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Section 1: 8-K (8-K)

8K for Q3 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): October 17, 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 October 17, 2018, Guaranty Bancorp (the “Company”) issued a press release announcing its financial results for the three and nine months ended September 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 October 17, 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: October 17, 2018

 

INDEX TO EXHIBITS

 

Exhibit No.

 

Description

Exhibit 99.1

 

Press Release dated October 17, 2018



 



3


(Back To Top)

Section 2: EX-99.1 (EX-99.1)

Earnings Release 20180930 Q3

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 Third Quarter 2018 Financial Results



·

Record quarterly earnings of $14.9 million, a $4.9 million or 48.6% increase compared to $10.1 million in the third quarter 2017

·

Continued growth in ROAA to 1.58% for the third quarter 2018 compared to 1.17% in the third quarter 2017

·

Exceptional efficiency ratio of 48.77% for the third quarter 2018 compared to 50.02% in the third quarter 2017

·

Continued success growing our balance sheet with quarterly net loan growth of $54.9 million or 7.6% annualized

·

Strong deposit growth of $112.2 million during the quarter or 15.1% annualized



DENVER, October 17, 2018 - Guaranty Bancorp (Nasdaq: GBNK) (“we”, “our” or “the Company”), a community bank holding company based in Colorado, today announced third quarter 2018 net income of $14.9 million, or $0.52 per basic common share and $0.51 per diluted common share, compared to net income of $10.1 million, or $0.36 per basic and diluted common share, in the third quarter 2017. The $4.million increase in third quarter 2018 net income, compared to the same quarter in 2017, was attributable to a combination of increased net interest income and noninterest income aided by reductions in both noninterest expense and income tax expense.  



“Our record third quarter 2018 financial performance,  as demonstrated by our ROAA of 1.58%, reflects the successful execution of our strategic initiatives across the Company, said Paul W. Taylor, President and Chief Executive Officer of Guaranty Bancorp. “Continued growth in our customer relationships has bolstered our balance sheet and resulted in increased net interest income. Our focus on expense management, reflected in our superior efficiency ratio of 48.77%, also enhanced our bottom line earnings.”

 

Taylor continued, “We look forward to building on this success through our upcoming merger with Independent Bank Group, Inc., which we expect to close at the end of the fourth quarter 2018, having received stockholder approval on September 25, 2018.”





 



1

 


 

Key Financial Measures



Income Statement







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

 

 

Nine Months Ended

 



 

September 30,

 

 

June 30,

 

 

September 30,

 

 

 

September 30,

 

 

September 30,

 



 

2018

 

 

2018

 

 

2017

 

 

 

2018

 

 

2017

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

(Dollars in thousands, except per share amounts)

 

Net income

$

14,944 

 

$

13,263 

 

$

10,054 

 

 

$

41,764 

 

$

30,019 

 

Operating earnings (1)

 

14,797 

 

 

14,116 

 

 

11,307 

 

 

 

42,352 

 

 

31,371 

 

Earnings per common share - diluted

 

0.51 

 

 

0.46 

 

 

0.36 

 

 

 

1.44 

 

 

1.07 

 

Earnings per common share - diluted - operating (1)

 

0.51 

 

 

0.49 

 

 

0.40 

 

 

 

1.46 

 

 

1.11 

 

Return on average assets

 

1.58 

%

 

1.43 

%

 

1.17 

%

 

 

1.50 

%

 

1.18 

%

Return on average assets - operating (1)

 

1.57 

%

 

1.52 

%

 

1.31 

%

 

 

1.52 

%

 

1.23 

%

Return on average equity

 

13.93 

%

 

12.79 

%

 

10.70 

%

 

 

13.40 

%

 

10.99 

%

Return on average equity - operating (1)

 

13.79 

%

 

13.61 

%

 

12.03 

%

 

 

13.58 

%

 

11.49 

%

Net interest margin

 

3.74 

%

 

3.80 

%

 

3.91 

%

 

 

3.77 

%

 

3.77 

%

Net interest margin, fully tax equivalent (2)

 

3.80 

%

 

3.87 

%

 

4.02 

%

 

 

3.84 

%

 

3.88 

%

Efficiency ratio - tax equivalent (3)

 

48.77 

%

 

50.73 

%

 

50.02 

%

 

 

50.77 

%

 

52.97 

%

Average cost of interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(including noninterest-bearing deposits)

 

0.64 

%

 

0.59 

%

 

0.44 

%

 

 

0.59 

%

 

0.44 

%

Average cost of deposits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(including noninterest-bearing deposits)

 

0.42 

%

 

0.38 

%

 

0.27 

%

 

 

0.37 

%

 

0.25 

%

Assets under management

$

1,536,555 

 

$

1,502,126 

 

$

814,684 

 

