Guaranty Bancorp Announces 2016 Third Quarter Financial Results
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DENVER, CO -- (Marketwired) -- 10/26/16 -- Guaranty Bancorp (NASDAQ: GBNK)
- Completed the merger with Home State Bancorp on September 8, 2016, adding $445.5 million in loans and $769.7 million in deposits
- Systems integration is expected to be completed by November 7, 2016, offering customers an expanded branch network
- Grew loans by $68.9 million, or 14.4% annualized, during the third quarter 2016, excluding loans acquired in the merger with Home State Bancorp
- Increased deposits by $135.0 million, or 29.1% annualized, during the third quarter 2016, excluding deposits acquired in the merger with Home State Bancorp
- Reduced the nonperforming asset ratio to 0.19% at September 30, 2016, as compared to 0.69% at September 30, 2015
Guaranty Bancorp (NASDAQ: GBNK) ("we", "our" or "the Company"), a community bank holding company based in Colorado, today announced third quarter 2016 net income of $5.8 million, or $0.25 per basic and diluted common share, as compared to $6.0 million, or $0.28 per basic and diluted common share in the third quarter 2015. Third quarter 2016 net income was impacted by $2.2 million in merger-related expenses. Third quarter 2016 operating earnings1 increased 21.6% to $7.3 million, or $0.32 per diluted common share, as compared to the third quarter 2015. For the nine months ended September 30, 2016, net income was $17.0 million or $0.78 per basic common share and $0.77 per diluted common share as compared to $16.6 million, or $0.79 per basic common share and $0.78 per diluted common share for the same period in 2015. Year-to-date 2016 net income includes $3.2 million in merger-related expenses. For the nine months ended September 30, 2016, operating earnings increased $2.6 million, or 15.4% to $19.2 million; an increase of $0.09 per diluted common share as compared to the same period in 2015.
"We are pleased to close our merger with Home State Bancorp and further our commitment to serving the financial needs of businesses and consumers in the state of Colorado," said Paul W. Taylor, President and Chief Executive Officer of Guaranty Bancorp. "The integration of our systems is expected to be completed on November 7th and our teams are diligently working to ensure a smooth transition as we move forward as one bank. Throughout this process, we have also remained focused on our business. Excluding loans and deposits acquired in the merger with Home State Bancorp, annualized loan and deposit growth was 14.4% and 29.1%, respectively, during the third quarter of 2016. In addition, we had an operating return on average assets of 1.11% during the third quarter of 2016. Following the system integration in the fourth quarter, we are poised to deliver long-term value for our customers, communities, employees and shareholders."
During the third quarter 2016, operating earnings increased $1.3 million, as compared to the same quarter in 2015, primarily due to a $3.3 million increase in net interest income and a $0.3 million increase in deposit service and other fees, partially offset by a $1.3 million increase in salaries and employee benefits and an increase in income tax expense due to an increase in pretax income. The $3.3 million increase in net interest income in the third quarter 2016, as compared to the third quarter 2015, was due to a combination of a $331.0 million, or 15.5% increase in average earning assets and a $0.8 million interest income recovery on a nonaccrual loan during the third quarter 2016. This interest recovery had a seven basis point impact on the quarterly operating return on average assets. Net income decreased $0.2 million for the third quarter 2016, as compared to the same quarter in 2015, due to a $3.8 million increase in noninterest expense, primarily merger-related expenses, mostly offset by a $3.3 million increase in net interest income and a $0.3 million increase in noninterest income. The merger-related expenses incurred in the third quarter 2016 were $2.2 million, consisting of $1.4 million in salaries and employee benefit expense related to severance and retention payments and $0.8 million in other general and administrative expense.
As compared to the second quarter 2016, third quarter 2016 operating earnings increased $1.2 million, or 20.3% to $7.3 million primarily due to a $2.9 million increase in net interest income and a $0.3 million increase in deposit service and other fees, partially offset by a $1.1 million increase in salaries and employee benefits expense. The $2.9 million increase in net interest income in the third quarter 2016, as compared to the second quarter 2016, was mostly related to a $238.2 million increase in average earning assets, partially due to the transaction with Home State Bancorp (Home State). Third quarter 2016 net income increased $0.1 million to $5.8 million, as compared to the second quarter 2016, primarily due to a $2.9 million increase in net interest income and a $0.6 million increase noninterest income, partially offset by a $3.5 million increase in noninterest expense. The $3.5 million increase in noninterest expense in the third quarter 2016 as compared to the second quarter 2016, was primarily related to a $1.9 million increase in merger-related expenses and a $0.8 million increase in salaries and employee benefits expense related to the transaction with Home State.
For the nine months ended September 30, 2016, operating earnings increased 15.4%, or $2.6 million, as compared to the same period in 2015 due to a $5.4 million increase in net interest income, mostly due to a $249.9 million, or 12.1% increase in average earning assets, partially offset by a $2.0 million increase in salaries and employee benefits and an increase in income taxes due to an increase in pretax income. Net income increased $0.4 million for the first nine months of 2016, as compared to the same period in 2015, due to the $5.4 million increase in net interest income, as discussed above, partially offset by a $4.5 million increase in noninterest expense, primarily due to $3.2 million in merger-related expenses incurred in 2016 and $0.8 million in salaries and benefit expenses related to the transaction with Home State.
