Great Southern Bancorp
Annual Report 2003

Plain-text annual report

2003 Annual Report for Shareholders ANNUAL MEETING GENERAL INFORMATION The 15th Annual Meeting of Shareholders will be held at 10 a.m. on Tuesday, May 4, 2004, at the Missouri Sports Hall of Fame, Springfield, Missouri. CORPORATE PROFILE Great Southern Bancorp, Inc. ("GSBC" or the "Company") is the holding company for Great Southern Bank (the "Bank"), which converted from a mutual to a stock company in December 1989. In June 1998, the Bank converted from a federal savings bank charter to a Missouri chartered trust company. Great Southern was founded in 1923 with a $5,000 investment, 4 employees and 936 members, and has grown to over $1.5 billion in assets, with more than 625 employees and in excess of 100,000 customers. The Bank is headquartered in Springfield, Missouri and operates 29 full service branches in 15 counties throughout the Ozarks; 11 in Springfield. A community-oriented company, GSBC and its subsidiaries offer a full range of banking, lending, investment, insurance and travel services. CORPORATE MISSION The mission of Great Southern is to build winning relationships with our customers, associates, shareholders and communities. We carry out our mission through our core values of teamwork, mutual respect, doing what’s right and uncompromising ethical standards. We are deeply committed to our relationships with our four constituencies and view each with equal importance. We build winning relationships with our customers and help them make their lives better and easier with our products and services. We build winning relationships with our associates, who have chosen our company to share their skills and talents and who deserve the opportunity to reach their full potential. We build winning relationships with our shareholders, who have entrusted us with their wealth and financial future and with our communities, upon which our company’s strength, prosperity and future rest. STOCK INFORMATION The Company’s Common Stock is listed on The NASDAQ Stock Market under the symbol "GSBC". As of December 31, 2003, there were 6,851,353 total shares outstanding and approximately 2,100 shareholders of record. The last sale of the Company’s Common Stock on December 31, 2003 was $46.37. HIGH/LOW STOCK PRICE First Quarter Second Quarter Third Quarter Fourth Quarter DIVIDEND DECLARATIONS First Quarter Second Quarter Third Quarter Fourth Quarter Year Ended December 31, 2003 Low High $36.14 $39.74 35.75 39.70 37.99 43.86 38.90 47.32 Year Ended December 31, 2003 $.150 .180 .180 .200 Year Ended December 31, 2002 Low $26.70 31.40 34.51 35.65 High $32.70 39.82 41.34 39.09 Year Ended December 31, 2002 $.265 .140 .140 .150 CORPORATE HEADQUARTERS 1451 E. Battlefield Springfield, MO 65804 1 (800) 749-7113 MAILING ADDRESS P.O. Box 9009, Springfield, MO 65808 DIVIDEND REINVESTMENT For details on the automatic reinvestment of dividends in common stock of the corporation call: 1 (800) 725-6651 or write: Great Southern Bancorp, Inc. Shareholder Relations P.O. Box 9009 Springfield, MO 65808 FORM 10-K The Form 10-K report filed with the Securities and Exchange Commission may be obtained from the Company’s internet website at www.greatsouthernbank.com or without charge by request to: Rex Copeland Treasurer Great Southern Bancorp, Inc. P.O. Box 9009, Springfield, MO 65808 INVESTOR RELATIONS Teresa Chasteen-Calhoun or Kelly Polonus Great Southern Bank P.O. Box 9009, Springfield, MO 65808 AUDITORS BKD, LLP Hammons Tower P.O. Box 1190 Springfield, MO 65801 LEGAL COUNSEL Silver Freedman & Taff L.L.P. 1700 Wisconsin Ave., NW Washington, DC 20007 Carnahan, Evans, Cantwell & Brown P.O. Box 10009 Springfield, MO 65808 TRANSFER AGENT AND REGISTRAR Registrar & Transfer Company 10 Commerce Drive Cranford, New Jersey 07016 2003 Annual Report for Shareholders Contents 12 11 14 16 13 2 Chairman’s Message Our performance continues to gain recognition for return on equity, expense management and market share. 8 Around the clock. Great Southern is expanding the horizon on customer convenience and accessibility. 10 On the horizon. Finding new and better ways to serve our customers has led to the area’s most comprehensive menu of financial products and services. 12 Around the corner. As our capability has grown, we’ve been able to explore other significant opportunities as a result of our reputation, size and know-how. 16 Across the desk. Our associates’ talents and dedication play crucial roles in the company’s success and drive its ultimate performance. 18 Through the community. Involvement in our communities has resulted in a growing variety of partnerships spreading across the region in many new and powerful ways. 20 Our team profile Great Southern Bancorp, Inc. and Great Southern Bank Directors and Officers 1 Message from the Chairman Great Southern’s 80th year, 2003, was another good year for the company. are declining. Our stock continues to perform extremely well, up 26% over the prior year end and the value of each dollar invested has grown about 31 times since going public in 1989. As of December 31, 2003, each share of stock purchased at $9.00 in the initial public offering had a value of approximately $278. In addition, we have regularly raised our cash dividend, including a 33% increase from fourth quarter 2002 to fourth quarter 2003. Our performance continues to gain recognition for return on equity, expense management and market share. In the June 2003 edition of the ABA Banking Journal, all publicly held U.S. banks and thrifts with assets over $1 billion were ranked by 2002 return on average equity. With a ROE of 24.25%, Great Southern ranked 11th on the list of the 50 top performing financial institutions with the distinction of being the only Missouri-based financial institution on the list. In the first nine months of 2003, the company achieved an efficiency ratio of 45.62%, with the American Banker ranking Great Southern in the top 8% of the 500 largest bank holding companies. Locally, in our home base of operations, Greene and Christian Counties in Missouri, we once again led in market share with 17.9% of the deposits with our closest pursuer at 11.8% (based on June 30, 2003 FDIC data). Another noteworthy accomplishment was Great Southern’s ranking