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Press Release

Great Western Bancorp, Inc. Announces Earnings of $43.3 Million for First Quarter Fiscal Year 2020 and Dividends of $0.30 Per Share

Company Release - 1/28/2020 7:02 AM ET

Highlights for the First Quarter of Fiscal Year 2020 (all quarterly comparisons in this document refer to the fourth quarter of fiscal year 2019, except as noted)

  • Net income was $43.3 million, or $0.77 per diluted share, compared to $50.3 million, or $0.89 per diluted share
  • Net interest margin decreased 2 basis points to 3.68% while adjusted net interest margin1, 2 decreased 4 basis points to 3.65%
  • Expense control remained strong with an efficiency ratio1 of 46.2%
  • Total loans were $9.63 billion, a decline of $80.5 million, or 0.8%
  • Total deposits were $10.09 billion, a decrease of $211.8 million, or 2.1%
  • Net charge-offs recognized were 0.25% of average total loans on an annualized basis, down from 0.31% of average total loans on an annualized basis, while other key asset quality metrics including nonaccrual loans, watch loans, substandard loans and other repossessed property deteriorated during the quarter due to downgrades on a small number of agriculture and agriculture-related exposures
  • 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 $43.3 million, or $0.77 per diluted share, for the first quarter of fiscal year 2020, compared to net income of $50.3 million, or $0.89 per diluted share, for the fourth quarter of fiscal year 2019.

"We are pleased with the start to our 2020 fiscal year with good earnings underpinned by us managing the cost of our deposits and expenses well," said Ken Karels, Chairperson of the Board, President and Chief Executive Officer. "While we have seen substandard loan balances increase through the quarter due to the migration of a small number of individual exposures, we feel comfortable with our strategies of working with customers to rehabilitate or exit many of these relationships."

Net Interest Income and Net Interest Margin2

Net interest income was $106.7 million, a decrease of $1.5 million, or 1.4%. The decrease was due to lower loan interest income as a result of a decrease in average loans outstanding, combined with a $2.0 million net reversal of interest income on loans moved to nonaccrual during the quarter, partially offset by a 20 basis point decrease in the cost of deposits.

Net interest margin was 3.68% and 3.70% for the quarters ended December 31, 2019 and September 30, 2019, respectively. Adjusted net interest margin1, which adjusts for the realized gain (loss) on interest rate swaps, was 3.65% and 3.69%, respectively, for the same periods. The lower margins were primarily driven by the yield on loans, which included a 7 basis point reduction in net interest margin due to the net reversal of interest income noted above, partially offset by a 20 basis point decrease in the cost of deposits to 0.86%.

Total loans outstanding were $9.63 billion as of December 31, 2019, a decrease of $80.5 million, or 0.8%. The decline in loans during the quarter was mainly attributable to the commercial non-real estate segment of the portfolio, which decreased by $43.5 million, or 2.5%, due to disbursement transaction timing within our mortgage warehouse lending, a reduction in the agriculture segment of $28.0 million, or 1.4%, primarily due to the workout of a small number of large relationships and a decrease of $7.7 million, or 0.2%, in CRE impacted by a number of loans refinancing with other institutions due to lower rates.

Total deposits were $10.09 billion as of December 31, 2019, a decrease of $211.8 million, or 2.1%, due to a reduction in the use of brokered deposits offset by increases in both consumer and business deposits. Interest-bearing deposits were $8.06 billion, a 3.4% decrease, and noninterest-bearing deposits were $2.03 billion, a 3.8% increase. FHLB and other borrowings increased by $235.0 million, or 69.1%, due to favorable rates making them a more cost-effective source of funding.

Provision for Loan and Lease Losses and Asset Quality

Provision for loan and lease losses was $8.1 million, an increase of $6.1 million. Net charge-offs were $6.1 million, or 0.25% 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. The ratio of allowance for loan and lease losses ("ALLL") to total loans increased to 0.76% as of December 31, 2019 from 0.73% as of September 30, 2019.

