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Section 1: 8-K (8-K)

8K for Q2 2018 Earnings Release



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): July 18, 2018

 

Guaranty Bancorp

(Exact name of registrant as specified in its charter)

 

Delaware

 

000-51556

 

41-2150446

(State or other jurisdiction of

 

(Commission

 

(IRS Employer

incorporation)

 

File Number)

 

Identification No.)

 



 

 

1331 Seventeenth St., Suite 200

Denver, CO

 

80202

(Address of principal executive offices)

 

(Zip Code)



 

(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))

 

 



Indicate by check mark whether the registrant is an emerging growth company as defined in rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12-b2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

 

Emerging growth company     

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     


 

Item 2.02      Results of Operations and Financial Condition.*

 

On July 18, 2018, Guaranty Bancorp (the “Company”) issued a press release announcing its financial results for the three and six months ended June 30, 2018. 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:

 



 

 

Exhibit No.

 

Description

Exhibit 99.1

 

Press Release dated July 18, 2018



* 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.







2


 

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.

 

 

 

GUARANTY BANCORP

 

 

 

 

 

 

By:

/s/ Christopher G. Treece

 

 

Name: Christopher G. Treece

 

 

Title: Executive Vice President, Chief Financial Officer and Secretary

 

Date: July 18, 2018

 

INDEX TO EXHIBITS

 

Exhibit No.

 

Description

Exhibit 99.1

 

Press Release dated July 18, 2018



 



3


(Back To Top)

Section 2: EX-99.1 (EX-99.1)

Earnings Release 20180630 Q2

Guaranty_Bancorp_Logo_72dpi.jpg







 

 

 

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



FOR IMMEDIATE RELEASE: 



Guaranty Bancorp Announces Second Quarter 2018 Financial Results



·

Continued improvement in profitability evidenced by a return on average assets of 1.43% in the second quarter 2018 compared to 1.19% in the second quarter 2017

·

Significant net income growth of $3.1 million, or 31.0% to $13.3 million compared to $10.1 million of net income in the second quarter 2017

·

Sustained improvement in efficiency ratio, decreasing to 50.73% in the second quarter 2018

·

On May 22, 2018 the planned acquisition by Independent Bank Group, Inc., expected to close in the fourth quarter 2018, was announced



DENVER, July 18, 2018 - Guaranty Bancorp (Nasdaq: GBNK) (“we”, “our” or “the Company”), a community bank holding company based in Colorado, today announced second quarter 2018 net income of $13.3 million, or $0.46 per basic and diluted common share, compared to net income of $10.1 million, or $0.36 per basic and diluted common share, in the second quarter 2017. The $3.1 million increase in second quarter 2018 net income, compared to the same quarter in 2017, was primarily attributable to higher net interest income resulting from higher average loan balances, increased loan yields, and a reduced tax rate.



On an operating basis1,  the Company’s second quarter 2018 return on average assets was 1.52% compared to 1.21% for the same quarter in 2017. On a GAAP basis, the Company’s return on average assets was 1.43% in the second quarter 2018 compared to 1.19% for the same quarter in 2017. The difference between the Company’s second quarter 2018 operating and GAAP return on average assets is primarily attributable to $1.0 million in merger-related expenses incurred in the second quarter 2018.



Once again, we are very pleased with our second quarter results,” said Paul W. Taylor, President and Chief Executive Officer of Guaranty Bancorp. “We achieved significant improvement in profitability with an exceptional operating return on average assets1 of 1.52% for the second quarter 2018 compared to 1.21% for the same quarter in 2017. In addition, our improved efficiency ratio of 50.73% in the second quarter 2018, compared to 53.77% during the same quarter in 2017, further demonstrates our focus on expense management.  Our net income growth of $3.1 million, or 31% to $13.3 million compared to second quarter 2017 was a direct result of our success in expanding our customer relationships and gaining market share.

 

Taylor continued, “Gross loan production during the quarter was strong, up 18% or $42.4 million quarter-over-quarter to $275.5 million. Due to the continued dynamic economy in Colorado, paydowns and maturities jumped during the quarter to $246.1 million.  On a net basis, loans increased by $29.3 million, or 4.1% on an annualized basis during the quarter. We are excited to build upon this success by joining together with Independent Bank Group, Inc., one of the premier community banks in the nation.” 

