Shares of Guaranty Bancorp (GBNK) of Denver, Colo. closed at $1.41 Wednesday, returning 7% year-to-date.
The company reported a second-quarter net loss of $4.4 million or 11 cents a share, following a first-quarter net loss of $1.8 million or 6 cents a share. A year earlier, the net loss was $10.9 million or 21 cents a share. Over the past year, elevated loan loss provisions have been a contributing factor in the company's losses, and Chief Operating Officer Paul Taylor explained that the company's expenses were "way beyond normal," as Guaranty Bancorp incurred legal and other expenses as it worked through repossessed assets.
A bank's provision for loan losses is its quarterly addition to its loan loss reserves, as it anticipates losses on specific problem loans, and directly affects earnings.
Taylor also comment on Guaranty Bancorp's net interest margin - essentially the average yield on loans and investments less the average cost of funds - which was 3.31% for the second quarter, compared to the aggregate second-quarter margin of 3.81% for all U.S. banks and thrifts reported by the FDIC, saying that the company's margin had declined over the past two years as the company reduced risk from the "legacy balance sheets" of the four banks the company purchased in 2004 and 2005. He also said the margin would "probably approach 4% by year-end" and that the company's goal was to achieve a margin of about 4.50%. balance sheet risk as it integrated
Guaranty Bancorp had $2 billion in total assets as of June 30. The company is not a TARP participant. Despite a track record of significant losses in 2007, 2008 and 2009 followed by narrowing losses for the first half of 2010, Guaranty Bancorp's tier 1 leverage ratio was 7.87% and its total risk-based capital ratio was 14.80% as of June 30, above the 5% and 10% most banks have to maintain in order to be considered well capitalized
Guaranty Bancorp raised $58 million in regulatory capital through an offering of preferred shares in August 2009, and said in its most recent 10-Q filing with the Securities and Exchange Commission that it "does not have any current plans to raise additional capital."
Nonperforming assets - including loans past due 90 or more days or in nonaccrual status (less government-guaranteed balances) and repossessed assets - comprised 4.83% as of June 30, which compared to the aggregate second-quarter "noncurrent assets" ratio of 3.31% reported by the FDIC for all U.S. banks and thrifts.
While Guaranty Bancorp's nonperforming assets ratio declined from 5.55% the previous quarter and slightly from 4.84% a year earlier, the company reported net charge-offs - loan losses less recoveries - of $13.5 million for the second quarter, for an annualized ratio of net charge-offs to average loans of 3.82%. In comparison, the national aggregate net charge-off ratio for the second quarter was 2.74%.
As of Wednesday's close, the shares were trading for 0.7 times tangible book value according to SNL.
One analyst is covering the shares, with a hold rating, according to Thomson Reuters.
With weak core earnings, Guaranty is not a compelling play for new investors, even with the company's low valuation, since there are many bank holding companies trading below book value that are already profitable. Meanwhile the company's cheap price relative to book value, decent capital position and network of 34 branches in Colorado's Front Range could make Guaranty Bancorp an ideal candidate for a take-out.