NYSE: GWB $ 37.03

As of November 20, 2018 Close
Minimum 20 minute delay.

Press Release

Great Western Bancorp, Inc. Announces Fiscal Year 2018 Fourth Quarter Financial Results; Strong Net Income Growth and Tangible Book Value Per Share¹ in Fiscal Year 2018

Company Release - 10/25/2018 7:01 AM ET

Highlights for the Fourth Quarter of Fiscal Year 2018 (all quarterly comparisons in this document refer to the third quarter of fiscal year 2018, except as noted)

  • Net income was $42.3 million, or $0.72 per diluted share, compared to $45.9 million, or $0.78 per diluted share
  • Net interest margin and adjusted net interest margin1, 2 were 3.79% and 3.77%, decreases of 18 and 17 basis points, respectively
  • The efficiency ratio1 was 48.1% for the quarter
  • Noninterest expenses were well controlled during the quarter
  • Total loans and total deposits grew $36.1 million, or 0.4%, and $148.2 million, or 1.5%, respectively

Highlights for Fiscal Year 2018 (all fiscal year comparisons refer to fiscal year 2017, except as noted)

  • Net income was $157.9 million, or $2.67 per diluted share, compared to $144.8 million, or $2.45 per diluted share, while adjusted net income1 was $171.5 million, or $2.90 per diluted share, compared to $145.2 million, or $2.46 per diluted share
  • Net interest margin and adjusted net interest margin1, 2 were 3.89% and 3.84%, a decrease of 1 basis points and an increase of 8 basis points, respectively
  • The efficiency ratio1 was 47.1% for the fiscal year
  • Book value per share was $31.24, an increase of $1.41 per share, or 4.7%, and tangible book value per share1 was $18.57, an increase of $1.46 per share, or 8.5%
  • Total loans increased $447.4 million, or 5.0%, to $9.42 billion, while total deposits grew $755.9 million, or 8.4%, to $9.73 billion
  • Total credit related charges were down compared to the prior year

SIOUX FALLS, S.D.--(BUSINESS WIRE)-- Great Western Bancorp, Inc. (NYSE: GWB) today reported net income of $42.3 million, or $0.72 per diluted share, for the fourth quarter of fiscal year 2018, compared to net income of $45.9 million, or $0.78 per diluted share. Net income for fiscal year 2018 was $157.9 million, or $2.67 per diluted share, compared to $144.8 million, or $2.45 per diluted share. Adjusted net income1 for fiscal year 2018, which excludes a nonrecurring charge to provision for income taxes, was $171.5 million, or $2.90 per diluted share, compared to $145.2 million, or $2.46 per diluted share.

"Even though the fourth quarter did have softer loan growth and some nonrecurring items impacting net interest margin, I am pleased with our results for fiscal year 2018," said Ken Karels, Chief Executive Officer and Chairperson of the Board. "We were able to deliver significant year-over-year growth including a 9.1% increase in net income, a 9.0% increase in diluted earnings per share and an 8.5% increase in tangible book value while maintaining a strong efficiency ratio."

Net Interest Income and Net Interest Margin2

Net interest income was $103.7 million for the quarter, a decrease of $2.7 million, or 2.6%. Higher loan interest income, driven by 0.8% growth in average loans outstanding and partially offset by a 7 basis point decrease in the yield on loans, was offset by higher interest expense associated with a 12 basis point increase in the cost of deposits.

Net interest margin was 3.79% and 3.97%, respectively, for the quarters ended September 30, 2018 and June 30, 2018. Adjusted net interest margin1, which adjusts for the realized gain (loss) on interest rate swaps, was 3.77% and 3.94%, respectively, for the same periods. During the current quarter, net interest margin and adjusted net interest margin1 were impacted by a reduction in interest on acquired loans of $2.0 million and a charge off of interest of $1.0 million. Excluding these two items, net interest margin and adjusted net interest margin1 were 3.90% and 3.88%, respectively, or decreases of 7 and 6 basis points, respectively, from the prior quarter. The lower margins were primarily driven by the yield on loans, which excluding the two items above, increased 5 basis points to 5.15%, which was more than offset by the cost of deposits, which increased 12 basis points to 0.82%.

Total loans outstanding were $9.42 billion as of September 30, 2018, increases of $36.1 million, or 0.4%, for the quarter and $447.4 million, or 5.0%, for the fiscal year. The majority of the growth for the fiscal year occurred in the commercial real estate ("CRE") category of the portfolio, which grew by $504.5 million, mainly across the construction and development, non-owner and owner occupied segments, partially offset by a reduction of $95.3 million in the residential real estate category of the portfolio.

1 This is a non-GAAP measure management believes is helpful to understanding trends in the business that may not be fully apparent based only on the most comparable GAAP measure. Further information on this measure and a reconciliation to the most comparable GAAP measure is provided at the end of this release.

2 All references to net interest income and net interest margin are presented on a fully-tax equivalent basis unless otherwise noted.

Total deposits grew to $9.73 billion as of September 30, 2018, increases of $148.2 million, or 1.5%, for the quarter and $755.9 million, or 8.4%, for the fiscal year. Noninterest-bearing deposits were $1.84 billion, a 0.7% decrease for the fiscal year and interest-bearing deposits were $7.89 billion, a 10.8% increase for the fiscal year. FHLB and other borrowings decreased by $368.2 million, or 57.2%, for the fiscal year as a result of deposit funding being more cost effective.

