-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DNz/O1IHg00TWjcwD5OID2aWVYYsvhiR2FcTQq4whmCAdGWQqLF85dGDfwuFg5nJ TPrOM77sUxqhs2ztI4Z6Yw== /in/edgar/work/0000928385-00-003100/0000928385-00-003100.txt : 20001115 0000928385-00-003100.hdr.sgml : 20001115 ACCESSION NUMBER: 0000928385-00-003100 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GUARANTY FEDERAL BANCSHARES INC CENTRAL INDEX KEY: 0001046203 STANDARD INDUSTRIAL CLASSIFICATION: [6035 ] IRS NUMBER: 431792717 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23325 FILM NUMBER: 764400 BUSINESS ADDRESS: STREET 1: 1341 WEST BATTLEFIELD CITY: SPRINGFIELD STATE: MO ZIP: 65807 BUSINESS PHONE: 4175204333 MAIL ADDRESS: STREET 1: 1341 WEST BATTLEFIELD CITY: SPRINGFIELD STATE: MO ZIP: 65807 10-Q 1 0001.txt 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended September 30, 2000 ------------------ OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission number 0-23325 ------- Guaranty Federal Bancshares, Inc. --------------------------------- (Exact name of registrant as specified in its charter) Delaware 43-1792717 -------- ---------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 1341 West Battlefield Springfield, Missouri 65807 --------------------- ----- (Address of principal executive offices) (Zip Code) Telephone Number: (417) 520-4333 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No___ ----- Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Class Outstanding at November 13, 2000 ----- -------------------------------- Common Stock, Par Value $0.10 4,448,965 Shares GUARANTY FEDERAL BANCSHARES, INC. Form 10-Q TABLE OF CONTENTS
Item Page PART I. Financial Information 1. Consolidated Financial Statements (Unaudited): Statements of Financial Condition 3 Statements of Income 4 Statements of Changes in Stockholders' Equity 5 Statements of Cash Flow 7 Notes to Consolidated Financial Statements 8 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 3. Quantitative and Qualitative Disclosures about Market Risk 13 PART II. Other Information 1. Legal Proceedings 16 2. Changes in Securities and Use of Proceeds 16 3. Defaults Upon Senior Securities 16 4. Submission of Matters to Vote of Security-holders 16 5. Other Information 16 6. Exhibits and Reports on Form 8-K 16 Signatures 17
2 Guaranty Federal Bancshares, Inc. Form 10-Q for September 30, 2000 PART I Item 1. Financial Statements - ---------------------------- GUARANTY FEDERAL BANCSHARES, INC. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION SEPTEMBER 30, 2000 (UNAUDITED) AND JUNE 30, 2000
9/30/2000 6/30/2000 --------- --------- ASSETS Cash $ 2,052,335 1,906,757 Interest-bearing deposits in other financial institutions 6,295,524 7,250,514 ------------- ------------- Cash and cash equivalents 8,347,859 9,157,271 Available-for-sale securities 16,528,550 13,645,307 Held-to-maturity securities 6,411,195 6,768,672 Stock in Federal Home Loan Bank, at cost 7,400,400 6,875,400 Mortgage loans held for sale 1,273,503 995,286 Loans receivable, net of allowance for loan losses; 9/30/2000 - $2,548,255; 6/30/2000 - $2,519,946 299,404,477 295,057,753 Accrued interest receivable: Loans 1,749,559 1,651,760 Investments 199,314 174,123 Prepaid expenses and other assets 1,204,802 728,989 Foreclosed assets held for sale - 1,625 Premises and equipment 7,248,325 6,800,198 ------------- ------------- $ 349,767,984 341,856,384 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits $ 140,220,897 144,607,238 Federal Home Loan Bank advances 148,006,790 136,507,147 Advances from borrowers for taxes and insurance 1,831,368 1,384,231 Accrued expenses and other liabilities 2,313,511 828,709 Accrued interest payable 818,717 959,354 Income taxes payable 844,614 333,772 Deferred income taxes 1,138,568 650,543 ------------- ------------- 295,174,465 285,270,994 ------------- ------------- STOCKHOLDERS' EQUITY Common Stock: $0.10 par value; authorized 10,000,000 shares; issued; 9/30/2000 - 6,252,197 shares, 6/30/2000 - 6,250,037 shares 625,220 625,004 Additional paid-in capital 48,047,679 47,921,681 Unearned ESOP shares (2,811,183) (2,870,440) Retained earnings, substantially restricted 24,517,614 24,654,965 Accumulated other comprehensive income Unrealized appreciation on available-for-sale securities, net of income taxes; 9/30/2000 - $1,787,111, 6/30/2000 - $1,408,906 3,042,918 2,398,947 ------------- ------------- 73,422,248 72,730,157 Treasury stock, at cost; 9/30/2000 - 1,602,434 shares, 6/30/2000 - 1,383,321 shares (18,828,729) (16,144,767) ------------- ------------- 54,593,519 56,585,390 ------------- ------------- $ 349,767,984 341,856,384 ============= =============
