UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended December 31, 1999
-----------------
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) 889-2494
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No___
-----
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Class Outstanding at February 4, 2000
----- -------------------------------
Common Stock, Par Value $0.10 5,252,777 Shares
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
Form 10-Q
TABLE OF CONTENTS
Item Page
- ---- ----
PART I. Financial Information
-----------------------------
1. Consolidated Financial Statements (Unaudited):
Statements of Financial Condition 3
Statements of Income 4
Statements of Changes in Stockholders' Equity 5
Statements of Cash Flow 7
Notes to Consolidated Financial Statements 8
2. Management's Discussion and Analysis of Financial Condition and 11
Results of Operations
3. Quantitative and Qualitative Disclosures about Market Risk 19
PART II. Other Information
--------------------------
1. Legal Proceedings 21
2. Changes in Securities and Use of Proceeds 21
3. Defaults Upon Senior Securities 21
4. Submission of Matters to Vote of Security-holders 21
5. Other Information 22
6. Exhibits and Reports on Form 8-K 22
Signatures 23
2
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1999 (UNAUDITED) AND JUNE 30, 1999
<TABLE>
<CAPTION>
ASSETS 12/31/99 6/30/99
------ -------- -------
<S> <C> <C>
Cash $ 2,399,141 1,656,648
Interest-bearing deposits in other financial institutions 3,918,829 8,032,473
------------- ---------
Cash and cash equivalents 6,317,970 9,689,121
Available-for-sale securities 7,415,065 8,951,175
Held-to-maturity securities 9,571,276 15,394,643
Mortgage loans held for sale 495,933 769,074
Loans receivable, net 284,446,254 263,499,778
Accrued interest receivable:
Loans 1,550,749 1,459,508
Investments 118,570 297,431
Prepaid expenses and other assets 6,328,065 5,671,845
Foreclosed assets held for sale -- 101,546
Premises and equipment 6,360,380 7,365,392
------------- ---------
$ 322,604,262 313,199,513
============= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
LIABILITIES
Deposits $ 143,196,344 141,137,154
Federal Home Loan Bank advances 115,835,718 104,794,640
Advances from borrowers for taxes and insurance 449,201 1,195,545
Accrued expenses and other liabilities 466,060 499,221
Accrued interest payable 560,661 543,641
Income taxes payable 425,800 235,587
------------- ---------
Deferred income taxes 980,780 1,360,503
------------- ---------
261,914,564 249,766,291
------------- ---------
STOCKHOLDERS' EQUITY
Common Stock:
$0.10 par value; authorized 10,000,000 shares;
issued; 12/31/99 - 6,247,329 shares, 6/30/99 - 6,245,775 shares 624,733 624,578
Additional paid-in capital 47,651,050 47,366,264
Unearned ESOP shares (2,985,260) (3,100,080)
Retained earnings, substantially restricted 23,906,375 23,236,009
Accumulated other comprehensive income
Unrealized appreciation on available-for-sale securities,
net of income taxes; 12/31/99 - $1,577,514, 6/30/99 - $2,026,448 2,022,686,038 3,438,826
------------- ---------
71,882,936 71,565,597
Treasury stock, at cost - 12/31/99 - 898,752 shares, 6/30/99- 64 (11,193,238) (8,132,375)
------------- ---------
60,689,698 63,433,222
------------- ---------
$ 322,604,262 313,199,513
============= ===========
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
THREE AND SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ending Six Months Ending
------------------- -----------------
12/31/1999 12/31/1998 12/31/1999 12/31/1998
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 5,381,790 4,590,813 10,561,689 8,974,029
Investment securities 199,704 441,973 411,671 874,576
Other 150,609 150,205 320,537 268,275
----------- ----------- ------------ ------------
5,732,103 5,182,991 11,293,897 10,116,880
----------- ----------- ------------ ------------
INTEREST EXPENSE
Deposits 1,511,475 1,516,084 3,011,053 3,102,268
Federal Home Loan Bank advances 1,609,334 1,173,633 3,094,730 2,089,612
----------- ----------- ------------ ------------
3,120,809 2,689,717 6,105,783 5,191,880
----------- ----------- ------------ ------------
Net Interest Income 2,611,294 2,493,274 5,188,114 4,925,000
Provision for Loan Losses 45,000 45,000 90,000 90,000
----------- ----------- ------------ ------------
Net Interest Income after
Provision for Loan Losses 2,566,294 2,448,274 5,098,114 4,835,000
----------- ----------- ------------ ------------
NONINTEREST INCOME (LOSS)
Service charges 287,372 221,252 559,789 427,152
Late charges and other fees 27,301 25,909 83,912 51,297
Gain (loss) on loans
and investment securities 12,737 28,953 (1,849) 38,703
Income (expense) on
foreclosed assets (431) (820) 12,941 (6,990)
Other income (expense) (34,166) 28,126 11,358 64,166
----------- ----------- ------------ ------------
292,813 303,420 666,151 574,328
----------- ----------- ------------ ------------
NONINTEREST EXPENSE
Salaries and employee benefits 879,155 711,315 1,686,213 1,485,160
Occupancy 191,178 198,175 396,270 372,505
SAIF deposit insurance premiums 21,062 20,702 41,134 43,076
Data processing fees 133,560 128,099 247,299 244,417
Advertising 66,011 116,955 156,342 224,851
Other expense 257,605 329,857 554,214 544,891
----------- ----------- ------------ ------------
1,548,571 1,505,103 3,081,472 2,914,900
----------- ----------- ------------ ------------
Income before Income Taxes 1,310,536 1,246,591 2,682,793 2,494,428
Provision for Income Taxes 469,017 426,162 981,176 875,896
----------- ----------- ------------ ------------
NET INCOME 841,519 820,429 1,701,617 1,618,532
OTHER COMPREHENSIVE INCOME
Unrealized appreciation on available-
for-sale securities (378,732) 919,135 (752,788) 1,032,501
----------- ----------- ------------ ------------
COMPREHENSIVE INCOME $ 462,787 1,739,564 948,829 2,651,033
=========== =========== ============ ============
BASIC EARNINGS PER SHARE $ 0.17 $ 0.15 $ 0.33 $ 0.29