Provision for Loan and Lease Losses and Asset Quality

Provision for loan and lease losses was $5.0 million for the quarter, an increase of $1.5 million. Net charge-offs for the quarter were $5.2 million, or 0.22% of average total loans on an annualized basis, with the majority of net charge-offs concentrated in the agriculture and CRE segments of the loan portfolio. The ratio of allowance for loan and lease losses ("ALLL") to total loans remained stable at 0.69% as of September 30, 2018.

Included within total loans are approximately $865.4 million of loans for which management has elected the fair value option. These loans are excluded from the ALLL process, but management has estimated that approximately $7.4 million of the fair value adjustment for these loans relates to credit risk, or 0.08% of total loans. Finally, total purchase discount remaining on all acquired loans equates to 0.19% of total loans.

At September 30, 2018, loans graded "Watch" increased $67.3 million, or 24.4%, for the quarter while loans graded "Substandard" decreased $15.4 million, or 5.7%, for the quarter. The increase in "Watch" graded loans was primarily driven by a small number of agriculture relationships. The decrease in "Substandard" graded loans was primarily driven the transfer of one large CRE relationship to other repossessed property during the quarter. Nonaccrual loans were $143.2 million as of September 30, 2018, representing an increase of $15.9 million for the quarter. Total other repossessed property balances were $23.1 million as of September 30, 2018, an increase of $12.9 million, or 125.8%, due to the addition of one large property during the quarter.

Total credit-related charges increased compared to the previous comparable quarter and decreased compared to fiscal year 2017. A summary of total credit-related charges incurred during the current and prior comparable quarter and current and prior twelve-month period is presented below:

GREAT WESTERN BANCORP, INC.        
Summary of Credit-Related Charges (Unaudited)
 
For the twelve months ended: For the three months ended:
September 30, September 30, September 30, September 30,
Item Included within F/S Line Item(s): 2018 2017 2018 2017
(dollars in thousands)
Provision for loan and lease losses Provision for loan and lease losses $ 17,986 $ 21,539 $ 5,015 $ 4,685
Net other repossessed property charges Net loss on repossessed property and other related expenses 4,369 1,749 2,850 541
Reversal of interest income on nonaccrual loans Interest income on loans 1,901 930 774 697
Loan fair value adjustment related to credit Net increase (decrease) in fair value of loans at fair value 194 936 (3 ) 940
Total $ 24,450 $ 25,154 $ 8,636   $ 6,863
 

Noninterest Income

Noninterest income was $19.3 million, an increase of $0.3 million, or 1.7%, for the quarter. Included within noninterest income is the net effect of the change in fair value loans for which the Company has elected the fair value option and the net gain (loss), realized and unrealized, of the related derivatives which generated a $(0.3) million unfavorable change over the prior quarter. Service charges and other fees increased by $0.5 million primarily due to an increase in net overdraft and non-sufficient funds income.

Noninterest Expense

Total noninterest expense was $59.6 million, an increase of $1.7 million, or 2.9%, for the quarter. This increase was mainly driven by a $2.5 million increase in net loss on repossessed property, partially offset by a $1.4 million decrease in salaries and employee benefits. Net loss on repossessed property was higher during the quarter due to expenses related to the settlement of a single other repossessed property. Salaries and employee benefits decreased due to the prior quarter having more health insurance claims.

The efficiency ratio1 was 48.1% for the quarter, an increase from 45.8%, due to higher expenses incurred during the quarter related to other repossessed property, a large reversal of interest income on nonaccrual loans and an increase in the cost of deposits.

Provision for Income Taxes

The provision for income taxes for the quarter ended September 30, 2018 was $14.4 million, reflecting an effective tax rate of 25.4%, compared to an effective tax rate of 26.3% for the prior quarter.

Capital

Tier 1 and total capital ratios were 12.0% and 13.0%, respectively, as of September 30, 2018, compared to 11.8% and 12.8%, respectively, as of June 30, 2018. The common equity tier 1 capital ratio and tier 1 leverage ratio were 11.3% and 10.7% as of September 30, 2018 compared to 11.0% and 10.6%, respectively, as of June 30, 2018. All regulatory capital ratios remain above regulatory minimums to be considered "well capitalized."

On October 25, 2018, the Company’s Board of Directors declared a dividend of $0.25 per common share payable on November 21, 2018 to stockholders of record as of close of business on November 9, 2018. The aggregate dividend payment will be approximately $14.7 million.

Business Outlook

"We are glad to report another strong year of financial results to our stockholders, especially the growth in diluted earnings per share and tangible book value accretion," added Karels. "While we have seen some pressure on our funding costs, we feel that this is manageable as we move into our fiscal 2019. We are positive about the talent we have recruited and the new locations opening in fiscal 2019. Also I would like to thank our employees for their contribution to a strong 2018."

Conference Call

Great Western Bancorp, Inc. will host a conference call to discuss its financial results for the fourth quarter of fiscal year 2018 on Thursday, October 25, 2018 at 7:30 AM (CT). The call can be accessed by dialing (855) 238-8837 approximately 10 minutes prior to the start time. Please ask to be joined into the Great Western Bancorp, Inc. (GWB) call. International callers should dial (412) 542-4114. The call will also be broadcast live over the Internet and can be accessed in the Investor Relations section of Great Western’s website at www.greatwesternbank.com. A replay will be available beginning one hour following the conference call and ending on November 8, 2018. To access the replay, dial (877) 344-7529 (U.S.) and use conference ID 10124515. International callers should dial (412) 317-0088 and enter the same conference ID number.

