Back to GetFilings.com

















                                                                                                                                              







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, 2002


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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of Exchange Act)


Yes        No   X    

   


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 10, 2003

Common Stock, Par Value $0.10                 

 3,028,601 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  Stockholders’ Equity

5


Statements of Cash Flows

7


Notes to Condensed 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


4.  Control and Procedures

17


PART II. Other Information


1.  Legal Proceedings

17


2.  Changes in Securities

17


3.  Defaults Upon Senior Securities

17


4.  Submission of Matters to Vote of Common Stockholders

17


5.  Other Information

17


6.  Exhibits and Reports on Form 8-K

17


Signatures



Certification of the Principal Executive Officer



Certification of the Principal Financial Officer














2



PART I

Item 1. Financial Statements

GUARANTY FEDERAL BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

DECEMBER 31, 2002 (UNAUDITED) AND JUNE 30, 2002

    

ASSETS

12/31/02

 

6/30/02

 Cash

 $           3,030,116

 

              3,251,579

 Interest-bearing deposits in other financial institutions

            10,180,720

 

            13,711,923

 Cash and cash equivalents

            13,210,836

 

            16,963,502

 Available-for-sale securities  

            14,763,145

 

            16,463,460

 Held-to-maturity securities  

              2,819,833

 

              3,219,091

 Stock in Federal Home Loan Bank, at cost

              8,600,400

 

              8,600,400

 Mortgage loans held for sale

              5,266,077

 

              3,131,138

 Loans receivable, net of allowance for loan losses;  

   

      12/31/02 - $2,639,552; 6/30/02 $2,649,872  

          319,633,449

 

          316,785,118

 Accrued interest receivable:

   

 Loans

              1,394,286

 

              1,569,260

 Investments

                   40,492

 

                   85,251

 Prepaid expenses and other assets  

              1,875,102

 

              1,693,760

 Foreclosed assets held for sale   

                     8,450

 

                 683,329

 Premises and equipment  

              7,089,729

 

              7,356,098

 

 $       374,701,799

 

          376,550,407

LIABILITIES AND STOCKHOLDERS' EQUITY

   

 

   

 LIABILITIES

   

 Deposits  

 $       230,258,874

 

          225,283,994

 Federal Home Loan Bank advances  

          104,368,292

 

          111,083,163

 Securities sold under agreements to repurchase

                 702,501

 

              1,093,074

 Advances from borrowers for taxes and insurance

                 324,282

 

              1,048,297

 Accrued expenses and other liabilities

                   52,749

 

                 103,993

 Accrued interest payable

                 742,372

 

                 759,099

 Dividend payable

                 420,430

 

                 347,656

 Income taxes payable

                 362,075

 

                 163,897

 Deferred income taxes  

              1,202,589

 

              1,232,357

 

          338,434,164

 

          341,115,530

 STOCKHOLDERS' EQUITY

   

 Common stock:

   

 $0.10 par value; authorized 10,000,000 shares;

   

 issued; 12/31/02 - 6,380,034 shares, 6/30/02 - 6,365,404 shares

                 638,003

 

                 636,540

 Additional paid-in capital

            50,195,997

 

            49,842,032

 Unearned ESOP shares

             (2,281,070)

 

             (2,406,070)

 Retained earnings, substantially restricted  

            28,299,337

 

            27,372,935

 Accumulated other comprehensive income

   

 Unrealized appreciation on available-for-sale securities,

   

 net of income taxes; 12/31/02 - $1,532,437, 6/30/02 - $1,731,122

              2,609,285

 

              2,947,587

 

            79,461,552

 

            78,393,024

 Treasury stock, at cost; 12/31/02 - 3,349,071 shares, 6/30/02 - 3,333,089 shares

           (43,193,917)

 

           (42,958,147)

 

            36,267,635

 

            35,434,877

 

 $       374,701,799

 

          376,550,407

   

   


See Notes to Condensed Consolidated Financial Statements

3


GUARANTY FEDERAL BANCSHARES, INC.

