Market Overview

Guaranty Bancorp Announces Second Quarter 2018 Financial Results

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  • Continued improvement in profitability evidenced by a return on average assets of 1.43% in the second quarter 2018 compared to 1.19% in the second quarter 2017
  • Significant net income growth of $3.1 million, or 31.0% to $13.3 million compared to $10.1 million of net income in the second quarter 2017
  • Sustained improvement in efficiency ratio, decreasing to 50.73% in the second quarter 2018
  • On May 22, 2018 the planned acquisition by Independent Bank Group, Inc., expected to close in the fourth quarter 2018, was announced

DENVER, July 18, 2018 (GLOBE NEWSWIRE) -- Guaranty Bancorp (NASDAQ:GBNK) ("we", "our" or "the Company"), a community bank holding company based in Colorado, today announced second quarter 2018 net income of $13.3 million, or $0.46 per basic and diluted common share, compared to net income of $10.1 million, or $0.36 per basic and diluted common share, in the second quarter 2017. The $3.1 million increase in second quarter 2018 net income, compared to the same quarter in 2017, was primarily attributable to higher net interest income resulting from higher average loan balances, increased loan yields, and a reduced tax rate.

On an operating basis1, the Company's second quarter 2018 return on average assets was 1.52% compared to 1.21% for the same quarter in 2017. On a GAAP basis, the Company's return on average assets was 1.43% in the second quarter 2018 compared to 1.19% for the same quarter in 2017. The difference between the Company's second quarter 2018 operating and GAAP return on average assets is primarily attributable to $1.0 million in merger-related expenses incurred in the second quarter 2018.

"Once again, we are very pleased with our second quarter results," said Paul W. Taylor, President and Chief Executive Officer of Guaranty Bancorp. "We achieved significant improvement in profitability with an exceptional operating return on average assets1 of 1.52% for the second quarter 2018 compared to 1.21% for the same quarter in 2017. In addition, our improved efficiency ratio of 50.73% in the second quarter 2018, compared to 53.77% during the same quarter in 2017, further demonstrates our focus on expense management. Our net income growth of $3.1 million, or 31% to $13.3 million compared to second quarter 2017 was a direct result of our success in expanding our customer relationships and gaining market share."

Taylor continued, "Gross loan production during the quarter was strong, up 18% or $42.4 million quarter-over-quarter to $275.5 million. Due to the continued dynamic economy in Colorado, paydowns and maturities jumped during the quarter to $246.1 million.  On a net basis, loans increased by $29.3 million, or 4.1% on an annualized basis during the quarter. We are excited to build upon this success by joining together with Independent Bank Group, Inc., one of the premier community banks in the nation."  
________________________

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       Six Months Ended  
    June 30,     March 31,     June 30,       June 30,     June 30,  
    2018     2018     2017       2018     2017  
                                 
    (Dollars in thousands, except per share amounts)  
Net income $ 13,263   $ 13,557   $ 10,125     $ 26,820   $ 19,965  
Operating earnings (1)   14,116     13,440     10,232       27,556     20,064  
Earnings per common share - diluted   0.46     0.47     0.36       0.92     0.71  
Earnings per common share - diluted - operating (1)   0.49     0.46     0.36       0.95     0.71  
Return on average assets   1.43 %   1.48 %   1.19 %     1.45 %   1.19 %
Return on average assets - operating (1)   1.52 %   1.47 %   1.21 %     1.49 %   1.19 %
Return on average equity   12.79 %   13.45 %   11.13 %     13.12 %   11.15 %
Return on average equity - operating (1)   13.61 %   13.33 %   11.25 %     13.48 %   11.20 %
Net interest margin   3.80 %   3.77 %   3.74 %     3.79 %   3.69 %
Net interest margin, fully tax equivalent (2)   3.87 %   3.84 %   3.85 %     3.86 %   3.80 %
Efficiency ratio - tax equivalent (3)   50.73 %   52.91 %   53.77 %     51.81 %   54.53 %
Average cost of interest-bearing liabilities                                
(including noninterest-bearing deposits)   0.59 %   0.52 %   0.46 %     0.56 %   0.44 %
Average cost of deposits                                
(including noninterest-bearing deposits)   0.38 %   0.31 %   0.26 %     0.34 %   0.25 %
Assets under management $ 1,502   $ 1,465   $ 792     $ 1,502   $ 792  
________________________                                
                                 
(1) See reconciliation of non-GAAP financial measures to the corresponding GAAP measurement in "Non-GAAP Financial Measures" later in this document.  
(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 24.66% for 2018 and 38% for 2017.  
(3) 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

    June 30,       March 31,       December 31,       September 30,       June 30,  
    2018
     2018
     2017
     2017
     2017
 
