United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the three months ended June 30, 1998
Commission File Number: 0-22269
GS Financial Corp.
(Exact Name of Registrant as Specified in its Charter)
Louisiana 72-1341014
(State or Other Jurisdiction (IRS Employer ID Number)
of Incorporation or Organization)
3798 Veterans Blvd.
Metairie, LA 70002
(Address of Principal Executive Offices)
Registrant's Telephone Number: (504) 457-6220
Indicate by check whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
x Yes No
As of June 30, 1998, there were 3,266,575 shares of the
Registrant's common stock outstanding. The financial statements
contained within this Form 10-Q for the three months ended June 30,
1998 and 1997 and for the six months ended June 30, 1998 represent
the consolidated financial position and results of operations of GS
Financial Corp. The results of operations for the six months ended
June 30, 1997 represent the consolidated results of operations of GS
Financial Corp. for the three months ended June 30, 1997, and the
singular results of operations of its wholly owned subsidiary,
Guaranty Savings and Homestead, for the three months ended March 31,
1997.
GS Financial Corp.
Form 10-Q
Three Months ended June 30, 1998
Table of Contents
Part I - Financial Information
Item 1 Financial Statements
Consolidated Balance Sheets
(as of June 30, 1998 Unaudited and December 31, 1997) 3
Consolidated Statements of Operations
(For the three and six months ended June 30, 1998 and 1997 Unaudited) 4
Consolidated Statements of Comprehensive Income
(For the three and six months ended June 30, 1998 and 1997 Unaudited) 5
Consolidated Statements of Equity Capital
(For the three and six months ended June 30, 1998 and 1997 Unaudited) 6
Consolidated Statements of Cash Flows
(For the six months ended June 30, 1998 and 1997 Unaudited) 7-8
Notes to Consolidated Financial Statements 8-12
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-16
Item 3 Quantitative and Qualitative Disclosures about
Market Risk 16
Part II Other Information 16
Item 1 Legal Proceedings 16
Item 2 Changes in Securities 16
Item 3 Defaults Upon Senior Securities 16
Item 4 Submission of Matters to a Vote of Security Holders 16
Item 5 Other Information 17
Item 6 Exhibits and Reports on Form 8-K 17
GS Financial Corp.
Consolidated Balance Sheets
(Dollars in Thousands)
(Unaudited)
ASSETS
June 30, 1998 December 31, 1997
-------------- -----------------
Cash and Due from Banks $ 303 $ 376
Interest Bearing Deposits
in Other Institutions 1,341 1,186
Federal Funds Sold 1,150 1,050
Investment Securities 23,025 27,974
Loans (Net) 61,846 53,588
Mortgage-Backed Securities 29,123 42,721
Collateralized Mortgage
Obligations 22,880 -
Accrued Interest Receivable 675 587
Premises & Equipment 2,611 2,715
Other Assets 2,197 1,199
----------- ----------
TOTAL ASSETS $ 145,151 $ 131,396
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Interest Bearing Deposits $ 57,245 $ 56,822
Non-Interest Bearing Dep. 783 899
Borrowings 33,166 16,157
Other Liabilities 1,649 1,471
----------- ----------
TOTAL LIABILITIES 92,843 75,349
STOCKHOLDERS' EQUITY
Common Stock & Additional
Paid in Capital 33,874 33,692
Treasury Stock (3,469) -
Unrealized Gain on Securities
Available for Sale 1,351 1,858
Unearned ESOP Shares (2,334) (2,516)
Unearned RRP Trust Stock (2,410) (2,076)
Other Stockholders' Equity 25,296 25,089
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 52,308 56,047
----------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 145,151 $ 131,396
=========== ==========
GS Financial Corp.
