Guaranty Bancshares, Inc. Reports First Quarter 2023 Financial Results

ADDISON, Texas--(BUSINESS WIRE)--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 ended March 31, 2023. The Company's net income available to common shareholders was $8.3 million, or $0.69 per basic share, for the quarter ended March 31, 2023, compared to $8.0 million, or $0.67 per basic share, for the quarter ended December 31, 2022 and $10.7 million, or $0.89 per basic share, for the quarter ended March 31, 2022. Return on average assets and average equity for the first quarter of 2023 were 1.01% and 11.18%, respectively, compared to 0.95% and 10.88%, respectively, for the fourth quarter of 2022 and 1.38% and 14.44%, respectively, for the first quarter of 2022. The increase in earnings during the first quarter of 2023, compared to the fourth quarter of 2022 was primarily due to a provision for credit losses of $2.8 million in the fourth quarter of 2022 and no provision in the first quarter of 2023. Noninterest expense was also $930,000 less in the current quarter than in the prior quarter. The decrease in net earnings compared to the first quarter of 2022 resulted from a reverse provision of $1.3 million, higher noninterest income of $1.6 million and lower noninterest expense of $888,000 in the prior year quarter. Our net core earnings^†, excluding provisions for credit losses, income taxes and PPP1/PPP2 net income are described further in a table below.

"The first quarter of 2023 was very eventful, as we witnessed two bank failures, concerns about the health of the overall banking system, possible industry-wide deposit runoff and continued discussions of a recession. Despite these events, the strength of our business model is showing its resilience. We're well prepared to manage through the current environment, as we have in previous challenging cycles and downturns. We are also fortunate to be located in Texas, which continues to have a vibrant economy. Our balance sheet is strong because we continue to maintain a disciplined approach to credit and market risks. Our unrealized losses on all securities at the end of the month was a moderate 12.8% of total capital and our liquidity remains strong. We've designed very granular loan and deposit portfolios with strong core customer relationships, all of which creates strength and stability for our Company," commented Ty Abston, the Company's Chairman and Chief Executive Officer.

RISK MANAGEMENT HIGHLIGHTS

In light of recent events, we are providing additional information below to highlight various risk management practices, as well as additional detail around the lower risk nature, composition and size of our loans, deposits and investment securities. These highlights help illustrate the more traditional and stable nature of our Bank model compared to others who have recently experienced liquidity and capital challenges.

• Granular and Reliable Deposit Base. As of March 31, 2023, we have 84,233 total deposit accounts with an average balance of $31,148. Excluding time deposits, 56.8% of our depositors have been customers of our Bank for more than 5 years and 89.0% have been customers for more than one year. We have a historically reliable core deposit base, with strong and trusted banking relationships, which was illustrated by an increase in total deposits of $8.3 million during March, despite general consumer uncertainty caused by the two bank failures in mid-March. Total deposits decreased $57.3 million in January, decreased by $8.8 million in February and increased by $8.3 million in March of 2023.
  
  As of March 31, 2023, our deposits accounts consisted of the following:

	March 31, 2023
(dollars in thousands)	Balance		Number of Accounts		Average Balance		% of Total Deposits
Consumer	$	1,379,264		71,635	$	19		52.6	%
Commercial		960,904		12,040		80		36.6	%
Public funds		283,200		548		517		10.8	%
Total deposits	$	2,623,368		84,223	$	31		100.0	%

Our level of uninsured deposits, excluding affiliate deposits (Guaranty-owned funds), public funds (all of which are collateralized) and director/officer accounts, is 30.3%. As of March 31, 2023, uninsured deposits consisted of the following:

	March 31, 2023
(dollars in thousands)	Balance			Uninsured Balance			% Uninsured of Total Deposits
Affiliate deposits	$	13,768		$	12,708			0.5	%
Customers		2,267,628			686,464			26.2	%
Public funds		283,200			267,072			10.2	%
Directors and officers		58,772			27,835			1.1	%
Total	$	2,623,368		$	994,079			37.9	%
Excluding public funds	$	(283,200	)	$	(267,072	)
Excluding affiliate deposits		(13,768	)		(12,708	)
Total, excluding public funds and affiliate deposits	$	2,326,400		$	714,299			30.7	%
Excluding directors and officers	$	(58,772	)	$	(27,835	)
Total, excluding public funds, affiliate deposits and directors and officers	$	2,267,628		$	686,464			30.3	%

As an additional resource to our uninsured depositors, we implemented the IntraFi CDARS program in late March 2023, which we began offering to our customers beginning April 1, 2023. This program allows deposit customers to obtain full FDIC deposit insurance while maintaining one time deposit relationship with our Bank.

We continued to increase interest rates paid on deposits during the quarter in order to pay competitive rates, however noninterest-bearing deposits continue to represent 37.8% of total deposits. Our cost of interest-bearing deposits increased 83 basis points during the quarter from 1.08% in the prior quarter to 1.91%, representing a beta on interest-bearing deposits of approximately 96.4% for the linked quarter. Our cost of total deposits (cost of funds) for the first quarter of 2023 increased 54 basis points from 0.64% in the prior quarter to 1.18%, representing a beta on total deposits of approximately 62.7% for the linked quarter.

On a trailing 12 month basis, our cost of interest-bearing deposits increased 66 basis points, from 0.32% at March 31, 2022 to 0.98% at March 31, 2023, representing a beta on interest-bearing deposits of approximately 24.5%. Our cost of total deposits increased 39 basis points from 0.20% at March 31, 2022 to 0.59%, representing a beta on total deposits of approximately 14.5%.

