Guaranty Bancshares, Inc. Reports Fourth Quarter and Year-End 2020 Financial Results

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Guaranty Bancshares, Inc. (NASDAQ: GNTY), the parent company of Guaranty Bank & Trust, N.A., today reported financial results for the fiscal quarter and year ended December 31, 2020. The Company's net income available to common shareholders was $9.9 million, or $0.90 per basic share, for the quarter ended December 31, 2020, compared to $10.1 million, or $0.92 per basic share, for the quarter ended September 30, 2020 and $7.4 million, or $0.64 per basic share, for the quarter ended December 31, 2019. Return on average assets and average equity for the fourth quarter of 2020 were 1.48% and 14.53%, respectively, compared to 1.53% and 15.21%, respectively, for the third quarter of 2020 and 1.25% and 11.24%, respectively, for the fourth quarter of 2019. The increase in earnings during the third and fourth quarters of 2020, compared to the fourth quarter of 2019, was largely due to the forgiveness and amortization of Paycheck Protection Program ("PPP") loans and recognition of associated loan origination fees, as well as increased non-interest income from mortgage and warehouse lending activities and decreases in interest expense relative to interest income. Net core earnings, excluding provisions for loan losses and income taxes and PPP net origination income, as well as our core net interest margin, adjusted to exclude the effects of PPP loans, are described further in tables below.

"Despite the many challenges endured by our customers and employees during 2020, we are pleased with the Company’s operating and financial results for fourth quarter and for the year. Throughout 2020, we worked diligently with our employees to follow strong safety protocols and to provide technology that allows them to work remotely when necessary. We participated in the SBA’s PPP loan program and worked with our customers to provide temporary payment or interest-only deferrals. We closely analyzed our loan portfolio and increased our reserves for credit losses due to the ongoing uncertainty of the impact and timing of possible economic hardships resulting from COVID-19. We gave back to our communities through monetary and volunteer donations to non-profits that support those impacted by the virus. Texas has proven to be a very resilient economy and it is in a strong position to rebound when the vaccines are readily available and the virus begins to subside. As our fourth quarter and year-end results indicate, our Bank continues to provide a solid core earnings foundation, sustainable net interest margin and very strong asset quality, all of which contribute to strong shareholder prospects. We look forward to 2021 and the ability for our communities, employees and customers to return to a more normal and social lifestyle," commented Ty Abston, the Company's Chairman and Chief Executive Officer.

QUARTERLY AND ANNUAL HIGHLIGHTS

  • Strong Net Earnings. Net earnings for the quarter were $9.9 million, down slightly from $10.1 million for the immediately prior quarter and up from $7.4 million for the same quarter of 2019. Net core earnings, which exclude provisions for loan losses and income tax, net PPP income, and interest on PPP-related borrowings, were $9.6 million for the fourth quarter, compared to $11.1 million for the third quarter of 2020, and $8.9 million during the fourth quarter of 2019.

    Net earnings for the year were $27.4 million, up from $26.3 million for the year ended 2019. Net core earnings were $40.3 million for the year ended December 31, 2020, compared to $33.3 million for the same period in 2019.

  • Solid Net Interest Margin. The fully tax-equivalent ("FTE") net interest margin was 3.85% for the fourth quarter of 2020, compared to 3.61% in the preceding quarter and 3.77% in the fourth quarter of 2019. Net interest income increased $1.7 million, or 7.5%, from $22.3 million in the third quarter of 2020 to $24.0 million in the fourth quarter of 2020. Interest expense decreased $376,000, or 14.0%, from $2.7 million in the third quarter of 2020 to $2.3 million in fourth quarter of 2020. The Bank continues to decrease cost of funds as higher rate CDs mature and to reduce interest rates on non-maturing deposits as market conditions allow. In addition, 63.9% of the loan portfolio, or $1.1 billion, has interest rate floors and 51.7% of those loans are currently at their loan floor. The weighted average interest rate of loans currently at their floor is 4.49%.

  • Steady Credit Quality and Reduced Deferrals. Non-performing assets as a percentage of total loans were 0.70% at December 31, 2020, compared to 0.72% at September 30, 2020 and December 31, 2019. Net charge-offs to average loans (annualized) were 0.03% at December 31, 2020, compared to 0.01% at September 30, 2020, and 0.04% at December 31, 2019. The level of initial COVID-related loan deferrals provided by the Bank during the first and second quarters of 2020 has declined significantly, with information about subsequent deferrals made on those loans described further in the Financial Condition section below.

    The Bank had no provision for loan losses during the quarter, compared to a $300,000 provision reversal in the third quarter of 2020 and no provision in the fourth quarter of 2019. The lack of provision expense and provision reversal during these quarters is indicative of our allowance for credit losses methodology and adoption of the Current Expected Credit Losses ("CECL") model during 2020. Additionally, in the second quarter of 2020, qualitative factor adjustments were made in our CECL model, primarily derived from changes in national GDP, Texas unemployment rates and national industry-related CRE trends, all of which are impacted by the effects of COVID-19 and resulted in the $12.1 million provision expense during second quarter. Qualitative factor adjustments made in the first half of 2020 remained consistent in the second half of 2020 because our CECL model assumes certain lag time in estimated losses that may occur as a result of the pandemic and due to the continued uncertainty surrounding the virus and timing of economic recovery. As of December 31, 2020, the Bank’s allowance for credit losses to gross loans is 1.80%, or 1.95% excluding PPP loan balances.

