GS Financial (GSLA) 10-Q 2003 Q2 Quarterly report

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 June 30, 2003

Commission File Number: 0-22269

GS Financial Corp.
(Exact Name of Registrant as Specified in its Charter)

Louisiana	72-1341014
(State or Other Jurisdiction	(IRS Employer ID Number)
of Incorporation or Organization)

3798 Veterans Blvd.
Metairie, LA 70002
(Address of Principal Executive Offices)

Registrant’s Telephone Number: (504) 457-6220

Indicate by check 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.

x Yes No

As of August 14, 2003, there were 1,342,027 shares of the Registrant’s common stock outstanding. The financial statements contained within this Form 10-Q for the three and six months ended June 30, 2003 and 2002 represent the consolidated financial position and results of operations of GS Financial Corp.

 GS Financial Corp.

Form 10-Q

Quarterly Period Ended June 30, 2003

Table of Contents

Part I - Financial Information
Item 1	Financial Statements
	Consolidated Balance Sheets
	(as of June 30, 2003, Unaudited and December 31, 2002, Audited)	3
	Consolidated Statements of Income
	(For the three and six months ended June 30, 2003 and 2002, Unaudited)	4
	Consolidated Statements of Changes in Stockholders’ Equity
	(For the six months ended June 30, 2003 and 2002, Unaudited)	5
	Consolidated Statements of Cash Flows
	(For the six months ended June 30, 2003 and 2002, Unaudited)	6-7
	Notes to Consolidated Financial Statements	7-12
Item 2	Management’s Discussion and Analysis of Financial
	Condition and Results of Operations	12-16
Item 3	Quantitative and Qualitative Disclosures about Market Risk	16
Item 4	Controls and Procedures	17
Part II - Other Information		17
Item 1	Legal Proceedings	17
Item 2	Changes in Securities and Use of Proceeds	17
Item 3	Defaults Upon Senior Securities	17
Item 4	Submission of Matters to a Vote of Security Holders	17
Item 5	Other Information	17
Item 6	Exhibits and Reports on Form 8-K	17-22

GS FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
ASSETS
			June 30, 2003		December 31, 2002
			(Unaudited)		(Audited)
Cash and Due from Banks		$	1,283	$	1,584
Interest-Bearing Deposits in Other Banks			13,663		9,578
Federal Funds Sold			675		2,190
Investment Securities Available for Sale			100,765		55,091
Loans (Net)			76,796		78,334
Mortgage-Backed Securities			496		569
Collateralized Mortgage Obligations			12,290		53,066
FHLB Stock			5,529		5,461
Accrued Interest Receivable			465		642
Premises and Equipment			2,641		2,668
Other Assets			983		846
	Total Assets	$	215,586	$	210,029

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
	Interest-Bearing Deposits		$	128,008	$	105,907
	Non-Interest Bearing Deposits			1,256		1,306
	Borrowings			53,602		66,392
	Other Liabilities			1,986		2,040
		Total Liabilities		184,852		175,645
STOCKHOLDERS’ EQUITY
	Common Stock & Additional Paid in Capital			34,249		34,074
	Treasury Stock			(31,049)		(27,695)
	Accumulated Other Comprehensive Income			1,326		2,028
	Unearned ESOP Stock			(943)		(1,083)
	Unearned RRP Trust Stock			(1,274)		(1,274)
	Retained Earnings			28,425		28,334
		Total Stockholders’ Equity		30,734		34,384
		Total Liabilities and Stockholders’ Equity	$	215,586	$	210,029

GS FINANCIAL CORP. CONSOLIDATED STATEMENTS OF INCOME (Dollars in Thousands, except per share data) (Unaudited)
				For The Three Months Ended June 30,				For the Six Months Ended June 30,
				2003		2002		2003		2002
INTEREST INCOME
	Loans		$	1,503	$	1,637	$	2,983	$	3,211
	Mortgage-Backed Securities			9		12		19		26
	Investment Securities			663		405		1,216		872
	Collateralized Mortgage Obligations			252		1,021		747		1,971
	Other Interest Income			65		60		137		125
		Total Interest Income		2,492		3,135		5,102		6,205
INTEREST EXPENSE
	Deposits			844		646		1,622		1,276
	FHLB Advances			769		1,032		1,599		2,111
		Total Interest Expense		1,613		1,678		3,221		3,387
NET INTEREST INCOME BEFORE
	PROVISION FOR LOAN LOSSES			879		1,457		1,881		2,818
PROVISION FOR LOAN LOSSES				56		11		56		15
NET INTEREST INCOME AFTER
	PROVISION FOR LOAN LOSSES			823		1,446		1,825		2,803
NON-INTEREST INCOME
	Gain on Investments			249		20		822		20
	Other Income			32		17		52		41
		Total Non-Interest Income		281		37		874		61
OTHER EXPENSES
	Compensation and Benefits			684		660		1,399		1,290
	Net Occupancy Expense			113		104		226		213
	Other Expenses			329		263		630		493
		Total Other Expenses		1,126		1,027		2,255		1,996
INCOME BEFORE TAX (BENEFIT) EXPENSE				(22)		456		444		868
INCOME TAX (BENEFIT) EXPENSE				(28)		98		63		182
NET INCOME			$	6	$	358	$	381	$	686
BASIC EARNINGS PER SHARE			$	.01	$	.25	$	.31	$	.48
DILUTED EARNINGS PER SHARE			$	.01	$	.25	$	.31	$	.48

