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 three months ended March 31, 2000
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.
x Yes No
As of April 20, 2000, there were 2,497,500 shares of the
Registrant's Common stock outstanding. The financial statements
contained within this Form 10-Q for the three months ended March 31,
2000 and 1999 represent the consolidated financial position and
results of operations of GS Financial Corp.
GS Financial Corp.
Form 10-Q
Three Months ended March 31, 2000
Table of Contents
Part I - Financial Information
Item 1 Financial Statements
Consolidated Balance Sheets
(as of March 31, 2000 Unaudited and December 31, 1999, Audited) 3
Consolidated Statements of Operations
(For the three months ended March 31, 2000 and 1999 Unaudited) 4
Consolidated Statements of Changes in Stockholders' Equity
(For the three months ended March 31, 2000 and 1999 Unaudited) 5
Consolidated Statements of Cash Flows
(For the three months ended March 31, 2000 and 1999 Unaudited) 6-7
Notes to Consolidated Financial Statements 7-12
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-17
Item 3 Quantitative and Qualitative Disclosures about
Market Risk 17
Part II Other Information 18
Item 1 Legal Proceedings 18
Item 2 Changes in Securities 18
Item 3 Defaults Upon Senior Securities 18
Item 4 Submission of Matters to a Vote of Security Holders 18-19
Item 5 Other Information 19
Item 6 Exhibits and Reports on Form 8-K 19
<PAGE>
GS Financial Corp.
Consolidated Balance Sheets
(Dollars in Thousands)
(Unaudited)
March 31, 2000 December 31, 1999
-------------- -----------------
ASSETS
Cash and Due from Banks $ 355 $ 145
Interest Bearing Deposits
in Other Banks 1,778 1,759
Federal Funds Sold 4,080 600
Investment Securities 7,200 10,483
Loans (Net) 71,634 70,066
Mortgage-Backed Securities 15,877 16,275
Collateralized Mortgage
Obligations 49,833 52,080
Accrued Interest Receivable 719 750
Premises & Equipment 2,616 2,646
Other Assets 3,259 3,178
----------- ----------
TOTAL ASSETS $ 157,351 $ 157,982
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Interest Bearing Deposits $ 58,637 $ 59,172
Non-Interest Bearing Dep. 717 811
Borrowings 53,796 53,988
Other Liabilities 623 463
----------- ----------
TOTAL LIABILITIES 113,773 114,434
STOCKHOLDERS' EQUITY
Common Stock & Additional
Paid in Capital 33,893 33,856
Treasury Stock (11,978) (11,978)
Accumulated Other
Comprehensive Income (751) (580)
Unearned ESOP Stock (1,857) (1,927)
Unearned RRP Trust Stock (1,975) (1,974)
Other Stockholders' Equity 26,244 26,151
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 43,578 43,548
----------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 157,351 $ 157,982
=========== ==========
<PAGE>
GS Financial Corp.
Consolidated Statements of Operations
(Dollars in Thousands, except per share data)
(Unaudited)
For the three months ended March 31,
2000 1999
---------------------
INTEREST INCOME (from)
Loans $ 1,405 $ 1,291
Mortgage-Backed Securities 284 343
Investment Securities 125 329
Collateralized Mortgage
Obligations 920 577
Other Interest Income 64 49
----- -----
TOTAL INTEREST INCOME 2,798 2,589
----- -----
INTEREST EXPENSE (on)
Deposits 623 639
FHLB Advances 744 598
----- -----
TOTAL INTEREST EXPENSE 1,367 1,237
----- -----
NET INTEREST INCOME BEFORE
PROVISION FOR LOAN LOSSES 1,431 1,352
PROVISION FOR LOAN LOSSES - -
----- -----
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,431 1,352
----- -----
NON-INTEREST INCOME
Gain/(Loss) on Investments (60) (7)
Other Income 2 4
----- -----
TOTAL NON-INTEREST INCOME (58) (3)
OTHER EXPENSES
Compensation and Benefits 529 514
Net Occupancy Expense 80 68
Other Expenses 226 220
----- -----
TOTAL OTHER EXPENSES 835 802
----- -----
INCOME BEFORE TAX EXPENSE 538 547
INCOME TAX EXPENSE 206 201
----- -----
NET INCOME $ 332 $ 346
===== =====
BASIC EARNINGS PER SHARE $ .14 $ .13
DILUTED EARNINGS PER SHARE $ .14 $ .13
<PAGE>
<TABLE>
<CAPTION>
GS Financial Corp.
