UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q

(Mark One)
       [X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
             OF THE SECURITIES EXCHANGE ACT OF 1934

             For the quarter ended December 31, 1997
                                           -----------------

                                       OR

       [ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
             THE SECURITIES EXCHANGE ACT OF 1934

             For the transition period from              to
                                                -----------     ------------

Commission number 0-23325
                  -------

                        Guaranty Federal Bancshares, Inc.
           ----------------------------------------------------------
             (Exact name of registrant as specified in its charter)

       Delaware                                          43-1792717     .
-------------------------------               ----------------------------------
(State or other jurisdiction of               (IRS Employer Identification No.)
incorporation or organization)

      1341 West Battlefield
      Springfield, Missouri                              65807           .
-------------------------------------------            ----------
(Address of principal executive offices)               (Zip Code)


                        Telephone Number: (417) 889-2494
                                          --------------

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 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   X                         No
                      ------                         ------

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


             Class                          Outstanding at February 10, 1998
             -----                          --------------------------------
    Common Stock, Par Value $0.10                   6,221,522 Shares

<PAGE>


                        GUARANTY FEDERAL BANCSHARES, INC

                                    Form 10-Q

                                TABLE OF CONTENTS

Item                                                                     Page
----                                                                     ----
                          PART I. Financial Information
                          -----------------------------

1.  Consolidated Financial Statement (Unaudited):
         Statements of Financial Condition                                3

         Statements of Income                                             4

         Statements of Cash Flow                                          5

         Notes to Consolidated Financial Statement                        6

2.  Management's Discussion and Analysis of Financial Condition and       9
         Results of Operations

                           PART II. Other Information
                           --------------------------

1.  Legal Proceedings                                                     16

2.  Changes in Securities and Use of Proceeds                             16

3.  Defaults Upon Senior Securities                                       17

4.  Submission of Matters to Vote of Security-holders                     17

5.  Other Information                                                     17

6.  Exhibits and Reports on Form 8-K                                      17

    Signatures                                                            18


<PAGE>

PART I

Item 1.  Financial Statements
         --------------------

                        GUARANTY FEDERAL BANCSHARES, INC.

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                 DECEMBER 31, 1997 (UNAUDITED) AND JUNE 30, 1997

                                     ASSETS
                                     ------
<TABLE>
<CAPTION>
                                                                        December 31,       June 30,
                                                                            1997             1997
                                                                       -------------    -------------
                                                                         (Unaudited)
<S>                                                                    <C>              <C>          
Cash                                                                   $     910,766    $     417,485
Interest-bearing deposits in other financial institutions                 20,307,148        3,399,866
                                                                       -------------    -------------
         Cash and cash equivalents                                        21,217,914        3,817,351

Available-for-sale securities                                              4,203,625        3,360,000
Held-to-maturity securities                                                6,477,317        8,585,753
Mortgage-backed securities, held-to-maturity                              14,120,442       15,813,890
Mortgage loans held for sale                                               6,369,428        5,903,002
Loans receivable, net                                                    166,863,350      152,232,295
Accrued interest receivable
         Loans                                                             1,043,335          996,014
         Investments                                                         147,886          165,949
         Mortgage-backed securities                                          155,777          149,598
Prepaid expenses and other assets                                          1,990,236        1,963,875
Foreclosed assets held for sale                                              488,155          210,155
Premises and equipment                                                     7,538,594        6,267,157
                                                                       -------------    -------------
                                                                       $ 230,616,059    $ 199,465,039
                                                                       =============    =============


                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------
LIABILITIES
Deposits                                                               $ 143,601,343    $ 151,246,482
Federal Home Loan Bank advances                                           15,130,926       18,150,844
Advances from borrowers for taxes and insurance                              211,225          674,618
Accrued expenses and other liabilities                                       668,171          666,427
Accrued interest payable                                                      88,477          131,245
Income taxes payable                                                         261,174          289,268
Deferred income taxes                                                      1,114,165          816,000
                                                                       -------------    -------------
                  Total Liabilities                                      161,075,481      171,974,884
                                                                       -------------    -------------

STOCKHOLDERS' EQUITY
Capital Stock
        Common stock, $0.10 par value; authorized 10,000,000 shares;
         issued and outstanding 6,221,522 shares                             622,152        3,125,000
Additional paid-in capital                                                48,962,954        3,687,356
Unearned ESOP shares                                                      (3,444,540)              --
Retained earnings, substantially restricted`                              20,886,991       18,620,219
                                                                       -------------    -------------
                                                                          67,027,557       25,432,575

Unrealized appreciation on available-for-sale securities,
     net of tax                                                            2,513,021        2,057,580
                                                                       -------------    -------------
                                                                          69,540,578       27,490,155
                                                                       -------------    -------------
                                                                       $ 230,616,059    $ 199,465,039
                                                                       =============    =============
</TABLE>


See Notes to Consolidated Financial Statements

                                       3

<PAGE>


                        GUARANTY FEDERAL BANCSHARES, INC.