As a direct result of the recently completed transaction with Home State, the Company improved its liquidity position as well as its concentration of commercial real estate during the third quarter 2016. The loan-to-deposit ratio decreased from 102.8% at June 30, 2016 to 87.7% at September 30, 2016, providing additional liquidity for continued balance sheet growth. In addition, our total commercial real estate as a percent of capital (CRE2 Ratio) fell significantly from 360% at June 30, 2016 to 314% at September 30, 2016. Commercial real estate is defined as our total reported loans secured by multifamily and non-farm residential properties, loans for construction, land development and other land and loans otherwise sensitive to the general commercial real estate market, including loans to commercial real estate related entities.
___________________________________________________________________________
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 Nine Months Ended
----------------------------- -------------------
September September September September
30, June 30, 30, 30, 30,
2016 2016 2015 2016 2015
----------------------------- -------------------
(Dollars in thousands, except per share amounts)
Net income $ 5,761 $ 5,685 $ 6,002 $ 16,981 $ 16,563
Operating earnings (1) 7,276 6,048 5,983 19,242 16,678
Earnings per common share
- diluted 0.25 0.27 0.28 0.77 0.78
Earnings per common share
- diluted - operating (1) 0.32 0.28 0.28 0.88 0.79
Return on average assets 0.88% 0.97% 1.05% 0.93% 1.01%
Return on average assets -
operating (1) 1.11% 1.03% 1.05% 1.05% 1.02%
Return on average equity 9.04% 10.03% 10.99% 9.64% 10.37%
Return on average equity -
operating (1) 11.42% 10.67% 10.95% 10.92% 10.44%
Net interest margin 3.66% 3.57% 3.59% 3.61% 3.70%
Efficiency ratio - tax
equivalent (2) 56.78% 59.08% 58.75% 58.51% 60.42%
_______________
(1) See reconciliation of non-GAAP financial measure to the corresponding
GAAP measurement in "Non-GAAP Financial Measures" later in this document.
(2) The efficiency ratio equals noninterest expense adjusted to exclude
amortization of intangible assets, prepayment penalties on long-term debt,
impairment of long-lived assets 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 has been adjusted to
reflect the amount that would have been earned had these investments been
subject to normal income taxation.
Balance Sheet
September December September
30, 31, Percent 30, Percent
2016 2015 Change 2015 Change
-----------------------------------------------------
(Dollars in thousands, except per share amounts)
Total investments $ 562,091 $ 424,692 32.4% $ 433,299 29.7%
Total loans, net of
deferred costs 2,412,999 1,814,536 33.0% 1,726,151 39.8%
Allowance for loan
losses (23,300) (23,000) 1.3% (22,890) 1.8%
Total assets 3,346,265 2,368,525 41.3% 2,285,630 46.4%
Total deposits 2,752,112 1,801,845 52.7% 1,847,329 49.0%
Book value per common
share 12.39 10.21 21.4% 10.07 23.0%
Tangible book value
per common share 9.85 9.97 (1.2)% 9.81 0.4%
Equity ratio - GAAP 10.50% 9.36% 12.2% 9.57% 9.7%
Tangible common equity
ratio 8.53% 9.16% (6.9)% 9.35% (8.8)%
Total risk-based
capital ratio 14.07% 13.24% 6.3% 13.39% 5.1%
Assets under
management and
administration $ 858,761 $ 698,247 23.0% $ 686,662 25.1%
Net Interest Income and Margin
Three Months Ended Nine Months Ended
----------------------------------- -----------------------
September September September September
30, June 30, 30, 30, 30,
2016 2016 2015 2016 2015
----------------------------------- -----------------------
(Dollars in thousands)
Net interest
income $ 22,750 $ 19,821 $ 19,406 $ 62,566 $ 57,123
Average earning
assets 2,472,767 2,234,612 2,141,807 2,314,455 2,064,587
Interest rate
spread 3.45% 3.39% 3.45% 3.43% 3.56%
Net interest
margin 3.66% 3.57% 3.59% 3.61% 3.70%
Net interest
margin, fully
tax equivalent 3.75% 3.65% 3.67% 3.69% 3.78%
Loan yield 4.41% 4.15% 4.15% 4.25% 4.28%
Average cost of
interest-
bearing
liabilities
(including
noninterest-
bearing
deposits) 0.44% 0.39% 0.28% 0.39% 0.26%
Average cost of
deposits
(including
noninterest-
bearing
deposits) 0.23% 0.23% 0.19% 0.23% 0.18%
Net interest income increased $3.3 million in the third quarter 2016, as compared to the same quarter in 2015, due to a $4.5 million increase in interest income, partially offset by a $1.1 million increase in interest expense. The increase in interest income was the result of a $307.4 million, or 18.0% increase in average loan balances in the third quarter 2016 as compared to the same quarter in 2015, a $0.8 million interest income recovery on a nonaccrual loan received in the third quarter 2016 and $0.3 million related to accretion of the discount applied to loans acquired in the Home State transaction. The increase in interest expense was due to a $0.5 million increase in subordinated debt expense, a $0.3 million increase in Federal Home Loan Bank (FHLB) borrowings expense and a $0.4 million increase in interest expense on deposits. On July 18, 2016, we issued $40.0 million of unsecured fixed-to-floating rate subordinated notes, to raise the cash consideration paid to the shareholders of Home State in connection with the transaction. FHLB borrowing expense increased in the third quarter 2016, as compared to the same quarter in 2015, as a result of fixed-rate hedged borrowings, $25.0 million of which became effective in the third quarter 2015 and $25.0 million of which became effective in the first quarter 2016. Interest expense on deposits increased in the third quarter 2016, as compared to the third quarter 2015, due to higher average deposit balances, attributable to both organic growth and the Home State transaction.
