- Total Assets: Decreased to $45.8 million during the quarter.
- Total Liabilities: Decreased by $48.5 million.
- Net Income: $7.4 million, equating to $0.65 per basic share.
- Net Interest Margin: Increased to 3.26% from 3.16% in the first quarter.
- Return on Average Assets: 0.95% for the quarter.
- Return on Average Equity: 9.91% for the quarter.
- Non-Interest Income: Decreased by $659,000.
- Non-Interest Expense: Down slightly by about $90,000.
- Efficiency Ratio: 72.34% for the quarter.
- Gross Loans: Decreased by $50.3 million in the first quarter.
- New Loans Originated: $73.5 million at an average rate of 8.26%.
- Non-Performing Assets: 0.71% of total assets.
- Net Charge-Offs: $78,000 during the quarter.
- Reverse Provision for Credit Losses: $1.2 million during the quarter.
- Allowance for Credit Losses (ACL) Coverage: 1.32% of total loans.
- Total Deposits: Relatively flat during the quarter.
- Non-Interest-Bearing Deposits: Decreased by $8.4 million.
- Interest-Bearing Accounts: Increased by $6.8 million.
- Uninsured Deposits: 25.7% of total deposits.
- Liquidity Ratio: 13.6% at quarter end.
- Total Equity: Increased by $2.7 million during the quarter.
- Dividend: $0.24 per share, up from $0.23 per share in 2023.
- Stock Repurchase: 138,427 shares at an average price of $29.50 per share.
- Total Equity to Average Assets: 9.9% as of June 30.
Release Date: July 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Guaranty Bancshares Inc (GNTY, Financial) reported a net income of $7.4 million for the second quarter, equating to $0.65 per basic share, up from $0.58 per share in the first quarter.
- The company's return on average assets improved to 0.95% from 0.85% in Q1, and return on average equity increased to 9.91% from 8.93% in Q1.
- Net interest margin increased to 3.26% in the second quarter, up from 3.16% in the first quarter.
- Non-performing assets remain low at 0.71% of total assets, with non-performing loans as a percentage of total loans at only 0.28%.
- Guaranty Bancshares Inc (GNTY) repurchased 138,427 shares of its common stock during the quarter, adding intrinsic value for shareholders.
Negative Points
- Total assets decreased by $45.8 million during the quarter, and total liabilities decreased by $48.5 million, primarily due to a reduction in loans.
- Non-interest income decreased by $659,000, primarily due to a $900,000 ORE valuation allowance.
- Gross loans decreased by $50.3 million in the first quarter and have decreased by about $108 million year to date.
- The efficiency ratio was 72.34% for the quarter, driven higher by the decrease in non-interest income.
- Substandard loans increased to $23.5 million at quarter end, up from $17.5 million at the end of Q1, primarily due to two loan relationships totaling $7.9 million being downgraded to substandard.
Q & A Highlights
Q: On the balance sheet, we saw the loan balances contract again in the second quarter. When could we see loan balances stabilize?
A: (Ty Abston, CEO) It's possible that the loan book could pay down another $100 million in the second half of the year. However, we expect growth opportunities to improve in 2025, especially with potential rate decreases and post-election stability.
Q: Can you provide more details on the FHLB advances paid down in the quarter and the remaining advances?
A: (Shalene Jacobson, CFO) We paid down the majority of the advances towards the end of the quarter at a rate of around 5.38%. The remaining advances are short-term with a similar rate and are due within this quarter.
Q: Regarding the Austin property, what was the most recent appraisal and the status of existing leases?
A: (Ty Abston, CEO) The appraisal is around $17 million, depending on the cap rates used. We have one remaining space under an LOI, and once leased, the property will be 100% occupied. We took a reserve due to cap rate assumptions but believe the property is a good asset.
Q: Is the increase in on-balance sheet liquidity related to regulatory pressures?
A: (Ty Abston, CEO) Yes, we aim to maintain strong liquidity and capital to be well-positioned for growth opportunities as the economy improves. We plan to build liquidity and add to the bond portfolio as needed.
Q: With declining loan balances and increasing liquidity, how should we think about the net interest margin (NIM) going forward?
A: (Ty Abston, CEO) We expect the NIM to improve by 2 to 3 basis points per month as assets reprice. Our goal is to reach a NIM of around 3.50% or higher by the end of next year, assuming no significant rate changes.
Q: Should we expect continued share repurchases given current capital levels and balance sheet trends?
A: (Ty Abston, CEO) Yes, if the earn-back period remains favorable, we will continue share repurchases as a capital allocation priority. If the earn-back period extends, we may be less aggressive.
Q: Do you think one rate cut is enough to push loan growth higher, or are more cuts needed?
A: (Ty Abston, CEO) More likely, two or three rate cuts would provide the confidence needed for growth. Getting past the election and seeing rate cuts would likely create more growth opportunities in 2025.
Q: What is your appetite for the construction and development segment heading into 2025?
A: (Ty Abston, CEO) Our appetite is more constrained, with tighter underwriting standards. We see good projects on hold due to the current environment, but opportunities should improve with a more favorable environment.
Q: Are second-quarter expenses a good run rate going forward?
A: (Shalene Jacobson, CFO) Yes, the second-quarter expense rate is a good run rate for the future.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
