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


                                   FORM 10-QSB


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

               For the quarterly period ended September 30, 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
--------------------------------------------------------------
(State or Other Jurisdiction of Incorporation or Organization)
                                                                04-2095007
                                                                ----------
                                                             (I.R.S. Employer
                                                             Identification No.)
221 West Aztec Avenue, Gallup, New Mexico
-----------------------------------------
(Address of Principal Executive Offices)
                                                                   87301
                                                                   -----
                                                                 (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 November 2, 1999, there were issued and outstanding  981,308 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
               September 30, 1999 and June 30, 1999                           3

           Consolidated Statements of Earnings and Comprehensive Earnings
               Three months ended September 30, 1999 and September 30, 1998   4

           Consolidated Statements of Cash Flows
               Three months ended September 30, 1999 and September 30, 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 6.    Exhibits and Reports on Form 8-K                                  16

           Signatures                                                        17


                                       2

<PAGE>
                               GFSB Bancorp, Inc.

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

Cash and due from banks                                                    $         2,023,643     $        2,839,479
Interest-bearing deposits with banks                                                   979,199              2,307,736
Federal funds sold                                                                           0                      0
Available-for-sale investment securities                                            16,628,192             10,295,919
Available-for-sale mortgage-backed securities                                       29,586,101             31,711,838
Held-to-Maturity investment securities                                               1,678,173              1,677,144
Stock of Federal Home Loan Bank, at cost, restricted                                 3,205,800              2,815,100
Loans receivable, net, substantially pledged                                        99,158,677             96,564,840
Accrued interest and dividends receivable                                              937,748                863,975
Premises and equipment                                                               1,362,943              1,404,616
Other real estate and repossessed property                                             147,959                150,459
Prepaid and other assets                                                                80,389                 54,365
Deferred tax asset                                                                      92,269                 68,377
                                                                             ------------------      -----------------

        TOTAL ASSETS                                                       $       155,881,094            150,753,849
                                                                             ==================      =================

                                        LIABILITIES AND STOCKHOLDERS' EQUITY

Transaction and NOW accounts                                               $        12,122,146     $       12,874,979
Savings and MMDA deposits                                                           14,773,113             16,962,513
Time deposits                                                                       52,276,539             51,391,829
Accrued interest payable                                                               358,581                276,328
Advances from borrowers for taxes and insurance                                        493,632                329,298
Accounts payable and accrued liabilities                                               387,056                426,634
Deferred income taxes                                                                  196,665                265,317
Dividends declared and payable                                                          73,766                 74,748
Advances from Federal Home Loan Bank                                                62,550,362             55,540,826
Income taxes payable                                                                   222,125                180,069
                                                                             ------------------      -----------------

        TOTAL LIABILITIES                                                          143,453,985            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 981,308 shares issued and
  outstanding at September 30, 1999, adjusted for
  40,035 shares at June 30, 1999 and September 30, 1999
  for unallocated Management Stock Bonus Plan shares
  held by the Company's wholly owned subsidiary, respectively.                          94,127                 95,354
Preferred stock, $.10 par value, 500,000
  shares authorized;  no shares issued or
  outstanding                                                                                -                      -
Additional paid-in-capital                                                           3,279,640              3,432,687
Unearned ESOP stock                                                                   (359,311)              (371,183)
Retained earnings, substantially
  restricted                                                                         9,030,889              8,759,425
Accumulated other comprehensive
earnings                                                                               381,762                515,025
                                                                             ------------------      -----------------

        TOTAL STOCKHOLDERS' EQUITY                                                  12,427,108             12,431,308
                                                                             ------------------      -----------------

        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                         $       155,881,094     $      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
                                                                                             September 30,
                                                                                 ---------------------------------------
                                                                                      1999                   1998
                                                                                 ---------------------------------------
                                                                                   (Unaudited)            (Unaudited)
<S>                                                                            <C>                    <C>
Interest income
             Loans receivable
                                Mortgage loans                                 $       1,819,818      $       1,516,686
                                Commercial loans                                         110,803                113,963
                                Share and consumer loans                                 110,735                 94,493
             Investment and mortgage-backed securities                                   631,017                510,863
             Other interest-earning assets                                                57,566                 51,071
                                                                                 ----------------       ----------------

                                TOTAL INTEREST EARNINGS                                2,729,939              2,287,076

Interest expense
             Deposits                                                                    787,992                829,779
             Advances from Federal Home Loan Bank                                        782,609                568,064
                                                                                 ----------------       ----------------

