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Press Release

Great Western Bancorp, Inc. Announces Earnings of $26.8 million for Third Quarter Fiscal Year 2019 and Dividends of $0.30 Per Share

Company Release - 7/25/2019 7:00 AM ET

Highlights for the Third Quarter of Fiscal Year 2019 (all quarterly comparisons in this document refer to the second quarter of fiscal year 2019, except as noted)

  • Net income was $26.8 million, or $0.47 per diluted share, compared to $44.5 million, or $0.78 per diluted share, for the prior quarter and $45.9 million, or $0.78 per diluted share, for the third quarter of fiscal year 2018
  • Net interest margin and adjusted net interest margin1, 2 were 3.70% and 3.71%, respectively, a decrease of 5 basis points each
  • Expense control remained strong with the efficiency ratio1 at 47.2% for the quarter and 46.3% for fiscal year-to-date
  • Total loans grew to $9.89 billion, an increase of $116.1 million, or 1.2%, with fiscal year-to-date growth of $471.0 million, or 5.0%
  • Total deposits were $10.24 billion, a decrease of $232.4 million, or 2.2%, for the quarter due to a reduction in brokered deposits and seasonal outflows consistent with prior years. Fiscal year-to-date growth remained solid at $502.4 million, or 5.2%, with cost of deposit increases beginning to level off
  • Profitability remains strong with return on tangible common equity1 of 14.5% for the fiscal year-to-date
  • Key asset quality metrics have deteriorated during the quarter, however this was mainly due to the dairy loan portfolio; the asset quality for the remainder of the portfolio remains stable
  • The Company's Board of Directors declared a quarterly dividend of $0.30 per share

SIOUX FALLS, S.D.--(BUSINESS WIRE)-- Great Western Bancorp, Inc. (NYSE: GWB) today reported net income of $26.8 million, or $0.47 per diluted share, for the third quarter of fiscal year 2019, compared to net income of $44.5 million, or $0.78 per diluted share, for the second quarter of fiscal year 2019 and $45.9 million, or $0.78 per diluted share, for the third quarter of fiscal year 2018.

"We are pleased with the loan growth, expense control and how we have managed our net interest margin during the quarter," said Ken Karels, Chief Executive Officer and Chairperson of the Board. "The recent deterioration in our asset quality metrics has been disappointing, but this is limited mainly to the dairy loan portfolio, and a couple of instances of customer fraud. We believe the overall asset quality within the remainder of the portfolio remains stable."

Net Interest Income and Net Interest Margin2

Net interest income was $107.1 million for the quarter, an increase of $2.1 million, or 2.0%. The increase was primarily attributable to higher loan interest income driven by increases in average loans and investments outstanding between the periods, partially offset by the cost of deposits. The cost of deposits modestly increased 3 basis points during the quarter, compared to an increase of 13 basis points in the previous quarter.

Net interest margin was 3.70% and 3.75%, respectively, for the quarters ended June 30, 2019 and March 31, 2019. Adjusted net interest margin1, which adjusts for the realized gain (loss) on interest rate swaps, was 3.71% and 3.76%, respectively, for the same periods. The lower margins were primarily driven by the cost of deposits, which had a moderate increase of 3 basis points to 1.11%, partially offset by the yield on loans, which increased 2 basis points to 5.25%, and the yield on the investment portfolio, which increased 2 basis points to 2.54%.

Total loans outstanding were $9.89 billion as of June 30, 2019, an increase of $116.1 million, or 1.2%, during the quarter, and growth of $471.0 million, or 5.0%, for fiscal year-to-date. During the quarter the commercial real estate ("CRE") segment of the portfolio grew by $150.0 million, or 3.0%, mainly in the non-owner-occupied category, commercial non-real estate grew by $26.4 million, or 1.5%, and the agriculture segment was reduced by $72.5 million, or 3.4%.

Total deposits were $10.24 billion as of June 30, 2019, a decrease of $232.4 million, or 2.2%, for the quarter with growth of $502.4 million, or 5.2%, for fiscal year-to-date. During the quarter, deposit decreases were driven by a reduction in brokered deposits and seasonal outflows consistent with prior years. Interest-bearing deposits were $8.30 billion, a 4.0% decrease for the quarter, and noninterest-bearing deposits were $1.94 billion, a 6.2% increase for the quarter. FHLB and other borrowings increased by $330.0 million, or 120.0%, for the quarter due to more favorable FHLB short term rates.

