Exhibit 99.1
 |
NASDAQ:GFED www.gbankmo.com |
| Contacts: | Shaun A. Burke, President and CEO or Carter M. Peters, CFO |
| 2144 E Republic Road, Suite F200 | |
| Springfield, MO 65804 | |
| 417-520-4333 |
Guaranty Federal Bancshares, Inc. ANNOUNCES
Preliminary SECOND QUARTER 2018 financial results AND
successful CLOSING AND MERGER OF hoMETOWN bANCSHARES, iNC.
AND ITS sUBSIDIARY, hOMETOWN bANK, national ASSOCIATION
SPRINGFIELD, MO – (July 19, 2018) – Guaranty Federal Bancshares, Inc., (NASDAQ:GFED), the holding company (the “Company”) for Guaranty Bank (the “Bank”), today announces the following preliminary results for the second quarter ended June 30, 2018. The results were negatively impacted by the expected $3.2 million of one-time, nonrecurring costs associated with its acquisition of Hometown Bancshares, Inc. (“Hometown”). These additional costs incurred during the quarter included a significant core processing vendor contract termination of approximately $2 million. Other acquisition costs included legal, professional, employee benefit and other data processing expense.
Net loss available to common shareholders for the quarter ended June 30, 2018 was ($343,000) and diluted earnings (loss) per common share (“EPS”) was ($0.08). Excluding the acquisition costs discussed above, the Company would have reported net income and diluted EPS of $1,916,000 and $0.43, respectively. For the second quarter of 2017, the Company reported net income of $1,593,000 and diluted EPS of $.36, respectively.
For the six months ended June 30, 2018, the Company reported net income and EPS of $1,012,761 and $0.23, respectively. Excluding the above acquisition costs, the Company would have reported net income and diluted EPS of $3,418,000 and $0.76, respectively. For the six months ending June 30, 2017, the Company reported net income and EPS of $3,022,000 and $.68, respectively.
Acquisition of Hometown, Headquartered in Carthage, Missouri
As previously announced, on April 2, 2018 (the “Acquisition Date”), the Company completed its $4.6 million cash purchase of Hometown. Hometown’s subsidiary bank, Hometown Bank, National Association, was merged into Guaranty Bank on June 8, 2018.
Shaun A. Burke, President and Chief Executive Officer of the Company stated, “We are entering an exciting new era. The merger expands our footprint in Southwest Missouri and creates economies of scale to create the operational efficiencies found in a larger company. We are excited to finally have the Hometown team join our organization and are already encouraged by the growth opportunities in the Joplin MSA. Once we get past the ‘noise in the numbers’ and the nonrecurring merger expenses, we are confident the results of the combined company will further enhance long-term shareholder value.”
As of the Acquisition Date, Hometown’s balance sheet had total assets of $177.7 million, consisting primarily of loans totaling $150.4 million. Total deposits were $161.0 million. Preliminary purchase accounting adjustments were recorded as of the Acquisition Date, resulting in goodwill of $2.6 million. A table below summarizes the assets acquired and liabilities assumed from Hometown.
Select Quarterly Financial Data
Below are selected financial results for the Company’s second quarter of 2018, compared to the first quarter of 2018 and the second quarter of 2017.
