EXHIBIT 10.5
<PAGE>

                              EMPLOYMENT AGREEMENT



         THIS  AGREEMENT,  is  entered  into  this  1st  day  of  January  1998,
("Effective Date") by and between Guaranty Federal Savings Bank (the "Bank") and
James E. Haseltine (the "Executive").

                                   WITNESSETH

         WHEREAS,  the Executive has heretofore been employed by the Bank as the
President and is experienced in all phases of the business of the Bank; and

         WHEREAS,  the Bank desires to be ensured of the  Executive's  continued
active participation in the business of the Bank; and

         WHEREAS,  in order to induce the  Executive  to remain in the employ of
the Bank and in  consideration  of the  Executive's  agreeing  to  remain in the
employ of the Bank,  the  parties  desire to specify the  continuing  employment
relationship between the Bank and the Executive;

         NOW  THEREFORE,  in  consideration  of  the  premises  and  the  mutual
agreements herein contained, the parties hereby agree as follows:

         1. Employment. The Bank hereby employs the Executive in the capacity of
President.  The Executive  hereby  accepts said  employment and agrees to render
such  administrative and management services to the Bank and to Guaranty Federal
Bancshares,  Inc.,  the  parent  holding  company  ("Parent")  as are  currently
rendered and as are  customarily  performed by persons and situated in a similar
executive  capacity.  The  Executive  shall promote the business of the Bank and
Parent. The Executive's other duties shall be such as the Board of Directors for
the Bank (the "Board of Directors" or "Board") may from time to time  reasonably
direct, including normal duties as an officer of the Bank.

         2. Term of Employment.  The term of employment of Executive  under this
Agreement  shall be for the period  commencing on the Effective  Date and ending
twenty-four (24) months  thereafter  ("Term").  References herein to the Term of
this Agreement shall refer both to the initial term and successive terms.

         3.   Compensation, Benefits and Expenses.

              (a) Base Salary.  The Bank shall  compensate and pay the Executive
during  the  Term of this  Agreement  a  minimum  base  salary  at the rate of $
106,109.00 per annum ("Base  Salary"),  payable in cash not less frequently than
bi-weekly; provided, that the rate of such salary shall be reviewed by the Board
of Directors not less often than annually,  and the Executive  shall be entitled
to receive increases at such percentages or in such amounts as

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determined  by the Board of  Directors.  The base  salary  may not de  decreased
without the Executive's express written consent.

            (b)  Discretionary   Bonus.  The  Executive  shall  be  entitled  to
participate in an equitable manner with all other senior management employees of
the Bank in  discretionary  bonuses that may be  authorized  and declared by the
Board of Directors to its senior  management  executives  from time to time.  No
other  compensation  provided for in this Agreement shall be deemed a substitute
for the Executive's right to participate in such discretionary  bonuses when and
as declared by the Board.

              (c)  Participation in Benefit and Retirement  Plans. The Executive
shall be entitled to  participate in and receive the benefits of any plan of the
Bank which may be or may become  applicable  to senior  management  relating  to
pension or other  retirement  benefit  plans,  profit-sharing,  stock options or
incentive plans, or other plans,  benefits and privileges given to employees and
executives  of the Bank,  to the extent  commensurate  with his then  duties and
responsibilities, as fixed by the Board of Directors of the Bank.

              (d)  Participation  in Medical Plans and Insurance  Policies.  The
Executive  shall be entitled to  participate  in and receive the benefits of any
plan or  policy  of the Bank  which may be or may  become  applicable  to senior
management relating to life insurance, short and long term disability,  medical,
dental, eye-care, prescription drugs or medical reimbursement plans.

              (e) Vacations and Sick Leave.  The Executive  shall be entitled to
paid annual vacation leave in accordance  with the policies as established  from
time to time by the  Board of  Directors,  which  shall in no event be less than
four weeks per annum.  The  Executive  shall also be  entitled to an annual sick
leave benefit as established by the Board for senior management employees of the
Bank. The Executive shall not be entitled to receive any additional compensation
from the Bank for failure to take a vacation or sick leave, nor shall he be able
to accumulate unused vacation or sick leave from one year to the next, except to
the extent authorized by the Board of Directors.