GS FINANCIAL CORP. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY For The Six Months Ended June 30, 2003, and 2002 (Dollars in Thousands) (Unaudited)
								Unearned		Accumulated
			Additional			Unearned		RRP		Other	Total
		Common Stock		Paid in Capital	Treasury Stock		ESOP Stock	Trust Stock	Retained Earnings	Comprehensive Income (Loss)	Stockholders’ Equity
BALANCE AT
DECEMBER 31, 2001		$ 34		$ 33,911	$ (25,179)		$ (1,365)	$ (1,477)	$ 27,639	$ 1,845	$ 35,408
Net Income for Six Months
	Ended June 30, 2002	-		-	-		-	-	686	-	686
Other Comprehensive
	Income Net of Applicable Deferred
	Income Taxes	-		-	-		-	-	-	(408)	(408)
Purchase of Treasury Stock		-		-	(881)		-	-	-	-	(881)
ESOP Compensation Earned		-		142	-		141	-	-	-	283
Cash Dividends Paid		-		-	-		-	-	(298)	-	(298)
BALANCE AT
June 30, 2002		$ 34		$ 34,053	$ (26,060)		$ (1,224)	$ (1,477)	$ 28,027	$ 2,253	$ 35,606
		==		=====	======		=====	=====	======	====	=====
BALANCE AT
DECEMBER 31, 2002		$ 34		$ 34,040	$ (27,695)		$ (1,083)	$ (1,274)	$ 28,334	$ 2,028	$ 34,384
Net Income for Six Months
	Ended June 30, 2003	-		-	-		-	-	381	-	381
Other Comprehensive
	Loss Net of Applicable Deferred
	Income Taxes	-		-	-		-	-	-	(702)	(702)
Purchase of Treasury Stock		-		-	(3,354)		-	-	-	-	(3,354)
ESOP Compensation Earned		-		175	-		140	-	-	-	315
Cash Dividends Paid		-		-	-		-	-	(290)	-	(290)
BALANCE AT
June 30, 2003		$ 34		$ 34,215	$ (31,049)		$ (943)	$ (1,274)	$ 28,425	$ 1,326	$ 30,734
		==		=====	======		=====	=====	======	====	=====

GS FINANCIAL CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited)
							For The Six Months Ended June 30,
							2003		2002
CASH FLOWS FROM OPERATING ACTIVITIES
	Net Income					$	381	$	686
	Adjustments to Reconcile Net Income to Net Cash
		Provided by Operating Activities:
			Depreciation				71		82
			Discount Accretion Net of Premiums Amortized				(21)		(460)
			Provision for Loan Losses				56		15
			Gain on Sale of Foreclosed Real Estate				-		(17)
			Net Loan Fees				(1)		(2)
			Dividend on ARM Fund				(602)		(313)
			Dividend on IMF Fund				(7)		(9)
			Dividend on UST Fund				(16)		(43)
			Non-Cash Dividend - FHLB				(68)		(79)
			ESOP Expense				315		235
			RRP Expense				74		74
			Gain on Sale of Investments				(822)		(20)
			Deferred Income Tax Provision				(3)		278
			Changes in Operating Assets and Liabilities:
				Decrease in Accrued Interest Receivable			177		85
				Increase in Prepaid Income Taxes - Current			1		16
				Increase in Deferred Charges			(64)		(80)
				Increase in Accrued Income Tax			57		-
				Increase in Other Liabilities			237		180
				Decrease in Accrued Interest Payable			(60)		(43)
				Increase in Other Assets			(83)		(19)
					Net Cash (Used in) Provided by Operating Activities		(378)		566
CASH FLOWS FROM INVESTING ACTIVITIES
	(Investment)/Redemption in Adjustable Rate Mutual Fund					$	(40,200)	$	6,663
	(Investment)/Redemption in UST Fund						(5,000)		4,255
	Purchase of CMOs						(14,566)		(41,799)
	Proceeds from Maturities of CMOs						47,520		26,970
	Proceeds from sale of CMOs						7,510		-
	Investment in FHLMC Preferred Stock						-		(3,621)
	Proceeds from sale of FHLMC Common Stock						254		-
	Proceeds from sale of Other Equity Investments						-		299
	Proceeds from Maturities of Mortgage-Backed Securities						64		197
	Net Loan Repayments/(Originations)						1,483		(2,248)
	Purchases of Premises and Equipment						(35)		(42)
	Purchase of Land for Future Branch Development						-		(171)
	Proceeds from Sales of Foreclosed Real Estate						-		51
	Investment in Foreclosed Real Estate						-		(45)
					Net Cash Used in Investing Activities		(2,970)		(9,491)

