<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>d10q.txt
<DESCRIPTION>FORM 10-Q
<TEXT>
<PAGE>
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 March 31, 2001
--------------
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 May 10, 2001
----- ---------------------------
Common Stock, Par Value $0.10 4,091,236 Shares
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
Form 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item Page
PART I. Financial Information
<S> <C>
1. Condensed 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 15
<CAPTION>
PART II. Other Information
<S> <C>
1. Legal Proceedings 18
2. Changes in Securities and Use of Proceeds 18
3. Defaults Upon Senior Securities 18
4. Submission of Matters to Vote of Security-holders 18
5. Other Information 18
6. Exhibits and Reports on Form 8-K 18
Signatures 19
</TABLE>
2
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
FORM 10-Q FOR MARCH 31, 2001
PART I
Item 1. Financial Statements
GUARANTY FEDERAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
MARCH 31, 2001 (UNAUDITED) AND JUNE 30, 2000
<TABLE>
<CAPTION>
3/31/2001 6/30/2000
--------- ---------
<S> <C> <C>
ASSETS
Cash $ 2,191,777 1,906,757
Interest-bearing deposits in other financial institutions 6,065,951 7,250,514
------------- -------------
Cash and cash equivalents 8,257,728 9,157,271
Available-for-sale securities 19,497,635 13,645,307
Held-to-maturity securities 5,081,643 6,768,672
Stock in Federal Home Loan Bank, at cost 8,600,400 6,875,400
Mortgage loans held for sale 5,445,466 995,286
Loans receivable, net of allowance for loan losses;
3/31/2001 - $2,733,255; 6/30/2000 - $2,519,946 317,425,202 295,057,753
Accrued interest receivable:
Loans 1,927,352 1,651,760
Investments 212,619 174,123
Prepaid expenses and other assets 1,174,502 728,989
Foreclosed assets held for sale - 1,625
Premises and equipment 7,782,706 6,800,198
------------- -------------
$ 375,405,253 341,856,384
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $ 147,808,321 144,607,238
Federal Home Loan Bank advances 169,833,370 136,507,147
Securities sold under agreements to repurchase 880,927 -
Advances from borrowers for taxes and insurance 952,578 1,384,231
Accrued expenses and other liabilities 3,097,476 828,709
Accrued interest payable 1,002,739 959,354
Income taxes payable 152,406 333,772
Deferred income taxes 1,390,500 650,543
------------- -------------
325,118,317 285,270,994
------------- -------------
STOCKHOLDERS' EQUITY
Common Stock:
$0.10 par value; authorized 10,000,000 shares;
issued; 3/31/2001 - 6,266,321 shares, 6/30/2000 - 6,250,037 shares 626,632 625,004
Additional paid-in capital 48,327,334 47,921,681
Unearned ESOP shares (2,696,363) (2,870,440)
Retained earnings, substantially restricted 25,175,314 24,654,965
Accumulated other comprehensive income
Unrealized appreciation on available-for-sale securities,
net of income taxes; 3/31/2001 - $2,165,425, 6/30/2000 - $1,408,906 3,687,075 2,398,947
------------- -------------
75,119,992 72,730,157
Treasury stock, at cost;
3/31/2001 - 2,087,885 shares, 6/30/2000 - 1,383,321 shares (24,833,056) (16,144,767)
------------- -------------
50,286,936 56,585,390
------------- -------------
$ 375,405,253 341,856,384
============= =============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
3
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
FORM 10-Q FOR MARCH 31, 2001
GUARANTY FEDERAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
THREE AND NINE MONTHS ENDED MARCH 31, 2001 AND 2000 (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ending Nine Months Ending
-------------------------- --------------------------
3/31/01 3/31/00 3/31/01 3/31/00
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 6,317,661 5,679,216 18,655,823 16,240,905
Investment securities 306,084 218,118 876,201 629,789
Other 204,750 154,294 711,111 474,831
----------- ----------- ----------- -----------
Total Interest Income 6,828,495 6,051,628 20,243,135 17,345,525
=========== =========== =========== ===========
INTEREST EXPENSE
Deposits 1,639,262 1,548,637 4,959,116 4,559,690
Federal Home Loan Bank advances 2,549,823 1,752,297 7,190,901 4,847,027
Other borrowed funds 6,363 - 6,363 -
----------- ----------- ----------- -----------
Total Interest Expense 4,195,448 3,300,934 12,156,380 9,406,717
=========== =========== =========== ===========
Net Interest Income 2,633,047 2,750,694 8,086,755 7,938,808
Provision for Loan Losses 115,000 45,000 215,000 135,000
