Exhibit 13.0





GS
      Financial Corp..2007
      Annual Report

















To
      our Shareholders:  A Message from the President and
      CEO








2007 –
THE YEAR OF CHALLENGE





The year
2007 will be remembered as a challenging year for the banking industry and it
was no different for GS Financial Corp.





Like the
industry as a whole, our profitability was fettered by margin compression, a
slow housing market, and increased competition for deposits.  Our net
income was impacted by the expenses of planned growth relating to new banking
locations, additional personnel, and additional investment in
technology.





We,
nevertheless, made progress in the fulfillment of our strategic objectives
related to increased loan growth, a better mix of fixed rate loans with shorter
maturities, the introduction of variable rate loans and enhanced product
offerings, the establishment of new banking locations, growth in low cost
deposits and improved technology.





Some of
our performance highlights include:





·
            Gross
      loans grew by $24.1 million or 24.7% during 2007 to $121.9
      million.


·
            We
      sold $15.2 million of residential loan originations in the secondary
      market in 2007 resulting in gains on loan sales of
    $189,000.


·
            Deposits
      grew by $6.8 million or 5.5% during 2007, including $2.3 million in
      non-interest bearing deposits.


·
            During
      2007, the Bank re-opened its newly renovated Mid-City New Orleans office,
      which was flooded by Hurricane Katrina, converted its loan production
      office in Ponchatoula, Louisiana to a full service branch and opened a
      full service trailer branch on the Westbank of Jefferson Parish in Harvey,
      Louisiana.


·
            Stockholders’
      equity at December 31, 2007 was $28.2 million, up $1.0 million from
      December 31, 2006.  Stockholders’ equity as a percentage of
      total assets at December 31, 2007 was
15.10%.





THE
COMMUNITY BANK BUSINESS MODEL





In past
communications to our shareholders, I have emphasized that we adopted a
community bank business model, transitioning the Bank from the traditional
savings and loan model.  I would like to share with you the status of
our transition.





Below is
a summary of some of the progress we have made in critical areas:





Information
technology – Management has focused much of its time and resources over
the past two years on developing new banking products and services, increasing
capacity for all business lines.  We have made significant
expenditures on hardware and software upgrades.  Some of the software
expenditures have included those for the implementation of corporate wide e-mail
and Internet access, online banking, documentation scanning, mortgage loan
origination and processing software and loan documentation software. This
investment will be increasingly leveraged over the next several years as each
department realizes operating efficiencies and expands existing product
offerings as more customers take advantage of our convenience products, such as
online banking, remote deposit and free bill payment services.





Mortgage
Banking – Management knew that, for our mortgage lending process to be
competitive, we had to evolve from a low volume long term fixed rate portfolio
lender.  To that end, we have added adjustable rate mortgage loan
products and home equity loans, and we now originate loans for sale into the
secondary market.  A significant investment in personnel was made
during the past two years in order to assemble a team of mortgage banking
professionals who could serve an increased volume of mortgage loans and
implement the secondary market program.  Management believes that the
significant changes we have made to mortgage lending will not only increase
profitability and reduce interest rate risk (by retaining primarily adjustable
rate loans in the portfolio), it will also allow us to both better serve our
mortgage loan customers with the additional products and better pricing and
permit us to be more competitive in our market area.





2007
Annual Report
 Page
1




Commercial
Banking – Management has completed the successful implementation of a new
commercial lending philosophy founded on the principles of safety, soundness and
profitability.  We hired experienced commercial lenders with a
successful business development track record and formal credit training in their
backgrounds, and placed them in locations where they have a customer following.
As a result of the investment in these new personnel, the commercial lending
team has significantly increased the quality of our commercial loan
portfolio.  These new bankers are committed to a relationship banking
approach to business development.  They have been the driving force in
the growth of our low cost commercial deposits and have already made a
significant contribution through their efforts to cross-sell mortgage loans,
home equity loans and retail deposits. Quarter by quarter these activities will
continue to improve the profitability of our Bank.





Deposit
Mix- Management recognized that our past reliance upon certificates of
deposit and traditional passbook savings accounts to fund the community bank
business model would be insufficient. We needed new and better deposit products
in order to compete more effectively.  Accordingly, we enhanced our
deposit product offerings.  We introduced tiered money market accounts
for individuals and businesses; we implemented several new pricing options for
certificates of deposit in an effort to move the high cost time deposit customer
into longer or shorter terms based upon management’s anticipation of interest
rate movements; and we placed increased emphasis on the sale of NOW checking
accounts coupled with better online banking products.





2008 -
WHAT ARE THE OPPORTUNITIES?





Guaranty
Savings Bank has made great progress transitioning to a community bank business
model.  This model reaches more customers through the offering of more
products, earns a higher interest margin and, in recent years, achieved more
profits than if we had retained the savings and loan business
model.  Although the amount of time it will take to fully transform
our pre-existing savings and loan balance sheet to one of a community bank is
uncertain, we believe it will occur gradually over a period of several
productive years.  Currently, much of our deposit mix remains
concentrated in time deposits as opposed to non-interest bearing and other
transactional accounts.  That is why we have placed emphasis and have
demonstrated progress in the growth of transactional and non-interest bearing
deposit products.  In addition, much of the loan portfolio remains
concentrated in 15-year and 30-year fixed rate residential portfolio loans as
opposed to adjustable rate loans, home equity loans and higher yielding shorter
term commercial loans.  That is why we have aggressively revitalized
both the mortgage lending and commercial banking teams.  While the
progress we have made has reduced our exposure to margin compression and
interest rate risk, we still have more to accomplish.





The
execution of our multi-year strategic plan will transition Guaranty Savings Bank
to a community bank and is expected to improve our profitability over
time.  We have made great strides and see progress every
day.  We believe our fundamentals are strong and our growth strategy
is sound.  We have a good management team, a healthy capital position,
minimal exposure to the sub-prime mortgage market, and, we believe, adequate
loan loss reserves. In addition, we have diversified our revenue streams and we
expect to capitalize on the recent big bank consolidation and acquisition
activities in our market by attracting more customers.





Management
and the Board of Directors of GS Financial Corp. and Guaranty Savings Bank
appreciate the confidence that you have placed in us by investing in our
Company.








/s/
Stephen E. Wessel








Stephen
Wessel


President
and Chief Executive Officer





2007
Annual Report
 Page
2




Index
      to Annual Report




Business
      Description
            4Shareholder
      Information
            4Selected
      Consolidated Financial Data
            5Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            6Management’s
      Report on Internal Control Over Financial Reporting
            27Report
      of Independent Registered Public Accounting Firm
            28Consolidated
      Balance Sheets
            29Consolidated
      Statements of Income
            31Consolidated
      Statements of Comprehensive Income
            32Consolidated
      Statements of Changes in Stockholders’ Equity
            33Consolidated
      Statements of Cash Flows
            34Notes
      to the Consolidated Financial Statements
            36Board
      of Directors
            64Executive
      Officers
            64Banking
      Locations
            65GS
      Financial Corp. Stock Performance
            65


2007
Annual Report
 Page
3




Business
      Description





GS
Financial Corp. (“GS Financial” or the “Company”) provides community banking
services through its wholly-owned subsidiary, Guaranty Savings Bank, a Louisiana
chartered savings bank, at its five banking locations and a loan production
office in the metropolitan New Orleans area.





The
Company, a thrift holding company organized and incorporated under the laws of
the State of Louisiana, is subject to the supervision and regulation of the
Office of Thrift Supervision as well as other federal and state agencies
governing the banking industry and public companies.





Shareholder
      Information




TRANSFER
AGENT, REGISTRAR, AND DIVIDEND PAYING AGENT FOR COMMON STOCK


Registered
shareholder inquiries related to stock transfers, address changes, lost stock
certificates, dividend payments or account consolidations should be directed
to:


Registrar
and Transfer Company


10
Commerce Drive


Cranford,
New Jersey 07016


(800)
368-5948


www.rtco.com





FORM
10-K AND OTHER FINANCIAL INFORMATION


Shareholders
are advised to review financial information and other disclosures about GS
Financial contained in its Annual Report on Form 10-K.  A copy of the
Form 10-K for the year ended December 31, 2007 and other financial reports filed
by GS Financial with the SEC is available on the Company’s web site at
www.gsfinancialcorp.com or the SEC’s web site at www.sec.gov, or may be obtained
without charge by calling Lettie Moll, Corporate Secretary, or Andrew Bower,
Chief Financial Officer, at (504) 457-6220 or by writing to:


GS
Financial Corp.


Investor
Relations


3798
Veterans Boulevard


Metairie,
Louisiana 70002





INDEPENDENT
REGISTERED PUBLIC ACCOUNTANTS


LaPorte,
Sehrt, Romig and Hand


A
Professional Accounting Corporation


110
Veterans Boulevard, Suite 200


Metairie,
Louisiana 70005




COMMON
STOCK


GS
Financial’s common stock is traded on The Nasdaq Global Market under the ticker
symbol GSLA.  At December 31, 2007, the closing price was $18.94 per
share and there were approximately 100 shareholders of record.





MARKET
PRICES AND DIVIDENDS


Set forth
below are the high and low sales prices for GS Financial’s common stock on the
Nasdaq Global Market and dividends paid for the periods presented.




Year
      2007
            
            Stock
      Price
            
            
            DividendsQuarter
      Ended
            
            High
            
            
            LowMarch
      31
            
            $
            21.38
            
            
            $
            19.00
            
            
            $
            0.10June
      30
            
            
            21.49
            
            
            
            18.26
            
            
            
            0.10September
      30
            
            
            20.75
            
            
            
            17.04
            
            
            
            0.10December
      31
            
            
            19.50
            
            
            
            17.59
            
            
            
            0.10Year
      2006
            
            Stock
      Price
            
            
            DividendsQuarter
      Ended
            
            High
            
            
            LowMarch
      31
            
            $
            17.68
            
            
            $
            14.99
            
            
            $
            0.10June
      30
            
            
            18.15
            
            
            
            16.74
            
            
            
            0.10September
      30
            
            
            18.50
            
            
            
            16.50
            
            
            
            0.10December
      31
            
            
            21.76
            
            
            
            18.20
            
            
            
            0.10





ANNUAL
MEETING


The
Annual Meeting of Shareholders of GS Financial Corp. will be held on Tuesday,
April 22, 2008, at 10:00 a.m. CDT at its corporate office.  The
address is:


Guaranty
Savings Bank


3798
Veterans Boulevard


Metairie,
Louisiana 70002




2007
Annual Report
 Page
4




GS
      Financial Corp. and SubsidiarySelected
      Consolidated Financial Data






At
      or For Years Ended December 31,($
      in thousands, except per share data)
            
            2007
            
            
            2006
            
            
            2005
            
            
            2004
            
            
            2003BALANCE
      SHEET DATATotal
      assets
            
            $
            186,487
            
            
            $
            168,380
            
            
            $
            177,614
            
            
            $
            200,066
            
            
            $
            214,714Cash
      and cash equivalents
            
            
            9,462
            
            
            
            11,117
            
            
            
            22,555
            
            
            
            7,024
            
            
            
            11,371Loans
      receivable, net
            
            
            118,477
            
            
            
            93,987
            
            
            
            69,657
            
            
            
            92,158
            
            
            
            77,367Investment
      securities
            
            
            47,747
            
            
            
            55,090
            
            
            
            77,344
            
            
            
            94,557
            
            
            
            119,271Deposit
      accounts
            
            
            129,510
            
            
            
            122,754
            
            
            
            118,866
            
            
            
            130,723
            
            
            
            142,108Borrowings
            
            
            26,986
            
            
            
            17,042
            
            
            
            32,106
            
            
            
            39,689
            
            
            
            42,135Stockholders'
      equity
            
            
            28,164
            
            
            
            27,164
            
            
            
            25,407
            
            
            
            28,944
            
            
            
            29,308INCOME
      STATEMENT DATAInterest
      income
            
            $
            11,248
            
            
            $
            11,000
            
            
            $
            10,466
            
            
            $
            10,989
            
            
            $
            9,993Interest
      expense
            
            
            5,547
            
            
            
            4,904
            
            
            
            4,856
            
            
            
            5,436
            
            
            
            6,178Net
      interest income
            
            
            5,701
            
            
            
            6,096
            
            
            
            5,610
            
            
            
            5,553
            
            
            
            3,815Provision
      (reversal) for loan losses
            
            
            (300
            )
            
            
            (1,981
            )
            
            
            4,793
            
            
            
            343
            
            
            
            118Non-interest
      income (loss)
            
            
            424
            
            
            
            51
            
            
            
            (1,294
            )
            
            
            (691
            )
            
            
            1,476Non-interest
      expense
            
            
            5,409
            
            
            
            4,926
            
            
            
            4,707
            
            
            
            4,483
            
            
            
            4,419Net
      income (loss) before taxes
            
            
            1,016
            
            
            
            3,202
            
            
            
            (5,184
            )
            
            
            36
            
            
            
            754Net
      income (loss)
            
            
            658
            
            
            
            2,114
            
            
            
            (3,676
            )
            
            
            199
            
            
            
            691KEY
      RATIOSReturn
      on average assets
            
            
            0.38
            %
            
            
            1.21
            %
            
            
            (1.96
            )%
            
            
            0.10
            %
            
            
            0.32
            %Return
      on average shareholders' equity
            
            
            2.40
            
            
            
            8.15
            
            
            
            (13.76
            )
            
            
            0.70
            
            
            
            2.17Net
      interest margin
            
            
            3.44
            
            
            
            3.58
            
            
            
            3.12
            
            
            
            2.73
            
            
            
            1.84Average
      loans to average deposits
            
            
            88.35
            
            
            
            70.74
            
            
            
            71.74
            
            
            
            62.69
            
            
            
            60.15Earning
      assets to interest-bearing liabilities
            
            
            118.86
            
            
            
            117.88
            
            
            
            115.04
            
            
            
            114.37
            
            
            
            115.53Efficiency
      ratio
            
            
            88.27
            
            
            
            80.14
            
            
            
            109.06
            
            
            
            92.20
            
            
            
            83.52Non-interest
      expense to average assets
            
            
            3.12
            
            
            
            2.82
            
            
            
            2.51
            
            
            
            2.12
            
            
            
            2.06Allowance
      for loan losses to loans
            
            
            2.82
            
            
            
            3.82
            
            
            
            7.58
            
            
            
            0.99
            
            
            
            0.77Stockholders'
      equity to total assets
            
            
            15.10
            
            
            
            16.16
            
            
            
            14.30
            
            
            
            14.47
            
            
            
            13.65COMMON
      SHARE DATAEarnings
      (loss) per share:Basic
            
            $
            0.53
            
            
            $
            1.74
            
            
            $
            (3.11
            )
            
            $
            0.17
            
            
            $
            0.58Diluted
            
            
            0.52
            
            
            
            1.73
            
            
            
            (3.11
            )
            
            
            0.17
            
            
            
            0.57Dividends
      paid per share
            
            
            0.40
            
            
            
            0.40
            
            
            
            0.40
            
            
            
            0.40
            
            
            
            0.40Dividend
      payout ratio
            
            
            76.44
            %
            
            
            22.99
            %
            
            
            n/a
            
            
            
            235.29
            %
            
            
            68.97
            %Book
      value per share
            
            $
            21.90
            
            
            $
            22.00
            
            
            $
            20.99
            
            
            $
            22.47
            
            
            $
            22.46Trading
      data:High
      closing price
            
            $
            21.49
            
            
            $
            21.76
            
            
            $
            19.66
            
            
            $
            19.90
            
            
            $
            19.50Low
      closing price
            
            
            17.04
            
            
            
            14.99
            
            
            
            12.86
            
            
            
            17.90
            
            
            
            18.00End
      of period closing price
            
            
            18.94
            
            
            
            19.80
            
            
            
            15.00
            
            
            
            18.00
            
            
            
            19.44Average
      shares outstanding:Basic
            
            
            1,243,655
            
            
            
            1,212,173
            
            
            
            1,181,313
            
            
            
            1,156,441
            
            
            
            1,194,296Diluted
            
            
            1,268,995
            
            
            
            1,222,949
            
            
            
            1,181,313
            
            
            
            1,178,013
            
            
            
            1,214,443





2007
Annual Report
 Page
5




GS
      Financial Corp. and SubsidiaryManagement's
      Discussion and Analysis of Financial Condition and Results of
      Operations




Presented
below is a discussion of the financial condition of GS Financial Corp. (“GS
Financial” or the “Company”), changes in financial condition and its results of
operations during 2007, 2006 and 2005.  Virtually all of the Company’s
operations are dependent on the operations of its subsidiary, Guaranty Savings
Bank (“Guaranty” or the “Bank”), formerly known as Guaranty Savings and
Homestead Association.  This discussion is presented to highlight and
supplement information presented elsewhere in this Annual Report, particularly
the consolidated audited financial statements and related notes.  This
discussion should be read in conjunction with the accompanying tables and our
consolidated, audited financial statements.  Certain financial
information in prior years has been reclassified to conform to the current
year’s presentation.





FORWARD-LOOKING
STATEMENTS


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





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





·
            expectations
      about overall economic recovery in the Company’s market
    area,


·
            expectations
      about the ability of the Bank’s borrowers to make payments on outstanding
      loans and the sufficiency of the allowance for loan
  losses,


·
            expectations
      about the current values of collateral securing the Bank’s outstanding
      loans,


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


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


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





Because
it is uncertain whether future conditions and events will confirm these
assumptions, there is a risk that the Company’s future results will differ
materially from what is stated or implied by such forward-looking
statements.  The Company cautions the reader to consider this
risk.





The
Company undertakes no obligation to update any forward-looking statement
included in this annual report, whether as a result of new information, future
events or developments, or for any other reason.





OVERVIEW


The
Company reported net income of $658,000, or $0.53 per share, for the year ended
December 31, 2007, compared with $2.1 million, or $1.74 per share, for the year
ended December 31, 2006.  The Company succeeded in its growth
initiatives during the year, including continued strong loan growth during a
year in which growth in the local market as a whole was minimal, deposit growth,
particularly in transactional accounts, and the opening of a new banking
location, re-opening of a banking location, and the conversion of our loan
production office to a full service branch.  The decline in
profitability in 2007 compared with 2006 was due in large part to the $2.0
million reversal in the provision for loan losses in 2006 compared to a $300,000
reversal in 2007, as well as margin compression as the Bank’s cost of funds
increased substantially during 2007.  This adverse trend in funding
costs began to reverse in the fourth quarter of 2007 and is continuing to trend
favorably thus far in 2008.





Hurricane
Katrina, which struck the Greater New Orleans area in August 2005, resulted in
substantial property damage in the market area that the Company operates in and
has displaced a significant number of people
and businesses.  Based upon its assessment of the property damage
caused by Hurricane Katrina, and taking into consideration its estimates of the
potential economic impact on its borrowers, the Company made provisions for loan
losses of $4.8 million for the year ended December 31, 2005.  In 2007
and 2006, $300,000 and $2.0 million, respectively, of these provisions were
reversed as conditions in the Bank’s area improved and the level of actual loan
impairment was less than what management expected at the end of 2005. The Bank re-opened its one
location which suffered extensive damage from Hurricane Katrina in August
2007.




2007
Annual Report
 Page
6




GS
      Financial Corp. and SubsidiaryManagement's
      Discussion and Analysis of Financial Condition and Results of
      Operations


The
Company’s net loan portfolio amounted to $118.5 million at December 31, 2007,
compared with $94.0 million and $69.7 million at December 31, 2006 and 2005,
respectively.  The increase in net loans receivable was due to a
substantial increase in the volume of new loan originations of both residential
and commercial real estate loans.  In December 2005, Stephen Wessel
was hired as the Bank’s new President and Chief Executive Officer.  In
addition, in January 2006, twonew commercial loan
officers were hired and, in March 2006, a mortgage banking manager was
hired.  During 2006, the Bank was approved as an originator to sell
loans to Fannie Mae and Freddie Mac and, in the fourth quarter of 2006, the Bank
sold its first loans in the secondary market.  During 2007, an
additional experienced mortgage loan originator was hired, and the Bank was
approved as an originator for two additional private investors.  These
factors contributed to the Bank increasing its residential loan production from
$20.5 million in 2006 to $35.6 million in 2007.  The Bank anticipates
continuing to sell loans in the secondary market while retaining servicing on
these loans to maintain customer relationships and earn servicing fee
income.  During 2007 and 2006, we sold an aggregate of $15.2 million
and $1.4 million, respectively, of residential mortgage loans into the secondary
market at a gain of $189,000 and $30,000, respectively.





CRITICAL
ACCOUNTING POLICIES


The
Company prepares its financial statements in accordance with accounting
principles generally accepted in the United States of America.  Note A
to the consolidated financial statements discusses certain accounting principles
and methods of applying those principles that are particularly important to this
process.  In applying these principles to determine the amounts and
other disclosures that are presented in the financial statements and discussed
in this section, the Company is required to make estimates and
assumptions.





The
Company believes that the determination of its estimate of the allowance for
loan losses involves a higher degree of judgment and complexity than its
application of other significant accounting policies.  Factors
considered in this determination and the processes used by management are
discussed in Note A to the consolidated financial statements and in the
discussion below under the headings “Loans” and “Allowance for Loan
Losses.”  Although management believes it has identified appropriate
factors for review and designed and implemented adequate procedures to support
the estimation process that are consistently followed, the allowance remains an
estimate about the effect of matters that are inherently
uncertain.  Over time, changes in economic conditions or the actual or
perceived financial condition of Guaranty’s credit customers or other factors
can materially impact the allowance estimate, potentially subjecting the Company
to significant earnings volatility.





One other
estimate requiring a high degree of judgment is the valuation allowance on the
deferred tax asset.  As operating losses can be carried forward 15
years and the Company expects positive taxable income for each year going
forward, no valuation allowance is deemed necessary on the portion of the
deferred tax asset created by net operating losses.  However, a
portion of the deferred tax asset relates to capital losses.  Tax
rules only allow these losses to be offset against future capital gains for five
years.  As it is uncertain whether the Bank will be able to realize
capital gains of the magnitude to fully offset these losses in the applicable
five year period, we elected to establish an appropriate valuation allowance for
the portion of the capital loss carryforward which we estimate may not be
utilized.  See Note I of the Consolidated Financial Statements for
further discussion of the Company’s income tax accounting.





2007
Annual Report
 Page
7




GS
      Financial Corp. and SubsidiaryManagement's
      Discussion and Analysis of Financial Condition and Results of
      Operations


FINANCIAL
CONDITION


At
December 31, 2007, GS Financial reported total assets of $186.5 million compared
to $168.4 million at the end of 2006.  Average total assets were
$172.6 million for the year ended December 31, 2007, a decrease of $1.5 million
compared to the year ended December 31, 2006, or 0.9%.





LOANS
AND ALLOWANCE FOR LOAN LOSSES


As with
most savings institutions, a significant portion of the Company’s assets are
comprised of loans made to its customers.  The Company engages
primarily in real estate lending, both residential and commercial.





In
general, credit is extended based on the current market conditions, prevailing
economic trends, the value of the underlying collateral and the borrower’s
credit history.  The lending activities of the Company are subject to
written underwriting standards and loan origination procedures established by
the Company's Board of Directors (the “Board”) and senior officers and are
incorporated into the Company's Lending Policy which is reviewed as needed by
the Board and senior officers.  The underwriting standards establish
the manner in which loan applications are accepted and
processed.  Such standards are written to comply with all applicable
laws and regulations including but not limited to Truth-In-Lending (Regulation
Z) and the Real Estate Settlement Procedures Act (“RESPA”).  These
standards pertain to such issues as maximum loan amounts, acceptable rates and
terms, appraisal guidelines, disclosure requirements, credit criteria,
debt-to-income ratios, complete applications, and title
requirements.  The Lending Policy establishes the overall direction of
the Company's lending activities within the community and forms the basis for
setting underwriting standards which limit the Company's exposure to credit
risk.