=========== =========== ============ ============
DILUTED EARNINGS PER SHARE $ 0.16 $ 0.14 $ 0.33 $ 0.28
=========== =========== ============ ============
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Accumulated Other
Comprehensive
Income
------------------
Additional Unearned Appreciation on
Common Paid In ESOP Treasury Retained Available-for-Sale
Stock Capital Shares Stock Earnings Securities, Net Total
--------- ---------- ---------- ---------- ---------- ----------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1999 $ 624,578 47,366,264 (3,100,080) (8,132,375) 23,236,009 3,438,826 63,433,222
Net income - - - - 1,701,617 - 1,701,617
Dividends on common stock,
($0.20 per share on
5,156,256 shares) - - - - (1,031,251) - (1,031,251)
Recognition and Retention Plan
(RRP) expense & Restricted Stock
Plan (RSP) expense - 247,395 - - - - 247,395
Stock options exercised 155 9,200 - - - - 9,355
Dividends on RRP Stock 6,567 6,567
Treasury stock purchased - - - (3,060,863) - - (3,060,863)
Release of ESOP shares - 17,499 114,820 - - - 132,319
Tax liability of RRP shares - 4,125 - - - 4,125
Change in unrealized
appreciation on available-
for-sale securitites, net
of income taxes of $442,114 - - - - - (752,788) (752,788)
--------- ---------- ---------- ---------- ---------- --------- ----------
Balance, December 31, 1999 $ 624,733 47,651,050 (2,985,260) (11,193,238) 23,906,375 2,686,038 60,689,698
========= ========== ========== =========== ========== ========= ==========
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
Accumulated Other
Comprehensive
Income
------------------
Additional Unearned Appreciation on
Common Paid In ESOP Treasury Retained Available-for-Sale
Stock Capital Shares Stock Earnings Securities, Net Total
--------- ---------- ---------- ---------- ---------- ----------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1998 $ 622,804 49,016,992 (3,444,540) - 21,682,950 2,811,892 70,690,098
Net Income - - - - 1,618,532 - 1,618,532
Dividends on common stock,
($0.16 per share) - - - - (839,899) - (839,899)
Dividends on RRP stock - 7,500 - - - - 7,500
Recognition and
Retention Plan
(RRP) expense
& Restricted Stock
Plan (RSP) expense - 263,534 - - - - 263,534
Stock options exercised 66 3,925 - - - - 3,991
RSP stock purchased - (2,373,065) - - - - (2,373,065)
Treasury stock purchased - - - (4,280,238) - - (4,280,238)
Release of ESOP shares - 52,817 229,640 - - - 282,457
Tax benefit of RRP/RSP shares - 23,554 - - - - 23,554
Change in unrealized
appreciation on available-
for-sale securities, net of
income taxes of $606,389 - - - - - 1,032,501 1,032,501
--------- ---------- ---------- ---------- ---------- --------- ----------
Balance, December 31, 1998 $ 622,870 46,995,257 (3,214,900) (4,280,238) 22,461,583 3,844,393 66,428,965
========= ========== ========== ========== ========== ========= ==========
</TABLE>
6
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,701,617 1,618,532
Items not requiring (providing) cash:
Deferred income taxes 80,825 (74,339)
Depreciation 215,073 200,386
Provision for loan losses 90,000 90,000
(Gain) loss on loans and investment securities 3,975 (38,703)
Loss on sale of premises and equipment 64,298 -
Gain on sale of foreclosed assets (13,372) (138)
Amortization of deferred income, premiums and discounts 44,519 67,416
RRP/RSP expense 247,395 263,534
Origination of loans held for sale (2,047,971) (8,443,733)
Proceeds from sale of loans held for sale 2,317,137 6,011,518
Release of ESOP shares 132,318 282,457
Changes in:
Accrued interest receivable 87,620 (26,059)
Prepaid expenses and other assets (104,220) (115,443)
Accounts payable and accrued expenses (16,141) 281,199
Income taxes payable 190,213 (236,709)
----------------- --------------
Net cash provided by (used in) operating activities 2,993,286 (120,082)
----------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans (21,073,389) (25,536,974)
Principal payments on available-for-sale securities 335,414 737,963
Principal payments on held-to-maturity securities 1,116,999 2,290,661
Purchase of premises and equipment (256,532) (52,326)
Proceeds from sale of premises and equipment 982,174 -
Purchase of available-for-sale securities (13,878) (394,554)
Proceeds from maturities of held-to-maturity securities 4,700,000 1,144,371
Purchase of FHLB stock (552,000) (1,837,300)
Proceeds from sale of foreclosed assets 114,918 302,562
Capitalized costs on foreclosed assets - 322
----------------- --------------
Net cash used in investing activities (14,646,294) (23,345,275)
----------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Tax benefit of vested RRP shares 4,125 23,554
Stock options exercised 9,355 3,991
Cash dividends paid (1,031,251) (839,899)
Cash dividends received on RRP Stock 6,567 7,500
Net increase in demand deposits,
NOW accounts and savings accounts 1,007,366 4,924,655
Net increase (decrease) in certificates of deposit 1,051,824 (9,090,475)
Proceeds from FHLB advances 19,686,124 40,302,500
Repayments of FHLB advances (8,645,046) (3,555,540)
Advances from borrowers for taxes and insurance (746,344) (501,151)
RSP stock purchased - (2,373,065)
Treasury stock purchased (3,060,863) (4,280,238)
----------------- --------------
Net cash provided by financing activities 8,281,857 24,621,832
----------------- --------------
INCREASE IN CASH AND CASH EQUIVALENTS (3,371,151) 1,156,475
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 9,689,121 7,304,923
----------------- --------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,317,970 8,461,398
================= ==============
</TABLE>
7
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: Conversion, Reorganization and Stock Issuance
---------------------------------------------
On December 30, 1997, Guaranty Federal Bancshares, Inc. completed the
conversion from a federally chartered mutual holding company, (formerly Guaranty
Federal Bancshares, M. H. C.) to a Delaware-chartered stock corporation.
