SOURCE: Guaranty Bancorp

Guaranty Bancorp

October 26, 2016 16:10 ET

Guaranty Bancorp Announces 2016 Third Quarter Financial Results

DENVER, CO --(Marketwired - October 26, 2016) - Guaranty Bancorp (NASDAQ: GBNK)

  • Completed the merger with Home State Bancorp on September 8, 2016, adding $445.5 million in loans and $769.7 million in deposits
  • Systems integration is expected to be completed by November 7, 2016, offering customers an expanded branch network
  • Grew loans by $68.9 million, or 14.4% annualized, during the third quarter 2016, excluding loans acquired in the merger with Home State Bancorp
  • Increased deposits by $135.0 million, or 29.1% annualized, during the third quarter 2016, excluding deposits acquired in the merger with Home State Bancorp
  • Reduced the nonperforming asset ratio to 0.19% at September 30, 2016, as compared to 0.69% at September 30, 2015

Guaranty Bancorp (NASDAQ: GBNK) ("we", "our" or "the Company"), a community bank holding company based in Colorado, today announced third quarter 2016 net income of $5.8 million, or $0.25 per basic and diluted common share, as compared to $6.0 million, or $0.28 per basic and diluted common share in the third quarter 2015. Third quarter 2016 net income was impacted by $2.2 million in merger-related expenses. Third quarter 2016 operating earnings1 increased 21.6% to $7.3 million, or $0.32 per diluted common share, as compared to the third quarter 2015. For the nine months ended September 30, 2016, net income was $17.0 million or $0.78 per basic common share and $0.77 per diluted common share as compared to $16.6 million, or $0.79 per basic common share and $0.78 per diluted common share for the same period in 2015. Year-to-date 2016 net income includes $3.2 million in merger-related expenses. For the nine months ended September 30, 2016, operating earnings increased $2.6 million, or 15.4% to $19.2 million; an increase of $0.09 per diluted common share as compared to the same period in 2015.

"We are pleased to close our merger with Home State Bancorp and further our commitment to serving the financial needs of businesses and consumers in the state of Colorado," said Paul W. Taylor, President and Chief Executive Officer of Guaranty Bancorp. "The integration of our systems is expected to be completed on November 7th and our teams are diligently working to ensure a smooth transition as we move forward as one bank. Throughout this process, we have also remained focused on our business. Excluding loans and deposits acquired in the merger with Home State Bancorp, annualized loan and deposit growth was 14.4% and 29.1%, respectively, during the third quarter of 2016. In addition, we had an operating return on average assets of 1.11% during the third quarter of 2016. Following the system integration in the fourth quarter, we are poised to deliver long-term value for our customers, communities, employees and shareholders."

During the third quarter 2016, operating earnings increased $1.3 million, as compared to the same quarter in 2015, primarily due to a $3.3 million increase in net interest income and a $0.3 million increase in deposit service and other fees, partially offset by a $1.3 million increase in salaries and employee benefits and an increase in income tax expense due to an increase in pretax income. The $3.3 million increase in net interest income in the third quarter 2016, as compared to the third quarter 2015, was due to a combination of a $331.0 million, or 15.5% increase in average earning assets and a $0.8 million interest income recovery on a nonaccrual loan during the third quarter 2016. This interest recovery had a seven basis point impact on the quarterly operating return on average assets. Net income decreased $0.2 million for the third quarter 2016, as compared to the same quarter in 2015, due to a $3.8 million increase in noninterest expense, primarily merger-related expenses, mostly offset by a $3.3 million increase in net interest income and a $0.3 million increase in noninterest income. The merger-related expenses incurred in the third quarter 2016 were $2.2 million, consisting of $1.4 million in salaries and employee benefit expense related to severance and retention payments and $0.8 million in other general and administrative expense.

As compared to the second quarter 2016, third quarter 2016 operating earnings increased $1.2 million, or 20.3% to $7.3 million primarily due to a $2.9 million increase in net interest income and a $0.3 million increase in deposit service and other fees, partially offset by a $1.1 million increase in salaries and employee benefits expense. The $2.9 million increase in net interest income in the third quarter 2016, as compared to the second quarter 2016, was mostly related to a $238.2 million increase in average earning assets, partially due to the transaction with Home State Bancorp (Home State). Third quarter 2016 net income increased $0.1 million to $5.8 million, as compared to the second quarter 2016, primarily due to a $2.9 million increase in net interest income and a $0.6 million increase noninterest income, partially offset by a $3.5 million increase in noninterest expense. The $3.5 million increase in noninterest expense in the third quarter 2016 as compared to the second quarter 2016, was primarily related to a $1.9 million increase in merger-related expenses and a $0.8 million increase in salaries and employee benefits expense related to the transaction with Home State.