Consolidated Statements of Changes in Stockholders' Equity
For The Three Months Ended March 31, 2000, and 1999
(Dollars in Thousands)
(Unaudited)
Accumulated
Additional Unearned Unearned Other Total
Common Paid-In Treasury ESOP RRP Trust Retained Comprehensive Stockholders'
Stock Capital Stock Stock Stock Earnings Income Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1998 $ 34 $ 33,810 $ (8,324) $ (2,208) $ (2,193) $ 25,622 $ 1,768 $ 48,509
Net Income-3 months
Ended March 31, 1999 - - - - - 346 - 346
Other Comprehensive
Income Net of
Applicable Deferred
Income Taxes - - - - - - (371) (371)
Retirement of ESOP Debt - 35 - 72 - - - 107
Cash Dividends Paid - - - - - (206) - (206)
BALANCE AT
MARCH 31, 1999 $ 34 $ 33,845 $ (8,324) $ (2,136) $ (2,193) $ 25,762 $ 1,397 $ 48,385
BALANCE AT
DECEMBER 31, 1999 $ 34 $ 33,822 $(11,978) $ (1,927) $ (1,974) $ 26,151 $ (580) $ 43,548
Net Income-3 months
Ended March 31, 2000 - - - - - 332 - 332
Other Comprehensive
Income Net of
Applicable Deferred
Income Taxes - - - - - - (171) (171)
Retirement of ESOP Debt - 37 - 70 - - - 107
Cash Dividends Paid - - - - - (238) - (238)
BALANCE AT
MARCH 31, 2000 $ 34 $ 33,859 $(11,978) $ (1,857) $ (1,974) $ 26,245 $ (751) $ 43,578
</TABLE>
<PAGE>
GS Financial Corp.
Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
For the Three Months Ended
March 31,
-----------------------
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 332 $ 346
Adjustments to Reconcile Net Income
to Net Cash Provided
by Operating Activities:
Depreciation 35 26
Premiums Amortized (19) 69
Loss on Sale of Loans - 5
Loss on Sale of Foreclosed Real Estate - 3
ESOP Expense 92 91
RP Expense 39 39
(Gain)/Loss on Sale of Investments 60 2
Decrease in Prepaid Income Tax - 5
Changes in Deferred Income Tax (45) 77
Changes in Operating Assets and Liabilities:
Decrease in Accrued Interest Receivable 31 2
(Increase) in Deferred Charges (38) (70)
Increase in Accrued Income Tax 169 201
Increase/(Decrease) in Other Liabilities 78 (221)
------ -------
Net Cash Provided by Operating Activities 734 575
CASH FLOWS FROM INVESTING ACTIVITIES
Net Redemption of ARM Mutual Fund 1,151 206
Proceeds from Maturities of CMOs 1,934 6,843
Proceeds from Maturities of Available-
For-Sale Securities 367 500
Proceeds from Maturities of
Mortgage-Backed Securities 454 2,517
Sale/(Purchase) of IMF Mutual Fund (Net) 1,782 (4,952)
Net Loan Originations (1,556) (1,004)
Purchases of Premises and Equipment (4) (6)
Dividend on ARM Fund (9) (36)
Dividend on IMF Fund (27) (105)
Non-Cash Dividend - FHLB Stock (44) (32)
---------- -------
Net Cash Provided by Investing Activities 4,049 3,931
---------- -------
<PAGE>
GS Financial Corp.
Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
For the Three Months Ended
March 31,
-----------------------
2000 1999
---- ----
CASH FLOW FROM FINANCING ACTIVITIES
Net Decrease in Deposits (533) (493)
Net Increase/(Decrease) in
Unapplied Loan Payments (7) 2
Payment of Cash Stock Dividends (238) (206)
Net Decrease in Advance Payments by
Borrowers for Taxes and Insurance (102) (138)
Net Decrease in FHLB Advances (193) (2,757)
---------- ---------
Net Cash Used in Financing Activities (1,073) (3,592)
---------- ---------
NET CASH EQUIVALENTS 3,710 914
CASH AND CASH EQUIVALENTS - January 1, 2,504 1,810
---------- ---------
CASH AND CASH EQUIVALENTS - March 31, $ 6,213 $ 2,724
========== =========
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"). The Company
registered its initial public offering ("IPO") of its common stock on
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 ("Application") 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 along with
related proxy materials from both the OTS and OFI by letters dated
February 7, 1997 and April 11, 1997, respectively.
<PAGE>
The accompanying financial statements represent the consolidated
financial position, results of operations and cash flows of the
Company. 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.
The results of operations for the three months ended March 31,
2000 are not necessarily indicative of the results to be expected for
the year ending December 31, 2000. The unaudited consolidated
financial statements and the notes included herein should be read in
conjunction with the audited financial statements and notes thereto
for the year ended December 31, 1999.
(2) EMPLOYEE STOCK OWNERSHIP PLAN
The GS Financial Employee Stock Ownership Plan (the "ESOP")
purchased 275,080 shares of the Company's common stock on April 1,
1997 financed by a loan from the Company. The loan is secured by
those shares not yet allocated to plan participants. At March 31,
2000, there were 192,715 unallocated shares and the balance of the
loan was $2.1 million. The Association bears the cost of the ESOP as
compensation expense which is based on principal and interest
payments on the corresponding debt as well as the market value of the
stock.
(3) EARNINGS PER SHARE AND PAYMENTS OF DIVIDENDS
Earnings per share are computed using the weighted average
number of shares outstanding as prescribed in Statement of Financial
Accounting Standard ("SFAS") 128. In accordance with SFAS 128, the
average weighted shares outstanding were approximately 2.3 million
for the three months ended March 31, 2000 and 2.6 million shares for
the three months ended March 31, 1999. During the three months ended
March 31, 2000 and 1999, the Company declared and paid cash dividends
in the amount of $.09 and $.07 per common share, respectively.
<PAGE>
(4) INVESTMENTS
March 31, 2000 December 31, 1999
-------------- -----------------
(Dollars in thousands)
Amortized Market Amortized Market
AVAILABLE FOR SALE Cost Value Cost Value
US Government and
Agency Obligations $ 4,311 $ 4,396 $ 4,678 $ 4,683
ARM Mutual Fund 239 232 1,390 1,381
IMF Mutual Fund 1,188 981 2,972 2,725
FHLMC Stock 35 1,591 35 1,694
------ ------ ------ ------
TOTAL INVESTMENTS $ 5,773 $ 7,200 $ 9,075 $ 10,483
===== ===== ====== ======
(5) LOANS
March 31, December 31,
(Dollars in Thousands) 2000 1999
-------- -----------
Total Loans $ 72,040 $ 70,484
Allowance for Loan Losses (413) (424)
Net Unearned Fees 7 6
-------- --------
TOTAL NET LOANS $ 71,634 $ 70,066
======== ========
Permanent Mortgages (1-4 family) $ 69,447 $ 67,648
Construction (1-4 family) 531 646
Commercial Mortgages 1,362 1,377
Other Mortgages 434 446
Consumer (secured by deposits) 266 367
---------- ----------
TOTAL LOANS $ 72,040 $ 70,484
======== ========
Allowance for Loan Losses
2000 1999
(Dollars in Thousands) ----- -----
Beginning Balance, December 31, $ 424 $ 463
Provision for Losses - -
Loans Charged Off 11 -
----- -----
Ending Balance, March 31, $ 413 $ 463
===== =====
<PAGE>
(6) MORTGAGE-BACKED SECURITIES
March 31, December 31,
