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 December 31, 2002
-----------------
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
- --------------------------------------------
(State or Other Jurisdiction of Incorporation or Organization)
04-2095007
------------
(I.R.S. Employer
Identification No.)
221 West Aztec Avenue, Gallup, New Mexico
- -----------------------------------------
(Address of Principal Executive Offices)
87301
-----
(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 January 21, 2003, 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. Condensed Consolidated Financial Statements:
Condensed Consolidated Statements of Financial Condition
December 31, 2002 and June 30, 2002 3
Condensed Consolidated Statements of Earnings and Comprehensive Earnings
Three months and six months ended December 31, 2002 and December 31, 2001. 4
Condensed Consolidated Statements of Cash Flows
Six months ended December 31, 2002 and December 31, 2001. 6
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis or Plan of Operation 9
Item 3. Controls and Procedures 15
PART II. OTHER INFORMATION
Item 4. Submission of Matter to a Vote of Security Holders 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 18
2
GFSB Bancorp, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, June 30,
2002 2002
------------- -------------
ASSETS
Cash and due from banks $ 5,594,431 $ 4,825,439
Interest-bearing deposits with banks 781,531 826,052
Available-for-sale investment securities 22,012,964 23,973,426
Available-for-sale mortgage-backed securities 30,601,985 27,290,274
Held-to-maturity investment securities 1,646,873 1,405,403
Stock of Federal Home Loan Bank, at cost, restricted 4,279,700 4,218,500
Loans receivable, net, substantially pledged 142,459,166 139,748,188
Accrued interest and dividends receivable 1,013,683 1,073,201
Premises and equipment 2,416,023 2,511,173
Other real estate and repossessed property 241,094 150,642
Prepaid and other assets 176,534 122,771
------------- -------------
TOTAL ASSETS $ 211,223,984 206,145,069
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Transaction and NOW accounts $ 21,419,958 $ 20,417,085
Savings and MMDA deposits 16,007,830 17,305,540
Time deposits 74,222,726 72,626,849
Advances from Federal Home Loan Bank 79,252,728 76,386,455
Repurchase agreements 1,129,962 1,234,857
Accrued interest payable 457,119 448,955
Advances from borrowers for taxes and insurance 412,927 416,575
Accounts payable and accrued liabilities 346,601 245,409
Deferred income taxes 597,631 568,728
Dividends declared and payable 121,557 110,506
Income taxes payable 18,492 1,168
------------- -------------
TOTAL LIABILITIES 193,987,531 189,762,127
------------- -------------
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 December 31, 2002 and June 30, 2002 115,011 115,011
Additional paid-in-capital 2,821,214 2,761,251
Unearned ESOP stock (175,606) (207,926)
Retained earnings, substantially
restricted 13,125,481 12,420,358
Accumulated other comprehensive
earnings 1,350,353 1,294,248
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 17,236,453 16,382,942
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 211,223,984 $ 206,145,069
============= =============
See notes to condensed consolidated financial statements.
3
GFSB Bancorp, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
AND COMPREHENSIVE EARNINGS
Three months ended Six months ended
December 31, December 31,
------------------------------- --------------------------------
2002 2001 2002 2001
------------------------------- --------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Interest income
Loans receivable
Mortgage loans $ 2,111,982 $ 2,176,818 4,247,677 $ 4,320,978
Commercial loans 332,932 323,645 664,412 676,911
Share and consumer loans 110,668 121,821 219,630 247,655
Investment and mortgage-backed securities 563,759 790,043 1,201,818 1,583,413
Other interest-earning assets 37,178 34,396 69,984 79,397
