Guaranty Bancshares(GNTY)2025-03-14 11:30Interest Rate Risk - The company is subject to interest rate risk, which may adversely affect earnings due to fluctuations in interest rates [119]. - Interest rate fluctuations may adversely affect the company's earnings, particularly due to the sensitivity of its assets and liabilities to changes in market interest rates [168]. - The Federal Reserve raised interest rates by 525 basis points over 15 months, with the target federal funds interest rate at 4.25% to 4.50% as of December 31, 2024 [450]. - Under the company's internal policy, estimated net income at risk for the subsequent one-year period should not decline by more than 15.0% for a 100 basis point shift in interest rates [455]. - The simulated change in net interest income shows a decrease of 0.73% for a 300 basis point increase in interest rates as of December 31, 2024 [456]. - The company’s exposure to interest rate risk is managed by the asset-liability committee, which regularly reviews the sensitivity of assets and liabilities to interest rate changes [453]. Loan Portfolio and Credit Risk - A significant portion of the loan portfolio is comprised of real estate loans, making it vulnerable to negative changes in the economy affecting real estate values and liquidity [119]. - Real estate loans comprised approximately 28.3 million, representing approximately 1.33% of total loans, reflecting management's assessment of potential losses [149]. - The company may face increased delinquencies and loan losses in its mortgage warehouse lending business due to credit risks and market value fluctuations [177]. Operational and Compliance Risks - The ongoing implementation of the Dodd-Frank Act could adversely affect the company's business, financial condition, and results of operations [124]. - The company is exposed to operational risks, including customer fraud and data processing system failures, which could negatively impact its business [124]. - The complexity of quantitative models used in risk management may lead to suboptimal decision-making if misunderstood or misapplied [139]. - The company maintains a system of internal controls to mitigate operational risks, including fraud and data processing errors, but failures could adversely affect financial condition [194]. - Regulatory challenges related to consumer protection laws could result in sanctions that negatively impact the company's operations and financial condition [220]. Strategic Growth and Acquisitions - The company plans to pursue acquisition opportunities that complement its activities, but these acquisitions carry risks such as intense competition and potential integration challenges [127]. - The company may not be able to implement aspects of its expansion strategy, which could adversely affect its ability to maintain historical earnings trends [125]. - The company intends to continue de novo branching as part of its expansion strategy, which carries risks related to obtaining necessary regulatory approvals [216]. - The company plans to pursue strategic acquisitions of financial institutions, but these require federal regulatory approvals that may not be granted [214]. Market and Economic Conditions - Changes in U.S. trade policies, including tariffs, may adversely impact the company's financial condition and results of operations [134]. - Economic conditions in primary markets, including the energy sector and oil prices, significantly impact the company's operations and customer repayment ability [171]. - The company faces strong competition from various financial institutions, which may lead to higher interest rates for deposits and lower yields on loans [172]. - Disruptions in the secondary market for residential mortgage loans could limit the company's ability to maintain or grow income from these activities [157]. Financial Position and Capital Management - As of December 31, 2024, the company had approximately 1.94 billion, or 72.1%, of total deposits were demand, savings, and money market accounts [160]. - The remaining balance of deposits included 696.3 million, or 25.8%, due to mature within one year [161]. - The company may need to raise additional capital in the future, which may not be available on acceptable terms or at all [166]. - The company is subject to stringent capital requirements under Basel III, which may lead to lower returns on equity and limit share repurchases or dividend payments [213]. Reputational and Environmental Risks - Negative public opinion and reputational damage could hinder the company's ability to attract new customers and retain existing ones [180]. - A significant portion of the company's business is generated from markets susceptible to natural disasters, which could lead to decreased revenue and increased loan losses [197]. - The company may incur substantial environmental liabilities related to real estate properties it owns or forecloses on, potentially impacting financial results [198]. Management and Governance - The company relies heavily on its executive management team, and the unexpected loss of key employees could adversely affect its operations [119]. - As of December 31, 2024, the company's management and board of directors owned approximately 17.7% of the outstanding shares, giving them significant control over corporate decisions [235]. - The company is dependent on Guaranty Bank & Trust for cash distributions to meet its obligations and pay dividends [240].