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Press Release

Great Western Bancorp, Inc. Announces Fiscal Year 2017 Third Quarter Financial Results

Company Release - 7/27/2017 7:00 AM ET

Highlights for the Third Quarter of Fiscal Year 2017

  • Third quarter net income was $35.1 million, or $0.59 per diluted share, a 33.0% increase in net income compared to $26.4 million, or $0.46 per diluted share, for the same quarter of fiscal year 2016
  • Net interest margin and adjusted net interest margin1 were 4.00% and 3.87%, respectively, increases of 2 and 4 basis points, respectively, compared to the quarter ended March 31, 2017
  • The efficiency ratio1 of 46.7% remained within management's targeted range
  • Total loans increased $94.4 million, or 1.1% compared to March 31, 2017, more than offsetting the decline in total loans in the quarter ended March 31, 2017 and bringing fiscal year-to-date loan growth to 1.3%
  • Total deposits declined by $132.8 million, or 1.5%, compared to March 31, 2017, consistent with expected seasonal outflows
  • Net charge-offs recognized during the quarter stabilized at 0.20% of average total loans on an annualized basis and key asset quality measures such as nonaccrual loans, classified loans and OREO generally remained stable compared to March 31, 2017

SIOUX FALLS, S.D.--(BUSINESS WIRE)-- Great Western Bancorp, Inc. (NYSE: GWB) today reported net income of $35.1 million, or $0.59 per diluted share, for the third quarter of fiscal year 2017, compared to net income of $26.4 million, or $0.46 per diluted share, for the same quarter of fiscal year 2016. Fiscal year-to-date net income of $107.1 million represents an increase of 22.4% compared to the same period in fiscal year 2016.

"At Great Western, we continue to execute on the activities we believe will prepare the organization for the months and years to come," said Ken Karels, Chairman, President and Chief Executive Officer. "Over the last 12 months, we have spent time moving stressed loan relationships with little chance of rehabilitation out of the bank, especially in the agriculture segment. This has resulted in a $97 million decrease in 'Watch' rated loans, while 'Substandard' rated loans have only increased by $13 million over the same period. We have also made significant investments of time and money into the programs required of a bank our size to measure and manage the various risks we take each day. Finally, although loan growth has been slower to materialize, I am happy to report that we are seeing robust loan growth activity in the first month of the new quarter, which is expected to support our previously communicated full-year loan growth expectations in the mid-single digit range."

Net Interest Income and Net Interest Margin2

Net interest income was $100.9 million for the third quarter of fiscal year 2017, an increase of $7.3 million, or 7.8%, compared to the same quarter in fiscal year 2016. The increase was primarily attributable to higher loan interest income driven by 8.0% growth in average loans outstanding between periods and increasing benchmark interest rates, which favorably impact the contractual interest rates on variable and adjustable rate loans. Additionally, higher LIBOR rates have also driven a significant reduction in the cost of interest rate swaps we use to hedge the interest rate risk on longer-term fixed rate loans, which we record through noninterest income. Higher loan interest income was partially offset by a $3.0 million increase in deposit interest expense, which is similarly the result of growth in average deposits outstanding and in most cases is also directly or indirectly attributable to increasing benchmark interest rates.

Net interest margin was 4.00%, 3.98% and 3.95%, respectively, for the quarters ended June 30, 2017, March 31, 2017 and June 30, 2016. Adjusted net interest margin1, which adjusts for the realized gain (loss) on interest rate swaps, was 3.87%, 3.83% and 3.74%, respectively, for the same periods. Net interest margin and adjusted net interest margin1 increased by 2 basis points and 4 basis points, respectively, compared to the quarter ended March 31, 2017. The yield on interest-earning assets increased by 6 basis points over the quarter, driven by lower average interest-earning cash balances as a proportion of earning assets and improving loan and investment yields. Meanwhile, the cost of interest-bearing liabilities increased by 4 basis points over the same period, including a 6 basis point increase in the cost of deposits, partially offset by a significant reduction in average FHLB borrowings outstanding. A $0.6 million reduction in the cost of interest rate swaps compared to the prior quarter is the driver of the more pronounced increase in adjusted net interest margin1 compared to net interest margin.

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.

Balance Sheet

Total loans outstanding were $8.79 billion as of June 30, 2017, an increase of $94.4 million compared to March 31, 2017, bringing fiscal year-to-date growth to 1.3%. During the quarter, commercial real estate loans grew by $114.8 million and commercial and industrial ("C&I") loans grew by $25.5 million, partially offset by a $27.2 million net reduction in agricultural loans. Residential real estate and consumer loan balances continued to decline in line with strategy.

