SOURCE: Guaranty Bancorp

Guaranty Bancorp

January 25, 2017 16:10 ET

Guaranty Bancorp Announces 2016 Annual and Fourth Quarter Financial Results

DENVER, CO--(Marketwired - January 25, 2017) - Guaranty Bancorp (NASDAQ: GBNK)

  • Increased 2016 net income by $2.3 million, or 10.1% compared to the prior year
  • Successfully completed integration of the former Home State Bank during the fourth quarter 2016
  • Increased loans by $259.1 million, or 14.3%, during 2016, excluding $445.5 million in loans acquired in the merger with Home State Bancorp
  • Grew deposits by $127.5 million, or 7.1%, during 2016, excluding $769.7 million in deposits acquired in the merger with Home State Bancorp

Guaranty Bancorp (NASDAQ: GBNK) ("we", "our" or "the Company"), a community bank holding company based in Colorado, today announced fourth quarter 2016 net income of $7.4 million, or $0.27 per basic common share and $0.26 per diluted common share, compared to $5.9 million, or $0.28 per basic and diluted common share in the fourth quarter 2015. Fourth quarter 2016 net income was impacted by $3.0 million in merger-related expenses. Fourth quarter 2016 operating earnings1 increased 62.0% to $9.4 million, or $0.34 per diluted common share, compared to $5.8 million in the fourth quarter 2015. For the year ended December 31, 2016, net income was $24.7 million or $1.06 per basic common share and $1.05 per diluted common share compared to $22.5 million, or $1.07 per basic common share and $1.06 per diluted common share in 2015. Net income in 2016 included $6.3 million in merger-related expenses. For the year ended December 31, 2016, operating earnings increased $6.5 million, or 28.9% to $29.0 million; an increase of $0.17 per diluted common share compared to $22.5 million in 2015.

"As we look back on our accomplishments in 2016, we have much to be proud of," said Paul W. Taylor, President and Chief Executive Officer of Guaranty Bancorp. "Late in the third quarter 2016, we successfully completed our merger with Home State Bancorp, the holding company for Home State Bank based in Loveland, Colorado. On November 7, 2016, we took the final step and fully integrated our systems and changed the name on the buildings to Guaranty Bank. Our employees have done a fantastic job coming together to serve our expanded customer base and we are focused on providing exceptional service to local Colorado businesses and consumers."

Taylor continued, "Even with all the activities surrounding the merger, loans increased by 14.3% in 2016, excluding $445.5 million in loans acquired in the merger with Home State Bancorp. Not only did we successfully grow loans, we did so while simultaneously improving the nonperforming asset ratio to 0.17% at December 31, 2016, compared to 0.64% at December 31, 2015. We are pleased with our momentum going into 2017 and the opportunity to further support the growth of our customers and the local Colorado economy."

1 This press release contains certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company's operational performance and to enhance investors' overall understanding of the Company's core financial performance. See the "Non-GAAP Financial Measures" section later in this press release for a definition of operating earnings and other non-GAAP measures.

  
Key Financial Measures 
Income Statement 
                      
   Quarter Ended   Year Ended  
   December 31, 2016   September 30, 2016   December 31, 2015   December 31, 2016   December 31, 2015  
   (Dollars in thousands, except per share amounts)  
Net income  $7,421   $5,765   $5,891   $24,727   $22,454  
Operating earnings (1)   9,445    7,281    5,830    29,013    22,509  
Earnings per common share - diluted   0.26    0.25    0.28    1.05    1.06  
Earnings per common share - diluted - operating (1)   0.34    0.32    0.27    1.23    1.06  
Return on average assets   0.88 %  0.88 %  1.00 %  0.93 %  1.01 %
Return on average assets - operating (1)   1.13 %  1.11 %  0.99 %  1.09 %  1.01 %
Return on average equity   8.41 %  9.04 %  10.55 %  9.35 %  10.42 %
Return on average equity - operating (1)   10.70 %  11.42 %  10.44 %  10.97 %  10.44 %
Net interest margin   3.58 %  3.66 %  3.58 %  3.60 %  3.67 %
Efficiency ratio - tax equivalent (2)   55.13 %  56.78 %  59.55 %  57.46 %  60.20 %
___________                          
(1) See reconciliation of non-GAAP financial measures to the corresponding GAAP measurement in "Non-GAAP Financial Measures" later in this document.
(2) The efficiency ratio equals noninterest expense adjusted to exclude amortization of intangible assets, prepayment penalties on long-term debt, impairment of long-lived assets and merger related expenses, divided by the sum of tax equivalent net interest income and tax equivalent noninterest income. To calculate tax equivalent net interest income and noninterest income, the interest earned on tax exempt loans and investment securities and the income earned on bank-owned life insurance have been adjusted to reflect the amount that would have been earned had these investments been subject to normal income taxation.
 
  
Balance Sheet 
                      
   December 31, 2016   September 30, 2016   Percent 
Change
  December 31, 2015   Percent 
Change
 
   (Dollars in thousands, except per share amounts)  
Total investments  $590,856   $562,091   5.1 % $424,692   39.1 %
Total loans, net of deferred fees and costs   2,519,138    2,412,999   4.4 %  1,814,536   38.8 %
Allowance for loan losses   (23,250 )  (23,300 ) (0.2) %  (23,000 ) 1.1 %
Total assets   3,366,427    3,346,265   0.6 %  2,368,525   42.1 %
Total deposits   2,699,084    2,752,112   (1.9) %  1,801,845   49.8 %
Book value per common share   12.44    12.39   0.4 %  10.21   21.8 %
Tangible book value per common share   9.91    9.85   0.6 %  9.97   (0.6) %
Equity ratio - GAAP   10.47 %  10.50 % (0.3) %  9.36 % 11.9 %
Tangible common equity ratio   8.52 %  8.53 % (0.1) %  9.16 % (7.0) %
Total risk-based capital ratio   13.58 %  14.07 % (3.5) %  13.24 % 2.6 %
Assets under management and administration  $852,420   $858,761   (0.7) % $698,247   22.1 %
                   