________________________



 

1  This press release contains certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of the Company’s core financial performance. See the “Non-GAAP Financial Measures” section later in this press release for a definition of operating earnings and other non-GAAP measures. 

1

 


 

Key Financial Measures



Income Statement







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

 

 

Six Months Ended

 



 

June 30,

 

 

March 31,

 

 

June 30,

 

 

 

June 30,

 

 

June 30,

 



 

2018

 

 

2018

 

 

2017

 

 

 

2018

 

 

2017

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

(Dollars in thousands, except per share amounts)

 

Net income

$

13,263 

 

$

13,557 

 

$

10,125 

 

 

$

26,820 

 

$

19,965 

 

Operating earnings (1)

 

14,116 

 

 

13,440 

 

 

10,232 

 

 

 

27,556 

 

 

20,064 

 

Earnings per common share - diluted

 

0.46 

 

 

0.47 

 

 

0.36 

 

 

 

0.92 

 

 

0.71 

 

Earnings per common share - diluted - operating (1)

 

0.49 

 

 

0.46 

 

 

0.36 

 

 

 

0.95 

 

 

0.71 

 

Return on average assets

 

1.43 

%

 

1.48 

%

 

1.19 

%

 

 

1.45 

%

 

1.19 

%

Return on average assets - operating (1)

 

1.52 

%

 

1.47 

%

 

1.21 

%

 

 

1.49 

%

 

1.19 

%

Return on average equity

 

12.79 

%

 

13.45 

%

 

11.13 

%

 

 

13.12 

%

 

11.15 

%

Return on average equity - operating (1)

 

13.61 

%

 

13.33 

%

 

11.25 

%

 

 

13.48 

%

 

11.20 

%

Net interest margin

 

3.80 

%

 

3.77 

%

 

3.74 

%

 

 

3.79 

%

 

3.69 

%

Net interest margin, fully tax equivalent (2)

 

3.87 

%

 

3.84 

%

 

3.85 

%

 

 

3.86 

%

 

3.80 

%

Efficiency ratio - tax equivalent (3)

 

50.73 

%

 

52.91 

%

 

53.77 

%

 

 

51.81 

%

 

54.53 

%

Average cost of interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(including noninterest-bearing deposits)

 

0.59 

%

 

0.52 

%

 

0.46 

%

 

 

0.56 

%

 

0.44 

%

Average cost of deposits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(including noninterest-bearing deposits)

 

0.38 

%

 

0.31 

%

 

0.26 

%

 

 

0.34 

%

 

0.25 

%

Assets under management

$

1,502 

 

$

1,465 

 

$

792 

 

 

$

1,502 

 

$

792 

 

________________________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) See reconciliation of non-GAAP financial measures to the corresponding GAAP measurement in "Non-GAAP Financial Measures" later in this document.

 

(2) The tax-equivalent basis was computed by calculating the deemed interest on municipal bonds and tax-exempt loans that would have been earned on a fully taxable basis to yield the same after-tax income, net of the interest expense disallowance under Internal Revenue Code Sections 265 and 291, using a combined federal and state marginal tax rate of 24.66% for 2018 and 38% for 2017.

 

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

 



Balance Sheet









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

June 30,

 

 

 

March 31,

 

 

 

December 31,

 

 

 

September 30,

 

 

 

June 30,

 



 

2018

 

 

 

2018

 

 

 

2017

 

 

 

2017

 

 

 

2017

 



 

(Dollars in thousands, except per share amounts)

Total investments

$

598,316 

 

 

$

598,391 

 

 

$

614,312 

 

 

$

576,459 

 

 

$

569,812 

 

Total loans, net of deferred costs and fees

 

2,876,721 

 

 

 

2,847,465 

 

 

 

2,807,388 

 

 

 

2,661,866 

 

 

 

2,578,472 

 

Allowance for loan losses

 

(23,750)

 

 

 

(23,350)

 

 

 

(23,250)

 

 

 

(22,900)

 

 

 

