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
$
33,549
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: