GS Financial Corp. Announces Second Quarter Results, Including Loss from Securities Writedown and Continued Loan and Deposit Gro

  
    
  
  
    
      GS Financial Corp., (NASDAQ: GSLA) (the “Company”), 
      the holding company of Guaranty Savings Bank (www.guarantysb.com), 
      announced a loss of $232,000 for the quarter ended June 30, 2008, 
      compared with earnings of $293,000 from the same period in 2007. The 
      loss per share for the second quarter of 2008 was ($.18), compared with 
      earnings of $.24 per share for the second quarter of 2007.
    
    
      The loss in the second quarter of 2008 was primarily a result of the 
      recognition of a non-cash impairment charge of $651,000 (pre-tax) and 
      $430,000 (after-tax) related to the Company’s 
      investment in two mutual funds that hold mortgage-backed securities. The 
      investments are in the AMF Ultra Short Mortgage Fund (ticker: ASARX) and 
      AMF Intermediate Mortgage Fund (ticker: ASCPX), which are held as 
      available-for-sale. Due to continued declines in the Net Asset Value of 
      these funds based on an evaluation of these funds’ 
      holdings, which include mortgage-backed securities that have been 
      downgraded by ratings agencies, and general market conditions for 
      private-label mortgage-backed securities, management has deemed the 
      losses in these funds to be “other than 
      temporary” and has accordingly recognized the 
      unrealized losses on these funds. The Company’s 
      investment in these mutual funds had a fair market value of $4.9 million 
      as of June 30, 2008.
    
    
      For the three months ended June 30, 2008, the Company reported a loss of 
      $232,000 compared to net income of $293,000 for the prior year quarterly 
      period. The Company's core earnings, which we define as our GAAP 
      earnings excluding impairment charges, were $198,000 for the quarter 
      ended June 30, 2008. Please see the reconciliation of GAAP and operating 
      earnings provided in this release for a calculation of our core 
      earnings. The $198,000 of operating earnings compares favorably to net 
      earnings of $126,000 for the quarter ended March 31, 2008, as well as 
      operating earnings of $95,000 for the quarter ended June 30, 2007, which 
      excludes a reversal of the provision for loan losses of $300,000 during 
      the quarter.
    
    
      “We continue to successfully execute all of 
      our key strategic initiatives. We are growing our loan and deposit 
      portfolios, and in spite of adverse industry conditions continue to 
      increase our mortgage loan sales in the secondary market. We are 
      beginning to realize the benefits of our investments in 2007 in new 
      locations, people and technologies, and this is evidenced by 
      improvements not only in operating income but in efficiency measures in 
      2008. We remain very well capitalized and are excited by the 
      opportunities we have to continue to grow and provide quality service to 
      our customers in the Greater New Orleans market. Second quarter results 
      reflected improved core earnings that were unfortunately overshadowed by 
      the investment loss,” noted President Steve 
      Wessel.
    
    
      For the first six months of 2008, net loss totaled $106,000 down from 
      income of $389,000 over the same time period in 2007. Loss per share 
      over the first half of 2008 was ($.08), compared with per share earnings 
      of $.32 in the first half of 2007. Excluding the securities impairment 
      loss, net income for the six months would have been $324,000, or $.25 
      per share. Please see the reconciliation of the Company’s 
      GAAP and operating earnings in this release.
    
    
      Net interest income, excluding loan loss reserves, for the quarter ended 
      June 30, 2008 was $1.6 million, up $248,000, or 17.8% from the second 
      quarter of 2007, and up $148,000, or 9.9% from the first quarter of 
      2008. The second quarter 2008 net interest margin was 3.45%, down 5 
      basis points from 3.50% for the second quarter of 2007, and up 24 basis 
      points from 3.21% in the first quarter of 2008.
    
    
      Net interest income for the first half of 2008 was $3.1 million, up 
      $370,000, or 13.4% from $2.8 million in the first six months of 2007. 
      This increase was driven by the Bank’s 
      increase in earning assets from year-to-year, primarily the result of 
      loan growth.
    