  
Net Interest Income and Margin 
                      
   Quarter Ended   Year Ended  
   December 31, 2016   September 30, 2016   December 31, 2015   December 31, 2016   December 31, 2015  
   (Dollars in thousands)  
Net interest income  $27,822   $22,750   $19,856   $90,388   $76,979  
Average earning assets   3,093,703    2,472,767    2,201,096    2,510,332    2,098,995  
Interest rate spread   3.38 %  3.45 %  3.43 %  3.42 %  3.53 %
Net interest margin   3.58 %  3.66 %  3.58 %  3.60 %  3.67 %
Net interest margin, fully tax equivalent   3.68 %  3.75 %  3.66 %  3.69 %  3.75 %
Loan yield   4.44 %  4.41 %  4.14 %  4.31 %  4.24 %
Average cost of interest-bearing liabilities (including noninterest-bearing deposits)   
0.40
%  
0.44
%  
0.30
%  
0.40
%  
0.27
%
Average cost of deposits (including noninterest-bearing deposits)   
0.22
%  
0.23
%  
0.20
%  
0.23
%  
0.18
%
                     

Net interest margin was 3.58% for the fourth quarter 2016, compared to 3.66% in the third quarter 2016 and 3.58% in the fourth quarter 2015. For the year ended December 31, 2016 net interest margin was 3.60% compared to 3.67% for 2015. Despite compression in the net interest margin, loan yields increased to 4.44% for the fourth quarter 2016, compared to 4.41% for the third quarter 2016 and 4.14% in the fourth quarter 2015, primarily due to the impact of purchase accounting. Average costs of interest-bearing liabilities, including noninterest-bearing deposits decreased to 0.40% for the fourth quarter 2016, compared to 0.44% for the third quarter 2016 and increased compared to 0.30% for the fourth quarter 2015. The decrease in the average cost of interest-bearing liabilities in the fourth quarter 2016 compared to the third quarter 2016 was due to a $202.2 million increase in average noninterest-bearing deposits. The increase in the average cost of interest-bearing liabilities in the fourth quarter 2016 compared to the same quarter in 2015 was mostly due to the July 2016 issuance of $40.0 million of unsecured fixed-to-floating rate subordinated notes to fund the cash consideration paid in the Home State transaction.

The net interest margin and loan yield are impacted by volatility in accretion of acquired loan discounts. The effects of the accretion on net interest margin and loan yield are outlined in the following table for the periods indicated.

                     
   Quarter Ended December 31, 2016    Year Ended December 31, 2016  
   Net Interest
 Margin
   Loan
 Yield
   Net Interest
 Margin
   Loan
 Yield
 
Reported  3.58 %  4.44 %  3.60 %  4.31 %
Less: Accelerated accretion of acquired loan discount from early payoffs  (0.09 )%  (0.10 )%  (0.03 )%  (0.04 )%
Subtotal  3.49 %  4.34 %  3.57 %  4.27 %
Less: Accretion of acquired loan discount not attributable to early payoffs  (0.05 )%  (0.07 )%  (0.02 )%  (0.03 )%
Excluding total accretion of loan acquisition discounts  3.44 %  4.27 %  3.55 %  4.24 %
                     
Total accretion of loan acquisition discounts  (0.14 )%  (0.17 )%  (0.05 )%  (0.07 )%
             

Net interest income increased $8.0 million in the fourth quarter 2016, compared to the same quarter in 2015, due to a $9.3 million increase in interest income, partially offset by a $1.4 million increase in interest expense. The increase in interest income was the result of an $892.6 million increase in average earning assets in the fourth quarter 2016, compared to the same quarter in 2015, and $1.0 million related to accretion of the discount applied to loans acquired in the Home State transaction. The increase in interest expense in the fourth quarter 2016, compared to the same quarter in 2015, was due to a $0.6 million increase in subordinated debt expense and a $0.6 million increase in interest expense on deposits. Interest expense on deposits increased in the fourth quarter 2016, compared to the same quarter in 2015, due to a $658.4 million increase in average interest-bearing deposit balances, attributable to both organic growth and the Home State transaction.

Compared to the third quarter 2016, net interest income increased by $5.1 million in the fourth quarter 2016 due to a $5.5 million increase in interest income, partially offset by a $0.4 million increase in interest expense. The increase in interest income during the fourth quarter 2016, compared to the third quarter 2016, was primarily due to a $620.9 million increase in average earning assets. The $0.4 million increase in interest expense in the fourth quarter 2016, compared to the third quarter 2016, was mostly due to a $453.9 million increase in average interest bearing deposits.

For the year ended December 31, 2016, net interest income increased $13.4 million, compared to the year ended December 31, 2015, due to a $17.5 million increase in interest income, partially offset by a $4.1 million increase in interest expense. The increase in interest income was primarily due to a $411.3 million increase in average earning assets, compared to 2015 and $1.3 million related to accretion of the discount applied to loans acquired in the Home State transaction. The $4.1 million increase in interest expense during the year ended December 31, 2016, compared to the year ended December 31, 2015, was due to a $1.7 million increase in deposit interest expense, a $1.3 million increase in FHLB borrowing expense and a $1.2 million increase in interest expense on subordinated debt. The increase in interest expense on deposits for the year ended December 31, 2016, compared to the same period in 2015, was the result of a five basis point increase in the weighted average cost of deposits and a $299.9 million increase in average deposit balances. The increased expense related to FHLB borrowings was the result of our hedged borrowings, increased borrowing levels required to fund loan growth and an increase in short-term, variable rates resulting from the December 2015 25 basis point federal funds interest rate increase. The increase in interest expense on subordinated debt during 2016, compared to 2015, was due to the $40.0 million of unsecured fixed-to-floating rate subordinated notes, discussed above.

