-----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, QwtkuvVAsVUpwnI9JuSKYj0orziF7FtPADbm6uIcBRUEHWpWj2RkUxHMi2Tni6BM kOaoYffJQlzCNnOv3Y1tGA== 0000928385-01-502408.txt : 20020410 0000928385-01-502408.hdr.sgml : 20020410 ACCESSION NUMBER: 0000928385-01-502408 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GUARANTY FEDERAL BANCSHARES INC CENTRAL INDEX KEY: 0001046203 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 431792717 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-23325 FILM NUMBER: 1782794 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 d10q.txt FORM 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, 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 November 9, 2001 ----- ------------------------------- Common Stock, Par Value $0.10 4,061,369 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 Flows 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, 2001 PART I Item 1. Financial Statements - ---------------------------- GUARANTY FEDERAL BANCSHARES, INC. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION SEPTEMBER 30, 2001 (UNAUDITED AND JUNE 30, 2001 9/30/2001 6/30/2001 ------------ ------------ ASSETS Cash $ 2,892,018 2,665,287 Interest-bearing deposits in other financial institutions 6,283,250 7,648,271 ------------ ------------ Cash and cash equivalents 9,175,268 10,313,558 Available-for-sale securities 20,945,062 19,447,892 Held-to-maturity securities 4,118,521 4,545,866 Stock in Federal Home Loan Bank, at cost 4,528,093 2,862,793 Mortgage loans held for sale Loans receivable, net of allowance for loan losses; 9/30/2001 - $2,772,389; 6/30/2001 - $2,697,389 322,096,438 317,243,111 Accrued interest receivable: Loans 1,843,736 1,940,922 Investments 139,170 207,831 Prepaid expenses and other assets 1,498,186 1,168,750 Foreclosed assets held for sale -- 4,200 Premises and equipment 7,583,550 7,758,082 ------------ ------------ $380,528,424 374,093,405 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits $179,846,691 170,647,500 Federal Home Loan Bank advances 140,400,954 146,656,583 Securities sold under agreements to repurchase 2,673,948 1,264,448 Advances from borrowers for taxes and insurance 1,686,421 1,293,062 Accrued expenses and other liabilities 2,883,475 1,344,804 Accrued interest payable 1,103,140 950,674 Income taxes payable 608,263 121,725 Deferred income taxes 1,406,693 1,608,818 ------------ ------------ 330,609,585 323,887,614 ------------ ------------ STOCKHOLDERS' EQUITY Common Stock: $0.10 par value; authorized 10,000,000 shares; issued; 9/30/2001 - 6,294,033 shares, 6/30/2001 - 6,268,394 shares 629,404 626,840 Additional paid-in capital 48,740,545 48,451,515 Unearned ESOP shares (2,583,390) (2,640,800) Retained earnings, subtantially restricted 25,970,547 25,951,537 Accumulated other comprehensive income Unrealized appreciation on available- for-sale securities, net of income taxes; 9/30/2001 - $2,054,447, 6/30/2001 - $2,318,786 3,498,112 3,948,203 ------------ ------------ 76,255,218 76,337,295 Treasury stock, at cost; 9/30/2001 - 2,218,100 shares, 6/30/2001 - 2,200,950 shares (26,336,379) (26,131,504) ------------ ------------ 49,918,839 50,205,791 ------------ ------------ $380,528,424 374,093,405 ============ ============ See Notes to Condensed Consolidated Financial Statements 3 Guaranty Federal Bancshares, Inc. Form 10-Q for September 30, 2001 GUARANTY FEDERAL BANCSHARES, INC. CONSOLIDATED STATEMENTS OF INCOME THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED 9/30/01 9/30/00 ------------ ------------ INTEREST INCOME Loans $ 6,360,382 5,968,170 Investment securities 193,725 293,749 Other 187,369 275,868 ------------ ------------ Total Interest Income 6,741,476 6,537,787 ------------ ------------ INTEREST EXPENSE Deposits 1,807,373 1,629,321 Federal Home Loan Bank advances 2,133,283 2,216,867 Other 12,188 -- ------------ ------------ Total Interest Expense 3,952,844 3,846,188 ------------ ------------ Net Interest Income 2,788,632 2,691,599 Provision for Loan Losses 75,000 30,000 Net Interest Income after Provision for Loan Losses 2,713,632 2,661,599 ------------ ------------ NONINTEREST INCOME Service charges 353,025 307,765 Late charges and other fees 29,018 58,239 Gain on loans and investments