    
      Additional financial highlights include the following:
    
    
      
        Total assets at June 30, 2008 were $205.6 million, up approximately 
        10.3% from December 31, 2007.
      
      
        Net loans at June 30, 2008 were $138.8 million, up approximately 17.2% 
        from December 31, 2007.
      
      
        Deposits at June 30, 2008 were $134.3 million, up approximately 3.7% 
        from December 31, 2007.
      
      
        Outstanding advances from the Federal Home Loan Bank at June 30, 2008 
        were $42.4 million, up approximately 57.0% from December 31, 2007.
      
      
        Stockholders’ equity at June 30, 2008 was 
        $27.5 million, down 2.5% from December 31, 2007. Stockholders’ 
        equity as a percentage of total assets at June 30, 2008 was 13.4%, 
        down from 15.1% at December 31, 2007. This ratio remains well above 
        all industry averages for savings banks and the Bank is classified as 
        well-capitalized under applicable regulatory definitions.
      
      
        Non-interest expense for the second quarter of 2008 totaled $1.5 
        million, up approximately 11.5% from a year earlier. Non-interest 
        expense for the first half of 2008 totaled $2.9 million, up 
        approximately 11.2% from the first six months of 2007. Non-interest 
        expense as a percentage of average assets in the first six months of 
        2008 was 2.94% on an annualized basis, down from 3.12% for the first 
        six months of 2007.
      
      
        Non-performing assets were $3,284,000 at June 30, 2008, compared to 
        $1,438,000 at December 31, 2007. All of these assets were 
        real-estate-secured loans which were originated prior to Hurricane 
        Katrina, and for which we believe we have adequate reserves. The ratio 
        of non-performing assets to total assets at June 30, 2008 was 1.60% 
        compared to 0.77% at December 31, 2007.
      
    
    
      FORWARD-LOOKING INFORMATION
    
    
      Statements contained in this news release which are not historical 
      facts may be forward-looking statements as that term is defined in the 
      Private Securities Litigation Reform Act of 1995. Such forward-looking 
      statements are subject to risks and uncertainties which could cause 
      actual results to differ materially from those currently anticipated due 
      to a number of factors. Factors which could result in material 
      variations include, but are not limited to, changes in interest rates 
      which could affect net interest margins and net interest income, 
      competitive factors which could affect net interest income and 
      noninterest income, changes in demand for loans, deposits and other 
      financial services in the Company's market area; changes in asset 
      quality, general economic conditions as well as other factors discussed 
      in documents filed by the Company with the Securities and Exchange 
      Commission from time to time. In addition to risks and uncertainties 
      described by the Company in prior filings with the SEC, other risks and 
      uncertainties potentially impacting the Company are those related to the 
      Company in its primary market area impacted by Hurricane Katrina, 
      including the continuing effect of the storm and its aftermath on the 
      Company's operating expenses and on the Company's borrowers and other 
      customers. The Company undertakes no obligation to update these 
      forward-looking statements to reflect events or circumstances that occur 
      after the date on which such statements were made.
    
    
      
        
           
        
      
      
        
          GS Financial Corp.
        
      
      
        
          Condensed Consolidated Statements of Financial Condition
        
      
      
        
           
        
      
      
        
          ($ in thousands)
        
        
           
        
        
          June 30, 2008 

          
            (Unaudited)
          
        
        
           
        
        
          December 31, 2007

          
            (Audited)
          
        
      
      
        
          ASSETS
        
        
           
        
        
        
        
           
        
        
        
      
      
        
          Cash & Amounts Due from Depository Institutions
        
        
        
        
          $
        
        
          2,938
        
        
        
        
        
        
          $
        
        
          2,485
        
        
        
      
      
        
          Interest-Bearing Deposits in Other Banks
        
        
        
        
        