Quarter ended | ||||||||||||
June 30, 2018 | March 31, 2018 | June 30, 2017 | ||||||||||
(Dollar amounts in thousands, except per share data) | ||||||||||||
Net income (loss) available to common shareholders | $ | (343 | ) | $ | 1,356 | $ | 1,593 | |||||
Diluted income (loss) per common share | $ | (0.08 | ) | $ | 0.30 | $ | 0.36 | |||||
Common shares outstanding | 4,406,432 | 4,403,965 | 4,374,725 | |||||||||
Average common shares outstanding , diluted | 4,471,893 | 4,466,786 | 4,426,411 | |||||||||
Annualized return on average assets | -0.14 | % | 0.70 | % | 0.85 | % | ||||||
Annualized return on average equity | -1.48 | % | 7.25 | % | 8.68 | % | ||||||
Net interest margin | 3.54 | % | 3.28 | % | 3.34 | % | ||||||
Efficiency ratio | 102.99 | % | 74.50 | % | 62.95 | % | ||||||
Tangible common equity to tangible assets | 7.26 | % | 9.40 | % | 9.75 | % | ||||||
Tangible book value per common share | $ | 15.73 | $ | 17.22 | $ | 16.76 | ||||||
Nonperforming assets to total assets | 1.42 | % | 1.21 | % | 1.47 | % | ||||||
The following were key items impacting the second quarter operating results as compared to the same quarter in 2017 and the financial condition results compared to December 31, 2017:
Net Interest income – Net interest income totaled $7,972,267 for the quarter as compared to $5,889,199 during the prior year quarter, an increase of 35%. Net interest income attributable to Hometown totaled $1,250,672 for the quarter and net interest income attributable to purchase accounting adjustments, primarily the accretion of the loan discount, was $454,792. Net interest margin was 3.54% as compared to 3.34% for the prior year quarter. See the Analysis of Net Interest Income and Margin table below for the second quarter.
Asset Quality, Provision for Loan Loss Expense and Allowance for Loan Losses – The Company’s nonperforming assets increased to $13.6 million as of June 30, 2018 as compared to $10.2 million as of December 31, 2017. $3.9 million of this increase was due to the acquisition of Hometown.
Based on its reserve analysis and methodology, the Company recorded a provision for loan loss expense of $500,000 during the quarter, a decrease from the $575,000 recognized during the prior year quarter. The provision for the quarter was primarily due to the increased reserves needed for growing loan balances for construction lending and various reserves on a few specific problem credits. At June 30, 2018, the allowance for loan losses of $7.6 million was 0.97% of gross loans outstanding (excluding mortgage loans held for sale), representing a decrease from the 1.12% as of December 31, 2017.
In accordance with generally accepted accounting principles for acquisition accounting, the loans acquired through the acquisition of Hometown were recorded at fair value; therefore, there was no allowance associated with Hometown’s loans at acquisition. Management continues to evaluate the allowance needed on the acquired Hometown loans factoring in the net remaining discount ($5.6 million at June 30, 2018).
Management believes the allowance for loan losses is at a sufficient level to provide for loan losses in the Bank’s existing loan portfolio.
Noninterest Income – Non-interest income increased $586,752 (43%) during the quarter primarily due to the Company’s increased income from sales of fixed-rate mortgage loans and Small Business Administration (“SBA”) loans, $194,000 combined. The Company also experienced a significant increase of approximately $262,000 in service charges, primarily due to the Hometown acquisition.
Noninterest Expense – Non-interest expenses increased $5,654,721 (124%) due to a few significant factors discussed below.
Due to the acquisition, $3,192,050 of one-time, nonrecurring merger costs were incurred during the quarter (further detailed above).
Salaries and employee benefits increased $1,167,093 for the quarter and is primarily due to the Hometown acquisition, $604,000, and also the Company’s existing expansion in the Joplin, Missouri market, pre-acquisition.
Occupancy expenses increased $552,511 for the quarter primarily due to the Company’s move to a new headquarters during the fourth quarter of 2017. Lease expense on the new facility began in January 2018 and total expense was $154,867 for the quarter. The remaining increase relates to depreciation on furniture and fixtures for the new facility and Hometown.
Amortization expense of the core deposit intangible from the Hometown acquisition was $220,000 for the quarter. There was no amortization during the prior year quarter.
Capital – At June 30, 2018, stockholders’ equity increased to $75.2 million compared to $74.9 million at December 31, 2017. On a per common share basis, tangible book value decreased to $15.73 at June 30, 2018 as compared to $17.10 as of December 31, 2017. This reduction was due to the acquisition of Hometown.