in the Springfield, Missouri News- Leader’s “Best of the Ozarks” readers’ poll, where we were voted “Best Bank,” “Best Travel Agency” and “Best Investment Brokerage Services.” The company was also honored by inclusion in the Springfield Business Journal’s “Dynamic Dozen” – It was an extremely challenging year, as it was for most of corporate America. We fared well, in part, because in uncertain times, it’s just natural for individuals and businesses to turn to those they know and trust…security, dependability, value and convenience…become even more important. These values have become synonymous with Great Southern through the years. Therefore, in this annual report, as we embark on our 15th Anniversary as a public company, and as I enter into my 30th year as Chairman, we revisit, with “The Sun Never Sets” theme, the very principles which brought us to where we are today. Today GSBC is achieving nearly double digit increases in operating earnings per share and deposit and loan growth while non-performing assets Five Year Cumulative Total Return** Great Southern Bancorp Nasdaq US Companies Nasdaq Financial Net Income* (per share of common stock) $3.33 Market Share* Market Share* Based on Deposits in Greene Based on Deposits in Greene & Christian Counties & Christian Counties 17.9% B S F y t n a r a u G k n a B e r u t a n g S i k n a B . . S U a c i r e m A f o k n a B k n a B e r i p m E k n a B e c r e m m o C k n a B n r e h t u o S t a e r G Signature Bank Guaranty FSB * Data Source: FDIC Website U S Bank Bank of America Empire Bank Commerce Bank Great Southern Ban 16 14 12 10 8 6 4 2 0 $ 250 200 150 100 50 0 JUN 98 DEC 98 DEC 99 DEC 00 DEC 01 DEC 02 DEC 03 Data as of: June 30, 2003. ** Graph assumes that $100 was invested in the Common Stock on June 30, 1998 and that all dividends were reinvested. 2 $3.00 2.50 2.00 1.50 1.00 0.50 0.00 JunJun 90 Junun 90 Jun 90 ’90† JunJune 9 Junune 9 June 95 ’95 DecDec 00DecDec 00 Dec 00 ’00 Dec 03 Dec 03 Dec 03Dec Dec ’03 † Figure stated is as if the company was publicly traded for all of the fiscal year 1990 (conversion was in Dec. 1989). the area’s fastest-growing companies based on gross revenues for the last three fiscal years. Great Southern was the only financial institution to make the list. How did we attain these results? By remaining true to our mission, our values and our strategic business plan. Through the years we have developed a professional, talented, energetic, disciplined and committed management team that understands what is required to achieve success. Each member of this team has a financial interest in GSBC stock and is rewarded for seeing that stockholders share in our success. The team is involved in an ongoing strategic review and plan process. Through this process we “plan our work and work our plan.” We are pleased to report that calendar year 2003 was another banner year with net income of $3.33 per share ($23.1 million). In addition, the company posted growth in all the following areas: total assets were $1.54 billion (up 9%); gross loans receivable were $1.14 billion (up 9%); and total deposits were $1.09 billion (up 11%). Non-performing assets were $16.4 million, down $2.4 million from December 31, 2002. Non-performings, as a percentage of total assets, were 1.07%. The company continues to raise the mark on an already healthy capital position. As of December 31, 2003, stockholders’ equity was $119.5 million (7.8% of total assets), equivalent to a book value of $17.45 per share. Of course, any successful year is underscored by contributions from key departments and initiatives. It is important that we highlight a few of these performances. To expand and diversify our loan portfolio, we opted to open a loan production branch in Kansas City, Missouri, and a loan production office in Rogers, Arkansas in 2003. The Kansas City office originated $41 million in 2003 and now has $85 million in outstanding loan balances. The Northwest Arkansas LPO opened in September, and by year’s end had $33 million in originations and outstanding balances of $57 million. Research is currently in progress to determine potential sites for additional LPOs. Our Correspondent Banking group had a phenomenal year – balances more than doubled, from $43 million at year-end 2002 to $93 million at December 31, 2003. Our Correspondent Banking department has been two to three years in the making, but in the past 18 months an aggressive direct mail and one-on-one calling program has paid significant dividends. Equally successful in providing relatively low-cost deposits was the Corporate Services Team. In 2002, this commercial business team brought in $18 million in deposits. In 2003, the team surpassed the $50 million mark – $23 million of which were commercial and retail deposits and the remainder were public funds. Great Southern Travel continued to shore up its dominance of both leisure and corporate travel markets in southwest and central Missouri with acquisitions of House of Travel and McDaniel Travel. The agency is now one of the largest 100 in the industry. We are also making exciting strides in associate development. From a new approach to employee orientation, to online training, to an internal communication link, we are striving to give our associates the resources they need to reach their full potential. At the center of this initiative is a newly formalized corporate mission, core values and Total Assets T Total Assets in billions $1.54 Total Deposits T Total Deposits in billions $1.14 Total Loans T Total Loans in billions $1.09 Commercial Real Estate & Construction Loans in millions 600 $622 5 1.55 2 1.2 9 0.9 6 0.6 3 0.3 0 0.0 DecDec 90DecDec 90 Dec 90 ’90 DecDec 95DecDec 9 Dec 95 ’95 DecDec 00DecDec 00 Dec 00 ’00 Dec 03 Dec 03 Dec 03Dec Dec ’03 1.0 0.8 0.6 0.4 0.2 0.0 Dec 90 Dec 90 Dec 90Dec Dec ’90 Dec 95 Dec 95 Dec 95Dec Dec ’95 Dec 00 Dec 00 Dec 00Dec Dec ’00 Decec 03Decec 0 Dec 03 ’03 1.0 0.8 0.6 0.4 0.2 0.0 500 400 300 200 100 0 Dec 90DecDec 9DecDec 9 ’90 DecDec 9DecDec 9 Dec 95 ’95 DecDec 00DecDec 0 Dec 00 ’00 DecDec 03DecDec 03 Dec 03 ’03 Dec 90 Dec 90 Dec 90Dec Dec ’90 Dec 95 Dec 95 Dec 95Dec Dec ’95 Dec 00 Dec 00 Dec 00Dec Dec ’00 Decec 03Decec 0 Dec 03 ’03 *All per share amounts have been adjusted to reflect stock splits. The company converted to a calendar year in December 1998; therefore prior years’ net income numbers will reflect a June 30 fiscal year end. 3 Message from the Chairman guidelines. In the coming year, there will be significant internal focus on instilling and incorporating the philosophy throughout our culture. With 2003’s strong foundation, we are optimistic about the year ahead. We are anticipating the move, during the second quarter, into our new 70,000 square foot state-of-the-art operations center. This will free up much needed space at our 1451 E. Battlefield headquarters for more loan officers/originators in the residential and commercial loan areas. The new location will allow corporate services and other key teams to be located together under one roof, thus enhancing referrals, selling and servicing of customers and teamwork. We are positioned well, with respect to our competitors, across all business and product lines and have the strength and flexibility to perform in either a growth environment or one with more subdued economic activity. There will continue, from a corporate standpoint, to be an emphasis on non-interest income generation and expense management. In all our markets, the primary focus will be expanding relationships with existing customers while adding new customers. We are pleased to announce the appointment of Earl A. Steinert Jr. to the Board of Directors. As a practicing CPA with more than 40 years of business experience, Mr. Steinert’s expertise will serve us well, especially in the area of corporate governance. In closing, I want to express my appreciation to our Associates for their dedication and commitment; to our Customers for their business and loyalty; to our Shareholders for their investment and confidence; and to our Communities for their support. We look forward to continuing to serve and to meeting the opportunities and challenges that 2004 and continued profitable growth will provide. We pledge our best efforts in the year ahead. William V. Turner CHAIRMAN The following tables set forth selected consolidated financial information and other financial data of the Company. The selected balance sheet and statement of income data are derived from our consolidated financial statements, which have been audited by BKD, LLP. See Item 7 of the Annual Report on Form 10-K, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” and Item 8 of the Annual Report on Form 10-K, “Financial Statements and Supplementary Information.” Results for past periods are not necessarily indicative of results that may be expected for any future period. Selected Consolidated Financial Data 2003 2002 December 31, 2001 (Dollars in thousands) 2000 1999 Summary Statement of Condition Information: Assets Loans receivable, net Allowance for loan losses Available-for-sale securities Held-to-maturity securities Foreclosed assets held for sale, net Allowance for foreclosed asset losses Deposits Total borrowings Stockholders’ equity (retained earnings substantially restricted) Average loans receivable Average total assets Average deposits Average stockholders’ equity Number of deposit accounts Number of full-service offices $1,540,723 1,094,197 20,844 259,600 53,944 9,034 --- 1,137,427 276,584 119,548 1,056,338 1,437,869 1,057,798 113,822 74,822 29 $1,402,638 997,647 21,288 236,269 52,587 4,328 --- 1,021,957 268,494 104,709 1,000,044 1,344,989 963,255 95,728 73,861 29 $1,323,103 964,886 21,328 233,805 37,465 3,057 150 886,870 333,666 85,254 936,117 1,193,772 802,286 79,484 71,998 28 $1,130,178 890,784 18,694 126,409 27,758 2,688 --- 751,042 291,573 71,049 843,170 1,013,963 676,633 69,208 73,394 27 $964,803 766,807 17,293 79,891 37,646 817 --- 625,900 261,642 68,926 746,979 928,182 612,503 68,758 73,932 27 4 4 Selected Consolidated Financial Data Summary Income Statement Information: Interest income: Loans Investment securities and other Interest expense: Deposits Federal Home Loan Bank advances Short-term borrowings and trust preferred securities Net interest income Provision for loan losses Net interest income after provision for loan losses Noninterest income: Commissions Service charges and ATM fees Net realized gains on sales of loans Net realized gains (losses) on sales of available-for-sale securities Other income Noninterest expense: Salaries and employee benefits Net occupancy expense Postage Insurance Advertising Office supplies and printing (Income) expense on foreclosed assets Other operating expenses Income before income taxes Provision for income taxes Net income 2003 $63,283 12,896 76,179 16,582 5,400 1,182 23,164 53,015 4,800 48,215 5,859 11,214 2,187 795 1,775 21,830 18,739 6,335 1,691 683 735 855 1,939 4,615 35,592 34,453 11,362 $23,091 5 For the Year Ended December 31, 2001 2002 (Dollars in thousands) 2000 1999 $64,062 16,099 80,161 $76,107 13,390 89,497 $77,399 8,751 86,150 $63,386 4,652 68,038 22,244 6,852 1,241 30,337 49,824 5,800 44,024 5,786 8,430 1,575 3,443 1,186 20,420 15,842 5,337 1,426 514 622 828 597 3,765 28,931 35,513 12,301 $23,212 32,405 10,339 3,163 45,907 43,590 5,200 38,390 5,765 8,352 1,756 139 1,237 17,249 15,126 4,730 1,233 485 686 774 216 4,156 27,406 28,233 9,475 $18,758 32,244 14,312 2,305 48,861 37,289 3,106 34,183 7,024 5,968 570 (9) 1,135 14,688 13,642 4,529 1,152 521 713 703 (295) 4,244 25,209 23,662 8,184 $15,478 24,966 9,403 1,094 35,463 32,575 2,062 30,513 7,054 4,502 1,098 316 2,379 15,349 13,765 4,124 1,006 639 611 991 --- 4,031 25,167 20,695 7,018 $13,677 Selected Consolidated Financial Data 2003 At or For the Year Ended December 31, 2001 2000 2002 (Dollars in thousands, except for per share data) Per Common Share Data: Basic earnings per common share Diluted earnings per common share Cash dividends declared Book value Average shares outstanding Year-end actual shares outstanding Year-end fully diluted shares outstanding Earnings Performance Ratios: Return on average assets(1) Return on average stockholders’ equity(2) Non-interest income to average total assets Non-interest expense to average total assets Average interest rate spread(3) Year-end interest rate spread Net interest margin(4) Adjusted efficiency ratio (excl. foreclosed assets)(5) Net overhead ratio(6) Common dividend pay-out ratio Asset Quality Ratios: Allowance for loan losses/year-end