UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[?] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number: 0-25854
GFSB BANCORP, INC.
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(Name of Small Business Issuer in its Charter)
Delaware 04-2095007
------------------------------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
221 West Aztec Avenue, Gallup, New Mexico 87301
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(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number, Including Area Code: (505) 722-4361
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
--- ---
As of October 27, 2000, there were issued and outstanding 936,000 shares of the
registrant's Common Stock.
<PAGE>
Index
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Statements of Financial Condition
September 30, 2000 and June 30, 2000 3
Consolidated Statements of Earnings and Comprehensive Earnings
Three months ended September 30, 2000 and September 30, 1999 4
Consolidated Statements of Cash Flows
Three months ended September 30, 2000 and September 30, 1999 6
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis or Plan of Operation 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
2
</TABLE>
<PAGE>
GFSB Bancorp, Inc.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
September 30, June 30,
2000 2000
------------- -------------
(Unaudited)
ASSETS
<S> <C> <C>
Cash and due from banks $ 2,824,074 $ 2,875,537
Interest-bearing deposits with banks 862,442 1,215,428
Available-for-sale investment securities 25,874,131 25,438,540
Available-for-sale mortgage-backed securities 28,451,491 28,930,510
Held-to-maturity investment securities 1,682,397 1,681,310
Stock of Federal Home Loan Bank, at cost, restricted 4,391,400 4,206,900
Loans receivable, net, substantially pledged 115,069,831 109,777,269
Accrued interest and dividends receivable 1,119,525 1,033,974
Premises and equipment 1,263,487 1,296,048
Other real estate and repossessed property 151,262 38,000
Prepaid and other assets 106,302 197,883
Deferred tax asset 94,517 94,517
------------- -------------
TOTAL ASSETS $ 181,890,859 176,785,916
============= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Transaction and NOW accounts $ 12,683,435 $ 12,409,069
Savings and MMDA deposits 13,379,320 14,801,893
Time deposits 53,859,872 52,736,983
Accrued interest payable 334,162 288,350
Advances from borrowers for taxes and insurance 533,759 305,909
Accounts payable and accrued liabilities 264,654 236,070
Repurchase agreements 2,463,609 230,839
Deferred income taxes 261,904 67,157
Dividends declared and payable 88,379 88,875
Advances from Federal Home Loan Bank 84,699,124 82,935,066
Income taxes payable 39,624 --
------------- -------------
TOTAL LIABILITIES 168,607,842 164,100,211
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Common stock, $.10 par value, 1,500,000
shares authorized; 940,963 issued and outstanding
at June 30, 2000 and 936,000 shares issued and
outstanding at September 30, 2000, held by the
Company's wholly owned subsidiary, respectively 93,600 94,096
Preferred stock, $.10 par value, 500,000
shares authorized; no shares issued or
outstanding -- --
Additional paid-in-capital 2,757,676 2,810,626
Unearned ESOP stock (311,839) (323,911)
Retained earnings, substantially
restricted 10,235,178 9,974,531
Accumulated other comprehensive
earnings 508,402 130,363
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TOTAL STOCKHOLDERS' EQUITY 13,283,017 12,685,705
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 181,890,859 $ 176,785,916
============= =============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
GFSB Bancorp, Inc.