Statements of Operations
(Dollars in Thousands)
(Unaudited)
For the three Months For the six Months
ended June 30, ended June 30,
1998 1997 1998 1997
----------------------------------------
INTEREST INCOME (from)
Loans $ 1,191 $ 998 $ 2,374 $ 1,978
Mortgage-Backed Securities 428 343 1,014 457
Investment Securities 426 432 861 807
Collateralized Mortgage
Obligations 179 0 232 0
Other Interest Income 60 295 106 503
----- ----- ----- -----
TOTAL INTEREST INCOME 2,284 2,068 4,587 3,745
----- ----- ----- -----
INTEREST EXPENSE (on)
Deposits 609 644 1,218 1,338
FHLB Advances 330 14 556 14
----- ----- ----- -----
TOTAL INTEREST EXPENSE 939 658 1,774 1,352
----- ----- ----- -----
NET INTEREST INCOME BEFORE
PROVISION FOR LOAN LOSSES 1,345 1,410 2,813 2,393
PROVISION FOR LOAN LOSSES 35 5 53 5
----- ----- ----- -----
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,310 1,405 2,760 2,388
----- ----- ----- -----
NON-INTEREST INCOME
Gain/(Loss) on Investments (10) (8) 248 (13)
Other Income 6 5 11 10
----- ----- ----- -----
TOTAL NON-INTEREST INCOME ( 4) (3) 259 ( 3)
OTHER EXPENSES
Compensation and Benefits 632 402 1,292 756
Net Occupancy Expense 72 65 143 146
Other Expenses 326 130 523 209
----- ----- ----- -----
TOTAL OTHER EXPENSES 1,030 597 1,958 1,111
----- ----- ----- -----
INCOME BEFORE TAX EXPENSE 276 805 1,061 1,274
INCOME TAX EXPENSE (99) (286) (385) (447)
----- ----- ----- -----
NET INCOME $ 177 $ 519 $ 676 $ 827
===== ===== ===== =====
EARNINGS PER SHARE $ .06 $ .16 $ .23 n/a
GS Financial Corp.
Consolidated Statements of Comprehensive Income
(Dollars in Thousands)
(Unaudited)
For the three Months For the six Months
ended June 30, ended June 30,
1998 1997 1998 1997
----------------------------------------
Net Income $ 201 $ 520 $ 676 $ 827
Other comprehensive income,
Net of income tax:
Unrealized gains/
(losses) on securities (52) 132 (159) (220)
--- --- --- ---
Comprehensive income $ 149 $ 652 $ 517 $ 607
=== === === ===
Statement of Changes in Equity Capital
GS Financial Corp.
Consolidated Statements of Changes in Stockholders' Equity
For The Six Months Ended June 30, 1998, and 1997
(Dollars in Thousands)
(Unaudited)
Unrealized Gain
on Securities
Available for
Sale Net of
Additional Unearned Unearned Applicable Total
Common Paid-In Treasury ESOP RRP Trust Retained Deferred Stockholders'
Stock Capital Stock Shares Stock Earnings Income Tax Equity
BALANCE AT
DECEMBER 31, 1996 $ - $ - $ - $ - $ - $ 23,862 $ 917 $ 24,779
Net Income-6 months
Ended June 30, 1997 - - - - - 827 - 827
Sale of Common Stock 34 33,530 - (2,751) - - - 30,813
Retirement of ESOP - 45 - - - 45
Debt
Decrease in Unrealized
Gain on Securities
Available for Sale - - - - - - (220) (220)
BALANCE AT
JUNE 30, 1997 34 33,530 - (2,706) - $ 24,689 $ 697 $ 56,244
BALANCE AT
DECEMBER 31, 1997 $ 34 $ 33,658 $ - $ (2,516) $ (2,076) $ 25,089 $ 1,858 $ 56,047
Net Income-6 months
Ended June 30, 1998 - - - - - 676 - 676
Decrease in Unrealized
Gain on Securities
Available for Sale - - - - - - (507) (507)
Purchase of Treasury
Stock - - (3,469) - - - - (3,469)
Purchase of RRP Trust
Stock - - - - (334) - - (334)
Retirement of ESOP Debt - 182 - 182 - - - 364
Dividends Paid - - - - - (469) - (469)
BALANCE AT
JUNE 30, 1998 $ 34 $ 33,840 $ (3,469) (2,334) $ (2,410) $ 25,296 $ 1,351 $ 52,308
GS Financial Corp.
Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
For the Six Months Ended
June 30,
-----------------------
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 676 $ 827
Adjustments to Reconcile Net Income
to Net Cash Provided
by Operating Activities:
Depreciation 62 64
Premiums/(Discounts) (Net) 99 (14)
Provision for Loan Losses 53 5
Loss on Sale of Loans (3) 5
Dividend on Arm Fund (431) (38)
ESOP Expense 327 -
Gain/(Loss) on Sale of Investments (249) 8
(Increase)/Decrease in Prepaid Income Tax ( 31) 2
Changes in Deferred Income Tax ( 72) (10)
Changes in Operating Assets and Liabilities:
(Increase)/Decrease in
Accrued Interest Receivable (87) (150)
(Increase)/Decrease in Deferred Charges (94) (21)
Increase/(Decrease) in Accrued Income Tax (76) 444
Increase/(Decrease) in Other Liabilities 515 ( 3)
(Increase)/Decrease in Other Assets 11 171
------ -------
Net Cash Provided by Operating Activities 700 1,290
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Sale of Available-
for-Sale Securities 12,697 5,564
Proceeds from Redemption of
Mutual Funds 4,261
Purchase of CMO's (29,182)
Proceeds from Maturities of CMO's 6,312
Purchase of Available-for-Sale
Securities (12,347)
Proceeds from Maturities of Available-
For-Sale Securities 1,300 4,900
Purchases of Mortgage-Backed
Securities (5,764) (27,892)
Proceeds from Maturities of
Mortgage-Backed Securities 5,966 770
Net Loan (Originations) or
Principal Repayments (8,309) (1,713)
Purchases of Premises and Equipment (15) (45)
Investment in Foreclosed Real Estate (11) (15)
Purchase of FHLB Stock (786)
Non-Cash Dividend - FHLB (31) (21)
---------- -------
Net Cash Used in Investing Activities (13,562) (30,799)
---------- -------
CASH FLOW FROM FINANCING ACTIVITIES
Net Increase/(Decrease) in Deposits 423 (3,720)
Sale of Common Stock 30,858
Purchases of Treasury Stock (3,469)
Net Increase/(Decrease) in
Unapplied Loan Payments 4 3
Payment of Cash Stock Dividends (469)
Net Increase/(Decrease) in Advance
Payments by Borrowers for Taxes
and Insurance (120) 15
Purchase of Stock for Recognition &
Retention Plan Trust (334)
Net Increase/(Decrease) in
FHLB Advances 17,009 8,000
---------- ---------
Net Cash From/(Used in) Financing
Activities 13,044 35,156
---------- ---------
NET CASH EQUIVALENTS 182 5,647
CASH AND CASH EQUIVALENTS - December 31, 2,612 7,591
---------- ---------
CASH AND CASH EQUIVALENTS - June 30 $ 2,794 $ 13,238
========== =========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GS Financial Corp. (the "Company") was organized and
incorporated under the laws of the State of Louisiana on December 24,
1996, for the purpose of becoming the holding company of Guaranty
Savings and Homestead Association, (the "Association"). The Company
registered its initial public offering ("IPO") of its common stock on
Form SB-2 with the Securities and Exchange Commission ("SEC") on
December 26, 1996, which as amended on February 6, 1997, was declared
effective by the SEC on February 11, 1997. The Association filed an
Application for Conversion ("Conversion") with the Office of Thrift
Supervision ("OTS") and the Louisiana Office of Financial
Institutions ("OFI"), the two primary regulators of the Association.
The Association received approval for its Conversion along with
related proxy materials from both the OTS and OFI by letters dated
February 7, 1997 and April 11, 1997 respectively.
The Conversion was approved by the members of the Association at
a special meeting held March 25, 1997. Pursuant to the Plan of
Conversion, which, in part, provided for the Association's conversion
from the mutual to stock form, the Company opened its subscription
offering on February 24, 1997 and closed the offering on March 17,
1997. The IPO was completed on April 1, 1997.
The accompanying financial statements represent the consolidated
financial position, results of operations and cash flows of the
Company except for those figures for the six months ended June 30,
1997, which represent the results of operations and cash flows of the
Association exclusively from January 1, 1997 to March 31, 1997. The
accompanying financial statements were prepared in accordance with
instructions to Form 10-Q, and therefore, do not include information
or footnotes necessary for a complete presentation of financial
position, results of operations and cash flows in conformity with
generally accepted accounting principles. However, all adjustments,
consisting only of normally recurring accruals, which, in the opinion
of management are necessary for a fair presentation of the financial
statements, have been included.
