Guaranty Bancshares : Q2 2024

Guaranty Bancshares, Inc. Reports Second Quarter 2024 Financial Results

Company Release - 7/15/2024

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ADDISON, Texas--(BUSINESS WIRE)-- Guaranty Bancshares, Inc. (NYSE: GNTY) (the "Company"), the parent company of Guaranty Bank & Trust, N.A. (the "Bank"), today reported financial results for the fiscal quarter ended June 30, 2024. The Company's net income available to common shareholders was $7.4 million, or $0.65 per basic share, for the quarter ended June 30, 2024, compared to $6.7 million, or $0.58 per basic share, for the quarter ended March 31, 2024 and $9.6 million, or $0.82 per basic share, for the quarter ended June 30, 2023. Return on average assets and average equity for the second quarter of 2024 were 0.95% and 9.91%, respectively, compared to 0.85% and 8.93%, respectively, for the first quarter of 2024 and 1.17% and 12.87%, respectively, for the second quarter of 2023. The increase in earnings during the second quarter of 2024 compared to the first quarter of 2024 was primarily due to the $1.2 million reversal of the provision for credit losses during the second quarter. The decrease in earnings in the second quarter of 2024 compared to the second quarter of 2023 was primarily due to a decrease in noninterest income in the current quarter compared to the prior year quarter.

"Second quarter 2024 results were good and consistent with our expectations. Net interest margin continued to improve from 3.16% in the first quarter to 3.26% in the second quarter. Deposit balances have remained stable as we've strategically shrunk the balance sheet and repaid an additional $30.0 million in FHLB advances during the quarter, as well as purchased some higher-yielding investment securities. Credit quality overall remains manageable with low past-due and charge-off percentages. That, along with lower loan balances, resulted in a $1.2 million reverse provision for credit losses during the quarter. However, we are closely monitoring and working with a handful of one-off borrowers that are experiencing financial difficulties and have adjusted their risk ratings and loss reserve amounts accordingly. We believe our balance sheet is strong and positioned to go on the offensive as the economy improves and the Bank continues to provide consistent earnings results for our shareholders," said Ty Abston, the Company's Chairman and Chief Executive Officer.

QUARTERLY HIGHLIGHTS

• Growing Earnings and Improving NIM. Net interest margin, on a fully taxable equivalent basis, continued to improve in the second quarter, increasing to 3.26%, compared to 3.16% in the first quarter and 3.19% in the prior year quarter. Earnings also improved compared to the prior quarter, due to the improved net interest margin, reverse credit loss provisions, and lower employee and compensation expenses. The net interest improvements resulted primarily from a slow-down in deposit cost increases, while earning assets have continued to reprice upward.
  
  
• Good Asset Quality. We have experienced some risk rating downgrades as we work with certain borrowers that are experiencing cash flow and other challenges. However, we believe overall credit quality remains strong and the expected losses on deteriorating credits are low primarily due to the Bank's equity position and/or strong guarantor support. Nonperforming assets as a percentage of total assets were 0.71% at June 30, 2024, compared to 0.68% at March 31, 2024 and 0.11% at June 30, 2023. Net charge-offs (annualized) to average loans were 0.01% for the quarter ended June 30, 2024, compared to 0.02% for the quarter ended March 31, 2024, and 0.03% for the quarter ended June 30, 2023.
  
  There was a reverse provision to the allowance for credit losses of $1.2 million during the second quarter, in addition to the $250,000 reverse provision in the first quarter. Changes to historical and qualitative factors have been minimal during the first half of 2024, therefore the decrease in the allowance for credit losses is due primarily to the decreases in outstanding loan balances of $107.6 million, or 4.6%, since January 1, 2024, which were partially offset by an increase in special mention and substandard loans during the same period as we continue to work with some stressed borrowers.
  
  Nonperforming assets consist of both nonaccrual loans and other real estate owned (ORE). Nonaccrual loans represent 0.28% of total outstanding loan balances as of June 30, 2024 and consist primarily of smaller dollar consumer and small business loans. In the first quarter, we foreclosed on a multi-purpose commercial real estate loan in a vibrant location in the South Austin area and recorded other real estate owned of $14.9 million. As the property was prepared for sale and marketing in the second quarter, management applied a more conservative capitalization rate to estimate current value and applied a $900,000 valuation allowance during the quarter, which is included in other noninterest income on the income statement and explains the quarter-over-quarter decrease in that balance. During the second quarter, we also foreclosed on a single-family residential property with a fair value of $1.2 million. At this time, we do not expect additional valuation allowances or losses on the ORE.
  
