gnty-ex991

ADDISON, Texas, April 23, 2019 /Business Wire/ -- Guaranty Bancshares, Inc. (NASDAQ: GNTY), the holding company for Guaranty Bank & Trust, N.A., today reported financial results for the fiscal quarter ended March 31, 2019. The company's net income available to common shareholders was $5.3 million, or $0.45 per basic share, for the quarter ended March 31, 2019, compared to $6.5 million, or $0.55 per basic share, for the quarter ended December 31, 2018 and $4.4 million, or $0.39 per basic share, for the quarter ended March 31, 2018. The earnings per basic share during the first quarter of 2019, compared to the same period in 2018, were impacted by the issuance of 899,816 shares of common stock in connection with the completion of the Westbound Bank ("Westbound") acquisition on June 1, 2018 and by our repurchase of 219,030 shares of common stock between April 1, 2018 and March 31, 2019. Return on average assets and average equity for the first quarter were 0.94% and 9.11%, respectively, compared to 1.15% and 10.67%, respectively, for the fourth quarter of 2018 and 0.89% and 8.35%, respectively, for the same period during 2018.

"We are very pleased with our strong core deposit growth, continued expansion in our net interest margin, and strong asset quality metrics this quarter. We will continue to execute on our strategic plan of organic growth of loan and deposit relationships in our expansion markets, which will further improve our efficiencies and performance as we add additional scale. While loan demand was softer in Q1 than previous quarters, we still see overall positive trends and opportunities in our markets and Texas as a whole. Our company’s stock valuation remains at what we see as a very attractive level, so we expect to continue executing on our previously announced stock repurchase plan," commented Ty Abston, the company's Chairman and Chief Executive Officer.

The company’s growth in net earnings in the first quarter of 2019, as compared to the first quarter of 2018, was primarily attributable to an increase in net interest income, before the provision for loan losses, of $3.6 million. These items were partially offset by an increase in noninterest expense of $2.3 million, of which $1.8 million related to higher employee compensation and benefits and occupancy expenses during the quarter. The increase in employee compensation and benefits and occupancy expenses resulted from an increase of 44 full-time equivalent employees, from 419 as of March 31, 2018 to 463 as of March 31, 2019, of which 28 new employees were related to the Westbound acquisition, 11 were related to our two de novo locations in Austin and Fort Worth, Texas that were opened in the fourth quarter of 2017, and other employees that were added to support operational growth.

Net interest income in the first quarter of 2019 and 2018 was $19.0 million and $15.4 million, respectively, an increase of $3.6 million, or 23.65%. Net interest margin for the first quarter of 2019 and 2018 was 3.64% and 3.41%, respectively. Net interest income and net interest margin, on a taxable equivalent basis, were $19.0 million and 3.75%, respectively, for the first quarter of 2019. Our net interest income was positively affected by achieving higher increases in loan yields than for deposit costs. During the period, our loan yield increased from 4.83% as of March 31, 2018 to 5.46% as of March 31, 2019, a change of 0.63% while our interest bearing deposit costs increased from 1.06% to 1.58% during the same period, a change of 0.52%.

The provision for loan losses was $575,000 in the first quarter of 2019, compared to $500,000 in the fourth quarter of 2018 and $600,000 in the first quarter of 2018. The provision for loan losses is primarily reflective of organic growth during the respective periods. Nonperforming assets as a percentage of total loans were 0.31% at March 31, 2019, compared to 0.46% at December 31, 2018, and 0.64% at March 31, 2018.

Noninterest income decreased $611,000, or 14.64%, in the first quarter of 2019 to $3.6 million, compared to $4.2 million for the quarter ended December 31, 2018. The decrease was primarily attributable to $601,000 recognized in the prior quarter as other noninterest income from the sale of our Atlanta, Texas bank location and former Longview, Texas bank location. Further contributing to the decrease was a decline in service charges income of $113,000, or 12.03% from the prior quarter, partially offset by an increase in the net realized gain on sale of loans of $40,000, or 9.15% from the prior quarter.