• Granular Loan Portfolio and Concentration Risk. Loan concentrations create risk that should be closely monitored and limited. We do not have significant concentrations to any one borrower, industry or geography, other than loans within Texas. Our credit administration committee meets at least monthly and monitors the loan portfolio against internal guidelines and limits using NAICS codes, industry classifications, geography, call report codes and other metrics. Although our legal loan limit is nearly $54.2 million, we have an internal loan limit of $30.0 million and rarely approve large loans without a significant borrower relationship and robust underwriting. As shown in the table below, our large loan concentration commitments and outstanding balances as of March 31, 2023 are reasonable:

	March 31, 2023
(dollars in thousands)	Number of Accounts		Total Commitment		Balance		Weighted Average LTV
> $ 5 million		65	$	459,788	$	363,314		69.99	%
> $ 10 million		10		139,513		93,544		50.98	%
> $ 20 million		2		43,240		31,103		58.22	%
Total		77	$	642,541	$	487,961		65.07	%

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 37.9% and 15.7% of the total loan portfolio, respectively. Office related loans represent 4.0% of the total loan portfolio, have an average balance of $504,000, 46.5% are owner occupied and only 21 of the 189 loans have committed balances over $1.0 million.

The table below illustrates the diversity of our portfolio as well as the relatively large number of lower average balance loans as of March 31, 2023:

	March 31, 2023
(dollars in thousands)	Balance		Number of Accounts		Average Balance		% of Total Loans
Commercial and industrial	$	295,936		1,893	$	156		12.4	%
Real estate:
Construction and development		372,203		902		413		15.7	%
Commercial real estate		900,190		1,057		852		37.9	%
Farmland		190,802		527		362		8.0	%
1-4 family residential		499,944		2,999		167		21.0	%
Multi-family residential		44,760		36		1,243		1.9	%
Consumer		60,163		4,331		14		2.5	%
Agricultural		13,545		336		40		0.6	%
Overdrafts		270		—		—		0.0	%
Total loans	$	2,377,813		12,081	$	197		100.0	%

• Good Asset Quality. Nonperforming assets as a percentage of total assets were 0.40% at March 31, 2023, compared to 0.32% at December 31, 2022 and 0.08% at March 31, 2022. Net charge-offs (annualized) to average loans were 0.00% for the quarter ended March 31, 2023, compared to 0.01% for the quarter ended December 31, 2022, and 0.02% for the quarter ended March 31, 2022. Consistent with our CECL methodology, we calculated and recorded a provision for credit losses of $2.8 million during the fourth quarter of 2022, as we incorporated recession forecasts for 2023 into our CECL model at that time. Due to minimal loan growth, minimal net charge-offs and minimal downward risk rating migrations during the first quarter of 2023, no additional ACL provision was necessary.
• Conservative Investment Portfolio. Our investment policies and strategies only allow for non-complex investments with little or no credit risk. Strategically, we strive to maintain an average life in the portfolio of five years or less, with longer duration securities usually in high quality municipal bonds in areas we are familiar with. We also monitor portfolio cash flows to ensure a good source of near term liquidity, as well as defensive cash flows as duration extends. During late 2021 and early 2022, we had significant excess cash but did not believe the low yields on investments at that time warranted the interest rate risk. To slightly improve the yields meant investing in securities with much longer lives. Because of this disciplined approach, our total unrealized losses, including both AFS and HTM securities are manageable and low. The table below presents total unrealized losses as of March 31, 2023, along with estimated unrealized losses if interest rates increase or decrease by 100 basis points.

	March 31, 2023				Net Unrealized Loss
(dollars in thousands)	Amortized Cost		Estimated Fair Value		-100 bps			Actual			+100 bps
Available for sale	$	193,121	$	173,744	$	(11,295	)	$	(19,377	)	$	(27,366	)
Held to maturity		482,305		450,505		(14,770	)		(31,800	)		(49,041	)

• Strong Capital and Liquidity. Our capital and liquidity ratios, as well as contingent liquidity sources, remain solid. We are taking advantage of low stock prices to repurchase shares of Company stock. During the first quarter of 2023, we repurchased 25,709 shares at an average price of $28.95 per share. Our liquidity ratio, calculated as cash, fed funds sold and non-pledged investments divided by total liabilities, was 14.7% as of quarter-end. Contingent liquidity sources and availability as of March 31 are provided below. Although we do not plan to access the Federal Reserve's Bank Term Funding Program (BTFP), we have $282.3 million of borrowing capacity based on the value of unpledged, par-value, securities available as collateral for this line. The table below shows our total lines of credit, current borrowings as of March 31, 2023 and total amounts available for future borrowings, if necessary.

	March 31, 2023				Total Available for Future Liquidity
(dollars in thousands)	Line of Credit		Borrowings
FHLB advances	$	1,097,558	$	340,000	$	757,558
Federal Reserve discount window		243,900		—		243,900
Correspondent bank lines of credit		50,000		—		50,000
Federal Reserve Bank Term Funding Program		282,342		—		282,342
Total liquidity lines					$	1,333,800

The table below provides total equity information as if the unrealized loss on HTM securities was recognized as a reduction in total equity. This information illustrates the strength of our capital, even with net unrealized losses on all investment securities considered.

