Good morning, and welcome to Guaranty Bancshares' second 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. To begin our call, I will now turn it over to our CEO, Ty Abston. Thank you, Nona. Good morning, everyone, and again, welcome to our second quarter earnings call for 2022. As outlined in our press release, we did have a good quarter, had strong growth and good earnings for the bank. We remain cautiously optimistic. Our state is doing well. Texas has a lot of growth going on. We're more cautious though with like everyone else, with the rates and everything going on from a macro standpoint. We're gonna go through our slide deck, and Cappy and Shalene will go through that, and then we'll answer questions at the end of the presentation. Cappy? Okay, Ty. Thank you. Good morning. I'll just briefly recap some of the highlights of the earnings release. You can see our total assets at the end of Q2 were $3.28 billion. That's up $91 million during the quarter, and that's up $195 million for the year, for the first six months. Diving into the balance sheet, I guess on the asset side of the balance sheet, probably the focus is on loans and securities. Our total loans, ex PPP and warehouse, were up $140 million for the quarter. That's 7.1%, and a total of $297 million for the year to date for the first six months, roughly 16%. Our new loan originations were strong, actually higher than Q1, but our payoffs were elevated a little bit, also from Q1. Shalene will go over a little more detail here in just a minute on some of the loan yields and what we're doing in the loan portfolio. Looking at the securities portfolio, you'll notice a few changes, I think if you see the trend. We did transfer $120 million of AFS bonds to held to maturity. We don't plan on selling those bonds before maturity, and they really have a relatively short duration. Our whole securities portfolio is relatively short in duration. We did buy some securities during the quarter, about $100 million. You'll see they're up, net of about $100 million during the quarter. Some of that was some more treasuries and some mortgage backs, again, that don't have a lot of duration. We basically just took that out of Fed funds, and that helped improve our total interest earning asset yield for the linked quarter. It actually increased 33 basis points, so total earning asset yield was 3.87% for the quarter. From the liquidity standpoint, we've got about $200 million in treasuries that are maturing in the next six months. Actually, about $150 million in the next three months, and then another $150 million in Q4. That's just gonna be with pay downs. It'll be closer to about $250 million in cash flow coming out of our bond portfolio. Even looking in the next 12 months, it's about $350 million. I'm not too concerned about the liquidity with the short-term duration of the bond portfolio and some of the changes we've made in the last three and six months. Looking over on the liability side, our deposits, they did decrease $17.8 billion, which was really driven by a decrease in our public fund deposit contract accounts. Public funds decreased about $38 million. That's very typical for Q2. Actually looking ahead, it'll probably happen in some decrease in Q3 based on the historical performance of what we've seen in our public fund money. They'll typically increase in Q4. The public fund money generally came out of interest-bearing accounts. It's public fund money is about 10% of our total deposits. Not a large concentration currently. Our DDA accounts continued to increase. They increased $40 million during the linked quarter. Now, DDA's non-interest bearing about 40% of total deposits. You see in our shareholder equity, we did have some changes. It did decrease $9 million during the linked quarter. We discussed details in the press release, but obviously the bigger component reflects a decrease in our accumulated other comprehensive income related to continued decreases in fair value of AFS securities. That was $11.7 million decrease in value of those AFS securities. That along with our buyback that we did during the quarter and our dividend payout, those are all decreases obviously in the capital count and then offset by the good earnings we had for the quarter. Just a real quick discussion on the buyback. We did buy back quite a few shares during the quarter. Our board authorized back about a year ago, 1 million shares that we could buy back. We're close to 250,000 shares, a little under it. I really think that probably will slow down. We just had an opportunity to buy at a good price to help offset some earnings per share dilution created by the sub debt issue that we did last quarter. In looking at the income statement on the earnings, our second quarter earnings were good, as Ty already alluded to, $10.8 million. That's $0.90 per basic share and $0.89 per diluted share. That's very similar to the strong first quarter we had of 2022. The first six months were good earnings. There wasn't really much extraordinary activity during the quarter. We did not do a provision or a release. Really, our PPP