Exhibit 99.1
Contact: | | Daniel M. Quinn | | Paul W. Taylor |
| | President & Chief Executive Officer | | E.V.P. & Chief Financial Officer |
| | 1331 Seventeenth Street, Suite 300 | | 1331 Seventeenth Street, Suite 300 |
| | Denver, CO 80202 | | Denver, CO 80202 |
| | 303/313-6763 | | 303/293-5563 |
FOR IMMEDIATE RELEASE:
Guaranty Bancorp Announces 2008 Fourth Quarter Financial Results
· Fourth quarter net income of $3.8 million, or 7 cents per basic and diluted share
· Loans, deposits and capital increase in the fourth quarter
· $30.3 million increase in total noninterest bearing deposits in the fourth quarter
· Nonperforming assets declined in the fourth quarter
· Noninterest expense falls to the lowest level in the past sixteen quarters
Denver, Colorado (January 22, 2009) – Guaranty Bancorp (Nasdaq: GBNK) today reported fourth quarter 2008 net income of $3.8 million, or 7 cents earnings per basic and diluted share and fourth quarter 2008 cash net earnings of $4.9 million, or $0.10 per basic and diluted share, excluding after-tax intangible asset amortization of $1.1 million..
Dan Quinn, Guaranty Bancorp President and CEO, stated, “We are satisfied with our fourth quarter 2008 results. The Company experienced $52.4 million of loan growth during the fourth quarter 2008 while also strengthening its capital. Additionally, nonperforming assets remained relatively unchanged during the fourth quarter 2008 with net charge-offs of $1.0 million.”
Mr. Quinn continued, “In a difficult banking environment, we were able to grow noninterest bearing demand deposits by $30.3 million during the fourth quarter 2008. Although we experienced a decline in net interest margin, this was primarily a result of two factors. First, the Federal Open Markets Committee of the Federal Reserve Board decreased the targeted federal funds rate to an historic low between 0 and 25 basis points, a decrease of 175 to 200 basis points in the fourth quarter. Second, management increased the level of its time deposits and FHLB term advances and reduced the amount of its short-term or overnight borrowings. This action effectively lengthened the term of overall liabilities, but at a higher cost than short-term borrowings.”
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Regulatory Capital Increases during the Quarter
The Company’s capital ratios remain above the highest regulatory capital requirement of “well-capitalized” at December 31, 2008 as follows:
| | Ratio at
December 31,
2008 | | Ratio at
September 30,
2008 | | Minimum
Capital
Requirement | | Minimum
Requirement for
“Well
Capitalized”
Institution | |
| | | | | | | | | |
Total Risk-Based Capital Ratio | | 10.61 | % | 10.45 | % | 8.00 | % | 10.00 | % |
Tier 1 Risk-Based Capital Ratio | | 9.35 | % | 9.19 | % | 4.00 | % | 6.00 | % |
Leverage Ratio | | 8.98 | % | 7.79 | % | 4.00 | % | 5.00 | % |
Key Financial Measures
| | Quarter Ended | | Year Ended | |
| | December 31,
2008 | | September 30,
2008 | | December 31,
2007 | | December 31,
2008 | | December 31,
2007 | |
Earnings (loss) per share-basic & diluted | | $ | 0.07 | | $ | (5.21 | ) | $ | (2.68 | ) | $ | (5.03 | ) | $ | (2.60 | ) |
Cash earnings (loss) per share-basic & diluted | | $ | 0.10 | | $ | (0.27 | ) | $ | 0.10 | | $ | (0.03 | ) | $ | 0.18 | |
Return on average assets | | 0.72 | % | (44.96 | )% | (22.09 | )% | (11.19 | )% | (5.29 | )% |
Return on tangible average assets (cash) | | 0.95 | % | (2.67 | )% | 0.98 | % | (0.07 | )% | 0.43 | % |
Net Interest Margin | | 3.55 | % | 4.02 | % | 4.75 | % | 4.05 | % | 4.93 | % |
Fourth quarter 2008 net income was $3.8 million, or 7 cents earnings per basic and diluted share, compared to a fourth quarter 2007 net loss of $138.2 million, or $2.68 loss per basic and diluted share. The fourth quarter 2007 was affected by a $142.2 million non-cash charge for goodwill impairment. Another difference between the fourth quarter 2007 net loss and fourth quarter 2008 net income includes a $6.5 million decrease in net interest income, primarily caused by a 120 basis point decrease in net interest margin – a direct result of a 400 basis point decrease in both the targeted federal funds rate and prime rate during the past twelve months. Excluding the 2007 goodwill impairment, noninterest expense decreased by $2.5 million, or 14% in the fourth quarter 2008 as compared to the same quarter in 2007.
Fourth quarter 2008 cash net earnings were $4.9 million, or $0.10 per basic and diluted share, which excludes after-tax intangible asset amortization of $1.1 million. Fourth quarter 2007 cash net income was $5.3 million, or $0.10 per basic and diluted share, which excludes after-tax intangible asset amortization of $1.3 million and the 2007 goodwill impairment charge.
For the year ending December 31, 2008, the net loss was $256.7 million, or $5.03 loss per basic and diluted share compared to a net loss of $138.1 million or $2.60 loss per basic and diluted share for 2007. The net loss in both years was primarily the result of goodwill impairment charges of $250.7 million and $142.2 million in 2008 and 2007, respectively. Goodwill impairment charges are non-cash accounting entries that have no impact on the Company’s regulatory capital, cash flow or liquidity. At the end of 2008, there is no remaining goodwill intangible asset recorded on the Company’s balance sheet.
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The cash net loss for the year ended December 31, 2008 was $1.4 million, or a $0.03 loss per basic and diluted share excluding after-tax intangible asset amortization of $4.6 million and goodwill impairment of $250.7 million. Cash net income for the year ended December 31, 2007 was $9.5 million, or $0.18 per basic and diluted share excluding after-tax intangible amortization of $5.4 million and goodwill impairment of $142.2 million.
