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, 2002
--------------
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.
----------------------------------------------
(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) 722-4361
--------------
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 30, 2002, 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
March 31, 2002 and June 30, 2001 3
Condensed Consolidated Statements of Earnings and Comprehensive Earnings
Three months and nine months ended March 31, 2002 and 2001 4
Condensed Consolidated Statements of Cash Flows
Nine months ended March 31, 2002 and 2001 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 16
Signatures 17
2
GFSB Bancorp, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
March 31, June 30,
2002 2001
------------- ------------
(Unaudited)
ASSETS
Cash and due from banks $ 3,986,496 $ 3,216,000
Interest-bearing deposits with banks 807,164 1,046,254
Available-for-sale investment securities 24,732,336 21,804,107
Available-for-sale mortgage-backed securities 29,355,761 32,376,812
Held-to-maturity investment securities 1,924,209 1,945,720
Stock of Federal Home Loan Bank, at cost, restricted 4,187,200 3,649,000
Loans receivable, net, substantially pledged 134,301,528 130,430,937
Accrued interest and dividends receivable 1,149,025 1,185,400
Premises and equipment 2,493,264 1,323,770
Other real estate and repossessed property 71,883 7,950
Prepaid and other assets 127,169 66,674
Deferred tax asset 98,006 98,006
------------- -------------
TOTAL ASSETS $ 203,234,041 197,150,630
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Transaction and NOW accounts $ 17,889,908 $ 15,462,712
Savings and MMDA deposits 16,086,320 14,521,879
Time deposits 68,265,935 76,675,576
Advances from Federal Home Loan Bank 81,616,607 72,105,997
Repurchase agreements 1,296,414 1,324,335
Accrued interest payable 471,024 473,446
Advances from borrowers for taxes and insurance 639,066 440,048
Accounts payable and accrued liabilities 328,044 219,855
Deferred income taxes 583,425 653,197
Dividends declared and payable 110,506 98,453
Income taxes payable 1,168 195,854
------------- -------------
TOTAL LIABILITIES 187,288,417 182,171,352
------------- -------------
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, 2002 and June 30, 2001 115,011 115,011
Additional paid-in-capital 2,720,352 2,630,860
Unearned ESOP stock (224,085) (272,480)
Retained earnings, substantially
restricted 12,201,814 11,237,917
Accumulated other comprehensive
earnings 1,132,532 1,267,970
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 15,945,624 14,979,278
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 203,234,041 $ 197,150,630
============= =============
See notes to condensed consolidated financial statements.
3
GFSB Bancorp, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
AND COMPREHENSIVE EARNINGS
Three months ended Nine months ended
March 31, March 31,
------------------------- -------------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Interest income
Loans receivable
Mortgage loans $ 2,136,176 $ 2,173,011 $ 6,457,153 6,435,237
Commercial loans 296,589 414,014 973,501 896,331
Share and consumer loans 109,856 150,367 357,511 460,612
Investment and mortgage-backed securities 722,954 889,473 2,306,366 2,758,665
Other interest-earning assets 34,092 80,675 113,489 250,988
----------- ----------- ----------- -----------
TOTAL INTEREST EARNINGS 3,299,667 3,707,540 10,208,020 10,801,833
Interest expense
Deposits 905,175 1,059,907 3,263,682 2,860,723
