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 September 30, 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 November 10, 2000, there were 1,995,446 shares of the
Registrant's Common stock outstanding, net of Treasury shares. The
financial statements contained within this Form 10-Q at and for the
three and nine months ended September 30, 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 September 30, 2000
Table of Contents
Part I - Financial Information
Item 1 Financial Statements
Consolidated Balance Sheets
(as of September 30, 2000 Unaudited and December 31, 1999 Audited) 3
Consolidated Statements of Operations
(For the three and nine months ended September 30, 2000 and 1999 Unaudited) 4
Consolidated Statements of Changes in Stockholders' Equity
(For the nine months ended September 30, 2000 and 1999 Unaudited) 5
Consolidated Statements of Cash Flows
(For the nine months ended September 30, 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 12-19
Item 3 Quantitative and Qualitative Disclosures about
Market Risk 19
Part II Other Information 19
Item 1 Legal Proceedings 19
Item 2 Changes in Securities 19
Item 3 Defaults Upon Senior Securities 19
Item 4 Submission of Matters to a Vote of Security Holders 19
Item 5 Other Information 19
Item 6 Exhibits and Reports on Form 8-K 20
GS Financial Corp.
Consolidated Balance Sheets
(Dollars in Thousands)
September 30, 2000 December 31, 1999
(Unaudited) (Audited)
------------------ -----------------
ASSETS
Cash and Due from Banks $ 440 $ 145
Interest-Bearing Deposits
in Other Banks 1,689 1,759
Federal Funds Sold 4,235 600
Investment Securities 6,769 10,483
Loans (Net) 73,554 70,066
Mortgage-Backed Securities 8,428 16,275
Collateralized Mortgage
Obligations 54,009 52,080
Accrued Interest Receivable 757 750
Premises & Equipment 2,557 2,646
Other Assets 3,503 3,178
----------- ----------
TOTAL ASSETS $ 155,941 $ 157,982
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Interest-Bearing Deposits $ 59,221 $ 59,172
Non-Interest Bearing Deposits 1,001 811
Borrowings 57,824 53,988
Other Liabilities 1,360 463
----------- ----------
TOTAL LIABILITIES 119,406 114,434
STOCKHOLDERS' EQUITY
Common Stock & Additional
Paid in Capital 33,972 33,856
Treasury Stock (20,175) (11,978)
Accumulated Other
Comprehensive Income (87) (580)
Unearned ESOP Stock (1,716) (1,927)
Unearned RRP Trust Stock (1,974) (1,974)
Other Stockholders' Equity 26,515 26,151
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 36,535 43,548
----------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 155,941 $ 157,982
=========== ==========
<PAGE>
GS Financial Corp.
Consolidated Statements of Operations
(Dollars in Thousands, except per share data)
(Unaudited)
For the three Months For the nine Months
ended September 30, ended September 30,
2000 1999 2000 1999
----------------------------------------
INTEREST INCOME (from)
Loans $ 1,486 $ 1,335 $ 4,320 $ 3,942
Mortgage-Backed Securities 188 301 726 962
Investment Securities 95 216 320 808
Collateralized Mortgage
Obligations 985 802 2,799 1,928
Other Interest Income 94 56 303 168
----- ----- ----- -----
TOTAL INTEREST INCOME 2,848 2,710 8,468 7,808
----- ----- ----- -----
INTEREST EXPENSE (on)
Deposits 686 634 1,942 1,909
FHLB Advances 851 729 2,363 1,903
----- ----- ----- -----
TOTAL INTEREST EXPENSE 1,537 1,363 4,305 3,812
----- ----- ----- -----
NET INTEREST INCOME BEFORE
PROVISION FOR LOAN LOSSES 1,311 1,347 4,163 3,996
PROVISION FOR LOAN LOSSES 7 - 7 -
----- ----- ----- -----
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,304 1,347 4,156 3,996
----- ----- ----- -----
NON-INTEREST INCOME
Gain/(Loss) on Investments 287 - 28 (17)
Other Income 5 5 10 11
----- ----- ----- -----
TOTAL NON-INTEREST INCOME 292 5 38 (6)
OTHER EXPENSES
Compensation and Benefits 525 505 1,578 1,524
Net Occupancy Expense 83 77 239 217
Other Expenses 256 220 750 681
----- ----- ----- -----
TOTAL OTHER EXPENSES 864 802 2,567 2,422
----- ----- ----- -----
INCOME BEFORE TAX EXPENSE 732 550 1,627 1,568
INCOME TAX EXPENSE 272 130 611 492
----- ----- ----- -----
NET INCOME $ 460 $ 420 $1,016 $1,076
===== ===== ===== =====
EARNINGS PER SHARE - PRIMARY $ .26 $ .18 $ .49 $ .45
EARNINGS PER SHARE - DILUTED $ .26 $ .18 $ .49 $ .45
<PAGE>
<TABLE>
GS Financial Corp.