              (f) Expenses.  The Bank shall reimburse the Executive or otherwise
provide for or pay for all  reasonable  expenses  incurred by the  Executive  in
furtherance of, or in connection with the business of the Bank,  including,  but
not by way of limitation,  automobile and traveling expenses, and all reasonable
entertainment  expenses,  subject  to such  reasonable  documentation  and other
limitations as may be established by the Board of Directors of the Bank. If such
expenses  are paid in the  first  instance  by the  Executive,  the  Bank  shall
reimburse the Executive therefor.

              (g)  Changes in  Benefits.  The Bank shall not make any changes in
such plans, benefits or privileges previously described in Section 3(c), (d) and
(e) which would adversely affect the Executive's rights or benefits  thereunder,
unless such change  occurs  pursuant to a program  applicable  to all  executive
officers of the Bank and does not result in a  proportionately  greater  adverse
change in the rights of, or benefits  to, the  Executive  as  compared  with any
other executive officer of the Bank. Nothing paid to Executive under any plan or
arrangement  presently in effect or made available in the future shall be deemed
to be in lieu of the  salary  payable to  Executive  pursuant  to  Section  3(a)
hereof.


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         4.   Loyalty; Noncompetition

              (a) The Executive  shall devote his full time and attention to the
performance  of his  employment  under  this  Agreement.  During the term of the
Executive's  employment under this Agreement,  the Executive shall not engage in
any business or activity  contrary to the  business  affairs or interests of the
Bank or Parent.

              (b) Nothing contained in this Section 4 shall be deemed to prevent
or  limit  the  right of  Executive  to  invest  in the  capital  stock or other
securities  of any  business  dissimilar  from that of the Bank or  Parent,  or,
solely as a passive or minority investor, in any business.

         5. Standards.  During the term of this  Agreement,  the Executive shall
perform his duties in  accordance  with such  reasonable  standards  expected of
executives with comparable  positions in comparable  organizations and as may be
established from time to time by the Board of Directors.

         6.  Termination and Termination  Pay. The Executive's  employment under
this Agreement shall be terminated upon any of the following occurrences:

              (a) The death of the Executive  during the term of this Agreement,
in  which  event  the  Executive's  estate  shall be  entitled  to  receive  the
compensation  due the  Executive  through the last day of the calendar  month in
which Executive's death shall have occurred.

              (b)  The  Board  of  Directors  may   terminate  the   Executive's
employment at any time, but any termination by the Board of Directors other than
termination  for Just  Cause,  shall  not  prejudice  the  Executive's  right to
compensation or other benefits under the Agreement.  The Executive shall have no
right to receive compensation or other benefits for any period after termination
for Just Cause. The Board may within its sole discretion,  acting in good faith,
terminate  the  Executive  for  Just  Cause  and  shall  notify  such  Executive
accordingly.  Termination for "Just Cause" shall include  termination because of
the Executive's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit,  intentional failure to perform stated
duties,  willful  violation of any law, rule or  regulation  (other than traffic
violations or similar  offenses) or final  cease-and-desist  order,  or material
breach of any provision of the Agreement.

              (c) Except as provided  pursuant to Section 9 hereof, in the event
Executive's  employment  under  this  Agreement  is  terminated  by the Board of
Directors without Just Cause, the Bank shall be obligated to continue to pay the
Executive  the salary  provided  pursuant to Section 3(a) herein,  up to date of
termination  of the  remaining  Term of this  Agreement,  but in no event  for a
period of less than  eighteen (18) months,  and the cost of Executive  obtaining
all health,  life,  disability,  and other benefits which the Executive would be
eligible  to  participate  in through  such date based upon the  benefit  levels
substantially equal to those being provided Executive at the date of termination
of employment.

