Note 13 - Benefit Plans

12 Months Ended

Dec. 31, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

NOTE 13:                    EMPLOYEE BENEFIT PLANS

Equity Plans

On May 26, 2010, the Company’s stockholders voted to approve the Guaranty Federal Bancshares, Inc. 2010 Equity Plan (the ”Plan”).  The Plan provides for the grant of up to 200,000 shares of Common Stock under equity awards including stock options, stock awards, restricted stock, stock appreciation rights, performance units, or other equity-based awards payable in cash or stock to key employees and directors of the Company and the Bank.  As of December 31, 2012, non-incentive stock options for 25,000 shares and restricted stock for 62,785 shares of Common Stock have been granted under the Plan.

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

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

	Number of shares
	Incentive Stock Option			Non-Incentive Stock Option			Weighted Average Exercise Price
Balance outstanding as of January 1, 2010		148,750			136,704		$	19.40
Granted		46,000			45,000			5.24
Exercised		-			-			-
Forfeited		-			(10,875	)		10.50
Balance outstanding as of December 31, 2010		194,750			170,829			16.14
Granted		-			-			-
Exercised		-			-			-
Forfeited		(10,250	)		(3,829	)		17.51
Balance outstanding as of December 31, 2011		184,500			167,000			16.09
Granted		-			-
Exercised		(2,003	)		-			6.18
Forfeited		(7,997	)		-			6.18
Balance outstanding as of December 31, 2012		174,500			167,000		$	16.38
Options exercisable as of December 31, 2012		130,900			131,000		$	18.95

As of December 31, 2012, total outstanding stock options of 341,500 had a remaining contractual life of 3.55 years.

The total intrinsic value of outstanding stock options was $0 at both December 31, 2012 and 2011 and the total intrinsic value of outstanding exercisable stock options was $0 at both December 31, 2012 and 2011.   The total fair value of share awards vested was $306,950 and $237,525 during 2012 and 2011, respectively.

There were no options granted during the years ended December 31, 2012 and 2011.  The fair value of each option granted is estimated on the date of the grant using the Black-Scholes pricing model with the following weighted-average assumptions for 2010.

	December 31, 2010
Dividends per share	$	-
Risk-free interest rate		2.15	%
Expected life of options (years)	5
Weighted-average volatility		42.62	%
Weighted-average fair value of options granted during year	$	2.04

In January 2012 and 2011, the Company granted restricted stock to directors that was fully vested and thus, expensed in full during the year ended December 31, 2012 and 2011, respectively.  The amount expensed of $110,009 and $100,017 for 2012 and 2011, respectively, represents 18,520 and 16,952 shares of common stock at a market price of $5.94 and $5.90, respectively, at the date of grant.

During 2012, the Company granted 27,313 shares of restricted stock to officers that have a cliff vesting at the end of two years, except for the CEO, who has a three year cliff vesting.  The expense is being recognized over the applicable vesting period.  The amount expensed during 2012 was $79,330.

Total stock-based compensation expense is comprised of expense for restricted stock awards and stock options.  Expense recognized for the years ended December 31, 2012, 2011 and 2010 was $253,017, $186,654 and $109,386, respectively.  As of December 31, 2012, there was $82,892 of unrecognized compensation expense related to nonvested stock options and $119,951 of unrecognized compensation expense related to nonvested restricted stock awards, which will be recognized over the remaining vesting periods.

Employee Stock Ownership Plan

The Bank sponsors an internally-leveraged Employee Stock Ownership Plan (ESOP). All employees are eligible to participate after they attain age twenty-one and complete twelve consecutive months of service during which they work at least 1,000 hours. The ESOP borrowed $3,444,540 from the Company and purchased 344,454 shares of the common stock of the Company. The ESOP debt is secured by shares of the Company. The loan will be repaid from contributions to the ESOP as approved annually by the Bank’s Board of Directors. As the debt is repaid, shares are released from collateral and allocated to employees’ accounts. The shares pledged as collateral are reported as unearned ESOP shares in the consolidated balance sheets. When shares are committed for release, the shares become outstanding for earnings per share computations. Dividends on allocated ESOP shares are recorded as a reduction of retained earnings and may be paid directly to participants or credited to their account; dividends are not paid on unallocated ESOP shares. Compensation expense is recognized ratably based on the average fair value of shares committed to be released. Compensation expense attributed to the ESOP was $153,848, $126,737 and $100,014 for the years ended December 31, 2012, 2011 and 2010, respectively.

The following is a summary of ESOP shares as of December 31, 2012:

Beginning ESOP shares	344,454
Released shares	(321,836	)
Shares committed for release	(22,618	)
Unreleased shares	-
Fair value of unreleased shares	-

Effective December 31, 2012, the Company’s Board of Directors approved to terminate the ESOP after all shares had been allocated to employees.  Subject to approval from the Internal Revenue Service, the plan will be terminated, all employee accounts will become fully vested and the plan shares will be distributed.