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Guaranty Bancorp Announces Third Quarter 2017 Financial Results

  • Expanded quarterly return on average assets to 1.17%, compared to 0.88% in the third quarter 2016
  • Increased quarterly net income by $4.3 million, or 74.4%, compared to the third quarter 2016
  • Increased loans $83.4 million, or 12.8%, annualized during the third quarter 2017
  • Grew deposits $134.4 million, or 19.3% annualized during the third quarter 2017

DENVER, Oct. 18, 2017 (GLOBE NEWSWIRE) -- Guaranty Bancorp (Nasdaq:GBNK) (“we”, “our” or “the Company”), a community bank holding company based in Colorado, today announced third quarter 2017 net income of $10.1 million, or $0.36 per basic and diluted common share, compared to $5.8 million, or $0.25 per basic and diluted common share in the third quarter 2016. For the nine months ended September 30, 2017, net income was $30.0 million or $1.08 per basic common share and $1.07 per diluted common share, compared to $17.3 million, or $0.80 per basic common share and $0.79 per diluted common share for the same period in 2016.

“We continue to deliver very solid profitability driven by strong loan and deposit growth,” said Paul W. Taylor, President and Chief Executive Officer of Guaranty Bancorp. “For the third quarter 2017, return on average assets increased by 33% to 1.17% due to balance sheet growth, expanded net interest margin, focus on noninterest income improvement, and diligent expense management.”

Taylor continued, “I am also pleased to announce that we have received all approvals required for our previously announced acquisition of Castle Rock Bank Holding Company. We expect to close the transaction and convert our systems in the fourth quarter of 2017. This acquisition will result in $3.7 billion in combined pro forma assets and further strengthens our position as the premier community bank in Colorado with our headquarters and all of our branches located within the state.”

The following tables highlight our key financial measures for 2017 and 2016. The significant improvement from 2016 to 2017 was favorably impacted by the successful integration of Home State Bancorp ("Home State") following its acquisition in September 2016, better efficiency, and stronger net interest margin on a higher earning asset base.