(23,125)

 

Total assets

 

3,775,967 

 

 

 

3,721,651 

 

 

 

3,698,890 

 

 

 

3,510,046 

 

 

 

3,403,852 

 

Total deposits

 

2,947,795 

 

 

 

3,031,714 

 

 

 

2,941,627 

 

 

 

2,898,060 

 

 

 

2,763,623 

 

Book value per common share

 

14.29 

 

 

 

14.01 

 

 

 

13.86 

 

 

 

13.21 

 

 

 

12.94 

 

Tangible book value per common share (1)

 

11.41 

 

 

 

11.09 

 

 

 

11.13 

 

 

 

10.75 

 

 

 

10.46 

 

Equity ratio - GAAP

 

11.10 

%

 

 

11.03 

%

 

 

10.95 

%

 

 

10.69 

%

 

 

10.80 

%

Tangible common equity ratio (1)

 

9.06 

%

 

 

8.93 

%

 

 

8.99 

%

 

 

8.88 

%

 

 

8.91 

%

Total risk-based capital ratio

 

13.51 

%

 

 

13.31 

%

 

 

13.36 

%

 

 

13.50 

%

 

 

13.65 

%

________________________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) See reconciliation of non-GAAP financial measures to the corresponding GAAP measurement in "Non-GAAP Financial Measures" later in this document.



2

 


 

Net Interest Income and Margin



The following tables present, for the periods indicated, average assets, liabilities and stockholders’ equity, as well as interest income from average interest-earning assets, interest expense from average interest-bearing liabilities and the resultant yields and costs expressed in percentages. Nonaccrual loans are included in the calculation of average loans and leases, while interest thereon is excluded from the computation of yield earned.







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Three Months Ended

 

 

Three Months Ended

 

 

Three Months Ended

 



 

June 30, 2018

 

 

 

March 31, 2018

 

 

 

June 30, 2017

 



 

Average Balance

 

Interest Income or Expense

Average Yield or Cost

 

 

 

Average Balance

 

Interest Income or Expense

Average Yield or Cost

 

 

 

Average Balance

 

Interest Income or Expense

Average Yield or Cost

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

(Dollars in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross loans, net of deferred costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and fees (1)(3)

$

2,858,683 

$

33,549  4.71 

%

 

$

2,835,485 

$

32,115  4.59 

%

 

$

2,581,043 

$

28,976  4.50 

%

Investment securities (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

357,286 

 

2,555  2.87 

%

 

 

364,652 

 

2,556  2.84 

%

 

 

354,230 

 

2,356  2.67 

%

Tax-exempt

 

215,158 

 

1,230  2.29 

%

 

 

217,367 

 

1,223  2.28 

%

 

 

201,893 

 

1,243  2.47 

%

Bank stocks (4)

 

26,052 

 

391  6.02 

%

 

 

26,845 

 

423  6.39 

%

 

 

23,531 

 

347  5.91 

%

Other earning assets

 

8,669 

 

38  1.76 

%

 

 

4,788 

 

19  1.61 

%

 

 

4,549 

 

11  0.97 

%

Total interest-earning assets

 

3,465,848 

 

37,763  4.37 

%

 

 

3,449,137 

 

36,336  4.27 

%

 

 

3,165,246 

 

32,933  4.17 

%

Non-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

36,025 

 

 

 

 

 

 

35,518 

 

 

 

 

 

 

34,714 

 

 

 

 

Other assets

 

229,342 

 

 

 

 

 

 

230,000 

 

 

 

 

 

 

204,149 

 

 

 

 

Total assets

$

3,731,215 

 

 

 

 

 

$

3,714,655 

 

 

 

 

 

$

3,404,109 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand and NOW

$

840,354 

$

486  0.23 

%

 

$

811,790 

$

368  0.18 

%

 

$

807,883 

$

354  0.18 

%

Money market

 

516,430 

 

807  0.63 

%

 

 

538,740 

 

623  0.47 

%

 

 

479,009 

 

402  0.34 

%

Savings

 

208,785 

 

58  0.11 

%

 

 

204,544 

 

56  0.11 

%

 

 

179,862 

 