 
Noninterest Income
 
The following table presents noninterest income as of the dates indicated:
              
   Quarter Ended  Year Ended
   December 31, 2016  September 30, 2016   December 31, 2015  December 31, 2016   December 31, 2015
   (In thousands)
Noninterest income:                      
 Deposit service and other fees  $3,405  $2,581   $2,259  $10,447   $8,941
 Investment management and trust   1,563   1,333    1,225   5,452    5,189
 Increase in cash surrender value of life insurance   
607
  
490
   
442
  
2,005
   
1,758
 Gain (loss) on sale of securities   49   (66 )  132   (73 )  132
 Gain on sale of SBA loans   401   208    143   873    824
 Other   207   159    61   553    336
 Total noninterest income  $6,232  $4,705   $4,262  $19,257   $17,180
                  

Fourth quarter 2016 noninterest income was $6.2 million compared to $4.7 million in the third quarter 2016 and $4.3 million in the fourth quarter 2015.

The $1.5 million increase in noninterest income in the fourth quarter 2016, compared to the third quarter 2016, was primarily due to an $0.8 million increase in deposit service and other fees, primarily generated by deposits acquired in the transaction with Home State, a $0.2 million increase in investment management and trust fees and a $0.2 million increase in the gain on sales of SBA loans.

The $2.0 million increase in noninterest income in the fourth quarter 2016, compared to the fourth quarter 2015, was attributable to a $1.1 million increase in deposit service and other fees primarily generated by deposits acquired in the transaction with Home State, a $0.3 million increase in investment management and trust fees and a $0.3 million increase in the gain on sales of SBA loans.

For the year ended December 31, 2016, noninterest income increased $2.1 million to $19.3 million compared to $17.2 million for the year ended December 31, 2015. The $2.1 million increase in noninterest income for 2016 was attributable to a $1.5 million increase in deposit service and other fees and a $0.3 million increase in investment management and trust fees, primarily due to fees generated by deposits and assets under management acquired in the Home State transaction.

 
Noninterest Expense
 
The following table presents noninterest expense as of the dates indicated:
             
   Quarter Ended  Year Ended
   December 31, 2016  September 30, 2016  December 31, 2015  December 31, 2016  December 31, 2015
   (In thousands)
Noninterest expense:                    
 Salaries and employee benefits  $12,654  $10,984  $8,643  $40,946  $33,564
 Occupancy expense   1,834   1,417   1,498   5,887   6,312
 Furniture and equipment   789   750   801   3,070   3,007
 Amortization of intangible assets   689   389   495   1,557   1,981
 Other real estate owned, net   4   20   16   31   80
 Insurance and assessment   496   608   603   2,314   2,398
 Professional fees   914   962   700   3,639   3,220
 Impairment of long-lived assets   185   -   -   185   122
 Other general and administrative   5,672   3,494   2,491   15,158   9,655
 Total noninterest expense  $23,237  $18,624  $15,247  $72,787  $60,339
                

Fourth quarter 2016 noninterest expense was $23.2 million compared to $18.6 million in the third quarter 2016 and $15.2 million in the fourth quarter 2015. The Company's tax equivalent efficiency ratio was 55.13% for the fourth quarter 2016 compared to 56.78% in the third quarter 2016 and 59.55% in the fourth quarter 2015.

Fourth quarter 2016 noninterest expense increased $4.6 million, compared to the third quarter 2016, primarily as a result of a $2.2 million increase in other general and administrative expense, a $1.7 million increase in salaries and employee benefits, a $0.4 million increase in occupancy expense and a $0.3 million increase in amortization of intangible assets. Merger-related expenses incurred in the fourth quarter 2016 were $3.0 million and consisted of $0.5 million in salaries and employee benefit expense related to severance and retention payments and $2.5 million in other general and administrative expense, primarily related to system conversion and integration costs. Salaries and employee benefits include merger-related expenses of $0.5 million in the fourth quarter 2016 and $1.4 million in the third quarter 2016, excluding merger-related expenses, this category of expense increased $2.6 million, mostly due to expenses related to the employees acquired in the Home State transaction. FTEs totaled 510 at December 31, 2016, compared to 547 at September 30, 2016, with the FTE reduction occurring late in the fourth quarter 2016. Similarly, the increases in occupancy expense and amortization of intangible assets were the result of buildings acquired and intangible assets recorded in the Home State transaction.

Noninterest expense increased by $8.0 million in the fourth quarter 2016, compared to the fourth quarter 2015, primarily due to $3.0 million in merger-related expenses incurred in the fourth quarter 2016. These merger-related expenses consisted of $0.5 million in salaries and employee benefit expense related to severance and retention payments and $2.5 million in other general and administrative expense. Excluding the merger-related expenses included in salaries and employee benefits, this category of expense increased $3.5 million, primarily due to an increase of 143 FTEs, due to the employees acquired in the Home State transaction. Other increases in noninterest expense included a $0.3 million increase in occupancy expense, a $0.2 million increase in amortization of intangible assets and a $0.2 million increase in professional fees.

For the year ended December 31, 2016, noninterest expense was $72.8 million, compared to $60.3 million for the year ended December 31, 2015. The $12.4 million increase in noninterest expense during 2016, compared to 2015, was primarily due to $6.3 million in merger-related expenses incurred during 2016. These merger-related expenses consisted of $1.9 million in salaries and employee benefits related to severance and retention payments and $4.4 million in other general and administrative expense, mostly due to system conversion costs and professional fees. Excluding the merger-related expenses, noninterest expense increased $6.2 million for the year ended December 31, 2016, compared to the year ended December 31, 2015, due to a $5.5 million increase in salaries and employee benefits, a $1.0 million increase in general and administrative expense and a $0.4 million increase in professional fees. These increases in noninterest income were partially offset by a $0.4 million decline in occupancy expense and a $0.4 million decline in amortization of intangible assets. The $5.5 million increase in salaries and employee benefits was mostly due to a $3.5 million increase in base salaries and a $1.4 million increase in employee benefits, mostly due to an increase of 143 FTEs since December 31, 2015. The $1.0 million increase in general and administrative expense during the year, compared to the prior year, was due to a $0.5 million increase in advertising and business development expense and smaller increases in several other categories.

  
Balance Sheet 
                      
   December 31, 2016   September 30, 2016   Percent
Change
  December 31, 2015   Percent
Change
 
   (Dollars in thousands)  
Total assets  $3,366,427   $3,346,265   0.6 % $2,368,525   42.1 %
Average assets, quarter-to-date   3,336,143    2,613,133   27.7 %  2,327,224   43.4 %
Total loans, net of deferred fees and costs   2,519,138    2,412,999   4.4 %  1,814,536   38.8 %
Total deposits   2,699,084    2,752,112   (1.9) %  1,801,845   49.8 %
                         
Equity ratio - GAAP   10.47 %  10.50 % (0.3) %  9.36 % 11.9 %
Tangible common equity ratio   8.52 %  8.53 % (0.1) %  9.16 % (7.0) %
                   

At December 31, 2016, the Company had total assets of $3.4 billion, reflecting an increase of $997.9 million compared to December 31, 2015, and an increase of $20.2 million compared to September 30, 2016. The increase in total assets year-over-year was comprised of a $704.6 million increase in loans, a $166.2 million increase in investments and a $66.5 million increase in goodwill and intangible assets related to the transaction with Home State. During the fourth quarter 2016, management moved approximately $64.3 million in investments from available-for-sale to the held-to-maturity portfolio to mitigate mark-to-market risk and its impact on tangible common equity. The third quarter 2016 acquisition of Home State included the acquisition of $445.5 million in loans and $769.9 million in deposits.

  
The following table sets forth the amount of loans outstanding at the dates indicated: 
                      
   December 31, 2016   September
30, 
2016
  June
30, 
2016
  March
31, 
2016
  December 31, 2015  
   (In thousands)  
Loans held for sale  $4,129   $-   $-   $-   $-  
Commercial and residential real estate   1,768,424    1,752,113    1,428,397    1,307,854    1,281,701  
Construction   88,451    75,603    26,497    87,753    107,170  
Commercial   432,083    400,281    336,069    329,939    323,552  
Consumer   125,264    81,766    66,539    66,829    66,288  
Other   100,848    102,887    40,640    37,534    35,570  
 Total gross loans   2,519,199    2,412,650    1,898,142    1,829,909    1,814,281  
  Deferred (fees) and costs   (61 )  349    401    337    255  
 Loans, net   2,519,138    2,412,999    1,898,543    1,830,246    1,814,536  
Less allowance for loan losses   (23,250 )  (23,300 )  (23,050 )  (23,025 )  (23,000 )
 Net loans  $2,495,888   $2,389,699   $1,875,493   $1,807,221   $1,791,536  
                     
  
The following table presents the changes in the Company's loan balances at the dates indicated: 
                      
   December 31, 2016   September
30,
2016
  June
30,
2016
  March
31, 
2016
  December 31, 2015  
   (In thousands)  
Beginning balance  $2,412,650   $1,898,142   $1,829,909   $1,814,281   $1,726,033  
New credit extended   232,499    129,064    121,753    105,843    155,745  
Acquisition of Home State Bank   -    445,529    -    -    -  
Net existing credit advanced   142,448    153,390    87,524    50,482    61,165  
Net pay-downs and maturities   (272,326 )  (214,089 )  (142,516 )  (139,914 )  (129,189 )
Other   3,928    614    1,472    (783 )  527  
 Gross loans   2,519,199    2,412,650    1,898,142    1,829,909    1,814,281  
Deferred (fees) and costs   (61 )  349    401    337    255  
 Loans, net  $2,519,138   $2,412,999   $1,898,543   $1,830,246   $1,814,536  
                           
Net change - loans outstanding  $106,139   $514,456   $68,297   $15,710   $88,385  
                     

During the fourth quarter 2016, loans net of deferred fees and costs increased $106.1 million despite $272.3 million in net pay-downs and maturities during the quarter. In addition to contractual loan principal payments and maturities, the fourth quarter 2016 included $48.5 million in payoffs due to our strategic decision not to match certain financing terms offered by competitors, $37.9 million in early payoffs related to our borrowers selling their assets, and $25.0 million in loan pay-downs related to fluctuations in loan balances to existing customers.

During the year ended December 31, 2016, loans net of deferred fees and costs increased by $704.6 million. Loans acquired in the transaction with Home State during the third quarter 2016 were $445.5 million. Excluding the loans acquired in the transaction with Home State, loans grew $259.1 million, or 14.3% since December 31, 2015.

 
The following table sets forth the amounts of deposits outstanding at the dates indicated:
                
   December 31, 2016  September
30,
2016
 June
30, 
2016
 March
31, 
2016
 December 31, 2015
   (In thousands)
Noninterest-bearing demand  $916,632  $857,064  $638,110  $631,544  $612,371
Interest-bearing demand and NOW   767,523   802,043   383,492   392,808   381,834
Money market   484,664   554,447   392,730   411,582   397,371
Savings   164,478   160,698   149,798   155,673   151,130
Time   365,787   377,860   283,231   281,110   259,139
Total deposits  $2,699,084  $2,752,112  $1,847,361  $1,872,717  $1,801,845
                

At December 31, 2016, non-maturing deposits were $2.3 billion, an increase of $790.6 million compared to December 31, 2015, and a decrease of $41.0 million compared to September 30, 2016. Deposits acquired in the transaction with Home State were $769.7 million, of which $685.6 million were non-maturing deposits. Excluding the deposits acquired in the Home State transaction, total deposits grew $127.5 million, or 7.1% during the year ended December 31, 2016. At December 31, 2016 and 2015, noninterest-bearing deposits as a percentage of total deposits were 34.0%.

At December 31, 2016, securities sold under agreements to repurchase were $36.9 million, an increase of $10.5 million compared to December 31, 2015, and an increase of $1.0 million compared to September 30, 2016. Securities sold under agreements to repurchase acquired in the transaction with Home State were $20.0 million.