_______________________________________
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 30, June 30, September 30, September 30, September 30,
2017 2017 2016 2017 2016
(Dollars in thousands, except per share amounts)
Net income$10,054 $10,125 $5,765 $30,019 $17,306
Operating earnings (1) 11,307 10,232 7,281 31,371 19,568
Earnings per common share - diluted 0.36 0.36 0.25 1.07 0.79
Earnings per common share - diluted - operating (1) 0.40 0.36 0.32 1.11 0.89
Return on average assets 1.17% 1.19% 0.88% 1.18% 0.95%
Return on average assets - operating (1) 1.31% 1.21% 1.11% 1.23% 1.07%
Return on average equity 10.70% 11.13% 9.04% 10.99% 9.82%
Return on average equity - operating (1) 12.03% 11.25% 11.42% 11.49% 11.11%
Net interest margin 3.91% 3.74% 3.66% 3.77% 3.61%
Efficiency ratio - tax equivalent (2) 50.02% 53.77% 56.78% 52.97% 58.51%
Average cost of interest-bearing liabilities (including noninterest-bearing deposits) 0.44% 0.46% 0.44% 0.44% 0.39%
Average cost of deposits (including noninterest-bearing deposits) 0.27% 0.26% 0.23% 0.25% 0.23%
________________________
(1) See reconciliation of non-GAAP financial measures 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, 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
September 30, June 30, March 31, December 31, September 30,
2017 2017 2017 2016 2016
(Dollars in thousands, except per share amounts)
Total investments$576,459 $569,812 $584,746 $590,856 $562,091
Total loans, net of deferred costs and fees 2,661,866 2,578,472 2,570,750 2,519,138 2,412,999
Allowance for loan losses (22,900) (23,125) (23,175) (23,250) (23,300)
Total assets 3,510,046 3,403,852 3,399,651 3,366,427 3,346,265
Total deposits 2,898,060 2,763,623 2,765,630 2,699,084 2,752,112
Book value per common share 13.21 12.94 12.64 12.44 12.39
Tangible book value per common share (1) 10.75 10.46 10.13 9.91 9.85
Equity ratio - GAAP 10.69% 10.80% 10.56% 10.47% 10.50%
Tangible common equity ratio (1) 8.88% 8.91% 8.65% 8.52% 8.53%
Total risk-based capital ratio 13.50% 13.65% 13.44% 13.58% 14.07%
________________________
(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
September 30, 2017 June 30, 2017 September 30, 2016
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)$2,593,667$30,9024.73% $2,581,043$28,9764.50% $2,010,622$22,2954.41%
Investment securities (1)
Taxable 339,671 2,2212.59% 354,230 2,3562.67% 276,227 1,7412.51%
Tax-exempt 210,363 1,2332.33% 201,893 1,2432.47% 130,270 9712.97%
Bank Stocks (4) 19,993 2755.46% 23,531 3475.91% 17,636 2375.35%
Other earning assets 18,060 571.25% 4,549 110.97% 38,012 981.03%
Total interest-earning assets 3,181,754 34,6884.33% 3,165,246 32,9334.17% 2,472,767 25,3424.08%
Non-earning assets:
Cash and due from banks 35,426 34,714 29,266
Other assets 206,044 204,149 111,100
Total assets$3,423,224 $3,404,109 $2,613,133
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
Deposits:
Interest-bearing demand and NOW$850,670$3800.18% $807,883$3540.18% $506,179$1700.13%
Money market 493,433 4590.37% 479,009 4020.34% 431,994 2970.27%
Savings 182,190 510.11% 179,862 490.11% 154,156 430.11%
Time certificates of deposit 420,102 1,0490.99% 414,533 9810.95% 307,113 7180.93%
Total interest-bearing deposits 1,946,395 1,9390.40% 1,881,287 1,7860.38% 1,399,442 1,2280.35%
Borrowings:
Repurchase agreements 33,958 160.19% 31,794 150.19% 23,533 130.22%
Federal funds purchased 1 -1.46% 1 -1.46% 1 -0.98%
Subordinated debentures 65,035 8685.30% 65,014 8565.28% 57,844 7154.92%
Borrowings 91,087 5312.31% 182,617 7771.71% 157,058 6361.61%
Total interest-bearing liabilities 2,136,476 3,3540.62% 2,160,713 3,4340.64% 1,637,878 2,5920.63%
Noninterest bearing liabilities:
Demand deposits 898,262 864,359 707,283
Other liabilities 15,739 14,078 14,402
Total liabilities 3,050,477 3,039,150 2,359,563
Stockholders' Equity 372,747 364,959 253,570
Total liabilities and stockholders' equity$3,423,224 $3,404,109 $2,613,133
Net interest income $31,334 $29,499 $22,750
Net interest margin 3.91% 3.74% 3.66%
Net interest margin, fully tax equivalent (2) 4.02% 3.85% 3.75%

(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 38.01%.
(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)
Nine Months Ended
Nine Months Ended
September 30, 2017 September 30, 2016
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)$2,571,906$87,2704.54% $1,891,756$60,2064.25%
Investment securities (1)
Taxable 351,818 6,8922.62% 283,215 5,4542.57%
Tax-exempt 204,814 3,7132.42% 105,290 2,4593.12%
Bank Stocks (4) 22,572 1,0115.99% 19,560 8295.66%
Other earning assets 8,953 761.13% 14,634 1050.96%
Total interest-earning assets 3,160,063 98,9624.19% 2,314,455 69,0533.99%
Non-earning assets:
Cash and due from banks 35,224 26,345
Other assets 205,373 102,907
Total assets$3,400,660 $2,443,707
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
Deposits:
Interest-bearing demand and NOW$810,763$1,0910.18% $421,109$3560.11%
Money market 487,635 1,1940.33% 410,815 8230.27%
Savings 177,968 1470.11% 152,843 1270.11%
Time certificates of deposit 403,068 2,8300.94% 288,620 1,9930.92%
Total interest-bearing deposits 1,879,434 5,2620.37% 1,273,387 3,2990.35%
Borrowings:
Repurchase agreements 34,063 480.19% 21,324 310.19%
Federal funds purchased 1 -1.46% 2 -0.98%
Subordinated debentures 65,014 2,5685.28% 36,542 1,1654.26%
Borrowings 161,023 2,0791.73% 218,677 1,9921.22%
Total interest-bearing liabilities 2,139,535 9,9570.62% 1,549,932 6,4870.56%
Noninterest bearing liabilities:
Demand deposits 881,017 645,249
Other liabilities 15,053 13,189
Total liabilities 3,035,605 2,208,370
Stockholders' Equity 365,055 235,337
Total liabilities and stockholders' equity$3,400,660 $2,443,707
Net interest income $89,005 $62,566
Net interest margin 3.77% 3.61%
Net interest margin, fully tax equivalent (2) 3.88% 3.69%

