Company Overview

Guaranty Bancshares, Inc. is a bank holding company headquartered in Mount Pleasant, Texas, providing a broad array of financial products and services to individuals and corporate customers primarily in its markets of East Texas, Dallas-Fort Worth, Greater Houston, and Central Texas through its wholly-owned subsidiary, Guaranty Bank & Trust, N.A.

Historical Background

Founded in 1913, Guaranty Bancshares has a rich history of serving its local communities, weathering economic cycles, and maintaining a steadfast focus on prudent banking practices. The company was incorporated in 1990 to serve as the holding company for Guaranty Bank Trust, with the goal of building a financially stable and community-focused bank in Texas. In its early years, Guaranty Bancshares concentrated on expanding its presence in East Texas, where it was headquartered.

Growth and Expansion

Over the following decades, Guaranty Bancshares strategically expanded its footprint across the vibrant state of Texas, opening new banking locations in the Dallas-Fort Worth, Houston, and Central Texas regions. This expansion allowed the company to capitalize on the region's robust economic growth and diversified industries. During this period of growth, Guaranty Bancshares built a strong reputation for financial strength and community leadership.

A significant milestone in the company's history came in May 2017 when Guaranty Bancshares completed an initial public offering, listing its common stock on the Nasdaq Global Select Market. This move provided the company with increased access to capital and enhanced its visibility in the financial markets.

Navigating Challenges

Guaranty Bancshares successfully navigated the challenges of the 2008 financial crisis from a position of relative strength, which allowed it to continue expanding its franchise in the years that followed. The company implemented a strategic approach to diversify its loan portfolio and deposit base, reducing its reliance on any single market or customer segment. This prudent strategy helped the bank withstand economic volatility and maintain stable earnings during this tumultuous period.

Recent Developments

In recent years, Guaranty Bancshares has focused on enhancing its digital banking capabilities and optimizing its branch network to better serve its customers. The company has also pursued strategic acquisitions to expand its geographic reach and product offerings. Despite the disruptions caused by the COVID-19 pandemic, Guaranty Bancshares has demonstrated remarkable resilience, leveraging its strong capital position and diversified business model to navigate the challenges.

Financials

As of September 30, 2024, Guaranty Bancshares reported total assets of $3.10 billion, a modest decrease of 2.80% from the previous year-end. This decline was primarily driven by a reduction in the company's loan portfolio, which contracted by 8.00% to $2.14 billion during the first nine months of 2024. Despite this contraction, Guaranty Bancshares maintained a strong net interest margin of 3.33% in the third quarter of 2024, up from 3.02% in the same period of the prior year, reflecting the company's ability to effectively manage its interest-earning assets and liabilities.

Loan Portfolio and Credit Quality

Guaranty Bancshares' loan portfolio is diversified across various sectors, with commercial and industrial loans, commercial real estate, and 1-4 family residential mortgages comprising the largest components. The company's non-performing assets as a percentage of total assets stood at a low 0.66% as of September 30, 2024, reflecting the bank's prudent underwriting and proactive management of credit risk. The allowance for credit losses, as a percentage of total loans, remained stable at 1.34% as of the end of the third quarter, compared to 1.33% at the end of the previous year.

Liquidity

The bank's deposit base continued to be a key strength, growing by $42.8 million, or 1.40%, during the third quarter of 2024. Guaranty Bancshares' deposit mix remained well-balanced, with non-interest-bearing demand deposits representing 31.50% of total deposits as of September 30, 2024. The company's cost of total deposits increased modestly to 2.31% in the third quarter, up from 2.28% in the prior quarter, as the bank adjusted its deposit rates in response to the rising interest rate environment.

As of September 30, 2024, the company had $2.67 billion in total deposits, with $839.57 million in noninterest-bearing deposits and $1.83 billion in interest-bearing deposits. The increase in deposit costs was primarily due to renewals of maturing certificates of deposit into new CDs paying higher rates.

Guaranty Bancshares maintains a strong liquidity position with $162.95 million in cash and cash equivalents as of the most recent quarter. The company also has access to $75 million in available federal funds lines of credit, a $25 million unsecured revolving line of credit, and access to FHLB advances. The current ratio and quick ratio both stand at 0.39, indicating the company's ability to meet short-term obligations.

Capital Position

Guaranty Bancshares' capital position remained strong, with a total risk-based capital ratio of 16.59% and a Tier 1 leverage ratio of 10.21% as of September 30, 2024. These ratios exceeded the regulatory thresholds for the bank to be classified as "well-capitalized," providing the company with ample flexibility to support future growth initiatives and withstand potential economic headwinds. The company's debt-to-equity ratio is 0.14, reflecting a conservative approach to leverage.

Financial Performance

During the third quarter of 2024, Guaranty Bancshares reported net income of $7.40 million, or $0.65 per diluted share, up from $6.30 million, or $0.54 per diluted share, in the same period of the prior year. This increase in profitability was driven by a combination of factors, including a $500,000 reversal of the provision for credit losses, higher net interest income, and improved non-interest income. The company's return on average assets and return on average equity stood at 0.96% and 9.58%, respectively, for the third quarter of 2024.

For the most recent quarter, Guaranty Bancshares reported revenue of $28.55 million, net income of $7.40 million, operating cash flow of -$21.50 million, and free cash flow of -$18.91 million. The company saw year-over-year growth in revenue, net income, and free cash flow compared to the prior year quarter.

Future Outlook

Looking ahead, Guaranty Bancshares remains well-positioned to capitalize on the robust economic growth in its Texas markets. The company's strong capital base, diversified loan portfolio, and stable deposit funding provide a solid foundation for continued expansion, both organically and through strategic acquisitions. As the bank navigates the evolving interest rate environment and economic landscape, Guaranty Bancshares' experienced management team and commitment to prudent risk management are expected to be key drivers of its long-term success.

Management expects to see continued overall improvements in the net interest margin (NIM) as loan assets continue to reprice at higher rates and improvements are seen on the deposit side. They anticipate the NIM will increase by about 2 basis points per month and are hoping to be a little under 3.50% by the end of 2025. A significant improvement in deposit costs is expected as $253 million in CDs will reprice in Q4 2024 from a weighted average rate of 4.77% to 3.55-4.20%.

Guaranty Bancshares believes it is well-positioned to grow the company by another $1-2 billion over the next 3-4 years, through both organic growth and potential bolt-on acquisitions. This growth strategy aligns with the broader banking industry trends in the company's geographic markets, which have seen steady growth with a CAGR of 3-5% over the past 5 years.