* Company's capital ratios all exceed well-capitalized regulatory requirements * Former Senator Hank Brown appointed to Board of Directors * Company applies for U.S. Treasury's Capital Purchase Program * Company's results affected by goodwill write-off for accounting purposes * Allowance for loan losses coverage improves to 2.52% of total loans, up from 1.48% in second quarter
DENVER, Nov. 4, 2008 (GLOBE NEWSWIRE) -- Guaranty Bancorp (Nasdaq:GBNK) today reported a third quarter 2008 net loss of $265.8 million, or a $5.21 loss per basic and diluted share, compared to third quarter 2007 net income of $1.5 million, or 3 cents earnings per basic and diluted share. The third quarter 2008 net loss was primarily a result of a $250.7 million non-cash charge related to goodwill impairment recorded during the quarter. This non-cash charge, which had no impact on operations, liquidity or capital, was primarily the result of the current adverse economic climate in our markets and for the overall financial services industry. Additionally, the Company recorded a $22.7 million increase to the provision for loan losses in the third quarter 2008 as compared to the third quarter 2007. These decreases to net income were partially offset by an aggregate $3.1 million decline in all other categories of noninterest expense, excluding the goodwill impairment.
Regarding the goodwill impairment, Dan Quinn, Guaranty Bancorp President and CEO, stated, "Because all of the Company's mergers and acquisitions occurred after the implementation of new accounting rules in 2002, which ceased the amortization of goodwill, our Company was more susceptible to goodwill impairment charges than many of our peers. Current adverse economic conditions in our markets and the overall financial services industry were the primary causes for this non-cash goodwill impairment charge. Further, this non-cash accounting charge has absolutely no impact on the bank's cash flow, liquidity or regulatory capital, nor will it affect the bank's day-to-day operations. Guaranty Bank and Trust Company remains a well-capitalized institution dedicated to high-touch customer service."
Mr. Quinn continued, "The third quarter provision for loan losses was driven primarily from an increase in nonperforming assets and related charge-offs, primarily due to weakness in the performance of residential construction, land and land development loans. The third quarter provision of $30.8 million exceeded net charge-offs of $12.5 million, resulting in an $18.3 million increase in the balance of the allowance for loan losses in anticipation of further credit challenges related specifically to the current adverse economic environment and identified impaired loans. We believe that continued economic weakness will likely result in elevated credit costs. As such, we continue to aggressively and proactively identify and manage problem assets within our loan portfolio."
Excluding the non-cash goodwill impairment charge and the after-tax intangible asset amortization of $1.2 million, the third quarter 2008 cash net loss was $13.9 million, or 27 cents cash loss per basic and diluted share, compared to third quarter 2007 cash net earnings of $2.8 million, or 5 cents cash earnings per basic and diluted share.
"In the current adverse economic environment, our priority is to maintain a strong balance sheet. In particular, we are focusing on deposit and other funding opportunities and strategies, such as our cash management services and retail banking products," stated Mr. Quinn. "In addition, during the third quarter we began offering Certificate of Deposit Account Registry Service (CDARS(tm)) deposits, which allows our customers the ability to increase their FDIC insurance coverage by up to $50 million. Further, to provide greater protection and flexibility primarily to our business customers, we plan to continue to participate in the FDIC's recently announced Temporary Liquidity Guarantee Program -- which provides full coverage above the current $250,000 FDIC limit for non-interest bearing deposit transaction accounts, regardless of dollar amount."
Former Senator Hank Brown Appointed to Board of Directors
The Company further announced today that former Senator Hank Brown has been appointed to the Company's Board of Directors. Mr. Brown has also been appointed to the Board's Compensation, Nominating and Governance Committee. Mr. Brown is currently Senior Counsel with the law firm of Brownstein Hyatt Farber Schreck. He also holds the Quigg and Virginia S. Newton Endowed Chair in Leadership at the University of Colorado, teaching in the political science department. Throughout his distinguished career, he has served as President of the University of Colorado; the President and Chief Executive Officer of the Daniels Fund, a charitable foundation; President of the University of Northern Colorado; a United States Senator representing the State of Colorado; a member of the U.S. House of Representatives, representing Colorado's 4th Congressional District for five consecutive terms; and Vice President of Monfort of Colorado. Mr. Brown also served in the U.S. Navy, where he volunteered his service in Vietnam and was decorated for his combat service as a forward air controller.
John Eggemeyer, Chairman of the Board, stated, "We are very pleased and honored to have Hank Brown join our Board. I, as well as each of the other members of the Board, welcome him and look forward to working with him."
Dan Quinn, President and CEO, added, "Hank Brown is very well-respected in our Colorado community as well as on a national basis. His experience, leadership and judgment will provide tremendous guidance to our Board and the Company."
