GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

See Notes to Consolidated Financial Statements

NOTE 1: BASIS OF PRESENTATION

          The accompanying unaudited interim consolidated financial statements of Great Southern Bancorp, Inc. (the "Company" or "Great Southern") have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The financial statements presented herein reflect all adjustments which are, in the opinion of management, necessary to fairly present the financial position, results of operations and cash flows of the Company for the periods presented. Those adjustments consist only of normal recurring adjustments. Operating results for the three and nine months ended September 30, 2003 and 2002 are not necessarily indicative of the results that may be expected for the full year. The consolidated statement of financial condition of the Company as of December 31, 2002, has been derived from the audited consolidated statement of financial condition of the Company as of that date.

          Certain information and note disclosures normally included in the Company's annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for 2002 filed with the Securities and Exchange Commission.

NOTE 2: OPERATING SEGMENTS

          The Company's banking operation is its only reportable segment. The banking operation segment is principally engaged in the business of originating residential and commercial real estate loans, commercial business loans and consumer loans. These loans are funded through the attraction of deposits from the general public, brokered deposit originations, and borrowings from the Federal Home Loan Bank ("FHLBank") and others. The operating results of this segment are regularly reviewed by management to assess performance and determine resource allocations.

          The following table provides information about segment profits and has been prepared using the same accounting policies as those described in Note 1. There are no material inter-segment 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 three operating segments of the Company. These segments include an insurance agency, a travel agency, and discount brokerage services.

NOTE 3: COMPREHENSIVE INCOME

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

NOTE 4: POTENTIAL IMPACT OF ACCOUNTING PRINCIPLES TO BE IMPLEMENTED IN THE FUTURE

          The Financial Accounting Standards Board ("FASB") recently issued its Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities," which requires the consolidation of certain special purpose entities ("SPE's) by a company if it is determined to be the primary beneficiary of the SPE's operating activities. The adoption of FIN 46 at July 1, 2003, had no effect on the Company's financial statements. One financial liability of the Company that may be impacted by FIN 46 is the Company's trust preferred securities and related debentures. This liability is, and has been, presented in the Company's financial statements as a liability and not a component of equity for financial reporting purposes. In addition, the Federal Reserve Board has allowed these securities to be included as capital for purposes of regulatory capital calculations. Recently, the FASB, Federal Reserve Board, and Securities and Exchange Commission have discussed the continuing inclusion of this item for regulatory capital purposes under the requirements of FIN 46. To date, no final determination has been reached and the Federal Reserve Board has instructed bank holding companies to continue to include these securities in regulatory capital calculations until further notice. The Company does not expect any material changes in how it reports these securities in its basic financial statements. The Company will continue to monitor these discussions and comply with the final rulemaking.

NOTE 5: STOCK OPTION PLAN

          The Company has a stock-based employee compensation plan. The accounting principles for the Company's employee compensation plan are described more fully in the Company's December 31, 2002 Annual Report on Form 10-K. In May 2003, the Company's stockholders ratified the 2003 Stock Option and Incentive Plan. The details of this plan are described in a Form S-8 filed in June 2003. 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 SFAS 123, "Accounting for Stock-Based Compensation," to stock-based employee compensation.

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

Forward-Looking Statements

          When used in this Form 10-Q and in future filings by the Company with the Securities and Exchange Commission (the "SEC"), in the Company's press releases or other public or shareholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project" 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 disclaims 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 the determination of the allowance for loan losses to involve 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 following should be read in conjunction with Management's Discussion and Analysis in the Company's December 31, 2002 Annual Report on Form 10-K.

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

COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 2003 AND DECEMBER 31, 2002

          During the nine months ended September 30, 2003, total assets increased by $95.7 million to $1.50 billion. Cash and interest-bearing deposits increased $12.5 million, available-for-sale securities increased $18.4 million, net loans receivable increased $63.1 million, and foreclosed assets increased $5.8 million. The increase in net loans receivable was primarily related to increases in commercial real estate, multi-family residential real estate, consumer and commercial business loans. Foreclosed assets increased primarily as the result of the transfer of one significant non-performing loan relationship into foreclosed assets during the quarter ended March 31, 2003.

