Guaranty Bank linked-quarter earnings drop 48%

Earnings per share for the second quarter were 26 cents, or $681,000 in net income. That’s compared to 23 cents per share in the first quarter and 50 cents per share – or $1.42 million in net income – in second-quarter 2007.

Guaranty attributed the year-over-year decline to net interest margin falling to 2.67 percent, compared to 3.36 percent last year, resulting from the Federal Reserve’s multiple interest rate cuts that began last fall. The rate cuts have impacted Guaranty’s yield on loans tied to the prime rate.

Other reasons for the double-digit earnings drop included a $430,000 increase in the bank’s provision for loan losses during the quarter to compensate for significant loan growth and economic concerns; a 37 percent decrease in noninterest income due to Freddie Mac’s financial downturn and stock price decline; and a 7 percent climb in noninterest expenses because of new personnel and the Federal Deposit Insurance Corp.’s increase in assessments of insurance premiums.

“The combined impact of net interest margin compression from the Fed’s dramatic rate reductions and the higher credit costs associated with the problems in the residential real estate markets were the key factors in our decline in earnings over 2007,” Guaranty Bank CEO and President Shaun Burke said in a news release. “Our current focus is to prudently provide credit and other banking services to our customers while closely monitoring the portions of our portfolio impacted by the current economic challenges.”

Guaranty assets at the end of the quarter were $670.7 million, up 19 percent from the end of 2007; net loans were $558.9 million, up 8 percent; and deposits were $446.7 million. up 7 percent.

Shares (Nasdaq: GFED) closed Wednesday at $13 and were trading at $13.41 as of 10:45 this morning. The 52-week range is $12.90 to $30.50.