UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period fromto.

Commission File Number: 001-38087

GUARANTY BANCSHARES, INC.

(Exact name of registrant as specified in its charter)



Texas	~~FORM 10-Q~~ 001-38087	75-1656431
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)
16475 Dallas Parkway, Suite 600 Addison, Texas		75001
(Address of Principal Executive Offices)		(Zip Code)

~~☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

~~For~~

(888) 572 - 9881

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the ~~quarterly period ended September 30, 2017~~

~~☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

~~For the transition period from~~to.

~~Commission File Number: 001-38087~~

Act:



Title of each class	~~GUARANTY BANCSHARES, INC.~~ ~~(Exact name~~	Trading symbol	Name of ~~registrant as specified in its charter)~~

each exchange on which registered
Common Stock, par value $1.00 per share
~~Texas~~ GNTY		~~75-1656431~~
~~(State or other jurisdiction of~~		~~(I.R.S. employer~~
~~incorporation or organization)~~		~~identification no.)~~

~~201 South Jefferson Avenue~~
~~Mount Pleasant, Texas~~		~~75455~~
~~(Address of principal executive offices)~~		~~(Zip code)~~ New York Stock Exchange



	~~(903) 572 - 9881~~ ~~(Registrant’s telephone number, including area code)~~

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ~~(Check one):~~



	Large accelerated filer ☐	☐	Accelerated filer ☐	☒

	Non-accelerated filer ☒	☐	Smaller reporting company ☐	☐
~~(Do not check if a smaller reporting company)~~

		Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒			☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the

Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☒

As of November ~~13, 2017,~~1, 2023, there were ~~11,058,956~~11,529,294 outstanding shares of the registrant’s common stock, par value $1.00 per share.

GUARANTY BANCSHARES, INC.




		~~Page~~
PART I — FINANCIAL INFORMATION				Page

Item 1.		Financial Statements – (Unaudited)	4	1
		Consolidated Balance Sheets as of September 30, ~~2017~~2023 and December 31, ~~2016~~2022	4	1
		Consolidated Statements of Earnings for the Three and Nine Months Ended September 30, ~~2017~~2023 and ~~2016~~2022	6	2
		Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, ~~2017~~2023 and ~~2016~~2022	7	3
		Consolidated Statements of Changes in ~~Shareholders’~~ Equity for the Three and Nine Months Ended September 30, ~~2017~~2023 and ~~2016~~2022	8	4
		Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2017~~2023 and ~~2016~~2022	9	6
		Notes to Consolidated Financial Statements	11	8
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	40	36
Item 3.		Quantitative and Qualitative Disclosures about Market Risk	74	64
Item 4.		Controls and Procedures	74	64

		PART II — OTHER INFORMATION
~~Item 1.~~	~~Legal Proceedings~~	75
Item ~~1A.~~ 1.	~~Risk Factors~~	75 Legal Proceedings		64
Item 1A.		Risk Factors		65
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	75	65
Item 3.		Defaults Upon Senior Securities	75	65
Item 4.		Mine Safety Disclosures	75	66
Item 5.		Other Information	75	66
Item 6.	~~Exhibits~~	76 Exhibits		66
~~SIGNATURES~~	77
SIGNATURES				67

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

GUARANTY BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share amounts)
(Unaudited) (Audited)
September 30,
2017 December 31,
2016
ASSETS
Cash and due from banks $ 33,736
$ 39,605
Federal funds sold 34,250
60,600
Interest-bearing deposits 27,075
27,338
Total cash and cash equivalents 95,061
127,543
Securities available for sale 238,133
156,925
Securities held to maturity 179,081
189,371
Loans held for sale 3,400
2,563
Loans, net 1,294,847
1,233,651
Accrued interest receivable 6,440
7,419
Premises and equipment, net 43,958
44,810
Other real estate owned 1,929
1,692
Cash surrender value of life insurance 18,376
17,804
Deferred tax asset 4,267
4,892
Core deposit intangible, net 2,870
3,308
Goodwill 18,742
18,742
Other assets 16,949
19,616
Total assets $ 1,924,053
$ 1,828,336
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
  Deposits
    Noninterest-bearing $ 405,678
$ 358,752
    Interest-bearing 1,211,624
1,218,039
          Total deposits 1,617,302
1,576,791
   Securities sold under agreements to repurchase 12,920
10,859
   Accrued interest and other liabilities 7,601
6,006
   Other debt —
18,286
   Federal Home Loan Bank advances 65,157
55,170
   Subordinated debentures 13,810
19,310
      Total liabilities 1,716,790
1,686,422

Commitments and contingent liabilities

KSOP-owned shares —
31,661

GUARANTY BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)


	(Unaudited)			(Audited)
	September 30, 2023			December 31, 2022
ASSETS
Cash and due from banks	$	47,922		$	52,390
Federal funds sold		73,275			47,275
Interest-bearing deposits		8,980			6,802
Total cash and cash equivalents		130,177			106,467
Securities available for sale		178,644			188,927
Securities held to maturity		408,308			509,008
Loans held for sale		2,506			3,156
Loans, net of allowance for credit losses of $31,140 and $31,974, respectively		2,286,163			2,344,245
Accrued interest receivable		11,307			11,555
Premises and equipment, net		56,712			54,291
Other real estate owned		—			38
Cash surrender value of life insurance		42,096			38,404
Core deposit intangible, net		1,524			1,859
Goodwill		32,160			32,160
Other assets		80,816			61,385
Total assets	$	3,230,413		$	3,351,495
LIABILITIES AND EQUITY
Liabilities
Deposits
Noninterest-bearing	$	903,391		$	1,052,144
Interest-bearing		1,754,902			1,629,010
Total deposits		2,658,293			2,681,154
Securities sold under agreements to repurchase		19,366			7,221
Accrued interest and other liabilities		31,218			28,409
Line of credit		2,000			—
Federal Home Loan Bank advances		175,000			290,000
Subordinated debt, net		47,752			49,153
Total liabilities		2,933,629			3,055,937
Commitments and contingencies (see Note 11)
Equity
Preferred stock, $5.00 par value, 15,000,000 shares authorized, no shares issued		—			—
Common stock, $1.00 par value, 50,000,000 shares authorized, 14,230,978 and 14,208,558 shares issued, and 11,554,094 and 11,941,672 shares outstanding, respectively		14,231			14,209
Additional paid-in capital		228,666			227,727
Retained earnings		153,654			137,565
Treasury stock, 2,676,884 and 2,266,886 shares, respectively, at cost		(70,796	)		(60,257	)
Accumulated other comprehensive loss		(29,529	)		(24,260	)
Equity attributable to Guaranty Bancshares, Inc.		296,226			294,984
Noncontrolling interest		558			574
Total equity		296,784			295,558
Total liabilities and equity	$	3,230,413		$	3,351,495

See accompanying notes to consolidated financial statements.

GUARANTY BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share amounts)
(Unaudited) (Audited)
September 30,
2017 December 31,
2016

Shareholders' equity
Preferred stock, $5.00 par value, 15,000,000 shares authorized, no shares issued —
—
Common stock, $1.00 par value, 50,000,000 shares authorized, 11,921,298 and 9,616,275 shares issued, 11,058,956 and 8,751,923 shares outstanding, respectively 11,921
9,616
Additional paid-in capital 155,493
101,736
Retained earnings 64,778
57,160
Treasury stock, 862,342 and 864,352 shares at cost (20,087 ) (20,111 )
Accumulated other comprehensive loss (4,842 ) (6,487 )
207,263
141,914
Less KSOP-owned shares —
31,661

Total shareholders' equity 207,263
110,253
Total liabilities and shareholders' equity $ 1,924,053
$ 1,828,336

~~See accompanying notes to consolidated financial statements.~~

GUARANTY BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)

(Dollars in thousands, except per share data)

Three Months Ended
September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Interest income
Loans, including fees $ 15,486
$ 14,294
$ 45,115
$ 40,857
Securities
Taxable 1,545
1,038
4,257
4,298
Nontaxable 919
923
2,761
2,308
Federal funds sold and interest-bearing deposits 215
172
960
528
Total interest income 18,165
16,427
53,093
47,991

Interest expense
Deposits 2,730
2,329
7,761
6,791
FHLB advances and federal funds purchased 157
109
294
277
Subordinated debentures 164
217
559
656
Other borrowed money 12
104
337
452
Total interest expense 3,063
2,759
8,951
8,176

Net interest income 15,102
13,668
44,142
39,815
Provision for loan losses 800
840
2,250
3,240
Net interest income after provision for loan losses 14,302
12,828
41,892
36,575

Noninterest income
Service charges 986
914
2,801
2,625
Net realized gain on securities transactions —
64
25
82
Net realized gain on sale of loans 589
486
1,490
1,231
Other income 2,127
1,938
6,184
5,664
Total noninterest income 3,702
3,402
10,500
9,602

Noninterest expense
Employee compensation and benefits 6,729
6,370
20,156
19,057
Occupancy expenses 1,938
1,720
5,552
5,196
Other expenses 3,499
3,390
10,409
10,087
Total noninterest expense 12,166
11,480
36,117
34,340

Income before income taxes 5,838
4,750
16,275
11,837
Income tax provision 1,699
1,380
4,644
3,290
Net earnings $ 4,139
$ 3,370
$ 11,631
$ 8,547
Basic earnings per share $ 0.37
$ 0.38
$ 1.17
$ 0.95
Diluted earnings per share $ 0.37
$ 0.38
$ 1.16
$ 0.95


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023			2022
Interest income
Loans, including fees	$	34,765	$	27,455	$	100,513		$	74,314
Securities
Taxable		2,906		3,331		8,561			8,133
Nontaxable		1,150		1,324		3,649			3,764
Nonmarketable equity securities		304		172		1,024			869
Federal funds sold and interest-bearing deposits		693		194		1,949			409
Total interest income		39,818		32,476		115,696			87,489

Interest expense
Deposits		13,069		2,455		30,670			5,320
FHLB advances and federal funds purchased		2,588		1,211		9,711			1,447
Subordinated debt		534		509		1,609			1,208
Other borrowed money		325		4		539			43
Total interest expense		16,516		4,179		42,529			8,018

Net interest income		23,302		28,297		73,167			79,471
Provision for (reversal of provision for) credit losses		—		600		—			(650	)
Net interest income after reversal of provision for credit losses		23,302		27,697		73,167			80,121

Noninterest income
Service charges		1,131		1,146		3,264			3,192
Net realized loss on sales of securities available for sale		—		—		(229	)		—
Net realized gain on sale of loans		218		338		1,005			2,125
Merchant and debit card fees		1,752		1,738		5,547			5,410
Other income		1,838		2,581		8,130			7,636
Total noninterest income		4,939		5,803		17,717			18,363

Noninterest expense
Employee compensation and benefits		11,944		11,851		36,147			35,113
Occupancy expenses		2,960		2,800		8,544			8,359
Other expenses		5,610		5,586		16,261			15,538
Total noninterest expense		20,514		20,237		60,952			59,010

Income before income taxes		7,727		13,263		29,932			39,474
Income tax provision		1,437		2,363		5,789			7,070
Net earnings	$	6,290	$	10,900	$	24,143		$	32,404
Net loss attributable to noncontrolling interest		7		3		16			21
Net earnings attributable to Guaranty Bancshares, Inc.	$	6,297	$	10,903	$	24,159		$	32,425
Basic earnings per share	$	0.54	$	0.92	$	2.06		$	2.70
Diluted earnings per share	$	0.54	$	0.91	$	2.05		$	2.68

See accompanying notes to consolidated financial statements.

GUARANTY BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(Dollars in thousands)

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net earnings $ 4,139
$ 3,370
$ 11,631
$ 8,547
Other comprehensive income:
Unrealized (losses) gains on securities
Unrealized holding (losses) gains arising during the period (264 ) (115 ) 2,422
3,990
Amortization of net unrealized gains on held to maturity securities 23
48
58
98
Reclassification adjustment for net gains included in net earnings —
(105 ) (25 ) (123 )
Tax effect 92
—
(839 ) (1,083 )
Unrealized (losses) gains on securities, net of tax (149 ) (172 ) 1,616
2,882
Unrealized holding gains (losses) arising during the period on interest rate swaps 35
34
29
(289 )
Total other comprehensive (loss) income (114 ) (138 ) 1,645
2,593
Comprehensive income $ 4,025
$ 3,232
$ 13,276
$ 11,140


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Net earnings	$	6,290		$	10,900		$	24,143		$	32,404
Other comprehensive loss:
Unrealized losses on securities:
Unrealized holding losses arising during the period, net of tax		(2,659	)		(2,155	)		(4,518	)		(13,920	)
Reclassification adjustment for net losses included in net earnings, net of tax		—			—			181			—
Unrealized losses on available for sale securities transferred to held to maturity, net of tax and amortization		(365	)		(277	)		(932	)		(17,170	)
Unrealized losses on securities, net of tax		(3,024	)		(2,432	)		(5,269	)		(31,090	)

Unrealized losses on interest rate swaps:
Unrealized holding gains arising during the period		—			—			—			497
Reclassification of realized gains on interest rate swap termination from accumulated other comprehensive loss		—			—			—			(685	)
Unrealized losses on interest rate swaps		—			—			—			(188	)

Total other comprehensive loss		(3,024	)		(2,432	)		(5,269	)		(31,278	)

Comprehensive income		3,266			8,468			18,874			1,126
Less comprehensive loss attributable to noncontrolling interest		7			3			16			21
Comprehensive income attributable to Guaranty Bancshares, Inc.	$	3,273		$	8,471		$	18,890		$	1,147

See accompanying notes to consolidated financial statements.

GUARANTY BANCSHARES, INC.

CONSOLIDATED ~~STATMENTS~~STATEMENTS OF CHANGES IN ~~SHAREHOLDERS’~~ EQUITY (Unaudited)

~~(Dollars in thousands, except share amounts)~~

Preferred Stock Common Stock Additional Paid-in Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Loss Less: KSOP-Owned Shares Total Shareholders’ Equity
For the Nine Months Ended September 30, 2016
Balance at December 31, 2015 $ —
$ 9,616
$ 101,525
$ 49,654
$ (16,486 ) $ (6,573 ) $ (35,384 ) $ 102,352
Net earnings —
—
—
8,547
—
—
—
8,547
Other comprehensive income —
—
—
—
—
2,593
—
2,593
Purchase of treasury stock —
—
—
—
(7,261 ) —
(3,000 ) (10,261 )
Sale of treasury stock —
—
—
—
8,557
—
—
8,557
Stock based compensation —
—
162
—
—
—
—
162
Net change in fair value of KSOP shares —
—
—
—
—
—
(1,539 ) (1,539 )
Dividends:
Common - $0.26 per share —
—
—
(2,328 ) —
—
—
(2,328 )
Balance at September 30, 2016 $ —
$ 9,616
$ 101,687
$ 55,873
$ (15,190 ) $ (3,980 ) $ (39,923 ) $ 108,083

For the Nine Months Ended September 30, 2017
Balance at December 31, 2016 $ —
$ 9,616
$ 101,736
$ 57,160
$ (20,111 ) $ (6,487 ) $ (31,661 ) $ 110,253
Net earnings —
—
—
11,631
—
—
—
11,631
Other comprehensive income —
—
—
—
—
1,645
—
1,645
Terminated KSOP put option —
—
—
—
—
—
34,300
34,300
Exercise of stock options —
5
55
—
24
—
—
84
Sale of common stock —
2,300
53,455
—
—
—
—
55,755
Stock based compensation —
—
247
—
—
—
—
247
Net change in fair value of KSOP shares —
—
—
—
—
—
(2,639 ) (2,639 )
Dividends:
Common - $0.39 per share —
—
—
(4,013 ) —
—
—
(4,013 )
Balance at September 30, 2017 $ —
$ 11,921
—
$ 155,493
—
$ 64,778
—
$ (20,087 ) —
$ (4,842 ) $ —
$ 207,263

~~See accompanying notes to consolidated financial statements.~~

GUARANTY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)
For the Nine Months Ended September 30,
2017 2016
Cash flows from operating activities
Net earnings $ 11,631
$ 8,547
Adjustments to reconcile net earnings to net cash provided from operating activities:
Depreciation 2,385
2,262
Amortization 782
779
Deferred taxes (214 ) (1,228 )
Premium amortization, net of discount accretion 3,581
3,528
Net realized gain on securities transactions (25 ) (82 )
Gain on sale of loans (1,490 ) (1,231 )
Provision for loan losses 2,250
3,240
Origination of loans held for sale (50,230 ) (43,146 )
Proceeds from loans held for sale 50,883
45,158
Write-down of other real estate and repossessed assets 9
107
Net loss (gain) on sale of premises, equipment, other real estate owned and other assets 111
(1,214 )
Stock based compensation 247
162
Net change in accrued interest receivable and other assets 1,680
(1,633 )
Net change in accrued interest payable and other liabilities 1,624
1,342
Net cash provided by operating activities 23,224
16,591

Cash flows from investing activities
Securities available for sale:
Purchases (313,177 ) (26,140 )
Proceeds from sales 213,813
103,942
Proceeds from maturities and principal repayments 18,925
54,021
Securities held to maturity:
Purchases —
(86,642 )
Proceeds from sales 923
1,866
Proceeds from maturities and principal repayments 7,497
15,121
Acquisition of Denton branch, net of cash paid —
2,399
Net purchases of premises and equipment (1,678 ) (634 )
Net proceeds from sale of premises, equipment, other real estate owned and other assets 1,830
2,826
Net increase in loans (64,438 ) (168,154 )
Net cash used in investing activities (136,305 ) (101,395 )

Cash flows from financing activities
Net change in deposits 40,511
64,536
Net change in securities sold under agreements to repurchase 2,061
(254 )
Proceeds from FHLB advances 60,000
120,178
Repayment of FHLB advances (50,013 ) (81,346 )
Proceeds from other debt 2,000
10,000
Repayment of other debt (20,286 ) (18,357 )
Repayments of debentures (5,500 ) (1,000 )
Purchase of treasury stock —
(7,261 )

~~See accompanying notes to consolidated financial statements.~~

GUARANTY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)
For the Nine Months Ended September 30,
2017 2016
Sale of treasury stock —
8,557
Exercise of stock options 84
—
Sale of common stock 55,755
—
Cash dividends (4,013 ) (2,329 )
Net cash provided by financing activities 80,599
92,724
Net change in cash and cash equivalents (32,482 ) 7,920
Cash and cash equivalents at beginning of period 127,543
111,379
Cash and cash equivalents at end of period $ 95,061
$ 119,299

Supplemental disclosures of cash flow information
Interest paid $ 8,958
$ 1,839
Income taxes paid 4,910
4,610

Supplemental schedule of noncash investing and financing activities
Transfer loans to other real estate owned and repossessed assets $ 992
$ 5,862
Terminated KSOP put option 34,300
—
Net change in fair value of KSOP shares 2,639
1,539

~~See accompanying notes to consolidated financial statements.~~

~~10.~~

~~Table of Contents~~

~~GUARANTY BANCSHARES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

(Dollars in thousands, except per share data)


	Attributable to Guaranty Bancshares, Inc.
	Preferred Stock		Common Stock		Additional Paid-in Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss			Noncontrolling Interest			Total Equity
For the Nine Months Ended September 30, 2023
Balance at December 31, 2022	$	—	$	14,209	$	227,727		$	137,565		$	(60,257	)	$	(24,260	)	$	574		$	295,558
Net earnings		—		—		—			24,159			—			—			(16	)		24,143
Other comprehensive loss		—		—		—			—			—			(5,269	)		—			(5,269	)
Exercise of stock options		—		21		495			—			—			—			—			516
Purchase of treasury stock		—		—		—			—			(10,539	)		—			—			(10,539	)
Restricted stock grants		—		1		(1	)		—			—			—			—			—
Stock based compensation		—		—		445			—			—			—			—			445
Cash dividends:
Common - $0.69 per share		—		—		—			(8,070	)		—			—			—			(8,070	)
Total equity at September 30, 2023	$	—	$	14,231	$	228,666		$	153,654		$	(70,796	)	$	(29,529	)	$	558		$	296,784

For the Three Months Ended September 30, 2023
Balance at June 30, 2023	$	—	$	14,218	$	228,241		$	150,015		$	(69,107	)	$	(26,505	)	$	565		$	297,427
Net earnings		—		—		—			6,297			—			—			(7	)		6,290
Other comprehensive loss		—		—		—			—			—			(3,024	)		—			(3,024	)
Exercise of stock options		—		13		278			—			—			—			—			291
Purchase of treasury stock		—		—		—			—			(1,689	)		—			—			(1,689	)
Stock based compensation		—		—		147			—			—			—			—			147
Cash dividends:
Common - $0.23 per share		—		—		—			(2,658	)		—			—			—			(2,658	)
Total equity at September 30, 2023	$	—	$	14,231	$	228,666		$	153,654		$	(70,796	)	$	(29,529	)	$	558		$	296,784

See accompanying notes to consolidated financial statements.


	Attributable to Guaranty Bancshares, Inc.
	Preferred Stock		Common Stock		Additional Paid-in Capital		Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest			Total Equity
For the Nine Months Ended September 30, 2022
Balance at December 31, 2021	$	—	$	14,139	$	225,544	$	107,645		$	(51,419	)	$	6,305		$	—		$	302,214
Net earnings		—		—		—		32,425			—			—			(21	)		32,404
Other comprehensive loss		—		—		—		—			—			(31,278	)		—			(31,278	)
Contributions from noncontrolling interest		—		—		—		—			—			—			598			598
Exercise of stock options		—		43		933		—			—			—			—			976
Purchase of treasury stock		—		—		—		—			(8,838	)		—			—			(8,838	)
Stock based compensation		—		—		485		—			—			—			—			485
Cash dividends:
Common - $0.66 per share		—		—		—		(7,900	)		—			—			—			(7,900	)
Total equity at September 30, 2022	$	—	$	14,182	$	226,962	$	132,170		$	(60,257	)	$	(24,973	)	$	577		$	288,661

For the Three Months Ended September 30, 2022
Balance at June 30, 2022	$	—	$	14,160	$	226,318	$	123,888		$	(59,570	)	$	(22,541	)	$	580		$	282,835
Net earnings		—		—		—		10,903			—			—			(3	)		10,900
Other comprehensive loss		—		—		—		—			—			(2,432	)		—			(2,432	)
Exercise of stock options		—		22		480		—			—			—			—			502
Purchase of treasury stock		—		—		—		—			(687	)		—			—			(687	)
Stock based compensation		—		—		164		—			—			—			—			164
Dividends:
Common - $0.22 per share		—		—		—		(2,621	)		—			—			—			(2,621	)
Total equity at September 30, 2022	$	—	$	14,182	$	226,962	$	132,170		$	(60,257	)	$	(24,973	)	$	577		$	288,661

See accompanying notes to consolidated financial statements.

GUARANTY BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Dollars in thousands)


	For the Nine Months Ended September 30,
	2023			2022
Cash flows from operating activities
Net earnings	$	24,143		$	32,404
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation		3,036			3,180
Amortization		556			563
Deferred taxes		(1,157	)		(4,315	)
Premium amortization, net of discount accretion		1,613			4,211
Net realized loss on sales of securities available for sale		229			—
Gain on sale of loans		(1,005	)		(2,125	)
Provision for (reversal of) credit losses		—			(650	)
Origination of loans held for sale		(32,719	)		(62,579	)
Proceeds from loans held for sale		34,374			66,084
Write-down of other real estate and repossessed assets		—			19
Net gain on sale of premises, equipment, other real estate owned and other assets		(2,944	)		(923	)
Stock based compensation		445			485
Net change in accrued interest receivable and other assets		(21,196	)		(8,509	)
Net change in accrued interest payable and other liabilities		2,778			420
Net cash provided by operating activities	$	8,153		$	28,265

Cash flows from investing activities
Securities available for sale:
Purchases	$	(1,404,235	)	$	(28,952	)
Proceeds from sales		21,268			—
Proceeds from maturities and principal repayments		1,386,666			31,248
Securities held to maturity:
Purchases		—			(1,043,343	)
Proceeds from maturities and principal repayments		99,020			696,450
Net repayments (originations) of loans		58,082			(358,088	)
Purchases of premises and equipment		(5,464	)		(4,574	)
Proceeds from sale of premises, equipment, other real estate owned and other assets		3,498			1,853
Net cash provided by (used in) investing activities	$	158,835		$	(705,406	)

See accompanying notes to consolidated financial statements.

GUARANTY BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Dollars in thousands)


	For the Nine Months Ended September 30,
	2023			2022
Cash flows from financing activities
Net change in deposits	$	(22,861	)	$	120,020
Net change in securities sold under agreements to repurchase		12,145			(6,559	)
Proceeds from FHLB advances		2,480,000			325,000
Repayment of FHLB advances		(2,595,000	)		(147,500	)
Proceeds from line of credit		15,000			1,000
Repayment of line of credit		(13,000	)		(6,000	)
Proceeds from issuance of subordinated debt		—			34,402
Repayments of debentures		(1,500	)		(3,093	)
Purchase of treasury stock		(10,539	)		(8,838	)
Exercise of stock options		516			976
Cash dividends paid		(8,039	)		(7,703	)
Net cash (used in) provided by financing activities	$	(143,278	)	$	301,705
Net change in cash and cash equivalents		23,710			(375,436	)
Cash and cash equivalents at beginning of period		106,467			499,605
Cash and cash equivalents at end of period	$	130,177		$	124,169

Supplemental disclosures of cash flow information
Interest paid	$	39,832		$	7,307
Income taxes paid		6,580			7,100

Supplemental schedule of noncash investing and financing activities
Cash dividends accrued	$	2,658		$	2,621
Lease right of use assets obtained in exchange for lease liabilities		568			337
Available for sale securities transferred to held to maturity, net of unrealized loss of $13,186		—			106,157
Transfer of loans to other real estate owned and repossessed assets		—			32
Contributions from noncontrolling interest		—			577

See accompanying notes to consolidated financial statements.

GUARANTY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations: Guaranty Bancshares, Inc. (“Guaranty”) is a bank holding company headquartered in Mount Pleasant, Texas that provides, through its wholly-owned subsidiary, Guaranty Bank & Trust, N.A. (the “Bank”), a broad array of financial products and services to individuals and corporate customers, primarily in its markets of East Texas, ~~Bryan/College Station and the~~ Dallas/Fort Worth, ~~metroplex.~~Greater Houston and Central Texas. The terms “the Company,” “we,” “us” and “our” mean Guaranty and its subsidiaries, when appropriate. The Company’s main sources of income are derived from granting loans throughout its markets and investing in securities issued or guaranteed by the U.S. Treasury, U.S. government agencies and state and political subdivisions. The Company’s primary lending products are real estate, commercial and consumer loans. Although the Company has a diversified loan portfolio, a substantial portion of its debtors’ abilities to honor contracts is dependent on the economy of the State of Texas and primarily the economies of East Texas, ~~Bryan/College Station and the~~ Dallas/Fort Worth, ~~metroplex.~~Greater Houston and Central Texas. The Company primarily funds its lending activities with deposit operations. The Company’s primary deposit products are checking accounts, money market accounts and certificates of deposit.

~~Basis~~

Principles of ~~Presentation~~Consolidation: The consolidated financial statements in this Quarterly Report on Form 10-Q (this “Report”) include the accounts of Guaranty, the Bank and ~~their respective other direct and~~ indirect subsidiaries that are wholly-owned or controlled. Subsidiaries that are less than wholly owned are fully consolidated if they are controlled by Guaranty or one of its subsidiaries, and the portion of any ~~other entities~~subsidiary not owned by Guaranty is reported as noncontrolling interest. All significant intercompany balances and transactions have been eliminated in ~~which Guaranty has a controlling interest.~~consolidation. The Bank has ~~five~~eight wholly-owned or controlled non-bank subsidiaries, Guaranty Company, Inc., G B COM, INC., 2800 South Texas Avenue LLC, Pin Oak Realty Holdings, Inc. ~~and~~, Pin Oak ~~Energy Holdings, LLC. All significant intercompany balances~~Asset Management, LLC, Guaranty Bank & Trust Political Action Committee, White Oak Aviation, LLC and ~~transactions have been eliminated in consolidation.~~Caliber Guaranty Private Account, LLC, the entity which has a noncontrolling interest. The accounting and financial reporting policies followed by the Company conform, in all material respects, to accounting principles generally accepted in the United States of America (“GAAP”) and to general practices within the financial services industry.

Basis of Presentation: The consolidated financial statements in this ~~Report~~report have not been audited by an independent registered public accounting firm, but in the opinion of management, reflect all adjustments necessary for a fair presentation of the Company’s financial position and results of operations. All such adjustments were of a normal and recurring nature. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q adopted by the Securities and Exchange Commission (“SEC”). Accordingly, the financial statements do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company’s consolidated financial statements, and notes thereto, for the year ended December 31, ~~2016,~~2022, included in Guaranty’s Annual Report on Form 10-K for the ~~Guaranty’s Prospectus~~year ended December 31, 2022, filed with the SEC ~~under Rule 424(b)~~ on ~~May 9, 2017, relating to its initial public offering.~~March 10, 2023. Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.

All dollar amounts referenced and discussed in the notes to the consolidated financial statements in this ~~Report~~report are presented in thousands, unless noted otherwise.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates and assumptions may also affect disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

~~KSOP Repurchase Right~~: In accordance with applicable provisions of the Internal Revenue Code, the terms of Guaranty’s employee stock ownership plan with 401(k) provisions (“KSOP”), provided that, for so long as Guaranty was a privately-held company without a public market for its common stock, KSOP participants would have the right, for a specified period of time, to require Guaranty to repurchase shares of its common stock that are distributed to them by the KSOP. This repurchase obligation terminated upon the consummation of Guaranty’s initial public offering and listing of its common stock on the NASDAQ Global Select Market in May 2017. However, because Guaranty was privately-held without a public market for its common stock as of and for the year ended December 31, 2016, the shares of common stock held by the KSOP are reflected in the Company’s consolidated balance sheet as of December 31, 2016 as a line item called “KSOP-owned shares,” appearing between total liabilities and shareholders’ equity. As a result, the KSOP-owned shares are deducted from shareholders’ equity in the Company’s consolidated balance sheet

~~(Continued)~~

~~11.~~

~~Table of Contents~~

~~GUARANTY BANCSHARES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share data)~~

as of December 31, 2016. For all periods following Guaranty’s initial public offering and continued listing of the Company’s common stock on the NASDAQ Global Select Market, the KSOP-owned shares will be included in, and not be deducted from, shareholders’ equity. The termination of the repurchase obligation following the listing of Guaranty’s common stock on the NASDAQ Global Select Market is also reflected in the statement of changes in shareholders’ equity as “terminated KSOP put option.”

Recent Accounting Pronouncements:

In ~~January 2017,~~March 2022, the FASB issued ASU 2022-02, Financial ~~Accounting Standards Board~~Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which eliminates the recognition and measurement guidance for troubled debt restructurings ("~~FASB"~~TDRs") ~~issued Accounting Standards Update (“ASU”) 2017-01,~~ ~~Business Combinations (Topic 805): Clarifying~~by creditors in ASC 310-40. The update also enhances disclosure requirements for certain loan restructurings by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying the ~~Definition of a Business. This ASU is intended to clarify~~recognition and measurement guidance for TDRs, an entity will apply the ~~definition of a business with the objective of adding~~loan refinancing and restructuring guidance to ~~assist entities with evaluating~~determine whether ~~transactions should be accounted for as acquisitions (or disposals)~~a modification or other form of ~~assets~~restructuring results in a new loan or ~~businesses. In addition,~~a continuation of an existing loan. Finally, the amendments in this ASU ~~provide~~require a ~~detailed framework~~public business entity to ~~assist entities~~disclose current-period gross write-offs by year of origination for financing receivables and net investments in ~~evaluating whether a set of assets and activities constitutes a business, as well as clarify~~leases in the definition of the term output so the term is consistent with how outputs are described in Topic 606. ASU 2017-01 is effective for public companies for annual periods beginning after December 15, 2017, including interim periods within those periods.existing vintage disclosures. The Company ~~does~~adopted this ASU effective on January 1, 2023, and used the modified retrospective method, which did not ~~expect this pronouncement to~~ have a significant impact on its consolidated financial statements.

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~. This ASU simplifies the accounting for goodwill impairment for all entities by requiring impairment changes to be based on the first step in today’s two-step impairment test, thus eliminating step two from the goodwill impairment test. In addition, the amendment eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform step two of the goodwill impairment test. For pubic companies, ASU 2017-04 is effective for fiscal years beginning after December 15, 2019 with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The ~~Company is in the process of evaluating the impact of this pronouncement, which is not expected to have a significant impact on its consolidated financial statements.~~

~~In November 2016, the FASB issued ASU 2016-18,~~ ~~Statement of Cash Flows (Topic 230): Restricted Cash~~, which requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. For public companies, ASU 2016-18 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The Company is in the process of evaluating the impact of this pronouncement, which is not expected to have a significant impact on its consolidated financial statements.

~~In August 2016, the FASB issued ASU 2016-15,~~ ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~, to address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments provide guidance on the following nine specific cash flow issues: 1) debt prepayment or debt extinguishment costs; 2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; 3) contingent consideration payments made after a business combination; 4) proceeds from the settlement of insurance claims; 5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned; 6) life insurance policies; 7) distributions received from equity method investees; 8) beneficial interests in securitization transactions; and 9) separately identifiable cash flows and application of the predominance principle. The amendments are effective for public companies for fiscal years beginning after December 31, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company does not expect the adoption of this guidance to be material to its consolidated financial statements.

~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~, which sets forth a "current expected credit loss" ("CECL") model requiring the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. For public companies, the amendments in this update are effective for fiscal

new modification disclosure

(Continued)

~~12.~~

~~Table of Contents~~

GUARANTY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share ~~data)~~amounts)

requirements are applied on a prospective basis.

years beginning after December 15, 2019, including interim periods within those fiscal years. The Company has assembled a transition team to assess the adoption of this ASU, and has developed a project plan regarding implementation.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 842)~~. The FASB issued this ASU to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet by lessees for those leases classified as operating leases under current U.S. GAAP and disclosing key information about leasing arrangements. The amendments in this ASU are effective for public companies for annual periods, and interim periods within those annual periods, beginning after December 15, 2018. Early adoption of this ASU is permitted for all entities. The Company is currently evaluating the impact of adopting the new guidance on its consolidated financial statements.

~~In January 2016, the FASB issued ASU 2016-01,~~ ~~Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Liabilities~~, which is intended to improve the recognition and measurement of financial instruments by requiring: equity investments (other than equity method or consolidation) to be measured at fair value with changes in fair value recognized in net income; public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; eliminating the requirement to disclose the fair value of financial instruments measured at amortized cost for organizations that are not public business entities; eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. This ASU is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This ASU permits early adoption of the instrument-specific credit risk provision. The Company is in the process of evaluating the impact of this pronouncement, which is not expected to have a significant impact on its consolidated financial statements.

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606),~~ ~~followed by various amendments~~: ~~ASU 2015-14,~~ ~~Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,~~ ~~ASU 2016-08,~~ ~~Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net),~~ ~~ASU 2016-10,~~ ~~Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,~~ ~~ASU 2016-11,~~ Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting, ~~and ASU 2016-12,~~ ~~Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.~~ The amendments in these updates amend existing guidance related to revenue from contracts with customers. The amendments supersede and replace nearly all existing revenue recognition guidance, including industry-specific guidance, establish a new control-based revenue recognition model, change the basis for deciding when revenue is recognized over a time or point in time, provide new and more detailed guidance on specific topics and expand and improve disclosures about revenue. In addition, these amendments specify the accounting for some costs to obtain or fulfill a contract with a customer. The amendments are effective for annual and interim periods beginning after December 15, 2017, and must be retrospectively applied. The majority of the Company's income consists of net interest income on financial assets and financial liabilities, which is explicitly excluded from the scope of the amendments. The Company continues to evaluate the impact of the amendments on the components of noninterest income that have recurring revenue streams; however, the Company does not expect any recognition changes to have a significant impact to its consolidated financial statements.

~~(Continued)~~

~~13.~~

~~Table of Contents~~

~~GUARANTY BANCSHARES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share data)~~

NOTE 2 - ~~ACQUISITIONS~~

On August 6, 2016, the Company purchased certain assets and assumed certain liabilities associated with a former branch location of a non-related bank in Denton, Texas (Denton), which resulted in the addition of approximately $4,659 in assets and the assumption of approximately $4,658 in liabilities. The Company acquired the bank premises at 4101 Wind River Lane in Denton and recorded it at fair market value of $2,075. Other assets acquired, at fair value, included cash of $2,399, core deposit intangible of $42, goodwill of $141 and loans of $2. Liabilities assumed included non-interest bearing deposits of $581, interest bearing deposits of $4,047 and other liabilities of $30. As a result of the transaction, the Company paid $66 to the seller, representing the difference in the value of the acquired assets less the value of the liabilities assumed by the Company in the transaction.

Goodwill of $141 arising from the Denton acquisition consisted largely of synergies and the cost savings resulting from the combining of the operations of the companies and is expected to be deductible for income taxes purposes.

~~NOTE 3 -~~ MARKETABLE SECURITIES

The following tables summarize the amortized cost and fair value of ~~securities~~ available for sale and ~~securities~~ held to maturity securities as of September 30, ~~2017~~2023 and December 31, ~~2016~~2022 and the corresponding amounts of gross unrealized gains and losses:


September 30, 2023	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available for sale:
Corporate bonds	$	29,902	$	—	$	3,353	$	26,549
Municipal securities		2,322		42		—		2,364
Mortgage-backed securities		151,424		19		19,302		132,141
Collateralized mortgage obligations		19,725		—		2,135		17,590
Total available for sale	$	203,373	$	61	$	24,790	$	178,644

Held to maturity:
U.S. government agencies	$	9,254	$	—	$	1,357	$	7,897
Treasury securities		69,307		—		1,725		67,582
Municipal securities		168,992		104		9,568		159,528
Mortgage-backed securities		122,231		—		19,631		102,600
Collateralized mortgage obligations		38,524		—		8,440		30,084
Total held to maturity	$	408,308	$	104	$	40,721	$	367,691


December 31, 2022	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available for sale:
Corporate bonds	$	29,964	$	—	$	2,177	$	27,787
Municipal securities		10,324		326		8		10,642
Mortgage-backed securities		145,896		1		15,556		130,341
Collateralized mortgage obligations		21,981		3		1,827		20,157
Total available for sale	$	208,165	$	330	$	19,568	$	188,927

Held to maturity:
U.S. government agencies	$	9,141	$	—	$	1,259	$	7,882
Treasury securities		133,735		—		2,921		130,814
Municipal securities		191,680		658		8,285		184,053
Mortgage-backed securities		132,693		—		14,708		117,985
Collateralized mortgage obligations		41,759		—		7,425		34,334
Total held to maturity	$	509,008	$	658	$	34,598	$	475,068

September 30, 2017
Amortized
Cost

Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair
Value
Available for sale:
Corporate bonds $ 18,842
$ 178
$ —
$ 19,020
Municipal securities 7,769
—
305
7,464
Mortgage-backed securities 91,801
20
863
90,958
Collateralized mortgage obligations 120,580
493
382
120,691
Total available for sale $ 238,992
$ 691
$ 1,550
$ 238,133

Held to maturity:
Municipal securities $ 146,993
$ 2,696
$ 516
$ 149,173
Mortgage-backed securities 23,337
278
66
23,549
Collateralized mortgage obligations 8,751
181
503
8,429
Total held to maturity $ 179,081
$ 3,155
$ 1,085
$ 181,151

~~(Continued)~~

~~14.~~

~~Table~~

From time to time, we have reclassified certain securities from available for sale to held to maturity. Such transfers are made at fair value at the date of ~~Contents~~

transfer. The unrealized holding gains and losses at the date of transfer are retained in accumulated other comprehensive loss and in the carrying value of the held to maturity securities and are amortized or accreted over the remaining life of the security. During the second quarter of 2022, we transferred $106,157 of securities from available for sale to held to maturity, which included a net unrealized loss on the date of transfer of $13,186. During the third quarter of 2021, we transferred $172,292 of securities from available for sale to held to maturity, which included a net unrealized gain on the date of transfer of $10,235. These unamortized unrealized losses and unaccreted unrealized gains on our transferred securities are included in accumulated other comprehensive loss on our balance sheet and they netted to an unrealized loss of $6,791 at September 30, 2023 compared to an unrealized loss of $5,861 at December 31, 2022. This amount will continue to be amortized and accreted out of accumulated other comprehensive loss over the remaining life of the underlying securities as an adjustment of the yield on those securities.

There is no allowance for credit losses recorded for our available for sale or held to maturity debt securities as of September 30, 2023 or December 31, 2022.