activity is beginning to wind down, so our core earnings were stronger than they've been than they've historically been in the last four plus quarters. Our return on average assets on net earnings was 1.35%, and our return on equity was 14.85%, both strong results for the quarter and again, very comparable to Q1. Our stated net interest margin was 3.61%. That's up 24 basis points linked quarter. It's up 17 basis points from same quarter last year. Again, a pretty good results on our net interest margin. Again, Shalene will talk about the loan side. I've already discussed on the bonds, we're able to do some movements there that helped. On our cost of funds, which comes off of that, although rates are trending up, as we all know, our cost of funds is trending up and is 23 basis points for the quarter, compared to 18 basis points for Q1. That's up about 5 basis points. We're pretty well using a deposit beta of 30%. We're looking to see as rates continue to go up, our cost of funds will also go up some, but we're monitoring that closely, and as you can see, haven't been affected too much, but we know that more of that's coming as rates rise. Looking at non-interest income for the quarter, it reported lower than Q1, but if you remember in Q1, we did have some extraordinary gains, $685,000 in our swap gain. Looking at recurring income, non-interest income was up for this quarter, about $290,000. That's 5%. That's driven by increased volume in our debit card transactions. But we did record during the quarter our annual bonus income from Mastercard, which is about $270,000. If you look back to this quarter last year, that comparable number was $230,000. Very comparable to what we normally get in that, but it also is reflective of increased activity. Through the offset of that, though, our mortgage volume and loans sold and gain on sale is down about 30% from last year. Our warehouse lending also is down, although not as big a contributing factor to our non-interest income. It's down about 60% year-over-year as mortgage rates continue to rise. Looking at expenses, they were up about $600,000. That's 3.2% for the linked quarter, and up about $2 million, which is about 11% from Q2 2021, a year ago. The main driver continues to be staffing and related benefits to be competitive and properly staffed for the growth that we have had and anticipate going forward. Our FTE fully... I mean our FTE count is actually up full-time equivalent about 501 employees now. That's up 23 full-time equivalents from a year ago. Our assets are up $350 million over that same time span. Like I told you last earnings call, we were looking to add some production staff in most of our metro markets, Houston, Austin, DFW, and in SBA. We added one in Houston, one in Austin, and one in the SBA department. In Q2, we also added some back office and the mortgage staff that I've talked about in Q1 calls. In Q2, we did that. We talked about how we've changed over some leadership in that department too. That's beginning to settle in now. We do look at our expense-to-asset ratio. That's about 2.44%, which is in line with what our goals are and what we think is appropriate. That's one of the targets that we continue to look at and stay in tune with. Our efficiency ratio, as we stated in there, was a little under 60%, which shows improvement over the last four quarters. That's kind of a brief overview, so I'll turn it over to Shalene. All right. Thanks, Cappy. Next I'll cover some of the highlights of our loan portfolio, credit quality, and the allowance for credit losses. First bullet there. The Texas economy is still doing relatively well and our loan demand continues to be good. I know it says strong, but we probably feel like loan demand is more good than strong at this point. For the second half of the year, we believe that our loan pipeline will be able to backfill payoffs and pay downs, but we really don't anticipate much loan growth during the second half of 2022. I'm sure Ty will probably give a little bit more color on that during the Q&A session. You know, we think if our loans stay flat during the second half of the year, then we'll probably be in good shape compared to some of our peers. As Cappy mentioned a moment ago, excluding PPP and warehouse loan changes, our loans increased by about $140 million or 7.1% during the quarter. The new loan originations and advances that were booked during the second quarter had an average loan yield of 4.65%. Overall, our loan yields are trending upwards. Excluding PPP, our average loan yield increased this quarter to 4.7% from 4.59% in the first quarter and 4.66% in the fourth quarter of 2021. The next bullet there talks a bit about rate sensitivity for our loans. We have $1.37 billion of loans that are either fully floating or adjustable at various dates. $267.8 million of that amount are fully floating and $1.1 billion are adjustable at various dates. We ran a model that says if rates increase as expected, which we assumed would be 75 basis points in July, 50 basis points in September and 25 basis points in each meeting in November and December, then $453.6 million of those loans will reprice by year-end. Of course, adjustable rate loans not repricing have a next repricing date subsequent to December thirty-first. Non-performing assets continue to remain relatively low, although our non-performing assets to total asset ratio did increase from 0.08% as of March 31st to 0.3% as of quarter end. This increase was due to four loans which were made to two related party borrowers that moved to non-accrual during the quarter. These loans are 75% SBA guaranteed. They were acquired in our 2018 acquisition of Westbound Bank, and they're collateralized by two hotels in Houston. The loans have total balances of $6.7 million. Our non-guaranteed exposure is about $1.68 million, and we've got reserves of about $1 million on these loans. We really don't expect there to be a material loss, if any, as we work through resolving these problem loans. You know, just in general, with respect to the acquired Westbound loans, we'd identified a handful of potential problem loans during that acquisition process, and these, we believe, hopefully, are the last of those that we're working through. The others that were identified as problems have already been successfully resolved, and in those cases, we were able to release some, if not all, of the related reserves that we'd put aside for those. We're continuing to work with these borrowers towards a positive outcome, but if that doesn't happen, like I said, we don't anticipate a material loss. Then the last couple bullets there, you can see that net charge-offs and the related ratios continue to be very low. The last thing I'll talk about is the allowance for credit losses. We had no provision for ACL during Q2. As you know, during Q1, we recorded a $1.25 million reverse provision as we fully unwound the remaining COVID-specific key factor that we had applied across our loan portfolio. During the quarter, the effects of that unwinding was offset by portfolio growth and a slight downward adjustment to some of our standard key factors. At the end of Q1, we felt like there was a greater level of economic uncertainty around the war in Ukraine and the Fed's plans to raise interest rates and by how much than there really was at the end of Q2. We essentially looked at our key factors across the board relative to pre-COVID levels and expectations and adjusted some of them, accordingly. We still have some key factors, particularly macroeconomic related, that are elevated, with respect to pre-COVID. We think could continue to change in future quarters based on any new knowledge of the impacts of inflation, whether or not a recession occurs, and the possible impact of those events on our borrowers. As of the end of Q2, ACL coverage is about 1.36% of total loans, compared to 1.46% at the end of Q1 and 1.59% at the end of last year. That covers our prepared remarks. I'll turn it over to Nona for our Q&A. Thank you, Shalene. It is now time for our Q&A session. If you have a question, you can hit the raise your hand button on the bottom of your screen. If you are participating by telephone, star nine will raise your hand, star six will unmute your line. Okay, our first call today will be from Matt Olney with Stephens. Hey, thanks. Good morning, everybody. Hey, good morning, Matt. Good morning, Matt. I want to dig more into the commentary about the slowing loan growth the back half of the year. Is there any more color you can share on this? Just trying to appreciate how much of that's being just conservative due to the economic headlines out there versus actual evidence of this in the pipelines. Thanks. Matt, this time, I mean, we're definitely seeing a slowing demand and we're seeing some slowing in the economy. Part of it is us just being conservative and, you know, tightening underwriting a little bit, and we've been doing that actually for about a year. We're definitely seeing some slowing economic activity. Like I said, even, I mean, Texas overall is doing really well, and we think it'll do better than most. These rates moving up as quickly as they have and as much as they have and as much as that we're anticipating, I don't think there's any doubt we're gonna see slowing economic activity. We do think we have enough momentum, as we mentioned, to kind of backfill pay down. We're, you know, we're kind of shooting for a flat outcome the second half of the year. We're seeing slowing, and we're gonna see slowing in all of our markets. Okay. Thanks for that, Ty. On deposit balances. I think end of day deposit balances were down in the second quarter. I think you mentioned public funds were a big driver of this. What are the expectations for deposit growth in the back half of the year? Matt, I'll answer that. This is Cappy. I did say public funds were down about $38 million. Again, that's typical in Q2. I think they'll go down again in Q3, which our history supports, and then back up in Q4. But again, that's 10% of our deposits, so it's not a big factor. But we're really projecting more of a flat growth in loan and deposits also with some of the moving around as rates go up that we