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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K

ý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2009oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                                  to


Commission file number 000-51556

GUARANTY BANCORP(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of
incorporation or organization)

41-2150446(IRS Employer Identification No.)1331 Seventeenth Street, Suite 300
Denver, Colorado(Address of principal executive offices)

80202(Zip Code)


(303) 293-5563(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Voting Common Stock, $0.001 are Value

The NASDAQ Stock Market LLC(Title of each class)

(Name of each exchange on which registered)


Securities registered pursuant to Section 12(g) of the Act:    None

Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o    No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o    No ý

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 ý    No o

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 o    No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment
to this Form 10-K. o

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 Act (Check one).

Large accelerated filer o

Accelerated filer ý

Non-accelerated filer o (Do not check if a
smaller reporting company)

Smaller reporting company o


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

The aggregate market value of the voting common stock held by non-affiliates of the registrant, computed by reference to the closing price per share of
the registrant's voting common stock as of the close of business on June 30, 2009, was approximately $74 million. For purposes of this computation, all executive officers, directors and
10% beneficial owners of the registrant are assumed to be affiliates. Such determination should not be deemed an admission that such officers, directors and beneficial owners are, in fact, affiliates
of the registrant. Registrant does not have any outstanding non-voting common equities.

As
of February 1, 2009, there were 52,817,985 shares of the registrant's voting common stock outstanding, including 1,366,938 shares of unvested restricted stock and performance
stock and excluding 129,806 shares to be issued under its deferred compensation plan.

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on
Form 10-K will be found in the registrant's definitive proxy statement for its 2010 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended, and such information is incorporated herein by reference.



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GUARANTY BANCORP  ANNUAL REPORT ON FORM 10-K  Table of Contents



PART I

3Forward-Looking Statements and Factors that Could Affect Future Results

3Item 1.

BUSINESS

4Item 1A.

RISK FACTORS

20Item 1B.

UNRESOLVED STAFF COMMENTS

32Item 2.

PROPERTIES

32Item 3.

LEGAL PROCEEDINGS

32Item 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

32PART II

33Item 5.

MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES

33Item 6.

SELECTED FINANCIAL DATA

36Item 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

38Item 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

76Item 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

78Item 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

132Item 9A.

CONTROLS AND PROCEDURES

132Item 9B.

OTHER INFORMATION

132PART III

133Item 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE OF THE
REGISTRANT

133Item 11.

EXECUTIVE COMPENSATION

133Item 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS

133Item 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

133Item 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

133PART IV

134Item 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

134SIGNATURES

137


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PART I

Forward-Looking Statements and Factors that Could Affect Future Results

Certain statements contained in this Annual Report on Form 10-K that are not statements of historical fact
constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"), notwithstanding that such statements are not specifically identified. In
addition, certain statements may be contained in our future filings with the SEC, in press releases, and in oral and written statements made by or with our approval that are not statements of
historical fact and constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues,
expenses, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (ii) statements of plans, objectives and expectations
of the Company or its management or board of directors, including those
relating to products or services; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Words such as "believes", "anticipates",
"expects", "intends", "targeted", "projected", "continue", "remain", "will", "should", "may" and other similar expressions are intended to identify forward-looking statements but are not the exclusive
means of identifying such statements.

Forward-looking
statements involve risks and uncertainties that may cause actual results to differ materially from those in such statements. Factors that could cause actual results to
differ from those discussed in the forward-looking statements include, but are not limited to:



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Forward-looking
statements speak only as of the date on which such statements are made. We do not intend to update any forward-looking statement to reflect events or circumstances after the date on
which such statement is made, or to reflect the occurrence of unanticipated events.

ITEM 1.    BUSINESS

Guaranty Bancorp

We are a bank holding company registered under the Bank Holding Company Act of 1956, as amended. Our principal business is to serve as
a holding company for our bank subsidiary, Guaranty Bank and Trust Company ("Guaranty Bank" or "Bank").

When
we say "we", "us", "our" or the "Company", we mean the Company on a consolidated basis with the Bank. When we refer to "Guaranty Bancorp" or the "holding company", we are referring
to the parent company on a standalone basis.

At
December 31, 2009, we had total assets of $2.1 billion, net loans of $1.5 billion, deposits of $1.7 billion and stockholders' equity of
$192.6 million, and we operated 34 branches in Colorado through our banking subsidiary, Guaranty Bank.

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Guaranty
Bancorp was incorporated in 2004 in Delaware under the name Centennial C Corp, and in 2004 and 2005 acquired several banking institutions and other entities, including Guaranty
Bank. By 2008, all of the entities acquired were either ultimately merged into either Guaranty Bancorp or Guaranty Bank or divested as follows:

Acquisitions

Entity

Date of CompletionCentennial Bank Holdings, Inc. (Predecessor) (Centennial C Corp
changed its name to Centennial Bank Holdings, Inc. in 2004)

July 16, 2004Centennial Bank of the West (merged into Guaranty Bank on
January 1, 2008)Guaranty Corporation (merged into Centennial Bank Holdings, Inc.)

December 31, 2004Guaranty Bank and Trust CompanyFirst National Bank of Strasburg (merged into Guaranty Bank on April 14, 2005)Collegiate Peaks Bank (divested on November 1, 2006)First MainStreet Financial, Ltd. (merged into Centennial Bank Holdings, Inc.)

October 1, 2005First MainStreet Bank, N.A. (merged into Centennial Bank of the West)First MainStreet Insurance, Ltd. (divested on March 1, 2006)Foothills Bank (merged into Guaranty Bank)

November 1, 2005


Divestitures

EntityFirst MainStreet Insurance, Ltd. (asset sale)

March 1, 2006Collegiate Peaks Bank

November 1, 2006


On
May 6, 2008, the stockholders of the Company approved the proposal to change the name of the holding company from Centennial Bank Holdings, Inc. to Guaranty Bancorp.
This name change was effective on May 12, 2008. As of December 31, 2009 and 2008, we had a single bank subsidiary, Guaranty Bank and Trust Company.

Business

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 (including energy loans), real estate loans, and small business and consumer loans. The
Bank also provides trust services, including personal trust administration, estate settlement, investment management accounts and self-directed IRAs. Substantially all loans are secured by
specific items of collateral, including business assets, consumer assets and commercial and residential real estate. Commercial loans are expected to be repaid from cash flow from business operations.
There are no significant concentrations of loans to any one industry or customer. The customers' ability to repay their loans is dependent on the real estate and general economic conditions of the
area, among other factors.

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We
concentrate our lending activities in the following principal areas:



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In
addition, we provide traditional deposit accounts such as demand, NOW, Money Market, IRA, time deposits and savings accounts. Our certificate of deposit customers, excluding brokered
deposits, primarily represent local relationships. The Company joined the Certificate of Deposit Account Registry Service (CDARS®) program in 2008, which enables our local customers to
obtain expanded FDIC insurance coverage on their deposits. Our branch network enables us to offer a full range of deposits, loans and personalized services to our targeted commercial and consumer
customers.

Our Philosophy and Strategy

We have established a philosophy of relationship banking: providing highly personalized and responsive services based on exceptional
customer service.

Our
strategy is to build a profitable, community-banking franchise along the Colorado Front Range spanning from Castle Rock to Fort Collins. We strive to be a premier community and
business bank with an emphasis on high quality customer service, commercial and retail banking and low-cost demand deposits, serving the needs of small to medium-sized businesses, the
owners and employees of those businesses and retail customers in the communities we serve. The strategy for serving our target markets is the delivery of a finely-focused set of value-added products
and services that satisfy the primary needs of our customers, emphasizing superior service and relationships as opposed to transaction volume or low pricing. As a locally managed banking institution,
we believe we are able to react more quickly to customers' needs and provide a superior level of customer service compared to larger regional and super-regional banks.

Our Principal Markets

We operate 34 branches located in the Denver metropolitan area and throughout Colorado's Northern Front Range.

The
Denver metropolitan area is composed of seven counties: Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas and Jefferson. The metropolitan area stretches from the south in Castle
Rock through downtown Denver northward to Boulder and Longmont. Denver is the largest city within a 600-mile radius.

Colorado's
Northern Front Range region begins just 30 miles north of central Denver in southern Boulder County. The I-25 corridor north from Denver to Fort Collins is a
contiguous stream of small communities/housing developments, open space, farm properties, and both small and large businesses. The region includes the cities of Fort Collins, Loveland, Greeley and
Longmont, all located in Boulder, Larimer and Weld counties. Colorado's Northern Front Range has a regional economy that is a diverse mix of agriculture, advanced technology, tourism, manufacturing,
service firms, government, education, retail, small business and construction.

Business Concentrations

No individual or single group of related accounts is considered material in relation to our total assets, or in relation to the overall
business of the Company. Approximately 61% of our loan portfolio held for investment at December 31, 2009 consisted of real estate-related loans, including construction loans, miniperm loans
and commercial real estate loans. Our business activities are currently focused in

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the
Colorado Front Range. Consequently, our financial condition, results of operations and cash flows depend upon the general trends in the economy of the Colorado Front Range and, in particular, the
residential and commercial real estate markets.

Competition

The banking business in Colorado is highly competitive. The market is characterized by a relatively small number of large financial
institutions with a large number of offices and numerous small to moderate-sized community banks and credit unions. Other entities in both the public and private sectors seeking to raise capital
through the issuance and sale of debt or equity securities also provide competition for us in the acquisition of deposits. We also compete with brokerage firms, money market funds and issuers of other
money market instruments. In recent years, increased competition has also developed from specialized finance and non-finance companies that offer wholesale finance, credit card and other
consumer finance services, including on-line banking services and personal finance software. Additionally, we expect competition to intensify among financial services companies due to the
recent consolidation of certain competing financial institutions and the conversion of certain investment banks to bank holding companies. Competition for deposit and loan products remains strong from
both banking and non-banking firms and this competition directly affects the rates of those products and the terms on which they are offered to consumers. In order to compete with other
competitors in our primary service area, we attempt to use to the fullest extent possible, the flexibility that our community bank status permits, including an emphasis on specialized services, local
promotional activity and personal contacts.

Technological
innovation continues to contribute to greater competition in domestic and international financial services markets. Technological innovation has, for example, made it
possible for non-depository institutions to offer customers automated transfer payment services previously limited to traditional banking products. In addition, customers now expect a
choice of several delivery systems and channels, including telephone, mail, computers via the internet, automated teller machines (ATMs), debit cards, point-of-sale
transactions,
automated clearing house transactions (ACH), remote deposit, mobile banking via telephone or wireless devices and in-store branches.

Mergers
between financial institutions have placed additional pressure on banks to consolidate their operations, reduce expenses and increase revenues to remain competitive. In addition,
competition has intensified due to federal and state interstate banking laws, which permit banking organizations to expand geographically with fewer restrictions than in the past. These laws allow
banks to merge with other banks across state lines, thereby enabling banks to establish or expand banking operations in our market. The competitive environment is also significantly impacted by
federal and state legislation that makes it easier for non-bank financial institutions to compete with us.

Economic
factors, along with legislative and technological changes, will have an ongoing impact on the competitive environment within the financial services industry. As an active
participant in financial markets, we strive to anticipate and adapt to dynamic competitive conditions, but we cannot provide assurance as to their impact on our future business, financial condition,
results of operations or cash flows or as to our continued ability to anticipate and adapt to changing conditions.

Supervision and Regulation

General

Set forth below is a description of the significant elements of the laws and regulations applicable to the Company. The description is
qualified in its entirety by reference to the full text of the statutes, regulations and policies that are described. Also, such statutes, regulations and policies are continually under review by the
U.S. Congress and state legislatures and federal and state regulatory agencies. A change in statutes, regulations or regulatory policies applicable to the holding company or its subsidiaries could
have a material effect on our business.

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Regulatory Agencies

Guaranty Bancorp is a legal entity separate and distinct from its bank subsidiary, Guaranty Bank. As a bank holding company, Guaranty
Bancorp is regulated under the Bank Holding Company Act of 1956, as amended, or the BHC Act, and is subject to inspection, examination and supervision by the Board of Governors of the Federal Reserve
System, or the Federal Reserve Board. Guaranty Bancorp is also under the jurisdiction of the SEC and is subject to the disclosure and regulatory requirements of the Securities Act of 1933, as amended,
and the Securities Exchange Act of 1934, as amended. Guaranty Bancorp is listed on The NASDAQ Stock Market LLC (Nasdaq) under the trading symbol "GBNK," and is subject to the rules of Nasdaq
for listed companies.

As
a Colorado-chartered bank, the Bank is subject to supervision, periodic examination, and regulation by the Colorado Division of Banking, or CDB. As a member of the Federal Reserve
System, the Bank is also subject to supervision, periodic examination and regulation by the Federal Reserve Bank of Kansas City, or the Federal Reserve.

Written Agreement

Based in part on the results of our regularly scheduled examination by the Federal Reserve and CDB in May 2009, the holding company and
the Bank entered into a Written Agreement on January 22, 2010 with the Federal Reserve and CDB (the "Written Agreement").

The
Written Agreement requires the Bank to submit written plans within certain timeframes to the Federal Reserve and the CDB that address the following items (i) strengthening
board oversight of the management and operations of the Bank; (ii) strengthening credit risk management practices; (iii) strengthening the Bank's management of commercial real estate
concentrations; (iv) improving the Bank's position with respect to problem assets; (v) maintaining adequate reserves for loan and lease losses; (vi) maintaining sufficient capital
at the Bank; (vii) improving the management of the Bank's liquidity position and funds management practices; (viii) reducing the Bank's reliance on brokered deposits; and
(ix) improving the Bank's earnings and overall condition through a business plan and budget. The Agreement also requires the Company to prepare and submit to the Federal Reserve (i) a
written plan that address maintaining sufficient capital at the Company and the Bank and (ii) a written statement of the Company's annual cash flow projections.

In
addition, the Agreement (i) requires the Bank's board of directors or a designated committee thereof to approve any extension, renewal or restructuring of any credit to any
borrower whose loans have been criticized by the Federal Reserve and/or the CDB; (ii) requires the Bank to charge off or collect certain problem loans; (iii) requires the Bank to review
and revise its allowance for loan and lease losses
consistent with relevant supervisory guidance; (iv) restricts the Bank from accepting any new brokered deposits, but continues to permit contractual rollovers and renewals of brokered deposits;
(v) requires the Company and the Bank to comply with the notice provisions of Section 32 of the Federal Deposit Insurance Act and Subpart H of Regulation Y of the Board of
Governors of the Federal Reserve System in connection with appointing any new director or senior executive officer or changing the responsibilities of any senior executive officer so that the officer
would assume a different senior executive officer position; and (vi) requires the Company and the Bank to comply with the restrictions on indemnification and severance payments of
Section 18(k) of the Federal Deposit Insurance Act and Part 359 of the FDIC's regulations.

Further,
the Written Agreement provides that prior written approval must be obtained from the Federal Reserve, and in the case of the Bank, the CDB, prior to paying dividends. Prior
written approval must also be obtained from the Federal Reserve before the Company can incur, increase or guarantee any debt, take any other form of payment representing a reduction in capital from
the Bank, or make any distributions of interest, principal or other sums on subordinated debentures or trust preferred securities.

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The
Board of Directors and management of the Company and the Bank are committed to addressing and resolving the matters raised in the Written Agreement on a timely basis and actions have
already been undertaken to comply with the various items addressed by the Written Agreement. With respect to board oversight, the board of directors of the Bank already regularly reviews written
reports that address credit risk management, commercial real estate concentrations, levels of adversely classified assets, capital, allowance for loan and lease losses, asset/liability management and
earnings. With respect to credit risk management, management has developed and utilizes risk of loss and loss given default models to evaluate risk exposure limits and potential changes in market
conditions and conducts monthly reviews of credit risk management reports with the boards of directors of the holding company and the Bank. With respect to concentrations of credit, the Bank's total
reported loans for construction, land development and other land declined to 110% of capital at December 31, 2009 from 199% at December 31, 2008 and the Bank's total reported commercial
real estate loans to total capital declined to 329% at December 31, 2009 from 417% at December 31, 2008. With respect to asset improvement, the Company has taken steps to mitigate risk
on each real estate loan upon renewal, or sooner based on facts and circumstances, to ensure that the Bank has updated appraisals or evaluations which may result in additional collateral or
guarantees. If necessary, the loan will be downgraded, placed on nonaccrual status, or foreclosed upon. In addition, the Company has reduced nonperforming loans since they peaked in September 2009
through the identification and reduction of higher-risk loans as evidenced by a 26.5% decline in nonperforming loans in the fourth quarter 2009. Management has also developed written plans
of actions with respect to all adversely classified assets. With respect to allowance for loan and lease losses, the Company's current methodology already considers the Bank's loan grading system, the
volume and severity of criticized loans, concentrations, historical losses, and the impact of overall economic and market conditions on loan and collateral values that could result in probable losses
within the portfolio, and the methodology is monitored as events and circumstances change. With respect to capital, the Company issued $57.8 million, net of expense, of Series A
Convertible Preferred Stock on August 11, 2009 and
subsequently contributed $40.0 million of capital to the Bank. In addition, the Company has developed a capital stress testing methodology that is updated twice a quarter and reviewed by ALCO.
With respect to liquidity/funds management, the Company has a contingent liquidity plan and updates the contingent liquidity plan and its liquidity models twice a quarter, which are reviewed by ALCO.
With respect to brokered deposits, the Company built-up excess asset-based liquidity in 2009 with $207.4 million in cash at the Federal Reserve Bank of Kansas City at
December 31, 2009 and the investment securities portfolio being increased by $104.0 million in 2009, which can be used for pledging purposes. The Company expects to utilize this
asset-based liquidity to allow a portion of its brokered deposits roll-off, although it may rollover or renew certain brokered deposits as permitted by the Written Agreement (during 2010,
the Company has $113.9 million of brokered deposits expiring and has excess asset-side liquidity to address these roll-offs). With respect to earnings and overall
condition, the Bank's board of directors has approved a budget for the Bank. This budget is subsequently updated on a monthly basis to create projections that are utilized to update the Company's
capital and liquidity plans. In addition, the Company's business plan was reviewed and approved by the holding company's board of directors. With respect to cash flow projections for the holding
company, the Company already prepares monthly holding company cash flow projections. At December 31, 2009, the holding company had over $18.8 million of cash, which is expected to be
sufficient to cover cash flow needs for over three years unless the holding company contributes additional capital to the Bank. Finally, management is already in the process of preparing the various
plans it must submit to its regulators pursuant to the Written Agreement and expects to timely submit such plans in accordance with the Written Agreement.

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Bank Holding Company Regulation

In general, the BHC Act limits the business of bank holding companies to banking, managing or controlling banks and other activities
that the Federal Reserve Board has determined to be so closely related to banking as to be a proper incident thereto.

The
BHC Act generally limits acquisitions by bank holding companies to commercial banks and companies engaged in activities that the Federal Reserve Board has determined to be so closely
related to banking as to be a proper incident thereto.

The
BHC Act, the Bank Merger Act, the Colorado Banking Code and other federal and state statutes regulate acquisitions of commercial banks. The BHC Act requires the prior approval of the
Federal Reserve Board for the direct or indirect acquisition of more than 5.0% of the voting shares of a commercial bank or its parent holding company. In reviewing applications seeking approval of
merger and acquisition transactions, the bank regulatory authorities will consider, among other things, the competitive effect and public benefits of the transactions, the capital position of the
combined organization, the applicant's performance record under the Community Reinvestment Act (see the
section captioned "Community Reinvestment Act" included elsewhere in this item), fair housing laws and the effectiveness of the subject organizations in combating money laundering activities.

Dividends

The principal source of the holding company's cash revenues is from dividends from its bank subsidiary, Guaranty Bank. Our earnings and
activities are affected by legislation, by regulations and by local legislative and administrative bodies and decisions of courts in the jurisdictions in which we conduct business. For example, these
include limitations on the ability of our bank subsidiary to pay dividends to the holding company and our ability to pay dividends to our stockholders. It is the policy of the Federal Reserve Board
that bank holding companies should pay cash dividends on common stock only out of income available over the past year and only if prospective earnings retention is consistent with the organization's
expected future needs and financial condition. The policy provides that bank holding companies should not maintain a level of cash dividends that undermines the bank holding company's ability to serve
as a source of strength to its banking subsidiary.

As
a member of the Federal Reserve System, the Bank is subject to Regulation H, which, among other things, provides that a member bank may not declare or pay a dividend if the
total of all dividends declared during the calendar year, including the proposed dividend, exceeds the sum of the bank's net income (as reportable in its Reports of Condition and Income) during the
current calendar year and its retained net income for the prior two calendar years, unless the Federal Reserve has approved the dividend. Regulation H also provides that a member bank may not
declare or pay a dividend if the dividend would exceed the bank's undivided profits as reportable on its Reports of Condition and Income, unless the Federal Reserve and holders of at least
two-thirds of the outstanding shares of each class of the bank's outstanding stock have approved the dividend. Additionally, there are potential additional restrictions and prohibitions if
a bank were to be less than well-capitalized.

As
a Colorado state-chartered bank, the Bank is subject to limitations under Colorado law on the payment of dividends. The Colorado Financial Institutions Code provides that a bank may
declare dividends from retained earnings and other components of capital specifically approved by the Banking Board so long as the declaration is made in compliance with rules established by the
Banking Board.

The
Written Agreement discussed above prohibits both the Company and the Bank from paying dividends without the prior written approval of the Federal Reserve, and, in the case of the
Bank, the Colorado Division of Banking.

As
of December 31, 2009, the holding company had approximately $18.8 million of cash on hand. Based on cash flow projections for the holding company, we estimate that this
cash is sufficient to meet

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the
operating needs of the holding company for over three years assuming that the holding company does not contribute any additional amounts of capital to the Bank.

Under
the terms of our trust preferred financings, including our related subordinated debentures, on September 7, 2000, February 22, 2001, June 30, 2003 and
April 8, 2004, respectively, we cannot declare or pay any dividends or distributions (other than stock dividends) on, or redeem, purchase, acquire or make a liquidation payment with respect to,
any shares of our capital stock if (1) an event of default under any of the subordinated debenture agreements has occurred and is continuing, or (2) if we give notice of our election to
begin an extension period whereby we may defer payment of interest on the trust preferred securities for a period of up to sixty consecutive months as long as we are in compliance with all covenants
of the agreement. On July 31, 2009, we elected to defer regularly scheduled interest payments on each of our subordinated debentures until further notice. In addition, we are currently
restricted from making payments of principal or interest on our subordinated debentures or trust preferred securities under the terms of our Written Agreement without the prior approval of the Federal
Reserve.

Any
future determination relating to dividend policy will be made at the discretion of our Board of Directors and will depend on a number of factors, including our future earnings,
capital requirements, financial condition, future prospects and such other factors as our Board of Directors may deem relevant.

Affiliate Transactions

There are various restrictions on the ability of the holding company to borrow from, and engage in certain other transactions with its
bank subsidiary. In general, these restrictions require that any extensions of credit must be secured by designated amounts of specified collateral and are limited, as to transactions with Guaranty
Bank, to 10% of Guaranty Bank's capital stock and surplus, and, as to the holding company, to 20% of Guaranty Bank's capital stock and surplus.

Federal
law also provides that extensions of credit and other transactions between Guaranty Bank and the holding company must be on terms and conditions, including credit standards, that
are substantially the same or at least as favorable to Guaranty Bank as those prevailing at the time for comparable transactions involving other non-affiliated companies or, in the absence
of comparable
transactions, on terms and conditions, including credit standards, that in good faith would be offered to, or would apply to, non-affiliated companies.

Source of Strength Doctrine

Federal Reserve Board policy requires bank holding companies to act as a source of financial and managerial strength to their
subsidiary banks. Under this policy, the holding company is expected to commit resources to support its bank subsidiary, including at times when the holding company may not be in a financial position
to provide it. Any capital loans by a bank holding company to its subsidiary bank are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary bank. The BHC Act
provides that, in the event of a bank holding company's bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a bank subsidiary will be
assumed by the bankruptcy trustee and entitled to priority of payment.

On
August 11, 2009, the Company issued 59,053 shares of 9% Series A Convertible Preferred Stock, which resulted in additional capital of $57,846,000, net of expenses.
Immediately after this capital raise, the Company injected $40 million of additional capital into the Bank.

Capital Adequacy and Prompt Corrective Action

Banks and bank holding companies are subject to various regulatory capital requirements administered by state and federal banking
agencies. Capital adequacy guidelines and, additionally for

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banks,
prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices.
Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weighting and other factors.

The
Federal Reserve Board has risk-based capital ratio and leverage ratio guidelines for banking organizations, which are intended to ensure that banking organizations have
adequate capital given the risk levels of assets and off-balance sheet financial instruments. Under the guidelines, banking organizations are required to maintain minimum ratios for
Tier 1 capital and total
capital to total risk-weighted assets (including certain off-balance sheet items, such as letters of credit). For purposes of calculating the ratios, a banking organization's
assets and some of its specified off-balance sheet commitments and obligations are assigned to various risk categories. A depository institution or holding company's capital, in turn, is
classified into one of three tiers, depending on type:



Guaranty
Bancorp, like other bank holding companies, currently is required to maintain Tier 1 capital and "total capital" (the sum of Tier 1, Tier 2 and
Tier 3 capital) equal to at least 4.0% and 8.0%, respectively, of its total risk-weighted assets (including various off-balance-sheet items, such as standby letters of
credit). Guaranty Bank, like other depository institutions, is required to maintain similar capital levels under capital adequacy guidelines.

Bank
holding companies and banks subject to the market risk capital guidelines are required to incorporate market and interest rate risk components into their risk-based
capital standards. Under the market risk capital guidelines, capital is allocated to support the amount of market risk related to a financial institution's ongoing trading activities.

Bank
holding companies and banks are also required to comply with minimum leverage ratio requirements. The leverage ratio is the ratio of a banking organization's Tier 1 capital
to its total adjusted quarterly average assets (as defined for regulatory purposes). The requirements necessitate a minimum leverage ratio of 3.0% for bank holding companies and banks that either have
the highest supervisory rating or have implemented the appropriate federal regulatory authority's risk-adjusted measure for market risk. All other bank holding companies and banks are
required to maintain a minimum leverage ratio of 4.0%, unless a different minimum is specified by an appropriate regulatory authority. For a depository institution to be considered "well capitalized"
under the regulatory framework for prompt corrective action, its leverage ratio must be at least 5.0%.

The
Federal Deposit Insurance Act, as amended ("FDIA"), requires, among other things, that federal banking agencies take "prompt corrective action" in respect of depository institutions
that do not meet
minimum capital requirements. The FDIA sets forth the following five capital tiers: "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized" and "critically
undercapitalized." A depository institution's capital tier will depend upon how its capital levels compare with various relevant capital measures and certain other factors, as established by
regulation. The relevant capital measures are the total capital ratio, the Tier 1 capital ratio and the leverage ratio.

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Under
the regulations adopted by the federal regulatory authorities, a bank will be: (i) "well capitalized" if the institution has a total risk-based capital ratio of
10.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, and a leverage ratio of 5.0% or greater, and is not subject to any order or written directive by any such
regulatory authority to meet and maintain a specific capital level for any capital measure; (ii) "adequately capitalized" if the institution has a total risk-based capital ratio of
8.0% or greater, a Tier 1 risk-based capital ratio of 4.0% or greater, and a leverage ratio of 4.0% or greater (3.0% in certain circumstances) and is not "well capitalized";
(iii) "undercapitalized" if the institution has a total risk-based capital ratio that is less than 8.0%, a Tier 1 risk-based capital ratio of less than 4.0% or a
leverage ratio of less than 4.0% (3.0% in certain circumstances); (iv) "significantly undercapitalized" if the institution has a total risk-based capital ratio of less than 6.0%, a
Tier 1 risk-based capital ratio of less than 3.0% or a leverage ratio of less than 3.0%; and (v) "critically undercapitalized" if the institution's tangible equity is equal
to or less than 2.0% of average quarterly tangible assets. An institution may be downgraded to, or deemed to be in, a capital category that is lower than indicated by its capital ratios if it is
determined to be in an unsafe or unsound condition or if it receives an unsatisfactory examination rating with respect to certain matters. A bank's capital category is determined solely for the
purpose of applying prompt corrective action regulations, and the capital category may not constitute an accurate representation of the bank's overall financial condition or prospects for other
purposes.

The
FDIA generally prohibits a depository institution from making any capital distributions (including payment of a dividend) or paying any management fee to its parent holding company
if the depository institution would thereafter be undercapitalized. Undercapitalized institutions are subject to growth limitations and are required to submit a capital restoration plan. The agencies
may not accept such a plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution's capital. In
addition, for a capital restoration plan to be acceptable, the depository institution's parent holding company must guarantee that the institution will comply with such capital restoration plan. The
aggregate liability of the parent holding company is limited to the lesser of (i) an amount equal to 5.0% of the depository institution's total assets at the time it became undercapitalized and
(ii) the amount which is necessary (or would have been necessary) to bring the institution into compliance with all capital standards applicable with respect to such institution as of the time
it fails to comply with the plan. If a depository institution fails to submit an acceptable plan, it is treated as if it is "significantly undercapitalized."

"Significantly
undercapitalized" depository institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become
"adequately capitalized," requirements to reduce total assets, and cessation of receipt of deposits from correspondent banks. "Critically undercapitalized" institutions are subject to the appointment
of a receiver or conservator.

Both
Guaranty Bank and Guaranty Bancorp have always maintained the capital ratios and leverage ratio at levels to be considered quantitatively well-capitalized. For
information regarding the capital ratios and leverage ratio of the Company and Guaranty Bank at December 31, 2009 and 2008, see the discussion under the section captioned "Capital" included in
Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 21Regulatory Capital Matters in the notes to consolidated financial
statements included in Item 8. Financial Statements and Supplementary Data elsewhere in this report.

Pursuant
to the Written Agreement, as discussed above, the Company and the Bank are required to submit written plans to the Federal Reserve and, in the case of the Bank, to the CDB to
continue to maintain sufficient capital at the Company and the Bank, respectively. Although the Written Agreement does not require any specific capital levels, it requires the capital plans to
address, consider and include the Company and the Bank's current and future capital needs; the adequacy of the Bank's capital, taking into account classified credits, concentrations of credit,
allowance for loan losses, current and projected asset growth and projected retained earnings; the source and timing of additional funds

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to
fulfill the Company and the Bank's future capital requirements; and that the holding company serve as a source of strength to the Bank. The Written Agreement does not address any prompt corrective
action with respect to either the Company or the Bank.

The
federal bank regulatory authorities' risk-based capital guidelines are based upon the 1988 capital accord of the Basel Committee on Banking Supervision, or the BIS. The
BIS is a committee of central banks and bank supervisors/regulators from the major industrialized countries that develops broad policy guidelines for use by each country's supervisors in determining
the supervisory policies they apply. In 2004, the BIS published a new capital accord to replace its 1988 capital accord, with an update in November 2005 ("BIS II").

BIS
II provides two approaches for setting capital standards for credit riskan internal ratings-based approach tailored to individual institutions' circumstances (which for
many asset classes is itself broken into a "foundation" approach and an "advanced or A-IRB" approach, the availability of which is subject to additional restrictions) and a standardized
approach that bases risk weightings on external credit assessments to a much greater extent than permitted in existing risk-based capital guidelines. BIS II also sets capital requirements
for operational risk and refines the existing capital requirements for market risk exposures.

In
December 2006, the agencies issued a notice of proposed rulemaking describing proposed amendments to their existing risk-based capital guidelines to make them more
risk-sensitive, generally following aspects of the standardized approach of BIS II. These latter proposed amendments, often referred to as "BIS I-A", would apply to banking
organizations that are not internationally active banking organizations subject to the A-IRB approach for internationally active banking organizations and do not "opt in" to that approach.
The agencies previously had issued advance notices of proposed rulemaking on both proposals (in August 2003 regarding the A-IRB approach of BIS II for internationally active banking
organizations and in October 2005 regarding BIS II).

In
July 2007, the U.S. banking and thrift agencies reached an agreement on the implementation of the capital adequacy regulations and standards based on BIS II. In November 2007, the
agencies approved final rules to implement the new risk-based capital requirements in the United States for large, internationally active banking organizations, or "core
banks"defined as those with consolidated total assets of $250 billion or more or consolidated on-balance sheet foreign exposures of $10 billion or more. The
final rule was effective as of April 1, 2008.

In
July 2009, various enhancements to strengthen the Basel II capital framework were finalized with regard notably to the treatment of certain complex securitization positions,
off-balance sheet vehicles and trading book exposures. These enhancements also covered key aspects of risk managements and disclosure and are part of a broader effort to strengthen the
regulation and supervision of internationally active banks, in light of weaknesses revealed by the financial market crisis, which started in 2007. Additional proposals addressing these issues are
expected in 2010.

We
are not a core bank and do not apply the BIS II approach to computing risk-weighted assets.

In
June 2008, the U.S. banking and thrift agencies announced a proposed rule that would provide all non-core banking organizations (that is, banking organizations not
required to adopt the advanced approaches) with the option to adopt a way to determine required regulatory capital that is more risk sensitive than the current Basel I-based rules, yet is
less complex than the advanced approach final rule. The proposed standardized framework addresses (i) expanding the number of risk-weight categories to which credit exposures may be
assigned, (ii) using loan-to-value ratios to risk weight most residential mortgages to enhance the risk sensitivity of the capital requirement, (iii) providing a
capital charge for operational risk using the Basic Indicator Approach under the international Basel II capital accord, (iv) emphasizing the importance of a bank's assessment of its overall
risk profile and capital adequacy and (v) providing for comprehensive disclosure requirements to complement the minimum

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capital
requirements and supervisory process through market discipline. This new proposal would replace the agencies' earlier BIS I-A proposal, issued in December 2006.

Emergency Economic Stabilization Act of 2008

In response to unprecedented market turmoil in the second half of 2008, the Emergency Economic Stabilization Act of 2008 ("EESA") was
enacted on October 3, 2008. EESA authorized the U.S. Treasury Department to provide up to $700 billion in funding for the financial services industry. Pursuant to the EESA, the Treasury
was initially authorized to use $350 billion for the Troubled Asset Relief Program (TARP). Of this amount, Treasury allocated $250 billion to the TARP Capital Purchase Program. On
January 15, 2009, the second $350 billion of TARP monies was released to the Treasury. The Secretary's authority under TARP was to expire on December 31, 2009, but the Secretary
certified to Congress that an extension was necessary and extended his authority through October 3, 2010.

Pursuant
to authority under EESA, the Treasury created the TARP Capital Purchase Program under which the Treasury may invest up to $250 billion in senior preferred stock of U.S.
banks and savings associations or their holding companies. Qualifying financial institutions may issue senior preferred stock, with warrants, with a value equal to not less than 1% of
risk-weighted assets and not more than the lesser of $25 billion or 3% of risk-weighted assets. The Company initially applied for up to three percent of its
risk-weighted assets, but withdrew its application in November 2009.

Deposit Insurance

The deposits of the Bank are insured up to applicable limits by the Deposit Insurance Fund, or the DIF, of the FDIC and are subject to
deposit insurance assessments to maintain the DIF. The FDIC utilizes a risk-based assessment system that imposes insurance premiums based upon a risk matrix that takes into account a
bank's capital level and supervisory rating.

Effective
January 1, 2007, the FDIC imposed deposit assessment rates based on the risk category of the bank. Risk Category I is the lowest risk category while Risk
Category IV is the highest risk category. Because of favorable loss experience and a healthy reserve ratio in the Bank Insurance Fund, or the BIF, of the FDIC, well-capitalized and
well-managed banks, paid minimal premiums for FDIC insurance from 1996 through 2006. With the additional deposit insurance, a deposit premium refund, in the form of credit offsets, was
granted to banks that were in existence on December 31, 1996 and paid deposit insurance premiums prior to that date. For 2007, the holding company's two subsidiary banks utilized the credit
offsets to eliminate nearly all of their 2007 FDIC insurance assessments.

For
2007 and 2008, the holding company's subsidiary banks qualified for Risk Category I. Risk Category I generally includes banks that are "well-capitalized"
and that receive a composite CAMELS rating of 2 or higher. For banks under $10 billion in total assets in Risk Category I, the 2007 and 2008 deposit assessment ranged from 5 to 7 basis
points of total qualified deposits. The actual assessment is dependent upon certain risk measures as defined in the final rule. In 2009, Guaranty Bank had its risk category change as a result of its
regularly scheduled regulatory examination in May 2009. For the second half of 2009, the Bank was in a Risk Category III.

On
October 16, 2008, the FDIC published a restoration plan designed to replenish the Deposit Insurance Fund over a period of five years and to increase the deposit insurance
reserve ratio, which decreased to 1.01% of insured deposits on June 30, 2008, to the statutory minimum of 1.15% of insured deposits by December 31, 2013. In order to implement the
restoration plan, the FDIC changed both its risk-based assessment system and its base assessment rates. For the first quarter of 2009 only, the FDIC increased all FDIC deposit assessment
rates by 7 basis points. These new rates ranged from 12-14 basis points for Risk Category I institutions to 50 basis points for Risk Category IV institutions. Under the
FDIC's restoration plan, the FDIC established new initial base assessment rates that are subject to adjustment. Beginning April 1, 2009, the base assessment rates range from 10-14
basis points

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for
Risk Category I institutions to 45 basis points for Risk Category IV institutions. A bank in Risk Category III has a new initial base assessment rate of 32 basis points.
Adjustments to the base assessment rate include an adjustment for brokered deposits and secured liabilities while providing a reduction for unsecured debt.

On
May 22, 2009, the FDIC adopted a final rule imposing a 5 basis point special assessment on each insured depository institution's assets minus Tier 1 capital as of
June 30, 2009. This special assessment was collected on September 30, 2009.

On
November 12, 2009, the FDIC adopted a final rule requiring insured institutions to prepay slightly over three years of estimated insurance assessments. The
pre-payment allowed the FDIC to strengthen the cash position of the Deposit Insurance Fund (DIF) immediately without impacting earnings of the industry. Payment of the prepaid assessment,
along with the payment of institutions' regular third quarter assessment was due on December 30, 2009. The Bank received an exemption from prepaying its FDIC insurance premiums.

The
FDIC may further increase or decrease the assessment rate schedule in order to manage the DIF to prescribed statutory target levels. An increase in the Risk Category for the Bank or
in the assessment rates could have an adverse effect on the Bank's earnings. The FDIC may terminate deposit insurance if it determines the institution involved has engaged in or is engaging in unsafe
or unsound banking practices, is in an unsafe or unsound condition, or has violated applicable laws, regulations or
orders. In the case of a Colorado-chartered bank, the termination of deposit insurance would result in the revocation of its charter.

In
addition, all institutions with deposits insured by the FDIC are required to pay assessments to fund interest payments on bonds issued by the Financing Corporation (FICO), a
mixed-ownership government corporation established to recapitalize a predecessor to the Deposit Insurance Fund. The current annualized assessment rate is 1.06 basis points, or approximately .265 basis
points per quarter. These assessments will continue until the Financing Corporation bonds mature in 2019.

The
enactment of EESA temporarily raised the basic limit on federal deposit insurance coverage from $100,000 to $250,000 per depositor. The temporary increase in deposit insurance
coverage became effective on October 3, 2008. On May 20, 2009, the FDIC extended this increased insurance level of $250,000 per depositor through December 31, 2013. On
January 1, 2014, the standard insurance amount will return to $100,000 per depositor for all account categories except for IRAs and other certain retirement accounts (including IRAs), which
will remain at $250,000 per depositor.