Advances from Federal Home Loan Bank 842,496 1,193,820 2,554,465 3,965,278
Repurchase agreements 1,552 11,980 12,787 54,604
----------- ----------- ----------- -----------
TOTAL INTEREST EXPENSE 1,749,223 2,265,707 5,830,934 6,880,605
----------- ----------- ----------- -----------
NET INTEREST EARNINGS 1,550,444 1,441,833 4,377,086 3,921,228
Provision for loan losses 70,011 120,000 120,018 270,000
----------- ----------- ----------- -----------
NET INTEREST EARNINGS AFTER
PROVISION FOR LOAN LOSSES 1,480,433 1,321,833 4,257,068 3,651,228
----------- ----------- ----------- -----------
Non-interest earnings
Income from real estate operations 1,350 - 2,250 -
Miscellaneous income 10,378 11,160 33,088 58,287
Net gains from sales of AFS securities - 11,261 10,000 10,925
Net gains from sales of loans 11,444 950 28,290 18,682
Service charge income 67,358 70,569 209,099 220,740
----------- ----------- ----------- -----------
TOTAL NON-INTEREST EARNINGS 90,530 93,940 282,727 308,634
----------- ----------- ----------- -----------
Non-interest expense
Compensation and benefits 546,105 402,721 1,436,484 1,235,229
FDIC Insurance 4,833 3,867 14,439 12,041
Insurance 11,445 8,872 29,022 25,275
Stock services 6,548 2,514 22,522 10,747
Occupancy 111,795 88,456 311,952 262,596
Data processing 92,790 61,040 241,771 163,226
Professional fees 22,185 14,274 89,538 66,165
Advertising 21,119 17,250 61,480 58,468
Stationary, printing and office supplies 22,159 14,609 76,740 49,818
ATM expense 12,388 9,169 35,067 30,801
Supervisory exam fees 13,568 12,130 41,810 34,081
Postage 16,130 13,925 44,589 32,725
Other 80,070 80,563 205,329 213,754
----------- ----------- ----------- -----------
TOTAL NON-INTEREST EXPENSE 961,135 729,390 2,610,743 2,194,926
----------- ----------- ----------- -----------
4
GFSB Bancorp, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
AND COMPREHENSIVE EARNINGS - CONTINUED
Three months ended Nine months ended
March 31, March 31,
---------------------------- ---------------------
2002 2001 2002 2001
---------------------------- ---------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
EARNINGS BEFORE INCOME TAXES 609,828 686,383 1,929,052 1,764,936
Income tax expense
Currently payable 191,311 243,406 631,625 590,226
Deferred provision - - - -
------------- ------------- --------- ---------
191,311 243,406 631,625 590,226
------------- ------------- --------- ---------
NET EARNINGS $ 418,517 $ 442,977 1,297,427 1,174,710
============= ============= ========= =========
Other Comprehensive Earnings
Unrealized (loss) gain, net of tax (171,117) 193,601 (135,439) 1,151,429
------------- ------------- --------- ---------
COMPREHENSIVE EARNINGS 247,400 636,578 1,161,988 2,326,139
============= ============= ========= =========
Earnings per common share
Basic $ 0.38 0.40 1.18 1.06
============= ============= ========= =========
Weighted average number of common shares outstanding
Basic 1,106,475 1,097,536 1,103,553 1,105,920
============= ============= ========= =========
Earnings per common share
Diluted 0.37 0.39 1.13 1.04
============= ============= ========= =========
Weighted average number of common shares outstanding
Diluted 1,146,377 1,123,578 1,143,355 1,134,130
============= ============= ========= =========
Comprehensive earnings per common share
Basic 0.22 0.58 1.05 2.10
============= ============= ========= =========
Diluted 0.22 0.57 1.02 2.05
============= ============= ========= =========
Dividends per share 0.10 0.09 0.10 0.08
============= ============= ========= =========
See notes to condensed consolidated financial statements.
5
GFSB Bancorp, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (decrease) in cash and cash equivalents
Nine months ended
March 31,
---------------------------
2002 2001
----------- ------------
(Unaudited) (Unaudited)
Cash flows from operating activities
Net earnings $ 1,297,427 $ 1,174,710
Adjustments to reconcile net earnings to
net cash provided by operations
Deferred loan origination fees (329,372) (257,244)
Gain on sale of loans and securities (38,290) (29,607)
Provision for loan losses 120,018 270,000
Depreciation of premises and equipment 141,219 135,043
Amortization of investment and mortgage-
backed securities premiums 121,727 55,439
Stock dividends on FHLB stock (90,300) (205,300)
Release of ESOP stock 121,237 78,455
Stock compensation 12,488 38,340
Net changes in operating assets and liabilities
Accrued interest and dividends receivable 36,375 (105,532)
Prepaid and other assets (60,495) 116,690
Accrued interest payable (2,422) 142,814
Accounts payable and accrued liabilities 95,701 42,839
Repurchase agreements (27,921) 1,147,635
Income taxes payable (194,686) 182,605
Dividends declared and payable 12,053 9,578
------------ ------------
Net cash provided by
operating activities 1,214,759 2,796,465
------------ ------------
Cash flows from investing activities
Purchase of premises and equipment (1,310,713) (75,125)
Loan originations and principal
repayment on loans, net (3,696,880) (17,940,653)
Principal payments on mortgage-backed
securities 7,951,455 3,521,945
Purchases of mortgage-backed securities (5,130,469) (2,504,724)
Purchases of available-for-sale securities (6,167,537) (3,284,814)
Maturities and proceeds from sale of
available-for-sale securities 1,310,000 6,442,814
Principal payments on available-for-sale securities 1,808,947 213,475
Principal payments on hold-to-maturity securities 25,000 10,000
Purchases of hold-to-maturity securities - (270,000)
Purchase of FHLB stock (447,900) (199,200)
------------ ------------
Net cash used by
investing activities (5,658,097) (14,086,282)
------------ ------------
6
GFSB Bancorp, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Increase (decrease) in cash and cash equivalents
Nine months ended
March 31,
-----------------------------------
2002 2001
---------------- ---------------
(Unaudited) (Unaudited)
Cash flows from financing activities
Net (decrease) increase in transaction accounts, passbook
savings, money market accounts, and
certificates of deposit $ (4,418,004) $ 22,964,390
Net increase in mortgage escrow funds 199,018 326,507
Proceeds from FHLB advances 175,155,000 1,616,072,346
Repayments on FHLB advances (165,644,390) (1,627,852,976)
Purchase of GFSB Bancorp stock under the
stock repurchase plan in cash (79,084) (291,930)
Dividends paid or to be paid in cash (333,530) (275,284)
Price paid for vested management bonus stock plan stock 16,650 50,512
Proceeds from exercise of stock 79,084 -
--------------- ---------------
Net cash provided by
financing activities 4,974,744 10,993,565
--------------- ---------------
Increase (decrease) in cash and cash equivalents 531,406 (296,252)
Cash and cash equivalents at beginning of period 4,262,254 4,090,965
--------------- ---------------
Cash and cash equivalents at end of period $ 4,793,660 3,794,713
=============== ===============
Supplemental disclosures of cash flow information
Cash paid during the period for
Interest on deposits and advances $ 5,833,356 $ 6,683,186
Income taxes 801,111 408,790
Change in unrealized gain, net of deferred
taxes on available-for-sale securities 135,439 1,151,429
Dividends declared not yet paid 110,506 98,453
Supplemental schedule of noncash and financing activities
Issuance of stock dividend $ - 23,091
See notes to condensed consolidated financial statements.
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 accounting principles
generally accepted in the United States of America. 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 earnings 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 statements 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, 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., 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.
On November 14, 2001, GFSB Bancorp purchased land and a building in San Juan
County, New Mexico for the purpose of opening a Branch of the Bank. The
acquisition totaled approximately $902,000. The Bank opened its new branch
facility on March 11, 2002. Renovation costs in connection with the new branch
were approximately $397,000 at March 31, 2002, which were capitalized.
Additionally, time deposits decreased $8,410,000 to $68,266,000 at March 31,
2002, from $76,676,000 at June 30, 2001 as a result of a decrease in our public
fund time deposits. The Bank funds loans from two primary sources, deposits and
Federal Home Loan Bank borrowings. Federal Home Loan Bank borrowings increased
$9,511,000 at March 31, 2002, to $81,617,000 from $72,106,000 at June 30, 2001.
The increase in borrowings was primarily the result of an offset to the decrease
in time deposits, additional borrowings were used to fund loans.
During the quarter ended March 31, 2002, the Bank introduced its "Gold
NetTeller" Internet Banking product at www.gallupfed.com. The service delivers
real-time interactive information for retail and commercial customers and
includes Bill Pay features. The web site will be expanded in the near future to
provide a substantial amount of information and range of services including a
commercial cash management product and on-line loan applications. The Company
believes the service will enhance its growth potential by allowing it to compete
favorably in this emerging technology within its marketing area and does not
anticipate a material impact on profitability.