————————————————————————————————————————————————————

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.

Included within total loans are approximately $772.2 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 $6.2 million of the fair value adjustment for these loans relates to credit risk, or 0.06% of total loans. Finally, total purchase discount remaining on all acquired loans equates to 0.12% of total loans.

Nonaccrual loans were $156.1 million as of December 31, 2019, representing an increase of $48.9 million, or 45.6%, related primarily to a small number of agriculture loans identified as we continue to work through the higher risk credits. Loans graded "Watch" increased $10.7 million, or 2.6%, to $416.3 million, and loans graded "Substandard" increased $167.6 million, or 35.5%, to $640.1 million. The increase in loans graded "Substandard" was primarily due to downgrades in the agriculture and agriculture-related commercial non-real estate segments, with a small number of downgrades in the commercial non-real estate segment. Total other repossessed property balances were $39.5 million as of December 31, 2019, an increase of $2.7 million, or 7.4%.

Total credit-related charges for the current quarter increased compared to the previous quarter and the comparable quarter of fiscal year 2019. A summary of total credit-related charges incurred during the current, previous and comparable quarters is presented below:

GREAT WESTERN BANCORP, INC.

 

 

 

Summary of Credit-Related Charges (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended:

 

 

 

 

December 31,

 

September 30,

 

December 31,

Item

 

Included within F/S Line Item(s):

 

2019

 

2019

 

2018

 

 

(dollars in thousands)

Provision for loan and lease losses

Provision for loan and lease losses

$

8,103

$

1,982

 

$

5,215

 

Net other repossessed property charges

Net loss on repossessed property and other related expenses

 

342

 

305

 

 

3,063

 

Net reversal (recovery) of interest income on nonaccrual loans

Interest income on loans

 

2,006

 

(157

)

 

(41

)

Loan fair value adjustment related to credit

Net increase in fair value of loans at fair value

 

2,134

 

2,085

 

 

1,184

 

Total

 

$

12,585

$

4,215

 

$

9,421

 

Noninterest Income

Noninterest income was $15.7 million, an increase of $0.7 million, or 4.7%. The increase was primarily due to an increase of $0.6 million, or 27.6%, in wealth management fees as a result of the purchase and assumption of management of trust assets in Colorado during 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 negligible change over the prior quarter.

Noninterest Expense

Total noninterest expense was $56.9 million, an increase of $1.7 million, or 3.1%. The majority of the increase was due to a $2.8 million increase in salaries and employee benefits, driven primarily by items related to fiscal year-end including vesting of share-based awards, incentive compensation and related payroll taxes as well as an increase in recruiting expense. In addition, data processing and communication expense decreased $0.8 million, or 12.6%, due to higher annual licensing and marketing campaign communication costs in the prior quarter.

The efficiency ratio1 was 46.2%, an increase from 44.5%, mainly due to due to the net reversal of interest income and higher salaries and employee benefits discussed previously.

Provision for Income Taxes

The provision for income taxes for the quarter ended December 31, 2019 was $12.6 million, reflecting an effective tax rate of 22.5%, compared to an effective tax rate of 22.1% in the prior quarter.

Capital

Tier 1 and total capital ratios were 12.0% and 13.0%, respectively, as of December 31, 2019, compared to 11.7% and 12.7% as of September 30, 2019. The common equity tier 1 capital ratio and tier 1 leverage ratio were 11.3% and 10.4%, respectively, as of December 31, 2019 compared to 11.0% and 10.1% as of September 30, 2019. All regulatory capital ratios remain above regulatory minimums to be considered "well capitalized."

On January 28, 2020, the Company’s Board of Directors declared a dividend of $0.30 per common share payable on February 26, 2020 to stockholders of record as of close of business on February 12, 2020. The aggregate dividend payment will be approximately $16.9 million.

