Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
GBNK > SEC Filings for GBNK > Form 10-Q on 31-Jul-2013All Recent SEC Filings

Show all filings for GUARANTY BANCORP

Form 10-Q for GUARANTY BANCORP


31-Jul-2013

Quarterly Report


ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

This MD&A should be read together with our unaudited Condensed Consolidated Financial Statements and unaudited Statistical Information included elsewhere in this Report, Part II, Item 1A of this Report, and Items 1, 1A, 7, 7A and 8 of our 2012 Annual Report on Form 10-K. Also, please see the disclosure in the "Forward-Looking Statements and Factors That Could Affect Future Results" section in this Report for certain other factors that could cause actual results or future events to differ materially from those anticipated in the forward-looking statements included in this Report or from historical performance.

Overview

Guaranty Bancorp is a bank holding company with its principal business to serve as a holding company to its Colorado-based bank subsidiary, Guaranty Bank and Trust Company. The Bank owns several single-member limited liability companies that hold real estate as well as an investment advisory firm, Private Capital Management LLC. Unless the context requires otherwise, the terms "Company," "us," "we," and "our" refer to Guaranty Bancorp on a consolidated basis. References to the "Bank" refer to Guaranty Bank and Trust Company, our bank subsidiary.

Through the Bank, we provide banking and other financial services throughout our targeted Colorado markets to consumers and primarily small and medium-sized businesses, including the owners and employees of those businesses. These banking products and services include accepting time and demand deposits, originating commercial loans (including energy loans), real estate loans (including construction loans), Small Business Administration guaranteed loans, and consumer loans. The Bank and its subsidiary, Private Capital Management LLC ("PCM"), also provide wealth management services, including private banking, investment management, jumbo mortgage loans and trust services. We derive our income primarily from interest (including loan origination fees) received on loans and, to a lesser extent, interest on investment securities and other fees received in connection with servicing loan and deposit accounts, personal trust and investment management services. Our major operating expenses include interest we pay on deposits and borrowings and general operating expenses. We rely primarily on locally generated deposits to provide us with funds for making loans.

In addition to building growth through our existing branches, we seek opportunities to acquire small to medium-sized banks or specialty finance companies that will allow us to expand our franchise in a manner consistent with our community-banking focus. Ideally, the financial institutions we seek to acquire will be in or contiguous to the existing footprint of the current branch network of our Bank, which would allow us to consolidate duplicative costs and administrative functions and to rationalize operating expenses. We believe that by streamlining the administrative and operational functions of an acquired financial institution, we are able to substantially lower operating costs, improve performance and quickly integrate the acquired financial institution while maintaining the stability of our franchise as well as that of the financial institution we acquire. We also seek opportunities which will allow us to further diversify our noninterest income base, including adding to our wealth management platform.

We are subject to competition from other financial institutions and our operating results, like those of other financial institutions operating exclusively or primarily in Colorado, are significantly influenced by economic conditions in Colorado, including the strength of the real estate market. In addition, both the fiscal and regulatory policies of the federal government and regulatory authorities that govern financial institutions and market interest rates impact our financial condition, results of operations and cash flows.


Table of Contents

Earnings Summary

The following table summarizes certain key financial results for the periods indicated:

Table 1



                                  Three Months Ended June 30,                      Six Months Ended June 30,
                                                           Change                                          Change
                                                          Favorable                                       Favorable
                            2013            2012        (Unfavorable)        2013           2012        (Unfavorable)
                                                 (In thousands, except share data and ratios)
Results of Operations:
Interest income          $    17,449    $     17,706   $          (257 )  $    34,779   $     35,398   $          (619 )
Interest expense               1,710           2,323               613          3,662          4,715             1,053
Net interest income           15,739          15,383               356         31,117         30,683               434
Provision for loan
losses                             -             500               500              -          1,500             1,500
Net interest income
after provision for
loan losses                   15,739          14,883               856         31,117         29,183             1,934
Noninterest income             3,711           2,911               800          6,661          6,010               651
Noninterest expense           13,879          17,516             3,637         29,071         31,998             2,927
Income before income
taxes                          5,571             278             5,293          8,707          3,195             5,512
Income tax expense             1,753          (5,914 )          (7,667 )        2,617         (5,914 )          (8,531 )
Net income               $     3,818    $      6,192   $        (2,374 )  $     6,090   $      9,109   $        (3,019 )

