Guaranty Bancshares, Inc. (NYSE: GNTY) (“Company”), the parent company of Guaranty Bank & Trust, N.A. (“Bank”), today announced financial results for the fiscal quarter ending June 30, 2024. The Company reported net income available to common shareholders of $7.4 million, or $0.65 per basic share, for the quarter, compared to $6.7 million, or $0.58 per basic share, for the quarter ending March 31, 2024, and $9.6 million, or $0.82 per basic share, for the quarter ending June 30, 2023. Return on average assets and average equity for Q2 2024 were 0.95% and 9.91%, respectively, compared to 0.85% and 8.93% in Q1 2024, and 1.17% and 12.87% in Q2 2023. The earnings increase from Q1 to Q2 2024 was mainly due to a $1.2 million reversal of the provision for credit losses. The earnings decrease from Q2 2023 to Q2 2024 was primarily due to lower noninterest income.
“Second quarter 2024 results were strong and aligned with our expectations. Net interest margin improved from 3.16% in Q1 to 3.26% in Q2. Deposit balances have remained stable as we’ve strategically reduced the balance sheet, repaid an additional $30.0 million in FHLB advances, and purchased higher-yielding investment securities. Credit quality remains manageable with low past-due and charge-off percentages. Along with lower loan balances, this resulted in a $1.2 million reverse provision for credit losses during the quarter. However, we are closely monitoring a few borrowers experiencing financial difficulties and have adjusted their risk ratings and loss reserves accordingly. We believe our balance sheet is strong and positioned for growth as the economy improves, continuing to deliver consistent earnings for our shareholders,” said Ty Abston, the Company’s Chairman and CEO.
QUARTERLY HIGHLIGHTS
Growing Earnings and Improving Net Interest Margin (NIM)
Net interest margin, on a fully taxable equivalent basis, improved in Q2, increasing to 3.26%, compared to 3.16% in Q1 and 3.19% in Q2 2023. Earnings improved from the previous quarter due to the improved net interest margin, reverse credit loss provisions, and lower employee and compensation expenses. The net interest improvements resulted mainly from a slowdown in deposit cost increases while earning assets continued to reprice upward.
Strong Asset Quality
We experienced some risk rating downgrades as we work with borrowers facing cash flow and other challenges. However, overall credit quality remains strong, with expected losses on deteriorating credits remaining low due to the Bank’s equity position and 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 Q2 2024, compared to 0.02% for Q1 2024 and 0.03% for Q2 2023.
There was a $1.2 million reverse provision to the allowance for credit losses in Q2, in addition to the $250,000 reverse provision in Q1. Changes to historical and qualitative factors have been minimal in 2024, so the decrease in the allowance for credit losses is mainly due to the $107.6 million decrease in outstanding loan balances, or 4.6%, since January 1, 2024, partially offset by an increase in special mention and substandard loans as we continue to work with stressed borrowers.
Nonperforming Assets
Nonperforming assets consist of nonaccrual loans and other real estate owned (ORE). Nonaccrual loans represent 0.28% of total outstanding loan balances as of June 30, 2024, primarily smaller dollar consumer and small business loans. In Q1, we foreclosed on a multi-purpose commercial real estate loan in South Austin, recording ORE of $14.9 million. As the property was prepared for sale and marketing in Q2, management applied a more conservative capitalization rate to estimate current value, applying a $900,000 valuation allowance. In Q2, we also foreclosed on a single-family residential property with a fair value of $1.2 million. No additional valuation allowances or losses on the ORE are expected.
Commercial Real Estate (CRE) Loans
As of June 30, 2024, CRE loans and real estate C&D loans represent 40.6% and 10.4% of the total loan portfolio, respectively. Office-related loans represent 5.5% of the total loan portfolio, with an average balance of $551,000.
Stable 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 reliable core deposit base with strong banking relationships. Total deposits decreased slightly by $1.7 million during Q2. DDA balances decreased by $11.1 million, savings and MMDA balances decreased by $21.9 million, while time deposits increased by $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 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 from 3.25% in the prior quarter to 3.32%. The increase was primarily due to renewals of maturing certificates of deposit into new CDs paying higher rates and the shift from noninterest-bearing to interest-bearing balances. Our total deposit cost for Q2 2024 increased five basis points from 2.23% in the prior quarter to 2.28%.