loans Non-performing assets/year-end loans and foreclosed assets Allowance for loan losses/non-performing loans Net charge-offs/average loans Gross non-performing assets/year-end assets Non-performing loans/year-end loans 1.87% 1.46 282.02 .50 1.07 .66 $3.37 3.33 .71 17.45 6,854 6,851 6,941 1.61% 20.29 1.52 2.47 3.68 3.60 3.89 44.96 .96 21.32 $ 3.38 3.34 .70 15.27 6,863 6,857 6,940 1.73% 24.25 1.52 2.11 3.59 3.70 3.85 40.34 .63 20.81 2.09% 1.84 146.60 .58 1.34 1.43 $ 2.72 2.70 .50 12.42 6,890 6,863 6,929 1.57% 23.60 1.44 2.28 3.37 3.44 3.80 44.69 .85 18.52 2.16% 1.22 237.03 .27 .91 .91 $ 2.16 2.12 .50 10.30 7,166 6,897 7,098 1.53% 22.36 1.55 2.52 3.26 3.26 3.81 49.07 1.04 23.58 2.06% 1.66 149.72 .20 1.34 1.37 1999 $ 1.79 1.76 .50 9.20 7,620 7,489 7,601 1.56% 19.98 1.75 2.87 3.36 3.40 3.86 52.51 1.06 28.41 2.21% 1.26 194.48 .23 1.05 1.18 Balance Sheet Ratios: Loans to deposits Average interest-earning assets as a percentage of average interest-bearing liabilities Capital Ratios: Average stockholders’ equity to average assets Year-end tangible stockholders’ equity to assets Great Southern Bank: Tier 1 risk-based capital ratio Total risk-based capital ratio Tier 1 leverage ratio Ratio of Earnings to Fixed Charges:(7) Including deposit interest Excluding deposit interest 96.20% 97.62% 108.80% 118.61% 122.51% 112.30 111.22 110.67 111.06 111.95 7.92% 7.75 7.12% 7.47 6.66% 6.44 6.83% 6.26 7.41% 7.10 10.86 12.12 8.88 2.49x 6.23x 10.32 11.58 8.22 2.17x 5.39x 8.93 10.20 7.18 1.62x 3.09x 8.91 10.17 7.36 1.48x 2.42x 8.97 10.23 7.45 1.58x 2.97x (1) Earnings divided by average total assets. (2) Earnings divided by average stockholders’ equity. (3) Yield on average interest- earning assets less rate on average interest-bearing lia- bilities. (4) Net interest income divided by average interest-earning assets. (5) Non-interest expense divid- ed by the sum of net interest income, on a tax equivalent basis, plus non-interest income. (6) Non-interest expense less (7) non-interest income divided by average total assets. 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 inter- est and amortization of debt discount and expense includ- ing amounts capitalized and the estimated interest por- tion of rents. 6 Around the clock. Minute by minute. At any hour. On your schedule. On the horizon. One step ahead. Never stopping. Wherever you travel. Around the corner. Always within reach. We’re here for you. Whenever you need us. Across the desk. At your service. At your convenience. Without hesitation. Through the community. In touch. Right here. Right now. The Great Southern sun never sets. 7 Arou n d t h Although the origin of the phrase “bankers’ hours” is unknown, its popular definition as “a short work day” has survived for generations. Undoubtedly it originated at a time when bankers closed early each day to tally the morning’s transactions. But as banking has evolved, driven by competition, technology and a greater emphasis on service, today’s youngest new customers nevertheless respond to the old joke “bankers’ hours” with a knowing smile. Somewhere deep in our collective consciousness there hours, the concept of banking convenience has both broadened and returned to its roots. The underlying consumer question is the same one it’s always been: “How accessible is my money?” When convenience was Down but not out. Like most of Stockton’s downtown square, our branch there took a direct tornado hit in May ... and disappeared. As crews cleaned up the rubble, we set up a “trailer branch” next to our remaining foundation and turned the lights back on. A permanent new branch is under construction at the same address, bigger and better than before. ❷ e C l ock remains a certain anxiety associated with being physically apart from our money. The latest marketing surveys continue to show “convenience” as the primary reason people bank where they bank. But as credit cards, electronic funds transferring and online banking have reduced our dependence on pocket cash, nearby drive- thrus and indeed, bankers’ Battlefield. Gary DeLong was back making service calls – out of a rented building and with hastily-salvaged equipment – within 48 hours of the Sunday afternoon tornado that leveled DeLong Plumbing and many of his neighbors in Battlefield. His real-time support team at Great Southern included Corporate Services officer Brad Heeren (left) and Gene Summers, Vice President - Insurance. ❷ 8 defined by bankers’ hours, Great Southern stayed open longer than other banks. When convenience was defined by proximity, Great Southern opened more branches, spread to nearby communities and cast an ATM network across the region to catch commuters on their way to work and home. As convenience has been refined over the years, and defined by other measures including product and service selection, responsiveness and capacity to help, Great Southern has continued to expand the horizon on customer convenience and accessibility. Today, Great Southern remains open longer than its competitors in every community we serve. We serve more communities in southern Missouri than any other bank, and maintain the region’s largest network of ATMs. We offer a broader selection of financial products and services, including corporate and correspondent banking, insurance, travel and brokerage services, a 24- hour phonebank and free online banking ’round the clock. As we’ve become the area’s largest home-owned bank, our capacity to help has grown and we’ve become a vital community partner and ready resource for special financial assistance and service whenever and wherever we’re needed. In short, the sun never sets on Great Southern convenience. Best of the Ozarks. Demographically representative or not, Springfield News-Leader’s annual “Best of the Ozarks” reader poll mirrored much of our internal research. This year, Great Southern took First Place in four categories: Best Bank, Best Investment Brokerage Services, Best Travel Agency and Best Bank Teller. ➛ The sun never sets. Celebrating Great Southern convenience, TV spots emphasized the bank’s many branches, ATMs, employees and ’round-the-clock consumer touch points, “which make it even easier to find out if we’re the right bank for you.” (cid:4) 9 r o H Onth e Our ongoing determination to find new and