          Total liabilities increased $85.1 million to $1.38 billion. Deposits increased $77.5 million and short-term borrowings increased $23.0 million, partially offset by a decrease in Federal Home Loan Bank ("FHLBank") advances of $15.6 million. The increase in short-term borrowings resulted from higher balances in securities sold under reverse repurchase agreements with our customers. FHLBank advances decreased due to their repayment when due utilizing funds from the additional deposit account balances. Interest-bearing checking balances increased $110.8 million. Non-interest-bearing checking balances increased $23.8 million. Checking and savings account balances totaled $447 million at September 30, 2003, up from $312 million at December 31, 2002. Retail certificates of deposit, including non-brokered deposits gathered through the internet, totaled $344 million at September 30, 2003, down from $359 million at December 31, 2002. Total brokered deposits were $302 million at September 30, 2003, down from $340 million at December 31, 2002. The weighted average cost of these brokered deposits was approximately 215 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. This higher cost of funds was primarily due to longer average maturities of these brokered deposits

          Stockholders' equity increased $10.6 million, to $115.3 million, primarily as a result of net income of $17.5 million, partially offset by dividend declarations of $3.5 million, a decrease in accumulated other comprehensive income of $2.7 million and net treasury stock repurchases of $702,000. The Company repurchased 31,273 shares of common stock at an average price of $39.32 per share during the nine months ended September 30, 2003 and reissued 21,492 shares of treasury stock at an average price of $21.89 per share to cover stock option exercises.

RESULTS OF OPERATIONS AND COMPARISON FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

          The increase in net income of $272,000, or 4.6%, for the three months ended September 30, 2003 compared to the same period in 2002, was primarily due to an increase in noninterest income of $1.4 million, or 30.8%, an increase in net interest income of $528,000, or 4.1%, a decrease in provision for loan losses of $100,000, or 7.7%, and a decrease in provision for income taxes of $107,000, or 3.4%. These were partially offset by an increase in noninterest expense of $1.9 million, or 25.9%, during the three month period.

          The decrease in net income of $396,000, or 2.2%, for the nine months ended September 30, 2003 compared to the same period in 2002, was primarily due to an increase in noninterest expense of $3.9 million, or 18.0%. This was partially offset by an increase in net interest income of $1.6 million, or 4.2%, an increase in noninterest income of $428,000, or 2.7%, a decrease in provision for loan losses of $700,000, or 16.3%, and a decrease in provision for income taxes of $815,000, or 8.6%, during the nine month period.

Total Interest Income

          Total interest income decreased $1.4 million, or 7.0%, during the three months ended September 30, 2003, when compared to the three months ended September 30, 2002. The decrease was due to a $537,000, or 3.2%, decrease in interest income on loans and a $908,000, or 23.0%, decrease 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. Interest income for both loans and investment securities and other interest-earning assets was positively impacted by higher average balances.

          Total interest income decreased $4.0 million, or 6.6%, during the nine months ended September 30, 2003, when compared to the nine months ended September 30, 2002. The decrease was due to a $992,000, or 2.1%, decrease in interest income on loans and a $3.0 million, or 24.4%, decrease 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. Interest income for both loans and investment securities and other interest-earning assets was positively impacted by higher average balances.

Interest Income - Loans

          During the three months ended September 30, 2003, interest income on loans decreased from lower average interest rates, partially offset by higher average balances. Interest income decreased $1.5 million as the result of lower average interest rates. The average yield on loans decreased from 6.59% during the three months ended September 30, 2002, to 6.01% during the three months ended September 30, 2003, primarily due to lower market rates of interest. A large portion of the Bank's loan portfolio adjusts with changes to the "prime rate" of interest. Approximately one-third of the total loan portfolio is subject to interest rate floors which have been reached. As a result, it will take one or more increases in the "prime rate" of interest for the interest rate on these loans to adjust upward. See the discussion under "Net Interest Income" for information about the changes in the "prime rate" during these periods.