CONSOLIDATED STATEMENTS OF EARNINGS
AND COMPREHENSIVE EARNINGS
<TABLE>
<CAPTION>
Three months ended
September 30,
-----------------------
2000 1999
-----------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Interest income
Loans receivable
Mortgage loans $2,067,880 $1,819,818
Commercial loans 194,963 110,803
Share and consumer loans 146,618 110,735
Investment and mortgage-backed securities 934,703 631,017
Other interest-earning assets 84,690 57,566
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TOTAL INTEREST EARNINGS 3,428,854 2,729,939
Interest expense
Deposits 870,487 787,992
Advances from Federal Home Loan Bank 1,368,866 782,609
Repurchase agreements 18,411 --
---------- ----------
TOTAL INTEREST EXPENSE 2,257,764 1,570,601
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NET INTEREST EARNINGS 1,171,090 1,159,338
Provision for loan losses 70,000 20,000
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NET INTEREST EARNINGS AFTER
PROVISION FOR LOAN LOSSES 1,101,090 1,139,338
Non-interest earnings
Income from real estate operations -- 2,500
Miscellaneous income 11,212 3,586
Net gains from sales of loans 14,415 7,141
Service charge income 71,110 59,639
---------- ----------
TOTAL NON-INTEREST EARNINGS 96,737 72,866
Non-interest expense
Compensation and benefits 388,130 394,835
Insurance 12,592 18,785
Stock services 2,292 2,499
Occupancy 90,945 75,644
Data processing 51,756 49,262
Professional fees 17,827 23,497
Advertising 18,322 14,166
Stationary, printing and office supplies 14,126 13,236
ATM expense 11,330 14,060
Supervisory Exam Fees 10,976 9,492
Postage 8,631 7,258
Other 62,029 51,433
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TOTAL NON-INTEREST EXPENSE 688,956 674,167
</TABLE>
4
<PAGE>
GFSB Bancorp, Inc.
CONSOLIDATED STATEMENTS OF EARNINGS
AND COMPREHENSIVE EARNINGS - CONTINUED
Three months ended
September 30,
2000 1999
(Unaudited) (Unaudited)
---------------------
EARNINGS BEFORE INCOME TAXES 508,871 538,037
Income tax expense
Currently payable 159,844 192,805
Deferred provision -- --
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159,844 192,805
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NET EARNINGS $ 349,027 $ 345,232
========= =========
Other Comprehensive Earnings
Unrealized gain (loss), net of tax 378,039 (133,263)
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COMPREHENSIVE EARNINGS 727,066 211,969
========= =========
Earnings per common share
Basic $ 0.39 0.37
========= =========
Weighted average number of common shares outstanding
Basic 890,800 932,654
========= =========
Earnings per common share
Diluted 0.38 0.36
========= =========
Weighted average number of common shares outstanding
Diluted 911,176 950,735
========= =========
5
<PAGE>
GFSB Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (decrease) in cash and cash equivalents
<TABLE>
<CAPTION>
Three months ended
September 30,
----------------------------
2000 1999
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities
Net earnings $ 349,027 $ 345,232
Adjustments to reconcile net earnings to
net cash provided by operations
Deferred loan origination fees (62,351) (91,399)
Gain on sale of sold loans (14,415) (7,141)
Provision for loan losses 70,000 20,000
Depreciation of premises and equipment 44,912 43,351
Amortization of investment and mortgage-
backed securities premiums 14,951 65,437
Stock dividends on FHLB stock (70,300) (40,700)
Release of ESOP stock 25,315 23,759
Stock compensation 17,400 16,221
Benefit for deferred income taxes -- (23,892)
Net changes in operating assets and liabilities
Accrued interest and dividends receivable (85,551) (73,773)
Prepaid and other assets 91,582 (26,024)
Accrued interest payable 45,812 82,253
Accounts payable and accrued liabilities 11,183 (55,799)
Repurchase agreements 2,232,770 --
Income taxes payable 39,624 42,057
Dividends declared and payable (496) (982)
----------- -----------
Net cash provided by
operating activities 2,709,463 318,600
Cash flows from investing activities
Purchase of premises and equipment (12,351) (1,678)
Loan originations and principal
repayment on loans, net (5,399,058) (2,512,797)
Principal payments on mortgage-backed
securities 1,066,246 2,065,934
Purchases of mortgage-backed securities (509,098) --
Purchases of available-for-sale securities (64,933) (6,615,850)
Principal payments on available-for-sale securities 107,961 75,000
Purchase of FHLB stock (114,200) (350,000)
----------- -----------
Net cash used by
investing activities (4,925,433) (7,339,391)
</TABLE>
6
<PAGE>
GFSB Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Increase (decrease) in cash and cash equivalents
