GlobeNewswire Inc | Jan 20, 2022 09:00AM EST

January 20, 2022

SPRINGFIELD, Mo., Jan. 20, 2022 (GLOBE NEWSWIRE) --

Highlights of the Fourth Quarter 2021

-- As previously announced in November 2021, Guaranty Federal Bancshares, Inc. (the Company) entered into a definitive merger agreement with QCR Holdings, Inc. (QCRH), a $6.0 billion multi-bank holding company headquartered in Moline, Illinois. QCRH will acquire the Company and merge its banking subsidiary Guaranty Bank into Springfield First Community Bank (SFC Bank), a QCRH Springfield-based subsidiary bank. The combined bank will operate under the Guaranty Bank name in all southwest Missouri markets. The transaction is subject to regulatory approvals, approval by the Companys stockholders and certain customary closing conditions. The transaction is expected to be completed in early second quarter of 2022. -- For the quarter, net income available to common shareholders and diluted earnings per common share was $2.5 million and $0.57, respectively. Excluding non-recurring merger costs of $573,000 for the quarter, net income available to common shareholders and diluted earnings per common share would have been $3.0 million and $0.68, respectively. -- Annualized return on average assets and average equity were 0.83% and 10.21%, respectively, when compared to 0.33% and 4.22% during the fourth quarter of 2020. Excluding non-recurring merger costs for the quarter, return on average assets and average equity would have been 0.98% and 12.08%, respectively. -- Net interest margin (NIM) increased to 3.18% for the quarter compared to 2.94% for the fourth quarter of 2020. The increase in NIM is primarily attributable to continued cost of funds improvement which declined another 45 basis points for the quarter, compared to the same quarter in the prior year. -- Total gross loans increased $28.4 million (4%) during the quarter. The growth was realized primarily in the commercial/industrial and construction categories. -- Non-performing asset balances declined $740,000 (7%) to $9.8 million. This resulted in a percentage to total assets of 0.84% as of December 31, 2021. -- Capital levels remain strong and tangible common equity returned to pre-pandemic levels. The tangible common equity ratio was 8.08% at December 31, 2021 compared to 7.48% at December 31, 2020. -- The Company declared its 31st consecutive quarterly dividend on December 30, 2021. -- Guaranty Bank was named as a Best Bank to Work For by American Banker for 2021.

CEO Comments

We are proud of our Companys performance for the quarter and the record earnings for the year. As weve moved into 2022, the economic trends appear strong. Weve seen the positive results of a much improving environment for loan growth and the continued reduction in our cost of funds, driven primarily by the repricing of higher-cost certificates of deposit and the full repayment of $50 million of wholesale funding liabilities during the previous quarter. The low interest rate environment and strong housing market continue to keep our mortgage team closing loans at a fast pace which contributed significant fee income to our quarterly results.

With the upcoming merger, we are entering an exciting new era for the Company. Joining the QCRH and SFC Bank teams will further expand our product and servicing offerings as well as our footprint in southwest Missouri. It will also create economies of scale to realize the operational efficiencies found in a larger company. We are confident the results of the combined company will further enhance long-term shareholder value.

- Shaun A. Burke, President and Chief Executive Officer

Select Quarterly Financial Data

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

Quarter ended December 31, September 30, December 31, 2021 2021 2020 (Dollar amounts in thousands, except per share data)Net income available to $ 2,506 $ 3,400 $ 946 common shareholders Diluted income per common $ 0.57 $ 0.78 $ 0.22 shareCommon shares outstanding 4,346,630 4,346,467 4,337,615 Average common shares 4,382,734 4,376,612 4,359,119 outstanding , diluted Annualized return on 0.83 % 1.12 % 0.33 %average assetsAnnualized return on 10.21 % 14.06 % 4.22 %average common equityNet interest margin 3.18 % 3.30 % 2.94 %Efficiency ratio 72.65 % 71.14 % 77.35 % Common equity to assets 8.31 % 8.19 % 7.76 %ratioTangible common equity to 8.08 % 7.95 % 7.48 %tangible assetsBook value per common $ 22.42 $ 21.95 $ 20.51 shareTangible book value per $ 21.74 $ 21.27 $ 19.71 common shareNonperforming assets to 0.84 % 0.91 % 1.67 %total assets



The following were items impacting the fourth 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 $226,000 (2%) during the quarter. The Company experienced a $69.2 million increase in the average balance of total interest-earning assets during the quarter, of which $48.4 million were in loans and $20.8 million were in lower yielding cash and investment securities. Offsetting the increase in earning asset volume was the continued reduction in offering rates on new and repricing loans as well as the decline in yields being earned on the Companys cash and investment balances.