Total deposits declined $132.8 million, or 1.5%, during the quarter, reducing fiscal year-to-date growth to $354.3 million, or 4.1%. Deposit activity during the quarter included reductions of $111.1 million in noninterest-bearing deposits and $21.7 million in interest-bearing deposits. Reductions in deposit balances in the third fiscal quarter are typically seasonal in nature and are consistent with prior years' results. The net loan growth and deposit outflows during the quarter were predominantly funded by an increase in FHLB advances and other borrowings outstanding.

Provision for Loan and Lease Losses and Asset Quality

Provision for loan and lease losses was $5.8 million for the quarter ended June 30, 2017, compared to $5.4 million for the same quarter of fiscal year 2016. Net charge-offs for the quarter were $4.3 million, or 0.20% of average total loans on an annualized basis, with the majority of net charge-offs concentrated in the C&I segment of the loan portfolio. For the comparable period in fiscal year 2016, net charge-offs were $3.0 million, or 0.15% of average total loans on an annualized basis. The ratio of allowance for loan and lease losses ("ALLL") to total loans was 0.73% at June 30, 2017, consistent with 0.72% at March 31, 2017 and 0.75% at June 30, 2016.

Included within total loans are approximately $1.05 billion 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 0.38% of total loans.

At June 30, 2017, loans graded "Watch" were $299.0 million, a decrease of $25.5 million, or 7.9%, compared to March 31, 2017, and a decrease of $96.9 million, or 24.5%, compared to June 30, 2016. Loans graded "Substandard" were $250.6 million, a decrease of $13.1 million, or 5.0%, compared to March 31, 2017, and an increase of $13.0 million, or 5.5%, compared to June 30, 2016.

Nonaccrual loans were $123.6 million as of June 30, 2017, with $5.0 million of the balance covered by FDIC loss-sharing agreements. Total nonaccrual loans decreased by $4.0 million during the quarter and increased by $15.4 million compared to same quarter in fiscal year 2016. Total OREO balances were $9.1 million as of June 30, 2017, an increase of $2.1 million, or 29.4%, compared to prior quarter and a decrease of $2.6 million, or 22.6%, compared to June 30, 2016. The increase during the quarter was driven almost entirely by the addition of one property into OREO.

Total credit-related charges increased compared to the previous quarter and decreased compared to the same quarter in fiscal year 2016. A summary of total credit-related charges incurred during the current, prior and comparable quarters and current and prior nine-month periods is presented below:

         
GREAT WESTERN BANCORP, INC.
Summary of Credit-Related Charges (Unaudited)
 

Included within F/S Line Item(s):

At or for the nine months ended: For the three months ended:
Item

June 30,
2017

June 30,
2016

June 30,
2017

March 31,
2017

June 30,
2016

(dollars in thousands)
Provision for loan and lease losses Provision for loan and lease losses $ 16,854 $ 11,892 $ 5,796 $ 4,009 $ 5,372
 
Net OREO charges Net loss on repossessed property and other related expenses 1,208 479 152 397 379
 
(Recovery) reversal of interest income on nonaccrual loans Interest income on loans 233 1,320 332 (25 ) 1,505
 
Loan fair value adjustment related to credit Net increase (decrease) in fair value of loans at fair value   (4 )   2,296     (293 )   (251 )   2,722  
Total $ 18,291   $ 15,987   $ 5,987   $ 4,130   $ 9,978  
 

Noninterest Income

Noninterest income was $15.5 million for the quarter ended June 30, 2017, an increase of $6.4 million, or 70.2%, compared to the third quarter of fiscal year 2016. Of this movement, $4.7 million is attributable to the net effect of the change in fair value of loans for which the Company has elected the fair value option and the net gain (loss), realized and unrealized, of the related derivatives used to manage the interest rate risk on these loans. This increase was comprised of a favorable change in the credit adjustment on the loans of $3.0 million, and a $1.7 million reduction in the current cost of interest rate swaps driven by changes in the interest rate environment.

The remaining $1.7 million increase in noninterest income was primarily driven by a $0.6 million increase in wealth management income, a $0.6 million increase in other income and a $0.4 million increase in service charges and other fees reflecting higher interchange income. Management estimates that the impact of recording higher debit card interchange income (i.e., "Durbin Amendment") was $2.6 million for the quarter, which is comparable to the estimate for the same quarter of fiscal year 2016. The higher allowable interchange rates were effective through June 30, 2017 and management expects lower interchange income in the quarter ending September 30, 2017.

Noninterest Expense

Total noninterest expense was $54.9 million for the third fiscal quarter ended June 30, 2017, a decrease of $6.3 million, or 10.3%, compared to the same quarter in fiscal year 2016. Included in noninterest expense for the quarter ended June 30, 2016 was $12.2 million of non-recurring acquisition expenses; absent this reduction, total noninterest expense increased by $5.9 million, or 12.0%, over the same period. The majority of the increase was driven by a $4.5 million increase in salaries and employee benefits, which includes additional roles added to meet regulatory and risk management expectations, higher long-term incentive compensation and higher cost of employee benefits, which is primarily related to health insurance. Data processing costs increased by $0.8 million, driven by amortization of recent technology investments, and professional fees increased by $0.8 million, including higher legal and insurance costs.