----------- ----------- ----------- -----------
Net Interest Income after
Provision for Loan Losses 2,518,047 2,705,694 7,871,755 7,803,808
----------- ----------- ----------- -----------
NONINTEREST INCOME (LOSS)
Service charges 292,648 262,954 923,758 822,743
Late charges and other fees 64,052 34,084 173,168 117,996
Gain (loss) on loans and
investment securities 146,711 (3,185) 301,469 (5,034)
Income (expense) on foreclosed assets - 8,716 (625) 21,657
Other income 37,223 34,015 104,864 45,373
----------- ----------- ----------- -----------
Total Noninterest Income 540,634 336,584 1,502,634 1,002,735
----------- ----------- ----------- -----------
NONINTEREST EXPENSE
Salaries and employee benefits 1,099,597 837,224 3,016,358 2,523,437
Occupancy 284,764 209,104 742,185 605,374
SAIF deposit insurance premiums 6,902 7,656 21,979 48,790
Data processing fees 244,208 144,035 479,174 391,334
Advertising 94,985 117,393 306,699 273,735
Other expense 279,887 334,299 999,684 888,513
----------- ----------- ----------- -----------
Total Noninterest Expense 2,010,343 1,649,711 5,566,079 4,731,183
----------- ----------- ----------- -----------
Income before Income Taxes 1,048,338 1,392,567 3,808,310 4,075,360
Provision for Income Taxes 352,213 494,229 1,351,560 1,475,405
----------- ----------- ----------- -----------
NET INCOME 696,125 898,338 2,456,750 2,599,955
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized appreciation (depreciation) on
available-for-sale securities,
net of income taxes of
$(102,706), $(124,823), $756,520
and $(566,936), respectively (174,878) (212,536) 1,288,128 (965,324)
----------- ----------- ----------- -----------
COMPREHENSIVE INCOME $ 521,247 685,802 3,744,878 1,634,631
=========== =========== =========== ===========
BASIC EARNINGS PER SHARE $ 0.17 0.18 0.58 0.51
=========== =========== =========== ===========
DILUTED EARNINGS PER SHARE $ 0.17 0.18 0.58 0.51
=========== =========== =========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
4
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
FORM 10-Q FOR MARCH 31, 2001
GUARANTY FEDERAL BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED MARCH 31, 2001 (UNAUDITED)
<TABLE>
<CAPTION>
Additional
Common Paid-In Unearned Retained
Stock Capital ESOP Shares Earnings
----- ------- ----------- ----------
<S> <C> <C> <C> <C>
Balance, July 1, 2000 $ 625,004 47,921,681 (2,870,440) 24,654,965
Net income - - - 2,456,750
Dividends on common stock,
($0.23 per share on 4,346,561 shares &
$0.24 per share on 3,902,882 shares) - - - (1,936,401)
Recognition and Retention Plan (RRP) &
Restricted Stock Plan (RSP):
RRP and RSP expense - 367,611 - -
Tax provision for RRP & RSP - (2,010) - -
Stock options exercised 1,628 96,054 - -
Dividends on RRP stock - 4,525 - -
Stock purchased for 2000 stock awards - (85,945) - -
Release of ESOP shares - 24,418 174,077 -
Treasury stock purchased - - - -
Change in unrealized appreciation on
available-for-sale securitites, net of
income taxes of $756,520 - - - -
--------- ---------- ----------- ----------
Balance, March 31, 2001 $ 626,632 48,326,334 (2,696,363) 25,175,314
========= ========== ========== ==========
<CAPTION>
Accumulated
Other
Comprehensive
Income
-----------
Unrealized
Appreciation on
Available-
for-Sale
Securities, Treasury
Net Stock Total
---------- ---------- ----------
<S> <C> <C> <C>
Balance, July 1, 2000 2,398,947 (16,144,767) 56,585,390
Net income - - 2,456,750
Dividends on common stock,
($0.23 per share on 4,346,561 shares &
$0.24 per share on 3,902,882 shares) - - (1,936,401)
Recognition and Retention Plan (RRP) &
Restricted Stock Plan (RSP):
RRP and RSP expense - - 367,611
Tax provision for RRP & RSP - - (2,010)
Stock options exercised - - 97,682
Dividends on RRP stock - - 4,525
Stock purchased for 2000 stock awards - - (85,945)
Release of ESOP shares - - 198,495
Treasury stock purchased - (8,688,289) (8,688,289)
Change in unrealized appreciation on
available-for-sale securitites, net of
income taxes of $756,520 1,288,128 - 1,288,128
--------- ---------- ----------
Balance, March 31, 2001 3,687,075 (24,833,056) 50,286,936
=== ==== ========= =========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
5
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
FORM 10-Q FOR MARCH 31, 2001
GUARANTY FEDERAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED MARCH 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
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