<TABLE>
<CAPTION>
Three months ended
September 30,
------------------------------
2000 1999
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(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from financing activities
Net increase in transaction accounts, passbook
savings, money market accounts, and
certificates of deposit $ (25,318) $ (2,057,523)
Net increase in mortgage escrow funds 227,850 164,334
Proceeds from FHLB advances 867,372,346 119,538,922
Repayments on FHLB advances (865,608,288) (112,529,387)
Purchase of GFSB Bancorp stock under the
stock repurchase plan in cash (66,690) (166,162)
Dividends paid or to be paid in cash (88,379) (73,766)
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Net cash provided by
financing activities 1,811,521 4,876,418
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Decrease in cash and cash equivalents (404,449) (2,144,373)
Cash and cash equivalents at beginning of period 4,090,965 5,147,215
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Cash and cash equivalents at end of period $ 3,686,516 3,002,842
============= =========
Supplemental disclosures
Cash paid during the period for
Interest on deposits and advances $ 2,193,541 $ 1,488,349
Income taxes 121,388 180,069
Change in unrealized gain (loss), net of deferred
taxes on available-for-sale securities 378,039 (133,263)
Dividends declared not yet paid 88,379 73,766
</TABLE>
7
<PAGE>
GFSB BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. The accompanying unaudited consolidated financial statements were in
accordance with instructions for Form 10-QSB and therefore do not include all
disclosure necessary for a complete presentation of the consolidated financial
statements in conformity with generally accepted accounting principles. However,
all adjustments which are, in the opinion of management, necessary for the fair
presentation of the interim financial statements have been included. All such
adjustments are of a normal recurring nature. The consolidated statements of
income are not necessarily indicative of results, which may be expected for the
entire year, or for any other interim period.
Certain information and footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. It is suggested that these condensed
unaudited financial statement be read in conjunction with the Form 10-KSB for
the year ended June 30, 2000.
8
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
The Private Securities Litigation Reform Act of 1995 contains safe harbor
provisions regarding forward-looking statements. When used in this discussion,
the words believes, anticipates, contemplates, expects, and similar expressions
are intended to identify forward-looking statements. Such statements are subject
to certain risks and uncertainties which could cause actual results to differ
materially from those projected. Those risks and uncertainties include changes
in interest rates, risks associated with the ability to control costs and
expenses, year 2000 issues and general economic conditions. We undertake no
obligation to publicly release the results of any revisions to those forward
looking statements which may be made to reflect events or circumstances after
the date hereof or to reflect the occurrence of unanticipated events.
Overview
GFSB Bancorp, Inc. (GFSB Bancorp) is a Company holding company headquartered in
Gallup, New Mexico, which provides a full range of deposits and traditional
mortgage loan products through its wholly owned Companying subsidiary, Gallup
Federal Savings Company (collectively, the Company).
FINANCIAL CONDITION
The total assets of the Company increased $5.1 million or 2.9% from $176.8
million at June 30, 2000 to $181.9 million at September 30, 2000. This increase
was primarily the result of a $5.3 million dollar increase in the company's net
loan portfolio. Of this increase, approximately $2.3 million was in commercial
loans, $1.4 million in consumer residential loans, and $1 million in commercial
real estate non-residential loans. The increase was the result of the Company
hiring a new senior lending officer in May 2000. During the same period, total
liabilities increased $4.5 million or 2.7% from $164.1 million at June 30, 2000
to $168.6 million at September 30, 2000. This increase was primarily due to an
increase in borrowings from the Federal Home Loan Bank (FHLB) of $1.8 million
and an increase in repurchase agreements of $2.2 million. FHLB advances and
repurchase agreements funded purchases of loans, securities, and mortgage loan
participations.