                                TOTAL INTEREST EXPENSE                                 1,570,602              1,397,843
                                                                                 ----------------       ----------------

                                NET INTEREST EARNINGS                                  1,159,338                889,233

Provision for loan losses                                                                 20,000                 15,000

                                                                                 ----------------       ----------------

                                NET INTEREST EARNINGS AFTER
                                  PROVISION FOR LOAN LOSSES                            1,139,338                874,233

Non-interest earnings
             Income from real estate operations                                            2,500                      -
             Miscellaneous income                                                          3,585                  8,726
             Net gains from sales of loans                                                 7,141                  2,135
             Service charge income                                                        59,639                 35,085

                                                                                 ----------------       ----------------

                                TOTAL NON-INTEREST EARNINGS                               72,866                 45,946

Non-interest expense
             Compensation and benefits                                                   394,835                340,237
             Insurance                                                                    18,785                 14,898
             Stock services                                                                2,499                 13,357
             Occupancy                                                                    75,644                 56,542
             Data processing                                                              49,262                 39,545
             Professional fees                                                            23,497                 12,954
             Advertising                                                                  14,166                 16,374
             Stationary, printing and office supplies                                     13,236                 14,951
             ATM Expense                                                                  14,060                 13,086
             Supervisory Exam Fees                                                         9,492                  9,245
             Postage                                                                       7,258                  8,234
             Other                                                                        51,435                 59,917
                                                                                 ----------------       ----------------

                                TOTAL NON-INTEREST EXPENSE                               674,167                599,341

</TABLE>

                                        4
<PAGE>

                               GFSB Bancorp, Inc.

                       CONSOLIDATED STATEMENTS OF EARNINGS
                     AND COMPREHENSIVE EARNINGS - CONTINUED

<TABLE>
<CAPTION>
                                                                                           Three months ended
                                                                                             September 30,
                                                                                 ---------------------------------------
                                                                                      1999                   1998
                                                                                 ---------------------------------------
                                                                                   (Unaudited)            (Unaudited)

<S>                                                                           <C>                    <C>
                                EARNINGS BEFORE INCOME TAXES                             538,037                320,838

Income tax expense
             Currently payable                                                           192,805                116,567
             Deferred provision                                                                -                      -
                                                                                 ----------------       ----------------

                                                                                         192,805                116,567
                                                                                 ----------------       ----------------

                                NET EARNINGS                                   $         345,232      $         204,271
                                                                                 ================       ================



Other Comprehensive Earnings
             Unrealized gain (loss), net of tax                                         (133,263)                (6,446)

                                                                                 ================       ================
                                COMPREHENSIVE EARNINGS                                   211,969                197,825
                                                                                 ================       ================


Earnings per common share
             Basic                                                             $            0.37                   0.19
                                                                                 ================       ================

Weighted average number of common shares outstanding
             Basic                                                                       932,654              1,065,025
                                                                                 ================       ================

Earnings per common share
             Diluted                                                                        0.36                   0.19
                                                                                 ================       ================

Weighted average number of common shares outstanding
             Diluted                                                                     950,735              1,093,847
                                                                                 ================       ================



Comprehensive earnings per common share
             Basic                                                                          0.23                   0.19
                                                                                 ================       ================

             Diluted                                                                        0.22                   0.18
                                                                                 ================       ================
</TABLE>


                                        5

<PAGE>
                               GFSB Bancorp, Inc.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                Increase (decrease) in cash and cash equivalents

<TABLE>
<CAPTION>
                                                                                 Three months ended
                                                                                   September 30,
                                                                      -----------------------------------------
                                                                           1999                   1998
                                                                      ---------------      --------------------
                                                                       (Unaudited)             (Unaudited)
<S>                                                                <C>                  <C>
Cash flows from operating activities
           Net earnings                                             $        345,232     $             204,271
           Adjustments to reconcile net earnings to
             net cash provided by operations
                     Deferred loan origination fees                          (91,399)                  (49,078)
                     Gain on sale of sold loans                               (7,141)                   (2,135)
                     Provision for loan losses                                20,000                    15,000
                     Depreciation of premises and equipment                   43,351                    30,682
                     Amortization of investment and mortgage-
                       backed securities premiums (discounts)                 65,437                   104,215
                     Stock dividends on FHLB stock                           (40,700)                  (30,800)
                     Release of ESOP stock                                    23,759                    23,028
                     Stock compensation                                       16,221                    13,446
                     Provision (benefit) for deferred income taxes           (23,892)                        -

