July 18, 2018 - 4:05 PM EDT
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Guaranty Bancorp Announces Second Quarter 2018 Financial Results
  • 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$33,5494.71% $2,835,485$32,1154.59% $2,581,043$28,9764.50%
Investment securities (1)                    
Taxable 357,286 2,5552.87%  364,652 2,5562.84%  354,230 2,3562.67%
Tax-exempt 215,158 1,2302.29%  217,367 1,2232.28%  201,893 1,2432.47%
Bank stocks (4) 26,052 3916.02%  26,845 4236.39%  23,531 3475.91%
Other earning assets 8,669 381.76%  4,788 191.61%  4,549 110.97%
Total interest-earning assets 3,465,848 37,7634.37%  3,449,137 36,3364.27%  3,165,246 32,9334.17%
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$4860.23% $811,790$3680.18% $807,883$3540.18%
Money market 516,430 8070.63%  538,740 6230.47%  479,009 4020.34%
Savings 208,785 580.11%  204,544 560.11%  179,862 490.11%
Time certificates of deposit 462,551 1,4261.24%  461,901 1,2241.07%  414,533 9810.95%
Total interest-bearing deposits 2,028,120 2,7770.55%  2,016,975 2,2710.46%  1,881,287 1,7860.38%
Borrowings:                    
Repurchase agreements 55,358 270.20%  43,711 210.19%  31,794 150.19%
Federal funds purchased 2,327 233.91%  1 -1.95%  1 -1.46%
Subordinated debentures 65,098 9335.75%  65,077 8895.54%  65,014 8565.28%
Borrowings 209,928 1,1252.15%  232,188 1,0621.85%  182,617 7771.71%
Total interest-bearing liabilities 2,360,831 4,8850.83%  2,357,952 4,2430.73%  2,160,713 3,4340.64%
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$65,6644.65% $2,560,845$56,3684.44%
Investment securities (1)             
Taxable 360,948 5,1112.86%  357,993 4,6712.63%
Tax-exempt 216,257 2,4532.29%  201,993 2,4802.48%
Bank stocks (4) 26,446 8146.21%  23,883 7366.21%
Other earning assets 6,739 571.71%  4,324 190.89%
Total interest-earning assets 3,457,539 74,0994.32%  3,149,038 64,2744.12%
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$8540.21% $790,478$7120.18%
Money market 527,523 1,4300.55%  484,688 7350.31%
Savings 206,676 1140.11%  175,823 960.11%
Time certificates of deposit 462,228 2,6501.16%  394,410 1,7800.91%
Total interest-bearing deposits 2,022,578 5,0480.50%  1,845,399 3,3230.36%
Borrowings:             
Repurchase agreements 49,567 480.20%  34,117 320.19%
Federal funds purchased 1,170 233.91%  1 -1.46%
Subordinated debentures 65,087 1,8225.65%  65,004 1,7005.27%
Borrowings 220,996 2,1872.00%  196,570 1,5481.59%
Total interest-bearing liabilities 2,359,398 9,1280.78%  2,141,091 6,6030.62%
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       
Consolidated10.75%10.57%7.00%N/A 
Guaranty Bank and Trust Company12.08%12.29%7.00%6.50%
         
Tier 1 Risk-Based Capital Ratio        
Consolidated11.53%11.36%8.50%N/A 
Guaranty Bank and Trust Company12.08%12.29%8.50%8.00%
         
Total Risk-Based Capital Ratio        
Consolidated13.51%13.36%10.50%N/A 
Guaranty Bank and Trust Company12.82%13.03%10.50%10.00%
         
Leverage Ratio        
Consolidated10.18%10.21%4.00%N/A 
Guaranty Bank and Trust Company10.67%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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Source: GlobeNewswire (July 18, 2018 - 4:05 PM EDT)

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