UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-QSB


            [|X|] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended December 31, 1999
                                               -----------------

                                       OR

            [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                            THE EXCHANGE ACT OF 1934

                For the transition period from            to
                                               ----------    --------

                         Commission file number: 0-25854


                               GFSB BANCORP, INC.
                  ---------------------------------------------
                 (Name of Small Business Issuer in its Charter)


Delaware                                                  04-2095007
--------                                                  ----------
(State or Other Jurisdiction of                        (I.R.S. Employer
Incorporation or Organization)                        Identification No.)

221 West Aztec Avenue, Gallup, New Mexico                   87301
-----------------------------------------                 ----------
(Address of Principal Executive Offices)                  (Zip Code)

Issuer's Telephone Number, Including Area Code:         (505) 722-4361
                                                        --------------

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.
                        Yes       |X|             No
                             -------------           ------------


As of February 8, 2000, there were issued and outstanding  970,358 shares of the
registrant's Common Stock.

<PAGE>
                               GFSB Bancorp, Inc.

                                      Index

                                                                        Page No.
                                                                        --------

                          PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements:

        Consolidated Statements of Financial Condition
            December 31, 1999 and June 30, 1999                             3

        Consolidated Statements of Earnings and Comprehensive Earnings
            Three months and six months ended December 31, 1999 and 1998    4

        Consolidated Statements of Cash Flows
            Six months ended December 31, 1999 and 1998                     6

        Notes to Consolidated Financial Statements                          8

Item 2. Management's Discussion and Analysis or Plan of Operation          10

                                     PART II. OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders                17

Item 6. Exhibits and Reports on Form 8-K                                   17

        Signatures                                                         18


                                        2
<PAGE>
                               GFSB Bancorp, Inc.

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
                                                                              December 31,              June 30,
                                                                                  1999                    1999
                                                                            ------------------      -----------------
                                                                               (Unaudited)
<S>                                                                      <C>                     <C>
                                     ASSETS

Cash and due from banks                                                   $         3,081,126     $        2,839,479
Interest-bearing deposits with banks                                                1,033,240              2,307,736
Federal funds sold                                                                          0                      0
Available-for-sale investment securities                                           19,202,739             10,295,919
Available-for-sale mortgage-backed securities                                      28,226,236             31,711,838
Held-to-Maturity investment securities                                              1,679,207              1,677,144
Stock of Federal Home Loan Bank, at cost, restricted                                3,574,400              2,815,100
Loans receivable, net, substantially pledged                                      104,140,875             96,564,840
Accrued interest and dividends receivable                                             856,351                863,975
Premises and equipment                                                              1,337,500              1,404,616
Other real estate and repossessed property                                            147,959                150,459
Prepaid and other assets                                                               45,032                 54,365
Deferred tax asset                                                                     92,269                 68,377
                                                                            ------------------      -----------------
       TOTAL ASSETS                                                       $       163,416,935            150,753,849
                                                                            ==================      =================

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Transaction and NOW accounts                                              $        11,619,807     $       12,874,979
Savings and MMDA deposits                                                          14,695,598             16,962,513
Time deposits                                                                      52,815,619             51,391,829
Accrued interest payable                                                              415,306                276,328
Advances from borrowers for taxes and insurance                                       328,244                329,298
Accounts payable and accrued liabilities                                              461,550                426,634
Deferred income taxes                                                                  73,221                265,317
Dividends declared and payable                                                         91,708                 74,748
Advances from Federal Home Loan Bank                                               70,275,888             55,540,826
Securities sold under agreements to repurchase                                        216,595                      0
Income taxes payable                                                                   39,539                180,069
                                                                            ------------------      -----------------
       TOTAL LIABILITIES                                                          151,033,076            138,322,541

COMMITMENTS AND CONTINGENCIES                                                               -                      -

STOCKHOLDERS' EQUITY
Common stock, $.10 par value, 1,500,000
  shares authorized;  993,578 issued and outstanding
  at June 30, 1999 and 976,308 shares issued and
  outstanding at December 31, 1999, adjusted for
  40,035 shares at June 30, 1999 and December 31, 1999
  for unallocated Management Stock Bonus Plan shares
  held by the Company's wholly owned subsidiary, respectively.                         93,627                 95,354
Preferred stock, $.10 par value, 500,000
  shares authorized;  no shares issued or
  outstanding                                                                               -                      -
Additional paid-in-capital                                                          3,218,135              3,432,687
Unearned ESOP stock                                                                  (348,063)              (371,183)
Retained earnings, substantially
  restricted                                                                        9,278,024              8,759,425
Accumulated other comprehensive
earnings                                                                              142,136                515,025
                                                                            ------------------      -----------------
       TOTAL STOCKHOLDERS' EQUITY                                                  12,383,859             12,431,308
                                                                            ------------------      -----------------
       TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                         $       163,416,935     $      150,753,849
                                                                            ==================      =================
</TABLE>

See notes to consolidated financial statements.

                                        3
<PAGE>
                               GFSB Bancorp, Inc.