The results of operations for the three and six months ended
June 30, 1998 are not necessarily indicative of the results to be
expected for the year ending December 31, 1998. The unaudited
consolidated financial statements and the notes included herein
should be read in conjunction with the audited financial statements
and notes thereto for the year ended December 31, 1997.
(2) EMPLOYEE STOCK OWNERSHIP PLAN
Effective January 1, 1997 the Association terminated its
Simplified Employee Pension Plan ("SEP") and formally adopted an
Employee Stock Ownership Plan ("ESOP") for the benefit of its
employees. The ESOP purchased 8% or 275,080 shares of the Company's
common stock in the Conversion. The purchase of this stock was
financed through a loan from the Company which is secured by the
above-mentioned shares. The balance of that loan was $2.4 million at
June 30, 1998. The Company accounts for the ESOP in accordance with
SOP 93-6 and, as such, approximately 23,465 shares had been earned by
plan participants at December 31, 1997. The Association bears the
cost of the ESOP as compensation expense which is based on principal
and interest payments on the corresponding debt as well as the market
value of the stock.
(3) EARNINGS PER SHARE AND PAYMENTS OF DIVIDENDS
Earnings per share are computed using the weighted average
number of shares outstanding as prescribed in SFAS 128. During the
second quarter of fiscal 1998, the Company declared and paid
dividends in the amount of $.07 per common share.
(4) STOCK CONVERSION
On April 1, 1997 the Company completed its IPO in which
3,438,500 shares of common stock were sold, par value $.01 per share,
at a cost of $10 per share. Costs totaling $772,371 were netted
against proceeds of approximately $34.3 million.
(5) INVESTMENTS
June 30, 1998 December 31, 1997
-------------- -----------------
(Dollars in thousands)
Amortized Market Amortized Market
AVAILABLE FOR SALE Cost Value Cost Value
US Government and
Agency Obligations $ 11,082 $ 11,337 $ 12,380 $ 12,663
ARM Mutual Fund 9,987 9,923 13,817 13,801
FHLMC Stock 35 1,765 35 1,510
------ ------ ------ ------
Total $ 21,104 $ 23,025 $ 26,232 $ 27,974
====== ====== ====== ======
(6) LOANS
June 30, December 31,
1998 1997
(Dollars in Thousands) -------- -----------
Total Loans $ 62,304 $ 53,995
Allowance for Loan Losses (463) (410)
Net Unearned Fees 5 3
-------- --------
TOTAL NET LOANS $ 61,846 $ 53,588
======== ========
Permanent Mortgages (1-4 family) $ 60,088 $ 53,058
Construction (1-4 family) 649 99
Commercial Mortgages 825 471
Other Mortgages 438 123
Consumer (secured by deposits) 304 244
---------- ----------
TOTAL LOANS $ 62,304 $ 53,995
======== ========
Allowance for Loan Losses
June 30,
---------
1998 1997
(Dollars in Thousands) ----- -----
Beginning Balance, March 31 $ 429 $ 382
Provision for Losses 34 5
Loans Charged Off 0 0
----- -----
Ending Balance, June 30 $ 463 $ 387
===== =====
(7) MORTGAGE BACKED SECURITIES
June 30, December 31,
1998 1997
--------- ------------
(Dollars in thousands)
Amortized Market Amortized Market
AVAILABLE FOR SALE Cost Value Cost Value
------ ----- ------ -----
GNMA Fixed Rate (1-4 family) $ 15,749 $ 15,833 $ 13,935 $ 14,414
FHLMC Fixed Rate (1-4 family) 2,967 2,979 10,659 11,202
FNMA Fixed Rate (1-4 family) 10,261 10,311 17,054 17,105
------ ------ ------ ------
TOTAL MORTGAGE BACKED SECURITIES $ 28,977 $ 29,123 $ 41,648 $ 42,721
====== ====== ====== ======
(8) INTEREST BEARING DEPOSITS
June 30, December 31,
1998 1997
--------- -----------
(Dollars in thousands)
Passbook Savings $ 22,113 $ 22,314
Certificates of Deposits 35,132 34,508
------- ------
TOTAL INTEREST BEARING DEPOSITS $ 57,245 $ 56,822
======= ======
(9) Stock Option Plan
On October 15, 1997, the stockholders approved the adoption of
the GS Financial Corp. 1997 Stock Option Plan for the benefit of
directors, officers and other key employees. Under this plan,
343,850 shares of common stock have been reserved for issuance
pursuant to the exercise of stock options granted under the Stock
Option Plan. The Company has followed all disclosure requirements
set forth in SFAS 123, "Accounting for Stock-Based Compensation." As
of June 30, 1998, options covering 275,076 shares had been granted,
however, due to the 5 year vesting requirement, no options had been
earned.