Total FHLB borrowings were $197.2 million at December 31, 2016, consisting of $124.7 million in overnight advances and $72.5 million in term advances. At December 31, 2015, total FHLB borrowings consisted of $185.8 million in overnight advances and $95.0 million in term advances.

  
Regulatory Capital Ratios 
  
The following table provides the capital ratios of the Company and the Bank as of the dates presented, along with the applicable regulatory capital requirements: 
                  
   Ratio at 
December 31, 2016
  Ratio at 
December 31, 2015
  Minimum Requirement
for "Adequately Capitalized"
Institution plus fully
phased in Capital
Conservation Buffer
  Minimum
Requirement for
"Well-Capitalized"
Institution
 
Common Equity Tier 1 Risk-Based Capital Ratio                
Consolidated  10.46 % 10.94 % 7.00 % N/A  
Guaranty Bank and Trust Company  12.43 % 11.96 % 7.00 % 6.50 %
                  
Tier 1 Risk-Based Capital Ratio                 
Consolidated  11.34 % 12.11 % 8.50 % N/A  
Guaranty Bank and Trust Company  12.43 % 11.96 % 8.50 % 8.00 %
                  
Total Risk-Based Capital Ratio                 
Consolidated  13.58 % 13.24 % 10.50 % N/A  
Guaranty Bank and Trust Company  13.26 % 13.09 % 10.50 % 10.00 %
                  
Leverage Ratio                 
Consolidated  9.81 % 10.68 % 4.00 % N/A  
Guaranty Bank and Trust Company  10.76 % 10.55 % 4.00 % 5.00 %
             

At December 31, 2016, all of our regulatory capital ratios remained well above minimum requirements for a "well-capitalized" institution. The Company's consolidated Tier 1 risk-based capital ratio decreased relative to December 31, 2015 whereas the Company's total risk-based capital ratios increased compared to December 31, 2015. The transaction with Home State was financed through the issuance of $40.0 million in fixed-to-floating rate subordinated notes, which qualified for treatment as Tier 2 capital and by the issuance of common stock valued at $117.5 million, which qualified as Common Equity Tier 1 capital.

  
Asset Quality 
  
The following table presents select asset quality data, including quarterly charged-off loans, recoveries and provision (credit) for loan losses as of the dates indicated: 
                      
   December 31, 2016   September 30, 2016   June
30,
2016
  March
31,
2016
  December 31, 2015  
   (Dollars in thousands)  
Originated nonaccrual loans and leases  $3,345   $3,399   $13,326   $13,401   $14,474  
Purchased nonaccrual loans and leases   1,902    2,108    -    -    -  
Accruing loans past due 90 days or more (1)   -    335    -    -    -  
                           
Total nonperforming loans (NPLs)  $5,247   $5,842   $13,326   $13,401   $14,474  
Other real estate owned and foreclosed assets   569    637    674    674    674  
                           
Total nonperforming assets (NPAs)  $5,816   $6,479   $14,000   $14,075   $15,148  
                           
Total classified assets  $33,443   $34,675   $25,644   $27,191   $26,428  
                           
Accruing loans past due 30-89 days (1)  $1,337   $2,157   $2,386   $1,398   $2,091  
                           
Charged-off loans  $(290 ) $(72 ) $(57 ) $(302 ) $(66 )
Recoveries   150    295    72    311    184  
 Net (charge-offs) recoveries  $(140 ) $223   $15   $9   $118  
                           
Provision (credit) for loan losses  $90   $27   $10   $16   $(8 )
                           
Allowance for loan losses  $23,250   $23,300   $23,050   $23,025   $23,000  
                           
Unaccreted discount  $14,682   $15,721   $-   $-   $-  
                           
Selected ratios:                          
NPLs to loans, net of deferred fees and costs (2)   0.21 %  0.24 %  0.70 %  0.73 %  0.80 %
NPAs to total assets   0.17 %  0.19 %  0.58 %  0.60 %  0.64 %
Allowance for loan losses plus unaccreted discount to NPLs   
722.93
%  
667.94
%  
172.97
%  
171.82
%  
158.91
%
Allowance for loan losses to loans, net of deferred fees and costs (2)   
0.92
%  
0.97
%  
1.21
%  
1.26
%  
1.27
%
Allowance for loan losses plus unaccreted discount to loans, net of deferred fees and costs (2)   

1.50
%  

1.61
%  

1.21
%  

1.26
%  

1.27
%
Loans 30-89 days past due to loans, net of deferred fees and costs (2)   
0.05
%  
0.09
%  
0.13
%  
0.08
%  
0.12
%
Texas ratio (3)   1.55 %  1.77 %  5.17 %  5.14 %  5.65 %
Classified asset ratio (4)   9.79 %  10.69 %  10.55 %  11.56 %  11.66 %
_______________                          
(1) Past due loans include both loans that are past due with respect to payments and loans that are past due because the loan has matured, and is in the process of renewal, but continues to be current with respect to payments.  
(2) Loans, net of deferred fees and costs, exclude loans held for sale.  
(3) Texas ratio defined as total NPAs divided by subsidiary bank only Tier 1 Capital plus allowance for loan losses.  
(4) Classified asset ratio defined as total classified assets to subsidiary bank only Tier 1 Capital plus allowance for loan losses.  
  
