Guaranty takes non-cash goodwill charge

DENVER – Guaranty Bancorp (Nasdaq: GBNK) took a non-cash charge of $250.7 million during the third quarter — completely eliminating its goodwill balance sheet item.

Overall, the company, which operates Guaranty Bank and Trust Co., saw a $265.6 million loss for the quarter. During the third quarter of 2007, the company recorded a net income of $1.5 million.

The goodwill impairment is an accounting item that does not impact the bank’s liquidity or regulatory capital. In a statement, the bank explained that its goodwill was higher than peer institutions, which made it more susceptible to impairment following the recent market volatility.

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“Due to the lack of comparable bank valuations, uncertainty in the interest rate environment, continued softness in the real estate market and the recent market volatility, it was determined that the goodwill impairment test should be performed, which resulted in a complete write-off of the recorded goodwill,” the company explained in the statement.

In addition to the goodwill impairment, the bank also increased its provision for loan losses by $22.7 million. Guaranty President Dan Quinn explained that the increase in the provision was driven by an increase in non-performing assets and related charge-offs. He cited weakness in the performance of residential construction, land and land development loans as the primary reason.

“We believe that continued economic weakness will likely result in elevated credit costs,” Quinn said. “As such, we continue to aggressively and proactively identify and manage problem assets within our loan portfolio.”

In afternoon trading, Guaranty’s stock was down 39 cents to $3.56 per share.