(dollars in thousands)	March 31, 2023
Total equity^(1)	$	300,270
Less: net unrealized loss on HTM securities, tax effected		(25,123	)
Total equity, including net unrealized loss on AFS and HTM securities^†	$	275,147
Net unrealized loss on AFS securities, tax effected		15,308
Net unrealized loss on HTM securities, tax effected		25,123
Net unrealized loss on AFS and HTM securities, tax effected	$	40,431
Net unrealized loss on securities as % of total equity^(1)		13.5	%
Total equity before impact of unrealized losses^†	$	315,578
Net unrealized loss on securities as % of total equity before impact of unrealized losses^†		12.8	%
Total average assets	$	3,325,005
Total equity to average assets		9.0	%
Total equity, adjusted for tax effected net unrealized loss, to average assets^†		8.3	%

(1) Includes the net unrealized loss on AFS securities, tax effected, of $15,308.

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

RESULTS OF OPERATIONS

Participation in the PPP1 and PPP2 program, as well as economic and COVID-related provisions for credit losses, created temporary extraordinary results in the calculation of net earnings and related performance ratios in previous quarters. The following table illustrates net earnings and net core earnings results, which are pre-tax, pre-provision and pre-extraordinary PPP1/PPP2 income, as well as performance ratios for the prior five quarters:

	Quarter Ended
	2023			2022
(dollars in thousands, except per share data)	March 31			December 31			September 30			June 30			March 31
Net earnings attributable to Guaranty Bancshares, Inc.	$	8,281		$	8,022		$	10,903		$	10,784		$	10,738
Adjustments:
Provision for credit losses		—			2,800			600			—			(1,250	)
Income tax provision		1,823			1,764			2,363			2,472			2,235
PPP loan interest and fees		(2	)		(1	)		(57	)		(436	)		(783	)
Net core earnings attributable to Guaranty Bancshares, Inc.^†	$	10,102		$	12,585		$	13,809		$	12,820		$	10,940
Total average assets	$	3,325,005		$	3,346,358		$	3,337,348		$	3,209,440		$	3,146,339
Adjustments:
PPP loans average balance		(519	)		(539	)		(1,159	)		(8,885	)		(36,720	)
Total average assets, adjusted^†	$	3,324,486		$	3,345,819		$	3,336,189		$	3,200,555		$	3,109,619
Total average equity	$	300,449		$	292,471		$	290,806		$	291,312		$	301,579
PERFORMANCE RATIOS
Net earnings to average assets (annualized)		1.01	%		0.95	%		1.30	%		1.35	%		1.38	%
Net earnings to average equity (annualized)		11.18			10.88			14.87			14.85			14.44
Net core earnings to average assets, as adjusted (annualized)^†		1.23			1.49			1.64			1.61			1.43
Net core earnings to average equity (annualized)^†		13.64			17.07			18.84			17.65			14.71
PER COMMON SHARE DATA
Weighted-average common shares outstanding, basic		11,939,593			11,938,973			11,907,233			11,968,227			12,109,074
Earnings per common share, basic	$	0.69		$	0.67		$	0.92		$	0.90		$	0.89
Net core earnings per common share, basic^†		0.85			1.05			1.16			1.07			0.90

† 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 credit losses, in the first quarter of 2023 and 2022 was $25.2 million and $24.3 million, respectively, an increase of $839,000, or 3.4%. The increase in net interest income resulted from an increase in interest income of $11.3 million, or 43.5%, which was offset by an increase in interest expense of $10.4 million, or 663.2%, compared to the prior year quarter. Interest income on loans increased $9.9 million, or 44.4%, during the current quarter compared to the prior year quarter. In addition, interest income from investment securities increased $1.0 million, or 32.7%, from the same quarter in the prior year. The increase in interest expense was due primarily to a $6.4 million increase in interest expense on deposits, and a $3.7 million increase in interest expense on FHLB advances and federal funds purchased. These increases were primarily due to rising interest rates between the two periods.

Net interest margin, on a fully taxable equivalent basis, for the first quarter of 2023 and 2022 was 3.24% and 3.37%, respectively. Net interest margin decreased 13 basis points primarily due to interest bearing liabilities repricing faster than our interest-earning assets. The cost of interest-bearing liabilities increased 208 basis points from the prior year quarter, while interest earning asset yields increased 126 basis points. The increase in yield on interest-earning assets resulted in part from average loan yields increasing from 4.66% for the first quarter of 2022 to 5.46% for the first quarter of 2023, an increase of 80 basis points and an increase in yields of available for sale and held to maturity securities of 35 and 73 basis points, respectively, from the prior year quarter. Loans increased $363.8 million, or 18.1%, from March 31, 2022. The weighted average yield on new loans originated in the first quarter was 7.27%. Our loan growth is a result of internally generated sources and is not from loan purchases from other originators. The increase in the cost of interest-bearing liabilities was due primarily to an increase in the cost of interest-bearing deposits from 0.29% to 1.91%, a change of 162 basis points, in the first quarter of 2023 compared to the same period in 2022, as well as increased rates on FHLB advances, which increased from 0.49% to 4.94%, an increase of 445 basis points, from the prior year quarter.

Net interest income, before the provision for credit losses, decreased $3.2 million, or 11.3%, from $28.4 million in the fourth quarter of 2022 to $25.2 million in the first quarter of 2023. The decrease in net interest income resulted primarily from an increase in interest expense of $4.6 million, or 62.8%, while interest income increased $1.4 million, or 4.0%. Loan interest income increased $2.0 million, or 6.5%, from the prior quarter. Average yield increased from 5.19% in the fourth quarter of 2022 to 5.46% in the first quarter of 2023. Those increases were partially offset by an increase in interest expense on interest-bearing deposits of $3.2 million, or 72.7% and FHLB advances of $1.4 million, or 56.7%, from the fourth quarter of 2022 to the first quarter of 2023.

