GS Financial Corp - Quarterly Report (10-Q)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended March 31, 2008	Commission File Number: 0-22269
GS Financial Corp.
(Exact Name of Issuer as Specified in its Charter)
Louisiana		72-1341014
(State of Incorporation)		(IRS Employer Identification No.)
3798 Veterans Blvd.
Metairie, LA 70002
(Address of Principal Executive Offices)
(504) 457-6220
(Issuer's Telephone Number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 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.

Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):

Large accelerated filer Accelerated filer

Non-accelerated filer Smaller reporting company

(Do not check if a smaller reporting company)

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 No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).YesNo

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at May 15, 2008
Common Stock, par value $.01 per share		1,285,800 shares

GS FINANCIAL CORP.

TABLE OF CONTENTS
Page
PART I – FINANCIAL INFORMATION
	Item 1	Financial Statements
			Consolidated Statements of Financial Condition	1
			Consolidated Statements of Income	2
			Consolidated Statements of Changes in Stockholders’ Equity	3
			Consolidated Statements of Cash Flows	4
			Notes to Consolidated Financial Statements	5
			Selected Consolidated Financial Data	7
	Item 2	Management’s Discussion and Analysis of Financial Condition or Plan of Operation		8
	Item 3	Quantitative and Qualitative Disclosures About Market Risk		17
	Item 4T	Controls and Procedures		17
PART II – OTHER INFORMATION
	Item 1	Legal Proceedings		17
	Item 1A	Risk Factors		17
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds		17
	Item 3	Defaults Upon Senior Securities		17
	Item 4	Submission of Matters to a Vote of Security Holders		17
	Item 5	Other Information		17
	Item 6	Exhibits		18
SIGNATURES EXHIBIT INDEX

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

GS Financial Corp.
Condensed Consolidated Statements of Financial Condition

($ in thousands)	3/31/2008 *(Unaudited)*			12/31/2007 (Audited)
ASSETS
Cash and Cash Equivalents
Cash & Amounts Due from Depository Institutions	$	2,757		$	2,485
Interest-Bearing Deposits from Other Banks		7,076			6,008
Federal Funds Sold		1,658			969
Total Cash and Cash Equivalents		11,491			9,462
Securities Available-for-Sale, at Fair Value		47,964			47,747
Loans, Net		129,815			118,477
Accrued Interest Receivable		1,716			1,828
Premises & Equipment, Net		5,863			5,874
Stock in Federal Home Loan Bank, at Cost		1,651			1,220
Foreclosed Assets		85			-
Real Estate Held-for-Investment, Net		446			450
Other Assets		1,500			1,429
Total Assets	$	200,531		$	186,487

LIABILITIES
Deposits
Interest-Bearing Deposits	$	125,168		$	123,825
Noninterest-Bearing Deposits		8,167			5,685
Total Deposits		133,335			129,510
FHLB Advances		37,537			26,986
Other Liabilities		1,538			1,827
Total Liabilities		172,410			158,323

STOCKHOLDERS' EQUITY
Preferred Stock - $.01 Par Value	$	-		$	-
Authorized - 5,000,000 shares
Issued - 0 shares
Common Stock - $.01 Par Value		34			34
Authorized - 20,000,000 shares
Issued - 3,438,500 shares at March 31, 2008 and December 31, 2007
Additional Paid-in Capital		34,546			34,546
Unearned RRP Trust Stock		(158	)		(158	)
Treasury Stock (2,152,700 Shares at March 31, 2008 and December 31, 2007)		(32,062	)		(32,062	)
Retained Earnings		25,917			25,919
Accumulated Other Comprehensive Loss		(156	)		(115	)
Total Stockholders' Equity		28,121			28,164
Total Liabilities & Stockholders' Equity	$	200,531		$	186,487
The accompanying notes are an integral part of these financial statements.

GS Financial Corp.
Consolidated Statements of Income
(Unaudited)

	For the Three Months Ended March 31,
($ in thousands, except per share data)	2008		2007
INTEREST AND DIVIDEND INCOME
Loans, Including Fees	$	2,199	$	1,793
Investment Securities		717		722
Other Interest Income		71		139
Total Interest and Dividend Income		2,987		2,654

INTEREST EXPENSE
Deposits		1,090		1,063
Advances from Federal Home Loan Bank		405		221
Interest Expense		1,495		1,284

NET INTEREST INCOME		1,492		1,370
PROVISION FOR LOAN LOSSES		-		-
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		1,492		1,370

NON-INTEREST EXPENSE
Salaries and Employee Benefits		864		793
Occupancy Expense		200		136
Ad Valorem Taxes		75		65
Other Expenses		277		282
Total Non-Interest Expense		1,416		1,276
NET INCOME BEFORE NON-INTEREST INCOME AND INCOME TAXES		76		94

NON-INTEREST INCOME
Gain on Sale of Mortgage Loans		95		4
Other Income		20		25
Total Non-Interest Income		115		29

INCOME BEFORE INCOME TAXES		191		123
INCOME TAX EXPENSE		65		27
NET INCOME	$	126	$	96

EARNINGS PER SHARE
Basic	$	0.10	$	0.08
Diluted	$	0.10	$	0.08
The accompanying notes are an integral part of these financial statements.