    (Dollars in thousands, except per share amounts)
Total investments $ 598,316       $ 598,391       $ 614,312       $ 576,459       $ 569,812    
Total loans, net of deferred costs and fees   2,876,721         2,847,465         2,807,388         2,661,866         2,578,472    
Allowance for loan losses   (23,750 )       (23,350 )       (23,250 )       (22,900 )       (23,125 )  
Total assets   3,775,967         3,721,651         3,698,890         3,510,046         3,403,852    
Total deposits   2,947,795         3,031,714         2,941,627         2,898,060         2,763,623    
Book value per common share   14.29         14.01         13.86         13.21         12.94    
Tangible book value per common share (1)   11.41         11.09         11.13         10.75         10.46    
Equity ratio - GAAP   11.10   %     11.03   %     10.95   %     10.69   %     10.80   %
Tangible common equity ratio (1)   9.06   %     8.93   %     8.99   %     8.88   %     8.91   %
Total risk-based capital ratio   13.51   %     13.31   %     13.36   %     13.50   %     13.65   %
________________________                                      
(1) See reconciliation of non-GAAP financial measures to the corresponding GAAP measurement in "Non-GAAP Financial Measures" later in this document.
 

Net Interest Income and Margin

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

  Three Months Ended     Three Months Ended     Three Months Ended  
    June 30, 2018       March 31, 2018       June 30, 2017  
    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) $ 2,858,683 $ 33,549 4.71 %   $ 2,835,485 $ 32,115 4.59 %   $ 2,581,043 $ 28,976 4.50 %
Investment securities (1)                                        
Taxable   357,286   2,555 2.87 %     364,652   2,556 2.84 %     354,230   2,356 2.67 %
Tax-exempt   215,158   1,230 2.29 %     217,367   1,223 2.28 %     201,893   1,243 2.47 %
Bank stocks (4)   26,052   391 6.02 %     26,845   423 6.39 %     23,531   347 5.91 %
Other earning assets   8,669   38 1.76 %     4,788   19 1.61 %     4,549   11 0.97 %
Total interest-earning assets   3,465,848   37,763 4.37 %     3,449,137   36,336 4.27 %     3,165,246   32,933 4.17 %
Non-earning assets:                                        
Cash and due from banks   36,025             35,518             34,714        
Other assets   229,342             230,000             204,149        
Total assets $ 3,731,215           $ 3,714,655           $ 3,404,109        
                                         
Liabilities and Stockholders' Equity:                                    
Interest-bearing liabilities:                                        
Deposits:                                        
Interest-bearing demand and NOW $ 840,354 $ 486 0.23 %   $ 811,790 $ 368 0.18 %   $ 807,883 $ 354 0.18 %
Money market   516,430   807 0.63 %     538,740   623 0.47 %     479,009   402 0.34 %
Savings   208,785   58 0.11 %     204,544   56 0.11 %     179,862   49 0.11 %
Time certificates of deposit   462,551   1,426 1.24 %     461,901   1,224 1.07 %     414,533   981 0.95 %
Total interest-bearing deposits   2,028,120   2,777 0.55 %     2,016,975   2,271 0.46 %     1,881,287   1,786 0.38 %
Borrowings:                                        
Repurchase agreements   55,358   27 0.20 %     43,711   21 0.19 %     31,794   15 0.19 %
Federal funds purchased   2,327   23 3.91 %     1   - 1.95 %     1   - 1.46 %
Subordinated debentures   65,098   933 5.75 %     65,077   889 5.54 %     65,014   856 5.28 %
Borrowings   209,928   1,125 2.15 %     232,188   1,062 1.85 %     182,617   777 1.71 %
Total interest-bearing liabilities   2,360,831   4,885 0.83 %     2,357,952   4,243 0.73 %     2,160,713   3,434 0.64 %
Noninterest bearing liabilities:                                        
Demand deposits   939,010             931,562             864,359        
Other liabilities   15,437             16,389             14,078        
Total liabilities   3,315,278             3,305,903             3,039,150        
Stockholders' equity   415,937             408,752             364,959        
Total liabilities and stockholders' equity $ 3,731,215           $ 3,714,655           $ 3,404,109        
                                         
Net interest income     $ 32,878           $ 32,093           $ 29,499    
Net interest margin         3.80 %           3.77 %           3.74 %
Net interest margin, fully tax                                        
equivalent (2)         3.87 %           3.84 %           3.85 %
                                         

(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 24.66% for 2018 and 38.01% for 2017.
(3) The loan average balances and rates include nonaccrual loans.
(4) Includes Bankers' Bank of the West stock, Federal Reserve Bank stock, Federal Home Loan Bank stock and Pacific Coast Bankers' Bank stock.

