GlobeNewswire Inc | Oct 21, 2021 09:00AM EDT

October 21, 2021

SPRINGFIELD, Mo., Oct. 21, 2021 (GLOBE NEWSWIRE) --

CEO Comments

Despite continued competitive and interest rate pressures, the Company experienced strong earnings in the third quarter, recognizing significant improvement over the same quarter in 2020. Net interest margin expanded as weve seen the positive results of the previous quarters loan growth, the repricing of higher-cost certificates of deposit and the repayment of a 6.92% fixed-rate trust preferred issuance. Additionally, the full repayment of $50 million of wholesale funding liabilities during the current quarter has made an immediate positive impact to capital levels and will further improve interest expense and net interest margin going forward. The low interest rate environment and strong housing market continue to keep our mortgage team closing loans at a record pace which contributed significant fee income to our quarterly results. We expect to finish 2021 strong and are already looking forward to 2022 and beyond.

- Shaun A. Burke, President and Chief Executive Officer

Highlights of Third Quarter 2021

-- Net income available to common shareholders for the quarter was $3.4 million as compared to $2.5 million in the second quarter of 2021 and $1.9 million earned during the third quarter of 2020. This resulted in diluted earnings per common share of $0.78 for the third quarter of 2021 compared to $0.58 for the second quarter of 2021 and $0.44 earned during the third quarter of 2020. -- Annualized return on average assets and average equity were 1.12% and 14.06%, respectively, when compared to 0.67% and 8.60% during the third quarter of 2020. -- Net interest margin (NIM) increased to 3.30% for the quarter compared to 2.90% for the third quarter of 2020. Excluding the impacts of interest and fee income from the SBAs Paycheck Protection Program (PPP), NIM would have been 3.01% for the quarter compared to 2.90% during the prior year quarter. Loan balances forgiven and repaid under the PPP were $20.1 million for the quarter. -- As of September 30, 2021, there were no loans under modification or deferment due to the financial hardship from the COVID-19 pandemic. -- Non-performing asset balances declined $625,000 (6%) to $10.6 million. This resulted in a percentage to total assets of 0.91% as of September 30, 2021. -- During September, the Company executed a de-leveraging transaction whereby utilizing the proceeds from the sale of $43 million in investment securities and $7 million of excess cash to terminate an interest rate swap and payoff $50 million in higher-cost FHLB advances. The $2.7 million of gains recognized on the investment sales were used to offset the prepayment loss on the interest rate swap of $2.6 million. The immediate financial impacts are as follows: Balance sheet reducing both lower yielding long-term assets and higher cost long-term borrowings, while increasing the Companys tangible common equity ratioIncome statement reducing cost of funds, expanding net interest margin and improving return on average assets due to the reduced total asset size -- The Company declared its 30th consecutive quarterly dividend on September 30, 2021.

Select Quarterly Financial Data

Below are selected financial results for the Companys third quarter of 2021, compared to the second quarter of 2021 and the third quarter of 2020.

Quarter ended September 30, June 30, September 30, 2021 2021 2020 (Dollar amounts in thousands, except per share data)Net income available to common $ 3,400 $ 2,516 $ 1,898shareholders Diluted income per common share $ 0.78 $ 0.58 $ 0.44Common shares outstanding 4,346,467 4,346,467 4,337,615Average common shares outstanding , 4,376,612 4,372,205 4,346,277diluted Annualized return on average assets 1.12% 0.83% 0.67%Annualized return on average common 14.06% 11.03% 8.60%equityNet interest margin 3.30% 2.94% 2.90%Efficiency ratio 71.14% 68.34% 70.31% Common equity to assets ratio 8.19% 7.78% 7.74%Tangible common equity to tangible 7.95% 7.53% 7.45%assetsBook value per common share $ 21.95 $ 21.45 $ 20.24Tangible book value per common $ 21.27 $ 20.71 $ 19.42shareNonperforming assets to total 0.91% 0.93% 1.03%assets

The following were items impacting the third quarter 2021 operating results as compared to the same quarter in 2020 and the financial condition results compared to December 31, 2020:

Interest Income Total interest income increased $891,000 (9%) during the quarter. The Company experienced a $66.7 million increase in the average balance of total interest-earning assets during the quarter, however that growth was primarily in lower yielding cash and investment securities. A sharp decline in key interest rates over the past year offset the strong volume and compressed offering rates on new and existing earning assets. However, the Companys total earning asset yield increased 7 basis points to 3.81% during the quarter primarily due to the impact of PPP loan fee income which was $899,000 for the quarter compared to $242,000 during the same quarter of 2020.

Interest Expense - Total interest expense decreased $768,000 (34%) during the quarter. The decrease is primarily driven by lower costs on nearly all interest-bearing deposits and borrowings in the current low-rate environment. The average balance of interest-bearing liabilities declined $20.1 million (2%), while the average cost of interest-bearing liabilities decreased 34 basis points to 0.70%. To fund its asset growth and maintain prudent liquidity levels going forward, the Company will continue to utilize a cost-effective mix of retail and commercial core deposits along with non-core, wholesale funding as necessary.

See the Analysis of Net Interest Income and Margin table below for more detailed information.

Asset Quality, Provision for Loan Loss Expense and Allowance for Loan Losses The Companys nonperforming assets decreased to $10.6 million (45%) as of September 30, 2021, compared to $19.2 million as of December 31, 2020.

Based on its reserve analysis and methodology, the Company recorded $100,000 in provision for loan loss expense during the quarter compared to $950,000 recorded during the prior year quarter. The expense amount was considered necessary primarily due to loan portfolio growth, offset by reductions in non-performing, delinquent and loans impacted by COVID-19. As of September 30, 2021, the allowance for loan losses of $10.6 million was 1.33% of gross loans outstanding (excluding mortgage loans held for sale), an increase from the 1.28% as of December 31, 2020.

In accordance with generally accepted accounting principles for acquisition accounting, the loans acquired through a prior acquisition were recorded at fair value; therefore, there was no allowance associated with the loans at acquisition. Management continues to evaluate the allowance needed on the acquired loans factoring in the net remaining discount of approximately $449,000 as of September 30, 2021.

Management believes the allowance for loan losses is at a sufficient level to provide for loan losses in the Companys existing loan portfolio.

Non-interest Income Non-interest income increased $2.2 million (69%) during the quarter compared to the same quarter in 2020 due to the following factors:

-- A significant portion of the change is due to the $2.7 million in gains recognized on available-for-sale securities primarily due to the de-leveraged transaction discussed above. -- Service charge income increased $130,000 (35%). -- Offsetting these items was a decline of $320,000 (17%) in fees generated from sales of mortgage and SBA loans, as well as commercial loan swaps when compared to the same quarter of 2020.

Non-interest Expense Non-interest expenses increased $2.9 million (37%) during the quarter when compared to the same quarter in 2020 due to the following factors. A significant portion of the increase is due to the $2.6 million prepayment loss recognized on the termination of an interest rate swap discussed above.

Capital As of September 30, 2021, stockholders equity increased $6.5 million (7%) to $95.5 million from $89.0 million as of December 31, 2020. Net income for the nine months ended exceeded dividends paid or declared by $6.2 million. On a per common share basis, tangible book value increased to $21.27 at September 30, 2021 as compared to $19.71 as of December 31, 2020.

From a regulatory capital standpoint, all capital ratios for the Company and Bank remain strong and above regulatory requirements.

Non-Generally Accepted Accounting Principle (GAAP) Financial Measures

In addition to the GAAP financial results presented in this press release, the Company presents non-GAAP financial measures discussed below. These non-GAAP measures are provided to enhance investors overall understanding of the Companys current financial performance. Additionally, Company management believes that this presentation enables meaningful comparison of financial performance in various periods. However, the non-GAAP financial results presented should not be considered a substitute for results that are presented in a manner consistent with GAAP. A limitation of the non-GAAP financial measures presented is that the adjustments concern gains, losses or expenses that the Company does expect to continue to recognize; the adjustments of these items should not be construed as an inference that these gains or expenses are unusual, infrequent or non-recurring. Therefore, Company management believes that both GAAP measures of its financial performance and the respective non-GAAP measures should be considered together.