The efficiency ratio1 was 46.7% for the quarter, a decrease from 58.8% for the same quarter of fiscal year 2016 and from 47.0% in the March 2017 quarter. The elevated efficiency ratio of the comparable prior period was due almost entirely to non-recurring acquisition expenses.

Provision for Income Taxes

The provision for income taxes for the third fiscal quarter ended June 30, 2017 was $18.4 million, reflecting an effective tax rate of 34.5% of income before income taxes. This compares to an effective tax rate of 22.8% for the third quarter of fiscal year 2016, which included a non-recurring benefit of $3.7 million relating to a correction of an immaterial error of a deferred tax item from an acquisition in 2008.

Capital

Tier 1 and total capital ratios were 11.5% and 12.6%, respectively, as of June 30, 2017, compared to 11.6% and 12.7%, respectively, as of March 31, 2017. The common equity tier 1 capital ratio was 10.7% as of June 30, 2017 and 10.8% as of March 31, 2017. The tier 1 leverage ratio was 10.3% as of June 30, 2017 and 10.0% as of March 31, 2017. All regulatory capital ratios remain above regulatory minimums to be considered "well capitalized."

On July 27, 2017, the Company’s Board of Directors declared a dividend of $0.20 per common share payable on August 23, 2017 to stockholders of record as of close of business on August 11, 2017. The aggregate dividend payment will be approximately $11.8 million.

Business Outlook

"Our dedication to developing processes and programs to meet regulatory and risk administration expectations have driven increased expenses in the short term," added Karels. "But we are proud that despite these increased costs we were able to maintain a very attractive efficiency ratio and we are dedicated to managing our cost structure in the future to drive further improvements to our efficiency. We believe we are pursuing the correct priorities to allow us to manage the business and its inherent risks while positioning for revenue growth."

Conference Call

Great Western Bancorp, Inc. will host a conference call to discuss its financial results for the third quarter of fiscal year 2017 on Thursday, July 27, 2017 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 August 10, 2017. To access the replay, dial (877) 344-7529 (U.S.) and use conference ID 10109131. International callers should dial (412) 317-0088 and enter the same conference ID number.

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, including those related to the integration of the recently-completed acquisition of HF Financial Corp., 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, 2016, and all risk factors associated with the recently completed acquisition of HF Financial Corp. 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 nine months ended: At or for the three months ended:

June 30,
2017

June 30,
2016

June 30,
2017

March 31,
2017

December 31,
2016

September 30,
2016

June 30,
2016

(dollars in thousands, except share and per share amounts)
Operating Data:
Interest and dividend income (FTE) $ 333,177 $ 293,502 $ 112,555 $ 110,075 $ 110,548 $ 109,730 $ 102,094
Interest expense 31,928 24,033 11,671 10,494 9,764 9,491 8,537
Noninterest income 43,226 26,739 15,485 13,834 13,907 15,798 9,097
Noninterest expense 161,312 150,297 54,922 53,852 52,537 57,342 61,222
Provision for loan and lease losses 16,854 11,892 5,796 4,009 7,049 5,063 5,372
Net income 107,125 87,495 35,060 35,162 36,903 33,758 26,360

Adjusted net income 1

$ 107,565 $ 95,524 $ 35,060 $ 35,162 $ 37,343 $ 35,458 $ 33,911
Common shares outstanding 58,761,597 58,693,499 58,761,597 58,760,517 58,755,989 58,693,304 58,693,499
Weighted average diluted common shares outstanding 59,065,402 55,993,011 59,130,632 59,073,669 58,991,905 58,938,367 57,176,705
Earnings per common share - diluted $ 1.81 $ 1.56 $ 0.59 $ 0.60 $ 0.63 $ 0.57 $ 0.46

Adjusted earnings per common share - diluted 1

$ 1.82 $ 1.71 $ 0.59 $ 0.60 $ 0.63 $ 0.60 $ 0.59
 
Performance Ratios:
Net interest margin (FTE) 2 3.95 % 3.97 % 4.00 % 3.98 % 3.89 % 3.92 % 3.95 %

Adjusted net interest margin (FTE) 1 2

3.80 % 3.74 % 3.87 %

3.83

%

3.71 % 3.73 % 3.74 %
Return on average total assets 2 1.26 % 1.16 % 1.25 % 1.26 % 1.28 % 1.19 % 1.00 %
Return on average common equity 2 8.5 % 7.8 % 8.2 % 8.5 % 8.8 % 8.2 % 6.8 %
Return on average tangible common equity 1 2 15.5 % 15.0 % 14.8 % 15.4 % 16.3 % 15.3 % 12.9 %
Efficiency ratio 1 46.3 % 50.0 % 46.7 % 47.0 % 45.1 % 48.5 % 58.8 %
 