Stockholders' equity increased to $69.5 million primarily due to the conversion
in which Guaranty Federal Bancshares, Inc. exchanged 1,880,710 shares of its
common stock for all the Bank's common stock not held by Guaranty Federal
Bancshares, M. H. C. This exchange ratio was 1.931. In addition 4,340,812 shares
at $10.00 per share were sold in the stock offering, including 344,454 shares to
the employee stock ownership plan ( the "ESOP"). Total shares of common stock
outstanding following the offering and exchange was 6,221,522.
In April 1995 Guaranty Federal Savings and Loan Association (the
"Association") reorganized from a federally chartered mutual savings and loan
association into a federal mutual holding company, Guaranty Federal Bancshares,
M. H. C. (the "MHC"). As part of the reorganization, the Association
incorporated a de novo federally chartered stock savings bank, Guaranty Federal
Savings Bank (the "Bank") and transferred most of its assets and all its
liabilities to the Bank. The Bank issued 3,125,000 shares of its common stock
(par value $1.00) of which 972,365 shares were sold to parties other than the
MHC, thus creating a minority ownership interest in the Bank. The shares had an
initial public offering price of $8 per share, resulting in gross sales proceeds
of $7,778,920. Costs related to the stock issuance of $654,388 were applied to
reduce the gross proceeds. Also $100,000 was transferred to the MHC for the
initial capitalization in connection with reorganization.
Note 2: 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.
8
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 3: Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of
the Company, its wholly-owned subsidiary, Guaranty Federal Savings Bank and the
wholly-owned subsidiary of the Bank, Guaranty Financial Services of Springfield,
Inc. Significant intercompany accounts and transactions have been eliminated in
consolidation.
Note 4: Earnings Per Share
------------------
<TABLE>
<CAPTION>
For three months ended December 31, 1999 For six months ended December 31, 1999
---------------------------------------- --------------------------------------
Income Shares Per-share Income Shares Per-share
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Income available to common stockholders $ 841,519 5,083,805 $ 0.17 $ 1,701,617 5,150,035 $ 0.33
======
Effect of Dilutive Securities
Stock Options 53,264 54,599
--------- --------- ---------
Income available to common stockholders $ 841,519 5,137,069 $ 0.16 $ 1,701,617 5,204,634 $ 0.33
========= ========= ====== =========== ========= ======
</TABLE>
<TABLE>
<CAPTION>
For three months ended December 31, 1998 For six months ended December 31, 1998
---------------------------------------- --------------------------------------
Income Shares Per-share Income Shares Per-share
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Income available to common stockholders $ 820,429 5,572,548 $ 0.15 $ 1,618,532 5,628,249 $ 0.29
Effect of Dilutive Securities
Stock Options 66,226 68,289
--------- ---------
Income available to common stockholders $ 820,429 5,638,774 $ 0.14 $ 1,618,532 5,696,538 $ 0.28
========= ========= ====== =========== ========= ======
</TABLE>
Options to purchase 5,000, 16,704, 5,000 and 426,515 shares of common
stock at $11.75, $12.25, $12.63 and $13.44 per share, respectively, were
outstanding during the three months and six months ended December 31, 1999, but
were not included in the computation of diluted EPS because the options'
exercise price was greater than the average market price of the common shares.
9
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 5: Benefit Plans
-------------
On October 18, 1995, the Bank's stockholders voted to approve both a
Recognition and Retention Plan ("RRP") and a Stock Option Plan ("SOP"). On July
22, 1998, the Company's stockholders voted to approve both a 1998 Restricted
Stock Plan (" RSP") and a 1998 Stock Option Plan ("1998 SOP"). The RRP and RSP
authorized shares to be issued to directors, officers and employees of the Bank.
As of December 31, 1999, all of the RRP and RSP shares have been purchased and
all except 2,925 shares have been awarded. The Bank is amortizing the RRP and
RSP expense over each participant's vesting period and the financial statements
reflect $247,395 RRP and RSP expense for the six month period ending December
31, 1999. The SOP and 1998 SOP authorized stock options on shares to be issued
to officers and employees of the Bank, as of December 31, 1999 all options
except those on 25,263 shares have been granted. The RRP, RSP, SOP and 1998 SOP
vest over a five year period. The RRP and SOP have been adjusted to reflect the
conversion, reorganization and stock issuance described in Note 1 with all
vesting periods remaining unchanged. At December 31, 1999, there were 567,494
unexercised options that have been granted at prices ranging from $5.83 to
$13.44 per share and 158,095 RRP and RSP shares were unvested.
10
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
-------------
General
- -------
The accompanying Consolidated Financial Statements include the accounts
of Guaranty Federal Bancshares, Inc. (the "Company"), and all accounts of its
wholly owned subsidiary, Guaranty Federal Savings Bank (the "Bank") and all
accounts of the wholly-owned subsidiary of the Bank, Guaranty Financial Services
of Springfield, Inc. All significant intercompany transactions and balances have
been eliminated in consolidation.
However, because the conversion, reorganization and stock issuance of
the Company, the Bank and related entities did not occur until December 30,
1997, all results prior to that date reflect the accounts of the Bank and its
subsidiary. The Company realized approximately $39.2 million in net proceeds
from the stock issuance of which the Company provided $19.9 million to the Bank
as capital and the Company provided a loan of $3.44 million to fund the purchase
of stock for the employee stock ownership plan. Other than the loan for the
ESOP, most of the funds received have been invested in loans.
The primary function of the Company has been to monitor its investment
in the Bank, as a result, the results of operations of the Company are derived
primarily from operations of the Bank. The Bank's results of operations are
primarily dependent on net interest margin, which is the difference between
interest income on interest-earning assets and interest expense on
interest-bearing liabilities. The Bank's income is also affected by the level of
its noninterest expenses, such as employee salary and benefits, occupancy
expenses and other expenses. The following discussion reviews the financial
condition at December 31, 1999 and the results of operations for the three
months and six months ended December 31, 1999 and 1998.
The discussion set forth below, as well as other portions of this Form
10-Q, may contain forward-looking comments. Such comments are based upon the
information currently available to management of the Company and management's
perception thereof as of the date of the Form 10-Q. Actual results of the
Company's operations could materially differ from those forward-looking
comments. The differences could be caused by a number of factors or combination
of factors including, but limited to; changes in demand for banking services;
changes in portfolio composition; changes in management strategy; increased
competition from both bank and non-bank companies; and changes in the general
level of interest rates.
