE-FOR-SALE SECURITIES:
U.S. government agencies $  11,000 $     --- $      2 $  10,998
Collateralized mortgage obligations 5,082 --- 11 5,071
Mortgage-backed securities 195,904 3,093 33 198,964
Corporate bonds 9,156 910 12 10,054
Equity securities 11,267
181
266
11,182
Total available-for-sale securities $232,409
$4,184
$  324
$236,269
HELD-TO-MATURITY SECURITIES:
States and political subdivisions and
   industrial revenue bonds

$  52,587


$3,313


$    ---


$  55,900

Total held-to-maturity securities $  52,587
$3,313
$    ---
$  55,900


December 31, 2001
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Approximate
Fair
Value
(Dollars in thousands)
AVAILABLE-FOR-SALE SECURITIES:
U.S. government agencies $  84,719 $   669 $     --- $  85,388
Collateralized mortgage obligations 5,188 --- 71 5,117
Mortgage-backed securities 120,544 28 1,147 119,425
Corporate bonds 8,311 417 --- 8,728
Equity securities 13,967
1,214
34
15,147
Total available-for-sale securities $232,729
$2,328
$1,252
$233,805
HELD-TO-MATURITY SECURITIES:
States and political subdivisions and
  industrial revenue bonds

$  37,465


$3,280


$     45


$ 40,700

Total held-to-maturity securities $  37,465
$3,280
$     45
$ 40,700


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December 31, 2000
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Approximate
Fair
Value
(Dollars in thousands)
AVAILABLE-FOR-SALE SECURITIES:
U.S. government agencies $114,321 $  553 $    99 $114,775
Collateralized mortgage obligations 3,424 15 --- 3,439
Equity securities 8,080
115
---
8,195
Total available-for-sale securities $125,825
$  683
$   99
$126,409
HELD-TO-MATURITY SECURITIES:
U.S. government agencies $  6,999 $   --- $    17 $    6,982
States and political subdivisions and
  industrial revenue bonds
17,101 17 107 17,011
Corporate bonds 2,805 95 25 2,875
Mortgage-backed securities 853
3
6
850
Total held-to-maturity securities $27,758
$  115
$  155
$  27,718


       The following table presents the contractual maturities and weighted average tax-equivalent yields of available-for-sale debt securities at December 31, 2002. The table is based on information prepared in accordance with generally accepted accounting principles.

Cost
Amortized
Yield

Approximate
Fair Value

(Dollars in thousands)
After one through five years $    1,243 5.49%       $    1,253
After five through ten years 10,000 3.55%       10,000
After ten years 8,913 9.93%       9,799
Securities not due on a single maturity date 200,986
4.89%       204,035
Total $221,142
$225,087


After One
Through
Five Years

After Five
Through Ten
Years

After Ten
Years

Securities
Not Due on
a Single
Maturity
Date

Total
(Dollars in thousands)
U.S. government agencies $1,000 $10,000 $     --- $         --- $  11,000
Collateralized mortgage obligations --- --- --- 5,082 5,082
Mortgage-backed securities --- --- --- 195,904 195,904
Corporate bonds 243
---
8,913
---
9,156
     Total $1,243
$10,000
$8,913
$200,986
$221,142


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       The following table presents the contractual maturities and weighted average tax-equivalent yields of held-to-maturity securities at December 31, 2002. The table is based on information prepared in accordance with generally accepted accounting principles.

Cost
Amortized
Yield

Approximate
Fair Value

(Dollars in thousands)
States and political subdivisions and
  industrial revenue bonds:
     After five through ten years $  9,923 11.12%       $11,056
     After ten years 42,664
8.22%       44,844
     Total $52,587
$55,900


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Sources of Funds

       General. Deposit accounts have traditionally been the principal source of the Bank's funds for use in lending and for other general business purposes. In addition to deposits, the Bank obtains funds through advances from the Federal Home Loan Bank of Des Moines, Iowa ("FHLBank") and other borrowings, loan repayments, loan sales, and cash flows generated from operations. Scheduled loan payments are a relatively stable source of funds, while deposit inflows and outflows and the related costs of such funds have varied widely. Borrowings such as FHLBank advances may be used on a short-term basis to compensate for seasonal reductions in deposits or deposit inflows at less than projected levels and may be used on a longer-term basis to support expanded lending activities. The availability of funds from loan sales is influenced by general interest rates as well as the volume of originations.

       Deposits. The Bank attracts both short-term and long-term deposits from the general public by offering a wide variety of accounts and rates. In recent years, the Bank has been required by market conditions to rely increasingly on short-term accounts and other deposit alternatives that are more responsive to market interest rates. The Bank offers regular savings accounts, checking accounts, various money market accounts, fixed-interest rate certificates with varying maturities, certificates of deposit in minimum amounts of $100,000 ("Jumbo" accounts), brokered certificates and individual retirement accounts.

       The following table sets forth the dollar amount of deposits, by interest rate range, in the various types of deposit programs offered by the Bank at the dates indicated. Interest rates on time deposits reflect the rate paid to the certificate holder and do not reflect the effects of the Company's interest rate swaps. The table is based on information prepared in accordance with generally accepted accounting principles.

December 31,
2002
2001
2000
Amount
Percent of
Total

Amount
Percent of
Total

Amount
Percent of
Total

(Dollars in thousands)
Time deposits:
 0.00% - 1.99% $     38,962 3.85% $    7,538 .85% $         --- ---%
 2.00% - 2.99% 208,708 20.64    59,443 6.73    --- ---   
 3.00% - 3.99% 168,186 16.63    94,097 10.65    94 .01   
 4.00% - 4.99% 62,045 6.14    145,515 16.47    14,847 1.98   
 5.00% - 5.99% 91,892 9.08    118,769 13.44    123,103 16.39   
 6.00% - 6.99% 119,145 11.78    212,617 24.06    360,825 48.04   
 7.00% and above 10,298
1.02   
24,527
2.77   
46,447
6.18   
Total Time deposits 699,236 69.14    662,506 74.97    545,316 72.60   
Non-interest-bearing demand deposits 94,508 9.35    62,131 7.03    60,353 8.04   
Savings deposits
    (1.23%-1.37%-2.51%)
876 .08    980 .11    20,400 2.72   
Interest-bearing demand deposits
    (1.08%-1.02%-2.23%)

216,699


21.43   


158,067


17.89   


124,973


16.64   

1,011,319 100.00%
883,684 100.00%
751,042 100.00%
Interest rate swap fair value adjustment 10,638
3,186
---
        Total Deposits $1,021,957
$886,870
$751,042

       A table showing maturity information for the Bank's time deposits as of December 31, 2002, is presented in Note 6 of the Notes to Consolidated Financial Statements.

       The variety of deposit accounts offered by the Bank has allowed it to be competitive in obtaining funds and has allowed it to respond with flexibility to changes in consumer demand. The Bank has become more susceptible to short-term fluctuations in deposit flows, as customers have become more interest rate conscious. The Bank manages the pricing of its deposits in keeping with its asset/liability management and profitability objectives. Based on its experience, management believes that its passbook and certificate accounts are relatively stable sources of deposits, while its checking accounts have proven to be more volatile. However, the ability of the Bank to attract and maintain deposits, and the rates paid on these deposits, has been and will continue to be significantly affected by money market conditions.



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       The following table sets forth the time remaining until maturity of the Bank's time deposits as of December 31, 2002. The table is based on information prepared in accordance with generally accepted accounting principles.

Maturity
3
Months or
Less

Over 3
Months to
6 Months

Over
6 to 12
Months

Over
12
Months
Total
(Dollars in thousands)
Time deposits:
 Less than $100,000 $  82,182 $52,079 $  65,968 $  57,480 $257,709
 $100,000 or more 26,713 18,917 23,479 18,219 87,328
 Brokered 50,115 27,475 42,192 220,038 339,820
 Public funds(1) 13,174
868
315
22
14,379
      Total $172,184
$99,339
$131,954
$295,759
$699,236
______________

(1)  Deposits from governmental and other public entities.

       Brokered deposits. Brokered deposits are marketed through national brokerage firms to their customers in $1,000 increments. The Bank maintains only one account for the total deposit amount while the records of detailed owners are maintained by the Depository Trust Company under the name of CEDE & Co. The deposits are transferable just like a stock or bond investment and the customer can open the account with only a phone call, just like buying a stock or bond. This provides a large deposit for the Bank at a lower operating cost since the Bank only has one account to maintain versus several accounts with multiple interest and maturity checks. At December 31, 2002 and 2001, the Bank had approximately $339.8 million and $355.5 million in brokered deposits, respectively.

       Unlike non-brokered deposits where the deposit amount can be withdrawn with a penalty for any reason, including increasing interest rates, a brokered deposit can only be withdrawn in the event of the death, or court declared mental incompetence, of the depositor. This allows the Bank to better manage the maturity of its deposits. Currently, the rates offered by the Bank for brokered deposits are comparable to that offered for retail certificates of deposit of similar size and maturity.

       In fiscal 2000, the Company began using interest rate swaps to manage its interest rate risks from recorded financial liabilities. During fiscal 2002 and 2001, the Company entered into interest rate swap agreements with the objective of hedging against the effects of changes in the fair value of its liabilities for fixed rate brokered certificates of deposit caused by changes in market interest rates. In fiscal 2002 and 2001, the Company's interest rate swaps reduced interest expense on deposits by approximately $10.4 million and $4.2 million, respectively, due to declining interest rates.

       Borrowings. Great Southern's other sources of funds include advances from the FHLBank and a Qualified Loan Review ("QLR") arrangement with the FRB and other borrowings.

       As a member of the FHLBank, the Bank is required to own capital stock in the FHLBank and is authorized to apply for advances from the FHLBank. Each FHLBank credit program has its own interest rate, which may be fixed or variable, and range of maturities. The FHLBank may prescribe the acceptable uses for these advances, as well as other risks on availability, limitations on the size of the advances and repayment provisions. At December 31, 2002, the amount outstanding was $206.2 million.



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       The FRB has a QLR program where the Bank can borrow on a temporary basis using commercial loans pledged to the FRB. Under the QLR program, the Bank can borrow any amount up to a calculated collateral value of the commercial loans pledged, for virtually any reason that creates a temporary cash need. Examples of this could be: (1) the need to disburse one or several loans but the permanent source of funds will not be available for a few days; (2) a temporary spike in interest rates on other funding sources that are being used; or (3) the need to purchase a security for collateral pledging purposes a few days prior to the funds becoming available on an existing security that is maturing. The Bank had commercial loans pledged to the FRB at December 31, 2002 that would have allowed approximately $100.3 million to be borrowed under the above arrangement. At December 31, 2002, the amount outstanding was $0.

       The Company has a line of credit available with a commercial bank. The amount available under the line of credit is $12,000,000. At December 31, 2002, the amount outstanding was $0.

       The Company has borrowing arrangements in place with the brokerage firms it conducts business with to borrow on margin against its available-for-sale securities. These borrowings are limited to a percent of the market value of the collateral, generally 40-50%, and are used by the Company for short-term cash needs including the purchase of available-for-sale securities and the repurchase of the Company's stock. At December 31, 2002, the amount outstanding was $0.

       During 2001, Great Southern Capital Trust I ("GSBCP"), a newly-formed Delaware business trust subsidiary of the Company, issued 1,725,000 shares of unsecured 9.00% Cumulative Trust Preferred Securities at $10 per share in an underwritten public offering. The gross proceeds of the offering were used to purchase a 9.00% Subordinated Debenture from the Company. The Company's proceeds from the issuance of the Subordinated Debentures to GSBCP, net of underwriting fees and offering expenses, were $16.3 million. The Company records distributions payable on the trust preferred securities as interest expense for financial reporting purposes. The proceeds from the offering were used to reduce the Company's indebtedness under the existing note payable to bank to $0. The trust preferred securities mature in 2031 and are redeemable at the Company's option beginning in 2006. The trust preferred securities qualify as Tier I capital for regulatory purposes.

       During 2001, the Company entered into an interest rate swap agreement to effectively convert the trust preferred securities, which are fixed rate debt, into variable rates of interest. The variable rate is three-month LIBOR plus 202 basis points, adjusting quarterly. The initial rate was 6.25% and the rate at December 31, 2002 was 3.87%.

       The following table sets forth the maximum month-end balances, average daily balances and weighted average interest rates of FHLBank advances during the periods indicated. The table is based on information prepared in accordance with generally accepted accounting principles.

Year Ended December 31,
2002
2001
2000
(Dollars in thousands)
FHLBank Advances:
  Maximum balance $270,544    $265,321    $267,968   
  Average balance 218,564    214,325    218,725   
  Weighted average interest rate 3.14% 4.82% 6.54%


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       The following table sets forth certain information as to the Company's FHLBank advances at the dates indicated. The table is based on information prepared in accordance with generally accepted accounting principles.

December 31,
2002
2001
2000
(Dollars in thousands)
FHLBank advances $206,226
$258,743
$234,378
Weighted average interest
  rate of FHLBank advances

2.90%


3.03%


6.41%

       The following tables set forth the maximum month-end balances, average daily balances and weighted average interest rates of other borrowings during the periods indicated. Other borrowings includes primarily federal funds purchased, securities sold under reverse repurchase agreements, note payable to bank, and trust preferred securities. The tables are based on information prepared in accordance with generally accepted accounting principles.

Year Ended December 31, 2002
Maximum
Balance

Average
Balance

Weighted
Average
Interest
Rate

(Dollars in thousands)
Other Borrowings:
  Federal funds purchased $41,000 $11,284 2.00%
  Securities sold under reverse repurchase agreements 38,504 22,037 1.31   
  Trust preferred securities 17,250 17,250 4.16   
  Other 2 59
.64   
     Total $50,630
2.43%
     Total maximum month-end balance $71,462


Year Ended December 31, 2001
Maximum
Balance

Average
Balance

Weighted
Average
Interest
Rate

(Dollars in thousands)
Other Borrowings:
  Federal funds purchased $113,100 $45,550 3.37%
  Securities sold under reverse repurchase agreements 20,852 15,128 3.18   
  Trust preferred securities 17,250 11,966 5.68   
  Other 16,447 6,155
7.58   
     Total $78,799
4.02%
     Total maximum month-end balance $144,586


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Year Ended December 31, 2000
Maximum
Balance
Average
Balance

Weighted
Average
Interest
Rate

(Dollars in thousands)
Other Borrowings:
  Federal funds purchased $25,000 $  2,806 6.99%
  Securities sold under reverse repurchase agreements 12,869 20,136 4.69   
  Other 19,326 15,031
7.75   
     Total $37,973
6.07%
     Total maximum month-end balance $57,195

       The following tables set forth year-end balances and weighted average interest rates of the Company's other borrowings at the dates indicated. The tables are based on information prepared in accordance with generally accepted accounting principles.

December 31, 2002
Balance
Weighted
Average
Interest Rate

(Dollars in thousands)
Other borrowings:
  Federal funds purchased $  4,800 1.50%
  Securities sold under reverse repurchase agreements 38,503 1.02   
  Trust preferred securities 18,964 3.88   
  Other 1
---   
     Total $62,268
1.88%


December 31, 2001
Balance
Weighted
Average
Interest Rate

(Dollars in thousands)
Other borrowings:
  Federal funds purchased $37,900  1.98%
  Securities sold under reverse repurchase agreements 19,866  .96   
  Trust preferred securities 17,160  4.62   
  Other (3)
1.66   
     Total $74,923 
2.32%


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December 31, 2000
Balance
Weighted
Average
Interest Rate

(Dollars in thousands)
Other borrowings:
  Federal funds purchased $25,000 7.00%
  Securities sold under reverse repurchase agreements 12,869 5.70   
  Note payable to bank 15,500 7.85   
  Other 3,826
7.80   
     Total $57,195
6.99%

Subsidiaries

       Great Southern. As a Missouri-chartered trust company, Great Southern may invest up to 3%, which is equal to $46.0 million, of its assets in service corporations. At December 31, 2002, the Bank's total investment in Great Southern Capital Management ("Capital Management") was $889,000. Capital Management was incorporated and organized in 1988 under the laws of the state of Missouri. At December 31, 2002, the Bank's total investment in Great Southern Financial Corporation ("GSFC") was $1.8 million. GSFC is incorporated under the laws of the State of Missouri, and does business as Great Southern Insurance and Great Southern Travel. These subsidiaries are primarily engaged in the activities described below.

       Great Southern Capital Management, Inc. Through 2002, Capital Management was a registered broker/dealer and a member of the National Association of Securities Dealers, Inc. ("NASD") and the Securities Investors Protection Corporation ("SIPC"). Capital Management offers a full line of financial consultation, investment counseling and discount brokerage services including execution of transactions involving stocks, bonds, options, mutual funds and other securities. In addition, Capital Management was registered as a municipal securities dealer. Capital Management operated through Great Southern's branch office network. Capital Management had net income of $125,000 and $35,000 in the years ended December 31, 2002 and 2001, respectively.

       During 2002, the Bank entered into an agreement with Raymond James Financial Services, Inc. whereby the products and services previously provided by Capital Management to its customers will now be provided through Raymond James. As of January 1, 2003, Capital Management's employees are now employees of the Bank, with broker registration, as well as memberships in NASD and SIPC, now provided through Raymond James.

       General Insurance Agency. Great Southern Insurance, a division of GSFC, was organized in 1974. It acts as a general property, casualty and life insurance agency for a number of clients, including the Bank. Great Southern Insurance had net income of $120,000 and $149,000 in the years ended December 31, 2002 and 2001, respectively.

       Travel Agency. Great Southern Travel, a division of GSFC, was organized in 1976. At December 31, 2002, it was the largest travel agency based in southwestern Missouri and was estimated to be in the top 5% (based on gross revenue) of travel agencies nationwide. Great Southern Travel operates from ten full-time locations, including a facility at the Springfield-Branson Regional Airport, and additional part-time locations. It engages in personal, commercial and group travel services. Great Southern Travel had net income (loss) of $133,000 and $(339,000) in the years ended December 31, 2002 and 2001, respectively.



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       GSB One, L.L.C. At December 31, 2002, the Bank's total investment in GSB One, L.L.C. ("GSB One") and GSB Two, L.L.C. ("GSB Two") was $514 million. The capital contribution was made by transferring participations in loans to GSB Two. GSB One is a Missouri limited liability company that was incorporated in March of 1998. Currently the only activity of this company is the ownership of GSB Two.

       GSB Two, L.L.C. This is a Missouri limited liability company that was incorporated in March of 1998. GSB Two is a real estate investment trust ("REIT"). It holds participations in real estate mortgages from the Bank. The Bank continues to service the loans in return for a management and servicing fee from GSB Two. GSB Two had net income of $23.4 million and $27.3 million in the years ended December 31, 2002 and 2001, respectively.

Competition

       Great Southern faces strong competition both in originating real estate and other loans and in attracting deposits. Competition in originating real estate loans comes primarily from other commercial banks, savings institutions and mortgage bankers making loans secured by real estate located in the Bank's market area. Commercial banks and finance companies provide vigorous competition in commercial and consumer lending. The Bank competes for real estate and other loans principally on the basis of the interest rates and loan fees it charges, the types of loans it originates and the quality of services it provides to borrowers. The other lines of business of the Bank, including loan servicing and loan sales, as well as the Bank and Company subsidiaries, face significant competition in their markets.

       The Bank faces substantial competition in attracting deposits from other commercial banks, savings institutions, money market and mutual funds, credit unions and other investment vehicles. The Bank attracts a significant amount of deposits through its branch offices primarily from the communities in which those branch offices are located; therefore, competition for those deposits is principally from other commercial banks and savings institutions located in the same communities. The Bank competes for these deposits by offering a variety of deposit accounts at competitive rates, convenient business hours, and convenient branch and ATM locations with inter-branch deposit and withdrawal privileges at each branch location.

Employees

       At December 31, 2002, the Bank and its affiliates had a total of 550 employees, including 143 part-time employees. None of the Bank's employees are represented by any collective bargaining agreement. Management considers its employee relations to be good.

Government Supervision and Regulation

       General

       On June 30, 1998, the Bank converted from a federal savings bank to a Missouri-chartered trust company, with the approval of the Missouri Division of Finance ("MDF") and the FRB. The Bank is regulated as a bank under state and federal law. By converting, the Bank was able to expand its consumer and commercial lending authority.

       Bancorp and its subsidiaries are subject to supervision and examination by applicable federal and state banking agencies. The earnings of the Bank's subsidiaries, and therefore the earnings of Bancorp, are affected by general economic conditions, management policies and the legislative and governmental actions of various regulatory authorities, including the FRB, the Federal Deposit Insurance Corporation ("FDIC") and the MDF. In addition, there are numerous governmental requirements and regulations that affect the


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activities of the Company and its subsidiaries. The following is a brief summary of certain aspects of the regulation of the Company and Great Southern and does not purport to fully discuss such regulation.

       Bank Holding Company Regulation

       The Company is a bank holding company that has elected to be treated as a financial holding company by the FRB. Financial holding companies are subject to comprehensive regulation by the FRB under the Bank Holding Company Act, and the regulations of the FRB. As a financial holding company, the Company is required to file reports with the FRB and such additional information as the FRB may require, and is subject to regular examinations by the FRB. The FRB also has extensive enforcement authority over financial holding companies, including, among other things, the ability to assess civil money penalties, to issue cease and desist or removal orders and to require that a holding company divest subsidiaries (including its bank subsidiaries). In general, enforcement actions may be initiated for violations of law and regulations and unsafe or unsound practices.

       Under FRB policy, a financial holding company must serve as a source of strength for its subsidiary banks. Under this policy the FRB may require, and has required in the past, that a holding company to contribute additional capital to an undercapitalized subsidiary bank.

       Under the Bank Holding Company Act, a financial holding company must obtain FRB approval before: (i) acquiring, directly or indirectly, ownership or control of any voting shares of another bank or bank holding company if, after such acquisition, it would own or control more than 5% of such shares (unless it already owns or controls the majority of such shares); (ii) acquiring all or substantially all of the assets of another bank or bank or financial holding company; or (iii) merging or consolidating with another bank or financial holding company.

       The Bank Holding Company Act also prohibits a financial holding company generally from engaging directly or indirectly in activities other than those involving banking, activities closely related to banking that are permitted for a bank holding company, securities, insurance or merchant banking.

       Interstate Banking and Branching

       Federal law allows the FRB to approve an application of a bank holding company to acquire control of, or acquire all or substantially all of the assets of, a bank located in a state other than such holding company's home state, without regard to whether the transaction is prohibited by the laws of any state. The FRB may not approve the acquisition of a bank that has not been in existence for the minimum time period (not exceeding five years) specified by the statutory law of the host state. Federal law also prohibits the FRB from approving an application if the applicant (and its depository institution affiliates) controls or would control more than 10% of the insured deposits in the United States or if the applicant would control30% or more of the deposits in any state in which the target bank maintains a branch and in which the applicant or any of its depository institution affiliates controls a depository institution or branch immediately prior to the acquisition of the target bank. Federal law does not affect the authority of states to limit the percentage of total insured deposits in the state which may be held or controlled by a bank or bank holding company to the extent such limitation does not discriminate against out-of-state banks or bank holding companies. Individual states may also waive the 30% state-wide concentration limit.

