UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
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FORM
10-Q
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT
OF 1934
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For
the Quarterly period ended
March
31, 2009
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Commission
File Number:
0-22269
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GS
Financial Corp.
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(Exact
Name of Registrant as Specified in its Charter)
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Louisiana
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72-1341014
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(State
of Incorporation)
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(IRS
Employer Identification No.)
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3798
Veterans Blvd.
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Metairie,
LA 70002
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(Address
of Principal Executive Offices)
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(504)
457-6220
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(Registrant’s
Telephone Number, including area code)
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Not applicable
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(Former
name, former address and former fiscal year, if changed since last
report)
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Indicate
by check mark 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
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Indicate
by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such
files).
[ ] Yes
[ ]
No
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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):
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Large
accelerated filer
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[
]
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Accelerated
filer
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[
]
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Non-accelerated
filer
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[
]
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Smaller
reporting company
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[X]
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(Do
not check if a smaller reporting company)
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Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes [
]
No [X]
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Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.
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Class
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Outstanding at May 15,
2009
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Common
Stock, par value $.01 per share
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1,269,307
shares
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GS
FINANCIAL CORP.
TABLE
OF CONTENTS
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Page
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PART
I – FINANCIAL INFORMATION
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Item
1
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Financial
Statements
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Consolidated
Statements of Financial Condition
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1
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Consolidated
Statements of Income
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2
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Consolidated
Statements of Changes in Stockholders’ Equity
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3
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Consolidated
Statements of Cash Flows
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4
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Notes
to Consolidated Financial Statements
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5
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Selected
Consolidated Financial Data
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7
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Item
2
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Management's
Discussion and Analysis of Financial Condition and Results of
Operations
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8
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Item
3
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Quantitative
and Qualitative Disclosures about Market Risk
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18
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Item
4
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Controls
and Procedures
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18
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PART
II – OTHER INFORMATION
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Item
1
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Legal
Proceedings
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18
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Item
1a
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Risk
Factors
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18
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Item
2
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Unregistered
Sales of Equity Securities and Use of Proceeds
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18
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Item
3
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Defaults
Upon Senior Securities
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19
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Item
4
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Submission
of Matters to a Vote of Security Holders
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19
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Item
5
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Other
Information
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19
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Item
6
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Exhibits
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19
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SIGNATURES
EXHIBIT
INDEX
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PART
I – FINANCIAL INFORMATION
ITEM
1 – FINANCIAL STATEMENTS
GS
FINANCIAL CORP. AND SUBSIDIARY
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CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION
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March
31, 2009
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December
31, 2008
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(Unaudited)
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(See
Note 1)
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(In
Thousands)
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ASSETS
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Cash
and Cash Equivalents
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Cash
& Amounts Due from Depository Institutions
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$ 2,917
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$ 2,313
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Interest-Bearing
Deposits in Other Banks
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6,315
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569
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Federal
Funds Sold
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8,532
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323
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Total
Cash and Cash Equivalents
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17,764
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3,205
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Securities
Available-for-Sale, at Fair Value
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50,216
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47,617
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Loans,
Net of Allowance for Loan Losses of $2,693 and
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$2,719,
Respectively
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170,364
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158,523
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Accrued
Interest Receivable
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1,556
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1,612
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Other
Real Estate
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461
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461
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Premises
and Equipment, Net
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5,763
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5,756
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Stock
in Federal Home Loan Bank, at Cost
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2,351
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2,300
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Real
Estate Held-for-Investment, Net
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434
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436
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Other
Assets
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2,094
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1,960
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Total
Assets
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$ 251,003
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$ 221,870
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LIABILITIES
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Deposits
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Noninterest-bearing
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$ 10,143
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$ 7,970
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Interest-bearing
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160,600
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132,145
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Total
Deposits
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170,743
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140,115
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Advance
Payments by Borrowers for Taxes and Insurance
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70
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167
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FHLB
Advances
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49,853
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52,002
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Other
Liabilities
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2,325
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2,028
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Total
Liabilities
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222,991
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194,312
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STOCKHOLDERS'
EQUITY
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Preferred
Stock - $.01 Par Value; 5,000,000 Shares Authorized,
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$ -
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$ -
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None
Issued
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Common
Stock - $.01 Par Value; 20,000,000 Shares Authorized,
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34
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34
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3,438,500
Shares Issued
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Additional
Paid-in Capital
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34,548
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34,546
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Unearned
RRP Trust Stock
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(137)
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(143)
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Treasury
Stock (2,162,359 Shares at March 31, 2009 and
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2,152,700
Shares at December 31, 2008)
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(32,179)
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(32,062)
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Retained
Earnings
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25,654
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25,404
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Accumulated
Other Comprehensive Income (Loss)
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92
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(221)
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Total
Stockholders' Equity
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28,012
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27,558
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Total
Liabilities & Stockholders' Equity
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$ 251,003
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$ 221,870
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The
accompanying notes are an integral part of these financial
statements.
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GS
FINANCIAL CORP. AND SUBSIDIARY
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CONSOLIDATED
STATEMENTS OF INCOME
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(Unaudited)
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For
the Three Months Ended
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March
31,
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2009
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2008
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(In
Thousands, Except Per Share Data)
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INTEREST
AND DIVIDED INCOME
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Loans,
Including Fees
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$ 2,747
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$ 2,199
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Investment
Securities
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636
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717
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Other
Interest Income
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5
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71
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Total
Interest and Dividend Income
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3,388
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2,987
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INTEREST
EXPENSE
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Deposits
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1,020
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1,090
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Advances
from Federal Home Loan Bank
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493
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405
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Total
Interest Expense
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1,513
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1,495
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NET
INTEREST INCOME
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1,875
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1,492
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PROVISION
FOR LOAN LOSSES
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-
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-
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NET
INTEREST INCOME AFTER PROVISION
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FOR
LOAN LOSSES
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1,875
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1,492
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NON-INTEREST
INCOME
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Loss
on Securities
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(2)
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-
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Gain
on Sale of Loans
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358
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95
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Other
Income
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17
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20
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Total
Non-Interest Income
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373
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115
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NON-INTEREST
EXPENSE
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Salaries
and Employee Benefits
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919
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864
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Occupancy
Expense
|
198
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200
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Ad
Valorem Taxes
|
58
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75
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Other
Expenses
|
501
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277
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Total
Non-Interest Expense
|
1,676
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1,416
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INCOME BEFORE
INCOME TAX EXPENSE
|
572
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191
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INCOME
TAX EXPENSE
|
194
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|
65
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NET
INCOME
|
$ 378
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$ 126
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EARNINGS
PER SHARE - BASIC
|
$ 0.30
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|
$ 0.10
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EARNINGS
PER SHARE - DILUTED
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$ 0.30
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$ 0.10
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The
accompanying notes are an integral part of these financial
statements.
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|
|
GS
FINANCIAL CORP. AND SUBSIDIARY
|
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
|
(Unaudited)
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|
|
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|
|
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Accumulated
|
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Additional
|
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Unearned
|
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Other
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Total
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|
Common
|
Paid-in
|
Treasury
|
RRP
Trust
|
Retained
|
Comprehensive
|
Stockholders'
|
(In
Thousands)
|
Stock
|
Capital
|
Stock
|
Stock
|
Earnings
|
|
Equity
|
Balances
At December 31, 2007
|
$ 34
|
$ 34,546
|
$ (32,062)
|
$ (158)
|
$ 25,919
|
$ (115)
|
$ 28,164
|
Comprehensive
Income:
|
|
|
|
|
|
|
|
Net
Income
|
-
|
-
|
-
|
-
|
126
|
-
|
126
|
Other
Comprehensive Loss,
|
|
|
|
|
|
|
|
Net
of Applicable Deferred
Income
Taxes
|
-
|
-
|
-
|
-
|
-
|
(41)
|
(41)
|
Total
Comprehensive Income (Loss)
|
-
|
-
|
-
|
-
|
126
|
(41)
|
85
|
Dividends
Declared
|
-
|
-
|
-
|
-
|
(128)
|
-
|
(128)
|
Balances
at March 31, 2008
|
$ 34
|
$ 34,546
|
$ (32,062)
|
$ (158)
|
$ 25,917
|
$ (156)
|
$ 28,121
|
|
|
|
|
|
|
|
|
Balances
At December 31, 2008
|
$ 34
|
$ 34,546
|
$ (32,062)
|
$ (143)
|
$ 25,404
|
$ (221)
|
$ 27,558
|
Comprehensive
Income:
|
|
|
|
|
|
|
|
Net
Income
|
-
|
-
|
-
|
-
|
378
|
-
|
378
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Other
Comprehensive Income,
|
|
|
|
|
|
|
|
Net
of Applicable Deferred
Income
Taxes
|
-
|
-
|
-
|
-
|
-
|
313
|
313
|
Total
Comprehensive Income
|
-
|
-
|
-
|
-
|
378
|
313
|
691
|
Distribution
of RRP Stock
|
-
|
2
|
-
|
6
|
-
|
-
|
8
|
Purchase
of Treasury Stock
|
-
|
-
|
(117)
|
-
|
-
|
-
|
(117)
|
Dividends
Declared
|
-
|
-
|
-
|
-
|
(128)
|
-
|
(128)
|
Balances
at March 31, 2009
|
$ 34
|
$ 34,548
|
$ (32,179)
|
$ (137)
|
$ 25,654
|
$ 92
|
$ 28,012
|
|
|
|
|
|
|
|
|
The
accompanying notes are an intergral part of these financial
statements.
|
|
|
GS
FINANCIAL CORP. AND SUBSIDIARY
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
For
the Three Months Ended
|
|
|
|
March
31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In
Thousands)
|
|
CASH FLOWS FROM OPERATING
ACTIVITIES:
|
|
|
|
|
|
|
Net
Income
|
|
$
|
378
|
|
|
$
|
126
|
|
Adjustments
to Reconcile Net Income to Net Cash
|
|
|
|
|
|
|
|
|
Provided
by (Used in) Operating Activities:
|
|
|
|
|
|
|
|
|
Depreciation
and Amortization
|
|
|
68
|
|
|
|
77
|
|
Premium
Amortization (Discount Accretion), Net
|
|
|
(19
|
)
|
|
|
(1
|
)
|
Non-Cash
Dividend - FHLB Stock
|
|
|
(3
|
)
|
|
|
-
|
|
RRP
Expense
|
|
|
8
|
|
|
|
4
|
|
Gain
on Sale of Loans
|
|
|
(358
|
)
|
|
|
(95
|
)
|
Loss
on Sale of Investments
|
|
|
2
|
|
|
|
-
|
|
Changes
in Operating Assets and Liabilities:
|
|
|
|
|
|
|
|
|
Accrued
Interest Receivable and Other Assets
|
|
|
(78
|
)
|
|
|
46
|
|
Accrued
Interest Payable and Other Liabilities
|
|
|
297
|
|
|
|
(288
|
)
|
Net
Cash Provided by (Used in) Operating Activities
|
|
|
295
|
|
|
|
(131
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds
from Maturities of Investment Securities
|
|
|
1,821
|
|
|
|
9,726
|
|
Purchases
of Investment Securities
|
|
|
(4,340
|
)
|
|
|
(10,000
|
)
|
Redemption
of Mutual Funds, Net
|
|
|
250
|
|
|
|
-
|
|
Loan
Originations and Principal Collections, Net
|
|
|
(30,572
|
)
|
|
|
(17,941
|
)
|
Proceeds
from Sales of Loans
|
|
|
19,089
|
|
|
|
6,613
|
|
Purchases
of Premises and Equipment
|
|
|
(73
|
)
|
|
|
(62
|
)
|
Purchase
of Federal Home Loan Bank Stock
|
|
|
(48
|
)
|
|
|
(431
|
)
|
Net
Cash Used in Investing Activities
|
|
|
(13,873
|
)
|
|
|
(12,095
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase
of Treasury Stock
|
|
|
(117
|
)
|
|
|
-
|
|
(Decrease)
Increase in Federal Home Loan Bank Advances
|
|
|
(2,149
|
)
|
|
|
10,551
|
|
Payment
of Cash Stock Dividends
|
|
|
(128
|
)
|
|
|
(128
|
)
|
Increase
in Deposits
|
|
|
30,628
|
|
|
|
3,825
|
|
(Decrease)
Increase in Deposit for Escrows
|
|
|
(97
|
)
|
|
|
7
|
|
Net
Cash Provided by Financing Activities
|
|
|
28,137
|
|
|
|
14,255
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
14,559
|
|
|
|
2,029
|
|
CASH
AND CASH EQUIVALENTS, BEGINNING OF YEAR
|
|
|
3,205
|
|
|
|
9,462
|
|
CASH
AND CASH EQUIVALENTS, END OF YEAR
|
|
$
|
17,764
|
|
|
$
|
11,491
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION
|
|
|
|
|
|
Cash
Paid During the Period for Interest
|
|
$
|
1,513
|
|
|
$
|
1,494
|
|
Cash
Paid During the Period for Income Taxes
|
|
|
-
|
|
|
|
-
|
|
Loans
Transferred to Other Real Estate During the Period
|
|
|
-
|
|
|
|
85
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these
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 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, 2009 are not necessarily indicative of the results to be expected for the
year ending December 31, 2009.
The
balance sheet at December 31, 2008 has been derived from the audited financial
statements at that date, but does not include all of the information and
footnotes required by U.S. generally accepted accounting principles for complete
financial statements. These unaudited financial statements should be read in
conjunction with the Company’s 2008 annual report on Form 10-K.
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 Standards No. 128. For the
three months ended March 31, 2009 and 2008, the Company did not have any
potentially dilutive securities.
|
For
the Three Months Ended
|
|
March
31,
|
($
in thousands, except per share data)
|
2009
|
|
2008
|
Numerator:
|
|
|
|
Net Income
|
$ 378
|
|
$ 126
|
Effect
of Dilutive Securities
|
-
|
|
-
|
Numerator
for Diluted Earnings Per Share
|
$ 378
|
|
$ 126
|
Denominator
|
|
|
|
Weighted
Average Shares Outstanding
|
1,274,892
|
|
1,285,800
|
Effect
of Potentially Dilutive Securities and Contingently Issuable
Shares
|
-
|
|
-
|
Denominator
for Diluted Earnings Per Share
|
1,274,892
|
|
1,285,800
|
Earnings
Per Share
|
|
|
|
Basic
|
$ 0.30
|
|
$ 0.10
|
Diluted
|
$ 0.30
|
|
$ 0.10
|
Cash
Dividends Per Share
|
$ 0.10
|
|
$ 0.10
|
|
|
|
|
NOTE
3 – EMPLOYEE STOCK OWNERSHIP 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 $25,000 and $28,000 for the three month periods
ended March 31, 2009 and 2008, respectively.
NOTE
4 – RECOGNITION AND RETENTION PLAN
On
October 15, 1997 the Company established the Recognition and Retention Plan and
Trust (“RRP” or the “Plan”) 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 Plan
generally provides that, Plan share awards are earned by recipients at a rate of
20% of the aggregate number of shares covered by the Plan over five
years. Pursuant to agreements with the Plan participants, all
outstanding Plan share awards are being earned by recipients at a rate of 10% of
the aggregate number of shares covered by the Plan over ten years. If
the employment of an employee or service as a non-employee director is
terminated prior to the tenth anniversary of the grant date of the Plan share
award for any reason (except for death, disability, or a change in control), the
recipient would forfeit the right to any shares subject to the awards which had
not been earned. As of March 31, 2009, of the 134,159 shares awarded, 6,627
shares have been forfeited due to termination of employment or service as a
director and 120,698 have been earned and issued. No further shares are
available for award under the RRP. Compensation expense related to the RRP was
$5,000 and $4,000 for the three month periods ended March 31, 2009 and 2008,
respectively.
GS
FINANCIAL CORP.
|
SELECTED
CONSOLIDATED FINANCIAL DATA
|
(Unaudited)
|
|
|
|
|
|
|
|
At
or For The Three Months Ended
|
($
in thousands, except per share data)
|
|
March
31, 2009
|
December
31, 2008
|
March
31, 2008
|
BALANCE
SHEET DATA
|
|
|
|
|
Total
Assets
|
|
$ 251,003
|
$ 221,870
|
$ 200,531
|
Cash
and Cash Equivalents
|
|
17,764
|
3,205
|
11,491
|
Loans
Receivable, Net
|
|
170,364
|
158,523
|
129,815
|
Investment
Securities
|
|
50,216
|
47,617
|
47,964
|
Deposit
Accounts
|
|
170,743
|
140,115
|
133,335
|
Borrowings
|
|
49,853
|
52,002
|
37,537
|
Stockholders'
Equity
|
|
28,012
|
27,558
|
28,121
|
INCOME
STATEMENT DATA
|
|
|
|
|
Interest
Income
|
|
$ 3,388
|
$ 3,206
|
$ 2,987
|
Interest
Expense
|
|
1,513
|
1,463
|
1,495
|
Net
Interest Income
|
|
1,875
|
1,743
|
1,492
|
Provision
for Loan Losses
|
|
-
|
-
|
-
|
Net
Interest Income After Provision for Loan Losses
|
1,875
|
1,743
|
1,492
|
Non-Interest
Income (Loss)
|
|
373
|
(637)
|
115
|
Non-Interest
Expense
|
|
1,676
|
1,344
|
1,416
|
Net
Income (Loss) Before Taxes
|
|
572
|
(238)
|
191
|
Income
Tax Expense (Benefit)
|
|
194
|
(68)
|
65
|
Net
Income (Loss)
|
|
378
|
(170)
|
126
|
KEY
RATIOS
1
|
|
|
|
|
Return
on Average Assets
|
|
0.64%
|
(0.31%)
|
0.26%
|
Return
on Average Stockholders' Equity
|
|
5.42%
|
(2.48%)
|
1.78%
|
Net
Interest Margin
|
|
3.35%
|
3.33%
|
3.21%
|
Average
Loans to Average Deposits
|
|
109.27%
|
110.59%
|
97.66%
|
Average
Interest-Earning Assets to Average Interest-Bearing
Liabilities
|
114.47%
|
116.12%
|
117.75%
|
Efficiency
Ratio
|
|
74.57%
|
121.52%
|
88.17%
|
Non-interest
Expense to Average Assets
|
|
2.86%
|
2.44%
|
2.91%
|
Allowance
for Loan Losses to Total Loans
|
|
1.56%
|
1.69%
|
2.57%
|
Stockholders'
Equity to Total Assets
|
|
11.16%
|
12.42%
|
14.02%
|
COMMON
SHARE DATA
|
|
|
|
|
Earnings
(Loss) Per Share
|
|
|
|
|
Basic
|
|
$ 0.30
|
$ (0.13)
|
$ 0.10
|
Diluted
|
|
0.30
|
(0.13)
|
0.10
|
Dividends
Paid Per Share
|
|
0.10
|
0.10
|
0.10
|
Book
Value Per Share
|
|
21.97
|
21.56
|
21.87
|
Average
Shares Outstanding
|
|
|
|
|
Basic
|
|
1,274,892
|
1,278,466
|
1,285,800
|
Diluted
|
|
1,274,892
|
1,278,466
|
1,285,800
|
1 Amounts
are annualized where appropriate
|
|
|
|
|
ITEM 2
-
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
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 2009 and 2008.
Virtually all of the Company’s operations are dependent on the operations of its
subsidiary, Guaranty Savings Bank (“Guaranty” or the “Bank”). Prior to June 15,
2006 the subsidiary was known as Guaranty Savings and Homestead Association.
Effective December 31, 2008, the Bank converted its charter from a Louisiana
state savings and loan association to a Federally-chartered savings bank. As a
result of the charter conversion, the Bank’s primary regulator became the Office
of Thrift Supervision. 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 2008 Annual Report on Form 10-K.
FORWARD-LOOKING
STATEMENTS
In
addition to the historical information, this quarterly report 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,
among other factors, 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, (e) the performance of
Guaranty’s net interest income and net interest margin assuming certain future
conditions, (f) the future prospects of metropolitan New Orleans, and (g)
changes or trends in certain expense levels.
Forward-looking
statements are based on numerous assumptions, which may be referred to
specifically in connection with a particular statement. Some of the
more important assumptions include:
·
|
expectations
about the overall economy in the Company’s market
area,
|
·
|
expectations
about the ability of the Bank’s borrowers to make payments on outstanding
loans and the sufficiency of the allowance for loan
losses,
|
·
|
expectations
about the current values of collateral securing the Bank’s outstanding
loans,
|
·
|
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,
and
|
·
|
expectations
regarding the nature and level of competition, changes in customer
behavior and preferences, and the Company’s ability to execute its plans
to respond effectively.
|
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.
OVERVIEW
The
Company reported net income of $378,000 for the quarter ended March 31, 2009,
compared with net income of $126,000 for the quarter ended March 31, 2008.
Earnings per share were $0.30 and $0.10 per share diluted for the quarters ended
March 31, 2009 and 2008, respectively. The Company continued to successfully
execute on its growth initiatives during the quarter which included strong loan
and deposit growth. The increase in profitability in the first quarter of 2009
compared to the same period in 2008 is attributable to the $383,000 increase in
net interest income caused by a $36.8 million increase in average
interest-earning assets and a reduction in the average cost of funds which was
partially offset by a slight decrease in the average yield on interest-earning
assets and a $38.0 million increase in average interest-bearing
liabilities.
The
Company’s net loan portfolio amounted to $170.4 million at March 31, 2009,
compared with $158.5 million at December 31, 2008. The $11.8 million
increase in net loans receivable was due to a substantial increase in the volume
of new loan originations of residential real estate loans. Through the Bank’s
recruiting efforts in recent years, several commercial loan officers and
mortgage loan originators have been hired which have significantly contributed
to the loan growth, particularly in this segment of the portfolio. In addition,
the Bank continued to sell residential mortgage loans in the secondary market
primarily to Fannie Mae and Freddie Mac, while retaining the servicing on these
loans to maintain customer relationships and earn servicing fee income. During
the first three months of 2009 and 2008, the Bank sold an aggregate of $19.1
million and $6.6 million, respectively, of residential mortgage loans into the
secondary market at a gain of $359,000 and $95,000, respectively.
Total
deposits for the Company have increased by $30.6 million from $140.1 million at
December 31, 2008 to $170.7 million at March 31, 2009. This is primarily due to
a significant increase in the balance of NOW account deposits, which includes
money market demand accounts, which was accomplished through the offering of
competitive interest rates on these products.
FINANCIAL
CONDITION
LOANS
AND ALLOWANCE FOR LOAN LOSSES
The
outstanding balance of total loans increased $11.8 million, or 7.3%, from $161.2
million at December 31, 2008, to $173.1 million at March 31, 2009. Average loans
for the first quarter of 2009 were $166.9 million, up $11.3 million, or 7.3%,
compared to $155.6 million for the fourth quarter of 2008. Table 1, which is
based on regulatory reporting codes, shows loan balances at quarter-end for the
most recent five quarters and average loans outstanding during each
quarter.
TABLE
1. COMPOSITION OF LOAN PORTFOLIO
|
|
|
|
|
|
2009
|
2008
|
($
in thousands)
|
March
31
|
December
31
|
September
30
|
June
30
|
March
31
|
Real
estate loans - residential
|
$ 88,544
|
$ 76,429
|
$ 77,448
|
$ 69,439
|
$ 66,124
|
Real
estate loans - commercial and other
|
66,407
|
67,751
|
61,450
|
58,683
|
53,445
|
Real
estate loans - construction
|
11,408
|
10,542
|
6,727
|
7,069
|
7,695
|
Consumer
loans
|
1,287
|
1,713
|
1,992
|
1,625
|
1,041
|
Commercial
business loans
|
5,411
|
4,807
|
4,534
|
5,260
|
4,929
|
Total Loans
|
$ 173,057
|
$ 161,242
|
$ 152,151
|
$ 142,076
|
$ 133,234
|
Average Total Loans During
Three-Month Period
|
$ 166,926
|
$ 155,609
|
$ 147,934
|
$ 136,395
|
$ 127,719
|
|
|
|
|
|
|
The
Company’s investment in residential real estate loans, which includes those
loans secured by one-to-four family dwellings (also referred to as
“single-family”), increased $12.1 million, or 15.9%, from December 31, 2008 to
March 31, 2009. Residential real estate loans increased due to the efforts of
the residential loan originators, who were hired since December 2008, the
commercial loan officers, and the relatively low level of market rates during
the first quarter of 2009. In addition, the expansion of loan product offerings
and enhanced marketing activities have contributed to the growth in this segment
of the loan portfolio.
All loans
carry a degree of credit risk. Management’s evaluation of this risk is
ultimately reflected in the estimate of probable loan losses that is reported in
the Company’s financial statements as the allowance for loan losses. As a result
of this ongoing evaluation, any additions to the allowance for loan losses are
reflected in the provision for loan losses and charged to operating expense. At
March 31, 2009 the allowance for loan losses was $2.7 million, or 1.6% of total
loans. Table 2 presents an analysis of the activity in the allowance for loan
losses for the past five quarters. The allowance was reduced in the first
quarter of 2009 as a specific reserve was assigned to a loan which was sold at
Sheriff’s sale for an amount less than the outstanding loan
balance.
TABLE
2. SUMMARY OF ACTIVITY IN THE ALLOWANCE FOR LOAN LOSSES
|
|
|
|
2009
|
2008
|
|
|
|
|
|
|
($
in thousands)
|
First
Quarter
|
Fourth
Quarter
|
Third
Quarter
|
Second
Quarter
|
First
Quarter
|
Beginning
Balance
|
$ 2,719
|
$ 2,818
|
$ 3,238
|
$ 3,419
|
$ 3,432
|
Provision
for Loan Losses Charged to Operations
|
-
|
-
|
-
|
-
|
-
|
Charge-offs
|
28
|
99
|
420
|
181
|
13
|
Recoveries
of loans previously charged-off
|
(2)
|
-
|
-
|
-
|
-
|
Ending
Balance
|
$ 2,693
|
$ 2,719
|
$ 2,818
|
$ 3,238
|
$ 3,419
|
Ratios
|
|
|
|
|
|
Charge-offs
to average loans
|
0.02%
|
0.06%
|
0.28%
|
0.13%
|
0.01%
|
Provision
for loan losses to charge-offs
|
n/a
|
n/a
|
n/a
|
n/a
|
n/a
|
Allowance
for loan losses to ending loans
|
1.56%
|
1.69%
|
1.85%
|
2.28%
|
2.57%
|
|
|
|
|
|
|
Table 3
summarizes the Company’s delinquent loans at March 31, 2009 and at the end of
the preceding four quarters. The balances presented reflect the total principal
balances outstanding on the loans rather than the amount of principal past
due.
TABLE
3. DELINQUENT LOANS
|
|
|
|
|
|
|
2009
|
2008
|
($
in thousands)
|
March
31
|
December
31
|
September
30
|
June
30
|
March
31
|
30-89
Days
|
$ 3,214
|
$ 5,231
|
$ 749
|
$ 265
|
$ 5,574
|
90+
Days
|
2,359
|
2,011
|
2,075
|
2,821
|
3,162
|
Total
|
$ 5,573
|
$ 7,242
|
$ 2,824
|
$ 3,086
|
$ 8,736
|
Ratios
|
|
|
|
|
|
Loans
delinquent 90 days or more to total loans
|
1.36%
|
1.25%
|
1.36%
|
1.99%
|
2.37%
|
Total
delinquent loans to total loans
|
3.22%
|
4.50%
|
1.86%
|
2.17%
|
6.56%
|
Allowance
for loan losses to non-accrual loans
|
114.16%
|
135.21%
|
135.83%
|
114.78%
|
108.13%
|
Allowance
for loan losses to total delinquent loans
|
48.32%
|
37.54%
|
99.79%
|
104.92%
|
39.14%
|
|
|
|
|
|
|
Nonperforming
assets consists of loans on non-accrual status and foreclosed assets. Table 4
sets forth the Company’s nonperforming assets at the dates indicated. The
Company did not have loans greater than 90 days delinquent and accruing interest
or troubled debt restructurings at the dates indicated.
TABLE
4. NONPERFORMING ASSETS
|
|
|
|
|
|
|
2009
|
2008
|
($
in thousands)
|
March
31
|
December
31
|
September
30
|
June
30
|
March
31
|
Loans
accounted for on a nonaccrual basis
|
$ 2,359
|
$ 2,011
|
$ 2,075
|
$ 2,821
|
$ 3,162
|
Foreclosed
assets
|
461
|
461
|
844
|
469
|
85
|
Total
nonperforming assets
|
$ 2,820
|
$ 2,472
|
$ 2,919
|
$ 3,290
|
$ 3,247
|
Loans
greater than 90 days past due and accruing interest
|
-
|
-
|
-
|
-
|
-
|
Troubled
debt restructurings
|
-
|
-
|
-
|
-
|
-
|
Ratios
|
|
|
|
|
|
Nonperforming
assets to loans plus foreclosed assets
|
1.63%
|
1.53%
|
1.91%
|
2.31%
|
2.44%
|
Nonperforming
assets to total assets
|
1.12%
|
1.11%
|
1.35%
|
1.60%
|
1.62%
|
Allowance
for loan losses to nonperforming assets
|
95.50%
|
109.99%
|
96.55%
|
98.42%
|
105.30%
|
|
|
|
|
|
|
Total
nonperforming assets as of March 31, 2009 includes a $1.4 million delinquent
renovation loan that is secured by a multifamily dwelling located in the
historic district of the French Quarter in New Orleans, Louisiana. The
foreclosure proceedings on this property, which commenced in prior year, were
completed in April 2009 as expected. As of May 24, 2008, the appraised value of
this property was $2.0 million based on the “as is”, incomplete
condition.
INVESTMENT
IN SECURITIES
At March
31, 2009, the Company’s total securities available-for-sale were $50.2 million,
compared to $47.6 million at December 31, 2008, an increase of $2.6 million, or
5.5%.
In 2008,
the Company recognized a non-cash impairment charge of $1.3 million for
other-than-temporary impairments of its investment in two mutual funds, the AMF
Ultra Short Mortgage (ticker: ASARX) and the AMF Intermediate Mortgage (ticker:
ASCPX). Prior to 2008, these investments were redeemable immediately at their
current market value. In 2008, the fund managers, Shay Assets Management, Inc.,
imposed a restriction on these mutual funds which limits redemptions for cash to
$250,000 per quarter based on the current market price at the time of
redemption. Approximately $252,000 of the holdings in the AMF Ultra
Short Mortgage fund, the remaining mutual fund in the Company’s securities
portfolio, were redeemed for cash in the first quarter of 2009.
At March
31, 2009, the net unrealized gain on the Company’s entire securities portfolio
was $140,000, or 0.3% of amortized cost, compared to the net unrealized loss of
$320,000, or 0.7% of amortized cost at December 31, 2008. The gains in the
securities portfolio consist primarily of increases in the market value of
mortgage-backed securities issued by government agencies. The losses in the
security portfolio are attributable to the discounting in values of
private-label collateralized mortgage obligations as a result of concerns with
the overall mortgage market. Management believes that these losses are temporary
in nature and will reverse themselves when market conditions become more
favorable for those types of investments.
TABLE
5. COMPOSITION OF INVESTMENT SECURITIES PORTFOLIO
|
|
|
|
March
31, 2009
|
December
31, 2008
|
March
31,2008
|
($
in thousands)
|
Amortized
Cost
|
Market
Value
|
Amortized
Cost
|
Market
Value
|
Amortized
Cost
|
Market
Value
|
U.S.
Agency Securities
|
$ 14,348
|
$ 14,383
|
$ 10,010
|
$ 10,070
|
$ 19,511
|
$ 19,705
|
Mortgage
Backed Securities
|
24,160
|
25,042
|
25,484
|
26,100
|
8,460
|
8,560
|
Collateralized
Mortgage Obligations
|
8,412
|
7,757
|
9,035
|
8,039
|
14,417
|
14,039
|
Mutual
Funds
|
3,156
|
3,034
|
3,408
|
3,408
|
5,803
|
5,660
|
Total
Investment Securities
|
$ 50,076
|
$ 50,216
|
$ 47,937
|
$ 47,617
|
$ 48,191
|
$ 47,964
|
|
|
|
|
|
|
|
DEPOSITS
At March
31, 2009, deposits totaled $170.7 million, an increase of $30.6 million, or
21.9%, from $140.1 million at December 31, 2008. Average deposits for
the first quarter of 2009 increased $12.1 million, or 8.6%, from the prior
quarter. The increase in deposits is due to a combination of factors
including: the efforts of the commercial loan originators to open non-interest
bearing transactional accounts for commercial customers, the offering of
competitive interest rates on money market and certain transactional accounts in
order to attract new customers, and the expanded branch network due to the
opening of new banking locations which occurred in the latter half of 2007. The
Company had no deposits that were obtained through outside deposit brokers at
March 31, 2009.
Table 6
presents the composition of average deposits for the quarters ended March 31,
2009, December 31, 2008, and March 31, 2008.
TABLE
6. DEPOSIT COMPOSITION
|
|
|
|
|
|
|
First
Quarter 2009
|
Fourth
Quarter 2008
|
First
Quarter 2008
|
($
in thousands)
|
Average
Balances
|
%
of
Deposits
|
Average
Balances
|
%
of
Deposits
|
Average
Balances
|
%
of
Deposits
|
Noninterest
bearing demand deposits
|
$ 8,860
|
5.8%
|
$ 10,158
|
7.2%
|
$ 8,072
|
6.2%
|
NOW
account deposits
|
42,089
|
27.6%
|
30,837
|
21.9%
|
23,345
|
17.8%
|
Savings
deposits
|
14,680
|
9.6%
|
15,738
|
11.2%
|
18,600
|
14.2%
|
Time
deposits
|
87,136
|
57.0%
|
83,977
|
59.7%
|
80,761
|
61.8%
|
Total
|
$ 152,765
|
100.00%
|
$ 140,710
|
100.00%
|
$ 130,778
|
100.00%
|
|
|
|
|
|
|
|
Average
certificates of deposit (or “time deposits”) totaled $87.1 million, or 57.0%, of
average total deposits for the quarter ended March 31, 2009, up $3.2 million, or
3.8%, compared to the fourth quarter of 2008. Average savings
deposits made up 9.6% of total average deposits, down from 11.2% in the prior
quarter. During the first quarter of 2009, the average balance of NOW
accounts, which includes money market deposit accounts, increased from 21.9% to
27.6% of average total deposits. The average balance of non-interest
bearing demand deposits decreased by $1.3 million, or 12.8%.
BORROWINGS
The Bank
is a member of the Federal Home Loan Bank of Dallas (“FHLB”). This
membership provides access to a variety of Federal Home Loan Bank advance
products as an alternative source of funds. At March 31, 2009 and
December 31, 2008, the Company’s borrowings from the Federal Home Loan Bank were
$49.9 million and $52.0 million, respectively, which represents a decrease of
$2.1 million, or 4.1%. Average advances for the first quarter of 2009 were $51.7
million, an increase of $1.8 million, or 3.6%, from the fourth quarter of 2008.
The decrease in FHLB borrowings during the first quarter of 2009 was due to the
non-renewal of a $2.0 million maturing advance.
The
Company is constantly evaluating its funding options to determine the most
cost-effective means of funding its growth while actively managing its
loans-to-deposits ratio. The Company’s utilization of borrowings continues to be
within the parameters determined by management to be prudent in terms of
liquidity and interest rate sensitivity. In addition, the Company has
significant remaining borrowing capacity should borrowing needs
arise.
STOCKHOLDERS’
EQUITY AND CAPITAL ADEQUACY
At March
31, 2009, stockholders’ equity totaled $28.0 million, compared to $27.6 million
at December 31, 2008. This increase of $454,000, or 1.6%, was primarily due to
net income of $378,000 and an increase in unrealized gains, net of tax, on
investment securities of $313,000, partially offset by cash dividends paid of
$128,000 and purchases of treasury stock of $117,000 for the three months ended
March 31, 2009.
Since
1998, the Company has repurchased shares of its common stock when shares have
been available at prices and amounts deemed prudent by
management. The Company announced a stock repurchase program in
October 2008 of up to 64,250 shares, or approximately 5.0%, of GS Financial
Corp.’s outstanding common stock through open market or privately negotiated
transactions. Table 7 summarizes the repurchase of the shares of its common
stock by year. All of the purchases were open market transactions and
most were at a discount to book value.
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
|
18.94
|
2005
|
3,907
|
74
|
19.06
|
2006
|
17,763
|
300
|
16.87
|
2007
|
10,468
|
188
|
18.00
|
2008
|
-
|
-
|
-
|
Three
months ended March 31, 2009
|
9,659
|
117
|
12.05
|
Total
Stock Repurchases
|
2,192,359
|
$ 32,798
|
$ 14.96
|
|
|
|
|
The
ratios in Table 8 indicate that the Bank was well capitalized at March 31,
2009. During 2008 and 2009, the Bank has reduced its overcapitalized
position as it has increased its holdings of loans. Risk-based capital ratios
declined in the first quarter of 2009 as there was a $10.9 million increase in
risk-weighted assets, attributable primarily to growth in the loan
portfolio. The regulatory capital ratios of Guaranty Savings Bank
exceed the minimum required ratios, and the Bank has been categorized as
“well-capitalized” in the most recent notice received from its primary
regulatory agency.
TABLE
8. REGULATORY CAPITAL AND CAPITAL RATIOS
|
|
|
2009
|
2008
|
($
in thousands)
|
March
31
|
December
31
|
March
31
|
Tier
1 regulatory capital
|
$ 26,078
|
$ 25,611
|
$ 27,253
|
Tier
2 regulatory capital
|
1,908
|
1,772
|
1,400
|
Total
regulatory capital
|
$ 27,986
|
$ 27,383
|
$ 28,653
|
Adjusted
total assets
|
$ 250,434
|
$ 221,614
|
$ 198,660
|
Risk-weighted
assets
|
$ 152,697
|
$ 141,772
|
$ 115,632
|
Ratios
|
|
|
|
Tier
1 capital to adjusted total assets
|
10.41%
|
11.56%
|
13.72%
|
Tier
1 capital to risk-weighted assets
|
17.08%
|
18.06%
|
23.57%
|
Total
regulatory capital to risk-weighted assets
|
18.33%
|
19.31%
|
24.78%
|
|
|
|
|
LIQUIDITY
AND CAPITAL RESOURCES
The
objective of liquidity management is to ensure that funds are available to meet
the 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, in the most cost-effective manner possible. The Company
develops its liquidity management strategies and measures and monitors liquidity
risk as part of its overall asset/liability management process by making use of
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
three months of 2009.
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 outright sales on the secondary market.
Cash
generated from operations is an 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 2009 and 2008. The Company reported net income of $378,000 for the
three months ended March 31, 2009, and experienced a net cash increase of
$314,000 from operations. Certain adjustments are made to net income to reach
the level of cash provided by operating activities, including non-cash expenses
(depreciation, employee compensation made in the form of stock, and deferred tax
provisions) and revenues (accretion of discounts and dividends received in the
form of stock).
In
addition, management monitors its liquidity position by tracking certain
financial data. Table 9 illustrates some of the factors that the Company uses to
measure liquidity. The Company remains highly liquid, though some liquidity is
being utilized to fund loan growth.
TABLE
9. KEY LIQUIDITY INDICATORS
|
|
|
|
|
2009
|
2008
|
($
in thousands)
|
March
31
|
December
31
|
March
31
|
Cash
and cash equivalents
|
$ 17,764
|
$ 3,205
|
$ 11,491
|
Total
loans
|
173,057
|
161,242
|
133,234
|
Total
deposits
|
170,743
|
140,115
|
133,335
|
Deposits
$100,000 and over
|
74,530
|
54,620
|
40,478
|
Ratios
|
|
|
|
Total
loans to total deposits
|
101.36%
|
115.08%
|
99.93%
|
Deposits
$100,000 and over to total deposits
|
43.65%
|
38.98%
|
30.36%
|
|
|
|
|
RESULTS
OF OPERATIONS
NET
INTEREST INCOME
Net
interest income for the first quarter of 2009 increased $383,000, or 25.7%, from
the first quarter of 2008, with a 19.7% increase in average interest-earning
assets and a 73 basis point reduction in the average cost of funds which was
partially offset by a 30 basis point decrease in the average yield on
interest-earning assets and a 24.1% increase in average interest-bearing
liabilities. Compared to the fourth quarter of 2008, first quarter net interest
income for 2009 was up $132,000, or 7.6%, on average interest-earning assets
that increased $14.4 million, or 6.9%, from the prior quarter. The year-to-year
increase in net interest income is primarily attributable to the increase in
interest-earning assets and the 14 basis point increase in net interest margin,
which measures net interest income as a percent of average interest-earning
assets, from 3.21% for the first quarter of 2008 to 3.35% for the first quarter
of 2009. Tables 10 and 11 show the components of the Company’s net interest
margin and the changes in those components from the fourth quarter of 2008 and
the first quarter of 2008.
Interest
income from average interest-earning assets for the first quarter of 2009 was up
$182,000, or 5.7%, from the fourth quarter of 2008. This increase was primarily
due to the Company’s average investment in loans which was up $11.3 million, or
7.3%, in the first quarter of 2009 compared to the fourth quarter of 2008
combined with a 7 basis point increase in the average yield over the same
period. The 15 basis point decrease in the average yield on investment
securities from the fourth quarter of 2008 to the first quarter of 2009 reduced
interest income and was due to the purchase of additional mortgage-backed
securities with lower coupon rates of interest. Interest income from average
interest-earning assets was up $401,000, or 13.4%, from the first quarter of
2008. This was primarily due to a $39.2 million, or 30.7%, increase in average
loans and was partially offset by several factors including a 27 basis point
decline in the average yield on loans, a 334 basis point decline in the average
yield on Federal funds sold and demand deposits, and a $3.9 million decrease in
the average balance of investment securities which were caused by significant
rate declines and the prepayment of investments.
For the
three month period ended March 31, 2009, interest expense increased $50,000, or
3.4%, from the
fourth
quarter of 2008 and increased $18,000, or 1.2%, from the first quarter of 2008.
The increase from the fourth quarter was driven by an $11.3 million, or
3
6
.5%, increase in the average
balance of NOW account deposits, which includes money market demand accounts,
and a $3.2 million, or 3.8%, increase i
n the average balance of time
deposits partially offset by a 22 basis point decline in the average cost of
time deposits.
NOW account deposits increased primarily as a result of management’s strategy
during the quarter to offer competitive rates on such accounts.