For the nine months ended September 30, 2016, operating earnings increased 15.4%, or $2.6 million, as compared to the same period in 2015 due to a $5.4 million increase in net interest income, mostly due to a $249.9 million, or 12.1% increase in average earning assets, partially offset by a $2.0 million increase in salaries and employee benefits and an increase in income taxes due to an increase in pretax income. Net income increased $0.4 million for the first nine months of 2016, as compared to the same period in 2015, due to the $5.4 million increase in net interest income, as discussed above, partially offset by a $4.5 million increase in noninterest expense, primarily due to $3.2 million in merger-related expenses incurred in 2016 and $0.8 million in salaries and benefit expenses related to the transaction with Home State.

As a direct result of the recently completed transaction with Home State, the Company improved its liquidity position as well as its concentration of commercial real estate during the third quarter 2016. The loan-to-deposit ratio decreased from 102.8% at June 30, 2016 to 87.7% at September 30, 2016, providing additional liquidity for continued balance sheet growth. In addition, our total commercial real estate as a percent of capital (CRE2 Ratio) fell significantly from 360% at June 30, 2016 to 314% at September 30, 2016. Commercial real estate is defined as our total reported loans secured by multifamily and non-farm residential properties, loans for construction, land development and other land and loans otherwise sensitive to the general commercial real estate market, including loans to commercial real estate related entities.

___________________________________________________________________________
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
                
   Three Months Ended  Nine Months Ended
   September 30,  June 30,  September 30,  September 30,  September 30,
   2016  2016  2015  2016  2015
   (Dollars in thousands, except per share amounts)
Net income  $5,761   $5,685   $6,002   $16,981   $16,563  
Operating earnings (1)   7,276    6,048    5,983    19,242    16,678  
Earnings per common share - diluted   0.25    0.27    0.28    0.77    0.78  
Earnings per common share - diluted - operating (1)   0.32    0.28    0.28    0.88    0.79  
Return on average assets   0.88 %  0.97 %  1.05 %  0.93 %  1.01 %
Return on average assets - operating (1)   1.11 %  1.03 %  1.05 %  1.05 %  1.02 %
Return on average equity   9.04 %  10.03 %  10.99 %  9.64 %  10.37 %
Return on average equity - operating (1)   11.42 %  10.67 %  10.95 %  10.92 %  10.44 %
Net interest margin   3.66 %  3.57 %  3.59 %  3.61 %  3.70 %
Efficiency ratio - tax equivalent (2)   56.78 %  59.08 %  58.75 %  58.51 %  60.42 %
_______________ 
(1) See reconciliation of non-GAAP financial measure 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 has been adjusted to reflect the amount that would have been earned had these investments been subject to normal income taxation.
 
Balance Sheet
                
   September 30,  December 31,  Percent  September 30,  Percent
   2016  2015  Change  2015  Change
   (Dollars in thousands, except per share amounts)
Total investments  $562,091   $424,692   32.4 % $433,299   29.7 %
Total loans, net of deferred costs   2,412,999    1,814,536   33.0 %  1,726,151   39.8 %
Allowance for loan losses   (23,300 )  (23,000 ) 1.3 %  (22,890 ) 1.8 %
Total assets   3,346,265    2,368,525   41.3 %  2,285,630   46.4 %
Total deposits   2,752,112    1,801,845   52.7 %  1,847,329   49.0 %
Book value per common share   12.39    10.21   21.4 %  10.07   23.0 %
Tangible book value per common share   9.85    9.97   (1.2 )%  9.81   0.4 %
Equity ratio - GAAP   10.50 %  9.36 % 12.2 %  9.57 % 9.7 %
Tangible common equity ratio   8.53 %  9.16 % (6.9 )%  9.35 % (8.8 )%
Total risk-based capital ratio   14.07 %  13.24 % 6.3 %  13.39 % 5.1 %
Assets under management and administration  $858,761   $698,247   23.0 % $686,662   25.1 %
                   
Net Interest Income and Margin
                
   Three Months Ended  Nine Months Ended
   September 30,  June 30,  September 30,  September 30,  September 30,
   2016  2016  2015  2016  2015
   (Dollars in thousands)
Net interest income  $22,750   $19,821   $19,406   $62,566   $57,123  
Average earning assets   2,472,767    2,234,612    2,141,807    2,314,455    2,064,587  
Interest rate spread   3.45 %  3.39 %  3.45 %  3.43 %  3.56 %
Net interest margin   3.66 %  3.57 %  3.59 %  3.61 %  3.70 %
Net interest margin, fully tax equivalent   3.75 %  3.65 %  3.67 %  3.69 %  3.78 %
Loan yield   4.41 %  4.15 %  4.15 %  4.25 %  4.28 %
Average cost of interest-bearing liabilities (including noninterest-bearing deposits)   0.44 %  0.39 %  0.28 %  0.39 %  0.26 %
Average cost of deposits (including noninterest-bearing deposits)   0.23 %  0.23 %  0.19 %  0.23 %  0.18 %
                     

