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Guaranty Bancorp announces second consecutive quarter of record net income and the signing of a definitive agreement to acquire Castle Rock Bank Holding Company

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Guaranty Bancorp announces second consecutive quarter of record net income and the signing of a definitive agreement to acquire Castle Rock Bank Holding Company

Guaranty Bancorp announces second consecutive quarter of record net income and the signing of a definitive agreement to acquire Castle Rock Bank Holding Company

DENVER, CO--(Marketwired - July 19, 2017) -

  • Increased quarterly net income by $4.4 million, or 78.1%, compared to the second quarter 2016
  • Expanded quarterly return on average assets to 1.19%, compared to 0.97% in the second quarter 2016
  • Continued improvement in quarterly efficiency ratio to 53.77%, compared to 59.08% in the second quarter 2016
  • Reduced the nonperforming asset to total asset ratio to 0.14%, compared to 0.58% in the second quarter 2016

Guaranty Bancorp (NASDAQ:GBNK) ("we", "our" or "the Company"), a community bank holding company based in Colorado, today announced second quarter 2017 net income of $10.1 million, or $0.36 per basic and diluted common share, compared to $5.7 million, or $0.27 per basic and diluted common share in the second quarter 2016. For the six months ended June 30, 2017, net income was $20.0 million or $0.72 per basic common share and $0.71 per diluted common share, compared to $11.5 million, or $0.54 per basic and diluted common share for the same period in 2016.

Today, the Company announces the signing of a definitive purchase agreement with Castle Rock Bank Holding Company, the holding company for Castle Rock Bank, in an all-stock transaction. Castle Rock Bank, a 43 year old community bank based in Castle Rock, Colorado, has $147.8 million in total assets as of June 30, 2017 and two bank branches strategically located between Denver and Colorado Springs, Colorado. The deal is subject to normal regulatory approvals and customary closing conditions and is expected to close in the first quarter of 2018. Following the close of the transaction, Castle Rock Bank will be merged into Guaranty Bank and Trust and all Castle Rock Bank branches will operate under the Guaranty Bank and Trust name. The Company expects the transaction to be $0.04 accretive to earnings per share in 2018 and have an internal rate of return in excess of 19%. Further information regarding the transaction can be found in the investor presentation filed as an exhibit to Guaranty Bancorp's Form 8-K filed on July 19, 2017.

"Our quarterly net income growth, together with our expanded quarterly return on average assets, demonstrates the successful business strategies we have in place to enhance shareholder value," said Paul W. Taylor, President and Chief Executive Officer of Guaranty Bancorp.

Taylor continued, "In addition, our continued commitment to grow our bank through strategic acquisitions is demonstrated by the announcement of our intent to acquire Castle Rock Bank Holding Company. We are pleased to welcome a high quality franchise like Castle Rock Bank with their solid core deposit base and excess liquidity to the Guaranty Bank organization. This acquisition provides a fill-in opportunity within our Front Range footprint and strengthens our position as one of the premier community banks headquartered in Colorado with approximately $3.6 billion in pro forma assets. Castle Rock Bank customers will continue to enjoy the exceptional service and local decision-making that a community bank provides. Customers of Castle Rock Bank will also have more locations along the Front Range to transact their business and enhanced service offerings including an expanded suite of Wealth Management and Treasury Management solutions. The acquisition of Castle Rock Bank furthers our reach into Douglas County, Colorado, a rapidly growing community that ranks 4th in the nation for highest median household income among counties with populations of 65,000 or more, according to the 2015 American Community Survey."

Key Financial Measures

Income Statement

               
    Three Months Ended       Six Months Ended  
    June 30,     March 31,     June 30,       June 30,     June 30,  
    2017     2017     2016       2017     2016  
    (Dollars in thousands, except per share amounts)  
Net income $ 10,125   $ 9,840   $ 5,686     $ 19,965   $ 11,541  
Operating earnings(1)   10,232     9,832     6,049       20,064     12,287  
Earnings per common share - diluted   0.36     0.35     0.27       0.71     0.54  
Earnings per common share - diluted - operating(1)   0.36     0.35     0.28       0.71     0.57  
Return on average assets   1.19 %   1.18 %   0.97 %     1.19 %   0.98 %
Return on average assets - operating(1)   1.21 %   1.18 %   1.03 %     1.19 %   1.05 %
Return on average equity   11.13 %   11.17 %   10.03 %     11.15 %   10.26 %
Return on average equity - operating(1)   11.25 %   11.16 %   10.67 %     11.20 %   10.93 %
Net interest margin   3.74 %   3.65 %   3.57 %     3.69 %   3.58 %
Efficiency ratio - tax equivalent(2)   53.77 %   55.33 %   59.08 %     54.53 %   59.50 %
Average cost of interest-bearing liabilities (including noninterest-bearing deposits)   0.46 %   0.43 %   0.39 %     0.44 %   0.37 %
Average cost of deposits (including noninterest-bearing deposits)   0.26 %   0.23 %   0.23 %     0.25 %   0.23 %
________________________                                