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

Provision for Loan and Lease Losses and Asset Quality

Provision for loan and lease losses was $26.1 million for the quarter, an increase of $18.4 million. Net charge-offs for the quarter were $17.5 million, or 0.72% of average total loans on an annualized basis, with the majority of net charge-offs concentrated in the agriculture and commercial non-real estate segments of the loan portfolio. Charge-offs in the current quarter included $10.0 million which related to the cattle industry which were based upon new and/or updated information received during the quarter, of which $4.0 million was to a cattle feed operator in which the Company believed involved borrower fraud, and $3.0 million related to loans in the grain industry. These relationships had been classified as substandard for a number of previous quarters. This quarter's charge-offs also included approximately $4.0 million to a retailer which the Company believed involved borrower fraud and the remaining $1.0 million related to another commercial exposure. The ratio of allowance for loan and lease losses ("ALLL") to total loans increased to 0.77% as of June 30, 2019 from 0.70% as of the prior quarter.

Included within total loans are approximately $816.9 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 $8.7 million of the fair value adjustment for these loans relates to credit risk, or 0.09% of total loans. Finally, total purchase discount remaining on all acquired loans equates to 0.16% of total loans.

Nonaccrual loans were $118.1 million as of June 30, 2019, representing a decrease of $3.6 million for the quarter. Loans graded "Watch" decreased $80.2 million, or 26.6%, to $220.9 million for the quarter, while loans graded "Substandard" increased $217.1 million, or 83.8%, to $476.0 million for the quarter. The increase in substandard balances was primarily a result of new and/or updated information resulting in downgrades within the dairy loan portfolio. For the relationships moved to substandard, the Company believes it remains well collateralized on these lending relationships. Total other repossessed property balances were $36.4 million as of June 30, 2019, an increase of $3.9 million, or 12.2%.

Total credit-related charges increased compared to the first nine months of fiscal year 2018, the previous quarter and the comparable quarter. A summary of total credit-related charges incurred during the current and comparable nine month periods and current, previous and comparable quarters is presented below:

GREAT WESTERN BANCORP, INC.

 

 

 

 

 

 

 

 

 

 

Summary of Credit-Related Charges (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the nine months ended:

 

For the three months ended:

Item

 

Included within F/S Line Item(s):

 

June 30, 2019

 

June 30, 2018

 

June 30, 2019

 

March 31, 2019

 

June 30, 2018

 

 

 

 

(dollars in thousands)

Provision for loan and lease losses

 

Provision for loan and lease losses

 

$

38,965

 

 

$

12,972

 

 

$

26,077

 

 

$

7,673

 

 

$

3,515

 

Net other repossessed property charges

 

Net loss on repossessed property and other related expenses

 

4,062

 

 

1,519

 

 

595

 

 

404

 

 

305

 

Reversal of interest income on nonaccrual loans

 

Interest income on loans

 

469

 

 

1,126

 

 

173

 

 

337

 

 

216

 

Loan fair value adjustment related to credit

 

Net increase (decrease) in fair value of loans at fair value

 

5,579

 

 

197

 

 

4,817

 

 

(422

)

 

(123

)

Total

 

 

 

$

49,075

 

 

$

15,814

 

 

$

31,662

 

 

$

7,992

 

 

$

3,913

 

Noninterest Income

Noninterest income was $10.8 million, a decrease of $7.5 million, or 40.9%, for the quarter. Included within noninterest income is the net change in fair value of loans for which the Company has elected the fair value option and the net realized and unrealized gain (loss) of the related derivatives which generated a $7.5 million unfavorable change over the prior quarter. The decrease in this line item was due to $5.2 million in credit charges on loans held at fair value and a $1.3 million increase in the counterparty credit valuation adjustment on the derivative portfolio.

Noninterest Expense

Total noninterest expense was $56.0 million, a decrease of $0.6 million, or 1.0%, for the quarter. Substantially all of the decrease was driven by a $0.6 million decrease in salaries and employee benefits due to a decrease in health insurance expense during the quarter.

The efficiency ratio1 was 47.2% for the quarter, an increase from 45.6%, mainly due to a decrease in noninterest income discussed above.

Provision for Income Taxes

The provision for income taxes for the quarter ended June 30, 2019 was $7.5 million, reflecting an effective tax rate of 22.0%, compared to an effective tax rate of 22.5% in the prior quarter.

Capital

Tier 1 and total capital ratios were 11.3% and 12.4%, respectively, as of June 30, 2019, compared to 11.4% and 12.4%. The common equity tier 1 capital ratio and tier 1 leverage ratio were 10.6% and 10.0%, respectively, as of June 30, 2019 compared to 10.7% and 10.2%. All regulatory capital ratios remain above regulatory minimums to be considered "well capitalized."

On July 25, 2019, the Company’s Board of Directors declared a dividend of $0.30 per common share payable on August 23, 2019 to stockholders of record as of close of business on August 9, 2019. The aggregate dividend payment will be approximately $17.1 million.