As compared to the second quarter 2016, net interest income increased by $2.9 million due to a $3.5 million increase in interest income, partially offset by a $0.6 million increase in interest expense. The increase in interest income during the third quarter 2016, as compared to the second quarter 2016, was primarily due to a $165.3 million increase in average loan balances and a $37.7 million increase in average investment balances. The $0.6 million increase in interest expense in the third quarter 2016, as compared to the second quarter 2016, was mostly due to the newly issued $40.0 million of unsecured fixed-to-floating rate subordinated notes, discussed above.
For the nine months ended September 30, 2016, net interest income increased $5.4 million, as compared to the same period in 2015, due to an $8.2 million increase in interest income, partially offset by a $2.7 million increase in interest expense. The year-to-date increase in interest income was driven by a $274.0 million, or 16.9% increase in average loans, as compared to the same period in 2015. The $2.7 million increase in interest expense during the first nine months of 2016, as compared to the same period in 2015, was due to a $1.2 million increase in FHLB borrowing expense, a $1.0 million increase in interest expense on deposits, and a $0.6 million increase in interest expense on subordinated debt. As outlined above, the increased cost of FHLB borrowings was the result of our hedged borrowings becoming fully effective, increased borrowing levels required to fund loan growth, and an increase in short-term, variable rates resulting from the December 2015 federal funds interest rate increase. The increase in interest expense on deposits in the first nine months of 2016, as compared to the same period in 2015, was the result of a five basis point increase in weighted average cost and a $185.1 million increase in average balances. The increase in interest expense on subordinated debt in the first nine months of 2016, as compared to the same period in 2015, was mostly due to the newly issued $40.0 million of unsecured fixed-to-floating rate subordinated notes, discussed above.
Noninterest Income
The following table presents noninterest income as of the dates indicated:
Three Months Ended Nine Months Ended
------------------------------- --------------------
September September September September
30, June 30, 30, 30, 30,
2016 2016 2015 2016 2015
------------------------------- --------------------
(In thousands)
Noninterest income:
Deposit service and
other fees $ 2,581 $ 2,292 $ 2,309 $ 7,042 $ 6,682
Investment management
and trust 1,333 1,276 1,292 3,889 3,964
Increase in cash
surrender value of
life insurance 490 460 447 1,398 1,316
Loss on sale of
securities (66) (101) - (122) -
Gain on sale of SBA
loans 208 110 232 472 681
Other 159 105 119 346 275
------------------------------- --------------------
Total noninterest
income $ 4,705 $ 4,142 $ 4,399 $ 13,025 $ 12,918
=============================== ====================
Third quarter 2016 noninterest income was $4.7 million as compared to $4.1 million in the second quarter 2016 and $4.4 million in the third quarter 2015.
The $0.6 million increase in noninterest income in the third quarter 2016, as compared to the second quarter 2016, was primarily due to a $0.3 million increase in deposit service and other fees, primarily generated by deposits acquired in the transaction with Home State as well as smaller increases in other categories. The $0.3 million increase in noninterest income in the third quarter 2016, as compared to the third quarter 2015, was attributable to an increase in deposit service and other fees primarily generated by deposits acquired in the transaction with Home State.
For the nine months ended September 30, 2016, noninterest income increased $0.1 million to $13.0 million as compared to $12.9 million for the same period in 2015.
Noninterest Expense
The following table presents noninterest expense as of the dates indicated:
Three Months Ended Nine Months Ended
------------------------------ -------------------
September September September September
30, June 30, 30, 30, 30,
2016 2016 2015 2016 2015
------------------------------ -------------------
(In thousands)
Noninterest expense:
Salaries and employee
benefits $ 10,984 $ 8,520 $ 8,318 $ 28,292 $ 24,921
Occupancy expense 1,417 1,261 1,487 4,053 4,814
Furniture and equipment 750 713 740 2,281 2,206
Amortization of
intangible assets 389 239 495 868 1,486
Other real estate
owned, net 20 5 (31) 27 64
Insurance and
assessment 608 597 604 1,818 1,795
Professional fees 962 906 838 2,725 2,520
Impairment of long-
lived assets - - - - 122
Other general and
administrative 3,494 2,893 2,415 9,486 7,164
------------------------------ -------------------
Total noninterest
expense $ 18,624 $ 15,134 $ 14,866 $ 49,550 $ 45,092
============================== ===================
Third quarter 2016 noninterest expense was $18.6 million as compared to $15.1 million in the second quarter 2016 and $14.9 million in the third quarter 2015. The Company's tax equivalent efficiency ratio was 56.78% for the third quarter 2016, as compared to 59.08% in the second quarter 2016, and 58.75% in the third quarter 2015.
Third quarter 2016 noninterest expense increased $3.5 million, as compared to the second quarter 2016, primarily as a result of a $1.9 million increase in merger-related expenses; consisting of a $1.4 million increase in salaries and employee benefit expense related to severance and retention payments and a $0.5 million increase in other general and administrative expenses. Excluding of the merger-related expenses included in salaries and employee benefits, this category of expense increased $1.1 million, mostly due to expenses related to the employees acquired in the Home State transaction.
Noninterest expense increased by $3.8 million in the third quarter 2016, as compared to the third quarter 2015, primarily due to $2.2 million in merger-related expenses incurred in the third quarter 2016; consisting of $1.4 million in salaries and employee benefit expense related to severance and retention payments and $0.8 million in other general and administrative expenses. Excluding the merger-related expenses included in salaries and employee benefits, this category of expense increased $1.3 million, consisting of $0.8 million related to the employees acquired in the Home State transaction and a $0.5 million increase in base salaries and employee benefit expense.
