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 and second quarters 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 $503,000 for the quarter ended June 30, 2009, compared with a net loss of $232,000 for the quarter ended June 30, 2008. Earnings (loss) per share were $0.40 and ($0.18) per share diluted for the quarters ended June 30, 2009 and 2008, respectively. Earnings for the first half of 2009 were $881,000, or $0.69 per share diluted, up from a loss of $106,000, or ($0.08) per share diluted, for the first six months of 2008. The increase in profitability in the second quarter and first six months of 2009 is attributable to the strong growth in loans and transactional deposits. Interest income improved during the quarter to $3.6 million and Guaranty's secondary marketing activities resulted in $335,000 of loan sale income. The improvement in earnings from the 2008 reported periods to the 2009 reported periods reflects the results of the Bank's implementation of its plan to expand products and services as part of its transition from a traditional thrift institution to a full service community bank.

Total assets at June 30, 2009 were $264.7 million, up approximately $42.9 million, or 19.3%, from December 31, 2008. In addition, the return on average assets increased to 0.76% for the second quarter of 2009. Average loans increased by $21.0 million, or 13.5%, during the first half of 2009 to $176.6 million at June 30, 2009, with the majority of the growth in both residential and nonresidential real estate secured loans.

Total deposits for the Company during the first six months of 2009 have increased by $49.5 million, or 35.3%, from $140.1 million at December 31, 2008 to $189.6 million at June 30, 2009. Included in this was $2.1 million, or 26.0%, of growth in noninterest-bearing deposits. Noninterest expense as a percentage of average assets was 2.77% for the first six months of 2009 compared to 2.92% for the same period in the prior year.

FINANCIAL CONDITION

LOANS AND ALLOWANCE FOR LOAN LOSSES
The outstanding balance of total loans increased $20.4 million, or 12.7%, from $161.2 million at December 31, 2008 to $181.6 million at June 30, 2009. Average loans for the second quarter of 2009 were $176.6 million, up $40.2 million, or 29.5%, compared to $136.4 million for the same period in 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)                   June 30      March 31       December 31       September 30       June 30
Real estate loans - residential   $  89,379     $  88,544     $      76,429     $       77,448     $  69,439
Real estate loans - commercial
and other                            70,980        66,407            67,751             61,450        58,683
Real estate loans -
construction                         14,578        11,408            10,542              6,727         7,069
Consumer loans                        1,266         1,287             1,713              1,992         1,625
Commercial business loans             5,445         5,411             4,807              4,534         5,260
   Total loans                    $ 181,648     $ 173,057     $     161,242     $      152,151     $ 142,076
   Average total loans during
three-month period                $ 176,633     $ 166,926     $     155,609     $      147,934     $ 136,395

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 $13.0 million, or 16.9%, from December 31, 2008 to June 30, 2009. Residential real estate loans increased due to the efforts of the Bank's three new residential loan originators, who were hired in the first quarter of 2009, and its commercial loan officers as well as the relatively low level of market rates of interest during the first six months 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 June 30, 2009, the allowance for loan losses was $2.6 million, or 1.5% 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 during the first six months of 2009 primarily due to charge-offs on a delinquent loan secured by land which was sold at Sherriff's sale for an amount less than the outstanding loan balance and the foreclosure of a loan secured by multifamily real estate.

TABLE 2. SUMMARY OF ACTIVITY IN THE ALLOWANCE FOR LOAN LOSSES
                                            2009                                  2008
                                    Second         First          Fourth         Third          Second
($ in thousands)                   Quarter        Quarter        Quarter         Quarter       Quarter

Beginning balance                 $    2,693     $    2,719     $    2,818     $    3,238     $    3,419
Provision for loan losses                  -              -              -              -              -
Loans charged off                         50             28             99            420            181
Recoveries of loans previously
charged-off                                -             (2 )            -              -              -
Ending balance                    $    2,643     $    2,693     $    2,719     $    2,818     $    3,238
Ratios
   Charge-offs to average loans         0.03 %         0.02 %         0.06 %         0.28 %         0.13 %
   Provision for loan losses to
charge-offs                              n/a            n/a            n/a            n/a            n/a
   Allowance for loan losses to
ending loans                            1.46 %         1.56 %         1.69 %         1.85 %         2.28 %

Table 3 summarizes the Company's delinquent loans at June 30, 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)             June 30      March 31      December 31  September 30  June 30
30-89 Days                  $     1,960  $     3,214     $     5,231   $      749   $    265
90+ Days                          3,092        2,359           2,011        2,075      2,821
   Total                    $     5,052  $     5,573     $     7,242  $     2,824  $   3,086
Ratios
   Loans delinquent 90+           1.70%        1.36%           1.25%        1.36%      1.99%
days to total loans
   Total delinquent loans         2.78%        3.22%           4.50%        1.86%      2.17%
to total loans
   Allowance for loan
losses to 90+ day
    delinquent loans             85.48%      114.16%         135.21%      135.81%    114.78%
   Allowance for loan
losses to total
    delinquent loans             52.32%       48.32%          37.54%       99.79%    104.93%

The increase in loans greater than 90 days delinquent is primarily due to two renovation loans totaling $1.6 million to a commercial borrower that are secured by non-owner-occupied, residential real estate located in uptown New Orleans, Louisiana, and non-owner-occupied, commercial real estate located in Algiers, Louisiana. These properties, which are under varying stages of renovation, had an aggregate appraised value of $1.1 million in 2006 based on their "as is", incomplete, condition and are currently in the process of foreclosure.