Regulatory Capital Measures are Above the Well-Capitalized Minimums
The Company's capital ratios remain strong as they exceed the highest regulatory capital requirement of "well-capitalized" at September 30, 2008 as follows:
Minimum
Requirement
Ratio at Ratio at Minimum for "Well
Sept. 30, Dec. 31, Capital Capitalized"
2008 2007 Requirement Institution
--------------------------------------------------
Total Risk-Based
Capital Ratio 10.5% 10.9% 8.00% 10.00%
Tier 1 Risk-Based
Capital Ratio 9.2% 9.6% 4.00% 6.00%
Leverage Ratio 7.8% 8.6% 4.00% 5.00%
Company Applies for U.S. Treasury's Capital Purchase Program
Even though the Company's capital ratios exceed the "well-capitalized" regulatory requirements at September 30, 2008, the Company determined that it was beneficial and prudent to submit an application to the U.S. Treasury to participate in the under the Troubled Asset Relief Program authorized by the Emergency Economic Stabilization Act of 2008. This program offers all qualifying banks that are approved by the Treasury the opportunity to issue and sell preferred stock, along with warrants to purchase common stock to the Treasury on what are believed to be attractive terms. The Company believes that under the terms of the program it would be eligible for up to approximately $59 million of capital under this program, although participation is still subject to approval by the Treasury. The Company does not expect to have to seek stockholder approval in connection with participation in the Capital Purchase Program.
Dan Quinn commented, "The Treasury's Capital Purchase Program, if completed, would provide the Company with an additional layer of capital to face this challenging economic environment. The additional capital would enable us to enhance our lending efforts throughout our footprint in the Colorado Front Range and to give consideration to any strategic opportunities that may arise to expand our franchise. Collectively, we would expect these activities to provide long-term benefits for our stockholders."
Key Financial Measures
---------------------------- --------------------
Quarter Ended Nine Months Ended
---------------------------- --------------------
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2008 2008 2007 2008 2007
---------------------------- --------------------
Earnings (loss)
per share-basic
& diluted $ (5.21) $ 0.04 $ 0.03 $ (5.11) $ --
Cash earnings
(loss) per share-
basic & diluted $ (0.27) $ 0.06 $ 0.05 $ (0.12) $ 0.08
Return on average
assets (44.96%) 0.35% 0.23% (14.75%) 0.01%
Return on tangible
average assets
(cash) (2.67%) 0.62% 0.51% (0.41%) 0.25%
Net interest
margin 4.02% 4.20% 4.82% 4.21% 4.99%
The Company's net income for the first nine months of 2008 decreased by $260.7 million over the same period in 2007 primarily due to the goodwill impairment and an increase to the provision for loan losses. For the year-to-date period ending September 30, 2008, the net loss was $260.6 million, or $5.11 loss per basic and diluted share compared to net income of $0.1 million or less than a penny per basic and diluted share for the same period in 2007.
The cash net loss for the first nine months of 2008 was $6.3 million, or $0.12 loss per basic and diluted share excluding after-tax intangible asset amortization of $3.5 million and goodwill impairment of $250.7 million. Cash net income for the first nine months of 2007 was $4.2 million, or $0.08 per basic and diluted share excluding after-tax intangible amortization of $4.1 million.
Goodwill Write-off
Goodwill is recorded in nearly every purchase transaction when a company buys another entity. The purchase price is allocated among the various components of the acquired business. This allocation is based on the appraised value of the underlying assets. If the purchase price is higher than the fair market value of the acquired business's identifiable net assets, the excess purchase price is labeled goodwill and is recorded as an intangible non-earning asset as well as capital for financial reporting purposes, but not regulatory purposes. Prior to the implementation of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, goodwill was written off as an expense over the estimated life of the goodwill. This caused the goodwill value to be reduced gradually. Under current accounting rules, goodwill is no longer written off slowly. Instead, a company must evaluate the value of goodwill each year, and write down any goodwill in excess of its current value. As goodwill is based on the purchase price paid, declines in value can cause goodwill impairment which is recorded as a non-cash adjustment to income and a decrease to the value of the intangible asset.
In accordance with FAS 142, the Company must test its goodwill annually for impairment, which it typically does in the fourth quarter. However, because of the recent adverse economic conditions affecting our markets and the overall financial services industry, including the continued softness in the real estate market, management accelerated this test to evaluate its goodwill balance at September 30, 2008. This evaluation looked at the impact of the recent tumultuous conditions in the banking industry on our valuation model.
All of the Company's acquisitions occurred after the implementation of new accounting guidance in 2002, which ceased the amortization of goodwill. Thus, the Company has traditionally had a higher level of goodwill to total equity than its peers. This made our goodwill more susceptible to the accounting considerations of market volatility in the financial services industry. Due to the lack of comparable bank valuations, uncertainty in the interest rate environment, continued softness in the real estate market and the recent market volatility, it was determined that the goodwill impairment test should be performed, which resulted in a complete write-off of the recorded goodwill. This $250.7 million non-cash accounting write-off in the third quarter has no impact on our cash flow, liquidity or regulatory capital, nor will it affect the bank's day-to-day operations or ability to serve its customers at the high level that they expect and deserve.