              (d) The voluntary  termination by the Executive during the term of
this  Agreement  with the delivery of no less than 60 days written notice to the
Board of  Director,  other  than

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pursuant  to Section  9(b),  in which case the  Executive  shall be  entitled to
receive only the  compensation,  vested rights,  and all employee benefits up to
the date of such termination.

         7.   Regulatory Exclusions.

              (a) If the Executive is suspended  and/or  temporarily  prohibited
from participating in the conduct of the Bank's affairs by a notice served under
Section  8(e)(3) or 8(g)(1) of the FDIA (12 U.S.C.  1818(e)(3) and (g)(1)),  the
Bank's  obligations  under the  Agreement  shall be  suspended as of the date of
service, unless stayed by appropriate proceedings.  If the charges in the notice
are  dismissed,  the Bank may within its discretion (I) pay the Executive all or
part of the compensation  withheld while its contract obligations were suspended
and (ii) reinstate any of its obligations which were suspended.

              (b) If the Executive is removed and/or permanently prohibited from
participating  in the  conduct of the Bank's  affairs by an order  issued  under
Sections  8(e)(4) or (g)(1) of the Federal  Deposit  Insurance  Act ("FDIA") (12
U.S.C.  1818(e)(4) and (g)(1)), all obligations of the Bank under this Agreement
shall terminate, as of the effective date of the order, but the vested rights of
the parties shall not be affected.

              (c) If the Bank is in default  (as  defined in Section  3(x)(1) of
FDIA) all  obligations  under this Agreement  shall  terminate as of the date of
default,  but  this  paragraph  shall  not  affect  any  vested  rights  of  the
contracting parties.

              (d) All  obligations  under this  Agreement  shall be  terminated,
except to the extent determined that continuation of this Agreement is necessary
for the  continued  operation of the Bank:  (I) by the Director of the Office of
Thrift Supervision ("Director of OTS"), or his or her designee, at the time that
the Federal Deposit Insurance  Corporation  ("FDIC") enters into an agreement to
provide assistance to or on behalf of the Bank under the authority  contained in
Section  13(c)  of  FDIA;  or (ii) by the  Director  of the  OTS,  or his or her
designee,  at the time that the  Director,  of the OTS,  or his or her  designee
approves a supervisory  merger to resolve  problems  related to operation of the
Bank or when  the  Bank is  determined  by the  Director  of the OTS to be in an
unsafe or unsound condition. Any rights of the parties that have already vested,
however, shall not be affected by such action.

              (e) Notwithstanding  anything herein to the contrary, any payments
made to the Executive pursuant to the Agreement, or otherwise,  shall be subject
to and  conditioned  upon  compliance with 12 USC ss.1828(k) and any regulations
promulgated thereunder.

         8. Disability.  If the Executive shall become disabled or incapacitated
to the extent  that he is unable to perform his duties  hereunder,  by reason of
medically determinable physical or mental impairment,  as determined by a doctor
engaged by the Board of  Directors,  Executive  shall  nevertheless  continue to
receive  the  compensation  and  benefits  for a period  of 12  months,  but not
exceeding  the  remaining  term of the  Agreement,  and 65%  thereafter  for the
remainder  of the term of the  Agreement.  Such  benefits  noted herein shall be
reduced by any benefits  otherwise  provided to the Executive during such period
under the  provisions  of  disability  insurance  coverage  in  effect  for Bank
employees.  Thereafter, Executive shall be eligible to receive benefits provided
by the Bank under the provisions of disability  insurance coverage in effect for
Bank employees.  Upon returning to active full-time employment,  the Executive's
full

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compensation  as set forth in this Agreement  shall be reinstated as of the date
of commencement of such activities.  In the event that the Executive  returns to
active employment on other than a full-time basis, then his compensation (as set
forth in Section 3(a) of this  Agreement)  shall be reduced in proportion to the
time  spent  in said  employment,  or as shall  otherwise  be  agreed  to by the
parties.