For the nine months ended September 30, 2016, noninterest expense was $49.6 million, as compared to $45.1 million for the same period in 2015. The $4.5 million increase in noninterest expense during the first nine months of 2016, as compared to the same period in 2015, was primarily due to $3.2 million in merger-related expenses incurred during the first nine months of 2016; consisting of $1.4 million in salaries and employee benefits related to severance and retention payments and $1.8 million in other general and administrative expenses. Excluding the merger-related expenses, noninterest expense increased $1.3 million for the first nine months of 2016, as compared to the same period in 2015, due to a $2.0 million increase in salaries and employee benefits, partially offset by a $0.8 million decline in occupancy expense. The $2.0 million increase in salaries and employee benefits was due to $0.8 million related to the employees acquired in the Home State transaction, a $0.8 million increase in base salaries and a $0.4 million increase in the Company's self-funded medical plan. The $0.8 million decrease in occupancy expense was related to a reduction in rent and depreciation expense related to the restructure of the lease for the Company's corporate office.
Balance Sheet
September December September
30, 31, Percent 30, Percent
2016 2015 Change 2015 Change
-----------------------------------------------------
(Dollars in thousands)
Total assets $3,346,265 $2,368,525 41.3% $2,285,630 46.4%
Average assets,
quarter-to-date 2,613,133 2,327,224 12.3% 2,268,603 15.2%
Total loans, net of
deferred costs 2,412,999 1,814,536 33.0% 1,726,151 39.8%
Total deposits 2,752,112 1,801,845 52.7% 1,847,329 49.0%
Equity ratio - GAAP 10.50% 9.36% 12.2% 9.57% 9.7%
Tangible common equity
ratio 8.53% 9.16% (6.9)% 9.35% (8.8)%
At September 30, 2016, the Company had total assets of $3.3 billion, reflecting an increase of $977.7 million as compared to December 31, 2015, and an increase of $1.1 billion as compared to September 30, 2015. The increase in total assets during the first nine months of 2016 was comprised of a $598.5 million increase in loans, a $137.4 million increase in investments, a $137.2 million increase in cash, and a $67.0 million increase in intangible assets related to the transaction with Home State. In addition, there were $37.6 million of combined increases in several other categories of nonearning assets. Loans acquired in the transaction with Home State during the third quarter 2016 were $445.5 million. Excluding the loans acquired from Home State, loans grew $68.9 million, or 14.4% annualized during the third quarter 2016.
The following table sets forth the amount of loans outstanding at the dates
indicated:
September December September
30, June 30, March 31, 31, 30,
2016 2016 2016 2015 2015
-----------------------------------------------------------
(In thousands)
Commercial and
residential
real estate $1,752,113 $1,428,397 $1,307,854 $1,281,701 $1,196,209
Construction 75,603 26,497 87,753 107,170 92,473
Commercial 400,281 336,069 329,939 323,552 336,414
Consumer 81,766 66,539 66,829 66,288 63,517
Other 102,887 40,640 37,534 35,570 37,420
-----------------------------------------------------------
Total gross
loans 2,412,650 1,898,142 1,829,909 1,814,281 1,726,033
Deferred
costs 349 401 337 255 118
-----------------------------------------------------------
Loans, net 2,412,999 1,898,543 1,830,246 1,814,536 1,726,151
Less allowance
for loan losses (23,300) (23,050) (23,025) (23,000) (22,890)
-----------------------------------------------------------
Net loans $2,389,699 $1,875,493 $1,807,221 $1,791,536 $1,703,261
===========================================================
The following table presents the changes in the Company's loan balances at
the dates indicated:
September December September
30, June 30, March 31, 31, 30,
2016 2016 2016 2015 2015
-----------------------------------------------------------
(In thousands)
Beginning
balance $1,898,142 $1,829,909 $1,814,281 $1,726,033 $1,668,831
New credit
extended 129,064 121,753 105,843 155,745 149,502
Acquisition of
Home State Bank 445,529 - - - -
Net existing
credit advanced 153,390 87,524 50,482 61,165 60,784
Net pay-downs
and maturities (214,089) (142,516) (139,914) (129,189) (152,279)
Charge-offs and
other 614 1,472 (783) 527 (805)
-----------------------------------------------------------
Gross loans 2,412,650 1,898,142 1,829,909 1,814,281 1,726,033
Deferred costs 349 401 337 255 118
-----------------------------------------------------------
Loans, net $2,412,999 $1,898,543 $1,830,246 $1,814,536 $1,726,151
===========================================================
Net change -
loans
outstanding $ 514,456 $ 68,297 $ 15,710 $ 88,385 $ 57,493
During the third quarter 2016, loans net of deferred costs and fees increased $514.5 million. Loans acquired in the transaction with Home State during the third quarter 2016 were $445.5 million. Excluding the loans acquired from Home State, loans grew $68.9 million during the third quarter 2016 despite $214.1 million in net pay-downs and maturities during the quarter. In addition to contractual loan principal payments and maturities, the third quarter 2016 included $37.7 million in early payoffs related to our borrowers selling their assets, $24.3 million in payoffs due to our strategic decision to not match certain financing terms offered by competitors, $27.8 million in loan pay-downs related to fluctuations in loan balances to existing customers.
During the twelve months ended September 30, 2016, loans net of deferred costs and fees increased by $686.8 million. Excluding the loans acquired in the transaction with Home State, loans grew $241.3 million, or 14.0% over the twelve months ending September 30, 2016.