                       CONSOLIDATED STATEMENTS OF EARNINGS
                           AND COMPREHENSIVE EARNINGS
<TABLE>
<CAPTION>
                                                                     Three months ended                    Six months ended
                                                                        December 31,                         December 31,
                                                                ------------------------------      -------------------------------
                                                                   1999              1998               1999              1998
                                                                ------------------------------      -------------------------------
                                                                (Unaudited)       (Unaudited)       (Unaudited)        (Unaudited)
<S>                                                           <C>               <C>                 <C>               <C>
Interest income
           Loans receivable
                          Mortgage loans                      $   1,903,691     $   1,605,430     $    3,723,509         3,122,116
                          Commercial loans                          108,791           122,734            219,594           236,696
                          Share and consumer loans                  117,839           101,303            228,575           195,796
           Investment and mortgage-backed securities                703,174           484,423          1,334,191           995,286
           Other interest-earning assets                             65,335            52,543            122,902           103,614
                                                                ------------      ------------      -------------      ------------
                          TOTAL INTEREST EARNINGS                 2,898,830         2,366,433          5,628,771         4,653,509
Interest expense
           Deposits                                                 789,052           820,827          1,577,045         1,650,605
           Advances from Federal Home Loan Bank                     919,749           583,917          1,702,359         1,151,981
           Other interest expense                                       912                 -                912                 -
                                                                ------------      ------------      -------------      ------------
                          TOTAL INTEREST EXPENSE                  1,709,713         1,404,744          3,280,316         2,802,587
                                                                ------------      ------------      -------------      ------------
                          NET INTEREST EARNINGS                   1,189,117           961,689          2,348,455         1,850,922
Provision for loan losses                                            40,000            25,000             60,000            40,000
                                                                ------------      ------------      -------------      ------------
                          NET INTEREST EARNINGS AFTER
                            PROVISION FOR LOAN LOSSES             1,149,117           936,689          2,288,455         1,810,922
Non-interest earnings
           Income from real estate operations                             -                 -              2,500                 -
           Miscellaneous income                                       4,699             2,564              8,284            11,288
           Net gains from sales of loans                             13,380             7,090             20,521             9,225
           Service charge income                                     70,820            38,109            130,460            73,194
                                                                ------------      ------------      -------------      ------------
                          TOTAL NON-INTEREST EARNINGS                88,899            47,763            161,765            93,707
Non-interest expense
           Compensation and benefits                                404,165           356,189            799,000           696,426
           Insurance                                                 19,555            14,923             38,339            29,821
           Stock services                                             3,403             3,287              5,903            16,644
           Occupancy                                                 83,471            70,015            159,115           126,558
           Data processing                                           47,596            59,552             96,857            99,097
           Professional fees                                         23,779            14,737             47,276            27,692
           Advertising                                               20,745            19,028             34,910            35,402
           Stationary, printing and office supplies                  26,479            19,408             39,714            34,359
           ATM Expense                                               11,610             9,272             25,670            22,358
           Supervisosry Exam Fees                                     9,491             9,245             18,983            18,490
           Postage                                                    8,713             5,443             15,972            13,677
           Other                                                     47,454            50,187             98,888           110,104
                                                                ------------      ------------      -------------      ------------
                          TOTAL NON-INTEREST EXPENSE                706,460           631,286          1,380,627         1,230,627

</TABLE>
                                              4
<PAGE>

                               GFSB Bancorp, Inc.

                       CONSOLIDATED STATEMENTS OF EARNINGS
                     AND COMPREHENSIVE EARNINGS - CONTINUED
<TABLE>
<CAPTION>
                                                                     Three months ended                    Six months ended
                                                                        December 31,                         December 31,
                                                                ------------------------------      -------------------------------
                                                                   1999              1998               1999              1998
                                                                ------------------------------      -------------------------------
                                                                (Unaudited)       (Unaudited)       (Unaudited)        (Unaudited)
<S>                                                           <C>               <C>                 <C>               <C>
                          EARNINGS BEFORE INCOME TAXES              531,556           353,166          1,069,593           674,002
Income tax expense
           Currently payable                                        192,713           135,723            385,518           252,289
           Deferred provision                                             -                -                   -                 -
                                                                ------------      ------------      -------------      ------------
                                                                    192,713           135,723            385,518           252,289
                                                                ------------      ------------      -------------      ------------
                          NET EARNINGS                        $     338,842     $     217,443            684,075           421,714
                                                                ============      ============      =============      ============
Other Comprehensive Earnings
           Unrealized gain (loss), net of tax                      (239,626)          207,231           (372,889)          200,785
                                                                ------------      ------------      -------------      ------------
                          COMPREHENSIVE EARNINGS                     99,216           424,674            311,186           622,499
                                                                ============      ============      =============      ============
Earnings per common share
           Basic                                              $        0.37              0.22               0.73              0.40
                                                                ============      ============      =============      ============
Weighted average number of common shares outstanding
           Basic                                                    925,753         1,008,985            931,000         1,047,923
                                                                ============      ============      =============      ============
Earnings per common share
           Diluted                                                     0.36              0.21               0.72              0.39
                                                                ============      ============      =============      ============
Weighted average number of common shares outstanding
           Diluted                                                  943,564         1,035,688            950,350         1,076,970
                                                                ============      ============      =============      ============
Comprehensive earnings per common share
           Basic                                                       0.11              0.42               0.33              0.59
                                                                ============      ============      =============      ============
           Diluted                                                     0.11              0.41               0.33              0.58
                                                                ============      ============      =============      ============
</TABLE>

                                              5
<PAGE>
                               GFSB Bancorp, Inc.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                Increase (decrease) in cash and cash equivalents
<TABLE>
<CAPTION>
                                                                                  Six months ended
                                                                                    December 31,
                                                                      -----------------------------------------
                                                                           1999                   1998
                                                                      ---------------      --------------------
                                                                       (Unaudited)             (Unaudited)
<S>                                                                <C>                  <C>
Cash flows from operating activities
           Net earnings                                             $        684,075     $             421,714
           Adjustments to reconcile net earnings to
             net cash provided by operations
                     Deferred loan origination fees                         (156,437)                 (157,153)
                     Gain on sale of sold loans                              (18,816)                   (9,225)
                     Provision for loan losses                                60,000                    40,000
                     Depreciation of premises and equipment                   87,535                    69,863
                     Amortization of investment and mortgage-
                       backed securities premiums (discounts)                101,279                   197,708
                     Stock dividends on FHLB stock                           (88,800)                  (63,100)
                     Release of ESOP stock                                    47,002                    45,376
                     Stock compensation                                       32,443                    26,893
                     Provision (benefit) for deferred income taxes           (23,892)                        -

           Net changes in operating assets and liabilities
                     Accrued interest and dividends receivable                 7,625                   (53,608)
                     Prepaid taxes                                                 -                         -
                     Prepaid and other assets                                  9,333                     2,736
                     Accrued interest payable                                138,978                    10,970
                     Accounts payable and accrued liabilities                  2,473                   136,574
                     Income taxes payable                                   (140,530)                  (87,996)
                     Dividends declared and payable                           16,960                    (8,523)
                                                                      ---------------      --------------------
                               Net cash provided by
                               operating activities                          759,228                   572,229