Net interest margin, on a taxable equivalent basis, decreased from 3.57% for the fourth quarter of 2022 to 3.24% for the first quarter of 2023, a decrease of 33 basis points. The decrease in net interest margin was primarily due to an increase in the cost of interest-bearing deposits from 1.08% in the fourth quarter to 1.91% in the first quarter of 2023, a change of 83 basis points, while loan yield only increased from 5.19% for the fourth quarter of 2022 to 5.46% for the first quarter of 2023, a change of 27 basis points.

During the first quarter of 2023, we recorded no provision for credit losses. During the fourth quarter of 2022, we recorded a $2.8 million provision to incorporate economic forecasts for a recession into our CECL model. The factors that were adjusted in the fourth quarter of 2022 are still relevant and the economic projections remain consistent. Furthermore, there was minimal growth in the loan portfolio during the quarter, risk ratings have remained consistent and no other qualitative factors necessitated significant changes during the first quarter 2023. As of March 31, 2023 and December 31, 2022, our allowance for credit losses as a percentage of total loans was 1.34%.

Noninterest income decreased $1.6 million, or 24.3%, in the first quarter of 2023 to $4.9 million, compared to $6.5 million for the first quarter of 2022. The decrease from the same quarter in 2022 was due primarily to a decrease in other noninterest income of $1.0 million, or 61.1%, which resulted from a net gain of $685,000 in the prior year quarter from the termination of three interest rate swaps, that was not present in the current quarter, as well a $171,000 negative swing on the fair value of SBA servicing assets from the prior period to the current period. There was also a decrease in the gain on sale of loans of $591,000, or 65.3%, an $84,000, or 72.4%, decrease in warehouse lending fees, and a $63,000, or 48.1%, decrease in mortgage fee income. These decreases were partially offset by a $101,000, or 10.3%, increase in service charge fee income, a $93,000, or 100.0%, increase in the net realized gain on sale of securities and an increase in merchant and debit card fees of $63,000, or 3.9%, compared to the same quarter in the prior year.

Noninterest expense increased $888,000, or 4.7%, in the first quarter of 2023 to $20.0 million, compared to the first quarter of 2022. The increase in noninterest expense in the first quarter of 2023 was driven primarily by a $732,000, or 6.3%, increase in employee compensation and benefits due to higher salaries of $610,000, higher insurance expense of $261,000, and partially offset by lower bonus expense of $392,000. Software and technology expense increased $187,000, or 15.5%, compared to the first quarter of 2022, due to additional technology investments and an increase in the cost of our core processing software. Other noninterest expense increased $155,000, or 15.1%, due to a $69,000 increase in customer related check and wire transfer losses, a $25,000 increase in contributions, a $19,000 increase in postage and an $18,000 increase in training and education during the first quarter of 2023. The increases were partially offset by a $187,000, or 24.3%, decrease in legal and professional fees and a $140,000, or 34.4%, decrease in advertising and promotions fees during the first quarter of 2023 compared to the same quarter of 2022. Amortization expense also fell $58,000, or 26.5%, from the prior year quarter.

Noninterest income in the first quarter of 2023 decreased by $217,000, or 4.2%, from $5.1 million in the fourth quarter of 2022. The decrease is due primarily due to a $79,000, or 45.9%, decrease in the net realized gain on the sale of securities quarter-over-quarter. Other noninterest income also decreased $53,000, or 7.4%, primarily due to a $41,000 downward adjustment of the SBA servicing asset, while merchant and debit card fee income decreased $37,000, or 2.2%.

Noninterest expense decreased $930,000, or 4.5%, in the first quarter of 2023, from $20.9 million for the quarter ended December 31, 2022. The decrease is primarily due to a $221,000, or 45.3%, decrease in advertising and promotion expense, a $196,000, or 25.2%, decrease in legal and professional fees, a $141,000, or 19.1%, decrease in ATM and debit card expense, a $129,000, or 8.5%, decrease in software and technology expense and a $135,000, or 10.2%, decrease in other noninterest expense during the first quarter of 2023 compared to the fourth quarter of 2022.

The Company’s efficiency ratio in the first quarter of 2023 was 66.41%, compared to 61.94% in the prior year quarter and 62.42% in the fourth quarter of 2022.

FINANCIAL CONDITION

Consolidated assets for the Company totaled $3.36 billion at March 31, 2023, compared to $3.35 billion at December 31, 2022 and $3.19 billion at March 31, 2022.

Gross loans decreased $363,000, or 0.02%, to $2.38 billion at March 31, 2023, compared to loans of $2.38 billion at December 31, 2022. Loan growth has remained relatively flat as we have tightened credit underwriting standards and borrowers have responded to the increases in interest rates with fewer requests.

Gross loans increased $363.8 million, or 18.1%, from $2.01 billion at March 31, 2022. The increase in gross loans during the first quarter of 2023 compared to the first quarter of 2022 resulted from organic loan growth and was partially offset by a $18.8 million reduction in PPP loan balances during the period. Excluding PPP and warehouse lending loans, gross loans increased $398.4 million, or 20.2%, from March 31, 2022.