The increase in
interest expense from the first quarter of 2008 is primarily due to a $38.0
million, or 24.1%, increase in the average balance of interest-bearing
liabilities which was significantly offset by a 107 basis point reduction in the
average cost of time deposits and an 80 basis point reduction in the average
cost of FHLB advances. The overall decrease in the average cost of funds was
primarily driven by a reduction in our deposit rates as maturing certificates of
deposit were renewed at lower rates particularly during the first half of 2008
and the refinancing of some existing higher-costing FHLB borrowings into
borrowings with a lower rate.
TABLE
10. SUMMARY OF AVERAGE BALANCE SHEETS, NET INTEREST INCOME AND INTEREST
RATES
|
|
|
First
Quarter 2009
|
Fourth
Quarter 2008
|
First
Quarter 2008
|
|
Average
|
|
Average
|
Average
|
|
Average
|
Average
|
|
Average
|
($
in thousands)
|
Balance
|
Interest
|
Yield/
Cost
|
Balance
|
Interest
|
Yield/
Cost
|
Balance
|
Interest
|
Yield/
Cost
|
ASSETS
|
|
|
|
|
|
|
|
|
|
INTEREST-EARNING
ASSETS
|
|
|
|
|
|
|
|
|
|
Loans
|
$ 166,926
|
$ 2,747
|
6.58%
|
$ 155,609
|
$ 2,531
|
6.51%
|
$ 127,725
|
$ 2,199
|
6.85%
|
U.S.
Agency securities
|
10,138
|
138
|
5.44
|
9,839
|
137
|
5.57
|
21,981
|
333
|
6.03
|
Mortgage-backed
securities
|
25,780
|
338
|
5.24
|
24,462
|
348
|
5.69
|
8,804
|
120
|
5.42
|
Collateralized
mortgage obligations
|
8,024
|
125
|
6.23
|
9,730
|
131
|
5.39
|
14,537
|
197
|
5.39
|
Mutual
funds
|
3,269
|
35
|
4.28
|
3,802
|
46
|
4.84
|
5,769
|
67
|
4.62
|
Total
investment in securities
|
47,211
|
636
|
5.39
|
47,833
|
662
|
5.54
|
51,091
|
717
|
5.64
|
FHLB
stock
|
2,345
|
3
|
0.51
|
2,290
|
10
|
1.75
|
1,547
|
12
|
3.09
|
Federal
funds sold and demand deposits
|
7,471
|
2
|
0.11
|
3,849
|
3
|
0.31
|
6,805
|
59
|
3.45
|
Total
interest-earning assets
|
223,953
|
3,388
|
6.05%
|
209,581
|
3,206
|
6.12%
|
187,168
|
2,987
|
6.35%
|
NONINTEREST-EARNING
ASSETS
|
|
|
|
|
|
|
|
|
Other
assets
|
13,368
|
|
|
13,508
|
|
|
11,685
|
|
|
Allowance
for loan losses
|
(2,719)
|
|
|
(2,782)
|
|
|
(3,432)
|
|
|
Total
assets
|
$ 234,602
|
|
|
$ 220,307
|
|
|
$ 195,421
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
INTEREST-BEARING
LIABILITIES
|
|
|
|
|
|
|
|
|
NOW
account deposits
|
$ 42,089
|
$ 278
|
2.64%
|
$ 30,837
|
$ 204
|
2.65%
|
$ 23,345
|
$ 159
|
2.71%
|
Savings
deposits
|
14,680
|
18
|
0.49
|
15,738
|
29
|
0.74
|
18,601
|
40
|
0.86
|
Time
deposits
|
87,136
|
724
|
3.32
|
83,977
|
744
|
3.54
|
80,761
|
891
|
4.39
|
Total
interest-bearing deposits
|
143,905
|
1,020
|
2.84
|
130,552
|
977
|
2.99
|
122,707
|
1,090
|
3.58
|
Borrowings
|
51,736
|
493
|
3.81
|
49,931
|
486
|
3.89
|
34,931
|
405
|
4.61
|
Total
interest-bearing liabilities
|
195,641
|
1,513
|
3.09%
|
180,483
|
1,463
|
3.24%
|
157,638
|
1,495
|
3.82%
|
NONINTEREST-BEARING
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
Demand
deposits
|
8,860
|
|
|
10,158
|
|
|
8,072
|
|
|
Other
liabilities
|
2,237
|
|
|
2,286
|
|
|
1,196
|
|
|
Stockholders'
equity
|
27,864
|
|
|
27,380
|
|
|
28,515
|
|
|
Total
liabilities and stockholders' equity
|
$ 234,602
|
|
|
$ 220,307
|
|
|
$ 195,421
|
|
|
Net
interest income and margin
|
|
$ 1,875
|
3.35%
|
|
$ 1,743
|
3.33%
|
|
$ 1,492
|
3.21%
|
Net
interest-earning assets and spread
|
$ 28,312
|
|
2.96%
|
$ 29,098
|
|
2.88%
|
$ 29,530
|
|
2.53%
|
Cost
of funding interest-earning assets
|
|
2.70%
|
|
|
2.79%
|
|
|
3.20%
|
|
|
|
|
|
|
|
|
|
|
TABLE
11. SUMMARY OF CHANGES IN NET INTEREST INCOME
|
|
|
|
First
Quarter 2009 Compared to:
|
|
Fourth
Quarter of 2008
|
|
First
Quarter of 2008
|
|
|
Due
to Change in
|
Total
|
Due
to Change in
|
Total
|
($
in thousands)
|
Volume
|
Rate
|
Increase
(Decrease)
|
Volume
|
Rate
|
Increase
(Decrease)
|
INTEREST
INCOME
|
|
|
|
|
|
|
Loans
|
$ 184
|
$ 32
|
$ 216
|
$ 675
|
$ (127)
|
$ 548
|
U.S.
Agency securities
|
4
|
(3)
|
1
|
(179)
|
(16)
|
(195)
|
Mortgage-backed
securities
|
19
|
(29)
|
(10)
|
231
|
(13)
|
218
|
Collateralized
mortgage obligations
|
(23)
|
17
|
(6)
|
(88)
|
16
|
(72)
|
Mutual
funds
|
(6)
|
(5)
|
(11)
|
(29)
|
(3)
|
(32)
|
Total
investment in securities
|
(6)
|
(20)
|
(26)
|
(65)
|
(16)
|
(81)
|
FHLB
stock
|
-
|
(7)
|
(7)
|
6
|
(15)
|
(9)
|
Federal
funds sold and demand deposits
|
3
|
(4)
|
(1)
|
6
|
(63)
|
(57)
|
Total
interest income
|
181
|
1
|
182
|
622
|
(221)
|
401
|
|
|
|
|
|
|
|
INTEREST
EXPENSE
|
|
|
|
|
|
|
NOW
account deposits
|
$ 74
|
$ -
|
$ 74
|
$ 128
|
$ (9)
|
$ 119
|
Savings
deposits
|
(2)
|
(9)
|
(11)
|
(8)
|
(14)
|
(22)
|
Time
deposits
|
28
|
(48)
|
(20)
|
70
|
(237)
|
(167)
|
Total
interest-bearing deposits
|
100
|
(57)
|
43
|
190
|
(260)
|
(70)
|
Borrowings
|
18
|
(11)
|
7
|
195
|
(107)
|
88
|
Total
interest expense
|
118
|
(68)
|
50
|
385
|
(367)
|
18
|
Change
in net interest income
|
63
|
69
|
132
|
237
|
146
|
383
|
|
|
|
|
|
|
|
PROVISION
FOR LOAN LOSSES
The
Company made no provision for loan losses during the first quarter of 2009. No
reversal or provision was made in 2008. In 2007, the Company reversed $300,000
of the provision that was taken in 2005. The market area remains in a
state of uncertainty regarding the level of recovery from Hurricane Katrina, but
borrower performance and insurance claims were better in 2007 than management’s
expectations, hence the reduction in the level of impairment in the loan
portfolio. The Bank’s asset quality committee will continue to meet
quarterly and address all potentially impaired loans and adjust the allowance
for loan losses accordingly based on the information available at the
time.