Net Interest Income and Margin (continued)

  Six Months Ended     Six Months Ended  
    June 30, 2018       June 30, 2017  
    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) $ 2,847,149 $ 65,664 4.65 %   $ 2,560,845 $ 56,368 4.44 %
Investment securities (1)                          
Taxable   360,948   5,111 2.86 %     357,993   4,671 2.63 %
Tax-exempt   216,257   2,453 2.29 %     201,993   2,480 2.48 %
Bank stocks (4)   26,446   814 6.21 %     23,883   736 6.21 %
Other earning assets   6,739   57 1.71 %     4,324   19 0.89 %
Total interest-earning assets   3,457,539   74,099 4.32 %     3,149,038   64,274 4.12 %
Non-earning assets:                          
Cash and due from banks   35,773             35,121        
Other assets   229,640             205,053        
Total assets $ 3,722,952           $ 3,389,212        
                           
Liabilities and Stockholder's Equity:                      
Interest-bearing liabilities:                          
Deposits:                          
Interest-bearing demand and NOW $ 826,151 $ 854 0.21 %   $ 790,478 $ 712 0.18 %
Money market   527,523   1,430 0.55 %     484,688   735 0.31 %
Savings   206,676   114 0.11 %     175,823   96 0.11 %
Time certificates of deposit   462,228   2,650 1.16 %     394,410   1,780 0.91 %
Total interest-bearing deposits   2,022,578   5,048 0.50 %     1,845,399   3,323 0.36 %
Borrowings:                          
Repurchase agreements   49,567   48 0.20 %     34,117   32 0.19 %
Federal funds purchased   1,170   23 3.91 %     1   - 1.46 %
Subordinated debentures   65,087   1,822 5.65 %     65,004   1,700 5.27 %
Borrowings   220,996   2,187 2.00 %     196,570   1,548 1.59 %
Total interest-bearing liabilities   2,359,398   9,128 0.78 %     2,141,091   6,603 0.62 %
Noninterest bearing liabilities:                          
Demand deposits   935,307             872,251        
Other liabilities   15,883             14,725        
Total liabilities   3,310,588             3,028,067        
Stockholders' equity   412,364             361,145        
Total liabilities and stockholders' equity $ 3,722,952           $ 3,389,212        
                           
Net interest income     $ 64,971           $ 57,671    
Net interest margin         3.79 %           3.69 %
Net interest margin, fully tax                          
equivalent (2)         3.86 %           3.80 %
                           

(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 24.66% for 2018 and 38.01% for 2017.
(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 $3.4 million in the second quarter 2018 to $32.9 million, compared to $29.5 million in the second quarter 2017, and increased $0.8 million from $32.1 million in the first quarter 2018.

The $3.4 million increase in net interest income in the second quarter 2018, compared to the second quarter 2017, was a result of a $4.8 million increase in interest income, partially offset by a $1.5 million increase in interest expense over the same period. The increase in interest income was mostly the result of a $300.6 million increase in average interest earning assets in the second quarter 2018, compared to the second quarter 2017, and a twenty basis point increase in the average yield on interest earning assets over the same time period. The increase in interest expense was due to the increasing cost of interest-bearing liabilities in addition to growth in deposits and borrowings.

The $0.8 million increase in net interest income in the second quarter 2018, compared to the first quarter 2018, was primarily due to a $1.4 million increase in interest income partially offset by a $0.6 million increase in interest expense. Interest income increased in the second quarter 2018 as a result of increased loan yields and increased average loan balances. Accretion of the discount on acquired loans was $1.1 million in the second quarter 2018, compared to $1.0 million in the first quarter 2018 and $1.2 million in the second quarter 2017.  The increase in interest expense in the second quarter 2018, compared to the first quarter 2018, was primarily a result of a $0.5 million increase in interest expense on deposits resulting from growth in average interest bearing deposit balances and a nine basis point increase in the cost of deposits.

For the six months ended June 30, 2018, net interest income increased $7.3 million, compared to the same period in 2017, primarily due to a $9.8 million increase in interest income resulting from a $308.5 million or 9.8% increase in average earning assets, partially offset by a $2.5 million increase in interest expense. The increase in interest expense was due to the increasing cost of interest-bearing liabilities in addition to growth in deposits and borrowings.

Noninterest Income

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

    Three Months Ended     Six Months Ended
    June 30,
2018
  March 31,
2018
  June 30,
2017
    June 30,
2018
  June 30,
2017
                       
    (In thousands)
Noninterest income:                      
Deposit service and other fees $ 3,646 $ 3,321 $ 3,545   $ 6,967 $ 6,825
Investment management and trust   2,466   2,298   1,483     4,764   3,004
Increase in cash surrender value of                      
life insurance   661   670   615     1,331   1,210
Gain on sale of securities   16   -   -     16   -
Gain on sale of SBA loans   255   231   447     486   828
Other   311   450   252     761   877
Total noninterest income $ 7,355 $ 6,970 $ 6,342   $ 14,325 $ 12,744
                       

Second quarter 2018 noninterest income increased by $1.0 million compared to the second quarter 2017 and by $0.4 million compared to the first quarter 2018. The increase was primarily due to a $1.0 million increase in investment management and trust income in the second quarter 2018, compared to the second quarter 2017, which was primarily a result of the January 2018 purchase of the assets under management of Wagner Wealth Management, LLC ("Wagner"). At June 30, 2018, assets under management were $1.5 billion compared to $792 million as of June 30, 2017.