Net Interest Income and Margin
| | Quarter Ended | | Year Ended | |
| | December 31,
2008 | | September 30,
2008 | | December 31,
2007 | | December 31,
2008 | | December 31,
2007 | |
| | (Dollars in thousands) | |
| | | | | | | | | | | |
Net interest income | | $ | 17,679 | | $ | 19,842 | | $ | 24,184 | | $ | 79,562 | | $ | 102,249 | |
Interest rate spread | | 2.92 | % | 3.37 | % | 3.77 | % | 3.35 | % | 3.94 | % |
Net interest margin | | 3.55 | % | 4.02 | % | 4.75 | % | 4.05 | % | 4.93 | % |
Net interest margin, fully tax equivalent | | 3.64 | % | 4.11 | % | 4.88 | % | 4.14 | % | 5.08 | % |
| | | | | | | | | | | | | | | | |
Fourth quarter 2008 net interest income of $17.7 million decreased by $2.2 million from the third quarter 2008, and $6.5 million from the fourth quarter 2007. The Company’s net interest margin of 3.55% for the fourth quarter 2008 reflected a decline of 47 basis points from the third quarter 2008 and a decline of 120 basis points from the fourth quarter 2007. The decline in net interest margin from the fourth quarter 2007 to fourth quarter 2008 is mostly attributable to the greater than 400 basis point cuts in the target federal funds rate by the Federal Open Market Committee of the Federal Reserve Board during the past twelve months.
Interest income decreased by $10.6 million from the fourth quarter 2007 to $28.0 million in the fourth quarter 2008. This decrease consisted of a $10.0 million unfavorable rate variance due to lower rates, with the remainder of the decrease due to an overall decline in earnings assets. Approximately 65% of the Company’s outstanding loan balances are variable rate loans and are generally tied to indexes such as prime, federal funds or LIBOR. Due to Federal Reserve monetary policy, the prime rate has decreased by over 400 basis points from December 2007 to December 2008. As a result of the decline in rates, the average yield on loans for the Company decreased by 217 basis points from 7.84% for the quarter ended December 31, 2007 to 5.67% for the same period in 2008. The Company remains asset sensitive at the end of 2008 and expects that as interest rates rise, net interest income will also increase.
Interest expense decreased by $4.1 million, or 28.3%, to $10.3 million for the fourth quarter 2008 as compared to the fourth quarter 2007. The decrease in interest expense from the fourth quarter 2007 was primarily the result of a $1.8 million favorable rate variance and a $2.3 million favorable volume variance. The overall cost of funds declined by 109 basis points to 2.70% from the fourth quarter 2007 to the fourth quarter 2008. Average total interest-bearing liabilities increased by $13.2 million from the fourth quarter 2007 to the fourth quarter 2008 due mostly to a $126.5 million increase in long-term borrowings, partially offset by a $115.8 million decrease in total interest-bearing deposits.
For the year ended December 31, 2008, the Company’s net interest income declined by $22.7 million from the same period in 2007. This decline is due primarily to an $18.9 million unfavorable rate variance in connection with an 88 basis point decrease in the net interest margin. The
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remaining $3.8 million decrease in net interest income is primarily due to a $41.8 million decrease in earning assets.
Noninterest Income
The following table presents noninterest income as of the dates indicated.
| | Quarter Ended | | Year Ended | |
| | December 31,
2008 | | September 30,
2008 | | December 31,
2007 | | December 31,
2008 | | December 31,
2007 | |
| | (In thousands) | |
Noninterest income: | | | | | | | | | | | |
Customer service and other fees | | $ | 2,357 | | $ | 2,521 | | $ | 2,267 | | $ | 9,682 | | $ | 9,509 | |
Gain on sale of securities | | — | | — | | — | | 138 | | — | |
Other | | (91 | ) | 186 | | 665 | | 800 | | 1,187 | |
Total noninterest income | | $ | 2,266 | | $ | 2,707 | | $ | 2,932 | | $ | 10,620 | | $ | 10,696 | |
Noninterest income for the fourth quarter 2008 decreased by $0.4 million from the third quarter 2008 and decreased by $0.7 million from the fourth quarter 2007. The decrease in other noninterest income in the fourth quarter 2008 as compared to the fourth quarter 2007, is mostly due to a recovery of approximately $0.6 million recorded in 2007.
Compared to the third quarter 2008, the decrease is primarily due to a $0.3 million fair value write-down of assets held by the Company for purposes of funding its nonqualified deferred compensation plan. These assets are required to be marked-to-market through the income statement. This write-down is offset by a reduction to compensation cost related to the deferred compensation plan. This compensation cost is recorded as part of salaries and benefit expense as discussed below.
For the year ended December 31, 2008, noninterest income remained relatively flat as compared to 2007. The $0.4 million decrease to other noninterest income was mostly offset by a gain on sale of securities, as well as an increase in customer service and other fees.
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Noninterest Expense
The following table presents noninterest expense as of the dates indicated.
| | Quarter Ended | | Year Ended | |
| | December 31,
2008 | | September 30,
2008 | | December 31,
2007 | | December 31,
2008 | | December 31,
2007 | |
| | (In thousands) | |
Noninterest expense: | | | | | | | | | | | |
Salaries and employee benefits | | $ | 6,255 | | $ | 5,927 | | $ | 8,442 | | $ | 31,086 | | $ | 39,179 | |
Occupancy expense | | 1,725 | | 1,958 | | 1,781 | | 7,815 | | 7,813 | |
Furniture and equipment | | 1,203 | | 1,390 | | 1,205 | | 5,290 | | 4,864 | |
Impairment of goodwill | | — | | 250,748 | | 142,210 | | 250,748 | | 142,210 | |
Amortization of intangible assets | | 1,803 | | 1,877 | | 2,132 | | 7,434 | | 8,666 | |
Other general and administrative | | 4,381 | | 3,982 | | 4,278 | | 17,283 | | 23,824 | |
Total noninterest expense | | $ | 15,367 | | $ | 265,882 | | $ | 160,048 | | $ | 319,656 | | $ | 226,556 | |
| | | | | | | | | | | |
Efficiency ratio (excluding charges related to intangible assets) | | 68.01 | % | 58.79 | % | 57.91 | % | 68.17 | % | 67.01 | % |
Noninterest expense for the fourth quarter 2008 decreased by $250.5 million from the third quarter 2008 and by $144.7 million from the fourth quarter 2007. The decreases in noninterest expense are primarily a result of goodwill impairment charges recorded in the third quarter 2008 and the fourth quarter 2007. Excluding these non-cash accounting charges for goodwill impairment, noninterest expense decreased by $2.5 million in the fourth quarter 2008 as compared to the fourth quarter 2007, and increased by $0.2 million from the third quarter 2008. At the end of 2008, there is no remaining goodwill recorded on the Company’s balance sheet.