Business Outlook

"We expect loan growth to be modest for the remainder of the fiscal year as we work through some of our substandard loan balances and our emphasis on sound loan underwriting standards," added Karels. "We have begun to see improvements in operating performance of our dairy segment that continue to support our strategy with the portfolio."

Conference Call

Great Western Bancorp, Inc. will host a conference call to discuss its financial results for the first quarter of fiscal year 2020 on Thursday, January 28, 2020 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 February 11, 2020. To access the replay, dial (877) 344-7529 (U.S.) and use conference ID 10137768. 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 Tuesday, February 4, 2020. The meeting will commence at 9:00 a.m. Mountain Time, at The Phoenician, 6000 E. Camelback Road, Scottsdale, Arizona. The record date for determination of stockholders entitled to notice of, and to vote at, the Annual Stockholder Meeting was December 9, 2019.

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, strategies for managing troubled loans, 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 and for the three months ended:

 

December 31,

September 30,

June 30,

March 31,

December 31,

2019

2019

2019

2019

2018

 

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

Operating Data:

 

 

 

 

 

Interest income (FTE)

$

133,060

 

$

140,257

 

$

139,623

 

$

135,328

 

$

133,551

 

Interest expense

26,364

 

32,061

 

32,570

 

30,411

 

27,167

 

Noninterest income

15,733

 

15,023

 

10,766

 

18,223

 

16,720

 

Noninterest expense

56,930

 

55,212

 

56,000

 

56,580

 

57,106

 

Provision for loan and lease losses

8,103

 

1,982

 

26,077

 

7,673

 

5,215

 

Net income

43,274

 

50,285

 

26,783

 

44,511

 

45,786

 

Common shares outstanding

56,382,915

 

56,283,659

 

56,939,032

 

56,938,435

 

56,938,435

 

Weighted average diluted common shares outstanding

56,457,967

 

56,804,172

 

57,110,103

 

57,074,674

 

58,039,292

 

Earnings per common share - diluted

$

0.77

 

$

0.89

 

$

0.47

 

$

0.78

 

$

0.79

 

Performance Ratios:

 

 

 

 

 

Net interest margin (FTE) ¹ ²

3.68

%

3.70

%

3.70

%

3.75

%

3.81

%

Adjusted net interest margin (FTE) ¹ ²

3.65

%

3.69

%

3.71

%

3.76

%

3.81

%

Return on average total assets ²

1.34

%

1.55

%

0.84

%

1.44

%

1.48

%

Return on average common equity ²

9.0

%

10.6

%

5.8

%

9.9

%

10.0

%

Return on average tangible common equity ¹ ²

15.0

%

17.6

%

9.7

%

16.9

%

17.1

%

Efficiency ratio ¹

46.2

%

44.5

%

47.2

%

45.6

%

46.1

%

Capital:

 

 

 

 

 

Tier 1 capital ratio

12.0

%

11.7

%

11.3

%

11.4

%

11.1

%

Total capital ratio

13.0

%

12.7

%

12.4

%

12.4

%

12.1

%

Tier 1 leverage ratio

10.4

%

10.1

%

10.0

%

10.2

%

10.1

%

Common equity tier 1 ratio

11.3

%

11.0

%

10.6

%

10.7

%

10.4

%

Tangible common equity / tangible assets ¹

9.7

%

9.6

%

9.3

%

9.2

%

9.0

%

Book value per share - GAAP

$

34.06

 

$

33.76

 

$

33.04

 

$

32.53

 

$

31.82

 

Tangible book value per share ¹

$

20.77

 

$

20.52

 

$

19.94

 

$

19.43

 

$

18.72

 

Asset Quality:

 

 

 

 

 

Nonaccrual loans

$

156,113

 

$

107,191

 

$

118,060

 

$

121,616

 

$

138,944

 

Other repossessed property

$

39,490

 

$

36,764

 

$

36,393

 

$

32,450

 

$

22,224

 

