UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
--------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE EXCHANGE ACT OF 1934
For the transition period from to
------------ ------------
Commission file number: 0-25854
GFSB BANCORP, INC.
----------------------------------------------------------
(Name of Small Business Issuer in its Charter)
Delaware 04-2095007
- -------------------------------------------- --------------------
(State or Other Jurisdiction of Incorporation (I.R.S. Employer
or Organization) Identification No.)
221 West Aztec Avenue, Gallup, New Mexico 87301
- ----------------------------------------- --------------------
(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number, Including Area Code: (505) 726-6500
--------------------
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 April 27, 2001, there were issued and outstanding 1,150,106 shares of the
registrant's Common Stock.
GFSB Bancorp, Inc.
Index
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Statements of Financial Condition
March 31, 2001 and June 30, 2000 3
Consolidated Statements of Earnings and Comprehensive Earnings
Three months and nine months ended March 31, 2001 and 2000 4
Consolidated Statements of Cash Flows
Nine months ended March 31, 2001 and 2000 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 16
Signatures 18
2
GFSB Bancorp, Inc.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
March 31, June 30,
2001 2000
------------- -------------
(Unaudited)
ASSETS
Cash and due from banks $ 2,841,356 $ 2,875,537
Interest-bearing deposits with banks 953,357 1,215,428
Available-for-sale investment securities 23,196,001 25,438,540
Available-for-sale mortgage-backed securities 28,481,143 28,930,510
Held-to-maturity investment securities 1,944,596 1,681,310
Stock of Federal Home Loan Bank, at cost, restricted 4,611,400 4,206,900
Loans receivable, net, substantially pledged 127,753,897 109,777,269
Accrued interest and dividends receivable 1,139,506 1,033,974
Premises and equipment 1,236,130 1,296,048
Other real estate and repossessed property 7,950 38,000
Prepaid and other assets 81,193 197,883
Deferred tax asset 94,517 94,517
------------- -------------
TOTAL ASSETS $ 192,341,046 176,785,916
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Transaction and NOW accounts $ 14,420,711 $ 12,409,069
Savings and MMDA deposits 14,779,029 14,801,893
Time deposits 73,712,595 52,736,983
Advances from Federal Home Loan Bank 71,154,436 82,935,066
Accrued interest payable 431,164 288,350
Advances from borrowers for taxes and insurance 632,416 305,909
Accounts payable and accrued liabilities 317,249 236,070
Repurchase agreements 1,378,474 230,839
Deferred income taxes 660,317 67,157
Dividends declared and payable 98,453 88,875
Income taxes payable 182,605 --
------------- -------------
TOTAL LIABILITIES 177,767,449 164,100,211
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Preferred stock, $.10 par value, 500,000
shares authorized; no shares issued or
outstanding - -
Common stock, $.10 par value, 1,500,000
shares authorized; 1,150,106 issued and outstanding
at March 31,2001 and 940,963 shares issued and
outstanding at June 30, 2000 115,011 94,096
Additional paid-in-capital 2,612,526 2,810,626
Unearned ESOP stock (286,597) (323,911)
Retained earnings, substantially
restricted 10,850,865 9,974,531
Accumulated other comprehensive
earnings 1,281,792 130,363
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 14,573,597 12,685,705
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 192,341,046 $ 176,785,916
============= =============
See notes to consolidated financial statements.
3
GFSB Bancorp, Inc.