Cash flows from investing activities
           Purchase of premises and equipment                                (20,419)                 (512,823)
           Loan originations and principal
             repayment on loans, net                                      (7,458,282)              (12,719,262)
           Principal payments on mortgage-backed
             securities                                                    3,296,815                 5,469,927
           Purchases of mortgage-backed securities                                 -                  (880,255)
           Purchases of available-for-sale securities                    (12,208,015)               (3,980,260)
           Maturities and proceeds from sale of
             available-for-sale securities                                 2,746,655                 2,010,000
           Principal payments on available-for-sale securities                75,000                    70,000
           Purchases of held-to-maturity securities                                -                  (980,000)
           Maturities and proceeds from sale of
            held-to-maturity securities                                            -                         -
           Purchase of FHLB stock                                           (670,500)                 (293,300)
                                                                      ---------------      --------------------
                               Net cash used by
                               investing activities                      (14,238,746)              (11,815,973)
</TABLE>
                                        6
<PAGE>

                               GFSB Bancorp, Inc.

                CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

                Increase (decrease) in cash and cash equivalents
<TABLE>
<CAPTION>

                                                                                  Six months ended
                                                                                    December 31,
                                                                      -----------------------------------------
                                                                           1999                   1998
                                                                      ---------------      --------------------
                                                                       (Unaudited)             (Unaudited)
<S>                                                                <C>                  <C>
Cash flows from financing activities
           Net increase in transaction accounts, passbook
             savings, money market accounts, and
             certificates of deposit                                $     (2,098,297)    $           4,528,652
           Net increase (decrease) in mortgage escrow funds                   (1,054)                   75,541
           Proceeds from FHLB advances                                   258,008,922               148,835,528
           Repayments on FHLB advances                                  (243,273,860)             (141,898,304)
           Net increase (decrease) in securities sold under
              agreements to repurchase                                       216,595                         -
           Purchase of GFSB Bancorp stock under the
             stock repurchase plan in cash                                  (248,487)               (1,609,036)
           Dividends paid or to be paid in cash                             (165,474)                 (150,530)
           Price paid for vested management bonus
           stock plan stock                                                        -                         -
           Proceeds from exercise of stock options                             8,325                         -
                                                                      ---------------      --------------------
                               Net cash provided by
                               financing activities                       12,446,670                 9,781,851
                                                                      ---------------      --------------------
           Increase (decrease) in cash and cash equivalents               (1,032,848)               (1,461,893)

           Cash and cash equivalents at beginning of period                5,147,215                 4,537,980
                                                                      ---------------      --------------------
           Cash and cash equivalents at end of period               $      4,114,366                 3,076,087
                                                                      ===============      ====================
Supplemental disclosures
           Cash paid during the period for
                     Interest on deposits and advances              $      3,136,426     $           1,754,827
                     Income taxes                                            526,049                   340,284

           Change in unrealized gain (loss), net of deferred
             taxes on available-for-sale securities                         (372,889)                  200,785

           Dividends declared not yet paid                                    91,708                    73,923

</TABLE>
                                        7
<PAGE>

                               GFSB BANCORP, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

1.  The  interim  financial  data  is  unaudited;  however,  in the  opinion  of
management, the interim data includes all adjustments, consisting only of normal
recurring  adjustments  necessary  for a fair  statement  of the results for the
interim periods.  The financial statements included herein have been prepared by
the Company pursuant to the rules and regulations of the Securities and Exchange
Commission.  Certain information and footnote  disclosures  normally included in
financial  statements  prepared in accordance with generally accepted accounting
principles   have  been  condensed  or  omitted   pursuant  to  such  rules  and
regulations,  although the Company believes that the disclosures included herein
are adequate to make the information presented not misleading.

The organization and business of the Company,  accounting  policies  followed by
the Company and other  information  is contained  in the notes to the  Company's
financial  statements filed as part of the Company's June 30, 1999, Form 10-KSB.
This quarterly report should be read in conjunction with such annual report.

2.       Dividends
         ---------

During the quarter ended  September 30, 1999, the Board of Directors  declared a
cash  dividend of $0.08 per share on the  Company's  outstanding  common  stock,
payable to  stockholders  of record as of September 30, 1999. The dividends were
paid in October 1999.

During the quarter ended  December 31, 1999,  the Board of Directors  declared a
quarterly cash dividend of $0.10 per share on the Company's  outstanding  common
stock,  payable to stockholders of record as of December 31, 1999. The dividends
were paid in January 2000.

As required by SOP 93-6,  the  dividends  on  unallocated  ESOP shares have been
recorded as an additional  $5,900  compensation  cost rather than a reduction of
retained earnings.

3.       Employee Stock Ownership Plan
         -----------------------------

On December 31, 1998 the Company  released  7,022.36  shares of its common stock
owned by the Company's  ESOP. On December 31, 1999, the Company was committed to
release 7,021.01 shares of this common stock. The commitment resulted in $98,000
of additional  compensation  cost for the twelve months ended December 31, 1999,
with $23,000 of that amount booked as additional compensation cost for the three
months ended December 31, 1999.

4.       Management Stock Bonus Plan

On January 5, 1996,  the  Company  made  awards  under the Plan in the amount of
30,573  shares.  The shares  were  awarded  at a price of $9.250  per share.  On
January 5, 1998,  the Company  made awards under the Plan in the amount of 2,250
shares.  On November  16,  1998,  the Company  made awards under the Plan in the
amount of 6,000 shares.  The retirement  during the quarter ended  September 30,
1997 of an officer, to whom an award had been made under the Plan, resulted in a
reduction of 3,000 shares in the total  number of shares  awarded.  Awards under
the Plan are earned at the rate of one-fifth of the award per year. From January
5, 1997 to January 5, 1999,  17,291  shares under the Plan were earned,  and the
corresponding  liability  was paid.  On November 16, 1999 1,200 shares under the
Plan were earned, and the corresponding liability was paid.