GS FINANCIAL CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (Dollars in Thousands) (Unaudited)
						For The Six Months Ended June 30,
						2003		2002
CASH FLOWS FROM FINANCING ACTIVITIES
		Net Increase in Deposits			$	22,232	$	12,234
		Net Decrease in Unapplied Loan Payments				2		-
		Net Decrease in Advance Payments by Borrowers for
			Taxes and Insurance			(183)		(154)
		Purchase of Treasury Stock				(3,354)		(881)
		Payment of Cash Stock Dividends				(290)		(298)
		Net Decrease in FHLB Advances				(12,790)		(6,856)
				Net Cash Provided by Financing Activities		5,617		4,045
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS						2,269		(4,880)
CASH AND CASH EQUIVALENTS – January 1,						13,352		8,638
CASH AND CASH EQUIVALENTS – June 30,					$	15,621	$	3,758
Cash Received During the Period For:
	Interest Income				$	5,279	$	6,110
Cash Paid During the Period For:
	Interest Expense				$	3,281	$	3,387
	Income Taxes				$	43	$	187

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

GS Financial Corp. (the Company) was organized and incorporated under the laws of the State of Louisiana on December 24, 1996, for the purpose of becoming the holding company of Guaranty Savings and Homestead Association (the Association). The Association is a state-chartered savings and loan association whose primary regulators are the Office of Thrift Supervision (OTS) and Louisiana Office of Financial Institutions (OFI).

The consolidated financial statements include the accounts of GS Financial Corp. and its subsidiary (the Company). All significant intercompany balances and transactions have been eliminated.

In preparing the consolidated financial statements, the Company is required to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the financial condition, results of operations, changes in stockholders’ equity and cash flows for the interim periods presented. These adjustments are of a normal recurring nature and include appropriate estimated provisions.

Pursuant to rules and regulations of the Securities and Exchange Commission, certain financial information and disclosures have been condensed or omitted in preparing the consolidated financial statements presented in this quarterly report on Form 10-Q. The results of operations for the three and six months ended June 30, 2003 are not necessarily indicative of the results to be expected for the year ending December 31, 2003. These unaudited financial statements should be read in conjunction with the Company’s 2002 annual report of Form 10-K.

(2) EMPLOYEE STOCK OWNERSHIP PLAN

The GS Financial Employee Stock Ownership Plan (ESOP) purchased 275,080 shares of the Company’s common stock on April 1, 1997 financed by a loan from the Company. The loan is secured by those shares not yet allocated to plan participants. At June 30, 2003, there were 108,318 unallocated shares and the balance of the loan was $1.2 million. The Association bears the cost of the ESOP as compensation expense which is based on principal and interest payments on the corresponding debt as well as the market value of the stock. Compensation expense related to the ESOP was $134,000 for the three months ended June 30, 2003, compared to $123,000 for the three months ended June 30, 2002. The increase was attributable to the rise in the market value of the stock.

(3) EARNINGS PER SHARE AND PAYMENTS OF DIVIDENDS

Earnings per share are computed using the weighted average number of shares outstanding as prescribed in Statement of Financial Accounting Standard ("SFAS") 128. In accordance with SFAS 128, the average weighted shares outstanding were approximately 1.2 million for the three months ended June 30, 2003, and 1.4 million shares for the three months ended June 30, 2002, basic and diluted. For the three months ended June 30, 2003, earnings per common share were $.01 (basic and diluted), compared to $.25 for the three months ended June 30, 2002 (basic and diluted). During the three months ended June 30, 2003 and 2002, the Company declared and paid cash dividends in the amount of $.10 and $.09 per common share, respectively.

