<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------------------------
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30,1996
[ ] 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 0-22742
GFS BANCORP, INC.
-------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 42-1410536
- ---------------------------- -----------------
(State or ther jurisdiction (I.R.S. Employer
of incorporation or Identification or
organization) Number)
1025 MAIN STREET, GRINNELL, IOWA 50112-0030
- ---------------------------------------------------------------------------
(Address of principal executive offices)
(515) 236-3121
(Issuer's telephone number)
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 [ ]
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
State the number of Shares outstanding of each of the issuer's classes of
common equity, as of the latest date:
As of September 30, 1996, there were 502,600 shares of the Registrant's
common stock issued and outstanding, including
9,994 shares of restricted stock.
<PAGE>
GFS BANCORP, INC.
INDEX
-----
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION (UNAUDITED) PAGE NO.
<S> <C> <C>
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets, September 30,1996
and June 30, 1996 (Unaudited)............................... 1
Consolidated Statement of Income for the Three Months
Ended September 30, 1996 and 1995 (Unaudited)............... 2
Consolidated Statement of Shareholders' Equity,
for the Three Months Ended September 30,1996
(Unaudited)................................................. 3
Consolidated Statement of Cash Flows, for the Three
Months Ended September 30, 1996 and 1995
(Unaudited)................................................. 4
Notes to Consolidated Financial Statements
(Unaudited)................................................. 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 7
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders......... 15
Signature Page............................................. 17
</TABLE>
i
<PAGE>
GFS BANCORP, INC
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
Sept 30, June 30,
ASSETS 1996 1996
----------- -----------
<S> <C> <C>
Cash and amounts due from depository institutions:
Noninterest bearing $343,192 $222,461
Interest bearing 1,528,870 2,048,671
Securities available for sale 1,609,425 1,672,763
Securites held to maturity 1,497,366 1,582,188
Mortgage-backed securities held to maturity 3,278,556 3,435,254
Stock in Federal Home Loan Bank, at cost (approximate fair value) 1,159,000 1,159,000
Loans receivable, net 74,583,223 71,772,896
Real estate acquired in settlement of loans, net -- 226,616
Premises and equipment, net 232,904 234,415
Accrued interest receivable 471,050 439,392
Other assets 502,163 510,960
------------------------
Total Assets $85,205,749 $83,304,616
========================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand $3,229,502 $4,651,689
Savings and money market 10,329,963 10,140,487
Certificates of deposit 41,330,320 38,330,207
------------------------
Total Deposits 54,889,785 53,122,383
Advances from Federal Home Loan Bank 19,304,229 19,317,997
Advances from borrowers for taxes and insurance 524,421 432,970
Accrued dividends payable 50,260 51,460
Other accrued expenses and liabilities 581,761 434,915
------------------------
Total Liabilities $75,350,456 $73,359,725
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, authorized 500,000 shares, issued non -- --
Common stock, $.01 par value, authorized 2,000,000 shares;
issued 550,160 shares; 5,501 5,501
Additional paid-in capital 5,154,725 5,138,066
Retained earnings - substantially restricted 5,843,875 5,856,546
Less:
Unearned employee stock ownership plan (243,931) (259,781)
Unearned retention and recognition plan (23,482) (32,659)
Treasury stock, at cost Sept 47,560 shares; June 40,450 shares (872,175) (728,800)
Unrealized loss on securities available for sale, net (9,220) (33,982)
------------------------
Total Stockholders' Equity $9,855,293 $9,944,891
------------------------
Total Liabilities & Stockholders' Equity $85,205,749 $83,304,616
========================
</TABLE>
1
<PAGE>
GFS BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three months Ended
September 30,
1996 1995
----------- ----------
<S> <C> <C>
Interest income:
Loans receivable $1,606,836 $1,207,823
Mortgage-backed securities 62,487 71,871
Other securities and interest-bearing cash accounts 89,947 140,092
-----------------------
1,759,270 1,419,786
-----------------------
Interest expense:
Deposits 709,690 620,204
Advances from Federal Home Loan Bank 295,251 246,636
-----------------------
1,004,941 866,840
-----------------------
NET INTEREST INCOME 754,329 552,946
Provision for loan losses 49,000 6,000
