<PAGE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
[ ] 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: No. 0-22742
GFS BANCORP, INC.
______________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 42-1410536
(State of other jurisdiction of (I.R.S. Employer
of incorporation or organization Identification No.)
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 of 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
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, 1997, there were 988,242 shares of the Registrant's
common stock issued and outstanding, including 8,538 shares of restricted
stock.<PAGE>
<PAGE>
GFS BANCORP, INC.
INDEX
PART I. FINANCIAL INFORMATION (unaudited) PAGE NO.
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets, September 30, 1997
and June 30, 1997 (Unaudited)................................. 1
Consolidated Statement of Income for the Three
Months Ended September 30, 1997 and 1996
(Unaudited)................................................... 2
Consolidated Statement of Shareholders' Equity,
for the Three Months Ended September 30, 1997
(Unaudited)................................................... 3
Consolidated Statement of Cash Flows, for the Three
Months Ended September 30, 1997 and 1996
(Unaudited)................................................... 4
Notes to Consolidated Financial Statements
(Unaudited)................................................... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 8
PART II. OTHER INFORMATION
Signature Page............................................... 17
<PAGE>
<PAGE>
GFS BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
Sept 30 June 30,
1997 1997
------------ ------------
<S> <C> <C>
ASSETS
Cash and amounts due from depository institutions:
Noninterest bearing $ 295,807 $ 334,287
Interest bearing 5,112,463 4,308,632
Securities available for sale 1,765,332 1,909,490
Securities held to maturity 1,497,927 1,497,785
Mortgage-backed securities held to maturity 3,108,816 3,145,696
Stock in Federal Home Loan Bank, at cost
(approximate fair value) 1,159,000 1,159,000
Loans receivable, net 80,054,011 78,474,914
Real estate acquired in settlement of loans, net 211,828 0
Premises and equipment, net 237,549 223,236
Accrued interest receivable 548,421 520,661
Other assets 504,540 489,552
----------- -----------
Total Assets $ 94,495,694 $ 92,063,253
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand $ 6,733,642 $ 6,273,344
Savings and money market 11,992,657 11,617,756
Certificates of deposit 43,019,245 41,659,676
----------- -----------
Total Deposits 61,745,544 59,550,776
Advances from Federal Home Loan Bank 20,446,711 20,961,466
Advances from borrowers for taxes and insurance 905,117 713,593
Accrued dividends payable 64,235 64,235
Other accrued expenses and liabilities 454,611 236,005
----------- -----------
Total Liabilities $ 83,616,218 $ 81,526,075
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS EQUITY
Preferred stock, $.01 par value,
authorized 500,000 shares, issued none $ -- $ --
Common stock, $.01 par value,
authorized 2,000,000 shares; issued
1,100,720 shares; 11,007 11,007
Additional paid-in capital 5,230,429 5,202,310
Retained earnings -substantially restricted 6,759,727 6,523,527
Less:
Unearned employee stock ownership plan (182,546) (197,631)
Unearned retention and recognition plan (4,150) (7,225)
Treasury stock at cost 112,478 shares (1,055,302) (1,055,302)
Unrealized gain on securities
available for sale, net 120,311 60,492
----------- -----------
Total Stockholders' Equity $ 10,879,476 $ 10,537,178
----------- -----------
Total Liabilities and Stockholders' Equity $ 94,495,694 $ 92,063,253
=========== ===========
</TABLE>
1 <PAGE>
<PAGE>
GFS BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
September 30,
------------------------
1997 1996
---------- ---------
<S> <C> <C>
Interest income:
Loans receivable $1,743,965 $1,606,836
Mortgage-backed securities 57,884 62,487
Other securities and interest-bearing
cash accounts 102,241 89,947
---------- ----------
1,904,090 1,759,270
Interest expense:
Deposits 765,192 709,690
Advances from Federal Home Loan Bank 325,260 295,251
---------- ----------
1,090,452 1,004,941
Net interest income 813,638 754,329
---------- ----------
Provision for loan losses 24,000 49,000
Net interest income after provision
for loan losses 789,638 705,329
Noninterest income:
Loss on sale of securities available for sale (3,003) (1,576)
Other 48,679 34,531
---------- ----------
45,676 32,955
---------- ----------
Noninterest expense:
Salaries and employee benefits 239,782 213,723
Occupancy expenses 21,450 19,491
Federal deposit insurance premiums 9,228 29,091
FDIC-SAIF Special Assessment 0 287,568
Data processing services 18,838 17,134
Other 100,048 79,489
---------- ----------
389,346 646,496
---------- ----------
Income before provision for income taxes 445,968 91,788
Provision for income taxes 148,000 56,082
---------- ----------
Net income $ 297,968 $ 35,706
========== ==========
Earnings per common share 0.29 0.04
========== ==========
</TABLE>
2<PAGE>
<PAGE>
GFS BANCORP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Additional ESOP
Common Paid-in Retained Stock
Stock Capital Earnings Awards
------ ---------- -------- ------
<S> <C> <C> <C> <C>
Balance, June 30, 1997 $11,007 $5,202,310 $6,523,527 $(197,631)
Net income 297,968
Dividends (61,768)
ESOP common stock released
for allocation 28,119 15,085
Amortization of RRP
contributions
Net change in unrealized
loss on securities
available for sale
------- ---------- ---------- ---------
Balance, September 30, 1997 $11,007 $5,230,429 $6,759,727 $(182,546)
======= ========== ========== =========
</TABLE>
<TABLE>
<CAPTION>
Net Unrealized
Loss on
RRP Available Total
Stock Treasury for Sale Stockholders'
Awards Stock Securities Equity
------ -------- ---------- ------------
<S> <C> <C> <C> <C>
Balance, June 30, 1997 $(7,225) $(1,055,302) $ 60,492 $10,537,178
Net income 297,968
Dividends (61,768)
ESOP common stock released
for allocation 43,204
Amortization of RRP
contributions 3,075 3,075
Net change in unrealized
loss on securities
available for sale 59,819 59,819
------- ----------- -------- -----------
Balance, September 30, 1997 $(4,150) $(1,055,302) $120,311 $10,879,476
======== =========== ======== ===========
</TABLE>
3
<PAGE>
<PAGE>
GFS BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
September 30,
-------------------------
1997 1996
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 297,968 $ 35,706
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation (263) 8,193
Loss on sale of available for sale investments 3,003 1,576
ESOP and RRP expense 46,279 41,686
Deferred loan fees, net (8,741) (16,513)
Provisions for loan losses 24,000 49,000
Change in:
Accrued interest receivable (27,760) (31,658)
Other assets (14,988) 8,797
Other liabilities 183,331 146,846
---------- ----------
Net cash provided by operating activities 502,829 243,633
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Maturity of securities held to maturity 0 85,000
Maturity of securities available for sale 0 0
Proceeds from sales of securities available for sale 236,107 99,925
Purchase of securities held to maturity 0 0
Purchase of securities available for sale 0 0
Principal payments received on mortgage-backed
securities 36,880 156,698
Purchase of loans to be held in portfolio (3,169,706) (3,638,297)
Net change in loans outstanding 1,363,522 781,244
Proceeds from sale of real estate 0 226,616
Purchase of premises and equipment (14,050) (6,682)
---------- ----------
Net cash (used) by investing activities (1,547,247) (2,295,496)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 2,194,768 1,767,402
Advances from Federal Home Loan Bank 1,000,000 0
Repayment of advances from the Federal Home Loan Bank (1,514,755) (13,768)
Net increase in advances from borrowers for taxes
and insurance 191,524 91,451
Purchase of treasury stock 0 (143,375)
Dividends paid (61,768) (48,917)
---------- ----------
Net cash provided by financing activities 1,809,769 1,652,793
---------- ----------
Net(increase) in cash and cash equivalents 765,351 (399,070)
Cash and cash equivalents, beginning of period 4,642,919 2,271,132
---------- ----------
Cash and cash equivalents, end of period $5,408,270 $1,872,062
========== ==========
</TABLE>
4<PAGE>
<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, 1997 and June 30, 1997, the
results of its operations for the three months ended
September 30, 1997 and 1996, changes in stockholders'
equity for the three months ended September 30, 1997 and
for the statement of cash flows for the three months
ended September 30, 1997 and 1996.
Operating results for the three months ended
September 30, 1997 are not necessarily indicative of the
results that may be expected for the fiscal year ending
June 30, 1998.