                        CONSOLIDATED STATEMENTS OF INCOME

        THREE AND SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996 (UNAUDITED)

<TABLE>
<CAPTION>
                                                    Three Months Ending          Six Months Ending
                                                -------------------------    -------------------------
                                                  12/31/97      12/31/96       12/31/97       12/31/96
                                                -----------    ----------    -----------     ----------
<S>                                             <C>             <C>          <C>             <C>      
INTEREST INCOME
Loans                                           $ 3,646,258     3,069,726    $ 7,097,589     5,946,574
Investment securities                                96,043       138,166        193,293       282,910
Mortgage-backed securities                          267,442       385,660        565,340       777,856
Escrow Fund Deposits                                200,551        89,950        293,574       174,253
                                                -----------     ---------    -----------     ---------
       Total Interest Income                      4,210,294     3,683,502      8,149,796     7,181,593
                                                -----------     ---------    -----------     ---------

INTEREST EXPENSE
Deposits                                          1,776,873     1,882,123      3,607,586     3,796,052
Federal Home Loan Bank advances                     462,573       186,674        820,018       238,573
Other Deposits                                       79,043             0         79,043             0
                                                -----------     ---------    -----------     ---------
       Total Interest Expense                     2,318,489     2,068,797      4,506,647     4,034,625
                                                -----------     ---------    -----------     ---------

NET INTEREST INCOME                               1,891,805     1,614,705      3,643,149     3,146,968

PROVISION FOR LOAN LOSSES                            30,000             0         63,352             0
                                                -----------     ---------    -----------     ---------

NET INTEREST INCOME AFTER
       PROVISION FOR LOAN LOSSES                  1,861,805     1,614,705      3,579,797     3,146,968
                                                -----------     ---------    -----------     ---------

NONINTEREST INCOME (LOSS)
Service charges                                     153,730        53,629        274,625        95,817
Late charges and other fees                          28,224        19,775         53,486        39,082
Gain on loans, investment
    securities and mortgage-backed securities        19,240         2,832         57,371        28,010
Income (expense) on foreclosed assets                 2,178       (10,805)         2,086       (11,396)
Other income                                         35,800        22,757         63,070        46,281
                                                -----------     ---------    -----------     ---------
       Total Noninterest Income                     239,172        88,188        450,638       197,794
                                                -----------     ---------    -----------     ---------

NONINTEREST EXPENSE
Salaries and employee benefits                      501,791       483,886      1,083,065     1,112,681
Occupancy                                           185,607       141,884        348,863       306,055
SAIF deposit insurance premiums                      23,982        67,201         46,952     1,089,693
Data processing fees                                109,990        93,392        197,302       183,129
Advertising                                         101,704        49,558        188,746        92,624
Other expense                                       215,342       140,360        394,251       258,699
                                                -----------     ---------    -----------     ---------
       Total Noninterest Expense                  1,138,416       982,281      2,259,179     3,042,881
                                                -----------     ---------    -----------     ---------

INCOME BEFORE INCOME TAXES                          962,561       720,612      1,771,256       307,881
PROVISION FOR INCOME TAXES                          367,773       267,260        659,965        97,929
                                                -----------     ---------    -----------     ---------

NET INCOME                                      $   594,788       453,352    $ 1,111,291       203,952
                                                ===========     =========    ===========     =========
 
EARNINGS PER SHARE                              $       n/a           n/a    $       n/a           n/a
                                                ===========     =========    ===========     =========
</TABLE>

See Notes to Consolidated Financial Statements

                                       4

<PAGE>


                        GUARANTY FEDERAL BANCSHARES, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

             SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996 (UNAUDITED)

