Q1 2022 Guaranty Bancshares Inc Earnings Call

April 18, 2022

Unknown Speaker: - first quarter 2022 earnings call.

Operator: My name is Nona Branch and I will be your operator for today's call.

Operator: A reminder, that this call is being recorded.

After the prepared remarks, there will be a Q&A session.

Our hosts for today's call will be Tyson Todd Abston, Chairman and Chief Executive Officer of the company, Cappy Payne, Senior Executive Vice President and Chief Financial Officer, Shalene Jacobson, executive Vice President and Chief Risk Officer.

Shalene Jacobson, executive Vice President and Chief Risk Officer.

Operator: To begin our call I will now turn it over to our CEO, Ty Abston.

Tyson Todd Abston: Thank you, Nona. Good morning everyone. Welcome to our call for the first quarter earnings call, Guaranty Bancshares.

We noted in our press release this morning the company had a very good quarter.

company had a very good quarter.

Very strong growth and good earnings for our company.

As we mentioned, we did unwind all of our Covid related reserves and Shalene will go through that a little bit. We did offset most of that negative of that release with additional reserves. On some of the macro factors, we're seeing out there in the economy and everything going on right now as I will discuss that further too.

negative of that release with additional reserves. On some of the macro factors, we're seeing out there in the economy and everything going on right now as I will discuss that further too.

I'm going to turn it over to Cappy Payne to go through the numbers and then when we're done we'll do Q&A and cover anything you'd like to cover. Cappy.

Cappy Payne: Thank you, Ty.

Thanks for joining us everyone! As Ty said we had a good quarter starting off 2022, a lot of key components on our balance sheet saw nice increases.

Our total assets were up $104 million for the quarter, now stand at just under $3.2 billion.

Obviously, the biggest component of that, component of that, is loans. They closed at a little over $2 billion.

Looking at the growth for the quarter, EX PPP and warehouse lending, we had a nice increase of $157 million, that's 8.6% of those loans when you when you take out PPP and warehouse.

for the quarter, EX PPP and warehouse lending, we had a nice increase of $157 million, that's 8.6% of

those loans when you when you take out PPP and warehouse.

The other big changes as you saw in the in the earnings release was a was a 50%+ increase in our bond portfolio, putting some of that excess liquidity to work.

earnings release was a was a 50%+ increase in our bond portfolio, putting some of that excess liquidity to work.

Shalene will talk a little bit about that in a minute and we can answer any questions you might have on that later on also.

Later on also.

But really the biggest driver of that growth in assets was created by our growth in deposits. Deposits grew again nicely this quarter $127 million for the quarter, they're now $2.8 billion.

in assets was created by our growth in deposits. Grew again nicely this quarter $127 million for the quarter.

Grew again nicely this quarter $127 million for the quarter.

There are now $2 8 billion.

We continued to add core deposits and opened new checking accounts just like we did in in 2021. At quarter end, our DDA accounts were, non-interest bearing accounts were 38% of our total deposits. So a good portion of those being in the core DDA checking type accounts.

in 2021. At quarter end, our DDA accounts were, non-interest bearing accounts were 38% of our total deposits. So a good portion of those being in the core DDA checking type accounts.

You'll notice our shareholders equity did decrease during the quarter, a little unusual - decreased about $10.3 million. That was driven by a negative market value swing.

market value swing.

Just right at $17 million that went through our OCI or other comprehensive income category and our capital account.

That's related to what is now an unrealized loss in our securities portfolio. At the beginning of the quarter we had a we had a $6 million unrealized gain in that portfolio and that's moved to be at the at the end of the quarter, fell to a $11 million unrealized loss in the bond portfolio. So that is a $17 million swing, which is about $1.40 - $1.45 of tangible book value.

moved to be at the at the end of the quarter,

fell to a $11 million unrealized loss in the bond portfolio. So that is a $17 million swing, which is about $1.40 - $1.45 of tangible book value.

tangible book value.

We also bought back shares during the quarter, <unk> of 56,000 shares. That's spending a little over $2 million or right at $2 million and we paid an increased cash dividend of $0.22 for the quarter. That's up from $0.20 in Q4 of 2021.