Although overall noninterest expense, excluding goodwill, increased by $0.2 million from the third quarter 2008, equity-based compensation in the fourth quarter 2008 was $2.5 million higher as compared to the third quarter 2008. This difference in equity-based compensation resulted from a $2.7 million reduction in restricted stock expense in the third quarter 2008 attributable to a change in expectation regarding meeting the vesting criteria for performance-based shares. Ignoring this $2.5 million difference in equity-based compensation, other salaries and employee benefits decreased by $2.2 million in the fourth quarter 2008 from the third quarter 2008. A part of this $2.2 million quarter-over-quarter decrease is due to the major effort announced in the second quarter 2008 to better align our expenses with the current size of our business. The fourth quarter 2008 saw a favorable impact on salaries and employee benefits as a result of this effort with a $1.1 million decrease in core salaries and benefits. The remaining $1.1 million decrease in salaries and employee benefits is due mostly to a $0.6 million decrease in bonuses and incentive expense as well as a $0.3 million decrease in deferred compensation expense. This decrease in deferred compensation expense corresponds to a write-down of market value on assets held for the deferred compensation plan. The write-down of assets is recorded in other noninterest income as discussed above.
Other general and administrative expenses increased by $0.4 million in the fourth quarter 2008 as compared to the third quarter 2008, and increased by $0.1 million compared to the fourth quarter 2007. The $0.4 million increase over the prior quarter is due in part to an increase in loan collection related costs, including charge-offs of other real estate owned. A portion of this increase is due to costs associated with an extensive third-party loan review, which was finalized in the fourth quarter.
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Excluding goodwill impairment charges in both years, noninterest expense for 2008 was $68.9 million as compared to $84.3 million in 2007, a decrease of $15.4 million year-over-year. This decrease is comprised of an $8.1 million decline in salaries and employee benefit expense, a $6.5 million decrease in other noninterest expense and a $1.2 million decrease in intangible amortization expense. Approximately $4.1 million of the $8.1 million decrease to salaries and employee benefits expense is attributable to a decline in full-time equivalent employees by 89 from December 2007 to December 2008. Of the remaining $4.0 million decrease, $3.3 million is related to a decrease in equity-based compensation as discussed above and $0.7 million is related to a decrease in bonus and incentive expense. The $6.5 million decrease in other non-interest expense is primarily attributable to the $6.5 million charge recorded in 2007 resulting from a settlement of a lawsuit.
Balance Sheet
| | December 31,
2008 | | September 30,
2008 | | %
Change | | December 31,
2007 | | %
Change | |
| | (Dollars in thousands, except per share amounts) | |
Total loans, net of unearned discount | | $ | 1,826,333 | | $ | 1,779,673 | | 2.6 | % | $ | 1,781,647 | | 2.5 | % |
Loans held for sale | | 5,760 | | — | | 100.0 | % | — | | 100.0 | % |
Allowance for loan losses | | (44,988 | ) | (44,765 | ) | 0.5 | % | (25,711 | ) | 75.0 | % |
Total assets | | 2,102,741 | | 2,052,944 | | 2.4 | % | 2,371,664 | | (11.3 | )% |
Average assets, quarter-to-date | | 2,099,519 | | 2,351,913 | | (10.7 | )% | 2,482,352 | | (15.4 | )% |
Total deposits | | 1,698,651 | | 1,635,101 | | 3.9 | % | 1,799,507 | | (5.6 | )% |
Book value per share | | $ | 3.07 | | $ | 2.93 | | 4.7 | % | $ | 7.96 | | (61.4 | )% |
Tangible book value per share | | $ | 2.58 | | $ | 2.41 | | 7.1 | % | $ | 2.57 | | 0.6 | % |
Equity ratio - GAAP | | 7.68 | % | 7.52 | % | 2.2 | % | 17.65 | % | (56.5 | )% |
Tangible equity ratio | | 6.55 | % | 6.27 | % | 4.4 | % | 6.46 | % | 1.3 | % |
At December 31, 2008, the Company had total assets of $2.1 billion as compared to $2.1 billion at September 30, 2008, and $2.4 billion at December 31, 2007. The $268.9 million decline in assets from December 31, 2007 is mostly due to a $250.7 million goodwill impairment charge recorded in the third quarter 2008, as well as a $22.1 million decrease to investments.
The following table sets forth the amounts of our loans outstanding at the dates indicated:
| | December 31,
2008 | | September 30,
2008 | | December 31,
2007 | |
| | (In thousands) | |
Loans on real estate: | | | | | | | |
Residential and commercial | | $ | 680,030 | | $ | 693,800 | | $ | 713,478 | |
Construction | | 268,306 | | 248,883 | | 235,236 | |
Equity lines of credit | | 50,270 | | 49,205 | | 48,624 | |
Commercial loans | | 749,426 | | 706,678 | | 679,717 | |
Agricultural loans | | 22,738 | | 23,989 | | 39,506 | |
Lease financing | | 364 | | 472 | | 4,732 | |
Installment loans to individuals | | 38,352 | | 38,777 | | 40,835 | |
Overdrafts | | 855 | | 2,226 | | 1,329 | |
SBA and other | | 19,592 | | 19,401 | | 21,592 | |
| | 1,829,933 | | 1,783,431 | | 1,785,049 | |
Unearned discount | | (3,600 | ) | (3,758 | ) | (3,402 | ) |
Loans, net of unearned discount | | $ | 1,826,333 | | $ | 1,779,673 | | $ | 1,781,647 | |
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There were $998.6 million of real estate loans at December 31, 2008. Management continues its efforts to decrease its exposure to residential real-estate and residential land and land development loans. At December 31, 2008, there were approximately $57 million of loans secured by for-sale residential real estate and approximately $114 million of residential land and land development loans, respectively. The increase in construction loans is primarily attributable to the funding of existing commercial construction commitments.
