UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC  20549





FORM
10-Q


(Mark
One)


T  QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d)


OF
THE SECURITIES EXCHANGE ACT OF 1934





For the
quarter ended March
31, 2008





OR





£ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF


THE
SECURITIES EXCHANGE ACT OF 1934





For the
transition period from _______ to _______





Commission
file number 0-23325





Guaranty
Federal Bancshares, Inc.


(Exact
name of registrant as specified in its charter)





Delaware
            
            43-1792717(State
      or other jurisdiction of incorporation or organization)
            
            (IRS
      Employer Identification No.)1341
      West BattlefieldSpringfield,
      Missouri
            
            65807(Address
      of principal executive offices)
            
            (Zip
      Code)





Telephone
Number:  (417)
520-4333





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days.  Yes T No £





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definitions of “accelerated filer”, “large accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):  Large accelerated filer £Accelerated filer £Non-accelerated filer £Smaller reporting company T





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act. Yes £
No T





Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of the latest practicable date.





Class
            
            Outstanding as of May
      9, 2008Common
      Stock, Par Value $0.10 per share
            
            2,706,052
      Shares













GUARANTY
      FEDERAL BANCSHARES, INC.TABLEOF CONTENTSPagePART
      I. Financial InformationItem
      1.  Financial StatementsConsolidated
      Financial Statements (Unaudited):Statements of Financial Condition
            
            3Statements of Income
            
            4Statements of  Stockholders’
    Equity
            
            5Statements of Cash Flows
            
            7Notes to Consolidated Financial
    Statements
            
            8Item
      2.  Management’s Discussion and Analysis of
      Financial Condition and Results of Operations
            
            11Item
      3. Quantitative and Qualitative Disclosures about Market
      Risk
            
            16Item
      4.  Control and Procedures
            
            18PART
      II. Other InformationItem
      1.  Legal Proceedings
            
            19Item
      1A.  Risk factors
            
            19Item
      2.  Unregistered Sales of Equity Securities and
      Use of Proceeds
            
            19Item
      3.  Defaults Upon Senior
      Securities
            
            19Item
      4.  Submission of Matters to a Vote of Security
      Holders
            
            19Item
      5.  Other Information
            
            19Item
      6.  Exhibits
            
            19Signatures





2
 Table of Contents





PARTI


Item1. Financial Statements





GUARANTYFEDERAL BANCSHARES, INC.


CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION


MARCH
31, 2008 (UNAUDITED) AND DECEMBER 31, 2007





ASSETS
            
            3/31/08
            
            
            12/31/07Cash
            
            $
            8,475,724
            
            
            
            11,135,960Interest-bearing
      deposits in other financial institutions
            
            
            4,177,439
            
            
            
            910,242Cash
      and cash equivalents
            
            
            12,653,163
            
            
            
            12,046,202Available-for-sale
      securities
            
            
            63,241,297
            
            
            
            14,729,938Held-to-maturity
      securities
            
            
            630,918
            
            
            
            654,775Stock
      in Federal Home Loan Bank, at cost
            
            
            5,061,061
            
            
            
            4,014,700Mortgage
      loans held for sale
            
            
            938,825
            
            
            
            2,141,998Loans
      receivable, net of allowance for loan losses of March 31, 2008 -
      $5,446,669 - December 31, 2007 - $5,962,923
            
            
            530,933,732
            
            
            
            514,100,035Accrued
      interest receivable:Loans
            
            
            2,167,643
            
            
            
            3,218,845Investments
            
            
            291,104
            
            
            
            104,603Prepaid
      expenses and other assets
            
            
            2,617,698
            
            
            
            2,841,411Foreclosed
      assets held for sale
            
            
            988,107
            
            
            
            727,422Premises
      and equipment
            
            
            9,602,133
            
            
            
            9,442,350Income
      taxes receivable
            
            
            816,682
            
            
            
            -Deferred
      income taxes
            
            
            1,495,663
            
            
            
            1,755,701$
            631,438,026
            
            
            
            565,777,980LIABILITIES
      AND STOCKHOLDERS' EQUITYLIABILITIESDeposits
            
            $
            431,104,544
            
            
            
            418,191,284Federal
      Home Loan Bank advances
            
            
            97,936,000
            
            
            
            76,086,000Securities
      sold under agreements to repurchase
            
            
            39,750,000
            
            
            
            9,849,295Subordinated
      debentures
            
            
            15,465,000
            
            
            
            15,465,000Notes
      payable
            
            
            1,435,190
            
            
            
            718,190Advances
      from borrowers for taxes and insurance
            
            
            312,229
            
            
            
            157,811Accrued
      expenses and other liabilities
            
            
            409,709
            
            
            
            299,005Accrued
      interest payable
            
            
            1,790,102
            
            
            
            1,793,663Dividend
      payable
            
            
            469,109
            
            
            
            469,373Income
      taxes payable
            
            
            -
            
            
            
            61,699588,671,883
            
            
            
            523,091,320COMMITMENTS
      AND CONTINGENCIES
            
            
            -
            
            
            
            -STOCKHOLDERS'
      EQUITYCommon
      Stock:$0.10
      par value; authorized 10,000,000 shares;issued March 31, 2008 - 6,748,835
      shares December 31, 2007 - 6,736,485 shares
            
            
            674,884
            
            
            
            673,649Additional
      paid-in capital
            
            
            57,853,192
            
            
            
            57,571,929Unearned
      ESOP shares
            
            
            (1,059,930
            )
            
            
            (1,116,930
            )Retained
      earnings, substantially restricted
            
            
            45,554,790
            
            
            
            45,402,449Accumulated
      other comprehensive incomeUnrealized
      appreciation on available-for-sale securities,net of income
      taxes
            
            
            602,325
            
            
            
            503,767103,625,261
            
            
            
            103,034,864Treasury
      stock, at cost; March 31, 2008 -  4,036,680
    shares;December
      31, 2007 - 4,017,166 shares
            
            
            (60,859,118
            )
            
            
            (60,348,204
            )42,766,143
            
            
            
            42,686,660$
            631,438,026
            
            
            
            565,777,980







See Notes
to Condensed Consolidated Financial Statements





3
 Table of Contents




GUARANTYFEDERAL BANCSHARES, INC.