<unk> of 56,000 shares. That's spending a little over $2 million or right at $2 million and we paid an increased cash dividend of $0.22 for the quarter.

cash dividend of $0.22 for the quarter.

That's up from $0.20 in Q4 of 2021.

Of course, the positive to our capital account was our good earnings that Ty was talking to - talking about.

For the quarter, we reported $0.89 per share - $0.88 fully diluted.

$0.88 fully diluted.

That's related to the $10.7 million net earnings that we reported in Q1 and those earnings are up $1.6 million from linked quarter.

earnings are up $1.6 million from linked quarter.

The biggest drivers of those, extraordinary in comparing quarter to quarter, would be the release of provision Ty alluded to $1.25 million and then the gain on some swap transactions, that we terminate a swap that Shalene will talk about in a little bit, and thats in non-interest income $685,000.

in comparing quarter to quarter, would be the release of provision Ty alluded to $1.25 million and then the gain on some swap transactions, that we terminate a swap that Shalene will talk about in a little bit, and thats in non-interest income $685,000.

$1 million to $5 million.

and then the gain on some swap transactions, that we terminate a swap that Shalene will talk about in a little bit, and thats in non interest income $685,000.

She will talk about the process of that.

process of that.

Even looking at our core earnings, and we define that in the earnings release as pre-tax, pre-provision and pre-PPP, it was the highest it's been in the last six quarters and our Q1 core earnings were 10.9%.

and we define that in the earnings release as pre-tax, pre-provision and pre-PPP, it was the highest it's been in the last six quarters and our Q1 core earnings were 10.9%.

it was the highest it's been in the last six quarters and our Q1 core earnings were 10.9%.

So looking at our on the income side, our NIM stayed pretty steady. Our stated NIM was 3.37% - that's down two basis points.

Looking at it ex PPP activity, our NIM was 3.30% - down three basis points. So really, really pretty steady. Our loan yields slipped a little bit still strong at 4.49% ex PPP, but that's down seven basis points. We did, as I said, book quite a few loans. So are looking at our yield on new loans originated, they stayed steady for the quarter. They were 4.22% and that's compared to 4.24% in linked quarter.

but that's down seven basis points. We did, as I said, book quite a few loans. So are looking at our yield on new loans originated, they stayed steady for the quarter. They were 4.22% and that's compared to 4.24% in linked quarter.

4.24% in linked quarter.

Our cost of deposits remained steady for this quarter. There were 18 basis points and they were 18 basis points in Q4 of last year. So, they have remained steady.

They have remained steady.

Looking at our non-interest income category, it's showing up 7% against, and Shalene will give us the details on the main driver of that being the termination of the swaps, but I will say if you looked at the components of that our mortgage volume was down as expected, a little more than what we thought they had projected last time it would be 12% or 15%, it was down 20% linked quarter and actually down 35% from a year ago when mortgage activity was really at its highest.

as expected a little more than what we thought they had projected last time it would be 12% or 15%, it was down 20% linked quarter and actually down 35% from a year ago when mortgage activity was really at its highest.

and actually down 35% from a year ago when mortgage activity was really at its highest.

I'll speak to a little bit about that just second.

Looking at our expenses they were up slightly about $103,000 for the quarter.

The main driver continues to be employee compensation and benefits.

Three quick points I think to that regard. The first one is we did onboard five new production officers in Q1. Three of those are in the Central Texas region, one in the DFW region and in one SBA.

And then the second bullet point I'd say is we did have a turnover in leadership in our mortgage division and there's going to be some added staff there most likely in Q2 related to that as we develop in a more defined strategic plan in mortgage and that staff will probably should include both production and back office. So that's a change we are looking forward to going forward.

there's going to be some added staff there most likely in Q2 related to that as we develop in a more defined strategic plan in mortgage and that staff will probably should include both production and back office. So that's a change we are looking forward to going forward.

looking forward to going forward.

And then the third bullet point, I think we addressed this last quarter too, we still have about four to five key production positions open that are currently not filled but likely to be filled sometime in 2022 but we will see. Those are production positions in Houston, Central Texas, and DFW, mainly.

positions in Houston, Central Texas, and DFW, mainly.