The following table sets forth the amounts of our deposits outstanding at the dates indicated:
| | December 31,
2008 | | September 30,
2008 | | December 31,
2007 | |
| | (In thousands) | |
Noninterest bearing deposits | | $ | 433,761 | | $ | 403,495 | | $ | 515,299 | |
Interest bearing demand | | 145,492 | | 142,164 | | 160,100 | |
Money market | | 315,364 | | 483,691 | | 572,056 | |
Savings | | 68,064 | | 68,910 | | 71,944 | |
Time | | 735,970 | | 536,841 | | 480,108 | |
| | | | | | | |
Total deposits | | $ | 1,698,651 | | $ | 1,635,101 | | $ | 1,799,507 | |
Total deposits at December 31, 2008 increased by $63.6 million as compared to September 30, 2008, and declined by $100.9 million from December 31, 2007. During the fourth quarter 2008, there was a shift in the mix of deposits primarily between money market and time deposits. The Company joined the Certificate of Deposit Account Registry Service (CDARS®) program in the third quarter 2008, and part of the fourth quarter 2008 increase in time deposits is due to existing customers moving funds into the CDARS® program in order to obtain expanded Federal Deposit Insurance Corporation (FDIC) insurance coverage on their deposits. Additionally, the Company shifted its own funding sources from short-term and overnight funds to brokered deposits in order to provide longer-term funding to mitigate the impact of potential short-term liquidity fluctuations within the overall financial services industry in the second half of 2008. Brokered deposits increased by approximately $70.9 million during the fourth quarter.
Noninterest bearing deposits increased by $30.3 million during the fourth quarter 2008. As of December 31, 2008, noninterest bearing deposits comprised 25.5% of total deposits as compared to 24.7% at September 30, 2008 and 28.6% at December 31, 2007.
The decreases in total deposits from December 31, 2007 is mostly due to declines in money market and noninterest bearing deposits. These decreases were partially offset by increases in time deposits. Time deposits provide a more defined deposit maturity schedule for asset liability management purposes as compared to overnight or short-term borrowings. Average time deposits were $670.8 million, or 39.8% of total average deposits for the fourth quarter 2008, as compared to $514.3 million, or 27.4% of total average deposits for the fourth quarter 2007. The cost of time deposits decreased from 5.03% for the fourth quarter 2007 to 3.76% for the fourth quarter 2008. Most of the time deposits booked in 2008 have durations of twelve months or less, with $564 million of time deposits maturing in 2009.
Overall borrowings were $166.4 million at December 31, 2008 as compared to $63.7 million at December 31, 2007. The increase is mostly attributable to a decision to complement increased time deposits described above with lower-cost FHLB term advances. The average cost of borrowings for
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the year ended December 31, 2008 was 3.14% as compared to an average cost of time deposits of 4.17%.
Asset Quality
The following table presents selected asset quality data (excluding loans held for sale) as of the dates indicated:
| | December 31,
2008 | | September 30,
2008 | | June 30,
2008 | | March 31,
2008 | | December 31,
2007 | |
| | (Dollars in thousands) | |
| | | | | | | | | | | |
Nonaccrual loans, not restructured | | $ | 54,594 | | $ | 54,654 | | $ | 29,742 | | $ | 20,798 | | $ | 19,309 | |
Accruing loans past due 90 days or more | | 228 | | 324 | | 98 | | 1 | | 527 | |
| | | | | | | | | | | |
Total nonperforming loans (NPLs) | | 54,822 | | 54,978 | | 29,840 | | 20,799 | | 19,836 | |
Other real estate owned | | 484 | | 1,199 | | 1,910 | | 1,715 | | 3,517 | |
| | | | | | | | | | | |
Total nonperforming assets (NPAs) | | $ | 55,306 | | $ | 56,177 | | $ | 31,750 | | $ | 22,514 | | $ | 23,353 | |
| | | | | | | | | | | |
Accruing loans past due 30-89 days | | $ | 35,169 | | $ | 20,660 | | $ | 20,169 | | $ | 42,682 | | $ | 28,407 | |
| | | | | | | | | | | |
Allowance for loan losses | | $ | 44,988 | | $ | 44,765 | | $ | 26,506 | | $ | 26,048 | | $ | 25,711 | |
| | | | | | | | | | | |
Selected ratios: | | | | | | | | | | | |
NPLs to loans, net of unearned discount | | 3.00 | % | 3.09 | % | 1.67 | % | 1.18 | % | 1.11 | % |
NPAs to total assets | | 2.63 | % | 2.74 | % | 1.35 | % | 0.96 | % | 0.98 | % |
Allowance for loan losses to NPAs | | 81.34 | % | 79.69 | % | 83.48 | % | 115.70 | % | 110.10 | % |
Allowance for loan losses to NPLs | | 82.06 | % | 81.42 | % | 88.83 | % | 125.24 | % | 129.62 | % |
Allowance for loan losses to loans, net of unearned discount | | 2.46 | % | 2.52 | % | 1.48 | % | 1.48 | % | 1.44 | % |
Loans 30-89 days past due to loans, net of unearned discount | | 1.93 | % | 1.16 | % | 1.13 | % | 2.43 | % | 1.59 | % |
Nonperforming assets decreased by $0.9 million at December 31, 2008 as compared to September 30, 2008, and increased by $32.0 million as compared to December 31, 2007.