CONSOLIDATED
STATEMENTS OF INCOME


THREE  MONTHS
ENDED MARCH 31, 2008 AND 2007 (UNAUDITED)





3/31/2008
            
            
            3/31/2007INTEREST
      INCOMELoans
            
            $
            8,602,216
            
            
            
            9,387,562Investment
      securities
            
            
            575,165
            
            
            
            97,241Other
            
            
            53,652
            
            
            
            81,1859,231,033
            
            
            
            9,565,988INTEREST
      EXPENSEDeposits
            
            
            3,986,532
            
            
            
            3,505,416Federal
      Home Loan Bank advances
            
            
            733,289
            
            
            
            1,175,193Other
            
            
            481,245
            
            
            
            265,8785,201,066
            
            
            
            4,946,487NET
      INTEREST INCOME
            
            
            4,029,967
            
            
            
            4,619,501PROVISION
      FOR LOAN LOSSES
            
            
            820,000
            
            
            
            210,000NET
      INTEREST INCOME AFTERPROVISION
      FOR LOAN LOSSES
            
            
            3,209,967
            
            
            
            4,409,501NONINTEREST
      INCOMEService
      charges
            
            
            459,400
            
            
            
            552,482Other
      fees
            
            
            6,398
            
            
            
            16,836Gain
      on sale of investment securities
            
            
            -
            
            
            
            192,616Gain
      on sale of loans
            
            
            231,077
            
            
            
            292,697Loss
      on foreclosed assets
            
            
            (13,202
            )
            
            
            (2,295
            )Other
      income
            
            
            198,178
            
            
            
            168,977881,851
            
            
            
            1,221,313NONINTEREST
      EXPENSESalaries
      and employee benefits
            
            
            1,891,462
            
            
            
            1,742,884Occupancy
            
            
            387,588
            
            
            
            411,753SAIF
      deposit insurance premiums
            
            
            62,499
            
            
            
            9,665Data
      processing
            
            
            89,816
            
            
            
            97,703Advertising
            
            
            99,999
            
            
            
            99,999Other
      expense
            
            
            570,044
            
            
            
            512,5443,101,408
            
            
            
            2,874,548INCOME
      BEFORE INCOME TAXES
            
            
            990,410
            
            
            
            2,756,266PROVISION
      FOR INCOME TAXES
            
            
            373,552
            
            
            
            1,002,726NET
      INCOME
            
            $
            616,858
            
            
            
            1,753,540BASIC
      EARNINGS PER SHARE
            
            $
            0.24
            
            
            
            0.63DILUTED
      EARNINGS PER SHARE
            
            $
            0.23
            
            
            
            0.62








4
 Table of Contents





GUARANTY FEDERAL BANCSHARES, INC.


CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY


THREE
MONTHS ENDED MARCH  31, 2008 (UNAUDITED)








Common Stock
            
            
            Additional Paid-In Capital
            
            
            Unearned ESOP Shares
            
            
            Treasury Stock
            
            
            Retained Earnings
            
            
            Accumulated Other Comprehensive
      Income
            
            
            TotalBalance,
      January 1, 2008
            
            $
            673,649
            
            
            
            57,571,929
            
            
            
            (1,116,930
            )
            
            
            (60,348,204
            )
            
            
            45,402,449
            
            
            
            503,767
            
            
            
            42,686,660Comprehensive
      incomeNet
      income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            616,858
            
            
            
            -
            
            
            
            616,858Change
      in unrealized appreciation on available-for-sale securities, net of income
      taxes
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            98,558
            
            
            
            98,558Total
      comprehensive income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            715,416Dividends
      ($0.18 per share)
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (464,517
            )
            
            
            -
            
            
            
            (464,517
            )Stock
      award plans
            
            
            -
            
            
            
            24,304
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            24,304Stock
      options exercised
            
            
            1,235
            
            
            
            163,887
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            165,122Release
      of ESOP shares
            
            
            -
            
            
            
            93,072
            
            
            
            57,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            150,072Treasury
      stock purchased
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (510,914
            )
            
            
            -
            
            
            
            -
            
            
            
            (510,914
            )Balance,
      March 31, 2008
            
            $
            674,884
            
            
            
            57,853,192
            
            
            
            (1,059,930
            )
            
            
            (60,859,118
            )
            
            
            45,554,790
            
            
            
            602,325
            
            
            
            42,766,143








5
 Table of Contents




GUARANTY
FEDERAL BANCSHARES, INC.


CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY


THREE
MONTHS ENDED MARCH 31, 2007 (UNAUDITED)


Common Stock
              
              
              Additional Paid-In Capital
              
              
              Unearned ESOP Shares
              
              
              Treasury Stock
              
              
              Retained Earnings
              
              
              Accumulated Other Comprehensive
      Income
              
              
              TotalBalance,
      January 1, 2007
              
              $
              665,353
              
              
              
              55,730,352
              
              
              
              (1,344,930
              )
              
              
              (52,869,086
              )
              
              
              41,183,006
              
              
              
              1,534,548
              
              
              
              44,899,243Comprehensive
      incomeNet
      income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,753,540
              
              
              
              -
              
              
              
              1,753,540Change
      in unrealized appreciationon available-for-sale securities, net of
      income taxes
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (303,177
              )
              
              
              (303,177
              )Total
      comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,450,363Dividends
      ($0.17 per share)
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (468,855
              )
              
              
              -
              
              
              
              (468,855
              )Stock
      award plans
              
              
              -
              
              
              
              13,119
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              13,119Stock
      options exercised
              
              
              4,894
              
              
              
              799,356
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              804,250Release
      of ESOP shares
              
              
              -
              
              
              
              109,404
              
              
              
              57,000
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              166,404Treasury
      stock purchased
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (985,319
              )
              
              
              -
              
              
              
              -
              
              
              
              (985,319
              )Balance,
      March 31, 2007
              
              $
              670,247
              
              
              
              56,652,231
              
              
              
              (1,287,930
              )
              
              
              (53,854,405
              )
              
              
              42,467,691
              
              
              
              1,231,371
              
              
              
              45,879,205








6
 Table of Contents




GUARANTY FEDERAL  BANCSHARES, INC


CONSOLIDATED
STATEMENTS OF CASH FLOWS


THREE
MONTHS ENDED MARCH 31, 2008 AND 2007 (UNAUDITED)








3/31/2008
            
            
            3/31/2007CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      income
            
            $
            616,858
            
            
            
            1,753,540Items
      not requiring (providing) cash:Deferred
      income taxes
            
            
            202,155
            
            
            
            106,728Depreciation
            
            
            209,519
            
            
            
            218,551Provision
      for loan losses
            
            
            820,000
            
            
            
            210,000Gain
      on loans and investment securities
            
            
            (231,077
            )
            
            
            (485,313
            )Loss
      (gain) on sale of foreclosed assets
            
            
            453
            
            
            
            (2,878
            )Amortization
      of deferred income, premiums and discounts
            
            
            3,862
            
            
            
            31,635Stock
      award plan expense
            
            
            24,304
            
            
            
            13,119Origination
      of loans held for sale
            
            
            (14,332,451
            )
            
            
            (16,874,472
            )Proceeds
      from sale of loans held for sale
            
            
            15,766,701
            
            
            
            16,915,954Release
      of ESOP shares
            
            
            150,072
            
            
            
            166,404Changes
      in:Accrued
      interest receivable
            
            
            864,701
            
            
            
            49,534Prepaid
      expenses and other assets
            
            
            223,713
            
            
            
            89,775Accounts
      payable and accrued expenses
            
            
            107,143
            
            
            
            58,793Income
      taxes receivable
            
            
            (878,381
            )
            
            
            753,612Net
      cash provided by operating activities
            
            
            3,547,572
            
            
            
            3,004,982CASH
      FLOWS FROM INVESTING ACTIVITIESNet
      (increase) decrease in loans
            
            
            (18,162,773
            )
            
            
            8,909,311Principal
      payments on available-for-sale securities
            
            
            398,106
            
            
            
            34,405Principal
      payments on held-to-maturity securities
            
            
            23,857
            
            
            
            30,780Proceeds
      from maturities of available-for-sale securities
            
            
            1,550,000
            
            
            
            -Purchase
      of premises and equipment
            
            
            (369,302
            )
            
            
            (122,581
            )Purchase
      of available-for-sale securities
            
            
            (50,306,886
            )
            
            
            (500,000
            )Proceeds
      from sale of available-for-sale securities
            
            
            -
            
            
            
            687,737(Purchase)
      redemption of FHLB stock
            
            
            (1,046,361
            )
            
            
            1,836,657Proceeds
      from sale of foreclosed assets
            
            
            247,938
            
            
            
            2,878Net
      cash provided by (used in) investing activities
            
            
            (67,665,421
            )
            
            
            10,879,187CASH
      FLOWS FROM FINANCING ACTIVITIESStock
      options exercised
            
            
            165,122
            
            
            
            804,250Cash
      dividends paid
            
            
            (464,781
            )
            
            
            (468,437
            )Net
      increase in demand deposits, NOW accounts and savings
    accounts
            
            
            7,212,287
            
            
            
            23,540,327Net
      increase in certificates of deposit
            
            
            5,700,973
            
            
            
            5,757,147Net
      increase in securities sold under agreements to repurchase
            
            
            29,900,705
            
            
            
            20,280Proceeds
      from FHLB advances
            
            
            570,300,000
            
            
            
            476,476,300Repayments
      of FHLB advances
            
            
            (548,450,000
            )
            
            
            (518,890,300
            )Proceeds
      from issuance of notes payable
            
            
            717,000
            
            
            
            -Advances
      from borrowers for taxes and insurance
            
            
            154,418
            
            
            
            115,655Treasury
      stock purchased
            
            
            (510,914
            )
            
            
            (985,319
            )Net
      cash provided by (used in) financing activities
            
            
            64,724,810
            
            
            
            (13,630,097
            )INCREASE  IN
      CASH AND CASH EQUIVALENTS
            
            
            606,961
            
            
            
            254,072CASH
      AND CASH EQUIVALENTS, BEGINNING OF PERIOD
            
            
            12,046,202
            
            
            
            14,880,601CASH
      AND CASH EQUIVALENTS, END OF PERIOD
            
            $
            12,653,163
            
            
            
            15,134,673








7
 Table of Contents





NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





Note
1:  Basis of Presentation





The accompanying unaudited interim
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X.  Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.  In the opinion of management, all adjustments
(consisting only of normal recurring accruals) considered necessary for a fair
presentation have been included.





The results of operations for the
period are not necessarily indicative of the results to be expected for the full
year.





These condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company’s Form 10-K annual report
for 2007 filed with the Securities and Exchange Commission.  The
condensed consolidated statement of financial condition of the Company as of
December 31, 2007, has been derived from the audited consolidated balance sheet
of the Company as of that date.  Certain information and note
disclosures normally included in the Company’s annual financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted.





Note
2:  Principles of Consolidation





The accompanying consolidated financial
statements include the accounts of Guaranty Federal Bancshares, Inc. (the
“Company”) and its wholly owned subsidiary, Guaranty Bank (the
“Bank”).  All significant intercompany transactions and balances have
been eliminated in consolidation.





Note
3:  Benefit Plans





The
Company has stock-based employee compensation plans, which are described fully
in the Company’s December 31, 2007 Annual Report on Form 10-K.





The table below summarizes transactions
under the Company’s stock option plans for three months ended March 31,
2008:








Number of sharesIncentive Stock Option
            
            
            Non-Incentive Stock Option
            
            
            Weighted Average Exercise
    PriceBalance
      outstanding as of January 1, 2008
            
            
            118,033
            
            
            
            114,206
            
            
            $
            20.48Granted
            
            
            27,000
            
            
            
            20,000
            
            
            
            28.74Exercised
            
            
            (5,750
            )
            
            
            (6,600
            )
            
            
            13.37Forfeited
            
            
            -
            
            
            
            -
            
            
            
            -Balance
      outstanding as of March 31, 2008
            
            
            139,283
            
            
            
            127,606
            
            
            
            22.26Options
      exercisable as of March 31, 2008
            
            
            62,186
            
            
            
            67,606
            
            
            
            17.11





8
 Table of Contents




Stock-based
compensation expense recognized for the three months ended March 31, 2008 and
2007 was $24,304 and $13,119, respectively. As of March 31, 2008, there was
$294,110 of unrecognized compensation expense related to nonvested stock
options, which will be recognized over the remaining vesting
period.





Note
4: Earnings Per Share








For three months ended March 31,
      2008Income Available to
      Stockholders
            
            
            Average Shares Outstanding
            
            
            Per-shareBasic
      Earnings per Share
            
            $
            616,858
            
            
            
            2,605,280
            
            
            
            0.24Effect
      of Dilutive Securities: Stock Options
            
            
            
            
            
            
            42,168Diluted
      Earnings per Share
            
            $
            616,858
            
            
            
            2,647,448
            
            
            
            0.23For three months ended March 31,
      2007Income Available to
      Stockholders
            
            
            Average Shares Outstanding
            
            
            Per-shareBasic
      Earnings per Share
            
            $
            1,753,540
            
            
            
            2,760,860
            
            
            
            0.63Effect
      of Dilutive Securities: Stock Options
            
            
            
            
            
            
            75,319Diluted
      Earnings per Share
            
            $
            1,753,540
            
            
            
            2,836,179
            
            
            
            0.62








Note
5: Other Comprehensive Income








3/31/2008
            
            
            3/31/2007Unrealized
      gains (losses) on available-for-sale securities
            
            $
            156,441
            
            
            
            (673,850
            )Less:
      Reclassification adjustment for realized gains included in
      income
            
            
            -
            
            
            
            (192,616
            )Other
      comprehensive income (loss), before tax effect
            
            
            156,441
            
            
            
            (481,234
            )Tax
      expense (benefit)
            
            
            57,883
            
            
            
            (178,057
            )Other
      Comprehensive Income (Loss)
            
            $
            98,558
            
            
            
            (303,177
            )








Note
6: New Accounting Pronouncements





In
September 2006, the Financial Accounting Standards Board (FASB) issued SFAS
No. 157, Fair Value
Measurements. This Statement defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles and expands
disclosure related to the use of fair value measures in financial statements.
This Statement applies under other accounting pronouncements that require or
permit fair value measurements, and does not expand the use of fair value
measures in financial statements, but standardizes its definition and guidance
in generally accepted accounting principles. SFAS No. 157 emphasizes that
fair value is a market-based measurement based on an exchange transaction
between market participants in which an entity sells an asset or transfers a
liability. SFAS No. 157 also establishes a fair value hierarchy from observable
market data as the highest level to fair value based on an entity's own fair
value assumptions as the lowest level. The provisions of FASB 157 were effective
as of January 1, 2008.  The adoption of the standard did not have a
material impact on the consolidated financial statements.  In February
2008, Financial Accounting Standards Board Staff Position No. 157-2, Effective Date of FASB Statement No.
157 was issued that delayed the application of SFAS No. 157 for
non-financial assets and non-financial liabilities, until January 1,
2009.





9
 Table of Contents





In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities.  This statement permits
companies to choose to measure financial instruments and certain other financial
assets and liabilities at fair value.  SFAS No. 159 is effective for
fiscal years beginning after November 15, 2007, with earlier adoption
permitted.  The provisions of this statement were effective for the
Company as of January 1, 2008.   The Company elected not to
measure any eligible items using the fair value option in accordance with SFAS
No. 159 and therefore, SFAS No. 159 did not have a material impact on the
consolidated financial statements.





In March
2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities, and Amendment of FASB Statement No.
133.  SFAS 161 amends SFAS 133, “Accounting for Derivative
Instruments and Hedging Activities,” to amend and expand the disclosure
requirements of SFAS 133 to provided greater transparency about (i) how and why
and entity uses derivative instruments, (ii) how derivative instruments and
related hedge items are accounted for under SFAS 133 and its related
interpretations, and (iii) how derivative instruments and related hedged items
affect and entity’s financial position, results of operations and cash
flows.  To meet those objectives, SFAS 161 requires qualitative
disclosures about objectives and strategies for using derivatives, quantitative
disclosures about fair value amounts of gains and losses on derivative
instruments and disclosures about credit-risk-related contingent features in
derivative agreements.  SFAS 161 is effective for the Company on
January 1, 2009 and is not expected to have a significant impact on the
Company’s financial position, results of operations or cash flows.





Note
7: Fair Value Disclosures





As
discussed in Note 6, SFAS No. 157 was implemented by the Company effective
January 1, 2008.  SFAS No. 157 establishes a hierarchy that
prioritizes the use of fair value inputs used in valuation methodologies into
the following three levels:





Level
1: Unadjusted quoted prices for identical assets or liabilities in active
markets that the entity has the ability to access as of the measurement
date.





Level
2:  Significant observable inputs other than Level 1 prices such as quoted
prices for similar assets or liabilities in active markets; quoted prices for
identical or similar assets or liabilities in markets that are not active; or
other inputs that are observable or can be derived from or corroborated by
observable market data by correlation or other means.





Level
3:  Significant unobservable inputs that reflect the reporting entity’s own
assumptions about the assumptions that market participants would use in pricing
an asset or liability.





The
following is a description of the Company’s valuation methodologies used to
measure and disclose the fair values of its financial assets and liabilities on
a recurring or nonrecurring basis:





Available-for-sale
securities:  Securities classified as available for sale are
recorded at fair value on a recurring basis utilizing Level 1 and Level 2
inputs.  For these securities, the Company obtains fair value
measurements from an independent pricing service.  The fair value
measurements consider observable data that may include dealer quotes, benchmark
yields, market spreads, live trading levels, market consensus prepayment speeds,
among other things.





Loans:   The
Company does not record loans at fair value on a recurring
basis.  However, nonrecurring fair value adjustments to collateral
dependent loans are recorded to reflect partial write-downs based on the
observable market price or current appraised value of the underlying
collateral.





Impaired
loans:   Impaired loans are reported at the fair value of
the underlying collateral if repayment is expected solely from the
collateral.  Collateral values are estimated using third party
appraisals or internally developed appraisals or discounted cash flow
analysis.





10
 Table of Contents





The
following table summarizes financial assets measured at fair value on a
recurring basis as of March 31, 2008, segregated by the level of the valuation
inputs within the fair value hierarchy utilized to measure fair value (dollar
amounts in thousands):








Level 1 inputs
            
            
            Level 2 inputs
            
            
            Level 3 inputs
            
            
            Total fair valueAvailable-for-sale
      securities
            
            $
            1,315
            
            
            
            61,926
            
            
            
            -
            
            
            
            63,241





Certain
financial assets are measured at fair value on a nonrecurring basis, that is,
the instruments are not measured at fair value on an ongoing basis but are
subject to fair value adjustments in certain circumstances (for example, when
there is evidence of impairment).  Financial assets measured at fair
value on a non-recurring basis during the three months ended March 31, 2008,
that were still held on the balance sheet at March 31, 2008, were valued using
the valuation inputs shown below (dollar amounts in thousands):








Level 1 inputs
            
            
            Level 2 inputs
            
            
            Level 3 inputs
            
            
            Total fair valueImpaired
      loans
            
            $
            -
            
            
            
            -
            
            
            
            5,130
            
            
            
            5,130





Certain
non-financial assets and non-financial liabilities measured at fair value on a
recurring and non-recurring basis include non-financial long-lived assets, such
as premises and equipment.  As stated above in Note 6, SFAS 157 will
be applicable to these fair value measurements beginning January 1,
2009.





Item2.  Management’s Discussion and Analysis of Financial
Condition and Results of Operations





General





The
primary function of the Company is to monitor and oversee its investment in
Guaranty Bank (the “Bank”), a wholly-owned subsidiary of the
Company.  The Company engages in few other activities, and the Company
has no significant assets other than its investment in the Bank.  As a
result, the results of operations of the Company are derived primarily from
operations of the Bank. The Bank’s results of operations are primarily dependent
on net interest margin, which is the difference between interest income on
interest-earning assets and interest expense on interest-bearing
liabilities.  The Bank’s income is also affected by the level of its
noninterest expenses, such as employee salaries and benefits, occupancy expenses
and other expenses.  The following discussion reviews the Company’s
financial condition as of March 31, 2008, and the results of operations for the
three months ended March 31, 2008 and 2007.





The
discussion set forth below, as well as other portions of this Form 10-Q, may
contain forward-looking comments. Such comments are based upon the information
currently available to management of the Company and management’s perception
thereof as of the date of this Form 10-Q.  When used in this Form
10-Q, words such as “anticipates,” “estimates,” “believes,” “expects,” and
similar expressions are intended to identify forward-looking statements but are
not the exclusive means of identifying such statements.  Such
statements are subject to risks and uncertainties.  Actual results of
the Company’s operations could materially differ from those forward-looking
comments.  The differences could be caused by a number of factors or
combination of factors including, but not limited to: changes in demand for
banking services; changes in portfolio composition; changes in management
strategy; increased competition from both bank and non-bank companies; changes
in the general level of interest rates; and other factors set forth in reports
and other documents filed by the Company with the Securities and Exchange
Commission from time to time, including the risk factors described under Item
1A. of the Company’s Form 10-K for the fiscal year ended December 31,
2007.








Financial
Condition





The
Company’s total assets increased $65,660,046 (12%) from $565,777,980 as of
December 31, 2007, to $631,438,026 as of March 31, 2008.





11
 Table of Contents





Cash and
cash equivalents increased $606,961 (5%) from $12,046,202 as of December 31,
2007, to $12,653,163 as of March 31, 2008.





Securities
available-for-sale increased $48,511,359 (329%) from $14,729,938 as of December
31, 2007, to $63,241,297 as of March 31, 2008. The increase is primarily due to
purchases of $50,306,886 offset by maturities of
$1,550,000.  Approximately $35 million of the purchases were due to a
structured leveraged transaction completed during the period.  The
Bank currently holds 26,600 shares of Federal Home Loan Mortgage Corporation
(“FHLMC”) stock with an amortized cost of $26,057 in the available-for-sale
category.  As of March 31, 2008, the gross unrealized gain on the
FHLMC stock was $647,455, a decrease from $880,205 as of December 31,
2007.





Securities
held-to-maturity decreased primarily due to principal repayments by $23,857 (4%)
from $654,775 as of December 31, 2007, to $630,918 as of March 31,
2008.





Stock in
Federal Home Loan Bank of Des Moines (“FHLB”) increased by $1,046,361 (26%), due
to purchases of such stock to continue to maintain a level to meet FHLB advance
requirements.





Net loans
receivable increased by $16,833,697 (3%) from $514,100,035 as of December 31,
2007, to $530,933,732 as of March 31, 2008.  Commercial real estate
loans increased by $29,052,472 (17%) from $175,995,074 as of December 31, 2007,
to $205,047,546 as of March 31, 2008.  Commercial loans decreased
$3,206,966 (3%) from $104,025,575 as of December 31, 2007, to $100,818,609 as of
March 31, 2008.  Permanent multi-family loans decreased by $6,660,477
(16%) from $41,947,555 as of December 31, 2007, to $35,287,078 as of March 31,
2008.  Construction loans decreased by $9,965,895 (11%) to $79,758,325
as of March 31, 2008 compared to $89,724,220 as of December 31, 2007. Loan
growth is anticipated in future quarters and represents a major part of the
Bank’s planned asset growth.





Allowance
for loan losses decreased $516,254 (9%) from $5,962,923 as of December 31, 2007
to $5,446,669 as of March 31, 2008. The allowance decreased due to net loan
charge-offs of $1,336,254 exceeding the provision for loan losses of $820,000
recorded during the period.  Management charged-off $1.2 million
relating to two specific loans that had been identified and classified as
impaired at quarter end and at December 31, 2007.  Due to loan growth,
the charge-offs noted and continuing concerns over the local and national
economy, management decided to record a provision for loan losses for the period
in order to maintain the allowance at a level in accordance with management’s
internal review and methodology.  See discussion under “Results of
Operations – Comparison of Three Month Periods Ended March 31, 2008 and 2007 –
Provision for Loan Losses.”   The allowance for loan losses, as a
percentage of net loans outstanding, as of March 31, 2008 and December 31, 2007
was 1.03% and 1.16%, respectively.  The allowance for loan losses, as
a percentage of impaired loans outstanding, as of March 31, 2008 and December
31, 2007 was 85.6% and 82.2%, respectively.  Management believes the
allowance for loan losses is at a level to be sufficient in providing for
potential loans losses in the Bank’s existing loan portfolio.





Deposits
increased $12,913,260 (3%) from $418,191,284 as of December 31, 2007, to
$431,104,544 as of March 31, 2008.  For the three months ended March
31, 2008, checking and savings accounts increased by $7,212,287 and certificates
of deposits increased by $5,700,973.  The increase in checking and
savings was due to the Bank’s continued emphasis on developing commercial
checking business.  The increase in certificates of deposit was
primarily due to the Company’s emphasis on retail customers offset by a decrease
in brokered deposits.  See also the discussion under “Quantitative and
Qualitative Disclosure about Market Risk – Asset/Liability
Management.”





