Guaranty Bancorp Announces Third Quarter 2017 Financial Results

Company Release - 10/18/2017 2:00 PM ET
  • 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 wit