Nonaccrual loans / total loans

1.62

%

1.10

%

1.19

%

1.24

%

1.42

%

Net charge-offs (recoveries)

$

6,096

 

$

7,754

 

$

17,534

 

$

5,863

 

$

3,562

 

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

0.25

%

0.31

%

0.72

%

0.25

%

0.15

%

Allowance for loan and lease losses / total loans

0.76

%

0.73

%

0.77

%

0.70

%

0.68

%

Watch-rated loans

$

416,259

 

$

405,549

 

$

220,883

 

$

301,099

 

$

321,593

 

Substandard loans

$

640,121

 

$

472,497

 

$

475,999

 

$

258,946

 

$

252,521

 

 

 

 

 

 

 

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 and for the three months ended:

 

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

December 31,

2019

 

2019

 

2019

 

2019

 

2018

 

 

(dollars in thousands)

Interest income

 

 

  

 

 

 

 

 

  

 

Loans

 

$

119,431

 

 

$

126,779

 

 

$

126,392

 

 

$

123,432

 

 

$

122,331

 

Investment securities

 

 

11,498

 

 

 

10,935

 

 

 

11,430

 

 

 

9,957

 

 

 

9,189

 

Federal funds sold and other

 

 

608

 

 

 

1,056

 

 

 

377

 

 

 

497

 

 

 

541

 

Total interest income

 

 

131,537

 

 

 

138,770

 

 

 

138,199

 

 

 

133,886

 

 

 

132,061

 

Interest expense

 

 

  

 

 

 

 

 

  

 

Deposits

 

 

21,940

 

 

 

27,211

 

 

 

28,615

 

 

 

27,098

 

 

 

23,794

 

FHLB advances and other borrowings

 

 

3,113

 

 

 

3,487

 

 

 

2,538

 

 

 

1,923

 

 

 

2,003

 

Subordinated debentures and subordinated notes payable

 

 

1,311

 

 

 

1,363

 

 

 

1,417

 

 

 

1,390

 

 

 

1,370

 

Total interest expense

 

 

26,364

 

 

 

32,061

 

 

 

32,570

 

 

 

30,411

 

 

 

27,167

 

Net interest income

 

 

105,173

 

 

 

106,709

 

 

 

105,629

 

 

 

103,475

 

 

 

104,894

 

Provision for loan and lease losses

 

 

8,103

 

 

 

1,982

 

 

 

26,077

 

 

 

7,673

 

 

 

5,215

 

Net interest income after provision for loan and lease losses

 

 

97,070

 

 

 

104,727

 

 

 

79,552

 

 

 

95,802

 

 

 

99,679

 

Noninterest income

 

 

  

 

 

 

 

 

  

 

Service charges and other fees

 

 

11,409

 

 

 

11,674

 

 

 

10,321

 

 

 

10,209

 

 

 

11,689

 

Wealth management fees

 

 

2,964

 

 

 

2,322

 

 

 

2,234

 

 

 

2,117

 

 

 

2,241

 

Mortgage banking income, net

 

 

1,612

 

 

 

1,482

 

 

 

1,055

 

 

 

991

 

 

 

1,320

 

Net gain (loss) on sale of securities

 

  

 

13

 

 

 

322

 

 

  

 

(513

)

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

 

 

(14,933

)

 

 

11,749

 

 

 

16,429

 

 

 

14,018

 

 

 

19,216

 

Net realized and unrealized gain (loss) on derivatives

 

 

13,516

 

 

 

(13,191

)

 

 

(20,904

)

 

 

(11,032

)

 

 

(18,317

)

Other

 

 

1,165

 

 

 

974

 

 

 

1,309

 

 

 

1,920

 

 

 

1,084

 

Total noninterest income

 

 

15,733

 

 

 

15,023

 

 

 

10,766

 

 

 

18,223

 

 

 

16,720

 

Noninterest expense

 

 

  

 

 

 

 

 

  

 

Salaries and employee benefits

 