------------- ------------ ------------- -------------
TOTAL INTEREST EARNINGS 3,156,519 3,446,723 6,403,521 6,908,354
Interest expense
Deposits 758,252 1,145,021 1,552,597 2,358,507
Advances from Federal Home Loan Bank 779,208 834,058 1,584,203 1,711,968
Repurchase agreements 1,408 2,733 3,550 11,235
------------- ------------ ------------- -------------
TOTAL INTEREST EXPENSE 1,538,868 1,981,812 3,140,350 4,081,710
------------- ------------ ------------- -------------
NET INTEREST EARNINGS 1,617,651 1,464,911 3,263,171 2,826,644
Provision for loan losses 50,000 - 75,000 50,007
------------- ------------ ------------- -------------
NET INTEREST EARNINGS AFTER
PROVISION FOR LOAN LOSSES 1,567,651 1,464,911 3,188,171 2,776,637
------------- ------------ ------------- -------------
Non-interest earnings
Income from real estate operations 1,550 900 3,750 900
Miscellaneous income 11,717 10,123 23,882 22,710
Net gains from sales of AFS securities - 10,000 - 10,000
Net gains from sales of loans 40,852 6,720 56,058 16,845
Service charge income 92,720 71,735 191,499 141,741
------------- ------------ ------------- -------------
TOTAL NON-INTEREST EARNINGS 146,839 99,478 275,189 192,196
------------- ------------ ------------- -------------
Non-interest expense
Compensation and benefits 576,170 470,874 1,114,476 890,379
FDIC insurance 4,598 4,847 8,927 9,607
Insurance 12,193 8,790 24,482 17,577
Stock services 5,109 13,361 9,053 15,974
Occupancy 129,580 98,445 265,620 200,157
Data processing 90,864 56,564 158,935 148,981
Professional fees 32,506 20,473 66,153 67,354
Advertising 36,062 19,528 71,775 40,361
Stationary, printing and office supplies 42,900 25,236 87,729 54,581
ATM expense 15,588 10,382 30,945 22,679
Supervisory exam fees 13,900 12,684 27,800 28,242
Postage 13,220 11,881 25,539 28,459
Other 96,343 56,667 173,399 125,258
------------- ------------ ------------- -------------
TOTAL NON-INTEREST EXPENSE 1,069,033 809,732 2,064,833 1,649,609
------------- ------------ ------------- -------------
4
GFSB Bancorp, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
AND COMPREHENSIVE EARNINGS - CONTINUED
Three months ended Six months ended
December 31, December 31, December 31, December 31,
------------------------------- --------------------------------
2002 2001 2002 2001
------------------------------- --------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
EARNINGS BEFORE INCOME TAXES 645,457 754,657 1,398,527 1,319,224
Income tax expense
Currently payable 219,876 266,626 461,343 440,314
Deferred provision - - - -
------------- ------------ ------------- -------------
219,876 266,626 461,343 440,314
------------- ------------ ------------- -------------
NET EARNINGS $ 425,581 $ 488,031 937,184 $ 878,910
============= ============ ============= =============
Other Comprehensive Earnings
Unrealized gain (loss), net of tax 37,435 (114,145) 56,106 35,679
------------- ------------ ------------- -------------
COMPREHENSIVE EARNINGS 463,016 373,886 993,290 914,589
============= ============ ============= =============
Earnings per common share
Basic $ 0.38 0.44 0.84 0.80
============= ============ ============= =============
Weighted average number of common shares outstanding
Basic 1,115,665 1,103,364 1,113,645 1,101,938
============= ============ ============= =============
Earnings per common share
Diluted 0.37 0.43 0.81 0.77
============= ============ ============= =============
Weighted average number of common shares outstanding
Diluted 1,162,238 1,143,436 1,159,720 1,140,767
============= ============ ============= =============
Comprehensive earnings per common share
Basic 0.42 0.34 0.89 0.83
============= ============ ============= =============
Diluted 0.40 0.33 0.86 0.80
============= ============ ============= =============
Dividends per share 0.11 0.10 0.21 0.19
============= ============ ============= =============
See notes to condensed consolidated financial statements.
5
GFSB Bancorp, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (decrease) in cash and cash equivalents
Six Months Ended
December 31,
-------------------------------
2002 2001
-------------- ---------------
(Unaudited) (Unaudited)
Cash flows from operating activities
Net earnings $ 937,184 $ 878,910
Adjustments to reconcile net earnings to
net cash provided by operations
Deferred loan origination fees (139,099) (215,510)
Gain on sale of loans and securities (56,058) (26,846)
Provision for loan losses 75,000 50,007
Depreciation of premises and equipment 121,718 104,891
Amortization of investment and mortgage-
backed securities premiums 39,757 96,793
Stock dividends on FHLB stock (61,200) (61,500)
Release of ESOP stock 92,282 76,335
Stock compensation 15,374 8,325
Net changes in operating assets and liabilities
Accrued interest and dividends receivable 59,518 68,104
Prepaid and other assets (118,323) (5,000)
Accrued interest payable 8,164 (35,341)
Accounts payable and accrued liabilities 85,818 63,591
Repurchase agreements (104,895) (274,840)
Income taxes payable 17,324 (194,686)
Dividends declared and payable 11,051 10,939
----------- -----------
Net cash provided by
operating activities 983,615 544,172
----------- -----------
Cash flows from investing activities
Purchase of premises and equipment (26,568) (998,650)
Loan originations and principal
repayment on loans, net (2,616,713) (370,373)
Principal payments on mortgage-backed
securities 4,954,873 5,423,524
Purchases of mortgage-backed securities (8,272,674) (5,130,469)
Purchases of available-for-sale securities (2,068,053) (4,043,762)
Maturities and proceeds from sale of
available-for-sale securities 785,000 1,310,000
Principal payments on available-for-sale securities 3,292,388 1,055,759
Purchases of hold-to-maturity securities (270,000) -
Principal payments on hold-to-maturity securities 31,000 5,000
Purchase of FHLB stock - (49,000)
----------- -----------
Net cash used by
investing activities (4,190,747) (2,797,971)
----------- -----------
6
GFSB Bancorp, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Increase (decrease) in cash and cash equivalents
Six Months Ended
December 31,
-------------------------------
2002 2001
-------------- --------------
(Unaudited) (Unaudited)
Cash flows from financing activities
Net increase in transaction accounts, passbook
savings, money market accounts, and
certificates of deposit $ 1,301,040 $ 2,798,245
Net (decrease) increase in mortgage escrow funds (3,648) 3,346
Proceeds from FHLB advances 200,425,000 291,654,462
Repayments on FHLB advances (197,558,727) (292,427,620)
Dividends paid or to be paid in cash (232,062) (218,520)
Price paid for vested management bonus
stock plan stock - 5,550
------------- -------------
Net cash provided by
financing activities 3,931,603 1,815,463
------------- -------------
Increase (decrease) in cash and cash equivalents 724,471 (438,336)
Cash and cash equivalents at beginning of period 5,651,491 4,262,254
------------- -------------
Cash and cash equivalents at end of period $ 6,375,962 3,823,918
============= =============
Supplemental disclosures of cash flow information
Cash paid during the period for
Interest on deposits and advances $ 3,132,186 $ 4,117,052
Income taxes 444,020 635,000
Change in unrealized gain, net of deferred
taxes on available-for-sale securities 56,106 35,679
Dividends declared not yet paid 121,557 109,392
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 and
comprehensive 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 accounting principles generally accepted
in the United States of America 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, 2002.
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. is a savings and loan 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.
9
RESULTS OF OPERATIONS
COMPARISON OF OPERATING RESULTS FOR QUARTER ENDED DECEMBER 31, 2002 COMPARED TO
QUARTER ENDED DECEMBER 31, 2001.
General
Net earnings for the quarter ended December 31, 2002 decreased $62,000 to
$426,000 from $488,000 for the quarter ended December 31, 2001. The decrease in
net earnings is primarily attributable to a $50,000 increase in the provision
for loan losses and a $259,000 increase in non-interest expense partially offset
by an increase in net interest earnings of $153,000, a $47,000 increase in
non-interest earnings, and a $47,000 decrease in income tax expense. Please
refer to "Average Balance Sheets" for an analysis of the changes in net interest
earnings for the quarter ended December 31, 2002 compared to the same 2001
period.