(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

                                       
    June 30,       March 31,       December 31,       September 30,       June 30,  
    2017       2017       2016       2016       2016  
    (Dollars in thousands, except per share amounts)
Total investments $ 569,812     $ 584,746     $ 590,856     $ 562,091     $ 369,008  
Total loans, net of deferred costs and fees   2,578,472       2,570,750       2,519,138       2,412,999       1,898,543  
Allowance for loan losses   (23,125)       (23,175)       (23,250)       (23,300)       (23,050)  
Total assets   3,403,852       3,399,651       3,366,427       3,346,265       2,395,015  
Total deposits   2,763,623       2,765,630       2,699,084       2,752,112       1,847,361  
Book value per common share   12.94       12.64       12.44       12.39       10.55  
Tangible book value per common share(1)   10.46       10.13       9.91       9.85       10.33  
Equity ratio - GAAP   10.80 %     10.56 %     10.47 %     10.50 %     9.60 %
Tangible common equity ratio(1)   8.91 %     8.65 %     8.52 %     8.53 %     9.42 %
Total risk-based capital ratio   13.65 %     13.44 %     13.58 %     14.07 %     13.34 %
________________________                                      

(1) See reconciliation of non-GAAP financial measures to the corresponding GAAP measurement in "Non-GAAP Financial Measures" later in this document.

Net Interest Income and Margin

The following tables present, for the periods indicated, average assets, liabilities and stockholders' equity, as well as interest income from average interest-earning assets, interest expense from average interest-bearing liabilities and the resultant yields and costs expressed in percentages. Nonaccrual loans are included in the calculation of average loans and leases, while interest thereon is excluded from the computation of yield earned.

                 
  Three Months Ended     Three Months Ended     Three Months Ended  
    June 30, 2017       March 31, 2017       June 30, 2016  
    Average Balance     Interest
Income
or
Expens
  Average
Yield or
Cost
      Average Balance   Interest
Income
or
Expense
  Average
Yield or
Cost
      Average Balance   Interest
Income
or
Expense
Average
Yield or
Cost
 
                                               
    (Dollars in thousands)  
ASSETS:                                              
Interest-earning assets:                                              
  Gross loans, net of deferred costs and fees(1)(3) $ 2,581,043   $ 28,976   4.50 %   $ 2,540,421 $ 27,392   4.37 %   $ 1,845,337 $ 19,057 4.15 %
  Investment securities(1)                                              
    Taxable   354,230     2,356   2.67 %     361,799   2,315   2.59 %     271,891   1,753 2.59 %
    Tax-exempt   201,893     1,243   2.47 %     202,094   1,237   2.48 %     94,397   757 3.23 %
  Bank Stocks(4)   23,531     347   5.91 %     24,237   389   6.51 %     20,165   281 5.60 %
  Other earning assets   4,549     11   0.97 %     4,097   8   0.79 %     2,822   3 0.43 %
  Total interest-earning assets   3,165,246     32,933   4.17 %     3,132,648   31,341   4.06 %     2,234,612   21,851 3.93 %
Non-earning assets:                                              
  Cash and due from banks   34,714                 35,533               24,754        
  Other assets   204,149                 205,972               97,598        
Total assets $ 3,404,109               $ 3,374,153             $ 2,356,964        
                                               
LIABILITIES AND STOCKHOLDERS' EQUITY:                                          
Interest-bearing liabilities:                                              
  Deposits:                                              
    Interest-bearing demand and NOW $ 807,883   $ 354   0.18 %   $ 772,880 $ 357   0.19 %   $ 378,438 $ 95 0.10 %
    Money market   479,009     402   0.34 %     490,430   333   0.28 %     398,209   266 0.27 %
    Savings   179,862     49   0.11 %     171,738   47   0.11 %     151,507   41 0.11 %
    Time certificates of deposit   414,533     981   0.95 %     374,065   800   0.87 %     284,178   662 0.94 %
    Total interest-bearing deposits   1,881,287     1,786   0.38 %     1,809,113   1,537   0.34 %     1,212,332   1,064 0.35 %
  Borrowings:                                              
    Repurchase agreements   31,794     15   0.19 %     36,466   17   0.19 %     19,477   8 0.17 %
    Federal funds purchased   1     -   1.46 %     1   -   1.46 %     3   - 0.98 %
    Subordinated debentures   65,014     856   5.28 %     64,993   844   5.27 %     25,774   225 3.51 %
    Borrowings   182,617     777   1.71 %     210,680   771   1.48 %     242,633   733 1.22 %
    Total interest-bearing liabilities   2,160,713     3,434   0.64 %     2,121,253   3,169   0.61 %     1,500,219   2,030 0.54 %
Noninterest bearing liabilities:                                              
  Demand deposits   864,359                 880,231               616,046        
  Other liabilities   14,078                 15,381               12,639        
  Total liabilities   3,039,150                 3,016,865               2,128,904        
Stockholders' Equity   364,959                 357,288               228,060        
Total liabilities and stockholders' equity $ 3,404,109               $ 3,374,153             $ 2,356,964        
                                               
Net interest income       $ 29,499             $ 28,172             $ 19,821    
Net interest margin             3.74 %             3.65 %           3.57 %
Net interest margin, fully tax equivalent(2)             3.85 %             3.76 %           3.65 %
                                               

(1) Yields on loans and securities have not been adjusted to a tax-equivalent basis.
(2) The tax-equivalent basis was computed by calculating the deemed interest on municipal bonds and tax-exempt loans that would have been earned on a fully taxable basis to yield the same after-tax income, net of the interest expense disallowance under Internal Revenue Code Sections 265 and 291, using a combined federal and state marginal tax rate of 38.01%.
(3) The loan average balances and rates include nonaccrual loans.
(4) Includes Bankers' Bank of the West stock, Federal Reserve Bank stock, Federal Home Loan Bank stock and Pacific Coast Bankers' Bank stock.