(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, 1997 was 1,036,350 shares. The amount set
forth above includes 8,538 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, 84,640 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 on
5<PAGE>
<PAGE>
93-6 "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, 1997, 46,016 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, 1997, the capital requirements for Grinnell
Federal Savings Bank (the "Bank") under applicable regulations
and its actual capital ratios. As of September 30, 1997, 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 . . . . . . . . $4,260 8.00% $9,855 18.51% $5,595 10.51%
Core Capital . . . . . . . 2,791 3.00 9,225 9.92 6,434 6.92
Tangible Capital. . . . . 1,396 1.50 9,225 9.92 7,829 8.42
</TABLE>
(4) Pending Accounting Pronouncements
---------------------------------
The Financial Accounting Standards Board (FASB) has
approved, effective for years beginning after December 15, 1997,
Statement No. 128, "Earning Per Share", Statement No. 129,
"Disclosure of Information About Capital Structure", Statement
No. 130, "Reporting Comprehensive Income and Statement No. 131,
"Disclosure About Segments of an Enterprise and Related
Information". FASB Statements No. 128, 129, 130 and 131 are not
expected to have a material effect on the Company's financial
statements when adopted.
(5) Pending Acquisition by First Federal Savings Bank of
Siouxland
----------------------------------------------------
On October 16, 1997, the Company entered into an Agreement
and Plan of Reorganization (the "Agreement"), providing for the
acquisition of the Company by First Federal Savings Bank of
Siouxland ("First Federal"), a mutual holding company
headquartered
6
<PAGE>
<PAGE>
in Sioux City, Iowa. The Agreement provides for the conversion
of each issued and outstanding share of the Company's common
stock into the right to receive $17.65 per share in cash from
First Federal. The acquisition is subject to receipt of
regulatory approvals, approvals by the Company's shareholders
and other conditions.
7<PAGE>
<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. 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.
8<PAGE>
<PAGE>
Recent Event -- Pending Acquisition by First Federal Savings
Bank of Siouxland
- ------------------------------------------------------------
On October 16, 1997, the Company entered into an Agreement
and Plan of Reorganization (the "Agreement"), providing for the
acquisition of the Company by First Federal Savings Bank of
Siouxland ("First Federal"), a mutual holding company
headquartered in Sioux City, Iowa. The Agreement provides for
the conversion of each issued and outstanding share of the
Company's common stock into the right to receive $17.65 per
share in cash from First Federal. The acquisition is subject to
receipt of regulatory approvals, approvals by the Company's
shareholders and other conditions.
Financial Condition
- -------------------
The Company's total assets increased $2.4 million, or 2.6%,
from $92.1 million at June 30, 1997 to $94.5 million at
September 30, 1997. This increase was due primarily to an
increase of $1.6 million in net loans receivable, $765,000 in
cash and $212,000 in real estate acquired in settlement of
loans. The increases were partially offset by a $144,000
decrease in investment securities and a $37,000 decrease in
mortgage-backed securities. The increases in loans were funded
primarily by a $2.2 million increase in savings deposits.
Total investment securities decreased by $144,000, or 4.2%,
from $3.40 million at June 30, 1997 to $3.26 million at
September 30, 1997 due to the sale of an investment in common
stock. At September 30, 1997 the investment portfolio consisted
primarily of $1.5 million in U.S. agency obligations, $780,000
in mutual funds, and $980,000 in equity securities consisting of
common stocks of two bank holding companies and preferred stocks
of one bank holding company, two utility companies and an
automobile manufacturer.
Total mortgage-backed securities decreased $37,000, or
1.2%, from $3.15 million at June 30, 1997 to $3.11 million at
September 30, 1997. The decrease in mortgage-backed securities
was due to amortization of principal and prepayments.
Net loans receivable increased $1.6 million, or 2.0%, from
$78.5 million at June 30, 1997 to $80.1 million at September 30,
1997. Mortgage loans originated during the three months ended
September 30, 1997, totaled $3.6 million secured primarily by
9<PAGE>
<PAGE>
single family dwellings in the Bank's market area. During this
period, the Bank also purchased $900,000 of loans secured by
one-to-four family dwellings, $9.7 million of multi-family and
$720,000 of commercial real estate loans primarily located in
the Madison, Wisconsin area. Of the $11.3 million in one-to-four
family, multi-family, and commercial real estate purchased
during the period, $8.1 million were sold to other financial
institutions with the Bank retaining the servicing.