 CONSOLIDATED STATEMENTS OF INCOME

 THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31, 2002 AND 2001 (UNAUDITED)

        
 

 Three months ended

 

 Six months ended

 

12/31/02

 

12/31/01

 

12/31/02

 

12/31/01

 INTEREST INCOME

       

 Loans

 $  5,338,380

 

     6,159,625

 

   10,826,819

 

   12,520,007

 Investment securities

        105,076

 

        190,223

 

        231,070

 

        383,948

 Other

        100,284

 

        146,759

 

        232,307

 

        334,128

      Total Interest Income

     5,543,740

 

     6,496,607

 

   11,290,196

 

   13,238,083

 INTEREST EXPENSE

   

 

   

    

 Deposits

     1,504,795

 

     1,816,039

 

     3,121,175

 

     3,623,412

 Federal Home Loan Bank advances

     1,458,495

 

     1,854,978

 

     2,959,213

 

     3,988,261

 Other

            2,111

 

            9,994

 

            5,188

 

          22,182

      Total Interest Expense

     2,965,401

 

     3,681,011

 

     6,085,576

 

     7,633,855

 Net Interest Income

     2,578,339

 

     2,815,596

 

     5,204,620

 

     5,604,228

 Provision for Loan Losses

        105,000

 

          75,000

 

        205,000

 

        150,000

 Net Interest Income after

   

 

   

    

      Provision for Loan Losses

     2,473,339

 

     2,740,596

 

     4,999,620

 

     5,454,228

 NONINTEREST INCOME (LOSS)

   

 

 

    

 Service charges

        443,552

 

        389,394

 

        884,132

 

        742,419

 Late charges and other fees

        (91,613)

 

          29,949

 

          65,238

 

          58,967

 Gain on sale of investment securities

                  -   

 

        205,199

 

                  -   

 

        366,911

 Gain on sale of loans

        444,643

 

        337,155

 

        669,220

 

        517,941

 Income on foreclosed assets

          24,658

 

               861

 

          19,865

 

               861

 Other income

          67,042

 

          55,957

 

        113,279

 

        121,152

      Total Noninterest Income

        888,282

 

     1,018,515

 

     1,751,734

 

     1,808,251

 NONINTEREST EXPENSE

   

 

 

    

 Salaries and employee benefits

     1,117,597

 

     1,145,672

 

     2,238,783

 

     2,227,377

 Occupancy

        337,044

 

        399,321

 

        673,847

 

        717,454

 SAIF deposit insurance premiums

            9,557

 

          10,409

 

          19,416

 

          17,365

 Data processing fees

        153,836

 

        110,405

 

        294,976

 

        245,027

 Advertising

          55,097

 

        107,171

 

        104,210

 

        185,583

 Other expense

        360,618

 

        606,421

 

        728,746

 

        992,884

      Total Noninterest Expense

     2,033,749

 

     2,379,399

 

     4,059,978

 

     4,385,690

 Income Before Income Taxes

     1,327,872

 

     1,379,712

 

     2,691,376

 

     2,876,789

 Provision for Income Taxes

        459,888

 

        447,024

 

        927,346

 

        975,021

 NET INCOME

        867,984

 

        932,688

 

     1,764,030

 

     1,901,768

 OTHER COMPREHENSIVE INCOME (LOSS)

       

 Unrealized appreciation (depreciation) on  

       

      available-for-sale securities, net of income taxes  

       

      of  $12,087, ($71,603), ($198,685) and ($335,942),

       

      respectively  

          20,581

 

      (121,918)

 

      (338,302)

 

      (572,009)

 COMPREHENSIVE INCOME

        888,565

 

        810,770

 

 $  1,425,728

 

     1,329,759

 BASIC EARNINGS PER SHARE

 $           0.31

 

              0.25

 

 $           0.63

 

              0.50

 DILUTED EARNINGS PER SHARE

 $           0.30

 

              0.24

 

 $           0.62

 

              0.49

        




See Notes to Condensed Consolidated Financial Statements

4














GUARANTY FEDERAL BANCSHARES, INC.