From a regulatory capital standpoint, all capital ratios for the 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 Company’s 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:
● | Gains (losses) on sales of available-for-sale securities |
● | Gains (losses) on foreclosed assets held for sale |
● | Provision for loan loss expense |
● | Provision (credit) for income taxes |
● | Merger costs |
A reconciliation of the Company’s net income to its operating income for the three and six months ended June 30, 2018 and 2017 is set forth below.
Quarter ended | Six months ended | |||||||||||||||
June 30, 2018 | June 30, 2017 | June 30, 2018 | June 30, 2017 | |||||||||||||
(Dollar amounts are in thousands) | ||||||||||||||||
Net income (loss) | $ | (343 | ) | $ | 1,593 | $ | 1,013 | $ | 3,022 | |||||||
Add back: | ||||||||||||||||
Provision (credit) for income taxes | (454 | ) | 521 | (160 | ) | 1,024 | ||||||||||
Income (loss) before income taxes | (797 | ) | 2,114 | 853 | 4,046 | |||||||||||
Add back/(subtract): | ||||||||||||||||
Gain (loss) on investment securities | 10 | (62 | ) | 7 | (62 | ) | ||||||||||
Net loss (gains) on foreclosed assets held for sale | (76 | ) | 30 | (121 | ) | (8 | ) | |||||||||
Merger costs | 3,192 | - | 3,420 | - | ||||||||||||
Provision for loan losses | 500 | 575 | 725 | 1,050 | ||||||||||||
| 3,626 | 543 | 4,031 | 980 | |||||||||||||
Operating income | $ | 2,829 | $ | 2,657 | $ | 4,884 | $ | 5,026 | ||||||||
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 18 full-service branches in Greene, Christian, Jasper Newton and McDonald Counties and a Loan Production Office in Webster County. Guaranty Bank is a member of the MoneyPass and TransFund ATM networks which provide its customers surcharge free access to over 24,000 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 Company’s 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 Company’s plans, objectives, expectations, estimates and intentions, that are subject to change based on various important factors (some of which are beyond the Company’s control). The following factors, among others, could cause the Company’s 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, 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:
Quarter ended | Six months ended | |||||||||||||||
Operating Data: | June 30, 2018 | June 30, 2017 | June 30, 2018 | June 30, 2017 | ||||||||||||
(Dollar amounts are in thousands, except per share data) | ||||||||||||||||
Total interest income | $ | 10,379 | $ | 7,242 | $ | 18,335 | $ | 14,013 | ||||||||
Total interest expense | 2,407 | 1,352 | 4,332 | 2,526 | ||||||||||||
Net interest income | 7,972 | 5,890 | 14,003 | 11,487 | ||||||||||||
Provision for loan losses | 500 | 575 | 725 | 1,050 | ||||||||||||
Net interest income after provision for loan losses | 7,472 | 5,315 | 13,278 | 10,437 | ||||||||||||
Noninterest income | ||||||||||||||||
Service charges | 552 | 290 | 869 | 558 | ||||||||||||
Gain on sale of loans held for sale | 617 | 524 | 997 | 932 | ||||||||||||
Gain on sale of Small Business Administration loans | 225 | 125 | 396 | 255 | ||||||||||||
Other income | 560 | 428 | 1,011 | 851 | ||||||||||||
| 1,954 | 1,367 | 3,273 | 2,596 | |||||||||||||