11
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
Financial Condition
- -------------------
The Bank's total assets increased $9,404,749, or 3.0%, from
$313,199,513 as of June 30, 1999, to $322,604,262 as of December 31, 1999.
Interest-bearing deposits in other financial institutions decreased
$4,113,644, or 51.2% from $8,032,473 as of June 30, 1999, to $3,918,829 as of
December 31, 1999, as the funds were used to fund new loans.
Securities available-for-sale decreased $1,536,110, or 17.2% from
$8,951,175 as of June 30, 1999, to $7,415,065 as of December 31, 1999. This is
primarily due to the decrease in fair value of various equity securities.
Securities held-to-maturity decreased due to maturities and principal
repayments, by $5,823,367, or 37.8%, from $15,394,643 as of June 30, 1999, to
$9,571,276 as of December 31, 1999. The Bank continues to hold 96,000 shares of
Federal Home Loan Corporation ("FHLMC") stock with a amortized cost of $94,000
in the available-for-sale category. As of December 31, 1999, the gross
unrealized gain on the stock was $4,518,000, a decrease from $5,474,000 as of
June 30, 1999.
Net loans receivable increased by $20,946,476, or 7.9%, from
$263,499,778, as of June 30, 1999, to $284,446,254, as of December 31, 1999, and
loans held-for-sale decreased by $273,141, or 35.5% from $769,074 as of June 30,
1999 to $495,933 as of December 31, 1999. Growth consisted of loans secured by
both owner and non-owner occupied residential real estate, which increased by
$10,293,000. In addition construction loans increased by $3,831,000. This was
primarily due to an increase of $4,457,000 in loans for the construction of 1-4
family units. Growth in loans receivable is anticipated to continue and
represents a major part of the Bank's planned assets growth.
Allowance for loan losses increased $85,554 or 3.6% from $2,349,328 of
June 30, 1999, to $2,434,882 as of December 31, 1999. The allowance increased
mainly due to an increase in the provision for loan losses. The allowance for
loan losses as of December 31, 1999 and June 30, 1999 was .86%, and .89%
respectively, of net loans outstanding. As of December 31, 1999, the allowance
for loan losses was 167.6% of impaired loans versus 259.3% as of June 30, 1999.
Fair value of foreclosed assets held-for-sale decreased $101,546 from
$101,546 as of June 30, 1999, to $0 as of December 31, 1999. This decrease was
due to the sale of all foreclosed assets. The Bank recorded a gain of $13,372 on
the sale of these assets.
Deposits increased $2,059,190 or 1.5%, from $141,137,154 as of June 30,
1999, to $143,196,344 as of December 31, 1999. For the six months ended December
31, 1999, checking and passbook accounts increased by $1,007,366, or 2.1% while
certificates of deposits increased by $1,051,824 or 1.1%.
12
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
Financial Condition, continued
- ------------------------------
As a result of the increase in loan demand and the repurchase of
Company stock, FHLB advances increased $11,041,078 or 10.5%, from $104,794,640
as of June 30, 1999, to $115,835,718 of December 31, 1999. As of December 31,
1999, the Bank had the ability to borrow an additional $70 million from the
FHLB.
Advances from borrowers for taxes and insurance decreased $746,344 or
62.4% from $1,195,545 as of June 30, 1999, to $449,201 as of December 31, 1999.
The majority of this decrease is due to the payment of 1999 real estate taxes
from borrower's escrow accounts.
Stockholders' equity (including unrealized appreciation on securities
available-for-sale, net of tax) decreased $2,743,524, or 4.3%, from $63,433,222
as of June 30, 1999, to $60,689,698 as of December 31, 1999. This decrease was
due to several factors. During this period a total of 256,625 shares of Company
stock were repurchased in the open market at a cost of $3,060,863. In addition,
dividends in the amount of $1,031,250 ($0.20 per share) were declared and
payable, at September 30, 1999, to stockholders' of record as of September 7,
1999. There was also a decrease in the unrealized appreciation on
available-for-sale securities of $752,788. On a per share basis, stockholders'
equity increased from $11.98 as of June 30, 1999 to $12.02 as of December 31,
1999.
Analysis of Core Earnings
- -------------------------
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. Net income is further affected by
non-interest income, non-interest expense, and income taxes.
13
<PAGE>
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.
<TABLE>
<CAPTION>
Six months ended Six months ended
December 31, 1999 December 31, 1998
----------------- -----------------
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning:
Loans $ 273,485 10,562 7.72% $ 222,614 8,974 8.06%
Investment securities 12,644 412 6.52% 28,017 875 6.25%
Other assets 15,541 320 4.12% 13,208 268 4.06%
----------------- -------------- ------------ ------------------ -------------- ------------
Total interest-earning 301,670 11,294 7.49% 263,839 10,117 7.67%
Noninterest-earning 8,146 7,468
----------------- ------------------
$ 309,816 $ 271,307
================= ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing:
Savings accounts $ 8,478 97 2.29% $ 8,371 110 2.63%
Transaction accounts 34,467 483 2.80% 26,892 378 2.81%
Certificates of Deposit 95,482 2,431 5.09% 96,884 2,614 5.40%
FHLB Advances 105,062 3,095 5.89% 69,274 2,090 6.03%
----------------- -------------- ------------ ------------------ -------------- ------------
Total interest-bearing 243,489 6,106 5.02% 201,421 5,192 5.16%
Noninterest-bearing 4,691 3,618
----------------- ------------------
Total liabilities 248,180 205,039
Stockholders' equity 61,636 66,268
----------------- ------------------
$ 309,816 $ 271,307
================= ==================
Net earning balance $ 58,181 $ 62,418
================= ==================
Earning yield less costing rate 2.47% 2.51%
============ ============
Net interest income, and
net yield spread on
interest earning assets $ 5,188 3.44% $ 4,925 3.73%
============== ============ ============== ============
Ratio on interest-earning assets to
interest-bearing liabilities 124% 131%
============== ==============
</TABLE>
14
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
Results of Operations - Comparison of Three Month and
Six Month Periods Ended December 31, 1999 and 1998
Net income for the three months and six months ended December 31, 1999
was $841,519 and $1,701,617 as compared to $820,429 and $1,618,532 for the three
months and six months ended December 31, 1998 which represents an increase in
earnings of $21,090 or 2.6% for the three month period, and a increase in
earnings of $83,085 or 5.1% for the six month period.
