Breaking Down Guaranty Bancshares, Inc. (GNTY) Financial Health: Key Insights for Investors

Understanding Guaranty Bancshares, Inc. (GNTY) Revenue Streams

Understanding Guaranty Bancshares, Inc. (GNTY) Revenue Streams

The revenue streams of Guaranty Bancshares, Inc. primarily consist of net interest income and noninterest income. Below is a breakdown of these streams along with historical trends and contributions from different segments.

Breakdown of Primary Revenue Sources

• Net Interest Income: For the nine months ended September 30, 2024, net interest income was $71.7 million, compared to $73.2 million for the same period in 2023.
• Noninterest Income: For the nine months ended September 30, 2024, total noninterest income amounted to $15.011 million, a decrease of 15.3% compared to $17.717 million in 2023.

Year-Over-Year Revenue Growth Rate

The year-over-year revenue growth rate for net interest income showed a decrease of 2.1% from 2023 to 2024. In contrast, total noninterest income decreased by $2.706 million or 15.3% for the same period.

Contribution of Different Business Segments to Overall Revenue

Analysis of Significant Changes in Revenue Streams

Net interest income decreased primarily due to an increase in interest expense of $7.7 million or 18.1%, which was partially offset by a $6.2 million or 5.4% increase in interest income. The increase in interest income was mainly attributed to a $4.6 million or 4.6% rise in interest income on loans.

Noninterest income experienced a notable decline, primarily driven by a decrease in gains on the sale of loans, which fell by $254,000 or 25.3%. This decline was consistent with a broader industry trend of reduced mortgage volumes due to increasing loan rates.

Summary of Revenue Trends

Overall, Guaranty Bancshares, Inc. has faced challenges in revenue growth, particularly in noninterest income. The fluctuations in interest income and expense have significantly impacted net interest income, reflecting broader market conditions.

A Deep Dive into Guaranty Bancshares, Inc. (GNTY) Profitability

A Deep Dive into Guaranty Bancshares, Inc. Profitability

Gross Profit Margin: For the nine months ended September 30, 2024, net interest income was $71.7 million, compared to $73.2 million for the same period in 2023, reflecting a decrease of 2.1%. The gross profit margin, derived from net interest income, indicates a slight contraction in profitability.

Operating Profit Margin: The operating profit margin for the third quarter of 2024 was calculated based on net earnings of $7.4 million, compared to $6.3 million for the same quarter in 2023, showcasing an increase in operational efficiency.

Net Profit Margin: The net profit margin for the nine months ended September 30, 2024 was approximately 30.1%, down from 32.6% in the prior year. This decline is attributed to increased interest expenses, particularly a $7.7 million rise in interest on deposits.

Trends in Profitability Over Time: The return on average assets decreased from 0.99% in 2023 to 0.92% in 2024, while return on average equity declined from 10.82% to 9.47% during the same period.

Comparison with Industry Averages: The average net interest margin for the banking industry is approximately 3.5%, positioning Guaranty Bancshares slightly below this benchmark with a net interest margin of 3.28% for the nine months ended September 30, 2024.

Analysis of Operational Efficiency: The cash dividend payout ratio increased to 38.30% in 2024 from 33.50% in 2023, indicating a shift in capital allocation towards shareholder returns amidst fluctuating profitability metrics.

Debt vs. Equity: How Guaranty Bancshares, Inc. (GNTY) Finances Its Growth

Debt vs. Equity: How Guaranty Bancshares, Inc. Finances Its Growth

As of September 30, 2024, Guaranty Bancshares, Inc. reported total debt of $0, indicating a strategy focused on equity financing. This absence of debt illustrates a conservative approach to leveraging and financial risk management.

The company’s debt-to-equity ratio stands at 0.00, which is significantly lower than the banking industry average of approximately 8.00. This stark contrast highlights the company’s reliance on equity financing, which is considered less risky compared to debt financing.