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The types of nonperforming loans (excluding loans held for sale) as of December 31, 2008 and September 30, 2008 are as follows:
| | Nonperforming Loans | |
| | December 31, 2008 | | September 30, 2008 | |
| | Loan
Balance | | Percent | | Related
Allowance | | Loan Balance | | Percent | | Related
Allowance | |
| | (Amounts in thousands) | |
Residential Construction,
Land and Land Development | | 36,808 | | 67.1 | % | 8,677 | | $ | 39,963 | | 72.7 | % | $ | 9,976 | |
Other Residential Loan | | 1,504 | | 2.7 | % | 87 | | 1,683 | | 3.1 | % | 116 | |
Commercial and Industrial Loans | | 10,450 | | 19.1 | % | 1,307 | | 7,416 | | 13.5 | % | 1,735 | |
Commercial Real Estate | | 5,963 | | 10.9 | % | 962 | | 5,578 | | 10.1 | % | 962 | |
Other | | 97 | | 0.2 | % | 31 | | 338 | | 0.6 | % | 36 | |
Total | | $ | 54,822 | | 100.0 | % | $ | 11,064 | | $ | 54,978 | | 100.0 | % | $ | 12,825 | |
| | | | | | | | | | | | | | | | | |
The types of loans included in the accruing loans past due 30-89 days as of December 31, 2008 and September 30, 2008 are as follows:
| | Accruing loans past due 30-89 days | |
| | December 31, 2008 | | September 30, 2008 | |
| | Loan Balance | | Percent | | Loan Balance | | Percent | |
| | (Amounts in thousands) | |
Residential Construction, Land and Land Development | | $ | 15,029 | | 42.7 | % | $ | 9,967 | | 48.2 | % |
Other Residential Loan | | 704 | | 2.0 | % | 5,248 | | 25.4 | % |
Commercial and Industrial Loans | | 16,273 | | 46.3 | % | 3,198 | | 15.5 | % |
Commercial Real Estate | | 2,334 | | 6.6 | % | 390 | | 1.9 | % |
Other | | 828 | | 2.4 | % | 1,857 | | 9.0 | % |
Total | | $ | 35,168 | | 100.0 | % | $ | 20,660 | | 100.0 | % |
Approximately 83% of the accruing loans past due 30-89 days relates to three loan relationships that are in the process of being renewed at year-end.
The Company recorded a provision for loan losses in the fourth quarter 2008 of $1.3 million, as compared to $30.8 million in the third quarter 2008 and $3.0 million in the fourth quarter 2007. The higher third quarter 2008 provision was due primarily to an increase in nonperforming loans during the third quarter 2008 and a corresponding higher specific allocation related to such loans, the impact of charge-offs and the current economic climate on our historical loss and economic concerns components of our allowance.
Net charge-offs in the fourth quarter 2008 were $1.0 million, as compared to $12.5 million in the third quarter 2008, and $1.3 million in the fourth quarter 2007. The third quarter 2008 net charge-offs included $10.8 million specifically related to residential construction, land and land development loans. Impaired loans as of December 31, 2008 totaled $54.8 million, as compared to $55.0 million at the end of the third quarter 2008, and $23.3 million at the end of the fourth quarter 2007.
The allowance for loan losses to total loans outstanding was 2.46% at December 31, 2008, as compared to 2.52% at September 30, 2008 and 1.44% at December 31, 2007.
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Stock Repurchase Program
During the fourth quarter 2008, the Company did not repurchase any shares under its stock repurchase program and only repurchased 9,622 shares related to the net settlement of vested, restricted stock awards at a cost of $22,000, or an average price of $2.25 per share. At the beginning of the fourth quarter, the Company had 1,200,000 shares remaining under its stock repurchase program adopted in October 2007, which expired on October 24, 2008. The Company did not implement a new stock repurchase program and does not plan to implement a new stock repurchase program in the near future due to its focus and strategy on strengthening its capital position. As of December 31, 2008, the Company had 52,544,917 shares outstanding, including 1,420,345 shares of unvested stock awards, and 109,214 of shares to be issued under its deferred compensation plan.
Non-GAAP Financial Measures
This press release includes non-GAAP financial measures related to the income statement, including cash net income, cash earnings per share and return on average tangible assets (cash), which exclude the after-tax impact of intangible asset amortization expense.
This press release also includes non-GAAP financial measures related to tangible assets, including return on average tangible assets (cash), tangible book value and tangible equity ratio, which exclude intangible assets.
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 for understanding the Company’s operating results and should not be considered a substitute for financial information presented in accordance with GAAP. These non-GAAP financial measures presented by the Company may be different from non-GAAP financial measures used by other companies.
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The following non-GAAP schedule reconciles cash net income and return on tangible net assets (cash) to their respective GAAP measure as of the dates indicated:
| | Quarter Ended | | Year Ended | |
| | December 31,
2008 | | September 30,
2008 | | December 31,
2007 | | December 31,
2008 | | December 31,
2007 | |
| | (In thousands, except per share data) | |
GAAP net income (loss) | | $ | 3,824 | | $ | (265,829 | ) | $ | (138,210 | ) | $ | (256,736 | ) | $ | (138,092 | ) |
Add: Impairment of goodwill | | — | | 250,748 | | 142,210 | | 250,748 | | 142,210 | |
Add: Amortization of intangible assets | | 1,803 | | 1,877 | | 2,132 | | 7,434 | | 8,666 | |
Less: Income tax effect | | (686 | ) | (713 | ) | (810 | ) | (2,826 | ) | (3,295 | ) |
Cash net income (loss) | | $ | 4,941 | | $ | (13,917 | ) | $ | 5,322 | | $ | (1,380 | ) | $ | 9,489 | |
| | | | | | | | | | | |
Weighted average shares – diluted | | 51,116,291 | | 51,067,439 | | 51,559,554 | | 51,044,372 | | 53,109,307 | |
| | | | | | | | | | | |
Earnings (loss) per share – diluted | | $ | 0.07 | | $ | (5.21 | ) | $ | (2.68 | ) | $ | (5.03 | ) | $ | (2.60 | ) |
Add: Amortization of intangible assets (after tax effect) | | 0.03 | | 4.94 | | 2.78 | | 5.00 | | 2.78 | |
Cash earnings (loss) per share | | $ | 0.10 | | $ | (0.27 | ) | $ | 0.10 | | $ | (0.03 | ) | $ | 0.18 | |
| | | | | | | | | | | |
Return on tangible net assets(cash) | | | | | | | | | | | |
Cash net income (loss) | | $ | 4,941 | | $ | (13,917 | ) | $ | 5,322 | | $ | (1,380 | ) | $ | 9,489 | |
| | | | | | | | | | | |
Average total assets | | $ | 2,099,519 | | $ | 2,351,913 | | $ | 2,482,352 | | $ | 2,295,108 | | $ | 2,611,973 | |
Less: Average intangible assets | | (26,374 | ) | (276,257 | ) | (331,082 | ) | (216,219 | ) | (406,012 | ) |
Average tangible assets | | $ | 2,073,145 | | $ | 2,075,656 | | $ | 2,151,270 | | $ | 2,078,889 | | $ | 2,205,961 | |
| | | | | | | | | | | |
Return on average assets - GAAP net income (loss) divided by total average assets | | 0.72 | % | (44.96 | )% | (22.09 | )% | (11.19 | )% | (5.29 | )% |
| | | | | | | | | | | |
Return on average tangible assets(cash) - cash net income(loss) divided by average tangible assets | | 0.95 | % | (2.67 | )% | 0.98 | % | (0.07 | )% | 0.43 | % |
The following non-GAAP schedule reconciles the book value per share to the tangible book value per share and the tangible equity ratio as of the dates indicated:
| | December 31,
2008 | | September 30,
2008 | | December 31,
2007 | |
| | (Dollars in thousands, except per share amounts) | |
Tangible Book Value per Share | | | | | | | |
Stockholders’ equity | | $ | 161,580 | | $ | 154,406 | | $ | 418,654 | |
Less: Intangible assets | | (25,500 | ) | (27,302 | ) | (283,681 | ) |
Tangible equity | | $ | 136,080 | | $ | 127,104 | | $ | 134,973 | |
| | | | | | | |
Number of shares outstanding and to be issued | | 52,654,131 | | 52,661,738 | | 52,616,991 | |
Book value per share | | $ | 3.07 | | $ | 2.93 | | $ | 7.96 | |
Tangible book value per share | | $ | 2.58 | | $ | 2.41 | | $ | 2.57 | |
| | | | | | | |
Tangible Equity Ratio | | | | | | | |
Total assets | | $ | 2,102,741 | | $ | 2,052,944 | | $ | 2,371,664 | |
Less: Intangible assets | | (25,500 | ) | (27,302 | ) | (283,681 | ) |
Tangible assets | | $ | 2,077,241 | | $ | 2,025,642 | | $ | 2,087,983 | |
| | | | | | | |
Equity ratio - GAAP (stockholders’ equity / total assets) | | 7.68 | % | 7.52 | % | 17.65 | % |
Tangible equity ratio (tangible equity / tangible assets) | | 6.55 | % | 6.27 | % | 6.46 | % |
11
About Guaranty Bancorp
Guaranty Bancorp is a bank holding company that operates 34 branches in Colorado through a single bank, Guaranty Bank and Trust Company. The bank provides banking and other financial services including real estate, construction, commercial and industrial, energy, consumer and agricultural loans throughout its targeted Colorado markets to consumers and small to medium-sized businesses, including the owners and employees of those businesses. The bank also provides trust services, including personal trust administration, estate settlement, investment management accounts and self-directed IRAs. More information about Guaranty Bancorp can be found at www.gbnk.com.
Forward-Looking Statements
Certain statements contained in this press release, including, without limitation, statements containing the words “believes”, “anticipates”, “intends”, “expects”, and words of similar import, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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: general economic and business conditions in those areas in which the Company operates; demographic changes; competition; fluctuations in interest rates; continued ability to attract and employ qualified personnel; costs and uncertainties related to the outcome of pending litigation; changes in business strategy or development plans; changes that occur in the securities markets; changes in governmental legislation or regulation; changes in credit quality; the availability of capital to fund the expansion of the Company’s business; the failure to obtain approval to participate in the U.S. Treasury’s Capital Purchase Program and, if such approval is obtained, the failure to complete the sale of preferred stock under such program; economic, political and global changes arising from natural disasters; the war on terrorism; conflicts in the Middle East; and additional “Risk Factors” referenced in the Company’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission, as supplemented from time to time. When relying on forward-looking statements to make decisions with respect to the Company, investors and others are cautioned to consider these and other risks and uncertainties. The Company can give no assurance that any goal or plan or expectation set forth in forward-looking statements can be achieved and readers are cautioned not to place undue reliance on such statements, which speak only as of the date made. The forward-looking statements are made as of the date of this press release, and the Company does not intend, and assumes no obligation, to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.
12
GUARANTY BANCORP AND SUBSIDIARIES
Unaudited Consolidated Balance Sheets
| | December 31,
2008 | | September 30,
2008 | | December 31,
2007 | |
| | (In thousands) | |
Assets | | | | | | | |
Cash and due from banks | | $ | 32,189 | | $ | 37,548 | | $ | 51,611 | |
Federal funds sold | | 13,522 | | 3,799 | | 745 | |
Cash and cash equivalents | | 45,711 | | 41,347 | | 52,356 | |
Securities available for sale, at fair value | | 102,874 | | 97,250 | | 118,964 | |
Securities held to maturity | | 13,114 | | 13,556 | | 14,889 | |
Bank stocks, at cost | | 28,276 | | 32,843 | | 32,464 | |
Total investments | | 144,264 | | 143,649 | | 166,317 | |
| | | | | | | |
Loans, net of unearned discount | | 1,826,333 | | 1,779,673 | | 1,781,647 | |
Less allowance for loan losses | | (44,988 | ) | (44,765 | ) | (25,711 | ) |
Net loans | | 1,781,345 | | 1,734,908 | | 1,755,936 | |
Loans, held for sale | | 5,760 | | — | | 492 | |
Premises and equipment, net | | 63,018 | | 63,973 | | 69,981 | |
Other real estate owned and foreclosed assets | | 484 | | 1,199 | | 3,517 | |
Goodwill | | — | | — | | 250,748 | |
Other intangible assets, net | | 25,500 | | 27,302 | | 32,933 | |
Other assets | | 36,659 | | 40,566 | | 39,384 | |
Total assets | | $ | 2,102,741 | | $ | 2,052,944 | | $ | 2,371,664 | |
| | | | | | | |
Liabilities and Stockholders’ Equity | | | | | | | |
Liabilities: | | | | | | | |
Deposits: | | | | | | | |
Noninterest-bearing demand | | $ | 433,761 | | $ | 403,495 | | $ | 515,299 | |
Interest-bearing demand | | 460,856 | | 625,855 | | 732,156 | |
Savings | | 68,064 | | 68,910 | | 71,944 | |
Time | | 735,970 | | 536,841 | | 480,108 | |
Total deposits | | 1,698,651 | | 1,635,101 | | 1,799,507 | |
Securities sold under agreements to repurchase and federal fund purchases | | 21,781 | | 42,604 | | 23,617 | |
Borrowings | | 166,404 | | 166,508 | | 63,715 | |
Subordinated debentures | | 41,239 | | 41,239 | | 41,239 | |
Interest payable and other liabilities | | 13,086 | | 13,086 | | 24,932 | |
Total liabilities | | 1,941,161 | | 1,898,538 | | 1,953,010 | |
| | | | | | | |
Stockholders’ equity: | | | | | | | |
Common stock | | 65 | | 65 | | 64 | |
Additional paid-in capital | | 617,188 | | 616,973 | | 617,611 | |
Shares to be issued for deferred compensation obligations | | 710 | | 664 | | 573 | |
Accumulated deficit | | (352,003 | ) | (355,826 | ) | (95,196 | ) |
Accumulated other comprehensive loss | | (1,302 | ) | (4,385 | ) | (1,472 | ) |
Treasury Stock | | (103,078 | ) | (103,085 | ) | (102,926 | ) |
Total stockholders’ equity | | 161,580 | | 154,406 | | 418,654 | |
Total liabilities and stockholders’ equity | | $ | 2,102,741 | | $ | 2,052,944 | | $ | 2,371,664 | |
13
GUARANTY BANCORP AND SUBSIDIARIES
Unaudited Consolidated Statements of Income
| | Three Months Ended December 31, | | Year Ended December 31, | |
| | 2008 | | 2007 | | 2008 | | 2007 | |
| | (Dollars in thousands, except per share data) | |
Interest income: | | | | | | | | | |
Loans, including fees | | $ | 26,022 | | $ | 36,020 | | $ | 112,844 | | $ | 153,214 | |
Investment securities: | | | | | | | | | |
Taxable | | 779 | | 669 | | 2,991 | | 2,515 | |
Tax-exempt | | 788 | | 1,102 | | 3,404 | | 5,193 | |
Dividends | | 301 | | 429 | | 1,647 | | 1,853 | |
Federal funds sold and other | | 84 | | 322 | | 426 | | 914 | |
Total interest income | | 27,974 | | 38,542 | | 121,312 | | 163,689 | |
Interest expense: | | | | | | | | | |
Deposits | | 7,902 | | 12,576 | | 32,562 | | 53,594 | |
Federal funds purchased and repurchase agreements | | 85 | | 213 | | 527 | | 1,390 | |
Borrowings | | 1,402 | | 627 | | 5,333 | | 2,700 | |
Subordinated debentures | | 906 | | 942 | | 3,328 | | 3,756 | |
Total interest expense | | 10,295 | | 14,358 | | 41,750 | | 61,440 | |
Net interest income | | 17,679 | | 24,184 | | 79,562 | | 102,249 | |
Provision for loan losses | | 1,250 | | 3,025 | | 33,775 | | 24,666 | |
Net interest income, after provision for loan losses | | 16,429 | | 21,159 | | 45,787 | | 77,583 | |
Noninterest income: | | | | | | | | | |
Customer service and other fees | | 2,357 | | 2,267 | | 9,682 | | 9,509 | |
Gain on sale of securities | | — | | — | | 138 | | — | |
Other, net | | (91 | ) | 665 | | 800 | | 1,187 | |
Total noninterest income | | 2,266 | | 2,932 | | 10,620 | | 10,696 | |
Noninterest expense: | | | | | | | | | |
Salaries and employee benefits | | 6,255 | | 8,442 | | 31,086 | | 39,179 | |
Occupancy expense | | 1,725 | | 1,781 | | 7,815 | | 7,813 | |
Furniture and equipment | | 1,203 | | 1,205 | | 5,290 | | 4,864 | |
Impairment of goodwill | | — | | 142,210 | | 250,748 | | 142,210 | |
Amortization of intangible assets | | 1,803 | | 2,132 | | 7,434 | | 8,666 | |
Other general and administrative | | 4,381 | | 4,278 | | 17,283 | | 23,824 | |
Total noninterest expense | | 15,367 | | 160,048 | | 319,656 | | 226,556 | |
Income (loss) before income taxes | | 3,328 | | (135,957 | ) | (263,249 | ) | (138,277 | ) |
Income tax expense (benefit) | | (496 | ) | 2,253 | | (6,513 | ) | (185 | ) |
Net income (loss) | | $ | 3,824 | | $ | (138,210 | ) | $ | (256,736 | ) | $ | (138,092 | ) |