(10) Recognition and Retention Plan
On October 15, 1997 the Company established the 1997 Recognition
and Retention Plan and Trust ("RRP") as an incentive to retain
personnel of experience and ability in key positions. Stockholders
approved a total of 137,540 shares of stock to be granted pursuant to
the RRP, or 4% of the common stock issued in the Conversion. By
January 16, 1998, the Company had acquired in open market
transactions a total of 137,540 shares of common stock for issuance
under the RRP. The vesting period of the RRP is five years and as
such the Company is accruing this expense commensurate with the
expiration of the vesting period based on the price of the stock
($17.187/share) on the date the RRP was approved.
(11) Treasury Stock
On February 18, 1998 the OTS approved a stock repurchase program
by the Company for 171,925 or 5% of the aggregate shares outstanding.
During the six months ended June 30, 1998, the Company acquired
171,925 shares at a total cost of $3.5 million.
Item 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
GENERAL
The Company's principal business is conducted through its wholly
owned subsidiary, Guaranty Savings and Homestead Association. The
Association, founded in New Orleans, Louisiana in 1937, provides
financial services primarily to individuals. It's principal products
include mortgage loans, passbook savings accounts and certificates of
deposit. The Association also invests in short-term and long-term
liquid investments such as overnight Federal Funds, United States
Treasury and Agency issued securities and mortgage-backed securities.
The following discussion compares the financial condition of GS
Financial Corp. at June 30, 1998 to December 31, 1997 and the results
of operations for the three months ended June 30, 1998 and 1997.
CHANGES IN FINANCIAL CONDITION
At June 30, 1998, the assets of the Company totaled $145.2
million, a increase of $13.8 million, or 10.5%, from December 31,
1997. Net loans receivable increased by $8.2 million, or 15.3%, to
$61.8 million at June 30, 1998 compared to $53.6 million at December
31, 1997. The increase came primarily in loans on 1-4 family
residential dwellings which, fueled by continued low rates, increased
$7.0 million or 13.2%, from $53.1 million at December 31, 1997 to
$60.1 million at June 30, 1998. This growth over the six months
ended June 30, 1998 was funded through the liquidation of various
short-term investments and mortgage-backed securities.
Mortgage-backed securities decreased $13.6 million, or 31.8%, to
$29.1 million at June 30, 1998 compared to $42.7 million at December
31, 1997. The change was the net result of $12.4 million of
mortgage-backed securities sold, $5 million in new purchases and $6.2
million in monthly principal payments for the six months ended
June 30, 1998.
Investment securities decreased $5.0 million, or 17.9%, to $23.0
million at June 30, 1998 compared to $28.0 million at December 31,
1997. The company used these funds to meet current loan demand.
At June 30, 1998, the Company's investment in Collateralized
Mortgage Obligations was $22.9 million. Part of this investment was
funded by the sale of $12.4 million of mortgage-backed securities in
February, 1998 and part of it was funded from additional Federal Home
Loan Bank Advances executed on June 25, 1998. These first tranch
instruments provide the Company with short-term availability at
yields over money market rates.