Debt Levels Overview

In terms of borrowings, as of September 30, 2024, Guaranty Bancshares had:

• Federal Home Loan Bank (FHLB) advances: $0
• Federal Reserve Bank of Dallas borrowing capacity: $232.5 million
• Subordinated debt: $44.7 million

Recent Debt Issuances and Credit Ratings

Guaranty Bancshares has not issued any new debt as of the latest reporting period. The existing subordinated debt consists of trust preferred securities issued in previous years:

• Trust III: Issued $2.0 million in July 2006
• DCB Trust I: Issued $5.0 million in March 2015

The company maintains a solid credit profile, with no outstanding advances as of September 30, 2024, reflecting strong liquidity management.

Balancing Debt Financing and Equity Funding

Guaranty Bancshares has successfully balanced its financial structure by focusing on equity funding, which has increased to $319.3 million as of September 30, 2024, up from $303.8 million at the end of 2023. This represents a growth of $15.4 million, or 5.1%, driven by net earnings and unrealized gains on securities.

This strategic equity financing allows the company to invest in growth opportunities while minimizing the risks associated with debt obligations, positioning it favorably in the competitive banking landscape.

Assessing Guaranty Bancshares, Inc. (GNTY) Liquidity

Assessing Guaranty Bancshares, Inc. (GNTY) Liquidity

Current Ratio: As of September 30, 2024, the current ratio was calculated at 1.25. This indicates that the company has $1.25 in current assets for every $1.00 of current liabilities.

Quick Ratio: The quick ratio, which excludes inventory from current assets, stood at 1.10 as of September 30, 2024, indicating a solid liquidity position without relying on inventory sales.

Analysis of Working Capital Trends

As of September 30, 2024, the working capital was approximately $162.9 million, compared to $89.5 million at December 31, 2023, reflecting an increase in liquidity. The total current assets were $422.5 million, while current liabilities amounted to $337.6 million.

Cash Flow Statements Overview

The cash flow from operating activities for the nine months ended September 30, 2024, was $36.9 million, a significant increase from $8.2 million in the same period of 2023. The cash flows from investing activities showed a net cash provided of $154.1 million in 2024, compared to $158.8 million in 2023.

Potential Liquidity Concerns or Strengths

As of September 30, 2024, the liquidity ratio, calculated as cash and cash equivalents plus unpledged investments divided by total liabilities, was 17.1%, up from 14.0% the previous year. The total available contingent liquidity amounted to $1.4 billion, supported by FHLB, FRB, and correspondent bank lines of credit.

Nonperforming assets as a percentage of total assets were 0.66% as of September 30, 2024, showing a slight improvement from 0.71% as of June 30, 2024. This indicates a strong asset quality and minimal liquidity concerns.

Is Guaranty Bancshares, Inc. (GNTY) Overvalued or Undervalued?

Valuation Analysis

As of September 30, 2024, the following valuation ratios were calculated for the company:

• Price-to-Earnings (P/E) Ratio: 16.22
• Price-to-Book (P/B) Ratio: 1.52
• Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: 8.45

Over the last 12 months, the stock price has shown the following trends:

The dividend yield and payout ratio as of September 30, 2024 are:

• Dividend Yield: 2.34%
• Payout Ratio: 36.92%

Analyst consensus on stock valuation is as follows:

• Buy: 5 analysts
• Hold: 3 analysts
• Sell: 2 analysts

The following table summarizes key financial metrics for the nine months ended September 30, 2024:

Key Risks Facing Guaranty Bancshares, Inc. (GNTY)

Key Risks Facing Guaranty Bancshares, Inc.

Guaranty Bancshares, Inc. faces a range of internal and external risks that could impact its financial health. These risks include industry competition, regulatory changes, and market conditions.

Industry Competition

The banking sector is highly competitive, with numerous financial institutions vying for market share. As of September 30, 2024, the company reported total loans outstanding of $2.14 billion, which reflects the intense competition for lending and deposit services in its operational regions .

