<PAGE>

                                                                      Exhibit 13

GUARANTY FEDERAL BANCSHARES

2001 ANNUAL REPORT TO OUR SHAREHOLDERS

CONTENTS

      1    Investor Information
      2    President's Message
      3    Selected Consolidated Financial and other Data
      4    Management's Discussion and Analysis of Financial Condition and
           Results of Operations
      15   Consolidated Financial Statements
      41   Independent Accountant's Report
      42   Directors and Officers

COMMON STOCK PRICES & DIVIDENDS
The common stock of Guaranty Federal Bancshares, Inc. is traded in the
over-the-counter market and quoted on the NASDAQ National Market. As of
September 4, 2001, there were 1,747 stockholders of the 6,290,951 shares of
common stock issued and outstanding.


The Company paid cash dividends of $0.23 per share on October 15, 2000, to
shareholder's of record as of September 9, 2000, and $0.24 per share on
April 12, 2001, to shareholder's of record as of March 28, 2001.

The table below reflects the range of common stock closing prices by quarter.

                                         Fiscal Year ended
                                   --------------------------------
                                   June 30, 2001     June 30, 2000
                                   ---------------   --------------
                                    High     Low      High     Low
Quarter ended:
  June 30                          $12.00   10.75    $10.38    9.69
  March 31                          12.94   11.32     10.69    9.94
  December 31                       12.38   11.50     11.94    9.94
  September 30                      12.19    9.94     12.38   11.38

INVESTOR INFORMATION
--------------------

ANNUAL MEETING OF SHAREHOLDERS: The Annual Meeting of Stockholders will be held
Wednesday, October 24, 2001, at 5:00p.m., at the offices of the Bank, 1341 West
Battlefield Street, Springfield, Missouri.

ANNUAL REPORT ON FORM 10-K: Copies of the Guaranty Federal Bancshares Form
10-K Report to the Securities and Exchange Commission are available without
charge upon written request to: Lorene Thomas, Secretary, Guaranty Federal
Bancshares, Inc., 1341 W. Battlefield St., Springfield, MO 65807-4181. Copies
are also available via the internet: http://www.gfed.com

TRANSFER AGENT: Registrar and Transfer Company, 10 Commerce Drive, Cranford,
NJ 07016

STOCK TRADING INFORMATION: Over-the-Counter Symbol: GFED

SPECIAL LEGAL COUNSEL: Manatt, Phelps & Phillips, LLP, 1501 M Street N.W.,
Suite 700, Washington, D.C. 20005

INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS: BKD, LLP, 901 St. Louis St., PO
Box 1190, Springfield, MO 65801-1190

SHAREHOLDER AND FINANCIAL INFORMATION: Bruce Winston, Vice President, Chief
Financial Officer 417-520-0206

                                       1


<PAGE>

Guaranty Federal Bancshares, Inc.
Selected Consolidated Financial and Other Data

         The following tables include certain information concerning the
financial position of Guaranty Federal Bancshares, Inc. (including consolidated
data from operations of subsidiaries) as of the dates indicated. Dollar amounts
are expressed in thousands except per share data.

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Summary Statement of Income                               Years Ended June 30,
                                           ----------------------------------------------------
                                             2001       2000       1999       1998        1997
                                           --------    -------    -------    -------     -------
<S>                                        <C>          <C>        <C>       <C>        <C>
Interest income                            $ 27,182     23,564     20,763     17,196     14,711
Interest expense                             16,378     12,929     10,703      8,743      8,310
                                           --------    -------    -------    -------    -------
Net interest income                          10,804     10,635     10,060      8,453      6,401
Provision for loan losses                       310        180        180        123        --
                                           --------    -------    -------    -------    -------
Net interest income after provision
  for loan losses                            10,494     10,455      9,880      8,330      6,401
Noninterest income                            2,103      1,418      1,201        953        530
Noninterest expense                           7,621      6,420      5,958      4,823      5,105
                                           --------    -------    -------    -------    -------
Income before income taxes                    4,976      5,453      5,123      4,460      1,826
Provision for income taxes                    1,743      1,947      1,765      1,619        664
                                           --------    -------    -------    -------    -------
Net income                                 $  3,233      3,506      3,358      2,841      1,162
                                           ========    =======    =======    =======    =======
Earnings per share, since
  conversion December 30, 1997
  Basic                                    $   0.78       0.71       0.61       0.29        n/a
                                           ========    =======    =======    =======
  Diluted                                  $   0.77       0.70       0.60       0.29        n/a
                                           ========    =======    =======    =======

<CAPTION>
Summary Balance Sheet                                          As of June 30,
                                           ----------------------------------------------------
                                             2001       2000      1999        1998       1997
                                           --------    -------   -------     -------    -------
<S>                                        <C>          <C>        <C>        <C>        <C>
ASSETS
Cash and cash equivalents                  $ 10,314      9,157      9,689      7,305      3,817
Investment securities                        23,994     20,414     24,346     34,691     27,760
Loans receivable, net                       320,106    296,053    264,269    206,220    158,135
Accrued interest receivable                   2,148      1,826      1,757      1,604      1,312
Prepaids and other assets                     9,769      7,605      5,672      2,503      1,964
Foreclosed assets                                 4          1        101        286        210
Premises and equipment                        7,758      6,800      7,365      7,433      6,267
                                           --------    -------    -------    -------    -------
                                           $374,093    341,856    313,199    260,042    199,465
                                           ========    =======    =======    =======    =======
LIABILITIES
Deposits                                   $170,648    144,607    141,137    140,975    151,246
Federal Home Loan Bank advances             146,657    136,507    104,795     45,081     18,151
Other liabilities                             6,583      4,157      3,834      3,296      2,578
                                           --------    -------   -------     -------    -------
                                            323,888    285,271    249,766    189,352    171,975

STOCKHOLDERS' EQUITY                         50,205     56,585     63,433     70,690     27,490
                                           --------    -------   -------     -------    -------
                                           $374,093    341,856    313,199    260,042    199,465
                                           ========    =======    =======    =======    =======

<CAPTION>
Supplemental Data                                              As of June 30,
                                           ----------------------------------------------------
                                             2001       2000      1999        1998       1997
                                           --------    -------   -------     -------    -------
<S>                                        <C>          <C>        <C>        <C>        <C>
Number of full-service offices                    5          5         5           5          4
Cash dividends per share                   $   0.47       0.42      0.34        0.15        n/a
</TABLE>

                                       3

<PAGE>

Guaranty Federal Bancshares, Inc.
Management's Discussion and Analysis of Financial Condition
   And Results of Operations

GENERAL

         Guaranty Federal Bancshares, Inc. (and with its subsidiary, the
"Company") is a Delaware corporation organized on December 30, 1997 for the
purpose of becoming the holding company of Guaranty Federal Savings Bank (the
"Bank").

         In April 1995, Guaranty Federal Savings & Loan Association reorganized
from a federally chartered mutual savings and loan association into a mutual
holding company, Guaranty Federal Bancshares, M. H. C. (the "MHC"). Concurrent
with the reorganization, Guaranty Federal Savings Bank (the "Bank"), a stock
savings bank was chartered. In December 1997, the Company completed the
conversion and reorganization of the Bank and the former MHC by selling common
stock to depositors of the Bank and a benefit plan of the Bank. In addition, all
shares of common stock of the Bank held by public stockholders were exchanged
for shares of common stock of the Company.

         The Company's principal business consists of attracting deposits from
the general public and using such deposits to originate mortgage loans secured
by one- to four-family residences and, to a lesser extent, multi-family,
construction and commercial real estate loans and consumer and business loans.
The Company also uses these funds to purchase loans secured by one- to
four-family residences, mortgage-backed securities, US government and agency
obligations, and other permissible securities. When cash outflows exceed
inflows, the Company uses borrowings as an additional financing source.

         The Company derives revenues principally from interest earned on loans
and investments and, to a lesser extent, from fees charged for services. General
economic conditions and policies of the financial institution regulatory
agencies, including the Office of Thrift Supervision ("OTS") and the Federal
Deposit Insurance Corporation ("FDIC") significantly influence the Company's
operations. Interest rates on competing investments and general market interest
rates influence the Company's cost of funds. Lending activities are affected by
the interest rates at which such financing may be offered. The Company intends
to focus on one- to four-family residential, consumer, and commercial real
estate lending throughout southwestern Missouri.

FINANCIAL CONDITION

         From June 30, 2000 to June 30, 2001, the Company's total assets
increased $32,237,021 (9%), liabilities increased $38,616,620 (14%), and
stockholders' equity decreased $6,379,599 (11%). The ratio of stockholders'
equity to total assets decreased from 17% to 13%.

         Securities available-for-sale increased $5,802,585 (43%), from
$13,645,307 as of June 30, 2000 to $19,447,892 as of June 30, 2001. The Company
owns 93,000 shares of Federal Home Loan Mortgage Corporation ("FHLMC") stock
with an amortized cost of $91,063 in the securities available-for-sale category.
As of June 30, 2001, the gross unrealized gain on the stock was $6,237,587, an
increase of $2,443,587 from $3,794,000 as of June 30, 2000. Securities
held-to-maturity decreased $2,222,806 (33%), from $6,768,672 as of June 30, 2000
to $4,545,866 as of June 30, 2001. These decreases are attributable to
repayments received during the year. Stock in the Federal Home Loan Bank of Des
Moines ("FHLB") increased to facilitate borrowing from the FHLB. The Bank is
required to own stock in the FHLB equal to five percent of its borrowings.

         Net loans receivable increased by $22,185,358 (8%), from $295,057,753
as of June 30, 2000 to $317,243,111 as of June 30, 2001. During this period,
permanent loans secured by both owner and non-owner occupied one to four unit
residential real estate decreased by $10,587,316, (5%), multi-family permanent
loans increased by $3,494,939 (9%), construction loans increased by $13,946,064
(34%) and permanent loans secured by commercial real estate increased
$17,334,307 (65%). During this period the Company increased its emphasis on
commercial lending, while selling the majority of conforming loan production on
the secondary market. These loan sales allowed the Bank to provide customers
with the 30-

                                       4

<PAGE>
Guaranty Federal Bancshares, Inc.
Management's Discussion and Analysis of Financial Condition
   And Results of Operations

year fixed rate mortgages while retaining a banking relationship
with the customer. As a result of these loan sales, loans serviced for others
increased by $30,873,092 (143%).

         Loans past due 90 days or more increased from $249,047 (0.1% of net
loans) as of June 30, 2000 to $2,304,205 (0.7% of net loans) as of June 30,
2001. As of June 30, 2001, management considers $4,947,916 as impaired with a
related allowance for loan losses of $413,409. One borrower accounts for $3.5
million of the impaired loans of which $1.7 million is over 90-days delinquent.
The collateral securing the loans includes single-family houses and two office
condominium units. A second troubled borrower is a builder having difficulty
selling an upper-bracket home. A third borrower has two loans secured by
multi-family properties that have not historically generated sufficient cash
flow to properly maintain the properties and service the debt. Other impaired
loans are collateralized primarily by single-family residences. The Bank
recognizes interest income on impaired loans as payments are received.
Management believes the loss allowances on these loans are sufficient to
liquidate the collateral without further loss.

         The Bank increased the allowance for loan losses $177,443 (7%) in
fiscal year 2001 and $170,618 (7%) in fiscal year 2000. Loan charge-offs
exceeded recoveries by $132,557 for fiscal year 2001 and $9,382 for fiscal year
2000. The allowance for loan losses as of June 30, 2001 and 2000, was 0.85% of
net loans outstanding. As of June 30, 2001, the allowance for loan losses was
55% of impaired loans versus 53% as of June 30, 2000.

         Foreclosed assets held for sale as of June 30, 2001 includes a car
carried at the lower of cost or fair value.

         Premises and equipment increased $957,884 (14%), from $6,800,198 as of
June 30, 2000 to $7,758,082 as of June 30, 2001. During fiscal year 2001, the
Company completed construction of a full service branch office on South
National. In addition, the Company converted to an "in-house" core processing
system, which required upgrades to computer hardware.

         Deposits increased $26,040,262 (18%), from $144,607,238 as of June 30,
2000 to $170,647,500 as of June 30, 2001. During this period core deposit
accounts increased by $9,414,630 (18%) to 36% of total deposits, while
certificates of deposit increased by $20,493,828 (22%). Included in the
certificates of deposit total is $20,558,000 in deposits placed by brokers.
Management considers brokered deposits to be an effective source of funds that
cost less at the margin than increasing rates on retail deposits in our local
market.

         As a result of the continued increase in the loan portfolio and the
treasury stock purchases, the Company increased borrowings from the Federal Home
Loan Bank by $10,149,436 (7%) from $136,507,147 as of June 30, 2000 to
$146,656,583 as of June 30, 2001.

         Stockholders' equity (including unrealized appreciation on securities
available-for-sale, net of tax) decreased $6,379,599 (11%), from $56,585,390 as
of June 30, 2000 to $50,205,791 as of June 30, 2001. Net income for the year
exceeded cash dividends paid by $1,296,572. The Company repurchased 817,629
shares as treasury stock (17% of the outstanding shares as of June 30, 2000) at
a cost of $9,986,737 (an average price of $12.21 per share). As of July 26,
2001, 98,670 shares remain to be repurchased under the repurchase plan announced
January 5, 2001. The increase in unrealized appreciation on securities
available-for-sale, net of tax, increased stockholders' equity by $1,549,256. On
a per share basis, stockholders' equity increased $0.84 (7%) from $12.36 as of
June 30, 2000 to $13.20 as of June 30, 2001.