       Additionally, the federal banking agencies are generally authorized to approve interstate bank merger transactions without regard to whether such transactions are prohibited by the law of any state. Interstate acquisitions of branches are permitted only if the law of the state in which the branch is located permits such


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acquisitions. Interstate mergers and branch acquisitions are also subject to the nationwide and statewide insured deposit concentration amounts described above.

       Federal law also authorizes the Office of the Comptroller of the Currency ("OCC") and the FDIC to approve interstate branching de novo by national and state banks, respectively, only in states which specifically allow for such branching. As required by federal law, the OCC, FDIC and FRB have prescribed regulations which prohibit any out-of-state bank from using the interstate branching authority primarily for the purpose of deposit production, including guidelines to ensure that interstate branches operated by an out-of-state bank in a host state reasonably help to meet the credit needs of the communities which they serve.

       Certain Transactions with Affiliates and Other Persons

       Transactions involving the Bank and its affiliates are subject to sections 23A and 23B of the Federal Reserve Act, and regulations thereunder, which impose certain quantitative limits and collateral requirements on such transactions, and require all such transactions to be on terms at least as favorable to the Bank as are available in transactions with non-affiliates.

       All loans by Great Southern to its directors and executive officers are subject to FRB regulations restricting loans and other transactions with affiliated persons of Great Southern. Transactions involving such persons must be on terms and conditions comparable to those for similar transactions with non-affiliates. A bank may have a policy allowing favorable rate loans to employees as long as it is an employee benefit available to bank employees. The Bank has such a policy in place that allows for loans to all employees.

       Dividends

       The FRB has issued a policy statement on the payment of cash dividends by bank holding companies, which expresses the FRB's view that a bank holding company should pay cash dividends only to the extent that its net income for the past year is sufficient to cover both the cash dividends and a rate of earning retention that is consistent with the holding company's capital needs, asset quality and overall financial condition. The FRB also indicated that it would be inappropriate for a company experiencing serious financial problems to borrow funds to pay dividends. Furthermore, a bank holding company may be prohibited from paying any dividends if the holding company's bank subsidiary is not adequately capitalized.

       Bank holding companies are required to give the FRB prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of the Company's consolidated net worth. The FRB may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, FRB order, or any condition imposed by, or written agreement with, the FRB. This notification requirement does not apply to any company that meets the well-capitalized standard for bank holding companies, is well-managed, and is not subject to any unresolved supervisory issues. Under Missouri law, the Bank may pay dividends from certain undivided profits and may not pay dividends if its capital is impaired.

       The Federal banking agencies have adopted various capital-related regulations. Under those regulations, a bank will be well capitalized if it has: (i) a total risk- based capital ratio of 10% or greater; (ii) a Tier I risk-based ratio of 6% or greater; (iii) a leverage ratio of 5% or greater; and (iv) is not subject to a regulatory requirement to maintain any specific capital measure. A bank will be adequately capitalized if


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it is not "well capitalized" and: (i) has a total risk-based capital ratio of 8% or greater; (ii) has a Tier I risk-based ratio of 4% or greater; and (iii) has a leverage ratio of 4% or greater. As of December 31, 2002, the Bank was "well capitalized."

       Federal banking agencies take into consideration concentrations of credit risk and risks from non-traditional activities, as well as an institution's ability to manage those risks, when determining the adequacy of an institution's capital. This evaluation will generally be made as part of the institution's regular safety and soundness examination. Under their regulations, the federal banking agencies consider interest rate risk (when the interest rate sensitivity of an institution's assets does not match the sensitivity of its liabilities or its off-balance-sheet position) in the evaluation of a bank's capital adequacy. The banking agencies have issued guidance on evaluating interest rate risk.

       The FRB has established capital regulations for bank holding companies that generally parallel the capital regulations for banks. As of December 31, 2002, the Company was "well capitalized."

       Insurance of Accounts and Regulation by the FDIC

       The FDIC maintains two separate deposit insurance funds: the Bank Insurance Fund (the "BIF") and the Savings Association Insurance Fund (the "SAIF"). Great Southern's depositors are insured by the SAIF up to $100,000 per insured account (as defined by law and regulation). This insurance is backed by the full faith and credit of the United States Government.

       As insurer, the FDIC is authorized to conduct examinations of and to require reporting by SAIF-insured associations. It also may prohibit any FDIC- insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious threat to the SAIF. The FDIC also has the authority to take enforcement actions against banks and savings associations.

       Great Southern pays annual assessments for SAIF insurance. Under current FDIC regulations, the annual SAIF assessment rate is based, in part, on the degree of risk to the deposit insurance fund that, in the opinion of the FDIC, is presented by a particular depository institution compared to other depository institutions. The FDIC uses a matrix having as variables the level of capitalization of a particular institution and the level of supervision that its operations require; and the rates determined in this fashion range from 0.00% of deposits for the least risky to 0.27% for the most risky. In establishing the SAIF assessment rate, the FDIC is required to consider the SAIF's expected operating expenses, case resolution expenditures and income and the effect of the assessment rate on SAIF members' earnings and capital. There is no cap on the amount the FDIC may increase the SAIF assessment rate. The Bank currently has a risk based assessment rate of 0.00%. In addition, the FDIC is authorized to raise the assessment rates in certain instances. Any increases in the assessments would negatively impact the earnings of Great Southern.

       The FDIC collects assessments against BIF and SAIF assessable deposits to service the debt on bonds issued during the 1980's to resolve the thrift bailout. For the quarter ended December 31, 2002, the assessment rate for both BIF and SAIF insured institutions was 1.70 basis points per $100 of assessable deposits.

       The Federal banking regulators are required to take prompt corrective action if an institution fails to satisfy the requirements to qualify as adequately capitalized. All institutions, regardless of their capital levels, will be restricted from making any capital distribution or paying any management fees that would cause the institution to fail to satisfy the requirements to qualify as adequately capitalized. An institution that is not at least adequately capitalized will be: (i) subject to increased monitoring by the appropriate Federal banking regulator; (ii) required to submit an acceptable capital restoration plan (including certain


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guarantees by any company controlling the institution) within 45 days; (iii) subject to asset growth limits; and (iv) required to obtain prior regulatory approval for acquisitions, branching and new lines of business. Additional restrictions, including appointment of a receiver or conservator, can apply, depending on the institution's capital level. The FDIC has jurisdiction over the Bank for purposes of prompt corrective action.

       Federal Reserve System

       The FRB requires all depository institutions to maintain reserves against their transaction accounts (primarily NOW and Super NOW checking accounts) and non-personal time deposits. At December 31, 2002, the Bank was in compliance with these reserve requirements.

       Banks are authorized to borrow from the FRB "discount window," but FRB regulations only allow this borrowing for short periods of time and generally require banks to exhaust other reasonable alternative sources of funds where practical, including FHLBank advances, before borrowing from the FRB. See "Sources of Funds Borrowings" above.

       Federal Home Loan Bank System

       The Bank is a member of the FHLBank of Des Moines, which is one of 12 regional FHLBanks.

       As a member, Great Southern is required to purchase and maintain stock in the FHLBank of Des Moines in an amount equal to the greater of 1% of its outstanding home loans or 5% of its outstanding FHLBank advances. At December 31, 2002, Great Southern had $15.0 million in FHLBank stock, which was in compliance with this requirement. In past years, the Bank has received substantial dividends on its FHLBank stock. Over the past five and one-half years, such dividends have averaged 5.70% and were 3.00% for year the ended December 31, 2002.

       Legislative and Regulatory Proposals

       Any changes in the extensive regulatory scheme to which the Company or the Bank is and will be subject, whether by any of the Federal banking agencies or Congress, could have a material effect on the Company or the Bank, and the Company and the Bank cannot predict what, if any, future actions may be taken by legislative or regulatory authorities or what impact such actions may have.

Federal and State Taxation

       The following discussion contains a summary of certain federal and state income tax provisions applicable to the Company and the Bank. It is not a comprehensive description of the federal income tax laws that may affect the Company and the Bank. The following discussion is based upon current provisions of the Internal Revenue Code of 1986 (the "Code") and Treasury and judicial interpretations thereof.

       General

       The Company and its subsidiaries file a consolidated federal income tax return using the accrual method of accounting, with the exception of GSB Two which files a separate return as a REIT. All corporations joining in the consolidated federal income tax return are jointly and severally liable for taxes due and payable by the consolidated group. The following discussion primarily focuses upon the taxation of the Bank, since the federal income tax law contains certain special provisions with respect to banks.



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       Financial institutions, such as the Bank, are subject, with certain exceptions, to the provisions of the Code generally applicable to corporations.

       Bad Debt Deduction

       Legislation passed by Congress and signed by the President repealed the bad debt reserve method of accounting for bad debts by large thrifts for taxable years beginning after 1995 (year ended June 30, 1997 for the Bank). The legislation requires applicable excess reserves accumulated after 1987 (year ended June 30, 1988 for the Bank) be recaptured and restored to income over a six year period with the first year beginning after 1995 (year ended June 30, 1997 for the Bank), and eliminates recapture of the applicable excess reserves accumulated prior to 1988 for thrifts converting to bank charters. The post 1987 recapture may be delayed for a one- or two-year period if certain residential loan origination requirements are met. The Bank met the residential loan origination requirements and delayed the recapture for two years. The amount of post 1987 recapture for the Bank is estimated at $5.2 million which created tax of approximately $1.8 million, or $300,000 per year for each of the six years. The $1.8 million of tax has been accrued by the Bank in previous periods and would not be reflected in earnings when paid. At December 31, 2002, the Company's net deferred tax asset included a deferred tax liability of approximately $300,000 for this bad debt allowance recapture.

       As of December 31, 2002 and 2001, retained earnings includes approximately $17,500,000 for which no deferred income tax liability has been recognized. This amount represents an allocation of income to bad debt deductions for tax purposes only for tax years prior to 1988. If the Bank were to liquidate, the entire amount would have to be recaptured and would create income for tax purposes only, which would be subject to the then-current corporate income tax rate. The unrecorded deferred income tax liability on the above amount was approximately $6,475,000 at December 31, 2002 and 2001.

       The Bank is required to follow the specific charge-off method which only allows a bad debt deduction equal to actual charge-offs, net of recoveries, experienced during the fiscal year of the deduction. In a year where recoveries exceed charge-offs, the Bank would be required to include the net recoveries in taxable income.

       Interest Deduction

       In the case of a financial institution, such as the Bank, no deduction is allowed for the pro rata portion of its interest expense which is allocable to tax-exempt interest on obligations acquired after August 7, 1986. A limited class of tax-exempt obligations acquired after August 7, 1986 will not be subject to this complete disallowance rule. For tax-exempt obligations acquired after December 31, 1982 and before August 8, 1986 and for obligations acquired after August 7, 1986 that are not subject to the complete disallowance rule, 80% of interest incurred to purchase or carry such obligations will be deductible. No portion of the interest expense allocable to tax-exempt obligations acquired by a financial institution before January 1, 1983, which is otherwise deductible, will be disallowed. The interest expense disallowance rules cited above have not significantly impacted the Bank.

       Alternative Minimum Tax

       Corporations generally are subject to a 20% corporate alternative minimum tax ("AMT"). A corporation must pay the AMT to the extent it exceeds that corporation's regular federal income tax liability The AMT is imposed on "alternative minimum taxable income," defined as taxable income with certain adjustments and tax preference items, less any available exemption. Such adjustments and items include, but are not limited to, (i) net interest received on certain tax-exempt bonds issued after August 7, 1986; and


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(ii) 75% of the difference between adjusted current earnings and alternative minimum taxable income, as otherwise determined with certain adjustments. Net operating loss carryovers may be utilized, subject to adjustment, to offset up to 90% of the alternative minimum taxable income, as otherwise determined. A portion of the AMT paid, if any, may be credited against future regular federal income tax liability.

       Missouri Taxation

       Missouri-based banks, such as the Bank, are subject to a franchise tax which is imposed on the larger of (i) the bank's taxable income at the rate of 7% of the taxable income (determined without regard for any net operating losses); or (ii) the bank's assets at a rate of .033% of total assets less deposits and the investment in greater than 50% owned subsidiaries. Missouri-based banks are entitled to a credit against the franchise tax for all other state or local taxes on banks, except taxes on real estate, unemployment taxes, bank tax, and taxes on tangible personal property owned by the Bank and held for lease or rental to others.

       The Company and all subsidiaries are subject to an income tax that is imposed on the corporation's taxable income at the rate of 6.25%. The return is filed on a consolidated basis by all members of the consolidated group including the Bank, but excluding GSB Two. As a REIT, GSB Two files a separate Missouri income tax return.

       Delaware Taxation

       As a Delaware corporation, the Company is required to file annual returns with and pay annual fees to the State of Delaware. The Company is also subject to an annual franchise tax imposed by the State of Delaware based on the number of authorized shares of Company common stock.

       Examinations

       The Company and its consolidated subsidiaries have not been audited recently by the Internal Revenue Service with respect to consolidated federal income tax returns, and as such, these returns have been closed without audit through December 31, 1998.

ITEM 2.     PROPERTIES.

       The following table sets forth certain information concerning the main corporate office and each branch office of the Company at December 31, 2002. The aggregate net book value of the Company's premises and equipment was $17.0 million at December 31, 2002 and $12.8 million at December 31, 2001. See also Note 5 and Note 13 of the Notes to Consolidated Financial Statements. Substantially all buildings owned are free of encumbrances or mortgages. In the opinion of management, the facilities are adequate and suitable for the needs of the Company.

Location
Year
Opened

Owned or
Leased
Lease Expiration
(Including any
Renewal Option)

CORPORATE HEADQUARTERS AND BANK:
1451 E. Battlefield Springfield, Missouri 1976 Owned    N/A
BRANCH BANKS:
430 South Avenue Springfield, Missouri 1983 Owned    N/A
1607 W. Kearney Springfield, Missouri 1976 Leased* 2022


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Location
Year
Opened

Owned or
Leased
Lease Expiration
(Including any
Renewal Option)

1615 W. Sunshine Springfield, Missouri 2001 Owned    N/A
2410 N. Glenstone(1) Springfield, Missouri 1977 Leased* 2003
1955 S. Campbell Springfield, Missouri 1979 Leased* 2020
3961 S. Campbell Springfield, Missouri 1998 Leased    2028
2609 A E. Sunshine Springfield, Missouri 2001 Owned    N/A
2735 W. Chestnut Springfield, Missouri 2002 Owned    N/A
1580 W. Battlefield Springfield, Missouri 1985 Leased* 2017
723 N. Benton Springfield, Missouri 1985 Owned    N/A
1302 S. Elliot(2) Aurora, Missouri 1985 Leased    2003
102 N. Jefferson Ava, Missouri 1982 Owned    N/A
110 W. Hensley Branson Missouri 1982 Owned    N/A
1729 W. Highway 76 Branson, Missouri 1983 Owned    N/A
919 W. Dallas Buffalo Missouri 1976 Owned    N/A
527 Ozark Cabool, Missouri 1989 Leased    2006
400 S. Garrison(3) Carthage, Missouri 1990 Owned    N/A
1710 E. 32nd Street Joplin, Missouri 1989 Leased* 2031
1232 S. Rangeline Joplin, Missouri 1998 Leased    2016
Highway 00 and 13 Kimberling City, Missouri 1984 Owned    N/A
528 S. Jefferson Lebanon, Missouri 1978 Leased* 2028
714 S. Neosho Boulevard Neosho, Missouri 1991 Owned    N/A
717 W. Mt. Vernon(4) Nixa, Missouri 1995 Owned    N/A
4571 Highway 54 Osage Beach, Missouri 1987 Owned    N/A
1701 W. Jackson Ozark, Missouri 1997 Owned    N/A
208 South Street Stockton, Missouri 1988 Leased    2006
323 E. Walnut Thayer, Missouri 1978 Leased* 2011
1210 Parkway Shopping Center West Plains, Missouri 1975 Owned    N/A
_________________
     * Building owned with land leased.
  1. The Company is currently constructing a new facility at 2562 N. Glenstone, Springfield, Missouri, to replace this branch. The new facility is owned by the Company and will open in 2003.
  2. The Company has constructed a new facility at 1500 S. Elliot, Aurora, Missouri, to replace this branch. The new facility is owned by the Company and opened in 2003.
  3. The Company has decided to close this branch in 2003. Customer accounts will be transferred to the branches in Joplin, Missouri.
  4. In 2002, the Company purchased land at Tracker Road and Main for a second branch location in Nixa, Missouri. The new facility is owned by the Company with a planned opening in 2003.

       In addition, the travel division has offices in many of the above locations as well as several small offices in other locations including some of its larger corporate customer's headquarters.

       On December 31, 2002, the Company purchased land and a commercial building in Springfield, Missouri, to be used as an operations center for most of the Company's back-office activities. Renovation of the building is expected to be completed in late 2003. Upon completion, this facility will house most of the employees currently at 430 South Avenue, Springfield, Missouri, and some employees from 1451 E.


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Battlefield, Springfield, Missouri, as well as some staff additions. The building at 430 South Avenue is being sold, with closing expected in early 2003. The Company's branch and certain other activities will remain at 430 South Avenue.

       The Bank maintains depositor and borrower customer files on an on-line basis, utilizing a telecommunications network, portions of which are leased. The book value of all data processing and computer equipment utilized by the Bank at December 31, 2002 was $261,000 compared to $588,000 at December 31, 2001. Management has a disaster recovery plan in place with respect to the data processing system as well as the Bank's operations as a whole.

        The Bank maintains a network of Automated Teller Machines ("ATMs"). The Bank utilizes an external service for operation of the ATMs that also allows access to the various national ATM networks. A total of 138 ATMs are located at various branches and primarily convenience stores located throughout southwest and central Missouri. The book value of all ATMs utilized by the Bank at December 31, 2002 was $559,000 compared to $563,000 at December 31, 2001. The Bank will evaluate and relocate existing ATMs as needed, but has no plans in the near future to materially increase its investment in the ATM network.

ITEM 3.       LEGAL PROCEEDINGS.

       The Registrant and its subsidiaries are involved as plaintiff or defendant in various legal actions arising in the normal course of their businesses. While the ultimate outcome of the various legal proceedings involving the Registrant and its subsidiaries cannot be predicted with certainty, it is the opinion of management, after consultation with legal counsel, that these legal actions currently are not material to the Registrant.

ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

       None.

ITEM 4A.     EXECUTIVE OFFICERS OF THE REGISTRANT.

       Pursuant to General Instruction G(3) of Form 10-K and Instruction 3 to Item 401(b) of Regulation S-K, the following list is included as an unnumbered item in Part I of this Form 10-K in lieu of being included in the Registrant's Definitive Proxy Statement.

       The following information as to the business experience during the past five years is supplied with respect to executive officers of the Company and its subsidiaries who are not directors of the Company and its subsidiaries. There are no arrangements or understandings between the persons named and any other person pursuant to which such officers were selected. The executive officers are elected annually and serve at the discretion of their respective Boards of Directors.

Steven G. Mitchem. Mr. Mitchem, age 51, is Senior Vice President and Chief Lending Officer of the Bank. He joined the Bank in 1990 and is responsible for all lending activities of the Bank. Prior to joining the Bank, Mr. Mitchem was a Senior Bank Examiner for the Federal Deposit Insurance Corporation.

Rex A. Copeland. Mr. Copeland, age 38, is Treasurer of the Company and Senior Vice President and Chief Financial Officer of the Bank. He joined the Bank in 2000 and is responsible for the financial functions of the Company, including the internal and external financial reporting of the Company and its subsidiaries. Mr. Copeland is a Certified Public Accountant. Prior to joining the Bank, Mr. Copeland served other


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financial services companies. He was Accounting Director of a division of H&R Block from 1999 to 2000, Division Controller of Bank One Corporation from 1996 to 1999 and an auditor with BKD, LLP, prior to that.

Doug W. Marrs. Mr. Marrs, age 45, is Vice President - Operations of the Bank. He joined the Bank in 1996 and is responsible for all operations functions of the Bank. Prior to joining the Bank, Mr. Marrs was a bank officer in the areas of operations and data processing at a competing $1 billion bank.

Larry A. Larimore. Mr. Larimore, age 62, is Secretary of the Company and Secretary, Vice President - Compliance Officer of the Bank. He joined the Bank in 1998 and is responsible for Compliance and Internal Audit for the Company and Bank. Prior to joining the Bank, Mr. Larimore was a bank officer in the areas of lending, compliance and internal audit at a competing area bank from 1990 to 1998.

PART II

       Responses incorporated by reference into the items under Part II of this Form 10-K are done so pursuant to Rule 12b-23 and General Instruction G(2) for Form 10-K.

ITEM 5.       MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
                            STOCKHOLDER MATTERS.

       Market Information. The Company's Common Stock is listed on The Nasdaq Stock Market under the symbol "GSBC."

       As of December 31, 2002 there were 6,857,121 total shares outstanding and approximately 1,000 shareholders of record.

High/Low Stock Price

2002
2001
2000
High
Low
High
Low
High
Low
First Quarter 32.70 26.70 23.00 15.63 22.25 17.25
Second Quarter 39.82 31.40 27.10 20.63 19.78 15.31
Third Quarter 41.34 34.51 33.95 25.41 17.25 14.88
Fourth Quarter 39.09 35.65 33.10 25.75 16.13 14.63

The last inter-dealer bid for the Company's Common Stock on December 31, 2002 was $36.75.

Dividend Declarations

December 31,
2002
December 31,
2001
December 31,
2000
First Quarter $.265 $.125 $.125
Second Quarter .140 .125 .125
Third Quarter .140 .125 .125
Fourth Quarter .150 .125 .125


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       The Company's ability to pay dividends is substantially dependent on the dividend payments it receives from the Bank. For a description of the regulatory restrictions on the ability of the Bank to pay dividends to the Company, and the ability of the Company to pay dividends to its stockholders, see "Item 1. Business - Government Supervision and Regulation - Dividends."

ITEM 6.       SELECTED CONSOLIDATED FINANCIAL DATA

       The following table sets forth selected consolidated financial information and other financial data of the Company. The selected balance sheet and statement of income data, insofar as they relate to the years ended December 31, 2002, 2001, 2000 and 1999, to the six months ended December 31, 1998 and to the year ended June 30, 1998 are derived from our consolidated financial statements, which have been audited by BKD, LLP. The selected consolidated financial data as of and for the six months ended December 31, 1997 are derived from unaudited consolidated financial statements. In our opinion, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of results as of and for the six months ended December 31, 1997 have been included. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," and Item 8, "Financial Statements and Supplementary Information." Results for past periods are not necessarily indicative of results that may be expected for any future period.

