·

Loans at September 30, 2015 increased $124.9 million from June 30, 2015, or 19.9% annualized, and $264.0 million, or 11.2%, from September 30, 2014.

·

Deposits at September 30, 2015 increased $75.0 million from June 30, 2015, or 11.3% annualized, and $341.0 million, or 14.4%, from September 30, 2014.

·

A provision for loan losses of $0.8 million was recorded in the third quarter of 2015, as compared to $1.1 million in the second quarter of 2015 and a negative provision of $0.5 million in the third quarter of 2014.

·

In the third quarter of 2015 the Company recorded its first full period of interest expense of $0.9 million on the subordinated notes issued on June 25, 2015.

Quarter ended (unaudited)

3Q15 change vs.

(in thousands, except per share amounts)

3Q15

2Q15

3Q14

2Q15

3Q14

Net interest income before provision

$

$

$

$

% 

$

%

Provision for loan losses

% 

%

Net interest income after provision

% 

%

Total noninterest income

% 

%

Total noninterest expense

% 

%

Net income before income taxes

% 

%

Provision for income taxes

% 

%

Income from continuing operations

% 

%

Discontinued operations, net of tax(1)

 -

 -

 -

 -

% 

%

Net income

% 

%

Preferred stock dividends

% 

%

Net income available to common shareholders

$

$

$

$

% 

$

%

Diluted earnings per common share

$

$

$

$

 -

 -

% 

$

%

KEY RATIOS

Net interest margin

%

%

%

Efficiency ratio(2)

%

%

%

Return on average assets

%

%

%

Return on average shareholders' equity

%

%

%

Noninterest income as a percentage of operating revenues

%

%

%

(1)

The Company discontinued the operations of its investment banking subsidiary, Green Manning & Bunch (GMB), as of March 31, 2015. GMB’s operations have been reported as discontinued operations retrospectively for all periods presented throughout this earnings release.

(2)

The efficiency ratio equals noninterest expense adjusted to exclude gains and losses on other real estate owned (OREO), other assets and investments, divided by the sum of tax equivalent net interest income and noninterest income. To calculate tax equivalent net interest income, the interest earned on tax exempt loans and investment securities has been adjusted to reflect the amount that would have been earned had these investments been subject to normal income taxation.

·

Loans at September 30, 2015 were $2.6 billion, an increase of $124.9 million from June 30, 2015. From September 30, 2014, loans increased $264.0 million, or 11.2%.

·

Loans increased $70.8 million in the Arizona market and $54.1 million in the Colorado market from June 30, 2015. 

Quarter ended (unaudited)

3Q15 change vs.

(in thousands)

3Q15

2Q15

3Q14

2Q15

3Q14

LOANS

Commercial

$

$

$

$

% 

$

% 

Owner-occupied real estate

% 

% 

Investor real estate

% 

% 

Construction & land

% 

% 

Consumer

% 

% 

Other

% 

% 

Total loans

$

$

$

$

% 

$

% 

·

New credit extensions during the third quarter of 2015 improved from the second quarter of 2015 (linked-quarter). However, the Company continued to experience a high level of paydowns and maturities, particularly within the commercial real estate portfolio. 

·

Commercial line utilization was 34.7% at September 30, 2015, compared to 36.3% and 39.7%, respectively, at the linked- and prior-year quarter ends.

Quarter ended (unaudited)

(in thousands)

3Q15

2Q15

1Q15

4Q14

3Q14

Loans - beginning balance

$

$

$

$

$

New credit extended

Credit advanced

Paydowns & maturities

Gross loan charge-offs

Loans - ending balance

$

$

$

$

$

Net change - loans outstanding

$

$

$

$

$

·

Customer Funding at September 30, 2015 increased $78.9 million from June 30, 2015 and $327.2 million from September 30, 2014.

·

Noninterest-bearing demand accounts increased $73.1 million from June 30, 2015 and were 41.7% of total deposits at September 30, 2015.   

Quarter ended (unaudited)

3Q15 change vs.

(in thousands)

3Q15

2Q15

3Q14

2Q15

3Q14

DEPOSITS AND CUSTOMER REPURCHASE AGREEMENTS

Money market

$

$

$

$

% 

$

%

Interest-bearing demand

% 

%

Savings

% 

%

Certificates of deposits under $100

% 

%

Certificates of deposits $100 and over

% 

%

Reciprocal CDARS

% 

%

Total interest-bearing deposits

% 

%

Noninterest-bearing demand deposits

% 

%

Customer repurchase agreements

% 

%

Total deposits and customer repurchase agreements

$

$

$

$

% 

$

%

·

The level of problem credits remains low, with nonperforming assets of $10.4 million at September 30, 2015, compared to $9.9 million at June 30, 2015, and $12.0 million at September 30, 2014. 

