Sign in
GB

GUARANTY BANCSHARES INC /TX/ (GNTY)·Q3 2024 Earnings Summary

Executive Summary

  • Stable earnings and continued margin expansion: EPS $0.65, flat QoQ and up vs $0.54 YoY; NIM (FTE) rose to 3.33% (+7 bps QoQ, +31 bps YoY) as asset yields outpaced liability costs and CDs begin to reprice lower .
  • Balance sheet de-risking largely complete: deposits grew to $2.67B (+$42.8M QoQ), all FHLB advances repaid ($0 at quarter-end), liquidity ratio improved to 17.1% .
  • Credit remains benign; modest reserve release: ACL/loans 1.34%; reverse provision of $0.5M tied to lower loan balances and stable trends; NPAs 0.66% of assets; ORE holding costs lifted expenses but both ORE properties are under contract and expected to close in Q4 with minimal, if any, losses .
  • Outlook/tone: Management expects NIM to continue improving (about 2 bps/month) with deposit cost tailwinds from $254M of CDs repricing in Q4 (avg 4.77% → 3.55–4.20%); 2025 poised for growth (organic and bolt-on), with optionality to add securities if loan demand stays muted .

What Went Well and What Went Wrong

  • What Went Well

    • Margin expansion and stable earnings: “Net interest margin is now at 3.33%, up 7 bps from prior quarter” while EPS held at $0.65 .
    • Funding, capital, and liquidity strengthened: Deposits +$42.8M QoQ, FHLB advances repaid, liquidity ratio 17.1%; contingent liquidity ~$1.4B; total equity to average assets 10.4% .
    • Credit quality remains favorable with improving substandard trends and both ORE properties under contract; management expects minimal, if any, losses on sale .

  • What Went Wrong

    • Loan balances contracted again (-$78.5M QoQ; -$181.7M YoY) amid tighter underwriting and softer demand, pressuring balance-sheet scale .
    • ORE holding costs ($642K) and property-related expenses elevated “other noninterest expense” and nudged total noninterest expense slightly QoQ .
    • Deposit mix normalization continues (DDA 31.5% vs 34.0% YoY), keeping some pressure on funding costs despite recent easing in competitive pricing .

Financial Results

MetricQ3 2023Q2 2024Q3 2024
Net Interest Income ($M)$23.3 $23.9 $24.2
Noninterest Income ($M)$4.9 $4.6 $5.2
Net Earnings ($M)$6.3 $7.4 $7.4
EPS (Basic)$0.54 $0.65 $0.65
NIM (FTE, %)3.02% 3.26% 3.33%
Efficiency Ratio (%)72.64% 72.34% 70.47%
ROAA (annualized)0.78% 0.95% 0.96%
ROAE (annualized)8.43% 9.91% 9.58%

Balance sheet (period-end):

MetricSep 30, 2023Jun 30, 2024Sep 30, 2024
Total Assets ($B)$3.23 $3.08 $3.10
Gross Loans ($B)$2.32 $2.21 $2.14
Total Deposits ($B)$2.66 $2.63 $2.67
FHLB Advances ($M)$175 $45 $0
Noninterest-bearing Deposits (% of total)34.0% 31.2% 31.5%

Loan portfolio mix ($M):

CategorySep 30, 2023Jun 30, 2024Sep 30, 2024
C&I$292.4 $264.1 $245.7
Construction & Development$317.5 $231.1 $213.0
Commercial Real Estate$901.3 $899.1 $866.1
1–4 Family Residential$504.0 $526.7 $524.2
Multifamily$42.7 $47.5 $54.2
Consumer$58.3 $53.6 $52.5
Total Loans$2,318.2 $2,215.0 $2,136.5

Key KPIs:

KPIQ3 2023Q2 2024Q3 2024
Loan Yield (%)5.91% 6.29% 6.35%
Cost of Interest-bearing Deposits (%)3.00% 3.32% 3.33%
Avg Cost of Total Deposits (%) – Non-GAAP1.98% 2.28% 2.31%
ACL / Loans (%)1.34% 1.32% 1.34%
NPAs / Assets (%)0.09% 0.71% 0.66%

Non-GAAP note: The “Avg Cost of Total Deposits” is a non-GAAP metric; reconciliations are provided in company materials .

