-----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, RXQhJmhv9w/QLakB2Bk/J81c1E83QcHsSB8gT9BVUhq/smGWIAeJ2BcAKM9PGGon auvJObgSur+OjbPWWfnBkQ== 0000928385-02-000337.txt : 20020414 0000928385-02-000337.hdr.sgml : 20020414 ACCESSION NUMBER: 0000928385-02-000337 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020211 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: 02533785 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 10-Q FOR 12/31/01 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 December 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 February 8, 2002 ----- ------------------------------- Common Stock, Par Value $0.10 4,041,970 Shares GUARANTY FEDERAL BANCSHARES, INC. Form 10-Q TABLE OF CONTENTS
Item Page PART I. Financial Information 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 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 14 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 December 31, 2001 PART I Item 1. Financial Statements - ---------------------------- GUARANTY FEDERAL BANCSHARES, INC. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION DECEMBER 31, 2001 (UNAUDITED) AND JUNE 30, 2001
12/31/01 6/30/2001 ------------- ------------ ASSETS Cash $ 3,349,326 2,665,287 Interest-bearing deposits in other financial institutions 22,519,978 7,648,271 ------------- ------------ Cash and cash equivalents 25,869,304 10,313,558 Available-for-sale securities 20,073,377 19,447,892 Held-to-maturity securities 3,784,471 4,545,866 Stock in Federal Home Loan Bank, at cost 8,600,400 8,600,400 Mortgage loans held for sale 8,008,683 2,862,793 Loans receivable, net of allowance for loan losses; 12/31/2001 - $2,594,919; 6/30/2001 - $2,697,389 330,410,773 317,243,111 Accrued interest receivable: Loans 1,699,428 1,940,922 Investments 131,924 207,831 Prepaid expenses and other assets 1,815,848 1,168,750 Foreclosed assets held for sale 41,329 4,200 Premises and equipment 7,698,603 7,758,082 ------------- ------------ $ 408,134,140 374,093,405 ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits $ 230,941,484 170,647,500 Federal Home Loan Bank advances 119,232,750 146,656,583 Securities sold under agreements to repurchase 2,193,845 1,264,448 Advances from borrowers for taxes and insurance 278,506 1,293,062 Accrued expenses and other liabilities 2,323,951 1,344,804 Accrued interest payable 1,070,645 950,674 Income taxes payable 259,396 121,725 Deferred income taxes 1,451,523 1,608,818 ------------- ------------ 357,752,100 323,887,614 ------------- ------------ STOCKHOLDER' EQUITY Common Stock: $0.10 par value; authorized 10,000,000 shares; issued; 12/31/2001 - 6,299,558 shares, 6/30/2001 - 6,268,394 shares 629,956 626,840 Additional paid-in capital 48,914,700 48,451,515 Unearned ESOP shares (2,525,980) (2,640,800) Retained earnings, substantially restricted 26,903,235 25,951,537 Accumulated other comprehensive income Unrealized appreciation on available-for-sale securities, net of income taxes; 12/31/2001 - $1,982,844, 6/30/2001 - $2,318,786 3,376,194 3,948,203 ------------- ------------ 77,298,105 76,337,295 Treasury stock, at cost; 12/31/2001 - 2,259,469 shares, 6/30/2001 - 2,200,950 shares (26,916,065) (26,131,504) ------------- ------------ 50,382,040 50,205,791 ------------- ------------ $ 408,134,140 374,093,405 ============= ============
See Notes to Condensed Consolidated Financial Statements 3 Guaranty Federal Bancshares, Inc. Form 10-Q for December 31, 2001 GUARANTY FEDERAL BANCSHARES, INC. CONSOLIDATED STATEMENTS OF INCOME THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31, 2001 AND 2000 (UNAUDITED)