Common Share Data:
Basic earnings per
common share             $      0.18    $       0.30   $         (0.12 )  $      0.29   $       0.44   $         (0.15 )
Diluted earnings per
common share             $      0.18    $       0.30   $         (0.12 )  $      0.29   $       0.44   $         (0.15 )
Average common shares
outstanding               20,860,228      20,782,861            77,367     20,854,858     20,780,713            74,145
Diluted average common
shares outstanding        20,941,486      20,847,792            93,694     20,934,521     20,857,264            77,257

Average equity to
average assets                 10.33 %         10.31 %             0.2 %        10.35 %        10.34 %             0.1 %
Return on average
equity                          8.02 %         14.15 %           (43.3 )%        6.47 %        10.50 %           (38.4 )%
Return on average
assets                          0.83 %          1.46 %           (43.2 )%        0.67 %         1.09 %           (38.5 )%
Dividend payout ratio          13.67 %           N/A              13.7 %         8.57 %          N/A               8.6 %




                                           June 30,      June 30,      Percent
                                             2013          2012         Change
Selected Balance Sheet Ratios:
Total risk-based capital to
risk-weighted assets                           14.96 %       16.50 %        (9.3 )%
Leverage ratio                                 11.46 %       12.55 %        (8.7 )%
Loans, net of unearned loan fees to
deposits                                       85.60 %       80.51 %         6.3 %
Allowance for loan losses to loans,
net of unearned loan fees                       1.63 %        2.64 %       (38.3 )%
Allowance for loan losses to
nonperforming loans                           103.61 %      137.65 %       (24.7 )%
Classified assets to allowance and
Tier 1 capital (1)                             16.48 %       33.79 %       (51.2 )%
Noninterest bearing deposits to total
deposits                                       34.90 %       39.61 %       (11.9 )%
Time deposits to total deposits                12.77 %       13.31 %        (4.1 )%



(1) Based on Bank only Tier 1 capital

Second quarter 2013 net income was $3.8 million as compared to $6.2 million for the same quarter in 2012. The second quarter 2012 net income was impacted by two significant non-cash items - a $5.7 million reversal of the remaining deferred tax valuation allowance, partially offset by a $2.8 million impairment on bank facilities. Excluding these two items, second quarter 2013 net income improved significantly compared to second quarter 2012 evidenced by a $0.4 million increase in net interest income, a $0.4 million increase in investment advisory income generated by PCM, a $0.3 million increase in gain on sale of SBA loans and a $0.8 net reduction in noninterest expense. These improvements were partially offset by a $0.3 million decline in gains on sales of securities as


Table of Contents

compared to the second quarter 2012.

For the six months ending June 30, 2013, net income was $6.1 million as compared to $9.1 million for the same period in 2012. As discussed above, 2012 year-to-date net income was significantly impacted by the non-cash reversal of the remaining deferred tax valuation allowance, partially offset by the impairment on bank facilities. Excluding these two items, 2013 year-to-date net income improved due to a $0.6 million increase in noninterest income, mostly due to investment advisory income generated by PCM and gains on sales of SBA loans; a $1.5 million reduction in provision for loan losses, due to improved credit quality; a $0.4 million increase in net interest income; and a $0.2 million net reduction in noninterest expense. These improvements were partially offset by a $0.9 million reduction in gains on sales of securities, a $0.6 million prepayment penalty on the early redemption of certain TruPs in the first quarter 2013 and recognition of income tax expense subsequent to the reversal of the remaining deferred tax valuation allowance in the second quarter 2012.

Net Interest Income and Net Interest Margin

Net interest income, which is the Company's primary source of income, represents the difference between interest earned on assets and interest paid on liabilities. The interest rate spread is the difference between the yield on our interest-bearing assets and liabilities. Net interest margin is net interest income expressed as a percentage of average interest-earning assets.

