Guaranty Bancshares Inc (GNTY) is a bank holding company that provides a wide range of financial products and services to individuals and businesses primarily in Texas. The company, through its wholly-owned subsidiary Guaranty Bank & Trust, N.A., operates a network of 33 banking locations across 26 Texas communities. With a focus on relationship-driven community banking, Guaranty Bancshares has steadily grown its footprint and built a reputation for strong financial performance and customer service.
Business Overview and History
Guaranty Bancshares was incorporated in 1990 to serve as the holding company for Guaranty Bank & Trust, which was originally chartered as a Texas state banking association in 1913. The company has built a strong reputation based on financial stability and community leadership over its long history. Guaranty's growth has been consistent and primarily organic, both through growth in its established East Texas markets and entry into new markets with de novo banking locations.
In 2013, the company expanded from its East Texas markets by opening a de novo banking location in Bryan-College Station, Texas. This was followed by the opening of de novo locations in Fort Worth and Austin in 2017, further diversifying the company's geographic footprint. Guaranty has continued to strategically expand its footprint, opening de novo locations in the Dallas-Fort Worth, Austin, and Houston metropolitan areas in subsequent years.
Guaranty Bancshares has also supplemented its organic growth through targeted acquisitions, including the 2015 acquisitions of Texas Leadership Bank and Preston State Bank, which expanded the company's presence in the Dallas-Fort Worth MSA. In 2018, the company entered the Houston MSA through the acquisition of Westbound Bank.
Throughout its history, Guaranty has faced various challenges, including navigating economic cycles and adapting to changes in the regulatory environment. The company weathered the 2008 financial crisis and subsequent economic downturn, maintaining its financial stability and continuing to serve its local communities. Guaranty has also had to adapt to an evolving regulatory landscape, particularly in the aftermath of the Dodd-Frank Act, which introduced new rules and requirements for financial institutions.
Despite these challenges, Guaranty Bancshares has remained focused on its community banking philosophy, emphasizing personal attention and tailored solutions for its customers. The company's consistent organic growth, strategic acquisitions, and strong risk management have allowed it to build a diverse franchise and establish a presence across key markets in Texas.
Guaranty Bancshares operates two main business segments: banking services and trust and wealth management. The banking services segment is the core of GNTY's business, providing a wide range of commercial and consumer banking products and services to customers primarily in the company's Texas markets. This includes various types of loans such as commercial and industrial, commercial real estate, construction and development, farmland, 1-4 family residential, multi-family residential, consumer, and agricultural loans.
The trust and wealth management division provides traditional trustee, custodial and escrow services, investment management solutions, and retirement plan services. Revenue from this segment is derived from noninterest income. For the year ended December 31, 2024, trust and wealth management income was $2.51 million.
Financial Performance and Ratios
As of December 31, 2024, Guaranty Bancshares reported total assets of $3.12 billion, total loans of $2.10 billion, and total deposits of $2.69 billion. The company's net income for the year ended December 31, 2024 was $31.5 million, or $2.75 per basic share, compared to $30.0 million, or $2.57 per basic share, in the prior year. The annual revenue for 2024 was $120.80 million.
Guaranty Bancshares' financial ratios remain strong, with a return on average assets (ROA) of 1.01% and a return on average equity (ROE) of 10.30% as of December 31, 2024. The company's efficiency ratio, which measures noninterest expense as a percentage of net interest income plus noninterest income, improved to 62.23% in the fourth quarter of 2024, compared to 66.34% in the same period of the prior year.
The company's capital position is also robust, with a total risk-based capital ratio of 17.09% and a Tier 1 leverage ratio of 10.27% as of December 31, 2024, well above the regulatory minimums for a "well-capitalized" institution.
For the most recent quarter (Q4 2024), Guaranty Bancshares reported revenue of $31.95 million and net income of $10.00 million. Year-over-year, revenue increased 7.93% and net income increased 42.62% from Q4 2023. The increase in net income was primarily due to an improvement in net interest income and lower noninterest expenses.
The company's net interest margin (NIM) increased 17 basis points from 3.15% in 2023 to 3.32% in 2024, demonstrating improved profitability on its interest-earning assets.
Loan Portfolio and Asset Quality
Guaranty Bancshares' loan portfolio is diversified across various sectors, with commercial and industrial loans (11.95% of total loans), commercial real estate loans (40.67%), and 1-4 family residential loans (24.82%) comprising the largest segments as of December 31, 2024. Other significant loan categories include construction and development (10.26%), farmland (6.91%), multi-family residential (2.42%), and consumer and agricultural loans (4.97%).