On
October 14, 2008, the FDIC announced its temporary Transaction Account Guarantee Program, which provides full coverage for noninterest-bearing transaction deposit accounts at
FDIC-insured institutions that agree to participate in the program. The unlimited coverage applies to all personal and business checking deposit accounts that do not earn interest
(including Demand Deposit (DDA) accounts), low-interest NOW accounts (NOW accounts that cannot earn more than 0.5% interest), Official Items, and IOLTA accounts. A 10-basis
point surcharge is added to a participating institution's current insurance assessment in order to fully cover all transaction accounts. Guaranty Bank elected to participate in the Transaction Account
Guarantee Program. This unlimited insurance coverage is temporary and was originally scheduled to expire on December 31, 2009. On August 26, 2009, the FDIC extended its temporary
Transaction Account Guarantee Program through June 30, 2010. The deposit insurance surcharge was increased from 10 to 25 basis points for institutions electing to continue in the Transaction
Account Guarantee Program. Guaranty Bank elected to continue to participate in the Transaction Account Guarantee Program through June 30, 2010. The expiration of the Transaction Account
Guarantee Program on June 30, 2010 could have an adverse impact on the levels of customer deposits that are sensitive to full FDIC insurance coverage.

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Depositor Preference

The FDIA provides that, in the event of the "liquidation or other resolution" of an insured depository institution, the claims of
depositors of the institution, including the claims of the FDIC as subrogee of insured depositors, and certain claims for administrative expenses of the FDIC as a receiver, will have priority over
other general unsecured claims against the institution. If an insured depository institution fails, insured and uninsured depositors, along with the FDIC, will have priority in payment ahead of
unsecured, non-deposit creditors, including the parent bank holding company, with respect to any extensions of credit they have made to such insured depository institution.

Community Reinvestment Act

The Community Reinvestment Act of 1977, or the CRA, requires depository institutions to assist in meeting the credit needs of their
market areas consistent with safe and sound banking practice. Under the CRA, each depository institution is required to help meet the credit needs of its market areas by, among other things, providing
credit to low- and moderate-income individuals and communities. These factors are also considered in evaluating mergers, acquisitions and applications to open a branch or facility. The
applicable federal regulators regularly conduct CRA examinations to assess the performance of financial institutions and assign one of four ratings to the institution's records of meeting the credit
needs of its community. During its last examination, a rating of "satisfactory" was received by the Bank.

Financial Privacy

In accordance with the Gramm-Leach-Bliley Financial Modernization Act of 1999, or the GLB Act, federal banking regulators adopted rules
that limit the ability of banks and other financial institutions to disclose non-public information about consumers to nonaffiliated third parties. These limitations require disclosure of
privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a nonaffiliated third party. The privacy provisions of the GLB Act
affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors.

Anti-Money Laundering Initiatives and the USA Patriot Act

A major focus of governmental policy on financial institutions this decade has been aimed at combating money laundering and terrorist
financing. The USA PATRIOT Act of 2001, or the USA Patriot Act, substantially broadened the scope of United States anti-money laundering laws and regulations by imposing significant new
compliance and due diligence obligations, creating new crimes and penalties and expanding the extra-territorial jurisdiction of the United States. The U.S. Treasury Department has issued a number of
regulations that apply various requirements of the USA Patriot Act to financial institutions such as the Bank. These regulations impose obligations on financial institutions to maintain appropriate
policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and to verify the identity of their customers. Failure of a financial institution to maintain
and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could have serious legal and reputational consequences
for the institution.

Office of Foreign Assets Control Regulation

The United States has imposed economic sanctions that affect transactions with designated foreign countries, nationals and others.
These are typically known as the "OFAC" rules based on their administration by the U.S. Treasury Department Office of Foreign Assets Control ("OFAC"). The OFAC-administered sanctions
targeting countries take many different forms. Generally, however, they contain one or more of the following elements: (i) restrictions on trade with or investment in a

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sanctioned
country, including prohibitions against direct or indirect imports from and exports to a sanctioned country and prohibitions on "U.S. persons" engaging in financial transactions relating to
making investments in, or providing investment-related advice or assistance to, a sanctioned country; and (ii) a blocking of assets in which the government or specially designated nationals of
the sanctioned country have an interest, by prohibiting transfers of property subject to U.S. jurisdiction (including property in the possession or control of U.S. persons). Blocked assets
(e.g., property and bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. Failure to comply with these sanctions could have serious
legal and reputational consequences.

Legislative and Regulatory Initiatives

From time to time, various legislative and regulatory initiatives are introduced in the U.S. Congress and state legislatures, as well
as by regulatory agencies. Such initiatives may include proposals to expand or contract the powers of bank holding companies and depository institutions or proposals to substantially change the
financial institution regulatory system. Such legislation could change banking statutes and our operating environment in substantial and unpredictable ways. If enacted, such legislation could increase
or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions, and other financial institutions. We
cannot predict whether any such legislation will be enacted, and, if enacted, the effect that it, or any implementing regulations, would have on our financial condition, results of operations or cash
flows. A change in statutes, regulations or regulatory policies applicable to the Company or any of its subsidiaries could have a material effect on our business.

Employees

At December 31, 2009, we employed 373 full-time equivalent employees. None of our employees are represented by
collective bargaining agreements. We believe our employee relations to be good.

Available Information

Guaranty Bancorp maintains an Internet website at www.gbnk.com. At this website, our annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and proxy statements on Schedule 14A and amendments to such reports filed or furnished pursuant
to Section 13(a) or 15(d) of the Exchange Act are available, free of charge, as soon as reasonably practicable after such forms are electronically filed with, or furnished to, the SEC. The
public may read and copy any materials we file with the SEC at the SEC's Public Reference Room, located at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site at www.sec.gov that contains reports, proxy and
information statements, and other information regarding issuers that file electronically with the SEC. You may obtain copies of the Company's filings on the SEC site. These documents may also be
obtained in print upon request by our stockholders to our Investor Relations Department.

We
have adopted a written code of ethics that applies to all directors, officers and employees of the Company, including our principal executive officer and senior financial officers, in
accordance with Section 406 of the Sarbanes-Oxley Act of 2002 and the rules of the Securities and Exchange Commission promulgated thereunder. The code of ethics, which we call our Code of
Business Conduct and Ethics, is available on our corporate website, www.gbnk.com, in the section entitled "Corporate Governance." In the event that we make changes in, or provide waivers from, the
provisions of this code of ethics that the SEC requires us to disclose, we intend to disclose these events on our corporate website in such section. In the Corporate Governance section of our
corporate website, we have also posted the charters for our Audit Committee and our Compensation, Nominating and Governance Committee, as well as our Corporate Governance Guidelines. In addition,
information concerning

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purchases
and sales of our equity securities by our executive officers and directors is posted on our website.

Our
Investor Relations Department can be contacted at Guaranty Bancorp, 1331 Seventeenth Street, Suite 300, Denver, CO 80202, Attention: Investor Relations, telephone
303-293-5563, or via e-mail to investor.relations@gbnk.com.

Except
for the documents specifically incorporated by reference into this document, information contained on our website or information that can be accessed through our website is not
incorporated by reference into this document.

ITEM 1A.    RISK FACTORS

An investment in our common stock is subject to risks inherent to our business. The material risks and uncertainties that management
believes affect us are described below. Before making an investment decision, you should carefully consider the risks and uncertainties described below together with all of the other information
included or incorporated by reference in this report. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that management is not aware of or
focused on or that management currently deems immaterial may also impair our business operations. This report is qualified in its entirety by these risk factors.

If
any of the following risks actually occurs, our financial condition, results of operations or cash flows could be materially and adversely affected. If this were to happen, the value
of our common stock could decline significantly, and you could lose all or part of your investment.

Our Business Has Been and May Continue to be Adversely Affected by Current Conditions in the Financial Markets And Economic Conditions Generally

Negative developments in 2008 and 2009 in the financial services industry have resulted in uncertainty in the financial markets in
general and a related general economic downturn, which have continued into 2010. In addition, as a consequence of the recession that the United States has been in, business activity across a wide
range of industries face serious difficulties due to the decrease in consumer spending, reduced consumer confidence brought on by deflated home prices, among other things, and reduced liquidity in the
credit markets. Unemployment has also increased significantly.

As
a result of these financial economic crises, many lending institutions, including us, have experienced declines in the performance of their loans, including construction, land
development and land loans, commercial real estate loans and other commercial and consumer loans. Moreover, competition among depository institutions for deposits and quality loans has increased
significantly. In addition, the values of real estate collateral supporting many commercial loans and home mortgages have declined and may continue to decline. Bank and bank holding company stock
prices have been negatively affected, and the ability of banks and bank holding companies to raise capital or borrow in the debt markets has become more difficult compared to recent years. As a
result, there is a potential for new federal or state laws and regulations regarding lending and funding practices and liquidity standards, and bank regulatory agencies have been and are expected to
continue to be very aggressive in responding to concerns and trends identified in examinations, including the issuance of formal or informal enforcement actions or orders. The impact of new
legislation in response to these developments may negatively impact our operations by restricting our business operations, including our ability to originate or sell loans, and adversely impact our
financial performance or our stock price.

In
addition, further negative market developments may affect consumer confidence levels and may cause adverse changes in payment patterns, causing increases in delinquencies and default
rates, which may impact our charge-offs and provision for credit losses. A worsening of these conditions would likely exacerbate the adverse effects of these difficult market conditions on
us and others in the financial services industry.

Overall,
during the past two years, the general business environment has had an adverse effect on our business, and there can be no assurance that the environment will improve in the
near term. Until conditions improve, we expect our business, financial condition and results of operations to be adversely affected.

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We are Subject to Credit Risk

There are inherent risks associated with our lending activities. These risks include, among other things, the impact of changes in
interest rates and changes in the economic conditions in the markets where we operate as well as those across the United States and abroad. Increases in interest rates and/or weakening economic
conditions could adversely impact the ability of borrowers to repay outstanding loans or the value of the collateral securing these loans. We are also subject to various laws and regulations that
affect our lending activities. Failure to comply with applicable laws and regulations could subject us to regulatory enforcement action that could result in the assessment of significant civil money
penalties against us.

We
seek to mitigate the risks inherent in our loan portfolio by adhering to specific underwriting practices. Although we believe that our underwriting criteria are appropriate for the
various kinds of loans we make, we may incur losses on loans that meet our underwriting criteria, and these losses may exceed the amounts set aside as reserves in our allowance for loan losses. Due to
recent economic conditions affecting the real estate market, many lending institutions, including us, have experienced substantial declines in the performance of their loans, including construction,
land development loans and land loans. The value of real estate collateral supporting many construction and land development loans, land loans, commercial loans and multi-family loans have declined
and may continue to decline. Recent negative developments in the financial industry and credit markets may continue to adversely impact our financial condition and results of operations.

We Are Subject to Interest Rate Risk

Our earnings and cash flows are largely dependent upon our net interest income. Net interest income is the difference between interest
income earned on interest-earning assets such as loans and securities and interest expense paid on interest-bearing liabilities such as deposits and borrowed funds. Interest rates are highly sensitive
to many factors that are beyond our control, including general economic conditions, demand for loans, securities and deposits, and policies of various governmental and regulatory agencies and, in
particular, the Board of Governors of the Federal Reserve System. Changes in monetary policy, including changes in interest rates, could influence not only the interest we receive on loans and
securities and the amount of interest we pay on deposits and borrowings, but such changes could also affect (i) our ability to originate loans and obtain deposits, (ii) the fair value of
our financial assets and liabilities, and (iii) the average duration of our loans and securities which are collateralized by mortgages. If the interest rates paid on deposits and other
borrowings increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore earnings, could be adversely affected. Earnings could also
be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings.

Any
substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on our financial condition, results of operations and cash flows. See
Item 7A. Quantitative and Qualitative Disclosures about Market Risk located elsewhere in this report for further discussion related to our management of interest rate risk.

We are Subject to a Regulatory Written Agreement that Restricts Us from Taking Certain Actions

On January 22, 2010, the Company and the Bank entered into a Written Agreement (the "Written Agreement") with the Federal
Reserve Bank of Kansas City (the "Federal Reserve") and the State of Colorado Division of Banking (the "CDB"). The Written Agreement requires the Bank to submit written plans within certain timeframes
to the Federal Reserve Bank and the CDB that address the following items: board oversight, credit risk management practices, commercial real estate concentrations, problem assets, reserves for loan
and lease losses, capital, liquidity, brokered deposits,

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earnings
and overall condition. The Agreement also requires the Company to submit to the Federal Reserve a written plan that addresses capital and a written statement of the Company's annual cash flow
projections.

In
addition, the Written Agreement places restrictions on the Company and the Bank accepting any new brokered deposits, but continues to permit contractual rollovers and renewals of
brokered deposits. The Written Agreement also provides that written approval must be obtained from the federal regulators prior to appointing any new director or senior executive officer or changing
the responsibilities of any senior executive officer and making indemnification and severance payments. Further, the Written Agreement provides that prior written approval must be obtained from the
Federal Reserve, and in the case of the Bank, the CDB, prior to paying dividends. Prior written approval must also be obtained from the Federal Reserve before the Company can incur, increase or
guarantee any debt, take any other form of payment representing a reduction in capital from the Bank, or make any distributions of interest, principal or other sums on subordinated debentures or trust
preferred securities.

There
can be no assurance that the terms and conditions of the Written Agreement will be met or that the impact or effect of such terms and conditions will not have a material adverse
effect with respect to our financial condition, results of operations and future prospects.

Also,
if, as a result of a future examination or review of the Bank, the Federal Reserve or the CDB should determine that the financial condition, capital resources, asset quality,
earnings prospects, management, liquidity, or other aspects of its operations have worsened or that it or its management is violating or has violated the Written Agreement or any law or regulation,
various additional remedies are available to the Federal Reserve and the CDB. Such remedies include the power to enjoin "unsafe or unsound" practices, to require affirmative action to correct any
conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in capital, to restrict our growth, to assess civil
monetary penalties, to remove officers and directors, and ultimately to terminate our deposit insurance, which for a Colorado-chartered bank would result in the revocation of its charter.

The Level of our Commercial Real Estate Loan Portfolio Subjects us to Additional Regulatory Scrutiny

The FDIC, the Federal Reserve and the Office of the Comptroller of the Currency have promulgated joint guidance on sound risk
management practices for financial institutions with concentrations in commercial real estate lending. Under the guidance, a financial institution that, like us, is actively involved in commercial
real estate lending should perform a risk assessment to identify concentrations. A financial institution may have a concentration in commercial real estate lending if, among other factors,
(i) total reported loans for construction, land development, and other land represent 100% or more of total capital or (ii) total reported loans secured by multifamily and
non-farm residential properties, loans for construction, land development and other land and loans otherwise sensitive to the general commercial real estate market, including loans to
commercial real estate related entities, represent 300% or more of total capital. Management should also employ heightened risk management practices including board and management oversight and
strategic planning, development of underwriting standards, risk assessment and monitoring through market analysis and stress testing.

We
have concluded that we have a concentration in commercial real estate lending under the foregoing standards. For our Bank, the amount of total reported loans for construction, land
development and other land represented 110% of capital at December 31, 2009 as compared to 199% of capital at December 31, 2008. Further, our Bank's total reported commercial real estate
loans to total capital is 329% at December 31, 2009, as compared to 417% of capital at December 31, 2008. Although these concentrations have improved significantly in 2009, the ratios
are still above the

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regulatory
concentration guidelines of 100% and 300% for construction, land development and other land and commercial real estate, respectively.

Under
the Written Agreement, our Bank is required to submit a written plan to continue to strengthen the Bank's management of commercial real estate concentrations, including steps to
reduce or mitigate the risk of concentrations. Working through a plan to mitigate our risks associated with commercial real estate concentrations could result in additional charge-offs and
loan losses or require the raising of additional capital in order to reduce our concentrations ratios.

Further Downturn in Our Real Estate Markets Could Hurt Our Business

Our business activities and credit exposure are primarily concentrated along the Front Range of Colorado. As of December 31,
2009, approximately 61% of the book value of our loan portfolio consisted of real estate loans. Substantially all of our real estate loans are located in Colorado. While we do not have any
sub-prime loans, our construction, land development and land loan portfolio, along with our commercial and multi-family loan portfolios and certain of our other loans, have been affected
by the recent downturn in the residential and commercial real estate market. Real estate values and real estate markets are generally affected by changes in national, regional or local economic
conditions, fluctuations in interest rates and the availability of loans to potential purchasers, changes in tax laws and other governmental statutes, regulations and policies and acts of nature. We
anticipate that further declines in the real estate markets in our primary market areas would affect our business. If real estate values continue to decline, the collateral for our loans will provide
less security. As a result, our ability to recover on defaulted loans by selling the underlying real estate will be diminished, and we would be more likely to suffer losses on defaulted loans. The
events and conditions described in this risk factor could therefore have a material adverse effect on our business, results of operations and financial condition.

We May be Required to Make Further Increases in Our Provisions for Loan Losses and to Charge Off Additional Loans in the Future, Which Could Adversely Affect Our Results of
Operations

We maintain an allowance for loan losses, which is a reserve established through a provision for loan losses charged to expense, that
represents management's best estimate of probable incurred losses within the existing portfolio of loans. The allowance, in the judgment of management, is necessary to reserve for estimated loan
losses and risks inherent in the loan portfolio. The level of the allowance reflects management's continuing evaluation of specific credit risks; loan loss experience; current loan portfolio quality;
present economic, political and regulatory conditions; industry concentrations; and other unidentified losses inherent in the current loan portfolio. The determination of the appropriate level of the
allowance for loan losses inherently involves a high degree of subjectivity and judgment and requires us to make significant estimates of current credit risks and future trends, all of which may
undergo material changes. Changes in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and
outside of our control, may require an increase in the allowance for loan losses. Increases in nonperforming loans have a significant impact on our allowance for loan losses. Generally, our
non-performing loans and assets reflect operating difficulties of individual borrowers resulting from weakness in the economy of the Front Range of Colorado. If current trends in the real
estate markets continue, we expect that we will continue to experience increased delinquencies and credit losses, particularly with respect to construction, land development and land loans. Moreover,
with the country currently in a recession, we expect that it will negatively impact economic conditions in our market areas and that we could experience significantly higher delinquencies and credit
losses.

Under
the Written Agreement, our Bank is required to submit a written plan regarding the allowance for loan losses. Although there are no current requirements by the regulators to
increase our current allowance for loan losses, the plan must address policies and procedures to periodically review

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and
update the allowance for loan losses methodology. As a result of these periodic reviews, we might adjust our allowance for loan losses based on differences in judgment between the regulators and
management. This could result in an increase in the provision for loan losses or the recognition of further loan charge-offs.

If
charge-offs in future periods exceed the allowance for loan losses, we will need additional provisions to increase the allowance for loan losses. Furthermore, growth in
the loan portfolio would generally lead to an increase in the provision for loan losses.

Any
increases in the allowance for loan losses will result in a decrease in net income and capital, and may have a material adverse effect on our financial condition, results of
operations and cash flows. See the section captioned "Allowance for Loan Losses" in Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations located elsewhere in this report for further discussion related to our process for determining the appropriate level of the allowance for loan losses.

Our Small to Medium-sized Business Target Markets may have Fewer Financial Resources to Weather a Downturn in the Economy

We target the banking and financial services needs of small and medium-sized businesses. These businesses generally have fewer
financial resources in terms of capital borrowing capacity than larger entities. If general economic conditions continue to negatively impact these businesses in the markets in which we operate, our
business, financial condition, and results of operation could be adversely affected.

Liquidity Risk Could Impair Our Ability to Fund Operations and Jeopardize Our Financial Condition

Liquidity is essential to our business. An inability to raise funds through traditional deposits, brokered deposit renewals or
rollovers, secured or unsecured borrowings, the sale of securities or loans and other sources could have a substantial negative effect on our liquidity. Our access to funding sources in amounts
adequate to finance our activities or the terms of which are acceptable to us could be impaired by factors that affect us specifically or the financial services industry or economy in general. Factors
that could detrimentally impact our access to liquidity sources include a decrease in the level of our business activity as a result of a downturn in the markets in which our loans are concentrated or
adverse regulatory action against us. Our ability to borrow could also be impaired by factors that are not specific to us, such as a disruption in the financial markets or negative views and
expectations about the prospects for the financial services industry in light of the recent turmoil faced by banking organizations and the continued deterioration in credit markets.

We
rely on commercial and retail deposits, brokered deposit renewals and rollovers, advances from the Federal Home Loan Bank ("FHLB") of Topeka and other secured and unsecured borrowings
to fund our operations. Although we have historically been able to replace maturing deposits and advances as necessary, we might not be able to replace such funds in the future if, among other things,
our results of operations or financial condition or the results of operations or financial condition of the FHLB of Topeka or market conditions were to change. In addition, if we fall below the FDIC's
thresholds to be considered "well capitalized", we will be unable to continue to rollover or renew brokered funds, and the interest rate paid on deposits would be restricted.

Under
the Written Agreement, our Bank is required to submit a written plan to improve the Bank's liquidity position, including measures to diversify funding sources and reduce reliance
on brokered deposits. The Written Agreements also restricts the Bank from issuing new brokered deposits, but the Bank can renew or rollover existing brokered deposits. Further, the Written Agreement
prevents the
Company, but not the Bank, from incurring, increasing or guaranteeing any debt without approval from the Federal Reserve.

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Although
we consider the current sources of funds adequate for our liquidity needs, there can be no assurance in this regard and we may be compelled to seek additional sources of
financing in the future. Likewise, the Company may seek written approval from the Federal Reserve to issue additional debt in the future. There can be no assurance that such written approval would be
obtained for additional borrowings at the holding company level, or that the additional borrowings would be available to us or, if available, would be on favorable terms.

In
addition, although we believe that the current level of cash at the holding company is sufficient to meet the operating needs of the holding company for over three years, assuming
that the holding company does not contribute any additional amounts of capital to the Bank, there can be no assurance in this regard and we may be compelled in the future to seek either additional
capital or dividends from the Bank to meet such needs. There can be no assurance that we could raise additional capital or that written approval would be obtained from our regulators for any such
dividends.

Bank
and holding company stock prices have been negatively affected by the recent adverse economic trend, as has the ability of banks and holding companies to raise capital or borrow in
the debt markets compared to recent years. If additional financing sources are unavailable or not available on reasonable terms, our financial condition, results of operations and future prospects
could be materially adversely affected.

We
actively monitor the depository institutions that hold our federal funds sold and due from banks cash balances. Our emphasis is primarily on safety of principal, and since September
2009, nearly all of our overnight funding is held at the Federal Reserve in order to mitigate risk associated with holding large amounts of cash with other financial institutions. Nonetheless, we are
currently not able to provide assurances that access to our cash equivalents and federal funds sold will not be impacted by adverse conditions in the financial markets. From
time-to-time, a portion of the balances in our accounts with financial institutions in the U.S. may exceed the FDIC insurance limits. While we monitor and adjust the balances
in our accounts as appropriate, these balances could be impacted if the financial institutions fail and could be subject to other adverse conditions in the financial markets.

Concern of Customers Over Deposit Insurance May Cause a Decrease in Deposits

With recent increased concerns about bank failures, customers increasingly are concerned about the extent to which their deposits are
insured by the FDIC. Customers may withdraw deposits in an effort to ensure that the amount they have on deposit with their bank is fully insured. Decreases in deposits may adversely affect our
funding costs and net income.

Our Deposit Insurance Premiums have Increased and Could Increase Further in the Future, Which Could Have a Material Adverse Effect on our Future Earnings

The FDIC insures deposits at FDIC insured financial institutions, including the Bank. The FDIC charges insured financial institutions
premiums to maintain the Deposit Insurance Fund at a certain level. Current economic conditions have increased bank failures and expectations for further failures, in which case the FDIC ensures
payments of deposits up to insured limits from the Deposit Insurance Fund.

In
the first quarter of 2009, the FDIC increased all FDIC deposit assessment rates by 7 basis points. Beginning in the second quarter of 2009, the base assessment rates were increased
again and currently range from 12-16 basis points for Risk Category I institutions to 45 basis points for Risk Category IV institutions, subject to adjustments for brokered
deposits, secured liabilities and a reduction for their unsecured debt. During 2009, the Bank migrated to a Risk Category III with a base assessment rate of 32 basis points.

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In
addition, on May 22, 2009, the FDIC adopted a final rule imposing a special assessment on all institutions of 5 basis points for the second quarter of 2009. The Bank accrued
$0.9 million for this special assessment as a liability and expense for the second quarter of 2009.

The
FDIC may further increase or decrease the assessment rate schedule in order to manage the DIF to prescribed statutory target levels. An increase in the Risk Category for the Bank or
in the assessment rates could have an adverse effect on the Bank's earnings. The FDIC may terminate deposit insurance if it determines the institution involved has engaged in or is engaging in unsafe
or unsound
banking practices, is in an unsafe or unsound condition, or has violated applicable laws, regulations or orders. In the case of a Colorado-chartered bank, the termination of deposit insurance would
result in the revocation of its charter.

We May Elect or be Compelled to Seek Additional Capital in the Future, But Capital May not be Available When it is Needed

We are required by federal and state regulatory authorities to maintain adequate levels of capital to support our operations. In
addition, we may elect to raise additional capital to support our business or to finance acquisitions, if any, or we may otherwise elect to raise additional capital. In that regard, a number of
financial institutions have recently raised considerable amounts of capital as a result of deterioration in their results of operations and financial condition arising from the turmoil in the mortgage
loan market, deteriorating economic conditions, declines in real estate values and other factors, which may diminish our ability to raise additional capital.

Our
ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of other factors, many of which are outside our
control, and on our financial performance. Accordingly, we cannot be assured of our ability to raise additional capital if needed or on terms acceptable to us. If we cannot raise additional capital
when needed, it may have a material adverse effect on our financial condition, results of operations and prospects.

The Value of Securities in Our Investment Securities Portfolio May be Negatively Affected by Continued Disruptions In Securities Markets

The market for some of the investment securities held in our portfolio has become volatile over the past two years. Volatile market
conditions may detrimentally affect the value of these securities, such as through reduced valuations due to the perception of heightened credit and liquidity risks. There can be no assurance that the
declines in market value associated with these disruptions will not result in other than temporary impairments of these assets, which would lead to accounting charges that could have a material
adverse effect on our net income and capital levels.

The Soundness of Other Financial Institutions Could Adversely Affect Us

Since mid-2007, the financial services industry as a whole, as well as the securities markets generally, have been
materially and adversely affected by very significant declines in the values of nearly all asset classes and by a very serious lack of liquidity.
Financial institutions in particular have been subject to increased volatility and an overall loss in investor confidence.

Our
ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services companies
are interrelated as a result of trading, clearing, counterparty, or other relationships. We have exposure to many different industries and counterparties, and we routinely execute transactions with
counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, mutual and hedge funds, and other institutional clients. As a result, defaults by,
or even rumors or questions about, one or more financial services companies, or the financial services industry generally, have led to market-wide liquidity problems and could lead to
losses or defaults by us or by other institutions. Many

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of
these transactions expose us to credit risk in the event of default of our counterparty or client. In addition, our credit risk may be exacerbated when the collateral held by us cannot be realized
or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure due us. There is no assurance that any such losses would not materially and adversely affect our
business, financial condition or results of operations.

We Are Subject to Extensive Government Regulation and Supervision

We are subject to extensive regulation, supervision and examination. Any change in the laws or regulations applicable to us, or in
banking regulators' supervisory policies or examination procedures, whether by the Colorado Division of Banking, the FDIC, the Federal Reserve Board, other state or federal regulators, the U.S.
Congress or the Colorado legislature could have a material adverse effect on our business, financial condition, results of operations and cash flows.

The
Bank is subject to regulations promulgated by the Colorado Division of Banking, as its chartering authority, and by the FDIC as the insurer of its deposits up to certain limits. The
bank also belongs to the Federal Home Loan Bank System and, as a member, it is subject to certain limited regulations promulgated by the Federal Home Loan Bank of Topeka. In addition, the Federal
Reserve Board regulates and oversees Guaranty Bancorp as a bank holding company, and the Bank, as a member of the Federal Reserve System.

This
regulation and supervision limits the activities in which we may engage. The purpose of regulation and supervision is primarily to protect the FDIC's insurance fund and our
depositors and borrowers, rather than our stockholders. Regulatory authorities have extensive discretion in the exercise of their supervisory and enforcement powers. They may, among other things,
impose restrictions on the operation of a banking institution, the classification of assets by such institution and such institution's
allowance for loan losses. Regulatory and law enforcement authorities also have wide discretion and extensive enforcement powers under various consumer protection and civil rights laws, including the
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Red Flag Identity Theft rules under the Fair and
Accurate Credit Transactions Act and Colorado's deceptive acts and practices law. These laws also permit private individual and class action lawsuits and provide for the recovery of attorneys fees in
certain instances. Given the current disruption in the financial markets and regulatory initiatives that are likely to be proposed by the new administration and Congress, new regulations and laws that
may affect us are increasingly likely. Compliance with such regulations and laws may increase our costs and limit our ability to pursue business opportunities. The Written Agreement also subjects us
to additional restrictions and more frequent oversight. No assurance can be given that the foregoing regulations and supervision will not change so as to affect us adversely.

There can be no Assurance That the Emergency Economic Stabilization Act of 2008 (the "EESA") and Other Government Programs Will Stabilize the U.S. Financial System

On October 3, 2008, the Emergency Economic Stabilization Act of 2008 (the "EESA") was enacted. The U.S. Treasury and banking
regulators implemented a number of continuing programs under this legislation and otherwise to address capital and liquidity issues in the banking system, including the TARP Capital Purchase Program,
the FDIC Temporary Liquidity Guarantee Program ("TLG Program") and Transaction Account Guarantee Program, an increase to FDIC insurance coverage for most accounts, among other programs.

There
can also be no assurance as to the actual impact that the EESA and other programs will continue to have on the financial markets, including credit availability. The failure of the
EESA and other programs to stabilize the financial markets and a continuation or worsening of current financial

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market
conditions could materially and adversely affect our business, financial condition, results of operations, access to credit or the trading price of our common stock.

Our Profitability Depends Significantly on Economic Conditions in the Colorado Front Range

Our success depends primarily on the general economic conditions in the counties in which we conduct business. Unlike larger banks that
are more geographically diversified, we provide banking and financial services to customers primarily in the Colorado Front Range, which includes the Denver metropolitan area. The local economic
conditions in our market area have a
significant impact on our loans, the ability of the borrowers to repay these loans and the value of the collateral securing these loans. A significant decline in general economic conditions caused by
inflation, natural disasters, recession, unemployment or other factors beyond our control would affect these local economic conditions and could adversely affect our financial condition, results of
operations and cash flows. Further deterioration in economic conditions, in particular within our primary market areas, could result in the following consequences, among others, any of which could
hurt our business materially: loan delinquencies on real estate, commercial and consumer loans may increase; problem assets and foreclosures may increase; demand for our products and services may
decline; and collateral for loans made by us, especially real estate, may decline in value, in turn reducing a customer's borrowing power and reducing the value of assets and collateral securing our
loans. In view of the concentration of our operations and the collateral securing our loan portfolio in Colorado's Front Range, we may be particularly susceptible to the adverse effects of any of
these consequences, any of which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We Operate in a Highly Competitive Industry and Market Area

We face substantial competition in all areas of our operations from a variety of different competitors, many of which are larger and
may have more financial resources. Such competitors primarily include national, regional, and community banks within the various markets we serve. We also face competition from many other types of
financial institutions, including, without limitation, savings and loans, credit unions, finance companies, brokerage firms, insurance companies, factoring companies and other financial
intermediaries. The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. Banks, securities firms
and insurance companies can merge under the umbrella of a financial holding company, which can offer virtually any type of financial service, including banking, securities underwriting, insurance
(both agency and underwriting) and merchant banking. Additionally, we expect competition to intensify among financial services companies due to the recent consolidation of certain competing financial
institutions and the conversion of certain investment banks to bank holding companies. Also, technology has lowered barriers to entry and made it possible for non-banks to offer products
and services traditionally provided by banks, such as automatic funds transfer and automatic payment systems. Many of our competitors have fewer regulatory constraints and may have lower cost
structures. Additionally, due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing
for those products and services than we can.

Our
ability to compete successfully depends on a number of factors, including, among other things:



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Failure
to perform in any of these areas could significantly weaken our competitive position, which could adversely affect our growth and profitability, which, in turn, could have a
material adverse effect on our financial condition, results of operations and cash flows.

We Rely on Dividends from Our Subsidiary for Most of Our Revenue

Because we are a holding company with no significant assets other than the Bank, we currently depend upon dividends from the Bank for a
substantial portion of our revenues. Our ability to pay dividends to our stockholders will therefore continue to depend in large part upon
our receipt of dividends or other capital distributions from the Bank. Our ability to pay dividends is subject to the restrictions of the Delaware General Corporation Law.

Various
banking laws applicable to the Bank limit the payment of dividends, management fees and other distributions by the Bank to the Company, and may therefore limit our ability to pay
dividends on our common stock. In addition, the Written Agreement prohibits both the Company and the Bank from paying dividends without the prior written approval of the Federal Reserve, and, in the
case of the Bank, the CDB. Accordingly, our ability to receive dividends from the Bank, as well as our ability to pay dividends to our stockholders will be restricted until the Written Agreement is
terminated.

From
time to time, we may become a party to financing agreements or other contractual arrangements that have the effect of limiting or prohibiting us or our bank subsidiary from
declaring or paying dividends. See "Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesDividends" for more
information on these restrictions.

Although
we believe that the current level of cash at the holding company is sufficient to meet the operating needs of the holding company for over three years, assuming that the holding
company does not contribute any additional amounts of capital to the Bank, there can be no assurance in this regard and we may be compelled in the future to seek either additional capital or dividends
from the Bank to meet such needs. There can be no assurance that we could raise additional capital or that written approval would be obtained from our regulators for any such dividends.

We are Dependent on Key Personnel and the Loss of One or More of Those Key Personnel Could Harm Our Business

Competition for qualified employees and personnel in the banking industry is intense and there are a limited number of qualified
persons with knowledge of and experience in the Colorado community banking industry. The process of recruiting personnel with the combination of skills and attributes required to carry out our
strategies is often lengthy. Our success depends to a significant degree upon our ability to attract and retain qualified management, loan origination, administrative, marketing and technical
personnel and upon the continued contributions of our management and personnel. In particular, our success is highly dependent upon the abilities of our senior executive management. We believe this
management team, comprised of individuals who have worked in the banking industry for many years, is integral to implementing our business plan. The loss of the services of one or more of them could
harm our business.

Under
the terms of the Written Agreement, prior written approval from the Federal Reserve must be obtained prior to appointing any new director or senior executive officer, or changing
the responsibilities of any senior executive officer so that the officer would assume a different senior

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executive
officer position. There is no assurance that written approval would be granted to appoint any new director or senior executive officer, or to change the responsibilities of any senior
executive officer.

Our Controls and Procedures May Fail or Be Circumvented

Management regularly reviews and updates our internal controls, disclosure controls and procedures, and corporate governance policies
and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the
system are met. Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our
business, results of operations, cash flows and financial condition.

We are Subject to Security and Operational Risks Relating to Our Use of Technology That Could Damage Our Reputation and Our Business

We rely heavily on communications and information systems to conduct our business. Any failure, interruption or breach in security of
these systems could result in failures or disruptions in our customer relationship management, general ledger, deposit, loan and other systems. While we have policies and procedures designed to
prevent or limit the effect of the failure, interruption or security breach of our information systems, there can be no assurance that any such failures, interruptions or security breaches will not
occur or, if they do occur, that they will be adequately addressed. Additionally, we outsource our data processing to a third party. If our third party provider encounters difficulties or if we have
difficulty in communicating with such third party, it will significantly affect our ability to adequately process and account for customer transactions, which would significantly affect our business
operations. Furthermore, breaches of such third party's technology may also cause reimbursable loss to our consumer and business customers, through no fault of our own. The occurrence of any failures,
interruptions or security breaches of information systems used to process customer transactions could damage our reputation, result in a loss of customer business, subject us to additional regulatory
scrutiny, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our financial condition, results of operations and cash flows.

We Continually Encounter Technological Change

The financial services industry is continually undergoing rapid technological change with frequent introductions of new
technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. Our future success
depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional
efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology-driven
products and services or be successful in marketing these products and services to our customers. Failure to successfully keep pace with technological change affecting the financial services industry
could have a material adverse impact on our business and, in turn, our financial condition, results of operations and cash flows.

We Are Subject to Claims and Litigation Pertaining to Fiduciary Responsibility

From time to time, customers make claims and take legal action pertaining to our performance of our fiduciary responsibilities. Whether
customer claims and legal action related to our performance of our fiduciary responsibilities are founded or unfounded, if such claims and legal actions are not resolved in a manner favorable to us,
they may result in significant financial liability and/or adversely affect the market perception of us and our products and services as well as impact customer demand

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for
our products and services. Any financial liability or reputation damage could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial
condition, results of operations and cash flows.

Concentrated Ownership of our Stock May Discourage a Change in Control and Have an Adverse Effect on the Share Price of our Common Stock

As of February 1, 2010, executive officers, directors and stockholders of more than 5% of our common stock beneficially owned or
controlled approximately 54.1% of our common stock, after giving effect to the conversion of our existing and outstanding Series A Convertible Preferred Stock at $1.80 per share. Investors who
purchase our common stock may be subject to certain risks due to the concentrated ownership of our common stock. Such a concentration of ownership may have the effect of discouraging, delaying or
preventing a change in control and may also have an adverse effect on the market price of our common stock.

We Face Risks Associated With Acquisitions or Mergers

We may pursue or be a party to an acquisition or merger opportunity in the future. Risks commonly encountered in mergers and
acquisitions include, among other things:



We
may not be successful in overcoming these risks or any other problems encountered in connection with mergers or acquisitions. Our integration of operations of banks or branches that
we acquire may not be successfully accomplished and may take a significant amount of time. Our inability to improve the operating performance of acquired banks and branches or to integrate
successfully or in a timely manner their operations could have a material adverse effect on our business, financial condition, results of operations and cash flows. We would expect to hire additional
employees and/or retain consultants to assist with integrating our operations, and we cannot assure that those individuals or firms will perform as expected or be successful in addressing these
issues.

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We are Exposed to Risk of Environmental Liabilities with Respect to Properties to Which We Take Title

In the course of our business, we may own or foreclose and take title to real estate, and could be subject to environmental liabilities
with respect to these properties. We may
be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with
environmental contamination, or may be required to investigate or clean up hazardous or toxic substances, or chemical releases at a property. The costs associated with investigation or remediation
activities could be substantial. In addition, as the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from
environmental contamination emanating from the property. If we ever become subject to significant environmental liabilities, our business, financial condition, cash flows, liquidity and results of
operations could be materially and adversely affected.

Severe Weather, Natural Disasters, Acts of War or Terrorism and Other External Events Could Significantly Impact Our Business

Severe weather, natural disasters, acts of war or terrorism and other adverse external events could have a significant impact on our
ability to conduct business. Such events could affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans,
cause significant property damage, result in loss of revenue and/or cause us to incur additional expenses. Although management has established disaster recovery policies and procedures, the occurrence
of any such event could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition, results of operations and cash flows.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

None.