 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

 SIX MONTHS ENDED DECEMBER 31, 2002 (UNAUDITED)

   

 

   

   
   

   

   

 Accumulated Other Comprehensive Income

  
 

 Common Stock

 Additional Paid-In Capital

 Unearned ESOP Shares

 Retained Earnings

 Unrealized Appreciation  on Available-for-Sale Securities, Net

 Treasury Stock

 Total

        

 Balance, July 1, 2002

 $     636,540

    49,842,032

      (2,406,070)

    27,372,935

                       2,947,587

    (42,958,147)

      35,434,877

 Net income

                    -

                     -

                       -

      1,764,030

                                      -

                      -

        1,764,030

 Dividends on common stock,

      

   

 ($0.15 per share on 2,781,315 shares &

       

       $0.15 per share on 2,802,866 shares)  

                    -

                     -

                       -

       (837,628)

                                      -

                      -

         (837,628)

 Stock award plans

                    -

         186,630

                       -

                    -

                                      -

                      -

           186,630

 Stock options exercised

            1,463

         112,091

                       -

                    -

                                      -

                      -

           113,554

 Release of ESOP shares

                    -

           55,244

           125,000

                    -

                                      -

                      -

           180,244

 Treasury stock purchased

                    -

                     -

                       -

                    -

                                      -

         (235,770)

         (235,770)

 Change in unrealized appreciation on

       

 available-for-sale securities, net of

 

   

     

 income taxes of  ($198,685)

                    -

                     -

                       -

                    -

                        (338,302)

                      -

         (338,302)

 Balance, December 31, 2002

 $     638,003

    50,195,997

      (2,281,070)

    28,299,337

                       2,609,285

    (43,193,917)

      36,267,635

   

   

   

 

   

   

 

   










See Notes to Condensed Consolidated Financial Statements

5





GUARANTY FEDERAL BANCSHARES, INC.

 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

 SIX MONTHS ENDED DECEMBER 31, 2001 (UNAUDITED)

   

 

   

   
   

   

   

 Accumulated Other Comprehensive Income

  
 

 Common Stock

 Additional Paid-In Capital

 Unearned ESOP Shares

 Retained Earnings

 Unrealized Appreciation  on Available-for-Sale Securities, Net

 Treasury 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)

 Stock award plans

                    -

         198,111

                       -

                    -

                                      -

                      -

           198,111

 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 securities, 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

6









GUARANTY FEDERAL  BANCSHARES, INC

 CONSOLIDATED STATEMENTS OF CASH FLOWS

 SIX MONTHS ENDED DECEMBER 31, 2002 AND 2001 (UNAUDITED)

  

12/31/02

 

12/31/01

 CASH FLOWS FROM OPERATING ACTIVITIES

    

 Net income

 

 $          1,764,030

 

        1,901,768

 Items not requiring (providing) cash:

    

 Deferred income taxes

 

                168,917

 

           178,647

 Depreciation

 

                404,498

 

           435,342

 Provision for loan losses

 

                205,000

 

           150,000

 Gain on loans and investment securities

 

              (669,220)

 

         (884,852)

 Gain on sale of foreclosed assets

 

                (26,218)

 

             (1,140)

 Amortization of deferred income, premiums and discounts

 

                (80,575)

 

           (17,280)

 RRP/RSP expense

 

                177,810

 

           218,328

 Origination of loans held for sale

 

         (34,910,348)

 

    (37,624,182)

 Proceeds from sale of loans held for sale

 

           33,444,629

 

      32,996,233

 Release of ESOP shares

 

                180,244

 

           153,977

 Changes in:

 

   

 

   

 Accrued interest receivable

 

                219,733

 

           395,589

 Prepaid expenses and other assets

 

              (181,342)

 

         (627,993)

 Accounts payable and accrued expenses

 

                (67,971)

 

           104,434

 Income taxes payable

 

                205,676

 

           117,454

            Net cash provided by (used in) operating activities

 

                834,863

 

      (2,503,675)

 CASH FLOWS FROM INVESTING ACTIVITIES

    

 Net (increase) decrease in loans

 

           (3,172,569)

 

        2,133,129

 Principal payments on available-for-sale securities

 

                172,835

 

        1,216,091

 Principal payments on held-to-maturity securities

 

                406,222

 

           756,495

 Purchase of premises and equipment

 

              (138,129)

 

         (182,095)

 Purchase of available-for-sale securities

 

           (2,978,928)

 

      (6,415,229)

 Proceeds from sale of available-for-sale securities

 

                            -

 

        2,109,541

 Proceeds from maturities of available-for-sale securities

 

             4,000,000

 

        2,000,000

 Proceeds from sale of foreclosed assets

 

                863,367

 

             11,491

 Cash acquired in purchase of Commercial Federal Bank branches

 

                            -

 

      25,556,972

           Net cash provided by (used in) investing activities

 

              (847,202)

 

