United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the period ended March 31, 1997
Commission File Number: 0-22269
GS Financial Corp.
(Exact Name of Registrant as Specified in its Charter)
Louisiana 72-1341014
(State or Other Jurisdiction (IRS Employer ID Number)
of Incorporation or Organization)
3798 Veterans Blvd.
Metairie, LA 70002
(Address of Principal Executive Offices)
Registrant's Telephone Number: (504) 457-6220
Indicate by check whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
As of March 31, 1997, there were 0 shares of the Registrant's Common stock
outstanding as the Registrant had not yet completed its initial public offering.
The Registrant's initial public offering was completed on April 1, 1997 and, as
of May 14, 1997 there were 3,438,500 shares of the Registrant's common stock,
par value $.01 per share, issued and outstanding. The information presented in
this Form 10-Q at March 31, 1997 and December 31, 1996 and for the three months
ended March 31, 1997 and 1996 is for the Registrant's wholly owned subsidiary,
Guaranty Savings and Homestead Association.
GS Financial Corp.
Form 10-Q
Quarter ended March 31, 1997
Table of Contents
Part I - Financial Information
Item 1
Consolidated Statements of Condition
(as of March 31, 1997 and December 31, 1996) 3
Consolidated Statements of Operations
(For the three months ended March 31, 1997 and 1996) 4
Consolidated Statements of Equity Capital
(For the three months ended March 31, 1997 and 1996) 5
Consolidated Statements of Cash Flows
(For the three months ended March 31, 1997 and 1996) 5-6
Notes to Consolidated Financial Statements 7
Item 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-13
Part II Other Information 13
Item 1 Legal Proceedings 13
Item 2 Changes in Securities 13
Item 3 Defaults Upon Senior Securities 13
Item 4 Submission of Matters to a Vote of Security
Holders 13
Item 5 Other Information 13
Item 6 Exhibits and Reports on Form 8-K 13
Guaranty Savings & Homestead Association
Statements of Financial Condition
ASSETS
March 31, 1997 December 31, 1996
Cash and Due from Banks $ 316,722 $ 328,566
Interest Bearing Deposits
in Other Institutions 8,621,805 1,212,089
Federal Funds Sold 36,550,000 6,050,000
Investment Securities 28,525,090 23,566,071
Loans (Net) 44,730,048 44,125,404
Mortgage Backed Securities 11,232,599 7,520,394
Premises & Equipment 2,760,922 2,752,273
Other Assets 2,602,256 1,994,968
----------- ----------
TOTAL ASSETS $ 135,339,442 $ 87,549,765
=========== ==========
LIABILITIES AND EQUITY CAPITAL
LIABILITIES
Interest Bearing Deposits $ 108,865,209 $ 61,420,982
Non-Interest Bearing Dep. 475,967 529,221
Other Liabilities 1,263,011 820,284
----------- ----------
TOTAL LIABILITIES 110,604,187 62,770,487
EQUITY CAPITAL
Unrealized Gain on Securities
Available for Sale 565,424 916,271
Retained Earnings 24,169,831 23,863,007
---------- ----------
TOTAL EQUITY CAPITAL 24,735,255 24,779,278
----------- ----------
TOTAL LIABILITIES AND
EQUITY CAPITAL $ 135,339,442 $ 87,549,765
=========== ==========
Guaranty Savings and Homestead Association
Statements of Operations
For the three Months Ending
---------------------------
March 31, 1997 March 31, 1996
-------------------------------
INTEREST INCOME
Loans Receivable $ 980,179 $ 929,691
Mortgage Backed Securities 114,305 102,586
Investment Securities 572,866 499,088
Other Interest Income 10,377 10,207
------ ------
TOTAL INTEREST INCOME 1,677,727 1,541,572
--------- ---------
INTEREST EXPENSE
Deposits 696,433 620,225
------- -------
TOTAL INTEREST EXPENSE 696,433 620,225
------- -------
NET INTEREST INCOME BEFORE
PROVISION FOR LOAN LOSSES 981,294 921,347
PROVISION FOR LOAN LOSSES 0 0
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 981,294 921,347
------- -------
OTHER INCOME 2,190 5,642
OTHER EXPENSES
Compensation and Benefits 354,659 309,855
Net Occupancy Expense 72,535 63,628
Data Processing 21,338 16,048
Federal Insurance Premiums 2,219 35,632
Advertising 2,500 6,577
Legal Fees 650 4,508
Audit and Consulting Fees 16,918 15,445