(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 38.01%.
(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 $8.6 million in the third quarter 2017, compared to the same quarter in 2016, and increased $1.8 million, compared to the second quarter 2017. The increase in net interest income was driven by an increase in average earning assets, the accretion of the discount on loans acquired in the Home State transaction and $0.9 million in an interest recovery on an impaired loan paid off in the third quarter 2017.

Beginning in the third quarter 2016, net interest margin and loan yield were favorably impacted by the accretion of the discount on loans acquired in the Home State transaction. Accretion on acquired loans was $1.0 million in the third quarter 2017, compared to $1.2 million in the second quarter 2017, and compared to $0.3 million in the third quarter 2016. Third quarter 2017 interest income included $0.6 million in accreted discount on loans paid off during the quarter.

For the nine months ended September 30, 2017, net interest income increased $26.4 million, compared to the same period in 2016, primarily due to an $845.6 million, or 36.5% increase in average earning assets, partially offset by a $589.6 million, or 38.0% increase in average interest bearing liabilities. Accretion of discount on acquired loans was $3.0 million during the nine months ended September 30, 2017, compared to $0.3 million during the same period in 2016. The Company acquired $445.5 million in loans and $769.7 million in deposits as a result of the September 2016 Home State transaction.

Noninterest Income

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

Three Months Ended Nine Months Ended
September 30,
2017
June 30,
2017
September 30,
2016
September 30,
2017
September 30,
2016
(In thousands)
Noninterest income:
Deposit service and other fees$3,580 $3,545$2,581 $10,405 $7,042
Investment management and trust 1,478 1,483 1,333 4,482 3,889
Increase in cash surrender value of life insurance 674 615 490 1,884 1,398
Loss on sale of securities (86) - (66) (86) (122)
Gain on sale of SBA loans 143 447 208 971 472
Other 341 252 159 1,218 346
Total noninterest income$6,130 $6,342$4,705 $18,874 $13,025

Beginning late in the third quarter 2016, noninterest income was favorably impacted by the Home State transaction, affecting deposit service and other fees, investment management and trust and merchant income which is included in “other” in the table above.

Noninterest income increased $1.4 million, or 30.3% in the third quarter 2017, compared to the same quarter in 2016 and decreased $0.2 million, compared to the second quarter 2017. The $0.2 million decline in noninterest income in the third quarter 2017, compared to the second quarter 2017, was primarily due to lower gains on sales of Small Business Administration (SBA) loans in the third quarter 2017.

For the nine months ended September 30, 2017, noninterest income increased $5.8 million, or 44.9%, compared to the same period in 2016. In addition to the impact of the Home State transaction, gain on sale of SBA loans increased $0.5 million, bank-owned life insurance increased $0.5 million, investment referral fees increased $0.3 million and interest rate swap income increased $0.2 million for the nine months ended September 30, 2017, compared to the same period in 2016. The Company recorded a $0.3 million gain on sale of its $2.0 million credit card loan portfolio, included in other noninterest income in the table above, in the first quarter 2017.

Noninterest Expense

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

Three Months Ended Nine Months Ended
September 30,
2017
June 30,
2017
September 30,
2016
September 30,
2017
September 30,
2016
(In thousands)
Noninterest expense:
Salaries and employee benefits$11,736 $11,247$10,984 $34,909$28,292
Occupancy expense 1,714 1,674 1,417 4,940 4,053
Furniture and equipment 974 975 750 2,894 2,281
Amortization of intangible assets 672 648 389 1,969 868
Other real estate owned, net (20) 126 20 174 27
Insurance and assessments 642 647 608 1,995 1,818
Professional fees 929 1,252 962 3,155 2,725
Impairment of long-lived assets - 34 - 224 -
Other general and administrative 5,160 3,900 3,494 12,579 9,486
Total noninterest expense$21,807 $20,503$18,624 $62,839$49,550

The increases in noninterest expense for the three and nine months ended September 30, 2017, compared to the same periods in 2016 were due primarily to the acquisition of Home State in September 2016. The three month and nine month periods ended September 30, 2017 include full quarters of expenses related to the 2016 acquisition, resulting in higher overall expenses in 2017 compared to the same periods in 2016, however expenses as a percent of average assets declined from 2.0% in 2016 to 1.8% in 2017.