<TABLE>
<CAPTION>


                                                                     1997             1996
                                                                     ----             ----
<S>                                                              <C>             <C>         
CASH FLOWS FROM OPERATING ACTIVITIES
   Net income                                                    $  1,111,291    $    203,952
   Items not requiring (providing) cash:
       Deferred income taxes                                           87,606          (3,712)
       Depreciation                                                   217,149         202,877
       Provision for loan losses                                            0
       Gain on loans, investment securities
         and mortgage-backed securities                               (57,371)        (28,010)
       Amortization of deferred income, premiums and discounts        (21,765)        (27,449)
       RRP expense                                                     47,979          73,138
   Origination of loans held for sale                              (4,920,734)     (2,545,899)
   Proceeds from sale of loans held for sale                        4,511,679       2,254,956
   Changes in:
       Accrued interest receivable                                    (35,437)        124,225
       Prepaid expenses and other assets                              (26,361)       (185,176)
       Accounts payable and accrued expenses                          (41,024)       (120,475)
       Income taxes payable                                           (43,094)          4,489
                                                                 ------------    ------------
         Net cash provided by (used in) operating activities          829,918         (47,084)
                                                                 ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Net increase in loans                                          (14,884,525)    (12,260,138)
   Principal payments on mortgage-backed securities,
       held-to-maturity                                             1,693,448       2,158,417
   Purchase of premises and equipment                                (259,788)        (97,220)
   Proceeds from sale of available-for-sale securities                      0       5,277,109
   Proceeds from maturities of available-for-sale securities                0         500,000
   Proceeds from maturities or calls of
       held-to-maturity investments                                 2,044,433       1,222,025
   Capitalized costs on foreclosed assets                                   0         (44,377)
                                                                 ------------    ------------
         Net cash used in investing activities                    (11,406,432)     (3,244,184)
                                                                 ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Tax benefit of vested RRP shares                                    32,229               0
   Proceeds from sale of common stock, net                         42,668,120               0
   Unearned ESOP shares                                            (3,444,540)              0
   Stock Options Exercised                                             18,516               0
   Cash dividends paid                                               (687,500)       (562,500)
   Cash dividends received on RRP Stock                                 5,905           3,493
   Net increase in demand deposits,
       NOW accounts and savings accounts                            5,384,078       1,583,221
   Net (decrease) in certificates of deposit                      (12,516,420)    (11,820,837)
   Proceeds from FHLB advances                                     30,000,000      24,163,750
   Repayments of FHLB advances                                    (33,019,918)     (8,000,000)
   Advances from borrowers for taxes and insurance                   (463,393)       (399,939)
   Reduction of shares in RRP Trust                                         0          13,358
                                                                 ------------    ------------
       Net cash provided by financing activities                   27,977,077       4,980,546
                                                                 ------------    ------------

INCREASE  IN CASH AND CASH EQUIVALENTS                             17,400,563       1,689,278

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                        3,817,351       2,674,557
                                                                 ------------    ------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                         $ 21,217,914    $  4,363,835
                                                                 ============    ============
</TABLE>

See Notes to Consolidated Financial Statements

                                       5

<PAGE>


                        GUARANTY FEDERAL BANCSHARES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Note 1:  Conversion, Reorganization and Stock Issuance
         ---------------------------------------------

         Guaranty  Federal  Bancshares,  Inc.  completed the  conversion  from a
federally   chartered  mutual  holding  company,   (formerly   Guaranty  Federal
Bancshares,  M. H. C.) to a Delaware-chartered stock corporation on December 30,
1997.  Stockholders'  equity  increased to $69.5  million  primarily  due to the
conversion in which Guaranty Federal Bancshares, Inc. exchanged 1,880,710 shares
of its common stock for all the Bank's common stock not held by Guaranty Federal
Bancshares, M. H. C. This exchange ratio was 1.931. In addition 4,340,812 shares
at $10.00 per share were sold in the stock offering, including 344,454 shares to
the employee stock  ownership  plan ( the "ESOP").  Total shares of common stock
outstanding following the offering and exchange is 6,221,522.

         In April  1995  Guaranty  Federal  Savings  and Loan  Association  (the
"Association")  reorganized  from a federally  chartered mutual savings and loan
association into a federal mutual holding company,  Guaranty Federal Bancshares,
M.  H.  C.  (the  "MHC").  As  part  of  the  reorganization,   the  Association
incorporated a de novo federally  chartered stock savings bank, Guaranty Federal
Savings  Bank  (the  "Bank")  and  transferred  most of its  assets  and all its
liabilities  to the Bank. The Bank issued  3,125,000  shares of its common stock
(par value $1.00) of which  972,365  shares were sold to parties  other than the
MHC, thus creating a minority  ownership interest in the Bank. The shares had an
initial public offering price of $8 per share, resulting in gross sales proceeds
of $7,778,920.  Costs related to the stock issuance,  which have been applied to
reduce the gross proceeds,  were $654,388.  Also $100,000 was transferred to the
MHC for the initial capitalization in connection with reorganization.

Note 2:  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.


                                       6

<PAGE>


                        GUARANTY FEDERAL BANCSHARES, INC
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Note 2:  Basis of Presentation, continued
         --------------------------------

           Operating  results for the six-month  periods ended December 31, 1997
and 1996, are not necessarily indicative of the results that may be expected for
the full year.  During the quarter ended December 31, 1997, the Company  engaged
in no significant  business  activity other than formation  activities  prior to
December 30, 1997.  Between December 30, 1997 and December 31, 1997, the company
engaged in no significant  business  activity other than ownership of the common
stock of the  Bank.  Accordingly,  all  consolidated  financial  statements  for
periods  prior to December  30,  1997,  relate  solely to the Bank and  Guaranty
Financial Services, Inc. of Springfield, a wholly owned subsidiary of the Bank.

Note 3:  Principles of Consolidation
         ---------------------------

         As more fully described in Note 1, the Company is a  Delaware-chartered
stock corporation organized to facilitate the conversion from the mutual holding
company  form of  ownership  of the Bank to the stock  holding  company  form of
ownership  of the  Bank  and  hold all of the  capital  stock  of the  Bank.  In
connection with the conversion, Guaranty Federal Bancshares, M. H. C., which had
owned 69% of the common  stock of the Bank,  was merged  with and into the Bank,
and its shares of the Bank were canceled.