The
outstanding balance in total loans at December 31, 2007 was $121.9 million, an
increase of $24.1 million, or 24.7%, from the year-end 2006 balance of $97.7
million.  The 2006 balance was up 29.7%, or $22.3 million, from the
end of 2005.  Average loans for 2007 were $107.8 million, up $20.4
million, or 23.4% from the prior year’s average level.  Table 1, which
is based on regulatory reporting codes, shows loan balances at year-end of the
most recent five years.





TABLE
      1. COMPOSITION OF LOAN PORTFOLIOAt
      December 31,($
      in thousands)
            
            2007
            
            
            2006
            
            
            2005
            
            
            2004
            
            
            2003Real
      estate loans - residential
            
            $
            62,481
            
            
            $
            48,610
            
            
            $
            36,800
            
            
            $
            45,007
            
            
            $
            44,021Real
      estate loans - commercial and other
            
            
            45,757
            
            
            
            36,896
            
            
            
            24,794
            
            
            
            36,143
            
            
            
            26,460Real
      estate loans - construction
            
            
            9,074
            
            
            
            9,089
            
            
            
            11,282
            
            
            
            8,233
            
            
            
            4,709Consumer
      loans
            
            
            913
            
            
            
            677
            
            
            
            669
            
            
            
            629
            
            
            
            513Commercial
      business loans
            
            
            3,625
            
            
            
            2,445
            
            
            
            1,819
            
            
            
            3,058
            
            
            
            2,257Total
      loans at year-end
            
            $
            121,850
            
            
            $
            97,717
            
            
            $
            75,364
            
            
            $
            93,070
            
            
            $
            77,960Allowance
      for loan losses
            
            
            (3,432
            )
            
            
            (3,732
            )
            
            
            (5,713
            )
            
            
            (920
            )
            
            
            (601
            )Deferred
      loan origination costs
            
            
            59
            
            
            
            2
            
            
            
            6
            
            
            
            8
            
            
            
            8Net
      loans at year end
            
            
            118,477
            
            
            
            93,987
            
            
            
            69,657
            
            
            
            92,158
            
            
            
            77,367Average
      total loans during year
            
            $
            107,785
            
            
            $
            87,360
            
            
            $
            87,437
            
            
            $
            87,185
            
            
            $
            76,623





The
Company’s investment in residential real estate loans, which includes those
loans secured by 1-4 family properties, increased 28.5%, or $13.9 million,
between December 31, 2006 and 2007, after an increase of 32.1%, or $11.8
million, between 2005 and 2006.  The increase in 2006 was due to
concerted marketing efforts as well as rebuilding loans made subsequent to
Hurricane Katrina converting to permanent mortgages.  In 2007,
residential real estate loans continued to increase as the Company added an
experienced mortgage loan originator and additional loan products as well as
continuing its marketing efforts.





2007
Annual Report
 Page
8




GS
      Financial Corp. and SubsidiaryManagement's
      Discussion and Analysis of Financial Condition and Results of
      Operations


Since
2000, the Company has been shifting its lending emphasis towards the commercial
real estate market to diversify and enhance the products and services offered to
its customers and add higher yielding loans to its overall
portfolio.  Commercial real estate loans typically carry higher yields
and associated risk than loans on 1-4 family dwellings.  The Company
offers real estate loans on multifamily residential dwellings, commercial real
estate and vacant land.  The Company also offers commercial
asset-based loans secured by non-real estate collateral such as inventory and
accounts receivable, though it does not actively solicit non-real estate
commercial loans.  The Company has a commercial loan committee
consisting of board members to evaluate commercial loan applications of
significant size and complexity.





During
2007 and 2006, the Company was able to develop significant new business in
commercial real estate loans.  Commercial real estate loans, including
owner-occupied buildings multi-family and retail property, increased 24.0%, or
$8.9 million between December 31, 2006 and 2007, which follow an increase of
48.8%, or $12.1 million, between December 31, 2005 and 2006.  At
December 31, 2007, commercial real estate and construction loans made up 45.0%
of the total loan portfolio compared to 47.1% and 47.9% at December 31, 2006 and
2005, respectively.





For the
year ended December 31, 2007, the Bank’s total loan origination’s amounted to
$56.2 million compared to $42.0 million and $14.7 million for the years ended
December 31, 2006 and 2005, respectively.  The increases in both
residential and commercial lending in 2007 and 2006 were due to the Bank hiring
experienced lending professionals in each area of expertise.





Table 2
reflects the Company’s total loan origination and repayment experience during
the periods indicated.





TABLE
      2. LOAN ORIGINATIONS BY TYPEYear
      Ended December 31,($
      in thousands)
            
            2007
            
            
            2006
            
            
            2005
            
            
            2004
            
            
            2003Real
      estate loans - residential
            
            $
            35,575
            
            
            $
            20,487
            
            
            $
            8,339
            
            
            $
            13,452
            
            
            $
            12,469Real
      estate loans - commercial and other
            
            
            15,447
            
            
            
            16,398
            
            
            
            1,143
            
            
            
            18,733
            
            
            
            15,103Real
      estate loans - construction
            
            
            3,684
            
            
            
            2,432
            
            
            
            4,896
            
            
            
            6,550
            
            
            
            3,152Consumer
      loans
            
            
            547
            
            
            
            345
            
            
            
            366
            
            
            
            269
            
            
            
            338Commercial
      loans
            
            
            949
            
            
            
            2,332
            
            
            
            -
            
            
            
            2,003
            
            
            
            3,153Total
      originations
            
            
            56,202
            
            
            
            41,994
            
            
            
            14,744
            
            
            
            41,007
            
            
            
            34,215Loan
      principal repayments
            
            
            (16,963
            )
            
            
            (18,108
            )
            
            
            (32,204
            )
            
            
            (25,897
            )
            
            
            (35,062
            )Loans
      sold
            
            
            (15,182
            )
            
            
            (1,353
            )
            
            
            -
            
            
            
            -
            
            
            
            -Net
      portfolio activity
            
            $
            24,057
            
            
            $
            22,533
            
            
            $
            (17,460
            )
            
            $
            15,110
            
            
            $
            (847
            )





2007
Annual Report
 Page
9




GS
      Financial Corp. and SubsidiaryManagement's
      Discussion and Analysis of Financial Condition and Results of
      Operations


Table 3
reflects contractual loan maturities, unadjusted for scheduled principal
reductions, prepayments or re-pricing opportunities.  Demand loans and
loans having no stated maturity are reported as due in one year or
less.   Most of the Bank’s outstanding loans carry a fixed rate
of interest, though certain commercial loans are tied to the Guaranty Savings
Bank Prime rate and home equity lines of credit have floating interest rates
which are tied to the Wall Street Prime rate.





TABLE
      3. LOAN MATURITIES BY TYPEAt
      December 31, 2007, Loans Maturing In($
      in thousands)
            
            One
      year or less
            
            
            One
      through five years
            
            
            More
      than five years
            
            
            TotalReal
      estate loans – residential
            
            $
            4,041
            
            
            $
            7,563
            
            
            $
            56,940
            
            
            $
            68,544Other
      real estate loans
            
            
            10,340
            
            
            
            20,639
            
            
            
            15,408
            
            
            
            46,387Consumer
      loans
            
            
            -
            
            
            
            197
            
            
            
            3,882
            
            
            
            4,079Commercial
      loans
            
            
            1,693
            
            
            
            1,147
            
            
            
            -
            
            
            
            2,840Total
            
            $
            16,074
            
            
            $
            29,546
            
            
            $
            76,230
            
            
            $
            121,850Percentage
            
            
            13.2
            %
            
            
            24.2
            %
            
            
            62.6
            %
            
            
            100.0
            %





Of the
Bank’s loans outstanding at December 31, 2007 with maturities greater than one
year, $101,036,000 have a fixed rate of interest and $4,740,000 have a variable
interest rate.





All loans
carry a degree of credit risk. Management’s evaluation of this risk ultimately
is reflected in the estimate of probable loan losses that is reported in the
Company’s financial statements as the allowance for loan
losses.  Additions to the allowance for loan losses as a result of
this ongoing evaluation are reflected in the provision for loan losses charged
to operating expense.





The
Company has adopted an asset classification policy which is designed to draw
attention to assets before collection becomes a problem, thus maintaining the
quality of the Company’s investment as an interest-earning asset.  The
policy also helps ensure the accurate reporting of the Company’s assets from a
valuation standpoint.  As part of this policy, all of the Company’s
loans are reviewed on a regular basis.  Payment histories as well as
the value of the underlying collateral are reviewed and assessed in light of
several risk factors.  The evaluation process considers the state of
the local economy as well as current interest rates and expectations of the
movement thereof.  Other risk factors include the level of credit
concentration the customer has with the Company, environmental factors which
could impair the value of the underlying collateral of an asset, or other
factors which might reduce the ability of the Company to collect all of the
principal and interest owed to the Company.





The
Company maintains a “Watch List” of loans, which is part of management’s
internal asset classification system.  The Watch List identifies
assets classified as “substandard,” “doubtful” or “loss,” pursuant to OTS
regulations.  Assets displaying tendencies which might hinder full
collection of principal are classified as substandard.  Such
tendencies include but are not limited to late payments on loans or
deterioration of the underlying collateral.





Loan
collection efforts in the form of past due notices commence when loan payments
are more than 15 days past due.  Once a loan reaches 15 days past due
status, the Company’s collection manager initiates personal contact with the
borrower.  When a loan becomes 90 days past due, the Company initiates
foreclosure proceedings.  At this point, loans are placed on
non-accrual status.  All interest and late charges due on such loans
are reversed in the form of reserves for uncollectible interest and late
charges.





In making
its risk evaluation and establishing an allowance for loan loss level that it
believes is adequate to absorb probable losses in the portfolio, management
considers various sources of information.  Some of the more
significant sources include analyses prepared on specific loans reviewed for
impairment, statistics on balances of loans assigned to internal risk rating
categories, reports on the composition and repayment portion of loan portfolios
not subject to individual risk ratings, and factors derived from historical loss experience.  In
addition to this more objective and quantitative information, management’s
evaluation must take into consideration its assessment of general economic
conditions and how current conditions affect segments of
borrowers.  Management must also make judgments regarding the level of
accuracy inherent in the loss allowance estimation
process.  Management’s Asset Quality Committee, consisting of
executive, lending and collections personnel, meets at least quarterly to
discuss the status of all potentially impaired loans.  Based on these
evaluations, an allowance analysis is prepared at least quarterly that
summarizes the results of the evaluation process and helps ensure a consistent
process over time.




2007
Annual Report
 Page
10





GS
      Financial Corp. and SubsidiaryManagement's
      Discussion and Analysis of Financial Condition and Results of
      Operations


At
December 31, 2007, the allowance for loan losses was $3.4 million, or 2.82% of
total loans, compared to $3.7 million, or 3.82% of total loans at the end of
2006.  No loans were charged off during the year ended December 31,
2007.  As a result of credit quality in 2007 and 2006 being better
than expectations at the time the Hurricane Katrina-related provision was
recorded, reversals of the provision for loan losses of $300,000 and $2.0
million were recorded in 2007 and 2006, respectively.  Table 4
presents an analysis of the activity in the allowance for loan losses for the
past five years.





TABLE
      4. SUMMARY OF ACTIVITY IN THE ALLOWANCE FOR LOSSESYear
      Ended December 31,($
      in thousands)
            
            2007
            
            
            2006
            
            
            2005
            
            
            2004
            
            
            2003Balance
      at the beginning of year
            
            $
            3,732
            
            
            $
            5,713
            
            
            $
            920
            
            
            $
            601
            
            
            $
            483Provision
      (reversal) for loan losses charged to operations
            
            
            (300
            )
            
            
            (1,981
            )
            
            
            4,793
            
            
            
            343
            
            
            
            118Loans
      charged to the allowance
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (24
            )
            
            
            -Recoveries
      of loans previously charged off
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Balance
      at the end of year
            
            $
            3,432
            
            
            $
            3,732
            
            
            $
            5,713
            
            
            $
            920
            
            
            $
            601RatiosCharge-offs
      to average loans
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            0.03
            %
            
            
            -Provision
      for loan losses to charge-offs
            
            
            n/a
            
            
            
            n/a
            
            
            
            n/a
            
            
            
            1,429.17
            %
            
            
            n/aAllowance
      for loan losses to loans at end of year
            
            
            2.82
            %
            
            
            3.82
            %
            
            
            7.58
            %
            
            
            0.99
            %
            
            
            0.77
            %





The
allowance for loan losses is comprised of specific reserves for each loan that
is reviewed for impairment or for which a probable loss has been identified and
general reserves for groups of homogenous loans.  Reserves for
impaired loans are based on discounted cash flows using the loan’s initial
effective interest rate, the observable market value of the loan or the fair
value of the underlying collateral.  General reserves are established
based on historic charge-offs, and based upon consideration of various other
factors including risk rating, industry concentration and loan
type.





The $4.8
million provision for loan losses made in 2005 and subsequent $2.0 million and
$300,000 reversals in 2006 and 2007, respectively, reflect management’s
assessment, based on the information available at the time, of the inherent
level of losses in the Bank’s portfolio.  In its assessment for
year-end 2005, management attempted to contact all borrowers with loans over
$200,000 and evaluated the collateral value for all loans where the Bank did not
receive either a loan payment or insurance proceeds for December
2005.  Of the $4.8 million provision, $3.3 million was recorded
specifically on an aggregate of $8.2 million of loans deemed impaired and on
which no loan payments had been received and the Company knew the collateral had
suffered property damage as a result of the hurricane.  The remaining
$1.5 million of the provision was applied to the general allowance for loan
losses.  Because significant uncertainties remain regarding the
performance of the Company’s loan portfolio after Hurricane Katrina, such as the
ultimate disposition of property insurance claims and the ultimate economic
recovery of greater New Orleans in a stressed national economy, the Company
maintained this general allowance for loan losses at $1.5 million at December
31, 2007 and 2006.  We will continue to assess the allowance for loan
losses and adjust it as appropriate for changes subsequent to December 31,
2007.




2007
Annual Report
 Page
11




GS
      Financial Corp. and SubsidiaryManagement's
      Discussion and Analysis of Financial Condition and Results of
      Operations


TABLE
      5. ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSESAt
      December 31,2007
            
            
            2006
            
            
            2005
            
            
            2004
            
            
            2003($
      in thousands)
            
            Allowance
      for Loan Losses
            
            
            %
      of Total Reserve
            
            
            Allowance
      for Loan Losses
            
            
            %
      of Total Reserve
            
            
            Allowance
      for Loan Losses
            
            
            %
      of Total Reserve
            
            
            Allowance
      for Loan Losses
            
            
            %
      of Total Reserve
            
            
            Allowance
      for Loan Losses
            
            
            %
      of Total ReserveReal
      estate loans - residential
            
            $
            1,169
            
            
            
            34.1
            %
            
            $
            1,177
            
            
            
            31.5
            %
            
            $
            3,332
            
            
            
            58.3
            %
            
            $
            239
            
            
            
            26.0
            %
            
            $
            147
            
            
            
            24.5
            %Real
      estate loans - commercial and other
            
            
            1,802
            
            
            
            52.5
            %
            
            
            1,963
            
            
            
            52.6
            %
            
            
            1,805
            
            
            
            31.6
            %
            
            
            591
            
            
            
            64.2
            %
            
            
            410
            
            
            
            68.2
            %Real
      estate loans - construction
            
            
            189
            
            
            
            5.5
            %
            
            
            360
            
            
            
            9.7
            %
            
            
            292
            
            
            
            5.1
            %
            
            
            4
            
            
            
            0.4
            %
            
            
            10
            
            
            
            1.7
            %Commercial
      loans
            
            
            272
            
            
            
            7.9
            %
            
            
            232
            
            
            
            6.2
            %
            
            
            284
            
            
            
            5.0
            %
            
            
            87
            
            
            
            9.4
            %
            
            
            34
            
            
            
            5.6
            %Total
            
            $
            3,432
            
            
            
            100.0
            %
            
            $
            3,732
            
            
            
            100.0
            %
            
            $
            5,713
            
            
            
            100.0
            %
            
            $
            921
            
            
            
            100.0
            %
            
            $
            601
            
            
            
            100.0
            %





Tables 6
and 7 set forth the Company’s delinquent loans and nonperforming assets for each
of the prior three and five years, respectively.   The balances
presented in Table 6 are total principal balances outstanding on the loans
rather than the actual principal past due.  Nonperforming assets
consist of loans on nonaccrual status and foreclosed assets.  There
were no loans 90 days delinquent and still accruing interest at any of the five
previous year ends.





TABLE
      6. DELINQUENT LOANSAt
      December 31,($
      in thousands)
            
            2007
            
            
            2006
            
            
            200530-89
      Days
            
            $
            3,305
            
            
            $
            1,379
            
            
            $
            9,29690+
      Days
            
            
            1,438
            
            
            
            179
            
            
            
            931Total
            
            $
            4,743
            
            
            $
            1,558
            
            
            $
            10,227RatiosLoans
      delinquent 90 days to total loans
            
            
            1.18
            %
            
            
            0.18
            %
            
            
            1.24
            %Total
      delinquent loans to total loans
            
            
            3.89
            %
            
            
            1.59
            %
            
            
            13.57
            %Allowance
      for loan losses to non-accrual loans
            
            
            238.66
            %
            
            
            2,084.92
            %
            
            
            613.64
            %Allowance
      for loan losses to total delinquent loans
            
            
            72.36
            %
            
            
            239.54
            %
            
            
            55.86
            %





TABLE
      7. NONPERFORMING ASSETSAt
      December 31,($
      in thousands)
            
            2007
            
            
            2006
            
            
            2005
            
            
            2004
            
            
            2003Loans
      accounted for on a nonaccrual basis
            
            $
            1,438
            
            
            $
            179
            
            
            $
            3,582
            
            
            $
            894
            
            
            $
            929Foreclosed
      assets
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            52Total
      nonperforming assets
            
            $
            1,438
            
            
            $
            179
            
            
            $
            3,582
            
            
            $
            894
            
            
            $
            981RatiosNonperforming
      assets to loans plus foreclosed assets
            
            
            1.18
            %
            
            
            0.18
            %
            
            
            4.75
            %
            
            
            0.96
            %
            
            
            1.26
            %Nonperforming
      assets to total assets
            
            
            0.77
            %
            
            
            0.11
            %
            
            
            2.02
            %
            
            
            0.45
            %
            
            
            0.46
            %Allowance
      for loan losses to nonperforming loans
            
            
            238.66
            %
            
            
            2,084.92
            %
            
            
            159.49
            %
            
            
            102.91
            %
            
            
            64.69
            %








During
the fourth quarter of 2005, the Bank unilaterally agreed to defer all loan
payments.  As a result, no loans other than those that were delinquent
prior to the deferral period were deemed to be delinquent, non-performing or
non-accrual during the three-month deferral period.




2007
Annual Report
 Page
12




GS
      Financial Corp. and SubsidiaryManagement's
      Discussion and Analysis of Financial Condition and Results of
      Operations  INVESTMENT
IN SECURITIES





Interest
rates dictate many of the investment decisions and policies of the
Company.  It is the policy of the Company not to engage in speculative
purchasing, selling or trading of investments; however, certain profits may be
taken from time to time on the sale of investments.  When interest
rate spreads reach acceptable levels, the Company may utilize leveraged
purchasing of investment securities, as has been done in the
past.  Also, when anticipated earnings permit, certain portfolio
adjustments may be made to enhance overall portfolio yield even though losses
may be recognized in doing so.





Liquidity
was reduced in 2005 as the result of a decline in deposits, caused in part by
Hurricane Katrina, and by contractual paydowns on FHLB
borrowings.  Significant loan growth in 2007 and 2006 further reduced
liquidity.  However, the Company still has substantial liquidity and
is in compliance with all regulatory requirements regarding
liquidity.  Information on changes in deposits and liquidity sources
are presented in later sections of this Management’s Discussion and
Analysis.  Management routinely places much of the Company’s liquid
assets into its investment portfolio to balance its need for liquidity with the
need to earn a competitive yield.  To allow for the investment
portfolio to fund liquidity needs as necessary, all investment securities have
been classified as available-for-sale during the past three years.





At
December 31, 2007, total securities were $47.7 million, down 13.3%, or $7.3
million, from December 31, 2006.  Mutual fund investments were 12.1%
of the total portfolio at December 31, 2007 compared with 19.6% at the prior
year-end.   Mortgage-backed securities, consisting of fixed-rate
and hybrid ARM securities issued by Fannie Mae and Freddie Mac, increased by
$5.1 million, or 135.1%





During
the year ended December 31, 2005, the Company recognized charges of $1.3
million, respectively, for other-than-temporary impairments of
available-for-sale securities.  The $1.3 million charge recognized in
2005 relates to the Company’s then $49 million investment in an ARM mutual fund
which, based on then current rates and market conditions, was deemed to be
other-than-temporarily impaired.  Approximately $5.0 million and $39.0
million of the holdings in this fund were sold in 2007 and 2006,
respectively.  Table 8 shows the book value of the Company’s
investment portfolio at December 31, 2007, 2006 and 2005.





TABLE
      8. COMPOSITION OF INVESTMENT PORTFOLIOAt
      December 31,2007
            
            
            2006
            
            
            2005($
      in thousands)
            
            Balance
            
            
            Percent
            
            
            Balance
            
            
            Percent
            
            
            Balance
            
            
            PercentU.S.
      Treasury and agency securities
            
            $
            18,421
            
            
            
            38.6
            %
            
            $
            23,326
            
            
            
            42.3
            %
            
            $
            5,449
            
            
            
            7.1
            %Mortgage-backed
      securities
            
            
            8,912
            
            
            
            18.7
            
            
            
            3,791
            
            
            
            6.9
            
            
            
            100
            
            
            
            0.1Collateralized
      mortgage obligations
            
            
            14,633
            
            
            
            30.6
            
            
            
            17,173
            
            
            
            31.2
            
            
            
            22,496
            
            
            
            29.1Mutual
      funds
            
            
            5,781
            
            
            
            12.1
            
            
            
            10,800
            
            
            
            19.6
            
            
            
            49,299
            
            
            
            63.7Total
      investments at year end
            
            $
            47,747
            
            
            
            100.0
            %
            
            $
            55,090
            
            
            
            100.0
            %
            
            $
            77,344
            
            
            
            100.0
            %Average
      investments during year
            
            $
            50,452
            
            
            
            
            
            
            $
            68,469
            
            
            
            
            
            
            $
            78,516





Information
about the contractual maturity and weighted-average yield of the Company’s
investment securities at December 31, 2007 is shown in Table 9
below.  At December 31, 2007, 12.1% of the investment portfolio
consisted of mutual fund or equity investments carrying no stated
maturity.  These investments are redeemable immediately at their
current market value.  Scheduled principal reductions and principal
repayments on mortgage-backed securities and collateralized mortgage obligations
are not reflected in Table 9.  If these expected principal reductions
were taken into consideration, the weighted-average maturity of the Company’s
overall securities portfolio would be approximately 33 months at December 31,
2007.  As the Company owned no tax-exempt securities during the
periods presented, no yield adjustments were necessary.




