DENVER, CO — (Marketwired) — 04/17/13 — Guaranty Bancorp (NASDAQ: GBNK)
Net loan growth in the first quarter 2013 of 7.7% annualized
Wealth management group grew assets under management in the first quarter 2013 by 18.4%
Net interest margin improvement of 13 basis points to 3.61%, as compared to prior quarter
Redemption of $15.0 million of our high-cost, fixed rate trust preferred securities
Guaranty Bancorp (NASDAQ: GBNK), a community bank holding company based in Colorado, today reported first quarter 2013 net income of $2.3 million, or $0.02 earnings per basic and diluted common share, compared to net income of $2.9 million, or $0.03 earnings per basic and diluted common share in the first quarter 2012.
First quarter 2013 pre-tax operating earnings(1) were $4.1 million compared to pre-tax operating earnings of $3.6 million in the same quarter last year. The increase in pre-tax operating earnings of $0.5 million was primarily due to an increase in noninterest income, mostly related to a $0.4 million improvement in investment advisory services income. First quarter 2013 GAAP net income declined $0.8 million as compared to the fourth quarter 2012 GAAP net income of $3.1 million, whereas first quarter 2013 pre-tax operating earnings increased $0.6 million to $4.1 million as compared to the prior linked quarter of $3.5 million. This increase in pre-tax earnings was primarily due to a decline in noninterest expense of $0.5 million combined with an increase in net interest income of $0.1 million due to a higher net interest income in the current quarter. The decline in noninterest expense was mostly due to a decline in professional fees, specifically legal expenses.
“We are pleased to report strong growth in loans and assets under management in the first quarter 2013,” said Paul W. Taylor, President and CEO. “We have successfully expanded our wealth management group since the acquisition of Private Capital Management last year and continue to grow loans in our local markets. We are particularly pleased with our commercial loan growth of 4.1% during the quarter, or 16.6% annualized. In addition, the prepayment of $15 million of our fixed, high-cost trust preferred securities during the first quarter has helped mitigate the pressure on our margin due to the current interest rate environment.”
(1) “Pre-tax operating earnings” is considered a “non-GAAP” financial measure, which we define as income before income taxes adjusted for (if any) provision (credit) for loan losses, other real estate owned expenses, debt termination expenses, acquisition, reorganization and integrations costs and securities gains and losses. More information regarding this measure and a reconciliation to the comparable GAAP measurement is provided under the heading Non-GAAP Financial Measures in this release.
Net interest income increased by $0.2 million to $15.4 million in the first quarter 2013 compared to the fourth quarter 2012, and increased by $0.1 million compared to the first quarter 2012. Net interest margin increased 13 basis points from 3.48% in the fourth quarter 2012 to 3.61% in the first quarter 2013 and declined 32 basis points from 3.93% in the first quarter 2012. The improvement in net interest margin as compared to the prior linked quarter was primarily due to a ten basis point increase in yield on earnings assets combined with a four basis point decline in the cost of interest bearing liabilities. The decline in net interest margin in the first quarter 2013 as compared to the same quarter in 2012 was related to a 48 basis point decline in the yield on earnings assets, partially offset by a 21 basis point decline in the cost of interest bearing liabilities.
The increase in net interest income in the first quarter 2013 as compared to the prior linked quarter was primarily due to a decrease in interest expense of $0.2 million mostly as a result of the prepayment of $15.0 million in fixed, high-cost trust preferred securities (“TruPS”) and related subordinated debentures in the first quarter 2013 as well as a reduction in deposit interest expense due to lower average rates. The prepayment of these TruPS and related subordinated debentures will result in annualized savings of approximately $1.6 million. First quarter 2013 interest income remained stable as compared to the prior linked quarter while average loan and investment balances increased $34.5 million and $47.2 million, respectively.
The increase in net interest income as compared to the same quarter in 2012 was primarily due to a decrease in interest income of $0.3 million, offset by a reduction in interest expense of $0.4 million. The decline in interest income largely relates to a decline in loan yield of 37 basis points, partially offset by an increase in average loan balances of $59.7 million, or 5.40%. The decline in interest expense was due to a change in the deposit mix from higher-cost time and money market deposits to lower yielding accounts and a reduction in subordinated debentures interest due to the prepayment of this debt during the first quarter 2013 as well as the payment of compounding, deferred interest on all subordinated debentures during the third quarter 2012.