Three months ended Six months ended ---------------------------- ---------------------------- 12/31/01 12/31/00 12/31/01 12/31/00 ------------ ---------- ------------ ----------- INTEREST INCOME Loans $ 6,159,625 6,369,992 $ 12,520,007 12,338,162 Investment securities 190,223 276,368 383,948 570,117 Other 146,759 230,493 334,128 506,361 ------------ ---------- ------------ ----------- Total Interest Income 6,496,607 6,876,853 13,238,083 13,414,640 ------------ ---------- ------------ ----------- INTEREST EXPENSE Deposits 1,816,039 1,690,533 3,623,412 3,319,854 Federal Home Loan Bank advances 1,854,978 2,424,211 3,988,261 4,641,078 Other 9,994 -- 22,182 -- ------------ ---------- ------------ ----------- Total Interest Expense 3,681,011 4,114,744 7,633,855 7,960,932 ------------ ---------- ------------ ----------- Net Interest Income 2,815,596 2,762,109 5,604,228 5,453,708 Provision for Loan Losses 75,000 70,000 150,000 100,000 ------------ ---------- ------------ ----------- Net Interest Income after Provision for Loan Losses 2,740,596 2,692,109 5,454,228 5,353,708 ------------ ---------- ------------ ----------- NONINTEREST INCOME Service charges 389,394 323,345 742,419 631,110 Late charges and other fees 29,949 50,877 58,967 109,116 Gain on loans and investment securities 542,354 111,805 884,852 154,758 Income (loss) on foreclosed assets 861 (905) 861 (625) Other income 55,957 36,972 121,152 67,641 ------------ ---------- ------------ ----------- Total Noninterest Income 1,018,515 522,094 1,808,251 962,000 ------------ ---------- ------------ ----------- NONINTEREST EXPENSE Salaries and employee benefits 1,145,672 979,518 2,227,377 1,916,761 Occupancy 338,255 245,081 616,081 457,421 SAIF deposit insurance premiums 10,409 7,416 17,365 15,077 Data processing fees 171,471 108,413 346,400 234,966 Advertising 107,171 112,701 185,583 211,714 Other expense 606,421 363,995 992,884 719,797 ------------ ---------- ------------ ----------- Total Noninterest Expense 2,379,399 1,817,124 4,385,690 3,555,736 ------------ ---------- ------------ ----------- Income Before Income Taxes 1,379,712 1,397,079 2,876,789 2,759,972 Provision for Income Taxes 447,024 499,889 975,021 999,347 ------------ ---------- ------------ ----------- NET INCOME 932,688 897,190 1,901,768 1,760,625 OTHER COMPREHENSIVE INCOME (LOSS) Unrealized appreciation (depreciation) on available-for-sale securities, net of income taxes of ($71,603), $481,021, ($335,942) and $859,226, respectively (121,918) 819,035 (572,009) 1,463,006 ------------ ---------- ------------ ----------- COMPREHENSIVE INCOME 810,770 1,716,225 $ 1,329,759 3,223,631 ============ ========== ============ =========== BASIC EARNINGS PER SHARE $ 0.25 0.21 $ 0.50 0.41 ============ ========== ============ =========== DILUTED EARNINGS PER SHARE $ 0.24 0.21 $ 0.49 0.40 ============ ========== ============ ===========
See Notes to Condensed Consolidated Financial Statements 4 Guaranty Federal Bancshares, Inc. Form 10-Q for December 31, 2001 GUARANTY FEDERAL BANCSHARES, INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY SIX MONTHS ENDED DECEMBER 31, 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 - - - 1,901,768 - - 1,901,768 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 - 218,328 - - - - 218,328 Tax liability of RRP & RSP shares - (20,217) - - - - (20,217) Stock options exercised 3,116 224,270 - - - - 227,386 Dividends on RRP stock - 1,647 - - - - 1,647 Release of ESOP shares - 39,157 114,820 - - - 153,977 Treasury stock purchased - - - - - (784,561) (784,561) Change in unrealized appreciation on available-for-sale securitites, net of income taxes of ($335,942) - - - - (572,009) - (572,009) --------- ---------- --------- ---------- -------------- ----------- ---------- Balance, December 31, 2001 $ 629,956 48,914,700 (2,525,980) 26,903,235 3,376,194 (26,916,065) 50,382,040 ========= ========== ========= ========== ============== =========== ==========
See Notes to Condensed Consolidated Financial Statements 5 Guaranty Federal Bancshares, Inc. Form 10-Q for December 31, 2001 GUARANTY FEDERAL BANCSHARES, INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY SIX MONTHS ENDED DECEMBER 31, 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 - - - 1,760,625 - - 1,760,625 Dividends on common stock, ($0.23 per share on 4,346,561 shares) - - - (999,710) - - (999,710) Recognition and Retention Plan (RRP) & Restricted Stock Plan (RSP): RRP and RSP expense - 245,686 - - - - 245,686 Tax liability of RRP & RSP - (2,010) - - - - (2,010) shares Stock options exercised 661 39,143 - - - - 39,804 Dividends on RRP stock - 4,525 - - - - 4,525 Stock purchased for 2000 stock awards - (85,945) - - - - (85,945) Release of ESOP shares - 15,086 116,667 - - - 131,753 Treasury stock purchased - - - - - (6,008,353) (6,008,353) Change in unrealized appreciation on available-for-sale securitites, net of income taxes of $859,226 - - - - 1,463,006 - 1,463,006 --------- ---------- ----------- ---------- ------------------ ------------ ---------- Balance, December 31, 2000 $ 625,665 48,138,166 (2,753,773) 25,415,880 3,861,953 (22,153,120) 53,134,771 ========= ========== =========== ========== ================== ============ ==========
See Notes to Condensed Consolidated Financial Statements 6 Guaranty Federal Bancshares, Inc. Form 10-Q for December 31, 2001 GUARANTY FEDERAL BANCSHARES, INC CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED DECEMBER 31, 2001 AND 2000 (UNAUDITED)
12/31/01 12/31/00 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 1,901,768 1,760,625 Items not requiring (providing) cash: Deferred income taxes 178,647 173,827 Depreciation 435,342 278,923 Provision for loan losses 150,000 100,000 Gain on loans and investment securities (884,852) (154,758) Gain on sale of premises and equipment - (3,415) (Gain) loss on sale of foreclosed assets (1,140) 1,070 Amortization of deferred income, premiums and discounts (17,280) (53,090) RRP/RSP expense 218,328 245,686 Origination of loans held for sale (37,624,182) (9,203,585) Proceeds from sale of loans held for sale 32,996,233 9,653,005 Release of ESOP shares 153,977 131,753 Changes in: Accrued interest receivable 395,589 (356,771) Prepaid expenses and other assets (627,993) (316,215) Accounts payable and accrued expenses 914,692 772,564 Income taxes payable 117,454 220,327 ------------ ------------ Net cash provided by (used in) operating activities (1,693,417) 3,249,946 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Net decrease (increase) in loans 2,133,129 (14,125,015) Principal payments on available-for-sale securities 1,216,091 15,406 Principal payments on held-to-maturity securities 756,495 1,272,461 Purchase of premises and equipment (182,095) (1,428,998) Proceeds from sale of premises and equipment - 5,622 Purchase of available-for-sale securities (6,415,229) (2,031,313) Proceeds from sale of available-for-sale securities 2,109,541 210,919 Proceeds from maturities of available-for-sale securities 2,000,000 - Purchase of FHLB stock - (1,049,600) Proceeds from sale of foreclosed assets 11,491 555 Cash acquired in purchase of Commercial Federal Bank branches 25,556,972 - ------------ ------------ Net cash provided by (used in) investing activities 27,186,395 (17,129,963) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Stock options exercised 227,386 39,804 Cash dividends paid (950,070) (999,710) Cash dividends received on RRP stock 1,647 4,525 Net increase in demand deposits, NOW accounts and savings accounts 9,202,636 221,327 Net increase (decrease) in certificates of deposit 10,804,119 (2,133,837) Proceeds from FHLB advances 46,500,000 43,000,000 Repayments of FHLB advances (73,923,833) (21,008,246) Advances from borrowers for taxes and insurance (1,014,556) (877,221) Stock purchased for stock awards - (85,945) Treasury stock purchased (784,561) (6,008,353) ------------ ------------ Net cash provided by (used in) financing activities (9,937,232) 12,152,344 ------------ ------------ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 15,555,746 (1,727,673) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 10,313,558 9,157,271 ------------ ------------ CASH AND CASH EQUIVALENTS, END OF PERIOD $ 25,869,304 7,429,598 ============ ============
See Notes to Condensed Consolidated Financial Statements 7 Guaranty Federal Bancshares, Inc. Form 10-Q for December 31, 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 (the "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 December 31, 2001, all of the RRP,RSP and 2000 SCP shares have been purchased and all except 14,076 shares have been awarded. As of December 31, 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 $218,328 of expense under these stock award plans for the six month period ended December 31, 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 December 31, 2001 all options except those on 64,611 shares have been granted. The RRP, RSP, SOP, 1998 SOP and 2000 SCP vest over a five year period. As of December 31, 2001, there were 493,792 unexercised options that have been granted at prices ranging from $5.83 to $13.44 per share and 193,346 RRP, RSP and 2000 SCP shares were unvested. 8 Guaranty Federal Bancshares, Inc. Form 10-Q for December 31, 2001 Note 4: Earnings Per Share