CONSOLIDATED STATEMENTS OF EARNINGS
AND COMPREHENSIVE EARNINGS
Three months ended Nine months ended
March 31, March 31,
--------------------------- ----------------------------
2001 2000 2001 2000
--------------------------- ----------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Interest income
Loans receivable
Mortgage loans $ 2,173,011 $ 1,965,405 $ 6,435,237 5,688,913
Commercial loans 414,014 134,946 896,331 354,540
Share and consumer loans 150,367 121,765 460,612 350,339
Investment and mortgage-backed securities 889,473 787,128 2,758,665 2,121,319
Other interest-earning assets 80,675 70,254 250,988 193,156
------------ ------------ ------------ ------------
TOTAL INTEREST EARNINGS 3,707,540 3,079,498 10,801,833 8,708,267
Interest expense
Deposits 1,059,907 808,376 2,860,723 2,385,421
Advances from Federal Home Loan Bank 1,193,820 1,034,046 3,965,278 2,736,404
Repurchase agreements 11,980 2,189 54,604 3,101
------------ ------------ ------------ ------------
TOTAL INTEREST EXPENSE 2,265,707 1,844,611 6,880,605 5,124,926
------------ ------------ ------------ ------------
NET INTEREST EARNINGS 1,441,833 1,234,887 3,921,228 3,583,341
Provision for loan losses 120,000 70,000 270,000 130,000
------------ ------------ ------------ ------------
NET INTEREST EARNINGS AFTER
PROVISION FOR LOAN LOSSES 1,321,833 1,164,887 3,651,228 3,453,341
Non-interest income
Income from real estate operations 0 2,500 0 5,000
Miscellaneous income 11,160 5,026 58,287 13,311
Net gains from sales of loans 950 7,306 18,682 26,122
Gains from sales of AFS securities 11,261 0 11,261 4,539
Losses from sales of AFS securities 0 (67,718) (336) (70,552)
Service charge income 70,569 57,247 220,740 187,707
------------ ------------ ------------ ------------
TOTAL NON-INTEREST INCOME 93,940 4,361 308,634 166,127
Non-interest expense
Compensation and benefits 402,721 431,280 1,235,229 1,230,279
FDIC Insurance 3,867 4,148 12,041 27,105
Insurance 8,872 8,085 25,275 23,467
Stock services 2,514 4,169 10,747 10,071
Occupancy 88,456 85,621 262,596 244,736
Data processing 61,040 50,863 163,226 147,720
Professional fees 14,274 20,303 66,165 67,579
Advertising 17,250 13,811 58,468 48,722
Stationery, printing and office supplies 14,609 19,440 49,818 59,154
ATM expense 9,169 12,045 30,801 37,715
Supervisory exam fees 12,130 10,384 34,081 29,367
Postage 13,925 9,391 32,725 25,363
Other 80,563 57,829 213,754 156,719
------------ ------------ ------------ ------------
TOTAL NON-INTEREST EXPENSE 729,390 727,369 2,194,926 2,107,997
------------ ------------ ------------ ------------
4
GFSB Bancorp, Inc.
CONSOLIDATED STATEMENTS OF EARNINGS
AND COMPREHENSIVE EARNINGS-CONTINUED
Three months ended Nine months ended
March 31, March 31,
------------------------- -------------------------
2001 2000 2001 2000
------------------------- -------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
EARNINGS BEFORE INCOME TAXES 686,383 441,879 1,764,936 1,511,471
Income tax expense
Currently payable 243,406 148,912 590,226 534,430
Deferred provision - - - -
----------- ----------- ----------- -----------
243,406 148,912 590,226 534,430
----------- ----------- ----------- -----------
NET EARNINGS $ 442,977 $ 292,967 1,174,710 977,041
=========== =========== =========== ===========
Other Comprehensive Earnings
Unrealized gain (loss), net of tax 193,601 (16,594) 1,151,429 (389,483)
----------- ----------- ----------- -----------
COMPREHENSIVE EARNINGS 636,578 276,373 2,326,139 587,558
=========== =========== =========== ===========
Earnings per common share
Basic $ 0.40 0.26 1.06 0.85
=========== =========== =========== ===========
Weighted average number of common shares outstanding
Basic 1,097,536 1,143,409 1,105,920 1,152,036
=========== =========== =========== ===========
Earnings per common share
Diluted 0.39 0.25 1.04 0.83
=========== =========== =========== ===========
Weighted average number of common shares outstanding
Diluted 1,123,578 1,166,315 1,134,130 1,174,942
=========== =========== =========== ===========
Comprehensive earnings per common share
Basic 0.58 0.24 2.10 0.51
=========== =========== =========== ===========
Diluted 0.57 0.24 2.05 0.50
=========== =========== =========== ===========
5
GFSB Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended
March 31,
----------------------------
2001 2000
------------ ------------
(Unaudited) (Unaudited)
Cash flows from operating activities
Net earnings $ 1,174,710 $ 977,041
Adjustments to reconcile net earnings to
net cash provided by operations
Deferred loan origination fees (257,244) (231,360)
Loss (gain) on sale of loans and securities (29,607) 39,891
Provision for loan losses 270,000 130,000
Depreciation of premises and equipment 135,043 133,468