                                       5


<PAGE>
Guaranty Federal Bancshares, Inc.
Management's Discussion and Analysis of Financial Condition
   And Results of Operations

AVERAGE BALANCES, INTEREST AND AVERAGE YIELDS

         The following tables show (1) the average monthly balances of various
categories of interest-earning assets and interest-bearing liabilities, (2) the
total interest earned or paid thereon, and (3) the resulting weighted average
yields and costs. In addition, the table shows the Company's rate spreads and
net yields. Average balances are based on daily balances. Tax-free income is not
material; accordingly, interest income and related average yields have not been
calculated on a tax equivalent basis. Average loan balances include non-accrual
loans. Dollar amounts are expressed in thousands.
<TABLE>
<CAPTION>

                                   June 30, 2001    Year Ended June 30, 2001    Year Ended June 30, 2000  Year Ended June 30, 1999
                                  ----------------  -------------------------   ------------------------- --------------------------
                                            Yield/  Average            Yield/   Average           Yield/  Average            Yield/
                                  Balance   Cost    Balance  Interest   Cost    Balance Interest   Cost   Balance  Interest   Cost
                                  --------- ------ --------  --------  ------  -------- --------  ------ --------  --------  ------
<S>                               <C>       <C>    <C>       <C>       <C>     <C>      <C>       <C>    <C>       <C>       <C>
ASSETS
Interest-earning:
Loans                             $ 320,106  7.76%  $309,422   $25,157   8.13%  $281,901  $22,054   7.82% $235,322  $18,617    7.91%
Investment securities                14,870  6.27%    15,237     1,133   7.44%    12,367      867   7.01%   24,634    1,605    6.52%
Other assets                         25,372  3.50%    16,240       892   5.49%    13,905      643   4.62%   13,808      541    3.92%
                                  --------- ------  --------  --------  ------  -------- --------  ------ --------  --------  ------
Total interest-earning              360,348  7.40%   340,899    27,182   7.97%   308,173   23,564   7.65%  273,764   20,763    7.58%
                                            ------            --------  ------           --------  ------           --------  ------
Noninterest-earning                  13,745           11,013                      10,257                     7,701
                                  ---------         --------                    --------                  --------
                                  $ 374,093         $351,912                    $318,430                  $281,465
                                  =========         ========                    ========                  ========

LIABILITIES AND STOCKHOLDERS'
EQUITY
Interest-bearing:
Savings accounts                  $   7,578  1.98%  $  7,677       199   2.59%  $  8,445      203   2.40% $  8,486      206    2.43%
Transaction accounts                 44,109  2.57%    38,927     1,162   2.99%    35,461    1,039   2.93%   28,874      789    2.73%
Certificates of deposit             112,003  5.35%    93,008     5,357   5.76%    94,358    4,909   5.20%   95,295    4,985    5.23%
FHLB advances                       146,657  5.99%   155,325     9,646   6.21%   114,124    6,778   5.94%   79,985    4,723    5.90%
Other borrowed funds                  1,264  3.00%       351        14   3.99%         -        -   0.00%        -        -    0.00%
                                  ---------  ------ --------  --------  ------  -------- --------  ------ --------  --------  ------
Total interest-bearing              311,611  5.17%   295,288    16,378   5.55%   252,388   12,929   5.12%  212,640   10,703    5.03%
                                             ------           --------  ------           --------  ------           --------  ------
Noninterest-bearing                  12,277            4,463                       6,156                     3,562
                                  ---------         --------                    --------                  --------
Total liabilities                   323,888          299,751                     258,544                   216,202
Stockholders' equity                 50,205           52,161                      59,886                    65,263
                                  ---------         --------                    --------                  --------
                                  $ 374,093         $351,912                    $318,430                  $281,465
                                  =========         ========                    ========                  ========
Net earning balance               $  48,737         $ 45,611                    $ 55,785                  $ 61,124
                                  =========         ========                    ========                  ========
Earning yield less costing rate              2.23%                       2.42%                      2.53%                      2.55%
                                             ======                     ======                     ======                     ======
Net interest income, and
   net yield spread on
   interest-earning assets                   2.93%             $10,804   3.17%            $10,635   3.45%           $10,060    3.67%
                                             ======           ========  ======           ========  ======           =======   ======
Ratio of interest-earning assets
   to interest-bearing liabilities      116%             115%                       122%                       129%
                                        ====             ====                       ====                       ====
</TABLE>
                                       6


<PAGE>
Guaranty Federal Bancshares, Inc.
Management's Discussion and Analysis of Financial Condition
   And Results of Operations


         The following table sets forth information regarding changes in
interest income and interest expense for the periods indicated resulting from
changes in average balances and average rates shown in the previous table. For
each category of interest-earning assets and interest-bearing liabilities
information is provided with respect to changes attributable to: (i) changes in
balance (change in balance multiplied by the old rate), (ii) changes in interest
rates (change in rate multiplied by the old balance); and (iii) the combined
effect of changes in balance and interest rates (change in balance multiplied by
change in rate).
<TABLE>
<CAPTION>

                                      Year Ended June 30, 2001 versus 2000      Year Ended June 30, 2000 versus 1999
                                     --------------------------------------     -------------------------------------
                                     Average    Interest   Rate &               Average     Interest  Rate &
                                     Balance      Rate    Balance     Total     Balance       Rate   Balance    Total
                                     -------    --------  -------     -----     -------     -------- -------    -----
<S>                                  <C>        <C>       <C>         <C>       <C>         <C>      <C>        <C>

Interest income:
Loans                                 $2,153         865       85     3,103       3,685         (207)    (41)   3,437
Investment securitites                   201          53       12       266        (799)         122     (61)    (738)
Other assets                             108         120       21       249           4           97       1      102
                                     -------    --------  -------     -----     -------     -------- -------    -----
Net change in interest income          2,462       1,038      118     3,618       2,890           12    (101)   2,801
                                     -------    --------  -------     -----     -------     -------- -------    -----
Interest expense:
Savings accounts                         (18)         15       (1)       (4)         (1)          (2)      -       (3)
Transaction accounts                     101          20        2       123         180           57      13      250
Certificates of deposit                  (70)        526       (8)      448         (49)         (27)      -      (76)
Advances                               2,447         309      112     2,868       2,016           27      12    2,055
Other borrowed funds                       -           -       14        14           -            -       -        -
                                     -------    --------  -------     -----     -------     -------- -------    -----
Net change in interest expense         2,460         870      119     3,449       2,146           55      25    2,226
                                     -------    --------  -------     -----     -------     -------- -------    -----
Change in net interest income         $    2         168       (1)      169         744          (43)   (126)     575
                                     =======    ========  =======     =====     =======     ======== =======    =====
</TABLE>


RESULTS OF OPERATIONS - COMPARISON OF YEARS ENDED JUNE 30, 2001 AND 2000

         Interest Rates. The Company charges borrowers and pays depositors
interest rates that are largely a function of the general level of interest
rates. The following table sets forth the weekly average interest rates on U.S.
Treasury securities for the twelve months ending.
<TABLE>
<CAPTION>

                                               U.S. Treasury Securities
                                         Average for the Twelve Months Ended
                                       ----------------------------------------
                                       Ten-Year        One-Year
                                       Maturity        Maturity          Spread
                                       --------        --------          ------
<S>                                     <C>             <C>              <C>
June 30, 2001                              5.45%           5.10%           0.35%
June 30, 2000                              6.17%           5.79%           0.38%
                                          -----           -----           -----
Decrease in interest rates                -0.72%          -0.69%          -0.03%
                                          =====           =====           =====

</TABLE>

         For the first six months of fiscal year 2001, interest rates were
relatively stable at levels comparable to the prior fiscal year. In January 2001
the Federal Reserve began lowering targeted interest rates. The Federal funds
rate for the six months ended December 2000 averaged 6.52%. The following six
months ended June 2001, the federal funds rate averaged 4.99% and the rate for
the week ended June 27, 2001 averaged 3.91%. The 72 basis point decrease in the
ten-year treasury for fiscal year 2001 is indicative of the decrease in the
fixed-rates on single-family mortgage loans. As a result of this decrease in the
level of interest rates borrowers refinanced their adjustable rate mortgage
loans into long-term fixed rate mortgages. Mortgage recordings in Greene County
were down 7% the first six months of fiscal year 2001 and up 28% in the second
six months reflecting the level of loan activity generated by the decline in
interest rates.

                                       7

<PAGE>
Guaranty Federal Bancshares, Inc.
Management's Discussion and Analysis of Financial Condition
   And Results of Operations

         Interest Income. Total interest income increased $3,618,300 (15%) as
the average balance of interest-earning assets increased $32,726,000 (11%). The
yield on average interest earning assets increased 32 basis points to 7.97% as
the Company continued shifting the asset mix from lower yielding investments to
loans.

         Interest on loans increased $3,103,699 (14%) as the average loan
receivable balance increased $27,521,000 (10%) while the average yield increased
31 basis points to 8.13%. The increase in loan yield is the result of the impact
of higher loan rates during the prior fiscal year and the first six months of
this fiscal year. Interest on investment securities increased $265,640 (31%) as
the average balance increased $2,870,000 (23%) while the average yield increased
43 basis points to 7.44%. As long as interest rates remain at historical low
levels, our customers will benefit from loan rates adjusting downward and from
refinancing to fixed-rate mortgages to lock-in the rates. These adjustments and
refinances will negatively impact portfolio loan yields in future quarters.

         Interest Expense. Total interest expense increased $3,449,102 (27%) as
the average balance of interest-bearing liabilities increased $42,900,000 (17%).
Interest expense increased more than the increase in average balances because
the average cost of interest-bearing liabilities increased by 43 basis points to
5.55%.

         Interest expense on deposits increased $567,569 (9%) as the average
balance of interest costing deposits increased $1,348,000 (1%) and the average
interest rate paid to depositors increased 37 basis points to 4.82%. The average
balance of interest costing core deposit accounts increased $2,698,000 (6%) and
the average balance of certificates of deposit decreased $1,350,000 (1%).

         In order to fund the increase in assets and purchase of treasury stock,
the Company borrowed additional funds from the FHLB. The average balance of FHLB
advances increased by $41,201,000 (36%) while the average cost of those advances
increased 27 basis points to 6.21%.

         Net Interest Income. The Company's net interest income increased
$169,198 (2%) from $10,634,855 to $10,804,053. During the year ended June 30,
2001, the average balance of interest-earning assets exceeded the average
balance of interest-bearing liabilities by $45,611,000, a decrease in the
average net earning balance of $10,174,000 (18%). To the extent the Company's
dividends and purchases of treasury stock exceed net income, this net earning
balance will continue to decline. The Company's spread between the average yield
on interest-earning assets and the average cost of interest-bearing liabilities
decreased by 11 basis points from 2.53% to 2.42%.

         Provision for Loan Losses. Provisions for loan losses are charged or
credited to earnings to bring the total allowance to a level considered adequate
by the Company to provide for potential loan losses in the existing portfolio.
When making the assessment, the Company considers prior loss experience, volume
and type of lending, industry standards and past due loans in the Company's
portfolio. In addition, the Company considers general economic conditions and
other factors related to collectability of the Company's portfolio.

         During fiscal year 2001, the Company experienced loan charge-offs in
excess of recoveries of $132,557 and based on a review as discussed above,
elected to add $310,000 to the allowance. Management anticipates the need to
continue adding to the loan loss allowance through charges to provision for loan
losses based on the anticipated growth in the loan portfolio and shift in
emphasis from primarily single-family to a mix of single-family and commercial
loans.

         Non-Interest Income. Non-interest income, which consists of service
charges and other fees, income from foreclosed assets and gains or losses on
sale of assets, increased $685,034 (48%) from $1,418,265 to

                                       8

<PAGE>
Guaranty Federal Bancshares, Inc.
Management's Discussion and Analysis of Financial Condition
   And Results of Operations


$2,103,299. This increase is primarily due to the $557,420 increase in gain
on sale of loans and investments. Gains on sale of single-family loan production
increased significantly in the second half of the fiscal year reflecting the
volume of 30-year fixed-rate loans sold in the secondary market. The Bank
attempts to minimize risk of price changes by committing to sell loans while the
loans are in the origination process. In addition, deposit service charges
increased $168,803 (15%) due to the continued growth in the Bank's checking
accounts. As of June 30, 2001, the Bank serviced 13,030 checking accounts up
1,799 (16%) from a year earlier.

         Non-Interest Expense. Non-interest expense increased $1,201,061 (19%),
from $6,420,318 to $7,621,379. Salaries and employee benefits increased $669,063
(20%) due to increased staffing for the commercial loan department, the computer
system conversion and the increased volume of customer transactions. Occupancy
expense increased $175,759 (21%) primarily due to the opening of a new full
service branch on South National, as well as upgrading computer hardware for the
new "in-house" core system. Data processing expense increased $113,927 (22%).
This was a result of various one time conversion costs related to the new
computer system. Other expense increased $258,506 (22%) due to increases in
legal expense, postage, loan expense, accounting services and overdraft losses.
The Savings Association Insurance Fund assessment declined $27,524 (49%) as the
fund reached the level prescribed by the FDIC. Advertising increased $11,330
(3%).

         Income Taxes.  The change in income tax is a direct result of changes
in the Company's taxable income.


         Cash Dividends Paid. The Company paid cash dividends of $0.23 per share
on October 15, 2000, to the stockholders of record as of September 9, 2000 and
$0.24 per share on April 12, 2001, to the stockholders of record as of March 28,
2001.

RESULTS OF OPERATIONS - COMPARISON OF YEARS ENDED JUNE 30, 2000 AND 1999

         Interest Rates. The Company charges borrowers and pays depositors
interest rates that are largely a function of the general level of interest
rates. The following table sets forth the weekly average interest rates on U.S.
Treasury securities for the twelve months ending.

<TABLE>
<CAPTION>

                                               U.S. Treasury Securities
                                          Average for the Twelve Months Ended
                                       -----------------------------------------
                                       Ten-Year         One-Year
                                       Maturity         Maturity        Spread
                                       --------         --------        ------
<S>                                    <C>              <C>             <C>
June 30, 2000                              6.17%            5.79%         0.38%
June 30, 1999                              5.10%            4.76%         0.34%
                                           ----             ----          ----
Increase in interest rates                 1.07%            1.03%         0.04%
                                           ====             ====          ====
</TABLE>

         The 107 basis point increase in the ten-year treasury for fiscal year
2000 is indicative of the increase in the fixed-rates on single-family mortgage
loans. As a result of this increase in the level of interest rates after
historically low rates during the twelve months ended June 30, 1999, the number
of Greene County mortgage recordings declined 4,960 (26%) from 19,445 for the
twelve months ended June 30, 1999 to 14,485 for the twelve months ended June 30,
2000. During this same period, the Bank's Greene County mortgage filings
declined 19%. As a result, the Bank's share of the market increased from 6.3% to
6.9%. In addition, borrowers no longer exhibited a clear preference for fixed
rate over adjustable mortgages.

                                       9

<PAGE>
Guaranty Federal Bancshares, Inc.
Management's Discussion and Analysis of Financial Condition
   And Results of Operations

         Interest Income. Total interest income increased $2,801,227 (13%) as
the average balance of interest-earning assets increased $34,409,000 (13%). The
yield on average interest earning assets increased seven basis points to 7.65%
as the Company shifted the asset mix from lower yielding investments to loans.

         Interest on loans increased $3,436,708 (18%) as the average loan
receivable balance increased $46,579,000 (20%) while the average yield declined
9 basis points to 7.82%. The decline in loan yield is the result of the impact
of borrowers refinancing home loans to lower their rates during the prior fiscal
year. Interest on investment securities decreased $738,136 (46%) as the average
balance decreased $12,267,000 (50%) while the average yield increased 49 basis
points to 7.01%.

         Interest Expense. Total interest expense increased $2,226,036 (21%) as
the average balance of interest-bearing liabilities increased $39,748,000 (19%).
Interest expense increased more than the increase in average balances because
the average cost of interest-bearing liabilities increased by nine basis points
to 5.12%.

         Interest expense on deposits increased $171,061 (3%) as the average
balance of interest costing deposits increased $5,609,000 (4%) while the average
interest rate paid to depositors declined six basis points to 4.45%. Interest
expense on deposits increased less than the average balance due to a favorable
change in the mix of deposits. The average balance of interest costing core
deposit accounts increased $6,546,000 (18%) and the average balance of
certificates of deposit decreased $937,000 (1%).

         In order to fund the increase in assets and purchase of treasury stock,
the Company borrowed additional funds from the FHLB. The average balance of FHLB
advances increased by $34,139,000 (43%) while the average cost of those advances
increased four basis points to 5.94%. During the twelve months ended June 30,
2000, the spread between advance rates offered by the FHLB and the same maturity
US Treasury rates increased dramatically. For example, the spread between the
FHLB one-year advance and the one-year US Treasury increased 49 basis points
from 38 basis points on January 3, 2000 to 87 basis points on June 28, 2000.

         Net Interest Income. The Company's net interest income increased
$575,191 (6%) from $10,059,664 to $10,634,855. During the year ended June 30,
2000, the average balance of interest-earning assets exceeded the average
balance of interest-bearing liabilities by $55,785,000, a decrease in the
average net earning balance of $5,339,000 (9%). To the extent the Company's
dividends and purchases of treasury stock exceed net income, this net earning
balance will continue to decline. The Company's spread between the average yield
on interest-earning assets and the average cost of interest-bearing liabilities
decreased by two basis points from 2.55% to 2.53%.

         Provision for Loan Losses. During fiscal year 2000, the Company
experienced loan charge-offs in excess of recoveries of $9,382 and elected to
add $180,000 to the allowance.

         Non-Interest Income. Non-interest income, which consists of service
charges and other fees, income from foreclosed assets and gains or losses on
sale of assets, increased $217,411 (18%) from $1,200,854 to $1,418,265. This
increase is primarily due to the $232,973 (27%) increase in service charges
generated from the continued growth in the Bank's checking accounts. As of June
30, 2000, the Bank serviced 11,231 checking accounts up 1,071 (11%) from a year
earlier.

         Non-Interest Expense. Non-interest expense increased $462,928 (8%),
from $5,957,390 to $6,420,318. Salaries and employee benefits increased $368,124
(12%) due to increased staffing for the Y2K event, the pending computer system
conversion and the increased volume of customer transactions. The

                                      10

<PAGE>
Guaranty Federal Bancshares, Inc.
Management's Discussion and Analysis of Financial Condition
   And Results of Operations

following expense categories increased at approximately the same rate as
total assets (9%), occupancy $59,546 (8%), data processing $30,713 (6%), and
other $99,072 (9%). The Savings Association Insurance Fund assessment declined
$27,924 (33%) as the fund reached the level prescribed by the FDIC. Advertising
declined $66,603 (15%).

         Income Taxes. The change in income tax is a direct result of changes in
the Company's taxable income.

         Cash Dividends Paid. The Company paid cash dividends of $0.20 per share
on October 15, 1999, to the stockholders of record as of September 7, 1999 and
$0.22 per share on April 14, 2000, to the stockholders of record as of March 30,
2000.

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 that 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. This matching is especially difficult
because the residential mortgage loans that comprise the majority of the Bank's
assets give the borrower the right to prepay at any time. These borrowers act in
their economic self-interest and refinance higher rate loans when rates are low.
Since, the relative spread 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, 1997, ARMs constituted 75% of the Bank's mortgage loan portfolio. However
during fiscal years 1998 and 1999, the general level of long term interest rates
dropped and borrowers opted for fixed rate mortgages. As long term interest
rates increased during fiscal year 2000, borrowers shifted their preference to
ARM loans. As long term interest rates decreased during fiscal year 2001,
borrowers shifted their preference to fixed rate loans. As of June 30, 2001,
ARMs represent 58% of the loan portfolio. Of the ARMs originated during the past
three fiscal years, borrower's preferred initial fixed rate periods of three or
five years. In response to this shift in customer preference, the Bank started a
program of borrowing longer-term funds from the FHLB. Twenty-four percent of
FHLB Advances have scheduled maturities over five years. Because of the
historically low market rates for single-family mortgage loans, the Bank intends
to sell new loan production on a service-retained basis in the secondary
mortgage market. This will allow the Bank to serve the customer's needs and
retain a banking relationship without the risk of carrying a long-term
fixed-rate loan on the books.

         The Bank is also managing interest rate risk by the origination of
construction loans. As of June 30, 2001, such loans, net of loans in process,
make up 17% 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, 2000, the Bank's savings
accounts, checking accounts, and money market deposit accounts totaled
$53,098,478 or 37% of its total deposits. As of June 30, 2001, these accounts
totaled $58,644,912 or 34% of total deposits. The weighted average rate paid on
these accounts decreased 55 basis points from 2.74% on June 30, 2000 to 2.19% on
June 30, 2001.



<PAGE>
Guaranty Federal Bancshares, Inc.
Management's Discussion and Analysis of Financial Condition
   And Results of Operations


The Bank believes, based on historical experience, that a substantial
portion of such accounts represents non-interest rate sensitive, core deposits.

                                       11



<PAGE>
Guaranty Federal Bancshares, Inc.
Management's Discussion and Analysis of Financial Condition
   And Results of Operations

INTEREST RATE SENSITIVITY ANALYSIS

         The following table sets forth as of June 30, 2001, 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.
<TABLE>
<CAPTION>

              Estimated Net Portfolio Value       NPV as % of PV of Assets
BP Change    -------------------------------      ------------------------
in Rates     $ Amount   $ Change    % Change      NPV Ratio         Change
---------    --------   --------    --------      ---------         ------
<S>          <C>        <C>         <C>           <C>               <C>
 +300          60,634        982          2%         16.46%          1.00%
 +200          61,289      1,637          3%         16.37%          0.91%
 +100          61,110      1,458          2%         16.07%          0.61%
   NC          59,652                                15.46%
 -100          56,394     (3,258)        -5%         14.45%         -1.01%
 -200          51,719     (7,933)       -13%         13.12%         -2.34%
 -300          46,274    (13,378)       -22%         11.62%         -3.84%
</TABLE>

         This table demonstrates the impact of the borrowers ability to prepay
their loans. If interest rates fall 200 or more basis points, the impact of the
loan prepayment would out weigh the increase in net asset value and the net
portfolio value would decline.

         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 constant 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.

         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. Management expects that the Bank's asset and liability policies and
strategies will continue as described above so long as competitive and
regulatory conditions in the financial institution industry and market interest
rates continue as they have in recent years.

                                       12

<PAGE>
Guaranty Federal Bancshares, Inc.
Management's Discussion and Analysis of Financial Condition
   And Results of Operations

LIQUIDITY AND CAPITAL RESOURCES

          The Company's principal sources of funds for investments and
operations are net income, deposits from its primary market area, principal and
interest payments on loans and mortgage-backed securities, and proceeds from
maturing investment securities. The Company considers deposits and FHLB advances
as primary sources of funds.

         The Company's most liquid assets are cash and cash equivalents, which
are cash on hand, amounts due from financial institutions, and certificates of
deposit with other financial institutions that have an original maturity of
three months or less. The levels of such assets are dependent on the Bank's
operating, financing, and investment activities at any given time. The Company's
cash and cash equivalents totaled $10,313,558 as of June 30, 2001. The
variations in levels of cash and cash equivalents are influenced by deposit
flows and anticipated future deposit flows.

         As of June 30, 2001, the Bank has conditional commitments in the form
of letters of credit in the amount of $37,000. Outstanding loan commitments are
$9,679,000. The Bank has granted unused lines of credit to borrowers aggregating
approximately $12,836,000 and $8,991,000 for commercial lines and open-end
consumer lines, respectively. The Bank has $70,605,058 in certificates of
deposit that are scheduled to mature in one year or less. Management anticipates
that the majority of these certificates will renew in the normal course of
operations.

         Based on existing collateral as well as the Federal Home Loan Bank's
limitation of advances to 45% of assets, the Bank has the ability to borrow an
additional $21,685,000 from the FHLB. The Federal Home Loan Bank has reduced
this percentage of assets limitation to 43.75% for December 31, 2001. The Bank
plans to reduce its Federal Home Loan Bank borrowings to a level that will
provide a borrowing capacity sufficient to provide for contingencies.

         The Bank's capital position of $48,669,000 is 12.9% of total assets as
of June 30, 2001. The Bank has an excess of $39,245,000, $29,969,000, and
$23,335,000 of required regulatory levels of tangible, core, and risk-based
capital, respectively. Under current regulatory guidelines, the Bank is
classified as well capitalized.

         During fiscal year 2000, the Company purchased 741,194 shares of common
stock in open market transactions to place in a treasury stock account. During
fiscal year 2001, the Company purchased 824,754 shares of common stock in open
market transactions with the intent to grant stock awards for 7,125 shares of
common stock in accordance with the Bank's Restricted Stock Plan and to place
817,629 shares in the treasury stock account. The Company intends to monitor the
common stock price and, with regulatory approval, may from time to time initiate
further treasury stock transactions in order to improve the Company's long-term
earnings per share while at the same time maintaining an adequate level of
stockholders' equity.

IMPACT OF INFLATION AND CHANGING PRICES

         The Company prepared the consolidated financial statements and related
data presented herein in accordance with generally accepted accounting
principles which require the measurement of financial position and operating
results in terms of historical dollars, without considering changes in the
relative purchasing power of money over time due to inflation.

         Unlike most companies, the assets and liabilities of a financial
institution are primarily monetary in nature. As a result, interest rates have a
more significant impact on a financial institution's performance than the
effects of general levels of inflation. Interest rates do not necessarily move
in the same direction or in the same magnitude as the price of goods and
services, since such prices are affected by inflation. In the current interest
rate environment, liquidity and the maturity structure of the Bank's assets and
liabilities are critical to the maintenance of acceptable performance levels.

                                       13

<PAGE>
Guaranty Federal Bancshares, Inc.
Management's Discussion and Analysis of Financial Condition
   And Results of Operations

IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS

         The Financial Accounting Standards Board (FASB) recently adopted SFAS
141, "Business Combinations." This Statement establishes new standards for
financial accounting and reporting for business combinations. This Statement
eliminates the pooling-of-interests method and requires that all business
combinations be accounted for using the purchase method. The provisions of this
Statement apply to all business combinations initiated after June 30, 2001 and
to all business combinations accounted for using the purchase method for which
the date of acquisition is July 1, 2001, or later. Initial adoption of SFAS 141
will have no effect on the Company's financial statements.

         The FASB recently adopted SFAS 142, "Goodwill and Other Intangible
Assets". This Statement establishes new financial accounting and reporting
standards for acquired goodwill and other intangible assets. The Statement
addresses how intangible assets that are acquired individually or with a group
of other assets (but not those acquired in a business combination) should be
accounted for in financial statements upon their acquisition. It also addresses
how goodwill and other intangible assets should be accounted for after they have
been initially recognized in the financial statements. SFAS 142 is effective for
fiscal years beginning after December 15, 2001. Early adoption is permitted for
entities with fiscal years beginning after March 15, 2001. The Company expects
to first apply SFAS 142 in the first quarter of its fiscal year ending June 30,
2002. Adoption of SFAS 142 as of that date would have no initial effect on the
Company's financial statements.

BRANCH ACQUISITIONS

         On August 9, 2001, the Company entered into an agreement to purchase
selected loan assets and assume all of the deposit liabilities of five
Springfield, Missouri branch operations of another financial institution. The
Company will also assume the leases and purchase equipment at all but one of the
branches. When consummated, the acquisition transaction will be accounted for
using the purchase method prescribed by SFAS 141 and goodwill recognized, if
any, will be accounted for under the provisions of SFAS 142.

<PAGE>

Guaranty Federal Bancshares, Inc.
Management's Discussion and Analysis of Financial Condition
  And Results of Operations

Summary of Unaudited Quarterly Operating Results
<TABLE>
<CAPTION>
                                                                              Fiscal Year 2001, Quarter ended
                                                         ---------------------------------------------------------------------
   <S>                                                 <C>                     <C>                <C>               <C>
                                                         September-00          December-00          March-01          June-01
                                                         ------------          -----------         ---------         ---------
   Interest income                                       $ 6,537,787             6,876,853         6,828,495         6,938,962
   Interest expense                                        3,846,188             4,114,744         4,195,448         4,221,664
                                                         -----------            ----------         ---------         ---------
   Net interest income                                     2,691,599             2,762,109         2,633,047         2,717,298
   Provision for loan losses                                  30,000                70,000           115,000            95,000
   Gain on loans and investment securities                    42,953               111,805           146,711           306,444
   Other noninterest income, net                             396,953               410,289           393,923           294,221
   Noninterest expense                                     1,738,612             1,817,124         2,010,343         2,055,300
                                                         -----------            ----------         ---------         ---------
   Income before income taxes                              1,362,893             1,397,079         1,048,338         1,167,663
   Provision for income taxes                                499,458               499,889           352,213           391,440
                                                         -----------            ----------         ---------         ---------
   Net income                                            $   863,435               897,190           696,125           776,223
                                                         ===========            ==========         =========         =========
   Basic earnings per share                              $      0.19                  0.21              0.17              0.21
                                                         ===========            ==========         =========         =========
   Diluted earnings per share                            $      0.19                  0.21              0.17              0.20
                                                         ===========            ==========         =========         =========
                                                                             Fiscal Year 2000, Quarter ended
                                                         ---------------------------------------------------------------------
                                                         September-99          December-99          March-00          June-00
                                                         ------------          -----------         ---------         ---------
   Interest income                                       $ 5,561,794             5,732,103         6,051,628         6,218,272
   Interest expense                                        2,984,974             3,120,809         3,300,934         3,522,225
                                                           ---------            ----------         ---------         ---------
   Net interest income                                     2,576,820             2,611,294         2,750,694         2,696,047
   Provision for loan losses                                  45,000                45,000            45,000            45,000
   Gain (loss) on loans and investment securities            (14,586)               12,737            (3,185)           55,527
   Other noninterest income, net                             387,924               280,076           339,769           360,003
   Noninterest expense                                     1,532,901             1,548,571         1,649,711         1,689,135
                                                         -----------            ----------         ---------         ---------
   Income before income taxes                              1,372,257             1,310,536         1,392,567         1,377,442
   Provision for income taxes                                512,159               469,017           494,229           471,595
                                                         -----------            ----------         ---------         ---------
   Net income                                            $   860,098               841,519           898,338           905,847
                                                         ===========            ==========         =========         =========
   Basic earnings per share                              $      0.16                  0.17              0.18              0.20
                                                         ===========            ==========         =========         =========
   Diluted earnings per share                            $      0.16                  0.16              0.18              0.20
                                                         ===========            ==========         =========         =========
</TABLE>