 

$

1,536,555 

 

$

814,684 

 

________________________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 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 38.01% 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









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

September 30,

 

 

 

June 30,

 

 

 

March 31,

 

 

 

December 31,

 

 

 

September 30,

 



 

2018

 

 

 

2018

 

 

 

2018

 

 

 

2017

 

 

 

2017

 



 

(Dollars in thousands, except per share amounts)

Total investments

$

612,234 

 

 

$

598,316 

 

 

$

598,391 

 

 

$

614,312 

 

 

$

576,459 

 

Total loans, net of deferred costs and fees

 

2,931,643 

 

 

 

2,876,721 

 

 

 

2,847,465 

 

 

 

2,807,388 

 

 

 

2,661,866 

 

Allowance for loan losses

 

(23,750)

 

 

 

(23,750)

 

 

 

(23,350)

 

 

 

(23,250)

 

 

 

(22,900)

 

Total assets

 

3,810,527 

 

 

 

3,775,967 

 

 

 

3,721,651 

 

 

 

3,698,890 

 

 

 

3,510,046 

 

Total deposits

 

3,059,947 

 

 

 

2,947,795 

 

 

 

3,031,714 

 

 

 

2,941,627 

 

 

 

2,898,060 

 

Book value per common share

 

14.61 

 

 

 

14.29 

 

 

 

14.01 

 

 

 

13.86 

 

 

 

13.21 

 

Tangible book value per common share (1)

 

11.76 

 

 

 

11.41 

 

 

 

11.09 

 

 

 

11.13 

 

 

 

10.75 

 

Equity ratio - GAAP

 

11.24 

%

 

 

11.10 

%

 

 

11.03 

%

 

 

10.95 

%

 

 

10.69 

%

Tangible common equity ratio (1)

 

9.24 

%

 

 

9.06 

%

 

 

8.93 

%

 

 

8.99 

%

 

 

8.88 

%

Total risk-based capital ratio

 

13.71 

%

 

 

13.51 

%

 

 

13.31 

%

 

 

13.36 

%

 

 

13.50 

%

________________________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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

 



 

September 30, 2018

 

 

 

June 30, 2018

 

 

 

September 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)

$

2,870,984 

$

33,825  4.67 

%

 

$

2,858,683 

$

33,549  4.71 

%

 

$

2,593,667 

$

30,902  4.73 

%

Investment securities (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

366,464 

 

2,652  2.87 

%

 

 

357,286 

 

2,555  2.87 

%

 

 

339,671 

 

2,221  2.59 

%

Tax-exempt

 

214,143 

 

1,206  2.23 

%

 

 

215,158 

 

1,230  2.29 

%

 

 

210,363 

 

1,233  2.33 

%

Bank stocks (4)

 

26,060 

 

406  6.18 

%

 

 

26,052 

 

391  6.02 

%

 

 

19,993 

 

275  5.46 

%

Other earning assets

 

5,287 

 

26  1.95 

%

 

 

8,669 

 

38  1.76 

%

 

 

18,060 

 

57  1.25 

%

Total interest-earning assets

 

3,482,938 

 

38,115  4.34 

%

 

 

3,465,848 

 

37,763  4.37 

%

 

 

3,181,754 

 

34,688  4.33 

%

Non-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

36,488 

 

 

 

 

 

 

36,025 

 

 

 

 

 

 

35,426 

 

 

 

 

Other assets

 

226,837 

 

 

 

 

 

 

229,342 

 

 

 

 

 

 

206,044 

 

 

 

 

Total assets

$

3,746,263 

 

 

 

 

 

$

3,731,215 

 

 

 

 

 

$

3,423,224 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand and NOW

$

808,172 

$

485  0.24 

%

 

$

840,354 

$

486  0.23 

%

 

$

850,670 

$

380  0.18 

%

Money market

 

542,557 

 

1,026  0.75 

%

 

 

516,430 

 

807  0.63 

%

 

 

493,433 

 

459  0.37 

%

Savings

 

209,856 

 

64  0.12 

%

 

 

208,785 

 

58  0.11 

%

 

 

182,190 

 

51  0.11 

%

Time certificates of deposit

 

463,183 

 

1,611  1.38 

%

 

 

462,551 

 

1,426  1.24 

%

 

 

420,102 

 

1,049  0.99 

%

Total interest-bearing deposits

 

2,023,768 

 

3,186  0.62 

%

 

 

2,028,120 

 

2,777  0.55 

%

 

 

1,946,395 

 

1,939  0.40 

%

Borrowings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Repurchase agreements

 

55,016 

 

23  0.17 

%

 

 

55,358 

 

27  0.20 

%

 

 

33,958 

 

16  0.19 

%

Federal funds purchased

 

6,241 

 

