GUAA Guaranty Bancorp Inc (CE)

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): October 14, 2015

 

Guaranty Bancorp

(Exact name of registrant as specified in its charter)

 

 

 

 

(303) 675-1194
(Registrant’s telephone number, including area code)

 

None

(Former name or former address, if changed since last report)

 

     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a -12)

 

☐    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

 

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Item 2.02.      Results of Operations and Financial Condition.*

 

On October 14, 2015, Guaranty Bancorp (the “Company”) issued a press release announcing its financial results for the three and nine months ended September 30, 2015. A copy of the press release is furnished as Exhibit 99.1 to this Report and is incorporated herein by reference. 

 

Item 9.01       Financial Statements and Exhibits.*

 

(d)   Exhibits

 

The following exhibit is furnished with this Current Report on Form 8-K:

 

 

* The information furnished pursuant to this Current Report on Form 8-K, including the exhibit attached hereto and incorporated by reference, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that Section, nor shall it be deemed incorporated by reference into any registration statement or other filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, except as expressly set forth by specific reference in such filing.

 

 

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

Date: October 14, 2015

 

INDEX TO EXHIBITS

 

 

 

 

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FOR IMMEDIATE RELEASE:

Guaranty Bancorp Announces 2015 Third Quarter Financial Results

 

DENVER, October  14, 2015 - Guaranty Bancorp (Nasdaq: GBNK) (“we”, “our” or “the Company”), a community bank holding company based in Colorado, today announced third quarter 2015 net income of $6.0 million or $0.28 per basic and diluted common share, an increase of $1.3 million or $0.06 per basic and diluted common share as compared to the third quarter 2014. For the nine months ended September 30, 2015, net income was $16.6 million or $0.79 per basic common share and $0.78 per diluted common share, an increase of $4.3 million or $0.20 per basic and diluted common share as compared to the same period in 2014.

 

“Our consistently strong operating metrics were recognized for the second consecutive year by Sandler O’Neill in their Bank & Thrift Sm-All  Star list,” said Paul W. Taylor, President and CEO. “We are proud to be named one of the top 34 performing small-cap banks and thrifts in the United States and we were the only Colorado bank to receive this recognition. Our quarterly net income growth of 28.5%, as compared to the same quarter in 2014, resulted in a 14 basis point improvement in quarterly return on average assets to 1.05%. This improved profitability was the result of diligent execution of our business strategy.  The sustained core deposit growth of 9.0% and strong loan growth of 16.5% for the twelve months ended September 30, 2015 reflects the confidence businesses have in the Colorado economy and the solid relationships we continue to develop.” 

 

The Company’s net income increased $1.3 million for the third quarter 2015 as compared to the same quarter in the prior year, due to a $1.3 million improvement in interest income, a $0.3 million decrease in interest expense and a $0.3 million decrease in noninterest expense. These improvements were partially offset by an increase in income taxes. The $1.3 million increase in interest income was primarily due to a $240.2 million increase in average loans for the quarter ended September 30, 2015 as compared to the same quarter in 2014. The $0.3 million decrease in interest expense during the third quarter 2015, as compared to the same quarter in 2014, was primarily driven by the prepayment of $90.0 million of Federal Home Loan Bank (FHLB) term advances during the fourth quarter 2014. The $0.3 million decrease in noninterest expense was mostly due to a decrease in other real estate owned (OREO) expenses and a decrease in intangible asset amortization expense. 

 

For the nine months ended September 30, 2015, net income increased 34.7% or $4.3 million, as compared to the same period in 2014, due to a $4.7 million increase in interest income, a $1.3 million decrease in interest expense, and a $1.1 million increase in noninterest income. These improvements were partially offset by a $0.4 million increase in noninterest expense and a $2.3 million increase in income taxes due to higher pretax income. The $4.7 million increase in interest income was the result of a $219.2 million increase in average loans for the nine months ended September 30, 2015 as compared to the same period in 2014. The $1.3 million decrease in interest expense was primarily related to the prepayment of $90.0 million of FHLB term advances, as discussed above. The $1.1 million increase in noninterest income was mostly due to a $0.8 million increase in investment management and trust income, a $0.4 million increase in bank

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owned life insurance (BOLI) income and a  $0.3 million increase in gains on sales of SBA loans during the nine months ended September 30, 2015 as compared to the same period in 2014. The $0.4 million increase in noninterest expense was mostly due to increases in salary and benefit expense related to the creation of new positions within the Company during the nine months ended September 30, 2015 as compared to the same period in 2014.

 

Key Financial Measures

Income Statement

 

 

 

 

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

 

Balance Sheet

 

 

 

 

 

Net Interest Income and Margin

 

 

 

During the third quarter 2015, net interest income increased $1.6 million, as compared to the same quarter in the prior year, due to a $1.3 million increase in interest income and a $0.3 million decrease in interest expense. Interest income

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increased mostly due to a 16.4% increase in average loan balances. Interest expense decreased primarily due to the prepayment of $90 million in FHLB term advances in the fourth quarter 2014.