Net interest income increased $3.3 million in the third quarter 2016, as compared to the same quarter in 2015, due to a $4.5 million increase in interest income, partially offset by a $1.1 million increase in interest expense. The increase in interest income was the result of a $307.4 million, or 18.0% increase in average loan balances in the third quarter 2016 as compared to the same quarter in 2015, a $0.8 million interest income recovery on a nonaccrual loan received in the third quarter 2016 and $0.3 million related to accretion of the discount applied to loans acquired in the Home State transaction. The increase in interest expense was due to a $0.5 million increase in subordinated debt expense, a $0.3 million increase in Federal Home Loan Bank (FHLB) borrowings expense and a $0.4 million increase in interest expense on deposits. On July 18, 2016, we issued $40.0 million of unsecured fixed-to-floating rate subordinated notes, to raise the cash consideration paid to the shareholders of Home State in connection with the transaction. FHLB borrowing expense increased in the third quarter 2016, as compared to the same quarter in 2015, as a result of fixed-rate hedged borrowings, $25.0 million of which became effective in the third quarter 2015 and $25.0 million of which became effective in the first quarter 2016. Interest expense on deposits increased in the third quarter 2016, as compared to the third quarter 2015, due to higher average deposit balances, attributable to both organic growth and the Home State transaction.

As compared to the second quarter 2016, net interest income increased by $2.9 million due to a $3.5 million increase in interest income, partially offset by a $0.6 million increase in interest expense. The increase in interest income during the third quarter 2016, as compared to the second quarter 2016, was primarily due to a $165.3 million increase in average loan balances and a $37.7 million increase in average investment balances. The $0.6 million increase in interest expense in the third quarter 2016, as compared to the second quarter 2016, was mostly due to the newly issued $40.0 million of unsecured fixed-to-floating rate subordinated notes, discussed above.

For the nine months ended September 30, 2016, net interest income increased $5.4 million, as compared to the same period in 2015, due to an $8.2 million increase in interest income, partially offset by a $2.7 million increase in interest expense. The year-to-date increase in interest income was driven by a $274.0 million, or 16.9% increase in average loans, as compared to the same period in 2015. The $2.7 million increase in interest expense during the first nine months of 2016, as compared to the same period in 2015, was due to a $1.2 million increase in FHLB borrowing expense, a $1.0 million increase in interest expense on deposits, and a $0.6 million increase in interest expense on subordinated debt. As outlined above, the increased cost of FHLB borrowings was the result of our hedged borrowings becoming fully effective, increased borrowing levels required to fund loan growth, and an increase in short-term, variable rates resulting from the December 2015 federal funds interest rate increase. The increase in interest expense on deposits in the first nine months of 2016, as compared to the same period in 2015, was the result of a five basis point increase in weighted average cost and a $185.1 million increase in average balances. The increase in interest expense on subordinated debt in the first nine months of 2016, as compared to the same period in 2015, was mostly due to the newly issued $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:
             
   Three Months Ended  Nine Months Ended
   September 30,
2016
 June 30,
2016
 September 30,
2015
 September 30,
2016
 September 30,
2015
   (In thousands)
Noninterest income:               
 Deposit service and other fees  $2,581   $2,292   $2,309  $7,042   $6,682
 Investment management and trust   1,333    1,276    1,292   3,889    3,964
 Increase in cash surrender value of life insurance   490    460    447   1,398    1,316
 Loss on sale of securities   (66 )  (101 )  -   (122 )  -
 Gain on sale of SBA loans   208    110    232   472    681
 Other   159    105    119   346    275
 Total noninterest income  $4,705   $4,142   $4,399  $13,025   $12,918
                    

Third quarter 2016 noninterest income was $4.7 million as compared to $4.1 million in the second quarter 2016 and $4.4 million in the third quarter 2015.

The $0.6 million increase in noninterest income in the third quarter 2016, as compared to the second quarter 2016, was primarily due to a $0.3 million increase in deposit service and other fees, primarily generated by deposits acquired in the transaction with Home State as well as smaller increases in other categories. The $0.3 million increase in noninterest income in the third quarter 2016, as compared to the third quarter 2015, was attributable to an increase in deposit service and other fees primarily generated by deposits acquired in the transaction with Home State.

For the nine months ended September 30, 2016, noninterest income increased $0.1 million to $13.0 million as compared to $12.9 million for the same period in 2015.