2007
Annual Report
 Page
13




GS
      Financial Corp. and SubsidiaryManagement's
      Discussion and Analysis of Financial Condition and Results of
      Operations


TABLE
      9. DISTRIBUTION OF INVESTMENT MATURITIESAt
      December 31, 2007($
      in thousands)
            
            One
      year or less
            
            
            Over
      one through five years
            
            
            Over
      five through ten years
            
            
            Over
      ten years
            
            
            TotalAmount
            
            
            Yield
            
            
            Amount
            
            
            Yield
            
            
            Amount
            
            
            Yield
            
            
            Amount
            
            
            Yield
            
            
            Amount
            
            
            YieldU.S.
      Treasury and Agency securities
            
            $
            -
            
            
            
            -
            
            
            $
            5,015
            
            
            
            5.13
            %
            
            $
            3,002
            
            
            
            6.00
            %
            
            $
            10,404
            
            
            
            6.48
            %
            
            $
            18,421
            
            
            
            5.67
            %Mortgage-backed
      securities
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            8,912
            
            
            
            5.68
            %
            
            
            8,912
            
            
            
            5.68
            %Collateralized
      Mortgage Obligations
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            408
            
            
            
            5.65
            %
            
            
            14,225
            
            
            
            5.35
            %
            
            
            14,633
            
            
            
            5.36
            %Mutual
      funds
            
            
            5,781
            
            
            
            5.02
            %
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            5,781
            
            
            
            5.02
            %Total
            
            $
            5,781
            
            
            
            5.02
            %
            
            $
            5,015
            
            
            
            5.13
            %
            
            $
            3,410
            
            
            
            6.00
            %
            
            $
            33,541
            
            
            
            5.79
            %
            
            $
            47,747
            
            
            
            5.50
            %Percentage
      of Total
            
            
            12.11
            %
            
            
            
            
            
            
            10.50
            %
            
            
            
            
            
            
            7.14
            %
            
            
            
            
            
            
            70.25
            %
            
            
            
            
            
            
            100.0
            %





All of
the Company’s investments in marketable securities are classified as available
for sale.  The net unrealized losses on these investments totaled
$167,000, or 0.35%, of amortized cost at December 31, 2007.  At
year-end 2006, there was a net unrealized loss of $477,000, or 0.90% of
amortized cost.  The reported amount of net unrealized gain or loss
varies based on the overall changes in market rates, shifts in the slope of the
yield curve, and movement in spreads to the yield curve for different types of
securities.





At
December 31, 2007, the Company had certain investment concentrations exceeding
10% of stockholders’ equity.   While these were significant in
amount, they were limited to “AAA” rated securities and management feels that
they present a limited risk of default, though the mutual funds do have a risk
of share price fluctuation.  Investments of the Company that exceed
10% of stockholders’ equity at December 31, 2007 are shown in Table 10
below.





TABLE
      10. INVESTMENTS GREATER THAN 10% OF STOCKHOLDERS' EQUITYAt
      December 31, 2006($
      in thousands)
            Type
            
            Total
      Investment
            
            
            %
      of Total Assets
            
            
            %
      of Stockholders' EquityFederal
      National Mortgage Association
            Agency
      Bond and Mortgage-Backed Securities
            
            $
            15,060
            
            
            
            8.08
            %
            
            
            53.47
            %Shay
      Mutual Funds
            Mutual
      Fund
            
            
            5,781
            
            
            
            3.10
            %
            
            
            20.53
            %Federal
      Home Loan Mortgage Corporation
            Mortgage-Backed
      Securities
            
            
            5,461
            
            
            
            2.93
            %
            
            
            19.39
            %Federal
      Home Loan Bank
            Agency
      Bond
            
            
            8,530
            
            
            
            4.57
            %
            
            
            30.29
            %Total
            
            
            $
            34,832
            
            
            
            18.68
            %
            
            
            123.68
            %





At
December 31, 2007 the Company had $3.5 million in investments in financial
instruments or participated in agreements with values that are linked to or
derived from changes in some underlying asset or index.  These
financial instruments or agreements are commonly referred to as derivatives and
include such instruments as futures, forward contracts, option contracts,
interest rate swap agreements and other financial arrangements with similar
characteristics.  The Company’s investments in derivatives consist of
two “range notes” issued by the Federal Home Loan Bank.  These notes
are long-term agency bonds which pay interest so long as LIBOR falls within a
certain range.  Since inception LIBOR has been within the required
range and interest has been paid.  These instruments are classified as
agency securities and as securities available for sale.  The impact of
SFAS 133, which requires marking these securities to market value through
operations, was not material in 2007.





DEPOSITS


Deposits
are the Company’s primary source of funding for earning assets.  The
Company offers a variety of products designed to attract and retain
customers.  The principal methods used by the Company to attract
deposits include its emphasis on personal service, competitive interest rates
and convenient office locations.  The Company does not actively
solicit or pay higher rates for “jumbo” (amounts over $100,000) certificates
of deposit.  The Company had no deposits that were obtained through
outside deposit brokers at December 31, 2007 or 2006.




2007
Annual Report
 Page
14




GS
      Financial Corp. and SubsidiaryManagement's
      Discussion and Analysis of Financial Condition and Results of
      Operations


At
December 31, 2007, deposits were up 5.5%, or $6.8 million, from the level at
December 31, 2006.  Average deposits for fiscal 2007 increased 2.3%,
or $2.9 million over 2006 and increased 1.5%, or $1.9 million, in 2006 from
2005.  The increase in deposits in 2006 was due to the addition of a
money market account in 2006 which attracted substantial balances (included in
Table 11 in NOW account deposits) and the stabilization in the area’s population
base as it recovers from the impact of Hurricane Katrina.  Those
factors also impacted the increase in 2007, as did the opening of new banking
locations.





TABLE
      11. DEPOSIT COMPOSITIONAt
      December 31,2007
            
            
            2006
            
            
            2005($
      in thousands)
            
            Average
      Balances
            
            
            %
      of Deposits
            
            
            Average
      Balances
            
            
            %
      of Deposits
            
            
            Average
      Balances
            
            
            %
      of DepositsNoninterest
      bearing demand deposits
            
            $
            4,380
            
            
            
            3.5
            %
            
            $
            2,367
            
            
            
            1.9
            %
            
            $
            895
            
            
            
            0.7
            %NOW
      account deposits
            
            
            21,576
            
            
            
            17.1
            
            
            
            17,186
            
            
            
            13.9
            
            
            
            7,778
            
            
            
            6.4Savings
      deposits
            
            
            20,511
            
            
            
            16.2
            
            
            
            27,103
            
            
            
            22.0
            
            
            
            30,551
            
            
            
            25.1Certificates
      of deposit
            
            
            79,911
            
            
            
            63.2
            
            
            
            76,841
            
            
            
            62.2
            
            
            
            82,409
            
            
            
            67.8Total
            
            $
            126,378
            
            
            
            100.0
            %
            
            $
            123,497
            
            
            
            100.0
            %
            
            $
            121,633
            
            
            
            100.0
            %





Average
certificates of deposit (or “time deposits”) totaled $79.9 million, or 63.2% of
total average deposits during 2007, up $3.1 million, or 4.0%, compared to
2006.  Average savings deposits made up 16.2% of total average
deposits during 2007, down from 22.0% in the previous year.  During
2007, the average balance of transaction accounts increased from 15.8% to 20.6%
of total deposits, with money market accounts contributing to the $4.4 million
increase in NOW accounts.  Non-interest bearing demand deposits
increased by $2.0 million as the Bank continued to increase its volume of
activity with commercial customers.  Table 12 shows the maturity
structure of time deposits over and under $100,000 at December 31,
2007.




TABLE
      12. MATURITIES OF TIME DEPOSITSAt
      December 31, 2007($
      in thousands)
                
                Less
      than $100,000
                
                
                $100,000
                  or
      more
                
                
                TotalAmount
                
                
                PercentageThree
      months or less
                
                $
                18,889
                
                
                $
                5,357
                
                
                $
                24,246
                
                
                
                29.95
                %Over
      three months through twelve months
                
                
                30,808
                
                
                
                8,899
                
                
                
                39,707
                
                
                
                49.05
                %Over
      twelve months
                
                
                12,935
                
                
                
                4,060
                
                
                
                16,995
                
                
                
                21.00
                %Total
                
                $
                62,632
                
                
                $
                18,316
                
                
                $
                80,948
                
                
                
                100.00
                %




BORROWINGS


The
Association is a member of the Federal Home Loan Bank.  This
membership provides access to a variety of Federal Home Loan Bank advance
products as an alternative source of funds.  At December 31, 2007, the
Company had outstanding advances totaling $27.0 million, compared to $17.0
million at year-end 2006.  Average advances outstanding during 2007
were $17.6 million, compared with $23.4 million for 2006.  The average
rate paid on FHLB advances during 2007 was 5.47%, compared to 5.30% in
2006.  FHLB advances increased $10.0 million, or 58.4%, at December
31, 2007 compared to December 31, 2006.  This increase was due to new
borrowings in 2007 to fund loan growth.  The Company’s reliance on
borrowings continues to be within the parameters determined by management to be
prudent in terms of liquidity and interest rate sensitivity, though the Company
has significant additional borrowing capacity should borrowing needs
arise.  Table 13 shows the scheduled maturities of FHLB advances at
December 31, 2007.





2007
Annual Report
 Page
15




GS
      Financial Corp. and SubsidiaryManagement's
      Discussion and Analysis of Financial Condition and Results of
      Operations


TABLE
      13. MATURITIES OF ADVANCESAt
      December 31, 2007($
      in thousands)
            
            Amount
            
            
            %
      of Total Advances
            
            
            Weighted
      Average Rate2008
            
            $
            11,514
            
            
            
            42.67
            %
            
            
            5.44
            %2009
            
            
            -
            
            
            
            -
            
            
            
            -2010
            
            
            13,000
            
            
            
            48.17
            %
            
            
            4.51
            %2011
            
            
            -
            
            
            
            -
            
            
            
            -2012
            
            
            2,472
            
            
            
            9.16
            %
            
            
            5.81
            %Total
      Advances
            
            $
            26,986
            
            
            
            100.00
            %
            
            
            5.07
            %





STOCKHOLDERS’
EQUITY AND CAPITAL ADEQUACY


At
December 31, 2007, stockholders’ equity totaled $28.2 million, compared to $27.2
million at the end of 2006.  The major factors in the $1 million
increase in 2007 were the net income of $658,000, issuances of additional shares
of common stock upon the exercise of stock options of $516,000, and a reduction
in the accumulated other comprehensive loss of $204,000, partially offset by
dividends paid of $503,000.  The dividend payout was 76.4% and 23.0%
of net income in 2007 and 2006, respectively.   As the Company
incurred a net loss in 2005 the dividend payout ratio was not a meaningful
measure.





Since
1998, the Company has repurchased shares of its common stock when shares have
been available at prices and amounts deemed prudent by
management.  Table 14 summarizes the repurchase of the shares of its
common stock by year.  All of the purchases were open market
transactions and most were at a discount to book value.





TABLE
      14. SUMMARY OF STOCK REPURCHASESYear
      Ended December 31,
            
            Shares
            
            
            Cost
      ($000)
            
            
            Average
      Price Per Share1998
            
            
            491,054
            
            
            $
            8,324
            
            
            $
            16.951999
            
            
            299,000
            
            
            
            3,653
            
            
            
            12.222000
            
            
            679,600
            
            
            
            8,590
            
            
            
            12.642001
            
            
            305,684
            
            
            
            4,612
            
            
            
            15.092002
            
            
            142,201
            
            
            
            2,516
            
            
            
            17.692003
            
            
            216,181
            
            
            
            4,109
            
            
            
            19.012004
            
            
            16,842
            
            
            
            315
            
            
            
            18.702005
            
            
            3,907
            
            
            
            74
            
            
            
            19.062006
            
            
            17,763
            
            
            
            300
            
            
            
            16.872007
            
            
            10,468
            
            
            
            188
            
            
            
            18.00Total
      Stock Repurchases
            
            
            2,182,700
            
            
            $
            32,681
            
            
            $
            14.97





The
ratios in Table 15 indicate that the Bank was well capitalized at December 31,
2007.    Risk-based capital ratios declined in 2006 as there
was a $15.6 million increase in risk-weighted assets, attributable primarily to
growth in the loan portfolio.    The regulatory capital
ratios of Guaranty Savings Bank exceed the minimum required ratios, and the Bank
has been categorized as “well-capitalized” in the most recent notice received
from its primary regulatory agency.




2007
Annual Report
 Page
16




GS
      Financial Corp. and SubsidiaryManagement's
      Discussion and Analysis of Financial Condition and Results of
      Operations


TABLE
      15. CAPITAL AND RISK BASED CAPITAL RATIOSDecember
31,($
      in thousands)
            
            2007
            
            
            2006
            
            
            2005Tier
      1 regulatory capital
            
            $
            27,197
            
            
            $
            26,580
            
            
            $
            23,772Tier
      2 regulatory capital
            
            
            1,260
            
            
            
            1,096
            
            
            
            905Total
      regulatory capital
            
            $
            28,457
            
            
            $
            27,676
            
            
            $
            24,677Adjusted
      total assets
            
            $
            184,285
            
            
            $
            167,126
            
            
            $
            176,444Risk-weighted
      assets
            
            $
            103,236
            
            
            $
            87,645
            
            
            $
            72,399RatiosTier
      1 capital to total assets
            
            
            14.76
            %
            
            
            15.90
            %
            
            
            13.47
            %Tier
      1 capital to risk-weighted assets
            
            
            26.34
            %
            
            
            30.33
            %
            
            
            32.83
            %Total
      capital to risk-weighted assets
            
            
            27.57
            %
            
            
            31.58
            %
            
            
            34.08
            %Stockholders'
      equity to total assets
            
            
            15.10
            %
            
            
            16.14
            %
            
            
            14.30
            %





LIQUIDITY
AND CAPITAL RESOURCES


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





On the
liability side, liquidity management focuses on growing the base of more stable
core deposits at competitive rates, while at the same time ensuring access to
economical wholesale funding sources.  The sections above on deposits
and borrowings discuss changes in these liability-funding sources in
2007.





Liquidity
management on the asset side primarily addresses the composition and maturity
structure of the loan and investment securities portfolios and their impact on
the Company’s ability to generate cash flows from scheduled payments,
contractual maturities and prepayments, their use as collateral for borrowings
and possible outright sales on the secondary market.  Tables 3 and 9
above present the contractual maturities of the loan portfolio and the Company’s
investment in securities.





Table 16
illustrates some the factors that the Company uses to measure
liquidity.  Cash and cash equivalents decreased somewhat during 2007
after decreasing substantially during 2006 compared to 2005. Cash balances were
unusually high at the end of 2005 primarily resulting from significant loan
paydowns occurring subsequent to Hurricane Katrina.  This excess cash
was used to fund loans and pay down FHLB advances in 2006.  Deposits
increased in 2007 as the Bank continued to attract both commercial and personal
transaction accounts.  Deposits increased slightly in 2006 as the
area’s population stabilized as people returned to the city following Hurricane
Katrina and the Bank introduced money market accounts, which attracted over $11
million in new deposits in 2006.





The
Company has made investment allocation decisions and developed loan and deposit
pricing strategies consistent with its assessment of current and future economic
conditions.  Management feels that these higher liquidity levels of
the past three years will continue to move toward more normal levels with
liquidity being used to pay down maturing FHLB debt and to take advantage of
anticipated significant new lending opportunities resulting from both
post-Hurricane Katrina rebuilding and the hiring of experienced commercial and
residential lenders.





2007
Annual Report
 Page
17




GS
      Financial Corp. and SubsidiaryManagement's
      Discussion and Analysis of Financial Condition and Results of
      Operations


TABLE
      16. KEY LIQUIDITY INDICATORSDecember
      31,($
      in thousands)
            
            2007
            
            
            2006
            
            
            2005Cash
      and cash equivalents
            
            $
            9,462
            
            
            $
            11,117
            
            
            $
            22,555Total
      loans
            
            
            121,850
            
            
            
            97,717
            
            
            
            75,364Total
      deposits
            
            
            129,510
            
            
            
            122,754
            
            
            
            118,866Deposits
      $100,000 and over
            
            
            35,586
            
            
            
            27,285
            
            
            
            16,301RatiosTotal
      loans to total deposits
            
            
            94.09
            %
            
            
            79.60
            %
            
            
            63.40
            %Deposits
      $100,000 and over to total deposits
            
            
            27.48
            %
            
            
            22.23
            %
            
            
            13.71
            %





ASSET/LIABILITY
MANAGEMENT


The
objective of the Company’s asset/liability management is to implement strategies
for the funding and deployment of its financial resources that are expected to
maximize profitability over time at acceptable levels of risk.





Interest
rate sensitivity is the potential impact of changing rate environments on both
net interest income and cash flows.  The Bank monitors its interest
rate sensitivity on a quarterly basis by reviewing net interest income
simulations, monitoring the economic value of equity and preparing interest rate
gap analyses.





The
simplest method of measuring interest rate sensitivity is gap analysis, which
identifies the difference between the dollar volume of assets and liabilities
that reprice within specific time periods.  A gap is considered
positive when the amount of interest-rate sensitive assets exceeds the amount of
interest-rate sensitive liabilities, and is considered negative when the amount
of interest-rate sensitive liabilities exceeds the amount of interest-rate
sensitive assets.  In general, during a period of rising interest
rates, a negative gap within shorter maturities would adversely affect net
interest income, while a positive gap within shorter maturities would result in
an increase in net interest income.  A cycle of falling interest rates
would have the opposite effect.





Since
thrift organizations are traditionally invested primarily in home mortgage loans
varying in contractual terms to maturity usually from 15 to 30 years while their
longest term interest-bearing liabilities are typically five-year certificates
of deposit, they tend to create negative gaps over the short
term.  Guaranty Savings Bank is no different; therefore, it is vital
that the Bank utilize its other investments to offset in the short-term
(12-months or less) horizon, the substantial negative re-pricing gap which
arises from one to five years, while at the same time maximizing net interest
income.  The Company has placed some of its ready cash in short-term
investments such as mortgage-based mutual funds that provide the benefit of
overnight availability.  The Bank also places a high emphasis on cash
flows in its portfolio of CMOs and mortgage-backed securities.  The
duration of the Bank’s CMOs varies from two to 15 years.  Table 17
shows the Company’s static gap position as of December 31, 2007.





Gap
analysis has several limitations, including the fact that it is a point-in-time
measurement that ignores the dynamic nature of the Company’s assets and
liabilities, and it does not take into consideration actions that management can
and will take to maximize net interest income over time.





2007
Annual Report
 Page
18




GS
      Financial Corp. and SubsidiaryManagement's
      Discussion and Analysis of Financial Condition and Results of
      Operations




TABLE
      17. INTEREST RATE SENSITIVITYBy
      Maturity or Re-pricing at December 31, 2007($
      in thousands)
            
            0-90 Days
            
            
            91-365 Days
            
            
            After
      1 through 3 Years
            
            
            After
      3 Years
            
            
            Non-interest earning/
      bearing
            
            
            TotalASSETSLoans
            
            $
            10,477
            
            
            $
            4,192
            
            
            $
            9,050
            
            
            $
            94,758
            
            
            $
            -
            
            
            $
            118,477Securities
      available for sale
            
            
            5,781
            
            
            
            -
            
            
            
            -
            
            
            
            41,966
            
            
            
            -
            
            
            
            47,747Cash
      and cash equivalents
            
            
            9,462
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            9,462Other
      assets
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            10,801
            
            
            
            10,801Total
      assets
            
            
            25,720
            
            
            
            4,192
            
            
            
            9,050
            
            
            
            136,724
            
            
            
            10,801
            
            
            
            186,487SOURCES
      OF FUNDSNoninterest
      bearing deposits
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            5,685
            
            
            
            5,685NOW
      account deposits
            
            
            23,968
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            23,968Savings
      deposits
            
            
            19,245
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            19,245Time
      deposits
            
            
            24,246
            
            
            
            39,706
            
            
            
            14,843
            
            
            
            2,153
            
            
            
            -
            
            
            
            80,948Advances
            
            
            1,350
            
            
            
            10,164
            
            
            
            13,000
            
            
            
            2,472
            
            
            
            -
            
            
            
            26,986Other
      liabilities
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,491
            
            
            
            1,491Stockholders'
      equity
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            28,164
            
            
            
            28,164Total
      sources of funds
            
            
            68,809
            
            
            
            49,870
            
            
            
            27,843
            
            
            
            4,625
            
            
            
            35,340
            
            
            
            186,487Interest
      rate sensitivity gapPeriod
            
            $
            (43,089
            )
            
            $
            (45,678
            )
            
            $
            (18,793
            )
            
            $
            132,099
            
            
            $
            (24,539
            )Cumulative
            
            $
            (43,089
            )
            
            $
            (88,767
            )
            
            $
            (107,560
            )
            
            $
            24,539
            
            
            $
            -Gap/total
      earning assetsPeriod
            
            
            (26.0
            )%
            
            
            (27.6
            )%
            
            
            (11.3
            )%
            
            
            79.7
            %
            
            
            (14.8
            )%Cumulative
            
            
            (26.0
            )%
            
            
            (53.6
            )%
            
            
            (64.9
            )%
            
            
            14.8
            %
            
            
            -





Another
tool used by management is a net portfolio value (“NPV”) model.  The
NPV is the difference between the market value of the Bank’s assets and the
market value of the Bank’s liabilities and off balance sheet
commitments.  At least quarterly, the Board reviews an internal model
and a standard thrift industry model prepared by the OTS from the Bank’s
quarterly Consolidated Maturity and Rate Report.





Table
18presented below
is an analysis of the Bank’s interest rate risk as measured by changes in NPV
for instantaneous and sustained parallel shifts in the yield curve, in 100 basis
point increments, up and down 300 basis points in accordance with OTS
regulations.  Currently, due to the low level of interest rates, the
only downward shocks capable of being applied realistically are 100 and 200
basis points.  As illustrated in the tables below, NPV is currently
more sensitive to and may be more negatively impacted by rising rates than
falling rates.





2007
Annual Report
 Page
19




GS
      Financial Corp. and SubsidiaryManagement's
      Discussion and Analysis of Financial Condition and Results of
      Operations




TABLE
      18. NET PORTFOLIO VALUEAt
      December 31,($
      in thousands)
            
            2007
            
            
            2006Change
      (Basis Point) in Interest Rates
            
            $
      Value
            
            
            $
      Change
            
            
            %
      Change
            
            
            $
      Value
            
            
            $
      Change
            
            
            %
      Change+300
            
            
            $
            23,861
            
            
            $
            (11,632
            )
            
            
            (33
            )%
            
            $
            24,026
            
            
            $
            (10,821
            )
            
            
            (31
            )%+200
            
            
            
            27,686
            
            
            
            (7,807
            )
            
            
            (22
            )%
            
            
            27,705
            
            
            
            (7,142
            )
            
            
            (20
            )%+100
            
            
            
            31,396
            
            
            
            (4,097
            )
            
            
            (12
            )%
            
            
            31,189
            
            
            
            (3,658
            )
            
            
            (10
            )%0
            
            
            
            35,493
            
            
            
            -
            
            
            
            -
            
            
            
            34,847
            
            
            
            -
            
            
            
            --100
            
            
            
            37,876
            
            
            
            2,383
            
            
            
            7
            %
            
            
            36,662
            
            
            
            1,815
            
            
            
            5
            %-200
            
            
            
            40,123
            
            
            
            4,630
            
            
            
            13
            %
            
            
            38,159
            
            
            
            3,312
            
            
            
            10
            %-300
            
            
            
            n/a
            
            
            
            n/a
            
            
            
            n/a
            
            
            
            n/a
            
            
            
            n/a
            
            
            
            n/a





IMPACT
OF INFLATION AND CHANGING PRICES


The great
majority of assets and liabilities of a financial institution are monetary in
nature.  Management believes the most significant potential impact of
inflationary or deflationary economic cycles on the Company’s financial results
is its ability to react to changes in interest rates.  Interest rates
do not necessarily move in the same direction, or at the same magnitude, as the
prices of goods and services.  As discussed above, the Company employs
asset/liability management strategies in its attempt to minimize the effects of
economic cycles on its net interest income.





Inflation
and changing prices also have an impact on the growth of total assets in the
banking industry and the resulting need to increase capital at higher than
normal rates in order to maintain an appropriate equity to assets
ratio.  Changing prices will also affect trends in noninterest
operating expenses and noninterest income.