During the third quarter 2017, merger-related expenses related to the pending acquisition of Castle Rock Bank Holding Company (Castle Rock) were $0.3 million and were included in other general and administrative expense. During the third quarter 2016, merger-related expenses related to the acquisition of Home State were $2.2 million, consisting of $1.4 million in salaries and employee benefits expense and $0.8 million in other general and administrative expense. No merger-related expenses were incurred in the second quarter 2017.

During the third quarter 2017, we settled litigation on a commercial real estate matter for $1.6 million, included in other general and administrative expense in the table above.

For the nine months ended September 30, 2017, salaries and employee benefits increased $6.6 million, compared to the same period in 2016, primarily due to a $4.0 million increase in base salary expense and a $1.8 million increase in our self-funded medical plan. Average full-time equivalent employees increased from 384 for the nine months ended September 30, 2016 to 494 for the nine months ended September 30, 2017, primarily due to the acquisition of Home State. Other general and administrative expense increased $3.1 million for the nine months ended September 30, 2017, compared to the same period in 2016 and consisted of the $1.6 million settlement of a litigation claim mentioned above, a $1.2 million increase in data processing expense, a $0.5 million increase in debit card interchange expense and a $0.4 million increase in communication expense. These increases in other general and administrative expense during the nine months ended September 30, 2017, compared to the same period in 2016, were partially offset by a $1.5 million decrease in merger-related expense. Amortization of intangible assets increased $1.1 million for the nine months ended September 30, 2017, compared to the same period in 2016, due to the amortization of intangible assets recorded in the Home State transaction. Occupancy expense increased $0.9 million for the nine months ended September 30, 2017, compared to the same period in 2016, due to increases in real estate taxes and building maintenance. As a result of the Home State transaction, we acquired eleven branches and closed five branches at the end of 2016.
Balance Sheet

September 30, June 30, March 31, December 31, September 30,
2017 2017 2017 2016 2016
(Dollars in thousands)
Total assets$3,510,046 $3,403,852 $3,399,651 $3,366,427 $3,346,265
Average assets, quarter-to-date 3,423,224 3,404,109 3,374,153 3,336,143 2,613,133
Total loans, net of deferred costs and fees 2,661,866 2,578,472 2,570,750 2,519,138 2,412,999
Total deposits 2,898,060 2,763,623 2,765,630 2,699,084 2,752,112
Equity ratio - GAAP 10.69% 10.80% 10.56% 10.47% 10.50%
Tangible common equity ratio (1) 8.88% 8.91% 8.65% 8.52% 8.53%
________________________
(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:

September 30, June 30, March 31, December 31, September 30,
2017 2017 2017 2016 2016
(In thousands)
Loans held for sale$314 $887 $951 $4,129 $-
Commercial and residential real estate 1,892,828 1,799,114 1,800,194 1,768,424 1,752,113
Construction 81,826 99,632 103,682 88,451 75,603
Commercial 449,450 451,701 451,708 432,083 400,281
Consumer 124,625 122,994 120,231 125,264 81,766
Other 112,763 103,990 93,979 100,848 102,887
Total gross loans 2,661,806 2,578,318 2,570,745 2,519,199 2,412,650
Deferred costs and (fees) 60 154 5 (61) 349
Loans, net 2,661,866 2,578,472 2,570,750 2,519,138 2,412,999
Less allowance for loan losses (22,900) (23,125) (23,175) (23,250) (23,300)
Net loans$2,638,966 $2,555,347 $2,547,575 $2,495,888 $2,389,699