Business Outlook

"We are pleased that we remain solidly profitable and have made good progress on managing the cost of our deposits during the quarter," added Karels. "Loan growth was good and well diversified across the footprint and we continue to manage our expense base well. We are disappointed with the level of charge-offs, provisioning and movements into substandard loans during the quarter but we expect to work these asset quality metrics to levels that are more acceptable over the coming quarters."

Conference Call

Great Western Bancorp, Inc. will host a conference call to discuss its financial results for the third quarter of fiscal year 2019 on Thursday, July 25, 2019 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 8, 2019. To access the replay, dial (877) 344-7529 (U.S.) and use conference ID 10132862. 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 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 most recently ended fiscal year, and in other periodic filings with the Securities and Exchange Commission. 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, 2019

 

June 30, 2018

 

 

June 30, 2019

 

March 31, 2019

December 31, 2018

September 30, 2018

June 30, 2018

 

 

(dollars in thousands, except share and per share amounts)

Operating Data:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income (FTE)

 

$

408,503

 

$

361,514

 

 

$

139,623

 

$

135,328

 

$

133,551

 

$

126,921

 

$

126,146

 

Interest expense

 

90,148

 

50,756

 

 

32,570

 

30,411

 

27,167

 

23,244

 

19,745

 

Noninterest income

 

45,709

 

54,355

 

 

10,766

 

18,223

 

16,720

 

19,255

 

18,939

 

Noninterest expense

 

169,686

 

171,875

 

 

56,000

 

56,580

 

57,106

 

59,550

 

57,863

 

Provision for loan and lease losses

 

38,965

 

12,972

 

 

26,077

 

7,673

 

5,215

 

5,015

 

3,515

 

Net income

 

117,080

 

115,636

 

 

26,783

 

44,511

 

45,786

 

42,281

 

45,874

 

Adjusted net income ¹

 

$

117,080

 

$

129,222

 

 

$

26,783

 

$

44,511

 

$

45,786

 

$

42,281

 

$

45,874

 

Common shares outstanding

 

56,939,032

 

58,911,563

 

 

56,939,032

 

56,938,435

 

56,938,435

 

58,917,147

 

58,911,563

 

Weighted average diluted common shares outstanding

 

57,408,023

 

59,134,635

 

 

57,110,103

 

57,074,674

 

58,039,292

 

59,122,699

 

59,170,058

 

Earnings per common share - diluted

 

$

2.04

 

$

1.96

 

 

$

0.47

 

$

0.78

 

$

0.79

 

$

0.72

 

$

0.78

 

Adjusted earnings per common share - diluted ¹

 

$

2.04

 

$

2.19

 

 

$

0.47

 

$

0.78

 

$

0.79

 

$

0.72

 

$

0.78

 

Performance Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin (FTE) ¹ ²

 

3.75

%

3.93

%

 

3.70

%

3.75

%

3.81

%

3.79

%

3.97

%

Adjusted net interest margin (FTE) ¹ ²

 

3.76

%

3.87

%

 

3.71

%

3.76

%

3.81

%

3.77

%

3.94

%

Return on average total assets ²

 

1.25

%

1.32

%

 

0.84

%

1.44

%

1.48

%

1.40

%

1.55

%

Return on average common equity ²

 

8.5

%

8.7

%

 

5.8

%

9.9

%

10.0

%

9.2

%

10.2

%

Return on average tangible common equity ¹ ²

 

14.5

%

15.2

%

 

9.7

%

16.9

%

17.1

%

15.7

%

17.7

%

Efficiency ratio ¹

 

46.3

%

46.7

%

 

47.2

%

45.6

%

46.1

%

48.1

%

45.8

%

Capital:

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 capital ratio

 

11.3

%

11.8

%

 

11.3

%

11.4

%

11.1

%

12.0

%

11.8

%

Total capital ratio

 

12.4

%

12.8

%

 

12.4

%

12.4

%

12.1

%

13.0

%

12.8

%

Tier 1 leverage ratio

 

10.0

%

10.6

%

 

10.0

%

10.2

%

10.1

%

10.7

%

10.6

%

Common equity tier 1 ratio

 

10.6

%

11.0

%

 

10.6

%

10.7

%

10.4

%

11.3

%

11.0

%

Tangible common equity / tangible assets ¹

 

9.3

%

9.5

%

 

9.3

%

9.2

%

9.0

%

9.6

%

9.5

%

Book value per share - GAAP

 

$

33.04

 

$

30.84

 

 

$

33.04

 

$

32.53

 

$

31.82

 

$

31.24

 

$

30.84

 

Tangible book value per share ¹

 

$

19.94

 

$

18.16

 

 

$

19.94

 

$

19.43

 

$

18.72

 

$

18.57

 

$

18.16

 

Asset Quality:

 

 

 

 

 

 

 

 

 

 

 

 

Nonaccrual loans

 

$

118,060

 