So that's a quick recap of the balance sheet.

Turn it over to you.

Shalene A. Jacobson: Thanks, Cappy.

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

portfolio, credit quality and the allowance for credit losses.

Luckily our economy here in Texas continues to be outstanding.

Hopefully most of you have received our annual report by now which we highlight several really interesting statistics about the growth in our state and economy.

we highlight several really interesting statistics about the growth in our state and economy.

Last year, Texas was number one on the U-Haul One Way Growth Index. So we've got lots of people coming to our state and I think as a result of that, partially as a result of that, loan demand has been really strong as well.

Yeah.

Yes.

As Cappy mentioned a moment ago, excluding PPP in warehouse loans, our loan increased about $157 million or 8.6% during the quarter.

Loan yields excluding PPP did slip slightly during the quarter to 4.59% compared to 4.66% in the previous quarter. However, we hope that downward trend will reverse itself as rates increased as economists and others predict that they will. So we included some information about rate sensitivity here in the presentation and in our release.

compared to 4.66% in the previous quarter. However, we hope that downward trend will reverse itself as rates increased as economists and others predict that they will. So we included some information about rate sensitivity here in the presentation and in our release.

economists and others predict that they will. So we included some information about rate sensitivity here in the presentation and in our release.

We have about $1.3 billion or 65% of our loan portfolio that have variable rates.

And so if rates increased as expected, which we estimated at 50 basis points in both May and June, and 25 basis points in each of the remaining five meetings during 2022, then $346 million or 27% of those variable rate loans will reprice by year end.

25 basis points in each of the remaining five meetings during 2022, then $346 million or 27% of those variable rate loans will reprice by year end.

So the loans that aren't repricing are really because at their next repricing date after December 31, 2021 because the loan rate floors. So we as of March 31, 2022, we have $685 million of loans that are at their floor rates, but if rates increased 75 basis points, 83% of those would be above their loan floor rate and at 150 basis point increase 97%, we'd be above their floor rate.

Really.

really because at their next repricing date after December 31, 2021 because the loan rate floors. So we as of March 31, 2022, we have $685 million of loans that are at their floor rates, but if rates increased 75 basis points, 83% of those would be above their loan floor rate and at 150 basis point increase 97%, we'd be above their floor rate.

because the loan rate floors. So we as of March 31, 2022, we have $685 million of loans that are at their floor rates, but if rates increased 75 basis points, 83% of those would be above their loan floor rate and at 150 basis point increase 97%, we'd be above their floor rate.

$685 million of loans that are at their floor rates, but if rates increased 75 basis points, 83% of those would be above their loan floor rate and at 150 basis point increase 97%, we'd be above their floor rate.

Again, the ones that are not going to be repricing by year end are because they're next repricing date is in 2023 or 2024.

because they're next repricing date is in 2023 or 2024.

And then we also.

We also crunched some numbers and basically said, assuming no payoffs or modifications under that scenario described, repricing would provide us with an estimated additional loan interest income of about $2.8 million between now and year end.

We also have a few bullets illustrating recent nonperforming assets and charge off trends continue to remain low.

The allowance for credit losses, as Cappy mentioned, we recorded a reverse provision of $1.25 million during the quarter.

We've seen significant improvements in Covid related health statistics and economic impacts of Covid during the first quarter in our communities.

the first quarter in our communities.

So as a result of that we fully unwound the remaining COVID-19 specific key factor in our allowance methodology.

allowance methodology.

<unk>.

However, the effective unwinding that Covid specific key factor was really offset quite a bit by growth in our loan portfolio and then we also did make some adjustments to some of our standard key factors for uncertainties related to inflation, uncertainties related to the impact of increases in interest rates on our borrowers and then overall geopolitical concerns such as the war in Ukraine and Russia.

related to the impact of increases in interest rates on our borrowers and then overall geopolitical concerns such as the war in Ukraine and Russia.

As of quarter end, our allowance coverage, excluding PPP loans with 1.46%, which is down from 1.64% at year end.

Onto the next slide. We talk a bit about PTT update, asset - light asset liability management and other items.