The company's asset quality remains strong, with nonperforming assets to total assets of just 0.16% at the end of 2024, down from 0.18% in the prior year. The net charge-off ratio for 2024 was very low at 0.02%, reflecting the high quality of the loan portfolio.
The allowance for credit losses totaled $28.29 million, or 1.33% of total loans, as of December 31, 2024, compared to $30.92 million, or 1.33% of total loans, at the end of 2023. The company recorded a $2.20 million reversal of provision for credit losses in 2024, reflecting the strong credit quality of the loan portfolio and a stable economic environment.
Liquidity and Funding
Guaranty Bancshares maintains a strong liquidity position, with a loan-to-deposit ratio of 79.20% as of December 31, 2024. The company's deposit base is primarily composed of low-cost core deposits, with noninterest-bearing demand deposits representing 31.10% of total deposits at the end of 2024.
As of December 31, 2024, the company reported cash and cash equivalents of $145.96 million. The debt-to-equity ratio stood at 0.13, indicating a conservative leverage position. Guaranty Bancshares also maintains strong liquidity ratios, with a current ratio of 1.11 and a quick ratio of 1.11 as of December 31, 2024.
In addition to its deposit funding, Guaranty Bancshares has access to other sources of liquidity, including borrowing capacity from the Federal Home Loan Bank, the Federal Reserve Bank, and various correspondent bank lines of credit. As of December 31, 2024, the company had total contingent liquidity of approximately $1.35 billion available through these various sources. Furthermore, GNTY has a $25 million unsecured revolving line of credit with a correspondent bank, with no amounts advanced as of December 31, 2024.
The average cost of total deposits for 2024 was 2.23%, reflecting the company's ability to maintain a stable and cost-effective funding base.
Growth Opportunities and Shareholder Value
Guaranty Bancshares' strategic focus is on organic growth, supplemented by selective acquisitions that align with the company's community banking model and culture. The company believes it is well-positioned to capitalize on opportunities in its existing markets, as well as potential new markets in Texas, given its strong capital position, stable funding base, and experienced management team.
GNTY primarily operates in East Texas, Central Texas, the Dallas-Fort Worth MSA, and the Houston MSA, providing a diverse geographic footprint across Texas. The Texas banking industry has seen steady growth in recent years, with a compound annual growth rate (CAGR) of 4-5% for the top banks in the state. Guaranty Bancshares has been able to keep pace with this growth through its expansion strategy.
In 2024, the company repurchased nearly 211,000 shares, or 1.8% of its outstanding common stock, demonstrating its commitment to enhancing shareholder value. The company's Board of Directors has also authorized a new $25 million stock repurchase program, which the company plans to utilize more aggressively in 2025 to take advantage of what it believes is a disconnect between the current stock price and the intrinsic value of the company.
Guaranty Bancshares paid dividends of $0.96 per share in 2024, further contributing to shareholder returns. The company's focus on organic growth, selective acquisitions, and shareholder-friendly initiatives, combined with its strong financial performance and prudent risk management, position it well for continued success in the years ahead.
Looking forward to 2025, Guaranty Bancshares is modeling continued NIM expansion throughout the year, regardless of the interest rate environment. The company is more optimistic about loan growth in 2025 compared to the last two years, as they have the capacity in their lending buckets and liquidity position to grow the loan book. While not specifically targeting deposit growth as a core strategy for 2025, GNTY will continue to focus on building core deposit relationships.
In terms of expense management, Guaranty Bancshares is expecting expense growth of only about 1-2% in 2025, targeting an expense ratio of around 2.5% of total assets. The company does not anticipate needing significant loan loss provisions in 2025 unless there is higher-than-expected loan growth, as their credit metrics remain strong.
Risks and Challenges
Like any financial institution, Guaranty Bancshares faces various risks and challenges, including interest rate risk, credit risk, and operational risk. The company's concentration in Texas, particularly in the energy and real estate sectors, exposes it to economic conditions within the state, which could impact loan performance and asset quality.
Moreover, the banking industry as a whole is highly regulated, and changes in laws and regulations could have a material impact on the company's operations and financial results. Guaranty Bancshares must also navigate the competitive landscape, as it competes with larger regional and national banks, as well as non-bank financial services providers, for customers and talented employees.
Conclusion
Guaranty Bancshares has a long history of financial strength, prudent risk management, and a focus on community banking that has allowed it to steadily grow its franchise and create value for shareholders. The company's diversified loan portfolio, strong liquidity position, and commitment to organic growth and shareholder-friendly initiatives position it well for continued success. While the company faces certain risks and challenges, its experienced management team, sound strategic vision, and strong capital base suggest that Guaranty Bancshares is well-equipped to navigate the evolving banking landscape and deliver long-term value to its shareholders.