-----------------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 705,329 546,946
Noninterest income:
Gain/(loss) on sale of securities for sale (1,576) 13,852
Other 34,531 22,279
-----------------------
32,955 36,131
-----------------------
Noninterest expenses:
Salaries and employee benefits 213,723 166,515
Real estate operations 0 45
Occupancy expenses 19,491 16,547
Federal deposit insurance premiums 29,091 25,168
FDIC - SAIF Special Assessment 287,568 0
Data processing services 17,134 14,778
Other 79,489 63,260
-----------------------
646,496 286,313
-----------------------
INCOME BEFORE PROVISION FOR INCOME TAX 91,788 296,764
Provision for income taxes 56,082 106,400
-----------------------
NET INCOME $35,706 $190,364
=======================
Earnings per common share $0.07 $0.36
=======================
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
GFS BANCORP, INC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
Net Unrealized
Loss on
Additional ESOP RRP Available Total
Common Paid-in Retained Stock Stock Treasury for Sale Stockholders
Stock Capital Earnings Awards Awards Stock Securities Equity
------- ----------- ---------- --------- --------- --------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1996 $5,501 $5,138,066 $5,856,546 ($259,781) ($32,659) ($728,800) ($33,982) $9,944,891
Net income 35,706 $35,706
Dividends declared (48,377) ($48,377)
ESOP common stock released
for allocation 16,659 15,850 $32,509
Amortization of RRP contributions 9,177 $9,177
Purchase of 7,000 shares of
treasury stock (143,375) ($143,375)
Net change in unrealized loss on
securites available for sale 24,762 $24,762
---------------------------------------------------------------------------------------------
Balance, September 30, 1996 $5,501 $5,154,725 $5,843,875 ($243,931) ($23,482) ($872,175) ($9,220) $9,855,293
=============================================================================================
</TABLE>
3
<PAGE>
GFS BANCORP, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
September 30
1996 1995
----------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 35,706 $ 190,364
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 8,193 6,036
(Gain) loss on sale of available for sale investments 1,576 (13,852)
ESOP and RRP expense 41,686 41,740
Deferred Loan fees, net (16,513) 21,983
Provisions for loan losses 49,000 6,000
Change in:
Accrued interest receivable (31,658) (12,639)
Other assets 8,797 24,733
Other liabilities 146,846 106,321
----------------------
Net cash provided by operating activities 243,633 370,686
----------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Maturity of securities held to maturity 85,000 0
Maturity of securities available for sale 0 150,000
Proceeds from sales of secutities available for sale 99,925 146,852
Purchase of securities held to maturity 0 0
Purchase of securities available for sale 0 0
Purchase of FHLB Stock 0 (95,400)
Principal payments received on mortgage-backed securities 156,698 236,691
Net (increase) in loans outstanding (2,857,053) (5,990,861)
Proceeds from sale of real estate 226,616 0
Purchase of premises and equipment (6,682) (20,372)
----------------------
Net cash (used) by investing activities (2,295,496) (5,573,090)
----------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 1,767,402 991,637
Advances from Federal Home Loan Bank 0 4,000,000
Repayment of advances from the Federal Home Loan Bank (13,768) (39,243)
Net increase (decrease) in advances from borrowers for
taxes and insurance 91,451 (102,884)
Net Proceeds from reissuance of treasury stock 0 9,520
Purchase of treasury stock (143,375) (327,880)
Dividends paid (48,917) (40,592)
----------------------
Net cash provided by financing activities 1,652,793 4,490,558
----------------------
Net (increase) in cash and cash equivalents (399,070) (711,846)
Cash and Cash equivalents, beginning of period 2,271,132 4,107,346
----------------------
Cash and Cash equivalents, end of period $1,872,062 $3,395,500
======================
</TABLE>
4
<PAGE>
GFS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Basis of Presentation
---------------------
The accompanying unaudited Consolidated Financial Statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Regulation S-
X. Accordingly, they do not include all the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, the Consolidated Financial Statements contain
all adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial condition of GFS Bancorp, Inc. as of September 30,
1996 and June 30, 1996, the results of its operations for the three months ended
September 30, 1996 and 1995, changes in stockholders' equity for the three
months ended September 30, 1996 and for the statement of cash flows for the
three months ended September 30, 1996 and 1995.
