2007-04-19 12:09:15 -

SPRINGFIELD, Mo., April 19 /PRNewswire-FirstCall/ -- Great Southern Bancorp, Inc. , the holding company for Great Southern Bank, today reported preliminary earnings for the quarter ended March 31, 2007, were $.53 per diluted share ($7,335,000) compared to the $.52 per diluted share ($7,196,000) the Company earned during the same quarter in the prior year. Excluding the effects of the Company's hedge accounting entries recorded, earnings for the three months ended March 31, 2007 and 2006, were $.53 and $.54 per diluted share, respectively.

For the three months ended March 31,

2007, return on average equity (ROAE) was 16.24%; return on average assets (ROAA) was 1.29%; and net interest margin (NIM) was 3.27%. The non-cash amortization of the prepaid broker fee to originate certificates of deposit (which was originally recorded as part of the accounting change in 2005) reduced net interest margin by .05% (from 3.32%). Stockholders' equity at March 31, 2007, was $181.2 million (7.9% of total assets), equivalent to a book value of $13.25 per share.

"In light of the challenging operating environment, we are pleased with our first quarter results," said Great Southern President and CEO Joseph W. Turner. "Loans increased $41 million from December 31, 2006, and given the level of loan repayments experienced in the first quarter, we are pleased with this growth. Demand for commercial loans remains strong. Although the level of non-performing loans has increased, loan charge-off levels as a percentage of total loans remain comparable to historic loss ratios. Primarily six relationships make up the majority of the $27.7 million in non-performing loans.

"The Company's core deposit growth continues to be positive. Core deposits increased $61 million from December 31, 2006. Two of the more significant areas of change were in retail CDs and interest bearing transaction accounts, which increased $20 million and $46 million, respectively. Although some of these deposits may prove to be seasonal, this increase is a reflection of our deposit acquisition initiatives and the great work of our Corporate Services and Retail Banking associates in acquiring and strengthening customer relationships. In addition, customer repurchase agreement accounts increased $45 million in the quarter. Expenses during the first quarter of 2007 increased only slightly from both the first quarter and fourth quarter in 2006, demonstrating that our expense management efforts are working."

Selected Financial Data and Non-GAAP Reconciliation (Dollars in thousands) Three Months Ended March 31, 2007 Effect of Excluding As Reported Hedge Accounting Hedge Accounting Entries Recorded Entries Recorded Net interest income $17,186 $ (229) $17,415 Provision for loan losses 1,350 -- 1,350 Non-interest income 6,965 341 6,624 Non-interest expense 11,918 -- 11,918 Provision for income taxes 3,548 (39) 3,509 Net income $7,335 $ 73 $7,262 Three Months Ended March 31, 2006 Effect of Excluding As Reported Hedge Accounting Hedge Accounting Entries Recorded Entries Recorded Net interest income $16,632 $ (263) $16,895 Provision for loan losses 1,325 -- 1,325 Non-interest income 7,123 (208) 7,331 Non-interest expense 11,750 -- 11,750 Provision for income taxes 3,484 165 3,649 Net income $7,196 $ (306) $7,502 Three Months Ended March 31, 2007 2006 Earnings Earnings Dollars Per Share Dollars Per Share Reported Earnings $7,335 $.53 $7,196 $.52 Amortization of deposit broker origination fees (net of taxes) 149 .01 171 .01 Net change in fair value of interest rate swaps and related deposits (net of taxes) (222) (.01) 135 .01 Earnings excluding impact of hedge accounting entries $7,262 $.53 $7,502 $.54 NET INTEREST INCOME

Including the impact of the accounting entries recorded for certain interest rate swaps, net interest income for the first quarter of 2007 increased $554,000 to $17,186,000 compared to $16,632,000 for the first quarter of 2006. Net interest margin was 3.27% in the quarter ended March 31, 2007, compared to 3.37% in the same period in 2006, a decrease of 10 basis points. For the three months ended March 31, 2007, and 2006, interest income was reduced $348,000 and $288,000, respectively, due to the reversal of accrued interest on loans which were added to non-performing status during the quarter. This reduced net interest income and net interest margin. For the three months ended March 31, 2007, the average balance of investment securities increased by $50 million due to the purchase of very short-term discount notes to pledge against increased public funds deposits. While the Company earned a positive spread on these securities, it was much smaller than the Company's overall net interest spread, having the effect of decreasing net interest margin.

Excluding the impact of the accounting entries recorded for certain interest rate swaps, economically, net interest income for the first quarter of 2007 increased $520,000 to $17,415,000 compared to $16,895,000 for the first quarter of 2006. Net interest margin excluding the effects of these accounting entries was 3.32% in the quarter ended March 31, 2007, compared to 3.42% in the quarter ended March 31, 2006.