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 December 31, 2002 Quarter ended December 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) $140,447 $2,556 7.28% $130,071 $2,622 8.06%
Investment securities and
mortgage-backed securities 51,160 564 4.41% 58,753 790 5.38%
Other interest-earning
assets (2) 5,392 37 2.74% 4,421 35 3.17%
---------- --------- ---------- ---------
Total interest-earning assets 196,999 3,157 6.41% 193,245 3,447 7.13%
--------- ---------
Non-interest-earning assets 11,522 6,671
---------- ----------
Total assets $208,521 $199,916
========== ==========
Interest-bearing liabilities:
Transaction accounts $ 8,626 $ 17 .79% $ 7,983 $ 18 .90%
Passbook savings 5,553 16 1.15% 4,422 14 1.27%
Money market accounts 12,500 40 1.28% 9,819 103 4.20%
Certificates of deposit 73,749 685 3.72% 78,885 1,010 5.12%
Other liabilities (3) 79,676 781 3.92% 72,357 837 4.63%
---------- --------- ---------- ---------
Total interest-bearing
liabilities 180,104 1,539 3.42% 173,466 1,982 4.57%
--------- ---------
Non-interest bearing
liabilities 11,343 10,724
---------- ----------
Total liabilities 191,447 184,190
Stockholders' equity 17,074 15,726
---------- ----------
Total liabilities and
stockholders' equity $208,521 $199,916
========== ==========
Net interest income $1,618 $1,465
========= =========
Interest rate spread (4) 2.99% 2.56%
========== ==========
Net yield on interest-
earning assets (5) 3.29% 3.03%
========== ==========
Ratio of average interest-
Earning assets to average
interest-bearing liabilities 1.09X 1.11X
========== ==========
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 December 31, 2002 vs. 2001
Increase (Decrease)
Due to
----------------------------------------
Rate/
Volume Rate Volume Net
------ ---- ------ ---
(Dollars in Thousands)
Interest income:
Loans receivable $ 209 $(254) $ (21) $ (66)
Mortgage-backed securities and
investment securities (102) (142) 18 (226)
Other interest-earning assets 8 (5) (1) 2
----- ----- ----- -----
Total interest-earning assets 115 (401) (4) (290)
Interest expense:
Transaction accounts 1 (2) 0 (1)
Savings accounts 4 (1) (1) 2
Money markets 28 (72) (19) (63)
Certificates of deposit (66) (276) 17 (325)
Other liabilities 85 (128) (13) (56)
----- ----- ----- -----
Total interest-bearing liabilities 52 (479) (16) (443)
----- ----- ----- -----
Net change in interest income $ 63 $ 78 $ 12 $ 153
===== ===== ===== =====
11
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 for the quarter ended December 31, 2002.
No provision for loan loss was made for the quarter ended December 31, 2001. The
increase in the provision for loan losses for the current three-month period was
primarily the result of loan 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.
Non-Interest Earnings
Total non-interest earnings increased by $47,000 or 47.6% to $147,000 for the
quarter ended December 31, 2002 from $99,000 for the quarter ended December 31,
2001. This increase was primarily due to an increase in service charge income of
$21,000, an increase in net gains from sales of loans of $34,000, offset by a
$10,000 decrease in net gains from sales of available-for-sale securities. The
increase in service charge income is primarily due to increased insufficient fee
charges collected on NOW and checking accounts,
Non-Interest Expense
Total non-interest expense increased $259,000 or 32% to $1,069,000 for the
quarter ended December 31, 2002 from $810,000 for the quarter ended December 31,
2001. The most significant changes in non-interest expenses were increases in
compensation and benefits, data processing, occupancy costs, advertising,
professional fees, stationary, printing and office supplies, and other operating
expenses, offset by a decrease in stock services. The $105,000 increase in
compensation and benefits expense reflects a $90,000 increase in general
salaries and benefits expense primarily due to the hiring of nine employees to
staff the Bank's new branch and general merit increases in administrative, other
employee salaries and employee health insurance expense. Other increases in
compensation and benefits include $8,000 in expense related to employee stock
compensation plans and $8,000 in expense related to director fee compensation.
Data processing increased $34,000 primarily due to higher service bureau expense
and higher other processing expenses for the quarter ending December 31, 2002.
Contributing to the increase in data processing is processing costs associated
with the growth in the volume of deposit and loan accounts. Occupancy costs
increased $31,000 due primarily to increases in depreciation for furniture,
fixtures, and equipment, maintenance contract expense and other occupancy costs
associated with maintaining the new branch. Advertising expense increased
$17,000 primarily due to the Bank's efforts to achieve growth in the Farmington,
New Mexico market, where the new branch is located. Stationary, printing and
office supplies increased $18,000 primarily due to the purchase of forms and
supplies for the new branch. Professional fees increased $12,000 primarily due
to higher legal fees, audit expense, and accounting fees for the quarter ended
December 31, 2002. Other operating expenses increased $40,000, primarily due to
higher loan expense, other real estate owned expense, correspondent bank
expense, armored transit expense, telephone expense and organization dues and
subscriptions expense in the quarter ended December 31, 2002. The $8,000
decrease in stock services for 2002 is primarily due to the absence of a $7,400
regulatory filing fee paid to the OTS in the quarter ended December 31, 2001.