ITEM 2.    PROPERTIES

As of December 31, 2009, we had a total of 34 branch office properties, 21 of which we owned and 13 of which we leased. All of
our properties are located in the Colorado Front Range. Each of Guaranty Bancorp's and Guaranty Bank's principal office is located at 1331 Seventeenth Street, Suite 300, Denver, Colorado 80202.

We
consider our properties to be suitable and adequate for our needs.

ITEM 3.    LEGAL PROCEEDINGS

In the ordinary course of our business, we are party to various legal actions, which we believe are incidental to the operation of our
business. Although the ultimate outcome and amount of liability, if any, with respect to these legal actions to which we are currently a party cannot presently be ascertained with certainty, in the
opinion of management, based upon information currently available to us, any resulting liability is not likely to have a material adverse effect on the Company's consolidated financial position,
results of operations or cash flows.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the security holders during the fourth quarter 2009.

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PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Common Stock Market Prices

Our voting common stock is traded on the Nasdaq Global Select Market ("Nasdaq") under the symbol "GBNK". We do not have any outstanding
non-voting common stock as of the date of this report. The table below sets forth the high and low sales prices per share of our voting common stock as reported by Nasdaq for each quarter
in the preceding two fiscal years.

Sales PricesHigh

Low

CloseYear/Quarter:2009Fourth quarter

$
1.75

$
0.96

$
1.32Third quarter


2.03


1.41


1.48Second quarter


2.95


1.52


1.91First quarter


2.43


1.35


1.752008Fourth quarter

$
6.35

$
1.42

$
2.00Third quarter


7.64


2.97


6.10Second quarter


6.75


3.59


3.60First quarter


7.00


4.89


6.28


On
February 11, 2010, the closing price of our voting common stock on Nasdaq was $1.41 per share. As of that date, we believe, based on the records of our transfer agent, that
there were approximately 238 record holders of our voting common stock.

Dividends

We have never declared or paid cash dividends on our common stock. Our board of directors reviews the appropriateness of declaring or
paying cash dividends on an ongoing basis. Any determination to declare or pay dividends in the future will be at the discretion of our board of directors. Our board of directors will take into
account such matters as general business conditions, our financial results, future prospects, capital requirements, contractual, legal and regulatory restrictions on the payment of dividends by us to
our stockholders or by our bank subsidiary to the holding company, and such other factors as our board of directors may deem relevant.

Our
ability to pay dividends is subject to the restrictions of the Delaware General Corporation Law. Because we are a holding company with no significant assets other than our bank
subsidiary, we currently depend upon dividends from our bank subsidiary for a substantial portion of our revenues. Our ability to pay dividends will therefore continue to depend in large part upon our
receipt of dividends or other capital distributions from our bank subsidiary.

Various
banking laws applicable to the Bank limit the payment of dividends, management fees and other distributions by the Bank to the Company, and may therefore limit our ability to pay
dividends on our common stock. In addition, the Written Agreement discussed in Note 23 within the Notes to Consolidated Financial Statements contained in "Item 8. Financial Statements
and Supplementary Data" prohibits both the Company and the Bank from paying dividends without the prior written approval of the Federal Reserve, and, in the case of the Bank, the Colorado Division of
Banking. Accordingly, our ability to pay dividends will be restricted until the Written Agreement is terminated.

33

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Table of Contents

Under
the terms of our trust preferred financings, including our related subordinated debentures, issued on September 7, 2000, February 22, 2001, June 30, 2003 and
April 8, 2004, respectively, we cannot declare or pay any dividends or distributions (other than stock dividends) on, or redeem, purchase, acquire or make a liquidation payment with respect to,
any shares of our capital stock if (1) an event of default under any of the subordinated debenture agreements has occurred and is continuing, or (2) if we give notice of our election to
begin an extension period whereby we may defer payment of interest on the trust preferred securities for a period of up to sixty consecutive months as long as we are in compliance with all covenants
of the agreement. On July 31, 2009, we elected to defer regularly scheduled interest payments on each of our subordinated debentures until further notice. In addition, we are currently
restricted from making payments of principal or interest on our subordinated debentures or trust preferred securities under the terms of our Written Agreement without the prior approval of the Federal
Reserve.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table provides information as of December 31, 2009, regarding securities issued and to be issued under our equity
compensation plans that were in effect during the year ended December 31, 2009:

Plan Category

Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights

Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights

Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))(a)

(b)

(c)Equity compensation plans approved by security holders

2005 Stock Incentive Plan(1)



(2)




524,815
(3)(4)Equity compensation plans not approved by security holders

None














524,815


---

Repurchases of Common Stock

Stock repurchase programs allow us to proactively manage our capital position and return excess capital to stockholders. See
"Supervision and Regulation" in Item 1 of this report for a discussion of potential regulatory limitations on the holdings company's receipt of dividends from its bank subsidiary, which may be
used to repurchase our common stock. The following table provides information with respect to purchases made by or on behalf of the Company or any "affiliated purchaser" (as defined in

34

---



Table of Contents

Rule 10b-18(a)(3)
under the Securities Exchange Act of 1934) of our common stock during the fourth quarter of 2009.

Total Shares Purchased

Average Price Paid per Share

Total Number of Shares Purchased as Part of Publicly Announced Plan

Maximum Number of Shares that May Yet be Purchased Under the Plans at The End of the PeriodOctober 1 to October 31, 2009




$






November 1 to November 30, 2009











December 1 to December 31, 2009


8,168
(1)

1.32





8,168

$
1.32








(1)These
shares relate to the net settlement of vested, restricted stock awards.


Performance Graph

Our voting common stock trades on the Nasdaq Global Select Market® under the symbol "GBNK". The following graph shows a
comparison from October 3, 2005 (the date the Company's voting common stock commenced trading on Nasdaq) through December 31, 2009 of cumulative total return for the Company's voting
common stock, the Nasdaq Stock Market (U.S.) Index and Nasdaq Bank Stocks Index. Such returns are based on historical results and are not intended to suggest future performance. Data for the Nasdaq
Stock Market (U.S.) Index and Nasdaq Bank Stocks Index assumes reinvestment of dividends. The Company has never paid dividends on its common stock. The total return on the Company's voting common
stock is determined based on the change in the price of the Company's voting common stock and assumes an original investment of $100. The total return on each of the indicated indices also assumes an
original investment in the index of $100.

GRAPHIC

Index

10/3/2005

12/30/2005

12/29/2006

12/31/2007

12/31/2008

12/31/2009NASDAQ (U.S.) Index


100


102


113


122


59


84NASDAQ Bank Stocks Index


100


102


114


91


66


55GBNK


100


102


78


48


17


11


35

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Table of Contents

ITEM 6.    SELECTED FINANCIAL DATA

The following table sets forth certain of our financial and statistical information for each of the years in the five-year
period ended December 31, 2009. The losses in 2008 and 2007 were primarily related to goodwill impairment charges of $250.7 million and $142.2 million in 2008 and 2007,
respectively. This data should be read in conjunction with our audited consolidated financial statements as of December 31, 2009 and 2008, and for each of the years in the
three-year period ended December 31, 2009, and related Notes to Consolidated Financial Statements contained in "Item 8. Financial Statements and Supplementary Data."

Year Ended December 31,2009

2008

2007

2006

2005(In thousands, except per share and percentage data)Consolidated Statement of Income (Loss) Data:Interest income

$
97,155

$
121,312

$
163,689

$
173,781

$
139,563Interest expense


34,382


41,750


61,440


57,584


31,694Net interest income


62,773


79,562


102,249


116,197


107,869Provision for loan losses


51,115


33,775


24,666


4,290


3,400Net interest income after provision for loan losses


11,658


45,787


77,583


111,907


104,469Noninterest income


10,412


10,620


10,696


12,717


10,317Noninterest expense(1)


70,438


319,656


226,556


90,908


91,983Income (loss) before income taxes


(48,368
)

(263,249
)

(138,227
)

33,716


22,803Income tax expense (benefit)


(19,161
)

(6,513
)

(185
)

11,286


7,639Income (loss) from continuing operations


(29,207
)

(256,736
)

(138,092
)

22,430


15,164Income (loss) from discontinued operations, net of tax











1,988


(482
)Net income (loss)


(29,207
)

(256,736
)

(138,092
)

24,418


14,682Preferred stock dividends


(1,389
)










Net income (loss) applicable to common stockholders

$
(30,596
)
$
(256,736
)
$
(138,092
)
$
24,418

$
14,682Share Data:Basic earnings (loss) per share

$
(0.60
)
$
(5.03
)
$
(2.60
)
$
0.42

$
0.27Diluted earnings (loss) per share

$
(0.60
)
$
(5.03
)
$
(2.60
)
$
0.42

$
0.27Basic earnings (loss) from continuing operations per share

$
(0.60
)
$
(5.03
)
$
(2.60
)
$
0.39

$
0.28Diluted earnings (loss) from continuing operations per share

$
(0.60
)
$
(5.03
)
$
(2.60
)
$
0.39

$
0.28Book value per share

$
2.50

$
3.07

$
7.96

$
10.30

$
10.13Weighted average shares outstandingbasic


51,378,360


51,044,372


53,109,307


57,539,996


54,222,327Weighted average shares outstandingdiluted


51,378,360


51,044,372


53,109,307


57,636,365


54,295,083Common shares outstanding at end of period


52,952,703


52,654,131


52,616,991


57,236,795


60,403,764


(1)Noninterest
expense in 2008 and 2007 includes a goodwill impairment charge of $250,748,000 and $142,210,000, respectively.


36

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Table of Contents




Year Ended December 31,2009

2008

2007

2006

2005(In thousands, except per share and percentage data)Consolidated Balance Sheet Data:Cash and cash equivalents

$
234,483

$
45,711

$
52,356

$
49,620

$
98,942Investments and other securities


248,236


144,264


166,317


200,322


175,753Net loans (including loans held for sale)


1,477,479


1,787,105


1,756,428


1,919,588


2,046,938Total assets


2,127,580


2,102,741


2,371,664


2,720,600


2,980,757Deposits


1,693,290


1,698,651


1,799,507


1,960,105


2,048,352Debt


228,593


229,424


128,571


134,340


215,872Stockholders' equity


192,638


161,580


418,654


589,459


598,748Selected Other Balance Sheet Data:Average assets


2,054,285


2,295,108


2,611,973


2,850,533


2,558,794Average earning assets


1,926,117


1,966,668


2,073,569


2,172,141


1,956,050Average stockholders' equity


178,411


356,646


551,532


597,491


542,684Selected Financial Ratios:Return on average assets(a)


(1.42
)%

(11.19
)%

(5.29
)%

0.86
%

0.57
%Return on average stockholders'
equity(b)


(16.37
)%

(71.99
)%

(25.04
)%

4.09
%

2.71
%Net interest margin(c)


3.26
%

4.05
%

4.93
%

5.35
%

5.51
%Efficiency ratio(d)


87.67
%

68.17
%

67.01
%

61.35
%

67.56
%Selected Asset Quality Ratios:Nonperforming assets to total assets


4.55
%

2.63
%

0.98
%

1.25
%

1.05
%Nonperforming loans to total loans


3.93
%

3.00
%

1.11
%

1.69
%

1.44
%Allowance for loan losses to total loans


3.42
%

2.46
%

1.44
%

1.43
%

1.33
%Allowance for loan losses to nonperforming loans


87.08
%

82.06
%

129.62
%

84.91
%

92.39
%Net charge-offs to average loans


2.62
%

0.81
%

1.44
%

0.21
%

0.23
%


---

37

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Table of Contents

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section should be read in conjunction with the disclosure regarding "Forward-Looking Statements and
Factors that Could Affect Future Results" set forth in the beginning of Part I of this report, as well as the discussion set forth in "Item 1A. Risk Factors" and "Item 8.
Financial Statements and Supplementary Data."



We are a bank holding company providing banking and other financial services throughout our targeted Colorado markets to consumers and
to small- and medium-sized businesses, including the owners and employees of those businesses. We offer an array of banking products and services to the communities we serve, including accepting time
and demand deposits and originating commercial loans (including energy loans), real estate loans, Small Business Administration guaranteed loans and consumer loans. We derive our income primarily from
interest received on real estate related loans, commercial loans and leases and consumer loans and, to a lesser extent, interest on investment securities, fees received in connection with servicing
loan and deposit accounts and fees from trust services. Our major operating expenses are the interest we pay on deposits and borrowings and general operating expenses. We rely primarily on locally
generated deposits to provide us with funds for making loans.

We
are subject to competition from other financial institutions and our operating results, like those of other financial institutions operating exclusively or primarily in Colorado, are
significantly influenced by
economic conditions in Colorado, including the strength of the real estate market. In addition, both the fiscal and regulatory policies of the federal government and regulatory authorities that govern
financial institutions and market interest rates also impact our financial condition, results of operations and cash flows.

As
detailed in Item 1Business, Centennial Bank Holdings, Inc. became Guaranty Bancorp effective May 12, 2008. Guaranty Bancorp has a single bank
subsidiary, Guaranty Bank and Trust Company. This structure is a result of a combination of four separate acquisitions in 2004 and 2005 and two divestitures in 2006.

Application of Critical Accounting Policies and Accounting Estimates

Our accounting policies are integral to understanding the financial results reported. Our most complex accounting policies require
management's judgment to ascertain the valuation of assets, liabilities, commitments and contingencies. We have established detailed policies and procedures that are intended to ensure valuation
methods are well controlled and consistently applied from period to period. In addition, the policies and procedures are intended to ensure that the process for changing methodologies occurs in an
appropriate manner. The following is a brief description of our current accounting policies that we believe are critical or involve significant management judgment.

Allowance for Loan Losses

The loan portfolio is the largest category of assets on our balance sheet. We determine probable incurred losses inherent in our loan
portfolio and establish an allowance for those losses by considering factors including historical loss rates, expected cash flows and estimated collateral values. In assessing these factors, we use
organizational history and experience with credit decisions and related outcomes. The allowance for loan losses represents our best estimate of losses inherent in the existing loan portfolio. The
allowance for loan losses is increased by the provision for loan losses charged to expense and reduced by loans charged off, net of recoveries. We evaluate our allowance for loan losses

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Table of Contents

quarterly.
If our underlying assumptions later prove to be inaccurate based on subsequent loss evaluations, the allowance for loan losses is adjusted.

We
estimate the appropriate level of allowance for loan losses by separately evaluating impaired and nonimpaired loans. A specific allowance is assigned to an impaired loan when expected
cash flows or collateral do not justify the carrying amount of the loan. The methodology used to assign an allowance to a nonimpaired loan is more subjective. Generally, the allowance assigned to
nonimpaired loans is determined by applying historical loss rates to existing loans with similar risk characteristics, adjusted for qualitative factors including the volume and severity of identified
classified loans, changes in economic conditions, changes in credit policies or underwriting standards, and changes in the level of credit risk associated with specific industries and markets. Because
the economic and business climate in any given industry or market, and its impact on any given borrower, can change rapidly, the risk profile of the loan portfolio is continually assessed and adjusted
when appropriate. Notwithstanding these procedures, there still exists the possibility that our assessment could prove to be significantly incorrect and that an immediate adjustment to the allowance
for loan losses would be required.

We
estimate the appropriate level of loan loss allowance by conducting a detailed review of a number of smaller portfolio segments that comprise our loan portfolios. We segment the loan
portfolio into as many components as practical. Each component would normally have similar characteristics, such as risk classification, past due status, type of loan, industry or collateral. The risk
profile of certain segments of the loan portfolio may be improving, while the risk profile of others may be deteriorating. As a result, changes in the appropriate level of the allowance for different
segments may offset one another. Adjustments to the allowance represent the aggregate impact from the analysis of all loan segments.

Other Real Estate Owned and Foreclosed Assets

Other real estate owned or other foreclosed assets acquired through loan foreclosure are initially recorded at fair value less costs to
sell when acquired, establishing a new cost basis. The adjustment at the time of foreclosure is recorded through the allowance for loan losses. Due to the subjective nature of establishing the fair
value when the asset is acquired, the actual fair value of the other real estate owned or foreclosed asset could differ from the original estimate. If it is determined that fair value declines
subsequent to foreclosure, a valuation allowance is recorded through noninterest expense. Operating costs associated with the assets after acquisition are also recorded as noninterest expense. Gains
and losses on the disposition of other real estate owned and foreclosed assets are netted and posted to other noninterest income.

Investment in Debt and Equity Securities

We classify our investments in debt and equity securities as either held-to-maturity or
available-for-sale. Securities classified as held-to-maturity are recorded at cost or amortized
cost. Available-for-sale securities are carried at fair value. Fair value calculations are based on quoted market prices when such prices are available. If quoted market prices
are not available, estimates of fair value are computed using a variety of techniques, including extrapolation from the quoted prices of similar instruments or recent trades for thinly traded
securities, fundamental analysis, or through obtaining purchase quotes. Due to the subjective nature of the valuation process, it is possible that the actual fair values of these investments could
differ from the estimated amounts, thereby affecting our financial position, results of operations and cash flows. If the estimated value of investments is less than the cost or amortized cost, we
evaluate whether an event or change in circumstances has occurred that may have a significant adverse effect on the fair value of the investment. If such an event or change has occurred and we
determine that the impairment is other-than-temporary, we expense the impairment of the investment in the period in which the event or change occurred.

39

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Table of Contents

Deferred Income Tax Assets/Liabilities

Our net deferred income tax asset arises from differences in the dates that items of income and expense enter into our reported income
and taxable income. Deferred tax assets and liabilities are established for these items as they arise. From an accounting standpoint, deferred tax assets are reviewed to determine if a valuation
allowance is required based on both positive and negative evidence currently available. Positive evidence includes the historical levels of our taxable income, estimates of our future taxable income
including tax planning strategies, the reversals of deferred tax liabilities and taxes available in carry-back years. Negative evidence primarily includes a cumulative
three-year loss for financial reporting purposes. Additionally, current and future economic and business conditions are considered.

Additionally,
the Company reviews its uncertain tax positions annually. An uncertain tax position is recognized as a benefit only if it is "more likely than not" that the tax position
would be sustained in a tax examination, with a tax examination being presumed to occur. The amount actually recognized is the largest amount of tax benefit that is greater than 50% likely to be
recognized on examination. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded. A significant amount of judgment is applied to determine both whether the tax
position meets the "more likely than not" test as well as to determine the largest amount of tax benefit that is greater than 50% likely to be recognized. Differences between the position taken by
management and that of taxing authorities could result in a reduction of a tax benefit or increase to tax liability, which could adversely affect future income tax expense.

Impairment of Goodwill and Intangible Assets

Core deposit and customer relationships, which are intangible assets with a finite life, are recorded on our balance sheets. These
intangible assets were capitalized as a result of past acquisitions and are being amortized over their estimated useful lives of up to 15 years. Core deposit intangible assets, with finite
lives will be tested for impairment when changes in events or circumstances indicate that its carrying amount may not be recoverable. Core deposits were tested for impairment during 2008 and 2007, as
part of the goodwill impairment test and no impairment was deemed necessary. A separate evaluation was performed in 2009 and we determined that no impairment was necessary.

As
a result of our acquisition activity, goodwill, an intangible asset with an indefinite life, was reflected on our balance sheet in prior periods. Goodwill was evaluated for impairment
annually, except when there were factors present that indicated a potential impairment, in which case, the goodwill impairment test was performed more frequently than annually. In 2008, the entire
balance of the goodwill asset was written off as impaired.

This
discussion has highlighted those accounting policies that we consider to be critical to our financial reporting process. However, all the accounting policies are important, and
therefore you are encouraged to review each of the policies included in Note 2 to "Notes to Consolidated Financial Statements" in Item 8, "Financial Statements and Supplementary Data",
to gain a better understanding of how our financial performance is measured and reported.

40

---



Table of Contents

RESULTS OF OPERATIONS

The following table presents certain key aspects of our performance.

Table 1

Year Ended December 31,

ChangeFavorable (Unfavorable)2009

2008

2007

2009 v 2008

2008 v 2007Results of Operations:Interest income

$
97,155

$
121,312

$
163,689

$
(24,157
)
$
(42,377
)Interest expense


34,382


41,750


61,440


7,368


19,690Net interest income


62,773


79,562


102,249


(16,789
)

(22,687
)Provision for loan losses


51,115


33,775


24,666


(17,340
)

(9,109
)Net interest income after provision for loan losses


11,658


45,787


77,583


(34,129
)

(31,796
)Noninterest income


10,412


10,620


10,696


(208
)

(76
)Noninterest expense


70,438


319,656


226,556


249,218


(93,100
)Loss before income taxes


(48,368
)

(263,249
)

(138,277
)

214,881


(124,972
)Income tax benefit


(19,161
)

(6,513
)

(185
)

12,648


6,328Net loss


(29,207
)

(256,736
)

(138,092
)

227,529


(118,644
)Preferred stock dividends


(1,389
)







1,389


Net loss applicable to common stockholders

$
(30,596
)
$
(256,736
)
$
(138,092
)
$
228,918

$
(118,644
)Common Share Data:Basic loss per common share

$
(0.60
)
$
(5.03
)
$
(2.60
)
$
4.43

$
(2.43
)Diluted loss per common share

$
(0.60
)
$
(5.03
)
$
(2.60
)
$
4.43

$
(2.43
)Average common shares outstanding


51,378,360


51,044,372


53,109,307


333,988


(2,064,935
)Diluted average common shares outstanding


51,378,360


51,044,372


53,109,307


333,988


(2,064,935
)


Year Ended December 31,

Percent Change2009

2008

2007

2009 v 2008

2008 v 2007Selected Balance Sheet Ratios:Total risk based capital to risk weighted assets


13.80
%

10.61
%

10.87
%

30.07
%

(2.39
)%Loans, net of unearned discount to deposits


89.74
%

107.52
%

99.01
%

(16.53
)%

8.60
%Allowance for loan losses to loans, net of unearned discount


3.42
%

2.46
%

1.44
%

39.08
%

70.83
%


2009 Compared to 2008

The Company's net loss for 2009 was $29.2 million, or $0.60 loss per basic and diluted common share, compared to a net loss of
$256.7 million or $5.03 loss per basic and diluted common share for the same period in 2008. Included in the basic and diluted common share computation for 2009 is a $1.4 million
preferred stock dividend paid in the form of additional shares of Series A convertible preferred stock. The primary cause for the decrease in net loss in 2009 as compared to 2008 is that there
was no goodwill impairment charge in 2009 as compared to the $250.7 million goodwill

41

---



Table of Contents

impairment
charge recorded during the third quarter 2008. Other changes in net income were a $16.8 million decrease in net interest income, primarily as a result of the Company being asset
sensitive and interest rates being significantly lower in 2009 as compared to 2008. The increase in provision for loan losses of $17.3 million was primarily due to the increase in
non-performing loans and the deterioration of the economic conditions during 2009 as compared to 2008. This is highlighted by a 96 basis point increase in our allowance for loan losses to
loans, net to 3.42% at December 31, 2009 as compared to 2.46% at December 31, 2008.

Without
the goodwill impairment charge in 2008, the 2008 noninterest expense was $68.9 million, compared to $70.4 million in 2009, an increase of $1.5 million. This
increase is primarily the result of a $4.3 million increase in expenses related to other real estate owned, a $3.6 million increase in insurance and assessments expenses and a
$0.4 million increase in other general and administrative expenses.
These increases were primarily offset by a $4.5 million decrease in salaries and employee benefits, a $1.1 million decrease in occupancy and furniture & equipment expense and a
$1.2 million decrease in the amortization of intangible assets. The primary reasons for these changes are discussed below under noninterest expense.

The
ending total risk capital ratio increased by 319 basis points to 13.80% at December 31, 2009 as compared to 10.61% at December 31, 2008. This increase is primarily the
result of the issuance of $57.8 million, net of expenses, of convertible preferred stock in August 2009.

2008 Compared to 2007

There was a net loss of $256.7 million for the year ended December 31, 2008 compared to a net loss of
$138.1 million for the same period in 2007. Both years were affected by goodwill impairment charges of $250.7 million and $142.2 million in 2008 and 2007, respectively. Other
changes in net income were a $22.7 million decrease in net interest income, primarily as a result of the Company being asset sensitive and interest rates being significantly lower in 2008 as
compared to 2007. The increase in provision for loan losses of $9.1 million was primarily due to the increase in non-performing loans and the deterioration of the economic
conditions during 2008 as compared to 2007. This is highlighted by a 102 basis point increase in our allowance for loan losses to loans, net to 2.46% at December 31, 2008 as compared to 1.44%
at December 31, 2007. Without the goodwill impairment charges in both years, noninterest expense was $68.9 million and $84.3 million in 2008 and 2007, respectively. The decrease
in noninterest expense, excluding goodwill impairment charges, is primarily a result of an $8.1 million decrease in salaries and employee benefits, as well as a $6.5 million decrease in
other general and administrative expenses, as discussed below under noninterest expense.

Prior
to recognizing goodwill impairment charges in 2007 and 2008, our goodwill and other intangible asset balances caused a proportional reduction in our return on average assets and
return on average equity when compared to entities with minimal intangible asset balances.

Goodwill
and other intangible assets have always been excluded from regulatory capital, and therefore had no impact on total risk based capital year over year. The ending total risk
capital ratio decreased by 26 basis points to 10.61% at December 31, 2008 as compared to 10.87% at December 31, 2007. This decrease is a result of the significant provision for loan
losses taken in 2008, as well as a $44.7 million increase in loans, net of unearned discount during 2008.

Net Interest Income and Net Interest Margin

Net interest income is our primary source of income and represents the difference between income on interest-earning assets and expense
on interest-bearing liabilities.

42

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Table of Contents

The following table summarizes the Company's net interest income and related spread and margin for the periods indicated:

Table 2

Year Ended December 31,2009

2008

2007(Dollars in thousands)Net interest income

$
62,773

$
79,562

$
102,249Interest rate spread


2.71
%

3.35
%

3.94
%Net interest margin


3.26
%

4.05
%

4.93
%Net interest margin, fully tax equivalent


3.34
%

4.14
%

5.08
%


43

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Table of Contents

The
following table presents, for the years indicated, average assets, liabilities and stockholders' equity, as well as the net interest income from average interest-earning assets and
the resultant yields expressed in percentages. Non-accrual loans are included in the calculation of average loans and leases while non-accrued interest thereon, is excluded
from the computation of yields earned.

Table 3

Year Ended December 31,2009

2008Average Balance

Interest Income or Expense

Average Yield or Cost

Average Balance

Interest Income or Expense

Average Yield or Cost(Dollars in thousands)ASSETS:Interest-earning assets:Gross loans, net of unearned fees(1)(2)(3)

$
1,686,136

$
89,625


5.32
%
$
1,797,357

$
112,844


6.28
%Investment securities(1)Taxable


79,483


3,479


4.38
%

53,215


2,991


5.62
%Tax-exempt


63,972


3,033


4.74
%

69,830


3,404


4.88
%Bank Stocks(4)


20,639


825


4.00
%

31,503


1,647


5.23
%Other earning assets


75,887


193


0.25
%

14,763


426


2.89
%Total interest-earning assets


1,926,117


97,155


5.04
%

1,966,668


121,312


6.17
%Non-earning assets:Cash and due from banks


26,829








36,846Other assets


101,339








291,594Total assets

$
2,054,285







$
2,295,108LIABILITIES AND STOCKHOLDERS' EQUITY:Interest-bearing liabilities:Deposits:Interest-bearing demand

$
148,972

$
368


0.25
%
$
150,210

$
763


0.51
%Money market


309,493


2,753


0.89
%

507,610


9,968


1.96
%Savings


71,645


215


0.30
%

70,243


397


0.56
%Time certificates of deposit


722,793


23,066


3.19
%

514,362


21,434


4.17
%Total interest-bearing deposits


1,252,903


26,402


2.11
%

1,242,425


32,562


2.62
%Borrowings:Repurchase agreements


15,557


139


0.89
%

18,698


390


2.09
%Federal funds purchased


141


1


0.69
%

6,181


137


2.21
%Subordinated debentures


41,239


2,556


6.20
%

41,239


3,328


8.07
%Borrowings


166,766


5,284


3.17
%

170,038


5,333


3.14
%Total interest-bearing liabilities


1,476,606


34,382


2.33
%

1,478,581


41,750


2.82
%Noninterest bearing liabilities:Demand deposits


387,597








440,359Other liabilities


11,671








19,522Total liabilities


1,875,874








1,938,462Stockholders' Equity


178,411








356,646Total liabilities and stockholders' equity

$
2,054,285







$
2,295,108Net interest income




$
62,773







$
79,562Net interest margin








3.26
%







4.05
%


(1)Yields
on loans and investment securities have not been adjusted to a tax-equivalent basis. Net interest margin on a fully
tax-equivalent basis would have been 3.34% and 4.14% for the year ended December 31, 2009 and December 31, 2008, respectively.(2)The
loan average balances include nonaccrual loans.(3)Net
loan fees of $3.2 million and $3.4 million for the year ended December 31, 2009 and 2008, respectively, are included in the yield
computation.(4)Includes
Bankers' Bank of the West stock, Federal Agricultural Mortgage Corporation (Farmer Mac) stock, Federal Reserve Bank stock and Federal Home Loan
Bank stock.


44

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The following table presents the dollar amount of changes in interest income and interest expense for the major categories of our interest-earning assets and
interest-bearing liabilities. Information is provided for each category of interest-earning assets and interest-bearing liabilities with respect to (i) changes attributable to changes in volume
(i.e., changes in average balances multiplied by the prior-period average rate) and (ii) changes attributable to rate (i.e., changes in average rate multiplied by prior-period
average balances). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to volume and the change
due to rate.

Table 4

Year Ended December 31, 2009 Compared to Year Ended December 31, 2008Net Change

Rate

Volume(In thousands)Interest income:Gross Loans, net of unearned fees

$
(23,219
)
$
(16,544
)
$
(6,675
)Investment SecuritiesTaxable


488


(396
)

884Tax-exempt


(371
)

(91
)

(280
)Bank Stocks


(822
)

(333
)

(489
)Other earning assets


(233
)

65


(298
)Total interest income


(24,157
)

(17,299
)

(6,858
)Interest expense:Deposits:Interest-bearing demand


(395
)

(389
)

(6
)Money market


(7,215
)

(4,211
)

(3,004
)Savings


(182
)

(190
)

8Time certificates of deposit


1,632


(2,235
)

3,867Repurchase agreements


(251
)

(194
)

(57
)Federal funds purchased


(136
)

(56
)

(80
)Subordinated debentures


(772
)

(772
)

0Borrowings


(49
)

56


(105
)Total interest expense


(7,368
)

(7,991
)

623Net interest income

$
(16,789
)
$
(9,308
)
$
(7,481
)


2009 Compared to 2008

For the year ended December 31, 2009, the Company's net interest income declined by $16.8 million to $62.8 million
as compared to $79.6 million for the same period in 2008. This decline is attributable to a $9.3 million unfavorable rate variance and a $7.5 million unfavorable volume variance.

The
$9.3 million unfavorable rate variance is due mostly to a $17.3 million unfavorable rate variance on interest-earning assets, partially offset by a $8.0 million
favorable rate variance on interest bearing liabilities. The $17.3 million rate variance related to interest-earning assets is due to the 113 basis point decline in the yield on
interest-earning assets during 2009. The yield on interest-earning assets fell from 6.17% to 5.04% year-over-year. This decrease in yield is partially a result of 56% of our
loan portfolio being variable rate loans tied to an index such as prime, federal funds or LIBOR. Although many of these loans have interest rate floors, the overall decline in interest rates discussed

45

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Table of Contents

above
caused the average yield on loans for the Company to decrease by 96 basis points from 6.28% for the year ended December 31, 2008 to 5.32% in 2009. During 2008, the prime rate fell from
7.25% at December 31, 2007 to 3.25% at December 31, 2008, a decrease of 400 basis points. Although the prime rate has stayed at 3.25% through 2009, because it was at higher rates
throughout most of 2008, this caused a decline in overall interest income on variable rate loans in 2009. A significant portion of the Company's variable rate loans renewed throughout 2009 with higher
rates due primarily to floors being added to the loan. Therefore, it is expected that the yield on earning assets will increase modestly during 2010 even if there are no increases to the targeted
federal funds rate by the FOMC.

Additionally,
the yield on other earning assets, which mostly represented federal funds sold and interest earning deposits at banks, declined by 264 basis points. In 2008, this category
did not affect the overall yield on interest-earning assets significantly as this category only represented 0.8% of all interest-earning assets. In 2009, this category represented 3.9% of all
interest-earning assets causing it
to have a more significant impact on the overall yield on interest-earning assets. Similarly, the yields on investment securities declined during 2009 while the average balances in these categories
increased.

Partially
offsetting the impact of the decline in yield on interest-earning assets was a favorable reduction in the cost of interest-bearing liabilities by 49 basis points during 2009.
The cost of interest-bearing liabilities declined from 2.82% in 2008 to 2.33% in 2009, mostly due to a decline in interest-bearing deposits. In particular, the cost of time deposits declined by 98
basis points during 2009 due to the renewals of time deposits at lower rates. During 2010, approximately $521.8 million of time deposits will mature with a weighted-average interest cost of
2.08%. If the interest rate environment remains flat during 2010, the average cost of time deposits will decline slightly throughout 2010 which will continue to improve our net interest margin.

The
$7.5 million unfavorable volume variance is primarily the result of a $40.6 million decline in total interest-earning assets. Most of this decline is a result of a
$111.2 million decline in average loan balances throughout 2009. The actual balance of loans outstanding at December 31, 2009, is $1.52 billion, compared to average loan balances
during 2009 of $1.69 billion, a difference of $166.5 million. Because of the lower ending balance of loans, it is expected that average loans outstanding will be lower in 2010 than they
were in 2009 causing an unfavorable volume variance in 2010. Offsetting this expected unfavorable loan volume variance, management expects to decrease the average balance of lower yielding other
earning assets (primarily federal funds sold and interest bearing deposits at banks) throughout 2010.

The
following table presents for the years indicated, average assets, liabilities and stockholders' equity, as well as the net interest income from average interest-earning assets and
the resultant yields expressed in percentages. Non-accrual loans are included in the calculation of average loans and leases while non-accrued interest thereon is excluded from
the computation of yields earned.

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Table 5

Year Ended December 31,2008

2007Average
Balance

Interest
Income or
Expense

Average
Yield or
Cost

Average
Balance

Interest
Income or
Expense

Average
Yield or
Cost(Dollars in thousands)ASSETS:Interest-earning assets:Gross loans, net of unearned fees(1)(2)(3)

$
1,797,357

$
112,844


6.28
%
$
1,871,703

$
153,214


8.19
%Investment securities(1)Taxable


53,215


2,991


5.62
%

52,166


2,515


4.82
%Tax-exempt


69,830


3,404


4.88
%

104,592


5,193


4.97
%Bank stocks(4)


31,503


1,647


5.23
%

32,091


1,853


5.78
%Other earning assets


14,763


426


2.89
%

13,017


914


7.02
%Total interest-earning assets


1,966,668


121,312


6.17
%

2,073,569


163,689


7.89
%Non-earning assets:Cash and due from banks


36,846








48,283Other assets


291,594








490,121Total assets

$
2,295,108







$
2,611,973LIABILITIES AND STOCKHOLDERS' EQUITY:Interest-bearing liabilities:Deposits:Interest-bearing demand

$
150,210

$
763


0.51
%
$
157,806

$
1,009


0.64
%Money market


507,610


9,968


1.96
%

638,295


23,583


3.69
%Savings


70,243


397


0.56
%

77,602


602


0.78
%Time certificates of deposit


514,362


21,434


4.17
%

562,075


28,400


5.05
%Total interest-bearing deposits


1,242,425


32,562


2.62
%

1,435,778


53,594


3.73
%Borrowings:Repurchase agreements


18,698


390


2.09
%

29,104


1,346


4.62
%Federal funds purchased


6,181


137


2.21
%

741


44


5.93
%Subordinated debentures


41,239


3,328


8.07
%

41,239


3,756


9.11
%Borrowings


170,038


5,333


3.14
%

47,895


2,700


5.64
%Total interest-bearing liabilities


1,478,581


41,750


2.82
%

1,554,757


61,440


3.95
%Noninterest bearing liabilities:Demand deposits


440,359








476,876Other liabilities


19,522








28,808Total liabilities


1,938,462








2,060,441Stockholders' equity


356,646








551,532Total liabilities and stockholders' equity

$
2,295,108







$
2,611,973Net interest income




$
79,562







$
102,249Net interest margin








4.05
%







4.93
%


(1)Yields
on loans and investment securities have not been adjusted to a tax-equivalent basis. Net interest margin on a fully
tax-equivalent basis would have been 4.14% and 5.08% for the twelve months ended December 31, 2008 and December 31, 2007, respectively.(2)The
loan average balances include nonaccrual loans.(3)Net
loan fees of $3.4 million and $5.2 million at December 31, 2008 and 2007, respectively, are included in the yield computation.(4)Includes
Bankers' Bank of the West stock, Federal Agricultural Mortgage Corporation (Farmer Mac) stock, Federal Reserve Bank stock and Federal Home Loan
Bank stock.


47

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Table of Contents




The following table presents the dollar amount of changes in interest income and interest expense for the major categories of our interest-earning
assets and interest-bearing liabilities. Information is provided for each category of interest-earning assets and interest-bearing liabilities with respect to (i) changes attributable to
changes in volume (i.e., changes in average balances multiplied by the prior-period average rate) and (ii) changes attributable to rate (i.e., changes in average rate multiplied
by prior-period average balances). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to volume
and the change due to rate.

Table 6

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007Net Change

Rate

Volume(In thousands)Interest income:Gross loans, net of unearned fees

$
(40,370
)
$
(34,491
)
$
(5,879
)Investment securitiesTaxable


476


424


52Tax-exempt


(1,789
)

(93
)

(1,696
)Equity securities


(206
)

(173
)

(33
)Other earning assets


(488
)

(632
)

144Total interest income


(42,377
)

(34,965
)

(7,412
)Interest expense:Deposits:Interest-bearing demand


(246
)

(199
)

(47
)Money market


(13,615
)

(9,475
)

(4,140
)Savings


(205
)

(152
)

(53
)Time certificates of deposit


(6,966
)

(4,693
)

(2,273
)Repurchase agreements


(956
)

(579
)

(377
)Federal funds purchased


93


(9
)

102Subordinated debentures


(428
)

(428
)

0Borrowings


2,633


(555
)

3,188Total interest expense


(19,690
)

(16,090
)

(3,600
)Net interest income

$
(22,687
)
$
(18,875
)
$
(3,812
)


2008 Compared to 2007

Net interest income decreased by $22.7 million, or 22.2%, for 2008 as compared to 2007. This decrease is attributable to an
$18.9 million unfavorable rate variance and a $3.8 million unfavorable volume variance as illustrated in Table 6 above.