Regulatory Supervisory Fees 11,634 11,570
Office Supplies and Telephone 22,008 21,449
Other Expenses 10,202 16,169
------- -------
TOTAL OTHER EXPENSES 514,663 500,881
------- -------
INCOME BEFORE TAX EXPENSE 468,821 426,108
INCOME TAX EXPENSE 161,135 147,637
------- -------
NET INCOME $ 307,686 $ 278,471
======= =======
GUARANTY SAVINGS AND HOMESTEAD ASSOCIATION
Statements of Changes in Equity Capital
For The Quarters Ended March 31, 1997, and 1996
Unrealized Gain
on Securities
Available for
Sale Net of
Applicable Total
Retained Deferred Equity
Earnings Income Tax Capital
BALANCE AT DECEMBER 31, 1995 $ 23,457,486 $488,880 $23,946,366
Net Income 278,471 278,471
Reduction in Unrealized Gain (2,660) (2,660)
BALANCE AT MARCH 31, 1996 $ 23,735,957 $486,220 $24,222,177
BALANCE AT DECEMBER 31, 1996 $ 23,862,144 $917,134 $24,779,278
Net Income 307,686 307,686
Reduction in Unrealized Gain (351,709) (351,709)
BALANCE AT MARCH 31, 1997 $ 24,169,830 $565,425 $24,735,255
GUARANTY SAVINGS AND HOMESTEAD ASSOCIATION
Statements of Cash Flows
For the Quarter Ended
March 31,
-----------------------
1997 1996
---- ----
CASH FLOWS FROM OPERATIING ACTIVITIES
Net Income 307,686 278,471
Adjustments to Reconcile Net Income
to Net Cash Provided
by Operating Activities:
Depreciation 31,670 27,037
Discounts Accretion (Net) (6,379) (160,264)
Provision for Losses 3,972
(Increase) Decrease in Prepaid Income 198,860 (28,823)
Deferred Income Tax 26,257
Changes in Operating Assets and Liabilities:
(Increase)/Decrease in
Accrued Interest Receivable (144,860) 11,879
(Increase)/Decrease in Deferred Charges (39,656) (64,953)
Increase/(Decrease) in Accrued Income Tax 157,276 147,636
Increase/(Decrease) in Other Liabilities 462,574 (76,760)
(Increase)/Decrease in Other Assets (608,761) (60)
--------- -------
Net Cash Provided by Operating Activities 358,410 164,392
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Held-to-Maturity Securities (6,302,358)
Proceeds from Maturities 9,000,000
of Held to Maturity Securities
Purchase of Available-for-Sale (8,564,989) (780,324)
Securities
Proceeds from Maturities 3,100,000 500,000
of Available for Sale Securities
Purchases of Mortgage-Backed (3,917,818) (1,435,735)
Securities
Proceeds from Maturities of 206,418 293,610
Mortgage Backed Securities
(Purchase) of ARM Mutual Fund (21,348) (705,345)
Loan (Originations) or (604,644) 348,125
Principal Repayments (Net)
Purchases of Premises and Equipment (38,829) (41,477)
Investment in Foreclosed Real Estate (8,000)
Non-Cash Dividend - FHLB (10,300) (10,200)
Investment in Real Estate Held- - (4,300)
for Investment
---------- -------
Net Cash Provided by Investing Activities (9,851,510) 853,996
---------- -------
CASH FLOW FROM FINANCIANG ACTIVITIES
Net Increase/(Decrease) in Deposits 2,377,207 (727,546)
Net Increase/(Decrease) in Stock
Subscription Deposits 45,067,020
Net Increase/(Decrease) in
Unapplied Loan Payments 769 666
Net Increase/(Decrease) in Advance
Payment by Borrowers for Taxes
and Insurance (54,025) (142,786)
---------- ---------
Net Cash (Used in) Financing Activities 47,390,971 (869,666)
---------- ---------
NET CASH EQUIVALENTS 37,897,871 148,722
CASH AND CASH EQUIVALENTS - December 31, 7,590,655 2,355,177
---------- ---------
CASH AND CASH EQUIVALENTS - March 31 45,488,526 2,503,899
========== =========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GS Financial Corp. (the "Company") was organized and incorporated under the
laws of the state of Louisiana on December 24, 1996 for the purpose of becoming
the holding company of Guaranty Savings and Homestead Association (the
"Association") in anticipation of converting the Association from a Louisiana
chartered mutual savings and loan association to a Louisiana chartered savings
and loan association, the offer and sale of common shares of stock of
the Company to certain depositors of the Association and the Company's Employee
Stock Ownership Plan (the "ESOP") and the issuance of the common stock of the
Association to the Company, collectively referred to as the "Conversion."
