The purpose of this discussion and analysis is to provide information necessary to gain an understanding of the financial condition, changes in financial condition, and results of operations of GS Financial Corp. ("GS Financial" or the "Company"), and its subsidiary during the first quarter of 2009 and 2008. Virtually all of the Company's operations are dependent on the operations of its subsidiary, Guaranty Savings Bank ("Guaranty" or the "Bank"). Prior to June 15, 2006 the subsidiary was known as Guaranty Savings and Homestead Association. Effective December 31, 2008, the Bank converted its charter from a Louisiana state savings and loan association to a Federally-chartered savings bank. As a result of the charter conversion, the Bank's primary regulator became the Office of Thrift Supervision. This discussion is presented to highlight and supplement information presented elsewhere in this quarterly report on Form 10-Q, particularly the consolidated financial statements and related notes in Item 1. This discussion and analysis should be read in conjunction with accompanying tables and the Company's 2008 Annual Report on Form 10-K.

FORWARD-LOOKING STATEMENTS
In addition to the historical information, this quarterly 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, and (g) changes or trends in certain expense levels.

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

†† expectations about the overall economy 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 quarterly report, whether as a result of new information, future events or developments, or for any other reason.

OVERVIEW

The Company reported net income of $378,000 for the quarter ended March 31, 2009, compared with net income of $126,000 for the quarter ended March 31, 2008. Earnings per share were $0.30 and $0.10 per share diluted for the quarters ended March 31, 2009 and 2008, respectively. The Company continued to successfully execute on its growth initiatives during the quarter which included strong loan and deposit growth. The increase in profitability in the first quarter of 2009 compared to the same period in 2008 is attributable to the $383,000 increase in net interest income caused by a $36.8 million increase in average interest-earning assets and a reduction in the average cost of funds which was partially offset by a slight decrease in the average yield on interest-earning assets and a $38.0 million increase in average interest-bearing liabilities.

The Company's net loan portfolio amounted to $170.4 million at March 31, 2009, compared with $158.5 million at December 31, 2008. The $11.8 million increase in net loans receivable was due to a substantial increase in the volume of new loan originations of residential real estate loans. Through the Bank's recruiting efforts in recent years, several commercial loan officers and mortgage loan originators have been hired which have significantly contributed to the loan growth, particularly in this segment of the portfolio. In addition, the Bank continued to sell residential mortgage loans in the secondary market primarily to Fannie Mae and Freddie Mac, while retaining the servicing on these loans to maintain customer relationships and earn servicing fee income. During the first three months of 2009 and 2008, the Bank sold an aggregate of $19.1 million and $6.6 million, respectively, of residential mortgage loans into the secondary market at a gain of $359,000 and $95,000, respectively.

FINANCIAL CONDITION

LOANS AND ALLOWANCE FOR LOAN LOSSES
The outstanding balance of total loans increased $11.8 million, or 7.3%, from $161.2 million at December 31, 2008, to $173.1 million at March 31, 2009. Average loans for the first quarter of 2009 were $166.9 million, up $11.3 million, or 7.3%, compared to $155.6 million for the fourth quarter of 2008. Table 1, which is based on regulatory reporting codes, shows loan balances at quarter-end for the most recent five quarters and average loans outstanding during each quarter.

TABLE 1. COMPOSITION OF LOAN PORTFOLIO
                             2009                               2008
($ in thousands)           March 31     December 31  September 30     June 30      March 31
Real estate loans -       $     88,544  $     76,429  $     77,448  $     69,439  $     66,124
residential
Real estate loans -             66,407        67,751        61,450        58,683        53,445
commercial and other
Real estate loans -             11,408        10,542         6,727         7,069         7,695
construction
Consumer loans                   1,287         1,713         1,992         1,625         1,041
Commercial business              5,411         4,807         4,534         5,260         4,929
loans
    Total Loans           $    173,057  $    161,242  $    152,151  $    142,076  $    133,234
   Average Total Loans
During                    $    166,926  $    155,609  $    147,934  $    136,395  $    127,719
   Three-Month Period

The Company's investment in residential real estate loans, which includes those loans secured by one-to-four family dwellings (also referred to as "single-family"), increased $12.1 million, or 15.9%, from December 31, 2008 to March 31, 2009. Residential real estate loans increased due to the efforts of the residential loan originators, who were hired since December 2008, the commercial loan officers, and the relatively low level of market rates during the first quarter of 2009. In addition, the expansion of loan product offerings and enhanced marketing activities have contributed to the growth in this segment of the loan portfolio.