Non-GAAP Reconciliation (Dollars in thousands) Three Months Ended March 31, 2007 2006 Dollars % Dollars % Net Interest Income/ Margin $17,186 3.27% $16,632 3.37% Amortization of deposit broker origination fees 229 .05 263 .05 Net interest income/ margin excluding impact of hedge accounting entries $17,415 3.32% $16,895 3.42%

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

NON-INTEREST INCOME

Non-interest income for the first quarter of 2007 was $6,965,000 compared with $7,123,000 for the first quarter 2006. The $158,000 decrease in non-interest income is primarily the result of the early repayment of five unrelated loans which triggered total prepayment fees of $532,000 in the quarter ended March 31, 2006. Total late charges and fees on loans decreased $616,000 in the three months ended March 31, 2007, compared to the same period in 2006. Although the Company does receive prepayment fees from time to time, it is difficult to forecast when and in what amounts fees will be collected. Non-interest income increased $296,000 in the three months ended March 31, 2007, and decreased $177,000 in the three months ended March 31, 2006, as a result of the change in the fair value of certain interest rate swaps and the related change in fair value of hedged deposits.

Service charges on deposit accounts and ATM fees increased $191,000, or 6%, compared to the same period in 2006. First quarter 2007 commission income from the Company's travel, insurance and investment divisions decreased $62,000, or 2%, compared to the same period in 2006. The travel division experienced an increase in commission revenues while the insurance and investment divisions experienced decreases.

NON-INTEREST EXPENSE

Non-interest expense for the first quarter of 2007 was $11,918,000 compared with $11,750,000 for the first quarter of 2006. Non-interest expense increased $48,000 when comparing the first quarter of 2007 to fourth quarter of 2006 expenses of $11,870,000 (excluding the effects of the one-time charge to write off trust preferred securities issuance costs). The Company's efficiency ratio for the quarter ended March 31, 2007, was 49.35% compared to 49.46% in the same quarter in 2006. These efficiency ratios include the impact of the hedge accounting entries for certain interest rate swaps. Excluding the effects of these entries, the efficiency ratio for the first quarter of 2007 was 49.58% compared to 48.50% in the same period in 2006. The Company's ratio of non-interest expense to average assets decreased from 2.20% for the three months ended March 31, 2006, to 2.08% for the three months ended March 31, 2007. As discussed in previous communications from the Company, changes were made to the Company's retirement plans in 2006. These changes resulted in a decrease of $234,000 in expenses in the first quarter of 2007 compared to the same quarter in 2006.

Non-GAAP Reconciliation (Dollars in thousands) Three Months Ended March 31, 2007 2006 Non-Interest Revenue Non-Interest Revenue Expense Dollars* % Expense Dollars* % Efficiency Ratio $11,918 $24,151 49.35% $11,750 $23,75 49.46% Amortization of deposit broker origination fees -- 229 (.44) -- 263 (.54) Net change in fair value of interest rate swaps and related deposits -- (341) .67 -- 208 (.42) Efficiency ratio excluding impact of hedge accounting entries $11,918 $24,039 49.58% $11,750 $24,226 48.50% * Net interest income plus non-interest income. INCOME TAXES

For the three months ended March 31, 2007, the Company's effective tax rate was 32.6%, which was consistent with historical levels of approximately 32%.

ASSET QUALITY

As a result of continued growth in the loan portfolio, changes in economic and market conditions that occur from time to time, and other factors specific to a borrower's circumstances, the level of non-performing assets will fluctuate. Non-performing assets at March 31, 2007, were $29.8 million, up $4.8 million from December 31, 2006. Non-performing assets as a percentage of total assets were 1.30% at March 31, 2007. Compared to December 31, 2006, non- performing loans increased $7.5 million to $27.7 million while foreclosed assets decreased $2.7 million to $2.1 million. Commercial real estate, construction and business loans comprised $26.0 million, or 94%, of the total $27.7 million of non-performing loans at March 31, 2007. The increase in non-performing loans during the quarter ended March 31, 2007, was primarily due to the addition of one relationship totaling $5.4 million. This relationship consists of residential and commercial development land in Branson, Mo., and other collateral. This project has recently experienced cash flow problems. The borrower is exploring various alternatives, including the sale of portions of the land. In addition, non-performing loans were reduced $686,000 during the quarter ended March 31, 2007, due to the transfer of one relationship to foreclosed real estate. This relationship consists of a mobile home park in the Kansas City, Kan., area.