GS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)

($ in thousands)	Common Stock		Additional Paid-in Capital		Treasury Stock			Unearned ESOP Stock		Unearned RRP Trust Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders' Equity
Balances At December 31, 2006	$	34	$	34,751	$	(32,493	)	$	-	$	(573	)	$	25,764		$	(319	)	$	27,164
Comprehensive Income:
Net Income		-		-		-			-		-			96			-			96
Other Comprehensive Income
Unrealized net holding gains on securities, net of taxes		-		-		-			-		-			-			76			76
Total Comprehensive Income		-		-		-			-		-			96			76			172
Distribution of RRP Stock		-		-		-			-		-			-			-			-
Purchase of Treasury Stock		-		-		-			-		-			-			-			-
Dividends Declared		-		-		-			-		-			(126	)		-			(126	)
Balances at March 31, 2007	$	34	$	34,751	$	(32,493	)		-	$	(573	)	$	25,734		$	(243	)	$	27,210
Balances At December 31, 2007	$	34	$	34,546	$	(32,062	)	$	-	$	(158	)	$	25,919		$	(115	)	$	28,164
Comprehensive Income:
Net Income		-		-		-			-		-			126			-			126
Other Comprehensive Income (Loss)
Unrealized net holding losses on securities, net of taxes		-		-		-			-		-			-			(41	)		(41	)
Total Comprehensive Income		-		-		-			-		-			126			(41	)		85
Distribution of RRP Stock		-		-		-			-		-			-			-			-
Purchase of Treasury Stock		-		-		-			-		-			-			-			-
Dividends Declared		-		-		-			-		-			(128	)		-			(128	)
Balances at March 31, 2008	$	34	$	34,546	$	(32,062	)	$	-	$	(158	)	$	25,917		$	(156	)	$	28,121
The accompanying notes are an integral part of these financial statements.

GS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Three Months Ended March 31,
($ in thousands)	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	126		$	96
Adjustments to Reconcile Net Income to Net Cash (Used in) Operating Activities
Depreciation		77			46
Discount Accretion Net of Premium Amortization		(1	)		(1	)
Provision for Loan Losses		-			-
Non-Cash Dividend - FHLB Stock		-			(14	)
Net Loan Fees		(18	)		(35	)
RRP Expense		4			30
Gain on Sale of Loans		(95	)		(4	)
Changes in Operating Assets and Liabilities
Decrease in Accrued Interest Receivable		112			233
(Increase) in Other Assets		(66	)		(80	)
Increase in Accrued Interest - FHLB Advances		38			-
Increase in Accrued Income Tax		65			26
Decrease in Other Liabilities		(391	)		(521	)
Net Cash (Used in) Operating Activities		(149	)		(224	)

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Maturities of Investment Securities		9,726			5,854
Purchases of Investment Securities		(10,000	)		(5,696	)
Investment in Mutual Funds, Net		-			5,000
Loan Originations and Principal Collections, Net		(17,923	)		(3,724	)
Proceeds from Sales of Mortgage Loans		6,613			219
Purchases of FHLB Stock		(431	)		-
Purchases of Premises and Equipment		(62	)		(653	)
Net Cash (Used in) Provided by Investing Activities		(12,077	)		1,000

CASH FLOWS FROM FINANCING ACTIVITIES
Increase (Decrease) in Advances from Federal Home Loan Bank		10,551			(1,353	)
Payment of Cash Stock Dividends		(128	)		(126	)
Increase in Deposits		3,825			1,972
Increase in Deposits for Escrows		7			42
Net Cash Provided by Financing Activities		14,255			535
NET INCREASE IN CASH AND CASH EQUIVALENTS		2,029			1,311
CASH AND CASH EQUIVALENTS - Beginning of Period		9,462			11,117
CASH AND CASH EQUIVALENTS - End of Period	$	11,491		$	12,428

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Paid During the Period For:
Interest Expense	$	1,494		$	1,284
Income Taxes		-			-
Loans Transferred to Foreclosed Real Estate During the Period	$	85			-
The accompanying notes are an integral part of these financial statements.

GS FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTATION

The consolidated financial statements include the accounts of GS Financial Corp. (the “Company”) and its wholly-owned subsidiary, Guaranty Savings Bank (the “Bank”), which prior to June, 2006 was known as Guaranty Savings and Homestead Association. All significant intercompany balances and transactions have been eliminated. Certain financial information for prior periods has been reclassified to conform with the current presentation.

In preparing the consolidated financial statements, the Company is required to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the financial condition, results of operations, changes in stockholders’ equity and cash flows for the interim periods presented. These adjustments are of a normal recurring nature and include appropriate estimated provisions.

Pursuant to rules and regulations of the Securities and Exchange Commission, certain financial information and disclosures have been condensed or omitted in preparing the consolidated financial statements presented in this quarterly report on Form 10-Q. The results of operations for the three months ended March 31, 2008 are not necessarily indicative of the results to be expected for the year ending December 31, 2008. These unaudited financial statements should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2007.

NOTE 2 – EARNINGS PER SHARE

Earnings per share are computed using the weighted average number of shares outstanding as prescribed in Statement of Financial Accounting Standard (“SFAS”) 128. The components used in this computation were as follows:

	Three Months Ended March 31
($ in thousands, except per share data)	2008		2007
Numerator:
Net Income	$	126	$	96
Effect of Dilutive Securities		-		-
Numerator for Diluted Earnings Per Share	$	126	$	96
Denominator
Weighted-Average Shares Outstanding		1,285,800		1,234,453
Effect of Potentially Dilutive Securities and Contingently Issuable Shares		-		37,646
Denominator for Diluted Earnings Per Share		1,285,800		1,272,099
Earnings Per Share
Basic	$	0.10	$	0.08
Diluted		0.10		0.08
Cash Dividends Per Share	$	0.10	$	0.10

NOTE 3 – EMPLOYEE STOCK OWNERSHIP PLAN AND 401(K) PLAN

The GS Financial Employee Stock Ownership Plan (“ESOP”) purchased 275,080 shares of the Company’s common stock on April 1, 1997 financed by a loan from the Company. The loan was secured by those shares not yet allocated to plan participants and was paid in full as of December 31, 2006. Effective January 1, 2007, the Company amended and restated its ESOP, added a 401(k) feature and renamed the plan the “Guaranty Savings Bank 401(k) Plan” (the “401(k) Plan”). Compensation expense related to the 401(k) Plan was $28,000 and $48,000 for the three month periods ended March 31, 2008 and 2007, respectively.

