10-Q 1 gbnk-20170331x10q.htm 10-Q 10-Q 20170331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




FORM 10-Q





 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended March 31, 2017



OR





 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the transition period from                      to                      

 

Commission File Number: 000-51556

 



GUARANTY BANCORP

(Exact name of registrant as specified in its charter)





 

 

DELAWARE

 

41-2150446

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer Identification Number)



 

1331 Seventeenth St., Suite 200

Denver, CO

 

80202

(Address of principal executive offices)

 

(Zip Code)



303-675-1194

(Registrant’s telephone number, including area code)


 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes No



Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  No  

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  

  



 

Large Accelerated Filer   

Accelerated Filer   

Non-accelerated Filer    (Do not check if smaller reporting company)

Smaller Reporting Company

Emerging Growth Company   

 



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.    



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes No  

1

 


 

As of April 27, 2017, there were 28,393,278 shares of the registrant’s common stock outstanding, of which 487,856 shares were in the form of unvested stock awards.

 

2

 


 

Table of Contents



 

 

 

 

 

  

 

  

 

Page



 

 

 

 



 

 

PART I—FINANCIAL INFORMATION

  



 

 

ITEM 1.

  

Unaudited Condensed Consolidated Financial Statements

  



 

 

 

  

Unaudited Condensed Consolidated Balance Sheets

  



 

 

 

  

Unaudited Condensed Consolidated Statements of Income 

  



 

 

 

  

Unaudited Condensed Consolidated Statements of Comprehensive Income 

  



 

 

 

  

Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity 

  



 

 

 

  

Unaudited Condensed Consolidated Statements of Cash Flows

  



 

 

 

  

Notes to Unaudited Condensed Consolidated Financial Statements

  



 

 

ITEM 2.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

  

39 



 

 

ITEM 3.

  

Quantitative and Qualitative Disclosures About Market Risk

  

61 



 

 

ITEM 4.

  

Controls and Procedures

  

63 



 

PART II—OTHER INFORMATION

  

64 



 

 

ITEM 1.

  

Legal Proceedings

  

64 



 

 

ITEM 1A.

  

Risk Factors

  

64 



 

 

ITEM 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

  

64 



 

 

ITEM 3.

  

Defaults Upon Senior Securities

  

64 



 

 

ITEM 4.

  

Mine Safety Disclosure

  

64 



 

 

ITEM 5.

  

Other Information

  

64 



 

 

ITEM 6.

  

Exhibits

  

65 



 



 



3

 


 

PART I – FINANCIAL INFORMATION



Item 1. Unaudited Condensed Consolidated Financial Statements



GUARANTY BANCORP AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets





 

 

 

 



 

 

 

 



 

March 31,

 

December 31,



 

2017

 

2016



 

(In thousands, except share and per share data)

Assets

 

 

 

 

Cash and due from banks

$

40,513 

$

50,111 



 

 

 

 

Time deposits with banks

 

254 

 

254 



 

 

 

 

Securities available for sale, at fair value

 

318,280 

 

324,228 

Securities held to maturity (fair value of $240,357 and $239,404

 

 

 

 

at March 31, 2017 and December 31, 2016)

 

243,452 

 

243,979 

Bank stocks, at cost

 

23,014 

 

22,649 

Total investments

 

584,746 

 

590,856 



 

 

 

 

Loans held for sale

 

951 

 

4,129 



 

 

 

 

Loans, held for investment, net of deferred costs and fees

 

2,569,799 

 

2,515,009 

Less allowance for loan losses

 

(23,175)

 

(23,250)

Net loans, held for investment

 

2,546,624 

 

2,491,759 



 

 

 

 

Premises and equipment, net

 

66,001 

 

67,390 

Other real estate owned and foreclosed assets

 

257 

 

569 

Goodwill

 

56,404 

 

56,404 

Other intangible assets, net

 

14,668 

 

15,317 

Bank-owned life insurance

 

66,034 

 

65,538 

Other assets

 

23,199 

 

24,100 

Total assets

$

3,399,651 

$

3,366,427 



 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

Liabilities:

 

 

 

 

Deposits:

 

 

 

 

Noninterest-bearing demand

$

868,189 

$

916,632 

Interest-bearing demand and NOW

 

821,518 

 

767,523 

Money market

 

489,921 

 

484,664 

Savings

 

178,157 

 

164,478 

Time

 

407,845 

 

365,787 

Total deposits

 

2,765,630 

 

2,699,084 



 

 

 

 

Securities sold under agreement to repurchase

 

34,457 

 

36,948 

Federal Home Loan Bank line of credit borrowing

 

90,400 

 

124,691 

Federal Home Loan Bank term notes

 

72,432 

 

72,477 

Subordinated debentures, net

 

65,002 

 

64,981 

Interest payable and other liabilities

 

12,892 

 

15,868 

Total liabilities

 

3,040,813 

 

3,014,049 



 

 

 

 

Stockholders’ equity:

 

 

 

 

Common stock (1)

 

31 

 

31 

Additional paid-in capital - common stock

 

832,815 

 

832,067 

Accumulated deficit

 

(361,592)

 

(367,944)

Accumulated other comprehensive loss

 

(6,416)

 

(6,726)

Treasury stock, at cost, 2,400,684 and 2,361,882 shares, respectively

 

(106,000)

 

(105,050)

Total stockholders’ equity

 

358,838 

 

352,378 

Total liabilities and stockholders’ equity

$

3,399,651 

$

3,366,427 

____________________

 

 

 

 

(1)

Common stock—$0.001 par value; 40,000,000 shares authorized; 30,793,962 shares issued and 28,393,278 shares outstanding at March 31, 2017 (includes 487,856 shares of unvested restricted stock); 40,000,000 shares authorized; 30,695,886 shares issued and 28,334,004 shares outstanding at December 31, 2016 (includes 513,187 shares of unvested restricted stock).

 

See "Notes to Unaudited Condensed Consolidated Financial Statements."