(Continued)

GUARANTY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share ~~data)~~

amounts)

December 31, 2016
Amortized
Cost

Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair
Value
Available for sale:
Corporate bonds $ 25,254
$ 6
$ 377
$ 24,883
Municipal securities 7,841
—
622
7,219
Mortgage-backed securities 61,298
—
1,608
59,690
Collateralized mortgage obligations 65,789
10
666
65,133
Total available for sale $ 160,182
$ 16
$ 3,273
$ 156,925

Held to maturity:
Municipal securities $ 149,420
$ 901
$ 3,889
$ 146,432
Mortgage-backed securities 28,450
318
290
28,478
Collateralized mortgage obligations 11,501
265
521
11,245
Total held to maturity $ 189,371
$ 1,484
$ 4,700
$ 186,155

~~The Company’s held~~

Information pertaining to ~~maturity mortgage-backed~~ securities ~~portfolio includes non-agency collateralized mortgage obligations~~ with ~~a carrying value of $1,470, which had~~gross unrealized losses ~~of $503~~ as of September 30, ~~2017. These non-agency~~2023 and December 31, 2022, for which no allowance for credit losses has been recorded, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position is detailed in the following tables:


	Less Than 12 Months					12 Months or Longer					Total
September 30, 2023	Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value
Available for sale:
Corporate bonds	$	—		$	—	$	(3,353	)	$	26,549	$	(3,353	)	$	26,549
Mortgage-backed securities		(454	)		21,642		(18,848	)		98,588		(19,302	)		120,230
Collateralized mortgage obligations		(3	)		3,117		(2,132	)		14,473		(2,135	)		17,590
Total available for sale	$	(457	)	$	24,759	$	(24,333	)	$	139,610	$	(24,790	)	$	164,369

Held to maturity:
U.S. government agencies	$	—		$	—	$	(1,357	)	$	7,897	$	(1,357	)	$	7,897
Treasury securities		(1,725	)		67,582		—			—		(1,725	)		67,582
Municipal securities		(798	)		61,215		(8,770	)		77,783		(9,568	)		138,998
Mortgage-backed securities		—			—		(19,631	)		102,600		(19,631	)		102,600
Collateralized mortgage obligations		—			—		(8,440	)		30,084		(8,440	)		30,084
Total held to maturity	$	(2,523	)	$	128,797	$	(38,198	)	$	218,364	$	(40,721	)	$	347,161


	Less Than 12 Months					12 Months or Longer					Total
December 31, 2022	Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value
Available for sale:
Corporate bonds	$	(1,518	)	$	20,323	$	(659	)	$	7,464		(2,177	)		27,787
Municipal securities		(8	)		1,659		—			—		(8	)		1,659
Mortgage-backed securities		(6,150	)		74,146		(9,406	)		55,826		(15,556	)		129,972
Collateralized mortgage obligations		(908	)		16,575		(919	)		3,411		(1,827	)		19,986
Total available for sale	$	(8,584	)	$	112,703	$	(10,984	)	$	66,701	$	(19,568	)	$	179,404

Held to maturity:
U.S. government agencies	$	(1,259	)	$	7,882	$	—		$	—	$	(1,259	)	$	7,882
Treasury securities		(2,921	)		130,814		—			—		(2,921	)		130,814
Municipal securities		(7,071	)		118,117		(1,214	)		3,701		(8,285	)		121,818
Mortgage-backed securities		(8,355	)		80,556		(6,353	)		37,429		(14,708	)		117,985
Collateralized mortgage obligations		(1,031	)		10,750		(6,394	)		23,584		(7,425	)		34,334
Total held to maturity	$	(20,637	)	$	348,119	$	(13,961	)	$	64,714	$	(34,598	)	$	412,833

There were 292 investments in an unrealized loss position at September 30, 2023, of which 77 were available for sale debt securities in an unrealized loss position with no recorded allowance for credit losses. The available for sale securities in a loss position were composed of corporate bonds, collateralized mortgage obligations and mortgage-backed securities.Management evaluates available for sale debt securities in an unrealized loss position to determine whether the impairment is due to credit-related factors or noncredit-related factors. With respect to the collateralized mortgage obligations and mortgage-backed securities ~~were rated AAA at purchase.~~issued by the U.S. government and its agencies, the Company has determined that a decline in fair value is not due to credit-related factors. The Company monitors ~~these~~the credit quality of other debt securities through the use of credit ratings and other factors specific to ~~ensure it~~an individual security in assessing whether or not the decline in fair value of municipal or corporate securities, relative to their amortized cost, is due to credit-related factors. Triggers to prompt further investigation of securities when the fair value is less than the amortized cost are when a security has ~~adequate~~been downgraded and falls below an A credit ~~support,~~rating, and the Company records other than temporary impairment (OTTI) as appropriate. The Company does not have the intent to sell these securities and does not expect to sell the securities before their anticipated recovery.

~~Management evaluates securities for OTTI on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation.~~security’s unrealized loss exceeds 20% of its book value. Consideration is given to (1) the ~~length of time and the~~ extent to which ~~the~~ fair value ~~has been~~is less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the ~~issuer~~security for a period of time sufficient to allow for any anticipated recovery in fair value. ~~The Company did not record any OTTI losses on any of its securities during the nine months ended September 30, 2017 or for the year ended December 31, 2016.~~

~~(Continued)~~

~~15.~~

~~Table of Contents~~

~~GUARANTY BANCSHARES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share data)~~

Information pertaining to securities with gross unrealized losses as of September 30, 2017 and December 31, 2016 aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position is detailed in the following tables:

Less Than 12 Months 12 Months or Longer Total
September 30, 2017
Gross
Unrealized
Losses

Estimated
Fair
Value

Gross
Unrealized
Losses

Estimated
Fair
Value

Gross
Unrealized
Losses

Estimated
Fair
Value
Available for sale:
Corporate bonds $ —
$ —
$ —
$ —
$ —
$ —
Municipal securities —
—
(305 ) 7,464
(305 ) 7,464
Mortgage-backed securities (556 ) 72,802
(307 ) 13,913
(863 ) 86,715
Collateralized mortgage obligations (244 ) 42,825
(138 ) 7,522
(382 ) 50,347
Total available for sale $ (800 ) $ 115,627
$ (750 ) $ 28,899
$ (1,550 ) $ 144,526

Held to maturity:
Municipal securities $ (258 ) $ 39,090
$ (258 ) $ 13,085
$ (516 ) $ 52,175
Mortgage-backed securities (66 ) 10,562
—
—
(66 ) 10,562
Collateralized mortgage obligations —
—
(503 ) 2,272
(503 ) 2,272
Total held to maturity $ (324 ) $ 49,652
$ (761 ) $ 15,357
$ (1,085 ) $ 65,009

Less Than 12 Months 12 Months or Longer Total
December 31, 2016
Gross
Unrealized
Losses

Estimated
Fair
Value

Gross
Unrealized
Losses

Estimated
Fair
Value

Gross
Unrealized
Losses

Estimated
Fair
Value
Available for sale:
Corporate bonds $ (377 ) $ 22,529
$ —
$ —
$ (377 ) $ 22,529
Municipal securities (622 ) 7,219
—
—
(622 ) 7,219
Mortgage-backed securities (1,047 ) 44,420
(561 ) 15,270
(1,608 ) 59,690
Collateralized mortgage obligations (437 ) 55,435
(229 ) 9,049
(666 ) 64,484
Total available for sale $ (2,483 ) $ 129,603
$ (790 ) $ 24,319
$ (3,273 ) $ 153,922

Held to maturity:
Municipal securities $ (3,889 ) $ 98,943
$ —
$ —
$ (3,889 ) $ 98,943
Mortgage-backed securities (290 ) 19,983
—
—
(290 ) 19,983
Collateralized mortgage obligations —
—
(521 ) 2,350
(521 ) 2,350
Total held to maturity $ (4,179 ) $ 118,926
$ (521 ) $ 2,350
$ (4,700 ) $ 121,276

The number of investment positions in an unrealized loss position totaled 104 and 177 at September 30, 2017 and December 31, 2016, respectively. The securities in a loss position were composed of tax-exempt municipal bonds, corporate bonds, collateralized mortgage obligations and mortgage backed securities.~~Management believes the unrealized loss on the remaining securities is a function of the movement of interest rates since the time of purchase.~~ Based on evaluation of available evidence, ~~including recent changes in interest rates, credit rating information and~~

~~(Continued)~~

~~16.~~

~~Table of Contents~~

~~GUARANTY BANCSHARES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share data)~~

~~information obtained from regulatory filings,~~ management believes the ~~declines in fair value for these~~unrealized losses on the securities as of September 30, 2023 and December 31, 2022 are temporary. Should the impairment of any of these securities become other-than-temporary, the cost basis of the investment would be reduced and the resulting loss recognized in net income in the period the OTTI is identified. The Companynot credit-related. Management does not have the intent to sell any of these securities and believes that it is more likely than not the Company will not have to sell any such securities before recovery of cost. The fair values are expected to recover as the securities approach their maturity date or

(Continued)

10.

GUARANTY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

repricing date or if market yields for the investments decline. Accordingly, no allowance for credit losses has been recorded for these securities.

Management assesses held to maturity securities sharing similar risk characteristics on a collective basis for expected credit losses under the current expected credit losses ("CECL") methodology. As of September 30, 2023 and December 31, 2022, our held to maturity securities consisted of U.S. government agencies, municipal bonds, treasury securities, collateralized mortgage obligations and mortgage-backed securities issued by the U.S. government and its agencies. With regard to the treasuries, collateralized mortgage obligations and mortgage-backed securities issued by the U.S. government, or agencies thereof, it is ~~likely~~expected that itthe securities will not be ~~required to sell~~settled at prices less than the amortized cost bases of the securities ~~before their anticipated recovery. The Company does not consider these~~as such securities ~~to be OTTI at September 30, 2017.~~

~~Mortgage-backed securities and collateralized mortgage obligations~~ are backed by ~~pools~~the full faith and credit of ~~mortgages that are insured~~ and/or guaranteed by the ~~Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association or the Government National Mortgage Association.~~

U.S. government. For municipal securities, management reviewed key risk indicators, including ratings by credit agencies when available, and determined that there is no current expectation of credit loss. Accordingly, no allowance for credit losses has been recorded for these securities.

As of September 30, ~~2017,~~2023, there were no holdings of securities of any one issuer, other than the collateralized mortgage obligations, treasuries and mortgage-backed securities issued by the U.S. government and its agencies, in an amount greater than 10% of ~~shareholders’ equity.~~

total equity attributable to Guaranty Bancshares, Inc.

Securities with fair values of approximately ~~$221,777~~$292,192 and ~~$259,499~~$396,584 at September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, respectively, were pledged to secure public fund deposits and for other purposes as required or permitted by law.

The proceeds from sales of available for sale securities and the associated gains and losses are listed below ~~for:~~for the:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023			2022
Proceeds from sales	$	—	$	—	$	21,268		$	—
Gross gains		—		—		184			—
Gross losses		—		—		(413	)		—

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Proceeds $ 199,974
$ 31,969
$ 214,736
$ 109,056
Gross gains —
96
38
243
Gross losses —
(32 ) (13 ) (161 )

During the nine months ended September 30, 2017 and 2016, the Company sold three held-to-maturity securities each year. The Company sold these municipal securities based upon internal credit analysis, under the belief that they had experienced significant deterioration in creditworthiness. The risk exposure presented by these municipalities had increased beyond acceptable levels, and the Company determined that it was reasonably possible that all amounts due would not be collected. The credit analysis determined that the municipalities had been significantly impacted because their tax bases are heavily reliant on the energy industry relative to other sectors of the economy. Specifically, the revenues of these municipalities have been adversely impacted by the significant decline in energy prices since 2014. The Company believes the sale of these securities were merited and permissible under the applicable accounting guidelines because of the significant deterioration in the creditworthiness of the issuers.

~~Sale of securities held to maturity were as follows for:~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Proceeds from sales $ —
$ —
$ 923
$ 1,866
Amortized cost —
—
907
1,842
Gross realized gains —
—
16
24
Tax expense related to securities gains/losses —
—
(4 ) (7 )

~~(Continued)~~

~~17.~~

~~Table of Contents~~

~~GUARANTY BANCSHARES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share data)~~

The contractual maturities at September 30, ~~2017~~2023 of available for sale and held to maturity securities at carrying value and estimated fair value are shown below. ~~The Company invests in mortgage-backed securities and collateralized mortgage obligations that have expected~~Expected maturities ~~that~~may differ from ~~their~~ contractual ~~maturities. These differences arise~~maturities because borrowers and/or issuers may have the right to call or prepay their obligation with or without call or prepayment penalties.


	Available for Sale				Held to Maturity
September 30, 2023	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due within one year	$	2,005	$	1,967	$	46,996	$	46,316
Due after one year through five years		7,544		7,145		68,569		65,029
Due after five years through ten years		22,675		19,801		80,411		76,728
Due after ten years		—		—		51,577		46,934
Mortgage-backed securities		151,424		132,141		122,231		102,600
Collateralized mortgage obligations		19,725		17,590		38,524		30,084
Total securities	$	203,373	$	178,644	$	408,308	$	367,691

(Continued)

11.

GUARANTY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

Available for Sale Held to Maturity

Amortized
Cost

Estimated
Fair
Value

Amortized
Cost

Estimated
Fair
Value
Due within one year $ —
$ —
$ 2,683
$ 2,693
Due after one year through five years 1,086
1,096
5,126
5,292
Due after five years through ten years 17,756
17,924
43,228
44,785
Due after ten years 7,769
7,464
95,956
96,403
Mortgage-backed securities 91,801
90,958
23,337
23,549
Collateralized mortgage obligations 120,580
120,691
8,751
8,429
Total Securities $ 238,992
$ 238,133
$ 179,081
$ 181,151

NOTE 43 - LOANS AND ALLOWANCE FOR ~~LOAN~~CREDIT LOSSES

The following table summarizes the Company’s loan portfolio by type of loan as of:


	September 30, 2023			December 31, 2022
Commercial and industrial	$	292,410		$	314,067
Real estate:
Construction and development		317,484			377,135
Commercial real estate		901,321			887,587
Farmland		188,614			185,817
1-4 family residential		504,002			493,061
Multi-family residential		42,720			45,147
Consumer		58,294			61,394
Agricultural		13,076			13,686
Overdrafts		328			282
Total loans		2,318,249			2,378,176
Net of:
Deferred loan fees, net		(946	)		(1,957	)
Allowance for credit losses		(31,140	)		(31,974	)
Total net loans(1)	$	2,286,163		$	2,344,245

(1) Excludes accrued interest receivable on loans of $8.6 million and $7.6 million as of September 30, 2023 and December 31, 2022, respectively, which is presented separately on the consolidated balance sheets.

September 30, 2017 December 31, 2016
Commercial and industrial $ 192,663
$ 223,997
Real estate:
Construction and development 201,067
129,366
Commercial real estate 393,314
367,656
Farmland 54,349
62,362
1-4 family residential 365,889
362,952
Multi-family residential 23,235
26,079
Consumer 51,711
53,505
Agricultural 24,449
18,901
Overdrafts 698
317
Total loans 1,307,375
1,245,135
Less:
Allowance for loan losses 12,528
11,484
Total net loans $ 1,294,847
$ 1,233,651

~~As of September 30, 2017 and December 31, 2016, included in total loans above were $1,089 and $1,210 in unamortized loan costs, net of loan fees, respectively.~~

(Continued)

~~18.~~

12.

~~Table of Contents~~

GUARANTY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share ~~data)~~

amounts)

The Company’s estimate of the allowance for credit losses (“ACL”) reflects losses expected over the remaining contractual life of the assets, adjusted for expected prepayments when appropriate. The contractual term does not consider possible extensions, renewals or modifications. The following tables present the activity in the ~~allowance for loan losses and the recorded investment in~~ACL by class of loans ~~by portfolio segment and based on impairment method~~ for the nine months ended September 30, ~~2017,~~2023, for the year ended December 31, ~~2016~~2022 and for the nine months ended September 30, ~~2016:~~

2022:


For the Nine Months Ended September 30, 2023	Commercial and industrial			Construction and development			Commercial real estate			Farmland		1-4 family residential		Multi-family residential			Consumer			Agricultural			Overdrafts			Total
Allowance for credit losses:
Beginning balance	$	4,382		$	4,889		$	12,658		$	2,008	$	6,617	$	490		$	778		$	149		$	3		$	31,974
(Reversal of) provision for credit losses		(186	)		(1,257	)		701			111		161		(19	)		309			(7	)		187			—
Loans charged-off		(392	)		—			(266	)		—		—		—			(72	)		(3	)		(229	)		(962	)
Recoveries		19			—			—			—		—		—			65			2			42			128
Ending balance	$	3,823		$	3,632		$	13,093		$	2,119	$	6,778	$	471		$	1,080		$	141		$	3		$	31,140


For the Year Ended December 31, 2022	Commercial and industrial			Construction and development		Commercial real estate			Farmland		1-4 family residential		Multi-family residential		Consumer			Agricultural			Overdrafts			Total
Allowance for credit losses:
Beginning balance	$	3,600		$	4,221	$	13,765		$	1,698	$	5,818	$	396	$	762		$	169		$	4		$	30,433
Provision for (reversal of) credit losses		902			668		(1,108	)		310		769		94		283			(20	)		252			2,150
Loans charged-off		(192	)		—		—			—		—		—		(322	)		—			(335	)		(849	)
Recoveries		72			—		1			—		30		—		55			—			82			240
Ending balance	$	4,382		$	4,889	$	12,658		$	2,008	$	6,617	$	490	$	778		$	149		$	3		$	31,974


For the Nine Months Ended September 30, 2022	Commercial and industrial			Construction and development		Commercial real estate			Farmland		1-4 family residential		Multi-family residential		Consumer			Agricultural			Overdrafts			Total
Allowance for credit losses:
Beginning balance	$	3,600		$	4,221	$	13,765		$	1,698	$	5,818	$	396	$	762		$	169		$	4			30,433
Provision for (reversal of) credit losses		347			389		(2,121	)		141		158		50		229			(19	)		176			(650	)
Loans charged-off		(192	)		—		—			—		—		—		(313	)		—			(241	)		(746	)
Recoveries		62			—		1			—		30		—		40			—			65			198
Ending balance	$	3,817		$	4,610	$	11,645		$	1,839	$	6,006	$	446	$	718		$	150		$	4		$	29,235

For the nine months ended September 30, 2017 Commercial
and
industrial Construction
and
development Commercial
real
estate Farmland 1-4 family
residential Multi-family
residential Consumer Agricultural Overdrafts Total
Allowance for loan losses:
Beginning balance $ 1,592
$ 1,161
$ 3,264
$ 482
$ 3,960
$ 281
$ 585
$ 153
$ 6
$ 11,484
Provision for loan losses 602
762
1,019
(24 ) (585 ) (15 ) 149
258
84
2,250
Loans charged-off (737 ) —
(84 ) —
(307 ) —
(230 ) (4 ) (117 ) (1,479 )
Recoveries 116
—
—
—
21
—
95
—
41
273
Ending balance $ 1,573
$ 1,923
$ 4,199
$ 458
$ 3,089
$ 266
$ 599
$ 407
$ 14
$ 12,528
Allowance ending balance:
Individually evaluated for impairment $ 19
$ —
$ 31
$ 85
$ 145
$ —
$ —
$ 240
$ —
$ 520
Collectively evaluated for impairment 1,554
1,923
4,168
373
2,944
266
599
167
14
12,008
Ending balance $ 1,573
$ 1,923
$ 4,199
$ 458
$ 3,089
$ 266
$ 599
$ 407
$ 14
$ 12,528
Loans:
Individually evaluated for impairment $ 354
$ —
$ 4,029
$ 276
$ 1,097
$ 228
$ —
$ 696
$ —
$ 6,680
Collectively evaluated for impairment 192,309
201,067
389,285
54,073
364,792
23,007
51,711
23,753
698
1,300,695
Ending balance $ 192,663
$ 201,067
$ 393,314
$ 54,349
$ 365,889
$ 23,235
$ 51,711
$ 24,449
$ 698
$ 1,307,375

For the year ended December 31, 2016 Commercial
and
industrial Construction
and
development Commercial
real
estate Farmland 1-4 family
residential Multi-family
residential Consumer Agricultural Overdrafts Total
Allowance for loan losses:
Beginning balance $ 1,878
$ 1,004
$ 2,106
$ 400
$ 2,839
$ 325
$ 562
$ 138
$ 11
$ 9,263
Provision for loan losses 910
162
1,158
82
1,117
(44 ) 171
15
69
3,640
Loans charged-off (1,213 ) (9 ) —
—
(71 ) —
(269 ) —
(200 ) (1,762 )
Recoveries 17
4
—
—
75
—
121
—
126
343
Ending balance $ 1,592
$ 1,161
$ 3,264
$ 482
$ 3,960
$ 281
$ 585
$ 153
$ 6
$ 11,484
Allowance ending balance:
Individually evaluated for impairment $ 64
$ —
$ —
$ 47
$ 108
$ —
$ 34
$ —
$ —
$ 253
Collectively evaluated for impairment 1,528
1,161
3,264
435
3,852
281
551
153
6
11,231
Ending balance $ 1,592
$ 1,161
$ 3,264
$ 482
$ 3,960
$ 281
$ 585
$ 153
$ 6
$ 11,484
Loans:
Individually evaluated for impairment $ 231
$ 1,825
$ 1,196
$ 258
$ 2,588
$ 5
$ 200
$ 15
$ —
$ 6,318
Collectively evaluated for impairment 223,766
127,541
366,460
62,104
360,364
26,074
53,305
18,886
317
1,238,817
Ending balance $ 223,997
$ 129,366
$ 367,656
$ 62,362
$ 362,952
$ 26,079
$ 53,505
$ 18,901
$ 317
$ 1,245,135

(Continued)

~~19.~~

13.

~~Table of Contents~~

GUARANTY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share ~~data)~~

amounts)

For the nine months ended September 30, 2016 Commercial
and
industrial Construction
and
development Commercial
real
estate Farmland 1-4 family
residential Multi-family
residential Consumer Agricultural Overdrafts Total
Allowance for loan losses:
Beginning balance $ 1,878
$ 1,004
$ 2,106
$ 400
$ 2,839
$ 325
$ 562
$ 138
$ 11
$ 9,263
Provision for loan losses 949
134
993
74
916
46
74
(10 ) 64
3,240
Loans charged-off (1,196 ) (9 ) —
—
(25 ) —
(170 ) —
(119 ) (1,519 )
Recoveries 14
4
—
—
—
—
103
—
61
182
Ending balance $ 1,645
$ 1,133
$ 3,099
$ 474
$ 3,730
$ 371
$ 569
$ 128
$ 17
$ 11,166
Allowance ending balance:
Individually evaluated for impairment $ 139
$ —
$ —
$ 47
$ 82
$ —
$ 29
$ 1
$ —
$ 298
Collectively evaluated for impairment 1,506
1,133
3,099
427
3,648
371
540
127
17
10,868
Ending balance $ 1,645
$ 1,133
$ 3,099
$ 474
$ 3,730
$ 371
$ 569
$ 128
$ 17
$ 11,166
Loans:
Individually evaluated for impairment $ 236
$ —
$ 1,464
$ 259
$ 2,177
$ —
$ 208
$ 319
$ —
$ 4,663
Collectively evaluated for impairment 224,381
125,045
359,212
61,643
346,224
34,538
54,137
18,904
594
1,224,678
Ending balance $ 224,617
$ 125,045
$ 360,676
$ 61,902
$ 348,401
$ 34,538
$ 54,345
$ 19,223
$ 594
$ 1,229,341

~~Credit Quality~~

We recorded no provision for credit losses during the first three quarters of 2023. During the fourth quarter of 2022, we recorded a $2.8 million provision to incorporate forecasts for an economic downturn and possible borrower stressors into our CECL model. The factors that were adjusted in the fourth quarter of 2022 are still relevant, however certain minor adjustments were made in subsequent quarters to reflect current portfolio credit quality trends.

The Company ~~closely monitors~~uses the weighted-average remaining maturity ("WARM") method as the basis for the estimation of expected credit losses. The WARM method uses a historical average annual charge-off rate containing loss content over a historical lookback period and is used as a foundation for estimating the credit loss reserve for the remaining outstanding balances of loans in a segment at the balance sheet date. The average annual charge-off rate is applied to the contractual term, further adjusted for estimated prepayments, to determine the unadjusted historical charge-off rate. The calculation of the unadjusted historical charge-off rate is then adjusted, using qualitative factors, for current conditions and for reasonable and supportable forecast periods. Qualitative loss factors are based on the Company’s judgment of company, market, industry or business specific data, differences in loan-specific risk characteristics such as underwriting standards, portfolio mix, risk grades, delinquency level, or term. These qualitative factors serve to compensate for additional areas of uncertainty inherent in the portfolio that are not reflected in our historic loss factors. Additionally, we have adjusted for changes in expected environmental and economic conditions, such as changes in unemployment rates, property values, and other relevant factors over the next 12 to 24 months. Management adjusted the historical loss experience for these expectations. No reversion adjustments were necessary, as the starting point for the Company’s estimate was a cumulative loss rate covering the expected contractual term of the portfolio.

The ACL is measured on a collective segment basis when similar risk characteristics exist. Our loan ~~performance trends to manage~~portfolio is segmented first by regulatory call report code, and ~~evaluate~~second, by internally identified risk grades for our commercial loan segments and by delinquency status for our consumer loan segments. We also have separate segments for our internally originated SBA loans and for our SBA loans acquired from Westbound Bank. Consistent forecasts of the ~~exposure to credit risk. Key factors tracked by~~loss drivers are used across the ~~Company and utilized in evaluating~~loan segments. For loans that do not share general risk characteristics with segments, we estimate a specific reserve on an individual basis. A reserve is recorded when the ~~credit quality~~carrying amount of the loan ~~portfolio include trends in delinquency ratios,~~exceeds the ~~level~~discounted estimated cash flows using the loan's initial effective interest rate or the fair value of ~~nonperforming assets, borrower’s repayment capacity, and~~ collateral ~~coverage.~~

for collateral-dependent loans.

Assets are graded “pass” when the relationship exhibits acceptable credit risk and indicates repayment ability, tolerable collateral coverage and reasonable performance history. Lending relationships exhibiting potentially significant credit risk and marginal repayment ability and/or asset protection are graded “special mention.” Assets classified as “substandard” are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness that jeopardizes the liquidation of the debt. Substandard graded loans are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Assets graded “doubtful” are substandard graded loans that have added characteristics that make collection or liquidation in full improbable. Loans that are on nonaccrual status are generally classified as substandard.

In general, the loans in our portfolio have low historical credit losses. The Company ~~typically measures impairment based on~~closely monitors economic conditions and loan performance trends to manage and evaluate the ~~present value of expected future cash flows, discounted at~~exposure to credit risk. Key factors tracked by the ~~loan's effective interest rate, or based on~~Company and utilized in evaluating the ~~loan's observable market price or the fair value~~credit quality of the loan portfolio include trends in delinquency ratios, the level of nonperforming assets, borrower’s repayment capacity, and collateral ~~if the loan is collateral-dependent.~~

coverage.

(Continued)

14.

GUARANTY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

The following ~~tables summarize~~table summarizes the credit exposure in the Company’s ~~consumer and commercial~~ loan ~~portfolios~~portfolio, by year of origination, as ~~of:~~

September 30, 2017
Commercial
and
industrial

Construction
and
development

Commercial
real
estate
Farmland
1-4 family
residential

Multi-family
residential
Consumer and Overdrafts Agricultural Total
Grade:
Pass $ 188,440
$ 181,879
$ 388,007
$ 53,649
$ 357,814
$ 21,659
$ 51,631
$ 22,525
$ 1,265,604
Special mention 3,705
19,188
1,030
413
3,059
1,348
362
1,147
30,252
Substandard 518
—
4,277
287
5,016
228
416
777
11,519
Total $ 192,663
$ 201,067
$ 393,314
$ 54,349
$ 365,889
$ 23,235
$ 52,409
$ 24,449
$ 1,307,375

~~(Continued)~~

~~20.~~

~~Table~~ of ~~Contents~~

September 30, 2023:


September 30, 2023	2023			2022		2021			2020		2019		Prior			Revolving Loans Amortized Cost			Total
Commercial and industrial:
Pass	$	32,026		$	79,790	$	46,995		$	14,326	$	8,905	$	13,823		$	94,131		$	289,996
Special mention		—			—		106			—		178		—			914			1,198
Substandard		—			240		—			158		382		163			—			943
Nonaccrual		—			55		19			49		—		91			59			273
Total commercial and industrial loans	$	32,026		$	80,085	$	47,120		$	14,533	$	9,465	$	14,077		$	95,104		$	292,410

Charge-offs	$	(79	)	$	—	$	(16	)	$	—	$	—	$	(4	)	$	(293	)	$	(392	)
Recoveries		—			—		—			—		—		4			15			19
Current period net	$	(79	)	$	—	$	(16	)	$	—	$	—	$	—		$	(278	)	$	(373	)

Construction and development:
Pass	$	60,356		$	139,131	$	78,124		$	7,990	$	6,654	$	12,970		$	11,738		$	316,963
Special mention		—			—		—			—		—		—			—			—
Substandard		—			191		213			—		—		—			—			404
Nonaccrual		—			73		—			—		—		44			—			117
Total construction and development loans	$	60,356		$	139,395	$	78,337		$	7,990	$	6,654	$	13,014		$	11,738		$	317,484

Charge-offs	$	—		$	—	$	—		$	—	$	—	$	—		$	—		$	—
Recoveries		—			—		—			—		—		—			—			—
Current period net	$	—		$	—	$	—		$	—	$	—	$	—		$	—		$	—

Commercial real estate:
Pass	$	32,724		$	344,992	$	148,989		$	82,926	$	55,603	$	184,028		$	15,697		$	864,959
Special mention		—			7,000		—			1,363		—		1,283			—			9,646
Substandard		—			15,840		6,853			—		53		3,938			—			26,684
Nonaccrual		—			—		—			—		32		—			—			32
Total commercial real estate loans	$	32,724		$	367,832	$	155,842		$	84,289	$	55,688	$	189,249		$	15,697		$	901,321

Charge-offs	$	(179	)	$	—	$	—		$	—	$	—	$	(87	)	$	—		$	(266	)
Recoveries		—			—		—			—		—		—			—			—
Current period net	$	(179	)	$	—	$	—		$	—	$	—	$	(87	)	$	—		$	(266	)

(Continued)

15.

GUARANTY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share ~~data)~~amounts)


September 30, 2023	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost		Total
Farmland:
Pass	$	19,029	$	81,693	$	49,194	$	8,725	$	6,156	$	16,160	$	7,302	$	188,259
Special mention		—		—		—		—		—		—		98		98
Substandard		—		—		—		—		28		55		—		83
Nonaccrual		—		—		—		—		—		174		—		174
Total farmland loans	$	19,029	$	81,693	$	49,194	$	8,725	$	6,184	$	16,389	$	7,400	$	188,614

Charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Recoveries		—		—		—		—		—		—		—		—
Current period net	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

1-4 family residential:
Pass	$	41,824	$	143,644	$	125,123	$	44,271	$	27,866	$	99,789	$	19,372	$	501,889
Special mention		—		—		—		—		—		273		—		273
Substandard		—		—		—		—		—		—		—		—
Nonaccrual		—		—		174		54		182		1,430		—		1,840
Total 1-4 family residential loans	$	41,824	$	143,644	$	125,297	$	44,325	$	28,048	$	101,492	$	19,372	$	504,002

Charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Recoveries		—		—		—		—		—		—		—		—
Current period net	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Multi-family residential:
Pass	$	192	$	18,077	$	16,602	$	2,389	$	3,903	$	1,553	$	4	$	42,720
Special mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—
Total multi-family residential loans	$	192	$	18,077	$	16,602	$	2,389	$	3,903	$	1,553	$	4	$	42,720

Charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Recoveries		—		—		—		—		—		—		—		—
Current period net	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

(Continued)

16.

GUARANTY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)


September 30, 2023	2023			2022			2021			2020			2019			Prior			Revolving Loans Amortized Cost			Total
Consumer and overdrafts:
Pass	$	21,536		$	18,832		$	6,718		$	2,996		$	754		$	2,483		$	4,981		$	58,300
Special mention		—			5			76			3			—			—			—			84
Substandard		—			—			—			—			—			—			—			—
Nonaccrual		18			80			69			12			43			16			—			238
Total consumer loans and overdrafts	$	21,554		$	18,917		$	6,863		$	3,011		$	797		$	2,499		$	4,981		$	58,622

Charge-offs	$	(234	)	$	(18	)	$	(36	)	$	(8	)	$	(5	)	$	—		$	—		$	(301	)
Recoveries		42			—			3			1			—			21			40			107
Current period net	$	(192	)	$	(18	)	$	(33	)	$	(7	)	$	(5	)	$	21		$	40		$	(194	)

Agricultural:
Pass	$	1,544		$	2,115		$	1,175		$	721		$	330		$	650		$	6,478		$	13,013
Special mention		—			—			—			—			—			—			—			—
Substandard		—			—			—			—			—			25			—			25
Nonaccrual		—			8			—			—			—			30			—			38
Total agricultural loans	$	1,544		$	2,123		$	1,175		$	721		$	330		$	705		$	6,478		$	13,076

Charge-offs	$	—		$	—		$	—		$	—		$	—		$	(3	)	$	—		$	(3	)
Recoveries		—			—			—			—			—			2			—			2
Current period net	$	—		$	—		$	—		$	—		$	—		$	(1	)	$	—		$	(1	)

Total loans:
Pass	$	209,231		$	828,274		$	472,920		$	164,344		$	110,171		$	331,456		$	159,703		$	2,276,099
Special mention		—			7,005			182			1,366			178			1,556			1,012			11,299
Substandard		—			16,271			7,066			158			463			4,181			—			28,139
Nonaccrual		18			216			262			115			257			1,785			59			2,712
Total loans	$	209,249		$	851,766		$	480,430		$	165,983		$	111,069		$	338,978		$	160,774		$	2,318,249

Charge-offs	$	(492	)	$	(18	)	$	(52	)	$	(8	)	$	(5	)	$	(94	)	$	(293	)	$	(962	)
Recoveries		42			—			3			1			—			27			55			128
Total current period net (charge-offs) recoveries	$	(450	)	$	(18	)	$	(49	)	$	(7	)	$	(5	)	$	(67	)	$	(238	)	$	(834	)

(Continued)

17.

GUARANTY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

The following table summarizes the credit exposure in the Company’s loan portfolio, by year of origination, as of December 31, 2022:


December 31, 2022	2022		2021		2020			2019		2018		Prior		Revolving Loans Amortized Cost			Total
Commercial and industrial:
Pass	$	99,750	$	57,854	$	19,577		$	11,797	$	4,172	$	12,907	$	105,628		$	311,685
Special mention		—		131		—			333		—		—		905			1,369
Substandard		14		—		246			423		192		23		—			898
Nonaccrual		72		33		10			—		—		—		—			115
Total commercial and industrial loans	$	99,836	$	58,018	$	19,833		$	12,553	$	4,364	$	12,930	$	106,533		$	314,067

Charge-offs	$	—	$	—	$	(67	)	$	—	$	—	$	—	$	(125	)	$	(192	)
Recoveries		—		—		—			—		—		32		40			72
Current period net	$	—	$	—	$	(67	)	$	—	$	—	$	32	$	(85	)	$	(120	)

Construction and development:
Pass	$	179,501	$	138,388	$	17,361		$	8,697	$	3,443	$	10,535	$	16,870		$	374,795
Special mention		905		—		—			—		—		—		—			905
Substandard		—		—		—			—		—		—		—			—
Nonaccrual		—		—		—			—		1,435		—		—			1,435
Total construction and development loans	$	180,406	$	138,388	$	17,361		$	8,697	$	4,878	$	10,535	$	16,870		$	377,135

Charge-offs	$	—	$	—	$	—		$	—	$	—	$	—	$	—		$	—
Recoveries		—		—		—			—		—		—		—			—
Current period net	$	—	$	—	$	—		$	—	$	—	$	—	$	—		$	—

Commercial real estate:
Pass	$	347,162	$	147,986	$	86,897		$	63,988	$	51,002	$	158,384	$	12,007		$	867,426
Special mention		—		—		1,300			—		2,594		3,427		—			7,321
Substandard		1,336		—		—			—		26		4,207		—			5,569
Nonaccrual		—		—		251			96		—		6,924		—			7,271
Total commercial real estate loans	$	348,498	$	147,986	$	88,448		$	64,084	$	53,622	$	172,942	$	12,007		$	887,587

Charge-offs	$	—	$	—	$	—		$	—	$	—	$	—	$	—		$	—
Recoveries		—		—		—			—		1		—		—			1
Current period net	$	—	$	—	$	—		$	—	$	1	$	—	$	—		$	1

(Continued)

18.

GUARANTY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)


December 31, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost		Total
Farmland:
Pass	$	93,128	$	51,912	$	10,284	$	6,646	$	5,956	$	11,741	$	5,948	$	185,615
Special mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		31		—		62		—		93
Nonaccrual		—		—		—		—		—		109		—		109
Total farmland loans	$	93,128	$	51,912	$	10,284	$	6,677	$	5,956	$	11,912	$	5,948	$	185,817

Charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Recoveries		—		—		—		—		—		—		—		—
Current period net	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

1-4 family residential:
Pass	$	143,268	$	128,957	$	50,140	$	30,068	$	27,104	$	89,678	$	21,956	$	491,171
Special mention		—		—		43		—		—		156		—		199
Substandard		—		—		—		—		—		—		—		—
Nonaccrual		—		148		—		116		118		1,309		—		1,691
Total 1-4 family residential loans	$	143,268	$	129,105	$	50,183	$	30,184	$	27,222	$	91,143	$	21,956	$	493,061

Charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Recoveries		—		—		—		—		—		30		—		30
Current period net	$	—	$	—	$	—	$	—	$	—	$	30	$	—	$	30

Multi-family residential:
Pass	$	18,183	$	18,331	$	2,463	$	4,216	$	878	$	985	$	91	$	45,147
Special mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—
Total multi-family residential loans	$	18,183	$	18,331	$	2,463	$	4,216	$	878	$	985	$	91	$	45,147

Charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Recoveries		—		—		—		—		—		—		—		—
Current period net	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

(Continued)

19.

GUARANTY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)


December 31, 2022	2022			2021			2020			2019			2018		Prior		Revolving Loans Amortized Cost			Total
Consumer and overdrafts:
Pass	$	32,817		$	11,789		$	5,455		$	1,835		$	3,079	$	473	$	6,008		$	61,456
Special mention		14			4			—			28			4		—		—			50
Substandard		—			—			—			—			—		—		—			—
Nonaccrual		17			93			21			12			23		4		—			170
Total consumer loans and overdrafts	$	32,848		$	11,886		$	5,476		$	1,875		$	3,106	$	477	$	6,008		$	61,676

Charge-offs	$	(335	)	$	(26	)	$	(25	)	$	(21	)	$	—	$	—	$	(250	)	$	(657	)
Recoveries		83			3			6			11			1		33		—			137
Current period net	$	(252	)	$	(23	)	$	(19	)	$	(10	)	$	1	$	33	$	(250	)	$	(520	)

Agricultural:
Pass	$	3,148		$	1,914		$	984		$	491		$	392	$	422	$	6,243		$	13,594
Special mention		—			—			—			—			—		3		—			3
Substandard		—			—			—			—			—		32		—			32
Nonaccrual		—			—			—			—			4		53		—			57
Total agricultural loans	$	3,148		$	1,914		$	984		$	491		$	396	$	510	$	6,243		$	13,686

Charge-offs	$	—		$	—		$	—		$	—		$	—	$	—	$	—		$	—
Recoveries		—			—			—			—			—		—		—			—
Current period net	$	—		$	—		$	—		$	—		$	—	$	—	$	—		$	—

Total loans:
Pass	$	916,957		$	557,131		$	193,161		$	127,738		$	96,026	$	285,125	$	174,751		$	2,350,889
Special mention		919			135			1,343			361			2,598		3,586		905			9,847
Substandard		1,350			—			246			454			218		4,324		—			6,592
Nonaccrual		89			274			282			224			1,580		8,399		—			10,848
Total loans	$	919,315		$	557,540		$	195,032		$	128,777		$	100,422	$	301,434	$	175,656		$	2,378,176

Charge-offs	$	(335	)	$	(26	)	$	(92	)	$	(21	)	$	—	$	—	$	(375	)	$	(849	)
Recoveries		83			3			6			11			2		95		40			240
Total current period net charge-offs	$	(252	)	$	(23	)	$	(86	)	$	(10	)	$	2	$	95	$	(335	)	$	(609	)

There were no loans classified in the “doubtful” or “loss” risk rating categories as of September 30, 2023 and December 31, 2022.

The following table presents the amortized cost basis of individually evaluated collateral-dependent loans within the ACL model as of September 30, 2023.


September 30, 2023	Real Estate		Non-RE		Total		Allowance for Credit Losses Allocation
Commercial real estate	$	14,527	$	—	$	14,527	$	—
Total	$	14,527	$	—	$	14,527	$	—

There were no individually evaluated collateral-dependent loans within the ACL model as of December 31, 2022.

(Continued)

20.