Total deposits increased by $2.2 million, or 3.7%, from
$59.5 million at June 30, 1997 to $61.7 million at September 30,
1997. This increase was primarily due to an increase of $1.4
million in certificate of deposit accounts and $835,000 in
demand, savings and money market accounts. Management believes
that this increase was primarily attributable to successful
marketing initiatives and competitive pricing.
Total borrowed funds consisted of advances from the Federal
Home Loan Bank ("FHLB") of Des Moines. FHLB advances decreased
by $515,000, or 2.5%, from $20.96 million at June 30, 1997 to
$20.45 million at September 30,1997.
Total stockholders' equity increased $342,000 from $10.54
million at June 30, 1997 to $10.88 million at September 30,
1997. This increase was primarily due to net income of
$298,000, amortization of Recognition and Retention Plan
("RRP"), allocations to the Employee Stock Ownership Plan
("ESOP"), and a decrease in unrealized loss on decline in value
of investments available for sale. The increase in
stockholders' equity was partially offset by the declaration of
a $0.065 dividend per share during the September 30, 1997
quarter. (See Consolidated Statement of Shareholders' Equity.)
Results of Operations - Comparison of Quarters Ended September
30, 1997 and 1996
- --------------------------------------------------------------
General. The Company's net income increased $262,000, or
727.8%, from $36,000 for the quarter ended September 30, 1996
to $298,000 for the quarter ended September 30, 1997. This
increase resulted primarily from a one time after-tax special
assessment in September 1996 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. Results for
September 1997
10<PAGE>
<PAGE>
were also favorably impacted by an $84,000 increase in net
interest income after provision for loan losses, which,
excluding the deposit insurance assessment, was partially offset
by a $30,000 increase in non-interest expense.
Net Interest Income. Net interest income, before provision
for loan losses, increased $60,000, or 8.0%, from $754,000 at
September 30, 1996 to $814,000 at September 30, 1997 due to
increases in average balances of interest-earning assets. The
Company's average spread increased from 2.65% for the three
months ended September 30, 1996 to 2.77% for the three months
ended September 30, 1997 due to the fact that yields on
interest-earning assets increased more than rates paid on
interest-bearing liabilities.
Interest Income. Interest income increased by $145,000, or
8.2%, from $1,759,000 at September 30, 1996 to $1,904,000 at
September 30, 1997. This increase was primarily due to an
increase of 0.08% in the average rate earned on interest-earning
assets and an increase of $8.0 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 $85,000,
or 8.46%, from $1,005,000 for the quarter ended September 30,
1996 to $1,090,000 for the quarter ended September 30, 1997.
This increase was primarily due to an $6.9 million increase in
the average balance of total deposits and borrowed funds, which
was partially offset by a 0.04% 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
$24,000 provision for loan losses was established for the
quarter ended September 30, 1997, as compared to a $49,000
provision for the quarter ended September 30, 1996. The higher
level of loan loss provision in the year earlier period reflects
management's assessment based on loan portfolio increases and
the level of non-performing assets at that time. Future
additions to the allowance for loan losses are dependent
11<PAGE>
<PAGE>
upon the performance and composition of the loan portfolio, the
economy, changes in real estate values and interest rates, the
view the regulatory authorities toward adequate reserve levels
and inflation. 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 increased from
$33,000 at September 30, 1996 to $46,000 at September 30, 1997.
Non-Interest Expense. Non-interest expense decreased by
$257,000 from $646,000 in the quarter ended September 30, 1996
to $389,000 in the quarter ended September 30, 1997. This
decrease was primarily due to a $287,568 special one time
FDIC-SAIF insurance assessment in September 1996 (See Results of
Operations - General above) and a $20,000 decrease in the
quarterly FDIC-SAIF premiums. Partially offsetting the decrease
was a $26,000 increase in compensation and benefits due to
fiscal year-end salary increases and a $21,000 increase in other
non-interest expenses.
Provision for Income Taxes. Income tax expense was
$56,000 for the quarter ended September 30, 1996 compared to
$148,000 for the quarter ended September 30, 1997. The $92,000
increase was due to a increase 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, 1997 was $630,000, or 0.8% of the total
loans. The June 30, 1997 allowance for loan losses was
$646,000, or 0.8% of total loans. This $16,000 decrease
reflects a $40,000 charge off on multi-family real estate
located in Madison, Wisconsin (see Non-Performing Assets below)
and the addition of $24,000 to the allowance for loan losses.