The
$18.9 million unfavorable rate variance is due mostly to a reduction in the yield on interest-earning assets during 2008. The yield on interest-earning assets fell from 7.89%
to 6.17% year-over-year, a decrease of 172 basis points. This decrease lowered interest income by $35.0 million from 2007 to 2008. This decrease is primarily a result of
a significant portion of our loan portfolio being variable rate loans tied to an index such as prime, federal funds or LIBOR. During 2008, the prime rate fell from 7.25% at December 31, 2007 to
3.25% at December 31, 2008, a decrease of 400 basis points. In 2007, the prime rate was 8.25% for almost three-fourths of the year before three decreases totaling 100 basis points reduced it
from 8.25% to 7.25% in the last three and half-months of

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2007.
For 2008, the rate decreases started early with a 125 basis point decrease in January 2008 alone. The federal funds rate has a direct impact on overall rates in the economy, and in particular on
the prime rate. Decreases in prime rate are generally identical in the amount of basis points as changes to the target federal funds rate by the FOMC. The prime rate fell by 400 basis points in 2008,
whereas the targeted federal funds rate fell by 400 to 425 basis points, as the last decrease in rates by the FOMC took the targeted federal rates to a point between 0 and 25 basis points. Partially
offsetting the $42.3 million decrease in interest income was a reduction in the interest paid on deposits and other borrowings of $19.7 million. The cost of funds decreased from 3.95% in
2007 to 2.82% in 2008. The cost of funds decreased by 113 basis points, as compared to the 172 basis point decrease in the yield on earning assets.

The
$3.8 million unfavorable volume variance in 2008 as compared to 2007 is due mostly to a $74.3 million decrease in the average balances of gross loans, net of unearned
discount and a $34.8 million decrease in average tax-exempt bonds in 2008 as compared to 2007. Although average loans decreased during 2008, the actual ending balance of loans
increased by $44.7 million at December 31, 2008 as compared to December 31, 2007. All other average interest-earning assets increased by $2.2 million
year-over-year as average
interest-earning assets decreased by $106.9 million in 2008 as compared to 2007. The 2008 decrease in average loans is mostly attributable to an $87.9 million
year-over-year decrease in average construction loans and a $10.6 million year-over-year decrease in average real estate mortgage loans,
partially offset by a year-over-year increase in average commercial loans.

Provision for Loan Losses

The provision for loan losses in each year represents a charge against earnings. The provision is the amount required to maintain the
allowance for loan losses at a level that, in our judgment, is adequate to absorb probable incurred loan losses in the loan portfolio. The provision for loan losses is based on our allowance
methodology and reflects our judgments about the adequacy of the allowance for loan losses. In determining the amount of the provision, we consider certain quantitative and qualitative factors
including our historical loan loss experience, the volume and type of lending we conduct, the results of our credit review process, the amounts and severity of classified, criticized and nonperforming
assets, regulatory policies, general economic conditions, underlying collateral values and other factors regarding collectability and impairment. The amount of expected loss on our loan portfolio is
influenced by the collateral value associated with our loans. Loans with greater collateral value lessen our exposure to loan loss provision.

For
further discussion of the methodology and factors impacting management's estimate of the allowance for loan losses, see "Financial ConditionAllowance for Loan Losses"
below. For a discussion of impaired loans and associated collateral values, see "Financial ConditionNonperforming Assets and Other Impaired Loans" below.

2009 Compared to 2008

The provision for loan losses increased by $17.3 million to $51.1 million for the year ended December 31, 2009 as
compared to $33.8 million in 2008.

Of
the $51.1 million of provision for loan losses in 2009, approximately $37.0 million was related to impaired loans and related charge-offs. Provision for loan
losses of $14.1 million was made for the general component of the allowance for loan losses, which was primarily due to the impact of net charge-offs during the year on the
historical loss and economic condition components of our allowance for loan losses. The Company determined that the provision for loan losses made during 2009 was sufficient to maintain our allowance
for loan losses at a level necessary for the probable incurred losses inherent in the loan portfolio as of December 31, 2009. The provision for loan losses was driven

49

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primarily
from an increase in nonperforming loans (nonperforming loans were $59.7 million at December 31, 2009 as compared to $54.8 million at December 31, 2008) and
related charge-offs, primarily due to weakness in the performance of residential construction, land and land development loans. Net charge-offs were $44.1 million in
2009 as compared to $14.5 million in 2008. We believe that continued economic weakness will likely result in elevated credit costs.

Our
allowance for loan losses compared to loans, net increased to 3.42% at December 31, 2009 compared to 2.46% at December 31, 2008.

2008 Compared to 2007

The provision for loan losses increased by $9.1 million to $33.8 million for the year ended December 31, 2008 as
compared to $24.7 million in 2007.

The
Company determined that the provision for loan losses made during 2008 of $33.8 million was necessary to have an allowance for loan losses at a level necessary for the
probable incurred losses inherent in the loan portfolio as of December 31, 2008. Specifically, the increase in impaired loans from $23.3 million at December 31, 2007 to
$54.8 million at December 31, 2008, and a corresponding higher specific allocation related to such loans accounted for approximately $21.3 million of provision for loan losses
made during 2008. Of this $21.3 million of provision for loan losses related to a higher specific allocation, $14.5 million was charged off during 2008. In addition to the
$21.3 million of provision related to a higher specific allocation, the impact of the level of charge-offs and the current economic climate on our historical loss and economic
concerns components of our allowance for loan losses resulted in an additional provision for loan losses of $12.5 million, for a total provision for loan losses of $33.8 million during
2008.

Noninterest Income

The following table presents our major categories of noninterest income:

Table 7

ChangeIncrease / (Decrease)Year Ended December 31,2009 v 2008

2008 v 20072009

2008

2007(In thousands)Customer service and other fees

$
9,520

$
9,682

$
9,509

$
(162
)
$
173Gain (loss) on sale of securities


(2
)

138





(140
)

138Other income


894


800


1,187


94


(387
)Total noninterest income

$
10,412

$
10,620

$
10,696

$
(208
)
$
(76
)


2009 Compared to 2008

Noninterest income remained relatively flat in 2009, with a $0.2 million, or 2%, decline in 2009 as compared to 2008. The
decline in noninterest income is mostly due to customer service and other fees, which declined primarily as a result of a decline in NSF and ATM fees, partially offset by an increase in analysis
account fees due to a lower earnings credit on compensating balances. Analysis fee income is generally offset by an earnings credit rate. As interest rates decline, the earnings credit rate offset
also decreases, which in turn increases analysis fees.

50

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Table of Contents

2008 Compared to 2007

Overall noninterest income also remained relatively flat in 2008 as compared to 2007. Customer service and other fees increased by
$0.2 million, or 1.8%, in 2008 as compared to 2007, primarily due to an increase in analysis fee income.

Other
income decreased by $0.4 million in 2008 as compared to 2007. Included in other income is net income on assets held by the Company for purposes of funding its nonqualified
deferred compensation plan. These assets are required to be marked-to-market through the income statement. As income from these assets is used to offset the cost of our
deferred compensation plan, they are invested in similar assets that are used to determine the value of the accounts of our deferred compensation plan participants. The value of these assets declined
in 2008, which caused a decrease in other noninterest income. However, there was an offsetting reduction in compensation expense, which is recorded as a part of salaries and employee benefit expense,
as discussed below under noninterest expense.

Noninterest Expense

The following table presents the major categories of noninterest expense:

Table 8

Year Ended
December 31,

ChangeIncrease/
(Decrease)2009

2008

2007

2009 v 2008

2008 v 2007(Amounts in thousands)Noninterest expense:Salaries and employee benefits

$
26,547

$
31,086

$
39,179

$
(4,539
)
$
(8,093
)Occupancy expense


7,609


7,815


7,813


(206
)

2Furniture and equipment


4,441


5,290


4,864


(849
)

426Impairment of goodwill





250,748


142,210


(250,748
)

108,538Amortization of intangible assets


6,278


7,433


8,666


(1,155
)

(1,233
)Other real estate owned


5,931


1,612


939


4,319


673Insurance and assessments


6,536


2,956


2,075


3,580


881Professional fees


3,224


3,256


3,841


(32
)

(585
)Other general and administrative


9,872


9,460


16,969


412


(7,509
)Total noninterest expense

$
70,438

$
319,656

$
226,556

$
(249,218
)
$
93,100


2009 Compared to 2008

Noninterest expense for the year ended December 31, 2009 decreased by $249.2 million to $70.4 million compared
with the same period in 2008. Excluding the $250.7 million goodwill impairment, noninterest expense increased by $1.5 million in 2009 as compared to 2008. This increase is primarily the
result of a $4.3 million increase in expenses related to other real estate owned, a $3.6 million increase in insurance and assessments expense and a $0.4 million increase in other
general and administrative expenses. These increases were partially offset by a $4.5 million decrease in salaries and employee benefits, a $1.1 million decrease in occupancy and
furniture & equipment expense and a $1.2 million decrease in the amortization of intangible assets.

Salaries
and employee benefits expense declined by $4.5 million, or 14.6%, in 2009 as compared to 2008. This decline is primarily a result of a $4.2 million decrease in
base salaries and employee benefit expense, primarily as a result of a decline in full-time equivalent employees by 68 from June 30, 2008 to December 31, 2009. At the end of
the second quarter 2008, the Company announced a major effort

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to
better align our expenses with the current size of our business. This effort was expected to reduce overall noninterest expense by approximately $6.0 million once fully implemented. A
significant portion of these annualized savings were expected to be from salaries and employee benefits expense and the salary and employee benefit portion of this goal was achieved in 2009. Overall
base salary and employee benefit expense is expected to remain consistent with 2009 levels throughout 2010 as employee levels are not expected to change significantly. In addition to the overall
decline in base salaries and employee benefits, incentive and bonus expense declined by $1.9 million, but was offset by a $1.6 million increase to equity based compensation expense.
Incentive and bonus expense declined due to the loss in 2009 being attributable to items that directly affect incentives and bonuses, including a decline in average loan balances, higher provision for
loan losses and higher overall loan workout expenses. The increase in equity based compensation expense in 2009 is due mostly to a $2.9 million reversal of equity based compensation in 2008,
which caused 2008 expense to be lower than expected. This reversal in 2008 was made due to a change in expectation regarding the vesting criteria for performance-based shares. It was determined that
it is no longer expected that the performance-based shares will meet their vesting condition, which is based on earnings per common share, prior to their expiration date of December 31, 2012.
Should this expectation change, additional expense could be recorded in future periods.

Overall
equity-based compensation expense is based on the actual stock price at the time of the awards were granted. Most of the awards were granted in 2005 through 2007 when stock
prices were higher and most of these grants expect to become fully vested in 2010. It is expected that 2010 equity-based compensation expense will be similar to 2009, but is expected to decline
significantly after 2010 as most of the awards granted with higher stock prices expect to vest in late 2010.

On
a combined basis, occupancy and furniture & equipment expense declined by $1.1 million, or 8.1%, to $12.1 million in 2009 as compared to $13.1 million in
2008. This decline is primarly attributable to lower depreciation expense and lower maintenance and repairs expense in 2009 as compared to 2008 due mostly to the closure of two branches in 2008, as
well as lower depreciation expense due to the outsourcing of certain data processing functions in late 2008.

Amortization
expense decreased in 2009 by $1.2 million, or 15.5%, as a result of accelerated amortization methods. Amortization expense is projected to decrease by
$1.1 million, or 17.7%, in 2010 as compared to 2009 as presented in Note 9, Other Intangible Assets, to "Item 8. Financial Statements and Supplementary DataNotes to
Consolidated Financial Statements".

Other
real estate owned expense increased by $4.3 million to $5.9 million in 2009 as compared to $1.6 million in 2008. The increase in expenses for other real estate
owned in 2009 as compared to 2008 is mostly due to valuation adjustments of other real estate owned, as well as $1.0 million of property holding expenses, including taxes and insurance. The
total balance of other real estate owned at December 31, 2009 is $37.2 million, with most of this balance attributable to foreclosures during 2009. The fair value of other real estate
owned is discussed in Note 19, Fair Value, to "Item 8. Financial Statements and Supplementary DataNotes to Consolidated Financial Statements". Generally, the fair value of
the other real estate owned is based on appraised values less estimated costs to sell the other real estate owned. As updated appraisals are obtained related to other real estate owned, any declines
in appraised value will affect the amount of other real estate owned expense through future write-downs in value.

The
increase in insurance and assessments expense of $3.6 million to $6.5 million in 2009 is mostly related to higher FDIC insurance assessment rates on deposits in 2009 as
compared to 2008, as well as a $0.9 million special assessment charged by the FDIC. This special assessment was charged on all banks as a percentage of net assets in the second quarter 2009.
With the completion of our regulatory examination at the end of the second quarter 2009, the overall FDIC insurance assessments increased. Based on ending deposits and the current FDIC rates in
effect, our overall FDIC insurance premiums

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are
expected to be approximately $0.6 million higher in 2010 as compared to 2009. Actual deposits at the end of each quarter and any changes to the FDIC insurance rates could affect this
estimate for 2010.

The
$0.4 million increase in other general and administrative expense to $9.9 million in 2009 as compared to $9.5 million in 2008 is mostly due to higher loan
workout related expenses. It is expected that overall loan workout related expenses will remain at elevated levels until our nonperforming asset balances decline significantly from current balances.

2008 Compared to 2007

Overall noninterest expense increased by $93.1 million in 2008 as compared to 2007. This increase was mostly due to a
$250.7 million goodwill impairment charge in 2008 as compared to a $142.2 million goodwill impairment charge in 2007. At December 31, 2008, there was no goodwill asset recorded on
the Company's consolidated balance sheet.

Excluding
the goodwill impairment charge in both years, noninterest expense would have been $68.9 million in 2008 as compared to $84.3 million in 2007, a decrease of
$15.4 million.

Salaries
and employee benefits decreased by $8.1 million, or 20.7%, from 2007 to 2008. The decrease is partially attributable to a $4.1 million decrease in base salaries
and employee benefits expense in connection with a decline in full-time equivalent employees by 89 from December 2007 to December 2008. Of the remaining $4.0 million decrease,
approximately $3.3 million is related to a decrease in equity-based compensation and $0.7 million is related to a decrease in bonus and incentive expense in 2008 as compared to 2007. The
decline in equity-based compensation is mostly due to a change in expectation regarding the vesting criteria for performance-based shares as discussed above.

Furniture
and equipment expense increased by $0.4 million, or 8.8%, in 2008 as compared to 2007. This increase is mostly due to accelerating depreciation expense for assets that
were abandoned upon the closing of two branches during 2008, as well as accelerated depreciation related to certain computer equipment that was no longer in service as of December 31, 2008, as
a result of our outsourcing of item processing and data processing in December 2008.

A
goodwill impairment charge of $250.7 million was recorded in 2008 as compared to a goodwill impairment charge of $142.2 million in 2007. Goodwill is recorded in nearly
every purchase transaction when a company buys another entity. The purchase price is allocated among the various components of the acquired business. This allocation is based on the appraised value of
the underlying assets. If the purchase price is higher than the fair market value of the acquired business' identifiable net assets, the excess purchase price is labeled goodwill and is recorded as an
intangible non-earning asset and capital (although it is not treated as capital for regulatory purposes). Under current accounting rules, a company must evaluate the value of goodwill each
year or whenever factors indicate that an impairment is probable, and write down any goodwill in excess of its current value. As goodwill is based on the purchase price paid, declines in value due to
changes in economic conditions can cause goodwill impairment. These 2008 and 2007 non-cash accounting write-offs of goodwill had no impact on our cash flow, liquidity or
regulatory capital.

Amortization
expense decreased in 2008 by $1.2 million, or 14.2%, as a result of accelerated amortization methods.

Other
real estate owned expense increased by $0.7 million in 2008 to $1.6 million as compared to $0.9 million in 2007. This increase in 2008 as compared to 2007 is
mostly due to charges related to the reduction of the carrying value of other real estate owned.

Insurance
and assessments increased by $0.9 million, or 42.5%, to $3.0 million in 2008 as compared to $2.1 million in 2007. The increase in 2008, as compared to
2007, was primarily because

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the
Company was able to utilize its one-time credit provided by the FDIC to offset the cost of its FDIC insurance premiums in 2007.

Other
general and administrative expenses decreased by $7.5 million, or 44.2%, to $9.5 million in 2008 as compared to $17.0 million in 2007. The $7.5 million
decrease is mostly due to two charges in 2007 that did not occur in 2008. First, there was a $6.5 million charge in 2007 as a result of a settlement of the Barnes action lawsuit. Second, in
2007 the Company recorded a $1.0 million charge for expenses associated with the combination of its subsidiary banks on January 1, 2008.

Income Taxes Benefit

2009 Compared to 2008

The effective tax benefit rate in 2009 was 39.6% as compared to 2.5% in 2008. In 2009, the primary differences between the expected tax
benefit rate and the actual tax benefit rate are state taxes and tax-exempt income. In 2008, the primary difference between the expected benefit rate and the actual benefit rate was the
significant goodwill impairment charge, which was not deductible for income tax purposes. For further information regarding differences between the expected tax rate and the actual tax rate, see
Note 13, Income Taxes under "Item 8. Financial Statements and Supplementary DataNotes to Consolidated Financial Statements".

Income
tax expense is the total of the current year income tax due or refundable and the change 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 carryforwards. 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 that includes 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 some portion, or all, of the deferred tax asset will not be realized. In assessing the realization
of 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, the forecasts of future income, applicable tax planning strategies, and assessments of current and future economic and business conditions. This analysis is
updated quarterly and adjusted as necessary. At the end of 2009, based on the Company's ability to carryback up to $9.4 million of potential tax losses generated in future years to prior years
and various tax planning strategies, including sale leaseback of certain locations, the Company has determined that a valuation allowance for deferred tax assets is not required.

Because
the Company continues to have a deferred tax asset, the Company will, on a quarterly basis, evaluate the need for a valuation allowance and whether the allowance should be
adjusted based on then available evidence. If the Company records a net loss for financial reporting purposes in 2010, it may record a valuation allowance related to its deferred tax assets depending
on then available evidence.

2008 Compared to 2007

The effective tax benefit in 2008 was 2.5% as compared to 0.1% in 2007. The reason for the benefit in 2008 is due to
tax-exempt income further reducing the net loss before taxes. No tax benefit was recorded in 2008 or 2007 as a result of the goodwill impairment charges, as goodwill impairment is not tax
deductible. The taxable loss before taxes for financial reporting purposes in 2008 was $263.3 million. After adding back the nondeductible goodwill impairment charge of $250.7 million,
the

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2008
taxable loss before taxes for financial reporting purposes would have been $12.5 million. This was further decreased by tax-exempt income causing an overall $6.5 million
tax benefit in 2008.

For
2007, the effective tax benefit was 0.1%. After adding back the nondeductible goodwill impairment charge of $142.2 million, the 2007 taxable income before taxes for financial
reporting purposes would
have been $3.9 million. This was mostly offset by tax-exempt income causing an overall small tax benefit in 2007.

FINANCIAL CONDITION

At December 31, 2009, we had total assets of $2.1 billion, compared to $2.1 billion at December 31, 2008.
Although total assets at December 31, 2009, remained consistent with the balance at the end of the prior year, there was a shift to more liquid assets during 2009, including investment
securities and short-term funding due to current economic conditions. Total loans declined by $307 million from $1.8 billion as of December 31, 2008 to
$1.5 billion as of December 31, 2009. During this same time period, the Company's investments increased by $104 million from $144 million as of December 31, 2008 to
$248 million as of December 31, 2009, and total cash and cash equivalents increased by $189 million to $235 million at December 31, 2009 as compared to
$46 million at December 31, 2008. The increase in cash and cash equivalents is primarily a result of the decline in loan balances, coupled with the issuance of $57.8 million, net
of expenses, of preferred stock in the third quarter of 2009. Management continues to evaluate alternatives for the utilization of this additional liquidity to improve our future net interest margin,
including a combination of purchasing new investments securities, making new loans and not renewing certain maturing time deposits.

The
overall $268.9 million decline in total assets in 2008 as compared to 2007 is mostly attributable to a $258.2 million decrease in goodwill and other intangible assets.

The
following table sets forth certain key consolidated balance sheet data:

Table 9

December 31,2009

2008

2007(In thousands)Cash and due from banks

$
234,483

$
45,711

$
52,356Total investments


248,236


144,264


166,317Total loans


1,519,608


1,826,333


1,781,647Total assets


2,127,580


2,102,741


2,371,664Earning assets


1,985,059


1,989,884


1,949,211Deposits


1,693,290


1,698,651


1,799,507


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Loans

The following table sets forth the amount of our loans outstanding at the dates indicated:

Table 10

December 31,2009

2008Amount

% of
Loans

Amount

% of
Total(Dollars in thousands)Real estate:Residential and commercial

$
815,571


54
%
$
730,300


40
%Construction


105,612


7
%

268,306


15
%Commercial


521,016


34
%

746,241


41
%Agricultural


18,429


1
%

22,738


1
%Consumer


36,175


2
%

38,352


2
%Lease financing and other


25,366


2
%

23,996


1
%Total gross loans


1,522,169


100
%

1,829,933


100
%Less: allowance for loan losses


(51,991
)




(44,988
)Unearned discount


(2,561
)




(3,600
)Net Loans

$
1,467,617




$
1,781,345Loans held for sale at lower of cost or fair value

$
9,862




$
5,760


There
were $921.2 million of real estate loans at December 31, 2009 as compared to $998.6 million at December 31, 2008, a decrease of $77.4 million as
management continues efforts to decrease its exposure to residential and commercial real-estate. At December 31, 2009, there were approximately $18 million of loans secured
by for-sale residential real estate and approximately $57 million of residential land and land development loans. This compares to
December 31, 2008, with approximately $57 million of loans secured by for-sale residential real estate and approximately $114 million of residential land and land
development loans.

Under
joint guidance from the FDIC, the Federal Reserve and the Office of the Comptroller of the Currency on sound risk management practices for financial institutions with
concentrations in commercial real estate lending, a financial institution is actively involved in commercial real estate lending if total reported loans secured by multifamily and non-farm
residential properties, loans for construction, land development and other land and loans otherwise sensitive to the general commercial real estate market, including loans to commercial real estate
related entities, represent 300% or more of total capital. For our Bank, the total reported commercial real estate loans to total capital is 329% at December 31, 2009, as compared to 417% of
capital at December 31, 2008. Loans secured by commercial real estate, as prescribed under the regulatory concentration guidelines, decreased by $134.4 million, or 15.3%, to
$742.6 million at December 31, 2009, as compared to $877.1 million at December 31, 2008. Management employs heightened risk management practices, including board and
management oversight and strategic planning, development of underwriting standards, risk assessment and monitoring through market analysis and stress testing. Loans secured by commercial real estate
are recorded on the balance sheet as either a commercial real estate loan or commercial loan depending on the purpose of the loan, not the underlying collateral. The overall decline in loans in 2009
is partially attributable to management's efforts to mitigate overall risk within the loan portfolio through the reduction of real estate loans and loans secured by real estate. Further, management
worked to reduce the volume of lower yielding syndicated and participated loans.

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Total
loans, net of unearned discount (excluding loans held for sale), decreased by $306.7 million, or 16.8%, from December 31, 2009 to December 31, 2008. Average
loans declined by $111.2 million in 2009 as compared to 2008.

With
respect to group concentrations, most of the Company's business activity is with customers in the state of Colorado. At December 31, 2009, the Company did not have any
significant concentrations in any particular industry.

Loan maturities

The following table shows the amounts of loans outstanding at December 31, 2009, which, based on remaining scheduled repayments
of principal, were due in one year or less, more than one year through five years, and more than five years. Demand or other loans
having no stated maturity and no stated schedule of repayments are reported as due in one year or less. The table also presents, for loans with maturities over one year, an analysis with respect to
fixed interest rate loans and floating interest rate loans. The table excludes unearned discount.

Table 11

Rate Structure for
Loans with
Maturities over
One YearMaturityOne Year
or Less

One
through
Five Years

Over Five
YearsTotal

Fixed Rate

Floating Rate(In thousands)Real estateresidential and commercial

$
325,301

$
340,153

$
150,117

$
815,571

$
254,285

$
235,985Real estateconstruction


74,882


30,730





105,612


13,750


16,980Commercial


240,586


202,136


78,294


521,016


105,797


174,634Agricultural


9,550


6,530


2,349


18,429


4,442


4,437Consumer


11,757


19,407


5,011


36,175


23,256


1,163Lease receivable and other


2,739


3,804


18,823


25,366


2,075


20,550Total

$
664,815

$
602,760

$
254,594

$
1,522,169

$
403,605

$
453,749


Nonperforming Assets and Other Impaired Loans

Credit risk related to nonperforming assets arises as a result of lending activities. To manage this risk, we employ frequent
monitoring procedures in order to appropriately classify assets including moving a loan to nonperforming status. This is accomplished through a risk rating system described below that identifies the
overall potential amount of risk associated with each loan in our loan portfolio. This monitoring and rating system is designed to help management determine current and potential problems so that
corrective actions can be taken promptly.

Loans
are generally placed on nonaccrual status when they become 90 days or more past due or at such time as management determines, after considering economic and business
conditions and an analysis of the borrower's financial condition, that the timely recognition of principal and interest is doubtful.

A
loan is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan
agreement. Impaired loans consist of our nonaccrual loans, loans that are 90 days or more past due, and other loans for which we determine that noncompliance with contractual terms of the loan
agreement is probable. Losses on individually identified impaired loans that are not collateral dependent are measured based on the present value of expected future cash flows discounted at the
original effective interest rate of each loan. For loans that are collateral dependent, impairment is measured based on the fair value of the collateral less estimated selling costs.

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Table 12

December 31,2009

2008(Dollars in thousands)Nonperforming assets:Nonaccrual loans and leases, not restructured

$
59,584

$
54,594Other impaired loans


123


228Total nonperforming loans

$
59,707

$
54,822Other real estate owned and foreclosed assets


37,192


484Total nonperforming assets

$
96,899

$
55,306Impaired Loans:Nonperforming loans

$
59,707

$
54,822Allocated allowance for loan losses


(6,603
)

(11,064
)Net investment in impaired loans

$
53,104

$
43,758Impaired loans with a valuation allowance

$
21,039

$
42,191Impaired loans without a valuation allowance


38,668


12,631Total impaired loans

$
59,707

$
54,822Valuation allowance related to impaired loans

$
6,603

$
11,064Valuation allowance as a percent of impaired loans


11.1
%

20.2
%Nonaccrual loans to loans, net of unearned discount


3.93
%

3.00
%Nonperforming assets to total assets


4.55
%

2.63
%Allowance for loan losses to nonperforming loans


87.08
%

82.06
%


Nonperforming
assets of $96.9 million at December 31, 2009 reflected an increase of $41.6 million from the December 31, 2008 balance of $55.3 million,
mostly due to the $36.7 million increase in other real estate owned and foreclosed assets.

At
December 31, 2009, approximately $25.8 million, or 43%, of all nonperforming loans outstanding were residential construction, land and land development. At
December 31, 2008, approximately $36.8 million, or 67.1%, of all nonperforming loans were residential construction, land and land development loans.

At
December 31, 2009, approximately $12.2 million, or 21%, of all nonperforming loans outstanding were commercial real estate loans. At December 31, 2008,
approximately $6.0 million, or 11.0%, of all nonperforming loans were commercial real estate loans.

The
Company's loss exposure on its nonperforming loans continues to be mitigated by collateral positions on these loans. The allocated allowance for loan losses associated with impaired
loans is computed based upon related collateral value of the loans. The collateral values are determined by recent appraisals, but are generally discounted significantly by management based on
historical collateral dispositions, changes in market conditions since the last valuation and management's expertise and knowledge of the client and the client's business. Annually or, more frequently
based on facts and circumstances, management reviews all real estate loan relationships in excess of $500,000. If, based on an internal evaluation of the property's value, it is determined that the
market or property conditions reflect a potential significant decline in value, an updated appraisal is obtained. Similarly, upon the renewal, extension or refinancing of a real estate loan with new
monies, an appraisal is obtained if based on an internal evaluation it is determined that there has been a significant decline in value. Appraisals are required for all new commercial real estate
loans in excess of $1,000,000; all new

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loans
secured by residential real estate loans in excess of $250,000; renewals, extensions or refinancing with the advance of new monies if there is evidence of market or property deterioration; and
any foreclosure of other real estate in excess of $250,000.

The
Company has an internal risk rating system of classified loans as pass, watch, special mention, substandard, doubtful and loss. These internal guidelines are based on the definitions
in the Uniform Agreement on the Classification of Assets and Appraisal of Securities Held by Banks and Thrifts issued by the Office of the Comptroller of the Currency, the Federal Deposit Insurance
Corporation, the Board of Governors of the Federal Reserve System, and the Office of Thrift Supervision. In particular, loans internally classified as substandard, doubtful or loss are considered
adversely classified loans. At December 31, 2009, the amount of loans that the Company has internally considered to be adversely classified, other than impaired loans as described above, has
declined to $101.0 million as compared to $119.7 million at December 31, 2008. Each internal risk classification is judgmental, but based on objective and subjective
factors/criteria. The internal risk ratings focus on an evaluation of the borrowers' ability to meet future debt service and performance to plan under stress versus only their current condition. As
described below under "Allowance for Loan Losses", the Company adjusts the general component of its allowance for loan losses for the trends in the volume and severity of adversely classified loans.

Other
real estate owned is $37.2 million at December 31, 2009, compared to $0.5 million at December 31, 2008. The balance at December 31, 2009, is
comprised of approximately 27 separate properties of which $15,406,000 is land; $20,455,000 is commercial real estate including multi-family units; and $1,331,000 is residential real estate.

At
December 31, 2009, no additional funds are committed to be advanced in connection with impaired loans.

At
December 31, 2009, there were fourteen construction loans with a remaining interest reserve of approximately $3,314,000. Additionally, at December 31, 2009, the amount
of troubled debt restructurings is immaterial.

The
following table presents our nonperforming assets at the dates indicated:

Table 13

At December 31,2009

2008

2007

2006

2005(Dollars in thousands)Nonaccrual loans, not restructured

$
59,584

$
54,594

$
19,309

$
32,852

$
29,608Accruing loans past due 90 days or more


123


228


527


3


131Total nonperforming loans (NPLs)


59,707


54,822


19,836


32,855


29,739Other real estate owned and foreclosed assets


37,192


484


3,517


1,207


1,465Total nonperforming assets (NPAs)

$
96,899

$
55,306

$
23,353

$
34,062

$
31,204Selected ratios:NPLs to loans, net of unearned discount


3.93
%

3.00
%

1.11
%

1.69
%

1.44
%NPAs to total assets


4.55
%

2.63
%

0.98
%

1.25
%

1.05
%


Allowance for Loan Losses

The allowance for loan losses is maintained at a level that, in our judgment, is adequate to absorb probable incurred loan losses in
the loan portfolio. The amount of the allowance is based on management's evaluation of the collectability of the loan portfolio, historical loss experience, and other significant factors affecting
loan portfolio collectability, including the level and trends in delinquent,

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nonaccrual
and adversely classified loans, trends in volume and terms of loans, levels and trends in credit concentrations, effects of changes in underwriting standards, policies, procedures and
practices, national and local economic trends and conditions, changes in capabilities and experience of lending management and staff, and other external factors including industry conditions,
competition and regulatory requirements.

Our
methodology for evaluating the adequacy of the allowance for loan losses has two basic elements: first, the specific identification of impaired loans and the measurement of an
estimated loss for each individual loan identified; and second, estimating a nonspecific allowance for probable losses on all other loans. Impaired loans are discussed in the previous section. The
specific allowance for impaired loans and the allowance calculated for probable incurred losses on other loans are combined to determine the required allowance for loan losses. The amount calculated
is compared to the actual allowance for loan losses at each quarter end and any shortfall is covered by an additional provision for loan losses.

In
estimating the nonspecific allowance for loan losses, we group the balance of the loan portfolio into segments that have common characteristics, such as loan type, collateral type or
risk rating. For each nonspecific allowance portfolio segment, we apply loss factors to calculate the required allowance. These loss factors are based upon three years of historical loss rates and
adjusted for qualitative factors affecting loan portfolio collectability as described above. Higher net charge-offs during 2009 and 2008 directly increased the historical loss factor. This
also had a direct impact on the economic concerns factor which looks at historical losses by type of loan and applies a loss factor based on both historical losses and management's estimate of the
economic climate for the remaining loans in the portfolio. Management also looks at risk weightings of loans and computes a factor for the volume and severity of classified loans using assigned risk
ratings under regulatory definitions of "watch", "substandard"', "doubtful" and "loss". Loans graded as either doubtful or loss are treated as impaired and are included as part of the specific reserve
computed above. Loans segregated by risk weighting categories watch or substandard are evaluated for trends in volume and severity.

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The
table below summarizes loans held for investment, average loans held for investment, nonperforming loans and changes in the allowance for loan losses arising from loan losses and
additions to the allowance from provisions charged to operating expense:

Table 14

2009

2008

2007

2006

2005(Dollars in thousands)Balance, beginning of period

$
44,988

$
25,711

$
27,899

$
27,475

$
25,022Allowance acquired through acquisition














3,855Unfunded commitment allowance(1)














(718
)Loan charge-offs:Real estateresidential and commercial


6,945


2,639


12,354


2,186


1,740Real estateconstruction


32,153


11,956


12,469


2,044


200Commercial


4,213


1,340


2,825


1,154


2,848Agricultural


3


17


654


40


35Consumer


281


275


497


477


670Lease receivable and other


2,412





174


26


48Total loan charge-offs:


46,007


16,227


28,973


5,927


5,541Recoveries:Real estateresidential and commercial


763


596


906


359


188Real estateconstruction


563


744


279


65


135Commercial


455


259


385


1,023


802Agricultural


9


15


394


84


73Consumer


100


115


134


223


133Lease receivable and other


5





21





126Total loan recoveries


1,895


1,729


2,119


1,754


1,457Net loan charge-offs


44,112


14,498


26,854


4,173


4,084Provision for loan losses(2)


51,115


33,775


24,666


4,597


3,400Balance, end of period

$
51,991

$
44,988

$
25,711

$
27,899

$
27,475Loans held for investment

$
1,519,608

$
1,826,333

$
1,781,647

$
1,947,487

$
2,067,593Average loans held for investment


1,682,580


1,797,304


1,868,856


1,975,055


1,774,241Nonperforming assets


96,899


55,306


23,353


32,855


29,739Selected ratios:Net charge-offs to average loans held for investment


2.62
%

0.81
%

1.44
%

0.21
%

0.23
%Provision for the allowance for loans to average loans held for investment


3.04
%

2.50
%

1.38
%

0.23
%

0.19
%Allowance for loans to loans held for investment at end of period


3.42
%

2.46
%

1.44
%

1.43
%

1.33
%Allowance for loans to non-performing assets


53.65
%

81.34
%

110.10
%

84.91
%

92.39
%


(1)The
reserve for unfunded loan commitments was reclassified from the allowance for loan losses to other liabilities at December 31, 2005.(2)The
provision for loan losses noted in the consolidated statements of income (loss) for the year ended December 31, 2006, includes a provision for
loan losses of $4,597,000 and a recovery on the reserve for unfunded commitments of $307,000.


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At
December 31, 2009, the allowance for loan losses was $52.0 million, or 3.42% of total loans held for investment. This compares to an allowance for loan
loss of $45.0 million, or 2.46% of total loans held for investment at December 31, 2008.

The
increase in the allowance for loan losses is due primarily to the impact of 2009 net charge-offs on the general components of the allowance for loan losses. Actual net
charge-offs related to loans were $44.1 million in 2009, as compared to $14.5 million in 2008, an increase of $29.6 million. Charge-offs are taken on loans
when management determines that after review of all possible sources of repayment, including future cash flows, collateral values and the financial strength of guarantors or co-makers,
that there is no longer a reasonable probability that the principal can be collected.

Net
charge-offs have an impact on the historical loss and economic condition components of our allowance for loan losses computation. Additionally, the time span for
evaluating the impact of historical losses was decreased from three years to two years in our analysis. As most of our charge-offs have occurred in the prior two years, this change from
three years to two years increased our historical loss component of the allowance for loan losses computation.

Approximately
$6.6 million, or 12.7%, of the $52.0 million allowance for loan losses at December 31, 2009, relates to loans specifically reserved. This compares to a
specific reserve of $11.1 million, or 24.6%, of the total allowance for loan losses at December 31, 2008. The decrease in the percent of the portfolio from specific reserves is
attributable to a higher collateral value related to impaired loans at December 31, 2009 as compared to 2008. The general reserve as a percent of overall loans, net of unearned discount, was
2.99% at December 31, 2009 as compared to 1.86% at December 31, 2008. The increase in the general reserve as a percent of loans, net of unearned discount, is due to higher
charge-offs in the most recent two years, an increase in the allowance for internally classified loans and management's expectation of overall economic conditions in the areas in which we
operate.

Management
continues to monitor the allowance for loan losses closely and will adjust the allowance when necessary, based on its analysis, which includes ongoing evaluation of
substandard loans and their collateral positions.

The
following table allocates the allowance for loan losses based on our judgment of inherent losses in the respective categories. While we have allocated the allowance to various
portfolio segments

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for
purposes of this table, the allowance for loan losses is general and is available for the portfolio in its entirety:

Table 15

At December 31,2009

2008

2007

2006

2005Allocation
of the
Allowance

Percent of
Allocation
to Total

Allocation
of the
Allowance

Percent of
Allocation
to Total

Allocation
of the
Allowance

Percent of
Allocation
to Total

Allocation
of the
Allowance

Percent of
Allocation
to Total

Allocation
of the
Allowance

Percent of
Allocation
to Total(Dollars in thousands)Real estateresidential and commercial

$
28,035


54.0
%
$
17,579


39.1
%
$
16,072


62.5
%
$
6,150


22.0
%
$
10,611


38.6
%Real estateconstruction


13,253


25.5


18,696


41.6


4,180


16.3


8,520


30.5


1,928


7.0Commercial


10,000


19.2


8,000


17.8


4,087


15.9


8,452


30.3


9,115


33.2Agricultural


173


0.3


97


0.2


387


1.5


2,071


7.4


477


1.7Consumer


388


0.7


559


1.2


909


3.5


2,027


7.3


721


2.6Leases receivable and other


142


0.3


57


0.1


76


0.3


679


2.5


8


0.0Unallocated(a)





0.0





0.0





0.0





0.0


4,615


16.9Total

$
51,991


100.0
%
$
44,988


100.0
%
$
25,711


100.0
%
$
27,899


100.0
%
$
27,475


100.0
%


(a)Represents
our estimate of risk associated with general economic conditions and portfolio concentrations that are not directly correlated to a specific loan
classification. This estimate was reallocated into the loan categories in 2006.


During 2009, the allocation of the allowance for losses attributable to real estate loans increased by $5.0 million to $41.3 million
at December 31, 2009 compared to $36.3 million at December 31, 2008. The increase in this allocation is due to a higher general reserve associated with real estate loans due
mostly to actual charge-offs during 2008 and 2009.

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During 2007, the change in the allocation of the reserve to real estate-mortgage loans is primarily attributable to higher balances of nonperforming and
classified loans being associated with real estate mortgage loans. This was due in part to a general deterioration in real estate values, particularly in Northern Colorado, during 2007.



We manage our investment portfolio principally to provide collateral for certain deposits, in particular public deposits, as well as to
balance our overall interest rate risk. To a lesser extent, we manage our investment portfolio to provide earnings with a view to minimizing credit risk. At December 31, 2009 and 2008, we did
not own any preferred stock in either the Federal National Mortgage Association (FNMA) or the Federal Home Loan Mortgage Corporation (FHLMC).