2000 1999
--------- ------------
(Dollars in thousands)
Amortized Market Amortized Market
AVAILABLE FOR SALE Cost Value Cost Value
------ ----- ------ -----
GNMA Fixed Rate (1-4 family) $ 9,841 $ 9,590 $ 10,160 $ 9,803
FHLMC Fixed Rate (1-4 family) 1,273 1,243 1,328 1,297
FNMA Fixed Rate (1-4 family) 5,170 5,044 5,255 5,175
------ ------ ------ ------
TOTAL MORTGAGE-BACKED SECURITIES $ 16,284 $ 15,877 $ 16,743 $ 16,275
====== ====== ====== ======
(7) COLLATERALIZED MORTGAGE OBLIGATIONS
March 31, December 31,
2000 1999
--------- ------------
(Dollars in thousands)
Amortized Market Amortized Market
AVAILABLE FOR SALE Cost Value Cost Value
------ ----- ------ -----
FNMA $ 7,296 $ 6,770 $ 8,058 $ 7,584
FHLMC 16,893 16,085 17,347 16,824
Private Issue 27,800 26,978 28,493 27,672
------ ------ ------ ------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS $ 51,989 $ 49,833 $ 53,898 $ 52,080
====== ====== ====== ======
(8) INTEREST BEARING DEPOSITS
March 31, December 31,
2000 1999
--------- -----------
(Dollars in thousands)
Passbook Savings $ 20,164 $ 20,170
Certificates of Deposits 38,449 39,002
Interest Bearing Checking 24 -
------- ------
TOTAL INTEREST BEARING DEPOSITS $ 58,637 $ 59,172
======= ======
<PAGE>
(9) FEDERAL HOME LOAN BANK ADVANCES
March 31, December 31,
2000 1999
--------- -----------
(Dollars in thousands)
Amounts maturing within 1 year $ 39,756 $ 17,784
Amounts maturing over 1 year 14,040 36,204
------- ------
TOTAL FEDERAL HOME LOAN BANK ADVANCES $ 53,796 $ 53,988
======= ======
(10) STOCK OPTION PLAN
On October 15, 1997, the stockholders approved the adoption of
the GS Financial Corp. 1997 Stock Option Plan for the benefit of
directors, officers and other key employees. Under this plan,
343,850 shares of common stock have been reserved for issuance
pursuant to the exercise of stock options with 275,076 shares granted
to vest over five years. The Company has followed all disclosure
requirements set forth in SFAS 123, "Accounting for Stock-Based
Compensation." To date no options have been exercised.
(11) RECOGNITION AND RETENTION PLAN
On October 15, 1997 the Company established the Recognition
and Retention Plan and Trust ("RRP") as an incentive to retain
personnel of experience and ability in key positions. Stockholders
approved a total of 137,540 shares of stock to be granted pursuant to
the RRP. The Company acquired a total of 137,500 shares of common
stock for issuance under the RRP. The Company is accruing this
expense over the ten-year vesting period based on the price of the
stock ($12.50/share) when the plan was modified in September, 1998.
As of March 31, 2000, 125,028 shares had been awarded of which 25,000
had been earned and issued.
(12) TREASURY STOCK
Through April 12, 2000, the Company has repurchased 941,054
shares reducing outstanding shares to 2,497,446. This brings the
Company's total investment in stock repurchased to $13.9 million.
The Company is currently in the process of repurchasing 300,000
shares over the next year beginning on April 1, 2000.
<PAGE>
(13) OTHER EXPENSES
Listed below are major recurring components comprising Other
Expenses.
For the Three Months Ended
March 31,
-----------------------
2000 1999
---- ----
Office Supplies & Telephone $ 27,004 $ 28,699
Bank Shares and Franchise Tax 101,572 87,157
Data Processing 35,735 19,741
Advertising 2,155 14,151
Supervisory Fees 13,791 21,086
Item 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
In addition to the historical information contained herein, the
following discussion contains forward-looking statements that involve
risk and uncertainties. Economic circumstances, the Company's
operations, and actual results could differ significantly from those
discussed in the forward-looking statements. The major factors that
could cause or contribute to such differences include, but are not
limited to, changes in the local economy as well as fluctuations in
prevailing interest rates. Other forward-looking statements are made
concerning the amount and adequacy of the allowance for loan losses.