      27,186,395

  CASH FLOWS FROM FINANCING ACTIVITIES

    

 Stock options exercised

 

                113,554

 

           227,386

 Cash dividends paid

 

              (764,854)

 

         (950,070)

 Cash dividends received on RRP stock

 

                    1,322

 

               1,647

 Net increase in demand deposits,

    

 NOW accounts and savings accounts

 

             8,403,811

 

      10,012,894

 Net increase (decrease) in certificates of deposit and securities sold

    

 under agreements to repurchase

 

           (3,819,504)

 

      10,804,119

 Proceeds from FHLB advances

 

           12,000,000

 

      46,500,000

 Repayments of FHLB advances

 

         (18,714,871)

 

    (73,923,833)

 Advances from borrowers for taxes and insurance

 

              (724,015)

 

      (1,014,556)

 Treasury stock purchased

 

              (235,770)

 

         (784,561)

      Net cash used in financing activities

 

           (3,740,327)

 

      (9,126,974)

 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

           (3,752,666)

 

      15,555,746

 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

           16,963,502

 

      10,313,558

 CASH AND CASH EQUIVALENTS, END OF PERIOD

 

 $        13,210,836

 

      25,869,304

     


See Notes to Condensed Consolidated Financial Statements

7

















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 2002 filed with the Securities and Exchange Commission.  The condensed consolidated statement of financial condition of the Company as of June 30, 2002, has been derived from the audited consolidated statement of financial condition 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.


Certain reclassifications have been made to the June 30, 2002 financial statement to conform to the December 31, 2002 financial statement presentation.  These reclassifications had no effect on net earnings.


Note 2:  Principles of Consolidation


The accompanying consolidated financial statements include the accounts of Guaranty Federal Bancshares, Inc. (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.  All significant intercompany transactions and balances 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 2000 Stock Compensation Plan (the “2000 SCP”) with both a stock award component and a stock option component.  On March 22, 2001, the directors of the Company established the 2001 Stock Compensation Plan (the “2001 SCP”) with both a stock award component and a stock option component. As of December 31, 2002, all of the RRP,RSP, 2000 SCP and 2001 SCP shares have been purchased and all except 13,046 shares have been awarded.  The Company is amortizing the RRP, RSP and SCP expense over each participant’s vesting period. The Company recognized $177,810 and  $218,328 of expense under these stock award plans for the six month periods ended December 31, 2002 and 2001, respectively.  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, 2002 all

options except those on 77,063 shares have been granted.  The RRP, RSP, SOP,1998 SOP and 2000 SCP vest over a five year period. As of December 31, 2002, there were 397,790 unexercised options that have been granted at prices ranging from $5.83 to $13.89 per share and 113,329 options were unvested.


8

Note 4: Earnings Per Share

 

 For three months ended December 31, 2002

 

 For six months ended December 31, 2002

 

 Income Available to Stockholders

 Average Shares Outstanding

 Per-share

 

 Income Available to Stockholders

 Average Shares Outstanding

 Per-share

 Basic Earnings per Share

 $       867,984

      2,801,361

 $            0.31

 

 $   1,764,030

      2,797,202

 $            0.63

 Effect of Dilutive Securities:  

      

   

 Stock Options

 

           60,180

   

  

           51,446

 

 Diluted Earnings per Share

 $       867,984

      2,861,541

 $            0.30

 

 $   1,764,030

      2,848,648

 $            0.62

        
 

 For three months ended December 31, 2001

 

 For six months ended December 31, 2001

 

 Income Available to Stockholders

 Average Shares Outstanding

 Per-share

 

 Income Available to Stockholders

 Average Shares Outstanding

 Per-share

 Basic Earnings per Share

 $       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

   

 Diluted Earnings per Share

 $       932,688

      3,866,209

 $            0.24

 

 $   1,901,768

      3,854,519

 $            0.49

        


Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations


General


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 salaries and benefits, occupancy expenses and other expenses.  The following discussion reviews the financial condition at December 31, 2002, and the results of operations for the three months and six months ended December 31, 2002 and 2001.


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.  When used in this Form 10-Q, words such as “anticipates,” “estimates,” “believes,” “expects,” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.  Such statements are subject to risks and uncertainties.  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 competiti on from both bank and non-bank companies; and changes in the general level of interest rates; and other factors set forth in reports and other documents filed by the Company with the Securities and Exchange Commission from time to time.


