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 June 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 August 11, 2000, there were 1,995,446 shares of the
Registrant's Common stock outstanding. The financial statements
contained within this Form 10-Q at and for the three and six months
ended June 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 June 30, 2000
Table of Contents
Part I - Financial Information
Item 1 Financial Statements
Consolidated Balance Sheets
(as of June 30, 2000 Unaudited and December 31, 1999 Audited) 3
Consolidated Statements of Operations
(For the three and six months ended June 30, 2000 and 1999 Unaudited) 4
Consolidated Statements of Changes in Stockholders' Equity
(For the six months ended June 30, 2000 and 1999 Unaudited) 5
Consolidated Statements of Cash Flows
(For the six months ended June 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 12-17
Item 3 Quantitative and Qualitative Disclosures about
Market Risk 17
Part II Other Information 17
Item 1 Legal Proceedings 17
Item 2 Changes in Securities 17
Item 3 Defaults Upon Senior Securities 17
Item 4 Submission of Matters to a Vote of Security Holders 17
Item 5 Other Information 18
Item 6 Exhibits and Reports on Form 8-K 18
<PAGE>
GS Financial Corp.
Consolidated Balance Sheets
(Dollars in Thousands)
(Unaudited)
June 30, 2000 December 31, 1999
--------------- -----------------
ASSETS
Cash and Due from Banks $ 83 $ 145
Interest Bearing Deposits
in Other Banks 2,291 1,759
Federal Funds Sold 1,675 600
Investment Securities 6,641 10,483
Loans (Net) 72,356 70,066
Mortgage-Backed Securities 12,180 16,275
Collateralized Mortgage
Obligations 47,669 52,080
Accrued Interest Receivable 700 750
Premises & Equipment 2,581 2,646
Other Assets 3,523 3,178
----------- ----------
TOTAL ASSETS $ 149,699 $ 157,982
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Interest Bearing Deposits $ 56,768 $ 59,172
Non-Interest Bearing Deposits 843 811
Borrowings 52,550 53,988
Other Liabilities 664 463
----------- ----------
TOTAL LIABILITIES 110,825 114,434
STOCKHOLDERS' EQUITY
Common Stock & Additional
Paid in Capital 33,932 33,856
Treasury Stock (16,902) (11,978)
Accumulated Other
Comprehensive Income (648) (580)
Unearned ESOP Stock (1,787) (1,927)
Unearned RRP Trust Stock (1,974) (1,974)
Other Stockholders' Equity 26,253 26,151
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 38,874 43,548
----------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 149,699 $ 157,982
=========== ==========
<PAGE>
GS Financial Corp.
Consolidated Statements of Operations
(Dollars in Thousands, except per share data)
(Unaudited)
For the three Months For the six Months
ended June 30, ended June 30,
2000 1999 2000 1999
----------------------------------------
INTEREST INCOME (from)
Loans $ 1,429 $ 1,316 $ 2,834 $ 2,607
Mortgage-Backed Securities 254 318 538 661
Investment Securities 100 263 225 592
Collateralized Mortgage
Obligations 893 549 1,813 1,126
Other Interest Income 146 62 210 111
----- ----- ----- -----
TOTAL INTEREST INCOME 2,822 2,508 5,620 5,097
----- ----- ----- -----
INTEREST EXPENSE (on)
Deposits 634 636 1,257 1,275
FHLB Advances 768 576 1,512 1,174
----- ----- ----- -----
TOTAL INTEREST EXPENSE 1,402 1,212 2,769 2,449
----- ----- ----- -----
NET INTEREST INCOME BEFORE
PROVISION FOR LOAN LOSSES 1,420 1,296 2,851 2,648
PROVISION FOR LOAN LOSSES - - - -
----- ----- ----- -----
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,420 1,296 2,851 2,648
----- ----- ----- -----
NON-INTEREST INCOME
Gain/(Loss) on Investments (199) (10) (259) (17)
Other Income 3 2 5 6
----- ----- ----- -----
TOTAL NON-INTEREST INCOME (196) ( 8) (254) (11)
OTHER EXPENSES
Compensation and Benefits 525 505 1,053 1,019
Net Occupancy Expense 76 72 156 140
Other Expenses 267 241 493 461
----- ----- ----- -----
TOTAL OTHER EXPENSES 868 818 1,702 1,620
----- ----- ----- -----
INCOME BEFORE TAX EXPENSE 356 470 895 1,017
INCOME TAX EXPENSE 133 161 340 362
----- ----- ----- -----
NET INCOME $ 223 $ 309 $ 555 $ 655
===== ===== ===== =====
EARNINGS PER SHARE - PRIMARY $ .11 $ .13 $ .25 $ .27
EARNINGS PER SHARE - DILUTED $ .11 $ .13 $ .25 $ .27
<PAGE>
<TABLE>
GS Financial Corp.