         The  consolidated  financial  statements  include  the  accounts of the
Company,  its wholly -owned  subsidiary,  Guaranty  Federal Savings Bank and the
wholly-owned subsidiary of the Bank, Guaranty Financial Services of Springfield,
Inc. Significant  intercompany accounts and transactions have been eliminated in
consolidation.

Note 4:  Earnings Per Share
         ------------------

         The  FASB  recently  adopted  SFAS  128,  "Earnings  Per  Share."  This
statement  replaces  the  presentation  of  primary  earnings  per share  with a
presentation  of basic  earnings per share.  The  statement  also  requires dual
presentation  of basic and diluted  earnings per share by entities  with complex
capital   structures  and  requires  a  reconciliation  of  the  numerators  and
denominators  between the two calculations.  SFAS 128 is effective for financial
statements issued for periods ending after December 15, 1997,  including interim
periods.




                                       7

<PAGE>


                        GUARANTY FEDERAL BANCSHARES, INC
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Note 4:  Earnings Per Share, continued
         -----------------------------

         As more fully  described  in the  preceding  Notes,  the Company had no
operations prior to December 30, 1997 and earnings per share information for the
common stock of the Company for the three  months and six months ended  December
31,  1996 and  1997  has not  been  presented  because  the  information  is not
available or would not be  meaningful.  Earnings per share  information  for the
Bank for the three and six months ended  December 31, 1996 and 1997 has not been
presented  because  the  information  that will be  provided  in future  periods
concerning  the  Company.  The  Company  expects to provide  earnings  per share
information for all periods beginning after December 31, 1997.

Note 5:  Benefit Plans
         -------------

         On October 18, 1995,  the Bank's  stockholders  voted to approve both a
Recognition and Retention Plan ("RRP") and a Stock Option Plan ("SOP").  The RRP
authorized shares to be issued to directors, officers and employees of the Bank.
As of December 31, 1997,  all of the RRP shares have been purchased and awarded.
The Bank is amortizing  the RRP expense over each  participant's  vesting period
and the  financial  statements  reflect  $47,979  RRP  expense for the six month
period ending  December 31, 1997. The SOP authorized  stock options on shares to
be issued to officers and employees of the Bank, all of which have been granted.
Both the RRP and SOP vest  over a five  year  period.  The RRP and SOP have been
adjusted to reflect the conversion,  reorganization and stock issuance described
in Note 1 with all vesting periods  remaining  unchanged.  At December 31, 1997,
the were, outstanding , 184,690 options that have been granted at prices ranging
from $5.83 to $6.08 per share and 47,208 RRP shares were unvested.




                                       8

<PAGE>


                        GUARANTY FEDERAL BANCSHARES, INC

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         -----------------------------------------------------------------------
         of Operations
         -------------

General
-------

         The accompanying Consolidated Financial Statements include the accounts
of Guaranty Federal  Bancshares,  Inc. (the "Company"),  and all accounts of its
wholly  owned  subsidiary , Guaranty  Federal  Savings Bank (the "Bank") and all
accounts of the wholly-owned subsidiary of the Bank, Guaranty Financial Services
of Springfield, Inc. All significant intercompany transactions and balances have
been eliminated in consolidation.

         However,  because the conversion,  reorganization and stock issuance of
the  Company,  the Bank and related  entities  did not occur until  December 30,
1997,  all results  prior to that date  reflect the accounts of the Bank and its
subsidiary. The Company realized approximately $39.2 million in net process from
the stock  issuance of which the Company  provided  $19.9 million to the Bank as
capital and the Company provided a loan of $3.44 million to fund the purchase of
stock for the employee stock ownership  plan.  Other than the loan for the ESOP,
most of the funds  received  are  expected  to remain in short term  instruments
until they are invested for longer term uses such as loans.

         The primary  function of the Company has been to monitor its investment
in the Bank,  as a result,  the results of  operation 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  salary and  benefits,  occupancy
expenses and other  expenses.  The  following  discussion  reviews the financial
condition at December 31, 1997,  and the results of operations for the three and
six months ended December 31, 1997 and 1996.

Financial Condition
-------------------

         The  Company's  total  assets  increased  $31,151,020,  or 15.6%,  from
$199,465,039 as of June 30, 1997, to $230,616,059 as of December 31, 1997.

         Cash and cash  equivalents  increased  by  $17,400,563,  or 455.8% from
$3,817,351 as of June 30, 1997, to $21,217,914 as of December 31, 1997.  This is
a result of proceeds from the stock conversion being placed in  interest-bearing
deposits with other financial institutions.


