Market Overview

Guaranty Bancorp Announces 2017 Annual and Fourth Quarter Financial Results

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  • Increased 2017 net income by $13.9 million to $38.6 million, an increase of 56.2% compared to the prior year
  • Expanded net interest margin to 3.77% for the year ended December 31, 2017, compared to 3.60% in 2016
  • Increased loans $217.2 million, or 8.7% during 2017, excluding $71.1 million in loans acquired in the acquisition of Castle Rock Bank Holding Company
  • Successfully completed the integration of Castle Rock Bank Holding Company during the fourth quarter 2017

DENVER, Jan. 24, 2018 (GLOBE NEWSWIRE) -- Guaranty Bancorp (NASDAQ:GBNK) ("we", "our" or "the Company"), a community bank holding company based in Colorado, today announced fourth quarter 2017 net income of $8.6 million, or $0.30 per basic and diluted common share, compared to $7.4 million, or $0.27 per basic common share and $0.26 per diluted common share, in the fourth quarter 2016. Fourth quarter 2017 earnings per common share was impacted by $3.3 million in merger-related expenses and a $1.0 million deferred tax asset write-down due to the change in the statutory federal corporate tax rate under the Tax Cuts and Jobs Act of 2017. Operating earnings per diluted common share was $0.41 for the fourth quarter 2017, compared to $0.34 per diluted common share in the fourth quarter 2016. For the year ended December 31, 2017, net income was $38.6 million or $1.38 per basic common share and $1.36 per diluted common share, compared to $24.7 million, or $1.06 per basic common share and $1.05 per diluted common share, in 2016.

"We are proud of our fourth quarter and year end results," said Paul W. Taylor, President and Chief Executive Officer of Guaranty Bancorp. "We had record net income of $38.6 million for the year, an increase of 56.2% compared to the prior year. This record income was fueled by balance sheet growth, an expanded net interest margin and improved profitability.  Our successful integration of Castle Rock Bank in the fourth quarter of 2017 has positioned us well in Douglas County, Colorado, one of the fastest growing counties in the country. Along with our growth, we continue to deliver improved profitability, demonstrated by the increase in our 2017 GAAP return on average assets to 1.12% compared to 0.93% in 2016 and an increase in our 2017 operating return on average assets to 1.25% compared to 1.09% in 2016."

Taylor continued, "I am also pleased to announce that on January 16, 2018, we acquired the assets of Wagner Wealth Management and have integrated them into our wholly owned subsidiary, Private Capital Management LLC. As a result, Private Capital Management LLC now has over $1.1 billion in assets under management. This acquisition further strengthens our wealth management strategy and desire to offer comprehensive financial solutions to our customers."

_______________________________________________________
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

The following tables highlight our key financial measures for 2017 and 2016. Significant year-over-year improvement reflects solid organic growth and improved efficiencies, further enhanced by the successful integration of Home State Bancorp (Home State) and Castle Rock Bank Holding Company (Castle Rock) following each acquisition in September 2016 and October 2017, respectively.

Income Statement 

                                 
    Quarter Ended       Year Ended  
    December 31,     September 30,     December 31,       December 31,     December 31,  
    2017     2017     2016       2017     2016  
                                 
    (Dollars in thousands, except per share amounts)  
Net income $  8,605    $  10,054    $  7,421      $  38,624    $  24,727   
Operating earnings (1)    11,885       11,307       9,445         43,256       29,013   
Earnings per common share - diluted    0.30       0.36       0.26         1.36       1.05   
Earnings per common share - diluted - operating (1)    0.41       0.40       0.34         1.53       1.23   
Return on average assets    0.95  %    1.17  %    0.88  %      1.12  %    0.93  %
Return on average assets - operating (1)    1.31  %    1.31  %    1.13  %      1.25  %    1.09  %
Return on average equity    8.59  %    10.70  %    8.41  %      10.35  %    9.35  %
Return on average equity - operating (1)    11.86  %    12.03  %    10.70  %      11.59  %    10.97  %
Net interest margin    3.77  %    3.91  %    3.58  %      3.77  %    3.60  %
Efficiency ratio - tax equivalent (2)    49.79  %    50.02  %    55.13  %      52.13  %    57.46  %
Average cost of interest-bearing liabilities (including noninterest-bearing deposits)    0.44  %    0.44  %    0.40  %      0.44  %    0.40  %
Average cost of deposits (including noninterest-bearing deposits)    0.28  %    0.27  %    0.22  %      0.26  %    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