Consolidated Statements of Changes in Stockholders' Equity
For The Nine Months Ended September 30, 2000, and 1999
<CAPTION> (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-9 months
Ended September 30, 1999 - - - - - 1,076 - 1,076
Other Comprehensive
Income Net of
Applicable Deferred
Income Taxes - - - - - - (1,734) (1,734)
Purchase of Treasury Stock - - (3,654) - - - - (3,654)
Retirement of ESOP Debt - 114 - 211 - - - 325
Cash Dividends Paid - - - - - (682) - (682)
BALANCE AT
SEPTEMBER 30, 1999 $ 34 $ 33,924 $(11,978) $(1,997) $(2,193) $ 26,016 $ 34 $ 43,840
BALANCE AT
DECEMBER 31, 1999 $ 34 $ 33,822 $(11,978) $(1,927) $(1,974) $ 26,151 $ (580) $ 43,548
Net Income-9 months
Ended September 30, 2000 - - - - - 1,016 - 1,016
Other Comprehensive
Income Net of
Applicable Deferred
Income Taxes - - - - - - 493 493
Purchase of Treasury Stock - - (8,197) - - - - (8,197)
Retirement of ESOP Debt - 116 - 211 - - - 327
Cash Dividends Paid - - - - - (652) - (652)
BALANCE AT
SEPTEMBER 30, 2000 $ 34 $ 33,938 $ (20,175) $(1,716) $(1,974) $ 26,515 $ (87) $ 36,535
</TABLE>
<PAGE>
GS Financial Corp.
Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
For the Nine Months Ended
September 30,
-----------------------
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 1,016 $ 1,076
Adjustments to Reconcile Net Income
to Net Cash Provided
by Operating Activities:
Depreciation 104 83
Premiums Amortized/(Discounts) Accreted (90) 150
Provision for Loan Loss 7 -
Loss on Sale of Loans - 5
Loss on Sale of Foreclosed Real Estate 12 -
(Gain)/Loss on Disposal of Fixed Assets (8) 3
Net Loan Fees (2) (1)
ESOP Expense 277 269
RRP Expense 117 117
(Gain)/Loss on Sale of Investments (20) 12
Decrease in Prepaid Income Tax - 47
Changes in Deferred Income Tax (227) (31)
Changes in Operating Assets and Liabilities:
(Increase) in Accrued Interest Receivable (7) (44)
(Increase) in Deferred Charges (17) (21)
Increase in Accrued Income Tax 157 -
Increase in Other Liabilities 368 34
(Increase) in Other Assets (8) (27)
------ -------
Net Cash Provided by Operating Activities 1,679 1,672
CASH FLOWS FROM INVESTING ACTIVITIES
Redemption of ARM Mutual Fund 651 1,590
Purchase of CMOs (8,647) (25,884)
Proceeds from Maturities of CMOs 7,341 16,133
Proceeds from Maturities of Available-
For-Sale Securities 455 4,215
Proceeds from Sale of FHLMC Stock 413 -
Proceeds from Maturities of
Mortgage-Backed Securities 1,613 5,354
Sale of IMF Mutual Fund - Net 2,615 2,617
Proceeds from Sales of Mortgage-
Backed Securities 6,394 -
Net Loan Originations (3,482) (4,264)
Purchases of Premises and Equipment (21) (10)
Proceeds from Sale of Premises and Equipment 16 -
<PAGE>
GS Financial Corp.
Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
For the Nine Months Ended
September 30,
-----------------------
Cash Flows from Investing Activities (Continued)
2000 1999
---- ----
Proceeds from Sale of Foreclosed Real Estate 2 -
Investment in Foreclosed Real Estate (116) -
Dividend on ARM Fund (24) ( 69)
Dividend on IMF Fund (43) (281)
Purchase of FHLB Stock (13) (275)
Non-Cash Dividend - FHLB Stock (186) (99)
---------- -------
Net Cash Provided By/(Used in)
Investing Activities 6,968 (973)
---------- -------
CASH FLOW FROM FINANCING ACTIVITIES
Net Increase/(Decrease) in Deposits 174 (1,534)
Purchases of Treasury Stock (8,197) (3,654)
Net (Decrease)/Increase in
Unapplied Loan Payments (4) 2
Payment of Cash Stock Dividends (652) (682)
Net Increase in Advance Payments
by Borrowers for Taxes and Insurance 57 76
Net Increase in FHLB Advances 3,835 6,794
---------- ---------
Net Cash (Used in)/Provided by
Financing Activities (4,787) 1,002
---------- ---------
NET CASH EQUIVALENTS 3,860 1,701
CASH AND CASH EQUIVALENTS - January 1, 2,504 1,810
---------- ---------
CASH AND CASH EQUIVALENTS - September 30, $ 6,364 $ 3,511
========== =========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
General
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").
<PAGE>
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 September
30, 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 ("ESOP")
purchased 275,080 shares of the Company's common stock on April 1,
1997, financed by a loan from the Company, as part of the Company's
Conversion from mutual to stock form of organization. The loan is
secured by those ESOP shares not yet allocated to plan participants.
At September 30, 2000, there were 192,715 unallocated shares and the
balance of the loan was $1.9 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 1,766,578 for the three
months ended September 30, 2000 and 2,302,598 shares for the three
months ended September 30, 1999. For the nine months ended September
30, 2000 and 1999, average weighted shares outstanding were 2,063,967
and 2,406,646 shares, respectively. During the three months ended
September 30, 2000 and 1999, the Company declared and paid cash
dividends in the amount of $.09 per common share.
<PAGE>
(4) INVESTMENTS
September 30, 2000 December 31, 1999
-------------- -----------------
(Dollars in thousands)
Amortized Market Amortized Market
AVAILABLE FOR SALE Cost Value Cost Value
US Government and
Agency Obligations $ 4,224 $ 4,267 $ 4,678 $ 4,683
ARM Mutual Fund 748 740 1,390 1,381
IMF Mutual Fund 432 356 2,972 2,725
FHLMC Stock 24 1,406 35 1,694
------ ------ ------ ------
Total $ 5,428 $ 6,769 $ 9,075 $ 10,483
====== ====== ====== ======
(5) LOANS
September 30, December 31,
(Dollars in Thousands) 2000 1999
-------- -----------
Total Loans $ 73,966 $ 70,484
Allowance for Loan Losses (420) (424)
Net Unearned Fees 8 6
-------- --------
TOTAL NET LOANS $ 73,554 $ 70,066
======== ========
Permanent Mortgages (1-4 family) $ 70,932 $ 67,648
Commercial Loans 350 -
Construction (1-4 family) 521 646
Commercial Mortgages 1,309 1,377
Other Mortgages 604 446
Consumer (secured by deposits) 250 367
---------- ----------
TOTAL LOANS $ 73,966 $ 70,484
======== ========
Allowance for Loan Losses
(Dollars in Thousands) 2000 1999
----- -----
Beginning Balance, June 30, $ 413 $ 463
Provision for Losses 7 -
Loans Charged Off - (45)
----- -----
Ending Balance, September 30, $ 420 $ 418
===== =====
<PAGE>
(6) MORTGAGE-BACKED SECURITIES
September 30, December 31,
2000 1999
--------- ------------
(Dollars in thousands)
Amortized Market Amortized Market
AVAILABLE FOR SALE Cost Value Cost Value
------ ----- ------ -----
GNMA Fixed-Rate (1-4 family) $ 5,751 $ 5,637 $ 10,160 $ 9,803
FHLMC Fixed-Rate (1-4 family) 1,157 1,139 1,328 1,297
FNMA Fixed-Rate (1-4 family) 1,688 1,652 5,255 5,175
------ ------ ------ ------