                                       9

<PAGE>


                        GUARANTY FEDERAL BANCSHARES, INC

Financial Condition (continued)
-------------------------------

         Available-for-sale  securities  increased  $843,625  ,  or  25.1%  from
$3,360,000  as of June 30, 1997,  to  $4,203,625  as of December  31, 1997,  and
held-to-maturity  securities decreased $2,108,436,  or 24.6%, from $8,585,753 as
of June 30, 1997 to $6,477,317 as of December 31, 1997.  The Bank deployed these
funds to higher  yielding  loans.  The Bank  continues to hold 96,000  shares of
Federal Home Mortgage Loan Corporation  ("FHLMC") stock with a amortized cost of
$94,000 in the  available-for-sale  category. As of December 31, 1997, the gross
unrealized  gain on the stock was  $3,932,000 an increase from  $3,266,000 as of
June 30, 1997.

         Mortgage-backed securities,  held-to-maturity,  decreased $1,693,448 or
10.7%, from $15,813,890 as of June 30, 1997, to $14,120,442,  as of December 31,
1997.  The decrease is  attributed to  prepayments  received on various pools of
mortgage-backed securities during the six months ending December 31, 1997. As of
December 31, 1997, and June 30, 1997, there were no  mortgage-backed  securities
classified as available for sale.

         Net  loans   receivable   increased  by  $14,631,055,   or  9.6%,  from
$152,323,295, as of June 30, 1997, to $166,863,350, as of December 31, 1997, and
loans  held-for-sale  increased by $466,426,  or 7.9% from $5,903,002 as of June
30, 1997 to $6,369,428 as of December 31, 1997.  Growth  consisted  primarily of
loans  secured by both owner and  non-owner  occupied  residential  real estate,
which  increased by  $9,700,000.  Growth in loans  receivable is  anticipated to
continue and represents a major part of the Bank's planned asset growth.

         Allowance for loan losses  decreased  $3,207 or 0.1% from $2,177,009 as
of June 30, 1997, to $2,173,802 as of December 31, 1997. The allowance decreased
due to  charge-offs  in excess of recoveries  for the period.  The allowance for
loan  losses as of December  31,  1997 and June 30,  1997 was 1.3%,  and 1.4% of
total loans outstanding.  As of December 31, 1997, the allowance for loan losses
was 237.1% of loans past due 90 days or more versus 262.8% as of June 30, 1997.

         Fair value of foreclosed assets held-for-sale  increased $278,000, from
$210,155 as of June 30, 1997 to $488,155 as of December 31, 1997. The properties
in this  category  include  a duplex  acquired  in July  1996,  a single  family
residence acquired in June 1997, a four-plex and a six-plex acquired in November
1997, and two automobiles  acquired in November 1997.  Management  believes that
these assets be sold with no further loss to the Bank.


                                       10

<PAGE>



                        GUARANTY FEDERAL BANCSHARES, INC

Financial Condition (continued)
-------------------------------

         Premises and equipment increased $1,271,437,  or 20.3%, from $6,267,157
as of June 30, 1997, to  $7,538,594  as of December 31, 1997.  The Bank opened a
new branch office in the southern  section of Springfield in December 1997. This
branch is  located  on a site of land  purchased  by the MHC,  and  subsequently
transferred  to the  Company  in  connection  with  its Plan of  Conversion  and
Reorganization.  The land was  transferred  at a fair value of  $1,228,798.  The
branch office is currently  housed in a modular  building  which is leased for a
two year period.  During the two year lease, the Bank intends to examine whether
to  extend  the lease of the  modular  office,  or  commence  construction  of a
permanent branch office facility.

         Deposits decreased $7,645,139 or 5.1%, from $151,246,482 as of June 30,
1997,  to  $143,601,343  as of  December  31,  1997.  For the six months  ending
December 31, 1997,  checking and passbook accounts  increased by $4,871,281,  or
17.0% while  certificates of deposits  decreased by $12,516,420,  or 10.2%.  The
majority of this  decrease can be  attributed  to the  management's  decision to
allow high cost  certificate  of deposit  accounts to run off and replace  these
funds with FHLB advances at an overall  lower cost.  In addition,  approximately
$1.5  million  was  withdrawn  from  accounts  to  purchase  stock in the recent
offering.

         FHLB advances  decreased to $3,019,918 or 16.6%, from $18,150,844 as of
June 30, 1997 to  $15,130,926  as of  December  31,  1997.  There was a total of
$18,000,000 in FHLB advances which were paid of with the proceeds from the stock
conversion.  As of  December  31,  1997 the Bank had the  ability  to  borrow an
additional $60.0 million from the FHLB.

         Stockholders' equity (including  unrealized  appreciation on securities
available-for-sale,   net  of  tax)  increased  $42,050,423,   or  153.0%,  from
$27,490,155 as of June 30, 1997, to  $69,540,578  as of December 31, 1997.  This
increase  was  primarily  due to the  sale of  $39,963,580  of  common  stock in
connection   with  the  Plan  of  Conversion  and   Reorganization.   Unrealized
appreciation on securities available-for-sale,  net of tax, contributed $455,441
to stockholders'  equity for the quarter. On October 18, 1997 a cash dividend of
$0.22  per  share  was  paid to the  stockholders  of  record  of the Bank as of
September 12, 1997.