Noninterest expense | ||||||||||||||||
Salaries and employee benefits | 4,102 | 2,935 | 7,275 | 5,792 | ||||||||||||
Occupancy | 1,038 | 485 | 1,808 | 971 | ||||||||||||
Merger costs | 3,192 | - | 3,420 | - | ||||||||||||
Amortization of core deposit intangible | 220 | - | 220 | - | ||||||||||||
Other expense | 1,671 | 1,148 | 2,975 | 2,224 | ||||||||||||
| 10,223 | 4,568 | 15,698 | 8,987 | |||||||||||||
Income (loss) before income taxes | (797 | ) | 2,114 | 853 | 4,046 | |||||||||||
Provision (credit) for income taxes | (454 | ) | 521 | (160 | ) | 1,024 | ||||||||||
Net income (loss) available for common shareholders | $ | (343 | ) | $ | 1,593 | $ | 1,013 | $ | 3,022 | |||||||
Net income (loss) per common share-basic | $ | (0.08 | ) | $ | 0.36 | $ | 0.23 | $ | 0.69 | |||||||
Net income (loss) per common share-diluted | $ | (0.08 | ) | $ | 0.36 | $ | 0.23 | $ | 0.68 | |||||||
Annualized return on average assets | -0.14 | % | 0.85 | % | 0.23 | % | 0.83 | % | ||||||||
Annualized return on average equity | -1.48 | % | 8.68 | % | 2.42 | % | 8.42 | % | ||||||||
Net interest margin | 3.54 | % | 3.34 | % | 3.43 | % | 3.34 | % | ||||||||
Efficiency ratio | 102.99 | % | 62.95 | % | 90.87 | % | 63.82 | % | ||||||||
At | At | |||||||
Financial Condition Data: | June 30, 2018 | December 31, 2017 | ||||||
Cash and cash equivalents | $ | 30,357 | $ | 37,407 | ||||
Investments | 89,581 | 81,495 | ||||||
Loans, net of allowance for loan losses 6/30/2018 - $7,573; 12/31/2017 - $7,107 | 774,289 | 631,527 | ||||||
Goodwill | 2,615 | - | ||||||
Core deposit intangible | 3,300 | - | ||||||
Premises and equipment, net | 22,307 | 10,607 | ||||||
Bank owned life insurance | 19,967 | 19,741 | ||||||
Other assets | 18,103 | 13,683 | ||||||
Total assets | $ | 960,519 | $ | 794,460 | ||||
Deposits | $ | 764,772 | $ | 607,364 | ||||
Advances from correspondent banks | 90,400 | 94,300 | ||||||
Subordinated debentures | 21,805 | 15,465 | ||||||
Other borrowed funds | 5,000 | - | ||||||
Other liabilities | 3,294 | 2,439 | ||||||
Total liabilities | 885,271 | 719,568 | ||||||
Stockholders' equity | 75,248 | 74,892 | ||||||
Total liabilities and stockholders' equity | $ | 960,519 | $ | 794,460 | ||||
Tangible common equity to tangible assets ratio | 7.26 | % | 9.43 | % | ||||
Tangible book value per common share | $ | 15.73 | $ | 17.10 | ||||
Nonperforming assets | $ | 13,609 | $ | 10,245 | ||||
Analysis of Net Interest Income and Margin:
Three months ended 6/30/2018 | Three months ended 6/30/2017 | |||||||||||||||||||||||
Average Balance | Interest |
Yield / Cost | Average Balance | Interest | Yield / Cost | |||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Interest-earning: | ||||||||||||||||||||||||
Loans | $ | 797,034 | $ | 9,819 | 4.94 | % | $ | 608,269 | $ | 6,744 | 4.45 | % | ||||||||||||
Investment securities | 88,755 | 528 | 2.39 | % | 88,267 | 454 | 2.06 | % | ||||||||||||||||
Other assets | 16,725 | 32 | 0.77 | % | 10,289 | 44 | 1.72 | % | ||||||||||||||||
Total interest-earning | 902,514 | 10,379 | 4.61 | % | 706,825 | 7,242 | 4.11 | % | ||||||||||||||||
Noninterest-earning | 64,965 | 39,043 | ||||||||||||||||||||||
| $ | 967,479 | $ | 745,868 | |||||||||||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||||