(4) INVESTMENT SECURITIES

(Dollars in thousands)		June 30, 2003				December 31, 2002
		Amortized		Market		Amortized		Market
AVAILABLE FOR SALE		Cost		Value		Cost		Value
US Government and
	Agency Obligations	$	801	$	910	$	801	$	917
ARM Mutual Fund			72,730		72,734		31,924		31,963
IMF Mutual Fund			418		425		412		419
UST Mutual Fund			5,016		5,016		-		-
FHLMC Common Stock			11		558		16		945
FHLMC Preferred Stock			19,846		21,122		19,846		20,847
TOTAL INVESTMENTS		$	98,822	$	100,765	$	52,999	$	55,091

(5) LOANS

	June 30,		December 31,
(Dollars in thousands)	2003		2002
Total Loans	$ 77,326		$ 78,807
Allowance for Loan Losses	(539)		(483)
Net Unearned Fees	9		10
	--------		--------
TOTAL NET LOANS	$ 76,796		$ 78,334
	=====		=====
Permanent Mortgages (1-4 family)	$ 49,791		$ 57,510
Construction	2,652		1,263
Commercial Mortgages	11,779		8,672
Other Mortgages	11,324		9,451
Commercial	1,268		1,515
Consumer (secured by deposits)	512		396
	--------		--------
TOTAL LOANS	$ 77,326		$ 78,807
	=====		=====
ALLOWANCE FOR LOAN LOSSES
For the Three Months Ended		June 30,
(Dollars in thousands)	2003		2002
	-----		-----
Beginning Balance, April 1,	$ 483		$ 439
Provision for Losses	56		11
Loans Charged Off	-		-
	-----		-----
Ending Balance, June 30,	$ 539		$ 450
	===		===

(6) MORTGAGE-BACKED SECURITIES

(Dollars in thousands)		June 30, 2003				December 31, 2002
		Amortized		Market		Amortized		Market
AVAILABLE FOR SALE		Cost		Value		Cost		Value
GNMA Fixed Rate (1-4 family)		$	473	$	496	$	539	$	569
TOTAL MORTGAGE-
	BACKED SECURITIES	$	473	$	496	$	539	$	569

(7) COLLATERALIZED MORTGAGE OBLIGATIONS

(Dollars in thousands)		June 30, 2003		December 31, 2002
		Amortized	Market	Amortized	Market
AVAILABLE FOR SALE		Cost	Value	Cost	Value
FNMA		$ 526	$ 524	$ 7,534	$ 7,524
FHLMC		5,523	5,525	19,404	19,483
GNMA		-	-	1,601	1,601
Private Issue		6,185	6,241	23,564	24,458
		--------	--------	--------	-------
TOTAL COLLATERALIZED MORTGAGE
	OBLIGATIONS	$ 12,234	$ 12,290	$ 52,103	$ 53,066
		=====	=====	=====	=====

(8) INTEREST-BEARING DEPOSITS

	June 30,	December 31,
(Dollars in thousands)	2003	2002
Passbook Savings	$ 33,396	$ 31,153
Certificates of Deposits	87,854	68,213
NOW Accounts	6,758	5,731
	----------	----------
TOTAL INTEREST-BEARING DEPOSITS	$ 128,008	$ 105,097
	======	======

(9) BORROWINGS

	June 30,	December 31,
(Dollars in thousands)	2003	2002
Amounts maturing within 1 year	$ 15,146	$ 27,453
Amounts maturing over 1 year	38,456	38,939
	--------	--------
TOTAL BORROWINGS	$ 53,602	$ 66,392
	=====	=====

(10) STOCK OPTION PLAN

On October 15, 1997, the stockholders approved the adoption of the GS Financial Corp. 1997 Stock Option Plan for the benefit of directors, officers and other key employees. Under this plan, 343,850 shares of common stock have been reserved for issuance pursuant to the exercise of stock options, of which 260,340 shares have become fully vested and exerciseable. To date no options have been exercised.

(11) RECOGNITION AND RETENTION PLAN

On October 15, 1997 the Company established the Recognition and Retention Plan and Trust (RRP) as an incentive to retain personnel of experience and ability in key positions. Stockholders approved a total of 137,540 shares of stock to be granted pursuant to the RRP. The Company acquired a total of 137,500 shares of common stock for issuance under the RRP. The Company is accruing this expense over the ten-year vesting period based on the price of the stock ($12.50/share) when the plan was modified in September, 1998. As of June 30, 2003, of the 125,028 shares awarded, 2,500 shares have been forfeited due to termination of employment and 65,460 had been earned and issued. Compensation expense related to the RRP was $37,000 for the three months ended June 30, 2003 and 2002.