 
Noninterest Expense
 
The following table presents noninterest expense as of the dates indicated:
             
   Three Months Ended  Nine Months Ended
   September 30,
2016
 June 30,
2016
 September 30,
2015
 September 30,
2016
 September 30,
2015
   (In thousands)
Noninterest expense:               
 Salaries and employee benefits  $10,984  $8,520  $8,318   $28,292  $24,921
 Occupancy expense   1,417   1,261   1,487    4,053   4,814
 Furniture and equipment   750   713   740    2,281   2,206
 Amortization of intangible assets   389   239   495    868   1,486
 Other real estate owned, net   20   5   (31 )  27   64
 Insurance and assessment   608   597   604    1,818   1,795
 Professional fees   962   906   838    2,725   2,520
 Impairment of long-lived assets   -   -   -    -   122
 Other general and administrative   3,494   2,893   2,415    9,486   7,164
 Total noninterest expense  $18,624  $15,134  $14,866   $49,550  $45,092
                  

Third quarter 2016 noninterest expense was $18.6 million as compared to $15.1 million in the second quarter 2016 and $14.9 million in the third quarter 2015. The Company's tax equivalent efficiency ratio was 56.78% for the third quarter 2016, as compared to 59.08% in the second quarter 2016, and 58.75% in the third quarter 2015.

Third quarter 2016 noninterest expense increased $3.5 million, as compared to the second quarter 2016, primarily as a result of a $1.9 million increase in merger-related expenses; consisting of a $1.4 million increase in salaries and employee benefit expense related to severance and retention payments and a $0.5 million increase in other general and administrative expenses. Excluding of the merger-related expenses included in salaries and employee benefits, this category of expense increased $1.1 million, mostly due to expenses related to the employees acquired in the Home State transaction.

Noninterest expense increased by $3.8 million in the third quarter 2016, as compared to the third quarter 2015, primarily due to $2.2 million in merger-related expenses incurred in the third quarter 2016; consisting of $1.4 million in salaries and employee benefit expense related to severance and retention payments and $0.8 million in other general and administrative expenses. Excluding the merger-related expenses included in salaries and employee benefits, this category of expense increased $1.3 million, consisting of $0.8 million related to the employees acquired in the Home State transaction and a $0.5 million increase in base salaries and employee benefit expense.

For the nine months ended September 30, 2016, noninterest expense was $49.6 million, as compared to $45.1 million for the same period in 2015. The $4.5 million increase in noninterest expense during the first nine months of 2016, as compared to the same period in 2015, was primarily due to $3.2 million in merger-related expenses incurred during the first nine months of 2016; consisting of $1.4 million in salaries and employee benefits related to severance and retention payments and $1.8 million in other general and administrative expenses. Excluding the merger-related expenses, noninterest expense increased $1.3 million for the first nine months of 2016, as compared to the same period in 2015, due to a $2.0 million increase in salaries and employee benefits, partially offset by a $0.8 million decline in occupancy expense. The $2.0 million increase in salaries and employee benefits was due to $0.8 million related to the employees acquired in the Home State transaction, a $0.8 million increase in base salaries and a $0.4 million increase in the Company's self-funded medical plan. The $0.8 million decrease in occupancy expense was related to a reduction in rent and depreciation expense related to the restructure of the lease for the Company's corporate office.

 
Balance Sheet
                
   September 30,  December 31,  Percent  September 30,  Percent
   2016  2015  Change  2015  Change
   (Dollars in thousands)
Total assets  $3,346,265   $2,368,525   41.3 % $2,285,630   46.4 %
Average assets, quarter-to-date   2,613,133    2,327,224   12.3 %  2,268,603   15.2 %
Total loans, net of deferred costs   2,412,999    1,814,536   33.0 %  1,726,151   39.8 %
Total deposits   2,752,112    1,801,845   52.7 %  1,847,329   49.0 %
                         
Equity ratio - GAAP   10.50 %  9.36 % 12.2 %  9.57 % 9.7 %
Tangible common equity ratio   8.53 %  9.16 % (6.9 )%  9.35 % (8.8 )%
                   

At September 30, 2016, the Company had total assets of $3.3 billion, reflecting an increase of $977.7 million as compared to December 31, 2015, and an increase of $1.1 billion as compared to September 30, 2015. The increase in total assets during the first nine months of 2016 was comprised of a $598.5 million increase in loans, a $137.4 million increase in investments, a $137.2 million increase in cash, and a $67.0 million increase in intangible assets related to the transaction with Home State. In addition, there were $37.6 million of combined increases in several other categories of nonearning assets. Loans acquired in the transaction with Home State during the third quarter 2016 were $445.5 million. Excluding the loans acquired from Home State, loans grew $68.9 million, or 14.4% annualized during the third quarter 2016.

 
The following table sets forth the amount of loans outstanding at the dates indicated:
                
   September 30,  June 30,  March 31,  December 31,  September 30,
   2016  2016  2016  2015  2015
   (In thousands)
Commercial and residential real estate  $1,752,113   $1,428,397   $1,307,854   $1,281,701   $1,196,209  
Construction   75,603    26,497    87,753    107,170    92,473  
Commercial   400,281    336,069    329,939    323,552    336,414  
Consumer   81,766    66,539    66,829    66,288    63,517  
Other   102,887    40,640    37,534    35,570    37,420  
 Total gross loans   2,412,650    1,898,142    1,829,909    1,814,281    1,726,033  
  Deferred costs   349    401    337    255    118  
 Loans, net   2,412,999    1,898,543    1,830,246    1,814,536    1,726,151  
Less allowance for loan losses   (23,300 )  (23,050 )  (23,025 )  (23,000 )  (22,890 )
 Net loans  $2,389,699   $1,875,493   $1,807,221   $1,791,536   $1,703,261  
                      