Net Interest Income and Margin (continued)

             
    Six Months Ended     Six Months Ended  
      June 30, 2017       June 30, 2016  
      Average
Balance
    Interest
Income
or
Expense
Average Yield or Cost       Average
Balance
    Interest
Income
or
Expense
Average Yield or Cost  
      (Dollars in thousands)  
ASSETS:                                
Interest-earning assets:                                
  Gross loans, net of deferred costs and fees(1)(3)   $ 2,560,845   $ 56,368 4.44 %   $ 1,831,669   $ 37,911 4.16 %
  Investment securities(1)                                
    Taxable     357,993     4,671 2.63 %     286,747     3,713 2.60 %
    Tax-exempt     201,993     2,480 2.48 %     92,663     1,488 3.23 %
  Bank Stocks(4)     23,883     736 6.21 %     20,533     592 5.80 %
  Other earning assets     4,324     19 0.89 %     2,817     7 0.50 %
  Total interest-earning assets     3,149,038     64,274 4.12 %     2,234,429     43,711 3.93 %
Non-earning assets:                                
  Cash and due from banks     35,121               24,868          
  Other assets     205,053               98,762          
Total assets   $ 3,389,212             $ 2,358,059          
                                 
LIABILITIES AND STOCKHOLDERS' EQUITY:                          
Interest-bearing liabilities:                                
  Deposits:                                
    Interest-bearing demand and NOW   $ 790,478   $ 712 0.18 %   $ 378,107   $ 186 0.10 %
    Money market     484,688     735 0.31 %     400,109     525 0.26 %
    Savings     175,823     96 0.11 %     152,180     83 0.11 %
    Time certificates of deposit     394,410     1,780 0.91 %     279,271     1,277 0.92 %
    Total interest-bearing deposits     1,845,399     3,323 0.36 %     1,209,667     2,071 0.34 %
  Borrowings:                                
    Repurchase agreements     34,117     32 0.19 %     20,207     18 0.18 %
    Federal funds purchased     1     - 1.46 %     2     - 0.98 %
    Subordinated debentures     65,004     1,700 5.27 %     25,774     450 3.51 %
    Borrowings     196,570     1,548 1.59 %     249,825     1,356 1.09 %
    Total interest-bearing liabilities     2,141,091     6,603 0.62 %     1,505,475     3,895 0.52 %
Noninterest bearing liabilities:                                
  Demand deposits     872,251               613,891          
  Other liabilities     14,725               12,573          
  Total liabilities     3,028,067               2,131,939          
Stockholders' Equity     361,145               226,120          
Total liabilities and stockholders' equity   $ 3,389,212             $ 2,358,059          
                                 
Net interest income         $ 57,671             $ 39,816    
Net interest margin             3.69 %             3.58 %
Net interest margin, fully tax equivalent (2)             3.80 %             3.66 %
                                 

(1) Yields on loans and securities have not been adjusted to a tax-equivalent basis.
(2) The tax-equivalent basis was computed by calculating the deemed interest on municipal bonds and tax-exempt loans that would have been earned on a fully taxable basis to yield the same after-tax income, net of the interest expense disallowance under Internal Revenue Code Sections 265 and 291, using a combined federal and state marginal tax rate of 38.01%.
(3) The loan average balances and rates include nonaccrual loans.
(4) Includes Bankers' Bank of the West stock, Federal Reserve Bank stock, Federal Home Loan Bank stock and Pacific Coast Bankers' Bank stock.

Net Interest Income and Margin (continued)

During the second quarter 2017, our net interest margin increased to 3.74%, compared to 3.57% for the second quarter 2016 and 3.65% for the first quarter 2017. The yield on average earnings assets increased to 4.17% for the second quarter 2017, compared to 3.93% for the second quarter 2016 and 4.06% for the first quarter 2017. Beginning in the third quarter 2016, net interest margin and loan yield were favorably impacted by the accretion of the discount on loans acquired in the Home State transaction. Accretion on acquired loans increased to $1.2 million in the second quarter 2017, compared to $0.8 million in the first quarter 2017. Second quarter 2017 interest income included $0.9 million of accreted discount on loans paid off during the quarter. The cost of interest-bearing liabilities increased to 0.64% for the second quarter 2017, compared to 0.54% for the second quarter 2016 and 0.61% for the first quarter 2017. The July 2016 issuance of $40.0 million of unsecured fixed-to-floating rate subordinated notes, bearing an initial interest rate of 5.75% through July 2021, was a primary driver of the increase in the average cost of interest-bearing liabilities.

Net interest income increased $9.7 million, or 48.8% in the second quarter 2017, compared to the same quarter in 2016, and increased $1.3 million, or 4.7%, compared to the first quarter 2017. The increase in net interest income was driven by an increase in average earning assets and the accretion of the discount on loans acquired in the acquisition of Home State Bancorp, partially offset by an increase in average interest-bearing liabilities.

For the six months ended June 30, 2017, net interest income increased $17.9 million, compared to the same period in 2016, primarily due to a $914.6 million, or 40.9% increase in average earning assets, partially offset by a $635.6 million, or 42.2% increase in average interest bearing liabilities. Accretion of discount on acquired loans was $2.0 million during the six months ended June 30, 2017. There was no accretion of discount on acquired loans in the six months ended June 30, 2016. The Company acquired $445.5 million in loans and $769.7 million in deposits as a result of the September 2016 Home State transaction.