(12) TREASURY STOCK

As of June 30, 2003, the Company had repurchased approximately 2.1 million shares at an average price of $14.83 per share. During the quarter ended June 30, 2003, the Company repurchased 52,734 shares at a cost of $999,548. The following table summarizes the repurchase of shares of the Company’s common stock by year:

	Shares	Average
Year	Repurchased	Price
1998	491,054	$ 16.95
1999	299,000	12.22
2000	679,600	12.64
2001	305,684	15.09
2002	142,201	17.69
2003	176,434	19.01
Total	2,093,973	$ 14.83

Due to the highly capitalized condition of the Company, management felt that these purchases, most of which were at a discount to book value, were an effective way to reduce capital while still enhancing shareholder value. Management believes that reducing capital through stock repurchases is a more conservative use of capital than alternatives such as expanding the banking activities of the Company’s subsidiary through acquisitions. These shares have not been retired and could potentially serve as a source of capital funding should the need arise in the future.

(13) OTHER EXPENSES

Listed below are major recurring components comprising Other Expenses.

	For the Three Months
	Ended June 30,
	2003		2002
Office Supplies and Telephone	$	48,519	$	39,782
Bank Shares and Franchise Tax		125,357		90,701
Data Processing		43,017		32,570
Advertising		18,862		21,908
Supervisory Fees		22,419		22,989

Item 2

Management’s Discussion and Analysis ofFinancial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

In addition to the historical information contained herein, the following discussion contains forward-looking statements as that term is defined by the Private Securities Litigation Reform Act of 1995. Economic circumstances, the Company’s operations, and actual results could differ significantly from those discussed in the forward-looking statements. The major factors that could cause or contribute to such differences include, but are not limited to, changes in the local economy as well as fluctuations in prevailing interest rates. Other forward-looking statements are made concerning the amount and adequacy of the allowance for loan losses.

GENERAL

The Company’s principal business is conducted through its wholly owned subsidiary, Guaranty Savings and Homestead Association. The Association, founded in New Orleans, Louisiana in 1937, provides financial services primarily to individuals. It’s principal products include residential and non-residential mortgage loans, commercial term and line of credit loans, passbook savings accounts, certificates of deposit, and demand deposit accounts. The Association also invests in short-term and long-term investments such as overnight Federal Funds, United States Treasury and Agency issued securities, CMOs and mortgage-backed securities.

The following discussion compares the financial condition of GS Financial Corp. at June 30, 2003 to December 31, 2002 and the results of operations for the three and six months ended June 30, 2003 and 2002. This discussion and analysis is intended to highlight and supplement information presented elsewhere in this quarterly report on Form 10-Q, particularly the consolidated financial statements and related notes in Item 1. This discussion and analysis should be read in conjunction with the Company’s 2002 annual report on Form 10-K.

CHANGES IN FINANCIAL CONDITION

At June 30, 2003, the assets of the Company totaled $215.6 million, increasing $5.6 million from December 31, 2002, when total assets were $210.0 million. The changes in the balance sheet for the first half of 2003 were made up of continued growth in customer deposits, accelerated paydown of the Company’s CMOs and loans, reinvestment of available cash into short term investments and regular amortization of the Company’s advances from FHLB. Customer deposit accounts grew $22.1 million during the six months ended June 30, 2003

Net loans decreased $1.5 million to $76.8 million at June 30, 2003, compared to $78.3 million at December 31, 2002. A $7.7 million decrease in mortgage loans secured by one-to-four residential dwellings was partially offset by increases in non-residential mortgage, commercial and construction loans. As of June 30, 2003, the Company had approximately $3.6 million in outstanding commercial and mortgage loan commitments.

Collateralized mortgage obligations decreased $40.8 million, or 77%, to $12.3 million at June 30, 2003 compared to $53.1 million at December 31, 2002. While the Company invested $14.6 million in CMOs during the first half of 2003, sales of $7.5 million and paydowns of $47.5 millionled to the net decrease. Most of these funds were rolled into the AMF Adjustable Rate Mortgage-backed (ARM) Mutual Fund.

The Company’s investment in mortgage-backed securities consists of fixed-rate GNMA bonds. During the first half of 2003, the Company’s investment in these instruments decreased $73,000 due to regularly scheduled paydowns, as well as a decline in the market value of the investments.