Non-GAAP financial metric. Calculations of this metric and reconciliations to GAAP are included in the schedules accompanying this release.

RESULTS OF OPERATIONS

Large provisions for credit losses in the second quarter of 2020 resulting from effects of COVID-19 and participation in the PPP program have created temporary extraordinary results in the calculation of net earnings and related performance ratios. With the credit outlook still uncertain as a result of COVID-19 and other economic factors, the following table illustrates net earnings and net core earnings results, which are pre-tax, pre-provision and pre-extraordinary PPP income, as well as performance ratios for the prior five quarters:

Quarter Ended

2020

2019

$ in thousands ('000s)

December 31

September 30

June 30

March 31

December 31

Net earnings

$

9,915

$

10,134

$

1,075

$

6,278

$

7,369

Adjustments:

Provision for credit losses

(300

)

12,100

1,400

Income tax provision (benefit)

2,290

2,350

(190

)

1,445

1,573

PPP loans, including fees

(2,654

)

(1,076

)

(2,540

)

Net interest expense on PPP-related borrowings

3

31

Net core earnings

$

9,551

$

11,111

$

10,476

$

9,123

$

8,942

Total average assets

$

2,659,725

$

2,639,335

$

2,657,609

$

2,325,618

$

2,341,766

Adjustments:

PPP loans average balance

(179,240

)

(209,506

)

(163,184

)

Excess fed funds sold due to PPP-related borrowings

(8,152

)

(84,066

)

Total average assets, adjusted

$

2,480,485

$

2,421,677

$

2,410,359

$

2,325,618

$

2,341,766

Total average equity

$

271,397

$

265,027

$

258,225

$

251,159

$

260,160

PERFORMANCE RATIOS

Net earnings to average assets (annualized)

1.48

%

1.53

%

0.16

%

1.09

%

1.25

%

Net earnings to average equity (annualized)

14.53

15.21

1.67

9.94

11.24

Net core earnings to average assets, as adjusted (annualized)

1.53

1.83

1.75

1.58

1.51

Net core earnings to average equity (annualized)

14.00

16.68

16.32

14.61

13.64

PER COMMON SHARE DATA

Weighted-average common shares outstanding, basic

10,966,504

11,012,060

11,025,924

11,432,391

11,533,849

Earnings per common share, basic

$

0.90

$

0.92

$

0.10

$

0.55

$

0.64

Net core earnings per common share, basic

0.87

1.01

0.95

0.80

0.78

† Non-GAAP financial metric. Calculations of this metric and reconciliations to GAAP are included in the schedules accompanying this release.

Net interest income, before the provision for loan losses, in the fourth quarter of 2020 and 2019 was $24.0 million and $20.5 million, respectively, an increase of $3.5 million, or 16.9%, resulting primarily from a decrease in deposit-related interest expense of $3.1 million, or 62.4%, compared to the same quarter of the prior year. Net interest income, before the provision for loan losses, in the third and fourth quarters of 2020 was $22.3 million and $24.0 million, respectively; an increase of $1.7 million, or 7.5%, resulting primarily from an increase in loan income of $1.3 million, or 5.8%, during the current quarter.

Net interest margin, on a taxable equivalent basis, for the fourth quarter of 2020 and 2019 was 3.85% and 3.77%, respectively. Loan yield decreased from 5.32% for the fourth quarter of 2019 to 4.93% for the fourth quarter of 2020, a change of 39 basis points, while the cost of interest-bearing deposits decreased from 1.35% to 0.51% during the same period, a change of 84 basis points. The decrease in loan yield was primarily due to the repricing of variable rate loans to lower interest rates during the period. The decrease in average deposit rate was primarily due to continued reductions in interest rates for non-maturing deposits as market conditions have allowed.

Net interest margin, on a taxable equivalent basis, increased from 3.61% in the third quarter of 2020 to 3.85% in the fourth quarter of 2020. Loan yield increased from 4.59% for the third quarter of 2020 to 4.93% for the fourth quarter of 2020, a change of 34 basis points due primarily to the effect of PPP loans during the third and fourth quarters of 2020. Loan yield, excluding the effect PPP loans, decreased seven basis points from the third quarter to the fourth quarter of 2020, due to the continued repricing of variable rate loans to lower interest rates. The cost of interest-bearing deposits decreased from 0.63% to 0.51% during the same period, a change of 12 basis points. These decreases were due primarily to the maturity of higher-rate CDs during the fourth quarter of 2020, as well as continued reductions in interest rates for non-maturing deposits as market conditions have allowed.