        
          3,223
        
        
        
        
        
        
        
        
          6,008
        
        
        
      
      
        
          Federal Funds Sold
        
        
        
        
        
        
          1,419
        
        
        
        
        
        
        
        
          969
        
        
        
      
      
        
          Securities Available-for-Sale, at Fair Value
        
        
        
        
        
        
          47,805
        
        
        
        
        
        
        
        
          47,747
        
        
        
      
      
        
          Loans, Net
        
        
        
        
        
        
          138,838
        
        
        
        
        
        
        
        
          118,477
        
        
        
      
      
        
          Accrued Interest Receivable
        
        
        
        
        
        
          1,516
        
        
        
        
        
        
        
        
          1,828
        
        
        
      
      
        
          Premises & Equipment, Net
        
        
        
        
        
        
          5,695
        
        
        
        
        
        
        
        
          5,874
        
        
        
      
      
        
          Stock in Federal Home Loan Bank, at Cost
        
        
        
        
        
        
          1,863
        
        
        
        
        
        
        
        
          1,220
        
        
        
      
      
        
          Other Real Estate
        
        
        
        
        
        
          469
        
        
        
        
        
        
        
        
          -
        
        
        
      
      
        
          Real Estate Held-for-Investment, Net
        
        
        
        
        
        
          443
        
        
        
        
        
        
        
        
          450
        
        
        
      
      
        
          Other Assets
        
        
           
        
        
           
        
        
          1,427
        
        
           
        
        
           
        
        
           
        
        
          1,429
        
        
           
        
      
      
        
          Total Assets
        
        
           
        
        
          $
        
        
          205,636
        
        
           
        
        
           
        
        
          $
        
        
          186,487
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          LIABILITIES
        
        
        
        
        
        
        
        
        
      
      
        
          Deposits
        
        
        
        
        
        
        
        
        
      
      
        
          Interest-Bearing Deposits
        
        
        
        
          $
        
        
          126,793
        
        
        
        
        
        
          $
        
        
          123,825
        
        
        
      
      
        
          Noninterest-Bearing Deposits
        
        
           
        
        
           
        
        
          7,548
        
        
           
        
        
           
        
        
           
        
        
          5,685
        
        
           
        
      
      
        
          Total Deposits
        
        
           
        
        
           
        
        
          134,341
        
        
           
        
        
           
        
        
           
        
        
          129,510
        
        
           
        
      
      
        
          FHLB Advances
        
        
        
        
        
        
          42,438
        
        
        
        
        
        
        
        
          26,986
        
        
        
      
      
        
          Other Liabilities
        
        
           
        
        
           
        
        
          1,395
        
        
           
        
        
           
        
        
           
        
        
          1,827
        
        
           
        
      
      
        
          Total Liabilities
        
        
           
        
        
           
        
        
          178,174
        
        
           
        
        
           
        
        
           
        
        
          158,323
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          STOCKHOLDERS' EQUITY
        
        
        
        
        
        
        
        
        
      
      
        
          Common Stock - $.01 Par Value
        
        
        
        
        
        
          34
        
        
        
        
        
        
          $
        
        
          34
        
        
        
      
      
        
          Additional Paid-in Capital
        
        
        
        
        
        
          34,546
        
        
        
        
        
        
        
        
          34,546
        
        
        
      
      
        
          Unearned RRP Trust Stock
        
        
        
        
        
        
          (158
        
        
          )
        
        
        
        
        
        
          (158
        
        
          )
        
      
      
        
          Treasury Stock
        
        
        
        
        
        
          (32,062
        
        
          )
        
        
        
        
        
        
          (32,062
        
        
          )
        
      
      
        
          Retained Earnings
        
        
        
        
        
        
          25,556
        
        
        
        
        
        
        
        
          25,919
        
        
        
      
      
        
          Accumulated Other Comprehensive Loss
        
        
           
        
        
           
        
        
          (454
        
        
          )
        