The following table presents the changes in the Company's loan balances at the dates indicated:
                
   September 30,  June 30,  March 31,  December 31,  September 30,
   2016  2016  2016  2015  2015
   (In thousands)
Beginning balance  $1,898,142   $1,829,909   $1,814,281   $1,726,033   $1,668,831  
New credit extended   129,064    121,753    105,843    155,745    149,502  
Acquisition of Home State Bank   445,529    -    -    -    -  
Net existing credit advanced   153,390    87,524    50,482    61,165    60,784  
Net pay-downs and maturities   (214,089 )  (142,516 )  (139,914 )  (129,189 )  (152,279 )
Charge-offs and other   614    1,472    (783 )  527    (805 )
 Gross loans   2,412,650    1,898,142    1,829,909    1,814,281    1,726,033  
Deferred costs   349    401    337    255    118  
 Loans, net  $2,412,999   $1,898,543   $1,830,246   $1,814,536   $1,726,151  
                           
Net change - loans outstanding  $514,456   $68,297   $15,710   $88,385   $57,493  
                     

During the third quarter 2016, loans net of deferred costs and fees increased $514.5 million. Loans acquired in the transaction with Home State during the third quarter 2016 were $445.5 million. Excluding the loans acquired from Home State, loans grew $68.9 million during the third quarter 2016 despite $214.1 million in net pay-downs and maturities during the quarter. In addition to contractual loan principal payments and maturities, the third quarter 2016 included $37.7 million in early payoffs related to our borrowers selling their assets, $24.3 million in payoffs due to our strategic decision to not match certain financing terms offered by competitors, $27.8 million in loan pay-downs related to fluctuations in loan balances to existing customers.

During the twelve months ended September 30, 2016, loans net of deferred costs and fees increased by $686.8 million. Excluding the loans acquired in the transaction with Home State, loans grew $241.3 million, or 14.0% over the twelve months ending September 30, 2016.

 
The following table sets forth the amounts of deposits outstanding at the dates indicated:
                
   September 30,  June 30,  March 31,  December 31,  September 30,
   2016  2016  2016  2015  2015
   (In thousands)
Noninterest-bearing demand  $857,064  $638,110  $631,544  $612,371  $683,797
Interest-bearing demand and NOW   802,043   383,492   392,808   381,834   405,092
Money market   554,447   392,730   411,582   397,371   369,023
Savings   160,698   149,798   155,673   151,130   144,602
Time   377,860   283,231   281,110   259,139   244,815
Total deposits  $2,752,112  $1,847,361  $1,872,717  $1,801,845  $1,847,329
                

At September 30, 2016, non-maturing deposits were $2.4 billion, an increase of $831.5 million as compared to December 31, 2015, and an increase of $771.7 million as compared to September 30, 2015. Deposits acquired in the transaction with Home State were $769.7 million, of which $685.7 million were non-maturing deposits. During the third quarter 2016, deposits grew $135.0 million, or 29.1% annualized, excluding the deposits acquired in the transaction with Home State. At September 30, 2016, noninterest-bearing deposits as a percentage of total deposits were 31.1%, as compared to 34.0% at December 31, 2015, and 37.0% at September 30, 2015.

At September 30, 2016, securities sold under agreements to repurchase were $35.9 million, an increase of $9.5 million as compared to December 31, 2015, and an increase of $5.8 million as compared to September 30, 2015. Securities sold under agreements to repurchase acquired in the transaction with Home State were $20.0 million.

Total FHLB borrowings were $122.5 million at September 30, 2016, all of which were term advances. During the third quarter 2016, the Company was able to repay all outstanding borrowings on its FHLB line of credit as of June 30, 2016, utilizing funds raised from increased deposit balances as well as proceeds from securities sold subsequent to the transaction with Home State. 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
September 30,
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  10.79 % 10.94 % 7.00 % N/A  
 Guaranty Bank and Trust Company  12.74 % 11.96 % 7.00 % 6.50 %
                  
Tier 1 Risk-Based Capital Ratio                 
 Consolidated  11.72 % 12.11 % 8.50 % N/A  
 Guaranty Bank and Trust Company  12.74 % 11.96 % 8.50 % 8.00 %
                  
Total Risk-Based Capital Ratio                 
 Consolidated  14.07 % 13.24 % 10.50 % N/A  
 Guaranty Bank and Trust Company  13.61 % 13.09 % 10.50 % 10.00 %
                  
Leverage Ratio                 
 Consolidated  12.40 % 10.68 % 4.00 % N/A  
 Guaranty Bank and Trust Company  13.48 % 10.55 % 4.00 % 5.00 %
              

At September 30, 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:
                