TOTAL MORTGAGE-BACKED SECURITIES $ 8,596 $ 8,428 $ 16,743 $ 16,275
====== ====== ====== ======
(7) COLLATERALIZED MORTGAGE OBLIGATIONS
September 30, December 31,
2000 1999
--------- ------------
(Dollars in thousands)
Amortized Market Amortized Market
AVAILABLE FOR SALE Cost Value Cost Value
------ ----- ------ -----
FNMA $ 5,997 $ 5,578 $ 8,058 $ 7,584
FHLMC 14,863 14,285 17,347 16,824
Private Issue 34,452 34,146 28,493 27,672
------ ------ ------ ------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS $ 55,312 $ 54,009 $ 53,898 $ 52,080
====== ====== ====== ======
(8) INTEREST BEARING DEPOSITS
September 30, December 31,
2000 1999
--------- -----------
(Dollars in thousands)
Passbook Savings $ 18,088 $ 20,170
Certificates of Deposits 39,191 39,002
NOW Accounts 1,942 -
------- ------
TOTAL INTEREST BEARING DEPOSITS $ 59,221 $ 59,172
======= ======
<PAGE>
(9) BORROWINGS (FEDERAL HOME LOAN BANK ADVANCES)
September 30, December 31,
2000 1999
--------- -----------
(Dollars in thousands)
Amounts maturing within 1 year $ 27,368 $ 17,784
Amounts maturing over 1 year 30,456 36,204
------- ------
TOTAL FEDERAL HOME LOAN BANK ADVANCES $ 57,824 $ 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. The RRP Plan
calls for 137,540 shares of stock to be granted to plan participants.
By January 16, 1998, the Company had acquired in open market
transactions a total of 137,500 shares of common stock for issuance
under the RRP. The Company is accruing this expense commensurate with
the expiration of 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 September 30, 2000, 25,000 shares have been distributed
to participants of the plan.
(12) TREASURY STOCK
On April 1, 2000, the Company realized its three year
anniversary of the initial public offering of its common stock
and is now exempt from previous OTS limitations regarding the
purchase of Treasury stock. As of September 30, 2000, the Company
had repurchased 1,443,054 shares of its outstanding common stock at a
cost of $20.2 million. In 2000, 653,000 shares of Treasury stock
were acquired at a cost of $8.2 million. On October 16, 2000, the
Company announced an additional buy-back of up to 400,000 shares.
<PAGE>
(13) OTHER EXPENSES
Listed below are major recurring components comprising Other
Expenses.
For the Three Months Ended
September 30,
-----------------------
2000 1999
---- ----
Office Supplies & Telephone $ 27,555 $ 32,077
Bank Shares and Franchise Tax 94,779 88,772
Data Processing 30,671 12,378
Advertising 29,848 25,994
Supervisory Fees 21,583 16,374
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 interest and non-interest bearing 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 September 30, 2000 to December 31, 1999 and the
results of operations for the three months and nine months ended
September 30, 2000 and 1999.
<PAGE>
CHANGES IN FINANCIAL CONDITION
At September 30, 2000, the assets of the Company totaled $155.9
million, a decrease of $2.1 million, or 1.0%, from $158.0
million at December 31, 1999. The nine months ended September 30,
2000 were characterized by growth in the Company's portfolio of
mortgage loans and new deposit products. During the nine months
ended September 30, 2000, the Company has acquired over $2 million in
interest and non-interest bearing demand deposit accounts. This has
resulted in a slight increase in the Company's customer base,
reversing the trend of declining deposits, which existed in earlier
reporting periods this year. The Company has realigned some of its
investment portfolio by selling longer-term mortgage-backed and
investment securities. The Company's current short-term investment
position has allowed funding of loan growth and reinvestment at more
advantageous rates on short-term investments such as Federal Funds.
During 2000, the Company has continued to buy back its common stock
at discounts to its book value.