The following table sets forth the amounts of deposits outstanding at the
dates indicated:
September December September
30, June 30, March 31, 31, 30,
2016 2016 2016 2015 2015
------------------------------------------------------
(In thousands)
Noninterest-bearing
demand $ 857,064 $ 638,110 $ 631,544 $ 612,371 $ 683,797
Interest-bearing
demand and NOW 802,043 383,492 392,808 381,834 405,092
Money market 554,447 392,730 411,582 397,371 369,023
Savings 160,698 149,798 155,673 151,130 144,602
Time 377,860 283,231 281,110 259,139 244,815
------------------------------------------------------
Total deposits $2,752,112 $1,847,361 $1,872,717 $1,801,845 $1,847,329
======================================================
At September 30, 2016, non-maturing deposits were $2.4 billion, an increase of $831.5 million as compared to December 31, 2015, and an increase of $771.7 million as compared to September 30, 2015. Deposits acquired in the transaction with Home State were $769.7 million, of which $685.7 million were non-maturing deposits. During the third quarter 2016, deposits grew $135.0 million, or 29.1% annualized, excluding the deposits acquired in the transaction with Home State. At September 30, 2016, noninterest-bearing deposits as a percentage of total deposits were 31.1%, as compared to 34.0% at December 31, 2015, and 37.0% at September 30, 2015.
At September 30, 2016, securities sold under agreements to repurchase were $35.9 million, an increase of $9.5 million as compared to December 31, 2015, and an increase of $5.8 million as compared to September 30, 2015. Securities sold under agreements to repurchase acquired in the transaction with Home State were $20.0 million.
Total FHLB borrowings were $122.5 million at September 30, 2016, all of which were term advances. During the third quarter 2016, the Company was able to repay all outstanding borrowings on its FHLB line of credit as of June 30, 2016, utilizing funds raised from increased deposit balances as well as proceeds from securities sold subsequent to the transaction with Home State. At December 31, 2015, total FHLB borrowings consisted of $185.8 million in overnight advances and $95.0 million in term advances.
Regulatory Capital Ratios
The following table provides the capital ratios of the Company and the Bank
as of the dates presented, along with the applicable regulatory capital
requirements:
Minimum
Requirement
for
"Adequately
Capitalized"
Institution Minimum
plus fully Requirement
Ratio at Ratio at phased in for
September December Capital "Well-
30, 31, Conservation Capitalized"
2016 2015 Buffer Institution
-----------------------------------------------
Common Equity Tier 1 Risk-
Based Capital Ratio
Consolidated 10.79% 10.94% 7.00% N/A
Guaranty Bank and Trust
Company 12.74% 11.96% 7.00% 6.50%
Tier 1 Risk-Based Capital
Ratio
Consolidated 11.72% 12.11% 8.50% N/A
Guaranty Bank and Trust
Company 12.74% 11.96% 8.50% 8.00%
Total Risk-Based Capital
Ratio
Consolidated 14.07% 13.24% 10.50% N/A
Guaranty Bank and Trust
Company 13.61% 13.09% 10.50% 10.00%
Leverage Ratio
Consolidated 12.40% 10.68% 4.00% N/A
Guaranty Bank and Trust
Company 13.48% 10.55% 4.00% 5.00%
At September 30, 2016, all of our regulatory capital ratios remained well above minimum requirements for a "well-capitalized" institution. The Company's consolidated Tier 1 risk-based capital ratio decreased relative to December 31, 2015 whereas the Company's total risk-based capital ratios increased compared to December 31, 2015. The transaction with Home State was financed through the issuance of $40.0 million in fixed-to-floating rate subordinated notes, which qualified for treatment as Tier 2 capital and by the issuance of common stock valued at $117.5 million, which qualified as Common Equity Tier 1 capital.
Asset Quality
The following table presents select asset quality data, including quarterly
charged-off loans, recoveries and provision (credit) for loan losses as of
the dates indicated:
September December September
30, June 30, March 31, 31, 30,
2016 2016 2015 2015 2015
------------------------------------------------------
(Dollars in thousands)
Originated nonaccrual
loans and leases $ 3,399 $ 13,326 $ 13,401 $ 14,474 $ 14,512
Purchased nonaccrual
loans and leases 2,108 - - - -
Accruing loans past
due 90 days or more
(1) 335 - - - -
------------------------------------------------------
Total nonperforming
loans (NPLs) $ 5,842 $ 13,326 $ 13,401 $ 14,474 $ 14,512
Other real estate
owned and foreclosed
assets 637 674 674 674 1,371
------------------------------------------------------
Total nonperforming
assets (NPAs) $ 6,479 $ 14,000 $ 14,075 $ 15,148 $ 15,883
======================================================
Total classified
assets $ 34,675 $ 25,644 $ 27,191 $ 26,428 $ 31,208
======================================================
Accruing loans past
due 30-89 days (1) $ 2,157 $ 2,386 $ 1,398 $ 2,091 $ 3,461
======================================================
Charged-off loans $ (72) $ (57) $ (302) $ (66) $ (75)
Recoveries 295 72 311 184 101
------------------------------------------------------
Net recoveries $ 223 $ 15 $ 9 $ 118 $ 26
======================================================
Provision (credit)
for loan losses $ 27 $ 10 $ 16 $ (8) $ 14
======================================================
Allowance for loan
losses $ 23,300 $ 23,050 $ 23,025 $ 23,000 $ 22,890
======================================================
Unaccreted discount $ 15,721 $ - $ - $ - $ -
======================================================
Selected ratios:
NPLs to loans, net of
deferred costs (2) 0.24% 0.70% 0.73% 0.80% 0.84%
NPAs to total assets 0.19% 0.58% 0.60% 0.64% 0.69%
Allowance for loan
losses plus
unaccreted discount
to NPLs 667.94% 172.97% 171.82% 158.91% 157.73%
Allowance for loan
losses to loans, net
of deferred costs
(2) 0.97% 1.21% 1.26% 1.27% 1.33%
Allowance for loan
losses plus
unaccreted discount
to loans, net of
deferred costs (2) 1.61% 1.21% 1.26% 1.27% 1.33%
Loans 30-89 days past
due to loans, net of
deferred costs (2) 0.09% 0.13% 0.08% 0.12% 0.20%
Texas ratio (3) 1.77% 5.17% 5.14% 5.65% 6.09%
Classified asset
ratio (4) 10.69% 10.55% 11.56% 11.66% 13.51%
_______________
(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) Loans, net of deferred costs, exclude loans held for sale.