Operating results for the three months ended September 30, 1996 are not
necessarily indicative of the results that may be expected for the fiscal year
ending June 30, 1997.
(2) Earnings Per Share of Common Stock
----------------------------------
Earnings per share is based on the weighted average number of shares
outstanding during the period, plus the shares that would be issued assuming the
conversion of dilutive stock options. The weighted average number of common and
common stock equivalents for the period ended September 30, 1996 was 530,377
shares. The amount set forth above includes 9,994 shares of restricted stock
issued in accordance with the recognition and retention plan established by the
Company. These restricted stock awards are reflected in the income per share
computations in the accompanying financial statements. In addition, 42,320
shares of common stock were issued to the Employee Stock Ownership Plan (ESOP)
trust for the benefit of the employees of the Company and its subsidiaries. In
accordance with American Institute of Certified Public Accountants Accounting
Standards Division statement of position 93-6 on
5
<PAGE>
"Employers Accounting for Employee Stock Ownership Plans," ESOP shares that have
been committed to be released are considered outstanding and ESOP shares that
have not been committed to be released are not considered outstanding. At
September 30, 1996, 18,378 ESOP shares were committed to be released and were
considered in the earnings per share computations.
(3) Regulatory Capital Requirements
-------------------------------
Pursuant to Office of Thrift Supervision Regulations, savings institutions
must meet three separate minimum capital-to-asset requirements. The following
table summarizes, as of September 30, 1996, the capital requirements for
Grinnell Federal Savings Bank (the "Bank") under applicable regulations and its
actual capital ratios. As of September 30, 1996, the Bank substantially exceeded
all current regulatory capital standards.
<TABLE>
<CAPTION>
Regulatory Actual
Capital Capital
Requirement (Bank Only) Excess Capital
----------------- ---------------- ------------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Risk-Based.......... $3,837 8.00% $9,045 18.86% $5,208 10.86%
Core Capital........ 2,520 3.0 8,444 10.05 5,924 7.05
Tangible Capital... 1,260 1.5 8,444 10.05 7,184 8.55
</TABLE>
(4) Pending Accounting Pronouncements
---------------------------------
The Financial Accounting Standards Board (FASB) has approved, effective for
years beginning after December 15,1995, Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,
Statement No. 122, Accounting for Mortgage Servicing Rights and Statement No.
123, Accounting for Stock-Based Compensation and for transactions after December
31,1996, Statement No. 125, Accounting for Transfers and Servicing of Financial
Assets and Extinguishment of Liabilities. FASB Statements No. 121,122,123 and
125 are not expected to have a material effect on the Company's financial
statements when adopted.
6
<PAGE>
PART I - ITEM 2
MANAGEMENTS'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Business
- --------
GFS Bancorp, Inc. (the "Company") was formed to be the holding company for
Grinnell Federal Savings Bank ("Grinnell Federal" or the "Bank") in connection
with the Bank's conversion to stock form. The Company completed its initial
public offering on January 5, 1994 with the sale of 529,000 shares at $10.00 per
share. The primary activity of the Company is to act as a holding company for
the Bank. As a result, unless otherwise noted, the following discussion relates
primarily to the Bank. The primary business of savings banks, including Grinnell
Federal, has historically consisted of attracting deposits from the general
public and providing financing for the purchase of residential properties. The
operations of the Bank are significantly affected by prevailing economic
conditions as well as by government policies and regulations relating to
monetary and fiscal affairs, housing and financial institutions.