                                       
    December 31,       September 30,       June 30,       March 31,       December 31,  
    2017       2017       2017       2017       2016  
    (Dollars in thousands, except per share amounts)
Total investments $  614,312       $  576,459       $  569,812       $  584,746       $  590,856    
Total loans, net of deferred fees and costs    2,807,388          2,661,866          2,578,472          2,570,750          2,519,138    
Allowance for loan losses    (23,250 )        (22,900 )        (23,125 )        (23,175 )        (23,250 )  
Total assets    3,698,890          3,510,046          3,403,852          3,399,651          3,366,427    
Total deposits    2,941,627          2,898,060          2,763,623          2,765,630          2,699,084    
Book value per common share    13.86          13.21          12.94          12.64          12.44    
Tangible book value per common share (1)    11.13          10.75          10.46          10.13          9.91    
Equity ratio - GAAP    10.95   %      10.69   %      10.80   %      10.56   %      10.47   %
Tangible common equity ratio (1)    8.99   %      8.88   %      8.91   %      8.65   %      8.52   %
Total risk-based capital ratio    13.36   %      13.50   %      13.65   %      13.44   %      13.58   %
________________________                                      
(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.

                                         
  Quarter Ended     Quarter Ended     Quarter Ended  
   December 31, 2017
     September 30, 2017
    December 31, 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 fees and costs (1)(3) $  2,728,736  $  31,404   4.57  %   $  2,593,667  $  30,902   4.73  %   $  2,421,057  $  27,043   4.44  %
Investment securities (1)                                        
Taxable    356,457     2,372   2.64  %      339,671     2,221   2.59  %      352,248     2,171   2.45  %
Tax-exempt    222,312     1,220   2.18  %      210,363     1,233   2.33  %      204,555     1,224   2.38  %
Bank Stocks (4)    19,951     279   5.55  %      19,993     275   5.46  %      16,923     234   5.50  %
Other earning assets    16,206     65   1.59  %      18,060     57   1.25  %      98,920     128   0.51  %
Total interest-earning assets    3,343,662     35,340   4.19  %      3,181,754     34,688   4.33  %      3,093,703     30,800   3.96  %
Non-earning assets:                                        
Cash and due from banks    23,879               35,426               36,494         
Other assets    236,011               206,044               205,946         
Total assets $  3,603,552            $  3,423,224            $  3,336,143         
                                         
LIABILITIES AND STOCKHOLDERS' EQUITY:                                    
Interest-bearing liabilities:                                        
Deposits:                                        
Interest-bearing demand and NOW $  831,610  $  351   0.17  %   $  850,670  $  380   0.18  %   $  794,139  $  345   0.17  %
Money market    544,882     516   0.38  %      493,433     459   0.37  %      519,361     359   0.27  %
Savings    198,513     56   0.11  %      182,190     51   0.11  %      162,363     46   0.11  %
Time certificates of deposit    449,767     1,159   1.02  %      420,102     1,049   0.99  %      377,499     810   0.85  %
Total interest-bearing deposits    2,024,772     2,082   0.41  %      1,946,395     1,939   0.40  %      1,853,362     1,560   0.33  %
Borrowings:                                        
Repurchase agreements    47,029     23   0.19  %      33,958     16   0.19  %      36,828     21   0.23  %
Federal funds purchased    1     -  1.95  %      1     -  1.46  %      2     -  0.84  %
Subordinated debentures    65,056     872   5.32  %      65,035     868   5.30  %      64,984     840   5.14  %
Borrowings    95,052     569   2.37  %      91,087     531   2.31  %      98,148     557   2.26  %
Total interest-bearing liabilities    2,231,910     3,546   0.63  %      2,136,476     3,354   0.62  %      2,053,324     2,978   0.58  %
Noninterest bearing liabilities:                                        
Demand deposits    958,934               898,262               909,523         
Other liabilities    15,208               15,739               22,045         
Total liabilities    3,206,052               3,050,477               2,984,892         
Stockholders' Equity    397,500               372,747               351,251         
Total liabilities and stockholders' equity $  3,603,552            $  3,423,224            $  3,336,143         
                                         
Net interest income     $  31,794            $  31,334            $  27,822     
Net interest margin          3.77  %            3.91  %            3.58  %
Net interest margin, fully tax                                        
equivalent (2)          3.89  %            4.02  %            3.68  %
 ________________________                                        
(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.
 


                           
  Year Ended     Year Ended  
   December 31, 2017
     December 31, 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 fees and costs (1)(3) $  2,611,435  $  118,674   4.54  %   $  2,024,804  $  87,249   4.31  %
Investment securities (1)                          
Taxable    352,989     9,264   2.62  %      300,568     7,625   2.54  %
Tax-exempt    209,224     4,933   2.36  %      130,242     3,683   2.83  %
Bank Stocks (4)    21,910     1,290   5.89  %      18,897     1,063   5.63  %
Other earning assets    10,782     141   1.31  %      35,821     233   0.65  %
Total interest-earning assets    3,206,340     134,302   4.19  %      2,510,332     99,853   3.98  %
Non-earning assets:                          
Cash and due from banks    32,364               28,896         
Other assets    213,085               128,807         
Total assets $  3,451,789            $  2,668,035         
                           