Interest bearing deposits remained relatively unchanged from
December 31, 1997 to June 30, 1998 at approximately $57 million.
The Company's borrowings increased $17.0 million or 104.9% to
$33.2 million at June 30, 1998 compared to $16.2 million at December
31, 1997. This was due to the Company expanding its leveraged
investing program. The Company's borrowings consist of $23.2 million
of fully amortizing advances from the Federal Home Loan Bank (FHLB)
as well as $10.0 million in balloon obligations from the FHLB.
Equity capital decreased $3.7 million, or 6.6%, to $52.3 million
at June 30, 1998 compared to $56.0 million at December 31, 1997. The
decrease was due to the net effects of $3.5 million in purchases of
Treasury Stock; $.3 million in the purchase of stock by the
Recognition and Retention Plan Trust; $.7 million in net income for
the six months ended June 30, 1998; $.4 million due to the retirement
of ESOP debt; $.5 million in cash dividends paid and a $.5 million
reduction in unrealized gain on securities available for sale.
RESULTS OF OPERATIONS
GENERAL
The Company reported net income for the six months ended June
30, 1998 of $.2 million which was a decrease of $.3 million compared
to $.5 million for the three months ended June 30, 1997. The
decrease was due primarily to an increase in other expenses of $.4
million, or 66.7%, to $1.0 million for the three months ended June
30, 1998 compared to $.6 million for the three months ended June 30,
1997.
INTEREST INCOME
Total interest income increased $.2 million, or 9.5%, to $2.3
million for the three months ended June 30, 1998 compared to $2.1
million for the three months ended June 30, 1997. This was due to
increases in interest on loans and mortgage-backed securities.
Interest on loans increased $.2 million, or 20.0%, to $1.2
million for the three months ended June 30, 1998 compared to $1.0
million for the three months ended June 31, 1997. This was due
primarily to growth in the loan portfolio. The average balance of
the loan portfolio for the six months ended June 30, 1998 was $56.7
million (net) compared to $45.0 million (net) for the six months
ended June 30, 1997. The average annualized yield on loans for the
six months ended June 30, 1997 was 8.8% compared to 8.4% for the six
months ended June 30, 1998.
Interest on mortgage-backed securities increased $.1 million, or
25.0%, to $.4 million for the three months ended June 30, 1998
compared to $.3 million for the three months ended June 30, 1997.
For the three months ending June 30, 1998 the average balance was
$26.6 million which for the same period in 1997 the average balance
was $19.3 million. The average annualized yield of mortgage-backed
securities was 6.4% for the three months ending June 30, 1998 and
7.1% for the same period in 1997.
Other interest income consists mainly of interest income on
overnight Fed Funds sold and interest bearing deposits in other
financial institutions. Other interest income decreased $.2 million
or 66.7%, from $.3 million for the three months ending June 30,1997
compared to $.1 million for the three months ending June 30, 1998.
This was due to the large investment in overnight Fed Funds for the
second quarter 1997 from the temporary investment of stock
subscription funds. The average balance in Fed Funds was $11.3
million for the three months ending June 30, 1997 and $1.2 million
for the same period in 1998.
PROVISION FOR LOAN LOSSES
The Company had a provision for loan loss for the quarter ended
June 30, 1998 of $.03 million compared to $.005 million provision for
the three months ending June 30, 1997. The general valuation
allowance is reviewed quarterly and is based on each individual
loan's performance as well as value of the underlying collateral.
Management has set .5% of the entire mortgage portfolio as an
appropriate allowance given the current economic conditions. The
Company employs the reserve method of accounting for its general and
specific valuation allowances for loan losses.
INTEREST EXPENSE
The Company's total interest expense increased $.2 million, or
28.6%, to $.9 million for the three months ended June 30, 1998
compared to $.7 million for the three months ended June 30, 1997.