Noninterest income decreased $103,000, or 2.81%, in the first quarter of 2019, compared to $3.7 million for the quarter ended March 31, 2018. The decrease was primarily attributable to a decrease in the net realized gain on sale of loans of $79,000, or 14.21%, from the same quarter in the prior year. Other noninterest income decreased $133,000, or 18.40%, from the same quarter in 2018 due primarily to a $263,000 negative adjustment in our SBA servicing asset fair value. These decreases were partially offset by increases in merchant and debit card fees and bank owned life insurance of $130,000 and $32,000, respectively.

Noninterest expense increased 6.37% in the first quarter of 2019 to $15.5 million, compared to $14.5 million for the quarter ended December 31, 2018. The increase resulted primarily from a $587,000, or 6.99%, increase in employee compensation and benefits and a $129,000 increase in software and technology expenses in the current quarter. These increases were partially offset by a $44,000, or 10.58%, decrease in advertising and promotions expense, from $416,000 in the previous quarter to $372,000 in the first quarter of 2019.

Noninterest expense increased $2.3 million, or 17.79%, in the first quarter of 2019, compared to the first quarter of 2018. The increase in noninterest expense in the first quarter of 2019 was primarily driven by an increase in employee compensation and

benefits expense to $9.0 million, up $1.2 million from the same quarter of the prior year due in part to the Westbound acquisition during the second quarter of 2018 and to new employees at our two de novo locations in Austin and Fort Worth, Texas. Occupancy expenses also increased $598,000, from $1.9 million in the first quarter of 2018, to $2.5 million in the first quarter of 2019. The increase in occupancy expense is primarily due to an increase in depreciation expense, ad valorum taxes, janitor expense and building maintenance, a combined expense increase of $310,000, resulting mainly from the Westbound acquisition and new Austin and Fort Worth locations. Other increases are due to commencement of leases in Austin and Fort Worth and adoption of the new Accounting Standards Codification 842, Leases. The company’s efficiency ratio in the first quarter of 2019 was 68.55%, compared to 68.99% in the same quarter last year.

Consolidated assets for the company totaled $2.31 billion at March 31, 2019, compared to $2.27 billion at December 31, 2018, and $2.00 billion at March 31, 2018. Gross loans decreased 0.23%, or $3.8 million, to $1.66 billion at March 31, 2019, compared to loans of $1.66 billion at December 31, 2018. Gross loans increased 18.15%, or $254.4 million, from $1.40 billion at March 31, 2018. Excluding the $154.7 million of loans acquired from Westbound, and the $10.2 million in loans sold with the Atlanta bank location, organic loan growth from March 31, 2018 to March 31, 2019 was $95.2 million, or 6.36%. Deposits increased by 4.85%, or $90.8 million, to $1.96 billion at March 31, 2019, compared to $1.87 billion at December 31, 2018. Total deposits increased 16.00%, or $270.7 million, from $1.69 billion at March 31, 2018. Excluding the $181.4 million of deposits acquired from Westbound, and the $32.4 million in deposits sold with the Atlanta bank location, organic deposit growth from March 31, 2018 to March 31, 2019 was $121.7 million, or 6.71%. Shareholders' equity totaled $250.3 million as of March 31, 2019, compared $244.6 million at December 31, 2018 and $207.4 million at March 31, 2018. The increases from the previous quarter and from March 31, 2018 were primarily the result of operating earnings and the issuance of common stock related to the Westbound acquisition on June 1, 2018.