LIABILITIES AND STOCKHOLDERS' EQUITY:                      
Interest-bearing liabilities:                          
Deposits:                          
Interest-bearing demand and NOW $  816,017  $  1,442   0.18  %   $  514,877  $  702   0.14  %
Money market    502,064     1,711   0.34  %      438,100     1,181   0.27  %
Savings    183,147     203   0.11  %      155,236     173   0.11  %
Time certificates of deposit    414,838     3,988   0.96  %      310,961     2,803   0.90  %
Total interest-bearing deposits    1,916,066     7,344   0.38  %      1,419,174     4,859   0.34  %
Borrowings:                          
Repurchase agreements    37,332     71   0.19  %      25,221     52   0.21  %
Federal funds purchased    1     -  1.58  %      2     -  0.94  %
Subordinated debentures    65,025     3,440   5.29  %      43,691     2,005   4.59  %
Borrowings    144,395     2,648   1.83  %      188,380     2,549   1.35  %
Total interest-bearing liabilities    2,162,819     13,503   0.62  %      1,676,468     9,465   0.56  %
Noninterest bearing liabilities:                          
Demand deposits    900,657               711,678         
Other liabilities    15,080               15,415         
Total liabilities    3,078,556               2,403,561         
Stockholders' Equity    373,233               264,474         
Total liabilities and stockholders' equity $  3,451,789            $  2,668,035         
                           
Net interest income     $  120,799            $  90,388     
Net interest margin          3.77  %            3.60  %
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 increased $4.0 million in the fourth quarter 2017, compared to the same quarter in 2016, and increased $0.5 million, compared to the third 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 Home State and Castle Rock transactions. Third quarter 2017 net interest income included a $0.9 million interest recovery on an impaired loan paid off during the quarter.

Net interest margin and loan yield were favorably impacted by the accretion of the discount on loans acquired in the Home State transaction in the third quarter 2016 and loans acquired in the Castle Rock transaction in the fourth quarter 2017. Accretion on acquired loans was $1.4 million in the fourth quarter 2017, compared to $1.0 million in the third quarter 2017, and $1.0 million in the fourth quarter 2016. Fourth quarter 2017 interest income included $0.9 million in accreted discount on loans paid off during the quarter.

For the year ended December 31, 2017, net interest income increased $30.4 million compared to the prior year, primarily due to a $696.0 million, or 27.7% increase in average earning assets, partially offset by a $486.4 million, or 29.0% increase in average interest bearing liabilities. Accretion of discount on acquired loans was $4.4 million during 2017, compared to $1.3 million 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. The Company acquired $71.1 million in loans and $128.4 million in deposits as a result of the October 2017 Castle Rock transaction.

Noninterest Income

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

                       
                   
    Quarter Ended     Year Ended
    December 31,
2017
  September 30,
2017
  December 31,
2016
    December 31,
2017
  December 31,
2016
                       
    (In thousands)
Noninterest income:                      
Deposit service and other fees $  3,546 $  3,580   $  3,405   $  13,951   $  10,447  
Investment management and trust    1,523    1,478      1,563      6,005      5,452  
Increase in cash surrender value of life insurance    675    674      607      2,559      2,005  
Gain (loss) on sale of securities    80    (86 )    49      (6 )    (73 )
Gain on sale of SBA loans    285    143      401      1,256      873  
Other    461    341      207      1,679      553  
Total noninterest income $  6,570 $  6,130   $  6,232   $  25,444   $  19,257  
                             

Beginning late in the third quarter 2016, noninterest income was favorably impacted by the Home State transaction, affecting deposit service and other fees, debit card interchange fees, and investment management and trust income.

Noninterest income increased $0.3 million in the fourth quarter 2017, compared to the same quarter in 2016 and increased $0.4 million, compared to the third quarter 2017. The $0.3 million increase in noninterest income in the fourth quarter 2017, compared to the same quarter in 2016, was primarily due to an increase in interest rate swap fees. The $0.4 million increase in noninterest income in the fourth quarter 2017, compared to the third quarter 2017, was primarily due to a $0.2 million increase in interest rate swap fees and a $0.2 million increase in gain on sales of securities.

For the year ended December 31, 2017, noninterest income increased $6.2 million, or 32.1%, compared to the same period in 2016. In addition to the impact of the Home State transaction, gain on sales of SBA loans increased $0.4 million, bank-owned life insurance income increased $0.6 million, and interest rate swap fees increased $0.4 million for the year ended December 31, 2017, compared to the prior year. The Company also 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.

On January 16, 2018, the Company subsidiary, Private Capital Management LLC, closed on its acquisition of the assets of Wagner Wealth Management, LLC, increasing its assets under management to over $1.1 billion on a pro-forma basis at December 31, 2017. Including the assets under management in our trust division of the Bank, the Company's total assets under management was over $1.4 billion on a pro-forma basis at December 31, 2017.

