- Earnings call transcript Q3 2022

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Operator

Good morning, and welcome to the Guaranty Bancshares' Third Quarter 2022 Earnings Call. My name is Nona Branch, and I will be your operator for today's call. This call is being recorded. After the prepared remarks, there will be a Q&A session.

Our host for today's call will be Ty Abston, Chairman and Chief Executive Officer of the Company; Cappy Payne, Senior Executive Vice President and Chief Financial Officer of the Company; Shalene Jacobson, Executive Vice President and Chief Financial Officer of the Bank. I Abston. turn call, our over our Ty CEO, begin will it now to To

Ty Abston

Nona. morning, you, Thank Good quarter our call. third everyone. Welcome to

think, downturn company resilient downturn several we for ‘XX. think positioned in experience through, any that to up kind financial Then and and we, reported company, our of high in are release, But well our in is economy outlined forward. -- As main Cappy? Texas some anticipating for Q&A. starting detail a walk everyone, the economic company. also a QX press we'll going level, results. areas We do strong see the will quarter, the open We of our growth of this the we'll like and at and it in downturn slides remain good we we then do we kind have to did in of

Cappy Payne

And for in are growth. proved And has the then about Pipelines payoffs looking quarter. higher the loan in They QX decrease QX. year-to-date beginning new more And than about our as originations, this were talk that diving in were warehouse million QX. lending. of in of into side, the asset and end they it's and was ex-PPP at talked and that at versus for of in down, Okay. the Thank quickly. quarter for year-to-date. paydowns, already again million detail looking QX the X% for that's $XXX at you, $X.XX we’ll our highlights and and here bit -- pretty statement steady $XXX the about Total Ty. -- came bit X.X% the of QX slide our of And event up balance increase year, the some million for or they slow they $XX were $XXX million loans growth strong about will the do year. lines, securities release, XX% or and next bucket, right or kind at Ty treasuries assets some a of $XXX main advances on quarter little a during treasury almost We growth our again, regions pretty CRE that portfolio, -- in some QX I'll or Home two. maturing. up into to the with a and Texas do looking short-term leading $XXX the income ex-PPP in chart Then, this were there our million of the Federal little in quarter total year of growth of for is Bank million still sheet treasuries million still matured -- at the you that X.X. and the that's duration they both we've some X% is $XX earnings million $XXX deposit treasuries, the XX% about about Loan up development. increase about will on portfolio we increase and drivers billion read were $XXX warehouse the XX are that bond and maturing our seeing And that in region are have again, those are was that an year. our the that mature four and category. tell in million-plus, yield those have can remaining Each the Those match before was We got bigger $XXX Central in C&D year-to-date, construction XX% million, of Along that were end have and lending. those

We'll of you mature. Loan all They as our can the this most increase $XX million -- pretty Bank $X million not that up our of that that $XXX roll averaged some million. represent XX% all were well quarter, XXXX, which all they down and continues year-to-date, XX% The of which for into to got deposits, Home quarter X.X%. at in Then Federal actually during was of just in total -- them. deposits, that those looking And I’ve of money about fund see, have the (ph) other our will almost up of Public year. advances that's the but they of DDA, deposits. million is will $XXX were

quarter. up the So our about retail -- our deposits million actually $XX were for other all

shareholder $X worth. a by did the We AOCI Earnings were we From a shares XX,XXX little about of quarter, pay linked X.X dividends million repurchased did $XX.X during of Our over so stock from the $X.XX, then, increase did million. decrease in our offset quarter. that's $XXX,XXX of And linked we million. a bit buyback equity by quarter. million little $X.X

a to XX% XXXX. at right on -- share that little is for XX.X%, is X.XX our than last dividends Basic right year's about better year-to-date. of year. track to year-to-date and income statement, $X.XX, and And compared this the or that's over again, $X.XX a a payout first-three quarters is increase QX $X.XX per QX paid dividend price which are year, at but earnings current at XX% were earnings the I per as net Based we for X.X% share. our yield on it's earnings. the bit Very out $X.XX of cash that pay looking said, a was similar, Our in QX actually

our release an shown in the table And was $XX.X define As pre-tax in QX we five last quarters. million do in prior again, It earnings and a we has describes core quarters, increase earnings. of and each in the as net pre-PPP core that effects. earnings include pre-provision

quarters on XX.XX%, and two of on first net return for strong was each earnings equity those year. to of Our this return very average results X.X% the was on the assets average both and quarter comparable

activity points The results equivalent -- Since net on that's it down, X fully is stated of XX effect interest not well wound basis this PPP in in linked X.XX% interest margin year quarter. were it pretty quarter net our same our have from tax it's Our did of up margin QX, quarter. basis down and any from was X.XX% especially points. last

up to loan bearing same for on XX loan book increase basis that DDA basis XX it's somewhat It said, QX $X.X total that yield offset cost basis to XX our quarter of quarter I interest bring But The deposits points X.XX%, points Our basis linked XX was points. our billion from so did XX% that the cost of our compared this have from now points is deposits. though total does XX linked down XX by basis -- as that, we and quarter basis as of of is increasing of of XX -- the deposits quarter points points. a in from and that's showed period.