$

127,315

 

 

$

118,060

 

$

121,616

 

$

138,944

 

$

143,206

 

$

127,315

 

Other repossessed property

 

$

36,393

 

$

10,221

 

 

$

36,393

 

$

32,450

 

$

22,224

 

$

23,074

 

$

10,221

 

Nonaccrual loans / total loans

 

1.19

%

1.36

%

 

1.19

%

1.24

%

1.42

%

1.52

%

1.36

%

Net charge-offs (recoveries)

 

$

26,959

 

$

11,787

 

 

$

17,534

 

$

5,863

 

$

3,562

 

$

5,163

 

$

3,966

 

Net charge-offs (recoveries) / average total loans ²

 

0.37

%

0.17

%

 

0.72

%

0.25

%

0.15

%

0.22

%

0.17

%

Allowance for loan and lease losses / total loans

 

0.77

%

0.69

%

 

0.77

%

0.70

%

0.68

%

0.69

%

0.69

%

Watch-rated loans

 

$

220,883

 

$

276,001

 

 

$

220,883

 

$

301,099

 

$

321,593

 

$

343,288

 

$

276,001

 

Substandard loans

 

$

475,999

 

$

268,017

 

 

$

475,999

 

$

258,946

 

$

252,521

 

$

252,660

 

$

268,017

 

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, 2019

June 30, 2018

 

June 30, 2019

March 31, 2019

December 31,
2018

September 30,
2018

June 30, 2018

 

 

(dollars in thousands)

Interest income

 

 

 

 

 

 

 

 

 

Loans

 

$

372,156

 

$

334,196

 

 

$

126,392

 

$

123,432

 

$

122,331

 

$

117,095

 

$

116,522

 

Investment securities

 

30,575

 

21,526

 

 

11,430

 

9,957

 

9,189

 

7,645

 

7,471

 

Federal funds sold and other

 

1,416

 

882

 

 

377

 

497

 

541

 

494

 

424

 

Total interest income

 

404,147

 

356,604

 

 

138,199

 

133,886

 

132,061

 

125,234

 

124,417

 

Interest expense

 

 

 

 

 

 

 

 

 

Deposits

 

79,507

 

40,116

 

 

28,615

 

27,098

 

23,794

 

19,996

 

16,460

 

FHLB advances and other borrowings

 

6,464

 

6,941

 

 

2,538

 

1,923

 

2,003

 

1,907

 

1,963

 

Subordinated debentures and subordinated notes payable

 

4,177

 

3,699

 

 

1,417

 

1,390

 

1,370

 

1,341

 

1,322

 

Total interest expense

 

90,148

 

50,756

 

 

32,570

 

30,411

 

27,167

 

23,244

 

19,745

 

Net interest income

 

313,999

 

305,848

 

 

105,629

 

103,475

 

104,894

 

101,990

 

104,672

 

Provision for loan and lease losses

 

38,965

 

12,972

 

 

26,077

 

7,673

 

5,215

 

5,015

 

3,515

 

Net interest income after provision for loan and lease losses

 

275,034

 

292,876

 

 

79,552

 

95,802

 

99,679

 

96,975

 

101,157

 

Noninterest income

 

 

 

 

 

 

 

 

 

Service charges and other fees

 

32,219

 

37,879

 

 

10,321

 

10,209

 

11,689

 

13,198

 

12,655

 

Wealth management fees

 

6,592

 

6,761

 

 

2,234

 

2,117

 

2,241

 

2,458

 

2,242

 

Mortgage banking income, net

 

3,366

 

4,178

 

 

1,055

 

991

 

1,320

 

1,664

 

1,352

 

Net (loss) gain on sale of securities

 

(191

)

6

 

 

322

 

 

(513

)

 

15

 

Net increase (decrease) in fair value of loans at fair value

 

49,662

 

(30,872

)

 

16,429

 

14,018

 

19,216

 

(14,534

)

(7,370

)

Net realized and unrealized (loss) gain on derivatives

 

(50,252

)

29,602

 

 

(20,904

)

(11,032

)

(18,317

)

14,994

 

8,093

 

Other

 

4,313

 

6,801

 

 

1,309

 

1,920

 

1,084

 

1,475

 

1,952

 

Total noninterest income

 

45,709

 

54,355

 

 

10,766

 

18,223

 

16,720

 

19,255

 

18,939

 

Noninterest expense

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

103,206

 

101,661

 

 

33,899

 

34,537

 

34,770

 

33,691

 

35,122

 

Data processing and communication

 

17,475

 

23,251

 

 

6,234

 

5,964

 

5,278

 

6,554

 

7,177

 

Occupancy and equipment

 

15,599

 

15,112

 

 

4,934

 

5,539

 

5,126

 

5,219

 

4,974

 