The
carrying value of our portfolio of investment securities at the dates indicated are as follows:

Table 16

At December 31,2009

2008(In thousands)Securities available-for-sale:U.S. Treasury securities

$


$
3,495U.S. Government agencies and government-sponsored entities


17,129


2,510State and municipal


60,827


63,015Mortgage backed securitiesagency/residential


127,340


31,965Mortgage backed securitiesprivate/residential


13,959


Marketable equity


1,519


1,345Other securities


360


544Total securities available-for-sale

$
221,134

$
102,874Securities held-to-maturity:Mortgage-backedagency/residential

$
9,942

$
13,114Bank Stocks, at cost

$
17,160

$
28,276


Securities
available-for-sale are carried at fair value, while securities held-to-maturity and bank stocks are carried at historical cost.

Fair
values for municipal securities are generally determined by matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying
exclusively on quoted prices for the specific securities but rather by relying on the securities' relationship to other benchmark quoted securities. Characteristics utilized by matrix pricing include
insurer, credit support, state of issuance, and bond rating. These factors are used to incorporate additional spreads and municipal curves. A separate curve structure is used for
bank-qualified municipal bonds versus general market municipals. For the bank-qualified municipal bonds, active quotes are obtained when available.

Fair
values for U.S. Treasury securities, U.S. government agencies and government-sponsored entities and mortgage backed securities are determined using a combination of daily closing
prices, evaluations, income data, security master (descriptive) data, and terms and conditions data. Additional data used to compute the fair value of U.S. mortgage-backed pass-through
issues (FHLMC, FNMA, GNMA, and SBA pools) includes daily composite seasoned, pool-specific, and generic coupon evaluations, and factors and descriptive data for individual
pass-through pools. Additional data used to compute the fair value of U.S. collateralized mortgage obligations include daily evaluations and

64

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descriptive
data. Additional data used to compute the fair value of mortgage backed securitiesprivate/residential include independent bond ratings.

One
municipal bond related to a hospital was priced using significant unobservable inputs. Management reviewed the financials of the hospital, had discussions with hospital management
and reviewed the underlying collateral for the municipal bond to determine an appropriate benchmark risk-adjusted interest rate based on transactions with similar risks.

The
carrying value of our investment securities at December 31, 2009 totaled $248.2 million compared to $144.3 million at December 31, 2008, an increase of
$103.9 million. The increase in overall securities balances during 2009 is mostly due to the reduction in overall loan balances coupled with overall deposit balances remaining relatively flat.
With the declines in loan balances throughout 2009, the mix of assets was changed to more liquid assets including interest bearing deposit with banks and investment securities.

The
balance of bank stocks decreased by $11.1 million during 2009 to $17.2 million. Bank stocks are comprised mostly of stock of the Federal Reserve Bank of Kansas City,
the Federal Home Loan Bank of Topeka and Bankers' Bank of the West. These stocks have restrictions placed on their transferability as only members of the entities can own the stock. During 2009, the
Company reduced its required holdings in the Federal Reserve Bank of Kansas City by $7.2 million and the Federal Home Loan BankTopeka by $3.9 million. The decline in the
Federal Reserve Bank of Kansas City is a function of the decline in overall stockholders' equity, excluding the preferred stock issuance. The decline in the Federal Home Loan BankTopeka
is due to a decline in overall loan balances.

The
following table shows the maturities of investment securities at December 31, 2009, December 31, 2008, and the weighted average yields of such securities, excluding the
benefit of tax-exempt securities:

Table 17

At December 31, 2009Within One Year

After One Year but
within Five Years

After Five Years but
within Ten Years

After Ten YearsAmount

Yield(1)

Amount

Yield(1)

Amount

Yield(1)

Amount

Yield(1)(Dollars in thousands)Securities available-for-sale:U.S. Government agencies and sponsored entities

$



0.00
%
$



0.00
%
$
4,967


2.97
%
$
12,162


5.08
%State and municipal


1,428


7.13
%

11,633


7.00
%

6,048


7.60
%

41,717


7.67
%Mortgage backed securitiesagency/residential





0.00
%




0.00
%

5,482


4.59
%

121,859


3.58
%Mortgage backed securitiesprivate/residential





0.00
%




0.00
%




0.00
%

13,959


5.38
%Marketable equity





0.00
%

1,519


0.88
%




0.00
%




0.00
%Other securities


360


6.25
%




0.00
%




0.00
%




0.00
%Total securities available-for-sale

$
1,788


6.95
%
$
13,152


6.29
%
$
16,497


5.17
%
$
189,697


4.91
%Securities held-to-maturity:Mortgage-backed

$



0.00
%
$



0.00
%
$



0.00
%
$
9,942


5.58
%


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At December 31, 2008Within One Year

After One Year but within Five Years

After Five Years but within Ten Years

After Ten YearsAmount

Yield(1)

Amount

Yield(1)

Amount

Yield(1)

Amount

Yield(1)(Dollars in thousands)Securities available-for-sale:U.S. Treasury securities

$
3,495


0.67
%
$



0.00
%
$



0.00
%
$



0.00
%U.S. Government agencies and sponsored entities





0.00
%




0.00
%




0.00
%

2,510


5.07
%State and municipal


2,105


6.68
%

14,581


6.84
%

3,239


7.05
%

43,090


7.53
%Mortgage backed securitiesagency/residential





0.00
%

142


4.76
%

931


4.37
%

30,892


5.02
%Marketable equity securities


1,345


28.35
%




0.00
%




0.00
%




0.00
%Other securities


184


6.25
%

360


6.25
%




0.00
%




0.00
%Total securities available-for-sale

$
7,129


7.81
%
$
15,083


6.81
%
$
4,170


6.45
%
$
76,492


6.44
%Securities held-to-maturity:Mortgage-backed

$



0.00
%
$



0.00
%
$



0.00
%
$
13,114


5.62
%


(1)Yield
is computed on a fully-tax equivalent basis for municipal bonds.


The
marketable equity securities yield for 2008 includes accretion income related to a purchase price adjustment on a security that was redeemed at par in April 2009.

At
December 31, 2009 and 2008, we held $17.2 million and $28.3 million, respectively, of other equity securities consisting of bank stocks with no maturity date,
which are not reflected in the above schedule.

Deposits

Total deposits were $1.7 billion at December 31, 2009, as compared to $1.7 billion at December 31, 2008.

Our
2009 average noninterest bearing deposits constituted 23.6% of our 2009 average total deposits, which compares to 2008 average noninterest bearing deposits to 2008 total average
deposits of 26.2%. The actual noninterest-bearing demand deposit balance at December 31, 2009, decreased by $67.7 million to $366.1 million. Included in the decrease in
noninterest-bearing demand deposit balances between December 31, 2008 and December 31, 2009 is a $66.5 million movement of funds from a noninterest bearing account to a money
market account by a single account holder who administers an omnibus account on behalf of bank cash sweep account customers.

Our
interest bearing demand deposits, including money market and savings accounts, increased by $66.9 million, to $595.8 million at December 31, 2009 as compared to
$528.9 million at December 31, 2008. This increase is primarily attributable to a $66.5 million movement of funds from a noninterest bearing account to a money market account as
described above.

The
Company joined the Certificate of Deposit Account Registry Service (CDARS®) program in 2008, and a part of the shift to time deposits was a result of existing customers
moving funds into the CDARS® program in order to obtain expanded FDIC insurance coverage on their deposits. Additionally, the Company began shifting its own funding sources from
short-term and overnight funds to brokered deposits in 2008 in order to provide longer-term funding to mitigate the impact of potential short-term liquidity
fluctuations within the overall financial services industry in the second half of 2008.

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The
following table shows the average amount and average rate paid on the categories of deposits for each of the periods indicated:

Table 18

At December 31,2009

2008

2007Average
Balance

Average
Rate

Average
Balance

Average
Rate

Average
Balance

Average
Rate(Dollars in thousands)Noninterest bearingNoninterest bearing deposits

$
387,597


0.00
%
$
440,359


0.00
%
$
476,876


0.00
%Interest bearing depositsInterest bearing demand


148,972


0.25
%

150,210


0.51
%

157,806


0.64
%Money market


309,493


0.89
%

507,610


1.96
%

638,295


3.69
%Savings


71,645


0.30
%

70,243


0.56
%

77,602


0.78
%Time


722,793


3.19
%

514,362


4.17
%

562,075


5.05
%Total interest bearing deposits


1,252,903


2.11
%

1,242,425


2.62
%

1,435,778


3.73
%Total deposits

$
1,640,500


1.61
%
$
1,682,784


1.94
%
$
1,912,654


2.80
%


Additionally,
the following table shows the maturities of time certificates of deposit and other time deposits of $100,000 or more, including brokered deposits, at the dates indicated:

Table 19

At December 31,2009

2008(In thousands)Due in three months or less

$
85,658

$
89,232Due in over three months through six months


48,716


33,336Due in over six months through twelve months


136,476


157,399Due in over twelve months


17,738


18,367Totals

$
288,588

$
298,334


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The
following table presents the mix of our deposits by type based on average balances for each of the periods indicated.

Table 20

At December 31,2009

2008

2007

2006Average
Balance

% of
Total

Average
Balance

% of
Total

Average
Balance

% of
Total

Average
Balance

% of
Total(Dollars in thousands)Noninterest bearing
deposits

$
387,597


23.63
%
$
440,359


26.17
%
$
476,876


24.93
%
$
519,893


26.21
%Interest bearing demand


148,972


9.08
%

150,210


8.93
%

157,806


8.25
%

167,381


8.44
%Money market


309,493


18.87
%

507,610


30.16
%

638,295


33.37
%

628,342


31.68
%Savings


71,645


4.37
%

70,243


4.17
%

77,602


4.06
%

93,622


4.72
%Time


722,793


44.05
%

514,362


30.57
%

562,075


29.39
%

574,320


28.95
%Total deposits

$
1,640,500


100.00
%
$
1,682,784


100.00
%
$
1,912,654


100.00
%
$
1,983,558


100.00
%


Overall average time deposits increased by $208.4 million, or 40.5%, to $722.8 million for 2009 compared to $514.4 million
for 2008. The actual balance of time deposits decreased by $4.6 million during 2009 to $731.4 million at December 31, 2009 compared to $736.0 million at December 31,
2008.

The
December 31, 2009 time deposit balance includes approximately $36.6 million from the CDARS® program, and $254.6 million of brokered deposits. At
December 31, 2008, approximately $63.2 million of time deposits came from the CDARS® program, and $189.2 million were brokered deposits. Brokered deposits, excluding
CDARS® deposits, comprised 15.0% of total deposits at December 31, 2009 and 11.6% at December 31, 2008. Overall time deposits as a percent of total deposits were 43.2% at
December 31, 2009 as compared to 43.3% at December 31, 2008. The overall cost of time deposits decreased from 4.17% in 2008 to 3.19% in 2009.

Borrowings

Subordinated Debentures and Trust Preferred Securities

In September 2000, the predecessor to the Company formed CenBank Statutory Trust I and completed an offering of $10.0 million
10.6% Cumulative Trust Preferred Securities, which are guaranteed by us. The Trust also issued common securities to the predecessor and used the net proceeds from the offering to purchase
$10.3 million in principal amount of 10.6% Subordinated Debentures. Interest paid on the 10.6% Debentures will be distributed to the holders of the 10.6% Preferred Securities. Distributions
payable on the 10.6% Preferred Securities are recorded as interest expense in the consolidated statements of income. These 10.6% Debentures are unsecured, junior rank and are subordinate in right of
payment to all senior debt of the Company. The 10.6% Preferred Securities are subject to mandatory redemption upon repayment of the 10.6% Debentures. We have the right, subject to events of default,
to defer payments of interest on the 10.6% Debentures at any time by extending the interest payment period for a period not exceeding 10 consecutive semi-annual periods with respect to
each deferral period, provided that no extension period may extend beyond the redemption or maturity date of the 10.6% Debentures. The 10.6% Debentures mature on September 7, 2030, which may be
shortened by us to not earlier than September 7, 2010, if certain conditions are met, or at any time upon the occurrence and continuation of certain changes in either the tax treatment or the
capital treatment of the Trust, the 10.6% Debentures or the 10.6% Preferred Securities.

In
February 2001, the predecessor to the Company formed CenBank Statutory Trust II and completed an offering of $5.0 million 10.2% Cumulative Trust Preferred Securities, which are

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guaranteed
by us. The Trust also issued common securities to the predecessor and used the net proceeds from the offering to purchase $5.2 million in principal amount of 10.2% Subordinated
Debentures. Interest paid on the 10.2% Debentures will be distributed to the holders of the 10.2% Preferred Securities. Terms and conditions of the 10.2% Debentures are substantially similar to those
as described under the CenBank Statutory Trust I. The 10.2% Debentures mature on February 22, 2031, which may be shortened by us to not earlier than February 22, 2011, if certain
conditions are met, or at any time upon the occurrence and continuation of certain changes in either the tax treatment or the capital treatment of the Trust, the 10.2% Debentures or the 10.2%
Preferred Securities.

In
April 2004, the predecessor to the Company formed CenBank Statutory Trust III and completed an offering of $15.0 million LIBOR plus 2.65% Cumulative Trust Preferred Securities,
which are guaranteed by us. The Trust also issued common securities to the predecessor and used the net proceeds from the offering to purchase $15.5 million in principal amount of floating rate
Subordinated Debentures. Interest paid on the floating rate Debentures will be distributed to the holders of the floating rate Preferred Securities. Terms and conditions of the floating rate
Debentures are substantially similar to those as described under the CenBank Statutory Trust I. The floating rate Debentures mature on April 15, 2034, which may be shortened by us to not
earlier than April 15, 2009, if certain conditions are met, or at any time upon the occurrence and continuation of certain changes in either the tax treatment or the capital treatment of the
Trust, the floating rate Debentures or the floating rate Preferred Securities.

In
June 2003, Guaranty Corporation formed Guaranty Capital Trust III and completed an offering of $10.0 million LIBOR plus 3.10% Cumulative Trust Preferred Securities, which are
guaranteed by us. The Trust also issued common securities to Guaranty and used the net proceeds from the offering to purchase $10.3 million in principal amount of Junior Subordinated Debt
Securities issued by Guaranty. We assumed Guaranty's obligations relating to such securities upon our acquisition of Guaranty. Interest paid on the debt securities will be distributed to the holders
of the Preferred Securities. We have the right, subject to events of default, to defer payments of interest on the subordinated debt securities at any time by extending the interest payment period for
a period not exceeding 20 consecutive quarterly periods with respect to each deferral period, provided that no extension period may extend beyond the redemption or maturity date of the subordinated
debt securities. The subordinated debt securities mature on July 7, 2033. These securities were callable on July 7, 2008. The Company did not call these securities as these are variable
rate securities that provide $10.0 million of additional Tier 1 capital. These securities remain callable at the end of each quarter. Management does not expect to call these securities
in 2010.

Under
the terms of each subordinated debentures agreement, the Company has the ability to defer interest on the debentures for a period of up to sixty months as long as it is in
compliance with all covenants of the agreement. On July 31, 2009, the Company notified the trustees of the four trusts that it will defer interest on all four of its subordinated debentures.
Such a deferral is not an event of default under each subordinated debentures agreement and interest on the debentures continues to
accrue during such deferral period. Prior to paying any interest on the subordinated debentures, the Company must obtain prior written approval from the Federal Reserve Bank of Kansas City under the
terms of its Written Agreement (see Note 23, Written Agreement under "Item 8. Financial Statements and Supplementary DataNotes to Consolidated Financial Statements" for
additional information).

The
Company is not considered the primary beneficiary of these Trusts (variable interest entities), therefore the trusts are not consolidated in the Company's financial statements, but
rather the subordinated debentures are shown as a liability. The Company's investment in the common stock of each trust is included in other assets on the consolidated balance sheets.

Although
the securities issued by each of the trusts are not included as a component of stockholders' equity in the consolidated balance sheets, the securities are treated as capital for

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regulatory
purposes. Specifically, under applicable regulatory guidelines, the $40 million of securities issued by the trusts qualify as Tier 1 capital, along with the
$59.2 million of Series A Convertible Preferred Stock, up to a maximum of 25% of capital on an aggregate basis. Any amount that exceeds 25% qualifies as Tier 2 capital. At
December 31, 2009, approximately $44.5 million of the combined $99.2 million of the trusts' securities and preferred stock outstanding qualified as Tier 1 capital. The
remaining $54.7 million is treated as Tier 2 capital.

The
Board of Governors of the Federal Reserve System, which is the holding company's banking regulator, has promulgated a modification of the capital regulations affecting trust
preferred securities. Under this modification, beginning March 31, 2011, the Company is required to use a more restrictive formula to determine the amount of trust preferred securities that can
be included in regulatory Tier I capital. The Company will be allowed to include in Tier I capital an amount of trust preferred securities equal to no more than 25% of the sum of all
core capital elements, which is generally defined as stockholders' equity less certain intangibles, including core deposit intangibles, net of any related deferred income tax liability. The existing
regulations in effect limit the amount of trust preferred securities that can be included in Tier I capital to 25% of the sum of core capital elements without a deduction for permitted
intangibles. The adoption of this modification is not expected to have a material impact on the inclusion of trust preferred securities for purposes of Tier 1 capital.

Other Borrowings

At December 31, 2009, our outstanding borrowings were $164,364,000 as compared to $166,404,000 at December 31, 2008.

The
borrowings at December 31, 2009 consisted of 16 separate fixed-rate term notes with the FHLB at our bank subsidiary level, with remaining maturities ranging from
11 to 96 months. Each advance with the Federal Home Loan Bank (FHLB) is payable at its maturity date, with a prepayment penalty if paid prior to maturity. Approximately $140 million of
the FHLB term advances at December 31, 2009 have Bermudan conversion options to a variable rate. If the notes are converted by the FHLB, the Bank has the option to prepay the advance without
penalty. If the notes are not converted by the FHLB, the note becomes convertible quarterly thereafter, with the option to convert to floating rate continuing to be at the discretion of the FHLB.
Three notes have potential conversions in 2010a $40 million note with a rate of 3.17%, a $30 million note with a rate of 2.95% and a $10 million note with a rate of
3.16% have their next quarterly conversion dates on 3/1/2010; 4/11/2010 and 4/26/2010, respectively. No other FHLB term note has a conversion option available in 2010. The remaining $60 million
of term notes with conversion options are layered with $40 million having their first conversion option available in 2011, and $20 million having its first conversion option available in
2013. Our bank subsidiary also had a $31.0 million line of credit with the FHLB at December 31, 2009, but there was no balance outstanding on this line of credit as of that date.

The
total commitment, including balances outstanding, for borrowings at the Federal Home Loan Bank for the term notes and the line of credit at December 31, 2009 and
December 31, 2008 was $195.3 million and $428.3 million, respectively. The interest rate on the line of credit varies with the federal funds rate, and was 0.18% and 0.65% at
December 31, 2009 and December 31, 2008, respectively. The term notes have fixed interest rates that range from 2.52% to 6.22%. The weighted-average rate on the FHLB term notes was 3.17%
at December 31, 2009.

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The Company had executed a specific pledging and security agreement with the FHLB in the amount of $195,338,000 at December 31, 2009, which encompassed
certain loans and securities as collateral for these borrowings. The carrying amount of loans and securities used for the specific pledging and security agreement at December 31, 2009, was
$397.9 million and $30.2 million, respectively. Prior to December 2009, the Company had a blanket pledging and security agreement with the FHLB with $428,317,000 pledged at 2008. The
maximum credit allowance for future borrowings, including term notes and the line of credit, was $30,974,000 and $261,913,000 at December 31, 2009 and 2008, respectively. The Company is in the
process of pledging additional specific loans as collateral under the FHLB pledging agreement. As of February 1, 2010, the total amount collateralized under the specific pledging and security
agreement with the FHLB increased to approximately $246.1 million, an increase of approximately $50.7 million compared to December 31, 2009.

As
of December 31, 2008, the Company had a revolving credit agreement, as amended, with U.S. Bank National Association, which contained financial covenants, including maintaining
a minimum adjusted return (excluding goodwill impairment and intangible asset amortization) on average assets, a maximum nonperforming assets to total loans ratio, regulatory capital ratios that
qualify the Company as well-capitalized and a minimum total risk-based capital amount. At December 31, 2008, the Company was in compliance with all covenants except the
minimum total risk-based capital amount. The minimum total risk-based capital amount was set by U.S. Bank and was based on the Company receiving additional capital from
Treasury's Capital Purchase Program prior to December 31, 2008. As the Company's application to receive capital under Treasury's Capital Purchase Program was still pending as of
December 31, 2008, the Company did not meet this financial covenant and voluntarily decided to terminate its line of credit on February 9, 2009 with U.S. Bank. The revolving credit
agreement would have otherwise expired on March 31, 2009.

CAPITAL

Current risk-based regulatory capital standards generally require banks and bank holding companies to maintain a ratio of
"core" or "Tier 1" capital (consisting principally of common equity) to total risk-weighted assets of at least 4%, a ratio of Tier 1 capital to total average assets (leverage
ratio) of at least 4% and a ratio of total capital (which includes Tier 1 capital plus certain forms of subordinated debt, a portion of the allowance for loan and lease losses and preferred
stock) to total risk-weighted assets of at least 8%. Risk-weighted assets are calculated by multiplying the balance in each category of assets by a risk factor, which ranges
from zero for cash assets and certain government obligations to 100% for high risk loans, and adding the products together.

Table 21

Ratio at
December 31,
2009

Ratio at
December 31,
2008

Minimum
Capital
Requirement

Minimum
Requirement for
"Well
Capitalized"
InstitutionTotal Risk-Based Capital RatioConsolidated Guaranty Bancorp


13.80
%

10.61
%

8.00
%

N/AGuaranty Bank and Trust Company


12.82
%

10.52
%

8.00
%

10.00
%Tier 1 Risk Based Capital RatioConsolidated Guaranty Bancorp


9.43
%

9.35
%

4.00
%

N/AGuaranty Bank and Trust Company


11.55
%

9.26
%

4.00
%

6.00
%Leverage RatioConsolidated Guaranty Bancorp


7.89
%

8.98
%

4.00
%

N/AGuaranty Bank and Trust Company


9.66
%

8.90
%

4.00
%

5.00
%


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The
overall increase in the consolidated risk-based regulatory capital ratios from 2008 to 2009 is primarily due to the issuance of $57.8 million, net of expenses, of
Series A Convertible Preferred Stock in August 2009, as well as a decrease in overall risk-weighted assets during 2009 due mostly to the decline in loan balances in 2009.

The
decline in the consolidated leverage ratio from 2008 to 2009 is due to the overall consolidated decline in Tier 1 capital primarily as a result of the 2009 loss. On a
consolidated basis, total capital increased due mostly to the preferred stock issued in 2009. Most of this preferred stock issuance was excluded from Tier 1 capital, although it is included in
total capital.

The
overall increase in all of the bank-only capital ratios is due to the contribution of $40 million of capital into the bank immediately after the holding company
issued the Series A Convertible Preferred Stock in August 2009. Additionally, total risk-weighted assets declined during 2009 due mostly to the decline in loan balances in 2009. At
the bank-only level, the entire $40 million of additional capital is included as Tier 1 capital, causing the bank-only leverage ratio to increase in 2009 as
compared to 2008.

On
October 3, 2008, the Emergency Economic Stabilization Act of 2008 (EESA) was enacted, which provided up to $700 billion in funding for the financial services industry.
The first phase of implementation of the EESA, also known as the Troubled Asset Relief Program (TARP), was the implementation of a $250 billion Treasury Capital Purchase Program. This program
allows a qualifying institution to apply for up to three-percent of its total risk-weighted assets in capital, which will be in the form of non-cumulative perpetual preferred
stock of the institution with a dividend rate of 5% until the fifth anniversary of the investment, and 9% thereafter. Treasury will also receive warrants for common stock of the institution equal to
15% of the capital invested. The Company applied for TARP in November 2008 and withdrew its application in November 2009.

LIQUIDITY

The Bank relies on deposits as its principal source of funds and, therefore, must be in a position to service depositors' needs as they
arise. Fluctuations in the balances of a few large depositors may cause temporary increases and decreases in liquidity from time to time. We deal with such fluctuations by using existing liquidity
sources.

The
Bank's primary sources of liquidity are its liquid assets. At December 31, 2009, the Company had $234.5 million of cash and cash equivalents, including
$207.4 million of interest bearing deposits at banks (most of which was held at the Federal Reserve Bank of Kansas City) that could be used for the Bank's immediate liquidity needs. Further,
the Company had $4.5 million of investment securities that were overpledged at December 31, 2009 and $42.1 million of unpledged securities. The unpledged securities mostly consist
of a single $38.0 million municipal bond to a hospital with limited marketability for purposes of liquidity.

Concerns
over deposit fluctuations with respect to the overall banking industry were addressed by the FDIC in September and October 2008. The FDIC temporarily increased the individual
account deposit insurance from $100,000 per account to $250,000 per account through December 31, 2009, which has subsequently been extended through December 31, 2013. The FDIC also
implemented a Temporary Liquidity Guarantee Program (TLGP), which provides for full FDIC coverage for transaction accounts, regardless of dollar amounts. The Bank elected to opt-in to this
program, thus, our customers receive full coverage for transaction accounts under the program. The TLGP was originally set to expire December 31, 2009, but the FDIC has extended the program
through June 30, 2010. The Bank elected to continue participation in this program. As of December 31, 2009, the Bank had approximately 276 accounts with approximately
$84.3 million of balances in excess of $250,000 covered under the TLGP. Concerns regarding the overall banking industry or the Company could have an adverse effect on future deposit levels.

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In
order to address the concern of FDIC insurance of larger depositors, the Bank became a member of the Certificate of Deposit Account Registry Service (CDARS®) program in
2008. Through CDARS®, the Bank's customers can increase their FDIC insurance by up to $50 million through reciprocal certificate of deposit accounts. This is accomplished by the
Bank entering into reciprocal depository relationships with other member banks. The individual customer's large deposit is broken into amounts below the $100,000 amount (or $250,000 if the time
deposit matures prior to December 31, 2013) and placed with other banks that are members of the network. The reciprocal member bank issues certificate of deposits in amounts that ensure that
the entire deposit is eligible for FDIC insurance. As of December 31, 2009, the Company had approximately $36.6 million of deposits in the CDARS® program. For regulatory
purposes, CDARS® is considered a brokered deposit even though reciprocal deposits are generally from customers in the local market. Under the terms of the Written Agreement, the Bank
cannot accept any new brokered deposits, but can continue to rollover or renew existing brokered deposits. Therefore, the CDARS® program will no longer be available to local market
customers of the Bank for purposes of additional reciprocal deposits.

When
the level of liquid assets (our primary liquidity) does not meet our liquidity needs, other available sources of liquid assets (our secondary liquidity), including the purchase of
federal funds, sales of loans, discount window borrowings from the Federal Reserve, and our lines of credit with the Federal Home Loan Bank of Topeka (FHLB) and other correspondent banks are employed
to meet current and presently anticipated funding needs. At December 31, 2009, the Bank had approximately $31.0 million of availability on its FHLB line, $45 million of
availability on its unsecured federal funds lines with correspondent banks, and $51.9 million of availability with the Federal Reserve discount window. Since December 31, 2009, the
availability on the FHLB line increased by approximately $50.7 million through January 31, 2010, whereas, the availability on the unsecured federal funds lines decreased by
$15 million over the same time.

Under
the terms of the Written Agreement, the Bank cannot obtain any new brokered deposits, but can continue to rollover or renew existing brokered deposits. Additionally, the Bank is
required to submit a written plan to improve the Bank's liquidity position, including measures to diversify funding sources and reduce reliance on brokered deposits. Since the date of the examination
on which the Written Agreement is based in part, the Company has diversified its funding sources, primarily through increasing its primary funding sources such as additional interest bearing deposits
in banks and investment securities. The Bank is currently in the process of preparing the plan, and expects to include in the plan that it will reduce its dependence on brokered deposits through the
utilization of excess short-term liquid assets, such as interest bearing deposits in banks, in order to replace brokered deposits as they mature. During 2010, approximately
$113.9 million of brokered deposits (excluding CDARS®) are expected to mature in 2010, although the Company may renew or rollover a portion of those brokered deposits. As needed for
liquidity and balance sheet planning, the Bank will continue to monitor and update its rates in order to rollover and obtain new time deposits from its local markets and/or directly through the
internet.

The
holding company relies on dividends from its Bank as a primary source of liquidity. The ability of the Bank to pay dividends or make other capital distributions to the holding
company is subject to the regulatory authority of the Federal Reserve and the CDB. The Written Agreement prohibits the Bank from paying dividends without the prior written approval of the Federal
Reserve and CDB. Accordingly, our ability to pay dividends will be restricted until the Written Agreement is terminated.

The
holding company requires liquidity for the payment of interest on the subordinated debentures, for operating expenses, principally salaries and benefits, for repurchases of our
common stock, and, if declared by our board of directors, for the payment of dividends to our stockholders. The Written Agreement prohibits the Company from paying dividends without the prior written
approval of the Federal Reserve. Accordingly, our ability to pay dividends to our stockholders will be restricted until the Written Agreement is terminated. Under the terms of our trust preferred
financings, we may

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defer
payment of interest on the trust preferred securities for a period of up to sixty consecutive months as long as we are in compliance with all covenants of the agreement. On July 31, 2009,
we gave notice that we will defer regularly scheduled interest payments on each of our subordinated debentures until further notice. In addition, we are currently restricted from making payments of
principal or interest on our subordinated debentures or trust preferred securities under the terms of our Written Agreement without the prior approval of the Federal Reserve.

In
February 2009, the holding company voluntarily decided to terminate its line of credit with U.S. Bank to reduce the costs related to a non-use fee, as the revolving credit
agreement would have otherwise expired on March 31, 2009.

As
of December 31, 2009, the holding company had approximately $18.8 million of cash on hand. Based on cash flow projections for the holding company, we estimate that this
cash is sufficient to meet the operating needs of the holding company for over three years assuming that the holding company does not contribute any additional amounts of capital to the Bank.

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OFF BALANCE SHEET ARRANGEMENTS, COMMITMENTS, GUARANTEES, AND CONTRACTUAL OBLIGATIONS

Contractual Obligations

The following table sets forth our significant contractual obligations and off-balance sheet commitments at
December 31, 2009:

Table 22

Payments Due by PeriodTotals

Less Than 1 Year

1 - 3 Years

4 - 5 Years

Over 5 Years(In thousands)Contractual ObligationsSubordinated Debentures

$
41,239

$


$


$


$
41,239Federal Home Loan Bank Obligations


164,364


1,070


3,009


50,285


110,000Operating Lease Obligations


14,567


2,973


5,277


3,564


2,753Totals

$
220,170

$
4,043

$
8,286

$
53,849

$
153,992Off Balance Sheet CommitmentsCommitments to extend credit

$
305,102

$
148,212

$
119,669

$
334

$
36,887Standby letters of credit


14,917


14,649


268





Commercial letters of credit


11,000





11,000





Totals

$
331,019

$
162,861

$
130,937

$
334

$
36,887


The
amount of off-balance sheet commitments of $331.0 million at December 31, 2009 represents a $95.1 million decline from the amount of
off-balance sheet commitments at December 31, 2008. Most of the decline has occurred in commitments of one to 3 years.

Of
the $164.4 million of term advances at December 31, 2009 with the FHLB, approximately $140 million are convertible to floating rate on predetermined conversion
dates at the discretion of the FHLB. If the bonds are converted by the FHLB, the Bank has the option to prepay the advance without penalty. If the bonds are not converted by the FHLB, the bond becomes
convertible quarterly thereafter, with the option to convert to floating rate continuing to be at the discretion of the FHLB. Three bonds have potential conversions in 2010a
$40 million bond with a rate of 3.17%, a $30 million bond with a rate of 2.95% and a $10 million bond with a rate of 3.16% have their next quarterly conversion dates on 3/1/2010;
4/11/2010 and 4/26/2010, respectively. No other FHLB term bond has a conversion option available in 2010. The remaining $60 million of term notes with conversion options are layered with
$40 million having their first conversion option available in 2011, and $20 million having its first
conversion option available in 2013. Our bank subsidiary also had a $31.0 million line of credit with the FHLB at December 31, 2009, but there was no balance outstanding on this line of
credit as of that date.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

See Note 2 of the Notes to Consolidated Financial Statements contained in "Item 8. Financial Statements and Supplementary
Data" for information on recent accounting pronouncements and their impact, if any, on our consolidated financial statements.

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ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss in a financial instrument arising from adverse changes in market prices and rates, foreign currency
exchange rates, commodity prices and equity prices. Our market risk arises primarily from interest rate risk inherent in our lending and deposit taking activities. To that end, management actively
monitors and manages our interest rate risk exposure. We have not entered into any market risk sensitive instruments for trading purposes. We manage our interest rate sensitivity by matching the
re-pricing opportunities on our earning assets to those on our funding liabilities. We use various asset/liability strategies to manage the re-pricing characteristics of our
assets and liabilities designed to ensure that exposure to interest rate fluctuations is limited within our guidelines of acceptable levels of risk-taking. Balance sheet hedging
strategies, including the terms and pricing of loans and deposits and managing the deployment of our securities, are used to reduce mismatches in interest rate re-pricing opportunities of
portfolio assets and their funding sources.

Our
Asset Liability Management Committee, or ALCO, addresses interest rate risk. The committee is composed of members of our senior management. The ALCO monitors interest rate risk by
analyzing the potential impact on the net portfolio of equity value and net interest income from potential changes in interest rates, and considers the impact of alternative strategies or changes in
balance sheet structure. The ALCO manages our balance sheet in part to maintain the potential impact on net portfolio value and net interest income within acceptable ranges despite changes in interest
rates.

Our
exposure to interest rate risk is reviewed on at least a quarterly basis by the ALCO and our board of directors. Interest rate risk exposure is measured using interest rate
sensitivity analysis to determine our change in net portfolio value and net interest income in the event of hypothetical changes in interest rates. If potential changes to net portfolio value and net
interest income resulting from hypothetical interest rate changes are not within board-approved limits, the board may direct management to adjust the asset and liability mix to bring interest rate
risk within board-approved limits.

We
monitor and evaluate our interest rate risk position on a quarterly basis using net interest income simulation analysis under 100 and 200 basis point change scenarios (see below).
Each of these analyses measures different interest rate risk factors inherent in the financial statements.

Net Interest Income Modeling

The Company's primary interest rate risk tool, the Net Interest Income Simulation Analysis, measures interest rate risk and the effect
of interest rate changes on net interest income. This analysis incorporates all of the Company's assets and liabilities together with forecasted changes in the balance sheet and assumptions that
reflect the current interest rate environment. Through these simulations, management estimates the impact on net interest income of a 100 and 200 basis point upward or downward change of market
interest rates over a one year period. Assumptions are made to project rates for new loans and deposits based on historical analysis, management outlook and repricing strategies. Asset prepayments and
other market risks are developed from industry estimates of prepayment speeds and other market changes. Since the results of these simulations can be significantly influenced by assumptions utilized,
management evaluates the sensitivity of the simulation results to changes in assumptions.

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The following table shows the net interest income increase or decrease over the next twelve months as of December 31, 2009 and
2008:

Table 23

INTEREST RATE RISK:

Annualized Net Interest IncomeDecember 31, 2009
Amount of Change

December 31, 2008
Amount of Change(In thousands)Change in Rates in Basis Points200

$
3,812

$
9,758100


1,266


4,628Static





(100)


827


2,037(200)


188


3,642


Overall,
the Company believes it is asset-sensitive, which is consistent with the decline in net interest income during 2009 as a result of lower rates. At December 31, 2009 and
2008, the company is positioned to have a short-term favorable interest income impact in a rising rate environment as well as a falling rate environment. This is because of the extremely
low rate environment at December 31, 2009 and 2008. The prime rate has historically been set at a rate of 300 basis points over the target federal funds rate. The target federal funds rate is
currently set by the FOMC at a rate between 0 and 25 basis points. The Company's interest rate risk modeling has an assumption that prime would continue to be set at a rate of 300 basis points over
the target federal funds rate, therefore, a 200 basis point decline in overall rates would only have between a 0 and 25 basis point decline in both federal funds and the prime rate Further, other
rates that are currently below 1% or 2% (e.g. U.S. Treasuries, LIBOR, etc.) are modeled to not fall below 0% with an overall 100 or 200 basis point decrease in rates. Many of our variable rate
loans are set to an index tied to prime, federal funds or LIBOR, therefore, a further decrease in rates would not have a substantial impact on loan yields. However, current deposit rates, especially
time deposit rates, would continue to decrease in a falling rate environment. As a falling rate environment would potentially impact the cost of liabilities to a greater degree than earning assets for
the above reasons, a falling rate environment is expected to have a favorable impact on net interest margin. However, if the actual prime rate falls
below a 300 basis point spread to target federal funds rate, the Company could experience a continued decrease in net interest income as a result of falling yields on earning assets tied to prime. The
Company is less asset sensitive in 2009 as compared to 2008 primarily due to the renewals of loans in 2009, and in particular, the renewals of variable rate loans with the addition of floors. The
floors in the loans will cause loans to be less sensitive to increases in interest rate in 2009 as compared to 2008.

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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements

Guaranty Bancorp and SubsidiariesManagement's Report On Internal Control Over Financial Reporting

79Report of Independent Registered Public Accounting Firm

80Consolidated Balance Sheets at December 31, 2009 and 2008

81Consolidated Statements of Operations, Years Ended December 31, 2009, 2008 and 2007.

82Consolidated Statements of Changes in Stockholders' Equity and Comprehensive Income (Loss), Years Ended December 31,
2009, 2008 and 2007.

83Consolidated Statements of Cash Flows, Years Ended December 31, 2009, 2008 and 2007.

84Notes to Consolidated Financial Statements

85


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Management's Report On Internal Control Over Financial Reporting

The management of Guaranty Bancorp, including its consolidated subsidiary, is responsible for establishing and maintaining adequate
internal control over financial reporting. The Company's internal control system was designed to provide reasonable assurance to the Company's management and Board of Directors regarding the
preparation and fair presentation of published financial statements in accordance with U.S. generally accepted accounting principles. All internal control systems, no matter how well designed, have
inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Management
maintains a comprehensive system of controls intended to ensure that transactions are executed in accordance with management's authorization, assets are safeguarded, and
financial records are reliable. Management also takes steps to see that information and communication flows are effective and to monitor performance, including performance of internal control
procedures.

As
of December 31, 2009, Guaranty Bancorp management assessed the effectiveness of the Company's internal control over financial reporting based on the framework established in Internal
ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management has
determined that the Company's internal control over financial reporting as of December 31, 2009, is effective.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements should they occur. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the control procedures may
deteriorate.

Crowe
Horwath LLP, the independent registered public accounting firm that audited the Company's consolidated financial statements for the years ended December 31, 2009 and
2008, included in this Annual Report on Form 10-K, has issued an attestation report on the Company's internal control over financial reporting as of December 31, 2009. The
report, which expresses an unqualified opinion on the effectiveness of the Company's internal control over financial reporting as of December 31, 2009, is included in this Item under the
heading "Report of Independent Registered Public Accounting Firm."

/s/ DANIEL M. QUINN Daniel M. Quinn
President and Chief Executive Officer

/s/ PAUL W. TAYLOR Paul W. Taylor
Executive Vice President,
Chief Financial and Operating
Officer and Secretary


February 12,
2010

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board
of Directors and Stockholders
Guaranty Bancorp
Denver, Colorado

We
have audited the accompanying consolidated balance sheets of Guaranty Bancorp as of December 31, 2009 and 2008, and the related consolidated statements of operations, changes
in stockholders' equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2009. We also have audited Guaranty
Bancorp's internal control over financial reporting as of December 31, 2009, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Guaranty Bancorp's management is responsible for these financial statements, for maintaining effective internal control over financial
reporting and for
its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to
express an opinion on these financial statements and an opinion on the effectiveness of the company's internal control over financial reporting based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material
respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our
opinions.

