Market Overview

Guaranty Bancorp Announces Third Quarter 2017 Financial Results

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  • Expanded quarterly return on average assets to 1.17%, compared to 0.88% in the third quarter 2016
  • Increased quarterly net income by $4.3 million, or 74.4%, compared to the third quarter 2016
  • Increased loans $83.4 million, or 12.8%, annualized during the third quarter 2017
  • Grew deposits $134.4 million, or 19.3% annualized during the third quarter 2017

DENVER, Oct. 18, 2017 (GLOBE NEWSWIRE) -- Guaranty Bancorp (NASDAQ:GBNK) ("we", "our" or "the Company"), a community bank holding company based in Colorado, today announced third quarter 2017 net income of $10.1 million, or $0.36 per basic and diluted common share, compared to $5.8 million, or $0.25 per basic and diluted common share in the third quarter 2016. For the nine months ended September 30, 2017, net income was $30.0 million or $1.08 per basic common share and $1.07 per diluted common share, compared to $17.3 million, or $0.80 per basic common share and $0.79 per diluted common share for the same period in 2016.

"We continue to deliver very solid profitability driven by strong loan and deposit growth," said Paul W. Taylor, President and Chief Executive Officer of Guaranty Bancorp. "For the third quarter 2017, return on average assets increased by 33% to 1.17% due to balance sheet growth, expanded net interest margin, focus on noninterest income improvement, and diligent expense management."

Taylor continued, "I am also pleased to announce that we have received all approvals required for our previously announced acquisition of Castle Rock Bank Holding Company. We expect to close the transaction and convert our systems in the fourth quarter of 2017. This acquisition will result in $3.7 billion in combined pro forma assets and further strengthens our position as the premier community bank in Colorado with our headquarters and all of our branches located within the state."

The following tables highlight our key financial measures for 2017 and 2016. The significant improvement from 2016 to 2017 was favorably impacted by the successful integration of Home State Bancorp ("Home State") following its acquisition in September 2016, better efficiency, and stronger net interest margin on a higher earning asset base.

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

                                 
Key Financial Measures                                
Income Statement                                
                                 
    Three Months Ended       Nine Months Ended  
    September 30,     June 30,     September 30,       September 30,     September 30,  
    2017     2017     2016       2017     2016  
                                 
    (Dollars in thousands, except per share amounts)  
Net income $ 10,054   $ 10,125   $ 5,765     $ 30,019   $ 17,306  
Operating earnings (1)   11,307     10,232     7,281       31,371     19,568  
Earnings per common share - diluted   0.36     0.36     0.25       1.07     0.79  
Earnings per common share - diluted - operating (1)   0.40     0.36     0.32       1.11     0.89  
Return on average assets   1.17 %   1.19 %   0.88 %     1.18 %   0.95 %
Return on average assets - operating (1)   1.31 %   1.21 %   1.11 %     1.23 %   1.07 %
Return on average equity   10.70 %   11.13 %   9.04 %     10.99 %   9.82 %
Return on average equity - operating (1)   12.03 %   11.25 %   11.42 %     11.49 %   11.11 %
Net interest margin   3.91 %   3.74 %   3.66 %     3.77 %   3.61 %
Efficiency ratio - tax equivalent (2)   50.02 %   53.77 %   56.78 %     52.97 %   58.51 %
Average cost of interest-bearing liabilities (including noninterest-bearing deposits)   0.44 %   0.46 %   0.44 %     0.44 %   0.39 %
Average cost of deposits (including noninterest-bearing deposits)   0.27 %   0.26 %   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, litigation-related settlements 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                            
                             