The Company filed Form SB-2 with the Securities and Exchange Commission ("SEC")
on December 26, 1996, which as amended on February 6, 1997, was declared
effective by the SEC on February 11, 1997. The Association filed an Application
for Conversion with the Office of Thrift Supervision ("OTS") and the Louisiana
Office of Financial Institutions ("OFI"), the two primary regulators of the
Association. The Association received approval for its application of
conversion along with related proxy materials from both the OTS and OFI by
letters dated February 7, 1997 and April 11, 1997 respectively.
Pursuant to the plan of conversion, the Company opened its subscription
offering on February 24, 1997 and closed the offering on March 17, 1997. The
Plan of Conversion was approved by the members of the Association at a special
meeting held March 26, 1997.
The accompanying financial statements represent the financial position, results
of operations and cash flows of the Association exclusively. The accompanying
financial statements were prepared in accordance with instructions to Form 10-Q,
and therefore, do not include information or footnotes necessary for a complete
presentation of financial position, results of operations and cash flows in
conformity with generally accepted accounting principles. However, all
adjustments, consisting only of normally recurring accruals, which, in the
opinion of management are necessary for a fair presentation of the financial
statements, have been included.
(2) EMPLOYEE STOCK OWNERSHIP PLAN
Effective January 1, 1997 the Association terminated its former retirement plan
or Simplified Employee Pension ("SEP") and formally adopted an Employee Stock
Ownership Plan ("ESOP") for the benefit of its employees. The ESOP purchased
8% of the common stock in the Conversion or 275,080 shares. The purchase of
this stock was financed through a loan from the Company.
(3) EARNINGS PER SHARE
Earnings per share is not considered reportable for the purposes of this
report.
(4) STOCK CONVERSION
As of March 31, 1997, the Association had incurred $772,371 in stock Conversion
costs which will be netted against the proceeds from the sale of stock. Of
these costs, $493,758 had been accrued but not paid. Also at March 31, 1997,
the Association had received $45.1 million in stock subscription deposits which
were being held in passbook savings deposits.
(5) INVESTMENTS
March 31, 1997 December 31, 1996
-------------- -----------------
(in thousands)
Amortized Market Amortized Market
Cost Value Cost Value
US Govt & Ag Oblig 26,556 26,474 21,086 21,518
(available for sale)
Other Securities 1,112 2,078 1,091 2,048
(available for sale) ------ ------ ------ ------
Total $ 27,668 $ 28,552 $ 22,177 $ 23,566
====== ====== ====== ======
(6) LOANS
March 31, December 31,
1997 1996
--------- ----------
Total Loans $ 45,105,365 $ 44,500,895
Allowance for Loan Losses (382,061) (382,061)
Net Unearned Fees 6,744 6,570
---------- ----------
TOTAL NET LOANS $ 44,730,048 $ 44,125,404
========== ==========
Permanent Mortgages (1-4 family) $ 44,202,343 $ 43,444,490
Construction (1-4 family) 158,682 297,726
Commercial Mortgages 416,042 429,955
Other Mortgages 139,573 145,376
Consumer (secured by deposits) 188,725 183,348
---------- ----------
TOTAL LOANS $ 45,105,365 $ 44,500,895
========== ==========
Allowance for Loan Losses
March 31,
---------
1997 1996
---- ----
Beginning Balance,Quarter $ 382,061 $ 323,455
Provision for Losses 0 0
Loans Charged Off 0 0
------- -------
Ending Balance, Quarter $ 382,061 $ 323,455
(7) MORTGAGE BACKED SECURITIES
March 31, December 31,
1997 1996
--------- ------------
(in thousands)
Book Market Book Market
Value Value Value Value
----- ----- ----- -----
FHLMC Fixed Rate (1-4 family) $ 6,384 $ 6,224 $ 4,793 $ 4,690
FNMA Fixed Rate (1-4 family) 4,849 4,800 2,718 2,640
------ ------ ----- -----
TOTAL MORTGAGE BACKED SECURITIES $ 11,233 $11,024 $ 7,511 $ 7,330
====== ====== ===== =====
(10) INTEREST BEARING DEPOSITS
March 31, December 31,
1997 1996
--------- -----------
(thousands)
Passbook Savings $ 27,675 $ 25,088
Certificates of Deposits 36,123 36,333
Deposits for Stock Purchases 45,067 0
------- ------
TOTAL INTEREST BEARING DEPOSITS $ 108,865 $ 61,421
======= ======
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following discussion compares the financial condition of Guaranty Savings
and Homestead Association (the "Association") at March 31, 1997 to December 31,
1996 and the results of operations for the three months ended March 31, 1997 and
the three months ended March 31, 1996.