           Net changes in operating assets and liabilities
                     Accrued interest and dividends receivable               (73,773)                  (65,468)
                     Prepaid taxes                                                 -                         -
                     Prepaid and other assets                                (26,024)                  (17,320)
                     Accrued interest payable                                 82,253                    26,286
                     Accounts payable and accrued liabilities                (55,799)                   22,835
                     Income taxes payable                                     42,057                   (37,718)
                     Dividends declared and payable                             (982)                   (5,840)
                                                                      ---------------      --------------------

                               Net cash provided by
                               operating activities                          318,600                   231,404

Cash flows from investing activities
           Purchase of premises and equipment                                 (1,678)                 (480,571)
           Loan originations and principal
             repayment on loans, net                                      (2,512,797)               (6,727,178)
           Principal payments on mortgage-backed
             securities                                                    2,065,934                 2,872,988
           Purchases of mortgage-backed securities                                 -                  (880,255)
           Purchases of available-for-sale securities                     (6,615,850)               (2,548,386)
           Maturities and proceeds from sale of
             available-for-sale securities                                         -                 1,010,000
           Principal payments on available-for-sale securities                75,000                    70,000
           Purchases of held-to-maturity securities                                -                         -
           Maturities and proceeds from sale of
            held-to-maturity securities                                            -                         -
           Purchase of FHLB stock                                           (350,000)                 (220,100)
                                                                      ---------------      --------------------

                               Net cash used by
                               investing activities                       (7,339,391)               (6,903,502)

</TABLE>

                                        6
<PAGE>

                               GFSB Bancorp, Inc.

                CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

                Increase (decrease) in cash and cash equivalents
<TABLE>
<CAPTION>
                                                                                 Three months ended
                                                                                   September 30,
                                                                      -----------------------------------------
                                                                           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                                $     (2,057,523)    $           1,365,470
           Net increase (decrease) in mortgage escrow funds                  164,334                   171,641
           Proceeds from FHLB advances                                   119,538,922                74,832,527
           Repayments on FHLB advances                                  (112,529,387)              (69,878,682)
           Purchase of GFSB Bancorp stock under the
             stock repurchase plan in cash                                  (166,162)               (1,090,472)
           Dividends paid or to be paid in cash                              (73,766)                  (76,606)
           Price paid for vested management bonus                                  -                         -
           stock plan stock
           Proceeds from exercise of stock options                                 -                         -
                                                                      ---------------      --------------------

                               Net cash provided by
                               financing activities                        4,876,418                 5,323,878
                                                                      ---------------      --------------------

           Increase (decrease) in cash and cash equivalents               (2,144,373)               (1,348,220)

           Cash and cash equivalents at beginning of period                5,147,215                 4,537,980
                                                                      ---------------      --------------------

           Cash and cash equivalents at end of period               $      3,002,842                 3,189,760
                                                                      ===============      ====================


Supplemental disclosures
           Cash paid during the period for
                     Interest on deposits and advances              $      1,488,349     $           1,371,557
                     Income taxes                                            180,069                   106,578

           Change in unrealized gain (loss), net of deferred
             taxes on available-for-sale securities                         (133,263)                   (6,446)

           Dividends declared not yet paid                                    73,766                    76,606

</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 June 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 June 30, 1999. The dividends were paid in July
1999.

During the quarter ended  September 30, 1999, the Board of Directors  declared a
quarterly 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.

As required by SOP 93-6,  the  dividends  on  unallocated  ESOP shares have been
recorded as an additional  $4,700  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 September 30, 1999, the Company was committed to
release 5328.59 shares of this common stock. The commitment  resulted in $75,000
of additional  compensation  cost for the nine months ended  September 30, 1999,
with $24,000 of that amount booked as additional compensation cost for the three
months ended September 30, 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 as of the
one-year anniversary of the grant of the award. On January 5, 1997, 6,112 shares
under the Plan were earned, and the corresponding liability was paid. On January
5,  1998,  5,363  shares  under  the Plan  were  earned,  and the  corresponding
liability was paid. On January 5, 1999, 5,548 shares under the Plan were earned,
and the corresponding liability was paid.