                                       11

<PAGE>


                        GUARANTY FEDERAL BANCSHARES, INC

              Results of Operations - Comparison of Three Month and
               Six Month Periods Ended December 31, 1997 and 1996

         Net income for the three months and six months ended  December 31, 1997
was $594,788 and $1,111,291,  as compared to $453,352 and $203,952 for the three
months and six months ended  December 31, 1996 which  represents  an increase in
earnings  of $141,436  or 31.2% for the three  month  period,  and a increase in
earnings  of  $907,339  or 444.9%  for the six month  period.  The  increase  in
earnings for the three month and six month period ending  December 31, 1997, was
primarily  due to increases in net  interest  income and non interest  income as
well as a  decrease  in  premiums  assessed  by the  Federal  Deposit  Insurance
Corporation  ("FDIC") on Savings Association  Insurance Fund ("SAIF") assessable
deposits.  Legislation was signed into law on September 30, 1996,  requiring all
SAIF-insured institutions to pay a one-time special assessment of 65.7 cents for
every $100 of deposits.  This special  assessment  decreased  net income for the
quarter ended September 30, 1996 by approximately $559,000.

Interest Income
---------------

         Total  interest  income  for the  three  months  and six  months  ended
December 31, 1997, increased $526,792 or 14.3% and $968,203 or 13.5% as compared
to the three  months and six months ended  December 31, 1996.  For the six month
period ended  December 31, 1997 the average yield on interest  earning assets of
8.13% remained the same,  while the average balance of interest  earnings assets
increased $24,000,000 over the same period one year ago.

Interest Expense
----------------

         Total  interest  expense  for the three  months  and six  months  ended
December  31,  1996,  increased  $249,692  or 12.1% and  $472,022  or 11.7% when
compared to the three months and six months ended December 31, 1996. For the six
month period  ended  December  31,  1997,  the average cost of interest  bearing
liabilities  decreased  14 basis  points  to 5.11%  while  the  average  balance
increased $23,000,000, when compared to the same period in 1996.

Net Interest Income
-------------------

         Net interest  income for the three months and six months ended December
31, 1997, increased $277,100,  or 17.2% and $496,181,  or 15.8% when compared to
the same  period in 1996.  This is due  primarily  to a  increase  in the spread
between the average yield on interest  earning  assets,  and the average cost of
interest bearing liabilities.  This spread increased by 14 basis points to 3.02%
for the six month period  ending  December 31, 1997,  when  compared to the same
period in 1996.  In  addition,  average  interest  earning  assets  increased by
$1,000,000 more than average interest bearing  liabilities did for the six month
period ended December 31, 1997.

                                       12

<PAGE>

                        GUARANTY FEDERAL BANCSHARES, INC

Provision for Loan Losses
-------------------------

         Based  primarily  on  the  continued   growth  of  the  loan  portfolio
management  decided to increase the  allowance  for loan loss reserve  through a
provision  for loan loss of $30,000  and  $63,352  for the three  months and six
months ended  December 31, 1997,  respectively.  There was no provision for loan
losses recorded for the three months and six months ended December 31, 1996. The
Bank will  continue  to monitor  its  allowance  for loan losses and make future
additions  based  on  economic  and  regulatory  conditions.  Although  the Bank
maintains  its  allowance  for loan losses at a level which it  considers  to be
sufficient  to provide for  potential  losses,  there can be no  assurance  that
future 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 loss provisions.

Noninterest Income
------------------

         Noninterest  income  increased  $150,984,  or 171.2% and  $252,844,  or
127.8%  for the three  months and six  months  ended  December  31,  1997,  when
compared  to the three  months and six  months  ended  December  31,  1996.  The
increase was primarily due to a increase in checking  account  service  charges,
which  increased  $100,101 or 186.7% and $178,808 or 186.6% for the three months
and six months  ended  December 31,  1997,  when  compared to the same period in
1996.

Noninterest Expense
-------------------

         Noninterest expense increased  $156,135,  or 15.9% for the three months
ended  December 31, 1997,  and  decreased  $783,702,  or 25.8% for the six month
period ending December 31, 1997 when compared to the three months and six months
ended  December 31, 1996.  The primary  cause for the decrease for the six month
period  ended  December  31,  1997 was the  one-time  assessment  by the Federal
Deposit  Insurance  Corporation  ("FDIC") on all SAIF assessable  deposits as of
March 31, 1995. This assessment resulted in a $931,989 addition to SAIF premiums
during the six month period ended December 31, 1996. The total SAIF premiums for
the six month period ending  December 31, 1996, was  $1,089,693,  as compared to
$46,952 for the six month period ending December 31, 1997.