Noninterest Expense

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

                   
    Quarter Ended     Year Ended
    December 31,
2017
  September 30,
2017
  December 31,
2016
    December 31,
2017
  December 31,
2016
                       
    (In thousands)
Noninterest expense:                      
Salaries and employee benefits $  11,853 $  11,736   $  12,654   $  46,762 $  40,946 
Occupancy expense    1,724    1,714      1,834      6,664    5,887 
Furniture and equipment    1,004    974      789      3,898    3,070 
Amortization of intangible assets    776    672      689      2,745    1,557 
Other real estate owned, net    -    (20 )    4      174    31 
Insurance and assessments    671    642      496      2,666    2,314 
Professional fees    974    929      914      4,129    3,639 
Impairment of long-lived assets    170    -      185      394    185 
Other general and administrative    6,784    5,160      5,672      19,363    15,158 
Total noninterest expense $  23,956 $  21,807   $  23,237   $  86,795 $  72,787 
                         

Noninterest expense increased $0.7 million for the fourth quarter 2017, compared to the same quarter in 2016, mostly due to a $0.3 million increase in merger-related expenses, described below, and a $0.5 million increase in employee incentive and bonus expense. Noninterest expense increased $2.1 million for the fourth quarter 2017, compared to the third quarter 2017, primarily due to the $3.0 million increase in merger-related expenses described below, partially offset by a $1.6 million settlement related to a commercial real estate matter incurred in the third quarter 2017, included in other general and administrative expense in the table above.

During the fourth quarter 2017, merger-related expenses related to the Castle Rock acquisition were $3.3 million and were included in other general and administrative expense. During the fourth quarter 2016, merger-related expenses for the Home State acquisition were $3.0 million, consisting of $0.5 million in salaries and employee benefits expense and $2.5 million in other general and administrative expense.

For the year ended December 31, 2017, noninterest expense increased $14.0 million, compared to the same period in 2016, primarily due to the overall growth of the Company, including the acquisition of Home State in September 2016 and the acquisition of Castle Rock in October 2017. Although noninterest expense increased in 2017 compared to 2016, noninterest expense as a percentage of average assets declined from 2.73% in 2016 to 2.51% in 2017.

The largest drivers of the $14.0 million increase in noninterest expense for the year ended December 31, 2017, compared to 2016, were a $5.8 million increase in salaries and employee benefits and a $4.2 million increase in other general and administrative expense. The increase in employee salary and benefits for the year ended December 31, 2017, compared to 2016, was primarily due to a $3.1 million increase in base salaries and a $1.6 million increase in employee benefit costs. Average full-time equivalent employees increased from 421 for the year ended December 31, 2016 to 496 for the year ended December 31, 2017, mostly due to the acquisition of Home State. The increase in other general and administrative expense for the year ended December 31, 2017 compared to 2016, was primarily due to a $1.6 million settlement of a litigation claim mentioned above, a $1.4 million increase in data processing expense, a $0.7 million increase in debit card interchange expense and a $0.4 million increase in communication expense.

Merger-related expenses for the year ended December 31, 2017 were $3.6 million, primarily related to the Castle Rock acquisition and included in other general and administrative expense. Merger-related expenses for the year ended December 31, 2016 were $6.3 million, related to the Home State acquisition and consisted of $1.9 million in salaries and employee benefits consisting of severance and retention payments, and $4.4 million in other general and administrative expense.

Tax Expense

In December 2017, the Tax Cuts and Jobs Act of 2017 was signed into law. This new tax law reduced the statutory federal corporate tax rate from 35.0% to 21.0%. The impact on the Company's net deferred tax asset resulted in a tax write-down of $1.0 million and is expected to lower the Company's effective tax rate to approximately 22% to 23% in 2018.

Balance Sheet

                                       
    December 31,       September 30,       June 30,       March 31,       December 31,  
    2017       2017       2017       2017       2016  
    (Dollars in thousands)
Total assets $  3,698,890      $  3,510,046      $  3,403,852      $  3,399,651      $  3,366,427   
Average assets, quarter-to-date    3,603,552         3,423,224         3,404,109         3,374,153         3,336,143   
Total loans, net of deferred fees and costs    2,807,388         2,661,866         2,578,472         2,570,750         2,519,138   
Total deposits    2,941,627         2,898,060         2,763,623         2,765,630         2,699,084   
                                       
Equity ratio - GAAP    10.95  %      10.69  %      10.80  %      10.56  %      10.47  %
Tangible common equity ratio (1)    8.99  %      8.88  %      8.91  %      8.65  %      8.52  %
________________________                                      
(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:

