<PAGE>
FORM 10-Q.--QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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 quarterly period ended December 31, 1997
-----------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to _________________________
Commission File Number 0-22559
GSB FINANCIAL CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 06-1481061
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE SOUTH CHURCH ST., GOSHEN, N.Y. 10924
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(Address of principal executive offices) (Zip Code)
(914)294-6151
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes __x__ No _____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Shares, $.01 par value 2,248,250
----------------------------- --------------------------------
(Title of class) (outstanding at January 31, 1998)
<PAGE>
GSB FINANCIAL CORPORATION
FORM 10-Q
For the Quarter Ended December 31, 1997
<TABLE>
<CAPTION>
INDEX
PART I. FINANCIAL INFORMATION Page
- ------- --------------------- ----
<S> <C> <C>
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of
December 31, 1997 (Unaudited) and September 30, 1997.......................... 1
Consolidated Statements of Income for the three months ended
December 31, 1997 and 1996 (Unaudited)........................................ 2
Consolidated Statements of Cash Flows for the three months ended December 31,
1997 and 1996 (Unaudited)..................................................... 3
Notes to Unaudited Consolidated Interim Financial Statements.................. 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations.................................................................... 5
PART II. OTHER INFORMATION
- -------- -----------------
Item 1. Legal Proceedings............................................................. 11
Item 6. Exhibits and Reports on Form 8-K.............................................. 12
Signatures.................................................................... 13
</TABLE>
<PAGE>
GSB Financial Corporation and Subsidiary
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands except share and per share amounts)
<TABLE>
<CAPTION>
December 31, September 30,
-----------------------------------
1997 1997
---------- ----------
<S> <C> <C>
ASSETS (unaudited)
Cash and due from banks $ 3,222 $ 3,218
Federal funds sold 2,900 5,100
--------- ---------
Cash and cash equivalents 6,122 8,318
Investment securities available for sale 25,614 26,638
Mortgage-backed securities:
Held to maturity (estimated market values of $5,236 and $ 5,766 at
December 31,1997 and September 30, 1997, respectively) 5,160 5,653
Available for sale 6,835 6,990
Loans receivable, net 68,469 65,738
Banking house and equipment 2,266 2,299
Accrued interest receivable 824 788
Prepaid expenses and other assets 594 622
--------- ---------
Total assets $ 115,884 $ 117,046
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits $ 81,443 $ 82,983
Mortgagors' escrow deposits 194 62
Accrued expenses and other liabilities 1,294 1,368
--------- ---------
Total liabilities $ 82,931 $ 84,413
Commitments and contigent liabilities
Stockholders' Equity
Preferred stock ($0.01 par value; 500,000 shares
authorized; none issued) -- --
Common stock ($0.01 par value; 4,500,000 shares authorized; 2,248,250
issued at December 31, 1997) 22 22
Additional paid-in capital 21,474 21,446
Retained earnings, substantially restricted 12,655 12,360
Net unrealized gain on securities available
for sale, net of taxes 511 559
Unallocated ESOP stock (1,709) (1,754)
--------- ---------
Total stockholders' equity $ 32,953 $ 32,633
--------- ---------
Total liabilities and stockholders' equity $ 115,884 $ 117,046
========= =========
</TABLE>
See accompanying notes to consolidated financial statement.