Loans receivable increased by $3.5 million, or 5.0%, to $73.6
million at September 30, 2000 compared to $70.1 million at December
31, 1999. The increase came primarily in loans on 1-4 family
residential dwellings. The Association expanded its loan products
and services with the addition of commercial lending activities.
Collateralized mortgage obligations increased $1.9 million, or
3.6%, to $54.0 million at September 30, 2000 compared to $52.1
million at December 31, 1999. The Company's portfolio of CMOs
consists of fixed rate, AAA rated bonds issued by FHLMC, FNMA and
various private companies such as Countrywide. The Company continues
to recognize favorable yields and steady cash flows from these
investments. Most of these bonds are part of the Company's program
of wholesale growth through leveraged investing and were funded with
advances from the Federal Home Loan Bank of Dallas (FHLB). During
2000, the Company has purchased $8.6 million in new CMOs, while
receiving $7.3 million in principal repayments.
Mortgage-backed securities decreased $7.9 million, or 48.5%, to
$8.4 million at September 30, 2000 compared to $16.3 million at
December 31, 1999. Thus far in 2000, the Company has sold $6.4
million in mortgage-backed securities at a loss of $.1 million. The
bonds sold were longer-term (greater than 10 years), fixed-rate,
agency-issued securities. The sale of these and other securities was
necessary to fund loan growth and take advantage of other investment
opportunities and the higher interest rates currently available on
short-term investments. Continued regular pay-downs of mortgage-
backed securities has totaled $1.6 million in principal for the nine
months ended September 30, 2000.
<PAGE>
Investment securities decreased $3.7 million, or 35.2%, to $6.8
million at September 30, 2000 compared to $10.5 million at December
31, 1999. This reduction was the net result of the sale of $.4
million in Federal Home Loan Mortgage Corporation (FHLMC) stock, $.4
million in principal payments from U.S. Treasury and Agency
securities and the net liquidation of $2.9 million of the Company's
mortgage-based mutual funds.
Interest-bearing deposits in other financial institutions
remained relatively unchanged as of September 30, 2000 at $1.7
million compared to $1.8 million at December 31, 1999.
Federal Funds Sold increased $3.6 million to $4.2 million at
September 30, 2000 compared to $.6 million at December 31, 1999.
This was the result of cash made available through the sale of
mortgage-backed and investment securities. Not only are Federal
Funds a convenient instrument to invest short-term funds but
currently offer favorable yields in the current interest rate
environment of the inverted yield curve.
Interest-bearing deposits were $59.2 million both at December
31, 1999 and at September 30, 2000. While the amount of deposits was
unchanged, the mix of deposit products did change significantly with
the addition of NOW accounts. Passbook savings accounts were down
approximately $2 million while new NOW accounts have grown to
approximately the same amount since they were first offered in
April, 2000. Certificates of deposit were unchanged at approximately
$39 million.
The Company's borrowings increased $3.8 million, or 7%, to
$57.8 million at September 30, 2000 compared to $54.0 million at
December 31, 1999. The Company's borrowings consist of $27.2 million
of fully amortizing advances from the FHLB as well as $30.6 million
in balloon obligations from the FHLB.
Stockholders' equity decreased $7.0 million, to $36.5
million at September 30, 2000 compared to $43.5 million at December
31, 1999. The decrease was due to the acquisition of $8.2 million of
Treasury Stock, net income of $1.0 million, an increase in
comprehensive income of $.5 million, dividends paid of $.6 million
and the net effects of the reduction of the ESOP debt totaling $.3
million.
<PAGE>
RESULTS OF OPERATIONS
GENERAL
The Company reported net income for the three months ended
September 30, 2000 of $.5 million, compared to $.4 million for the
three months ended September 30, 1999. This represents earnings of
$.26 per common share for the three months ended September 30, 2000
compared to $.18 per common share for the three months ended
September 30, 1999. The increase in net income was due to gains
realized by the Company on the sale of FHLMC stock totaling
approximately $.3 million. The increase in earnings per share was
also enhanced by the decrease in the average number of shares
outstanding as a result of stock repurchases. For the three months
ended September 30, 2000, average shares outstanding were 1.8
million, compared to 2.3 million for the three months ended September
30, 1999.