    September 30,     June 30,     March 31,     December 31,     September 30,
    2017      2017      2017      2016      2016 
    (Dollars in thousands, except per share amounts)
Total investments $ 576,459     $ 569,812     $ 584,746     $ 590,856     $ 562,091  
Total loans, net of deferred costs and fees   2,661,866       2,578,472       2,570,750       2,519,138       2,412,999  
Allowance for loan losses   (22,900 )     (23,125 )     (23,175 )     (23,250 )     (23,300 )
Total assets   3,510,046       3,403,852       3,399,651       3,366,427       3,346,265  
Total deposits   2,898,060       2,763,623       2,765,630       2,699,084       2,752,112  
Book value per common share   13.21       12.94       12.64       12.44       12.39  
Tangible book value per common share (1)   10.75       10.46       10.13       9.91       9.85  
Equity ratio - GAAP   10.69 %     10.80 %     10.56 %     10.47 %     10.50 %
Tangible common equity ratio (1)   8.88 %     8.91 %     8.65 %     8.52 %     8.53 %
Total risk-based capital ratio   13.50 %     13.65 %     13.44 %     13.58 %     14.07 %
________________________                            
(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  
    September 30, 2017       June 30, 2017       September 30, 2016  
    Average Balance   Interest
Income or Expense
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) $ 2,593,667 $ 30,902 4.73 %   $ 2,581,043 $ 28,976 4.50 %   $ 2,010,622 $ 22,295 4.41 %
Investment securities (1)                                        
Taxable   339,671   2,221 2.59 %     354,230   2,356 2.67 %     276,227   1,741 2.51 %
Tax-exempt   210,363   1,233 2.33 %     201,893   1,243 2.47 %     130,270   971 2.97 %
Bank Stocks (4)   19,993   275 5.46 %     23,531   347 5.91 %     17,636   237 5.35 %
Other earning assets   18,060   57 1.25 %     4,549   11 0.97 %     38,012   98 1.03 %
Total interest-earning assets   3,181,754   34,688 4.33 %     3,165,246   32,933 4.17 %     2,472,767   25,342 4.08 %
Non-earning assets:                                        
Cash and due from banks   35,426             34,714             29,266        
Other assets   206,044             204,149             111,100        
Total assets $ 3,423,224           $ 3,404,109           $ 2,613,133        
                                         
LIABILITIES AND STOCKHOLDERS' EQUITY:
                             
Interest-bearing liabilities:                                        
Deposits:                                        
Interest-bearing demand and NOW $ 850,670 $ 380 0.18 %   $ 807,883 $ 354 0.18 %   $ 506,179 $ 170 0.13 %
Money market   493,433   459 0.37 %     479,009   402 0.34 %     431,994   297 0.27 %
Savings   182,190   51 0.11 %     179,862   49 0.11 %     154,156   43 0.11 %
Time certificates of deposit   420,102   1,049 0.99 %     414,533   981 0.95 %     307,113   718 0.93 %
Total interest-bearing deposits   1,946,395   1,939 0.40 %     1,881,287   1,786 0.38 %     1,399,442   1,228 0.35 %
Borrowings:                                        
Repurchase agreements   33,958   16 0.19 %     31,794   15 0.19 %     23,533   13 0.22 %
Federal funds purchased   1   - 1.46 %     1   - 1.46 %     1   - 0.98 %
Subordinated debentures   65,035   868 5.30 %     65,014   856 5.28 %     57,844   715 4.92 %
Borrowings   91,087   531 2.31 %     182,617   777 1.71 %     157,058   636 1.61 %
Total interest-bearing liabilities   2,136,476   3,354 0.62 %     2,160,713   3,434 0.64 %     1,637,878   2,592 0.63 %
Noninterest bearing liabilities:                                        
Demand deposits   898,262             864,359             707,283        
Other liabilities   15,739             14,078             14,402        
Total liabilities   3,050,477             3,039,150             2,359,563        
Stockholders' Equity   372,747             364,959             253,570        
Total liabilities and stockholders' equity $ 3,423,224           $ 3,404,109           $ 2,613,133        
                                         
Net interest income     $ 31,334           $ 29,499           $ 22,750    
Net interest margin         3.91 %           3.74 %           3.66 %
Net interest margin, fully tax equivalent (2)         4.02 %           3.85 %           3.75 %
                                         

(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)                      
                           
    Nine Months Ended
      Nine Months Ended
 
    September 30, 2017       September 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) $ 2,571,906 $ 87,270 4.54 %   $ 1,891,756 $ 60,206 4.25 %
Investment securities (1)                          
Taxable   351,818   6,892 2.62 %     283,215   5,454 2.57 %
Tax-exempt   204,814   3,713 2.42 %     105,290   2,459 3.12 %
Bank Stocks (4)   22,572   1,011 5.99 %     19,560   829 5.66 %
Other earning assets   8,953   76 1.13 %     14,634   105 0.96 %
Total interest-earning assets   3,160,063   98,962 4.19 %     2,314,455   69,053 3.99 %
Non-earning assets:                          
Cash and due from banks   35,224             26,345        
Other assets   205,373             102,907        
Total assets $ 3,400,660           $ 2,443,707        
                           