At March 31, 1997, the assets of the Association totaled $135.3 million, an
increase of $47.7 million, or 54.4%, from December 31, 1996. This was due
primarily to the influx of $45.1 million from the Company's stock offering.
Net loans receivable increased by $604,644, or 1.37%, to $44.7 million at
March 31, 1997 compared to $44.1 million at December 31, 1996. The increase
was primarily the result of an $757,853, or 1.74%, increase in single family
residential loans. The increase was funded internally from short term
investments.
Interest bearing deposits in other financial institutions increased $7.4
million, or 616.7%, to $8.6 million at March 31, 1997 compared to $1.2 million
at December 31, 1996. Federal Funds sold increased $30.5 million, or 504.9%,
to $36.5 million at March 31, 1997 compared to $6.1 million at December 31,
1996. Both the increase in interest bearing deposits in other financial
institutions and Federal Funds sold were funded primarily by the proceeds of
the Association's Conversion.
Investment securities increased $5 million, or 21.1%, to $28.6 million at
March 31, 1997 compared to $23.6 million at December 31, 1996. This increase
was funded primarily through the re-investment of short term investments
available at December 31, 1996.
Mortgage-backed securities increased $3.7 million, or 49.3%, to $11.2 million
at March 31, 1997 compared to $7.5 million at December 31, 1996. This increase
was funded primarily by the net proceeds of the Association's conversion from
mutual to stock form.
Interest bearing deposits increased $47.5 million, or 77.4%, to $108.9 million
at March 31, 1997 compared to $61.4 million at December 31, 1996. This was due
to the net inflow of subscription orders in the Conversion offering of the
Company's stock being placed in passbook savings accounts pending the
consummation of the Conversion.
Other liabilities increased $442,727, or 54.0%, to $1.3 million at March 31,
1997 compared to $820,284 at December 31, 1996. The increase was due mainly
to the accrual of stock conversion costs totaling $493,758.
Equity capital decreased $44,023, or .18%, to $24.7 million at March 31, 1997
compared to $24.8 million at December 31, 1996. This was due to the net
effects of net income for the quarter of $307,686 being offset by the reduction
of unrealized gains on available for sale securities of $351,709.
RESULTS OF OPERATIONS
The Association reported net income for the three months ended March 31, 1997
of $307,686 which was an increase of $29,215 compared to the three months
ended March 31, 1996 where net income totaled $278,471. The increase was due
primarily to an increase in net interest income of $59,947, or 6.5%, to $981,294
for the three months ended March 31, 1997 compared to $921,347 for the three
months ended March 31, 1996.
Total interest income increased $136,155, or 8.8%, to $1.7 million for the
three months ended March 31, 1997 compared to $1.5 million for the three months
ended March 31, 1996. This was due to the increase in interest on loans as well
as the increase in interest and dividends on investment securities.
Interest on loans increased $50,488, or 5.40%, to $980,179 for the three months
ended March 31, 1997 compared to $929,691 for the three months ended March 31,
1996. This was due primarily to growth in the loan portfolio. The average
balance of the loan portfolio for the three months ended March 31, 1997 was
$44.4 million (net) compared to $39.6 million (net) for the three months ended
March 31, 1996. The yield on loans for the three months ended March 31, 1997
was 8.83% (annualized) compared to 9.38% (annualized) for the three months ended
March 31, 1996.
Interest and dividends on investment securities increased $73,778, or 14.8%,
to $572,866 for the three months ended March 31, 1997 compared to $499,088 for
the three months ended March 31, 1996. This was primarily due to an increase
in interest income on Federal Funds sold and interest bearing deposits in other
Financial institutions of $163,989 which offset a decrease in interest on
investment securities of $104,170 for the three months ended March 31, 1997
compared to the three months ended March 31, 1996. The increase in interest
on Federal Funds sold and interest bearing deposits in other institutions was
due to the investment of conversion subscription funds in short term
investments. The decrease in interest on investment securities was due to a
reduction in the average balance of the investment portfolio of $9.3 million, or
30.2%, for the three months ended March 31, 1997 compared to the three months
ended March 31, 1996.