  Commercial real estate (CRE) loans, particularly office related loans, have received increased scrutiny in recent months. As of June 30, 2024, our CRE loans and real estate C&D loans represent 40.6% and 10.4% of the total loan portfolio, respectively, and office-related loans represent 5.5% of the total loan portfolio with an average balance of $551,000.
  
  
• Granular and Consistent Core Deposit Base. As of June 30, 2024, we have 89,370 total deposit accounts with an average account balance of $29,385. We have a historically reliable core deposit base, with strong and trusted banking relationships. Total deposits decreased slightly by $1.7 million during the second quarter. DDA balances decreased $11.1 million, savings and MMDA balances decreased $21.9 million while time deposits increased $31.3 million. Excluding public funds and Bank-owned accounts, our uninsured deposits as of June 30, 2024 were 25.7% of total deposits.
  
  Interest rates paid on deposits during the quarter stabilized with minimal increases. Despite the decrease in DDA during the quarter, noninterest-bearing deposits still represent 31.2% of total deposits. Our cost of interest-bearing deposits increased seven basis points during the quarter from 3.25% in the prior quarter to 3.32%. This increase was primarily due to renewals of maturing certificates of deposit into new CDs paying higher rates and the shift from noninterest-bearing balances to interest-bearing. Our cost of total deposits for the second quarter of 2024 increased five basis points from 2.23% in the prior quarter to 2.28%^† .
  
  
• Healthy Capital and Liquidity. Our capital and liquidity ratios, as well as contingent liquidity sources, remain very healthy. During the second quarter of 2024, we repurchased 138,427 shares of our common stock, or 1.21% of our average shares outstanding during the period, at an average price of $29.56 per share. Our liquidity ratio, calculated as cash and cash equivalents and unpledged investments divided by total liabilities, was 13.6% as of June 30, 2024, compared to 12.9% as of June 30, 2023. Our total available contingent liquidity, net of current outstanding borrowings, was $1.3 billion, consisting of FHLB, FRB and correspondent bank fed funds and revolving lines of credit. Finally, our total equity to average quarterly assets as of June 30, 2024 was 9.9%. If we had to recognize our entire net unrealized losses on both AFS and HTM securities, our total equity to average assets ratio would be 9.1%^† , which we believe represents a strong capital level under regulatory requirements.

† Non-GAAP financial metric. Calculations of this metric and reconciliations to GAAP are included in the schedules accompanying this release.

RESULTS OF OPERATIONS

Net interest income, before the provision for credit losses, in the second quarter of 2024 and 2023 was $23.9 million and $24.7 million, respectively, a decrease of $823,000, or 3.3%. The decrease in net interest income resulted from an increase in interest expense of $2.8 million, or 20.0%, compared to the prior year quarter, which was partially offset by an increase in interest income of $2.0 million, or 5.1%, from the same quarter in the prior year. The increases in both interest income and expense resulted primarily from higher rates during the period. Interest expense was also somewhat impacted by a shift from noninterest-bearing to interest-bearing deposit accounts, which resulted in increased expense in the second quarter of 2024 compared to the prior year quarter. Our noninterest-bearing deposits to total deposits were 31.2% and 35.2% as of June 30, 2024 and 2023, respectively.

Net interest margin, on a fully taxable equivalent basis, for the second quarter of 2024 and 2023 was 3.26% and 3.19%, respectively. Net interest margin, on a fully taxable equivalent basis, increased seven basis points primarily due to increases in interest earned on loans and available for sale securities during the period. The cost of interest-bearing liabilities increased 61 basis points from the prior year quarter, while interest-earning asset yields increased 57 basis points. The increase in the cost of interest-bearing liabilities was due primarily to an increase in the cost of interest-bearing deposits from 2.41% to 3.32%, a change of 91 basis points, in the second quarter of 2024 compared to the same period in 2023. The increases in cost were partially offset by increases in yield on the loan portfolio from 5.70% to 6.29%, or 59 basis points, as well as 97 and 14 basis point increases in yield on AFS and HTM securities, respectively. Although the cost of interest-bearing liabilities have repriced more quickly during this period, the weighted average yield on $73.5 million in new loans originated in the second quarter was 8.26%.

Net interest income, before the provision for credit losses, increased $293,000, or 1.2%, from $23.6 million in the first quarter of 2024 to $23.9 million in the second quarter of 2024. The increase in net interest income resulted primarily from an decrease in interest expense of $332,000, or 1.9%, compared to a decrease in interest income of only $39,000, or 0.1%.