4

 


 

GUARANTY BANCORP AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Income







 

 

 

 



 

 

 

 



 

Three Months Ended March 31,



 

2017

 

2016



 

 

 

 



 

(In thousands, except share and per share data)

Interest income:

 

 

 

 

Loans, including costs and fees

$

27,392 

$

18,854 

Investment securities:

 

 

 

 

Taxable

 

2,315 

 

1,960 

Tax-exempt

 

1,237 

 

731 

Dividends

 

389 

 

311 

Federal funds sold and other

 

 

Total interest income

 

31,341 

 

21,860 

Interest expense:

 

 

 

 

Deposits

 

1,537 

 

1,007 

Securities sold under agreement to repurchase

 

17 

 

10 

Borrowings

 

771 

 

623 

Subordinated debentures

 

844 

 

225 

Total interest expense

 

3,169 

 

1,865 

Net interest income

 

28,172 

 

19,995 

Provision for loan losses

 

 

16 

Net interest income, after provision for loan losses

 

28,167 

 

19,979 

Noninterest income:

 

 

 

 

Deposit service and other fees

 

3,280 

 

2,169 

Investment management and trust

 

1,521 

 

1,280 

Increase in cash surrender value of life insurance

 

595 

 

448 

Gain on sale of securities

 

 -

 

45 

Gain on sale of SBA loans

 

381 

 

154 

Other

 

625 

 

82 

Total noninterest income

 

6,402 

 

4,178 

Noninterest expense:

 

 

 

 

Salaries and employee benefits

 

11,926 

 

8,788 

Occupancy expense

 

1,552 

 

1,375 

Furniture and equipment

 

945 

 

818 

Amortization of intangible assets

 

649 

 

240 

Other real estate owned, net

 

68 

 

Insurance and assessments

 

706 

 

613 

Professional fees

 

974 

 

857 

Impairment of long-lived assets

 

190 

 

 -

Other general and administrative

 

3,519 

 

3,099 

Total noninterest expense

 

20,529 

 

15,792 

Income before income taxes

 

14,040 

 

8,365 

Income tax expense

 

4,200 

 

2,510 

Net income

$

9,840 

$

5,855 



 

 

 

 

Earnings per common share–basic: 

$

0.35 

$

0.28 

Earnings per common share–diluted: 

 

0.35 

 

0.27 

Dividends declared per common share: 

 

0.13 

 

0.12 



 

 

 

 

Weighted average common shares outstanding-basic:

 

27,867,558 

 

21,184,892 

Weighted average common shares outstanding-diluted:

 

28,090,179 

 

21,398,559 



See "Notes to Unaudited Condensed Consolidated Financial Statements."

5

 


 

GUARANTY BANCORP AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Comprehensive Income













 

 

 

 

 



 

 

 

 

 



 

Three Months Ended March 31,



 

2017

 

 

2016



 

 

 

 

 



 

(In thousands)



 

 

 

 

 

Net income

$

9,840 

 

$

5,855 

Change in net unrealized gains (losses) on available for sale

 

 

 

 

 

securities during the period excluding the change attributable to

 

 

 

 

 

available for sale securities reclassified to held to maturity

 

122 

 

 

2,001 

Income tax effect

 

(46)

 

 

(761)

Change in unamortized loss on available for sale securities

 

 

 

 

 

reclassified into held to maturity securities

 

116 

 

 

107 

Income tax effect

 

(44)

 

 

(41)

Reclassification adjustment for net losses (gains) included

 

 

 

 

 

in net income during the period

 

 -

 

 

(45)

Income tax effect

 

 -

 

 

17 

Change in fair value of derivatives during the period

 

44 

 

 

(1,423)

Income tax effect

 

(17)

 

 

541 

Reclassification adjustment of losses on derivatives

 

 

 

 

 

during the period

 

217 

 

 

165 

Income tax effect

 

(82)

 

 

(63)

Other comprehensive income (loss)

 

310 

 

 

498 

Total comprehensive income

$

10,150 

 

$

6,353 







See "Notes to Unaudited Condensed Consolidated Financial Statements”





 

6

 


 

GUARANTY BANCORP AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity

(In thousands, except share data)







 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



Common Stock
Shares Outstanding

 

Common Stock
and Additional
Paid-in Capital

 

Treasury
Stock

 

Accumulated
Deficit

 

Accumulated Other
Comprehensive Loss

 

Totals



 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2016

21,704,852 

 

712,334 

 

(103,743)

 

(382,147)

 

(4,805)

$

221,639 

Net income

 -

 

 -

 

 -

 

5,855 

 

 -

 

5,855 

Other comprehensive income

 -

 

 -

 

 -

 

 -

 

498 

 

498 

Stock compensation awards, net of forfeitures

141,526 

 

 -

 

 -

 

 -

 

 -

 

 -

Stock based compensation, net

 -

 

837 

 

 -

 

 -

 

 -

 

837 

Repurchase of common stock

(55,578)

 

 -

 

(869)

 

 -

 

 -

 

(869)

Dividends paid

 -

 

 -

 

 -

 

(2,441)

 

 -

 

(2,441)

Balance, March 31, 2016

21,790,800 

$

713,171 

$

(104,612)

$

(378,733)

$

(4,307)

$

225,519 



 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2017

28,334,004 

$

832,098 

$

(105,050)

$

(367,944)

$

(6,726)

$

352,378 

Net income

 -

 

 -

 

 -

 

9,840 

 

 -

 

9,840 

Other comprehensive income

 -

 

 -

 

 -

 

 -

 

310 

 

310 

Stock compensation awards, net of forfeitures

98,076 

 

 -

 

 -

 

 -

 

 -

 

 -

Stock based compensation, net

 -

 

748 

 

 -

 

 -

 

 -

 

748 

Repurchase of common stock

(38,802)

 

 -

 

(950)

 

 -

 

 -

 

(950)

Dividends paid

 -

 

 -

 

 -

 

(3,488)

 

 -

 

(3,488)

Balance, March 31, 2017

28,393,278 

$

832,846 

$

(106,000)

$

(361,592)

$

(6,416)

$

358,838 























See "Notes to Unaudited Condensed Consolidated Financial Statements."







 

7

 


 





GUARANTY BANCORP AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows







 

 

 

 

 



 

 

 

 

 



 

Three Months Ended March 31,



 

2017

 

 

2016



 

 

 

 

 



 

(In thousands)

Cash flows from operating activities:

 

 

 

 

 

Net income

$

9,840 

 

$

5,855 

Reconciliation of net income to net cash from operating activities:

 

 

 

 

 

Depreciation and amortization

 

1,386 

 

 

917 

Net amortization on investment and loan portfolios

 

73 

 

 

51 

Provision for loan losses

 

 

 

16 

Impairment of long-lived assets

 

190 

 

 

 -

Stock compensation, net

 

748 

 

 

837 

Dividends on bank stocks

 

(154)

 

 

(179)

Increase in cash surrender value of life insurance

 

(496)

 

 

(370)

Gain on sale of securities and SBA loans

 

(381)

 

 

(199)

Gain on the sale of other assets

 

(271)

 

 

(14)

Origination of SBA loans with intent to sell

 

(325)

 

 

(1,918)

Proceeds from the sale of SBA loans originated with intent to sell

 

4,481 

 

 

2,528 

Loss, net, and valuation adjustments on real estate owned

 

66 

 

 

 -

Net change in:

 

 

 

 

 

Interest receivable and other assets

 

909 

 

 

(242)

Net deferred income tax assets

 

654 

 

 

205 

Interest payable and other liabilities

 

(2,701)

 

 

1,983 

Net cash from operating activities

 

14,024 

 

 

9,470 

Cash flows from investing activities:

 

 

 

 

 

Activity in available for sale securities:

 

 

 

 

 

Sales, maturities, prepayments and calls

 

10,513 

 

 

27,863 

Purchases

 

(5,054)

 

 

 -

Activity in held to maturity securities and bank stocks:

 

 

 

 

 

Maturities, prepayments and calls

 

4,219 

 

 

5,950 

Purchases

 

(4,163)

 

 

(7,887)

Loan originations, net of principal collections

 

(32,382)

 

 

(15,168)

Loan purchases

 

(25,838)

 

 

 -

Proceeds from sale of other assets

 

300 

 

 

 -

Proceeds from sales of other real estate owned and foreclosed assets

 

240 

 

 

 -

Proceeds from sale of SBA and other loans transferred to held for sale

 

3,817 

 

 

 -

Additions to premises and equipment

 

(598)

 

 

(665)

Net cash from investing activities

 

(48,946)

 

 

10,093 

Cash flows from financing activities:

 

 

 

 

 

Net change in deposits

 

66,570 

 

 

70,872 

Repayment of Federal Home Loan Bank term notes

 

(34,291)

 

 

 -

Net change in borrowings on Federal Home Loan Bank line of credit

 

(26)

 

 

(99,947)

Proceeds from Federal Home Loan Bank term advances

 

 -

 

 

25,000 

Cash dividends on common stock

 

(3,488)

 

 

(2,441)

Net change in repurchase agreements and federal funds purchased

 

(2,491)

 

 

(7,747)

Repurchase of common stock

 

(950)

 

 

(869)

Net cash from financing activities

 

25,324 

 

 

(15,132)

Net change in cash and cash equivalents

 

(9,598)

 

 

4,431 

Cash and cash equivalents, beginning of period

 

50,111 

 

 

26,711 

Cash and cash equivalents, end of period

$

40,513 

 

$

31,142 



 

 

 

 

 





See "Notes to Unaudited Condensed Consolidated Financial Statements."

8

 


 

GUARANTY BANCORP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements



(1)

Organization, Operations and Basis of Presentation



Guaranty Bancorp is a bank holding company registered under the Bank Holding Company Act of 1956, as amended, and headquartered in Colorado.



The Company’s principal business is to serve as a holding company for its bank subsidiary, Guaranty Bank and Trust Company, referred to as the “Bank”.



References to “Company,” “us,” “we,” and “our” refer to Guaranty Bancorp on a consolidated basis. References to “Guaranty Bancorp” or to the “holding company” refer to the parent company on a stand-alone basis.



The Bank is a full-service community bank offering an array of banking products and services to the communities it serves along the Front Range of Colorado including: accepting time and demand deposits and originating commercial loans, commercial and residential real estate loans, Small Business Administration (“SBA”) guaranteed loans and consumer loans. The Bank, together with its wholly owned subsidiaries Private Capital Management, LLC (“PCM”) and Cherry Hills Investment Advisors, Inc. (“CHIA”), provide wealth management services, including private banking, investment management and trust services. Substantially all of the Bank’s loans are secured by specific items of collateral, including business assets, commercial and residential real estate, which include land or improved land and consumer assets. Commercial loans are expected to be repaid from cash flow from the operations of businesses that have taken out the loans. There are no significant concentrations of loans to any one industry or customer. On September 8, 2016, the Company completed the acquisition of Home State Bancorp (“Home State”), based in Loveland, Colorado, in exchange for a combination of Company stock and cash. The transaction enhanced the Company’s balance sheet liquidity and supports the Company’s objective of serving the banking needs of northern Colorado business and consumer customers. On April 3, 2017, CHIA was consolidated into PCM.



(a)Basis of Presentation



The accounting and reporting policies of the Company conform to generally accepted accounting principles in the United States of America. All material intercompany balances and transactions have been eliminated in consolidation. The Company’s financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of its financial position and results of operations for the periods presented. All such adjustments are of a normal and recurring nature. Subsequent events have been evaluated through the date of financial statement issuance.



Certain information and note disclosures normally included in consolidated financial statements, prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States of America, have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The interim operating results presented in these financial statements are not necessarily indicative of operating results for the full year. For further information, refer to the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K, for the year ended December 31, 2016.



(b)Business Combinations



The Company accounts for acquisitions of businesses using the acquisition method of accounting. Under the acquisition method, assets acquired and liabilities assumed are recorded at their estimated fair value upon the date of acquisition. Management utilizes various valuation techniques including discounted cash flow analyses to determine the fair values of assets acquired and liabilities assumed. Any excess of purchase price over amounts allocated to the acquired assets, including identifiable intangible assets, and liabilities assumed is recorded as goodwill.



(c)Use of Estimates



The preparation of the consolidated financial statements, in conformity with U.S. GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of

9

 


 

the dates of the consolidated balance sheets and income and expense for the periods presented. Actual results could differ significantly from those estimates.



