Guaranty Bancorp Announces 2015 Annual and Fourth Quarter Financial Results

DENVER, CO--(Marketwired - January 27, 2016) - Guaranty Bancorp (NASDAQ: GBNK)

• Grew net loans by 17.7% during 2015
• Increased net income by 66.2% during 2015 as compared to 2014
• Expanded 2015 return on average assets significantly to 1.01% as compared to 0.68% in 2014
• Improved the efficiency ratio to 60.2% during 2015 as compared to 65.6% during 2014

Guaranty Bancorp (NASDAQ: GBNK) ("we", "our" or "the Company"), a community bank holding company based in Colorado, today announced fourth quarter 2015 net income of $5.9 million or $0.28 per basic and diluted common share, an increase of $4.7 million or $0.22 per basic and diluted common share as compared to the fourth quarter 2014. For the year ended December 31, 2015, net income was $22.5 million or $1.07 per basic common share and $1.06 per diluted common share, an increase of $8.9 million or $0.43 per basic common share and $0.42 per diluted common share as compared to the year ended December 31, 2014.

"I am very pleased with our results for 2015," said Paul W. Taylor, President and Chief Executive Officer. "Our experienced team of local bankers delivered strong net loan growth of 17.7% in 2015. The loan growth contributed to a 66.2% increase in net income in 2015 as compared to 2014 and we continue to balance our growth with outstanding operational execution. For 2015, we achieved a return on average assets of 1.01% as compared to 0.68% in 2014. We have also improved our efficiency ratio to 60.2% during 2015 as compared to 65.6% during 2014. Our solid results for the year demonstrate the success we are having executing our strategic plans and position us well heading into 2016."

The Company's net income increased $4.7 million for the fourth quarter 2015, as compared to the same quarter in the prior year, primarily due to a $2.1 million increase in interest income and the absence of a $5.5 million penalty paid during the fourth quarter of 2014 related to the prepayment of $90.0 million in Federal Home Loan Bank term advances "Fourth Quarter 2014 FHLB Penalty". These improvements were partially offset by a $2.7 million increase in income taxes due to higher pretax income. The $2.1 million increase in interest income was primarily due to a $287.3 million increase in average loans for the quarter ended December 31, 2015 as compared to the same quarter in 2014.

For the year ended December 31, 2015, net income increased $8.9 million, as compared to the prior year, due to a $6.8 million increase in interest income, a $1.4 million decrease in interest expense, a $0.5 million increase in noninterest income and a $5.4 million decrease in noninterest expense. These improvements were partially offset by a $5.0 million increase in income taxes due to higher pretax income. The $6.8 million increase in interest income was the result of a $236.4 million increase in average loans for the year ended December 31, 2015 as compared to the year ended December 31, 2014. The $1.4 million decrease in interest expense was primarily related to the Fourth Quarter 2014 FHLB Penalty, as discussed above. The $0.5 million increase in noninterest income was mostly due to a $0.8 million increase in investment management and trust income for the year ended December 31, 2015 as compared to the same period in 2014. The $5.4 million decrease in noninterest expense for the year ended December 31, 2015 as compared to the year ended December 31, 2014 was primarily due to the absence of the Fourth Quarter 2014 FHLB Penalty.

⁽¹⁾ The "efficiency ratio" equals noninterest expense adjusted to exclude amortization of intangible assets, prepayment penalties on long-term debt and impairment of long-lived assets divided by the sum of tax equivalent net interest income and tax equivalent noninterest income. To calculate tax equivalent net interest income and noninterest income, the interest earned on tax exempt loans and investment securities and the income earned on bank-owned life insurance has been adjusted to reflect the amount that would have been earned had these investments been subject to normal income taxation.

Fourth quarter 2015 earnings per share remained the same as the third quarter 2015. Fourth quarter 2015 return on average assets was 1.00%, as compared to 1.05% in the third quarter 2015. Average earnings assets increased by $59.3 million during the fourth quarter 2015, primarily due to loan growth. As net interest margin remained relatively flat during the quarter, the quarterly variance in the return on average assets was primarily due to a combination of a $0.3 million increase in salary and benefit expense and a $0.1 million decrease in noninterest income in the fourth quarter 2015 as compared to the third quarter 2015. These variances were partially offset by a decrease in tax expense related to these two items. The fourth quarter 2015 increase in salary and benefit expense compared to the third quarter 2015 was mostly due to an additional accrual for bonus and incentive expense due to the Company's strong performance during 2015. The decrease in noninterest income in the fourth quarter 2015 as compared to the third quarter 2015 was primarily due to normal volatility of gains on sales of small business administration (SBA) loans.

Net interest income increased $2.2 million in the fourth quarter 2015, as compared to the same quarter in 2014, due to a $2.1 million increase in interest income and a $0.1 million decrease in interest expense. The increase in interest income was primarily the result of a 19.4% increase in average loan balances in the fourth quarter 2015 as compared to the same quarter in 2014.

In the fourth quarter 2015, net interest income increased $0.5 million as compared to the third quarter 2015, due to a $0.6 million increase in interest income, partially offset by a $0.1 million increase in interest expense. The increase in interest income during the fourth quarter 2015, as compared to the third quarter 2015, was primarily due to a $65.8 million increase in average loan balances. The increase in interest expense during the fourth quarter 2015, as compared to the third quarter 2015, was due to a $35.1 million increase in average interest-bearing deposits and an increase in the average cost of borrowings.

Net interest income increased by $8.2 million, to $77.0 million for the year ended December 31, 2015, as compared to $68.8 million in 2014. The increase in net interest income during 2015 was attributable to a $6.8 million increase in interest income and a $1.4 million decrease in interest expense. The year-over-year increase in interest income was driven by a $236.4 million increase in average loans as compared to 2014. The decline in interest expense during 2015, as compared to the prior year, was primarily due to the Fourth Quarter 2014 FHLB Penalty. During 2015, the Company recognized a one basis point expansion in net interest margin to 3.67%, which was primarily the result of the decline in the average cost of borrowings, discussed above.

Fourth quarter 2015 noninterest income was $4.3 million as compared to $4.4 million in the third quarter 2015 and $4.9 million in the fourth quarter 2014.

Fourth quarter 2015 noninterest income declined $0.6 million, as compared to the fourth quarter 2014, primarily due to a $0.3 million decrease in other noninterest income related to non-recurring income received in 2014 and a $0.3 million decline in gains on sales of SBA loans.

For the year ended December 31, 2015, noninterest income increased $0.5 million, primarily as a result of a $0.8 million increase in investment management and trust earnings and a $0.5 million increase in earnings on bank owned life insurance (BOLI), partially offset by a $0.8 million decline in other noninterest income. The increase in investment management and trust income during 2015, as compared to 2014 was mostly due to the Company's July 2014 acquisition of an investment management firm. The increase in BOLI income was primarily the result of an additional $15.0 million in BOLI insurance purchased during the fourth quarter of 2014 and the first quarter of 2015. The decrease in other noninterest income during 2015, as compared to 2014, was comprised of a $0.3 decrease in customer interest rate swap income and a $0.3 million decrease related to non-recurring income received in 2014.

Noninterest expense increased by $0.4 million to $15.2 million in the fourth quarter 2015 as compared to $14.9 million in the third quarter 2015, and decreased $5.8 million as compared to the same quarter in 2014. The increase in noninterest expense as compared to the third quarter 2015 was primarily attributable to a $0.3 million increase in salaries and employee benefits, specifically related to incentive compensation. Excluding the Fourth Quarter 2014 FHLB Penalty, fourth quarter 2015 noninterest expense increased by $0.3 million as compared to the fourth quarter 2014. The Company's tax equivalent efficiency ratio was 59.55% for the fourth quarter 2015, as compared to 58.75% for the third quarter 2015, and 64.03% for the fourth quarter 2014.

Noninterest expense was $60.3 million for the year ended December 31, 2015, a decrease of $5.4 million as compared to $65.7 million in 2014, primarily due to the Fourth Quarter 2014 FHLB Penalty. During 2015, salaries and employee benefits increased $0.8 million mostly due to an increase in incentive compensation, resulting from the continued strong financial performance of the Company.

At December 31, 2015, the Company had total assets of $2.4 billion, reflecting an $82.9 million increase as compared to September 30, 2015, and a $243.7 million increase as compared to December 31, 2014. The increase in total assets during 2015 was primarily comprised of growth in net loans of $273.1 million, partially offset by a $24.8 million decrease in total investments and a $5.7 million decrease in cash. The increase in total assets was primarily funded by a $116.5 million increase in total deposits, a $113.5 million increase in securities sold under agreements to repurchase and borrowings and a $14.7 million net increase in equity.

During the fourth quarter 2015, loans net of deferred costs and fees increased $88.4 million which was comprised of an $85.5 million increase in commercial and residential real estate loans and a $14.7 million increase in construction loans, partially offset by a $12.9 million decline in commercial loans, primarily energy related. Fourth quarter 2015 net loan growth consisted of $216.9 million in new loans and net existing credit advanced, partially offset by $129.2 million in net loan pay-downs and maturities. In addition to contractual loan principal payments and maturities, the fourth quarter 2015 included $25.2 million in early payoffs related to the sale of the borrower's assets, $19.0 million in payoffs due to our strategic decision to not match certain financing terms offered by competitors, $11.5 million in pay-downs related to revolving line of credit fluctuations and $11.2 million in pay-downs of energy-related loans.

During the fourth quarter 2015, we continued to proactively reduce our direct exposure to the energy industry, realizing reductions of 46.8%, or $24.2 million, in commitments and 49.5%, or $11.2 million, in outstanding loan balances. As compared to December 31, 2014, our direct exposure to the energy industry has declined by 74.7%, or $81.5 million, in commitments and by 80.6%, or $47.2 million, in outstanding loan balances. Our current energy portfolio consists of four relationships totaling $11.4 million in outstanding loan balances, which is less than 1.0% of our total loan portfolio. At December 31, 2015, the energy portfolio was comprised entirely of exploration and production loans, with relatively equal exposure to oil and natural gas.

For the year ended December 31, 2015, loans net of deferred costs and fees increased by $273.1 million, or 17.7%. Net loan growth was comprised of a $232.4 million increase in commercial and residential real estate loans and a $40.5 million increase in construction loans. The growth in loans was the result of the development of new customer relationships and growth in existing customer relationships. The utilization rate on commercial lines of credit was 41.2% at December 31, 2015 as compared to 41.0% at December 31, 2014.

At December 31, 2015, 1-4 family residential real estate loans were $349.1 million, as compared to $302.9 million at September 30, 2015, and $262.7 million as of December 31, 2014. The fourth quarter and annual growth in 1-4 family residential real estate loans was mostly due to growth in jumbo mortgage loans.

At December 31, 2015, non-maturing deposits were $1.5 billion, an increase of $49.3 million as compared to December 31, 2014, and a decrease of $59.8 million as compared to September 30, 2015. Non-maturing deposits increased significantly during the third quarter 2015 due to seasonal cash fluctuations of various commercial customers. Many of these same customers withdrew a portion of their balances during the fourth quarter 2015, which resulted in the decline in non-maturing deposits during the fourth quarter 2015 as compared to the third quarter 2015. During 2015, non-maturing deposits grew 3.3% as compared to the prior year. At December 31, 2015, noninterest-bearing deposits as a percentage of total deposits were 34.0%, as compared to 37.0% at September 30, 2015, and 38.8% at December 31, 2014.

At December 31, 2015, securities sold under agreements to repurchase were $26.5 million, a decrease of $7.0 million as compared to December 31, 2014, and a decrease of $3.7 million as compared to September 30, 2015.

Total FHLB borrowings were $280.8 million at December 31, 2015 consisting of $185.8 million of overnight advances on our subsidiary bank, Guaranty Bank and Trust Company's (Bank) line of credit and $95.0 million in term advances. At December 31, 2014, total FHLB borrowings consisted of $140.3 million in overnight advances and $20.0 million in term advances.