The Bank’s continued participation in the PPP program has created temporary extraordinary results in the calculation of net interest margin. To illustrate core net interest margin, the table below excludes PPP loans and their associated fees and costs, as well as the average balance of related FHLB borrowings and fed funds sold, for the three months and year ended December 31, 2020:

For the Three Months Ended
December 31, 2020

For the Year Ended
December 31, 2020

$ in thousands ('000s)

Average
Outstanding
Balance

Interest
Earned/
Interest
Paid

Average
Yield/ Rate

Average
Outstanding
Balance

Interest
Earned/
Interest
Paid

Average
Yield/ Rate

Total interest-earning assets

$

2,496,945

$

26,253

4.18

%

$

2,404,779

$

103,042

4.28

%

Adjustments:

PPP loans average balance and net fees(1)

(179,240

)

(2,654

)

5.89

(138,291

)

(6,270

)

4.53

Excess fed funds sold due to PPP-related borrowings

(22,951

)

(23

)

0.10

Total interest-earning assets, net of PPP effects

$

2,317,705

$

23,599

4.05

%

$

2,243,537

$

96,749

4.31

%

Interest expense adjustment:

PPP-related FHLB borrowings

(22,951

)

(57

)

0.25

Net interest income

$

23,952

$

89,982

Net interest margin(2)

3.82

%

3.74

%

Net interest margin, FTE(3)

3.85

3.77

Net interest income, net of PPP effects

21,298

83,746

Net interest margin, net of PPP effects†(4)

3.66

3.73

Net interest margin, FTE, net of PPP effects†(5)

3.70

3.77

Efficiency ratio(6)

59.82

58.86

Efficiency ratio, net of PPP effects†(7)

65.55

63.10

† Non-GAAP financial metric. Calculations of this metric and reconciliations to GAAP are included in the schedules accompanying this release.

(1) Interest earned consists of interest income of $470,000 and $1.4 million, and net origination fees recognized in earnings of $2.2 million and $4.9 million for the three months and year ended December 31, 2020

(2) Net interest margin is equal to net interest income divided by average interest-earning assets, annualized. Taxes are not a part of this calculation.

(3) 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%.

(4) Net interest margin is equal to net interest income, net of PPP effects, divided by average interest-earning assets, annualized. Taxes are not a part of this calculation.

(5) Net interest margin on a taxable equivalent basis is equal to net interest income, net of PPP effects, adjusted for nontaxable income divided by average interest-earning assets, annualized, using a marginal tax rate of 21%.

(6) 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.

(7) The efficiency ratio was calculated by dividing total noninterest expense, net of PPP-related deferred costs, by net interest income, net of PPP effects, plus noninterest income, excluding securities gains or losses. Taxes are not part of this calculation.

The Bank adopted the CECL standard (Accounting Standards Update 2016-13 or ASC 326) on January 1, 2020. The day one impact of adopting CECL resulted in an allowance increase of $4.5 million, or 28.1%, from December 31, 2019. There was no provision for loan losses during the fourth quarter of 2020 and 2019, compared to provision reversal of $300,000 in the third quarter of 2020. The provision expense recorded during the first half of 2020 resulted largely from additional qualitative factors, primarily derived from changes in national GDP, Texas unemployment rates and national industry related CRE trends, all of which were impacted by the effects of COVID-19. Other provision increases in the first half of 2020 resulted from detailed review of the loan portfolio and from discussions with borrowers about their financial hardships, if any, which led to downgrades of loans in loans and industries affected by the crisis to appropriate risk ratings given the expected impacts of COVID-19. Management believes the provisions made in both the first and second quarter, as a result of risk rating downgrades and qualitative factor adjustments in the CECL model, appropriately capture the current credit risks associated with COVID-19. During the third and fourth quarters of 2020, qualitative factor adjustments remained consistent because our CECL model assumes a lag in estimated losses as a result of economic declines caused by the virus. During the third quarter of 2020, loan balances declined in certain pooled segments that contain higher allowance allocation factors, resulting in a lower calculated allowance for credit losses and a reverse provision of $300,000. Furthermore, a new round of stimulus has been introduced (known as "PPP-2"), which is an indication that the economic effects of the pandemic may be longer lasting than initially predicted. It is possible that the economic effects of the pandemic could continue throughout and even beyond the 2021 year, and the long term economic impacts of COVID-19 and the response of governments and our customers are still unknown.

Noninterest income increased $1.8 million, or 37.5%, in the fourth quarter of 2020, to $6.4 million, compared to $4.7 million for the fourth quarter of 2019. The increase from the same quarter in 2019 was due primarily to an increase in the gain on sale of loans of $1.2 million, or 159.4%, and an increase in merchant and debit card fees of $256,000, or 22.5%, from the same quarter of the prior year. The remaining increase resulted from a $163,000 increase in mortgage and warehouse fee income and a $70,000 increase on gains on sale of assets and ORE. These increases were partially offset by a $154,000, or 15.1%, decrease in service charges during the fourth quarter of 2020, as compared to the same quarter of 2019, due primarily to lower insufficient funds fees as consumers are transitioning to more digital spending methods.

Noninterest income decreased $237,000, or 3.6%, to $6.4 million in the fourth quarter of 2020, compared to $6.7 million for the quarter ended September 30, 2020. This was primarily attributable to a decrease in merchant and debit card fees caused by the receipt of approx. $190,000 from an annual contract incentive payment from the debit card processor in the third quarter that was not present in the fourth quarter 2020, as well as a decrease in the gain on sale of loans of $91,000, or 4.3%, during the fourth quarter. These were partially offset by an increase in service charges of $151,000, or 21.1%.