Nearly all of our PPP one loans have been forgiven or are paying as agreed and all of the related deferred income has been recognized.

as agreed and all of the related deferred income has been recognized.

We made really good progress on PPP two forgiveness during the quarter with only about $19.1 million remaining on our books and unrecognized deferred fees about $477,000.

As both Ty and Cappy mentioned, we did terminate some interest rate swaps that were used to hedge three month federal home loan bank advances so we paid off those advances that were $40 million and then we recognize the $685,000 net gain on termination of the swaps which is included in other non-interest income on the income statement.

advances that were $40 million and then we recognize the $685,000 net gain on termination of the swaps which is included in other non-interest income on the income statement.

included in other non-interest income on the income statement.

We also deployed quite a bit of excess cash to purchase securities, including about $270 million in short term treasuries that mature from August of 2022 through March 2024, and then we purchased about $30 million of agency mortgage backed securities.

mature from August of 2022 through March 2024, and then we purchased about $30 million of agency mortgage backed securities.

All of the purchases in 2022 are classified as held to maturity and as we continue to buy more we'll classify those as held to maturity as well. in order to take some of that volatility out of the AOCI and tangible book value hopefully.

we continue to buy more we'll classify those as held to maturity as well.

classify those as held to maturity as well.

in order to take some of that volatility out of the AOCI and tangible book value hopefully.

and tangible book value hopefully.

And then we will continue to maintain a conservative stance on our cost of total deposits and raising rates there given our excess liquidity position.

As of quarter end 38.1% of our total deposits were non-interest bearing so that helps as well.

that helps as well.

And then finally back on March fourth we issued $35 million in subordinated notes with a fixed rate of 3.625%.

$35 million in subordinated notes with a fixed rate of 3.625%.

So it's fixed for five years and then converts to a floating rate equal to the three months term, so for a <unk> spread of 192 basis points until it matures in April 2032.

rate equal to the three months term, so for a <unk> spread of 192 basis points until it matures in April 2032.

We've already been able to put quite a bit of that money to work through the share repurchases that Cappy mentioned earlier.

That concludes our presentation today.

I'll turn it over to you all for questions.

Operator: Thank you Shelly.

It is now time for our Q&A part of our call. If you have any questions you can hit the raise your hand button at the bottom of your screen. If you're participating by telephone star nine will raise your hand, star six will unmute your line.

Our first call today will be from Brady Gailey with KBW.

Brady Matthew Gailey: Hey, thanks. Good morning, guys.

Tyson Todd Abston: Good morning, Brady.

Brady Matthew Gailey: So there are several moving parts within spread income with the termination and also with this bond book growth.

I think you ended the quarter at about $800 million in bonds but it seems like you have a little more cash that you could put to use there. How should we think about the bond balances going forward?

but it seems like you have a little more cash that you could put to use there. How should we think about the bond balances going forward?

the bond balances going forward?

Tyson Todd Abston: So, Brady, this is Ty.

This quarter, we purchased quite a few bonds and really their short treasuries. So we started - kind of built the ladder from six months out to two years, just because of everything that's going on in the yield curve.

And.

That leaves us with about $150 to $160 million or so in fed funds. That's kind of a peg balance for us, so I wouldn't - we're not going to probably be moving a lot of additional funds into that program, but we certainly could and we were just taking advantage of the yield curve the shift in the yield curve and felt like it made sense and still kept us very short as far as those bonds.

were just taking advantage of the yield curve the shift in the yield curve and felt like it made sense and still kept us very short.

felt like it made sense and still kept us very short.

as far as those bonds.

Bonds.

Brady Matthew Gailey: Okay, alright. That's helpful. And then on the expense side, it sounds like you're making some changes in mortgage and maybe growing that that group more now. How could that impact expenses? I know before we kind of talked about $76 million to $77 million expense run rate. Will that be higher given the changes you're making in mortgage this year?

it sounds like you're making some changes in mortgage and maybe growing that that group more now. How could that impact expenses? I know before we kind of talked about $76 million to $77 million expense run rate. Will that be higher given the changes you're making in mortgage this year?

that group more now. How could that impact expenses? I know before we kind of talked about $76 million to $77 million expense run rate. Will that be higher given the changes you're making in mortgage this year?