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

September 30, June 30, March 31, December 31, September 30,
2017 2017 2017 2016 2016
(In thousands)
Beginning balance$2,578,318 $2,570,745 $2,519,199 $2,412,650 $1,898,142
New credit extended 192,774 132,420 139,185 232,499 129,064
Acquisition of Home State Bank - - - - 445,529
Net existing credit advanced 59,275 73,298 111,821 142,448 153,390
Net pay-downs and maturities (165,520) (196,511) (195,678) (272,326) (214,089)
Other (3,041) (1,634) (3,782) 3,928 614
Gross loans 2,661,806 2,578,318 2,570,745 2,519,199 2,412,650
Deferred costs and (fees) 60 154 5 (61) 349
Loans, net$2,661,866 $2,578,472 $2,570,750 $2,519,138 $2,412,999
Net change - loans outstanding$83,394 $7,722 $51,612 $106,139 $514,456

During the third quarter 2017, loans net of deferred costs and fees increased $83.4 million, or 12.8% annualized, despite $165.5 million in pay-downs and maturities during the quarter. In addition to contractual loan principal payments and maturities, the third quarter 2017 included $34.2 million in early payoffs related to our borrowers selling their assets, $14.7 million in loan payoffs related to classified loans, $9.2 million in loan pay-downs related to fluctuations in loan balances to existing customers and $4.3 million due to our strategic decision to not match certain financing terms offered by competitors.

During the twelve months ended September 30, 2017, loans net of deferred costs and fees increased by $248.9 million, or 10.3%.

Balance Sheet (continued)

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

September 30, June 30, March 31, December 31, September 30,
2017 2017 2017 2016 2016
(In thousands)
Noninterest-bearing demand$924,361$876,043$868,189$916,632$857,064
Interest-bearing demand and NOW 866,309 811,639 821,518 767,523 802,043
Money market 502,400 475,656 489,921 484,664 554,447
Savings 183,366 183,200 178,157 164,478 160,698
Time 421,624 417,085 407,845 365,787 377,860
Total deposits$2,898,060$2,763,623$2,765,630$2,699,084$2,752,112

At September 30, 2017, deposits had increased $134.4 million, compared to June 30, 2017, primarily due to increases in balances of several large commercial customers. At September 30, 2017, noninterest-bearing deposits as a percentage of total deposits were 31.9%, compared to 31.7% at June 30, 2017 and 31.1% at September 30, 2016.

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:

Ratio at
September 30,
2017
Ratio at
December 31,
2016
Minimum Requirement
for “Adequately Capitalized”
Institution plus fully
phased in Capital
Conservation Buffer
Minimum
Requirement for
"Well-Capitalized"
Institution
Common Equity Tier 1 Risk-Based Capital Ratio
Consolidated10.56%10.46%7.00%N/A
Guaranty Bank and Trust Company12.23%12.43%7.00%6.50%
Tier 1 Risk-Based Capital Ratio
Consolidated11.40%11.34%8.50%N/A
Guaranty Bank and Trust Company12.23%12.43%8.50%8.00%
Total Risk-Based Capital Ratio
Consolidated13.50%13.58%10.50%N/A
Guaranty Bank and Trust Company13.00%13.26%10.50%10.00%
Leverage Ratio
Consolidated10.15%9.81%4.00%N/A
Guaranty Bank and Trust Company10.89%10.76%4.00%5.00%

At September 30, 2017, all of our regulatory capital ratios remained well above minimum requirements for a “well-capitalized” institution. Our consolidated total risk-based capital ratio decreased compared to December 31, 2016, primarily due to an increase in risk-based assets during the nine months ended September 30, 2017. At September 30, 2017, our bank-level capital ratios had declined compared to December 31, 2016, primarily due to the $18.7 million dividend paid to the Company in the second quarter 2017 to fund stockholder dividends and debt servicing during 2017.