Net interest margin, on a fully taxable equivalent basis, increased from 3.16% for the first quarter of 2024 to 3.26% for the second quarter of 2024, an increase of 10 basis points. The increase in net interest margin, on a fully taxable equivalent basis, was primarily due to an increase in loan yields from 6.21% for the first quarter of 2024 to 6.29% for the second quarter of 2024, a change of eight basis points, and a decrease in total interest-earning assets during the second quarter of 2024. This increase was partially offset by an increase in the cost of interest-bearing deposits from 3.25% in the first quarter of 2024 to 3.32% in the second quarter of 2024, a change of seven basis points.

We recorded a reverse provision for credit losses of $1.2 million and $250,000 during the second and first quarters of 2024, respectively. Our gross loan balances decreased by $50.3 million during the second quarter and by $107.6 million during the first half of 2024, while overall credit quality trends and economic forecast assumptions remained relatively stable. As of June 30, 2024 and December 31, 2023, our allowance for credit losses as a percentage of total loans was 1.32% and 1.33%, respectively.

Noninterest income decreased $3.3 million, or 41.6%, in the second quarter of 2024 to $4.6 million, compared to $7.9 million for the second quarter of 2023. The decrease from the same quarter in 2023 was primarily due to a one-time gain on the sale of nonmarketable correspondent bank stock of $2.8 million in the prior year quarter and a $900,000 ORE valuation allowance during the second quarter of 2024 (described further in the Quarterly Highlights above).

Noninterest expense increased $131,000, or 0.6%, in the second quarter of 2024 to $20.6 million, compared to $20.5 million for the second quarter of 2023. The increase in noninterest expense in the second quarter of 2024 was driven primarily by an increase in other noninterest expense of $393,000, or 32.5%, due to $222,000 in ORE expenses during the current quarter, as well as a $123,000 increase in losses sustained due to fraudulent check activity during the current quarter. Additionally, the Bank saw an increase in software and technology expense of $122,000, or 8.0%. These were partially offset by a $216,000, or 1.8%, decrease in employee compensation and benefits and a $144,000, or 14.6%, decrease in legal and professional fees compared to the second quarter of 2023.

Noninterest income in the second quarter of 2024 decreased by $659,000, or 12.5%, from $5.3 million in the first quarter of 2024. The decrease was primarily due to a decrease in other noninterest income of $1.1 million, or 94.3%, primarily the result of a $900,000 ORE valuation allowance during the second quarter of 2024. Additionally, there was $499,000 in prior write-down recoveries on receivables related to SBA loans during the first quarter of 2024 that were not present in the second quarter of 2024.

Noninterest expense decreased $90,000, or 0.4%, in the second quarter of 2024, from $20.7 million for the quarter ended March 31, 2024. The decrease resulted primarily from a $714,000, or 5.7%, decrease in employee compensation and benefits. There was a $287,000 higher expense in the first quarter related to our executive compensation program, which is primarily funded by the Company during the first quarter of each year. Payroll tax-related expense decreased by $192,000 from the first quarter to the second quarter due to bonus-related taxes paid during the first quarter. Bonus expense was decreased in the second quarter compared to the first quarter by $125,000 as production-related incentives are expected to be lower than originally accrued for. These decreases were partially offset by a $177,000, or 6.4%, increase in occupancy expenses, a $176,000, or 28.9%, increase in ATM and debit card expense and a $164,000, or 11.4%, increase in other noninterest expense during the second quarter of 2024 compared to the first quarter of 2024.

The Company's efficiency ratio in the second quarter of 2024 was 72.34%, compared to 62.84% in the prior year quarter and 71.74% in the first quarter of 2024.

FINANCIAL CONDITION

Consolidated assets for the Company totaled $3.08 billion at June 30, 2024, compared to $3.13 billion at March 31, 2024 and $3.21 billion at June 30, 2023.

Gross loans decreased by $50.3 million, or 2.2%, during the quarter resulting in a gross loan balance of $2.21 billion at June 30, 2024, compared to $2.27 billion at March 31, 2024. Our decline in loans resulted primarily from tighter underwriting due to the current economic environment and from lower demand from potential borrowers.

Gross loans decreased $118.9 million, or 5.1%, from $2.33 billion at June 30, 2023. The decrease in gross loans during the second quarter of 2024 compared to the second quarter of 2023 resulted from tightened credit underwriting standards and loan terms, along with fewer borrower requests in response to higher interest rates and project costs.