FHLB
advances increased by $21,850,000 from $76,086,000 as of December 31, 2007, to
$97,936,000 as of March 31, 2008 primarily to fund asset growth during the
period.





Securities
sold under agreements to repurchase increased $29,900,705 (304%) from $9,849,295
as of December 31, 2007, to $39,750,000 as of March 31, 2008, due to the
structured leveraged transaction completed during the period.





12
 Table of Contents





Stockholders’
equity (including unrealized appreciation on securities available-for-sale, net
of tax) increased $79,483 from $42,686,660 as of December 31, 2007, to
$42,766,143 as of March 31, 2008. The Company’s net income during this period
was $616,858 which was partially offset by dividends in the amount
of  $469,109 which were declared on March 27, 2008 and paid on April
18, 2008, to stockholders of record as of April 7, 2008.  In
addition, the increase in stockholders’ equity was further offset as the
Company repurchased 19,514 shares of treasury stock at an aggregate cost of
$510,914 (an average cost of $26.18 per share).  On a per share basis,
stockholders’ equity increased from $16.37 as of December 31, 2007 to $16.41 as
of March 31, 2008.





Average
Balances, Interest and Average Yields





The
Company’s profitability is primarily dependent upon net interest income, which
represents the difference between interest and fees earned on loans and debt and
equity securities, and the cost of deposits and borrowings.  Net
interest income is dependent on the difference between the average balances and
rates earned on interest-earning assets and the average balances and rates paid
on interest-bearing liabilities.  Non-interest income, non-interest
expense, and income taxes also impact net income.





The
following table sets forth certain information relating to the Company’s average
consolidated statements of financial condition and reflects the average yield on
assets and average cost of liabilities for the periods
indicated.  Such yields and costs are derived by dividing income or
expense annualized by the average balance of assets or liabilities,
respectively, for the periods shown.  Average balances were derived
from average daily balances.  The average balance of loans includes
loans on which the Company has discontinued accruing interest.  The
yields and costs include fees which are considered adjustments to
yields.  All dollar amounts are in thousands.





13
 Table of Contents




Three Months ended
3/31/2008
            
            
            Three Months ended
3/31/2007Average Balance
            
            
            Interest
            
            
            Yield / Cost
            
            
            Average Balance
            
            
            Interest
            
            
            Yield / CostASSETSInterest-earning:Loans
            
            $
            520,562
            
            
            
            8,602
            
            
            
            6.61
            %
            
            $
            478,767
            
            
            
            9,388
            
            
            
            7.84
            %Investment
      securities
            
            
            44,073
            
            
            
            575
            
            
            
            5.22
            %
            
            
            8,480
            
            
            
            97
            
            
            
            4.58
            %Other
      assets
            
            
            6,285
            
            
            
            54
            
            
            
            3.41
            %
            
            
            8,968
            
            
            
            81
            
            
            
            3.61
            %Total
      interest-earning
            
            
            570,920
            
            
            
            9,231
            
            
            
            6.47
            %
            
            
            496,215
            
            
            
            9,566
            
            
            
            7.71
            %Noninterest-earning
            
            
            19,942
            
            
            
            
            
            
            
            
            
            
            
            16,803$
            590,862
            
            
            
            
            
            
            
            
            
            
            $
            513,018LIABILITIES
      AND STOCKHOLDERS’ EQUITYInterest-bearing:Savings
      accounts
            
            $
            12,642
            
            
            
            51
            
            
            
            1.61
            %
            
            $
            14,804
            
            
            
            95
            
            
            
            2.57
            %Transaction
      accounts
            
            
            99,107
            
            
            
            562
            
            
            
            2.27
            %
            
            
            93,044
            
            
            
            653
            
            
            
            2.81
            %Certificates
      of deposit
            
            
            276,797
            
            
            
            3,364
            
            
            
            4.86
            %
            
            
            225,504
            
            
            
            2,757
            
            
            
            4.89
            %FHLB
      Advances
            
            
            84,561
            
            
            
            733
            
            
            
            3.47
            %
            
            
            88,300
            
            
            
            1,175
            
            
            
            5.32
            %Securities
      sold under agreements to repurchase
            
            
            29,861
            
            
            
            224
            
            
            
            3.00
            %
            
            
            1,465
            
            
            
            10
            
            
            
            2.73
            %Subordinated
      debentures
            
            
            15,465
            
            
            
            257
            
            
            
            6.65
            %
            
            
            15,465
            
            
            
            257
            
            
            
            6.65
            %Other
      borrowed funds
            
            
            919
            
            
            
            10
            
            
            
            4.35
            %
            
            
            -
            
            
            
            -
            
            
            
            0.00
            %Total
      interest-bearing
            
            
            519,352
            
            
            
            5,201
            
            
            
            4.01
            %
            
            
            438,582
            
            
            
            4,947
            
            
            
            4.51
            %Noninterest-bearing
            
            
            28,300
            
            
            
            
            
            
            
            
            
            
            
            28,237Total
      liabilities
            
            
            547,652
            
            
            
            
            
            
            
            
            
            
            
            466,819Stockholders’
      equity
            
            
            43,210
            
            
            
            
            
            
            
            
            
            
            
            46,199$
            590,862
            
            
            
            
            
            
            
            
            
            
            $
            513,018Net
      earning balance
            
            $
            51,568
            
            
            
            
            
            
            
            
            
            
            $
            57,633Earning
      yield less costing rate
            
            
            
            
            
            
            
            
            
            
            2.46
            %
            
            
            
            
            
            
            
            
            
            
            3.20
            %Net
      interest income, and net yield spreadon interest earning
      assets
            
            
            
            
            
            $
            4,030
            
            
            
            2.82
            %
            
            
            
            
            
            $
            4,619
            
            
            
            3.72
            %Ratio
      of interest-earning assets tointerest-bearing
      liabilities
            
            
            
            
            
            
            110
            %
            
            
            
            
            
            
            
            
            
            
            113
            %








Results
of Operations - Comparison of Three Month Periods Ended March
31,  2008
and 2007





Net
income for the three months ended March 31, 2008 was $616,858 as compared to
$1,753,540 for the three months ended March 31, 2007, which represents a
decrease in earnings of $1,136,682 (65%) for the three month period ended March
31, 2008.