See Notes to Condensed Consolidated Financial Statements 3 GUARANTY FEDERAL BANCSHARES, INC. CONSOLIDATED STATEMENTS OF INCOME Guaranty Federal Three Bancshares Months Ended September 30, 2000 And 1999 (Unaudited) Form 10-Q for September 30, 2000
9/30/00 9/30/99 ------------ ------------ INTEREST INCOME Loans $ 5,968,170 5,179,899 Investment securities 293,749 211,967 Other 275,868 169,928 ------------ ------------ Total Interest Income 6,537,787 5,561,794 ------------ ------------ INTEREST EXPENSE Deposits 1,629,321 1,499,578 Federal Home Loan Bank advances 2,216,867 1,485,396 ------------ ------------ Total Interest Expense 3,846,188 2,984,974 ------------ ------------ Net Interest Income 2,691,599 2,576,820 Provision for Loan Losses 30,000 45,000 ------------ ------------ Net Interest Income after Provision for Loan Losses 2,661,599 2,531,820 ------------ ------------ NONINTEREST INCOME (LOSS) Service charges 307,765 272,417 Late charges and other fees 58,239 56,611 Gain (loss) on loans and investment securities 42,953 (14,586) Income on foreclosed assets 280 13,372 Other income 30,669 45,524 ------------ ------------ Total Noninterest Income 439,906 373,338 ------------ ------------ NONINTEREST EXPENSE Salaries and employee benefits 937,243 807,058 Occupancy 212,340 205,092 SAIF deposit insurance premiums 99,013 20,072 Data processing fees 7,661 113,739 Advertising 126,553 90,331 Other expense 355,802 296,609 ------------ ------------ Total Noninterest Expense 1,738,612 1,532,901 ------------ ------------ Income Before Income Taxes 1,362,893 1,372,257 Provision for Income Taxes 499,458 512,159 ------------ ------------ NET INCOME 863,435 860,098 OTHER COMPREHENSIVE INCOME (LOSS) Unrealized appreciation (depreciation) on available-for-sale securities, net of income taxes of $378,204 and $(219,684) for 2000 and 1999, respectively 643,971 (374,056) ------------ ------------ COMPREHENSIVE INCOME $ 1,507,406 486,042 ============ ============ BASIC EARNINGS PER SHARE $ 0.19 0.16 ============ ============ DILUTED EARNINGS PER SHARE $ 0.19 0.16 ============ ============
See Notes to Condensed Consolidated Financial Statements 4 Guaranty Federal Bancshares, Inc. Form 10-Q For September 30, 2000 GUARANTY FEDERAL BANCSHARES, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY THREE MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED)
Accumulated Other Comprehensive Income ------------------- Unrealized Additional Appreciation on Common Paid-In Unearned Retained Available-for-Sale Treasury Stock Capital ESOP Shares Earnings Securities, Net Stock Total --------- ---------- ------------ ---------- ------------------- ----------- ---------- Balance, June 30, 2000 $625,004 47,921,681 (2,870,440) 24,654,965 2,398,947 (16,144,767) 56,585,390 Net income - - - 863,435 - - 863,435 Dividends on common stock, ($0.23 per share on 4,351,241 shares) - - - (1,000,786) - - (1,000,786) Recognition and Retention Plan (RRP) & Restricted Stock Plan (RSP): RRP and RSP expense - 133,936 - - - - 133,936 Tax liability of RRP & RSP shares - (26,474) - - - - (26,474) Stock options exercised 216 12,787 - - - - 13,003 Release of ESOP shares - 5,749 59,257 - - - 65,006 Treasury stock purchased - - - - - (2,683,962) (2,683,962) Change in unrealized appreciation on available-for-sale securitites, net of income taxes of $378,204 - - - - 643,971 - 643,971 -------- ---------- ---------- ---------- --------- ----------- ---------- Balance, September 30, 2000 $625,220 48,047,679 (2,811,183) 24,517,614 3,042,918 (18,828,729) 54,593,519 ======== ========== ========== ========== ========= =========== ==========
See Notes to Condensed Consolidated Finacial Statements 5 Guaranty Federal Bancshares, Inc. Form 10-Q For September 30, 2000 GUARANTY FEDERAL BANCSHARES, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY THREE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
Accumulated Other Comprehensive Income ------------------- Unrealized Appreciation Additional (Depreciation) on Common Paid-In Unearned Retained Available-for-Sale Treasury Stock Capital ESOP Shares Earnings Securities, Net Stock Total --------- ---------- ------------ ---------- ------------------- ----------- ---------- Balance, June 30, 1999 $624,578 47,366,264 (3,100,080) 23,236,009 3,438,826 (8,132,375) 63,433,222 Net Income - - - 860,098 - - 860,098 Dividends on common stock, ($0.20 per share on 5,136,256 shares) - - - (1,027,250) - - (1,027,250) Recognition and Retention Plan (RRP) & Restricted Stock Plan (RSP): RRP and RSP expense - 121,336 - - - - 121,336 Tax liability of RRP shares - (19,439) - - - - (19,439) Stock options exercised 49 2,949 - - - - 2,998 Release of ESOP shares - 11,247 57,410 - - - 68,657 Treasury stock purchased - - - - - (1,774,529) (1,774,529) Change in unrealized appreciation on available-for-sale securities, net of income taxes of $(219,684) - - - - (374,056) - (374,056) -------- ---------- ---------- ---------- --------- ---------- ---------- Balance, September 30, 1999 $624,627 47,482,357 (3,042,670) 23,068,857 3,064,770 (9,906,904) 61,291,037 ======== ========== ========== ========== ========= ========== ==========