GUARANTY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

December 31, 2016
Commercial
and
industrial

Construction
and
development

Commercial
real
estate
Farmland
1-4 family
residential

Multi-family
residential
Consumer and Overdrafts Agricultural Total
Grade:
Pass $ 218,975
$ 127,537
$ 360,264
$ 61,713
$ 353,483
$ 25,871
$ 52,648
$ 17,965
$ 1,218,456
Special mention 4,299
4
1,927
248
4,311
—
524
478
11,791
Substandard 706
1,825
5,465
401
5,121
208
568
458
14,752
Doubtful 17
—
—
—
37
—
82
—
136
Total $ 223,997
$ 129,366
$ 367,656
$ 62,362
$ 362,952
$ 26,079
$ 53,822
$ 18,901
$ 1,245,135

The following tables summarize the payment status of loans in the Company’s total loan portfolio, including an aging of delinquent loans and loans 90 days or more past due continuing to accrue interest ~~and loans classified as nonperforming~~ as of:


September 30, 2023	30 to 59 Days Past Due		60 to 89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days and Accruing
Commercial and industrial	$	1,168	$	93	$	147	$	1,408	$	291,002	$	292,410	$	—
Real estate:
Construction and development		7,976		—		117		8,093		309,391		317,484		—
Commercial real estate		4,483		1,212		—		5,695		895,626		901,321		—
Farmland		1,937		32		73		2,042		186,572		188,614		—
1-4 family residential		3,906		403		670		4,979		499,023		504,002		—
Multi-family residential		—		—		—		—		42,720		42,720		—
Consumer		412		129		118		659		57,635		58,294		—
Agricultural		79		1		—		80		12,996		13,076		—
Overdrafts		—		—		—		—		328		328		—
Total	$	19,961	$	1,870	$	1,125	$	22,956	$	2,295,293	$	2,318,249	$	—


December 31, 2022	30 to 59 Days Past Due		60 to 89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days and Accruing
Commercial and industrial	$	440	$	44	$	105	$	589	$	313,478	$	314,067	$	—
Real estate:
Construction and development		258		73		1,435		1,766		375,369		377,135		—
Commercial real estate		882		354		6,708		7,944		879,643		887,587		—
Farmland		129		79		—		208		185,609		185,817		—
1-4 family residential		2,101		547		572		3,220		489,841		493,061		—
Multi-family residential		—		—		—		—		45,147		45,147		—
Consumer		164		118		70		352		61,042		61,394		—
Agricultural		37		10		—		47		13,639		13,686		—
Overdrafts		—		—		—		—		282		282		—
Total	$	4,011	$	1,225	$	8,890	$	14,126	$	2,364,050	$	2,378,176	$	—

September 30, 2017 30 to 59 Days Past Due 60 to 89 Days Past Due 90 Days and Greater Past Due Total Past Due Current
Total
Loans
Recorded Investment > 90 Days and Accruing
Commercial and industrial $ 246
$ 60
$ 30
$ 336
$ 192,327
$ 192,663
$ —
Real estate:
   Construction and development 77
—
—
77
200,990
201,067
—
   Commercial real estate —
38
1,521
1,559
391,755
393,314
—
   Farmland 2
—
6
8
54,341
54,349
—
   1-4 family residential 2,701
838
1,894
5,433
360,456
365,889
—
   Multi-family residential —
—
228
228
23,007
23,235
—
Consumer 617
201
94
912
50,799
51,711
—
Agricultural 66
—
4
70
24,379
24,449
—
Overdrafts —
—
—
—
698
698
—
Total $ 3,709
$ 1,137
$ 3,777
$ 8,623
$ 1,298,752
$ 1,307,375
$ —

December 31, 2016 30 to 59 Days Past Due 60 to 89 Days Past Due 90 Days and Greater Past Due Total Past Due Current Total
Loans Recorded Investment > 90 Days and Accruing
Commercial and industrial $ 941
$ 105
$ 25
$ 1,071
$ 222,926
$ 223,997
$ —
Real estate:
   Construction and development 73
—
1,825
1,898
127,468
129,366
—
   Commercial real estate 1,629
32
134
1,795
365,861
367,656
—
   Farmland 100
26
7
133
62,229
62,362
—
   1-4 family residential 3,724
803
1,041
5,568
357,384
362,952
—
   Multi-family residential 207
49
—
256
25,823
26,079
—
Consumer 613
205
87
905
52,600
53,505
—
Agricultural 59
—
15
74
18,827
18,901
—
Overdrafts —
—
—
—
317
317
—
Total $ 7,346
$ 1,220
$ 3,134
$ 11,700
$ 1,233,435
$ 1,245,135
$ —

~~(Continued)~~

~~21.~~

~~Table of Contents~~

~~GUARANTY BANCSHARES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share data)~~

The following table presents information regarding nonaccrual loans as of:


	September 30, 2023		December 31, 2022
Commercial and industrial	$	273	$	115
Real estate:
Construction and development		117		1,435
Commercial real estate		32		7,271
Farmland		174		109
1-4 family residential		1,840		1,691
Consumer and overdrafts		238		170
Agricultural		38		57
Total	$	2,712	$	10,848

September 30, 2017 December 31, 2016
Commercial and industrial $ 57
$ 82
Real estate:
   Construction and development —
1,825
   Commercial real estate 2,113
415
   Farmland 162
176
   1-4 family residential 2,716
1,699
   Multi-family residential 228
5
Consumer 164
192
Agricultural 315
15
Total $ 5,755
$ 4,409

~~Impaired Loans and~~

There were no commitments to lend additional funds to borrowers whose loans were classified as nonaccrual. There were no nonaccrual loans for which there was no related allowance at September 30, 2023.

Modifications to Borrowers Experiencing Financial Difficulty

The Company adopted Accounting Standards Update (“ASU”) 2022-02, Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings

A and Vintage Disclosures (“ASU 2022-02”) effective January 1, 2023. The amendments in ASU 2022-02 eliminated the recognition and measure of troubled debt ~~restructuring (“TDR”) is a restructuring~~restructurings and enhanced disclosures for loan modifications to borrowers experiencing financial difficulty.

(Continued)

21.

GUARANTY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in which a bank, for economic or legal reasons related to a borrower's financial difficulties, grants a concession to the borrower that it would not otherwise consider. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due from the borrower in accordance with original contractual terms of the loan. Loans with insignificant delays or insignificant short falls in the amount of payments expected to be collected are not considered to be impaired. Loans defined as individually impaired, based on applicable accounting guidance, include larger balance nonperforming loans and TDRs.

thousands, except per share amounts)

~~The outstanding balances of TDRs are shown below:~~

September 30, 2017 December 31, 2016
Nonaccrual TDRs $ —
$ 43
Performing TDRs 316
462
Total $ 316
$ 505
Specific reserves on TDRs $ 19
$ 4

The following ~~tables present~~table presents the amortized cost basis of loans ~~by class~~made to borrowers experiencing financial difficulty that were modified ~~as TDRs that occurred~~ during the nine months ended September 30, ~~2017~~2023 and ~~2016:~~

Nine Months Ended September 30, 2017
Number
of
Contracts

Pre-Modification
Outstanding
Recorded
Investment

Post-Modification
Outstanding
Recorded
Investment
Commercial and industrial 1 $ 34
$ 15
1-4 family residential 1 11
11
Total 2 $ 45
$ 26

~~There were no TDRs that have subsequently defaulted through~~continue to experience financial difficulty as of September 30, ~~2017.~~ 2023:


For the Nine Months Ended September 30, 2023	Term Extension		Total Class of Financing Receivable
1-4 family residential		58		0.01	%
Consumer		14		0.02	%
Total loans	$	72		0.03	%

The ~~TDRs described~~following table presents the financial effect of the loan modifications presented above ~~increased the allowance for loan losses by $19 and resulted in no charge-offs~~to borrowers experiencing financial difficulty during the nine months ended September 30, ~~2017.~~

2023:



Term Extension
Loan Type		Financial Effect
1-4 family residential		Amortization period was extended by a weighted-average period of 5.00 years.
Consumer		Amortization period was extended by a weighted-average period of 0.26 years.

~~(Continued)~~

~~22.~~

~~Table~~

The following table provides an age analysis of ~~Contents~~

~~GUARANTY BANCSHARES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share data)~~

Nine Months Ended September 30, 2016
Number
of
Contracts

Pre-Modification
Outstanding
Recorded
Investment

Post-Modification
Outstanding
Recorded
Investment
Commercial and industrial 1
$ 90
$ 90
Commercial real estate 1
796
796
1-4 family residential 2 189
189
Total 4 $ 1,075
$ 1,075

~~There~~loans made to borrowers experiencing financial difficult that were ~~no TDRs that subsequently defaulted in 2016. The TDRs described above~~modified on or after our ASU 2022-02 adoption date of January 1, 2023:


	Current		30 to 89 Days Past Due		90 Days or Greater Past Due
1-4 family residential	$	58	$	—	$	—
Consumer		14		—		—
Total loans	$	72	$	—	$	—

As of September 30, 2023, the Company did not ~~increase the allowance for loan losses and resulted in no charge-offs~~have any loans made to borrowers experiencing financial difficulty that were modified during the nine months ended September 30, ~~2016.~~

~~The following table presents information about the Company’s impaired~~2023 that subsequently defaulted.

There were no loans ~~as of:~~

September 30, 2017 Unpaid
Principal
Balance Recorded
Investment Related
Allowance Average
Recorded
Investment
With no related allowance recorded:
Commercial and industrial $ 325
$ 325
$ —
$ 381
Real estate:
Construction and development —
—
—
415
Commercial real estate 3,746
3,746
—
4,363
Farmland 120
120
—
106
1-4 family residential 231
231
—
1,288
Multi-family residential 228
228
—
166
Consumer —
—
—
81
Agricultural 397
397
—
380
Subtotal 5,047
5,047
—
7,180
With allowance recorded:
Commercial and industrial 29
29
19
411
Real estate:
Construction and development —
—
—
10
Commercial real estate 283
283
31
580
Farmland 156
156
85
122
1-4 family residential 866
866
145
867
Multi-family residential —
—
—
26
Consumer —
—
—
56
Agricultural 299
299
240
176
Subtotal 1,633
1,633
520
2,248
Total $ 6,680
$ 6,680
$ 520
$ 9,428

~~(Continued)~~

~~23.~~

~~Table of Contents~~

~~GUARANTY BANCSHARES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share data)~~

~~The following table presents information about the Company’s impaired loans as of:~~

December 31, 2016 Unpaid
Principal
Balance Recorded
Investment
Related
Allowance

Average
Recorded
Investment
With no related allowance recorded:
Commercial and industrial $ 28
$ 28
$ —
$ 809
Real estate:
Construction and development 1,825
1,825
—
172
Commercial real estate 1,196
1,196
—
871
Farmland 89
89
—
109
1-4 family residential 1,799
1,799
—
1,575
Multi-family residential 5
5
—
2
Consumer 105
105
—
89
Agricultural 15
15
—
68
Subtotal 5,062
5,062
—
3,695
With allowance recorded:
Commercial and industrial 203
203
64
3,153
Real estate:
Farmland 169
169
47
169
1-4 family residential 789
789
108
639
Consumer 95
95
34
155
Agricultural —
—
—
2
Subtotal 1,256
1,256
253
4,118
Total $ 6,318
$ 6,318
$ 253
$ 7,813

~~During~~restructured during the nine months ended September 30, ~~2017 and 2016, total interest income and cash-based interest income recognized on impaired loans was minimal.~~2022.

NOTE 54 - SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER DEBT

~~At September 30, 2017 and December 31, 2016, securities~~

Securities sold under agreements to repurchase ~~totaled $12,920~~were $19,366 and ~~$10,859, respectively.~~

$7,221 as of September 30, 2023 and December 31, 2022, respectively, and are secured by mortgage-backed securities and collateralized mortgage obligations.

The Company has ~~a $25.0 million~~an unsecured $25,000 revolving line of credit, which had ana $2,000 outstanding balance ~~of $0~~ at ~~quarter end,~~September 30, 2023 and no outstanding balance at December 31, 2022, bears interest at the greater of (i) the prime rate, ~~plus 0.50%~~which was 8.50% at September 30, 2023, or (ii) the rate floor of 3.50%, with interest payable quarterly, and matures in March ~~2018.~~

2024.

Federal Home Loan Bank (FHLB) advances bear interest based on a fixed or variable rate, payable monthly, with all principal due at maturity. The following table presents the scheduled maturities of fixed and variable rate FHLB advances and their weighted average rates, as of September 30, 2023:


Year	Current Weighted Average Rate			Principal Due
Fixed rate advances
2023		5.38	%	$	165,000
2024		4.38	%		10,000
Total FHLB advances				$	175,000

(Continued)

~~24.~~

22.

~~Table of Contents~~

GUARANTY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share ~~data)~~

amounts)

NOTE 65 - SUBORDINATED ~~DEBENTURES~~

DEBT

Subordinated ~~debentures are~~debt was made up of the following as of:


	September 30, 2023		December 31, 2022
Trust III Debentures	$	2,062	$	2,062
DCB Trust I Debentures		5,155		5,155
Subordinated note		34,535		34,436
Other debentures		6,000		7,500
	$	47,752	$	49,153

September 30, 2017 December 31, 2016
Trust II Debentures $ 3,093
$ 3,093
Trust III Debentures 2,062
2,062
DCB Trust I Debentures 5,155
5,155
Other debentures 3,500
9,000
$ 13,810
$ 19,310

~~The~~

As of September 30, 2023, the Company has ~~three~~two active trusts, ~~Guaranty (TX) Capital Trust II (“Trust II”),~~ Guaranty (TX) Capital Trust III (“Trust III”), and DCB Financial Trust I (“DCB Trust I”~~) (“Trust II”, “Trust III” and together with “DCB Trust I,” the “Trusts”~~). Upon formation, the Trusts issued pass-through securities (“TruPS”) with a liquidation value of ~~$1,000~~$1,000 per share to third parties in private placements. Concurrently with the issuance of the TruPS, the Trusts (composed of Trust III and DCB Trust I) issued common securities to the Company. The Trusts invested the proceeds of the sales of securities to the Company (“Debentures”). The Debentures mature approximately 30 years after the formation date, which may be shortened if certain conditions are met (including the Company having received prior approval of the Federal Reserve and any other required regulatory approvals).


	Trust III		DCB Trust I
Formation date	July 25, 2006		March 29, 2007
Capital trust pass-through securities
Number of shares		2,000		5,000
Original liquidation value	$	2,000	$	5,000
Common securities liquidation value		62		155

Trust II Trust III DCB Trust I
Formation date October 30, 2002 July 25, 2006 March 29, 2007

Capital trust pass-through securities
Number of shares 3,000
2,000
5,000
Original liquidation value $ 3,000
$ 2,000
$ 5,000

Common securities liquidation value 93
62
155

The securities held by the Trusts qualify as Tier 1 capital for the Company under Federal Reserve Board guidelines. The Federal Reserve’s guidelines restrict core capital elements (including trust preferred securities and qualifying perpetual preferred stock) to 25% of all core capital elements, net of goodwill less any associated deferred tax liability. Because the Company’s aggregate amount of trust preferred securities is less than the limit of 25% of Tier 1 capital, net of goodwill, the full amount is includable in Tier 1 capital at September 30, ~~2017~~2023 and December 31, ~~2016.~~2022. Additionally, the terms provide that trust preferred securities would no longer qualify for Tier 1 capital within five years of their maturity, but would be included as Tier 2 capital. However, the trust preferred securities would be amortized out of Tier 2 capital by one-fifth each year and excluded from Tier 2 capital completely during the year prior to maturity of the junior subordinated debentures.

With certain exceptions, the amount of the principal and any accrued and unpaid interest on the Debentures are subordinated in right of payment to the prior payment in full of all senior indebtedness of the Company. Interest on the Debentures is payable quarterly. The interest is deferrable on a cumulative basis for up to five consecutive years following a suspension of dividend payments on all other capital stock. No principal payments are due until maturity for each of the Debentures.


	Trust III Debentures		DCB Trust I Debentures
Original amount	$	2,062	$	5,155
Maturity date	October 1, 2036		June 15, 2037
Interest due	Quarterly		Quarterly

Trust II Debentures Trust III Debentures DCB Trust I Debentures
Original amount $ 3,093
$ 2,062
$ 5,155
Maturity date October 30, 2032
October 1, 2036
June 15, 2037
Interest due Quarterly Quarterly Quarterly

~~(Continued)~~

~~25.~~

~~Table of Contents~~

~~GUARANTY BANCSHARES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share data)~~

In accordance with ASC 810, "Consolidation," the junior subordinated debentures issued by the Company to the subsidiary trusts are shown as liabilities in the consolidated balance sheets and interest expense associated with the junior subordinated debentures is shown in the consolidated statements of earnings.

Trust IIIII Debentures

Interest is payable at a variable rate per annum, reset quarterly, equal to ~~3 month~~3-month LIBOR plus ~~3.35%~~1.67%.

On any interest payment date on or after October 30, 2012 and prior to maturity date, the debentures are redeemable for cash at the option of the Company, on at least 30, but not more than 60 days’ notice, in whole or in part, at a redemption price equal to 100% of the principal amount to be redeemed, plus accrued interest to the date of redemption.

~~Trust III Debentures~~

~~Interest was payable at a variable rate per annum, reset quarterly, equal to 3 month LIBOR plus 1.67%.~~

On any interest payment date on or after October 1, 2016 and prior to maturity date, the debentures are redeemable for cash at the option of the Company, on at least 30, but not more than 60 ~~days’~~days’ notice, in whole or in part, at a redemption price equal to ~~100%~~100% of the principal amount to be redeemed, plus accrued interest to the date of redemption.

(Continued)

23.

GUARANTY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

DCB Trust I Debentures

Interest is payable at a variable rate per annum, reset quarterly, equal to ~~3 month~~3-month LIBOR plus ~~1.80%~~1.80%.

On any interest payment date on or after June 15, 2012 and prior to maturity date, the debentures are redeemable for cash at the option of the Company, on at least 30, but not more than 60 ~~days’~~days’ notice, in whole or in part, at a redemption price equal to ~~100%~~100% of the principal amount to be redeemed, plus accrued interest to the date of redemption.

Subordinated Note

In March 2022, the Company completed a private placement of $35,000 aggregate principal amount of its fixed-to-floating rate subordinated note due April 1, 2032. The subordinated note initially bears a fixed interest rate of 3.625% per year, due semi-annually in arrears on April 1 and October 1. Commencing on April 1, 2027, the interest rate on the subordinated note will reset each quarter at a floating interest rate equal to the then-current three-month term Secured Overnight Financing Rate ("SOFR") plus 192 basis points. The Company may at its option redeem in whole or in part the subordinated note on or after March 4, 2027 without a premium. The subordinated note is treated as Tier 2 capital for regulatory purposes (subject to reductions in the amount includable as Tier 2 capital in the final five years prior to maturity), and is presented net of related unamortized issuance costs on the consolidated balance sheets.

Other ~~debentures~~

Debentures

In ~~July 2015,~~May 2020, the Company issued ~~$4,000~~$10,000 in debentures ~~of which $3,000 were issued~~ to directors and other related parties. The ~~$3,000 of~~ debentures ~~to related parties~~ were ~~repaid in May 2017 and~~issued at a ~~$500~~ par value ~~debenture, which carried a rate~~ of ~~2.5%,~~$500 each with fixed annual rates between 1.00% and 4.00% and maturity dates between November 1, 2020 and November 1, 2024. Various of these debentures have matured since issuance and ~~was repaid in July 2017. The remaining $500 debenture has a rate~~$6,000 remains as of ~~4.00% and a maturity date of January 1, 2019.~~September 30, 2023. At the Company’s option, and with 30 days advanced notice to the holder, the entire principal amount and all accrued interest may be paid to the holder on or before the ~~due~~maturity date of any debenture. The redemption price is equal to ~~100%~~100% of the face amount of the debenture redeemed, plus all accrued interest.

~~In December 2015,~~

The scheduled principal payments and weighted average rates of the ~~Company issued $5,000 in debentures, of which $2,500 were issued to directors~~Debentures, the subordinated note and other ~~related parties. In May 2017, $2,000 of the related party~~ debentures were repaid with a portion of the proceeds of Guaranty’s initial public offering. The remaining $3,000 of debentures were issued at par value of $500 each with rates ranging from 3.00% to 5.00% and maturity dates from July 1, 2018 to July 1, 2020. At the Company’s option, and with 30 days advanced notice to the holder, the entire principal amount and all accrued interest may be paid to the holder on or before the due date of any debenture. The redemption price is equal to 100% of the face amount of the debenture redeemed, plus all accrued interest.

are as follows:


Year	Current Weighted Average Rate			Principal Due
2023		3.00	%	$	2,000
2024		3.74	%		4,000
Thereafter		4.20	%		42,217
Total scheduled principal payments					48,217
Unamortized debt issuance costs					(465	)
				$	47,752

~~(Continued)~~

~~26.~~

~~Table of Contents~~

~~GUARANTY BANCSHARES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share data)~~

NOTE ~~7 - STOCK OPTIONS~~

6 – EQUITY AWARDS

The Company’s 2015 Equity Incentive Plan (the “Plan”) ~~which~~ was adopted by the Company and approved by its shareholders in April ~~2015, amended and restated the Company’s 2014 Stock Option Plan.~~2015. The maximum number of shares of common stock that may be issued pursuant to stock-based awards under the Plan equals ~~1,000,000~~1,100,000 shares, all of which may be subject to incentive stock option treatment. Option awards are generally granted with an exercise price equal to the market price of the Company’s common stock at the date of ~~grant. Currently outstanding~~grant; those option awards have vesting periods ranging from 5 to 10 years and have 10-year contractual terms.

Restricted stock awards vest under the period of restriction specified within their respective award agreements as determined by the Company. Forfeitures are recognized as they occur, subject to a 90-day grace period for vested options.

The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the table below. Expected volatilities are based on historical volatilities of the Company’s common stock and similar peer group averages. The Company uses historical data to estimate option exercise and post-vesting termination behavior. The expected term of options granted is based on historical data and represents the period of time that options granted are expected to be outstanding, which takes in to account that the options are not transferable. The dividend yield is the total dividends per share paid during the period divided by the average of the

(Continued)

24.

GUARANTY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

Company's stock price on each date a grant was issued. The risk-free interest rate for the expected term of the option is based on U.S. Treasury yield curve in effect at the time of the grant.

A summary of stock option activity in the Plan during the nine months ended September 30, ~~2017~~2023 and ~~2016~~2022 follows:


Nine Months Ended September 30, 2023	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life in Years		Aggregate Intrinsic Value
Outstanding at beginning of year		497,820		$	28.07		5.87	$	3,402
Granted		41,500			28.44
Exercised		(21,440	)		24.05
Forfeited		(48,450	)		30.62
Balance, September 30, 2023		469,430		$	28.02		5.53	$	1,228

Exercisable at end of period		268,030		$	25.87		3.96	$	956


Nine Months Ended September 30, 2022	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life in Years		Aggregate Intrinsic Value
Outstanding at beginning of year		502,780		$	25.77		5.59	$	5,936
Granted		69,000			35.71
Exercised		(43,280	)		22.56
Forfeited		(29,920	)		27.21
Balance, September 30, 2022		498,580		$	27.34		5.62	$	3,725

Exercisable at end of period		283,910		$	24.96		4.20	$	2,733

Nine Months Ended September 30, 2017 Number of Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life in Years Aggregate Intrinsic Value
Outstanding at beginning of year 340,377
$ 23.43
7.34 $ 194
   Granted 150,598
27.64
9.62 657
   Exercised (7,033 ) 11.94
4.48 141
   Forfeited (6,000 ) 23.17
7.13 53
Balance, September 30, 2017 477,942
$ 24.93
7.57 $ 3,376

Exercisable at end of period 98,044
$ 23.45
6.17 $ 838

Nine Months Ended September 30, 2016 Number of Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life in Years Aggregate Intrinsic Value
Outstanding at beginning of year 314,391
$ 23.28
8.00 $ 225
Granted 37,500
23.44
9.50 21
Forfeited (19,000 ) 23.16
8.15 16
Balance, September 30, 2016 332,891
$ 23.31
7.45 $ 230

Exercisable at end of period 58,491
$ 21.24
6.53 $ 161

~~(Continued)~~

~~27.~~

~~Table of Contents~~

~~GUARANTY BANCSHARES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share data)~~

A summary of nonvested stock option activity in the Plan during the nine months ended September 30, ~~2017~~2023 and ~~2016~~2022 follows:


Nine Months Ended September 30, 2023	Number of Shares			Weighted-Average Grant Date Fair Value
Outstanding at beginning of year		216,480		$	5.95
Granted		41,500			5.82
Vested		(35,860	)		5.82
Forfeited		(20,720	)		12.41
Balance, September 30, 2023		201,400		$	5.95


Nine Months Ended September 30, 2022	Number of Shares			Weighted-Average Grant Date Fair Value
Outstanding at beginning of year		207,084		$	5.23
Granted		69,000			6.56
Vested		(46,014	)		5.90
Forfeited		(15,400	)		9.09
Balance, September 30, 2022		214,670		$	5.53

Nine Months Ended September 30, 2017 Number of Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life in Years Aggregate Intrinsic Value
Outstanding at beginning of year 250,700
$ 23.73
7.65 $ 69
   Granted 150,598
27.64
9.62 657
   Vested (17,400 ) 23.13
7.91 154
   Forfeited (4,000 ) 23.17
7.13 53
Balance, September 30, 2017 379,898
$ 25.31
7.93 $ 2,538

Nine Months Ended September 30, 2016 Number of Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life in Years Aggregate Intrinsic Value
Outstanding at beginning of year 267,200
$ 23.72
8.22 $ 76
   Granted 37,500
23.44
9.50 21
   Vested (13,500 ) 23.00
8.59 14
   Forfeited (16,800 ) 23.16
8.15 16
Balance, September 30, 2016 274,400
$ 23.75
7.65 $ 69

Information related to stock options in the Plan is as follows for the nine months ended:


	September 30, 2023		September 30, 2022
Intrinsic value of options exercised	$	99	$	521
Cash received from options exercised		516		976
Weighted average fair value of options granted		5.82		6.56

(Continued)

25.

GUARANTY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

Restricted Stock Awards

A summary of restricted stock activity in the Plan during the nine months ended September 30, 2023 and 2022 follows:


Nine Months Ended September 30, 2023	Number of Shares			Weighted-Average Grant Date Fair Value
Outstanding at beginning of year		18,930		$	27.51
Granted		2,056			34.10
Vested		(3,670	)		28.57
Forfeited		(1,076	)		28.93
Balance, September 30, 2023		16,240		$	28.02


Nine Months Ended September 30, 2022	Number of Shares			Weighted-Average Grant Date Fair Value
Outstanding at beginning of year		30,190		$	27.52
Vested		(4,770	)		28.32
Balance, September 30, 2022		25,420		$	27.37

September 30, 2017
Intrinsic value of options exercised $ 141
Cash received from options exercised 84
Tax benefit realized from options exercised —
Weighted average fair value of options granted 5.40

Restricted stock granted to employees typically vests over five years, but vesting periods may vary. Compensation expense for these grants will be recognized over the vesting period of the awards based on the fair value of the stock at the issue date.

As of September 30, ~~2017,~~2023, there was ~~$1,963~~$1,372 of total unrecognized compensation expense related to ~~unvested~~nonvested stock options granted under the Plan. The expense is expected to be recognized over a weighted-average period of ~~4.43~~3.06 years.

The Company granted options under the Plan during the first nine months of ~~2016~~2023 and ~~2017.~~2022. Expense of ~~$247~~$445 and ~~$162~~$485 was recorded during the nine months ended September 30, ~~2017~~2023 and ~~2016, respectively.~~2022, respectively, which represents the fair value of shares, restricted stock and stock options vested during those periods.

NOTE 87 - EMPLOYEE BENEFITS

KSOP

The Company maintains an Employee Stock Ownership Plan containing Section 401(k) provisions covering substantially all employees (“KSOP”). The plan provides for a matching contribution of up to 5%5% of a participant’s qualified compensation starting January 1, 2016. As of December 31, 2016, the plan included a repurchase obligation, or “put option”, which is a right to demand that the sponsor repurchase shares of employer stock distributed to the participant under the terms of the plan, for which there was no public market for such shares, of an established cash price. This put option was terminated upon completion of Guaranty’s initial public offering and listing of its common stock on the NASDAQ Global Select Market in May 2017. Guaranty’s total contributions accrued or paid during the nine months ended September 30, ~~2017~~2023 and ~~2016~~2022 totaled ~~$739~~$1,258 and ~~$727, respectively.~~

~~Benefits~~$1,221, respectively, and is included in employee compensation and benefits on the Company’s consolidated statements of earnings.

Upon separation from service or other distributable event, a participant’s account under the KSOP ~~generally are~~may be distributed ~~to participants~~in kind in the form of ~~cash, although participants have~~ the ~~right~~GNTY common shares allocated to ~~receive distributions~~his or her account (with the balance payable in cash), or the ~~form of shares of common stock.~~

~~(Continued)~~

~~28.~~

~~Table of Contents~~

~~GUARANTY BANCSHARES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars~~entire account can be liquidated and distributed in ~~thousands, except per share data)~~

As of December 31, 2016, the fair value of shares of common stock, held by the KSOP, was deducted from permanent shareholders’ equity in the consolidated balance sheets, and reflected in a line item below liabilities and above shareholders’ equity. This presentation was necessary in order to recognize the put option within the KSOP-owned shares, consistent with SEC guidelines, because the Company was not yet publicly traded. The Company used a valuation by an external third party to determine the maximum possible cash obligation related to those securities. Increases or decreases in the value of the cash obligation were included in a separate line item in the statements of changes in shareholders’ equity. The fair value of allocated and unallocated shares subject to the repurchase obligation totaled $31,661 as of December 31, 2016.

cash.

As of September 30, ~~2017 and December 31, 2016,~~2023, the number of shares held by the KSOP ~~were 1,314,277 and 1,319,225, respectively.~~was 1,018,013. There were no unallocated shares to plan participants as of September 30, ~~2017~~2023, and there were 50,000 shares unallocated to plan participants as of December 31, 2016. During the nine months ended September 30, 2017 and 2016, the Company did not repurchase any shares from KSOP participants that received distributions of shares from the KSOP which were subject to the put option that applied to the KSOP shares before we were publicly traded. Allall shares held by the KSOP were treated as ~~outstanding at each of the respective period ends.~~

outstanding.

Executive Incentive Retirement Plan

The Company established a ~~non-qualified,~~nonqualified, non-contributory executive incentive retirement plan covering a selected group of key personnel to provide benefits equal to amounts computed under an “award criteria” at various targeted salary levels as adjusted for annual earnings performance of the Company. The plan is non-funded.

In connection with the Executive Incentive Retirement Plan, the Company has purchased life insurance policies on the respective officers. The cash surrender value of life insurance policies held by the Company totaled ~~$18,376~~$42,096 and ~~$17,804~~$38,404 as of September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, respectively.

(Continued)

26.

GUARANTY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

Expense related to these plans totaled ~~$381~~$764 and ~~$329~~$651 for the nine months ended September 30, ~~2017~~2023 and ~~2016, respectively, and~~2022, respectively. This expense is included in employee compensation and benefits on the Company’s consolidated statements of earnings. The recorded liability totaled approximately ~~$2,361~~$5,917 and ~~$2,002~~$5,388 as of September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, respectively and is included in accrued interest and other liabilities on the Company’s consolidated balance sheets.

Bonus Plan

The Company has a bonus plan that rewards officers and employees based on performance of individual business units of the Company. Earnings and growth performance goals for each business unit and for the Company as a whole are established at the beginning of the calendar year and approved annually by Guaranty’s board of directors. The ~~Bonus Plan~~bonus plan provides for a predetermined bonus amount to be contributed to the employee bonus pool based on (i) earnings target and growth for individual business units and (ii) achieving certain pre-tax return on average equity and pre-tax return on average asset levels for the Company as a whole. These bonus amounts are established annually by Guaranty’s board of directors. The bonus expense under this plan for the nine months ended September 30, ~~2017~~2023 and ~~2016~~2022 totaled ~~$1,718~~$2,877 and ~~$1,451, respectively and~~$3,933, respectively. This expense is included in employee compensation and benefits on the consolidated statements of earnings.

NOTE 8 – LEASES

The Company has operating leases for bank locations, ATMs, corporate offices, and certain other arrangements, which have remaining lease terms of 1 year to 12 years. Some of the Company’s operating leases include options to extend the leases for up to 10 years.

Operating leases in which we are the lessee must be recorded as right-of-use assets with corresponding lease liabilities. The right-of-use asset represents our right to utilize the underlying asset during the lease term, while the lease liability represents the present value of the obligation of the Company to make periodic lease payments over the life of the lease. The associated operating lease costs are composed of the amortization of the right-of-use asset and the implicit interest accreted on the lease liability, which is recognized on a straight-line basis over the life of the lease. As of September 30, 2023, operating lease right-of-use assets were $11,997 and liabilities were $12,643, and as of December 31, 2022, lease assets and liabilities were $12,896 and $13,520, respectively, and were included within the accompanying consolidated balance sheets as components of other assets and accrued interest and other liabilities, respectively.

Operating lease expense for operating leases accounted for under ASC 842 for the nine months ended September 30, 2023 and 2022 was approximately $1,724 and $1,673, respectively, and is included as a component of occupancy expenses within the accompanying consolidated statements of earnings.

The table below summarizes other information related to our operating leases as of:


	September 30, 2023			December 31, 2022
Operating leases
Operating lease right-of-use assets	$	11,997		$	12,896
Operating lease liabilities		12,643			13,520

Weighted average remaining lease term
Operating leases	7 years			8 years
Weighted average discount rate
Operating leases		2.09	%		2.00	%

(Continued)

27.

GUARANTY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

The Company leases some of its banking facilities under non-cancelable operating leases expiring in various years through 2027 and thereafter. Minimum future lease payments under these non-cancelable operating leases as of September 30, 2023, are as follows:


Year Ended December 31,	Amount
2023	$	563
2024		2,212
2025		2,043
2026		1,806
2027		1,615
Thereafter		4,715
Total lease payments		12,954
Less: interest		(311	)
Present value of lease liabilities	$	12,643

NOTE 9 - INCOME TAXES

Income tax ~~expenses were~~expense was as follows for:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Income tax expense for the period	$	1,437		$	2,363		$	5,789		$	7,070
Effective tax rate		18.60	%		17.82	%		19.34	%		17.91	%

Nine Months Ended September 30,
2017 2016
Income tax expense for the period $ 4,644
$ 3,290
Effective tax rate 28.54 % 27.79 %

The effective tax rates differ from the statutory federal tax rate of ~~35%~~21% for the three and nine months ended September 30, 2022 largely due to tax exempt interest income earned on certain investment securities and ~~loans and~~loans. For the ~~nontaxable earnings~~nine months ended September 30, 2023, effective tax rates were higher due to effects of higher interest expense on ~~bank owned life insurance.~~tax-exempt municipal securities.

~~(Continued)~~

~~29.~~

~~Table of Contents~~

~~GUARANTY BANCSHARES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share data)~~

NOTE 10 - DERIVATIVE FINANCIAL INSTRUMENTS

The Company utilizes certain derivative financial instruments. Stand-alone derivative financial instruments such as interest rate swaps, are used to economically hedge interest rate risk related to the Company’s liabilities. These derivative instruments involve both credit and market risk. The notional amounts are amounts on which calculations, payments, and the value of the derivative are based. Notional amounts do not represent direct credit exposures. Direct credit exposure is limited to the net difference between the calculated amounts to be received and paid, if any. Such difference, which represents the fair value of the derivative instruments, is reflected on the Company’s consolidated balance ~~sheet~~sheets in other ~~liabilities.~~

liabilities, if applicable.

The Company is exposed to credit related losses in the event of nonperformance by the counterparties to those agreements. The Company controls the credit risk of its financial contracts through credit approvals, limits and monitoring procedures, and does not expect any counterparties to fail to perform their respective obligations.

~~The~~

In the first quarter of 2022, the Company ~~entered into~~terminated interest rate swaps that were originally designed to receive payments at a ~~fixed~~floating rate in exchange for paying a ~~floating~~fixed rate, on the ~~debentures discussed in Note 6. Management believes~~objective of which was to reduce the overall cost of short-term 3-month FHLB advances that ~~entering into~~were renewed consistent with the reset terms on the interest rate swaps. The swaps ~~exposed the Company to variability~~were canceled at a net gain of $685, which is included in ~~their fair value due to changes~~other noninterest income in the ~~level~~Consolidated Statement of interest rates. It is the Company’s objective to hedge the change in fair value of floating rate debentures at coverage levels that are appropriate, given anticipated or existing interest rate levels and other market considerations, as well as the relationship of change in this liability to other liabilities of the Company. To meet this objective, the Company utilizes interest rate swaps as an asset/liability management strategy to hedge the change in value of the cash flows due to changes in expected interest rate assumptions.

Interest rate swaps with notional amounts totaling $5,000 as of September 30, 2017 and December 31, 2016, were designated as cash flow hedges of the debentures and were determined to be fully effective during all periods presented. As such, no amount of ineffectiveness has been included in net income.

Therefore, the aggregate fair value of the swaps is recorded in accrued interest and other liabilities within the Company’s consolidated balance sheets with changes in fair value recorded in other comprehensive income. The amount included in accumulated other comprehensive income would be reclassified to current earnings should the hedges no longer be considered effective. The Company expects the hedges to remain fully effective during the remaining terms of the swaps.

~~The information pertaining to outstanding interest rate swap agreements used to hedge floating rate debentures was as follows as of:~~

September 30, 2017:
Notional
Amount

Pay
Rate

Receive
Rate

Effective
Date

Maturity
in Years

Unrealized
Losses
$ 2,000
5.979 % 3 month LIBOR plus 1.67% October 1, 2016 8.51 $ 340
$ 3,000
7.505 % 3 month LIBOR plus 3.35% October 30, 2012 5.08 $ 326

December 31, 2016:
Notional
Amount

Pay
Rate

Receive
Rate

Effective
Date

Maturity
in Years

Unrealized
Losses
$ 2,000
5.979 % 3 month LIBOR plus 1.67% October 1, 2016 9.25 $ 342
$ 3,000
7.505 % 3 month LIBOR plus 3.35% October 30, 2012 5.83 $ 353

Earnings.

Interest expense recorded on these swap transactions totaled ~~$559 and $656~~$188 during the nine months ended September 30, ~~2017 and 2016, respectively, and~~2022. This expense is reported as a component of interest expense on the ~~debentures. At September 30, 2017,~~debentures and the ~~Company expected none of the unrealized loss to be reclassified as a reduction of interest expense during the remainder of 2017.~~FHLB advances and federal funds purchased.

~~(Continued)~~

~~30.~~

~~Table of Contents~~

~~GUARANTY BANCSHARES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share data)~~

NOTE 11 - COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Company enters into various transactions, which, in accordance with GAAP, are not included in its consolidated balance sheets. These transactions are referred to as “off-balance sheet commitments.” The

(Continued)

28.

GUARANTY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

Company enters into these transactions to meet the financing needs of its customers. These transactions include commitments to extend credit and letters of credit, which involve elements of credit risk in excess of the amounts recognized in the consolidated balance sheets. The Company minimizes its exposure to loss under these commitments by subjecting them to credit approval and monitoring procedures.

The Company enters into contractual commitments to extend credit, normally with fixed expiration dates or termination clauses, at specified rates and for specific purposes. Customers use credit commitments to ensure that funds will be available for working capital purposes, for capital expenditures and to ensure access to funds at specified terms and conditions. Substantially all of the Company’s commitments to extend credit are contingent upon customers maintaining specific credit standards at the time of loan funding. Management ~~assesses~~considers the likelihood of commitments and letters of credit to be funded, along with credit related conditions present in the loan agreements when estimating an ACL for off-balance sheet commitments. Loan agreements executed in connection with construction loans and commercial lines of credit have standard conditions which must be met prior to the Company being required to provide additional funding, including conditions precedent that typically include: (i) no event of default or potential default has occurred; (ii) that no material adverse events have taken place that would materially affect the borrower or the value of the collateral, (iii) that the borrower remains in compliance with all loan obligations and covenants and has made no misrepresentations; (iv) that the collateral has not been damaged or impaired; (v) that the project remains on budget and in compliance with all laws and regulations; and (vi) that all management agreements, lease agreements and franchise agreements that affect the value of the collateral remain in force. If the conditions precedent have not been met, the Company retains the option to cease current draws and/or future funding. As a result of these conditions within our loan agreements, management has determined that credit risk ~~associated~~is minimal and there is no recorded ACL with ~~certain~~respect to these commitments ~~to extend credit in determining the level~~as of ~~the allowance for credit losses.~~

September 30, 2023 and December 31, 2022.

Letters of credit are written conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The Company’s policies generally require that letters of credit arrangements contain security and debt covenants similar to those contained in loan agreements. In the event the customer does not perform in accordance with the terms of the agreement with the third party, the Company would be required to fund the commitment. The maximum potential amount of future payments the Company could be required to make is represented by the contractual amount shown in the table below. If the commitment were funded, the Company would be entitled to seek recovery from the customer. Our credit risk associated with issuing letters of credit is essentially the same as the risk involved in extending loan facilities to our customers. As of September 30, ~~2017~~2023 and December 31, ~~2016,~~ 2022, no amounts have been recorded as ~~liabilities~~an ACL for the Bank’s potential obligations under these guarantees.

Commitments and letters of credit outstanding were as follows as of:


	Contract or Notional Amount
	September 30, 2023		December 31, 2022
Commitments to extend credit	$	362,267	$	474,745
Letters of credit		8,396		8,289

Contract or Notional Amount
September 30, 2017 December 31, 2016
Commitments to extend credit $ 339,872
$ 297,607
Letters of credit 9,334
8,879

Litigation

The Company is involved in certain claims and lawsuits occurring in the normal course of business. Management, after consultation with legal counsel, does not believe that the outcome of these actions, if determined adversely, would have a material impact on the consolidated financial statements of the Company.

FHLB Letters of Credit

At September 30, ~~2017,~~2023, the Company had letters of credit of ~~$52,000~~$15,000 pledged to secure public deposits, repurchase agreements, and for other purposes required or permitted by law.

NOTE 12 - REGULATORY MATTERS

The Company on a consolidated basis and the Bank are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities, and certain off balance sheet items as calculated under regulatory accounting practices. The Company’s capital amounts and

(Continued)

29.