(d)Loans and Loan Commitments 



The Company extends commercial, real estate and consumer loans to customers. A substantial portion of the loan portfolio consists of commercial and real estate loans throughout the Front Range of Colorado. The ability of the Company’s borrowers to honor their contracts is generally dependent upon the real estate and general economic conditions prevailing in Colorado, among other factors.



Purchased loans that on the date of acquisition reflected evidence of credit deterioration since origination and for which collection of all contractually required payments was not probable were designated as purchased credit impaired or “PCI” loans. In the September 8, 2016 Home State transaction, the Company designated $2,108,000 of loans as PCI. As of March 31, 2017, $1,715,000 in PCI loans remained in the Company’s loan portfolio. Loans not designated as PCI (“Non-PCI” loans) comprise the significant majority of the Company’s loan portfolio and consist of internally originated loans in addition to acquired loans. Acquired Non-PCI loans were designated as such as of the date of acquisition because they demonstrated no evidence of credit deterioration since origination and because management considered the collection of all contractually required payments probable.



Loans that management has the intent and ability to hold for the foreseeable future, or until maturity or payoff, are reported at their outstanding unpaid principal balances, adjusted for charge-offs, the allowance for loan losses, acquisition-related discount and any deferred fees or costs. Acquired loans are recorded upon acquisition at fair value, with no associated allowance for loan loss. However, if subsequent to acquisition, the credit quality of an acquired loan deteriorates, an allowance may be required. Accounting for loans is performed consistently across all portfolio segments and classes.



A portfolio segment is defined in accounting guidance as the level at which an entity develops and documents a systematic methodology to determine its allowance for loan losses. A class is defined in accounting guidance as a group of loans having similar initial measurement attributes, risk characteristics and methods for monitoring and assessing risk.



Interest income is accrued on the unpaid principal balance of the Company’s loans. Loan origination fees, net of direct origination costs, are deferred and recognized as an adjustment to the related loan yield using the effective interest method without anticipating prepayments. Purchase discount or premium on acquired, Non-PCI loans is recognized as an adjustment to interest income over the contractual life of such loans using the effective interest method, or taken into income when the related loans are paid off or sold. With respect to PCI loans, the “accretable yield”, calculated as the excess of undiscounted expected cash flows at acquisition over the fair value at acquisition, is accreted into income over the term of the loan assuming the amount and timing of cash flows are reasonably estimable.



The accrual of interest on loans is discontinued (and the loan is put on nonaccrual status) at the time the loan is 90 days past due unless the loan is well secured and in process of collection. The time at which a loan enters past due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged-off prior to the date on which they would otherwise enter past due status if collection of principal or interest is considered doubtful. The interest on a nonaccrual loan is accounted for using the cost-recovery or cash-basis method until the loan qualifies for a return to the accrual-basis method. Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero, with payments received being applied first to the principal balance of the loan. Under the cash-basis method, interest income is recognized when the payment is received in cash. A loan is returned to accrual status after the delinquent borrower’s financial condition has improved, when all the principal and interest amounts contractually due are brought current, and when the likelihood of the borrower making future timely payments is reasonably assured.



Financial instruments include off‑balance sheet credit instruments, such as commitments to make loans and commercial letters of credit issued to meet customer financing needs. The face amount of each item represents the Company’s total exposure to loss with respect to the item before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.



10

 


 

(e)Allowance for Loan Losses and Allowance for Unfunded Commitments



The allowance for loan losses, or “the allowance”, is a valuation allowance for probable incurred loan losses and is reported as a reduction of outstanding loan balances.



Management evaluates the amount of the allowance on a regular basis based upon its periodic review of the collectability of the Company’s loans. Factors affecting the collectability of the loans include historical loss, the nature and volume of the loan portfolio, adverse situations that may affect borrowers’ ability to repay, estimated value of any underlying collateral, prevailing economic conditions and historical loss experience.  This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. Management maintains the allowance at a level that it deems appropriate to adequately provide for probable incurred losses in the loan portfolio and other extensions of credit. The Company’s methodology for estimating the allowance is consistent across all portfolio segments and classes of loans.



Loans deemed to be uncollectable are charged-off and deducted from the allowance. The Company’s loan portfolio primarily consists of non-homogeneous commercial and real estate loans where charge-offs are considered on a loan-by-loan basis based on the facts and circumstances, including management’s evaluation of collateral values in comparison to book values on collateral-dependent loans. Charge-offs on smaller balance unsecured homogenous type loans, such as overdrafts and ready reserves are recognized by the time the loan in question is 90 days past due. The provision for loan losses and recoveries on loans previously charged-off are added to the allowance.



The allowance consists of both specific and general components. The specific component relates to loans that are individually classified as impaired. All loans are subject to individual impairment evaluation should the pertinent facts and circumstances suggest that such evaluation is necessary. Factors considered by management in determining impairment include the loan’s payment status and the probability of collecting scheduled principal and interest payments when they become due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the original underlying loan agreement. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. If a loan is impaired, a portion, if any, of the allowance is allocated so that the loan is reported at the present value of estimated future cash flows using the loan’s original contractual rate or at the fair value of collateral, less estimated selling costs, if repayment is expected solely from collateral. Troubled debt restructurings (“TDRs”) are separately identified for impairment disclosures. If a TDR is considered to be a collateral-dependent loan, impairment of the loan is measured using the fair value of the collateral, less estimated selling costs. Likewise, if a TDR is not collateral-dependent, impairment is measured using the present value of estimated future cash flows using the loan’s effective rate at inception. For TDRs that subsequently default, the Company determines the amount of reserve in accordance with its accounting policy for the allowance.



The general component of the allowance covers all other loans not specifically identified as impaired and is determined by calculating losses recognized by portfolio segment during the current credit cycle and adjusted based on management’s evaluation of various qualitative factors. In performing this calculation, loans are aggregated into one of three portfolio segments: Real Estate, Consumer and Commercial & Other. An assessment of risks impacting loans in each of these portfolio segments is performed and qualitative adjustment factors, which will adjust the historical loss rate, are estimated. These qualitative adjustment factors consider current conditions relative to conditions present throughout the current credit cycle in the following areas: credit quality, loan class concentration levels, economic conditions, loan growth dynamics and organizational conditions. The historical loss experience is adjusted for management’s estimate of the impact of these factors based on the risks present for each portfolio segment.