                     
    December 31,   September 30,   June 30,   March 31,   December 31,
    2017    2017    2017    2017    2016 
    (In thousands)
Loans held for sale $  1,725   $  314   $  887   $  951   $  4,129  
Commercial and residential real estate    1,977,431      1,892,828      1,799,114      1,800,194      1,768,424  
Construction    99,965      81,826      99,632      103,682      88,451  
Commercial    523,355      499,936      490,771      482,318      461,666  
Consumer    143,066      124,625      122,994      120,231      125,264  
Other    61,982      62,277      64,920      63,369      71,265  
Total gross loans    2,807,524      2,661,806      2,578,318      2,570,745      2,519,199  
Deferred (fees) and costs    (136 )    60      154      5      (61 )
Loans, net    2,807,388      2,661,866      2,578,472      2,570,750      2,519,138  
Less allowance for loan losses    (23,250 )    (22,900 )    (23,125 )    (23,175 )    (23,250 )
Net loans $  2,784,138   $  2,638,966   $  2,555,347   $  2,547,575   $  2,495,888  
                               

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

                     
    December 31,   September 30,   June 30,   March 31,   December 31,
    2017    2017    2017    2017    2016 
    (In thousands)
Beginning balance $  2,661,806   $  2,578,318   $  2,570,745   $  2,519,199   $  2,412,650  
New credit extended    186,969      192,774      132,420      139,185      232,499  
Acquisition of Castle Rock Bank    71,052      -      -      -      -  
Net existing credit advanced    77,307      59,275      73,298      111,821      142,448  
Net pay-downs and maturities    (191,624 )    (165,520 )    (196,511 )    (195,678 )    (272,326 )
Other    2,014      (3,041 )    (1,634 )    (3,782 )    3,928  
Gross loans    2,807,524      2,661,806      2,578,318      2,570,745      2,519,199  
Deferred (fees) and costs    (136 )    60      154      5      (61 )
Loans, net $  2,807,388   $  2,661,866   $  2,578,472   $  2,570,750   $  2,519,138  
                     
Net change - loans outstanding $  145,522   $  83,394   $  7,722   $  51,612   $  106,139  
                               

During the fourth quarter 2017, loans net of deferred costs and fees increased $145.5 million, comprised of $264.3 million in new loans and advances on existing loans and $71.1 million in loans acquired in the Castle Rock transaction, partially offset by $191.6 million in net pay-downs and maturities during the quarter. In addition to contractual loan principal payments and maturities, the fourth quarter 2017 included $44.5 million in early payoffs related to our borrowers selling their assets, $20.6 million in loan payoffs related to our strategic decision to not match certain financing terms offered by competitors, and $9.7 million in loan pay-downs related to fluctuations in loan balances to existing customers.

For the year ended December 31, 2017, loans net of deferred costs and fees increased by $288.3 million, or 11.4%, primarily due to a 13.1% increase in commercial loans and an 11.8% increase in commercial and residential real estate loans.

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

                     
    December 31,   September 30,   June 30,   March 31,   December 31,
    2017   2017   2017   2017   2016
    (In thousands)
Noninterest-bearing demand $  939,550  $  924,361  $  876,043  $  868,189  $  916,632 
Interest-bearing demand and NOW    813,882     866,309     811,639     821,518     767,523 
Money market    527,621     502,400     475,656     489,921     484,664 
Savings    201,687     183,366     183,200     178,157     164,478 
Time    458,887     421,624     417,085     407,845     365,787 
Total deposits $  2,941,627  $  2,898,060  $  2,763,623  $  2,765,630  $  2,699,084 
                     

At December 31, 2017, deposits increased $242.5 million compared to December 31, 2016. The year-over-year increase in deposits was attributable to organic growth and $128.4 million in deposits acquired in the October 27, 2017 Castle Rock transaction. During the fourth quarter 2017, average deposits increased $139.0 million compared to the third quarter 2017. During the fourth quarter 2017, the balances of several of our large commercial deposit customers decreased due to normal cash flow fluctuations. At December 31, 2017, noninterest-bearing deposits as a percentage of total deposits were 31.9%, compared to 31.9% at September 30, 2017 and 34.0% at December 31, 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
December 31,
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  10.57  %  10.46  %  7.00  % N/A  
Guaranty Bank and Trust Company  12.29  %  12.43  %  7.00  %  6.50  %
                 
Tier 1 Risk-Based Capital Ratio                
Consolidated  11.36  %  11.34  %  8.50  % N/A  
Guaranty Bank and Trust Company  12.29  %  12.43  %  8.50  %  8.00  %
                 
Total Risk-Based Capital Ratio                
Consolidated  13.36  %  13.58  %  10.50  % N/A  
Guaranty Bank and Trust Company  13.03  %  13.26  %  10.50  %  10.00  %
                 
Leverage Ratio                
Consolidated  10.21  %  9.81  %  4.00  % N/A  
Guaranty Bank and Trust Company  11.05  %  10.76  %  4.00  %  5.00  %

At December 31, 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 year ended December 31, 2017. At December 31, 2017, most of 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:

                               
                               
    December 31,     September 30,     June 30,     March 31,     December 31,  
    2017      2017      2017      2017      2016   
    (Dollars in thousands)  
Originated nonaccrual loans $  3,932     $  3,935     $  3,332     $  3,387     $  3,345    
Purchased credit impaired loans    1,622        809        1,290        1,715        1,902    
Accruing loans past due 90 days or more (1)    -        -        -        -        -    
                               
Total nonperforming loans (NPLs) $  5,554     $  4,744     $  4,622     $  5,102     $  5,247    
Other real estate owned and foreclosed assets    761        -        113        257        569    
                               
Total nonperforming assets (NPAs) $  6,315     $  4,744     $  4,735     $  5,359     $  5,816    
                               
Total classified assets $  28,330     $  28,186     $  29,188     $  30,201     $  33,443    
                               
Accruing loans past due 30-89 days (1) $  2,869     $  9,129     $  957     $  3,858     $  1,337    
                               
Charged-off loans $  (117 )   $  (970 )   $  (338 )   $  (125 )   $  (290 )  
Recoveries    183        248        82        45        150    
Net (charge-offs) recoveries $  66     $  (722 )   $  (256 )   $  (80 )   $  (140 )  
                               
Provision for loan losses $  284     $  497     $  206     $  5     $  90    
                               
Allowance for loan losses $  23,250     $  22,900     $  23,125     $  23,175     $  23,250    
                               
Unaccreted loan discount (2) $  13,049     $  11,654     $  12,665     $  13,896     $  14,682    
                               
Selected ratios:                              
NPLs to loans, net of deferred fees and costs (3)    0.20   %    0.18   %    0.18   %    0.20   %    0.21   %
NPAs to total assets    0.17   %    0.14   %    0.14   %    0.16   %    0.17   %
Allowance for loan losses to NPLs    418.62   %    482.72   %    500.32   %    454.23   %    443.11   %
Allowance for loan losses to loans, net of deferred fees and costs (3)    0.83   %    0.86   %    0.90   %    0.90   %    0.92   %
Loans 30-89 days past due to loans, net of deferred fees and costs (3)    0.10   %    0.34   %    0.04   %    0.15   %    0.05   %
Texas ratio (4)    1.53   %    1.22   %    1.26   %    1.39   %    1.55   %
Classified asset ratio (5)    7.43   %    7.57   %    8.08   %    8.24   %    9.79   %
________________________                              
(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 and Castle Rock transactions.  
(3) Loans, net of deferred fees and costs, 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 is defined as total classified assets to subsidiary bank only Tier 1 Capital plus allowance for loan losses.  
   

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

                     
December 31, 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 $  410  $  - $  1,750  $  2,160  $  1,977,335 
Construction    -    -    -    -    99,960 
Commercial    1,663     -    2,079     3,742     523,330 
Consumer    469     -    444     913     143,059 
Other    327     -    1,281     1,608     61,979 
Total $  2,869  $  - $  5,554  $  8,423  $  2,805,663 

 

                     
                     
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 
                     

At December 31, 2017, nonperforming assets were $6.3 million, an increase of $1.6 million compared to September 30, 2017 and an increase of $0.5 million compared to December 31, 2016. As a result of the Castle Rock transaction, the Company acquired $1.6 million of nonperforming loans and $0.8 million of other real estate owned. At December 31, 2017, performing troubled debt restructurings were $18.1 million, compared to $11.0 million at September 30, 2017 and $25.1 million at December 31, 2016. The increase in performing troubled debt restructurings in the fourth quarter 2017, compared to the third quarter 2017, was due to the modification of a single commercial loan. The year-over-year decrease in performing troubled debt restructurings was primarily due to the payoff of a $9.4 million out-of-state loan syndication during the third quarter 2017, partially offset by the modification of a single commercial loan during the fourth quarter 2017. The increase in loans 30-89 days past due during the fourth quarter 2017, compared to the fourth quarter 2016, was mostly due to a single commercial loan relationship.

Net recoveries were $0.1 million during the fourth quarter 2017, compared to net charge-offs of $0.7 million during the third quarter 2017 and net charge-offs of $0.1 million in the fourth quarter 2016. During the fourth quarter 2017, the Bank recorded a $0.3 million provision for loan losses, compared to a $0.5 million provision in the third quarter 2017 and a $0.1 million provision in the fourth 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 December 31, 2017, the Company had 29,222,264 shares of voting common stock outstanding, of which 434,149 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, net deferred tax asset write-downs and gains or losses on the sale or disposal of other assets. The Company also discloses the following GAAP profitability metrics alongside the operating earnings equivalent: return on average assets, return on average equity and earnings per share (diluted).

