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 registrants 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. Managements 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 Companys 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 Companys 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 Banks 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 Companys stock price on the date the shares are awarded to employees.
On October 18, 1995, the Banks stockholders voted to approve both a Recognition and Retention Plan (RRP) and a Stock Option Plan (SOP). On July 22, 1998, the Companys 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 participants 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. Managements 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 Banks 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 Banks 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 managements 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 Companys 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 Companys 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 Banks 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 borrowers 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 Companys 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 Companys 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 Banks 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 Banks 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 Companys 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 borrowers intent and ability to repay the loan, local economic conditions and the Banks historical loss ratios. The Banks 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 Banks 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 Companys 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 Companys financial statements.
Liquidity and Capital Resources
The Banks 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 Banks liquidity needs.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Asset/Liability Management
The goal of the Banks 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 Banks 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 Banks assets with liabilities of a comparable duration to minimize the impact of changing interest rates on the Banks net interest income. Since the relative spread between financial assets and liabilities is constantly changing, the Banks 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 customers 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 Banks asset/liability management objectives and spread requirements. As of June 30, 2002, the Banks 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 Banks 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 Banks 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 Banks 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 Banks 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 Banks management is responsible for administering the policies and determinations of the Board of Directors with respect to the Banks 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 Companys 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 Companys 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 Companys management, including the Companys Chief Executive Officer and the Companys Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures. Based on the foregoing, the Companys Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures were effective.
(a)
There have been no significant changes in the Companys 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