Net income is primarily dependent upon the difference (or "spread") between
the average yield earned on loans, mortgage-backed and related securities and
investments, and the average rate paid on deposits and borrowings, as well as
the relative amounts of such assets and liabilities. The interest rate spread is
affected by regulatory, economic and competitive factors that influence interest
rates, loan demand and deposit flows. The Bank, like other thrift institutions,
is subject to interest rate risk to the degree that its interest-bearing
liabilities mature or reprice at different times, or on a different basis, than
its interest-earning assets.
Net income is also affected by, among other things, gains and losses on
sales of real estate and investments, mortgage-backed and related securities,
investment securities and foreclosed assets, provisions for loan losses, service
charges and other fees, operating expenses and income taxes.
7
<PAGE>
Financial Condition
- -------------------
The Company's total assets increased $1.9 million, or 2.3%, from $83.3
million at June 30, 1996 to $85.2 million at September 30, 1996. This increase
was due primarily to an increase of $2.8 million in net loans receivable,
partially offset by a $399,000 decrease in cash, a $148,000 decrease in
investment securities, a $157,000 decrease in mortgage-backed securities and a
$227,000 decrease in real estate acquired in settlement of loans. The increases
in loans were funded primarily by a $1.8 million increase in savings deposits.
Total investment securities decreased by $148,000, or 4.5%, from $3.3
million at June 30, 1996 to $3.1 million at September 30, 1996 due to the sale
of an investment in common stock. At September 30, 1996 the investment portfolio
consisted primarily of $1.5 million in U.S. agency obligations, $800,000 in
mutual funds, and $800,000 in equity securities consisting of common stocks of
two bank holding companies and a life insurance company and preferred stocks of
two bank holding companies, a power company and an automobile manufacturer.
Total mortgage-backed securities decreased $157,000, or 4.6%, from $3.4
million at June 30, 1996 to $3.3 million at September 30, 1996. The decrease in
mortgage-backed securities was due to amortization of principal and prepayments.
Net loans receivable increased $2.8 million, or 3.9%, from $71.8 million at
June 30, 1996 to $74.6 million at September 30, 1996. Mortgage loans originated
during the three months ended September 30, 1996, totaled $3.7 million secured
primarily by single family dwellings in the Bank's market area. During this
period, the Bank also purchased $2.4 million of loans secured by one-to-four
family dwellings, $2.6 million of multi-family, $116,000 in land development,
and $1.0 million of commercial real estate loans primarily located in the
Madison, Wisconsin area. Of the $6.1 million in one-to-four family, multi-
family, land development and commercial real estate purchased during the period,
$3.8 million were sold to other financial institutions with the Bank retaining
the servicing.
Total deposits increased by $1.8 million, or 3.4%, from $53.1 million at
June 30, 1996 to $54.9 million at September 30, 1996. This increase was
primarily due to an increase of $3.0 million in
8
<PAGE>
certificate of deposit accounts and $190,000 in savings and money market
accounts, which was partially offset by a $1.4 million decrease in demand
deposits. Management believes the increase in certificate of deposits was
primarily attributable to increased marketing efforts and attractive rates paid
on deposit accounts.
Total borrowed funds at June 30, 1996 and at September 30,1996 was
$19.3 million.
Total stockholders' equity decreased $90,000 from $9.94 million at
June 30, 1996 to $9.86 million at September 30, 1996. The decrease was primarily
due to the $143,000 cost to repurchase 7,000 shares of the Company's stock,
the declaration of a $.10 per share dividend and the impact of a one time after-
tax special FDIC assessment of $181,000. (See Results of Operations - General
and Regulatory Developments.) The impact of the stock repurchase and dividend
was offset by net income of $35,700 and amortization of Recognition and
Retention Plan ("RRP"), allocations to the Employee Stock Ownership Plan
("ESOP"), and a decrease in unrealized loss on available for sale securities.
(See Consolidated Statement of Shareholders' Equity.)