Professional fees

 

11,181

 

12,564

 

 

3,923

 

3,970

 

3,288

 

5,326

 

4,297

 

Advertising

 

3,299

 

3,441

 

 

1,145

 

1,216

 

938

 

1,066

 

1,260

 

Net loss on repossessed property and other related expenses

 

4,062

 

1,519

 

 

595

 

404

 

3,063

 

2,850

 

305

 

Other

 

14,864

 

14,327

 

 

5,270

 

4,950

 

4,643

 

4,844

 

4,728

 

Total noninterest expense

 

169,686

 

171,875

 

 

56,000

 

56,580

 

57,106

 

59,550

 

57,863

 

Income before income taxes

 

151,057

 

175,356

 

 

34,318

 

57,445

 

59,293

 

56,680

 

62,233

 

Provision for income taxes

 

33,977

 

59,720

 

 

7,535

 

12,934

 

13,507

 

14,399

 

16,359

 

Net income

 

$

117,080

 

$

115,636

 

 

$

26,783

 

$

44,511

 

$

45,786

 

$

42,281

 

$

45,874

 

GREAT WESTERN BANCORP, INC.

 

 

 

 

 

 

 

 

 

 

Summarized Consolidated Balance Sheet (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

 

June 30, 2019

 

March 31, 2019

 

December 31,
2018

 

September 30,
2018

 

June 30, 2018

 

 

(dollars in thousands)

Assets

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

225,356

 

 

$

282,638

 

 

$

276,760

 

 

$

298,696

 

 

$

294,614

 

Investment securities

 

1,799,430

 

 

1,763,305

 

 

1,531,916

 

 

1,385,650

 

 

1,372,711

 

Total loans

 

9,886,971

 

 

9,770,911

 

 

9,767,476

 

 

9,415,924

 

 

9,379,819

 

Allowance for loan and lease losses

 

(76,546

)

 

(68,003

)

 

(66,193

)

 

(64,540

)

 

(64,688

)

Loans, net

 

9,810,425

 

 

9,702,908

 

 

9,701,283

 

 

9,351,384

 

 

9,315,131

 

Goodwill

 

739,023

 

 

739,023

 

 

739,023

 

 

739,023

 

 

739,023

 

Other assets

 

380,662

 

 

342,288

 

 

324,659

 

 

342,055

 

 

287,569

 

Total assets

 

$

12,954,896

 

 

$

12,830,162

 

 

$

12,573,641

 

 

$

12,116,808

 

 

$

12,009,048

 

Liabilities and stockholders' equity

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

$

1,936,986

 

 

$

1,824,507

 

 

$

1,879,883

 

 

$

1,842,704

 

 

$

1,793,293

 

Interest-bearing deposits

 

8,298,958

 

 

8,643,876

 

 

8,233,364

 

 

7,890,795

 

 

7,792,025

 

Total deposits

 

10,235,944

 

 

10,468,383

 

 

10,113,247

 

 

9,733,499

 

 

9,585,318

 

Securities sold under agreements to repurchase

 

56,925

 

 

62,537

 

 

56,649

 

 

90,907

 

 

105,478

 

FHLB advances and other borrowings

 

605,000

 

 

275,000

 

 

410,000

 

 

275,000

 

 

335,000

 

Other liabilities

 

175,899

 

 

171,848

 

 

181,737

 

 

176,851

 

 

166,511

 

Total liabilities

 

11,073,768

 

 

10,977,768

 

 

10,761,633

 

 

10,276,257

 

 

10,192,307

 

Stockholders' equity

 

1,881,128

 

 

1,852,394

 

 

1,812,008

 

 

1,840,551

 

 

1,816,741

 

Total liabilities and stockholders' equity

 

$

12,954,896

 

 

$

12,830,162

 

 

$

12,573,641

 

 

$

12,116,808

 

 

$

12,009,048

 

GREAT WESTERN BANCORP, INC.

 

 

 

 

 

 

 

 

 

 

 

 

Loan Portfolio Summary (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

Fiscal year-to-date:

 

 

June 30, 2019

 

March 31, 2019

 

December 31,
2018

 

September 30,
2018

 

Change
($)

 

Change
(%)

 

 

(dollars in thousands)

Construction and development

 

$

626,671

 

 

$

607,757

 

 

$

579,941

 

 

$

637,693

 

 

$

(11,022

)

 

(1.7

)%

Owner-occupied CRE

 

1,375,235

 

 

1,366,844

 

 

1,359,979

 

 

1,334,480

 

 

40,755

 

 

3.1

%

Non-owner-occupied CRE

 

2,784,030

 

 

2,681,686

 

 

2,577,158

 

 

2,347,237

 

 

436,793

 

 

18.6

%

Multifamily residential real estate

 

413,806

 

 