December 31,
June 30,
2002
2001
2000
1999
1998(1)
1998
(Dollars in thousands)
Summary Statement of
 Condition Information:
  Assets $1,402,638 $1,323,103 $1,130,178 $964,803 $836,498 $795,091
  Loans receivable, net 997,647 964,886 890,784 766,807 696,962 653,672
  Allowance for loan losses 21,288 21,328 18,694 17,293 16,928 16,373
  Available-for-sale securities 236,269 233,805 126,409 79,891 6,476 6,363
  Held-to-maturity securities 52,587 37,465 27,758 37,646 60,394 51,917
  Foreclosed assets held for sale, net 4,328 3,057 2,688 817 2,810 4,751
  Allowance for foreclosed asset losses --- 150 --- --- --- ---
  Intangibles --- --- 264 404 543 626
  Deposits 1,021,957 886,870 751,042 625,900 597,625 549,773
  Total borrowings 268,494 333,666 291,573 261,642 159,250 169,509
  Stockholders' equity (retained
    earnings substantially restricted)
104,709 85,254 71,049 68,926 68,382 67,409
  Average loans receivable 1,000,044 936,117 843,170 746,979 647,797 624,290
  Average total assets 1,344,989 1,193,772 1,013,963 928,182 805,170 747,901
  Average deposits 963,255 802,286 676,633 612,503 577,820 487,386
  Average stockholders' equity 95,728 79,484 69,208 68,758 66,997 64,212
  Number of deposit accounts 73,861 71,998 73,394 73,932 74,375 74,070
  Number of full-service offices 29 28 27 27 27 27


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For the Year Ended December 31,
For the Six Months Ended
December 31,

For the
Year Ended
June 30,

2002
2001
2000
1999
1998(1)
1997
1998
(Dollars in thousands)
Summary Income Statement
  Information:
Interest income:
  Loans $64,062 $76,107 $77,399 $63,386 $30,332 $27,878 $57,537
  Investment securities and other 16,099
13,390
8,751
4,652
2,153
2,163
4,395
80,161
89,497
86,150
68,038
32,485
30,041
61,932
Interest expense:
  Deposits 22,244 32,405 32,244 24,966 12,255 10,395 20,951
  Federal Home Loan Bank advances 6,852 10,339 14,312 9,403 4,237 4,676 9,905
  Short-term borrowings and trust
     preferred securities
1,241
3,163
2,305
1,094
38
530
1,136
30,337
45,907
48,861
35,463
16,530
15,601
31,992
Net interest income 49,824 43,590 37,289 32,575 15,955 14,440 29,940
Provision for loan losses 5,800
5,200
3,106
2,062
1,291
852
1,853
Net interest income after
  provision for loan losses 44,024
38,390
34,183
30,513
14,664
13,588
28,087
Noninterest income:
  Commissions 5,786 5,765 7,024 7,054 3,136 2,586 5,652
  Service charges and ATM fees 8,430 8,352 5,968 4,502 2,390 1,753 3,841
  Net realized gains on sales of loans 1,575 1,756 570 1,098 386 461 1,125
  Net realized gains (losses) on sales
     of available-for-sale securities 3,443 139 (9) 316 355 873 1,398
  Income (expense) on foreclosed
     assets
(597) (216) 295 --- 420 383 326
  Other income 1,186
1,237
1,135
2,379
1,171
777
1,457
19,823
17,033
14,983
15,349
7,858
6,833
13,799
Noninterest expense:
  Salaries and employee benefits 15,842 15,126 13,642 13,765 5,743 5,227 10,829
  Net occupancy expense 5,337 4,730 4,529 4,124 1,772 1,349 3,034
  Postage 1,426 1,233 1,152 1,006 447 392 857
  Insurance 514 485 521 639 292 352 637
  Amortization of excess of cost over
     fair value of net assets acquired
--- 284 160 160 83 --- 65
  Advertising 622 686 713 611 276 295 586
  Office supplies and printing 828 774 703 991 396 323 666
  Other operating expenses 3,765
3,872
4,084
3,871
2,297
1,945
3,844
28,334
27,190
25,504
25,167
11,306
9,883
20,518
Income before income taxes 35,513 28,233 23,662 20,695 11,216 10,538 21,368
Provision for income taxes 12,301
9,475
8,184
7,018
3,858
3,058
6,924
Net income $23,212
$18,758
$15,478
$ 13,677
$  7,358
$  7,480
$14,444


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At or For the Year Ended December 31,
At or For the Six
Months Ended
December 31,

At or For
the Year
Ended
June 30,

2002
2001
2000
1999
1998(1)
1997
1998
(Dollars in thousands, except per share data)
Per Common Share Data:
  Basic earnings per common share $ 3.38    $ 2.72    $ 2.16    $1.79    $ .93    $ .93    $ 1.79   
  Diluted earnings per common share 3.34    2.70    2.12    1.76    .91    .91    1.76   
  Cash dividends declared .70    .50    .50    .50    .24    .21    .43   
  Book value 15.27    12.42    10.30    9.20    8.76    8.13    8.47   
  Average shares outstanding 6,863    6,890    7,166    7,620    7,897    8,082    8,052   
  Year-end actual shares outstanding 6,857    6,863    6,897    7,489    7,803    8,066    7,962   
  Year-end fully diluted shares outstanding 6,940    6,929    7,098    7,601    8,012    8,218    8,204   
Earnings Performance Ratios:(2)
  Return on average assets(3) 1.73% 1.57% 1.53% 1.56% 1.83% 2.08% 1.93%
  Return on average stockholders' equity(4) 24.25    23.60    22.36    19.98    21.97    24.04    22.49   
  Non-interest income to average total assets 1.47    1.43    1.48    1.65    1.95    1.90    1.85   
  Non-interest expense to average total assets 2.11    2.28    2.52    2.87    2.81    2.75    2.74   
  Average interest rate spread(5) 3.59    3.37    3.26    3.36    4.02    3.78    3.79   
  Year-end interest rate spread 3.70    3.44    3.26    3.40    3.62    3.75    3.81   
  Net interest margin(6) 3.85    3.80    3.81    3.86    4.32    4.18    4.18   
  Adjusted efficiency ratio (excl. foreclosed assets)(7) 40.34    44.69    49.07    52.51    48.33    47.31    47.20   
  Net overhead ratio(8) .63    .85    1.04    1.06    .87    .85    .90   
  Common dividend pay-out ratio 20.81    18.52    23.58    28.41    25.82    23.08    24.43   
Asset Quality Ratios:(2)
  Allowance for loan losses/year-end loans 2.09% 2.16% 2.06% 2.21% 2.37% 2.48% 2.44%
  Non-performing assets/year-end loans and
    foreclosed assets
1.84    1.22    1.66    1.26    1.46    2.20    1.81   
  Allowance for loan losses/non-performing loans 146.60    237.03    149.72    194.48    228.20    155.26    227.18   
  Net charge-offs/average loans .58    .27    .20    .23    .23    .09    .16   
  Gross non-performing assets/year end assets 1.34    .91    1.34    1.05    1.55    1.84    1.79   
  Non-performing loans/year-end loans 1.43    .91    1.37    1.18    1.42    1.60    1.42   
Balance Sheet Ratios:
  Loans to deposits 97.62    108.80    118.61    122.51    116.62    134.11    118.90   
  Average interest-earning assets as a percentage
    of average interest-bearing liabilities
111.22    110.67    111.06    111.95    106.57    108.82    108.62   
Capital Ratios:
  Average stockholders' equity to average assets 7.12% 6.66% 6.83% 7.41% 8.32% 8.64% 8.59%
  Year-end tangible stockholders' equity to assets 7.47    6.44    6.26    7.10    8.11    8.67    8.40   
  Great Southern Bank:
     Tier 1 risk-based capital ratio 10.32    8.93    8.91    8.97    9.65    9.95    9.71   
     Total risk-based capital ratio 11.58    10.20    10.17    10.23    10.92    11.22    10.98   
     Tier 1 leverage ratio 8.22    7.18    7.36    7.45    8.15    7.49    7.52   
Ratio of Earnings to Fixed Charges:(9)
  Including deposit interest 2.17x 1.62x 1.48x 1.58x 1.68x 1.68x 1.67x
  Excluding deposit interest 5.39x 3.09x 2.42x 2.97x 3.62x 3.02x 2.94x

____________________

  1. In 1998, we changed our fiscal year-end from June 30 to December 31.
  2. Certain financial ratios for interim periods have been annualized.
  3. Earnings divided by average total assets.
  4. Earnings divided by average stockholders' equity.
  5. Yield on average interest-earning assets less rate on average interest-bearing liabilities.
  6. Net interest income divided by average interest-earning assets.
  7. Non-interest expense divided by the sum of net interest income, on a tax equivalent basis, plus non-interest income.
  8. Non-interest expense less non-interest income divided by average total assets.
  9. In computing the ratio of earnings to fixed charges: (a) earnings have been based on income before income taxes and fixed charges, and (b) fixed charges consist of interest and amortization of debt discount and expense including amounts capitalized and the estimated interest portion of rents.


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ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                   FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-looking Statements

       When used in this Annual Report and in future filings by the Company with the Securities and Exchange Commission (the "SEC"), in the Company's press releases or other public or shareholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project" 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, demand for loans and deposits in the Company's market area and competition, that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to advise readers that the factors listed above could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

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

Critical Accounting Policies, Judgments and Estimates

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

       The Company considers that the determination of the allowance for loan losses involves a higher degree of judgment and complexity than its other significant accounting policies. The allowance for loan losses is calculated with the objective of maintaining an allowance level believed by management to be sufficient to absorb estimated loan losses. Management's determination of the adequacy of the allowance is based on periodic evaluations of the loan portfolio and other relevant factors. However, this evaluation is inherently subjective as it requires material estimates, including, among others, expected default probabilities, loss given 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.

General

       The profitability of the Company and, more specifically, the profitability of its primary subsidiary, Great Southern Bank (the "Bank"), depends primarily on its net interest income. Net interest income is the difference between the interest income it earns on interest-earning assets, mainly its loans and investment


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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.

       The Company's profitability is also affected by the level of its non-interest income and operating expenses. Non-interest income consists primarily of gains on sales of loans and available-for-sale investments, service charges and ATM fees, commissions earned by non-bank subsidiaries and other general operating income. Operating expenses consist primarily of salaries and employee benefits, occupancy-related expenses, postage, insurance, advertising, office expenses and other general operating expenses.

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

Effect of Federal Laws and Regulations

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

Potential Impact of Accounting Principles to Be Implemented in the Future

       In July 2002, the Financial Accounting Standards Board ("FASB") issued SFAS 146, "Accounting for Costs Associated with Exit or Disposal Activities." This Statement requires that a liability for costs associated with an exit or disposal activity be recognized when incurred rather than at the date of commitment to an exit or disposal plan. This Statement replaces EITF 94-3 and is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. The adoption of this Statement is not expected to have a material effect on the Company's financial statements.

       In October 2002, the FASB issued SFAS 147, "Acquisitions of Certain Financial Institutions." This Statement brings all business combinations involving financial institutions, except mutuals, into the scope of SFAS 141, "Business Combinations." SFAS 147 requires that all acquisitions of financial institutions that meet the definition of a business, including acquisitions of part of a financial institution that meet the definition of a business, be accounted for in accordance with SFAS 141 and the related intangibles accounted for in accordance with SFAS 142. SFAS 147 removes such acquisitions from the scope of SFAS 72, "Accounting for Certain Acquisitions of Banking or Thrift Institutions." SFAS 147 also amends SFAS 144 to include in its scope long-term customer-relationship intangible assets of financial institutions. SFAS 147 is generally effective immediately and provides guidance with respect to amortization and impairment of intangibles recognized in connection with acquisitions previously within the scope of SFAS 72. The adoption of this Statement did not have a material effect on the Company's financial statements.



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       The FASB recently issued its Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." This new Interpretation requires a guarantor to recognize a liability for the fair value of the obligation undertaken in issuing a guarantee at its inception and prescribes disclosures regarding guarantees. The Interpretation applies only to guarantees issued or modified after December 31, 2002. Guarantees issued by the Company are principally in the form of letters of credit as discussed in Note 15. Initial adoption of the Interpretation is not expected to have a material effect on the Company's financial statements. The Company's application of the Interpretation to guarantees issued or modified after December 31, 2002, will, if material, result in recognition of a liability for such guarantees, as well as recognition of fee revenue from them over the period of time the guarantees are outstanding.

Comparison of Financial Condition at December 31, 2002 and December 31, 2001

       During the year ended December 31, 2002, the Company increased total assets by $80 million to $1.40 billion. Net loans increased by $37 million. The main loan areas experiencing increases were commercial real estate, commercial construction, and consumer. One- to four-family mortgage loans and mortgage loans held for sale decreased during 2002. Total investment securities increased by $18 million, which was primarily an increase in held-to-maturity industrial revenue bonds and available-for-sale United States government agency mortgage-backed securities, partially offset by a decrease in United States government agency debt securities. Cash and cash equivalents increased $21 million primarily due to higher balances of vault cash and larger cash letter settlements at December 31, 2002. Prepaid expenses and other assets increased $9 million, primarily as a result of recording the increase in mark-to-market value of the Company's interest rate swaps. Based upon the terms of these swap agreements, in accordance with generally accepted accounting principles, the Company records changes in the market value of its interest rate swaps in the category "other assets," with a corresponding increase or decrease to the liability being hedged.

       Total liabilities increased $60 million from December 31, 2001 to December 31, 2002, to $1.30 billion. Deposits increased $135 million, partially offset by a decrease in FHLBank advances of $53 million and a decrease in short-term borrowings of $14 million. The decrease in short-term borrowings was the result of decreases in federal funds purchased, partially offset by increases in securities sold under repurchase agreements. FHLBank advances decreased due to their repayment when due utilizing funds from the additional deposit account balances. Retail certificates of deposit increased $52 million, to $359 million. Total brokered deposits were $340 million at December 31, 2002, down from $355 million at December 31, 2001. The weighted average cost of these deposits was approximately 162 basis points higher than the retail certificate of deposit portfolio, excluding the effect of the Company's interest rate swaps on a portion of these brokered certificates of deposit. The interest rate swaps reduced the weighted average cost of the brokered certificate of deposit portfolio to a rate that is approximately 141 basis points lower than the retail certificate of deposit portfolio. Interest-bearing checking balances accounted for $59 million of the increase in deposits. Non-interest-bearing checking balances increased $32 million. Checking and savings account balances totaled $312 million at December 31, 2002. During 2002, the Company became a correspondent bank for several local financial institutions, which led to a portion of the increase in checking account balances. In addition, the Company added new money market and corporate checking products which led to increased balances. Management continues to feel that FHLBank advances and brokered deposits are viable alternatives to retail deposits when factoring in all the costs associated with the generation and maintenance of additional retail deposits.

       Stockholders' equity increased $19.4 million from $85.3 million at December 31, 2001 to $104.7 million at December 31, 2002. Net income for fiscal year 2002 was $23.2 million and accumulated other comprehensive income increased by $1.9 million. These items were partially offset by dividends of $4.8


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million and net treasury stock repurchases of $845,000. The Company repurchased 38,676 shares of common stock at an average price of $34.71 per share during 2002.

Results of Operations and Comparison for the Years Ended December 31, 2002 and 2001

General

       The increase in earnings of $4.5 million, or 23.7%, during the year ended December 31, 2002, compared to the year ended December 31, 2001, was primarily due to an increase in net interest income of $6.2 million, or 14.3%, and an increase in non-interest income of $2.8 million, or 16.4%, partially offset by an increase in non-interest expense of $1.1 million, or 4.2%, an increase in provision for loan losses of $600,000, or 11.5%, and an increase in provision for income taxes of $2.8 million, or 29.8%.

Total Interest Income

       Total interest income decreased $9.3 million, or 10.4%, during the year ended December 31, 2002 compared to the year ended December 31, 2001. The decrease was due to a $12.0 million, or 15.8%, decrease in interest income on loans, partially offset by a $2.7 million, or 20.2%, increase in interest income on investments and other interest-earning assets. Interest income for both loans and investment securities and other interest-earning assets decreased due to significantly lower average rates of interest, while interest income for both was positively impacted by higher average balances. In addition, interest income in 2002 was higher due to the recovery of $415,000 of interest on a commercial real estate loan that was charged off in a prior year.

Interest Income - Loans

       During the year ended December 31, 2002 compared to December 31, 2001, interest income on loans decreased from lower average interest rates, partially offset by higher average balances. Interest income decreased $17.0 million as the result of lower average interest rates. The average yield on loans decreased from 8.13% during the year ended December 31, 2001, to 6.41% during the year ended December 31, 2002, as a result of decreases in market rates of interest, primarily the "prime rate" of interest. A large portion of the Bank's loan portfolio adjusts with changes to the "prime rate" of interest.

       Interest income increased $5.0 million as the result of higher average loan balances from $936 million during the year ended December 31, 2001 to $1.00 billion during the year ended December 31, 2002. The higher average balance resulted principally from the Bank's increased commercial real estate and construction lending, commercial business lending and indirect dealer consumer lending. The Bank's one- to four-family residential loan portfolio has decreased since December 31, 2000, due to the origination of a greater dollar amount of fixed-rate rather than adjustable-rate loans. The Bank generally sells these fixed-rate loans in the secondary market.

Interest Income - Investments and Other Interest-earning Deposits

       Interest income on investments and other interest-earning assets increased mainly as a result of higher average balances during the year ended December 31, 2002, when compared to the year ended December 31, 2001. Interest income increased $4.6 million as a result of an increase in average balances from $211 million during the year ended December 31, 2001, to $293 million during the year ended December 31, 2002. This increase was primarily in available-for-sale securities, where additional securities were acquired for liquidity and pledging to deposit accounts under repurchase agreements. The increase in


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interest income was partially offset by $1.9 million as a result of a decrease in average yields from 6.33% during the year ended December 31, 2001, to 5.49% during the year ended December 31, 2002.

Total Interest Expense

       Total interest expense decreased $15.6 million, or 33.9%, during the year ended December 31, 2002, when compared with the year ended December 31, 2001, primarily due to a decrease in interest expense on deposits of $10.2 million, or 31.4%, a decrease in interest expense on FHLBank advances of $3.5 million, or 33.7%, and a decrease in interest expense on short-term borrowings and trust preferred securities of $1.9 million, or 60.8%.

Interest Expense - Deposits

       Interest expense on deposits decreased $14.8 million as a result of a decrease in average rates of interest on time deposits from 5.03% during the year ended December 31, 2001, to 2.83% during the year ended December 31, 2002, and increased $4.9 million due to an increase in average balances of time deposits from $593 million during the year ended December 31, 2001, to $705 million during the year ended December 31, 2002. The average balance of time deposits increased primarily as a result of the Company's use of brokered and other time deposits to fund loan and investment securities growth. In recent years, brokered deposit rates have become competitive with rates on FHLBank advances and larger retail deposits. The average interest rates decreased due to lower overall market rates of interest in 2002 and the effects of the Company's interest rate swaps.

       Interest on demand deposits decreased $786,000 due to a decrease in average rates from 1.69% during the year ended December 31, 2001, to 1.22% during the year ended December 31, 2002, and increased $620,000 due to an increase in average balances from $144 million during the year ended December 31, 2001, to $187 million during the year ended December 31, 2002. The other deposit category, savings, experienced a $108,000 decrease due to decreases in both average balances and average rates of interest.

Interest Expense - FHLBank Advances, Short-term Borrowings and Trust Preferred Securities

       Interest expense on FHLBank advances, short-term borrowings and trust preferred securities decreased $4.2 million due to a decrease in average rates from 4.61% in the year ended December 31, 2001, to 3.00% in the year ended December 31, 2002. In addition, average balances decreased from $293 million during the year ended December 31, 2001, to $270 million during the year ended December 31, 2002, resulting in decreased interest expense of $1.2 million. The average balance decrease was offset by increases in deposits. Average interest rates decreased due to lower overall market rates during 2002. The Company's use of FHLBank advances, short-term borrowings and trust preferred securities which reprice frequently (daily, monthly or quarterly) contributed to the significant decrease in average rates of interest.

Net Interest Income

       The Company's overall interest rate spread increased 22 basis points, or 6.5%, from 3.37% during the year ended December 31, 2001, to 3.59% during the year ended December 31, 2002. The increase was due to a 182 basis point decrease in the weighted average rate paid on interest-bearing liabilities partially offset by a 160 basis point decrease in the weighted average yield received on interest-earning assets. The Company's overall net interest margin increased 5 basis points, or 1.3%, from 3.80% during the year ended December 31, 2001, to 3.85% during the year ended December 31, 2002. In comparing the two years, the yield on loans decreased 172 basis points while the yield on investment securities and other interest-earning


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assets decreased 84 basis points. The rate paid on deposits decreased 187 basis points, while the rate paid on FHLBank advances and other borrowings decreased 161 basis points.

       The prime rate of interest averaged 6.92% during the year ended December 31, 2001, compared to an average of 4.68% during the year ended December 31, 2002. As a large percentage of the Bank's loans are tied to prime, this decrease was the primary reason for the decrease in the weighted average yield received on interest-earning assets.

       Interest rates paid on deposits, FHLBank advances and other borrowings decreased significantly during 2002 compared to 2001. As market rates of interest declined during 2002, the Company reduced rates paid to depositors. In addition in 2002, the Company continued to utilize interest rate swaps and FHLBank advances which repriced daily, monthly or quarterly to further reduce interest expense.

Provision for Loan Losses and Allowance for Loan Losses

       The provision for loan losses increased $600,000, or 11.5%, during the year ended December 31, 2002, from $5.2 million during the year ended December 31, 2001 to $5.8 million during the year ended December 31, 2002. The provision recorded in 2002 was consistent with the Company's increased level of net charge-offs and higher balances of non-performing loans. The allowance for loan losses remained virtually unchanged at December 31, 2002 compared to December 31, 2001, even though the amount of non-performing loans increased significantly. The increase in non-performing loans primarily resulted from the deterioration of credits that were classified as potential problem loans at December 31, 2001. The Company had established a loan loss allowance in 2001 that included reserves for these potential problem loans at that time.

       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. Management has 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 collectibility of the portfolio. 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 was 2.09% and 2.16% at December 31, 2002 and 2001, respectively. Management considers the allowance for loan losses adequate to cover losses inherent in the Company's loan portfolio at this time, based on current economic conditions. If economic conditions deteriorate significantly, it is possible that additional assets would be classified as non-performing, and accordingly, additional provision for losses would be required, thereby adversely affecting future results of operations and financial condition.

Non-performing Assets

       Non-performing assets increased $6.2 million, or 49.6%, from $12.6 million at December 31, 2001, to $18.8 million at December 31, 2002. Non-performing loans increased $5.0 million, or 52.1%, from $9.5


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million at December 31, 2001, to $14.5 million at December 31, 2002, and foreclosed assets increased $1.2 million, or 41.6%, from $3.1 million at December 31, 2001, to $4.3 million at December 31, 2002.