Interest Income
- ---------------
Total interest income for the three months and six months ended
December 31, 1999, increased $549,112 or 10.6% and $1,177,017 or 11.6% as
compared to the three months and six months ended December 31, 1998. For the six
month period ended December 31, 1999 compared to the same period in 1998, the
average yield on interest earning assets decreased 18 basis points to 7.49%,
while the average balance of interest earnings assets increased $37,831,000 over
the same period one year ago.
Interest Expense
- ----------------
Total interest expense for the three months and six months ended
December 31, 1999, increased $431,092 or 16.0% and $913,903 or 17.6% when
compared to the three months and six months ended December 31, 1998. For the six
month period ended December 31, 1999 the average cost of interest bearing
liabilities decreased 14 basis points to 5.02% while the average balance
increased $42,068,000, when compared to the same period in 1998.
Net Interest Income
- -------------------
Net interest income for the three months and six months ended December
31, 1999, increased $118,020, or 4.7% and $263,114, or 5.3% when compared to the
same period in 1998. For the six month period ended December 31, 1999 the
increases in average balances of interest earning assets and interest bearing
liabilities discussed above contributed to the increase in net interest income
by approximately $366,000. This was offset by the decrease in net earning yield
by 4 basis points which resulted in a decrease in net interest income of
approximately $103,000 for the same period.
15
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
Provision for Loan Losses
- -------------------------
Based primarily on the continued growth of the loan portfolio
management decided to increase the allowance for loan loss reserve through a
provision for loan loss of $45,000 and $90,000 for the three months and six
months ended December 31, 1999, respectively, compared to $45,000 and $90,000
for the same period in 1998. 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 $10,607, or 3.5% and increased $91,823, or
16.0% for the three months and six months ended December 31, 1999, when compared
to the three months and six months ended December 31, 1998. The decrease for the
three months ended December 31, 1999 was primarily due to losses on sale of
premises and equipment during the period of $64,000, the increase for the six
ended was primarily due to a increase in checking account service charges, which
increased $132,637 or 31.1% for the six months ended December 31, 1999, when
compared to the same period in 1998.
Noninterest Expense
- -------------------
Noninterest expense increased $43,468, or 2.9% for the three months
ended December 31, 1999, and increased $166,572, or 5.7% for the six months
ending December 31, 1999 when compared to the three months and six months ended
December 31, 1998. In general this increase can be attributed to the overall
increase in accounts served. There were no significant changes in any individual
expense category.
Provision for Income Taxes
- --------------------------
There was a $42,855 and $105,280 increase in the provision for income
taxes for the three months and six months ended December 31, 1999, as compared
to the same period in 1998. This increase was due to the increase in before tax
income for the three months and six months ended December 31, 1999, compared to
the same period in 1998.
16
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
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,
1999, was $2,434,882 or 0.9% of loans receivable. Total assets classified as
substandard or loss as of December 31, 1999, were $3,324,400 or 1.0% of total
assets. Management has considered nonperforming and total classified assets in
evaluating the adequacy of the Bank's allowance for loan losses.
The ratio of nonperforming assets to total assets is another useful
tool in evaluating exposure to credit risk. Nonperforming assets of the Bank
include nonperforming loans (nonaccruing loans) and assets which have been
acquired as a result of foreclosure or deed-in-lieu of foreclosure.
12/31/1999 06/30/1999 06/30/1998
(Dollars In Thousands)
Nonperforming loans $ 1,455 906 1,012
Real estate acquired in
settlement of loans - 101 286
------- ----- -----
Total Nonperforming Assets $ 1,455 1,007 1,298
======= ===== =====
Total Nonperforming Assets
as a Percentage of Total
Assets 0.46% 0.32% 0.50%
Allowance for loan losses $ 2,435 2,349 2,191
Allowance for loan losses as a
Percentage of average loans, net 0.89% 1.00% 1.24%
Asset/Liability Management
- --------------------------
The goal of the Bank's asset/liability policy is to manage interest
rate risk so as to maximize net interest income over time in changing interest
rate environments. Management monitors the Bank's net interest spreads (the
difference between yields received on assets and paid on liabilities) and,
although constrained by market conditions, economic conditions, and prudent
underwriting standards, it offers deposit rates and loan rates designed to
maximize net interest income. Management also attempts to fund the Bank's assets
with liabilities of a comparable duration to minimize the impact of changing
interest rates on the Bank's net interest income. Since the relative spread
17
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
between financial assets and liabilities is constantly changing, the Bank's
current net interest income may not be an indication of future net interest
income.
The Bank's initial efforts to manage interest rate risk included
implementing an adjustable rate mortgage loan ("ARM") program beginning in the
early 1980s. The ARMs have met with excellent customer acceptance. As of June
30, 1999, ARMs constituted 59.3% of the Bank's mortgage loan portfolio. As of
December 31, 1999, ARMs represent 60.5% of the loan portfolio. Of the ARMs
originated during the first quarter of fiscal year 2000, borrowers preferred
initial fixed rate periods of three or five years. The Bank has continued to
fund fixed rate loans through a program of borrowing longer-term funds from the
FHLB.
The Bank is also managing interest rate risk by the origination of
construction loans. As of December 31, 1999, such loans made up 10.1% of the
Bank's loan portfolio. In general, these loans have higher yields, shorter
maturities and greater interest rate sensitivity than other real estate loans.
The Bank constantly monitors its deposits in an effort to decrease
their interest rate sensitivity. Rates of interest paid on deposits at the Bank
are priced competitively in order to meet the Bank's asset/liability management
objectives and spread requirements. As of June 30, 1999, the Bank's savings
accounts, checking accounts, and money market deposit accounts totaled
$46,736,183 or 33.1% of its total deposits. As of December 31,1999, these
accounts totaled $47,743,549 or 33.4% of total deposits. The Bank believes,
based on historical experience, that a substantial portion of such accounts
represents non-interest rate sensitive, core deposits.