For the nine months ended September 30, 2000, net income was
$1.0 million, or $.49 per common share, compared to $1.1 million, or
$.45 per common share, for the nine months ended September 30, 1999.
Average shares outstanding were 2.1 million shares for the nine
months ended September 30, 2000, compared to 2.4 million for the nine
months ended September 30, 1999.
INTEREST INCOME
Total interest income increased $.1 million or 3.7% to $2.8
million for the three months ended September 30, 2000, compared to
$2.7 million for the three months ended September 30, 1999. The
makeup of the interest income was changed with interest on loans up
$.1 million, interest on CMOs up $.2 million, interest on mortgage-
backed securities down $1 million and interest on investment
securities down $.1 million. Total interest income increased $.7
million, or 9.0%, for the nine months ended September 30, 2000 to
$8.5 million compared to $7.8 million for the nine months ended
September 30, 1999.
For the three months ended September 30, 2000, average interest-
earning assets were $151.1 million with an average annualized yield
of 7.53%, compared to $154.8 million yielding 7.00% for the three
months ended September 30, 1999. For the nine months ended September
30, 2000, average interest-earning assets were $152.2 million which
yielded 7.42% annualized. For the nine months ended September 30,
1999, average interest-bearing assets were $150.6 million with a
yield of 6.91%.
<PAGE>
Interest on loans increased $.15 million, or 11.3%, to $1.5
million for the three months ended September 30, 2000 compared to
$1.35 million for the three months ended September 30, 1999. This
was due primarily to growth in the loan portfolio. The average
balance of the loan portfolio for the three months ended September
30, 2000 was $72.8 million (net) compared to $66.3 million (net) for
the three months ended September 30, 1999. The average annualized
yield on loans for the three months ended September 30, 2000 and 1999
was 8.17% and 8.05% respectively. Interest on loans for the nine
months ended September 30, 2000 was $4.3 million compared to $3.9
million for the nine months ended September 30, 1999. The nine month
results equated to yields of 7.99% and 8.00% on average balances of
$72.1 million and $65.7 million, respectively, for the nine months
ended September 30, 2000 and 1999.
Interest on mortgage-backed securities decreased $.1 million, or
33%, to $.2 million for the three months ended September 30, 2000
compared to $.3 million for the three months ended September 30,
1999. For the three months ended September 30, 2000 the average
balance of mortgage-backed securities was $11.6 million; for the same
period in 1999 the average balance was $18.2 million. The average
annualized yield of mortgage-backed securities was 6.5% for the three
months ended September 30, 2000 compared to 6.6% for the same period
in 1999.
For the three months ended September 30, 2000, the Company has
earned $1.0 million in interest on its collateralized mortgage
obligations. This represents a yield of 7.3% on an average balance
of $54.0 million. For the same such period in 1999 interest on CMOs
was $.8 million on an average balance of $49.1 million yielding
6.53%. For the nine months ended September 30, 2000, interest on
CMOs was $2.8 million on an average balance of $52.7 million
representing a yield of 7.09%. For the nine months ended September
30, 1999, interest on CMOs was $1.9 million on an average balance of
$41.3 million which yielded 6.22%.
Interest income from investment securities decreased $.1
million, or 50%, to $.1 million for the three months ended September
30, 2000 compared to $.2 million for the three months ended September
30, 1999. The results for the third quarter of 2000 reflected an
annualized yield of 5.55% on an average balance of $6.8 million in
investment securities while the third quarter 1999's annualized
yield was 5.25% on an average balance of $16.5 million. For the nine
months ended September 30, 2000, interest on investment securities
was $.3 million on an average balance of $7.6 million compared to $.8
million on an average balance of $19.3 million. This represents
yields of 5.60% and 5.57%, respectively, for the nine months ended
September 30, 2000 and 1999.