         Interest income increased $964,000 as the result of an increase in average loan balances from $1.01 billion during the three months ended September 30, 2002, to $1.07 billion during the three months ended September 30, 2003. The higher average balance resulted from the Bank's increases in commercial real estate, multi-family residential real estate, and construction lending. The Bank's one- to four-family residential loan portfolio has decreased since December 31, 2000, due to the origination of a greater portion of fixed-rate rather than adjustable-rate loans. The Bank generally sells these fixed-rate loans in the secondary market.

          During the nine months ended September 30, 2003, interest income on loans decreased from lower average interest rates, partially offset by higher average balances. Interest income decreased $3.4 million as the result of lower average interest rates. The average yield on loans decreased from 6.46% during the nine months ended September 30, 2002, to 6.01% during the nine months ended September 30, 2003, primarily due to lower market rates of interest. A large portion of the Bank's loan portfolio adjusts with changes to the "prime rate" of interest. Approximately one-third of the total loan portfolio is subject to interest rate floors which have been reached. As a result, it will take one or more increases in the "prime rate" of interest for the interest rate on these loans to adjust upward. See the discussion under "Net Interest Income" for information about the changes in the "prime rate" during these periods.

          Interest income increased $2.4 million as the result of an increase in average loan balances from $992 million during the nine months ended September 30, 2002, to $1.04 billion during the nine months ended September 30, 2003. The higher average balance resulted from the Bank's increases in commercial real estate, multi-family residential real estate, and construction lending. The Bank's one- to four-family residential loan portfolio has decreased since December 31, 2000, due to the origination of a greater portion 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 Assets

          Interest income on investment securities and other interest-earning assets decreased from lower average interest rates, partially offset by higher average balances during the three months ended September 30, 2003, when compared to the three months ended September 30, 2002. Interest income decreased $1.1 million as a result of lower average yields from 5.39% during the three months ended September 30, 2002, to 3.93% during the three months ended September 30, 2003, due to lower market rates of interest in 2003 and increased premium amortization due to greater prepayments on the Company's mortgage-backed securities portfolio. Interest income increased $212,000 as a result of higher average balances from $294 million during the three months ended September 30, 2002 to $310 million during the three months ended September 30, 2003.

          Interest income on investment securities and other interest-earning assets decreased from lower average interest rates during the nine months ended September 30, 2003, when compared to the nine months ended September 30, 2002. Interest income decreased $3.2 million as a result of lower average yields from 5.67% during the nine months ended September 30, 2002, to 4.21% during the nine months ended September 30, 2003, due to lower market rates of interest in 2003 and increased premium amortization due to greater prepayments on the Company's mortgage-backed securities portfolio. Interest income increased $226,000 as a result of higher average balances from $291 million during the nine months ended September 30, 2002 to $297 million during the nine months ended September 30, 2003.

Total Interest Expense

          Total interest expense decreased $2.0 million, or 26.4%, during the three months ended September 30, 2003 when compared with the same period in 2002. The decrease during the three month period was due to a $1.5 million, or 28.1%, decrease in interest expense on deposits, a $429,000, or 24.7%, decrease in interest expense on FHLBank advances, and a $15,000, or 5.2%, decrease in interest expense on short-term borrowings and trust preferred securities.

          Total interest expense decreased $5.6 million, or 24.0%, during the nine months ended September 30, 2003 when compared with the same period in 2002. The decrease during the nine month period was due to a $4.2 million, or 25.1%, decrease in interest expense on deposits, a $1.3 million, or 23.8%, decrease in interest expense on FHLBank advances, and a $44,000, or 4.7%, decrease in interest expense on short-term borrowings and trust preferred securities.

Interest Expense - Deposits

          Interest expense on deposits decreased $1.3 million due to lower average interest rates on time deposits from 2.71% during the three months ended September 30, 2002, to 1.90% during the three months ended September 30, 2003 and decreased $324,000 as a result of lower average balances of time deposits from $705 million during the three months ended September 30, 2002, to $661 million during the three months ended September 30, 2003. The average interest rates decreased due to lower overall market rates of interest, including rates on the Company's interest rate swaps. Interest on demand deposits increased $293,000 due to higher average balances from $193 million during the three months ended September 30, 2002, to $294 million during the three months ended September 30, 2003, and decreased $178,000 due to lower average rates from 1.38% during the three months ended September 30, 2002, to 1.06% during the three months ended September 30, 2003. Interest on savings deposits decreased a total of $2,000 due to lower average rates.