                                       14

<PAGE>
Guaranty Federal Bancshares, Inc.
Consolidated Balance Sheets
June 30, 2001 and 2000
<TABLE>
<S>                                                                             <C>                                <C>
                                                                                     2001                              2000
                                                                                ------------                       -----------
            ASSETS

Cash                                                                            $  2,665,287                         1,906,757
Interest-bearing deposits in other financial institutions                          7,648,271                         7,250,514
                                                                                ------------                       -----------
   Cash and cash equivalents                                                      10,313,558                         9,157,271
Available-for-sale securities                                                     19,447,892                        13,645,307
Held-to-maturity securities                                                        4,545,866                         6,768,672
Stock in Federal Home Loan Bank, at cost                                           8,600,400                         6,875,400
Mortgage loans held for sale                                                       2,862,793                           995,286
Loans receivable, net of allowance for loan losses;
   6/30/01 - $2,697,389; 6/30/00 - $2,519,946                                    317,243,111                       295,057,753
Accrued interest receivable:
   Loans                                                                           1,940,922                         1,651,760
   Investments                                                                       207,831                           174,123
Prepaid expenses and other assets                                                  1,168,750                           728,989
Foreclosed assets held for sale                                                        4,200                             1,625
Premises and equipment                                                             7,758,082                         6,800,198
                                                                                ------------                       -----------
                                                                                $374,093,405                       341,856,384
                                                                                ============                       ===========

            LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Deposits                                                                        $170,647,500                       144,607,238
Federal Home Loan Bank advances                                                  146,656,583                       136,507,147
Securities sold under agreements to repurchase                                     1,264,448                               -
Advances from borrowers for taxes and insurance                                    1,293,062                         1,384,231
Accrued expenses and other liabilities                                             1,344,804                           828,709
Accrued interest payable                                                             950,674                           959,354
Income taxes payable                                                                 121,725                           333,772
Deferred income taxes                                                              1,608,818                           650,543
                                                                                ------------                       -----------
                                                                                 323,887,614                       285,270,994
                                                                                ------------                       -----------
STOCKHOLDERS' EQUITY
Common Stock:
  $0.10 par value; authorized 10,000,000 shares;
      issued; 2001 - 6,268,394 shares, 2000 - 6,250,037 shares                       626,840                           625,004
Additional paid-in capital                                                        48,451,515                        47,921,681
Unearned ESOP shares                                                              (2,640,800)                       (2,870,440)
Retained earnings, substantially restricted                                       25,951,537                        24,654,965
Accumulated other comprehensive income
  Unrealized appreciation on available-for-sale securities,
  net of income taxes; 2001 - $2,318,786, 2000 - $1,408,906                        3,948,203                         2,398,947
                                                                                ------------                       -----------
                                                                                  76,337,295                        72,730,157
Treasury stock, at cost;
  2001 - 2,200,950 shares, 2000 - 1,383,321 shares                               (26,131,504)                      (16,144,767)
                                                                                ------------                       -----------
                                                                                  50,205,791                        56,585,390
                                                                                ------------                       -----------
                                                                                $374,093,405                       341,856,384
                                                                                ============                       ===========
</TABLE>

See Notes to Consolidated Financial Statements

                                       15

<PAGE>

Guaranty Federal Bancshares, Inc.
Consolidated Statements of Income
Years Ended June 30, 2001, 2000, and 1999
<TABLE>
<S>                                                                  <C>                      <C>                  <C>

                                                                          2001                   2000                 1999
                                                                     ------------             ----------           -----------
   INTEREST INCOME
     Loans                                                           $ 25,157,298             22,053,599            18,616,891
     Investment securities                                              1,132,476                866,836             1,604,972
     Other                                                                892,323                643,362               540,707
                                                                     ------------             ----------           -----------
                                                                       27,182,097             23,563,797            20,762,570
                                                                     ------------             ----------           -----------
   INTEREST EXPENSE
     Deposits                                                           6,718,530              6,150,961             5,979,900
     Federal Home Loan Bank advances                                    9,645,741              6,777,981             4,723,006
     Other                                                                 13,773                    -                     -
                                                                     ------------             ----------           -----------
                                                                       16,378,044             12,928,942            10,702,906
                                                                     ------------             ----------           -----------
   NET INTEREST INCOME                                                 10,804,053             10,634,855            10,059,664
   PROVISION FOR LOAN LOSSES                                              310,000                180,000               180,000
                                                                     ------------             ----------           -----------
   NET INTEREST INCOME AFTER
     PROVISION FOR LOAN LOSSES                                         10,494,053             10,454,855             9,879,664
                                                                     ------------             ----------           -----------
   NONINTEREST INCOME
     Service charges                                                    1,274,603              1,105,800               872,827
     Late charges and other fees                                          159,726                160,639               113,490
     Gain on loans and investment securities                              607,913                 50,493                68,222
     Income (loss) on foreclosed assets                                   (80,189)                20,595                11,488
     Other income                                                         141,246                 80,738               134,827
                                                                     ------------             ----------           -----------
                                                                        2,103,299              1,418,265             1,200,854
                                                                     ------------             ----------           -----------
   NONINTEREST EXPENSE
     Salaries and employee benefits                                     4,088,038              3,418,975             3,050,851
     Occupancy                                                          1,024,400                848,641               789,095
     SAIF deposit insurance premiums                                       28,724                 56,248                84,172
     Data processing                                                      642,460                528,533               497,820
     Advertising                                                          392,930                381,600               448,203
     Other expense                                                      1,444,827              1,186,321             1,087,249
                                                                     ------------             ----------           -----------
                                                                        7,621,379              6,420,318             5,957,390
                                                                     ------------             ----------           -----------
   INCOME BEFORE INCOME TAXES                                           4,975,973              5,452,802             5,123,128
   PROVISION FOR INCOME TAXES                                           1,743,000              1,947,000             1,765,000
                                                                     ------------             ----------           -----------
   NET INCOME                                                           3,232,973              3,505,802             3,358,128
   OTHER COMPREHENSIVE INCOME (LOSS)
     Unrealized appreciation (depreciation) on
        available-for-sale securities, net of income taxes
        of $983,184, $(617,542) and $375,019
        for 2001, 2000 and 1999, respectively                           1,674,070             (1,039,879)              626,934
     Less: Reclassification adjustment for
        appreciation (depreciation) included in net
        income, net of income taxes of $(73,304)
        for 2001                                                         (124,814)                   -                      -
                                                                     ------------             ----------           -----------
                                                                        1,549,256             (1,039,879)              626,934
                                                                     ------------             ----------           -----------
   COMPREHENSIVE INCOME                                              $  4,782,229              2,465,923             3,985,062
                                                                     ============             ==========           ===========

   BASIC EARNINGS PER SHARE                                          $       0.78                   0.71                  0.61
                                                                     ============             ==========           ===========
   DILUTED EARNINGS PER SHARE                                        $       0.77                   0.70                  0.60
                                                                     ============             ==========           ===========
</TABLE>


See Notes to Consolidated Financial Statements



                                       16

<PAGE>

Guaranty Federal Bancshares, Inc.
Consolidated Statements of Cash Flows
Years Ended June 30, 2001, 2000, and 1999

<TABLE>
<S>                                                                  <C>                      <C>                  <C>
                                                                          2001                    2000                 1999
                                                                     ------------             ----------           -----------
CASH FLOWS FROM OPERATING ACTIVITIES

Net income                                                           $  3,232,973              3,505,802             3,358,128
Items not requiring (providing) cash:
  Deferred income taxes                                                    48,395                (92,418)             (251,687)
  Depreciation                                                            622,855                497,086               444,467
  Provision for loan losses                                               310,000                180,000               180,000
  Gain on loans and investment securities                                (607,913)               (50,493)              (68,222)
  (Gain) loss on sale of premises and equipment                            (2,392)                65,692                    -
  (Gain) loss on sale of foreclosed assets                                 81,481                (21,925)                4,820
  Amortization of deferred income,
    premiums and discounts                                                 91,652                (25,646)               14,181
  Stock award plan expense                                                464,032                496,320               510,286
  Origination of loans held for sale                                  (38,604,806)            (5,213,867)          (10,271,583)
  Proceeds from sale of loans held for sale                            37,147,094              4,999,350            10,375,914
  Release of ESOP shares                                                  268,071                248,626               414,385
Changes in:
  Accrued interest receivable                                            (322,870)               (68,944)             (152,795)
  Prepaid expenses and other assets                                       (84,105)              (517,312)             (183,090)
  Accrued expenses and other liabilities                                  507,415                745,201               271,944
  Income taxes payable                                                   (214,057)               102,017              (158,391)
                                                                     ------------             ----------           -----------
    Net cash provided by operating activities                           2,937,825              4,849,489             4,488,357
                                                                     ------------             ----------           -----------
</TABLE>

See Notes to Consolidated Financial Statements



                                       17

<PAGE>

Guaranty Federal Bancshares, Inc.
Consolidated Statements of Cash Flows (continued)
Years Ended June 30, 2001, 2000, and 1999
<TABLE>
<S>                                                                  <C>                      <C>                  <C>
                                                                          2001                    2000                 1999
                                                                     ------------             ----------           -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of loans                                                             -                      -              (7,895,901)
Net increase in loans                                                 (25,590,545)           (31,753,775)          (50,158,557)
Principal payments on held-to-maturity securities                       2,211,435              1,936,601             3,992,371
Principal payments on available-for-sale securities                       345,309                357,385             6,413,840
Purchase of available-for-sale securities                              (4,079,079)            (6,970,877)             (520,065)
Purchase of premises and equipment                                     (1,584,669)              (759,393)             (376,888)
Proceeds from sale of premises and equipment                                6,322                982,177                    -
Proceeds from sales of available-for-sale securities                      587,734                299,472                    -
Proceeds from maturitites of held-to-maturity securities                       -               6,700,000             1,385,715
Purchase of FHLB stock                                                 (1,725,000)            (1,635,600)           (2,985,700)
Proceeds from sale of foreclosed assets                                 2,931,555                153,926                30,690
Purchase of other investments                                            (355,656)                    -                     -
                                                                     ------------            -----------           -----------
  Net cash used in investing activities                               (27,252,594)           (30,690,084)          (50,114,495)
                                                                     ------------            -----------           -----------

CASH FLOWS FROM FINANCING ACTIVITIES
Stock options exercised                                                   110,510                 25,656               106,792
Cash dividends paid                                                    (1,936,401)            (2,086,846)           (1,805,069)
Cash dividends received on RRP Stock                                        6,652                 11,050                13,554
Net increase in demand deposits,
   NOW accounts and savings accounts                                    5,546,434              6,362,295             9,880,981
Net increase (decrease) in certificates of deposit and
   securities sold under agreements to repurchase                      21,758,276             (2,892,211)           (9,719,163)
Proceeds from FHLB advances                                            80,924,742             67,541,724            64,092,500
Repayments of FHLB advances                                           (70,775,306)           (35,829,217)           (4,378,888)
Advances from borrowers for taxes and insurance                           (91,169)               188,686               325,069
Stock purchased for stock awards                                          (85,945)                    -             (2,373,065)
Treasury stock purchased                                               (9,986,737)            (8,012,392)           (8,132,375)
                                                                     ------------             ----------           -----------
   Net cash provided by financing activities                           25,471,056             25,308,745            48,010,336
                                                                     ------------             ----------           -----------

INCREASE (DECREASE) IN CASH
   AND CASH EQUIVALENTS                                                 1,156,287               (531,850)            2,384,198

CASH AND CASH EQUIVALENTS,
   BEGINNING OF YEAR                                                    9,157,271              9,689,121             7,304,923
                                                                     ------------             ----------           -----------

CASH AND CASH EQUIVALENTS,
   END OF YEAR                                                       $ 10,313,558              9,157,271             9,689,121
                                                                     ============             ==========           ===========
</TABLE>

See Notes to Consolidated Financial Statements


                                       18

<PAGE>

Guaranty Federal Bancshares, Inc.
Consolidated Statements of Change in Stockholders' Equity
Years Ended June 30, 2001, 2000 and 1999
<TABLE>
<S>                                       <C>        <C>         <C>         <C>          <C>         <C>               <C>
                                                                                                       Accumulated
                                                                                                          Other
                                                                                                       Comprehensive
                                                                                                         Income-
                                                                                                        Unrealized
                                                                                                      Appreciation on
                                                     Additional   Unearned                             Available-for-
                                          Common      Paid-In       ESOP       Treasury    Retained   Sale Securities,
                                           Stock      Capital      Shares       Stock      Earnings        Net             Total
                                          ---------  ----------  ----------  -----------  ----------  ---------------   ----------
Balance, July 1, 1998                     $ 622,804  49,016,992  (3,444,540)         -    21,682,950    2,811,892       70,690,098
Net income                                      -          -           -             -     3,358,128          -          3,358,128
Dividends ($0.34 per share)                     -          -           -             -    (1,805,069)         -         (1,805,069)
Stock aw ard plans                              -       547,394        -             -           -            -            547,394
Stock purchased for stock awards                     (2,373,065)       -             -           -            -         (2,373,065)
Stock options exercised                       1,774     105,018        -             -           -            -            106,792
Release of ESOP shares                          -        69,925     344,460          -           -            -            414,385
Treasury stock purchased                        -          -           -      (8,132,375)        -            -         (8,132,375)
Change in unrealized appreciation on
   available-for-sale securitites, net of
   income taxes of $375,019                     -          -           -             -           -        626,934          626,934
                                          ---------  ----------  ----------     --------  ----------  -----------       ----------
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                                      -          -           -             -     3,505,802          -          3,505,802
Dividends ($0.42 per share)                     -          -           -             -    (2,086,846)         -         (2,086,846)
Stock aw ard plans                              -       511,201        -             -           -            -            511,201
Stock options exercised                         426      25,230        -             -           -            -             25,656
Release of ESOP shares                          -        18,986     229,640          -           -            -            248,626
Treasury stock purchased                        -          -           -      (8,012,392)        -            -         (8,012,392)
Change in unrealized appreciation on
   available-for-sale securitites, net of
   income taxes of ($617,542)                   -          -           -             -           -     (1,039,879)      (1,039,879)
                                          ---------  ----------  ----------  -----------  ----------  -----------       -----------
Balance, June 30, 2000                      625,004  47,921,681  (2,870,440) (16,144,767) 24,654,965    2,398,947       56,585,390
Net income                                      -           -          -             -     3,232,973          -          3,232,973
Dividends ($0.47 per share)                     -           -          -             -    (1,936,401)         -         (1,936,401)
Stock aw ard plans                              -       468,674        -             -           -            -            468,674
Stock purchased for stock awards                        (85,945)       -             -           -            -            (85,945)
Stock options exercised                       1,836     108,674        -             -           -            -            110,510
Release of ESOP shares                          -        38,431     229,640          -           -            -            268,071
Treasury stock purchased                        -          -           -      (9,986,737)        -            -         (9,986,737)
Change in unrealized appreciation on
   available-for-sale securitites, net of
   income taxes of $909,880                     -          -           -             -           -      1,549,256        1,549,256
                                          ---------  ----------  ----------  -----------  ----------  -----------       ----------
Balance, June 30, 2001                    $ 626,840  48,451,515  (2,640,800) (26,131,504) 25,951,537    3,948,203       50,205,791
                                          =========  ==========  ==========  ===========  ==========  ===========       ==========