Noninterest Income

The following table presents noninterest income as of the dates indicated:

             
      Three Months Ended     Six Months Ended
      June 30,
2017
    March 31,
2017
    June 30,
2016
    June 30,
2017
    June 30,
2016
      (In thousands)
Noninterest income:                              
  Deposit service and other fees   $ 3,545   $ 3,280   $ 2,292   $ 6,825   $ 4,461
  Investment management and trust     1,483     1,521     1,276     3,004     2,556
  Increase in cash surrender value of life insurance     615     595     460     1,210     908
  Loss on sale of securities     -     -     (101)     -     (56)
  Gain on sale of SBA loans     447     381     110     828     264
  Other     252     625     105     877     187
  Total noninterest income   $ 6,342   $ 6,402   $ 4,142   $ 12,744   $ 8,320
                                 

Beginning in the third quarter 2016, noninterest income was favorably impacted by the Home State transaction, affecting deposit service and other fees, investment management and trust and merchant income; included in "other" in the table above.

Noninterest income increased $2.2 million, or 53.1% in the second quarter 2017, compared to the same quarter in 2016 and decreased $0.1 million, compared to the first quarter 2017. Second quarter 2017 deposit service and other fees increased $0.3 million, compared to the first quarter 2017, primarily due to an increase in debit card interchange income and an increase in annual fees on overdraft protection accounts. First quarter 2017 noninterest income included a $0.3 million gain on sale of our $2.0 million credit card loan portfolio.

For the six months ended June 30, 2017, noninterest income increased $4.4 million, or 53.2%, compared to the same period in 2016. In addition to the impact of the Home State transaction, gain on sale of SBA loans increased $0.6 million and bank-owned life insurance increased $0.3 million for the six months ended June 30, 2017, compared to the same period in 2016.

Noninterest Expense

The following table presents noninterest expense as of the dates indicated:

             
      Three Months Ended     Six Months Ended
      June 30,
2017
    March 31,
2017
    June 30,
2016
    June 30,
2017
    June 30,
2016
      (In thousands)
Noninterest expense:                              
  Salaries and employee benefits   $ 11,247   $ 11,926   $ 8,520   $ 23,173   $ 17,308
  Occupancy expense     1,674     1,552     1,261     3,226     2,636
  Furniture and equipment     975     945     713     1,920     1,531
  Amortization of intangible assets     648     649     239     1,297     479
  Other real estate owned, net     126     68     5     194     7
  Insurance and assessments     647     706     597     1,353     1,210
  Professional fees     1,252     974     906     2,226     1,763
  Impairment of long-lived assets     34     190     -     224     -
  Other general and administrative     3,900     3,519     2,893     7,419     5,992
  Total noninterest expense   $ 20,503   $ 20,529   $ 15,134   $ 41,032   $ 30,926
                                 

Beginning in the third quarter 2016, noninterest expense was significantly impacted by the Home State transaction, primarily affecting salaries and employee benefits, other general and administrative, amortization of intangible assets and occupancy.

Salaries and employee benefits increased $2.7 million in the second quarter 2017, compared to the same quarter in 2016, primarily due to a $1.8 million increase in base salaries and a $0.5 million increase in our self-funded medical plan. Since June 30, 2016, our full-time equivalent employees (FTE) increased by 128 FTE to 491 FTE at June 30, 2017. Other general and administrative expenses increased $1.0 million in the second quarter 2017, compared to the same quarter in 2016, primarily due to increases in data processing and debit card interchange expense.

Salaries and employee benefits decreased $0.7 million in the second quarter 2017, compared to the first quarter 2017, mostly due to a decline in payroll taxes related to the timing of the annual payroll cycle. Offsetting the decline in salaries and employee benefits, other general and administrative expense increased $0.4 million and professional fees increased $0.3 million in the second quarter 2017, compared to the first quarter 2017. The increase in general and administrative expense in the second quarter 2017, compared to the first quarter 2017, was related to increases in data processing expense and security expense. The increase in professional fees in the second quarter 2017, compared to the first quarter 2017, was mostly related to increases to legal and miscellaneous professional fees.

For the six months ended June 30, 2017, noninterest expense increased $10.1 million, compared to the same period in 2016, primarily due to the impact of the Home State transaction. Salaries and employee benefits increased $5.9 million for the six months ended June 30, 2017, compared to the same period in 2016, primarily due to a $3.8 million increase in base salary expense and a $1.2 million increase in our self-funded medical plan. Other general and administrative expense increased $1.4 million for the six months ended June 30, 2017, compared to the same period in 2016, due to increases in data processing, debit card interchange expense and communication expense. Amortization of intangible assets increased $0.8 million for the six months ended June 30, 2017, compared to the same period in 2016, due to the intangible assets recorded in the Home State transaction. Occupancy expense increased $0.6 million for the six months ended June 30, 2017, compared to the same period in 2016, due to increases in real estate taxes and depreciation. As a result of the Home State transaction, we acquired eleven branches and closed five branches by the end of 2016.

Balance Sheet

                                       
    June 30,       March 31,       December 31,       September 30,       June 30,  
    2017       2017       2016       2016       2016  
    (Dollars in thousands)
Total assets $ 3,403,852     $ 3,399,651     $ 3,366,427     $ 3,346,265     $ 2,395,015  
Average assets, quarter-to-date   3,404,109       3,374,153       3,336,143       2,613,133       2,356,964  
Total loans, net of deferred costs and fees   2,578,472       2,570,750       2,519,138       2,412,999       1,898,543  
Total deposits   2,763,623       2,765,630       2,699,084       2,752,112       1,847,361  
                                       
Equity ratio - GAAP   10.80 %     10.56 %     10.47 %     10.50 %     9.60 %
Tangible common equity ratio   8.91 %     8.65 %     8.52 %     8.53 %     9.42 %
                                       

Second quarter 2017 average assets were $3.4 billion, reflecting an increase of $1.0 billion compared to June 30, 2016, and an increase of $30.0 million compared to March 31, 2017. During the third quarter 2016, the Company acquired $445.5 million in loans and $769.7 million in deposits in the Home State transaction.