Annual Stockholder Meeting

The Company's Board of Directors has set the Great Western Bancorp, Inc. Annual Stockholder Meeting for Thursday, February 21, 2019. The meeting will commence at 9:00 a.m. Mountain Standard Time, at the Hyatt Regency Scottsdale Resort & Spa at Gainey Ranch, 7500 East Doubletree Ranch Road, Scottsdale, Arizona. The record date for determination of stockholders entitled to notice of, and to vote at, the Annual Stockholder Meeting is December 28, 2018.

About Great Western Bancorp, Inc.

Great Western Bancorp, Inc. is the holding company for Great Western Bank, a full-service regional bank focused on relationship-based business and agribusiness banking. Great Western Bank offers small and mid-sized businesses a focused suite of financial products and a range of deposit and loan products to retail customers through several channels, including the branch network, online banking system, mobile banking applications and customer care centers. The bank services its customers through more than 170 branches in nine states: Arizona, Colorado, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota. To learn more about Great Western Bank visit www.greatwesternbank.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements about Great Western Bancorp, Inc.’s expectations, beliefs, plans, strategies, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipates,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “views,” “intends” and similar words or phrases. In particular, the statements included in this press release concerning Great Western Bancorp, Inc.’s expected performance and strategy, the outlook for its agricultural lending segment and the interest rate environment are not historical facts and are forward-looking. Accordingly, the forward-looking statements in this press release are only predictions and involve estimates, known and unknown risks, assumptions and uncertainties that could cause actual results to differ materially from those expressed. All forward-looking statements are necessarily only estimates of future results, and there can be no assurance that actual results will not differ materially from expectations, and, therefore, you are cautioned not to place undue reliance on such statements. Any forward-looking statements are qualified in their entirety by reference to the factors discussed in the sections titled “Item 1A. Risk Factors” and "Cautionary Note Regarding Forward-Looking Statements" in Great Western Bancorp, Inc.’s Annual Report on Form 10-K for the fiscal year ended September 30, 2017, and in the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2018. Further, any forward-looking statement speaks only as of the date on which it is made, and Great Western Bancorp, Inc. undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

GREAT WESTERN BANCORP, INC.  
Consolidated Financial Data (Unaudited)
     
At or for the twelve months ended: At or for the three months ended:
September 30, September 30, September 30,   June 30,   March 31,   December 31, September 30,
2018   2017 2018   2018   2018   2017   2017
(dollars in thousands, except share and per share amounts)
Operating Data:
Interest income (FTE) $ 488,434 $ 443,114 $ 126,921 $ 126,146 $ 118,849 $ 116,519 $ 115,185
Interest expense 74,000 45,320 23,244 19,745 16,680 14,332 13,391
Noninterest income 73,609 63,214 19,255 18,939 18,742 16,674 14,740
Noninterest expense 231,425 216,643 59,550 57,863 59,144 54,868 55,332
Provision for loan and lease losses 17,986 21,539 5,015 3,515 4,900 4,557 4,685
Net income 157,916 144,786 42,281 45,874 40,532 29,230 37,662
Adjusted net income ¹ $ 171,502 $ 145,226 $ 42,281 $ 45,874 $ 40,532 $ 42,816 $ 37,662
Common shares outstanding 58,917,147 58,834,066 58,917,147 58,911,563 58,896,189 58,896,189 58,834,066
Weighted average diluted common shares outstanding 59,131,650 59,029,382 59,122,699 59,170,058 59,146,117 59,087,729 58,914,144
Earnings per common share - diluted $ 2.67 $ 2.45 $ 0.72 $ 0.78 $ 0.69 $ 0.49 $ 0.64
Adjusted earnings per common share - diluted ¹ $ 2.90 $ 2.46 $ 0.72 $ 0.78 $ 0.69 $ 0.72 $ 0.64
Performance Ratios:
Net interest margin (FTE) ¹ ² 3.89 % 3.90 % 3.79 % 3.97 % 3.92 % 3.89 % 3.93 %
Adjusted net interest margin (FTE) ¹ ² 3.84 % 3.76 % 3.77 % 3.94 % 3.86 % 3.80 % 3.82 %
Return on average total assets ² 1.34 % 1.27 % 1.40 % 1.55 % 1.40 % 1.00 % 1.30 %
Return on average common equity ² 8.8 % 8.5 % 9.2 % 10.2 % 9.3 % 6.6 % 8.6 %
Return on average tangible common equity ¹ ² 15.3 % 15.4 % 15.7 % 17.7 % 16.2 % 11.6 % 15.2 %
Efficiency ratio ¹ 47.1 % 46.5 % 48.1 % 45.8 % 48.6 % 45.8 % 47.1 %
Capital:
Tier 1 capital ratio 12.0 % 11.4 % 12.0 % 11.8 % 11.5 % 11.3 % 11.4 %
Total capital ratio 13.0 % 12.5 % 13.0 % 12.8 % 12.5 % 12.3 % 12.5 %
Tier 1 leverage ratio 10.7 % 10.3 % 10.7 % 10.6 % 10.4 % 10.3 % 10.3 %
Common equity tier 1 ratio 11.3 % 10.7 % 11.3 % 11.0 % 10.7 % 10.5 % 10.7 %
Tangible common equity / tangible assets ¹ 9.6 % 9.2 % 9.6 % 9.5 % 9.3 % 9.2 % 9.2 %
Book value per share - GAAP $ 31.24 $ 29.83 $ 31.24 $ 30.84 $ 30.37 $ 30.02 $ 29.83
Tangible book value per share ¹ $ 18.57 $ 17.11 $ 18.57 $ 18.16 $ 17.68 $ 17.32 $ 17.11
Asset Quality:
Nonaccrual loans $ 143,206 $ 138,312 $ 143,206 $ 127,315 $ 131,274 $ 147,325 $ 138,312
Other repossessed property $ 23,074 $ 8,985 $ 23,074 $ 10,221 $ 16,726 $ 10,486 $ 8,985
Nonaccrual loans / total loans 1.52 % 1.54 % 1.52 % 1.36 % 1.41 % 1.61 % 1.54 %
Net charge-offs (recoveries) $ 16,949 $ 22,678 $ 5,163 $ 3,966 $ 3,784 $ 4,037 $ 5,394
Net charge-offs (recoveries) / average total loans ² 0.18 % 0.26 % 0.22 % 0.17 % 0.17 % 0.18 % 0.24 %
Allowance for loan and lease losses / total loans 0.69 % 0.71 % 0.69 % 0.69 % 0.70 % 0.70 % 0.71 %
Watch-rated loans $ 343,288 $ 311,611 $ 343,288 $ 276,001 $ 294,873 $ 287,468 $ 311,611

1 This is a non-GAAP financial measure management believes is helpful to interpreting our financial results. See the tables at the end of this document for the calculation of the measure and reconciliation to the most comparable GAAP measure.

2 Annualized for all partial-year periods.

 
GREAT WESTERN BANCORP, INC.              
Consolidated Income Statement (Unaudited)
 
At or for the twelve months ended: At or for the three months ended:
September 30, September 30, September 30, June 30, March 31, December 31, September 30,
2018   2017 2018   2018   2018   2017   2017
(dollars in thousands)
Interest income
Loans $ 451,290 $ 407,282 $ 117,095 $ 116,522 $ 109,993 $ 107,680 $ 106,277
Investment securities 29,171 26,311 7,645 7,471 7,013 7,043 6,592
Federal funds sold and other   1,376       922     494       424       227       231       194  
Total interest income 481,837 434,515 125,234 124,417 117,233 114,954 113,063
Interest expense
Deposits 60,112 35,035 19,996 16,460 12,658 10,998 10,439
FHLB advances and other borrowings 8,848 5,821 1,907 1,963 2,815 2,164 1,787
Subordinated debentures and subordinated notes payable   5,040       4,464     1,341       1,322       1,207       1,170       1,165  
Total interest expense   74,000       45,320     23,244       19,745       16,680       14,332       13,391  
Net interest income 407,837 389,195 101,990 104,672 100,553 100,622 99,672
Provision for loan and lease losses   17,986       21,539     5,015       3,515       4,900       4,557       4,685  
Net interest income after provision for loan and lease losses   389,851       367,656     96,975       101,157       95,653       96,065       94,987  
Noninterest income
Service charges and other fees 51,077 55,725 13,198 12,655 12,047 13,178 13,742
Wealth management fees 9,219 9,118 2,458 2,242 2,335 2,185 2,002
Mortgage banking income, net 5,842 7,928 1,664 1,352 1,166 1,660 1,798
Net gain (loss) on sale of securities 6 75 15 (8 ) (1 ) 32
Net (decrease) increase in fair value of loans at fair value (37,955 ) (65,231 ) (7,083 ) (7,370 ) (14,838 ) (8,665 ) (2,073 )
Net realized and unrealized gain (loss) on derivatives 37,144 49,900 7,543 8,093 14,282 7,227 (1,581 )
Other   8,276       5,699     1,475       1,952       3,758       1,090       820  
Total noninterest income 73,609 63,214 19,255 18,939 18,742 16,674 14,740
Noninterest expense
Salaries and employee benefits 135,352 128,135 33,691 35,122 33,672 32,868 31,263
Data processing and communication 29,805 28,288 6,554 7,177 9,190 6,884 7,324
Occupancy and equipment 20,330 19,817 5,219 4,974 5,290 4,848 5,006
Professional fees 17,891 15,038 5,326 4,297 4,027 4,240 4,503
Advertising 4,507 3,983 1,066 1,260 1,121 1,059 954
Net loss on repossessed property and other related expenses 4,369 1,749 2,850 305 1,000 214 541
Amortization of core deposits and other intangibles 1,662 2,358 394 416 426 426 430
Acquisition expenses 710

 

Other   17,509       16,565     4,450       4,312       4,418       4,329       5,311  
Total noninterest expense   231,425       216,643     59,550       57,863       59,144       54,868       55,332  
Income before income taxes 232,035 214,227 56,680 62,233 55,251 57,871 54,395
Provision for income taxes   74,119       69,441     14,399       16,359       14,719       28,641       16,733  
Net income $ 157,916     $ 144,786   $ 42,281     $ 45,874     $ 40,532     $ 29,230     $ 37,662  
 
GREAT WESTERN BANCORP, INC.          
Summarized Consolidated Balance Sheet (Unaudited)
 