A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Guaranty Bancorp as of December 31, 2009 and 2008,
and the results of its operations and its cash flows for each of the years in the three year-period ended December 31, 2009, in conformity with accounting principles generally
accepted in the United States of America. Also, in our opinion, Guaranty Bancorp maintained, in all material respects, effective internal control over financial reporting as of December 31,
2009, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

/s/ Crowe Horwath LLP


Sherman
Oaks, California
February 12, 2010

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GUARANTY BANCORP AND SUBSIDIARIES        Consolidated Balance Sheets        December 31, 2009 and 2008

December 31,
2009

December 31,
2008(Dollars in thousands,
except per share data)AssetsCash and due from banks

$
234,483

$
32,189Federal funds sold





13,522Cash and cash equivalents


234,483


45,711Securities available for sale, at fair value


221,134


102,874Securities held to maturity (fair value of $10,428 and $13,505 at December 31, 2009
and December 31, 2008)


9,942


13,114Bank stocks, at cost


17,160


28,276Total investments


248,236


144,264Loans, net of unearned discount


1,519,608


1,826,333Less allowance for loan losses


(51,991
)

(44,988
)Net loans


1,467,617


1,781,345Loans held for sale


9,862


5,760Premises and equipment, net


60,267


63,018Other real estate owned and foreclosed assets


37,192


484Other intangible assets, net


19,222


25,500Other assets


50,701


36,659Total assets

$
2,127,580

$
2,102,741Liabilities and Stockholders' EquityLiabilities:Deposits:Noninterest-bearing demand

$
366,103

$
433,761Interest-bearing demand


523,971


460,856Savings


71,816


68,064Time


731,400


735,970Total deposits


1,693,290


1,698,651Securities sold under agreements to repurchase and federal funds purchased


22,990


21,781Borrowings


164,364


166,404Subordinated debentures


41,239


41,239Interest payable and other liabilities


13,059


13,086Total liabilities


1,934,942


1,941,161Commitments and contingent liabilities





Stockholders' equity:Preferred stock$0.001 par value; 9% non-cumulative; 73,280 shares authorized, 60,434 shares issued and outstanding at December 31, 2009; no shares
authorized or outstanding at December 31, 2008; liquidation preference of $60,434 at December 31, 2009.


59,227


Common stock$0.001 par value; 150,000,000 shares authorized, 64,952,450 shares issued, 52,952,703 shares outstanding at December 31, 2009
(includes 1,381,105 shares of unvested restricted stock and 129,806 shares to be issued); 64,542,950 shares issued, 52,654,131 shares outstanding at December 31, 2008 (includes 1,420,345 shares of unvested restricted stock and 109,214 of shares
to be issued).


65


65Additional paid-in capitalCommon stock


618,343


617,188Shares to be issued for deferred compensation obligations


199


710Accumulated deficit


(382,599
)

(352,003
)Accumulated other comprehensive loss


(143
)

(1,302
)Treasury Stock, at cost, 10,873,533 and 10,996,513, respectively


(102,454
)

(103,078
)Total stockholders' equity


192,638


161,580Total liabilities and stockholders' equity

$
2,127,580

$
2,102,741


See "Notes to Consolidated Financial Statements."

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GUARANTY BANCORP AND SUBSIDIARIES        Consolidated Statements of Operations        Years ended December 31, 2009, 2008 and 2007

Year Ended December 31,2009

2008

2007(In thousands, except share
and per share data)Interest income:Loans, including fees

$
89,625

$
112,844

$
153,214Investment securities:Taxable


3,479


2,991


2,515Tax-exempt


3,033


3,404


5,193Dividends


825


1,647


1,853Federal funds sold and other


193


426


914Total interest income


97,155


121,312


163,689Interest expense:Deposits


26,402


32,562


53,594Securities sold under agreement to repurchase and federal funds purchased


140


527


1,390Borrowings


5,284


5,333


2,700Subordinated debentures


2,556


3,328


3,756Total interest expense


34,382


41,750


61,440Net interest income


62,773


79,562


102,249Provision for loan losses


51,115


33,775


24,666Net interest income, after provision for loan losses


11,658


45,787


77,583Noninterest income:Customer service and other fees


9,520


9,682


9,509Gain (loss) on sale of securities


(2
)

138


Other


894


800


1,187Total noninterest income


10,412


10,620


10,696Noninterest expense:Salaries and employee benefits


26,547


31,086


39,179Occupancy expense


7,609


7,815


7,813Furniture and equipment


4,441


5,290


4,864Impairment of goodwill





250,748


142,210Amortization of intangible assets


6,278


7,433


8,666Other real estate owned


5,931


1,612


939Insurance and assessments


6,536


2,956


2,075Professional fees


3,224


3,256


3,841Other general and administrative


9,872


9,460


16,969Total noninterest expense


70,438


319,656


226,556Loss before income taxes


(48,368
)

(263,249
)

(138,277
)Income tax benefit


(19,161
)

(6,513
)

(185
)Net loss


(29,207
)

(256,736
)

(138,092
)Preferred stock dividends


(1,389
)




Net loss applicable to common stockholders

$
(30,596
)
$
(256,736
)
$
(138,092
)Loss per common sharebasic:

$
(0.60
)
$
(5.03
)
$
(2.60
)Loss per common sharediluted:


(0.60
)

(5.03
)

(2.60
)Weighted average common shares outstanding-basic


51,378,360


51,044,372


53,109,307Weighted average common shares outstanding-diluted


51,378,360


51,044,372


53,109,307


See "Notes to Consolidated Financial Statements."

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Table of Contents

GUARANTY BANCORP AND SUBSIDIARIES        Consolidated Statements of Changes in Stockholders' Equity and Comprehensive Income (Loss)        Years ended December 31,
 2009, 2008 and 2007

Preferred
Shares
Outstanding

Preferred
Stock

Common
Stock
shares
Outstanding
and to be
issued

Common
Stock and
Additional
Paid-in
Capital

Shares
to be
Issued

Treasury
Stock

Accumulated
Deficit

Accumulated
Other
Comprehensive
Income (Loss)

Totals(In thousands, except share data)Balance, December 31, 2006




$



57,236,795

$
614,553

$
775

$
(69,574
)
$
42,896

$
809

$
589,459Comprehensive loss:Net loss




















(138,092
)




(138,092
)Other comprehensive loss























(2,281
)

(2,281
)Total comprehensive loss


























(140,373
)Stock compensation awards, net of forfeitures








(13,267
)
















Earned stock award compensation











2,871














2,871Repurchase of common stock








(4,618,438
)







(33,386
)







(33,386
)Deferred compensation








11,901





83











83Common shares issued











251


(285
)

34








Balance, December 31, 2007








52,616,991


617,675


573


(102,926
)

(95,196
)

(1,472
)

418,654Cumulative adjustment to apply
ASC 715-60-55-176




















(71
)




(71
)Comprehensive income:Net loss




















(256,736
)




(256,736
)Other comprehensive income























170


170Total comprehensive loss


























(256,566
)Stock compensation awards, net of forfeitures








24,232

















Earned stock award compensation, net











(422
)













(422
)Repurchase of common stock








(39,354
)







(179
)







(179
)Deferred compensation








52,262





164











164Common shares issued














(27
)

27








Balance, December 31, 2008








52,654,131


617,253


710


(103,078
)

(352,003
)

(1,302
)

161,580Comprehensive income:Net loss




















(29,207
)




(29,207
)Other comprehensive income























1,159


1,159Total comprehensive loss


























(28,048
)Stock compensation awards, net of forfeitures








205,597

















Earned stock award compensation, net











1,155














1,155Repurchase of common stock








(32,279
)







(59
)







(59
)Deferred compensation








125,254





172











172Common shares issued














(683
)

683








Preferred shares issued, net of expenses


59,053


57,846




















57,846Preferred share dividends


1,381


1,381














(1,389
)




(8
)Balance, December 31, 2009


60,434

$
59,227


52,952,703

$
618,408

$
199

$
(102,454
)
$
(382,599
)
$
(143
)
$
192,638


See "Notes to Consolidated Financial Statements"

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Table of Contents

GUARANTY BANCORP AND SUBSIDIARIES        Consolidated Statements of Cash Flows        Years ended December 31, 2009, 2008 and 2007

Year Ended December 31,2009

2008

2007(In thousands)Cash flows from operating activities:Net loss

$
(29,207
)
$
(256,736
)
$
(138,092
)Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization


9,853


11,848


12,914Provision for loan losses


51,115


33,775


24,666Stock compensation, net


1,155


(422
)

2,871Loss (gain) on sale of securities


2


(138
)

Loss (gain) on sale or disposal of real estate owned and assets


122


(26
)

269Other real estate owned valuation adjustments


5,063


1,484


203Impairment of goodwill





250,748


142,210Write down of premises and equipment





1,070


Other


(889
)

(33
)

(886
)Net change in:Other assets


(14,682
)

3,526


1,756Interest payable and other liabilities


(27
)

(12,205
)

(10,361
)Net cash provided by operating activities


22,505


32,891


35,550Cash flows from investing activities:Activity in available-for-sale securities:Sales, maturities, prepayments, and calls


28,907


45,997


46,724Purchases


(145,295
)

(29,289
)

(12,050
)Activity in held-to-maturity securities and bank stocks:Maturities, prepayments and calls


15,382


6,407


1,531Purchases


(829
)




(5,194
)Loan originations and principal collections, net


195,931


(68,178
)

103,190Collections on and proceeds from sale of loans held for sale


7,960


492


31,459Proceeds from sales of other real estate owned and foreclosed assets


13,569


3,705


1,424Proceeds from sales of premises and equipment


15





933Proceeds from sale of assets held for sale





2,462Additions to premises and equipment


(960
)

(950
)

(1,078
)Net cash provided (used) by investing activities


114,680


(39,354
)

166,939Cash flows from financing activities:Net decrease in deposits


(5,361
)

(100,856
)

(160,598
)Net change in short-term borrowings





(16,359
)

(42,158
)Proceeds from issuance of long-term debt





125,070


40,000Repayment of long-term debt


(2,040
)

(6,022
)

(1,759
)Net change in federal funds purchased and repurchase agreements


1,209


(1,836
)

(1,852
)Repurchase of common stock


(59
)

(179
)

(33,386
)Issuance of preferred stock


57,846





Cash dividends on preferred stock


(8
)




Net cash provided (used) by financing activities


51,587


(182
)

(199,753
)Net change in cash and cash equivalents


188,772


(6,645
)

2,736Cash and cash equivalents, beginning of year


45,711


52,356


49,620Cash and cash equivalents, end of year

$
234,483

$
45,711

$
52,356Supplemental disclosure of cash flow activity:Interest paid on deposits and borrowed funds

$
34,911

$
41,945

$
62,416Income taxes paid (refunded)


(3,916
)

3,371


8,398Supplemental disclosure of noncash activities:Loans transferred to other real estate owned and foreclosed assets


55,413


2,789


4,125Loans transferred to loans held for sale


12,062


5,760


31,951Premises and equipment transferred to assets held for sale





2,418


Preferred stock dividends


1,381








See "Notes to Consolidated Financial Statements."

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Table of Contents

GUARANTY BANCORP AND SUBSIDIARIES        Notes to Consolidated Financial Statements

(1) Organization

Guaranty Bancorp (formerly Centennial Bank Holdings, Inc.) is a bank holding company registered under the Bank Holding Company Act of 1956, as amended. On May 6, 2008, the
stockholders of the Company approved the proposal to change the name of the holding company from Centennial Bank Holdings, Inc. to Guaranty Bancorp. This name change was effective on
May 12, 2008.

Our
principal business is to serve as a holding company for our subsidiaries. As of December 31, 2009 and 2008, Guaranty Bancorp had a single bank subsidiary, Guaranty Bank and
Trust Company, referred to as Guaranty Bank or the Bank. At December 31, 2007, Guaranty Bancorp's subsidiaries were Guaranty Bank and Centennial Bank of the West, referred to as CBW. CBW was
merged into Guaranty Bank on January 1, 2008.

Reference
to "Banks" means Guaranty Bank and CBW. Reference to "Bank" means Guaranty Bank after the merger of CBW and Guaranty Bank. Reference to "we" or "Company" means the Company on a
consolidated basis with the Banks, or the Bank, as applicable. References to "Guaranty" or to the "Holding Company" refer to the parent company on a stand-alone basis.

(2) Summary of Significant Accounting Policies



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 (including energy loans), real estate loans, Small Business Administration guaranteed
loans and consumer loans. The Bank also provides trust services, including personal trust administration, estate settlement, investment management accounts and self-directed IRAs.
Substantially all loans are secured by specific items of collateral including business assets, consumer assets, and commercial and residential real estate. Commercial loans are expected to be repaid
from cash flow from operations of businesses. There are no significant concentrations of loans to any one industry or customer. However, our customers' ability to repay their loans is dependent on the
real estate and general economic conditions of the area, among other factors.

All
significant intercompany transactions and balances are eliminated in consolidation.

The
accounting and reporting policies of the Company conform to generally accepted accounting principles in the United States of America.



The Company has evaluated subsequent events for recognition and disclosure through February 12, 2010, which is the date the
financial statements were issued.



The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the consolidated balance sheet and income and expense for the periods
presented. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant changes include the assessment for impairment of certain
investment securities, the allowance for loan losses, deferred tax assets and

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Table of Contents

GUARANTY BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

liabilities,
impairment of goodwill and other intangible assets, stock compensation expense and other real estate owned. Assumptions and factors used in the estimates are evaluated on an annual basis
or whenever events or changes in circumstance indicate that the previous assumptions and factors have changed. The result of the analysis could result in adjustments to the estimates.



Cash and cash equivalents on the Company's consolidated balance sheets include cash, balances due from banks, interest-bearing deposits
in other financial institutions and federal funds sold that have an original maturity of three months or less. Interest-bearing deposits in other financial institutions mature within one year and are
carried at cost. Net cash flows are reported for customer loan and deposit transactions, interest bearing deposits in other financial institutions, borrowings, federal funds purchased and repurchase
agreements.



Debt securities are classified as held to maturity and carried at amortized cost when management has the positive intent and ability to
hold them to maturity. Debt securities not classified as held to maturity are classified as available for sale. Equity securities with readily determinable fair values are classified as available for
sale. Securities available for sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of tax.

Interest
income includes amortization of purchase premium or discount. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments,
except for mortgage backed securities where prepayments are anticipated. Gains and losses on sales are recorded on the trade date and determined using the specific identification method.

Management
evaluates securities for other-than-temporary impairment ("OTTI") at least on a quarterly basis, and more frequently when economic or market conditions
warrant such an evaluation.



Loans held for sale are carried at the lower of aggregate cost, net of discounts or premiums and a valuation allowance, or estimated
fair value. Estimated fair value is determined using forward commitments to sell loans to permanent investors, or current market rates for loans of similar quality and type. Net unrealized losses, if
any, are recognized in a valuation allowance by charges to earnings. Discounts or premiums on loans held for sale are deferred until the related loan is sold. Loans held for sale consist of certain
classified loans and are generally secured by real estate. Loans held for sale are sold with servicing rights released.

Loans
are considered sold when the Company surrenders control over the transferred assets to the purchaser, with standard representations and warranties. At such time, the loan is
removed from the loan portfolio and a gain or loss is recorded on the sale. Gains and losses on loan sales are determined based on the difference between the carrying value of the assets sold, the
estimated fair value of any assets or liabilities that are newly created as a result of the transaction, and the proceeds from the sale. Losses related to asset quality are recorded against the
allowance for valuation losses at the time the loss is probable and quantifiable and charged to earnings.

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Table of Contents

GUARANTY BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)



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

Loans
that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding unpaid principal balances,
adjusted for charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans. Loans acquired in business combinations that have evidence of credit
deterioration are recorded at the present value of expected amounts of principal and interest to be received, i.e., fair value. After acquisition, incurred losses are recognized in the
allowance for loan losses.

Interest
income is accrued on the unpaid principal balance. Loan origination fees, net of direct origination costs, are deferred and recognized as an adjustment of the related loan yield
using the effective interest method without anticipating prepayments.

The
accrual of interest on loans is discontinued at the time the loan is 90 days delinquent unless the credit is well secured and in process of collection. Consumer loans are
typically charged off no later than 120 days past due. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged-off at
an earlier date if collection of principal or interest is considered doubtful. Nonaccrual loans and loans past due 90 days still on accrual include both smaller balance homogenous loans that
are collectively evaluated for impairment and individually classified impaired loans. A loan is moved to nonaccrual status in accordance with the Company's policy, typically after ninety days of
nonpayment.

The
interest on nonaccrual loans is accounted for on the cash-basis method, until qualifying for a return to the accrual basis of accounting. Loans are returned to accrual
status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.



The allowance for loan losses is a valuation allowance for probable incurred loan losses. The allowance for loan losses is reported as
a reduction of outstanding loan balances.

The
allowance for loan losses is evaluated on a regular basis by management and is based upon management's periodic review of the collectability of the loans in light of historical
experience, the nature and volume of the loan portfolio, adverse situations that may affect borrowers' ability to repay, estimated value of any underlying collateral and prevailing economic
conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. An allowance for loan losses is
maintained at a level deemed appropriate by management to adequately provide for known and inherent risks in the loan portfolio and other extensions of credit.

Loans
that are deemed to be uncollectible are charged off and deducted from the allowance. The provision for loan losses and recoveries on loans previously charged off are added to the
allowance.

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Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

The
allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired. The general component covers all other
loans and is based on historical loss experience adjusted for current factors. 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 loan agreement. Factors considered by management in determining impairment include
payment status and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not
classified as impaired.

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. The allocated allowance for impaired loans is measured on a loan-by-loan basis for commercial, real estate and agricultural loans by either the present value
of expected future cash flows discounted at the loan's effective interest rate,
the loan's obtainable market price, or the fair value of the collateral if the loan is collateral dependent. Groups of smaller balance homogenous loans are collectively evaluated for impairment.



Transfers of financial assets are accounted for as sales, when control over the assets has been relinquished. Control over transferred
assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to
pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.



Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired,
establishing a new cost basis. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating revenues and expenses of such assets and reductions in the
fair value of the assets are included in noninterest expense. Gains and losses on their disposition are included in noninterest income.



Land is carried at cost. Buildings, equipment and software are carried at cost, less accumulated depreciation and amortization computed
on the straight-line method over the useful lives of the assets. Leasehold improvements are depreciated over the shorter of their estimated useful life or the lease term. Buildings and
leasehold improvements carry an estimated useful life of five to forty years and equipment and software carry an estimated useful life of one to fifteen years. Repairs and maintenance are charged to
noninterest expense as incurred.

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Table of Contents

GUARANTY BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)



The Bank is a member of the Federal Home Loan Bank (FHLB) system. Members are required to own a certain amount of stock based on the
level of borrowings and other factors, and may invest in additional amounts. The Bank also owns Federal Reserve Bank (FRB) stock and Banker's Bank of the West (BBOW) stock. FHLB, FRB and BBOW stock is
carried at cost, classified as a restricted security, and periodically reviewed for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.



Goodwill represents the excess of cost over the fair value of the net assets of businesses acquired. Goodwill and intangible assets
acquired in a business combination and determined to have an indefinite useful life are tested for impairment and not amortized. Intangible assets with definite useful lives are amortized over their
estimated useful lives to their estimated residual values.

Prior
to the complete write-off of goodwill in 2008, goodwill was our only intangible asset with an indefinite life. The annual impairment analysis of goodwill included
identification of reporting units, the determination of the carrying value of each reporting unit, including the existing goodwill and intangible assets, and the estimation of the fair value of each
reporting unit. We identified one significant reporting unitbanking operations. The Company tested for impairment of goodwill annually as of October 31, or if an event occurred or
circumstances changed that more likely than not reduced the fair value of the reporting unit. In the goodwill impairment test, we determine the fair value of our reporting unit and compare it to its
carrying amount. If the carrying amount of a reporting unit exceeds its fair value, we are required to perform a second step to the impairment test to measure the extent of the impairment.

The
second step of the goodwill impairment test is performed to determine the amount of the goodwill impairment, if any. Step two required us to compute the implied fair value of the
reporting unit goodwill and compare it against the actual carrying amount of the reporting unit goodwill. The implied fair value of the reporting unit goodwill was determined in the same manner that
goodwill recognized in a business combination is determined. That is, the fair value of the reporting unit was allocated to all of the individual assets and liabilities of the reporting unit,
including any unrecognized identifiable intangible assets, as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit determined in the first step
was the price paid to acquire the reporting unit. The allocation process is only performed for purposes of testing goodwill for impairment, as the other assets and liabilities are not written up or
down, nor is any additional unrecognized identifiable asset recorded as part of this process.

Core
deposit intangible assets, referred to as CDI, are recognized apart from goodwill at the time of acquisition based on valuations prepared by independent third parties or other
estimates of fair value. In preparing such valuations, variables such as deposit servicing costs, attrition rates, and market discount rates are considered. CDI assets are amortized to expense over
their useful lives, which we have estimated to range from 7 years to 15 years.

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GUARANTY BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)



Long-lived assets, such as premises and equipment, and definite-lived intangible assets subject to amortization, are
reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying value of the asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying value of an asset exceeds its estimated
undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying value of the asset exceeds the fair value of the asset, less costs to sell.

Assets
to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying value or fair value less costs to sell, and are no longer depreciated.
The assets and liabilities of a disposal group classified as held for sale are presented separately in the appropriate asset and liability sections of the consolidated balance sheet.



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 for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial
instruments are recorded when they are funded.



The Company's Amended and Restated 2005 Stock Incentive Plan ("Plan") provides for up to 2,500,000 grants of stock options, stock
awards, stock units awards, performance stock awards, stock appreciation rights, and other equity-based awards to key employees, nonemployee directors, consultants and prospective employees. As of
December 31, 2009, the Company has only granted stock awards. The Company recognizes stock compensation cost 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 recognized reflects estimated forfeitures, adjusted as necessary for actual forfeitures. The Company has issued stock awards that vest based on service periods from
one to four years, and stock awards that vest based on performance conditions. The maximum contractual term for the performance-based share awards is December 31, 2012. At the end of 2009, none
of the performance-based restricted stock awards were expected to vest prior to the end of the contractual term. Should this expectation change, additional expense could be recorded in future periods.

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GUARANTY BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)



The Company has life insurance policies on certain key executives and former key executives. At December 31, 2009 and 2008, the
carrying value of the company-owned life insurance polices was $14,247,000 and $13,640,000 million, respectively, which is included in other assets on the Consolidated Balance Sheets. Company
owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other
amounts likely due at settlement.



The Company has Deferred Compensation Plans (the "Plans") that allow directors and certain key employees to voluntarily defer
compensation. Compensation expense is recorded for the deferred compensation and a related liability is recognized. Participants may elect designated investment options for the notional investment of
their deferred compensation. The recorded obligations are adjusted for deemed income or loss related to the investments selected. Participants in the 2005 Deferred Compensation Plan (2005 Plan) are
given the opportunity to elect to have all or a portion of their deferred compensation earn a rate of return equal to the total return on the Company's common stock. The 2005 Plan does not provide for
diversification of a participant's assets allocated to Company common stock and assets allocated to Company common stock can only be settled with a fixed number of shares of stock. The deferred
compensation obligation associated with Company common stock is classified as a component of stockholders' equity and the related shares are treated as shares to be issued and are included in total
shares outstanding. At December 31, 2009 and 2008, there were 129,806 and 109,214 shares, respectively, to be issued included in total shares outstanding. Subsequent changes in the fair value
of the common stock are not reflected in operations or stockholders' equity of the Company. Actual Company common stock held by the Company for the satisfaction of obligations of the 2005 Plan is
classified as treasury stock.



Income tax expense is the total of the current year income tax due or refundable and the change 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 that
includes the enactment date. A valuation allowance, if needed,
reduces deferred tax assets to the amount expected to be realized. For purposes of a valuation allowance, the Company evaluates all evidence currently available, both positive and negative, including
existence of taxes paid in available carry-back years, forecasts of future income, cumulative losses, applicable tax planning strategies and assessments of the current and future economic
and business conditions.

At
December 31, 2009 and 2008, the Company did not have any uncertain tax positions for which a tax benefit is disallowed under current accounting guidance. A tax position is
recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the
largest amount of tax benefit

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GUARANTY BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

that
is greater than 50% likely of being realized on examination. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded.

The
Company recognizes interest related to income tax matters as interest expense and penalties related to income tax matter as other noninterest expense.



The Company operates as one segment. The operating information used by the Company's chief executive officer for purposes of assessing
performance and making operating decisions about the Company is the consolidated financial statements presented in this report. For the years ended 2009 and 2008, the Company had one active operating
subsidiary, Guaranty Bank and Trust Company. For the year ended 2007, the Company had two active operating subsidiaries, Centennial Bank of the West and Guaranty Bank and Trust Company. The Company
has determined that banking is its one reportable business segment.



Basic loss per common share represents the loss allocable to common stockholders divided by the weighted average number of common
shares outstanding during the period. Diluted loss per share reflects additional common shares that would have been outstanding if potential dilutive common shares had been issued. The Company's
obligation to issue shares of stock to participants in its deferred compensation plan has been treated as outstanding shares of stock in the
basic earnings per common share calculation. Dilutive common shares that may be issued by the Company relate to convertible preferred stock and unvested common share grants subject to a service
condition for the years ended December 31, 2009, 2008 and 2007. The loss per common share have been computed based on the following:

Year Ended December 31,2009

2008

2007Average common shares outstanding


51,378,360


51,044,372


53,109,307Effect of dilutive preferred stock(1)








Effect of dilutive unvested stock grants(2)








Average shares outstanding and calculated diluted earnings per common share


51,378,360


51,044,372


53,109,307


(1)The
Company has 60,434 shares outstanding of convertible preferred stock at December 31, 2009. These shares are convertible into 33,574,444 shares of
common stock of the Company based on a conversion price of $1.80. The impact of the future conversion of these shares is antidilutive in 2009 due to the net loss for the period.(2)The
impact of unvested stock grants of 1,381,105, 1,420,345 and 1,651,345 at December 31, 2009, 2008 and 2007, respectively, are antidilutive due to
the net loss for those periods.


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Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)






Accounting principles require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes
in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the balance
sheet, such items, along with net income (loss), are components of comprehensive income (loss).

The
entire balance of other comprehensive income (loss) at December 31, 2009, 2008 and 2007 was due to unrealized gains (losses) on securities available for sale.

Following
are the components of other accumulated comprehensive income (loss) and related tax effects for the periods indicated:

Year Ended December 31,2009

2008

2007(In thousands)Net loss

$
(29,207
)
$
(256,736
)
$
(138,092
)Other comprehensive income (loss):Change in net unrealized gains (losses), net


1,869


414


(3,684
)Less: Reclassification adjustments for losses (gains) included in income


2


(138
)

Net unrealized holding gains (losses)


1,871


276


(3,684
)Income tax benefit (expense)


(712
)

(106
)

1,403Other comprehensive income (loss)


1,159


170


(2,281
)Total comprehensive loss

$
(28,048
)
$
(256,566
)
$
(140,373
)




A portion of the cash on hand or on deposit with the Federal Reserve Bank of Kansas City (the "Federal Reserve") was required to meet
regulatory reserve and clearing requirements. The clearing requirement was $500,000 at December 31, 2009 and 2008. At December 31, 2009 and 2008, there was no reserve requirement. An
amount in excess of the reserve and clearing requirements is maintained in an interest bearing account with the Federal Reserve in lieu of maintaining federal funds sold balances with other financial
institutions.



Various banking laws applicable to the Bank limit the payment of dividends by the Bank to the Company or by the Company to both common
and preferred stockholders. In addition, the Company signed a Written Agreement on January 22, 2010, which, among other things prohibits both the Company and the Bank from paying dividends
without the prior written approval of the Federal Reserve and, in the case of the Bank, the Colorado Division of Banking (the "CDB"). Accordingly, our ability to pay dividends will be restricted until
the Written Agreement is terminated.



Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in
a separate note. Fair value estimates involve uncertainties and

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Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

matters
of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in
market conditions could significantly affect the estimates.



Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the
likelihood of a loss is probable and an amount or range of loss can be reasonably estimated. Loss contingencies at December 31, 2009 and 2008 are more fully disclosed in note 15 to the
consolidated financial statements.



Adoption of New Accounting Standards:In September 2006, the FASB issued guidance that defines fair value, establishes a
framework for measuring fair
value and expands disclosures about fair value measurements. This guidance also establishes a fair value hierarchy about the assumptions used to measure fair value and clarifies assumptions about risk
and the effect of a restriction on the sale or use of an asset. The guidance was effective for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued guidance that
delayed the effective date of this fair value guidance for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value on a recurring basis (at
least annually) to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The impact of adoption was not material.

In
December 2007, the FASB issued guidance that establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any noncontrolling interest in an acquiree, including the recognition and measurement of goodwill acquired in a business combination. The guidance is effective
for fiscal years beginning on or after December 15, 2008. The impact of adoption was not material as the Company did not have an acquisition during 2009.

In
March 2008, the FASB issued guidance that amended and expanded the disclosure requirements for derivative instruments and hedging activities. The guidance requires qualitative
disclosure about objectives and strategies for using derivative and hedging instruments, quantitative disclosures about fair value amounts of the instruments and gains and losses on such instruments,
as well as disclosures about credit-risk features in derivative agreements. The guidance was effective for financial statements issued for fiscal years and interim periods beginning after
November 15, 2008. The Company adopted this guidance on January 1, 2009 and, as a result, provides more disclosure about the Company's derivative activities. Please see note 16
for more information.

In
May 2009, the FASB issued guidance which requires the effects of events that occur subsequent to the balance-sheet date be evaluated through the date the financial statements are
either issued or available to be issued. Companies are required to disclose the date through which subsequent events have been evaluated and whether that date is the date the financial statements were
issued or the date the financial statements were available to be issued. Companies are required to reflect in their financial statements the effects of subsequent events that provide additional
evidence about conditions at the balance-sheet date (recognized subsequent events). Companies are also prohibited from reflecting in their financial statements the effects of subsequent events that
provide evidence about conditions that arose after the balance-sheet date (nonrecognized subsequent events). However, information about

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Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

those
events is required to be disclosed if the financial statements would otherwise be misleading if these conditions were not disclosed. This guidance was effective for interim and annual financial
periods ending after June 15, 2009 with prospective application. The impact of adoption was not material.

In
June 2009, the FASB replacedThe Hierarchy of Generally Accepted Accounting Principles, with theFASB
Accounting Standards CodificationTM (The Codification) as the source of authoritative accounting principles recognized by the FASB to be applied by
nongovernmental entities in the preparation of financial statements in conformity with GAAP. Rules and interpretive releases of the Securities and Exchange Commission under authority of federal
securities laws are also sources of authoritative GAAP for SEC registrants. The Codification was effective for financial statements issued for periods ending after September 15, 2009.

In
June 2008, the FASB issued guidance which addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore,
included in the
earnings allocation in computing earnings per common share (EPS) under the two-class method. Unvested share-based payment awards that contain non-forfeitable rights to
dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of EPS pursuant to the two-class method. This guidance was
effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. All prior-period EPS data presented were to be adjusted
retrospectively (including interim financial statements, summaries of earnings, and selected financial data) to conform to the provisions of this guidance. Since the Company's unvested restricted
stock awards do not contain nonforfeitable rights to dividends, they are not included under the scope of this pronouncement, and therefore, the impact of adoption was not material.

In
April 2009, the FASB amended existing guidance for determining whether impairment is other-than-temporary for debt securities. The guidance requires an entity
to assess whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either
of these criteria are met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For securities that do not meet the aforementioned criteria, the
amount of impairment is split into two components as follows: 1) other-than-temporary impairment (OTTI) related to other factors, which is recognized in other
comprehensive income and 2) OTTI related to credit loss, which must be recognized in the income statement. The credit loss is defined as the difference between the present value of the cash
flows expected to be collected and the amortized cost basis. Additionally, disclosures about other-than-temporary impairments for debt and equity securities were expanded. This
guidance was effective for interim and annual reporting periods ending after June 15, 2009. The impact of adoption was not material.

In
April 2009, the FASB issued guidance that emphasizes that the objective of a fair value measurement does not change even when market activity for the asset or liability has decreased
significantly. Fair value is the price that would be received for an asset sold or paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between
market participants at the measurement date under current market conditions. When observable transactions or quoted prices are not considered orderly, then little, if any, weight should be assigned to
the indication of the asset or liability's fair value. Adjustments to those transactions or prices should be applied to determine the appropriate fair value. The guidance, which was applied
prospectively, was

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Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

effective
for interim and annual reporting periods ending after June 15, 2009. The impact of adoption was not material.

In
August 2009, the FASB amended existing guidance for the fair value measurement of liabilities by clarifying that in circumstances in which a quoted price in an active market for the
identical liability is not available, a reporting entity is required to measure fair value using a valuation technique that uses the quoted price of the identical liability when traded as an asset,
quoted prices for similar liabilities or similar liabilities when traded as assets, or that is consistent with existing fair value guidance. The amendments in this guidance also clarify that both a
quoted price in an active market for the identical
liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are
Level 1 fair value measurements. The guidance was effective for the first reporting period beginning after issuance. The impact of adoption was not material.



In June 2009, the FASB amended previous guidance relating to transfers of financial assets and eliminated the concept of a qualifying
special purpose entity. This guidance must be applied as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009, for interim periods
within that first annual reporting period and for interim and annual reporting periods thereafter. This guidance must be applied to transfers occurring on or after the effective date. Additionally, on
and after the effective date, the concept of a qualifying special-purpose entity is no longer relevant for accounting purposes. Therefore, formerly qualifying special-purpose entities should be
evaluated for consolidation by reporting entities on and after the effective date in accordance with the applicable consolidation guidance. The disclosure provisions were also amended and apply to
transfers that occurred both before and after the effective date of this guidance. The effect of adopting this new guidance is not expected to have a material impact on the Company's consolidated
financial position, results of operations or cash flows.

In
June 2009, the FASB amended guidance for consolidation of variable interest entity guidance by replacing the quantitative-based risks and rewards calculation for determining which
enterprise, if any, has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable
interest entity that most significantly impact the entity's economic performance and (1) the obligation to absorb losses of the entity or (2) the right to receive benefits from the
entity. Additional disclosures about an enterprise's involvement in variable interest entities are also required. This guidance is effective as of the beginning of each reporting entity's first annual
reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Early adoption is
prohibited. The effect of adopting this new guidance is not expected to have a material impact on the Company's consolidated financial position, results of operations or cash flows.



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 net change in cash and cash equivalents.

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Notes to Consolidated Financial Statements (Continued)

(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) were as follows at the
dates presented:

December 31, 2009Fair
Value

Gross
unrealized
gains

Gross
unrealized
losses

Amortized
Cost(In thousands)Securities available for sale:U.S. government agencies and government-sponsored entities

$
17,129

$


$
(329
)
$
17,458State and municipal


60,827


820


(567
)

60,574Mortgage-backed securitiesagency/residential


127,340


1,300


(889
)

126,929Mortgage-backed securitiesprivate/residential


13,959





(567
)

14,526Marketable equity


1,519








1,519Other securities


360








360Securities available-for-sale

$
221,134

$
2,120

$
(2,352
)
$
221,366




December 31, 2008Securities available for sale:U.S. Treasury securities

$
3,495

$
1

$


$
3,494U.S. government agencies and government-sponsored entities


2,510


17





2,493State and municipal


63,015


456


(2,836
)

65,395Mortgage-backed securitiesagency/residential


31,965


299


(40
)

31,706Marketable equity


1,345








1,345Other securities


544








544Securities available-for-sale

$
102,874

$
773

$
(2,876
)
$
104,977


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

Amortized cost

Gross unrealized gains

Gross unrealized losses

Fair value(In thousands)December 31, 2009:Mortgage-backed securitiesagency/residential

$
9,942

$
486

$


$
10,428December 31, 2008:Mortgage-backed securitiesagency/residential

$
13,114

$
391

$


$
13,505


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Notes to Consolidated Financial Statements (Continued)

(3) Securities (Continued)

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

Year Ended December 31,2009

2008

2007(In thousands)Proceeds

$
6,411

$
24,902

$
1,440Gross Gains


4


179


1Gross Losses


(6
)

(41
)

(1
)


The
tax expense/benefit recorded related to the realized gain/losses on sale of securities was not material during 2009, 2008 and 2007, respectively.

The
amortized cost and estimated fair value of available for sale debt securities by contractual maturity at December 31, 2009 and 2008 are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to prepay obligations with or without prepayment penalties.

Available for sale (AFS)2009

Amortized cost

Fair value(In thousands)Debt securities available for sale:Due in one year or less

$
1,398

$
1,428Due after one year through five years


11,292


11,635Due after five years through ten years


10,768


11,015Due after ten years


54,574


53,878Total AFS excluding MBS, marketable equity and other securities


78,032


77,956Mortgage-backed securities, marketable equity and other securities


143,334


143,178Total available for sale

$
221,366

$
221,134




Held to maturityAmortized cost

Fair value(In thousands)Securities held to maturity:Mortgage-backed securitiesagency/residential

$
9,942

$
10,428


Investment
securities with carrying values of $187,905,000 and $74,436,000 were pledged at December 31, 2009 and 2008 respectively, as collateral for public deposits and for other
purposes as required or permitted by law.

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Notes to Consolidated Financial Statements (Continued)

(3) Securities (Continued)

The
following table presents the fair value and the unrealized loss on securities that were temporarily impaired and the length of time the individual securities have been in a
continuous unrealized loss position as of December 31, 2009:

Less than
12 months

12 months
or more

TotalFair
value

Unrealized
losses

Fair
value

Unrealized
losses

Fair
value

Unrealized
losses(In thousands)Description of securities:U.S. government agencies and government-sponsored entities

$
17,129

$
(329
)
$


$


$
17,129

$
(329
)State and municipal


37,453


(567
)







37,453


(567
)Mortgage-backed securities agency/residential


50,163


(889
)







50,163


(889
)Mortgage-backed securities private/residential


13,959


(567
)







13,959


(567
)Total temporarily impaired

$
118,704

$
(2,352
)
$


$


$
118,704

$
(2,352
)


In
determining whether or not there is an OTTI for debt securities, management considers many factors, including: (1) the length of time and the extent to which the fair value has
been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and
(4) whether the Company has the intention to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether
an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

At
December 31, 2009, there were twelve individual securities in an unrealized loss position. There were no individual securities that have been in a continuous unrealized loss
position for 12 months or longer at December 31, 2009. The securities fluctuate in value since their purchase dates primarily as a result of changes in market interest rates.

All
of the Bank's agency and mortgage-backed securities are backed by either a U.S. Government agency or government-sponsored agency, except for four private-label mortgage-backed
securities with a total fair value of $14.0 million. These private-label securities are senior tranches that are rated AAA by two separate rating agencies at December 31, 2009. The
decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality.

The
Bank's municipal bond securities have all been rated investment grade or higher by various rating agencies or have been subject to an annual internal review process by management.
This annual review process for non-rated securities considers a review of the issuers' current financial statements, including the related cash flows and interest payments. We concluded
that the unrealized loss positions on these securities is a result of the level of market interest rates and not a result of the underlying issuers' ability to repay.