better ways to serve our customers has led to the development of the area’s most comprehensive menu of financial products and services, and we’re adding faster than we’re subtracting. As other banks have changed hands, explored niches, consolidated operations and specialized over the years, it’s no surprise that many consumers today find themselves maintaining multiple bank relationships. Indeed, considering the evolution of everything from credit cards to online brokerage, from credit unions where you work to on-the-spot financing where you shop, it’s more uncommon today NOT to Welcome aboard. The name has changed but the new Great Southern Travel at the Galleria retains the expertise of Branch Manager Marvin McDaniel and son Brian who now oversees corporate sales at our travel headquarters on South National. Linda Strait, House of Travel owner for 25 years, is our new Operations Manager. ❿ We’re trying to keep it that way. A new family of Great Southern VISA® cards for 2003 revealed a whole new horizon of benefits for credit card holders, combining Platinum level card service with either cash back on purchases or earned travel rewards. Compare that to any card you’re carrying now. It’s more for your money. A new internal initiative, “Partners for Success” shines the light on our small business expertise and service ... available at the nearest Great Southern branch. Home office Commercial Lending and Corporate Services officers partner with individual branch managers to provide their local business clients full- spectrum business banking, including easy applications Everything under the sun. Heather Ramsey combines on-site, “full-Bancorp” customer service with an impressive list of amenities for busy VIP clients including physicians, attorneys and CPAs. ❷ i z o n have multiple bank relationships, whether you stop to think about it or not. Great Southern has never stopped thinking about it. In fact, as we enter our 81st year, we find more promise than ever in our continued focus on what got us here in the first place. Comprehensive personal service begets comprehensive loyalty, and for Great Southern customers, the dawn of new financial service and convenience has always appeared first at home. Our customers don’t really need another bank. From an infant’s first college savings account to their first checking account, credit card and car loan as a young adult – through home loans, family vacations, business ventures, retirement and their kids’ kids’ dreams – it’s possible to enjoy the best in banking all along the way, all the while building on a strong and mutually loyal bank relationship. 10 and quick turnaround on loans up to $150,000. In our outlying branches, Great Southern continues to spread big bank service and expertise to our small community neighbors. In the past year, the bank significantly expanded its branch sales force with the addition of 24 new Personal Bankers. Great Southern Financial The right plan. Retirement Plan Consultant Greg Cox presents on-site seminars to help business owners and their employees discover the best way to achieve their mutual goals for financial security. ❷ Services now fields a team of Series 7-licensed “team leaders” to assist branch personnel in on-the-spot sales of fixed annuities across the bank’s entire 120- mile-radius branch network. Building on its full-service capability in affiliation with Raymond James, our Financial Services division also added a full-time Retirement Plan Specialist to support the bank’s Corporate Services team at the client level. For our investor and business clients who expect top quality funds management, it just keeps getting better. client services comes into sharpest focus at our VIP Banking level. VIP Banking Director Heather Ramsey and her staff work closely with all internal business units to offer our entire menu of products and services to busy clients at work or home, on their schedules, ala carte, and at their convenience. Are we trying to be “all things to all people”? Not exactly. We’re trying to be one thing to the people we know: Their single, best financial services provider in the Ozarks. Bigger is better in the travel industry as well. In August, our travel agency acquired the 35-year-old House of Travel in Springfield’s Brentwood Center, a seven-person agency devoted to leisure travel. The addition of McDaniel Travel in January underscored Great Southern Travel’s commitment to corporate travelers as well. Together, these key acquisitions further strengthened Great Southern Travel’s position as the largest travel agency in southwest and central Missouri – a win-win move that gives us even more clout in negotiating the best travel deals for our customers. As broad as it is, the full spectrum of Great Southern The big picture. Team Leaders Shannan Snider, Donna Morris, Rebecca Williams and Marcy Dollens conduct regular sales and product training clinics to help branches work across business lines and build more comprehensive customer relationships. ➛ Partners for Success. Commercial Loan Officer Kent Lammers helps Branch Manager Tenya Privett offer big bank loan service to her nearby business clients like USA Furniture’s Barry Hogan, center. (cid:4) 11 e C o rner Arou n d t h As we’ve invested in new services for existing customers, we’ve realized a return far greater than just solidifying our primary bank relationships with them. Loyal customers refer new customers. Who are simultaneously served by our growing product portfolio and delivery channels. Which in turn reveal new opportunities for growth as our capability and influence spreads. Customer demand leads to obvious growth initiatives like the opening of an additional branch in Nixa, the relocation and expansion of our facility on north Glenstone in Springfield, and plans for a second branch in the vibrant Ozark community to open later this year. Other growth opportunities are less obvious, but no less important. Our continued interest in community development has uncovered significant other underserved markets, including the region’s expanding Hispanic and retirement communities. We go where there’s a need, and when we go, we go all out. Our Hispanic outreach program, “Sueños Sin FronterasSM” (Dreams Without Borders), was introduced just