LIABILITIES AND STOCKHOLDERS' EQUITY:                      
Interest-bearing liabilities:                          
Deposits:                          
Interest-bearing demand and NOW $ 810,763 $ 1,091 0.18 %   $ 421,109 $ 356 0.11 %
Money market   487,635   1,194 0.33 %     410,815   823 0.27 %
Savings   177,968   147 0.11 %     152,843   127 0.11 %
Time certificates of deposit   403,068   2,830 0.94 %     288,620   1,993 0.92 %
Total interest-bearing deposits   1,879,434   5,262 0.37 %     1,273,387   3,299 0.35 %
Borrowings:                          
Repurchase agreements   34,063   48 0.19 %     21,324   31 0.19 %
Federal funds purchased   1   - 1.46 %     2   - 0.98 %
Subordinated debentures   65,014   2,568 5.28 %     36,542   1,165 4.26 %
Borrowings   161,023   2,079 1.73 %     218,677   1,992 1.22 %
Total interest-bearing liabilities   2,139,535   9,957 0.62 %     1,549,932   6,487 0.56 %
Noninterest bearing liabilities:                          
Demand deposits   881,017             645,249        
Other liabilities   15,053             13,189        
Total liabilities   3,035,605             2,208,370        
Stockholders' Equity   365,055             235,337        
Total liabilities and stockholders' equity $ 3,400,660           $ 2,443,707        
                           
Net interest income     $ 89,005           $ 62,566    
Net interest margin         3.77 %           3.61 %
Net interest margin, fully tax equivalent (2)         3.88 %           3.69 %
                           

(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)

Net interest income increased $8.6 million in the third quarter 2017, compared to the same quarter in 2016, and increased $1.8 million, compared to the second quarter 2017. The increase in net interest income was driven by an increase in average earning assets, the accretion of the discount on loans acquired in the Home State transaction and $0.9 million in an interest recovery on an impaired loan paid off in the third 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 was $1.0 million in the third quarter 2017, compared to $1.2 million in the second quarter 2017, and compared to $0.3 million in the third quarter 2016. Third quarter 2017 interest income included $0.6 million in accreted discount on loans paid off during the quarter.

For the nine months ended September 30, 2017, net interest income increased $26.4 million, compared to the same period in 2016, primarily due to an $845.6 million, or 36.5% increase in average earning assets, partially offset by a $589.6 million, or 38.0% increase in average interest bearing liabilities. Accretion of discount on acquired loans was $3.0 million during the nine months ended September 30, 2017, compared to $0.3 million during the same period in 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     Nine Months Ended
    September 30,
2017
  June 30,
2017
  September 30,
2016
    September 30,
2017
  September 30,
2016
                       
    (In thousands)
Noninterest income:                      
Deposit service and other fees $ 3,580   $ 3,545 $ 2,581     $ 10,405   $ 7,042  
Investment management and trust   1,478     1,483   1,333       4,482     3,889  
Increase in cash surrender value of life insurance   674     615   490       1,884     1,398  
Loss on sale of securities   (86 )   -   (66 )     (86 )   (122 )
Gain on sale of SBA loans   143     447   208       971     472  
Other   341     252   159       1,218     346  
Total noninterest income $ 6,130   $ 6,342 $ 4,705     $ 18,874   $ 13,025  
                               

Beginning late 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 which is included in "other" in the table above.

Noninterest income increased $1.4 million, or 30.3% in the third quarter 2017, compared to the same quarter in 2016 and decreased $0.2 million, compared to the second quarter 2017. The $0.2 million decline in noninterest income in the third quarter 2017, compared to the second quarter 2017, was primarily due to lower gains on sales of Small Business Administration (SBA) loans in the third quarter 2017.

For the nine months ended September 30, 2017, noninterest income increased $5.8 million, or 44.9%, compared to the same period in 2016. In addition to the impact of the Home State transaction, gain on sale of SBA loans increased $0.5 million, bank-owned life insurance increased $0.5 million, investment referral fees increased $0.3 million and interest rate swap income increased $0.2 million for the nine months ended September 30, 2017, compared to the same period in 2016. The Company recorded a $0.3 million gain on sale of its $2.0 million credit card loan portfolio, included in other noninterest income in the table above, in the first quarter 2017.

Noninterest Expense

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

                   
    Three Months Ended     Nine Months Ended
    September 30,
2017
  June 30,
2017
  September 30,
2016
    September 30,
2017
  September 30,
2016
                       
    (In thousands)
Noninterest expense:                      
Salaries and employee benefits $ 11,736   $ 11,247 $ 10,984   $ 34,909 $ 28,292
Occupancy expense   1,714     1,674   1,417     4,940   4,053
Furniture and equipment   974     975   750     2,894   2,281
Amortization of intangible assets   672     648   389     1,969   868
Other real estate owned, net   (20 )   126   20     174   27
Insurance and assessments   642     647   608     1,995   1,818
Professional fees   929     1,252   962     3,155   2,725
Impairment of long-lived assets   -     34   -     224   -
Other general and administrative   5,160     3,900   3,494     12,579   9,486
Total noninterest expense $ 21,807   $ 20,503 $ 18,624   $ 62,839 $ 49,550
                         

The increases in noninterest expense for the three and nine months ended September 30, 2017, compared to the same periods in 2016 were due primarily to the acquisition of Home State in September 2016.  The three month and nine month periods ended September 30, 2017 include full quarters of expenses related to the 2016 acquisition, resulting in higher overall expenses in 2017 compared to the same periods in 2016, however expenses as a percent of average assets declined from 2.0% in 2016 to 1.8% in 2017.