GUARANTY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

~~(Continued)~~

~~31.~~

~~Table~~

The Basel III Capital Rules, a comprehensive capital framework for U.S. banking organizations, became effective for the Company and Bank on January 1, 2015, with certain transition provisions that were fully phased in on January 1, 2019. Quantitative measures established by the Basel III Capital Rules to ensure capital adequacy require the maintenance of ~~Contents~~

~~GUARANTY BANCSHARES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share data)~~

~~A comparison of the Company’s and Bank’s actual capital~~minimum amounts and ratios ~~to required capital amounts and ratios are presented~~(set forth in the ~~following tables~~table below) of Common Equity Tier 1 capital, Tier 1 capital and Total capital (as defined in the regulations) to risk-weighted assets (as defined), and or Tier 1 capital to adjusted quarterly average assets (as defined). Management believes, as ~~of:~~

Actual Minimum Required For Capital Adequacy Purposes To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio Amount Ratio Amount Ratio
September 30, 2017
Total capital to risk-weighted assets:
      Consolidated $ 213,905
14.62 % $ 117,065
8.00 % n/a
      Bank 202,722
13.85 % 117,078
8.00 % $ 146,348
10.00 %
Tier 1 capital to risk-weighted assets:
      Consolidated 201,377
13.76 % 87,799
6.00 % n/a
      Bank 190,194
13.00 % 87,809
6.00 % 117,078
8.00 %
Tier 1 capital to average assets:
      Consolidated 201,377
10.68 % 75,457
4.00 % n/a
      Bank 190,194
10.08 % 75,465
4.00 % 94,331
5.00 %
Common equity tier 1 capital to risk-weighted assets:
      Consolidated 191,067
13.06 % 65,849
4.50 % n/a
      Bank 190,195
13.11 % 65,307
4.50 % 94,333
6.50 %

Actual Minimum Required For Capital Adequacy Purposes To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio Amount Ratio Amount Ratio
December 31, 2016
Total capital to risk-weighted assets:
      Consolidated $ 149,468
10.86 % $ 110,083
8.00 % n/a
      Bank 173,528
12.63 % 109,947
8.00 % $ 137,434
10.00 %
Tier 1 capital to risk-weighted assets:
      Consolidated 137,984
10.03 % 82,562
6.00 % n/a
      Bank 162,044
11.79 % 82,460
6.00 % 109,947
8.00 %
Tier 1 capital to average assets:
      Consolidated 137,984
7.71 % 71,560
4.00 % n/a
      Bank 162,044
9.06 % 71,505
4.00 % 89,381
5.00 %
Common equity tier 1 capital to risk-weighted assets:
      Consolidated 127,674
9.28 % 61,922
4.50 % n/a
      Bank 162,044
11.79 % 61,845
4.50 % 89,332
6.50 %

~~In July 2013,~~of September 30, 2023 and December 31, 2022, that the ~~Federal Reserve published final rules for the adoption of the Basel III regulatory~~Bank met all capital ~~framework (the “Basel III Capital Rules”).~~ adequacy requirements to which it was subject.

The Basel III Capital Rules, among other things, ~~(1) introduce~~(i) introduced a new capital measure called “Common Equity Tier 1” (“~~CETI”~~CET1”), ~~(2) specify~~(ii) specified that Tier 1 capital consist of ~~Common Equity Tier 1~~CET1 and “Additional Tier 1 Capital” instruments meeting specified requirements, ~~(3) define Common Equity Tier 1~~(iii) defined CET1 narrowly by requiring that most deductions/adjustments to regulatory capital measures be made to ~~Common Equity Tier 1~~CET1 and not to the other components of capital, ~~and (4) expand~~(iv) expanded the scope of the deductions/adjustments as compared to existing ~~regulations. The Basel III Capital Rules became effective for the Company~~regulations, and (v) imposed a "capital conservation buffer" of 2.5% above minimum risk-based capital requirements, below which an institution would be subject to limitations on ~~January 1, 2015, with~~ certain ~~transition provisions to be fully phased in by January 1, 2019.~~

~~Starting in January 2016, the implementation~~activities including payment of the capital conservation buffer became effective for the Company starting at the 0.625% level and increases 0.625% each year thereafter, until it reaches 2.5% on January 1, 2019. The capital conservation buffer is designed to absorb losses during periods of economic stress and effectively increases

~~(Continued)~~

~~32.~~

~~Table of Contents~~

~~GUARANTY BANCSHARES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per~~dividends, share ~~data)~~

the minimum required risk-weighted capital ratios. Failure to meet the full amount of the buffer will result in restrictions on the Company’s ability to make capital distributions, including dividend payments and stock repurchases and ~~to pay~~ discretionary bonuses to executive officers.

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios (set forth in the table above) of total, CETI and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. Management believes, as of September 30, 2017 and December 31, 2016 that the Company met all capital adequacy requirements to which it was subject.

As of September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, the ~~Bank’s~~Company’s capital ratios exceeded those levels necessary to be categorized as “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well capitalized”, the ~~Bank~~Company must maintain minimum ~~total risk-based, CETI, Tier 1 risk-based and Tier 1 leverage~~capital ratios as set forth in the ~~table above.~~table. There are no conditions or events since September 30, ~~2017~~2023 that management believes have changed the ~~Bank’s capital category under the regulatory framework for prompt corrective action.~~

Company’s category.

The Federal Reserve’s guidelines regarding the capital treatment of trust preferred securities limits restricted core capital elements (including trust preferred securities and qualifying perpetual preferred stock) to 25% of all core capital elements, net of goodwill less any associated deferred tax liability. Because the Company’s aggregate amount of trust preferred securities is less than the limit of 25% of Tier 1 capital, net of goodwill, the rules permit the inclusion of ~~$10,310~~$7,217 of trust preferred securities in Tier 1capital atas of both September 30, ~~2017~~2023 and December 31, ~~2016.~~2022. Additionally, the rules provide that trust preferred securities would no longer qualify for Tier 1 capital within five years of their maturity, but would be included as Tier 2 capital. However, the trust preferred securities would be amortized out of Tier 2 capital by one-fifth each year and excluded from Tier 2 capital completely during the year prior to maturity of the subordinated debentures.

A comparison of the Company’s and Bank’s actual capital amounts and ratios to required capital amounts and ratios are presented in the following tables as of:


	Actual			Minimum Required For Capital Adequacy Purposes			Minimum Required Under Basel III (Including Buffer)			To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio	Amount		Ratio	Amount		Ratio	Amount		Ratio
September 30, 2023
Total capital to risk-weighted assets:
Consolidated	$	364,878	14.93%	$	195,454	8.00%	$	256,533	10.50%	$	244,317	10.00%
Bank		372,346	15.25%		195,334	8.00%		256,376	10.50%		244,167	10.00%
Tier 1 capital to risk-weighted assets:
Consolidated		299,796	12.27%		146,590	6.00%		207,670	8.50%		146,590	6.00%
Bank		341,818	14.00%		146,500	6.00%		207,542	8.50%		195,334	8.00%
Tier 1 capital to average assets:(1)
Consolidated		299,796	9.34%		128,334	4.00%		128,334	4.00%	n/a
Bank		341,818	10.68%		128,010	4.00%		128,010	4.00%		160,013	5.00%
Common equity tier 1 capital to risk-weighted assets:
Consolidated		292,579	11.98%		109,943	4.50%		171,022	7.00%	n/a
Bank		341,818	14.00%		109,875	4.50%		170,917	7.00%		158,709	6.50%
(1) The Tier 1 capital ratio (to average assets) is not impacted by the Basel III Capital Rules; however, the Federal Reserve and the FDIC may require the Consolidated Company and the Bank, respectively, to maintain a Tier 1 capital ratio (to average assets) above the required minimum.

(Continued)

30.

GUARANTY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)


	Actual			Minimum Required For Capital Adequacy Purposes			Minimum Required Under Basel III (Including Buffer)			To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio	Amount		Ratio	Amount		Ratio	Amount		Ratio
December 31, 2022
Total capital to risk-weighted assets:
Consolidated	$	358,702	14.37%	$	199,687	8.00%	$	262,089	10.50%	$	249,608	10.00%
Bank		361,125	14.48%		199,570	8.00%		261,936	10.50%		249,463	10.00%
Tier 1 capital to risk-weighted assets:
Consolidated		292,966	11.74%		149,765	6.00%		212,167	8.50%		149,765	6.00%
Bank		329,933	13.23%		149,678	6.00%		212,044	8.50%		199,570	8.00%
Tier 1 capital to average assets:(1)
Consolidated		292,966	8.77%		133,614	4.00%		133,614	4.00%	n/a
Bank		329,933	9.89%		133,375	4.00%		133,375	4.00%		166,718	5.00%
Common equity tier 1 capital to risk-weighted assets:
Consolidated		285,749	11.45%		112,324	4.50%		174,726	7.00%	n/a
Bank		329,933	13.23%		112,258	4.50%		174,624	7.00%		162,151	6.50%
(1) The Tier 1 capital ratio (to average assets) is not impacted by the Basel III Capital Rules; however, the Federal Reserve and the FDIC may require the Consolidated Company and the Bank, respectively, to maintain a Tier 1 capital ratio (to average assets) above the required minimum.

Dividends paid by Guaranty are mainly provided by dividends from its subsidiaries. However, certain regulatory restrictions exist regarding the ability of its bank subsidiary to transfer funds to Guaranty in the form of cash dividends, loans or advances. The amount of dividends that a subsidiary bank organized as a national banking association, such as the Bank, may declare in a calendar year is the subsidiary bank’s net profits for that year combined with its retained net profits for the preceding two years. Retained net profits, as defined by the OCC, consist of net income less dividends declared during the period.

~~(Continued)~~

~~33.~~

~~Table of Contents~~

~~GUARANTY BANCSHARES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share data)~~

NOTE 13 - FAIR VALUE

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1 - Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2 - Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 - Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate fair value:

Marketable Securities: The fair values for marketable securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).

Loans Held For ~~Sale:~~Sale: Loans held for sale are carried at the lower of cost or fair value, which is evaluated on a pool-level basis. The fair value of loans held for sale is determined using quoted prices for similar assets, adjusted for specific attributes of that loan or other observable market data, such as outstanding commitments from third party investors (Level 2).

~~Derivative Instruments~~

Other Real Estate Owned: ~~The~~Assets acquired through or instead of loan foreclosure are initially recorded at fair ~~values~~value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of ~~derivatives are~~cost

(Continued)

31.

GUARANTY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals which are updated no less frequently than annually. These appraisals may utilize a single valuation ~~models using observable market~~approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data ~~as of the measurement date~~available. Real estate owned properties are evaluated on a quarterly basis for additional impairment and adjusted accordingly (Level 2)3).

~~Impaired~~

Individually Evaluated Collateral Dependent Loans: The fair value of ~~impaired~~individually evaluated collateral dependent loans ~~with specific allocations of the allowance for loan losses~~ is generally based on ~~the present value of estimated future cash flows using the loan's existing rate or, if repayment is expected solely from the collateral,~~ the fair value of collateral, less costs to sell. The fair value of real estate collateral is determined using recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant (Level 3). Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business (Level 3). ~~Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.~~

~~Other Real Estate Owned~~: Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals which are updated no less frequently than annually. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Real estate owned properties are evaluated on a quarterly basis for additional impairment and adjusted accordingly (Level 3).

~~(Continued)~~

~~34.~~

~~Table of Contents~~

~~GUARANTY BANCSHARES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share data)~~

The following tables summarize quantitative disclosures about the fair value measurements for each category of financial assets (liabilities) carried at fair value:


September 30, 2023	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Assets at fair value on a recurring basis:
Available for sale securities:
Mortgage-backed securities	$	132,141	$	—	$	132,141	$	—
Collateralized mortgage obligations		17,590		—		17,590		—
Municipal securities		2,364		—		2,364		—
Corporate bonds		26,549		—		26,549		—
Loans held for sale		2,506		—		—		2,506
Cash surrender value of life insurance		42,096		—		42,096		—
SBA servicing assets		709		—		—		709

Assets at fair value on a nonrecurring basis:
Individually evaluated collateral dependent loans		14,527		—		—		14,527


December 31, 2022	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Assets at fair value on a recurring basis:
Available for sale securities:
Mortgage-backed securities	$	130,341	$	—	$	130,341	$	—
Collateralized mortgage obligations		20,157		—		20,157		—
Municipal securities		10,642		—		10,642		—
Corporate bonds		27,787		—		27,787		—
Loans held for sale		3,156		—		—		3,156
Cash surrender value of life insurance		38,404		—		38,404		—
SBA servicing assets		874		—		—		874

Assets at fair value on a nonrecurring basis:
Individually evaluated collateral dependent loans		—		—		—		—

As of September 30, 2017 Fair Value
Quoted Prices in Active Markets for Identical Assets
(Level 1)

Significant Other Observable
Inputs
(Level 2)

Significant Other Unobservable Inputs
(Level 3)
Assets (liabilities) at fair value on a recurring basis:
Available for sale securities
Mortgage-backed securities $ 90,958
$ —
$ 90,958
$ —
Collateralized mortgage obligations 120,691
—
120,691
—
Municipal securities 7,464
—
7,464
—
Corporate bonds 19,020
—
19,020
—
Derivative instruments (666 ) —
(666 ) —

Assets at fair value on a nonrecurring basis:
Impaired loans 6,160
—
—
6,160
Other real estate owned 1,929
—
—
1,929

As of December 31, 2016 Fair Value
Quoted Prices in Active Markets for Identical Assets
(Level 1)

Significant Other Observable
Inputs
(Level 2)

Significant Other Unobservable Inputs
(Level 3)
Assets (liabilities) at fair value on a recurring basis:
Available for sale securities
Mortgage-backed securities $ 59,690
$ —
$ 59,690
$ —
Collateralized mortgage obligations 65,133
—
65,133
—
Municipal securities 7,219
—
7,219
—
Corporate bonds 24,883
—
24,883
—
U.S. treasury securities —
—
—
—
Derivative instruments (695 ) —
(695 ) —

Assets at fair value on a nonrecurring basis:
Impaired loans 6,065
—
—
6,065
Other real estate owned 1,692
—
—
1,692

There were no transfers between Level 2 and Level 3 during the nine months ended September 30, ~~2017~~2023 or ~~for~~during the year ended December 31, ~~2016.~~

2022.

(Continued)

32.

GUARANTY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

Nonfinancial Assets and Nonfinancial Liabilities

Nonfinancial assets measured at fair value on a nonrecurring basis ~~during the nine months ended September 30, 2017 and 2016~~ include certain foreclosed assets which, upon initial recognition, ~~were~~are remeasured and reported at fair value through a charge-off to the allowance for ~~loan~~credit losses and certain foreclosed assets which, subsequent to their initial recognition, ~~were~~are remeasured at fair value through a write-down included in current earnings. The fair value of a foreclosed asset is estimated using Level 2 inputs based on observable market data or Level 3 inputs based on customized discounting criteria.

~~(Continued)~~

~~35.~~

~~Table~~

As of ~~Contents~~

~~GUARANTY BANCSHARES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share data)~~

~~The following table presents~~September 30, 2023 and 2022, and December 31, 2022, there were no foreclosed assets that were remeasured and recorded at fair ~~value as of:~~

value.

September 30, 2017 December 31, 2016 September 30, 2016
Foreclosed assets remeasured at initial recognition:
Carrying value of foreclosed assets prior to remeasurement $ 544
$ 78
$ 67
Charge-offs recognized in the allowance for loan losses (175 ) (11 ) (11 )
Fair value of foreclosed assets remeasured at initial recognition $ 369
$ 67
$ 56

Foreclosed assets remeasured subsequent to initial recognition:
Carrying value of foreclosed assets prior to remeasurement $ —
$ 170
$ 180
Write-downs included in collection and other real estate owned expense —
(69 ) (79 )
Fair value of foreclosed assets remeasured subsequent to initial recognition $ —
$ 101
$ 101

The following ~~tables present~~table presents quantitative information about nonrecurring Level 3 fair value measurements as ~~of:~~of December 31, 2022. There were no nonrecurring level 3 fair value measurements requiring quantitative information as of September 30, 2023.

December 31, 2022

Fair Value

Valuation
Technique(s)

Unobservable Input(s)

Range
(Weighted
Average)

Other real estate owned

Appraisal value of collateral

Selling costs or other normal adjustments

The following table presents information on individually evaluated collateral dependent loans included in the ACL model as of September 30, 2023. There were no individually evaluated collateral dependent loans included in the ACL model as of December 31, 2022.


	Fair Value Measurements Using
September 30, 2023	Level 1		Level 2		Level 3		Total Fair Value
Commercial real estate		—		—	$	14,527	$	14,527
Total	$	—	$	—	$	14,527	$	14,527

Fair Value
Valuation
Technique(s)
Unobservable Input(s) Range (Weighted Average)
September 30, 2017
Impaired loans $ 6,160
Fair value of collateral - sales comparison approach Selling costs or other normal adjustments: Real estate Equipment 10%-20% (16%) 10%-20% (5.3%)
Other real estate owned $ 1,929
Appraisal value of collateral Selling costs or other normal adjustments 10%-20% (16%)

Fair Value
Valuation
Technique(s)
Unobservable Input(s) Range (Weighted Average)
December 31, 2016
Impaired loans $ 6,065
Fair value of collateral - sales comparison approach Selling costs or other normal adjustments: Real estate Equipment 10%-20% (16%) 40%-50% (42%)
Other real estate owned $ 1,692
Appraisal value of collateral Selling costs or other normal adjustments 10%-20% (16%)

~~(Continued)~~

~~36.~~

~~Table of Contents~~

~~GUARANTY BANCSHARES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share data)~~

The carrying amounts and estimated fair values of financial instruments not previously discussed in this note, as of September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, are as follows:


	Fair value measurements as of September 30, 2023 using:
	Carrying Amount		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
Financial assets:
Cash, due from banks, federal funds sold and interest-bearing deposits	$	130,177	$	130,177	$	—	$	—	$	130,177
Marketable securities held to maturity		408,308		—		367,691		—		367,691
Loans, net		2,286,163		—		—		2,149,124		2,149,124
Accrued interest receivable		11,307		—		11,307		—		11,307
Nonmarketable equity securities		26,077		—		26,077		—		26,077
Financial liabilities:
Deposits	$	2,658,293	$	1,944,979	$	712,856	$	—	$	2,657,835
Securities sold under repurchase agreements		19,366		—		19,366		—		19,366
Accrued interest payable		5,045		—		5,045		—		5,045
Federal Home Loan Bank advances		175,000		—		174,872		—		174,872
Subordinated debt		47,752		—		48,452		—		48,452

(Continued)

33.

GUARANTY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)


	Fair value measurements as of December 31, 2022 using:
	Carrying Amount		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
Financial assets:
Cash, due from banks, federal funds sold and interest-bearing deposits	$	106,467	$	106,467	$	—	$	—	$	106,467
Marketable securities held to maturity		509,008		—		475,068		—		475,068
Loans, net		2,344,245		—		—		2,217,606		2,217,606
Accrued interest receivable		11,555		—		11,555		—		11,555
Nonmarketable equity securities		25,585		—		25,585		—		25,585
Financial liabilities:
Deposits	$	2,681,154	$	2,326,615	$	351,981	$	—	$	2,678,596
Securities sold under repurchase agreements		7,221		—		7,221		—		7,221
Accrued interest payable		2,348		—		2,348		—		2,348
Federal Home Loan Bank advances		290,000		—		289,926		—		289,926
Subordinated debt		49,153		—		50,025		—		50,025

Fair value measurements as of
September 30, 2017 using:
Carrying Amount
Level 1
Inputs

Level 2
Inputs

Level 3
Inputs

Total
Fair Value
Financial assets:
Cash, due from banks, federal funds sold and interest-bearing deposits $ 95,061
$ 67,986
$ 27,075
$ —
$ 95,061
Marketable securities held to maturity 179,081
—
181,151
—
181,151
Loans, net 1,294,847
—
—
1,293,992
1,293,992
Accrued interest receivable 6,440
—
6,440
—
6,440
Nonmarketable equity securities 9,379
—
9,379
—
9,379
Cash surrender value of life insurance 18,376
—
18,376
—
18,376
Financial liabilities:
Deposits $ 1,617,302
$ 1,305,206
$ 305,084
$ —
$ 1,610,290
Securities sold under repurchase agreements 12,920
—
12,920
—
12,920
Accrued interest payable 883
—
883
—
883
Federal Home Loan Bank advances 65,157
—
64,856
—
64,856
Subordinated debentures 13,810
—
11,445
—
11,445

Fair value measurements as of
December 31, 2016 using:
Carrying Amount
Level 1
Inputs

Level 2
Inputs

Level 3
Inputs

Total
Fair Value
Financial assets:
Cash, due from banks, federal funds sold and interest-bearing deposits $ 127,543
$ 100,205
$ 27,338
$ —
$ 127,543
Marketable securities held to maturity 189,371
—
186,155
—
186,155
Loans, net 1,233,651
—
—
1,235,306
1,235,306
Accrued interest receivable 7,419
—
7,419
—
7,419
Nonmarketable equity securities 10,500
—
10,500
—
10,500
Cash surrender value of life insurance 17,804
—
17,804
—
17,804
Financial liabilities:
Deposits $ 1,576,791
$ 1,234,875
$ 342,615
$ —
$ 1,577,490
Securities sold under repurchase agreements 10,859
—
10,859
—
10,859
Accrued interest payable 889
—
889
—
889
Other debt 18,286
—
18,286
—
18,286
Federal Home Loan Bank advances 55,170
—
55,160
—
55,160
Subordinated debentures 19,310
—
16,809
—
16,809

The methods and assumptions, not previously presented, used to estimate fair values are described as follows:

Cash and Cash Equivalents

: The carrying amounts of cash and short-term instruments approximate fair values (Level 1).

~~(Continued)~~

~~37.~~

~~Table~~

Marketable Securities Held to Maturity: The fair values for marketable securities held to maturity are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of ~~Contents~~

~~GUARANTY BANCSHARES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share data)~~

similar securities (Level 2).

Loans, net

: The fair value of fixed-rate loans and variable-rate loans that reprice on an infrequent basis is estimated by discounting future cash flows using the current interest rates at which similar loans with similar terms would be made to borrowers of similar credit quality (Level 3).

~~Cash Surrender Value of Life Insurance~~

~~The carrying amounts of bank-owned life insurance approximate their fair value.~~

Nonmarketable Equity Securities

: It is not practical to determine the fair value of Independent Bankers Financial Corporation, Federal Home Loan Bank, Federal Reserve Bank and other stock due to restrictions placed on its transferability.

Deposits and Securities Sold Under Repurchase Agreements

: The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) (Level 1). The fair values of deposit liabilities with defined maturities are estimated by discounting future cash flows using interest rates currently offered for deposits of similar remaining maturities (Level 2).

Other Borrowings

: The fair value of borrowings, consisting of lines of credit, Federal Home Loan Bank advances and ~~Subordinated debentures~~subordinated debt is estimated by discounting future cash flows using currently available rates for similar financing (Level 2).

Accrued Interest Receivable/Payable

: The carrying amounts of accrued interest approximate their fair values (Level 2).

Off-balance Sheet Instruments

: Fair values for off-balance sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of commitments is not material.

NOTE 14 - EARNINGS PER SHARE

Basic earnings per share is computed by dividing net earnings available to common shareholders by the weighted-average common shares outstanding for the period. Net losses attributable to the noncontrolling interest during the three and nine months ended September 30, 2023 were $7 and $16, respectively, and are excluded from this calculation. Net losses attributable to the noncontrolling interest during the three and nine months ended September 30, 2022 were $3 and $21, respectively, and are excluded from this calculation. Diluted earnings per share reflects the maximum potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock and would then share in the net earnings of the Company. Dilutive share equivalents include stock-based awards issued to employees.

(Continued)

34.

GUARANTY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

Stock options granted by the Company are treated as potential shares in computing diluted earnings per share. Diluted shares outstanding include the dilutive effect of in-the-money awards which is calculated based on the average share price for each fiscal period using the treasury stock method. Under the treasury stock method, the amount that the employee must pay for exercising stock options, the amount of compensation cost for future service that the Company has not yet recognized, and the amount of tax impact that would be recorded in additional paid-in capital when the award becomes deductible are assumed to be used to repurchase shares.

~~(Continued)~~

~~38.~~

~~Table of Contents~~

~~GUARANTY BANCSHARES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except per share data)~~

The computations of basic and diluted earnings per share for the Company were as follows for the:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Numerator:
Net earnings attributable to Guaranty Bancshares, Inc.	$	6,297	$	10,903	$	24,159	$	32,425

Denominator:
Weighted-average shares outstanding (basic)		11,568,897		11,907,233		11,746,630		11,994,105
Effect of dilutive securities:
Common stock equivalent shares from stock options		50,445		125,158		44,573		125,344
Weighted-average shares outstanding (diluted)		11,619,342		12,032,391		11,791,204		12,119,449

Net earnings attributable to Guaranty Bancshares, Inc. per share
Basic	$	0.54	$	0.92	$	2.06	$	2.70
Diluted	$	0.54	$	0.91	$	2.05	$	2.68

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Numerator:
Net earnings (basic) $ 4,139
$ 3,370
$ 11,631
$ 8,547
Net earnings (diluted) $ 4,139
$ 3,370
$ 11,631
$ 8,547

Denominator:
Weighted-average shares outstanding (basic) 11,058,956
8,955,476
9,951,767
8,991,671
Effect of dilutive securities:
Common stock equivalent shares from stock options 105,473
9,581
75,505
9,581
Weighted-average shares outstanding (diluted) 11,164,429
8,965,057
10,027,272
9,001,252

Net earnings per share
Basic $ 0.37
$ 0.38
$ 1.17
$ 0.95
Diluted $ 0.37
$ 0.38
$ 1.16
$ 0.95

(Continued)

~~39.~~

35.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and notes thereto appearing in Item 1 of Part I of this Quarterly Report on Form 10-Q (this “Report”) ~~as well as with our consolidated financial statements~~ and ~~notes thereto~~any subsequent Quarterly Reports on Form 10-Q, the risk factors appearing in Item 1A of Part II of this Report, and the other risks and uncertainties listed from time to time in our ~~Prospectus,~~reports and documents filed with the SEC, including our Annual Report on ~~May 9, 2017 pursuant to Rule 424(b) of~~Form 10-K for the ~~Securities Act of 1933, as amended (the “Securities Act”), relating to our initial public offering (the “IPO Prospectus”).~~year ended December 31, 2022. Unless the context indicates ~~otherwises,~~otherwise, references in this Report to “we,” “our,” “us,” and the “Company” refer to Guaranty Bancshares, Inc., a Texas ~~Corporation,~~corporation, and its consolidated subsidiaries. References in this Report to “Guaranty Bank & Trust” and the “Bank” refer to Guaranty Bank & Trust, N.A., a national banking association and our ~~wholly owned~~wholly-owned consolidated subsidiary.

This discussion and analysis contains forward-looking statements that are subject to certain risks and uncertainties and are based on certain assumptions that we believe are reasonable but may prove to be inaccurate. Certain risks, uncertainties and other factors, including those set forth under “Forward-Looking Statements” and “Risk Factors” in our IPO Prospectus, may cause actual results to differ materially from those projected results discussed in the forward-looking statements appearing in this discussion and analysis. We assume no obligation to update any of these forward-looking statements. For additional information concerning forward-looking statements, please read “-Special Cautionary Notice Regarding Forward-Looking Statements” below.

General

We were incorporated in 1990 to serve as the holding company for Guaranty Bank & Trust. Since our founding, we have built a reputation based on financial stability and community leadership. In May 2017, we consummated an initial public offering of our common stock, which ~~is traded~~began trading on the ~~NASDAQ~~Nasdaq Global Select Market until March 7, 2023, at which time our listing was transferred to the New York Stock Exchange, where our common stock continues to trade under the symbol ~~“GNTY.”~~

"GNTY".

We currently operate 2632 banking locations in the East Texas, Dallas/Fort Worth, ~~East Texas~~Houston and Central Texas regions of the state. Our ~~growth has been consistent and primarily organic. Our~~ principal executive office is located at ~~201 South Jefferson Street, Mount Pleasant,~~16475 Dallas Parkway, Suite 600, Addison, Texas, ~~75455,~~75001 and our telephone number is ~~(903)~~(888) 572-9881. Our website address is www.gnty.com. Information contained on our website does not constitute a part of this Report and is not incorporated by reference into this filing or any other report.

As a bank holding company that operates through one segment, we generate most of our revenue from interest on loans and investments, customer service and loan fees, fees related to the sale of mortgage loans, and trust and wealth management services. We incur interest expense on deposits and other borrowed funds, as well as noninterest expense, such as salaries and employee benefits and occupancy expenses. We analyze our ability to maximize income generated from ~~interest earning~~interest-earning assets and control the interest expenses of our liabilities, measured as net interest income, through our net interest margin and net interest spread. Net interest income is the difference between interest income on interest-earning assets, such as loans and securities, and interest expense on interest-bearing liabilities, such as deposits and borrowings, which are used to fund those assets. Net interest margin is a ratio calculated as net interest income divided by average interest-earning assets. Net interest spread is the difference between rates earned on interest-earning assets and rates paid on interest-bearing liabilities.

Changes in market interest rates and the interest rates we earn on interest-earning assets or pay on interest-bearing liabilities, as well as in the volume and types of interest-earning assets, interest-bearing and noninterest-bearing liabilities and ~~shareholders’~~shareholders' equity, are usually the largest drivers of periodic changes in net interest spread, net interest margin and net interest income. Fluctuations in market interest rates are driven by many factors, including governmental monetary policies, inflation, deflation, macroeconomic developments, changes in unemployment, the money supply, political and international conditions and conditions in domestic and foreign financial markets. Periodic changes in the volume and types of loans in our loan portfolio are affected by, among other factors, economic and competitive conditions in Texas, as well as developments affecting the real estate, technology, financial services, insurance, transportation, manufacturing and energy sectors within our target markets and throughout the State of Texas.

QUARTERLY HIGHLIGHTS

•

~~40.~~

~~Critical Accounting Policies~~

~~Our consolidated financial statements are prepared in accordance with GAAP~~Granular and with general practices within the financial services industry. Application of these principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under current circumstances. These assumptions form the basis for our judgments about the carrying values of assets and liabilities that are not readily available from independent, objective sources. We evaluate our estimates on an ongoing basis. Use of alternative assumptions may have resulted in significantly different estimates. Actual results may differ from these estimates.

We have identified the following accounting policies and estimates that, due to the difficult, subjective or complex judgments and assumptions inherent in those policies and estimates, and the potential sensitivity of our consolidated financial statements to those judgments and assumptions, is critical to an understanding of our financial condition and results of operations. We believe that the judgments, estimates and assumptions used in the preparation of our financial statements are appropriate.

~~Loans and Allowance for Loan Losses~~

Loans are stated at the amount of unpaid principal, reduced by unearned income and an allowance for loan losses. Interest on loans is recognized using the simple-interest method on the daily balances of the principal amounts outstanding. Fees associated with the origination of loans and certain direct loan origination costs are netted and the net amount is deferred and recognized over the life of the loan as an adjustment of yield.

The accrual of interest on loans is discontinued when there is a clear indication that the borrower’s cash flow may not be sufficient to meet payments as they become due, which is generally when a loan is 90 days past due. A loan may continue to accrue interest, even if it is more than 90 days past due, if the loan is both well collateralized and it is in the process of collection. When a loan is placed on nonaccrual status, all previously accrued and unpaid interest is reversed. Interest income is subsequently recognized on a cash basis as long as the remaining book balance of the asset is deemed to be collectible. If collectability is questionable, then cash payments are applied to principal. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured in accordance with the terms of the loan agreement.

The allowance for loan losses is an estimated amount management believes is adequate to absorb inherent losses on existing loans that may be uncollectible based upon review and evaluation of our loan portfolio. Management’s periodic evaluation of the allowance is based on general economic conditions, the financial condition of borrowers, the value and liquidity of collateral, delinquency, prior loan loss experience and the results of periodic reviews of the portfolio.

The allowance for loan losses is comprised of two components. The first component, the general reserve, is determined in accordance with current authoritative accounting guidance that considers historical loss rates for the last five years adjusted for qualitative factors based upon general economic conditions and other qualitative risk factors both internal and external to us. Such qualitative factors include current local economic conditions and trends including unemployment, changes in lending staff, policies and procedures, changes in credit concentrations, changes in the trends and severity of problem loans and changes in trends in volume and terms of loans. These qualitative factors serve to compensate for additional areas of uncertainty inherent in the portfolio that are not reflected in our historic loss factors. For purposes of determining the general reserve, the loan portfolio, less cash secured loans, government guaranteed loans and impaired loans, is multiplied by our adjusted historical loss rate. The second component of the allowance for loan losses, the specific reserve, is determined in accordance with current authoritative accounting guidance based on probable and incurred losses on specific classified loans.

~~The allowance for loan losses is increased by charges to income and decreased by charge-offs (net of recoveries).~~

In general, the loans in our portfolio have low historical credit losses. The credit quality of loans in our portfolios is impacted by delinquency status and debt service coverage generated by our borrowers’ businesses and fluctuations in the value of real estate collateral. Management considers delinquency status to be the most meaningful indicator of the credit quality of one-to-four single family residential, home equity loans and lines of credit and other consumer loans. In general, loans do not begin to show signs of credit deterioration or default until they have been outstanding

~~41.~~

for some period of time, a process we refers to as “seasoning.” As a result, a portfolio of older loans will usually behave more predictably than a portfolio of newer loans. We consider the majority of our loans to be “seasoned” and that the credit quality and current level of delinquencies and defaults represents the level of reserve needed in the allowance for loan losses. If delinquencies and defaults were to increase, we may be required to increase our provision for loan losses, which would adversely affect our results of operations and financial condition.

Delinquency statistics are updated at least monthly. Internal risk ratings are considered the most meaningful indicator of credit quality for new commercial and industrial, construction, and commercial real estate loans. Internal risk ratings are a key factor in identifying loans that are individually evaluated for impairment and impact management’s estimates of loss factors used in determining the amount of the allowance for loan losses. Internal risk ratings are updated on a continuous basis.

Loans are considered impaired when, based on current information and events, it is probable we will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. If a loan is impaired, a specific valuation allowance is allocated, if necessary. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis. Impaired loans, or portions thereof, are charged off when deemed uncollectible.

Our policy requires measurement of the allowance for an impaired collateral dependent loan based on the fair value of the collateral. Other loan impairments are measured based on the present value of expected future cash flows or the loan’s observable market price. Stable Core Deposit Base.As of September 30, ~~2017~~2023, we have 87,208 total deposit accounts with an average account balance of $30,482. We have a historically reliable core deposit base, with strong and ~~December 31, 2016, all significant impaired loans have been determined~~trusted banking relationships. Total deposits increased by $55.5 million during the third quarter, which consisted primarily of an increase in core deposits of $75.7 million, offset by a decrease in public funds deposits of $20.2 million. The bank has not historically used brokered deposits and does not foresee a reliance on them going forward, however, we issued $50.0 million of these deposits during the second quarter to ~~be collateral dependent~~test their availability as a contingent liquidity source. Half of the brokered CD's mature in November 2023 and the ~~allowance~~remainder in February 2024. Excluding public funds and bank-owned accounts, our uninsured deposits as of September 30, 2023 were 25.02% of total deposits.

We continued to increase interest rates paid on deposits during the quarter in order to pay competitive rates, however noninterest-bearing deposits still represent 34.0% of total deposits. Our cost of interest-bearing deposits

(Continued)

36.

increased 59 basis points during the quarter from 2.41% in the prior quarter to 3.00%, representing a beta on interest-bearing deposits of approximately 217.6% for ~~loss has been measured utilizing~~ the ~~estimated fair value~~linked quarter compared to the federal funds target rates. Our cost of total deposits for the ~~collateral.~~

~~From time~~third quarter of 2023 increased 45 basis points from 1.53% in the prior quarter to ~~time, we modify our loan agreement with~~1.98%, representing a ~~borrower. A modified loan is considered~~beta on total deposits of approximately 166.0% for the linked quarter.

•

Strong Asset Quality. Nonperforming assets as a ~~troubled debt restructuring when two conditions are met: (i)~~percentage of total assets were 0.09% at September 30, 2023, compared to 0.11% at June 30, 2023 and 0.28% at September 30, 2022. Net charge-offs (annualized) to average loans were 0.11% for the ~~borrower is experiencing financial difficulty~~quarter ended September 30, 2023, compared to 0.03% for the quarter ended June 30, 2023, and ~~(ii) concessions are made by us that would not otherwise be considered~~0.07% for ~~a borrower with similar credit risk characteristics. Modifications to loan terms may include a lower interest rate, a reduction~~the quarter ended September 30, 2022. During the third quarter, nonperforming assets consisted primarily of ~~principal, or a longer term to maturity. We review each troubled debt restructured loan and determine on a case by case basis if the loan is subject to impairment~~nonaccrual loans and the ~~need for~~decrease from the prior quarter resulted from the resolution or payoff of smaller balance loans.

Loans risk rated as substandard increased during the quarter from $8.1 million as of June 30, 2023 to $29.5 million as of September 30, 2023, an increase of $21.4 million. Despite the increase, substandard loans continued to represent a ~~specific allowance for loan loss allocation. An allowance for loan loss allocation is based on either the present value~~modest 1.3% of ~~estimated future cash flows or the estimated fair value of the underlying collateral.~~

We have certain lending policies and procedures in place that are designed to maximize loan income with an acceptable level of risk. Management reviews and approves these policies and procedures on a regular basis and makes changes as appropriate. Management receives frequent reports related to loan originations, quality, concentrations, delinquencies, non-performing and potential problem loans. Diversification in the loan portfolio is a means of managing risk associated with fluctuations in economic conditions, both by type of loan and geography.

~~Commercial and industrial~~total loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably and effectively. Underwriting standards are designed to determine whether the borrower possesses sound business ethics and practices and to evaluate current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed. Commercial and industrial loans areat quarter-end. The increase results primarily ~~made based on the identified cash flows of the borrower and, secondarily, on the underlying collateral provided by the borrower. Most~~from two commercial ~~and industrial loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and include personal guarantees.~~

Real estate loans are also subject to underwriting standards and processes similar to commercial and industrial loans. These loans are underwritten primarily based on projected cash flows and, secondarily, as loans secured by real estate collateral. The repayment of real estate loans, with outstanding balances of $14.5 million and $6.9 million, respectively. The larger credit is ~~generally largely dependent on~~currently performing, is not past due, and is well-collateralized in the ~~successful operation~~desirable Austin, Texas market with an LTV of 69%. Management believes this credit will be favorably resolved with minimal to no loss by year-end. The second, smaller loan is an amortizing commercial real estate loan in which we hold a priority first lien position. The project is being developed under an SBA 504 program, with a different lender managing the project's construction phase and financing the second lien debenture note. This loan is also performing, is not past due and is well-collateralized with an LTV of 46%. These two downgrades resulted from general economic stress factors, and appropriate credit reserves were captured in our CECL model.

Commercial real estate (CRE) loans, particularly office related loans, have received increased scrutiny in recent months. Our CRE loans and real estate C&D loans represent 38.9% and 13.7% of the ~~property securing~~total loan portfolio, respectively. Office-related loans represent 4.7% of the ~~loans or~~total loan portfolio and have an average balance of $523,000.

Although asset quality remains strong, we made minor adjustments to certain qualitative factors during the ~~business conducted on the property securing the loan. Real estate loans may be more adversely affected by conditions~~third quarter to incorporate improvements in C&D concentrations and past-due and non-accrual trends. These qualitative adjustments, along with minimal charge-offs and a reduction in the ~~real estate markets or~~total loan portfolio, resulted in no provision for credit loss in the ~~general economy. The properties securing our real estate portfolio are generally diverse in terms~~third quarter of ~~type~~2023.

•

Strong Capital and ~~geographic location throughout the State of Texas. This diversity helps us reduce the exposure to adverse economic events that affect any single market or industry.~~

~~We utilize methodical credit standards~~Liquidity. Our capital and ~~analysis to supplement our policies and procedures in underwriting consumer loans. Our loan policy addresses types of consumer loans that may be originated~~liquidity ratios, as well as ~~the underlying~~

~~42.~~

~~collateral, if secured, which must be perfected. The relatively small individual dollar amounts of consumer loans that are spread over numerous individual borrowers also minimizes risk.~~

~~Marketable Securities~~

Securities are classified as held to maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Securities are classified as available for sale when they might be sold before maturity. Securities available for sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income. Management determines the appropriate classification of securities at the time of purchase. Interest income includes amortization and accretion of purchase premiums and discounts. Gains and losses on sales are recorded on the trade date and determined using the specific identification method.

Management evaluates securities for other-than-temporary impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: (1) OTTI related to credit loss, which must be recognized in the income statement and (2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis.

~~Fair Values of Financial Instruments~~

Fair values of financial instruments are estimated using relevant market information and other assumptions. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates. The fair value estimates of existing on and off-balance sheet financial instruments do not include the value of anticipated future business or the value of assets and liabilities not considered financial instruments.

~~Emerging Growth Company~~

~~The JOBS Act permits an “emerging growth company”~~contingent liquidity sources, remain very healthy. We continue to take advantage of low stock prices to repurchase shares of Company stock and add intrinsic value for shareholders. During the third quarter of 2023, we repurchased 61,688 shares, or 0.53% of average shares outstanding during the period, at an ~~extended transition period~~average price of $27.38 per share. Our liquidity ratio, calculated as cash and cash equivalents and unpledged investments divided by total liabilities, was 14.0% as of quarter-end. Our total available contingent liquidity, net of current outstanding borrowings, is $1.2 billion, consisting of FHLB, FRB and correspondent bank fed funds and revolving lines of credit. Finally, our total equity to ~~comply with new or revised accounting standards applicable~~average assets as of September 30, 2023 is 9.2%. If we had to ~~public companies. However, we have “opted out”~~recognize our entire unrealized losses on both AFS and HTM securities, our total equity to average assets ratio would be 8.2%†, which is still a strong capital level under regulatory requirements.

† Non-GAAP financial metric. Calculations of this ~~provision. As a result, we will comply with new or revised accounting standards~~metric and reconciliations to ~~the same extent that compliance is required for non-emerging growth companies. Our decision to opt out~~GAAP are included in subsequent sections of ~~the extended transition period under the JOBS Act is irrevocable.~~

this MD&A.

Discussion and Analysis of Results of Operations for the Nine Months Ended September 30, ~~2017~~2023 and ~~2016~~

2022

Results of Operations

The following discussion and analysis ~~of our results of operations~~ compares our results of operations for the nine months ended September 30, ~~2017~~2023 with the nine months ended September 30, ~~2016.~~2022. The results of operations for the nine months ended September 30, ~~2017~~2023 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, ~~2017.~~

2023.

(Continued)

37.