Financial Condition


The Company’s total assets decreased $1,848,608 (1%) from $376,550,407 as of June 30, 2002, to $374,701,799 as of December 31, 2002.




9


Interest-bearing deposits in other financial institutions decreased $3,531,203 (26%) from $13,711,923 as of June 30, 2002, to $10,180,720 as of December 31, 2002, as funds from these deposits were used to fund new loans.


Securities available-for-sale decreased $1,700,315 (10%) from $16,463,460 as of June 30, 2002, to $14,763,145 as of December 31, 2002.  This decrease primarily resulted from principal repayments and maturities of such securities exceeding additional purchases of such securities by $1,193,907.  The Bank continues to hold 82,000 shares of Federal Home Loan Mortgage Corporation (“FHLMC”) stock with an amortized cost of $80,294 in the available-for-sale category.  As of December 31, 2002, the gross unrealized gain on the FHLMC stock was $4,761,806, a decrease from $5,044,706 as of June 30, 2002.


Securities held-to-maturity decreased by $399,258 (12%) from $3,219,091 as of June 30, 2002, to $2,819,833 as of December 31, 2002 primarily due to principal repayments.


Net loans receivable increased by $2,848,331 from $316,785,118 as of June 30, 2002, to $319,633,449 as of December 31, 2002.  During this period the Bank continued its increased emphasis on commercial lending.  As a result, commercial loans increased by $7,540,209 during this period.  In addition, the Bank is 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 $6,320,693 while loans held for sale increased by $2,134,939. The Bank continued to be active in construction lending resulting in construction loans increasing by $9,101,097 during the period.  See discussion under “Quantitative and Qualitative Disclosures about Market Risk – Asset Liability Management.”  Loan growth is anticipated to continue and represents a major part of the Bank’s planned asset growth .  


Allowance for loan losses decreased $10,320 from $2,649,872 as of June 30, 2002 to $2,639,552 as of December 31, 2002.  The allowance for loan losses 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, 2002 and June 30, 2002 was 0.83% and 0.83%, respectively, of net loans outstanding.  As of December 31, 2002, the allowance for loan losses was 667% of impaired loans versus 151% as of June 30, 2002.


Premises and equipment decreased $266,369  (4%) from $7,356,098, as of June 30, 2002 to $7,089,729 as of December 31, 2002, primarily due to the depreciation recognized on these assets.


Deposits increased $4,974,880 (2%) from $225,283,994 as of June 30, 2002, to $230,258,874 as of December 31, 2002.  For the six months ended December 31, 2002, checking and savings accounts increased by $8,403,811 (9%) while certificates of deposits decreased by $3,428,931 (3%).  See discussion under “Quantitative and Qualitative Disclosures about Market Risk – Asset Liability Management.”


Federal Home Loan Bank advances decreased by $6,714,871 (6%) from $111,083,163 as of June 30, 2002, to $104,368,292 as of December 31, 2002 due to repayments of principal.


Advances from borrowers for taxes and insurance decreased $724,015 (69%) from $1,048,297 of June 30, 2002, to $324,282 as of December 31, 2002. This decrease was primarily due to the payment of 2002 real estate taxes from borrower’s escrow accounts during the quarter ended December 31, 2002.  


Stockholders’ equity (including unrealized appreciation on securities available-for-sale, net of tax) increased $832,758 (2%) from $35,434,877 as of June 30, 2002, to $36,267,635 as of December 31, 2002.  This increase was due to several factors.  During this period, net income was $1,764,030 which was partially offset by a first quarter dividend of $417,198 ($0.15 per share) which was declared prior to September 30, 2002 and paid on October 18, 2002, to stockholders’ of record as of October 4, 2002, and a second quarter dividend of $420,430 ($0.15 per share) which was declared prior to December 31, 2002 and paid on January 24, 2003, to stockholders’ of record as of January 10, 2003.  There was a decrease in the unrealized appreciation on available-for-sale securities

of  $338,302.  In addition, the Company repurchased 15,982 shares of treasury stock at a cost of $235,770 (an average cost of $14.75 per share).  As of December 31, 2002, 15,727 shares remain to be repurchased under the repurchase plan announced January 5, 2001.  On a per share basis, stockholders’ equity increased from $12.69 as of June 30, 2002 to $12.94 as of December 31, 2002.