At  December  31,  1999,  21,503  shares  remain to be  awarded  under the Plan,
including  401 shares earned under the Plan but withheld from vesting to satisfy
tax obligations of recipients.  As a result of vesting and the dividends  earned
on the vested shares,  a liability and  corresponding  compensation  cost in the
amount of $67,700 has been  recorded for the twelve  months  ended  December 31,
1999,  with $16,200 of that amount  booked as  additional  compensation  for the
three months ended December 31, 1999, under the provisions of the Plan.

                                       8
<PAGE>

5.       Earnings Per Share
         ------------------

The Company has potential  dilutive common stock (stock options to employees and
directors)  and  accordingly  presents  basic and  diluted  earnings  per share.
Diluted per share  amounts  assume the  conversion,  exercise or issuance of all
potential  common  stock  instruments  unless  the effect is to reduce a loss or
increase the income per common share

The weighted  average number of shares of common stock used to compute the basic
earnings  per share was  increased  by 17,811 for the three month  period  ended
December 31, 1999,  and by 26,703 for the three month period ended  December 31,
1998, in computing the diluted per share data.

The weighted  average number of shares of common stock used to compute the basic
earnings  per  share was  increased  by 19,350  for the six month  period  ended
December  31, 1999,  and by 29,047 for the six month  period ended  December 31,
1998, in computing the diluted per share data.


6.       Comprehensive Earnings
         ----------------------

Comprehensive earnings, defined as the change in equity of a business enterprise
from transactions and other events and circumstances from non-owner sources. The
only item of other comprehensive earnings for the Company is the unrealized gain
(loss) on available-for-sale securities.


                                       9

<PAGE>


Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

General

GFSB  Bancorp,  Inc.,  is the 100% owner of Gallup  Federal  Savings  Bank ("the
Bank"), and the Bank is currently the only entity with which the holding company
has an  ownership  interest.  The Bank is  primarily  engaged in the business of
accepting  deposit  accounts  from the  general  public  and using such funds to
originate mortgage loans for the purchase and refinancing of  one-to-four-family
homes located in its primary market area. The Bank also originates multi-family,
commercial real estate, construction, consumer and commercial business loans and
purchases participations in one-to-four family and commercial real estate loans.
The Bank also purchases  mortgage-backed and investment securities.  The largest
components  of the Bank's net  earnings are net  interest  income,  which is the
difference between interest income and interest expense, and non-interest income
derived primarily from fees. Consequently,  the Bank's earnings are dependent on
its ability to originate  loans,  and the relative  amounts of  interest-earning
assets  and  interest-bearing  liabilities.  The  Bank's  net  earnings  is also
affected  by its  provision  for  loan  losses  as well as the  amount  of other
expense,  such as  compensation  and benefit  expense,  occupancy  and equipment
expense and deposit insurance  premium  expenses.  Earnings of the Bank also are
affected   significantly  by  general   economic  and  competitive   conditions,
particularly  changes in market interest rates,  government policies and actions
of regulatory authorities.

GFSB Bancorp,  Inc. (the  "Company")  may from time to time make written or oral
"forward-looking  statements",  including  statements contained in the Company's
filing with the  Securities  and  Exchange  Commission  (including  this quarter
report on Form 10-QSB and the exhibits thereto),  in its reports to stockholders
and in other  communication by the Company,  which are made in good faith by the
Company  pursuant to the "safe  harbor"  provisions  of the  Private  Securities
Litigation Reform Act of 1995.

These  forward-looking  statements  involve  risks  and  uncertainties,  such as
statements  of the  Company's  plans,  objectives,  expectations,  estimates and
intentions,  that are subject to change based on various important factors (some
of which are beyond the Company's control). The following factors, among others,
could cause the Company's  financial  performance to differ  materially from the
plans,  objectives,  expectations,  estimates and  intentions  expressed in such
forward-looking statements: the strength of the United States economy in general
and  the  strength  of  the  local  economies  in  which  the  Company  conducts
operations;  the effects of, and changes in, trade, monetary and fiscal policies
and laws,  including  interest  rate  policies of the Board of  Governors of the
Federal  Reserve  System,   inflation,   interest  rate,   market  and  monetary
fluctuations;  the timely  development  of and  acceptance  of new  products and
services of the Company and the perceived  overall  value of these  products and
services by users,  including  the  features,  pricing  and quality  compared to
competitors'  products and  services;  the  willingness  of users to  substitute
competitors' products and services for the Company's products and services;  the
success of the  Company in  gaining  regulatory  approval  of its  products  and
services,  when required;  the impact of changes in financial services' laws and
regulations   (including  laws  concerning   taxes,   banking,   securities  and
insurance);  technological  changes;  disruption  in data  processing  caused by
computer  malfunctions  associated  with the year 2000  problem that are greater
than anticipated;  acquisitions; changes in consumer spending and saving habits;
and the success of the Company at managing these risks.

The Company cautions that this list of important  factors is not exclusive.  The
Company does not  undertake  to update and  forward-looking  statement,  whether
written  or oral,  that may be made  from  time to time by or on  behalf  of the
Company.


Management Strategy

Management's  strategy  has been to monitor  interest  rate  risk,  by asset and
liability  management,  and maintain asset quality while enhancing  earnings and
profitability.   The  Bank's   strategy  has  been   primarily  to  make  loans,
secondarily,  to invest in mortgage-backed securities and investment securities,
and thirdly, to purchase  participations in adjustable rate,  one-to-four family
mortgage loans primarily secured by one-to-four  family  residences.  The Bank's
purchase of  mortgage-backed  securities and  investment  securities is designed

                                       10
<PAGE>

primarily for safety of principal and secondarily for rate of return. The Bank's
lending  strategy has  historically  focused on the  origination  of traditional
one-to-four-family   mortgage  loans  primarily  secured  by  one-to-four-family
residences in the Bank's primary market area.