The Association had no provision for loan loss for the quarter ended March 31,
1997 nor March 31, 1996. Provisions for loan losses are charged to earnings to
bring the total allowance for loan losses to a level considered appropriate by
management based on quarterly review which is reflective of each individual
loan's performance and condition of the underlying collateral. Management
targets a certain percentage of the entire mortgage portfolio given the current
economic conditions at which the general valuation allowance is deemed adequate.
The Association employs the reserve method of accounting for its general and
specific valuation allowance for loan losses. For the three months ended
March 31, 1997 and March 31, 1996 no additional provision was necessary due
to recoveries of specific valuation allowances which were credited back to the
general valuation allowance, thereby offsetting the need for an additional
provision to the general valuation allowance caused by growth in the mortgage
portfolio.
The Association's total interest expense increased $76,208, or 12.3%, to
$696,433 for the three months ended March 31, 1997 compared to $620,225 for
the three months ended March 31, 1996. This was due primarily to the increase
in the average balances of deposits $9.7 million, or 16%, to $69.9 million for
the three months ended March 31, 1997 compared to $60.3 million for the three
months ended March 31, 1996. The average cost of funds for the three months
ended March 31, 1997 was 4.35%, compared to 4.03% for the three months ended
March 31, 1996, which was reflective of a 7.94% increase in the cost of funds.
Other expenses for the three months ended March 31, 1997 were $514,663
compared to $500,881 for the three months ended March 31, 1996. This represents
an increase of $13,782 or 2.75% from March 31, 1996 to March 31, 1996. Salaries
and employee benefits increased $44,804, or 14.5%. This was due to the accrual
of potential employee bonuses of $22,500 for the three months ended March 31,
1997 which were not included in the compensation expense for the three months
ended March 31, 1996. The increase was also due to a cost of living adjustment
given to employees on July 1, 1996, plus the cost of hiring of additional staff
necessary for the opening of the Mandeville Branch. Net occupancy expense was
up $8,907 mainly due to the depreciation, maintenance and utility expense of
the new Mandeville Branch which was placed in service in May, 1996. The
increase in salaries and employee benefits was largely offset by a reduction
in Federal insurance premium of $33,413 from $35,632 for the three months ended
March 31, 1996 compared to $2,219 for the three months ended March 31, 1997,
due to a special rebate from the SAIF recapitalization premium from 1996.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity measures the Association's ability to meet its short term obligations
with ready cash. The Association is required under Federal regulations to
maintain certain levels of "liquid" investments, specifically not less than
5% of its average daily balance of net withdrawable deposit accounts. For its
liquid investments, the Association utilizes a combination of cash on hand,
certain money market investments and deposits in other Financial institutions
as well as U.S. Government and Agency issued securities. As of March 31, 1997,
the Association's liquidity stood at 66.36% or $66.6 million in excess of the
minimum requirement.
The Association is required to maintain regulatory capital sufficient to meet
all three of the regulatory capital requirements, those being tangible capital
(1.5%), core capital (3.0%), and risk based capital (8.0%). As of March 31,
1997, the Association's tangible and core capital amounted to $22.1 million or
17.97% of adjusted total assets, while the Association's risk based capital was
$24.4 million or 61.34% of total adjusted risk weighted assets.
Part II - Other Information
Item 1 - Legal Proceedings
There are no matters required to be reported under this item.
Item 2 - Changes in Securities
There are no matters required to be reported under this item.
Item 3 - Defaults Upon Senior Securities
There are no matters required to be reported under this item.
Item 4 - Submission of Matters to a Vote of Security Holders:
There are no matters required to be reported under this item.
Item 5 - Other Information
There are no matters required to be reported under this item.
Item 6 - Exhibits and Reports on Form 8-K:
(a) Not Applicable
(b) No Form 8-K reports were filed during the quarter.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GS FINANCIAL CORP.
REGISTRANT
DATE: MAY 14, 1997 BY:/s/Donald C. Scott
------------------
DONALD C. SCOTT, CHAIRMAN OF THE
BOARD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
DATE: MAY 14, 1997 BY:/s/Glenn R. Bartels
-------------------
GLENN R. BARTELS
CONTROLLER
2
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