Total deposits decreased by $1.7 million, or 0.1%, to $2.63 billion at June 30, 2024, compared to $2.63 billion at March 31, 2024, and increased $23.3 million, or 0.9%, from $2.60 billion at June 30, 2023. The decrease in deposits during the second quarter of 2024 compared to the first quarter of 2024 was the result of a decrease in noninterest-bearing deposits of $8.4 million, offset by an increase in interest-bearing deposits of $6.7 million. The increase in deposits during the current quarter compared to the prior year quarter resulted primarily from an increase in interest-bearing deposits of $118.4 million, partially offset by a decrease in noninterest-bearing deposits of $95.0 million.

Nonperforming assets as a percentage of total loans were 0.98% at June 30, 2024, compared to 0.94% at March 31, 2024 and 0.15% at June 30, 2023. Nonperforming assets as a percentage of total assets were 0.71% at June 30, 2024, compared to 0.68% at March 31, 2024, and 0.11% at June 30, 2023. The Bank's nonperforming assets consist primarily of other real estate owned and nonaccrual loans. The increase in nonperforming assets compared to the prior year quarter was primarily due to the increase in other real estate owned, which is described in the Quarterly Highlights above.

Total equity was $308.6 million at June 30, 2024, compared to $305.9 million at March 31, 2024 and $297.4 million at June 30, 2023. The increase in total equity compared to the prior quarter and prior year quarter resulted primarily from net income of $7.4 million during the second quarter and a positive shift in our net unrealized losses on securities compared to the prior periods. These increases were somewhat offset by the payment of dividends of $2.7 million during the second quarter of 2024, and a higher volume of stock share repurchases of $4.1 million during the second quarter of 2024 compared to prior quarters.

		As of
		2024			2023
(dollars in thousands)		June 30			March 31			December 31			September 30			June 30
ASSETS
Cash and due from banks		$	45,016			$	43,872			$	47,744			$	47,922			$	47,663
Federal funds sold			40,475				24,300				36,575				73,275				44,950
Interest-bearing deposits			4,721				4,921				5,205				8,980				4,738
Total cash and cash equivalents			90,212				73,093				89,524				130,177				97,351
Securities available for sale			242,662				228,787				196,195				178,644				166,596
Securities held to maturity			347,992				363,963				404,208				408,308				437,292
Loans held for sale			871				874				976				2,506				795
Loans, net			2,185,247				2,234,012				2,290,881				2,286,163				2,300,882
Accrued interest receivable			12,397				11,747				13,143				11,307				11,110
Premises and equipment, net			57,475				56,921				57,018				56,712				56,151
Other real estate owned			15,184				14,900				-				-				-
Cash surrender value of life insurance			42,369				42,119				42,348				42,096				41,830
Core deposit intangible, net			1,206				1,312				1,418				1,524				1,633
Goodwill			32,160				32,160				32,160				32,160				32,160
Other assets			53,842				67,550				56,920				80,816				60,396
Total assets		$	3,081,617			$	3,127,438			$	3,184,791			$	3,230,413			$	3,206,196
LIABILITIES AND EQUITY
Deposits
Noninterest-bearing		$	820,430			$	828,861			$	852,957			$	903,391			$	915,462
Interest-bearing			1,805,732				1,798,983				1,780,289				1,754,902				1,687,355
Total deposits			2,626,162				2,627,844				2,633,246				2,658,293				2,602,817
Securities sold under agreements to repurchase			25,173				39,058				25,172				19,366				20,532
Accrued interest and other liabilities			32,860				33,807				32,242				31,218				30,701
Line of credit			-				-				4,500				2,000				12,000
Federal Home Loan Bank advances			45,000				75,000				140,000				175,000				195,000
Subordinated debentures			43,852				45,819				45,785				47,752				47,719
Total liabilities			2,773,047				2,821,528				2,880,945				2,933,629				2,908,769
Equity attributable to Guaranty Bancshares, Inc.			308,043				305,371				303,300				296,226				296,862
Noncontrolling interest			527				539				546				558				565
Total equity			308,570				305,910				303,846				296,784				297,427
Total liabilities and equity		$	3,081,617			$	3,127,438			$	3,184,791			$	3,230,413			$	3,206,196