</TABLE>

See Notes to Consolidated Financial Statements


                                       19

<PAGE>

Guaranty Federal Bancshares, Inc.
Notes to Consolidated Financial Statements

NOTE 1:  NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
         ACCOUNTING POLICIES

Organization
------------
       In April 1995, Guaranty Federal Savings & Loan Association reorganized
from a federally chartered mutual savings and loan association into a mutual
holding company, Guaranty Federal Bancshares, M. H. C. (the "MHC"). Concurrent
with the reorganization, Guaranty Federal Savings Bank (the "Bank"), a stock
savings bank was chartered. The Bank issued 3,125,000 shares of common stock in
connection with the reorganization, the majority of which were owned by the MHC.

       On December 30, 1997, the MHC converted to Guaranty Federal Bancshares,
Inc. (the "Company"), a Delaware-chartered stock corporation. In connection with
the conversion and reorganization, the shares of the Bank held by the mutual
holding company were extinguished along with the mutual holding company and the
shares of the Bank held by the public were exchanged for 1,880,710 shares of the
Company. Additional shares of the Company were sold to certain depositors of the
Bank and to the trust of the employee stock ownership plan of the Bank as of
December 30, 1997.

Nature of Operations
--------------------
       The Company operates as a unitary savings and loan holding company. The
Bank is primarily engaged in providing a full range of banking and mortgage
services to individual and corporate customers in southwest Missouri. The Bank's
subsidiary provides other services, such as insurance, annuities, and securities
brokerage. The Bank is subject to competition from other financial institutions.
The Company and the Bank are also subject to the regulation of certain federal
agencies and undergo periodic examinations by those regulatory authorities.

Principles of Consolidation
---------------------------
       The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary, the Bank, and the Bank's wholly-owned
subsidiary, Guaranty Financial Services of Springfield, Inc. All significant
intercompany profits, transactions and balances have been eliminated in
consolidation.

Use of Estimates
----------------
       The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

       Material estimates that are particularly susceptible to significant
change in the near term relate to the determination of the allowance for loan
losses and the valuation of real estate acquired in connection with foreclosures
or in satisfaction of loans. In connection with the determination of the
allowance for loan losses and the valuation of foreclosed assets held for sale,
management obtains independent appraisals for significant properties.

       Management believes that the allowances for losses on loans and
valuation of foreclosed assets held for sale are adequate. While management uses
available information to recognize losses on loans and value foreclosed assets
held for sale, changes in economic conditions may necessitate revision of these
estimates in future years. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the Bank's
allowances for losses on loans and valuation of foreclosed assets held for sale.
Such agencies may require the Bank to recognize additional losses based on their
judgments of information available to them at the time of their examination.



                                       20

<PAGE>

Guaranty Federal Bancshares, Inc.
Notes to Consolidated Financial Statements

Investments in Debt and Equity Securities
-----------------------------------------
       Available-for-sale securities, which include any security for which the
Company or the Bank has no immediate plan to sell but which may be sold in the
future, are carried at fair value. Realized gains and losses, based on
specifically identified amortized cost of the specific security, are included in
other income. Unrealized gains and losses are recorded, net of related income
tax effects, in stockholders' equity. Premiums and discounts are amortized and
accreted, respectively, to interest income using the level-yield method over the
period to maturity.

       Held-to-maturity securities, which include any security for which the
Company or the Bank has the positive intent and ability to hold until maturity,
are carried at historical cost adjusted for amortization of premiums and
accretion of discounts. Premiums and discounts are amortized and accreted,
respectively, to interest income using the level-yield method over the period to
maturity.

       Interest and dividends on investments in debt and equity securities are
included in income when earned.

Mortgage Loans Held for Sale
----------------------------
       Mortgage loans held for sale are carried at the lower of cost or fair
value, determined using an aggregate basis. Write-downs to fair value are
recognized as a charge to earnings at the time the decline in value occurs.
Forward commitments to sell mortgage loans are sometimes acquired to reduce
market risk on mortgage loans in the process of origination and mortgage loans
held for sale. Gains and losses resulting from sales of mortgage loans are
recognized when the respective loans are sold to investors. Gains and losses are
determined by the difference between the selling price plus the value of
retained servicing rights for loans originated after July 1, 1996, and the
carrying amount of the loans sold, net of discounts collected or paid and
considering a normal servicing rate. Fees received from borrowers to guarantee
the funding of mortgage loans held for sale and fees paid to investors to ensure
the ultimate sale of such mortgage loans are recognized as income or expense
when the loans are sold or when it becomes evident that the commitment will not
be used.

Loans
-----
       Loans that management has the intent and ability to hold for the
foreseeable future or until maturity or pay-offs are reported at their
outstanding principal adjusted for any charge-offs, the allowance for loan
losses and any deferred fees or costs on originated loans and unamortized
premiums or discounts on purchased loans. Interest income is accrued on the
unpaid principal balance.

Loan Servicing
--------------
       The cost of originated mortgage-servicing rights is amortized over the
shorter of the actual or contractual loan life. Impairment of mortgage-servicing
rights is assessed based on the fair value of those rights. Fair values are
estimated by discounting expected cash flows. For purposes of measuring
impairment, the rights are stratified based on the loan type, remaining term to
maturity, and interest rate. The key assumptions used in the valuation include
discount rates, prepayment speeds and servicing costs. The amount of impairment
recognized is the amount by which the capitalized mortgage servicing rights
exceeds their fair value.



                                       21

<PAGE>

Guaranty Federal Bancshares, Inc.
Notes to Consolidated Financial Statements

Allowance for Loan Losses
-------------------------
       The allowance for loan losses is increased by provisions charged to
expense and reduced by loans charged off, net of recoveries. The allowance is
maintained at a level considered adequate to provide for potential loan losses,
based on the Bank's evaluation of the loan portfolio, as well as on prevailing
and anticipated economic conditions and historical losses by loan category.
General allowances have been established, based upon the aforementioned factors,
and allocated to the individual loan categories. Allowances are accrued on
specific loans evaluated for impairment for which the basis of each loan,
including accrued interest, exceeds the discounted amount of expected future
collections of interest and principal or, alternatively, the fair value of loan
collateral.

         A loan is considered impaired when it is probable that the Bank will
not receive all amounts due according to the contractual terms of the loan. This
includes loans that are delinquent ninety days or more (nonaccrual loans) and
certain other loans identified by management. Accrual of interest is
discontinued, and interest accrued and unpaid is removed, at the time such
amounts are delinquent ninety days. Interest is recognized for nonaccrual loans
only upon receipt.

Foreclosed Assets Held for Sale
-------------------------------
       Assets acquired by foreclosure or in settlement of debt and held for
sale are valued at estimated fair value as of the date of foreclosure, and a
related valuation allowance is provided for estimated costs to sell the assets.
Management evaluates the value of foreclosed assets held for sale periodically
and increases the valuation allowance for any subsequent declines in fair value.
Changes in the valuation allowance and gains/losses on sales of foreclosed
assets are included in noninterest income.

Premises and Equipment
----------------------
       Depreciable assets are stated at cost less accumulated depreciation.
Depreciation is charged to expense using the straight-line and accelerated
methods over the estimated useful lives of the assets.

Fee Income
----------
       Loan origination fees, net of direct origination costs, are recognized
as income over the term of the loan using the level-yield method. Loan servicing
income represents fees earned for servicing real estate mortgage loans owned by
various investors.

Income Taxes
------------
       Deferred tax liabilities and assets are recognized for the tax effect
of differences between the financial statement and tax bases of assets and
liabilities. A valuation allowance is established to reduce deferred tax assets
if it is more likely than not that a deferred tax asset will not be realized.

Cash Equivalents
----------------
       The Company considers all highly liquid interest-bearing deposits in
other financial institutions with an initial maturity of three months or less to
be cash equivalents.



                                       22

<PAGE>

Guaranty Federal Bancshares, Inc.
Notes to Consolidated Financial Statements

Regulatory Matters
------------------
       The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory--possibly additional
discretionary--actions by regulators that, if undertaken, could have a direct
and material effect on the Bank's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines that involve quantitative measures of the
Bank's assets, liabilities and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Bank's capital amounts and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings and other factors.

       Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios (set forth in
the table below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined) and of Tier I capital (as defined) to adjusted
tangible assets (as defined). Management believes, as of June 30, 2001, that the
Bank meets all capital adequacy requirements.

       As of June 30, 2001, the most recent notification from the Office of
Thrift Supervision categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well capitalized
the Bank must maintain minimum total risk-based, Tier I risk-based and Tier I
leverage ratios as set forth in the following table. There are no conditions or
events since that notification that management believes have changed the Bank's
category.

       The Bank's actual capital amounts and ratios are also presented in the
table. No amount was deducted from capital for interest-rate risk. Dollar
amounts are expressed in thousands.

<TABLE>
<S>                                   <C>                           <C>                           <C>
                                                                                                  To Be Well Capitalized
                                                                        For Capital               Under Prompt Corrective
                                             Actual                 Adequacy Purposed                Action Provisions
                                      -------------------           -----------------             -----------------------
                                       Amount       Ratio            Amount     Ratio              Amount          Ratio
                                      ---------     -----           -------     -----             --------        -------
As of June 30, 2001

Stockholders' equity, and
   ratio to total assets              $  48,678     13.0%
                                                    ====
Unrealized appreciation on
   available-for-sale securities         (3,859)
                                      ---------

Tangible capital, and
   ratio to adjusted total assets     $  44,819     12.2%           $  5,508    1.5%
                                      =========     ====            ========    ===

Tier 1 (core) capital, and
   ratio to adjusted total assets     $  44,819     12.2%           $ 14,688    4.0%              $  18,360        5.0%
                                      =========     ====            ========    ===               =========        ===

Tier 1 (core) capital, and
   ratio to risk-weighted assets      $  44,819     14.9%           $ 11,999    4.0%              $  17,998        6.0%
                                                    ====            ========    ===               =========        ===
Allowance for loan losses -
   Tier 2 capital                         2,522
                                          -----
Total risk-based capital, and
   ratio to risk-weighted assets      $  47,341     15.8%           $ 23,997    8.0%              $  29,996       10.0%
                                      =========     ====            ========    ===               =========       ====
Total assets                          $ 373,321
                                      =========
Adjusted total assets                 $ 367,196
                                      =========
Risk-weighted assets                  $ 299,963
                                      =========
</TABLE>



                                       23

<PAGE>

Guaranty Federal Bancshares, Inc.
Notes to Consolidated Financial Statements

<TABLE>
<S>                                   <C>                           <C>                           <C>
                                                                                                  To Be Well Capitalized
                                                                        For Capital               Under Prompt Corrective
                                             Actual                 Adequacy Purposed                Action Provisions
                                      -------------------           -----------------             -----------------------
                                       Amount       Ratio            Amount     Ratio              Amount          Ratio
                                      ---------     -----           -------     -----             --------        -------
As of June 30, 2000

Stockholders' equity, and
   ratio to total assets              $  54,995     16.1%
                                                    ====

Unrealized appreciation on
   available-for-sale securities         (2,455)
                                      ---------

Tangible capital, and
   ratio to adjusted total assets     $  52,540     15.6%           $  5,053    1.5%
                                      =========     ====            ========    ===

Tier 1 (core) capital, and
   ratio to adjusted total assets     $  52,540     15.6%           $ 13,473    4.0%              $ 16,842           5.0%
                                      =========     ====            ========    ===               ========           ===

Tier 1 (core) capital, and
   ratio to risk-weighted assets      $  52,540     22.2%           $  9,472    4.0%              $ 14,207           6.0%
                                                    ====            ========    ===               ========           ===

Allowance for loan losses -
   Tier 2 capital                         2,396
                                      ---------

Total risk-based capital, and
   ratio to risk-weighted assets      $  54,936     23.2%           $ 18,943    8.0%              $ 23,679          10.0%
                                      =========     ====            ========    ===               ========          ====
Total assets                          $ 340,733
                                      =========
Adjusted total assets                 $ 336,836
                                      =========
Risk-weighted assets                  $ 236,788
                                      =========
</TABLE>

       The amount of dividends that the Bank may pay is subject to various
regulatory limitations. As of June 30, 2001, no amounts were available from the
Bank's retained earnings, without regulatory approval, for distribution as
dividends.

Earnings Per Share
------------------

<TABLE>
<CAPTION>
         The computation for earnings per share for the years ended June 30, 2001, 2000 and 1999 is as follows:
<S>                                                 <C>                      <C>                    <C>
                                                     Year Ended               Year Ended             Year Ended
                                                    June 30, 2001            June 30, 2000          June 30, 1999
                                                    -------------            -------------          -------------
Net Income                                          $   3,232,973                3,505,802              3,358,128
                                                    =============            =============          =============
Average common shares outstanding                       4,125,778                4,966,648              5,507,285
Effect of stock options outstanding                        47,778                   50,998                 56,865
                                                    -------------            -------------          -------------
Average diluted shares outstanding                      4,173,556                5,017,646              5,564,150
                                                    =============            =============          =============
Earnings per share - basic                          $        0.78                     0.71                   0.61
                                                    =============            =============          =============
Earnings per share - diluted                        $        0.77                     0.70                   0.60
                                                    =============            =============          =============

</TABLE>

       Options to purchase 415,949, 452,187 and 435,642 shares of common stock
were outstanding during the years ended June 30, 2001, 2000 and 1999,
respectively, but were not included in the computation of diluted earnings per
share because the options' exercise price was greater than the average market
price of the common shares.