Amortization of investment and mortgage-
backed securities premiums 55,439 126,429
Stock dividend on FHLB stock (205,300) (144,400)
Release of ESOP stock 78,455 72,124
Stock compensation 38,340 48,664
Provision (benefit) for deferred income taxes - (23,892)
Net changes in operating assets and liabilities
Accrued interest and dividends receivable (105,532) (184,257)
Prepaid and other assets 116,690 (54,177)
Accrued interest payable 142,814 58,831
Accounts payable and accrued liabilities 42,839 (32,163)
Repurchase agreements 1,147,635 271,139
Income taxes payable 182,605 (238,044)
Dividends declared and payable 9,578 15,602
----------- ------------
Net cash provided by
operating activities 2,796,465 964,896
----------- ------------
Cash flows from investing activities
Purchase of premises and equipment (75,125) (41,804)
Loan originations and principal
repayment on loans, net (17,940,653) (9,374,012)
Principal payments on mortgage-backed
securities 3,521,945 4,341,753
Purchases of mortgage-backed securities (2,504,724) --
Purchases of available-for-sale securities (3,284,814) (15,929,426)
Maturities and proceeds from sale of
available-for-sale securities 6,442,814 4,112,575
Principal payments on available-for-sale securities 213,475 76,900
Principal payments on hold-to-maturity securities 10,000 --
Purchases of hold-to-maturity securities (270,000) --
Purchase of FHLB stock (199,200) (775,900)
----------- ------------
Net cash used by
investing activities (14,086,282) (17,589,914)
----------- ------------
6
GFSB Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Nine months ended
March 31,
----------------------------------
2001 2000
--------------- ---------------
(Unaudited) (Unaudited)
Cash flows from financing activities
Net increase in transaction accounts, passbook
savings, money market accounts, and
certificates of deposit $ 22,964,390 $ 1,428,758
Net increase in mortgage escrow funds 326,507 197,791
Proceeds from FHLB advances 1,616,072,346 487,058,922
Repayments on FHLB advances (1,627,852,976) (471,918,956)
Purchase of GFSB Bancorp stock under
stock repurchase plan in cash (291,930) (539,640)
Dividends paid or to be paid in cash (275,284) (255,824)
Price paid for vested management bonus
stock plan stock 50,512 55,463
Proceeds from exercise of stock options -- 19,425
--------------- ---------------
Net cash provided by
financing activities 10,993,565 16,045,939
--------------- ---------------
Decrease in cash and cash equivalents (296,252) (579,079)
Cash and cash equivalents at beginning of period 4,090,965 5,147,215
--------------- ---------------
Cash and cash equivalents at end of period $ 3,794,713 4,568,136
=============== ===============
Supplemental disclosures of cash flow information
Cash paid during the period for
Interest on deposits and advances $ 6,683,186 $ 5,062,994
Income taxes 408,790 772,475
Change in unrealized gain (loss), net of deferred
taxes on available-for-sale securities 1,151,429 (389,483)
Dividends declared not yet paid 98,453 90,350
7
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.
2. Stock Dividend
The Board of Directors of the Company announced on October 31, 2000, the
declaration of a 25% stock dividend payable on December 15, 2000 to shareholders
of record on December 1, 2000. The basic and diluted weighted average number of
shares outstanding and net earnings and comprehensive earnings per share
information for all prior reporting periods have been restated to reflect the
effects of the stock dividend.
8
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, 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 bank holding company headquartered in
Gallup, New Mexico, which provides a full range of deposits and traditional
mortgage loan products through its wholly owned banking subsidiary, Gallup
Federal Savings Bank. All references refer collectively to the Company and the
Bank, unless the context indicates otherwise.
FINANCIAL CONDITION
The total assets of the Company increased $15.6 million or 8.8% from $176.8
million at June 30, 2000 to $192.3 million at March 31, 2001. This increase was
primarily the result of an $18 million dollar increase in the Company's net loan
portfolio, offset by a decrease of $2.4 million in the Company's
available-for-sale investment portfolio. Of this loan increase, approximately
$12.2 million was in commercial loans, $4.5 million in consumer residential
loans, and $1.8 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 and management efforts to increase lending activity. The decrease in
the investment portfolio is due primarily to proceeds received from net
maturities and sales of available-for-sale securities of $3.2 million.