Noninterest expense increased $1.9 million, or 12.0%, in the fourth quarter of 2020, compared to the fourth quarter of 2019. The increase in noninterest expense in the fourth quarter of 2020 was primarily driven by an increase in employee compensation and benefits expense of $879,000, or 9.4%, to $10.2 million, from the same quarter of the prior year, as well as an increase in legal and professional fees of $357,000, or 58.4%. Additional increases were due to the effects of a $252,000, or 100%, increase in FDIC insurance assessment fees during the fourth quarter of 2020 due to FDIC assessment credits of $534,000 that were received and recognized during the prior year. Software and technology expense also increased $225,000, or 24.9%, as a result of new software and hardware investments to allow employees to securely work from home and to improve online deposit account opening. Occupancy expenses increased $98,000, or 3.9%, from the same quarter of the prior year and there was an increase in ATM and debit card expense of $89,000, or 19.5%, resulting from increased usage of ATM and debit cards during the period. The company’s efficiency ratio in the fourth quarter of 2020 was 59.82%, compared to 64.47% in the same quarter last year. Adjusted to remove the effects of PPP-related transactions, the company’s efficiency ratio for the fourth quarter of 2020 was 65.55%.

Noninterest expense increased $1.4 million, or 8.4%, in the fourth quarter of 2020 to $18.2 million, compared to the quarter ended September 30, 2020. The increase was primarily due to a $772,000, or 8.2%, increase in employee compensation and benefits associated with the resumption of normal levels of employee bonus accruals through the end of the year, as well as a $394,000, or 68.6%, increase in legal and professional fees during the quarter resulting from recruiting costs and additional audit and legal fees. The company’s efficiency ratio in the fourth quarter of 2020 was 59.82%, compared to 57.90% in the prior quarter. Adjusted to remove the effects of PPP-related transactions, the company’s efficiency ratio for the fourth quarter of 2020 was 65.55% and for the third quarter of 2020 was 60.22%.

Non-GAAP financial metric. Calculations of this metric and reconciliations to GAAP are included in the schedules accompanying this release.

FINANCIAL CONDITION

Consolidated assets for the company totaled $2.74 billion at December 31, 2020, compared to $2.66 billion at September 30, 2020 and $2.32 billion at December 31, 2019. Gross loans decreased 4.7%, or $91.8 million, to $1.87 billion at December 31, 2020, compared to loans of $1.96 billion at September 30, 2020. Gross loans increased 9.4%, or $160.4 million, from $1.71 billion at December 31, 2019. The increase in gross loans during the fourth quarter of 2020 compared to the fourth quarter of 2019 included outstanding PPP loan balances of $139.8 million, to 1,452 borrowers, as of December 31, 2020. Excluding the outstanding PPP balances as of December 31, 2020, gross loans increased $20.6 million, or 1.21%. The decrease in gross loans from the third quarter of 2020 to the fourth quarter of 2020 is primarily due to the $70.0 million, or 33.3%, decline in outstanding PPP loan balances in the fourth quarter of 2020. Excluding the decrease in the balance of PPP loans, gross loans decreased by 1.1%, or $22.0 million, from the prior quarter.

Deposits increased by 2.8%, or $63.3 million, to $2.29 billion at December 31, 2020, compared to $2.22 billion at September 30, 2020. Total deposits increased 16.8%, or $329.6 million, from $1.96 billion at December 31, 2019. Changes in deposits during these periods were heavily impacted by the deposit of PPP loan proceeds into demand accounts at the Bank, as well as apparent changes in depositor spending habits in these periods resulting from economic and other uncertainties due to COVID-19. Shareholders' equity totaled $272.6 million as of December 31, 2020, compared to $266.9 million at September 30, 2020 and $261.6 million at December 31, 2019. The increase from the previous quarter resulted primarily from an increase in net income of $10.0 million, offset by the purchase of treasury stock during the quarter of $2.8 million and the payment of dividends of $2.2 million.

Nonperforming assets as a percentage of total loans were 0.70% at December 31, 2020, compared to 0.72% at September 30, 2020 and December 31, 2019. The Bank’s nonperforming assets consist primarily of nonaccrual loans, three of which are Small Business Administration (SBA) 7(a), partially guaranteed (75%) loans acquired in the June 2018 acquisition of Westbound Bank with combined book balances of $8.7 million as of December 31, 2020. These loans were internally identified as problem assets prior to COVID-19 and are properly reserved. Management continues to work toward a satisfactory resolution for these three loans. Excluding these partially guaranteed SBA loans, non-performing assets as a percentage of total loans at December 31, 2020 would be 0.29% and, excluding PPP loans, would be 0.32%.

During the first and second quarters of 2020, the Bank provided financial relief to many of its customers due to the COVID-19 outbreak through either 3-month principal and interest ("P&I") payment deferrals or through 6-month interest-only ("I/O") deferrals. Under the initial deferral program, the Bank provided 3-month P&I deferrals on 658 loans with principal balances of $247.8 million and provided up to 6-month I/O deferrals on 336 loans with principal balances of $183.7 million. As of January 14, 2021, there are 16 loans totaling $50.4 million that remain under a deferral program. There are three loans with outstanding balances of $1.4 million that remain under their initial 6-month I/O deferral. There are 12 loans with principal balances of $46.6 million that have entered a subsequent interest-only deferral. There is one loan with a principal balance of $2.4 million that has entered a subsequent P&I deferral. We will continue to work with these borrowers, who are primarily in the hotel, restaurant and hospitality industries, to allow their businesses and payment sources to recover to normal levels.