beta We XX%. our bearing interest at have had is deposit right

and in linked Shalene are ACL. We income, future a of quarter, our three be projecting are that looking gain that bit on but from to little in release, higher know restructuring loan that's I decrease our quarter, really mortgage Obviously, main our term. up. about biggest the that talks down. we also is to now earnings more And restructured non-interest loans because provision for of we're a We leadership on growth, the geared reasons. we're near last projecting Then at rates, decreased XX% about it did we'll X,XX,XXX Because hikes getting increase been being closer the we sale X,XX,XXX did when department. talk of leadership mortgage The talk on rate to going of did volumes do department basically that's back XX%. and SBA

volumes certainly we QX. of in both saw So going departments have those should than forward higher

though, reason increase income annual was debit income our top we so first a of to be the quarter. offset in Then to sale of record did quarter-on-quarter did about debit gain card, due XXX,XXX airplane increased that's reasons, to made that's two QX our just non-comparable. we second of have recorded debit card line are and a in income The an gain an for showing XXX,XXX this X%, XXX,XXX two card going on We that down. -- under in payment volume. revenue asset of to those X,XX,XXX increase bonus an Year-over-year

did to the SBA during a due looking then non-interest increase an the our did and write-down from quarter. the that primarily discovered receivable at expenses, in that that of we an quarter expense show that during we XXX,XXX XXX,XXX So described release earnings quarter, we that’s linked X.X% of that

going XXXX $XX.X million $XX looking expenses. at our on about increase And assets a around be a within of expenses total metric, guidance X.X% for from which within our asset of will X.XX%, of that’s million show $XX to that's to we're probably X.X% our have non-interest in be about So ‘XX, average over we'll X.X% XXXX XXXX, over still anywhere probably increase again then expenses. and X% million expense projecting

So turn it about will and slide. next the to she over I'll talk Shalene

Shalene Jacobson

Hey. Thanks, Cappy.

quality Next, I'll for credit portfolio, the of credit highlights and our of loan some allowance cover losses. the

a to beginning our future. is brakes the and quarter. to as in rates than actually growth strong down likely move pipeline the in due as to on because the partially As fourth to slowdown we're the rapid be, the near we And Cappy for some interest mentioned, continued slow loan be tapping stronger prepare quarter, we the the is partially demand higher we recession it third but expected into

we're but going more with trending Overall, will As repay. really yields that and for borrowers' Therefore, loan XXXX XXXX. Ty higher doing of our Texas well, underwriting loan growth capacity our slide. believe next economy quarter the into conservative balance mentioned, on pretty is all provide soon Ty impact outlook fourth still the relatively we upwards. standards you being on are sheet know, will to and rates thoughts tightening

And the originations quarter bullet a quarter. weighted rate sensitivity average increased the for quarter X.XX% was first percentage in from loan is rate and second weighted the during to quarter X.XX%, average rate X.XX% X.X% talks of of bit next a in second loan was quarter than the loans. originated the new more XXXX. in Our yields average our point from X.XX% about that whole third of our weighted which this The

We floating have fully billion of at loans the rates are various or fully adjustable at (ph) future. remaining various and the million states adjustable either $X.X fully $X.XX in $X.XX or are billion various in the of floating states the billion are future. $XXX.X adjustable -- that

balances that net four to continue low. million we our with to we will associated and as which of finally, net last we These of we've charge-offs is primarily acquired SBA XXXX. compared consist XX.X% these the XXXX. are those for portion $XXX.X in of So to continue fourth from related loans X.X% now. our are of continue charge-offs end. work of currently be hotels on million, expect our about loans made to through them and Westbound portfolio by by Bank loss, prior A guaranteed and XX% assets X.XX% acquired large believe any, the relatively borrowers loan we to non-accrual remain that of two expect of to Houston. exposure which about our is are million non-guaranteed problem really a year books low at loan our were got total four identified loans, non-performing our collateralized back these if if be in and we the total which problem there ones They in two loans, ratios to back reserves Non-performing Westbound assets, quarter. don't reserve quarter, and are million in as and $X rates right when increase party average in reprice have We the $X.X $X.X And material resolving