securities 342,498 42,953 Income on foreclosed assets -- 280 Other income 65,195 30,669 ------------ ------------ Total Noninterest Income 789,736 439,906 ------------ ------------ NONINTEREST EXPENSE Salaries and employee benefits 1,081,705 937,243 Occupancy 277,826 212,340 SAIF deposit insurance premiums 6,956 7,661 Data processing fees 174,929 126,553 Advertising 78,412 99,013 Other expense 386,463 355,802 ------------ ------------ Total Noninterest Expense 2,006,291 1,738,612 ------------ ------------ Income Before Income Taxes 1,497,077 1,362,893 Provision for Income Taxes 527,997 499,458 ------------ ------------ NET INCOME 969,080 863,435 OTHER COMPREHENSIVE INCOME (LOSS) Unrealized appreciation (depreciation) on available-for-sale securities, net of income taxes of ($264,339) and $378,204 for 2001 and 2000, respectively (450,091) 643,971 ------------ ------------ COMPREHENSIVE INCOME $ 518,989 1,507,406 ============ ============ BASIC EARNINGS PER SHARE $ 0.25 0.19 ============ ============ DILUTED EARNINGS PER SHARE $ 0.25 0.19 ============ ============ See Notes to Condensed Consolidated Financial Statements 4 Guaranty Federal Bancshares, Inc. Form 10-Q for September 30, 2001 GUARANTY FEDERAL BANCSHARES, INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY THREE MONTHS ENDED SEPTEMBER 30, 2001 (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, July 1, 2001 $ 626,840 48,451,515 (2,640,800) 25,951,537 3,948,203 (26,131,504) 50,205,791 Net income -- -- -- 969,080 -- -- 969,080 Dividends on common stock, ($0.25 per share on 3,800,279 shares) -- -- -- (950,070) -- -- (950,070) Recognition and Retention Plan (RRP) & Restricted Stock Plan (RSP): RRP and RSP expense -- 123,560 -- -- -- -- 123,560 Tax liability of RRP & RSP shares -- (21,649) -- -- -- -- (21,649) Stock options exercised 2,564 169,962 -- -- -- -- 172,526 Release of ESOP shares -- 17,157 57,410 -- -- -- 74,567 Treasury stock purchased -- -- -- -- -- (204,875) (204,875) Change in unrealized appreciation on available- for-sale securities, net of income taxes of ($264,339) -- -- -- -- (450,091) -- (450,091) --------- ----------- ----------- ------------ ------------ ------------ ----------- Balance, September 30, 2001 $ 626,404 48,740,545 (2,583,390) 25,970,547 3,498,112 (26,336,379) 49,918,839 ========= =========== =========== ============ ============ ============ ===========
See Notes to Condensed Consolidated Financial Statements 5 Guaranty Federal Bancshares, Inc. Form 10-Q for September 30, 2001 GUARANTY FEDERAL BANCSHARES, INC. CONSOLIDATED STATEMENT 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, July 1, 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 securities, 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 Financial Statements 6 Guaranty Federal Bancshares, Inc. Form 10-Q for September 30, 2001 GUARANTY FEDERAL BANCSHARES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED) 9/30/01 9/30/00 ------------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 969,080 863,435 Items not requiring (providing) cash: Deferred income taxes 62,214 109,821 Depreciation 222,877 130,233 Provision for loan losses 75,000 30,000 Gain on loans and investments securities (342,498) (42,953) Loss on sale of foreclosed assets -- 1,070 Amortization of deferred income, premiums and discounts (27,823) (2,338) RRP/RSP expense 123,560 133,936 Origination of loans held for sale (13,539,408) (4,757,435) Proceeds from sale of loans held for sale 12,054,893 4,521,189 Release of ESOP shares 74,567 65,006 Changes in: Accrued interest receivable 165,847 (122,990) Prepaid expenses and other assets (329,436) (475,813) Accounts payable and accrued expenses 741,067 343,379 Income taxes payable 464,889 484,368 ------------ ----------- Net cash provided by operating activities 714,829 1,280,908 ------------ ----------- CASH FLOWS FROM INVESTING ACTIVITIES Net increase in loans (4,928,695) (4,372,613) Principal payments on available-for-sale securities 495,196 21,000 Principal payments on held-to-maturity securities 423,340 355,750 Maturities on available-for-sale securities 2,000,000 -- Purchase of premises and equipment (48,345) (578,360) Purchase of available-for-sale securities (4,915,229) (2,000,000) Proceeds