393,505

 

 

393,223

 

 

309,920

 

 

103,886

 

 

33.5

%

Commercial real estate

 

5,199,742

 

 

5,049,792

 

 

4,910,301

 

 

4,629,330

 

 

570,412

 

 

12.3

%

Agriculture

 

2,049,395

 

 

2,121,872

 

 

2,234,735

 

 

2,182,688

 

 

(133,293

)

 

(6.1

)%

Commercial non-real estate

 

1,747,501

 

 

1,721,095

 

 

1,713,760

 

 

1,699,987

 

 

47,514

 

 

2.8

%

Residential real estate

 

816,751

 

 

815,212

 

 

845,262

 

 

837,569

 

 

(20,818

)

 

(2.5

)%

Consumer

 

53,277

 

 

44,504

 

 

47,704

 

 

49,689

 

 

3,588

 

 

7.2

%

Other ¹

 

48,406

 

 

46,163

 

 

44,130

 

 

46,487

 

 

1,919

 

 

4.1

%

Total unpaid principal balance

 

9,915,072

 

 

9,798,638

 

 

9,795,892

 

 

9,445,750

 

 

469,322

 

 

5.0

%

Less: Unamortized discount on acquired loans and unearned net deferred fees and costs and loans in process

 

(28,101

)

 

(27,727

)

 

(28,416

)

 

(29,826

)

 

1,725

 

 

(5.8

)%

Total loans

 

$

9,886,971

 

 

$

9,770,911

 

 

$

9,767,476

 

 

$

9,415,924

 

 

$

471,047

 

 

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

 

 

June 30, 2019

 

March 31, 2019

 

June 30, 2018

 

 

Average
Balance

Interest
(FTE)

Yield /
Cost¹

 

Average
Balance

Interest
(FTE)

Yield /
Cost¹

 

Average
Balance

Interest
(FTE)

Yield /
Cost¹

 

 

(dollars in thousands)

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing bank deposits

 

$

51,640

 

$

377

 

2.93

%

 

$

63,546

 

$

497

 

3.17

%

 

$

90,868

 

$

424

 

1.87

%

Investment securities

 

1,807,747

 

11,430

 

2.54

%

 

1,603,038

 

9,957

 

2.52

%

 

1,357,808

 

7,471

 

2.21

%

Non-ASC 310-30 loans, net ²

 

9,699,433

 

125,522

 

5.19

%

 

9,615,096

 

122,970

 

5.19

%

 

9,220,931

 

114,489

 

4.98

%

ASC 310-30 loans, net

 

58,701

 

2,294

 

15.67

%

 

63,879

 

1,904

 

12.09

%

 

78,471

 

3,762

 

19.23

%

Loans, net

 

9,758,134

 

127,816

 

5.25

%

 

9,678,975

 

124,874

 

5.23

%

 

9,299,402

 

118,251

 

5.10

%

Total interest-earning assets

 

11,617,521

 

139,623

 

4.82

%

 

11,345,559

 

135,328

 

4.84

%

 

10,748,078

 

126,146

 

4.71

%

Noninterest-earning assets

 

1,213,087

 

 

 

 

1,186,286

 

 

 

 

1,152,724

 

 

 

Total assets

 

$

12,830,608

 

$

139,623

 

4.36

%

 

$

12,531,845

 

$

135,328

 

4.38

%

 

$

11,900,802

 

$

126,146

 

4.25

%

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

$

1,875,649

 

 

 

 

$

1,800,307

 

 

 

 

$

1,793,784

 

 

 

Interest-bearing deposits

 

6,391,396

 

$

18,493

 

1.16

%

 

6,363,730

 

$

17,865

 

1.14

%

 

6,101,679

 

$

11,705

 

0.77

%

Time deposits

 

2,091,603

 

10,122

 

1.94

%

 

2,039,208

 

9,233

 

1.84

%

 

1,578,253

 

4,755

 

1.21

%

Total deposits

 

10,358,648

 

28,615

 

1.11

%

 

10,203,245

 

27,098

 

1.08

%

 

9,473,716

 

16,460

 

0.70

%

Securities sold under agreements to repurchase

 

60,551

 

41

 

0.27

%

 

63,237

 

43

 

0.28

%

 

99,897

 

80

 

0.32

%

FHLB advances and other borrowings

 

361,736

 

2,497

 

2.77

%

 

264,347

 

1,880

 

2.88

%

 

357,102

 

1,883

 

2.11

%

Subordinated debentures and subordinated notes payable

 

108,584

 

1,417

 

5.23

%

 

108,522

 

1,390

 

5.19

%

 

108,398

 

1,322

 

4.89

%

Total borrowings

 

530,871

 

3,955

 

2.99

%

 

436,106

 

3,313

 

3.08

%

 