 

35,905

 

 

 

33,099

 

 

 

33,899

 

 

 

34,537

 

 

 

34,770

 

Data processing and communication

 

 

5,773

 

 

 

6,602

 

 

 

6,234

 

 

 

5,964

 

 

 

5,278

 

Occupancy and equipment

 

 

5,093

 

 

 

5,185

 

 

 

4,934

 

 

 

5,539

 

 

 

5,126

 

Professional fees

 

 

3,764

 

 

 

3,398

 

 

 

3,923

 

 

 

3,970

 

 

 

3,288

 

Advertising

 

 

865

 

 

 

1,194

 

 

 

1,145

 

 

 

1,216

 

 

 

938

 

Net loss on repossessed property and other related expenses

 

 

342

 

 

 

305

 

 

 

595

 

 

 

404

 

 

 

3,063

 

Other

 

 

5,188

 

 

 

5,429

 

 

 

5,270

 

 

 

4,950

 

 

 

4,643

 

Total noninterest expense

 

 

56,930

 

 

 

55,212

 

 

 

56,000

 

 

 

56,580

 

 

 

57,106

 

Income before income taxes

 

 

55,873

 

 

 

64,538

 

 

 

34,318

 

 

 

57,445

 

 

 

59,293

 

Provision for income taxes

 

 

12,599

 

 

 

14,253

 

 

 

7,535

 

 

 

12,934

 

 

 

13,507

 

Net income

 

$

43,274

 

 

$

50,285

 

 

$

26,783

 

 

$

44,511

 

 

$

45,786

 

GREAT WESTERN BANCORP, INC.

 

 

 

 

 

 

 

 

 

 

Summarized Consolidated Balance Sheet (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

December 31,

2019

 

2019

 

2019

 

2019

 

2018

 

 

(dollars in thousands)

Assets

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

247,421

 

 

$

243,474

 

 

$

225,356

 

 

$

282,638

 

 

$

276,760

 

Investment securities

 

 

1,904,291

 

 

 

1,783,208

 

 

 

1,799,430

 

 

 

1,763,305

 

 

 

1,531,916

 

Total loans

 

 

9,626,224

 

 

 

9,706,763

 

 

 

9,886,971

 

 

 

9,770,911

 

 

 

9,767,476

 

Allowance for loan and lease losses

 

 

(72,781

)

 

 

(70,774

)

 

 

(76,546

)

 

 

(68,003

)

 

 

(66,193

)

Loans, net

 

 

9,553,443

 

 

 

9,635,989

 

 

 

9,810,425

 

 

 

9,702,908

 

 

 

9,701,283

 

Goodwill

 

 

740,562

 

 

 

739,023

 

 

 

739,023

 

 

 

739,023

 

 

 

739,023

 

Other assets

 

 

399,803

 

 

 

386,607

 

 

 

380,662

 

 

 

342,288

 

 

 

324,659

 

Total assets

 

$

12,845,520

 

 

$

12,788,301

 

 

$

12,954,896

 

 

$

12,830,162

 

 

$

12,573,641

 

Liabilities and stockholders' equity

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

$

2,029,872

 

 

$

1,956,025

 

 

$

1,936,986

 

 

$

1,824,507

 

 

$

1,879,883

 

Interest-bearing deposits

 

 

8,058,656

 

 

 

8,344,314

 

 

 

8,298,958

 

 

 

8,643,876

 

 

 

8,233,364

 

Total deposits

 

 

10,088,528

 

 

 

10,300,339

 

 

 

10,235,944

 

 

 

10,468,383

 

 

 

10,113,247

 

Securities sold under agreements to repurchase

 

 

66,289

 

 

 

68,992

 

 

 

56,925

 

 

 

62,537

 

 

 

56,649

 

FHLB advances and other borrowings

 

 

575,000

 

 

 

340,000

 

 

 

605,000

 

 

 

275,000

 

 

 