49  0.11 

%

Time certificates of deposit

 

462,551 

 

1,426  1.24 

%

 

 

461,901 

 

1,224  1.07 

%

 

 

414,533 

 

981  0.95 

%

Total interest-bearing deposits

 

2,028,120 

 

2,777  0.55 

%

 

 

2,016,975 

 

2,271  0.46 

%

 

 

1,881,287 

 

1,786  0.38 

%

Borrowings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Repurchase agreements

 

55,358 

 

27  0.20 

%

 

 

43,711 

 

21  0.19 

%

 

 

31,794 

 

15  0.19 

%

Federal funds purchased

 

2,327 

 

23  3.91 

%

 

 

 

 -

1.95 

%

 

 

 

 -

1.46 

%

Subordinated debentures

 

65,098 

 

933  5.75 

%

 

 

65,077 

 

889  5.54 

%

 

 

65,014 

 

856  5.28 

%

Borrowings

 

209,928 

 

1,125  2.15 

%

 

 

232,188 

 

1,062  1.85 

%

 

 

182,617 

 

777  1.71 

%

Total interest-bearing liabilities

 

2,360,831 

 

4,885  0.83 

%

 

 

2,357,952 

 

4,243  0.73 

%

 

 

2,160,713 

 

3,434  0.64 

%

Noninterest bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

939,010 

 

 

 

 

 

 

931,562 

 

 

 

 

 

 

864,359 

 

 

 

 

Other liabilities

 

15,437 

 

 

 

 

 

 

16,389 

 

 

 

 

 

 

14,078 

 

 

 

 

Total liabilities

 

3,315,278 

 

 

 

 

 

 

3,305,903 

 

 

 

 

 

 

3,039,150 

 

 

 

 

Stockholders' equity

 

415,937 

 

 

 

 

 

 

408,752 

 

 

 

 

 

 

364,959 

 

 

 

 

Total liabilities and stockholders' equity

$

3,731,215 

 

 

 

 

 

$

3,714,655 

 

 

 

 

 

$

3,404,109 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

$

32,878 

 

 

 

 

 

$

32,093 

 

 

 

 

 

$

29,499 

 

 

Net interest margin

 

 

 

 

3.80 

%

 

 

 

 

 

3.77 

%

 

 

 

 

 

3.74 

%

Net interest margin, fully tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

equivalent (2)

 

 

 

 

3.87 

%

 

 

 

 

 

3.84 

%

 

 

 

 

 

3.85 

%



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



(1) Yields on loans and securities have not been adjusted to a tax-equivalent basis.

(2) The tax-equivalent basis was computed by calculating the deemed interest on municipal bonds and tax-exempt loans that would have been earned on a fully taxable basis to yield the same after-tax income, net of the interest expense disallowance under Internal Revenue Code Sections 265 and 291, using a combined federal and state marginal tax rate of 24.66% for 2018 and 38.01% for 2017.  

(3) The loan average balances and rates include nonaccrual loans.

(4) Includes Bankers’ Bank of the West stock, Federal Reserve Bank stock, Federal Home Loan Bank stock and Pacific Coast Bankers’ Bank stock.



3

 


 

Net Interest Income and Margin (continued)







 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 



Six Months Ended

 

 

Six Months Ended

 



 

June 30, 2018

 

 

 

June 30, 2017

 



 

Average Balance

 

Interest Income or Expense

Average Yield or Cost

 

 

 

Average Balance

 

Interest Income or Expense

Average Yield or Cost

 



 

 

 

 

 

 

 

 

 

 

 

 

 



 

(Dollars in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross loans, net of deferred costs

 

 

 

 

 

 

 

 

 

 

 

 

 

and fees (1)(3)

$

2,847,149 

$

65,664  4.65 

%

 

$

2,560,845 

$

56,368  4.44 

%

Investment securities (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

360,948 

 

5,111  2.86 

%

 

 

357,993 

 

4,671  2.63 

%

Tax-exempt

 

216,257 

 

2,453  2.29 

%

 

 

201,993 

 

2,480  2.48 

%

Bank stocks (4)

 

26,446 

 

814  6.21 

%

 

 

