NOTE A

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

GS Financial Corp. (the "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 (the "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. Other than steps related to the reorganization described
below, the Company was essentially inactive until April 1, 1997,
when it acquired the Association in a business reorganization
of entities under common control in a manner similar to a pooling
of interest.The acquired Association became a wholly-owned
subsidiary of the Company as part of the conversion through the
exchange of 1,000 shares of common stock that consists of 100
percent of the outstanding stock of the Association. The Association
operates in the savings and loan industry and as such provides
financial services primarily to individuals, mainly through the
origination of loans on one to four family residences, and the
acceptance of deposits in the form of passbook savings, certificates
of deposit, and demand deposit accounts.

The Association 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.

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiary, Guaranty
Savings and Homestead Association. In consolidation, significant
inter-company accounts, transactions, and profits have been eliminated.

BASIS OF FINANCIAL STATEMENT PRESENTATION

The financial statements have been prepared in conformity with
generally accepted accounting principles. In preparing the financial
statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as
of the date of the statement of financial condition and revenues
and expenses for the year. Actual results could differ significantly
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 real estate acquired in connection with
foreclosures or in satisfaction of loans. Management independently
determines the allowance for losses on loans based on an evaluation
of the loan history and the condition of the underlying properties.
In connection with the determination of the allowances for losses
on foreclosed real estate, management obtains independent appraisals
for all properties.



While management uses available information to recognize losses
on loans and foreclosed real estate, future additions to the allowances
may be necessary based on changes in local economic conditions.
In addition, regulatory agencies, as an integral part of their
examination process, periodically review the Associations
allowances for losses on loans and foreclosed real estate. Such
agencies may require the Association to recognize additions to
the allowances based on their judgments about information available
to them at the time of their examination.

CASH AND CASH EQUIVALENTS

For the purposes of presentation in the consolidated statements
of cash flows, cash and cash equivalents include all cash and
amounts due from depository institutions, interest-bearing deposits
in other banks, and Federal Funds Sold.

INVESTMENT SECURITIES

Marketable securities are classified as available-for-sale
and are carried at fair value. Unrealized gains and losses on
securities available-for-sale are recognized as direct increases
or decreases in comprehensive income. The cost of securities sold
is recognized using the specific identification method. Premiums
and discounts are being amortized over the life of the securities
as a yield adjustment.

MORTGAGE-BACKED SECURITIES

Mortgage-backed securities represent participating interests
in pools of first mortgage loans originated and serviced by issuers
of the securities. Unrealized gains and losses on mortgage-backed
securities are recognized as direct increases or decreases in
comprehensive income. The cost of securities sold is recognized
using the specific identification method. Premiums and discounts
are being amortized over the life of the securities as a yield
adjustment. During 2000, the Company held mortgage-backed securities
issued by the Government National Mortgage Association, the Federal
Home Loan Mortgage Corporation, and the Federal National Mortgage
Association.

COLLATERALIZED MORTGAGE OBLIGATIONS

Collateralized Mortgage Obligations (CMOs) are multiple
class mortgage-backed securities. An underlying pool of mortgages
held by the issuer serves as collateral for the debt obligations,
and principal and interest payments from the pool of mortgages
are used to retire the CMOs.

Currently, the Companys investment in CMOs is limited
to first-tranche Real Estate Mortgage Investment Conduits (REMICs).
A REMIC is a pass-through investment vehicle created under the
Tax Reform Act of 1986 to issue multiple class mortgage-backed
securities. The multiple classes in a REMIC are known as "tranches".

Currently, the Companys investment in REMICs is
limited to those issued by FNMA, FHLMC and "AAA" rated
non-governmental agencies. These are defined to be within the
20% risk-weighted category for thrift institutions. Prior to investing,
the Company receives a prospectus that includes the various cash
flow and interest rate risk scenarios possible for each bond.