---------- ---------- ------------ ---------- ------------------ -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, July 1, 1999 $ 624,578 47,366,264 (3,100,080) 23,236,009 3,438,826 (8,132,375) 63,433,222
Net income - - - 2,599,955 - - 2,599,955
Dividends on common stock,
($0.20 per share on 5,156,256
shares & $0.22 per share on
4,798,163 shares) - - - (2,086,846) - - (2,086,846)
Recognition and Retention Plan
(RRP) & Restricted Stock Plan (RSP):
RRP and RSP expense - 371,955 - - - - 371,955
Dividends on RRP Stock - 6,567 - - - - 6,567
Tax benefit of RRP & RSP - 3,831 - - - - 3,831
Stock options exercised 396 23,455 - - - - 23,851
Release of ESOP shares - 19,269 172,230 - - - 191,499
Treasury stock purchased - - - - - (5,707,114) (5,707,114)
Change in unrealized appreciation
on available-for-sale securitites,
net of income taxes of $(566,936) - - - - (965,324) - (965,324)
--------- ---------- ----------- ---------- ---------- ----------- ----------
Balance, March 31, 2000 $ 624,974 47,791,341 (2,927,850) 23,749,118 2,473,502 (13,839,489) 57,871,596
========= ========== =========== ========== ========== =========== ==========
</TABLE>
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
FORM 10-Q FOR MARCH 31, 2001
GUARANTY FEDERAL BANCSHARES, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 2001 AND 2000 (UNAUDITED)
<TABLE>
<CAPTION>
3/31/01 3/31/00
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,456,750 2,599,955
Items not requiring (providing) cash:
Deferred income taxes (16,563) (18,546)
Depreciation 440,868 342,797
Provision for loan losses 215,000 135,000
(Gain) loss on loans and investment securities (301,469) 5,034
(Gain) loss on sale of premises and equipment (2,743) 64,298
(Gain) loss on sale of foreclosed assets 1,070 (13,372)
Amortization of deferred income, premiums and discounts (79,748) 24,688
RRP/RSP expense 368,611 371,955
Origination of loans held for sale (21,793,131) (3,578,374)
Proceeds from sale of loans held for sale 17,519,803 3,668,579
Release of ESOP shares 198,495 191,499
Changes in:
Accrued interest receivable (314,088) (4,766)
Prepaid expenses and other assets (445,513) (358,486)
Accounts payable and accrued expenses 1,375,461 (59,327)
Income taxes payable (183,376) 150,834
------------ ------------
Net cash provided by (used in) operating activities (560,573) 3,521,768
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans (22,495,626) (26,266,397)
Principal payments on available-for-sale securities 73,320 402,179
Principal payments on held-to-maturity securities 1,652,964 1,662,067
Purchase of premises and equipment (1,426,255) (333,358)
Proceeds from sale of premises and equipment 5,622 982,174
Purchase of available-for-sale securities (4,008,379) (335,578)
Proceeds from sale of available-for-sale securities 278,986 -
Proceeds from maturities of held-to-maturity securities - 4,700,000
Purchase of FHLB stock (1,725,000) (859,600)
Proceeds from sale of foreclosed assets 555 114,918
------------ ------------
Net cash used in investing activities (27,643,813) (19,933,595)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Stock options exercised 97,682 23,851
Cash dividends paid (999,710) (1,031,250)
Cash dividends received on RRP stock 4,525 6,567
Net increase in demand deposits,
NOW accounts and savings accounts 2,764,650 4,524,799
Net increase (decrease) in certificates of deposit 436,433 (806,614)
Net increase in securities sold under agreements to repurchase 880,927 -
Proceeds from FHLB advances 72,500,000 38,686,124
Repayments of FHLB advances (39,173,777) (22,330,677)
Advances from borrowers for taxes and insurance (431,653) (250,875)
Stock purchased for stock awards (85,945) -
Treasury stock purchased (8,688,289) (5,707,114)
------------ ------------
Net cash provided by financing activities 27,304,843 13,114,811
------------ ------------
DECREASE IN CASH AND CASH EQUIVALENTS (899,543) (3,297,016)
------------ ------------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 9,157,271 9,689,121
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 8,257,728 6,392,105
============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
7
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
FORM 10-Q FOR MARCH 31, 2001
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: Basis of Presentation
The accompanying unaudited interim condensed 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 adjustments) considered
necessary for a fair presentation have been included.