         9.   Change in Control.

              (a) Notwithstanding  any provision herein to the contrary,  in the
event of the involuntary  termination of Executive's  employment during the term
of this Agreement following any change in control of the Bank or Parent,  absent
Just Cause.  Executive shall be paid an amount equal to the product of two times
the Executive's "base amount" as definded in Section  280G(b)(3) of the Internal
Revenue  Code of 1986,  as amended  (the  "Code")  and  regulations  promulgated
thereunder.  Said sum shall be paid, at the option of  Executive,  either in one
(1) lump sum  within  thirty  (30) days of such  termination  discounted  to the
present  value of such payment using as the discount rate the interest in effect
on one year U.S.  Treasury  obligations as of the date of payment as reported in
the Wall Street Journal Eastern Edition,  or in periodic  payments over the next
24 months or the  remaining  term of this  Agreement  whichever  is less,  as if
Executive's  employment had not been  terminated,  and such payments shall be in
lieu of any  other  future  payments  which  the  Executive  would be  otherwise
entitled  to receive  under  Section 6 of this  Agreement.  Notwithstanding  the
forgoing, all sums payable hereunder shall be reduced in such manner and to such
extent so that no such payments made  hereunder when  aggregated  with all other
payments to be made to the  Executive  by the Bank or the Parent shall be deemed
an "excess parachute payment" in accordance with Section 280G of the Code and be
subject to the  excise tax  provided  at Section  4999(a) of the Code.  The term
"control"  shall refer to the ownership,  holding or power to vote more than 25%
of the  Parent's  or Bank's  voting  stock,  the  control of the  election  of a
majority of the Parent's or Bank's  directors,  or the exercise of a controlling
influence over the management or policies of the Parent or Bank by any person or
by  persons  acting  as a group  within  the  meaning  of  Section  13(d) of the
Securities  Exchange Act of 1934.  The term "person"  means an individual  other
than the Executive, or a corporation,  partnership,  trust,  association,  joint
venture, pool, syndicate,  sole proprietorship,  unincorporated  organization or
any other form of entity not specifically listed herein.

              (b)  Notwithstanding  any other provision of this Agreement to the
contrary,  Executive may voluntarily terminate his employment during the term of
this  Agreement  following  a  change  in  control  of the Bank or  Parent,  and
Executive  shall  thereupon  be entitled to receive  the  payment  described  in
Section 9(a) of this Agreement,  upon the occurrence, or within ninety (90) days
thereafter,  of any of the following events, which have not been consented to in
advance by the Executive in writing:  (I) if Executive would be required to move
his personal  residence or perform his principal  executive  functions more than
thirty-five (35) miles from the Executive's  primary office as of the signing of
this Agreement;  (ii) if in the organizational  structure of the Bank, Executive
would be  required  to  report to a person or  persons  other  than the Board of
Directors  of the Bank;  (iii) if the Bank should  fail to maintain  Executive's
base  compensation  in effect as of the date of the  Change in  Control  and the
existing  employee  benefits plans,  including  material  fringe benefit,  stock
option and  retirement  plans;  (iv) if Executive  would be assigned  duties and
responsibilities  other than those  normally  associated  with his  position  as
referenced  at  Section  1,  herein;  (v)  if  Executive's  responsibilities  or
authority  have in any way

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been  materially  diminished  or  reduced;  or (vi) if  Executive  would  not be
reelected to the Board of Directors of the Bank.

         10. Withholding. All payments required to be made by the Bank hereunder
to the Executive  shall be subject to the  withholding of such amounts,  if any,
relating  to tax  and  other  payroll  deductions  as the  Bank  may  reasonably
determine should be withheld pursuant to any applicable law or regulation.

         11.   Successors and Assigns.

              (a) This  Agreement  shall  inure to the benefit of and be binding
upon any corporate or other successor of the Bank or Parent which shall acquire,
directly or indirectly, by merger, consolidation,  purchase or otherwise, all or
substantially all of the assets or stock of the Bank or Parent.

              (b) Since the Bank is  contracting  for the  unique  and  personal
skills of the  Executive,  the Executive  shall be precluded  from  assigning or
delegating his rights or duties  hereunder  without first  obtaining the written
consent of the Bank.