410,000

 

Other liabilities

 

 

195,034

 

 

 

178,721

 

 

 

175,899

 

 

 

171,848

 

 

 

181,737

 

Total liabilities

 

 

10,924,851

 

 

 

10,888,052

 

 

 

11,073,768

 

 

 

10,977,768

 

 

 

10,761,633

 

Stockholders' equity

 

 

1,920,669

 

 

 

1,900,249

 

 

 

1,881,128

 

 

 

1,852,394

 

 

 

1,812,008

 

Total liabilities and stockholders' equity

 

$

12,845,520

 

 

$

12,788,301

 

 

$

12,954,896

 

 

$

12,830,162

 

 

$

12,573,641

 

GREAT WESTERN BANCORP, INC.

 

 

 

 

 

 

 

 

Loan Portfolio Summary (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

Fiscal year-to-date:

 

 

December 31,

 

September 30,

 

Change

 

Change

2019

 

2019

 

($)

 

(%)

 

 

(dollars in thousands)

Construction and development

 

$

496,156

 

 

$

463,757

 

 

$

32,399

 

 

7.0

 

%

Owner-occupied CRE

 

 

1,380,773

 

 

 

1,411,199

 

 

 

(30,426

)

 

(2.2

)

%

Non-owner-occupied CRE

 

 

2,827,484

 

 

 

2,853,131

 

 

 

(25,647

)

 

(0.9

)

%

Multifamily residential real estate

 

 

380,301

 

 

 

364,323

 

 

 

15,978

 

 

4.4

 

%

Commercial real estate

 

 

5,084,714

 

 

 

5,092,410

 

 

 

(7,696

)

 

(0.2

)

%

Agriculture

 

 

1,980,678

 

 

 

2,008,644

 

 

 

(27,966

)

 

(1.4

)

%

Commercial non-real estate

 

 

1,676,426

 

 

 

1,719,956

 

 

 

(43,530

)

 

(2.5

)

%

Residential real estate

 

 

811,735

 

 

 

812,208

 

 

 

(473

)

 

(0.1

)

%

Consumer

 

 

50,697

 

 

 

51,925

 

 

 

(1,228

)

 

(2.4

)

%

Other ¹

 

 

46,875

 

 

 

47,541

 

 

 

(666

)

 

(1.4

)

%

Total unpaid principal balance

 

 

9,651,125

 

 

 

9,732,684

 

 

 

(81,559

)

 

(0.8

)

%

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

 

 

(24,901

)

 

 

(25,921

)

 

 

1,020

 

 

(3.9

)

%

Total loans

 

$

9,626,224

 

 

$

9,706,763

 

 

$

(80,539

)

 

(0.8

)

%

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

 

December 31, 2019

 

September 30, 2019

 

December 31, 2018

 

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 ²

$

32,803

 

$

608

 

7.37

%

 

$

39,617

 

$

1,056

 

10.58

%

 

$

91,780

 

$

541

 

2.34

%

Investment securities

1,904,350

 

11,498

 

2.40

%

 

1,822,670

 

10,935

 

2.38

%

 

1,491,285

 

9,189

 

2.44

%

Non-ASC 310-30 loans, net ³

9,554,161

 

119,232

 

4.96

%

 

9,693,395

 

126,410

 

5.17

%

 

9,435,901

 

121,851

 

5.12

%

ASC 310-30 loans, net

52,296

 

1,722

 

13.10

%

 

54,141

 

1,856

 

13.60

%

 

67,834

 

1,970

 

11.52

%

Loans, net

9,606,457

 

120,954

 

5.01

%

 

9,747,536

 

128,266

 

5.22

%

 

9,503,735

 

123,821

 

5.17

%

Total interest-earning assets

11,543,610

 

133,060

 

4.59

%

 

11,609,823

 

140,257

 

4.79

%

 

11,086,800

 

133,551

 

4.78

%

Noninterest-earning assets

1,267,983

 