The following table sets forth the amount of loans outstanding at the dates indicated:

                             
    June 30,     March 31,     December 31,     September 30,     June 30,
    2017     2017     2016     2016     2016
    (In thousands)
Loans held for sale $ 887   $ 951   $ 4,129   $ -   $ -
Commercial and residential real estate   1,799,114     1,800,194     1,768,424     1,752,113     1,428,397
Construction   99,632     103,682     88,451     75,603     26,497
Commercial   451,701     451,708     432,083     400,281     336,069
Consumer   122,994     120,231     125,264     81,766     66,539
Other   103,990     93,979     100,848     102,887     40,640
  Total gross loans   2,578,318     2,570,745     2,519,199     2,412,650     1,898,142
    Deferred costs and (fees)   154     5     (61)     349     401
  Loans, net   2,578,472     2,570,750     2,519,138     2,412,999     1,898,543
Less allowance for loan losses   (23,125)     (23,175)     (23,250)     (23,300)     (23,050)
  Net loans $ 2,555,347   $ 2,547,575   $ 2,495,888   $ 2,389,699   $ 1,875,493
                               

The following table presents the changes in the Company's loan balances at the dates indicated:

                                   
    June 30,     March 31,     December 31,     September 30,     June 30,     March 31,
    2017     2017     2016     2016     2016     2016
    (In thousands)
Beginning balance $ 2,570,745   $ 2,519,199   $ 2,412,650   $ 1,898,142   $ 1,829,909     1,814,281
New credit extended   132,420     139,185     232,499     129,064     121,753     105,843
Acquisition of Home State Bank   -     -     -     445,529     -     -
Net existing credit advanced   73,298     111,821     142,448     153,390     87,524     50,482
Net pay-downs and maturities   (196,511)     (195,678)     (272,326)     (214,089)     (142,516)     (139,914)
Other   (1,634)     (3,782)     3,928     614     1,472     (783)
  Gross loans   2,578,318     2,570,745     2,519,199     2,412,650     1,898,142     1,829,909
Deferred costs and (fees)   154     5     (61)     349     401     337
  Loans, net $ 2,578,472   $ 2,570,750   $ 2,519,138   $ 2,412,999   $ 1,898,543     1,830,246
                                   
Net change - loans outstanding $ 7,722   $ 51,612   $ 106,139   $ 514,456   $ 68,297     15,710
                                   

For the six months ended June 30, 2017, new credit extended and credit advanced on existing lines increased $91.1 million, or 24.9% to $456.7 million, compared to $365.6 million in the same period in 2016. Net pay-downs and maturities on loans increased $109.8 million, or 38.9% to $392.2 million for the six months ended June 30, 2017, compared to $282.4 million for the same period in 2016. In addition to contractual loan principal payments and maturities, the second quarter 2017 included $40.1 million in early payoffs related to our borrowers selling their assets, $18.0 million in payoffs due to our strategic decision not to match certain financing terms offered by competitors, $17.2 million in loan pay-downs related to fluctuations in loan balances to existing customers and $8.1 million in loan payoffs related to watch or classified loans.

Balance Sheet (continued)

Second quarter 2017 average loans increased $40.6 million, or 6.4% annualized. Net loan growth was $7.7 million during the second quarter 2017, compared to the first quarter 2017. During the twelve months ended June 30, 2017, loans increased by $679.9 million, or 35.8%. Excluding the loans acquired in the transaction with Home State, loans grew $234.4 million, or 12.3% since June 30, 2016.

The following table sets forth the amounts of deposits outstanding at the dates indicated:

                     
    June 30,   March 31,   December 31,   September 30,   June 30,
    2017   2017   2016   2016   2016
    (In thousands)
Noninterest-bearing demand $  876,043  $  868,189  $  916,632  $  857,064  $  638,110 
Interest-bearing demand and NOW    811,639     821,518     767,523     802,043     383,492 
Money market    475,656     489,921     484,664     554,447     392,730 
Savings    183,200     178,157     164,478     160,698     149,798 
Time    417,085     407,845     365,787     377,860     283,231 
Total deposits $  2,763,623  $  2,765,630  $  2,699,084  $  2,752,112  $  1,847,361 
                     

At June 30, 2017, deposits were $2.8 billion, an increase of $0.9 billion, or 49.6%, compared to June 30, 2016. The $769.7 million in deposits acquired in the Home State transaction, consisted of $685.6 million in non-maturing deposits and $84.1 million in time deposits. Excluding the deposits acquired in the Home State transaction total deposits grew $146.6 million during the twelve months ended June 30, 2017. At June 30, 2017, noninterest-bearing deposits as a percentage of total deposits were 31.7%, compared to 34.5% at June 30, 2016 and 31.4% at March 31, 2017. At June 30, 2017, securities sold under agreements to repurchase were $29.6 million, compared to $36.9 million at December 31, 2016 and $18.0 million at June 30, 2016. Securities sold under agreements to repurchase acquired in the Home State transaction were $20.0 million.