$76 million to $77 million expense run rate. Will that be higher given the changes you're making in mortgage this year?

Cappy Payne: Yeah, a little bit, Brady. This is Cappy. I would say our run rate will be in the $77 million maybe $78 million range going forward for this year.

Brady Matthew Gailey: Okay.

And then I think mortgage fees just a little more than you thought. Any update on how you think mortgage and just overall fee income will trend for the rest of the year?

just a little more than you thought. Any update on how you think mortgage and just overall fee income will trend for the rest of the year?

Cappy Payne: I think we're - as we deploy this new team, we're going to we're going to think of different ways to be more productive and get more production off of our SaaS. So I think that that will increase going forward.

be more productive and get more production off of our SaaS. So I think that that will increase going forward.

I'm just going to say this, I think it will not continue to decrease. I think we will be flat for Q2, and then we'll - Q3 and Q4, we will see how that can - how we can grow that.

Q2, and then we'll - Q3 and Q4, we will see how that can - how we can grow that.

Q4, we will see how that can - how we can grow that.

how that can - how we can grow that.

grow that.

Brady Matthew Gailey: Okay.

Alright, great. Thanks, guys.

Cappy Payne: Thanks, Brady.

Operator: Our next call will be from Michael Rose with Raymond James.

Okay.

Multiple speakers: Hey, good morning, everyone. How are you, Michael? Hey, good morning, Michael.

Michael Rose: Hey, so really strong loan growth this quarter and you mentioned that the pipeline's still remained pretty strong. You know previously you guys had talked about kind of a high single digit growth rate - you're well above that if you annualize this quarter's growth ex warehouse, ex PPP.

pretty strong. You know previously you guys had talked about kind of a high single digit growth rate - you're well above that.

if you annualize this quarter's growth ex warehouse, ex PPP.

Any sort of way, we should think about it?

Are you seeing any pull forward of growth? Some rebuilding of inventories? And then conversely, do you have any caution as we potentially move into the back half of the year just given obviously some of the Q factors for that went up for environmental concerns?

And then conversely, do you have any caution as we potentially move into the back half of the year just given obviously some of the Q factors for that went up for environmental concerns?

that went up for environmental concerns?

Cappy Payne: So Michael there is like I mentioned, I mean, theres a lot of positive things going on in our state and we're certainly participating in that and I would guide on an annualized basis, low to mid double digits for our growth.

we're certainly participating in that and I would guide on an annualized basis, low to mid double digits for our growth.

on an annualized basis, low to mid double digits for our growth.

But like I said in my press release, I mean with all the things going on that are positive we still have growing concerns from a macro standpoint. of things that are going on obviously outside of our control with inflation, rising rates, and there is some geopolitical environment things going on around the world. So all those things collectively create some real concerns and so that's why we added additional reserves.

of things that are going on obviously outside of our control with inflation, rising rates, and there is some geopolitical environment things going on around the world. So all those things collectively create some real concerns and so that's why we added additional reserves.

create some real concerns and so that's why we added additional reserves.

I mentioned, we took COVID-19 out of our our reserve models, but some additional concerns we have from a macro standpoint. So we're going to - we're going to continue to be cautious as we look at opportunities to grow the company and as we were certainly underwriting with that caution and but there's just a lot of very positive things happened in our state, but those things can be, those things can be sidelined as well with the macro events.

some additional concerns we have

from a macro standpoint. So we're going to - we're going to continue to

be cautious as we look at opportunities to grow the company and as we were certainly underwriting with that caution and but there's just a lot of very positive things happened in our state, but those things can be, those things can be sidelined as well with the macro events.

those things can be sidelined as well with the macro events.