RESULTS
OF OPERATIONS


The
Company reported net income of $658,000, or $0.53 per share in 2007, compared
with $2.1 million, or $1.74 per share, during 2006, and a loss of $3.7 million,
or $3.11 per share in 2005.  Earnings in 2007 and 2006 included
reversals of $300,000 ($198,000 after tax) and $2.0 million ($1.3 million after
tax) of the loan loss reserves established in 2005 due to the uncertainties in
the loan portfolio subsequent to Hurricane Katrina.  The losses in
2005 resulted primarily from a substantial loan loss provision of $4.8 million
to cover potential loan losses resulting from the impact of Hurricane Katrina
and a $1.3 million recognition of losses on available-for-sale investment
securities as other-than-temporary.





NET
INTEREST INCOME


The
Company’s net interest income decreased 6.5%, or $395,000, in 2007 compared to
2006, due primarily to a 2.7% decline in average interest-earning
assets.  This followed an 8.7%, or $486,000 increase in net interest
income for 2006 over 2005, when a 64 basis point increase in the average yield
earned on interest earning assets more than offset a decrease in the average
balance of interest-earning assets of 5.3%. Net interest margin is net interest
income expressed as a percent of average interest-earning assets.  In
2007 compared to 2006, the Company’s net interest margin fell 14 basis points
from 3.58% to 3.44% with a 33 basis point increase in the average yield on
earning assets being offset by a 58 basis point increase in the cost of
interest-bearing liabilities.  This increase in cost of funds, which
was driven in large part by lower-yield certificates of deposit renewing into
higher-yielding certificates, was experienced throughout the banking
industry.  In 2006, the Company’s net interest margin increased by 46
basis points compared to 2005.





During
2007, loans constituted 65% of average interest-earning assets, up from 51% in
2006 and 49% in 2005. Collateralized mortgage obligation investments made up 10%
of average interest-earning assets during 2007, down from 11% in 2006 and 13% in
2005.  Mutual fund investments, consisting primarily of investments in
funds secured by short-term mortgage instruments, were 4% of average
interest-earning assets in 2007, down from 17% in 2006 and 28% in
2005.  A substantial portion of the mutual fund investments
were liquidated during the past three years to diversify the investment
portfolio and to fund loan growth.




2007
Annual Report
 Page
20
 
  GS
      Financial Corp. and SubsidiaryManagement's
      Discussion and Analysis of Financial Condition and Results of
      Operations


The
Company’s funding mix, though improving, continues to have a negative impact on
interest margins.  The percentage of average interest-earning assets
funded by higher-cost sources of funds, including certificates of deposit and
FHLB borrowings, was 59% in both 2007 and 2006, compared to 66% in
2005.  This is expected to further improve in 2008 as the Bank
continues to emphasize attracting lower-cost transaction
accounts.  During 2007, lower-cost core deposits totaled 28% of
average interest earning assets, up from 26% of average interest-earning assets
in 2006 and 21% in 2005.  The improved funding mix was more than
offset by an increase in the cost of funds, as the cost of interest-bearing
deposits increased by 73 basis points in 2007 compared to 2006 and 56 basis
points in 2006 compared to 2005, and the total cost of interest-bearing
liabilities increased by 58 basis points in 2007 compared to 2006, following a
28 basis point increase in 2006 compared to 2005.  These increases
primarily reflect changes in market rates of interest, though the sharp upward
trend in funding costs, which was experienced most heavily by savings
institutions such as Guaranty Savings Bank which had high volumes of time
deposits re-pricing at higher rates, reversed in the fourth quarter of 2007 and
rates continue to decrease early in 2008.




2007
Annual Report
 Page
21




GS
      Financial Corp. and SubsidiaryManagement's
      Discussion and Analysis of Financial Condition and Results of
      Operations


Table 19
below sets forth, for the periods indicated, information regarding (i) the total
dollar amount of interest income from interest-earning assets and the resulting
average yields; (ii) the total dollar amount of interest expense on
interest-bearing liabilities and the resulting average rate; (iii) net interest
income; (iv) interest rate spread; and (v) net interest
margin.  Information is based on average daily balances during the
indicated periods.





TABLE
      19. SUMMARY OF AVERAGE BALANCES, NET INTEREST INCOME AND INTEREST
      RATESYear
      Ended December 31,
            
            2007
            
            
            2006
            
            
            2005($
      in thousands)
            
            Average
      Balance
            
            
            Interest
            
            
            Average
      Yield/ Cost
            
            
            Average
      Balance
            
            
            Interest
            
            
            Average
      Yield/ Cost
            
            
            Average
      Balance
            
            
            Interest
            
            
            Average
      Yield/ CostASSETSINTEREST-EARNING
      ASSETSLoans
            
            $
            107,785
            
            
            $
            8,043
            
            
            
            7.46
            %
            
            $
            87,360
            
            
            $
            6,803
            
            
            
            7.79
            %
            
            $
            87,437
            
            
            $
            6,658
            
            
            
            7.61
            %U.S.
      Treasury and Agency securities
            
            
            22,103
            
            
            
            1,301
            
            
            
            5.89
            
            
            
            16,916
            
            
            
            892
            
            
            
            5.27
            
            
            
            4,376
            
            
            
            231
            
            
            
            5.28Mortgage-backed
      securities
            
            
            5,704
            
            
            
            299
            
            
            
            5.24
            
            
            
            2,502
            
            
            
            152
            
            
            
            6.08
            
            
            
            136
            
            
            
            9
            
            
            
            6.62Collateralized
      mortgage obligations
            
            
            15,794
            
            
            
            875
            
            
            
            5.54
            
            
            
            19,383
            
            
            
            1,098
            
            
            
            5.66
            
            
            
            22,788
            
            
            
            1,471
            
            
            
            6.46Mutual
      funds
            
            
            6,851
            
            
            
            355
            
            
            
            5.18
            
            
            
            29,668
            
            
            
            1,344
            
            
            
            4.53
            
            
            
            49,495
            
            
            
            1,720
            
            
            
            3.48FHLMC
      stock
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,721
            
            
            
            -
            
            
            
            -Total
      investment in securities
            
            
            50,452
            
            
            
            2,830
            
            
            
            5.61
            %
            
            
            68,469
            
            
            
            3,486
            
            
            
            5.09
            %
            
            
            78,516
            
            
            
            3,431
            
            
            
            4.37
            %FHLB
      stock
            
            
            1,008
            
            
            
            53
            
            
            
            5.26
            %
            
            
            1,437
            
            
            
            74
            
            
            
            5.17
            %
            
            
            2,294
            
            
            
            82
            
            
            
            3.57
            %Federal
      funds sold and demand deposits
            
            
            6,410
            
            
            
            322
            
            
            
            5.02
            %
            
            
            13,069
            
            
            
            637
            
            
            
            4.88
            %
            
            
            11,584
            
            
            
            295
            
            
            
            2.55
            %Total
      interest-earning assets
            
            
            165,655
            
            
            
            11,248
            
            
            
            6.79
            %
            
            
            170,335
            
            
            
            11,000
            
            
            
            6.46
            %
            
            
            179,831
            
            
            
            10,466
            
            
            
            5.82
            %NONINTEREST-EARNING
      ASSETSOther
      assets
            
            
            10,523
            
            
            
            
            
            
            
            
            
            
            
            8,942
            
            
            
            
            
            
            
            
            
            
            
            8,315Allowance
      for loan losses
            
            
            (3,580
            )
            
            
            
            
            
            
            
            
            
            
            (5,207
            )
            
            
            
            
            
            
            
            
            
            
            (933
            )Total
      assets
            
            $
            172,598
            
            
            
            
            
            
            
            
            
            
            $
            174,070
            
            
            
            
            
            
            
            
            
            
            $
            187,213LIABILITIES
      AND STOCKHOLDERS' EQUITYINTEREST-BEARING
      LIABILITIESNOW
      account deposits
            
            $
            21,576
            
            
            $
            722
            
            
            
            3.35
            %
            
            $
            17,186
            
            
            $
            388
            
            
            
            2.26
            %
            
            $
            7,778
            
            
            $
            97
            
            
            
            1.25
            %Savings
      deposits
            
            
            20,511
            
            
            
            247
            
            
            
            1.20
            %
            
            
            27,103
            
            
            
            339
            
            
            
            1.25
            %
            
            
            30,551
            
            
            
            382
            
            
            
            1.25
            %Time
      deposits
            
            
            79,911
            
            
            
            3,617
            
            
            
            4.53
            %
            
            
            76,842
            
            
            
            2,938
            
            
            
            3.82
            %
            
            
            82,409
            
            
            
            2,508
            
            
            
            3.04
            %Total
      interest-bearing deposits
            
            
            121,998
            
            
            
            4,586
            
            
            
            3.76
            %
            
            
            121,131
            
            
            
            3,665
            
            
            
            3.03
            %
            
            
            120,738
            
            
            
            2,987
            
            
            
            2.47
            %Borrowings
            
            
            17,564
            
            
            
            961
            
            
            
            5.47
            %
            
            
            23,368
            
            
            
            1,239
            
            
            
            5.30
            %
            
            
            35,589
            
            
            
            1,869
            
            
            
            5.25
            %Total
      interest-bearing liabilities
            
            
            139,562
            
            
            
            5,547
            
            
            
            3.97
            %
            
            
            144,499
            
            
            
            4,904
            
            
            
            3.39
            %
            
            
            156,327
            
            
            
            4,856
            
            
            
            3.10
            %NONINTEREST-BEARING
      LIABILITIES AND STOCKHOLDERS' EQUITYDemand
      deposits
            
            
            4,380
            
            
            
            
            
            
            
            
            
            
            
            2,367
            
            
            
            
            
            
            
            
            
            
            
            895Other
      liabilities
            
            
            1,230
            
            
            
            
            
            
            
            
            
            
            
            1,195
            
            
            
            
            
            
            
            
            
            
            
            3,264Shareholders'
      equity
            
            
            27,426
            
            
            
            
            
            
            
            
            
            
            
            26,009
            
            
            
            
            
            
            
            
            
            
            
            26,727Total
      liabilities and stockholders' equity
            
            $
            172,598
            
            
            
            
            
            
            
            
            
            
            $
            174,070
            
            
            
            
            
            
            
            
            
            
            $
            187,213Net
      interest income and margin
            
            
            
            
            
            $
            5,701
            
            
            
            3.44
            %
            
            
            
            
            
            $
            6,096
            
            
            
            3.58
            %
            
            
            
            
            
            $
            5,610
            
            
            
            3.12
            %Net
      interest-earning assets and spread
            
            $
            26,093
            
            
            
            
            
            
            
            2.82
            %
            
            $
            25,836
            
            
            
            
            
            
            
            3.07
            %
            
            $
            23,504
            
            
            
            
            
            
            
            2.72
            %Cost
      of funding interest-earning assets
            
            
            
            
            
            
            
            
            
            
            3.35
            %
            
            
            
            
            
            
            
            
            
            
            2.88
            %
            
            
            
            
            
            
            
            
            
            
            2.70
            %




2007
Annual Report
 Page
22




GS
      Financial Corp. and SubsidiaryManagement's
      Discussion and Analysis of Financial Condition and Results of
      Operations


Table 20
below sets forth the effects of changing rates and volumes on net interest
income of the Company.  Information is provided with respect to (i)
effects on interest income attributable to changes in volume (changes in volume
multiplied by prior rate) and (ii) effects on interest income attributable to
changes in rate (changes in rate multiplied by prior volume).  The
change in interest due to both volume and rate has been allocated
proportionately between volume and rate based on the absolute dollar amount of
the change in each.





TABLE
      20. SUMMARY OF CHANGES IN NET INTEREST INCOME2007
      Compared to 2006
            
            
            2006
      Compared to 2005Due
      to Change in
            
            
            Total
      Increase (Decrease)
            
            
            Due
      to Change in
            
            
            Total
      Increase (Decrease)($
      in thousands)
            
            Volume
            
            
            Rate
            
            
            Volume
            
            
            RateINTEREST
      INCOMELoans
            
            $
            1,591
            
            
            $
            (351
            )
            
            $
            1,240
            
            
            $
            (6
            )
            
            $
            151
            
            
            $
            145U.S.
      Treasury and Agency securities
            
            
            274
            
            
            
            135
            
            
            
            409
            
            
            
            661
            
            
            
            (1
            )
            
            
            660Mortgage-backed
      securities
            
            
            195
            
            
            
            (48
            )
            
            
            147
            
            
            
            157
            
            
            
            (14
            )
            
            
            143Collateralized
      mortgage obligations
            
            
            (203
            )
            
            
            (20
            )
            
            
            (223
            )
            
            
            (220
            )
            
            
            (153
            )
            
            
            (373
            )Mutual
      funds
            
            
            (1,034
            )
            
            
            45
            
            
            
            (989
            )
            
            
            (689
            )
            
            
            313
            
            
            
            (376
            )FHLMC
      stock
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Total
      investment in securities
            
            
            (768
            )
            
            
            112
            
            
            
            (656
            )
            
            
            (91
            )
            
            
            145
            
            
            
            54FHLB
      stock
            
            
            (22
            )
            
            
            1
            
            
            
            (21
            )
            
            
            (31
            )
            
            
            23
            
            
            
            (8
            )Federal
      funds sold and demand deposits
            
            
            (325
            )
            
            
            10
            
            
            
            (315
            )
            
            
            38
            
            
            
            304
            
            
            
            342Total
      interest income
            
            
            476
            
            
            
            (228
            )
            
            
            248
            
            
            
            (90
            )
            
            
            623
            
            
            
            533INTEREST
      EXPENSENOW
      account deposits
            
            
            99
            
            
            
            235
            
            
            
            334
            
            
            
            117
            
            
            
            174
            
            
            
            291Savings
      deposits
            
            
            (82
            )
            
            
            (10
            )
            
            
            (92
            )
            
            
            (43
            )
            
            
            -
            
            
            
            (43
            )Time
      deposits
            
            
            117
            
            
            
            562
            
            
            
            679
            
            
            
            (169
            )
            
            
            599
            
            
            
            430Total
      interest-bearing deposits
            
            
            134
            
            
            
            787
            
            
            
            921
            
            
            
            (95
            )
            
            
            773
            
            
            
            678Borrowings
            
            
            (308
            )
            
            
            30
            
            
            
            (278
            )
            
            
            (642
            )
            
            
            12
            
            
            
            (630
            )Total
      interest expense
            
            
            (174
            )
            
            
            817
            
            
            
            643
            
            
            
            (737
            )
            
            
            785
            
            
            
            48Change
      in net interest income
            
            $
            650
            
            
            $
            (1,045
            )
            
            $
            (395
            )
            
            $
            647
            
            
            $
            (162
            )
            
            $
            485





PROVISION
FOR LOAN LOSSES


The
Company took a provision for loan losses of $4.8 million in 2005, all subsequent
to Hurricane Katrina, as the hurricane severely impacted the entire area in
which the Company does business.  The impact was on both the
collateral securing certain loans and on the income or cash flow of many
borrowers.  At the 2005 year-end, the Company evaluated the entire
loan portfolio to make its assessment of potential losses, including contacting
borrowers, inspecting properties and determining the status of insurance claims
against damaged properties.  Management believes the provision and
resultant reserve to be adequate but not excessive.  As previously
discussed under “Loans and Allowance for Loan Losses,” the provision for loan
losses for the year ended December 31, 2005 was based on the information
available to management at the time.  Considerable uncertainties were
outstanding regarding, among other things, the extent of any economic recovery
in the greater New Orleans area and the ultimate disposition of property
insurance claims.





In 2007
and 2006 the Company reversed $300,000 and $2.0 million, respectively, of the
provision that was taken in 2005.  The area remains in a state of
uncertainty regarding the level of recovery from Hurricane Katrina, but borrower
performance and insurance claims were better in 2007 and 2006 than management’s
expectations, hence reducing the level of impairment in the loan
portfolio.  The Bank’s asset quality committee
will continue to meet quarterly and address all potentially impaired loans and
adjust the allowance for loan losses accordingly based on the information
available at the time.




2007
Annual Report
 Page
23




GS
      Financial Corp. and SubsidiaryManagement's
      Discussion and Analysis of Financial Condition and Results of
      Operations


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





NON-INTEREST
INCOME


Total
non-interest income increased $373,000 from $51,000 in 2006 to $424,000 in
2007.  In 2007, the Bank recognized $189,000 in income from gains
realized on the sale of mortgage loans in the secondary market, up from $30,000
in 2006.  The Bank also had an increase in miscellaneous income due to
a non-recurring gain of $110,000 on a processing error by a third party
vendor.  Table 21 shows the components of non-interest income for each
year in the three-year period ended December 31, 2007, along with the percentage
changes between years for each component.  Excluding gains and losses
from the sale of securities, fixed assets and foreclosed assets, non-interest
income was $424,000, up from $141,000 in 2006 and $120,000 in 2005, an increase
primarily attributable to gains on the sales of mortgage loans, the
non-recurring gain and an increase in penalties for the early closing of
certificates of deposit.  2005 non-interest income was adversely
affected by securities losses of $1.3 million which consisted primarily of an
other-than-temporary impairment of the Bank’s investment in a mutual fund which
invests in short-term mortgage instruments.





Service
charges on deposit accounts were $25,000 in 2007, up from $19,000 in 2006 and
2005.  The Company continues to develop new deposit products and
pricing strategies to increase transaction accounts and related fee
income.  In 2007, the Bank recognized $189,000 in gains on the sale of
mortgage loans, up from $30,000 in 2006.  The Bank began selling
mortgage loans in the secondary market in the fourth quarter of
2006.  Non-interest income before securities transactions was
adversely impacted in 2005 by a $159,000 loss taken on fixed assets destroyed by
Hurricane Katrina.  The Company recognized a gain of $40,000 on the
sale of foreclosed real estate in 2005.





Income
from real estate held for investment was $52,000 in 2007 and 2006, compared to
$53,000 in 2005.  This income is for rent received by the Company on
property not used in its banking operations.  The Company took a loss
of $159,000 in 2005 on property at one branch location that was substantially
damaged by Hurricane Katrina.  The non-recoverable assets have been
written off and the Company has now rebuilt its branch facility in the same
location.





TABLE
      21. NON-INTEREST INCOME($
      in thousands)
            
            2007
            
            
            %
      change
            
            
            2006
            
            
            %
      change
            
            
            2005Service
      charges on deposit accounts
            
            $
            25
            
            
            
            32
            %
            
            $
            19
            
            
            
            -
            
            
            $
            19ATM
      fees
            
            
            9
            
            
            
            125
            %
            
            
            4
            
            
            
            (33
            )%
            
            
            6Early
      closing penalties
            
            
            34
            
            
            
            62
            %
            
            
            21
            
            
            
            133
            %
            
            
            9Income
      from real estate held for investment
            
            
            52
            
            
            
            -
            
            
            
            52
            
            
            
            (2
            )%
            
            
            53Gain
      on sales of mortgage loans
            
            
            189
            
            
            
            530
            %
            
            
            30
            
            
            
            -
            
            
            
            -Gain
      on sales and income from foreclosed assets
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (100
            )%
            
            
            40Loss
      on impairment of fixed assets
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            100
            %
            
            
            (159
            )Miscellaneous
            
            
            115
            
            
            
            667
            %
            
            
            15
            
            
            
            (55
            )%
            
            
            33Total
      noninterest income before securities transactions
            
            
            424
            
            
            
            201
            %
            
            
            141
            
            
            
            14,000
            %
            
            
            1Net
      (loss)/gain on securities transactions
            
            
            -
            
            
            
            (100
            )%
            
            
            (90
            )
            
            
            (93
            )%
            
            
            (1,295
            )Total
      noninterest income (loss)
            
            
            424
            
            
            
            731
            %
            
            
            51
            
            
            
            n/a
            
            
            
            (1,294
            )




2007
Annual Report
 Page
24




GS
      Financial Corp. and SubsidiaryManagement's
      Discussion and Analysis of Financial Condition and Results of
      Operations


NON-INTEREST
EXPENSE


Table
22shows the
components of non-interest expense for each year of the three-year period ended
December 31, 2007 along with percent changes between years for each
component.  Non-interest expense increased 9.8%, or $483,000, in 2007
after a 4.7%, or $219,000, increase in 2006 compared to 2005.





TABLE
      22. NON-INTEREST EXPENSE($
      in thousands)
            
            2007
            
            
            %
      change
            
            
            2006
            
            
            %
      change
            
            
            2005Employee
      compensation
            
            $
            2,518
            
            
            
            10.34
            %
            
            $
            2,282
            
            
            
            9.55
            %
            
            $
            2,083Employee
      benefits
            
            
            742
            
            
            
            (22.55
            %)
            
            
            958
            
            
            
            7.28
            %
            
            
            893Total
      personnel expense
            
            
            3,260
            
            
            
            0.62
            %
            
            
            3,240
            
            
            
            8.87
            %
            
            
            2,976Net
      occupancy expense
            
            
            673
            
            
            
            24.16
            %
            
            
            542
            
            
            
            18.34
            %
            
            
            458Ad
      Valorem taxes
            
            
            258
            
            
            
            32.99
            %
            
            
            194
            
            
            
            (55.40
            %)
            
            
            435Data
      processing costs
            
            
            301
            
            
            
            24.90
            %
            
            
            241
            
            
            
            35.39
            %
            
            
            178Advertising
            
            
            139
            
            
            
            247.50
            %
            
            
            40
            
            
            
            (40.30
            %)
            
            
            67ATM
      expenses
            
            
            39
            
            
            
            62.50
            %
            
            
            24
            
            
            
            4.35
            %
            
            
            23Professional
      fees
            
            
            188
            
            
            
            8.67
            %
            
            
            173
            
            
            
            (13.50
            %)
            
            
            200Deposit
      insurance and supervisory fees
            
            
            106
            
            
            
            2.91
            %
            
            
            103
            
            
            
            (16.94
            %)
            
            
            124Printing
      and office supplies
            
            
            113
            
            
            
            (5.04
            %)
            
            
            119
            
            
            
            105.17
            %
            
            
            58Telephone
            
            
            66
            
            
            
            29.41
            %
            
            
            51
            
            
            
            (22.73
            %)
            
            
            66Other
      operating expenses
            
            
            266
            
            
            
            18.09
            %
            
            
            199
            
            
            
            63.11
            %
            
            
            122Total
      non-interest expense
            
            $
            5,409
            
            
            
            9.81
            %
            
            $
            4,926
            
            
            
            4.65
            %
            
            $
            4,707Efficiency
      Ratio
            
            
            88.27
            %
            
            
            
            
            
            
            80.14
            %
            
            
            
            
            
            
            109.06
            %(a)
      Not meaningful





Total
personnel costs increased 0.6%, or $20,000, in 2007 compared to 2006, primarily
due to the additional employees at our new banking locations offset by a
reduction in employee benefits as a result of the Bank’s ESOP being combined
with a less costly 401(k) plan.  This followed an 8.9%, or $264,000,
increase in 2006 over 2005 which was due primarily to the Bank adding employees
to accommodate its increasing product offerings and transaction
volume.  The Company provides full health insurance benefits to its
employees and partial benefits to dependents of employees.  Employee
health insurance costs were $285,000 in 2007, an increase of $19,000, or 7.1%
from 2006, and in 2005 the Company incurred an increase of $19,000, or 7.8%,
compared to 2005.





The
Company had provided retirement benefits under an Employee Stock Ownership Plan
(“ESOP”).  The cost of providing this benefit fluctuated with the
price of the Company’s stock.  The cost associated with this plan was
$407,000 in 2006, down from $412,000 in 2005.  While the share price
increased in 2006, this was offset by a lower number of shares remaining to be
allocated in 2006.  The ESOP shares have been fully distributed, and
participant ESOP balances have been rolled into a new 401(k) plan established by
the Company effective January 1, 2007.   In 2007 the Company
recognized expense relating to its 401(k) plan of $93,000.