Total deposits decreased by $57.8 million, or 2.2%, to $2.62 billion at March 31, 2023, compared to $2.68 billion at December 31, 2022, and decreased $174.0 million, or 6.2%, from $2.80 billion at March 31, 2022. The decrease in deposits during the quarter resulted from a decrease in noninterest-bearing deposits of $59.6 million, offset by an increase in interest-bearing deposits of $1.8 million. Total deposits decreased $57.3 million and $8.8 million in January and February of 2023, but increased by $8.3 million in March 2023, despite the concerns regarding the mid-March bank failures. The decrease in deposits during the current quarter compared to the prior year quarter resulted primarily from a decrease in noninterest-bearing deposits of $73.3 million and a decrease in interest-bearing deposits of $100.8 million.

Nonperforming assets as a percentage of total loans were 0.57% at March 31, 2023, compared to 0.46% at December 31, 2022 and 0.13% at March 31, 2022. The Bank's nonperforming assets consist primarily of nonaccrual loans. Four loans were added to nonaccrual status in the second quarter of 2022 and 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 $6.7 million as of March 31, 2023. These loans, collateralized by two hotels, were identified as problem assets prior to COVID-19 but obtained government stimulus and other relief which allowed the two related borrowers to remain current through early 2022. Management continues to work toward a satisfactory resolution for these four loans, however, in the event of foreclosure, a significant loss is not expected due to estimated current collateral values and the SBA guarantees. Another previously classified loan was downgraded to non-accrual status during the fourth quarter of 2022 with a principal balance of $1.4 million. The loan is considered well-secured and has a low loan-to-value ratio with guarantor support. Management expects this loan will be paid in full in the near future. No losses are anticipated.

Total equity was $300.3 million as of March 31, 2023, compared to $295.6 million at December 31, 2022 and $291.9 million at March 31, 2022. The increase from the previous quarter resulted primarily from net income of $8.3 million, offset by a decrease in accumulated other comprehensive loss of $450,000 due to fluctuations in the fair value of available for sale securities during the period, by the payment of dividends of $2.7 million and repurchase of Company stock of $744,000 during the first quarter of 2023.

Nonperforming assets as a percentage of total assets were 0.40% at March 31, 2023, compared to 0.32% at December 31, 2022, and 0.08% at March 31, 2022.

	As of
	2023		2022
(dollars in thousands)	March 31		December 31		September 30		June 30		March 31
ASSETS
Cash and due from banks	$	59,030	$	52,390	$	48,010	$	56,545	$	58,788
Federal funds sold		95,400		47,275		71,875		2,425		139,300
Interest-bearing deposits		3,695		6,802		4,284		12,053		24,003
Total cash and cash equivalents		158,125		106,467		124,169		71,023		222,091
Securities available for sale		173,744		188,927		197,944		196,095		306,704
Securities held to maturity		476,105		509,008		633,386		713,390		494,289
Loans held for sale		1,260		3,156		2,749		2,770		1,166
Loans, net		2,344,240		2,344,245		2,234,782		2,107,658		1,983,449
Accrued interest receivable		10,443		11,555		10,111		10,144		8,961
Premises and equipment, net		55,457		54,291		54,212		54,437		54,316
Other real estate owned		38		38		5		—		—
Cash surrender value of life insurance		38,619		38,404		38,194		37,979		37,352
Core deposit intangible, net		1,746		1,859		1,973		2,086		2,199
Goodwill		32,160		32,160		32,160		32,160		32,160
Other assets		64,350		61,385		60,581		53,171		47,142
Total assets	$	3,356,287	$	3,351,495	$	3,390,266	$	3,280,913	$	3,189,829
LIABILITIES AND EQUITY
Deposits
Noninterest-bearing	$	992,527	$	1,052,144	$	1,141,184	$	1,105,756	$	1,065,789
Interest-bearing		1,630,841		1,629,010		1,649,326		1,673,865		1,731,621
Total deposits		2,623,368		2,681,154		2,790,510		2,779,621		2,797,410
Securities sold under agreements to repurchase		13,338		7,221		7,592		7,871		11,090
Accrued interest and other liabilities		30,125		28,409		27,384		28,033		27,803
Line of credit		—		—		—		—		—
Federal Home Loan Bank advances		340,000		290,000		225,000		131,500		7,500
Subordinated debentures		49,186		49,153		51,119		51,053		54,146
Total liabilities		3,056,017		3,055,937		3,101,605		2,998,078		2,897,949
Equity attributable to Guaranty Bancshares, Inc.		299,700		294,984		288,084		282,255		291,282
Noncontrolling interest		570		574		577		580		598
Total equity		300,270		295,558		288,661		282,835		291,880
Total liabilities and equity	$	3,356,287	$	3,351,495	$	3,390,266	$	3,280,913	$	3,189,829