565,397

 

3,285

 

2.33

%

Total interest-bearing liabilities

 

10,889,519

 

$

32,570

 

1.20

%

 

10,639,351

 

$

30,411

 

1.16

%

 

10,039,113

 

$

19,745

 

0.79

%

Noninterest-bearing liabilities

 

76,957

 

 

 

 

69,554

 

 

 

 

65,623

 

 

 

Stockholders' equity

 

1,864,132

 

 

 

 

1,822,940

 

 

 

 

1,796,066

 

 

 

Total liabilities and stockholders' equity

 

$

12,830,608

 

 

 

 

$

12,531,845

 

 

 

 

$

11,900,802

 

 

 

Net interest spread

 

 

 

3.16

%

 

 

 

3.22

%

 

 

 

3.46

%

Net interest income and net interest margin (FTE)

 

 

$

107,053

 

3.70

%

 

 

$

104,917

 

3.75

%

 

 

$

106,401

 

3.97

%

Less: Tax equivalent adjustment

 

 

1,424

 

 

 

 

1,442

 

 

 

 

1,729

 

 

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

 

 

$

105,629

 

3.65

%

 

 

$

103,475

 

3.70

%

 

 

$

104,672

 

3.91

%

1 Annualized for all partial-year periods.

2 Interest income includes $0.3 million and $0.9 million for the third quarter of fiscal years 2019 and 2018, respectively, resulting from accretion of purchase accounting discount associated with acquired loans.

GREAT WESTERN BANCORP, INC.

 

 

 

 

 

 

Net Interest Margin (FTE) (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

June 30, 2019

 

June 30, 2018

 

 

Average
Balance

Interest
(FTE)

Yield /
Cost ¹

 

Average
Balance

Interest
(FTE)

Yield /
Cost ¹

 

 

(dollars in thousands)

Assets

 

 

 

 

 

 

 

 

Interest-bearing bank deposits

 

$

68,989

 

$

1,416

 

2.74

%

 

$

71,915

 

$

882

 

1.64

%

Investment securities

 

1,634,023

 

30,575

 

2.50

%

 

1,379,713

 

21,526

 

2.09

%

Non-ASC 310-30 loans, net ²

 

9,583,477

 

370,343

 

5.17

%

 

9,042,253

 

329,416

 

4.87

%

ASC 310-30 loans, net

 

63,471

 

6,169

 

12.99

%

 

83,539

 

9,690

 

15.51

%

Loans, net

 

9,646,948

 

376,512

 

5.22

%

 

9,125,792

 

339,106

 

4.97

%

Total interest-earning assets

 

11,349,960

 

408,503

 

4.81

%

 

10,577,420

 

361,514

 

4.57

%

Noninterest-earning assets

 

1,195,398

 

 

 

 

1,161,618

 

 

 

Total assets

 

$

12,545,358

 

$

408,503

 

4.35

%

 

$

11,739,038

 

$

361,514

 

4.12

%

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

$

1,846,467

 

 

 

 

$

1,808,110

 

 

 

Interest-bearing deposits

 

6,301,910

 

$

52,094

 

1.11

%

 

5,972,877

 

$

29,486

 

0.66

%

Time deposits

 

2,022,702

 

27,413

 

1.81

%

 

1,386,921

 

10,630

 

1.02

%

Total deposits

 

10,171,079

 

79,507

 

1.05

%

 

9,167,908

 

40,116

 

0.59

%

Securities sold under agreements to repurchase

 

67,879

 

140

 

0.28

%

 

110,959

 

259

 

0.31

%

FHLB advances and other borrowings

 

289,526

 

6,324

 

2.92

%

 

509,822

 

6,682

 

1.75

%

Subordinated debentures and subordinated notes payable

 

108,530

 

4,177

 

5.15

%

 

108,357

 

3,699

 

4.56

%

Total borrowings

 

465,935

 

10,641

 

3.05

%

 

729,138

 

10,640

 

1.95

%

Total interest-bearing liabilities

 

10,637,014

 

$

90,148

 

1.13

%

 

9,897,046

 

$

50,756

 

0.69

%

Noninterest-bearing liabilities

 

73,636

 

 

 

 

66,225

 

 

 

Stockholders' equity

 

1,834,708

 

 

 

 

1,775,767

 

 

 

Total liabilities and stockholders' equity

 

$

12,545,358

 

 

 

 

$

11,739,038

 

 

 

Net interest spread

 

 

 

3.22

%

 

 

 

3.43

%

Net interest income and net interest margin (FTE) ¹

 

 

$

318,355

 

3.75

%

 

 

$

310,758

 

3.93

%

Less: Tax equivalent adjustment

 

 

4,356

 

 

 

 

4,910

 

 

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

 

 

$

313,999

 

3.70

%

 

 

$

305,848

 

3.87

%

1 Annualized for all partial-year periods.

2 Interest income includes $1.0 million and $2.1 million for the first nine months of fiscal years 2019 and 2018, respectively, resulting from accretion of purchase accounting discount associated with acquired loans.