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
June 30,
2017
  Ratio at
December 31,
2016
  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 10.61 % 10.46 % 7.00 % N/A  
  Guaranty Bank and Trust Company 12.19 % 12.43 % 7.00 % 6.50 %
                 
Tier 1 Risk-Based Capital Ratio                
  Consolidated 11.47 % 11.34 % 8.50 % N/A  
  Guaranty Bank and Trust Company 12.19 % 12.43 % 8.50 % 8.00 %
                 
Total Risk-Based Capital Ratio                
  Consolidated 13.65 % 13.58 % 10.50 % N/A  
  Guaranty Bank and Trust Company 12.99 % 13.26 % 10.50 % 10.00 %
                 
Leverage Ratio                
  Consolidated 9.98 % 9.81 % 4.00 % N/A  
  Guaranty Bank and Trust Company 10.60 % 10.76 % 4.00 % 5.00 %
                   

At June 30, 2017, all of our regulatory capital ratios remained well above minimum requirements for a "well-capitalized" institution. Our consolidated total risk-based capital ratio increased compared to December 31, 2016, primarily due to an increase in retained 2017 earnings. At June 30, 2017, our bank-level capital ratios declined compared to December 31, 2016, primarily due to the $18.7 million dividend paid to the Company in the second quarter 2017 to fund stockholder dividends and debt servicing during 2017.

Asset Quality

The following table presents select asset quality data, including quarterly charged-off loans, recoveries and provision for loan losses as of the dates indicated:

                               
    June 30,     March 31,     December 31,     September 30,     June 30,  
    2017     2017     2016     2016     2016  
    (Dollars in thousands)  
Originated nonaccrual loans $ 3,332   $ 3,387   $ 3,345   $ 3,399   $ 13,326  
Purchased credit impaired loans   1,290     1,715     1,902     2,108     -  
Accruing loans past due 90 days or more(1)   -     -     -     335     -  
                               
Total nonperforming loans (NPLs) $ 4,622   $ 5,102   $ 5,247   $ 5,842   $ 13,326  
Other real estate owned and foreclosed assets   113     257     569     637     674  
                               
Total nonperforming assets (NPAs) $ 4,735   $ 5,359   $ 5,816   $ 6,479   $ 14,000  
                               
Total classified assets $ 29,188   $ 30,201   $ 33,443   $ 34,675   $ 25,644  
                               
Accruing loans past due 30-89 days(1) $ 957   $ 3,858   $ 1,337   $ 2,157   $ 2,386  
                               
Charged-off loans $ (338)   $ (125)   $ (290)   $ (72)   $ (57)  
Recoveries   82     45     150     295     72  
  Net (charge-offs) recoveries $ (256)   $ (80)   $ (140)   $ 223   $ 15  
                               
Provision for loan losses $ 206   $ 5   $ 90   $ 27   $ 10  
                               
Allowance for loan losses $ 23,125   $ 23,175   $ 23,250   $ 23,300   $ 23,050  
                               
Unaccreted loan discount(5) $ 12,665   $ 13,896   $ 14,682   $ 15,721   $ -  
                               
Selected ratios:                              
NPLs to loans, net of deferred costs and fees(2)   0.18 %   0.20 %   0.21 %   0.24 %   0.70 %
NPAs to total assets   0.14 %   0.16 %   0.17 %   0.19 %   0.58 %
Allowance for loan losses to NPLs   500.32 %   454.23 %   443.11 %   398.84 %   172.97 %
Allowance for loan losses to loans, net of deferred costs and fees(2)   0.90 %   0.90 %   0.92 %   0.97 %   1.21 %
Loans 30-89 days past due to loans, net of deferred costs and fees(2)   0.04 %   0.15 %   0.05 %   0.09 %   0.13 %
Texas ratio(3)   1.26 %   1.39 %   1.55 %   1.77 %   5.17 %
Classified asset ratio(4)   8.08 %   8.24 %   9.79 %   10.69 %   10.55 %
________________________                              

(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 and fees, 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.
(5)  Related to loans acquired in the Home State transaction.

Asset Quality (continued)

The following tables summarize past due loans held for investment by class as of the dates indicated:

                             
June 30, 2017   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 $ -   $ -   $ 2,154   $ 2,154   $ 1,799,222
Construction   -     -     -     -     99,638
Commercial   587     -     1,368     1,955     451,728
Consumer   370     -     193     563     123,001
Other   -     -     907     907     103,996
Total $ 957   $ -   $ 4,622   $ 5,579   $ 2,577,585
                             
                             
                             
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
                             

During the second quarter 2017, nonperforming assets decreased by $0.6 million from March 31, 2017 and $9.3 million from June 30, 2016. The $9.3 million decline in nonperforming assets, compared to June 30, 2016 included the return of a $9.4 million out-of-state loan syndication to performing status. Also, as a result of the transaction with Home State, $2.1 million of nonperforming loans were acquired. At June 30, 2017, performing troubled debt restructurings were $23.4 million, compared to $23.2 million at March 31, 2017 and $13.1 million at June 30, 2016. The increase in performing troubled debt restructurings in the second quarter 2017, compared to the same quarter in 2016, was primarily due to a return of the $9.4 million out-of-state loan syndication to performing status, described above.

At June 30, 2017, classified assets represented 8.1% of bank-level Tier 1 risk-based capital plus allowance for loan losses, compared to 8.2% at March 31, 2017 and 10.6% at June 30, 2016.