	Quarter Ended
	2023			2022
(dollars in thousands, except per share data)	March 31			December 31			September 30			June 30			March 31
STATEMENTS OF EARNINGS
Interest income	$	37,144		$	35,720		$	32,476		$	29,120		$	25,893
Interest expense		11,982			7,362			4,179			2,269			1,570
Net interest income		25,162			28,358			28,297			26,851			24,323
Provision for credit losses		—			2,800			600			—			(1,250	)
Net interest income after provision for credit losses		25,162			25,558			27,697			26,851			25,573
Noninterest income		4,905			5,122			5,803			6,081			6,479
Noninterest expense		19,967			20,897			20,237			19,694			19,079
Income before income taxes		10,100			9,783			13,263			13,238			12,973
Income tax provision		1,823			1,764			2,363			2,472			2,235
Net earnings	$	8,277		$	8,019		$	10,900		$	10,766		$	10,738
Net loss attributable to noncontrolling interest		4			3			3			18			—
Net earnings attributable to Guaranty Bancshares, Inc.	$	8,281		$	8,022		$	10,903		$	10,784		$	10,738
PER COMMON SHARE DATA
Earnings per common share, basic	$	0.69		$	0.67		$	0.92		$	0.90		$	0.89
Earnings per common share, diluted		0.69			0.67			0.91			0.89			0.88
Cash dividends per common share		0.23			0.22			0.22			0.22			0.22
Book value per common share - end of quarter		25.13			24.70			24.18			23.69			24.14
Tangible book value per common share - end of quarter^(1)		22.29			21.85			21.31			20.82			21.29
Common shares outstanding - end of quarter^(4)		11,925,357			11,941,672			11,915,372			11,912,249			12,066,480
Weighted-average common shares outstanding, basic		11,939,593			11,938,973			11,907,233			11,968,227			12,109,074
Weighted-average common shares outstanding, diluted		12,012,004			12,048,475			12,032,391			12,098,983			12,260,945
PERFORMANCE RATIOS
Return on average assets (annualized)		1.01	%		0.95	%		1.30	%		1.35	%		1.38	%
Return on average equity (annualized)		11.18			10.88			14.87			14.85			14.44
Net interest margin, fully taxable equivalent (annualized)^(2)		3.24			3.57			3.59			3.61			3.37
Efficiency ratio^(3)		66.41			62.42			59.35			59.80			61.94

(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)	March 31			December 31			September 30			June 30			March 31
LOAN PORTFOLIO COMPOSITION
Commercial and industrial	$	287,506		$	303,373		$	278,091		$	268,812		$	270,074
Real estate:
Construction and development		372,203			377,135			391,564			350,024			318,035
Commercial real estate		900,190			887,587			821,941			749,603			674,558
Farmland		190,802			185,817			179,402			166,309			186,982
1-4 family residential		499,944			493,061			467,983			450,929			430,755
Multi-family residential		44,760			45,147			43,025			55,985			42,021
Consumer		60,163			61,394			58,835			56,433			52,670
Agricultural		13,545			13,686			13,917			14,502			14,403
Warehouse lending		8,430			10,694			10,938			25,344			24,260
Overdrafts		270			282			369			435			303
Total loans^(1)(2)	$	2,377,813		$	2,378,176		$	2,266,065		$	2,138,376		$	2,014,061
	Quarter Ended
	2023			2022
(dollars in thousands)	March 31			December 31			September 30			June 30			March 31
ALLOWANCE FOR CREDIT LOSSES
Balance at beginning of period	$	31,974		$	29,235		$	28,997		$	29,096		$	30,433
Loans charged-off		(94	)		(103	)		(418	)		(125	)		(203	)
Recoveries		73			42			56			26			116
Provision for credit loss expense		—			2,800			600			—			(1,250	)
Balance at end of period	$	31,953		$	31,974		$	29,235		$	28,997		$	29,096
Allowance for credit losses / period-end loans		1.34	%		1.34	%		1.29	%		1.36	%		1.44	%
Allowance for credit losses / nonperforming loans		238.4			294.7			313.3			294.4			1,084.9
Net charge-offs / average loans (annualized)		0.00			0.01			0.07			0.02			0.02
NONPERFORMING ASSETS
Nonaccrual loans	$	13,405		$	10,848		$	9,330		$	9,848		$	2,682
Other real estate owned		38			38			5			—			—
Repossessed assets owned		—			—			—			27			7
Total nonperforming assets	$	13,443		$	10,886		$	9,335		$	9,875		$	2,689
Nonperforming assets as a percentage of:
Total loans^(1)(2)		0.57	%		0.46	%		0.41	%		0.46	%		0.13	%
Total assets		0.40			0.32			0.28			0.30			0.08

(1) Excludes outstanding balances of loans held for sale of $1.3 million, $3.2 million, $2.7 million, $2.8 million, and $1.2 million as of March 31, 2023, and December 31, September 30, June 30, and March 31, 2022, respectively.

(2) Excludes deferred loan fees of $1.6 million, $2.0 million, $2.0 million, $1.7 million, and $1.5 million as of March 31, 2023, and December 31, September 30, June 30, and March 31, 2022, respectively.

	Quarter Ended
	2023		2022
(dollars in thousands)	March 31		December 31		September 30		June 30		March 31
NONINTEREST INCOME
Service charges	$	1,077	$	1,096	$	1,146	$	1,070	$	976
Net realized gain on securities transactions		93		172		—		—		—
Net realized gain on sale of loans		314		310		338		882		905
Fiduciary and custodial income		638		642		576		638		642
Bank-owned life insurance income		214		209		215		207		211
Merchant and debit card fees		1,674		1,711		1,738		2,061		1,611
Loan processing fee income		134		150		192		232		187
Warehouse lending fees		32		37		59		79		116
Mortgage fee income		68		81		75		102		131
Other noninterest income		661		714		1,464		810		1,700
Total noninterest income	$	4,905	$	5,122	$	5,803	$	6,081	$	6,479
NONINTEREST EXPENSE
Employee compensation and benefits	$	12,264	$	12,364	$	11,851	$	11,730	$	11,532
Occupancy expenses		2,830		2,770		2,800		2,848		2,711
Legal and professional fees		583		779		503		773		770
Software and technology		1,396		1,525		1,409		1,339		1,209
Amortization		161		161		166		178		219
Director and committee fees		199		199		213		219		205
Advertising and promotions		267		488		378		320		407
ATM and debit card expense		599		740		723		674		578
Telecommunication expense		183		193		184		187		186
FDIC insurance assessment fees		301		359		272		237		233
Other noninterest expense		1,184		1,319		1,738		1,189		1,029
Total noninterest expense	$	19,967	$	20,897	$	20,237	$	19,694	$	19,079