		Quarter Ended
		2024			2023
(dollars in thousands, except per share data)		June 30			March 31			December 31			September 30			June 30
STATEMENTS OF EARNINGS
Interest income		$	40,713			$	40,752			$	40,796			$	39,818			$	38,734
Interest expense			16,833				17,165				16,983				16,516				14,031
Net interest income			23,880				23,587				23,813				23,302				24,703
Reversal of provision for credit losses			(1,200	)			(250	)			-				-				-
Net interest income after provision for credit losses			25,080				23,837				23,813				23,302				24,703
Noninterest income			4,599				5,258				4,796				4,939				7,873
Noninterest expense			20,602				20,692				21,402				20,514				20,471
Income before income taxes			9,077				8,403				7,207				7,727				12,105
Income tax provision			1,654				1,722				1,341				1,437				2,529
Net earnings		$	7,423			$	6,681			$	5,866			$	6,290			$	9,576
Net loss attributable to noncontrolling interest			12				7				12				7				5
Net earnings attributable to Guaranty Bancshares, Inc.		$	7,435			$	6,688			$	5,878			$	6,297			$	9,581
PER COMMON SHARE DATA
Earnings per common share, basic		$	0.65			$	0.58			$	0.51			$	0.54			$	0.82
Earnings per common share, diluted			0.65				0.58				0.51				0.54				0.81
Cash dividends per common share			0.24				0.24				0.23				0.23				0.23
Book value per common share - end of quarter			26.98				26.47				26.28				25.64				25.58
Tangible book value per common share - end of quarter(1)			24.06				23.57				23.37				22.72				22.67
Common shares outstanding - end of quarter(2)			11,417,270				11,534,960				11,540,644				11,554,094				11,603,167
Weighted-average common shares outstanding, basic			11,483,091				11,539,167				11,536,878				11,568,897				11,735,475
Weighted-average common shares outstanding, diluted			11,525,504				11,598,239				11,589,165				11,619,342				11,756,512
PERFORMANCE RATIOS
Return on average assets (annualized)			0.95	%			0.85	%			0.73	%			0.78	%			1.17	%
Return on average equity (annualized)			9.91				8.93				7.93				8.43				12.87
Net interest margin, fully taxable equivalent (annualized)(3)			3.26				3.16				3.11				3.02				3.19
Efficiency ratio(4)			72.34				71.74				74.81				72.64				62.84
(1) See Non-GAAP Reconciling Tables.
(2) Excludes the dilutive effect, if any, of shares of common stock issuable upon exercise of outstanding stock options.
(3) Net interest margin on a fully taxable equivalent basis is equal to net interest income adjusted for nontaxable income divided by average interest-earning assets, annualized, using a marginal tax rate of 21%.
(4) The efficiency ratio was calculated by dividing total noninterest expense by net interest income plus noninterest income, excluding securities gains or losses. Taxes are not part of this calculation.

		As of
		2024			2023
(dollars in thousands)		June 30			March 31			December 31			September 30			June 30
LOAN PORTFOLIO COMPOSITION
Commercial and industrial		$	264,058			$	269,560			$	287,565			$	292,410			$	295,864
Real estate:
Construction and development			231,053				273,300				296,639				317,484				345,127
Commercial real estate			899,120				906,684				923,195				901,321				891,883
Farmland			180,126				180,502				186,295				188,614				187,105
1-4 family residential			526,650				523,573				514,603				504,002				496,340
Multi-family residential			47,507				44,569				44,292				42,720				44,385
Consumer			53,642				54,375				57,059				58,294				59,498
Agricultural			12,506				12,418				12,685				13,076				13,447
Overdrafts			335				276				243				328				252
Total loans(1)(2)		$	2,214,997			$	2,265,257			$	2,322,576			$	2,318,249			$	2,333,901
		Quarter Ended
		2024			2023
(dollars in thousands)		June 30			March 31			December 31			September 30			June 30
ALLOWANCE FOR CREDIT LOSSES
Balance at beginning of period		$	30,560			$	30,920			$	31,140			$	31,759			$	31,953
Loans charged-off			(115	)			(310	)			(242	)			(644	)			(224	)
Recoveries			37				200				22				25				30
Reversal of provision for credit loss expense			(1,200	)			(250	)			-				-				-
Balance at end of period		$	29,282			$	30,560			$	30,920			$	31,140			$	31,759
Allowance for credit losses / period-end loans			1.32	%			1.35	%			1.33	%			1.34	%			1.36	%
Allowance for credit losses / nonperforming loans			470.4				496.0				552.9				1,148.2				894.6
Net charge-offs / average loans (annualized)			0.01				0.02				0.04				0.11				0.03
NONPERFORMING ASSETS
Nonaccrual loans		$	6,225			$	6,161			$	5,592			$	2,712			$	3,550
Other real estate owned			15,184				14,900				-				-				-
Repossessed assets owned			331				236				234				250				-
Total nonperforming assets		$	21,740			$	21,297			$	5,826			$	2,962			$	3,550
Nonaccrual loans as a percentage of total loans(1)(2)			0.28	%			0.27	%			0.24	%			0.12	%			0.15	%
Nonperforming assets as a percentage of:
Total loans(1)(2)			0.98	%			0.94	%			0.25	%			0.13	%			0.15	%
Total assets			0.71				0.68				0.18				0.09				0.11
(1) Excludes outstanding balances of loans held for sale of $871,000, $874,000, $976,000, $2.5 million, and $795,000 as of June 30 and March 31, 2024 and December 31, September 30, June 30, 2023, respectively.
(2) Excludes deferred loan fees of $468,000, $685,000, $775,000, $946,000, and $1.3 million as of June 30 and March 31, 2024 and December 31, September 30, June 30, 2023, respectively.