allowance million credit $X.XX Next had step no provision Did provision in we is during provision QX. the $XXX,XXX for QX have We QX. release a losses during losses. and credit had for a

we still of XXX,XXX second earlier going quarter. especially the economic end situation for quarter, that factors mostly to in were but that our we're factors in forecasts to do third So this year-to-date forward. at the of related and those we appropriate a still year believe change Q release We expect XXXX, many adjusted

about. So, Q to the expectations X.XX% loans the of Q for at in the continue total was We impacts quarter uncertainty hikes. compared to then were The quarter our Ukraine And war borrowers the and and as impossible recession was ACL factor we a rate adjustments the continued in of in that XXXX. adjustments quarter and the evaluate for pretty near world loan in likely continue economic its X.XX% X.XX% our to minimal during to Cappy impacts future. the it's and nation. make spoke around and believe probabilities upward year-end future we'll coverage to growth on prior factors to provision our due mostly this the that

for I So comments next, turn liability other XXXX it asset to Ty on will over outlook management. and

Ty Abston

Thanks, Shalene.

we've of for theme kind like, So ’XX saying, us is and growth. slower the been in

core We’re have by sheet, with above balance has, anticipating strong will of but how We to the very our is going mean, base think the like and as and we're from real we additional plan with design bond to $XX front we're no increases. manageable reserves even position economic -- key this portfolio, balance works. forecast what model, coming actually Shalene I that, be be anticipate market with funding in for anticipate that's and our part into with the just business we way anticipate those, we adding from and of way up but downturn now the additional of beyond in a ALC our think, said, impacts losses or just everyone just We but founding duration but think works for and actual since a year. think into rate manageable. didn't advantage deposit we ALC our rate do losses [indiscernible] portfolio loading CECL standpoint and be, going our and strong we of went risk, else and the a budget that's We And going have, core positioned very of do some liquidity that's still will and very we're well manage during a reserves that's forward. losses the end part with did that sheet and just million and see actually to us do increase it factors. we of We ended have to we do COVID, the that CECL a having COVID. those the I our significant We CECL, kind

that's even that's So slowdown going we're the last impact going year but increase an been has unprecedented velocity CECL, like reserves of of I'm given anticipating of in severity, It's Obviously, Texas. have an very just on and into seen. to it's the that to on have assuming the This significant bank, this knows every we're all we've clear. economy, here nobody impact. and going rate our in the increases factors

planning questions so do planning we think answer up it's ‘XX. anticipate And try your to to I'll and that that's to and prudent what we're questions to as has. for now we open start anyone

Operator

is It to for now call portion Brad [Operator Q&A Instructions] first our from Milsaps. our you, Thank Ty. our of So time today going is call. be

Just moment. a

Okay. Brad?

Brad Milsaps

Am Hey. coming through? I

Ty Abston

Yes. Hey, Brad.

Brad Milsaps

you Hey, all Ty. Hey, How Cappy. are Hey, doing? Shalene.

Ty Abston

Good.

Brad Milsaps

on. what's on I just mortgage I'm the have Is know itself fee also market. Maybe of speaks the I a have the start retaining to premiums this any you she of just about, the income. guys that wanted that loan you that could going the some some to sheet? little piece obviously, some of Are talk quarter? maybe down. gains all have balance it if come of I kind better -- Appreciate you detail know, know didn't growth. SBA of what's given. curious production that bit on driving I

general? correlated that's if and curious your fees just of general any of kind of outlook for Just in kind

Cappy Payne

tougher soft SBA, little SBA things Well, department may originated. opportunity, that but have just warehouse no, other to piece mean, actually as and planning material and soft of that have specific different pieces for significant may the to giving have any budgeting a income and improve any we're been more mortgage we ’XX just headwinds. of SBA that be that. of significant SBA originations retained we've It's that fee we components haven't and retained not and in I have get just areas

we're pleasantly income anticipating kind enjoy looking surprised, we're being fee across at but the that's So of it. be, We'd obviously board. slowdown in how

Ty Abston

say for million. I guidance $XX the would ’XX be Brad, our million to would But $XX in