Net earnings attributable to Guaranty Bancshares, Inc. (which excludes the minority interest of consolidated subsidiaries) were ~~$11.6~~$24.1 million for the nine months ended September 30, ~~2017,~~2023, as compared to ~~$8.5~~$32.4 million for the nine months ended September 30, ~~2016.~~2022. The following table presents key earnings data for the periods indicated:

~~43.~~

For the Nine Months Ended September 30,
2017 2016
(Dollars in thousands, except per share data)
Net earnings $ 11,631
$ 8,547
Net earnings per common share
-basic 1.17
0.95
-diluted 1.16
0.95
Net interest margin⁽¹⁾
3.37 % 3.25 %
Net interest rate spread⁽²⁾
3.15 % 3.06 %
Return on average assets 0.82 % 0.65 %
Return on average equity 8.74 % 7.89 %
Average equity to average total assets 9.42 % 8.19 %
Dividend payout ratio 33.33 % 27.37 %

~~(1) Net interest margin is equal to net interest income divided by average interest-earning assets.~~

~~(2) Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.~~


	Nine Months Ended September 30,
(dollars in thousands, except per share data)	2023			2022
Net earnings attributable to Guaranty Bancshares, Inc.	$	24,159		$	32,425
Net earnings attributable to Guaranty Bancshares, Inc. per common share
-basic		2.06			2.70
-diluted		2.05			2.68
Net interest margin(1)		3.17	%		3.49	%
Net interest rate spread(2)		2.17	%		3.26	%
Return on average assets		0.99	%		1.34	%
Return on average equity		10.82	%		14.73	%
Average equity to average total assets		9.14	%		9.11	%
Cash dividend payout ratio		33.50	%		24.44	%

(1) Net interest margin is equal to net interest income divided by average interest-earning assets.
(2) Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.

Net Interest Income

Our operating results depend primarily on our net interest income. Fluctuations in market interest rates impact the yield and rates paid on interest-earning assets and interest-bearing liabilities, respectively. Changes in the amount and type of interest-earning assets and interest-bearing liabilities also impact our net interest income. To evaluate net interest income, we measure and monitor (1) yields on our loans and other interest-earning assets, (2) the costs of our deposits and other funding sources, (3) our net interest spread and (4) our net interest margin. Because noninterest-bearing sources of funds, such as noninterest-bearing deposits and shareholders’ equity also fund interest-earning assets, net interest margin includes the benefit of these noninterest-bearing sources.

Net interest income, before the provision for credit losses, for the nine months ended September 30, ~~2017~~2023 and 2022 was ~~$44.1~~$73.2 million ~~compared to $39.8~~and $79.5 million, ~~for the nine months ended September 30, 2016, an increase~~respectively, a decrease of ~~$4.3~~$6.3 million, or ~~10.9%~~7.9%. The ~~increase~~decrease in net interest income ~~was comprised~~resulted primarily from an increase in interest expense of ~~a $5.1~~$34.5 million, or ~~10.6%~~430.4% partially offset by a $28.2 million, or 32.2%, increase in interest ~~income offset by a $775,000, or 9.5%, increase in interest expense.~~ income.

The ~~growth in interest income was primarily attributable to a $110.6~~$34.5 million or 9.5%, increase in average loans outstanding for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016, further improved by a 0.04% increase in the average yield on total loans. The increase in average loans outstanding was primarily due to organic growth in all of our markets and continuing maturity of ~~de novo~~ ~~and acquired locations in the Dallas/Fort Worth metroplex and Bryan/College Station markets. The $775,000~~ increase in interest expense for the nine months ended September 30, ~~2017~~2023 was primarily related to a ~~$74.1~~$25.4 million, or ~~6.33%~~476.5%, increase in interest on deposits, despite a $16.3 million, or 1.0%, decrease in average interest-bearing deposits. The increase in deposit-related interest expense was due to a 204 basis point increase in average rate paid on these deposits over the same period in ~~2016.~~ 2022. Additionally, there was a $8.3 million increase in interest on FHLB advances.

The ~~majority~~increase in interest income for the nine months ended September 30, 2023 was primarily related to an increase in interest income on loans of ~~this increase was due~~$26.2 million, or 35.3%, during the nine months ended September 30, 2023 compared to ~~organic growth, primarily~~the same period in ~~savings and money market accounts, driven in part by favorable rates that were offered in our Bryan/College Station and Dallas/Fort Worth metroplex markets.~~ 2022.

For the nine months ended September 30, ~~2017,~~2023, net interest margin on a taxable equivalent basis and net interest spread were ~~3.37%~~3.16% and ~~3.15%~~2.17%, respectively, compared to ~~3.25%~~3.53% and ~~3.06%~~3.26% for the same period in ~~2016,~~2022, which reflects a 118 basis point increase in the ~~increases~~yield on interest-earning assets offset by 227 basis point increase in ~~interest income discussed above relative~~the rate on interest-bearing liabilities from the same period of the prior year. The increase in rates is primarily due to market rate conditions during the nine months ended September 30, 2023 compared to the ~~increases in interest expense.~~

same period of the prior year.

Average Balance Sheet Amounts, Interest Earned and Yield Analysis

The following table presents an analysis of net interest income and net interest spread for the periods indicated, including average outstanding balances for ~~each~~all major ~~category~~categories of interest-earning assets and interest-bearing liabilities, the interest earned or paid on such amounts, and the average ~~rate~~rates earned or paid on such assets or liabilities, respectively. The table also sets forth the net interest margin on average total interest-earning assets for the same periods. Interest earned on loans that are classified as nonaccrual is not recognized in income; however, the balances are reflected in average outstanding balances for the period. For the nine months ended September 30, ~~2017~~2023 and ~~2016,~~2022, the amount of

(Continued)

38.

interest income not recognized on nonaccrual loans was not material. Any nonaccrual loans have been included in the table as loans carrying a zero yield.

~~44.~~

For the Nine Months Ended September 30,
2017 2016
Average Outstanding Balance Interest Earned/ Interest Paid Average Yield/ Rate Average Outstanding Balance Interest Earned/ Interest Paid Average Yield/ Rate
(Dollars in thousands)
Assets
Interest-earnings assets:
Total loans⁽¹⁾
$ 1,269,387
$ 45,115
4.75 % $ 1,158,807
$ 40,857
4.71 %
Securities available for sale 216,908
3,678
2.27 % 216,744
3,057
1.88 %
Securities held to maturity 184,269
3,340
2.42 % 179,963
3,549
2.63 %
Nonmarketable equity securities 7,012
379
7.23 % 8,452
193
3.05 %
Interest-bearing deposits in other banks 72,948
581
1.06 % 74,525
335
0.60 %
Total interest-earning assets 1,750,524
$ 53,093
4.06 % 1,638,491
$ 47,991
3.91 %
Allowance for loan losses (12,040 ) (10,654 )
Noninterest-earnings assets 144,937
137,796

Total assets $ 1,883,421
$ 1,765,633

Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Interest-bearing deposits $ 1,243,536
$ 7,761
0.83 % $ 1,169,468
$ 6,791
0.78 %
Advances from FHLB and fed funds purchased 41,661
294
0.94 % 65,503
240
0.49 %
Other debt 8,973
300
4.48 % 13,650
452
4.42 %
Subordinated debentures 16,607
559
4.50 % 20,642
656
4.25 %
Securities sold under agreements to repurchase 12,937
37
0.38 % 12,264
37
0.40 %
Total interest-bearing liabilities 1,323,714
$ 8,951
0.90 % 1,281,527
$ 8,176
0.85 %
Noninterest-bearing liabilities:
Noninterest-bearing deposits 375,655
333,640

Accrued interest and other liabilities 6,650
5,939

Total noninterest-bearing liabilities 382,305
339,579

Shareholders’ equity 177,402
144,527

Total liabilities and shareholders’ equity $ 1,883,421
$ 1,765,633

Net interest rate spread⁽²⁾
3.15 % 3.06 %
Net interest income $ 44,142
$ 39,815

Net interest margin⁽³⁾
3.37 % 3.25 %

~~(1) Includes average outstanding balances of loans held for sale of $3.5 million and $3.2 million for the nine months ended September 30, 2017 and 2016, respectively.~~

~~(2) Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.~~

~~(3) Net interest margin is equal to net interest income divided by average interest-earning assets.~~


	Nine Months Ended September 30,
	2023								2022
(dollars in thousands)	Average Outstanding Balance			Interest Earned/ Interest Paid		Average Yield/ Rate			Average Outstanding Balance			Interest Earned/ Interest Paid		Average Yield/ Rate
ASSETS
Interest-earning assets:
Total loans(1)	$	2,359,880		$	100,513		5.69	%	$	2,066,529		$	74,314		4.81	%
Securities available for sale		180,645			3,619		2.68			316,386			4,330		1.83
Securities held to maturity		463,434			8,591		2.48			499,092			7,567		2.03
Nonmarketable equity securities		27,727			1,024		4.94			16,937			869		6.86
Interest-bearing deposits in other banks		49,923			1,949		5.22			145,936			409		0.37
Total interest-earning assets		3,081,609			115,696		5.02			3,044,880			87,489		3.84
Allowance for credit losses		(31,804	)							(29,341	)
Noninterest-earning assets		219,227								216,140
Total assets	$	3,269,032							$	3,231,679
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Interest-bearing deposits	$	1,668,394		$	30,670		2.46	%	$	1,684,725		$	5,320		0.42	%
Advances from FHLB and fed funds purchased		255,011			9,711		5.09			96,462			1,447		2.01
Line of credit		4,139			268		8.66			—			34		—
Subordinated debt		48,357			1,609		4.45			46,024			1,208		3.51
Securities sold under agreements to repurchase		19,548			271		1.85			8,920			9		0.13
Total interest-bearing liabilities		1,995,449			42,529		2.85			1,836,131			8,018		0.58
Noninterest-bearing liabilities:
Noninterest-bearing deposits		944,870								1,075,941
Accrued interest and other liabilities		30,057								25,212
Total noninterest-bearing liabilities		974,927								1,101,153
Equity		298,656								294,395
Total liabilities and equity	$	3,269,032							$	3,231,679
Net interest rate spread(2)							2.17	%							3.26	%
Net interest income				$	73,167							$	79,471
Net interest margin(3)							3.17	%							3.49	%
Net interest margin, fully taxable equivalent(4)							3.16	%							3.53	%

(1) Includes average outstanding balances of loans held for sale of $1.4 million and $2.6 million for the nine months ended September 30, 2023 and 2022, respectively.
(2) Net interest spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
(3) Net interest margin is equal to net interest income divided by average interest-earning assets, annualized.
(4) Net interest margin on a taxable equivalent basis is equal to net interest income adjusted for nontaxable income divided by average interest-earning assets, annualized, using a marginal tax rate of 21%.

The following table presents the change in interest income and interest expense for the periods indicated for ~~each~~all major ~~component~~components of interest-earning assets and interest-bearing liabilities and distinguishes between the changes

(Continued)

39.

attributable to changes in volume and interest rates. For purposes of this table, changes attributable to both rate and volume that cannot be segregated have been allocated to rate.

~~45.~~

For the Nine Months Ended September 30, 2017 vs. 2016
Increase (Decrease)
Due to Change in Total Increase
Volume Rate (Decrease)
(Dollars in thousands)
Interest-earning assets:
Total loans $ 5,255
$ (997 ) $ 4,258
Securities available for sale 4
617
621
Securities held to maturity 104
(313 ) (209 )
Nonmarketable equity securities (104 ) 290
186
Interest-earning deposits in other banks (17 ) 263
246
Total increase (decrease) in interest income $ 5,242
$ (140 ) $ 5,102

Interest-bearing liabilities:
Interest-bearing deposits $ 618
$ 352
$ 970
Advances from FHLB and fed funds purchased (225 ) 279
54
Other debt (209 ) 58
(151 )
Subordinated debentures (182 ) 84
(98 )
Securities sold under agreements to repurchase 3
(3 ) —
Total increase in interest expense 5
770
775
Increase (decrease) in net interest income $ 5,237
$ (910 ) $ 4,327


	For the Nine Months Ended September 30, 2023 vs. 2022
	Increase (Decrease)
	Due to Change in						Total Increase
(in thousands)	Volume			Rate			(Decrease)
Interest-earning assets:
Total loans	$	10,554		$	15,645		$	26,199
Securities available for sale		(1,858	)		1,147			(711	)
Securities held to maturity		(541	)		1,565			1,024
Nonmarketable equity securities		554			(399	)		155
Interest-earning deposits in other banks		(266	)		1,806			1,540
Total increase in interest income	$	8,443		$	19,764		$	28,207

Interest-bearing liabilities:
Interest-bearing deposits	$	(51	)	$	25,401		$	25,350
Advances from FHLB		2,384			5,880			8,264
Line of credit		—			234			234
Subordinated debt		61			340			401
Securities sold under agreements to repurchase		10			252			262
Total increase in interest expense		2,404			32,107			34,511
Increase (decrease) in net interest income	$	6,039		$	(12,343	)	$	(6,304	)

Provision for ~~Loan~~Credit Losses

The provision for ~~loan~~credit losses is a charge to income in order to bring our allowance for ~~loan~~credit losses to a level deemed appropriate by management based on factors such as historical loss experience, trends in classified and past due loans, volume and growth in the loan portfolio, current economic conditions in our markets and value of the underlying collateral. Loans are charged off against the allowance for ~~loan~~credit losses when determined appropriate. Although management believes it uses the best information available to make determinations with respect to the provision for ~~loan~~credit losses, future adjustments may be necessary if economic conditions differ from the assumptions used in making the determination.

~~The provision for loan losses for~~

During the nine months ended September 30, ~~2017 was $2.3 million~~2023, we recorded no provision for credit loss, compared to ~~$3.2 million for the nine months ended September 30, 2016. The decrease in the~~a reverse provision ~~expense was related to one large loan relationship whose repayment ability deteriorated in the prior year, thus increasing a specific reserve allocated to the borrower~~of $650,000 during ~~the prior year. Net charge offs were $1.2 million for the nine months ended September 30, 2017 compared to $1.3 million for~~ the same period in ~~2016.~~2022. During the fourth quarter of 2022, we recorded a $2.8 million provision to incorporate economic forecasts for an economic downturn and possible borrower stressors into our CECL model. The ~~amount~~factors that were adjusted in the fourth quarter of ~~net charge offs during the nine months ended~~2022 are still relevant, however certain minor adjustments were made in subsequent quarters to reflect current portfolio credit quality trends. As of September 30, ~~2017 resulted primarily from two relationships totaling approximately $700,000,~~2023, our allowance for credit losses as ~~well as smaller charge off amounts in our single family and consumer loan portfolios. The amount~~a percentage of ~~net charge offs during the nine months ended~~total loans was 1.34%.

As of September 30, ~~2016 resulted primarily from one relationship, totaling approximately $1.2~~2023, there were $23.0 million ~~that was charged off during the third quarter~~in loan balances past due 30 or more days, including $1.6 million in loan balances for nonperforming (nonaccrual) loans, compared to $14.1 million and $7.5 million, respectively, as of ~~2016.~~

December 31, 2022, and $9.9 million and $7.5 million, respectively, as of September 30, 2022.

Noninterest Income

Our primary sources of recurring noninterest income are service charges on deposit accounts, merchant and debit card fees, fiduciary income, gains on the sale of both mortgage and SBA loans, and income from bank-owned life insurance. Noninterest income does not include loan origination fees to the extent they exceed the direct loan origination costs, which are generally recognized over the life of the related loan as an adjustment to yield using the interest method.

(Continued)

40.

The following table presents components of noninterest income for the nine months ended September 30, ~~2017~~2023 and ~~2016~~2022 and the period-over-period variations in the categories of noninterest income:

~~46.~~

For the Nine Months Ended September 30, Increase (Decrease)
2017 2016 2017 v. 2016
(Dollars in thousands)
Noninterest income:
Service charges on deposit accounts $ 2,801
$ 2,625
$ 176
Merchant and debit card fees 2,301
2,026
275
Fiduciary income 1,055
1,058
(3 )
Gain on sales of loans 1,490
1,231
259
Bank-owned life insurance income 347
337
10
Gain on sales of investment securities 25
82
(57 )
Loan processing fee income 454
473
(19 )
Other noninterest income 2,027
1,770
257
Total noninterest income $ 10,500
$ 9,602
$ 898


	Nine Months Ended September 30,					Increase (Decrease)
(in thousands)	2023			2022		2023 vs. 2022
Noninterest income:
Service charges	$	3,264		$	3,192	$	72
Net realized loss on securities transactions		(229	)		—		(229	)
Gain on sale of loans		1,005			2,125		(1,120	)
Fiduciary and custodial income		1,905			1,856		49
Bank-owned life insurance income		692			633		59
Merchant and debit card fees		5,547			5,410		137
Loan processing fee income		404			611		(207	)
Mortgage fee income		164			308		(144	)
Other noninterest income		4,965			4,228		737
Total noninterest income	$	17,717		$	18,363	$	(646	)

Total noninterest income ~~increased $898,000,~~decreased $646,000, or ~~9.35%~~3.5%, for the nine months ended September 30, ~~2017~~2023 compared to the same period in ~~2016.~~2022. Material changes in the components of noninterest income are discussed below.

~~Service Charges~~

Net Realized Loss on ~~Deposit Accounts.~~ Securities Transactions. We ~~earn fees~~sell securities from ~~our customers for deposit-related services, and these fees constitute a significant and predictable component of our~~time-to-time, which results in gains or losses being recognized in the income statement as noninterest income. ~~Service charges~~During the nine months ended September 30, 2023 we sold securities for a net loss of $229,000. No securities were sold during the nine months ended September 30, 2022.

Gain on ~~deposit accounts were $2.8~~Sale of Loans. We originate long-term fixed-rate mortgage loans and Small Business Administration (SBA) loans for resale into the secondary market. We sold 130 mortgage loans for $34.2 million during the nine months ended September 30, 2023 compared to 229 mortgage loans for $62.2 million for the quarter ended September 30, 2022, which is consistent with the industry-wide decline in overall mortgage volumes attributable to increased mortgage loan rates. Gain on sale of loans was $1.0 million for the nine months ended September 30, ~~2017, which increased over~~2023, a decrease of $1.1 million, or 52.7%, compared to $2.1 million for the nine months ended September 30, 2022. The gain reported in the current period was attributable to the gain on sale of mortgage loans of $844,000 and gain on SBA 7(a) loan sales of $162,000, while the gain during the same period in ~~2016 by $176,000, or 6.7%. This increase~~the prior year consisted of $1.7 million in ~~service charges was due~~mortgage loan sales and $392,000 in ~~part to our deposit growth during the same period and a new deposit service charge and fee schedule implemented during February 2017.~~

SBA 7(a) loan sales.

Merchant and Debit Card Fees. We earn interchange income related to the activity of our customers’ merchant debit card usage. Debit card interchange income was ~~$2.3~~$5.5 million for the nine months ended September 30, ~~2017,~~2023, compared to ~~$2.0~~$5.4 million for the same period in ~~2016,~~2022, an increase of ~~$275,000,~~$137,000, or ~~13.6%~~2.5%. The increase was primarily due to growth in the number of ~~demand deposit accounts~~DDAs and debit card usage volume during ~~2017.~~

~~Gain on Sales~~2023. The total number of ~~Loans.~~ ~~We originate long-term fixed-rate mortgage loans for resale into the secondary market. We sold 270 loans for $49.4 million~~DDAs increased by 1,326 accounts, from 54,673 as of September 30, 2022 to 55,999 as of September 30, 2023.

Loan Processing Fee Income. Revenue earned from collection of loan processing fees was $404,000 for the nine months ended September 30, ~~2017~~2023, compared to ~~224~~$611,000 for the same period in 2022, a decrease of $207,000, or 33.9%. The decrease in loan processing fee income is primarily attributable to a decrease in the volume of newly originated, renewed or extended loans ~~for $43.2 million for~~during the period.

Mortgage Fee Income. Mortgage fee income consists of lender processing fees such as underwriting fees, administrative fees and funding fees that are collected from mortgage loans that the Bank intends to sell on the secondary
market. The decrease of $144,000, or 46.8%, from September 30, 2022 was primarily due to a lower volume of mortgage purchases and refinances during the nine months ended September 30, 2016. Gain on sale of loans was $1,490,000 for the nine months ended September 30, 2017, an increase of $259,000, or 21.0%, compared to $1,231,000 for the same period in 2016, which reflects an increase in mortgage volume and the number of loans sold.

2023.

Other. This category includes a variety of other income producing activities, including ~~mortgage~~ loan origination fees, wire transfer fees, loan administration fees, and other fee income. Other noninterest income increased ~~$257,000,~~$737,000, or ~~14.5%~~17.4%, for the nine months ended September 30, ~~2017,~~2023, compared to the same period in ~~2016~~2022, resulting primarily from a one-time gain on the sale of nonmarketable correspondent bank stock of $2.8 million during the nine months ended September 30, 2023. This was partially offset by a one-time net gain of $685,000 during the first quarter of 2022 from the termination of three interest rate swaps which was not present in 2023. Additionally, there was a decrease in warehouse lending fees of $214,000 due ~~primarily~~ to a decrease in overall warehouse lending activity and a $219,000 downward adjustment on the ~~growth~~fair value of our SBA servicing assets in ~~our loan portfolio and increased mortgage origination volume causing an increase in fee income generated from loan administration fees and income from mortgage loan origination and processing fees.~~

2023.

(Continued)

41.

Noninterest Expense

Generally, noninterest expense is composed of all employee expenses and costs associated with operating our facilities, obtaining and retaining customer relationships and providing bank services. The largest component of noninterest expense is salaries and employee benefits. Noninterest expense also includes operational expenses, such as occupancy expenses, depreciation and amortization of our facilities and our furniture, fixtures and office equipment, professional and regulatory fees, including FDIC assessments, data processing expenses, and advertising and promotion expenses.

For the nine months ended September 30, ~~2017,~~2023, noninterest expense totaled ~~$36.1~~$61.0 million, an increase of ~~$1.8~~$1.9 million, or ~~5.17%~~3.3%, compared to ~~$34.3~~$59.0 million for the nine months ended September 30, ~~2016.~~2022. The following table presents, for the periods indicated, the major categories of noninterest expense:

~~47.~~

For the Nine Months Ended September 30, Increase (Decrease)
2017 2016 2017 v. 2016
(Dollars in thousands)
Employee compensation and benefits $ 20,156
$ 19,057
$ 1,099
Non-staff expenses:
Occupancy expenses 5,552
5,196
356
Amortization 781
719
62
Software and Technology 1,533
1,368
165
FDIC insurance assessment fees 527
900
(373 )
Legal and professional fees 1,472
1,358
114
Advertising and promotions 879
752
127
Telecommunication expense 412
438
(26 )
ATM and debit card expense 766
705
61
Director and committee fees 760
680
80
Other noninterest expense 3,279
3,167
112
Total noninterest expense $ 36,117
$ 34,340
$ 1,777


	Nine Months Ended September 30,				Increase (Decrease)
(in thousands)	2023		2022		2023 vs. 2022
Employee compensation and benefits	$	36,147	$	35,113	$	1,034
Non-staff expenses:
Occupancy expenses		8,544		8,359		185
Legal and professional fees		2,470		2,046		424
Software and technology		4,417		3,957		460
Amortization		457		563		(106	)
Director and committee fees		592		637		(45	)
Advertising and promotions		824		1,105		(281	)
ATM and debit card expense		2,141		1,975		166
Telecommunication expense		532		557		(25	)
FDIC insurance assessment fees		1,186		742		444
Other noninterest expense		3,642		3,956		(314	)
Total noninterest expense	$	60,952	$	59,010	$	1,942

Material changes in the components of noninterest expense are discussed below.

Employee Compensation and Benefits. Salaries and employee benefits are the largest component of noninterest expense and include payroll expense, the cost of incentive compensation, benefit plans, health insurance and payroll taxes. Salaries and employee benefits were ~~$20.2~~$36.1 million for the nine months ended September 30, ~~2017,~~2023, an increase of ~~$1,099,000,~~$1.0 million, or ~~5.8%~~2.9%, compared to ~~$19.1~~$35.1 million for the same period in ~~2016. The increase was~~2022. Employee compensation and benefits expense increased due ~~primarily~~ to ~~an increase in per~~higher salaries of $1.5 million and higher employee ~~salaries, as well as increased health insurance expenses,~~benefits of $581,000, partially offset by lower bonus expense ~~benefit plan~~of $1.1 million.

Software and Technology. Software and technology expenses ~~and payroll taxes. As of September 30, 2017 and 2016, we had 397 and 395 full-time equivalent employees, respectively, an increase of two employees.~~

~~Occupancy Expenses.~~ ~~Occupancy expenses were $5.6 million and $5.2~~increased $460,000, or 11.6%, from $4.0 million for the nine months ended September 30, 2017 and 2016, respectively. The increase of $356,000, or 6.9%, resulted primarily from additional lease expense of banking centers totaling $181,000 and an increase in ad valorem taxes of $90,000, primarily associated with repossessed assets.

~~Software and Technology.~~ ~~Software and technology expenses increased~~ ~~$165,000, or~~ ~~12.06%, from~~ ~~$1.37~~2022 to $4.4 million ~~for the~~ ~~nine months ended September 30, 2016~~ to ~~$1.53 million~~ for the nine months ended September 30, ~~2017.~~2023. The increase is attributable primarily to ~~incremental~~additional technology investments and an increase in the cost of our core processing ~~fees~~software resulting from ~~growth~~a higher asset tier adjustment in ~~volume~~2023.

Amortization. Amortization costs include amortization of ~~our loan~~software and core deposit ~~accounts.~~

~~FDIC Insurance Assessment Fees.~~ ~~FDIC assessment fees~~intangibles. Amortization costs were ~~$527,000 and $900,000~~$457,000 for the nine months ended September 30, ~~2017 and 2016, respectively. The~~2023, a decrease of ~~$373,000,~~$106,000, or ~~41.4%~~18.8%, ~~resulted~~compared to $563,000 for the same period in 2022. The primary reason for the decrease in amortization was due to a reduction in software amortization from ~~the effect of an update in our accounting methodology during 2016 related~~$223,000 to ~~accrual of the assessment fees and an increased one time expense in the prior period.~~

~~Advertising and Promotions.~~ ~~Advertising and promotion related expenses were $879,000 and $752,000~~$122,000 for the nine months ended September 30, ~~2017~~2022 and ~~2016,~~2023, respectively.

Advertising and Promotions. Advertising and promotion-related expenses were $824,000 and $1.1 million for the nine months ended September 30, 2023 and 2022, respectively, a decrease of $281,000, or 25.4%. The decrease was primarily due to decreased advertising and vendor costs in the current period compared to the same period in the prior year.

ATM and Debit Card Expense. We pay processing fees related to the activity of our customers’ ATM and debit card usage. ATM and debit card expenses were $2.1 million for the nine months ended September 30, 2023, an increase of $166,000, or 8.4%, compared to the same period in 2022, as a result of increased ATM and debit card usage by our customers.

FDIC Insurance Assessment Fees. FDIC insurance assessment fees were $1.2 million for the nine months ended September 30, 2023, compared to $742,000 for the same period in 2022. The increase of ~~$127,000,~~$444,000, or ~~16.9%~~59.8%, was primarily due to ~~increases~~an increase in ~~advertising expense~~the insurance assessment rate resulting from changes in certain financial ratios used in the calculation and an overall increase in our ~~growth markets, especially Dallas/Fort Worth and Bryan/College Station.~~

assessment base, which is calculated as average total assets less average tangible equity.

(Continued)

42.

Other. This category includes operating and administrative expenses, such as stock option expense, expenses ~~and losses~~ related to repossession of assets, small hardware and software purchases, expense of the value of stock appreciation rights, losses incurred on problem assets, ~~OREO related expenses, gains or~~ losses on ~~the~~ sale of ~~OREO,~~other real estate owned and other assets, other real estate owned expense and write-downs, business development expenses (i.e., travel and entertainment, charitable contributions and club memberships), insurance and security expenses. Other noninterest expense ~~increased to $3.3~~decreased $314,000, or 7.9%, from $4.0 million for the nine months ended September 30, ~~2017, compared~~2022 to ~~$3.2~~$3.6 million for the ~~same period in 2016, an increase of $112,000, or 3.5%. The increase was~~nine months ended September 30, 2023 primarily due to ~~additional stock appreciation rights and stock option expenses~~a $487,000 write-down of ~~$306,000 during the~~

~~48.~~

~~comparable periods, partially offset by a decrease in loan and filing fee expenses of $168,000~~an SBA receivable balance during the ~~comparable periods, resulting from both processing efficiencies and a reduction~~third quarter of 2022 which was not applicable in ~~appraisal review costs by reviewing the appraisals internally, rather than through a third party vendor.~~

2023.

Income Tax Expense

The amount of income tax expense we incur is influenced by the amounts of our pre-tax income, tax-exempt income and other nondeductible expenses. Deferred tax assets and liabilities are reflected at current income tax rates in effect for the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

For the nine months ended September 30, ~~2017~~2023 and ~~2016,~~2022, income tax expense totaled ~~$4.6~~$5.8 million and ~~$3.3~~$7.1 million, respectively. The decrease in income tax expense was primarily due to a decrease in net earnings before taxes of $9.5 million. Our effective tax rates for the nine months ended September 30, ~~2017~~2023 and ~~2016~~2022 were ~~28.54%~~19.34% and ~~27.79%~~17.91%, respectively.

Discussion and Analysis of Results of Operations for the Three Months Ended September 30, ~~2017~~2023 and ~~2016~~

2022

Results of Operations

The following discussion and analysis of our results of operations compares our results of operations for the three months ended September 30, ~~2017~~2023 with the three months ended September 30, ~~2016.~~2022. The results of operations for the three months ended September 30, ~~2017~~2023 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, ~~2017.~~

2023.

Net earnings attributable to Guaranty Bancshares Inc. were ~~$4.1~~$6.3 million for the three months ended September 30, ~~2017,~~2023, as compared to ~~$3.4~~$10.9 million for the three months ended September 30, ~~2016.~~ 2022. Basic earnings attributable to Guaranty Bancshares, Inc. per share were $0.54 for the three months ended September 30, 2023 compared to $0.92 during the same period in 2022.

The following table presents key earnings data for the periods indicated:

For the Three Months Ended September 30,
2017 2016
(Dollars in thousands, except per share data)
Net earnings $ 4,139
$ 3,370
Net earnings per common share
-basic 0.37
0.38
-diluted 0.37
0.38
Net interest margin⁽¹⁾
3.38 % 3.26 %
Net interest rate spread⁽²⁾
3.13 % 3.07 %
Return on average assets 0.87 % 0.75 %
Return on average equity 7.99 % 9.20 %
Average equity to average total assets 10.86 % 8.16 %

~~(1) Net interest margin is equal to net interest income divided by average interest-earning assets.~~

~~(2) Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.~~


	Quarter Ended September 30,
(dollars in thousands, except per share data)	2023			2022
Net earnings attributable to Guaranty Bancshares, Inc.	$	6,297		$	10,903
Net earnings attributable to Guaranty Bancshares, Inc. per common share
-basic		0.54			0.92
-diluted		0.54			0.91
Net interest margin(1)		3.06	%		3.56	%
Net interest rate spread(2)		1.94	%		3.22	%
Return on average assets		0.78	%		1.30	%
Return on average equity		8.43	%		14.87	%
Average equity to average total assets		9.22	%		8.71	%
Cash dividend payout ratio		42.59	%		23.91	%

(1) Net interest margin is equal to net interest income divided by average interest-earning assets.
(2) Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.

Net Interest Income

Net interest income, before the provision for credit losses, in the ~~three months ended September 30, 2017~~third quarter of 2023 and 2022 was ~~$15.1~~$23.3 million ~~compared to $13.7~~and $28.3 million, ~~for the three months ended September 30, 2016, an increase~~respectively, a decrease of ~~$1.4~~$5.0 million, or ~~10.5%~~17.7%. The ~~increase~~decrease in net interest income ~~was comprised~~resulted from an increase in interest expense of ~~a $1.7~~$12.3 million, or ~~10.6%~~295.2%, compared to the prior year quarter, which was partially offset by an increase in interest income ~~offset by a $304,000,~~of $7.3 million, or ~~11.0%~~22.6%, from the same quarter in the prior year. The increase in interest ~~expense.~~expense was due primarily to an $10.6 million increase in deposit interest and a $1.4 million increase in FHLB advance interest, each resulting from higher interest rates between the two periods. The ~~growth~~increase in interest income was primarily ~~attributable~~due to ~~a $76.7~~an increase in loan interest of $7.3 million, or ~~6.3%~~26.6%, increase in average loans outstanding for the three months ended September 30, 2017, compared to the three months ended September 30, 2016, and further improved by a 0.07% increase in the average yield on total loans. The increase in average loans outstanding was primarily due to organic growth in all of our markets and continuing maturity of ~~de novo~~ ~~and acquired locations in the Dallas/Fort Worth metroplex and Bryan/College Station markets. The $304,000~~

~~49.~~

increase in interest expense for the three months ended September 30, 2017 was primarily related to a $62.9 million, or 5.4%, increase in average interest-bearing deposits over the same period in 2016, and an increase in interest income on fed funds sold and

(Continued)

43.

interest-bearing deposits in other banks of $499,000, or 257.2%, during the ~~average rate of 0.08%. The majority of this increase was due~~current quarter compared to ~~organic growth, primarily in money market accounts, driven in part by favorable rates that were offered in our Bryan/College Station and Dallas/Fort Worth metroplex markets. For~~ the ~~three months ended September 30, 2017, net~~prior year quarter.

Net interest margin, ~~and net interest spread were 3.38% and 3.13%, respectively, compared to 3.26% and 3.07%~~on a taxable equivalent basis, for the ~~same period in 2016, which reflects the increases in interest income discussed above relative to the increases in interest expense.~~

third quarter of 2023 and 2022 was 3.02% and 3.59%, respectively.

Average Balance Sheet Amounts, Interest Earned and Yield Analysis

The following table presents an analysis of net interest income and net interest spread for the periods indicated, including average outstanding balances for ~~each~~ each major category of interest-earning assets and interest-bearing liabilities, the interest earned or paid on such amounts, and the average rate earned or paid on such assets or liabilities, respectively.

The table also sets forth the net interest margin on average total interest-earning assets for the same periods. Interest earned on loans that are classified as nonaccrual is not recognized in income; however, the balances are reflected in average outstanding balances for the period. For the three months ended September 30, ~~2017~~2023 and ~~2016,~~2022, the amount of interest income not recognized on nonaccrual loans was not material. Any nonaccrual loans have been included in the table as loans carrying a zero yield.

~~50.~~


	Quarter Ended September 30,
	2023								2022
(dollars in thousands)	Average Outstanding Balance			Interest Earned/ Interest Paid		Average Yield/ Rate			Average Outstanding Balance			Interest Earned/ Interest Paid		Average Yield/ Rate
ASSETS
Interest-earning assets:
Total loans(1)	$	2,332,171		$	34,765		5.91	%	$	2,191,411		$	27,455		4.97	%
Securities available for sale		181,946			1,346		2.93			196,875			1,239		2.50
Securities held to maturity		432,687			2,710		2.48			707,601			3,416		1.92
Nonmarketable equity securities		25,429			304		4.74			21,382			172		3.19
Interest-bearing deposits in other banks		52,424			693		5.24			32,233			194		2.39
Total interest-earning assets		3,024,657			39,818		5.22			3,149,502			32,476		4.09
Allowance for credit losses		(31,574	)							(28,777	)
Noninterest-earning assets		220,406								216,623
Total assets	$	3,213,489							$	3,337,348
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Interest-bearing deposits	$	1,726,218		$	13,069		3.00	%	$	1,650,314		$	2,455		0.59	%
Advances from FHLB and fed funds purchased		194,115			2,588		5.29			202,832			1,211		2.37
Line of credit		5,011			204		16.15			—			—		—
Subordinated debt		47,730			534		4.44			51,087			509		3.95
Securities sold under agreements to repurchase		22,718			121		2.11			6,844			4		0.23
Total interest-bearing liabilities		1,995,792			16,516		3.28			1,911,077			4,179		0.87
Noninterest-bearing liabilities:
Noninterest-bearing deposits		888,772								1,109,205
Accrued interest and other liabilities		32,716								26,260
Total noninterest-bearing liabilities		921,488								1,135,465
Equity		296,209								290,806
Total liabilities and equity	$	3,213,489							$	3,337,348
Net interest rate spread(2)							1.94	%							3.22	%
Net interest income				$	23,302							$	28,297
Net interest margin(3)							3.06	%							3.56	%
Net interest margin, fully taxable equivalent(4)							3.02	%							3.59	%

(1) Includes average outstanding balances of loans held for sale of $1.1 million and $2.1 million for the quarter ended September 30, 2023 and 2022, respectively.
(2) Net interest spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
(3) Net interest margin is equal to net interest income divided by average interest-earning assets, annualized.
(4) Net interest margin on a taxable equivalent basis is equal to net interest income adjusted for nontaxable income divided by average interest-earning assets, annualized, using a marginal tax rate of 21%.

(Continued)

44.

For the Three Months Ended September 30,
2017 2016
Average Outstanding Balance Interest Earned/ Interest Paid Average Yield/ Rate Average Outstanding Balance Interest Earned/ Interest Paid Average Yield/ Rate
(Dollars in thousands)
Assets
Interest-earnings assets:
Total loans⁽¹⁾
$ 1,300,307
$ 15,486
4.72 % $ 1,223,611
$ 14,294
4.65 %
Securities available for sale 245,409
1,376
2.22 % 163,563
709
1.72 %
Securities held to maturity 180,737
1,088
2.39 % 196,003
1,252
2.54 %
Nonmarketable equity securities 6,541
59
3.58 % 8,816
61
2.75 %
Interest-bearing deposits in other banks 40,997
156
1.51 % 75,112
111
0.59 %
Total interest-earning assets 1,773,991
$ 18,165
4.06 % 1,667,105
$ 16,427
3.92 %
Allowance for loan losses (12,492 ) (11,843 )
Noninterest-earnings assets 145,958
140,087

Total assets $ 1,907,457
$ 1,795,349

Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Interest-bearing deposits $ 1,224,991
$ 2,730
0.88 % $ 1,162,060
$ 2,329
0.80 %
Advances from FHLB and fed funds purchased 50,420
157
1.24 % 93,001
97
0.41 %
Other debt —
—
— % 10,000
104
4.14 %
Subordinated debentures 13,821
164
4.71 % 20,310
217
4.25 %
Securities sold under agreements to repurchase 14,262
12
0.33 % 11,952
12
0.40 %
Total interest-bearing liabilities 1,303,494
$ 3,063
0.93 % 1,297,323
$ 2,759
0.85 %
Noninterest-bearing liabilities:
Noninterest-bearing deposits 390,043
344,721

Accrued interest and other liabilities 6,798
6,752

Total noninterest-bearing liabilities 396,841
351,473

Shareholders’ equity 207,122
146,553

Total liabilities and shareholders’ equity $ 1,907,457
$ 1,795,349

Net interest rate spread⁽²⁾
3.13 % 3.07 %
Net interest income $ 15,102
$ 13,668

Net interest margin⁽³⁾
3.38 % 3.26 %

~~(1) Includes average outstanding balances of loans held for sale of $2.1 million and $1.7 million for the three months ended September 30, 2017 and 2016, respectively.~~

~~(2) Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.~~

~~(3) Net interest margin is equal to net interest income divided by average interest-earning assets.~~

The following table presents the change in interest income and interest expense for the periods indicated for each major component of interest-earning assets and interest-bearing liabilities and distinguishes between the changes attributable to changes in volume and interest rates. For purposes of this table, changes attributable to both rate and volume that cannot be segregated have been allocated to rate.

~~51.~~

For the Three Months Ended September 30, 2017 vs. 2016
Increase (Decrease)
Due to Change in Total Increase
Volume Rate (Decrease)
(Dollars in thousands)
Interest-earning assets:
Total loans $ 3,624
$ (2,432 ) $ 1,192
Securities available for sale 1,821
(1,154 ) 667
Securities held to maturity (365 ) 201
(164 )
Nonmarketable equity securities (81 ) 79
(2 )
Interest-earning deposits in other banks (515 ) 560
45
Total increase (decrease) in interest income $ 4,484
$ (2,746 ) $ 1,738

Interest-bearing liabilities:
Interest-bearing deposits $ 556
$ (155 ) $ 401
Advances from FHLB and fed funds purchased (526 ) 586
60
Other debt —
(104 ) (104 )
Subordinated debentures (305 ) 252
(53 )
Securities sold under agreements to repurchase 8
(8 ) —
Total increase (decrease) in interest expense (267 ) 571
304
Increase (decrease) in net interest income $ 4,751
$ (3,317 ) $ 1,434


	For the Three Months Ended September 30, 2023 vs. 2022
	Increase (Decrease)
	Due to Change in						Total Increase
(in thousands)	Volume			Rate			(Decrease)
Interest-earning assets:
Total loans	$	1,763		$	5,547		$	7,310
Securities available for sale		(94	)		201			107
Securities held to maturity		(1,330	)		624			(706	)
Nonmarketable equity securities		33			99			132
Interest-earning deposits in other banks		122			377			499
Total increase in interest income	$	494		$	6,848		$	7,342

Interest-bearing liabilities:
Interest-bearing deposits	$	113		$	10,501		$	10,614
Advances from FHLB		(52	)		1,429			1,377
Line of credit		204			—			204
Subordinated debt		(33	)		58			25
Securities sold under agreements to repurchase		9			108			117
Total increase in interest expense		241			12,096			12,337
Increase (decrease) in net interest income	$	253		$	(5,248	)	$	(4,995	)

Provision for ~~Loan~~Credit Losses

~~The~~

We recorded no provision for ~~loan~~credit losses for the three months ended September 30, 2017 was $800,000 compared to $840,000 for the three months ended September 30, 2016. Net charge offs were $1.0 million for the three months ended September 30, 2017 compared to $1.3 million for the same period in 2016. Two relationships totaling approximately $700,000 were charged off during the third quarter of ~~2017~~2023, and ~~one relationship totaling approximately $1.2 million was charged off during~~a $600,000 provision in the third quarter of ~~2016.~~

2022. During the fourth quarter of 2022, we recorded a $2.8 million provision to incorporate forecasts for an economic downturn and possible borrower stressors into our CECL model. The factors that were adjusted in the fourth quarter of 2022 are still relevant, however certain minor adjustments were made in subsequent quarters to reflect current portfolio credit quality trends. As of September 30, 2023, our allowance for credit losses as a percentage of total loans was 1.34%.