Unrealized gains and losses on CMOs are recognized as
direct increases or decreases in comprehensive income. The cost
of securities sold is recognized using the specific identification
method. Premiums and discounts are being amortized over the life
of the securities as a yield adjustment.

LOANS

Loans are stated at unpaid principal balances, less the allowance
for loan losses and net deferred loan fees.

Loan origination and commitment fees, as well as certain direct
origination costs, are deferred and amortized as a yield adjustment
over the contractual lives of the related loans using the interest
method.

Loans are placed on non-accrual when principal or interest
is delinquent for 90 days or more. Any unpaid interest previously
accrued on those loans is reversed from income, and thereafter
interest is recognized only to the extent of payments received.

A loan is considered impaired when, based on current information
and events, it is probable that a creditor will be unable to collect
all amounts due according to the contractual terms of the loan
agreement. Interest payments on impaired loans are typically applied
to principal unless collectibility of the principal amount is
fully assured, in which case interest is recognized on the cash
basis. Residential mortgage loans and consumer installment loans
are considered to be groups of smaller balance homogeneous loans
and are collectively evaluated for impairment and are not subject
to SFAS 114 measurement criteria.

The allowance for loan losses is maintained at a level that,
in managements judgment, is adequate to absorb probable
losses inherent in the loan portfolio. The amount of the allowance
is based on managements evaluation of the collectibility
of the loan portfolio, including the nature of the portfolio,
credit concentrations, trends in historical loss experience, specific
impaired loans, and economic conditions. The allowance is increased
by a provision for loan losses, which is charged to expense, and
reduced by charge-offs, net of recoveries. Changes in the allowance
relating to impaired loans are charged or credited to the provision
for loan losses.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, less accumulated
depreciation computed principally on the straight-line and modified
accelerated cost recovery methods over the estimated useful lives
of the assets which range from 5 to 10 years for furniture and
equipment, and 31 to 39 years for buildings. Maintenance and repairs
are expensed as incurred, while major additions and improvements
are capitalized.

When these assets are retired or otherwise disposed of, the
cost and related accumulated depreciation or amortization are
removed from the accounts, and any resulting gain or loss is reflected
in income for the period.

FORECLOSED REAL ESTATE

Foreclosed real estate includes real estate acquired in settlement
of loans. At the time of foreclosure, foreclosed real estate is
recorded at the lower of the Associations cost or the assets
fair value, less estimated selling costs, which becomes the propertys
new basis. After foreclosure, valuations are periodically performed
by management and the real estate is carried at the lower of cost
or fair value less estimated selling costs. Costs incurred in
maintaining foreclosed real estate are included in income (loss)
on foreclosed real estate.

REAL ESTATE HELD-FOR-INVESTMENT

Real estate held-for-investment consists of the land and building
of a former branch location of the Association. Due to regulatory
considerations, the Association sold this property to the Company
during 1998 at fair value. The gain on the sale realized by the
Association is eliminated through consolidation. During 2000,
the Company transferred the remaining book value of the building
to land. The Company plans to redevelop this property in 2001,
and all existing structures are to be demolished.

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 shares of income taxes in accordance with a
written tax-sharing agreement.

Income taxes are provided for the tax effects of the transactions
reported in the financial statements and consist of taxes currently
due plus deferred taxes related to differences between the basis
of assets and liabilities for financial and income tax reporting.
The deferred tax assets and liabilities represent the future tax
return consequences of those differences, which will either be
taxable or deductible when the assets and liabilities are recovered
or settled. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not
that some portion of the deferred tax asset will not be realized.
Deferred tax assets and liabilities are adjusted for the effect
of changes in tax laws and rates on the date of enactment.

While the Association is exempt from Louisiana income tax,
it is subject to the Louisiana Ad Valorem tax that is based on
stockholders equity and net income.

NON-DIRECT RESPONSE ADVERTISING COSTS

The Company expenses advertising costs as incurred. Advertising
cost were $95,000, $69,000 and $78,000 for the years ended December
31, 2000, 1999 and 1998, respectively.