<PAGE>
GSB Financial Corporation and Subsidiary
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands except shares and per share amounts)
<TABLE>
<CAPTION>
For the Quarter Ended
December 31,
-------------------------------------
1997 1996
---------- ----------
<S> <C> <C>
INTEREST INCOME
Loans $ 1,302 $ 1,154
Federal funds sold 57 22
Investment securities 438 386
Mortgage-backed securities 199 113
---------- ----------
Total interest income 1,996 1,675
INTEREST EXPENSE
Deposit accounts 778 764
Other borrowings -- 16
Stock subscription interest expense -- --
---------- ----------
Total interest expense 778 780
Net interest income 1,218 895
Provision for loan losses 20 --
---------- ----------
Net interest income after provision for loan losses 1,198 895
NON-INTEREST INCOME
Service charges on deposit accounts 34 37
Other income 30 32
Net realized gains on securities -- --
Capital gains distributions 82 93
---------- ----------
Total non-interest income 146 162
NON-INTEREST EXPENSE
Salaries and employee benefits 489 355
Occupancy and equipment 86 82
Data processing expenses 43 51
Other non-interest expense 234 149
---------- ----------
Total non-interest expense 852 637
---------- ----------
Income before income taxes 492 420
Income tax expense 197 125
---------- ----------
Net income $ 295 $ 295
========== ==========
Basic earnings per share $ 0.14 N/A
Weighted average shares outstanding 2,072,984 N/A
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
GSB FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended December 31,
-------------------------------
1997 1996
---- ----
(In Thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 295 $ 295
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 40 38
Provision for loan losses 20 --
ESOP compensation expense 73 --
Increase (decrease) other assets (7) 38
Net amortization on investment securities - 20 21
Net amortization (accretion) on mortgage - backed
Securities - held to maturity 1 (2)
Net amortization (accretion) on mortgage - backed
Securities - available for sale 4 --
Increase (decrease) in accrued expenses and other
liabilities (22) 18
------- -------
Net cash provided by operating activities 424 408
------- -------
Cash flows from investing activities:
Proceeds from principal paydowns of mortgage - backed
Securities - held to maturity 492 303
Proceeds from principal paydowns of mortgage - backed
Securities - available for sale 154 --
Proceeds from maturity and redemption of investment
Securities - available for sale 900 3,235
Purchase of investment securities - available for -- (1,082)
Net (increase) in loans (2,751) (2,287)
Capital expenditures (6) (3)
Proceeds from sale of other real estate owned -- --
------- -------
Net cash provided (used) by investing activities (1,211) 166
------- -------
Cash flow from financing activities:
Net (decrease) in demand, statement passbook, money
Market and NOW deposit accounts (1,540) (859)
Increase in advances from borrowers for taxes
and insurance 132 79
Net increase in other borrowings -- 1,000
------- -------
Net cash provided by ( used in) financing activities (1,408) 220
------- -------
Net increase (decrease) in cash and cash equivalents (2,195) 794
Cash and cash equivalents at beginning of year 8,318 4,684
------- -------
Cash and cash equivalents at end of year $ 6,123 $ 5,478
======= =======
Additional Disclosures:
Supplemental disclosures of cash flows
information-cash paid during year for:
Interest on other borrowings $ -- $ 16
Income taxes 47 39
Supplemental schedule of non-cash investing
activities:
Change in unrealized gains in investment securities -
available for sale (48) (64)
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
GSB Financial Corporation
Notes to Unaudited Consolidated Interim Financial Statements
1. Basis of Presentation
GSB Financial Corporation ("GSB Financial") was incorporated under Delaware law
in March 1997 as a holding company to purchase 100% of the common stock of
Goshen Savings Bank (the "Bank"). On July 9, 1997, GSB Financial completed its
initial public offering of 2,248,250 shares of common stock in connection with
the conversion of the Bank from a mutual form institution to a stock savings
bank (the "Conversion"). Concurrently with the Conversion, GSB Financial
acquired all of the Bank's common stock.
The consolidated financial statements included herein have been prepared by the
Company without audit. In the opinion of management, the quarterly unaudited
financial statements include all adjustments, consisting of normal recurring
accruals, necessary for a fair presentation of the consolidated financial
position and results of operations for the periods presented. Certain
information and footnote disclosures normally included in accordance with
generally accepted accounting principles have been condensed or omitted pursuant
to the rules and regulations of the Securities and Exchange Commission. The
Company believes that the disclosures are adequate to make the information
presented not misleading, however, the results for the periods presented are not
indicative of the results to be expected for the entire year.
The unaudited quarterly financial statement presented herein should be read in
conjunction with the annual audited consolidated financial statements of the
Company for the fiscal year ended September 30, 1997. Significant intercompany
transactions and amounts have been eliminated.
2. Earnings Per Share
On July 9, 1997, GSB Financial Corporation completed its initial stock offering
of 2,248,250 shares of common stock. Concurrent with the offering, approximately
8% of the shares sold (179,860) were purchased by the GSB Financial Corporation
Employee Stock Ownership Plan ("ESOP") using the proceeds of a loan from the
Company to the ESOP. On September 30, 1997, and December 31, 1997, 4,496 and
4,497 shares, respectively, were released from the ESOP loan for allocation to
plan participants. Consequently, the remaining 170,867 shares have not been
committed to be released and under AICPA Statement of Position 93-6, these
shares will not be considered outstanding for purposes of calculating per share
amounts. Earnings per share are not presented for periods prior to the initial
public offering as the Bank was a mutual savings bank, and had no stock
outstanding. During the quarter ended December 31, 1997, the Company had no
outstanding securities or other contracts which, if exercised or converted,
would have resulted in the issuance of common stock. Hence, in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings per Share," basic
and diluted earnings per share are identical.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
GSB Financial Corporation (the "Company") was formed in March 1997 to acquire
the common stock of Goshen Savings Bank (the "Bank") upon its conversion from a
mutual savings bank to a stock savings bank. On July 9, 1997, the Company
completed its initial public offering, issuing 2,248,250 shares of $0.01 par
value common stock at $10.00 per share. Net proceeds to the Company were $21.4
million after conversion costs, and $19.6 million excluding the shares acquired
by the Company's Employee Stock Ownership Plan (the "ESOP"), which were
purchased with the proceeds of a loan from the Company. All references to the
Company prior to July 9, 1997, except where otherwise indicated, are to the
Bank.
The Company's strategy is to continue to be a community oriented savings bank
offering a variety of financial services. The Company attracts deposits from its
local community and invests those deposits principally in one-to-four family
residential mortgage loans. Management seeks to maintain a high quality loan
portfolio with low levels of delinquencies and non-performing assets by
concentrating on residential mortgage loans in its local community. Management
also considers other loans types consistent with its mission to serve the local
consumer and business community.
The Bank is a federal savings bank with deposits insured by the Bank Insurance
Fund ("BIF") of the FDIC. The Bank's primary federal banking regulator is the
Office of Thrift Supervision ("OTS").
The financial condition and results of operations of the Company are primarily
dependent upon the operations of the Bank, and the earnings from securities
investments made by the Company with the portion of the net proceeds of its
stock offering retained by it. The Company's results of operations are dependent
principally on its net interest income, representing the difference between the
income earned on its loan and securities portfolios and its cost of funds,
represented principally by interest paid on its deposit accounts. Results of
operations are also affected by the Company's provision for loan losses. In
addition to net interest income, other sources of income for the Company include
deposit account fees, loan and loan servicing fees, gains on the sale of
securities, capital gain distributions on mutual fund investments, and fees for
banking services such as safe deposit boxes. The largest category of
non-interest expense is compensation and benefits expense. Other principal
categories of non-interest expense include occupancy expense, data processing
costs, advertising and marketing expenses, and insurance costs. Results of
operations are also significantly affected by general economic and competitive
conditions, particularly changes in market interest rates, government policies
and actions of regulatory authorities.
The Company's strategy is to continue to operate the Bank as a community-based
savings bank while exploring appropriate opportunities to leverage the
additional capital obtained in the Conversion. The Company is seeking to improve
its customer service delivery capability, enabling it to provide better services
to existing customers and seek to expand its customer base.
<PAGE>
Average Balances, Interest Rates and Yield
The following table presents for the periods indicated, the total
dollar amount of interest income from average interest-earning assets and the
resultant yields, as well as the interest expense on average interest-bearing
liabilities, expressed both in dollars and rates. No tax equivalent adjustments
were made. All average balances are monthly average balances.
Non-interest-bearing checking accounts are included in the tables as a component
of non-interest-bearing liabilities.
<TABLE>
<CAPTION>
For the Three Months Ended December 31,
---------------------------------------------------------------------
1997 1996
-------------------------------- --------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost(5)(6) Balance Interest Cost(5)(6)
------- -------- ---------- ------- -------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earnings assets:
Loans receivable(1) ......................... $ 67,000 $ 1,302 7.77% $ 60,323 $ 1,154 7.66%
Mortgage-backed securities .................. 12,360 199 6.44 6,226 113 7.26
Investment securities ....................... 25,106 438 6.44 21,295 386 6.48
Federal funds sold .......................... 5,201 57 4.38 1,720 22 5.12
-------- -------- -------- --------
Total interest-earning assets ........... 109,667 1,996 7.16 89,564 1,675 7.30
Non-interest-earning assets 5,502 -------- 7,192 --------
-------- --------
Total assets ........................... $115,169 $ 96,756
======== ========
Interest-bearing liabilities:
Savings accounts ............................ $ 26,358 198 3.00 $ 25,994 196 3.02
Certificates of deposit ..................... 37,672 487 5.17 37,850 466 4.94
Money market ................................ 8,781 66 3.01 10,439 78 2.99
NOW accounts ................................ 4,122 27 2.62 3,736 24 2.57
Other ....................................... 0 0 0.00 1,431 16 4.47
-------- -------- -------- --------
Total interest-bearing
liabilities ........................... 76,933 778 4.05 79,450 780 3.93
Non-interest-bearing -------- --------
liabilities ............................... 5,561 5,379
-------- --------
Total liabilities ....................... 82,494 84,829
Equity ...................................... 32,675 11,927
-------- --------
Total liabilities and equity ........... $115,169 $ 96,756
======== ========
Net interest income/spread(2)(3) ............ $ 1,218 3.11% $ 895 3.37%
======== ==== ======== ====
Net earning assets/net
interest margin (4) ....................... $ 32,734 4.32% $ 10,114 3.81%
======== ===== ======== ====
Ratio of average interest-earning assets
to average interest-bearing liabilities . 1.43x 1.13x
======== ========
</TABLE>
(1) Average balances include non-accrual loans. Interest on such loans is
recognized as and when received.
(2) Includes interest-bearing deposit in other financial institution.
(3) Interest-rate spread represents the difference between average yield on
interest-earning assets and the average cost of interest-bearing liabilities.
(4) Net yield on interest-earning assets ("net interest margin") represents net
interest income as a percentage of average interest-earning assets.
(5) Yields for the three month periods have been annualized when appropriate.
(6) During the three months ended December 31, 1997 and 1996, the Company
received $45,000 and $55,000, respectively, in annual non-capital distributions
on its mutual fund investment which was recorded as interest earned. For purpose
of reporting the yields, spreads and net interest margin for such periods, only
one-quarter of such amounts have been taken into account so that yields, spreads
and margins are comparable to those shown in the Company's 1997 Annual Report.
If such amounts had been included in full for the respective fiscal quarters,
the interest rate spreads for the three months ended December 31, 1997 and 1996,
would have been 3.23% and 3.55%, respectively, and the net interest margins
would have been 4.44% and 4.00%, respectively, for such periods.
<PAGE>
Comparison of Financial Condition at December 31, 1997 and September 30, 1997
The Company's total assets amounted to $115.9 million at December 31, 1997 as
compared to $117.0 million at September 30, 1997. Loans, net increased $2.7
million, or 4.2%, from $65.7 million to $68.5 million due to steady loan demand.
Federal funds, investment securities available for sale and mortgage-backed
securities decreased by $2.2 million, $1.0 million and $648,000, respectively,
during the first quarter of fiscal 1998, primarily to fund the new loan demand
and a decline of $1.6 million in deposits. The decline in deposits during the
three months ended December 31, 1997, is believed to have resulted from
competitive pressures, principally related to the strong stock market and low
interest rate conditions which are believed to have caused some customers to
seek non-deposit investments with higher returns. Deposits totaled $81.4 million
at December 31, 1997 as compared to $83.0 million at September 30, 1997.
Total equity increased to $32.9 million at December 31, 1997, from $32.6 million
at September 30, 1997. The $320,000 increase in equity included the retention of
net income of $295,000, and $73,000 representing the financial statement effect
of the release of ESOP stock for allocation, partially offset by a decrease of
$48,000 in the net unrealized gain on securities available for sale.
