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 September 30, 2001
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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
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(State or Other Jurisdiction of Incorporation or Organization)
04-2095007
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(I.R.S. Employer
Identification No.)
221 West Aztec Avenue, Gallup, New Mexico
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(Address of Principal Executive Offices)
87301
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(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
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As of October 31, 2001, there were issued and outstanding 1,150,106 shares of
the registrant's Common Stock.
GFSB Bancorp, Inc.
Index
Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Statements of Financial Condition
September 30, 2001 and June 30, 2001 3
Condensed Consolidated Statements of Earnings and Comprehensive Earnings
Three months ended September 30, 2001 and September 30, 2000 4
Condensed Consolidated Statements of Cash Flows
Three months ended September 30, 2001 and September 30, 2000 6
Notes to Condensed 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
GFSB Bancorp, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, June 30,
2001 2001
-------------- -------------
ASSETS
Cash and due from banks $ 3,262,494 $ 3,216,000
Interest-bearing deposits with banks 947,226 1,046,254
Available-for-sale investment securities 24,938,184 21,804,107
Available-for-sale mortgage-backed securities 29,607,072 32,376,812
Held-to-maturity investment securities 1,946,874 1,945,720
Stock of Federal Home Loan Bank, at cost, restricted 3,683,300 3,649,000
Loans receivable, net, substantially pledged 128,848,787 130,430,937
Accrued interest and dividends receivable 1,227,600 1,185,400
Premises and equipment 1,334,330 1,323,770
Other real estate and repossessed property 195,549 7,950
Prepaid and other assets 209,769 66,674
Deferred tax asset 98,006 98,006
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TOTAL ASSETS $ 196,299,191 197,150,630
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Transaction and NOW accounts $ 15,430,310 $ 15,462,712
Savings and MMDA deposits 13,841,560 14,521,879
Time deposits 78,298,005 76,675,576
Advances from Federal Home Loan Bank 69,701,204 72,105,997
Repurchase agreements 1,410,283 1,324,335
Accrued interest payable 464,857 473,446
Advances from borrowers for taxes and insurance 618,579 440,048
Accounts payable and accrued liabilities 245,886 219,855
Deferred income taxes 730,379 653,197
Dividends declared and payable 98,453 98,453
Income taxes payable - 195,854
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TOTAL LIABILITIES 180,839,516 182,171,352
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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 June 30, 2001 and September 30, 2001 115,011 115,011
Additional paid-in-capital 2,658,849 2,630,860
Unearned ESOP stock (257,267) (272,480)
Retained earnings, substantially
restricted 11,525,288 11,237,917
Accumulated other comprehensive
earnings 1,417,794 1,267,970
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TOTAL STOCKHOLDERS' EQUITY 15,459,675 14,979,278
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 196,299,191 $ 197,150,630
============= =============
See notes to consolidated financial statements.
3
GFSB Bancorp, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
AND COMPREHENSIVE EARNINGS
Three months ended
September 30,
--------------------------
2001 2000
----------- ------------
(Unaudited) (Unaudited)
Interest income
Loans receivable
Mortgage loans $2,144,160 $2,067,880
Commercial loans 353,267 194,963
Share and consumer loans 125,834 146,618
Investment and mortgage-backed securities 793,370 934,703
Other interest-earning assets 45,000 84,690
---------- ----------
TOTAL INTEREST EARNINGS 3,461,631 3,428,854
Interest expense
Deposits 1,213,486 870,487
Advances from Federal Home Loan Bank 877,910 1,368,866
Repurchase agreements 8,502 18,411
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TOTAL INTEREST EXPENSE 2,099,898 2,257,764
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NET INTEREST EARNINGS 1,361,733 1,171,090
Provision for loan losses 50,007 70,000
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NET INTEREST EARNINGS AFTER
PROVISION FOR LOAN LOSSES 1,311,726 1,101,090
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Non-interest earnings
Miscellaneous income 12,587 11,212
Net gains from sales of loans 10,125 14,415
Service charge income 70,006 71,110
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TOTAL NON-INTEREST EARNINGS 92,718 96,737
---------- ----------
Non-interest expense
Compensation and benefits 419,505 388,130
FDIC insurance 4,760 4,201
Insurance 8,787 8,391
Stock services 2,613 2,292
Occupancy 101,712 90,945
Data processing 92,417 51,756
Professional fees 46,880 17,827
Advertising 20,833 18,322
Stationary, printing and office supplies 29,345 14,126
ATM expense 12,297 11,330
Supervisory Exam Fees 15,558 10,976
Postage 16,577 8,631
Other 68,592 62,029
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TOTAL NON-INTEREST EXPENSE 839,876 688,956
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4
GFSB Bancorp, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
AND COMPREHENSIVE EARNINGS - CONTINUED