Investment securities increased $45.7 million to $100.8 million at June 30, 2003 compared to $55.1 million at December 31, 2002. The increase was due mainly to the reinvestment of cash from CMO paydowns in the AMF Adjustable Rate Mortgage-backed (ARM) Mutual Fund totaling $40.2 million.

The Company’s overall cash position increased approximately $2.3 million. Cash and cash equivalents increased from $13.3 million at December 31, 2002, compared to $15.6 million at June 30, 2003. Balances of interest bearing deposits in Federal Home Loan Bank increased while cash on hand and Federal Funds Sold decreased.

Interest-bearing deposits increased $22.1 million to $128.0 million at June 30, 2003, compared to $105.9 million at December 31, 2002. This change was made up of increases in passbook savings, certificates of deposit and NOW accounts.

The Company’s borrowings from the Federal Home Loan Bank decreased $12.8 million from $66.4 million at December 31, 2002 compared to $53.6 million at June 30, 2003. The Company’s borrowings consisted of $32.2 million of fully amortizing advances from the Federal Home Loan Bank (FHLB), $16.9 in bullet (interest only until maturity) advances, and $4.5 million in balloon obligations from the FHLB. The decrease was due to regularly scheduled monthly amortization payments.

Stockholders’ equity decreased $3.7 million to $30.7 million at June 30, 2003 compared to $34.4 million at December 31, 2002. This was the net result during the six months ended June 30, 2003 of net income of $381,000, decrease in other accumulated comprehensive income of $702,000, an increase due to retirement of ESOP debt of $315,000, decrease due to dividends paid of $267,000 and a decrease from treasury stock purchases of $3.4 million.

RESULTS OF OPERATIONS

GENERAL

Net income for the three months ended June 30, 2003 was $6,000 compared to $358,000 for the three months ended June 30, 2002. Basic earnings per common share were $.01 for the three months ended June 30, 2003 on average shares outstanding of 1,187,429 compared to $.25 per common share for the three months ended June 30, 2002 on average shares outstanding of 1,611,168.

For the six months ended June 30, 2003, net income was $381,000, or $.31 per common share on average shares outstanding of 1,242,659, compared to net income of $686,000, or $.48 per common share on average shares outstanding of 1,424,441for the six month period ended June 30, 2002.

It should be noted that the results in 2003 included the effects from non-recurring gains of $822,000 on the sale of investment securities.

INTEREST INCOME

Total interest income for the quarter ended June 30, 2003 was $2.5 million, compared to $3.1 million for the quarter ended June 30, 2002. For the three months ended June 30, 2003, average interest-earning assets were $206.5 million with an annualized yield of 4.8%. For the same period in 2002 average total interest-earning assets were $185.8 million yielding 6.7%. For the six months ended June 30, 2003, the Company’s average earning assets were $204.4 yielding 5.0%. For the six months ended June 30, 2002, average earning assets were $185.2 million yielding 6.7%.

Interest income from loans was $1.5 million for the three months ended June 30, 2003, compared to $1.6 million for the three months ended June 30, 2002. During the second quarter of 2003, the average loan portfolio balance was $75.5 million and yielded 8.0%. The average balance of the loan portfolio for the second quarter of 2002 was $82.2 million which yielded 7.8%.

Interest income from mortgage-backed securities was $9,000 for the three months ended June 30, 2003, compared to $12,000 for the three months ended June 30, 2002. The average balance of mortgage-backed securities during the three months ended June 30, 2003, was $485,000 which yielded 7.4%. For the same period in 2002, the average balance of mortgage-backed securities was $700,000 which yielded of 7.1%.

Interest income from CMOs decreased to $252,000 for the three months ended June 30, 2003, compared to $1,021,000 for the three months ended June 30, 2002. During the three months ended June 30, 2003 the average balance of the Company’s portfolio of CMOs was $24.8 million with an annualized yield of 4.07%. For the same period in 2002, the average balance was $54.5 million which yielded 7.5%.

Interest income from investment securities was $663,000 for the three months ended June 30, 2003 compared to $405,000 for the three months ended June 30, 2002. The average balance of investment securities was $96.4 million which yielded 2.9% during the three months ended June 30, 2003 compared to $38.1 million yielding 4.3% for the three months ended June 30, 2002.

Other interest income, consisting of interest income on overnight Federal Funds Sold, interest-bearing deposits in other banks, and dividends on FHLB stock, increased from $60,000 for the three months ended June 30, 2002, to $65,000 for the three months ended June 30, 2003. For the three months ended June 30, 2003, the average balance of such investments was $14.8 million compared to $10.2 million for the three months ended June 30, 2002.