NEW ACCOUNTING STANDARDS

Statement of Financial Accounting Standards No. 138 (SFAS 138),
Accounting for Certain Derivative Instruments and Certain Hedging
Activities, an amendment of SFAS 133, is effective for the
quarter beginning after June 15, 2000. This statement addresses
a limited number of issues causing implementation difficulties
for entities that apply SFAS 133, which requires all derivatives
to be recognized at fair value as either assets or liabilities
in the consolidated balances sheets. Changes in the fair value
of derivatives not designated as hedging instruments are to be
recognized currently in earnings. Gains or losses on derivatives
designated as hedging instruments are either to be recognized
currently in earnings or are to be recognized as a component of
other comprehensive income, depending on the intended use of the
derivatives and the resulting designation. Adoption of this pronouncement
had no effect on the financial position and results of operations
of the Company.

Statement of Financial Accounting Standards No. 140 (SFAS 140),
Accounting for Transfers and servicing of Financial Assets
and Extinguishments of Liabilities, is a replacement of SFAS
125. This statement provides accounting and reporting standards
for transfers and servicing of financial assets and extinguishments
of liabilities. Those standards are based on consistent application
of a financial-components approach that focuses on control. Under
this approach, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and
the liabilities it has incurred, derecognizes financial assets
when control has been surrendered, and derecognizes liabilities
when extinguished. This statement provides consistent standards
for distinguishing transfers of financial assets that are sales
from transfers that are secured borrowings. This statement is
effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after March 31, 2001
and for recognition and reclassification of collateral and for
disclosures relating to securitization transactions and collateral
for years ending after December 15, 2000. The adoption of this
pronouncement had no effect on the financial position and results
of operations of the Company.



NOTE B

INVESTMENT SECURITIES

Securities available-for-sale consist of the following (in
thousands):



|                           | December 31, 2000    |       | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair 
    Value
|-------------------------- | -------------------- | ----- | -------------- | ---------------------- | ----------------------- | ---------------
|                           |                      |       | ----------     |                        | ----------              |                
|U. S. Government           |                      |       |                |                        |                         |                
|                           | and Federal Agencies | $     | 2,389          | $                      | 72                      | $              
|Adjustable Rate            |                      |       |                |                        |                         |                
|                           | Mortgage Mutual Fund |       | 2,831          |                        | -                       |                
|Intermediate               |                      |       |                |                        |                         |                
|                           | Mortgage Mutual Fund |       | 400            |                        | -                       |                
|                           |                      |       |                |                        |                         |                
|FHLMC Common Stock         |                      | 25    |                | 1,767                  |                         | -              
|FHLMC Preferred Stock      |                      | 3,506 |                |                        |                         | 2              
|Equity Investments - Other |                      | 50    |                | -                      |                         | -              
|                           |                      |       | -------        |                        | -------                 |                
|                           |                      | $     | 9,201          | $                      | 1,839                   | $              
|                           |                      |       | =====          |                        | =====                   |                
|                           |                      |       |                |                        |                         |                
|                           | December 31, 1999    |       | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair 
    Value
|                           |                      |       | ----------     |                        | ----------              |                
|U. S. Government           |                      |       |                |                        |                         |                
|                           | and Federal Agencies | $     | 4,678          | $                      | 35                      | $              
|Adjustable Rate            |                      |       |                |                        |                         |                
|                           | Mortgage Mutual Fund |       | 1,390          |                        | -                       |                
|Intermediate               |                      |       |                |                        |                         |                
|                           | Mortgage Mutual Fund |       | 2,972          |                        | -                       |                
|                           |                      |       |                |                        |                         |                
|FHLMC Common Stock         |                      | 35    |                | 1,659                  |                         | -              
|                           |                      |       | -------        |                        | -------                 |                
|                           |                      | $     | 9,075          | $                      | 1,694                   | $              
|                           |                      |       | =====          |                        | =====                   |                