RESULTS OF OPERATIONS
COMPARISON OF OPERATING RESULTS FOR QUARTER ENDED MARCH 31, 2002 COMPARED TO
QUARTER ENDED MARCH 31, 2001.
General
Net income for the quarter ended March 31, 2002 decreased $24,000 from $443,000
for the quarter ended March 31, 2001 to $419,000 for the quarter ended March 31,
2002. The decrease in net income was primarily the result of an increase in net
interest earnings income of $109,000, a $50,000 decrease in the provision for
loan losses, offset by a $232,000 increase in non-interest expense and an
$52,000 decrease in income tax expense. Please refer to "Average Balance Sheets"
for an analysis of the changes in net interest income for the three months ended
March 31, 2002 compared to the same 2001 period.
9
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 March 31, 2002 Quarter ended March 31, 2001
---------------------------- ----------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------- -------- ---------- ------- -------- ----------
(Dollars in Thousands) (Dollars in Thousands)
Interest-earning assets:
Loans receivable (1) $133,371 $2,543 7.63% $125,317 $2,738 8.74%
Investment securities and
mortgage-backed securities 56,817 723 5.09% 54,739 889 6.50%
Other interest-earning
assets (2) 4,889 33 2.70% 5,706 81 5.67%
----------- ---------- ----------- ----------
Total interest-earning assets 195,077 3,299 6.32% 185,762 3,708 7.98%
Non-interest-earning assets 7,480 5,631
----------- -----------
Total assets $202,557 $191,393
=========== ============
Interest-bearing liabilities:
Transaction accounts $ 8,205 $ 16 .78% $ 6,370 $ 23 1.44%
Savings accounts 4,753 15 1.26% 4,835 22 1.82%
Money market accounts 10,645 32 1.20% 9,634 82 3.40%
Certificates of deposit 74,428 842 4.53% 63,091 933 5.92%
Other liabilities (3) 77,900 844 4.33% 83,319 1,206 5.79%
----------- ---------- ----------- ---------- -----------
Total interest-bearing
liabilities 175,931 1,749 3.98% 167,249 2,266 5.42%
Non-interest bearing
liabilities 10,692 9,814
----------- -----------
Total liabilities 186,623 177,063
Stockholders' equity 15,934 14,330
----------- -----------
Total liabilities and
stockholders' equity $202,557 $191,393
=========== ===========
Net interest income $1,550 $1,442
========== ==========
Interest rate spread (4) 2.34% 2.56%
=========== ===========
Net yield on interest-
Earning assets (5) 3.18% 3.11%
=========== ===========
Ratio of average interest-
Earning assets to average
interest-bearing liabilities 1.11X 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.
10
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, 2002 vs. 2001
Increase (Decrease)
Due to
---------------------------------
Rate/
Volume Rate Volume Net
------ ---- ------ -----
(Dollars in Thousands)
Interest income:
Loans receivable $ 176 $(348) $ (22) $(194)
Mortgage-backed securities and
investment securities 34 (193) (7) (166)
Other interest-earning assets (12) (42) 6 (48)
----- ----- ----- -----
Total interest-earning assets 198 (583) (23) (408)
----- ----- ----- -----
Interest expense:
Transaction accounts 7 (11) (3) (7)
Savings accounts (1) (7) 1 (7)
Money markets 9 (53) (6) (50)
Certificates of deposit 168 (219) (39) (90)
Other liabilities (78) (304) 20 (362)
----- ----- ----- -----
Total interest-bearing liabilities 105 (594) (27) (516)
----- ----- ----- -----
Net change in interest income $ 93 $ 11 $ 4 $ 108
===== ===== ===== =====
Provision for Losses on Loans
The Company maintains an allowance for loan losses based upon management's
periodic evaluation of known and inherent risks in the loan portfolio, past loss
experience, adverse situations that may affect the borrower's ability to repay
loans, estimated value of the underlying collateral and current and expected
market conditions. The provision for loan loss was $70,000 and $120,000 for the
quarter ended March 31, 2002 and 2001. The decrease in the provision for loan
losses for the current three-month period was the result of less loan growth in
commercial 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 at the balance sheet date, 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.