 

 

 

1,238,412

 

 

 

 

1,186,821

 

 

 

Total assets

$

12,811,593

 

$

133,060

 

4.13

%

 

$

12,848,235

 

$

140,257

 

4.33

%

 

$

12,273,621

 

$

133,551

 

4.32

%

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

$

1,977,084

 

 

 

 

$

1,903,177

 

 

 

 

$

1,865,295

 

 

 

Interest-bearing deposits

6,306,861

 

$

13,373

 

0.84

%

 

6,241,782

 

$

17,211

 

1.09

%

 

6,148,755

 

$

15,736

 

1.02

%

Time deposits

1,847,954

 

8,567

 

1.84

%

 

2,054,370

 

10,000

 

1.93

%

 

1,937,295

 

8,058

 

1.65

%

Total deposits

10,131,899

 

21,940

 

0.86

%

 

10,199,329

 

27,211

 

1.06

%

 

9,951,345

 

23,794

 

0.95

%

Securities sold under agreements to repurchase

66,527

 

31

 

0.19

%

 

62,302

 

40

 

0.25

%

 

79,849

 

57

 

0.28

%

FHLB advances and other borrowings

497,034

 

3,082

 

2.47

%

 

512,924

 

3,447

 

2.67

%

 

242,495

 

1,946

 

3.18

%

Subordinated debentures and subordinated notes payable

108,663

 

1,311

 

4.80

%

 

108,622

 

1,363

 

4.98

%

 

108,483

 

1,370

 

5.01

%

Total borrowings

672,224

 

4,424

 

2.62

%

 

683,848

 

4,850

 

2.81

%

 

430,827

 

3,373

 

3.11

%

Total interest-bearing liabilities

10,804,123

 

$

26,364

 

0.97

%

 

10,883,177

 

$

32,061

 

1.17

%

 

10,382,172

 

$

27,167

 

1.04

%

Noninterest-bearing liabilities

98,951

 

 

 

 

79,273

 

 

 

 

74,397

 

 

 

Stockholders' equity

1,908,519

 

 

 

 

1,885,785

 

 

 

 

1,817,052

 

 

 

Total liabilities and stockholders' equity

$

12,811,593

 

 

 

 

$

12,848,235

 

 

 

 

$

12,273,621

 

 

 

Net interest spread

 

 

3.16

%

 

 

 

3.16

%

 

 

 

3.28

%

Net interest income and net interest margin (FTE)

 

$

106,696

 

3.68

%

 

 

$

108,196

 

3.70

%

 

 

$

106,384

 

3.81

%

Less: Tax equivalent adjustment

 

1,523

 

 

 

 

1,487

 

 

 

 

1,490

 

 

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

 

$

105,173

 

3.62

%

 

 

$

106,709

 

3.65

%

 

 

$

104,894

 

3.75

%

1 Annualized for all partial-year periods.

2 Interest income includes $0.4 million and $0.0 million for the first quarter of fiscal years 2020 and 2019, respectively, resulting from interest earned on derivative collateral included in other assets on the consolidated balance sheets.

3 Interest income includes $0.6 million and $0.4 million for the first quarter of fiscal years 2020 and 2019, 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 tangible net income and return on average tangible common equity. 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 based on our cash payments and receipts during the applicable period.

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 and for the three months ended:

 

December 31,

September 30,

June 30,

March 31,

December 31,

2019

2019

2019

2019

2018

 

(dollars in thousands except share and per share amounts)

Tangible net income and return on average tangible common equity:

 

 

 

 

 

Net income - GAAP

$

43,274

 

$

50,285

 

$

26,783

 

$

44,511

 

$

45,786

 

Add: Amortization of intangible assets, net of tax

377

 

315

 

335

 

343

 

344

 

Tangible net income

$

43,651

 

$

50,600

 

$

27,118

 

$

44,854

 

$

46,130

 

 

 

 

 

 

 