Net Interest Income and Margin
----------------------------- -------------------
Quarter Ended Nine Months Ended
----------------------------- -------------------
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2008 2008 2007 2008 2007
----------------------------- -------------------
(Dollars in thousands)
Net interest
income $ 19,842 $ 20,391 $ 25,236 $ 61,883 $ 78,066
Interest rate
spread 3.37% 3.50% 3.84% 3.48% 4.00%
Net interest
margin 4.02% 4.20% 4.82% 4.21% 4.99%
Net interest
margin, fully
tax equivalent 4.11% 4.28% 4.97% 4.31% 5.15%
Third quarter 2008 net interest income of $19.8 million decreased by $0.5 million from the second quarter 2008, and $5.4 million from the third quarter 2007. The Company's net interest margin of 4.02% for the third quarter 2008 reflected a decline of 18 basis points from the second quarter 2008 and a decline of 80 basis points from the third quarter 2007. The decline in net interest margin from the third quarter 2007 to third quarter 2008 is mostly attributable to the 275 basis point rate cuts in aggregate by the Federal Open Market Committee of the Federal Reserve Board during the past twelve months.
Interest income decreased by $11.4 million from the third quarter 2007 to $29.7 million in the third quarter 2008. This decrease consisted of a $9.5 million unfavorable rate variance due to lower rates, with the remainder of the decrease due to an overall decline in earnings assets. Approximately 64% of the Company's outstanding loan balances are variable rate loans and are generally tied to indexes such as LIBOR, prime or federal funds. Due to Federal Reserve monetary policy, the prime rate has decreased by 275 basis points from September 2007 to September 2008. As a result of the decline in rates, the average yield on loans for the Company decreased by 204 basis points from 8.13% for the quarter ended September 30, 2007 to 6.09% for the same period in 2008.
Interest expense decreased by $6.0 million, or 37.7%, to $9.9 million for the third quarter 2008 as compared to the third quarter 2007. The decrease in interest expense from the third quarter 2007 was primarily the result of a $4.7 million favorable rate variance with the remaining $1.3 million the result of a reduction in interest-bearing liabilities. The overall cost of funds declined by 135 basis points to 2.65% from the third quarter 2007 to the third quarter 2008. Average total interest-bearing liabilities declined by $88.3 million from the third quarter 2007 to the third quarter 2008 due mostly to a $239.6 million decrease in interest-bearing deposits, partially offset by a $166.7 million increase in borrowings and federal funds purchased.
For the nine months ended September 30, 2008, the Company's net interest income declined by $16.2 million from the same period in 2007. This decline is due mostly to a $14.1 million unfavorable rate variance due to a 78 basis point decrease in net interest margin. The remaining $2.1 million decrease in net interest income is primarily due to lower earning assets.
Noninterest Income
The following table presents noninterest income as of the dates indicated:
----------------------------- -------------------
Quarter Ended Nine Months Ended
----------------------------- -------------------
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2008 2008 2007 2008 2007
----------------------------- -------------------
(In thousands)
Noninterest income:
Customer service
and other fees $ 2,521 $ 2,528 $ 2,390 $ 7,325 $ 7,242
Gain on sale of
securities -- -- -- 138 --
Other 186 604 230 891 522
----------------------------- -------------------
Total noninterest
income $ 2,707 $ 3,132 $ 2,620 $ 8,354 $ 7,764
============================= ===================
Noninterest income for third quarter 2008 decreased by $0.4 million from the second quarter 2008 and increased by $0.1 million from the third quarter 2007. The $0.1 million increase in the third quarter 2008 as compared to the same period in 2007 is primarily attributable to a $0.2 million increase in analysis fees because of lower earnings credit rates on compensating balances.
For the nine months ended September 30, 2008, noninterest income increased by $0.6 million, or 7.6%, from the same period in 2007. The increase is mostly attributable to higher fee income, gain on sale of securities and a reduction in losses from disposals of other real estate owned.
Noninterest Expense
The following table presents noninterest expense as of the dates indicated:
---------------------------- ------------------
Quarter Ended Nine Months Ended
---------------------------- ------------------
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2008 2008 2007 2008 2007
---------------------------- ------------------
(In thousands)
Noninterest
expense:
Salaries and
employee benefits $ 5,927 $ 9,184 $ 9,039 $ 24,831 $ 30,737
Occupancy expense 1,958 2,131 1,855 6,090 6,032
Furniture and
equipment 1,390 1,383 1,188 4,087 3,659
Impairment of
goodwill 250,748 -- -- 250,748 --
Amortization of
intangible assets 1,877 1,877 2,143 5,631 6,533
Other general and
administrative 3,982 5,122 3,980 12,902 19,548
---------------------------- ------------------
Total
noninterest
expense $265,882 $ 19,697 $ 18,205 $304,289 $ 66,509
============================ ==================
Efficiency ratio
(excluding charges
related to
intangible assets) 58.79% 75.76% 57.66% 68.21% 69.88%
Noninterest expense for the third quarter 2008 increased by $246.2 million from the second quarter 2008 and by $247.7 million from the third quarter 2007. Excluding the $250.7 million goodwill impairment charge in the third quarter 2008, noninterest expense decreased by $4.6 million from the second quarter of 2008, and decreased by $3.1 million from the third quarter 2007. This decrease in noninterest expense from the second quarter of 2008 is mostly attributable to a $3.3 million decrease in salaries and employee benefits and a $1.1 million decrease in other general and administrative expenses. The $3.3 million decline in salaries and employee benefits expense from the second quarter 2008 primarily relates to a $2.7 million reduction in restricted stock expense, mostly due to performance-based shares that are no longer expected to meet their performance target prior to the expiration date. This $2.7 million reduction was partially offset by $0.7 million of severance cost during the third quarter 2008. The remaining decrease is mostly due to an overall decrease in base salary expense as a result of fewer employees in the third quarter 2008 as compared to the second quarter 2008.