 
The following tables summarize past due loans held for investment by class as of the dates indicated:
                
December 31, 2016  30-89
Days Past
Due
 90 Days +
Past Due
and Still
Accruing
 Nonaccrual  Total Nonaccrual and
Past Due
 Total Loans,
Held for
Investment
   (In thousands)
Commercial and residential real estate  $ 1,258  $ -  $ 2,835  $ 4,093  $ 1,768,381
Construction   -   -   -   -   88,449
Commercial   37   -   1,094   1,131   432,072
Consumer   42   -   201   243   125,261
Other   -   -   1,117   1,117   100,846
Total  $1,337  $-  $5,247  $6,584  $2,515,009
                     
                     
December 31, 2015  30-89
Days Past
Due
 90 Days +
Past Due
and Still
Accruing
 Nonaccrual  Total Nonaccrual and
Past Due
 Total Loans,
Held for
Investment
   (In thousands)
Commercial and residential real estate  $ 653  $ -  $ 11,905  $ 12,558  $ 1,281,881
Construction   -   -   986   986   107,185
Commercial   1,147   -   874   2,021   323,598
Consumer   291   -   459   750   66,297
Other   -   -   250   250   35,575
Total  $2,091  $-  $14,474  $16,565  $1,814,536
                

During the fourth quarter 2016, nonperforming assets decreased by $0.6 million from September 30, 2016 and $9.3 million from December 31, 2015. The $9.3 million decline in nonperforming assets during 2016 included a return of a $9.4 million out-of-state loan syndication to performing status. As a result of the transaction with Home State, $2.1 million of nonperforming loans were acquired. At December 31, 2016, performing troubled debt restructurings were $25.1 million, compared to $24.4 million at September 30, 2016 and $11.7 million at December 31, 2015. The increase in performing troubled debt restructurings in 2016, compared to the prior year, was primarily due to a return of the $9.4 million out-of-state loan syndication to performing status, described above.

At December 31, 2016, classified assets represented 9.8% of bank-level Tier 1 risk-based capital plus allowance for loan losses, compared to 10.7% at September 30, 2016 and 11.7% at December 31, 2015.

All acquired loans are initially recorded at their estimated fair value which encompasses an estimate of credit losses. The table below presents two alternative views of credit risk coverage ratios for loans, reflecting adjustments for acquired loans and the associated purchase accounting discount:

            
   Loans  Allowance /
Discount
 Allowance over
Loans Ratio
 
   (Dollars in thousands)  
December 31, 2016 Reported Balance  $2,515,009   23,250  0.92 %
Unaccreted net discount   14,682   14,682     
Adjusted December 31, 2016 Balance  $2,529,691  $37,932  1.50 %
_______________         
1 Unaccreted net discount relates to $445.5 million of acquired loans and is assigned specifically to those loans only. The discount represents the remaining acquisition date fair value adjustment based on market, liquidity, interest rate risk and credit risk and is being accreted into interest income over the remaining life of the respective loans. Credit deterioration on acquired loans subsequent to purchase will result in recognition of additional allowance for loan losses to the extent recorded investment exceeds net realizable value.
 

Net charge-offs were $0.1 million during the fourth quarter 2016, compared to $0.2 million in net recoveries in the third quarter of 2016 and $0.1 million in net recoveries in the fourth quarter 2015. During the fourth quarter 2016, the Bank recorded a $0.1 million provision for loan losses compared to an immaterial provision in the third quarter 2016 and an immaterial credit provision in the fourth quarter 2015. The Bank considered recoveries, historical charge-offs, level of nonperforming loans, loan growth and other factors when determining the adequacy of the allowance for loan losses and the resulting amount of loan loss provision to be recognized during the quarter.

Shares Outstanding

As of December 31, 2016, the Company had 28,334,004 shares of voting common stock outstanding, of which 513,187 shares were in the form of unvested stock awards.

Non-GAAP Financial Measures

The Company discloses certain non-GAAP financial measures related to tangible assets, including tangible book value and tangible common equity, and operating earnings adjusted for merger-related expenses, OREO expenses, debt termination expense, impairments of long-lived assets, securities gains and losses and gains or losses on the sale or disposal of other assets. The Company also discloses the following GAAP profitability metrics alongside the operating earnings equivalent: return on average assets, return on average equity and earnings per share (diluted).

The Company discloses these non-GAAP financial measures to provide meaningful supplemental information regarding the Company's operational performance and to enhance investors' overall understanding of the Company's core financial performance. Management believes that these non-GAAP financial measures allow for additional transparency and are used by some investors, analysts and other users of the Company's financial information as performance measures. These non-GAAP financial measures are presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP. These non-GAAP financial measures presented by the Company may be different from non-GAAP financial measures used by other companies.

  
The following non-GAAP schedule reconciles the non-GAAP operating earnings to GAAP net income as of the dates indicated: 
                  
   Quarter Ended  Year Ended  
   December 31, 2016  September 30, 2016  December 31, 2015  December 31, 2016  December 31, 2015  
   (Dollars in thousands, except per share amounts)  
Net income  $7,421  $5,765  $5,891  $24,727  $22,454  
Expenses adjusted for:                      
 Expenses (gains) related to other real estate owned, net   
4
  
20
  
16
  
31
  
80
 
 Merger-related expenses   3,032   2,205   -   6,259   -  
 Impairment of long-lived assets   185   -   -   185   122  
Income adjusted for:                      
 (Gain) loss on sale of securities   (49 ) 66   (132 ) 73   (132 )
 (Gain) loss on sale of other assets   -   -   18   (14 ) 18  
Pre-tax earnings adjustment   3,172   2,291   (98 ) 6,534   88  
Tax effect of adjustments (1)   (1,148 ) (775 ) 37   (2,248 ) (33 )
Tax effected operating earnings adjustment   2,024   1,516   (61 ) 4,286   55  
Operating earnings  $9,445  $7,281  $5,830  $29,013  $22,509  
                       
Average assets  $3,336,143  $2,613,133  $2,327,224  $2,668,035  $2,226,794  
                       
Average equity  $351,251  $253,570  $221,515  $264,474  $215,513  
                       
Fully diluted average common shares outstanding:   
28,043,944
  
22,984,647
  
21,303,763
  
23,559,947
  
21,272,336
 
                       
Earnings per common share-diluted - operating:  $
0.34
 $
0.32
 $
0.27
 $
1.23
 $
1.06
 
Earnings per common share-diluted:  $0.26  $0.25  $0.28  $1.05  $1.06  
                       
ROAA - operating   1.13 % 1.11 % 0.99 % 1.09 % 1.01 %
ROAA (GAAP)   0.88 % 0.88 % 1.00 % 0.93 % 1.01 %
                       
ROAE - operating   10.70 % 11.42 % 10.44 % 10.97 % 10.44 %
ROAE (GAAP)   8.41 % 9.04 % 10.55 % 9.35 % 10.42 %
___________                      
(1) Tax effect calculated using a combined federal and state marginal tax rate of 38.01%, adjusted for tax effect of nondeductible merger-related expenses.  
  