During the third quarter 2017, merger-related expenses related to the pending acquisition of Castle Rock Bank Holding Company (Castle Rock) were $0.3 million and were included in other general and administrative expense. During the third quarter 2016, merger-related expenses related to the acquisition of Home State were $2.2 million, consisting of $1.4 million in salaries and employee benefits expense and $0.8 million in other general and administrative expense. No merger-related expenses were incurred in the second quarter 2017.

During the third quarter 2017, we settled litigation on a commercial real estate matter for $1.6 million, included in other general and administrative expense in the table above.

For the nine months ended September 30, 2017, salaries and employee benefits increased $6.6 million, compared to the same period in 2016, primarily due to a $4.0 million increase in base salary expense and a $1.8 million increase in our self-funded medical plan. Average full-time equivalent employees increased from 384 for the nine months ended September 30, 2016 to 494 for the nine months ended September 30, 2017, primarily due to the acquisition of Home State. Other general and administrative expense increased $3.1 million for the nine months ended September 30, 2017, compared to the same period in 2016 and consisted of the $1.6 million settlement of a litigation claim mentioned above, a $1.2 million increase in data processing expense, a $0.5 million increase in debit card interchange expense and a $0.4 million increase in communication expense. These increases in other general and administrative expense during the nine months ended September 30, 2017, compared to the same period in 2016, were partially offset by a $1.5 million decrease in merger-related expense. Amortization of intangible assets increased $1.1 million for the nine months ended September 30, 2017, compared to the same period in 2016, due to the amortization of intangible assets recorded in the Home State transaction. Occupancy expense increased $0.9 million for the nine months ended September 30, 2017, compared to the same period in 2016, due to increases in real estate taxes and building maintenance. As a result of the Home State transaction, we acquired eleven branches and closed five branches at the end of 2016.
Balance Sheet

                                       
                                       
    September 30,       June 30,       March 31,       December 31,       September 30,  
    2017       2017       2017       2016       2016  
    (Dollars in thousands)
Total assets $ 3,510,046     $ 3,403,852     $ 3,399,651     $ 3,366,427     $ 3,346,265  
Average assets, quarter-to-date   3,423,224       3,404,109       3,374,153       3,336,143       2,613,133  
Total loans, net of deferred costs and fees   2,661,866       2,578,472       2,570,750       2,519,138       2,412,999  
Total deposits   2,898,060       2,763,623       2,765,630       2,699,084       2,752,112  
                                       
Equity ratio - GAAP   10.69 %     10.80 %     10.56 %     10.47 %     10.50 %
Tangible common equity ratio (1)   8.88 %     8.91 %     8.65 %     8.52 %     8.53 %
________________________                                      
(1) See reconciliation of non-GAAP financial measures to the corresponding GAAP measurement in "Non-GAAP Financial Measures" later in this document.
 

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

                     
    September 30,   June 30,   March 31,   December 31,   September 30,
    2017     2017     2017     2016     2016  
    (In thousands)
Loans held for sale $ 314   $ 887   $ 951   $ 4,129   $ -  
Commercial and residential real estate   1,892,828     1,799,114     1,800,194     1,768,424     1,752,113  
Construction   81,826     99,632     103,682     88,451     75,603  
Commercial   449,450     451,701     451,708     432,083     400,281  
Consumer   124,625     122,994     120,231     125,264     81,766  
Other   112,763     103,990     93,979     100,848     102,887  
Total gross loans   2,661,806     2,578,318     2,570,745     2,519,199     2,412,650  
Deferred costs and (fees)   60     154     5     (61 )   349  
Loans, net   2,661,866     2,578,472     2,570,750     2,519,138     2,412,999  
Less allowance for loan losses   (22,900 )   (23,125 )   (23,175 )   (23,250 )   (23,300 )
Net loans $ 2,638,966   $ 2,555,347   $ 2,547,575   $ 2,495,888   $ 2,389,699  
                               