Non-GAAP Financial Measures and Reconciliation

We rely on certain non-GAAP financial measures in making financial and operational decisions about our business. We believe that each of the non-GAAP financial 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 common 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 financial 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, 2019

June 30, 2018

 

June 30, 2019

March 31, 2019

December 31,
2018

September 30,
2018

June 30, 2018

 

 

(dollars in thousands except share and per share amounts)

Adjusted net income and adjusted earnings per common share:

 

 

 

 

 

 

 

 

 

Net income - GAAP

 

$

117,080

 

$

115,636

 

 

$

26,783

 

$

44,511

 

$

45,786

 

$

42,281

 

$

45,874

 

Add: Deferred taxes revaluation due to Tax Reform Act

 

 

13,586

 

 

 

 

 

 

 

Adjusted net income

 

$

117,080

 

$

129,222

 

 

$

26,783

 

$

44,511

 

$

45,786

 

$

42,281

 

$

45,874

 

 

 

 

 

 

 

 

 

 

 

Weighted average diluted common shares outstanding

 

57,408,023

 

59,134,635

 

 

57,110,103

 

57,074,674

 

58,039,292

 

59,122,699

 

59,170,058

 

Earnings per common share - diluted

 

$

2.04

 

$

1.96

 

 

$

0.47

 

$

0.78

 

$

0.79

 

$

0.72

 

$

0.78

 

Adjusted earnings per common share - diluted

 

$

2.04

 

$

2.19

 

 

$

0.47

 

$

0.78

 

$

0.79

 

$

0.72

 

$

0.78

 

 

 

 

 

 

 

 

 

 

 

Tangible net income and return on average tangible common equity:

 

 

 

 

 

 

 

 

 

Net income - GAAP

 

$

117,080

 

$

115,636

 

 

$

26,783

 

$

44,511

 

$

45,786

 

$

42,281

 

$

45,874

 

Add: Amortization of intangible assets, net of tax

 

1,022

 

1,117

 

 

335

 

343

 

344

 

343

 

366

 

Tangible net income

 

$

118,102

 

$

116,753

 

 

$

27,118

 

$

44,854

 

$

46,130

 

$

42,624

 

$

46,240

 

 

 

 

 

 

 

 

 

 

 

Average common equity

 

$

1,834,708

 

$

1,775,767

 

 

$

1,864,132

 

$

1,822,940

 

$

1,817,052

 

$

1,825,312

 

$

1,796,066

 

Less: Average goodwill and other intangible assets

 

746,110

 

747,718

 

 

745,718

 

746,107

 

746,503

 

746,900

 

747,294

 

Average tangible common equity

 

$

1,088,598

 

$

1,028,049

 

 

$

1,118,414

 

$

1,076,833

 

$

1,070,549

 

$

1,078,412

 

$

1,048,772

 

 

 

 

 

 

 

 

 

 

 

Return on average common equity *

 

8.5

%

8.7

%

 

5.8

%

9.9

%

10.0

%

9.2

%

10.2

%

Return on average tangible common equity **

 

14.5

%

15.2

%

 

9.7

%

16.9

%

17.1

%

15.7

%

17.7

%

* 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

 

$

313,999

 

$

305,848

 

 

$

105,629

 

$

103,475

 

$

104,894

 

$

101,990

 

$

104,672

 

Add: Tax equivalent adjustment

 

4,356

 

4,910

 

 

1,424

 

1,442

 

1,490

 

1,687

 

1,729

 

Net interest income (FTE)

 

318,355

 

310,758

 

 

107,053

 

104,917

 

106,384

 

103,677

 

106,401

 

Add: Current realized derivative gain (loss)

 

746

 

(4,946

)

 

321

 

405

 

21

 

(419

)

(830

)

Adjusted net interest income (FTE)

 

$

319,101

 

$

305,812

 

 

$

107,374

 

$

105,322

 

$

106,405

 

$

103,258

 

$

105,571

 

 

 

 

 

 

 

 

 

 

 

Average interest-earning assets

 

$

11,349,960

 

$

10,577,420

 

 

$

11,617,521

 

$

11,345,559

 

$

11,086,800

 

$

10,857,168

 

$

10,748,078

 

Net interest margin (FTE) *

 

3.75

%

3.93

%

 

3.70

%

3.75

%

3.81

%

3.79

%

3.97

%

Adjusted net interest margin (FTE) **

 

3.76

%

3.87

%

 

3.71

%

3.76

%

3.81

%

3.77

%

3.94

%

* 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.