          Interest expense on deposits decreased $4.4 million due to lower average interest rates on time deposits from 2.92% during the nine months ended September 30, 2002, to 2.07% during the nine months ended September 30, 2003 and decreased $293,000 as a result of lower average balances of time deposits from $695 million during the nine months ended September 30, 2002, to $682 million during the nine months ended September 30, 2003. The average interest rates decreased due to lower overall market rates of interest, including rates on the Company's interest rate swaps. Interest on demand deposits increased $625,000 due to higher average balances from $179 million during the nine months ended September 30, 2002, to $254 million during the nine months ended September 30, 2003, and decreased $201,000 due to lower average rates from 1.22% during the nine months ended September 30, 2002, to 1.08% during the nine months ended September 30, 2003. Interest on savings deposits decreased a total of $5,000 due to lower average balances and lower average rates.

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

          Interest expense on FHLBank advances, short-term borrowings and trust preferred securities decreased $354,000 due to lower average rates of interest from 3.05% in the three months ended September 30, 2002 to 2.49% in the three months ended September 30, 2003. The Company's use of FHLBank advances, short-term borrowings and trust preferred securities which reprice daily, monthly, or quarterly contributed to the decrease in average rates of interest. In addition, interest expense decreased $90,000 due to lower average balances from $266 million during the three months ended September 30, 2002, to $255 million during the three months ended September 30, 2003.

          Interest expense on FHLBank advances, short-term borrowings and trust preferred securities decreased $730,000 due to lower average rates of interest from 3.00% in the nine months ended September 30, 2002 to 2.57% in the nine months ended September 30, 2003. The Company's use of FHLBank advances, short-term borrowings and trust preferred securities which reprice daily, monthly, or quarterly contributed to the decrease in average rates of interest. In addition, interest expense decreased $596,000 due to lower average balances from $281 million during the nine months ended September 30, 2002, to $259 million during the nine months ended September 30, 2003.

Net Interest Income

          The Company's overall interest rate spread decreased 3 basis points, or 0.8%, from 3.75% during the three months ended September 30, 2002, to 3.72% during the three months ended September 30, 2003. The decrease was due to a 78 basis point decrease in the weighted average yield received on interest-earning assets, partially offset by a 75 basis point decrease in the weighted average rate paid on interest-bearing liabilities. In comparing the two periods, the yield on loans decreased 58 basis points while the yield on investment securities decreased 146 basis points. The rate paid on deposits decreased 78 basis points while the rate paid on FHLBank advances and other borrowings decreased 56 basis points. The Company's overall net interest margin decreased 7 basis points, or 1.7%, from 4.01% during the three months ended September 30, 2002, to 3.94% during the three months ended September 30, 2003.

          The prime rate of interest averaged 4.75% during the three months ended September 30, 2002, compared to an average of 4.00% during the three months ended September 30, 2003. 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 loans. The decrease in the weighted average yield received on investment securities primarily resulted from maturities of higher yielding securities with the proceeds being reinvested at lower market yields and the increased amortization of premiums paid on the Company's mortgage-backed securities portfolio due to higher levels of prepayments on the underlying mortgages.

          Interest rates paid on certificates of deposit decreased significantly during the three months ended September 30, 2003, compared to the three months ended September 30, 2002. As certificates of deposit matured and were renewed or replaced, in most cases the new interest rate on these deposits was significantly lower than the previous rate. In addition, the Company continued to utilize interest rate swaps and FHLBank advances which repriced frequently to further reduce interest expense. See "Item III. Quantitative and Qualitative Disclosures About Market Risk" for additional information on the Company's interest rate swaps.