The following is a summary of maturities of securities available-for-sale
(in thousands):



|                     |                                    | December 31,                         
|-------------------- | ---------------------------------- | -------------------------------------
|                     |                                    | 2000
    SecuritiesAvailable-for-Sale
|                     |                                    |                                      
|                     |                                    |                                      
|Amounts Maturing in: |                                    |                                      
|                     | In One Year or Less                |                                      
|                     | After One Year Through Five Years  |                                      
|                     | After Five Years Through Ten Years |                                      
|                     |                                    |                                      
|                     |                                    |                                      
|                     |                                    |                                      

The Company is holding agency securities in the amount of $500,000
that are callable in 2001. The Company is holding FHLMC preferred
stock callable in 2004 and 2009.

During 2000, the Company realized losses of $210,000 through
the redemption of $2.6 million of its Intermediate Mortgage Mutual
Fund. The Company also sold 10,000 shares of FHLMC common stock
for $413,000, realizing a gain of $403,000. During 1999, the Company
realized losses of $13,387 through the redemption of $3.1 million
of its Adjustable Rate Mortgage Fund. During 1998, the Company
realized losses of $57,565 through the net redemption of $11.5
million of its Adjustable Rate Mortgage Fund.

Included in other assets are two equity securities being carried
at cost of $27,000. The fair value for these securities approximates
cost.





NOTE C

MORTGAGE-BACKED SECURITIES

Mortgage-backed securities consist of the following (in thousands):



|December 31, 2000   |   | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair 
    Value
|------------------- | - | -------------- | ---------------------- | ----------------------- | ---------------
|                    |   | ----------     |                        | ----------              |                
|Available for Sale: |   |                |                        |                         |                
|FNMA                | $ | 1,481          | $                      | -                       | $              
|FHLMC               |   | 1,096          |                        | -                       |                
|GNMA                |   | 1,541          |                        | 4                       |                
|                    |   | -------        |                        | -------                 |                
|                    | $ | 4,118          | $                      | 4                       | $              
|                    |   | =====          |                        | =====                   |                
|                    |   |                |                        |                         |                
|December 31, 1999   |   | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair 
    Value
|                    |   | ----------     |                        | ----------              |                
|Available for Sale: |   |                |                        |                         |                
|FNMA                | $ | 5,255          | $                      | 1                       | $              
|FHLMC               |   | 1,328          |                        | 3                       |                
|GNMA                |   | 10,160         |                        | -                       |                
|                    |   | -------        |                        | -------                 |                
|                    | $ | 16,743         | $                      | 4                       | $              
|                    |   | =====          |                        | =====                   |                







The amortized cost and fair value of mortgage-backed securities
at December 31, 2000 and 1999, by contractual maturity, are shown
below (in thousands). Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay
obligations without call or prepayment penalties.



|                                     | December 31, 2000                  |   | Amortized Cost | Fair Value
|------------------------------------ | ---------------------------------- | - | -------------- | ----------
|                                     |                                    |   | ---------      |           
|Mortgage-Backed Securities Maturing: |                                    |   |                |           
|                                     | In One Year or Less                | $ | 230            | $         
|                                     | After One Year Through Five Years  |   | 814            |           
|                                     | After Five Years Through Ten Years |   | 1,187          |           
|                                     | After Ten Years                    |   | 1,887          |           
|                                     |                                    |   | ------         |           
|                                     |                                    | $ | 4,118          | $         
|                                     |                                    |   | =====          |           

|                                     | December 31, 1999                  |   | Amortized Cost | Fair Value
|------------------------------------ | ---------------------------------- | - | -------------- | ----------
|                                     |                                    |   | ---------      |           
|Mortgage-Backed Securities Maturing: |                                    |   |                |           
|                                     | In One Year or Less                | $ | 112            | $         
|                                     | After One Year Through Five Years  |   | 1,411          |           
|                                     | After Five Years Through Ten Years |   | 1,403          |           
|                                     | After Ten Years                    |   | 13,817         |           
|                                     |                                    |   | --------       |           
|                                     |                                    | $ | 16,743         | $         
|                                     |                                    |   | =====          |           