12
RESULTS OF OPERATIONS
COMPARISON OF OPERATING RESULTS FOR THE SIX-MONTH PERIOD ENDED DECEMBER 31, 2002
COMPARED TO THE SIX-MONTH PERIOD ENDED DECEMBER 31, 2001.
General
Net income for the six months ended December 31, 2002 increased $58,000 to
$937,000 compared to net income of $879,000 for the comparable six-month period
in 2001. The increase in net income was primarily the result of an increase net
interest earnings income of $437,000 and an $83,000 increase in non-interest
earnings partially offset by a $25,000 increase in the provision for loan
losses, a $415,000 increase in non-interest expense and a $21,000 increase in
income tax expense. Please refer to "Average Balance Sheets" for an analysis of
the change in net interest earnings for the six months ended December 31, 2002
compared to the same 2001 period.
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.
Six-month period ended Six-month period ended
----------------------- ----------------------
December 31, 2002 December 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) $139,545 $5,132 7.36% $129,776 $5,246 8.08%
Investment securities and
Mortgage-backed securities 52,017 1,202 4.62% 57,559 1,583 5.50%
Other interest-earning
assets (2) 5,198 70 2.69% 4,596 79 3.44%
----------- ---------- ----------- ----------
Total interest-earning assets 196,760 6,404 6.51% 191,931 6,908 7.20%
Non-interest-earning assets 10,639 6,175
----------- -----------
Total assets $207,399 $198,106
=========== ============
Interest-bearing liabilities:
Transaction accounts $ 8,709 $ 35 .80% $ 7,814 $ 43 1.10%
Passbook savings 12,583 33 .52% 4,548 29 1.28%
Money market accounts 12,235 78 1.28% 9,699 206 4.25%
Certificates of deposit 73,705 1,407 3.82% 78,229 2,079 5.32%
Other liabilities (3) 76,061 1,587 4.18% 71,661 1,724 4.81%
----------- ---------- ----------- ---------- -----------
Total interest-bearing
liabilities 183,293 3,140 3.43% 171,951 4,081 4.75%
Non-interest bearing
liabilities 7,225 10,670
----------- -----------
Total liabilities 190,518 182,621
Stockholders' equity 16,881 15,485
----------- -----------
Total liabilities and
Stockholders' equity $207,399 $198,106
=========== ===========
Net interest income $3,264 $2,827
========== ==========
Interest rate spread (4) 3.08% 2.45%
=========== ===========
Net yield on interest-
earning assets (5) 3.32% 2.95%
=========== ===========
Ratio of average interest-
earning assets to average
interest-bearing liabilities 1.07X 1.12X
=========== ===========
13
(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.
Six-month period ended
December 31, 2002 vs. 2001
Increase (Decrease)
Due to
-----------------------------------
Rate/
Volume Rate Volume Net
------ ---- ------ ---
(Dollars in Thousands)
Interest income:
Loans receivable $ 395 $(467) $ (42) $(114)
Mortgage-backed securities and
investment securities (152) (253) 24 (381)
Other interest-earning assets 10 (17) (2) (9)
----- ----- ----- -----
Total interest-earning assets 253 (737) (20) (504)
----- ----- ----- -----
Interest expense:
Transaction accounts 5 (12) (1) (8)
Savings accounts 51 (17) (30) 4
Money markets 54 (144) (38) (128)
Certificates of deposit (120) (587) 35 (672)
Other liabilities 106 (226) (17) (137)
----- ----- ----- -----
Total interest-bearing liabilities 96 (986) (51) (941)
----- ----- ----- -----
Net change in interest income $ 157 $ 249 $ 31 $ 437
===== ===== ===== =====
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 $75,000 and $50,000 for the
six-month period ended December 31, 2002 and 2001, respectively. See "Comparison
of Operating Results for the quarter ended December 31, 2002 compared to quarter
ended December 31, 2001 - Provision for Losses on Loans."