33  2.07 

%

 

 

2,327 

 

23  3.91 

%

 

 

 

 -

1.46 

%

Subordinated debentures

 

65,119 

 

937  5.71 

%

 

 

65,098 

 

933  5.75 

%

 

 

65,035 

 

868  5.30 

%

Borrowings

 

193,921 

 

1,146  2.34 

%

 

 

209,928 

 

1,125  2.15 

%

 

 

91,087 

 

531  2.31 

%

Total interest-bearing liabilities

 

2,344,065 

 

5,325  0.90 

%

 

 

2,360,831 

 

4,885  0.83 

%

 

 

2,136,476 

 

3,354  0.62 

%

Noninterest bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

960,347 

 

 

 

 

 

 

939,010 

 

 

 

 

 

 

898,262 

 

 

 

 

Other liabilities

 

16,258 

 

 

 

 

 

 

15,437 

 

 

 

 

 

 

15,739 

 

 

 

 

Total liabilities

 

3,320,670 

 

 

 

 

 

 

3,315,278 

 

 

 

 

 

 

3,050,477 

 

 

 

 

Stockholders' equity

 

425,593 

 

 

 

 

 

 

415,937 

 

 

 

 

 

 

372,747 

 

 

 

 

Total liabilities and stockholders' equity

$

3,746,263 

 

 

 

 

 

$

3,731,215 

 

 

 

 

 

$

3,423,224 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

$

32,790 

 

 

 

 

 

$

32,878 

 

 

 

 

 

$

31,334 

 

 

Net interest margin

 

 

 

 

3.74 

%

 

 

 

 

 

3.80 

%

 

 

 

 

 

3.91 

%

Net interest margin, fully tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

equivalent (2)

 

 

 

 

3.80 

%

 

 

 

 

 

3.87 

%

 

 

 

 

 

4.02 

%



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



(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)







 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 



 

Nine Months Ended

 

 

 

Nine Months Ended

 



 

September 30, 2018

 

 

 

September 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)

$

2,855,181 

$

99,489  4.66 

%

 

$

2,571,906 

$

87,270  4.54 

%

Investment securities (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

362,807 

 

7,763  2.86 

%

 

 

351,818 

 

6,892  2.62 

%

Tax-exempt

 

215,544 

 

3,659  2.27 

%

 

 

204,814 

 

3,713  2.42 

%

Bank stocks (4)

 

26,317 

 

1,220  6.20 

%

 

 

22,572 

 

1,011  5.99 

%

Other earning assets

 

6,250 

 

83  1.78 

%

 

 

8,953 

 

76  1.13 

%

Total interest-earning assets

 

3,466,099 

 

112,214  4.33 

%

 

 

3,160,063 

 

98,962  4.19 

%

Non-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

36,014 

 

 

 

 

 

 

35,224 

 

 

 

 

Other assets

 

228,688 

 

 

 

 

 

 

205,373 

 

 

 

 

Total assets

$

3,730,801 

 

 

 

 

 

$

3,400,660 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity:

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand and NOW

$

820,093 

$

1,340  0.22 

%

 

$

810,763 

$

1,091  0.18 

%

Money market

 

532,590 

 

2,456  0.62 

%

 

 

487,635 

 

1,194  0.33 

%

Savings

 

207,748 

 

178  0.11 

%

 

 

177,968 

 

147  0.11 

%

Time certificates of deposit

 

462,550 

 

4,260  1.23 

%

 

 

403,068 

 

2,830  0.94 

%

Total interest-bearing deposits

 

2,022,981 

 

8,234  0.54 

%

 

 

1,879,434 

 

5,262  0.37 

%

Borrowings:

 

 

 

 

 

 

 

 

 

 

 

 

 

Repurchase agreements

 

51,403 

 

71  0.18 

%

 

 

34,063 

 

48  0.19 

%

Federal funds purchased

 

2,879 

 

56  2.62 

%

 

 

 

 -

1.46 

%

Subordinated debentures

 

65,098 

 

2,759  5.67 

%

 

 

65,014 

 

2,568  5.28 

%

Borrowings

 

211,872 

 

3,333  2.10 

%

 

 

161,023 

 

2,079  1.73 

%

Total interest-bearing liabilities

 

2,354,233 

 

14,453  0.82 

%

 

 

2,139,535 

 

9,957  0.62 

%

Noninterest bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

943,743 

 

 

 

 

 

 

881,017 

 

 

 

 

Other liabilities

 

16,003 

 

 

 

 

 

 

15,053 

 

 

 

 

Total liabilities

 

3,313,979 

 

 

 

 

 

 

3,035,605 

 

 

 

 

Stockholders' equity

 

416,822 

 

 

 

 

 

 

365,055 

 

 

 

 

Total liabilities and stockholders' equity

$

3,730,801 

 

 

 

 

 

$

3,400,660 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

$

97,761 

 

 

 

 

 

$

89,005 

 

 

Net interest margin

 

 

 

 

3.77 

%

 

 

 

 

 

3.77 

%

Net interest margin, fully tax

 

 

 

 

 

 

 

 

 

 

 

 

 

equivalent (2)

 

 

 

 

3.84 

%

 

 

 

 

 

3.88 

%



 

 

 

 

 

 

 

 

 

 

 

 

 



(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 $1.5 million in the third quarter 2018 to $32.8 million, compared to $31.3 million in the third quarter 2017, and decreased $0.1 million from $32.9 million in the second quarter 2018.