Interest Expense - Total interest expense decreased $995,000 (46%) during the quarter. The decrease was driven by lower costs on nearly all interest-bearing deposits in the current low-rate environment and the full redemption of $5.2 million of subordinated debentures in the second quarter and the full repayment of $50 million of wholesale funding liabilities during the third quarter. The average balance of interest-bearing liabilities declined $35.8 million (4%), while the average cost of interest-bearing liabilities decreased 45 basis points to 0.56%. 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 $9.8 million (49%) as of December 31, 2021, compared to $19.2 million as of December 31, 2020.

Based on its reserve analysis and methodology, the Company did not record a provision for loan loss expense during the quarter compared to $1.4 million recognized during the prior year quarter. As of December 31, 2021, the allowance for loan losses of $10.6 million was 1.29% 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 $443,000 as of December 31, 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 $332,000 (14%) during the quarter compared to the same quarter in 2020 due primarily to a $542,000 increase in income from sales of Small Business Administration loans and a $124,000 increase in deposit service charges. These were offset by a $268,000 decline in income from sales of fixed-rate mortgage loans.

Non-interest Expense Non-interest expenses increased $649,000 (8%) during the quarter when compared to the same quarter in 2020 due primarily to $573,000 of one-time, nonrecurring merger costs that were incurred (further discussed above). These were comprised of legal and investment banking fees.

Capital As of December 31, 2021, stockholders equity increased $8.5 million (10%) to $97.5 million from $89.0 million as of December 31, 2020. Net income for the year exceeded dividends paid or declared by $8.0 million. On a per common share basis, tangible book value increased to $21.74 at December 31, 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/losses 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 -- Merger costs

A reconciliation of the Companys net income to its operating income for the quarter and year ended December 31, 2021 and 2020 is set forth below.

Quarter ended Year ended December December December 31, December 31, 31, 2021 31, 2020 2021 2020 (Dollar amounts are in (Dollar amounts are in thousands) thousands) Net income $ 2,506 $ 946 $ 10,638 $ 6,832 Add back: Provision (credit) 704 (40 ) 2,680 1,235 for income taxesIncome before income 3,210 906 13,318 8,067 taxes Add back/(subtract): Net (gains)/losseson investment 1 - (2,740 ) (461 )securitiesCommercial loan (1 ) (51 ) (105 ) (1,149 )referral incomeMerger costs 573 - 573 - Loss on earlytermination of - - 2,580 - interest rate swapNet (gains) losseson foreclosed assets 47 (85 ) 121 (36 )held for saleProvision for loan - 1,400 800 3,600 losses 620 1,264 1,229 1,954 Operating income $ 3,830 $ 2,170 $ 14,547 $ 10,021