For three months ended December 31, 2001 For six months ended December 31, 2001 ---------------------------------------- -------------------------------------- Income Shares Per-share Income Shares Per-share Basic EPS Income available to common stockholders $ 932,688 3,804,633 $ 0.25 $ 1,901,768 3,805,851 $ 0.50 ======== ========= Effect of Dilutive Securities Stock Options 61,576 48,668 --------- --------- --------- Income available to common stockholders $ 932,688 3,866,209 $ 0.24 $ 1,901,768 3,854,519 $ 0.49 ========= ========= ======== ============ ========= =========
For three months ended December 31, 2000 For six months ended December 31, 2000 ---------------------------------------- -------------------------------------- Income Shares Per-share Income Shares Per-share Basic EPS Income available to common stockholders $ 897,190 4,203,523 $ 0.21 $ 1,760,625 4,336,264 $ 0.41 ======== ========= Effect of Dilutive Securities Stock Options 48,644 52,285 --------- --------- --------- Income available to common stockholders $ 897,190 4,252,167 $ 0.21 $ 1,760,625 4,388,549 $ 0.40 ========= ========= ======== ============ ========= =========
Options to purchase 325,923 shares of common stock at $13.44 per share, outstanding during the six months ended December 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. Note 5: Branch Acquisition On December 6, 2001, the Bank completed an acquisition of certain assets and liabilities of five branches of Commercial Federal Bank in Springfield, Missouri. The Bank acquired approximately $15.5 million in select consumer and home equity loans and assumed approximately $41.2 million in deposit liabilities. The Bank has also assumed the leases and equipment at all but one of the branches. The transaction has been accounted for as a purchase by recording the acquired assets and liabilities at their estimated fair values at the acquisition date. Net proceeds received by the Bank below their fair values was recorded as goodwill. The consolidated operations of the Company include the interest income and expense on the acquired loan assets and deposit liabilities from the acquisition date. Information necessary to present the results of operations on a pro forma basis for the current and comparable prior periods is unavailable. 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 December 31, 2001, and the results of operations for the six months ended December 31, 2001 and 2000. 9 Guaranty Federal Bancshares, Inc. Form 10-Q for December 31, 2001 The Bank completed its acquisition of the Springfield branch offices of Commercial Federal Bank on December 6, 2001, in which it assumed approximately $41.2 million in deposit liabilities, and purchased approximately $15.5 million in loan assets. In addition the Bank acquired four " in store" branches located in Dillons Supermarkets. The acquisition increased the number of offices from five to nine. 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; changes in management strategy; increased competition from both bank and non-bank companies; changes in the general level of interest rates; the effect of regulatory or government legislative changes; technology changes; and fluctuation in inflation. Financial Condition The Company's total assets increased $34,040,735 (9%) from $374,093,405 as of June 30, 2001, to $408,134,140 as of December 31, 2001. Interest-bearing deposits in other financial institutions increased $14,871,707 (194%) from $7,648,271 as of June 30, 2001, to $22,519,978 as of December 31, 2001, as the Company received approximately $25.6 million cash as a result of its acquisition of the Springfield branches of Commercial Federal Bank. Approximately $15.3 million of these proceeds were used to repay FHLB advances. Securities available-for-sale increased $625,485 (3%) from $19,447,892 as of June 30, 2001, to $20,073,377 as of December 31, 2001. This is primarily due to purchases of $6,415,229 of investment securities, which was partially offset by maturities of $2,000,000 in securities, $2,109,541 in sales of securities, and the decrease in fair value of various equity securities. The Bank continues to hold 88,000 shares of Federal Home Loan Mortgage Corporation ("FHLMC") stock with an amortized cost of $86,168 in the available-for-sale category. As of December 31,2001, the gross unrealized gain on the stock was $5,669,032, a decrease from $6,237,587 as of June 30, 2001. Securities held-to-maturity decreased due to principal repayments, by $761,395 (17%) from $4,545,866 as of June 30, 2001, to $3,784,471 as of December 31, 2001. Net loans receivable increased by $13,167,662 (4%) from $317,243,111 as of June 30, 2001, to $330,410,773 as of December 31, 2001. As a part of the Commercial Federal acquisition, the Company purchased approximately $15.5 million in consumer and home equity loans. Also, during this period the Bank continued its increased emphasis on commercial lending. As a result commercial loans have increased by $24,859,551 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 $13,239,443 while loans held for sale increased by $5,145,890. The Bank continues to be active in construction lending. However, during the period construction loans decreased by $13,562,420. Loan growth is anticipated to continue and represents a major part of the Bank's planned asset growth. Allowance for loan losses decreased $102,470 (4%) from $2,697,389 as of June 30, 2001 to $2,594,919 as of December 31, 2001. The allowance decreased due to net loan charge-offs exceeding the provision for loan losses for the period. The allowance for loan losses as of December 31, 2001 and June 30, 2001 was 0.79% and 0.85% respectively, of net loans outstanding. As of December 31, 2001, the allowance for loan losses was 74% of impaired loans versus 55% as of June 30, 2001. Premises and equipment decreased $59,479 (1%) from $7,758,082, as of June 30, 2001 to $7,698,603 as of December 31, 2001 primarily due to the depreciation recognized on these assets. 10 Guaranty Federal Bancshares, Inc. Form 10-Q for December 31, 2001 Deposits increased $60,293,984 (35%) from $170,647,500 as of June 30, 2001, to $230,941,484 as of December 31, 2001. As a result of the Commercial Federal acquisition, the Company assumed approximately $41.2 million in deposits. Excluding the acquisition, for the six months ended December 31, 2001, checking and savings accounts increased by $9,202,636 (16%) while certificates of deposits increased by $10,804,119 (10%). In order to comply with the Federal Home Loan Bank (the "FHLB") limitation of advances to 35% of assets, the Company decreased borrowings from the FHLB by $27,423,833 (19%) from $146,656,583 as of June 30, 2001, to $119,232,750 as of 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 decreased $1,014,556 (78%) from $1,293,062 as of June 30, 2001, to $278,506 as of December 31, 2001. This was primarily due to the payment of 2001 real estate taxes from borrower's escrow accounts. Accrued expenses and other liabilities increased $979,147 (73%) from $1,344,804 as of June 30, 2001, to $2,323,951 as of December 31, 2001. This is primarily due to increases in Bank accounts payable outstanding during this period. Stockholders' equity (including unrealized appreciation on securities available-for-sale, net of tax) increased $176,249 from $50,205,791 as of June 30, 2001, to $50,382,040 as of December 31, 2001. During this period the Company repurchased a total of 58,519 of its outstanding shares in the open market at a cost of $784,561. 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 $572,009. On a per share basis, stockholders' equity increased from $13.20 as of June 30, 2001 to $13.30 as of December 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 Guaranty Federal Bancshares, Inc. Form 10-Q for December 31, 2001