The following table summarizes the Company's net interest income and related spread and margin for the current quarter and prior four quarters:

Table 2



                                                         Three Months Ended
                            June 30,       March 31,      December 31,      September 30,      June 30,
                              2013           2013             2012              2012             2012
                                                       (Dollars in thousands)
Net interest income        $    15,739    $    15,378    $       15,217    $        14,511    $    15,383
Interest rate spread              3.41 %         3.35 %            3.21 %             3.15 %         3.53 %
Net interest margin               3.61 %         3.61 %            3.48 %             3.46 %         3.86 %
Net interest margin,
fully tax equivalent              3.72 %         3.72 %            3.57 %             3.55 %         3.95 %

Second quarter 2013 net interest income increased by $0.4 million to $15.7 million from $15.4 million recognized in the first quarter 2013, and increased by $0.4 million compared to the second quarter 2012. The Company's net interest margin of 3.61% remained consistent with the prior linked quarter and reflected a decline of 25 basis points from 3.86% in the second quarter 2012. The Company's stable net interest margin in the second quarter 2013 as compared to the prior linked quarter was due to a favorable change in the mix of our earning assets combined with a reduction in the cost of interest bearing liabilities, offset by lower yields on earning assets. The decline in net interest margin as compared to the second quarter 2012 was the result of a 43 basis point decline in the yield on earnings assets, partially offset by a 31 basis point favorable decline in the cost of interest bearing liabilities.

Net interest income increased by $0.4 million in the second quarter 2013 compared to the same quarter in 2012, primarily due to a $0.6 million decline in interest expense, partially offset by a $0.2 decline in interest income. The decline in interest expense was attributable to favorable rate and volume variances of $0.4 and $0.2 million, respectively, mostly related to the redemption of $15.0 million of fixed, high-cost TruPS and related subordinated debentures during the first quarter 2013 combined with the payment of previously deferred interest payments on each of our subordinated debentures during the third quarter 2012. The decline in interest income was primarily due to an unfavorable rate variance of $3.3 million, partially offset by a favorable volume variance of $3.1 million. The favorable volume variance was primarily attributable to the $105.1 million increase in average loan balances, while the rate variance was mostly due to a 60 basis point decrease in loan yields during the second quarter 2013 compared to the same quarter in 2012.

On a linked quarter basis, net interest income increased by $0.4 million in the second quarter 2013 due a $0.2 million decrease in interest expense combined with a $0.2 million increase in interest income. This increase in interest income was primarily attributable to a $50.7 million increase in average loans during the quarter, partially


Table of Contents

offset by a 24 basis point decrease in yield. The decrease in interest expense was primarily attributable to the early redemption of certain TruPs and related subordinated debentures in the first quarter 2013.

Table 3



                                                 Six Months Ended
                                              June 30,       June 30,
                                                2013           2012
                                              (Dollars in thousands)
Net interest income                         $     31,117    $   30,683
Interest rate spread                                3.38 %        3.57 %
Net interest margin                                 3.61 %        3.90 %
Net interest margin, fully tax equivalent           3.72 %        3.99 %

For the six month period ended June 30, 2013, net interest income increased by $0.4 million, or 1.4%, as compared to the same period in 2012. This increase was comprised of a $1.1 million favorable decrease in interest expense, partially offset by a $0.6 million decrease in interest income.

The $1.1 million decrease in interest expense was primarily the result of a $0.8 million decline in interest expense on subordinated debentures, mostly related to the redemption of $15.0 million of fixed, high-cost TruPS and related subordinated debentures during the first quarter 2013 combined with the payment of previously deferred interest payments on each of our subordinated debentures during the third quarter 2012. The remainder of the decrease in interest expense was attributable to a favorable decline in the cost of deposits. The decrease in interest income for the six months ending June 30, 2013 compared to the same period in 2012 was due to a $4.4 favorable volume variance, offset by a $5.0 million unfavorable rate variance. The favorable volume variance was the result of a $153.9 million increase in average earning assets, primarily due to an $82.5 million increase in average loans during the six months ended June 30, 2013 as compared to the same period in 2012. The unfavorable rate variance was the result of a 44 basis point decline in yield on average earning assets.