NOTE 4 – RECOGNITION AND RETENTION PLAN

On October 15, 1997 the Company established the 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. The Company acquired a total of 137,500 shares of common stock for issuance under the RRP. The Company is accruing this expense over the ten-year vesting period based on the price of the stock ($12.50/share) when the plan was modified in September 1998. As of March 31, 2008 of the 125,028 shares awarded, 9,968 shares have been forfeited due to termination of employment or service as a director and 106,812 shares had been earned and issued. Compensation expense related to the RRP was $4,000 and $30,000 for the three months ended March 31, 2008 and 2007, respectively.

GS FINANCIAL CORP.
SELECTED CONSOLIDATED FINANCIAL DATA
(Unaudited)

	Three Months Ended
($ in thousands, except per share data)	March 31, 2008			December 31, 2007			March 31, 2007
SUMMARY OF INCOME
Interest Income	$	2,987		$	3,000		$	2,654
Interest Expense		1,495			1,473			1,284
Net Interest Income		1,492			1,527			1,370
Provision for Loan Losses		-			-			-
Net Interest Income After Provision for Loan Losses		1,492			1,527			1,370
Non-Interest Income		115			243			29
Non-Interest Expense		1,416			1,378			1,276
Net Income Before Taxes		191			392			123
Income Tax Expense		65			192			27
Net Income	$	126		$	200		$	96
SELECTED BALANCE SHEET DATA
Total Assets	$	200,531		$	186,487		$	168,615
Loans Receivable, Net		129,815			118,477			97,490
Investment Securities		47,964			47,747			50,043
Deposit Accounts		133,335			129,510			124,726
Borrowings		37,537			26,986			15,689
Stockholders' Equity		28,121			28,164			27,210
SELECTED AVERAGE BALANCES
Total Assets		195,421			181,052			167,067
Loans Receivable, Net		124,287			114,011			93,987
Investment Securities		51,091			47,913			52,173
Deposit Accounts		130,778			129,943			122,632
Borrowings		34,931			21,645			16,230
Equity		28,515			28,140			27,254
KEY RATIOS
Return on average assets		0.26	%		0.65	%		0.23	%
Return on average shareholders' equity		1.78	%		2.82	%		1.43	%
Net interest margin		3.21	%		3.50	%		3.44	%
Average loans to average deposits		97.66	%		90.38	%		79.50	%
Average interest-earning assets to interest-bearing liabilities		117.75	%		118.20	%		119.17	%
Efficiency ratio		88.17	%		77.85	%		93.14	%
Non-interest expense to average assets		2.91	%		2.95	%		3.10	%
Allowance for loan losses to total loans		2.57	%		2.82	%		3.69	%
Stockholders' equity to total assets		14.02	%		15.10	%		16.14	%
COMMON SHARE DATA
Earnings per share
Basic	$	0.10		$	0.16		$	0.08
Diluted		0.10			0.16			0.08
Dividends paid per share		0.10			0.10			0.10
Book value per share		21.87			21.90			22.04
Average shares outstanding
Basic		1,285,800			1,270,963			1,234,453
Diluted		1,285,800			1,273,430			1,272,099

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The purpose of this discussion and analysis is to provide information necessary to gain an understanding of the financial condition, changes in financial condition and results of operations of GS Financial Corp. (“GS Financial” or the “Company”), and its subsidiary during the first quarter of 2008 and 2007. Virtually all of the Company’s operations are dependent on the operations of its subsidiary, Guaranty Savings Bank (“Guaranty” or the “Bank”). This discussion is presented to highlight and supplement information presented elsewhere in this quarterly report on Form 10-Q, particularly the consolidated financial statements and related notes in Item 1. This discussion and analysis should be read in conjunction with accompanying tables and the Company’s annual report on Form 10-K for the year ended December 31, 2007.

FORWARD-LOOKING STATEMENTS

In addition to the historical information, this discussion includes certain forward-looking statements as that term is defined by the Private Securities Litigation Reform Act of 1995. Such statements include, but may not be limited to comments regarding (a) the potential for earnings volatility from changes in the estimated allowance for loan losses over time, (b) the expected growth rate of the loan portfolio, (c) future changes in the mix of deposits, (d) the results of net interest income simulations run by the Company to measure interest rate sensitivity, (d) the performance of Guaranty’s net interest income and net interest margin assuming certain future conditions, and (f) changes or trends in certain expense levels.

Forward-looking statements are based on numerous assumptions, certain of which may be referred to specifically in connection with a particular statement. Some of the more important assumptions include:

·	expectations about overall economic strength and the performance of the economies in Guaranty’s market area,

·	expectations about the movement of interest rates, including actions that may be taken by the Federal Reserve Board in response to changing economic conditions,

·	reliance on existing or anticipated changes in laws or regulations affecting the activities of the banking industry and other financial service providers,

·	expectations regarding the nature and level of competition, changes in customer behavior and preferences, and Guaranty’s ability to execute its plans to respond effectively, and

·	expectations regarding the ability of Guaranty’s market area to recover economically from the damages caused by Hurricane Katrina.

Because it is uncertain whether future conditions and events will confirm these assumptions, there is a risk that the Company’s future results will differ materially from what is stated or implied by such forward-looking statements. The Company cautions the reader to consider this risk. The Company undertakes no obligation to update any forward-looking statement included in this quarterly report, whether as a result of new information, future events or developments, or for any other reason.

FINANCIAL CONDITION

LOANS AND ALLOWANCE FOR LOAN LOSSES

Total loans increased $11.3 million, or 9.3%, from year-end 2007 to the end the first quarter of 2008. Average net loans for the first quarter of 2008 were $124.3 million, up $30.3 million (32.2%) compared to the first quarter of 2007. Table 1, which is based on regulatory reporting classifications, shows loan balances at March 31, 2008 and at the end of the four prior quarters and average loans outstanding during each quarter.

TABLE 1. COMPOSITION OF LOAN PORTFOLIO
	2008		2007
($ in thousands)	March 31		December 31		September 30		June 30		March 31
Real estate loans – residential	$	66,124	$	62,481	$	58,885	$	55,282	$	51,056
Real estate loans - commercial and other		53,445		45,757		43,528		42,822		40,019
Real estate loans - construction		7,695		9,074		7,392		7,859		7,120
Consumer loans		1,041		913		668		658		676
Commercial business loans		4,929		3,625		2,779		2,264		2,306
Total Loans	$	133,234	$	121,850	$	113,252	$	108,885	$	101,177
Average Loans During Period	$	127,719	$	117,442	$	111,274	$	104,448	$	99,004

The Bank has hired four experienced commercial loan officers, a mortgage banking manager and a residential loan officer since the beginning of 2006. The loan growth since the beginning of 2006 reflects the start of an economic recovery in the Bank’s market area subsequent to Hurricane Katrina and the efforts of the new loan officers.

All loans carry a degree of credit risk. Management’s evaluation of this risk ultimately is reflected in the estimate of probable loan losses that is reported in the Company’s financial statements as the allowance for loan losses. Changes in this ongoing evaluation over time are reflected in the provision for loan losses charged to operating expense. At March 31, 2008, the allowance for loan losses was $3.4 million, or 2.57% of total loans. Table 2 presents an analysis of the activity in the allowance for loan losses for the past five quarters. A reduction in the allowance was taken in the second quarter of 2007 to reflect improvements in the quality of the loan portfolio as borrowers have exceeded management’s initial expectations in meeting their obligations subsequent to Hurricane Katrina. The increase in delinquencies in the first quarter of 2008 relates almost entirely to well-margined real estate loans that were issued prior to Hurricane Katrina. One loan of $1.3 million secured by a mixed-use property in Orleans Parish is the majority of the increase in non-performing loans during the first quarter of 2008. The Bank is actively monitoring all delinquent loans and believes its allowance for loan losses is adequate to absorb any losses inherent in the loan portfolio.

TABLE 2. SUMMARY OF ACTIVITY IN THE ALLOWANCE FOR LOAN LOSSES
	2008						2007
($ in thousands)	First Quarter			Fourth Quarter			Third Quarter			Second Quarter			First Quarter
Beginning Balance	$	3,432		$	3,432		$	3,432		$	3,732		$	3,732
Provision (Reversal) for Loan Losses		-			-			-			(300	)		-
Loans Charged Off		13			-			-			-			-
Recoveries of loans previously charged off		-			-			-			-			-
Ending Balance	$	3,419		$	3,432		$	3,432		$	3,432		$	3,732
Ratios
Charge-offs to average loans		0.01	%		0.00	%		0.00	%		0.00	%		0.00	%
Provision for loan losses to charge-offs		n/a			n/a			n/a			n/a			n/a
Allowance for loan losses to charge-offs (annualized)		n/a			n/a			n/a			n/a			n/a
Allowance for loan losses to total loans		2.57	%		2.82	%		3.03	%		3.15	%		3.69	%

Tables 3 and 4 set forth the Company’s delinquent loans and nonperforming assets at March 31, 2008 and at the end of the preceding four quarters. The balances presented in Table 3 are total principal balances outstanding on the loans rather than the actual principal past due. Nonperforming assets consist of loans on nonaccrual status and foreclosed assets. There were no loans 90 days delinquent and still accruing interest at the end of any of the five quarters presented.

TABLE 3. DELINQUENT LOANS
	2008			2007
($ in thousands)	March 31			December 31			September 30			June 30			March 31
30-89 Days	$	5,574		$	3,305		$	4,054		$	2,577		$	1,234
90+ Days		3,162			1,438			990			502			335
Total	$	8,736		$	4,743		$	5,044		$	3,079		$	1,569
Ratios
Loans delinquent 90 days to total loans		2.37	%		1.18	%		0.87	%		0.46	%		0.33	%
Total delinquent loans to total loans		6.56	%		3.89	%		4.45	%		2.83	%		1.55	%
Allowance for loan losses to 90 day delinquent loans		108.13	%		238.66	%		346.67	%		683.67	%		1,114.03	%
Allowance for loan losses to total delinquent loans		39.14	%		72.36	%		68.04	%		111.46	%		237.86	%