As of
September 30, June 30, March 31, December 31, September 30,
2018 2018 2018 2017 2017
(dollars in thousands)
Assets
Cash and cash equivalents $ 298,696 $ 294,614 $ 371,749 $ 297,596 $ 360,396
Investment securities 1,385,650 1,372,711 1,307,598 1,366,641 1,367,960
Total loans 9,415,924 9,379,819 9,338,306 9,165,373 8,968,553
Allowance for loan and lease losses (64,540 ) (64,688 ) (65,139 ) (64,023 ) (63,503 )
Loans, net 9,351,384 9,315,131 9,273,167 9,101,350 8,905,050
Goodwill 739,023 739,023 739,023 739,023 739,023
Other assets 342,055   287,569   300,780   301,971   317,582  
Total assets $ 12,116,808   $ 12,009,048   $ 11,992,317   $ 11,806,581   $ 11,690,011  
Liabilities and stockholders' equity
Noninterest-bearing deposits $ 1,842,704 $ 1,793,293 $ 1,854,734 $ 1,932,080 $ 1,856,126
Interest-bearing deposits 7,890,795   7,792,025   7,532,233   7,092,105   7,121,487  
Total deposits 9,733,499 9,585,318 9,386,967 9,024,185 8,977,613
Securities sold under agreements to repurchase 90,907 105,478 103,291 116,884 132,636
FHLB advances and other borrowings 275,000 335,000 551,003 721,009 643,214
Other liabilities 176,851   166,511   162,358   176,630   181,548  
Total liabilities 10,276,257 10,192,307 10,203,619 10,038,708 9,935,011
Stockholders' equity 1,840,551   1,816,741   1,788,698   1,767,873   1,755,000  
Total liabilities and stockholders' equity $ 12,116,808   $ 12,009,048   $ 11,992,317   $ 11,806,581   $ 11,690,011  
 
GREAT WESTERN BANCORP, INC.              
Loan Portfolio Summary (Unaudited)
 
As of Fiscal year-to-date:
September 30, June 30, March 31, December 31, September 30, Change Change
2018 2018 2018 2017 2017 ($) (%)
(dollars in thousands)
Construction and development $ 637,693 $ 733,612 $ 721,340 $ 622,985 $ 538,736 $ 98,957 18.4

 %

Owner-occupied CRE 1,334,480 1,360,969 1,341,034 1,317,585 1,219,523 114,957 9.4

 %

Non-owner-occupied CRE 2,347,237 2,123,002 2,077,424 2,035,987 2,025,326 321,911 15.9

 %

Multifamily residential real estate 309,920   311,863   327,980   319,139   341,220   (31,300 ) (9.2

)%

Commercial real estate 4,629,330 4,529,446 4,467,778 4,295,696 4,124,805 504,525 12.2

 %

Agriculture 2,182,688 2,176,318 2,177,020 2,177,383 2,122,138 60,550 2.9

 %

Commercial non-real estate 1,699,987 1,750,827 1,767,587 1,695,731 1,718,914 (18,927 ) (1.1 )%
Residential real estate 837,569 857,848 866,982 924,439 932,892 (95,323 ) (10.2 )%
Consumer 49,689 51,417 55,190 62,872 66,559 (16,870 ) (25.3 )%
Other ¹ 46,487   44,187   41,816   45,805   43,207   3,280   7.6

 %

Total unpaid principal balance 9,445,750 9,410,043 9,376,373 9,201,926 9,008,515 437,235 4.9

 %

Less: Unamortized discount on acquired loans and unearned net deferred fees and costs and loans in process (29,826 ) (30,224 ) (38,067 ) (36,553 ) (39,962 ) 10,136   (25.4 )%
Total loans $ 9,415,924   $ 9,379,819   $ 9,338,306   $ 9,165,373   $ 8,968,553   $ 447,371   5.0

 %

1 Other loans primarily include consumer and commercial credit cards, customer deposit account overdrafts, and lease receivables.
 
GREAT WESTERN BANCORP, INC.                
Net Interest Margin (FTE) (Unaudited)
 
Three Months Ended
September 30, 2018 June 30, 2018 September 30, 2017
Average Interest Yield / Average Interest Yield / Average Interest Yield /
Balance   (FTE)   Cost ¹ Balance   (FTE)   Cost ¹ Balance   (FTE)   Cost ¹
(dollars in thousands)
Assets
Interest-bearing bank deposits $ 84,659 $ 494 2.32 % $ 90,868 $ 424 1.87 % $ 55,834 $ 194 1.38 %
Investment securities 1,399,389 7,645 2.17 % 1,357,808 7,471 2.21 % 1,403,240 6,592 1.86 %
Non ASC 310-30 loans, net ² 9,299,318 116,971 4.99 % 9,220,931 114,489 4.98 % 8,728,514 105,120 4.78 %
ASC 310-30 loans, net 73,802     1,811   9.74 % 78,471     3,762   19.23 % 95,813     3,279   13.58 %
Loans, net 9,373,120     118,782   5.03 % 9,299,402     118,251   5.10 % 8,824,327     108,399   4.87 %
Total interest-earning assets 10,857,168 126,921 4.64 % 10,748,078 126,146 4.71 % 10,283,401 115,185 4.44 %
Noninterest-earning assets 1,158,351   1,152,724   1,166,931  
Total assets $ 12,015,519     $ 126,921   4.19 % $ 11,900,802     $ 126,146   4.25 % $ 11,450,332     $ 115,185   3.99 %
Liabilities and Stockholders' Equity
Noninterest-bearing deposits $ 1,813,547 $ 1,793,784 $ 1,793,321
Interest-bearing deposits 6,042,096 $ 13,606 0.89 % 6,101,679 $ 11,705 0.77 % 5,817,665 $ 7,909 0.54 %
Time deposits 1,774,277     6,390   1.43 % 1,578,253     4,755   1.21 % 1,280,226     2,530   0.78 %
Total deposits 9,629,920 19,996 0.82 % 9,473,716 16,460 0.70 % 8,891,212 10,439 0.47 %
Securities sold under agreements to repurchase 101,519 82 0.32 % 99,897 80 0.32 % 116,004 85 0.29 %
FHLB advances and other borrowings 280,823 1,825 2.58 % 357,102 1,883 2.11 % 509,959 1,702 1.32 %
Subordinated debentures and subordinated notes payable 108,440     1,341   4.91 % 108,398     1,322   4.89 % 108,275     1,165   4.27 %
Total borrowings 490,782     3,248   2.63 % 565,397     3,285   2.33 % 734,238     2,952   1.60 %
Total interest-bearing liabilities 10,120,702 $ 23,244 0.91 % 10,039,113 $ 19,745 0.79 % 9,625,450 $ 13,391 0.55 %
Noninterest-bearing liabilities 69,505 65,623 84,453
Stockholders' equity 1,825,312   1,796,066   1,740,429  
Total liabilities and stockholders' equity $ 12,015,519   $ 11,900,802   $ 11,450,332  
Net interest spread 3.28 % 3.46 % 3.44 %
Net interest income and net interest margin (FTE) $ 103,677   3.79 % $ 106,401   3.97 % $ 101,794   3.93 %
Less: Tax equivalent adjustment 1,687   1,729   2,122  
Net interest income and net interest margin - ties to Statements of Comprehensive Income $ 101,990   3.73 % $ 104,672   3.91 % $ 99,672   3.85 %
1 Annualized for all partial-year periods.