The following table presents noninterest income as of the dates indicated:
Excluding gain on sales of securities, noninterest income remained at a consistent level in the first quarter 2013 as compared to the fourth quarter 2012 and increased $0.5 million as compared to the same quarter in 2012. The increase in noninterest income, net of gains on sales of securities, as compared to the first quarter 2012 was primarily due to fee income generated by Private Capital Management, an investment management firm acquired in July 2012 and gains on sales of small business administration loans (“SBA”). We expect noninterest income to continue to be augmented by growth in both investment advisory fees as well as gains on sales of SBA loans.
Private Capital Management increased assets under management by $33.0 million, or 18.4%, to $212.2 million as of March 31, 2013 as compared to $179.2 million at December 31, 2012, and $47.5 million, or 28.8%, since acquisition. Private Capital Management has contributed approximately $0.9 million to noninterest income since July 2012.
The following table presents noninterest expense as of the dates indicated:
Noninterest expense decreased $2.7 million to $15.2 million in the first quarter 2013 as compared to $17.9 million in the fourth quarter 2012 and increased $0.7 million as compared to $14.5 million in the first quarter 2012.
The decrease in noninterest expense in the first quarter 2013 as compared to the prior linked quarter was primarily due to declines in OREO expenses of $2.9 million, related to a $3.0 million write-down of a single OREO property; professional fees of $0.6 million, largely due to legal expenses; and other general and administrative expense of $0.3 million, related to declines in marketing and other miscellaneous operating expenses. These declines were partially offset by increases in salary and benefits of $0.6 million and the prepayment penalty of $0.6 million on the early redemption of $15.0 million of fixed, high-cost TruPS and related subordinated debentures. The increase in salary and benefits was mostly related to increases due to the annual payroll tax cycle, equity compensation expense and timing differences in our self-funded medical plan.
As compared to the first quarter 2012, the increase in noninterest expense in the first quarter 2013 was primarily due to increases in salary and benefits of $0.6 million, the prepayment penalty of $0.6 million, discussed above, and increases in professional fees of $0.3 million, related to legal fees. The increase in salary and benefits was mostly due to increases in base salaries related to the reallocation from retail to commercial staff, equity compensation expense, and timing differences in our self-funded medical plan. These increases were partially offset by decreases in occupancy expense of $0.4 million, due to branch closures in 2012, and insurance and assessments of $0.2 million, as a result of lower FDIC assessments.
At March 31, 2013, the Company had total assets of $1.8 billion, which represented a $50.1 million decrease as compared to December 31, 2012 and a $120.4 million increase as compared to March 31, 2012. The decrease in total assets from year end 2012 consisted primarily of decreases in cash and time deposits with banks of $110.3 million and OREO of $11.0 million. These declines were partially offset by an increase in loans, net of unearned discount, of $21.9 million and an increase in investments of $53.3 million. As compared to March 31, 2012, the increase in total assets was primarily due to an increase in investments of $110.8 million, an increase in loans, net of unearned discount of $70.7 million, and a decrease in the allowance for loan losses of $6.0 million. These increases were partially offset by decreases in cash and time deposits with banks of $44.4 million, premises and equipment of $6.6 million and OREO of $19.5 million.
The following table sets forth the amounts of loans outstanding at the dates indicated:
For the quarter ending March 31, 2013, loans, net of unearned discount, grew $21.9 million, or 7.7% on an annualized basis. As compared to the same quarter last year, loans, net of unearned discount, grew $70.7 million, or 6.4%. On a linked quarter basis, the increase in loans was primarily due to increases in commercial and residential real estate of $23.2 million and commercial loans of $9.7 million, partially offset by declines in construction loans of $9.1 million, SBA loans of $1.5 million and installment loans of $1.3 million. Commercial and residential real estate growth during the first quarter 2013 was primarily due to growth in jumbo mortgages of $15.2 million as well as a new loan collateralized by a hospitality-related property. Commercial loan growth was primarily attributable to growth in middle market and energy lending. The decline in construction loans was primarily due to the permanent financing of a single loan and subsequent transfer to commercial real estate. At March 31, 2013, the overall loan portfolio included 28.5% owner-occupied properties; 18.8% retail and industrial properties; 11.1% office properties; 10.2% other commercial real estate properties; and 3.7% multi-family properties. The Bank has capacity to extend additional credit on commercial and residential real estate loans pursuant to the Bank-s concentration ratios discussed below.