At September  30, 1999,  21,102 shares remain to be awarded under the Plan. As a
result  of this  vesting  and the  dividends  earned  on the  vested  shares,  a
liability and corresponding  compensation cost in the amount of $51,500 has been
recorded for the nine months  ended  September  30,  1999,  with $16,200 of that
amount booked as additional  compensation  for the three months ended  September
30, 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 18,081 for the three month  period  ended
September 30, 1999, and by 28,822 for the three month period ended September 30,
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 has  recently  begun  purchasing
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 now 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  $5.1 million or 3.4% from $150.8  million at
June 30,  1999 to $155.9  million  at  September  30,  1999.  This  increase  is
primarily the result of a $2.6 million increase in the Bank's net loan portfolio
and a $4.2 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
million  or 2.5%  from  $81.2  million  at June  30,  1999 to $79.2  million  at
September  30, 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 $7 million from $55.5
million  at June  30,  1999 to  $62.6  million  at  September  30,  1999.  These
additional  borrowings  funded purchases of loans,  securities and mortgage loan
participations.  The Bank had $382,000 and $515,000 in unrealized  gains (net of
deferred  taxes) at  September  30, 1999 and June 30,  1999,  respectively  from
market gains on the Bank's  available-for-sale  investment  and  mortgage-backed
portfolios.

                                       11
<PAGE>

RESULTS OF OPERATIONS

COMPARISON OF OPERATING RESULTS FOR QUARTER ENDED SEPTEMBER 30, 1999 COMPARED TO
QUARTER ENDED SEPTEMBER 30, 1998

General

Net earnings  increased $141,000 or 69% for the quarter ended September 30, 1999
from the quarter ended September 30, 1998. This increase is primarily the result
of an  increase  in  net  interest  earning  of  $270,000  and  an  increase  in
non-interest earnings of $27,000,  offset by an increase in non-interest expense
of  $75,000,  an  increase  in income tax  expense of $76,000 and an increase in
provision for loan losses of $5,000

Interest Earnings

Total  interest  income  increased  $443,000 or 19.4% from $2.3  million for the
quarter ended September 30, 1998 to $2.7 million for the quarter ended September
30,1999.  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  $173,000 or 12.4% from $1.4 million for the
quarter ended September 30, 1999 to $1.6 million for the quarter ended September
30, 1999.  This  increase was  primarily  due to an increase in FHLB  borrowings
offset by a decrease in the bank's deposit base.

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 $463,000 and $401,000 at
September  30, 1999 and 1998,  respectively.  The  provision for loan loss was $
20,000  and  $15,000  for  the  quarter  ended  September  30,  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 $27,000 or 58.6% from $46,000 for the
quarter ended  September 30, 1998 to $73,000 for the quarter ended September 30,
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 12.5% from  $599,000 for the
quarter ended September 30, 1998 to $674,000 for the quarter ended September 30,
1999.  This  increase  was  primarily  due to an  increase in  compensation  and
benefits of $55,000 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 $19,000,  data
processing costs of $10,000,  professional fees of $11,000 and insurance expense
of $4,000,  offset by a decrease in stock  services  of  $11,000,  a decrease in
other operating expense of $10,000 and a decrease in advertising of $2,000.  The
increase in occupancy cost is primarily due to leasehold improvement expense and
janitorial expense for the

                                       12
<PAGE>

Loan Center and depreciation of furniture, fixtures, and equipment. The increase
in data  processing  expense is primarily  due to service  bureau  expense.  The
decrease in stock  services is primarily due to fee paid to the OTS for filing a
change of control  application  for the quarter  ending  September 30, 1998. The
decrease in other operating expense is primarily due to a decrease in Other Real
Estate Owned expense.

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 September 30, 1999, the
Bank's  liquidity,  as measured for  regulatory  purposes,  was 5.64%.  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  September  30,  1999,  cash and cash  equivalents
totaled  $3  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 September 30, 1999, the Bank had $62.6 million in outstanding borrowings from
the  FHLB  of  Dallas.  These  outstanding  borrowings  were  used  to  purchase
additional   investment  and   mortgage-backed   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 September 30, 1999, the Bank
originated  $9.6  million  in  total  loans   (including   loan   participations
purchased),  of which $7.1  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 Bank's loan demand 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  $319,000 and $231,000 for the three month period ended  September 30, 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 $7 million  and $7 million for the three
month period ended September 30, 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 $5 million  and $5 million for the three  month  period  ended
September 30, 1999 and 1998, respectively.

The Bank  anticipates  that it will have sufficient  funds available to meet its
current commitments.  As of September 30, 1999, the Bank had commitments to fund
loans of $6 million.  Certificates of deposit scheduled

                                       13
<PAGE>

to  mature  in one  year  or less  totaled  $33  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.