PROVISION FOR LOAN LOSSES

The Company had an allocation to provision for loan losses of $56,000 for the three months ended June 30, 2003 and $11,000 for the three months ended June 30, 2002. These provisions were made due to the Company’s shift to a higher percentage of non-residential mortgage and commercial loans as a percentage of the entire loan portfolio. In accordance with the policies and procedures adopted by the Company, non-residential mortgages and commercial loans are allocated a higher provision than loans secured by one-to-four family dwellings due to the higher inherent risk associated with those types of credits. Asset quality remains strong with non-performing assets in 2003 remaining low. Over the last ten years, repossessions and charge-offs have been very low for the Company due to the strength of the local economy and real estate market and the high underwriting standards maintained by management. At June 30, 2003, the allowance for loan losses stood at .70% of the entire loan portfolio, compared to .61% at December 31, 2002. Loans classified as substandard, for which a specific potential for loss has been identified are considered "special assets." Special assets at June 30, 2003 were $279,000 with an allocated allowance for loan losses (ALL) of $30,000, compared to $280,000 at December 31, 2002 with an allocated (ALL) of $30,000.

INTEREST EXPENSE

The Company’s total interest expense decreased $65,000 to $1,613,000 for the three months ended June 30, 2003 compared to $1,678,000 for the three months ended June 30, 2002. The average balance of total interest-bearing liabilities was $178.4 million at a cost of 3.6% for the three months ended June 30, 2003. For the same period in 2002 the average balance of interest-bearing liabilities was $153.1 million costing 4.4%. The decrease in cost of funds was due to the effects of lower rates paid on certificates of deposit, passbook savings and NOW accounts and less reliance on wholesale funds borrowed from the FHLB.

The average balance of interest-bearing deposits was $123.8 million for the three months ended June 30, 2003 costing 2.7%. Average interest-bearing deposits for the three months ended June 30, 2002 was $79.4 million costing 3.3%. Interest expense on interest-bearing deposits was $844,000 for the three months ended June 30, 2003, compared to $646,000 for the three months ended June 30, 2002.

The average balance of FHLB advances was $54.6 million at an annualized cost of 5.6% for the three months ended June 30, 2003. The average balance of FHLB advances for the three months ended June 30, 2002 was $73.7 million with an annualized cost of 5.6%.

OTHER EXPENSES

Total other expenses for the three months ended June 30, 2003 were $1.1 million compared to $1.0 million for the three months ended June 30, 2002. The increase in expenses was primarily attributable to the compensation costs of additional personnel necessitated by the expansion of services and locations.

INCOME TAXES

The Company reported an income tax benefit of $28,000 for the second quarter of 2003 compared to an expense of 98,000 for the second quarter of 2002. The provision for income taxes differs from that computed by applying statutory rates primarily due to the effects of non-taxable dividend income.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity measures the Company’s ability to meet its short-term obligations with ready cash. These commitments and obligations include loan disbursements, savings withdrawals by customers, the payment of dividends, cash letters and the daily operating expenses of the Company. Liquidity management involves the daily monitoring of cash on hand, non-interest bearing operating accounts, overnight Federal Funds Sold, short-term investments, and the Company’s ability to convert these assets into cash without incurring a loss. Monthly paydowns on mortgage loans, mortgage-backed securities and CMOs are anticipated and channeled to either cash on hand, overnight Federal Funds Sold or short-term investments in order to meet the Company’s demands and maximize interest earned on these funds.

The Company’s primary sources of funds are interest-bearing customer deposits, FHLB advances and maturities of existing investments including mortgage loans, mortgage-backed securities, investment securities and collateralized mortgage obligations. The Company does not utilize brokered deposits nor does it offer special rates for "jumbo" deposits of $100,000 or more.

The Association is required to maintain regulatory capital sufficient to meet all three of the regulatory capital requirements, those being tangible capital (1.5%), core capital (3.0%), and risk-based capital (8.0%). As of June 30, 2003, the Association’s tangible and core capital amounted to $26.1 million, or 12.4% of adjusted total assets, while the Association’s risk-based capital was $26.6 million, or 28.3% of total adjusted risk-weighted assets.

Item 3 – Quantitative and Qualitative Disclosures about Market Risk

Quantitative and qualitative disclosures about market risk are presented at December 31, 2002 in the Company’s Annual Report on Form 10-K, filed with the SEC on March 25, 2003. Management believes there have been no material changes in the Company’s market risk since December 31, 2002.

