ADDISON, Texas–(BUSINESS WIRE)–#gnty–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 and year ended December 31, 2023. The Company’s net income available to common shareholders was $5.9 million, or $0.51 per basic share, for the quarter ended December 31, 2023, compared to $6.3 million, or $0.54 per basic share, for the quarter ended September 30, 2023 and $8.0 million, or $0.67 per basic share, for the quarter ended December 31, 2022. Return on average assets and average equity for the fourth quarter of 2023 were 0.73% and 7.93%, respectively, compared to 0.78% and 8.43%, respectively, for the third quarter of 2023 and 0.95% and 10.88%, respectively, for the fourth quarter of 2022. The decrease in earnings during the fourth quarter of 2023 compared to the third quarter of 2023 was primarily due to fluctuations in general operating expenses. The decrease in earnings in the fourth quarter of 2023 compared to the fourth quarter of 2022 was primarily due to lower net interest income in the current quarter, offset by a $2.8 million provision for credit losses in the prior year quarter.

“Despite the many industry headwinds in 2023, our earnings were relatively good. Our net interest margin hit its lowest point in 2023 during the third quarter but has steadily increased each month in the fourth quarter as our loans reprice and cost of non-maturing deposits remain steady. Our balance sheet is strong and our earnings stream continues to produce consistent results. Non-performing assets remain very low and although we anticipate the need to work with some borrowers as their loan rates adjust, we do not foresee any significant problems as a result of the higher interest rate environment or economic slowdown at this point. We are looking forward to 2024 and have built a balance sheet that will allow us to grow and capitalize on new opportunities when the timing is right and economic conditions become less uncertain. Our liquidity and capital remains very healthy and we continue to focus on driving long term shareholder value,” said Ty Abston, the Company’s Chairman and Chief Executive Officer.

QUARTERLY AND ANNUAL HIGHLIGHTS

Strong Asset Quality. Nonperforming assets as a percentage of total assets were 0.18% at December 31, 2023, compared to 0.09% at September 30, 2023 and 0.32% at December 31, 2022. Net charge-offs (annualized) to average loans were 0.04% for the quarter ended December 31, 2023, compared to 0.11% for the quarter ended September 30, 2023, and 0.01% for the quarter ended December 31, 2022. Net charge-offs to average loans for the years ending December 31, 2023 and 2022 were 0.04% and 0.03%, respectively.

Commercial real estate (CRE) loans, particularly office related loans, have received increased scrutiny in recent months. Our CRE loans and real estate C&D loans represent 39.7% and 12.8% of the total loan portfolio, respectively. Office-related loans represent 4.6% of the total loan portfolio and have an average balance of $515,000.
Granular and Stable Core Deposit Base. As of December 31, 2023, we have 87,664 total deposit accounts with an average account balance of $30,038. We have a historically reliable core deposit base, with strong and trusted banking relationships. Total deposits decreased by $25.0 million during the fourth quarter, which consisted primarily of a decrease in DDA balances of $48.6 million, a decrease in time deposits of $8.1 million and offset by an increase in savings and MMDA balances of $33.5 million. The decrease in time deposits resulted in part due to $25.0 million in brokered CDs that matured and were not renewed during the fourth quarter. The Bank has not historically used brokered deposits and does not foresee a reliance on them going forward, however, our year-end deposit balance does include $25.0 million of brokered deposits that mature in February 2024 and were issued, along with the $25.0 million that matured in the fourth quarter, to test their availability as a contingent liquidity source. Excluding public funds and bank-owned accounts, our uninsured deposits as of December 31, 2023 were 25.07% 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 32.4% of total deposits. Our cost of interest-bearing deposits increased 17 basis points during the quarter from 3.00% in the prior quarter to 3.17%, representing a beta on interest-bearing deposits of approximately 62.7% for the linked quarter compared to the federal funds target rates. These increases are primarily due to renewals of maturing certificates of deposit into new CD’s paying higher rates. Our cost of total deposits for the fourth quarter of 2023 increased 16 basis points from 1.98% in the prior quarter to 2.14%, representing a beta on total deposits of approximately 59.0% for the linked quarter.
Healthy Capital and Liquidity. Our capital and liquidity ratios, as well as contingent liquidity sources, remain very healthy. During the fourth quarter of 2023, we repurchased 24,800 shares, or 0.21% of average shares outstanding during the period, at an average price of $27.76 per share. During the year, we repurchased 434,798 shares at an average price of $25.82 per share. Our liquidity ratio, calculated as cash and cash equivalents and unpledged investments divided by total liabilities, was 12.2% as of December 31, 2023, compared to 14.5% as of December 31, 2022. Our total available contingent liquidity, net of current outstanding borrowings, is $1.2 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 December 31, 2023 was 9.5%. If we had to recognize our entire unrealized losses on both AFS and HTM securities, our total equity to average assets ratio would be 8.8%^†, which is still 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 fourth quarter of 2023 and 2022 was $23.8 million and $28.4 million, respectively, a decrease of $4.5 million, or 16.0%. The decrease in net interest income resulted from an increase in interest expense of $9.6 million, or 130.7%, compared to the prior year quarter, which was partially offset by an increase in interest income of $5.1 million, or 14.2%, 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 impacted by a shift from noninterest-bearing to interest-bearing deposit accounts, which resulted in increased expense in the fourth quarter of 2023 compared to the prior year quarter.