See Notes to Condensed Cosolidate Financial Statements 6 Guaranty Federal Bancshares, Inc. Form 10-Q for September 30, 2000 GUARANTY FEDERAL BANCSHARES, INC CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED)
9/30/00 9/30/99 --------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 863,435 860,098 Items not requiring (providing) cash: Deferred income taxes 109,821 88,661 Depreciation 130,233 104,523 Provision for loan losses 30,000 45,000 (Gain) loss on loans and investment securities (42,953) 14,586 (Gain) loss on sale of foreclosed assets 1,070 (13,372) Amortization of deferred income, premiums and discounts (2,338) 24,086 RRP/RSP expense 133,936 121,336 Origination of loans held for sale (4,757,435) (570,534) Proceeds from sale of loans held for sale 4,521,189 696,369 Release of ESOP shares 65,006 68,657 Changes in: Accrued interest receivable (122,990) 136,487 Prepaid expenses and other assets (475,813) 50,720 Accounts payable and accrued expenses 343,379 (61,005) Income taxes payable 484,368 397,066 --------------- ------------- Net cash provided by operating activities 1,280,908 1,962,678 --------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES Net increase in loans (4,372,613) (10,752,440) Principal payments on available-for-sale securities 21,000 296,260 Principal payments on held-to-maturity securities 355,750 674,525 Purchase of premises and equipment (578,360) (98,292) Purchase of available-for-sale securities (2,000,000) - Proceeds from maturities of held-to-maturity securities - 4,700,000 Proceeds from sale of available-for-sale securities 118,868 - Purchase of FHLB stock (525,000) (119,500) Proceeds from sale of foreclosed assets 555 114,918 --------------- ------------- Net cash used in investing activities (6,979,800) (5,184,529) --------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES Stock options exercised 13,003 2,998 Net decrease in demand deposits, NOW accounts and savings accounts (2,765,009) (66,696) Net increase (decrease) in certificates of deposit (1,621,332) 2,098,175 Proceeds from FHLB advances 24,000,000 3,019,600 Repayments of FHLB advances (12,500,357) (4,479,968) Advances from borrowers for taxes and insurance 447,137 471,048 Treasury stock purchased (2,683,962) (1,774,529) --------------- ------------- Net cash provided by (used in) financing activities 4,889,480 (729,372) --------------- ------------- DECREASE IN CASH AND CASH EQUIVALENTS (809,412) (3,951,223) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 9,157,271 9,689,121 --------------- ------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 8,347,859 5,737,898 =============== =============
See Notes to Condensed Consolidated Financial Statements 7 Guaranty Federal Bancshares, Inc. Form 10-Q for September 30, 2000 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1: Basis of Presentation The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations for the period are not necessarily indicative of the results to be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Form 10-K annual report for 2000 filed with the Securities and Exchange Commission. The condensed consolidated balance sheet of the Company as of June 30, 2000, has been derived from the audited consolidated balance sheet of the Company as of that date. Certain information and note disclosures normally included in the Company's annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Note 2: Principles of Consolidation The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiary, Guaranty Federal Savings Bank and the wholly-owned subsidiary of the Bank, Guaranty Financial Services of Springfield, Inc. Significant intercompany accounts and transactions have been eliminated in consolidation. Note 3: Benefit Plans On October 18, 1995, the Bank's stockholders voted to approve both a Recognition and Retention Plan ("RRP") and a Stock Option Plan ("SOP"). On July 22, 1998, the Company's stockholders voted to approve both a 1998 Restricted Stock Plan ("RSP") and a 1998 Stock Option Plan ("1998 SOP"). The RRP and RSP authorized shares to be issued to directors, officers and employees of the Bank. On February 17, 2000, the directors of the Company established the Stock Compensation Plan (the "2000 SCP") with both a stock award component and stock option component. Under the stock award component of this