The Company recognizes a liability in relation to unfunded commitments that is intended to represent the estimated future losses on commitments. In calculating the amount of this liability, management considers the amount of the Company’s off-balance sheet commitments, estimated utilization factors and loan specific

11

 


 

risk factors. The Company’s liability for unfunded commitments is calculated quarterly and the liability is included under “other liabilities” in the consolidated balance sheet.



(f)Goodwill and Other Intangible Assets



Goodwill was recorded in the Home State transaction and represents the excess of the purchase price over the fair value of acquired tangible assets, identifiable intangible assets and liabilities. Goodwill is assessed at least annually for impairment and any such impairment is recognized in the period identified.  



Intangible assets acquired in a business combination are amortized over their estimated useful lives to their estimated residual values and evaluated for impairment whenever changes in circumstances indicate that such an evaluation is necessary.



Core deposit intangible assets (“CDI assets”) are recognized at the time of their acquisition based on valuations prepared by independent third parties or other estimates of fair value. In preparing such valuations, management considers variables such as deposit servicing costs, attrition rates and market discount rates. CDI assets are amortized to expense over their useful lives, ranging from 10 years to 15 years.



Customer relationship intangible assets are recognized at the time of their acquisition based upon management’s estimate of their fair value. In preparing their valuation, management considers variables such as growth in existing customer base, attrition rates and market discount rates. The customer relationship intangible assets are amortized to expense over their estimated useful life, which has been estimated to be 10 years. The Company has recognized three customer relationship intangible assets as a result of the acquisitions of PCM on July 31, 2012, CHIA on July 16, 2014 and Home State on September 8, 2016.  



(g)Derivative Instruments 



The Company records all derivatives on its consolidated balance sheets at fair value. At the inception of a derivative contract, the Company designates the derivative as one of three types based on the Company’s intentions and belief as to the derivative’s likely effectiveness as a hedge. These three types are (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value hedge”), (2) a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”), or (3) an instrument with no hedging designation (“stand-alone derivative”). To date, the Company has entered into cash flow hedges and stand-alone derivative agreements but has not entered into any fair value hedges. For a cash flow hedge, the gain or loss on the derivative is reported in other comprehensive income and is reclassified into earnings in the same periods during which the hedged transaction impacts earnings. Any portion of the cash flow hedge not deemed highly effective in hedging the changes in expected cash flows of the hedged item are recognized immediately in current earnings. Changes in the fair value of derivatives that do not qualify for hedge accounting are reported currently in earnings as noninterest income.



The Company formally documents the relationship between derivatives and hedged items, as well as the risk-management objective and the strategy for undertaking hedge transactions, at the inception of the derivative contract. This documentation includes linking cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the hedge is highly effective in offsetting changes in cash flows of the hedged items.



(h)Stock Incentive Plan



The Company’s Amended and Restated 2005 Stock Incentive Plan (the “Incentive Plan”) provided for the grant of equity-based awards representing up to a total of 1,700,000 shares of voting common stock to key employees, nonemployee directors, consultants and prospective employees. The Incentive Plan expired by its terms on April 4, 2015. At the Company’s annual meeting of stockholders on May 5, 2015, the Company’s stockholders approved the Guaranty Bancorp 2015 Long-Term Incentive Plan (the “2015 Plan”), which had been previously approved by the Company’s Board of Directors. The 2015 Plan provides for the grant of stock options, stock awards, stock unit awards, performance stock awards, stock appreciation rights and other equity-based awards representing up to a total of 935,000 shares of voting common stock to key employees, nonemployee directors, consultants and prospective employees. All awards issued under the Incentive Plan

12

 


 

will remain outstanding in accordance with their terms despite the expiration of the Incentive Plan; however, any awards granted subsequent to the expiration of the Incentive Plan have been, and will continue to be, issued under the 2015 Plan.



As of March 31, 2017, the Company had granted stock awards under both the Incentive Plan and the 2015 Plan. The Company recognizes stock compensation expense for services received in a share-based payment transaction over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. The compensation cost of employee and director services received in exchange for stock awards is based on the grant date fair value of the award, as determined by quoted market prices. Stock compensation expense is recognized using an estimated forfeiture rate, adjusted as necessary to reflect actual forfeitures. The Company has issued stock awards that vest based on the passage of time over service periods of one to five years (in some cases vesting in annual installments, in other cases cliff vesting at the end of the service period) and other stock awards that vest contingent upon the satisfaction of certain performance conditions. The last date on which outstanding performance stock awards may vest is February 15, 2020. Compensation cost related to the performance stock awards is recognized based on an evaluation of expected financial performance in comparison to established criteria. Should expectations of the Company’s future financial performance change, expense to be recognized in future periods could be impacted.



(i)Stock Repurchase Plan



On February 7, 2017, the Company’s Board of Directors authorized the extension of the expiration date of the Company’s share repurchase program originally announced in April 2014. Due to previous extensions the program was scheduled to expire on April 2, 2017, however, this most recent extension extends the expiration date of the repurchase program through April 2, 2018. Pursuant to the program, the Company may repurchase up to 1,000,000 shares of its voting common stock, par value $0.001 per share. As of the date of this filing, the Company had not repurchased any shares under the program.



(j)Income Taxes



Income tax expense is the total of the current year’s income tax payable or refundable and the increase or decrease in deferred tax assets and liabilities. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period of the enactment date.



Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that the Company will not realize some portion of or the entire deferred tax asset. In assessing the Company’s likelihood of realizing deferred tax assets, management evaluates both positive and negative evidence, including the existence of any cumulative losses in the current year and the prior two years, the amount of taxes paid in available carry-back years, forecasts of future income, taking into account applicable tax planning strategies and assessments of current and future economic and business conditions. Management performs this analysis quarterly and adjusts as necessary. At March 31, 2017 and December 31, 2016, the Company had a net deferred tax asset of $3,862,000 and $4,846,000, respectively, which includes the deferred tax asset (liability) associated with the net unrealized loss (gain) on securities and interest rate swaps. After analyzing the composition of, and changes in, the deferred tax assets and liabilities and considering the Company’s forecasted future taxable income and various tax planning strategies, including the intent to hold the securities available for sale that were in a loss position until maturity, management determined that as of March 31, 2017, it was “more likely than not” that the net deferred tax asset would be fully realized. As a result, there was no valuation allowance with respect to the Company’s deferred tax asset as of March 31, 2017 or December 31, 2016. 