(3) Texas ratio defined as total NPAs divided by subsidiary bank only Tier 1
Capital plus allowance for loan losses.
(4) Classified asset ratio defined as total classified assets to subsidiary
bank only Tier 1 Capital plus allowance for loan losses.
The following tables summarize past due loans held for investment by class
as of the dates indicated:
90 Days + Total Total
30-89 Past Due Nonaccrual Loans,
Days Past and Still and Held for
September 30, 2016 Due Accruing Nonaccrual Past Due Investment
--------------------- ------------------------------------------------------
(In thousands)
Commercial and
residential real
estate $ 803 $ - $ 3,008 $ 3,811 $1,752,366
Construction - - - - 75,614
Commercial 1,090 335 828 2,253 400,339
Consumer 57 - 248 305 81,778
Other 207 - 1,423 1,630 102,902
------------------------------------------------------
Total $ 2,157 $ 335 $ 5,507 $ 7,999 $2,412,999
======================================================
90 Days + Total Total
30-89 Past Due Nonaccrual Loans,
Days Past and Still and Held for
December 31, 2015 Due Accruing Nonaccrual Past Due Investment
--------------------- ------------------------------------------------------
(In thousands)
Commercial and
residential real
estate $ 653 $ - $ 11,905 $ 12,558 $1,281,881
Construction - - 986 986 107,185
Commercial 1,147 - 874 2,021 323,598
Consumer 291 - 459 750 66,297
Other - - 250 250 35,575
------------------------------------------------------
Total $ 2,091 $ - $ 14,474 $ 16,565 $1,814,536
======================================================
During the third quarter 2016, nonperforming assets decreased by $7.5 million from June 30, 2016 and $9.4 million from September 30, 2015. The $7.5 million decline in nonperforming assets during the third quarter 2016 included the transfer of a $9.4 million out-of-state loan syndication to performing status. As a result of the transaction with Home State, $2.1 million of nonperforming loans and $0.1 million of other real estate owned were acquired. At September 30, 2016, performing troubled debt restructurings were $24.4 million, as compared to $13.1 million at June 30, 2016 and $12.1 million at September 30, 2015. The increase in performing troubled debt restructurings in the third quarter 2016, as compared the second quarter 2016, was primarily due to the transfer of a $9.4 million out-of-state loan syndication to performing status, described above.
At September 30, 2016, classified assets represented 10.7% of bank-level Tier 1 risk-based capital plus allowance for loan losses, as compared to 11.7% at December 31, 2015, and 13.5% at September 30, 2015.
All acquired loans are initially recorded at their estimated fair value which encompasses an estimate of credit losses. The table below presents two alternative views of credit risk coverage ratios for loans, reflecting adjustments for acquired loans and the associated purchase accounting discount:
Allowance /
Loans Discount Coverage Ratio
------------ ------------ ---------------
(Dollars in thousands)
September 30, 2016 reported
balance $ 2,412,999 23,300 0.97%
Unaccreted net discount 15,721 15,721
------------ ------------ ---------------
Adjusted September 30, 2016
balance $ 2,428,720 $ 39,021 1.61%
============ ============ ===============
Net recoveries of $0.2 million were recognized during the third quarter 2016, as compared to immaterial net recoveries in the second quarter of 2016 and immaterial net recoveries in the third quarter 2015. During the third quarter 2016, the Bank recorded an immaterial provision for loan losses as compared to immaterial provisions in both the second quarter 2016 and the third quarter 2015. 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 September 30, 2016, the Company had 28,349,107 shares of common stock outstanding, consisting of 27,330,107 shares of voting common stock, of which 564,376 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, and operating earnings adjusted for merger-related expenses, OREO expenses, debt termination expense, impairments of long-lived assets, securities gains and losses 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
--------------------------------------
September September
30, June 30, 30,
2016 2016 2015
--------------------------------------
(Dollars in thousands, except per
share amounts)
Net income $ 5,761 $ 5,685 $ 6,002
Expenses adjusted for:
Expenses (gains) related to other
real estate owned, net 20 5 (31)
Merger-related expenses 2,205 347 -
Impairment of long-lived assets - - -
Income adjusted for:
Loss on sale of securities 66 101 -
Gain on sale of other assets - - -
--------------------------------------
Pre-tax earnings adjustment 2,291 453 (31)
--------------------------------------
Tax effect of adjustments (1) (776) (90) 12
--------------------------------------
Tax effected operating earnings
adjustment 1,515 363 (19)
--------------------------------------
Operating earnings $ 7,276 $ 6,048 $ 5,983
======================================
Average assets $ 2,613,133 $ 2,356,964 $ 2,268,603
Average equity $ 253,570 $ 228,060 $ 216,742
Fully diluted average common shares
outstanding: 22,957,268 21,361,712 21,224,989
Earnings per common share-diluted -
operating: $ 0.32 $ 0.28 $ 0.28
Earnings per common share-diluted: $ 0.25 $ 0.27 $ 0.28