Basic and diluted earnings per share for the first quarter of fiscal 1998 were
both $0.14, calculated by dividing reported net income by weighted average
shares of 2,072,984 for the period from October 1, 1997 through December 31,
1997, excluding unallocated ESOP stock.
Comparison of Operating Results for the Three Months Ended December 31, 1997 and
1996
Interest Income was $2.0 million for the first quarter of fiscal 1998 as
compared to $1.7 million for the first quarter of fiscal 1997, a $321,000 or
19.2% increase. The increase was primarily volume related. Average earning
assets for the quarter ended December 31, 1997, increased by $20.1 million over
average earning assets for the comparable period last year. The increases in the
volume of all earning asset categories resulted from the Company's investment of
the proceeds of its public offering. Interest earned on loans increased
primarily due to an increase of approximately $6.7 million in the average volume
of loans, coupled with an increase in the average yield on loans. This increase
in average yield resulted principally from customer demand for fixed rate loans
which were originated at initial interest rates higher than the comparable
fully-indexed rates on adjustable rate mortgage loans in the Company's
portfolio.
Interest earned on mortgage-backed securities increased by $86,000. This was due
to an increase in the average balance of mortgage-backed securities by $6.1
million to $12.4 million in the first quarter of fiscal 1998, as compared to
$6.2 million in the first quarter of fiscal 1997. The volume increase was
partially offset by an 82 basis point decline in average yield on
mortgage-backed securities. The decline in average yield was the result of lower
market interest rates which reduced available yields on mortgage-backed
securities purchased during the latter half of calendar year 1997 with the
proceeds of the Company's stock offering, while higher rate mortgage-backed
securities purchased in past years were gradually repaid. Interest earned on
investment securities and federal funds increased by $52,000 and $35,000,
<PAGE>
respectively. This was due to an increase in the average balances of investment
securities and federal funds by $3.8 million and $3.5 million, respectively,
partially offset by decreases in the average yields of four and 74 basis points,
respectively, due to lower market interest rates.
Interest Expense was $778,000 for the first quarter of fiscal 1998 as compared
to $780,000 for the same quarter in fiscal 1997. The decrease in interest
expense was caused by a reduction in average interest-bearing liabilities of
$2.5 million or 3.2%, substantially offset by a 12 basis point increase in the
average cost of funds. Average interest bearing liabilities declined when
comparing the quarter ended December 31, 1997, with the comparable quarter the
prior year because of the combined effect of competition for deposits and the
repayment of outstanding borrowings. Management also believes that part of the
decline may represent deposits which were withdrawn and used to purchase stock
of the Company in the Conversion. The increase in the average cost of funds was
caused principally by a 23 basis point increase in the average rate paid on
certificates of deposit as competition for deposits in the local market caused
upward pressure on short term certificate of deposit rates
Provision for Loan Losses. The Company increased its provision for loan losses
from zero for the quarter ended December 31, 1996 to $20,000 for the quarter
ended December 31, 1997 due to increases in the loan portfolio. At December 31,
1997, the allowance for loan losses represented 137.9% of non-performing loans
and 0.23% of total loans. Non-performing loans at December 31, 1997 were
$115,000, or 0.17% of total loans, and were represented by one residential
mortgage loan on which a foreclosure action has been commenced and the borrower
has filed a bankruptcy petition.
Non-interest income was $146,000 for the first quarter of fiscal 1998 as
compared to $162,000 for the same quarter in fiscal 1997. The decrease of
$16,000 is principally caused by a reduction of $11,000 of capital gains
distributions on the Company's mutual fund investment.
Non-interest expense was $852,000 for the first quarter of fiscal 1998, compared
to $637,000 for the comparable quarter in fiscal 1997. The increase of $215,000
is mostly comprised of $73,000 of compensation expense in connection with the
Company's ESOP and $68,000 of expenses incurred or accrued related to operating
a public company and the holding of the first annual meeting of stockholders. An
additional $61,000 increase in salaries and employee benefits expense was due in
substantial part to normal salary increases and an increase of approximately
four full-time equivalent employees.