Three months ended Three months ended
September 30, September 30,
-------------------------------------
2001 2000
-------------------------------------
(Unaudited) (Unaudited)
EARNINGS BEFORE INCOME TAXES 564,568 508,871
Income tax expense
Currently payable 173,688 159,844
Deferred provision - -
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173,688 159,844
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NET EARNINGS $ 390,880 $ 349,027
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Other Comprehensive Earnings
Unrealized gain, net of tax 149,823 378,039
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COMPREHENSIVE EARNINGS 540,703 727,066
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Earnings per common share
Basic $ 0.36 0.31
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Weighted average number of common shares outstanding
Basic 1,100,443 1,113,500
=========== ==========
Earnings per common share
Diluted 0.34 0.31
=========== ==========
Weighted average number of common shares outstanding
Diluted 1,140,381 1,138,970
=========== ==========
Comprehensive earnings per common share
Basic 0.49 0.65
=========== ==========
Diluted 0.47 0.64
=========== ==========
Dividends per share 0.09 0.10
=========== ==========
5
GFSB Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (decrease) in cash and cash equivalents
Three months ended
September 30,
---------------------------
2001 2000
---------------------------
(Unaudited) (Unaudited)
Cash flows from operating activities
Net earnings $ 390,880 $ 349,027
Adjustments to reconcile net earnings to
net cash provided by operations
Deferred loan origination fees (62,524) (62,351)
Loss(gain) on sale of loans (10,125) (14,415)
Provision for loan losses 50,007 70,000
Depreciation of premises and equipment 52,877 44,912
Amortization of investment and mortgage-
backed securities premiums 62,675 14,951
Stock dividends on FHLB stock (33,500) (70,300)
Release of ESOP stock 37,653 25,315
Stock compensation 4,162 17,400
Net changes in operating assets and liabilities
Accrued interest and dividends receivable (42,200) (85,551)
Prepaid and other assets (143,095) 91,582
Accrued interest payable (8,589) 45,812
Accounts payable and accrued liabilities 21,869 11,183
Repurchase agreements 85,948 2,232,770
Income taxes payable (195,854) 39,624
Dividends declared and payable - (496)
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Net cash provided by
operating activities 210,184 2,709,463
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Cash flows from investing activities
Purchase of premises and equipment (63,437) (12,351)
Loan originations and principal
repayment on loans, net 1,417,193 (5,399,058)
Principal payments on mortgage-backed
securities 2,877,594 1,066,246
Purchases of mortgage-backed securities - (509,098)
Purchases of available-for-sale securities (3,992,187) (64,933)
Maturities and proceeds from sale of
available-for-sale securities 200,000 -
Principal payments on available-for-sale securities 713,433 107,961
Purchase of FHLB stock (800) (114,200)
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Net cash provided (used) by
investing activities 1,151,796 (4,925,433)
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6
GFSB Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Increase (decrease) in cash and cash equivalents
Three months ended Three months ended
September 30, September 30,
------------------ ------------------
2001 2000
------------------ ------------------
(Unaudited) (Unaudited)
Cash flows from financing activities
Net decrease in transaction accounts, passbook
savings, money market accounts, and
certificates of deposit $ 909,708 $ (25,318)
Net increase in mortgage escrow funds 178,531 227,850
Proceeds from FHLB advances 165,567,462 867,372,346
Repayments on FHLB advances (167,972,255) (865,608,288)
Purchase of GFSB Bancorp stock under the
stock repurchase plan in cash - (66,690)
Dividends paid or to be paid in cash (103,510) (88,379)
Price paid for vested management bonus
stock plan stock 5,550 -
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Net cash provided (used) by
financing activities (1,414,514) 1,811,521
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Decrease in cash and cash equivalents (52,534) (404,449)
Cash and cash equivalents at beginning of period 4,262,254 4,090,965
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Cash and cash equivalents at end of period $ 4,209,720 3,686,516
============= ==============
Supplemental disclosures of cash flow information
Cash paid during the period for
Interest on deposits and advances $ 2,099,985 $ 2,193,541
Income taxes 415,511 121,388
Change in unrealized gain, net of deferred
taxes on available-for-sale securities 149,823 378,039
Dividends declared not yet paid 98,453 88,379
7
GFSB BANCORP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. The accompanying unaudited condensed 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 condensed 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
consolidated unaudited financial statement be read in conjunction with the Form
10-KSB for the year ended June 30, 2001.
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, 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 (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 (Bank). All references refer collectively to the
Company and the Bank, unless the context indicates otherwise.