	Quarter Ended March 31,
	2023								2022
(dollars in thousands)	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)	$	2,388,045		$	32,157		5.46	%	$	1,937,000		$	22,272		4.66	%
Securities available for sale		184,572			1,068		2.35			328,737			1,618		2.00
Securities held to maturity		502,760			3,050		2.46			347,188			1,485		1.73
Nonmarketable equity securities		28,381			419		5.99			15,234			408		10.86
Interest-bearing deposits in other banks		34,986			450		5.22			334,871			110		0.13
Total interest-earning assets		3,138,744			37,144		4.80			2,963,030			25,893		3.54
Allowance for credit losses		(31,934	)							(30,205	)
Noninterest-earning assets		218,195								213,514
Total assets	$	3,325,005							$	3,146,339
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Interest-bearing deposits	$	1,624,610		$	7,655		1.91	%	$	1,710,157		$	1,242		0.29	%
Advances from FHLB and fed funds purchased		310,103			3,774		4.94			37,722			46		0.49
Line of credit		—			—		—			3,778			34		3.65
Subordinated debt		49,164			540		4.45			30,492			246		3.27
Securities sold under agreements to repurchase		10,974			13		0.48			10,916			2		0.07
Total interest-bearing liabilities		1,994,851			11,982		2.44			1,793,065			1,570		0.36
Noninterest-bearing liabilities:
Noninterest-bearing deposits		1,002,793								1,027,429
Accrued interest and other liabilities		26,912								24,266
Total noninterest-bearing liabilities		1,029,705								1,051,695
Equity		300,449								301,579
Total liabilities and equity	$	3,325,005							$	3,146,339
Net interest rate spread^(2)							2.36	%							3.18	%
Net interest income				$	25,162							$	24,323
Net interest margin^(3)							3.25	%							3.33	%
Net interest margin, fully taxable equivalent^(4)							3.24	%							3.37	%

(1) Includes average outstanding balances of loans held for sale of $1.7 million and $3.2 million for the quarter ended March 31, 2023 and 2022, 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%.

NON-GAAP RECONCILING TABLES

Tangible Book Value per Common Share
	As of
	2023			2022
(dollars in thousands, except per share data)	March 31			December 31			September 30			June 30			March 31
Equity attributable to Guaranty Bancshares, Inc.	$	299,700		$	294,984		$	288,084		$	282,255		$	291,282
Adjustments:
Goodwill		(32,160	)		(32,160	)		(32,160	)		(32,160	)		(32,160	)
Core deposit intangible, net		(1,746	)		(1,859	)		(1,973	)		(2,086	)		(2,199	)
Total tangible common equity attributable to Guaranty Bancshares, Inc.	$	265,794		$	260,965		$	253,951		$	248,009		$	256,923
Common shares outstanding^(1)		11,925,357			11,941,672			11,915,372			11,912,249			12,066,480
Book value per common share	$	25.13		$	24.70		$	24.18		$	23.69		$	24.14
Tangible book value per common share^(1)		22.29			21.85			21.31			20.82			21.29

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

Net Unrealized Loss on Securities, Tax Effected, as % of Total Equity
(dollars in thousands)	March 31, 2023
Total equity^(1)	$	300,270
Less: net unrealized loss on HTM securities, tax effected		(25,123	)
Total equity, including net unrealized loss on AFS and HTM securities^†	$	275,147
Net unrealized loss on AFS securities, tax effected		15,308
Net unrealized loss on HTM securities, tax effected		25,123
Net unrealized loss on AFS and HTM securities, tax effected	$	40,431
Net unrealized loss on securities as % of total equity^(1)		13.5	%
Total equity before impact of unrealized losses^†	$	315,578
Net unrealized loss on securities as % of total equity before impact of unrealized losses^†		12.8	%
Total average assets	$	3,325,005
Total equity to average assets		9.0	%
Total equity, adjusted for tax effected net unrealized loss, to average assets^†		8.3	%

(1) Includes the net unrealized loss on AFS securities, tax effected, of $15,308.

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

Net Core Earnings and Net Core Earnings per Common Share
	Quarter Ended
	2023			2022
(dollars in thousands, except per share data)	March 31			December 31			September 30			June 30			March 31
Net earnings attributable to Guaranty Bancshares, Inc.	$	8,281		$	8,022		$	10,903		$	10,784		$	10,738
Adjustments:
Provision for credit losses		—			2,800			600			—			(1,250	)
Income tax provision		1,823			1,764			2,363			2,472			2,235
PPP loans, including fees		(2	)		(1	)		(57	)		(436	)		(783	)
Net core earnings attributable to Guaranty Bancshares, Inc.	$	10,102		$	12,585		$	13,809		$	12,820		$	10,940
Weighted-average common shares outstanding, basic		11,939,593			11,938,973			11,907,233			11,968,227			12,109,074
Earnings per common share, basic	$	0.69		$	0.67		$	0.92		$	0.90		$	0.89
Net core earnings per common share, basic		0.85			1.05			1.16			1.07			0.90