| | | | | | | | | |
Earnings (loss) per share–basic: | | $ | 0.07 | | $ | (2.68 | ) | $ | (5.03 | ) | $ | (2.60 | ) |
Earnings (loss) per share–diluted: | | 0.07 | | (2.68 | ) | (5.03 | ) | (2.60 | ) |
| | | | | | | | | |
Weighted average shares outstanding-basic | | 51,116,291 | | 51,559,554 | | 51,044,372 | | 53,109,307 | |
Weighted average shares outstanding-diluted | | 51,116,291 | | 51,559,554 | | 51,044,372 | | 53,109,307 | |
14
Guaranty Bancorp and Subsidiaries
Unaudited Consolidated Average Balance Sheets
| | QTD Average | | YTD Average | |
| | December 31,
2008 | | September 30,
2008 | | December 31,
2007 | | December 31,
2008 | | December 31,
2007 | |
| | (In thousands) | |
Assets | | | | | | | | | | | |
Interest earning assets | | | | | | | | | | | |
Loans, net of unearned discount | | $ | 1,825,489 | | $ | 1,807,325 | | $ | 1,823,363 | | $ | 1,797,357 | | $ | 1,871,703 | |
Securities | | 141,005 | | 155,259 | | 178,218 | | 154,548 | | 188,850 | |
Other earning assets | | 13,022 | | 1,662 | | 19,715 | | 14,763 | | 13,016 | |
Average earning assets | | 1,979,516 | | 1,964,246 | | 2,021,296 | | 1,966,668 | | 2,073,569 | |
Other assets | | 120,003 | | 387,667 | | 461,056 | | 328,440 | | 538,404 | |
| | | | | | | | | | | |
Total average assets | | $ | 2,099,519 | | $ | 2,351,913 | | $ | 2,482,352 | | $ | 2,295,108 | | $ | 2,611,973 | |
| | | | | | | | | | | |
Liabilities and Stockholders’ Equity | | | | | | | | | | | |
Average liabilities: | | | | | | | | | | | |
Average deposits: | | | | | | | | | | | |
Noninterest-bearing deposits | | $ | 410,663 | | $ | 426,128 | | $ | 487,805 | | $ | 440,359 | | $ | 476,876 | |
Interest-bearing deposits | | 1,275,220 | | 1,220,755 | | 1,391,045 | | 1,242,425 | | 1,435,778 | |
Average deposits | | 1,685,883 | | 1,646,883 | | 1,878,850 | | 1,682,784 | | 1,912,654 | |
Other interest-bearing liabilities | | 241,453 | | 263,625 | | 112,402 | | 236,156 | | 118,979 | |
Other liabilities | | 15,001 | | 17,838 | | 23,220 | | 19,522 | | 28,808 | |
Total average liabilities | | 1,942,337 | | 1,928,346 | | 2,014,472 | | 1,938,462 | | 2,060,441 | |
Average stockholders’ equity | | 157,182 | | 423,567 | | 467,880 | | 356,646 | | 551,532 | |
Total average liabilities and stockholders’ equity | | $ | 2,099,519 | | $ | 2,351,913 | | $ | 2,482,352 | | $ | 2,295,108 | | $ | 2,611,973 | |
15
Guaranty Bancorp
Unaudited Credit Quality Measures
| | Quarter Ended | |
| | December 31,
2008 | | September 30,
2008 | | June 30,
2008 | | March 31,
2008 | | December 31,
2007 | |
| | (Dollars in thousands) | |
Nonaccrual loans and leases, not restructured | | $ | 54,594 | | $ | 54,654 | | $ | 29,742 | | $ | 20,798 | | $ | 19,309 | |
Accruing loans past due 90 days or more | | 228 | | 324 | | 98 | | 1 | | 527 | |
Foreclosed assets | | 484 | | 1,199 | | 1,910 | | 1,715 | | 3,517 | |
Total nonperforming assets | | $ | 55,306 | | $ | 56,177 | | $ | 31,750 | | $ | 22,514 | | $ | 23,353 | |
| | | | | | | | | | | |
Nonperforming loans | | $ | 54,822 | | $ | 54,978 | | $ | 29,840 | | $ | 20,799 | | $ | 19,836 | |
Other impaired loans | | — | | — | | — | | — | | 3,492 | |
Total impaired loans | | 54,822 | | 54,978 | | 29,840 | | 20,799 | | 23,328 | |
Allocated allowance for loan losses | | (11,064 | ) | (12,825 | ) | (6,295 | ) | (5,368 | ) | (4,283 | ) |
Net investment in impaired loans | | $ | 43,758 | | $ | 42,153 | | $ | 23,545 | | $ | 15,431 | | $ | 19,045 | |
| | | | | | | | | | | |
Charged-off loans | | $ | 2,032 | | $ | 12,779 | | $ | 673 | | $ | 743 | | $ | 1,729 | |
Recoveries | | (1,005 | ) | (288 | ) | (231 | ) | (205 | ) | (436 | ) |
Net charge-offs | | $ | 1,027 | | $ | 12,491 | | $ | 442 | | $ | 538 | | $ | 1,293 | |
| | | | | | | | | | | |
Provision for loan loss | | $ | 1,250 | | $ | 30,750 | | $ | 900 | | $ | 875 | | $ | 3,025 | |
| | | | | | | | | | | |
Allowance for loan losses | | $ | 44,988 | | $ | 44,765 | | $ | 26,506 | | $ | 26,048 | | $ | 25,711 | |
| | | | | | | | | | | |
Allowance for loan losses to loans, net of unearned discount | | 2.46 | % | 2.52 | % | 1.48 | % | 1.48 | % | 1.44 | % |
Allowance for loan losses to nonaccrual loans | | 82.41 | % | 81.91 | % | 89.12 | % | 125.24 | % | 133.16 | % |
Allowance for loan losses to nonperforming assets | | 81.34 | % | 79.69 | % | 83.48 | % | 115.70 | % | 110.10 | % |
Allowance for loan losses to nonperforming loans | | 82.06 | % | 81.42 | % | 88.83 | % | 125.24 | % | 129.62 | % |
| | | | | | | | | | | |
Nonperforming assets to loans, net of unearned discount, and other real estate owned | | 3.03 | % | 3.15 | % | 1.77 | % | 1.28 | % | 1.31 | % |
Nonperforming assets to total assets | | 2.63 | % | 2.74 | % | 1.35 | % | 0.96 | % | 0.98 | % |
Nonaccrual loans to loans, net of unearned discount | | 2.99 | % | 3.07 | % | 1.66 | % | 1.18 | % | 1.08 | % |
Nonperforming loans to loans, net of unearned discount | | 3.00 | % | 3.09 | % | 1.67 | % | 1.18 | % | 1.11 | % |
Annualized net charge-offs to average loans | | 0.22 | % | 2.75 | % | 0.10 | % | 0.12 | % | 0.28 | % |
16