plan, the Committee awarded 7,125 shares of the Company's common stock. As of September 30, 2000, all of the RRP and RSP shares have been purchased and all except 1,661 shares have been awarded. As of September 30, 2000, the stock award component of the 2000 SCP has not been funded. The Bank is amortizing the RRP, RSP and SCP expense over each participant's vesting period. The Company recognized $133,936 of expense under these stock award plans for the three month period ended September 30, 2000. The SOP, 1998 SOP and the 2000 SCP authorized stock options on shares to be issued to officers and employees of the Bank, as of September 30, 2000 all options except those on 27,619 shares have been granted. The RRP, RSP, SOP,1998 SOP and 2000 SCP vest over a five year period. As of September 30, 2000, there were 577,825 unexercised options that have been granted at prices ranging from $5.83 to $13.44 per share and 132,639 RRP ,RSP and 2000 SCP shares were unvested. 8 Guaranty Federal Bancshares, Inc. Form 10-Q for September 30, 2000 Note 4: Earnings Per Share
For three months ended September 30, 2000 ------------------------------------------- Average Income Available Shares to Stockholders Outstanding Per-share ---------------- ----------- --------- Basic Earnings per Share $ 863,435 4,469,004 $ 0.19 ========= Effect of Dilutive Securities: Stock Options 54,103 --------- Diluted Earnings per Share $ 863,435 4,523,107 $ 0.19 ========== ========= ========= For three months ended September 30, 1999 ------------------------------------------- Average Income Available Shares to Stockholders Outstanding Per-share ---------------- ----------- --------- Basic Earnings per Share $ 860,098 5,216,265 $ 0.16 ========= Effect of Dilutive Securities: Stock Options 57,869 --------- Diluted Earnings per Share $ 860,098 5,274,134 $ 0.16 ========== ========= =========
Options to purchase 5,000, 16,704, 5,000 and 417,630 shares of common stock at $11.75, $12.25, $12.63 and $13.44 per share, respectively, outstanding during the three months ended September 30, 2000, were not included in the computation of diluted EPS because the options' exercise price was greater than the average market price of the common shares. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations General The accompanying Consolidated Financial Statements include the accounts of Guaranty Federal Bancshares, Inc. (the "Company"), and all accounts of its wholly owned subsidiary, Guaranty Federal Savings Bank (the "Bank") and all accounts of the wholly-owned subsidiary of the Bank, Guaranty Financial Services of Springfield, Inc. All significant intercompany transactions and balances have been eliminated in consolidation. The primary function of the Company has been to monitor its investment in the Bank. As a result, the results of operations of the Company are derived primarily from operations of the Bank. The Bank's results of operations are primarily dependent on net interest margin, which is the difference between interest income on interest-earning assets and interest expense on interest- bearing liabilities. The Bank's income is also affected by the level of its noninterest expenses, such as employee salary and benefits, occupancy expenses and other expenses. The following discussion reviews the financial condition at September 30, 2000, and the results of operations for the three months ended September 30, 2000 and 1999. The discussion set forth below, as well as other portions of this Form 10- Q, may contain forward-looking comments. Such comments are based upon the information currently available to management of the Company and management's perception thereof as of the date of the Form 10-Q. Actual results of the Company's operations could materially differ from those forward-looking comments. The differences could be caused by a number of factors or combination of factors including, but limited to: changes in demand for banking services; changes in portfolio composition; changes in management strategy; increased competition from both bank and non-bank companies; and changes in the general level of interest rates. 