TABLE 4. NONPERFORMING ASSETS
	2008			2007
($ in thousands)	March 31			December 31			September 30			June 30			March 31
Loans accounted for on a nonaccrual basis	$	3,162		$	1,438		$	1,310		$	502		$	335
Foreclosed assets		85			-			-			-			-
Total nonperforming assets	$	3,247		$	1,438		$	1,310		$	502		$	335
Ratios
Nonperforming assets to loans plus foreclosed assets		2.44	%		1.18	%		1.16	%		0.46	%		0.33	%
Nonperforming assets to total assets		1.62	%		0.77	%		0.74	%		0.30	%		0.20	%
Allowance for loan losses to nonperforming assets		105.30	%		238.66	%		261.98	%		683.67	%		1,114.03	%

INVESTMENT IN SECURITIES

At March 31, 2008, the Company’s total securities available-for-sale were $48.0 million, compared to $47.7 million at December 31, 2007 and $50.4 million at March 31, 2007. Management expects that funding needs from loan growth will lead to further reductions in the investment portfolio. Proceeds from interest, dividends and principal repayments that are not needed to fund new loan commitments will likely be reinvested in pass-through mortgage backed obligations.

At March 31, 2008, the net unrealized losses on the Company’s entire securities portfolio was $227,000, or 0.47% of amortized cost, compared to net unrealized losses of $167,000, or 0.35% of amortized cost at December 31, 2007. These losses consist primarily of losses in collateralized mortgage obligations and mutual funds caused by market concerns in the mortgage industry. Management believes that these losses are temporary in nature and will reverse themselves when interest rates become more favorable for those types of investments. The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 159, which allows for the accounting for selected financial assets using the fair value method. Certain financial institutions early-adopted Statement No. 159, allowing the institution to identify certain specific losses and take them as a charge to retained earnings rather than recognize the writedown of securities as losses. The Company did not elect to early adopt Statement No. 159

TABLE 5. COMPOSITION OF INVESTMENT PORTFOLIO
	March 31, 2008				December 31, 2007				March 31, 2007
($ in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
U.S. Agency Securities	$	19,511	$	19,705	$	18,492	$	18,421	$	22,486	$	22,343
Mortgage Backed Securities		8,460		8,560		8,849		8,912		5,302		5,345
Collateralized Mortgage Obligations		14,417		14,039		14,736		14,633		16,781		16,537
Mutual funds		5,803		5,660		5,837		5,781		5,836		5,818
Total Investments	$	48,191	$	47,964	$	47,914	$	47,747	$	50,405	$	50,043

DEPOSITS

At March 31, 2008, deposits increased $3.8 million, or 2.9% above the level at December 31, 2007 and increased $8.6 million, or 6.9% above the level at the end of the first quarter of the previous year. Average deposits totaled $130.8 million in the first quarter of 2008, a $1.3 million (1.0%) increase from the fourth quarter of 2007 and an $8.1 million (6.6%) increase from the first quarter of 2007.

Table 6 presents the composition of average deposits for the quarters ended March 31, 2008, December 31, 2007 and March 31, 2007.

TABLE 6. DEPOSIT COMPOSITION
	*First Quarter 2008*					Fourth Quarter 2007					First Quarter 2007
($ in thousands)	Average Balances		% of Deposits			Average Balances		% of Deposits			Average Balances		% of Deposits
Noninterest bearing demand deposits	$	8,072		6.2	%	$	5,881		4.5	%	$	3,330		2.7	%
NOW account deposits		23,345		17.8			23,764		18.3			18,833		15.4
Savings deposits		18,600		14.2			19,229		14.8			21,980		17.9
Time deposits		80,761		61.8			81,069		62.4			78,489		64.0
Total	$	130,778		100.0	%	$	129,943		100.0	%	$	122,632		100.0	%

BORROWINGS

At March 31, 2008, the Company’s borrowings from the Federal Home Loan Bank increased $10.6 million, or 39.1%, from December 31, 2007 and $21.8 million, or 139.3%, from March 31, 2007. Average advances for the first quarter of 2008 were $34.9 million, up $13.3 million, or 61.4%, from the fourth quarter of 2007 and up $18.7 million, or 115.2%, from the prior year’s first quarter. The increased borrowings were used to fund loan growth and due to the interest rate environment represented a relatively inexpensive wholesale funding source during the first quarter of 2008.

STOCKHOLDERS’ EQUITY AND CAPITAL ADEQUACY

At March 31, 2008, stockholders’ equity totaled $28.1 million, down $43,000 from December 31, 2007. The $43,000 reduction in equity during the quarter during the quarter as earnings of $126,000 were offset by an increase in unrealized securities losses (net of taxes) of $41,000 and dividends of $128,000.

Since 1998, the Company has been regularly repurchasing shares of its common stock when shares have been available at prices and amounts deemed prudent by management. Due to the highly capitalized condition of the Company, management has felt in the past that these purchases, most of which were at a discount to book value, were an effective way to reduce capital while still enhancing shareholder value. These shares have not been retired and could potentially serve as a source of capital funding should the need arise in the future. In 2007, an exercise of stock options led to the reissuance of 30,000 shares of stock from treasury. This transaction is not reflected in Table 7. Table 7 summarizes the repurchase of the shares of its common stock by year.