9
RESULTS OF OPERATIONS
Net income for the three months ended September 30, 2001 increased $42,000 to
$391,000 compared to net income of $349,000 for the comparable three-month
period in 2000. The slight increase in net income was the result of higher net
interest earnings income offset by a decrease in provision for loan losses and
non-interest earnings and increases in non-interest expense and income tax
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 annual 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 September 30, 2001 Quarter ended September 30, 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) $129,249 $2,623 8.12% $112,842 $2,409 8.54%
Investment securities and
mortgage-backed securities 56,099 793 5.65% 56,082 935 6.67%
Other interest-earning
assets (2) 4,754 45 3.79% 5,268 85 6.45%
-------- ------ -------- ------
Total interest-earning assets 190,102 3,461 7.28% 174,192 3,429 7.87%
------ ------
Non-interest-earning assets 5,729 5,605
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Total assets $195,831 $179,797
======== ========
Interest-bearing liabilities:
Transaction accounts $ 7,614 $ 24 1.26% $ 6,028 $ 22 1.46%
Passbook savings 4,677 16 1.37% 5,042 26 2.06%
Money market accounts 9,473 58 2.45% 9,363 85 3.63%
Certificates of deposit 77,591 1,116 5.75% 52,876 738 5.58%
Other liabilities (3) 70,828 886 5.00% 85,486 1,387 6.49%
-------- ------ -------- ------
Total interest-bearing
liabilities 170,183 2,100 4.94% 158,795 2,258 5.69%
------ ------
Non-interest bearing
liabilities 10,411 8,025
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Total liabilities 180,594 166,820
Stockholders' equity 15,237 12,977
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Total liabilities and
stockholders' equity $195,831 $179,797
========= ========
Net interest income $1,361 $1,171
====== ======
Interest rate spread (4) 2.34% 2.18%
===== =====
Net yield on interest-
earning assets (5) 2.86% 2.69%
===== =====
Ratio of average interest-
Earning assets to average
interest-bearing liabilities 1.09X 1.10X
===== =====
10
(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 September 30, 2001 vs.
2000
Increase (Decrease)
Due to
---------------------------------
Rate/
Volume Rate Volume Net
------ ---- ------ -----
(Dollars in Thousands)
Interest income:
Loans receivable $ 350 $(118) $ (18) $ 214
Mortgage-backed securities and
investment securities 0 (143) 1 (142)
Other interest-earning assets (8) (35) 3 (40)
----- ----- ----- -----
Total interest-earning assets 342 (296) (14) 32
Interest expense:
Transaction accounts 6 (3) (1) 2
Savings accounts (2) (9) 1 (10)
Money markets 1 (28) 0 (27)
Certificates of deposit 345 22 11 378
Other liabilities (238) (318) 55 (501)
----- ----- ----- -----
Total interest-bearing liabilities 112 (336) 66 (158)
----- ----- ----- -----
Net change in interest income $ 230 $ (40) $ (52) $ 190
===== ===== ===== =====
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 $50,000 and $70,000 for the
quarter ended September 30, 2001 and 2000, respectively. The decrease in the
provision for loan losses was the result of less loan growth in commercial and
commercial real estate loans for the current three-month period. 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.
11
Non-Interest Income
Total non-interest income decreased by $4,000 or 4.3% from $96,700 for the
quarter ended September 30, 2000 to $92,700 for the quarter ended September 30,
2001. This decrease was primarily due to a decrease net gains from sales of
loans of $4,300.
Non-Interest Expense
Total non-interest expense increased $150,900 or 21.9% from $689,900 for the
quarter ended September 30, 2000 to $839,900 for the quarter ended September 30,
2001. The most significant changes in non-interest expenses were increases in
data processing, compensation and benefits, professional fees, occupancy costs,
stationary, printing, and office supplies, postage and other non-interest
expenses. Data processing expense increased by $40,700 due to increased service
bureau expense resulting from growth in deposits and loans and a change in our
service bureau provider. The increase in compensation and benefits expense
reflects increases of $33,000 in general salaries and benefits expense primarily
due to the hiring of the operations manager in September 30, 2000 and the hiring
of two additions to staff in the current three-month period. Also, contributing
to this increase were general merit increases. The increase in professional fees
of $29,000 was due to increases in audit, accounting, and legal fees. Occupancy
costs increased $10,800 due primarily to increases in depreciation for
furniture, fixtures, and equipment. Stationary, printing and office supplies
increased $15,200 primarily as the result of the purchase of new forms needed
for our new service bureau form format. Postage increased $7,900 due to normal
operating expenses. Contributing to the other non-interest expense increase of
$6,600 were increases in employee travel expenses associated with employee
education and training.
12
PART II. OTHER INFORMATION
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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.
*** 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
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 13, 2001 /s/Jerry R. Spurlin
----------------- -----------------------------------------------
Jerry R. Spurlin
Assistant Secretary and Chief Financial Officer
(Duly Authorized Representative and
Principal Financial Officer)
14