The table below provides detail about the current I/O and P&I and deferral programs as of January 14, 2021:

As of January 14, 2021

$ in thousands ('000s)

I/O Deferred

P&I Deferred

CRE - owner occupied

$

3,903

$

CRE - non-owner occupied

2,403

2,425

Construction and development

679

Commercial and industrial

51

Subtotal - deferrals, excluding COVID higher risk industries

$

7,036

$

2,425

COVID higher risk industries (excluded from segment subtotals above):

Restaurant

$

3,984

$

Hotel

36,979

Subtotal - deferrals of COVID higher risk industries

$

40,963

$

Total of all deferrals

$

47,999

$

2,425

% of total loans, excluding PPP

2.8

%

0.1

%

Finally, management continues to closely monitor loans and concentrations in COVID-19 affected industries. Social distancing, stay-at-home orders and other measures as a result of the virus have particularly affected the restaurant, hospitality, retail commercial real estate ("CRE") and energy sectors. Excluding SBA partially guaranteed (75%) loans, the Bank has direct exposure, through total loan commitments with weighted average loan-to-values ("LTV"), as of December 31, 2020, of $26.4 million with 60.5% weighted average LTV to restaurants, $56.1 million with 51.5% weighted average LTV to retail CRE and $67.0 million with 56.5% weighted average LTV to hotel/hospitality borrowers.

Guaranty Bancshares, Inc.

Consolidated Financial Summary (Unaudited)

(In thousands, except share and per share data)

As of

2020

2019

December 31

September 30

June 30

March 31

December 31

ASSETS

Cash and due from banks

$

47,836

$

35,714

$

35,490

$

40,354

$

39,907

Federal funds sold

218,825

101,300

104,375

81,250

45,246

Interest-bearing deposits

85,130

56,357

51,129

25,324

5,561

Total cash and cash equivalents

351,791

193,371

190,994

146,928

90,714

Securities available for sale

380,795

368,887

376,381

377,062

212,716

Securities held to maturity

155,458

Loans held for sale

5,542

9,148

7,194

4,024

2,368

Loans, net

1,831,737

1,921,234

1,919,201

1,696,861

1,690,794

Accrued interest receivable

9,834

8,361

11,864

8,148

9,151

Premises and equipment, net

55,212

55,468

55,251

54,496

53,431

Other real estate owned

404

310

402

605

603

Cash surrender value of life insurance

35,510

35,304

34,920

34,713

34,495

Core deposit intangible, net

2,999

3,213

3,426

3,639

3,853

Goodwill

32,160

32,160

32,160

32,160

32,160

Other assets

34,848

35,228

35,402

32,348

32,701

Total assets

$

2,740,832

$

2,662,684

$

2,667,195

$

2,390,984

$

2,318,444

LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits

Noninterest-bearing

$

779,740

$

776,364

$

772,179

$

528,817

$

525,865

Interest-bearing

1,506,650

1,446,718

1,469,847

1,471,609

1,430,939

Total deposits

2,286,390

2,223,082

2,242,026

2,000,426

1,956,804

Securities sold under agreements to repurchase

15,631

20,520

17,414

11,843

11,100

Accrued interest and other liabilities

25,257

25,814

25,960

23,645

23,061

Line of credit

12,000

7,000

2,000

20,000

Federal Home Loan Bank advances

109,101

99,105

100,610

70,614

55,118

Subordinated debentures

19,810

20,310

20,310

10,810

10,810

Total liabilities

...

2,468,189

2,395,831

2,408,320

2,137,338

2,056,893

Total shareholders' equity

272,643

266,853

258,875

253,646

261,551

Total liabilities and shareholders' equity

$

2,740,832

$

2,662,684

$

2,667,195

$

2,390,984

$

2,318,444

Guaranty Bancshares, Inc.

Consolidated Financial Summary (Unaudited)

(In thousands, except share and per share data)

Quarter Ended

2020

2019

December 31

September 30

June 30

March 31

December 31

STATEMENTS OF EARNINGS

Interest income

$

26,253

$

24,956

$

26,581

$

25,252

$

25,848

Interest expense

2,301

2,677

3,399

4,683

5,354

Net interest income

23,952

22,279

23,182

20,569

20,494

Provision for credit losses

(300

)

12,100

1,400

Net interest income after provision for loan losses

23,952

22,579

11,082

19,169

20,494

Noninterest income

6,426

6,663

4,987

4,961

4,674

Noninterest expense

18,173

16,758

15,184

16,407

16,226

Income before income taxes

12,205

12,484

885

7,723

8,942

Income tax provision (benefit)

2,290

2,350

(190

)

1,445

1,573

Net earnings

$

9,915

$

10,134

$

1,075

$

6,278

$

7,369

PER COMMON SHARE DATA

Earnings per common share, basic

$

0.90

$

0.92

$

0.10

$

0.55

$

0.64

Earnings per common share, diluted(1)