On
January 7, 2005, the Company entered into an Early Retirement and Consulting
Agreement with its former President and Chief Executive
Officer.  During 2005, the Company recognized $449,000 in expense with
respect to this agreement, which represents the discounted present value of the
36 monthly payments due to the former President and Chief Executive Officer and
interest accrued during 2005.  The last expense relating to this
agreement is the interest expense on the discounted amount, which amounted to
$4,000 and $14,000 in 2007 and 2006.  The agreement expired on January
7, 2008, at which time the former President and Chief Executive Officer resigned
from the Board of Directors.





Advertising
costs in 2007 increased by $99,000, or 248% compared with 2006, primarily
relating to advertising to promote the Bank’s new products, its re-opened
Mid-City New Orleans location, the new Westbank
location and the conversion of the Ponchatoula location to a full-service
branch.  Advertising costs in 2006 declined by $27,000, or 40%,
compared with 2005.




2007
Annual Report
 Page
25
 
  GS
      Financial Corp. and SubsidiaryManagement's
      Discussion and Analysis of Financial Condition and Results of
      Operations


Occupancy
expenses, net, increased 24%, or $131,000 in 2007, primarily due to the addition
of a new branch location, the re-building and re-opening of an existing location
damaged by Hurricane Katrina and the conversion of a loan production office to a
full-service branch.  Occupancy expenses, net, increased 18%, or
$84,000 in 2006.  Ad Valorem taxes increased 33%, or $64,000 in 2007
following a decrease of 55%, or $241,000, in 2006.  Included in this
category is a tax that banks in Louisiana pay in lieu of a state income
tax.  This tax, known as the bank shares tax, is based on the value of
their capital stock.  This expense fluctuates based in part on the
growth in the Bank’s equity and earnings and in part on market valuation trends
for the banking industry.  A decrease in equity and an overpayment of
2005 taxes being applied as a credit in 2006 was the primary reason for the
decrease in ad valorem taxes in 2006 compared to 2005.  The taxes
returned to a more normal level in 2007.





INCOME
TAXES


Income
tax expense was $358,000 in 2007, compared with $1.1 million in 2006, and a $1.5
million benefit in 2005.  The Company’s effective tax rate in 2007
approximated the 34% statutory rate.  In 2005, the benefit was less
than the 34% statutory rate because the Bank incurred losses relating to the
write-down of securities as an other-than-temporary impairment, which is
classified as a capital loss for tax purposes.  As there was and
remains uncertainty whether the Company can generate sufficient capital gains to
offset those losses, a valuation allowance against the Bank’s deferred tax asset
was established.  See Note I to the financial statements for
additional information on the Company’s effective tax rates and the composition
of changes in income tax expense for all periods.





CONTRACTUAL
OBLIGATIONS


The
following table summarizes payments due from the Company under specified
long-term and certain other contractual obligations as of December 31,
2007.  The Company leases one banking location from a third-party,
plus it leases a temporary facility, including both the trailer and banking
equipment, placed on Company-owned property.  Both of these are
short-term, renewable leases expiring in 2008.  Obligations under
deposit contracts are not included.  The maturities of time deposits
are scheduled in Table 12 above in the section on “Deposits”.





TABLE
      23. CONTRACTUAL OBLIGATIONS($
      in thousands)
            
            Payments
      Due By Period From December 31, 2007Total
            
            
            Less
              Than
      1 Year
            
            
            1-3
      Years
            
            
            3-5
      Years
            
            
            More
              Than
      5 YearsFederal
      Home Loan Bank advances
            
            $
            26,986
            
            
            $
            11,514
            
            
            $
            13,000
            
            
            $
            2,472
            
            
            $
            -Operating
      leases on banking facilities
            
            
            33
            
            
            
            33
            
            
            
            -
            
            
            
            -
            
            
            
            -Total
      obligations
            
            $
            27,019
            
            
            $
            11,547
            
            
            $
            13,000
            
            
            $
            2,472
            
            
            $
            -





OFF-BALANCE
SHEET OBLIGATIONS


The
Company is a party to financial instruments with off-balance sheet risk in the
normal course of business to meet the financing needs of its
customers.  These financial instruments include mortgage and
construction loan commitments, letters of credit and commercial lines of
credit.  Those instruments involve, to varying degrees, elements of
credit risk in excess of the amount recognized in the balance
sheet.  The Company’s exposure to credit loss in the event of
non-performance by the other party to the financial instrument is represented by
the contractual notional amount of those instruments.  The Company
uses the same credit policies in making commitments and conditional obligations
as it does for on-balance sheet instruments.





2007
Annual Report
 Page
26




GS
      Financial Corp. and SubsidiaryManagement's
      Discussion and Analysis of Financial Condition and Results of
      Operations


The
Company’s contingent liabilities and commitments as of December 31, 2007 are as
follows:





TABLE
      24. OFF-BALANCE SHEET OBLIGATIONS($
      in thousands)
            
            Commitments
      Due By Period From December 31, 2007Total
            
            
            Less
              Than
      1 Year
            
            
            1-3
      Years
            
            
            3-5
      Years
            
            
            More
      Than 5 YearsMortgage
      loan commitments
            
            $
            17,182
            
            
            $
            17,182
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -Construction
      loan commitments
            
            
            2,777
            
            
            
            2,777
            
            
            
            -
            
            
            
            -
            
            
            
            -Unused
      portions of lines of credit
            
            
            2,215
            
            
            
            2,215Letters
      of credit
            
            
            442
            
            
            
            442Total
      Obligations
            
            $
            22,616
            
            
            $
            22,616
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -





Management’s
      Report On Internal Control Over Financial
  Reporting





Management
is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act
Rule 13a-15(f).  The Company’s internal control over financial
reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the Company;
(ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of
the Company are being made only in accordance with authorizations of management
and directors of the Company; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the Company’s assets that could have a material effect on the
financial statements.




Internal
control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements prepared for external purposes in accordance with generally
accepted accounting principles. Because of its inherent limitations, internal
control over financial reporting may not prevent or detect
misstatements.  Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.




Under the
supervision and with the participation of management, including our principal
executive officer and principal financial officer, we conducted an evaluation of
the effectiveness of our internal control over financial reporting based on the
framework in Internal Control — Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on our
evaluation under the framework in Internal Control — Integrated
Framework, management concluded that our internal control over financial
reporting was effective as of December 31, 2007.




This
Annual Report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the Company’s registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the Company to provide only management’s report
in this Annual Report.





2007
Annual Report
 Page
27











To the
Board of Directors


GS
Financial Corp. and Subsidiary


Metairie,
Louisiana





Report of Independent
Registered Public Accounting Firm





We have audited the accompanying
consolidated balance sheets of GS FINANCIAL CORP.and its
wholly-owned subsidiary, Guaranty Savings Bank, as of December 31, 2007 and
2006, and the related consolidated statements of income (loss), comprehensive
income (loss), changes in stockholders’ equity, and cash flows for each of the
three years in the period ended December 31, 2007.  These
financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these
financial statements based on our audits.





We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United
States).  Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are
free of material misstatement.  An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audits provide a reasonable basis for our opinion.





In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of GS FINANCIAL CORP.and its
wholly-owned subsidiary,Guaranty Savings Bank,
as of December 31, 2007 and 2006, and the consolidated results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2007, in conformity with accounting principles generally accepted
in the United States of America.











A
Professional Accounting Corporation





Metairie,
Louisiana


March 25,
2008









2007
Annual Report
 Page
28





GS
      FINANCIAL CORP. AND SUBSIDIARYCONSOLIDATED
      BALANCE SHEETSASSETSDecember
      31,2007
                
                
                2006(In
      Thousands)Cash
      and Cash EquivalentsCash
      and Amounts Due from Depository Institutions
                
                $
                2,485
                
                
                $
                1,893Interest-Bearing
      Deposits in Other Banks
                
                
                6,008
                
                
                
                6,544Federal
      Funds Sold
                
                
                969
                
                
                
                2,680Total
      Cash and Cash Equivalents
                
                
                9,462
                
                
                
                11,117Securities
      Available-for-Sale
                
                
                47,747
                
                
                
                55,090Loans,
      Net of Allowance for Loan Losses of $3,432 and$3,732,
      Respectively
                
                
                118,477
                
                
                
                93,987Accrued
      Interest Receivable
                
                
                1,828
                
                
                
                2,004Premises
      and Equipment, Net
                
                
                5,874
                
                
                
                3,578Stock
      in Federal Home Loan Bank, at Cost
                
                
                1,220
                
                
                
                982Real
      Estate Held-for-Investment, Net
                
                
                450
                
                
                
                464Other
      Assets
                
                
                1,429
                
                
                
                1,158Total
      Assets
                
                $
                186,487
                
                
                $
                168,380




The
accompanying notes are an integral part of these financial
statements.




2007
Annual Report
 Page
29





GS
      FINANCIAL CORP. AND SUBSIDIARY
                  CONSOLIDATED BALANCE
      SHEETSLIABILITIES AND STOCKHOLDERS'
      EQUITYDecember
      31,2007
                
                
                2006(In
      Thousands)LIABILITIESDepositsNoninterest-bearing
                
                $
                5,685
                
                
                $
                3,390Interest-bearing
                
                
                123,825
                
                
                
                119,364Total
      Deposits
                
                
                129,510
                
                
                
                122,754Advance
      Payments by Borrowers for Taxes and Insurance
                
                
                335
                
                
                
                235FHLB
      Advances
                
                
                26,986
                
                
                
                17,042Other
      Liabilities
                
                
                1,492
                
                
                
                1,185Total
      Liabilities
                
                
                158,323
                
                
                
                141,216STOCKHOLDERS'
      EQUITYPreferred
      Stock - $.01 Par Value; 5,000,000 Shares Authorized, None
      Issued
                
                
                -
                
                
                
                -Common
      Stock - $.01 Par Value;  20,000,000 Shares Authorized 3,438,500
      Shares Issued
                
                
                34
                
                
                
                34Additional
      Paid-In Capital
                
                
                34,546
                
                
                
                34,701Unearned
      RRP Trust Stock
                
                
                (158
                )
                
                
                (523
                )Treasury
      Stock (2,152,700 Shares in 2007, and 2,172,232 Shares in 2006) at
      Cost
                
                
                (32,062
                )
                
                
                (32,493
                )Retained
      Earnings
                
                
                25,919
                
                
                
                25,764Accumulated
      Other Comprehensive Loss
                
                
                (115
                )
                
                
                (319
                )Total
      Stockholders' Equity
                
                
                28,164
                
                
                
                27,164Total
      Liabilities and Stockholders' Equity
                
                $
                186,487
                
                
                $
                168,380





The
accompanying notes are an integral part of these financial
statements.





2007
Annual Report
 Page
30





GS
      FINANCIAL CORP. AND SUBSIDIARYCONSOLIDATED
      STATEMENTS OF INCOME (LOSS)For
      the Years EndedDecember 31,2007
              
              
              2006
              
              
              2005(In
      Thousands, Except Per Share Data)INTEREST
      AND DIVIDEND INCOMELoans,
      Including Fees
              
              $
              8,043
              
              
              $
              6,803
              
              
              $
              6,658Investment
      Securities
              
              
              2,830
              
              
              
              3,485
              
              
              
              3,431Other
      Interest Income
              
              
              375
              
              
              
              712
              
              
              
              377Total
      Interest Income
              
              
              11,248
              
              
              
              11,000
              
              
              
              10,466INTEREST
      EXPENSEDeposits
              
              
              4,586
              
              
              
              3,665
              
              
              
              2,987Advances
      from Federal Home Loan Bank
              
              
              961
              
              
              
              1,239
              
              
              
              1,869Total
      Interest Expense
              
              
              5,547
              
              
              
              4,904
              
              
              
              4,856NET
      INTEREST INCOME
              
              
              5,701
              
              
              
              6,096
              
              
              
              5,610(REVERSAL)
      PROVISION FOR LOAN LOSSES
              
              
              (300
              )
              
              
              (1,981
              )
              
              
              4,793NET
      INTEREST INCOME AFTER PROVISIONFOR
      LOAN LOSSES
              
              
              6,001
              
              
              
              8,077
              
              
              
              817NON-INTEREST
      INCOME (LOSS)Gain
      on Sale of Loans
              
              
              189
              
              
              
              30
              
              
              
              -Customer
      Service Fees
              
              
              68
              
              
              
              44
              
              
              
              34Other
      Income
              
              
              167
              
              
              
              67
              
              
              
              (33
              )Total
      Non-Interest Income (Loss)
              
              
              424
              
              
              
              141
              
              
              
              1NON-INTEREST
      EXPENSESSalaries
      and Employee Benefits
              
              
              3,260
              
              
              
              3,240
              
              
              
              2,976Occupancy
      Expense
              
              
              673
              
              
              
              542
              
              
              
              458Ad
      Valorem Taxes
              
              
              258
              
              
              
              194
              
              
              
              435Net
      Loss on Sale of Available-for-Sale Securities
              
              
              -
              
              
              
              90
              
              
              
              1,295Other
      Expenses
              
              
              1,218
              
              
              
              950
              
              
              
              838Total
      Non-Interest Expenses
              
              
              5,409
              
              
              
              5,016
              
              
              
              6,002INCOME
      (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT)
              
              
              1,016
              
              
              
              3,202
              
              
              
              (5,184
              )INCOME
      TAX EXPENSE (BENEFIT)
              
              
              358
              
              
              
              1,088
              
              
              
              (1,508
              )NET
      INCOME (LOSS)
              
              $
              658
              
              
              $
              2,114
              
              
              $
              (3,676
              )EARNINGS
      (LOSS) PER SHARE - BASIC
              
              $
              0.53
              
              
              $
              1.74
              
              
              $
              (3.11
              )EARNINGS
      (LOSS) PER SHARE - DILUTED
              
              $
              0.52
              
              
              $
              1.73
              
              
              $
              (3.11
              )


The
accompanying notes are an integral part of these financial
statements.








2007
Annual Report
 Page
31





GS
      FINANCIAL CORP. AND SUBSIDIARYCONSOLIDATED
      STATEMENTS OF COMPREHENSIVE INCOME (LOSS)For
      the Years EndedDecember 31,2007
              
              
              2006
              
              
              2005(In
      Thousands)NET
      INCOME (LOSS)$
              658
              
              
              $
              2,114
              
              
              $
              (3,676
              )OTHER
      COMPREHENSIVE INCOME (LOSS),NET
      OF TAX:Unrealized
      Holding Gain (Losses) Arising During the Period
              
              
              247
              
              
              
              (150
              )
              
              
              (704
              )Reclassification
      Adjustment for LossesIncluded
      in Net Income
              
              
              (43
              )
              
              
              29
              
              
              
              802Total
      Other Comprehensive Income (Loss)
              
              
              204
              
              
              
              (121
              )
              
              
              98COMPREHENSIVE
      INCOME (LOSS)
              
              $
              862
              
              
              $
              1,993
              
              
              $
              (3,578
              )





The
accompanying notes are an integral part of these financial
statements.




2007
Annual Report
 Page
32





GS
      FINANCIAL CORP. AND SUBSIDIARYCONSOLIDATED
      STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITYFor
      the Years Ended December 31, 2007, 2006, and 2005AccumulatedAdditional
              
              
              
              
              
              Unearned
              
              
              Unearned
              
              
              
              
              
              Other
              
              
              TotalCommon
              
              
              Paid-In
              
              
              Treasury
              
              
              ESOP
              
              
              RRP
      Trust
              
              
              Retained
              
              
              Comprehensive
              
              
              Stockholders'Stock
              
              
              Capital
              
              
              Stock
              
              
              Stock
              
              
              Stock
              
              
              Earnings
              
              
              Income
      (Loss)
              
              
              Equity(In
      Thousands)BALANCES
      AT JANUARY 1, 2005
              
              $
              34
              
              
              $
              34,425
              
              
              $
              (32,119
              )
              
              $
              (521
              )
              
              $
              (865
              )
              
              $
              28,286
              
              
              $
              (296
              )
              
              $
              28,944Distribution
      of RRP Trust Stock
              
              
              -
              
              
              
              (43
              )
              
              
              -
              
              
              
              -
              
              
              
              167
              
              
              
              -
              
              
              
              -
              
              
              
              124ESOP
      Compensation Earned
              
              
              -
              
              
              
              183
              
              
              
              -
              
              
              
              282
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              465Purchase
      of Treasury Stock
              
              
              -
              
              
              
              -
              
              
              
              (74
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (74
              )Dividends
      Declared
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (474
              )
              
              
              -
              
              
              
              (474
              )Net
      Loss - Year Ended December 31, 2005
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (3,676
              )
              
              
              -
              
              
              
              (3,676
              )Other
      Comprehensive Income, Net of ApplicableDeferred Income
      Taxes
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              98
              
              
              
              98BALANCES
      AT DECEMBER 31, 2005
              
              
              34
              
              
              
              34,565
              
              
              
              (32,193
              )
              
              
              (239
              )
              
              
              (698
              )
              
              
              24,136
              
              
              
              (198
              )
              
              
              25,407Distribution
      of RRP Trust Stock
              
              
              -
              
              
              
              (50
              )
              
              
              -
              
              
              
              -
              
              
              
              175
              
              
              
              -
              
              
              
              -
              
              
              
              125ESOP
      Compensation Earned
              
              
              -
              
              
              
              186
              
              
              
              -
              
              
              
              239
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              425Purchase
      of Treasury Stock
              
              
              -
              
              
              
              -
              
              
              
              (300
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (300
              )Dividends
      Declared
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (486
              )
              
              
              -
              
              
              
              (486
              )Net
      Income - Year Ended December 31, 2006
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              2,114
              
              
              
              -
              
              
              
              2,114Other
      Comprehensive Loss, Net of ApplicableDeferred Income
      Taxes
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (121
              )
              
              
              (121
              )BALANCES
      AT DECEMBER 31, 2006
              
              
              34
              
              
              
              34,701
              
              
              
              (32,493
              )
              
              
              -
              
              
              
              (523
              )
              
              
              25,764
              
              
              
              (319
              )
              
              
              27,164Distribution
      of RRP Trust Stock
              
              
              -
              
              
              
              (52
              )
              
              
              -
              
              
              
              -
              
              
              
              177
              
              
              
              -
              
              
              
              -
              
              
              
              125Retirement
      of RRP Trust Stock
              
              
              -
              
              
              
              -
              
              
              
              (188
              )
              
              
              -
              
              
              
              188
              
              
              
              -
              
              
              
              -
              
              
              
              -Exercise
      of Stock Options
              
              
              -
              
              
              
              (103
              )
              
              
              619
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              516Dividends
      Declared
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (503
              )
              
              
              -
              
              
              
              (503
              )Net
      Income - Year Ended December 31, 2007
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              658
              
              
              
              -
              
              
              
              658Other Comprehensive
      Income, Net of Applicable Deferred
      Income Taxes
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              204
              
              
              
              204BALANCES
      AT DECEMBER 31, 2007
              
              $
              34
              
              
              $
              34,546
              
              
              $
              (32,062
              )
              
              $
              -
              
              
              $
              (158
              )
              
              $
              25,919
              
              
              $
              (115
              )
              
              $
              28,164





The
accompanying notes are an integral part of these financial
statements.





2007
Annual Report
 Page
33





GS
      FINANCIAL CORP. AND SUBSIDIARYCONSOLIDATED
      STATEMENTS OF CASH FLOWSFor
      the Years EndedDecember 31,2007
              
              
              2006
              
              
              2005(In
      Thousands)CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      Income (Loss)
              
              $
              658
              
              
              $
              2,114
              
              
              $
              (3,676
              )Adjustments
      to Reconcile Net Income (Loss) to Net CashProvided
      by Operating Activities:Depreciation
              
              
              229
              
              
              
              172
              
              
              
              154Impairment
      of Fixed Assets
              
              
              -
              
              
              
              -
              
              
              
              159Accretion
      Net of Premium Amortization
              
              
              (26
              )
              
              
              (45
              )
              
              
              (80
              )(Reversal)
      Provision for Loan Losses
              
              
              (300
              )
              
              
              (1,981
              )
              
              
              4,793Non-Cash
      Dividend - FHLB Stock
              
              
              (53
              )
              
              
              (74
              )
              
              
              (81
              )Net
      Loan Fees
              
              
              56
              
              
              
              2
              
              
              
              2Mutual
      Fund Dividends Reinvested
              
              
              -
              
              
              
              (517
              )
              
              
              -ESOP
      Expense
              
              
              -
              
              
              
              408
              
              
              
              465RRP
      Expense
              
              
              111
              
              
              
              143
              
              
              
              119Gain
      on Sale of Loans
              
              
              (189
              )
              
              
              (30
              )
              
              
              -Gain
      on Sale of Foreclosed Real Estate
              
              
              -
              
              
              
              -
              
              
              
              (40
              )Loss
      on Sale of Investments
              
              
              -
              
              
              
              90
              
              
              
              18Loss
      on Write-Down of Investments
              
              
              -
              
              
              
              -
              
              
              
              1,277Deferred
      Income Tax Expense (Benefit)
              
              
              970
              
              
              
              325
              
              
              
              (1,722
              )Changes
      in Operating Assets and Liabilities:Decrease
      (Increase) in Accrued Interest Receivable
              
              
              176
              
              
              
              (377
              )
              
              
              (1,025
              )Decrease
      (Increase) in Prepaid Income Taxes
              
              
              80
              
              
              
              -
              
              
              
              (16
              )(Increase)
      Decrease in Other Assets
              
              
              (351
              )
              
              
              451
              
              
              
              54Increase
      in Accrued Interest - FHLB Advances
              
              
              22
              
              
              
              27
              
              
              
              27Increase
      (Decrease) in Accrued Income Tax
              
              
              1
              
              
              
              (65
              )
              
              
              83(Decrease)
      Increase in Other Liabilities
              
              
              (672
              )
              
              
              308
              
              
              
              735Net
      Cash Provided by Operating Activities
              
              
              712
              
              
              
              951
              
              
              
              1,246CASH
      FLOWS FROM INVESTING ACTIVITIESProceeds
      from Maturities of Investment Securities
              
              
              14,119
              
              
              
              6,117
              
              
              
              8,872Proceeds
      from Sales of Investment Securities
              
              
              -
              
              
              
              14,963
              
              
              
              19,631Purchases
      of Investment Securities
              
              
              (11,546
              )
              
              
              (37,543
              )
              
              
              (12,077
              )Redemption
      of (Investment in) Mutual Funds, Net
              
              
              5,000
              
              
              
              38,961
              
              
              
              (133
              )Loan
      Originations and Principal Collections, Net
              
              
              (39,239
              )
              
              
              (23,638
              )
              
              
              17,312Proceeds
      from Sales of Loans
              
              
              15,182
              
              
              
              1,353
              
              
              
              -Purchases
      of Premises and Equipment
              
              
              (2,511
              )
              
              
              (1,480
              )
              
              
              (49
              )Proceeds
      from Sales of Foreclosed Real Estate
              
              
              -
              
              
              
              -
              
              
              
              199Investment
      in Foreclosed Real Estate
              
              
              -
              
              
              
              -
              
              
              
              (5
              )(Purchase)
      Redemption of Federal Home Loan Bank Stock
              
              
              (185
              )
              
              
              925
              
              
              
              692Net
      Cash (Used in) Provided by Investing Activities
              
              
              (19,180
              )
              
              
              (342
              )
              
              
              34,442


The
accompanying notes are an integral part of these financial
statements.