<PAGE>
Other interest income consists mainly of interest income on
over-night Federal Funds sold, dividends on FHLB stock and interest
bearing deposits in other financial institutions. Other interest
income was $.1 million for the three months ended September 30, 2000,
compared to $.05 million for the three months ended September 30,
1999. For the nine months ended September 30, 2000, other interest
income was $.3 million compared to $.17 million for the nine months
ended September 30, 1999. The average balance in other interest-
bearing assets was $5.6 million for the nine months ended September
30, 2000, which yielded 7.20%. For the nine months ended September
30, 1999, the average balance in other interest-bearing assets was
$4.4 million, which yielded 5.07%. Yields for 2000 have been
increased by a special one-time dividend received by the Company on
its FHLB stock and by rising short-term interest rates.
PROVISION FOR LOAN LOSSES
The Company had a $7,000 provision for loan loss for the three
months ended September 30, 2000, compared to none for the three
months ended September 30, 1999. The provision was a result of the
recent loan growth in the loan portfolio and application of its
policies and methodologies related to loan loss reserves. As in
previous years, the Company continues to experience low loan
delinquencies and minimal credit losses related to its loan
portfolio. The local economy and related real estate market continue
to remain strong. The Allowance for Loan Loss (ALL) is reviewed
quarterly and is based on management's assessment of 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 $.18 million, or
13.2%, to $1.54 million for the three months ended September 30,
2000, compared to $1.36 million for the three months ended September
30, 1999. Most of the increase was due to an increase in interest
expense of $.12 million on advances from the Federal Home Loan Bank.
The Company's overall cost of funds increased from 4.91% (annualized)
for the three months ended September 30, 1999 to 5.38% (annualized)
for the same period in 2000. The increased cost of funds was due to
the increase of Federal Home Loan Bank Advances as a percentage of
total interest-bearing funds and to the Federal Reserve's tightening
of short-term rates. For the nine months ended September 30, 2000,
the Company's overall cost of funds was 5.22% on an average balance
of interest-bearing liabilities of $110.0 million. For the nine
months ended September 30, 1999, the Company's cost of funds was
4.93% on an average balance of interest-bearing liabilities of $103.1
million.
<PAGE>
While the amount of interest paid on interest-bearing deposits
increased only slightly, the cost of those funds for the three months
ended September 30, 2000 increased to 4.73% compared to 4.24% for the
three months ended September 30, 1999. For the nine months ended
September 30, 2000, the Company's cost of interest-bearing deposits
was 4.47% on an average balance of $58.0 million, compared to 4.21%
on an average balance of $60.5 million for the nine months ended
September 30, 1999.
The cost of the Company's advances from the Federal Home Loan
Bank increased from 5.69% for the three months ended September 30,
1999, to 6.05% for the three months ended September 30, 2000. For
the nine months ended September 30, 2000, the cost of the Company's
FHLB advances was 6.05% on an average balance of $52.0 million,
compared to 5.95% on an average balance of $42.6 million for the nine
months ended September 30, 1999.
OTHER EXPENSES
Other expenses for the three months ended September 30, 2000
were $.9 million compared to $.8 million for the three months ended
September 30, 1999. This represents an increase of $.1 million, or
12.5%. The change was the result of increases in compensation
expense, data processing expense and miscellaneous taxes. Operating
expenses for the nine months ended September 30, 2000 were $2.6
million, compared to $2.4 million for the nine months ended September
30, 1999, reflecting an increase of 8.0%. Accounting for the
majority of the increase was a $.06 million increase in taxes and
compensation expense, and a $.04 million increase in data processing
expense.
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, advances from the Federal Home Loan Bank and
regular amortization 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.
<PAGE>
The Company 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 Company 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 September 30, 2000, the Company's liquidity stood
at 62.5%, or $67.2 million in excess of the minimum requirement.
The Company 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 September 30, 2000, the Company's
tangible and core capital amounted to $28.8 million, or 18.7% of
adjusted total assets, while the Company's risk-based capital was
$29.3 million, or 52.8% of total adjusted risk-weighted assets.
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.
Part II - Other Information
Item 1 - Legal Proceedings
There are no matters required to be reported under this item.
Item 2 - Changes in Securities and Use of Proceeds
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.
<PAGE>
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: November 15, 2000 BY:/S/Donald C. Scott
------------------
DONALD C. SCOTT, CHAIRMAN OF THE
BOARD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
DATE: November 15, 2000 BY:/s/Glenn R. Bartels
-------------------
GLENN R. BARTELS
CONTROLLER
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