  
The following non-GAAP schedules reconcile the book value per share to the tangible book value per share and the GAAP equity ratio to the tangible equity ratio as of the dates indicated: 
              
Tangible Book Value per Common Share             
   December 31, 2016   September 30, 2016   December 31, 2015  
   (Dollars in thousands, except per share amounts)  
 Total stockholders' equity  $352,378   $351,360   $221,639  
 Less: Goodwill and other intangible assets   (71,721 )  (72,153 )  (5,173 )
 Tangible common equity  $280,657   $279,207   $216,466  
                 
 Number of common shares outstanding   28,334,004    28,349,107    21,704,852  
                 
 Book value per common share  $12.44   $12.39   $10.21  
 Tangible book value per common share  $9.91   $9.85   $9.97  
              
                 
Tangible Common Equity Ratio                
   December 31, 2016   September 30, 2016   December 31, 2015  
   (Dollars in thousands)  
 Total stockholders' equity  $352,378   $351,360   $221,639  
 Less: Goodwill and other intangible assets   (71,721 )  (72,153 )  (5,173 )
 Tangible common equity  $280,657   $279,207   $216,466  
                 
 Total assets  $3,366,427   $3,346,265   $2,368,525  
 Less: Goodwill and other intangible assets   (71,721 )  (72,153 )  (5,173 )
 Tangible assets  $3,294,706   $3,274,112   $2,363,352  
                 
 Equity ratio - GAAP (total stockholders' equity / total assets)   10.47 %  10.50 %  9.36 %
 Tangible common equity ratio (tangible common equity / tangible assets)   8.52 %  8.53 %  9.16 %
             

About Guaranty Bancorp

Guaranty Bancorp is a $3.4 billion financial services company that operates as the bank holding company for Guaranty Bank and Trust Company, a premier Colorado community bank. The Bank provides comprehensive financial solutions to consumers and small to medium-sized businesses that value local and personalized service. In addition to loans and depository services, the Bank also offers wealth management solutions, including trust and investment management services. More information about Guaranty Bancorp can be found at www.gbnk.com.

Forward-Looking Statements

This press release contains forward-looking statements, which are included in accordance with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "could," "expects," "plans," "intends," "anticipates," "believes," "estimates," "predicts," "potential," or "continue," or the negative of such terms and other comparable terminology. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: failure to maintain adequate levels of capital and liquidity to support the Company's operations; general economic and business conditions in those areas in which the Company operates, including the impact of global and national economic conditions on our local economy; demographic changes; competition; fluctuations in interest rates; continued ability to attract and employ qualified personnel; ability to receive regulatory approval for the bank subsidiary to declare dividends to the Company; adequacy of the allowance for loan losses, changes in credit quality and the effect of credit quality on the provision for credit losses and allowance for loan losses; changes in governmental legislation or regulation, including, but not limited to, any increase in FDIC insurance premiums; changes in accounting policies and practices; changes in business strategy or development plans; failure or inability to complete mergers or other corporate transactions; failure or inability to realize fully the expected benefits of mergers or other corporate transactions; changes in the securities markets; changes in consumer spending, borrowing and savings habits; the availability of capital from private or government sources; competition for loans and deposits and failure to attract or retain loans and deposits; failure to recognize expected cost savings; changes in the financial performance and/or condition of our borrowers and the ability of our borrowers to perform under the terms of their loans and terms of other credit agreements; changes in oil and natural gas prices; political instability, acts of war or terrorism and natural disasters; and additional "Risk Factors" referenced in the Company's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission, as supplemented from time to time. When relying on forward-looking statements to make decisions with respect to the Company, investors and others are cautioned to consider these and other risks and uncertainties. The Company can give no assurance that any goal or plan or expectation set forth in any forward-looking statement can be achieved and readers are cautioned not to place undue reliance on such statements, which speak only as of the date made. The forward-looking statements are made as of the date of this press release, and, except as may otherwise be required by law, the Company does not intend, and assumes no obligation, to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.

  
GUARANTY BANCORP AND SUBSIDIARIES 
Unaudited Consolidated Balance Sheets 
              
   December 31,   September 30,   December 31,  
   2016   2016   2015  
   (In thousands)  
Assets                
Cash and due from banks  $50,111   $163,908   $26,711  
                 
Time deposits with banks   254    504    -  
                 
Securities available for sale, at fair value   324,228    364,349    255,431  
Securities held to maturity   243,979    183,184    148,761  
Bank stocks, at cost   22,649    14,558    20,500  
   Total investments   590,856    562,091    424,692  
                 
Loans held for sale   4,129    -    -  
                 
Loans, held for investment, net of deferred fees and costs   2,515,009    2,412,999    1,814,536  
 Less allowance for loan losses   (23,250 )  (23,300 )  (23,000 )
   Net loans, held for investment   2,491,759    2,389,699    1,791,536  
                 
Premises and equipment, net   67,390    68,779    48,308  
Other real estate owned and foreclosed assets   569    637    674  
Goodwill   56,404    56,148    -  
Other intangible assets, net   15,317    16,005    5,173  
Bank owned life insurance   65,538    65,030    48,909  
Other assets   24,100    23,464    22,522  
   Total assets  $3,366,427   $3,346,265   $2,368,525  
                 
Liabilities and Stockholders' Equity                
Liabilities:                
 Deposits:                
  Noninterest-bearing demand  $916,632   $857,064   $612,371  
  Interest-bearing demand and NOW   767,523    802,043    381,834  
  Money market   484,664    554,447    397,371  
  Savings   164,478    160,698    151,130  
  Time   365,787    377,860    259,139  
   Total deposits   2,699,084    2,752,112    1,801,845  
                 