Capital:
Tier 1 capital ratio 11.5 % 10.9 % 11.5 % 11.6 % 11.2 % 11.1 % 10.9 %
Total capital ratio 12.6 % 12.0 % 12.6 % 12.7 % 12.3 % 12.2 % 12.0 %
Tier 1 leverage ratio 10.3 % 10.0 % 10.3 % 10.0 % 9.7 % 9.5 % 10.0 %
Common equity tier 1 ratio 10.7 % 10.0 % 10.7 % 10.8 % 10.4 % 10.2 % 10.0 %
Tangible common equity / tangible assets 1 9.2 % 8.3 % 9.2 % 9.0 % 8.7 % 8.5 % 8.3 %
Book value per share - GAAP $ 29.49 $ 27.95 $ 29.49 $ 29.05 $ 28.57 $ 28.34 $ 27.95
Tangible book value per share 1 $ 16.75 $ 15.15 $ 16.75 $ 16.29 $ 15.81 $ 15.55 $ 15.15
 
Asset Quality:
Nonaccrual loans $ 123,641 $ 108,207 $ 123,641 $ 127,675 $ 124,178 $ 126,395 $ 108,207
OREO $ 9,051 $ 11,701 $ 9,051 $ 6,994 $ 8,093 $ 10,282 $ 11,701
Nonaccrual loans / total loans 1.41 % 1.26 % 1.41 % 1.47 % 1.41 % 1.46 % 1.26 %
Net charge-offs (recoveries) $ 17,282 $ 4,849 $ 4,267 $ 8,091 $ 4,924 $ 4,654 $ 3,046
Net charge-offs (recoveries) / average total loans 2 0.27 % 0.08 % 0.20 % 0.38 % 0.22 % 0.21 % 0.15 %
Allowance for loan and lease losses / total loans 0.73 % 0.75 % 0.73 % 0.72 % 0.76 % 0.74 % 0.75 %
Watch-rated loans $ 298,963 $ 395,893 $ 298,963 $ 324,457 $ 334,673 $ 327,608 $ 395,893
 

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 nine months ended: At or for the three months ended:

June 30,
2017

June 30,
2016

June 30,
2017

 

March 31,
2017

 

December 31,
2016

 

September 30,
2016

 

June 30,
2016

(dollars in thousands)
Interest and dividend income
Loans $ 306,253 $ 269,137 $ 103,435 $ 101,136 $ 101,683 $ 101,307 $ 93,749
Taxable securities 18,170 17,600 6,238 6,055 5,878 5,649 5,826
Nontaxable securities 710 85 269 241 199 145 61
Dividends on securities 839 832 296 242 300 369 396
Federal funds sold and other   728     326     163     219     346     248     157  
Total interest and dividend income 326,700 287,980 110,401 107,893 108,406 107,718 100,189
Interest expense
Deposits 24,596 18,145 9,478 7,829 7,290 6,968 6,451
 
Securities sold under agreements to repurchase 298 395 86 98 115 125 124
FHLB advances and other borrowings 3,735 2,831 994 1,469 1,271 1,323 986
Subordinated debentures and subordinated notes payable   3,299     2,662     1,113     1,098     1,088     1,075     976  
Total interest expense   31,928     24,033     11,671     10,494     9,764     9,491     8,537  
Net interest income 294,772 263,947 98,730 97,399 98,642 98,227 91,652
Provision for loan and lease losses   16,854     11,892     5,796     4,009     7,049     5,063     5,372  
Net interest income after provision for loan and lease losses   277,918     252,055     92,934     93,390     91,593     93,164     86,280  
Noninterest income
Service charges and other fees 36,735 33,098 12,730 11,919 12,086 13,111 12,316
Wealth management fees 7,116 5,087 2,433 2,429 2,254 2,196 1,807
Mortgage banking income, net 6,130 4,143 1,828 1,640 2,662 3,119 1,669
Net gain (loss) on sale of securities 44 (196 ) 44 356 134
Net increase (decrease) in fair value of loans at fair value (63,158 ) 35,253 6,060 (5,216 ) (64,001 ) (8,939 ) 14,198
Net realized and unrealized gain (loss) on derivatives 51,481 (53,379 ) (9,088 ) 1,592 58,976 4,721 (21,925 )
Other   4,878     2,733     1,522     1,426     1,930     1,234     898  
Total noninterest income 43,226 26,739 15,485 13,834 13,907 15,798 9,097
Noninterest expense
Salaries and employee benefits 96,872 78,417 32,868 32,370 31,634 30,638 28,352
Data processing 18,020 15,822 6,378 5,965 5,677 5,896 5,625
Occupancy expenses 12,437 11,436 4,057 4,355 4,024 4,323 4,002
Professional fees 10,535 9,087 4,141 3,559 2,835 4,485 3,327
Communication expenses 2,945 2,650 992 914 1,040 1,072 788
Advertising 3,029 3,015 1,059 995 975 1,252 1,047
Equipment expenses 2,375 2,794 809 768 798 1,001 959
Net loss on repossessed property and other related expenses 1,208 479 152 397 658 784 379
Amortization of core deposits and other intangibles 1,927 2,239 538 550 839 1,024 822
Acquisition expenses 710 12,950 710 2,742 12,179
Other   11,254     11,408     3,928     3,979     3,347     4,125     3,742  
Total noninterest expense   161,312     150,297     54,922     53,852     52,537     57,342     61,222  
Income before income taxes 159,832 128,497 53,497 53,372 52,963 51,620 34,155
Provision for income taxes   52,707     41,002     18,437     18,210     16,060     17,862     7,795  
Net income $ 107,125   $ 87,495   $ 35,060   $ 35,162   $ 36,903   $ 33,758   $ 26,360  
 