All loans carry a degree of credit risk. Management's evaluation of this risk is ultimately reflected in the estimate of probable loan losses that is reported in the Company's financial statements as the allowance for loan losses. As a result of this ongoing evaluation, any additions to the allowance for loan losses are reflected in the provision for loan losses and charged to operating expense. At March 31, 2009 the allowance for loan losses was $2.7 million, or 1.6% of total loans. Table 2 presents an analysis of the activity in the allowance for loan losses for the past five quarters. The allowance was reduced in the first quarter of 2009 as a specific reserve was assigned to a loan which was sold at Sheriff's sale for an amount less than the outstanding loan balance.

TABLE 2. SUMMARY OF ACTIVITY IN THE ALLOWANCE FOR LOAN LOSSES
                                  2009                                2008

($ in thousands)              First Quarter Fourth Quarter Third Quarter Second Quarter First Quarter
Beginning Balance               $     2,719    $     2,818   $     3,238    $     3,419   $     3,432
Provision for Loan Losses                 -              -             -              -             -
Charged to Operations
Charge-offs                              28             99           420            181            13
Recoveries of loans                     (2)              -             -              -             -
previously charged-off
Ending Balance                  $     2,693    $     2,719   $     2,818    $     3,238   $     3,419
Ratios
Charge-offs to average loans          0.02%          0.06%         0.28%          0.13%         0.01%
Provision for loan losses to            n/a            n/a           n/a            n/a           n/a
charge-offs
Allowance for loan losses to          1.56%          1.69%         1.85%          2.28%         2.57%
ending loans

Table 3 summarizes the Company's delinquent loans at March 31, 2009 and at the end of the preceding four quarters. The balances presented reflect the total principal balances outstanding on the loans rather than the amount of principal past due.

TABLE 3. DELINQUENT LOANS
                                2009                           2008
($ in thousands)              March 31   December 31 September 30   June 30    March 31
30-89 Days                    $    3,214  $    5,231   $      749  $      265  $    5,574
90+ Days                           2,359       2,011        2,075       2,821       3,162
Total                         $    5,573  $    7,242   $    2,824  $    3,086  $    8,736
Ratios
Loans delinquent 90 days or        1.36%       1.25%        1.36%       1.99%       2.37%
more to total loans
Total delinquent loans to          3.22%       4.50%        1.86%       2.17%       6.56%
total loans
Allowance for loan losses to     114.16%     135.21%      135.83%     114.78%     108.13%
non-accrual loans
Allowance for loan losses to      48.32%      37.54%       99.79%     104.92%      39.14%
total delinquent loans

Nonperforming assets consists of loans on non-accrual status and foreclosed assets. Table 4 sets forth the Company's nonperforming assets at the dates indicated. The Company did not have loans greater than 90 days delinquent and accruing interest or troubled debt restructurings at the dates indicated.

TABLE 4. NONPERFORMING ASSETS
                                      2009                               2008
($ in thousands)                    March 31     December 31  September 30     June 30      March 31
Loans accounted for on a           $      2,359  $      2,011  $      2,075  $      2,821  $      3,162
nonaccrual basis
Foreclosed assets                           461           461           844           469            85
Total nonperforming assets         $      2,820  $      2,472  $      2,919  $      3,290  $      3,247
Loans greater than 90 days past               -             -             -             -             -
due and accruing interest
Troubled debt restructurings                  -             -             -             -             -
Ratios
Nonperforming assets to loans             1.63%         1.53%         1.91%         2.31%         2.44%
plus foreclosed assets
Nonperforming assets to total             1.12%         1.11%         1.35%         1.60%         1.62%
assets
Allowance for loan losses to             95.50%       109.99%        96.55%        98.42%       105.30%
nonperforming assets

Total nonperforming assets as of March 31, 2009 includes a $1.4 million delinquent renovation loan that is secured by a multifamily dwelling located in the historic district of the French Quarter in New Orleans, Louisiana. The foreclosure proceedings on this property, which commenced in prior year, were completed in April 2009 as expected. As of May 24, 2008, the appraised value of this property was $2.0 million based on the "as is", incomplete condition.

INVESTMENT IN SECURITIES
At March 31, 2009, the Company's total securities available-for-sale were $50.2 million, compared to $47.6 million at December 31, 2008, an increase of $2.6 million, or 5.5%.

In 2008, the Company recognized a non-cash impairment charge of $1.3 million for other-than-temporary impairments of its investment in two mutual funds, the AMF Ultra Short Mortgage (ticker: ASARX) and the AMF Intermediate Mortgage (ticker:
ASCPX). Prior to 2008, these investments were redeemable immediately at their current market value. In 2008, the fund managers, Shay Assets Management, Inc., imposed a restriction on these mutual funds which limits redemptions for cash to $250,000 per quarter based on the current market price at the time of redemption. Approximately $252,000 of the holdings in the AMF Ultra Short Mortgage fund, the remaining mutual fund in the Company's securities portfolio, were redeemed for cash in the first quarter of 2009.