RESULTS OF OPERATIONS - COMPARISON OF QUARTERS ENDED SEPTEMBER 30, 1996 AND 1995
- --------------------------------------------------------------------------------
General. The Company's net income decreased $154,000, or 81.1%,
--------
from $190,000 for the quarter ended September 30, 1995 to $36,000 for the
quarter ended September 30, 1996. This decrease resulted primarily from a one
time after-tax special assessment of $181,000 ($287,568 before the effect of
federal and state income taxes) levied by the Federal Deposit Insurance
Corporation (the "FDIC") in order to capitalize the Savings Association
Insurance Fund. (See Regulatory Developments.)
Net Interest Income. Net interest income, before provision for loan
--------------------
losses, increased $201,000, or 36.3%, from $553,000 at September 30, 1995 to
$754,000 at September 30, 1996 due to increases in average balances of interest-
earning assets. The Company's average spread increased from 2.34% for the three
months ended September 30, 1995 to 2.65% for the three months ended September
30, 1996 due to the fact that yields on interest-earning assets increased more
than rates paid on interest-bearing liabilities.
9
<PAGE>
Interest Income. Interest income increased by $339,000, or 24.2%,
----------------
from $1.4 million at September 30, 1995 to $1.8 million at September 30, 1996.
This increase was primarily due to an increase of 0.18% in the average rate
earned on interest-earning assets and an increase of $12.3 million in the
average balance of such assets. The average balance of such assets increased due
to an increase in the average balance of loans as a result of increased
originations and purchases.
Interest Expense. Interest expense increased by $138,000, or 15.9%,
-----------------
from $867,000 for the quarter ended September 30, 1995 to $1.0 million for the
quarter ended September 30, 1996. This increase was primarily due to an $11.8
million increase in the average balance of total deposits and borrowed funds,
which was partially offset by a .13% decrease in the average rate paid on
interest-bearing liabilities.
Provision for Loan Losses. The provision for loan losses is
--------------------------
determined by management as the amount to be added to the allowance for loan
losses after net charge-offs have been deducted to bring the allowance to a
level which is considered adequate to absorb losses inherent in the loan
portfolio in accordance with general accepted accounting principles. A $49,000
provision for loan losses was established for the quarter ended September 30,
1996, as compared to a $6,000 provision for the quarter ended September 30,
1995. The increase in loan loss provisions was due to further increases in the
mortgage loan portfolio. Although the Company maintains its allowance for loan
losses at a level which it considers to be adequate to provide for potential
losses, there can be no assurance that future losses will not exceed estimated
amounts or that additional provisions for loan losses will not be required for
future periods.
Non-Interest Income. Non-interest income decreased from $36,000 at
--------------------
September 30, 1995 to $33,000 at September 30, 1996.
Non-Interest Expense. Non-interest expense increased by $360,000
---------------------
from $286,000 in the quarter ended September 30, 1995 to $646,000 in the quarter
ended September 30, 1996. This increase was primarily due to a $287,568
special one time FDIC-SAIF insurance assessment (See Results of Operations -
General above and Regulatory Developments below) and a $47,000 increase in
compensation and benefits due to staff additions and fiscal year-end salary
increases.
10
<PAGE>
Provision for Income Taxes. Income tax expense was $106,000 for the
---------------------------
quarter ended September 30, 1995 compared to $56,000 for the quarter ended
September 30, 1996. The $50,000 decrease was due to a decrease in income
subject to taxes.
Allowance for Loan Losses. The allowance for loan losses is
--------------------------
calculated based upon an evaluation of pertinent factors underlying the types
and qualities of the Company's loans. Management considers such factors as the
repayment status of a loan, the estimated fair value of the underlying
collateral, the borrower's ability to repay the loan, current and anticipated
economic conditions which might affect the borrower's ability to repay the loan
and the Company's past statistical history concerning charge-offs. The
Company's allowance for loan losses as of September 30, 1996 was $689,000, or
0.9% of the total loans. The June 30, 1996 allowance for loan losses was
$641,000, or 0.9% of total loans.