Securities sold under agreement to repurchase and federal funds purchased   36,948    35,936    
26,477
 
Federal Home Loan Bank term notes   72,477    122,521    95,000  
Federal Home Loan Bank line of credit borrowing   124,691    -    185,847  
Subordinated debentures   64,981    64,973    25,774  
Interest payable and other liabilities   15,868    19,363    11,943  
   Total liabilities   3,014,049    2,994,905    2,146,886  
                 
Stockholders' equity:                
 Common stock and additional paid-in capital - common stock   832,098    831,106    712,334  
 Accumulated deficit   (367,944 )  (372,170 )  (382,147 )
 Accumulated other comprehensive loss   (6,726 )  (2,936 )  (4,805 )
 Treasury stock   (105,050 )  (104,640 )  (103,743 )
   Total stockholders' equity   352,378    351,360    221,639  
   Total liabilities and stockholders' equity  $3,366,427   $3,346,265   $2,368,525  
             
 
GUARANTY BANCORP AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
 
   Quarter Ended December 31,   Year Ended December 31,
   2016  2015   2016   2015
   (In thousands, except share and per share data)
Interest income:                  
 Loans, including costs and fees  $27,043  $18,439   $87,249   $70,188
 Investment securities:                  
  Taxable   2,171   2,060    7,625    8,325
  Tax-exempt   1,224   719    3,683    2,852
 Dividends   234   235    1,063    959
 Federal funds sold and other   128   1    233    6
  Total interest income   30,800   21,454    99,853    82,330
Interest expense:                  
 Deposits   1,560   923    4,859    3,207
 Securities sold under agreement to repurchase and federal funds purchased   
21
  
14
   
52
   
45
 Borrowings   557   453    2,549    1,285
 Subordinated debentures   840   208    2,005    814
  Total interest expense   2,978   1,598    9,465    5,351
  Net interest income   27,822   19,856    90,388    76,979
Provision (credit) for loan losses   90   (8 )  143    96
  Net interest income, after provision for loan losses   27,732   19,864    90,245    76,883
Noninterest income:                  
 Deposit service and other fees   3,405   2,259    10,447    8,941
 Investment management and trust   1,563   1,225    5,452    5,189
 Increase in cash surrender value of life insurance   607   442    2,005    1,758
 Gain (loss) on sale of securities   49   132    (73 )  132
 Gain on sale of SBA loans   401   143    873    824
 Other   207   61    553    336
  Total noninterest income   6,232   4,262    19,257    17,180
Noninterest expense:                  
 Salaries and employee benefits   12,654   8,643    40,946    33,564
 Occupancy expense   1,834   1,498    5,887    6,312
 Furniture and equipment   789   801    3,070    3,007
 Amortization of intangible assets   689   495    1,557    1,981
 Other real estate owned, net   4   16    31    80
 Insurance and assessments   496   603    2,314    2,398
 Professional fees   914   700    3,639    3,220
 Impairment of long-lived assets   185   -    185    122
 Other general and administrative   5,672   2,491    15,158    9,655
  Total noninterest expense   23,237   15,247    72,787    60,339
  Income before income taxes   10,727   8,879    36,715    33,724
Income tax expense   3,306   2,988    11,988    11,270
  Net income  $7,421  $5,891   $24,727   $22,454
                   
Earnings per common share-basic:  $0.27  $0.28   $1.06   $1.07
Earnings per common share-diluted:   0.26   0.28    1.05    1.06
Dividend declared per common share:  $0.12  $0.10   $0.46   $0.40
                   
Weighted average common shares outstanding-basic:   27,784,996   21,077,889    23,267,108    21,065,590
Weighted average common shares outstanding-diluted:   28,043,944   21,303,763    23,559,947    21,272,336
               
 
GUARANTY BANCORP AND SUBSIDIARIES
Unaudited Consolidated Average Balance Sheets
                
   QTD Average  YTD Average
   December 31,
2016
 September 30,
2016
 December 31,
2015
 December 31,
2016
 December 31,
2015
   (In thousands)
Assets                    
Interest earning assets                    
 Loans, net of deferred fees and costs  $2,421,057  $2,010,622  $1,769,010  $2,024,804  $1,655,857
 Securities   573,726   424,133   429,971   449,707   441,046
 Other earning assets   98,920   38,012   2,115   35,821   2,092
Average earning assets   3,093,703   2,472,767   2,201,096   2,510,332   2,098,995
Other assets   242,440   140,366   126,128   157,703   127,799
Total average assets  $3,336,143  $2,613,133  $2,327,224  $2,668,035  $2,226,794
                     
Liabilities and Stockholders' Equity                    
Average liabilities:                    
Average deposits:                    
 Noninterest-bearing deposits  $909,523  $707,283  $648,903  $711,678  $642,015
 Interest-bearing deposits   1,853,362   1,399,442   1,194,964   1,419,174   1,119,309
 Average deposits   2,762,885   2,106,725   1,843,867   2,130,852   1,761,324
Other interest-bearing liabilities   199,962   238,436   246,959   257,294   236,568
Other liabilities   22,045   14,402   14,883   15,415   13,389
Total average liabilities   2,984,892   2,359,563   2,105,709   2,403,561   2,011,281
Average stockholders' equity   351,251   253,570   221,515   264,474   215,513
Total average liabilities and stockholders' equity  $3,336,143  $2,613,133  $2,327,224  $2,668,035  $2,226,794
                

Contact Information

  • Contacts:
    Paul W. Taylor

    President and Chief Executive Officer
    Guaranty Bancorp
    1331 Seventeenth Street, Suite 200
    Denver, CO 80202
    (303) 293-5563

    Christopher G. Treece
    E.V.P., Chief Financial Officer and Secretary
    Guaranty Bancorp
    1331 Seventeenth Street, Suite 200
    Denver, CO 80202

    (303) 675-1194