At  September  30,  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 September 30, 1999 was $19,000. The Bank
does not  anticipate any material  expenses for the quarter ending  December 31,
1999.  In  September  1998 the bank  hired a full time data  processing  systems
administrator.  Although he has other duties,  his primary  duties are Year 2000
administration,  testing,  remediation, and contingency planning, and his salary
is allocated to Year 2000 expense.  The budget  allocation for Year 2000 expense
is expected to cover personnel and other costs, including some contingency costs
for  operation  under the  contingency  plan.  Should the Bank have to resort to
alternative operating procedures due to major systems or communication  failures
at the beginning of the Year 2000, additional costs could be material.

Senior management has developed an emergency preparedness/business recovery plan
for  continuation of services to the Bank's customers in the event of systems of
communication  failures  at the  beginning  of the Year 2000.  The plan is being
continually  refined,  and  management  believes  that the Bank  will be able to
continue to operate in the Year 2000 even if some systems fail.  Near the end of
December  1999,  the bank  will  generate  paper and  spreadsheet  backup of all
customer and general ledger  accounts.  Due to the size of the Bank,  management
believes  that the Bank  will be able to  operate  with  transactions  processed
manually until normal  operation can be restored.  This procedure  could require
changing of schedules and hiring of temporary  staff,  which would increase cost
of operations.  If this  procedure  were to continue for any extended  period of
time, or if the bank ultimately had to change data service  providers,  the cost
could be material.

In its initial  Year 2000  Action  Plan,  the Bank  identified  seven  phases as
necessary to  implement a Year 2000  compliant  system.  The Bank is a federally
chartered  financial  institution  regulated by the Office of Thrift Supervision
("OTS"). The OTS identified five phases for Year 2000 compliance.  The following
list describes the five phases as identified by the OTS with  comparable  phases
from the Bank's Year 2000 Action Plan identified in parentheses, if different:

1.   Awareness  -- Inform  senior  management  of Year 2000 issues and  possible
     impact to the overall organization.

2.   Assessment  (Inventory,  Assessment) -- Estimate the scope of the Year 2000
     project and develop  the budget for project  execution.  Develop a complete
     inventory of hardware, software and systems, and categorize by importance.

3.   Renovation  (Analysis,  Renovation)  --  Perform a  detailed  analysis  and
     develop detailed plans for correction,  testing and reimplementing critical
     applications. Correct and replace all critical applications.

4.   Validation  (Testing)  -- Test all  critical  applications  unit and system
     level.

5.   Implementation  -- Implement all critical  applications  and databases in a
     production environment. Integration test.

As Of  September  30,  1999,  the  Bank has  completed  its  Year  2000  project
compliance efforts.

                                       14
<PAGE>



Subsequent Events

At the Annual Organizational  meeting of the Board of Directors of GFSB Bancorp,
Inc. the following officers were elected.

<TABLE>
<CAPTION>
<S>                                <C>
Wallace R. Phillips, DDS            Chairman of the Board
James Nechero, Jr.                  Vice-Chairman of the Board
Richard C. Kauzlaric                President and C.E.O.
George S. Perce                     Secretary
Michael Mataya                      Treasurer
Rick Gallegos                       An Executive Officer by virtue of his position as President of Gallup
                                    Federal Savings Bank
Jerry R. Spurlin                    Assistant Secretary and Chief Financial Officer
William W. Head                     Assistant Secretary and Chief Lending Officer
Marshall W. Coker                   Chief Administrative Officer
Jennifer Hembd                      Vice-President/Mortgage Loan Officer
Evelyn Lovato                       Assistant Vice-President/Financial Officer
Lisa Marcelli                       Assistant Cashier/Mortgage Loan Processing Officer
Mauri Slaughter                     Assistant Cashier/Consumer Loan Officer
Cynthia Clifford                    Assistant Cashier/Bookkeeping Supervisor
Cathy Marquez                       Assistant Cashier/Head Teller
</TABLE>

Vernon I.  Hamilton and Charles L. Parker,  Jr. are directors of the Company but
hold no office.


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
November 2, 1999,  23,170 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.


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

                                       15
<PAGE>

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.


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

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

                                       16
<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:  November 10, 1999         /s/Jerry R. Spurlin
                                 -----------------------------------------------
                                 Jerry R. Spurlin
                                 Assistant Secretary and Chief Financial Officer
                                 (Duly Authorized Representative and
                                 Principal Financial Officer)