2007
Annual Report
 Page
34





GS
      FINANCIAL CORP. AND SUBSIDIARYCONSOLIDATED
      STATEMENTS OF CASH FLOWS (Continued)For
      the Years EndedDecember 31,2007
              
              
              2006
              
              
              2005(In
      Thousands)CASH
      FLOWS FROM FINANCING ACTIVITIESPurchase
      of Treasury Stock
              
              
              -
              
              
              
              (300
              )
              
              
              (74
              )Proceeds
      from Stock Option Exercise
              
              
              516
              
              
              
              -
              
              
              
              -Increase
      (Decrease) in Advances from Federal Home Loan Bank
              
              
              9,944
              
              
              
              (15,064
              )
              
              
              (7,583
              )Payment
      of Cash Stock Dividends
              
              
              (503
              )
              
              
              (486
              )
              
              
              (474
              )Increase
      (Decrease) in Deposits
              
              
              6,756
              
              
              
              3,888
              
              
              
              (11,857
              )Increase
      (Decrease) in Deposits for Escrows
              
              
              100
              
              
              
              (85
              )
              
              
              (169
              )Net
      Cash Provided by (Used in) Financing Activities
              
              
              16,813
              
              
              
              (12,047
              )
              
              
              (20,157
              )NET
      (DECREASE) INCREASE IN CASH AND CASHEQUIVALENTS
              
              
              (1,655
              )
              
              
              (11,438
              )
              
              
              15,531CASH
      AND CASH EQUIVALENTS, BEGINNING OF YEAR
              
              
              11,117
              
              
              
              22,555
              
              
              
              7,024CASH
      AND CASH EQUIVALENTS, END OF YEAR
              
              $
              9,462
              
              
              $
              11,117
              
              
              $
              22,555SUPPLEMENTAL
      DISCLOSURE OF CASH FLOWINFORMATIONCash
      Paid During the Year for:Interest
              
              $
              5,524
              
              
              $
              5,014
              
              
              $
              4,883Income
      Taxes
              
              
              -
              
              
              
              -
              
              
              
              109Loans Transferred
      to Foreclosed Real Estate During the Year
              
              
              -
              
              
              
              -
              
              
              
              154Market
      Value Adjustment for (Loss) Gain on Securites
      Available-for-Sale
              
              
              244
              
              
              
              (183
              )
              
              
              148





The
accompanying notes are an integral part of these financial
statements.




2007
Annual Report
 Page
35




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements




NOTE
A
 SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
 
 NATURE
OF OPERATIONS
 GS FINANCIAL CORP. (Company)
was organized as a Louisiana corporation on December 24, 1996, for the purpose
of becoming the holding company of Guaranty Savings and Homestead Association
(Association) in anticipation of converting the Association from a Louisiana
chartered mutual savings and loan association to a Louisiana chartered stock
savings and loan association.  In June 2006, the Association changed
its name to Guaranty Savings Bank (Bank).  The Bank operates in the
banking/savings and loan industry and, as such, provides financial services to
individuals, corporate entities and other organizations through the origination
of loans and the acceptance of deposits in the form of passbook savings,
certificates of deposit, money market accounts and demand deposit
accounts.
 
 The Bank
is subject to competition from other financial institutions, and is also subject
to the regulations of certain Federal and State agencies and undergoes periodic
examinations by those regulatory authorities.
 
 BASIS
OF PRESENTATION AND CONSOLIDATION
 The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiary, Guaranty Savings Bank.  All significant
inter-company balances and transactions have been eliminated in
consolidation.
 
 USE
OF ESTIMATES
 In
preparing consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America, management is
required to make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the balance sheets and reported amounts
of revenues and expenses during the reporting period.  Actual results
could differ from those estimates.  Material estimates that are
particularly susceptible to significant change relate to the determination of
the allowance for losses on loans and valuation of foreclosed real
estate.
 
 SIGNIFICANT
GROUP CONCENTRATIONS OF CREDIT RISK
 Most of
the Company’s activities are with customers located within the greater New
Orleans area in Louisiana.  Note B discusses the types of securities
in which the Company invests.  Note C discusses the types of lending
in which the Company engages.  The Company does not have any
significant concentrations in any one industry or to any one
customer.
 
 CASH
AND CASH EQUIVALENTS
 For the
purposes of the Consolidated Statements of Cash Flows, cash and cash equivalents
include cash and balances due from banks, federal funds sold and securities
purchased under agreements to resell, all of which mature within ninety
days.





2007
Annual Report
 Page
36


GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)
  NOTE
A


SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





SECURITIES
AVAILABLE-FOR-SALE


Marketable
securities are classified as “available-for-sale” and recorded at fair value,
with unrealized gains and losses excluded from earnings and reported in other
comprehensive income.





Purchase
premiums and discounts are recognized in interest income over the terms of the
securities.  Gains and losses on sales of securities are recorded on
the trade date and are determined using the specific identification
method.





LOANS


The
Company, through the Bank, grants mortgage, commercial and construction loans,
and lines of credit to customers.  A substantial portion of the loan
portfolio is represented by mortgage loans throughout the greater New Orleans
area.  The ability of the Company’s debtors to honor their contracts
is dependent upon the real estate and general economic conditions in this
area.





Loans are
reported at their outstanding unpaid principal balance adjusted for charge-offs,
the allowance for loan losses, and any deferred fees or costs on originated
loans.  Interest income is accrued on the unpaid principal
balance.  Loan origination and commitment fees, as well as certain
direct origination costs, are deferred and amortized as a yield adjustment over
the lives of the related loans using the interest
method.  Amortization of net deferred loan fees or costs is
discontinued when a loan is placed on non-accrual status.





The
accrual of interest on loans is discontinued at the time the loan is 90 days
past due.  At that time, uncollected interest previously recorded is
reversed.  If the delinquent interest is subsequently collected, it is
credited to income in the period collected.  Interest on impaired
loans is discontinued when, in management’s opinion, the borrower may be unable
to meet payments as they become due.





Subsequent
to Hurricane Katrina, the Bank deferred loan payments for certain loans for the
months of September, October and November 2005.  Interest continued to
accrue at the contract rate, and unpaid interest for these months will be due at
payoff or maturity.   For loans which were performing prior to
Hurricane Katrina, the deferral period was not considered in measuring
delinquency and performing status.





ALLOWANCE
FOR LOAN LOSSES


The
allowance for loan losses is established as losses are estimated to have
occurred through a provision for loan losses charged to
earnings.  Loan losses are charged against the allowance when
management believes the uncollectibility of a loan balance is confirmed.
Subsequent recoveries, if any, are credited to the allowance.





2007
Annual Report
 Page
37




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)


NOTE
A


SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





ALLOWANCE
FOR LOAN LOSSES (Continued)


The allowance for loan losses is
evaluated on a regular basis by management and is based upon management’s
periodic review of the Bank’s past loan loss experience, known and inherent
risks in the portfolio, adverse situations that may affect the borrower’s
ability to pay, the estimated value of underlying collateral, and prevailing
economic conditions.  This evaluation is inherently subjective, as it
requires estimates that are susceptible to significant revision as more
information becomes available.





A loan is
considered impaired when, based on current information and events, it is
probable the Bank will be unable to collect the scheduled payments of principal
or interest when due according to the contractual terms of the loan
agreement.  Factors considered by management in determining impairment
include payment status, collateral value, and the probability of collecting
scheduled principal and interest payments when due.  Impairment is
measured on a loan by loan basis by either the present value of expected future
cash flows discounted at the loan’s effective interest rate, the loan’s
obtainable market price, or the fair value of the collateral if the loan is
collateral dependent.





FORECLOSED
ASSETS


Assets
acquired through, or in lieu of, loan foreclosure are held for sale and are
initially recorded at the lower of the related loan balance or fair value less
estimated cost to sell at the date of foreclosure.  Management
periodically performs valuations, and an allowance for losses will be
established to reduce the net carrying value to net realizable value if
necessary.  Costs related to improvement of the property are
capitalized, whereas costs related to holding the property are charged to
operations.





PREMISES
AND EQUIPMENT


Land is
carried at cost.  Buildings and equipment are carried at cost, less
accumulated depreciation computed on the straight-line method over the estimated
useful lives of the assets.  Estimated useful lives of premises and
equipment range as follows:





Building
      and Improvements
              10
      - 39 YearsFurniture
      and Equipment
              3 -
      7 Years


REAL
ESTATE HELD-FOR-INVESTMENT


Real
estate held-for-investment consists of a multi-suite office
building.  The Company leases two of the four suites to the Bank,
which serve as a mortgage loan production office.  The remaining two
suites are leased by unrelated third parties.


2007
Annual Report
 Page
38




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)


NOTE
A
 SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 INCOME
TAXES
 The
Company and its wholly-owned subsidiary file a consolidated Federal income tax
return on a calendar year basis.  Each entity pays its pro rata share
of income taxes in accordance with a written tax-sharing agreement.
 
 Deferred
income tax assets and liabilities are determined using the liability (or balance
sheet) method.  Under this method, the net deferred tax asset or
liability is determined based on the tax effects of the temporary differences
between the book and tax bases of the various balance sheet assets and
liabilities and gives current recognition to change in tax rates and
laws.
 
 While the
Bank is exempt from Louisiana income tax, it is subject to the Louisiana Ad
Valorem tax that is based on stockholders’ equity and net income.
 
 STOCK
COMPENSATION PLANS
 During
2005, the FASB revised SFAS No. 123.  SFAS No. 123(R) replaces the
prior SFAS No. 123 and superseded APB Opinion No. 25.  This Statement
requires a public entity to measure the cost of employee services received in
exchange for an award of equity instruments based on the grant-date fair value
of the award.  That cost is to be recognized over the period during
which an employee is required to provide service in exchange for the
award.  The adoption had no impact on the Company’s interim or annual
financial statements for 2007, 2006, or 2005 since all outstanding options
issued became fully vested in 2002 and all unexercised options expired in
2007.
 
 ADVERTISING
COSTS
 The
Company expenses advertising costs as incurred.  Advertising costs
were $139,000, $40,000, and $67,000 for the years ended December 31, 2007, 2006
and 2005, respectively.
 
 COMPREHENSIVE
INCOME
 Accounting
principles generally require that recognized revenue, expenses, gains and losses
be included in net income.  Although certain changes in assets and
liabilities, such as unrealized gains and losses on available-for-sale
securities, are reported as a separate component of the equity section of the
balance sheets; such items, along with net income, are components of
comprehensive income.
 
 RECENT ACCOUNTING
PRONOUNCEMENTS
 In
September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements.  This Statement defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles,
and expands disclosures about fair value measurements.  This Statement
is effective for financial statements issued for fiscal years beginning after
November 15, 2007.  This pronouncement is not expected to have a
material effect on the financial position and results of operations of the
Company.





2007
Annual Report
 Page
39




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)


NOTE
A


SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





RECENT
ACCOUNTING PRONOUNCEMENTS (Continued)


In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities (as amended).  This Statement
permits entities to choose to measure many financial instruments and certain
other items at fair value.  The objective is to provide entities with
the opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently without having to apply complex hedge
accounting provisions.  This Statement is effective as of the
beginning of an entity’s first fiscal year that begins after November 15,
2007.  The Company did not elect to early-adopt SFAS No. 159 and
currently has no intention of electing the fair value option for any financial
instruments.





In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements (an amendment of ARB No.
51).  This Statement was issued to improve the relevance,
comparability, and transparency of the financial information that a reporting
entity provides in its consolidated financial statements.  This
Statement is effective for fiscal years, and interim periods with those fiscal
years, beginning on or after December 31, 2008.








NOTE
B


SECURITIES
AVAILABLE-FOR-SALE


The
amortized costs and fair value of securities available-for-sale, with gross
unrealized gains and losses, follows:




December
      31, 2007Gross
              
              
              GrossAmortized
              
              
              Unrealized
              
              
              UnrealizedCost
              
              
              Gains
              
              
              Losses
              
              
              Fair
      Value(In
      Thousands)Debt
      SecuritiesU.S.
      Government and FederalAgencies
              
              $
              18,492
              
              
              $
              138
              
              
              $
              209
              
              
              $
              18,421Mortgage-Backed
      Securities
              
              
              8,849
              
              
              
              88
              
              
              
              25
              
              
              
              8,912Collateralized
      Mortgage Obligations
              
              
              14,736
              
              
              
              10
              
              
              
              113
              
              
              
              14,633Total Debt Securities
              
              
              42,077
              
              
              
              236
              
              
              
              347
              
              
              
              41,966Marketable
      Equity SecuritiesMutual
      Funds
              
              
              5,837
              
              
              
              -
              
              
              
              56
              
              
              
              5,781Total Marketable Equity Securities
              
              
              5,837
              
              
              
              -
              
              
              
              56
              
              
              
              5,781Total Securities Available-for-Sale
              
              $
              47,914
              
              
              $
              236
              
              
              $
              403
              
              
              $
              47,747





2007
Annual Report
 Page
40


GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)


NOTE
B


SECURITIES
AVAILABLE-FOR-SALE (Continued)




December
      31, 2006Gross
              
              
              GrossAmortized
              
              
              Unrealized
              
              
              UnrealizedCost
              
              
              Gains
              
              
              Losses
              
              
              Fair
      Value(In
      Thousands)Debt
      SecuritiesU.S.
      Government and FederalAgencies
              
              $
              23,485
              
              
              $
              -
              
              
              $
              159
              
              
              $
              23,326Mortgage-Backed
      Securities
              
              
              3,764
              
              
              
              27
              
              
              
              -
              
              
              
              3,791Collateralized
      Mortgage Obligations
              
              
              17,486
              
              
              
              3
              
              
              
              316
              
              
              
              17,173Total
      Debt Securities
              
              
              44,735
              
              
              
              30
              
              
              
              475
              
              
              
              44,290Marketable
      Equity SecuritiesMutual
      Funds
              
              
              10,832
              
              
              
              -
              
              
              
              32
              
              
              
              10,800Total
      Marketable Equity Securities
              
              
              10,832
              
              
              
              -
              
              
              
              32
              
              
              
              10,800Total
      Securities Available-for-Sale
              
              $
              55,567
              
              
              $
              30
              
              
              $
              507
              
              
              $
              55,090


The amortized cost and fair value of
debt securities by contractual maturity at December 31, 2007,
follows.  Debt securities with scheduled repayments, such as
mortgage-backed-securities and collateralized mortgage obligations are presented
in separate totals.





Cost
              
              
              Fair
      Value(In
      Thousands)Amounts
      Maturing in:Within
      One Year
              
              $
              -
              
              
              $
              -One
      to Five Years
              
              
              4,992
              
              
              
              5,016Five
      to Ten Years
              
              
              3,000
              
              
              
              3,002Greater
      than Ten Years
              
              
              10,500
              
              
              
              10,40318,492
              
              
              
              18,421Mortgage-Backed
      Securities
              
              
              8,849
              
              
              
              8,912Collateralized
      Mortgage Obligations
              
              
              14,736
              
              
              
              14,633$
              42,077
              
              
              $
              41,966





2007
Annual Report
 Page
41


GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)


NOTE
B


SECURITIES
AVAILABLE-FOR-SALE (Continued)


For the
years ended December 31, 2007, 2006 and 2005, proceeds from the sale of
securities available-for-sale amounted to $-0-, $14,963,000, and $19,631,000,
respectively.  Gross realized gains amounted to $-0-, $3,000, and
$92,000, respectively.  Gross realized losses in 2007, 2006 and 2005,
were $-0-, $-0-, and $110,000, respectively.  $10,000,000 was received
as proceeds from called securities in 2007.  No securities were called
in 2006 or 2005.





In
addition to the sales of securities available-for-sale, the Company also
redeemed shares of its investment in mutual funds during the years ended
December 31, 2007 and 2006.  Proceeds from the redemption of
these shares amounted to $5,000,000 and $38,463,000 in 2007 and 2006,
respectively, and the Company realized losses of $-0- and $93,000 on these
redemptions in the years ended December 31, 2007 and 2006,
respectively.  There were no redemptions in 2005.





In
accordance with the Company’s policy to review the investment portfolio for
declines that may be other than temporary, non-cash losses of approximately
$1,277,000 were recorded on certain available-for-sale securities in
2005.  No other-than-temporary losses were recorded in 2007 or
2006.





No
securities were pledged at December 31, 2007 and 2006.





Information
pertaining to securities with gross unrealized losses at December 31, 2007 and
2006, aggregated by investment category and length of time that individual
securities have been in a continuous loss position follows:


Less
      Than Twelve Months
              
              
              Over
      Twelve MonthsDecember 31,
      2007
              
              Gross
              
              
              
              
              
              GrossUnrealized
              
              
              Fair
              
              
              Unrealized
              
              
              FairLosses
              
              
              Value
              
              
              Losses
              
              
              Value(In
      Thousands)U.S.
      Government and FederalAgencies
              
              $
              -
              
              
              $
              2,033
              
              
              $
              70
              
              
              $
              16,527Mortgage-Backed
      Securities
              
              
              25
              
              
              
              5,620
              
              
              
              -
              
              
              
              3,292Collateralized
      Mortgage Obligations
              
              
              -
              
              
              
              -
              
              
              
              172
              
              
              
              14,574Marketable
      Equity Securities
              
              
              -
              
              
              
              -
              
              
              
              56
              
              
              
              5,781Total
      Securities
              
              $
              25
              
              
              $
              7,653
              
              
              $
              298
              
              
              $
              40,174





2007
Annual Report
 Page
42


GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)


NOTE
B


SECURITIES
- AVAILABLE-FOR-SALE (Continued)


The Company’s investment in equity
securities consists primarily of shares of an adjustable rate mortgage loan
mutual fund.  The unrealized losses associated with this fund were
caused by interest rate increases, and the timing between when these rate
increases took place compared to the resulting adjustment in rates in the
underlying mortgage loans.  Because the Company has the ability to
hold these investments for a reasonable period of time sufficient for recovery
of fair value, which may be maturity for the Collateralized Mortgage
Obligations, it does not consider the investments to be other-than-temporarily
impaired at December 31, 2007.




Less
      Than Twelve Months
              
              
              Over
      Twelve MonthsDecember 31,
      2006
              
              Gross
              
              
              
              
              
              GrossUnrealized
              
              
              Fair
              
              
              Unrealized
              
              
              FairLosses
              
              
              Value
              
              
              Losses
              
              
              Value(In
      Thousands)U.S.
      Government and FederalAgencies
              
              $
              159
              
              
              $
              23,326
              
              
              $
              -
              
              
              $
              -Collateralized
      Mortgage Obligations
              
              
              -
              
              
              
              -
              
              
              
              316
              
              
              
              16,112Marketable
      Equity Securities
              
              
              -
              
              
              
              -
              
              
              
              32
              
              
              
              10,800Total
      Securities
              
              $
              159
              
              
              $
              23,326
              
              
              $
              348
              
              
              $
              26,912








NOTE
C


LOANS


A summary
of the balances of loans follows:


December
      31,2007
              
              
              2006(In
      Thousands)Loans
      Secured by First Mortgages on Real Estate:1-4
      Family Residential
              
              $
              62,481
              
              
              $
              48,610Construction
              
              
              9,074
              
              
              
              9,089Commercial
      Real Estate
              
              
              37,851
              
              
              
              30,791Other
              
              
              7,906
              
              
              
              6,105Total
      Real Estate Loans
              
              
              117,312
              
              
              
              94,595Consumer
      Loans
              
              
              913
              
              
              
              677Commercial
      Loans
              
              
              3,625
              
              
              
              2,445Total
      Loans
              
              
              121,850
              
              
              
              97,717Allowance
      for Loan Losses
              
              
              (3,432
              )
              
              
              (3,732
              )Net
      Deferred Loan Origination Costs
              
              
              59
              
              
              
              2Loans,
      Net
              
              $
              118,477
              
              
              $
              93,987





2007
Annual Report
 Page
43




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)


NOTE
C


LOANS
(Continued)





An analysis of the allowance for loan
losses is as follows:




Years
      Ended December 31,2007
              
              
              2006
              
              
              2005(In
      Thousands)Balance,
      Beginning of Year
              
              $
              3,732
              
              
              $
              5,713
              
              
              $
              920(Reversal)
      Provision for Loan Losses
              
              
              (300
              )
              
              
              (1,981
              )
              
              
              4,793Charge-offs
              
              
              -
              
              
              
              -
              
              
              
              -Balance,
      End of Year
              
              $
              3,432
              
              
              $
              3,732
              
              
              $
              5,713







Loans receivable as
of December 31, 2007, are scheduled to mature and adjustable rate loans are
scheduled to re-price as follows:
  Under
      One
                
                
                One
      to Five
                
                
                Six
      to Ten
                
                
                Over
      TenYear
                
                
                Years
                
                
                Years
                
                
                Years
                
                
                Total(In
      Thousands)1-4
      Family - Fixed Rate
                
                $
                4,041
                
                
                $
                7,563
                
                
                $
                6,866
                
                
                $
                50,074
                
                
                $
                68,544Other
      Real Estate -Fixed Rate
                
                
                10,340
                
                
                
                20,639
                
                
                
                6,947
                
                
                
                8,461
                
                
                
                46,387Commercial
      - Fixed Rate
                
                
                1,693
                
                
                
                1,147
                
                
                
                -
                
                
                
                -
                
                
                
                2,840All
      Other Loans
                
                
                -
                
                
                
                197
                
                
                
                3,014
                
                
                
                868
                
                
                
                4,079$
                16,074
                
                
                $
                29,546
                
                
                $
                16,827
                
                
                $
                59,403
                
                
                $
                121,850


Loans for
which impairment had been recognized totaled approximately $6,101,000 and
$8,894,000 at December 31, 2007 and 2006, respectively.  The valuation
allowance related to impaired loans amounted to $682,000 and $1,248,000 at
December 31, 2007 and 2006, respectively.  The amount of interest
income that would have been recorded on impaired loans at December 31, 2007 and
2006, was $35,000 and $46,000, respectively.




2007
Annual Report
 Page
44


GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)


NOTE
C


LOANS
(Continued)





In the ordinary course of business, the
Company has granted loans to principal officers and directors and their
affiliates.  In the opinion of management, such transactions were on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time of comparable transactions with other persons and did not
involve more than a normal risk of collectibility or present any other
unfavorable features to the Bank.





An
analysis of the changes in loans to such borrowers follows:




December
      31,2007
              
              
              2006(In
      Thousands)Balance,
      Beginning of Year
              
              $
              620
              
              
              $
              222Additions
              
              
              -
              
              
              
              410Payments
      and Renewals
              
              
              (60
              )
              
              
              (12
              )Balance,
      End of Year
              
              $
              560
              
              
              $
              620





The
Company’s lending activity is concentrated within the greater New Orleans area
and surrounding parishes, with its major emphasis in the origination of
permanent single-family dwelling loans and real-estate secured commercial
loans.  Such loans comprise the majority of the Company’s loan
portfolio.








NOTE
D


ACCRUED
INTEREST RECEIVABLE


Accrued
interest receivable at December 31, 2007 and 2006, consists of the
following:




December
      31,2007
              
              
              2006(In
      Thousands)Loans
              
              $
              1,462
              
              
              $
              1,507Securities
              
              
              366
              
              
              
              497Total
      Accrued Interest
              
              $
              1,828
              
              
              $
              2,004


2007
Annual Report
 Page
45


GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)
 NOTE
E


PREMISES
AND EQUIPMENT


A summary
of the cost and accumulated depreciation of premises and equipment
follows:




December
      31,2007
              
              
              2006(In
      Thousands)Land
              
              $
              2,755
              
              
              $
              2,099Buildings
      and Improvements
              
              
              3,157
              
              
              
              1,849Furniture,
      Fixtures and Equipment
              
              
              1,418
              
              
              
              9997,330
              
              
              
              4,947Accumulated
      Depreciation and Amortization
              
              
              (1,456
              )
              
              
              (1,369
              )$
              5,874
              
              
              $
              3,578





Depreciation
expense for the years ended December 31, 2007, 2006 and 2005, was approximately
$215,000, $158,000, and $139,000, respectively.  During 2005, the Bank
recognized an impairment charge of $159,000 relating to fixed assets damaged as
a result of Hurricane Katrina.