9 Guaranty Federal Bancshares, Inc. Form 10-Q for September 30, 2000 Financial Condition The Company's's total assets increased $7,911,600 (2%) from $341,856,384 as of June 30, 2000, to $349,767,984 as of September 30, 2000. Interest-bearing deposits in other financial institutions decreased $954,990 (13%) from $7,250,514 as of June 30, 2000, to $6,295,524 as of September 30, 2000, as the funds were used to fund new loans. Securities available-for-sale increased $2,883,243 (21%) from $13,645,307 as of June 30, 2000, to $16,528,550 as of September 30, 2000. This is primarily due to purchases of $2,000,000 of investment securities and the increase in fair value of various equity securities. The Bank continues to hold 96,000 shares of Federal Home Loan Mortgage Corporation ("FHLMC") stock with an amortized cost of $94,000 in the available-for-sale category. As of September 30, 2000, the gross unrealized gain on the stock was $5,096,000, a increase from $3,794,000 as of June 30, 2000. Securities held-to-maturity decreased due to maturities and principal repayments, by $357,477 (5%) from $6,768,672 as of June 30, 2000, to $6,411,195 as of September 30, 2000. Net loans receivable increased by $4,346,724 (1%) from $295,057,753 as of June 30, 2000, to $299,404,477 as of September 30, 2000. Permanent mortgage loans secured by both owner and non-owner occupied residential real estate increased by $5,295,000 and construction loans increased by $1,217,000. Loan growth is anticipated to continue and represents a major part of the Bank's planned assets growth. Allowance for loan losses increased $28,309 (1%) from $2,519,946 as of June 30, 2000 to $2,548,255 as of September 30, 2000. The allowance increased due to the provision for loan losses for the period exceeding net loan charge-offs. The allowance for loan losses as of September 30, 2000 and June 30, 2000 was 0.85%, of net loans outstanding. As of September 30, 2000, the allowance for loan losses was 54% of impaired loans versus 53% as of June 30, 2000. Premises and equipment increased $448,127 (7%) from $6,800,198 as of June 30, 2000 to $7,248,325 as of September 30, 2000. The increase is due to the additions related to the Company's new branch office. Deposits decreased $4,386,341 (3%) from $144,607,238 as of June 30, 2000, to $140,220,897 as of September 30, 2000. For the three months ended September 30, 2000, checking and savings accounts decreased by $2,765,009 (5%) while certificates of deposits decreased by $1,621,332 (2%). In order to fund the increase in loan demand and the repurchase of Company stock, the Company increased borrowings from the Federal Home Loan Bank (the "FHLB") by $11,499,643 (8%) from $136,507,147 as of June 30, 2000, to $148,006,790 as of September 30, 2000. As of September 30, 2000, the Bank had the ability to borrow an additional $47 million from the FHLB. Advances from borrowers for taxes and insurance increased $447,137 (32%) from $1,384,231 of June 30, 2000, to $1,831,368 as of September 30, 2000. Accrued expenses and other liabilities increased $1,484,802 (179%) from $828,709 as of June 30, 2000, to $2,313,511 as of September 30, 2000. The majority of this increase is due to a $0.23 per share dividend payable to stockholders of record September 5, 2000, totaling $1,000,786. Stockholders' equity (including unrealized appreciation on securities available-for-sale, net of tax) decreased $1,991,871 (4%) from $56,585,390 as of June 30, 2000, to $54,593,519 as of September 30, 2000. This decrease was due to several factors. During this period the Company repurchased a total of 219,113 of its outstanding shares in the open market at a cost of $2,683,962. In addition, dividends in the amount of $1,000,786 ($0.23 per share) were declared and paid, on October 15, 2000, to stockholders' of record as of September 5, 2000. There was an increase in the unrealized appreciation on available-for-sale securities of $643,971. On a per share basis, stockholders' equity increased from $12.36 as of June 30, 2000 to $12.50 as of September 30, 2000. 10 Guaranty Federal Bancshares, Inc. Form 10-Q for September 30, 2000 Average Balances, Interest and Average Yields The Company's profitability is primarily dependent upon net interest income, which represents the difference between interest and fees earned on loans and debt and equity securities, and the cost of deposits and borrowings. Net interest income is dependent on the difference between the average balances and rates earned on interest-earning assets and the average balances and rates paid on interest-bearing liabilities. Non-interest income, non-interest expense, and income taxes also impact net income. The following table sets forth certain information relating to the Company's average consolidated statements of financial condition and reflects the average yield on assets and average cost of liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense annualized by the average balance of assets or liabilities, respectively, for the periods shown. Average balances were derived from average daily balances. The average balance of loans includes loans on which the Company has discontinued accruing interest. The yields and costs include fees which are considered adjustments to yields. All dollar amounts are in thousands.