       Non-performing Loans. Non-performing loans increased primarily as a result of the addition of two lending relationships, one with a remaining balance of $886,000 and another with a remaining balance of $7.3 million. These two relationships are described below. Commercial loans comprise $12.0 million, or 82%, of the total $14.5 million non-performing loans at December 31, 2002. Two unrelated commercial real estate credit relationships, totaling $7.3 million and $1.0 million as of December 31, 2002, respectively, account for a majority of this non-performing total. The $7.3 million relationship is primarily secured by condominium buildings and lots, single-family residences and lots, a golf course, and other developed and undeveloped land. This relationship was described in the December 31, 2001, Annual Report on Form 10-K and was included in potential problem loans at that time. This relationship was included in non-performing loans during the second quarter of 2002, and a total of $3.2 million was subsequently charged off during the remainder of 2002. The $1.0 million relationship is secured by the real estate and business assets of a restaurant in Branson, Missouri. This relationship was placed in a non-accrual status in the fourth quarter of 2001. Mortgage loans comprise $1.7 million, or 12%, of the total $14.5 million non-performing loans at December 31, 2002. One credit relationship, totaling $886,000 accounted for a large portion of this non-performing mortgage loan total. The $886,000 relationship is comprised of ten loans, which are primarily secured by residential rental properties and condominiums in Branson, Missouri. This relationship was first included in non-performing loans in the quarter ended March 31, 2002. This relationship was originally $2.3 million; the balance has been reduced through charge-offs, foreclosures, and the sale of collateral and repayment of loans by the borrowers.

       Subsequent to December 31, 2002, the $7.3 million relationship described above was foreclosed upon, with Great Southern, along with the lead bank in this participation, as the successful bidders. An updated valuation of the property has been completed during the first quarter 2003. The Company's one-third interest in the property has been recorded in foreclosed assets at a carrying value of $6.7 million, with the difference recorded as a loan charge-off in the quarter ended March 31, 2003.

       Foreclosed Assets. Of the total $4.3 million of foreclosed assets at December 31, 2002, foreclosed real estate totaled $3.0 million and repossessed automobiles totaled $1.3 million. Of the total real estate assets, three relationships account for $2.4 million. The first relationship has a remaining balance of $1.7 million and involves a motel, condominium units and vacant land in the Branson, Missouri, area. This relationship was described in the December 31, 2001, Annual Report on Form 10-K and was included in non-performing loans at that time. During 2002, a portion of the vacant land with a book value of $650,000 was sold with no additional loss to the Company. Subsequent to December 31, 2002, all of the assets described in this relationship, except a portion of the vacant land valued at $275,000, were sold with no additional loss to the Company. The second relationship has a remaining balance of $519,000 and involves a golf course and condominium units in the Branson, Missouri, area. The third relationship has a remaining balance of $275,000 and involves a commercial office building in Joplin, Missouri. Subsequent to December 31, 2002, this building was sold with no additional loss to the Company.

       Potential Problem Loans. Potential problem loans decreased $7.3 million, or 39%, from $18.7 million at December 31, 2001, to $11.4 million at December 31, 2002. These are loans which management has identified through routine internal review procedures as having possible credit problems which may cause the borrowers difficulty in complying with current loan repayment terms. These loans are not reflected in the non-performing loans. Potential problem loans decreased primarily as a result of the $7.3 million commercial real estate credit relationship discussed above under "Non-performing Loans," which was reclassified from potential problem loans to non-performing loans, and other smaller relationships which were removed from or added to the problem asset watchlist. Three unrelated real estate credit relationships,


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totaling $3.6 million, $1.3 million and $917,000, respectively, account for a majority of this potential problem loan total. The $3.6 million relationship is secured by a motel in Springfield, Missouri. The $1.3 million relationship is secured by a motel in Branson, Missouri. The $917,000 relationship is secured by five single-family homes under construction in Monett, Missouri.

Non-interest Income

       Non-interest income increased $2.8 million, or 16.4%, in the year ended December 31, 2002, when compared to the year ended December 31, 2001. The increase was primarily due to an increase of $3.3 million in net realized gains on sales of available-for-sale investment securities. The increase in gain on sale of available-for-sale securities was primarily due to the sale of the Company's holdings of the common stock of another publicly traded company. This transaction was previously discussed in SEC filings by the Company. In addition, the Company sold some of its investments in debt securities to restructure its portfolio and realized the resulting gains and losses.

       This increase was partially offset by: (i) a decrease in net realized gains on sales of fixed-rate residential and student loans of $181,000, or 10.3%; and (ii) expenses on foreclosed assets of $597,000 in 2002 versus expenses on foreclosed assets of $216,000 in 2001. In 2002, the Company incurred higher expenses related to increased levels of foreclosures and repossessions. In addition, the Company recorded $254,000 of provision for losses on foreclosed assets in 2002 compared to a provision of $150,000 in 2001. During 2001, the Company sold one commercial real estate loan that was purchased at a discount from the Resolution Trust Corporation in a prior year, resulting in a gain of $300,000.

Non-Interest Expense

       Non-interest expense increased $1.1 million, or 4.2%, in the year ended December 31, 2002, when compared to the year ended December 31, 2001. The increase was primarily due to: (i) an increase of $716,000, or 4.7%, in salaries and employee benefits; and (ii) an increase of $607,000, or 12.8%, in net occupancy and equipment expense due primarily to increases in depreciation and various maintenance projects on buildings and equipment. The increase in salaries and employee benefits primarily relates to normal merit increases for existing employees and the hiring of additional experienced personnel to fill key supervisory and customer sales positions. This was partially offset by smaller increases and decreases in other expense categories.

Provision for Income Taxes

       Provision for income taxes as a percentage of pre-tax income increased slightly from 33.6% for the year ended December 31, 2001, to 34.6% for the year ended December 31, 2002. The dollar amount of increase in the provision was primarily due to the increase in income before taxes.



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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. The table does not reflect any effect of income taxes.

December 31,
2002

Year Ended
December 31, 2002

Year Ended
December 31, 2001

Year Ended
December 31, 2000

Yield/Rate
Average
Balance

Interest
Yield/Rate
Average
Balance

Interest
Yield/Rate
Average
Balance

Interest
Yield/Rate
(Dollars in thousands)
Interest-earning assets:
Loans receivable 6.10% $1,000,044 $64,062 6.41% $   936,117 $76,107 8.13% $843,170 $77,399 9.18%
Investment securities and other interest-
  earning assets

5.24   


293,022


16,099


5.49   


211,461


13,390


6.33   


135,148


8,751


6.47   

Total interest-earning assets 5.90   
$1,293,066
80,161
6.20   
$1,147,578
89,497
7.80   
$978,318
86,150
8.81   
Interest-bearing liabilities:
Interest-bearing demand 1.08    $   187,171 2,277 1.22    $   144,374 2,443 1.69    $122,392 2,617 2.14   
Savings 1.23    1,005 17 1.69    5,358 125 2.33    25,400 631 2.48   
Time deposits 2.38   
704,523
19,950
2.83   
593,265
29,837
5.03   
476,386
28,996
6.09   
Total deposits 2.07    892,699 22,244 2.49    742,997 32,405 4.36    624,178 32,244 5.17   
FHLB advances and other borrowings 2.66   
269,901
8,093
3.00   
293,124
13,502
4.61   
256,698
16,617
6.47   
Total interest-bearing liabilities 2.20   
$1,162,600
30,337
2.61   
$1,036,121
45,907
4.43   
$880,876
48,861
5.55   
Net interest income:
Interest rate spread 3.70%
$49,824
3.59%
$43,590
3.37%
$37,289
3.26%
Net interest margin* 3.85%
3.80%
3.81%
Average interest-earning assets to average
  interest-bearing liabilities

111.2%


110.8%


111.1%


              *Defined as the Company's net interest income divided by total interest-earning assets.

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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.

Year Ended
December 31, 2002 vs.
December 31, 2001

Year Ended
December 31, 2001 vs.
December 31, 2000

Increase
(Decrease)
Due to

Total
Increase
(Decrease)
Increase
(Decrease)
Due to
Total
Increase
(Decrease)

Rate
Volume
Rate
Volume
(Dollars in thousands)
Interest-earning assets:
Loans receivable $(16,974) $  4,929  $(12,045) $  (9,345) $  8,053  $(1,292)
Investment securities and other
 interest-earning assets

(1,947)


4,656 


2,709 


(197)


4,836 


4,639 

Total interest-earning assets (18,921)
9,585 
(9,336)
(9,542)
12,889 
3,347 
Interest-bearing liabilities:
Demand deposits (786) 620  (166) (598) 424  (174)
Savings deposits (49) (59) (108) (41) (465) (506)
Time deposits (14,748)
4,861 
(9,887)
(5,550)
6,391 
841 
Total deposits (15,583) 5,422  (10,161) (6,189) 6,350  161 
FHLBank advances and other
 borrowings

(4,230)


(1,179)


(5,409)


(5,248)


2,133 


(3,115)

Total interest-bearing liabilities (19,813)
4,243 
(15,570)
(11,437)
8,483 
(2,954)
Net interest income $      892 
$  5,342 
$   6,234 
$    1,895 
$  4,406 
$  6,301 


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Results of Operations and Comparison for the Years Ended December 31, 2001 and 2000

General

       The increase in earnings of $3.3 million, or 21.2%, during the year ended December 31, 2001, compared to the year ended December 31, 2000, was primarily due to an increase in net interest income of $6.3 million, or 16.9%, and an increase in non-interest income of $2.1 million, or 13.7%, partially offset by an increase in non-interest expense of $1.7 million, or 6.6%, an increase in provision for loan losses of $2.1 million, or 67.4%, and an increase in provision for income taxes of $1.3 million, or 15.8%.

Total Interest Income

       Total interest income increased $3.3 million, or 3.9%, during the year ended December 31, 2001 compared to the year ended December 31, 2000. The increase was due to a $4.6 million, or 53.0%, increase in interest income on investments and other interest-earning assets, partially offset by a $1.3 million, or 1.7%, decrease in interest income on loans. Interest income for both loans and investment securities and other interest-earning assets increased due to higher average balances, while interest on loans was negatively impacted by significantly lower average rates.

       In addition, interest income in 2001 was higher due to the following items:

Interest Income - Loans

       During the year ended December 31, 2001 compared to December 31, 2000, interest income on loans decreased from lower average interest rates, partially offset by higher average balances. Interest income decreased $9.3 million as the result of lower average interest rates. The average yield on loans decreased from 9.18% during the year ended December 31, 2000, to 8.13% during the year ended December 31, 2001, as a result of decreases in market rates of interest, primarily the "prime rate" of interest. A large portion of the Bank's loan portfolio adjusts with changes to the "prime rate" of interest.

       Interest income increased $8.0 million as the result of higher average loan balances from $843 million during the year ended December 31, 2000 to $936 million during the year ended December 31, 2001. The higher average balance resulted principally from the Bank's increased commercial real estate and construction lending, commercial business lending and indirect dealer consumer lending. The Bank's one- to four-family residential loan portfolio has decreased since December 31, 2000, due to the origination of a greater dollar amount of fixed-rate rather than adjustable-rate loans. The Bank generally sells these fixed-rate loans in the secondary market.



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Interest Income - Investments And Other Interest-earning Assets

       Interest income on investments and other interest-earning assets increased mainly as a result of higher average balances during the year ended December 31, 2001, when compared to the year ended December 31, 2000. Interest income increased $4.8 million as a result of an increase in average balances from $135 million during the year ended December 31, 2000, to $211 million during the year ended December 31, 2001. This increase was primarily in available-for-sale securities, where additional securities were acquired for liquidity and pledging to deposit accounts under repurchase agreements. The increase in interest income was offset by $197,000 as a result of a decrease in average yields from 6.47% during the year ended December 31, 2000, to 6.33% during the year ended December 31, 2001.

Total Interest Expense

       Total interest expense decreased $3.0 million, or 6.0%, during the year ended December 31, 2001, when compared with the year ended December 31, 2000, primarily due to a decrease in interest expense on FHLBank advances of $4.0 million, or 27.8%, partially offset by an increase in interest expense on deposits of $0.2 million, or 0.5%, and an increase in interest expense on short-term borrowings and trust preferred securities of $0.9 million, or 37.2%.

Interest Expense - Deposits

       Interest expense on deposits increased $6.4 million as a result of an increase in average balances of time deposits from $476 million during the year ended December 31, 2000, to $593 million during the year ended December 31, 2001, and decreased $5.6 million due to a decrease in average interest rates on time deposits from 6.09% during the year ended December 31, 2000, to 5.03% during the year ended December 31, 2001. The average balances of time deposits increased primarily as a result of the Company's use of brokered and other time deposits to fund loan and investment securities growth. In recent years, brokered deposit rates have become competitive with rates on FHLBank advances and larger retail deposits. The average interest rates decreased due to lower overall market rates of interest in 2001 and the effects of the Company's interest rate swaps.

       Interest on demand deposits decreased $598,000 due to a decrease in average rates from 2.14% during the year ended December 31, 2000, to 1.69% during the year ended December 31, 2001, and increased $424,000 due to an increase in average balances from $122 million during the year ended December 31, 2000, to $144 million during the year ended December 31, 2001. The other deposit category, savings, experienced a $506,000 decrease due primarily to a decrease in average balances. The changes in average balances for demand deposits and savings deposits approximately offset each other and resulted from the Company's change of product offerings and the reclassification of certain account types.

Interest Expense - FHLBank And Other Borrowings

       Interest expense on FHLBank advances, short-term borrowings and trust preferred securities decreased $3.1 million due to a decrease in average rates from 6.47% in the year ended December 31, 2000, to 4.61% in the year ended December 31, 2001. This was partially offset by an increase in average balances from $257 million during the year ended December 31, 2000, to $293 million during the year ended December 31, 2001, resulting in increased interest expense of $2.1 million due to higher average balances. The average balance increase was used to fund growth in loans and investment securities. Average interest rates decreased due to lower overall market rates during 2001. The Company's use of FHLBank advances, short-term borrowings and trust preferred securities which reprice daily, monthly or quarterly contributed to the significant decrease in average rates of interest.



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Net Interest Income

       The Company's overall interest rate spread increased 11 basis points, or 3.4%, from 3.26% during the year ended December 31, 2000, to 3.37% during the year ended December 31, 2001. The increase was due to a 112 basis point decrease in the weighted average rate paid on interest-bearing liabilities partially offset by a 101 basis point decrease in the weighted average yield received on interest-earning assets. The Company's overall net interest margin decreased 1 basis point, or 0.3%, from 3.81% during the year ended December 31, 2000, to 3.80% during the year ended December 31, 2001. In comparing the two years, the yield on loans decreased 105 basis points while the yield on investment securities and other interest-earning assets decreased 14 basis points. The rate paid on deposits decreased 81 basis points, while the rate paid on FHLBank advances and other borrowings decreased 186 basis points.

       The prime rate of interest averaged 9.23% during the year ended December 31, 2000, compared to an average of 6.92% during the year ended December 31, 2001. As a large percentage of the Bank's loans are tied to prime, this decrease was the primary reason for the decrease in the weighted average yield received on interest-earning assets.

       Interest rates paid on deposits, FHLBank advances and other borrowings decreased significantly during 2001 compared to 2000. As market rates of interest declined during 2001, the Company reduced rates paid to depositors. In addition in 2001, the Company utilized interest rate swaps and FHLBank advances which repriced daily, monthly or quarterly to reduce interest expense.

Provision For Loan Losses

       The provision for loan losses increased $2.1 million, or 67.4%, during the year ended December 31, 2001, from $3.1 million during the year ended December 31, 2000 to $5.2 million during the year ended December 31, 2001.

       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. Management has 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 collectibility of the portfolio. 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.

       Non-performing assets decreased $2.6 million, or 16.9%, from $15.2 million at December 31, 2000, to $12.6 million at December 31, 2001. Non-performing loans decreased $3.0 million, or 23.5%, from $12.5 million at December 31, 2000, to $9.5 million at December 31, 2001, and foreclosed assets increased $0.4 million, or 13.7%, from $2.7 million at December 31, 2000, to $3.1 million at December 31, 2001.

       Commercial loans comprise $7.8 million, or 82%, of the total $9.5 million non-performing loans at December 31, 2001. Three unrelated commercial real estate credit relationships, totaling $2.4 million, $1.7 million and $1.1 million, respectively, account for a majority of this non-performing total. The $2.4 million


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relationship is secured by a motel, condominium units and vacant land in the Branson, Missouri area. This relationship was placed in a non-accrual status in the fourth quarter of 2001. The $1.7 million relationship is secured primarily by condominium buildings and lots, single-family residences and lots, and other developed land near the Lake of the Ozarks, Missouri. This credit is part of the $7.3 million relationship described in the 2000 Annual Report on Form 10-K. The $1.1 million relationship is secured by the real estate and business assets of a restaurant in Branson, Missouri. A portion of this credit is guaranteed by the Small Business Administration. This relationship was placed in a non-accrual status in the fourth quarter of 2001.

       Of the total $3.1 million of foreclosed assets at December 31, 2001, three relationships account for $2.0 million. The first relationship involves a planned golf course and undeveloped lots near the Lake of the Ozarks, Missouri. The golf course is not operating and is listed for sale with a broker. The second relationship involves a single-family residence located near Springfield, Missouri. The property is listed for sale with a broker. The third relationship involves a single-family residence located in Springfield, Missouri. The house was under construction at the time of foreclosure and is now near completion.

       Potential problem loans increased $11.2 million, or 150%, from $7.5 million at December 31, 2000, to $18.7 million at December 31, 2001. These are loans which management has identified through routine internal review procedures as having possible credit problems which may cause the borrowers difficulty in complying with current loan repayment terms. These loans are not reflected in the non-performing loans. Potential problem loans increased primarily as a result of one large commercial real estate credit relationship, totaling $7.8 million, which was removed from non-performing status, although this relationship remains on the problem asset watch list currently. This relationship was described in the December 31, 2000 Annual Report on Form 10-K and is secured by a golf course, condominium buildings and lots, single-family residences and lots, and other developed and undeveloped land. The loan relationship has been strengthened through a participation in this credit with another financial institution, which resulted in additional collateral being provided for the loan.

       The Bank's allowance for loan losses as a percentage of total loans was 2.16% and 2.06% at December 31, 2001 and 2000, respectively. Management considers the allowance for loan losses adequate to cover losses inherent in the Company's loan portfolio at this time, based on current economic conditions. If economic conditions deteriorate significantly, it is possible that additional assets would be classified as non-performing, and accordingly, additional provision for losses would be required, thereby adversely affecting future results of operations and financial condition.

Non-interest Income

       Non-interest income increased $2.1 million, or 13.7%, in the year ended December 31, 2001, when compared to the year ended December 31, 2000. The increase was primarily due to: (i) an increase in service charges and ATM fees of $2.4 million, or 39.9%; (ii) an increase in net realized gains on sales of fixed rate residential and other loans of $1.2 million, or 208%; and (iii) an increase of $148,000 in profits on sales of available-for-sale investment securities. The increase in service charge income resulted from new products introduced, increased activity and a larger number of deposit accounts. The increase in ATM fees is related to an increase in overall usage by customers and non-customers. During the year ended December 31, 2001, the Bank sold significantly more residential and student loans than in 2000. During 2001, interest rates were conducive to the generation of fixed-rate mortgages, which the Bank typically sells, rather than adjustable-rate mortgages, which the Bank typically retains in its portfolio. During the year ended December 31, 2001, the Company sold some of its investments in debt securities to restructure its portfolio and realized the resulting gains and losses.



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       This increase was partially offset by: (i) a decrease in commissions revenues of $1.3 million, or 17.9%; and (ii) expenses on foreclosed assets of $216,000 in 2001 versus gains on foreclosed assets of $295,000 in 2000. In 2001, the Company incurred expenses to prepare properties for sale, primarily related to two properties. Both the travel and investment subsidiaries have experienced decreased sales activity as a result of general economic conditions prevailing in 2001. The investment subsidiary has been adversely affected by declining activity by investors in the U. S. stock markets. The travel subsidiary has been adversely affected by the merger of American Airlines and Trans World Airlines (TWA). Special incentives negotiated between the travel subsidiary and TWA were discontinued in 2001 as a result of the merger. In addition, the terrorist attacks on September 11, 2001, caused the cancellation of many travel activities, resulting in commission refunds by the travel subsidiary. Due to the current instability in the travel industry, the travel subsidiary likely will continue to generate little net income.

Non-interest Expense

       Non-interest expense increased $1.7 million, or 6.6%, in the year ended December 31, 2001, when compared to the year ended December 31, 2000. The increase was primarily due to: (i) an increase of $1.5 million, or 10.9%, in salaries and employee benefits; and (ii) an increase of $201,000, or 4.4%, in net occupancy and equipment expense due primarily to renovation work (and the related depreciation) at the Company's main office and operations center and other branch locations. The increase in salaries and employee benefits primarily relates to normal merit increases for existing employees and the hiring of additional experienced personnel to fill key supervisory and customer sales positions.

       This was partially offset by smaller increases and decreases in other expense categories.

Provision For Income Taxes

       Provision for income taxes as a percentage of pre-tax income decreased slightly from 34.6% for the year ended December 31, 2000, to 33.6% for the year ended December 31, 2001. This decrease primarily relates to the Company's increase in average balances in tax-exempt investments.

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 December 31, 2002, the Company had commitments of approximately $139 million to fund loan originations, issued lines of credit, outstanding letters of credit and unadvanced loans.

       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.

       The Company's stockholders' equity was $104.7 million, or 7.5% of total assets of $1.40 billion at December 31, 2002, compared to equity of $85.3 million, or 6.4% of total assets of $1.32 billion at December 31, 2001.



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       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 risked-based capital ratio of 8.00%, and a minimum 4.00% Tier 1 leverage ratio. On December 31, 2002, the Bank's Tier 1 risk-based capital ratio was 10.32%, total risk-based capital ratio was 11.58% and the Tier 1 leverage ratio was 8.22%. As of December 31, 2002, the Bank was "well capitalized" as defined by the Federal banking agencies' capital-related regulations. The FRB has established capital regulations for bank holding companies that generally parallel the capital regulations for banks. As of December 31, 2002, the Company was "well capitalized" under the capital ratios described above.

       At December 31, 2002, the held-to-maturity investment portfolio included no gross unrealized losses.

       The Company's primary sources of funds are certificates of deposit, FHLBank advances, other borrowings, loan repayments, 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.

       Statements of Cash Flows. During the years ended December 31, 2002, 2001 and 2000, the Company had positive cash flows from operating activities and positive cash flows from financing activities. The Company experienced negative cash flows from investing activities during each of these same time periods.

       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, the provision for losses on foreclosed assets, depreciation, 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 sources of cash flows from operating activities. Operating activities provided cash flows of $29.2 million, $23.5 million and $26.3 million during the years ended December 31, 2002, 2001 and 2000, respectively.

       During the years ended December 31, 2002, 2001 and 2000, investing activities used cash of $64.5 million, $197.4 million and $170.5 million, primarily due to the net increase of loans and the net purchases of investment securities in each period.

       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 and changes in short-term borrowings, as well as the issuance of trust preferred securities, purchases of treasury stock and dividend payments to stockholders. Financing activities provided $56.0 million, $168.9 million and $140.7 million for the years ended December 31, 2002, 2001 and 2000, respectively. Financing activities in the future are expected to primarily include changes in deposits, changes in FHLBank advances, changes in short-term borrowings, purchases of treasury stock and dividend payments to stockholders.

       Dividends. During the year ended December 31, 2002, the Company declared dividends of $.70 per share (20.8% of net income) and paid dividends of $.55 per share (16.3% of net income), compared to dividends declared and paid during the year ended December 31, 2001 of $.50 per share, or 18.5% of net income. The Board of Directors meets regularly to consider the level and the timing of dividend payments.