NOTE
F


REAL
ESTATE HELD-FOR-INVESTMENT


Real
estate held-for-investment, which consists of a multi-suite office building that
includes a branch location of the Bank, is summarized below:




December
      31,2007
              
              
              2006(In
      Thousands)Land
              
              $
              226
              
              
              $
              226Buildings
      and Improvements
              
              
              320
              
              
              
              320546
              
              
              
              546Accumulated
      Depreciation and Amortization
              
              
              (96
              )
              
              
              (82
              )$
              450
              
              
              $
              464





Depreciation
expense for each of the years ended December 31, 2007, 2006 and 2005, was
$14,000, $14,000 and $15,000, respectively.
 
 Rental
income for the years ended December 31, 2007, 2006 and 2005, was $52,000,
$52,000 and $53,000 respectively.


2007
Annual Report
 Page
46


GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)


NOTE
G


DEPOSITS


Interest-bearing
deposit account balances at December 31, 2007 and 2006, are summarized as
follows:




Weighted
      Average
              
              
              Account
      Balances at December 31,Rate
      at December 31,
              
              
              2007
              
              
              20062007
              
              
              2006
              
              
              Amount
              
              
              Percent
              
              
              Amount
              
              
              Percent(In
      Thousands)Balance
      by Interest RateDemand
      Deposit Accounts
              
              
              2.39
              %
              
              
              2.47
              %
              
              $
              23,632
              
              
              
              19.08
              %
              
              $
              17,926
              
              
              
              15.02
              %Savings
      Accounts
              
              
              1.00
              %
              
              
              1.25
              %
              
              
              19,245
              
              
              
              15.54
              %
              
              
              22,807
              
              
              
              19.11
              %Certificates
      of Deposit
              
              
              4.64
              %
              
              
              4.40
              %
              
              
              80,948
              
              
              
              65.37
              %
              
              
              78,631
              
              
              
              65.87
              %$
              123,825
              
              
              
              100.00
              %
              
              $
              119,364
              
              
              
              100.00
              %Certificate
      Accounts MaturingOne
      Year or Less
              
              
              
              
              
              
              
              
              
              $
              63,953
              
              
              
              79.01
              %
              
              $
              50,180
              
              
              
              63.81
              %One
      to Two Years
              
              
              
              
              
              
              
              
              
              
              6,533
              
              
              
              8.07
              %
              
              
              23,140
              
              
              
              29.43
              %Two
      to Three Years
              
              
              
              
              
              
              
              
              
              
              8,308
              
              
              
              10.26
              %
              
              
              2,019
              
              
              
              2.57
              %Three
      to Five Years
              
              
              
              
              
              
              
              
              
              
              2,154
              
              
              
              2.66
              %
              
              
              3,292
              
              
              
              4.19
              %$
              80,948
              
              
              
              100.00
              %
              
              $
              78,631
              
              
              
              100.00
              %





The
aggregate amount of time deposits in denominations of $100,000 or more at
December 31, 2007 and 2006, was approximately $18,316,000 and $15,438,000,
respectively.





Interest
expense for each of the following periods is as follows:




Years
      Ended December 31,2007
              
              
              2006
              
              
              2005(In
      Thousands)Certificates
      of Deposit
              
              $
              3,617
              
              
              $
              2,938
              
              
              $
              2,508NOW
      Accounts
              
              
              722
              
              
              
              388
              
              
              
              97Passbook
      Savings
              
              
              247
              
              
              
              339
              
              
              
              382$
              4,586
              
              
              $
              3,665
              
              
              $
              2,987





The Bank
held deposits of approximately $1,424,000 and $1,261,000 for related parties at
December 31, 2007 and 2006, respectively.




2007
Annual Report
 Page
47


GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)


NOTE
H


BORROWINGS


Pursuant
to collateral agreements with the Federal Home Loan Bank (FHLB), advances issued
by the FHLB are secured by a blanket floating lien on first mortgage loans and
certain pledged Collateralized Mortgage Obligations.  Total interest
expense recognized on FHLB advances in 2007, 2006 and 2005, was $961,000,
$1,239,000, and $1,869,000, respectively.





Advances
consisted of the following at December 31, 2007 and 2006,
respectively.




FHLB
      Advance TotalContract
      Rate
            
            
            2007
            
            
            2006(In
      Thousands)4%
      - 4.99%
            
            
            $
            11,000
            
            
            $
            -5%
      - 5.99%
            
            
            
            15,986
            
            
            
            17,0426%
      - 6.99%
            
            
            
            -
            
            
            
            -$
            26,986
            
            
            $
            17,042









YearEnding
      December31,
              
              Amount
      Maturing(In
      Thousands)2008
              
              $
              11,5142009
              
              
              -2010
              
              
              13,0002011
              
              
              -2012
              
              
              2,472$
              26,986


NOTE
I


INCOME
TAX EXPENSE


The
provision for income taxes for 2007, 2006 and 2005, consists of the
following:




Years
      EndedDecember 31,2007
              
              
              2006
              
              
              2005(In
      Thousands)Current
      Tax Expense (Benefit)
              
              
              
              
              
              $
              (612
              )
              
              $
              193
              
              
              $
              -Deferred
      Tax Expense (Benefit)
              
              
              
              
              
              
              970
              
              
              
              895
              
              
              
              (1,508
              )$
              358
              
              
              $
              1,088
              
              
              $
              (1,508
              )




2007
Annual Report
 Page
48




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)


NOTE
I


INCOME
TAX EXPENSE (Continued)


The
provision for Federal income taxes differs from that computed by applying
Federal statutory rates to income (loss) before Federal income tax expense, as
indicated in the following analysis:




Years
      EndedDecember 31,2007
              
              
              2006
              
              
              2005(In
      Thousands)Expected
      Tax Provision at a 34% Rate
              
              $
              346
              
              
              $
              1,089
              
              
              $
              (1,762
              )Expected
      State Corporate Tax
              
              
              --
              
              
              
              3
              
              
              
              (4
              )Employee
      Stock Ownership Plan
              
              
              --
              
              
              
              63
              
              
              
              37Valuation
      Allowance on Capital Loss
              
              
              --
              
              
              
              --
              
              
              
              241Other
              
              
              12
              
              
              
              (67
              )
              
              
              (20
              )$
              358
              
              
              $
              1,088
              
              
              $
              (1,508
              )





The net
deferred tax assets or liabilities in the accompanying consolidated balance
sheets include the following components:





2007
                
                
                2006(In
      Thousands)Deferred
      Tax AssetsRecognition
      and Retention Plan
                
                $
                5
                
                
                $
                9Credits
      Carryforward
                
                
                118
                
                
                
                -Recognition
      of Other-than-Temporary Decline inMarket
      Value of Available-for-Sale Securities
                
                
                93
                
                
                
                434Market
      Value Adjustment to Available-for-Sale Securities
                
                
                56
                
                
                
                161Net
      Operating Loss Carryforward
                
                
                356
                
                
                
                1Capital
      Loss Carryforward
                
                
                322
                
                
                
                172Allowance
      for Loan Losses
                
                
                93
                
                
                
                255Other
                
                
                11
                
                
                
                53Total
      Deferred Tax Assets
                
                $
                1,054
                
                
                $
                1,085





2007
Annual Report
 Page
49




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)


NOTE
I


INCOME
TAX EXPENSE (Continued)




2007
              
              
              2006(In
      Thousands)Deferred
      Tax LiabilitiesPremises
      and Equipment
              
              $
              (297
              )
              
              $
              -Section
      585 Bad Debt Deduction
              
              
              (455
              )
              
              
              -FHLB
      Stock Dividends
              
              
              (261
              )
              
              
              (464
              )Other
              
              
              (47
              )
              
              
              (89
              )Total
      Deferred Tax Liabilities
              
              
              (1,060
              )
              
              
              (553
              )Valuation
      Allowance
              
              
              (241
              )
              
              
              (241
              )Net
      Deferred Tax Liability
              
              $
              (247
              )
              
              $
              291





SFAS No.
109 requires a valuation allowance to be recorded when it is more likely than
not that some or all of the deferred tax assets will not be
realized.  At December 31, 2007 and 2006, a valuation allowance of
$241,000 for approximately 50% of the recognition in other-than-temporary
decline of market value of available-for-sale securities was recorded because of
uncertainties as to the amount of capital gains that would be generated in
future years.





Included
in retained earnings at December 31, 2007 and 2006, is approximately $3,800,000
in bad debt reserves for which no deferred Federal income tax liability has been
recorded.  These amounts represent allocations of income to bad debt
deductions for tax purposes only.  Reduction of these reserves for
purposes other than tax bad-debt losses or adjustments arising from carryback of
net operating losses would create income for tax purposes, which would be
subject to the then-current corporate income tax rate.  The unrecorded
deferred liability on these amounts was approximately $1,292,000 for December
31, 2007 and 2006, respectively.





NOTE
J


EMPLOYEE
STOCK OWNERSHIP PLAN


During
1997, GS Financial Corp. instituted an employee stock ownership plan. The GS
Financial Corp. Employee Stock Ownership Plan (ESOP) enables all eligible
employees of the Bank to share in the growth of the Company through the
acquisition of stock.  Employees were generally eligible to
participate in the ESOP after completion of one year of service and attaining
age 21.





The ESOP
purchased eight percent of the shares offered in the initial public offering of
the Company (275,080 shares).  This purchase was facilitated by a loan
from the Company to the ESOP in the amount of $2,750,800.  The loan
was secured by a pledge of the ESOP shares.  The shares pledged as
collateral were reported as unearned ESOP shares in the balance
sheets.  The corresponding note was paid back in 40 equal quarterly
payments of $103,000 on the last business day of each quarter, beginning June
30, 1997, at the rate of 8.5%.  The loan was fully repaid as of
December 31, 2006, but in prior periods the note payable and the corresponding
note receivable had been eliminated for consolidation purposes.




2007
Annual Report
 Page
50




GS
      Financial Corp. and SubsidiaryNotes to
      Consolidated Financial Statements




NOTE
J


EMPLOYEE
STOCK OWNERSHIP PLAN (Continued)


The
Company made contributions to the plan, in the form of debt service, at the
discretion of its Board of Directors.  Dividends received on the ESOP
shares were utilized to service the debt.  Shares were released for
allocation to plan participants based on principal and interest payments of the
note.  Compensation expense was recognized based on the number of
shares allocated to plan participants each year and the average market price of
the stock for the current year.  Released ESOP shares become
outstanding for earnings per share computations.





As
compensation expense was incurred, the Unearned ESOP Shares account was reduced
based on the original cost of the stock.  The difference between the
cost and average market price of shares released for allocation was applied to
Additional Paid-In Capital.  ESOP compensation expense was
approximately $-0-, $407,000, and $412,000 for the years ended
December 31, 2007, 2006 and 2005, respectively.





The ESOP
shares as of December 31, 2007 and 2006, were as follows:




2007
              
              
              2006Allocated
      Shares
              
              
              179,591
              
              
              
              155,669Shares
      Released for Allocation
              
              
              -
              
              
              
              23,922Unreleased
      Shares
              
              
              -
              
              
              
              -Total
      ESOP Shares
              
              
              179,591
              
              
              
              179,591Fair
      Value of Unreleased Shares (In
      Thousands)
              
              $
              -
              
              
              $
              -Stock
      Price at December 31
              
              $
              18.94
              
              
              $
              19.80





Total
ESOP shares decreased in 2006, due to the release of shares for employees who
terminated their employment in 2006.





Effective
January 1, 2007, the Company amended and restated its ESOP, added a 401(k)
feature and renamed the plan the “Guaranty Savings Bank 401(k) Plan” (the 401(k)
Plan).  ESOP shares will be maintained in the 401(k) Plan, which will
provide the ability to diversify into other 401(k) Plan
investments.  Employees may defer up to 15% of their salary, up to the
IRS maximum ($15,500 in 2007) on a tax-deferred basis and have a variety of
investment options, including a money market fund, fixed-income, blended and
equity mutual funds, and GS Financial Corp. stock.  The Company will
match 100% of contributions up to 3% of an employee’s salary and 50% of the next
2% of employee contributions.  This match enables the 401(k) Plan to
comply with IRS safe harbor rules exempting it from top-heavy testing and
maintaining its tax-exempt status.  In addition, the Company may, at
its discretion, make additional profit sharing contributions of up to 6% of
participants’ salaries.





2007
Annual Report
 Page
51


GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)


NOTE
K


RECOGNITION
AND RETENTION PLAN


On
October 15, 1997, the Company established a Recognition and Retention Plan
(the Plan) as an incentive to retain personnel of experience and ability in
key positions.  The Company approved a total of 137,540 shares of
stock to be acquired for the Plan, of which 125,028 shares were allocated for
distribution to key employees and directors.





As shares
are acquired for the Plan, the purchase price of these shares is recorded as
unearned compensation, a contra equity account.  As the shares are
distributed, the contra equity account is reduced.





During
1998, with unanimous approval of the Plan participants, all outstanding grants
were amended by the Board as a direct effort to reduce the Company’s expenses
resulting from the Plan.  Prior to the amendments, Plan share awards
were earned by recipients at a rate of 20% of the aggregate number of shares
covered by the Plan over five years.  Plan share awards were amended
to provide that they are earned by recipients at a rate of 10% of the aggregate
number of shares covered by the plan over ten years.  If the
employment of an employee or service as a non-employee director was terminated
prior to the tenth anniversary of the date of grant of Plan share award for any
reason (except for death or disability or a change in control), the recipient
would forfeit the right to any shares subject to the awards which have not been
earned.





During
2007, the Company granted 5,000 shares to its President and in 2006 the Company
granted 1,776 shares to a new director, both grants vesting over ten years at a
rate of 10% per year.





Compensation
expense pertaining to the Recognition and Retention Plan was $111,000 $126,000,
and $119,000 for the years ended December 31, 2007, 2006 and 2005,
respectively.





A summary
of the changes in restricted stock follows:




Unawarded
      Shares
              
              
              Awarded
      Shares2007
              
              
              2006
              
              
              2007
              
              
              2006Balance,
      Beginning of Year
              
              
              14,968
              
              
              
              16,744
              
              
              
              13,369
              
              
              
              21,411Purchased
      by Plan
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Granted
              
              
              (5,000
              )
              
              
              (1,776
              )
              
              
              5,000
              
              
              
              1,776Forfeited/expired
              
              
              (9,968
              )
              
              
              -
              
              
              
              (559
              )
              
              
              -Earned
      and Issued
              
              
              -
              
              
              
              -
              
              
              
              (9,562
              )
              
              
              (9,818
              )Balance,
      End of Year
              
              
              -
              
              
              
              14,968
              
              
              
              8,248
              
              
              
              13,369




2007
Annual Report
 Page
52


GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)
 NOTE
L


STOCK
OPTION PLAN


In 1997,
the Company adopted a stock option plan for the benefit of directors, officers,
and other key employees.  The number of shares of common stock
reserved for issuance under the stock option plan was 343,850 shares, or ten
percent of the total number of shares of common stock sold in the Company’s
initial public offering of its common stock.





The plan
also permits the granting of Stock Appreciation Rights (SARs).  SARs
entitle the holder to receive, in the form of cash or stock, the increase in the
fair value of the Company stock from the date of grant to the date of
exercise.  No SARs have been issued under the plan.





On
October 15, 1997, the Company granted a total of 275,076 options to
directors.  Under the plan, the exercise price of each option cannot
be less than the fair value of the underlying common stock as of the date of the
option grant, and the maximum term is 10 years.  Options vested over
five years.  During 2002, the options had fully vested.





During
2005, the Company adopted SFAS No. 123(R), which replaced SFAS No. 123 and
superceded APB No. 25.  The adoption of this pronouncement had no
impact on the Company’s interim or annual financial position or results of
operations.





A summary
of the status of the Company’s stock option plan as of December 31, 2007, 2006,
and 2005, and changes during the years ending on those dates is presented
below:




2007
              
              
              2006
              
              
              2005Exercise
              
              
              
              
              
              Exercise
              
              
              
              
              
              ExerciseFixed Options
              
              Shares
              
              
              Price
              
              
              Shares
              
              
              Price
              
              
              Shares
              
              
              PriceOutstanding,Beginning
      of Year
              
              
              216,132
              
              
              
              
              
              
              216,132
              
              
              $
              17.18
              
              
              
              245,604
              
              
              $
              17.18Granted
              
              
              -
              
              
              
              
              
              
              -
              
              
              
              
              
              
              
              -Exercised
              
              
              30,000
              
              
              
              17.18
              
              
              
              -
              
              
              
              
              
              
              
              -Forfeited/expired
              
              
              186,132
              
              
              
              
              
              
              
              -
              
              
              
              
              
              
              
              29,472Outstanding,End
      of Year
              
              
              -
              
              
              
              
              
              
              
              216,132
              
              
              $
              17.18
              
              
              
              216,132
              
              
              $
              17.18Options
      Exercisable atYear-End
              
              
              -
              
              
              
              
              
              
              
              216,132
              
              
              $
              17.18
              
              
              
              216,132
              
              
              $
              17.18





2007
Annual Report
 Page
53




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)




NOTE
M


COMPREHENSIVE
INCOME


Comprehensive
income was comprised of changes in the Company’s unrealized holding gains or
losses on securities available-for-sale during 2007, 2006 and
2005.  The components of comprehensive income and related tax effects
are as follows:




Years
      Ended December 31,2007
              
              
              2006
              
              
              2005(In
      Thousands)Gross
      Unrealized Holding Gains (Losses)Arising
      During the Period
              
              $
              374
              
              
              $
              (227
              )
              
              $
              (1,066
              )Tax
      (Expense) Benefit
              
              
              (127
              )
              
              
              77
              
              
              
              362247
              
              
              
              (150
              )
              
              
              (704
              )Reclassification
      Adjustment for Gains (Losses)Included
      in Net Income
              
              
              (65
              )
              
              
              44
              
              
              
              1,215Tax
      (Expense) Benefit
              
              
              22
              
              
              
              (15
              )
              
              
              (413
              )(43
              )
              
              
              29
              
              
              
              802Net
      Unrealized Holding Gains (Losses)Arising
      During the Period
              
              $
              204
              
              
              $
              (121
              )
              
              $
              98








NOTE
N


REGULATORY
      MATTERS


The Bank
is subject to various regulatory capital requirements administered by its
primary federal regulator, the Office of Thrift Supervision
(OTS).  Failure to meet the minimum regulatory capital requirements
can initiate certain mandatory, and possible additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on the Bank
and the financial statements.  Under the regulatory capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines involving quantitative measures of the
Bank’s assets, liabilities, and certain off-balance sheet items as calculated
under regulatory accounting practices.  The Bank’s capital amounts and
classification under the prompt corrective action guidelines are also subject to
qualitative judgments by the regulators about components, risk weightings, and
other factors.





Quantitative
measures established by regulation to ensure capital adequacy require the Bank
to maintain minimum amounts and ratios of:  total risk-based capital
and Tier I capital to risk-weighted assets (as defined in the regulations), Tier
I capital to adjusted total assets (as defined), tangible capital to adjusted
total assets (as defined), and tangible equity to adjusted total assets (as
defined).  As of December 31, 2007, the Bank meets all of the capital
requirements to which it is subject and is deemed to be well
capitalized.





2007
Annual Report
 Page
54


GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)


NOTE
N


REGULATORY
      MATTERS (Continued)


The
actual and required capital amounts and ratios applicable to the Bank for the
years ended December 31, 2007 and 2006, are presented in the following tables,
including a reconciliation of capital under generally accepted accounting
principles (GAAP) to such amounts reported for regulatory purposes.




Minimum
      to be WellCapitalized
      UnderMinimum
      for Capital
              
              
              Prompt
      CorrectiveActual
              
              
              Adequacy
      Purposes
              
              
              Action
      ProvisionsDecember 31,
      2007
              
              Amount
              
              
              Ratio
              
              
              Amount
              
              
              Ratio
              
              
              Amount
              
              
              Ratio(Dollars
      in Thousands)Tangible
      Capital
              
              $
              27,107
              
              
              
              14.65
              %
              
              $
              2,776
              
              
              
              1.50
              %
              
              
              N/A
              
              
              
              N/ATangible
      Equity Ratio
              
              
              27,107
              
              
              
              14.65
              %
              
              
              3,702
              
              
              
              2.00
              %
              
              
              N/A
              
              
              
              N/ATier
      1 Capital
              
              
              27,107
              
              
              
              14.65
              %
              
              
              5,552
              
              
              
              3.00
              %
              
              $
              9,254
              
              
              
              5.00
              %Tier
      1 Risk-Based Capital
              
              
              27,107
              
              
              
              26.06
              %
              
              
              4,161
              
              
              
              4.00
              %
              
              
              6,242
              
              
              
              6.00
              %Total
      Risk-Based Capital
              
              
              28,367
              
              
              
              27.27
              %
              
              
              8,322
              
              
              
              8.00
              %
              
              
              10,403
              
              
              
              10.00
              %December 31,
      2006Tangible
      Capital
              
              $
              26,580
              
              
              
              15.90
              %
              
              $
              2,507
              
              
              
              1.50
              %
              
              
              N/A
              
              
              
              N/ATangible
      Equity Ratio
              
              
              26,580
              
              
              
              15.90
              %
              
              
              3,343
              
              
              
              2.00
              %
              
              
              N/A
              
              
              
              N/ATier
      1 Capital
              
              
              26,580
              
              
              
              15.90
              %
              
              
              5,014
              
              
              
              3.00
              %
              
              $
              8,356
              
              
              
              5.00
              %Tier
      1 Risk-Based Capital
              
              
              26,580
              
              
              
              30.33
              %
              
              
              3,506
              
              
              
              4.00
              %
              
              
              5,259
              
              
              
              6.00
              %Total
      Risk-Based Capital
              
              
              27,676
              
              
              
              31.58
              %
              
              
              7,012
              
              
              
              8.00
              %
              
              
              8,765
              
              
              
              10.00
              %





NOTE
O


FINANCIAL
INSTRUMENTS WITH OFF-BALANCE SHEET RISK


The Bank
is a party to credit related commitments with off-balance sheet risk in the
normal course of business to meet the financing needs of its
customers.  These consist of outstanding mortgage and construction
loan commitments and commercial lines of credit.  Such commitments
involve, to varying degrees, elements of credit and interest rate risk in excess
of the amount recognized in the consolidated financial statements.





The
Bank’s exposure to credit loss is represented by the contractual amount of these
commitments.  The Company follows the same credit policies in making
commitments as it does for on-balance sheet instruments.





As of
December 31, 2007 and 2006, outstanding mortgage, construction and commercial
lines of credit commitments were approximately $19,959,000 and $6,693,000,
respectively.





2007
Annual Report
 Page
55




GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)




NOTE
O


FINANCIAL
INSTRUMENTS WITH OFF-BALANCE SHEET RISK (Continued)


Commitments
to extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract.  Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee.  The commitments for lines of credit may
expire without being drawn upon.  Therefore, the total commitment
amounts do not necessarily represent future cash requirements.  The
amount of collateral obtained, if it is deemed necessary by the Bank, is based
on management’s credit evaluation of the customer.





As of
December 31, 2007, the Company held $3.5 million in securities that would be
classified as derivatives.  These securities are backed by U.S.
Government agencies, and are included as available-for-sale securities on the
Company’s balance sheet.  The condition that makes these particular
securities, known as “range notes”, considered derivatives is that the payment
of interest is dependent upon a specific LIBOR interest rate falling within a
certain range.  Should LIBOR exceed the range, payments of interest
will be suspended until the certain LIBOR rate return to the
range.  Since acquiring these securities, they have remained in the
range for interest to be paid to the bank.  The “range” condition has
no impact on the principal obligation of these notes.





These
derivative securities were not acquired to hedge a specific risk.  The
impact of SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which requires marking these
securities to market value, was not material.