The ratio of the allowance for loan losses to non-performing
assets decreased from 70% of non-performing assets at
June 30, 1997 to 68% of non-performing assets at September 30,
1997, due to the combination of a $7,000 increase in non-
12<PAGE>
<PAGE>
performing assets with the $16,000 decline in allowance for loan
losses referenced above. Management believes that the current
allowance for loan losses is adequate to protect against the
risk inherent in Grinnell Federal's loan portfolio based on all
current available information.
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 $7,000 from $922,000, or 1.00% of
total assets at June 30, 1997, to $929,000, or 0.98% of total
assets at September 30, 1997. This $929,000 consisted primarily
of nine loans totaling $188,000 secured by single-family homes,
two loans totaling $498,000 secured by multi-family real estate
located in Madison, Wisconsin, four consumer loan totaling
$31,000 and $212,000 in real estate acquired in settlement of
loans located in Madison, Wisconsin.
The Madison, Wisconsin real estate acquired in settlement
of loans consists of a 104 unit apartment property. The Bank
owns a 9% interest in this property based on its participation
interest in the original underlying loan. As discussed above,
this asset was written down to its approximate fair value on
September 30, 1997 through a $40,000 charge-off to its Allowance
for Loan Losses.
In addition, at September 30, 1997, other assets of concern
totaled $1,028,000 and included seven loans totaling $165,000
secured by single-family residences and a $272,000 single-family
home in Houston, Texas, one $537,000 loan secured by commercial
real estate located in Grinnell, Iowa, one $54,000 commercial
business loan and one $3,000 consumer loan. 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 $1.7 million at September 30,1997 as compared to
$2.0 million at June 30, 1997. At September 30, 1997, 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.
13
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
September 30, June 30,
1997 1997
------------ -------
(Dollars in Thousands)
<S> <C> <C>
Non-Accruing Loans ................... $ 717 $ 922
Foreclosed Assets .................... 212 ---
----- -----
Total Non-Performing Assets .......... $ 929 $ 922
Total Non-Performing Assets as a
Percentage of Total Assets........ 0.98% 1.00%
</TABLE>
Liquidity 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 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. At September 30, 1997 the Bank's
liquidity ratio was 8.0% 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, 1997, the Company has
commitments to purchase or originate loans totaling $309,000 and
$536,000 in commitments for unused lines of credit. 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, 1997, the Bank exceeded all fully phased-in
regulatory capital standards.
14<PAGE>
<PAGE>
At September 30, 1997, the Bank's tangible capital was $9.2
million, or 9.9%, of adjusted total assets, which is in excess
of the 1.5% requirement by $7.8 million. In addition, at
September 30, 1997, the Bank had core capital of $9.2 million ,
or 9.9%, of adjusted total assets, which exceeds the 3%
requirement by $6.4 million. The Bank had risk-based capital of
$9.9 million at September 30, 1997 or 18.5% of risk-adjusted
assets which exceeds the 8.0% risk-based capital requirement by
$5.6 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.
Regulatory Developments
- -----------------------
Legislation currently under consideration by Congress would
repeal the federal thrift charter and require federal
associations like the Bank to convert to national banks two
years after the enactment of the bill. The bill, in its current
form, would permit federal thrifts that converted to national
banks to exercise any authority which they were legally entitled
to exercise immediately prior to such conversion and would not
be required to divest any branches. Further, these institutions
could continue to branch in any state in which they were located
to the same extent as national banks. Unitary savings and loan
holding companies, like the Company, could continue to exercise
any powers they had prior to their subsidiary becoming a bank by
operation of law as long as they did not acquire another bank.
Powers of those unitary savings and loan holding companies that
were grandfathered, however, could not be transferred to another
company which acquires control of the unitary holding company
after the effective date of the law. There can be no assurance
that this legislation will be passed in its current form. At
this time, the Company is unable to predict whether such
legislation would significantly impact its operation.
15<PAGE>
<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
--------------------------------------------------
None.
Item 5. Other Information
-----------------
None.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
No. 27 Financial Data Schedule.
(b) Reports on Form 8-K
None.
16<PAGE>
<PAGE>
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.
GFS BANCORP, INC.
Dated: November 12, 1997 /s/ Steven L. Opsal
-------------------------------------
Steven L. Opsal, President
and Chief Executive Officer
Dated: November 12, 1997 /s/ Katherine A. Rose
-------------------------------------
Katherine A. Rose, Vice President
and Chief Financial Officer
17
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