UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             .

Commission File Number: 001-38087

GUARANTY BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

Texas	001-38087	75-1656431
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)
16475 Dallas Parkway, Suite 600 Addison, Texas		75001
(Address of Principal Executive Offices)		(Zip Code)

(888) 572 - 9881

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol	Name of each exchange on which registered
Common Stock, par value $1.00 per share	GNTY	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ☒  No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ☒  No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”  “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ☐  No  ☒

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the

Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes  ☐  No  ☒

As of November 1, 2019, there were 11,531,943 outstanding shares of the registrant’s common stock, par value $1.00 per share.

GUARANTY BANCSHARES, INC.

	PART I — FINANCIAL INFORMATION	Page
Item 1.	Financial Statements – (Unaudited)	3
	Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018	3
	Consolidated Statements of Earnings for the Three and Nine Months Ended September 30, 2019 and 2018	4
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2019 and 2018	5
	Consolidated Statements of Changes in Shareholders’ Equity for the Three and Nine Months Ended September 30, 2019 and 2018	6
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018	8
	Notes to Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	68
Item 4.	Controls and Procedures	69
	PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	70
Item 1A.	Risk Factors	70
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	70
Item 3.	Defaults Upon Senior Securities	70
Item 4.	Mine Safety Disclosures	70
Item 5.	Other Information	70
Item 6.	Exhibits	71
SIGNATURES		72

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

GUARANTY BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)

	(Unaudited)			(Audited)
	September 30, 2019			December 31, 2018
ASSETS
Cash and due from banks	$	42,051		$	44,471
Federal funds sold		14,250			20,275
Interest-bearing deposits		2,347			6,764
Total cash and cash equivalents		58,648			71,510
Securities available for sale		221,345			232,975
Securities held to maturity		156,925			163,164
Loans held for sale		3,841			1,795
Loans, net		1,720,595			1,645,444
Accrued interest receivable		7,825			9,292
Premises and equipment, net		52,956			52,227
Other real estate owned		551			751
Cash surrender value of life insurance		34,280			26,301
Deferred tax asset		2,363			3,209
Core deposit intangible, net		4,066			4,706
Goodwill		32,160			32,160
Other assets		30,467			23,436
Total assets	$	2,326,022		$	2,266,970
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing	$	528,301		$	489,789
Interest-bearing		1,435,012			1,381,691
Total deposits		1,963,313			1,871,480
Securities sold under agreements to repurchase		11,363			12,228
Accrued interest and other liabilities		23,508			10,733
Federal Home Loan Bank advances		60,623			115,136
Subordinated debentures		11,310			12,810
Total liabilities		2,070,117			2,022,387
Commitments and contingencies (see Note 12)
Shareholders' equity
Preferred stock, $5.00 par value, 15,000,000 shares authorized, no shares issued		—			—
Common stock, $1.00 par value, 50,000,000 shares authorized, 12,889,597 and 12,835,486 shares issued, and 11,534,393 and 11,829,868 shares outstanding, respectively		12,890			12,835
Additional paid-in capital		186,165			185,174
Retained earnings		92,947			80,088
Treasury stock, 1,355,204 and 1,005,618 shares at cost		(34,419	)		(24,352	)
Accumulated other comprehensive loss		(1,678	)		(9,162	)
Total shareholders' equity		255,905			244,583
Total liabilities and shareholders' equity	$	2,326,022		$	2,266,970

See accompanying notes to consolidated financial statements.

3.

GUARANTY BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)

(Dollars in thousands, except per share data)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019			2018
Interest income
Loans, including fees	$	22,996	$	20,879	$	67,821		$	55,377
Securities
Taxable		1,417		1,526		4,543			4,713
Nontaxable		955		966		2,871			2,812
Federal funds sold and interest-bearing deposits		485		304		1,478			837
Total interest income		25,853		23,675		76,713			63,739
Interest expense
Deposits		5,304		4,670		16,681			11,948
FHLB advances and federal funds purchased		298		593		1,126			1,181
Subordinated debentures		156		173		495			516
Other borrowed money		12		10		35			34
Total interest expense		5,770		5,446		18,337			13,679
Net interest income		20,083		18,229		58,376			50,060
Provision for loan losses		100		500		1,250			1,750
Net interest income after provision for loan losses		19,983		17,729		57,126			48,310
Noninterest income
Service charges		978		921		2,693			2,661
Net realized gain (loss) on securities transactions		—		1		(22	)		(50	)
Net realized gain on sale of loans		910		637		2,070			1,871
Other income		2,728		1,990		7,547			6,648
Total noninterest income		4,616		3,549		12,288			11,130
Noninterest expense
Employee compensation and benefits		8,896		8,156		26,575			23,723
Occupancy expenses		2,448		2,217		7,336			6,076
Other expenses		4,091		4,654		12,388			12,431
Total noninterest expense		15,435		15,027		46,299			42,230
Income before income taxes		9,164		6,251		23,115			17,210
Income tax provision		1,634		1,160		4,205			3,126
Net earnings	$	7,530	$	5,091	$	18,910		$	14,084
Basic earnings per share	$	0.65	$	0.43	$	1.62		$	1.23
Diluted earnings per share	$	0.65	$	0.42	$	1.62		$	1.22

See accompanying notes to consolidated financial statements.

4.

GUARANTY BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(Dollars in thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Net earnings	$	7,530		$	5,091		$	18,910		$	14,084
Other comprehensive income:
Unrealized gains (losses) on securities
Unrealized holding gains (losses) arising during the period		1,232			(1,592	)		9,716			(6,104	)
Amortization of net unrealized gains on held to maturity securities		5			6			14			28
Reclassification adjustment for net (gains) losses included in net earnings		—			(1	)		22			50
Tax effect		(260	)		334			(2,065	)		1,271
Unrealized gains (losses) on securities, net of tax		977			(1,253	)		7,687			(4,755	)
Unrealized holding (losses) gains arising during the period on interest rate swaps		(29	)		67			(203	)		263
Total other comprehensive income (loss)		948			(1,186	)		7,484			(4,492	)
Reclassification of certain tax effects from accumulated other comprehensive income		—			—			—			(486	)
Comprehensive income	$	8,478		$	3,905		$	26,394		$	9,106

See accompanying notes to consolidated financial statements.

5.

GUARANTY BANCSHARES, INC.

CONSOLIDATED STATMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

(Dollars in thousands, except per share amounts)

	Preferred Stock		Common Stock		Additional Paid-in Capital			Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
For the Nine Months Ended September 30, 2019
Balance at December 31, 2018	$	—	$	12,835	$	185,174		$	80,088	$	(24,352	)	$	(9,162	)	$	244,583
Net earnings		—		—		—			18,910		—			—			18,910
Other comprehensive income		—		—		—			—		—			7,484			7,484
Exercise of stock options		—		24		529			—		—			—			553
Purchase of treasury stock		—		—		—			—		(10,067	)		—			(10,067	)
Restricted stock grants		—		31		(31	)		—		—			—			—
Stock based compensation		—		—		493			—		—			—			493
Dividends: