FOR IMMEDIATE RELEASE:

Guaranty Bancorp Announces 2016 First Quarter Financial Results



DENVER, April 20, 2016 - Guaranty Bancorp (Nasdaq: GBNK) (“we”, “our” or “the Company”), a community bank holding company based in Colorado, today announced first quarter 2016 net income of $5.5 million, or $0.26 per basic and diluted common share, an increase of $0.5 million or $0.02 per basic and diluted common share as compared to the first quarter 2015. 



The Company’s operating earnings1 increased $0.8 million, or 15.8% for the first quarter 2016, as compared to the same quarter in the prior year. The $0.8 million increase in operating earnings was due to a $1.2 million increase in net interest income resulting from a $288.4 million, or 18.9% increase in average loan balances, partially offset by an increase in income taxes due to higher pretax income. The Company’s net income increased $0.5 million for the three months ended March 31, 2016, as compared to the same period in the prior year due to a $1.2 million increase in net interest income, partially offset by $0.7 million of merger-related expenses incurred in the first quarter of 2016.



“We have some very exciting initiatives in 2016 that will help to advance our growth strategy and strengthen our market share,” said Paul W. Taylor, President and Chief Executive Officer. “On March 16th, we announced our planned merger with Home State Bancorp, based in Loveland, Colorado. Together, our two premier community banks will create one of the largest bank holding companies headquartered in the state of Colorado. Based on financial results as of December 31, 2015, the combined company will have approximately $3.3 billion in total assets, $2.5 billion in total deposits and $2.3 billion in total gross loans. We expect the transaction to close in the third quarter of 2016. I look forward to this exciting opportunity for our combined customers, employees and shareholders.”



Mr. Taylor added, “I am equally pleased with our sustained momentum in the first quarter of 2016. We continue to remain focused on the fundamentals of our business, as evidenced by our nearly 16% growth in operating earnings as compared with the first quarter 2015, and strong balance sheet growth including a 17.7% increase in loans and an 8.8% increase in deposits over the last twelve months.”



As compared to the fourth quarter 2015, the Company’s first quarter 2016 operating earnings increased $0.1 million to $5.9 million. Operating return on average assets increased to 1.01% in the first quarter 2016 compared to 0.99% in the fourth quarter 2015. As compared to the fourth quarter 2015, the Company’s first quarter 2016 net income decreased $0.4 million to $5.5 million primarily due to merger-related expenses incurred during the first quarter 2016. Return on average assets (GAAP) during the first quarter 2016 was 0.94% compared to 1.00% in the fourth quarter in the prior year.

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1  This press release contains certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of the Company’s core financial performance. See the “Non-GAAP Financial Measures” section later in this press release for a definition of operating earnings and other non-GAAP measures.





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Key Financial Measures

Income Statement







(1) See reconciliation of non-GAAP financial measure to the corresponding GAAP measurement in "Non-GAAP Financial Measures" later in this document.

(2) The efficiency ratio equals noninterest expense adjusted to exclude amortization of intangible assets, prepayment penalties on long-term debt, impairment of long-lived assets and merger related expenses, divided by the sum of tax equivalent net interest income and tax equivalent noninterest income. To calculate tax equivalent net interest income and noninterest income, the interest earned on tax exempt loans and investment securities and the income earned on bank-owned life insurance has been adjusted to reflect the amount that would have been earned had these investments been subject to normal income taxation. 



Balance Sheet









Net Interest Income and Margin







Net interest income increased $1.2 million in the first quarter 2016, as compared to the same quarter in 2015, due to a $2.0 million increase in interest income, partially offset by a $0.8 million increase in interest expense. The increase in interest income was primarily the result of a $288.4 million, or 18.9% increase in average loan balances in the first quarter 2016 as compared to the same quarter in 2015. The increase in interest expense is primarily attributable to a $116.2 million increase in the Company’s average FHLB borrowings compounded by an increase in the average cost of

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these borrowings.



In the first quarter 2016, net interest income increased $0.1 million as compared to the fourth quarter 2015, due to a $0.4 million increase in interest income, partially offset by a $0.3 million increase in interest expense. The increase in interest income during the first quarter 2016, as compared to the fourth quarter 2015, was primarily due to a $49.0 million increase in average loan balances. The increase in interest expense during the first quarter 2016, as compared to the fourth quarter 2015, was primarily due to a $65.3 million increase in average Federal Home Loan Bank (FHLB) borrowings as well as an increase in the average cost of these borrowings. 



Noninterest Income



The following table presents noninterest income as of the dates indicated:









First quarter 2016 noninterest income was $4.2 million as compared to $4.3 million in the fourth quarter 2015 and $4.1 million in the first quarter 2015.



Noninterest Expense



The following table presents noninterest expense as of the dates indicated:









Noninterest expense increased by $0.5 million to $15.8 million in the first quarter 2016 as compared to the fourth quarter 2015 and the first quarter 2015, primarily due to the $0.7 million in merger related expenses incurred during the first quarter 2016. Other offsetting variances in noninterest expense during the first quarter 2016 as compared to the fourth quarter 2015 included a $0.3 million decrease in amortization related to the use of accelerated amortization and a $0.2 million increase in professional fees. The Company’s tax equivalent efficiency ratio was 59.92% for the first quarter 2016, as compared to 59.55% for the fourth quarter 2015, and 62.82% for the first quarter 2015.

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Balance Sheet











At March 31, 2016, the Company had total assets of $2.4 billion, reflecting a decrease of $6.3 million as compared to December 31, 2015 and an increase of $216.8 million as compared to March 31, 2015. The $70.9 increase in total deposits during the first quarter 2016 assisted in the Company reducing its FHLB borrowings by $74.9 million from $280.8 million as of December 31, 2015 to $205.9 million as of March 31, 2016.



The following table sets forth the amount of loans outstanding at the dates indicated:







The following table presents the changes in our loan balances at the dates indicated:







During the first quarter 2016, loans net of deferred costs and fees increased $15.7 million which was comprised of a $26.2 million increase in commercial and residential real estate loans and a $6.4 million increase in commercial loans, partially offset by a $19.4 million decline in construction loans. First quarter 2016 net loan growth consisted of $156.3 million in new loans and net existing credit advanced, partially offset by $139.9 million in net loan pay-downs and maturities. In addition to contractual loan principal payments and maturities, the first quarter 2016 included $28.1 million in early payoffs related to the sale of the borrower’s assets, $21.4 million in payoffs due to our strategic decision to not match certain financing terms offered by competitors, $11.7 million in pay-downs related to revolving line of credit fluctuations and $10.0 million in pay-downs of energy-related loans. 

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For the twelve months ended March 31, 2016, loans net of deferred costs and fees increased by $275.1 million, or 17.7%. Net loan growth was comprised of a $252.6 million increase in commercial and residential real estate loans and a $15.2 million increase in construction loans. The growth in loans was the result of the development of new customer relationships and growth in existing customer relationships. The utilization rate on commercial lines of credit was 43.0% at March 31, 2016 as compared to 41.2% at December 31, 2015 and 37.8% as of March 31, 2015. At March 31, 2016, 1-4 family residential real estate loans were $343.1 million, as compared to $349.1 million at December 31, 2015, and $262.0 million as of March 31, 2015. 



The following table sets forth the amounts of deposits outstanding at the dates indicated:







At March 31, 2016, non-maturing deposits were $1.6 billion, an increase of $48.9 million as compared to December 31, 2015, and an increase of $62.6 million as compared to March 31, 2015.  The increase in non-maturing deposits during the first quarter 2016 was attributable to seasonal cash fluctuations of various commercial customers in addition to new customer relationships. At March 31, 2016, noninterest-bearing deposits as a percentage of total deposits were 33.7%, as compared to 34.0% at December 31, 2015, and 38.3% at March 31, 2015.



At March 31, 2016, securities sold under agreements to repurchase were $18.7 million, a decrease of $7.7 million as compared to December 31, 2015, and a decrease of $5.2 million as compared to March 31, 2015.



Total FHLB borrowings were $205.9 million at March 31, 2016 consisting of $85.9 million of overnight advances on our subsidiary bank’s,  (Guaranty Bank and Trust Company) line of credit and $120.0 million in term advances. At December 31, 2015, total FHLB borrowings consisted of $185.8 million in overnight advances and $95.0 million in term advances. 



Regulatory Capital Ratios



The following table provides the capital ratios of the Company and the Bank as of the dates presented, along with the applicable regulatory capital requirements:



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At March 31, 2016, all of our regulatory capital ratios remained well above minimum requirements for a “well-capitalized” institution. Our Tier 1 risk-based capital ratio and total risk-based capital ratios increased as compared to our ratios at December 31, 2015 as a result of increased capital due to first quarter earnings, partially offset by growth in risk-weighted assets.