The $3.1 million decrease in noninterest expense excluding goodwill impairment for the three-months ended September 30, 2008 as compared to the same period in 2007 is due mostly to a $3.1 million decrease in salaries and employee benefits. Most of this decrease is related to a reduction in restricted stock expense as described above.
Noninterest expense for the nine months ended September 30, 2008 increased by $237.8 million over the same period in 2007. Excluding the $250.7 million goodwill impairment charge, noninterest expense for the nine months ended September 30, 2008 decreased by $13.0 million, or 19.5%, over the same period in 2007. This decrease in the year-to-date noninterest expense is mostly due to a $5.9 million decrease in salaries and employee benefits and a $6.6 million decrease in other general and administrative expense. The $5.9 million decline in salaries and employee benefits expense is due to a $2.8 million reduction in restricted stock expense primarily due to the reasons discussed above, a $1.0 million decrease to accruals for bonus and incentives and a $2.8 million decrease in base salaries and benefits. This decrease in base salary and benefit expense is due primarily to a decrease of 89 full-time equivalent employees from September 2007 to September 2008. These decreases were partially offset by a $0.7 million increase related to severance costs. The $6.6 million decline in other general and administrative expense is mostly attributable to the $6.5 million charge for a settlement of a lawsuit in the second quarter 2007, a $1.0 million restructuring charge taken for the merger of the Company's subsidiary banks in 2007 and a $1.1 million decrease in professional fees mostly due to external and internal audit related expenses. These items were partially offset by a $1.3 million charge in the second quarter 2008 related to the decision to close two branches as well as a $1.0 million increase in expenses associated with other real estate owned.
Balance Sheet
September 30, September 30,
2008 June 30, 2008 2007
-----------------------------------------------------------------------
(Amounts in thousands, except per share amounts)
Total loans, net of
unearned discount $ 1,779,673 $ 1,789,155 $ 1,819,188
Loans held for sale -- -- 31,459
Allowance for loan losses (44,765) (26,506) (23,979)
Total assets 2,052,944 2,358,559 2,617,153
Average assets,
quarter-to-date 2,351,913 2,350,421 2,626,913
Total deposits 1,635,101 1,707,031 1,915,932
Book value per share $ 2.93 $ 8.04 $ 10.44
Tangible book value per
share $ 2.41 $ 2.73 $ 2.50
Equity ratio - GAAP 7.52% 17.97% 21.50%
Tangible equity ratio 6.27% 6.93% 6.15%
At September 30, 2008, the Company had total assets of $2.1 billion as compared to $2.4 billion at June 30, 2008, and $2.6 billion at September 30, 2007. The $564.2 million decline in assets from September 30, 2007 is mostly due to $392.9 million in combined goodwill impairment charges recorded in the fourth quarter 2007 and third quarter 2008, as well as a $46.0 million decrease to securities available for sale and a $39.5 million decrease in loans, net of unearned discount.
The following table sets forth the amounts of our loans outstanding at the dates indicated:
Sept. 30, June 30, Dec. 31, Sept. 30,
2008 2008 2007 2007
----------------------------------------------
(In thousands)
Loans on real
estate:
Residential and
commercial
mortgage $ 693,800 $ 717,533 $ 713,478 $ 724,528
Construction 248,883 232,522 235,236 290,591
Equity lines of
credit 49,205 46,778 48,624 49,747
Commercial loans 706,678 705,309 679,717 643,702
Agricultural loans 23,989 29,442 39,506 43,142
Lease financing 472 472 4,732 5,677
Installment loans to
individuals 38,777 39,611 40,835 40,868
Overdrafts 2,226 915 1,329 4,261
SBA and other 19,401 20,241 21,592 20,402
----------------------------------------------
1,783,431 1,792,823 1,785,049 1,822,918
Unearned discount (3,758) (3,668) (3,402) (3,730)
----------------------------------------------
Loans, net of
unearned discount $1,779,673 $1,789,155 $1,781,647 $1,819,188
==============================================
Of the $992 million of real estate loans at September 30, 2008, approximately $62 million were secured by for-sale residential real estate. Further, approximately $115 million of these real estate loans consisted of residential land and land development loans.