Since December 31, 2012, the ratio of construction, land and land development loans to capital decreased by one percentage point to 56% at March 31, 2013. During the same period, the ratio of commercial real estate loans to capital increased by 19 percentage points to 297%, attributed to an increase in commercial real estate loans as well as a decrease in capital. The decrease in capital was primarily related to the $15.0 million dividend paid from the Bank to our holding company to redeem $15.0 million in TruPS. These concentration ratios remain below the regulatory commercial real estate concentration guidelines of 100% for land and construction loans and 300% for all investor real estate loans.
The following table sets forth the amounts of deposits outstanding at the dates indicated:
Non-maturing deposits decreased $9.9 million in the first quarter 2013 as compared to the fourth quarter 2012 and increased $104.0 million, or 9.1%, as compared to the first quarter 2012. The growth in non-maturing deposits since March 31, 2012 included approximately $50.0 million in balances from five customers. During the first quarter 2013, a portion of these funds were withdrawn and we expect the remaining funds will be withdrawn during the second quarter 2013. Time deposits decreased $2.6 million as of March 31, 2013 as compared to December 31, 2012 and $0.7 million as compared to March 31, 2012. At March 31, 2013, noninterest-bearing deposits as a percentage of total deposits was 36.1% as compared to 38.8% at December 31, 2012 and 35.0% at March 31, 2012.
During the first quarter 2013, securities sold under agreements to repurchase decreased $6.2 million from December 31, 2012 and increased $41.8 million from March 31, 2012 to $60.8 million at March 31, 2013. The increase from the first quarter last year was primarily related to a single depositor whose balance is expected to be re-deployed into the depositor-s operations during the second quarter 2013.
Total borrowings were $110.2 million at March 31, 2013, December 31, 2012 and March 31, 2012. The entire balance of borrowings at each balance sheet date consisted of term notes with the FHLB.
The following table provides the capital ratios of the Company and the Bank as of the dates presented, along with the applicable regulatory capital requirements:
Our consolidated total risk-based capital ratio and our Tier 1 risk-based capital ratio declined by approximately one percentage point and our leverage ratio declined by approximately one half of a percentage point due the redemption of certain TruPS in the first quarter 2013. The Company redeemed all of its $10.0 million CenBank I 10.6% and $5.0 million CenBank II 10.2% TruPS. The TruPS were redeemed at a price equal to 104.24% (CenBank I) and 104.08% (CenBank II) of the liquidation amount of $1,000 per trust preferred security, respectively, plus all accrued and unpaid distributions to the respective redemption dates. The redemption of the TruPS was funded by a dividend from the Bank. All three ratios continue to remain well above the minimum capital requirements for holding companies and well capitalized requirements for banks.
The following table presents select asset quality data as of the dates indicated:
The following tables summarize past due loans by class as of the dates indicated:
At March 31, 2013, classified assets as a percentage of capital and allowance for loan losses were 23.8%, a favorable decrease from 25.2% at December 31, 2012 and 35.4% at March 31, 2012. Overall classified assets declined by $6.1 million, or 10.4%, during the first quarter 2013, and decreased by $28.6 million, or 35.2%, for the twelve months ended March 31, 2013.
During the first quarter 2013, nonperforming assets increased $6.6 million as compared to the prior quarter primarily due to the increase in nonaccrual loans of $17.8 million, partially offset by the sale of our single largest OREO property of $10.9 million. The increase in nonaccrual loans was related to two out-of-state loan participations purchased nearly five years ago with a current combined principal balance of $21.7 million. We are diligently working to remove these two participations from nonaccrual status due to their relative size. Our exposure to future declines in credit quality related to this type of participation has greatly diminished, as only $13.2 million of pass-rated, out-of-state loan participations remain in our loan portfolio at March 31, 2013, as compared to $32.9 million at December 31, 2012 and $69.8 million at March 31, 2012.