Three Months ended 9/30/2000 Three Months ended 9/30/1999 -------------------------------- ------------------------------- Average Yield / Average Yield/ Balance Interest Cost Balance Interest Cost --------- -------- -------- --------- -------- ------- ASSETS Interest-earning: Loans $ 297,971 5,968 8.01% $ 268,378 5,180 7.72% Investment securities 15,392 294 7.64% 13,141 212 6.45% Other assets 16,786 276 6.58% 17,403 170 3.91% --------- ------- ----- --------- ------ ----- Total interest-earning 330,149 6,538 7.92% 298,922 5,562 7.44% Noninterest-earning 7,697 8,161 --------- --------- $ 337,846 $ 307,083 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing: Savings accounts $ 8,257 59 2.86% $ 8,526 48 2.25% Transaction accounts 37,380 296 3.17% 34,077 243 2.85% Certificates of Deposit 90,014 1,275 5.67% 95,570 1,209 5.06% FHLB Advances 141,355 2,217 6.27% 101,464 1,485 5.85% --------- ------- ----- --------- ------ ----- Total interest-bearing 277,006 3,847 5.56% 239,637 2,985 4.98% Noninterest-bearing 5,141 4,130 --------- --------- Total liabilities 282,147 243,767 Stockholders' equity 55,699 63,316 --------- --------- $ 337,846 $ 307,083 ========= ========= Net earning balance $ 53,143 $ 59,285 ========= ========= Earning yield less costing rate 2.36% 2.46% ===== ===== Net interest income, and net yield spread on interest earning assets $ 2,691 3.26% $ 2,577 3.45% ======= ===== ======= ===== Ratio of interest-earning assets to interest-bearing liabilities 119% 125% ======= =======
11 Guaranty Federal Bancshares, Inc. Form 10-Q for September 30, 2000 Results of Operations - Comparison of Three Month Periods Ended September 30, 2000 and 1999 Net income for the three months ended September 30, 2000 was $863,435 ($0.19 per share) as compared to $860,098 ($0.16 per share) for the three months ended September 30, 1999, which represents an increase in earnings of $3,337 for the three month period. Interest Income Total interest income for the three months ended September 30, 2000, increased $975,993 (18%) as compared to the three months ended September 30, 1999. For the three month period ended September 30, 2000 compared to the same period in 1999, the average yield on interest earning assets increased 48 basis points to 7.92%, while the average balance of interest earnings assets increased $31,227,000. Interest Expense Total interest expense for the three months ended September 30, 2000, increased $861,214 (29%) when compared to the three months ended September 30, 1999. For the three month period ended September 30, 2000, the average cost of interest bearing liabilities increased 58 basis points to 5.56% while the average balance increased $37,369,000 when compared to the same period in 1999. Net Interest Income Net interest income for the three months ended September 30, 2000, increased $114,779 (4%) when compared to the same period in 1999. The average balance of interest bearing liabilities increased $6,142,000 more than the average balance in interest earning assets. This reduction in net interest earning assets was due to the purchase of treasury stock funded by Federal Home Loan Bank borrowings. For the three month period ended September 30, 2000, the earning yield minus the costing rate spread declined 10 basis points to 2.36%. Provision for Loan Losses Based primarily on the continued growth of the loan portfolio, management decided to increase the allowance for loan losses through a provision for loan loss of $30,000 for the three months ended September 30, 2000, and of $45,000 for the same period in 1999. The Bank will continue to monitor its allowance for loan losses and make future additions based on economic and regulatory conditions. Although the Bank maintains its allowance for loan losses at a level, which it considers to be sufficient to provide for potential losses, there can be no assurance that future losses will not exceed internal estimates. In addition, the amount of the allowance for loan losses is subject to review by regulatory agencies which can order the establishment of additional loss provisions. Noninterest Income Noninterest income increased $66,568 (18%) for the three months ended September 30, 2000, when compared to the three months ended September 30, 1999. These increases were primarily due to an increase in checking account service charges, of $35,348 (13%) for the three months. Noninterest Expense Noninterest expense increased $205,711 (13%) for the three months ended September 30, 2000, when compared to the three months ended September 30, 1999. This increase can be attributed to the Company's conversion from a service bureau to an in-house computer system and the overall increase in accounts served. Provision for Income Taxes The provision for income taxes decreased $12,701 (2%) for the three months ended September 30, 2000, as compared to the same period in 1999. This decrease was due to the decrease in before tax income for the three months ended September 30, 2000, compared to the same period in 1999. 12 Guaranty Federal Bancshares, Inc. Form 10-Q for September 30, 2000 Item 3. Quantitative and Qualitative Disclosures about Market Risk Nonperforming Assets The allowance for loan losses is calculated based upon an evaluation of pertinent factors underlying the various types and quality of the loans. Management considers such factors as the repayment status of a loan, the estimated net realizable value of the underlying collateral, the borrower's intent and ability to repay the loan, local economic conditions and the Bank's historical loss ratios. The Bank's allowance for loan losses as of September 30, 2000, was $2,548,255 or 0.8% of loans receivable. Total assets classified as substandard or loss as of September 30, 2000, were $6,181,053 or 1.8% of total assets. Management has considered nonperforming and total classified assets in evaluating the adequacy of the Bank's allowance for loan losses. The ratio of nonperforming assets to total assets is another useful tool in evaluating exposure to credit risk. Nonperforming assets of the Bank include nonperforming loans (nonaccruing loans) and assets which have been acquired as a result of foreclosure or deed-in-lieu of foreclosure. All dollar amounts are in thousands.