Noninterest Income

The following table presents components of noninterest income for the three months ended September 30, ~~2017~~2023 and ~~2016~~2022 and the period-over-period variations in the categories of noninterest income:

For the Three Months Ended
September 30, Increase (Decrease)
2017 2016 2017 v. 2016
(Dollars in thousands)
Noninterest income:
Service charges on deposit accounts $ 986
$ 914
$ 72
Merchant and debit card fees 778
690
88
Fiduciary income 362
364
(2 )
Gain on sales of loans 589
486
103
Bank-owned life insurance income 116
112
4
Gain (loss) on sales of investment securities —
64
(64 )
Loan processing fee income 146
161
(15 )
Other noninterest income 725
611
114
Total noninterest income $ 3,702
$ 3,402
$ 300

~~52.~~


	Quarter Ended September 30,				Increase (Decrease)
(in thousands)	2023		2022		2023 vs. 2022
Noninterest income:
Service charges	$	1,131	$	1,146	$	(15	)
Gain on sale of loans		218		338		(120	)
Fiduciary and custodial income		637		576		61
Bank-owned life insurance income		267		215		52
Merchant and debit card fees		1,752		1,738		14
Loan processing fee income		128		192		(64	)
Mortgage fee income		46		75		(29	)
Other noninterest income		760		1,523		(763	)
Total noninterest income	$	4,939	$	5,803	$	(864	)

Total noninterest income ~~increased $300,000,~~decreased $864,000, or ~~8.8%~~14.9%, for the three months ended September 30, ~~2017~~2023 compared to the same period in ~~2016.~~2022. Material changes in the components of noninterest income are discussed below.

~~Service Charges~~

Gain on ~~Deposit Accounts.~~ Sale of Loans. We ~~earn fees from our customers~~sold 35 mortgage loans for ~~deposit-related services, and these fees constitute a significant and predictable component~~$8.9 million during the three months ended September 30, 2023 compared to 50 mortgage loans for $14.6 million during the three months ended September 30, 2022. Gain on sale of ~~our noninterest income. Service charges on deposit accounts were $986,000~~loans was $218,000 for the three months ended September 30, ~~2017, which increased over the same period in 2016 by $72,000,~~2023, a decrease of $120,000, or ~~7.9%. This increase in service charges was due in part to our deposit growth during the same period and a new deposit service charge and fee schedule implemented during February 2017.~~

~~Merchant and Debit Card Fees.~~ ~~We earn interchange income related to the activity of our customers’ merchant debit card usage. Debit card interchange income was $778,000 for the three months ended September 30, 2017~~35.5%, compared to ~~$690,000~~$338,000 for the same period in ~~2016, an~~2022. The total gain on loans sold during the quarter ended September 30, 2023 consisted

(Continued)

45.

of a gain of $190,000 in mortgage loans and a gain of $28,000 in SBA 7(a) loans sold, compared to $338,000 of mortgage and no SBA loans sold, respectively, during the quarter ended September 30, 2022.

Fiduciary and Custodial Income. We have trust powers and provide fiduciary and custodial services through our trust and wealth management division. Fiduciary income increased $61,000, or 10.6%, compared to the same period in 2022. The revenue increase resulted primarily from 32 new accounts that opened in 2023 and generated additional income during the quarter. Furthermore, revenue for our services fluctuates by month with the market value for all publicly traded assets, which are primarily held in irrevocable trusts and investment management accounts that carry higher fees. Additionally, our custody-only assets are carried in a tiered percentage rate fee schedule charged against market value.

Bank-Owned Life Insurance Income. We invest in bank-owned life insurance due to its attractive nontaxable return and protection against the loss of ~~$88,000,~~our key employees. We record income based on the growth of the cash surrender value of these policies as well as the annual yield net of fees and charges, including mortality charges. Income from bank-owned life insurance increased by $52,000, or ~~12.8%.~~24.2%, during the quarter ended September 30, 2023 compared to the quarter ended September 30, 2022. The increase ~~was~~in income is primarily due to ~~growth in~~additional policies purchased on the ~~number~~lives of ~~demand deposit accounts and debit card usage volume during 2017.~~

~~Gain on Sale~~existing officers of ~~Loans.~~ ~~We originate long-term fixed-rate mortgage loans for resale into~~ the ~~secondary market. We sold 109 loans for $19.9 million~~Company.

Loan Processing Fee Income. Revenue earned from collection of loan processing fees was $128,000 for the ~~three months~~quarter ended September 30, ~~2017~~2023, compared to ~~92 loans for $16.2 million for the three months ended September 30, 2016. Gain on sale of loans was $589,000 for the three months ended September 30, 2017, an increase of $103,000, or 21.2%, compared to $486,000~~$192,000 for the same period in ~~2016, which reflects an increase~~2022, a decrease of $64,000, or 33.3%. The decrease is primarily due to a decline in the volume of newly originated, renewed or extended loans during the period.

Mortgage Fee Income. Mortgage fee income consists of lender processing fees such as underwriting fees,
administrative fees and funding fees that are collected from mortgage loans that the Bank intends to sell on the secondary
market. Mortgage fee income decreased from $75,000 to $46,000 for the quarters ended September 30, 2023 and 2022, respectively. The decrease of $29,000, or 38.7%, from September 30, 2022 was primarily due to a lower volume of mortgage purchases and refinances during the ~~number of loans sold.~~

quarter ended September 30, 2023.

Other.This category includes a variety of other income producing activities, including mortgage loan origination fees, wire transfer fees, loan administration fees, and other fee income. Other noninterest income ~~increased $114,000,~~decreased $763,000, or ~~18.7%~~50.1%, ~~for the three months ended September 30, 2017~~ compared to the same period in ~~2016~~2022. The decrease in other noninterest income was due primarily to a gain on sale of an airplane asset of $894,000 during the ~~growth~~third quarter of 2022 which was not present in ~~our loan portfolio and increased mortgage origination volume causing an increase in fee income generated from loan administration fees and income from mortgage loan origination and processing fees.~~

the current quarter.

Noninterest Expense

For the three months ended September 30, ~~2017,~~2023, noninterest expense totaled ~~$12.2~~$20.5 million, an increase of ~~$686,000,~~$277,000, or ~~6.0%~~1.4%, compared to ~~$11.5~~$20.2 million for the three months ended September 30, ~~2016.~~2022. The following table presents, for the periods indicated, the major categories of noninterest expense:

For the Three Months Ended
September 30, Increase (Decrease)
2017 2016 2017 v. 2016
(Dollars in thousands)
Employee compensation and benefits $ 6,729
$ 6,370
$ 359
Non-staff expenses:
Occupancy expenses 1,938
1,720
218
Amortization 258
240
18
Software and Technology 533
451
82
FDIC insurance assessment fees 162
300
(138 )
Legal and professional fees 692
481
211
Advertising and promotions 303
278
25
Telecommunication expense 128
130
(2 )
ATM and debit card expense 253
203
50
Director and committee fees 253
222
31
Other noninterest expense 917
1,085
(168 )
Total noninterest expense $ 12,166
$ 11,480
$ 686


	Quarter Ended September 30,				Increase (Decrease)
(in thousands)	2023		2022		2023 vs. 2022
Employee compensation and benefits	$	11,944	$	11,851	$	93
Non-staff expenses:
Occupancy expenses		2,960		2,800		160
Legal and professional fees		902		503		399
Software and technology		1,490		1,409		81
Amortization		147		166		(19	)
Director and committee fees		192		213		(21	)
Advertising and promotions		288		378		(90	)
ATM and debit card expense		803		723		80
Telecommunication expense		178		184		(6	)
FDIC insurance assessment fees		363		272		91
Other noninterest expense		1,247		1,738		(491	)
Total noninterest expense	$	20,514	$	20,237	$	277

Material changes in the components of noninterest expense are discussed below.

~~53.~~

Employee Compensation and Benefits. Salaries and employee benefits are the largest component of noninterest expense and include payroll expense, the cost of incentive compensation, benefit plans, health insurance and payroll taxes. Salaries and employee benefits were ~~$6.7~~$11.9 million for the three months ended September 30, ~~2017,~~2023, an increase of ~~$359,000,~~$93,000, or ~~5.6%~~0.8%, compared to ~~$6.4~~$11.9 million for the same period in ~~2016.~~2022. The increase resulted primarily from higher salary expense and employee benefits during the quarter ended September 30, 2023.

(Continued)

46.

Occupancy Expense. Occupancy expenses are mainly composed of depreciation expense on fixed assets and lease expense related to ASC 842 accounting. Occupancy expenses increased $160,000, or 5.7%, compared to the same quarter of the prior year. The increase was primarily due ~~primarily~~ to an $80,000 increase in ~~per employee salaries, as well as increased health insurance expenses, benefit plan expenses~~lease expense and ~~payroll taxes. As of~~a $76,000 increase in maintenance and service expense during the quarter ended September 30, ~~2017~~2023.

Legal and ~~2016, we had 397~~Professional Fees. Legal and ~~395 full-time equivalent employees,~~professional fees, which include audit, loan review and regulatory assessments other than FDIC insurance assessment fees, were $902,000 and $503,000 for the quarters ended September 30, 2023 and 2022, respectively, an increase of ~~two employees.~~

~~Occupancy Expenses.~~ ~~Occupancy~~$399,000, or 79.3%. The increase was primarily due to recruiting fees during the quarter ended September 30, 2023.

Advertising and Promotions. Advertising and promotion-related expenses were ~~$1.9 million~~$288,000 and ~~$1.7 million~~$378,000 for the three months ended September 30, ~~2017~~2023 and ~~2016, respectively.~~2022, respectively, a decrease of $90,000, or 23.8%. The ~~increase of $218,000, or 12.7%, resulted~~decrease was primarily ~~from additional lease expense of banking centers~~due to decreased vendor costs in the current period compared to the same period in the prior year.

ATM and ~~an increase during the quarter of machine~~Debit Card Expense. ATM and ~~equipment servicing~~debit card expenses ~~related to automated teller machines and banking center alarm systems.~~

~~Software and Technology Fees.~~ ~~Software and technology fees consist of fees paid to third parties for support of software and technology products. Software support fee expense was $533,000~~were $803,000 for the three months ended September 30, ~~2017,~~2023, an increase of $80,000, or 11.1%, compared to ~~$451,000~~$723,000 for the same period in ~~2016, an increase~~2022 as a result of ~~$82,000, or 18.2%. The increase resulted primarily from general increases in support~~increased ATM and ~~technology contract costs.~~

debit card usage by our customers.

FDIC Insurance Assessment ~~Fees.~~ Fees. FDIC insurance assessment fees were ~~$162,000 and $300,000~~$363,000 for the three months ended September 30, ~~2017 and 2016, respectively.~~2023, compared to $272,000 for the same period in 2022. The ~~decrease~~increase of ~~$138,000,~~$91,000, or ~~46.0%~~33.5%, ~~resulted from the effect of~~was primarily due to an ~~update~~increase in ~~our accounting methodology during 2016 related to accrual of~~ the assessment ~~fees and an increased one time expense~~rate resulting from changes in financial ratios used in the ~~prior period.~~

calculation as well a higher assessment base, which is calculated as average total assets, less average tangible equity.

Other. This category includes operating and administrative expenses, such as stock option expense, expenses ~~and losses~~ related to repossession of assets, small hardware and software purchases, expense of the value of stock appreciation rights, losses incurred on problem assets, ~~OREO related expenses, gains or~~ losses on ~~the~~ sale of ~~OREO,~~other real estate owned and other assets, other real estate owned expense and write-downs, business development expenses (i.e., travel and entertainment, charitable contributions and club memberships), insurance and security expenses. Other noninterest expense decreased ~~to $917,000 for the three months ended September 30, 2017, compared to $1.1 million for the same period in 2016, a decrease of $168,000,~~$491,000, or ~~15.48%. The decrease was~~28.3%, primarily due to ~~reductions~~a write-down in ~~office and computer supplies, account promotion expense and~~the second quarter of 2022 of $487,000 related to an SBA loan ~~and filing expenses, quarter-over-quarter, partially offset by an increase in liability insurance expense.~~

related receivable that was subsequently resolved.

Income Tax Expense

For the three months ended September 30, ~~2017~~2023 and ~~2016,~~2022, income tax expense totaled ~~$1.7~~$1.4 million and ~~$1.4~~$2.4 million, respectively. ~~Our~~The effective tax rates for the three months ended September 30, ~~2017~~2023 and ~~2016,~~2022 were ~~29.10%~~18.60% and ~~29.05%~~17.82%, respectively.

The effective tax rates differ from the statutory federal tax rate of 21% for the three months ended September 30, 2023 and 2022, largely due to tax exempt interest income earned on certain investment securities and loans and the nontaxable earnings on bank-owned life insurance.

Discussion and Analysis of Financial Condition as of September 30, ~~2017~~

2023

Assets

Our total assets ~~increased $95.7~~decreased $121.1 million, or ~~5.2%~~3.6%, from ~~$1.8~~$3.35 billion as of December 31, ~~2016~~2022 to ~~$1.9~~$3.23 billion as of September 30, ~~2017. Our asset growth~~2023. The decline was primarily due to ~~increases~~a $111.0 million, or 15.9%, decrease in ~~our loan~~total investment securities and ~~securities portfolios, offset by decreases~~a decrease in ~~cash and other assets.~~

gross loans of $59.9 million, or 2.5%, during the period.

Loan Portfolio

Our primary source of income is derived through interest earned on loans to small- to medium-sized businesses, commercial companies, professionals and individuals located in our primary market areas. A substantial portion of our loan portfolio consists of commercial and industrial loans and real estate loans secured by commercial real estate properties located in our primary market areas. Our loan portfolio represents the highest yielding component of our earning asset base.

Our loan portfolio is the largest category of our earning assets. As of September 30, ~~2017,~~2023 and December 31, 2022 total loans held for investment were ~~$1.31~~$2.32 billion, ~~an increase~~a decrease of ~~$62.2~~$60 million ~~or 5.0%, from the December 31, 2016 balance of $1.25 billion. In addition to these amounts, $3.4~~between periods. Additionally, $2.5 million and ~~$2.6~~$3.2 million in loans were classified as held for sale as of September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, respectively.

~~54.~~

(Continued)

47.

Total loans, excluding those held for sale, as a percentage of deposits, were ~~80.8%~~87.2% and ~~79.0%~~88.7% as of September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, respectively. Total loans, excluding those held for sale, as a percentage of total assets, were ~~67.9%~~71.8% and ~~68.1%~~71.0% as of September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, respectively.

The following table summarizes our loan portfolio by type of loan and dollar change and percentage change from December 31, ~~2016~~2022 to September 30, ~~2017:~~

As of September 30, 2017 As of December 31, 2016 Dollar Change Percent Change
(Dollars in thousands)
Commercial and industrial $ 192,663
$ 223,997
$ (31,334 ) (13.99 )%
Real estate:
Construction and development 201,067
129,366
71,701
55.42 %
Commercial real estate 393,314
367,656
25,658
6.98 %
Farmland 54,349
62,362
(8,013 ) (12.85 )%
1-4 family residential 365,889
362,952
2,937
0.81 %
Multi-family residential 23,235
26,079
(2,844 ) (10.91 )%
Consumer and overdrafts 52,409
53,822
(1,413 ) (2.63 )%
Agricultural 24,449
18,901
5,548
29.35 %
Total loans held for investment $ 1,307,375
$ 1,245,135
$ 62,240
5.00 %

Total loans held for sale $ 3,400
$ 2,563
$ 837
32.66 %

2023:


(in thousands)	As of September 30, 2023		As of December 31, 2022		Increase (Decrease)			Percent Change
Commercial and industrial	$	292,410	$	314,067	$	(21,657	)		(6.90	%)
Real estate:
Construction and development		317,484		377,135		(59,651	)		(15.82	%)
Commercial real estate		901,321		887,587		13,734			1.55	%
Farmland		188,614		185,817		2,797			1.51	%
1-4 family residential		504,002		493,061		10,941			2.22	%
Multi-family residential		42,720		45,147		(2,427	)		(5.38	%)
Consumer and overdrafts		58,622		61,676		(3,054	)		(4.95	%)
Agricultural		13,076		13,686		(610	)		(4.46	%)
Total loans held for investment	$	2,318,249	$	2,378,176	$	(59,927	)		(2.52	%)

Total loans held for sale	$	2,506	$	3,156	$	(650	)		(20.60	%)

The contractual maturity ranges of loans in our loan portfolio and the amount of such loans with fixed and floating interest rates in each maturity range as of September 30, 2023 are summarized in the following table:


	As of September 30, 2023
(in thousands)	One Year or Less		After One Through Five Years		After Five Through Fifteen Years		After Fifteen Years		Total
Commercial and industrial	$	97,999	$	131,844	$	60,112	$	2,455	$	292,410
Real estate:
Construction and development		163,263		37,901		75,178		41,142		317,484
Commercial real estate		46,754		234,984		316,940		302,643		901,321
Farmland		34,590		67,403		43,496		43,125		188,614
1-4 family residential		30,596		33,423		181,124		258,859		504,002
Multi-family residential		1,355		20,901		15,338		5,126		42,720
Consumer		14,072		40,727		1,859		1,964		58,622
Agricultural		8,423		4,286		367		—		13,076
Total loans	$	397,052	$	571,469	$	694,414	$	655,314	$	2,318,249
Amounts with fixed rates	$	231,875	$	450,578	$	41,747	$	37,207	$	761,407
Amounts with adjustable rates	$	165,177	$	120,891	$	652,667	$	618,107	$	1,556,842

Nonperforming Assets

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due. In general, we place loans on nonaccrual status when they become 90 days past due. We also place loans on nonaccrual status if they are less than 90 days past due if the collection of principal or interest is in doubt. When interest accrual is discontinued, all unpaid accrued interest is reversed from income. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are, in management’s opinion, reasonably assured.

We believe our conservative lending approach and focused management of nonperforming assets has resulted in sound asset quality and timely resolution of problem assets. We have several procedures in place to assist us in maintaining the overall quality of our loan portfolio. We have established underwriting guidelines to be followed by our bankers, and we also monitor our delinquency levels for any negative or adverse trends. There can be no assurance, however, that our loan portfolio will not become subject to increasing pressures from deteriorating borrower credit due to general economic conditions.

~~We had $10.2 million~~

(Continued)

48.

Nonperforming assets as a percentage of total loans were 0.13% at September 30, 2023, compared to 0.46% at December 31, 2022. The Bank's nonperforming assets consist primarily of nonaccrual loans. The decrease in nonperforming assets asis primarily due to the resolution of ~~September 30, 2017, compared to $9.6 million as of December 31, 2016. We had $5.8 million in~~several nonperforming loans as of September 30, 2017, compared to $4.4 million as of December 31, 2016. The $1.3 million, or 30.5%, increase in our nonperforming (nonaccrual) loans from December 31, 2016 to September 30, 2017 primarily relates to an increase in nonaccrual loans in our 1-4 family residential portfolio of $1.0 million,assets during the second quarter, four of which ~~$612,000 is related to one borrower~~had outstanding principal balances of $6.7 million and ~~several~~were Small Business Administration (SBA) 7(a), partially guaranteed (75%) loans, ~~that are~~acquired in the ~~process~~June 2018 acquisition of ~~foreclosure. We also had~~Westbound Bank. An additional nonperforming loan with an ~~increase~~outstanding balance of $1.4 million was resolved in ~~our nonaccrual commercial real estate portfolio~~the second quarter and paid off. Each of $1.7 million, of which $1.5 million is related to two borrowers. The increase in nonaccrual loans was partially offset by a decrease in our construction and development nonaccrual portfolio, all of which was attributable to one borrower that was returned to accrual status in accordancethese nonperforming assets were resolved with ~~our loan policy.~~

~~55.~~

minimal incurred losses.

The following table presents information regarding nonperforming assets and loans as of:

September 30, 2017 December 31, 2016
(Dollars in thousands)
Nonaccrual loans $ 5,755
$ 4,409
Accruing loans 90 or more days past due —
—
Total nonperforming loans 5,755
4,409
Other real estate owned:
Commercial real estate, construction and development, and farmland 1,003
1,074
Residential real estate 926
618
Total other real estate owned 1,929
1,692
Repossessed assets owned 2,479
3,530
Total other assets owned 4,408
5,222
Total nonperforming assets $ 10,163
$ 9,631
Restructured loans-nonaccrual $ —
$ 43
Restructured loans-accruing 316
462
Ratio of nonperforming loans to total loans⁽¹⁾⁽²⁾
0.44 % 0.35 %
Ratio of nonperforming assets to total assets 0.53 % 0.53 %

~~(1) Excludes loans held for sale of $3.4 million and $2.6 million as of September 30, 2017and December 31, 2016, respectively.~~

~~(2) Restructured loans-nonaccrual are included in nonaccrual loans which are a component of nonperforming loans.~~


(dollars in thousands)	September 30, 2023			December 31, 2022
Nonaccrual loans	$	2,712		$	10,848
Accruing loans 90 or more days past due		—			—
Total nonperforming loans		2,712			10,848
Other real estate owned:
Residential real estate		—			38
Total other real estate owned		—			38
Repossessed assets owned		250			—
Total other assets owned		250			38
Total nonperforming assets	$	2,962		$	10,886
Ratio of nonaccrual loans to total loans(1)		0.12	%		0.46	%
Ratio of nonperforming loans to total loans(1)		0.12	%		0.46	%
Ratio of nonperforming assets to total loans(1)		0.13	%		0.46	%
Ratio of nonperforming assets to total assets		0.09	%		0.32	%

(1) Excludes loans held for sale of $2.5 million and $3.2 million as of September 30, 2023 and December 31, 2022, respectively.

The following table presents nonaccrual loans by category as of:

September 30, 2017 December 31, 2016
(Dollars in thousands)
Nonaccrual loans by category:
Real estate:
Construction and development $ —
$ 1,825
Commercial real estate 2,113
415
Farmland 162
176
1-4 family residential 2,716
1,699
Multi-family residential 228
5
Commercial and industrial 57
82
Consumer 164
192
Agricultural 315
15
Total $ 5,755
$ 4,409


(in thousands)	September 30, 2023		December 31, 2022
Commercial and industrial	$	273	$	115
Real estate:
Construction and development		117		1,435
Commercial real estate		32		7,271
Farmland		174		109
1-4 family residential		1,840		1,691
Consumer and overdrafts		238		170
Agricultural		38		57
Total	$	2,712	$	10,848

Potential Problem Loans

From a credit risk standpoint, we classify loans in one of five ~~categories:~~risk ratings: pass, special mention, substandard, doubtful or loss. Within the pass ~~category,~~rating, we classify loans into one of the following ~~four~~five subcategories based on perceived credit risk, including repayment capacity and collateral security: superior, excellent, good, acceptable and ~~acceptable.~~acceptable/watch. The classifications of loans reflect a judgment about the risks of default and loss associated with the loan. We review the ratings on credits monthly. Ratings are adjusted to reflect the degree of risk and loss that is believed to be inherent in each credit as of each monthly reporting period. Our methodology is structured so that specific ~~reserve~~ACL allocations are increased in accordance with deterioration in credit quality (and a corresponding increase in risk and loss) or decreased in accordance with improvement in credit quality (and a corresponding decrease in risk and loss).

Credits rated special mention show clear signs of financial weaknesses or deterioration in creditworthiness; however, such concerns are not so pronounced that we generally expect to experience significant loss within the ~~short-~~

~~56.~~

~~term.~~short-term. Such credits typically maintain the ability to perform within standard credit terms and credit exposure is not as prominent as credits with a lower rating. The increase in special mention loans from December 31, 2016 to September 30, 2017 is attributable to one borrower, with an outstanding balance of $19.0 million, whose cash flow was adversely impacted by hurricane Harvey, thus was added to our special mention/watch list until the cash flow returns to normal levels. The physical collateral was not impacted and we do not expect any long term impairment or losses as a result of the hurricane for this loan.

Credits rated substandard are those in which the normal repayment of principal and interest may be, or has been, jeopardized by reason of adverse trends or developments of a financial, managerial, economic or political nature, or important weaknesses which exist in collateral. A protracted workout on these credits is a distinct possibility. Prompt corrective action is therefore required to reduce exposure and to assure that adequate remedial measures are taken by the borrower. Credit exposure becomes more likely in such credits and a serious evaluation of the secondary support to the credit is performed.

(Continued)

49.

Credits rated as doubtful have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full questionable and there is a high probability of loss based on currently existing facts, conditions and values.

Credits rated as loss are ~~charged-off.~~charged off. We have no expectation of the recovery of any payments in respect of credits rated as loss.

The following tables summarize the internal ratings of our performing, classified and nonaccrual (as well as substandard) loans, by category, as of:

September 30, 2017
Pass Special Mention Substandard Doubtful Loss Total
(Dollars in thousands)
Real estate:
Construction and development $ 181,879
$ 19,188
$ —
$ —
$ —
$ 201,067
Commercial real estate 388,007
1,030
4,277
—
—
393,314
Farmland 53,649
413
287
—
—
54,349
1-4 family residential 357,814
3,059
5,016
—
—
365,889
Multi-family residential 21,659
1,348
228
—
—
23,235
Commercial and industrial 188,440
3,705
518
—
—
192,663
Consumer and overdrafts 51,631
362
416
—
—
52,409
Agricultural 22,525
1,147
777
—
—
24,449
Total $ 1,265,604
$ 30,252
$ 11,519
$ —
$ —
$ 1,307,375

December 31, 2016
Pass Special Mention Substandard Doubtful Loss Total
(Dollars in thousands)
Real estate:
Construction and development $ 127,537
$ 4
$ 1,825
$ —
$ —
$ 129,366
Commercial real estate 360,264
1,927
5,465
—
—
367,656
Farmland 61,713
248
401
—
—
62,362
1-4 family residential 353,483
4,311
5,121
37
—
362,952
Multi-family residential 25,871
—
208
—
—
26,079
Commercial and industrial 218,975
4,299
706
17
—
223,997
Consumer and overdrafts 52,648
524
568
82
—
53,822
Agricultural 17,965
478
458
—
—
18,901
Total $ 1,218,456
$ 11,791
$ 14,752
$ 136
$ —
$ 1,245,135

~~57.~~


	September 30, 2023
(in thousands)	Pass		Special Mention		Substandard		Doubtful		Loss		Nonaccrual		Total
Commercial and industrial	$	289,996	$	1,198	$	943	$	—	$	—	$	273	$	292,410
Real estate:
Construction and development		316,963		—		404		—		—		117		317,484
Commercial real estate		864,959		9,646		26,684		—		—		32		901,321
Farmland		188,259		98		83		—		—		174		188,614
1-4 family residential		501,889		273		—		—		—		1,840		504,002
Multi-family residential		42,720		—		—		—		—		—		42,720
Consumer and overdrafts		58,300		84		—		—		—		238		58,622
Agricultural		13,013		—		25		—		—		38		13,076
Total	$	2,276,099	$	11,299	$	28,139	$	—	$	—	$	2,712	$	2,318,249


	December 31, 2022
(in thousands)	Pass		Special Mention		Substandard		Doubtful		Loss		Nonaccrual		Total
Commercial and industrial	$	311,685	$	1,369	$	898	$	—	$	—	$	115	$	314,067
Real estate:
Construction and development		374,795		905		—		—		—		1,435		377,135
Commercial real estate		867,426		7,321		5,569		—		—		7,271		887,587
Farmland		185,615		—		93		—		—		109		185,817
1-4 family residential		491,171		199		—		—		—		1,691		493,061
Multi-family residential		45,147		—		—		—		—		—		45,147
Consumer and overdrafts		61,456		50		—		—		—		170		61,676
Agricultural		13,594		3		32		—		—		57		13,686
Total	$	2,350,889	$	9,847	$	6,592	$	—	$	—	$	10,848	$	2,378,176

Loans risk rated as substandard increased during the quarter from $8.1 million as of June 30, 2023 to $29.5 million as of September 30, 2023, an increase of $21.4 million. Despite the increase, substandard loans continued to represent a modest 1.3% of total loans at quarter-end. The increase results primarily from two commercial real estate loans, with outstanding balances of $14.5 million and $6.9 million, respectively. The larger credit is currently performing, is not past due, and is well-collateralized in the desirable Austin, Texas market with an LTV of 69%. Management believes this credit will be favorably resolved with minimal to no loss by year-end. The second, smaller loan is an amortizing commercial real estate loan in which we hold a priority first lien position. The project is being developed under an SBA 504 program, with a different lender managing the project's construction phase and financing the second lien debenture note. This loan is also performing, is not past due and is well-collateralized with an LTV of 46%. These two downgrades resulted from general economic stress factors, and appropriate credit reserves were captured in our CECL model.

Allowance for ~~Loan~~Credit Losses

We maintain an allowance for ~~loan~~credit losses (“ACL”) that represents management’s best estimate of the ~~loan~~appropriate level of losses and risks inherent in our ~~loan portfolio.~~applicable financial assets under the current expected credit loss model. The amount of the allowance for ~~loan~~credit losses should not be interpreted as an indication that charge-offs in future periods will necessarily occur in those amounts, or at all. The determination of the amount of allowance involves a high degree of judgment and subjectivity.

For available for sale debt securities in an unrealized loss position, the Company evaluates the securities at each measurement date to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors. Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. Credit-related impairment is recognized as an ACL on the balance sheet,

(Continued)

50.

limited to the amount by which the amortized cost basis exceeds the fair value, with a corresponding adjustment to earnings through provision for credit loss expense. As of September 30, 2023, the Company determined that all available for sale securities that experienced a decline in fair value below the amortized costs basis were due to noncredit-related factors, therefore no related ACL was recorded and there was no related provision expense recognized during the nine months ended September 30, 2023.

For held to maturity debt securities, the Company evaluates expected credit losses on a collective basis by major security type with each type sharing similar risk characteristics, and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. With regard to U.S. Treasury and residential mortgage-backed securities issued by the U.S. governments, or agencies thereof, it is expected that the securities will not be settled at prices less than the amortized cost bases of the securities as such securities are backed by the full faith and credit of and/or guaranteed by the U.S. government. Accordingly, no allowance for credit losses has been recorded for these securities. With regard to municipal securities, management considers 1) issuer bond ratings, 2) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, 3) internal forecasts and 4) whether or not such securities are guaranteed by the Texas Permanent School Fund or pre-refunded by the issuers. As of September 30, 2023, the Company determined there were no credit related concerns that warrant an ACL for the held to maturity portfolio.

In determining the ~~allowance~~ACL for ~~loan losses,~~loans held for investment, we primarily estimate losses on ~~specific loans, or groups~~segments of loans with similar risk characteristics and where the ~~probable~~potential loss can be identified and reasonably determined. For loans that do not share similar risk characteristics with our existing segments, they are evaluated individually for an ACL. Our portfolio is segmented by regulatory call report codes, with additional segments for SBA loans acquired from Westbound Bank and for SBA loans originated by us. The segments are further disaggregated by internally assigned risk rating classifications. The balance of the ~~allowance for loan losses~~ACL is ~~based on internally assigned risk classifications of loans,~~determined using the current expected credit loss model, which considers historical loan loss rates, changes in the nature of our loan portfolio, overall portfolio quality, industry concentrations, delinquency trends, current economic factors and reasonable and supportable forecasts of the ~~estimated~~ impact of ~~current~~future economic conditions on ~~certain historical~~ loan loss rates. Please see ~~“-Critical~~“Critical Accounting ~~Policies-Allowance~~Policies - Allowance for ~~Loan Losses.~~Credit Losses.”

In connection with the review of our loan portfolio, we consider risk elements attributable to particular loan types or categories in assessing the quality of individual loans. Some of the risk elements we consider include:

•

for commercial and industrial loans, the debt service coverage ratio (income from the business in excess of operating expenses compared to loan repayment requirements), the operating results of the commercial, industrial or professional enterprise, the borrower’s business, professional and financial ability and expertise, the specific risks and volatility of income and operating results typical for businesses in that category and the value, nature and marketability of collateral;

•

for commercial mortgage loans and multifamily residential loans, the debt service coverage ratio, operating results of the owner in the case of ~~owner occupied~~owner-occupied properties, the loan to value ratio, the age and condition of the collateral and the volatility of income, property value and future operating results typical of properties of that type;

•

for 1-4 family residential mortgage loans, the borrower’s ability to repay the loan, including a consideration of the ~~debt to income~~debt-to-income ratio and employment and income stability, the loan-to-value ratio, and the age, condition and marketability of the collateral; and

•

for construction and development loans, the perceived feasibility of the project including the ability to sell developed lots or improvements constructed for resale or the ability to lease property constructed for lease, the quality and nature of contracts for presale or prelease, if any, experience and ability of the developer and loan to value ratio.

As of September 30, ~~2017,~~2023, the allowance for ~~loan~~credit losses totaled ~~$12.5~~$31.1 million, or ~~0.96%~~1.34%, of total loans, excluding those held for sale. As of December 31, ~~2016,~~2022, the allowance for ~~loan~~credit losses totaled ~~$11.5~~$32.0 million, or ~~0.92%~~1.34%, of total loans, excluding those held for sale. During the fourth quarter of 2022, we recorded a $2.8 million provision to incorporate economic forecasts for an economic downturn and possible borrower stressors into our CECL model. The ~~increase~~factors that were adjusted in ~~allowance is due~~the fourth quarter of 2022 are still relevant, however certain minor adjustments were made in subsequent quarters to general reserves for organic loan growth, specific allocations on impaired assets and slightly higher qualitative factors in general allocation in recognition of certain macroeconomic trends in consumer and commercial real estate lending.

~~58.~~

reflect current portfolio credit quality trends.

(Continued)

51.

The following table presents, as of and for the periods indicated, an analysis of the allowance for ~~loan~~credit losses and other related data:

For the Nine Months Ended September 30, For the Year Ended December 31,
2017 2016 2016
(Dollars in thousands)
Average loans outstanding⁽¹⁾
$ 1,269,387
$ 1,158,807
$ 1,179,938
Gross loans outstanding at end of period⁽²⁾
$ 1,307,375
$ 1,229,341
$ 1,245,135
Allowance for loan losses at beginning of the period 11,484
9,263
9,263
Provision for loan losses 2,250
3,240
3,640
Charge-offs:
Real Estate:
Construction and development —
9
9
Commercial real estate 84
—
—
Farmland —
—
—
1-4 family residential 307
25
71
Multi-family residential —
—
—
Commercial and industrial 737
1,196
1,213
Consumer 230
170
269
Agriculture 4
—
—
Overdrafts 117
119
200
Total charge-offs 1,479
1,519
1,762
Recoveries:
Real Estate:
Construction and development —
4
4
Commercial real estate —
—
—
Farmland —
—
—
1-4 family residential 21
—
75
Multi-family residential —
—
—
Commercial and industrial 116
14
17
Consumer 95
103
121
Agriculture —
—
—
Overdrafts 41
61
126
Total recoveries 273
182
343
Net charge-offs 1,206
1,337
1,419
Allowance for loan losses at end of period $ 12,528
$ 11,166
$ 11,484
Ratio of allowance to end of period loans⁽²⁾
0.96 % 0.91 % 0.92 %
Ratio of net charge-offs to average loans⁽¹⁾
0.13 % 0.15 % 0.12 %

~~(1) Includes average outstanding balances~~


	As of and For The Nine Months Ended September 30,						As of and For The Year Ended December 31,
(dollars in thousands)	2023			2022			2022
Average loans outstanding(1)	$	2,359,880		$	2,066,529		$	2,126,810
Gross loans outstanding at end of period(2)		2,318,249			2,266,065			2,378,176
Allowance for credit losses at beginning of the period		31,974			30,433			30,433
Reversal of provision for credit losses		—			(650	)		2,150
Charge offs:
Commercial and industrial		392			192			192
Commercial real estate		266			—			—
Consumer		72			313			322
Agriculture		3			—			—
Overdrafts		229			241			335
Total charge-offs		962			746			849
Recoveries:
Commercial and industrial		19			62			72
Real estate:
Commercial real estate		—			1			1
1-4 family residential		—			30			30
Consumer		65			40			55
Agriculture		2			—			—
Overdrafts		42			65			82
Total recoveries		128			198			240
Net charge-offs		834			548			609
Allowance for credit losses at end of period	$	31,140		$	29,235		$	31,974
Ratio of allowance to end of period loans(2)		1.34	%		1.29	%		1.34	%
Ratio of net charge-offs to average loans(1)		0.04	%		0.03	%		0.03	%

Total nonaccrual loans	$	2,712		$	9,330		$	10,848
Ratio of allowance to nonaccrual loans		1148.2	%		313.3	%		294.7	%

(1) Includes average outstanding balances of loans held for sale of $1.4 million, $2.6 million and $2.4 million for the nine months ended September 30, 2023 and 2022, and for the year ended December 31, 2022, respectively.
(2) Excludes loans held for sale of $2.5 million, $2.7 million and $3.2 million for the nine months ended September 30, 2023 and 2022, and for the year ended December 31, 2022, respectively.

The ratio of ~~loans held for sale of $2.8 million, $3.0 million and $3.0 million for the nine months ended September 30, 2017 and 2016 and for the year ended December 31, 2016, respectively.~~

~~(2) Excludes loans held for sale of $3.4 million, $3.1 million and $2.6 million for the nine months ended September 30, 2017 and 2016 and for the year ended December 31, 2016, respectively.~~

~~The~~ allowance for ~~loan~~credit losses to ~~non-performing~~nonperforming loans ~~has decreased~~increased from ~~260.5%~~294.7% at December 31, ~~2016~~2022 to ~~217.7%~~1148.2% at September 30, ~~2017. Non-performing~~2023. Nonperforming loans ~~increased~~decreased to ~~$5.8~~$2.7 million at September 30, ~~2017~~2023, compared to ~~$4.4~~$10.8 million at December 31, ~~2016, which is attributable primarily~~2022.

The following table shows the ratio of net charge-offs (recoveries) to ~~an increases in nonaccrual~~average loans ~~in our 1-4 family residential and commercial real estate portfolios, and partially offset~~outstanding by ~~a decrease in nonaccrual loans in our construction and development portfolio.~~

~~59.~~

loan category for the dates indicated:


	Nine Months Ended September 30,
	2023			2022
Commercial and industrial		0.13	%		0.04	%
Real estate:
Commercial real estate		0.03	%		—
1-4 family residential		—			(0.01	%)
Consumer		0.01	%		0.50	%
Agricultural		0.01	%		—
Overdrafts		47.70	%		40.18	%
Net charge-offs to total loans		0.04	%		0.03	%

Although we believe that we have established our allowance for ~~loan~~credit losses in accordance with GAAP and that the allowance for ~~loan~~credit losses was adequate to provide for known and inherent losses in the portfolio at all times shown above, future provisions for ~~loan~~credit losses will be subject to ongoing evaluations of the risks in our loan portfolio. If our primary market areas experience economic declines, if asset quality deteriorates or if we are successful in growing the size of our loan portfolio, our allowance could become inadequate and material additional provisions for ~~loan~~credit losses could be required.

(Continued)

52.

The following table shows the allocation of the allowance for ~~loan~~credit losses among loan categories and certain other information as of the dates indicated. The allocation of the allowance for ~~loan~~credit losses as shown in the table should neither be interpreted as an indication of future charge-offs, nor as an indication that charge-offs in future periods will necessarily occur in these amounts or in the indicated proportions. The total allowance is available to absorb losses from any loan category.

As of September 30, 2017 As of December 31, 2016
Amount Percent to Total Loans Amount Percent to Total Loans
(Dollars in thousands)
Real estate:
Construction and development $ 1,923
0.15 % $ 1,161
0.09 %
Commercial real estate 4,199
0.32 % 3,264
0.26 %
Farmland 458
0.04 % 482
0.04 %
1-4 family residential 3,089
0.24 % 3,960
0.32 %
Multi-family residential 266
0.02 % 281
0.02 %
Total real estate 9,935
0.77 % 9,148
0.73 %
Commercial and industrial 1,573
0.12 % 1,592
0.13 %
Consumer 613
0.05 % 591
0.05 %
Agricultural 407
0.03 % 153
0.01 %
Total allowance for loan losses $ 12,528
0.97 % $ 11,484
0.92 %


	As of September 30, 2023					As of December 31, 2022
(in thousands)	Amount		Percent to Total Loans			Amount		Percent to Total Loans
Commercial and industrial	$	3,823		12.28	%	$	4,382		13.70	%
Real estate:
Construction and development		3,632		11.66	%		4,889		15.29	%
Commercial real estate		13,093		42.05	%		12,658		39.59	%
Farmland		2,119		6.80	%		2,008		6.28	%
1-4 family residential		6,778		21.77	%		6,617		20.69	%
Multi-family residential		471		1.51	%		490		1.53	%
Total real estate		26,093		83.79	%		26,662		83.38	%
Consumer and overdrafts		1,083		3.48	%		781		2.44	%
Agricultural		141		0.45	%		149		0.48	%
Total allowance for credit losses	$	31,140		100.00	%	$	31,974		100.00	%

Securities

We use our securities portfolio to provide a source of liquidity, provide an appropriate return on funds invested, manage interest rate risk, meet collateral requirements and meet regulatory capital requirements. As of September 30, ~~2017,~~2023, the carrying amount of our investment securities totaled ~~$417.2~~$587.0 million, ~~an increase~~a decrease of ~~$70.9~~$111.0 million, or ~~20.5%~~15.9%, compared to ~~$346.3~~$697.9 million as of December 31, ~~2016.~~2022. Investment securities represented ~~21.7%~~18.2% and ~~18.9%~~20.8% of total assets as of September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, respectively.