Item 4. - Controls and Procedures

Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on such evaluation, or Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations and are operating in an effective manner.

No change in our internal control over financial reporting (as defined in Rules 13a–15(f) or 15(d)-15(f) under the Securities Exchange Act of 1934) occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to affect, our internal control over financial reporting.

Part II - Other Information

Item 1 - Legal Proceedings

There are no matters required to be reported under this item.

Item 2 - Changes in Securities and Use of Proceeds

There are no matters required to be reported under this item.

Item 3 - Defaults Upon Senior Securities

There are no matters required to be reported under this item.

Item 4 - Submission of Matters to a Vote of Security Holders

There are no matters required to be reported under this item.

Item 5 - Other Information

There are no matters required to be reported under this item.

Item 6 - Exhibits and Reports on Form 10-K:

Exhibits

3.1*	Articles of Incorporation of GS Financial Corp.
3.2*	Bylaws of GS Financial Corp.
4.1*	Stock Certificate of GS Financial Corp.
10.1**	GS Financial Corp. Stock Option Plan
10.2**	GS Financial Corp. Recognition and Retention Plan and Trust
		Agreement for Employees and Non-Employee Directors
31.1	Certification of the Chief Executive Officer Pursuant to Rules 13a-14 and
		15d-14 of the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Chief Financial Officer Pursuant to Rules 13a-14 and
		15d-14 of the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of the Chief Executive Officer Pursuant to Rules 13a-14 and
		15d-14 of the Securities Exchange Act of 1934 and Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of the Chief Executive Officer Pursuant to Rules 13a-14 and
		15d-14 of the Securities Exchange Act of 1934 and Section 906 of the Sarbanes-Oxley Act of 2002

* Incorporated herein by reference from the Registration Statement on Form SB-2 (Registration number 333-18841) filed by the Registrant with the SEC on December 26, 1996, as subsequently amended.

** Incorporated herein by reference from the definitive proxy statement, dated September 16, 1997, filed by the Registrant with the SEC (Commission File No. 000-22269)

Reports on Form 8-K

On a Form 8-K dated May 15, 2003, the registrant reported under Item 9 the correction of the release of its financial results for the quarter ended March 31, 2003. The news release covering the correction, along with the original news release covering the financial results as originally stated were filed as an exhibit under Item 7.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GS FINANCIAL CORP.

Date: August 14, 2003	By:	/s/ Donald C. Scott
		Donald C. Scott, Chairman Board, President and Chief Executive Officer

Date: August 14, 2003	By:	/s/ Jerry M. Sintes
		Jerry M. Sintes Chief Financial Officer

Exhibit 31.1

PURSUANT TO RULES 13a-14 AND 15d-14 OF THE SECURITIES EXCHANGE ACT OF 1934 AND SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

I, Donald C. Scott, certify that:

1. I have reviewed this quarterly report on Form 10-Q of GS Financial Corp. (the Registrant);

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the Registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any changes in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting ; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: August 14, 2003	By:	/s/ Donald C. Scott
		Donald C. Scott, Chairman of the Board, President and Chief Executive Officer

Exhibit 31.2

PURSUANT TO RULES 13a-14 AND 15d-14 OF THE SECURITIES EXCHANGE ACT OF 1934 AND SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

I, Jerry M. Sintes, certify that:

1. I have reviewed this quarterly report on Form 10-Q of GS Financial Corp. (the Registrant);

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the Registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any changes in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting ; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: August 14, 2003	By:	/s/ Jerry M. Sintes
		Jerry M. Sintes, Chief Financial Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C.SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANCES-OXLEY ACT OF 2002

I, Donald C. Scott, Chairman of the Board, President and Chief Executive Officer of GS Financial Corp., hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1. The Quarterly Report on Form 10-Q of the Company of the quarterly period ended June 30, 2003 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d); and
   
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
   

By: /s/Donald C. Scott
----------------------

Donald C. Scott, Chairman of the Board,
President and Chief Executive Officer


Date: August 14, 2003

  

Exhibit 32.2

 CERTIFICATION PURSUANT TO18 U.S.C.SECTION 1350AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANCES-OXLEY ACT OF 2002 

I, Jerry M. Sintes, Chief Financial Officer of GS Financial Corp., hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1. The Quarterly Report on Form 10-Q of the Company of the quarterly period ended June 30, 2003 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d); and
   
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
   

By: /s/Jerry M. Sintes
----------------------

Jerry M. Sintes, Chief Financial Officer


Date: August 14, 2003