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:

September 30, June 30, March 31, December 31, September 30,
2017 2017 2017 2016 2016
(Dollars in thousands)
Originated nonaccrual loans$3,935 $3,332 $3,387 $3,345 $3,399
Purchased credit impaired loans 809 1,290 1,715 1,902 2,108
Accruing loans past due 90 days or more (1) - - - - 335
Total nonperforming loans (NPLs)$4,744 $4,622 $5,102 $5,247 $5,842
Other real estate owned and foreclosed assets - 113 257 569 637
Total nonperforming assets (NPAs)$4,744 $4,735 $5,359 $5,816 $6,479
Total classified assets$28,186 $29,188 $30,201 $33,443 $34,675
Accruing loans past due 30-89 days (1)$9,129 $957 $3,858 $1,337 $2,157
Charged-off loans$(970)$(338)$(125)$(290)$(72)
Recoveries 248 82 45 150 295
Net (charge-offs) recoveries$(722)$(256)$(80)$(140)$223
Provision for loan losses$497 $206 $5 $90 $27
Allowance for loan losses$22,900 $23,125 $23,175 $23,250 $23,300
Unaccreted loan discount (2)$11,654 $12,665 $13,896 $14,682 $15,721
Selected ratios:
NPLs to loans, net of deferred costs and fees (3) 0.18% 0.18% 0.20% 0.21% 0.24%
NPAs to total assets 0.14% 0.14% 0.16% 0.17% 0.19%
Allowance for loan losses to NPLs 482.72% 500.32% 454.23% 443.11% 398.84%
Allowance for loan losses to loans, net of deferred costs and fees (3) 0.86% 0.90% 0.90% 0.92% 0.97%
Loans 30-89 days past due to loans, net of deferred costs and fees (3) 0.34% 0.04% 0.15% 0.05% 0.09%
Texas ratio (4) 1.22% 1.26% 1.39% 1.55% 1.77%
Classified asset ratio (5) 7.57% 8.08% 8.24% 9.79% 10.69%
________________________
(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 transaction.
(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:

September 30, 2017 30-89
Days Past
Due
90 Days +
Past Due
and Still
Accruing
Nonaccrual Total Nonaccrual and
Past Due
Total Loans,
Held for
Investment
(In thousands)
Commercial and residential real estate$113$-$1,722$1,835$1,892,870
Construction - - - - 81,828
Commercial 8,879 - 844 9,723 449,460
Consumer 137 - 264 401 124,628
Other - - 1,914 1,914 112,766
Total$9,129$-$4,744$13,873$2,661,552


December 31, 2016 30-89
Days Past
Due
90 Days +
Past Due
and Still
Accruing
Nonaccrual Total Nonaccrual and
Past Due
Total Loans,
Held for
Investment
(In thousands)
Commercial and residential real estate$1,258$-$2,835$4,093$1,768,381
Construction - - - - 88,449
Commercial 37 - 1,094 1,131 432,072
Consumer 42 - 201 243 125,261
Other - - 1,117 1,117 100,846
Total$1,337$-$5,247$6,584$2,515,009

During the third quarter 2017, nonperforming assets remained level at $4.7 million compared with June 30, 2017 and declined by $1.7 million from $6.5 million as of September 30, 2016. At September 30, 2017, performing troubled debt restructurings were $11.0 million, compared to $23.4 million at June 30, 2017 and $24.4 million at September 30, 2016. The decrease in performing troubled debt restructurings in the third quarter 2017, compared to the same quarter in 2016, was primarily due to the payoff of a $9.4 million out-of-state loan syndication. The increase in loans 30-89 days past due during the third quarter 2017, compared to the fourth quarter 2016 was mostly due to a single commercial loan relationship.

At September 30, 2017, classified assets represented 7.6% of bank-level Tier 1 risk-based capital plus allowance for loan losses, compared to 8.1% at June 30, 2017 and 10.7% at September 30, 2016.