        
           
        
        
           
        
        
          (115
        
        
          )
        
      
      
        
          Total Stockholders' Equity
        
        
           
        
        
           
        
        
          27,462
        
        
           
        
        
           
        
        
           
        
        
          28,164
        
        
           
        
      
      
        
          Total Liabilities & Stockholders' Equity
        
        
           
        
        
          $
        
        
          205,636
        
        
           
        
        
           
        
        
          $
        
        
          186,487
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Selected Asset Quality Data
        
        
        
        
        
        
        
        
        
      
      
        
          Total Non Performing Assets
        
        
        
        
          $
        
        
          3,284
        
        
        
        
        
        
          $
        
        
          1,438
        
        
        
      
      
        
          Non Performing Assets to Total Assets
        
        
        
        
        
        
          1.60
        
        
          %
        
        
        
        
        
        
          0.77
        
        
          %
        
      
    
    
      
        
           
        
      
      
        
          GS Financial Corp.
        
      
      
        
          Condensed Consolidated Statements of Income
        
      
      
        
          (Unaudited)
        
      
      
        
           
        
      
      
        
           
        
        
           
        
        
          For the Three Months 

          
            Ended June 30,
          
        
        
           
        
        
          For the Six Months

          
            Ended June 30,
          
        
      
      
        
          ($ in thousands, except per share data)
        
        
           
        
        
          2008
        
        
           
        
        
          2007
        
        
           
        
        
          2008
        
        
           
        
        
          2007
        
      
      
        
          Interest and Dividend Income
        
        
           
        
        
          $
        
        
          3,019
        
        
        
        
           
        
        
          $
        
        
          2,733
        
        
        
        
           
        
        
          $
        
        
          6,006
        
        
        
        
           
        
        
          $
        
        
          5,387
        
        
        
      
      
        
          Interest Expense
        
        
           
        
        
           
        
        
          1,380
        
        
           
        
        
           
        
        
           
        
        
          1,342
        
        
           
        
        
           
        
        
           
        
        
          2,876
        
        
           
        
        
           
        
        
           
        
        
          2,627
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net Interest Income
        
        
        
        
        
        
          1,639
        
        
        
        
        
        
        
        
          1,391
        
        
        
        
        
        
        
        
          3,130
        
        
        
        
        
        
        
        
          2,760
        
        
        
      
      
        
          Provision (Reversal) for Loan Losses
        
        
           
        
        
           
        
        
          -
        
        
           
        
        
           
        
        
           
        
        
          (300
        
        
          )
        
        
           
        
        
           
        
        
          -
        
        
           
        
        
           
        
        
           
        
        
          (300
        
        
          )
        
      
      
        
          Net Interest Income after Provision (Reversal) for Loan Losses
        
        
           
        
        
           
        
        
          1,639
        
        
           
        
        
           
        
        
           
        
        
          1,691
        
        
           
        
        
           
        
        
           
        
        
          3,130
        
        
           
        
        
           
        
        
           
        
        
          3,060
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Non-interest Expense
        
        
           
        
        
           
        
        
          1,465
        
        
           
        
        
           
        
        
           
        
        
          1,314
        
        
           
        
        
           
        
        
           
        
        
          2,881
        
        
           
        
        
           
        
        
           
        
        
          2,590
        
        
           
        
      
      
        
          Net Income Before Non-Interest Income and Income Taxes
        
        
           
        
        
           
        
        
          174
        
        
           
        
        
           
        
        
           
        
        
          377
        
        
           
        
        
           
        
        
           
        
        
          249
        
        
           
        
        
           
        
        
           
        
        
          470
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Non-interest Income (Loss), excluding securities transactions
        
        
        
        
        
        
          135
        
        
        
        
        
        
        
        
          43
        
        
        
        
        
        
        
        
          250
        
        
        
        
        
        
        
        
          72
        
        
        
      
      
        
          Loss on sale/writedown of investment securities
        
        
           