from sale of available-for-sale securities 402,342 118,868 Purchase of FHLB stock -- (525,000) Proceeds from sale of foreclosed assets 4,200 555 ------------ ----------- Net cash used in investing activities (6,567,191) (6,979,800) ------------ ----------- CASH FLOWS FROM FINANCING ACTIVITIES Stock options exercised 172,526 13,003 Net increase (decrease) in demand deposits, NOW accounts and savings accounts 4,942,036 (2,765,009) Net increase (decrease) in certificates of deposit and securities sold under agreements to repurchase 5,666,655 (1,621,332) Proceeds from FHLB advances 24,500,000 24,000,000 Repayments of FHLB advances (30,755,629) (12,500,357) Advances from borrowers for taxes and insurance 393,359 447,137 Treasury stock purchased (204,875) (2,683,962) ------------ ----------- Net cash provided by financing activities 4,714,072 4,889,480 ------------ ----------- DECREASE IN CASH AND CASH EQUIVALENTS (1,138,290) (809,412) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 10,313,558 9,157,271 ------------ ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 9,175,268 8,347,859 ============ =========== See Notes to Condensed Consolidated Financial Statements 7 Guaranty Federal Bancshares, Inc. Form 10-Q for September 30, 2001 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 2001 filed with the Securities and Exchange Commission. The condensed consolidated balance sheet of the Company as of June 30, 2001, 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 The Company has established four stock award plans for the benefit of certain directors, officers and employees of the Bank and its subsidiary. The plans provide a proprietary interest in the Company in a manner designed to encourage these individuals to remain with the Bank. A Committee of the Bank's Board of Directors administers the plans. The Company accounts for the cost of share purchases under the plans as a reduction of stockholders' equity. The awards vest at the rate of 20% per year over a five-year period. Compensation expense is recognized based on the Company's stock price on the date the shares are awarded to employees. 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. On March 22, 2001, the directors of the Company established the Stock Compensation Plan (the "2001 SCP") with both a stock award component and stock option component. As of September 30, 2001, all of the RRP,RSP and 2000 SCP shares have been purchased and all except 1,078 shares have been awarded. As of September 30, 2001, all of the 2001 SCP shares have been awarded, but have not yet been purchased. The Company is amortizing the RRP, RSP and SCP expense over each participant's vesting period. The Company recognized $123,560 of expense under these stock award plans for the three month period ended September 30, 2001. 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, 2001 all options except those on 28,533 shares have been granted. The RRP, RSP, SOP,1998 SOP and 2000 SCP vest over a five year period. As of September 30, 2001, there were 530,128 unexercised options that have been granted at prices ranging from $5.83 to $13.44 per share and 227,176 RRP, RSP and 2000 SCP shares were unvested. 8 Guaranty Federal Bancshares, Inc. Form 10-Q for September 30, 2001 Note 4: Earnings Per Share For three months ended September 30, 2001 ----------------------------------------- Average Income Available Shares to Stockholders Outstanding Per-share ---------------- ----------- --------- Basic Earnings per Share $ 969,080 3,807,070 $ 0.25 ========= Effect of Dilutive Securities: Stock Options 46,201 ---------- Diluted Earnings per Share $ 969,080 3,853,271 $ 0.25 ============ ========== ========= 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 ============ ========== ========= Options to purchase 357,645 shares of common stock at $13.44 per share, outstanding during the three months ended September 30, 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 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, 2001, and the results of operations for the three months ended September 30, 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 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, 2001 Financial Condition The Company's total