GENERAL
The Company's principal business is conducted through its wholly
owned subsidiary, Guaranty Savings and Homestead Association. The
Association, founded in New Orleans, Louisiana in 1937, provides
financial services primarily to individuals. It's principal products
include mortgage loans, passbook savings accounts, certificates
of deposit, and demand deposit accounts. The Association also
invests in short-term and long-term liquid investments such as
overnight Federal Funds, United States Treasury and Agency issued
securities, and mortgage-backed securities.
The following discussion compares the financial condition of GS
Financial Corp. at March 31, 2000 to December 31, 1999 and the
results of operations for the three months ended March 31, 2000 and
1999.
<PAGE>
CHANGES IN FINANCIAL CONDITION
At March 31, 2000, the assets of the Company totaled $157.4
million, a decrease of $.6 million from December 31, 1999 when total
assets were $158.0 million. The first quarter of 2000 saw continued
loan growth from 1999 with a slight improvement from the growth
experienced during the first quarter of 1999. Prepayments on the
Company's mortgage derivative instruments slowed increasing their
yields. By contrast, the first quarter of 1999, was characterized by
rapid prepayments and somewhat lesser than expected yields. During
both three-month periods, the Company's interest bearing deposits
decreased as more reliance was placed on wholesale funds. For the
first time in 2000, the Company offered interest-bearing checking
accounts.
Growth in the mortgage loan portfolio increased from the first
quarter of 1999. Net loans increased $1.5 million for the first
quarter of 2000 compared to $1.0 million for the three months ended
March 31, 1999. Loans receivable at March 31, 2000 totaled $71.6
million, up 2% from December 31, 1999. The increase in both years
came primarily from loans on 1-4 family residential dwellings.
Collateralized mortgage obligations decreased $2.3 million, or
4%, to $49.8 million at March 31, 2000 compared to $52.1 million at
December 31, 1999. The slowing of payments on these instruments from
1999 to 2000 can be attributed to higher short-term interest rates
and the related rise in mortgage rates.
Mortgage-backed securities decreased $.4 million to $15.9 at
March 31, 2000, compared to $16.3 million at December 31, 1999. This
represents a decrease of 2%. Rising interest rates had a similar
slowing effect on prepayments as that experienced by the Company's
collateralized mortgage obligations.
During the first quarter of 2000, the Company used cash flows
from its investment portfolio to fund loan growth and deposit
decreases. Investment securities decreased 31% to $7.2 million at
March 31, 2000 compared to $10.5 million at December 31, 1999. The
Company invested excess cash from mortgage-derivative paydowns in
short term qualified thrift mutual funds.
At March 31, 2000 the Company's investment in Federal Funds sold
was $4.1 million. This amount is substantially higher than the
amount usually maintained in Federal Funds due to a dividend received
by the Company from the Association for the Company's pending stock
repurchases.
<PAGE>
Interest-bearing deposits decreased $.6 million in the quarter
ended March 31, 2000. This represented a 1% decline from $59.2
million in interest bearing deposits at December 31, 1999, compared
to $58.6 million at March 31, 2000.
During the quarter ended March 31, 2000, the Company's
borrowings from the Federal Home Loan Bank decreased $.2 million from
$54.0 million at December 31, 1999 compared to $53.8 million at March
31, 2000. At March 31, 2000, the Company's borrowings consisted of
$34.7 million of fully amortizing advances from the Federal Home Loan
Bank (FHLB) as well as $19.1 million in balloon obligations from the
FHLB. This was due to scheduled paydowns of the Company's FHLB
advances which is part of its leveraged investing program.
Stockholders' equity was unchanged at $43.5 million from
December 31, 1999 to March 31, 2000. This was due to the net effects
of $.3 million in net income for the three months ended March 31,
2000; $.1 million due to the retirement of ESOP debt; $.2 million in
cash dividends paid and a $.2 million reduction in other
comprehensive income.