ROAA - operating 1.11% 1.03% 1.05%
ROAA (GAAP) 0.88% 0.97% 1.05%
ROAE - operating 11.42% 10.67% 10.95%
ROAE (GAAP) 9.04% 10.03% 10.99%
Nine Months Ended
-------------------------
September September
30, 30,
2016 2015
-------------------------
(Dollars in thousands,
except per share amounts)
Net income $ 16,981 $ 16,563
Expenses adjusted for:
Expenses (gains) related to other
real estate owned, net 27 64
Merger-related expenses 3,227 -
Impairment of long-lived assets - 122
Income adjusted for:
Loss on sale of securities 122 -
Gain on sale of other assets (14) -
-------------------------
Pre-tax earnings adjustment 3,362 186
-------------------------
Tax effect of adjustments (1) (1,101) (71)
-------------------------
Tax effected operating earnings
adjustment 2,261 115
-------------------------
Operating earnings $ 19,242 $ 16,678
=========================
Average assets $ 2,443,707 $ 2,192,948
Average equity $ 235,337 $ 213,490
Fully diluted average common shares
outstanding: 21,965,047 21,215,435
Earnings per common share-diluted -
operating: $ 0.88 $ 0.79
Earnings per common share-diluted: $ 0.77 $ 0.78
ROAA - operating 1.05% 1.02%
ROAA (GAAP) 0.93% 1.01%
ROAE - operating 10.92% 10.44%
ROAE (GAAP) 9.64% 10.37%
_______________
(1) Tax effect calculated using a combined federal and state marginal tax
rate of 38.01%, adjusted for tax effect of nondeductible
merger-related expenses.
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
September September
30, December 31, 30,
2016 2015 2015
--------------------------------------
(Dollars in thousands, except per
share amounts)
Total stockholders' equity $ 351,360 $ 221,639 $ 218,803
Less: Goodwill and other intangible
assets (72,153) (5,173) (5,668)
--------------------------------------
Tangible common equity $ 279,207 $ 216,466 $ 213,135
======================================
Number of common shares outstanding 28,349,107 21,704,852 21,728,202
Book value per common share $ 12.39 $ 10.21 $ 10.07
Tangible book value per common
share $ 9.85 $ 9.97 $ 9.81
Tangible Common Equity Ratio
September September
30, December 31, 30,
2016 2015 2015
--------------------------------------
(Dollars in thousands)
Total stockholders' equity $ 351,360 $ 221,639 $ 218,803
Less: Goodwill and other intangible
assets (72,153) (5,173) (5,668)
--------------------------------------
Tangible common equity $ 279,207 $ 216,466 $ 213,135
======================================
Total assets $ 3,346,265 $ 2,368,525 $ 2,285,630
Less: Goodwill and other intangible
assets (72,153) (5,173) (5,668)
--------------------------------------
Tangible assets $ 3,274,112 $ 2,363,352 $ 2,279,962
======================================
Equity ratio - GAAP (total
stockholders' equity / total
assets) 10.50% 9.36% 9.57%
Tangible common equity ratio
(tangible common equity / tangible
assets) 8.53% 9.16% 9.35%
About Guaranty Bancorp
Guaranty Bancorp is a $3.3 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; 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; 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
September December September
30, 31, 30,
2016 2015 2015
-----------------------------------
(In thousands)
Assets
Cash and due from banks $ 163,908 $ 26,711 $ 23,750
-----------------------------------
Time deposits with banks 504 - -
Securities available for sale, at fair
value 364,349 255,431 276,353
Securities held to maturity 183,184 148,761 140,928
Bank stocks, at cost 14,558 20,500 16,018
-----------------------------------
Total investments 562,091 424,692 433,299
-----------------------------------
Loans held for sale - - 8
Loans, held for investment, net of
deferred costs 2,412,999 1,814,536 1,726,143
Less allowance for loan losses (23,300) (23,000) (22,890)
-----------------------------------
Net loans, held for investment 2,389,699 1,791,536 1,703,253
-----------------------------------
Premises and equipment, net 68,779 48,308 48,564
Other real estate owned and foreclosed
assets 637 674 1,371
Goodwill 56,148 - -
Other intangible assets, net 16,005 5,173 5,668
Bank owned life insurance 65,030 48,909 48,537
Other assets 23,464 22,522 21,180
-----------------------------------
Total assets $3,346,265 $2,368,525 $2,285,630
===================================
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing demand $ 857,064 $ 612,371 $ 683,797
Interest-bearing demand and NOW 802,043 381,834 405,092
Money market 554,447 397,371 369,023
Savings 160,698 151,130 144,602
Time 377,860 259,139 244,815
-----------------------------------
Total deposits 2,752,112 1,801,845 1,847,329
-----------------------------------
Securities sold under agreement to
repurchase and federal funds purchased 35,936 26,477 30,151
Federal Home Loan Bank term notes 122,521 95,000 95,000
Federal Home Loan Bank line of credit
borrowing - 185,847 56,300
Subordinated debentures 64,973 25,774 25,774
Interest payable and other liabilities 19,363 11,943 12,273
-----------------------------------
Total liabilities 2,994,905 2,146,886 2,066,827
-----------------------------------
Stockholders' equity:
Common stock and additional paid-in
capital - common stock 831,431 712,334 711,610
Accumulated deficit (372,495) (382,147) (385,930)
Accumulated other comprehensive loss (2,936) (4,805) (3,421)