0.90

0.92

0.10

0.55

0.63

Cash dividends per common share

0.20

0.20

0.19

0.19

0.18

Book value per common share - end of quarter

24.93

24.29

23.50

22.79

22.65

Tangible book value per common share - end of quarter(2)

21.72

21.07

20.27

19.58

19.53

Common shares outstanding - end of quarter

10,935,415

10,988,239

11,013,804

11,128,556

11,547,443

Weighted-average common shares outstanding, basic

10,966,504

11,012,060

11,025,924

11,432,391

11,533,849

Weighted-average common shares outstanding, diluted(1)

11,014,149

11,012,060

11,025,924

11,432,391

11,621,887

PERFORMANCE RATIOS

Return on average assets (annualized)

1.48

%

1.53

%

0.16

%

1.09

%

1.25

%

Return on average equity (annualized)

14.53

15.21

1.67

9.94

11.24

Net interest margin, fully taxable equivalent (annualized)(3)

3.85

3.61

3.78

3.87

3.77

Efficiency ratio(4)

59.82

57.90

53.90

64.27

64.47

(1) Outstanding options and the closing price of the company's stock as of September 30, June 30 and March 31, 2020 had an anti-dilutive effect on each respective quarter end's weighted-average common shares outstanding; therefore, the effect of their conversion has been excluded from the calculation of the diluted weighted-average common shares outstanding for those periods. The diluted EPS for those quarters has been calculated using the basic weighted-average shares outstanding in order to comply with GAAP. There was not an anti-dilutive effect for the quarters ended December 31, 2020 and 2019.

(2) See Reconciliation of non-GAAP Financial Measures table.

(3) 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%.

(4) 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.

Guaranty Bancshares, Inc.

Consolidated Financial Summary (Unaudited)

(In thousands, except share and per share data)

For the Years Ended

December 31,

2020

2019

INCOME STATEMENTS

Interest income

$

103,042

$

102,561

Interest expense

13,060

23,691

Net interest income

89,982

78,870

Provision for loan losses

13,200

1,250

Net interest income after provision for loan losses

76,782

77,620

Noninterest income

23,037

16,973

Noninterest expense

66,522

62,536

Income before income taxes

33,297

32,057

Income tax provision

5,895

5,778

Net earnings

$

27,402

$

26,279

PER COMMON SHARE DATA

Earnings per common share, basic

$

2.47

$

2.26

Earnings per common share, diluted(1)

2.47

2.26

Cash dividends per common share

0.78

0.70

Book value per common share - end of period

24.93

22.65

Common shares outstanding - end of period

10,935,415

11,547,443

Weighted-average common shares outstanding, basic

11,108,564

11,638,897

Weighted-average common shares outstanding, diluted(1)

11,108,564

11,705,099

PERFORMANCE RATIOS

Return on average assets

1.07

%

1.13

%

Return on average equity

10.39

10.37

Net interest margin, fully taxable equivalent(2)

3.77

3.69

Efficiency ratio(3)

58.86

65.23

(1) Outstanding options and the closing price of the company's stock during the year ended December 31, 2020 had a net anti-dilutive effect on the weighted-average common shares outstanding; therefore, the effect of their conversion has been excluded from the calculation of the diluted weighted-average common shares outstanding. The diluted EPS has been calculated using the basic weighted-average shares outstanding in order to comply with GAAP.

(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.

Guaranty Bancshares, Inc.

Selected Financial Data (Unaudited)

(In thousands)

As of

2020

2019

December 31

September 30

June 30

March 31

December 31

LOAN PORTFOLIO COMPOSITION

Commercial and industrial

$

445,771

$

531,152

$

522,248

$

297,163

$

279,583

Real estate:

Construction and development

270,407

269,101

265,982

263,973

280,498

Commercial real estate

594,216

602,664

606,061

584,883

567,360

Farmland

78,508

80,197

77,625

78,635

57,476

1-4 family residential

389,096

385,783

383,590

400,605

412,166

Multi-family residential

21,701

19,499

29,692

20,430

37,379

Consumer

51,044

52,855

52,986

52,996

53,245

Agricultural

15,734

17,004

18,981

19,314

18,359

Overdrafts

342

379

275

354

329

Total loans(1)(2)

$

1,866,819

$

1,958,634

$

1,957,440

$

1,718,353

$

1,706,395

Quarter Ended

2020

2019

December 31

September 30

June 30

March 31

December 31

ALLOWANCE FOR LOAN LOSSES

Balance at beginning of period(3)

$

33,757

$

34,119

$

21,948

$

20,750

$

16,394

Loans charged-off

(159

)

(101

)

(59

)

(224

)

(221

)

Recoveries

21

39

130

22

29

Provision for loan loss expense

(300

)

12,100

1,400

Balance at end of period

$

33,619

$

33,757

$

34,119

$

21,948

$

16,202

Allowance for loan losses / period-end loans

1.80

%

1.72

%

1.74

%

1.28

%

0.95

%

Allowance for loan losses / nonperforming loans

264.6

245.0

235.6

135.2

143.9

Net charge-offs (recoveries) / average loans (annualized)

0.03

0.01

(0.02

)

0.05

0.04

NON-PERFORMING ASSETS

Non-accrual loans(4)