For a
more detailed discussion of the changes in the allowance for loan losses,
non-performing assets, and general credit quality, see the earlier section on
Loans and Allowance for Loan Losses. The future level of the
allowance and provisions 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 increased $258,000, or 224.3%, during the first quarter of 2009 compared
to the same period in 2008, primarily due to a significant increase in the gain
on sales of mortgage loans in the secondary market largely attributable to
favorable mortgage loan interest rates. As a result of the increased activity,
the Bank has expanded its mortgage lending operations by hiring additional
mortgage originators.
Income
from real estate held for investment was $14,000 for both the three month
periods ended March 31, 2009 and 2008. This income is for rent
received by the Company on property not used in its banking
operations.
Service
charges on deposit accounts were $13,000 for the first three months of 2009, up
from $5,000 for the same period in 2008. The Company continues to develop new
deposit products and pricing strategies to increase transaction accounts and the
related fee income. The major categories of non-interest income for
the three months ended March 31, 2009 and 2008 are presented in Table
12.
As
previously discussed in “Investment in Securities,” the Company redeemed for
cash a total of $252,000 of the holdings in the AMF Ultra short mortgage fund
and realized losses of $2,000 during the first quarter of 2009. There were no
redemptions for cash of the Company’s investment in mutual funds during the same
period in 2008.
TABLE
12. NON-INTEREST INCOME
|
|
|
($
in thousands)
|
First
Quarter 2009
|
First
Quarter 2008
|
Service
charges on deposit accounts
|
$ 13
|
$ 5
|
ATM
fees
|
6
|
3
|
Early
closing penalties
|
2
|
1
|
Income
from real estate held for investment
|
14
|
14
|
Gain
on sales of mortgage loans
|
358
|
95
|
Miscellaneous
|
(18)
|
(3)
|
Total
non-interest income before securities transactions
|
375
|
115
|
Net
(loss)/gain on securities transactions
|
(2)
|
-
|
Total
non-interest income
|
$ 373
|
$ 115
|
|
|
|
NON-INTEREST
EXPENSE
Non-interest
expense for the first quarter of 2009 totaled $1.7 million, a $260,000, or
18.4%, increase from the first quarter of 2008. Non-interest expense for the
three months ended March 31, 2009 and 2008 are presented in Table 13
below.
TABLE
13. NON-INTEREST EXPENSE
|
|
|
($
in thousands)
|
First
Quarter 2009
|
First
Quarter 2008
|
Employee
compensation and benefits
|
$ 919
|
$ 864
|
Net
occupancy expense
|
198
|
200
|
Ad
Valorem taxes
|
58
|
75
|
Data
processing costs
|
88
|
71
|
Advertising
|
21
|
12
|
ATM
server expenses
|
13
|
9
|
Professional
fees
|
165
|
48
|
Deposit
insurance and supervisory fees
|
76
|
29
|
Printing
and office supplies
|
31
|
22
|
Telephone
|
13
|
17
|
Security
expense
|
12
|
8
|
Dues
and subscriptions
|
19
|
25
|
Other
operating expenses
|
63
|
36
|
Total
non-interest expense
|
$ 1,676
|
$ 1,416
|
Efficiency
ratio
|
74.57%
|
88.17%
|
|
|
|
Employee
compensations and benefits, which represent the largest component of
non-interest expense, increased $55,000, or 6.4%, to $919,000 in the first
quarter of 2009 compared to $864,000 in the first quarter of 2008. The increase
in personnel costs for the first three months of 2009 is primarily due to an
increase in mortgage originator commissions in response to the increase in
mortgage loan origination activity.
Professional
fees were $165,000 for the first three months of 2009, which represents an
increase of $117,000, or 243.8%, from the same period in 2008. The increase in
professional fees was primarily due to the legal costs associated with the
agreement the Company recently entered into with certain shareholders. In
addition, the Bank increased its utilization of the services of attorneys to
assist with loan collection activity and various consultants to provide
assessments of its internal processes and procedures.
Deposit
insurance and supervisory fees increased $47,000, or 162.1%, to $76,000 for the
quarter ended March 31, 2009 from $29,000 for the quarter ended March 31, 2008.
This is attributable to the increased cost of FDIC insurance premiums and the
increased level of deposits.
While
non-interest expense increased during the first quarter of 2009, the rate of
increase was slower than that of asset and revenue growth, evidenced by the
improvement in the Company’s efficiency ratio from 88.2% to 74.6% when compared
to the first quarter of 2008.
Item
3 – Quantitative and Qualitative Disclosures about Market Risk
Not
applicable.
Item
4 – 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)
Purchases of
Equity Securities
The
Company’s repurchases of its common stock made during the quarter ended March
31, 2009 are set forth in the table below:
|
|
Total
Number of Shares
|
|
|
Average
Price Paid per Share
|
|
|
Total
Number of Shares Purchased as Part of Publicly Announced Plans or
Programs
|
|
|
Maximum
Number of Shares that May Yet Be Purchased Under the Plans or Programs
(1)
|
|
January
1, 2009 – January 31, 2009
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
64,250
|
|
February
1, 2008 – February 28, 2009
|
|
|
6,659
|
|
|
|
11.87
|
|
|
|
6,659
|
|
|
|
57,591
|
|
March
1, 2009 – March 31, 2009
|
|
|
3,000
|
|
|
|
12.43
|
|
|
|
3,000
|
|
|
|
54,591
|
|
Total
|
|
|
9,659
|
|
|
$
|
12.05
|
|
|
|
9,659
|
|
|
|
54,591
|
|
Notes
to this table:
(1)
|
On
October 22, 2008 the Company announced by press release a stock repurchase
program to repurchase 64,250 shares, or 5.0% of its outstanding common
stock over a one year period, or such longer amount of time as may be
necessary to complete the repurchase plan. The program became effective
November 6, 2008.
|
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
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
*
|
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.
|
|
|
**
|
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)
|
SIGNATURES
Pursuant to
the requirements of Section 13 or 15(d) of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
GS FINANCIAL CORP.
Date:
May 15, 2009
By:
/s/Stephen E. Wessel
Stephen E. Wessel
President
and Chief Executive Officer
Date:
May 15, 2009
By:
/s/Stephen
F. Theriot
Stephen F. Theriot
Chief Financial Officer
EXHIBIT
INDEX
No.
|
|
Description
|
|
|
|
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
|
|
|
|
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