These loans  typically have fixed rates.  The Bank also invests a portion of its
assets  in  construction,   consumer,  commercial  business,   multi-family  and
commercial real estate loans as a method of enhancing earnings and profitability
while also  reducing  interest  rate risk.  Since  1994,  the Bank has  actively
originated  commercial  business loans,  increased its origination of commercial
real  estate  loans,   construction  loans,  and  purchased   participations  in
commercial real estate loans.  These loans  typically have  adjustable  interest
rates and are for shorter terms than residential first mortgage loans. This type
of lending generally has more risk than residential lending. The Bank's purchase
of  participations  in adjustable  rate,  one-to-four  family  mortgage loans is
designed to increase  earnings and reduce  interest rate risk.  These loans have
more risk than loans  originated by the Bank,  therefore,  they have  adjustable
rates that are higher than standard.  The Bank also purchases  automobile  loans
from dealers.  These loans have risk and terms  comparable  to automobile  loans
originated in the Bank.  Investment securities in the Bank's portfolio typically
have shorter terms to maturity than residential first mortgage loans. As part of
its asset/liability  management strategy, the Bank sells its fixed rate mortgage
loans with terms over 15 years into the secondary market. The Bank has sought to
remain  competitive  in its market by offering a variety of products.  Automated
Teller Machine access and credit life insurance are additional  products offered
by the Bank.  The Bank attempts to manage the interest rates it pays on deposits
while  maintaining a stable deposit base and providing  quality  services to its
customers.

During the past few years the competing financial institutions located in Gallup
have all been acquired by statewide and regional  bank holding  companies.  As a
result,  as of 1995, the Bank is the only local  institution  headquartered  and
managed in Gallup, New Mexico.  The Bank believes that its "hometown"  advantage
provides an opportunity  to expand its operations as the only local  independent
financial  institution.  The Bank also believes that it has a unique  ability to
grow as a result of the  relatively  large number of local retail and  wholesale
businesses  specializing in Indian jewelry.  In addition,  the Bank is exploring
methods of  increasing  its business with the large Native  American  population
located in the nearby Navajo and Zuni Pueblo Indian reservations.

Asset and Liability Management

In an effort to reduce  interest  rate  risk and  protect  it from the  negative
effect  of  rapid  increases  and  decreases  in  interest  rates,  the Bank has
instituted  certain asset and liability  management  measures.  (See "Management
Strategy" discussed above).

The Bank, like many other thrift institutions,  is exposed to interest rate risk
as a result of the  difference in the maturity of  interest-bearing  liabilities
and  interest-earning  assets and the volatility of interest rates. Most deposit
accounts  react  more  quickly to market  interest  rate  movements  than do the
existing  mortgage  loans  because of their  shorter  terms to  maturity;  sharp
decreases  in  interest  rates  would  typically  positively  affect  the Bank's
earnings.  Conversely,  this same mismatch will generally  adversely  affect the
Bank's earnings during periods of increasing interest rates.

FINANCIAL CONDITION

The Bank's total assets  increased  $12.7 million or 8.4% from $150.8 million at
June 30, 1999 to $163.4 million at December 31, 1999. This increase is primarily
the result of a $7.6  million  increase in the Bank's net loan  portfolio  and a
$5.4 million increase in the Bank's  investment  portfolio.  The majority of the
increases  are  directly  attributable  to efforts  of  Management  to  increase
investment and lending activity. During the same period, deposits decreased $2.1
million or 2.7% from $81.2 million at June 30, 1999 to $79.1 million at December
31, 1999.  This  decrease is primarily due to a decrease in the Bank's volume of
savings and MMDA accounts;  management  believes this to be primarily a seasonal
fluctuation.  Advances from the FHLB increased  $14.7 million from $55.5 million
at June 30,  1999 to $70.3  million  at  December  31,  1999.  These  additional
borrowings   funded   purchases  of  loans,   securities,   and  mortgage   loan
participations.  The Bank had $142,000 and $515,000 in unrealized  gains (net of
deferred taxes) at December 31, 1999 and June 30, 1999, respectively from market
gains on the  Bank's  equity  securities  offset by market  losses on the Bank's
available-for-sale investment and mortgage-backed portfolios.


                                       11
<PAGE>

RESULTS OF OPERATIONS

COMPARISON OF OPERATING  RESULTS FOR QUARTER ENDED DECEMBER 31, 1999 COMPARED TO
QUARTER ENDED DECEMBER 31, 1998

General

Net earnings increased $121,000 or 55.8% for the quarter ended December 31, 1999
from the quarter ended December 31, 1998.  This increase is primarily the result
of an  increase  in  net  interest  earnings  of  $227,000  and an  increase  in
non-interest earnings of $41,000,  offset by an increase in non-interest expense
of  $75,000,  an  increase  in income tax  expense of $57,000 and an increase in
provision for loan losses of $15,000

Interest Earnings

Total  interest  income  increased  $532,000 or 22.5% from $2.4  million for the
quarter ended  December 31, 1998 to $2.9 million for the quarter ended  December
31,1999.  This increase was primarily  due to  substantial  increases in the net
loan portfolio and securities portfolio of the bank.

Interest Expense

Total  interest  expense  increased  $305,000 or 21.7% from $1.4 million for the
quarter ended  December 31, 1999 to $1.7 million for the quarter ended  December
31, 1999.  This  increase was  primarily  due to an increase in FHLB  borrowings
offset by a decrease in the deposit base of the bank.

Provision for Losses on Loans

The Bank maintains an allowance for loan losses based upon management's periodic
evaluation  of  known  and  inherent  risks  in the loan  portfolio,  past  loss
experience,  adverse  situations that may affect the borrower's ability to repay
loans,  estimated  value of the  underlying  collateral and current and expected
market  conditions.  The  allowance for loan losses was $498,000 and $421,000 at
December 31,1999 and 1998, respectively. The provision for loan loss was $40,000
and $25,000  for the quarter  ended  December  31, 1999 and 1998,  respectively.
Based on a historical  trend of limited losses on residential  loans, the amount
of the loan loss provision  allocated to residential  loans remained  relatively
stable for the two periods. While the Bank maintains its allowance for losses at
a level  which it  considers  to be  adequate,  there can be no  assurance  that
further  additions will not be made to the loss  allowances and that such losses
will not exceed the estimated amounts.  Recent substantial increases in the loan
portfolio  of the Bank may  result in an  increase  of  provision  for losses on
loans. The  establishment of a loan loss provision each period adversely impacts
the Bank's net earnings.