last year but already serves as a model for other local businesses seeking to address the specific cultural needs of our area’s rapidly-growing Spanish-speaking population. Key elements of the program include bilingual tellers and ATMs, co-sponsorship of internal and external literacy programs in partnership with local advocacy and resource organizations, and the development of specialized services like a unique electronic remittance system that eliminates costly wire fees on funds transfers to family members across the border. It’s a new market for us, but the rules are familiar: It’s all about service, filling a need and taking care of each customer. Hablamos Español. Great Southern’s culturally- specific services include Free Checking, “borderless” ATM cards for home and away, 24-hour phone banking in Spanish and a growing staff of bilingual associates that includes a dedicated loan officer. ➛(cid:1)❷ North and South. Grand Prize winners of free airline tickets to Mexico at the Grand Opening of our new Nixa North location were Gay and Kevin Howard (shown here with Branch Manager Keith Willcut). The Howards opened their first Great Southern account in 1997 at our southwest Nixa branch on Mt. Vernon. (cid:4) 12 Parkmoor at the Gardens. Each branch is open once a week to provide on-site, full- service banking to residents, their families and facility staff members, even if they bank elsewhere. As Community Development VP Brian Fogle likes to put it, “We’re doing well by doing good.” As our capability has grown, we’ve been able to explore other significant opportunities simply as a result of our reputation, size and know-how. As a “bank’s bank,” Great Southern offers The development of specialized services also marked our entry into the area’s growing retirement and residential living market – quite literally. Great Southern’s innovative On- Premise Banking program effectively established five new bank branches inside prominent area independent living facilities, including The Cambridge, Creekside at Elfindale, Maranatha Village, The Montclair and Redefining banking convenience. On-Premise personal bankers Jeremy Tate and Heather Austin man dedicated branch offices inside independent living facilities each week to provide residents practically every service our regular branches offer. ➛ The bank for business. A specially-trained team coordinates services, referrals and hand-off procedures between departments to offer commercial clients single-source business banking.Corporate Services Officers Melanie Robbins, Brad Heeren, Laura Beaver and Bonnie Watkins were instrumental in opening accounts totaling over $52 million during the year. ➛ 13 Arou n d t h a full range of correspondent banking services to local banks, credit unions and other financial institutions, including check, coin and currency processing, ACH origination, credit services, account reconciliation and analysis services. Our new Correspondent Banking initiative posted balances of $93 million by year-end 2003. e C o rner Customer referral has also spurred a number of important growth initiatives, including the development of commercial loan business in new territories like Kansas City and Northwest Arkansas. Great Southern has been familiar with these two growth markets for some time, primarily as a result of serving loan needs for local clients with commercial interests in those areas. In 2003, the bank opened dedicated loan production offices in both Kansas City and Rogers, Arkansas to more conveniently serve those customers, capitalize on referrals and attract new business. Our Kansas City branch opened in January, 2003 at 9229 Ward Parkway and experienced strong growth through the year, with $41 million in commercial loan originations and more than $85 million in outstanding loan balances at year end. In September, 2003 our Northwest Arkansas office opened in Rogers at 2104 S. 54th Street to serve the Northwest Arkansas corridor, which includes the cities of Fayetteville, Rogers, Springdale and Bentonville. A Milken Institute report recently named the Northwest Arkansas corridor as the strongest regional economy By land or by sea. Consumer Lending Vice President Mary Allison and her team have helped the bank develop a strong indirect lending market working with area auto, truck, RV and motorcycle dealers to offer their customers attractive on-the-spot financing. A significant new client, Tracker Marine produced more than $8 million additional loan volume in 2003. With Mary are TMFS Sales and Operations Manager Jim Elliff and Assistant Sales and Operations Manager Brian Zumwalt. ❷ Sun signs. Job site signs crowd the parking lot at our new loan production office in Rogers, Ark., all earmarked for sites like this one where commercial loan officers Ron Pender and James Brookhart support John Montgomery (center), an experienced developer of nursing homes like the new Bradford Park Manor in Rogers. (cid:4) 14 14 at home. As Kansas City Manager Cal Glasco likes to put it, “We simply shower our customers and prospects with more expertise and service than they expect.” Or put another way, “the sun never sets on Great Southern service.” in the nation. We don’t have any reason to doubt it. Loan originations in 2003 for the Northwest Arkansas office totalled $33 million by year end, with outstanding loan balances of $57 million at year end. Our recipe for success in these new territories is the same one we’ve always used The bank’s bank. Gwen Hager (center) provides a full range of Correspondent Banking services to clients like Dianna Letterman and Julie Wagner of the Postal Federal Community Credit Union. ➛ One on one. Corporate Services officer Bonnie Watkins specializes in tailoring bank services to the specific needs of clients like Drury University’s Vice President of Administration Raymond Worley III. ➛ Great Southern hospitality. In appreciation of our working associates in real estate, the bank hosted exclusive Sunset Mixers for local realtor offices to introduce a new Realtor®sRate program that offers favorable personal home loan rates, complimentary neighborhood surround mail service every time they sell a house and in-house servicing, on call. (cid:4) 15 Across t h e D e sk deliver on this mission through our core values of