The results of operations for the periods 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 March 31, 2001, all
of the RRP, RSP and SCP shares have been purchased and awarded. The Bank is
amortizing the RRP, RSP and SCP expense over each participant's vesting period.
The Company recognized $368,611 of expense under these stock award plans for the
nine month period ended March 31, 2001. The SOP, 1998 SOP and 2000 SCP
authorized stock options on shares to be issued to officers and employees of the
Bank. As of March 31, 2001 all options except those on 34,023 shares have been
granted. The RRP, RSP, SOP,1998 SOP and 2000 SCP vest over a five year period.
As of March 31, 2001, there were 557,617 unexercised options that have been
granted at prices ranging from $5.83 to $13.44 per share and 119,142 RRP, RSP
and 2000 SCP shares were unvested.
8
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
FORM 10-Q FOR MARCH 31, 2001
Note 4: Earnings Per Share
<TABLE>
<CAPTION>
For three months ended March 31, 2001 For nine months ended March 31, 2001
------------------------------------- -------------------------------------
Income Shares Per-share Income Shares Per-share
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Income available to common stockholders $ 696,125 3,980,180 $ 0.17 $ 2,456,750 4,218,857 $ 0.58
======= =======
Effect of Dilutive Securities
Stock Options - 53,324 - 44,368
---------- --------- ---------
Income available to common stockholders $ 696,125 4,033,504 $ 0.17 $ 2,456,750 4,263,225 $ 0.58
========== ========= ======= =========== ========= ======
</TABLE>
<TABLE>
<CAPTION>
For three months ended March 31, 2001 For nine months ended March 31, 2001
------------------------------------- -------------------------------------
Income Shares Per-share Income Shares Per-share
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Income available to common stockholders $ 898,338 4,928,861 $ 0.18 $ 2,559,955 5,076,310 $ 0.51
======= =======
Effect of Dilutive Securities
Stock Options - 46,827 - 52,127
---------- --------- ----------- ---------
Income available to common stockholders $ 898,338 4,975,688 $ 0.18 $ 2,559,955 5,128,437 $ 0.51
========== ========= ======= =========== ========= ======
</TABLE>
Options to purchase 5,000, 8,000 and 393,226 shares of common stock at
$12.63, $12.75 and $13.44 per share, respectively, outstanding during the three
months ended March 31, 2001, 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. Options to purchase 10,000, 16,704, 5,000, 8,000 and 393,226
shares of common stock at $12.00, $12.25, $12.63, $12.75 and $13.44 per share,
respectively, outstanding during the nine months ended March 31, 2001, 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 condensed 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
March 31, 2001 and June 30, 2000, and the results of operations for the nine
months ended March 31, 2001 and 2000.
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 not limited to: changes in demand for banking
services; changes in portfolio composition; performance of loans; changes in
management strategy; increased competition from both bank and non-bank
companies; and changes in the general level of interest rates.
9
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
FORM 10-Q FOR MARCH 31, 2001
Financial Condition
The Company's total assets increased $33,548,869 (10%) from $341,856,384 as
of June 30, 2000, to $375,405,253 as of March 3, 2001.