Guidance Changes

MetricPeriodPrevious Guidance (Q2’24 call)Current Guidance (Q3’24 call)Change
NIM trajectory2H24–2025Improve ~2–3 bps/month; potential to exceed ~3.50% by end-2025 as assets reprice Improve ~2 bps/month; trending “a little under 3.50%” exit-2025; deposit repricing a tailwind Maintained/slightly refined (timing/level)
Deposit costs (CDs)Q4’24Ongoing repricing; pressure easing ~$254M CDs (34% of CD book) reprice in Q4 at avg 4.77% → 3.55–4.20% ranges; 90% of CDs reprice over next 9 months (avg 4.73%) More specific and favorable
Loan growth outlook2H24 vs 2025Further contraction possible in 2H24; growth likely in 2025 post rate cuts/election clarity Near-term muted; positioned to grow $1–$2B over 3–4 years; expect positive 2025 growth; add AFS if loans lag Maintained near term; reiterated stronger medium-term
ORE resolutionQ4’24ORE (Austin) conservatively marked; marketing underway Both ORE under contract; expect Q4 closings with minimal/ no losses; Q3 ORE holding costs $642K Confidence increased
Share repurchaseOngoingContinue if earn-back acceptable (approx 3.6 years) Opportunistic; dependent on price/earn-back; may pause if stock moves higher Maintained
DividendOngoing$0.24 per share per quarter $0.24 per share declared for Oct 9, 2024 payment Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1’24 and Q2’24)Current Period (Q3’24)Trend
NIM / Asset-Liability RepricingNIM building; goal +2–3 bps/month; 3.50% in 2025 without cuts and reiterated in Q2 NIM 3.33%; expect ~2 bps/month; deposit repricing tailwind Improving
Deposit competition & betasCompetition easing; modeled down-rate pass-through later in 2025 “Much less pressure” on deposit pricing; longer-term beta sensitivity ~0.4% modeled (higher early-2025, then back to ~0.4% 2H25) Easing
ORE / CreditQ2: $900K valuation allowance on Austin ORE; marketing underway Two ORE under contract; expect Q4 closing; minimal/no losses; NCOs 0.04% Resolving
Loan growth outlookContraction possible near-term; 2025 recovery post cuts/election Muted now; plan to grow $1–$2B over 3–4 years; bolt-on M&A optionality Cautiously constructive
Liquidity/CapitalLiquidity ratio 13.6%; contingent liquidity ~$1.3B; repay FHLB Liquidity ratio 17.1%; contingent liquidity ~$1.4B; FHLB $0 Strengthening
Securities strategyAdding AFS as yields attractive; optional vs shrinking loans Continued systematic AFS adds (e.g., MBS 4.9%, UST 3.9%) Continuing

Management Commentary

  • Strategy and growth optionality (Ty Abston): “We think we’re well positioned to grow this company another $1 billion, $2 billion over the next 3 to 4 years… that’s going to be organic growth [and] bolt-on acquisitions” .
  • NIM and deposits (Shalene Jacobson): “We still do anticipate that NIM will increase by about 2 basis points per month… about $253 million in CDs will reprice [in Q4] at 4.77% weighted avg rate… specials now range from 3.55% to 4.2%” .
  • Deposit market tone (Ty Abston): “We’re seeing less deposit pressure… rates have been coming down across the board… much less pressure on the deposit side” .
  • ORE resolution and credit (Shalene Jacobson): “We now have sales contracts on both [ORE properties]… we do not anticipate any losses from the current book values” .

Q&A Highlights

  • NIM path and deposit repricing: Management reaffirmed ~2 bps/month NIM expansion with Q4 CD repricing (34% of CDs) providing tailwinds; 90% of CDs reprice over next 9 months (avg 4.73%) .
  • Loan growth vs securities: If loan growth lags into early-2025, they will continue systematic AFS purchases given attractive yields and ample liquidity .
  • Share repurchases: Buybacks remain opportunistic; willingness tied to valuation/earn-back; activity may slow if shares rise .
  • Deposit competition: Pricing pressure “much less” than 6–9 months ago, supporting easing deposit costs .
  • Rate sensitivity: ~<$250M in floating loans reprice daily; deposit beta modeling refined for 2025 (higher early, trending back to ~0.4% later in year) .

Estimates Context

  • We attempted to retrieve S&P Global (Capital IQ) consensus for quarterly EPS and revenue; consensus data was unavailable during this session. As a result, we cannot provide a beat/miss assessment versus Street estimates at this time. We will update once S&P Global data is accessible.

Key Takeaways for Investors

  • Margin expansion continues and should persist near term as CDs reprice down and loan yields remain elevated; each month of ~2 bps adds incremental earnings power even on a smaller balance sheet .
  • Funding profile improved: deposit growth, zero FHLB borrowings, higher liquidity and ample contingent capacity (~$1.4B) reduce tail risk and support offensive positioning into 2025 .
  • Credit benign; ORE resolution in Q4 removes a transitory expense headwind and simplifies the story; reserve ratio steady at 1.34% with very low NCOs .
  • Balance-sheet optionality: If loan demand remains muted, management will keep adding AFS at attractive yields; if demand improves, they have capital/liquidity to pivot to growth (organic plus bolt-ons) .
  • Capital return steady: Dividend maintained at $0.24 and buybacks remain a lever when valuation/earn-back are attractive .
  • 2025 setup: With political/rate clarity, Texas macro and customer sentiment could support a return to growth; management explicitly targets $1–$2B asset expansion over 3–4 years without stretching .

Additional detail and source documents:

  • Q3 2024 earnings press release/8‑K: financials, KPIs, non‑GAAP reconciliations .
  • Q3 2024 call transcript: strategic context, deposit repricing/competition, ORE resolution, buyback stance .
  • Prior quarters for trend analysis: Q2 2024 press release and call – –; Q1 2024 8‑K and call – –.