Michael Rose: Okay, maybe as a follow up to that. So if I look at kind of post day one <unk> your reserve was around the 120 - 1.2% range. You guys are a little bit above that obviously negative provision this quarter as kind of walk through. Do you still feel like there's room to bring that down over coming quarters, just given how strong the asset quality metrics or would you expect to be somewhat cautious just given the broader economic concerns?

follow up to that. So if I look at kind of post day one <unk> your reserve was

around the 120 - 1.2% range. You guys are a little bit above that obviously negative provision this quarter as kind of walk through. Do you still feel like there's room to bring that down over coming quarters, just given how strong

bring that down over coming quarters, just given how strong

the asset quality metrics or would you expect to be somewhat cautious just given the broader economic concerns?

somewhat cautious just given the broader economic concerns?

the broader economic concerns?

Cappy Payne: It's going to be more of the latter, Michael. I mean, we're going to we're still going to obviously, we have very strong asset quality, but just the factors that we've put in place and just overall thoughts on things I've mentioned, we're going to maintain pretty conservative reserves for the foreseeable future.

obviously, we have very strong asset quality, but just the factors that we've put in place and just overall thoughts on things I've mentioned, we're going to maintain pretty conservative reserves for the foreseeable future.

for the foreseeable future.

Michael Rose: Okay, and then maybe finally for me you guys repurchased a little bit of stock this quarter, but I think your program expired

at the middle of last month. Are there any plans to potentially put another one into place, just given the performance of bank stocks in general? Yours included, and be a little bit more opportunistic here? Just any sort of thoughts on buyback would be great. Thanks. Yes, Michael, we got - we have that already teed up.

potentially put another one into place, just given the performance of bank stocks in general? Yours included.

Multiple speakers: and be a little bit more opportunistic here? Just any sort of thoughts on buyback would be great. Thanks. Yes, Michael, we got - we have that already teed up.

Cappy Payne: That will be renewed this week.

Multiple speakers: Perfect. Thanks for taking my questions. Thanks, Mike.

Operator: Our next call is from Matt Olney with Stephens.

Matthew Covington Olney: Hi, thanks. Good morning, everybody.

I wanted to circle back on the loan growth commentary. It sounds like the guidance is a little bit more optimistic now than it was previously.

Last time, we talked in January you talked about the concern of loan paydowns are going to remain elevated and possibly accelerate.

I'm curious what you saw on the paydown front in Q! and what the expectations are now for the full year with respect to the pay downs and what that updated guidance now assumes?

the pay downs and what that updated guidance now assumes?

Cappy Payne: So Matt we had pay downs definitely slow in Q1 and we anticipate that kind of maintaining current pace.

We.

We anticipate that kind of maintaining.

Current pace.

That being said the things I've been talking about are really hard to gauge that but pay downs slowed down and some of the things that we've had in the pipeline entering the year kind of came to fruition and were able to close in Q1.

to gauge that but pay downs slowed down and some of the things that we've had in pipeline entering the year kind of came to fruition and were able to close in Q1.

pay downs slowed down and some of the things that we've had in pipeline entering the year kind of came to fruition and were able to close in Q1.

kind of came to fruition and were able to close in Q1.

and were able to close in Q1.

I still - I am confident that guiding higher based on those two factors and just overall strength, we're seeing in our footprint, but again just trying not to get ahead of ourselves with everything else going on.

but again just trying not to get ahead of ourselves with everything else going on.

get ahead of ourselves with everything else going on.

Multiple speakers: Okay, yeah. Thank you for that. Sure.

Then on the deposit growth some really good numbers in Q1. Just remind us of the seasonal nature of the bank's deposit base - just trying to appreciate what the expectations should be for the rest of the year with respect to deposit growth.

For the rest of the year with respect to deposit growth.

Cappy Payne: I don't think we'll have that type of growth going forward, Matt, but normally in Q1, we see pretty good growth in the public funds deposits and that did not happen this year. So none of that growth for this quarter was really related to deposit fund money.

Fund money.

So.

So when you separate that out typically public fund money will decrease in Q2, Q3, and Q4, and increase in Q1, specifically.

I think that will that will pan out and the fact that we'll have a little bit of decrease there, but as we continue to open up new accounts and new markets and we really emphasize the total relationship is where even as we are binding loan customers to add checking accounts and deposit accounts with it.

Pan out and the fact that we'll have a little bit of decrease there, but as we continue to open up new accounts and new markets and we really emphasize the total relationship is where even as we are.