Interest-bearing deposits in other financial institutions decreased
$1,184,563 (16%) from $7,250,514 as of June 30, 2000, to $6,065,951 as of March
31, 2001, as the funds were used to fund new loans.
Securities available-for-sale increased $5,852,328 (43%) from $13,645,307
as of June 30, 2000, to $19,497,635 as of March 31, 2001. This is primarily due
to purchases of $4,000,000 of investment securities and the increase in fair
value of various equity securities. The Bank continues to hold 94,000 shares of
Federal Home Loan Mortgage Corporation ("FHLMC") stock with an amortized cost of
$92,042 in the available-for-sale category. As of March 31, 2001, the gross
unrealized gain on the stock was $6,001,978, an increase from $3,794,000 as of
June 30, 2000.
Securities held-to-maturity decreased due to maturities and principal
repayments, by $1,687,029 (25%) from $6,768,672 as of June 30, 2000, to
$5,081,643 as of March 31, 2001.
Net loans receivable increased by $22,367,449 (8%) from $295,057,753 as of
June 30, 2000, to $317,425,202 as of March 31, 2001. During this period the
Bank has hired three experienced commercial loan officers and increased its
emphasis on commercial lending. As a result commercial loans have increased by
$18,105,401 during this period. In addition the Bank has begun selling
conforming loans on single family residences, while retaining the servicing
rights. As a result permanent mortgage loans secured by both owner and non-
owner occupied residential real estate decreased by $756,294, while loans held
for sale increased by $4,450,180. The Bank continued to be active in
construction lending. During the period construction loans increased by
$9,386,221. Loan growth is anticipated to continue and represents a major part
of the Bank's planned asset growth.
Allowance for loan losses increased $213,309 (8%) from $2,519,946 as of
June 30, 2000 to $2,733,255 as of March 31, 2001. 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 March 31, 2001 and June 30, 2000 was 0.85%
respectively, of net loans outstanding. As of March 31, 2001, the allowance for
loan losses was 33% of impaired loans versus 53% as of June 30, 2000.
Premises and equipment increased $982,508 (14%) from $6,800,198 as of June
30, 2000 to $7,782,706 as of March 31, 2001. The increase is due to the
additions related to the Company's new branch office.
Deposits increased $3,201,083 (2%) from $144,607,238 as of June 30, 2000,
to $147,808,321 as of March 31, 2001. For the nine months ended March 31, 2001,
checking and savings accounts increased by $2,764,650 (5%) while certificates of
deposits increased by $436,433 (0.5%).
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 $33,326,223 (24%) from $136,507,147 as of June 30, 2000, to
$169,833,370 as of March 31, 2001. As of March 31, 2001, the Bank had the
ability to borrow an additional $14.1 million from the FHLB.
Advances from borrowers for taxes and insurance decreased $431,653 (31%)
from $1,384,231 of June 30, 2000, to $952,578 as of March 31, 2001. This
decrease was primarily due to the payment of 2000 real estate taxes from
borrower's escrow accounts.
Accrued expenses and other liabilities increased $2,268,767 (274%) from
$828,709 as of June 30, 2000, to $3,097,476 as of March 31, 2001 primarily due
to changes in procedure regarding the issuance of Bank accounts payable checks
and receipt of customer down payments on loans in process. These changes were
the result of operational changes from the Company's conversion from a service
bureau to an in-house computer system in September 2000. Prior to conversion,
accounts payable checks were issued and deducted from the FHLB demand account
(and included as a part of cash and cash equivalents) and customer down
payments received on loans were
10
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
FORM 10-Q FOR MARCH 31, 2001
classified as a liability. Subsequent to conversion, accounts payable checks are
drawn on a separate deposit account of the Bank and recorded as a liability
while outstanding and customer down payments are included in loans in process,
as a part of loans receivable, net. In addition, there were $936,691 ($0.24 per
share) of dividends declared but unpaid as of March 31, 2001.
Stockholders' equity (including unrealized appreciation on securities
available-for-sale, net of tax) decreased $6,298,454 (11%) from $56,585,390 as
of June 30, 2000, to $50,286,936 as of March 31, 2001. This decrease was due to
several factors. During this period the Company repurchased a total of 704,564
of its outstanding shares in the open market at a cost of $8,688,289 ($12.33 per
share). In addition, dividends in the amount of $999,710 ($0.23 per share) were
declared and paid, on October 15, 2000, to stockholders of record as of
September 5, 2000 and $936,691 ($0.24 per share) were declared and paid on April
12, 2001, to stockholders of record as of March 28,2001. There was an increase
in the unrealized appreciation on available-for-sale securities of $1,288,128.