TABLE 7. SUMMARY OF STOCK REPURCHASES
Year Ended December 31,	Shares		Cost ($000)		Average Price Per Share
1998		491,054	$	8,324	$	16.95
1999		299,000		3,653		12.22
2000		679,600		8,590		12.64
2001		305,684		4,612		15.09
2002		142,201		2,516		17.69
2003		216,181		4,109		19.01
2004		16,842		315		18.70
2005		3,907		74		19.06
2006		17,763		300		16.87
2007		10,468		188		18.00
2008		-		-		-
Total Stock Repurchases		2,182,700	$	32,681	$	14.97

The ratios in Table 8 indicate that the Bank remained well capitalized at March 31, 2008. The regulatory capital ratios of Guaranty Savings Bank exceed the minimum required ratios, and the Bank has been categorized as “well-capitalized” in the most recent notice received from its primary regulatory agency.

TABLE 8. CAPITAL AND RISK BASED CAPITAL RATIOS
	*2008*			2007
($ in thousands)	March 31			December 31			March 31
Tier 1 regulatory capital	$	27,253		$	27,197		$	26,716
Tier 2 regulatory capital		1,400			1,260			1,144
Total regulatory capital	$	28,653		$	28,457		$	27,860
Adjusted total assets	$	198,660		$	184,285		$	167,755
Risk-weighted assets	$	115,632		$	103,236		$	92,868
Ratios
Tier 1 capital to adjusted total assets		13.72	%		14.76	%		13.74	%
Tier 1 capital to risk-weighted assets		23.57	%		26.34	%		34.61	%
Total capital to risk-weighted assets		24.78	%		27.57	%		35.86	%
Shareholders' equity to total assets		14.02	%		15.10	%		14.38	%

LIQUIDITY AND CAPITAL RESOURCES

The objective of liquidity management is to ensure that funds are available to meet cash flow requirements of depositors and borrowers, while at the same time meeting the operating, capital and strategic cash flow needs of the Company and the Bank, all in the most cost-effective manner. The Company develops its liquidity management strategies and measures and monitors liquidity risk as part of its overall asset/liability management process, making use of the quantitative modeling tools to project cash flows under a variety of possible scenarios.

On the liability side, liquidity management focuses on growing the base of more stable core deposits at competitive rates, while at the same time ensuring access to economical wholesale funding sources. The sections above on Deposits and Borrowings discuss changes in these liability-funding sources in the first quarter of 2008.

Liquidity management on the asset side primarily addresses the composition and maturity structure of the loan and investment securities portfolios and their impact on the Company’s ability to generate cash flows from scheduled payments, contractual maturities and prepayments, their use as collateral for borrowings and possible sales on the secondary market.

Cash generated from operations is another important source of funds to meet liquidity needs. The consolidated statements of cash flows present operating cash flows and summarize all significant sources and uses of funds for the first three months of 2008 and 2007.

Table 9 illustrates some of the factors that the Company uses to measure liquidity. The Bank continues to have adequate liquidity but should additional liquidity needs arise the Bank can pursue various options, including liquidating investments or borrowing additional funds to fund continued loan growth.

TABLE 9. KEY LIQUIDITY INDICATORS
	*2008*			2007
($ in thousands)	March 31			December 31			March 31
Cash and cash equivalents	$	11,491		$	9,462		$	12,428
Total loans		133,234			121,850			101,177
Total deposits		133,335			129,510			124,726
Deposits $100,000 and over		40,478			35,586			29,309
Ratios
Total loans to total deposits		99.93	%		94.08	%		81.15	%
Deposits $100,000 and over to total deposits		30.36	%		27.48	%		23.50	%

RESULTS OF OPERATIONS

NET INTEREST INCOME

Net interest income for the first quarter of 2008 increased $122,000, or 8.9%, from the first quarter of 2007, as average earning assets increased 15.9% between these periods. First quarter net interest income for 2008 was down $36,000, or 2.4%, on earning assets that were up 8.0% compared with the fourth quarter of 2007. The increase in earning asset balances was offset by decreasing yields on earning assets caused by the sharp interest rate decreases in the first quarter of 2008 and a significant loan being placed on non-accrual causing the reversal of $42,000 in previously earned interest income, adversely impacting the Bank’s net interest margin.

The Company’s net interest margin level of 3.21% was a 29 basis point decrease from the fourth quarter of 2007 and a 23 basis point decrease compared to 3.44% in the year-earlier quarter. Tables 10 and 11 show the components of the Company’s net interest margin in the first quarter of 2008 and the changes in those components from the fourth quarter of 2007 and first quarter of 2007.

During the first quarter of 2008, interest income from earning assets was down $13,000, or 0.4%, from the fourth quarter of 2007 and up $333,000, or 12.5%, from the first quarter of 2007. The increase compared to the first quarter of 2007 was volume driven, with the 15.9% year-to-year growth in average earning assets. Compared with the fourth quarter of 2007, the $13,000 interest income decrease was caused by a 59 basis point drop in the yield on earning assets more than offsetting the 8.0% increase in average earning asset balances from quarter to quarter.

During the first quarter of 2008, interest expense was up $23,000, or 1.6%, from the fourth quarter of 2007 and up $211,000, or 16.4%, from the first quarter of 2007. The increases from the prior year and prior quarter are due to increases in the average volume of interest bearing liabilities as the cost of interest bearing liabilities has decreased by 23 basis points from the fourth quarter of 2007 and by 3 basis points in comparison with the first quarter of 2007.

The average cost on interest bearing deposits decreased to 3.58% for the first quarter of 2008, from 3.78% in the fourth quarter of 2007 and 3.61% in the first quarter of 2007. These changes in rates accounted for decreases of $84,000 and $22,000 in interest expense from the fourth and first quarters of 2007, respectively. The changes in interest costs have been slower in response to the Federal Reserve’s rate cuts than the interest earning assets, but the Bank has substantial deposit and borrowing repricing opportunities due to maturities in the remainder of 2008.