Consolidated Statements of Changes in Stockholders' Equity
For The Six Months Ended June 30, 2000, and 1999
(Dollars in Thousands)
(Unaudited)
<CAPTION>
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-6 months
Ended June 30, 1999 - - - - - 655 - 655
Other Comprehensive
Income Net of
Applicable Deferred
Income Taxes - - - - - - (942) (942)
Purchase of Treasury Stock - - (3,654) - - - - (3,654)
Retirement of ESOP Debt - 74 - 140 - - - 214
Cash Dividends Paid - - - - - (443) - (443)
BALANCE AT
June 30, 1999 $ 34 $ 33,884 $(11,978) $(2,068) $(2,193) $ 25,834 $ 826 $ 44,339
BALANCE AT
DECEMBER 31, 1999 $ 34 $ 33,822 $(11,978) $(1,927) $(1,974) $ 26,151 $ (580) $ 43,548
Net Income-6 months
Ended June 30, 2000 - - - - - 555 - 555
Other Comprehensive
Income Net of
Applicable Deferred
Income Taxes - - - - - - (68) (68)
Purchase of Treasury Stock - - (4,924) - - - - (4,924)
Retirement of ESOP Debt - 76 - 140 - - - 216
Cash Dividends Paid - - - - - (453) - (453)
BALANCE AT
JUNE 30, 2000 $ 34 $ 33,898 $ (16,902) $(1,787) $(1,974) $ 26,253 $ (648) $ 38,874
</TABLE>
GS Financial Corp.
Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
For the Six Months Ended
June 30,
-----------------------
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 555 $ 655
Adjustments to Reconcile Net Income
to Net Cash Provided
by Operating Activities:
Depreciation 70 53
Premiums Amortized (47) 131
Loss on Sale of Loans - 5
Loss on Sale of Foreclosed Real Estate - 3
Net Loan Fees (1) -
ESOP Expense 185 179
RRP Expense 78 77
Loss on Sale of Investments 259 12
(Increase)/Decrease in Prepaid Income Tax (44) 69
Changes in Deferred Income Tax (263) 12
Changes in Operating Assets and Liabilities:
Decrease/(Increase) in Accrued
Interest Receivable 50 (18)
(Increase) in Deferred Charges (51) (57)
(Decrease)/Increase in Accrued Income Tax (18) 9
Increase/(Decrease) in Other Liabilities 176 (143)
Decrease/(Increase) in Other Assets 2 ( 3)
------ -------
Net Cash Provided by Operating Activities 951 984
CASH FLOWS FROM INVESTING ACTIVITIES
Redemption of ARM Mutual Fund 1,039 103
Purchase of CMOs - (15,422)
Proceeds from Maturities of CMOs 4,370 11,940
Proceeds from Maturities of Available-
For-Sale Securities 411 3,015
Proceeds from Maturities of
Mortgage-Backed Securities 1,011 4,042
Sale/(Purchase) of IMF Mutual Fund (Net) 2,427 (1,703)
Proceeds from Sales of Mortgage-
Backed Securities 3,125 -
Net Loan Originations (2,278) (1,868)
Purchases of Premises and Equipment ( 4) ( 7)
GS Financial Corp.
Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
For the Six Months Ended
June 30,
-----------------------
Cash Flows from Investing Activities (Continued)
2000 1999
---- ----
Dividend on ARM Fund (15) ( 40)
Dividend on IMF Fund (36) (205)
Investment in Foreclosed Real Estate (116) -
Purchase of FHLB Stock - (133)
Non-Cash Dividend - FHLB Stock (139) (63)
---------- -------
Net Cash Provided By/(Used) in
Investing Activities 9,795 (341)
---------- -------
CASH FLOW FROM FINANCING ACTIVITIES
Net Decrease in Deposits (2,363) (812)
Purchases of Treasury Stock (4,924) (3,654)
Net (Decrease)/Increase in
Unapplied Loan Payments (6) 3
Payment of Cash Stock Dividends (453) (443)
Net (Decrease)/Increase in Advance Payments
by Borrowers for Taxes and Insurance (16) 3
Net (Decrease)/Increase in FHLB Advances (1,439) 4,445
---------- ---------
Net Cash (Used in) Financing Activities (9,201) (458)
---------- ---------
NET CASH EQUIVALENTS 1,545 185
CASH AND CASH EQUIVALENTS - January 1, 2,504 1,810
---------- ---------
CASH AND CASH EQUIVALENTS - June 30, $ 4,049 $ 1,995
========== =========
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").
(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 June 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 June 30, 2000, there were 192,715 unallocated shares and the
balance of the loan was $2.0 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 2,085,362 for the three
months ended June 30, 2000 and 2,319,027 shares for the three months
ended June 30, 1999. For the six months ended June 30, 2000 and
1999, average weighted shares outstanding were 2,214,296 and
2,459,532 shares, respectively. During the three months ended June
30, 2000 and 1999, the Company declared and paid cash dividends in
the amount of $.09 per common share.
(4) INVESTMENTS
June 30, 2000 December 31, 1999
-------------- -----------------
(Dollars in thousands)
Amortized Market Amortized Market
AVAILABLE FOR SALE Cost Value Cost Value
US Government and
Agency Obligations $ 4,268 $ 4,288 $ 4,678 $ 4,683
ARM Mutual Fund 360 351 1,390 1,381
IMF Mutual Fund 688 545 2,972 2,725
FHLMC Stock 35 1,457 35 1,694
------ ------ ------ ------
Total $ 5,351 $ 6,641 $ 9,075 $ 10,483
====== ====== ====== ======
(5) LOANS
June 30, December 31,
(Dollars in Thousands) 2000 1999
-------- -----------
Total Loans $ 72,762 $ 70,484
Allowance for Loan Losses (413) (424)
Net Unearned Fees 7 6
-------- --------
TOTAL NET LOANS $ 72,356 $ 70,066
======== ========
Permanent Mortgages (1-4 family) $ 69,834 $ 67,648
Construction (1-4 family) 768 646
Commercial Mortgages 1,297 1,377
Other Mortgages 627 446
Consumer (secured by deposits) 236 367
---------- ----------
TOTAL LOANS $ 72,762 $ 70,484
======== ========
Allowance for Loan Losses
(Dollars in Thousands) 2000 1999
----- -----
Beginning Balance, March 31, $ 413 $ 463
Provision for Losses - -
Loans Charged Off - -
----- -----
Ending Balance, June 30, $ 413 $ 463
===== =====
(6) MORTGAGE-BACKED SECURITIES
June 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) $ 9,485 $ 9,205 $ 10,160 $ 9,803
FHLMC Fixed-Rate (1-4 family) 1,213 1,186 1,328 1,297
FNMA Fixed-Rate (1-4 family) 1,838 1,789 5,255 5,175
------ ------ ------ ------
TOTAL MORTGAGE-BACKED SECURITIES $ 12,536 $ 12,180 $ 16,743 $ 16,275
====== ====== ====== ======
(7) COLLATERALIZED MORTGAGE OBLIGATIONS
June 30, December 31,
2000 1999
--------- ------------
(Dollars in thousands)
Amortized Market Amortized Market
AVAILABLE FOR SALE Cost Value Cost Value
------ ----- ------ -----
FNMA $ 6,485 $ 6,017 $ 8,058 $ 7,584
FHLMC 16,183 15,411 17,347 16,824
Private Issue 26,919 26,241 28,493 27,672
------ ------ ------ ------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS $ 49,587 $ 47,669 $ 53,898 $ 52,080
====== ====== ====== ======
(8) INTEREST BEARING DEPOSITS
June 30, December 31,
2000 1999
--------- -----------
(Dollars in thousands)
Passbook Savings $ 19,179 $ 20,170
Certificates of Deposits 37,470 39,002
NOW Accounts 119 -
------- ------
TOTAL INTEREST BEARING DEPOSITS $ 56,768 $ 59,172
======= ======
(9) FEDERAL HOME LOAN BANK ADVANCES
June 30, December 31,
2000 1999
--------- -----------
(Dollars in thousands)
Amounts maturing within 1 year $ 19,285 $ 17,784
Amounts maturing over 1 year 33,265 36,204
------- ------
TOTAL FEDERAL HOME LOAN BANK ADVANCES $ 52,550 $ 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 June 30, 2000, 25,000 shares have been distributed to
1999. 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. At June 30, 2000, the Company had
repurchased 1,191,054 shares of its outstanding common stock at a
cost of $16.9 million. Since that time the Company has made
additional acquisitions of its outstanding shares. As of August 11,
2000, the Company had acquired a total of 1,443,054 shares of
Treasury stock at an average price of $13.98 per common share.
(13) OTHER EXPENSES
Listed below are major recurring components comprising Other
Expenses.