   September 30,  June 30,  March 31,  December 31,  September 30,
   2016  2016  2015  2015  2015
   (Dollars in thousands)
Originated nonaccrual loans and leases  $3,399   $13,326   $13,401   $14,474   $14,512  
Purchased nonaccrual loans and leases   2,108    -    -    -    -  
Accruing loans past due 90 days or more (1)   335    -    -    -    -  
                           
Total nonperforming loans (NPLs)  $5,842   $13,326   $13,401   $14,474   $14,512  
Other real estate owned and foreclosed assets   637    674    674    674    1,371  
                           
Total nonperforming assets (NPAs)  $6,479   $14,000   $14,075   $15,148   $15,883  
                           
Total classified assets  $34,675   $25,644   $27,191   $26,428   $31,208  
                           
Accruing loans past due 30-89 days (1)  $2,157   $2,386   $1,398   $2,091   $3,461  
                           
Charged-off loans  $(72 ) $(57 ) $(302 ) $(66 ) $(75 )
Recoveries   295    72    311    184    101  
 Net recoveries  $223   $15   $9   $118   $26  
                           
Provision (credit) for loan losses  $27   $10   $16   $(8 ) $14  
                           
Allowance for loan losses  $23,300   $23,050   $23,025   $23,000   $22,890  
                           
Unaccreted discount  $15,721   $-   $-   $-   $-  
                           
Selected ratios:                          
NPLs to loans, net of deferred costs (2)   0.24 %  0.70 %  0.73 %  0.80 %  0.84 %
NPAs to total assets   0.19 %  0.58 %  0.60 %  0.64 %  0.69 %
Allowance for loan losses plus unaccreted discount to NPLs   667.94 %  172.97 %  171.82 %  158.91 %  157.73 %
Allowance for loan losses to loans, net of deferred costs (2)   0.97 %  1.21 %  1.26 %  1.27 %  1.33 %
Allowance for loan losses plus unaccreted discount to loans, net of deferred costs (2)   1.61 %  1.21 %  1.26 %  1.27 %  1.33 %
Loans 30-89 days past due to loans, net of deferred costs (2)   0.09 %  0.13 %  0.08 %  0.12 %  0.20 %
Texas ratio (3)   1.77 %  5.17 %  5.14 %  5.65 %  6.09 %
Classified asset ratio (4)   10.69 %  10.55 %  11.56 %  11.66 %  13.51 %
_______________ 
(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 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:
                
September 30, 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  $803  $-  $3,008  $3,811  $1,752,366
Construction   -   -   -   -   75,614
Commercial   1,090   335   828   2,253   400,339
Consumer   57   -   248   305   81,778
Other   207   -   1,423   1,630   102,902
Total  $2,157  $335  $5,507  $7,999  $2,412,999
                
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 third quarter 2016, nonperforming assets decreased by $7.5 million from June 30, 2016 and $9.4 million from September 30, 2015. The $7.5 million decline in nonperforming assets during the third quarter 2016 included the transfer 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 and $0.1 million of other real estate owned were acquired. At September 30, 2016, performing troubled debt restructurings were $24.4 million, as compared to $13.1 million at June 30, 2016 and $12.1 million at September 30, 2015. The increase in performing troubled debt restructurings in the third quarter 2016, as compared the second quarter 2016, was primarily due to the transfer of a $9.4 million out-of-state loan syndication to performing status, described above.

At September 30, 2016, classified assets represented 10.7% of bank-level Tier 1 risk-based capital plus allowance for loan losses, as compared to 11.7% at December 31, 2015, and 13.5% at September 30, 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
 Coverage Ratio
   (Dollars in thousands)
September 30, 2016 reported balance  $2,412,999   23,300  0.97 %
Unaccreted net discount   15,721   15,721     
Adjusted September 30, 2016 balance  $2,428,720  $39,021  1.61 %
          

Net recoveries of $0.2 million were recognized during the third quarter 2016, as compared to immaterial net recoveries in the second quarter of 2016 and immaterial net recoveries in the third quarter 2015. During the third quarter 2016, the Bank recorded an immaterial provision for loan losses as compared to immaterial provisions in both the second quarter 2016 and the third 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 September 30, 2016, the Company had 28,349,107 shares of common stock outstanding, consisting of 27,330,107 shares of voting common stock, of which 564,376 shares were in the form of unvested stock awards, and 1,019,000 shares of non-voting common stock.

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:
                
   Three Months Ended  Nine Months Ended
   September 30,  June 30,  September 30,  September 30,  September 30,
   2016  2016  2015  2016  2015
   (Dollars in thousands, except per share amounts)
Net income  $5,761   $5,685   $6,002   $16,981   $16,563  
Expenses adjusted for:                          
 Expenses (gains) related to other real estate owned, net   20    5    (31 )  27    64  
 Merger-related expenses   2,205    347    -    3,227    -  
 Impairment of long-lived assets   -    -    -    -    122  
Income adjusted for:                          
 Loss on sale of securities   66    101    -    122    -  
 Gain on sale of other assets   -    -    -    (14 )  -  
Pre-tax earnings adjustment   2,291    453    (31 )  3,362    186  
Tax effect of adjustments (1)   (776 )  (90 )  12    (1,101 )  (71 )
Tax effected operating earnings adjustment   1,515    363    (19 )  2,261    115  
Operating earnings  $7,276   $6,048   $5,983   $19,242   $16,678  
                           
Average assets  $2,613,133   $2,356,964   $2,268,603   $2,443,707   $2,192,948  
                           
Average equity  $253,570   $228,060   $216,742   $235,337   $213,490  
                           
Fully diluted average common shares outstanding:   22,957,268    21,361,712    21,224,989    21,965,047    21,215,435  
                           
Earnings per common share-diluted - operating:  $0.32   $0.28   $0.28   $0.88   $0.79  
Earnings per common share-diluted:  $0.25   $0.27   $0.28   $0.77   $0.78  
                           
ROAA - operating   1.11 %  1.03 %  1.05 %  1.05 %  1.02 %
ROAA (GAAP)   0.88 %  0.97 %  1.05 %  0.93 %  1.01 %
                           
ROAE - operating   11.42 %  10.67 %  10.95 %  10.92 %  10.44 %
ROAE (GAAP)   9.04 %  10.03 %  10.99 %  9.64 %  10.37 %
_______________
(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         
   September 30,  December 31,  September 30,
   2016  2015  2015
   (Dollars in thousands, except per share amounts)
 Total stockholders' equity  $351,360   $221,639   $218,803  
 Less: Goodwill and other intangible assets   (72,153 )  (5,173 )  (5,668 )
 Tangible common equity  $279,207   $216,466   $213,135  
                  
 Number of common shares outstanding   28,349,107    21,704,852    21,728,202  
                  
 Book value per common share  $12.39   $10.21   $10.07  
 Tangible book value per common share  $9.85   $9.97   $9.81  
              
Tangible Common Equity Ratio         
   September 30,  December 31,  September 30,
   2016  2015  2015
   (Dollars in thousands)
 Total stockholders' equity  $351,360   $221,639   $218,803  
 Less: Goodwill and other intangible assets   (72,153 )  (5,173 )  (5,668 )
 Tangible common equity  $279,207   $216,466   $213,135  
                  
 Total assets  $3,346,265   $2,368,525   $2,285,630  
 Less: Goodwill and other intangible assets   (72,153 )  (5,173 )  (5,668 )
 Tangible assets  $3,274,112   $2,363,352   $2,279,962  
                  
 Equity ratio - GAAP (total stockholders' equity / total assets)   10.50 %  9.36 %  9.57 %
 Tangible common equity ratio (tangible common equity / tangible assets)   8.53 %  9.16 %  9.35 %
              

About Guaranty Bancorp

Guaranty Bancorp is a $3.3 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
          
   September 30,  December 31,  September 30,
   2016  2015  2015
   (In thousands)
Assets         
Cash and due from banks  $163,908   $26,711   $23,750  
                 
Time deposits with banks   504    -    -  
                 
Securities available for sale, at fair value   364,349    255,431    276,353  
Securities held to maturity   183,184    148,761    140,928  
Bank stocks, at cost   14,558    20,500    16,018  
   Total investments   562,091    424,692    433,299  
                 
Loans held for sale   -    -    8  
                 
Loans, held for investment, net of deferred costs   2,412,999    1,814,536    1,726,143  
 Less allowance for loan losses   (23,300 )  (23,000 )  (22,890 )
   Net loans, held for investment   2,389,699    1,791,536    1,703,253  
                 
Premises and equipment, net   68,779    48,308    48,564  
Other real estate owned and foreclosed assets   637    674    1,371  
Goodwill   56,148    -    -  
Other intangible assets, net   16,005    5,173    5,668  
Bank owned life insurance   65,030    48,909    48,537  
Other assets   23,464    22,522    21,180  
   Total assets  $3,346,265   $2,368,525   $2,285,630  
                 
Liabilities and Stockholders' Equity                
Liabilities:                
 Deposits:                
  Noninterest-bearing demand  $857,064   $612,371   $683,797  
  Interest-bearing demand and NOW   802,043    381,834    405,092  
  Money market   554,447    397,371    369,023  
  Savings   160,698    151,130    144,602  
  Time   377,860    259,139    244,815  
   Total deposits   2,752,112    1,801,845    1,847,329  
                 
Securities sold under agreement to repurchase and federal funds purchased   35,936    26,477    30,151  
Federal Home Loan Bank term notes   122,521    95,000    95,000  
Federal Home Loan Bank line of credit borrowing   -    185,847    56,300  
Subordinated debentures   64,973    25,774    25,774  
Interest payable and other liabilities   19,363    11,943    12,273  
   Total liabilities   2,994,905    2,146,886    2,066,827  
                 