Interest
Income





Total
interest income for the three months ended March 31, 2008, decreased $334,955
(4%) as compared to the three months ended March 31, 2007.  For the
three month period ended March 31, 2008 compared to the same period in 2007, the
average yield on interest earning assets decreased 124 basis points to 6.47%,
and the average balance of interest earnings assets increased approximately
$74,705,000.  The Company’s decline in the average yield on interest
earning assets was due to the Federal Reserve’s significant interest rate cuts
of 3% since September 2007.  This affected the Company’s yield on
loans which are tied to the prime rate.




14
 Table of Contents





Interest
Expense





Total
interest expense for the three months ended March 31, 2008, increased $254,579
(5%) when compared to the three months ended March 31, 2007.  For the
three month period ended March 31, 2008, the average cost of interest bearing
liabilities decreased 50 basis points to 4.01%, and the average balance of
interest bearing liabilities increased approximately $80,770,000 when compared
to the same period in 2007.





Net Interest
Income





Net
interest income for the three months ended March 31, 2008, decreased $589,534
(13%) when compared to the same period in 2007. The average balance of interest
bearing liabilities increased by approximately $6,065,000 more than the average
balance in interest earning assets increased when comparing the three month
period ended March 31, 2008 to the same period in 2007.  For the three
month period ended March 31, 2008, the earning yield minus the costing rate
spread decreased 74 basis points to 2.46% when compared to the same period in
2007.





Provision for Loan
Losses





Based on
its internal analysis and methodology, management recorded a provision for loan
loss of $820,000 for the three months ended March 31, 2008, compared to $210,000
for the same period in 2007.  This increase is due to the Bank’s
continued loan growth, increased charge-offs on two specific loans for the
period and continuing concerns over the local and national
economy.  The Bank will continue to monitor its allowance for loan
losses and make future additions based on economic and regulatory
conditions.  Management of the Company anticipates the need to
continue increasing the allowance for loan losses through charges to the
provision for loan losses as anticipated growth in the Bank’s loan portfolio
increases or other circumstances warrant.  Although the Bank maintains
its allowance for loan losses at a level which it considers to be sufficient to
provide for potential loan losses in its existing loan portfolio, there can be
no assurance that future loan losses will not exceed internal
estimates.  In addition, the amount of the allowance for loan losses
is subject to review by regulatory agencies which can order the establishment of
additional loan loss provisions.





Noninterest
Income





Noninterest
income decreased $339,462 (28%) for the three months ended March 31, 2008 when
compared to the three months ended March 31, 2007.





Gains on
sales of investment securities decreased $192,616 (100%) due to the Bank’s
suspension of selling shares of its Freddie Mac (FRE) equity investment, due to
the significant financial downturn in FRE and a sharp decline in its stock
price.  Service charges on transaction accounts decreased by $93,082
(17%) during the three months ended March 31, 2008 when compared to the same
period in 2007, primarily due to declines in overdraft charges.  Gain
on sale of loans decreased $61,620 (21%) for the three months ended March 31,
2008 when compared to the same period in 2007.





Noninterest
Expense





Noninterest
expense increased $226,860 (8%) for the three months ended March 31, 2008 when
compared to the three months ended March 31, 2007.





Salaries
and employee benefits increased $148,578 (9%) for the three months ended March
31, 2008 when compared to the same period in 2007.  This increase was
primarily due to additions in several staff positions in the areas of commercial
lending, corporate services, human resources, marketing and internal audit
throughout fiscal year 2007.  SAIF deposit insurance premiums
increased $52,834 (547%) due to the increase in Federal Deposit Insurance
Corporation insurance premium assessments in 2007.  Because of credits
available to the Company for 2007, these increased costs were not owed by the
Company until the first quarter of 2008.




15
 Table of Contents





Provision for Income
Taxes





There was
a decrease of $629,174 (63%) in the provision for income taxes for the three
months ended March 31, 2008 as compared to the same period in 2007 due to a
decrease in taxable income for the period.





Nonperforming
Assets





The
allowance for loan losses is calculated based upon an evaluation of pertinent
factors underlying the various types and quality of the Bank’s existing loan
portfolio.  When making such evaluation, management considers such
factors as the repayment status of its loans, the estimated net realizable value
of the underlying collateral, borrowers’ intent (to the extent known by the
Bank) and ability to repay the loan, local economic conditions and the Bank’s
historical loss ratios.  The allowance for loan losses, as a
percentage of impaired loans outstanding, as of March 31, 2008 and December 31,
2007 was 85.6% and 82.2%, respectively.  Total loans classified as
substandard, doubtful or loss as of March 31, 2008, were $17.4 million or 2.76%
of total assets as compared to $17.8 million, or 3.41% of total assets at
December 31, 2007.  Management considered impaired and total
classified loans in evaluating the adequacy of the Bank’s allowance for loan
losses.





The ratio
of nonperforming assets to total assets is another useful tool in evaluating
exposure to credit risk.  Nonperforming assets of the Bank include
impaired loans and assets which have been acquired as a result of foreclosure or
deed-in-lieu of foreclosure.  All dollar amounts are in
thousands.








3/31/2008
            
            
            12/31/2007
            
            
            12/31/2006Impaired
      loans
            
            $
            6,366
            
            
            
            7,254
            
            
            
            2,748Real
      estate acquired in settlement of loans
            
            
            988
            
            
            
            727
            
            
            
            173Total
      nonperforming assets
            
            $
            7,354
            
            
            
            7,981
            
            
            
            2,921Total
      nonperforming assets as a percentage of total assets
            
            
            1.16
            %
            
            
            1.41
            %
            
            
            0.56
            %Allowance
      for loan losses
            
            $
            5,447
            
            
            
            5,963
            
            
            
            5,783Allowance
      for loan losses as a percentage of net loans
            
            
            1.03
            %
            
            
            1.16
            %
            
            
            1.20
            %








Liquidity
and Capital Resources





The
Bank’s primary sources of funds are deposits, principal and interest payments on
loans and mortgage-backed securities, proceeds from maturing investment
securities and extensions of credit from FHLB.  While scheduled loan
and security repayments and the maturity of short-term investments are somewhat
predictable sources of funding, deposit flows are influenced by many factors,
which make their cash flows difficult to anticipate.





The Bank
uses its liquidity resources principally to satisfy its ongoing commitments
which include funding loan commitments, funding maturing certificates of deposit
as well as deposit withdrawals, maintaining liquidity, purchasing investments,
and meeting operating expenses.  Management believes that anticipated
cash flows and deposit growth will be adequate to meet the Bank’s liquidity
needs.