~~Our investment portfolio consists of securities classified as available for sale and held to maturity.~~

As of September 30, ~~2017,~~2023, securities available for sale totaled $178.6 million and securities held to maturity totaled ~~$238.1 million and $179.1 million, respectively.~~$408.3 million. As of December 31, ~~2016,~~2022, securities available for sale totaled $188.9 million and securities in held to maturity totaled $156.9 million and $189.4 million, respectively. Held to maturity percentages represented 42.9% of our investment portfolio as of September 30, 2017 and 54.7% as of December 31, 2016. While we generally seek to maintain 50.0% or less of our portfolio in held to maturity securities, the Company has the intent and ability to hold its held to maturity securities until maturity or call and the December 31, 2016 policy exception was approved by our board of directors. $509.0 million.

The carrying values of our investment securities classified as available for sale are adjusted for unrealized gain or loss, and any gain or loss is reported on an after-tax basis as a component of other comprehensive income in ~~shareholders’~~ equity.

~~60.~~

As of September 30, 2023, the Company determined that all available for sale securities that experienced a decline in fair value below their amortized cost basis were impacted by noncredit-related factors and that securities held to maturity have not experienced credit deterioration; therefore, the Company carried no ACL with respect to our securities portfolio at September 30, 2023.

From time to time, we have reclassified certain securities from available for sale to held to maturity. Such transfers are made at fair value at the date of transfer. The net unrealized holding gains or losses at the date of transfer are retained in accumulated other comprehensive income and in the carrying value of the held to maturity securities and are amortized over the remaining life of the security. The net unamortized, unrealized loss remaining on transferred securities included in accumulated other comprehensive loss in the accompanying balance sheets totaled $6.8 million at September 30, 2023, compared to a net unamortized, unrealized loss of $5.9 million at December 31, 2022. This amount will be amortized out of accumulated other comprehensive loss over the remaining life of the underlying securities as an adjustment of the yield on those securities.

The following tables summarize the amortized cost and estimated fair value of our investment securities:

As of September 30, 2017
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
(Dollars in thousands)
Corporate bonds $ 18,842
$ 178
$ —
$ 19,020
Municipal securities 154,762
2,696
821
156,637
Mortgage-backed securities 115,138
298
929
114,507
Collateralized mortgage obligations 129,331
674
885
129,120
Total $ 418,073
$ 3,846
$ 2,635
$ 419,284

As of December 31, 2016
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
(Dollars in thousands)
Corporate bonds $ 25,254
$ 6
$ 377
$ 24,883
Municipal securities 157,261
901
4,511
153,651
Mortgage-backed securities 89,748
318
1,898
88,168
Collateralized mortgage obligations 77,290
275
1,187
76,378
Total $ 349,553
$ 1,500
$ 7,973
$ 343,080


	As of September 30, 2023
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. government agencies	$	9,254	$	—	$	1,357	$	7,897
Treasury securities		69,307		—		1,725		67,582
Corporate bonds		29,902		—		3,353		26,549
Municipal securities		171,314		146		9,568		161,892
Mortgage-backed securities		273,655		19		38,933		234,741
Collateralized mortgage obligations		58,249		—		10,575		47,674
Total	$	611,681	$	165	$	65,511	$	546,335

(Continued)

53.


	As of December 31, 2022
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. government agencies	$	9,141	$	—	$	1,259	$	7,882
Treasury securities		133,735		—		2,921		130,814
Corporate bonds		29,964		—		2,177		27,787
Municipal securities		202,004		984		8,293		194,695
Mortgage-backed securities		278,589		1		30,264		248,326
Collateralized mortgage obligations		63,740		3		9,252		54,491
Total	$	717,173	$	988	$	54,166	$	663,995

We do not hold any Fannie Mae or Freddie Mac preferred stock, collateralized debt obligations, structured investment vehicles or second lien elements in our investment portfolio. As of September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, our investment portfolio did not contain any securities that are directly backed by subprime or Alt-A ~~mortgages. The Bank owns no~~mortgages, non-U.S. agency mortgage-backed securities ~~and only one non-U.S. agency~~or corporate collateralized mortgage ~~obligation, which is categorized as held to maturity and had a $1.5 million carrying value as of September 30, 2017.~~

Our management evaluates securities for OTTI at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. In 2013, we recognized OTTI with respect to the non-U.S. agency corporate collateralized mortgage obligation that we hold. As of September 30, 2017, $461,307 of OTTI was recorded.

obligations.

The following tables ~~sets~~set forth the fair value of available for sale securities and the amortized cost of held to maturity securities, ~~and the fair value of available for sale securities,~~expected maturities and approximated weighted average yield based on estimated annual income divided by the average amortized cost of our securities portfolio as of the dates indicated. ~~The contractual maturity of a mortgage-backed security is the date at which the last underlying mortgage matures.~~

As of September 30, 2017
Within One Year After One Year but Within Five Years After Five Years but Within Ten Years After Ten Years Total
Amount Yield Amount Yield Amount Yield Amount Yield Total Yield
(Dollars in thousands)
Corporate bonds $ —
— % $ 1,096
2.59 % $ 17,924
2.93 % $ —
— % $ 19,020
2.91 %
Municipal securities 2,683
2.27 % 5,126
3.56 % 43,228
3.63 % 103,420
3.63 % $ 154,457
3.60 %
Mortgage-backed securities —
— % 58,496
2.25 % 55,799
2.54 % —
— % $ 114,295
2.39 %
Collateralized mortgage obligations 381
— % 84,374
2.55 % 44,687
2.67 % —
2.69 % $ 129,442
2.61 %
Total $ 3,064
2.27 % $ 149,092
2.46 % $ 161,638
2.89 % $ 103,420
3.48 % $ 417,214
2.92 %

~~61.~~

As of December 31, 2016
Within One Year After One Year but Within Five Years After Five Years but Within Ten Years After Ten Years Total
Amount Yield Amount Yield Amount Yield Amount Yield Total Yield
(Dollars in thousands)
Corporate bonds $ —
— % $ 7,453
2.30 % $ 17,430
2.93 % $ —
— % $ 24,883
2.75 %
Municipal securities 732
3.98 % 6,103
3.45 % 38,634
3.49 % 111,170
3.62 % $ 156,639
3.58 %
Mortgage-backed securities —
— % 74,047
2.02 % 14,093
2.27 % —
— % $ 88,140
2.06 %
Collateralized mortgage obligations —
— % 27,668
2.92 % 26,184
2.68 % 22,782
2.98 % $ 76,634
2.81 %
Total $ 732
3.98 % $ 115,271
2.33 % $ 96,341
3.00 % $ 133,952
3.50 % $ 346,296
2.97 %


	As of September 30, 2023
	Within One Year			After One Year but Within Five Years			After Five Years but Within Ten Years			After Ten Years				Total
(dollars in thousands)	Amount		Yield	Amount		Yield	Amount		Yield	Amount			Yield	Total		Yield
U.S. government agencies	$	—	—	$	9,254	1.35%	$	—	—	$	—		—	$	9,254	1.35%
Treasury securities		39,944	2.21%		29,363	2.92%		—	—		—		—		69,307	2.51%
Corporate bonds		1,967	3.31%		7,145	3.40%		17,437	4.00%		—		—		26,549	3.80%
Municipal securities		8,588	3.66%		42,669	2.89%		69,353	3.06%		50,746		3.17%		171,356	3.09%
Mortgage-backed securities		—	—		41,669	1.76%		184,930	2.66%		27,773		3.06%		254,372	2.55%
Collateralized mortgage obligations		1,180	2.57%		22,135	3.24%		35,243	1.38%		(2,444	)	2.51%		56,114	2.12%
Total	$	51,679	2.50%	$	152,235	2.54%	$	306,963	2.68%	$	76,075		3.12%	$	586,952	2.69%


	As of December 31, 2022
	Within One Year			After One Year but Within Five Years			After Five Years but Within Ten Years			After Ten Years			Total
(dollars in thousands)	Amount		Yield	Amount		Yield	Amount		Yield	Amount		Yield	Total		Yield
U.S. government agencies	$	—	—	$	—	—	$	9,141	1.35%	$	—	—	$	9,141	1.35%
Treasury securities		64,798	1.46%		68,937	2.51%		—	—		—	—		133,735	2.00%
Corporate bonds		—	—		9,690	3.41%		18,097	4.00%		—	—		27,787	3.80%
Municipal securities		19,151	3.48%		46,087	3.18%		56,844	3.21%		80,240	3.44%		202,322	3.32%
Mortgage-backed securities		3,042	2.43%		80,292	1.91%		170,487	2.51%		9,213	1.93%		263,034	2.31%
Collateralized mortgage obligations		626	3.82%		25,772	2.79%		32,107	1.47%		3,411	1.09%		61,916	1.98%
Total	$	87,617	1.95%	$	230,778	2.49%	$	286,676	2.57%	$	92,864	3.15%	$	697,935	2.54%

The contractual maturity of mortgage-backed securities and collateralized mortgage obligations is not a reliable indicator of their expected life because borrowers have the right to prepay their obligations at any time. Mortgage-backed securities and collateralized mortgage obligations are typically issued with stated principal amounts and are backed by pools of mortgage loans and other loans with varying maturities. The term of the underlying mortgages and loans may vary significantly due to the ability of a borrower to prepay. Monthly pay downs on mortgage-backed securities typically cause the average life of the securities to be much different than the stated contractual maturity. During a period of increasing

(Continued)

54.

interest rates, fixed rate mortgage-backed securities do not tend to experience heavy prepayments of principal, and, consequently, the average life of this security is typically lengthened. If interest rates begin to fall, prepayments may increase, thereby shortening the estimated life of this security. The weighted average life of our investment portfolio was ~~7.42~~5.57 years with an estimated effective duration of ~~4.63~~4.39 years as of September 30, ~~2017.~~

2023.

As of September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, respectively, we did not own securities of any one issuer, other than the U.S. government and its agencies, for which aggregate adjusted cost exceeded 10.0% of ~~the consolidated shareholders’~~ equity.

The average yield of our securities portfolio was ~~2.92%~~2.69% and 2.54% as of September 30, ~~2017 compared~~2023 and December 31, 2022, respectively. Average yield went up 15 basis points primarily due to ~~2.97% as~~a 51 basis point increase in yield on treasury securities and a 24 basis point increase in yield on mortgage-backed securities, which were partially offset by a 23 basis point decrease in yield on municipal securities. As of September 30, 2023, the fair value of available for sale and amortized cost of held to maturity mortgage-backed securities and municipal securities comprised 43.3% and 29.2% of the portfolio, respectively. As of December 31, ~~2016. The decrease in average yield as of September 30, 2017, compared to December 31, 2016, was primarily due to purchases of new~~2022, mortgage-backed securities and ~~collateralized mortgage obligations, which typically have a lower yield than do the~~ municipal securities in our portfolio. Municipal securities decreased slightly from $156.6 million at a yield of 3.58%, as of December 31, 2016, to $154.5 million at a yield of 3.60% as of September 30, 2017, however, municipal securities represent only 37.0%comprised 37.7% and 29.0% of the ~~total investment~~ portfolio, ~~as September 30, 2017, compared to 45.2% of the total investment portfolio as of December 31, 2016.~~

respectively.

Deposits

We offer a variety of deposit products, which have a wide range of interest rates and terms, including demand, savings, money market and time accounts. We rely primarily on competitive pricing policies, convenient locations and personalized service to attract and retain these deposits.

~~Total~~

Average total deposits ~~as of~~for the nine months ended September 30, ~~2017~~2023 were ~~$1.62~~$2.61 billion, ~~an increase~~a decrease of ~~$40.5~~$139.5 million, or ~~2.6%~~0.1%, compared to ~~$1.58~~$2.75 billion ~~as of~~for the year ended December 31, ~~2016.~~

~~62.~~

2022. The average rate paid on total interest-bearing deposits was 2.46% and 0.58% for the nine months ended September 30, 2023 and year ended December 31, 2022, respectively. The increase in average rates between periods was driven primarily by a cumulative 100 basis point increase in market rates made by the Federal Reserve during the first nine months of 2023, and a 125 cumulative basis point increase during the last quarter of the prior year.

The following table presents the average balance of, and rate paid on, deposits for the periods indicated:


	Nine Months Ended September 30,
	2023					2022
(dollars in thousands)	Average Balance		Average Rate Paid			Average Balance		Average Rate Paid
NOW and interest-bearing demand accounts	$	270,055		1.01	%	$	383,149		0.36	%
Savings accounts		134,914		0.75	%		140,461		0.20	%
Money market accounts		710,049		2.63	%		832,662		0.41	%
Certificates and other time deposits		553,376		3.06	%		328,453		0.62	%
Total interest-bearing deposits		1,668,394		2.46	%		1,684,725		0.42	%
Noninterest-bearing demand accounts		944,870		0	%		1,075,941		0	%
Total deposits	$	2,613,264		1.51	%	$	2,760,666		0.26	%

The following table presents the average balances on deposits for the periods indicated:

For the Nine Months Ended September 30, 2017 For the Year Ended December 31, 2016 Dollar Change Percent Change
(Dollars in thousands)
Now and interest-bearing demand accounts $ 264,502
$ 278,521
$ (14,019 ) (5.03 )%
Savings accounts 64,705
59,961
4,744
7.91 %
Money market accounts 589,763
482,089
107,674
22.33 %
Certificates and other time deposits 324,566
354,949
(30,383 ) (8.56 )%
Total interest-bearing deposits 1,243,536
1,175,520
68,016
5.79 %
Noninterest-bearing demand accounts 375,655
340,240
35,415
10.41 %
Total deposits $ 1,619,191
$ 1,515,760
$ 103,431
6.82 %


(dollars in thousands)	For the Nine Months Ended September 30, 2023		For the Year Ended December 31, 2022		Increase (Decrease) ($)			Increase (Decrease) (%)
NOW and interest-bearing demand accounts	$	270,055	$	364,941	$	(94,886	)		(26.00	%)
Savings accounts		134,914		141,484		(6,570	)		(4.64	%)
Money market accounts		710,049		831,833		(121,784	)		(14.64	%)
Certificates and other time deposits		553,376		332,029		221,347			66.66	%
Total interest-bearing deposits		1,668,394		1,670,287		(1,893	)		(0.11	%)
Noninterest-bearing demand accounts		944,870		1,082,513		(137,643	)		(12.72	%)
Total deposits	$	2,613,264	$	2,752,800	$	(139,536	)		(5.07	%)

The ratio of average noninterest-bearing deposits to average total deposits for the nine months ended September 30, 2023 and year ended December 31, 2022 was 36.2% and 39.3%, respectively.

Total deposits as of September 30, 2023 were $2.66 billion, a decrease of $22.9 million, or 0.9%, compared to $2.68 billion as of December 31, 2022.

(Continued)

55.

Noninterest-bearing deposits as of September 30, 2023 were $903.4 million compared to $1.05 billion as of December 31, 2022, a decrease of $148.8 million, or 14.1%.

Total interest-bearing deposits as of September 30, 2023 and December 31, 2022 were $1.75 billion, which represented a slight increase of $125.9 million, or 7.7%.

The aggregate amount of certificates and other time deposits in denominations ~~of $100,000 or more~~greater than $250,000 as of September 30, ~~2017~~2023 and December 31, ~~2016~~2022 was ~~$190.4~~$269.5 million and ~~$218.6~~$130.0 million, respectively.

The ~~scheduled maturities~~amount of ~~time deposits~~uninsured certificates of deposit will differ from the total amount of certificates of deposit greater than ~~$100,000 were~~$250,000 due to various factors, including joint account ownership. The following table sets forth the amount of uninsured certificates of deposit greater than $250,000 by time remaining until maturity as ~~follows:~~

As of September 30, 2017
Amount Weighted Average Interest Rate
(Dollars in thousands)
Under 3 months $ 41,718
0.95 %
3 to 6 months 42,231
1.02 %
6 to 12 months 61,233
1.04 %
12 to 24 months 24,091
1.24 %
24 to 36 months 4,574
1.49 %
36 to 48 months 11,936
1.56 %
Over 48 months 4,638
1.63 %
Total $ 190,421
1.10 %

of September 30, 2023.


(dollars in thousands)	September 30, 2023
Under 3 months	$	69,010
3 to 6 months		66,532
6 to 12 months		68,739
Over 12 months		5,314
Total	$	209,595

Borrowings

We utilize short-term and long-term borrowings to supplement deposits to fund our lending and investment activities, each of which is discussed below.

Federal Home Loan Bank (FHLB) Advances. The FHLB allows us to borrow on a blanket floating lien status collateralized by certain securities and loans. As of September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, total borrowing capacity of ~~$471.4~~$911.9 million and ~~$400.4~~$755.0 million, respectively, was available under this arrangement. Our outstanding FHLB advances mature within ~~5 years.~~one year. As of September 30, ~~2017,~~2023, approximately ~~$1.0~~$1.96 billion in real estate loans were pledged as collateral for our FHLB borrowings. We utilize these borrowings to meet liquidity needs and to ~~fund certain fixed~~hedge interest rate ~~loans in our portfolio.~~ risk.

The following table presents our FHLB borrowings by maturity and weighted average rate as of September 30, ~~2017:~~

Balance Weighted Average Rate
(Dollars in thousands)
Less than 90 days $ 20,000
1.17 %
90 days to less than one year 25,000
1.12 %
Three to five years 20,157
1.11 %
Total $ 65,157
1.13 %

~~63.~~

2023:


(dollars in thousands)	Balance		Weighted Average Interest Rate
Less than 90 days	$	165,000		5.38	%
90 days to less than one year		10,000		4.38	%
Total	$	175,000		5.32	%

Federal Reserve Bank of Dallas. The Federal Reserve Bank of Dallas has an available borrower in custody arrangement, which allows us to borrow on a collateralized basis. Certain commercial and industrial and consumer loans are pledged under this arrangement. We maintain this borrowing arrangement to meet liquidity needs pursuant to our contingency funding plan. As of September 30, ~~2017~~2023 and December 31, ~~2016, $142.0~~2022, $235.2 million and ~~$168.3~~$227.6 million, respectively, were available under this arrangement. As of September 30, ~~2017,~~2023 and December 31, 2022, approximately ~~$184.4~~$295.9 million and $289.5 million, respectively, in consumer and commercial and industrial loans were pledged as collateral. As of September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, no borrowings were outstanding under this arrangement.

Subordinated Debt, Trust Preferred Securities and Other Debentures. We have issued subordinated debentures relating to the issuance of trust preferred securities. In October 2002, we formed Guaranty (TX) Capital Trust II, which issued $3.0 million in trust preferred securities to a third party in a private placement. Concurrent with the issuance of the trust preferred securities, the trust issued common securities to the Company in the aggregate liquidation value of $93,000. The trust invested the total proceeds from the sale of the trust preferred securities and the common securities in $3.1 million of the Company’s junior subordinated debentures, which will mature on October 30, 2032. In July 2006, we formed Guaranty (TX) Capital Trust III, which issued $2.0 million in trust preferred securities to a third party in a private placement. Concurrent with the issuance of the trust preferred securities, the trust issued common securities to the Company in the aggregate liquidation value of $62,000. The trust invested the total proceeds from the sale of the trust preferred securities and the common securities in $2.1 million of the Company’s junior subordinated debentures, which will mature on October 1, 2036.

In March 2015, we acquired DCB Trust I, which issued $5.0 million in trust preferred securities to a third party in a private placement. Concurrent with the issuance of the trust preferred securities, the trust issued common securities to the Company in the aggregate liquidation value of $155,000. The trust invested the total proceeds from the sale of the trust preferred securities and the common securities in $5.2 million of the Company’s junior subordinated debentures, which will mature on June 15, 2037.

(Continued)

56.

With certain exceptions, the amount of the principal and any accrued and unpaid interest on the debentures are subordinated in right of payment to the prior payment in full of all of our senior indebtedness. The terms of the debentures are such that they qualify as Tier 1 capital under the Federal Reserve’s regulatory capital guidelines applicable to bank holding companies. Interest on the Trust IIIII Debentures is payable at a variable rate per annum, reset quarterly, equal to 3-month LIBOR plus 3.35%, thereafter. Interest on the Trust III Debentures was payable at a fixed rate per annum equal to 7.43% until October 1, 2016 and is a variable rate per annum, reset quarterly, equal to 3-month LIBOR plus 1.67%~~, thereafter.~~. Interest on the DCB Trust I Debentures is payable at a variable rate per annum, reset quarterly, equal to 3-month LIBOR plus 1.80%. The interest is deferrable on a cumulative basis for up to five consecutive years following a suspension of dividend payments on all other capital stock. No principal payments are due until maturity for each of the debentures.

~~On any interest payment date on or after (1) June 15, 2012 for~~

Both the DCB Trust I Debentures ~~(2) October 30, 2012 for the Trust II Debentures~~ and ~~(3) October 1, 2016 for~~ the Trust III Debentures ~~and before their respective maturity dates, the debentures~~ are redeemable, in whole or in part, ~~for cash~~ at our option onafter at least 30, but not more than 60, ~~days’~~days' notice, on any interest payment date, at a redemption price equal to 100% of the ~~principal~~ amount to be redeemed, plus accrued interest to the date of redemption.

~~Beginning~~

On March 4, 2022, the Company completed a private placement of $35.0 million aggregate principal amount of its fixed-to-floating rate subordinated note due April 1, 2032. The subordinated note initially bears a fixed interest rate of 3.625% per year, due semi-annually in ~~July 2015, we have from time to time issued~~arrears on April 1 and October 1. Commencing on April 1, 2027, the interest rate on the subordinated ~~debentures. All of the debentures pay~~note will reset each quarter at a floating interest ~~semi-annually and are redeemable before their maturity date at our option, with 30 days’ notice to the holder, for a cash amount~~rate equal to the ~~principal~~then-current three month term SOFR plus 192 basis points. The Company may at its option redeem in whole or in part the subordinated note on or after March 4, 2027 without a premium. The subordinated note is treated as Tier 2 Capital for regulatory purposes (subject to reductions in the amount includable as Tier 2 capital in the final five years prior to maturity), and ~~all accrued interest. In July 2015, we~~is presented net of $465,000 in related unamortized debt issuance costs on the consolidated balance sheets.

On May 1, 2020, the Company issued ~~$4.0~~$10.0 million in debentures ~~of which $3.0 million were issued~~ to directors and other related parties. The ~~$3.0 million of~~ debentures ~~to related parties were repaid~~have stated maturity dates between November 1, 2020 and November 1, 2024, and bear interest at fixed annual rates between 1.00% and 4.00%. The Company pays interest semi-annually on May 1st and November 1st in ~~May 2017 with a portion~~arrears during the term of the ~~proceeds~~debentures. Various portions of ~~our initial public offering~~these debentures have matured since issuance and ~~a $500,000 par value debenture, which carried a rate~~$6.0 million remains outstanding as of ~~2.5%, matured and was repaid~~September 30, 2023. The debentures are redeemable by the Company at its option, in ~~July 2017.~~whole in or part, at any time on or before the due date of any debenture. The ~~remaining $500,000 debenture has a rate of 4.0% and matures in January 2019. In December 2015, we issued $5.0 million in debentures, of which $2.5 million were issued~~redemption price is equal to ~~directors and other related parties. In May 2017, $2.0 million~~100% of the ~~$2.5 million of debentures issued to related parties were repaid with a portion~~face amount of the proceeds of our initial public offering. The remaining $3.0 million in debentures were issued in the principal amount of $500,000 each with rates ranging from 3.00% to 5.00% depending on maturity dates, which range from July 1, 2018 to July 1, 2020.

debenture redeemed, plus all accrued but unpaid interest.

Other Borrowings. We have historically used a line of credit with a correspondent bank as a source of funding for working capital needs, the payment of dividends when there is a temporary timing difference in cash flows, and repurchases of equity securities. ~~As of December 31, 2016,~~In March 2017, we ~~had a $15.0 million~~entered into an unsecured revolving line of credit for $25.0 million, and ~~$10.0 million amortizing note with our correspondent bank. In March 2017,~~ we ~~renegotiated the loan agreement such~~renewed that ~~the outstanding balance of our revolving~~ line of credit ~~and amortizing note was converted to a $25.0 million unsecured~~

~~64.~~

~~revolving line of credit.~~in March 2023. The line of credit bears interest at the prime rate ~~plus 0.50%~~(8.50% as of September 30, 2023) subject to a floor of 3.50%, with quarterly interest payments, and matures in March ~~2018. During the second quarter of 2017, we used a portion of the proceeds from our initial public offering to repay the outstanding balance of the revolving line of credit. Therefore, as~~2024. As of September 30, ~~2017,~~2023, there was noa $2.0 million outstanding balance on the line of credit.

Liquidity and Capital Resources

Liquidity

Liquidity involves our ability to raise funds to support asset growth and acquisitions or reduce assets to meet deposit withdrawals and other payment obligations, to maintain reserve requirements and otherwise to operate on an ongoing basis and manage unexpected events. For the nine months ended September 30, ~~2017~~2023 and the year ended December 31, ~~2016,~~2022, liquidity needs were primarily met by core deposits, security and loan maturities and amortizing investment and loan portfolios. Although access to purchased funds from correspondent banks and overnight or longer term advances from the FHLB and the Federal Reserve Bank of Dallas are available, and have been utilized on occasion to take advantage of investment opportunities, we do not generally rely on these external funding sources. As of September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, we maintained ~~three~~two federal funds lines of credit with commercial banks that provide for the availability to borrow up to an aggregate ~~$70~~$55.0 million in federal funds. There were no funds under these lines of credit outstanding as of September 30, ~~2017~~2023 and December 31, ~~2016.~~2022. In addition to these federal funds lines of credit, our $25.0 million revolving line of credit discussed above in “Other Borrowings”provides an additional source of liquidity.

Contingent liquidity sources and availability as of September 30, 2023 are provided below. Although we do not plan to access the Federal Reserve's Bank Term Funding Program (BTFP), we have $267.8 million of borrowing capacity based

(Continued)

57.

on the value of unpledged, par value securities available as collateral for this line. The table below shows our total lines of credit, current borrowings as of September 30, 2023 and total amounts available for future borrowings, if necessary.


	September 30, 2023				Total Available for Future Liquidity
(dollars in thousands)	Line of Credit		Borrowings
FHLB advances	$	1,086,881	$	175,000	$	911,881
Federal Reserve discount window		235,153		—		235,153
Federal funds lines of credit		55,000		—		55,000
Correspondent bank line of credit		25,000		2,000		23,000
Federal Reserve Bank Term Funding Program		267,752		—		267,752
Total liquidity lines					$	1,492,786

The following table illustrates, during the periods presented, the composition of our funding sources and the average assets in which those funds are invested as a percentage of average total assets for the period indicated. Average assets were ~~$1.9~~$3.27 billion for the nine months ended September 30, ~~2017~~2023 and ~~$1.8~~$3.26 billion for the year ended December 31, ~~2016.~~

~~65.~~

For the Nine Months Ended For the Year Ended
September 30, 2017 December 31, 2016
Sources of Funds:
Deposits:
Noninterest-bearing 19.95 % 19.15 %
Interest-bearing 66.03 % 66.16 %
Federal funds purchased — % 0.01 %
Advances from FHLB 2.21 % 3.53 %
Other debt 0.48 % 0.74 %
Subordinated denentures 0.88 % 1.14 %
Securities sold under agreements to repurchase 0.69 % 0.73 %
Accrued interest and other liabilities 0.34 % 0.36 %
Shareholders’ equity 9.42 % 8.18 %
Total 100.00 % 100.00 %

Uses of Funds:
Loans 66.76 % 65.80 %
Securities available for sale 11.52 % 11.17 %
Securities held to maturity 9.78 % 10.29 %
Nonmarketable equity securities 0.37 % 0.48 %
Federal funds sold 2.61 % 2.96 %
Interest-bearing deposits in other banks 1.26 % 1.44 %
Other noninterest-earning assets 7.70 % 7.86 %
Total 100.00 % 100.00 %

Average noninterest-bearing deposits to average deposits 23.20 % 22.45 %
Average loans to average deposits 78.40 % 77.84 %

2022.


	Nine Months Ended September 30, 2023			Year Ended December 31, 2022
Sources of Funds:
Deposits:
Noninterest-bearing		28.90	%		33.20	%
Interest-bearing		51.04	%		51.23	%
Advances from FHLB		7.80	%		4.07	%
Line of credit		0.13	%		0.00	%
Subordinated debt		1.48	%		1.44	%
Securities sold under agreements to repurchase		0.60	%		0.26	%
Accrued interest and other liabilities		0.91	%		0.79	%
Equity		9.14	%		9.01	%
Total		100.00	%		100.00	%

Uses of Funds:
Loans		71.22	%		64.33	%
Securities available for sale		5.53	%		8.83	%
Securities held to maturity		14.18	%		15.89	%
Nonmarketable equity securities		0.85	%		0.58	%
Federal funds sold		1.34	%		3.26	%
Interest-bearing deposits in other banks		0.19	%		0.47	%
Other noninterest-earning assets		6.69	%		6.64	%
Total		100.00	%		100.00	%

Average noninterest-bearing deposits to average deposits		36.16	%		39.32	%
Average loans to average deposits		90.30	%		77.26	%

Our primary source of funds is deposits, and our primary use of funds is loans. We do not expect a change in the primary source or use of our funds in the foreseeable future. Our average loans, including average loans held for sale, increased ~~$110.6~~$293.4 million, or ~~9.5%~~14.2%, for the nine months ended September 30, ~~2017~~2023 compared to the same period in ~~2016.~~2022, while our average deposits decreased $147.4 million, or 5.3%, for the same time period. We predominantly invest excess deposits in overnight deposits with our correspondent banks, federal funds sold, securities, interest-bearing deposits at other banks or other short-term liquid investments until needed to fund loan growth.

As of September 30, ~~2017,~~2023, we had ~~$339.9~~$362.3 million in outstanding commitments to extend credit and ~~$9.3~~$8.4 million in commitments associated with outstanding standby and commercial letters of credit. As of December 31, ~~2016,~~2022, we had ~~$297.6~~$474.7 million in outstanding commitments to extend credit and ~~$8.9~~$8.3 million in commitments associated with outstanding standby and commercial letters of credit. Since commitments associated with letters of credit and commitments to extend credit may expire unused, the total outstanding may not necessarily reflect the actual future cash funding requirements.

As of September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, we had no exposure to future cash requirements associated with known uncertainties or capital expenditures of a material nature, except for the put option associated with shares distributed from our KSOP, which terminated upon consummation of our initial public offering and listing on the NASDAQ Global Select Market in May 2017.nature. As of September 30, ~~2017,~~2023, we had cash and cash equivalents of ~~$95.1~~$130.2 million, compared to ~~$127.5~~$106.5 million as of December 31, ~~2016.~~2022. The ~~decrease~~increase was primarily due to a ~~decrease~~increase in federal funds sold of ~~$26.4 million.~~

~~66.~~

$26.0 million, which is used for liquidity purposes.

(Continued)

58.

Capital Resources

Total ~~shareholders’~~ equity increased to ~~$207.3~~$296.8 million as of September 30, ~~2017,~~2023, compared to ~~$141.9~~$295.6 million as of December 31, ~~2016 (including KSOP-owned shares),~~2022, an increase of ~~$65.3~~$1.2 million, or ~~46.0%~~0.4%. The increase from December 31, ~~2016~~2022 was ~~primarily the result of the issuance of new shares of common stock in connection with our initial public offering in May 2017, as well as $11.6 million in~~due to net earnings ~~for~~attributable to Guaranty Bancshares, Inc. of $24.2 million, offset by the ~~nine months ended September 30, 2017~~repurchase of Company stock of $10.5 million, the payment of dividends of $8.1 million and ~~the decrease~~an increase in accumulated other comprehensive loss of ~~$1.6~~$5.3 million ~~related primarily~~due to ~~increased value~~fluctuations in the ~~unrealized gains on securities held~~fair value of available for sale ~~and partially offset by~~securities during the ~~payment of dividends of $4.0 million.~~

year.

Capital management consists of providing equity and other instruments that qualify as regulatory capital to support current and future operations. Banking regulators view capital levels as important indicators of an institution’s financial soundness. As a general matter, FDIC-insured depository institutions and their holding companies are required to maintain minimum capital relative to the amount and types of assets they hold. We are subject to certain regulatory capital requirements at the bank holding company and bank levels. As of September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, we were in compliance with all applicable regulatory capital requirements at the bank and bank holding company levels, and the Bank was classified as “well capitalized,” for purposes of the prompt corrective action regulations. As we deploy our capital, ~~and continue to grow our operations,~~ our regulatory capital levels may decrease depending on our level of ~~earnings.~~earnings and provisions for credit losses. However, we expect to closely monitor our loan portfolio, operating expenses and ~~control our growth~~overall capital levels in order to remain in compliance with all regulatory capital standards applicable to us.

~~67.~~

The following table presents our regulatory capital ratios as of:

September 30, 2017 December 31, 2016
Amount Ratio Amount Ratio
(Dollars in thousands)
Guaranty Bancshares, Inc.

  Total capital (to risk weighted assets) $ 213,905
14.62 % $ 149,468
10.86 %
  Tier 1 capital (to risk weighted assets) 201,377
13.76 % 137,984
10.03 %
  Tier 1 capital (to average assets) 201,377
10.68 % 137,984
7.71 %
  Common equity tier 1 risk-based capital 191,067
13.06 % 127,674
9.28 %

Guaranty Bank & Trust

  Total capital (to risk weighted assets) $ 202,722
13.85 % $ 173,528
12.63 %
  Tier 1 capital (to risk weighted assets) 190,194
13.00 % 162,044
11.79 %
  Tier 1 capital (to average assets) 190,194
10.08 % 162,044
9.06 %
  Common equity tier 1 risk-based capital 190,195
13.00 % 162,044
11.79 %


	September 30, 2023					December 31, 2022
(dollars in thousands)	Amount		Ratio			Amount		Ratio
Guaranty Bancshares, Inc. (consolidated)

Total capital (to risk-weighted assets)	$	364,878		14.93	%	$	358,702		14.37	%
Tier 1 capital (to risk-weighted assets)		299,796		12.27	%		292,966		11.74	%
Tier 1 capital (to average assets)		299,796		9.34	%		292,966		8.77	%
Common equity tier 1 capital (to risk-weighted assets)		292,579		11.98	%		285,749		11.45	%

Guaranty Bank & Trust, N.A.

Total capital (to risk weighted assets)	$	372,346		15.25	%	$	361,125		14.48	%
Tier 1 capital (to risk weighted assets)		341,818		14.00	%		329,933		13.23	%
Tier 1 capital (to average assets)		341,818		10.68	%		329,933		9.89	%
Common equity tier 1 capital (to risk-weighted assets)		341,818		14.00	%		329,933		13.23	%

Contractual Obligations

The following table summarizes contractual obligations and other commitments to make future payments as of September 30, ~~2017 (other than non-time deposit obligations),~~2023, which consist of future cash payments associated with our contractual obligations.

As of September 30, 2017
1 year or less More than 1 year but less than 3 years 3 years or more but less than 5 years 5 years or more Total
(Dollars in thousands)
Time deposits $ 232,964
$ 46,392
$ 23,726
$ —
$ 303,082
Advances from FHLB 45,000
—
20,157
—
65,157
Subordinated debentures 1,000
2,500
—
10,310
13,810
Total $ 278,964
$ 48,892
$ 43,883
$ 10,310
$ 382,049


	As of September 30, 2023
(in thousands)	1 year or less		More than 1 year but less than 3 years		3 years or more but less than 5 years		5 years or more		Total
Time deposits	$	667,103	$	40,629	$	5,582	$	—	$	713,314
Advances from FHLB		175,000		—		—		—		175,000
Subordinated debt		4,000		2,000		—		35,000		41,000
Operating leases		2,017		3,722		3,156		3,748		12,643
Total	$	848,120	$	46,351	$	8,738	$	38,748	$	941,957

Off-Balance Sheet Items

In the normal course of business, we enter into various transactions, which, in accordance with GAAP, are not included in our consolidated balance sheets. We enter into these transactions to meet the financing needs of our customers. These transactions include commitments to extend credit and standby and commercial letters of credit, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in our consolidated balance sheets.

Our commitments associated with outstanding standby and commercial letters of credit and commitments to extend credit expiring by period as of ~~the date indicated~~September 30, 2023 are summarized below. Since commitments associated with letters of

(Continued)

59.

credit and commitments to extend credit may expire unused, the amounts shown do not necessarily reflect the actual future cash funding requirements.

~~68.~~

As of September 30, 2017
1 year or less More than 1 year but less than 3 years 3 years or more but less than 5 years 5 years or more Total
(Dollars in thousands)
Standby and commercial letters of credit $ 7,465
$ 212
$ 91
$ 1,566
$ 9,334
Commitments to extend credit 154,305
45,252
74,833
65,482
339,872
Total $ 161,770
$ 45,464
$ 74,924
$ 67,048
$ 349,206


	As of September 30, 2023
(in thousands)	1 year or less		More than 1 year but less than 3 years		3 years or more but less than 5 years		5 years or more		Total
Standby and commercial letters of credit	$	5,313	$	2,182	$	27	$	874	$	8,396
Commitments to extend credit		227,271		59,193		10,011		65,792		362,267
Total	$	232,584	$	61,375	$	10,038	$	66,666	$	370,663

Standby and commercial letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third party. In the event of nonperformance by the customer, we have rights to the underlying collateral, which can include commercial real estate, physical plant and property, inventory, receivables, cash and/or marketable securities. Our credit risk associated with issuing letters of credit is essentially the same as the risk involved in extending loan facilities to our customers.

Management evaluated the likelihood of funding the standby and commercial letters of credit as of September 30, 2023, and determined the likelihood to be improbable. Therefore, no ACL was recorded for standby and commercial letters of credit as of September 30, 2023.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being fully drawn upon, the total commitment amounts disclosed above do not necessarily represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if considered necessary by us, upon extension of credit, is based on management’s credit evaluation of the customer.

Loan agreements executed in connection with construction loans and commercial lines of credit have standard conditions which must be met prior to the Company being required to provide additional funding, including conditions precedent that typically include: (i) no event of default or potential default has occurred; (ii) that no material adverse events have taken place that would materially affect the borrower or the value of the collateral, (iii) that the borrower remains in compliance with all loan obligations and covenants and has made no misrepresentations; (iv) that the collateral has not been damaged or impaired; (v) that the project remains on budget and in compliance with all laws and regulations; and (vi) that all management agreements, lease agreements and franchise agreements that affect the value of the collateral remain in force. If the conditions precedent have not been met, the Company retains the option to cease current draws and/or future funding. As a result of these conditions within our loan agreements, management believes the credit risk of these off balance sheet items is minimal and we recorded no ACL with respect to these loan agreements as of September 30, 2023.

Interest Rate Sensitivity and Market Risk

As a financial institution, our primary component of market risk is interest rate volatility. Our asset liability and funds management policy provides management with the guidelines for effective funds management, and we have established a measurement system for monitoring our net interest rate sensitivity position. We have historically managed our sensitivity position within our established guidelines.

Inflation in the U.S. remains high, primarily as a result of lingering effects from the COVID-19 pandemic and related governmental policies, as well as other geo-political factors. However, unlike many industrial companies, substantially all of our assets and liabilities are monetary in nature, which means that interest rates have a more significant impact on our performance than the effects of general levels of inflation.

To combat record levels of inflation, the Federal Reserve approved its first interest rate increase in the current cycle in March 2022, and has since raised interest rates by 525 basis points through September 30, 2023. Members of the Federal Open Markets Committee have signaled they may further increase the federal funds rate by an additional 25 basis points during the remainder of 2023. If the Federal Reserve does ultimately continue to increase interest rates, we expect those increases to have a negative impact on our net income in the short term due to timing differences in asset and liability repricing, but ultimately a net positive impact on our net income, despite likely absolute increases in our operating expenses due to inflation.

Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on most of our assets and liabilities, and the market value of all interest-earning assets and interest-bearing liabilities, other than those which have a short term to maturity. Interest rate risk is the potential of economic losses due to future interest rate changes.

(Continued)

60.

These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair market values. The objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk while at the same time maximizing income.

We manage our exposure to interest rates by structuring our balance sheet in the ordinary course of business. We do not enter into instruments such as leveraged derivatives, financial options, financial future contracts or forward delivery contracts for the purpose of reducing interest rate risk. Based upon the nature of our operations, we are not subject to foreign exchange or commodity price risk. We do not own any trading assets.

Our exposure to interest rate risk is managed by the asset-liability committee of the Bank, in accordance with policies approved by its board of directors. The committee formulates strategies based on appropriate levels of interest rate risk. In determining the appropriate level of interest rate risk, the committee considers the impact on earnings and capital on the current outlook on interest rates, potential changes in interest rates, regional economies, liquidity, business strategies and other factors. The committee meets regularly to review, among other things, the sensitivity of assets and liabilities to interest rate changes, the book and market values of assets and liabilities, unrealized gains and losses, purchase and sale activities, commitments to originate loans and the maturities of investments and borrowings. Additionally, the committee reviews liquidity, cash flow flexibility, maturities of deposits and consumer and commercial deposit activity. Management employs methodologies to manage interest rate risk, which include an analysis of relationships between interest-earning assets and interest-bearing liabilities and an interest rate shock simulation model.

We use interest rate risk simulation models and shock analyses to test the interest rate sensitivity of net interest income and fair value of equity, and the impact of changes in interest rates on other financial metrics. Contractual maturities and re-pricing opportunities of loans are incorporated in the model as are prepayment assumptions, maturity data and call options within the investment portfolio. Average life of non-maturity deposit accounts are based on

~~69.~~

standard regulatory decay assumptions and are incorporated into the model. The assumptions used are inherently uncertain and, as a result, the model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income. Actual results will differ from the model’s simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in market conditions and the application and timing of various management strategies.