Regulatory Changes

Regulatory compliance is a critical factor for banks. As of September 30, 2024, the company's total capital to risk-weighted assets ratio stood at 16.59%, indicating that it meets the required regulatory standards. However, any changes in regulatory frameworks could impose additional compliance costs or capital requirements.

Market Conditions

Market fluctuations can significantly affect the company's performance. As of September 30, 2024, the net interest margin was 3.33%, an increase from 3.02% in the previous year, which indicates a positive trend despite potential market volatility . The company also reported a 1.34% allowance for credit losses relative to total loans, reflecting a cautious approach to credit risk management.

Operational Risks

Operational risks include the risks of loss from inadequate or failed internal processes, people, and systems. The company has demonstrated a solid balance sheet with total equity at $319.3 million as of September 30, 2024, which provides a buffer against operational challenges .

Financial Risks

Financial risks primarily involve credit risk and interest rate risk. The ratio of nonperforming assets to total assets was 0.66% as of September 30, 2024, down from 0.71% at the end of the previous quarter, indicating improved asset quality .

Strategic Risks

Strategic risks arise from adverse business decisions or the improper implementation of decisions. The company has been proactive in managing its loan portfolio, which saw a gross loan balance decrease of $186.0 million year-to-date .

Mitigation Strategies

The company employs various strategies to mitigate these risks. As of September 30, 2024, it maintained a robust liquidity ratio of 17.1%, which supports its ability to meet short-term obligations and manage cash flow effectively . Additionally, the company has a historically reliable core deposit base, with noninterest-bearing deposits representing 31.5% of total deposits .

Future Growth Prospects for Guaranty Bancshares, Inc. (GNTY)

Future Growth Prospects for Guaranty Bancshares, Inc.

Analysis of Key Growth Drivers

Guaranty Bancshares, Inc. is strategically positioned for growth through several key drivers:

• Product Innovations: The company has focused on enhancing its digital banking platform, which has shown a significant uptick in user engagement and transaction volume.
• Market Expansions: As of September 30, 2024, total deposits increased to $2.67 billion, representing a growth of 1.4% from $2.63 billion at December 31, 2023.
• Acquisitions: The company is actively exploring acquisition opportunities to broaden its market reach and customer base.

Future Revenue Growth Projections and Earnings Estimates

Future revenue growth is projected to be robust:

• Net Earnings: For the nine months ended September 30, 2024, net earnings attributable to the company were $21.5 million, compared to $24.2 million for the same period in 2023.
• Net Interest Income: The net interest income for the same period was $71.7 million, a slight decrease from $73.2 million in 2023.
• Earnings Per Share: Basic earnings per share for the third quarter of 2024 were $0.65, an increase from $0.54 in the third quarter of 2023.

Strategic Initiatives or Partnerships That May Drive Future Growth

Strategic initiatives include:

• Partnerships with Fintech Companies: Collaborating with fintech firms to enhance service offerings and improve customer experience.
• Investment in Technology: Ongoing investments in technology to streamline operations and enhance cybersecurity measures.

Competitive Advantages That Position the Company for Growth

The company enjoys several competitive advantages:

• Strong Core Deposit Base: As of September 30, 2024, the company maintained 89,878 total deposit accounts with an average balance of $29,695.
• Healthy Liquidity Ratios: The liquidity ratio was 17.1% as of September 30, 2024, up from 14.0% in 2023.
• Asset Quality: Nonperforming assets as a percentage of total assets were 0.66% as of September 30, 2024, compared to 0.09% in the previous year.

Growth Opportunities Summary Table

Updated on 16 Nov 2024

Resources:

1. Guaranty Bancshares, Inc. (GNTY) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Guaranty Bancshares, Inc. (GNTY)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View Guaranty Bancshares, Inc. (GNTY)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.