Compared to the first quarter 2018, noninterest income increased $0.4 million in the second quarter 2018, primarily as a result of increased deposit service charges and investment management and trust income.

For the six months ended June 30, 2018, noninterest income increased $1.6 million, compared to the same period in 2017, primarily due to increased investment management and trust income resulting from the Wagner acquisition.

Noninterest Expense

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

    Three Months Ended     Six Months Ended
    June 30,
2018
  March 31,
2018
  June 30,
2017
    June 30,
2018
  June 30,
2017
                       
    (In thousands)
Noninterest expense:                      
Salaries and employee benefits $  12,871  $  12,903  $  11,247    $  25,774  $  23,173 
Occupancy expense    1,681     1,738     1,674       3,419     3,226 
Furniture and equipment    1,031     1,060     975       2,091     1,920 
Amortization of intangible assets    952     912     648       1,864     1,297 
Other real estate owned, net    2     39     126       41     194 
Insurance and assessments    670     697     647       1,367     1,353 
Professional fees    1,040     1,091     1,252       2,131     2,226 
Impairment of long-lived assets    -    -    34       -    224 
Other general and administrative    4,424     3,506     3,900       7,930     7,419 
Total noninterest expense $  22,671  $  21,946  $  20,503    $  44,617  $  41,032 
                       

Second quarter 2018 noninterest expense increased $2.2 million compared to the second quarter 2017 and by $0.7 million compared to the first quarter 2018. The increase in noninterest expense in the second quarter 2018, compared to the second quarter 2017, was mostly due to a $1.6 million increase in salaries and employee benefits, primarily as a result of employees added in the fourth quarter 2017 acquisition of Castle Rock and the first quarter 2018 Wagner acquisition, and a $1.0 million increase in merger-related expenses, included in other general and administrative expense, as a result of the pending merger with and into Independent Bank Group, Inc. ("Independent").

Compared to the first quarter 2018, noninterest expense increased $0.7 million in the second quarter 2018, primarily as a result of a $1.0 million increase in merger-related expenses related to the pending merger with and into Independent.

For the six months ended June 30, 2018, noninterest expense increased $3.6 million, compared to the same period in 2017, due to a $2.6 million increase in salaries and employee benefits primarily attributable to the fourth quarter 2017 acquisition of Castle Rock and the first quarter 2018 Wagner acquisition, combined with the $1.1 million increase in merger-related expenses due to the pending merger with and into Independent.

Tax Expense

The Company's 2018 income tax expense has been favorably impacted by the Tax Cuts and Jobs Act of 2017, which was signed into law in December 2017. This new tax law reduced the statutory federal corporate tax rate from 35.0% to 21.0% beginning on January 1, 2018. The Company's second quarter 2018 income tax expense and effective tax rate were $3.8 million and 22.1%, respectively, compared to income tax expense and an effective tax rate of $5.0 million and 33.1% in the second quarter 2017. During the first quarter 2018, the Company's income tax expense of $3.4 million and effective tax rate of 19.9% reflected the direct benefit to tax expense of $327,000 related to the vesting of shares of Company restricted stock. The direct tax benefit recognized in the first quarter 2018 reflected an appreciation in the Company's stock price between the grant date and the vesting date. The majority of vestings of the Company's restricted stock occurs annually in the first quarter.

Balance Sheet

    June 30,       March 31,       December 31,       September 30,       June 30,  
    2018       2018       2017       2017       2017  
    (Dollars in thousands)
Total assets $ 3,775,967     $ 3,721,651     $ 3,698,890     $ 3,510,046     $ 3,403,852  
Average assets, quarter-to-date   3,731,215       3,714,655       3,603,552       3,423,224       3,404,109  
Total loans, net of deferred costs and fees   2,876,721       2,847,465       2,807,388       2,661,866       2,578,472  
Total deposits   2,947,795       3,031,714       2,941,627       2,898,060       2,763,623  
                                       
Equity ratio - GAAP   11.10 %     11.03 %     10.95 %     10.69 %     10.80 %
Tangible common equity ratio (1)   9.06 %     8.93 %     8.99 %     8.88 %     8.91 %
________________________                                      
(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:

