The Federal Reserve has lifted a written agreement with Guaranty Bancorp and its bank, which could free the Denver company to retire some of its more costly debt.
The Fed announced the termination on Tuesday, but the $1.7 billion company has not yet disclosed the move. A call to Guaranty was not immediately returned.
The Fed, along with the Colorado Division of Banking, put the company and its Guaranty Bank and Trust under the order in January 2010 after a $30.6 million loss in 2009 and a $256.7 million loss a year earlier. The company was struggling with a construction portfolio.
The company’s capital position, however, was better than many community banks at the time. In May 2009, Guaranty raised $59.1 million from private-equity firms including Patriot Financial Partners and Castle Creek Capital Partners.
Still, the agreement required the company to submit a written capital plan. It also addressed board oversight, real estate concentrations, reserves and the bank’s ability to fund itself with brokered deposits, among other things. Guaranty said in its 2011 annual report that it had achieved full compliance with all aspects of the agreement.
Tim O’Brien, an analyst at Sandler O’Neill & Partners, said that, since the written agreement was put into place, the company had shaved $400 million of assets and had focused on cleaning up its asset quality. At March 31, its nonperforming asset ratio was 3.44%.
O’Brien says he expects Guaranty to retire as much as $15 million of high-cost trust-preferred securities now that the agreement is gone. Regulatory orders typically forbid the company from making such moves. “This is really another step in the right direction for them,” O’Brien says. “They have this [trust-preferred] debt that is at a higher cost that they can ultimately call and pay off.”