Binding loan customers to add checking accounts and deposit accounts with it.

add checking accounts and deposit accounts with it.

Thank you.

I think that pace will slow down, but I don't see a big drop off.

Matthew Covington Olney: Okay. Thanks for that, Cappy.

Last question for me I want to dig in a little bit more on the loan floors and the expectations of repricing of some of those loans.

I was little surprised that the disclosure that 27% of the variable rate loans would reprice higher under that rate scenario that you guys disclosed.

would reprice higher under that rate scenario that you guys disclosed.

Shalene, I think you were saying this is more of a timing issue because it sounds like the loans are going to be above the floors for a while but contractually it can still be several months before you receive the benefits of higher rates. Just any more color you can give me on the timing aspect of those loans?

Shalene A. Jacobson: So yes, it definitely is - the floors really aren't going to play a significant factor because we're estimating that they're raising the rates so quickly.

Estimating that they're raising their rates so quickly.

But yes.

But, yes, we have quite a few loans that reprice every 12 months or every 24 months or maybe they're fixed for a period of time and then they move to variable so we're including those within the $1.3 billion of variable rate loans that we mentioned, so it really is just a timing issue. I don't have the numbers - I've got some people pulling out a report that can tell me exactly when the remainder will be priced, but it'll be - the majority of that will reprice in 2023 with some going over into 2024, because most of our variable rate loans that reprice over a period of time will be 12 months.

reprice every 12 months or every 24 months or maybe they're fixed for a period of time and then they move to variable so we're including those within the $1.3 billion of variable rate loans that we mentioned, so it really is just a timing issue. I don't have the numbers - I've got some people pulling out a report that can tell me exactly when the remainder will be priced, but it'll be - the majority of that will reprice in 2023 with some going over into 2024, because most of our variable rate loans that reprice over a period of time will be 12 months.

a report that can tell me exactly when the remainder will be priced, but it'll be - the majority of that will reprice in 2023 with some going over into 2024, because most of our variable rate loans that reprice over a period of time will be 12 months.

with some going over into 2024, because most of our variable rate loans that reprice over a period of time will be 12 months.

that reprice over a period of time will be 12 months.

Matthew Covington Olney: Got it.

Okay. Thanks guys, I appreciate your help.

Cappy Payne: Sure. Thanks, Matt.

Operator: Our next call will be from Brad Milsap with Piper Sandler.

Yeah.

Multiple speakers: Hey. Good morning, guys, Hi, Brad. Hey, Brad.

Bradley Jason Milsaps: Just wanted to maybe delve into the margin a little bit more. Can you guys give me a sense of kind of the rates on the bonds that you purchased during the quarter and obviously you're going to have your benefit from a mix change here. Just kind of how you're thinking about the NIM, Cappy, and rate hike, Todd.

that you purchased during the quarter and obviously you're going to have your benefit from a mix change here. Just kind of how you're thinking about the NIM, Cappy, and rate hike, Todd.

obviously you're going to have your benefit from a mix change here. Just kind of how you're thinking about the NIM, Cappy, and rate hike, Todd.

Cappy Payne: Well the bonds, we purchased during the quarter, as Ty and Shalene both mentioned, were pretty short term, a lot of taking advantage of that shift in the yield curve. A lot of the treasury notes that we bought were again six months put to two years. So those rates weren't very high, it was just more of a back to putting our excess liquidity to work quicker and that will work until they mature. We did buy a few mortgage backs - not much really but that yield was somewhere in the in the 3% now so that's a pretty good increase from what they were about a year ago and about 1%.

again six months put to two years. So those rates weren't very high, it was just more of a back to putting our excess liquidity to work quicker and that will work until they mature. We did buy a few mortgage backs - not much really but that yield was somewhere in the in the 3% now so that's a pretty good increase from what they were about a year ago and about 1%.

to work quicker and that will work until they mature. We did buy a few mortgage backs - not much really but that yield was somewhere in the in the 3% now so that's a pretty good increase from what they were about a year ago and about 1%.

until they mature. We did buy a few mortgage backs - not much really but that yield was somewhere in the in the 3% now so that's a pretty good increase from what they were about a year ago and about 1%.

not much really but that yield was somewhere in the in the 3% now so that's a pretty good increase from what they were about a year ago and about 1%.

that's a pretty good increase from what they were about a year ago and about 1%.

Again getting back to what Ty said, I think the bond portfolio growth will probably will slow down quite a bit.

As far as.

As far as the loan growth and putting those loans to work quicker - putting those loans on the books in Q1 got that margin working a little quicker. So I think we continue to see a little bit of a shift or a decrease in the loan yield, but they'll start going up here in Q - in the second half of the year for sure. So I don't I don't see much slippage at all in our margin.

- putting those loans on the books in Q1 got that margin working a little quicker. So I think we continue to see a little bit of a

Margin working a little quicker. So I think we continue to see a little bit of a

shift or a decrease in the loan yield, but they'll start going up here in Q - in the second half of the year for sure. So I don't I don't see much slippage at all in our margin.

I think we can we can really play defensive on our on our liability side still and we'll see an increase in cost of funds as rates go up, no doubt, but not to the pace that that they changed change at prime for sure.

defensive on our on our liability side still and we'll see an increase in cost of funds as rates go up, no doubt, but not to the pace that that they changed change at prime for sure.

see an increase in cost of funds as rates go up, no doubt, but not to the pace that that they changed change at prime for sure.

that they changed change at prime for sure.

Bradley Jason Milsaps: And just to follow up on that point have you guys, I know this is tough to predict but if we do get that rate scenario that you guys laid out in the deck that would result in your loan portfolio repricing as you expect, what do you think that would do to the right side of the balance sheet?

Bradley Jason Milsaps: if we do get that rate scenario that you guys laid out in the deck that would result in your loan portfolio repricing as you expect, what do you think that would do to the right side of the balance sheet?

No.

that would result in your loan portfolio repricing as you expect, what do you think that would do to the right side of the balance sheet?

What does your crystal ball say sort of on deposit betas at various levels of rates going up?

at various levels of rates going up?

Cappy Payne: Well as I said, we're going to - we're going to have to increase rates on deposits. There's no doubt - we're going to do that to be competitive. It's just not going to keep up with the same pace. So I guess, if you will - of it's 20% for every 20% - for every 50 basis point increase or something like that, and there are any in the increase in prime or an increase in fed funds, would be our increase in deposits.

20% forever.

Hum.

20% for every 50 basis point increase or something like that, and there are any in the increase in prime or an increase in fed funds, would be our increase in deposits.

and there are any in the increase in prime or an increase in fed funds, would be our increase in deposits.

would be our increase in deposits.

Bradley Jason Milsaps: Okay, and then finally just

maybe a question for Ty. The five new producers that you brought over we're they a contributor at all during the first quarter to the extent, they were, they weren't?

That you brought over.

What would be your expectation on what those folks can kind of bring in?

Is that a big part of sort of your increased loan guidance as you think about 2022?

Tyson Todd Abston: No Brad it really - I mean, yes the producers we onboarded in the last 12 months were part of that growth but honestly it was part of - it was really across our footprint. All four regions that we're in had a really strong quarter. So our expectations, yes, new producers will will be part of that growth the rest of this year, but our existing producers and existing footprint are a big part of that equation as well.

<unk>, we onboard in the last 12 months were part of that growth, but honestly. It was part of it was really across our footprint.

All four regions that ran really have had.

had a really strong quarter. So our expectations, yes, new producers will will be part of that growth the rest of this year, but our existing producers and existing footprint are a big part of that equation as well.

will be part of that growth the rest of this year, but our existing producers and existing footprint are a big part of that equation as well.

The rest of this year, but our existing producers in our existing footprint.

A big part of equation as well.

Bradley Jason Milsaps: Okay, great. Thank you guys.

Sure. Thanks, Brad.

Operator: This concludes our Q&A session for our call. I would like to remind everyone that the recording will be available at GNTY.com in our Investor Relations page by 1P.M. Today. Thank you for attending.

Goodbye.

Q1 2022 Guaranty Bancshares Inc Earnings Call

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