The following table sets forth the amounts of our deposits outstanding at the dates indicated:
Sept. 30, June, 30 Dec. 31, Sept. 30,
2008 2008 2007 2007
----------------------------------------------
(In thousands)
Noninterest bearing
deposits $ 403,495 $ 515,646 $ 515,299 $ 464,446
Interest bearing
demand 142,164 149,019 160,100 156,548
Money market 483,691 524,592 572,056 661,379
Savings 68,910 71,474 71,944 73,054
Time 536,841 446,300 480,108 560,505
----------------------------------------------
Total deposits $1,635,101 $1,707,031 $1,799,507 $1,915,932
==============================================
Total deposits at September 30, 2008 decreased by $71.9 million as compared to June 30, 2008, and declined by $164.4 million from December 31, 2007 and by $280.8 million from September 30, 2007. Approximately $62 million of the $71.9 million decrease from the June 30, 2008 actual ending deposit balance was related to a receipt on the last day of the second quarter of a short-term deposit from a single depositor that was withdrawn shortly after the close of the second quarter. The remainder of the decreases in noninterest bearing deposits and money markets were partially offset by an increase in time deposits. Average time deposits were $484.7 million, or 29.4% of total average deposits for the third quarter 2008, as compared to $579.3 million, or 30.2% of total average deposits for the third quarter 2007. The cost of time deposits decreased from 5.06% for the third quarter 2007 to 3.97% for the third quarter 2008.
The decreases in total deposits from both December 31, 2007 and September 30, 2007 are mostly due to declines in money market and noninterest bearing deposits. These decreases were partially offset by increases in time deposits. Time deposits increased during the third quarter 2008 as part of a strategic decision to mitigate the impact of overall market liquidity concerns arising in the third quarter 2008. Time deposits provide a more defined deposit maturity schedule for asset liability management purposes. Average noninterest bearing deposits were $426.1 million, or 25.9% of total deposits, for the quarter ended September 30, 2008 as compared to $458.1 million, or 23.9% of total deposits, for the quarter ended September 30, 2007.
Overall borrowings were $166.5 million at September 30, 2008 as compared to $63.7 million at December 31, 2007 and $51.1 million at September 30, 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 the nine-months ended September 30, 2008 was 3.13% as compared to an average cost of time-deposits of 4.37%.
Asset Quality
The following table presents selected asset quality data (excluding loans held for sale) as of the dates indicated:
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
2008 2008 2008 2007 2007
------------------------------------------------
(Dollars in thousands)
Nonaccrual loans,
not
restructured $ 54,654 $ 29,742 $ 20,798 $ 19,309 $ 16,831
Accruing loans past
due 90 days or
more 324 98 1 527 9
------------------------------------------------
Total nonperforming
loans (NPLs) 54,978 29,840 20,799 19,836 16,840
Other real estate
owned 1,199 1,910 1,715 3,517 3,401
------------------------------------------------
Total
nonperforming
assets (NPAs) $ 56,177 $ 31,750 $ 22,514 $ 23,353 $ 20,241
================================================
Accruing loans
past due 30-89
days $ 20,660 $ 20,169 $ 42,682 $ 28,407 $ 29,584
================================================
Allowance for loan
losses $ 44,765 $ 26,506 $ 26,048 $ 25,711 $ 23,979
================================================
Selected ratios:
NPLs to loans, net
of unearned
discount 3.09% 1.67% 1.18% 1.11% 0.93%
NPAs to total
assets 2.74% 1.35% 0.96% 0.98% 0.77%
Allowance for loan
losses to NPAs 79.69% 83.48% 115.70% 110.10% 118.47%
Allowance for loan
losses to NPLs 81.42% 88.83% 125.24% 129.62% 142.39%
Allowance for loan
losses to loans,
net of unearned
discount 2.52% 1.48% 1.48% 1.44% 1.32%
Loans 30-89 days
past due to loans,
net of unearned
discount 1.16% 1.13% 2.43% 1.59% 1.63%
Nonperforming assets increased by $24.4 million at September 30, 2008 as compared to June 30, 2008, and increased by $35.9 million as compared to September 30, 2007.
The types of nonperforming loans as of September 30, 2008 and June 30, 2008 are as follows:
---------------------------------------------------
Nonperforming Loans
---------------------------------------------------
September 30, 2008 June 30, 2008
---------------------------------------------------
Loan Related Loan Related
Balance Percent Allowance Balance Percent Allowance
------------------------- -------------------------
(Amounts in thousands)
Residential
Construction,
Land and Land
Development $ 39,963 72.7% $ 9,976 $ 16,598 55.6% $ 3,639
Other
Residential
Loan 1,683 3.1% 116 937 3.2% 159
Commercial and
Industrial Loans 7,416 13.5% 1,735 4,559 15.3% 1,206
Commercial Real
Estate 5,578 10.1% 962 7,648 25.6% 1,240
Other 338 0.6% 36 98 0.3% 51
------------------------- -------------------------
Total $ 54,978 100.0% $ 12,825 $ 29,840 100.0% $ 6,295
========================= =========================
The types of loans included in the accruing loans past due 30-89 days as of September 30, 2008 and June 30, 2008 are as follows:
----------------------------------
Accruing loans past due 30-89 days
----------------------------------
September 30,
2008 June 30, 2008
---------------- ----------------
Loan Loan
Balance Percent Balance Percent
---------------- ----------------
(Amounts in thousands)
Residential Construction, Land
and Land Development $ 9,967 48.2% $ 1,519 7.5%
Other Residential Loan 5,248 25.4% 4,789 23.8%
Commercial and Industrial Loans 3,198 15.5% 12,183 60.4%
Commercial Real Estate 390 1.9% 1,398 6.9%
Other 1,857 9.0% 280 1.4%
---------------- ----------------
Total $20,660 100.0% $20,169 100.0%
================ ================
The Company took a third quarter 2008 provision for loan losses of $30.8 million, as compared to $0.9 million in the second quarter 2008 and $8.0 million in the third quarter 2007. The increase in nonperforming loans 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 were the primary causes for the increase in the provision for loan losses in the third quarter 2008.