        
        
           
        
        
          (660
        
        
          )
        
        
           
        
        
           
        
        
          -
        
        
           
        
        
           
        
        
           
        
        
          (660
        
        
          )
        
        
           
        
        
           
        
        
          -
        
        
           
        
      
      
        
          Income Before Tax Expense
        
        
           
        
        
           
        
        
          (351
        
        
          )
        
        
           
        
        
           
        
        
          420
        
        
           
        
        
           
        
        
           
        
        
          (161
        
        
          )
        
        
           
        
        
           
        
        
          542
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Income Tax Expense
        
        
           
        
        
           
        
        
          (119
        
        
          )
        
        
           
        
        
           
        
        
          127
        
        
           
        
        
           
        
        
           
        
        
          (55
        
        
          )
        
        
           
        
        
           
        
        
          153
        
        
           
        
      
      
        
          Net Income
        
        
           
        
        
          $
        
        
          (232
        
        
          )
        
        
           
        
        
          $
        
        
          293
        
        
           
        
        
           
        
        
          $
        
        
          (106
        
        
          )
        
        
           
        
        
          $
        
        
          389
        
        
           
        
      
      
        
          Earnings Per Share – Basic
        
        
           
        
        
          $
        
        
          (0.18
        
        
          )
        
        
           
        
        
          $
        
        
          0.24
        
        
           
        
        
           
        
        
          $
        
        
          (0.08
        
        
          )
        
        
           
        
        
          $
        
        
          0.32
        
        
           
        
      
      
        
          Earnings Per Share –Diluted
        
        
           
        
        
          $
        
        
          (0.18
        
        
          )
        
        
           
        
        
          $
        
        
          0.23
        
        
           
        
        
           
        
        
          $
        
        
          (0.08
        
        
          )
        
        
           
        
        
          $
        
        
          0.31
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Selected Operating Data
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Weighted Average Shares Outstanding
        
        
        
        
        
        
          1,284,483
        
        
        
        
        
        
        
        
          1,234,453
        
        
        
        
        
        
        
        
          1,284,483
        
        
        
        
        
        
        
        
          1,234,453
        
        
        
      
      
        
          Non-Interest Expense/Average Assets1
        
        
        
        
        
        
          2.92
        
        
          %
        
        
        
        
        
        
          3.13
        
        
          %
        
        
        
        
        
        
          2.94
        
        
          %
        
        
        
        
        
        
          3.12
        
        
          %
        
      
      
        
          Net Interest Margin1
        
        
           
        
        
           
        
        
          3.45
        
        
          %
        
        
           
        
        
           
        
        
          3.50
        
        
          %
        
        
           
        
        
           
        
        
          3.34
        
        
          %
        
        
           
        
        
           
        
        
          3.49
        
        
          %
        
      
      
        
          1 Annualized
        
      
    
    
      
        
          
            GS FINANCIAL CORP.
          
          
            RECONCILIATION OF GAAP AND OPERATING EARNINGS
          
          
            (unaudited)
          
        
      
      
        
           
        
      
      
        
          Although operating earnings are not a measure of performance 
          calculated in accordance with U.S. generally accepted accounting 
          principles ("GAAP"), we believe that the operating earnings are an 
          important indication of our ability to generate earnings through our 
          fundamental banking business. Since operating earnings exclude the 
          effects of certain items that are unusual and/or difficult to 
          predict, we believe that our operating earnings provide useful 
          supplemental information to both management and investors in 
          evaluating the Company's financial results.
        
      
      
        
           
        
      
      
        
          Operating earnings should not be considered in isolation or as a 
          substitute for net income, cash flows from operating activities, or 
          other income or cash flow statement data calculated in accordance 
          with GAAP. Moreover, the manner in which we calculate our operating 
          earnings may differ from that of other companies reporting measures 
          with similar names.
        