At December 31, 2015, all of our regulatory capital ratios remain well above minimum requirements for a "well-capitalized" institution. Our ratios decreased as compared to our ratios at December 31, 2014 primarily due to an increase in risk-weighted assets during the year, driven primarily by loan growth in addition to new risk-weighting requirements under the final rule on Enhanced Regulatory Capital Standards, commonly referred to as Basel III, which became effective in the first quarter of 2015.

Asset Quality

The following table presents select asset quality data, including quarterly charged-off loans, recoveries and provision (credit) for loans losses are presented for each of the dates indicated:

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

During the fourth quarter 2015, nonperforming assets decreased by $0.7 million from September 30, 2015 and increased by $0.4 million from December 31, 2014. The decrease in nonperforming assets at December 31, 2015 as compared to September 30, 2015 was primarily the result of the sale of a single OREO property valued at $0.7 million as of September 30, 2015. The $0.4 million increase in nonperforming assets as of December 31, 2015, as compared to December 31, 2014, was the result of three loans with an aggregate principal balance of $2.7 million which were moved to nonaccrual status during 2015, partially offset by a $1.5 million decline in OREO during the year. As of December 31, 2015, nonperforming loans included one out-of-state loan participation with a balance of $9.5 million.

At December 31, 2015, classified assets represent 11.7% of bank-level Tier 1 risk-based capital plus allowance for loan losses, as compared to 13.5% at September 30, 2015, and 11.1% at December 31, 2014.

Net recoveries in fourth quarter 2015 were $0.1 million as compared to an immaterial amount of net recoveries in the third quarter 2015, and net recoveries of $0.1 million in the fourth quarter 2014. The Bank considered recoveries, historical charge-offs, level of nonperforming loans, loan growth and other factors when determining the adequacy of the allowance for loan losses and the resulting amount of loan loss provision to be recognized during the quarter.

Shares Outstanding

As of December 31, 2015, the Company had 21,704,852 shares of common stock outstanding, consisting of 20,685,852 shares of voting common stock, of which 590,755 shares were in the form of unvested stock awards, and 1,019,000 shares of non-voting common stock.

Non-GAAP Financial Measures

The Company discloses certain non-GAAP financial measures related to tangible assets, including tangible book value and tangible common equity, pre-tax operating earnings adjusted for (if any) provision (credit) for loan losses, OREO expenses, debt termination expense, impairments of long-lived assets and securities gains and losses.

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 pre-tax operating earnings to GAAP net income before income taxes as of the dates indicated:

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:

The following non-GAAP schedule reconciles the following GAAP measures to net income, earnings per share and ROAA excluding the impact of the net Fourth Quarter 2014 FHLB Penalty for the periods presented:

About Guaranty Bancorp

Guaranty Bancorp is a $2.4 billion financial services company that operates as the bank holding company for Guaranty Bank and Trust Company, a premier Colorado community bank. The Bank provides comprehensive financial solutions to consumers and small to medium-sized businesses that value local and personalized service. In addition to loans and depository services, the Bank also offers wealth management solutions, including trust and investment management services. More information about Guaranty Bancorp can be found at www.gbnk.com.

Forward-Looking Statements

This press release contains forward-looking statements, which are included in accordance with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "could," "expects," "plans," "intends," "anticipates," "believes," "estimates," "predicts," "potential," or "continue," or the negative of such terms and other comparable terminology. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: failure to maintain adequate levels of capital and liquidity to support the Company's operations; general economic and business conditions in those areas in which the Company operates, including the impact of global and national economic conditions on our local economy; demographic changes; competition; fluctuations in interest rates; continued ability to attract and employ qualified personnel; ability to receive regulatory approval for the bank subsidiary to declare dividends to the Company; adequacy of the allowance for loan losses, changes in credit quality and the effect of credit quality on the provision for credit losses and allowance for loan losses; changes in governmental legislation or regulation, including, but not limited to, any increase in FDIC insurance premiums; changes in accounting policies and practices; changes in business strategy or development plans; 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.