NOTE
P


COMMITMENTS
AND CONTINGENCIES





EMPLOYMENT
CONTRACTS


On
January 7, 2005, the former Chief Executive Officer retired from the
Company.  The Company entered into an early retirement and consulting
agreement with the former Chief Executive Officer.  The agreement
provides that the former Chief Executive Officer will provide up to 60 hours of
consulting services per month for 36 months.  In addition, the
agreement provided provisions for a non-compete period, which expired on January
6, 2006.  The agreement stipulates that the Company will pay the
former Chief Executive Officer $13,000 per month for 36 months.  This
contract expired and was not renewed at January 6, 2008.





OPERATING
LEASES


During
2003, the Bank entered into a lease with the Company for a branch office
location.  The rental expense associated with this lease is eliminated in
the consolidated statement of operations.  The lease had a term of 24
months with a rental rate of $4,025 per month.  The Bank has continued to
lease this property subsequent to the lease expiration on a month-to-month
basis.  In addition, the Bank leases a branch location from a third party
for $1,650 per month.  The lease, which is renewable, expires on April 30,
2008.  The Bank also leases a temporary banking facility and furnishings
which it utilizes at a new branch location on land owned by the Bank.  This
is a twelve month lease, with monthly payments of $2,935 per month, which
expires on September 30, 2008.  The Company’s total contractual obligations
under these leases are $33,000, all of which is due in 2008.





2007
Annual Report
 Page
56


GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)




NOTE
P


COMMITMENTS
AND CONTINGENCIES





OPERATING
LEASES (Continued)


Total
rent expense incurred by the Bank under these leases amounted to $81,000,
$61,300 and $60,300, for the years ended December 31, 2007, 2006, and 2005 ,
respectively.


NOTE
Q




CONCENTRATION
OF CREDIT RISK


In
accordance with industry practices, the Company has deposits in other financial
institutions for more than the insured limit.  These deposits in other
institutions do not represent more than the normal industry credit
risk.








NOTE
R


ESTIMATED
FAIR VALUE OF FINANCIAL INSTRUMENTS


The
following disclosure is made in accordance with the requirements of SFAS No.
107, Disclosures About Fair
Value of Financial Instruments.  Financial instruments are
defined as cash and contractual rights and obligations that require settlement,
directly or indirectly, in cash.  In cases where quoted market prices
are not available, fair values have been estimated using the present value of
future cash flows or other valuation techniques.  The results of these
techniques are highly sensitive to the assumptions used, such as those
concerning appropriate discount rates and estimates of future cash flows, which
require considerable judgment.  Accordingly, estimates presented
herein are not necessarily indicative of the amounts the Company could realize
in a current settlement of the underlying financial instruments.  SFAS
No. 107 excludes certain financial instruments and all non-financial instruments
from its disclosure requirements.  These disclosures should not be
interpreted as representing an aggregate measure of the underlying value of the
Company.





The
following methods and assumptions were used by the Company in estimating fair
value disclosures for financial instruments.





Cashand Cash
Equivalents


The
carrying amount of cash and due from financial institutions, federal funds sold
and short-term investments approximate fair values.





Securities


Fair
values for securities, excluding Federal Home Loan Bank Stock, are based on
quoted market prices.  If quoted market prices are not available, fair
values are based on quoted market prices of comparable instruments.





Loans Receivable,
Net


The fair
values of loans are estimated through discounted cash flow analysis, using
current rates at which loans with similar terms would be made to borrowers with
similar credit quality.  Appropriate adjustments are made to reflect
probable credit losses.  The carrying amount of accrued interest on
loans approximated its fair value.





2007
Annual Report
 Page
57


GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)




NOTE
R


ESTIMATED
FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)


Federal Home Loan Bank
Stock


The
carrying value of Federal Home Loan Bank Stock approximates fair value based on
the redemption provisions of the Federal Home Loan Bank.





Deposit
Liabilities


SFAS No.
107 specifies that the fair value of deposit liabilities with no defined
maturity is the amount payable on demand at the reporting date, i.e., their
carrying or book value. These deposits include interest and non-interest bearing
checking, passbook, and money market accounts. The fair value of fixed rate
certificates of deposit is estimated using a discounted cash flow calculation
that applies interest rates currently offered on certificates of similar
remaining maturities to a schedule of aggregate expected cash flows on time
deposits.





Advances from the Federal
Home Loan Bank


The fair
value of fixed rate borrowings is estimated using discounted cash flows, based
on current incremental borrowing rates for similar types of borrowing
arrangements.





Accrued
Interest


The
carrying amount of accrued interest approximates its fair value.





Off-Balance Sheet
Instruments


Off-balance
sheet financial instruments include commitments to extend credit and undisbursed
lines of credit.  The fair value of such instruments is estimated
using fees currently charged for similar arrangements in the marketplace,
adjusted for changes in terms and credit risk as appropriate.  The
estimated fair value for these instruments was not significant at


December
31, 2007 and 2006.  The contract or notional amounts of the Company’s
financial instruments with off-balance sheet risk are disclosed in Note
O.





The
estimated fair values of the Company’s financial instruments are as
follows:


December
      31, 2007
              
              
              December
      31, 2006Carrying
      Amount
              
              
              Fair
      Value
              
              
              Carrying
      Amount
              
              
              Fair
      Value(In
      Thousands)Financial
      AssetsCash
      and Cash Equivalents
              
              $
              9,462
              
              
              $
              9,457
              
              
              $
              11,117
              
              
              $
              11,117Securities
      Available-for-Sale
              
              
              47,747
              
              
              
              47,747
              
              
              
              55,090
              
              
              
              55,090Loans,
      Net
              
              
              118,477
              
              
              
              123,967
              
              
              
              93,987
              
              
              
              98,080Federal
      Home Loan Bank Stock
              
              
              1,220
              
              
              
              1,220
              
              
              
              982
              
              
              
              982Accrued
      Interest Receivable
              
              
              1,828
              
              
              
              1,828
              
              
              
              2,004
              
              
              
              2,004Financial
      LiabilitiesDeposits
              
              $
              129,510
              
              
              $
              130,320
              
              
              $
              122,754
              
              
              $
              122,417Borrowings
              
              
              26,986
              
              
              
              27,549
              
              
              
              17,042
              
              
              
              17,082Accrued
      Interest Payable
              
              
              102
              
              
              
              102
              
              
              
              84
              
              
              
              84


2007
Annual Report
 Page
58


GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)
  NOTE
S


SELECTED
QUARTERLY FINANCIAL DATA (Unaudited)


The
following sets forth condensed quarterly results of operations for 2007 and
2006, (dollar amounts in
thousands, except per share data):




First
              
              
              Second
              
              
              Third
              
              
              Fourth2007
              
              Quarter
              
              
              Quarter
              
              
              Quarter
              
              
              QuarterInterest
      Income
              
              $
              2,654
              
              
              $
              2,733
              
              
              $
              2,861
              
              
              $
              3,000Interest
      Expense
              
              
              1,284
              
              
              
              1,342
              
              
              
              1,448
              
              
              
              1,473Net
      Interest Income
              
              
              1,370
              
              
              
              1,391
              
              
              
              1,413
              
              
              
              1,527Provision
      (Reversal) for Loan Losses
              
              
              -
              
              
              
              (300
              )
              
              
              -
              
              
              
              -Other
      Income (Loss)
              
              
              29
              
              
              
              43
              
              
              
              109
              
              
              
              243Other
      Expense
              
              
              1,276
              
              
              
              1,314
              
              
              
              1,441
              
              
              
              1,378Income
      Tax Expense
              
              
              27
              
              
              
              127
              
              
              
              12
              
              
              
              192Net
      Income
              
              $
              96
              
              
              $
              293
              
              
              $
              69
              
              
              $
              200Net
      Income per Common Share1Basic
              
              $
              0.08
              
              
              $
              0.24
              
              
              $
              0.06
              
              
              $
              0.16Diluted
              
              $
              0.08
              
              
              $
              0.24
              
              
              $
              0.06
              
              
              $
              0.16Dividends
      Per Share
              
              $
              0.10
              
              
              $
              0.10
              
              
              $
              0.10
              
              
              $
              0.101
      Quarterly per share amounts do not add to total for the year ended due to
      rounding.First
              
              
              Second
              
              
              Third
              
              
              Fourth2006
              
              Quarter
              
              
              Quarter
              
              
              Quarter
              
              
              QuarterInterest
      Income
              
              $
              2,712
              
              
              $
              2,782
              
              
              $
              2,800
              
              
              $
              2,706Interest
      Expense
              
              
              1,173
              
              
              
              1,170
              
              
              
              1,262
              
              
              
              1,299Net
      Interest Income
              
              
              1,539
              
              
              
              1,612
              
              
              
              1,538
              
              
              
              1,407Provision
      (Reversal) for Loan Losses
              
              
              -
              
              
              
              -
              
              
              
              (1,981
              )
              
              
              -Other
      Income (Loss)
              
              
              7
              
              
              
              (53
              )
              
              
              31
              
              
              
              66Other
      Expense
              
              
              1,132
              
              
              
              1,187
              
              
              
              1,261
              
              
              
              1,346Income
      Tax Expense
              
              
              138
              
              
              
              129
              
              
              
              778
              
              
              
              43Net
      Income
              
              $
              276
              
              
              $
              243
              
              
              $
              1,511
              
              
              $
              84Net
      Income per Common Share1Basic
              
              $
              0.23
              
              
              $
              0.20
              
              
              $
              1.25
              
              
              $
              0.07Diluted
              
              $
              0.23
              
              
              $
              0.20
              
              
              $
              1.24
              
              
              $
              0.07Dividends
      Per Share
              
              $
              0.10
              
              
              $
              0.10
              
              
              $
              0.10
              
              
              $
              0.101
      Quarterly per share amounts do not add to total for the year ended due to
      rounding.






2007
Annual Report
 Page
59


GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)




NOTE
T


EARNINGS (LOSS) PER COMMON
SHARE


Earnings
(loss) per share are computed using the weighted average number of shares
outstanding as prescribed in SFAS No. 128.  Options to purchase
216,132 shares at $17.18 per share were outstanding through October 15, 2007 and
during the year ended December 31, 2006.  These options were not
included in the computation of diluted loss per share for 2005, because the
options’ exercise price was greater than the average market value price of the
common shares.  The options were included in the computation of
diluted earnings per share for the years ended December 31, 2007 and
2006.  The Company had no other securities outstanding during the
years ended December 31, 2007, 2006 or 2005, that would have a dilutive effect
on earnings (loss) per share.





Years
      Ended December 31,2007
              
              
              2006
              
              
              2005(Dollars
      in Thousands, Except Per Share Data)NumeratorNet
      Income (Loss)
              
              $
              658
              
              
              $
              2,114
              
              
              $
              (3,676
              )Effect
      of Dilutive Securities
              
              
              -
              
              
              
              -
              
              
              
              -Numerator
      for Diluted Earnings (Loss) Per Share
              
              $
              658
              
              
              $
              2,114
              
              
              $
              (3,676
              )DenominatorWeighted-Average
      Shares Outstanding
              
              
              1,243,655
              
              
              
              1,212,174
              
              
              
              1,181,313Effect
      of Potentially Dilutive Securities
              
              
              25,340
              
              
              
              10,776
              
              
              
              -Denominator
      for Diluted Earnings Per Share
              
              
              1,268,995
              
              
              
              1,222,950
              
              
              
              1,181,313Earnings
      (Loss) Per ShareBasic
              
              $
              0.53
              
              
              $
              1.74
              
              
              $
              (3.11
              )Diluted
              
              $
              0.52
              
              
              $
              1.73
              
              
              $
              (3.11
              )Cash
      Dividends Per Share
              
              $
              0.40
              
              
              $
              0.40
              
              
              $
              0.40


The
following table presents the components of average outstanding shares for each
of the three years:


Years
      Ended December 31,2007
                
                
                2006
                
                
                2005Average
      Common Shares Issued
                
                
                3,438,500
                
                
                
                3,438,500
                
                
                
                3,438,500Average
      Treasury Shares
                
                
                (2,165,821
                )
                
                
                (2,162,860
                )
                
                
                (2,153,780
                )Average
      Unearned ESOP Shares
                
                
                -
                
                
                
                (23,856
                )
                
                
                (51,977
                )Average
      Unearned RRP Trust Shares
                
                
                (29,024
                )
                
                
                (39,610
                )
                
                
                (51,430
                )1,243,655
                
                
                
                1,212,174
                
                
                
                1,181,313


2007
Annual Report
 Page
60


GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)




NOTE
U


CONDENSED
FINANCIAL INFORMATION - PARENT COMPANY ONLY


Financial information pertaining only
to GS Financial Corp. is as follows:




CONDENSED
      BALANCE SHEETSASSETSDecember
      31,2007
              
              
              2006(In
      Thousands)Cash
      and Cash Equivalents
              
              $
              755
              
              
              $
              661Investments
      - Available-for-Sale, at Fair Value
              
              
              78
              
              
              
              107Investment
      in Subsidiary
              
              
              26,959
              
              
              
              26,262Other
      Assets
              
              
              691
              
              
              
              815Total
      Assets
              
              $
              28,483
              
              
              $
              27,845LIABILITIES
      AND STOCKHOLDERS' EQUITYOther
      Liabilities
              
              $
              141
              
              
              $
              589Stockholders'
      Equity
              
              
              28,342
              
              
              
              27,256Total
      Liabilities and Stockholders' Equity
              
              $
              28,483
              
              
              $
              27,845




2007
Annual Report
 Page
61


GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)




NOTE
U


CONDENSED
FINANCIAL INFORMATION - PARENT COMPANY ONLY (Continued)






CONDENSED
      STATEMENTS OF INCOMEYears
      Ended December 31,2007
              
              
              2006
              
              
              2005(In
      Thousands)Income:Dividends
      from Guaranty Savings Bank
              
              $
              500
              
              
              $
              -
              
              
              $
              262Interest
      Income
              
              
              23
              
              
              
              53
              
              
              
              82Other
      Income
              
              
              100
              
              
              
              96
              
              
              
              97Total
      Income
              
              
              623
              
              
              
              149
              
              
              
              441Operating
      Expenses
              
              
              306
              
              
              
              321
              
              
              
              274Income
      (Loss) Before Income Taxes and Equity inUndistributed
      Earnings (Loss) of Guaranty Savings Bank
              
              
              317
              
              
              
              (172
              )
              
              
              167Applicable
      Income Tax Benefit
              
              
              (76
              )
              
              
              (58
              )
              
              
              (23
              )Equity
      in Undistributed Earnings (Loss) ofGuaranty
      Savings Bank
              
              
              265
              
              
              
              2,228
              
              
              
              (3,866
              )Net
      Income (Loss)
              
              $
              658
              
              
              $
              2,114
              
              
              $
              (3,676
              )




2007
Annual Report
 Page
62


GS
      Financial Corp. and SubsidiaryNotes
      to Consolidated Financial Statements
(Continued)




NOTE
U


CONDENSED
FINANCIAL INFORMATION - PARENT COMPANY ONLY (Continued)


CONDENSED
      STATEMENTS OF CASH FLOWSYears
      Ended December 31,2007
              
              
              2006
              
              
              2005(In
      Thousands)OPERATING
      ACTIVITIESNet
      Income (Loss)
              
              $
              658
              
              
              $
              2,114
              
              
              $
              (3,676
              )Adjustments
      to Reconcile Net Income (Loss) to Net CashProvided
      by Operating ActivitiesDepreciation
      Expense
              
              
              14
              
              
              
              16
              
              
              
              18Loss
      on Sale of Investments
              
              
              -
              
              
              
              4
              
              
              
              -Equity
      in Undistributed (Earnings) Loss of Subsidiary
              
              
              (265
              )
              
              
              (2,228
              )
              
              
              3,866Amortization
      of Investment Premium
              
              
              -
              
              
              
              2
              
              
              
              3Decrease
      (Increase) in Other Assets
              
              
              124
              
              
              
              (10
              )
              
              
              25Change
      in Deferred Income Tax Assets/Liabilities
              
              
              (31
              )
              
              
              (42
              )
              
              
              (5
              )(Decrease)
      Increase in Other Liabilities
              
              
              (448
              )
              
              
              321
              
              
              
              95Net
      Cash Provided by Operating Activities
              
              
              52
              
              
              
              177
              
              
              
              326INVESTING
      ACTIVITIESRedemption
      (Investment) in Mutual Funds
              
              
              -
              
              
              
              442
              
              
              
              (150
              )Principal
      Paydowns Note Receivable GS Financial ESOP
              
              
              -
              
              
              
              334
              
              
              
              363Proceeds
      from  Maturities of Investment Securities
              
              
              29
              
              
              
              22
              
              
              
              125Net
      Cash Provided by Investing Activities
              
              
              29
              
              
              
              798
              
              
              
              338FINANCING
      ACTIVITIESPurchase
      of Treasury Stock
              
              
              -
              
              
              
              (300
              )
              
              
              (74
              )Proceeds
      from Stock Option Exercise
              
              
              516
              
              
              
              -
              
              
              
              -Payment
      of Dividends
              
              
              (503
              )
              
              
              (486
              )
              
              
              (474
              )Net
      Cash Provided by (Used in) Financing Activities
              
              
              13
              
              
              
              (786
              )
              
              
              (548
              )INCREASE
      IN CASH AND CASH EQUIVALENTS
              
              
              94
              
              
              
              189
              
              
              
              116CASH
      AND CASH EQUIVALENTS, BEGINNING OF YEAR
              
              
              661
              
              
              
              472
              
              
              
              356CASH
      AND CASH EQUIVALENTS, END OF YEAR
              
              $
              755
              
              
              $
              661
              
              
              $
              472


2007
Annual Report
 Page
63




Board
      of Directors


Albert
J. Zahn, Jr.


Mr. Zahn
(age 57) is a certified public accountant and president of the firm Al Zahn,
CPA, A Professional Accounting Corporation.  He has served as Chairman
of the Board of GS Financial and Guaranty Savings since April 2005 and has been
a director since 1992.





Edward
J. Bourgeois


Mr.
Bourgeois (age 51) is a certified public accountant in the State of Louisiana
and currently serves as President of Centergy Consulting, LLC, New Orleans,
Louisiana, a consulting firm specializing in the banking and financial
industry.  Mr. Bourgeois also serves as the President and Chief
Executive Officer of My EZ Car Care, LLC, an automotive services limited
liability company.  Mr. Bourgeois was formerly the Executive Vice
President/Chief Operating Officer of Crescent Bank and Trust, New Orleans,
Louisiana from 2001 to 2004.  Prior thereto, Mr. Bourgeois was
President of Bourgeois Consulting, a bank consulting agency in New Orleans,
Louisiana from 2000 to 2001, and during 2001, was a Senior Vice President of
Ebank.com, Atlanta, Georgia.  He is a member of the American Institute
of Certified Public Accountants and Louisiana Society of Certified Public
Accountants and Board member of the National Automotive Finance
Association.  He has been a director since 2004.





Stephen
L. Cory


Mr. Cory
(age 58) is an insurance agent and President of Cory, Tucker & Larrowe
Agency in Metairie, Louisiana.  He has been a director since
1995.





Bradford
A. Glazer


Mr.
Glazer (age 52) is President of Glazer Enterprises, Inc., a transportation
agency representing Cincy Limos, M.H. Timmer, LLC, and Park Transport,
Inc.  Cincy Limos is a limousine service serving greater
Cincinnati.  M.H. Timmer is a freight agency representing the Landstar
Carrier Group, which is a global transportation provider.  Park
Transport is a 48-state full truckload freight broker.  Mr. Glazer
also serves as the President of Park Transport.  Glazer Enterprises,
located in Cincinnati, Ohio, is also a real estate management and development
company.  He has been a director since 1991.





Bruce
A. Scott


Mr. Scott
(age 55) is an attorney and has served as Executive Vice President of GS
Financial since February 1997 and Executive Vice President of Guaranty Savings
since 1985.  Mr. Scott also serves as legal counsel and Personnel
Manager of Guaranty Savings, and performs certain legal services for Guaranty
Savings and its borrowers in connection with real estate loan closings and
receives fees from the borrowers in connection therewith.  He has been
a director since 1982.




Hayden
W. Wren III


Mr. Wren
(age 59) is the Director of Commercial/ Investment Brokerage of Corporate
Realty, Inc., New Orleans Louisiana.  Mr. Wren is a Certified
Commercial Investment Member (CCIM), a member of the Society of Industrial and
Office Realtors (SIOR), and a licensed Certified Public Accountant having
membership affiliations with the American Society of Certified Public
Accountants and the Louisiana Society of Certified Public
Accountants.  He was appointed in May 2004 to fill the position of a
retiring director.








Executive
      Officers Who Are Not Directors





Stephen
E. Wessel


Mr.
Wessel (age 45) has served as President and Chief Executive Officer of GS
Financial and Guaranty Savings since December, 2005.  Since December,
2007, he has served as a Director of Guaranty Savings
Bank.  Previously he served as Senior Vice President/South Louisiana
Business Banking Manager for AmSouth Bank, a regional commercial bank, New
Orleans, Louisiana since August, 2001.  Prior thereto, Mr. Wessel
served as Vice President/Regional Business Banking Manager for Whitney National
Bank, New Orleans, Louisiana from December 1991 to August 2001.





Lettie
R. Moll


Ms. Moll
(age 54) has served as Vice President and Corporate Secretary of the Company
since 1997 and Vice President and Corporate Secretary of the Association since
March 1987 and March 1982, respectively.  Ms. Moll currently serves as
Guaranty Savings Bank's Branch Administrator and manages the deposit
products.





J.
Andrew Bower


Mr. Bower
(age 43) has served as Chief Financial Officer and Senior Vice President of GS
Financial and Guaranty Savings since January 2006.  Prior thereto, Mr.
Bower was a self-employed consultant providing internal audit, accounting and
loan review services primarily to banks in the greater New Orleans area,
including GS Financial and Guaranty Savings since January
2002.  Previously, Mr. Bower was employed as an accounting manager at
Stewart Enterprises, Inc., Metairie, Louisiana, from September 2000 through
January 2002, and as an audit manager at Arthur Andersen LLP from December 1992
to September 2000.





2007
Annual Report
 Page
64




Banking
      Locations


Main
Office


3798
Veterans Memorial Blvd.


Metairie,
LA   70002





1800
Manhattan Blvd.


Harvey,
LA    70058





3915
Canal Street


New
Orleans, LA  70119





2111 N.
Causeway Blvd


Mandeville,
LA  70471





1515 Hwy
51 South


Ponchatoula,
LA  70454





Loan
Production Office


1700
Veterans Memorial Blvd.


Metairie,
LA  70002








GS
      Financial Corp. Stock Performance





The
following graph compares the cumulative total return relating to the Company’s
common stock with (a) the cumulative total return on the stocks included in the
Nasdaq Composite Index, and (b) the cumulative return on the stocks in the SNL
under $250 million Thrift Index.  All of these cumulative returns are
computed assuming the reinvestment of dividends at the frequency with which
dividends were paid during the applicable period.











Period
      EndingIndex
            
            12/31/02
            
            
            12/31/03
            
            
            12/31/04
            
            
            12/31/05
            
            
            12/31/06
            
            
            12/31/07GS
      Financial
            
            $
            100.00
            
            
            $
            109.41
            
            
            $
            103.42
            
            
            $
            88.18
            
            
            $
            119.16
            
            
            $
            116.32NASDAQ
      Composite
            
            
            100.00
            
            
            
            150.01
            
            
            
            162.89
            
            
            
            165.13
            
            
            
            180.85
            
            
            
            198.60SNL
      Thrift < $250M Index
            
            
            100.00
            
            
            
            139.14
            
            
            
            141.22
            
            
            
            136.49
            
            
            
            136.54
            
            
            
            124.99


_____________________________





*
      Source:  SNL Financial LC












2007
      Annual Report
            Page
      65