The Company and the Bank are subject to U.S. federal income tax, State of Colorado income tax and income tax in other states. Generally, the Company is no longer subject to examination by Federal taxing authorities for years before 2013 and is no longer subject to examination by the State of Colorado for years before 2012. The Company recognizes interest related to income tax matters as interest expense and penalties

13

 


 

related to income tax matters as other noninterest expense. At March 31, 2017 and December 31, 2016, the Company did not have any amounts accrued for interest or penalties.



(k)Earnings per Common Share



Basic earnings per common share represents the earnings allocable to common stockholders divided by the weighted average number of common shares outstanding during the period. Dilutive common shares that may be issued by the Company represent unvested stock awards subject to a service or performance condition.



Earnings per common share have been computed based on the following calculation of weighted average shares outstanding:







 

 

 



 

 

 



Three Months Ended March 31,



2017

 

2016



 

 

 

Average common shares outstanding

27,867,558 

 

21,184,892 

Effect of dilutive unvested stock grants (1)

222,621 

 

213,667 

Average shares outstanding for calculated

 

 

 

diluted earnings per common share

28,090,179 

 

21,398,559 

_____________

 

 

 





(1) Unvested stock grants representing 487,856 shares at March 31, 2017 had a dilutive impact of 222,621 shares in the diluted earnings per share calculation for the three months ended March 31, 2017. Unvested stock grants representing 556,944 shares at March 31, 2016 had a dilutive impact of 213,667 shares in the diluted earnings per share calculation for the three months ended March 31, 2016.





(l)Recently Issued Accounting Standards



Adoption of New Accounting Standards:



In March 2016, the FASB issued accounting standards update 2016-09 Compensation-Stock Compensation. The purpose of the update was to simplify the accounting for share-based payment transactions, including the income tax consequences of such transactions. Under the provisions of the update the income tax consequences of excess tax benefits and deficiencies should be recognized in income tax expense in the reporting period in which the awards vest. Previously, excess tax benefits or deficiencies impacted stockholder’s equity directly to the extent there was a cumulative excess tax benefit. In the event that a tax deficiency had occurred during the reporting period and a cumulative excess tax benefit did not exist, the tax deficiency was recognized in income tax expense under previous GAAP. The update also provides that entities may continue to estimate forfeitures in accounting for stock based compensation or recognize them as they occur. The provisions of this update become effective for interim and annual periods beginning after December 15, 2016, however early adoption was permitted beginning in 2016. The Company adopted the provisions of the update in the fourth quarter of 2016. During the first quarter 2017, $511,000 of excess tax benefits related to restricted stock vestings reduced income tax expense. Comparatively, excess tax benefits of $320,000 were retroactively recognized in the first quarter 2016, upon adoption in the fourth quarter 2016.



Recently Issued but not yet Effective Accounting Standards:



In May 2014, the FASB issued accounting standards update 2014-09 Revenue from Contracts with Customers. The main provisions of the update require the identification of performance obligations within a contract and require the recognition of revenue based on a stand-alone allocation of contract revenue to each performance obligation. Performance obligations may be satisfied and revenue recognized over a period of time if: (i) the customer simultaneously receives and consumes the benefits provided by the entity’s performance as the entity performs, or (ii) the entity’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced, or (iii) the entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date. The amendments of the update are to be effective for public entities beginning with interim and annual reporting periods beginning after December 15, 2017. Management does not expect the requirements of this update to have a material impact on the Company’s financial position, results of operations or cash flows.



14

 


 

In January 2016, the FASB released accounting standards update 2016-01 Recognition and Measurement of Financial Assets and Liabilities. The main provisions of the update are to eliminate the available for sale classification of accounting for equity securities and to adjust the fair value disclosures for financial instruments carried at amortized costs such that the disclosed fair values represent an exit price as opposed to an entry price. The provisions of this update will require that equity securities be carried at fair market value on the balance sheet and any periodic changes in value will be adjustments to the income statement. A practical expedient is provided for equity securities without a readily determinable fair value, such that these securities can be carried at cost less any impairment. The provisions of this update become effective for interim and annual periods beginning after December 15, 2017. Management does not expect the requirements of this update to have a material impact on the Company’s financial position, results of operations or cash flows.



In February 2016, the FASB issued accounting standards update 2016-02 Leases. The update requires all leases, with the exception of short-term leases that have contractual terms of no greater than one year, to be recorded on the balance sheet. Under the provisions of the update, leases classified as operating will be reflected on the balance sheet with the recognition of both a right-of-use asset and a lease liability. Under the update, a distinction will exist between finance and operating type leases and the rules for determining which classification a lease will fall into are similar to existing rules. For public business entities, the amendments of this update are effective for interim and annual periods beginning after December 15, 2018. The update requires a modified retrospective transition under which comparative balance sheets from the earliest historical period presented will be revised to reflect what the financials would have looked like were the provisions of the update applied consistently in all prior periods. Management is in the process of evaluating the impacts of the update on the Company’s financial position and does not expect the requirements of the update to have a material impact on the Company’s financial position, results of operations or cash flows. Based on leases outstanding at March 31, 2017, we anticipate total assets and total liabilities will increase between $8,200,000 and $9,800,000 as the result of additional leases being recognized on our balance sheet. Decisions to repurchase, modify, or renew leases prior to the implementation date will impact the results of the Company’s final analysis.