At March 31, 2001 total liabilities increased $13.7 million or 8.3% from $164.1
million at June 30, 2000 to $177.8 million at March 31, 2001. This increase was
primarily due to an increase in deposits of $23 million, offset by a decrease in
borrowings from the Federal Home Loan Bank (FHLB) of $11.8 million. The increase
in deposits was primarily the result of growth in the Company's volume of jumbo
certificates of deposit (public, brokered and private) and transaction and NOW
accounts. This increase was primarily attributed to the increase in market rates
paid on these products. Funds used from growth of deposits were used to pay down
FHLB advances. At March 31, 2001, accumulated other comprehensive earnings
increased by $1.2 million to $1.3 million from $130,000 at June 30, 2000,
respectively from market gains on the Company's available-for-sale investment
securities and available-for-sale mortgage-backed securities.
9
RESULTS OF OPERATIONS
COMPARISON OF OPERATING RESULTS FOR QUARTER ENDED MARCH 31, 2001 COMPARED TO
QUARTER ENDED MARCH 31, 2000.
General
Net income for the quarter ended March 31, 2001 increased $150,000 to $443,000
compared to net income of $293,000 for the comparable quarter 2000. The 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.
Quarter ended Quarter ended
March 31, 2001 March 31, 2000
-------------- --------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
(Dollars in Thousands) (Dollars in Thousands)
Interest-earning assets:
Loans receivable (1) $125,317 $2,738 8.74% $105,947 $2,222 8.39%
Investment securities and
mortgage-backed securities 54,739 889 6.50% 49,791 787 6.32%
Other interest-earning
assets (2) 5,706 81 5.67% 4,842 70 5.78%
----------- ---------- ----------- ----------
Total interest-earning assets 185,762 3,708 7.98% 160,580 3,079 7.67%
Non-interest-earning assets 5,631 5,679
----------- -----------
Total assets $191,393 $166,259
=========== ============
Interest-bearing liabilities:
Transaction accounts $ 6,370 $ 23 1.44% $ 5,943 $ 21 1.41%
Passbook savings 4,835 22 1.82% 4,979 25 2.01%
Money market accounts 9,634 82 3.40% 9,998 77 3.08%
Certificates of deposit 63,091 933 5.92% 53,766 685 5.10%
Other liabilities (3) 83,319 1,206 5.79% 71,812 1,036 5.77%
----------- ---------- ----------- ---------- -----------
Total interest-bearing
liabilities 167,249 2,266 5.42% 146,498 1,844 5.03%
Non-interest bearing
liabilities 9,814 7,408
----------- -----------
Total liabilities 177,063 153,906
Stockholders' equity 14,330 12,353
----------- -----------
Total liabilities and
Stockholders' equity $191,393 $166,259
=========== ===========
Net interest income $1,442 $1,235
========== ==========
10
Interest rate spread (4) 2.56% 2.64%
=========== ========
Net yield on interest-
earning assets (5) 3.11% 3.08%
=========== ========
Ratio of average interest-
earning assets to average
interest-bearing liabilities 1.11X 1.10X
=========== ========
(1) Average balances include non-accrual loans.
(2) Includes interest-bearing deposits in other financial institutions
(3) Other liabilities include FHLB advances and Repurchase agreements.