 

Net interest income increased $0.5 million, as compared to the second quarter 2015, due to a $0.7 million increase in interest income, partially offset by a $0.2 million increase in interest expense. The increase in interest income during the third quarter 2015, as compared to the second quarter 2015, was due to an $84.8 million increase in average loan balances, partially offset by lower loan yields. The increase in interest expense during the third quarter 2015, as compared to the second quarter 2015, was due to an $84.8 million increase in average interest-bearing deposits required to fund loan growth. During the third quarter 2015, the net interest margin decreased eight basis points, as compared to the second quarter 2015, mostly due to a decline in loan yield. 

 

For the nine months ended September 30, 2015, net interest income increased $6.0 million, as compared to the same period in 2014, due to a $4.7 million increase in interest income and a $1.3 million decrease in interest expense. The year-to-date increase in interest income was driven by a $219.2 million increase in average loans, compared to the same period in 2014. The decline in interest expense during the first nine months of 2015, as compared to the same period in 2014, was primarily due to the prepayment of $90.0 million of FHLB term advances in the fourth quarter 2014. During the nine months ended September 30, 2015, the net interest margin increased three basis points to 3.70% as compared to 3.67% for the same period in 2014. The increase in the net interest margin was mostly due to the decrease in the cost of average interest-bearing liabilities due to the prepayment of FHLB term advances, as discussed above. 

 

Noninterest Income

 

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

 

 

 

 

Third quarter 2015 noninterest income was consistent with second quarter 2015 noninterest income of $4.4 million and increased $0.1 million as compared to $4.3 million in the third quarter 2014.

 

For the nine months ended September 30, 2015, noninterest income increased $1.1 million to $12.9 million as compared to $11.8 million for the same period in 2014. The increase in noninterest income was due to a $0.8 million increase in investment management and trust income, a $0.4 million increase in BOLI income and a $0.3 million increase in gains on sale of SBA loans. The increase in BOLI income was due to the purchase of an additional BOLI subsequent to September 30, 2014. The increases in noninterest income were partially offset by decreases in other noninterest income related to customer interest rate swap income for the nine months ended September 30, 2015 as compared to the same period in the prior year.

 

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Noninterest Expense

 

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

 

 

 

 

Noninterest expense decreased $0.1 million to $14.9 million, as compared to $15.0 million in the second quarter 2015, and decreased $0.3 million as compared to the same quarter in 2014. The Company’s tax equivalent efficiency ratio improved 102 basis points to 58.75% for the quarter ended September 30, 2015, as compared to 59.77% for the quarter ended June 30, 2015, and improved 493 basis points as compared to 63.68% for the quarter ended September 30, 2014.

 

For the nine months ended September 30, 2015, noninterest expense was $45.1 million as compared to $44.7 million for the same period in 2014. The increase in noninterest expense for the first nine months of 2015, as compared to the same period in 2014, was primarily due to a $0.6 million increase in salaries and employee benefits mostly due to the creation of new positions within our wealth management, healthcare lending, equipment finance lending and compliance groups.  

 

Balance Sheet

 

 

 

 

 

At September 30, 2015, the Company had total assets of $2.3 billion, reflecting a $160.9 million increase as compared to December 31, 2014 and a $207.7 million increase as compared to September 30, 2014. The increase in total assets during the nine months ended September 30, 2015 was mostly due to a $184.7 million increase in net loans. The growth in net loans for the first nine months of 2015 was funded by $162.0 million in deposit growth and a $16.2 million decline in investments. The increase in total assets, as compared to September 30, 2014, was due to a $243.9 million increase in net loans and a $16.4 million increase in BOLI, funded by a $184.7 million increase in deposits, a $22.9 million decrease in cash and a $22.8 million decrease in investments.

 

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The following table sets forth the amount of loans outstanding at the dates indicated:

 

 

 

The following table presents the changes in our loan balances at the dates indicated:

 

 

 

During the third quarter 2015, loans net of deferred costs and fees increased $57.5 million which was comprised of a $49.7 million increase in commercial and residential real estate loans, a $7.0 million increase in construction loans and a $2.6 million increase in commercial loans. Third quarter 2015 net loan growth consisted of $210.3 million in new loans and net existing credit advanced, partially offset by $152.3 million in net loan pay-downs and maturities. In addition to contractual loan principal payments and maturities, the third quarter 2015 included $23.5 million in pay-downs related to revolving line of credit fluctuations, $21.2 million in early payoffs related to the sale of the borrower’s assets, $19.0 million in pay-offs due to our strategic decision to not match certain financing terms offered by competitors, and $9.3 million in pay-downs of energy-related loans. 

 

During the third quarter 2015, we continued to proactively reduce our direct exposure to the energy industry, realizing reductions of 26.5% or $16.6 million in commitments and 29.2% or $9.3 million in outstanding loan balances. As compared to December 31, 2014, our direct exposure to the energy industry has declined by 46.0% or $39.2 million in commitments and by 44.1% or $24.2 million in outstanding loan balances. Our current energy portfolio consists of eight relationships totaling $22.5 million in outstanding loan balances, which is less than 2.0% of our total loan portfolio. At September 30, 2015, the energy portfolio was comprised primarily of exploration and production loans, with relatively equal exposure to oil and natural gas. 