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

The following non-GAAP schedule reconciles the non-GAAP operating earnings to GAAP net income as of the dates indicated:

                                 
  Quarter Ended       Year Ended
    December 31,     September 30,     December 31,       December 31,     December 31,  
    2017      2017      2016        2017      2016   
                                 
    (Dollars in thousands, except per share amounts)
Net income $  8,605     $  10,054     $  7,421       $  38,624     $  24,727    
Expenses adjusted for:                                
Expenses (gains) related to other real estate owned, net    -        (20 )      4          174        31    
Merger-related expenses    3,319        268        3,032          3,587        6,259    
Impairment of long-lived assets    170        -        185          394        185    
Litigation-related settlements    75        1,600        -          1,675        -    
Income adjusted for:                                
(Gain) loss on sale of securities    (80 )      86        (49 )        6        73    
(Gain) on sale of other assets    -        (2 )      -          (259 )      (14 )  
Pre-tax earnings adjustment    3,484        1,932        3,172          5,577        6,534    
Tax effect of adjustments (1)    (1,180 )      (679 )      (1,148 )        (1,921 )      (2,248 )  
Net deferred tax assets write-down (2)    976        -        -          976        -    
Tax effected operating earnings adjustment    3,280        1,253        2,024          4,632    -    4,286    
Operating earnings $  11,885     $  11,307     $  9,445       $  43,256     $  29,013    
                                 
Average assets $  3,603,552     $  3,423,224     $  3,336,143       $  3,451,789     $  2,668,035    
                                 
Average equity $  397,500     $  372,747     $  351,251       $  373,233     $  264,474    
                                 
Fully diluted average common shares outstanding:    28,791,748        28,120,111        28,043,944          28,343,687        23,559,947    
                                 
Earnings per common share–diluted: $  0.30     $  0.36     $  0.26       $  1.36     $  1.05    
Earnings per common share–diluted - operating: $  0.41     $  0.40     $  0.34       $  1.53     $  1.23    
                                 
ROAA (GAAP)    0.95   %    1.17   %    0.88   %      1.12   %    0.93   %
ROAA - operating    1.31   %    1.31   %    1.13   %      1.25   %    1.09   %
                                 
ROAE (GAAP)    8.59   %    10.70   %    8.41   %      10.35   %    9.35   %
ROAE - operating    11.86   %    12.03   %    10.70   %      11.59   %    10.97   %
________________                                
(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.
(2) The net deferred tax assets write-down relates to the Tax Cuts and Jobs Act of 2017.
 

The following non-GAAP schedules reconcile the book value per share to the tangible book value per share and the GAAP equity ratio to the tangible equity ratio as of the dates indicated:

                             
Tangible Book Value per Common Share                            
    December 31,     September 30,     June 30,     March 31,     December 31,
    2017      2017      2017      2017      2016 
    (Dollars in thousands, except per share amounts)
Total stockholders' equity $  404,899     $  375,152     $  367,529     $  358,838     $  352,378  
Less: Goodwill and other intangible assets    (79,547 )      (69,752 )      (70,424 )      (71,072 )      (71,721 )
Tangible common equity $  325,352     $  305,400     $  297,105     $  287,766     $  280,657  
                             
Number of common shares outstanding    29,222,264        28,401,870        28,406,758        28,393,278        28,334,004  
                             
Book value per common share $  13.86     $  13.21     $  12.94     $  12.64     $  12.44  
Tangible book value per common share $  11.13     $  10.75     $  10.46     $  10.13     $  9.91  
                                       

 

                               
Tangible Common Equity Ratio                              
    December 31,     September 30,     June 30,     March 31,     December 31,  
    2017      2017      2017      2017      2016   
    (Dollars in thousands)  
Total stockholders' equity $  404,899     $  375,152     $  367,529     $  358,838     $  352,378    
Less: Goodwill and other intangible assets    (79,547 )      (69,752 )      (70,424 )      (71,072 )      (71,721 )  
Tangible common equity $  325,352     $  305,400     $  297,105     $  287,766     $  280,657    
                               
Total assets $  3,698,890     $  3,510,046     $  3,403,852     $  3,399,651     $  3,366,427    
Less: Goodwill and other intangible assets    (79,547 )      (69,752 )      (70,424 )      (71,072 )      (71,721 )  
Tangible assets $  3,619,343     $  3,440,294     $  3,333,428     $  3,328,579     $  3,294,706    
                               
Equity ratio - GAAP (total stockholders' equity / total assets)    10.95   %    10.69   %    10.80   %    10.56   %    10.47   %
Tangible common equity ratio (tangible common equity / tangible assets)    8.99   %    8.88   %    8.91   %    8.65   %    8.52   %
                                         

About Guaranty Bancorp

Guaranty Bancorp is a $3.7 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 and the effects of the Tax Cuts and Jobs Act of 2017; 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; 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  
             
    December 31,   September 30,   December 31,
    2017    2017    2016 
    (In thousands)
Assets            
Cash and due from banks $  51,553   $  64,388   $  50,111  
             
Time deposits with banks    254      254      254  
             
Securities available for sale, at fair value    329,977      298,483      324,228  
Securities held to maturity    259,916      258,541      243,979  
Bank stocks, at cost    24,419      19,435      22,649  
Total investments    614,312      576,459      590,856  
             