 
GREAT WESTERN BANCORP, INC.
Summarized Consolidated Balance Sheet (Unaudited)
 
As of

June 30, 2017

  March 31, 2017   December 31, 2016   September 30, 2016   June 30, 2016
(dollars in thousands)
Assets
Cash and cash equivalents $ 327,901 $ 335,929 $ 270,168 $ 524,611 $ 475,785
Securities 1,366,442 1,350,893 1,371,558 1,317,386 1,361,164
Total loans 8,791,852 8,697,426 8,779,107 8,682,644 8,606,974
Allowance for loan and lease losses   (64,214 )   (62,685 )   (66,767 )   (64,642 )   (64,243 )
Loans, net 8,727,638 8,634,741 8,712,340 8,618,002 8,542,731
Goodwill and other intangible assets 748,828 749,366 749,916 750,755 751,217
Other assets   295,375     285,912     318,635     320,426     322,325  
Total assets $ 11,466,184   $ 11,356,841   $ 11,422,617   $ 11,531,180   $ 11,453,222  
 
Liabilities and stockholders' equity
Noninterest-bearing deposits $ 1,915,560 $ 2,026,627 $ 1,954,881 $ 1,880,512 $ 1,802,169
Interest-bearing deposits   7,043,542     7,065,291     6,751,366     6,724,278     6,678,040  
Total deposits 8,959,102 9,091,918 8,706,247 8,604,790 8,480,209
Securities sold under agreements to repurchase 123,851 124,472 142,741 141,688 159,016
FHLB advances and other borrowings 471,719 264,624 711,029 871,037 913,377
Other liabilities   178,529     168,966     183,962     250,274     260,109  
Total liabilities 9,733,201 9,649,980 9,743,979 9,867,789 9,812,711
Stockholders' equity   1,732,983     1,706,861     1,678,638     1,663,391     1,640,511  
Total liabilities and stockholders' equity $ 11,466,184   $ 11,356,841   $ 11,422,617   $ 11,531,180   $ 11,453,222  
 
           
GREAT WESTERN BANCORP, INC.
Loan Portfolio Summary (Unaudited)
 
As of Fiscal year-to-date:

June 30,
2017

 

March 31,
2017

 

December 31,
2016

September 30,
2016

Change
($)

Change
(%)

(dollars in thousands)
Commercial non-real estate $ 1,715,630 $ 1,690,149 $ 1,643,986 $ 1,673,166 $ 42,464 2.5 %
Agriculture 2,087,113 2,114,287 2,206,263 2,168,937 (81,824 ) (3.8 )%
Construction and development 490,025 450,419 423,864 469,968 20,057 4.3 %
Owner-occupied CRE 1,232,488 1,191,348 1,197,253 1,167,265 65,223 5.6 %
Non-owner-occupied CRE 1,881,726 1,754,631 1,775,107 1,678,007 203,719 12.1 %
Multifamily residential real estate   361,360     454,437     455,880     438,867     (77,507 ) (17.7 )%
Commercial real estate 3,965,599 3,850,835 3,852,104 3,754,107 211,492 5.6 %
Residential real estate 953,340 971,374 1,008,325 1,020,958 (67,618 ) (6.6 )%
Consumer 70,028 74,718 71,795 76,273 (6,245 ) (8.2 )%
Other 1   44,111     39,976     47,569     42,477     1,634   3.8 %
Total unpaid principal balance 8,835,821 8,741,339 8,830,042 8,735,918 99,903 1.1 %
Less: Unamortized discount on acquired loans and unearned net deferred fees and costs and loans in process   (43,969 )   (43,913 )   (50,935 )   (53,274 )   9,305   17.5 %
Total loans $ 8,791,852   $ 8,697,426   $ 8,779,107   $ 8,682,644   $ 109,208   1.3 %
 