		Quarter Ended
		2024			2023
(dollars in thousands)		June 30			March 31			December 31			September 30			June 30
NONINTEREST INCOME
Service charges		$	1,098			$	1,069			$	1,123			$	1,131			$	1,056
Net realized loss on securities transactions			-				-				-				-				(322	)
Net realized gain on sale of loans			227				272				196				218				473
Fiduciary and custodial income			657				649				624				637				630
Bank-owned life insurance income			250				251				249				267				211
Merchant and debit card fees			2,122				1,706				1,760				1,752				2,121
Loan processing fee income			136				118				116				128				142
Mortgage fee income			43				41				30				46				50
Other noninterest income			66				1,152				698				760				3,512
Total noninterest income		$	4,599			$	5,258			$	4,796			$	4,939			$	7,873
NONINTEREST EXPENSE
Employee compensation and benefits		$	11,723			$	12,437			$	12,715			$	11,944			$	11,939
Occupancy expenses			2,924				2,747				2,757				2,960				2,754
Legal and professional fees			841				772				954				902				985
Software and technology			1,653				1,642				1,740				1,490				1,531
Amortization			142				143				145				147				149
Director and committee fees			198				200				186				192				201
Advertising and promotions			208				169				352				288				269
ATM and debit card expense			785				609				763				803				739
Telecommunication expense			159				173				175				178				171
FDIC insurance assessment fees			365				360				321				363				522
Other noninterest expense			1,604				1,440				1,294				1,247				1,211
Total noninterest expense		$	20,602			$	20,692			$	21,402			$	20,514			$	20,471

		Quarter Ended June 30,
		2024			2023
(dollars in thousands)		Average Outstanding Balance			Interest Earned/ Interest Paid			Average Yield/ Rate			Average Outstanding Balance			Interest Earned/ Interest Paid			Average Yield/ Rate
ASSETS
Interest-earning assets:
Total loans(1)		$	2,237,469			$	35,009				6.29	%		$	2,363,158			$	33,591				5.70	%
Securities available for sale			245,309				2,267				3.72				175,447				1,205				2.75
Securities held to maturity			356,922				2,332				2.63				455,626				2,831				2.49
Nonmarketable equity securities			23,243				280				4.85				28,931				301				4.17
Interest-bearing deposits in other banks			58,341				825				5.69				62,165				806				5.20
Total interest-earning assets			2,921,284				40,713				5.61				3,085,327				38,734				5.04
Allowance for credit losses			(30,407	)									(31,909	)
Noninterest-earning assets			240,707										219,532
Total assets		$	3,131,584									$	3,272,950
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Interest-bearing deposits		$	1,795,958			$	14,824				3.32	%		$	1,653,237			$	9,946				2.41	%
Advances from FHLB and fed funds purchased			90,055				1,207				5.39				262,088				3,349				5.13
Line of credit			-				-				-				7,352				64				3.49
Subordinated debt			44,489				511				4.62				48,192				535				4.45
Securities sold under agreements to repurchase			44,059				291				2.66				24,823				137				2.21
Total interest-bearing liabilities			1,974,561				16,833				3.43				1,995,692				14,031				2.82
Noninterest-bearing liabilities:
Noninterest-bearing deposits			818,290										948,083
Accrued interest and other liabilities			36,931										30,480
Total noninterest-bearing liabilities			855,221										978,563
Equity			301,802										298,695
Total liabilities and equity		$	3,131,584									$	3,272,950
Net interest rate spread(2)									2.18	%									2.22	%
Net interest income					$	23,880									$	24,703
Net interest margin(3)									3.29	%									3.21	%
Net interest margin, fully taxable equivalent(4)									3.26	%									3.19	%
(1) Includes average outstanding balances of loans held for sale of $817,000 and $1.4 million for the quarter ended June 30, 2024 and 2023, respectively.
(2) Net interest spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
(3) Net interest margin is equal to net interest income divided by average interest-earning assets, annualized.
(4) Net interest margin on a fully taxable equivalent basis is equal to net interest income adjusted for nontaxable income divided by average interest-earning assets, annualized, using a marginal tax rate of 21%.