Net charge-offs were $0.7 million during the third quarter of 2017, compared to $0.3 million during the second quarter 2017 and $0.2 million in net recoveries in the third quarter of 2016. During the third quarter 2017, the Bank recorded a $0.5 million provision for loan losses, compared to a $0.2 million provision in the second quarter 2017 and an immaterial provision in the third quarter 2016. 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 September 30, 2017, the Company had 28,401,870 shares of voting common stock outstanding, of which 476,549 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, OREO expenses, debt termination expense, impairments of long-lived assets, litigation-related settlements, 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 Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2017 2017 2016 2017 2016
(Dollars in thousands, except per share amounts)
Net income$10,054 $10,125 $5,765 $30,019 $17,306
Expenses adjusted for:
Expenses (gains) related to other real estate owned, net (20) 126 20 174 27
Merger-related expenses 268 - 2,205 268 3,227
Impairment of long-lived assets - 34 - 224 -
Litigation-related settlements 1,600 - - 1,600 -
Income adjusted for:
Loss on sale of securities 86 - 66 86 122
(Gain) loss on sale of other assets (2) 14 - (259) (14)
Pre-tax earnings adjustment 1,932 174 2,291 2,093 3,362
Tax effect of adjustments (1) (679) (67) (775) (741) (1,100)
Tax effected operating earnings adjustment 1,253 107 1,516 1,352 2,262
Operating earnings$11,307 $10,232 $7,281 $31,371 $19,568
Average assets$3,423,224 $3,404,109 $2,613,133 $3,400,660 $2,443,707
Average equity$372,747 $364,959 $253,570 $365,055 $235,337
Fully diluted average common shares outstanding: 28,120,111 28,095,871 22,984,647 28,140,332 21,995,855
Earnings per common share–diluted:$0.36 $0.36 $0.25 $1.07 $0.79
Earnings per common share–diluted - operating:$0.40 $0.36 $0.32 $1.11 $0.89
ROAA (GAAP) 1.17% 1.19% 0.88% 1.18% 0.95%
ROAA - operating 1.31% 1.21% 1.11% 1.23% 1.07%
ROAE (GAAP) 10.70% 11.13% 9.04% 10.99% 9.82%
ROAE - operating 12.03% 11.25% 11.42% 11.49% 11.11%
________________
(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.

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
September 30, June 30, March 31, December 31, September 30,
2017 2017 2017 2016 2016
(Dollars in thousands, except per share amounts)
Total stockholders' equity$375,152 $367,529 $358,838 $352,378 $351,360
Less: Goodwill and other intangible assets (69,752) (70,424) (71,072) (71,721) (72,153)
Tangible common equity$305,400 $297,105 $287,766 $280,657 $279,207
Number of common shares outstanding 28,401,870 28,406,758 28,393,278 28,334,004 28,349,107
Book value per common share$13.21 $12.94 $12.64 $12.44 $12.39
Tangible book value per common share$10.75 $10.46 $10.13 $9.91 $9.85


Tangible Common Equity Ratio
September 30, June 30, March 31, December 31, September 30,
2017 2017 2017 2016 2016
(Dollars in thousands)
Total stockholders' equity$375,152 $367,529 $358,838 $352,378 $351,360
Less: Goodwill and other intangible assets (69,752) (70,424) (71,072) (71,721) (72,153)
Tangible common equity$305,400 $297,105 $287,766 $280,657 $279,207
Total assets$3,510,046 $3,403,852 $3,399,651 $3,366,427 $3,346,265
Less: Goodwill and other intangible assets (69,752) (70,424) (71,072) (71,721) (72,153)
Tangible assets$3,440,294 $3,333,428 $3,328,579 $3,294,706 $3,274,112
Equity ratio - GAAP (total stockholders' equity / total assets) 10.69% 10.80% 10.56% 10.47% 10.50%
Tangible common equity ratio (tangible common equity / tangible assets) 8.88% 8.91% 8.65% 8.52% 8.53%