RESULTS OF OPERATIONS
GENERAL
Net income for the three months ended March 31, 2000 was $.3
million which was unchanged from the first quarter of 1999. An
increase in interest income in the first quarter of 2000 compared to
the first quarter of 1999 was offset by increases in interest
expense, losses on investments, other expenses and income tax
expense.
INTEREST INCOME
Total interest income for the quarter ended March 31, 2000 was
$2.8 million compared to $2.6 million for the quarter ended March 31,
1999. This represents an increase of $.2 million, or 8%. The
increases over the three-month periods were due to increases in
interest on collateralized mortgage obligations ("CMOs") and mortgage
loans which were partially offset by decreases in interest income
from investment securities and mortgage-backed securities.
For the three months ended March 31, 2000, average total
interest-earning assets were $154.6 million with an annualized yield
of 7.24%. For the same period in 1999 average total interest earning
assets was $150.0 million yielding 6.91%.
<PAGE>
Interest on loans increased $.1 million to $1.4 million for the
three months ended March 31, 2000 compared to $1.3 million for the
three months ended March 31, 1999. During the first quarter of 2000,
the average loan portfolio balance was $70.8 million and yielded
7.94%. The average balance of the loan portfolio for the three
months ended March 31, 1999 was $64.2 million (net). The average
annualized yield on loans for the three months ended March 31, 1999
was 8.0%.
Interest on mortgage-backed securities was unchanged at $.3
million for three months ended March 31, 2000 and 1999. During the
three months ended March 31, 2000, the average balance of the
Company's portfolio of mortgage-backed securities was $16.5 million
yielding 6.9% while the average balance for the three months ended
March 31, 1999 was $21.7 million which yielded 6.33%. The increased
yield in the first quarter of 2000 was due to the slowing of
prepayments and the maturity of some lower coupon instruments during
1999.
During the three months ended March 31, 2000 the average balance
of the Company's portfolio of CMOs was $54.1 million with an
annualized yield of 6.81%. For the same period in 1999, the average
balance was $38.3 million which yielded 6.0%. To date in 2000 the
Company has earned $.9 million in interest on CMOs which is an
increase of $.3 million compared to the three months ended March 31,
1999. This represents an increase of 50% from 1999 to 2000. Most of
these investments are part of the Company's wholesale growth strategy
of leveraged investing. During the latter part of 1998 and early
1999, the yield on the Company's investment in CMOs had been reduced
by the rapid prepayment of these bonds due to sustained low national
market interest rates.
Interest income on investment securities was $.1 million for the
three months ended March 31, 2000 compared to $.3 million for the
three months ended March 31, 1999. The average balance of investment
securities was $8.8 million which yielded 5.0% during the three
months ended March 31, 2000 compared to $21.9 million yielding 6.0%
for the three months ended March 31, 1999. The reduction in yield
for the three months ended March 31, 2000 has been due to the
Company's FHLMC stock representing a larger percentage of the
Company's investment portfolio.
Other interest income, consisting of interest income on
overnight Federal Funds sold, interest bearing deposits in other
financial institutions, and dividends on FHLB stock, remained
substantially unchanged from the three months ended March 31, 2000
and 1999 at $.06 million and $.05 million, respectively.
<PAGE>
PROVISION FOR LOAN LOSSES
The Company had no provision for loan loss for the quarters
ended March 31, 2000 and 1999. The Allowance for Loan Loss (the
"ALL") is reviewed quarterly and is based on each individual loan's
performance as well as the estimated value of the underlying
collateral. The Company employs the reserve method of accounting for
its ALL.
INTEREST EXPENSE
The Company's total interest expense increased $.2 million to
$1.4 million for the three months ended March 31, 2000 compared to
$1.2 million for the three months ended March 31, 1999. Average
total interest bearing liabilities were $110.0 million at a cost of
4.97% for the three months ended March 31, 2000. For the same period
in 1999 the average balance of interest bearing liabilities was
$104.3 million costing 4.7%. The rise in cost of funds was due to the
effects of rising short-term national interest rates and the
Company's increased use of FHLB advances as part of its leveraged
investing program.