Non-Interest Earnings
Total non-interest earnings increased by $83,000 or 43.2% to $275,000 for the
six months ended December 31, 2002 from $192,000 for the six month ended
December 31, 2001. This increase was primarily due to an increase in service
charge income of $50,000, an increase in net gains from sales of loans of
$39,000, offset by a $10,000 decrease in net gains from sales of
available-for-sale securities. The increase in service charge income is
primarily due to increased insufficient fee charges collected on NOW and
checking accounts,
14
Non-Interest Expense
Total non-interest expense increased $415,000 or 25.2% to $2,065,000 for the six
months ended December 31, 2002 from $1,650,000 for the six months ended December
31, 2001. The most significant changes in non-interest expenses were increases
in compensation and benefits, data processing, occupancy costs, advertising,
stationary, printing and office supplies, ATM expense and other operating
expenses, offset by a decrease in stock services. The $224,000 increase in
compensation and benefits expense reflects a $188,000 increase in general
salaries and benefits expense primarily due to the hiring of nine employees to
staff the Bank's new branch and general merit increases in administrative, other
employee salaries and employee health insurance expense. Other increases in
compensation and benefits include $20,000 in expense related to employee stock
compensation plans and $17,000 in expense related to director fee compensation.
Data processing increased $10,000 primarily due to an increase of $22,000 in
other processing expenses resulting from the processing cost associated with the
growth in the volume of deposit and loan accounts, offset by a decrease in
service bureau expense. Service bureau expense was higher in the quarter ending
September 30, 2001 due to a change to a new service bureau provider. Occupancy
costs increased $65,000 due primarily to increases in depreciation for
furniture, fixtures, and equipment, maintenance contract expense and other
occupancy costs associated with maintaining the new branch. Advertising expense
increased $31,000 primarily due to the Bank's efforts to achieve growth in the
Farmington, New Mexico market, where the new branch is located. Stationary,
printing and office supplies increased $33,000 primarily due to the purchase of
forms and supplies for the new branch. ATM expense increased $8,000 due to a
change in our ATM servicing provider. Other operating expenses increased
$48,000, due primarily to higher loan expense, other real estate owned expense,
correspondent bank expense, armored transit expense and telephone expense for
the six months ended December 31, 2002. The $7,000 decrease in stock services
for 2002 is primarily due to the absence of a $7,400 regulatory filing fee paid
to the OTS in the quarter ended December 31, 2001.
Item 3. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. Based on their evaluation
------------------------------------------------
as of a date within 90 days of the filing date of this Quarterly Report on Form
10-QSB, the Registrant's principal executive officer and principal financial
officer have concluded that the Registrant's disclosure controls and procedures
(as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act
of 1934 (the "Exchange Act")) are effective to ensure that information required
to be disclosed by the Company in reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission rules and forms.
(b) Changes in internal controls. There were no significant changes in the
------------------------------
Registrant's internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
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
---------------------------------------------------
The annual meeting of the stockholders of the Company was held on October 28,
2002. At the meeting two directors were elected for terms to expire in 2005 and
the appointment of Neff + Ricci, LLP as the Company's independent accountants
was ratified.
The results of voting are shown for each matter considered.
Director election:
Nominees Votes for Votes withheld
Vernon I. Hamilton 939,435 15,275
James Nechero, Jr. 938,994 15,716
Independent accountant ratification:
Votes for Votes against Abstentions
953,782 0 928
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****
99.0 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
16
--------------
* 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.
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: February 5, 2003 /s/Jerry R. Spurlin
-----------------------------------------------
Jerry R. Spurlin
Assistant Secretary and Chief Financial Officer
(Duly Authorized Representative and
Principal Financial Officer)
18
SECTION 302 CERTIFICATION
I, Richard C. Kauzlaric, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of GFSB Bancorp, Inc.:
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: February 5, 2003 /s/Richard C. Kauzlaric
----------------------------------------
Richard C. Kauzlaric
President
SECTION 302 CERTIFICATION
I, Jerry R. Spurlin, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of GFSB Bancorp, Inc.:
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: February 5, 2003 /s/Jerry R. Spurlin
--------------------------------
Jerry R. Spurlin
Chief Financial Officer