	As of
	2019		2018
	March 31		December 31		September 30		June 30		March 31
ASSETS
Cash and due from banks	$	40,915	$	44,471	$	38,483	$	37,944	$	33,021
Federal funds sold		58,000		20,275		10,700		56,850		43,875
Interest-bearing deposits		9,389		6,764		4,868		4,186		9,715
Total cash and cash equivalents		108,304		71,510		54,051		98,980		86,611
Securities available for sale		236,979		232,975		232,378		243,490		235,075
Securities held to maturity		160,980		163,164		164,839		167,239		170,408
Loans held for sale		1,222		1,795		826		1,731		1,477
Loans, net		1,640,979		1,645,444		1,638,149		1,580,441		1,388,913
Accrued interest receivable		8,245		9,292		7,760		8,667		6,719
Premises and equipment, net		52,378		52,227		52,660		53,396		45,095
Other real estate owned		632		751		1,783		1,926		2,076
Cash surrender value of life insurance		26,458		26,301		25,747		25,590		19,468
Deferred tax asset		2,167		3,209		3,237		2,902		3,354
Core deposit intangible, net		4,493		4,706		4,919		5,133		2,578
Goodwill		32,160		32,160		32,160		32,019		18,742
Other assets		33,994		23,436		24,071		23,126		17,369
Total assets	$	2,308,991	$	2,266,970	$	2,242,580	$	2,244,640	$	1,997,885
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing	$	490,206	$	489,789	$	479,405	$	464,236	$	421,255
Interest-bearing		1,472,095		1,381,691		1,357,934		1,384,189		1,270,327
Total deposits		1,962,301		1,871,480		1,837,339		1,848,425		1,691,582
Securities sold under agreements to repurchase		11,542		12,228		11,107		12,588		12,395
Accrued interest and other liabilities		22,396		10,733		10,187		9,515		7,575
Federal Home Loan Bank advances		50,131		115,136		129,140		120,644		65,149
Subordinated debentures		12,310		12,810		12,810		13,810		13,810
Total liabilities		2,058,680		2,022,387		2,000,583		2,004,982		1,790,511

Total shareholders' equity		250,311		244,583		241,997		239,658		207,374
Total liabilities and shareholders' equity	$	2,308,991	$	2,266,970	$	2,242,580	$	2,244,640	$	1,997,885

	Quarter Ended
	2019			2018
	March 31			December 31			September 30			June 30			March 31
INCOME STATEMENTS
Interest income	$	25,307		$	24,719		$	23,675		$	21,026		$	19,038
Interest expense		6,300			5,863			5,446			4,567			3,666
Net interest income		19,007			18,856			18,229			16,459			15,372
Provision for loan losses		575			500			500			650			600
Net interest income after provision for loan losses		18,432			18,356			17,729			15,809			14,772
Noninterest income		3,562			4,173			3,549			3,916			3,665
Noninterest expense		15,470			14,544			15,027			14,069			13,134
Income before income taxes		6,524			7,985			6,251			5,656			5,303
Income tax provision		1,187			1,473			1,160			1,022			944
Net earnings	$	5,337		$	6,512		$	5,091		$	4,634		$	4,359
PER COMMON SHARE DATA
Earnings per common share, basic	$	0.45		$	0.55		$	0.43		$	0.41		$	0.39
Earnings per common share, diluted		0.45			0.55			0.42			0.41			0.39
Cash dividends per common share		0.17			0.17			0.15			0.14			0.14
Book value per common share - end of quarter		21.19			20.68			20.23			20.04			18.75
Tangible book value per common share - end of quarter⁽¹⁾		18.09			17.56			17.13			16.81			16.82
Common shares outstanding - end of quarter		11,813,586			11,829,868			11,964,472			11,960,772			11,058,956
Weighted-average common shares outstanding, basic		11,816,347			11,888,817			11,962,654			11,327,363			11,058,956
Weighted-average common shares outstanding, diluted		11,907,287			11,951,271			12,033,434			11,440,103			11,177,579
PERFORMANCE RATIOS
Return on average assets (annualized)		0.94	%		1.15	%		0.91	%		0.90	%		0.89	%
Return on average equity (annualized)		9.11			10.67			8.39			8.58			8.35
Net interest margin (annualized)		3.64			3.58			3.50			3.44			3.41
Efficiency ratio⁽²⁾		68.55			63.16			69.00			68.88			68.99

(2) 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.