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       Common Stock Repurchases. The Company has been in various buy-back programs since May 1990. During the year ended December 31, 2002, the Company repurchased 38,676 shares of its common stock at an average price of $34.71 per share and reissued 33,262 shares of treasury stock at an average price of $18.78 per share to cover stock option exercises. During the year ended December 31, 2001, the Company repurchased 61,267 shares of its common stock at an average price of $26.75 per share and reissued 26,470 shares of treasury stock at an average price of $15.62 per share to cover stock option exercises.

       Management intends to continue its stock buy-back programs from time to time as long as repurchasing the stock contributes to the overall growth of shareholder value. The number of shares of stock that will be repurchased and the price that will be 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 7A.   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. However, the Company's interest rate swaps on certain brokered deposits have accelerated the repricing of these deposits to partially offset the effects of assets that reprice quickly.

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 Great Southern's 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 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


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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 December 31, 2002, Great Southern's internal interest rate risk models indicate a one-year interest rate sensitivity gap that is slightly positive.

       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 Company's 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 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 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.



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       In 2000, the Company began using interest rate swap derivatives as one method to manage some of its interest rate risks from recorded financial liabilities. These derivatives are utilized when they can be demonstrated to effectively hedge a designated asset or liability and such asset or liability exposes the Company to interest rate risk.

       Beginning in 2001, interest rate swaps are carried at fair value determined using quoted dealer prices and are recognized in the statement of financial condition in the prepaid expenses and other assets caption. Amounts to be paid or received under interest rate swaps are accounted for on the accrual basis and recognized as interest income or expense of the related liability. Gains and losses on early termination of these instruments are deferred and amortized as an adjustment to the yield on the related liability over the shorter of the remaining contract life or the maturity of the related asset or liability. If the related liability is sold or otherwise liquidated, the instrument is marked to market, with the resultant gains and losses recognized in noninterest income.

       The Company has entered into interest rate swap agreements with the objective of hedging against the effects of changes in the fair value of its liabilities for fixed rate brokered certificates of deposit and trust preferred securities caused by changes in market interest rates. The swap agreements generally provide for the Company to pay a variable rate of interest based on a spread to the one-month or three-month London Interbank Offering Rate (LIBOR) and to receive a fixed rate of interest equal to that of the hedged instrument. Under the swap agreements the Company is to pay or receive interest monthly, quarterly, semiannually or at maturity.

       At December 31, 2002, the notional amount of interest rate swaps outstanding was approximately $270,308,000, all consisting of swaps in a receivable position. At December 31, 2001, the notional amount of interest rate swaps outstanding was approximately $257,490,000, all consisting of swaps in a receivable position. The maturities of interest rate swaps outstanding at December 31, 2002 and 2001, in terms of notional amounts and their average pay and receive rates is discussed further in Note 14 of the Notes to Consolidated Financial Statements.

       The following tables illustrate the expected maturities and repricing, respectively, of the Bank's financial instruments at December 31, 2002. These schedules include the effects on interest rates and repricing periods of the Company's interest rate swaps on time deposits and other borrowings. These schedules do not reflect the effects of possible prepayments or enforcement of due-on-sale clauses. The tables are based on information prepared in accordance with generally accepted accounting principles.



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Maturities

December 31,
2002
Fair Value

2003
2004
2005
2006
2007
Thereafter
Total
(Dollars in thousands)
Financial Assets:
Interest bearing deposits $547    ---    ---    ---    ---    ---    $547    $547   
Weighted average rate 0.72% ---    ---    ---    ---    ---    0.72% ---   
Available-for-sale equity securities $296    ---    ---    ---    ---    $10,886    $11,182    $11,182   
Weighted average rate 5.94% ---    ---    ---    ---    6.10% 6.10% ---   
Available-for-sale debt securities ---    $255    ---    ---    $998    $223,834    $225,087    $225,087   
Weighted average rate ---    9.01% ---    ---    4.59% 5.10% 5.10% ---   
Held to maturity securities ---    ---    ---    ---    ---    $52,587    $52,587    $55,900   
Weighted average rate ---    ---    ---    ---    ---    8.75% 8.75% ---   
Adjustable rate loans $172,878    $78,110    $69,513    $87,924    $73,167    $238,061    $719,653    $724,321   
Weighted average rate 5.37% 5.03% 5.19% 4.93% 5.70%  5.61% 5.38% ---   
Fixed rate loans $79,391    $36,157    $41,716    $40,324    $43,643    $58,830    $300,061    $302,586   
Weighted average rate 6.26% 8.35% 8.76% 9.29% 8.55% 8.63% 8.06%  ---   
Federal Home Loan Bank stock ---    ---    ---    ---    ---    $14,962   $14,962   $14,962   
Weighted average rate ---    ---    ---    ---    ---    3.00% 3.00% ---   
Financial Liabilities:
Savings deposits $876    ---    ---    ---    ---    ---    $876     $876   
Weighted average rate 1.23% ---    ---    ---    ---    ---    1.23%  ---   
Time deposits $403,477    $58,022    $30,806    $14,195    $14,424    $178,312    $699,236    $715,944   
Weighted average rate 2.57% 3.43% 2.80% 2.25% 2.43% 1.55% 2.38% ---   
Interest bearing demand $216,699    ---    ---    ---    ---    ---    $216,699    $216,699   
Weighted average rate 1.08% ---    ---    ---    ---    ---    1.08% ---   
Non-interest bearing demand $94,508    ---    ---    ---    ---    ---    $94,508     $94,508    
Weighted average rate ---     ---    ---    ---    ---    ---    ---     ---   
Federal Home Loan Bank and other
  borrowings
$141,817    $25,842    $3,201    $1,426    $3,474     $91,020    $266,780    $281,876   
Weighted average rate 1.67% 2.14% 6.62% 6.73% 7.13%  3.98% 2.66% ---   


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Repricing

December 31,
2002
Fair Value

2003
2004
2005
2006
2007
Thereafter
Total
(Dollars in thousands)
Financial Assets:
Interest bearing deposits $547    ---    ---    ---    ---    ---    $547    $547   
Weighted average rate 0.72% ---    ---    ---    ---    ---    0.72% ---   
Available-for-sale equity securities $296    ---    ---    ---    ---    $10,886    $11,182    $11,182   
Weighted average rate 5.94% ---    ---    ---    ---    6.10% 6.10% ---   
Available-for-sale debt securities ---     $255   ---    ---    $998    $223,834    $225,087    $225,087   
Weighted average rate ---     9.01% ---    ---    4.59% 5.10% 5.10% ---   
Held to maturity securities $15,211    ---    ---    ---    $6,570    $30,806    $52,587    $55,900   
Weighted average rate 5.90% ---    ---    ---    7.58% 10.40% 8.75% ---   
Adjustable rate loans $690,518    $17,912    $3,883    $2,301    $4,946    $93    $719,653    $724,321   
Weighted average rate 5.32% 6.35% 7.70% 7.53% 7.23% 4.88% 5.38% ---   
Fixed rate loans $79,391    $36,157    $41,716    $40,324    $43,643    $58,830    $300,061    $302,586   
Weighted average rate 6.26% 8.35% 8.76% 9.29% 8.55% 8.63% 8.06%  ---   
Federal Home Loan Bank stock $14,962    ---    ---    ---    ---    ---    $14,962    $14,962  
Weighted average rate 3.00% ---    ---    ---    ---    ---    3.00% ---  
Financial Liabilities:
Savings deposits $876    ---    ---    ---    ---    ---    $876    $876   
Weighted average rate 1.23% ---    ---    ---    ---    ---    1.23% ---   
Time deposits $620,203    $51,056    $15,324    $4,195    $4,424    $4,034    $699,236    $715,944   
Weighted average rate 2.16% 3.73% 4.73% 4.24% 4.84% 5.81% 2.38% ---   
Interest bearing demand $216,699    ---    ---    ---    ---    ---    $216,699    $216,699   
Weighted average rate 1.08% ---    ---    ---    ---    ---    1.08% ---   
Non-interest bearing demand $94,508    ---    ---    ---    ---    ---    $94,508    $94,508   
Weighted average rate ---    ---    ---    ---    ---    ---    ---    ---   
Federal Home Loan Bank and other
  borrowings
$241,997    $2,841    $3,201    $1,426    $3,474    $13,841    $266,780    $281,876   
Weighted average rate 2.26% 7.32% 6.62% 6.73% 7.13% 6.31% 2.66% ---   


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ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

Independent Accountants' Report

Board of Directors
Great Southern Bancorp, Inc.
Springfield, Missouri

We have audited the consolidated statements of financial condition of Great Southern Bancorp, Inc. as of December 31, 2002 and 2001, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2002. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Great Southern Bancorp, Inc. as of December 31, 2002 and 2001, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.

/s/BKD, LLP

Springfield, Missouri
January 31, 2003

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Great Southern Bancorp, Inc.
Consolidated Statements of Financial Condition
December 31, 2002 and 2001
(In Thousands, Except Per Share Data)





Assets 2002
2001
Cash $  55,327 $  29,646
Interest-bearing deposits in other financial institutions 547
5,474
       Cash and cash equivalents 55,874 35,120
Available-for-sale securities 236,269 233,805
Held-to-maturity securities 52,587 37,465
Mortgage loans held for sale 2,636 7,135
Loans receivable, net 995,011 957,751
Interest receivable
   Loans 5,076 5,147
   Investments 1,490 2,063
Prepaid expenses and other assets 16,452 7,464
Foreclosed assets held for sale, net 4,328 3,057
Premises and equipment, net 16,963 12,839
Federal Home Loan Bank stock 14,962 14,962
Refundable income taxes 990 --
Deferred income taxes --
6,295
       Total assets $  1,402,638
$  1,323,103

See Notes to Consolidated Financial Statements.

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Liabilities and Stockholders' Equity

2002
2001
  Liabilities
     Deposits $  1,021,957 $  886,870
     Federal Home Loan Bank advances 206,226 258,743
     Short-term borrowings 43,304 57,763
     Trust preferred securities 18,964 17,160
     Accrued interest payable 2,485 5,186
     Advances from borrowers for taxes and insurance 229 295
     Accounts payable and accrued expenses 3,697 2,983
     Income taxes payable -- 8,849
     Deferred income taxes 1,067
--
          Total liabilities 1,297,929
1,237,849
   Stockholders' Equity
     Capital stock
       Serial preferred stock, $.01 par value; authorized
        1,000,000 shares -- --
       Common stock, $.01 par value; authorized
        20,000,000 shares, issued 12,325,002 shares 123 123
     Additional paid-in capital 17,033 17,160
     Retained earnings 145,931 127,489
     Accumulated other comprehensive income
       Unrealized appreciation on available-for-sale
       securities, net of income taxes of $1,286 and
       $384 at December 31, 2002 and 2001, respectively 2,568
710
165,655 145,482
     Less treasury common stock, at cost; December 31,
       2002 and 2001 - 5,467,881 and 5,462,467 shares,
       respectively 60,946
60,228
          Total stockholders' equity 104,709
85,254
          Total liabilities and stockholders' equity $  1,402,638
$  1,323,103

See Notes to Consolidated Financial Statements.

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Great Southern Bancorp, Inc.
Consolidated Statements of Income
Years Ended December 31, 2002, 2001 and 2000
(In Thousands, Except Per Share Data)

2002
2001
2000
Interest Income
     Loans $  64,062  $  76,107  $  77,399 
     Investment securities and other 16,099 
13,390 
8,751 
80,161 
89,497 
86,150 
Interest Expense
     Deposits 22,244  32,405  32,244 
     Federal Home Loan Bank advances 6,852  10,339  14,312 
     Short-term borrowings and trust preferred securities 1,241 
3,163 
2,305 
30,337 
45,907 
48,861 
Net Interest Income 49,824  43,590  37,289 
Provision for Loan Losses 5,800 
5,200 
3,106 
Net Interest Income After Provision for Loan Losses  44,024
 38,390
 34,183
Noninterest Income
     Commissions 5,786  5,765  7,024 
     Service charges and ATM fees 8,430  8,352  5,968 
     Net gains on loan sales 1,575  1,756  570 
     Net realized gains (losses) on sales of available-for-sale
       securities
3,443  139  (9)
     Income (expense) on foreclosed assets (597) (216) 295 
     Other income 1,186 
1,237 
1,135 
19,823 
17,033 
14,983 
Noninterest Expense
     Salaries and employee benefits 15,842  15,126  13,642 
     Net occupancy expense 5,337  4,730  4,529 
     Postage 1,426  1,233  1,152 
     Insurance 514  485  521 
     Amortization of excess of cost over fair value of net
      assets acquired --  284  160 
     Advertising 622  686  713 
     Office supplies and printing 828  774  703 
     Other operating expenses 3,765 
3,872 
4,084 
28,334 
27,190 
25,504 
Income Before Income Taxes 35,513  28,233  23,662 
Provision for Income Taxes 12,301 
9,475 
8,184 
Net Income $  23,212 
$  18,758 
$  15,478 
Earnings Per Common Share
     Basic $  3.38 
$  2.72 
$  2.16 
     Diluted $  3.34 
$  2.70 
$  2.12 

See Notes to Consolidated Financial Statements.

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Great Southern Bancorp, Inc.
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 2002, 2001 and 2000
(In Thousands, Except Per Share Data)

Additional
Comprehensive Common Paid-in
Income
Stock
Capital
Balance, January 1, 2000 $            --  $        123  $     17,487 
     Net income 15,478  --  -- 
     Stock issued under Stock Option Plan --  --  (26)
     Dividends declared, $.50 per share --  --  -- 
     Change in unrealized appreciation on
       available-for-sale securities, net of
       income taxes of $582 1,028  --  -- 
     Treasury stock purchased -- 
-- 
-- 
     Comprehensive income $    16,506 
Balance, December 31, 2000 $            --  123  17,461 
     Net income 18,758  --  --
     Stock issued under Stock Option Plan --  --  (301)
     Dividends declared, $.50 per share --  --  -- 
     Change in unrealized appreciation on
       available-for-sale securities, net of
       income taxes of $184 326  --  -- 
     Treasury stock purchased -- 
-- 
-- 
     Comprehensive income $    19,084 
Balance, December 31, 2001 $            --  123  17,160 
     Net income 23,212  --  -- 
     Stock issued under Stock Option Plan --  --  (127)
     Dividends declared, $.70 per share --  --  -- 
     Change in unrealized appreciation on
       available-for-sale securities, net of
       income taxes of $902 1,858  --  -- 
     Treasury stock purchased -- 
-- 
--
Comprehensive income $    25,070
Balance, December 31, 2002 $        123 
$     17,033 

See Notes to Consolidated Financial Statements.

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Great Southern Bancorp, Inc.
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 2002, 2001 and 2000
(In Thousands, Except Per Share Data)

Accumulated
Other
Comprehensive
Retained Income Treasury
Earnings
(Loss)
Stock
Total
Balance, January 1, 2000 $  100,310  $      (644) $  (48,351) $  68,925 
     Net income 15,478  --  --  15,478 
     Stock issued under Stock Option Plan --  --  507  481 
     Dividends declared, $.50 per share (3,611) --  --  (3,611)
     Change in unrealized appreciation on
       available-for-sale securities, net of
       income taxes of $582 --  1,028  --  1,028 
     Treasury stock purchased -- 
-- 
(11,252)
(11,252)
Balance, December 31, 2000 112,177  384  (59,096) 71,049 
     Net income 18,758  --  --  18,758 
     Stock issued under Stock Option Plan --  --  507  206 
     Dividends declared, $.50 per share (3,446) --  --  (3,446)
     Change in unrealized appreciation on
       available-for-sale securities, net of
       income taxes of $184 --  326  --  326 
     Treasury stock purchased -- 
-- 
(1,639)
(1,639)
Balance, December 31, 2001 127,489  710  (60,228) 85,254 
     Net income 23,212  --  --  23,212 
     Stock issued under Stock Option Plan --  --  624  497 
     Dividends declared, $.70 per share (4,770) --  --  (4,770)
     Change in unrealized appreciation on
       available-for-sale securities, net of
       income taxes of $902 --  1,858  --  1,858 
     Treasury stock purchased -- 
-- 
(1,342)
(1,342)
Balance, December 31, 2001 $  145,931 
$  2,568 
$  (60,946)
$  104,709

See Notes to Consolidated Financial Statements.

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Great Southern Bancorp, Inc.
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 2002, 2001 and 2000
(In Thousands)

2002
2001
2000
Reclassification Disclosure
     Unrealized appreciation on available-for-sale
       securities, net of income taxes of $2,073 for
       December 31, 2002; $231 for December 31,
       2001; $585 for December 31, 2000 $  4,130 $  418 $  1,022 
     Less reclassification adjustment for (depreciation)
       appreciation included in net income, net of
       income taxes of $1,171 for December 31, 2002;
       $47 for December 31, 2001; $(3) for
       December 31, 2000 2,272
92
(6)
     Change in unrealized appreciation on available-for-
       sale securities, net of income taxes $  1,858
$  326
$  1,028 


See Notes to Consolidated Financial Statements.

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Great Southern Bancorp, Inc.
Consolidated Statements of Cash Flows
Years Ended December 31, 2002, 2001 and 2000
(In Thousands)

2002
2001
2000
Operating Activities
     Net income $  23,212  $  18,758  $  15,478 
     Proceeds from sales of loans held for sale 106,487  104,997  35,511 
     Originations of loans held for sale (98,939) (105,766) (32,960)
     Items not requiring (providing) cash
       Depreciation 2,593  2,259  2,191 
       Amortization 136  409  160 
       Provision for loan losses 5,800  5,200  3,106 
       Provision for losses on foreclosed assets 254  150  -- 
       Net gains on loan sales (1,575) (1,756) (570)
       Net realized (gains) losses on available-for-
         sale securities (3,443) (139)
       (Gain) loss on sale of premises and equipment (76) 87  206 
       Gain on sale of foreclosed assets (271) (576) (495)
       Amortization of deferred income, premiums
         and discounts 659  (1,493) (790)
       Deferred income taxes (2,654) (1,306) (958)
     Changes in
       Interest receivable 644  1,701  (3,057)
       Prepaid expenses and other assets 132  90  329 
       Accounts payable and accrued expenses (3,016) (933) 1,274 
       Income taxes refundable/payable (725)
1,781
6,870
           Net cash provided by operating activities 29,218 
23,463 
26,304

See Notes to Consolidated Financial Statements.

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Great Southern Bancorp, Inc.
Consolidated Statements of Cash Flows
Years Ended December 31, 2002, 2001 and 2000
(In Thousands)

2002
2001
2000
Investing Activities
     Net change in loans $  (29,144) $  (48,976) $  (115,090)
     Purchase of loans (31,448) (45,990) (26,292)
     Proceeds from sale of student loans 10,838  11,700  12,400
     Purchase of premises and equipment (6,876) (4,956) (2,729)
     Proceeds from sale of premises and equipment 235  87  -- 
     Proceeds from sale of foreclosed assets 4,815  5,060  437 
     Capitalized costs on foreclosed assets 31  (523) (359)
     Proceeds from maturing held-to-maturity
       securities 11,687  17,354 
     Purchase of held-to-maturity securities (26,811) (17,315) (7,474)
     Proceeds from sale of available-for-sale securities 151,265  106,292  19,982 
     Proceeds from maturities, calls and repayments of
       available-for-sale securities 90,024  161,828  60,230 
     Purchase of available-for-sale securities (239,087) (363,762) (125,873)
     Purchase of Federal Home Loan Bank stock --
(867)
(3,114)
           Net cash used in investing activities (64,471)
(197,417)
(170,528)

See Notes to Consolidated Financial Statements.

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Great Southern Bancorp, Inc.
Consolidated Statements of Cash Flows
Years Ended December 31, 2002, 2001 and 2000
(In Thousands)

2002
2001
2000
Financing Activities
     Net increase in certificates of deposit $    36,730  $   117,190  $   110,964 
     Net increase in checking and savings accounts 90,905  15,452  14,178 
     Proceeds from Federal Home Loan Bank
       advances and note payable to bank 2,829,500  1,459,300  3,966,483 
     Repayments of Federal Home Loan Bank
       advances and note payable to bank (2,882,017) (1,450,435) (3,924,653)
     Net increase (decrease) in short-term borrowings (14,459) 16,068  (11,899)
     Proceeds from issuance of trust preferred
       securities --  17,250  -- 
     Payment of financing costs on trust preferred
       securities --  (924) -- 
     Advances (to) from borrowers for taxes and
       insurance (66) (49) 34 
     Purchase of treasury stock (1,342) (1,639) (11,252)
     Dividends paid (3,741) (3,446) (3,611)
     Stock options exercised 497 
206 
481 
           Net cash provided by financing activities 56,007 
168,973 
140,725 
Increase (Decrease) in Cash and Cash
  Equivalents 20,754  (4,981) (3,499)
Cash and Cash Equivalents, Beginning of
  Year 35,120 
40,101 
43,600 
Cash and Cash Equivalents, End of Year $  55,874 
$  35,120 
$  40,101 

See Notes to Consolidated Financial Statements.

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Great Southern Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000

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

   Nature of Operations

Great Southern Bancorp, Inc. ("GSBC" or the "Company") operates as a one-bank holding company. GSBC's business primarily consists of the business of Great Southern Bank (the "Bank"), which provides a full range of financial services as well as travel, insurance and investment services through the Company's and the Bank's other wholly owned subsidiaries to customers primarily in southwest and central Missouri. The Company and the Bank are subject to the regulation of certain federal and state agencies and undergo periodic examinations by those regulatory agencies.

In June 1998, the Bank converted to a state-chartered trust company, and the Company became a one-bank holding company. Until that time the Bank was a stock savings bank, and the Company was a savings bank holding company.

   Use of Estimates

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

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses. In connection with the determination of the allowance for loan losses, management obtains independent appraisals for significant properties.

   Principles of Consolidation

The consolidated financial statements include the accounts of Great Southern Bancorp, Inc., its wholly owned subsidiaries, Great Southern Capital Trust I and Great Southern Bank and the Bank's wholly owned subsidiaries, Great Southern Capital Management, Inc., GSB One LLC (including its wholly owned subsidiary, GSB Two LLC) and Great Southern Financial Corporation. All significant intercompany accounts and transactions have been eliminated in consolidation.

   Reclassifications

Certain prior periods amounts have been reclassified to conform to the 2002 financial statements presentation. These reclassifications had no effect on net income.



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Great Southern Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000

   Federal Home Loan Bank Stock

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

   Securities

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

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

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

   Mortgage Loans Held for Sale

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

   Loans

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

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



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Great Southern Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000

   Allowance for Loan Losses

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

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

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

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

   Foreclosed Assets Held for Sale

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

   Premises and Equipment

Premises and equipment are stated at cost less accumulated depreciation. Depreciation is charged to expense using the straight-line and accelerated methods over the estimated useful lives of the



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Great Southern Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000

assets. Leasehold improvements are capitalized and amortized using the straight-line and accelerated methods over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter.