TABLE 5. COMPOSITION OF INVESTMENT SECURITIES PORTFOLIO
                            March 31, 2009           December 31, 2008           March 31,2008
                        Amortized      Market     Amortized      Market     Amortized      Market
($ in thousands)           Cost        Value         Cost        Value         Cost        Value
U.S. Agency Securities  $    14,348  $    14,383  $    10,010  $    10,070  $    19,511  $    19,705
Mortgage Backed              24,160       25,042       25,484       26,100        8,460        8,560
Securities
Collateralized                8,412        7,757        9,035        8,039       14,417       14,039
Mortgage Obligations
Mutual Funds                  3,156        3,034        3,408        3,408        5,803        5,660
Total Investment        $    50,076  $    50,216  $    47,937  $    47,617  $    48,191  $    47,964
Securities

DEPOSITS
At March 31, 2009, deposits totaled $170.7 million, an increase of $30.6 million, or 21.9%, from $140.1 million at December 31, 2008. Average deposits for the first quarter of 2009 increased $12.1 million, or 8.6%, from the prior quarter. The increase in deposits is due to a combination of factors including:
the efforts of the commercial loan originators to open non-interest bearing transactional accounts for commercial customers, the offering of competitive interest rates on money market and certain transactional accounts in order to attract new customers, and the expanded branch network due to the opening of new banking locations which occurred in the latter half of 2007. The Company had no deposits that were obtained through outside deposit brokers at March 31, 2009.

Table 6 presents the composition of average deposits for the quarters ended March 31, 2009, December 31, 2008, and March 31, 2008.

TABLE 6. DEPOSIT COMPOSITION
                          First Quarter 2009        Fourth Quarter 2008        First Quarter 2008
($ in thousands)       Average Balances   % of   Average Balances   % of    Average Balances   % of
                                        Deposits                   Deposits                  Deposits
Noninterest bearing          $    8,860     5.8%      $    10,158      7.2%       $    8,072     6.2%
demand deposits
NOW account deposits             42,089    27.6%           30,837     21.9%           23,345    17.8%
Savings deposits                 14,680     9.6%           15,738     11.2%           18,600    14.2%
Time deposits                    87,136    57.0%           83,977     59.7%           80,761    61.8%
Total                       $   152,765  100.00%      $   140,710   100.00%      $   130,778  100.00%

Average certificates of deposit (or "time deposits") totaled $87.1 million, or 57.0%, of average total deposits for the quarter ended March 31, 2009, up $3.2 million, or 3.8%, compared to the fourth quarter of 2008. Average savings deposits made up 9.6% of total average deposits, down from 11.2% in the prior quarter. During the first quarter of 2009, the average balance of NOW accounts, which includes money market deposit accounts, increased from 21.9% to 27.6% of average total deposits. The average balance of non-interest bearing demand deposits decreased by $1.3 million, or 12.8%.

BORROWINGS
The Bank is a member of the Federal Home Loan Bank of Dallas ("FHLB"). This membership provides access to a variety of Federal Home Loan Bank advance products as an alternative source of funds. At March 31, 2009 and December 31, 2008, the Company's borrowings from the Federal Home Loan Bank were $49.9 million and $52.0 million, respectively, which represents a decrease of $2.1 million, or 4.1%. Average advances for the first quarter of 2009 were $51.7 million, an increase of $1.8 million, or 3.6%, from the fourth quarter of 2008. The decrease in FHLB borrowings during the first quarter of 2009 was due to the non-renewal of a $2.0 million maturing advance.

STOCKHOLDERS' EQUITY AND CAPITAL ADEQUACY
At March 31, 2009, stockholders' equity totaled $28.0 million, compared to $27.6 million at December 31, 2008. This increase of $454,000, or 1.6%, was primarily due to net income of $378,000 and an increase in unrealized gains, net of tax, on investment securities of $313,000, partially offset by cash dividends paid of $128,000 and purchases of treasury stock of $117,000 for the three months ended March 31, 2009.

Since 1998, the Company has repurchased shares of its common stock when shares have been available at prices and amounts deemed prudent by management. The Company announced a stock repurchase program in October 2008 of up to 64,250 shares, or approximately 5.0%, of GS Financial Corp.'s outstanding common stock through open market or privately negotiated transactions. Table 7 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 7. SUMMARY OF STOCK REPURCHASES
                                                              Average Price
Year Ended December 31,                  Shares   Cost ($000)   Per Share
1998                                    491,054  $      8,324  $      16.95
1999                                    299,000         3,653         12.22
2000                                    679,600         8,590         12.64
2001                                    305,684         4,612         15.09
2002                                    142,201         2,516         17.69
2003                                    216,181         4,109         19.01
2004                                     16,842           315         18.94
2005                                      3,907            74         19.06
2006                                     17,763           300         16.87
2007                                     10,468           188         18.00
2008                                          -             -             -
Three months ended March 31, 2009         9,659           117         12.05
Total Stock Repurchases               2,192,359  $     32,798  $      14.96

The ratios in Table 8 indicate that the Bank was well capitalized at March 31, 2009. During 2008 and 2009, the Bank has reduced its overcapitalized position as it has increased its holdings of loans. Risk-based capital ratios declined in the first quarter of 2009 as there was a $10.9 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.

TABLE 8. REGULATORY CAPITAL AND CAPITAL RATIOS
                                           2009                  2008
($ in thousands)                         March 31     December 31     March 31
Tier 1 regulatory capital               $     26,078  $     25,611   $     27,253
Tier 2 regulatory capital                      1,908         1,772          1,400
Total regulatory capital                $     27,986  $     27,383   $     28,653
Adjusted total assets                   $    250,434  $    221,614   $    198,660
Risk-weighted assets                    $    152,697  $    141,772   $    115,632
Ratios
Tier 1 capital to adjusted total              10.41%        11.56%         13.72%
assets
Tier 1 capital to risk-weighted               17.08%        18.06%         23.57%
assets
Total regulatory capital to                   18.33%        19.31%         24.78%
risk-weighted assets

LIQUIDITY AND CAPITAL RESOURCES
The objective of liquidity management is to ensure that funds are available to meet the 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, in the most cost-effective manner possible. The Company develops its liquidity management strategies and measures and monitors liquidity risk as part of its overall asset/liability management process by making use of 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 the first three months of 2009.

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.

Cash generated from operations is an important source of funds to meet liquidity needs. The consolidated statements of cash flows present operating cash flows and summarize all significant sources and uses of funds for the first three months of 2009 and 2008. The Company reported net income of $378,000 for the three months ended March 31, 2009, and experienced a net cash increase of $314,000 from operations. Certain adjustments are made to net income to reach the level of cash provided by operating activities, including non-cash expenses (depreciation, employee compensation made in the form of stock, and deferred tax provisions) and revenues (accretion of discounts and dividends received in the form of stock).

In addition, management monitors its liquidity position by tracking certain financial data. Table 9 illustrates some of the factors that the Company uses to measure liquidity. The Company remains highly liquid, though some liquidity is being utilized to fund loan growth.

TABLE 9. KEY LIQUIDITY INDICATORS
                                        2009                  2008
($ in thousands)                      March 31     December 31     March 31
Cash and cash equivalents           $      17,764  $      3,205  $      11,491
Total loans                               173,057       161,242        133,234
Total deposits                            170,743       140,115        133,335
Deposits $100,000 and over                 74,530        54,620         40,478
Ratios
Total loans to total deposits             101.36%       115.08%         99.93%
Deposits $100,000 and over to              43.65%        38.98%         30.36%
total deposits

RESULTS OF OPERATIONS

NET INTEREST INCOME
Net interest income for the first quarter of 2009 increased $383,000, or 25.7%, from the first quarter of 2008, with a 19.7% increase in average interest-earning assets and a 73 basis point reduction in the average cost of funds which was partially offset by a 30 basis point decrease in the average yield on interest-earning assets and a 24.1% increase in average interest-bearing liabilities. Compared to the fourth quarter of 2008, first quarter net interest income for 2009 was up $132,000, or 7.6%, on average interest-earning assets that increased $14.4 million, or 6.9%, from the prior quarter. The year-to-year increase in net interest income is primarily attributable to the increase in interest-earning assets and the 14 basis point increase in net interest margin, which measures net interest income as a percent of average interest-earning assets, from 3.21% for the first quarter of 2008 to 3.35% for the first quarter of 2009. Tables 10 and 11 show the components of the Company's net interest margin and the changes in those components from the fourth quarter of 2008 and the first quarter of 2008.

Interest income from average interest-earning assets for the first quarter of 2009 was up $182,000, or 5.7%, from the fourth quarter of 2008. This increase was primarily due to the Company's average investment in loans which was up $11.3 million, or 7.3%, in the first quarter of 2009 compared to the fourth quarter of 2008 combined with a 7 basis point increase in the average yield over the same period. The 15 basis point decrease in the average yield on investment . . .