doing what’s right, teamwork, mutual respect and the highest ethical standards of behavior. Through the years, the key to Great Southern’s success has been building winning relationships on many different levels. It is so much a part of who we are as a company that we’ve incorporated it in a restatement of our mission: “Building winning relationships with our customers, associates, shareholders and communities.” We expect everyone on the Great Southern team to Whether it’s working across the desk with customers, with another Great Southern associate or working out in the community, our associates’ talents and dedication play crucial roles in the company’s success and drive its ultimate performance. As a company, we are committed to providing a fair, respectful and challenging workplace to ensure that our associates continue to thrive and grow. Ongoing training is essential, not only to help our associates reach their full potential, but to stay up to speed and maintain our role of leadership in a quickly evolving industry. New training programs in 2003 included advanced classes on utilizing our Customer Relationship Management (CRM) software system, and a cross-training program in which associates receive comprehensive tools, techniques and product training to ensure they are able to address all of our customers’ needs, whether the subject is banking, insurance, investments or travel – business or personal. Along with training, practice makes perfect. Another major initiative in 2003 restructured the Commercial Lending team to position itself for Sun classes. New recruits learn about Great Southern’s core values, mission, roles in the community and their own positions on the team at give-and-take orientation classes that also help identify their personal career paths and potential at the company. (cid:3) The new hot spot. About 260 Great Southern employees look forward to expanded office accommodations at our new 70,000 sq. ft. Operations Center, to open in the second quarter of 2004 on Glenstone at St. Louis in Springfield. ❿ 16 additional growth and to facilitate response to market demand. A new Quality Control area rids relationship managers of administrative duties so they can focus more closely on building relationships with clients. The division also worked collaboratively across business lines to develop new processes that capitalize on the company’s extensive branch network and allow us to more efficiently serve small business clients. Also to accommodate future growth, the company is completing renovation of a former Albertson’s grocery superstore that will serve as our new Operations Center in Springfield. The 70,000 square-foot building will house all operations personnel under one roof and provide an efficient, state-of-the-art work environment that facilitates teamwork and internal communication. As an added bonus, the move what they bring to Great Southern, and as we embrace the diversity of many fresh new talents, we also celebrate the loyalty and dedication of many long-term associates, several with more than two decades of company service under their belts. In terms of opportunity, the sun never sets at Great Southern. Revolving around the sun. A new intranet Web site, GS Link, fosters internal communications and provides all associates ongoing, timely desktop information and news about the banking industry, their company and what’s happening right now. (cid:3) frees up much-needed office space at the bank’s headquarters on Battlefield to accommodate and centralize our expanding residential and commercial lending teams. The benefits of Great Southern’s continued focus on the quality of its people and across-the-desk work environment have become especially apparent in the synergism of a team that has grown to a population of more than 600 today. Every associate is unique in Other Key Members of the Management Team (Standing) Coleen Viefhaus - Assistant Vice President and Regional Sales Manager, Paul Potthoff - Vice President and Commercial Lending Officer, Heather Ramsey - Assistant Vice President and Director of VIP Banking, Bob Ogden - Vice President and Commercial Lending Officer; (seated l to r) Emily Clayton - Director of Training, Mary Allison - Vice President and Consumer Lending Manager, Kim Warren - Assistant Vice President and Residential Lending Manager, Renee Boyce - Assistant Vice President of Loan Operations, Denie' Patrick - Assistant Vice President and Regional Services Manager, and Gwen Hager - Correspondent Banking Officer ➛ 20-, 30- and 40- somethings. Associates with 2 or more decades of company service include (standing) Bob Ogden - 21, Ann Turner - 20, Bill Turner - 30, David Westervelt - 27; (seated l to r) Debby Ray - 22, Betty Hygh - 45, Lois McPhetridge - 23, Teresa Chasteen-Calhoun - 20, Jane Enloe - 26, Carolyn Northington - 24, and Donna Taylor - 20. ➛ 17 h Thro u g Great Southern’s long commitment to help nurture and develop the communities it serves has resulted in a growing variety of partnerships that continues to spread across the region in many new and powerful ways. Indeed, we’re doing well by doing good. Especially as our capacity to help has grown, we understand that our company plays significant roles in the economic prosperity of our communities, whether it’s helping individuals, Just add sun. Springfield’s own center-city redevelopment reflects the visionary effort at several of our recent projects in Kansas City, where historical, vacant downtown buildings are being reborn as luxury-living lofts and condominiums. ❷ t h e Community Corporations (CDCs) begin operation, including the Ozarks Regional CDC, Joplin Capital Corporation, and in response to the May 2003 devastating storms, the Stockton CDC. Just as important, we feel strongly about our role as a good neighbor. We want to help where and when we can -- whether it’s in a time of crisis or to help an ongoing worthwhile cause that betters the lives of individuals and the community at large. Our success has enabled us to give back to many fine organizations and in 2003, the company contributed $200,000 in cash to local nonprofits to help them provide much needed services. Our greatest source of pride, however, is in our associates, who have contributed their considerable resources