          The Company's overall interest rate spread increased 4 basis points, or 1.1%, from 3.60% during the nine months ended September 30, 2002, to 3.64% during the nine months ended September 30, 2003. The increase was due to a 71 basis point decrease in the weighted average rate paid on interest-bearing liabilities, partially offset by a 67 basis point decrease in the weighted average yield received on interest-earning assets. In comparing the two periods, the yield on loans decreased 45 basis points while the yield on investment securities decreased 146 basis points. The rate paid on deposits decreased 77 basis points while the rate paid on FHLBank advances and other borrowings decreased 43 basis points. The Company's overall net interest margin decreased 1 basis point, or 0.3%, from 3.87% during the nine months ended September 30, 2002, to 3.86% during the nine months ended September 30, 2003.

          The prime rate of interest averaged 4.75% during the nine months ended September 30, 2002, compared to an average of 4.16% during the nine months ended September 30, 2003. 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 loans. The decrease in the weighted average yield received on investment securities primarily resulted from maturities of higher yielding securities with the proceeds being reinvested at lower market yields and the increased amortization of premiums paid on the Company's mortgage-backed securities portfolio due to higher levels of prepayments on the underlying mortgages.

          Interest rates paid on certificates of deposit decreased significantly during the nine months ended September 30, 2003, compared to the nine months ended September 30, 2002. As certificates of deposit matured and were renewed or replaced, in most cases the new interest rate on these deposits was significantly lower than the previous rate. In addition, the Company continued to utilize interest rate swaps and FHLBank advances which repriced frequently to further reduce interest expense. See "Item III. Quantitative and Qualitative Disclosures About Market Risk" for additional information on the Company's interest rate swaps.

Provision for Loan Losses and Allowance for Loan Losses

          The provision for loan losses decreased $100,000, or 7.7%, from $1.3 million during the three months ended September 30, 2002 to $1.2 million during the three months ended September 30, 2003. Net charge-offs during the three months ended September 30, 2003 were $1.0 million compared to net charge-offs of $524,000 during the three months ended September 30, 2002.

          The provision for loan losses decreased $700,000, or 16.3%, from $4.3 million during the nine months ended September 30, 2002 to $3.6 million during the nine months ended September 30, 2003. Net charge-offs during the nine months ended September 30, 2003 were $4.1 million compared to net charge-offs of $3.6 million during the nine months ended September 30, 2002.

          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 1.93% and 2.09% at September 30, 2003, and December 31, 2002, 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 provisions for losses would be required, thereby adversely affecting future results of operations and financial condition.

Non-performing Assets

          Non-performing assets increased $107,000 during the nine months ended September 30, 2003, from $18.8 million at December 31, 2002 to $19.0 million at September 30, 2003. Non-performing assets as a percentage of total assets were 1.27% at September 30, 2003. Non-performing loans decreased $5.7 million, or 39.5%, from $14.5 million at December 31, 2002 to $8.8 million at September 30, 2003. Foreclosed assets increased $5.9 million, or 135%, from $4.3 million at December 31, 2002 to $10.2 million at September 30, 2003.

          Non-performing Loans. Non-performing loans decreased primarily as a result of the transfer to foreclosed assets of one relationship with a remaining book balance at the time of transfer of $7.3 million. This relationship involves condominium buildings and lots, single-family residences and lots, a golf course, and other developed and undeveloped land. At the time of foreclosure during the quarter ended March 31, 2003, the balance was reduced to $6.7 million through a charge-off of approximately $600,000. This relationship was most recently described in the June 30, 2003, Quarterly Report on Form 10-Q and was included in foreclosed assets at that time. Three unrelated credit relationships, totaling $1.5 million, $952,000, and $676,000, respectively, account for a large portion of the non-performing loan total at September 30, 2003. The $952,000 relationship and the $676,000 relationship were reclassified from potential problem loans to non-performing loans during the quarter ended September 30, 2003. The $1.5 million relationship is comprised of four loans, which are primarily secured by the automobile floor plan assets of a car dealership in Springfield, Missouri. This relationship was most recently described in the June 30, 2003, Quarterly Report on Form 10-Q and was included in non-performing loans at that time. The $952,000 relationship is secured by a commercial retail shopping center in Stone County near Branson, Missouri. This relationship was most recently described in the June 30, 2003, Quarterly Report on Form 10-Q and was included in potential problem loans at that time. The $676,000 relationship is secured primarily by a motel in Branson, Missouri, as well as additional real estate collateral. This relationship was most recently described in the June 30, 2003, Quarterly Report on Form 10-Q and was included in potential problem loans at that time. This loan is part of the $2.1 million relationship described in the June 30, 2003 Form 10-Q. The remainder of this relationship, primarily secured by a motel in Springfield, Missouri, is included in potential problem loans. Subsequent to September 30, 2003, the Bank has foreclosed upon the motel in Branson, Missouri.