Brad Milsaps

maybe Great. mid margin, as maybe think of or expected noted that Okay. the deck And in early kind be that for the you, color. next year. peak to, you follow-up, Thank I guys a may on just then you guys plateau

kind of lot of wanted the Just just which some level if peak? a off curious parts could advances those know you of maybe just there's I expected there, sheet. talk FHLB on you Cappy, maybe about but repeat And about at paid of being two said off those a to kind you can and you rolling then touch balance of what timing moving the items? maybe

Cappy Payne

we said $XXX do will I Federal our somewhat. that rolling that, of QX. said, about Loan treasuries. And Loan Home because million in up a mature that treasuries get timed I Brad, that as They are in with $XXX to Bank have million Bank line off, just Yeah. Federal maturities lot in we Home advances

those, we with be of going some maturing. Some that we're the some that But into will, of XXXX. down roll treasuries over to paid will that, of are

there's we I we're at. seeing margin, I our do think think No loans increase to doubt. booked the to we continue increase. being will On when cost said, of still opportunity funds,

around need care in XXXX where stay be probably range. we to margin, the early the peak as take of should our But to said I we to in Just X.X% our think market customers. probably in to X.XX% and

Brad Milsaps

I Great. it. Thank appreciate you, guys.

Ty Abston

You bet.

Operator

Olney with next is Matt Our call Stephens. with

Matt Olney

morning, Thanks. guys. Hey. Good

Ty Abston

Good morning.

Matt Olney

that size contraction in commentary of overall the right? and quarter like your FHLB maturing in perhaps sheet maturing of overall the with feels the about some Am even balance It early portfolio, should fourth some I asset of the the securities Cappy, there. securities thinking ‘XX. see

Cappy Payne

in correct. Ty flat addition already treasuries, these no loan for pipeline -- standpoint, up at has think growth But of -- we're in slowing yeah, due said, looking to the to doubt, that pretty as multiple down. some From some reasons. not and grind the part, I'm I Matt, that's

Matt Olney

guess you a shaped the talk back, uncertainty in the build still the given talked more about ratio expectations for can in bag year? versus and you ’XX ratio grow you in ACL does And build helpful. next Okay. ’XX if Can Thanks. ’XX to That's appreciate ACL step if certainly EPS economy. then taking I you think the about

Ty Abston

Well, Cappy. go ahead,

we if think not are, say, we per like we the I ACL As will ratio earnings then share build grow.

due a ’XX of we will to build. earnings in I somewhat have think less ACL

Cappy Payne

But don't today as company here mean, for our exposure to actual reality end said see we the with in Matt, to have just I But front we're to that. loss we're we the going is downturn. like, CECL, load

So more reserves in, Again, be in. be that bank will we're be environment going as any to views given floating in anticipated, just (ph) CECL. the will has

Matt Olney

That's I No. how understand. works. Yeah. the CECL

charge-offs So XXXX just portfolio changed metro it in frame the in the seems experienced was appreciate slide levels low the I it that. commentary how downturns. on weighted color the I more Any heavily lastly, that loan And much bank prior specifically, much the definitely of guess, reminds towards deck, has since in us and in has the and Texas. East like it as not guess, back time Texas then I very

of kind on any can give the picture years? XX Thanks. how over you it's thoughts changed last big Just us

Ty Abston

good it's would changed seven, much say doubt. has metro more on portfolio without now markets going The eight been for Matt. I years. the And in Yeah, we've way, in diversified geographically. that a a

you're markets. metro half of individuals. individuals to, the of period are our company in actually underwriting in referring actually are And markets, is been credit our the key philosophy we've and growth we've same So that the directing that some

well. and its positive has I ways we in how conservative of why philosophies at we're even a would have credit state. downturn look the the the just different areas but and a But just of geographic the portfolio very same. different think standpoint, a underwrite our but not We in of portfolio we'll sector diversification, remained changed, different impacts that being lot parts more So core we argue weathering from different diversification, think downturn that's resilient only and we how sectors little downturn, in

Matt Olney

guys. Thanks,

Ty Abston

Matt. Thanks,

Operator

with Rose James. next are from Michael questions Raymond Our

Michael Rose

Hey. everyone. Good morning,

Ty Abston

morning. Good

Michael Rose

Just a morning. good -- couple

here. Just a couple of follow-up questions

it us pipeline in under slowing magnitude talking XX% the little and you of about but mean on I I in but of pressure. Can bit, guys some you a kind what you are understand sense term good structure of certainly year. ex-PPP, terms a ex-warehouse give markets, is So self-imposed know assume you're are given obviously year-to-date. slowing and of just you're next pricing

some to wanted trying -- are of Just just semblance get get to down or slow we pin down, kind you here? what but expecting magnitude to I'm not trying for to