Interest-bearing: | ||||||||||||||||||||||||
Savings accounts | $ | 43,012 | 26 | 0.24 | % | $ | 29,509 | 14 | 0.19 | % | ||||||||||||||
Transaction accounts | 425,153 | 1,126 | 1.06 | % | 340,975 | 459 | 0.54 | % | ||||||||||||||||
Certificates of deposit | 211,246 | 568 | 1.08 | % | 114,227 | 273 | 0.96 | % | ||||||||||||||||
FHLB advances | 77,991 | 406 | 2.09 | % | 104,255 | 450 | 1.73 | % | ||||||||||||||||
Other borrowed funds | 1,109 | 4 | 0.00 | % | - | - | 0.00 | % | ||||||||||||||||
Subordinated debentures | 21,651 | 277 | 5.13 | % | 15,465 | 156 | 4.05 | % | ||||||||||||||||
Total interest-bearing | 780,162 | 2,407 | 1.24 | % | 604,431 | 1,352 | 0.90 | % | ||||||||||||||||
Noninterest-bearing | 94,344 | 68,342 | ||||||||||||||||||||||
Total liabilities | 874,506 | 672,773 | ||||||||||||||||||||||
Stockholders’ equity | 92,973 | 73,095 | ||||||||||||||||||||||
| $ | 967,479 | $ | 745,868 | |||||||||||||||||||||
Net earning balance | $ | 122,352 | $ | 102,394 | ||||||||||||||||||||
Earning yield less costing rate | 3.38 | % | 3.21 | % | ||||||||||||||||||||
Net interest income, and net yield spread on interest earning assets | $ | 7,972 | 3.54 | % | $ | 5,890 | 3.34 | % | ||||||||||||||||
Ratio of interest-earning assets to interest-bearing liabilities | 116 | % | 117 | % | ||||||||||||||||||||
Guaranty Federal Bancshares, Inc. | |||||||||||
Net Assets Acquired from Hometown | |||||||||||
April 2, 2018 |
Acquired from | Fair Value | Fair | ||||||||||
Hometown | Adjustments | Value | ||||||||||
Assets Acquired | ||||||||||||
Cash and Due From Banks | $ | 7,083 | $ | - | $ | 7,083 | ||||||
Investment Securities | 7,521 | - | 7,521 | |||||||||
Loans | 150,390 | (6,471 | ) | 143,919 | ||||||||
Allowance for Loan Losses | (2,348 | ) | 2,348 | - | ||||||||
Net Loans | 148,042 | (4,123 | ) | 143,919 | ||||||||
Fixed Assets | 9,268 | 798 | 10,066 | |||||||||
Foreclosed Assets held for sale | 1,647 | (400 | ) | 1,247 | ||||||||
Core Deposit Intangible | - | 3,520 | 3,520 | |||||||||
Other Assets | 4,146 | 1,283 | 5,429 | |||||||||
Total Assets Acquired | $ | 177,707 | $ | 1,078 | $ | 178,785 | ||||||
Liabilities Assumed | ||||||||||||
Deposits | 161,001 | 247 | 161,248 | |||||||||
Federal Home Loan Bank advances | 2,000 | - | 2,000 | |||||||||
Securities Sold Under Agreements to Repurchase | 2,159 | - | 2,159 | |||||||||
Other borrowings | 3,000 | - | 3,000 | |||||||||
Subordinated debentures | 6,186 | 176 | 6,362 | |||||||||
Other Liabilities | 2,003 | - | 2,003 | |||||||||
Total Liabilities Assumed | 176,349 | $ | 423 | 176,772 | ||||||||
Stockholders' Equity | ||||||||||||
Common Stock | 231 | (231 | ) | - | ||||||||
Capital Surplus | 18,936 | (18,936 | ) | - | ||||||||
Retained Earnings | (17,587 | ) | 17,587 | - | ||||||||
Accumulated Other Comprehensive Loss | (222 | ) | 222 | - | ||||||||
Treasury Stock | - | - | - | |||||||||
Total Stockholders' Equity Assumed | 1,358 | $ | (1,358 | ) | - | |||||||
Total Liabilities and Stockholders' Equity Assumed | $ | 177,707 | $ | (935 | ) | $ | 176,772 | |||||
Net Assets Acquired | $ | 2,013 | ||||||||||
Purchase Price | 4,628 | |||||||||||
Goodwill | $ | 2,615 | ||||||||||