in time and talent to causes throughout our communities. From reading a book to a student, to walking in the American Cancer Society Relay for Life or folding clothes for a clothing bank, Great Southern associates show they care about what is businesses or institutions. We must also ensure that all members of our communities have equal access to financial products and services. This is why we created the Great Southern Community Development division, which just completed its first full year of operation. Major Community Development division initiatives have included the Hispanic outreach program, On-Premise Banking, and assistance to area developers with affordable housing and center city revitalization projects. To help small businesses, Great Southern has embraced a leadership role in helping several area Community Development Go baby go! The latest new Halftime Game, Diaper Dash kept the crowd on the edge of their seats as “Baby Bear” contestants raced home to parents’ welcoming arms ... and winners’ circle prizes of $250, $100 and $50 savings accounts. ❿ 18 happening in the community as they give of themselves to make things better. In 2003, our associates personally gave more than $8,000 to help area nonprofits through our new monthly Caring and Sharing Casual Day alone. For a minimal donation, associates can wear jeans to work and help a great cause at the same time. This same spirit of caring and sharing extends throughout our Partners in education. With an armful of ribbons and medals for McGregor Elementary’s best readers, Denise Baker, Marketing and Community Development VP Brian Fogle were big hits at the Read-A-Thon assembly. So was the surprise appearance of the SMS Boomer Bear (Lori Hunt, marketing department). ❷ communities in many ways other than charitable giving. At our Partner-In-Education elementary school, Great Southern associates were instrumental in helping McGregor achieve one of the most successful fundraisers in the school’s history during our first annual Read-A-Thon. Great Southern associates read books to kick off the drive, funded awards and presented medals to top readers in each class. Other school partnerships include a long tradition of support for sports programs at area high schools and universities. Our ever- popular basketball and football Halftime Games have become a favorite and expected part of the action for fans and have helped support, the Missouri Sports Hall of Fame presented its 2nd Annual Founders Award to Chairman William Turner and President/CEO Joseph Turner to lead off its ceremony of new inductees for 2003. Of course we appreciate the recognition, but that’s not why we do what we do. We’re a part of our community, by choice, and as everybody around here knows, the sun never sets on Great Southern involvement. make Great Southern a household name in southern Missouri. A major new attraction gets up and running this Spring with the opening of Hammons Field, a $32 million downtown Springfield ballpark funded by Springfield businessman and philanthropist John Q. Hammons. The ballpark will be the home of the Southwest Missouri State baseball Bears and a proposed minor league team. On opening day, the festivities will have a warm and familiar look to area fans as Great Southern unveils a top-of-the-5th- inning pitching contest, the Great Southern $trike Zone. Underscoring our company’s significant contributions to regional sports and community Food banking. Great Southern associates collected more than 900 pounds of food for the regional food bank, Ozarks Food Harvest (OFH), and raised more than $1,200 for OFH’s "Food For Thought" program, which reaches out to school children in need of proper nutrition at home. ❷ 19 Directors and Executive Officers Directors of Great Southern Bancorp, Inc. and Great Southern Bank Back row Earl A. Steinert, Jr. Board Member Co-owner, EAS Investment Enterprises, Inc. William V. Turner Chairman of the Board Joseph W. Turner President and Chief Executive Officer Larry D. Frazier Board Member Retired – Hollister, MO Julie T. Brown Board Member Shareholder, Carnahan, Evans, Cantwell & Brown, P.C. Front row Thomas J. Carlson Board Member Partner, Carlson Gardner, Inc. William E. Barclay Board Member Auto Magic/Jiffy Lube Chairman Executive Officers of Great Southern Bank Left to right Joseph W. Turner President and Chief Executive Officer Doug Marrs Vice President, Operations William V. Turner Chairman of the Board Rex Copeland Senior Vice President and Chief Financial Officer Steve Mitchem Senior Vice President and Chief Lending Officer 20 Officers of Great Southern Bank - Strategic Plan Team Front row along counter Doug Marrs Vice President of Bank Operations Teresa Chasteen-Calhoun Vice President and Director of Marketing Barby Pohl Vice President of Branch Administration Kelly Polonus Vice President and Director of Corporate Communications Second row Steve Mitchem Senior Vice President and Chief Lending Officer Byron Robison Vice President and Agency Manager Great Southern Insurance Kris Conley Executive Vice President and General Manager Great Southern Travel Services Tammy Baurichter Vice President and Controller Matt Snyder Vice President and Director of Human Resources Third row Gary Lewis Vice President and Commercial Lending Officer Colleen Neill Executive Assistant Mike Bennitt President - Great Southern Financial Services Debbie Flowers Vice President and Credit Risk Manager Lin Thomason Vice President and Director of Information Services Back row Rex Copeland Senior Vice President and Chief Financial Officer/Treasurer Brian Fogle Vice President of Community Development Larry Larimore Vice President and Compliance Officer/Secretary Joe Turner President and Chief Executive Officer 2003 Financial Information Contents 2 Chairman’s Message. 4 Selected Consolidated Financial Data. 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations. 31 Independent Accountants’ Report. 32 Consolidated Statements of Financial Condition. 34 Consolidated Statements of Income. 35 Consolidated Statements of Stockholders’ Equity. 37 Consolidated Statements of Cash Flows. 40 Notes to Consolidated Financial Statements. 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 

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