On a per share basis, excluding unearned ESOP shares, stockholders' equity
increased from $12.36 as of June 30, 2000 to $12.87 as of March 31, 2001.
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.
11
<PAGE>
GUARANTY FEDERAL BANCHSARES, INC.
FORM 10-Q FOR MARCH 31, 2001
<TABLE>
<CAPTION>
Three Months ended 3/31/2001 Three Months ended 3/31/2000
---------------------------- ----------------------------
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning:
Loans $ 309,963 6,318 8.15% $282,841 5,679 8.03%
Investment securities 17,227 306 7.11% 11,970 218 7.28%
Other assets 16,575 204 4.92% 13,011 155 4.77%
--------- ----- ---- -------- ----- ----
Total interest-earning 343,765 6,828 7.94% 307,822 6,052 7.86%
Noninterest-earning 7,531 7,427
--------- --------
$ 351,296 $315,249
--------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing:
Savings accounts $ 7,654 49 2.56% $ 8,362 51 2.44%
Transaction accounts 38,323 289 3.02% 35,219 269 3.06%
Certificates of Deposit 89,442 1,301 5.82% 94,632 1,229 5.19%
FHLB Advances 159,711 2,550 6.39% 113,798 1,752 6.16%
Other borrowed funds 358 6 6.70% - - 0.00%
--------- ----- ---- -------- ----- ----
Total interest-bearing 295,488 4,195 5.68% 252,011 3,301 5.24%
Noninterest-bearing 4,003 3,027
--------- --------
Total liabilities 299,491 255,038
Stockholders' equity 51,805 60,211
--------- --------
$ 351,296 $315,249
========= ========
Net earning balance $ 48,277 $ 55,811
========= ========
Earning yield less costing rate 2.27% 2.62%
==== ====
Net interest income, and net yield spread
on interest earning assets $ 2,633 3.06% $ 2,751 3.57%
======== ==== ======= ====
Ratio of interest-earning assets to
interest-bearing liabilities 116% 122%
=== ===
</TABLE>
12
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
FORM 10-Q FOR MARCH 31, 2001
<TABLE>
<CAPTION>
Nine Months ended 3/31/2001 Nine Months ended 3/31/2000
----------------------------- ------------------------------
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ------ ------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning:
Loans $305,626 18,656 8.14% $278,163 16,241 7.78%
Investment securities 15,822 876 7.38% 12,307 630 6.83%
Other assets 16,440 711 5.77% 14,276 475 4.44%
-------- ------- ------ -------- ------- -----
Total interest-earning 337,888 20,243 7.99% 304,746 17,346 7.59%
Noninterest-earning 8,572 7,794
-------- --------
$346,460 $312,540
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing:
Savings accounts $ 7,767 159 2.73% $ 8,420 148 2.34%
Transaction accounts 37,914 889 3.13% 34,843 752 2.88%
Certificates of Deposit 89,628 3,911 5.82% 95,057 3,660 5.13%
FHLB Advances 153,293 7,191 6.25% 109,430 4,847 5.91%
Other Borrowed Funds 179 6 4.47% - - 0.00%
-------- ------- ----- ------- ----- -----
Total interest-bearing 288,781 12,156 5.61% 247,750 9,407 5.06%
Noninterest-bearing 4,525 3,859
-------- -------
Total liabilities 293,306 251,609
Stockholders' equity 53,154 60,931
-------- --------
$346,460 $312,540
======== ========
Net earning balance $ 49,107 $ 56,996
======== ========
Earning yield less costing rate 2.38% 2.53%
==== ====
Net interest income, and net yield spread
on interest earning assets $ 8,087 3.19% $ 7,939 3.47%
======== ==== ======= ====
Ratio of interest-earning assets to
interest-bearing liabilities 117% 123%
=== ===
</TABLE>
Results of Operations - Comparison of Three Month and Nine Month Periods Ended
March 31, 2001 and 2000.