The specific component of the allowance for loan losses increased $3.8 million from $2.7 million at December 31, 2012 to $6.5 million at March 31, 2013, primarily due to the two participations transferred to nonaccrual status during the first quarter 2013, as discussed above. The general component of the allowance for loan losses decreased from $22.5 million at December 31, 2012 to $17.5 million at March 31, 2013. The general component represented 1.5% of loans, net of unearned discount, at March 31, 2013 as compared to 1.9% at December 31, 2012. This decline was due mostly to an improvement in local economic conditions, less remaining risk in our portfolio related to out-of-state loan participations, declines in watch loans, and declines in net charge-offs. Loans classified as special mention and watch declined by $23.9 million, or 44.2%, as compared to the prior quarter to $30.2 million at March 31, 2013. Net charge-offs in the first quarter 2013 were $1.1 million as compared to negligible net charge-offs in the fourth quarter 2012 and $5.6 million in the first quarter 2012. The coverage ratio, defined as allowance for loan losses divided by nonperforming loans, decreased from 180.7% at December 31, 2012 to 76.3% at March 31, 2013. The decline in our coverage ratio reflects the movement of the two out-of-state loan participations to nonaccrual status in the first quarter.
The Company did not record a provision for loan losses in the first quarter 2013 as compared to a $3.5 million credit provision in the fourth quarter 2012 and a $1.0 million provision in the first quarter 2012.
As of March 31, 2013, the Company had 106,914,333 shares of common stock outstanding, consisting of 101,819,333 shares of voting common stock and 5,095,000 shares of non-voting common stock. At March 31, 2013, total common shares outstanding include 2,638,418 shares of unvested stock awards.
This press release contains certain non-GAAP financial measures related to tangible assets, including tangible book value and tangible common equity, and pre-tax operating earnings adjusted for (if any) provision (credit) for loan losses, other real estate owned expenses, debt termination expense, acquisition, reorganization and integration costs and securities gains and losses.
The Company discloses these non-GAAP financial measures to provide meaningful supplemental information regarding the Company-s operational performance and to enhance investors- overall understanding of the Company-s core financial performance. Management believes that these non-GAAP financial measures allow for additional transparency and are used by some investors, analysts and other users of the Company-s financial information as performance measures. These non-GAAP financial measures are presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP. These non-GAAP financial measures presented by the Company may be different from non-GAAP financial measures used by other companies.
The following non-GAAP schedule reconciles the non-GAAP pre-tax operating earnings to GAAP net income before income taxes as of the dates indicated:
The following non-GAAP schedules reconcile the book value per share to the tangible book value per share and the GAAP equity ratio to the tangible equity ratio as of the dates indicated:
Guaranty Bancorp is a bank holding company that operates 28 branches in Colorado through a single bank, Guaranty Bank and Trust Company. The Bank provides banking and other financial services including commercial and industrial, real estate, construction, 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 and its subsidiary also provide wealth management services, including private banking, investment management and trust services. More information about Guaranty Bancorp can be found at .
This press release contains forward-looking statements, which are included in accordance with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of such terms and other comparable terminology. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company-s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: failure to maintain adequate levels of capital and liquidity to support Company-s operations; 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; ability to receive regulatory approval for the bank subsidiary to declare dividends to the Company; adequacy of the allowance for loan losses, changes in credit quality and the effect of credit quality on the provision for credit losses and allowance for loan losses; changes in governmental legislation or regulation, including, but not limited to, any increase in FDIC insurance premiums; changes in accounting policies and practices; changes in business strategy or development plans; changes in the securities markets; changes in consumer spending, borrowing and savings habits; the availability of capital from private or government sources; competition for loans and deposits and failure to attract or retain loans and deposits; changes in the financial performance and/or condition of our borrowers and the ability of our borrowers to perform under the terms of their loans and terms of other credit agreements; political instability, acts of war or terrorism and natural disasters; 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.