Income tax expense was $197,000 for the first quarter of fiscal 1998, compared
to $125,000 for the comparable quarter in fiscal 1997. The increase of $72,000
was principally caused by a $60,000 reduction in tax expense during the quarter
ended December 31, 1996, due to a reduction in deferred tax liabilities caused
by changes in the New York State law regarding the tax bad debt deduction.
Liquidity and Capital Resources
The Company's primary sources of funds are deposits, proceeds from the principal
and interest payments on loans, mortgage-backed and debt securities and capital
gain distributions on its mutual fund investment. While maturities and scheduled
amortization of loans and securities are predictable sources of funds, deposit
outflows, mortgage prepayments and mortgage loan and securities sales are
greatly influenced by general interest rates, economic conditions and
competition.
<PAGE>
The Bank closely monitors its liquidity position on a regular basis.
Excess short-term liquidity is invested in overnight federal funds sold. If the
Bank requires funds beyond its ability to generate them internally, additional
sources of funds are available through the use of borrowings. At December 31,
1997, the Bank had available lines of credit with the Federal Home Loan Bank of
New York of $15.5 million. The Bank may, from time to time, use borrowings to
satisfy funding needs rather than increase the rates paid on new deposits,
because the latter could have a greater adverse effect on the overall cost of
funds. In the future, borrowings may also provide an appropriate method of
leveraging the additional capital obtained in the Conversion.
Loan commitments totaled $3.4 million at December 31, 1997, and the
Bank had $1.1 million of unused home equity lines of credit and $194,000 of
unused consumer overdraft checking lines of credit. Management anticipates that
the Bank will have sufficient funds available to meet its current loan
commitments. Certificates of deposit, which are scheduled to mature in one year
or less from December 31, 1997, totaled $34.7 million. Management anticipates
that the Bank will be able to retain substantially all of such deposits if the
Bank decides to do so to fund loans and other investments.
At December 31, 1997, the Bank exceeded all regulatory capital
requirements of the OTS applicable to it, with tangible and core capital of
$21.7 million, or 20.1% of adjusted assets and total risk-based capital of $21.8
million, or 40.6% of risk-weighted assets. The Bank was classified as "well
capitalized" at December 31, 1997 under OTS regulations.
The Bank is subject to the minimum liquidity regulations of the OTS. At
December 31, 1997, OTS regulations required that the Bank maintain liquid assets
equal to at least 4% of its net withdrawable accounts plus short term
borrowings, measured on a monthly basis. The Bank has satisfied this requirement
throughout the period during which it has been a federal savings bank, and at
December 31, 1997 had liquid assets equal to 26.8% of net withdrawable accounts
plus short term borrowings.
The following table sets forth information regarding the regulatory
capital ratios of the Bank at December 31, 1997.
<TABLE>
<CAPTION>
Actual Minimum Capital For Classification as
Well Capitalized
Bank Amount Ratio Amount Ratio Amount Ratio
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Tangible Capital $21,661 20.10% 1,616 1.50% - -
Tier 1 (Core) Capital 21,661 20.10% 3,233 3.00% $5,388 5.0%
Risk Based Capital:
Tier 1 21,661 40.35% - - 3,221 6.0%
Total 21,819 40.64% 4,295 8.00% 5,368 10.0%
</TABLE>
<PAGE>
Forward-Looking Statements
When used in this report on form 10-Q, in future filings by the Company
with the Securities and Exchange Commission, in the Company's press releases or
other public or stockholder communications, or in oral statements made with the
approval of an authorized officer, words and phrases such as " will likely
result" "are expected to," "will continue," "are estimated," "are anticipated"
and other similar expressions, are intended to identify "forward-looking
statements" under the Private Securities Litigation Reform Act. In particular,
certain information customarily disclosed by financial institutions, such as
estimates of interest rate sensitivity and the adequacy of the loan loss
allowance, are inherently forward-looking statements because, by their nature,
they represent attempts to estimate what will occur in the future.