The value of the Bank's loan portfolio will change as interest rates
change. Rising interest rates will decrease the Bank's net portfolio value,
while falling interest rates increase the value of that portfolio.
18
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
Interest Rate Sensitivity Analysis
- ----------------------------------
The following table sets forth as of September 30, 1999 (the most
recent available), the OTS estimate of the projected changes in net portfolio
value ("NPV") in the event of 100, 200, and 300 basis point ("bp") instantaneous
and permanent increases and decreases in market interest rates. Dollar amounts
are expressed in thousands.
Estimated Net Portfolio Value NPV as % of PV of Assets
BP Change ----------------------------- ------------------------
in Rates $ Amount $Change %Change NPV Ratio BP Change
-------- -------- ------- ------- --------- ---------
+300 60,278 (5,023) -8% 20.5% -37 bp
+200 63,083 (2,218) -3% 21.0% +9 bp
+100 64,880 (421) -1% 21.1% +24 bp
NC 65,301 20.9%
- -100 64,002 (1,299) -2% 20.2% -70 bp
- -200 61,315 (3,987) -7% 19.1% -177 bp
- -300 58,308 (6,993) -11% 18.0% -292 bp
Computations of prospective effects of hypothetical interest rate
changes are calculated by the OTS from data provided by the Bank and are based
on numerous assumptions, including relative levels of market interest rates,
loan repayments and deposit run-offs, and should not be relied upon as
indicative of actual results. Further, the computations do not contemplate any
actions the Bank may undertake in response to changes in interest rates.
Management cannot predict future interest rates or their effect on the
Bank's NPV in the future. Certain shortcomings are inherent in the method of
analysis presented in the computation of NPV. For example, although certain
assets and liabilities may have similar maturities or periods to repricing, they
may react in differing degrees to changes in market interest rates.
Additionally, certain assets, such as adjustable rate loans, which represent the
Bank's primary loan product, have an initial fixed rate period typically from
one to five years and over the remaining life of the asset changes in the
interest rate are restricted. In addition, the proportion of adjustable rate
loans in the Bank's portfolio could decrease in future periods due to
refinancing activity if market interest rates remain or decrease in the future.
Further, in the event of a change in interest rates, prepayment and early
withdrawal levels could deviate significantly from those assumed in the table.
Finally, the ability of many borrowers to service their adjustable-rate debt may
decrease in the event of an interest rate increase.
19
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
Interest Rate Sensitivity Analysis, continued
- ---------------------------------------------
The Bank's Board of Directors is responsible for reviewing the asset
and liability policies. The Board meets quarterly to review interest rate risk
and trends, as well as liquidity and capital ratios and requirements. The Bank's
management is responsible for administering the policies and determinations of
the Board of Directors with respect to the Bank's asset and liability goals and
strategies.
Liquidity and Capital Resources
- -------------------------------
The Bank's primary sources of funds are deposits, principal and
interest payments on loans and securities and extensions of credit from the
Federal Home Loan Bank of Des Moines. While scheduled loan and security
repayments and the maturity of short-term investments are somewhat predictable
sources of funding, deposit flows are influenced by many factors which make
their cash flows difficult to anticipate. Office of Thrift Supervision
regulations require the Bank to maintain cash and eligible investments in an
amount equal to at least 4% of customer accounts and short-term borrowings to
assure its ability to meet demands for withdrawals and repayment of short-term
borrowings. As of December 31, 1999, the Bank's liquidity ratio was 10.6%, which
exceeded the minimum regulatory requirement.
The Bank uses its liquidity resources principally to satisfy its
ongoing commitments which include funding loan commitments, funding maturing
certificates of deposit as well as deposit withdrawals, maintaining liquidity,
purchasing investments, and meeting operating expenses. As of December 31, 1999,
the Bank had approximately $2,354,000 in commitments to originate mortgage loans
and $15,260,000 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.
The Company believes successful remediation of mission-critical systems
has been completed in a timely manner. The Company has not experienced any
significant operational or financial problems related to the Year 2000
compliance. Management presently believes that the Year 2000 Issue will not pose
any future operational problems.
20
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
PART II
Item 1. Legal Proceedings
- ------- -----------------
None.
Item 2. Changes in Securities
- ------- ---------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
- ------- -------------------------------
Not applicable.
Item 4. Submission of Matters to Vote of Common Stockholders
- ------- ----------------------------------------------------
The annual meeting of stockholders of the registrant was held on
October 27, 1999. At the meeting the stockholders elected Wayne Barnes, Ivy
Rogers, and Gregory Ostergren to three-year terms as director of the Savings
Bank, while Gary Lipscomb, George Hall, Jack Barham, James Haseltine and Raymond
Tripp continue to serve as directors. Also at that meeting, Baird, Kurtz &
Dobson was ratified as Independent Certified Public Accountant. These same
entities serve in identical capacities for the subsidiary bank of the
registrant.
The results of voting are shown for each matter considered.
Director election:
Nominee Votes For Votes Withheld
- ------- --------- --------------
Wayne Barnes 4,889,524 130,776
Ivy Rogers 4,877,627 152,673
Gregory Ostergren 4,886,365 143,935
Auditor ratification:
Votes For 4,941,317
Votes Against 68,580
Abstentions 20,403
21
<PAGE>
Item 5. Other Information
- ------- -----------------
None.
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
a) Exhibits
4 Preferred Share Purchase Rights. Incorporated by reference to the
Form 8-A filed on January 22, 1999 with the U.S. Securities and
Exchange Commission (File No. 0-23325).
10.5 Change in Control Severance Agreements.
b) Reports on Form 8-K
None.
22
<PAGE>
GUARANTY FEDERAL BANCSHARES, INC.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant has this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Guaranty Federal Bancshares, Inc.
Signatures Date
---------- ----
/s/ James E. Haseltine February 4, 2000
- ------------------------------------------ ---------------------------
James E. Haseltine
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Bruce Winston February 4, 2000
- ------------------------------------------ ---------------------------
Bruce Winston
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
23
EXHIBIT 10.5
<PAGE>
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS CHANGE IN CONTROL SEVERANCE AGREEMENT ("Agreement") entered into
this 1st day of January 2000 ("Effective Date"), by and between Guaranty Federal
Savings Bank (the "Bank") and James E. Haseltine (the "Executive").