Stockholders' equity:                
 Common stock and additional paid-in capital - common stock   831,431    712,334    711,610  
 Accumulated deficit   (372,495 )  (382,147 )  (385,930 )
 Accumulated other comprehensive loss   (2,936 )  (4,805 )  (3,421 )
 Treasury stock   (104,640 )  (103,743 )  (103,456 )
   Total stockholders' equity   351,360    221,639    218,803  
   Total liabilities and stockholders' equity  $3,346,265   $2,368,525   $2,285,630  
                
GUARANTY BANCORP AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
             
   Three Months Ended September 30,  Nine Months Ended September 30,
   2016  2015  2016  2015
   (In thousands, except share and per share data)
Interest income:            
 Loans, including costs and fees  $22,295   $17,829   $60,206   $51,749
 Investment securities:                   
  Taxable   1,741    2,064    5,454    6,265
  Tax-exempt   971    719    2,459    2,133
 Dividends   237    249    829    724
 Federal funds sold and other   98    2    105    5
  Total interest income   25,342    20,863    69,053    60,876
Interest expense:                   
 Deposits   1,228    866    3,299    2,284
 Securities sold under agreement to repurchase and federal funds purchased   13    11    31    31
 Borrowings   636    375    1,992    832
 Subordinated debentures   715    205    1,165    606
  Total interest expense   2,592    1,457    6,487    3,753
  Net interest income   22,750    19,406    62,566    57,123
Provision for loan losses   27    14    53    104
  Net interest income, after provision for loan losses   22,723    19,392    62,513    57,019
Noninterest income:                   
 Deposit service and other fees   2,581    2,309    7,042    6,682
 Investment management and trust   1,333    1,292    3,889    3,964
 Increase in cash surrender value of life insurance   490    447    1,398    1,316
 Loss on sale of securities   (66 )  -    (122 )  -
 Gain on sale of SBA loans   208    232    472    681
 Other   159    119    346    275
  Total noninterest income   4,705    4,399    13,025    12,918
Noninterest expense:                   
 Salaries and employee benefits   10,984    8,318    28,292    24,921
 Occupancy expense   1,417    1,487    4,053    4,814
 Furniture and equipment   750    740    2,281    2,206
 Amortization of intangible assets   389    495    868    1,486
 Other real estate owned, net   20    (31 )  27    64
 Insurance and assessments   608    604    1,818    1,795
 Professional fees   962    838    2,725    2,520
 Impairment of long-lived assets   -    -    -    122
 Other general and administrative   3,494    2,415    9,486    7,164
  Total noninterest expense   18,624    14,866    49,550    45,092
  Income before income taxes   8,804    8,925    25,988    24,845
Income tax expense   3,043    2,923    9,007    8,282
  Net income  $5,761   $6,002   $16,981   $16,563
                    
Earnings per common share-basic:  $0.25   $0.28   $0.78   $0.79
Earnings per common share-diluted:   0.25    0.28    0.77    0.78
Dividend declared per common share:  $0.12   $0.10   $0.35   $0.30
                    
Weighted average common shares outstanding-basic:   22,811,386    21,076,380    21,750,153    21,061,445
Weighted average common shares outstanding-diluted:   22,957,268    21,224,989    21,965,047    21,215,435
                
GUARANTY BANCORP AND SUBSIDIARIES
Unaudited Consolidated Average Balance Sheets
                
   QTD Average  YTD Average
   September 30,  June 30,  September 30,  September 30,  September 30,
   2016  2016  2015  2016  2015
   (In thousands)
Assets               
Interest earning assets               
 Loans, net of deferred costs  $2,010,622  $1,845,337  $1,703,218  $1,891,756  $1,617,724
 Securities   424,133   386,453   436,643   408,065   444,778
 Other earning assets   38,012   2,822   1,946   14,634   2,085
Average earning assets   2,472,767   2,234,612   2,141,807   2,314,455   2,064,587
Other assets   140,366   122,352   126,796   129,252   128,361
Total average assets  $2,613,133  $2,356,964  $2,268,603  $2,443,707  $2,192,948
                     
Liabilities and Stockholders' Equity                    
Average liabilities:                    
Average deposits:                    
 Noninterest-bearing deposits  $707,283  $616,046  $637,184  $645,249  $639,694
 Interest-bearing deposits   1,399,442   1,212,332   1,159,829   1,273,387   1,093,813
 Average deposits   2,106,725   1,828,378   1,797,013   1,918,636   1,733,507
Other interest-bearing liabilities   238,436   287,887   242,330   276,545   233,066
Other liabilities   14,402   12,639   12,518   13,189   12,885
Total average liabilities   2,359,563   2,128,904   2,051,861   2,208,370   1,979,458
Average stockholders' equity   253,570   228,060   216,742   235,337   213,490
Total average liabilities and stockholders' equity  $2,613,133  $2,356,964  $2,268,603  $2,443,707  $2,192,948
                

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