          Foreclosed Assets. Of the total $10.2 million of foreclosed assets at September 30, 2003, foreclosed real estate totaled $9.4 million and repossessed automobiles totaled $802,000. Of the total real estate assets, two relationships accounted for $7.2 million. The first relationship had a remaining balance of $6.7 million as of September 30, 2003, and was discussed above in Non-performing Loans. The second relationship had a remaining balance of $511,000 as of September 30, 2003, and involves a motel, restaurant, golf course and condominium units in the Branson, Missouri area. This relationship was most recently described in the June 30, 2003, Quarterly Report on Form 10-Q and was included in foreclosed assets at that time. Each of these foreclosed assets is currently being marketed for sale. During the quarter ended September 30, 2003, one significant property was sold and removed from foreclosed assets. This asset, which was most recently described in the June 30, 2003, Quarterly Report on Form 10-Q and was included in foreclosed assets at that time, involved a motel in Springfield, Missouri. This property was sold with an additional loss of $450,000 recognized by Great Southern. The loss is included in non-interest expense in the September 30, 2003, financial statements.

          Potential Problem Loans. Potential problem loans decreased $7.4 million during the nine months ended September 30, 2003 from $11.4 million at December 31, 2002 to $4.0 million at September 30, 2003. Potential problem loans 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. During the nine months ended September 30, 2003, potential problem loans decreased $3.6 million as a result of the foreclosure of the motel in Springfield, Missouri, which is described above under Foreclosed Assets. In addition, potential problem loans decreased $1.8 million as a result of the change of status to non-performing loans of the automobile floorplan relationship described above under Non-performing Loans. At the time this relationship was changed to non-performing status, certain loans in this relationship were written down by approximately $300,000 through a charge against the allowance for loan losses. Potential problem loans also decreased as a result of the change of status to non-performing loans of the $952,000 relationship described above under Non-performing Loans. These decreases were partially offset by the addition of two unrelated relationships totaling $1.4 million and $555,000, respectively. The $1.4 million relationship is secured primarily by a motel in Springfield, Missouri. The $555,000 relationship is secured by a condominium development in Branson, Missouri. In addition to these relationships, one other significant unrelated relationship was included in the potential problem loan total. This relationship totaled $1.3 million as of September 30, 2003, and is secured by a motel in Branson, Missouri.

Noninterest Income

          Total noninterest income increased $1.4 million, or 30.8%, in the three months ended September 30, 2003 when compared to the same period in 2002. The increase was primarily due to: (i) an increase in service charges and ATM fees of $680,000, or 30.7%; (ii) an increase in net realized gains on sales of fixed-rate residential and student loans of $456,000, or 134%; and (iii) a net increase in commission revenues earned by the Company's travel, insurance and investment divisions in 2003 of $228,000, or 18.0%. The increase in service charge fees resulted from a larger number of accounts, higher levels of insufficient funds transactions by customers, and slight increases in fees for insufficient funds checks. The increase in ATM fees was related to a change in 2003 by the Company to process its transactions in-house, an increase in overall usage by customers and non-customers and additional ATMs placed in service. During the three months ended September 30, 2003, the Bank sold more residential and student loans than in the same period during 2002. During both periods, lower interest rates were conducive to the generation of fixed-rate mortgages, which the Bank typically sells, rather than adjustable-rate mortgages, which the Ban k typically retains in its portfolio. In addition, higher levels of refinancing activity continued in the three months ended September 30, 2003. This increase was partially offset by a decrease in net realized gains on sales of available-for-sale securities of $150,000, or 24.2%.