Table of Contents

The following table presents, for the periods indicated, average assets, liabilities and stockholders' equity, as well as the net interest income from average interest-earning assets and the resultant annualized yields and costs expressed in percentages.

Table 4



                                                   Three Months Ended June 30,
                                          2013                                     2012
                                        Interest      Average                    Interest      Average
                          Average       Income or     Yield or     Average       Income or     Yield or
                           Balance       Expense        Cost        Balance       Expense        Cost
                                                     (Dollars in thousands)
ASSETS:
Interest-earning
assets:
Gross loans, net of
unearned fees
(1)(2)(3)                $ 1,215,104   $     14,104        4.66 % $ 1,110,035         14,511        5.26 %
Investment securities
(1)
Taxable                      403,199          2,322        2.31 %     321,029          2,366        2.96 %
Tax-exempt                    82,662            786        3.81 %      53,239            618        4.66 %
Bank Stocks (4)               17,158            170        3.97 %      14,691            153        4.18 %
Other earning assets          28,826             67        0.93 %     103,783             58        0.22 %
Total interest-earning
assets                     1,746,949         17,449        4.01 %   1,602,777         17,706        4.44 %
Non-earning assets:
Cash and due from
banks                          8,045                                    8,353
Other assets                  93,650                                   95,732
Total assets             $ 1,848,644                              $ 1,706,862

LIABILITIES AND
STOCKHOLDERS' EQUITY:
Interest-bearing
liabilities:
Deposits:
Interest-bearing
demand and NOW           $   312,152   $         82        0.11 % $   272,007   $        116        0.17 %
Money market                 320,005            249        0.31 %     290,604            268        0.37 %
Savings                      106,471             39        0.15 %      97,120             36        0.15 %
Time certificates of
deposit                      185,303            245        0.53 %     187,343            291        0.62 %
Total interest-bearing
deposits                     923,931            615        0.27 %     847,074            711        0.34 %
Borrowings:
Repurchase agreements         31,757             11        0.14 %      15,225             12        0.31 %
Federal funds
purchased (5)                     27              -           0 %           3              -        0.97 %
Subordinated
debentures (6)                25,774            235        3.66 %      49,649            773        6.26 %
Borrowings                   157,298            849        2.16 %     110,176            827        3.02 %
Total interest-bearing
liabilities                1,138,787          1,710        0.60 %   1,022,127          2,323        0.91 %
Noninterest bearing
liabilities:
Demand deposits              510,596                                  502,209
Other liabilities              8,280                                    6,581
Total liabilities          1,657,663                                1,530,917
Stockholders' Equity         190,981                                  175,945
Total liabilities and
stockholders' equity     $ 1,848,644                              $ 1,706,862

Net interest income                    $     15,739                             $     15,383
Net interest margin                                        3.61 %                                   3.86 %



(1) Yields on loans and securities have not been adjusted to a tax-equivalent basis. Net interest margin on a fully tax-equivalent basis would have been 3.72% and 3.95% for the three months ended June 30, 2013 and 2012, respectively. 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%.

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

(3) Net loan fees of $0.3 million and $0.4 million for the three months ended June 30, 2013 and 2012, respectively, are included in the yield computation.

(4) Includes Bankers' Bank of the West stock, Federal Agricultural Mortgage Corporation (Farmer Mac) stock, Federal Reserve Bank stock and Federal Home Loan Bank stock.

(5) The interest expense related to federal funds purchased for the second quarter 2013 and 2012 rounded to zero.

(6) June 30, 2012 includes accrued interest, resulting from deferred payments on Trust Preferred Securities.