           Advertising expense increased $52,146, or 105.2% for the three months
ended  December 31, 1996,  and increased  $96,122,  or 103.8% for the six months
ended  December 31, 1997,  when compared to the same period in 1996. The primary
reason for this  increase  was the  additional  expense in  connection  with the
marketing  campaign designed to attract checking accounts which was initiated in
early 1997.

                                       13

<PAGE>


                        GUARANTY FEDERAL BANCSHARES, INC

Noninterest Expense, continued
------------------------------

         The  ESOP  was  implemented  at the  time of the  stock  conversion  at
December 30, 1997. In addition, the Company intends to adopt a stock option plan
and a restricted  stock plan if  stockholder  approvals are  received.  The cost
associated with these benefit plans as well as costs associated with the Company
being a public  company are expected to increase  noninterest  expense in future
periods.

Provision for Income Taxes
--------------------------

         There was a $100,513 and $562,036  increase in the provision for income
taxes for the three months and six months ended  December 31, 1997,  as compared
to the same  period in 1996.  The large  increase  for the  three  months  ended
December  31, 1997,  was  primarily  due to the increase in pre-tax  income when
compared  to the same  period in 1996.  The  increase  for the six months  ended
December 31, 1997,  was primarily  due to the increase in pre-tax  income due to
the FDIC special assessment made September 30, 1996.

Nonperforming Assets
--------------------

         The allowance for loan losses is calculated based upon an evaluation of
pertinent  factors  underlying  the  various  types and  quality  of the  loans.
Management  considers  such  factors  as the  repayment  status  of a loan,  the
estimated net  realizable  value of the  underlying  collateral,  the borrower's
intent and ability to repay the loan,  local economic  conditions and the Bank's
historical loss ratios.  The Bank's allowance for loan losses as of December 31,
1997, was  $2,173,802 or 1.3% of loans  receivable.  Total assets  classified as
substandard,  doubtful, or loss as of December 31, 1997, were $1,902,414 or 0.8%
of total assets.  Management has considered  nonperforming  and total classified
assets in evaluating the adequacy of the Bank's allowance for loan losses.

                                       14

<PAGE>


                        
                       GUARANTY FEDERAL BANCSHARES, INC.

Nonperforming Assets, continued
-------------------------------

         The ratio of  nonperforming  assets to total  assets is another  useful
tool in  evaluating  exposure to credit risk.  Nonperforming  assets of the Bank
include  nonperforming  loans  (nonaccruing  loans) and  assets  which have been
acquired as a result of foreclosure or deed-in-lieu of foreclosure.

<TABLE>

                                                  12/31/97         6/30/97              12/31/96
                                                  --------         -------              --------
                                                            (Dollars In Thousands)

<S>                                              <C>              <C>                 <C>       
   Nonperforming loans                           $    1,392       $    1,257          $      172
   Real estate acquired in
   settlement of loans                                  488              210                 453
                                                 ----------       ----------          ----------

   Total Nonperforming Assets                    $    1,808       $    1,467          $      625
                                                 ==========       ==========          ==========
   Total Nonperforming Assets
   as a Percentage of Total
   Assets                                              0.81%            0.74%               0.33%
   Allowance for loan losses                        $ 2,173          $ 2,177             $ 2,078
   Allowance for loan losses as a
         Percentage of average loans, net              1.36%            1.49%               1.41%

</TABLE>

Liquidity and Capital Resources
-------------------------------

         The  Bank's  primary  sources  of funds  are  deposits,  principal  and
interest  payments on loans,  and  securities  and extensions of credit from the
Federal  Home  Loan  Bank of Des  Moines.  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.   Office  of  Thrift  Supervision
regulations  require the Bank to maintain  cash and eligible  investments  in an
amount equal to at least 5% of customer  accounts and  short-term  borrowings to
assure its ability to meet demands for  withdrawals  and repayment of short-term
borrowings. As of December 31, 1997, the Bank's liquidity ratio was 28.7%, which
exceeded the minimum regulatory requirement.

         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.  At December 31, 1997,
the Bank had approximately $2,900,000 in commitments to originate mortgage loans
and $11,438,000 in loans-in-process on mortgage loans. These commitments will be
funded  through  existing  cash  balances,  cash flow from  operations  and,  if
required  FHLB advances . Management  believes that  anticipated  cash flows and
deposit growth will be adequate to meet the Bank's liquidity needs.


                                       15
<PAGE>




                        GUARANTY FEDERAL BANCSHARES, INC.

                                     PART II

Item 1.  Legal Proceedings
--------------------------

         None.

