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 September 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 September 30, 2024, compared to $7.4 million, or $0.65 per basic share, for the quarter ended June 30, 2024 and $6.3 million, or $0.54 per basic share, for the quarter ended September 30, 2023. Return on average assets and average equity for the third quarter of 2024 were 0.96% and 9.58%, respectively, compared to 0.95% and 9.91%, respectively, for the second quarter of 2024 and 0.78% and 8.43%, respectively, for the third quarter of 2023. The increase in earnings during the third quarter of 2024 compared to the third quarter of 2023 was primarily due to an increase in net interest income of $889,000, or 3.8%, along with a reverse provision for credit losses of $500,000 during the third quarter of 2024 compared to no provision during the prior year quarter.

"Our earnings and margin results were good in the third quarter and continue to show improvement as the Fed begins to lower interest rates. Net interest margin is now at 3.33%, up 7 basis points from the prior quarter and 31 basis points from the third quarter of 2023. We continue to position our balance sheet to take advantage of possible loan growth and other opportunities when economic conditions improve and interest rates continue to fall. Deposit balances increased during the quarter, we purchased additional higher yielding AFS securities and we repaid the remaining $45.0 million in FHLB advances. We believe credit quality remains strong with very low past-dues and charge-offs. Non-performing assets should also be very low by year-end as we anticipate resolutions for the ORE on our balance sheet. Our capital and liquidity levels are solid and will leave us well positioned to drive positive strategic objectives and obtain favorable results for shareholders for the remainder of 2024 and 2025," said Ty Abston, the Company's Chairman and Chief Executive Officer.

QUARTERLY HIGHLIGHTS

• Improvement in NIM and Stable Earnings. Net interest margin, on a fully taxable equivalent basis, continued to improve in the third quarter, increasing to 3.33%, compared to 3.26% in the second quarter and 3.02% in the prior year quarter. Earnings were fairly consistent with the prior quarter, showing improvements in net interest income, non-interest income and employee and compensation expenses, which were slightly offset by a lower reverse provision for credit losses and higher provision for income taxes in the third quarter. The net interest income improvements resulted primarily from a decrease in interest bearing liability costs, while earning assets have continued to reprice upward.
  
  

• Solid Balance Sheet, Capital and Liquidity. During the past year, we have strategically shrunk our balance sheet primarily by paying off debt and allowing transactional/non-relationship loans to pay off. This strategy positions us to be on the offense when we believe strong opportunities for growth or M&A are presented. Our capital and liquidity ratios, as well as contingent liquidity sources, remain very healthy. During the third quarter of 2024, we repurchased 59,996 shares of our common stock, or 0.53% of our average shares outstanding during the period, at an average price of $30.65 per share. Our liquidity ratio, calculated as cash and cash equivalents and unpledged investments divided by total liabilities, was 17.1% as of September 30, 2024, compared to 14.0% as of September 30, 2023. Our total available contingent liquidity, net of current outstanding borrowings, was $1.4 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 September 30, 2024 was 10.4%. 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 9.8%^†, which we believe represents a strong capital level under regulatory requirements.
  
  
  
  
• Good Asset Quality. Overall credit quality remains strong and the expected losses on deteriorating credits are low due to the Bank's equity position and/or strong guarantor support. Nonperforming assets as a percentage of total assets were 0.66% at September 30, 2024, compared to 0.71% at June 30, 2024 and 0.09% at September 30, 2023. Net charge-offs (annualized) to average loans were 0.04% for the quarter ended September 30, 2024, compared to 0.01% for the quarter ended June 30, 2024, and 0.11% for the quarter ended September 30, 2023.
  
  
  
  There was a reverse provision to the allowance for credit losses of $500,000 during the third quarter, in addition to the $1.45 million reverse provision during the first half of the year. Changes to historical and qualitative factors have been minimal during the first three quarters of 2024, therefore the decrease in the allowance for credit losses was due primarily to the decreases in outstanding loan balances of $186.0 million, or 8.0%, since January 1, 2024, which were partially offset by an increase in special mention loans during the same period as we continue to work with a relatively small number of stressed borrowers.
  
  
  
  Nonperforming assets consist of both nonaccrual loans and other real estate owned (ORE). Nonaccrual loans represented 0.24% of total outstanding loan balances as of September 30, 2024 and consisted primarily of smaller dollar consumer and small business loans. ORE consisted of two real estate properties, both of which we expect to resolve and sell in the fourth quarter of 2024 with minimal, if any, losses. Nonaccrual loans represented 0.28% and 0.12% of total outstanding loan balances as of June 30, 2024 and September 30, 2023, respectively.
  