  June 30,
March 31,
  December 31, September 30,
June 30,
    2018     2018     2017     2017     2017  
    (In thousands)
Loans held for sale $ 1,766   $ 1,940   $ 1,725   $ 314   $ 887  
Commercial and residential real estate   2,023,729     2,003,326     1,977,431     1,892,828     1,799,114  
Construction   122,789     107,707     99,965     81,826     99,632  
Commercial   547,206     543,818     523,355     499,936     490,771  
Consumer   124,396     133,670     143,066     124,625     122,994  
Other   56,502     57,123     61,982     62,277     64,920  
Total gross loans   2,876,388     2,847,584     2,807,524     2,661,806     2,578,318  
Deferred costs and (fees)   333     (119 )   (136 )   60     154  
Loans, net   2,876,721     2,847,465     2,807,388     2,661,866     2,578,472  
Less allowance for loan losses   (23,750 )   (23,350 )   (23,250 )   (22,900 )   (23,125 )
Net loans $ 2,852,971   $ 2,824,115   $ 2,784,138   $ 2,638,966   $ 2,555,347  
                               

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

    June 30,   March 31,   December 31,   September 30,   June 30,
    2018     2018     2017     2017     2017  
    (In thousands)
Beginning balance $ 2,847,584   $ 2,807,524   $ 2,661,806   $ 2,578,318   $ 2,570,745  
New credit extended   164,258     156,311     186,969     192,774     132,420  
Acquisition of Castle Rock Bank   -     -     71,052     -     -  
Net existing credit advanced   111,266     76,770     77,307     59,275     73,298  
Net pay-downs and maturities   (246,108 )   (192,986 )   (191,624 )   (165,520 )   (196,511 )
Other   (612 )   (35 )   2,014     (3,041 )   (1,634 )
Gross loans   2,876,388     2,847,584     2,807,524     2,661,806     2,578,318  
Deferred costs and (fees)   333     (119 )   (136 )   60     154  
Loans, net $ 2,876,721   $ 2,847,465   $ 2,807,388   $ 2,661,866   $ 2,578,472  
                     
Net change - loans outstanding $ 29,256   $ 40,077   $ 145,522   $ 83,394   $ 7,722  

During the second quarter 2018, loans net of deferred costs and fees increased $29.3 million, comprised of $275.5 million in new loans and advances on existing loans, partially offset by $246.1 million in net pay-downs and maturities during the quarter. In addition to contractual loan principal payments and maturities, the second quarter 2018 included $67.6 million in early payoffs related to our borrowers selling their assets, $2.7 million in loan pay-downs related to fluctuations in loan balances of existing customers, and $44.5 million in loan payoffs related to our strategic decision not to match certain financing terms offered by competitors.

Balance Sheet (continued)

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

                     
                     
    June 30,   March 31,   December 31,   September 30,   June 30,
    2018   2018   2017   2017   2017
    (In thousands)
Noninterest-bearing demand $  924,415  $  973,172  $  939,550  $  924,361  $  876,043 
Interest-bearing demand and NOW    835,378     849,741     813,882     866,309     811,639 
Money market    519,916     531,818     527,621     502,400     475,656 
Savings    206,710     210,376     201,687     183,366     183,200 
Time    461,376     466,607     458,887     421,624     417,085 
Total deposits $  2,947,795  $  3,031,714  $  2,941,627  $  2,898,060  $  2,763,623 
                     

At June 30, 2018, total deposits were $2.9 billion, an increase of $6.2 million compared to December 31, 2017 and an increase of $184.2 million compared to June 30, 2017. The Company acquired $128.4 million in deposits in the October 2017 Castle Rock transaction. At June 30, 2018, noninterest-bearing deposits as a percentage of total deposits were 31.4%, compared to 31.9% at December 31, 2017 and 31.7% at June 30, 2017.

Regulatory Capital Ratios

The following table provides the capital ratios of the Company and the Guaranty Bank and Trust Company (the "Bank") as of the dates presented, along with the applicable regulatory capital requirements:

  Ratio at
June 30,
2018
  Ratio at
December 31,
2017
  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 10.75 % 10.57 % 7.00 % N/A  
Guaranty Bank and Trust Company 12.08 % 12.29 % 7.00 % 6.50 %
                 
Tier 1 Risk-Based Capital Ratio                
Consolidated 11.53 % 11.36 % 8.50 % N/A  
Guaranty Bank and Trust Company 12.08 % 12.29 % 8.50 % 8.00 %
                 
Total Risk-Based Capital Ratio                
Consolidated 13.51 % 13.36 % 10.50 % N/A  
Guaranty Bank and Trust Company 12.82 % 13.03 % 10.50 % 10.00 %
                 
Leverage Ratio                
Consolidated 10.18 % 10.21 % 4.00 % N/A  
Guaranty Bank and Trust Company 10.67 % 11.05 % 4.00 % 5.00 %

At June 30, 2018, all of our regulatory capital ratios remained well above minimum requirements for a "well-capitalized" institution. Our consolidated capital ratios generally increased compared to December 31, 2017, primarily due to 2018 earnings. At June 30, 2018, our bank-level capital ratios declined compared to December 31, 2017, primarily due to the $23.8 million dividend paid to the Company in the second quarter 2018 to fund stockholder dividends and debt servicing in 2018.