(4) Interest-rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(5) 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
March 31, 2001 vs. 2000
Increase (decrease)
Due to
-----------------------------------
Rate/
Volume Rate Volume Net
------ ---- ------ ---
(Dollars in Thousands)
Interest income:
Loans receivable $ 406 $ 93 $ 17 $ 516
Mortgage-backed securities and
investment securities 78 22 2 102
Other interest-earning assets 12 (1) - 11
----- ----- ----- -----
Total interest-earning assets 496 114 19 629
----- ----- ----- -----
Interest expense:
Transaction accounts 2 - - 2
Savings accounts (1) (2) - (3)
Money markets (3) 8 - 5
Certificates of deposit 119 110 19 248
Other liabilities 166 4 - 170
----- ----- ----- -----
Total interest-bearing liabilities 283 120 19 422
----- ----- ----- -----
Net change in interest income $ 213 $ (6) $ - $ 207
===== ===== ===== =====
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 $120,000 and $70,000 for the
quarter ended March 31, 2001 and 2000, 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
11
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 $89,600 from $4,400 for the quarter ended
March 31, 2000 to $93,900 for the quarter ended March 31, 2001. The increase in
non-interest income for the quarter ended March 31, 2001 is primarily due to
increased income from gains from the sale of available-for-sale securities,
miscellaneous income and service charge income. Miscellaneous income increased
$6,100, due primarily to an increase in commission fees collected from credit
card merchant sales of $3,300 and $1,800 from a gain on the sale of equipment.
Service charge income increased $13,300 as the result of increased NSF charges
collected on NOW and checking accounts. For the quarter ended March 31, 2000,
the Company incurred losses from the sale of available-for-sale securities of
$67,700, which primarily accounted for the lower non-interest income for the
previous year period.
Non-Interest Expense
Total non-interest expense increased $2,000 from $727,400 for the quarter ended
March 31, 2000 to $729,400 for the quarter ended March 31, 2001. Though total
non-interest expense remained virtually unchanged for the current 2001 quarter
as compared to the 2000 quarter, the most significant change in non-interest
expense was a $28,600 decrease in compensation and benefits offset by increases
of $10,200 in data processing expense, and $22,700 in other non-interest
expense. The decrease in compensation and benefits expense reflects $24,300 in
general salaries and benefits expense primarily due to hiring of additional
staff and general merit increases which were offset by decreased charges of
$11,900 relating to the 1996 management stock compensation plan and $41,000 of
state gross receipt tax. The participants of the 1996 awards from the stock
compensation plan became fully vested at January 5, 2001. During the quarter
ended March 31, 2000, the Company paid to the state $41,000 in gross receipts
tax for director's fees. Data processing expense increased $10,200 for the
current 2001 quarter primarily due to a $5,800 charge to computer expense for
the replacement of network software, which was not fully depreciated and
increases in service bureau expense resulting from growth in deposits and loans.
Other non-interest expense increased $22,700 primarily due to normal increases
in operating expenses, which included $11,000 in telephone expenses related to
the upgrade in telephone services.
12
RESULTS OF OPERATIONS
COMPARISON OF OPERATING RESULTS FOR THE NINE-MONTH PERIOD ENDED MARCH 31, 2001
COMPARED TO THE NINE-MONTH PERIOD ENDED MARCH 31, 2000.
General
Net income for the nine months ended March 31, 2001 increased $198,000 to
$1,175,000 compared to net income of $977,000 for the comparable nine-month
period in 2000. The 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 nine-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.
Nine-month period ended Nine-month period ended
------------------------ -----------------------
March 31, 2001 March 31, 2000
-------------- --------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
(Dollars in Thousands) (Dollars in Thousands)
Interest-earning assets:
Loans receivable (1) $119,120 $7,792 8.72% $102,021 $6,394 8.36%
Investment securities and
mortgage-backed securities 55,490 2,759 6.63% 47,696 2,121 5.93%
Other interest-earning
assets (2) 5,515 251 6.07% 4,627 193 5.56%
----------- ---------- ----------- ----------
Total interest-earning assets 180,125 10,802 8.00% 154,344 8,708 7.52%
Non-interest-earning assets 5,830 5,221
----------- -----------
Total assets $185,955 $159,565
=========== ============
Interest-bearing liabilities:
Transaction accounts $ 6,169 $ 69 1.49% $ 5,959 $ 68 1.52%
Passbook savings 4,935 73 1.97% 4,930 75 2.03%
Money market accounts 9,494 250 3.51% 10,336 229 2.95%
Certificates of deposit 57,207 2,469 5.75% 52,697 2,013 5.09%
Other liabilities (3) 85,251 4,020 6.29% 65,415 2,740 5.58%
----------- ---------- ----------- ---------- -----------
Total interest-bearing
liabilities 163,056 6,881 5.63% 139,337 5,125 4.90%
Non-interest bearing
liabilities 9,248 7,832
----------- -----------
Total liabilities 172,304 147,169
Stockholders' equity 13,651 12,396
----------- -----------
Total liabilities and
Stockholders' equity $185,955 $159,565
=========== ===========
Net interest income $3,921 $3,583
========== ==========
13
Interest rate spread (4) 2.37% 2.62%
=========== =========
Net yield on interest-
earning assets (5) 2.90% 3.10%
=========== =========
Ratio of average interest-
earning assets to average
interest-bearing liabilities 1.10X 1.11X
=========== =========
(1) Average balances include non-accrual loans.