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 Year ended December 31, December 31, 2021 2020 2021 2020 (Dollar amounts are in thousands, except per share data) Total interest $ 10,170 $ 9,944 $ 41,195 $ 40,870 incomeTotal interest 1,157 2,152 6,525 9,611 expenseNet interest 9,013 7,792 34,670 31,259 incomeProvision for loan - 1,400 800 3,600 lossesNet interest income afterprovision for loan 9,013 6,392 33,870 27,659 lossesNoninterest income Service charges 500 376 1,805 1,469 Gain on sale ofloans held for 812 1,080 4,032 3,702 saleGain on sale ofSmall Business 662 120 1,948 619 AdministrationloansGain (loss) onsale of (1 ) - 2,740 461 investmentsNet gain (loss) on (47 ) 85 (121 ) 36 foreclosed assetsCommercial loan 1 51 105 1,149 referral incomeOther income 796 679 3,164 2,637 2,723 2,391 13,673 10,073 Noninterest expenseSalaries and 4,839 4,671 18,318 17,348 employee benefitsLoss on earlytermination of - - 2,580 - interest rate swapMerger costs 573 - 573 - Occupancy 1,115 1,142 4,544 4,623 Other expense 1,999 2,064 8,210 7,694 8,526 7,877 34,225 29,665 Income before 3,210 906 13,318 8,067 income taxesProvision (credit) 704 (40 ) 2,680 1,235 for income taxesNet income $ 2,506 $ 946 $ 10,638 $ 6,832 Net income per $ 0.58 $ 0.22 $ 2.45 $ 1.58 common share-basicNet income percommon $ 0.57 $ 0.22 $ 2.44 $ 1.57 share-diluted Annualized return 0.83 % 0.33 % 0.88 % 0.63 %on average assetsAnnualized return 10.21 % 4.22 % 11.34 % 7.85 %on average equityNet interest 3.18 % 2.94 % 3.07 % 3.06 %marginEfficiency ratio 72.65 % 77.35 % 70.80 % 71.77 % Financial As of Condition Data: December 31, December 31, 2021 2020 Cash and cash $ 130,646 $ 148,423 equivalentsAvailable-for-sale 151,652 168,881 securitiesLoans, net ofallowance for loan losses12/31/2021 -$10,589; 12/31/ 814,758 753,508 2020 - $9,617Intangibles 2,985 3,462 Premises and 16,785 17,898 equipment, netLease right-of-use 8,034 8,470 assetsBank owned life 31,925 25,295 insuranceOther assets 16,125 20,316 Total assets $ 1,172,910 $ 1,146,253 Deposits $ 1,016,319 $ 938,673 Advances fromcorrespondent 16,000 66,000 banksSubordinated 10,310 15,465 debenturesSubordinated notes 19,610 19,564 Lease liabilities 8,164 8,561 Other liabilities 5,043 9,022 Total liabilities 1,075,446 1,057,285 Stockholders' 97,464 88,968 equityTotal liabilitiesand stockholders' $ 1,172,910 $ 1,146,253 equity Common equity to 8.31 % 7.76 % assets ratioTangible commonequity to tangible 8.08 % 7.48 % assets ratio (1)Book value per $ 22.42 $ 20.51 common shareTangible bookvalue per common $ 21.74 $ 19.71 share (2)Nonperforming $ 9,826 $ 19,175 assets

(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 12/31/2021 Three months ended 12/31/2020 Average Interest Yield / Average Interest Yield / Balance Cost Balance CostASSETS Interest-earning: Loans $ 815,770 $ 9,125 4.44 % $ 767,404 $ 8,764 4.54 %Investment 148,364 927 2.48 % 159,098 1,032 2.58 %securitiesOther assets 159,140 118 0.29 % 127,587 148 0.46 %Total 1,123,274 10,170 3.59 % 1,054,089 9,944 3.75 %interest-earningNoninterest-earning 76,146 70,958 $ 1,199,420 $ 1,125,047 LIABILITIES ANDSTOCKHOLDERS? EQUITYInterest-bearing: Savings accounts $ 61,643 19 0.12 % $ 48,987 16 0.13 %Transaction 557,085 412 0.29 % 511,945 485 0.38 %accountsCertificates of 147,903 321 0.86 % 187,010 888 1.89 %depositFHLB advances 16,000 32 0.79 % 66,000 317 1.91 %Other borrowed 574 2 0.00 % - 2 0.00 %fundsSubordinateddebentures issued 10,310 108 4.10 % 15,465 181 4.58 %to Capital TrustsSubordinated notes, 19,602 263 5.32 % 19,557 263 0 netTotal 813,117 1,157 0.56 % 848,964 2,152 1.01 %interest-bearingNoninterest-bearing 288,925 186,953 Total liabilities 1,102,042 1,035,917 Stockholders? 97,378 89,130 equity $ 1,199,420 $ 1,125,047Net earning balance $ 310,157 $ 205,125 Earning yield less 3.03 % 2.74 %costing rateNet interestincome, and net yield spreadon interest earning $ 9,013 3.18 % $ 7,792 2.94 %assetsRatio ofinterest-earning assets tointerest-bearing 138 % 124 % liabilities

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