	As of
	2019			2018
	March 31			December 31			September 30			June 30			March 31
LOAN PORTFOLIO COMPOSITION
Commercial and industrial	$	246,176		$	261,779		$	248,758		$	234,396		$	206,308
Real estate:
Construction and development		250,852			237,503			229,307			211,745			193,909
Commercial real estate		581,926			582,519			599,153			570,448			450,076
Farmland		72,274			67,845			65,209			68,272			63,971
1-4 family residential		390,618			393,067			392,456			392,940			377,278
Multi-family residential		37,430			38,386			38,523			39,023			37,992
Consumer		56,158			54,777			53,947			52,949			48,982
Agricultural		19,994			23,277			24,184			23,362			22,545
Overdrafts		275			382			326			339			273
Total loans⁽¹⁾⁽²⁾	$	1,655,703		$	1,659,535		$	1,651,863		$	1,593,474		$	1,401,334

	Quarter Ended
	2019			2018
	March 31			December 31			September 30			June 30			March 31
ALLOWANCE FOR LOAN LOSSES
Balance at beginning of period	$	14,651		$	14,441		$	13,890		$	13,375		$	12,859
Loans charged-off		(78	)		(507	)		(94	)		(201	)		(116	)
Recoveries		42			217			145			66			32
Provision for loan losses		575			500			500			650			600
Balance at end of period	$	15,190		$	14,651		$	14,441		$	13,890		$	13,375

Allowance for loan losses / period-end loans		0.92	%		0.88	%		0.87	%		0.87	%		0.95	%
Allowance for loan losses / nonperforming loans		419.2			248.7			166.8			162.3			282.4
Net charge-offs / average loans (annualized)		0.01			0.07			(0.01	)		0.04			0.02

NON-PERFORMING ASSETS
Non-accrual loans ⁽³⁾	$	3,624		$	5,891		$	8,657		$	8,557		$	4,737
Other real estate owned		632			751			1,783			1,926			2,076
Repossessed assets owned		948			971			986			1,624			2,107
Total non-performing assets	$	5,204		$	7,613		$	11,426		$	12,107		$	8,920

Non-performing assets as a percentage of:
Total loans⁽¹⁾⁽³⁾		0.31	%		0.46	%		0.69	%		0.76	%		0.64	%
Total assets		0.23			0.34			0.51			0.54			0.45

Restructured loans-nonaccrual	$	487		$	335		$	—		$	—		$	—
Restructured loans-accruing		671			861			727			737			746

(1) Excludes outstanding balances of loans held for sale of $1.2 million, $1.8 million, $826,000, $1.7 million, and $1.5 million as of March 31, 2019, and December 31, September 30, June 30, and March 31, 2018, respectively.

(2) Excludes deferred loan fees of $466,000, $560,000, $727,000, $857,000, and $1.0 million as of March 31, 2019, and December 31, September 30, June 30, and March 31, 2018, respectively.

(3) Restructured loans-nonaccrual are included in nonaccrual loans which are a component of nonperforming loans.

	Quarter Ended
	2019		2018
	March 31		December 31		September 30		June 30			March 31
NONINTEREST INCOME
Service charges	$	826	$	939	$	921	$	852		$	888
Net realized gain (loss) on securities transactions		—		—		1		(51	)		—
Net realized gain on sale of loans		477		437		637		678			556
Fiduciary income		425		408		402		379			398
Bank-owned life insurance income		158		152		157		135			126
Merchant and debit card fees		959		1,005		937		871			829
Loan processing fee income		128		131		158		155			145
Other noninterest income		589		1,101		336		897			723
Total noninterest income	$	3,562	$	4,173	$	3,549	$	3,916		$	3,665

NONINTEREST EXPENSE
Employee compensation and benefits	$	8,986	$	8,399	$	8,156	$	7,789		$	7,778
Occupancy expenses		2,451		2,322		2,217		2,006			1,853
Legal and professional fees		626		531		948		1,033			568
Software and technology		782		653		636		657			556
Amortization		349		347		349		275			257
Director and committee fees		239		227		255		268			279
Advertising and promotions		385		416		335		380			279
ATM and debit card expense		278		270		289		259			309
Telecommunication expense		174		173		170		154			152
FDIC insurance assessment fees		33		146		164		159			156
Other noninterest expense		1,167		1,060		1,508		1,089			947
Total noninterest expense	$	15,470	$	14,544	$	15,027	$	14,069		$	13,134