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)
           
For the three months ended:
June 30, 2017   March 31, 2017 June 30, 2016

Average
Balance

 

Interest
(FTE)

 

Yield /
Cost 1

Average
Balance

Interest
(FTE)

Yield /
Cost 1

Average
Balance

Interest
(FTE)

Yield /
Cost 1

(dollars in thousands)
Assets
Interest-bearing bank deposits $ 62,187 $ 163 1.05 % $ 109,737 $ 219 0.81 % $ 130,521 $ 157 0.48 %
Investment securities 1,398,370 6,803 1.95 % 1,382,743 6,538 1.92 % 1,373,451 6,283 1.84 %
Non ASC 310-30 loans, net 2 8,550,349 102,720 4.82 % 8,531,652 101,007 4.80 % 7,903,860 93,733 4.77 %
ASC 310-30 loans, net   113,498   2,869 10.14 %   120,743   2,311 7.76 %   120,744   1,921 6.40 %
Loans, net   8,663,847   105,589 4.89 %   8,652,395   103,318 4.84 %   8,024,604   95,654 4.79 %
Total interest-earning assets 10,124,404 112,555 4.46 % 10,144,875 110,075 4.40 % 9,528,576 102,094 4.31 %
Noninterest-earning assets   1,154,295   1,146,196   1,085,961
Total assets $ 11,278,699 $ 112,555 4.00 % $ 11,291,071 $ 110,075 3.95 % $ 10,614,537 $ 102,094 3.87 %
 
Liabilities and Stockholders' Equity
Noninterest-bearing deposits $ 1,815,407 $ 1,825,174 $ 1,497,567
NOW, money market and savings deposits 5,849,998 $ 7,172 0.49 % 5,623,676 $ 5,759 0.42 % 5,236,443 $ 4,270 0.33 %
Time deposits   1,289,402   2,306 0.72 %   1,286,203   2,070 0.65 %   1,340,460   2,182 0.65 %
Total deposits 8,954,807 9,478 0.42 % 8,735,053 7,829 0.36 % 8,074,470 6,452 0.32 %
Securities sold under agreements to repurchase 118,373 86 0.29 % 117,970 98 0.34 % 152,615 124 0.33 %
FHLB advances and other borrowings 303,846 994 1.31 % 571,338 1,469 1.04 % 600,477 986 0.66 %
Subordinated debentures and subordinated notes payable   108,234   1,113 4.13 %   108,196   1,098 4.12 %   101,419   975 3.87 %
Total borrowings   530,453   2,193 1.66 %   797,504   2,665 1.36 %   854,511   2,085 0.98 %
Total interest-bearing liabilities 9,485,260 $ 11,671 0.49 % 9,532,557 $ 10,494 0.45 % 8,928,981 $ 8,537 0.38 %
Noninterest-bearing liabilities 77,979 71,744 118,184
Stockholders' equity   1,715,460   1,686,770   1,567,372
Total liabilities and stockholders' equity $ 11,278,699 $ 11,291,071 $ 10,614,537
Net interest spread 3.51 % 3.50 % 3.49 %
Net interest income and net interest margin (FTE) $ 100,884 4.00 % $ 99,581 3.98 % $ 93,557 3.95 %
Less: Tax equivalent adjustment   2,154   2,182   1,905

Net interest income and net interest margin - ties to Statements of Comprehensive Income

$ 98,730 3.91 %

 

$ 97,399 3.89 % $ 91,652 3.87 %
 
1 Annualized for all partial-year periods.

2 Interest income includes $0.7 million and $1.8 million for the third quarter of fiscal year 2017 and 2016, respectively, resulting from accretion of purchase accounting discount associated with acquired loans.

 
 
GREAT WESTERN BANCORP, INC.
Net Interest Margin (FTE) (Unaudited)
     
For the nine months ended:
June 30, 2017   June 30, 2016

Average
Balance

 

Interest
(FTE)

 

Yield /
Cost 1

Average
Balance

Interest
(FTE)

Yield /
Cost 1

(dollars in thousands)
Assets
Interest-bearing bank deposits $ 146,209 $ 728 0.67 % $ 102,206 $ 326 0.43 %
Investment securities 1,386,190 19,719 1.90 % 1,362,576 18,517 1.82 %
Non ASC 310-30 loans, net 2 8,532,650 305,208 4.78 % 7,489,534 269,452 4.81 %
ASC 310-30 loans, net   120,138     7,522   8.37 %   107,580     5,207   6.47 %
Loans, net   8,652,788     312,730   4.83 %   7,597,114     274,659   4.83 %
Total interest-earning assets 10,185,187 333,177 4.37 % 9,061,896 293,502 4.33 %
Noninterest-earning assets   1,150,838     1,055,005  
Total assets $ 11,336,025   $ 333,177   3.93 % $ 10,116,901   $ 293,502   3.88 %
 