Net income for the three months and nine months ended March 31, 2001 was
$696,125 and $2,456,750 as compared to $898,338 and $2,599,955 for the three
months and nine months ended March 31, 2000 which represents an decrease in
earnings of $202,213 or 23% for the three month period, and an decrease in
earnings of $143,205 or 6% for the nine month period. The decrease in net income
for the three months and nine months ended can be attributed to several factors
which are discussed below.
Interest Income
---------------
Total interest income for the three months and nine months ended March 31,
2001, increased $776,867 or 13% and $2,897,610 or 17% as compared to the three
months and nine months ended March 31, 2000. For the three month and nine
month periods ended March 31, 2001 compared to the same periods in 2000, the
average yield on interest earning assets increased 8 basis points to 7.94% and
40 basis points to 7.99% while the average balance of interest earnings assets
increased $35,943,000 and $33,142,000 respectively. Nonperforming assets (non-
accrual loans) were $8,259,000 as of March 31,2001 compared to $1,126,000 as of
March 31, 2000. This resulted in a reduction in interest income of $159,000 and
$264,000 for the three and nine months ended March 31, 2001, respectively.
13
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
FORM 10-Q FOR MARCH 31, 2001
Interest Expense
----------------
Total interest expense for the three months and nine months ended March 31,
2001, increased $894,514 or 27% and $2,749,663 or 29% when compared to the
three months and nine months ended March 31, 2000. For the three month and nine
month periods ended March 31, 2001 compared to the same periods in 2000, the
average cost of interest bearing liabilities increased 44 basis points to 5.68%
and 55 basis points to 5.61% while the average balance increased $43,477,000 and
$41,031,000 respectively.
Net Interest Income
-------------------
Net interest income for the three months ended March 31, 2001, decreased
$117,647, or 4% and increased $147,947, or 2% for the nine months ended March
31, 2001, when compared to the same period in 2000. The yield on interest
earning assets minus the cost on interest bearing liabilities decreased by 36
basis points, to 2.26% and 15 basis points to 2.38% for the three months and
nine months ended March 31, 2001, respectively, when compared to the same
periods one year ago.
Provision for Loan Losses
-------------------------
Based on the continued growth of the loan portfolio, the increase in non-
accrual loans and the increased emphasis on commercial lending, management
decided to increase the allowance for loan losses through a provision for loan
losses of $115,000 and $215,000 for the three months and nine months ended March
31, 2001, respectively, compared to $45,000 and $135,000 for the same periods in
2000. 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 $204,050, or 61% and $499,899, or 50% for the
three months and nine months ended March 31, 2001, when compared to the three
months and nine months ended March 31, 2000. For the three and nine month
periods, the gain on sale of loans and investment securities increased $149,896
and $306,503 respectively, when compared to the same period in 2000. The gain on
sale of loans is the result of mortgage banking activities related to the sale
of single family conforming residential loans. The gain on sale of investments
is the result of the sale of 2,000 shares of FHLMC stock during the nine month
period. In addition, for the three and nine month periods, checking account
service charges increased $26,694 or 11% and $101,015 or 12% respectively,
compared to the same periods in 2000. Gains on sale of premises and equipment,
included in other income for the nine months ended March 31, 2001 increased
$67,041 or 104%, respectively, when compared to the same period in 2000.
Noninterest Expense
-------------------
Noninterest expense increased $360,632, or 22% for the three months ended
March 31, 2001, and increased $834,896 or 18% for the nine month period ending
March 31, 2001 when compared to the three months and nine months ended March 31,
2000. This increase is primarily attributed to the Company's expansion of the
commercial loan department, the conversion from a service bureau to an in-house
computer system and the overall increase in accounts served.
Provision for Income Taxes
--------------------------
There was a $142,016 and $123,845 decrease in the provision for income
taxes for the three months and nine months ended March 31, 2001, as compared to
the same period in 2000. This decrease was due to the decrease in before tax
income for the three months and nine months ended March 31, 2001, compared to
the same periods in 2000.