Net interest margin, on a fully taxable equivalent basis, for the fourth quarter of 2023 and 2022 was 3.11% and 3.57%, respectively. Net interest margin decreased 46 basis points primarily due to interest-bearing liabilities repricing faster than our interest-earning assets and a shift from no or lower interest cost DDA and money market accounts to higher cost certificates of deposit. The cost of interest-bearing liabilities increased 184 basis points from the prior year quarter, while interest earning asset yields increased 90 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 1.08% to 3.17%, a change of 209 basis points, in the fourth quarter of 2023 compared to the same period in 2022, as well as increased rates on FHLB advances, which increased from 3.97% to 5.40%, an increase of 143 basis points, from the prior year quarter. The increases in cost were partially offset by increases in yield on the loan portfolio from 5.19% to 6.06%, or 87 basis points, as well as 38 and 34 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 $89.6 million in new loans originated in the fourth quarter was 8.61%.

Net interest income, before the provision for credit losses, increased $511,000, or 2.2%, from $23.3 million in the third quarter of 2023 to $23.8 million in the fourth quarter of 2023. The increase in net interest income resulted primarily from an increase in interest income of $978,000, or 2.5%, partially offset by an increase in interest expense of $467,000, or 2.8%. The increase in interest income was primarily due to higher interest earned on loans of $808,000, or 2.3%, from the prior quarter and higher interest earned on securities of $103,000, or 2.5%. The increase in interest expense resulted primarily from an increase of $1.2 million, or 9.5%, in interest-bearing deposit expense, partially offset by a decrease in FHLB advances expense of $673,000, or 26.0%, and a decrease in interest expense on other borrowed money of $102,000, or 31.4%, from the prior quarter.

Net interest margin, on a taxable equivalent basis, increased from 3.02% for the third quarter of 2023 to 3.11% for the fourth quarter of 2023, an increase of nine basis points. The increase in net interest margin was primarily due to an increase on loan yield from 5.91% for the third quarter of 2023 to 6.06% for the fourth quarter of 2023, a change of 15 basis points. This increase was partially offset by an increase in the cost of interest-bearing deposits from 3.00% in the third quarter to 3.17% in the fourth quarter of 2023, a change of 17 basis points.

We recorded no provision for credit losses during 2023. During the fourth quarter of 2022, we recorded a $2.8 million provision to incorporate forecasts for an economic downturn and possible borrower stressors into our CECL model. The factors that were adjusted in the fourth quarter of 2022 remain relevant, however certain minor adjustments were made in subsequent quarters to reflect current portfolio credit quality trends. As of December 31, 2023 and December 31, 2022, our allowance for credit losses as a percentage of total loans was 1.33% and 1.34%, respectively.

Noninterest income decreased $326,000, or 6.4%, in the fourth quarter of 2023 to $4.8 million, compared to $5.1 million for the fourth quarter of 2022. The decrease from the same quarter in 2022 was partially due to a gain on securities sold of $172,000 in the prior year quarter and no gain on securities sales in the current quarter. There was also a decrease in the gain on sale of loans of $114,000, or 36.8% along with a $51,000, or 63.0%, decrease in mortgage fee income compared to the same quarter in the prior year.

Noninterest expense increased $505,000, or 2.4%, in the fourth quarter of 2023 to $21.4 million, compared to $20.9 million for the fourth quarter of 2022. The increase in noninterest expense in the fourth quarter of 2023 was driven primarily by a $351,000, or 2.8%, increase in employee compensation and benefits, an increase in software and technology expense of $215,000, or 14.1%, and a $175,000, or 22.5%, increase in legal and professional fees primarily related to recruiting fees compared to the fourth quarter of 2022. These were partially offset by a $136,000, or 27.9%, decrease in advertising and promotions expense.