Operating Income

Operating income is a non-GAAP financial measure that adjusts net income for the following non-operating items:

-- Provision for income taxes -- Gains on sales of investment securities -- Commercial loan referral income -- Net gains/losses on foreclosed assets held for sale -- Provision for loan loss expense -- Loss on early termination of interest rate swap

A reconciliation of the Companys net income to its operating income for the three and nine months ended September 30, 2021 and 2020 is set forth below.

Quarter ended Nine months ended September September September September 30, 2021 30, 2020 30, 2021 30, 2020 (Dollar amounts are in (Dollar amounts are in thousands) thousands)Net income $ 3,400 $ 1,898 $ 8,133 $ 5,886 Add back: Provision for income 802 418 1,975 1,275 taxesIncome before income 4,202 2,316 10,108 7,161 taxes Add back/(subtract): Net gains on investment (2,674 ) (298 ) (2,741 ) (461 )securitiesLoss on early termination 2,580 - 2,580 - of interest rate swapCommercial loan referral (42 ) (161 ) (105 ) (1,097 )incomeNet (gains) losses onforeclosed assets held (53 ) (32 ) 74 49 for saleProvision for loan losses 100 950 800 2,200 (89 ) 459 608 691 Operating income $ 4,113 $ 2,775 $ 10,716 $ 7,852

About Guaranty Federal Bancshares, Inc.

Guaranty Federal Bancshares, Inc. (NASDAQ:GFED) has a subsidiary corporation offering full banking services. The principal subsidiary, Guaranty Bank, is headquartered in Springfield, Missouri, and has 16 full-service branches in Greene, Christian, Jasper and Newton Counties and a Loan Production Office in Webster County. Guaranty Bank is a member of the MoneyPass ATM network which provide its customers surcharge free access to over 37,000 ATMs nationwide. For more information visit the Guaranty Bank website: www.gbankmo.com.

The Company may from time to time make written or oral forward-looking statements, including statements contained in the Companys filings with the SEC, in its reports to stockholders and in other communications by the Company, which are made in good faith by the Company pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as anticipates, estimates, believes, expects, and similar expressions are intended to identify such forward-looking statements but are not the exclusive means of identifying such statements.

These forward-looking statements involve risks and uncertainties, such as statements of the Companys plans, objectives, expectations, estimates and intentions, that are subject to change based on various important factors (some of which are beyond the Companys control). The following factors, among others, could cause the Companys financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements:

the strength of the United States economy in general and the strength of the local economies in which we conduct operations; the effects of the COVID-19 pandemic, including on our credit quality and business operations, as well as its impact on general economic and financial market conditions; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve, inflation, interest rates, market and monetary fluctuations; the timely development of and acceptance of new products and services and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors products and services; the willingness of users to substitute competitors products and services for our products and services; our success in gaining regulatory approval of our products and services, when required; the impact of changes in financial services laws and regulations (including laws concerning taxes, banking, securities and insurance); technological changes; the ability to successfully manage and integrate any future acquisitions if and when our board of directors and management conclude any such acquisitions are appropriate; changes in consumer spending and saving habits; our success at managing the risks resulting from these factors; and other factors set forth in reports and other documents filed by the Company with the SEC from time to time.