At March 31, 2007, six significant loan relationships accounted for $20.5 million of the total non-performing loan balance of $27.7 million. Five of these relationships were included in the Non-performing Loans category at December 31, 2006, and were described more fully in the December 31, 2006, Annual Report on Form 10-K.

Potential problem loans increased $5.2 million during the three months ended March 31, 2007, from $13.6 million at December 31, 2006, to $18.8 million at March 31, 2007. Potential problem loans are loans which management has identified as having possible credit problems which may cause the borrowers difficulty in complying with current repayment terms. These loans are not reflected in the non-performing assets. Potential problem loans increased primarily due to the addition of one loan relationship to the Potential Problem Loans category in the first quarter of 2007. This relationship totaled $5.1 million and is primarily secured by a 39-unit condominium development in Kansas City, Mo., with additional real estate collateral. Approximately 60% of the units in the project have been sold and closed. The remaining units are currently marketed, with three contracts pending. Two other unrelated relationships totaling $1.8 million were added to the Potential Problem Loans category in the first quarter of 2007. In addition, two unrelated relationships totaling $1.0 million were transferred from Potential Problem Loans to the Non-performing Loans category in the first quarter of 2007, and one relationship in the Potential Problem Loans category was reduced by $1.5 million through the borrower's sale of a portion of the real estate collateral.

Foreclosed assets decreased $2.7 million during the three months ended March 31, 2007, from $4.8 million at December 31, 2006, to $2.1 million at March 31, 2007. Foreclosed assets decreased primarily due to the sale of one asset carried at $3.2 million. This asset consisted of a townhome/apartment development in the Kansas City, Mo., area. This decrease was partially offset by the addition to foreclosed assets discussed above.

BUSINESS INITIATIVES

In March 2007, Great Southern Travel, a subsidiary of Great Southern Bank, acquired a St. Louis-based travel agency, The Travel Company. The acquisition marks Great Southern Travel's first physical presence in St. Louis and, in conjunction with the Company's loan production facility, will help strengthen the Company's name recognition in the region. The Travel Company operates two offices in the St. Louis market, in Creve Coeur, Mo., and St. Peters, Mo.

The Company continues its focus on acquiring consumer and commercial deposits and began two new initiatives in the first quarter. First, a seasoned banking professional, whose main responsibility is to acquire corporate deposits, was hired in the St. Louis market to serve as a Corporate Services representative. The banker will be located in the Creve Coeur loan production office. The Company's remote capture depository product, "Great Access Deposit Direct," will be available for corporate customers in this market.

Second, a marketing strategy to gain deposits in targeted markets in the Company's footprint was expanded at the end of the first quarter. Various highly-targeted direct mail pieces were sent to customers and non-customers in growth markets soliciting core deposit products. This marketing program was introduced in late 2006 and results from this effort prompted the Company to expand the program in 2007.

In the second quarter of 2007, the Company expects to open a new full-service banking center in southwest Springfield, a growing section of the city. This banking center, located on West Republic Road, is the 18th in the Springfield metropolitan footprint and the 38th for the Company.

The common stock of Great Southern Bancorp, Inc., is quoted on the Nasdaq Global Select Market System under the symbol "GSBC". The last reported sale of GSBC stock in the quarter ended March 31, 2007, was $29.28.

Great Southern offers a broad range of banking, investment, insurance and travel services to customers and clients. Headquartered in Springfield, Mo., Great Southern operates 37 banking centers and 180 ATMs in Missouri. The Company also serves lending needs through loan production offices in Overland Park, Kan., Rogers, Ark., Columbia, Mo., and St. Louis.

http://www.greatsouthernbank.com/

When used in this press release, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "intends" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties, including, among other things, changes in economic conditions in Great Southern Bancorp's ("Company") market area, changes in policies by regulatory agencies, fluctuations in interest rates, the credit risks of lending activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses, the Company's ability to access cost-effective funding, demand for loans and deposits in the Company's market area and competition, that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to advise readers that the factors listed above could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

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

The following tables set forth certain selected consolidated financial information of the company at and for the periods indicated. Financial data for all periods is unaudited. In the opinion of management, all adjustments, which consist only of normal recurring accruals, necessary for a fair presentation of the results for and at such unaudited periods have been included. The results of operations and other data for the three months ended March 31, 2007 and 2006 are not necessarily indicative of the results of operations, which may be expected for any future period.