Asset Quality

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

                               
                               
    June 30,     March 31,     December 31,     September 30,     June 30,  
    2018       2018       2017       2017       2017    
    (Dollars in thousands)  
Originated nonaccrual loans $  3,348      $  3,696      $  3,932      $  3,935      $  3,332     
Purchased credit impaired loans    1,157         1,495         1,622         809         1,290     
Accruing loans past due 90 days or more (1)    370         -        -        -        -    
                               
Total nonperforming loans (NPLs) $  4,875      $  5,191      $  5,554      $  4,744      $  4,622     
Other real estate owned and foreclosed assets    629         629         761         -        113     
                               
Total nonperforming assets (NPAs) $  5,504      $  5,820      $  6,315      $  4,744      $  4,735     
                               
Total classified assets $  25,552      $  26,125      $  28,330      $  28,186      $  29,188     
                               
Accruing loans past due 30-89 days (1) $  2,546      $  2,671      $  2,869      $  9,129      $  957     
                               
Charged-off loans $  (332 )   $  (261 )   $  (117 )   $  (970 )   $  (338 )  
Recoveries    202         173         183         248         82     
Net (charge-offs) recoveries $  (130 )   $  (88 )   $  66      $  (722 )   $  (256 )  
                               
Provision for loan losses $  530      $  188      $  284      $  497      $  206     
                               
Allowance for loan losses $  23,750      $  23,350      $  23,250      $  22,900      $  23,125     
                               
Unaccreted loan discount (2) $  10,939      $  12,046      $  13,049      $  11,654      $  12,665     
                               
Selected ratios:                              
NPLs to loans, net of deferred costs and fees (3)    0.17    %    0.18    %    0.20    %    0.18    %    0.18    %
NPAs to total assets    0.15    %    0.16    %    0.17    %    0.14    %    0.14    %
Allowance for loan losses to NPLs    487.18    %    449.82    %    418.62    %    482.72    %    500.32    %
Allowance for loan losses to loans, net of                              
deferred costs and fees (3)    0.83    %    0.82    %    0.83    %    0.86    %    0.90    %
Loans 30-89 days past due to loans, net of                              
deferred costs and fees (3)    0.09    %    0.09    %    0.10    %    0.34    %    0.04    %
Texas ratio (4)    1.33    %    1.38    %    1.53    %    1.22    %    1.26    %
Classified asset ratio (5)    6.99    %    6.73    %    7.43    %    7.57    %    8.08    %
________________________                              
(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 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:

                     
                     
June 30, 2018   30-89
Days Past
Due
  90 Days +
Past Due
and Still
Accruing
  90 Days +
 Past Due and
Nonaccrual
  Total Nonaccrual
and
Past Due
  Total Loans,
Held for
Investment
    (In thousands)
Commercial and residential                    
real estate $ 182 $ - $ 176 $ 358 $ 2,023,964
Construction   -   -   -   -   122,803
Commercial   707   170   3,144   4,021   547,269
Consumer   455   200   47   702   124,410
Other   1,202   -   1,138   2,340   56,509
Total $ 2,546 $ 370 $ 4,505 $ 7,421 $ 2,874,955
                     


December 31, 2017   30-89
Days Past
Due
  90 Days +
Past Due
and Still
Accruing
  90 Days +
 Past Due and
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
                     

At June 30, 2018, nonperforming assets were $5.5 million, a decrease of $0.3 million compared to March 31, 2018 and an increase of $0.8 million compared to June 30, 2017. 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 June 30, 2018, performing troubled debt restructurings were $16.8 million, compared to $18.4 million at March 31, 2018 and $23.4 million at June 30, 2017. 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.

Net charge offs were $0.1 million during the second quarter 2018, compared to net charge-offs of $0.1 million during the first quarter 2018 and net charge-offs of $0.3 million in the second quarter 2017. During the second quarter 2018, the Bank recorded a $0.5 million provision for loan losses, compared to a $0.2 million provision in the first quarter 2018 and a $0.2 million provision in the second quarter 2017. The Bank considered recoveries, historical charge-offs, the level of nonperforming loans, loan growth and other factors when determining the adequacy of the allowance for loan losses and the resulting amount of loan loss provision to be recognized during the quarter.

Shares Outstanding

As of June 30, 2018, the Company had 29,308,857 shares of voting common stock outstanding, of which 441,335 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, net losses or write-downs related to OREO, 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:

  Three Months Ended       Six Months Ended
    June 30,     March 31,     June 30,       June 30,     June 30,  
    2018       2018       2017         2018       2017    
                                 
    (Dollars in thousands, except per share amounts)
Net income $ 13,263     $ 13,557     $ 10,125       $ 26,820     $ 19,965    
Expenses adjusted for:                                
Losses (gains) related to other real                                
estate owned, net   -       33       126         33       194    
Merger-related expenses   1,033       75       -         1,108       -    
Impairment of long-lived assets   -       -       34         -       224    
Income adjusted for:                                
(Gain) on sale of securities   (16 )     -       -         (16 )     -    
(Gain) loss on sale of other assets   8       (281 )     14         (273 )     (257 )  
Pre-tax operating earnings adjustment   1,025       (173 )     174         852       161    
Tax effect of adjustments (1)   (172 )     56       (67 )       (116 )     (62 )  
Tax effected operating earnings adjustment   853       (117 )     107         736   -   99    
Operating earnings $ 14,116     $ 13,440     $ 10,232       $ 27,556     $ 20,064    
                                 
Average assets $ 3,731,215     $ 3,714,655     $ 3,404,109       $ 3,722,952     $ 3,389,212    
Average equity $ 415,937     $ 408,752     $ 364,959       $ 412,364     $ 361,145    
                                 
Fully diluted average common                                
shares outstanding:   29,048,850       29,036,820       28,095,871         29,067,349       28,120,746    
Earnings per common                                
share–diluted: $ 0.46     $ 0.47     $ 0.36       $ 0.92     $ 0.71    
Earnings per common                                
share–diluted - operating: $ 0.49     $ 0.46     $ 0.36       $ 0.95     $ 0.71    
                                 
ROAA (GAAP)   1.43   %   1.48   %   1.19   %     1.45   %   1.19   %
ROAA - operating   1.52   %   1.47   %   1.21   %     1.49   %   1.19   %
ROAE (GAAP)   12.79   %   13.45   %   11.13   %     13.12   %   11.15   %
ROAE - operating   13.61   %   13.33   %   11.25   %     13.48   %   11.20   %
________________                                
(1) Tax effect calculated using a combined federal and state marginal tax rate of 24.66% for 2018 and 38.01% for 2017, adjusted for tax effect of nondeductible merger-related expenses.
 

Non-GAAP Financial Measures (continued)

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

Tangible Book Value per Common Share                            
    June 30,     March 31,     December 31,     September 30,     June 30,
    2018       2018       2017       2017       2017  
    (Dollars in thousands, except per share amounts)
Total stockholders' equity $  418,951      $  410,432      $  404,899      $  375,152      $  367,529   
Less: Goodwill and other intangible assets    (84,655 )      (85,608 )      (79,547 )      (69,752 )      (70,424 )
Tangible common equity $  334,296      $  324,824      $  325,352      $  305,400      $  297,105   
                             
Number of common shares outstanding    29,308,857         29,297,002         29,222,264         28,401,870         28,406,758   
                             
Book value per common share $  14.29      $  14.01      $  13.86      $  13.21      $  12.94   
Tangible book value per common share $  11.41      $  11.09      $  11.13      $  10.75      $  10.46   


Tangible Common Equity Ratio                              
    June 30,     March 31,     December 31,     September 30,     June 30,  
    2018       2018       2017       2017       2017    
    (Dollars in thousands)  
Total stockholders' equity $ 418,951     $ 410,432     $ 404,899     $ 375,152     $ 367,529    
Less: Goodwill and other intangible assets   (84,655 )     (85,608 )     (79,547 )     (69,752 )     (70,424 )  
Tangible common equity $ 334,296     $ 324,824     $ 325,352     $ 305,400     $ 297,105    
                               
Total assets $ 3,775,967     $ 3,721,651     $ 3,698,890     $ 3,510,046     $ 3,403,852    
Less: Goodwill and other intangible assets   (84,655 )     (85,608 )     (79,547 )     (69,752 )     (70,424 )  
Tangible assets $ 3,691,312     $ 3,636,043     $ 3,619,343     $ 3,440,294     $ 3,333,428    
                               
Equity ratio - GAAP (total stockholders'                              
equity / total assets)   11.10   %   11.03   %   10.95   %   10.69   %   10.80   %
Tangible common equity ratio (tangible                              
common equity / tangible assets)   9.06   %   8.93   %   8.99   %   8.88   %   8.91   %
                                         

About Guaranty Bancorp

Guaranty Bancorp is a $3.8 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
             
    June 30,   December 31,   June 30,
    2018
  2017
  2017
    (In thousands)
Assets            
Cash and due from banks $ 72,348   $ 51,553   $ 46,582  
             
Time deposits with banks   254     254     254  
             
Securities available for sale, at fair value   316,499     329,977     305,910  
Securities held to maturity   253,398     259,916     240,899  
Bank stocks, at cost   28,419     24,419     23,003  
Total investments   598,316     614,312     569,812  
             