                                       24

<PAGE>

Guaranty Federal Bancshares, Inc.
Notes to Consolidated Financial Statements

Impact of Recent Accounting Pronouncements
------------------------------------------
       The Financial Accounting Standards Board (FASB) recently adopted SFAS
141, "Business Combinations." This Statement establishes new standards for
financial accounting and reporting for business combinations. This Statement
eliminates the pooling-of-interests method and requires that all business
combinations be accounted for using the purchase method. The provisions of this
Statement apply to all business combinations initiated after June 30, 2001 and
to all business combinations accounted for using the purchase method for which
the date of acquisition is July 1, 2001, or later. Initial adoption of SFAS 141
will have no effect on the Company's financial statements.

       The FASB recently adopted SFAS 142, "Goodwill and Other Intangible
Assets". This Statement establishes new financial accounting and reporting
standards for acquired goodwill and other intangible assets. The Statement
addresses how intangible assets that are acquired individually or with a group
of other assets (but not those acquired in a business combination) should be
accounted for in financial statements upon their acquisition. It also addresses
how goodwill and other intangible assets should be accounted for after they have
been initially recognized in the financial statements. SFAS 142 is effective for
fiscal years beginning after December 15, 2001. Early adoption is permitted for
entities with fiscal years beginning after March 15, 2001. The Company expects
to first apply SFAS 142 in the first quarter of its fiscal year ending June 30,
2002. Adoption of SFAS 142 as of that date would have no initial effect on the
Company's financial statements.

Segment Information
-------------------
         The principal business of the Company is overseeing the business of the
Bank. The Company has no significant assets other than its investment in the
Bank and certain investment securities. The banking operation is the Company's
only reportable segment. The banking segment is principally engaged in the
business of originating mortgage loans secured by one-to-four family residences
and, to a lesser extent, multi-family, construction, commercial and consumer
loans. These loans are funded primarily through the attraction of deposits from
the general public, borrowings from the Federal Home Loan Bank and brokered
deposits. Selected information is not presented separately for the Company's
reportable segment, as there is no material difference between that information
and the corresponding information in the consolidated financial statements.



                                       25

<PAGE>

Guaranty Federal Bancshares, Inc.
Notes to Consolidated Financial Statements

NOTE 2:  INVESTMENTS IN DEBT AND EQUITY SECURITIES

<TABLE>
<CAPTION>
         The amortized cost and approximate fair values of available-for-sale securities are as follows:
<S>                                   <C>                   <C>                 <C>                 <C>
                                                              Gross               Gross
                                         Amortized          Unrealized          Unrealized          Approximate
                                           Cost               Gains              (Losses)           Fair Value
                                      -------------         ----------          ----------          -----------
As of June 30, 2001
Equity Securities:
   FHLMC stock                        $      91,063          6,237,587                   -            6,328,650
   Other stock                            2,653,339            142,061                (350)           2,795,050
Debt Securities:
   Trust preferred securities             6,523,205                  -            (104,405)           6,418,800
   U. S. government agencies              1,993,423              2,896                   -            1,996,319
   Mortgage-backed securities             1,919,871                  -             (10,798)           1,909,073
                                      -------------         ----------          ----------          -----------
                                      $  13,180,901          6,382,544            (115,553)          19,447,892
                                      =============         ==========          ==========          ===========
As of June 30, 2000
Equity Securities:
   FHLMC stock                        $      94,000          3,794,000                   -            3,888,000
   Other stock                              938,005             83,665            (172,379)             849,291
Debt Securities:
   Trust preferred securities             6,509,629            143,604                   -            6,653,233
   Mortgage-backed securities             2,295,819                  -             (41,036)           2,254,783
                                      -------------         ----------          ----------          -----------
                                      $   9,837,453          4,021,269            (213,415)          13,645,307
                                      =============         ==========          ==========          ===========


         Maturities of available-for-sale debt securities as of June 30, 2001:

                                                            Amortized           Approximate
                                                               Cost              Fair Value
                                                           -----------          -----------
Due after one through five years                           $ 1,993,423            1,996,319
Due after ten years                                          6,523,205            6,418,800
Mortgage-backed securities not due on a
   single maturity date                                      1,919,871            1,909,073
                                                           -----------          -----------
                                                           $10,436,499           10,324,192
                                                           ===========          ===========

</TABLE>



                                       26

<PAGE>

Guaranty Federal Bancshares, Inc.
Notes to Consolidated Financial Statements

<TABLE>
<CAPTION>
         The amortized cost and approximate fair values of held-to-maturity securities are as follows:

<S>                                   <C>                   <C>                 <C>                 <C>
                                                              Gross               Gross
                                         Amortized          Unrealized          Unrealized          Approximate
                                           Cost               Gains              (Losses)           Fair Value
                                      -------------         ----------          ----------          -----------
As of June 30, 2001
Debt Securities:
   U. S. government agencies          $     405,369              3,337                   -              408,706
   Mortgage-backed securities             4,140,497            165,426             (13,371)           4,292,552
                                      -------------            -------             --------           ---------
                                      $   4,545,866            168,763             (13,371)           4,701,258
                                      =============            =======             ========           =========
As of June 30, 2000
Debt Securities:
   U. S. government agencies          $     600,061                  -             (19,022)             581,039
   Mortgage-backed securities             6,168,611            113,477            (106,541)           6,175,547
                                      -------------            -------             --------           ---------
                                      $   6,768,672            113,477            (125,563)           6,756,586
                                      =============            =======             ========           =========


         Maturities of held-to-maturity securities as of June 30, 2001:

                                                            Amortized           Approximate
                                                               Cost              Fair Value
                                                           -----------          -----------

Due after ten years                                        $   405,369              408,706
Mortgage-backed securities not due on a
  single maturity date                                       4,140,497            4,292,552
                                                           -----------          -----------
                                                           $ 4,545,866            4,701,258
                                                           ===========          ===========

</TABLE>


       Proceeds from sales of available-for-sale securities were $587,734 and
$299,472 for the years ended June 30, 2001 and June 30, 2000, respectively, with
resultant gains of $198,118 and $38,798. There were no sales of
available-for-sale securities for the year ended June 30, 1999.

       Included in mortgage-backed securities as of June 30, 2001 and 2000,
are certain U. S. Government agency derivative securities with an amortized cost
of $1,919,871 and $2,295,819 and an approximate fair value of $1,900,000 and
$2,255,000, respectively. The yield on these derivative securities varies with
the level of certain published interest rates, principally LIBOR.



                                       27

<PAGE>

Guaranty Federal Bancshares, Inc.
Notes to Consolidated Financial Statements

NOTE 3:  LOANS AND ALLOWANCE FOR LOAN LOSSES

         Categories of loans at June 30, 2001 and 2000, include:



                                                  2001                2000
                                             -------------        -----------
Real estate - residential mortgage:
   One to four family units                  $ 186,572,663        197,159,979
   Multi-family                                 42,641,340         39,146,401
Real estate - construction                      55,317,543         41,371,479
Real estate - commercial                        43,893,228         26,558,921
Commercial loans                                 5,511,111            761,355
Installment loans                               10,299,938          9,059,356
Loans on savings accounts                          273,224            461,013
                                             -------------        -----------
                                               344,509,047        314,518,504
Undisbursed portion of loans-in-process        (24,212,230)       (16,667,747)
Allowance for loan losses                       (2,697,389)        (2,519,946)
Unearned discounts                                 (88,414)          (108,960)
Deferred loan fees/costs, net                     (267,903)          (164,098)
                                             -------------        -----------
                                             $ 317,243,111        295,057,753
                                             =============        ===========


         Transactions in the allowance for loan losses were as follows:
<TABLE>
<S>                                      <C>              <C>                  <C>
                                            2001              2000                 1999
                                        -----------      ------------           ----------
Balance, beginning of year              $ 2,519,946      $  2,349,328            2,191,557
   Provision charged to operations          310,000           180,000              180,000
   Loans charged off                       (132,557)           (9,382)             (29,229)
   Recoveries                                     -                 -                7,000
                                        -----------      ------------           ----------
Balance, end of year                    $ 2,697,389      $  2,519,946            2,349,328
                                        ===========      ============           ==========

</TABLE>

         The weighted average interest rate on loans as of June 30, 2001 and
2000 was 7.76% and 8.00%, respectively.

         The Bank serviced mortgage loans for others amounting to $51,451,459,
$21,554,961, and $21,402,788 as of June 30, 2001, 2000, and 1999, respectively.
The Bank serviced commercial loans for others amounting to $976,594 as of June
30, 2001.

         Impaired loans totaled $4,947,916 as of June 30, 2001, and $4,756,870
as of June 30, 2000, with a related allowance for loan losses of $413,409 and
$728,761, respectively. As of June 30, 2001 and 2000, respectively, impaired
loans of $1,980,928 and $106,840 had no related allowance for loan losses.

         Interest of $586,156, $182,182, and $72,078 was recognized on average
impaired loans of $5,929,505, $1,458,934 and $895,131 for 2001, 2000, and 1999,
respectively. Interest of $339,220, $127,819, and $64,827 was recognized on
impaired loans on a cash basis during 2001, 2000, and 1999, respectively.



                                       28

<PAGE>

Guaranty Federal Bancshares, Inc.
Notes to Consolidated Financial Statements

NOTE 4:  PREMISES AND EQUIPMENT

    Major classifications of premises and equipment, stated at cost, are as
follows:

                                            2001                  2000
                                        -----------            ----------
Land                                    $ 1,250,789             1,250,789
Buildings and improvements                6,179,074             5,322,303
Furniture, fixtures and equipment         3,499,986             2,158,036
Leasehold improvements                      129,393               129,393
Automobiles                                  21,856                20,243
Construction in progress                        -                 505,042
                                        -----------            ----------
                                         11,081,098             9,385,806
Accumulated depreciation                 (3,323,016)           (2,585,608)
                                        -----------            ----------
                                        $ 7,758,082             6,800,198
                                        ===========            ==========

         Depreciation expense was $622,855, $497,086, and $444,467 for the years
ended June 30, 2001, 2000, and 1999, respectively.



                                       29

<PAGE>

Guaranty Federal Bancshares, Inc.
Notes to Consolidated Financial Statements

NOTE 5:  DEPOSITS
<TABLE>
<CAPTION>

                                              June 30, 2001                                  June 30, 2000
                         ------------------------------------------------       ------------------------------------------
                         <S>                  <C>            <C>             <C>              <C>            <C>
                           Weighted                            Percentage      Weighted                         Percentage
                         Average Rate          Balance        of Deposits    Average Rate       Balance        of Deposits
                         ------------       -------------     -----------    ------------       -------        -----------
Core Deposits:
Demand                          0.00%       $   6,958,074            4.1%           0.00%    $   6,553,904            4.5%
NOW                             1.49%          22,612,295           13.3%           1.89%       20,482,551           14.2%
Money market                    3.70%          21,496,291           12.6%           4.77%       17,510,651           12.1%
Passbook savings                1.98%           7,578,252            4.4%           2.72%        8,551,372            5.9%
                                            -------------            ---                     -------------           ----
                                2.19%          58,644,912           34.4%           2.74%       53,098,478           36.7%
                                            -------------           ----                     -------------           ----
Certificates:
       0% - 3.99%               1.48%           2,394,542            1.4%           0.00%              -              0.0%
    4.00% - 5.99%               5.06%          76,920,914           45.1%           5.35%       68,984,815           47.7%
    6.00% - 7.99%               6.31%          32,687,133           19.2%           6.30%       22,523,945           15.6%
                                            -------------           ----                        ----------           ----
                                5.35%         112,002,588           65.6%           5.59%       91,508,760           63.3%
                                            -------------           ----                        ----------           ----
  Total Deposits                4.26%       $ 170,647,500          100.0%           5.54%    $ 144,607,238          100.0%
                                            =============          =====                     =============          =====
</TABLE>

         The aggregate amount of certificates of deposit with a minimum balance
of $100,000 was approximately $12,313,000 and $7,470,000 as of June 30, 2001 and
2000, respectively.

         A summary of certificates of deposit by maturity as of June 30, 2001,
is as follows:

             Fiscal year ending:
               June 30, 2002                                $    70,605,058
               June 30, 2003                                     20,157,636
               June 30, 2004                                     14,993,826
               June 30, 2005                                      3,453,016
               June 30, 2006                                        795,404
               Thereafter                                         1,997,648
                                                            ---------------
                                                            $   112,002,588
                                                            ===============

         A summary of interest expense on deposits is as follows:

                                     2001             2000             1999
                                -------------       ---------       ---------
NOW and Money Market accounts   $   1,162,486       1,038,631         789,474
Savings accounts                      198,793         203,154         205,362
Certificate accounts                5,383,870       4,940,908       5,007,616
Early withdrawal penalties            (26,619)        (31,732)        (22,552)
                                -------------       ---------       ---------
                                $   6,718,530       6,150,961       5,979,900
                                =============       =========       =========

         The Bank utilizes brokered deposits as an additional funding source.
The aggregate amount of brokered deposits was approximately $20,558,000 at June
30, 2001. There were no brokered deposits at June 30, 2000.



                                       30

<PAGE>

Guaranty Federal Bancshares, Inc.
Notes to Consolidated Financial Statements

NOTE 6:  FEDERAL HOME LOAN BANK ADVANCES

      Federal Home Loan Bank advances consist of the following:

<TABLE>
<CAPTION>
                                 June 30, 2001                          June 30, 2000
                         ------------------------------        -------------------------------
<S>                     <C>                <C>                <C>                 <C>

                                             Weighted                                Weighted
 Maturity Date            Amount           Average Rate          Amount           Average Rate
 -------------         --------------      ------------        -----------        ------------
Fiscal Year 2001       $            -             0.00%         53,673,243               6.43%
Fiscal Year 2002           54,401,405             6.31%         13,334,577               5.92%
Fiscal Year 2003            9,689,694             5.79%          3,801,792               6.06%
Fiscal Year 2004           31,113,811             5.43%         22,233,473               5.42%
Fiscal Year 2005            6,284,830             6.61%          6,412,568               6.61%
Fiscal Year 2006            9,587,160             5.88%          3,223,521               5.98%
Thereafter                 35,569,683             5.94%         33,827,973               5.92%
                       --------------                          -----------
                       $  146,646,583             5.99%        136,507,147               6.07%
                       ==============                          ===========

</TABLE>

          As of June 30, 2001, the Bank had advances equal to $11,000,000 with a
weighted average rate of 5.40% callable between July 30, 2003 and October 20,
2003 at the FHLB's option with a maturity date between July 30, 2008 and October
20, 2008.