In June 2016, the FASB issued accounting standards update 2016-13 Financial Instruments - Credit Losses, commonly referred to as “CECL”. The provisions of the update eliminate the probable initial recognition threshold under current GAAP which requires reserves to be based on an incurred loss methodology. Under CECL, reserves required for financial assets measured at amortized cost will reflect an organization’s estimate of all expected credit losses over the contractual term of the financial asset and thereby require the use of reasonable and supportable forecasts to estimate future credit losses. Because CECL encompasses all financial assets carried at amortized cost, the requirement that reserves be established based on an organization’s reasonable and supportable estimate of expected credit losses extends to held to maturity (“HTM”) debt securities. Under the provisions of the update credit losses recognized on available for sale (“AFS”) debt securities will be presented as an allowance as opposed to a write-down. In addition, CECL will modify the accounting for purchased loans, with credit deterioration since origination, so that reserves are established at the date of acquisition for purchased loans. Under current GAAP a purchased loan’s contractual balance is adjusted to fair value through a credit discount and no reserve is recorded on the purchased loan upon acquisition. Since under CECL reserves will be established for purchased loans at the time of acquisition, the accounting for purchased loans is made more comparable to the accounting for originated loans. Finally, increased disclosure requirements under CECL require organizations to present the currently required credit quality disclosures disaggregated by the year of origination or vintage. The FASB expects that the evaluation of underwriting standards and credit quality trends by financial statement users will be enhanced with the additional vintage disclosures. For public business entities that are SEC filers, the amendments of the update will become effective beginning January 1, 2020. The Company has formed a cross-functional committee that is assessing our data and system needs and has begun to evaluate whether an external vendor may be engaged to assist with CECL. Management expects to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the first reporting period in which the new standard is effective, but cannot yet estimate the magnitude of the one-time adjustment or the overall impact of the new guidance on the Company’s financial position, results of operations or cash flows.



In August 2016, the FASB issued accounting standards update 2016-15, Statement of Cash Flows. This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice of how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments in this update are effective for fiscal years and interim periods beginning after

15

 


 

December 15, 2017; however early adoption is permitted. Management is currently in the process of evaluating the impact of the update on the Company’s statement of cash flows.



In January 2017, the FASB issued accounting standards update 2017-04, Simplifying the Test for Goodwill Impairment. The provisions of the update eliminate the existing second step of the goodwill impairment test which provides for the allocation of reporting unit fair value among existing assets and liabilities, with the net leftover amount representing the implied fair value of goodwill. In replacement of the existing goodwill impairment rule, the update will provide that impairment should be recognized as the excess of any of the reporting unit’s goodwill over the fair value of the reporting unit. Under the provisions of this update the amount of the impairment is limited to the carrying value of the reporting unit’s goodwill. For public business entities that are SEC filers the amendments of the update will become effective in fiscal years beginning after December 15, 2019.



In March 2017, the FASB issued accounting standards update 2017-08, Premium Amortization on Purchased Callable Debt Securities. The provisions of the update require premiums recognized upon the purchase of callable debt securities to be amortized to the earliest call date in order to avoid losses recognized upon call. For public business entities that are SEC filers the amendments of the update will become effective in fiscal years beginning after December 15, 2018. Management does not expect the requirements of this update to have a material impact on the Company’s financial position, results of operations or cash flows.



(m)Reclassifications



Certain reclassifications of prior year balances have been made to conform to the current year presentation. These reclassifications had no impact on the Company’s consolidated financial position, results of operations or cash flows. 



(2)Business Combination



On March 16, 2016, the Company entered into an Agreement and Plan of Reorganization (the “Merger Agreement”) with Home State, parent company of Home State Bank, a Colorado state chartered bank headquartered in Loveland, Colorado whereby Home State would merge into the Company. The transaction closed on September 8, 2016 with an aggregate transaction value of $152,478,000. The Merger Agreement provided that, subject to certain conditions, Home State shareholders would receive 6,533,756 shares of Company voting common stock valued at $117,477,000 based on the Company’s closing stock price on September 8, 2016 of $17.98, in addition to $35,001,000 in cash. 



The transaction enhanced the Company’s balance sheet liquidity and supported the Company’s objective of serving the banking needs of northern Colorado business and consumer customers. 



Goodwill of $56,404,000 was recognized in the transaction and represents expected synergies and cost savings resulting from combining the operations of Home State with those of the Company. Due to the tax-free structure of the transaction, the recognized goodwill was not deductible for tax purposes. The estimated fair value of assets acquired and liabilities assumed at acquisition were recorded on the Company’s balance sheet at the date of acquisition and subjected to limited measurement period adjustments in the fourth quarter 2016 as a result of receipt of final valuations. Recorded fair values of acquired assets and liabilities are subject to adjustment for up to one year from the date of the acquisition. There were no measurement period adjustments in the first quarter 2017.



16

 


 

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed in the September 8, 2016 Home State transaction, and reflects all adjustments made to the fair value of the opening balance sheet through March 31, 2017:







 

 



 

 

Assets acquired:

 

 



 

(In thousands)

Cash and cash equivalents

$

11,849 

Time deposits with banks

 

504 

Securities available-for-sale

 

396,450 

Securities held-to-maturity

 

850 

Bank stocks

 

1,477 

Net Loans

 

445,529 

Premises and equipment, net

 

22,950 

Other real estate owned

 

45 

Goodwill

 

56,404 

Other intangible assets, net

 

11,701 

Other assets

 

8,118 

Total assets acquired

 

955,877 



 

 

Liabilities assumed:

 

 

Deposits

 

769,709 

Securities sold under agreement to repurchase and federal funds purchased

 

19,985 

Federal Home Loan Bank term notes

 

2,525 

Federal Home Loan Bank line of credit borrowing

 

2,052 

Other liabilities

 

9,128 

Total liabilities assumed

 

803,399 

Net Assets Acquired

$

152,478 



No merger expenses were incurred in the first quarter 2017 while pre-tax merger expenses of $675,000 were included in the Company’s results of operations in the first quarter 2016.