Selected Financial Condition Data: March 31, December 31, 2007 2006 (Dollars in thousands) Total assets $2,280,919 $2,240,308 Loans receivable, gross 1,740,189 1,698,302 Allowance for loan losses 26,833 26,258 Foreclosed assets, net 2,060 4,768 Available-for-sale securities, at fair value 383,372 344,192 Deposits 1,757,332 1,703,804 Total borrowings 318,653 325,900 Stockholders' equity 181,236 175,578 Non-performing assets 29,761 25,011 Three Months Ended Three Months Ended March 31, December 31, 2007 2006 2006 Selected Operating Data: (Dollars in thousands) Interest income $39,458 $34,197 $39,452 Interest expense 22,272 17,565 21,845 Net interest income 17,186 16,632 17,607 Provision for loan losses 1,350 1,325 1,350 Non-interest income 6,965 7,123 7,977 Non-interest expense 11,918 11,750 12,653 Provision for income taxes 3,548 3,484 3,588 Net income $7,335 $7,196 $7,993 Three Months Ended Three Months Ended March 31, December 31, 2007 2006 2006 Per Common Share: Net income (fully diluted) $.53 $.52 $.58 Period end book value $13.25 $11.51 $12.84 Earnings Performance Ratios: Annualized return on average assets 1.29% 1.34% 1.46% Annualized return on average stockholders' equity 16.24% 17.84% 18.37% Net interest margin 3.27% 3.37% 3.41% Average interest rate spread 2.73% 2.91% 2.81% Efficiency ratio 49.35% 49.46% 49.46% Non-interest expense to average total assets 2.08% 2.20% 2.31% Asset Quality Ratios: Allowance for loan losses to period-end loans 1.54% 1.54% 1.54% Non-performing assets to period-end assets 1.30% 1.06% 1.12% Non-performing loans to period-end loans 1.59% 1.35% 1.19% Annualized net charge-offs to average loans .18% .16% .29% GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (In thousands, except number of shares) March 31, December 31, 2007 2006 (Unaudited) ASSETS Cash $ 97,167 $ 132,100 Interest-bearing deposits in other financial institutions 1,331 1,050 Cash and cash equivalents 98,498 133,150 Available-for-sale securities 383,372 344,192 Held-to-maturity securities (fair value $1,573 - March 2007; $1,569 - December 2006) 1,470 1,470 Mortgage loans held for sale 4,640 2,574 Loans receivable, net of allowance for loan losses of $26,833 - March 2007; $26,258 - December 2006 1,713,356 1,672,044 Interest receivable 14,166 13,587 Prepaid expenses and other assets 13,213 15,554 Foreclosed assets held for sale, net 2,060 4,768 Premises and equipment, net 26,686 26,417 Goodwill and other intangible assets 2,086 1,395 Investment in Federal Home Loan Bank stock 8,875 10,479 Refundable income taxes -- 2,306 Deferred income taxes 12,497 12,372 Total Assets $2,280,919 $2,240,308 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits $1,757,332 $1,703,804 Federal Home Loan Bank advances 120,420 179,170 Short-term borrowings 172,459 120,956 Subordinated debentures issued to capital trust 25,774 25,774 Accrued interest payable 5,867 5,810 Advances from borrowers for taxes and insurance 743 388 Accounts payable and accrued expenses 15,418 28,828 Income taxes payable 1,670 -- Total Liabilities 2,099,683 2,064,730 Stockholders' Equity: Capital stock Serial preferred stock, $.01 par value; authorized 1,000,000 shares; none issued -- -- Common stock, $.01 par value; authorized 20,000,000 shares; issued and outstanding March 2007 - 13,678,596 shares; December 2006 - 13,676,965 share 137 137 Additional paid-in capital 18,757 18,481 Retained earnings 163,579 158,780 Accumulated other comprehensive income (loss) (1,237) (1,820) Total Stockholders' Equity 181,236 175,578 Total Liabilities and Stockholders' Equity $2,280,919 $2,240,308 GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) THREE MONTHS ENDED THREE MONTHS ENDED March 31, December 31 2007 2006 2006 (Unaudited) (Unaudited) INTEREST INCOME Loans $ 34,677 $ 29,801 $ 35,474 Investment securities and other 4,781 4,396 3,978 TOTAL INTEREST INCOME 39,458 34,197 39,452 INTEREST EXPENSE Deposits 18,226 13,757 18,140 Federal Home Loan Bank advances 1,863 2,032 1,900 Short-term borrowings 1,743 1,491 1,423 Subordinated debentures issued to capital trust 440 285 382 TOTAL INTEREST EXPENSE 22,272 17,565 21,845 NET INTEREST INCOME 17,186 16,632 17,607 PROVISION FOR LOAN LOSSES 1,350 1,325 1,350 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 15,836 15,307 16,257 NON-INTEREST INCOME Commissions 2,480 2,542 2,153 Service charges and ATM fees 3,503 3,312 3,752 Net realized gains on sales of loans 175 213 237 Net realized gains (losses) on sales of available-for-sale securities -- -- 1 Net gain (loss) on sales of fixed assets 10 149 2 Late charges and fees on loans 163 779 276 Change in interest rate swap fair value net of change in hedged deposit fair value 296 (177) 777 Other income 338 305 779 TOTAL NON-INTEREST INCOME 6,965 7,123 7,977 NON-INTEREST EXPENSE Salaries and employee benefits 7,136 6,981 6,838 Net occupancy and equipment expense 1,942 1,931 1,962 Postage 532 527 544 Insurance 221 212 219 Advertising 247 253 425 Office supplies and printing 232 213 238 Telephone 335 340 350 Legal, audit and other professional fees 249 241 261 Expense (income) on foreclosed assets 114 (35) 9 Write-off of trust preferred securities issuance costs -- -- 783 Other operating expenses 910 1,087 1,024 TOTAL NON-INTEREST EXPENSE 11,918 11,750 12,653 INCOME BEFORE INCOME TAXES 10,883 10,680 11,581 PROVISION FOR INCOME TAXES 3,548 3,484 3,588 NET INCOME $7,335 $7,196 $7,993 BASIC EARNINGS PER COMMON SHARE $.54 $.52 $.58 DILUTED EARNINGS PER COMMON SHARE $.53 $.52 $.58 DIVIDENDS DECLARED PER COMMON SHARE $.16 $.14 $.16 Average Balances, Interest Rates and Yields