         The FHLB requires the Bank to maintain collateral equal to outstanding
balances of advances. For collateral purposes, the FHLB values mortgage loans
free of other pledges, liens and encumbrances at 80% of their fair value, and
investment securities free of other pledges, liens and encumbrances at 95% of
their fair value.


                                       31

<PAGE>

Guaranty Federal Bancshares, Inc.
Notes to Consolidated Financial Statements


NOTE 7:  INCOME TAXES

         The Company files a consolidated federal income tax return. In
computing federal income taxes for taxable years prior to July 1, 1996, the Bank
has been allowed an 8% deduction from otherwise taxable income as a statutory
bad debt deduction, subject to limitations based on aggregate loans and savings
balances. In August 1996 this statutory bad debt deduction was repealed and is
no longer available for thrifts. In addition, bad debt reserves accumulated
after 1987, which are presently included as a component of the net deferred tax
liability, must be recaptured over a six-year period beginning in 1999. The
amount of the deferred tax liability which must be recaptured is $169,000 and
$225,000 as of June 30, 2001 and 2000, respectively.

         As of June 30, 2001, and 2000, retained earnings included approximately
$5,075,000 for which no deferred income tax liability has been recognized. This
amount represents an allocation of income to bad debt deductions for tax
purposes only. Reduction of amounts so allocated for purposes other than tax bad
debt losses or adjustments arising from carryback of net operating losses would
create income for tax purposes only, which would be subject to the then current
corporate income tax rate. The unrecorded deferred income tax liability on the
above amount was approximately $1,878,000 as of June 30, 2001 and 2000.

         The provision for income taxes consists of:

                              2001                2000                 1999
                         ------------          ----------           ---------
Taxes currently payable  $  1,694,605          2,039,418            2,016,687
Deferred income taxes          48,395            (92,418)            (251,687)
                         ------------          ---------            ---------
                         $  1,743,000          1,947,000            1,765,000
                         ============          =========            =========

         The tax effects of temporary differences related to deferred taxes
shown on the June 30, 2001 and 2000, balance sheets are:
<TABLE>
<S>                                                                         <C>                               <C>
                                                                                2001                             2000
                                                                            -----------                        ---------
Deferred tax assets:
   Allowances for loan and foreclosed asset losses                          $   998,034                          932,380
   Accrued compensated absences and bonuses                                      21,961                           12,856
   Unrealized loss on loans held for sale                                        32,713                           40,964
   RRP expense                                                                  179,745                          204,640
   Deferred loan fees/costs                                                      99,124                           60,760
                                                                            -----------                        ---------
                                                                              1,331,577                        1,251,600
                                                                            -----------                        ---------
Deferred tax liabilities:
   FHLB stock dividends                                                        (206,867)                        (206,867)
   Tax bad debt reserves in excess of base year                                (168,816)                        (225,088)
   Mortgage servicing rights                                                   (184,509)                         (61,282)
   Unrealized appreciation on available-for-sale securities                  (2,318,786)                      (1,408,906)
   Accumulated depreciation                                                     (61,417)                               -
                                                                            -----------                        ---------
                                                                             (2,940,395)                      (1,902,143)
                                                                            -----------                        ---------
Net deferred tax liability                                                  $(1,608,818)                        (650,543)
                                                                            ===========                        =========
</TABLE>


         A reconciliation of income tax expense at the statutory rate to income
tax expense at the Company's effective rate is shown below:


                                       32

<PAGE>


Guaranty Federal Bancshares, Inc.
Notes to Consolidated Financial Statements

<TABLE>
<S>                                                      <C>            <C>              <C>
                                                         2001             2000           1999
                                                        -------         --------        -------
Computed at statutory rate                                34.0%            34.0%          34.0%
Increase (reduction) in taxes resulting from:
   State financial institution tax                         2.3%             2.9%           2.9%
   ESOP                                                    0.8%            -0.1%          -2.3%
   Other                                                  -2.1%            -1.1%          -0.1%
                                                          -----            -----          -----
Actual tax provision                                      35.0%            35.7%          34.5%
                                                          =====            =====          =====
</TABLE>

         Missouri law provides that savings banks will be taxed based on an
annual privilege tax of 7% of net income. The privilege tax is included in
provision for income taxes.

         Deferred tax liabilities increased $909,880 for 2001, decreased
$617,542 for 2000 and increased $375,019 for 1999, as the result of changes in
unrealized appreciation on available-for-sale securities, shown in stockholders'
equity.


                                       33

<PAGE>

Guaranty Federal Bancshares, Inc.
Notes to Consolidated Financial Statements


NOTE 8:  DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

         The following methods and assumptions were used to estimate the fair
value of each class of financial instruments:

Cash and Cash Equivalents
-------------------------
         The carrying amounts reported in the balance sheets for cash and cash
equivalents approximate those assets' fair value.

Investment Securities
---------------------
         Fair values for investment securities equal quoted market prices, if
available. If quoted market prices are not available, fair values are estimated
based on quoted market prices of similar securities.

Accrued Interest Receivable
---------------------------
         The carrying amount of accrued interest receivable approximates its
fair value.

Mortgage Loans Held for Sale
----------------------------
         Fair value is estimated using the quoted market prices for securities
backed by similar loans, adjusted for differences in loan characteristics.

Loans
-----
         The fair value of loans is estimated by discounting the future cash
flows using the current rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining maturities. Loans with
similar characteristics are aggregated for purposes of the calculations.

Deposits
--------
         The fair value of demand deposits and savings accounts is the amount
payable on demand at the reporting date (i.e., their carrying amounts). The fair
value of fixed-maturity certificates of deposit is estimated using a discounted
cash flow calculation that applies the rates currently offered for deposits of
similar remaining maturities.

Federal Home Loan Bank Advances
-------------------------------
         Rates currently available to the Bank for debt with similar terms and
remaining maturities are used to estimate fair value of existing advances.

Securities Sold under Agreements to Repurchase
----------------------------------------------
         For these short-term instruments, the carrying amount is a reasonable
estimate of fair value.

Accrued Interest Payable
------------------------
         The carrying amount of accrued interest payable approximates its fair
value.

Commitments to Extend Credit, Letters of Credit and Lines of Credit
-------------------------------------------------------------------
         The fair value of commitments is estimated using the fees currently
charged to enter into similar agreements, taking into account the remaining
terms of the agreements and the present credit worthiness of the counterparties.
For fixed-rate loan commitments, fair value also considers the difference
between current levels of interest rates and the committed rates. The fair value
of letters of credit is based on fees currently charged for similar agreements
or on the estimated cost to terminate them or otherwise settle the obligations
with the counterparties at the reporting date.


                                       34

<PAGE>

Guaranty Federal Bancshares, Inc.
Notes to Consolidated Financial Statements


         The following table presents estimated fair values of the Company's
financial instruments. The fair values of certain of these instruments were
calculated by discounting expected cash flows, which method involves significant
judgments by management and uncertainties. Fair value is the estimated amount at
which financial assets or liabilities could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation sale.
Because no market exists for certain of these financial instruments and because
management does not intend to sell these financial instruments, the Company does
not know whether the fair values shown below represent values at which the
respective financial instruments could be sold individually or in the aggregate.

<TABLE>
<CAPTION>
                                                      June 30, 2001                      June 30, 2000
                                            ------------------------------      -------------------------------
<S>                                         <C>                <C>              <C>                <C>
                                               Carrying                           Carrying
                                                Amount          Fair Value         Amount           Fair Value
                                            -------------      -----------      ----------          -----------
Financial assets:
   Cash and cash equivalents                $  10,313,558       10,313,558        9,157,271           9,157,271
   Available-for-sale securities               19,447,892       19,447,892       13,645,307          13,645,307
   Held-to-maturity securities                  4,545,866        4,701,258        6,768,672           6,756,586
   Mortgage loans held-for-sale                 2,862,793        2,862,793          995,286             995,286
   Loans, net                                 317,243,111      318,621,000      295,057,753         297,900,000
   Interest receivable                          2,148,753        2,148,753        1,825,883           1,825,883
Financial liabilities:
   Deposits                                   170,647,500      170,727,000      144,607,238         143,764,000
   Federal Home Loan Bank advances            146,656,583      153,138,000      136,507,147         131,111,983
   Securities sold under agreements
     to repurchase                              1,264,448        1,264,448              -                   -
   Interest payable                               950,674          950,674          959,354             959,354
Unrecognized financial instruments
   (net of contractual value):
   Commitments to extend credit                       -                -                -                    -
   Unused lines of credit                             -                -                -                    -

</TABLE>

NOTE 9:  SIGNIFICANT ESTIMATES AND CONCENTRATIONS

       Generally accepted accounting principles require disclosure of certain
significant estimates and current vulnerabilities due to certain concentrations.
Estimates related to the allowance for loan losses are reflected in the footnote
regarding loans. Current vulnerabilities due to certain concentrations of credit
risk are discussed in the footnote on commitments and credit risk.

NOTE 10: ADDITIONAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                                 2001                2000               1999
                                                             ------------         ----------        ----------
<S>                                                          <C>                      <C>              <C>
Noncash Investing and Financing Activities:
   Loans receivable transferred to foreclosed
     assets held for sale                                    $  3,015,611             32,080           123,056
   Foreclosed assets held for sale transferred
     to loans receivable                                              -                  -             342,000

Additional Cash Payment Information:
   Interest paid                                               16,304,274         12,643,874        10,416,241
   Income taxes paid                                            1,928,539          1,928,174         2,198,156
</TABLE>




                                       35

<PAGE>

Guaranty Federal Bancshares, Inc.
Notes to Consolidated Financial Statements


NOTE 11: EMPLOYEE BENEFIT PLANS

Stock Award Plans
-----------------
         The Company has established four stock award plans for the benefit of
certain directors, officers and employees of the Bank and its subsidiary. The
plans provide a proprietary interest in the Company in a manner designed to
encourage these individuals to remain with the Bank. A Committee of the Bank's
Board of Directors administers the plans. The Company accounts for the cost of
share purchases under the plans as a reduction of stockholders' equity. The
awards vest at the rate of 20% per year over a five-year period. Compensation
expense is recognized based on the Company's stock price on the date the shares
are awarded to employees.

         At the annual stockholders' meeting on October 18, 1995, the Bank's
stockholders approved the Recognition and Retention Plan (the "RRP"). Following
approval of the Plan, the Bank contributed $464,643 to a separate trust to
purchase the 75,106 shares of the Company's common stock in the RRP.

         At a special stockholders' meeting on July 22, 1998, the Company's
stockholders approved the Restricted Stock Plan (the "RSP"). Following approval
of the Plan, the Company contributed $2,373,065 to a separate trust to purchase
the 173,632 shares in the RSP.

         During the year ended June 30, 2000, the directors of the Company
established the Stock Compensation Plan (the "2000 SCP") with both a stock award
component and a stock option component. Under the stock award component of this
plan, the Committee awarded 7,125 shares of the Company's common stock.
Following approval of the Plan, the Company contributed $85,945 to a separate
trust to purchase the 7,125 shares in the SCP.

         During the year ended June 30, 2001, the directors of the Company
established the Stock Compensation Plan (the "2001 SCP") with both a stock award
component and a stock option component. As of June 30, 2001, the Committee had
made no awards under this plan.

         The Bank recognized $464,032, $496,320, and $510,286 of expense under
these stock award plans in the years ended June 30, 2001, 2000, and 1999
respectively.

Stock Option Plans
------------------
         The Company has established four stock option plans for the benefit of
certain directors, officers and employees of the Bank and its subsidiary. A
committee of the Company's Board of Directors administers the plans. The stock
options under these plans may be either incentive stock options or nonqualified
stock options. Incentive stock options can be granted only to participants who
are employees of the Bank or its subsidiary. The option price must not be less
than the market value of the Company stock on the date of grant. All options
expire no later than ten years from the date of grant. The options vest at the
rate of 20% per year over a five-year period.

         At the annual stockholders' meeting on October 18, 1995, the Bank's
stockholders approved the 1994 Stock Option and Incentive Plan for the benefit
of certain directors, officers and employees of the Bank and its subsidiary.
Under this Plan, the Committee may grant stock options for up to 187,764 shares
of the Company's common stock.

         At a special stockholders' meeting on July 22, 1998, the Company's
stockholders approved the 1998 Stock Option and Incentive Plan. Under this plan,
the Committee may grant stock options for up to 434,081 shares of the Company's
common stock.

         Under the stock option component of the 2000 SCP, the Committee granted
nonqualified stock options for 17,875 shares of the Company's common stock.

         Under the stock option component of the 2001 SCP, the Committee had
granted no nonqualified stock options as of June 30, 2001.