10


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.

 

Six Months ended 12/31/2002

 

Six Months ended 12/31/2001

 

 Average Balance

 

 Interest

 

 Yield / Cost

 

 Average Balance

 

 Interest

 

 Yield / Cost

 ASSETS

           

 Interest-earning:

           

 Loans

 $           323,292

 

           10,827

 

6.70%

 

 $           327,488

 

           12,520

 

7.65%

 Investment securities

                11,988

 

                231

 

3.85%

 

                16,215

 

                384

 

4.74%

 Other assets

                24,800

 

                232

 

1.87%

 

                26,813

 

                334

 

2.49%

 Total interest-earning

              360,080

 

           11,290

 

6.27%

 

              370,516

 

           13,238

 

7.15%

 Noninterest-earning

                13,990

     

                13,148

    
 

 $           374,070

     

 $           383,664

    

 LIABILITIES AND STOCKHOLDERS’ EQUITY

        

 Interest-bearing:

           

 Savings accounts

 $             17,507

 

                132

 

1.51%

 

 $               9,453

 

                  83

 

1.76%

 Transaction accounts

                67,002

 

                460

 

1.37%

 

                48,963

 

                486

 

1.99%

 Certificates of Deposit

              127,218

 

             2,530

 

3.98%

 

              119,812

 

             3,054

 

5.10%

 FHLB Advances

              107,612

 

             2,959

 

5.50%

 

              139,613

 

             3,988

 

5.71%

 Repurchase agreements

                     971

 

                    5

 

1.03%

 

                  2,108

 

                  22

 

2.09%

 


 


   


 


  

 Total interest-bearing

              320,310

 

             6,086

 

3.80%

 

              319,949

 

             7,633

 

4.77%

 Noninterest-bearing

                17,390

     

                12,795

    

 Total liabilities

              337,700

     

              332,744

    

 Stockholders’ equity

                36,370

     

                50,920

    
 

 $           374,070

     

 $           383,664

    

 Net earning balance

 $             39,770

     

 $             50,567

    

 Earning yield less costing rate

   

2.47%

     

2.38%

 Net interest income, and net yield spread

          

 on interest earning assets

  

 $          5,204

 

2.89%

   

 $          5,605

 

3.03%

 Ratio of interest-earning assets to

          

      interest-bearing liabilities

 

112%

     

116%

  
            




11


Results of Operations - Comparison of Three Month and Six Month Periods Ended December 31,   

2002 and 2001


Net income for the three months and six months ended December 31, 2002 was $867,984 and $1,764,030, respectively, as compared to $932,688 and $1,901,768, respectively, for the three months and six months ended December 31, 2001, which represents a decrease in earnings of $64,704 (7%) for the three month period, and a decrease in earnings of $137,738 (7%) for the six month period.

Interest Income


Total interest income for the three months and six months ended December 31, 2002, decreased $952,867

(15%) and $1,947,887 (15%) as compared to the three months and six months ended December 31, 2001.   For the three month and six month periods ended December 31, 2002 compared to the same periods in 2001, the average yield on interest earning assets decreased 71 basis points to 6.17% and 88 basis points to 6.27%, respectively, while the average balance of interest earning assets decreased $18,090,000 and $10,436,000, respectively.


Interest Expense


Total interest expense for the three months and six months ended December 31, 2002, decreased  $715,610  (19%) and $1,548,279 (20%) when compared to the three months and six months ended December 31, 2001.  For the three month and six month periods ended December 31, 2002 compared to the same periods in 2001, the average cost of interest bearing liabilities decreased 79 basis points to 3.72% and 97 basis points to 3.80%, respectively, while the average balance decreased $8,068,000 for the three month period ended December 31, 2002 and increased $361,000 for the six month period ended December 31, 2002.


Net Interest Income


As a result of the interest income and interest expense for the three months and six months ended December 31, 2002, net interest income for the 2002 periods decreased $237,257 (8%) and $399,608 (7%), respectively, when compared to the same periods in 2001.