  

• Granular and Consistent Core Deposit Base. As of September 30, 2024, we have 89,878 total deposit accounts with an average account balance of $29,695. We have a historically reliable core deposit base, with strong and trusted banking relationships. Total deposits increased by $42.8 million during the third quarter. DDA and time deposit balances increased $19.2 million and $24.5 million, respectively, while savings and MMDA balances decreased $965,000 during the third quarter of 2024. Excluding public funds and Bank-owned accounts, our uninsured deposits as of September 30, 2024 were 26.3% of total deposits.
  
  
  
  Interest rates paid on deposits during the quarter stabilized with minimal increases. Noninterest-bearing deposits represent 31.5% of total deposits as of September 30, 2024. Our cost of interest-bearing deposits increased one basis point during the quarter from 3.32% in the prior quarter to 3.33%. This increase was primarily due to renewals of maturing certificates of deposit into new CDs paying higher rates, although current CD rate offerings were recently lowered late in the quarter. Our cost of total deposits for the third quarter of 2024 increased three basis points from 2.28% in the prior quarter to 2.31%^†.

_{† 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 reversal of the provision for credit losses, for the third quarter of 2024 and 2023 was $24.2 million and $23.3 million, respectively, an increase of $889,000, or 3.8%. The increase in net interest income resulted from an increase in interest income of $615,000, or 1.5%, combined with a decrease in interest expense of $274,000, or 1.7%, compared to the prior year quarter. The increase in interest income resulted primarily from a $670,000, or 16.5%, increase in interest income on securities and a $205,000, or 29.6%, increase in interest income received from Federal funds sold and interest-bearing deposits. The decrease in interest expense resulted primarily from a $2.3 million and $808,000 decrease in interest paid on FHLB borrowings and brokered deposits, respectively. These decreases were partially offset by a $2.6 million increase in interest paid on CD accounts during the third quarter of 2024 compared to the same period of the prior year. Our noninterest-bearing deposits to total deposits were 31.5% and 34.0% as of September 30, 2024 and 2023, respectively.

Net interest margin, on a fully taxable equivalent basis, for the third quarter of 2024 and 2023 was 3.33% and 3.02%, respectively. Net interest margin, on a fully taxable equivalent basis, increased 31 basis points primarily due to a 40 basis point increase in interest-earning asset yields partially offset by an increase of eight basis points in the cost of interest-bearing liabilities from the prior year quarter. The increase in yield on interest-earning assets was primarily due to increases in yield on the loan portfolio from 5.91% to 6.35%, or 44 basis points, as well as 82 and 10 basis point increases in yield on AFS and HTM securities, respectively, during the period. The increase in the cost of interest-bearing liabilities was due primarily to an increase in the cost of interest-bearing deposits from 3.00% to 3.33%, a change of 33 basis points, since September 30, 2023.

Net interest income, before the reversal of the provision for credit losses, increased $311,000, or 1.3%, from $23.9 million in the second quarter of 2024 to $24.2 million for the third quarter of 2024. The increase in net interest income resulted primarily from a larger decrease in interest expense of $591,000, or 3.5%, compared to the decrease in interest income of $280,000, or 0.7%, from the prior quarter.

Net interest margin, on a fully taxable equivalent basis, increased from 3.26% for the second quarter of 2024 to 3.33% for the third quarter of 2024, an increase of seven basis points. The increase in net interest margin, on a fully taxable equivalent basis, was primarily due to a one basis point increase in the yield earned on interest-earning assets, further improved by a seven basis point decrease in rates on interest-bearing liabilities. The increase in yield was primarily due to an increase in loan yields from 6.29% for the second quarter of 2024 to 6.35% for the third quarter of 2024, a change of six basis points, partially offset by decreases in yield on all other interest-earning assets for a net increase of one basis point in yields on interest-earning assets. This increase was improved by a decrease in interest-bearing liabilities of seven basis points since June 30, 2024.