The $1.5 million increase in net interest income in the third quarter 2018, compared to the third quarter 2017, was a result of a $3.4 million increase in interest income, partially offset by a $2.0 million increase in interest expense over the same period. The increase in interest income was mostly the result of a $301.2 million increase in average interest earning assets in the third quarter 2018, compared to the third quarter 2017. The increase in interest expense was due to the increasing cost of interest-bearing liabilities in addition to growth in deposits and borrowings.



The $0.1 million decrease in net interest income in the third quarter 2018, compared to the second quarter 2018, was primarily due to the increase in interest expense, primarily on deposits, exceeding the corresponding increase in interest income. Accretion of the discount on acquired loans was $0.8 million in the third quarter 2018, compared to $1.million in the second quarter 2018 and $1.0 million in the third quarter 2017. The increase in interest expense in the third quarter 2018, compared to the second quarter 2018, was primarily a result of a $0.4 million increase in interest expense on deposits resulting from a seven basis point increase in the cost of deposits. 



For the nine months ended September 30, 2018, net interest income increased $8.8 million compared to the same period in 2017, primarily due to a $13.3 million increase in interest income resulting from a $306.0 million or 9.7% increase in average earning assets, partially offset by a $4.5 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

 

 

Nine Months Ended



 

September 30,
2018

 

June 30,
2018

 

September 30,
2017

 

 

September 30,
2018

 

September 30,
2017



 

 

 

 

 

 

 

 

 

 

 



 

(In thousands)

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

Deposit service and other fees

$

3,571 

$

3,646 

$

3,580 

 

$

10,538 

$

10,405 

Investment management and trust

 

2,750 

 

2,466 

 

1,478 

 

 

7,514 

 

4,482 

Increase in cash surrender value of

 

 

 

 

 

 

 

 

 

 

 

life insurance

 

670 

 

661 

 

674 

 

 

2,001 

 

1,884 

Gain (loss) on sale of securities

 

 -

 

16 

 

(86)

 

 

16 

 

(86)

Gain on sale of SBA loans

 

430 

 

255 

 

143 

 

 

916 

 

971 

Other

 

851 

 

311 

 

341 

 

 

1,612 

 

1,218 

Total noninterest income

$

8,272 

$

7,355 

$

6,130 

 

$

22,597 

$

18,874 



Third quarter 2018 noninterest income increased by $2.1 million compared to the third quarter 2017 and by $0.9 million compared to the second quarter 2018. The increase was primarily due to a $1.3 million increase in investment management and trust income in the third quarter 2018 compared to the third quarter 2017, which was primarily a result of the January 2018 purchase of the assets under management of Wagner Wealth Management, LLC (“Wagner”). At September 30, 2018, assets under management were $1.5 billion compared to $815 million as of September 30, 2017. 



Compared to the second quarter 2018, noninterest income increased $0.9 million in the third quarter 2018, primarily as a result of a $0.7 million increase in gains on the sale of long-lived assets.



For the nine months ended September 30, 2018, noninterest income increased $3.7 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

 

 

Nine Months Ended



 

September 30,
2018

 

June 30,
2018

 

September 30,
2017

 

 

September 30,
2018

 

September 30,
2017



 

 

 

 

 

 

 

 

 

 

 



 

(In thousands)

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

$

12,617 

$

12,871 

$

11,736 

 

$

38,391 

$

34,909 

Occupancy expense

 

1,667 

 

1,681 

 

1,714 

 

 

5,086 

 

4,940 

Furniture and equipment

 

1,009 

 

1,031 

 

974 

 

 

3,100 

 

2,894 

Amortization of intangible assets

 

924 

 

952 

 

672 

 

 

2,788 

 

1,969 

Other real estate owned, net

 

19 

 

 

(20)

 

 

60 

 

174 

Insurance and assessments

 

694 

 

670 

 

642 

 

 

2,061 

 

1,995 

Professional fees

 

905 

 

1,040 

 

929 

 

 

3,036 

 

3,155 

Impairment of long-lived assets

 

 -

 

 -

 

 -

 

 

 -