The average balance of interest bearing deposits was $58.4
million for the three months ended March 31, 2000 costing 4.3%.
Average interest bearing deposits for the three months ended March
31, 1999 was $60.7 million costing 4.21%. Interest expense on
interest bearing deposits was $.6 million for the three months ended
March 31, 2000 and 1999.
The average balance of FHLB advances was $51.7 million at an
annualized cost of 5.8% for the three months ended March 31, 2000.
Both the cost and average balance increased from the three months
ended March 31, 1999, during which the average balance of the
Company's FHLB advances was $43.7 million with an annualized cost of
5.48%.
OTHER EXPENSES
Other expenses for the three months ended March 31, 2000 and
1999 were $.8 million. Please refer to the consolidated statement of
operations or note 13, Other Expenses, included in this report, for
the detail on the differences in the two quarters ending March 31,
2000 and 1999.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Liquidity measures the Company's ability to meet its short-term
obligations with ready cash. These commitments and obligations
include loan disbursements, savings withdrawals by customers, the
payment of dividends and the daily operating expenses of the Company.
The Company's primary sources of funds are interest bearing
customer deposits, FHLB advances and maturities of existing
investments including mortgage loans, mortgage-backed securities,
investment securities and collateralized mortgage obligations. The
Company does not utilize brokered deposits nor does it offer special
rates for "jumbo" deposits of $100,000 or more.
The Association is required under Federal regulations to
maintain certain levels of "liquid" investments, specifically not
less than 4% 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, 2000, the
Association's liquidity stood at 60.8%, or $63.5 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, 2000, the Association's
tangible and core capital amounted to $28.0 million, or 18.4% of
adjusted total assets, while the Association's risk-based capital was
$28.4 million, or 52.3% of total adjusted risk-weighted assets.
Year 2000
The Company experienced no problems during the rollover to the
Year 2000. The Company is continuing to monitor its information
systems throughout the Year 2000 to ensure total Year 2000
compliance.
Item 3 - Quantitative and Qualitative Disclosures about Market Risk
Quantitative and qualitative disclosures about market risk are
presented at December 31, 1999 in the Company's Annual Report on Form
10-K, filed with the SEC on March 30, 2000. Management believes
there have been no material changes in the Company's market risk
since December 31, 1999.
<PAGE>
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
On March 24, 2000, the Company commenced a proxy solicitation of
its stockholders with respect to the Annual Meeting of Stockholders
held on April 25, 2000 ("Annual Meeting"). There were two issues
considered at the Annual Meeting, the election of three directors and
the ratification of the appointment of the Company's independent
auditors. Both issues passed by the vote reflected below. In
addition to the directors elected to three-year terms at the Annual
Meeting, the following persons had term of office as a director which
continued after the Annual Meeting: Donald C. Scott, Bruce A. Scott,
Victor Kirschman, Mannie D. Paine, Jr., Kenneth B. Caldcleugh, and
Bradford A. Glazer.
Approval of the election of Stephen L. Cory to a three year term as
director.
For Withheld
--- --------
2,304,488 97,049
Approval of the election of J. Scott Key to a three year term as
director.
For Withheld
--- --------
2,304,888 96,649
Approval of the election of Albert J. Zahn, Jr. to a three year term
as director.
For Withheld
--- --------
2,304,888 96,649
<PAGE>
Approval to ratify the appointment of LaPorte, Sehrt, Romig and Hand
as the Company's independent auditors for the year ending December
31, 2000.
For Against Abstained
--- ------- ---------
2,356,748 39,669 5,120
The matters considered at the Annual Meeting were discretionary
items and there were no broker non-votes.
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) Exhibits
27.0 Financial Data Schedule
(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.
DATE: May 12, 2000 BY:/s/ Donald C. Scott
-------------------
DONALD C. SCOTT, CHAIRMAN OF THE
BOARD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
DATE: May 12, 2000 BY:/s/ Glenn R. Bartels
--------------------
GLENN R. BARTELS
CONTROLLER
18
19
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