Net charge-offs in the third quarter 2008 were $12.5 million, as compared to $0.4 million in the second quarter 2008, and $19.6 million in the third 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 September 30, 2008 totaled $55.0 million, as compared to $29.8 million at the end of the second quarter 2008, and $17.4 million at the end of the third quarter 2007.
The allowance for loan losses to total loans outstanding was 2.52% at September 30, 2008, as compared to 1.48% at June 30, 2008 and 1.32% at September 30, 2007.
Stock Repurchase Program
During the third quarter 2008, the Company did not repurchase any shares under its stock repurchase program and only repurchased 7,087 shares related to the net settlement of vested, restricted stock awards at a cost of $37,000, or an average price of $5.24 per share. At September 30, 2008, 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 does not anticipate implementing a new stock repurchase program in the near future due to its focus and strategy to strengthen its capital position. As of September 30, 2008, the Company had 52,661,738 shares outstanding, including 1,566,812 shares of unvested stock awards, and 78,298 of shares to be issued at September 30, 2008 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.
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 Nine Months Ended
----------------------------------- -----------------------
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2008 2008 2007 2008 2007
----------------------------------- -----------------------
(In thousands, except per share data)
GAAP net
income
(loss) $ (265,829) $ 2,025 $ 1,503 $ (260,559) $ 118
Add:
Impairment
of
goodwill 250,748 250,748
Add:
Amorti-
zation of
intangible
assets 1,877 1,877 2,143 5,631 6,533
Less:
Income
tax
effect (713) (713) (815) (2,140) (2,483)
----------------------------------- -----------------------
Cash net
income
(loss) $ (13,917) $ 3,189 $ 2,831 $ (6,320) $ 4,168
=================================== =======================
Weighted
average
shares -
diluted 51,067,439 51,091,042 52,742,028 51,020,220 53,771,405
Earnings
(loss)
per
share -
diluted $ (5.21) $ 0.04 $ 0.03 $ (5.11) $ --
Add:
Amorti-
zation of
intangible
assets
(after tax
effect) 4.94 0.02 0.02 4.99 0.08
----------------------------------- -----------------------
Cash
earnings
(loss)
per
share $ (0.27) $ 0.06 $ 0.05 $ (0.12) $ 0.08
=================================== =======================
Return on
tangible
net assets
(cash)
Cash net
income
(loss) $ (13,917) $ 3,189 $ 2,831 $ (6,320) $ 4,168
----------------------------------- -----------------------
Average
total
assets $2,351,913 $2,350,421 $2,626,913 $2,359,584 $2,656,329
Less:
Average
intangible
assets (276,257) (280,845) (429,045) (279,963) (431,262)
----------------------------------- -----------------------
Average
tangible
assets $2,075,656 $2,069,576 $2,197,868 $2,079,621 $2,225,067
----------------------------------- -----------------------
Return on
average
assets -
GAAP net
income
(loss)
divided
by total
average
assets (44.96%) 0.35% 0.23% (14.75%) 0.01%
=================================== =======================
Return on
average
tangible
assets
(cash) -
cash net
income
(loss)
divided by
average
tangible
assets (2.67%) 0.62% 0.51% (0.41%) 0.25%
=================================== =======================
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:
September 30, June 30, September 30,
2008 2008 2007
-------------------------------------
(Dollars in thousands, except
per share amounts)
Tangible Book Value per Share
Stockholders' equity $ 154,406 $ 423,927 $ 562,656
Less: Intangible assets (27,302) (279,927) (428,024)
-------------------------------------
Tangible equity $ 127,104 $ 144,000 $ 134,632
=====================================
Number of shares outstanding
and to be issued 52,661,738 52,736,269 53,870,812
Book value per share $ 2.93 $ 8.04 $ 10.44
Tangible book value per share $ 2.41 $ 2.73 $ 2.50
Tangible Equity Ratio
Total assets $ 2,052,944 $ 2,358,559 $ 2,617,153
Less: Intangible assets (27,302) (279,927) (428,024)
-------------------------------------
Tangible assets $ 2,025,642 $ 2,078,632 $ 2,189,129
=====================================
Equity ratio - GAAP
(stockholders' equity / total
assets) 7.52% 17.97% 21.50%
Tangible equity ratio
(tangible equity / tangible
assets) 6.27% 6.93% 6.15%
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.
GUARANTY BANCORP AND SUBSIDIARIES
Unaudited Consolidated Balance Sheets
Sept. 30, Dec. 31, Sept. 30,
2008 2007 2007
----------------------------------
(In thousands, except per
share data)
Assets
Cash and due from banks $ 37,548 $ 51,611 $ 51,083
Federal funds sold 3,799 745 3,457
----------------------------------
Cash and cash equivalents 41,347 52,356 54,540
----------------------------------
Securities available for sale,
at fair value 97,250 118,964 143,266
Securities held to maturity 13,556 14,889 11,555
Bank stocks, at cost 32,843 32,464 32,328
----------------------------------
Total investments 143,649 166,317 187,149
----------------------------------
Loans, net of unearned discount 1,779,673 1,781,647 1,819,188
Less allowance for loan losses (44,765) (25,711) (23,979)
----------------------------------
Net loans 1,734,908 1,755,936 1,795,209
----------------------------------
Loans, held for sale -- 492 31,459
Premises and equipment, net 63,973 69,981 71,240
Other real estate owned and
foreclosed assets 1,199 3,517 3,401
Goodwill -- 250,748 392,958
Other intangible assets, net 27,302 32,933 35,066
Other assets 40,566 39,384 46,131
----------------------------------
Total assets $2,052,944 $2,371,664 $2,617,153
==================================
Liabilities and Stockholders'
Equity
Liabilities:
Deposits:
Noninterest-bearing demand $ 403,495 $ 515,299 $ 464,446
Interest-bearing demand 625,855 732,156 817,927
Savings 68,910 71,944 73,054
Time 536,841 480,108 560,505
----------------------------------
Total deposits 1,635,101 1,799,507 1,915,932
----------------------------------
Securities sold under agreements
to repurchase and federal fund
purchases 42,604 23,617 17,910
Borrowings 166,508 63,715 51,062
Subordinated debentures 41,239 41,239 41,239
Interest payable and other
liabilities 13,086 24,932 28,354
----------------------------------
Total liabilities 1,898,538 1,953,010 2,054,497
----------------------------------
Stockholders' equity:
Common stock 65 64 64
Additional paid-in capital 616,973 617,611 616,861
Shares to be issued for
deferred compensation
obligations 664 573 551
Accumulated deficit (355,826) (95,196) 43,014
Accumulated other comprehensive
loss (4,385) (1,472) (1,401)
Treasury Stock (103,085) (102,926) (96,433)
----------------------------------
Total stockholders' equity 154,406 418,654 562,656
----------------------------------
Total liabilities and
stockholders' equity $2,052,944 $2,371,664 $2,617,153
==================================
GUARANTY BANCORP AND SUBSIDIARIES
Unaudited Consolidated Statements of Income
------------------------ ------------------------
Three Months Ended Nine Months Ended
------------------------ ------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2008 2007 2008 2007
--------------------------------------------------
(In thousands, except per share data)
Interest income:
Loans, including
fees $ 27,675 $ 38,369 $ 86,822 $ 117,194
Investment
securities:
Taxable 749 617 2,212 1,846
Tax-exempt 846 1,343 2,616 4,091
Dividends 441 490 1,346 1,424
Federal funds
sold and other 8 265 342 592
------------------------ ------------------------
Total interest
income 29,719 41,084 93,338 125,147
------------------------ ------------------------
Interest expense:
Deposits 7,454 13,933 24,660 41,017
Federal funds
purchased and
repurchase
agreements 160 428 442 1,177
Borrowings 1,485 543 3,931 2,073
Subordinated
debentures 778 944 2,422 2,814
------------------------ ------------------------
Total interest
expense 9,877 15,848 31,455 47,081
------------------------ ------------------------
Net interest
income 19,842 25,236 61,883 78,066
Provision for loan
losses 30,750 8,026 32,525 21,641
------------------------ ------------------------
Net interest
income, after
provision for
loan losses (10,908) 17,210 29,358 56,425
Noninterest income:
Customer service
and other fees 2,521 2,390 7,325 7,242
Gain on sale of
securities -- -- 138 --
Other 186 230 891 522
------------------------ ------------------------
Total
noninterest
income 2,707 2,620 8,354 7,764
Noninterest
expense:
Salaries and
employee benefits 5,927 9,039 24,831 30,737
Occupancy expense 1,958 1,855 6,090 6,032
Furniture and
equipment 1,390 1,188 4,087 3,659
Impairment of
goodwill 250,748 -- 250,748 --
Amortization of
intangible assets 1,877 2,143 5,631 6,533
Other general and
administrative 3,982 3,980 12,902 19,548
------------------------ ------------------------
Total
noninterest
expense 265,882 18,205 304,289 66,509
------------------------ ------------------------
Income (loss)
before income