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)                       June 30      March 31       December 31  September 30     June 30
Loans accounted for on a             $      2,885  $      2,210    $      2,011  $      2,075  $      2,821
non-accrual basis
Foreclosed assets                           1,847           461             461           844           469
   Total nonperforming assets        $      4,732  $      2,671    $      2,472  $      2,919  $      3,290
Loans greater than 90 days past due           207           149               -             -             -
and accruing interest
Troubled debt restructurings                    -             -               -             -             -
Ratios
   Nonperforming assets to loans            2.58%         1.52%           1.53%         1.91%         2.31%
plus foreclosed assets
   Nonperforming assets to total            1.79%         1.06%           1.11%         1.35%         1.60%
assets
   Allowance for loan losses to            91.61%       121.86%         135.21%       135.81%       114.78%
nonperforming loans

Foreclosed assets as of June 30, 2009 include a $1.4 million multifamily dwelling located in the historic district of the French Quarter in New Orleans, Louisiana. The foreclosure proceedings on the property, which was under renovation, were completed in April 2009. The appraised value of the property was $1.6 million based on the "as is", incomplete, condition. The Company has been marketing this property for sale since May 2009.

INVESTMENT IN SECURITIES
At June 30, 2009, the Company's total securities available-for-sale were $52.8 million, compared to $47.6 million at December 31, 2008, which represents an increase of $5.2 million, or 10.8%.

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 $511,000 of the holdings in the AMF Ultra Short Mortgage fund, the remaining mutual fund in the Company's securities portfolio, were redeemed for cash during the first six months of 2009. As of June 30, 2009, our remaining investment in the AMF Ultra Short Mortgage Fund was $2.9 million and had a market value of $2.8 million.

At June 30, 2009, the net unrealized loss on the Company's entire securities portfolio was $195,000, or 0.4% of amortized cost, compared to the net unrealized loss of $320,000, or 0.7% of amortized cost at December 31, 2008. The gains in the securities portfolio consist primarily of increases in the market value of mortgage-backed securities issued by government agencies. The losses in the security portfolio are attributable to the reduced values of certain private-label collateralized mortgage obligations as a result of concerns with the overall mortgage market. Management believes that these losses are temporary in nature and will reverse themselves when market conditions become more favorable for those types of investments.

TABLE 5. COMPOSITION OF INVESTMENT SECURITIES PORTFOLIO
                             June 30, 2009             December 31, 2008              June 30, 2008
($ in thousands)      Amortized Cost Market Value Amortized Cost  Market Value Amortized Cost  Market Value
U.S. Agency               $   10,362   $   10,379     $   10,010    $   10,070     $   12,511    $   12,293
securities
Mortgage-backed               31,706       32,263         25,484        26,100         17,171        17,057
securities
Collateralized                 6,763        6,173          9,035         8,039         13,880        13,375
mortgage obligations
Municipal securities           1,248        1,165              -             -              -             -
Mutual funds                   2,897        2,801          3,408         3,408          4,891         5,055
   Total investment       $   52,976   $   52,781     $   47,937    $   47,617     $   48,453    $   47,780
securities

DEPOSITS
At June 30, 2009, deposits totaled $189.6 million, an increase of $49.5 million, or 35.3%, from $140.1 million at December 31, 2008. Average deposits for the second quarter of 2009 increased $31.5 million, or 20.6%, from the prior quarter. Average certificates of deposit (or "time deposits") totaled $94.1 million, or 51.1%, of average total deposits for the quarter ended June 30, 2009, up $7.0 million, or 8.0%, compared to the first quarter of 2009. Average savings deposits made up 7.5% of total average deposits, down from 9.6% in the prior quarter. During the second quarter of 2009, the average balance of NOW accounts, which includes money market deposit accounts, increased from 27.6% to 35.7% of average total deposits. The average balance of noninterest-bearing demand deposits increased during the second quarter of 2009 by $1.6 million, or 17.9%, from $8.9 million in the prior quarter.

Table 6 presents the composition of average deposits for the quarters ended June 30, 2009, March 31, 2009, and June 30, 2008.