Non-Interest Income

Total  non-Interest  income  increased  by $41,000 or 83.1% from $48,000 for the
quarter ended  December 31, 1998 to $89,000 for the quarter  ended  December 31,
1999.  This increase was  primarily due to increased  service and NSF charges on
NOW and checking accounts.

Non-Interest Expense

Total  non-interest  expense  increased  $75,000 or 11.9% from  $631,000 for the
quarter ended  December 31, 1998 to $706,000 for the quarter ended  December 31,
1999.  This  increase  was  primarily  due to an  increase in  compensation  and
benefits of $48,000 from general salary increases,  increases due to accrual for
stock-based  compensation  programs and increases in employee  health  insurance
benefits.   Other  factors  were  increases  in  occupancy   costs  of  $13,000,
professional fees of $9,000, stationary, printing and office supplies of $7,000,
insurance expense of $5,000, offset by a decrease in data processing of $12,000.
The increase in occupancy  cost is primarily  due to  furniture,  fixtures,  and
equipment  expense.  The decrease in data processing expense is primarily due to
service  bureau  expense for upgrading  computer  software in the quarter ending
December 31, 1998.


                                       12
<PAGE>

RESULTS OF OPERATIONS

COMPARISON  OF OPERATING  RESULTS FOR SIX MONTH  PERIOD ENDED  DECEMBER 31, 1999
COMPARED TO SIX MONTH PERIOD ENDED DECEMBER 31, 1998

General

Net earnings increased $262,000 or 62.2% for the six-month period ended December
31, 1999 from the  six-month  period ended  December 31, 1998.  This increase is
primarily the result of an increase in  net-interest  earnings of $498,000 and a
increase  in  non-interest  earnings  of  $68,000,  offset  by  an  increase  in
non-interest  expense of  $150,000,  an increase in  provision  for loan loss of
$20,000 and an increase in provision for income taxes of $133,000.

Interest Earnings

Total  interest  income  increased  $975,000 or 20.9% from $4.7  million for the
six-month  period ended  December 31,  1998,  to $5.6 million for the  six-month
period ended  December 31, 1999.  This increase was primarily due to substantial
increases in the net loan portfolio and securities portfolio of the bank.

Interest Expense

Total  interest  expense  increased  $478,000  or 17% from $2.8  million for the
six-month  period  ended  December  31, 1998 to $3.3  million for the  six-month
period ended  December 31, 1999.  This increase was primarily due to an increase
in FHLB borrowings offset by a decrease in the deposit base of the bank.

Provision for Losses on Loans

The Bank maintains an allowance for loan losses based upon management's periodic
evaluation  of  known  and  inherent  risks  in the loan  portfolio,  past  loss
experience,  adverse  situations that may affect the borrower's ability to repay
loans,  estimated  value of the  underlying  collateral and current and expected
market  conditions.  The  allowance for loan losses was $498,000 and $421,000 at
December  31,  1999 and  1998,  respectively.  The  provision  for loan loss was
$60,000 and $40,000 for the six-month  period ended  December 31, 1999 and 1998,
respectively.  Based on a  historical  trend of  limited  losses on  residential
loans,  the amount of the loan loss  provision  allocated to  residential  loans
remained  relatively  stable for the two periods.  While the Bank  maintains its
allowance for losses at a level which it considers to be adequate,  there can be
no assurance that further  additions will not be made to the loss allowances and
that such  losses  will not exceed the  estimated  amounts.  Recent  substantial
increases  in the loan  portfolio  of the  Bank may  result  in an  increase  of
provision for losses on loans.  The  establishment of a loan loss provision each
period adversely impacts the Bank's net earnings.

Non-Interest Income

Total  non-Interest  income  increased  by $68,000 or 72.6% from $94,000 for the
six-month  period ended  December 31, 1998 to $162,000 for the six-month  period
ended  December 31, 1999.  This increase was primarily due to increased  service
and NSF charges on NOW and  checking  accounts and an increase in net gains from
sales of loans.

Non-Interest Expense

Total  non-interest  expense increased $150,000 or 12.2% from $1,231,000 for the
six-month  period ended December 31, 1998 to $1,381,000 for the six month period
ended  December 31, 1999.  This  increase  was  primarily  due to an increase in
compensation  and benefits of $103,000  from the hiring of  additional  staff to
handle  growth,   salary  expense  for  a  full  time  data  processing  systems
administrator for Year 2000 administration,  general salary increases, increases
due to accrual for stock-based  compensation  programs and increases in employee
health  insurance  benefits.  Other factors were increases in occupancy costs of

                                       13
<PAGE>

$33,000,  professional fees of $20,000, insurance expense of $9,000, offset by a
decrease in stock  services  of  $11,000.  The  increase  in  occupancy  cost is
primarily due leasehold  improvement expense and janitorial expense for the Loan
Center and furniture,  fixtures,  and equipment  expense.  The decrease in stock
services  in  primarily  due to a fee paid to the OTS for  filing  a  change  of
control application for the quarter ended September 30, 1998.


Liquidity and Capital Resources

The Bank is required under applicable federal  regulations to maintain specified
levels of "liquid" investments in qualifying types of U.S.  Government,  federal
agency and other  investments.  Prior OTS  regulations  required  that a savings
institution  maintain  liquid  assets of not less than 5% of its  average  daily
balance of net withdrawable  deposit accounts and borrowings payable in one year
or less, of which short-term liquid assets consist of not less than 1%, with the
qualifying investments limited to those having maturities of five years of less.
Revised OTS regulations  effective  November 13, 1997 lowered the required level
of liquid assets to 4%,  removed the  short-term  liquid asset  requirement  and
deleted the five year or less maturity  requirement.  At December 31, 1999,  the
Bank's  liquidity,  as measured for  regulatory  purposes,  was 5.28%.  The Bank
adjusts liquidity as appropriate to meet its asset/liability objectives.