Provision for Loan Losses


Based primarily on the continued growth of the commercial loan portfolio, management decided to record a provision for loan losses of $105,000 and $205,000 for the three months and six months ended December 31, 2002, respectively, compared to $75,000 and $150,000 for the same periods in 2001.  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 decreased $130,233 (13%) and $56,517 (3%) for the three months and six months ended December 31, 2002, when compared to the three months and six months ended December 31, 2001.  The decrease for the three months and six months ended December 31, 2002 was primarily due to decreases in gain on sale of investment securities and the decrease in late charges and other fees discussed below.  During the three months and six months ended December 31, 2001, gain on sale of investments was $205,199 and $366,911, respectively. During the same periods in 2002, there were no gains on sale of investments.  


Late charges and other fees decreased $121,562 (406%) for the three months ended December 31, 2002, and increased $6,271 (11%) for the six months ended December 31, 2002, when compared to the same periods in 2001. The decrease in the three months ended December 31, 2002 was primarily due to increases in amortization expense associated with the Bank’s originated mortgage servicing rights and the recording of a loss on impairment.  A loss on impairment of these rights of $80,341 was recognized based on the Bank’s fair value assessment of such rights at December 31, 2002.  Decreases in fair value of these rights is primarily due to increased prepayment speeds


12

on loans being serviced for others.  The increase in prepayment speed is attributable to significant increases in refinancings in a historically low interest rate environment.

 

Gain on sale of loans increased $107,488 (32%) and  $151,279 (29%) for the three months and six months ended December 31, 2002, respectively, when compared to the same periods in 2001. Gains on sale of single-family loans increased, which reflects the volume of 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.  Checking account service charges increased $54,158 (14%) and $141,713 (19%) for the three months and six months ended December 31, 2002, respectively, compared to the same periods in 2001, due to the continued growth in the number of customer checking accounts.

Noninterest Expense


Noninterest expense decreased $345,650 (15%) and $325,712 (7%) for the three months and six months ended December 31, 2002 when compared to the three months and six months ended December 31, 2001.  These decreases resulted primarily from decreases in other expense of $245,803 (41%) and $264,138 (27%), respectively, during the periods due to approximately $175,000 in “one-time” costs in connection with the Commercial Federal branch acquisition during the three months and six months ended December 31, 2001, and approximately $80,000 in “one-time” legal and professional expenses during the same periods in 2001.   The remainder of the decreases can be attributed to the Company’s aggressive approach to controlling expenses. There was no significant change in any other individual expense category.


Provision for Income Taxes


There was a  $12,864 increase and  a $47,675 decrease in the provision for income taxes for the three months and six months ended December 31, 2002, respectively, as compared to the same periods in 2001.

 

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, 2002, was $2,639,552 or 0.83% of loans receivable.  Total assets classified as substandard or loss as of December 31, 2002, were $334,555 or 0.1% 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.  Dollar amounts in the table below are in thousands.

 

12/31/02

6/30/02

6/30/01

 Nonperforming loans

 $                  396

                  1,751

                  4,948

 Real estate acquired in settlement of loans

                         8

                     683

                         4

 Total nonperforming assets

 $                  404

                  2,434

                  4,952

    

 Total nonperforming assets as a percentage of total assets

0.11%

0.65%

1.32%

 Allowance for loan losses

 $               2,640

                  2,650

                  2,697

 Allowance for loan losses as a percentage of average net loans

0.82%

0.82%

0.87%

    


Impact of Recent Accounting Pronouncements


The Financial Accounting Standards Board (FASB) recently adopted Statement of Financial Accounting Standards No. 142 (SFAS 142),  “Goodwill and Other Intangible Assets”. This Statement establishes new financial


13


accounting and reporting standards for acquired goodwill and other intangible assets.  The Statement addresses how

intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in financial statements upon their acquisition.  It also addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. SFAS 142 is effective for fiscal years beginning after December 15, 2001.  The Company adopted SFAS 142 in the quarter ending September 30, 2002.  Adoption of SFAS 142 as of that date had no effect on the Company’s financial statements.


The FASB recently adopted SFAS 147, “Acquisitions of Certain Financial Institutions.”  This statement removes acquisitions of financial institutions from the scope of  SFAS 72, “Accounting for Certain Acquisitions of Banking or Thrift Institutions” if those acquisitions meet the definition of a business combination.  Financial institutions meeting certain conditions in SFAS 147 will be required to cease amortizing certain intangible assets acquired in transactions previously accounted for under SFAS 72 and restate previously issued interim financial information.  The provisions of the Statement were effective on October 1, 2002.  Adoption of SFAS 147 had no effect on the Company’s financial statements.