We recorded a reverse provision for credit losses of $500,000 during the third quarter of 2024, and $1.2 million and $250,000 of reverse provisions during the second and first quarters of 2024, respectively. The reverse provisions resulted from a decline in gross loan balances of $78.5 million during the third quarter and of $186.0 million year to date, while overall credit quality trends and economic forecast assumptions remained relatively stable. As of September 30, 2024 and December 31, 2023, our allowance for credit losses as a percentage of total loans was 1.34% and 1.33%, respectively.

Noninterest income increased $215,000, or 4.4%, during the third quarter of 2024 to $5.2 million, compared to $4.9 million for the third quarter of 2023. The increase from the same quarter in 2023 was primarily due to rental income received during the quarter.

Noninterest income for the third quarter of 2024 increased by $555,000, or 12.1%, from $4.6 million in the second quarter of 2024. The increase was primarily due to an increase in other noninterest income of $909,000, or 1377.3%, primarily the result of a $900,000 ORE valuation allowance during the second quarter of 2024. This was partially offset by a $305,000, or 14.4%, decrease in merchant and debit card fees due to an annual payment from our third party processing vendor during the second quarter of 2024.

Noninterest expense increased $164,000, or 0.8%, during the third quarter of 2024 to $20.7 million, compared to $20.5 million for the third quarter of 2023. The increase in noninterest expense during the third quarter of 2024 was driven primarily by an increase in other noninterest expense of $498,000, or 39.9%, due to $642,000 in ORE-related holding costs during the current quarter, which was partially offset by a $358,000, or 3.0%, decrease in employee compensation and benefits and a $127,000, or 14.1%, decrease in legal and professional fees compared to the third quarter of 2023.

Noninterest expense increased $76,000, or 0.4%, during the third quarter of 2024, from $20.6 million for the quarter ended June 30, 2024. The increase resulted primarily from a $141,000, or 8.8%, increase in other noninterest expense due to $642,000 in ORE-related holding costs during the current quarter. Additionally, the Bank saw a $102,000, or 3.5%, increase in occupancy expenses during the third quarter of 2024 compared to the second quarter of 2024. These increases were partially offset by a $137,000, or 1.2%, decrease in employee compensation and benefits.

The Company’s efficiency ratio for the third quarter of 2024 was 70.47%, compared to 72.64% for the prior year quarter and 72.34% for the second quarter of 2024.

FINANCIAL CONDITION

Consolidated assets for the Company totaled $3.10 billion at September 30, 2024, compared to $3.08 billion at June 30, 2024 and $3.23 billion at September 30, 2023.

Gross loans decreased by $78.5 million, or 3.5%, during the quarter resulting in a gross loan balance of $2.14 billion at September 30, 2024, compared to $2.21 billion at June 30, 2024. Our decline in loans resulted primarily from tighter underwriting, strategic non-renewal decisions and from lower demand from potential borrowers.

Gross loans decreased $181.7 million, or 7.8%, from $2.32 billion at September 30, 2023. The decrease in gross loans during the third quarter of 2024 compared to the third 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 increased by $42.8 million, or 1.6%, to $2.67 billion at September 30, 2024, compared to $2.63 billion at June 30, 2024, and increased $10.6 million, or 0.4%, from $2.66 billion at September 30, 2023. The increase in deposits during the third quarter of 2024 compared to the second quarter of 2024 was the result of an increase in noninterest-bearing and interest-bearing deposits of $19.1 million and $23.6 million, respectively. The increase in deposits during the current quarter compared to the prior year quarter resulted primarily from an increase in interest-bearing deposits of $74.4 million, offset by a decrease in noninterest-bearing deposits of $63.8 million.

Nonperforming assets as a percentage of total loans were 0.96% at September 30, 2024, compared to 0.98% at June 30, 2024 and 0.13% at September 30, 2023. Nonperforming assets as a percentage of total assets were 0.66% at September 30, 2024, compared to 0.71% at June 30, 2024, and 0.09% at September 30, 2023. The Bank's nonperforming assets consist primarily of ORE and nonaccrual loans. The increase in nonperforming assets compared to the prior year quarter was primarily due to the acquisition of ORE, which is expected to be fully resolved by year-end.

Total equity was $319.3 million at September 30, 2024, compared to $308.6 million at June 30, 2024 and $296.8 million at September 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 third quarter and from a positive shift in our net unrealized losses on securities compared to the prior periods. The increases in equity were somewhat offset by the payment of dividends and by the repurchase of stock totaling $1.8 million during the third quarter of 2024, $4.1 million during the second quarter of 2024 and $1.7 million during the third quarter of 2023.