About Guaranty Bancorp

Guaranty Bancorp is a $3.5 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; Castle Rock Bank’s business experiencing disruptions due to transaction-related uncertainty or other factors making it more difficult to maintain relationships with employees, customers, other business partners or governmental entities; 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
September 30, December 31, September 30,
2017 2016 2016
(In thousands)
Assets
Cash and due from banks$64,388 $50,111 $163,908
Time deposits with banks 254 254 504
Securities available for sale, at fair value 298,483 324,228 364,349
Securities held to maturity 258,541 243,979 183,184
Bank stocks, at cost 19,435 22,649 14,558
Total investments 576,459 590,856 562,091
Loans held for sale 314 4,129 -
Loans, held for investment, net of deferred costs and fees 2,661,552 2,515,009 2,412,999
Less allowance for loan losses (22,900) (23,250) (23,300)
Net loans, held for investment 2,638,652 2,491,759 2,389,699
Premises and equipment, net 63,280 67,390 68,779
Other real estate owned and foreclosed assets - 569 637
Goodwill 56,404 56,404 56,148
Other intangible assets, net 13,348 15,317 16,005
Bank owned life insurance 74,625 65,538 65,030
Other assets 22,322 24,100 23,464
Total assets$3,510,046 $3,366,427 $3,346,265
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Noninterest-bearing demand$924,361 $916,632 $857,064
Interest-bearing demand and NOW 866,309 767,523 802,043
Money market 502,400 484,664 554,447
Savings 183,366 164,478 160,698
Time 421,624 365,787 377,860
Total deposits 2,898,060 2,699,084 2,752,112
Securities sold under agreement to repurchase 37,943 36,948 35,936
Federal Home Loan Bank line of credit borrowing 51,182 124,691 -
Federal Home Loan Bank term notes 70,000 72,477 122,521
Subordinated debentures, net 65,044 64,981 64,973
Interest payable and other liabilities 12,665 15,868 19,363
Total liabilities 3,134,894 3,014,049 2,994,905
Stockholders’ equity:
Common stock and additional paid-in capital - common stock 834,370 832,098 831,106
Accumulated deficit (348,392) (367,944) (372,170)
Accumulated other comprehensive loss (4,791) (6,726) (2,936)
Treasury stock (106,035) (105,050) (104,640)
Total stockholders’ equity 375,152 352,378 351,360
Total liabilities and stockholders’ equity$3,510,046 $3,366,427 $3,346,265


GUARANTY BANCORP AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(In thousands, except share and per share data)
Interest income:
Loans, including costs and fees$30,902 $22,295 $87,270 $60,206
Investment securities:
Taxable 2,221 1,741 6,892 5,454
Tax-exempt 1,233 971 3,713 2,459
Dividends 275 237 1,011 829
Federal funds sold and other 57 98 76 105
Total interest income 34,688 25,342 98,962 69,053
Interest expense:
Deposits 1,939 1,228 5,262 3,299
Securities sold under agreement to repurchase 16 13 48 31
Borrowings 531 636 2,079 1,992
Subordinated debentures 868 715 2,568 1,165
Total interest expense 3,354 2,592 9,957 6,487
Net interest income 31,334 22,750 89,005 62,566
Provision for loan losses 497 27 708 53
Net interest income, after provision for loan losses 30,837 22,723 88,297 62,513
Noninterest income:
Deposit service and other fees 3,580 2,581 10,405 7,042
Investment management and trust 1,478 1,333 4,482 3,889
Increase in cash surrender value of life insurance 674 490 1,884 1,398
Loss on sale of securities (86) (66) (86) (122)
Gain on sale of SBA loans 143 208 971 472
Other 341 159 1,218 346
Total noninterest income 6,130 4,705 18,874 13,025
Noninterest expense:
Salaries and employee benefits 11,736 10,984 34,909 28,292
Occupancy expense 1,714 1,417 4,940 4,053
Furniture and equipment 974 750 2,894 2,281
Amortization of intangible assets 672 389 1,969 868
Other real estate owned, net (20) 20 174 27
Insurance and assessments 642 608 1,995 1,818
Professional fees 929 962 3,155 2,725
Impairment of long-lived assets - - 224 -
Other general and administrative 5,160 3,494 12,579 9,486
Total noninterest expense 21,807 18,624 62,839 49,550
Income before income taxes 15,160 8,804 44,332 25,988
Income tax expense 5,106 3,039 14,313 8,682
Net income$10,054 $5,765 $30,019 $17,306
Earnings per common share–basic:$0.36 $0.25 $1.08 $0.80
Earnings per common share–diluted: 0.36 0.25 1.07 0.79
Dividend declared per common share:$0.13 $0.12 $0.38 $0.35
Weighted average common shares outstanding-basic: 27,920,658 22,811,386 27,900,627 21,750,153
Weighted average common shares outstanding-diluted: 28,120,111 22,984,647 28,140,332 21,995,855


Contacts:Paul W. Taylor Christopher G. Treece
President and Chief Executive Officer E.V.P., Chief Financial Officer and Secretary
Guaranty Bancorp Guaranty Bancorp
1331 Seventeenth Street, Suite 200 1331 Seventeenth Street, Suite 200
Denver, CO 80202 Denver, CO 80202
(303) 293-5563 (303) 675-1194


Source:Guaranty Bancorp