Six Months ended 12/31/2001 Six Months ended 12/31/2000 ---------------------------------- ---------------------------------- Average Yield / Average Yield / Balance Interest Cost Balance Interest Cost ----------- ---------- --------- ----------- ---------- --------- ASSETS Interest-earning: Loans $ 327,488 12,520 7.65% $ 301,289 12,338 8.19% Investment securities 16,215 384 4.74% 15,077 570 7.56% Other assets 26,813 334 2.49% 16,305 507 6.22% ---------- ---------- ---- ---------- ---------- ---- Total interest-earning 370,516 13,238 7.15% 332,671 13,415 8.07% Noninterest-earning 13,148 8,953 ---------- ---------- $ 383,664 $ 341,624 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing: Savings accounts $ 9,453 83 1.76% $ 7,880 110 2.79% Transaction accounts 48,963 486 1.99% 37,505 600 3.20% Certificates of Deposit 119,812 3,054 5.10% 89,814 2,610 5.81% FHLB Advances 139,613 3,988 5.71% 146,875 4,641 6.32% Repurchase agreements 2,108 22 2.09% - - 0.00% ---------- ---------- ---- ---------- ---------- ---- Total interest-bearing 319,949 7,633 4.77% 282,074 7,961 5.65% Noninterest-bearing 12,795 5,045 ---------- ---------- Total liabilities 332,744 287,119 Stockholders' equity 50,920 54,505 ---------- ---------- $ 383,664 $ 341,624 ========== ========== Net earning balance $ 50,567 $ 50,597 ========== ========== Earning yield less costing rate 2.38% 2.42% ==== ==== Net interest income, and net yield spread on interest earning assets $ 5,605 3.03% $ 5,454 3.28% ========== ==== ========== ==== Ratio of interest-earning assets to interest-bearing liabilities 116% 118% === ===
Results of Operations - Comparison of Three Month and Six Month Periods Ended December 31, 2001 and 2000 Net income for the three months and six months ended December 31, 2001 was $932,688 and $1,901,768 as compared to $897,190 and $1,760,625 for the three months and six months ended December 31, 2000 which represents an increase in earnings of $35,498 or 4% for the three month period, and an increase in earnings of $141,143 or 8% for the six month period. Interest Income - --------------- Total interest income for the three months and six months ended December 31, 2001, decreased $380,246 or 6% and $176,557 or 1% as compared to the three months and six months ended December 31, 2000. For the three month and six month period ended December 31, 2001 compared to the same period in 2000, the average yield on interest earning assets decreased 133 basis points to 6.88% and 92 basis points to 7.15% while the average balance of interest earnings assets increased $42,548,000 and $37,845,000 respectively. 12 Guaranty Federal Bancshares, Inc. Form 10-Q for December 31, 2001 Interest Expense - ---------------- Total interest expense for the three months and six months ended December 31, 2001, decreased $433,733 or 11% and $327,077 or 4% when compared to the three months and six months ended December 31, 2000. For the three month and six month period ended December 31, 2001 compared to the same period in 2000, the average cost of interest bearing liabilities decreased 114 basis points to 4.51% and 88 basis points to 4.77% while the average balance increased $39,556,000 and $37,875,000 respectively. Net Interest Income - ------------------- Net interest income for the three months and six months ended December 31, 2001, increased $53,487, or 2% and $150,520, or 3% when 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 losses of $75,000 and $150,000 for the three months and six months ended December 31, 2001, respectively, compared to $70,000 and $100,000 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 $496,421, or 95% and $846,251, or 88% for the three months and six months ended December 31, 2001, when compared to the three months and six months ended December 31, 2000. The increase for the three months and six months ended December 31, 2001 was partially due to increases in gain on sale of loans and investment securities which increased $430,549 and $730,094 respectively, when compared to the same period in 2000. Gains on sale of single-family loan production increased which reflects the volume of 30-year fixed rate loans sold in the secondary market. The Bank attempts to minimize risk of price changes by committing to sell loans while the loans are in the origination process. In addition checking account service charges increased $66,049 or 20% and $111,309 or 18% respectively, compared to the same periods in 2000 due to the continued growth in the number of customer checking accounts. Noninterest Expense - ------------------- Noninterest expense increased $562,275, or 31% for the three months ended December 31, 2001, and increased $829,954, or 23% for the six month period ending December 31, 2001 when compared to the three months and six months ended December 31, 2000. Increases in salaries and employee benefits, occupancy and data processing expense are principally attributable to the Company's recent expansion through branch additions and an overall increase in accounts served. There was approximately $175,000 in "one-time" costs in connection with the Commercial Federal branch acquisition. There was also an increase in legal and professional expenses of $79,658 or 98%, during this period. Provision for Income Taxes - -------------------------- There was a $52,865 and $24,326 decrease in the provision for income taxes for the three months and six months ended December 31, 2001, as compared to the same period in 2000. The decrease for the three and six months ended December 31, 2001 was primarily due to reductions in taxable income for increased stock options exercised and loan charge-offs. 13 Guaranty Federal Bancshares, Inc. Form 10-Q for December 31, 2001 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 December 31, 2001, the Bank had approximately $3,755,000 in commitments to originate mortgage loans and $15,624,000 in mortgage loans-in-process. 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. 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 December 31, 2001, was $2,594,919 or 0.8% of loans receivable. Total assets classified as substandard or loss as of December 31, 2001, were $2,927,343 or 0.7% 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.
12/31/01 6/30/01 6/30/00 ---------- --------- ---------- Nonperforming loans $ 3,494 4,948 4,757 Real estate acquired in settlement of loans 41 4 2 -------- -------- -------- Total nonperforming assets $ 3,535 4,952 4,759 ======== ======== ======== Total nonperforming assets as a percentage of total assets 0.87% 1.32% 1.39% Allowance for loan losses $ 2,595 2,697 2,520 Allowance for loan losses as a percentage of average net loans 0.79% 0.87% 0.89%
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 14 Guaranty Federal Bancshares, Inc. Form 10-Q for December 31, 2001 of June 30, 2001, ARMs constituted 58% of the Bank's loan portfolio. As of December 31, 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. The Bank is currently selling fixed rate conforming loans on single family residences, while retaining the servicing rights. The Bank is also managing interest rate risk by the origination of construction loans. As of December 31, 2001, such loans made up 11% 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 December 31, 2001, these accounts totaled $85,715,609 or 37% 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 September 30, 2001 (the most recent available), the Office of Thrift Supervision ("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 100 and 200 basis point instantaneous 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 $ 51,556 $ (2,429) -4% 13.74% 0.04% +200 53,156 (829) -2% 13.95% 0.16% +100 54,112 127 0% 14.00% 0.21% NC 53,985 13.79% -100 52,834 (1,151) -2% 13.35% -0.44% -200 51,104 (2,881) -5% 12.78% -1.01% 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 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. 15 Guaranty Federal Bancshares, Inc. Form 10-Q for December 31, 2001 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. 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 b) Reports on Form 8-K December 10, 2001 16 Guaranty Federal Bancshares, Inc. Form 10-Q for December 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/ Don M. Gibson February 8, 2002 ----------------- ---------------- Don M. Gibson President and Chief Executive Officer (Principal Executive Officer) /s/ Bruce Winston February 8, 2002 ----------------- ---------------- Bruce Winston Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 17 -----END PRIVACY-ENHANCED MESSAGE-----