Asset Quality



The following table presents select asset quality data, including quarterly charged-off loans, recoveries and provision (credit) for loan losses as of the dates indicated:





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The following tables summarize past due loans held for investment by class as of the dates indicated:









During the first quarter 2016, nonperforming assets decreased by $1.1 million from December 31, 2015 and decreased by $1.4 million from March 31, 2015. The decrease in nonperforming assets at March 31, 2016 as compared to December 31, 2015 was primarily the result of the payoff during the first quarter 2016 of a single nonaccrual loan with  a balance of $1.0 million as of December 31, 2015. As of March 31, 2016, nonperforming loans included one out-of-state loan participation with a balance of $9.5 million.



At March 31, 2016, classified assets represented 11.6% of bank-level Tier 1 risk-based capital plus allowance for loan losses, as compared to 11.7% at December 31, 2015, and 11.3% at March 31, 2015. 



Net recoveries in first quarter 2016 were immaterial as compared to net recoveries of $0.1 million in the fourth quarter 2015, and an immaterial amount of net recoveries in the first quarter 2015.  The Bank considered recoveries, historical charge-offs, level of nonperforming loans, loan growth and other factors when determining the adequacy of the allowance for loan losses and the resulting amount of loan loss provision to be recognized during the quarter.



Shares Outstanding



As of March 31, 2016, the Company had 21,790,800 shares of common stock outstanding, consisting of 20,771,800 shares of voting common stock, of which 556,944 shares were in the form of unvested stock awards, and 1,019,000 shares of non-voting common stock.



Non-GAAP Financial Measures



The Company discloses certain non-GAAP financial measures related to tangible assets, including tangible book value and tangible common equity, and operating earnings adjusted for merger related expenses, OREO expenses, debt termination expense, impairments of long-lived assets, securities gains and losses and gains or losses on the sale or

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disposal of other assets. The Company also discloses the following GAAP profitability metrics alongside the operating earnings equivalent: return on average assets, return on average equity and earnings per share (diluted).



The Company discloses these non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of the Company’s core financial performance. Management believes that these non-GAAP financial measures allow for additional transparency and are used by some investors, analysts and other users of the Company’s financial information as performance measures. These non-GAAP financial measures are presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP. These non-GAAP financial measures presented by the Company may be different from non-GAAP financial measures used by other companies.



The following non-GAAP schedule reconciles the non-GAAP operating earnings to GAAP net income as of the dates indicated:









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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:















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About Guaranty Bancorp



Guaranty Bancorp is a  $2.4 billion financial services company that operates as the bank holding company for Guaranty Bank and Trust Company, a premier Colorado community bank. The Bank provides comprehensive financial solutions to consumers and small to medium-sized businesses that value local and personalized service. In addition to loans and depository services, the Bank also offers wealth management solutions, including trust and investment management services. More information about Guaranty Bancorp can be found at www.gbnk.com.



Forward-Looking Statements 



This press release contains forward-looking statements, which are included in accordance with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of such terms and other comparable terminology. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: failure to maintain adequate levels of capital and liquidity to support the Company’s operations; general economic and business conditions in those areas in which the Company operates, including the impact of global and national economic conditions on our local economy; demographic changes; competition; fluctuations in interest rates; continued ability to attract and employ qualified personnel; ability to receive regulatory approval for the bank subsidiary to declare dividends to the Company; adequacy of the allowance for loan losses, changes in credit quality and the effect of credit quality on the provision for credit losses and allowance for loan losses; changes in governmental legislation or regulation, including, but not limited to, any increase in FDIC insurance premiums; changes in accounting policies and practices; changes in business strategy or development plans; failure or inability to complete mergers or other corporate transactions; 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; failure to recognize expected cost savings; 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; changes in oil and natural gas prices; 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 any forward-looking statement 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, except as may otherwise be required by law, 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.



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GUARANTY BANCORP AND SUBSIDIARIES

Unaudited Consolidated Balance Sheets



















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GUARANTY BANCORP AND SUBSIDIARIES

Unaudited Consolidated Statements of Operations





















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GUARANTY BANCORP AND SUBSIDIARIES

Unaudited Consolidated Average Balance Sheets

























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