Non-Performing Assets. Total non-performing assets (defined as non-
---------------------
accruing loans for which payments have been due and uncollected for a period in
excess of 90 days plus foreclosed assets) increased $400,000 from $1.0 million,
or 1.15% of total assets at June 30, 1996, to $1.4 million, or 1.63% of total
assets at September 30, 1996. This $1.4 million consisted primarily of seven
loans totaling $127,000 secured by single-family homes, three loans totaling
$751,00 secured by multi-family real estate located in Madison, Wisconsin, one
non-mortgage commercial loan for $51,000, one consumer loan for $21,000 and a
$437,000 package of equipment leases owned by the Bank. The referenced
equipment leases were sold and serviced by Bennett Funding Group and its
affiliates (the "Bennett Group"), certain of which companies have been charged
by the Securities and Exchange Commission with, among other things, the illegal
sale of fictitious equipment leases. On April 1, 1996, the Bennett Group filed
for Chapter 11 Bankruptcy, resulting in the suspension of payments on the Bank's
leases. On June 27, 1996, the Company learned that approximately half of the
leases may have been pledged more than once, thus raising a question as to the
priority of the Bank's security interest. Based on the facts available at this
time and the Bank's level of provisions for loan losses, management does not
currently expect these events to have a material adverse effect on the Company's
earnings or financial condition. This conclusion, however, may be altered by
future developments in this matter. Write-downs of this asset may be necessary,
though the size of any such write-downs cannot be predicted with accuracy at
this time. The $400,000
11
<PAGE>
increase in non-performing assets primarily reflects the addition of the three
loans totaling $751,000 secured by multi-family real estate located in Madison,
Wisconsin, which was partially offset by the redemption of a $227,000 parcel of
real estate in judgment, which had been non-performing at June 30, 1996.
In addition, at September 30, 1996, other assets of concern totaled
$420,000 and included eight loans totaling $137,000 secured by single-family
residences and a $283,000 single-family home in Houston, Texas. While these
loans raise concerns as to timely collectibility, based upon information
currently available, management does not anticipate any material loss on these
assets.
Assets classified pursuant to the Office of Thrift Supervision ("OTS")
regulations and assets designated special mention totaled $1.8 million at
September 30,1996 as compared to $2.5 million at June 30, 1996. At September 30,
1996, all classified assets were included in non-performing assets or other
assets of concern.
For all periods presented the Company had no significant troubled debt
restructuring. The following table sets forth the amount of non-performing
assets at the periods indicated.
<TABLE>
<CAPTION>
September 30, June 30,
1996 1996
------------- ---------
(Dollars in Thousands)
<S> <C> <C>
Non-Accruing Loans................ $1,385 $ 735
Foreclosed Assets................. -- 227
Total Non-Performing Assets....... $1,385 $ 962
Total Non-Performing Assets as a
Percentage of Total Assets..... 1.63% 1.15%
</TABLE>
Liqidity and Capital Resources. The Company's primary sources of
-------------------------------
funds are deposits, principal and interest payments on loans and mortgage-backed
securities, FHLB-Des Moines advances and funds provided by operations. While
scheduled loan and mortgage-backed security repayments and maturity of short-
term investments are a relatively predictable source of funds, deposit flows are
greatly influenced by general interest rates, economic conditions and
competition. Current Office of Thrift Supervision regulations require the Bank
to maintain cash and eligible investments in an
12
<PAGE>
amount equal to at least 5% of customer accounts and short-term borrowings to
assure its ability to meet demands for withdrawals and repayments of short-term
borrowings. For September 1996 the Bank's average monthly liquidity ratio was
9.3% which exceeded the minimum regulatory requirements.
The Company uses its capital resources principally to meet its ongoing
commitments to fund maturing certificates of deposits and loan commitments,
maintain its liquidity and meet operating expenses. At September 30, 1996, the
Company has commitments to purchase or originate loans totaling $638,000. The
Company considers it liquidity and capital resources to be adequate to meet its
foreseeable short- and long-term needs. The Company expects to be able to fund
or refinance, on a timely basis, its material commitments and long-term
liabilities.