·

The Company recognized net recoveries of $0.3 million during the third quarter of 2015.

·

The Allowance was 1.33% of total loans at September 30, 2015.

Quarter ended (unaudited)

(in thousands)

3Q15

2Q15

3Q14

ALLOWANCE FOR LOAN AND CREDIT LOSSES

Beginning allowance for loan losses

$

$

$

Provision for loan losses

Net recovery (charge-off)

Ending allowance for loan losses

$

$

$

CREDIT QUALITY

Nonaccrual loans

$

$

$

Loans 90 days or more past due and accruing interest

 -

 -

 -

Total nonperforming loans

OREO and repossessed assets

Total nonperforming assets

$

$

$

Performing renegotiated loans

$

$

$

Classified loans

$

$

$

ASSET QUALITY MEASURES

Nonperforming assets to total assets

% 

% 

% 

Nonperforming loans to total loans

% 

% 

% 

Nonperforming loans and OREO to total loans and OREO

% 

% 

% 

Allowance for loan and credit losses to total loans

% 

% 

% 

Allowance for loan and credit losses to nonperforming loans

% 

% 

% 

·

On June 25, 2015, the Company issued $60 million of unsecured fixed-to-floating rate subordinated notes due 2030 (Notes). Unless redeemed, the Notes will bear 5.625% annual interest until June 25, 2025, and thereafter until maturity in June 2030 at a floating rate equal to LIBOR plus 317 basis points.

·

The Company used the net proceeds of the Notes to redeem its Small Business Lending Fund (SBLF) preferred stock. The SBLF shares were included in Tier 1 capital, whereas the Notes qualify as Tier 2 capital. As a result, the Company’s Tier 1 capital ratio declined; however, while total regulatory capital did not change significantly as a result of the transactions, shareholders’ equity did decline.

·

On October 2, 2015, the Board of Directors of the Company declared a quarterly cash dividend of $0.045 per common share. The dividend will be paid on November 2, 2015 to shareholders of record on October 26, 2015.

Quarter ended (unaudited)

(in thousands, except per share amounts)

3Q15

2Q15

3Q14

EQUITY MEASURES

Common shareholders' equity

$

$

$

Total shareholders' equity

Common shares outstanding at period end

Book value per common share

$

$

$

Tangible book value per common share *

$

$

$

Tangible common equity to tangible assets *

% 

% 

% 

Tangible equity to tangible assets *

% 

% 

% 

Tier 1 capital ratio

**

% 

% 

Total-risk based capital ratio

**

% 

% 

·

Net interest income on a tax-equivalent basis was $28.9 million for the third quarter of 2015, a decrease of $0.5 million from the linked-quarter.

·

The third quarter of 2015 reflected the first full quarter of interest expense related to the Notes issued in late June 2015. The incremental quarterly interest expense was $0.8 million as compared to the second quarter of 2015.

·

Net Interest Margin (NIM) contracted 24 basis points on a linked-quarter basis to 3.72%.

o

NIM was adversely impacted by the Notes offering, which contributed 11 basis points of the contraction to the reported NIM compared to the linked-quarter.

o

In addition, loan yields declined on a linked-quarter basis by 15 basis points, in part due to a reduction in past-due interest collected on problem loan resolutions and prepayment penalties, which were particularly pronounced in the first half of 2015.

·

Offsetting the NIM compression was an increase in the earning asset base, and improved deposit composition.

o

From June 30, 2015, average loans increased $72.3 million while average federal funds sold, interest-earning deposits and investments increased $33.1 million.

o

Average deposits increased $43.4 million from June 30, 2015, with average noninterest-bearing deposits increasing $50.9 million from June 30, 2015.

·

The Company has decided to focus on fee-based business lines with recurring revenue, and as of March 31, 2015 ceased offering investment banking services. The operations of GMB have been reported as discontinued operations retrospectively for all periods presented.

·

Total noninterest income declined from the linked-quarter primarily due to lower income on equity method investments.

·

Noninterest income as a percentage of operating income was 20.4% for the third quarter of 2015, as compared to 21.3% and 20.8%, respectively, for the linked- and prior-year quarters.

Quarter ended (unaudited)

3Q15 change vs.

(in thousands)

3Q15

2Q15

3Q14

2Q15

3Q14

Noninterest income:

Deposit service charges

$

$

$

$

% 

$

% 

Investment advisory income

% 

% 

Insurance income

% 

% 

Other income

% 

% 

Total noninterest income

$

$

$

$

% 

$

% 

·

Total noninterest expense increased $0.4 million from the linked-quarter and $1.4 million from the prior-year quarter.

·

The decrease in compensation related expenses over the linked-quarter is primarily due to an increase in deferred direct loan origination costs (which are credited against salary expense) related to higher loan origination levels.