      
      
        
           
        
      
      
        
          Reconciliations of the Company's GAAP and operating earnings for the 
          three months ended June 30, 2008, March 31, 2008 and June 30, 2007 
          and for the six months ended June 30, 2008 and 2007 follow:
        
      
    
    
      
        
        
        
           
        
        
          
            For the Three Months Ended
          
        
        
           
        
        
           
        
        
          
            For the Six Months Ended
          
        
      
      
        
          
            (in thousands, except per share data)
          
        
        
        
        
          June 30,

          
            2008
          
        
        
           
        
        
          March 

          
            31, 2008
          
        
        
           
        
        
          June 30,

          
            2007
          
        
        
        
        
        
        
          June 30,

          
            2008
          
        
        
           
        
        
          June 30,

          
            2007
          
        
      
      
        
          GAAP (Loss) Earnings
        
        
        
        
          $
        
        
          (232
        
        
          )
        
        
        
        
          $
        
        
          126
        
        
        
        
          $
        
        
          293
        
        
        
        
        
        
        
        
          $
        
        
          (106
        
        
          )
        
        
        
        
          $
        
        
          389
        
        
        
      
      
        
          Adjustments to GAAP (loss) earnings:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          
            Loss on other-than-temporary impairment of securities
          
        
        
        
        
        
        
          651
        
        
        
        
        
        
        
        
          -
        
        
        
        
        
        
          -
        
        
        
        
        
        
        
        
        
        
          651
        
        
        
        
        
        
        
        
          -
        
        
        
      
      
        
          Reversal of provision for loan losses
        
        
        
        
        
        
          -
        
        
        
        
        
        
        
        
          -
        
        
        
        
        
        
          (300
        
        
          )
        
        
        
        
        
        
        
        
          -
        
        
        
        
        
        
        
        
          (300
        
        
          )
        
      
      
        
          Income tax effect
        
        
        
        
           
        
        
          (221
        
        
          )
        
        
        
        
           
        
        
          -
        
        
        
        
           
        
        
          102
        
        
           
        
        
        
        
        
        
           
        
        
          (221
        
        
          )
        
        
        
        
           
        
        
          102
        
        
           
        
      
      
        
          Operating Earnings
        
        
        
        
          $
        
        
          198
        
        
           
        
        
        
        
          $
        
        
          126
        
        
        
        
          $
        
        
          95
        
        
           
        
        
        
        
        
        
          $
        
        
          324
        
        
           
        
        
        
        
          $
        
        
          191
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Diluted GAAP (Loss) Earnings per Share
        
        
        
        
          $
        
        
          (.18
        
        
          )
        
        
        
        
          $
        
        
          .10
        
        
        
        
          $
        
        
          .23
        
        
        
        
        
        
        
        
          $
        
        
          (.08
        
        
          )
        
        
        
        
          $
        
        
          .31
        
        
        
      
      
        
          
            Adjustments to diluted GAAP (loss) earnings per share:
          
          
             
          
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          
            Loss on other-than-temporary impairment of securities
          
        
        
        
        
        
        
          .33
        
        
        
        
        
        
        
        
          -
        
        
        
        
        
        
          -
        
        
        
        
        
        
        
        
        
        
          .33
        
        
        
        
        
        
        
        
          -
        
        
        
      
      
        
          Reversal of provision for loan losses
        
        
        
        
           
        
        
          -
        
        
           
        
        
        
        
           
        
        
          -
        
        
        
        
           
        
        
          (.16
        
        
          )
        
        
        
        
        
        
           
        
        
          -
        
        
           
        
        
        
        
           
        
        
          (.16
        
        
          )
        
      
      
        
          Diluted operating earnings per share
        
        
        
        
          $
        
        
          .15
        
        
           
        
        
        
        
          $
        
        
          .10
        
        
        
        
          $
        
        
          .07
        
        
           
        
        
        
        
        
        
          $
        
        
          .25
        
        
           
        
        
        
        
          $
        
        
          .15