The increase was the net effect of additional interest expense of $.3
million on advances from the Federal Home Loan Bank and a decrease of
approximately $.1 million on interest bearing deposits. The cost of
interest bearing deposits decreased from 4.4% (annualized) for the
three months ending June 30, 1997 to 4.2% (annualized) for the same
period in 1998. This decrease was due to a reduction in rates paid
on passbook savings accounts. The Company's overall cost of funds
including advances from the Federal Home Loan Bank was 4.7% for the
three months ended June 30, 1998 compared to 4.4% for the three
months ended June 30, 1997.
OTHER EXPENSES
Other expenses for the three months ended June 30, 1998 were
$1.0 million compared to $.6 million for the three months ended June
30, 1997. This represents an increase of $.4 million or 66.7% from
June 30, 1997 to June 30, 1998. Salaries and employee benefits
increased $.2 million, or 50.0% to $.6 million for the three months
ended June 30, 1998 compared to $.4 million for the three months
ended June 30, 1997. This was due to the cost of implementation of
the Employee Stock Ownership Plan (ESOP) and Recognition and
Retention Plan and Trust which were not accrued prior to June 30,
1997.
The Company has also incurred approximately $.2 million in new
state and federal taxes which are directly the result of converting
to a stock charter. The Company wrote off the expenses associated
with a potential acquisition when negotiations were terminated. Many
of these expenses were not accrued prior to June 30, 1997. The
Company, while now fully realizing the expense of being publiclicly
held, is currently implementing significant expense reduction
measures to bring earnings back to acceptable levels.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity measures the Company's ability to meet its short-term
obligations with ready cash. The Company is required under Federal
regulations to maintain certain levels of "liquid" investments,
specifically not less than 5% of its average daily balance of net
withdrawable deposit accounts. For its liquid investments, the
Company utilizes a combination of cash on hand, certain money market
investments and deposits in other financial institutions as well as
U.S. Government and Agency issued securities. As of June 30, 1998,
the Company's liquidity stood at 59.01% or $48.8 million in excess of
the minimum requirement.
The Company is required to maintain regulatory capital
sufficient to meet all three of the regulatory capital requirements,
those being tangible capital (1.5%), core capital (3.0%), and risk-
based capital (8.0%). As of June 30, 1998, the Company's tangible
and core capital amounted to $39.0 million or 29.7% of adjusted total
assets, while the Company's risk-based capital was $40.1 million or
82.5% of total adjusted risk-weighted assets.
Item 3 - Quantitative and Qualitative Disclosures about Market Risk
Quantitative and qualitative disclosures about market risk are
presented at December 31, 1997 in the Company's Annual Report on Form
10-K, filed with the SEC on March 30, 1998. Management believes
there have been no material changes in the Company's market risk
since December 31, 1997.
Part II - Other Information
Item 1 - Legal Proceedings
There are no matters required to be reported under this item.
Item 2 - Changes in Securities
There are no matters required to be reported under this item.
Item 3 - Defaults Upon Senior Securities
There are no matters required to be reported under this item.
Item 4 - Submission of Matters to a Vote of Security Holders
There are no matters required to be reported under this item.
Item 5 - Other Information
Deadlines for Shareholder Proposals
Pursuant to Rule 14a-5(e) under the Securities Exchange Act of 1934,
as amended, effective June 29, 1998:
(1) The deadline for submitting proposals for inclusion in the
Company's proxy statement and for of proxy for the Company's
1999 annual Meeting of Stockholders pursuant to Rule 14a-8 is
November 30, 1998.
(2) The date after which notice of a shareholder proposal
submitted outside the processes of Rule 14a-8 is considered
untimely is January 29, 1999.
Item 6 - Exhibits and Reports on Form 8-K:
(a) Exhibits
27.0 Financial Data Schedule
(b) No Form 8-K reports were filed during the quarter.
SIGNATURES
In accordance with the requirements of the Securities Exchange
Act of 1934, the registrant has caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
GS FINANCIAL CORP.
DATE: AUGUST 12, 1998 BY:/s/ Donald C. Scott
-------------------
DONALD C. SCOTT, CHAIRMAN OF THE
BOARD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
DATE: AUGUST 12, 1998 BY:/s/Glenn R. Bartels
-------------------
GLENN R. BARTELS
CONTROLLER
2