          Total noninterest income increased $428,000, or 2.7%, in the nine months ended September 30, 2003 when compared to the same period in 2002. The increase was primarily due to: (i) an increase in service charges and ATM fees of $2.1 million, or 34.3%; and (ii) an increase in net realized gains on sales of fixed-rate residential and student loans of $879,000, or 84.9%. The increase in service charge fees resulted from a larger number of accounts, higher levels of insufficient funds transactions by customers, and slight increases in fees for insufficient funds checks. The increase in ATM fees was related to a change in 2003 by the Company to process its transactions in-house, an increase in overall usage by customers and non-customers and additional ATMs placed in service. During the nine months ended September 30, 2003, the Bank sold more residential and student loans than in the same period during 2002. During both periods, lower 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. In addition, higher levels of refinancing activity continued in the nine months ended September 30, 2003.

          This increase was partially offset by: (i) a decrease in net realized gains on sales of available-for-sale securities of $2.9 million; and (ii) a net decrease in commission revenues earned by the Company's travel, insurance and investment divisions in 2003 of $145,000, or 3.2%. The decrease in gain on sale of available-for-sale securities was due to the sale in 2002 of the Company's holdings of the common stock of another publicly traded company. In the nine months ended September 30, 2003, the Company had net gains of $585,000 from the sale of investment securities.

Noninterest Expense

          Total noninterest expense increased $1.9 million or 25.9%, in the three months ended September 30, 2003, compared to the same period in 2002. The increase was primarily due to: (i) an increase of $872,000, or 21.7%, in salaries and employee benefits primarily due to increased incentives paid to mortgage loan originators due to increased loan closings, the hiring of additional experienced personnel to fill commercial lending, credit administration, and branch supervisory positions, the opening of two loan production offices, increased costs for health insurance and pension benefits, and normal merit increases for existing employees; (ii) an increase in net occupancy and equipment expense of $208,000, or 14.4%, primarily due to increases in depreciation on new offices and equipment and various maintenance projects on buildings and equipment; (iii) an increase in expenses on foreclosed assets of $575,000, due to a $450,000 loss on the disposition of one foreclosed asset and other expenses of maintaining various foreclosed assets; and (iv) minor increases in other noninterest expense areas, such as postage, advertising, and supplies.

          Total noninterest expense increased $3.9 million, or 18.0%, in the nine months ended September 30, 2003, compared to the same period in 2002. The increase was primarily due to: (i) an increase of $1.9 million or 15.7%, in salaries and employee benefits primarily due to increased incentives paid to mortgage loan originators due to increased loan closings, the hiring of additional experienced personnel to fill commercial lending, credit administration, and branch supervisory positions, the opening of two loan production offices, increased costs for health insurance and pension benefits, and normal merit increases for existing employees; (ii) an increase in net occupancy and equipment expense of $762,000, or 19.6%, primarily due to increases in depreciation on new offices and equipment and various maintenance projects on buildings and equipment; (iii) an increase in expenses on foreclosed assets of $588,000, due to a $450,000 loss on the disposition of one foreclosed asset and other expenses of maintaining various foreclosed assets; and (iv) minor increases in other noninterest expense areas, such as postage, advertising, and supplies.

Provision for Income Taxes

          Provision for income taxes as a percentage of pre-tax income decreased from 34.7% in the three months ended September 30, 2002, to 32.9% in the three months ended September 30, 2003. This decrease is primarily due to higher balances of tax-exempt investment securities and loans.

          Provision for income taxes as a percentage of pre-tax income decreased from 34.7% in the nine months ended September 30, 2002, to 33.2% in the nine months ended September 30, 2003. This decrease is primarily due to higher balances of tax-exempt investment securities and loans.

Average Balances, Interest Rates and Yields

          The following tables present, 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 tables do not include non-interest-bearing demand deposits and do not reflect any effect of income taxes.

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