At
December 31, 2009, there was a security of a single issuer with a book value of $38,020,000, or approximately 19.7% of stockholders' equity. This security is a hospital revenue
bond, funded by revenues from a hospital within the Company's footprint. This amortizing tax-exempt bond carries an

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Notes to Consolidated Financial Statements (Continued)

(3) Securities (Continued)

interest
rate of 4.75% and a maturity of December 1, 2031. At December 31, 2009, the bond had an unrealized loss of approximately $0.6 million, or 1.5% of book value. In addition
to its annual review of nonrated municipal bonds completed in the fourth quarter 2009, the Company reviews the financial statements of the hospital quarterly. To date, the bond has paid principal and
interest in accordance with its contractual terms.

We
do not intend to sell any of the debt securities with an unrealized loss and do not believe that it is more likely than not that we will be required to sell a security in an
unrealized loss position prior to a recovery in its value. The fair value of these debt securities is expected to recover as the bonds approach maturity. Accordingly, we have not recognized any OTTI
in our consolidated statements of income.

The
following table presents the fair value and the unrealized loss on securities that were temporarily impaired as of December 31, 2008:

Less than
12 months

12 months
or more

TotalFair
value

Unrealized
losses

Fair
value

Unrealized
losses

Fair
value

Unrealized
losses(In thousands)Description of securities:State and municipal

$
2,670

$
(23
)
$
35,897

$
(2,813
)
$
38,567

$
(2,836
)Mortgage-backed securitiesagency/residential


4,348


(40
)







4,348


(40
)Total temporarily impaired

$
7,018

$
(63
)
$
35,897

$
(2,813
)
$
42,915

$
(2,876
)


At
December 31, 2008, there was a security of a single issuer with a book value of $38,710,000, which exceeded 10% of stockholders' equity. This security is a hospital revenue
bond, funded by revenues from a hospital within the Company's footprint. At December 31, 2008, the bond had an unrealized loss of approximately $2.8 million, or 7.3% of book value.

(4) Bank Stocks

The Company, through its subsidiary bank, is a member of both the Federal Reserve Bank of Kansas City and the Federal Home Loan Bank of Topeka, and is required to maintain an investment
in the capital stock of each. The Federal Reserve, Federal Home Loan Bank and other bank stock are restricted in that they can only be redeemed by the issuer at par value. The Company's investment at
December 31 was as follows:

2009

2008(In thousands)Federal Reserve Bank of Kansas City

$
6,534

$
13,768Federal Home Loan Bank of Topeka


9,868


13,747Other bank stocks securities


758


761Totals

$
17,160

$
28,276


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Notes to Consolidated Financial Statements (Continued)

(4) Bank Stocks (Continued)

The
investments in bank stocks are reviewed by management quarterly for potential other-than-temporary-impairment. This quarterly review considers the credit
quality of the institution, the institution's ability to repurchase shares, the Company's carrying value in the shares relative to the share's book value. Based on each of these reviews, Management
concluded that there was no other-than-temporary-impairment during 2009 or 2008.

(5) Loans

A summary of the balances of loans at December 31 follows:

2009

2008(In thousands)Loans on real estate:Residential and commercial

$
760,719

$
680,030Construction


105,612


268,306Equity lines of credit


54,852


50,270Commercial loans


521,016


746,241Agricultural loans


18,429


22,738Lease financing


4,011


3,549Installment loans to individuals


36,175


38,352Overdrafts


358


855SBA and other


20,997


19,592$
1,522,169

$
1,829,933Less:Allowance for loan losses


(51,991
)

(44,988
)Unearned discount


(2,561
)

(3,600
)Net Loans

$
1,467,617

$
1,781,345


Activity
in the allowance for loan losses is as follows:

Year Ended December 31,2009

2008

2007(In thousands)Balance, beginning of period

$
44,988

$
25,711

$
27,899Provision for loan losses


51,115


33,775


24,666Loans charged off


(46,007
)

(16,227
)

(28,973
)Recoveries on loans previously charged-off


1,895


1,729


2,119Balance, end of period

$
51,991

$
44,988

$
25,711


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Notes to Consolidated Financial Statements (Continued)

(5) Loans (Continued)

A
summary of transactions in the reserve for unfunded commitments for the periods indicated is as follows:

Year Ended December 31,2009

2008

2007(In thousands)Balance, beginning of period

$
223

$
522

$
411Provision (credit) for losses on unfunded commitments


20


(299
)

111Balance, end of period

$
243

$
223

$
522


The
following is a summary of information pertaining to impaired loans at December 31:

2009

2008(In thousands)Impaired loans with a valuation allowance

$
21,039

$
42,191Impaired loans without a valuation allowance


38,668


12,631Total impaired loans

$
59,707

$
54,822Valuation allowance related to impaired loans

$
6,603

$
11,064


The
following is a summary of nonaccrual loans and loans past due 90 days still on accrual status:

2009

2008(In thousands)Nonaccrual loans

$
59,584

$
54,594Loans past due over 90 days still on accrual

$
123

$
228


The
amount of trouble debt restructurings is immaterial at December 31, 2009 and 2008, respectively.

The
following is a summary of interest recognized and cash-basis interest earned on impaired loans:

Year Ended December 31,2009

2008

2007(In thousands)Average of individually impaired loans during year

$
61,816

$
36,773

$
35,160Interest income recognized during impairment

$
203

$
147

$
1,410Cash-basis interest income recognized

$
203

$
147

$
1,146


The
gross interest income that would have been recorded in the period that ended if the nonaccrual loans had been current in accordance with their original terms and had been outstanding
throughout the period or since origination, if held for part of the period for December 31, 2009 and 2008, was $4,198,000 and $4,522,000, respectively.

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Notes to Consolidated Financial Statements (Continued)

(6) Premises and Equipment

A summary of the cost and accumulated depreciation and amortization of premises and equipment at December 31 is as follows:

2009

2008(In thousands)Land

$
13,693

$
13,693Buildings


45,032


45,033Leasehold improvements


5,891


5,917Equipment and software


16,176


17,012Leasehold interest in land


684


684Subtotal

$
81,476

$
82,339Accumulated depreciation and amortization


(21,209
)

(19,321
)Total premises and equipment

$
60,267

$
63,018


Depreciation
expense for the years ended December 31, 2009, 2008 and 2007 was approximately $3,575,000, $4,300,000 and $4,200,000, respectively. Such amounts are classified in
occupancy and furniture and equipment expense.

Operating Leases:Pursuant to the terms of non-cancelable lease agreements in effect at December 31, 2009 pertaining to banking
premises, future minimum rent commitments under various operating leases are as follows (in thousands):

2010

$
2,9732011


2,9232012


2,3542013


1,8812014


1,683Thereafter


2,753$
14,567


Certain
leases contain options to extend the lease terms for five to twenty one years. The cost of such rentals is not included in the above rental commitments. Rent expense for the
years ended December 31, 2009, 2008 and 2007 was $3,438,000, $3,458,000 and $3,391,000, respectively.

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Notes to Consolidated Financial Statements (Continued)

(7) Other Real Estate Owned

Changes in the carrying amount of the Company's other real estate owned for the years ended December 31, 2009 and 2008 were as follows (in thousands):

Balance as of December 31, 2007

$
3,517Additions to OREO


2,789Sales Proceeds


(3,705
)Loss on sale, net


(18
)Transfer from other liabilities


(615
)Total write-downs


(1,484
)Balance as of December 31, 2008

$
484Additions to OREO


55,413Sales Proceeds


(13,569
)Loss on sale, net


(72
)Total write-downs


(5,063
)Balance as of December 31, 2009

$
37,192


Write-downs
are included in other real estate owned expense and losses on sale, net are included in other noninterest income.

(8) Goodwill

Changes in the carrying amount of the Company's goodwill for the years ended December 31, 2009 and 2008 were as follows (in thousands):

Balance as of December 31, 2007

$
250,748Impairment


(250,748
)Balance as of December 31, 2008

$
Impairment


Balance as of December 31, 2009

$



Goodwill
for the Company's single reporting unit was tested annually for impairment, unless an event occurs or circumstances change that would more likely than not reduce the fair value
of the reporting unit.

Impairment
exists when a reporting unit's carrying value of goodwill exceeds its fair value, which is determined through a two-step impairment test. Step 1 includes the
determination of the carrying value of our single reporting unit, including the existing goodwill and intangible assets, and estimating the fair value of the reporting unit. We determined the fair
value of our reporting unit and compared it to its carrying amount. If the carrying amount of a reporting unit exceeds its fair value, we are required to perform a second step to the impairment test.

During
2008, we performed an impairment test prior to the annual impairment testing date due to the uncertainty in the interest rate environment, continued softness in the real estate
market and the market volatility of the financial services industry in 2008. This impairment test indicated that the Step 2 analysis was necessary. Step 2 of the goodwill impairment test was
performed to measure the

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GUARANTY BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(8) Goodwill (Continued)

impairment
loss. Step 2 requires that the implied fair value of the reporting unit goodwill be compared to the carrying amount of that goodwill. If the carrying amount of the reporting unit goodwill
exceeds the implied fair value of that goodwill, an impairment loss shall be recognized in an amount equal to that excess. After performing Step 2 it was determined that the implied value of goodwill
was less than the carrying costs, resulting in an impairment charge of $250,748,000.

(9) Other Intangible Assets

Intangible assets with a finite life are recorded on our balance sheets. These intangible assets were capitalized as a result of past acquisitions and are being amortized over their
estimated useful lives. At December 31, 2009 and 2008, the only such asset on the Company's balance sheet is the core deposit intangible, which is tested annually for impairment, and no
impairment was deemed necessary.

A
summary of the core deposit intangible asset and the accumulated amortization is below:

December 31,Useful life

2009

2008(In thousands)Core deposit intangible assets

7 - 15 years

$
62,975

$
62,975Accumulated amortization




(43,753
)

(37,475
)Other intangible assets, net



$
19,222

$
25,500


Amortization
expense for the years ended December 31, 2009, 2008 and 2007 was $6,278,000, $7,433,000, and $8,666,000, respectively. Estimated amortization expense for the next
five years, and thereafter, is as follows (amounts in thousands):

TotalFiscal year ending:2010

$
5,1692011


4,0912012


3,0332013


2,5662014


2,097Thereafter


2,266$
19,222


105

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GUARANTY BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(10) Deposits

The aggregate amount of time deposits in denominations of $100,000 or more at December 31, 2009 and 2008 was $288,588,000 and $298,334,000, respectively.

At
December 31, 2009 and 2008, the Bank had $254,636,000 and $192,873,000, respectively, in brokered time deposits. Additionally, the Bank had reciprocal time deposits with other
depository institutions
that are treated as brokered deposits for regulatory purposes of $36,616,000 and $59,301,000 at December 31, 2009 and 2008, respectively.

At
December 31, 2009, the scheduled maturities of interest-bearing time deposits for the next five years are as follows (amounts in thousands):

2010

$
521,8052011


204,9752012


4,4952013


1252014


$
731,400


(11) Securities Sold Under Agreements to Repurchase

The following is a summary of information pertaining to securities sold under agreement to repurchase at December 31:

2009

2008(Dollars in thousands)Ending Balance

$
22,850

$
21,781Weighted-average interest rate at year-end


0.94
%

1.02
%


Securities
sold under agreements to repurchase, which are classified as secured borrowings, generally mature within one to four days from the transaction date. Securities sold under
agreements to repurchase are reflected at the amount of cash received in connection with the transaction. The Company may be required to provide additional collateral based on the fair value of the
underlying security. The securities sold under agreements to repurchase are collateralized by government agency and mortgage-backed securities held by the Company.

Information
concerning securities sold under agreements to repurchase is summarized below:

Year Ended December 31,2009

2008

2007(Dollars in thousands)Average daily balance during the year

$
15,557

$
18,698

$
29,104Average interest rate during the year


0.89
%

2.09
%

4.62
%Maximum month-end balance during the year

$
22,850

$
22,332

$
40,020


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GUARANTY BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(12) Borrowings

A summary of borrowings is as follows:

Principal

Interest rate

Maturity
date

Total
committed(Dollars in thousands)December 31, 2009Short-term borrowings:FHLB line of credit

$





n/a


195,338Total short-term borrowings

$
Long-term borrowings:FHLB term notes (fixed rate)


164,364

Range: 2.52%-6.22%


2010-2018


See belowTotal borrowings

$
164,364December 31, 2008Short-term borrowings:FHLB line of credit

$





n/a


428,317Total short-term borrowings

$
Long-term borrowings:FHLB term notes (fixed rate)


166,404

Range: 2.52%-6.22%


2009-2018


See belowTotal borrowings

$
166,404


Each
advance with the Federal Home Loan Bank (FHLB) is payable at its maturity date, with a prepayment penalty if paid prior to maturity. The weighted-average rate on the FHLB term notes
is 3.17% at December 31, 2009. At December 31, 2009, approximately $140 million of the FHLB fixed rate term notes with a weighted-average rate of 3.02% were convertible to
floating rate on predetermined conversion dates at the discretion of the FHLB. If the notes are converted by the FHLB, the Bank has the option to prepay the advance without penalty. If the notes are
not converted by the FHLB, the note becomes convertible quarterly thereafter, with the option to convert to floating rate continuing to be at the discretion of the FHLB. Three notes have potential
conversions in 2010a $40 million note with a rate of 3.17%, a $30 million note with a rate of 2.95% and a $10 million note with a rate of 3.16% have their next
quarterly conversion dates on 3/1/2010; 4/11/2010 and 4/26/2010, respectively. No other FHLB term note has a conversion option available in 2010. The remaining $60 million of term notes with
conversion options are layered with $40 million having their first conversion option available in 2011, and $20 million having its first conversion option available in 2013.

The
Bank has executed a specific pledging and security agreement with the FHLB in the amount of $195,338,000 at December 31, 2009 which encompassed certain loans and securities as
collateral for these borrowings. Prior to December 2009, the Bank had a blanket pledging and security agreement
with the FHLB with $428,317,000 pledged at 2008. The maximum credit allowance for future borrowings, including term notes and the line of credit, was $30,974,000 and $261,913,000 at
December 31, 2009 and 2008, respectively.

As
of December 31, 2008, the holding company had a revolving credit agreement, as amended, with U.S. Bank National Association, which contained financial covenants, including
maintaining a minimum adjusted return (excluding goodwill impairment and intangible asset amortization) on average

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Notes to Consolidated Financial Statements (Continued)

(12) Borrowings (Continued)

assets,
a maximum nonperforming assets to total loans ratio for the subsidiary bank, regulatory capital ratios that qualify the Company, on a consolidated basis, as well-capitalized and a
minimum total risk-based capital amount. At December 31, 2008, the holding company was in compliance with all covenants except the minimum total risk-based capital
amount. The minimum total risk-based capital amount was set by U.S. Bank and was based on the holding company receiving additional capital from Treasury's Capital Purchase Program prior to
December 31, 2008. As the holding company's application to receive capital under Treasury's Capital Purchase Program was still pending as of December 31, 2008, the holding company did
not meet this financial covenant and voluntarily decided to terminate its line of credit on February 9, 2009 with U.S. Bank. The revolving credit agreement would have otherwise expired on
March 31, 2009.

At
December 31, 2009, the scheduled maturities of borrowings are as follows (in thousands):

2010

$
1,0702011


2,9952012


142013


50,2072014


78Thereafter


110,000Total borrowings

$
164,364


(13) Income Taxes

The components of the income tax benefit are as follows:

Year ended December 31,2009

2008

2007(In thousands)Current tax provision:Federal

$
(14,199
)
$
1,585

$
3,709State





1,080


943Total current tax provision


(14,199
)

2,665


4,652Deferred tax provision (benefit):Federal


(3,458
)

(8,452
)

(4,561
)State


(1,504
)

(726
)

(276
)Total deferred tax provision


(4,962
)

(9,178
)

(4,837
)Total tax provision (benefit)

$
(19,161
)
$
(6,513
)
$
(185
)


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GUARANTY BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(13) Income Taxes (Continued)

Income
tax expense attributable to the loss from continuing operations differed from the amounts computed by applying the U.S. federal statutory tax rate to pretax loss from operations
as a result of the following:

Year ended December 31,2009

2008

2007Tax (benefit) at statutory federal rate


(35.0
)%

(35.0
)%

(35.0
)%State tax, net of federal benefit


(3.3
)%

(0.2
)%

0.1
%Tax exempt income


(2.9
)%

(0.4
)%

(1.6
)%Goodwill impairment





33.3
%

36.0
%Other


1.6
%

(0.2
)%

0.4
%(39.6
)%

(2.5
)%

(0.1
)%


Current
taxes receivable included in other assets totaled approximately $13,623,000 and $3,397,000 at December 31, 2009 and December 31, 2008, respectively. The Company's
net deferred tax asset is included in other assets at December 31, 2009 and December 31, 2008.

Deferred
tax assets and liabilities result from the tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes at December 31 are as follows:

2009

2008(In thousands)Deferred tax assets:Allowance for loan losses

$
19,762

$
17,100Fair value adjustments on securities, loans, deposits, and subordinated debentures


67


407Other assets, accruals and other real estate owned


2,138


2,867Unrealized loss on securities


88


801State net operating loss carryforwards


1,207Intangible assets


1,002


1,106Stock compensation and other


804


1,523Total deferred tax assets


25,068


23,804Deferred tax liabilities:Premises and equipment


5,320


5,861Core deposit intangibles and fixed rate loan purchase accounting adjustments


7,366


9,723FHLB stock, prepaid assets, equity investments and other liabilities


2,212


2,299Total deferred tax liabilities


14,898


17,883Deferred tax asset (liability)

$
10,170

$
5,921


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Notes to Consolidated Financial Statements (Continued)

(13) Income Taxes (Continued)

Realization
of the Company's deferred tax assets is dependent upon the Company generating sufficient taxable income to obtain benefit from the reversal of net deductible temporary
differences. The amount of deferred tax assets considered realizable is subject to adjustment in future periods based on estimates of future taxable income. In assessing the realization of deferred
tax assets, the Company
considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation
of future taxable income, including tax planning strategies, during the periods in which those temporary differences become deductible. The Company determined that it has sufficient prior year taxable
income that is still available for carryback, as well as various tax planning strategies which could be implemented to generate taxable income in future taxable periods in which the deferred taxes are
deductible, to support the current balance of deferred tax assets. Based on these factors, the Company believes it is more likely than not that the Company will realize the benefits of these
deductible differences at December 31, 2009, 2008 and 2007, and therefore, no valuation allowance for deferred tax assets was recorded at December 31, 2009, 2008 and 2007.

At
December 31, 2009, the Company did not have a federal net operating loss or tax credit carryforward. At December 31, 2009, the Company had a state net operating loss
carryforward of approximately $40.5 million expiring in 2029.

As
of December 31, 2009 and December 31, 2008, the Company did not have any unrecognized tax benefits. The Company does not expect the total amount of unrecognized tax
benefits to significantly increase or decrease in the next twelve months. The Company recognizes interest related to income tax matters as interest expense and penalties related to income tax matters
as other noninterest expense and did not have any accrued interest and/or penalties at December 31, 2009 or 2008. The Company received approximately $27,000 and $41,000 of interest income on
tax refunds in 2009 and 2008, respectively. No other interest or penalties related to tax matters were incurred during 2009 or 2008. The Company and its subsidiaries are subject to U.S. federal income
tax, as well as state of Colorado income tax. The Company is no longer subject to examination by taxing authorities for years before 2006, but could be subject to adjustment by taxing authorities up
to the amount of the 2009 net operating loss expected to be carried back to years before 2006.

(14) Subordinated Debentures and Trust Preferred Securities

The Company had a $41,239,000 aggregate balance of subordinated debentures outstanding with a weighted average cost of 5.87% and 8.68% at December 31, 2009 and 2008, respectively.
The subordinated debentures were issued in four separate series. Each issuance has a maturity of thirty
years from its date of issue. The subordinated debentures were issued to trusts established by us, which in turn issued $40,000,000 of trust preferred securities. Generally and with certain
limitations, the Company is permitted to call the debentures subsequent to the first five or ten years, as applicable, after issue if certain conditions are met, or at any time upon the occurrence and
continuation of certain changes in either the tax treatment or the capital treatment of the trusts, the debentures or the preferred securities.

In
September 2000, a predecessor to the Company formed CenBank Statutory Trust I and completed an offering of $10.0 million, 10.6% Cumulative Trust Preferred Securities (Preferred
Securities), which are guaranteed by the Company. The Trust also issued common securities to the predecessor of the Company and used the net proceeds from the offering to purchase $10.3 million
in

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Notes to Consolidated Financial Statements (Continued)

(14) Subordinated Debentures and Trust Preferred Securities (Continued)

principal
amount of 10.6% Junior Subordinated Debentures (Debentures) issued. The Company assumed the predecessor's obligations relating to such securities upon the acquisition of the predecessor.
Interest paid on the Debentures is distributed to the holders of the Preferred Securities. Distributions payable on the Preferred Securities are recorded as interest expense in the consolidated
statements of income. These Debentures are unsecured, rank junior and are subordinate in right of payment to all senior debt of the Company. The Preferred Securities are subject to mandatory
redemption upon repayment of the Debentures. The Company has the right, subject to events of default, to defer payments of interest on the Debentures at any time by extending the interest payment
period for a period not exceeding 10 consecutive semi-annual periods with respect to each deferral period, provided that no extension period may extend beyond the redemption or maturity
date of the Debentures. The Debentures mature on September 7, 2030, which may be shortened by us to not earlier than September 7, 2010, if certain conditions are met, or at any time upon
the occurrence and continuation of certain changes in either the tax treatment or the capital treatment of the Trust, the Debentures or the Preferred Securities.

In
February 2001, a predecessor to the Company formed CenBank Statutory Trust II and completed an offering of $5.0 million 10.2% Cumulative Trust Preferred Securities (Preferred
Securities), which are guaranteed by the Company. The Trust also issued common securities to the predecessor of the Company and used the net proceeds from the offering to purchase $5.2 million
in principal amount of 10.2% Junior Subordinated Debentures (Debentures) issued. The Company assumed the predecessor's obligations relating to such securities upon the acquisition of the predecessor.
Interest paid on the Debentures is distributed to the holders of the Preferred Securities. Terms and conditions of these Debentures are substantially similar to those as described under the CenBank
Statutory Trust I. The Debentures mature on February 22, 2031, which may be shortened by us to not earlier than February 22, 2011, if certain conditions are met, or at any time upon the
occurrence and continuation of certain changes in either the tax treatment or the capital treatment of the Trust, the Debentures or the Preferred Securities.

In
April 2004, a predecessor to the Company formed CenBank Statutory Trust III and completed an offering of $15.0 million LIBOR plus 2.65% Cumulative Trust Preferred Securities
(Preferred Securities), which are guaranteed by the Company. The Trust also issued common securities to the predecessor of the Company and used the net proceeds from the offering to purchase
$15.5 million in
principal amount of floating rate Junior Subordinated Debentures (Debentures) issued. The Company assumed the predecessor's obligations relating to such securities upon the acquisition of the
predecessor. Interest paid on the Debentures is distributed to the holders of the Preferred Securities. Terms and conditions of these Debentures are substantially similar to those as described under
the CenBank Statutory Trust I. The Debentures mature on April 15, 2034, which may be shortened by us to not earlier than April 15, 2009, if certain conditions are met, or at any time
upon the occurrence and continuation of certain changes in either the tax treatment or the capital treatment of the Trust, the Debentures or the Preferred Securities.

In
June 2003, a predecessor to the Company formed Guaranty Capital Trust III and completed an offering of $10.0 million LIBOR plus 3.10% Cumulative Trust Preferred Securities
(Preferred Securities), which are guaranteed by the Company. The Trust also issued common securities to the predecessor of the Company and used the net proceeds from the offering to purchase
$10.3 million in principal amount of Junior Subordinated Debt Securities issued. The Company assumed the predecessor's obligations relating to such securities upon the acquisition of the
predecessor. Interest is

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Notes to Consolidated Financial Statements (Continued)

(14) Subordinated Debentures and Trust Preferred Securities (Continued)

paid
quarterly and is distributed to the holders of the Preferred Securities. The Company has the right, subject to events of default, to defer payments of interest on the Debentures at any time by
extending the interest payment period for a period not exceeding 20 consecutive quarterly periods with respect to each deferral period, provided that no extension period may extend beyond the
redemption or maturity date of the Debentures. The Debentures mature on July 7, 2033. The Guaranty Capital Trust III trust preferred issuance was initially callable on July 7, 2008. The
Company did not call this security on July 7, 2008; however, this security remains callable on each quarterly interest payment date.

Under
the terms of each subordinated debentures agreement, the Company has the ability to defer interest on the debentures for a period of up to sixty months as long as it is in
compliance with all covenants of the agreement. On July 31, 2009, the Company notified the trustees of the four trusts that it will defer interest on all four of its subordinated debentures.
Such a deferral is not an event of default under each subordinated debentures agreement and interest on the debentures continues to accrue during the deferral period. Prior to paying any interest on
the subordinated debentures, the Company must obtain prior written approval from the Federal Reserve Bank of Kansas City under the terms of its Written Agreement (see Note 23, Written Agreement
for additional information). At December 31, 2009, the Company is in compliance with all covenants of the agreements.

The
Company is not considered the primary beneficiary of these Trusts (variable interest entities), therefore the trusts are not consolidated in the Company's financial statements, but
rather the subordinated debentures are shown as a liability. The Company's investment in the common stock of each trust is included in other assets in the Consolidated Balance Sheets.

Although
the securities issued by each of the trusts are not included as a component of stockholders' equity in the consolidated balance sheets, the securities are treated as capital for
regulatory purposes.
Specifically, under applicable regulatory guidelines, the $40 million of securities issued by the trusts qualify as Tier 1 capital, along with the $59.2 million of 9%
Series A Convertible Preferred Stock, up to a maximum of 25% of capital on an aggregate basis. Any amount that exceeds 25% qualifies as Tier 2 capital. At December 31, 2009,
approximately $44.5 million of the combined $99.2 million of the trusts' securities and preferred stock outstanding qualified as Tier 1 capital. The remaining $54.7 million
is treated as Tier 2 capital.

The
Board of Governors of the Federal Reserve System, which is the holding company's banking regulator, has promulgated a modification of the capital regulations affecting trust
preferred securities. Under this modification, beginning March 31, 2011, the Company is required to use a more restrictive formula to determine the amount of trust preferred securities that can
be included in regulatory Tier I capital. The Company will be allowed to include in Tier I capital an amount of trust preferred securities equal to no more than 25% of the sum of all
core capital elements, which is generally defined as stockholders' equity less certain intangibles, including core deposit intangibles, net of any related deferred income tax liability. The existing
regulations in effect limit the amount of trust preferred securities that can be included in Tier I capital to 25% of the sum of core capital elements without a deduction for permitted
intangibles. The adoption of this modification is not expected to have a material impact on the inclusion of trust preferred securities for purposes of Tier 1 capital.

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Notes to Consolidated Financial Statements (Continued)

(14) Subordinated Debentures and Trust Preferred Securities (Continued)

The
following table summarizes the terms of each subordinated debenture issuance at December 31, 2009 (dollars in thousands):

Date
Issued

Amount

Maturity
Date

Call
Date*

Fixed or
Variable

Rate
Adjuster

Rate at
December 31,
2009

Next Rate
Reset
Date**CenBank Trust I


9/7/2000

$
10,310


9/7/2030


9/7/2010

Fixed


N/A


10.60
%

N/ACenBank Trust II


2/22/2001


5,155


2/22/2031


2/22/2011

Fixed


N/A


10.20
%

N/ACenBank Trust III


4/8/2004


15,464


4/15/2034


4/15/2010

Variable


LIBOR + 2.65
%

2.93
%

1/15/2010Guaranty Capital Trust III


6/30/2003


10,310


7/7/2033


4/7/2010

Variable


LIBOR + 3.10
%

3.38
%

1/07/2010


*Call
date represents the earliest date that the Company can next call the debentures.**On
January 7, 2010, the rate on the Guaranty Capital Trust III subordinated debentures reset to 3.35%. On January 15, 2010, the rate on the
CenBank Trust III subordinated debentures reset to 2.90%.


(15) Commitments

The Bank is a party to credit-related financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit, stand-by letters of credit and commercial letters of credit. Such commitments involve, to varying degrees, elements of credit
and interest rate risk in excess of the amount recognized in the consolidated balance sheets.

The
Bank's exposure to credit loss is represented by the contractual amount of these commitments. The Bank follows the same credit policies in making commitments as it does for
on-balance sheet instruments.

At
December 31, the following financial instruments were outstanding whose contract amounts represented credit risk:

2009

2008(In thousands)Commitments to extend credit:Variable

$
173,593

$
222,055Fixed


131,509


168,222Total commitments to extend credit

$
305,102

$
390,277Standby letters of credit

$
14,917

$
24,792Commercial letters of credit


11,000


11,000


Commitments
to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee. Several of the commitments may expire without being drawn upon. Therefore, the total commitment amounts do not
necessarily represent future cash requirements. Off-balance sheet risk to credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The
same credit policies are used to make such commitments as are used for loans, including obtaining collateral, if necessary, at exercise of the commitment.

Commitments
to extend credit under overdraft protection agreements are commitments for possible future extensions of credit to existing deposit customers. These lines of credit are
uncollateralized and usually do not contain a specified maturity date and may not be drawn upon to the total extent to which the Company is committed.

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Notes to Consolidated Financial Statements (Continued)

(15) Commitments (Continued)

Stand-by
letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Those letters of credit are primarily
issued to support public and private borrowing arrangements. Essentially all letters of credit issued have expiration dates within one year. The credit risk involved in issuing letters of credit is
essentially the same as that
involved in extending loan facilities to customers. The Bank generally holds collateral supporting those commitments if deemed necessary.

The
Bank enters into commercial letters of credit on behalf of its customers who authorize a third party to draw drafts on the Bank up to a stipulated amount and with specific terms and
conditions. A commercial letter of credit is a conditional commitment on the part of the Bank to provide payment on drafts drawn in accordance with the terms of the commercial letter of credit.

(16) Contingencies

In the ordinary course of our business, we are party to various legal actions, which we believe are incidental to the operation of our business. Although the ultimate outcome and amount
of liability, if any, with respect to these other legal actions to which we are currently a party, cannot presently be ascertained with certainty, in the opinion of management, based upon information
currently available to us, any resulting liability is not likely to have a material adverse effect on the Company's consolidated financial position, results of operations or cash flows.

(17) Employee Benefit Plans

Substantially all employees are eligible to participate in the Company's 401(k) plan. Employees may contribute up to 100 percent of their compensation subject to certain limits
based on federal tax laws. The Company makes matching contributions equal to a specified percentage of the employee's compensation as defined by the Plan. For years ended December 31, 2009,
2008 and 2007, expensed contributions to the 401(k) plan were $597,000, $720,000 and $801,000, respectively.

Stock-Based Compensation

Under the Company's Amended and Restated 2005 Stock Incentive Plan (the "Incentive Plan"), the Company's Board of Directors may grant
stock-based compensation awards to nonemployee directors, key employees, consultants and prospective employees under the terms described in the Incentive Plan. The allowable stock-based compensation
awards include the grant of Options, Restricted Stock Awards, Restricted Stock Unit Awards, Performance Stock Awards, Stock Appreciation Rights and other Equity-Based Awards. The Incentive Plan
provides that eligible participants may be granted shares of Company common stock that are subject to forfeiture until the grantee vests in the stock award based on the established conditions, which
may include service conditions, established performance measures or both.

Prior
to vesting of the stock awards with a service vesting condition, each grantee shall have the rights of a stockholder with respect to voting of the granted stock. The recipient is
not entitled to dividend rights with respect to the shares of granted stock until vesting occurs. Prior to vesting of the stock awards with performance vesting conditions, each grantee shall have the
rights of a stockholder with respect to voting of the granted stock. The recipient is not entitled to dividend rights with respect to the shares of granted stock until initial vesting occurs, at which
time, the dividend rights will exist on

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Notes to Consolidated Financial Statements (Continued)

(17) Employee Benefit Plans (Continued)

vested
and unvested shares of granted stock, subject to termination of such rights under the terms of the Incentive Plan.

Other
than the stock awards with service and performance based vesting conditions, no grants have been made under the Incentive Plan.

The
Incentive Plan authorized grants of stock-based compensation awards of up to 2,500,000 shares of authorized Company common stock, subject to adjustments provided by the Incentive
Plan. As of December 31, 2009 and 2008, there were 1,381,105 and 1,420,345 shares of unvested stock granted (net of forfeitures), with 524,815 and 730,412 shares available for grant under the
Incentive Plan, respectively. Of the 1,381,105 shares unearned at December 31, 2009, approximately 667,000 shares are expected to vest. The Company does not expect any of the 630,000 shares of
performance awards to vest.

A
summary of the status of unearned stock awards and the change during the year is presented in the table below:

Shares

Weighted Average
Fair Value on
Award DateUnearned at December 31, 2008


1,420,345

$
9.65Awarded


409,500


1.29Forfeited


(203,903
)

10.11Vested


(244,837
)

9.39Unearned at December 31, 2009


1,381,105

$
7.15


The
Company recognized $1,155,000 in stock-based compensation expense for the year ended December 31, 2009. The Company recognized a benefit of $422,000 related to stock-based
compensation for the year ended December 31, 2008. This benefit consisted of $2,292,000 in expense for stock-based compensation for services rendered for 2008, less a $2,714,000 cumulative
adjustment related to performance-based shares not expected to vest prior to their expiration date as well as a cumulative forfeiture adjustment on remaining service-based restricted awards. The
performance-based shares have a performance criterion that must be met on or before the expiration date of December 31, 2012 in order for the performance-based shares to fully or partially
vest. Based on management's latest analysis completed in 2008, management determined that it was not probable that the Company would meet the performance criterion on or before December 31,
2012 and thus recorded a cumulative adjustment for the performance-based shares in 2008. Should this expectation change, additional expense could be recorded in future periods. The Company recognized
$2,871,000 in compensation expense for services rendered for the year ended December 31, 2007. The total income tax effect recognized in the income statement for share-based compensation
arrangements was a $282,000 expense for the year ended December 31, 2009, compared to a tax expense of $824,000 and a tax benefit of $1,019,000 for the years ended December 31, 2008 and
2007, respectively. The 2009 income tax effect related to share-based compensation arrangements included $721,000 in expense related to the write-off of the
deferred tax asset for the difference between the grant date value of the award as compared to fair value of the award upon vesting.

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GUARANTY BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(17) Employee Benefit Plans (Continued)

At
December 31, 2009, compensation cost of $1,870,000 related to unearned awards not yet recognized is expected to be recognized over a weighted-average period of
2.7 years.

A
summary of the Company's awards for the years ended December 31, 2009 and 2008 is presented in the table below:

Year Ended December 31,2009

2008Number of shares granted


409,500


164,500Weighted-average grant-date fair value

$
1.29

$
6.16Number of shares that vested


244,837


255,232Fair value of shares vested

$
399,784

$
1,003,930Tax benefit realized

$
151,958

$
381,594


Deferred Compensation Plans

The Company maintains a Deferred Compensation Plan for a select group of management or highly compensated employees and
non-employee members of the Board. The plan, which is meant to be an unfunded deferred compensation plan, is intended to be exempt from certain requirements of the Employee Retirement
Income Security Act of 1974. The plan allows the participants to defer up to 80% of their salary and up to 100% of their bonus or incentive compensation, and up to 100% of cash fees in the case of
directors, until termination or upon the occurrence of other specified events (e.g., disability, previously specified dates, and unforeseeable emergencies). The plan permits participants to
elect to have deferred amounts deemed to be invested in various investment funds or Company common stock. The plan does not guarantee any minimum rate of return. Participation in the plan is voluntary
and participants may change their elections annually or otherwise as permitted by the plan and applicable regulations governing the deferred tax treatment of the plan. The Company may, in its sole
discretion, make additional contributions to participants' accounts. The Company did not make any additional contributions to participants' accounts in 2009, 2008 or 2007. Deferred compensation
expense for $176,000 was booked in 2009. A benefit of $341,000 was recognized for deferred compensation in 2008 as the deemed investments in
the investment funds selected by the participants declined in value during 2008. The expense incurred for deferred compensation was $118,000 in 2007. The deferred compensation liability was $668,000
and $904,000 at December 31, 2009 and 2008, respectively, and is reported with interest payable and other liabilities on the consolidated balance sheets. Additionally, for participants who
elected to defer compensation through Company stock, the Company has recorded Stock to be Issued as a component of Stockholders' equity in the amount of $199,000 and $710,000 at December 31,
2009 and 2008, respectively.

(18) Related-Party Transactions

The Company has granted loans to directors and their affiliates amounting to $300,000 and $450,000 at December 31, 2009 and 2008, respectively. There were no related-party loans
on past due or non-accrual status.

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GUARANTY BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(18) Related-Party Transactions (Continued)

Activity
during 2009 regarding outstanding loans to certain related-party loan customers (directors of the Company, including companies in which they are principal owners) was as follows
(in thousands):

Balance, December 31, 2008

$
450Advances


65Repayments


(215
)Balance, December 31, 2009

$
300


Deposits
from related parties held by the Company at December 31, 2009 and 2008 amounted to $1,244,824 and $1,122,000, respectively.

Castle
Creek Financial LLC ("Castle Creek Financial") serves as the exclusive financial advisor for the Company. Castle Creek Financial is an affiliate of Castle Creek
Capital LLC, which is controlled by the Company's Chairman of the Board. No payments to Castle Creek Financial were made in 2009, 2008 or 2007.

The
Company has incurred costs for facility rental and related services from companies that were affiliated with either members of the Board of Directors or certain former members of
executive management during 2007. We paid $779,000 to companies with such relationships for facility rental and related services in 2007. The facility rent for a company affiliated with a prior member
of the Company's board of directors is not disclosed as related party rent expense in 2008 or 2009 as the director to whom this company was affiliated was no longer a member of the Company's board of
directors as of January 1, 2008.

(19) Fair Value

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability
in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:



A
financial instrument's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The
fair values of securities available for sale are generally determined by matrix pricing, which is a mathematical technique widely used in the industry to value debt securities
without relying exclusively on quoted prices for the specific securities but rather by relying on the securities' relationship to other benchmark quoted securities (Level 2 inputs).

117

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GUARANTY BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(19) Fair Value (Continued)

The
fair value of loans held for sale is based upon binding contracts and quotes from third party investors (Level 2 inputs).

Impaired
loans are evaluated and valued at the time the loan is identified as impaired, at the lower of cost or fair value. Fair value is measured based on the value of the collateral
securing these loans and is classified at a level 3 in the fair value hierarchy. Collateral may be real estate and/or business assets including equipment, inventory and/or accounts receivable
and is determined based on appraisals performed by qualified licensed appraisers hired by the Company. Appraised and reported values may be discounted based on management's historical knowledge,
changes in market conditions from the time of valuation, and/or management's expertise and knowledge of the client and client's business. Such discounts are typically significant and result in a
Level 3 classification of the inputs for determining fair value. Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly,
based on the same factors identified above.

The
fair values of derivatives are generally derived from market-observable data such as interest rates, volatilities, and information derived from or corroborated by that
market-observable data, which generally fall into Level 2 inputs. However, a significant input into the fair value of the derivatives is a credit valuation adjustment, which uses credit spreads
that are typically derived by management or obtained from a third party data provider that provides an implied credit spread for public entities. As a result, the credit spreads are generally
unobservable to the market, rendering them a Level 3 input.