On a quarterly basis, we run two simulation models including a static balance sheet and dynamic growth balance sheet. These models test the impact on net interest income and fair value of equity from changes in market interest rates under various scenarios. Under the static and dynamic growth models, rates are shocked instantaneously and ramped rate changes over a twelve-month horizon based upon parallel and non-parallel yield curve shifts. Parallel shock scenarios assume instantaneous parallel movements in the yield curve compared to a flat yield curve scenario. Non-parallel simulation involves analysis of interest income and expense under various changes in the shape of the yield curve. Our internal policy regarding internal rate risk simulations currently specifies that for instantaneous parallel shifts of the yield curve, estimated net income at risk for the subsequent one-year period should not decline by more than ~~15.0%~~10.0% for a 100 basis point shift, ~~20.0%~~15.0% for a 200 basis point shift and ~~30.0%~~25.0% for a 300 basis point shift.

The following table summarizes the simulated change in net interest income and fair value of equity over a 12-month horizon as of:

September 30, 2017 December 31, 2016
Change in Interest Rates (Basis Points) Percent Change in Net Interest Income Percent Change in Fair Value of Equity Percent Change in Net Interest Income Percent Change in Fair Value of Equity
+300 1.83 % (15.87%)
1.44 % (18.99%)
+200 1.92 % (7.71%)
1.42 % (9.58%)
+100 1.71 % (2.41%)
1.19 % (3.45%)
Base — % — % — % — %
-100 (0.54%)
(4.72%)
(0.29%)
(1.80%)


	September 30, 2023						December 31, 2022
Change in Interest Rates (Basis Points)	Percent Change in Net Interest Income			Percent Change in Fair Value of Equity			Percent Change in Net Interest Income			Percent Change in Fair Value of Equity
+300		(2.47	%)		(29.83	%)		0.43	%		(18.35	%)
+200		(1.78	%)		(18.76	%)		0.17	%		(10.87	%)
+100		(1.29	%)		(9.32	%)		(0.21	%)		(5.17	%)
Base		—			—			—			—
-100		(0.96	%)		4.68	%		0.34	%		1.48	%
-200		(0.43	%)		7.87	%		4.16	%		(0.70	%)

The results are primarily due to behavior of demand, money market and savings deposits during such rate fluctuations. We have found that, historically, interest rates on these deposits change more slowly than changes in the discount and federal funds rates. This assumption is incorporated into the simulation model and is generally not fully reflected in a gap analysis. The assumptions incorporated into the model are inherently uncertain and, as a result, the model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income. Actual results will differ from the model’s simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in market conditions and the application and timing of various strategies.

(Continued)

61.

Impact of Inflation

Our consolidated financial statements and related notes included elsewhere in this Report have been prepared in accordance with GAAP. GAAP requires the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative value of money over time due to inflation or ~~recession.~~

deflation.

Unlike many industrial companies, substantially all of our assets and liabilities are monetary in nature. As a result, interest rates have a more significant impact on our performance than the effects of general levels of inflation. Interest rates may not necessarily move in the same direction or in the same magnitude as the prices of goods and services. However, other operating expenses do reflect general levels of inflation.

Non-GAAP Financial Measures

Our accounting and reporting policies conform to GAAP and the prevailing practices in the banking industry. However, we also evaluate our performance based on certain additional financial measures discussed in this Report as being non-GAAP financial measures. We classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the United States in our statements

~~70.~~

of income, balance sheets or statements of cash flows. Non-GAAP financial measures do not include operating and other statistical measures or ratios or statistical measures calculated using exclusively either financial measures calculated in accordance with GAAP, operating measures or other measures that are not non-GAAP financial measures or both.

The non-GAAP financial measures that we discuss in this Report should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we discuss in this Report may differ from that of other companies reporting measures with similar names. It is important to understand how other banking organizations calculate their financial measures with names similar to the non-GAAP financial measures we have discussed in this Report when comparing such non-GAAP financial measures.

~~Tangible Book Value Per Common Share~~. Tangible book value per common share is a non-GAAP measure generally used by investors, financial analysts and investment bankers to evaluate financial institutions. We calculate (1) tangible common equity as total shareholders’ equity, less goodwill, core deposit intangibles and other intangible assets, net of accumulated amortization, and (2) tangible book value per common share as tangible common equity divided by shares of common stock outstanding. The most directly comparable GAAP financial measure for tangible book value per common share is book value per common share.

We believe that the tangible book value per common share measure is important to many investors in the marketplace who are interested in changes from period to period in book value per common share exclusive of changes in intangible assets. Goodwill and other intangible assets have the effect of increasing total book value while not increasing our tangible book value.

The following ~~table reconciles,~~tables reconcile, as of and for the dates set forth below, ~~total shareholders’ equity to tangible common equity and presents tangible book value per common share compared to book value per common share:~~

As of September 30, As of December 31,
2017 2016 2016
(Dollars in thousands, except per share data)
Tangible Common Equity
Total shareholders’ equity, including KSOP-owned shares $ 207,263
$ 148,005
$ 141,914
Adjustments:
Goodwill (18,742 ) (18,742 ) (18,742 )
Core deposit and other intangibles (2,870 ) (3,453 ) (3,308 )
Total tangible common equity $ 185,651
$ 125,810
$ 119,864
Common shares outstanding⁽¹⁾
11,058,956
8,955,476
8,751,923
Book value per common share $ 18.74
$ 16.53
$ 16.22
Tangible book value per common share $ 16.79
$ 14.05
$ 13.70

~~(1) Excludes~~ the ~~dilutive effect, if any,~~following financial measures:

Net Unrealized Loss on Securities, Tax Effected, as % of ~~75,505, 9,581 and 8,066 shares~~Total Equity


(dollars in thousands)	September 30, 2023
Total equity(1)	$	296,784
Less: net unrealized loss on HTM securities, tax effected		(32,087	)
Total equity, including net unrealized loss on AFS and HTM securities	$	264,697

Net unrealized loss on AFS securities, tax effected		19,536
Net unrealized loss on HTM securities, tax effected		32,087
Net unrealized loss on AFS and HTM securities, tax effected	$	51,623

Net unrealized loss on securities as % of total equity(1)		17.4	%
Total equity before impact of unrealized losses	$	316,320
Net unrealized loss on securities as % of total equity before impact of unrealized losses		16.3	%

Total average assets	$	3,213,489
Total equity to average assets		9.2	%
Total equity, adjusted for tax effected net unrealized loss, to average assets		8.2	%

(1) Includes the net unrealized loss on AFS securities, tax effected, of $19,536.

(Continued)

62.

Cost of ~~common stock issuable upon exercise of outstanding stock options as of September 30, 2017, September 30, 2016 and December 31, 2016, respectively.~~

~~Tangible Common Equity to Tangible Assets~~. Tangible common equity to tangible assets is a non-GAAP measure generally used by investors, financial analysts and investment bankers to evaluate financial institutions. We calculate tangible common equity, as described above, and tangible assets as total assets less goodwill, core deposit intangibles and other intangible assets, net of accumulated amortization. The most directly comparable GAAP financial measure for tangible common equity to tangible assets is total common shareholders’ equity to total assets.

We believe that this measure is important to many investors in the marketplace who are interested in the relative changes from period to period of tangible common equity to tangible assets, each exclusive of changes in intangible assets. Goodwill and other intangible assets have the effect of increasing both total shareholders’ equity and assets while not increasing our tangible common equity or tangible assets.

~~71.~~

~~The following table reconciles, as of the dates set forth below, total shareholders’ equity to tangible common equity and total assets to tangible assets:~~

As of September 30, 2017 As of December 31, 2016
(Dollars in thousands)
Tangible Common Equity
Total shareholders’ equity, including KSOP-owned shares $ 207,263
$ 141,914
Adjustments:
Goodwill (18,742 ) (18,742 )
Core deposit and other intangibles (2,870 ) (3,308 )
Total tangible common equity $ 185,651
$ 119,864
Tangible Assets
Total assets $ 1,924,053
$ 1,828,336
Adjustments:
Goodwill (18,742 ) (18,742 )
Core deposit and other intangibles $ (2,870 ) $ (3,308 )
Total tangible assets $ 1,902,441
$ 1,806,286

Total Deposits


	Quarter Ended
(dollars in thousands)	September 30, 2023			June 30, 2023			September 30, 2022
Total average interest-bearing deposits	$	1,726,218		$	1,653,237		$	1,650,314
Adjustments:
Noninterest-bearing deposits		888,772			948,083			1,109,205
Total average deposits	$	2,614,990		$	2,601,320		$	2,759,519

Total deposit-related interest expense	$	13,069		$	9,946		$	2,455

Average cost of interest-bearing deposits		3.00	%		2.41	%		0.59	%
Average cost of total deposits		1.98			1.53			0.35

Cautionary Notice Regarding Forward-Looking Statements

This Report, our other filings with the SEC, and other press releases, documents, reports and announcements that we make, issue or publish may contain statements that we believe are “forward-looking statements” within the meaning of section 27A of the Securities Act and section 21E of the Exchange Act. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance, including our future revenues, income, expenses, provision for taxes, effective tax rate, earnings per share and cash flows, our future capital expenditures and dividends, our future financial condition and changes therein, including changes in our loan portfolio and allowance for ~~loan~~credit losses, our future capital structure or changes therein, the plan and objectives of management for future operations, our future or ~~proposes~~proposed acquisitions, the future or expected effect of acquisitions on our operations, results of the operations and financial condition, our future economic performance and the statements of the assumptions underlying any such statement. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following:

•

our ability to prudently manage our growth and execute our strategy;

•

risks associated with our acquisition and de novo branching strategy;

•

business and economic conditions generally and in the financial services industry, nationally and within our primary Texas markets;

•

concentration of our business within our geographic areas of operation in Texas;

•

deterioration of our asset quality and higher loan charge-offs;

•

changes in the value of collateral securing our loans;

•

inaccuracies in the assumptions and estimate we make in establishing the allowance for ~~loan~~credit losses reserve and other estimates;

•

changes in management personnel and our ability to attract, motivate and retain qualified personnel;

~~72.~~

•

liquidity risks associated with our business;

•

interest rate risk associated with our business that could decrease net interest income;

•

our ability to maintain important deposit customer relationships and our reputation;

•

operational risks associated with our business;

•

volatility and direction of market interest rates;

•

change in regulatory requirements to maintain minimum capital levels;

•

increased competition in the financial services industry, particularly from regional and national institutions;

•

institution and outcome of litigation and other legal proceeding against us or to which we become subject;

•

changes in the laws, rules, regulations, interpretations or policies relating to financial institution, accounting, tax, trade, monetary and fiscal matters;

•

further government intervention in the U.S. financial system;

(Continued)

63.

•

changes in the scope and cost of FDIC insurance and other coverage;

•

natural disasters and adverse weather, acts of terrorism (including ~~cyber attacks)~~cyberattacks), an outbreak of hostilities or public health outbreaks (such as COVID-19), or other international or domestic calamities, ~~catastrophic events including storms, droughts, tornados and flooding,~~ and other matters beyond our control;

•

risks that the financial institutions we may acquire or de novo branches we may open will not be integrated successfully, or the integrations may be more time consuming or costly than expected;

•

technology related changes are difficult to make or are more expensive than expected; and

•

the other factors that are described ~~or referenced in our IPO Prospectus~~ under the caption “Risk Factors”; or referenced in this report, our Annual Report on Form 10-K for the year ended December 31, 2022, and other risks included in the Company’s filings with the SEC.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Report. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

~~73.~~

Item 3.Quantitative and Qualitative Disclosures About Market Risk

The Company manages market risk, which, as a financial institution is primarily interest rate volatility, through the Asset-Liability Committee of the Bank, in accordance with policies approved by its board of directors. The Company uses an interest rate risk simulation model and shock analysis to test the interest rate sensitivity of net interest income and fair value of equity, and the impact of changes in interest rates on other financial metrics. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Interest Rate Sensitivity and Market Risk” herein for a discussion of how we manage market risk.

Item 4.Controls and Procedures

Evaluation of disclosure controls and procedures:

As of the end of the period covered by this Report, the Company carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply judgment in evaluating its controls and procedures. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) were effective as of the end of the period covered by this Report.

Changes in internal control over financial reporting:

There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, ~~2017~~2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

~~74.~~

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company is from time to time subject to claims and litigation arising in the ordinary course of business. These claims and litigation may include, among other things, allegations of violation of banking and other applicable regulations, competition law, labor laws and consumer protection laws, as well as claims or litigation relating to intellectual property, securities, breach of contract and tort. The Company intends to defend itself vigorously against any pending or future claims and litigation.

(Continued)

64.

At this time, in the opinion of management, the likelihood is remote that the impact of such proceedings, either individually or in the aggregate, would have a material adverse effect on the ~~Company~~Company’s combined results of operations, financial condition or cash flows. However, one or more unfavorable outcomes in any claim or litigation against the Company could have a material adverse effect for the period in which they are resolved. In addition, regardless of their merits or their ultimate outcomes, such matters are costly, divert management’s attention and may materially adversely affect the Company’s reputation, even if resolved in ~~our~~the Company’s favor.

Item 1A.Risk Factors

In evaluating an investment in the Company’s common stock, investors should consider carefully, among other things, the risk factors previously disclosed in under the caption “Risk Factors” in the Company’s ~~IPO Prospectus filed~~Annual Report on Form 10-K for the year ended December 31, 2022, and other risks included in the Company’s filings with the ~~Securities and Exchange Commission on May 9, 2017 pursuant to Rule 424(b) of the Securities Act, in connection with the initial public offering of the Company’s common stock.~~SEC. The Company’s business could be harmed by any of these risks. The trading price of the Company’s common stock could decline due to any of these risks, and you may lose all or part of your investment.

The following risk has been added to supplement the Company’s risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Recent volatility in the banking sector may result in new legislation, regulations or policy changes that could subject the Company and the Bank to increased government regulation and supervision.

The recent collapses of Silicon Valley Bank and Signature Bank have led to interventions by the FDIC, the Federal Reserve, and the U.S. Treasury Secretary in order to safeguard the depositors of these establishments. In light of these events, Congress and federal banking authorities have initiated assessments to pinpoint the causes of these failures, proposing various explanations such as insufficient regulation and oversight, as well as the institutions' inability to effectively manage interest rate and liquidity risks. Ongoing analysis of these developments might result in government-driven measures aimed at averting similar bank failures in the future, which could include changes to risk-based capital regulations. Federal banking authorities may also reconsider relevant liquidity risk management standards.

While it is impossible to definitively predict which measures lawmakers and regulatory bodies might adopt, or the specifics and extent of any such measures, any of the aforementioned potential changes could, among other consequences, impose additional costs on us, restrict the range of financial services and products the Bank is able to offer, and curtail the future expansion of both the Company and the Bank. These factors could substantially and negatively impact the Company's business, operational results, or financial standing.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

~~There were no sales~~

On April 21, 2022, the Company announced the adoption of ~~equity securities~~a new stock repurchase program that authorized the repurchase of up to 1,000,000 shares of the Company common stock. The stock repurchase program will be effective until the earlier of April 21, 2024, or the date all shares authorized for repurchase under the program have been repurchased, unless shortened or extended by the board of directors. The repurchase plan permits shares to be acquired from time to time in the open market or negotiated transactions at prices management considers to be attractive and in the best interest of both the Company and its shareholders, subject to compliance with applicable laws and regulations, general market and economic conditions, the financial and regulatory condition of the Company, liquidity and other factors.

The table below contains information regarding all shares repurchased by the Company during the period covered by this Report that were not registered with the SEC under the Securities Act. In May 2017, during the period covered by this Report, the Company issued and sold 2,300,000 shares of our common stock, including 300,000 shares of common stock sold pursuant to the underwriters’ full exercise of their option to purchase additional shares, in the Company’s initial public offering at an offering price of $27.00 per share, for aggregate net proceeds of approximately $57.6 million. All of the shares issued and sold in the initial public offering were registered under the Securities Act pursuant to a Registration Statement on Form S-1 (File No. 333-217176), which was declared effective by the Securities and Exchange Commission on May 8, 2017. Sandler O’Neill + Partners, L.P. and Stephens Inc. acted as underwriters. There has been no material change in the planned use of proceeds from our initial public offering as described in our IPO Prospectus (File No. 333-217176), filed with the Securities and Exchange Commission on May 9, 2017 pursuant to Rule 424(b) of the Securities Act.

periods indicated.


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
July, 2023		45,840	$	27.28		45,840		411,462
August, 2023		—		—		—		411,462
September, 2023		15,848		27.66		15,848		395,614
Total		61,688	$	27.38		61,688

Item 3.Defaults Upon Senior Securities

None.

(Continued)

65.

Item 4.Mine Safety Disclosures

Not applicable.

Item 5. Other Information

(a)

Not applicable.

(b)

~~Item 5.Other Information~~

~~None.~~

~~75.~~

Not applicable.

(c)

During the three months ended September 30, 2023, no director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.

Item 6.Exhibits



Exhibit Number		Description of Exhibit

3.1		Amended and Restated Certificate of Formation of Guaranty Bancshares, Inc. (incorporated by reference to Exhibit 3.1 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 filed May 1, ~~2017 (File No. 333-217176))~~2017).

3.2		Amended and Restated Bylaws of Guaranty Bancshares, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 filed April 6, ~~2017 (File No. 333-217176))~~2017).

~~31.1~~4.1*		Specimen common stock certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1 filed with the SEC on April 6, 2017).

		The other instruments defining the rights of the long-term debt securities of Guaranty Bancshares, Inc. and its subsidiaries are omitted pursuant to section (b)(4)(iii)(A) of Item 601 of Regulation S-K. Guaranty Bancshares, Inc. hereby agrees to furnish copies of these instruments to the SEC upon request.

31.1*		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101* 101.INS		~~The following materials from Guaranty Bancshares’ Quarterly Report on Form 10-Q for~~ XBRL Instance Document – the ~~quarter ended September 30, 2017, formatted~~instance document does not appear in the Interactive Data File because its XBRL (Extensible Business Reporting Language), furnished herewith: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Changestags are embedded within the Inline XBRL document.
101.SCH		XBRL Taxonomy Extension Schema Document*
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB		XBRL Taxonomy Extension Label Linkbase Document*
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document*
104		Cover Page Interactive Data File (formatted as inline XBRL and contained in ~~Shareholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements.~~Exhibit 101)*

______________________________

* Filed with this Quarterly Report on Form 10-Q

** Furnished with this Quarterly Report on Form 10-Q

~~76.~~

(Continued)

66.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		GUARANTY BANCSHARES, INC.
		(Registrant)


Date: November ~~13, 2017~~3, 2023		/s/ Tyson T. Abston
		Tyson T. Abston
		Chairman of the Board & Chief Executive Officer





Date: November ~~13, 2017~~3, 2023		/s/ Clifton A. Payne
		Clifton A. Payne
		Chief Financial Officer & Director

~~77.~~

67.



	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Interest income
Loans, including fees	$	15,486	$	14,294	$	45,115	$	40,857
Securities
Taxable	1,545		1,038		4,257		4,298
Nontaxable	919		923		2,761		2,308
Federal funds sold and interest-bearing deposits	215		172		960		528
Total interest income	18,165		16,427		53,093		47,991

Interest expense
Deposits	2,730		2,329		7,761		6,791
FHLB advances and federal funds purchased	157		109		294		277
Subordinated debentures	164		217		559		656
Other borrowed money	12		104		337		452
Total interest expense	3,063		2,759		8,951		8,176

Net interest income	15,102		13,668		44,142		39,815
Provision for loan losses	800		840		2,250		3,240
Net interest income after provision for loan losses	14,302		12,828		41,892		36,575

Noninterest income
Service charges	986		914		2,801		2,625
Net realized gain on securities transactions	—		64		25		82
Net realized gain on sale of loans	589		486		1,490		1,231
Other income	2,127		1,938		6,184		5,664
Total noninterest income	3,702		3,402		10,500		9,602

Noninterest expense
Employee compensation and benefits	6,729		6,370		20,156		19,057
Occupancy expenses	1,938		1,720		5,552		5,196
Other expenses	3,499		3,390		10,409		10,087
Total noninterest expense	12,166		11,480		36,117		34,340

Income before income taxes	5,838		4,750		16,275		11,837
Income tax provision	1,699		1,380		4,644		3,290
Net earnings	$	4,139	$	3,370	$	11,631	$	8,547
Basic earnings per share	$	0.37	$	0.38	$	1.17	$	0.95
Diluted earnings per share	$	0.37	$	0.38	$	1.16	$	0.95



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net earnings	$	4,139		$	3,370		$	11,631		$	8,547
Other comprehensive income:
Unrealized (losses) gains on securities
Unrealized holding (losses) gains arising during the period	(264		)	(115		)	2,422			3,990
Amortization of net unrealized gains on held to maturity securities	23			48			58			98
Reclassification adjustment for net gains included in net earnings	—			(105		)	(25		)	(123		)
Tax effect	92			—			(839		)	(1,083		)
Unrealized (losses) gains on securities, net of tax	(149		)	(172		)	1,616			2,882
Unrealized holding gains (losses) arising during the period on interest rate swaps	35			34			29			(289		)
Total other comprehensive (loss) income	(114		)	(138		)	1,645			2,593
Comprehensive income	$	4,025		$	3,232		$	13,276		$	11,140



	Preferred Stock		Common Stock			Additional Paid-in Capital			Retained Earnings				Treasury Stock				Accumulated Other Comprehensive Loss			Less: KSOP-Owned Shares			Total Shareholders’ Equity
For the Nine Months Ended September 30, 2016
Balance at December 31, 2015	$	—	$	9,616		$	101,525		$	49,654			$	(16,486	)		$	(6,573	)	$	(35,384	)	$	102,352
Net earnings	—		—			—			8,547				—				—			—			8,547
Other comprehensive income	—		—			—			—				—				2,593			—			2,593
Purchase of treasury stock	—		—			—			—				(7,261		)		—			(3,000		)	(10,261		)
Sale of treasury stock	—		—			—			—				8,557				—			—			8,557
Stock based compensation	—		—			162			—				—				—			—			162
Net change in fair value of KSOP shares	—		—			—			—				—				—			(1,539		)	(1,539		)
Dividends:
Common - $0.26 per share	—		—			—			(2,328		)		—				—			—			(2,328		)
Balance at September 30, 2016	$	—	$	9,616		$	101,687		$	55,873			$	(15,190	)		$	(3,980	)	$	(39,923	)	$	108,083

For the Nine Months Ended September 30, 2017
Balance at December 31, 2016	$	—	$	9,616		$	101,736		$	57,160			$	(20,111	)		$	(6,487	)	$	(31,661	)	$	110,253
Net earnings	—		—			—			11,631				—				—			—			11,631
Other comprehensive income	—		—			—			—				—				1,645			—			1,645
Terminated KSOP put option	—		—			—			—				—				—			34,300			34,300
Exercise of stock options	—		5			55			—				24				—			—			84
Sale of common stock	—		2,300			53,455			—				—				—			—			55,755
Stock based compensation	—		—			247			—				—				—			—			247
Net change in fair value of KSOP shares	—		—			—			—				—				—			(2,639		)	(2,639		)
Dividends:
Common - $0.39 per share	—		—			—			(4,013		)		—				—			—			(4,013		)
Balance at September 30, 2017	$	—	$	11,921	—	$	155,493	—	$	64,778		—	$	(20,087	)	—	$	(4,842	)	$	—		$	207,263



GUARANTY BANCSHARES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands)
	For the Nine Months Ended September 30,
	2017			2016
Cash flows from operating activities
Net earnings	$	11,631		$	8,547
Adjustments to reconcile net earnings to net cash provided from operating activities:
Depreciation	2,385			2,262
Amortization	782			779
Deferred taxes	(214		)	(1,228		)
Premium amortization, net of discount accretion	3,581			3,528
Net realized gain on securities transactions	(25		)	(82		)
Gain on sale of loans	(1,490		)	(1,231		)
Provision for loan losses	2,250			3,240
Origination of loans held for sale	(50,230		)	(43,146		)
Proceeds from loans held for sale	50,883			45,158
Write-down of other real estate and repossessed assets	9			107
Net loss (gain) on sale of premises, equipment, other real estate owned and other assets	111			(1,214		)
Stock based compensation	247			162
Net change in accrued interest receivable and other assets	1,680			(1,633		)
Net change in accrued interest payable and other liabilities	1,624			1,342
Net cash provided by operating activities	23,224			16,591

Cash flows from investing activities
Securities available for sale:
Purchases	(313,177		)	(26,140		)
Proceeds from sales	213,813			103,942
Proceeds from maturities and principal repayments	18,925			54,021
Securities held to maturity:
Purchases	—			(86,642		)
Proceeds from sales	923			1,866
Proceeds from maturities and principal repayments	7,497			15,121
Acquisition of Denton branch, net of cash paid	—			2,399
Net purchases of premises and equipment	(1,678		)	(634		)
Net proceeds from sale of premises, equipment, other real estate owned and other assets	1,830			2,826
Net increase in loans	(64,438		)	(168,154		)
Net cash used in investing activities	(136,305		)	(101,395		)

Cash flows from financing activities
Net change in deposits	40,511			64,536
Net change in securities sold under agreements to repurchase	2,061			(254		)
Proceeds from FHLB advances	60,000			120,178
Repayment of FHLB advances	(50,013		)	(81,346		)
Proceeds from other debt	2,000			10,000
Repayment of other debt	(20,286		)	(18,357		)
Repayments of debentures	(5,500		)	(1,000		)
Purchase of treasury stock	—			(7,261		)



September 30, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available for sale:
Corporate bonds	$	18,842	$	178	$	—	$	19,020
Municipal securities	7,769		—		305		7,464
Mortgage-backed securities	91,801		20		863		90,958
Collateralized mortgage obligations	120,580		493		382		120,691
Total available for sale	$	238,992	$	691	$	1,550	$	238,133

Held to maturity:
Municipal securities	$	146,993	$	2,696	$	516	$	149,173
Mortgage-backed securities	23,337		278		66		23,549
Collateralized mortgage obligations	8,751		181		503		8,429
Total held to maturity	$	179,081	$	3,155	$	1,085	$	181,151



December 31, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available for sale:
Corporate bonds	$	25,254	$	6	$	377	$	24,883
Municipal securities	7,841		—		622		7,219
Mortgage-backed securities	61,298		—		1,608		59,690
Collateralized mortgage obligations	65,789		10		666		65,133
Total available for sale	$	160,182	$	16	$	3,273	$	156,925

Held to maturity:
Municipal securities	$	149,420	$	901	$	3,889	$	146,432
Mortgage-backed securities	28,450		318		290		28,478
Collateralized mortgage obligations	11,501		265		521		11,245
Total held to maturity	$	189,371	$	1,484	$	4,700	$	186,155



For the year ended December 31, 2016	Commercial and industrial			Construction and development			Commercial real estate		Farmland		1-4 family residential			Multi-family residential			Consumer			Agricultural		Overdrafts			Total
Allowance for loan losses:
Beginning balance	$	1,878		$	1,004		$	2,106	$	400	$	2,839		$	325		$	562		$	138	$	11		$	9,263
Provision for loan losses	910			162			1,158		82		1,117			(44		)	171			15		69			3,640
Loans charged-off	(1,213		)	(9		)	—		—		(71		)	—			(269		)	—		(200		)	(1,762		)
Recoveries	17			4			—		—		75			—			121			—		126			343
Ending balance	$	1,592		$	1,161		$	3,264	$	482	$	3,960		$	281		$	585		$	153	$	6		$	11,484
Allowance ending balance:
Individually evaluated for impairment	$	64		$	—		$	—	$	47	$	108		$	—		$	34		$	—	$	—		$	253
Collectively evaluated for impairment	1,528			1,161			3,264		435		3,852			281			551			153		6			11,231
Ending balance	$	1,592		$	1,161		$	3,264	$	482	$	3,960		$	281		$	585		$	153	$	6		$	11,484
Loans:
Individually evaluated for impairment	$	231		$	1,825		$	1,196	$	258	$	2,588		$	5		$	200		$	15	$	—		$	6,318
Collectively evaluated for impairment	223,766			127,541			366,460		62,104		360,364			26,074			53,305			18,886		317			1,238,817
Ending balance	$	223,997		$	129,366		$	367,656	$	62,362	$	362,952		$	26,079		$	53,505		$	18,901	$	317		$	1,245,135



September 30, 2017	30 to 59 Days Past Due		60 to 89 Days Past Due		90 Days and Greater Past Due		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days and Accruing
Commercial and industrial	$	246	$	60	$	30	$	336	$	192,327	$	192,663	$	—
Real estate:
Construction and development	77		—		—		77		200,990		201,067		—
Commercial real estate	—		38		1,521		1,559		391,755		393,314		—
Farmland	2		—		6		8		54,341		54,349		—
1-4 family residential	2,701		838		1,894		5,433		360,456		365,889		—
Multi-family residential	—		—		228		228		23,007		23,235		—
Consumer	617		201		94		912		50,799		51,711		—
Agricultural	66		—		4		70		24,379		24,449		—
Overdrafts	—		—		—		—		698		698		—
Total	$	3,709	$	1,137	$	3,777	$	8,623	$	1,298,752	$	1,307,375	$	—



	September 30, 2017		December 31, 2016
Nonaccrual TDRs	$	—	$	43
Performing TDRs	316		462
Total	$	316	$	505
Specific reserves on TDRs	$	19	$	4



Nine Months Ended September 30, 2017	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial and industrial	1	$	34	$	15
1-4 family residential	1	11		11
Total	2	$	45	$	26



Nine Months Ended September 30, 2016	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial and industrial	1	$	90	$	90
Commercial real estate	1	796		796
1-4 family residential	2	189		189
Total	4	$	1,075	$	1,075



September 30, 2017	Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment
With no related allowance recorded:
Commercial and industrial	$	325	$	325	$	—	$	381
Real estate:
Construction and development	—		—		—		415
Commercial real estate	3,746		3,746		—		4,363
Farmland	120		120		—		106
1-4 family residential	231		231		—		1,288
Multi-family residential	228		228		—		166
Consumer	—		—		—		81
Agricultural	397		397		—		380
Subtotal	5,047		5,047		—		7,180
With allowance recorded:
Commercial and industrial	29		29		19		411
Real estate:
Construction and development	—		—		—		10
Commercial real estate	283		283		31		580
Farmland	156		156		85		122
1-4 family residential	866		866		145		867
Multi-family residential	—		—		—		26
Consumer	—		—		—		56
Agricultural	299		299		240		176
Subtotal	1,633		1,633		520		2,248
Total	$	6,680	$	6,680	$	520	$	9,428



	September 30, 2017		December 31, 2016
Trust II Debentures	$	3,093	$	3,093
Trust III Debentures	2,062		2,062
DCB Trust I Debentures	5,155		5,155
Other debentures	3,500		9,000
	$	13,810	$	19,310



	Trust II		Trust III		DCB Trust I
Formation date	October 30, 2002		July 25, 2006		March 29, 2007

Capital trust pass-through securities
Number of shares	3,000		2,000		5,000
Original liquidation value	$	3,000	$	2,000	$	5,000

Common securities liquidation value	93		62		155



Nine Months Ended September 30, 2017	Number of Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life in Years	Aggregate Intrinsic Value
Outstanding at beginning of year	340,377		$	23.43	7.34	$	194
Granted	150,598		27.64		9.62	657
Exercised	(7,033	)	11.94		4.48	141
Forfeited	(6,000	)	23.17		7.13	53
Balance, September 30, 2017	477,942		$	24.93	7.57	$	3,376

Exercisable at end of period	98,044		$	23.45	6.17	$	838



September 30, 2017:
Notional Amount		Pay Rate		Receive Rate	Effective Date	Maturity in Years	Unrealized Losses
$	2,000	5.979	%	3 month LIBOR plus 1.67%	October 1, 2016	8.51	$	340
$	3,000	7.505	%	3 month LIBOR plus 3.35%	October 30, 2012	5.08	$	326



December 31, 2016:
Notional Amount		Pay Rate		Receive Rate	Effective Date	Maturity in Years	Unrealized Losses
$	2,000	5.979	%	3 month LIBOR plus 1.67%	October 1, 2016	9.25	$	342
$	3,000	7.505	%	3 month LIBOR plus 3.35%	October 30, 2012	5.83	$	353



	Actual				Minimum Required For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
September 30, 2017
Total capital to risk-weighted assets:
Consolidated	$	213,905	14.62	%	$	117,065	8.00	%			n/a
Bank	202,722		13.85	%	117,078		8.00	%	$	146,348	10.00	%
Tier 1 capital to risk-weighted assets:
Consolidated	201,377		13.76	%	87,799		6.00	%			n/a
Bank	190,194		13.00	%	87,809		6.00	%	117,078		8.00	%
Tier 1 capital to average assets:
Consolidated	201,377		10.68	%	75,457		4.00	%			n/a
Bank	190,194		10.08	%	75,465		4.00	%	94,331		5.00	%
Common equity tier 1 capital to risk-weighted assets:
Consolidated	191,067		13.06	%	65,849		4.50	%			n/a
Bank	190,195		13.11	%	65,307		4.50	%	94,333		6.50	%



As of September 30, 2017	Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Other Unobservable Inputs (Level 3)
Assets (liabilities) at fair value on a recurring basis:
Available for sale securities
Mortgage-backed securities	$	90,958		$	—	$	90,958		$	—
Collateralized mortgage obligations	120,691			—		120,691			—
Municipal securities	7,464			—		7,464			—
Corporate bonds	19,020			—		19,020			—
Derivative instruments	(666		)	—		(666		)	—

Assets at fair value on a nonrecurring basis:
Impaired loans	6,160			—		—			6,160
Other real estate owned	1,929			—		—			1,929



As of December 31, 2016	Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Other Unobservable Inputs (Level 3)
Assets (liabilities) at fair value on a recurring basis:
Available for sale securities
Mortgage-backed securities	$	59,690		$	—	$	59,690		$	—
Collateralized mortgage obligations	65,133			—		65,133			—
Municipal securities	7,219			—		7,219			—
Corporate bonds	24,883			—		24,883			—
U.S. treasury securities	—			—		—			—
Derivative instruments	(695		)	—		(695		)	—

Assets at fair value on a nonrecurring basis:
Impaired loans	6,065			—		—			6,065
Other real estate owned	1,692			—		—			1,692



	September 30, 2017			December 31, 2016			September 30, 2016
Foreclosed assets remeasured at initial recognition:
Carrying value of foreclosed assets prior to remeasurement	$	544		$	78		$	67
Charge-offs recognized in the allowance for loan losses	(175		)	(11		)	(11		)
Fair value of foreclosed assets remeasured at initial recognition	$	369		$	67		$	56

Foreclosed assets remeasured subsequent to initial recognition:
Carrying value of foreclosed assets prior to remeasurement	$	—		$	170		$	180
Write-downs included in collection and other real estate owned expense	—			(69		)	(79		)
Fair value of foreclosed assets remeasured subsequent to initial recognition	$	—		$	101		$	101



	Fair value measurements as of September 30, 2017 using:
	Carrying Amount		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
Financial assets:
Cash, due from banks, federal funds sold and interest-bearing deposits	$	95,061	$	67,986	$	27,075	$	—	$	95,061
Marketable securities held to maturity	179,081		—		181,151		—		181,151
Loans, net	1,294,847		—		—		1,293,992		1,293,992
Accrued interest receivable	6,440		—		6,440		—		6,440
Nonmarketable equity securities	9,379		—		9,379		—		9,379
Cash surrender value of life insurance	18,376		—		18,376		—		18,376
Financial liabilities:
Deposits	$	1,617,302	$	1,305,206	$	305,084	$	—	$	1,610,290
Securities sold under repurchase agreements	12,920		—		12,920		—		12,920
Accrued interest payable	883		—		883		—		883
Federal Home Loan Bank advances	65,157		—		64,856		—		64,856
Subordinated debentures	13,810		—		11,445		—		11,445



	As of September 30, 2017		As of December 31, 2016		Dollar Change			Percent Change
	(Dollars in thousands)
Commercial and industrial	$	192,663	$	223,997	$	(31,334	)	(13.99	)%
Real estate:
Construction and development	201,067		129,366		71,701			55.42	%
Commercial real estate	393,314		367,656		25,658			6.98	%
Farmland	54,349		62,362		(8,013		)	(12.85	)%
1-4 family residential	365,889		362,952		2,937			0.81	%
Multi-family residential	23,235		26,079		(2,844		)	(10.91	)%
Consumer and overdrafts	52,409		53,822		(1,413		)	(2.63	)%
Agricultural	24,449		18,901		5,548			29.35	%
Total loans held for investment	$	1,307,375	$	1,245,135	$	62,240		5.00	%

Total loans held for sale	$	3,400	$	2,563	$	837		32.66	%



	For the Nine Months Ended September 30,						For the Year Ended December 31,
	2017			2016			2016
	(Dollars in thousands)
Average loans outstanding⁽¹⁾	$	1,269,387		$	1,158,807		$	1,179,938
Gross loans outstanding at end of period⁽²⁾	$	1,307,375		$	1,229,341		$	1,245,135
Allowance for loan losses at beginning of the period	11,484			9,263			9,263
Provision for loan losses	2,250			3,240			3,640
Charge-offs:
Real Estate:
Construction and development	—			9			9
Commercial real estate	84			—			—
Farmland	—			—			—
1-4 family residential	307			25			71
Multi-family residential	—			—			—
Commercial and industrial	737			1,196			1,213
Consumer	230			170			269
Agriculture	4			—			—
Overdrafts	117			119			200
Total charge-offs	1,479			1,519			1,762
Recoveries:
Real Estate:
Construction and development	—			4			4
Commercial real estate	—			—			—
Farmland	—			—			—
1-4 family residential	21			—			75
Multi-family residential	—			—			—
Commercial and industrial	116			14			17
Consumer	95			103			121
Agriculture	—			—			—
Overdrafts	41			61			126
Total recoveries	273			182			343
Net charge-offs	1,206			1,337			1,419
Allowance for loan losses at end of period	$	12,528		$	11,166		$	11,484
Ratio of allowance to end of period loans⁽²⁾	0.96		%	0.91		%	0.92		%
Ratio of net charge-offs to average loans⁽¹⁾	0.13		%	0.15		%	0.12		%



	As of September 30, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(Dollars in thousands)
Corporate bonds	$	18,842	$	178	$	—	$	19,020
Municipal securities	154,762		2,696		821		156,637
Mortgage-backed securities	115,138		298		929		114,507
Collateralized mortgage obligations	129,331		674		885		129,120
Total	$	418,073	$	3,846	$	2,635	$	419,284



	As of September 30, 2017
	Within One Year				After One Year but Within Five Years				After Five Years but Within Ten Years				After Ten Years				Total
	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Total		Yield
	(Dollars in thousands)
Corporate bonds	$	—	—	%	$	1,096	2.59	%	$	17,924	2.93	%	$	—	—	%	$	19,020	2.91	%
Municipal securities	2,683		2.27	%	5,126		3.56	%	43,228		3.63	%	103,420		3.63	%	$	154,457	3.60	%
Mortgage-backed securities	—		—	%	58,496		2.25	%	55,799		2.54	%	—		—	%	$	114,295	2.39	%
Collateralized mortgage obligations	381		—	%	84,374		2.55	%	44,687		2.67	%	—		2.69	%	$	129,442	2.61	%
Total	$	3,064	2.27	%	$	149,092	2.46	%	$	161,638	2.89	%	$	103,420	3.48	%	$	417,214	2.92	%



	As of September 30, 2017
	Amount		Weighted Average Interest Rate
	(Dollars in thousands)
Under 3 months	$	41,718	0.95	%
3 to 6 months	42,231		1.02	%
6 to 12 months	61,233		1.04	%
12 to 24 months	24,091		1.24	%
24 to 36 months	4,574		1.49	%
36 to 48 months	11,936		1.56	%
Over 48 months	4,638		1.63	%
Total	$	190,421	1.10	%



	Balance		Weighted Average Rate
	(Dollars in thousands)
Less than 90 days	$	20,000	1.17	%
90 days to less than one year	25,000		1.12	%
Three to five years	20,157		1.11	%
Total	$	65,157	1.13	%



	For the Nine Months Ended		For the Year Ended
	September 30, 2017		December 31, 2016
Sources of Funds:
Deposits:
Noninterest-bearing	19.95	%	19.15	%
Interest-bearing	66.03	%	66.16	%
Federal funds purchased	—	%	0.01	%
Advances from FHLB	2.21	%	3.53	%
Other debt	0.48	%	0.74	%
Subordinated denentures	0.88	%	1.14	%
Securities sold under agreements to repurchase	0.69	%	0.73	%
Accrued interest and other liabilities	0.34	%	0.36	%
Shareholders’ equity	9.42	%	8.18	%
Total	100.00	%	100.00	%

Uses of Funds:
Loans	66.76	%	65.80	%
Securities available for sale	11.52	%	11.17	%
Securities held to maturity	9.78	%	10.29	%
Nonmarketable equity securities	0.37	%	0.48	%
Federal funds sold	2.61	%	2.96	%
Interest-bearing deposits in other banks	1.26	%	1.44	%
Other noninterest-earning assets	7.70	%	7.86	%
Total	100.00	%	100.00	%

Average noninterest-bearing deposits to average deposits	23.20	%	22.45	%
Average loans to average deposits	78.40	%	77.84	%



	As of September 30, 2017
	1 year or less		More than 1 year but less than 3 years		3 years or more but less than 5 years		5 years or more		Total
	(Dollars in thousands)
Time deposits	$	232,964	$	46,392	$	23,726	$	—	$	303,082
Advances from FHLB	45,000		—		20,157		—		65,157
Subordinated debentures	1,000		2,500		—		10,310		13,810
Total	$	278,964	$	48,892	$	43,883	$	10,310	$	382,049