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Exhibit 10.5
 
Written Description of
2012 Executive Incentive Compensation Annual Plan -
Chief Credit Officer

The following is a description of the material terms of the 2012 Executive
Incentive Compensation Annual Plan (the “Plan”) that was adopted by the
Compensation Committee (the “Committee”) of the Board of Directors of Guaranty
Federal Bancshares, Inc. (the “Company”) with respect to the bonus payable to
Sheri Biser, the Company’s Chief Credit Officer (the "Executive"), for 2012:

The Plan will pay a maximum of $56,400 of which twenty-five percent (25%) of the
bonus amount will be paid in cash and seventy-five percent (75%) will be paid in
the form of restricted stock grants.  There are three possible levels of
incentive awards: threshold (25%); target (50%); and maximum (100%).  For any
bonus amount to be paid, the threshold level of performance must be
achieved.  The bonus amount will be prorated for performance achievements
between the threshold and target levels and between the target and maximum
levels.  The four performance measurements of the Company (and the weight given
to each measurement) applicable to each award level are as follows: (i) revenue
growth (25%); (ii) net interest margin (25%); (iii) pre-tax net income (25%);
and (iv) adversely classified assets to tier 1 capital and allowance for loan
losses (25%). The following minimum criteria must all be satisfied before an
award is paid under the Plan: (i) net income of the Company for calendar year
2012 of at least 75% of approved budget; (ii) satisfactory audits as determined
by the Board of Directors of the Company after review of findings from
regulatory examination reports and applicable audits and reviews; (iii) no
restatement of income for any prior period previously released; (iv) the bank’s
tier 1 leverage capital and total risk-based capital ratios must not fall below
9% and 12%, respectively, and adversely classified assets to tier 1 capital and
allowance for loan losses must not exceed 50%; (v) satisfactory performance
appraisal, actively employed by Guaranty Bank, and in good standing at the time
the bonus is paid, which will not be prior to the public release of earnings in
2013 for the calendar year 2012; and (vi) the Board of Directors of the Company
retains the right to make the final determination of the bonus payment and
amount, if any, and may consider other pertinent facts prior to making an award
of restricted stock.

The Plan also includes a provision requiring the "clawback" of any bonus paid to
the Executive under the Plan.  In the event that any payment under the Plan was
based on materially inaccurate financial statements or any other materially
inaccurate performance metric criteria, the Executive shall immediately pay back
such payment to the Company.  In addition, in the event that, after a payment
has been made under the Plan, the Executive voluntarily terminates his
employment and at the time of such termination Guaranty Bank has a composite
rating lower than 2 under the CAMELS rating system, the Executive shall
immediately pay back the full amount of such bonus amount upon such voluntary
termination of employment.
 
The Plan also includes vesting and holding periods for the restricted stock
grants.  The vesting period for these grants shall be two (2) years from the
date of grant.  Also, the Executive agrees not to sell, transfer or otherwise
dispose of such shares for a period of three (3) years from the date of the
award.  Exceptions to such restriction on sale, transfer or disposition may be
granted for hardship circumstances to be determined by the Committee.
 
 

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