In 2000, the Company sold GNMA and FNMA mortgage-backed securities
with a book value of $10,581,506 , resulting in a loss of $337,000.
There were no sales of mortgage-backed securities in 1999. During
1998, the Company sold mortgage-backed securities with a book
value of $12,387,568 for $12,646,040. This resulted in a realized
gain of $258,471.





NOTE D

COLLATERALIZED MORTGAGE OBLIGATIONS

Collateralized Mortgage Obligations (CMOs) consist of
the following (in thousands):



|December 31, 2000   |   | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair 
    Value
|------------------- | - | -------------- | ---------------------- | ----------------------- | ---------------
|                    |   | ----------     |                        | ----------              |                
|Available-for-Sale: |   |                |                        |                         |                
|FNMA                | $ | 5,766          | $                      | -                       | $              
|FHLMC               |   | 14,254         |                        | 196                     |                
|GNMA                |   | 33,562         |                        | 583                     |                
|                    |   | -------        |                        | -------                 |                
|                    | $ | 53,582         | $                      | 779                     | $              
|                    |   | =====          |                        | =====                   |                

|December 31, 1999   |   | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair 
    Value
|------------------- | - | -------------- | ---------------------- | ----------------------- | ---------------
|                    |   | ----------     |                        | ----------              |                
|Available-for-Sale: |   |                |                        |                         |                
|FNMA                | $ | 8,058          | $                      | -                       | $              
|FHLMC               |   | 17,347         |                        | 167                     |                
|GNMA                |   | 28,493         |                        | 15                      |                
|                    |   | -------        |                        | -------                 |                
|                    | $ | 53,898         | $                      | 182                     | $              
|                    |   | =====          |                        | =====                   |                

At December 31, 2000 and 1999, CMOs are classified as
available-for-sale, and are reported on the financial statements
at their fair value. Also, all of the CMOs held as of December
31, 2000 and 1999 have contractual maturities of greater than
ten years. There were no sales of CMOs during 2000, 1999
and 1998.

At December 31, 2000, a CMO with a market value of $766,073
has been pledged as collateral towards the outstanding balance
of Advances from the Federal Home Loan Bank.





NOTE E

LOANS

Loans at December 31, 2000 and 1999 are summarized as follows
(in thousands):



|                      |                        |                         |       | December 31,
|--------------------- | ---------------------- | ----------------------- | ----- | ------------
|                      |                        |                         |       | 2000        
|First Mortgage Loans: |                        |                         |       |             
|                      | One to Four            |                         |       |             
|                      |                        | Family Residential      | $     | 71,092      
|                      | FHA and VA             |                         | 52    |             
|                      | Construction           |                         | 619   |             
|                      | Commercial Real Estate |                         | 1,006 |             
|                      | Other                  |                         | 1,453 |             
|                      |                        |                         |       | ---------   
|                      |                        | Total Real Estate Loans |       | 74,222      
|                      |                        |                         |       |             
|Consumer Loans:       |                        |                         |       |             
|                      | Second Mortgage        |                         | 52    |             
|                      | Loans on Deposits      |                         | 237   |             
|                      |                        |                         |       | ---------   
|                      |                        | Total Consumer Loans    |       | 289         
|                      |                        |                         |       |             
|Commercial Loans      |                        | 381                     |       | -           
|                      |                        |                         |       | ---------   
|                      |                        |                         |       | 74,892      
|                      |                        |                         |       |             
|Allowance for         |                        |                         |       |             
|                      | Loan Losses            |                         | (420) |             
|                      |                        |                         |       |             
|Net Deferred Loan     |                        |                         |       |             
|                      | Origination Costs      |                         | 8     |             
|                      |                        |                         |       | ---------   
|Net Loans             | $                      | 74,480                  | $     | 70,066      
|                      |                        |                         |       | =====       