Financial Highlights: Operating Data: Quarter ended Nine months ended September 30, September 30, 2021 2020 2021 2020 (Dollar amounts are in thousands, except per share data) Total interest income $ 10,859 $ 9,968 $ 31,025 $ 30,926Total interest expense 1,469 2,237 5,368 7,460Net interest income 9,390 7,731 25,657 23,466Provision for loan 100 950 800 2,200lossesNet interest incomeafter provision for 9,290 6,781 24,857 21,266loan lossesNoninterest income Service charges 500 370 1,305 1,093Gain on sale of loans 1,105 1,195 3,220 2,621held for saleGain on sale of SmallBusiness 388 499 1,286 499Administration loansGain on sale of 2,674 298 2,741 461investmentsCommercial loan 42 161 105 1,097referral incomeOther income 809 747 2,293 1,911 5,518 3,270 10,950 7,682Noninterest expense Salaries and employee 4,631 4,589 13,479 12,678benefitsOccupancy 1,158 1,165 3,430 3,481Loss on earlytermination of 2,580 - 2,580 -interest rate swapOther expense 2,237 1,981 6,210 5,628 10,606 7,735 25,699 21,787Income before income 4,202 2,316 10,108 7,161taxesProvision for income 802 418 1,975 1,275taxesNet income $ 3,400 $ 1,898 $ 8,133 $ 5,886Net income per common $ 0.78 $ 0.44 $ 1.87 $ 1.36share-basicNet income per common $ 0.78 $ 0.44 $ 1.86 $ 1.36share-diluted Annualized return on 1.12% 0.67% 0.90% 0.73%average assetsAnnualized return on 14.06% 8.60% 11.74% 9.11%average equityNet interest margin 3.30% 2.90% 3.03% 3.11%Efficiency ratio 71.14% 70.31% 70.20% 69.95% Financial Condition As of Data: September December 30, 31, 2021 2020 Cash and cash $ 151,283 $ 148,423 equivalentsAvailable-for-sale 151,456 168,881 securitiesLoans, net ofallowance for loan losses9/30/2021 - $10,566; 786,406 753,508 12/31/2020 - $9,617Intangibles 3,104 3,462 Premises and 17,180 17,898 equipment, netLease right-of-use 8,188 8,470 assetsBank owned life 31,745 25,295 insuranceOther assets 16,513 20,316 Total assets $ 1,165,875 $ 1,146,253 Deposits $ 1,011,296 $ 938,673 Advances from 16,000 66,000 correspondent banksSubordinated 10,310 15,465 debenturesSubordinated notes 19,598 19,564 Lease liabilities 8,308 8,561 Other liabilities 4,821 9,022 Total liabilities 1,070,333 1,057,285 Stockholders' equity 95,542 88,968 Total liabilities and $ 1,165,875 $ 1,146,253 stockholders' equity Common equity to 8.19% 7.76% assets ratioTangible common equityto tangible assets 7.95% 7.48% ratio (1)Book value per common $ 21.95 $ 20.51 shareTangible book value $ 21.27 $ 19.71 per common share (2)Nonperforming assets $ 10,566 $ 19,175

(1) Total Assets less Intangibles divided by Stockholders Equity(2) Stockholders Equity less Intangibles divided by Common Shares Outstanding

Analysis of Net Interest Income and Margin:

Three months ended 9/30/2021 Three months ended 9/30/2020 Average Yield Average Yield Balance Interest / Balance Interest / Cost CostASSETS Interest-earning: Loans $ 805,039 $ 9,555 4.71 % $ 787,380 $ 8,814 4.46 %Investment 189,362 1,200 2.51 % 152,163 1,004 2.62 %securitiesOther assets 134,279 104 0.31 % 122,442 150 0.49 %Total 1,128,680 10,859 3.81 % 1,061,985 9,968 3.74 %interest-earningNoninterest-earning 73,741 70,028 $ 1,202,421 $ 1,132,013 LIABILITIES ANDSTOCKHOLDERS? EQUITYInterest-bearing: Savings accounts $ 18 0.12 % $ 19 0.15 % 57,921 49,079Transaction 523,845 416 0.32 % 521,312 543 0.41 %accountsCertificates of 160,003 429 1.06 % 188,688 938 1.98 %depositFHLB advances 65,457 233 1.41 % 66,000 303 1.83 %Other borrowed 594 2 1.34 % 3,807 41 4.28 %fundsSubordinated notes, 19,591 263 5.33 % 13,478 181 5.34 %netSubordinateddebentures issued 10,310 108 4.16 % 15,465 212 5.45 %to Capital TrustsTotal 837,721 1,469 0.70 % 857,829 2,237 1.04 %interest-bearingNoninterest-bearing 268,750 186,384 Total liabilities 1,106,471 1,044,213 Stockholders? 95,950 87,800 equity $ 1,202,421 $ 1,132,013 Net earning balance $ $ 290,959 204,156Earning yield less 3.11 % 2.70 %costing rateNet interestincome, and netyield spread on $ 9,390 3.30 % $ 7,731 2.90 %interest earningassetsRatio ofinterest-earningassets to 135 % 124 % interest-bearingliabilities

Contacts: Shaun A. Burke (CEO) or Carter M. Peters (CFO), 1-833-875-2492