11
Non-Interest Income
Total non-interest income decreased by $3,400 or 3.6% from $93,900 for the
quarter ended March 31, 2001 to $90,500 for the quarter ended March 31, 2002.
This decrease was primarily due to a decrease in service charge income of
$3,200. Net gains from sales of loans were $11,400 and $1,000 for the quarter
ended March 31, 2002 and 2001. There were no net gains from available-for-sale
securities for the quarter ended March 31, 2002. Net gains from sales of
available-for-sale securities for the quarter ending March 31, 2001 were
$11,300.
Non-Interest Expense
Total non-interest expense increased $231,700 or 31.8% from $729,400 for the
quarter ended March 31, 2001 to $961,100 for the quarter ended March 31, 2002.
The most significant increases in non-interest expense for the current period
were primarily attributable to compensation and benefits, data processing,
occupancy, stock services, professional fees and stationary, printing, and
office supplies. The increase in compensation and benefits expense reflects
increases of $62,200 in general salaries and benefit expense, primarily due to
the hiring of a project manager for the new branch purchase in the second 2002
quarter and the hiring of nine employees to staff the new branch, an increase of
$17,000 in expense related to employee stock compensation plans, and $57,400 due
to the repurchase of stock from an employee exercise/sale of stock. General
merit increases also contribute to this increase. Data processing expense
increased by $31,800 due to increased service bureau expense resulting from the
growth in the number of deposit and loan accounts serviced, and a change in our
service bureau provider. Occupancy costs increased $23,300, primarily due to
increases in depreciation for furniture, fixtures, and equipment, resulting from
the purchase of equipment needed to operate our new service bureau format and
equipment purchased for the new branch (occupancy expense for the new branch
purchase was $11,000.) Stock services increased $4,000 due primarily to an
increase in our NASDAQ annual fees. Professional fees increased by $7,900
primarily due to an increase in legal and accounting fees this quarter.
Stationary, printing and office supplies increased $7,600, primarily due to the
purchase of forms and supplies for the new branch and normal increases in
stationary, printing and office supplies expense.
RESULTS OF OPERATIONS
COMPARISON OF OPERATING RESULTS FOR THE NINE-MONTH PERIOD ENDED MARCH 31, 2002
COMPARED TO THE NINE-MONTH PERIOD ENDED MARCH 31, 2001.
General
Net income for the nine months ended March 31, 2002 increased $123,000 to
$1,297,000 compared to net income of $1,175,000 for the comparable nine-month
period in 2001. The increase in net income was primarily the result of an
increase net interest earnings income of $456,000, a $150,000 decline in the
provision for loan losses, a decrease of $26,000 in non-interest earnings,
offset by a $416,000 increase in non-interest expense and a $42,000 increase in
income tax expense. Please refer to "Average Balance Sheets" for an analysis of
the change in net interest income for the nine months ended March 31, 2002
compared to the same 2001 period.
12
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, 2002 March 31, 2001
-------------- --------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------- -------- ---------- ------- -------- ----------
(Dollars in Thousands) (Dollars in Thousands)
Interest-earning assets:
Loans receivable (1) $131,100 $7,788 7.92% $119,120 $7,792 8.72%
Investment securities and
mortgage-backed securities 57,271 2,306 5.37% 55,490 2,759 6.63%
Other interest-earning
assets (2) 3,776 113 3.99% 5,515 251 6.07%
----------- ---------- ----------- ----------
Total interest-earning assets 192,147 10,207 7.05% 180,125 10,802 8.00%
Non-interest-earning assets 7,594 5,830
----------- -----------
Total assets $199,741 $185,955
=========== ============
Interest-bearing liabilities:
Transaction accounts $ 7,901 $ 59 1.00% $ 6,169 $ 69 1.49%
Passbook savings 4,640 44 1.26% 4,935 73 1.97%
Money market accounts 10,066 127 1.68% 9,494 250 3.51%
Certificates of deposit 76,639 3,033 5.26% 57,207 2,469 5.75%
Other liabilities (3) 74,085 2,567 4.62% 85,251 4,020 6.29%
----------- ---------- ----------- ---------- -----------
Total interest-bearing
liabilities 173,331 5,830 4.48% 163,056 6,881 5.63%
Non-interest bearing
liabilities 10,773 9,248
----------- -----------
Total liabilities 184,104 172,304
Stockholders' equity 15,637 13,651
----------- -----------
Total liabilities and
stockholders' equity $199,741 $185,955
=========== ===========
Net interest income $4,377 $3,921
========== ==========
Interest rate spread (4) 2.57% 2.37%
=========== ===========
Net yield on interest-
earning assets (5) 3.04% 2.90%
=========== ===========
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.