see beginning to happen when customers begin to put funds in other investment products. So I'd say pretty flat for the rest of the year also, just like loans. Okay. Cappy, you mentioned some securities purchases that were made in the second quarter. At this point, do you expect any more incremental purchases in the near term? Not to a great degree, Matt. Again, that was pretty well just putting our liquidity to a little bit better use and putting them in treasuries and getting a little better yield. I don't see us doing a whole lot of that going forward. Again, it'll depend on loan demand and deposit or loan growth and deposit growth. I think that will slow down in second half of the year. Yes. Just lastly, remind us what the duration is of the overall investment securities portfolio? Currently it's 3.2, but that's it is weighted down with a lot of treasuries. We got about $300 million that we laddered treasuries in. Again, a lot of that I told you a while ago about, the cash flow is gonna come out of those treasuries, it was short term. That's about 30% of our bond portfolio. They have $300 million of the $900 million. Without those, it's gonna the duration will be a little higher, probably a high 4s-5. Okay. Got it. Thanks, guys. Thanks, Matt. Thanks, Matt. Okay, our next call will be from Brady Gailey with KBW. Hey, thanks. Good morning, guys. Hey. Good morning, Brady. I wanted to start with expenses. Yeah, I know we're seeing inflation pressure everywhere, and I think last quarter, you guys targeted an annual expense number around that $77 million-$78 million range. You know, is that still? If you look at the first half of the year, it seems like you're kind of on track to do that. Any update on how you're thinking about expenses from here? Yeah, I would, we're up in that, Brady, again, as we've added some production staff and some back office staff. Our FTEs are up quite a bit and just to handle our growth. I would say in the $79 million-$80 million looking forward would be more the range. Okay. All right. You know, we've had several quarters here with the provision being zero or negative. Any update, you know, as we potentially head into a recession and, you know, maybe the CECL model changes a little bit. Any update on how you think the provision could trend from here? Is it likely that we'll start to see a number, a positive number in that line going forward? Brady, this time, sure we will. I mean, we've been effectively unwinding COVID. Just with, you know, our modeling and our loss history, I mean, our provisions, we think, are very conservative where they are, but we also are looking forward into economy that we think will be slowing. We'll definitely, I think, be starting to see some provisions going forward as we move forward. That said, though, I have got a couple of things I can add to that. Brady, we did look at our key factors and our overall methodology compared to how it was pre-COVID and when we first implemented CECL. Some of the expectations that we had in terms of the forward-looking loss estimates when we implemented CECL were with the expectation that there was gonna be a down trend in the economy, not necessarily a recession, but we felt like we were, you know, at the end of a good cycle and maybe in the ninth inning with some expectations of that declining. We're still quite a bit higher than we were on day one CECL at- 1.36% versus a little less than 125 basis points back then. I think relatively we're still much more conservative than we felt, you know, pre the whole COVID pandemic. Yeah. My last question is just on the buyback. You know, pretty good activity. We purchased about 1.5% of the company. It sounds like that's gonna slow. Is the messaging that, you know, you'll still be active in the buyback, but just not at the level that we saw in 2Q? We'll be active, Brady, in the buyback if we think it's a fair price. I think that's gonna slow, though, and then just because of other things going on, I do see that slowing down looking forward in the next six months. All right. Great. Well, thanks for all the color, and Shalene, congratulations on your promotion. Thank you, Brady. Our next call will be from Brad Milsaps with Piper Sandler. Hey, good morning. Am I coming through? Yeah, Brad. We got you. Good morning. Thanks. You guys have addressed a lot, but did want to touch on Cappy. It looks like you guys added some FHLB advances towards the end of the quarter. Just kind of curious, kind of your thinking around that, sort of what the duration, the cost and, you know, kind of how those how long those might hang around, you know, just some other strategy you're working on there. Yeah, Brad, that was more just liquidity positioning. They're all short term. Not all of them, but the majority of those advances will mature in the next six months. We kept them short term, kind of line up when those treasuries roll off, and they should just be able to offset each other, and then we'll handle growth or whatever deposits and loans happen in the interim. Okay. You kind of answered my next question there. The $150 or so that rolls