Loans held for sale   1,766     1,725     887  
             
Loans, held for investment, net of deferred costs and fees   2,874,955     2,805,663     2,577,585  
Less allowance for loan losses   (23,750 )   (23,250 )   (23,125 )
Net loans, held for investment   2,851,205     2,782,413     2,554,460  
             
Premises and equipment, net   63,957     65,874     64,774  
Other real estate owned and foreclosed assets   629     761     113  
Goodwill   67,917     65,106     56,404  
Other intangible assets, net   16,738     14,441     14,020  
Bank owned life insurance   79,706     78,573     74,050  
Other assets   23,131     23,878     22,496  
Total assets $ 3,775,967   $ 3,698,890   $ 3,403,852  
             
Liabilities and Stockholders' Equity            
Liabilities:            
Deposits:            
Noninterest-bearing demand $ 924,415   $ 939,550   $ 876,043  
Interest-bearing demand and NOW   835,378     813,882     811,639  
Money market   519,916     527,621     475,656  
Savings   206,710     201,687     183,200  
Time   461,376     458,887     417,085  
Total deposits   2,947,795     2,941,627     2,763,623  
             
Securities sold under agreement to repurchase   56,856     44,746     29,553  
Federal Home Loan Bank line of credit borrowing   220,700     157,444     90,900  
Federal Home Loan Bank term notes   50,000     70,000     71,772  
Subordinated debentures, net   65,106     65,065     65,023  
Interest payable and other liabilities   16,559     15,109     15,452  
Total liabilities   3,357,016     3,293,991     3,036,323  
             
Stockholders' equity:            
Common stock and additional paid-in capital - common stock   861,307     859,541     833,600  
Accumulated deficit   (324,931 )   (343,383 )   (354,956 )
Accumulated other comprehensive loss   (9,757 )   (4,694 )   (5,112 )
Treasury stock   (107,668 )   (106,565 )   (106,003 )
Total stockholders' equity   418,951     404,899     367,529  
Total liabilities and stockholders' equity $ 3,775,967   $ 3,698,890   $ 3,403,852  
                   


GUARANTY BANCORP AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations 
                   
    Three Months Ended June 30,     Six Months Ended June 30,
    2018   2017     2018   2017
                   
    (In thousands, except share and per share data)
Interest income:                  
Loans, including costs and fees $ 33,549 $ 28,976   $ 65,664 $ 56,368
Investment securities:                  
Taxable   2,555   2,356     5,111   4,671
Tax-exempt   1,230   1,243     2,453   2,480
Dividends   391   347     814   736
Federal funds sold and other   38   11     57   19
Total interest income   37,763   32,933     74,099   64,274
Interest expense:                  
Deposits   2,777   1,786     5,048   3,323
Securities sold under agreement to repurchase   27   15     48   32
Federal funds purchased   23   -     23   -
Borrowings   1,125   777     2,187   1,548
Subordinated debentures   933   856     1,822   1,700
Total interest expense   4,885   3,434     9,128   6,603
Net interest income   32,878   29,499     64,971   57,671
Provision for loan losses   530   206     718   211
Net interest income, after provision for loan losses   32,348   29,293     64,253   57,460
Noninterest income:                  
Deposit service and other fees   3,646   3,545     6,967   6,825
Investment management and trust   2,466   1,483     4,764   3,004
Increase in cash surrender value of life insurance   661   615     1,331   1,210
Gain on sale of securities   16   -     16   -
Gain on sale of SBA loans   255   447     486   828
Other   311   252     761   877
Total noninterest income   7,355   6,342     14,325   12,744
Noninterest expense:                  
Salaries and employee benefits   12,871   11,247     25,774   23,173
Occupancy expense   1,681   1,674     3,419   3,226
Furniture and equipment   1,031   975     2,091   1,920
Amortization of intangible assets   952   648     1,864   1,297
Other real estate owned, net   2   126     41   194
Insurance and assessments   670   647     1,367   1,353
Professional fees   1,040   1,252     2,131   2,226
Impairment of long-lived assets   -   34     -   224
Other general and administrative   4,424   3,900     7,930   7,419
Total noninterest expense   22,671   20,503     44,617   41,032
Income before income taxes   17,032   15,132     33,961   29,172
Income tax expense   3,769   5,007     7,141   9,207
Net income $ 13,263 $ 10,125   $ 26,820 $ 19,965
                   
Earnings per common share–basic: $ 0.46 $ 0.36   $ 0.93 $ 0.72
Earnings per common share–diluted:   0.46   0.36     0.92   0.71
Dividend declared per common share:   0.16   0.13     0.33   0.25
                   
Weighted average common shares outstanding-basic:   28,863,536   27,913,082     28,843,295   27,890,446
Weighted average common shares outstanding-diluted:   29,048,850   28,095,871     29,067,349   28,120,746


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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