Loan Servicing and Origination Fee Income

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

Earnings Per Share

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

Earnings per share (EPS) were computed as follows:

2002
2001
2000
(In Thousands, Except Per Share Data)
Net income $  23,212
$  18,758
$  15,478
Average common shares outstanding 6,863 6,889 7,166
Average common share stock options outstanding 83
67
147
Average diluted common shares 6,946
6,956
7,313
Earnings per common share - basic $    3.38
$    2.72
$    2.16
Earnings per common share - diluted $    3.34
$    2.70
$    2.12

Options to purchase 16,600 and 130,075 shares of common stock were outstanding during the years ended December 31, 2002 and 2000, but were not included in the computation of diluted earnings per share because the options' exercise price was greater than the average market price of the common shares.



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Great Southern Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000

   Stock Option Plan

The Company has a stock-based employee compensation plan, which is described more fully in Note 18. The Company accounts for this plan under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price at least equal to the market value of the underlying common stock on the grant date. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.

Year Ended December 31,
2002
2001
2000
(In Thousands, Except Per Share Amounts)
Net income, as reported $23,212  $18,758  $15,478 
Less
     Total stock-based employee
       compensation cost determined
       under the fair value based method,
       net of income taxes (260)
(358)
(303)
Pro forma net income $22,952 
$18,400 
$15,175 
Earnings per share
       Basic - as reported $    3.38 
$    2.72 
$    2.16 
       Basic - pro forma $    3.34 
$    2.67 
$    2.12 
       Diluted - as reported $    3.34 
$    2.70 
$    2.12 
       Diluted - pro forma $    3.30 
$    2.65 
$    2.08 

   Cash Equivalents

The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. At December 31, 2002 and 2001, cash equivalents consisted of interest-bearing deposits in other financial institutions.

   Income Taxes

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



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Great Southern Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000

   Interest Rate Swaps

Beginning in 2001, interest rate swaps are carried at fair value determined using quoted dealer prices and are recognized in the statements of financial condition in the prepaid expenses and other assets caption. The Company uses interest rate swaps to help manage its interest rate risk from recorded financial liabilities. These instruments are utilized when they can be demonstrated to effectively hedge a designated liability and such liability exposes the Company to interest-rate risk. Amounts to be paid or received under interest-rate swaps are accounted for on the accrual basis and recognized as interest income or expense of the related liability. Gains and losses on early termination of these instruments are deferred and amortized as an adjustment to the yield on the related liability over the shorter of the remaining contract life or the maturity of the related asset or liability. If the related liability is sold or otherwise liquidated, the instrument is marked to market, with the resultant gains and losses recognized in noninterest income.

   Restriction on Cash and Due From Banks

The Bank is required to maintain reserve funds in cash and/or on deposit with the Federal Reserve Bank. The reserve required at December 31, 2002 and 2001, respectively, was $13,219,000 and $15,679,000.

   Future Changes in Accounting Principle

The Financial Accounting Standards Board ("FASB") recently issued its Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." This new Interpretation requires a guarantor to recognize a liability for the fair value of the obligation undertaken in issuing a guarantee at its inception and prescribes disclosures regarding guarantees. The Interpretation applies only to guarantees issued or modified after December 31, 2002. Guarantees issued by the Bank are principally in the form of letters of credit as discussed in Note 15. Initial adoption of the Interpretation will have no effect on the Bank's financial statements. The Bank's application of the Interpretation to guarantees issued or modified after December 31, 2002, will, if material, result in recognition of a liability for such guarantees, as well as recognition of fee revenue from them over the period of time the guarantees are outstanding.

In July 2002, FASB issued SFAS 146, "Accounting for Costs Associated with Exit or Disposal Activities." This Statement requires that a liability for costs associated with an exit or disposal activity be recognized when incurred rather than at the date of commitment to an exit or disposal plan. This Statement replaces EITF 94-3 and is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. The adoption of this Statement is not expected to have a material effect on the Company's financial statements.

In October 2002, the FASB issued SFAS 147, "Acquisitions of Certain Financial Institutions." This Statement brings all business combinations involving financial institutions, except mutuals, into the scope of SFAS 141, "Business Combinations." SFAS 147 requires that all acquisitions of financial institutions that meet the definition of a business, including acquisitions of part of a financial



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Great Southern Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000

institution that meet the definition of a business, be accounted for in accordance with SFAS 141 and the related intangibles accounted for in accordance with SFAS 142. SFAS 147 removes such acquisitions from the scope of SFAS 72, "Accounting for Certain Acquisitions of Banking or Thrift Institutions." SFAS 147 also amends SFAS 144 to include in its scope long-term customer-relationship intangible assets of financial institutions. SFAS 147 is generally effective immediately and provides guidance with respect to amortization and impairment of intangibles recognized in connection with acquisitions previously within the scope of SFAS 72. The adoption of this Statement did not have a material effect on the Company's financial statements.

Note 2:    Investments in Debt and Equity Securities

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

December 31, 2002
Gross Gross Approximate
Amortized Unrealized Unrealized Fair
Cost
Gains
Losses
Value
(In Thousands)
U.S. government agencies $  11,000 $      -- $    2 $  10,998
Collateralized mortgage
 obligations 5,082 -- 11 5,071
Mortgage-backed securities 195,904 3,093 33 198,964
Corporate bonds 9,156 910 12 10,054
Equity securities 11,267
181
266
11,182
$232,409
$4,184
$324
$236,269

December 31, 2001
Gross Gross Approximate
Amortized Unrealized Unrealized Fair
Cost
Gains
Losses
Value
(In Thousands)
U.S. government agencies $  84,719 $   669 $     -- $  85,388
Collateralized mortgage
 obligations 5,188 -- 71 5,117
Mortgage-backed securities 120,544 28 1,147 119,425
Corporate bonds 8,311 417 -- 8,728
Equity securities 13,967
1,214
34
15,147
$232,729
$2,328
$1,252
$233,805


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Great Southern Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000

The amortized cost and fair value of available-for-sale securities at December 31, 2002, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Approximate
Amortized Fair
Cost
Value
(In Thousands)
After one through five years $   1,243 $   1,253
After five through ten years 10,000 10,000
After ten years 8,913 9,799
Securities not due on a single maturity date 200,986
204,035
$221,142
$225,087

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

December 31, 2002
Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Approximate
Fair
Value

(In Thousands)
States and political
  subdivisions and
  industrial revenue bonds


$  52,587


$  3,313


$  --


$  55,900


December 31, 2001
Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Approximate
Fair
Value

(In Thousands)
States and political
  subdivisions and
  industrial revenue bonds


$  37,465


$  3,280


$  45


$  40,700

The amortized cost and fair value of held-to-maturity securities at December 31, 2002, 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.



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Great Southern Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000

Approximate
Amortized Fair
Cost
Value
(In Thousands)
After five through ten years $  9,923 $11,056
After ten years 42,664
44,844
$52,587
$55,900

The amortized cost of securities pledged as collateral to secure public deposits and for other purposes amounted to approximately $40,667,743 and $17,899,700 at December 31, 2002 and 2001, respectively, with approximate fair values of $40,594,100 and $18,107,200, respectively. The amortized cost of securities pledged as collateral to secure collateralized borrowing accounts amounted to approximately $43,042,700 and $25,865,400 at December 31, 2002 and 2001, respectively, with approximate fair values of $43,333,900 and $26,081,600, respectively. The amortized cost of securities pledged as collateral to secure Federal Home Loan Bank advances amounted to approximately $109,704,500 and $144,928,400 at December 31, 2002 and 2001, respectively, with approximate fair values of $111,069,300 and $145,800,700, respectively.

Note 3:    Loans and Allowance for Loan Losses

Categories of loans at December 31, 2002 and 2001, include:

2002
2001
(In Thousands)
One-to-four family residential mortgage loans $  169,506  $  183,421 
Other residential mortgage loans 84,862  88,274 
Commercial real estate loans 401,942  351,037 
Other commercial loans 91,123  97,557 
Construction loans 212,670  206,885 
Installment, education and other loans 110,182  97,745 
Prepaid dealer premium 2,261  1,810 
Discounts on loans purchased (37) (43)
Undisbursed portion of loans in process (55,468) (46,744)
Allowance for loan losses (21,288) (21,328)
Deferred loan fees and gains, net (742)
(863)
$  995,011 
$  957,751 



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Great Southern Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000

Transactions in the allowance for loan losses were as follows:

2002
2001
2000
(In Thousands)
Balance, beginning of year $21,328  $18,694  $17,293 
     Provision charged to expense 5,800  5,200  3,106 
     Loans charged off, net of recoveries
       of $1,874 for 2002, $2,335 for
       2001 and $1,446 for 2000 (5,840)
(2,566)
(1,705)
Balance, end of year $21,288
$21,328
$18,694

The weighted average interest rate on loans receivable at December 31, 2002 and 2001, was 6.10% and 6.54%, respectively.

Loans serviced for others are not included in the accompanying consolidated statements of financial condition. The unpaid principal balances of loans serviced for others were $36,826,000 and $39,511,000 at December 31, 2002 and 2001, respectively.

Gross impaired loans totaled approximately $14,521,000 and $8,998,000 at December 31, 2002 and 2001, respectively. An allowance for loan losses of $1,949,000 and $1,205,837 relates to these impaired loans at December 31, 2002 and 2001, respectively. There were two impaired loans at December 31, 2002, and no impaired loans at December 31, 2001, without a related allowance for loan losses assigned.

Interest of approximately $828,000, $1,283,000 and $1,671,000 was received on average impaired loans of approximately $13,101,000, $8,056,000 and $12,132,000 for the years ended December 31, 2002, 2001 and 2000, respectively. Interest of approximately $1,831,000 and $1,756,000 would have been recognized on an accrual basis during the years ended December 31, 2002 and 2001, respectively. Interest that would have been recognized on impaired loans on an accrual basis during 2000 was not materially different than interest received on a cash basis.

At December 31, 2002 and 2001, accruing loans delinquent 90 days or more totaled approximately $1,024,000 and $548,000, respectively. Nonaccruing loans at December 31, 2002 and 2001, were approximately $13,497,000 and $8,998,000, respectively.

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

Certain directors and executive officers of the Company and the Bank are customers of and had transactions with the Bank in the ordinary course of business. In the opinion of management, all loans included in such transactions were made on substantially the same terms as those prevailing at the time for comparable transactions with unrelated parties. At December 31, 2002 and 2001, loans outstanding to these directors and executive officers are summarized as follows:



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Great Southern Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000

December 31, December 31,
2002
2001
(In Thousands)
Balance, beginning of year $10,073  $  5,731 
New loans 6,962  14,617 
Payments (4,646)
(10,275)
Balance, end of year $12,389 
$ 10,073 

Included in the amount of new loans originated to directors and executive officers of the Company and the Bank during 2001 is approximately $13,400,000 of loans to a director appointed during 2001. This amount represents the outstanding balance of the loans as of the date that this individual was elected to the Board.

Note 4:   Foreclosed Assets Held for Sale

Activity in the allowance for losses on foreclosed assets was as follows:

2002
2001
2000
(In Thousands)

Balance, beginning of year
$  150  $  --  $  -- 
Provision charged to expense --  150  -- 
Charge-offs, net of recoveries (150)
-- 
-- 
Balance, end of year $     -- 
$  150 
$    -- 

Note 5:   Premises and Equipment

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

December 31,
2002
2001
(In Thousands)
Land $  4,728 $  2,978
Buildings and improvements 12,957 11,120
Furniture, fixtures and equipment 13,737
12,341
31,422 26,439
Less accumulated depreciation 14,459
13,600
$16,963
$12,839


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Great Southern Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000

Note 6:   Deposits

Deposits are summarized as follows:

Weighted Average December 31,
Interest Rate
2002
2001
(In Thousands, Except
Interest Rates)
Noninterest-bearing accounts -- $    94,508 $    62,131
Interest-bearing checking 1.08% - 1.02% 216,699 158,067
Savings accounts 1.23% - 1.37% 876
980
312,083
221,178
Certificate accounts 0% - 1.99% 38,962 7,538
2% - 2.99% 208,708 59,443
3% - 3.99% 168,186 94,097
4% - 4.99% 62,045 145,515
5% - 5.99% 91,892 118,769
6% - 6.99% 119,145 212,617
7% and above 10,298
24,527
699,236
662,506
Interest rate swap fair value
  adjustment 10,638
3,186
$1,021,957
$  886,870

The weighted average interest rate on certificates of deposit was 2.38% and 3.48% at December 31, 2002 and 2001, respectively.

The aggregate amount of certificates of deposit originated by the Bank in denominations greater than $100,000 was approximately $100,782,000 and $79,664,000 at December 31, 2002 and 2001, respectively. The Bank utilizes brokered deposits as an additional funding source. The aggregate amount of brokered deposits, which are primarily in denominations of $100,000 or more, was approximately $339,820,000 and $355,461,000 at December 31, 2002 and 2001, respectively.



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Great Southern Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000

At December 31, 2002, scheduled maturities of certificates of deposit are as follows (in thousands):

2003 $  403,477
2004 58,022
2005 30,806
2006 14,195
2007 14,424
Thereafter 178,312
$  699,236

A summary of interest expense on deposits is as follows:

2002
2001
2000
(In Thousands)
Checking accounts $  2,277  $  2,443  $  2,617 
Savings accounts 17  125  631 
Certificate accounts 19,990  29,905  29,096 
Early withdrawal penalties (40)
(68)
(100)
$  22,244 
$  32,405 
$  32,244 

Note 7:   Advances From Federal Home Loan Bank

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

December 31, 2002 December 31, 2001
Weighted Weighted
Average Average
Interest Interest
Due In
Amount
Rate
Amount
Rate
(In Thousands, Except Interest Rates)
2002 $        -- --% $  101,227 2.11%
2003 81,263 1.52    31,327 2.06   
2004 25,842 2.14    25,914 2.58   
2005 3,201 6.62    3,280 6.64   
2006 1,426 6.73    1,514 6.78   
2007 3,474 7.13    4,323 7.19   
2008 and thereafter 91,020
3.98    91,158
4.14   
$  206,226
2.90    $  258,743
3.03   


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Great Southern Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000

Included in the Bank's FHLB advances is a $25,000,000 advance with a maturity date of December 16, 2010. The advance has a call provision that allows the Federal Home Loan Bank of Des Moines to call the advance quarterly.

Included in the Bank's FHLB advances is a $25,000,000 advance with a maturity date of January 20, 2011. The advance has a call provision that allows the Federal Home Loan Bank of Des Moines to call the advance on January 20, 2003, and quarterly thereafter.

The Bank has pledged FHLB stock, investment securities and first mortgage loans free of pledges, liens and encumbrances as collateral for outstanding advances. Investment securities with approximate carrying values of $111,069,000 and $144,928,000, respectively, were specifically pledged as collateral for advances at December 31, 2002 and 2001. Loans with carrying values of approximately $536,720,000 and $543,881,000 were pledged as collateral for outstanding advances at December 31, 2002 and 2001, respectively.

Note 8:   Short-term Borrowings

Short-term borrowings are summarized as follows:

December 31,
2002
2001
(In Thousands)
Federal funds purchased $   4,800 $  37,900
Securities sold under reverse repurchase agreements 38,504
19,863
$  43,304
$  57,763

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

Short-term borrowings had weighted average interest rates of 1.08% and 1.63% at December 31, 2002 and 2001, respectively. Short-term borrowings averaged $33,380,000 and $66,833,000 for the years ended December 31, 2002 and 2001, respectively. The maximum amounts outstanding at any month end were $54,212,000 and $127,336,000 during those same periods.



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Great Southern Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000

Note 9:    Note Payable to Bank

The Company has a line of credit with a commercial bank. The amount available under the line of credit was $12,000,000 at December 31, 2002 and 2001, respectively. There were no amounts outstanding under the line at December 31, 2002 and 2001. The note bears interest at LIBOR plus 1.25% due quarterly, is secured by all of the common stock of the Bank and matures November 1, 2003.

The Bank has a potentially available $100,330,000 line of credit under a borrowing arrangement with the Federal Reserve Bank at December 31, 2002. The line is secured primarily by commercial loans and was not drawn upon at December 31, 2002.

Note 10:   Trust Preferred Securities

During 2001 GSBCP, a newly formed Delaware business trust subsidiary of the Company, issued 1,725,000 shares of unsecured 9.00% Cumulative Trust Preferred Securities at $10 per share in an underwritten public offering. The gross proceeds of the offering were used to purchase a 9.00% Subordinated Debenture from the Company. The Company's proceeds from the issuance of the Subordinated Debentures to GSBCP, net of underwriting fees and offering expenses, were $16.3 million. The Company records distributions payable on the trust preferred securities as interest expense for financial reporting purposes. The proceeds from the offering were used to payoff the Company's indebtedness under the existing note payable to bank. The trust preferred securities mature in 2031 and are redeemable at the Company's option beginning in 2006. The trust preferred securities qualify as Tier I capital for regulatory purposes.

During 2001 the Company entered into an interest rate swap agreement to effectively convert this fixed rate debt to variable rates of interest. The variable rate is three-month LIBOR plus 202 basis points, adjusting quarterly. The initial rate was 6.25% and the rate at December 31, 2002 and 2001, was 3.87% and 4.62%, respectively.

Trust preferred securities are summarized as follows:

December 31,
2002
2001
(In Thousands)
Trust preferred securities $  17,250 $  17,250
Interest rate swap fair value adjustment 1,714
(90)


$  18,964
$  17,160



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Great Southern Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000

Note 11:  Income Taxes

The Company files a consolidated federal income tax return. During the time the Bank operated under a thrift charter, thrifts were allowed a percentage of otherwise taxable income as a statutory bad debt deduction, subject to limitations based on aggregate loans and savings balances. This percentage was most recently 8%. In August 1996 this statutory bad debt deduction was repealed and is no longer available for thrifts. In addition, bad debt allowances accumulated after 1988, which are presently included as a component of the net deferred tax asset, must be recaptured over a six-year period beginning with the period ended December 31, 1998. The amount of the deferred tax liability which must be recaptured is approximately $302,000 at December 31, 2002.

As of December 31, 2002 and 2001, retained earnings includes approximately $17,500,000 for which no deferred income tax liability has been recognized. This amount represents an allocation of income to bad debt deductions for tax purposes only for tax years prior to 1988. If the Bank were to liquidate, the entire amount would have to be recaptured and would create income for tax purposes only, which would be subject to the then-current corporate income tax rate. The unrecorded deferred income tax liability on the above amount was approximately $6,475,000 at December 31, 2002 and 2001.

The provision for income taxes includes these components:

2002
2001
2000
(In Thousands)
Taxes currently payable $  14,955 $  10,781 $  9,142
Deferred income taxes (2,654)
(1,306)
(958)
Income tax expense $  12,301
$  9,475
$  8,184

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

December 31,
2002
2001
(In Thousands)
Deferred tax assets
    Allowance for loan losses $  7,451 $  7,465
    Accrued expenses 231 113
    Partnership tax credits 168 139
    Excess of cost over fair value of net assets acquired 187 126
    Other 77
16
8,114
7,859



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December 31,
2002
2001
(In Thousands)
Deferred tax liabilities
   Tax bad debt allowance in excess of base year
     allowance
$  (302) $  (605)
   FHLB stock dividends (575) (575)
   Unrealized appreciation on available-for-sale
     securities
(1,286) (384)
   Real estate investment trust dividends (7,018)
--
(9,181)
(1,564)
     Net deferred tax asset (liability) $  (1,067)
$  6,295

Reconciliations of the Company's provision for income taxes to the statutory corporate tax rates are as follows:

2002
2001
2000
Tax at statutory rate 35.0% 35.0% 35.0%
Other (.4)
(1.4)
(.4)
34.6%
33.6%
34.6%

The income and other tax returns of the Company and its consolidated subsidiaries are subject to but have not been audited recently by the Internal Revenue Service and state taxing authorities. These returns have been closed without audit through December 31, 1998.

Note 12:   Disclosures About Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:
   Cash and Cash Equivalents and Federal Home Loan Bank Stock

The carrying amount approximates fair value.




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Great Southern Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000

   Securities

Fair values for securities equal quoted market prices, if available. If quoted market prices are not available, fair value is estimated based on quoted market prices of similar securities.

   Mortgage Loans Held for Sale

Fair value is estimated using the quoted market prices of similar loans originated.

   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.

   Note Payable to Bank and Trust Preferred Securities

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

   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



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Great Southern Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000

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.

   Interest Rate Swaps

Fair values of interest rate swaps are estimated based on quoted dealer prices.

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

December 31, 2002 December 31, 2001
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
(In Thousands)
Financial assets
  Cash and cash equivalents $  55,874 $  55,874 $  35,120 $  35,120
  Available-for-sale securities 236,269 236,269 233,805 233,805
  Held-to-maturity securities 52,587 55,900 37,465 40,703
  Mortgage loans held for sale 2,636 2,636 7,135 7,135
  Loans, net of allowance for loan
    losses
995,011 1,002,983 957,751 979,782
  Accrued interest receivable 6,566 6,566 7,210 7,210
  Investment in FHLB stock 14,962 14,962 14,962 14,962
  Interest rate swaps 12,353 12,353 3,096 3,096

Financial liabilities
  Deposits 1,021,957 1,028,027 886,870 886,656
  FHLB advances 206,226 217,894 258,743 258,373
  Short-term borrowings 43,304 43,304 57,763 57,763
  Trust preferred securities 18,964 18,964 17,160 17,160
  Accrued interest payable 2,485 2,485 5,186 5,186
  Unrecognized financial
    instruments (net of contractual
    value)
      Commitments to originate loans -- -- -- --
        Letters of credit -- -- -- --
        Lines of credit -- -- -- --



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Great Southern Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000

Note 13:   Operating Leases

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

At December 31, 2002, future minimum lease payments are as follows (in thousands):

2003 $  183
2004 140
2005 112
2006 112
2007 112
Later Years 468
$ 1,127

Rental expense was $266,905, $250,161 and $297,274 for the years ended December 31, 2002, 2001 and 2000, respectively.

Note 14:   Interest Rate Swaps

The Company has entered into interest rate swap agreements with the objective of hedging against the effects of changes in the fair value of its liabilities for fixed rate brokered certificates of deposit and trust preferred securities caused by changes in market interest rates. The swap agreements generally provide for the Company to pay a variable rate of interest based on a spread to the one-month or three-month London Interbank Offering Rate (LIBOR) and to receive a fixed rate of interest equal to that of the hedged instrument. Under the swap agreements the Company is to pay or receive interest monthly, quarterly, semiannually or at maturity.