·

Total full-time equivalent employees at September 30, 2015 were relatively unchanged from June 30, 2015 at 530, versus 524 at September 30, 2014.

·

The increase in other operating expenses over the linked- and prior-year quarters is the result of higher service contracts fees, which are a function of client transaction volumes, and higher professional services fees.

·

The prior-year quarter benefited from greater net gains on OREO and other assets of $0.6 million, which reduced total noninterest expense.

·

The efficiency ratio was 68.3% for the third quarter of 2015, as compared to 65.5% and 67.4%, respectively, for the linked- and prior-year quarters.

Quarter ended (unaudited)

3Q15 change vs.

(in thousands)

3Q15

2Q15

3Q14

2Q15

3Q14

Noninterest expense:

Salaries and employee benefits

$

$

$

$

% 

$

% 

Stock-based compensation expense

% 

% 

Occupancy expenses, premises and equipment

% 

% 

Amortization of intangibles

 -

 -

% 

% 

Other operating expenses

% 

% 

Net (gain) loss on OREO, repossessed assets and other

% 

% 

Total noninterest expense

$

$

$

$

% 

$

% 

·

Risks and uncertainties described in our reports filed with the Securities and Exchange Commission, including our most recent Form 10-K.

·

Competitive pressures among depository and other financial institutions nationally and in our market areas may increase significantly.

·

Adverse changes in the economy or business conditions, either nationally or in our market areas, could increase credit-related losses and expenses and/or limit growth.

·

Increases in defaults by borrowers and other delinquencies could result in increases in our provision for losses on loans and related expenses.

·

Our ability to manage growth effectively could adversely affect our results of operations and prospects.

·

Fluctuations in interest rates and market prices could reduce our net interest margin and asset valuations and increase our expenses.

·

The consequences of continued bank acquisitions and mergers in our market areas, resulting in fewer but much larger and financially stronger competitors, could increase competition for financial services to our detriment.

·

Changes in legislative or regulatory requirements applicable to us and our subsidiaries and implementation of current legislative or regulatory requirements could increase costs, limit certain operations and adversely affect results of operations.

·

Changes in tax requirements, including tax rate changes, new tax laws and revised tax law interpretations may increase our tax expense or adversely affect our customers' businesses.

Three months ended September 30, 

Nine months ended September 30, 

(in thousands, except per share amounts)

2015

2014

2015

2014

INCOME STATEMENT DATA

Interest income

$

$

$

$

Interest expense

NET INTEREST INCOME BEFORE PROVISION

Provision for loan losses

NET INTEREST INCOME AFTER PROVISION

Noninterest income

Noninterest expense

INCOME BEFORE INCOME TAXES

Provision for income taxes

NET INCOME FROM CONTINUING OPERATIONS

Income (loss) from discontinued operations, net of tax

 -

NET INCOME

$

$

$

$

Preferred stock dividends

NET INCOME AVAILABLE TO COMMON SHAREHOLDERS

$

$

$

$

EARNINGS PER COMMON SHARE

BASIC

$

$

$

$

DILUTED

$

$

$

$

EQUITY MEASURES

Common shares outstanding at period end (in thousands)

Book value per common share

$

$

Tangible book value per common share *

$

$

Tangible common equity to tangible assets *

% 

% 

Tangible equity to tangible assets *

% 

% 

* See accompanying Reconciliation of Non-GAAP Measures to GAAP

PERIOD END BALANCES

Total assets

$

$

Investments

Loans

Intangible assets

Deposits

Subordinated debentures

Common shareholders' equity

Total shareholders' equity

Interest-earning assets

Interest-bearing liabilities

BALANCE SHEET AVERAGES

Average assets

$

$

Average investments

Average loans

Average deposits

Average subordinated debentures

Average shareholders' equity

Average interest-earning assets

Average interest-bearing liabilities

Three months ended September 30, 

Nine months ended September 30, 

(in thousands)

2015

2014

2015

2014

PROFITABILITY MEASURES

Net interest margin

% 

% 

% 

% 

Efficiency ratio - tax equivalent

% 

% 

% 

% 

Return on average assets

% 

% 

% 

% 

Return on average shareholders' equity

% 

% 

% 

% 

Noninterest income as a percentage of operating revenues

% 

% 

% 

% 

CREDIT QUALITY

Nonperforming loans

Nonaccrual loans

$

$

Loans 90 days or more past due and accruing interest

 -

 -

Total nonperforming loans

OREO & repossessed assets

Total nonperforming assets

$

$

Performing renegotiated loans

$

$

Classified loans

$

$

Charge-offs

$

$

Recoveries

Net charge-offs

$

$

Nonperforming assets to total assets

% 

% 

Nonperforming loans to total loans

% 

% 

Nonperforming loans and OREO to total loans and OREO