For the Three Months Ended
June 30,
-----------------------
2000 1999
---- ----
Office Supplies & Telephone $ 30,939 $ 32,186
Bank Shares and Franchise Tax 116,054 87,138
Data Processing 31,248 18,366
Advertising 19,360 9,739
Supervisory Fees 13,790 19,544
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 June 30, 2000 to December 31, 1999 and the
results of operations for the three months and six months ended June
30, 2000 and 1999.
CHANGES IN FINANCIAL CONDITION
At June 30, 2000, the assets of the Company totaled $149.7
million, a decrease of $8.3 million, or 5%, from $158.0
million at December 31, 1999. The six months ended June 30, 2000
were characterized by growth in the Company's portfolio of mortgage
loans while interest-bearing deposits and FHLB advances decreased.
The funding for these changes was facilitated through the sale and
regular amortization of the Company's mortgage-backed securities and
collateralized mortgage obligations.
Loans receivable increased by $2.3 million, or 3%, to $72.4
million at June 30, 2000 compared to $70.1 million at December 31,
1999. The increase came primarily in loans on 1-4 family residential
dwellings.
Collateralized mortgage obligations decreased $4.4 million, or
8%, to $47.7 million at June 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. During the last three months of 1999
and first three months of 2000, monthly principal payments from these
instruments slowed. However, the three months ended June 30, 2000
and into July, 2000 have seen a trend of increased principal cash
flow from these investments.
Mortgage-backed securities decreased $4.1 million, or 25%, to
$12.2 million at June 30, 2000 compared to $16.3 million at December
31, 1999. This was due to the continued pay-downs of these
instruments totaling $1.0 million and the sale of $3.1 million of
mortgage-backed securities in May, 2000. These bonds were liquidated
to provide funds for mortage loans and other cash needs.
Investment securities decreased $3.9 million, or 37%, to $6.6
million at June 30, 2000 compared to $10.5 million at December
31, 1999. This reduction is the result of the maturity of some of
the Company's bonds, net redemption of the Adjustable Rate Mutual
Fund and Intermediate Mortgage Fund, and a reduction in the market
value of the Company's FHLMC common stock.
Interest bearing deposits decreased $2.4 million, or 4% to
$56.8 million at June 30, 2000 compared to $59.2 million at December
31, 1999.
The Company's borrowings decreased $1.4 million, or 3%, to
$52.6 million at June 30, 2000 compared to $54.0 million at December
31, 1999. The Company's borrowings consist of $31.0 million of fully
amortizing advances from the Federal Home Loan Bank (FHLB) as well as
$21.6 million in balloon obligations from the FHLB.
Stockholders' equity decreased $4.6 million, to $38.9
million at June 30, 2000 compared to $43.5 million at December
31, 1999. The decrease was mainly due to the acquisition of $4.9
million of Treasury Stock in April and May 2000, net income of $.6
million, a decrease in comprehensive income of $.1 million, dividends
paid of $.4 million and the net effects of the reduction of the ESOP
debt totaling $.2 million.
RESULTS OF OPERATIONS
GENERAL
The Company reported net income for the three months ended
June 30, 2000 of $.2 million which was a decrease of $.1
million compared to $.3 million for the three months ended June
30, 1999. This represents earnings of $.11 per common share for the
three months ended June 30, 2000 compared to $.13 per common share
for the three months ended June 30, 1999. The decrease was due to
losses realized by the Company on the sale of investments totaling
$.2 million. For the six months ended June 30, 2000, net income was
$.6 million, or $.25 per common share, compared to $.7 million, or
$.27 per common share, for the six months ended June 30, 1999.
INTEREST INCOME
Total interest income increased $.3 million, or 12.0%, to $2.8
million for the three months ended June 30, 2000 compared to
$2.5 million for the three months ended June 30, 1999. This was
due primarily to increases in interest on collateralized mortgage
obligations and mortgage loans, which was partially offset by
decreases in interest income from mortgage-backed securities.
Total interest income increased $.5 million, or 10%, for the six
months ended June 30, 2000 to $5.6 million compared to $5.1 million
for the six months ended June 30, 1999.
Interest on loans increased $.1 million, or 8%, to $1.4
million for the three months ended June 30, 2000 compared to
$1.3 million for the three months ended June 30, 1999. This was
due primarily to growth in the loan portfolio. The average balance
of the loan portfolio for the three months ended June 30, 2000 was
$71.5 million (net) compared to $65.3 million (net) for the three
months ended June 30, 1999. The average annualized yield on loans
for the three months ended June 30, 2000 and 1999 was 7.99% and 8.06%
respectively. Interest on loans for the six months ended June 30,
2000 was $2.8 million compared to $2.6 million for the six months
ended June 30, 1999. The six month results equated to yields of
7.92% and 7.99% on average balances of $71.6 million and $65.2
million, respectively, for the six months ended June 30, 2000 and
1999.