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, 2002, the Bank had approximately $4,536,000 in commitments to originate mortgage loans and $23,119,000 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.


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, the Bank 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.


As a part of its asset and liability management strategy the Bank implemented an adjustable rate mortgage loan (“ARM”) program beginning in the early 1980s. Throughout the past several years, the Bank has continued to emphasize the origination of adjustable-rate, one- to four-family residential loans and adjustable-rate or relatively short-term commercial real estate, commercial business and consumer loans, while originating fixed-rate, one- to four-family residential loans primarily for immediate resale in the secondary market on a service-retained basis. This allows 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 December 31, 2002, such loans made up 18% of the net loans receivable.  In general, these loans have higher yields, shorter maturities and greater interest rate sensitivity than other real estate loans.



14


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, 2002, the Bank’s savings accounts, checking accounts, and money market deposit accounts totaled $93,701,835 or 42% of its total deposits.  As of  December 31, 2002 these accounts totaled $102,105,647 or 44% of total deposits.  The Bank believes, based on historical experience, that a substantial portion of such accounts represents non-interest rate sensitive, core deposits.  


Interest Rate Sensitivity Analysis


The following table sets forth as of September 30, 2002 (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 a 100 basis point instantaneous and permanent decrease 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

 

 $        39,871

 

 $          3,394

 

9%

 

10.58%

 

1.18%

+200

 

           39,436

 

             2,959

 

8%

 

10.34%

 

0.95%

+100

 

           38,372

 

             1,895

 

5%

 

9.96%

 

0.57%

   NC

 

           36,477

     

9.40%

  

 -100

 

           34,357

 

           (2,120)

 

-6%

 

8.79%

 

0.60%

           

Computations of prospective effects of hypothetical interest rate changes are calculated by the Office of Thrift Supervision (“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 steady in the future.  Further, in the event of a change in interest rates, prepayment and early withdrawal levels could deviate sign ificantly 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.  














15


Item 4. Controls and Procedures


(a)  The Company maintains disclosure controls and procedures as defined in Rule 13a-14(c) of the Securities Exchange Act of 1934 that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.   


Within 90 days prior to the date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures.   Based on the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.


(a)

There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect the internal controls subsequent to the date the Company completed its evaluation.









































16


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)

List of Exhibits

          

99.1 CEO certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

99.2 CFO certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

b)

Reports on Form 8-K

None.


































17













SIGNATURES


Pursuant to 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.




Date

Signature and Title



February  10, 2003

/s/ Don M. Gibson                              


Don M. Gibson

President and Chief Executive Officer

(Principal Executive Officer and Duly Authorized Officer)



Date



February 10, 2003

/s/ Bruce Winston

Bruce Winston

Senior Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)



































18


Certification of the Principal Executive Officer

(Section 302 of the Sarbanes-Oxley Act of 2002)


I, Don M. Gibson, certify that:


1. I have reviewed this quarterly report on Form 10-Q of Guaranty Federal Bancshares, Inc.;


2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;


3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;


4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:


a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;


b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and


c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;


5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):


a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and


b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and


6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


Date: February 10, 2003

/s/ Don M. Gibson               

Don M. Gibson
President and Chief Executive Officer

(Principal Executive Officer)









19


Certification of the Principal Financial Officer

(Section 302 of the Sarbanes-Oxley Act of 2002)


I, Bruce Winston, certify that:


1. I have reviewed this quarterly report on Form 10-Q of Guaranty Federal Bancshares, Inc.;


2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;


3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;


4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:


a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;


b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and


c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;


5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):


a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and


b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and


6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


Date: February 10, 2003

 /s/ Bruce Winston
Bruce Winston

Chief Financial Officer

(Principal Financial Officer)





20


Exhibit 99.1

CEO CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Quarterly Report of Guaranty Federal Bancshares, Inc. (the “Company”) on Form 10-Q for the period ending December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Don M. Gibson, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)  The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/  Don M. Gibson

Don M. Gibson
Chief Executive Officer
February 10, 2003


































21



























Exhibit 99.2

CFO CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Quarterly Report of Guaranty Federal Bancshares, Inc. (the “Company”) on Form 10-Q for the period ending December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Bruce Winston, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)  The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/  Bruce Winston

Bruce Winston
Chief Financial Officer
February 10, 2003














22