taxes (274,083) 1,625 (266,577) (2,320)
Income tax
expense
(benefit) (8,254) 122 (6,018) (2,438)
------------------------ ------------------------
Net income
(loss) $ (265,829) $ 1,503 $ (260,559) $ 118
======================== ========================
Earnings (loss)
per share-basic: $ (5.21) $ 0.03 $ (5.11) $ --
Earnings (loss)
per share-
diluted: (5.21) 0.03 (5.11) --
Weighted average
shares
outstanding-
basic 51,067,439 52,699,409 51,020,220 53,631,569
Weighted average
shares
outstanding-
diluted 51,067,439 52,742,028 51,020,220 53,771,405
Guaranty Bancorp and Subsidiaries
Unaudited Consolidated Average Balance Sheets
-------------------------------- ---------------------
QTD Average YTD Average
-------------------------------- ---------------------
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2008 2008 2007 2008 2007
-------------------------------- ---------------------
(In thousands)
Assets
Interest
earning
assets
Loans, net
of unearned
discount $1,807,325 $1,788,603 $1,871,939 $1,787,912 $1,888,013
Securities 155,259 162,293 189,526 159,095 192,433
Other
earning
assets 1,662 2,738 16,326 15,348 10,769
-------------------------------- ---------------------
Average
earning
assets 1,964,246 1,953,634 2,077,791 1,962,355 2,091,215
Other assets 387,667 396,787 549,122 397,229 565,114
-------------------------------- ---------------------
Total average
assets $2,351,913 $2,350,421 $2,626,913 $2,359,584 $2,656,329
================================ =====================
Liabilities
and
Stockholders'
Equity
Average
liabilities:
Average
deposits:
Noninterest-
bearing
deposits $ 426,128 $ 452,315 $ 458,143 $ 450,330 $ 473,214
Interest-
bearing
deposits 1,220,755 1,195,998 1,460,366 1,231,414 1,450,853
-------------------------------- ---------------------
Average
deposits 1,646,883 1,648,313 1,918,509 1,681,744 1,924,067
Other
interest-
bearing
liabilities 263,625 258,557 112,298 234,379 121,208
Other
liabilities 17,838 18,802 26,848 19,842 31,332
-------------------------------- ---------------------
Total average
liabilities 1,928,346 1,925,672 2,057,655 1,935,965 2,076,607
Average
stockholders'
equity 423,567 424,749 569,258 423,619 579,722
-------------------------------- ---------------------
Total average
liabilities
and
stockholders'
equity $2,351,913 $2,350,421 $2,626,913 $2,359,584 $2,656,329
================================ =====================
Guaranty Bancorp
Unaudited Credit Quality Measures
Quarter Ended
------------------------------------------------
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
2008 2008 2008 2007 2007
------------------------------------------------
(Dollars in thousands)
Nonaccrual loans
and leases, not
restructured $ 54,654 $ 29,742 $ 20,798 $ 19,309 $ 16,831
Accruing loans
past due 90 days
or more 324 98 1 527 9
Other real estate
owned 1,199 1,910 1,715 3,517 3,401
------------------------------------------------
Total
nonperforming
assets $ 56,177 $ 31,750 $ 22,514 $ 23,353 $ 20,241
------------------------------------------------
Nonperforming
loans $ 54,978 $ 29,840 $ 20,799 $ 19,836 $ 16,840
Other impaired
loans -- -- -- 3,492 510
------------------------------------------------
Total impaired
loans 54,978 29,840 20,799 23,328 17,350
Allocated
allowance for
loan losses (12,825) (6,295) (5,368) (4,283) (4,028)
------------------------------------------------
Net investment in
impaired loans $ 42,153 $ 23,545 $ 15,431 $ 19,045 $ 13,322
================================================
Charged-off loans $ 12,779 $ 673 $ 743 $ 1,729 $ 20,079
Recoveries (288) (231) (205) (436) (438)
------------------------------------------------
Net charge-offs $ 12,491 $ 442 $ 538 $ 1,293 $ 19,641
================================================
Provision for loan
loss $ 30,750 $ 900 $ 875 $ 3,025 $ 8,026
================================================
Allowance for loan
losses $ 44,765 $ 26,506 $ 26,048 $ 25,711 $ 23,979
================================================
Allowance for loan
losses to loans,
net of unearned
discount 2.52% 1.48% 1.48% 1.44% 1.32%
Allowance for loan
losses to
nonaccrual loans 81.91% 89.12% 125.24% 133.16% 142.47%
Allowance for loan
losses to
nonperforming
assets 79.69% 83.48% 115.70% 110.10% 118.47%
Allowance for loan
losses to
nonperforming
loans 81.42% 88.83% 125.24% 129.62% 142.39%
Nonperforming
assets to loans,
net of unearned
discount, and
other real
estate owned 3.15% 1.77% 1.28% 1.31% 1.11%
Annualized net
charge-offs to
average loans 2.75% 0.10% 0.12% 0.28% 4.16%
Nonaccrual loans
to loans, net of
unearned discount 3.07% 1.66% 1.18% 1.08% 0.93%