Average borrowings were up $13.3 million for the first quarter of 2008 compared to the fourth quarter of 2007, and up $18.7 million compared to the first quarter of 2007. These increases in the average balances, which were incurred to fund loan growth, accounted for $154,000 and $217,000 in increased interest expense for each respective time frame.

TABLE 10. SUMMARY OF AVERAGE BALANCE SHEETS, NET INTEREST INCOME AND INTEREST RATES
	*First Quarter 2008*								Fourth Quarter 2007								First Quarter 2007
($ in thousands)	Average Balance			Interest		Average Yield/ Cost			Average Balance			Interest		Average Yield/ Cost			Average Balance			Interest		Average Yield/ Cost
ASSETS
INTEREST-EARNING ASSETS
Loans	$	127,725			2,199		6.85	%	$	117,442		$	2,239		7.65	%	$	99,004			1,793		7.34	%
U.S. Agency securities		21,981			333		6.03			20,997			312		5.96			21,337			307		5.84
Mortgage-backed securities		8,804			120		5.42			6,301			84		5.35			3,901			57		5.93
Collateralized mortgage obligations		14,537			197		5.39			14,832			200		5.41			16,849			230		5.54
Mutual funds		5,769			67		4.62			5,783			74		5.13			10,086			128		5.15
Total investment in securities		51,091			717		5.64			47,913			670		5.55			52,173			722		5.61
FHLB stock		1,547			12		3.09			1,043			13		5.00			982			14		5.78
Federal funds sold and demand deposits		6,805			59		3.45			6,867			78		4.56			9,358			125		5.42
Total interest-earning assets		187,168			2,987		6.35	%		173,265			3,000		6.94	%		161,517			2,654		6.66	%
NONINTEREST-EARNING ASSETS
Other assets		11,685								11,219								9,282
Allowance for loan losses		(3,432	)							(3,432	)							(3,732	)
Total assets	$	195,421							$	181,052							$	167,067

LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES
NOW account deposits	$	23,345			159		2.71	%	$	23,764		$	192		3.24	%	$	18,833			142		3.06	%
Savings deposits		18,601			40		0.86			19,229			52		1.08			21,980			68		1.25
Time deposits		80,761			891		4.39			81,068			937		4.64			78,489			852		4.41
Total interest-bearing deposits		122,707			1,090		3.58			124,061			1,181		3.78			119,302			1,062		3.61
Borrowings		34,931			405		4.61			21,645			291		5.39			16,230			222		5.55
Total interest-bearing liabilities		157,638			1,495		3.82	%		145,706			1,472		4.05	%		135,532			1,284		3.85	%
NONINTEREST-BEARING LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits		8,072								5,881								3,330
Other liabilities		1,196								1,325								951
Shareholders' equity		28,515								28,140								27,254
Total liabilities and shareholders' equity	$	195,421							$	181,052							$	167,067
Net interest income and margin				$	1,492		3.21	%				$	1,528		3.50	%				$	1,370		3.44	%
Net interest-earning assets and spread	$	29,670					2.53	%	$	26,093					2.89	%	$	25,985					2.81	%
Cost of funding interest-earning assets							3.20	%							3.37	%							3.14	%

TABLE 11. SUMMARY OF CHANGES IN NET INTEREST MARGIN
	*First Quarter 2008 Compared to:*
	Fourth Quarter of 2007									First Quarter of 2007
	Due to Change in						Total Increase (Decrease)			Due to Change in					Total Increase (Decrease)
($ in thousands)	Volume			Rate			Total Increase (Decrease)			Volume				Rate	Total Increase (Decrease)
INTEREST INCOME
Loans	$	177		$	(217	)	$	(40	)	$	479		$ (73)	$ 406
U.S. Agency securities		15			6			21			10		16	26
Mortgage-backed securities		34			2			36			67		(4)	63
Collateralized mortgage obligations		(4	)		1			(3	)		(31	)	(2)	(33)
Mutual funds		0			(7	)		(7	)		(50	)	(11)	(61)
Total investment in securities		45			2			47			(4	)	(1)	(5)
FHLB stock		4			(5	)		(1	)		4		(6)	(2)
Federal funds sold and demand deposits		(1	)		(18	)		(19	)		(22	)	(44)	(66)
Total interest income		225			(238	)		(13	)		457		(124)	333

INTEREST EXPENSE
NOW account deposits	$	(3	)	$	(30	)	$	(33	)	$	31		$ (14)	$ 17
Savings deposits		(1	)		(11	)		(12	)		(7	)	(21)	(28)
Time deposits		(3	)		(43	)		(46	)		26		13	39
Total interest-bearing deposits		(7	)		(84	)		(91	)		50		(22)	28
Borrowings		154			(40	)		114			217		(34)	183
Total interest expense		147			(124	)		23			267		(56)	211
Change in net interest income		78			(114	)		(36	)		190		(68)	122

PROVISION FOR LOAN LOSSES

The Company made no provision for loan losses in the first quarter of 2008 or 2007, nor in the fourth quarter of 2007. There was a charge-off of $13,000 in the first quarter of 2008 and there were no charge-offs in the fourth or first quarters of 2007.

For a more detailed discussion of changes in the allowance for loan losses, nonperforming assets and general credit quality, see the earlier section on Loans and Allowance for Loan Losses. The future level of the allowance for loan losses will reflect management’s ongoing evaluation of credit risk, based on established internal policies and practices.