WHEREAS, the Executive is currently employed by the Bank as President
and is experienced in the business of the Bank; and
WHEREAS, the parties desire by this writing to set forth the rights and
responsibilities of the Bank and Executive if the Bank should undergo a change
in control (as defined hereinafter in the Agreement) after the Effective Date.
NOW, THEREFORE, it is AGREED as follows:
1. Employment. The Executive is employed in the capacity as the
President of the Bank. The Executive shall render such administrative and
management services to the Bank and Guaranty Federal Bancshares, Inc. ("Parent")
as are currently rendered and as are customarily performed by persons situated
in a similar executive capacity. The Executive's other duties shall be such as
the Board of Directors for the Bank (the "Board of Directors" or "Board") may
from time to time reasonably direct, including normal duties as an officer of
the Bank and the Parent.
2. Term of Agreement. The term of this Agreement shall be for the
period commencing on the Effective Date and ending thirty-six (36) months
thereafter ("Term").
3. Termination of Employment in Connection with or Subsequent to a
Change in Control.
(a) Notwithstanding any provision herein to the contrary, in the event
of the involuntary termination of Executive's employment under this Agreement,
absent Just Cause, in connection with, or within twenty-four (24) months after,
any Change in Control of the Bank or Parent, Executive shall be paid an amount
equal to two (2.0) times the Executives "base amount" as defined in Section
280G(b)(3) of the Internal Revenue Code of 1986 ("Code"), and the costs
associated with maintaining coverage under the Bank's medical and dental
insurance reimbursement plans similar to that in effect on the date of
termination of employment for a period of two years thereafter. Said sum shall
be paid, at the option of Executive, either in one (1) lump sum not later than
the date of such termination of employment or in periodic payments over the next
24 months, as if Executive's employment had not been terminated. Notwithstanding
the forgoing, all sums payable hereunder shall be reduced in such manner and to
such extent so that no such payments made hereunder when aggregated with all
other payments to be made to the Executive by the Bank or the Parent shall be
deemed an "excess parachute payment" in accordance with Section 280G of the Code
and be subject to the excise tax provided at Section 4999(a) of the
1
<PAGE>
Code. The term "change in control" shall refer to (i) the sale of all, or a
material portion, of the assets of the Bank or the Parent; (ii) the merger or
recapitalization of the Bank or the Parent whereby the Bank or the Parent is not
the surviving entity; (iii) a change in control of the Bank or the Parent, as
otherwise defined or determined by the Office of Thrift Supervision or
regulations promulgated by it; or (iv) the acquisition, directly or indirectly,
of the beneficial ownership (within the meaning of that term as it is used in
Section 13(d) of the Securities Exchange Act of 1934 and the rules and
regulations promulgated thereunder) of twenty-five percent (25%) or more of the
outstanding voting securities of the Bank or the Parent by any person, trust,
entity or group. This limitation shall not apply to the purchase of shares by
underwriters in connection with a public offering of Bank or Parent stock, or
the purchase of shares of up to 25% of any class of securities of the Bank or
Parent by a tax-qualified employee stock benefit plan which is exempt from the
approval requirements, set forth under 12 C.F.R. ss.574.3(c)(1)(vi) as now in
effect or as may hereafter be amended. The term "person" refers to an individual
or a corporation, partnership, trust, association, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization or any other form of
entity not specifically listed herein.
(b) Notwithstanding any other provision of this Agreement to the
contrary, Executive may voluntarily terminate his employment within 24 months
following a change in control of the Bank or Parent, and Executive shall
thereupon be entitled to receive the payment described in Section 3(a) of this
Agreement, upon the occurrence, or within 120 days thereafter, of any of the
following events, which have not been consented to in advance by the Executive
in writing: (i) if Executive would be required to move his personal residence or
perform his principal executive functions more than thirty-five (35) miles from
the Executive's primary office as of the signing of this Agreement; (ii) if in
the organizational structure of the Bank, Executive would be required to report
to a person or persons other than the Board of Directors of the Bank; (iii) if
the Bank should fail to maintain Executive's base compensation in effect as of
the date of the Change in Control and the existing employee benefits plans,
including material fringe benefit, stock option and retirement plans; (iv) if
Executive would be assigned duties and responsibilities other than those
normally associated with his position as referenced at Section 1, herein; (v) if
Executive's responsibilities or authority have in any way been materially
diminished or reduced; or (vi) if Executive would not be reelected to the Board
of Directors of the Bank or the Parent.
4. Other Changes in Employment Status.
Except as provided for at Section 3, herein, the Board of Directors may
terminate the Executive's employment at any time with or without Just Cause
within its sole discretion. This Agreement shall not be deemed to give Executive
any right to be retained in the employment or service of the Bank, or to
interfere with the right of the Bank to terminate the employment of the
Executive at any time. The Executive shall have no right to receive compensation
or other benefits for any period after termination for Just Cause. Termination
for "Just Cause" shall include termination because of the Executive's personal
dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving
personal profit, intentional failure to perform stated
2
<PAGE>
duties, willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of the Agreement.
5. Regulatory Exclusions.
(a) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Bank under this Agreement
shall terminate, as of the effective date of the order, but the vested rights of
the contracting parties shall not be affected.
(b) If the Bank is in default (as defined in Section 3(x)(1) of FDIA)
all obligations under this Agreement shall terminate as of the date of default,
but this paragraph shall not affect any vested rights of the contracting
parties.
(c) All obligations under this Agreement shall be terminated, except to
the extent determined that continuation of this Agreement is necessary for the
continued operation of the Bank: (i) by the Director of the Office of Thrift
Supervision ("Director of OTS"), or his or her designee, at the time that the
Federal Deposit Insurance Corporation ("FDIC") enters into an agreement to
provide assistance to or on behalf of the Bank under the authority contained in
Section 13(c) of FDIA; or (ii) by the Director of the OTS, or his or her
designee, at the time that the Director of the OTS, or his or her designee
approves a supervisory merger to resolve problems related to operation of the
Bank or when the Bank is determined by the Director of the OTS to be in an
unsafe or unsound condition. Any rights of the parties that have already vested,
however, shall not be affected by such action.