2 Interest income includes $0.6 million and $0.8 million for the fourth quarter of fiscal year 2018 and 2017, respectively, resulting from accretion of purchase accounting discount associated with acquired loans.

 
GREAT WESTERN BANCORP, INC.          
Net Interest Margin (FTE) (Unaudited)
 
Twelve Months Ended
September 30, 2018 September 30, 2017
Average Interest Yield / Average Interest Yield /
Balance   (FTE) ¹   Cost ² Balance   (FTE) ¹   Cost ²
(dollars in thousands)
Assets
Interest-bearing bank deposits $ 75,101 $ 1,376 1.83% $ 123,616 $ 922 0.75%
Investment securities 1,384,632 29,171 2.11% 1,390,453 26,311 1.89%
Non ASC 310-30 loans, net ³ 9,106,519 446,386 4.90% 8,581,615 405,080 4.72%
ASC 310-30 loans, net 81,105   11,501 14.18% 114,057   10,801 9.47%
Loans, net 9,187,624   457,887 4.98% 8,695,672   415,881 4.78%
Total interest-earning assets 10,647,357 488,434 4.59% 10,209,741 443,114 4.34%
Noninterest-earning assets 1,160,802 1,154,861
Total assets $ 11,808,159   $ 488,434 4.14% $ 11,364,602   $ 443,114 3.90%
Liabilities and Stockholders' Equity
Noninterest-bearing deposits $ 1,809,470 $ 1,806,491
Interest-bearing deposits 5,990,182 $ 43,092 0.72% 5,709,863 $ 25,969 0.45%
Time deposits 1,483,760   17,020 1.15% 1,300,987   9,066 0.70%
Total deposits 9,283,412 60,112 0.65% 8,817,341 35,035 0.40%
Securities sold under agreements to repurchase 108,599 340 0.31% 122,188 384 0.31%
FHLB advances and other borrowings 452,572 8,508 1.88% 525,491 5,437 1.03%
Subordinated debentures and subordinated notes payable 108,378   5,040 4.65% 108,917   4,464 4.10%
Total borrowings 669,549   13,888 2.07% 756,596   10,285 1.36%
Total interest-bearing liabilities 9,952,961 $ 74,000 0.74% 9,573,937 $ 45,320 0.47%
Noninterest-bearing liabilities 67,045 88,440
Stockholders' equity 1,788,153 1,702,225
Total liabilities and stockholders' equity $ 11,808,159 $ 11,364,602
Net interest spread 3.40% 3.43%
Net interest income and net interest margin (FTE) ¹ $ 414,434 3.89% $ 397,794 3.90%
Less: Tax equivalent adjustment 6,597 8,599
Net interest income and net interest margin - ties to Statements of Comprehensive Income $ 407,837 3.83% $ 389,195 3.81%
1 Annualized for all partial-year periods.

2 Interest income includes $2.7 million and $4.1 million for the twelve months ended 2018 and 2017, respectively, resulting from accretion of purchase accounting discount associated with acquired loans.

 

Non-GAAP Measures and Reconciliation

We rely on certain non-GAAP measures in making financial and operational decisions about our business. We believe that each of the non-GAAP measures presented is helpful in highlighting trends in our business, financial condition and results of operations which might not otherwise be apparent when relying solely on our financial results calculated in accordance with U.S. GAAP. We disclose net interest income and related ratios and analysis on a taxable-equivalent basis, which may also be considered non-GAAP financial measures. We believe this presentation to be the preferred industry measurement of net interest income as it provides a relevant comparison of net interest income arising from taxable and tax-exempt sources. In addition, certain performance measures, including the efficiency ratio and net interest margin utilize net interest income on a taxable-equivalent basis.