Net charge-offs were $0.3 million during the second quarter of 2017, compared to $0.1 million during the first quarter 2017 and immaterial net recoveries in the second quarter of 2016. During the second quarter 2017, the Bank recorded a $0.2 million provision for loan losses, compared to immaterial provisions in the first quarter 2017 and the second quarter 2016. The Bank considered recoveries, historical charge-offs, the 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 June 30, 2017, the Company had 28,406,758 shares of voting common stock outstanding, of which 487,994 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:

                                 
  Three Months Ended       Six Months Ended
    June 30,     March 31,     June 30,       June 30,     June 30,  
    2017     2017     2016       2017     2016  
    (Dollars in thousands, except per share amounts)
Net income $ 10,125   $ 9,840   $ 5,686     $ 19,965   $ 11,541  
Expenses adjusted for:                                
  Expenses (gains) related to other real estate owned, net   126     68     5       194     7  
  Merger-related expenses   -     -     347       -     1,022  
  Impairment of long-lived assets   34     190     -       224     -  
Income adjusted for:                                
  Loss on sale of securities   -     -     101       -     56  
  (Gain) loss on sale of other assets   14     (271)     -       (257)     (14)  
Pre-tax earnings adjustment   174     (13)     453       161     1,071  
Tax effect of adjustments(1)   (67)     5     (90)       (62)     (325)  
Tax effected operating earnings adjustment   107     (8)     363       99 -   746  
Operating earnings $ 10,232   $ 9,832   $ 6,049     $ 20,064   $ 12,287  
                                 
Average assets $ 3,404,109   $ 3,374,153   $ 2,356,964     $ 3,389,212   $ 2,358,059  
                                 
Average equity $ 364,959   $ 357,288   $ 228,060     $ 361,145   $ 226,120  
                                 
  Fully diluted average common shares outstanding:   28,095,871     28,090,179     21,378,349       28,120,746     21,437,781  
                                 
  Earnings per common share-diluted: $ 0.36   $ 0.35   $ 0.27     $ 0.71   $ 0.54  
Earnings per common share-diluted - operating: $ 0.36   $ 0.35   $ 0.28     $ 0.71   $ 0.57  
                                 
ROAA (GAAP)   1.19 %   1.18 %   0.97 %     1.19 %   0.98 %
ROAA - operating   1.21 %   1.18 %   1.03 %     1.19 %   1.05 %
                                 
ROAE (GAAP)   11.13 %   11.17 %   10.03 %     11.15 %   10.26 %
ROAE - operating   11.25 %   11.16 %   10.67 %     11.20 %   10.93 %
________________                                

(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.

Non-GAAP Financial Measures (continued)

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                  
      June 30,     December 31,     June 30,
      2017     2016     2016
      (Dollars in thousands, except per share amounts)
  Total stockholders' equity   $ 367,529   $ 352,378   $ 229,958
  Less: Goodwill and other intangible assets     (70,424)     (71,721)     (4,694)
  Tangible common equity   $ 297,105   $ 280,657   $ 225,264
                   
  Number of common shares outstanding     28,406,758     28,334,004     21,802,054
                   
  Book value per common share   $ 12.94   $ 12.44   $ 10.55
  Tangible book value per common share   $ 10.46   $ 9.91   $ 10.33
                     
                     
Tangible Common Equity Ratio                    
      June 30,     December 31,     June 30,  
      2017     2016     2016  
      (Dollars in thousands)  
  Total stockholders' equity   $ 367,529   $ 352,378   $ 229,958  
  Less: Goodwill and other intangible assets     (70,424)     (71,721)     (4,694)  
  Tangible common equity   $ 297,105   $ 280,657   $ 225,264  
                       
  Total assets   $ 3,403,852   $ 3,366,427   $ 2,395,015  
  Less: Goodwill and other intangible assets     (70,424)     (71,721)     (4,694)  
  Tangible assets   $ 3,333,428   $ 3,294,706   $ 2,390,321  
                       
  Equity ratio - GAAP (total stockholders' equity / total assets)     10.80 %   10.47 %   9.60 %
  Tangible common equity ratio (tangible common equity / tangible assets)     8.91 %   8.52 %   9.42 %
                       

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; Castle Rock Bank's business experiencing disruptions due to transaction-related uncertainty or other factors making it more difficult to maintain relationships with employees, customers, other business partners or governmental entities; difficulty retaining key employees; the parties being unable to successfully implement integration strategies or to achieve expected synergies and operating efficiencies within the expected time-frames or at all; 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.

Notice to Shareholders

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the proposed merger transaction, a registration statement on Form S-4 will be filed with the SEC by Guaranty Bancorp. The registration statement will contain a proxy statement/prospectus to be distributed to the shareholders of Castle Rock Bank Holding Company in connection with their vote on the merger. Shareholders of Castle Rock Bank Holding Company are encouraged to read the registration statement and any other relevant documents filed with the SEC, including the proxy statement / prospectus that will be part of the registration statement, because they will contain important information about the proposed merger. The final proxy statement/prospectus will be mailed to shareholders of Castle Rock Bank Holding Company. Investors and security holders will be able to obtain the documents free of charge at the SEC's website, www.sec.gov. In addition, documents filed with the SEC by Guaranty Bancorp will be available free of charge by (1) accessing the Guaranty Bancorp website at www.gbnk.com under the "SEC Filings" link (2) writing Guaranty Bancorp at 1331 17th Street, Suite 200, Denver, CO 80202, Attention: Investor Relations or (3) writing Castle Rock Bank Holding Company at 509 N. Wilcox St., Castle Rock, CO 80104, Attention: Corporate Secretary.