The following table presents, for the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. Average balances of loans receivable include the average balances of non- accrual loans for each period. Interest income on loans includes interest received on non-accrual loans on a cash basis. Interest income on loans includes the amortization of net loan fees, which were deferred in accordance with accounting standards. Fees included in interest income were $694,000 and $626,000 for the periods ended March 31, 2007 and 2006, respectively. Tax- exempt income was not calculated on a tax equivalent basis. The table does not reflect any effect of income taxes.

Three Months Ended Three Months Ended March 31, 2007 March 31, 2006 Average Yield/ Average Yield/ Balance Interest Rate Balance Interest Rate (Dollars in thousands) Interest-earning assets: Loans receivable: One- to four-family residential $174,648 $3,013 7.00% $176,371 $2,877 6.61% Other residential 74,542 1,556 8.47 98,934 1,997 8.18 Commercial real estate 463,151 9,672 8.47 457,945 8,590 7.61 Construction 653,974 13,649 8.46 543,466 10,734 8.01 Commercial business 155,574 3,209 8.36 99,661 1,996 8.12 Other loans 144,812 2,704 7.57 139,528 2,487 7.23 Industrial revenue bonds 52,636 875 6.74 67,573 1,120 6.72 Total loans receivable 1,719,337 34,678 8.18 1,583,478 29,801 7.63 Investment securities and other interest-earning assets 409,272 4,781 4.74 419,896 4,396 4.25 Total interest-earning assets 2,128,609 39,458 7.52 2,003,374 34,197 6.92 Non-interest-earning assets: Cash and cash equivalents 94,293 101,216 Other non-earning assets 45,445 38,219 Total assets $2,268,347 $2,142,809 Interest-bearing liabilities: Interest-bearing demand and savings $433,173 3,502 3.28 $448,956 3,190 2.88 Time deposits 1,122,878 14,724 5.32 965,717 10,567 4.44 Total deposits 1,556,051 18,226 4.75 1,414,673 13,757 3.94 Short-term borrowings 156,818 1,743 4.51 148,499 1,491 4.07 Subordinated debentures issued to capital trust 25,774 440 6.93 17,989 285 6.43 FHLB advances 147,277 1,863 5.13 193,764 2,032 4.25 Total interest-bearing liabilities 1,885,919 22,272 4.79 1,774,925 17,565 4.01 Non-interest-bearing liabilities: Demand deposits 174,594 182,154 Other liabilities 27,214 24,357 Total liabilities 2,087,727 1,981,436 Stockholders' equity 180,620 161,373 Total liabilities and stockholders' equity $2,268,347 $2,142,809 Net interest income: Interest rate spread $17,186 2.73% $16,632 2.91% Net interest margin* 3.27% 3.37% Average interest-earning assets to average interest-bearing liabilities 112.9% 112.9%

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

Source: Great Southern Bancorp, Inc.