Treasury stock (104,640) (103,743) (103,456)
-----------------------------------
Total stockholders' equity 351,360 221,639 218,803
-----------------------------------
Total liabilities and
stockholders' equity $3,346,265 $2,368,525 $2,285,630
===================================
GUARANTY BANCORP AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- ------------------------
2016 2015 2016 2015
------------------------- ------------------------
(In thousands, except share and per share data)
Interest income:
Loans, including costs
and fees $ 22,295 $ 17,829 $ 60,206 $ 51,749
Investment securities:
Taxable 1,741 2,064 5,454 6,265
Tax-exempt 971 719 2,459 2,133
Dividends 237 249 829 724
Federal funds sold and
other 98 2 105 5
------------------------- ------------------------
Total interest income 25,342 20,863 69,053 60,876
------------------------- ------------------------
Interest expense:
Deposits 1,228 866 3,299 2,284
Securities sold under
agreement to
repurchase and federal
funds purchased 13 11 31 31
Borrowings 636 375 1,992 832
Subordinated debentures 715 205 1,165 606
------------------------- ------------------------
Total interest
expense 2,592 1,457 6,487 3,753
------------------------- ------------------------
Net interest income 22,750 19,406 62,566 57,123
Provision for loan losses 27 14 53 104
------------------------- ------------------------
Net interest income,
after provision for
loan losses 22,723 19,392 62,513 57,019
Noninterest income:
Deposit service and
other fees 2,581 2,309 7,042 6,682
Investment management
and trust 1,333 1,292 3,889 3,964
Increase in cash
surrender value of
life insurance 490 447 1,398 1,316
Loss on sale of
securities (66) - (122) -
Gain on sale of SBA
loans 208 232 472 681
Other 159 119 346 275
------------------------- ------------------------
Total noninterest
income 4,705 4,399 13,025 12,918
Noninterest expense:
Salaries and employee
benefits 10,984 8,318 28,292 24,921
Occupancy expense 1,417 1,487 4,053 4,814
Furniture and equipment 750 740 2,281 2,206
Amortization of
intangible assets 389 495 868 1,486
Other real estate
owned, net 20 (31) 27 64
Insurance and
assessments 608 604 1,818 1,795
Professional fees 962 838 2,725 2,520
Impairment of long-
lived assets - - - 122
Other general and
administrative 3,494 2,415 9,486 7,164
------------------------- ------------------------
Total noninterest
expense 18,624 14,866 49,550 45,092
------------------------- ------------------------
Income before income
taxes 8,804 8,925 25,988 24,845
Income tax expense 3,043 2,923 9,007 8,282
------------------------- ------------------------
Net income $ 5,761 $ 6,002 $ 16,981 $ 16,563
========================= ========================
Earnings per common
share-basic: $ 0.25 $ 0.28 $ 0.78 $ 0.79
Earnings per common
share-diluted: 0.25 0.28 0.77 0.78
Dividend declared per
common share: $ 0.12 $ 0.10 $ 0.35 $ 0.30
Weighted average common
shares outstanding-
basic: 22,811,386 21,076,380 21,750,153 21,061,445
Weighted average common
shares outstanding-
diluted: 22,957,268 21,224,989 21,965,047 21,215,435
GUARANTY BANCORP AND SUBSIDIARIES
Unaudited Consolidated Average Balance Sheets
QTD Average YTD Average
-------------------------------- ---------------------
September September September September
30, June 30, 30, 30, 30,
2016 2016 2015 2016 2015
-------------------------------- ---------------------
(In thousands)
Assets
Interest earning
assets
Loans, net of
deferred costs $2,010,622 $1,845,337 $1,703,218 $1,891,756 $1,617,724
Securities 424,133 386,453 436,643 408,065 444,778
Other earning
assets 38,012 2,822 1,946 14,634 2,085
-------------------------------- ---------------------
Average earning
assets 2,472,767 2,234,612 2,141,807 2,314,455 2,064,587
Other assets 140,366 122,352 126,796 129,252 128,361
-------------------------------- ---------------------
Total average assets $2,613,133 $2,356,964 $2,268,603 $2,443,707 $2,192,948
================================ =====================
Liabilities and
Stockholders' Equity
Average liabilities:
Average deposits:
Noninterest-bearing
deposits $ 707,283 $ 616,046 $ 637,184 $ 645,249 $ 639,694
Interest-bearing
deposits 1,399,442 1,212,332 1,159,829 1,273,387 1,093,813
-------------------------------- ---------------------
Average deposits 2,106,725 1,828,378 1,797,013 1,918,636 1,733,507
Other interest-
bearing liabilities 238,436 287,887 242,330 276,545 233,066
Other liabilities 14,402 12,639 12,518 13,189 12,885
-------------------------------- ---------------------
Total average
liabilities 2,359,563 2,128,904 2,051,861 2,208,370 1,979,458
Average stockholders'
equity 253,570 228,060 216,742 235,337 213,490
-------------------------------- ---------------------
Total average
liabilities and
stockholders' equity $2,613,133 $2,356,964 $2,268,603 $2,443,707 $2,192,948
================================ =====================
Contacts: Paul W. Taylor President and Chief Executive Officer Guaranty Bancorp 1331 Seventeenth Street, Suite 200 Denver, CO 80202 (303) 293-5563 Christopher G. Treece E.V.P., Chief Financial Officer and SecretaryGuaranty Bancorp1331 Seventeenth Street, Suite 200Denver, CO 80202(303) 675-1194
Source: Guaranty Bancorp
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