$

12,705

$

13,780

$

14,480

$

16,232

$

11,262

Other real estate owned

404

310

402

605

603

Repossessed assets owned

6

3

38

292

392

Total non-performing assets

$

13,115

$

14,093

$

14,920

$

17,129

$

12,257

Non-performing assets as a percentage of:

Total loans(1)(2)

0.70

%

0.72

%

0.76

%

1.00

%

0.72

%

Total loans, excluding PPP(1)(2)

0.76

0.81

0.85

1.00

0.72

Total assets

0.48

0.53

0.56

0.72

0.53

TDR loans - nonaccrual

$

90

$

92

$

95

$

97

$

101

TDR loans - accruing

9,626

7,891

7,216

7,220

7,240

(1) Excludes outstanding balances of loans held for sale of $5.5 million, $9.1 million, $7.2 million, $4.0 million, and $2.4 million as of December 31, September 30, June 30 and March 31, 2020 and December 31, 2019, respectively.

(2) Excludes deferred loan (fees) costs of $(1.5) million, $(3.6) million, $(4.1) million, $456,000, and $601,000 as of December 31, September 30, June 30 and March 31, 2020 and December 31, 2019, respectively.

(3) The balance at the beginning of the period ended March 31, 2020 includes a $4.5 million impact of adopting ASC 326.

(4) TDR loans - nonaccrual are included in nonaccrual loans, which are a component of nonperforming loans.

Guaranty Bancshares, Inc.

Selected Financial Data (Unaudited)

(In thousands)

Quarter Ended

2020

2019

December 31

September 30

June 30

March 31

December 31

NONINTEREST INCOME

Service charges

$

868

$

717

$

571

$

908

$

1,022

Net realized gain on sale of loans

2,023

2,114

1,508

1,189

780

Fiduciary and custodial income

513

511

474

514

455

Bank-owned life insurance income

205

208

207

218

214

Merchant and debit card fees

1,396

1,654

1,334

1,131

1,140

Loan processing fee income

167

181

130

150

157

Other noninterest income

1,254

1,278

763

851

906

Total noninterest income

$

6,426

$

6,663

$

4,987

$

4,961

$

4,674

NONINTEREST EXPENSE

Employee compensation and benefits

$

10,211

$

9,439

$

8,077

$

9,466

$

9,332

Occupancy expenses

2,596

2,597

2,550

2,477

2,498

Legal and professional fees

968

574

589

519

611

Software and technology

1,127

1,093

945

939

902

Amortization

340

338

338

333

338

Director and committee fees

251

211

165

219

188

Advertising and promotions

356

301

408

433

523

ATM and debit card expense

545

509

479

418

456

Telecommunication expense

244

231

209

180

168

FDIC insurance assessment fees

252

252

122

195

Other noninterest expense

1,283

1,213

1,302

1,228

1,210

Total noninterest expense

$

18,173

$

16,758

$

15,184

$

16,407

$

16,226

Guaranty Bancshares, Inc.

Selected Financial Data (Unaudited)

(In thousands)

For the Three Months Ended December 31,

2020

2019

Average
Outstanding
Balance

Interest
Earned/
Interest
Paid

Average
Yield/
Rate

Average
Outstanding
Balance

Interest
Earned/
Interest
Paid

Average
Yield/
Rate

ASSETS

interest-earning assets:

Total loans(1)

$

1,937,556

$

23,998

4.93

%

$

1,727,866

$

23,159

5.32

%

Securities available for sale

374,362

2,087

2.22

225,002

1,343

2.37

Securities held to maturity

156,263

989

2.51

Nonmarketable equity securities

9,617

106

4.38

9,078

169

7.39

Interest-bearing deposits in other banks

175,410

62

0.14

44,962

188

1.66

Total interest-earning assets

2,496,945

26,253

4.18

2,163,171

25,848

4.74

Allowance for loan losses

(33,712

)

(16,312

)

Noninterest-earning assets

196,492

194,907

Total assets

$

2,659,725

$

2,341,766

LIABILITIES AND SHAREHOLDERS' EQUITY

Interest-bearing liabilities:

Interest-bearing deposits

$

1,469,890

$

1,878

0.51

%

$

1,450,592

$

4,930

1.35

%

Advances from FHLB and fed funds purchased

66,331

124

0.74

45,614

263

2.29

Line of credit

10,696

94

3.50

Subordinated debentures

19,989

191

3.80

11,305

154

5.40

Securities sold under agreements to repurchase

20,902

14

0.27

11,469

7

0.24

Total interest-bearing liabilities

1,587,808

2,301

0.58

1,518,980

5,354

1.40

Noninterest-bearing liabilities:

Noninterest-bearing deposits

772,422

532,965

Accrued interest and other liabilities

28,098

29,661

Total noninterest-bearing liabilities

800,520

562,626

Shareholders’ equity

271,397

260,160

Total liabilities and shareholders’ equity

$

2,659,725

$

2,341,766

Net interest rate spread(2)

3.60

%

3.34

%

Net interest income

$

23,952

$

20,494

Net interest margin(3)

3.82

%

3.77

%

Net interest margin, fully taxable equivalent(4)

3.85

%

3.77

%

(1) Includes average outstanding balances of loans held for sale of $5.8 million and $3.8 million for the three months ended December 31, 2020 and 2019, respectively.