Liabilities and Stockholders' Equity
Noninterest-bearing deposits $ 1,810,880 $ 1,420,749
NOW, money market and savings deposits 5,673,929 $ 18,060 0.43 % 4,973,268 $ 11,498 0.31 %
Time deposits   1,307,908     6,536   0.67 %   1,326,782     6,648   0.67 %
Total deposits 8,792,717 24,596 0.37 % 7,720,799 18,146 0.31 %
Securities sold under agreements to repurchase 124,249 298 0.32 % 163,622 395 0.32 %
FHLB advances and other borrowings 530,668 3,735 0.94 % 524,004 2,831 0.72 %
Subordinated debentures and subordinated notes payable   109,130     3,299   4.04 %   94,304     2,661   3.77 %
Total borrowings   764,047     7,332   1.28 %   781,930     5,887   1.01 %
Total interest-bearing liabilities 9,556,764 $ 31,928 0.45 % 8,502,729 $ 24,033 0.38 %
Noninterest-bearing liabilities 89,770 107,432
Stockholders' equity   1,689,491     1,506,740  
Total liabilities and stockholders' equity $ 11,336,025   $ 10,116,901  
Net interest spread 3.48 % 3.50 %
Net interest income and net interest margin (FTE) $ 301,249   3.95 % $ 269,469   3.97 %
Less: Tax equivalent adjustment   6,477     5,522  

Net interest income and net interest margin - ties to Statements of Comprehensive Income

$ 294,772   3.87 % $ 263,947   3.89 %
 
1 Annualized for all partial-year periods.

2 Interest income includes $3.0 million and $1.9 million for the first nine months of fiscal year 2017 and 2016, 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. generally accepted accounting principles, or GAAP.

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). 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 nine months ended: At or for the three months ended:

June 30,
2017

June 30,
2016

June 30,
2017

March 31,
2017

December 31,
2016

September 30,
2016

June 30,
2016

(dollars in thousands except share and per share amounts)
Adjusted net income and adjusted earnings per common share:
Net income - GAAP $ 107,125 $ 87,495 $ 35,060 $ 35,162 $ 36,903 $ 33,758 $ 26,360
Add: Acquisition expenses 710 12,950 710 2,742 12,179
Add: Tax effect at 38%   (270 )   (4,921 )           (270 )   (1,042 )   (4,628 )
Adjusted net income $ 107,565   $ 95,524   $ 35,060   $ 35,162   $ 37,343   $ 35,458   $ 33,911  
 
Weighted average diluted common shares outstanding 59,065,402 55,993,011 59,130,632 59,073,669 58,991,905 58,938,367 57,176,705
Earnings per common share - diluted $ 1.81 $ 1.56 $ 0.59 $ 0.60 $ 0.63 $ 0.57 $ 0.46
Adjusted earnings per common share - diluted $ 1.82 $ 1.71 $ 0.59 $ 0.60 $ 0.63 $ 0.60 $ 0.59
 
Tangible net income and return on average tangible common equity:
Net income - GAAP $ 107,125 $ 87,495 $ 35,060 $ 35,162 $ 36,903 $ 33,758 $ 26,360
Add: Amortization of intangible assets 1,927 2,239 538 550 839 1,024 822
Add: Tax on amortization of intangible assets   (264 )   (660 )   (50 )   (50 )   (163 )   (220 )   (220 )
Tangible net income $ 108,788   $ 89,074   $ 35,548   $ 35,662   $ 37,579   $ 34,562   $ 26,962  
 
Average common equity $ 1,689,491 $ 1,506,740 $ 1,715,460 $ 1,686,770 $ 1,666,243 $ 1,647,155 $ 1,567,372
Less: Average goodwill and other intangible assets   749,667     712,049     749,074     749,638     750,290     750,756     727,707  
Average tangible common equity $ 939,824   $ 794,691   $ 966,386   $ 937,132   $ 915,953   $ 896,399   $ 839,665  
Return on average common equity * 8.5 % 7.8 % 8.2 % 8.5 % 8.8 % 8.2 % 6.8 %
Return on average tangible common equity ** 15.5 % 15.0 % 14.8 % 15.4 % 16.3 % 15.3 % 12.9 %
 
* 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 $ 294,772 $ 263,947 $ 98,730 $ 97,399 $ 98,642 $ 98,227 $ 91,652
Add: Tax equivalent adjustment   6,477     5,522     2,154     2,182     2,142     2,012     1,905  
Net interest income (FTE) 301,249 269,469 100,884 99,581 100,784 100,239 93,557
Add: Current realized derivative gain (loss)   (11,681 )   (15,832 )   (3,320 )   (3,875 )   (4,486 )   (4,895 )   (5,005 )
Adjusted net interest income (FTE) $ 289,568   $ 253,637   $ 97,564   $ 95,706   $ 96,298   $ 95,344   $ 88,552  
 