 

For the twelve months ended September 30, 2015, loans net of deferred costs and fees increased by $243.9 million, or 16.5%. Net loan growth was comprised of a $195.0 million increase in commercial and residential real estate loans and a $49.9 million increase in commercial loans. The growth in loans was the result of development of new customer relationships and growth in existing customer relationships. The utilization rate on commercial lines of credit was 39.7% at September 30, 2015 as compared to 41.0% at both December 31, 2014 and September 30, 2014. 

 

At  September 30, 2015, 1-4 family residential real estate loans grew $44.8 million to $302.9 million, as compared to $258.1 million at September 30, 2014, mostly due to growth in jumbo mortgage loans. 

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

 

 

 

At September 30, 2015, non-maturing deposits were $1.6 billion, an increase of $109.1 million as compared to the fourth quarter 2014, and an increase of  $133.0 million, or 9.0%, as compared to the third quarter 2014. At September 30, 2015, noninterest-bearing deposits as a percentage of total deposits were 37.0%, as compared to 38.8% at December 31, 2014 and 37.2% at September 30, 2014.

 

At September 30, 2015, securities sold under agreements to repurchase were $30.2 million, a decrease of $3.4 million as compared to December 31, 2014, and an increase of $6.5 million as compared to September 30, 2014.

 

Total FHLB borrowings were $151.3 million at September 30, 2015 consisting of $56.3 million of overnight advances on our line of credit and $95.0 million in term advances. At December 31, 2014, total FHLB borrowings consisted of $140.3 million in overnight advances and $20.0 million in term advances.

 

Regulatory Capital Ratios

 

The following table provides the capital ratios of the Company and our subsidiary bank, Guaranty Bank and Trust Company (“Bank”) as of the dates presented, along with the applicable regulatory capital requirements:

 

At September 30, 2015, all our regulatory capital ratios remain well above minimum requirements for a “well-capitalized” institution. Our ratios decreased as compared to our ratios at December 31, 2014 primarily due to an increase in risk-weighted assets during the period, driven by loan growth during the first nine months of 2015 as well as new risk-weighting requirements under the final rule on Enhanced Regulatory Capital Standards, commonly referred to as Basel III, which became effective in the first quarter of 2015.

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Asset Quality

 

The following table presents select asset quality data as of the dates indicated:

 

 

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

 

 

 

 

During the third quarter 2015, nonperforming assets increased by $1.2 million from June 30, 2015 and decreased $0.9 million from September 30, 2014. The increase in nonperforming assets during the third quarter 2015 as compared to the second quarter 2015 was primarily the result of the downgrade of two loans to nonaccrual. Nonperforming loans at September 30, 2015 include one out-of-state loan participation with a balance of $9.5 million.

 

At September 30, 2015, classified assets represent 13.5% of bank-level Tier 1 risk-based capital plus allowance for loan losses as compared to 13.9% at June 30, 2015 and 13.4% at September 30, 2014.

 

Net recoveries in the third quarter 2015 were less than $0.1 million as compared to net recoveries of $0.2 million in the second quarter 2015 and net recoveries of $0.2 million in the third quarter 2014. During the quarter ended September 30, 2015, the Bank recorded an immaterial provision for loan losses as compared to a $0.1 million provision recorded in the second quarter 2015 and the immaterial credit provision for loan losses recorded in the third quarter 2014. The Bank considered recoveries, historical charge-offs, level of nonperforming loans, loan growth and other factors when determining the adequacy of the allowance for loan losses and the resulting amount of loan loss provision to be recognized during the quarter.

 

Shares Outstanding

 

As of September 30, 2015, the Company had 21,728,202 shares of common stock outstanding, consisting of 20,709,202 shares of voting common stock, of which 651,275 shares were in the form of unvested stock awards, and 1,019,000 shares of non-voting common stock.

 

Non-GAAP Financial Measures

 

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

 

The Company discloses these non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of the Company’s core financial performance. Management believes that these non-GAAP financial measures allow for additional transparency and are used by some investors, analysts and other users of the Company’s financial information as performance measures. These non-GAAP financial measures are presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP. These non-GAAP financial measures presented by the Company may be different from non-GAAP financial measures used by other companies.

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The following non-GAAP schedule reconciles the non-GAAP pre-tax operating earnings to GAAP net income before income taxes as of the dates indicated:

 

 

 

 

 

The following non-GAAP schedules reconcile the book value per share to the tangible book value per share and the GAAP equity ratio to the tangible equity ratio as of the dates indicated:

 

 

 

 

 

 

 

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About Guaranty Bancorp

 

Guaranty Bancorp is a $2.3 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; 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.

 

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GUARANTY BANCORP AND SUBSIDIARIES

Unaudited Consolidated Balance Sheets

 

 

 

 

 

 

 

 

 

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GUARANTY BANCORP AND SUBSIDIARIES

Unaudited Consolidated Statements of Operations

 

 

 

 

 

 

 

 

 

 

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GUARANTY BANCORP AND SUBSIDIARIES

Unaudited Consolidated Average Balance Sheets

 

 

 

 

 

 

 

 

 

 

 

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