9/30/00 6/30/00 6/30/99 ------- ------- ------- Nonperforming loans $ 4,708 4,757 906 Real estate acquired in settlement of loans - 2 101 ------- ------- ------- Total nonperforming assets $ 4,708 4,759 1,007 ======= ======= ======= Total nonperforming assets as a percentage of total assets 1.35% 1.39% 0.32% Allowance for loan losses $ 2,548 2,520 2,349 Allowance for loan losses as a percentage of average net loans 0.86% 0.89% 1.00%
Asset/Liability Management The goal of the Bank's asset/liability policy is to manage interest rate risk so as to maximize net interest income over time in changing interest rate environments. Management monitors the Bank's net interest spreads (the difference between yields received on assets and paid on liabilities) and, although constrained by market conditions, economic conditions, and prudent underwriting standards, it offers deposit rates and loan rates designed to maximize net interest income. Management also attempts to fund the Bank's assets with liabilities of a comparable duration to minimize the impact of changing interest rates on the Bank's net interest income. Since the relative spread between financial assets and liabilities is constantly changing, the Bank's current net interest income may not be an indication of future net interest income. The Bank's initial efforts to manage interest rate risk included implementing an adjustable rate mortgage loan ("ARM") program beginning in the early 1980s. The ARMs have met with excellent customer acceptance. As of June 30, 2000, ARMs constituted 62% of the Bank's loan portfolio. As of September 30, 2000, ARMs represent 65% of the loan portfolio. Of the ARMs originated during fiscal year 2000, borrowers preferred initial fixed rate periods of three or five years. The Bank has continued to fund fixed rate loans through a program of borrowing longer-term funds from the FHLB. The Bank is also managing interest rate risk by the origination of construction loans. As of September 30, 2000, such loans made up 9.3% of the Bank's loan portfolio. In general, these loans have higher yields, shorter maturities and greater interest rate sensitivity than other real estate loans. The Bank constantly monitors its deposits in an effort to decrease their interest rate sensitivity. Rates of interest paid on deposits at the Bank are priced competitively in order to meet the Bank's asset/liability management objectives and spread requirements. As of June 30, 2000, the Bank's savings accounts, checking accounts, and money market deposit accounts totaled $53,098,478 or 37% of its total deposits. As of September 30, 2000, these 13 Guaranty Federal Bancshares, Inc. Form 10-Q for September 30, 2000 accounts totaled $50,333,469 or 36% of total deposits. The Bank believes, based on historical experience, that a substantial portion of such accounts represents non-interest rate sensitive, core deposits. The value of the Bank's loan portfolio will change as interest rates change. Rising interest rates will decrease the Bank's net portfolio value, while falling interest rates increase the value of that portfolio. Interest Rate Sensitivity Analysis - ---------------------------------- The following table sets forth as of June 30, 2000 (the most recent available), the OTS estimate of the projected changes in net portfolio value ("NPV") in the event of 100, 200, and 300 basis point ("bp") instantaneous and permanent increases and decreases in market interest rates. Dollar amounts are expressed in thousands. BP Change Estimated Net Portfolio Value NPV as % of PV of Assets ------------------------------ ------------------------ in Rates $ Amount $ Change % Change NPV Ratio Change - --------- -------- --------- -------- --------- ------ +300 $ 53,481 $ (6,843) 11% 16.74% -1.07% +200 56,555 (3,769) -6% 17.32% -0.49% +100 58,925 (1,399) -2% 17.70% -0.11% NC 60,324 17.81% -100 60,587 263 0% 17.63% -0.18% -200 59,318 (1,006) -2% 17.07% -0.74% -300 57,585 (2,739) -5% 16.40% -1.41% Computations of prospective effects of hypothetical interest rate changes are calculated by the OTS from data provided by the Bank and are based on numerous assumptions, including relative levels of market interest rates, loan repayments and deposit run-offs, and should not be relied upon as indicative of actual results. Further, the computations do not contemplate any actions the Bank may undertake in response to changes in interest rates. Management cannot predict future interest rates or their effect on the Bank's NPV in the future. Certain shortcomings are inherent in the method of analysis presented in the computation of NPV. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in differing degrees to changes in market interest rates. Additionally, certain assets, such as adjustable rate loans, which represent the Bank's primary loan product, have an initial fixed rate period typically from one to five years and over the remaining life of the asset changes in the interest rate are restricted. In addition, the proportion of adjustable rate loans in the Bank's portfolio could decrease in future periods due to refinancing activity if market interest rates remain or decrease in the future. Further, in the event of a change in interest rates, prepayment and early withdrawal levels could deviate significantly from those assumed in the table. Finally, the ability of many borrowers to service their adjustable-rate debt may decrease in the event of an interest rate increase. The Bank's Board of Directors is responsible for reviewing the asset and liability policies. The Board meets quarterly to review interest rate risk and trends, as well as liquidity and capital ratios and requirements. The Bank's management is responsible for administering the policies and determinations of the Board of Directors with respect to the Bank's asset and liability goals and strategies. Liquidity and Capital Resources The Bank's primary sources of funds are deposits, principal and interest payments on loans and securities and extensions of credit from the Federal Home Loan Bank of Des Moines. While scheduled loan and security repayments and the maturity of short-term investments are somewhat predictable sources of funding, deposit flows are influenced by many factors, which make their cash flows difficult to anticipate. Office of Thrift Supervision regulations require the Bank to maintain cash and eligible investments in an amount equal to at least 4% of customer accounts and short-term borrowings to assure its ability to meet demands for withdrawals and repayment of short- 14 Guaranty Federal Bancshares, Inc. Form 10-Q for September 30, 2000 term borrowings. As of September 30, 2000, the Bank's liquidity ratio was 11.2% which exceeded the minimum regulatory requirement. The Bank uses its liquidity resources principally to satisfy its ongoing commitments which include funding loan commitments, funding maturing certificates of deposit as well as deposit withdrawals, maintaining liquidity, purchasing investments, and meeting operating expenses. As of September 30, 2000, the Bank had approximately $1,734,000 commitments to originate mortgage loans and $17,273,395 in loans-in-process on mortgage loans. These commitments will be funded through existing cash balances, cash flow from operations and, if required, FHLB advances . Management believes that anticipated cash flows and deposit growth will be adequate to meet the Bank's liquidity needs. 15 Guaranty Federal Bancshares, Inc. Form 10-Q for September 30, 2000 PART II Item 1. Legal Proceedings None. Item 2. Changes in Securities Not applicable. Item 3. Defaults Upon Senior Securities Not applicable. Item 4. Submission of Matters to Vote of Common Stockholders The annual meeting of stockholders of the registrant was held on October 25, 2000. At the meeting the stockholders elected Gary Lipscomb and Kurt Hellweg to three-year terms as director of the Savings Bank, while Jack Barham, Wayne Barnes, James Haseltine, Ivy Rogers and Raymond Tripp continue to serve as directors. Also at that meeting , Baird, Kurtz and Dobson was ratified as Independent Certified Public Accountants. These same entities serve in identical capacities for the subsidiary bank of the registrant. The results of voting are shown for each matter considered. Director election: Nominee Votes For Votes Withheld - ------- --------- -------------- Kurt Hellweg 4,007,699 83,172 Gary Lipscomb 4,009,099 81,772 Auditor ratification: Votes for 4,061,771 Votes against 18,147 Abstentions 10,953 Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K a) Exhibits 10.6 2000 Stock Compensation Plan b) Reports on Form 8-K None. Guaranty Federal Bancshares,Inc. Form 10-Q for September 30, 2000 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Guaranty Federal Bancshares, Inc. Signature and Title Date /s/ James E. Haseltine November 13, 2000 ---------------------- ----------------- James E. Haseltine President and Chief Executive Officer (Principal Executive Officer) /s/ Bruce Winston ----------------- Bruce Winston November 13, 2000 ----------------- Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) EX-27 2 0002.txt EXHIBIT 27
9 1,000 3-MOS JUN-30-2000 SEP-30-2000 2,052 6,296 0 0 16,529 6,411 0 303,226 2,548 349,768 140,221 148,007 6,947 0 0 0 625 53,969 349,768 5,968 294 276 6,538 1,629 3,846 2,692 (44) 1 1,739 1,363 863 0 0 863 0.19 0.19 3.26 4,708 4,708 0 0 2,520 5 0 2,548 2,548 0 0
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