In particular, we evaluate our profitability and performance based on our adjusted net income, adjusted earnings per common share, tangible net income and return on average tangible common equity. Our adjusted net income and adjusted earnings per common share exclude the after-tax effect of items with a significant impact to net income that we do not believe to be recurring in nature, (e.g., one-time acquisition expenses as well as the effect of revaluation of deferred taxes). Our tangible net income and return on average tangible common equity exclude the effects of amortization expense relating to intangible assets and related tax effects from the acquisition of us by National Australia Bank Limited ("NAB") and our acquisitions of other institutions. We believe these measures help highlight trends associated with our financial condition and results of operations by providing net income and return information excluding significant nonrecurring items (for adjusted net income and adjusted earnings per share) and based on our cash payments and receipts during the applicable period (for tangible net income and return on average tangible common equity).

We also evaluate our profitability and performance based on our adjusted net interest income, adjusted net interest margin, adjusted interest income on non ASC 310-30 loans and adjusted yield on non ASC 310-30 loans. We adjust each of these four measures to include the current realized gain (loss) of derivatives we use to manage interest rate risk on certain of our loans, which we believe economically offsets the interest income earned on the loans. Similarly, we evaluate our operational efficiency based on our efficiency ratio, which excludes the effect of amortization of core deposit and other intangibles (a non-cash expense item) and includes the tax benefit associated with our tax-advantaged loans.

We evaluate our financial condition based on the ratio of our tangible common equity to our tangible assets and the ratio of our tangible common equity to common shares outstanding. Our calculation of this ratio excludes the effect of our goodwill and other intangible assets. We believe this measure is helpful in highlighting the common equity component of our capital and because of its focus by federal bank regulators when reviewing the health and strength of financial institutions in recent years and when considering regulatory approvals for certain actions, including capital actions. We also believe the ratio of our tangible common equity to common shares outstanding is helpful in understanding our stockholders’ relative ownership position as we undertake various actions to issue and retire common shares outstanding.

Reconciliations for each of these non-GAAP financial measures to the closest GAAP financial measures are included in the tables below. Each of the non-GAAP measures presented should be considered in context with our GAAP financial results included in this release.

GREAT WESTERN BANCORP, INC.              
Reconciliation of Non-GAAP Measures (Unaudited)
 
At or for the twelve months ended: At or for the three months ended:
September 30, September 30, September 30, June 30, March 31, December 31, September 30,
2018   2017 2018   2018   2018   2017   2017
(dollars in thousands except share and per share amounts)
Adjusted net income and adjusted earnings per common share:
Net income - GAAP $ 157,916 $ 144,786 $ 42,281 $ 45,874 $ 40,532 $ 29,230 $ 37,662
Add: Acquisition expenses, net of tax 440
Add: Deferred taxes revaluation 13,586                   13,586      
Adjusted net income $ 171,502     $ 145,226   $ 42,281     $ 45,874     $ 40,532     $ 42,816     $ 37,662  
 
Weighted average diluted common shares outstanding 59,131,650 59,029,382 59,122,699 59,170,058 59,146,117 59,087,729 58,914,144
Earnings per common share - diluted $ 2.67 $ 2.45 $ 0.72 $ 0.78 $ 0.69 $ 0.49 $ 0.64
Adjusted earnings per common share - diluted $ 2.90 $ 2.46 $ 0.72 $ 0.78 $ 0.69 $ 0.72 $ 0.64
 
Tangible net income and return on average tangible common equity:
Net income - GAAP $ 157,916 $ 144,786 $ 42,281 $ 45,874 $ 40,532 $ 29,230 $ 37,662
Add: Amortization of intangible assets, net of tax 1,460     2,044   343     366     376     376     380  
Tangible net income $ 159,376     $ 146,830   $ 42,624     $ 46,240     $ 40,908     $ 29,606     $ 38,042  
 
Average common equity $ 1,788,153 $ 1,702,225 $ 1,825,312 $ 1,796,066 $ 1,770,117 $ 1,761,127 $ 1,740,429
Less: Average goodwill and other intangible assets 747,513     749,393   746,900     747,294     747,716     748,144     748,571  
Average tangible common equity $ 1,040,640     $ 952,832   $ 1,078,412     $ 1,048,772     $ 1,022,401     $ 1,012,983     $ 991,858  
 
Return on average common equity * 8.8 % 8.5 % 9.2 % 10.2 % 9.3 % 6.6 % 8.6 %
Return on average tangible common equity ** 15.3 % 15.4 % 15.7 % 17.7 % 16.2 % 11.6 % 15.2 %
* Calculated as net income - GAAP divided by average common equity. Annualized for partial-year periods.
** Calculated as tangible net income divided by average tangible common equity. Annualized for partial-year periods.
 
Adjusted net interest income and adjusted net interest margin (fully-tax equivalent basis):
Net interest income - GAAP $ 407,837 $ 389,195 $ 101,990 $ 104,672 $ 100,553 $ 100,622 $ 99,672
Add: Tax equivalent adjustment 6,597     8,599   1,687     1,729     1,616     1,565     2,122  
Net interest income (FTE) 414,434 397,794 103,677 106,401 102,169 102,187 101,794
Add: Current realized derivative gain (loss) (5,365 )   (14,395 ) (419 )   (830 )   (1,640 )   (2,476 )   (2,714 )
Adjusted net interest income (FTE) $ 409,069     $ 383,399   $ 103,258     $ 105,571     $ 100,529     $ 99,711     $ 99,080  
 
Average interest-earning assets $ 10,647,357 $ 10,209,741 $ 10,857,168 $ 10,748,078 $ 10,571,300 $ 10,412,882 $ 10,283,401
Net interest margin (FTE) * 3.89 % 3.90 % 3.79 % 3.97 % 3.92 % 3.89 % 3.93 %
Adjusted net interest margin (FTE) ** 3.84 % 3.76 % 3.77 % 3.94 % 3.86 % 3.80 % 3.82 %
* Calculated as net interest income (FTE) divided by average interest earning assets. Annualized for partial-year periods.
** Calculated as adjusted net interest income (FTE) divided by average interest earning assets. Annualized for partial-year periods.
 