Item 2.  Changes in Securities and use of proceeds
--------------------------------------------------

         The registrant  filed a registration  statement on Form S-1 (Commission
file no.  333-36141)  that was  declared  effective  on November  12,  1997.  On
December 30, 1997,  Guaranty Federal  Bancshares,  Inc. completed the conversion
and  reorganization  of  Guaranty  Federal  Savings  Bank and its former  mutual
holding  company  by  selling  4,340,812  shares  of  common  stock  to  certain
depositors  of the Bank and a benefit  plan of the Bank at a price of $10.00 per
share. In addition  approximately  1,880,710  shares of common stock of the Bank
held by public  stockholders were exchanged for common stock of Guaranty Federal
Bancshares,  Inc. at a ratio of 1.931  shares of common stock of the Company for
each share of the Bank. The only class of securities  registered pursuant to the
offering was common stock,  par value $0.10 per share,  and all 6,221,522 shares
registered were issued.

         The  Offering  commenced  on November  21, 1997 and was  terminated  on
December 16, 1997,  after the sale of all of the Common stock  registered  under
the  Offering  at $10.00  per  share.  Friedman,  Billings,  Ramsey & Co.,  Inc.
assisted the registrant as the sole underwriter on a best effort basis.

         Of the 6,221,522  shares  registered and issued:  (1) 3,996,358  shares
were sold (at $10.00 per share),  resulting  in cash  proceeds to the Company of
$39,963,580,  (2) 344,454 shares were sold (at $10.00 per share) to the trust of
the  employee  stock  ownership  plan of the Bank (the  "ESOP")  and funded by a
direct  loan (with  proceeds  used from the  offering)  from the  Company to the
trust,  an  affiliate  of the  Company,  in the  amount  of  $3,444,540  and (3)
1,880,710  shares (minus a certain de minimum  number of  fractional  shares for
which cash will be paid)  issued in exchange  for the common  stock of the Bank.
The  expenses  for the  offering  were  $740,000  resulting  in net  proceeds of
$42,668,000  ($43,408,000  minus  $740,000)  of which  $19,981,790  was directly
contributed to the Bank,  and  $22,686,030  was retained by the Company.  Of the
$740,000 in expenses,  $150,000 in underwriting  commissions and $40,000 in fees
were paid to Friedman, Billings, Ramsey & Co., Inc.

         There has been no material  change in the use of the net proceeds  from
the  disclosures  set  forth  in the  prospectus  filed in  connection  with the
Offering.  The  Company  used a portion of the  proceeds it retained to loan the
Company's  Employee Stock Ownership Plan approximately $3.4 million at a rate of
8.5%,  to be repaid over 15 years.  The Bank has used the  $19,981,790  proceeds
contributed by the Company to repay outstanding FHLB advances.  The remainder of
the  proceeds  have  been  loaned  to the  Bank to  fund  its  general  business
operations.

         The only direct or indirect  payments to directors,  officers,  general
partners of the  Company or their  associates,  to persons  owning 10 percent or
more of any class of equity securities of the Company,  and to affiliates of the
Company were: (1) the  contribution  of the Company to the Bank, (2) the loan to
the Bank, and (3) the loan to the trust of the ESOP. The only direct or indirect
payment to others was the  $740,000 in expenses.  The $740,000 in expenses,  the
contribution  by the  Company to the Bank and the amount lent to the Bank by the
Company are reasonable estimates.

                                       16

<PAGE>

                        GUARANTY FEDERAL BANCSHARES, INC.

                                     PART II

Item 3.  Defaults Upon Senior Securities
----------------------------------------

         Not applicable.

Item 4.  Submission of Matters to Vote of Security Holders
----------------------------------------------------------

         At the annual meeting of  stockholders  of the  subsidiary  bank of the
registrant, held on October 18, 1997, the stockholders elected Gary Lipscomb and
George Hall to three-year  terms as director of the Savings Bank,  while Jack L.
Barham,  Wayne V. Barnes and Ivy Rogers and James E. Haseltine continue to serve
as  directors.  Also at that  meeting,  Baird,  Kurtz,  & Dobson was ratified as
Independent Certified Public Accountant.  These same entities serve in identical
capacities with the registrant.

         At a special  meeting,  held  December 19, 1997,  Members of the Mutual
Holding Company and the Public  stockholders' of the Bank,  approved the Plan of
Conversion and Reorganization.

Item 5.  Other Information
--------------------------

         At the December 17, 1997 board meeting,  Gerald L. Bos was appointed to
the Board of Directors, for a three-year term.

Item 6.  Exhibits and Reports on Form 8-K
-----------------------------------------

         a)       Exhibits

                  None.

         b)       Reports on Form 8-K

                  None.

                                       17
<PAGE>




                        GUARANTY FEDERAL BANCSHARES, INC.

                                   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.


              Signatures                                        Date
              ----------                                        ----

        \S\  James E. Haseltine                               2/10/98
     ------------------------------------------------      --------------
        James E. Haseltine
        President and Chief Executive Officer
        (Duly authorized officer)



        \S\  Bruce Winston                                     2/10/98
     -----------------------------------------------      ----------------
        Bruce Winston
        Vice President and Chief Financial Officer
        (Principal Financial and Accounting Officer)