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,
    2017     2017     2017     2016     2016  
    (In thousands)
Beginning balance $ 2,578,318   $ 2,570,745   $ 2,519,199   $ 2,412,650   $ 1,898,142  
New credit extended   192,774     132,420     139,185     232,499     129,064  
Acquisition of Home State Bank   -     -     -     -     445,529  
Net existing credit advanced   59,275     73,298     111,821     142,448     153,390  
Net pay-downs and maturities   (165,520 )   (196,511 )   (195,678 )   (272,326 )   (214,089 )
Other   (3,041 )   (1,634 )   (3,782 )   3,928     614  
Gross loans   2,661,806     2,578,318     2,570,745     2,519,199     2,412,650  
Deferred costs and (fees)   60     154     5     (61 )   349  
Loans, net $ 2,661,866   $ 2,578,472   $ 2,570,750   $ 2,519,138   $ 2,412,999  
                     
Net change - loans outstanding $ 83,394   $ 7,722   $ 51,612   $ 106,139   $ 514,456  
                               

During the third quarter 2017, loans net of deferred costs and fees increased $83.4 million, or 12.8% annualized, despite $165.5 million in pay-downs and maturities during the quarter. In addition to contractual loan principal payments and maturities, the third quarter 2017 included $34.2 million in early payoffs related to our borrowers selling their assets, $14.7 million in loan payoffs related to classified loans, $9.2 million in loan pay-downs related to fluctuations in loan balances to existing customers and $4.3 million due to our strategic decision to not match certain financing terms offered by competitors.

During the twelve months ended September 30, 2017, loans net of deferred costs and fees increased by $248.9 million, or 10.3%.

Balance Sheet (continued)

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

                     
    September 30,   June 30,   March 31,   December 31,   September 30,
    2017   2017   2017   2016   2016
    (In thousands)
Noninterest-bearing demand $ 924,361 $ 876,043 $ 868,189 $ 916,632 $ 857,064
Interest-bearing demand and NOW   866,309   811,639   821,518   767,523   802,043
Money market   502,400   475,656   489,921   484,664   554,447
Savings   183,366   183,200   178,157   164,478   160,698
Time   421,624   417,085   407,845   365,787   377,860
Total deposits $ 2,898,060 $ 2,763,623 $ 2,765,630 $ 2,699,084 $ 2,752,112
                     

At September 30, 2017, deposits had increased $134.4 million, compared to June 30, 2017, primarily due to increases in balances of several large commercial customers. At September 30, 2017, noninterest-bearing deposits as a percentage of total deposits were 31.9%, compared to 31.7% at June 30, 2017 and 31.1% at September 30, 2016.

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,
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 10.56 % 10.46 % 7.00 % N/A  
Guaranty Bank and Trust Company 12.23 % 12.43 % 7.00 % 6.50 %
                 
Tier 1 Risk-Based Capital Ratio                
Consolidated 11.40 % 11.34 % 8.50 % N/A  
Guaranty Bank and Trust Company 12.23 % 12.43 % 8.50 % 8.00 %
                 
Total Risk-Based Capital Ratio                
Consolidated 13.50 % 13.58 % 10.50 % N/A  
Guaranty Bank and Trust Company 13.00 % 13.26 % 10.50 % 10.00 %
                 
Leverage Ratio                
Consolidated 10.15 % 9.81 % 4.00 % N/A  
Guaranty Bank and Trust Company 10.89 % 10.76 % 4.00 % 5.00 %
                 

At September 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 decreased compared to December 31, 2016, primarily due to an increase in risk-based assets during the nine months ended September 30, 2017. At September 30, 2017, our bank-level capital ratios had 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:

                     
    September 30,   June 30,   March 31,   December 31,   September 30,
    2017   2017   2017   2016   2016
    (Dollars in thousands)
Originated nonaccrual loans $ 3,935   $ 3,332   $ 3,387   $ 3,345   $ 3,399  
Purchased credit impaired loans   809     1,290     1,715     1,902     2,108  
Accruing loans past due 90 days or more (1)   -     -     -     -     335  
                     
Total nonperforming loans (NPLs) $ 4,744   $ 4,622   $ 5,102   $ 5,247   $ 5,842  
Other real estate owned and foreclosed assets   -     113     257     569     637  
                     
Total nonperforming assets (NPAs) $ 4,744   $ 4,735   $ 5,359   $ 5,816   $ 6,479  
                     
Total classified assets $ 28,186   $ 29,188   $ 30,201   $ 33,443   $ 34,675  
                     
Accruing loans past due 30-89 days (1) $ 9,129   $ 957   $ 3,858   $ 1,337   $ 2,157  
                     