Regulatory standards impose the following capital requirements: a risk-
based capital standard expressed as a percent of risk-adjusted assets, a
leverage ratio of core capital to total adjusted assets, and a tangible capital
ratio expressed as a percent of total adjusted assets. As of September 30,
1996, the Bank exceeded all fully phased-in regulatory capital standards.
At September 30, 1996, the Bank's tangible capital was $8.4 million, or
10.0%, of adjusted total assets, which is in excess of the 1.5% requirement by
$7.2 million. In addition, at September 30, 1996, the Bank had core capital of
$8.4 million , or 10.0%, of adjusted total assets, which exceeds the 3%
requirement by $5.9 million. The Bank had risk-based capital of $9.0 million at
September 30, 1996 or 18.9% of risk-adjusted assets which exceeds the 8.0% risk-
based capital requirement by $5.2 million.
The OTS requires every savings association with more than normal interest
rate risk to deduct from its total capital, for purposes of determining
compliance with such requirement, an amount equal to 50% of its interest-rate
risk exposure multiplied by the present value of its assets. Any savings
association with less than $300 million in assets and a total capital ratio in
excess of 12% is exempt from this requirement unless the OTS determines
otherwise. The Bank meets the criteria for an exemption from this requirement
and has not been advised by the OTS that it is otherwise subject to this rule.
13
<PAGE>
Regulatory Developments
- -----------------------
Pursuant to recently enacted legislation, the FDIC has levied an
assessment on institutions with deposits insured by the SAIF in order to
recapitalize the SAIF. The assessment, set by the FDIC at approximately 0.65% of
SAIF-insured deposits as of March 31, 1995, will be paid on November 27, 1996.
The effect of this assessment was to reduce the company's net income for the
quarter ended September 30, 1996, by $181,000, or $.41 per share. As a result of
this legislation, the Company's deposit insurance premiums will decline from the
current 0.23% of insured deposits to 0.06% of insured deposits commencing on
January 1, 1997.
In addition to numerous regulatory relief provisions contained in the
recent legislation, the legislation provides for a merger of the SAIF and the
Bank Insurance Fund effective January 1, 1999 if there are no insured savings
associations remaining on that date, and directs the Secretary of Treasury to
make recommendations to the Congress by March 31, 1997 with respect to
establishment of a common charter for banks and thrift institutions.
14
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
None.
Item 2. Changes in Securities
---------------------
None.
Item 3. Defaults Upon Senior Securities
-------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Annual Meeting of Shareholders (the"Meeting") of GFS Bancorp, Inc.
was held on October 23,1996. Shareholders approved the election of
Steven L. Opsal, Thomas M. Groth and Theodore Mokricky as directors of
the Company for a three year term and ratification of the appointment
of McGladrey & Pullen, LLP as auditors of the Company for the fiscal
year ending June 30, 1997.
The following is a record of the votes cast in the election of
directors of the Company:
Steven L. Opsal: For 427,218
Withheld 1,000
Thomas M. Groth: For 426,918
Withheld 1,300
Theodore Mokricky: For 426,618
Withheld 1,600
15
<PAGE>
The following is a record of the votes cast in respect of the proposal
to ratify the appointment of McGladrey & Pullen, LLP as the Company's auditors
for the fiscal year ending June 30, 1997.
For 428,218
Against 200
Abstain 9,478
Item 5. Other Information
-----------------
None.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
16
<PAGE>
Pursuant to the requirement 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.
GFS BANCORP, INC.
Registrant
Date: November 12, 1996 /s/ Steven L. Opsal
---------------------------------
Steven L. Opsal, President
and Chief Executive Officer
Date: November 12, 1996 /s/ Katherine A. Rose
-----------------------------------
Katherine A. Rose, Senior Vice
President and Chief Financial
Officer
17
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<PAGE>
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<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
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0
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