assets increased $6,435,019 (2%) from $374,093,405 as of June 30, 2001, to $380,528,424 as of September 30, 2001. Interest-bearing deposits in other financial institutions decreased $1,365,021 (18%) from $7,648,271 as of June 30, 2001, to $6,283,250 as of September 30, 2001, as the funds were used to fund new loans. Securities available-for-sale increased $1,497,170 (8%) from $19,447,892 as of June 30, 2001, to $20,945,062 as of September 30, 2001. This is primarily due to purchases of $4,915,228 of investment securities, which was partially offset by the maturity of $2,000,000 in investment securities and the decrease in fair value of various equity securities. The Bank continues to hold 91,000 shares of Federal Home Loan Mortgage Corporation ("FHLMC") stock with an amortized cost of $89,105 in the available-for-sale category. As of September 30, 2001, the gross unrealized gain on the stock was $5,825,895, a decrease from $6,237,587 as of June 30, 2001. Securities held-to-maturity decreased due to principal repayments, by $427,345 (9%) from $4,545,866 as of June 30, 2001, to $4,118,521 as of September 30, 2001. Net loans receivable increased by $4,853,327 (2%) from $317,243,111 as of June 30, 2001, to $322,096,438 as of September 30, 2001. During this period the Bank continued its increased emphasis on commercial lending. As a result commercial loans have increased by $10,156,491 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 $7,914,952 while loans held for sale increased by $1,665,300. The Bank continued to be active in construction lending. However, during the period construction loans decreased by $6,619,933. Loan growth is anticipated to continue and represents a major part of the Bank's planned asset growth. Allowance for loan losses increased $75,000 (3%) from $2,697,389 as of June 30, 2001 to $2,772,389 as of September 30, 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 September 30, 2001 and June 30, 2001 was 0.86% and 0.85% respectively, of net loans outstanding. As of September 30, 2001, the allowance for loan losses was 68% of impaired loans versus 55% as of June 30, 2001. Premises and equipment decreased $174,532 (2%) from $7,758,082, as of June 30, 2001 to $7,583,550 as of September 30, 2001 primarily due to the depreciation recognized on these assets. Deposits increased $9,199,191 (5%) from $170,647,500 as of June 30, 2001, to $179,846,691 as of September 30, 2001. For the three months ended September 30, 2001, checking and savings accounts increased by $4,942,036 (8%) while certificates of deposits increased by $4,257,155 (4%). In order to comply with the Federal Home Loan Bank (the "FHLB") limitation of advances to 45% of assets, the Company decreased borrowings from the FHLB by $6,255,629 (4%) from $146,656,583 as of June 30, 2001, to $140,400,954 as of September 30, 2001. The FHLB has reduced this percentage of assets limitation to 43.75% for December 31, 2001. The Company plans to reduce its FHLB borrowings to a level that will provide a borrowing capacity sufficient to provide for contingencies. Advances from borrowers for taxes and insurance increased $393,359 (30%) from $1,293,062 of June 30, 2001, to $1,686,421 as of September 30, 2001. Accrued expenses and other liabilities increased $1,538,671 (114%) from $1,344,804 as of June 30, 2001, to $2,883,475 as of September 30, 2001. The majority of this increase is due to a $0.25 per share dividend payable to stockholders of record September 4, 2001, totaling $950,070. Stockholders' equity (including unrealized appreciation on securities available-for-sale, net of tax) decreased $286,952 (1%) from $50,205,791 as of June 30, 2001, to $49,918,839 as of September 30, 2001. This decrease was due to several factors. During this period the Company repurchased a total of 17,150 of its outstanding 10 Guaranty Federal Bancshares, Inc. Form 10-Q for September 30, 2001 shares in the open market at a cost of $204,875. In addition, dividends in the amount of $950,070 ($0.25 per share) were declared and paid, on October 15, 2001, to stockholders' of record as of September 4, 2001. There was a decrease in the unrealized appreciation on available-for-sale securities of $450,091. On a per share basis, stockholders' equity decreased from $13.20 as of June 30, 2001 to $13.08 as of September 30, 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 Guaranty Federal Bancshares, Inc. Form 10-Q for September 30, 2001
