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Note 21: Stock Option Plan

12 Months Ended

Dec. 31, 2013

The Company established the 1997 Stock Option and Incentive Plan for employees and directors of the Company and its subsidiaries. Under the plan, stock options or other awards could be granted with respect to 1,600,000 (adjusted for stock splits) shares of common stock. Upon stockholders’ approval of the 2003 Stock Option and Incentive Plan (the “2003 Plan”), the 1997 Stock Option and Incentive Plan was frozen; therefore, no new stock options or other awards may be granted under this plan. At December 31, 2013 and 2012, no options were outstanding under this plan. On May 15, 2013, the Company’s stockholders approved the Great Southern Bancorp, Inc. 2013 Equity Incentive Plan (the “2013 Plan”). Upon the stockholders’ approval of the 2013 Plan, the Company’s 2003 Plan was frozen. As a result, no new stock options or other awards may be granted under this plan; however, existing outstanding awards under the 2003 Plan were not affected. At December 31, 2013, 583,207 options were outstanding under the 2003 Plan.

During 2013, the Company established the 2013 Plan, which provides for the grant from time to time to directors, emeritus directors, officers, employees and advisory directors of stock options, stock appreciation rights and restricted stock awards. The number of shares of Common Stock available for awards under the 2013 Plan is 700,000, all of which may be utilized for stock options and stock appreciation rights and no more than 100,000 of which may be utilized for restricted stock awards. At December 31, 2013, 116,500 options were outstanding under the 2013 Plan.

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

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

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

			Weighted
	Available to Grant	Shares Under Option	Average Exercise Price

Balance, January 1, 2011	462,453	743,796	$23.592
Granted	(120,100)	120,100	19.349
Exercised	--	(25,856)	12.053
Forfeited from terminated plan(s)	--	(4,000)	12.898
Forfeited from current plan(s)	24,987	(24,987)	23.349

Balance, December 31, 2011	367,340	809,053	23.391
Granted	(105,200)	105,200	24.759
Exercised	--	(116,479)	19.488
Forfeited from current plan(s)	64,482	(64,482)	23.168

Balance, December 31, 2012	326,622	733,292	24.227
Granted from 2003 Plan	(3,100)	3,100	23.957
Exercised	--	(106,367)	19.687
Forfeited from terminated plan(s)	46,818	(46,818)	27.202
Termination of 2003 Plan	(370,340)	--
	--	583,207
Available to grant from 2013 Plan	700,000	--
Granted from 2013 Plan	(116,500)	116,500	29.515

Balance, December 31, 2013	583,500	699,707	$25.597

The Company’s stock option grants contain terms that provide for a graded vesting schedule whereby portions of the options vest in increments over the requisite service period. These options typically vest one-fourth at the end of years two, three, four and five from the grant date. As provided for under FASB ASC 718, the Company has elected to recognize compensation expense for options with graded vesting schedules on a straight-line basis over the requisite service period for the entire option grant. In addition, ASC 718 requires companies to recognize compensation expense based on the estimated number of stock options for which service is expected to be rendered. Because the historical forfeitures of its share-based awards have not been material, the Company has not adjusted for forfeitures in its share-based compensation expensed under ASC 718.

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

	December 31,	December 31,	December 31,
	2013	2012	2011
Expected dividends per share	$0.72	$0.72	$0.72
Risk-free interest rate	1.53%	0.65%	0.93%
Expected life of options	5 years	5 years	5 years
Expected volatility	24.80%	28.83%	27.99%
Weighted average fair value of
options granted during year	$5.22	$4.55	$3.15

Expected volatilities are based on the historical volatility of the Company’s stock, based on the monthly closing stock price. The expected term of options granted is based on actual historical exercise behavior of all employees and directors and approximates the graded vesting period of the options. Expected dividends are based on the annualized dividends declared at the time of the option grant. The risk-free interest rate is based on the five-year treasury rate on the grant date of the options.

The following table presents the activity related to options under all plans for the year ended December 31, 2013.

			Weighted
		Weighted	Average
		Average	Remaining
		Exercise	Contractual
	Options	Price	Term

Options outstanding, January 1, 2013	733,292	$24.227	5.34
Granted	119,600	29.371
Exercised	(106,367)	19.687
Forfeited	(46,818)	27.202
Options outstanding, December 31, 2013	699,707	25.597	5.93

Options exercisable, December 31, 2013	359,749	26.356	3.28

For the years ended December 31, 2013, 2012 and 2011, options granted were 119,600, 105,200, and 120,100, respectively. The total intrinsic value (amount by which the fair value of the underlying stock exceeds the exercise price of an option on exercise date) of options exercised during the years ended December 31, 2013, 2012 and 2011, was $858,000, $1.0 million and $145,000, respectively. Cash received from the exercise of options for the years ended December 31, 2013, 2012 and 2011, was $1.2 million, $2.3 million and $311,000, respectively. The actual tax benefit realized for the tax deductions from option exercises totaled $764,000, $888,000 and $97,000 for the years ended December 31, 2013, 2012 and 2011, respectively.

The following table presents the activity related to nonvested options under all plans for the year ended December 31, 2013.

		Weighted	Weighted
		Average	Average
		Exercise	Grant Date
	Options	Price	Fair Value

Nonvested options, January 1, 2013	300,703	$21.442	$4.596
Granted	119,600	29.371	5.212
Vested this period	(65,389)	18.437	4.768
Nonvested options forfeited	(14,956)	21.715	4.790

Nonvested options, December 31, 2013	339,958	24.794	4.768

At December 31, 2012, there was $1.5 million of total unrecognized compensation cost related to nonvested options granted under the Company’s plans. This compensation cost is expected to be recognized through 2018, with the majority of this expense recognized in 2014 and 2015.

The following table further summarizes information about stock options outstanding at December 31, 2013:

	Options Outstanding
		Weighted		Options Exercisable
		Average	Weighted		Weighted
		Remaining	Average		Average
Range of	Number	Contractual	Exercise	Number	Exercise
Exercise Prices	Outstanding	Life	Price	Exercisable	Price

$8.360 to $19.960	126,372	7.20 years	$16.924	51,163	$13.489
$20.120 to $25.000	207,050	7.53 years	23.373	58,801	22.065
$25.480 to $36.390	366,285	4.58 years	29.846	249,785	30.001

	699,707	5.93 years	25.597	359,749	26.356