A wide variety of factors could cause the Company's actual results and
experiences to differ materially from the anticipated results or other
expectations expressed in the Company's forward-looking statements. Some of the
risks and uncertainties that may affect operations, performance, results of the
Company's business, the interest rate sensitivity of its assets and liabilities,
and the adequacy of its loan loss allowance, include but are not limited to: (i)
deterioration in local, regional, national or global economic conditions which
could result, among other things, in an increase in loan delinquencies, a
decrease in property values, or a change in the housing turnover rate; (ii)
changes in market interest rates or changes in the speed at which market
interest rates change; (iii) changes in laws and regulations affecting the
financial services industry; (iv) changes in competition; and (v) changes in
consumer preferences.
Furthermore, changes in the economic circumstances of individual
borrowers could have a material adverse effect on their ability to repay their
loans regardless of general economic conditions. Likewise, financial adversity
experienced by any one major business in the Company's market area could have a
significant adverse effect on those of the Company's customers who are employees
of that business or otherwise rely upon it for their economic well being. This
could affect their ability to honor their loan obligations and their ability to
maintain deposit balances.
For these reasons, the Company cautions readers not to place undue
reliance upon any forward-looking statements. Forward-looking statements speak
only as of the date made and the Company assumes no obligation to update or
revise any such statements upon any change in applicable circumstances.
Year 2000 Compliance
The Company is continuing the process of evaluating its computer
software and hardware for Year 2000 compliance. The Bank is also investigating
vendors in connection with its planned replacement of the software and hardware
for its retail delivery system to assure that the new system will be Year 2000
compliant. The replacement of the hardware and software, which the Bank is
undertaking regardless of the Year 2000 issue, should serve to facilitate the
avoidance of Year 2000 problems without incurring additional expenses in
connection with the Bank's core systems over and above those which would be
incurred as part of a normal replacement program.
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings
In the ordinary course of business, the Company and the Bank are subject to
legal actions which involve claims for monetary relief. Management, based on
advice of counsel, does not believe that any currently known legal actions,
individually or in the aggregate will have a material effect on its consolidated
financial condition or results of operation.
Item 2. Changes in Securities
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11 - Computation of Earnings Per Share
Exhibit 27 - Financial Data Schedule*
(b) Reports on Form 8-K
None
- ------------------------------------------------------------------------
* Submitted only with filing in electronic format.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GSB Financial Corporation
Date: February 17, 1998 /s/ Clifford E. Kelsey, Jr.
------------------------------------
Clifford E. Kelsey, Jr.
President and Chief
Executive Officer
(Principal Executive Officer)
Date: February 17, 1998 /s/ Stephen W. Dederick
------------------------------------
Stephen W. Dederick
Chief Financial Officer
(Principal Financial and
Accounting Officer)
<PAGE>
Exhibit 11
Computation of Net Income Per Share
<TABLE>
<CAPTION>
For the Quarter Ended
December 31, 1997 December 31, 1996
----------------- ----------------------
<S> <C> <C>
Net income applicable to common stock $ 295,000 N/A
Weighted average common shares 2,072,984 N/A
Earnings per common share $ 0.14 N/A
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM "THE
CONSOLIDATED FINANCIAL STATEMENTS" AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 3,222
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2,900
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 32,449
<INVESTMENTS-CARRYING> 5,160
<INVESTMENTS-MARKET> 5,236
<LOANS> 68,469
<ALLOWANCE> 158
<TOTAL-ASSETS> 115,884
<DEPOSITS> 81,443
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,488
<LONG-TERM> 0
0
0
<COMMON> 21,496
<OTHER-SE> 11,457
<TOTAL-LIABILITIES-AND-EQUITY> 117,046
<INTEREST-LOAN> 1,302
<INTEREST-INVEST> 694
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 1,996
<INTEREST-DEPOSIT> 778
<INTEREST-EXPENSE> 778
<INTEREST-INCOME-NET> 1,218
<LOAN-LOSSES> 20
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 852
<INCOME-PRETAX> 492
<INCOME-PRE-EXTRAORDINARY> 492
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 295
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.14
<YIELD-ACTUAL> 4.32
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 139
<CHARGE-OFFS> 1
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 158
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 158
</TABLE>