		Six Months Ended June 30,
		2024			2023
(dollars in thousands)		Average Outstanding Balance			Interest Earned/ Interest Paid			Average Yield/ Rate			Average Outstanding Balance			Interest Earned/ Interest Paid			Average Yield/ Rate
ASSETS
Interest-earning assets:
Total loans(1)		$	2,268,323			$	70,500				6.25	%		$	2,375,533			$	65,748				5.58	%
Securities available for sale			230,803				4,118				3.59				179,984				2,273				2.55
Securities held to maturity			375,158				4,865				2.61				479,063				5,881				2.48
Nonmarketable equity securities			23,840				528				4.45				28,658				720				5.07
Interest-bearing deposits in other banks			52,007				1,454				5.62				48,650				1,256				5.21
Total interest-earning assets			2,950,131				81,465				5.55				3,111,888				75,878				4.92
Allowance for credit losses			(30,643	)									(31,922	)
Noninterest-earning assets			235,769										218,868
Total assets		$	3,155,257									$	3,298,834
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Interest-bearing deposits		$	1,792,538			$	29,283				3.29	%		$	1,639,003			$	17,601				2.17	%
Advances from FHLB and fed funds purchased			115,824				3,127				5.43				285,963				7,123				5.02
Line of credit			420				18				8.62				3,696				64				3.49
Subordinated debt			45,143				1,028				4.58				48,675				1,075				4.45
Securities sold under agreements to repurchase			42,665				542				2.55				17,937				150				1.69
Total interest-bearing liabilities			1,996,590				33,998				3.42				1,995,274				26,013				2.63
Noninterest-bearing liabilities:
Noninterest-bearing deposits			820,964										977,738
Accrued interest and other liabilities			36,201										28,706
Total noninterest-bearing liabilities			857,165										1,006,444
Equity			301,502										297,116
Total liabilities and equity		$	3,155,257									$	3,298,834
Net interest rate spread(2)									2.13	%									2.29	%
Net interest income					$	47,467									$	49,865
Net interest margin(3)									3.24	%									3.23	%
Net interest margin, fully taxable equivalent(4)									3.21	%									3.22	%
(1) Includes average outstanding balances of loans held for sale of $761,000 and $1.5 million for the six months ended June 30, 2024 and 2023, respectively.
(2) Net interest spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
(3) Net interest margin is equal to net interest income divided by average interest-earning assets, annualized.
(4) Net interest margin on a fully taxable equivalent basis is equal to net interest income adjusted for nontaxable income divided by average interest-earning assets, annualized, using a marginal tax rate of 21%.

NON-GAAP RECONCILING TABLES

Tangible Book Value per Common Share

		As of
		2024			2023
(dollars in thousands, except per share data)		June 30			March 31			December 31			September 30			June 30
Equity attributable to Guaranty Bancshares, Inc.		$	308,043			$	305,371			$	303,300			$	296,226			$	296,862
Adjustments:
Goodwill			(32,160	)			(32,160	)			(32,160	)			(32,160	)			(32,160	)
Core deposit intangible, net			(1,206	)			(1,312	)			(1,418	)			(1,524	)			(1,633	)
Total tangible common equity attributable to Guaranty Bancshares, Inc.		$	274,677			$	271,899			$	269,722			$	262,542			$	263,069
Common shares outstanding(1)			11,417,270				11,534,960				11,540,644				11,554,094				11,603,167
Book value per common share		$	26.98			$	26.47			$	26.28			$	25.64			$	25.58
Tangible book value per common share(1)			24.06				23.57				23.37				22.72				22.67
(1) Excludes the dilutive effect, if any, of shares of common stock issuable upon exercise of outstanding stock options.

Net Unrealized Loss on Securities, Tax Effected, as a Percentage of Total Equity

(dollars in thousands)		June 30, 2024
Total equity(1)		$	308,570
Less: net unrealized loss on HTM securities, tax effected			(25,019	)
Total equity, including net unrealized loss on AFS and HTM securities		$	283,551
Net unrealized loss on AFS securities, tax effected			15,110
Net unrealized loss on HTM securities, tax effected			25,019
Net unrealized loss on AFS and HTM securities, tax effected		$	40,129
Net unrealized loss on securities as % of total equity(1)			13.0	%
Total equity before impact of unrealized losses		$	323,680
Net unrealized loss on securities as % of total equity before impact of unrealized losses			12.4	%
Total average assets		$	3,131,584
Total equity to average assets			9.9	%
Total equity, adjusted for tax effected net unrealized loss, to average assets			9.1	%
(1) Includes the net unrealized loss on AFS securities, tax effected, of $15.1 million.