At December 31, 2002, the notional amount of interest rate swaps outstanding was approximately $270,308,000, all consisting of swaps in a receivable position. At December 31, 2001, the notional amount of interest rate swaps outstanding was approximately $257,490,000, all consisting of swaps in a receivable position. The maturities of interest rate swaps outstanding at December 31, 2002 and 2001, in terms of notional amounts and their average pay and receive rates were as follows:



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Great Southern Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000

2002 2001
Fixed
to
Variable
Average
Pay
Rate
Average
Receive
Rate
Fixed
to
Variable
Average
Pay
Rate
Average
Receive
Rate
(In Millions)
Interest Rate Swaps

Expected
Maturity Date
2002 $       -- --% --% $  49.2 1.61% 6.36%
2003 36.0 .73    5.52    31.0 1.08    5.88   
2004 7.0 1.23    6.57    7.0 1.85    6.57   
2005 15.5 .89    6.20    15.5 1.49    6.20   
2006 10.0 1.42    5.30    10.0 1.93    5.30   
2007 10.0 1.36    3.50    20.0 2.10    4.00   
2008 27.6 1.28    3.85    7.6 1.54    5.93   
2009 19.8 1.55    5.50    25.0 2.20    6.06   
2011 22.5 1.54    5.69    15.0 2.13    6.17   
2012 10.0 1.40    5.50    -- --    --   
2016 39.8 1.56    6.14    60.0 2.08    6.22   
2017 54.9 1.40    4.70    -- --    --   
2031 17.2
3.87    9.00    17.2
4.68    9.00   

$  270.3
1.47    5.49    $  257.5
2.00    6.16   

Note 15:   Commitments and Credit Risk

    Commitments to Originate Loans

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

At December 31, 2002 and 2001, the Bank had outstanding commitments to originate loans and fund commercial construction aggregating approximately $4,721,000 and $6,216,000, respectively. The commitments extend over varying periods of time with the majority being disbursed within a 30- to 180-day period.




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Great Southern Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000

Mortgage loans in the process of origination represent amounts that the Bank plans to fund within a normal period of 60 to 90 days, and which are intended for sale to investors in the secondary market. Total mortgage loans in the process of origination amounted to approximately $3,497,000 and $5,475,000, at December 31, 2002 and 2001, respectively.

   Letters of Credit

Letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers.

The Company had total outstanding letters of credit amounting to approximately $15,711,000 and $11,923,000, at December 31, 2002 and 2001, respectively, with $8,282,000 and $4,076,000, respectively, of the letters of credit having terms up to five years. The remaining $7,429,000 and $7,847,000 at December 31, 2002 and 2001, respectively, consisted of an outstanding letter of credit to guarantee the payment of principal and interest on a Multifamily Housing Refunding Revenue Bond Issue. The Federal Home Loan Bank has issued a letter of credit backing the Bank's letter of credit.

   Lines of Credit

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

At December 31, 2002, the Bank had granted unused lines of credit to borrowers aggregating approximately $95,393,000 and $19,910,000 for commercial lines and open-end consumer lines, respectively. At December 31, 2001, the Bank had granted unused lines of credit to borrowers aggregating approximately $72,971,000 and $17,514,000 for commercial lines and open-end consumer lines, respectively.

   Credit Risk

The Bank grants collateralized commercial, real estate and consumer loans primarily to customers in the southwest and central portions of Missouri. Although the Bank has a diversified portfolio, loans aggregating approximately $162,103,000 and $155,626,000 at December 31, 2002 and 2001,




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respectively, are secured by motels, restaurants, recreational facilities, other commercial properties and residential mortgages in the Branson, Missouri, area. Residential mortgages account for approximately $63,890,000 and $67,870,000 of this total at December 31, 2002 and 2001, respectively.

Note 16:   Additional Cash Flow Information

2002
2001
2000
(In Thousands)
Noncash Investing and Financing Activities
    Real estate acquired in settlement of
      loans
$7,392 $6,959 $3,458
    Sale and financing of foreclosed assets $1,292 $2,479 $1,705
    Dividends declared but not paid $1,029 -- --
Additional Cash Payment Information
    Interest paid $33,038 $46,839 $48,575
    Income taxes paid $15,676 $9,000 $2,300

Note 17:   Employee Benefits

The Company participates in a multi-employer defined benefit plan covering all employees who have met minimum service requirements. The Company's policy is to fund pension cost accrued. Employer contributions charged to expense for the years ended December 31, 2002, 2001 and 2000, were approximately $246,000, $230,000 and $0, respectively. As a member of a multi-employer pension plan, disclosures of plan assets and liabilities for individual employers are not required or practicable.

The Company has a defined contribution pension plan covering substantially all employees. The Company matches 100% of the employee's contribution on the first 3% of the employee's compensation, and also matches 50% of the employee's contribution on the next 2% of the employee's compensation. Employer contributions charged to expense for the years ended December 31, 2002, 2001 and 2000, were approximately $255,000, $313,000 and $309,000, respectively.

Note 18:   Stock Option Plan

The Company established the 1989 Stock Option and Incentive Plan for employees and directors of the Company and its subsidiaries. Under the plan, stock options or awards may be granted with respect to 1,232,496 shares of common stock.




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Great Southern Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000

In addition, the Board of Directors of the Company established the 1997 Stock Option and Incentive Plan for employees and directors of the Company and its subsidiaries. Under the plan, stock options or awards may be granted with respect to 800,000 shares of common stock.

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

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

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

Available
to Grant
Shares
Under
Option
Weighted
Average
Exercise
Price
Balance, January 1, 2000   751,822   305,770 $  17.933
   Granted (62,513) 62,513 16.383
   Exercised -- (71,205) (12.140)
   Forfeited 62,520
(62,520)
(19.974)
Balance, December 31, 2000 751,829 234,558 16.510
   Granted (62,075) 62,075 26.291
   Exercised -- (54,932) (16.052)
   Forfeited 15,849
(15,849)
(20.134)

Balance, December 31, 2001 705,603 225,852 21.480
   Granted (67,050) 67,050 37.231
   Exercised -- (45,827) (18.414)
   Forfeited 16,465
(16,465)
(24.386)
Balance, December 31, 2002   655,018
  230,610
26.462

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




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Great Southern Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000

December 31,
2002
December 31,
2001
December 31,
2000


Dividends per share $0.56 $0.50 $0.50
Risk-free interest rate 2.93% 3.91% 5.93%
Expected life of options 5 Years 5 Years 5 Years
Weighted average fair value of
   options granted during year
$9.83 $19.57 $10.11

The following table further summarizes information about stock options outstanding at December 31, 2002:

Options Outstanding
Options Exercisable
Range of
Exercise Prices
Number
Outstanding
Weighted
Average
Remaining
Contractual
Life
Weighted
Average
Exercise
Price
Number
Exercisable
Weighted
Average
Exercise
Price
$10.938 to $16.875 34,333 6.86 years $14.850 12,508 $13.403
$17.000 to $18.188 18,675 3.91 years $17.594 6,725 $17.415
$21.500 to $28.375 112,802 6.00 years $25.261 40,634 $24.624
$36.375 to $40.020 64,800 8.56 years $37.261 -- N/A

Note 19:   Significant Estimates and Concentrations

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

Note 20:   Regulatory Matters

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




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Great Southern Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of Total and Tier I Capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I Capital (as defined) to adjusted tangible assets (as defined). Management believes, as of December 31, 2002, that the Bank meets all capital adequacy requirements to which it is subject.

As of December 31, 2002, the most recent notification from the Bank's regulators categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain minimum total risk-based, Tier I risk-based and Tier 1 leverage capital ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank's category.

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

Actual For Capital
Adequacy Purposes
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
(In Thousands)
As of December 31, 2002
  Total Risk-Based Capital
    Great Southern Bancorp, Inc. $133,209 12.1% ≥$87,840 ≥8.0% N/A N/A
    Great Southern Bank $127,343 11.6% ≥$87,986 ≥8.0% ≥$109,983 ≥10.0%
  Tier I Risk-Based Capital
    Great Southern Bancorp, Inc. $119,391 10.9% ≥$43,920 ≥4.0% N/A N/A
    Great Southern Bank $113,502 10.3% ≥$43,993 ≥4.0% ≥$65,990 ≥6.0%
  Tier 1 Leverage Capital
    Great Southern Bancorp, Inc. $119,391 8.6% ≥$55,360 ≥4.0% N/A N/A
    Great Southern Bank $113,502 8.2% ≥$55,246 ≥4.0% ≥$69,058 ≥5.0%
As of December 31, 2001
  Total Risk-Based Capital
    Great Southern Bancorp, Inc. $113,274 10.9% ≥$82,986 ≥8.0% N/A N/A
    Great Southern Bank $104,610 10.2% ≥$82,087 ≥8.0% ≥$102,609 ≥10.0%
  Tier I Risk-Based Capital
    Great Southern Bancorp, Inc. $100,204 9.7% ≥$41,493 ≥4.0% N/A N/A
    Great Southern Bank $91,679 8.9% ≥$41,043 ≥4.0% ≥$61,565 ≥6.0%
  Tier 1 Leverage Capital
    Great Southern Bancorp, Inc. $100,204 7.8% ≥$51,101 ≥4.0% N/A N/A
    Great Southern Bank $91,679 7.2% ≥$50,642 ≥4.0% ≥$63,302 ≥5.0%



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Great Southern Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000

The Company and the Bank are subject to certain restrictions on the amount of dividends that may be declared without prior regulatory approval. At December 31, 2002 and 2001, the Company and the Bank exceeded their minimum capital requirements. The entities may not pay dividends which would reduce capital below the minimum requirements shown above.

Note 21:   Summary of Unaudited Quarterly Operating Results

Following is a summary of unaudited quarterly operating results for the years 2002, 2001 and 2000:

2002
Three Months Ended
March 31
June 30
September 30
December 31
(In Thousands, Except Per Share Data)
Interest income $19,781 $20,153 $20,513 $19,714
Interest expense 8,110 7,633 7,476 7,118
Provision for loan losses 1,350 1,650 1,300 1,500
Net realized gains (losses) on
   available-for-sale securities
595 2,229 621 (2)
Net income 5,402 6,534 5,919 5,357
Earnings per common share - diluted .78 .94 .85 .77



2001
Three Months Ended
March 31
June 30
September 30
December 31
(In Thousands, Except Per Share Data)
Interest income $24,842 $22,096 $22,127 $20,432
Interest expense 13,571 12,408 10,504 9,410
Provision for loan losses 1,650 1,050 1,050 1,450
Net realized gains (losses) on
   available-for-sale securities
-- 268 99 (228)
Net income 4,727 4,532 4,850 4,649
Earnings per common share - diluted .67 .65 .70 .68



2000
Three Months Ended
March 31
June 30
September 30
December 31
(In Thousands, Except Per Share Data)
Interest income $19,321 $20,573 $22,425 $23,831
Interest expense 10,608 11,434 12,810 14,009
Provision for loan losses 476 600 900 1,130
Net realized gains (losses) on
   available-for-sale securities
-- (6) -- (3)
Net income 3,659 3,884 3,992 3,943
Earnings per common share - diluted .48 .53 .55 .56



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Great Southern Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000

Note 22:   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, commercial business loans and consumer loans and funding these loans through attracting deposits from the general public, originating brokered deposits and borrowing from the Federal Home Loan Bank and others. The operating results of this segment are regularly reviewed by management to make decisions about resource allocations and to assess performance.

The following table provides information about segment profits and segment assets and has been prepared using the same accounting policies as those described in the summary of significant accounting policies in Note 1. There are no material intersegment revenues. Thus, no reconciliations to amounts reported in the consolidated financial statements are necessary. Revenue from segments below the reportable segment threshold is attributable to four operating segments of the Company. These segments include an insurance agency, a travel agency, discount brokerage services and real estate appraisal services (2000 only).

Year Ended December 31, 2002
Banking
All Other
Totals
(In Thousands)

Interest income $80,117 $44 $80,161
Interest expense $30,337 -- $30,337
Depreciation and amortization $2,607 $122 $2,729
Provision for income taxes $12,105 $196 $12,301
Segment profit $22,840 $372 $23,212
Segment assets $1,398,930 $3,708 $1,402,638
Expenditures for additions to premises and
   equipment
$6,791 $85 $6,876
Year Ended December 31, 2001
Banking
All Other
Totals
(In Thousands)

Interest income $89,425 $72 $89,497
Interest expense $45,907 -- $45,907
Depreciation and amortization $2,246 $422 $2,668
Provision for income taxes $9,570 $(95) $9,475
Segment profit $18,924 $(166) $18,758
Segment assets $1,319,989 $3,114 $1,323,103
Expenditures for additions to premises
   and equipment
$4,781 $175 $4,956



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Year Ended December 31, 2000
Banking
All Other
Totals
(In Thousands)

Interest income $86,104 $46 $86,150
Interest expense $48,849 $12 $48,861
Depreciation and amortization $2,055 $296 $2,351
Provision for income taxes $7,821 $363 $8,184
Segment profit $14,766 $712 $15,478
Segment assets $1,126,413 $3,765 $1,130,178
Expenditures for additions to premises
   and equipment
$2,276 $453 $2,729

Note 23: Condensed Parent Company Statements

The condensed balance sheets at December 31, 2002 and 2001, and statements of income and cash flows for the years ended December 31, 2002, 2001 and 2000, for the parent company, Great Southern Bancorp, Inc., are as follows:

December 31,
2002
2001
(In Thousands)
Balance Sheets
  Assets
    Cash $      5,410 $         491
    Available-for-sale securities 285 9,190
    Investment in subsidiary bank 116,134 91,580
    Income taxes receivable 101 535
    Premises and equipment 179 130
    Prepaid expenses 878 909
    Other assets 2,393
544
$  125,380
$  103,379
Liabilities and Stockholders' Equity
    Accounts payable and accrued expenses $     1,696 $        540
    Trust preferred securities 18,964 17,160
    Deferred income taxes 11 425
    Common stock 123 123
    Additional paid-in capital 17,033 17,160
    Retained earnings 145,931 127,489
    Unrealized appreciation on available-for-sale
      securities, net
2,568 710
    Treasury stock, at cost (60,946)
(60,228)
$  125,380
$  103,379



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Great Southern Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000

2002
2001
2000
(In Thousands)
Statements of Income
   Income
      Dividends from subsidiary
        bank
$  500 $  7,300 $  7,000
      Interest and dividend income 178 348 324
      Net realized gains (losses) on
        sales of available-for-sale
        securities


2,240


29


(11)
2,918
7,677
7,313
   Expense
      Operating expenses 485 370 219
      Interest expense 718
1,146
1,041
1,203
1,516
1,260
   Income before income tax and
      equity in undistributed earnings
      of subsidiaries
1,715 6,161 6,053
   Provision (credit) for income taxes 431
(398)
(371)
   Income before equity in earnings
      of subsidiaries
1,284 6,559 6,424
   Equity in undistributed earnings of
      subsidiaries

21,928

12,199

9,054
$  23,212
$  18,758
$  15,478



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Great Southern Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000

2002
2001
2000
(In Thousands)
Statements of Cash Flows
   Operating Activities
      Net income $  23,212 $  18,758 $  15,478
      Items not requiring (providing) cash
         Equity in undistributed earnings of
            subsidiaries
(21,928) (12,199) (9,054)
         Depreciation 16 2 --
         Amortization 40 34 --
         Net realized (gains) losses on sales of
            available-for-sale securities
(2,240) (29) 11
      Changes in
         Prepaid expenses and other assets (4) (942) --
         Accounts payable and accrued expenses 127 496 3
         Income taxes 434
(398)
(312)
            Net cash provided by (used in) operating activities (343)
5,722
6,126
   Investing Activities
      Purchase of fixed assets (65) -- --
      Proceeds from sale of available-for-sale
         securities
9,963 129 65
      Other investments (50) -- (50)
      Investment in subsidiary --
(534)
(1,000)
            Net cash provided by (used in) investing activities 9,848
(405)
(985)
   Financing Activities
      Repayment of bank overdraft -- -- (16)
      Proceeds from issuance of trust preferred
         securities
-- 17,250 --
      Net increase (decrease) in short-term borrowings -- (17,841) 9,902
      Dividends paid (3,741) (3,446) (3,611)
      Stock options exercised 497 206 481
      Treasury stock purchased (1,342)
(1,639)
(11,253)
            Net cash used in financing activities (4,586)
(5,470)
(4,497)
   Increase (Decrease) in Cash 4,919 (153) 644
   Cash, Beginning of Year 491
644
--
   Cash, End of Year $  5,410
$  491
$  644
   Additional Cash Payment Information
      Interest paid $720 $1,186 $1,038


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ITEM 9.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                      ACCOUNTING AND FINANCIAL DISCLOSURE.

       None.

PART III

ITEM 10.       DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

       (a)       Directors of the Registrant

Nominees to Serve a Three-Year Term Expiring at the 2006 Annual Meeting

       Thomas J. Carlson, age 50, was first appointed a Director of Bancorp in January 2001. He is the co-owner of Carlson Gardner, Inc., a real estate development company that has been in business since 1993. Mr. Carlson is also a shareholder of Woodco, Inc., a real estate construction company. He co-owns and is a member of Missouri Equity Partners, L.L.C. and Mid America Property Management, L.L.C. He is the President and Chief Executive Officer of Pointe Royale Development, Inc., a real estate development company. Mr. Carlson serves on the Board of Directors of ITEC Attractions, Inc., which owns the IMAX Theater in Branson, Missouri. Mr. Carlson, an attorney, is active in local political and civic affairs. He was a member of the Springfield City Council from 1983 to 1985, serving as Mayor Pro Tem from 1985 to 1987. He was Mayor of the City of Springfield from 1987 to 1993. Thereafter, he served on the Springfield-Branson Regional Airport Board. In 1997, he was again re-elected to the Springfield City Council. In 2001, he was again elected Mayor of the City of Springfield, a position he continues to hold. None of these entities are affiliated with Bancorp.

       Joseph W. Turner, age 38, joined Great Southern Bank ("Great Southern") in 1991 and became an officer of Bancorp in 1995. Mr. J. Turner became a Director in 1997 and currently serves as President and Chief Executive Officer of Bancorp and Great Southern. Prior to joining Great Southern, Mr. J. Turner was an attorney with the Kansas City, Missouri law firm of Stinson, Mag and Fizzell. Mr. J. Turner is the son of William V. Turner, who is a Director and the Chairman of the Board of Bancorp and Great Southern. Mr. J. Turner is the brother of Julie T. Brown, who is a Director of Bancorp and Great Southern.

Information with Respect to the Continuing Directors

       In addition to the nominees proposed to serve on the Bancorp Board of Directors, the following individuals are also members of the Bancorp Board, for a term ending on the date of the annual meeting of stockholders in the year indicated. The principal occupation and business experience for the last five years and certain other information with respect to each continuing director of Bancorp is set forth below. The information concerning the continuing directors has been furnished by them to Bancorp.

Directors Serving a Three-Year Term Expiring at the 2004 Annual Meeting

       William V. Turner, age 70, has served as the Chairman of the Board of Great Southern since 1974, Chief Executive Officer of Great Southern from 1974 to 2000, and President of Great Southern from 1974 to 1997. Mr. W. Turner has served in similar capacities with Bancorp since its incorporation in 1989. Mr. W. Turner has also served as Chairman of the Board and President of Great Southern Financial Corporation (a subsidiary of Great Southern) since its incorporation in 1974 and Chairman of the Board of Great Southern Capital Management, Inc. (a subsidiary of Great Southern) since its formation in 1988. Mr. W. Turner is the


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father of Joseph W. Turner, who is a Director and the Chief Executive Officer and President of Bancorp and Great Southern. Mr. W. Turner is also the father of Julie T. Brown, who is a Director of Bancorp and Great Southern.

       Julie T. Brown, age 41, was first appointed a Director of Great Southern and Bancorp in 2002. Ms. Brown is an attorney and shareholder with the Springfield, Missouri law firm of Carnahan, Evans, Cantwell and Brown, P.C. having joined the firm in February 1996. Carnahan, Evans, Cantwell and Brown, P.C. represents both Great Southern and Bancorp in corporate matters. Ms. Brown is active in local civic affairs, serving on the Boards of the Community Foundation of the Ozarks, and the Discovery Center of Springfield, among others. Ms. Brown is the daughter of William V. Turner, who is a Director and the Chairman of the Board of Bancorp and Great Southern, and the sister of Joseph W. Turner, who is a Director and the Chief Executive Officer and President of Bancorp and Great Southern.

Directors Serving a Three-Year Term Expiring at the 2005 Annual Meeting

       William E. Barclay, age 73, was first elected a Director of Great Southern in 1975 and of Bancorp in 1989. Mr. Barclay is the founder and has served as President and/or Chairman of Auto-Magic Full Service Car Washes in Springfield, Missouri since 1962. Mr. Barclay also founded Barclay Love Oil Company in Springfield, Missouri in 1964, founded a chain of Ye Ole Buggy Bath Self-Service Car Washes in Springfield, Missouri in 1978 and opened a Jiffy Lube franchise in Springfield, Missouri in 1987. None of these entities are affiliated with Bancorp.

       Larry D. Frazier, age 65, was first elected a Director of Great Southern and of Bancorp in May 1992. Mr. Frazier was elected a Director of Great Southern Financial Corporation (a subsidiary of Great Southern) in 1976, where he served until his election as Director of Great Southern and Bancorp. Mr. Frazier is retired from White River Valley Electric Cooperative in Branson, Missouri, where he served as Chief Executive Officer from 1975 to 1998. Mr. Frazier also has served as President of Rural Missouri Cable T.V., Inc. since 1979. These entities are not affiliated with Bancorp.

(b)   Executive Officers of the Registrant

       Included under Part I of this Form 10-K.

(c)   Compliance with Section 16(a) of the Exchange Act

       Section 16(a) of the Exchange Act requires Bancorp's directors, its executive officers and persons who own more than ten percent of the Common Stock, to file reports detailing their ownership and changes of ownership in the Common Stock with the SEC and to furnish Bancorp with copies of all such ownership reports. Based solely on Bancorp's review of the copies of the ownership reports furnished to Bancorp, and written representations relative to the filing of certain forms, Bancorp is aware of three late filings for William V. Turner for ten transactions in January 2002, four transactions in June 2001 and three transactions in October 2000; four late filings for Joseph W. Turner for six transactions in January 2002, three transactions in June 2001, four transactions in October 2000 and one transaction in December 1999; two late filings for Julie T. Brown for three transactions in October 2002 and two transactions in July 2002; two late filings for Steven G. Mitchem for five transactions in March 2002 and seven transactions in August 2001; one late filing for Larry A. Larimore for one transaction in October 2001; and one late filing for Douglas W. Marrs for four transactions in January 2001.



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ITEM 11.    EXECUTIVE COMPENSATION.

Summary Compensation Table

       The following table sets forth information concerning the compensation of William V. Turner, the Chairman of the Board; Joseph W. Turner, the President and Chief Executive Officer; Rex A. Copeland, the Treasurer; and Steven G. Mitchem, the Chief Lending Officer of Great Southern Bank. No other executive officer earned a salary and bonus in excess of $100,000 for fiscal 2002.