23,883 

 

736  6.21 

%

Other earning assets

 

6,739 

 

57  1.71 

%

 

 

4,324 

 

19  0.89 

%

Total interest-earning assets

 

3,457,539 

 

74,099  4.32 

%

 

 

3,149,038 

 

64,274  4.12 

%

Non-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

35,773 

 

 

 

 

 

 

35,121 

 

 

 

 

Other assets

 

229,640 

 

 

 

 

 

 

205,053 

 

 

 

 

Total assets

$

3,722,952 

 

 

 

 

 

$

3,389,212 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholder’s Equity:

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand and NOW

$

826,151 

$

854  0.21 

%

 

$

790,478 

$

712  0.18 

%

Money market

 

527,523 

 

1,430  0.55 

%

 

 

484,688 

 

735  0.31 

%

Savings

 

206,676 

 

114  0.11 

%

 

 

175,823 

 

96  0.11 

%

Time certificates of deposit

 

462,228 

 

2,650  1.16 

%

 

 

394,410 

 

1,780  0.91 

%

Total interest-bearing deposits

 

2,022,578 

 

5,048  0.50 

%

 

 

1,845,399 

 

3,323  0.36 

%

Borrowings:

 

 

 

 

 

 

 

 

 

 

 

 

 

Repurchase agreements

 

49,567 

 

48  0.20 

%

 

 

34,117 

 

32  0.19 

%

Federal funds purchased

 

1,170 

 

23  3.91 

%

 

 

 

 -

1.46 

%

Subordinated debentures

 

65,087 

 

1,822  5.65 

%

 

 

65,004 

 

1,700  5.27 

%

Borrowings

 

220,996 

 

2,187  2.00 

%

 

 

196,570 

 

1,548  1.59 

%

Total interest-bearing liabilities

 

2,359,398 

 

9,128  0.78 

%

 

 

2,141,091 

 

6,603  0.62 

%

Noninterest bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

935,307 

 

 

 

 

 

 

872,251 

 

 

 

 

Other liabilities

 

15,883 

 

 

 

 

 

 

14,725 

 

 

 

 

Total liabilities

 

3,310,588 

 

 

 

 

 

 

3,028,067 

 

 

 

 

Stockholders' equity

 

412,364 

 

 

 

 

 

 

361,145 

 

 

 

 

Total liabilities and stockholders' equity

$

3,722,952 

 

 

 

 

 

$

3,389,212 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

$

64,971 

 

 

 

 

 

$

57,671 

 

 

Net interest margin

 

 

 

 

3.79 

%

 

 

 

 

 

3.69 

%

Net interest margin, fully tax

 

 

 

 

 

 

 

 

 

 

 

 

 

equivalent (2)

 

 

 

 

3.86 

%

 

 

 

 

 

3.80 

%



 

 

 

 

 

 

 

 

 

 

 

 

 



(1) Yields on loans and securities have not been adjusted to a tax-equivalent basis.

(2) The tax-equivalent basis was computed by calculating the deemed interest on municipal bonds and tax-exempt loans that would have been earned on a fully taxable basis to yield the same after-tax income, net of the interest expense disallowance under Internal Revenue Code Sections 265 and 291, using a combined federal and state marginal tax rate of 24.66% for 2018 and 38.01% for 2017.  

(3) The loan average balances and rates include nonaccrual loans.

(4) Includes Bankers’ Bank of the West stock, Federal Reserve Bank stock, Federal Home Loan Bank stock and Pacific Coast Bankers’ Bank stock.





4

 


 

Net Interest Income and Margin (continued)



Net interest income increased $3.4 million in the second quarter 2018 to $32.9 million, compared to $29.5 million in the second quarter 2017, and increased $0.8 million from $32.1 million in the first quarter 2018.



The $3.4 million increase in net interest income in the second quarter 2018, compared to the second quarter 2017, was a result of a $4.8 million increase in interest income, partially offset by a $1.5 million increase in interest expense over the same period. The increase in interest income was mostly the result of a $300.6 million increase in average interest earning assets in the second quarter 2018, compared to the second quarter 2017, and a twenty basis point increase in the average yield on interest earning assets over the same time period. The increase in interest expense was due to the increasing cost of interest-bearing liabilities in addition to growth in deposits and borrowings.