Three Months ended 9/30/2001 Three Months ended 9/30/2000 ------------------------------ ------------------------------ Average Yield/ Average Yield/ Balance Interest Cost Balance Interest Cost -------- -------- -------- -------- -------- ------- ASSETS Interest-earning: Loans $ 324,298 6,360 7.84% $ 297,971 5,968 8.01% Investment securities 15,535 194 5.00% 15,392 294 7.64% Other assets 23,357 187 3.20% 16,786 276 6.58% ---------- ------- ------ --------- ------- ------ Total interest-earning 363,190 6,741 7.42% 330,149 6,538 7.92% Noninterest-earning 13,084 7,697 ---------- --------- $ 376,274 $ 337,846 ========== ========= LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing: Savings accounts $ 7,428 38 2.05% $ 8,257 59 2.86% Transaction accounts 46,438 268 2.31% 37,380 296 3.17% Certificates of Deposit 113,852 1,502 5.28% 90,014 1,275 5.67% FHLB Advances 143,146 2,133 5.96% 141,355 2,217 6.27% Other Borrowed Funds $ 1,868 12 2.57% -- -- 0.00% ---------- ------- ------ --------- ------- ------ Total interest-bearing 312,732 3,953 5.06% 277,006 3,847 5.56% Noninterest-bearing 12,617 5,141 ---------- --------- Total liabilities 325,349 282,147 Stockholders' equity 50,925 55,699 ---------- --------- $ 376,274 $ 337,846 ========== ========= Net earning balance $ 50,458 $ 53,143 ========== ========= Earning yield less costing rate 2.36% 2.36% ==== ==== Net interest income, and net yield spread on interest earning assets $ 2,788 3.07% $ 2,691 3.26% ======= ==== ======= ==== Ratio of interest-earning assets to interest-bearing liabilities 116% 119% === ===
Results of Operations - Comparison of Three Month Periods Ended September 30, 2001 and 2000 Net income for the three months ended September 30, 2001 was $969,080 ($0.25 per share) as compared to $863,435 ($0.19 per share) for the three months ended September 30, 2000, which represents an increase in earnings of $105,645 for the three month period. Interest Income Total interest income for the three months ended September 30, 2001, increased $203,689 (3%) as compared to the three months ended September 30, 2000. For the three month period ended September 30, 2001 compared to the same period in 2000, the average yield on interest earning assets decreased 50 basis points to 7.42%, while the average balance of interest earnings assets increased $33,041,000. Interest Expense Total interest expense for the three months ended September 30, 2001, increased $94,468 (2%) when compared to the three months ended September 30, 2000. For the three month period ended September 30, 2001, the average cost of interest bearing liabilities decreased 50 basis points to 5.06% while the average balance increased $35,726,000 when compared to the same period in 2000. 12 Guaranty Federal Bancshares, Inc. Form 10-Q for September 30, 2001 Net Interest Income Net interest income for the three months ended September 30, 2001, increased $97,033 (4%) when compared to the same period in 2000. The average balance of interest bearing liabilities increased $2,685,000 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, 2001, the earning yield minus the costing rate spread remained constant at 2.36% compared to the same period in 2000. 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 $75,000 for the three months ended September 30, 2001, and of $30,000 for the same period 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 $349,830 (80%) for the three months ended September 30, 2001, when compared to the three months ended September 30, 2000. These increases were primarily due to an increase in gain on sale of loans and investments, of $299,545 (697%) for the three months. Noninterest Expense Noninterest expense increased $267,679 (15%) for the three months ended September 30, 2001, when compared to the three months ended September 30, 2000. This increase can be attributed to the Company's addition of a full service branch, the overall increase in accounts served, as well as increased staffing of the commercial loan department. Provision for Income Taxes The provision for income taxes increased $28,539 (6%) for the three months ended September 30, 2001, as compared to the same period in 2000. This increase was due to the increase in before tax income for the three months ended September 30, 2001, compared to the same period in 2000. 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, 2001, was $2,772,389 or 0.8% of loans receivable. Total assets classified as substandard or loss as of September 30, 2001, were $3,951,421 or 1.0% 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. 13 Guaranty Federal Bancshares, Inc. Form 10-Q for September 30, 2001 9/30/01 6/30/01 6/30/00 ----------- ------------ ----------- Nonperforming loans $ 4,048 4,948 4,757 Real estate acquired in settlement of loans -- 4 2 ---------- ----------- ---------- Total nonperforming assets $ 4,048 4,952 4,759 ========== =========== ========== Total nonperforming assets as a percentage of total assets 1.06% 1.32% 1.39% Allowance for loan losses $ 2,772 2,697 2,520 Allowance for loan losses as a percentage of average net loans 0.85% 0.87% 0.89% Item 3. Quantitative and Qualitative Disclosures about Market Risk 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, 2001, ARMs constituted 58% of the Bank's loan portfolio. As of September 30, 2001 ARMs represent 52% of the loan portfolio. Of the ARMs originated during fiscal year 2001, borrowers preferred initial fixed rate periods of three or five years. In response to this shift in customer preference, the Bank started a program of borrowing longer-term funds from the FHLB. Because of the historically low market rates for single-family mortgage loans, the Bank intends to sell new loan production on a service-retained basis in the secondary mortgage market. The will allow the Bank to serve the customer's needs and retain a banking relationship without the risk of carrying a long-term fixed- rate loan on the books. The Bank is also managing interest rate risk by the origination of construction loans. As of September 30, 2001, such loans made up 10.3% 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, 2001, the Bank's savings accounts, checking accounts, and money market deposit accounts totaled $58,644,912 or 34% of its total deposits. As of September 30, 2001, these accounts totaled $63,586,948 or 35% 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. 14 Guaranty Federal Bancshares, Inc. Form 10-Q for September 30, 2001 Interest Rate Sensitivity Analysis - ---------------------------------- The following table sets forth as of June 30, 2001 (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 $ 60,634 $ 982 2% 16.46% 1.00% +200 61,289 1,637 3% 16.37% 0.91% +100 61,110 1,458 2% 16.07% 0.61% NC 59,652 15.46% -100 56,394 (3,258) -5% 14.45% -1.01% -200 51,719 (7,933) -13% 13.12% -2.34% -300 46,274 (13,378) -22% 11.62% -3.84% 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. 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, 2001, the Bank had approximately $2,374,000 in commitments to originate mortgage loans and $18,475,692 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 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 24, 2001. At the meeting the stockholders elected Jack Barham, James Haseltine and Raymond Tripp to three-year terms as director of the Savings Bank, while Wayne Barnes, Ivy Rogers, Gary Lipscomb and Kurt Hellweg continue to serve as directors. Also at that meeting, BKD, LLP 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 - -------------------- --------- -------------- Jack Barham 2,592,356 814,178 James Haseltine 2,596,964 809,570 Raymond Tripp 2,599,464 807,070 Auditor ratification: Votes for 3,371,676 Votes against 25,838 Abstentions 9,020 Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K a) Exhibits None. b) Reports on Form 8-K None. 16 Guaranty Federal Bancshares, Inc. Form 10-Q for September 30, 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 November 9, 2001 ---------------------- ---------------- James E. Haseltine President and Chief Executive Officer (Principal Executive Officer) /s/ Bruce Winston November 9, 2001 ----------------- ---------------- Bruce Winston Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 17 -----END PRIVACY-ENHANCED MESSAGE-----