Interest on mortgage-backed securities decreased $.1 million, or
33%, to $.2 million for the three months ended June 30, 2000
compared to $.3 million for the three months ended June 30,
1999. For the three months ended June 30, 2000 the average
balance of mortgage-backed securities was $14.7 million; for the same
period in 1999 the average balance was $19.7 million. The average
annualized yield of mortgage-backed securities was 6.9% for the three
months ended June 30, 2000 compared to 6.5% for the same period in
1999.
For the three months ended June 30, 2000, the Company has earned
$.9 million in interest on its collateralized mortgage obligations.
This represents a yield of 6.85% on an average balance of $52.1
million. For the same such period in 1999 interest on CMOs was $.5
million on an average balance of $36.2 million yielding 6.06%. For
the six months ended June 30, 2000, interest on CMOs was $1.8 million
on an average balance of $51.9 million representing a yield of 6.98%.
For the six months ended June 30, 1999, interest on CMOs was $1.1
million on an average balance of $37.3 million which yielded 6.04%.
Interest income from investment securities decreased $.2
million, or 67%, to $.1 million for the three months ended June 30,
2000 compared to $.3 million for the three months ended June 30,
1999. The results for the second quarter of 2000 reflected an
annualized yield of 5.58% on an average balance of $7.1 million in
investment securities while the second quarter 1999's annualized
yield was 3.94% on an average balance of $26.7 million. For the six
months ended June 30, 2000, interest on investment securities was $.2
million on an average balance of $8.0 million compared to $.6 million
on an average balance of $20.8 million. This represents yields of
5.65% and 5.68%, respectively, for the six months ended June 30, 2000
and 1999.
Other interest income consists mainly of interest income on
overnight Federal Funds sold and interest bearing deposits in other
financial institutions. Other interest income was $.15 million for
the three months ended June 30, 2000, compared to $.06 million for
the three months ended June 30, 1999. This represents an increase of
150.0% and was due to the fact that the Company is keeping more in
Federal Funds sold due to this year's stock buy-back programs and the
Company's receipt of a one time special dividend on its Federal Home
Loan Bank stock received in April 2000.
PROVISION FOR LOAN LOSSES
The Company had no provision for loan loss for the quarters
ended June 30, 2000 and 1999. The Allowance for Loan Loss (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, or
17%, to $1.4 million for the three months ended June 30, 2000
compared to $1.2 million for the three months ended June 30,
1999. The increase was due to an increase in interest expense of $.2
million on advances from the Federal Home Loan Bank. The Company's
overall cost of funds increased from 4.76% (annualized) for the three
months ended June 30, 1999 to 5.11% (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 increases in short-term
rates over the last twelve months. While the amount of interest paid
on interest-bearing deposits was unchanged at $.6 million, the cost
for the three months ended June 30, 2000 was 4.41% compared to 4.23%
for the three months ended June 30, 1999. For the six months ended
June 30, 2000, the Company's overall cost of funds was 5.03% on an
average balance of interest-bearing liabilities of $110.0 million.
For the six months ended June 30, 1999, the Company's cost of funds
was 4.75% on an average balance of interest-bearing liabilities of
$103.1 million. The cost of the Company's advances from the Federal
Home Loan Bank increased from 5.53% (annualized) for the three months
ended June 30, 1999, compared to 5.86% (annualized) for the three
months ended June 30, 2000.
OTHER EXPENSES
Other expenses for the three months ended June 30, 2000
were $.9 million compared to $.8 million for the three months ended
June 30, 1999. This represents an increase of $.1 million, or
13%. The change was the result of increases in compensation expense,
data processing expense and miscellaneous taxes. Operating expenses
for the six months ended June 30, 2000 reflected a similar $.1
million increase compared to 1999.
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
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 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 June 30, 2000, the Company's liquidity stood at
60.5%, or $61.5 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 June 30, 2000, the Company's
tangible and core capital amounted to $28.3 million, or 19.3% of
adjusted total assets, while the Company's risk-based capital was
$28.7 million, or 54.8% 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
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) 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: August 11, 2000 BY:/s/Donald C. Scott
------------------
DONALD C. SCOTT, CHAIRMAN OF THE
BOARD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
DATE: August 11, 2000 BY:/s/Glenn R. Bartels
-------------------
GLENN R. BARTELS
CONTROLLER
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