Adjusted interest income and adjusted yield (fully-tax equivalent basis), on non ASC 310-30 loans:
Interest income - GAAP $ 439,789 $ 396,481 $ 115,284 $ 112,760 $ 106,811 $ 104,935 $ 102,998
Add: Tax equivalent adjustment 6,597     8,599   1,687     1,729     1,616     1,565     2,122  
Interest income (FTE) 446,386 405,080 116,971 114,489 108,427 106,500 105,120
Add: Current realized derivative gain (loss) (5,365 )   (14,395 ) (419 )   (830 )   (1,640 )   (2,476 )   (2,714 )
Adjusted interest income (FTE) $ 441,021     $ 390,685   $ 116,552     $ 113,659     $ 106,787     $ 104,024     $ 102,406  
 
Average non ASC 310-30 loans $9,106,519 $8,581,615 $ 9,299,318 $ 9,220,931 $ 9,064,899 $ 8,840,929 $ 8,728,514
Yield (FTE) * 4.90 % 4.72 % 4.99 % 4.98 % 4.85 % 4.78 % 4.78 %
Adjusted yield (FTE) ** 4.84 % 4.55 % 4.97 % 4.94 % 4.78 % 4.67 % 4.65 %
* Calculated as interest income (FTE) divided by average loans. Annualized for partial-year periods.
** Calculated as adjusted interest income (FTE) divided by average loans. Annualized for partial-year periods.
 
Efficiency ratio:
Total revenue - GAAP $ 481,446 $ 452,409 $ 121,245 $ 123,611 $ 119,295 $ 117,296 $ 114,412
Add: Tax equivalent adjustment 6,597     8,599   1,687     1,729     1,616     1,565     2,122  
Total revenue (FTE) $ 488,043     $ 461,008   $ 122,932     $ 125,340     $ 120,911     $ 118,861     $ 116,534  
 
Noninterest expense $ 231,425 $ 216,643 $ 59,550 $ 57,863 $ 59,144 $ 54,868 $ 55,332
Less: Amortization of intangible assets 1,662     2,358   394     416     426     426     430  
Tangible noninterest expense $ 229,763     $ 214,285   $ 59,156     $ 57,447     $ 58,718     $ 54,442     $ 54,902  
 
Efficiency ratio * 47.1 % 46.5 % 48.1 % 45.8 % 48.6 % 45.8 % 47.1 %
* Calculated as the ratio of tangible noninterest expense to total revenue (FTE).
 
Tangible common equity and tangible common equity to tangible assets:
Total stockholders' equity $ 1,840,551 $ 1,755,000 $ 1,840,551 $ 1,816,741 $ 1,788,698 $ 1,767,873 $ 1,755,000
Less: Goodwill and other intangible assets 746,735     748,397   746,735     747,129     747,545     747,971     748,397  
Tangible common equity $ 1,093,816     $ 1,006,603   $ 1,093,816     $ 1,069,612     $ 1,041,153     $ 1,019,902     $ 1,006,603  
 
Total assets $ 12,116,808 $ 11,690,011 $ 12,116,808 $ 12,009,048 $ 11,992,317 $ 11,806,581 $ 11,690,011
Less: Goodwill and other intangible assets 746,735     748,397   746,735     747,129     747,545     747,971     748,397  
Tangible assets $ 11,370,073     $ 10,941,614   $ 11,370,073     $ 11,261,919     $ 11,244,772     $ 11,058,610     $ 10,941,614  
 
Tangible common equity to tangible assets 9.6 % 9.2 % 9.6 % 9.5 % 9.3 % 9.2 % 9.2 %
 
Tangible book value per share:
Total stockholders' equity $ 1,840,551 $ 1,755,000 $ 1,840,551 $ 1,816,741 $ 1,788,698 $ 1,767,873 $ 1,755,000
Less: Goodwill and other intangible assets 746,735     748,397   746,735     747,129     747,545     747,971     748,397  
Tangible common equity $ 1,093,816     $ 1,006,603   $ 1,093,816     $ 1,069,612     $ 1,041,153     $ 1,019,902     $ 1,006,603  
 
Common shares outstanding 58,917,147 58,834,066 58,917,147 58,911,563 58,896,189 58,896,189 58,834,066
Book value per share - GAAP $ 31.24 $ 29.83 $ 31.24 $ 30.84 $ 30.37 $ 30.02 $ 29.83
Tangible book value per share $ 18.57 $ 17.11 $ 18.57 $ 18.16 $ 17.68 $ 17.32 $ 17.11

Great Western Bancorp, Inc.
Media Contact:
Ann Nachtigal, 605-988-9217
ann.nachtigal@greatwesternbank.com
or
Investor Relations Contact:
Peter Chapman, 605-373-3198
peter.chapman@greatwesternbank.com

Source: Great Western Bancorp, Inc.