The $0.8 million increase in net interest income in the second quarter 2018, compared to the first quarter 2018, was primarily due to a $1.4 million increase in interest income partially offset by a $0.6 million increase in interest expense. Interest income increased in the second quarter 2018 as a result of increased loan yields and increased average loan balances. Accretion of the discount on acquired loans was $1.1 million in the second quarter 2018, compared to $1.0 million in the first quarter 2018 and $1.2 million in the second quarter 2017. The increase in interest expense in the second quarter 2018, compared to the first quarter 2018, was primarily a result of a $0.5 million increase in interest expense on deposits resulting from growth in average interest bearing deposit balances and a nine basis point increase in the cost of deposits.



For the six months ended June 30, 2018, net interest income increased $7.3 million, compared to the same period in 2017, primarily due to a $9.8 million increase in interest income resulting from a $308.5 million or 9.8% increase in average earning assets, partially offset by a $2.5 million increase in interest expense. The increase in interest expense was due to the increasing cost of interest-bearing liabilities in addition to growth in deposits and borrowings. 



Noninterest Income



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







 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

 

Six Months Ended



 

June 30,
2018

 

March 31,
2018

 

June 30,
2017

 

 

June 30,
2018

 

June 30,
2017



 

 

 

 

 

 

 

 

 

 

 



 

(In thousands)

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

Deposit service and other fees

$

3,646 

$

3,321 

$

3,545 

 

$

6,967 

$

6,825 

Investment management and trust

 

2,466 

 

2,298 

 

1,483 

 

 

4,764 

 

3,004 

Increase in cash surrender value of

 

 

 

 

 

 

 

 

 

 

 

life insurance

 

661 

 

670 

 

615 

 

 

1,331 

 

1,210 

Gain on sale of securities

 

16 

 

 -

 

 -

 

 

16 

 

 -

Gain on sale of SBA loans

 

255 

 

231 

 

447 

 

 

486 

 

828 

Other

 

311 

 

450 

 

252 

 

 

761 

 

877 

Total noninterest income

$

7,355 

$

6,970 

$

6,342 

 

$

14,325 

$

12,744 



Second quarter 2018 noninterest income increased by $1.0 million compared to the second quarter 2017 and by $0.4 million compared to the first quarter 2018. The increase was primarily due to a $1.0 million increase in investment management and trust income in the second quarter 2018, compared to the second quarter 2017, which was primarily a result of the January 2018 purchase of the assets under management of Wagner Wealth Management, LLC (“Wagner”). At June 30, 2018, assets under management were $1.5 billion compared to $792 million as of June 30, 2017.



Compared to the first quarter 2018, noninterest income increased $0.4 million in the second quarter 2018, primarily as a result of increased deposit service charges and investment management and trust income.



For the six months ended June 30, 2018, noninterest income increased $1.6 million, compared to the same period in 2017, primarily due to increased investment management and trust income resulting from the Wagner acquisition.





5

 


 

Noninterest Expense



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









 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

 

Six Months Ended



 

June 30,
2018

 

March 31,
2018

 

June 30,
2017

 

 

June 30,
2018

 

June 30,
2017



 

 

 

 

 

 

 

 

 

 

 



 

(In thousands)

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

$

12,871 

$

12,903 

$

11,247 

 

$

25,774 

$

23,173 

Occupancy expense

 

1,681 

 

1,738 

 

1,674 

 

 

3,419 

 

3,226 

Furniture and equipment

 

1,031 

 

1,060 

 

975 

 

 

2,091 

 

1,920 

Amortization of intangible assets

 

952 

 

912 

 

648 

 

 

1,864 

 

1,297 

Other real estate owned, net

 

 

39 

 

126 

 

 

41 

 

194 

Insurance and assessments

 

670 

 

697 

 

647 

 

 

1,367 

 

1,353 

Professional fees

 

1,040 

 

1,091 

 

1,252 

 

 

2,131 

 

2,226 

Impairment of long-lived assets

 

 -

 

 -

 

34 

 

 

 -