Charged-off loans $ (970 ) $ (338 ) $ (125 ) $ (290 ) $ (72 )
Recoveries   248     82     45     150     295  
Net (charge-offs) recoveries $ (722 ) $ (256 ) $ (80 ) $ (140 ) $ 223  
                     
Provision for loan losses $ 497   $ 206   $ 5   $ 90   $ 27  
                     
Allowance for loan losses $ 22,900   $ 23,125   $ 23,175   $ 23,250   $ 23,300  
                     
Unaccreted loan discount (2) $ 11,654   $ 12,665   $ 13,896   $ 14,682   $ 15,721  
                     
Selected ratios:                    
NPLs to loans, net of deferred costs and fees (3)   0.18 %   0.18 %   0.20 %   0.21 %   0.24 %
NPAs to total assets   0.14 %   0.14 %   0.16 %   0.17 %   0.19 %
Allowance for loan losses to NPLs   482.72 %   500.32 %   454.23 %   443.11 %   398.84 %
Allowance for loan losses to loans, net of deferred costs and fees (3)   0.86 %   0.90 %   0.90 %   0.92 %   0.97 %
Loans 30-89 days past due to loans, net of deferred costs and fees (3)   0.34 %   0.04 %   0.15 %   0.05 %   0.09 %
Texas ratio (4)   1.22 %   1.26 %   1.39 %   1.55 %   1.77 %
Classified asset ratio (5)   7.57 %   8.08 %   8.24 %   9.79 %   10.69 %
________________________                    
(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) Related to loans acquired in the Home State transaction.
(3) Loans, net of deferred costs and fees, exclude loans held for sale.
(4) Texas ratio defined as total NPAs divided by subsidiary bank only Tier 1 Capital plus allowance for loan losses.
(5) Classified asset ratio defined as total classified assets to subsidiary bank only Tier 1 Capital plus allowance for loan losses.
 

Asset Quality (continued)

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

                     
September 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 $ 113 $ - $ 1,722 $ 1,835 $ 1,892,870
Construction   -   -   -   -   81,828
Commercial   8,879   -   844   9,723   449,460
Consumer   137   -   264   401   124,628
Other   -   -   1,914   1,914   112,766
Total $ 9,129 $ - $ 4,744 $ 13,873 $ 2,661,552


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 third quarter 2017, nonperforming assets remained level at $4.7 million compared with June 30, 2017 and declined by $1.7 million from $6.5 million as of September 30, 2016. At September 30, 2017, performing troubled debt restructurings were $11.0 million, compared to $23.4 million at June 30, 2017 and $24.4 million at September 30, 2016. The decrease in performing troubled debt restructurings in the third quarter 2017, compared to the same quarter in 2016, was primarily due to the payoff of a $9.4 million out-of-state loan syndication. The increase in loans 30-89 days past due during the third quarter 2017, compared to the fourth quarter 2016 was mostly due to a single commercial loan relationship.

At September 30, 2017, classified assets represented 7.6% of bank-level Tier 1 risk-based capital plus allowance for loan losses, compared to 8.1% at June 30, 2017 and 10.7% at September 30, 2016.

Net charge-offs were $0.7 million during the third quarter of 2017, compared to $0.3 million during the second quarter 2017 and $0.2 million in net recoveries in the third quarter of 2016. During the third quarter 2017, the Bank recorded a $0.5 million provision for loan losses, compared to a $0.2 million provision in the second quarter 2017 and an immaterial provision in the third 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 September 30, 2017, the Company had 28,401,870 shares of voting common stock outstanding, of which 476,549 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, litigation-related settlements, 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,
    2017     2017     2016       2017     2016  
                       
    (Dollars in thousands, except per share amounts)
Net income $ 10,054   $ 10,125   $ 5,765     $ 30,019   $ 17,306  
Expenses adjusted for:                      
Expenses (gains) related to other real estate owned, net   (20 )   126     20       174     27  
Merger-related expenses   268     -     2,205       268     3,227  
Impairment of long-lived assets   -     34     -       224     -  
Litigation-related settlements   1,600     -     -       1,600     -  
Income adjusted for:                      
Loss on sale of securities   86     -     66       86     122  
(Gain) loss on sale of other assets   (2 )   14     -       (259 )   (14 )
Pre-tax earnings adjustment   1,932     174     2,291       2,093     3,362  
Tax effect of adjustments (1)   (679 )   (67 )   (775 )     (741 )   (1,100 )
Tax effected operating earnings adjustment   1,253     107     1,516       1,352     2,262  
Operating earnings $ 11,307   $ 10,232   $ 7,281     $ 31,371   $ 19,568  
                       