9
<PAGE>
RESULTS OF OPERATIONS
Net income for the three months ended September 30, 2000 increased $4,000 to
$349,000 compared to net income of $345,000 for the comparable three-month
period in 1999. The slight increase in net income was the result of higher net
interest earnings income and non-interest earnings offset by increases to the
provision for loan losses and non-interest expense. See Average Balance Sheets
and Rate/Volume Analysis for the details of the Company's results of operations
for the current and prior three-month periods.
Average Balance Sheets
The following table sets forth certain information relating to the Company's
average balance sheet and reflects the average yield on assets and average cost
of liabilities for the periods indicated and the average yields earned and rates
paid. Average balances are derived from month-end balances. Management does not
believe that the use of month-end balances instead of daily average balances has
caused any material differences in the information presented.
<TABLE>
<CAPTION>
Quarter ended September 30, 2000 Quarter ended September 30, 1999
-------------------------------- --------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------- -------- ---------- ------- -------- ----------
(Dollars in Thousands) (Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable (1) $112,842 $2,409 8.54% $ 97,893 $2,041 8.34%
Investment securities and
Mortgage-backed securities 56,082 935 6.67% 45,862 631 5.50%
Other interest-earning
Assets (2) 5,268 85 6.45% 4,471 58 5.19%
-------- ------ -------- ------
Total interest-earning assets 174,192 3,429 7.87% 148,226 2,730 7.37%
Non-interest-earning assets 5,605 4,824
-------- --------
Total assets $179,797 $153,050
======== ========
Interest-bearing liabilities:
Transaction accounts $ 6,028 $ 22 1.46% $ 6,037 $ 23 1.52%
Passbook savings 5,042 26 2.06% 4,860 25 2.06%
Money market accounts 9,363 85 3.63% 11,072 81 2.93%
Certificates of deposit 52,876 738 5.58% 51,737 659 5.09%
Other liabilities 85,486 1,387 6.49% 58,945 783 5.31%
-------- ------ -------- ------
Total interest-bearing
liabilities 158,795 2,258 5.69% 132,651 1,571 4.74%
Non-interest bearing
liabilities 8,025 8,042
-------- --------
Total liabilities 166,820 140,693
Stockholders' equity 12,977 12,357
-------- --------
Total liabilities and
Stockholders' equity $179,797 $153,050
======== ========
Net interest income $1,171 $1,159
====== ======
Interest rate spread (3) 2.18% 2.63%
==== ====
Net yield on interest-
earning assets (4) 2.69% 3.13%
==== ====
Ratio of average interest-
Earning assets to average
interest-bearing liabilities 1.10X 1.12X
==== ====
</TABLE>
(1) Average balances include non-accrual loans.
(2) Includes interest-bearing deposits in other financial institutions
10
<PAGE>
(3) Interest-rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(4) Net yield on interest - earning assets represents net interest income as a
percentage of average interest-earning assets.
Rate/Volume Analysis
The table below sets forth certain information regarding changes in interest
income and interest expense of the Company for the periods indicated. For each
category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in volume; (ii)
changes in rates; (iii) changes in rate-volume. The changes attributable to the
combined impact of volume and rate have been allocated proportionately to the
changes due to volume and the changes due to rate.
Quarter ended September 30, 2000 vs.