	For the Three Months Ended March 31,
	2019								2018
	Average Outstanding Balance			Interest Earned/ Interest Paid		Average Yield/ Rate			Average Outstanding Balance			Interest Earned/ Interest Paid		Average Yield/ Rate
ASSETS
Interest-earnings assets:
Total loans⁽¹⁾	$	1,651,608		$	22,244		5.46	%	$	1,364,724		$	16,256		4.83	%
Securities available for sale		233,625			1,530		2.66			238,233			1,442		2.45
Securities held to maturity		162,121			1,028		2.57			172,679			1,061		2.49
Nonmarketable equity securities		12,128			170		5.68			7,508			89		4.81
Interest-bearing deposits in other banks		57,240			335		2.37			43,547			190		1.77
Total interest-earning assets		2,116,722			25,307		4.85			1,826,691			19,038		4.23
Allowance for loan losses		(14,906	)							(12,989	)
Noninterest-earnings assets		188,917								142,343
Total assets	$	2,290,733							$	1,956,045
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits	$	1,458,261		$	5,673		1.58	%	$	1,255,975		$	3,274		1.06	%
Advances from FHLB and fed funds purchased		74,700			447		2.43			59,979			214		1.45
Subordinated debentures		12,310			169		5.57			13,810			167		4.90
Securities sold under agreements to repurchase		11,065			11		0.40			11,621			11		0.38
Total interest-bearing liabilities		1,556,336			6,300		1.64			1,341,385			3,666		1.11
Noninterest-bearing liabilities:
Noninterest-bearing deposits		475,890								400,347
Accrued interest and other liabilities		20,893								5,589
Total noninterest-bearing liabilities		496,783								405,936
Shareholders’ equity		237,614								208,724
Total liabilities and shareholders’ equity	$	2,290,733							$	1,956,045
Net interest rate spread⁽²⁾							3.21	%							3.12	%
Net interest income				$	19,007							$	15,372
Net interest margin⁽³⁾							3.64	%							3.41	%

(1) Includes average outstanding balances of loans held for sale of $1.3 million and $1.7 million for the three months ended March 31, 2019 and 2018, 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.

	As of
	2019			2018
	March 31			December 31			September 30			June 30			March 31
Total shareholders’ equity	$	250,311		$	244,583		$	241,997		$	239,658		$	207,374
Adjustments:
Goodwill		(32,160	)		(32,160	)		(32,160	)		(32,019	)		(18,742	)
Core deposit intangible		(4,493	)		(4,706	)		(4,919	)		(5,133	)		(2,578	)
Total tangible common equity	$	213,658		$	207,717		$	204,918		$	202,506		$	186,054
Common shares outstanding - end of quarter⁽¹⁾		11,813,586			11,829,868			11,964,472			11,960,772			11,058,956
Book value per common share	$	21.19		$	20.68		$	20.23		$	20.04		$	18.75
Tangible book value per common share		18.09			17.56			17.13			16.93			16.82

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

Certain of the financial measures and ratios we present, including “tangible book value per share” 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.

Guaranty Bancshares, Inc. is a bank holding company that conducts commercial banking activities through its wholly-owned subsidiary, Guaranty Bank & Trust, N.A. As one of the oldest regional community banks in Texas, Guaranty Bank & Trust provides its customers with a full array of relationship-driven commercial and consumer banking products and services, as well as mortgage, trust, and wealth management products and services. Guaranty Bank & Trust has 30 banking locations across 23 Texas communities located within the East Texas, Dallas/Fort Worth, Greater Houston and Central Texas regions of the state. Visit www.gnty.com for more 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. 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"), and the following factors: business and economic conditions generally and in the financial services industry, nationally and within our current and future geographic market areas; economic, market, operational, liquidity, credit and interest rate risks associated with our business; the composition of our loan portfolio, including deteriorating asset quality and higher loan charge-offs; the laws and regulations applicable to our business; our ability to achieve organic loan and deposit growth and the composition of such growth; increased competition in the financial services industry, nationally, regionally or locally; our ability to maintain our historical earnings trends; our ability to raise additional capital to execute our business plan; acquisitions and integrations of acquired businesses; systems failures or interruptions involving our information technology and telecommunications systems or third-party servicers; the composition of our management team and our ability to attract and retain key personnel; the fiscal position of the U.S. federal government and the soundness of other financial institutions; and the amount of nonperforming and classified assets we hold. 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.