 
GUARANTY BANCORP AND SUBSIDIARIES
Unaudited Consolidated Balance Sheets
                   
      June 30,     December 31,     June 30,
      2017     2016     2016
      (In thousands)
Assets                  
Cash and due from banks   $ 46,582   $ 50,111   $ 30,446
                   
Time deposits with banks     254     254     -
                   
Securities available for sale, at fair value     305,910     324,228     198,156
Securities held to maturity     240,899     243,979     149,196
Bank stocks, at cost     23,003     22,649     21,656
      Total investments     569,812     590,856     369,008
                   
Loans held for sale     887     4,129     -
                   
Loans, held for investment, net of deferred costs and fees     2,577,585     2,515,009     1,898,543
  Less allowance for loan losses     (23,125)     (23,250)     (23,050)
      Net loans, held for investment     2,554,460     2,491,759     1,875,493
                   
Premises and equipment, net     64,774     67,390     45,769
Other real estate owned and foreclosed assets     113     569     674
Goodwill     56,404     56,404     -
Other intangible assets, net     14,020     15,317     4,694
Bank owned life insurance     74,050     65,538     49,639
Other assets     22,496     24,100     19,292
      Total assets   $ 3,403,852   $ 3,366,427   $ 2,395,015
                   
Liabilities and Stockholders' Equity                  
Liabilities:                  
  Deposits:                  
    Noninterest-bearing demand   $ 876,043   $ 916,632   $ 638,110
    Interest-bearing demand and NOW     811,639     767,523     383,492
    Money market     475,656     484,664     392,730
    Savings     183,200     164,478     149,798
    Time     417,085     365,787     283,231
      Total deposits     2,763,623     2,699,084     1,847,361
                   
Securities sold under agreement to repurchase     29,553     36,948     17,990
Federal Home Loan Bank line of credit borrowing     90,900     124,691     141,600
Federal Home Loan Bank term notes     71,772     72,477     120,000
Subordinated debentures, net     65,023     64,981     25,774
Interest payable and other liabilities     15,452     15,868     12,332
      Total liabilities     3,036,323     3,014,049     2,165,057
                   
Stockholders' equity:                  
  Common stock and additional paid-in capital - common stock     833,600     832,098     713,900
  Accumulated deficit     (354,956)     (367,944)     (375,490)
  Accumulated other comprehensive loss     (5,112)     (6,726)     (3,837)
  Treasury stock     (106,003)     (105,050)     (104,615)
      Total stockholders' equity     367,529     352,378     229,958
      Total liabilities and stockholders' equity   $ 3,403,852   $ 3,366,427   $ 2,395,015
 
 
GUARANTY BANCORP AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
                       
    Three Months Ended June 30,     Six Months Ended June 30,
    2017     2016     2017     2016
    (In thousands, except share and per share data)
Interest income:                      
  Loans, including costs and fees $ 28,976   $ 19,057   $ 56,368   $ 37,911
  Investment securities:                      
    Taxable   2,356     1,753     4,671     3,713
    Tax-exempt   1,243     757     2,480     1,488
  Dividends   347     281     736     592
  Federal funds sold and other   11     3     19     7
    Total interest income   32,933     21,851     64,274     43,711
Interest expense:                      
  Deposits   1,786     1,064     3,323     2,071
  Securities sold under agreement to repurchase   15     8     32     18
  Borrowings   777     733     1,548     1,356
  Subordinated debentures   856     225     1,700     450
    Total interest expense   3,434     2,030     6,603     3,895
    Net interest income   29,499     19,821     57,671     39,816
Provision for loan losses   206     10     211     26
    Net interest income, after provision for loan losses   29,293     19,811     57,460     39,790
Noninterest income:                      
  Deposit service and other fees   3,545     2,292     6,825     4,461
  Investment management and trust   1,483     1,276     3,004     2,556
  Increase in cash surrender value of life insurance   615     460     1,210     908
  Loss on sale of securities   -     (101)     -     (56)
  Gain on sale of SBA loans   447     110     828     264
  Other   252     105     877     187
    Total noninterest income   6,342     4,142     12,744     8,320
Noninterest expense:                      
  Salaries and employee benefits   11,247     8,520     23,173     17,308
  Occupancy expense   1,674     1,261     3,226     2,636
  Furniture and equipment   975     713     1,920     1,531
  Amortization of intangible assets   648     239     1,297     479
  Other real estate owned, net   126     5     194     7
  Insurance and assessments   647     597     1,353     1,210
  Professional fees   1,252     906     2,226     1,763
  Impairment of long-lived assets   34     -     224     -
  Other general and administrative   3,900     2,893     7,419     5,992
    Total noninterest expense   20,503     15,134     41,032     30,926
    Income before income taxes   15,132     8,819     29,172     17,184
Income tax expense   5,007     3,133     9,207     5,643
    Net income $ 10,125   $ 5,686   $ 19,965   $ 11,541
                       
Earnings per common share-basic: $ 0.36   $ 0.27   $ 0.72   $ 0.54
Earnings per common share-diluted:   0.36     0.27     0.71     0.54
Dividend declared per common share: $ 0.13   $ 0.12   $ 0.25   $ 0.23
                       
Weighted average common shares outstanding-basic:   27,913,082     21,242,520     27,890,446     21,213,706
Weighted average common shares outstanding-diluted:   28,095,871     21,378,349     28,120,746     21,437,781

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

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