13
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, 2002 vs. 2001
Increase (Decrease)
Due to
----------------------------------------
Rate/
Volume Rate Volume Net
------ ---- ------ -----
(Dollars in Thousands)
Interest income:
Loans receivable $ 783 $ (714) $ (71) $ (2)
Mortgage-backed securities and
investment securities 89 (524) (17) (452)
Other interest-earning assets (79) (86) 27 (138)
------ ------- ------- -------
Total interest-earning assets 793 (1,324) (61) (592)
------ ------- ------- -------
Interest expense:
Transaction accounts 19 (23) (6) (10)
Savings accounts (4) (26) 2 (28)
Money markets 15 (130) (8) (123)
Certificates of deposit 838 (210) (60) 568
Other liabilities (527) (1,068) 140 (1,455)
------ ------- ------- -------
Total interest-bearing liabilities 341 (1,457) 68 (1,048)
------ ------- ------- -------
Net change in interest income $ 452 $ 133 $ (129) $ 456
====== ======= ======= =======
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 $270,000 for the
nine-month period ended March 31, 2002 and 2001, respectively. See "Comparison
of Operating Results for the quarter ended March 31, 2002 compared to quarter
ended March 31, 2001 - Provision for Losses on Loans."
14
Non-Interest Income
Total non-interest income decreased by $25,900 or 8.4% from $308,600 for the
nine months ended March 31, 2001 to $282,700 for the nine months ended March 31,
2002. This decrease was primarily due to decreased miscellaneous income of
$25,200 and decreased service charge income of $11,600, offset by an increase in
net gains from the sale of loans of $9,600. The decrease in miscellaneous income
is a result of recognition of a $21,300 gain on the sale of other real estate
owned and proceeds received of $6,000 from a winning raffle ticket in the
quarter ended December 31, 2000. See "Comparison of Operating Results for
quarter ended March 31, 2002 compared to quarter ended March 31, 2001 -
Non-Interest Income. "
Non-Interest Expense
Total non-interest expense increased $415,800 or 18.9% from $2,194,900 for the
nine months ended March 31, 2001 to $2,610,700 for the nine months ended March
31, 2002. The most significant changes in non-interest expenses were increases
in compensation and benefits, data processing, occupancy costs, professional
fees, stationary, printing, and office supplies. The increase in compensation
and benefits expense reflects increases of $115,200 in general salaries and
benefits expense primarily due to the hiring of a project manager for the new
branch purchase in September 2001, the hiring of nine employees to staff the new
branch and the hiring of two additions to staff in current nine-month period.
Also, contributing to this increase were general merit increases. Other
increases in compensation and benefits were, $17,000 in expense related to
employee stock compensation plans, and $57,400 due to the repurchase of stock
from an employee exercise/sale of stock. Data processing expense increased by
$78,500 due to increased service bureau expense resulting from growth in the
number of deposit and loan accounts serviced and a change in our service bureau
provider. The increase in professional fees of $23,400 was due to increases in
audit, accounting, and legal fees. Occupancy costs increased $49,400 due
primarily to increases in depreciation for furniture, fixtures, and equipment,
resulting from the purchase of equipment needed to operate our new service
bureau format and equipment purchased for the new branch. Stationary, printing
and office supplies increased $26,900 primarily as the result of the purchase of
new forms during the first 2002-quarter for the Bank's new service bureau and
the purchase of forms and supplies for the new branch.
15
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.
*** 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.
16
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, 2002 /s/Jerry R. Spurlin
-----------------------------------------------
Jerry R. Spurlin
Assistant Secretary and Chief Financial Officer
(Duly Authorized Representative and
Principal Financial Officer)
17