	Three Months Ended March 31,						Three Months Ended December 31,
(dollars in thousands, except per share data)	2023			2022			2023
Net earnings attributable to Guaranty Bancshares, Inc.	$	8,281		$	10,738		$	8,022
Adjustments:
Reversal of provision for credit losses		—			(1,250	)		2,800
Income tax provision		1,823			2,235			1,764
PPP loans, including fees		(2	)		(783	)		(1	)
Net core earnings attributable to Guaranty Bancshares, Inc.	$	10,102		$	10,940		$	12,585
Weighted-average common shares outstanding, basic		11,939,593			12,109,074			11,938,973
Earnings per common share, basic	$	0.69		$	0.89		$	0.67
Net core earnings attributable to Guaranty Bancshares, Inc. per common share, basic		0.85			0.90			1.05

Net Core Earnings to Average Assets, as Adjusted, and Average Equity
	Quarter Ended
	2023			2022
(dollars in thousands)	March 31			December 31			September 30			June 30			March 31
Net core earnings attributable to Guaranty Bancshares, Inc.	$	10,102		$	12,585		$	13,809		$	12,820		$	10,940
Total average assets	$	3,325,005		$	3,346,358		$	3,337,348		$	3,209,440		$	3,146,339
Adjustments:
PPP loan average balance		(519	)		(539	)		(1,159	)		(8,885	)		(36,720	)
Total average assets, adjusted	$	3,324,486		$	3,345,819		$	3,336,189		$	3,200,555		$	3,109,619
Net core earnings attributable to Guaranty Bancshares, Inc. to average assets, as adjusted (annualized)		1.23	%		1.49	%		1.64	%		1.61	%		1.43	%
Total average equity	$	300,449		$	292,471		$	290,806		$	291,312		$	301,579
Net core earnings attributable to Guaranty Bancshares, Inc. to average equity (annualized)		13.64	%		17.07	%		18.84	%		17.65	%		14.71	%

Cost of Total Deposits
	Quarter Ended
(dollars in thousands)	March 31, 2023			December 31, 2022			March 31, 2022
Total average interest-bearing deposits	$	1,624,610		$	1,627,442		$	1,710,157
Adjustments:
Noninterest-bearing deposits		1,002,793			1,102,016			1,027,429
Total average deposits	$	2,627,403		$	2,729,458		$	2,737,586
Total deposit-related interest expense	$	7,655		$	4,433		$	1,242
Average cost of interest-bearing deposits		1.91	%		1.08	%		0.29	%
Average cost of total deposits (cost of funds)		1.18			0.64			0.18

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

About Non-GAAP Financial Measures

Certain of the financial measures and ratios we present, including “tangible book value per share,” “net core earnings,” “core net interest margin,” and PPP-adjusted metrics are supplemental measures that are not required by, or are not presented in accordance with, U.S. generally accepted accounting principles (GAAP). We refer to these financial measures and ratios as “non-GAAP financial measures.” We consider the use of select non-GAAP financial measures and ratios to be useful for financial and operational decision making and useful in evaluating period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenditures or assets that we believe are not indicative of our primary business operating results or by presenting certain metrics on a fully taxable equivalent basis. We believe that management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, analyzing and comparing past, present and future periods.

These non-GAAP financial measures should not be considered a substitute for financial information presented in accordance with GAAP and you should not rely on non-GAAP financial measures alone as measures of our performance. The non-GAAP financial measures we present may differ from non-GAAP financial measures used by our peers or other companies. We compensate for these limitations by providing the equivalent GAAP measures whenever we present the non-GAAP financial measures and by including a reconciliation of the impact of the components adjusted for in the non-GAAP financial measure so that both measures and the individual components may be considered when analyzing our performance.

A reconciliation of non-GAAP financial measures to the comparable GAAP financial measures is included at the end of the financial statement tables.

Conference Call Information

The Company will hold a conference call to discuss first quarter 2023 financial results on Monday, April 17, 2023 at 10:00 am Central Time. The conference call will be hosted by Ty Abston, Chairman and CEO, Cappy Payne, SEVP and Company CFO, and Shalene Jacobson, EVP and Bank CFO. All conference attendees must register before the call at www.gnty.com/earningscall. The conference materials will be available by accessing the Investor Relations page on our website, www.gnty.com. A recording of the conference call will be available by 1:00 pm Central Time the day of the call and remain available through April 30, 2023 on our Investor Relations webpage.

About Guaranty Bancshares, Inc.

Guaranty Bancshares, Inc. is the parent company for Guaranty Bank & Trust, N.A. Guaranty Bank & Trust has 32 banking locations across 26 Texas communities located within the East Texas, Dallas/Fort Worth, Houston and Central Texas regions of the state. As of March 31, 2023, Guaranty Bancshares, Inc. had total assets of $3.4 billion, total loans of $2.4 billion and total deposits of $2.6 billion. Visit www.gnty.com for more information.

Cautionary Statement Regarding Forward-Looking Information

This communication contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, future events and our results of operations, financial condition and financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would” and “outlook,” or the negative version of those words or other comparable words of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Actual results may also be significantly impacted by the effects of the ongoing COVID-19 pandemic, including, among other effects: the impact of the public health crisis; the operation of financial markets; global supply chain disruption; employment levels; market liquidity; the impact of various actions taken in response by the U.S. federal government, the Federal Reserve, other banking regulators, state and local governments; and the impact that all of these factors have on our borrowers, other customers, vendors and counterparties. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. Such factors include, without limitation, the “Risk Factors” referenced in our most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q, other risks and uncertainties listed from time to time in our reports and documents filed with the Securities and Exchange Commission ("SEC"). We can give no assurance that any goal or plan or expectation set forth in forward-looking statements can be achieved and readers are cautioned not to place undue reliance on such statements. The forward-looking statements are made as of the date of this communication, and we do not intend, and assume no obligation, to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by applicable law.