(2) Includes interest-bearing deposits in other financial institutions
(3) Other liabilities include FHLB advances and Repurchase agreements
(4) Interest-rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(5) 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.
Nine-month period ended
March 31, 2001 vs. 2000
Increase (decrease)
Due to
----------------------------------------
Rate/
Volume Rate Volume Net
------ ---- ------ -----
(Dollars in Thousands)
Interest income:
Loans receivable $ 1,072 $ 275 $ 51 $ 1,398
Mortgage-backed securities and
investment securities 347 250 41 638
Other interest-earning assets 37 18 3 58
------- ------- ------- -------
Total interest-earning assets 1,456 543 95 2,094
------- ------- ------- -------
Interest expense:
Transaction accounts 2 (1) - 1
Savings accounts - - (2) (2)
Money markets (18) 43 (4) 21
Certificates of deposit 173 261 22 456
Other liabilities 829 347 104 1,280
------- ------- ------- -------
Total interest-bearing liabilities 986 650 120 1,756
------- ------- ------- -------
Net change in interest income $ 470 $ (107) $ (25) $ 338
======= ======= ======= =======
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 $270,000 and $130,000 for the
nine-month period ended March 31, 2001 and 2000, respectively. The increase in
the provision for loan losses for the current nine-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
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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 $142,500 from $166,100 for the nine
months ended March 31, 2000 to $308,600 for the nine months ended March 31,
2001. The increase in non-interest income for the nine months ended March 31,
2001 primarily is due to increased miscellaneous income, gains from the sale of
available-for- sale securities, and service charge fees. Miscellaneous income
increased $45,000, due primarily to a gain on the sale of other real estate
owned of $21,000, an increase in commission fees collected from credit card
merchant sales of $14,200, a gain on the sale of equipment of $1,800 and $6,000
from a wining raffle ticket, which the Company subsequently donated to several
local charities. Service charge income increased $33,000 as the result of
increased NSF charges collected on NOW and checking accounts. For the nine
months ended March 31, 2000, the Company incurred losses from the sale of
available-for-sale securities of $70,600, which primarily accounts for the lower
non-interest income for the previous year period.
Non-Interest Expense
Total non-interest expense increased $86,900 from $2,108,000 for the nine months
ended March 31, 2000 to $2,194,900 for the nine months ended March 31, 2001. The
most significant changes in non-interest expense were increases in occupancy,
data processing, and other non-interest expenses, which were offset by decreased
FDIC insurance assessments and ATM expense. Occupancy expense increased $17,900
primarily due to increased automated teller machine maintenance expense. Data
processing increased $15,500 primarily due to a $5,800 charge to computer
expense for the replacement of network software, which was not fully depreciated
and increases in service bureau expense resulting from growth in deposits and
loans. Other non-interest expense increased $57,000 primarily due to normal
increases in operating expense, which included $29,000 in telephone expense
related to the upgrade in telephone services. Effective January 2000, FDIC
assessments were lowered. The $6,900 decrease in ATM expense is primarily due to
the reduction in use of our customer's using foreign ATM machines.
Liquidity and Capital Resources
The Bank 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 March 31, 2001,
the Bank's liquidity, as measured for regulatory purposes, was 5.28%.
At March 31, 2001, the Bank exceeded each of the three OTS capital requirements
on a fully-phased-in basis.
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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****
--------------
* 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.
16
*** 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.
17
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: May 7, 2001 /s/Jerry R. Spurlin
----------- -----------------------------------------------
Jerry R. Spurlin
Assistant Secretary and Chief Financial Officer
(Duly Authorized Representative and
Principal Financial Officer)
18