 



(3)Securities



The fair value of available for sale debt securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) (“AOCI”) were as follows at the dates presented:









 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



March 31, 2017



 

Fair
Value

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Amortized
Cost



 

(In thousands)

Securities available for sale:

 

 

 

 

 

 

 

 

State and municipal

$

80,929 

$

100 

$

(2,261)

$

83,090 

Mortgage-backed - agency / residential

 

124,545 

 

301 

 

(3,395)

 

127,639 

Mortgage-backed - private / residential

 

265 

 

 -

 

(4)

 

269 

Corporate

 

91,269 

 

529 

 

(1,485)

 

92,225 

Collateralized loan obligations

 

21,272 

 

64 

 

(39)

 

21,247 

Total securities available for sale

$

318,280 

$

994 

$

(7,184)

$

324,470 





17

 


 



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



December 31, 2016



 

Fair
Value

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Amortized
Cost



 

(In thousands)

Securities available for sale:

 

 

 

 

 

 

 

 

State and municipal

$

81,608 

$

91 

$

(2,542)

$

84,059 

Mortgage-backed - agency / residential

 

129,832 

 

347 

 

(3,117)

 

132,602 

Mortgage-backed - private / residential

 

265 

 

 -

 

(6)

 

271 

Corporate

 

86,246 

 

288 

 

(1,357)

 

87,315 

Collateralized loan obligations

 

26,277 

 

50 

 

(66)

 

26,293 

Total securities available for sale

$

324,228 

$

776 

$

(7,088)

$

330,540 



The carrying amount, unrecognized gains/losses and fair value of securities held to maturity were as follows at the dates presented:



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

Fair
Value

 

Gross
Unrecognized
Gains

 

Gross
Unrecognized
Losses

 

Amortized
Cost



 

(In thousands)

March 31, 2017:

 

 

 

 

 

 

 

 

State and municipal

$

119,413 

$

955 

$

(2,196)

$

120,654 

Mortgage-backed - agency / residential

 

101,484 

 

588 

 

(2,419)

 

103,315 

Asset-backed

 

18,260 

 

78 

 

(101)

 

18,283 

Other

 

1,200 

 

 -

 

 -

 

1,200 



$

240,357 

$

1,621 

$

(4,716)

$

243,452 



 

 

 

 

 

 

 

 

December 31, 2016:

 

 

 

 

 

 

 

 

State and municipal

$

118,734 

$

745 

$

(3,120)

$

121,109 

Mortgage-backed - agency / residential

 

100,565 

 

507 

 

(2,590)

 

102,648 

Asset-backed

 

18,905 

 

 

(126)

 

19,022 

Other

 

1,200 

 

 -

 

 -

 

1,200 



$

239,404 

$

1,261 

$

(5,836)

$

243,979 

The proceeds from sales and calls of securities and the associated gains are listed below:







 

 

 

 



 

 

 

 



 

Three Months Ended March 31,



 

2017

 

2016



 

 

 

 



 

(In thousands)

Proceeds

$

 -

$

19,468 

Gross gains

 

 -

 

113 

Gross losses

 

 -

 

(68)

Net tax (benefit) expense related to

 

 

 

 

gains (losses) on sale

 

 -

 

17 



18

 


 

The amortized cost and estimated fair value of available for sale and held to maturity debt securities by contractual maturity at March 31, 2017 are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to prepay obligations with or without prepayment penalties. Securities not due at a single maturity date are presented separately.



 

 

 

 



 

 

 

 



 

Available for Sale



 

Fair Value

 

Amortized Cost



 

(In thousands)

Securities available for sale:

 

 

 

 

Due in one year or less

$

4,022 

$

4,015 

Due after one year through five years

 

21,139 

 

20,928 

Due after five years through ten years

 

80,219 

 

82,461 

Due after ten years

 

66,818 

 

67,911 

Total AFS, excluding mortgage-backed (MBS)

 

 

 

 

and collateralized loan obligations

 

172,198 

 

175,315 

Mortgage-backed and collateralized

 

 

 

 

loan obligations

 

146,082 

 

149,155 

Total securities available for sale

$

318,280 

$

324,470 











 

 

 

 



 

 

 

 



 

Held to Maturity



 

Fair Value

 

Amortized Cost



 

(In thousands)

Securities held to maturity:

 

 

 

 

Due in one year or less

$

340 

$

340 

Due after one year through five years

 

9,270 

 

9,141 

Due after five years through ten years

 

74,023 

 

75,324 

Due after ten years

 

36,980 

 

37,049 

Total HTM, excluding MBS and asset-backed

 

120,613 

 

121,854 

Mortgage-backed and asset-backed

 

119,744 

 

121,598 

Total securities held to maturity

$

240,357 

$

243,452 







 

 

 

 



The following tables present the fair value and the unrealized loss on securities that were temporarily impaired as of March 31, 2017 and December 31, 2016, aggregated by major security type and length of time in a continuous unrealized loss position:







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2017

 

Less than 12 Months

 

 

12 Months or More

 

 

Total



 

Fair
Value

 

 

Unrealized
Losses

 

 

Fair
Value

 

 

Unrealized
Losses

 

 

Fair
Value

 

 

Unrealized
Losses



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

(In thousands)

Description of securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

State and municipal

$

46,564 

 

$

(2,261)

 

$

 -

 

$

 -

 

$

46,564 

 

$

(2,261)

Mortgage-backed - agency /

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

residential

 

84,996 

 

 

(2,635)

 

 

15,222 

 

 

(760)

 

 

100,218 

 

 

(3,395)

Mortgage-backed - private /

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

residential

 

265 

 

 

(4)

 

 

 -

 

 

 -

 

 

265 

 

 

(4)

Corporate

 

47,386 

 

 

(1,171)

 

 

5,686 

 

 

(314)

 

 

53,072 

 

 

(1,485)

Collateralized loan obligations

 

10,263 

 

 

(21)

 

 

3,500 

 

 

(18)

 

 

13,763 

 

 

(39)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held to maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

State and municipal

 

86,035 

 

 

(2,840)

 

 

608 

 

 

(246)

 

 

86,643 

 

 

(3,086)

Mortgage-backed - agency /

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

residential

 

96,188 

 

 

(3,098)

 

 

 -

 

 

 -

 

 

96,188 

 

 

(3,098)

Asset-backed

 

15,346 

 

 

(412)

 

 

2,914 

 

 

(99)

 

 

18,260 

 

 

(511)

Total temporarily impaired

$

387,043 

 

$

(12,442)

 

$

27,930 

 

$

(1,437)

 

$

414,973 

 

$

(13,879)





19

 


 





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2016

 

Less than 12 Months

 

 

12 Months or More

 

 

Total



 

Fair
Value

 

 

Unrealized
Losses

 

 

Fair
Value

 

 

Unrealized
Losses

 

 

Fair
Value

 

 

Unrealized
Losses