NON-INTEREST INCOME

Non-interest income before securities transactions was up $86,000, or 297%, for the first quarter of 2008 compared to the same time period of 2007. Gains on the sale of mortgage loans totaled $95,000 for the quarter, up from $4,000 for the first quarter of 2007. Mortgage loan sales are a key element of the Bank’s strategy and should continue as a significant source of non-interest income. The major categories of non-interest income for the three months ended March 31, 2008 and 2007 are presented in Table 12.

TABLE 12. NON-INTEREST INCOME
($ in thousands)	First Quarter 2008			First Quarter 2007		Percentage Increase (Decrease)
Service charges on deposit accounts	$	5		$	4		25	%
ATM surcharges and network fees		3			1		200
Early closing penalties		1			4		(75	)
Income from real estate held for investment		14			13		8
Gain on sales of mortgage loans		95			4		2,275
Miscellaneous		(3	)		3		n/a
Total noninterest income before securities transactions		115			29		297
Securities transactions		-			-
Total noninterest income	$	115		$	29		297	%

NON-INTEREST EXPENSE

Non-interest expense for the first quarter of 2008 totaled $1.4 million, a $140,000, or 11% increase from the first quarter of 2007. This expense growth was expected as part of management’s long-term plan to grow through increasing its branch locations, product offerings, delivery channels and adding banking professionals. The growth in expenses has been accompanied by increases in production, and as a result both non-interest expense as a percentage of average assets and the Company’s efficiency ratio improved in the first quarter of 2008 compared to the same period in 2007. Non-interest expense for the three months ended March 31, 2008 and 2007 are presented in Table 13 below.

TABLE 13. NON-INTEREST EXPENSE
($ in thousands)	First Quarter 2008			First Quarter 2007			Percentage Increase (Decrease)
Employee compensation	$	639		$	546			17	%
Employee benefits		225			247			(9	)
Total personnel expense		864			793			9
Net occupancy expense		200			136			47
Ad Valorem taxes		75			65			15
Data processing costs		71			71			-
Advertising		12			21			(43	)
ATM server expense		9			6			50
Professional fees		48			49			(2	)
Deposit insurance and supervisory fees		29			27			7
Printing and office supplies		22			30			(27	)
Telephone		17			14			21
Dues and Subscriptions		25			25			-
Other operating expenses		44			39			13
Total non-interest expense	$	1,416		$	1,276			11	%
Non-interest expense/average assets		2.91	%		3.10	%
Efficiency ratio		88.17	%		93.14	%

Personnel costs, which represent the largest component of non-interest expense, increased $71,000, or 9%, to $864,000 in the first quarter of 2008 compared to $793,000 in the first quarter of 2007.

Occupancy expense increased by $64,000, or 47%, in the first quarter of 2008 compared to the first quarter of 2007. This is the result of the Canal St. branch in New Orleans being re-opened during 2007, the Westbank branch in Harvey newly opening in 2007, and the Ponchatoula loan production office being converted to a full-service branch during the first quarter of 2007.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not Applicable.

Item 4T - Controls and Procedures

Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations and are operating in an effective manner.

No change in our internal control over financial reporting (as defined in Rules 13a–15(f) or 15(d)-15(f) under the Securities Exchange Act of 1934) occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to affect, our internal control over financial reporting.

Part II - Other Information

Item 1 - Legal Proceedings

There are no matters required to be reported under this item.

Item 1A. Risk Factors

Not applicable.

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

(a) Not applicable

(b) Not applicable

(c)	There were no issuer purchases of equity securities during the quarter.

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

There are no matters required to be reported under this item.

Item 6 - Exhibits

3.1 (1)	Articles of Incorporation of GS Financial Corp.
3.2 (1)	Bylaws of GS Financial Corp.
4.1 (1)	Stock Certificate of GS Financial Corp.
10.1 (2)	GS Financial Corp. Stock Option Plan
10.2 (2)	GS Financial Corp. Recognition and Retention Plan and Trust Agreement for Employees and Non-Employee Directors
10.3 (3)	Early Retirement and Consulting Agreement by and among GS Financial Corp., Guaranty Savings and Homestead Association and Donald C. Scott Dated January 7, 2005
10.4 (4)	Letter Agreement, dated as of December 8, 2005, by and between Guaranty Savings and Homestead Association and Stephen E. Wessel
31.1	Rule 13a-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a) Certification of Chief Financial Officer
32.0	Certification pursuant to 18 U.S.C. Section 1350

(1)	Incorporated herein by reference from the Registration Statement on Form SB-2 (Registration number 333-18841) filed by the Registrant with the SEC on December 26, 1996, as subsequently amended.

(2)	Incorporated herein by reference from the definitive proxy statement, dated September 16, 1997, filed by the Registrant with the SEC (Commission File No. 000-22269)

(3)	Incorporated herein by reference from the current report on Form 8-K, dated January 7, 2005 filed by the registrant with the SEC (Commission File No. 000-22269).

(4)	Incorporated herein by reference from the current report on Form 8-K, dated December 8, 2005 filed by the registrant with the SEC (Commission File No. 000-22269).

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.

GS FINANCIAL CORP.

Date:	May 15, 2008	By:	/s/ Stephen E. Wessel
		By:	Stephen E. Wessel President and Chief Executive Officer
Date:	May 15, 2008	By:	/s/ J. Andrew Bower
		By:	J. Andrew Bower Chief Financial Officer

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