Average assets $ 3,423,224   $ 3,404,109   $ 2,613,133     $ 3,400,660   $ 2,443,707  
                       
Average equity $ 372,747   $ 364,959   $ 253,570     $ 365,055   $ 235,337  
                       
Fully diluted average common shares outstanding:   28,120,111     28,095,871     22,984,647       28,140,332     21,995,855  
                       
Earnings per common share–diluted: $ 0.36   $ 0.36   $ 0.25     $ 1.07   $ 0.79  
Earnings per common share–diluted - operating: $ 0.40   $ 0.36   $ 0.32     $ 1.11   $ 0.89  
                       
ROAA (GAAP)   1.17 %   1.19 %   0.88 %     1.18 %   0.95 %
ROAA - operating   1.31 %   1.21 %   1.11 %     1.23 %   1.07 %
                       
ROAE (GAAP)   10.70 %   11.13 %   9.04 %     10.99 %   9.82 %
ROAE - operating   12.03 %   11.25 %   11.42 %     11.49 %   11.11 %
________________                      
(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                            
    September 30,     June 30,     March 31,     December 31,     September 30,
    2017       2017       2017       2016       2016  
    (Dollars in thousands, except per share amounts)
Total stockholders' equity $ 375,152     $ 367,529     $ 358,838     $ 352,378     $ 351,360  
Less: Goodwill and other intangible assets   (69,752 )     (70,424 )     (71,072 )     (71,721 )     (72,153 )
Tangible common equity $ 305,400     $ 297,105     $ 287,766     $ 280,657     $ 279,207  
                             
Number of common shares outstanding   28,401,870       28,406,758       28,393,278       28,334,004       28,349,107  
                             
Book value per common share $ 13.21     $ 12.94     $ 12.64     $ 12.44     $ 12.39  
Tangible book value per common share $ 10.75     $ 10.46     $ 10.13     $ 9.91     $ 9.85  


Tangible Common Equity Ratio                              
    September 30,     June 30,     March 31,     December 31,     September 30,  
    2017     2017     2017     2016     2016  
    (Dollars in thousands)  
Total stockholders' equity $ 375,152     $ 367,529     $ 358,838     $ 352,378     $ 351,360    
Less: Goodwill and other intangible assets   (69,752 )     (70,424 )     (71,072 )     (71,721 )     (72,153 )  
Tangible common equity $ 305,400     $ 297,105     $ 287,766     $ 280,657     $ 279,207    
                               
Total assets $ 3,510,046     $ 3,403,852     $ 3,399,651     $ 3,366,427     $ 3,346,265    
Less: Goodwill and other intangible assets   (69,752 )     (70,424 )     (71,072 )     (71,721 )     (72,153 )  
Tangible assets $ 3,440,294     $ 3,333,428     $ 3,328,579     $ 3,294,706     $ 3,274,112    
                               
Equity ratio - GAAP (total stockholders' equity / total assets)   10.69 %     10.80 %     10.56 %     10.47 %     10.50 %  
Tangible common equity ratio (tangible common equity / tangible assets)   8.88 %     8.91 %     8.65 %     8.52 %     8.53 %  

About Guaranty Bancorp

Guaranty Bancorp is a $3.5 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.

 
GUARANTY BANCORP AND SUBSIDIARIES
Unaudited Consolidated Balance Sheets
             
    September 30,   December 31,   September 30,
    2017     2016     2016  
    (In thousands)
Assets            
Cash and due from banks $ 64,388   $ 50,111   $ 163,908  
             
Time deposits with banks   254     254     504  
             
Securities available for sale, at fair value   298,483     324,228     364,349  
Securities held to maturity   258,541     243,979     183,184  
Bank stocks, at cost   19,435     22,649     14,558  
Total investments   576,459     590,856     562,091  
             
Loans held for sale   314     4,129     -  
             
Loans, held for investment, net of deferred costs and fees   2,661,552     2,515,009     2,412,999  
Less allowance for loan losses   (22,900 )   (23,250 )   (23,300 )
Net loans, held for investment   2,638,652     2,491,759     2,389,699  
             
Premises and equipment, net   63,280     67,390     68,779  
Other real estate owned and foreclosed assets   -     569     637  
Goodwill   56,404     56,404     56,148  
Other intangible assets, net   13,348     15,317     16,005  
Bank owned life insurance   74,625     65,538     65,030  
Other assets   22,322     24,100     23,464  
Total assets $ 3,510,046   $ 3,366,427   $ 3,346,265  
             
Liabilities and Stockholders' Equity            
Liabilities:            
Deposits:            
Noninterest-bearing demand $ 924,361   $ 916,632   $ 857,064  
Interest-bearing demand and NOW   866,309     767,523     802,043  
Money market   502,400     484,664     554,447  
Savings   183,366     164,478     160,698  
Time   421,624     365,787     377,860  
Total deposits   2,898,060     2,699,084     2,752,112  
             
Securities sold under agreement to repurchase   37,943     36,948     35,936  
Federal Home Loan Bank line of credit borrowing   51,182     124,691     -  
Federal Home Loan Bank term notes   70,000     72,477     122,521  
Subordinated debentures, net   65,044     64,981     64,973  
Interest payable and other liabilities   12,665     15,868     19,363  
Total liabilities   3,134,894     3,014,049     2,994,905  
             
Stockholders' equity:            
Common stock and additional paid-in capital - common stock   834,370     832,098     831,106  
Accumulated deficit   (348,392 )   (367,944 )   (372,170 )
Accumulated other comprehensive loss   (4,791 )   (6,726 )   (2,936 )
Treasury stock   (106,035 )   (105,050 )   (104,640 )
Total stockholders' equity   375,152     352,378     351,360  
Total liabilities and stockholders' equity $ 3,510,046   $ 3,366,427   $ 3,346,265  


GUARANTY BANCORP AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
                   
    Three Months Ended September 30,     Nine Months Ended September 30,
    2017     2016       2017     2016  
                   
    (In thousands, except share and per share data)
Interest income:                  
Loans, including costs and fees $ 30,902   $ 22,295     $ 87,270   $ 60,206  
Investment securities:                  
Taxable   2,221     1,741       6,892     5,454  
Tax-exempt   1,233     971       3,713     2,459  
Dividends   275     237       1,011     829  
Federal funds sold and other   57     98       76     105  
Total interest income   34,688     25,342       98,962     69,053  
Interest expense:                  
Deposits   1,939     1,228       5,262     3,299  
Securities sold under agreement to repurchase   16     13       48     31  
Borrowings   531     636       2,079     1,992  
Subordinated debentures   868     715       2,568     1,165  
Total interest expense   3,354     2,592       9,957     6,487  
Net interest income   31,334     22,750       89,005     62,566  
Provision for loan losses   497     27       708     53  
Net interest income, after provision for loan losses   30,837     22,723       88,297     62,513  
Noninterest income:                  
Deposit service and other fees   3,580     2,581       10,405     7,042  
Investment management and trust   1,478     1,333       4,482     3,889  
Increase in cash surrender value of life insurance   674     490       1,884     1,398  
Loss on sale of securities   (86 )   (66 )     (86 )   (122 )
Gain on sale of SBA loans   143     208       971     472  
Other   341     159       1,218     346  
Total noninterest income   6,130     4,705       18,874     13,025  
Noninterest expense:                  
Salaries and employee benefits   11,736     10,984       34,909     28,292  
Occupancy expense   1,714     1,417       4,940     4,053  
Furniture and equipment   974     750       2,894     2,281  
Amortization of intangible assets   672     389       1,969     868  
Other real estate owned, net   (20 )   20       174     27  
Insurance and assessments   642     608       1,995     1,818  
Professional fees   929     962       3,155     2,725  
Impairment of long-lived assets   -     -       224     -  
Other general and administrative   5,160     3,494       12,579     9,486  
Total noninterest expense   21,807     18,624       62,839     49,550  
Income before income taxes   15,160     8,804       44,332     25,988  
Income tax expense   5,106     3,039       14,313     8,682  
Net income $ 10,054   $ 5,765     $ 30,019   $ 17,306  
                   
Earnings per common share–basic: $ 0.36   $ 0.25     $ 1.08   $ 0.80  
Earnings per common share–diluted:   0.36     0.25       1.07     0.79  
Dividend declared per common share: $ 0.13   $ 0.12     $ 0.38   $ 0.35  
                   
Weighted average common shares outstanding-basic:   27,920,658     22,811,386       27,900,627     21,750,153  
Weighted average common shares outstanding-diluted:   28,120,111     22,984,647       28,140,332     21,995,855  


         
Contacts: Paul W. Taylor   Christopher G. Treece
  President and Chief Executive Officer   E.V.P., Chief Financial Officer and Secretary
  Guaranty Bancorp   Guaranty Bancorp
  1331 Seventeenth Street, Suite 200   1331 Seventeenth Street, Suite 200
  Denver, CO 80202   Denver, CO 80202
  (303) 293-5563   (303) 675-1194

 

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