(2) Net interest spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.

(3) Net interest margin is equal to net interest income divided by average interest-earning assets, annualized.

(4) 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%.

Guaranty Bancshares, Inc.

Selected Financial Data (Unaudited)

(In thousands)

For The Years Ended December 31,

2020

2019

Average
Outstanding
Balance

Interest
Earned/
Interest
Paid

Average
Yield/
Rate

Average
Outstanding
Balance

Interest
Earned/
Interest
Paid

Average
Yield/
Rate

ASSETS

interest-earning assets:

Total loans(1)

$

1,872,914

$

93,335

4.98

%

$

1,689,108

$

90,980

5.39

%

Securities available for sale

338,510

7,798

2.30

229,351

5,715

2.49

Securities held to maturity

35,935

956

2.66

159,104

4,031

2.53

Nonmarketable equity securities

10,761

439

4.08

11,343

640

5.64

Interest-bearing deposits in other banks

146,659

514

0.35

53,783

1,195

2.22

Total interest-earning assets

2,404,779

103,042

4.28

2,142,689

102,561

4.79

Allowance for credit losses

(29,100

)

(15,692

)

Noninterest-earning assets

195,324

191,942

Total assets

$

2,571,003

$

2,318,939

LIABILITIES AND SHAREHOLDERS' EQUITY

Interest-bearing liabilities:

Interest-bearing deposits

$

1,468,353

$

11,624

0.79

%

$

1,460,215

$

21,611

1.48

%

Advances from FHLB and fed funds purchased

75,940

470

0.62

58,070

1,389

2.39

Line of credit

6,727

213

3.17

Subordinated debentures

17,198

702

4.08

11,905

655

5.50

Securities sold under agreements to repurchase

18,115

51

0.28

10,901

36

0.33

Total interest-bearing liabilities

1,586,333

13,060

0.82

1,541,091

23,691

1.54

Noninterest-bearing liabilities:

Noninterest-bearing deposits

696,454

500,895

Accrued interest and other liabilities

24,450

23,430

Total noninterest-bearing liabilities

720,904

524,325

Shareholders’ equity

263,766

253,523

Total liabilities and shareholders’ equity

$

2,571,003

$

2,318,939

Net interest rate spread(2)

3.46

%

3.25

%

Net interest income

$

89,982

$

78,870

Net interest margin(3)

3.74

%

3.68

%

Net interest margin, fully taxable equivalent(4)

3.77

%

3.69

%

(1) Includes average outstanding balances of loans held for sale of $6.0 million and $2.7 million for the years ended December 31, 2020 and 2019, respectively.

(2) Net interest spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.

(3) Net interest margin is equal to net interest income divided by average interest-earning assets.

(4) Net interest margin on a taxable equivalent basis is equal to net interest income adjusted for nontaxable income divided by average interest-earning assets, using a marginal tax rate of 21%.

Guaranty Bancshares, Inc.

Reconciliation of Non-GAAP Financial Measures (Unaudited)

(In thousands, except share and per share data)

Tangible Book Value per Common Share

As of

2020

2019

December 31

September 30

June 30

March 31

December 31

Total shareholders’ equity

$

272,643

$

266,853

$

258,875

$

253,646

$

261,551

Adjustments:

Goodwill

(32,160

)

(32,160

)

(32,160

)

(32,160

)

(32,160

)

Core deposit intangible, net

(2,999

)

(3,213

)

(3,426

)

(3,639

)

(3,853

)

Total tangible common equity

$

237,484

$

231,480

$

223,289

$

217,847

$

225,538

Common shares outstanding - end of quarter(1)

10,935,415

10,988,239

11,013,804

11,128,556

11,547,443

Book value per common share

$

24.93

$

24.29

$

23.50

$

22.79

$

22.65

Tangible book value per common share

21.72

21.07

20.27

19.58

19.53

(1) Excludes the dilutive effect, if any, of shares of common stock issuable upon exercise of outstanding stock options.

Net Core Earnings and Net Core Earnings per Common Share

Quarter Ended

2020

2019

December 31

September 30

June 30

March 31

December 31

Net earnings

$

9,915

$

10,134

$

1,075

$

6,278

$

7,369

Adjustments:

Provision for credit losses

(300

)

12,100

1,400

Income tax provision (benefit)

2,290

2,350

(190

)

1,445

1,573

PPP loans, including fees

(2,654

)

(1,076

)

(2,540

)

Net interest expense on PPP-related borrowings

3

31

Net core earnings

$

9,551

$

11,111

$

10,476

$

9,123

$

8,942

Weighted-average common shares outstanding, basic

10,966,504

11,012,060

11,025,924

11,432,391

11,533,849

Earnings per common share, basic

$

0.90

$

0.92

$

0.10

$

0.55

$

0.64

Net core earnings per common share, basic

0.87

1.01

0.95

0.80

0.78

Net Core Earnings to Average Assets, as Adjusted, and Average Equity

Quarter Ended

2020

2019

December 31

September 30

June 30

March 31

December 31

Net core earnings

$

9,551

$

11,111

$

10,476