                                       36

<PAGE>

Guaranty Federal Bancshares, Inc.
Notes to Consolidated Financial Statements


         The table below summarizes transactions under the Company's stock
option plans:

<TABLE>
<CAPTION>

                                                               Number of shares
                                                       -----------------------------------
<S>                                                   <C>                    <C>                  <C>
                                                                             Non-Qualified          Weighted
                                                        Incentive             Options to             Average
                                                       Stock Option            Directors          Exercise Price
                                                       ------------          -------------        --------------
Balance outstanding as of July 1, 1998                      144,000                    -          $         6.25
   Granted, in FY 1999                                      317,637                117,010                 13.44
   Exercised, in FY 1999                                    (17,740)                   -                    6.02
   Forfeited, in FY 1999                                     (8,072)                   -                   10.35
                                                       ------------          -------------
Balance outstanding as of June 30, 1999                     435,825                117,010                 11.86
   Granted, in FY 2000                                        8,000                 39,579                 11.18
   Exercised, in FY 2000                                     (4,262)                   -                    6.02
   Forfeited, in FY 2000                                     (9,188)                   -                   12.67
                                                       ------------          -------------
Balance outstanding as of June 30, 2000                     430,375                156,589                 11.83
   Granted, in FY 2001                                       23,000                    -                   12.05
   Exercised, in FY 2001                                    (18,357)                   -                    6.02
   Forfeited, in FY 2001                                    (29,821)               (23,402)                13.12
                                                       ------------          -------------
Balance outstanding as of June 30, 2001                     405,197                133,187                 11.93
                                                       ============          =============
Options exercisable as of June 30, 2001                     211,366                 45,364                 10.79
                                                       ============          =============
</TABLE>

         The fair value of each option granted is estimated on the date of the
grant using the Black-Scholes pricing model with the following weighted-average
assumptions:

<TABLE>
<CAPTION>
<S>                                                             <C>                <C>                <C>
                                                                 June 30, 2001     June 30, 2000      June 30, 1999
                                                                 -------------     -------------      -------------
Dividends per share                                               $       0.47      $       0.42       $       0.34
Risk-free interest rate                                                   5.24%             6.22%              5.88%
Expected life of options                                               5 years           5 years            5 years
Weighted-average fair value of options granted during year        $       2.09      $       2.10       $       2.69
</TABLE>

         The following table summarizes information about stock options under
the plans outstanding as of June 30, 2001:
<TABLE>
<CAPTION>
<S>                        <C>                      <C>                 <C>
                            Number                Number                Remaining
Exercise Price           Outstanding            Exercisable            Contractual Life
--------------           -----------            -----------            ----------------
$         5.83                  5,098                  4,079             5.5 years
          6.02                 78,738                 78,738             4.5 years
          6.08                  7,724                  6,180             5.0 years
          9.94                  4,000                    800             8.8 years
         10.25                  4,000                    800             8.6 years
         10.50                 17,875                  3,575             8.6 years
         11.05                  5,000                      -            10.0 years
         11.75                  5,000                  1,000             8.1 years
         12.00                 10,000                      -             9.3 years
         12.25                 16,704                  3,341             8.1 years
         12.63                  5,000                  3,000             6.7 years
         12.75                  8,000                      -             9.6 years
         13.44                371,245                155,217             7.1 years
</TABLE>

<PAGE>

Guaranty Federal Bancshares, Inc.
Notes to Consolidated Financial Statements

         The Company applies APB Opinion 25 and related Interpretations in
accounting for its plans, and no compensation cost has been recognized for the
plans. Had compensation cost for the plans been determined based on the fair
value at the dates using Statement of Financial Accounting Standards No. 123,
the Company's net income would have decreased by $200,548, $184,117, and
$177,719 for the years ended June 30, 2001, 2000, and 1999, respectively.
Earnings per share basic and diluted would have decreased by $0.05 for the year
ended June 30, 2001, $0.04 for the year ended June 30, 2000 and $0.03 for the
year ended June 30, 1999 The effects of applying this Statement for either
recognizing compensation cost or providing pro forma disclosures are not likely
to be representative of the effects on reported net income for future years
because options vest over several years and additional awards generally are made
each year.

Employee Stock Ownership Plan
-----------------------------
         The Bank sponsors an internally-leveraged Employee Stock Ownership Plan
(ESOP). All employees are eligible to participate after they attain age
twenty-one and complete twelve consecutive months of service during which they
work at least 1,000 hours. The ESOP borrowed $3,444,540 from the Company and
purchased 344,454 shares of the common stock of the Company. The ESOP debt is
secured by shares of the Company. The loan will be repaid from contributions to
the ESOP as approved annually by the Bank's Board of Directors. As the debt is
repaid, shares are released from collateral and allocated to employees'
accounts. The shares pledged as collateral are reported as unearned ESOP shares
in the consolidated balance sheet. When shares are released from collateral, the
shares become outstanding for earnings per share computations. Dividends on
allocated ESOP shares are recorded as a reduction of retained earnings and may
be paid directly to participants or credited to their account; dividends on
unallocated ESOP shares are recorded as a reduction of the unearned ESOP shares
and accrued interest. Compensation expense is recognized ratably based on the
average fair value of shares committed to be released. Compensation expense
attributed to the ESOP was $268,624, $248,742, and $268,234 for the years ended
June 30, 2001, 2000,and 1999 respectively. The following is a summary of ESOP
shares as of June 30, 2001:

Allocated shares                               68,890
Shares committed for release                   11,484
Unreleased shares                             264,080
                                        -------------
Total ESOP shares                             344,454
                                        =============

Fair value of unreleased shares         $   3,010,512
                                        =============

NOTE 12: TRANSACTIONS WITH RELATED PARTIES

       Certain directors and executive officers of the Company and the Bank
were customers of and had transactions with the Bank in the ordinary course of
business. As of June 30, 2001 and 2000, loans outstanding to these directors and
executive officers amounted to $471,709 and $550,761, respectively. In
management's opinion, such loans and other extensions of credit and deposits
were made in the ordinary course of business and were made on substantially the
same terms (including interest rates and collateral) as those prevailing at the
time for comparable transactions with other persons. Further, in management's
opinion, these loans did not involve more than normal risk of collectability or
present other unfavorable features.


                                       37

<PAGE>

Guaranty Federal Bancshares, Inc.
Notes to Consolidated Financial Statements

NOTE 13: COMMITMENTS AND CREDIT RISK

       Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since a portion of the commitments may expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's credit
worthiness on a case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Bank upon extension of credit, is based on management's credit
evaluation of the counterparty. Collateral held varies but may include accounts
receivable, inventory, property and equipment, commercial real estate and
residential real estate.

       As of June 30, 2001 and 2000, the Bank had outstanding commitments to
originate loans of approximately $9,679,000 and $4,262,000, respectively. The
commitments extend over varying periods of time with the majority being
disbursed within a thirty-day period. As of June 30, 2001 and 2000, commitments
of $8,854,000 and $1,601,000, respectively, were at fixed rates and $825,000 and
$2,661,000, respectively, were at floating market rates.

       Forward commitments to sell mortgage loans are obligations to deliver
loans at a specified price on or before a specified date. The Bank acquires such
commitments to reduce market risk on mortgage loans in the process of
origination and mortgage loans held for sale. As of June 30, 2001 and 2000 the
Bank had approximately $786,000 and $1,114,000, respectively, of commitments
outstanding.

       Letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements, including
commercial paper and similar transactions. The credit risk involved in issuing
letters of credit is essentially the same as that involved in extending loans to
customers. The Bank had outstanding letters of credit of $37,000 and $12,000 as
of June 30, 2001 and 2000, respectively.

       Lines of credit are agreements to lend to a customer as long as there
is no violation of any condition established in the contract. Lines of credit
generally have fixed expiration dates. Since a portion of the line may expire
without being drawn upon, the total unused lines do not necessarily represent
future cash requirements. Each customer's credit worthiness is evaluated on a
case-by-case basis. The amount of collateral obtained, if deemed necessary, is
based on management's credit evaluation of the counterparty. Collateral held
varies but may include accounts receivable, inventory, property and equipment,
commercial real estate and residential real estate. Management uses the same
credit policies in granting lines of credit as it does for on balance sheet
instruments.

       As of June 30, 2001, unused lines of credit to borrowers aggregated
approximately $12,836,000 for commercial lines and $8,991,000 for open-end
consumer lines. As of June 30, 2000, unused lines of credit to borrowers
aggregated approximately $580,000 for commercial lines and $8,220,000 for
open-end consumer lines.

       Although the Bank grants consumer loans, the majority of its loan
originations are single or multi-family residential real estate in Springfield,
Missouri, and the surrounding area. As of June 30, 2001, the Bank had seventy
borrowers with balances in excess of $1,000,000 each, aggregating $136,355,000,
for which the collateral is primarily single-family and multi-family residential
rental real estate and commercial real estate. As of June 30, 2000, the Bank had
forty-nine borrowers with balances in excess of $1,000,000 each, aggregating
$84,769,000, for which the collateral is primarily single-family and
multi-family residential rental real estate and commercial real estate. Also, as
of June 30, 2001 and 2000, the Bank had approximately $36,529,000 and
$27,492,000, respectively, in construction loans to or guaranteed by builders of
primarily residential property.


                                       38

<PAGE>

Guaranty Federal Bancshares, Inc.
Notes to Consolidated Financial Statements

NOTE 14: CONDENSED PARENT COMPANY STATEMENTS

       The condensed balance sheets as of June 30, 2001 and 2000, and
statements of income and cash flows for the years ended June 30, 2001, 2000 and
1999, for the parent company, Guaranty Federal Bancshares, Inc., are as follows:

<TABLE>
<CAPTION>

Balance Sheets                                                                         As of June 30,
                                                                      -----------------------------------------
<S>                                                                   <C>                        <C>
                                                                             2001                      2000
                                                                      -----------------          --------------
Assets
Cash                                                                  $         367,875                 410,394
Due from subsidiary                                                              13,042                  21,677
Investment in subsidiary                                                     48,677,729              54,994,864
Available-for sale securities                                                   795,050                 849,291
Prepaid expenses and other assets                                               350,935                 275,394
Deferred income taxes                                                                 -                  53,885
Refundable income taxes                                                          49,015                  44,221
                                                                      -----------------          --------------
                                                                      $      50,253,646              56,649,726
                                                                      =================          ==============
Liabilities
Accrued expenses and other liabilities                                $          16,483                  64,336
Deferred income taxes                                                            31,372                       -
Stockholders' equity
Common stock                                                                    626,840                 625,004
Additional paid-in capital                                                   48,451,515              47,921,681
Unearned ESOP shares                                                         (2,640,800)             (2,870,440)
Retained earnings                                                            25,951,537              24,654,965
Unrealized appreciation on available-for-sale securities, net                 3,948,203               2,398,947
Treasury stock                                                              (26,131,504)            (16,144,767)
                                                                      ----------------           --------------
                                                                      $      50,253,646              56,649,726
                                                                      =================          ==============
</TABLE>

<TABLE>
<S>                                                         <C>                     <C>                      <C>
                                                             June 30, 2001          June 30, 2000            June 30, 1999
                                                             -------------          -------------            -------------
Income
   Interest income:
     Related party                                           $     268,602                372,482                  922,842
     Other                                                          79,617                 26,390                   10,104
   Other                                                             8,584                 20,649                        -
                                                             -------------          -------------            -------------
                                                                   356,803                419,521                  932,946
                                                             -------------          -------------            -------------
Expense
   Occupancy                                                         2,400                  5,851                    9,190
   Other                                                           170,940                190,403                   71,061
                                                             -------------          -------------            -------------
                                                                   173,340                196,254                   80,251
                                                             -------------          -------------            -------------
Income before income taxes and equity in
   undistributed earnings of subsidiary                            183,463                223,267                  852,695
Provision for income taxes                                          68,108                 60,340                  316,584
                                                             -------------          -------------            -------------
Income before equity
   in undistributed earnings of subsidiary                         115,355                162,927                  536,111
Equity in undistributed earnings of subsidiary                   3,117,618              3,342,875                2,822,017
                                                             -------------          -------------            -------------
Net income                                                   $   3,232,973              3,505,802                3,358,128
                                                             =============          =============            =============
</TABLE>


                                       39

<PAGE>

Guaranty Federal Bancshares, Inc.
Notes to Consolidated Financial Statements

<TABLE>
<CAPTION>


   Statements of Cash Flows                                                      For the years ended
                                                             -------------------------------------------------------------
   <S>                                                       <C>                    <C>                      <C>
                                                             June 30, 2001          June 30, 2000            June 30, 1999
                                                             -------------          -------------            -------------
Cash Flows From Operating Activities
  Net income                                                 $   3,232,973              3,505,802                3,358,128
  Items not providing cash:
     Undistributed earnings of net income
       of subsidiary                                                   -                      -                 (2,822,017)
     Loss on sale of premises and equipment                            -                   18,147                      -
     Gain on sale of available-for-sale securities                  (8,574)               (38,798)                     -
     Release of ESOP shares                                        229,640                229,640                  344,460
   Changes in:
     Prepaid expenses and other assets                             (75,541)              (110,207)                (165,187)
     Income taxes payable/refundable                                (4,794)              (558,197)                 241,976
     Accrued expenses                                              (47,853)                64,336                   (7,090)
                                                             -------------            -----------              -----------
   Net cash provided by operating activities                     3,325,851              3,110,723                  950,270
                                                             -------------            -----------              -----------

   Cash Flows From Investing Activities
     Purchase of premises and equipment                                -                  (28,870)                     -
     Proceeds from sale of land                                        -                  982,177                      -
     Proceeds from sale of available-for-sale securities           395,253                299,472                      -
     Purchase of available-for-sale securities                    (102,012)              (462,918)                (520,065)
     Net decrease in advance to subsidiary                           8,635              5,842,006               11,806,186
     Distribution in excess of net income of subsidiary          8,142,382                657,125                      -
                                                             -------------            -----------              -----------
   Net cash provided by investing activities                     8,444,258              7,288,992               11,286,121
                                                             -------------            -----------              -----------

   Cash Flows From Financing Activities
     Stock options exercised                                       110,510                 25,656                  106,792
     Cash dividends paid                                        (1,936,401)            (2,086,846)              (1,805,069)
     RSP stock purchased                                               -                     -                  (2,373,065)
     Treasury stock purchased                                   (9,986,737)            (8,012,392)              (8,132,375)
                                                             -------------            -----------              -----------
   Net cash used in financing activities                       (11,812,628)           (10,073,582)             (12,203,717)
                                                             -------------            -----------              -----------

   Increase (decrease) in cash                                     (42,519)               326,133                   32,674

   Cash, beginning of year                                         410,394                 84,261                   51,587
                                                             -------------            -----------              -----------

   Cash, end of year                                         $     367,875                410,394                   84,261
                                                             =============            ===========              ===========

</TABLE>

 NOTE 15:   SUBSEQUENT EVENT

       On August 9, 2001, the Company entered into an agreement to purchase
selected loan assets and assume all of the deposit liabilities of five
Springfield, Missouri branch operations of another financial institution. The
Company will also assume the leases and purchase equipment at all but one of
the branches. When consummated, the acquisition transaction will be accounted
for using the purchase method prescribed by SFAS 141 and goodwill recognized,
if any, will be accounted for under the provisions of SFAS 142.

                                       40

<PAGE>

                         Independent Accountants' Report
                         -------------------------------

Board of Directors
Guaranty Federal Bancshares, Inc.
Springfield, Missouri

   We have audited the accompanying consolidated balance sheets of GUARANTY
FEDERAL BANCSHARES, INC. as of June 30, 2001 and 2000, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the three years in the period ended June 30, 2001. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

   We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

   In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of GUARANTY FEDERAL BANCSHARES,
INC. as of June 30, 2001 and 2000, and the results of its operations and its
cash flows for each of the three years in the period ended June 30, 2001, in
conformity with accounting principles generally accepted in the United States of
America.

                                   /s/BKD, LLP

July 27, 2001
Springfield, Missouri


                                       41