Table of Contents

Table 4 (Continued)



                                                  Six Months Ended June 30,
                                        2013                                    2012
                                        Interest     Average                    Interest     Average
                          Average       Income or    Yield or     Average       Income or    Yield or
                          Balance        Expense       Cost       Balance        Expense       Cost
                                                   (Dollars in thousands)
ASSETS:
Interest-earning
assets:
Gross loans, net of
unearned fees
(1)(2)(3)               $  1,189,883   $    28,186       4.78 % $  1,107,358   $    28,993       5.27 %
Investment securities
(1)
Taxable                      403,153         4,587       2.29 %      315,335         4,759       3.03 %
Tax-exempt                    81,898         1,579       3.89 %       53,064         1,235       4.68 %
Bank Stocks (4)               15,733           326       4.18 %       14,641           311       4.27 %
Other earning assets          47,051           101       0.43 %       93,446           100       0.21 %
Total
interest-earning
assets                     1,737,718        34,779       4.04 %    1,583,844        35,398       4.49 %
Non-earning assets:
Cash and due from
banks                          8,036                                   8,380
Other assets                  89,187                                  95,474
Total assets            $  1,834,941                            $  1,687,698

LIABILITIES AND
STOCKHOLDERS' EQUITY:
Interest-bearing
liabilities:
Deposits:
Interest-bearing
demand and NOW          $    294,315   $       160       0.11 % $    276,971   $       250       0.18 %
Money market                 322,573           507       0.32 %      290,477           544       0.38 %
Savings                      105,755            77       0.15 %       95,864            71       0.15 %
Time certificates of
deposit                      187,724           506       0.54 %      192,372           623       0.65 %
Total
interest-bearing
deposits                     910,367         1,250       0.28 %      855,684         1,488       0.35 %
Borrowings:
Repurchase agreements         46,636            29       0.13 %       15,047            24       0.32 %
Federal funds
purchased (5)                     14             -          1 %            2             -       0.90 %
Subordinated
debentures (6)                30,957           716       4.66 %       49,277         1,549       6.32 %
Borrowings                   133,932         1,667       2.51 %      110,176         1,654       3.02 %
Total
interest-bearing
liabilities                1,121,906         3,662       0.66 %    1,030,186         4,715       0.92 %
Noninterest bearing
liabilities:
Demand deposits              514,583                                 475,571
Other liabilities              8,604                                   7,431
Total liabilities          1,645,093                               1,513,188
Stockholders' Equity         189,848                                 174,510
Total liabilities and
stockholders' equity    $  1,834,941                            $  1,687,698

Net interest income                    $    31,117                             $    30,683
Net interest margin                                      3.61 %                                  3.90 %



(1) Yields on loans and securities have not been adjusted to a tax-equivalent basis. Net interest margin on a fully tax-equivalent basis would have been 3.72% and 3.99% for the six months ended June 30, 2013 and 2012, respectively. 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%.

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

(3) Net loan fees of $0.6 million and $0.8 million for the six months ended June 30, 2013 and 2012, respectively, are included in the yield computation.

(4) Includes Bankers' Bank of the West stock, Federal Agricultural Mortgage Corporation (Farmer Mac) stock, Federal Reserve Bank stock and Federal Home Loan Bank stock.

(5) The interest expense related to federal funds purchased for the six months ended June 30, 2013 and 2012 rounded to zero.

(6) The six months ended June 30, 2012 includes accrued interest, resulting from deferred payments on Trust Preferred Securities.


Table of Contents

The following table presents the dollar amount of changes in interest income and interest expense for the major categories of our interest-earning assets and interest-bearing liabilities. Information is provided for each category of interest-earning assets and interest-bearing liabilities with respect to
(i) changes attributable to volume (i.e., changes in average balances multiplied by the prior-period average rate) and (ii) changes attributable to rate (i.e., changes in average rate multiplied by prior-period average balances). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to volume and the change due to rate.

Table 5



                              Three Months Ended June 30, 2013              Six Months Ended June 30, 2013
                               Compared to Three Months Ended                Compared to Six Months Ended
                                       June 30, 2012                                June 30, 2012
. . .
  Add GBNK to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for GBNK - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.