Average interest-earning assets $ 10,185,187 $ 9,061,896 $ 10,124,404 $ 10,144,875 $ 10,286,284 $ 10,173,743 $ 9,528,576
Net interest margin (FTE) * 3.95 % 3.97 % 4.00 % 3.98 % 3.89 % 3.92 % 3.95 %
Adjusted net interest margin (FTE) ** 3.80 % 3.74 % 3.87 % 3.83 % 3.71 % 3.73 % 3.74 %
 
* 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 $ 298,731 $ 263,930 $ 100,566 $ 98,825 $ 99,339 $ 99,058 $ 91,829
Add: Tax equivalent adjustment   6,477     5,522     2,154     2,182     2,142     2,012     1,905  
Interest income (FTE) 305,208 269,452 102,720 101,007 101,481 101,070 93,734
Add: Current realized derivative gain (loss)   (11,681 )   (15,832 )   (3,320 )   (3,875 )   (4,486 )   (4,895 )   (5,005 )
Adjusted interest income (FTE) $ 293,527   $ 253,620   $ 99,400   $ 97,132   $ 96,995   $ 96,175   $ 88,729  
 
Average non ASC 310-30 loans $ 8,532,650 $ 7,489,534 $ 8,550,349 $ 8,531,652 $ 8,515,947 $ 8,477,214 $ 7,903,860
Yield (FTE) * 4.78 % 4.81 % 4.82 % 4.80 % 4.73 % 4.74 % 4.77 %
Adjusted yield (FTE) ** 4.60 % 4.52 % 4.66 % 4.62 % 4.52 % 4.51 % 4.52 %
 
* 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 $ 337,998 $ 290,686 $ 114,215 $ 111,233 $ 112,549 $ 114,025 $ 100,749
Add: Tax equivalent adjustment   6,477     5,522     2,154     2,182     2,142     2,012     1,905  
Total revenue (FTE) $ 344,475   $ 296,208   $ 116,369   $ 113,415   $ 114,691   $ 116,037   $ 102,654  
 
Noninterest expense $ 161,312 $ 150,297 $ 54,922 $ 53,852 $ 52,537 $ 57,342 $ 61,222
Less: Amortization of intangible assets   1,927     2,239     538     550     839     1,024     822  
Tangible noninterest expense $ 159,385   $ 148,058   $ 54,384   $ 53,302   $ 51,698   $ 56,318   $ 60,400  
Efficiency ratio * 46.3 % 50.0 % 46.7 % 47.0 % 45.1 % 48.5 % 58.8 %
 
* 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 $ 1,732,983 $ 1,640,511 $ 1,732,983 $ 1,706,861 $ 1,678,638 $ 1,663,391 $ 1,640,511
Less: Goodwill and other intangible assets   748,828     751,217     748,828     749,366     749,916     750,755     751,217  
Tangible common equity $ 984,155   $ 889,294   $ 984,155   $ 957,495   $ 928,722   $ 912,636   $ 889,294  
 
Total assets $ 11,466,184 $ 11,453,222 $ 11,466,184 $ 11,356,841 $ 11,422,617 $ 11,531,180 $ 11,453,222
Less: Goodwill and other intangible assets   748,828     751,217     748,828     749,366     749,916     750,755     751,217  
Tangible assets $ 10,717,356   $ 10,702,005   $ 10,717,356   $ 10,607,475   $ 10,672,701   $ 10,780,425   $ 10,702,005  
Tangible common equity to tangible assets 9.2 % 8.3 % 9.2 % 9.0 % 8.7 % 8.5 % 8.3 %
 
Tangible book value per share:
Total stockholders' equity $ 1,732,983 $ 1,640,511 $ 1,732,983 $ 1,706,861 $ 1,678,638 $ 1,663,391 $ 1,640,511
Less: Goodwill and other intangible assets   748,828     751,217     748,828     749,366     749,916     750,755     751,217  
Tangible common equity $ 984,155   $ 889,294   $ 984,155   $ 957,495   $ 928,722   $ 912,636   $ 889,294  
 
Common shares outstanding 58,761,597 58,693,499 58,761,597 58,760,517 58,755,989 58,693,304 58,693,499
Book value per share - GAAP $ 29.49 $ 27.95 $ 29.49 $ 29.05 $ 28.57 $ 28.34 $ 27.95
Tangible book value per share $ 16.75 $ 15.15 $ 16.75 $ 16.29 $ 15.81 $ 15.55 $ 15.15
 

GREAT WESTERN BANCORP, INC.
Media Contact:
Ann Nachtigal, 605-988-9217
ann.nachtigal@greatwesternbank.com
or
Investor Relations Contact:
David Hinderaker, 605-988-9253
david.hinderaker@greatwesternbank.com

Source: Great Western Bancorp, Inc.