The Bank's primary sources of funds are deposits, amortization and prepayment of
loans and mortgage-backed  securities,  maturities of investment securities, and
funds provided from operations. While scheduled loan repayments are a relatively
predictable source of funds, deposit flows and loan and mortgage-backed security
prepayments are  significantly  influenced by general  interest rates,  economic
conditions  and  competition.  In  addition,  the Bank  invests  excess funds in
overnight  deposits,  which provide  liquidity to meet lending  requirements and
deposit fluctuations.

The Bank's  most  liquid  assets are cash and cash  equivalents,  which  include
investments in highly liquid short-term  investments.  The level of these assets
are  dependent on the Bank's  operating,  financing,  and  investing  activities
during any given period. At December 31, 1999, cash and cash equivalents totaled
$4 million.  The Bank has other  sources of liquidity  if a need for  additional
funds arises.  Additional  sources of funds include FHLB of Dallas  advances and
the ability to borrow against mortgage-backed and other securities.  At December
31, 1999, the Bank had $70.3 million in outstanding  borrowings from the FHLB of
Dallas. These outstanding borrowings were used to purchase additional investment
securities and mortgage loan participations as a means of enhancing earnings.

The  primary  investment  activity  of the  Bank is the  origination  of  loans,
primarily  mortgage  loans.  During the quarter ended December 31 1999, the Bank
originated  $13.4  million  in  total  loans   (including  loan   participations
purchased),  of which $9.6  million  were  mortgage  loans.  Another  investment
activity  of the  Bank is the  investment  of funds  in U.S.  Government  Agency
securities,  mortgage-backed  securities,  collateralized  mortgage obligations,
federal funds and  FHLB-Dallas  overnight  funds and readily  marketable  equity
securities. During periods when the loan demand of the Bank is limited, the Bank
may  purchase  short-term  investment  securities  to obtain a higher yield than
otherwise available.

The Bank's cash flows are comprised of three primary classifications: cash flows
from operating activities,  investing activities and financing activities.  Cash
flows  from  operating  activities,  consisting  principally  of  net  earnings,
provision  for loan losses,  amortization  of  investment  and  mortgage  backed
securities  premiums and discounts,  stock based  compensation  costs and income
taxes less  disbursements  of interest and dividends,  and loan origination fees
were $759,000 and $572,000 for the six month period ended  December 31, 1999 and
1998 respectively. Net cash used for investing activities consisted primarily of
disbursement of loan  originations and investment and  mortgage-backed  security
purchases,  offset by principal  collections on loans and principal  collections
and proceeds from the maturities of investment  securities  and  mortgage-backed
securities,  were $14.2 million and $11.8 million for the six month period ended
December  31, 1999 and 1998,  respectively.  Net cash  provided  from  financing
activities  consisting  primarily of net activity in deposit and escrow accounts
and new FHLB  borrowings,  offset by repayments on FHLB  borrowings,  were $12.4
million and $9.8 million for the six month  period  ended  December 31, 1999 and
1998, respectively.

                                       14
<PAGE>

The Bank  anticipates  that it will have sufficient  funds available to meet its
current  commitments.  As of December 31, 1999, the Bank had commitments to fund
loans of $10 million. Certificates of deposit scheduled to mature in one year or
less totaled $37 million.  Based on  historical  withdrawals  and  outflows,  on
internal daily deposit  reports  monitored by management,  and the fact that the
Bank does not accept any brokered deposits,  management believes that a majority
of deposits will remain with the Bank. As a result, no adverse liquidity effects
are expected.

Pursuant  to  Financial  Accounting  Standards  Bulletin  No.  130,  the Bank is
required to record unrealized gains and losses in its investment  portfolio that
may result from movements in interest rates. The Bank showed unrealized  losses,
net of tax effect,  totaling $240,000, due to increases in interest rates during
the three months ended  December 31, 1999.  Management  does not  anticipate the
realization  of this loss.  The unrealized  loss  negatively  impacts the Bank's
capital.  However,  the unrealized  losses combined with net operating income of
$339,000  yielded a net  increase  in the  Bank's  capital  of  $99,000,  net of
applicable  taxes,  during the three months ended December 31, 1999.  During the
six months ended  December 31, 1999,  the  unrealized  losses in the  investment
portfolio totaled $373,000.

At  December  31,  1999,  the  Bank  exceeded  each  of the  three  OTS  capital
requirements on a fully-phased-in basis.

The Year 2000 issue

Year 2000 expense for the quarter ended December 31, 1999 was $14,000.  The Bank
does not anticipate any material expenses for the quarter ending March 31, 2000.

As Of  September  30,  1999,  the  Bank had  completed  its  Year  2000  project
compliance  efforts.  During the  quarter  ended  December  31,  1999,  the Bank
continued  to refine  its Year  2000  emergency  preparedness/business  recovery
plans.

During  the  month  of  January  2000 the Bank  has  operated  normally  and has
experienced no significant Year 2000 problems.


Subsequent Events

None


Stock Repurchase Program

On May 20, 1999 the Company  issued a press release  announcing its intention to
repurchase  up to 5%  (49,965  shares)  of the  Company's  common  stock.  As of
February 4, 2000,  34,120 shares have been repurchased and retired as authorized
but unissued.  The Company  believes that it has sufficient  capital to complete
the repurchase  and that the repurchase  will not cause the Bank to fail to meet
its regulatory capital requirements.

Impact of Inflation and Changing Prices

The  consolidated  financial  statements  of  the  Company  and  notes  thereto,
presented  elsewhere  herein,  have been prepared in accordance  with  Generally
Accepted  Accounting  Principles  ("GAAP"),  which  require the  measurement  of
financial  position  and  operating  results  primarily  in terms of  historical
dollars without considering the change in the relative purchasing power of money
over time and due to  inflation.  The impact of  inflation  is  reflected in the
increased cost of the Company's  operations.  Unlike most industrial  companies,
nearly all the assets and liabilities of the Company are financial. As a result,
interest  rates have a greater impact on the Company's  performance  than do the
effects of general levels of inflation.  Interest rates do not necessarily  move
in the same direction or to the same extent as the prices of goods and services.