1999
Increase (Decrease)
Due to
-----------------------------
Rate/
Volume Rate Volume Net
------ ---- ------ ----
(Dollars in Thousands)
Interest income:
Loans receivable $ 311 $ 49 $ 8 $368
Mortgage-backed securities and
investment securities 140 134 30 304
Other interest-earning assets 10 14 3 27
------ ---- ---- ----
Total interest-earning assets 461 197 41 699
Interest expense:
Transaction accounts - - - -
Savings accounts - - - -
Money markets (13) 20 (3) 4
Certificates of deposit 14 63 2 79
Other liabilities 353 174 77 604
------ ---- ---- ----
Total interest-bearing liabilities 354 257 76 687
------ ---- ---- ----
Net change in interest income $ 107 $(60) $(35) $ 12
====== ==== ==== ====
Provision for Losses on Loans
The Company maintains an allowance for loan losses based upon management's
periodic evaluation of known and inherent risks in the loan portfolio, past loss
experience, adverse situations that may affect the borrower's ability to repay
loans, estimated value of the underlying collateral and current and expected
market conditions. The provision for loan loss was $ 70,000 and $20,000 for the
quarter ended September 30, 2000 and 1999, respectively. The increase in the
provision for loan losses for the current three-month period was the result of
the growth in commercial and commercial real estate loans, which tend to have
greater credit risk than residential real estate loans. While the Company
maintains its allowance for losses at a level which it considers to be adequate,
there can be no assurance that further additions will not be made to the loss
allowances and that such losses will not exceed the estimated amounts. Recent
substantial increases in the loan portfolio of the Company may result in an
increase of provision for losses on loans.
Non-Interest Income
Total non-interest income increased by $24,000 or 32.8% from $73,000 for the
quarter ended September 30, 1999 to $97,000 for the quarter ended September 30,
2000. This increase was primarily due to increased service charge income of
approximately $11,500. Net gains from sales of loans increased approximately
$7,300 and miscellaneous income increased approximately $7,600, due primarily to
commission fees collected from credit card merchant sales.
11
<PAGE>
Non-Interest Expense
Total non-interest expense increased $15,000 or 2.2% from $674,000 for the
quarter ended September 30, 1999 to $689,000 for the quarter ended September 30,
2000. Occupancy costs was the most significant factor, due to increases in
Automated Teller Machine maintenance expense, utilities, and property taxes.
Liquidity and Capital Resources
The Company is required under applicable federal regulations to maintain
"liquid" investments in qualifying types of U.S. Government, federal agency and
other investments of not less than 4% of its average daily balance of net
withdrawable deposit accounts and borrowings payable in one year of less. At
September 30, 2000, the Company's liquidity, as measured for regulatory
purposes, was 5.51%.
At September 30, 2000, the Company exceeded each of the three OTS capital
requirements on a fully-phased-in basis.
12
<PAGE>
PART II. OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
-----------------
Not applicable.
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable.
Item 5. Other Information
-----------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) List of Exhibits
3.1 Certificate of Incorporation of GFSB Bancorp, Inc.*
3.2 Bylaws of GFSB Bancorp, Inc.*
10.1 1995 Stock Option Plan**
10.2 Management Stock Bonus Plan**
10.3 Form of Directors Deferred Compensation Agreement between the Bank
and Directors***
10.4 Form of Directors Stock Compensation Plan between the Company and
Directors of the Company***
10.5 2000 Stock Option Plan****
27 Financial Data Schedule (electronic filing only)
--------------
* Incorporated herein by reference to exhibits 3(i)(Certificate of
Incorporation) and 3(ii)(Bylaws) to the Registration Statement on Form S-1
of the Registrant (File No. 33-90400) initially filed with the Commission
on March 17, 1995.
** Incorporated by reference to the identically numbered exhibits of the
Annual Report on Form 10-KSB for the fiscal year ended June 30, 1997 (File
No. 0-25854) filed with the SEC.
*** Incorporated by reference to the identically numbered exhibits of the
Quarterly Report on Form 10-QSB for the quarter ended March 31, 2000 filed
with the SEC.
**** Incorporated by reference to the Proxy Statement for the Annual Meeting of
Stockholders on October 27, 2000 and filed with the SEC on September 25,
2000.
(b) Not applicable.
13
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GFSB BANCORP, INC.
Date: November 3, 2000 /s/Jerry R. Spurlin
-----------------------------------------------
Jerry R. Spurlin
Assistant Secretary and Chief Financial Officer
(Duly Authorized Representative and
Principal Financial Officer)
14