An analysis of the allowance for loan losses as follows (in
thousands):



|                     |         |      | Years Ended December 31,
|-------------------- | ------- | ---- | ------------------------
|                     |         |      | 2000                    
|                     |         |      | -----                   
|Balance, Beginning   |         |      |                         
|                     | of Year | $    | 424                     
|Provision for Losses |         | 7    |                         
|Loans Charged Off    |         | (11) |                         
|Recoveries           |         | -    |                         
|                     |         |      | -----                   
|Balance, End of Year | $       | 420  | $                       
|                     |         |      | ====                    

Loans receivable as of December 31, 2000 are scheduled to mature
and adjustable rate loans are scheduled to reprice as follows
(in thousands):



|                            |              |     | Under 
    One 
    Year | One to 
    Five 
    Years | Six 
    to Ten Years | Over 
    10 
    Years | Total 
|--------------------------- | ------------ | --- | ------------------------ | --------------------------- | --------------------- | ----------------------- | ------
|                            |              |     | ------                   |                             | ------                |                         | ------
|Loans Secured by 1-4 Family |              |     |                          |                             |                       |                         |       
|                            | Residential: |     |                          |                             |                       |                         |       
|Fixed Rate                  | $            | 65  | $                        | 2,054                       | $                     | 9,740                   | $     
|Other Loans Secured by      |              |     |                          |                             |                       |                         |       
|                            | Real Estate: |     |                          |                             |                       |                         |       
|Fixed Rate                  |              | 32  |                          | 111                         |                       | 331                     |       
|Commercial Fixed Rate       |              | 99  |                          | -                           |                       | -                       |       
|All Other Loans             |              | 237 |                          | -                           |                       | -                       |       
|                            |              |     | ------                   |                             | ------                |                         | ------
|                            |              | $   | 433                      | $                           | 2,165                 | $                       | 10,071
|                            |              |     | =====                    |                             | =====                 |                         | ===== 

At December 31, 2000 and 1999, the Association had loans totaling
approximately $320,000 and $254,000, respectively, for which impairment
had been recognized. The allowance for loan losses related to
these loans totaled $68,000 and $64,000 at December 31, 2000 and
1999, respectively. The amount of interest income that would have
been recorded on loans in non-accrual status at December 31, 2000,
had such loans performed in accordance with their terms, was approximately
$20,000. Such interest foregone for the year ended December 31,
1999 was approximately $3,000.

In the ordinary course of business, the Association has and
expects to continue to have transactions, including borrowings,
with its officers and directors. 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 Association.

Loans to such borrowers are summarized as follows (in thousands):



|                     |         |       | December 31,
|-------------------- | ------- | ----- | ------------
|                     |         |       | 2000        
|Balance, Beginning   |         |       |             
|                     | of Year | $     | 904         
|Additions            |         | 602   |             
|Payments and Renewal |         | (52)  |             
|                     |         |       | ---------   
|Balance, End of Year |         | 1,454 |             

The Associations lending activity is concentrated within
the metropolitan New Orleans area and surrounding parishes, with
its major emphasis in the origination of permanent single-family
dwelling loans. Such loans comprise the majority of the Associations
loan portfolio.



NOTE F

ACCRUED INTEREST RECEIVABLE

Accrued interest receivable at December 31, 2000 and 1999 consists
of the following (in thousands):



|                                    |   |     | December 31,
|----------------------------------- | - | --- | ------------
|                                    |   |     | 2000        
|Loans                               | $ | 311 | $           
|Mortgage-Backed Securities          |   | 24  |             
|Collateralized Mortgage Obligations |   | 304 |             
|Investments and Other               |   | 43  |             
|                                    |   |     | ------      
|Totals                              | $ | 682 | $           
|                                    |   |     | ====