Noninterest income in the fourth quarter of 2023 decreased by $143,000, or 2.9%, from $4.9 million in the third quarter of 2023. The decrease is primarily due to a decrease in other noninterest income of $62,000, or 8.2%, primarily the result of decreased credit card income during the period. Gain on sale of loans decreased $22,000, or 10.1%, while bank-owned life insurance income decreased $17,000, or 6.4%. Additionally, mortgage fee income fell $16,000, or 34.8%, and loan processing fee income decreased $12,000, or 9.4% from the third quarter.

Noninterest expense increased $888,000, or 4.3%, in the fourth quarter of 2023, from $20.5 million for the quarter ended September 30, 2023. The increase resulted from an increase of $771,000, or 6.5%, in employee compensation and benefits primarily due to annual raises, which went into effect during the fourth quarter. There was also a $250,000, or 16.8%, increase in software and technology expense and a $64,000, or 22.2%, increase in advertising and promotions expense during the fourth quarter of 2023 compared to the third quarter of 2023. These increases were partially offset by a $203,000, or 6.9%, decrease in occupancy expenses due to lower than anticipated property taxes payable and a reverse accrual posted in the fourth quarter, compared with the third quarter of 2023.

The Company’s efficiency ratio in the fourth quarter of 2023 was 74.81%, compared to 62.42% in the prior year quarter and 72.64% in the third quarter of 2023.

FINANCIAL CONDITION

Consolidated assets for the Company totaled $3.18 billion at December 31, 2023, compared to $3.23 billion at September 30, 2023 and $3.35 billion at December 31, 2022.

Gross loans increased slightly by $4.3 million, or 0.19%, during the quarter resulting in a gross loan balance of $2.32 billion at both December 31, 2023 and September 30, 2023. Our loan growth is entirely due to organic loan growth during the quarter and not to purchases of assets.

Gross loans decreased $55.6 million, or 2.3%, from $2.38 billion at December 31, 2022. The decrease in gross loans during the fourth quarter of 2023 compared to the fourth quarter of 2022 resulted from tightened credit underwriting standards and loan terms, along with fewer borrower requests in response to higher interest rates. Additionally, there was a $10.7 million decrease in warehouse lending loans, as we discontinued that line of business in the second quarter of 2023.

Total deposits decreased by $25.0 million, or 0.9%, to $2.63 billion at December 31, 2023, compared to $2.66 billion at September 30, 2023, and decreased $47.9 million, or 1.8%, from $2.68 billion at December 31, 2022. The decrease in deposits during the fourth quarter resulted from a decrease in noninterest-bearing deposits of $50.4 million, offset by an increase in interest-bearing deposits of $25.4 million. We also allowed $25.0 million in brokered certificates of deposit to mature and not renew during the fourth quarter of 2023. The decrease in deposits during the current quarter compared to the prior year quarter resulted primarily from a decrease in noninterest-bearing deposits of $199.2 million, partially offset by an increase in interest-bearing deposits of $151.3 million.

Nonperforming assets as a percentage of total loans were 0.25% at December 31, 2023, compared to 0.13% at September 30, 2023 and 0.46% at December 31, 2022. Nonperforming assets as a percentage of total assets were 0.18% at December 31, 2023, compared to 0.09% at September 30, 2023, and 0.32% at December 31, 2022. The Bank’s nonperforming assets consist primarily of nonaccrual loans. The decrease in nonperforming assets compared to the prior year end is primarily due to the resolution of several lower balance nonperforming assets during 2023.

Total equity was $303.8 million as of December 31, 2023, compared to $296.8 million at September 30, 2023 and $295.6 million at December 31, 2022. The increase from the previous quarter resulted primarily from net income of $5.9 million and a reduction in accumulated other comprehensive loss of $4.2 million due to increases in the fair value of available for sale securities during the period. This was partially offset by the payment of dividends of $2.7 million during the fourth quarter of 2023.

	As of
	2023								2022
(dollars in thousands)	December 31		September 30		June 30		March 31		December 31
ASSETS
Cash and due from banks	$	47,744	$	47,922	$	47,663	$	59,030	$	52,390
Federal funds sold		36,575		73,275		44,950		95,400		47,275
Interest-bearing deposits		5,205		8,980		4,738		3,695		6,802
Total cash and cash equivalents		89,524		130,177		97,351		158,125		106,467
Securities available for sale		196,195		178,644		166,596		173,744		188,927
Securities held to maturity		404,208		408,308		437,292		476,105		509,008
Loans held for sale		976		2,506		795		1,260		3,156
Loans, net		2,290,881		2,286,163		2,300,882		2,344,240		2,344,245
Accrued interest receivable		13,143		11,307		11,110		10,443		11,555
Premises and equipment, net		57,018		56,712		56,151		55,457		54,291
Other real estate owned		—		—		—		38		38
Cash surrender value of life insurance		42,348		42,096		41,830		38,619		38,404
Core deposit intangible, net		1,418		1,524		1,633		1,746		1,859
Goodwill		32,160		32,160		32,160		32,160		32,160
Other assets		56,920		80,816		60,396		64,350		61,385
Total assets	$	3,184,791	$	3,230,413	$	3,206,196	$	3,356,287	$	3,351,495
LIABILITIES AND EQUITY
Deposits
Noninterest-bearing	$	852,957	$	903,391	$	915,462	$	992,527	$	1,052,144
Interest-bearing		1,780,289		1,754,902		1,687,355		1,630,841		1,629,010
Total deposits		2,633,246		2,658,293		2,602,817		2,623,368		2,681,154
Securities sold under agreements to repurchase		25,172		19,366		20,532		13,338		7,221
Accrued interest and other liabilities		32,242		31,218		30,701		30,125		28,409
Line of credit		4,500		2,000		12,000		—		—
Federal Home Loan Bank advances		140,000		175,000		195,000		340,000		290,000
Subordinated debentures		45,785		47,752		47,719		49,186		49,153
Total liabilities		2,880,945		2,933,629		2,908,769		3,056,017		3,055,937

Equity attributable to Guaranty Bancshares, Inc.		303,300		296,226		296,862		299,700		294,984
Noncontrolling interest		546		558		565		570		574
Total equity		303,846		296,784		297,427		300,270		295,558
Total liabilities and equity	$	3,184,791	$	3,230,413	$	3,206,196	$	3,356,287	$	3,351,495

	Quarter Ended
	2023												2022
(dollars in thousands, except per share data)	December 31			September 30			June 30			March 31			December 31
STATEMENTS OF EARNINGS
Interest income	$	40,796		$	39,818		$	38,734		$	37,144		$	35,720
Interest expense		16,983			16,516			14,031			11,982			7,362
Net interest income		23,813			23,302			24,703			25,162			28,358
Provision for credit losses		—			—			—			—			2,800
Net interest income after provision for credit losses		23,813			23,302			24,703			25,162			25,558
Noninterest income		4,796			4,939			7,873			4,905			5,122
Noninterest expense		21,402			20,514			20,471			19,967			20,897
Income before income taxes		7,207			7,727			12,105			10,100			9,783
Income tax provision		1,341			1,437			2,529			1,823			1,764
Net earnings	$	5,866		$	6,290		$	9,576		$	8,277		$	8,019
Net loss attributable to noncontrolling interest		12			7			5			4			3
Net earnings attributable to Guaranty Bancshares, Inc.	$	5,878		$	6,297		$	9,581		$	8,281		$	8,022

PER COMMON SHARE DATA
Earnings per common share, basic	$	0.51		$	0.54		$	0.82		$	0.69		$	0.67
Earnings per common share, diluted		0.51			0.54			0.81			0.69			0.67
Cash dividends per common share		0.23			0.23			0.23			0.23			0.22
Book value per common share – end of quarter		26.28			25.64			25.58			25.13			24.70
Tangible book value per common share – end of quarter⁽¹⁾		23.37			22.72			22.67			22.29			21.85
Common shares outstanding – end of quarter⁽⁴⁾		11,540,644			11,554,094			11,603,167			11,925,357			11,941,672
Weighted-average common shares outstanding, basic		11,536,878			11,568,897			11,735,475			11,939,593			11,938,973
Weighted-average common shares outstanding, diluted		11,589,165			11,619,342			11,756,512			12,012,004			12,048,475

PERFORMANCE RATIOS
Return on average assets (annualized)		0.73	%		0.78	%		1.17	%		1.01	%		0.95	%
Return on average equity (annualized)		7.93			8.43			12.87			11.18			10.88
Net interest margin, fully taxable equivalent (annualized)⁽²⁾		3.11			3.02			3.19			3.24			3.57
Efficiency ratio⁽³⁾		74.81			72.64			62.84			66.41			62.42

(1) See Reconciliation of non-GAAP Financial Measures table.
(2) Net interest margin on a 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%.
(3) 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.
(4) Excludes the dilutive effect, if any, of shares of common stock issuable upon exercise of outstanding stock options.

	For the Years Ended
	December 31,
(dollars in thousands, except per share data)	2023			2022
INCOME STATEMENTS
Interest income	$	156,492		$	123,209
Interest expense		59,512			15,380
Net interest income		96,980			107,829
Provision for loan losses		—			2,150
Net interest income after provision for loan losses		96,980			105,679
Noninterest income		22,513			23,485
Noninterest expense		82,354			79,907
Income before income taxes		37,139			49,257
Income tax provision		7,130			8,834
Net earnings	$	30,009		$	40,423
Net loss attributable to noncontrolling interest		28			24
Net earnings attributable to Guaranty Bancshares, Inc.	$	30,037		$	40,447

PER COMMON SHARE DATA
Earnings per common share, basic	$	2.57		$	3.38
Earnings per common share, diluted		2.56			3.34
Cash dividends per common share		0.92			0.88
Book value per common share – end of period		26.28			24.70
Tangible book value per common share – end of period⁽¹⁾		23.37			21.85
Common shares outstanding – end of period⁽⁴⁾		11,540,644			11,941,672
Weighted-average common shares outstanding, basic		11,693,761			11,980,209
Weighted-average common shares outstanding, diluted		11,738,605			12,092,847

PERFORMANCE RATIOS
Return on average assets		0.92	%		1.24	%
Return on average equity		10.10			13.76
Net interest margin, fully taxable equivalent⁽²⁾		3.15			3.54
Efficiency ratio⁽³⁾		68.92			60.85

(1) See Reconciliation of non-GAAP Financial Measures table.
(2) Net interest margin on a 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%.
(3) 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.
(4) Excludes the dilutive effect, if any, of shares of common stock issuable upon exercise of outstanding stock options.

	As of
	2023												2022
(dollars in thousands)	December 31			September 30			June 30			March 31			December 31
LOAN PORTFOLIO COMPOSITION
Commercial and industrial	$	287,565		$	292,410		$	295,864		$	295,936		$	314,067
Real estate:
Construction and development		296,639			317,484			345,127			372,203			377,135
Commercial real estate		923,195			901,321			891,883			900,190			887,587
Farmland		186,295			188,614			187,105			190,802			185,817
1-4 family residential		514,603			504,002			496,340			499,944			493,061
Multi-family residential		44,292			42,720			44,385			44,760			45,147
Consumer		57,059			58,294			59,498			60,163			61,394
Agricultural		12,685			13,076			13,447			13,545			13,686
Overdrafts		243			328			252			270			282
Total loans⁽¹⁾⁽²⁾	$	2,322,576		$	2,318,249		$	2,333,901		$	2,377,813		$	2,378,176

	Quarter Ended
	2023												2022
(dollars in thousands)	December 31			September 30			June 30			March 31			December 31
ALLOWANCE FOR CREDIT LOSSES
Balance at beginning of period	$	31,140		$	31,759		$	31,953		$	31,974		$	29,235
Loans charged-off		(242	)		(644	)		(224	)		(94	)		(103	)
Recoveries		22			25			30			73			42
Provision for credit loss expense		—			—			—			—			2,800
Balance at end of period	$	30,920		$	31,140		$	31,759		$	31,953		$	31,974

Allowance for credit losses / period-end loans		1.33	%		1.34	%		1.36	%		1.34	%		1.34	%
Allowance for credit losses / nonperforming loans		552.9			1,148.2			894.6			238.4			294.7
Net charge-offs / average loans (annualized)		0.04			0.11			0.03			0.00			0.01

NONPERFORMING ASSETS
Nonaccrual loans	$	5,592		$	2,712		$	3,550		$	13,405		$	10,848
Other real estate owned		—			—			—			38			38
Repossessed assets owned		234			250			—			—			—
Total nonperforming assets	$	5,826		$	2,962		$	3,550		$	13,443		$	10,886

Nonperforming assets as a percentage of:
Total loans⁽¹⁾⁽²⁾		0.25	%		0.13	%		0.15	%		0.57	%		0.46	%
Total assets		0.18			0.09			0.11			0.40			0.32

(1) Excludes outstanding balances of loans held for sale of $976,000, $2.5 million, $795,000, $1.3 million, and $3.2 million as of December 31, September 30, June 30 and March 31, 2023, and December 31, 2022, respectively.
(2) Excludes deferred loan fees of $775,000, $946,000, $1.3 million, $1.6 million, and $2.0 million as of December 31, September 30, June 30 and March 31, 2023, and December 31, 2022, respectively.