Loans held for sale    1,725      314      4,129  
             
Loans, held for investment, net of deferred fees and costs    2,805,663      2,661,552      2,515,009  
Less allowance for loan losses    (23,250 )    (22,900 )    (23,250 )
Net loans, held for investment    2,782,413      2,638,652      2,491,759  
             
Premises and equipment, net    65,874      63,280      67,390  
Other real estate owned and foreclosed assets    761      -      569  
Goodwill    65,106      56,404      56,404  
Other intangible assets, net    14,441      13,348      15,317  
Bank owned life insurance    78,573      74,625      65,538  
Other assets    23,878      22,322      24,100  
Total assets $  3,698,890   $  3,510,046   $  3,366,427  
             
Liabilities and Stockholders' Equity            
Liabilities:            
Deposits:            
Noninterest-bearing demand $  939,550   $  924,361   $  916,632  
Interest-bearing demand and NOW    813,882      866,309      767,523  
Money market    527,621      502,400      484,664  
Savings    201,687      183,366      164,478  
Time    458,887      421,624      365,787  
Total deposits    2,941,627      2,898,060      2,699,084  
             
Securities sold under agreement to repurchase    44,746      37,943      36,948  
Federal Home Loan Bank line of credit borrowing    157,444      51,182      124,691  
Federal Home Loan Bank term notes    70,000      70,000      72,477  
Subordinated debentures, net    65,065      65,044      64,981  
Interest payable and other liabilities    15,109      12,665      15,868  
Total liabilities    3,293,991      3,134,894      3,014,049  
             
Stockholders' equity:            
Common stock and additional paid-in capital - common stock    859,541      834,370      832,098  
Accumulated deficit    (343,383 )    (348,392 )    (367,944 )
Accumulated other comprehensive loss    (4,694 )    (4,791 )    (6,726 )
Treasury stock    (106,565 )    (106,035 )    (105,050 )
Total stockholders' equity    404,899      375,152      352,378  
Total liabilities and stockholders' equity $  3,698,890   $  3,510,046   $  3,366,427  
                   

 

                   
     GUARANTY BANCORP AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
                   
    Quarter Ended December 31,     Year Ended December 31,
    2017   2016     2017    2016 
                   
    (In thousands, except share and per share data)
Interest income:                  
Loans, including costs and fees $  31,404 $  27,043   $  118,674   $  87,249  
Investment securities:                  
Taxable    2,372    2,171      9,264      7,625  
Tax-exempt    1,220    1,224      4,933      3,683  
Dividends    279    234      1,290      1,063  
Federal funds sold and other    65    128      141      233  
Total interest income    35,340    30,800      134,302      99,853  
Interest expense:                  
Deposits    2,082    1,560      7,344      4,859  
Securities sold under agreement to repurchase    23    21      71      52  
Borrowings    569    557      2,648      2,549  
Subordinated debentures    872    840      3,440      2,005  
Total interest expense    3,546    2,978      13,503      9,465  
Net interest income    31,794    27,822      120,799      90,388  
Provision for loan losses    284    90      992      143  
Net interest income, after provision for loan losses    31,510    27,732      119,807      90,245  
Noninterest income:                  
Deposit service and other fees    3,546    3,405      13,951      10,447  
Investment management and trust    1,523    1,563      6,005      5,452  
Increase in cash surrender value of life insurance    675    607      2,559      2,005  
Gain (loss) on sale of securities    80    49      (6 )    (73 )
Gain on sale of SBA loans    285    401      1,256      873  
Other    461    207      1,679      553  
Total noninterest income    6,570    6,232      25,444      19,257  
Noninterest expense:                  
Salaries and employee benefits    11,853    12,654      46,762      40,946  
Occupancy expense    1,724    1,834      6,664      5,887  
Furniture and equipment    1,004    789      3,898      3,070  
Amortization of intangible assets    776    689      2,745      1,557  
Other real estate owned, net    -    4      174      31  
Insurance and assessments    671    496      2,666      2,314  
Professional fees    974    914      4,129      3,639  
Impairment of long-lived assets    170    185      394      185  
Other general and administrative    6,784    5,672      19,363      15,158  
Total noninterest expense    23,956    23,237      86,795      72,787  
Income before income taxes    14,124    10,727      58,456      36,715  
Income tax expense    5,519    3,306      19,832      11,988  
Net income $  8,605 $  7,421   $  38,624   $  24,727  
                   
Earnings per common share–basic: $  0.30 $  0.27   $  1.38   $  1.06  
Earnings per common share–diluted:    0.30    0.26      1.36      1.05  
Dividend declared per common share: $  0.13 $  0.12   $  0.50   $  0.46  
                   
Weighted average common shares outstanding-basic:    28,519,382    27,784,996      28,056,588      23,267,108  
Weighted average common shares outstanding-diluted:    28,791,748    28,043,944      28,343,687      23,559,947  

 

         
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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