TABLE 6. DEPOSIT COMPOSITION
                       Second Quarter 2009   First Quarter 2009  Second Quarter 2008
($ in thousands)         Average     % of     Average     % of     Average     % of
                        Balances   Deposits  Balances   Deposits  Balances   Deposits
Noninterest-bearing     $   10,445     5.7%   $   8,860     5.8%   $   8,335     6.2%
demand deposits
NOW and MMDA account        65,839    35.7%      42,089    27.6%      24,470    18.3%
deposits
Savings deposits            13,841     7.5%      14,680     9.6%      17,458    13.1%
Time deposits               94,127    51.1%      87,136    57.0%      83,375    62.4%
   Total                $  184,252   100.0%  $  152,765   100.0%  $  133,638   100.0%

The increase in deposits is due to a combination of factors including: the efforts of the commercial loan originators to open noninterest-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 June 30, 2009.

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 June 30, 2009 and December 31, 2008, the Company's borrowings from the Federal Home Loan Bank were $44.5 million and $52.0 million, respectively, which represents a decrease of $7.5 million, or 14.4%. Average advances for the second quarter of 2009 were $47.9 million, a decrease of $3.8 million, or 7.3%, from the first quarter of 2009. The decrease in FHLB borrowings during the first six months of 2009 was due to the non-renewal of $7.3 million in maturing advances.

The Company is constantly evaluating its funding options to determine the most cost-effective means of funding its growth while actively managing the ratio of average loans to average deposits. The Company's utilization of borrowings continues to be within the parameters determined by management to be prudent in terms of liquidity and interest rate sensitivity. In addition, the Company has significant remaining borrowing capacity should borrowing needs arise.

STOCKHOLDERS' EQUITY AND CAPITAL ADEQUACY
At June 30, 2009, stockholders' equity totaled $28.1 million, compared to $27.6 million at December 31, 2008. This increase of $580,000, or 2.1%, was primarily due to net income of $881,000 and an increase in unrealized gains, net of tax, on investment securities of $93,000, partially offset by cash dividends paid of $256,000 and purchases of treasury stock of $153,000 for the six months ended June 30, 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           19.00
2004                              16,842             315           18.71
2005                               3,907              74           19.06
2006                              17,763             300           16.87
2007                              10,468             188           18.00
2008                                   -               -               -
Six months ended June 30, 2009    12,248             153           12.42
   Total stock repurchases     2,194,948  $       32,834  $        14.96

The ratios in Table 8 indicate that the Bank remained well capitalized as of June 30, 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 second quarter of 2009 as there was an $18.3 million increase in risk-weighted assets, attributable primarily to growth in the loan portfolio. The regulatory capital ratios of Guaranty Savings Bank continue to 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)                June 30     December 31     June 30
Tier 1 regulatory capital     $     26,408  $     25,611  $     27,023
Tier 2 regulatory capital            1,704         1,772         1,600
   Total regulatory capital   $     28,112  $     27,383  $     28,623
Adjusted total assets         $    264,234  $    221,614  $    204,879
Risk-weighted assets          $    160,037  $    141,772  $    128,027
Ratios
   Tier 1 capital to                 9.99%        11.56%        13.19%
adjusted total assets
   Tier 1 capital to                16.50%        18.06%        21.11%
risk-weighted assets
   Total capital to                 17.57%        19.31%        22.36%
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 during the first six 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 in 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 six months of 2009 and 2008. The Company reported net income of $881,000 for the six months ended June 30, 2009, and experienced a net cash increase of $176,000 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.

TABLE 9. KEY LIQUIDITY
INDICATORS
                                     2009                  2008
($ in thousands)                   June 30      December 31      June 30
Cash and cash equivalents        $      18,778  $       3,205  $       7,580
Total loans                            181,648        161,242        142,076
Total deposits                         189,622        140,115        134,341
Deposits $100,000 and over              86,765         54,620         43,386
Ratios
   Total loans to total                 95.79%        115.08%        105.76%
deposits
   Deposits $100,000 and over           45.76%         38.98%         32.30%
to total deposits

The Company remains highly liquid, as additional liquidity has been obtained through its deposit account offerings that were developed, in part, to reduce the Bank's loan to deposit ratio. However, liquidity is being used to fund loan growth and payoff maturing FHLB advances when appropriate.

RESULTS OF OPERATIONS

NET INTEREST INCOME
Net interest income for the second quarter of 2009 increased by $72,000, or 3.8%, from the first quarter of 2009 due to a $27.4 million, or 12.2%, increase in average interest-earning assets and a 9 basis point reduction in the average costs of funds. This was partially offset by a $26.1 million, or 13.3%, increase in average interest-bearing liabilities. Second quarter net interest income for 2009 increased by $308,000, or 18.8%, from $1.6 million during the same period in prior year due to a $59.2 million, or 30.8%, increase in average . . .