Ty Abston

say cautious to that I a in digit I QX pipeline of mean, just without I growth would of of part slower more would be underwriting we're and And just put we're we QX were kind starting fact the how in lot Yeah, up, pipeline, booked growth looking like it we're at little low-single be is would our credits. a going appropriate. Michael. really momentum the of doubt, a what and we seeing was part the year. first in

I moves velocity -- to of if just natural -- well, think just shocked we're kind certainly, board not of, And the I be rate I of a see the it's that. is slower last again, that, Texas going months. here growth be probably part to going doing this byproduct the we've all across even we're banks. So though kind to too, And don't if rates we slow this nine it's with last to think and of six seen would

Michael Rose

on Appreciate other in maybe guys you what that the and context mentioned happened what could restructuring you and thing give and One SBA little move up mean color as Can picked that a as some to mortgage. forward? leadership I there just we that. both

Ty Abston

for both SBA. mortgage So we've two and in leaders brought new

we those that those prospects. areas better kind and in think actually as minimal, will areas when operating we're some are downturn do board. to added us bring start this to, of of as take actually we both seeing going things -- bench the work as for it's talent but strength on to both far able advantage expenses delta improve don't the Just we've the probably think We well to

Michael Rose

Perfect. XX it if Okay. general to of kind of think you of growth then, down -- that impact in And range break I is your a -- just roughly? kind new the hiring you mentioned, of versus much How I of expenses, can just kind think versus the inflationary XX. is business of

Ty Abston

have Well, to but Michael, that's on a but and inflationary that, we're obviously to detail increase per se, I don’t that it's be related going X% factors. projecting

to new far have -- related into foresee hires, a because As as that. monitor we're going new but lot still hires hire really we openings, slowdown new don't of in those so a going I to into XXXX just economy, of the

Michael Rose

Okay.

inflation. So most

Ty Abston

Yeah.

Michael Rose

Okay. Thanks for thanks for questions. taking my

Ty Abston

Michael. Sure,

Operator

Our next Brady caller will be with KBW. Gailey

Brady Gailey

Good morning, Hey. guys.

Ty Abston

Good Brady. morning,

Brady Gailey

ask the asked asset lot a I about the we've So to wanted side, but side. liability about

you of that level. thinking couple flows at has pretty deposits. $X.X last some It around deposits, for still deposit quarters here are you going look it's been excess flat like billion forward. about the If the How industry feels

next flat can or potentially you So think some do shrinkage year? XQ you could and you see that hold do in think you

Ty Abston

we see we're level that a quarter, have fourth flat, growth, maintaining really no looking the XXXX. increase deposits, but the think little into we but I may projecting bit of

Okay. And

Brady Gailey

Okay. flat assets. And going mean, guys still to look, are money, you you're if earning you then have I

quarter. capital pretty AOCI. should changes know outside of limited I the here, your in third buybacks So grow with were

from into ramping think go do here buybacks we're headed away? since or a do about recession buybacks or So we

Ty Abston

decent. valuation. now, value up, held on Right I our look mean, fairly just Brady mean, has think, I that we based I at

saw significant as with So see would doing dropping our the COVID. buyback. But valuation what aggressive active we then we the with more we and intrinsic a if downturn like been in be buybacks the we were we value of being, versus company haven't

relative kind of of on to market just company. dependent of intrinsic really value view where is it's So the our the

Brady Gailey

All end Do of let right. off, bought million just I you a roll next of think about How off mentioned bond your replacing some that do mean, think of $XXX go decent and wondering is of million. that for about away year? you size we And then should me, around portfolio. that. balance $XXX or book that's finally treasuries your rolling just I'm you

Cappy Payne

those at -- the so million in term $XXX short portfolios treasuries. treasuries and about about So we're we right have XX% term of in short

to short we of actually we duration advances, treasuries. some because those took short point use which will will pretty actually a And also have to some some that still -- buy add we but We some at then portfolio. duration out pay down of this

those I could and add take some would reinvest half say the portfolio and probably So duration other advances the we would that of dollars probably you pay the half to down have. we

Brady Gailey

Okay. color Great. All Thanks the right. guys. for

Cappy Payne

Thanks, Brady.

Ty Abston

Thanks, Brady.

Operator

you would our that will call by for you. our like this remind recordings today. page I at P.M. investor the everyone of your website gnty.com. Thank available our X:XX for questions. relationship -- to on concludes Thank be Investor relations call This

Guaranty Bancshares (GNTY) 17 Oct 222022 Q3 Earnings call transcript