off in the treasury book in the next three months, I should think about that as paying down those advances and not necessarily going back into the bond book. Yes, that's correct, Brad. Okay. Brad, I'll add a little bit to that. I mean, as you know, the last couple of years, we've carried a lot of liquidity. Just, the intent was not to buy bonds where, you know, when rates were, you know, extraordinarily low. We've been pretty aggressive in buying bonds, this first half of the year. That's gonna slow, and we've kind of pre-purchased effectively some bonds, and that's what those advances are offsetting. We bought primarily in the 2-3-year Treasury space, but we also bought some mortgage backs too recently. That's gonna slow down. We just kind of bought ahead as the market, you know, started getting pretty attractive. Got it. Very helpful. Thank you. On the deposit side of the equation, Cappy, I think you mentioned a 30% deposit beta. You were 23 basis points on average for the quarter. Do you have a sense of where kind of maybe your spot rate was at June 30? Just wanted to kind of get a sense of maybe how things might or might not have accelerated, you know, in June as the rate increases really picked up in terms of kind of where you may have had to move rates to in order to compete. I think Brad, the 30 basis beta factor is high. I think we were probably around the 25 or lower at Q1 at the end of the quarter. I'd just say 30, you see, as rates begin to move and, you know, we're gonna have to look and see what we're paying our customers and be fair to that. I think we may have a little bit more movement in rates as they start to or continue to increase in the next few months. I think that 30 beta factor is high. Okay. Very good. Thank you, guys. I appreciate it. Thanks, Brad. Our next call is from Michael Rose with Raymond James. Hey, guys. Can you hear me? Yeah. Good morning, Michael. Great. Good morning. Thanks for taking my questions. Just a couple follow-ups to what's already been kind of asked and answered. It seems like loans, deposits, you know, not a lot of growth there. The securities to assets, you know, bumping up around 28%. Cash is relatively low at this point. You get some repricing opportunities here in the nearer term. If I look at last quarter's, you know, rate sensitivity and the 100, 200 basis points, not a lot of lift. Does it feel like maybe, you know, we're getting over the next couple quarters, you know, assuming we get, you know, what was laid out in your slides and what we get from the Fed, that, you know, are we getting closer towards a peak in margin? Then, you know, would NII dollars, you know, potentially really just be a function of balance sheet growth into next year? It sounds like you guys are being a little more cautious. I guess overall what I'm trying to ask is, you know, is the outlook for NII gonna slow as we move into next year? Thanks. You wanna take it, Cappy? Yeah, I'll take that, Michael. I do think again think it'll slow as we begin to raise rates a little bit on the deposit side. It all depend on the loan growth. Shalene's already talked about, you know, the new loan rates, yields that we book were higher than we projected. Our loan yields increased a little more than we thought they would. I mean, all that from that standpoint is certainly positive. But then again, if we don't book as many loans, you know, we'll just have to see how that works in the loan book. I do think that it will be slower in the second half of the year, so the net interest income, I think, it'll change due to balance sheet growth. As rates rise, I think we'll see some lift in our margin, certainly on the top side, total earning asset yields. Okay. That's helpful. Can you just talk about exception requests on deposit pricing? Have you started to see that? I think, you know, based on my channel checks, it seems like that really began to ramp in the last two weeks of June, it really picked up, you know, to start off this month. Just any sort of color there. On the asset side, it seems like, you know, you obviously have some loans that are repricing higher, but you do have a fair amount of commercial real estate loans. What's the pricing like in that market? Thanks. Well, I'll take exception to that on the deposit side. We really hadn't began to see much of that. Michael, we did put out a CD special that has gained some interest. It's nothing crazy. It's not even highest in the market by any stretch of the imagination. It's a 1.50 CD rate on 13-month CD. So, we really haven't seen a whole lot of requests, though, say, "Hey, you pay me more or I'm moving our money." We're paying pretty straight to the street rate on that. That's on deposit side. On the loan pricing, it's in the mid fives, kind of the baseline on where we're starting on loan pricing. Okay. Thanks for taking all my questions. Sure. Thanks, Michael. That concludes our Q&A portion of our meeting. Want to remind everyone that the call recording will be available by 1 P.M. today on our investor relations page at gnty.com. Thank you for attending, and this concludes our call.