                                       15
<PAGE>

Recapture of Post 1987 Bad Debt Reserves

The Small Business Job Protection Act of 1996, among other things, equalized the
taxation  of  thrifts  and  banks.  The bill no longer  allows  thrifts a choice
between the  percentage of taxable  income method and the  experience  method in
determining  additions  to their bad debt  reserves.  Smaller  thrifts with $500
million of assets or less are only allowed to use the experience  method,  which
is generally  available to small banks  currently.  Larger  thrifts must use the
specific  charge off method  regarding its bad debts.  Any reserve amounts added
after 1987 will be taxed over a six year period beginning in 1996; however,  bad
debt reserves set aside through 1987 will  generally not be taxed.  Institutions
can delay these taxes for two years if they meet a  residential  - lending test.
At June 30, 1999,  the Bank had $46,613 of post 1987 bad-debt  reserves of which
1/6th or $9,323 was  recaptured  into taxable income for the year ended June 30,
1999.  Future  recapture  of the Bank's  bad-debt  reserves  may have an adverse
effect on net earnings. Management does not believe such future recapture of the
Bank's bad debt  reserves  will have a material  impact on the Bank's  financial
condition.


Impact of Certain Accounting Standards

In October,  1995,  the FASB issued SFAS No. 123  "Statement of  Accounting  for
Stock-Based   Compensation"  which  defines  a  "fair  value  based  method"  of
accounting for an employee stock option whereby compensation cost is measured at
the  grant  date  based on the value of the  award  and is  recognized  over the
service  period.  The FASB encouraged all entities to adopt the fair value based
method,  however, it allows entities to continue the use of the "intrinsic value
based method" prescribed by Accounting  Principles Board ("APB") Opinion No. 25.
Under the intrinsic value based method,  compensation  cost is the excess of the
market price of the stock at the grant date over the amount an employee must pay
to acquire the stock.  However,  most stock option plans have no intrinsic value
at the grant date and, as such, no  compensation  cost is  recognized  under APB
Opinion No. 25. Entities electing to continue use of the accounting treatment of
APB Opinion No. 25 must make certain pro forma  disclosures as if the fair value
based method had been  applied.  The Bank has  continued  to use the  "intrinsic
value based method" as prescribed by APB Opinion No. 25.

In June 1997,  the FASB issued SFAS No. 131,  "Disclosures  About Segments of an
Enterprise and Related  Information." This Statement  establishes  standards for
the way that public entities  report  information  about  operating  segments in
annual  financial  statements  and  requires  that  selected  information  about
operating  segments be reported in interim  financial  reports as well.  It also
establishes  standards  for related  disclosures  about  products and  services,
geographic  areas and major  customers.  This  Statement is effective for fiscal
years beginning after December 31, 1997, except for interim financial statements
in the initial year of its application.

In February 1998,  the FASB issued SFAS No. 132,  Employer's  Disclosures  about
Pensions and Other Postretirement  Benefits. This statements revises disclosures
about pension and other  postretirement  benefit  plans.  It does not change the
measurement  or recognition of those plans.  This statement  eliminates  certain
disclosures  from SFAS No.'s 87, 88, and 106.  This  statement is effective  for
fiscal years  beginning after December 15, 1997. This statement is currently not
applicable to the Bank.

In  June  1998,  the  FASB  issued  SFAS  No.  133,  Accounting  for  Derivative
Instruments and Hedging Activities.  This statement  establishes  accounting and
reporting  standards for derivative  instruments,  including certain  derivative
instruments   embedded  in  other   contracts   (collectively   referred  to  as
derivatives) and for hedging activities.  This statement is effective for fiscal
years  beginning after June 15, 1999.  Earlier  application of this statement is
encouraged. This statement is currently not applicable to the Bank.

In October 1998, the FASB issued SFAS No. 134,  Accounting  for  Mortgage-Backed
Securities  Retained After the Securitization of Mortgage Loans Held for Sale by
a Mortgage Banking Enterprise. This statement amends SFAS No. 65 to require that
after the  securitization  of a  mortgage  loan an entity  engaged  in  mortgage
banking activities  classify the resulting mortgage backed security as a trading
or  held-for-sale  based on the  intent  to sell or hold the  investments.  This
statement is effective for the first fiscal quarter beginning after December 15,
1998. This statement is currently not applicable to the Bank.

                                       16
<PAGE>

PART II.  OTHER INFORMATION
--------  -----------------

Item 4. Submission of Matters to a Vote of Security Holder.

The annual  meeting of the  stockholders  of the Company was held on October 27,
1999. At the meeting two directors were elected for terms to expire in 2002, the
appointment of an independent  accountant was ratified , the GFSB Bancorp,  Inc.
1995  Stock  Option  Plan was  ratified  and the  Gallup  Federal  Savings  Bank
Management Stock Bonus Plan and Trust Agreement was ratified.

The results of voting are shown for each matter considered.

Director election:

Nominee                  Votes For        Votes Withheld       Broker non-votes

James Nechero, Jr.      714,612               1,853                      0

Vernon I. Hamilton      691,497              24,968                      0

Auditor ratification:

Votes for       716,465

Votes against   0

Abstentions     0

GFSB Bancorp, Inc 1995 Stock Option Plan ratification:

Votes for       529,355

Votes against    26,903

Abstentions         750

Gallup  Federal  Savings Bank  Management  Stock Bonus Plan and Trust  Agreement
ratification:

Votes for       688,775

Votes against    27,690

Abstentions      0


Item 6.  Exhibits and Reports on Form 8-K
None

                                       17
<PAGE>



SIGNATURES

In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.

                                GFSB BANCORP, INC.


Date:  February 11, 2000        /s/Jerry R. Spurlin
                                ------------------------------------------------
                                Jerry R. Spurlin
                                Assistant Secretary and Chief Financial Officer
                                (Duly Authorized Representative and
                                Principal Financial Officer)