Level 3
is for positions that are not traded in active markets or are subject to transfer restrictions, and/or where valuations are adjusted to reflect illiquidity and/or
non-transferability. Such adjustments are generally based on available market evidence. In the absence of such evidence, management's best estimate is used. At December 31, 2009,
the Company had one investment that was classified as a level 3 investment, which is the hospital municipal bond discussed in Note 3. Management's best estimate consists of both internal
and external support on the Level 3 investment. Internal cash flow models using a present value formula along with indicative exit pricing obtained from broker/dealers were used to determine
the fair value for the Level 3 investment. Subsequent to inception, management only changes level 3 inputs and assumptions when corroborated by evidence such as transactions in similar
instruments, completed or pending third-party transactions in the underlying investment or comparable entities, subsequent rounds of financing, recapitalizations and other transactions across the
capital structure, offerings in the equity or debt markets, and changes in financial ratios or cash flows.

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Table of Contents

GUARANTY BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(19) Fair Value (Continued)

Financial Assets and Liabilities Measured on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below:

Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Balance(In thousands)Assets/Liabilities at December 31, 2009U.S. government agencies and government-sponsored entities

$


$
17,129

$


$
17,129State and municipal





23,374


37,453


60,827Mortgage-backed securitiesagency/residential





127,340





127,340Mortgage-backed securitiesprivate/residential





13,959





13,959Marketable equity





1,519





1,519Other securities





360





360Derivative Assets








206


206Derivative Liabilities








(151
)

(151
)Assets at December 31, 2008U.S. Treasury Securities

$


$
3,495

$


$
3,495U.S. government agencies and government-sponsored entities





2,510





2,510State and municipal





27,118


35,897


63,015Mortgage-backed securitiesagency/residential





31,965





31,965Marketable equity





1,345





1,345Other securities





544





544


See
Note 20, Derivatives and Hedging Activity, for further discussion of the valuation of the derivatives as of December 31, 2009.

The
table below presents a reconciliation and income statement classification of gains and losses for all assets measured at fair value on a recurring basis using significant
unobservable inputs (Level 3) for the year ended December 31, 2009:

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

Net Derivative
Assets and
Liabilities

Available for Sale
Securities(In Thousands)Balance, December 31, 2008

$


$
35,897Total unrealized gains (losses) included in:Net Income


55


Other Comprehensive Income





2,246Purchases, sales, issuances and settlements, net





(690
)Transfers in and (out) of level three





Balance December 31, 2009

$
55

$
37,453


119

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Table of Contents

GUARANTY BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(19) Fair Value (Continued)

The
table below presents a reconciliation and income statement classification of gains and losses for all assets measured at fair value on a recurring basis using significant
unobservable inputs (Level 3) for the year ended December 31, 2008:

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

Available for Sale
Securities(In Thousands)Balance, December 31, 2007

$
Total unrealized gains (losses) included in:Net Income


Other Comprehensive Income


Purchases, sales, issuances and settlements, net


Transfers in and (out) of level three


35,897Balance December 31, 2008

$
35,897


Financial Assets and Liabilities Measured on a Non-Recurring Basis

The following represent assets and liabilities measured at fair value on a non-recurring basis as of December 31,
2009 and 2008. The valuation methodology used to measure the fair value of these loans is described earlier in the Note.

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Total(In thousands)Assets at December 31, 2009Impaired loans

$


$


$
23,357

$
23,357Loans held for sale








9,862


9,862Assets at December 31, 2008Impaired loans

$


$


$
33,192

$
33,192


Impaired
loans, which are usually measured for impairment using the fair value of collateral, had a carrying amount of $59,707,000 at December 31, 2009, after a partial
charge-off of $9,372,188. In addition, these loans have a specific valuation allowance of $6,603,000 at December 31, 2009. Of the $59,707,000 impaired loan portfolio at
December 31, 2009, $30,235,000 were carried at fair value as a result of the aforementioned charge-offs and specific valuation allowances. The remaining $29,472,000 were carried at
cost at December 31, 2009, as the fair value of the collateral on these loans exceeded the book value for each individual credit. Charge-offs and changes in specific valuation
allowances during 2009 on impaired loans carried at fair value at December 31, 2009 resulted in additional provision for loan losses of $14,289,000.

At
December 31, 2008, impaired loans had a carrying amount of $54,822,000, after a partial charge-off of $3,757,000. In addition, these loans had a specific valuation
allowance of $11,064,000. Of the $54,822,000 impaired loan portfolio at December 31, 2008, $43,939,000 were carried at fair value as

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GUARANTY BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(19) Fair Value (Continued)

a
result of the aforementioned charge-offs and specific valuation allowances. The remaining $10,883,000 were carried at cost at December 31, 2008, as the fair value of the
collateral on these loans exceeds the book value for each individual credit. Charge-offs and changes in specific valuation allowances during 2008 on impaired loans carried at fair value at
December 31, 2008 resulted in additional provision for loan losses of $14,060,000.

Loans
held for sale, which are carried at the lower of cost or fair value, were carried at the fair value of $9,862,000, which is made up of the original outstanding balance of
$16,023,000, net of charge-offs taken at the date the loans were transferred to held for sale of $6,161,000. There were no additional charges to earnings in 2009 for changes in the fair
value for loans held for sale.

Nonfinancial Assets and Liabilities Measured on a Non-Recurring Basis

Nonfinancial assets and liabilities measured at fair value on a nonrecurring basis are summarized below:

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Balance as of
December 31, 2009(In thousands)Assets at December 31, 2009Other real estate owned and foreclosed assets

$


$


$
37,192

$
37,192


Other
real estate owned is valued at the time the loan is foreclosed upon and the asset is transferred to other real estate owned. The value is based primarily on third party appraisals,
less costs to sell. The appraisals are generally discounted based on management's historical knowledge, changes in market conditions from the time of valuation, and/or management's expertise and
knowledge of the client and client's business. Such discounts are typically significant and result in a Level 3 classification of the inputs for determining fair value. Other real estate owned
is reviewed and evaluated on at least an annual basis for additional impairment and adjusted accordingly, based on the same factors identified above. Other real estate owned had a carrying amount of
$37,192,000 at December 31, 2009, which is made up of an outstanding balance of $40,144,000, with a valuation allowance of $2,952,000. Changes in the valuation allowance on other real estate
owned outstanding at December 31, 2009 resulted in a write-down of $2,922,000 during 2009.

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GUARANTY BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(19) Fair Value (Continued)

Fair Value of Financial Instruments

The estimated fair values, and related carrying amounts, of the Company's financial instruments are as follows:

December 31, 2009

December 31, 2008Carrying
amount

Fair
value

Carrying
amount

Fair
value(In thousands)Financial assets:Cash and cash equivalents

$
234,483

$
234,483

$
45,711

$
45,711Securities available for sale


221,134


221,134


102,874


102,874Securities held to maturity


9,942


10,428


13,114


13,505Bank stocks


17,160


n/a


28,276


n/aLoans, net


1,467,617


1,494,649


1,781,345


1,777,496Loans held for sale


9,862


9,862


5,760


5,760Accrued interest receivable


6,675


6,675


7,202


7,202Interest rate swaps, net


55


55





Financial liabilities:Deposits


1,693,290


1,700,549


1,698,651


1,712,160Federal funds purchased and sold under agreements to repurchase


22,990


22,990


21,781


21,781Subordinated debentures


41,239


33,768


41,239


35,938Long-term borrowings


164,364


171,345


166,404


178,785Accrued interest payable


3,398


3,398


3,927


3,927


The
fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based
upon quoted market prices. However, in many instances, there are no quoted market prices for the Company's various financial instruments. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of
future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

Certain
financial instruments and all nonfinancial instruments are excluded from the disclosure requirements. Therefore, the aggregate fair value amounts presented may not necessarily
represent the underlying fair value of the Company.

The
following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments:



The carrying amounts of cash and short-term instruments approximate fair values.



Fair values for securities available for sale and held to maturity are generally determined by matrix pricing, which is a mathematical
technique widely used in the industry to value debt securities without

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GUARANTY BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(19) Fair Value (Continued)

relying
exclusively on quoted prices for the specific securities but rather by relying on the securities' relationship to other benchmark quoted securities.

It
is not practical to determine the fair value of bank stocks due to restrictions placed on the transferability of FHLB stock, Federal Reserve Bank stock and Bankers' Bank of the West
stock. These three stocks comprise the balance of bank stocks.



Loans, net excludes loans held-for-sale as these fair values are disclosed on a separate line on the table. For
variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. Fair values for other loans (e.g., commercial
real estate and investment property mortgage loans, commercial and industrial loans) are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with
similar terms to borrowers of similar credit quality. Impaired loans are valued at the lower of cost or fair value as described above in this note.

Loans
held for sale are carried at lower cost or fair value. The fair value of loans held for sale is based upon binding contracts and quotes from third party investors.



The fair value for interest rate swaps are determined by netting the discounted future fixed cash receipts, or payments, and the
discounted expected variable cash payments,
or receipts. The variable cash payments, or receipts, are based on an expectation of future interest rates derived from forward interest rate curves.



The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings, and
certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount). The carrying amounts of
variable-rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date. Fair values for fixed-rate
certificates of deposit are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly
maturities on time deposits.



The carrying amounts of federal funds purchased, borrowings under repurchase agreements, and other short-term borrowings
maturing within ninety days approximate their fair values.



The fair values of the Company's long-term borrowings are estimated using discounted cash flow analyses based on the
Company's current incremental borrowing rates for similar types of borrowing arrangements.

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GUARANTY BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(19) Fair Value (Continued)



The fair values of the Company's Subordinated Debentures are estimated using discounted cash flow analyses based on the Company's
current incremental borrowing rates for similar types of borrowing arrangements.



The carrying amounts of accrued interest approximate fair value.



Fair values for off-balance sheet, credit-related financial instruments are based on fees currently charged to enter into
similar agreements, taking into account the remaining terms of the agreements and the counterparties' credit standing. The fair value of commitments is not material.

(20) Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally
manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity,
and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities. The Company's existing interest rate derivatives result from a service provided to certain
qualifying customers and, therefore, are not used to manage interest rate risk in the Company's assets or liabilities. The Company manages a matched book with respect to its derivative instruments in
order to minimize its net risk exposure resulting from such transactions.

Fair Values of Derivative Instruments on the Consolidated Balance Sheet

The table below presents the fair value of the Company's derivative financial instruments as well as their classification on the
Consolidated Balance Sheet as of December 31, 2009.

Asset
Derivatives

Liability
Derivatives(In thousands)As of December 31, 2009:Derivativesnotdesignated as hedging instrumentsInterest Rate Products

$
206

$
151Total derivativesnotdesignated as hedging instruments

$
206

$
151


The
asset derivatives are classified in other assets on the balance sheet and the liability derivatives are classified in interest payable and other liabilities on the consolidated
balance sheet.

Non-designated Hedges

None of the Company's derivatives are designated as qualifying hedging relationships. Derivatives not designated as hedges are not
speculative and result from a service the Company provides to certain

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GUARANTY BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(20) Derivatives and Hedging Activities (Continued)

customers,
which the Company implemented during the first quarter of 2009. The Company executes interest rate swaps with commercial banking customers to facilitate the customer's respective risk
management strategies. Those interest rate swaps are simultaneously hedged by offsetting interest rate swaps that the Company executes with a third party, such that the Company minimizes its net risk
exposure resulting from such transactions. As the interest rate swaps associated with this program do not meet the strict hedge accounting requirements under FASC Topic 815, changes in the fair value
of both the customer swaps and the offsetting swaps are recognized directly in earnings. As of December 31, 2009, the Company had two interest rate swaps with customers with a total notional
amount of $24,419,000, and two offsetting interest rate swaps with a total notional amount of
$24,419,000; for an aggregate notional amount of $48,838,000 related to this program. During 2009, the Company recognized a net gain of $55,000 related to changes in fair value of these swaps.

Effect of Derivative Instruments on the Consolidated Income Statement

The tables below present the effect of the Company's derivative financial instruments on the Consolidated Income Statement for 2009:

Derivatives Not
Designated as Hedging
Instruments

Location of Gain or
(Loss) Recognized in
Income on Derivative

Amount of Gain
Recognized in Income
on Derivative 2009(In thousands)Interest Rate Products

Other non-interest income

$
55Total



$
55


(21) Regulatory Capital Matters

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate
certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's consolidated financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and
certain off-balance sheet items as calculated under regulatory accounting practices. The Company's capital amounts and classification are also subject to qualitative judgments by the
regulators about components, risk weighting, and other factors.

Quantitative
measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the following table) of
Total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. Management
believes, as of December 31, 2009, that the Company and its bank subsidiary met all capital adequacy requirements to which they are subject.

As
of December 31, 2009, the most recent notifications from the Company's bank regulatory agencies categorized the bank subsidiary as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum Total risk-based, Tier 1 risk-based, and
Tier 1 leverage ratios, as set forth in the following table. Prompt corrective action provisions are not applicable to bank holding companies. There are no conditions or events since that
notification that management believes have changed the categorization of the Company or its bank subsidiary as well capitalized.

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GUARANTY BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(21) Regulatory Capital Matters (Continued)

The
Company's and the Bank's actual capital amounts and ratios for 2009 and 2008 are presented in the table below.

Actual

Minimum Capital
Adequacy Requirement

Minimum to be Well
Capitalized Under
Prompt Corrective
Action ProvisionsAmount

Ratio

Amount

Ratio

Amount

Ratio(Dollars in thousands)As of December 31, 2009:Total capital to risk weighted assets:Consolidated

$
243,271


13.80
%
$
141,011


8.00
%

N/A


N/AGuaranty Bank


225,588


12.82


140,793


8.00


175,991


10.00Tier 1 capital to risk weighted assets:Consolidated


166,152


9.43


70,506


4.00


N/A


N/AGuaranty Bank


203,216


11.55


70,396


4.00


105,594


6.00Tier 1 capital to average assets:Consolidated


166,152


7.89


84,214


4.00


N/A


N/AGuaranty Bank


203,216


9.66


84,116


4.00


105,145


5.00As of December 31, 2008:Total capital to risk weighted assets:Consolidated

$
212,334


10.61
%
$
160,065


8.00
%

N/A


N/AGuaranty Bank


210,340


10.52


159,882


8.00


199,853


10.00Tier 1 capital to risk weighted assets:Consolidated


187,074


9.35


80,033


4.00


N/A


N/AGuaranty Bank


185,109


9.26


79,941


4.00


119,912


6.00Tier 1 capital to average assets:Consolidated


187,074


8.98


83,348


4.00


N/A


N/AGuaranty Bank


185,109


8.90


83,184


4.00


103,980


5.00


Dividend Restrictions

Holders of voting common stock are entitled to dividends out of funds legally available for such dividends when, if and as declared by
the Board of Directors. The Company has not paid dividends since its inception.

Various
banking laws applicable to the Bank limit the payment of dividends, management fees and other distributions by the Bank to the Company, and may therefore limit our ability to pay
dividends on our common stock. In addition, the Written Agreement discussed in Note 23 prohibits both the Company and the Bank from paying dividends without the prior written approval of the
Federal Reserve, and, in the case of the Bank, the CDB. Accordingly, our ability to pay dividends will be restricted until the Written Agreement is terminated.

Under
the terms of our trust preferred financings, including our related subordinated debentures, on September 7, 2000, February 22, 2001, June 30, 2003 and
April 8, 2004, respectively, we cannot declare or pay any dividends or distributions (other than stock dividends) on, or redeem, purchase, acquire or make a liquidation payment with respect to,
any shares of our capital stock if (1) an event of default under any of the subordinated debenture agreements has occurred and is continuing, or (2) if we give notice of our election to
begin an extension period whereby we may defer payment of interest on the trust preferred securities for a period of up to sixty consecutive months as long as we are in compliance with all covenants
of the agreement. On July 31, 2009, we elected to defer regularly

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Table of Contents

GUARANTY BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(21) Regulatory Capital Matters (Continued)

scheduled
interest payments on each of our subordinated debentures until further notice. In addition, we are currently restricted from making payments of principal or interest on our subordinated
debentures or trust preferred securities under the terms of our Written Agreement without the prior approval of the Federal Reserve.

Any
future determination relating to dividend policy will be made at the discretion of our Board of Directors and will depend on a number of factors, including our future earnings,
capital requirements, financial condition, future prospects and such other factors as our Board of Directors may deem relevant.

(22) Preferred Stock

On August 11, 2009, the Company issued 59,053 shares of 9% non-cumulative Series A Convertible Preferred Stock, which resulted in additional capital of
$57,846,000, net of expenses. The liquidation preference for the Series A Convertible Preferred Stock is $1,000 per share. The Series A Convertible Preferred Stock is not redeemable.
Each share of Series A Convertible Preferred Stock will automatically convert into shares of the Company's common stock on the fifth anniversary of the issuance date of the Series A
Convertible Preferred Stock, or August 11, 2014, subject to certain limitations. The preferred stock holders may elect to convert their shares of Series A Convertible Preferred Stock
into shares of the Company's common stock prior to the mandatory conversion of the Series A Convertible Preferred Stock following the earlier of the second anniversary of the issuance date the
Series A Convertible Preferred Stock, or August 11, 2011, and the occurrence of certain events resulting in the conversion, exchange or reclassification of the Company's common stock.
Each share of Series A Convertible Preferred Stock will be convertible into shares of the Company's common stock at a conversion price of $1.80 per share, adjustable downward in $0.04
increments to $1.50 per share in the event of certain nonpayments of dividends (whether paid in cash or in kind) on the Series A Convertible Preferred Stock. The conversion price of the
Series A Convertible Preferred Stock is subject to customary anti-dilution adjustments. Due to the conversion price adjustment resulting from nonpayment of dividends, for purposes
of the risk-based and leverage capital guidelines of the Board of Governors of the Federal Reserve System, and for purposes of regulatory reporting, the Series A Convertible
Preferred Stock is treated as cumulative preferred stock (e.g., a restricted core capital element for Tier 1 capital purposes).

(23) Written Agreement

On January 22, 2010, the Company and the Bank entered into a Written Agreement with the Federal Reserve and the CDB. The Written Agreement requires the Bank to submit written
plans within certain timeframes to the Federal Reserve and the CDB that address the following items: board oversight, credit risk management practices, commercial real estate concentrations, problem
assets, reserves for loan and lease losses, capital, liquidity, brokered deposits, earnings and overall condition. The Agreement also requires the Company to submit to the Federal Reserve a written
plan that addresses capital and a written statement of the Company's annual cash flow projections.

In
addition, the Written Agreement places restrictions on the Bank accepting any new brokered deposits, but continues to permit contractual rollovers and renewals of brokered deposits.
The Written Agreement also provides that written approval must be obtained from the federal regulators prior to appointing any new director or senior executive officer or changing the responsibilities
of any senior executive officer and making indemnification and severance payments. Further, the Written Agreement provides that prior written approval must be obtained from the Federal Reserve, and in
the case of the Bank, the CDB, prior to paying dividends. Prior written approval must also be obtained from the Federal Reserve before the Company can incur, increase or guarantee any debt, take any
other form of payment representing a reduction in capital from the Bank, or make any distributions of interest, principal or other sums on subordinated debentures or trust preferred securities.

127

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Table of Contents

GUARANTY BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(24) Parent Company Only Condensed Financial Information

The following is condensed financial information of Guaranty Bancorp (parent company only):

Balance Sheets  (Parent Company Only)  December 31, 2009 and 2008

2009

2008(In thousands)ASSETSCash

$
743

$
3,595Time deposits with banks


18,043


Other loans





454Investment in subsidiaries


214,989


199,614Other assets


3,938


3,915Total assets

$
237,713

$
207,578LIABILITIES AND STOCKHOLDERS' EQUITYLiabilities:Subordinated debentures

$
41,239

$
41,239Other liabilities


3,836


4,759Total liabilities


45,075


45,998Stockholders' equity:Preferred stock


59,227


Common stock


65


65Common stockadditional paid-in capital


618,343


617,188Stock to be issued


199


710Accumulated deficit


(382,599
)

(352,003
)Accumulated other comprehensive loss


(143
)

(1,302
)Treasury stock


(102,454
)

(103,078
)Total stockholders' equity


192,638


161,580Total liabilities and stockholders' equity

$
237,713

$
207,578


128

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Table of Contents

GUARANTY BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(24) Parent Company Only Condensed Financial Information (Continued)

Statements of Operations  (Parent Company Only)  Years ended December 31, 2009, 2008 and 2007

2009

2008

2007(In thousands)Income:Interest income on other investments

$
2

$
42

$
74Charges for servicessubsidiary banks


4,221


5,256


15,511Other


227


52


289Total income


4,450


5,350


15,874Expenses:Interest expense


2,562


3,597


4,912Salaries and benefits


3,423


1,959


12,218Professional services


1,783


2,210


3,024Impairment of goodwill





4,756


Other


896


1,066


5,377Total expenses


8,664


13,588


25,531Loss before federal income taxes and equity in undistributed net income of subsidiaries


(4,214
)

(8,238
)

(9,656
)Income tax benefit


(1,821
)

(1,385
)

(3,617
)Loss before equity in undistributed net income of subsidiaries


(2,393
)

(6,853
)

(6,039
)Equity in undistributed loss of subsidiaries


(26,814
)

(249,883
)

(132,053
)Net loss


(29,207
)

(256,736
)

(138,092
)Preferred stock dividends


(1,389
)




Net loss attributable to common stockholders

$
(30,596
)
$
(256,736
)
$
(138,092
)


129

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Table of Contents

GUARANTY BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(24) Parent Company Only Condensed Financial Information (Continued)

Statements of Cash Flows  (Parent Company Only)  Years ended December 31, 2009, 2008 and 2007

Years ended December 31,2009

2008

2007(Amounts in thousands)Cash flows from operating activitiesNet loss

$
(29,207
)
$
(256,736
)
$
(138,092
)Adjustments to reconcile net loss to net cash used by operating activities:Depreciation


7


8


942Loss on sale of assets








1Equity based compensation


125


(1,534
)

964Deferred compensationshares to be issued


172


164


83Impairment of goodwill





4,756


Other





3


(3
)Net change in:Other assets


(30
)

228


3,152Other liabilities


(923
)

(234
)

(3,935
)Due from subsidiaries








247Equity in loss of consolidated subsidiaries


26,814


249,883


132,053Net cash used by operating activities


(3,042
)

(3,462
)

(4,588
)Cash flow from investing activities:Loan principal collections


454


418


386Transfers of premises and equipment to (from) affiliates





2,978


(35
)Additions to premises and equipment








(700
)Dividends received from subsidiaries





19,000


25,000Investments in subsidiaries


(40,000
)




Net cash provided (used) by investing activities


(39,546
)

22,396


24,651Cash flows from financing activities:Net changes in short-term borrowings





(15,160
)

12,710Repurchase of common stock


(59
)

(179
)

(33,386
)Proceeds from issuance of preferred stock


57,846





Dividends paid


(8
)




Net cash provided (used) by financing activities


57,779


(15,339
)

(20,676
)Net change in cash and cash equivalents


15,191


3,595


(613
)Cash and cash equivalents, beginning of year


3,595





613Cash and cash equivalents, end of year

$
18,786

$
3,595

$



130

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Table of Contents

GUARANTY BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(25) Quarterly Results of Operations (Unaudited)

2009 Quarterly Results of Operations

Quarter EndedDecember 31, 2009

September 30, 2009

June 30, 2009

March 31, 2009(Amounts in thousands, except share data)Interest income

$
24,051

$
23,469

$
24,775

$
24,860Interest expense


7,767


8,558


8,915


9,142Net interest income


16,284


14,911


15,860


15,718Provision for loan losses


10,005


20,000


18,605


2,505Net interest income after provision for loan losses


6,279


(5,089
)

(2,745
)

13,213Noninterest income


2,420


2,450


2,627


2,915Noninterest expense


19,834


17,409


17,714


15,481Income (loss) before income taxes


(11,135
)

(20,048
)

(17,832
)

647Income tax expense (benefit)


(9,250
)

(3,147
)

(6,975
)

211Net income (loss)


(1,885
)

(16,901
)

(10,857
)

436Preferred stock dividends


(1,389
)







Net income (loss) attributable to common stockholders

$
(3,274
)
$
(16,901
)
$
(10,857
)
$
436Earnings (loss) per sharebasic and diluted

$
(0.07
)
$
(0.33
)
$
(0.21
)
$
0.01


2008 Quarterly Results of Operations

Quarter EndedDecember 31, 2008

September 30, 2008

June 30, 2008

March 31, 2008(Amounts in thousands, except per share data)Interest income

$
27,974

$
29,719

$
30,216

$
33,403Interest expense


10,295


9,877


9,825


11,753Net interest income


17,679


19,842


20,391


21,650Provision for loan losses


1,250


30,750


900


875Net interest income after provision for loan losses


16,429


(10,908
)

19,491


20,775Noninterest income


2,266


2,707


3,132


2,515Noninterest expense


15,367


265,882


19,697


18,710Income (loss) before income taxes


3,328


(274,083
)

2,926


4,580Income tax expense (benefit)


(495
)

(8,254
)

901


1,335Net income (loss)

$
3,823

$
(265,829
)
$
2,025

$
3,245Earnings (loss) per sharebasic and diluted

$
0.08

$
(5.21
)
$
0.04

$
0.06


The
third quarter 2008 results included a $250.7 million goodwill impairment charge, which is not deductible for income tax purposes, as well as a $30.8 million provision
for loan losses.

131

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Table of Contents

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.    CONTROLS AND PROCEDURES

(a)    Evaluation of disclosure controls and procedures.The Company's management, with the participation of the
Chief Executive Officer and the Chief Financial Officer, conducted an evaluation of
the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of December 31, 2009. Based
on that evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures were effective as of December 31,
2009.

(b)    Management's Report on Internal Control over Financial Reporting.The Company's management is responsible
for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934). The Company's
management, with the participation of the Chief Executive Officer and the Chief Financial Officer, conducted an evaluation of the effectiveness, as of December 31, 2009 of the Company's
internal control over financial reporting based on the framework in "Internal ControlIntegrated Framework," issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on this evaluation, the Company's management concluded that the Company's internal control over financial reporting was effective as of December 31, 2009. Management's Report on Internal
Control over Financial Reporting is set forth in Part II, Item 8 of this Annual Report on Form 10-K.

Attestation Report of the Independent Registered Public Accounting Firm.Crowe Horwath LLP, an independent registered public
accounting firm,
has audited the consolidated financial statements for the years ended December 31, 2009 and 2008, included in this Annual Report on Form 10-K and, as part of their audit, has
issued its report on the effectiveness of the Company's internal control over financial reporting as of December 31, 2009. Crowe Horwath's report is set forth in Part II, Item 8
of this Annual Report on Form 10-K.

(c)    Changes in Internal Control Over Financial Reporting.There were no changes in the Company's internal
control over financial reporting that occurred during the fourth quarter of 2009 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over
financial reporting.

ITEM 9B.    OTHER INFORMATION

None.

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Table of Contents

PART III

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE OF THE REGISTRANT

Information required by this Item is incorporated herein by reference to our Proxy Statement (Schedule 14A) for our 2010 Annual
Meeting of Stockholders to be filed with the SEC within 120 days of our fiscal year-end. Information relating to our Code of Business Conduct and Ethics that applies to our
employees, including its senior financial officers, is included in Part I of this Annual Report on Form 10-K under "Item 1. BusinessAvailable
Information."

ITEM 11.    EXECUTIVE COMPENSATION

The information required by this Item is incorporated herein by reference to our Proxy Statement (Schedule 14A) for our 2010
Annual Meeting of Stockholders to be filed with the SEC within 120 days of our fiscal year-end.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Certain information regarding securities authorized for issuance under our equity compensation plans is included under the section
captioned "Securities Authorized for Issuance Under Equity Compensation Plans" in Item 5 in this Annual Report on Form 10-K. Other information required by this Item is
incorporated herein by reference to our Proxy Statement (Schedule 14A) for our 2010 Annual Meeting of Stockholders to be filed with the SEC within 120 days of our fiscal
year-end.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item is incorporated herein by reference to our Proxy Statement (Schedule 14A) for our 2010
Annual Meeting of Stockholders to be filed with the SEC within 120 days of our fiscal year-end.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is incorporated herein by reference to our Proxy Statement (Schedule 14A) for our 2010
Annual Meeting of Stockholders to be filed with the SEC within 120 days of our fiscal year-end.

133

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Table of Contents

PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)   1. Financial Statements

The
consolidated financial statements of Guaranty Bancorp and its subsidiaries and independent auditors' reports are included in Part II (Item 8) of this
Form 10-K.

2.     Financial
Statement Schedules

All
financial statement schedules have been omitted, as they are either inapplicable or included in the Notes to Consolidated Financial Statements.

3.     Exhibits

The
following documents are included or incorporated by reference in this Annual Report on Form 10-K:

Exhibit
Number

Description of Exhibit3.1

Second Amended and Restated Certification of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to Registrant's Form 8-K filed on August 12, 2009)3.2

Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to Registrant's Form 8-K filed on May 7, 2008.)4.1

Specimen stock certificate representing shares of common stock of the Registrant (incorporated by reference to Exhibit 4.1 to Registrant's Form 10-K filed on February 13, 2009)4.2

Certificate of Designations for Series A Convertible Preferred Stock of the Registrant (incorporated by reference to Exhibit 4.1 to Registrant's Form 8-K filed on August 12, 2009)4.3

Indenture, dated September 7, 2000, between State Street Bank and Trust Company of Connecticut, National Association, and the Registrant (incorporated herein by reference from Exhibit 4.2 to Registrant's
Registration Statement on Form S-1 (File No. 333-124855), as amended)4.4

Amended and Restated Declaration of Trust, dated September 7, 2000, by and among State Street Bank and Trust Company of Connecticut, National Association, the Administrators and the Registrant (incorporated herein by
reference from Exhibit 4.3 to Registrant's Registration Statement on Form S-1 (File No. 333-124855), as amended)4.5

Guarantee Agreement, dated September 7, 2000, by and between State Street Bank and Trust Company of Connecticut, National Association, and the Registrant (incorporated herein by reference from Exhibit 4.4 to
Registrant's Registration Statement on Form S-1 (File No. 333-124855), as amended)4.6

Indenture, dated February 22, 2001, State Street Bank and Trust Company of Connecticut, National Association, and the Registrant (incorporated herein by reference from Exhibit 4.5 to Registrant's Registration
Statement on Form S-1 (File No. 333-124855), as amended)4.7

Amended and Restated Declaration of Trust, dated February 22, 2001, by and among State Street Bank and Trust Company of Connecticut, National Association, the Administrators and the Registrant (incorporated herein by
reference from Exhibit 4.6 to Registrant's Registration Statement on Form S-1 (File No. 333-124855), as amended)4.8

Guarantee Agreement, dated February 22, 2001, by and between State Street Bank and Trust Company of Connecticut, National Association, and the Registrant (incorporated herein by reference from Exhibit 4.7 to
Registrant's Registration Statement on Form S-1 (File No. 333-124855), as amended)


134

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Table of Contents

Exhibit
Number

Description of Exhibit4.9

Junior Subordinated Indenture, dated April 8, 2004, between Deutsche Bank Trust Company Americas and the Registrant (incorporated herein by reference from Exhibit 4.8 to Registrant's Registration Statement on
Form S-1 (File No. 333-124855), as amended)4.10

Amended and Restated Trust Agreement, dated April 8, 2004, among Deutsche Bank Trust Company Americas, Deutsche Bank Trust Company Delaware, the Administrative Trustees and the Registrant (incorporated herein by
reference from Exhibit 4.9 to Registrant's Registration Statement on Form S-1 (File No. 333-124855), as amended)4.11

Guarantee Agreement, dated April 8, 2004, between Deutsche Bank Trust Company Americas and the Registrant (incorporated herein by reference from Exhibit 4.10 to Registrant's Registration Statement on
Form S-1 (File No. 333-124855), as amended)4.12

Assumption Letter, dated December 31, 2004, to Wells Fargo Bank, National Association, and Wells Fargo Delaware Trust Company from the Registrant (incorporated herein by reference from Exhibit 4.11 to
Registrant's Registration Statement on Form S-1 (File No. 333-124855), as amended)4.13

Indenture, dated June 30, 2003, between Wells Fargo Bank, National Association, and Guaranty Corporation (incorporated herein by reference from Exhibit 4.12 to Registrant's Registration Statement on
Form S-1 (File No. 333-124855), as amended)4.14

First Supplemental Indenture, dated December 31, 2004, by and between Wells Fargo Bank, National Association, and the Registrant (incorporated herein by reference from Exhibit 4.13 to Registrant's Registration
Statement on Form S-1 (File No. 333-124855), as amended)4.15

Amended and Restated Declaration of Trust, dated June 30, 2003, by the Trustees, the Administrators and Guaranty Corporation (incorporated herein by reference from Exhibit 4.14 to Registrant's Registration
Statement on Form S-1 (File No. 333-124855), as amended)4.16

Guarantee Agreement, dated June 30, 2003, by Wells Fargo Bank, National Association, and Guaranty Corporation (incorporated herein by reference from Exhibit 4.15 to Registrant's Registration Statement on
Form S-1 (File No. 333-124855), as amended)10.1

Investment Agreement, dated as of May 6, 2009, by and among the Registrant and the Investors named therein (incorporated by reference to Exhibit 10.1 to Registrant's Form 8-K filed on May 12,
2009)10.2

Amendment No. 1 to Investment Agreement, dated as August 11, 2009, by and among the Registrant and the Investors named therein (incorporated by reference to Exhibit 10.1 to Registrant's Form 8-K filed
on August 12, 2009)10.3

Amendment No. 2 to Investment Agreement, dated as of February 11, 2010, by and among the Registrant and the Investors named therein (filed herewith)10.4

Form of Indemnification Agreement for Executive Officers and Directors of the Registrant (incorporated herein by reference from Exhibit 10.2 to Registrant's Registration Statement on Form S-1 (File
No. 333-124855), as amended)10.5

Guaranty Bancorp Change in Control Severance Plan, amended and restated as of January 1, 2009 (incorporated herein by reference from Exhibit 10.5 to Registrant's Form 10-Q filed on November 7,
2008)10.6

Amended and Restated 2005 Stock Incentive Plan (incorporated herein by reference from Exhibit 10.1 to Registrant's Form 10-Q filed on May 9, 2007)10.7

Amendment to Guaranty Bancorp 2005 Stock Incentive Plan, effective as of January 1, 2009 (incorporated herein by reference from Exhibit 10.4 to Registrant's Form 10-Q filed on November 7,
2008)10.8

Form of Option Award Agreement (incorporated herein by reference from Exhibit 10.16 to Registrant's Registration Statement on Form S-1 (File No. 333-124855), as amended)


135

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Table of Contents

Exhibit
Number

Description of Exhibit10.9

Amended Form of Restricted Stock Award Agreement (incorporated herein by reference from Exhibit 10.16 to Registrant's Registration Statement on Form S-4 (File No. 333-126643), as amended)10.10

Form of Restricted Stock Award Agreement for Directors (incorporated herein by reference from Exhibit 10.16.1 to Registrant's Registration Statement on Form S-4 (File No. 333-126643), as amended)10.11

Amended and Restated Guaranty Bancorp Deferred Compensation Plan, effective January 1, 2009 (incorporated herein by reference from Exhibit 10.2 to Registrant's Form 10-Q filed on August 7,
2008)10.12

Form of Executive Cash Incentive Plan (incorporated herein by reference from Exhibit 10.9 to Registrant's Form 10-K filed on March 3, 2008)10.13

Amendment to Guaranty Bancorp Executive Cash Incentive Plan, effective as of January 1, 2009 (incorporated herein by reference from Exhibit 10.4 to Registrant's Form 10-Q filed on November 7,
2008)10.14

Severance Agreement and Release, dated as of February 12, 2009, between Registrant and Sherri L. Heronema (incorporated herein by reference from Exhibit 10.1 of the Registrant's Form 8-K filed on
February 12, 2009)10.15

Severance Agreement and Release, dated as of April 15, 2009, between Registrant and Zsolt K. Bessko (incorporated herein by reference from Exhibit 10.2 of the Registrant's Form 10-Q filed on
July 31, 2009)10.16

Services Agreement, dated as of November 8, 2006, by and between Castle Creek Financial LLC and the Registrant (incorporated herein by reference from Exhibit 10.2 to Registrant's Form 10-Q filed on
November 13, 2006)11.1

Statement re: Computation of Per Share Earnings (See "Item 6. Selected Financial Data" and Note 2(s) of the Notes to Consolidated Financial Statements contained in "Item 8. Financial Statements and
Supplementary Data" of this Annual Report on Form 10-K)12.1

Statement re: Computation of Ratios (See "Item 6. Selected Financial Data" of this Annual Report on Form 10-K)21.1

Subsidiaries of the Registrant (filed herewith)23.1

Consent of Crowe Horwath LLP (filed herewith)24.1

Power of Attorney (included on signature page)31.1

Section 302 Certifications (filed herewith)32.1

Section 906 Certifications (filed herewith)


Indicates
a management contract or compensatory plan or arrangement


(b)   Exhibits

The
exhibits listed in Item 15(a)(3) are incorporated by reference or attached hereto.

(c)   Excluded Financial Statements

Not
Applicable

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Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date:
February 12, 2010

GUARANTY BANCORPBy:

/s/ PAUL W. TAYLORName:

Paul W. TaylorTitle:

Executive Vice President, Chief Financial and
Operating Officer and Secretary


KNOW
ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Daniel M. Quinn and Paul W. Taylor, and each of them severally, his or her
true and lawful attorney-in-fact with power of substitution and resubstitution to sign in his or her name, place and stead, in any and all capacities, to do any and all things
and execute any and all instruments that such attorney-in-fact may deem necessary or advisable under the Securities Exchange Act of 1934 and any rules, regulations and
requirements of the U.S. Securities and Exchange Commission in connection with this Annual Report on Form 10-K and any and all amendments hereto, as fully for all intents and
purposes as he or she might or could do in person, and hereby ratifies and confirms all said attorneys-in-fact and agents, each acting alone, and his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons on behalf of the registrant and in the capacities
and on the dates indicated. Signature Title Date

Name

Title

Date/s/ DANIEL M. QUINN Daniel M. Quinn

President and Chief Executive Officer
(Principal Executive Officer) and Director

February 12, 2010/s/ PAUL W. TAYLOR Paul W. Taylor

Executive Vice President, Chief
Financial and Operating
Officer and Secretary
(Principal Financial and Accounting Officer)

February 12, 2010/s/ JOHN M. EGGEMEYER John M. Eggemeyer

Chairman of the Board and Director

February 12, 2010/s/ G. HANK BROWN G. Hank Brown

Director

February 12, 2010


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Table of Contents

Name

Title

Date/s/ EDWARD B. CORDES Edward B. Cordes

Director

February 12, 2010/s/ STEPHEN D. JOYCE Stephen D. Joyce

Director

February 12, 2010/s/ GAIL H. KLAPPER Gail H. Klapper

Director

February 12, 2010/s/ KATHLEEN SMYTHE Kathleen Smythe

Director

February 12, 2010/s/ MATTHEW P. WAGNER Matthew P. Wagner

Director

February 12, 2010/s/ W. KIRK WYCOFF W. Kirk Wycoff

Director

February 12, 2010/s/ ALBERT C. YATES Albert C. Yates

Director

February 12, 2010


138

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