(d) If the Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(3) and (g)(1)), the
Bank's obligations under the Agreement shall be suspended as of the date of
service, unless stayed by appropriate proceedings. If the charges in the notice
are dismissed, the Bank may within its discretion (i) pay the Executive all or
part of the compensation withheld while its contract obligations were suspended
and (ii) reinstate (in whole or in part) any of its obligations which were
suspended.
(e) Notwithstanding anything herein to the contrary, any payments made
to the Executive pursuant to the Agreement, or otherwise, shall be subject to
and conditioned upon compliance with 12 USC ss.1828(k) and any regulations
promulgated thereunder.
6. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be binding upon
any corporate or other successor of the Bank which shall acquire, directly or
indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Bank or Parent.
3
<PAGE>
(b) The Executive shall be precluded from assigning or delegating his
rights or duties hereunder without first obtaining the written consent of the
Bank.
7. Amendments. No amendments or additions to this Agreement shall be
binding upon the parties hereto unless made in writing and signed by both
parties, except as herein otherwise specifically provided.
8. Applicable Law. This agreement shall be governed by all respects
whether as to validity, construction, capacity, performance or otherwise, by the
laws of the State of Missouri, except to the extent that Federal law shall be
deemed to apply.
9. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
10. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the rules then in effect of the district office of the American
Arbitration Association ("AAA") nearest to the home office of the Bank, and
judgment upon the award rendered may be entered in any court having jurisdiction
thereof, except to the extent that the parties may otherwise reach a mutual
settlement of such issue. Further, the settlement of the dispute to be approved
by the Board of the Bank may include a provision for the reimbursement by the
Bank to the Executive for all reasonable costs and expenses, including
reasonable attorneys' fees, arising from such dispute, proceedings or actions,
or the Board of the Bank or the Parent may authorize such reimbursement of such
reasonable costs and expenses by separate action upon a written action and
determination of the Board following settlement of the dispute. Such
reimbursement shall be paid within ten (10) days of Executive furnishing to the
Bank or Parent evidence, which may be in the form, among other things, of a
canceled check or receipt, of any costs or expenses incurred by Executive.
11. Confidential Information. The Executive acknowledges that during
his or her employment he or she will learn and have access to confidential
information regarding the Bank and the Parent and its customers and businesses
("Confidential Information"). The Executive agrees and covenants not to disclose
or use for his or her own benefit, or the benefit of any other person or entity,
any such Confidential Information, unless or until the Bank or tthe Parent
consents to such disclosure or use or such information becomes common knowledge
in the industry or is otherwise legally in the public domain. The Executive
shall not knowingly disclose or reveal to any unauthorized person any
Confidential Information relating to the Bank, the Parent, or any subsidiaries
or affiliates, or to any of the businesses operated by them, and the Executive
confirms that such information constitutes the exclusive property of the Bank
and the Parent. The Executive shall not otherwise knowingly act or conduct
himself (a) to the material detriment of the Bank or the Parent, or its
subsidiaries, or affiliates, or (b) in a manner which is inimical or contrary to
the interests of the Bank or the Parent. Executive acknowledges and agrees that
the existence of this Agreement and its terms and conditions constitutes
Confidential Information of the Bank, and the
4
<PAGE>
Executive agrees not to disclose the Agreement or its contents without the prior
written consent of the Bank. Notwithstanding the foregoing, the Bank reserves
the right in its sole discretion to make disclosure of this Agreement as it
deems necessary or appropriate in compliance with its regulatory reporting
requirements. Notwithstanding anything herein to the contrary, failure by the
Executive to comply with the provisions of this Section may result in the
immediate termination of the Agreement within the sole discretion of the Bank,
disciplinary action against the Executive taken by the Bank, including but not
limited to the termination of employment of the Executive for breach of the
Agreement and the provisions of this Section, and other remedies that may be
available in law or in equity.
12. Entire Agreement. This Agreement together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto. This Agreement supercedes any
prior written Employment Agreement or Severance Agreements between the Executive
and the Bank or the Parent.
[End of Agreement]
5
<PAGE>
In addition to the change in control severance agreement with Mr.
Haseltine, Guaranty Federal Savings Bank entered into identical agreements as of
the same date with the following nine employees of the bank: William Williams,
Bruce Winston, Kevin Bell, Larry Cruzan, Dana Elwell, Thomas Howard, Jerry
Graham, Carla Green, and Lorene Thomas. Each agreement provides for the payment
of two times the employee's "base amount" (as defined in 26 U.S.C. Section
280G(b)(3)) in the event of a change in control.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT ON FORM 10Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 2,399
<INT-BEARING-DEPOSITS> 3,919
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 7,415
<INVESTMENTS-CARRYING> 9,571
<INVESTMENTS-MARKET> 9,695
<LOANS> 287,377
<ALLOWANCE> 2,435
<TOTAL-ASSETS> 322,604
<DEPOSITS> 143,196
<SHORT-TERM> 115,836
<LIABILITIES-OTHER> 2,883
<LONG-TERM> 0
0
0
<COMMON> 625
<OTHER-SE> 60,065
<TOTAL-LIABILITIES-AND-EQUITY> 322,604
<INTEREST-LOAN> 10,562
<INTEREST-INVEST> 412
<INTEREST-OTHER> 321
<INTEREST-TOTAL> 11,295
<INTEREST-DEPOSIT> 3,011
<INTEREST-EXPENSE> 6,106
<INTEREST-INCOME-NET> 5,188
<LOAN-LOSSES> 90
<SECURITIES-GAINS> (2)
<EXPENSE-OTHER> 3,081
<INCOME-PRETAX> 2,683
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,702
<EPS-BASIC> 0.33
<EPS-DILUTED> 0.33
<YIELD-ACTUAL> 3.44
<LOANS-NON> 1,455
<LOANS-PAST> 1,455
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,405
<CHARGE-OFFS> 4
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 2,435
<ALLOWANCE-DOMESTIC> 2,435
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