Cost of Total Deposits

		Quarter Ended
(dollars in thousands)		June 30, 2024			March 31, 2024			June 30, 2023
Average interest-bearing deposits
Certificates and other time deposits		$	736,394			$	724,248			$	556,022
Other interest-bearing deposits			1,059,564				1,064,871				1,097,215
Total average interest-bearing deposits		$	1,795,958			$	1,789,119			$	1,653,237
Adjustments:
Noninterest-bearing deposits			818,290				823,638				948,083
Total average deposits		$	2,614,248			$	2,612,757			$	2,601,320
Deposit-related interest expense
Certificates and other time deposits		$	8,215			$	7,820			$	4,511
Other interest-bearing deposits			6,609				6,639				5,435
Total deposit-related interest expense		$	14,824			$	14,459			$	9,946
Average cost of certificates and other time deposits			4.49	%			4.34	%			3.25	%
Average cost of other interest-bearing deposits			2.51	%			2.51	%			1.99	%
Average cost of interest-bearing deposits			3.32	%			3.25	%			2.41	%
Average cost of total deposits			2.28				2.23				1.53

About Non-GAAP Financial Measures

Certain of the financial measures and ratios we present, including "tangible book value per common share", "net unrealized loss on securities, tax effected, as a percentage of total equity" and "cost of total deposits" are supplemental measures that are not required by, or are not presented in accordance with, U.S. generally accepted accounting principles (GAAP). We refer to these financial measures and ratios as "non-GAAP financial measures." We consider the use of select non-GAAP financial measures and ratios to be useful for financial and operational decision making and useful in evaluating period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenditures or assets that we believe are not indicative of our primary business operating results or by presenting certain metrics on a fully taxable equivalent basis. We believe that management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, analyzing and comparing past, present and future periods.

These non-GAAP financial measures should not be considered a substitute for financial information presented in accordance with GAAP and you should not rely on non-GAAP financial measures alone as measures of our performance. The non-GAAP financial measures we present may differ from non-GAAP financial measures used by our peers or other companies. We compensate for these limitations by providing the equivalent GAAP measures whenever we present the non-GAAP financial measures and by including a reconciliation of the impact of the components adjusted for in the non-GAAP financial measure so that both measures and the individual components may be considered when analyzing our performance.

A reconciliation of non-GAAP financial measures to the comparable GAAP financial measures is included at the end of the financial statement tables.

Conference Call Information

The Company will hold a conference call to discuss second quarter 2024 financial results on Monday, July 15, 2024 at 10:00 am Central Time. The conference call will be hosted by Ty Abston, Chairman and CEO, and Shalene Jacobson, EVP and CFO. All conference attendees must register before the call at www.gnty.com/earningscall. The conference materials will be available by accessing the Investor Relations page on our website, www.gnty.com. A recording of the conference call will be available by 1:00 pm Central Time the day of the call and remain available through July 31, 2024 on our Investor Relations webpage.

About Guaranty Bancshares, Inc.

Guaranty Bancshares, Inc. is the parent company for Guaranty Bank & Trust, N.A. Guaranty Bank & Trust has 33 banking locations across 26 Texas communities located within the East Texas, Dallas/Fort Worth, Houston and Central Texas regions of the state. As of June 30, 2024, Guaranty Bancshares, Inc. had total assets of $3.1 billion, total loans of $2.2 billion and total deposits of $2.6 billion. Visit www.gnty.com for more information.

Cautionary Statement Regarding Forward-Looking Information

This communication contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, future events and our results of operations, financial condition and financial performance. These statements are often, but not always, made through the use of words or phrases such as "may," "should," "could," "predict," "potential," "believe," "will likely result," "expect," "continue," "will," "anticipate," "seek," "estimate," "intend," "plan," "projection," "would" and "outlook," or the negative version of those words or other comparable words of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. Such factors include, without limitation, the "Risk Factors" referenced in our most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q, and other risks and uncertainties listed from time to time in our reports and documents filed with the Securities and Exchange Commission. We can give no assurance that any goal or plan or expectation set forth in forward-looking statements can be achieved and readers are cautioned not to place undue reliance on such statements. The forward-looking statements are made as of the date of this communication, and we do not intend, and assume no obligation, to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by applicable law.

Shalene Jacobson
Executive Vice President and Chief Financial Officer
Guaranty Bancshares, Inc.
[phone]
[e-mail]

Source: Guaranty Bancshares, Inc.

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