Item3.  Quantitative and Qualitative Disclosures about
Market Risk





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, the Bank offers deposit rates and loan rates designed to
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.  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.





16
 Table of Contents





As a part
of its asset and liability management strategy and throughout the past several
years, the Bank has continued to emphasize the origination of adjustable-rate,
one- to four-family residential loans and adjustable-rate or relatively
short-term commercial real estate, commercial business and consumer loans, while
originating fixed-rate, one- to four-family residential loans primarily for
immediate resale in the secondary market on either a service-retained basis or
service-released basis. This allows the Bank to serve the customer’s needs and
retain a banking relationship with respect to such fixed-rate residential loans,
while limiting its exposure to the risk associated with  carrying a
long-term fixed-rate loan in its loan portfolio.





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





Interest Rate Sensitivity
Analysis





The
following table sets forth as of March 31, 2008 management’s estimates 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  100,
200 and 300 basis point instantaneous and permanent decreases in market interest
rates.  Dollar amounts are expressed in thousands.





BP Change
            
            
            Estimated Net Portfolio
    Value
            
            
            NPV as % of PV of Assetsin Rates
            
            
            $ Amount
            
            
            $ Change
            
            
            % Change
            
            
            NPV Ratio
            
            
            Change+300
            
            
            $
            54,750
            
            
            $
            16,605
            
            
            
            44
            %
            
            
            8.91
            %
            
            
            2.85
            %+200
            
            
            
            50,166
            
            
            
            12,021
            
            
            
            32
            %
            
            
            8.10
            %
            
            
            2.04
            %+100
            
            
            
            44,602
            
            
            
            6,457
            
            
            
            17
            %
            
            
            7.14
            %
            
            
            1.08
            %NC
            
            
            
            38,145
            
            
            
            -
            
            
            
            -
            
            
            
            6.06
            %
            
            
            --100
            
            
            
            30,651
            
            
            
            (7,494
            )
            
            
            -20
            %
            
            
            4.83
            %
            
            
            -1.23
            %-200
            
            
            
            22,769
            
            
            
            (15,376
            )
            
            
            -40
            %
            
            
            3.55
            %
            
            
            -2.51
            %-300
            
            
            
            18,127
            
            
            
            (20,018
            )
            
            
            -52
            %
            
            
            2.80
            %
            
            
            -3.26
            %








Computations
of prospective effects of hypothetical interest rate changes are based on an
internally generated model using actual maturity and repricing schedules for the
Bank’s loans and deposits, 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,
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 steady 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.




17
 Table of Contents





The
Bank’s Board of Directors (the “Board”) is responsible for reviewing the Bank’s
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 with respect to the Bank’s asset
and liability goals and strategies.





Item4. Controls and Procedures





(a)  The
Company maintains disclosure controls and procedures (as defined in Rule
13a-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)) that are
designed to ensure that information required to be disclosed in the Company’s
Exchange Act reports is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission's rules and
forms, and that such information is accumulated and communicated to the
Company’s management, including its Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosure.





The
Company conducted an evaluation, under the supervision and with the
participation of the Company’s management, including the Company’s Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
Company’s disclosure controls and procedures.   Based on this
evaluation, the Company’s Chief Executive Officer and Chief Financial Officer
concluded that the Company’s disclosure controls and procedures were effective
as of March 31, 2008.





(b)  There
have been no changes in the Company’s internal control over financial reporting
during the quarter ended March 31, 2008 that have materially affected, or are
reasonably likely to materially affect, the Company’s internal control over
financial reporting.





18
 Table of Contents





PARTII





Item1.
            Legal
      Proceedings




None.





Item 1A.
            Risk
      Factors




Not
applicable.





Item 2.
            Unregistered
      Sales of Equity Securities and Use of
Proceeds





The
following table summarizes the repurchase activity of the Company’s common stock
during the Company’s first quarter ended March 31, 2008.





ISSUER
PURCHASES OF EQUITY SECURITIES








Period
            
            (a)
      Total Number of Shares Purchased
            
            
            (b)
      Average Price Paid per Share
            
            
            (c)
      Total Number of Shares Purchased as Part of Publicly Announced Plans or
      Programs (1)
            
            
            (d)
      Maximum Number of Shares that May Yet Be Purchased Under the Plans or
      ProgramsJanuary
      1, 2008 to January 31, 2008
            
            
            4,893
            
            
            $
            25.10
            
            
            
            4,893
            
            
            
            255,785February
      1, 2008 to February 29, 2008
            
            
            8,900
            
            
            $
            26.68
            
            
            
            8,900
            
            
            
            246,885March
      1, 2008 to March 31, 2008
            
            
            5,721
            
            
            $
            26.34
            
            
            
            5,721
            
            
            
            241,164Total
            
            
            19,514
            
            
            $
            26.18
            
            
            
            19,514








(1)
            The
      Company has a repurchase plan which was announced on August 20,
      2007.  This plan authorizes the purchase by the Company of up to
      350,000 shares of the Company’s common stock.  There is no
      expiration date for this plan.  There are no other repurchase
      plans in effect at this time.





Item3.
            Defaults
      Upon Senior Securities


Not
applicable.





Item4.
            Submission
      of Matters to a Vote of Common Security
Holders


Not
applicable.





Item5.
            Other
      Information


None.





Item6.
            Exhibits





11.
            Statement
      re: computation of per share earnings (set forth in “Note 4: Earnings Per
      Share” of the Notes to Condensed Consolidated Financial Statements
      (unaudited))


31(i).1
            Certification
      of the Principal Executive Officer pursuant to Rule 13a -14(a) of the
      Exchange Act


31(i).2
            Certification
      of the Principal Financial Officer pursuant to Rule 13a - 14(a) of the
      Exchange Act


32.1
            CEO
      certification pursuant to 18 U.S.C. Section
1350


32.2
            CFO
      certification pursuant to 18 U.S.C. Section
1350




19
 Table of Contents





SIGNATURES








Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.








Guaranty
      Federal Bancshares, Inc.Signature
      and Title
            
            Date/s/ Shaun A.
      Burke
            
            
            May 15,
      2008Shaun
      A. BurkePresident
      and Chief Executive Officer(Principal
      Executive Officer and Duly Authorized Officer)/s/ Carter
      Peters
            
            
            May 15,
      2008Carter
      PetersExecutive
      Vice President and Chief Financial Officer(Principal
      Financial and Accounting Officer)


20