         12. Amendment; Waiver. No provisions of this Agreement may be modified,
waived or discharged unless such waiver,  modification or discharge is agreed to
in  writing,  signed by the  Executive  and such  officer or  officers as may be
specifically  designated  by the Board of  Directors  of the Bank to sign on its
behalf.  No  waiver by any part  hereto  at any time of any  breach by any other
party  hereto  of, or  compliance  with,  any  condition  or  provision  of this
Agreement  to be  performed  by such  other  party  shall be  deemed a waiver of
similar or  dissimilar  provisions  or conditions at the same or at any prior or
subsequent time.

         13.  Governing  Law. The  validity,  interpretation,  construction  and
performance of this Agreement shall be governed by the laws of the United States
where applicable and otherwise by the substantive laws of the State of Missouri.

         14.  Nature of  Obligation.  Nothing  contained  herein shall create or
require the Bank to create a trust of any kind to fund any benefits which may be
payable  hereunder,  and to the extent  that the  Executive  acquires a right to
receive  benefits from the Bank  hereunder,  such right shall be no greater than
the right of any unsecured general creditor of the Bank.

         15. Headings.  The section headings contained in this Agreement are for
reference  purposes  only  and  shall  not  affect  in any  way the  meaning  or
interpretation of this Agreement.

         16.  Severability.  The  provisions of this  Agreement  shall be deemed
severable  and the  invalidity  or  unenforceability  of any  provision  of this
Agreement  shall  not  affect  the  validity  or  enforceability  of  the  other
provisions of this Agreement, which shall remain in full force and effect.

         17. Arbitration. Any controversy or claim arising out of or relating to
this  Agreement,  or the breach  thereof,  shall be settled  by  arbitration  in
accordance  with the rules then in effect of the district office of the American
Arbitration  Association  ("AAA")  nearest to the home  office

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of the Bank,  and judgment  upon the award  rendered may be entered in any court
having jurisdiction thereof, except to the extent that the parties may otherwise
reach a mutual settlement of such issue.  Further, the settlement of the dispute
to be  approved  by the  Board of the  Bank  may  include  a  provision  for the
reimbursement  by the  Bank  to the  Executive  for  all  reasonable  costs  and
expenses,  including  reasonable  attorneys'  fees,  arising from such  dispute,
proceedings  or  actions,  or the Board of the Bank or the Parent may  authorize
such reimbursement of such reasonable costs and expenses by separate action upon
a written  action and  determination  of the Board  following  settlement of the
dispute.  Such  reimbursement  shall be paid  within ten (10) days of  Executive
furnishing to the Bank or Parent evidence, which may be in the form, among other
things,  of a canceled  check or receipt,  of any costs or expenses  incurred by
Executive.

         18. Entire Agreement. This Agreement together with any understanding or
modifications  thereof as agreed to in writing by the parties,  shall constitute
the entire agreement between the parties hereto.

         IN WITNESS  WHEREOF,  the parties have executed  this  Agreement on the
date first hereinabove written.


                                                 Guaranty Federal Savings Bank


ATTEST:                                          By s/s  James E. Haseltine
                                                    ---------------------------

 s/s  E. Lorene Thomas
----------------------
Secretary



WITNESS:


                                                   s/s  James E. Haseltine
-----------------------------                      ---------------------------
                                                   James E. Haseltine, Executive




<PAGE>


In addition to the employment  agreement with Mr.  Haseltine,  Guaranty  Federal
Savings Bank entered into  identical  employment  agreements as of the same date
with the following eight employees of the bank: William Williams, Bruce Winston,
Kevin Bell,  Larry Cruzan,  Dana Elwell,  Jerry Graham,  Carla Green, and Lorene
Thomas.  These  additional  eight contracts  provide for the payment of salaries
aggregating  $453,500 and each  agreement  provides for the payment of two times
the employee's "base amount" (as defined in 26 U.S.C. Section 280G(b)(3)) in the
event of a change in control.