Annual Compensation
Long-Term
Compensation
Awards

Name and Principal Position


Year
Salary
($)(1)

Bonus
($)

Options
(#)

All Other
Compensation
($)(2)

William V. Turner Fiscal 2002 239,071 176,731 7,500 117,039
  Chairman of the Board Fiscal 2001 232,329 140,308 7,500 113,717
Fiscal 2000 226,494 120,000 7,500 6,960

Joseph W. Turner Fiscal 2002 198,938 176,731 7,500 9,657
  Chief Executive Officer and Fiscal 2001 188,370 140,308 7,500 13,751
  President Fiscal 2000 179,714 120,000 7,500 6,581

Rex A. Copeland Fiscal 2002 122,500 13,530 3,000 5,696
  Treasurer Fiscal 2001 110,750 12,210 3,000 497
Fiscal 2000 84,570 --- 7,080 39,781

Steven G. Mitchem Fiscal 2002 109,792 12,100 3,000 5,145
  Chief Lending Officer Fiscal 2001 104,583 11,550 3,000 4,292
Fiscal 2000 94,667 --- 2,500 4,335
                     

  1. Includes directors' fees for Mr. W. Turner of $36,000, $32,100 and $31,200 for Fiscal 2002, Fiscal 2001 and Fiscal 2000, respectively; and for Mr. J. Turner of $24,000, $19,500 and $18,000 for Fiscal 2002, Fiscal 2001 and Fiscal 2000, respectively.
  2. Fiscal 2002 includes: (a) company matching contributions to Bancorp's 401(k) plan (Mr. W. Turner - $8,000, Mr. J. Turner - $8,000, Mr. R. Copeland - $5,417and Mr. S. Mitchem - $4,866), (b) term life insurance premiums paid by Great Southern for the benefit of Mr. W. Turner - $279, Mr. J. Turner - $279, Mr. R. Copeland - $279 and Mr. S. Mitchem - $279, (c) compensation under applicable Internal Revenue Service regulations for personal use of Great Southern's aircraft by Mr. W. Turner - $1,307 and Mr. J. Turner - $1,378 and (d) annual benefit payments under Bancorp's pension plan to Mr. W. Turner - $107,453.


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Option Grants During the Fiscal Year Ended December 31, 2002

       The following table sets forth options to acquire shares of Common Stock which were granted during fiscal 2002 to the executive officers named in the Summary Compensation Table.

OPTIONS GRANTS IN FISCAL 2002

Individual Grants
Name


Number of
Securities
Underlying
Options
Granted
(#)(1)

% of Total
Options
Granted to
All
Employees
in Fiscal
2002

Exercise or
Base Price
($ per share)

Expiration
Date

Potential Realizable
Value at Assumed
Annual Rate of
Stock Price
Appreciation for
Option Term
5% ($)
10% ($)

William V. Turner 7,500 11.2% $40.0200 9-18-2007 $48,101 $139,300
Joseph W. Turner 7,500 11.2    40.0200 9-18-2007 $48,101 $139,300
Rex A. Copeland 3,000 4.5    36.3750 9-18-2012 $68,628 $173,917
Steven G. Mitchem 3,000 4.5    36.3750 9-18-2012 $68,628 $173,917
                     
  1. Options for William V. Turner and Joseph W. Turner were granted at 110% of the market price on the date of grant, vest 25% per year after a one year holding period beginning on the date of grant (September 18, 2002), and must be exercised within 5 years of the grant. Options for Rex A. Copeland and Steven G. Mitchem vest 25% per year after a two year holding period beginning on the date of grant (September 18, 2002), and must be exercised within 10 years of the grant.

Option Exercises and Fiscal Year-End Values

       The following table sets forth all stock options exercised by the named executives during fiscal 2002 and the number and value of unexercised options held by such executive officers at December 31, 2002.

Number of Securities
Underlying Unexercised
Options at Fiscal Year-End (#)

Value of Unexercised
In-the-Money Options
at Fiscal Year-End ($)(2)

Name
Shares
Acquired on
Exercise (#)

Value
Realized
($)(1)

Exercisable
Unexercisable
Exercisable
Unexercisable

William V. Turner 15,625 $204,160 6,250 18,125 $  83,221 $135,342
Joseph W. Turner 11,560 231,785 14,375 18,125 197,544 135,342
Rex A. Copeland 1,770 30,113 --- 11,310 --- 136,329
Steven G. Mitchem 550 6,170 925 8,775 16,310 84,214
                     
  1. Value realized is calculated based on the difference between the option exercise price and the closing market price of the Common Stock on the date of exercise multiplied by the number of shares to which the exercise relates.
  2. The value of unexercised options was calculated at a per share price of $36.75, based on the closing price of the Common Stock as reported on the Nasdaq National Market System on December 31, 2002, less the exercise price per share.


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Employment Agreements

       William V. Turner and Joseph W. Turner (the "Employees") have entered into employment agreements with Great Southern (the "Employment Agreements"). The Employment Agreements provide for an annual base salary in an amount not less than the Employee's then-current salary and an initial term of five years with respect to Mr. W. Turner, and five years with respect to Mr. J. Turner. The Employment Agreements provide for an extension of one year, in addition to the then-remaining term, on each anniversary of the effective date of the agreements subject to the Board's discretion. The Employment Agreements provide that Great Southern may terminate the employment of either of the Employees for "cause," as defined in the Employment Agreements, at any time. The Employment Agreements also provide that in the event Great Southern chooses to terminate the employment of either of the Employees for reasons other than for cause, or in the event either of the Employees resigns from Great Southern upon the failure of the Great Southern Board of Directors to reelect the Employee to his current office or upon a material lessening of his functions, duties or responsibilities, the employee would be entitled to the payments owed for the remaining term of the agreement. If the employment of either of the Employees is terminated in connection with or within 12 months of a "change in control" of Great Southern or Bancorp, each of the Employees would be entitled to (i) a lump sum payment equal to 299% of the Employee's base amount of compensation as defined in Section 280G(b)(3) of the Internal Revenue Code of 1986, as amended, and (ii) continued payment of his salary under the applicable Employment Agreement for the term of the agreement. If Messrs. W. Turner and J. Turner had been entitled to the lump sum payments described in clause (i) of the preceding sentence as of December 31, 2002, the payments would have amounted to $1,323,077 and $753,965, respectively.

Directors' Compensation

       Directors of Bancorp receive a monthly fee of $500, which is the only compensation paid to directors by Bancorp. Directors of Great Southern receive a monthly fee of $1,500, except for William V. Turner, the Chairman of the Board of Directors, who receives a monthly fee of $1,900. The director of Great Southern Financial Corporation, who is William V. Turner, receives a monthly fee of $600 for his service on that board. The directors of Bancorp and its subsidiaries are not paid any fees for committee service and are not reimbursed for their costs in attending the Board of Directors or any committee meetings.

Benefits

       Pension Plan. Great Southern's employees are included in the Pentegra Retirement Fund, a multiple employer comprehensive pension plan. This noncontributory defined benefit retirement plan covers all employees who have met minimum service requirements.



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       The following table illustrates annual pension benefits payable upon retirement, subject to limits established by federal law, based on various levels of compensation and years of service and assuming payment in the form of a straight-life annuity. Covered compensation includes all regular and overtime pay excluding bonuses and commissions. At December 31, 2002, Messrs. J. Turner, R. Copeland and S. Mitchem had 10, 2 and 11 years, respectively, of credited service under the pension plan. Mr. W. Turner is no longer accruing additional benefits under the plan and, in 2002, received annual benefit payments of $107,453 under the pension plan. The benefits under this plan are not subject to Social Security or other offsets.

PENSION PLAN TABLE

Average Annual Years of Service
Covered Compensation
10
20
30
40
$ 50,000 $10,000 $ 20,000     $ 30,000     $ 40,000    
100,000 20,000 40,000     60,000     80,000    
150,000 30,000 60,000     90,000     120,000    
200,000 40,000 80,000     120,000     160,000    
250,000 50,000 100,000     150,000     160,000(1)
300,000 60,000 120,000     160,000(1) 160,000(1)
350,000 70,000 140,000     160,000(1) 160,000(1)
400,000 80,000 160,000     160,000(1) 160,000(1)
450,000 90,000 160,000(1) 160,000(1) 160,000(1)
________________
  1. The maximum retirement benefit currently permitted by federal law is $160,000 per year for this type of plan.


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ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                   MANAGEMENT.

       The following table sets forth certain information, as of March 21, 2003 (the "Record Date") as to those persons believed by management of Bancorp to be beneficial owners of more than five percent of the outstanding shares of Common Stock. Persons, legal or natural, and groups beneficially owning in excess of five percent of the Common Stock are required to file certain reports regarding such ownership with Bancorp and with the United States Securities and Exchange Commission (the "SEC") in accordance with the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Where appropriate, historical information set forth below is based on the most recent Schedule 13D or 13G filed on behalf of such person with Bancorp. Other than those persons listed below, management is not aware of any person or group that owns more than five percent of the Common Stock as of the Record Date.

Name and Address
of Beneficial Owner
Amount and
Nature of Beneficial
Ownership(1)
Percent of
Class(2)

William V. Turner
Ann S. Turner
Turner Family Limited Partnership
Turner Family Foundation
925 St. Andrews Circle
Springfield, MO 65809
1,034,335(3) 15.06%

Robert M. Mahoney
Joyce B. Mahoney
Tri-States Company
4940 S. Farm Road 189
Suite 500
Rogersville, MO 65742
527,384(4) 7.69   

Earl A. Steinert, Jr.
1736 E. Sunshine
Springfield, MO 65804
460,500(5) 6.71   

____________________

  1. Due to the rules for determining beneficial ownership, the same securities may be attributed as being beneficially owned by more than one person. The holders may disclaim beneficial ownership of the included shares which are owned by or with family members, trusts or other entities.
  2. The percentage ownership is based on the number of shares outstanding as of the Record Date.
  3. Under Rule 13d-3 under the Exchange Act, share amounts shown for Bancorp's officers and directors include shares that they may acquire upon the exercise of options that are exercisable at the Record Date or will become exercisable within 60 days of that date. This figure includes 6,250 shares which may be acquired through option exercises by William V. Turner. This figure also includes 36,228 shares held in various capacities by Ann S. Turner, Mr. W. Turner's wife, which Mr. W. Turner may be deemed to beneficially own, 14,826 shares held by the Turner Family Foundation which Mr. and Mrs. Turner may be deemed to beneficially own and 783,012 shares held by the Turner Family Limited Partnership which Mr. and Mrs. W. Turner may be deemed to beneficially own. Mr. W. Turner disclaims beneficial ownership as to shares beneficially owned by Ann S. Turner and the Turner Family Foundation, and 258,678 shares owned by the Turner Family Limited Partnership. This figure also includes 194,019 shares held in various capacities by William V. Turner, Mrs. Turner's husband, which Mrs. Turner may be deemed to beneficially own. Mrs. Turner disclaims beneficial ownership as to shares beneficially owned by William V. Turner, and 258,768 shares owned by the Turner Family Limited Partnership.


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  1. Robert M. Mahoney, Joyce B. Mahoney and Tri-States Service Company reported ownership of 486,184 shares in a Schedule 13D filed on July 3, 1997. The Schedule 13D was a joint filing pursuant to Rule 13d-1(k)(1) of the Exchange Act. Joyce B. Mahoney and Tri-States Service Company disclaim beneficial ownership as to all shares. Robert M. Mahoney reported sole voting and dispositive power as to all shares. Robert M. Mahoney notified the Company that he purchased an additional 41,200 shares during 2001, reporting total ownership as Robert Mahoney Trust - 215,867 shares, Joyce Mahoney Trust - 215,867 shares and Tri-States Service Company - 95,650 shares.
  2. As reported by Earl A. Steinert, Jr. in a Schedule 13D filed on March 13, 1997. Earl A. Steinert, Jr. reported sole voting and dispositive power as to 391,500 shares and shared voting and dispositive power as to 69,000 shares. The 69,000 shares include 54,000 shares held by Earl A. Steinert, Jr. Trustee of the Earl A. Steinert Trust II and 15,000 shares held by Dorothy E. Steinert, Earl A. Steinert and Barbara Lee Stole, Joint Tenants. Earl A. Steinert, Jr. disclaims beneficial ownership as to these 69,000 shares.

Stock Ownership of Management

       The following table sets forth information, as of the Record Date, as to shares of Common Stock beneficially owned by the directors and nominees named under "Item 10. Directors and Executive Officers of the Registrant" above, the executive officers named in the Summary Compensation Table under "Item 11. Executive Compensation" above, and the directors and all executive officers of Bancorp as a group. Each beneficial owner listed has sole voting and dispositive power with respect to the shares of Common Stock reported, except as otherwise indicated.

Name
Amount and
Nature of Beneficial
Ownership(1)

Percent of
Class(2)


William V. Turner 1,034,335(3) 15.06%
Larry D. Frazier 55,000     .80   
Joseph W. Turner 52,206(4) .76   
William E. Barclay 8,048     .12   
Thomas J. Carlson 1,500     .02   
Julie T. Brown 3,425     .05   
Rex A. Copeland 3,314(5) .05   
Steven G. Mitchem 36,135(6) .53   
Directors and Executive Officers
  as a Group (10 persons)
1,196,993(7) 17.40   

_______________

  1. Amounts include shares held directly, as well as shares held jointly with family members, in retirement accounts, in a fiduciary capacity, by certain family members, by certain related entities or by trusts of which the directors and executive officers are trustees or substantial beneficiaries, with respect to which shares the respective director or executive officer may be deemed to have sole or shared voting and/or dispositive powers. Under Rule 13d-3 the Exchange Act, share amounts shown for Bancorp's officers and directors include shares that they may acquire upon the exercise of options that are exercisable at the Record Date or will become exercisable within 60 days of that date. Due to the rules for determining beneficial ownership, the same securities may be attributed as being beneficially owned by more than one person. The holders may disclaim beneficial ownership of the included shares which are owned by or with family members, trusts or other entities.
  2. The percentage ownership is based on the number of shares outstanding as of the Record Date.
  3. For a detailed discussion of the nature of Mr. W. Turner's ownership, see Footnote 3 to the table of beneficial owners set out above.
  4. This figure includes 9,375 shares that may be acquired through option exercises.
  5. This figure includes 1,250 shares that may be acquired through option exercises.
  6. This figure includes 1,525 shares that may be acquired through option exercises.
  7. The figure includes an aggregate of 19,839 shares that may be acquired through option exercises by all directors and executive officers as a group.


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       The following table sets forth information as of December 31, 2002 with respect to compensation plans under which shares of our common stock may be issued:

Equity Compensation Plan Information

Plan Category
Number of Shares
to be issued upon
Exercise of
Outstanding
Options, Warrants
and Rights

Weighted Average
Exercise Price of
Outstanding
Options, Warrants
and Rights

Number of Shares Remaining
Available for Future Issuance
Under Equity Compensation
Plans (Excluding Shares
Reflected in the First Column)

Equity compensation plans approved by stockholders 230,610 26.462 655,018(1)
Equity compensation plans not approved by stockholders N/A N/A N/A
Total 230,610 26.462 655,018(1)
_________________________

(1) Under the Company's 1997 Stock Option and Incentive Plan, up to all remaining shares could be issued to plan participants as restricted stock.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

       Great Southern, like many financial institutions, has from time to time extended loans to its officers, directors and employees, generally for the financing of their personal residences, at favorable interest rates. Generally, residential loans have been granted at interest rates 1% above Great Southern's cost of funds, subject to annual adjustments. Other than the interest rate, these loans have been made in the ordinary course of business, on substantially the same terms and collateral as those of comparable transactions prevailing at the time, and, in the opinion of management, do not involve more than the normal risk of collectibility or present other unfavorable features. All loans by Great Southern to its directors and executive officers are subject to regulations restricting loans and other transactions with affiliated persons of Great Southern. Great Southern may also grant loans to officers, directors and employees, their related interests and their immediate family members in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons which, in the opinion of management, do not involve more than the normal risk of collectibility or present other unfavorable features.



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       No directors, executive officers or their affiliates, had aggregate indebtedness to Great Southern on below market rate loans exceeding $60,000 at any time since January 1, 2002 except as noted below.

Name
Position
Date of
Loan

Largest
Amount
Outstanding
Since
01/01/02

Balance
as of
12/31/02

Interest
Rate at
12/31/02

Type

Joseph W. Turner CEO and President of Bancorp
and Great Southern
09/14/98
08/31/00
$286,168
92,847
$280,688
5,672
3.24%
4.25%
Home Mortgage
Home Equity Line

Rex A. Copeland Treasurer of Bancorp; Senior
Vice President and CFO of
Great Southern
06/01/00 181,795 174,876 3.71% Home Mortgage

Steven G. Mitchem Senior Vice President and Chief
Lending Officer of Great
Southern
06/22/98
07/01/02
141,624
7,954
136,965
7,858
3.23%
6.00%
Home Mortgage
Home Equity Line

Larry A. Larimore Secretary of Bancorp and Great
Southern; Vice President of Great Southern
08/17/00
07/31/02
211,640
32,267
207,974
31,952
3.31%
6.00%
Home Mortgage
Home Equity Line

Douglas W. Marrs Vice President - Operations of
Great Southern
08/06/01
02/25/98
99,384
30,418
97,824
27,818
3.31%
4.25%
Home Mortgage
Home Equity Line

ITEM 14.   CONTROLS AND PROCEDURES

       (a) Evaluation of Disclosure Controls and Procedures: An evaluation of the Company's disclosure controls and procedures (as defined in Section 13a-14(c) of the Securities Exchange Act of 1934 (the "Act") was carried out under the supervision and with the participation of our Chief Executive Officer, Chief Financial Officer and several other members of our senior management within the 90-day period preceding the filing date of this annual report. The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures as currently in effect are effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934 is (i) accumulated and communicated to management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.

       (b) Changes in Internal Controls: In the quarter ended December 31, 2002, the Company did not make any significant changes in, nor take any corrective actions regarding, its internal controls or other factors that could significantly affect these controls.



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PART IV

ITEM 15.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
                   FORM 8-K.

(a) List of Documents Filed as Part of This Report
(1) Financial Statements
The Consolidated Financial Statements and Independent Accountants' Report are included in Item 8.
(2) Financial Statement Schedules
Inapplicable.
(3) List of Exhibits
Exhibits incorporated by reference below are incorporated by reference pursuant to Rule 12b-32.
(2) Plan of acquisition, reorganization, arrangement, liquidation, or succession
Inapplicable.
(3) Articles of incorporation and Bylaws
(i) The Registrant's Certificate of Incorporation previously filed with the Commission (File no. 33- 30597) as Exhibit 3.1 to the Registrant's Registration Statement on Form S-1 dated August 18,1989, is incorporated herein by reference as Exhibit 3.1.
(ii) The Registrant's Certificate of Amendment of Certificate of Incorporation previously field with the Commission as Exhibit 3.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1997, is incorporated herein by reference as Exhibit 3.2.
(iii) The Registrant's Bylaws, as amended, previously filed with the Commission (File no. 33-30597) as Exhibit 3.2 to the Registrant's Annual Report on Form 10-K for fiscal year ended June 30, 1990, is incorporated herein by reference as Exhibit 3.3.
(4) Instruments defining the rights of security holders, including indentures
Inapplicable.
(9) Voting trust agreement
Inapplicable.


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(10) Material contracts
The Registrant's 1989 Stock Option and Incentive Plan previously filed with the Commission (File no. 33- 30597) 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.
An Employment Agreement dated September 18, 2002 between the Registrant and William V. Turner is attached hereto as Exhibit 10.2.
An Employment Agreement dated September 18, 2002 between the Registrant and Joseph W. Turner is attached hereto as Exhibit 10.4.
The Registrant's 1997 Stock Option and Incentive Plan previously filed with the Commission (File no. 33-30597) as Annex A to the Registrant's Definitive Proxy Statement for the fiscal year ended June 30, 1997, is incorporated herein by reference as Exhibit 10.5.
The Registrant's Revolving Note, as modified, with a commercial bank is attached hereto as Exhibit 10.6.
(11) Statement re computation of per share earnings
The Statement re computation of per share earnings is included in Note 1 of the Consolidated Financial Statements under Part II, Item 8 above.
(12) Statements re computation of ratios
The Statement re computation of ratio of earnings to fixed charges is attached hereto as Exhibit 12.
(13) Annual report to security holders, Form 10-Q or quarterly report to security holders
Inapplicable.
(16) Letter re change in certifying accountant
Inapplicable.
(18) Letter re change in accounting principles


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Inapplicable.
(21) Subsidiaries of the registrant
A listing of the Registrant's subsidiaries is attached hereto as Exhibit 21.
(22) Published report regarding matters submitted to vote of security holders
Inapplicable.
(23) Consents of experts and counsel
The consent of BKD, LLP to the incorporation by reference into the Form S-8 previously filed on December 16, 1992 with the Commission (File no. 33-55832) of their report on the financial statements included in this Form 10-K, is attached hereto as Exhibit 23.
(24) Power of attorney
Included as part of signature page.
(99) Additional Exhibits
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
None.


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SIGNATURES

       Pursuant to the requirements of Section 13 or 15(d) 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.



Date: March 28, 2003 By: /s/ Joseph W. Turner                                                 
Joseph W. Turner
President, Chief Executive Officer and Director
(Duly Authorized Representative)

POWER OF ATTORNEY

       We, the undersigned officers and directors of Great Southern Bancorp, Inc., hereby severally and individually constitute and appoint Joseph W. Turner and Rex A. Copeland, and each of them, the true and lawful attorneys and agents of each of us to execute in the name, place and stead of each of us (individually and in any capacity stated below) any and all amendments to this Annual Report on Form 10-K and all instruments necessary or advisable in connection therewith and to file the same with the Securities and Exchange Commission, each of said attorneys and agents to have the power to act with or without the others and to have full power and authority to do and perform in the name and on behalf of each of the undersigned every act whatsoever necessary or advisable to be done in the premises as fully and to all intents and purposes as any of the undersigned might or could do in person, and we hereby ratify and confirm our signatures as they may be signed by our said attorneys and agents or each of them to any and all such amendments and instruments.

       Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

Signature
Capacity in Which Signed
Date


/s/ Joseph W. Turner
Joseph W. Turner
President, Chief Executive Officer and Director
(Principal Executive Officer)
March 28, 2003


/s/ William V. Turner
William V. Turner
Chairman of the Board March 28, 2003


/s/ Rex A. Copeland
Rex A. Copeland
Treasurer
  (Principal Financial Officer and
  Principal Accounting Officer)
March 28, 2003


/s/ William E. Barclay
William E. Barclay
Director March 28, 2003


/s/ Larry D. Frazier
Larry D. Frazier
Director March 28, 2003


/s/ Thomas J. Carlson
Thomas J. Carlson
Director March 28, 2003


/s/ Julie T. Brown
Julie T. Brown
Director March 28, 2003


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CERTIFICATIONS

       I, Joseph W. Turner, certify that:

       1. I have reviewed this annual report on Form 10-K of Great Southern Bancorp, Inc.;

       2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

       3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

       4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

       a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

       b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and

       c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

       5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

       a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

       b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

       6. The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: March 28, 2003



/s/ Joseph W. Turner


Joseph W. Turner
President and Chief Executive Officer



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       I, Rex A. Copeland, certify that:

       1. I have reviewed this annual report on Form 10-K of Great Southern Bancorp, Inc.;

       2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

       3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

       4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

       a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

       b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and

       c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

       5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

       a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

       b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

       6. The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: March 28, 2003



/s/ Rex A. Copeland


Rex A. Copeland
Treasurer



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GREAT SOUTHERN BANCORP, INC.

INDEX TO EXHIBITS

Exhibit
No.
Document
10.2 Employment Agreement of William V. Turner
10.4 Employment Agreement of Joseph W. Turner
10.6 Revolving Note, as modified
12 Statement of Ratio of Earnings to Fixed Charges
21 Subsidiaries of the Registrant
23 Consent of BKD, LLP, Certified Public Accountants
99 Certification