14
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
FORM 10-Q FOR MARCH 31, 2001
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 March 31,
2001, was $2,733,255 or 0.8% of loans receivable. Total assets classified as
substandard or loss as of March 31, 2001, were $9,026,247 or 2.4% of total
assets. Substandard loans at March 31, 2001 include nonaccrual loans to four
borrowers totaling $7.9 million as follows:
o The Bank has a 75% participation interest in a loan secured by three motels
with a principal balance of $3.0 million. Subsequent to March 31, 2001 the
Bank and participant accepted a deed-in-lieu of foreclosure from the
borrower.
o The Bank has loans with principal balances totaling $3.7 million to a
builder who has had difficulty making monthly interest payments. Only one
of the collateral properties has a tenant making lease payments. Payment of
principal and interest of $2.6 million is contingent on the profitable
liquidation of the collateral.
o The Bank has loans with principal balances totaling $0.8 million to a
borrower secured by multi-family properties. These properties have not
historically generated sufficient cash flow to properly maintain the
properties and service the debt. Subsequent to March 31, 2001 one of the
collateral buildings was destroyed by fire. The Bank believes insurance
proceeds will be sufficient to restore the collateral.
o The Bank has loans with principal balances totaling $0.4 million to a
builder who has sold a house under a contract for deed. The purchaser has
been unable to perform under the contract and the builder has been unable
to make payments to the Bank.
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.
<TABLE>
<CAPTION>
3/31/01 6/30/00 6/30/99
------- ------- -------
<S> <C> <C> <C>
Nonperforming loans $8,259 4,757 906
Real estate acquired in settlement of loans -- 2 101
------- ------- -------
Total nonperforming assets $8,259 4,759 1,007
======= ======= =======
Total nonperforming assets as a percentage
of total assets 2.20% 1.39% 0.32%
Allowance for loan losses $2,733 2,520 2,349
Allowance for loan losses as a percentage
of average net loans 0.89% 0.89% 1.00%
</TABLE>
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
15
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
FORM 10-Q FOR MARCH 31, 2001
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 and March 31, 2001, ARMs constituted 62% and 63% of the Bank's loan
portfolio, respectively. Of the ARMs originated during fiscal year 2001,
borrowers preferred initial fixed rate periods of three or five years.
The Bank is also managing interest rate risk by the origination of
construction loans. As of March 31, 2001, such loans made up 10% 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 March 31, 2001, these accounts
totaled $55,863,128 or 38% 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 December 31, 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.
<TABLE>
<CAPTION>
Estimated Net Portfolio Value NPV as % of PV of Assets
BP Change ---------------------------------------------- -------------------------
in Rates $ Amount $ Change % Change NPV Ratio Change
-------- -------- --------- -------- --------- ------
<S> <C> <C> <C> <C> <C>
+300 $ 53,902 $ (1,975) -4% 15.72% 0.24%
+200 55,495 (382) -1% 15.88% 0.40%
+100 56,201 324 1% 15.81% 0.33%
NC 55,877 15.48%
-100 54,190 (1,687) -3% 14.82% -0.66%
-200 51,361 (4,516) -8% 13.89% -1.59%
-300 48,861 (7,016) -13% 13.04% -2.44%
</TABLE>
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 unchanged or decrease in
the future. Further, in the event of a change in interest rates, prepayment and
early
16
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
FORM 10-Q FOR MARCH 31, 2001
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-term borrowings. As of March 31,
2001, the Bank's liquidity ratio was 8.0% 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 March 31, 2001,
the Bank had approximately $3,880,000 in commitments to originate mortgage loans
and $20,871,000 in loans-in-process on mortgage loans. These commitments will
be funded through existing cash balances, cash flow from operations and, if
required, brokered deposits .
Due to the anticipated shift in the loan portfolio from conforming single
family loans to commercial real estate and other commercial loans, the Bank
anticipates shifting funding from FHLB advances to brokered deposits. These
deposits generally have an all-inclusive cost greater than advances, but will
allow the Bank to originate higher yielding loans.
17
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
FORM 10-Q FOR MARCH 31, 2001
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
None
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
10.6 2000 Stock Compensation Plan
27 Financial Data Schedule (Filed Herewith.)
b) Reports on Form 8-K
None.
18
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
FORM 10-Q FOR MARCH 31, 2001
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 May 8, 2001
---------------------- -----------
James E. Haseltine
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Bruce Winston May 8, 2001
----------------- -----------
Bruce Winston
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
19
</TEXT>
</DOCUMENT>