Average common equity

$

1,908,519

 

$

1,885,785

 

$

1,864,132

 

$

1,822,940

 

$

1,817,052

 

Less: Average goodwill and other intangible assets

748,146

 

745,349

 

745,718

 

746,107

 

746,503

 

Average tangible common equity

$

1,160,373

 

$

1,140,436

 

$

1,118,414

 

$

1,076,833

 

$

1,070,549

 

 

 

 

 

 

 

Return on average common equity *

9.0

%

10.6

%

5.8

%

9.9

%

10.0

%

Return on average tangible common equity **

15.0

%

17.6

%

9.7

%

16.9

%

17.1

%

* 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

$

105,173

 

$

106,709

 

$

105,629

 

$

103,475

 

$

104,894

 

Add: Tax equivalent adjustment

1,523

 

1,487

 

1,424

 

1,442

 

1,490

 

Net interest income (FTE)

106,696

 

108,196

 

107,053

 

104,917

 

106,384

 

Add: Current realized derivative gain (loss)

(890)

 

(127)

 

321

 

405

 

21

 

Adjusted net interest income (FTE)

$

105,806

 

$

108,069

 

$

107,374

 

$

105,322

 

$

106,405

 

 

 

 

 

 

 

Average interest-earning assets

$

11,543,610

 

$

11,609,823

 

$

11,617,521

 

$

11,345,559

 

$

11,086,800

 

Net interest margin (FTE) *

3.68

%

3.70

%

3.70

%

3.75

%

3.81

%

Adjusted net interest margin (FTE) **

3.65

%

3.69

%

3.71

%

3.76

%

3.81

%

* 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

$

117,709

 

$

124,923

 

$

124,098

 

$

121,528

 

$

120,361

 

Add: Tax equivalent adjustment

1,523

 

1,487

 

1,424

 

1,442

 

1,490

 

Interest income (FTE)

119,232

 

126,410

 

125,522

 

122,970

 

121,851

 

Add: Current realized derivative gain (loss)

(890)

 

(127)

 

321

 

405

 

21

 

Adjusted interest income (FTE)

$

118,342

 

$

126,283

 

$

125,843

 

$

123,375

 

$

121,872

 

 

 

 

 

 

 

Average non-ASC 310-30 loans

$

9,554,161

 

$

9,693,395

 

$

9,699,433

 

$

9,615,096

 

$

9,435,901

 

Yield (FTE) *

4.96

%

5.17

%

5.19

%

5.19

%

5.12

%

Adjusted yield (FTE) **

4.93

%

5.17

%

5.20

%

5.20

%

5.12

%

* 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

$

120,906

 

$

121,732

 

$

116,395

 

$

121,698

 

$

121,614

 

Add: Tax equivalent adjustment

1,523

 

1,487

 

1,424

 

1,442

 

1,490

 

Total revenue (FTE)

$

122,429

 

$

123,219

 

$

117,819

 

$

123,140

 

$

123,104

 

 

 

 

 

 

 

Noninterest expense

$

56,930

 

$

55,212

 

$

56,000

 

$

56,580

 

$

57,106

 

Less: Amortization of intangible assets

427

 

366

 

385

 

394

 

394

 

Tangible noninterest expense

$

56,503

 

$

54,846

 

$

55,615

 

$

56,186

 

$

56,712

 

 

 

 

 

 

 

Efficiency ratio *

46.2

%

44.5

%

47.2

%

45.6

%

46.1

%

* 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

$

1,920,669

 

$

1,900,249

 

$

1,881,128

 

$

1,852,394

 

$

1,812,008

 

Less: Goodwill and other intangible assets

749,481

 

745,197

 

745,563

 

745,947

 

746,341

 

Tangible common equity

$

1,171,188

 

$

1,155,052

 

$

1,135,565

 

$

1,106,447

 

$

1,065,667

 

 

 

 

 

 

 

Total assets

$

12,845,520

 

$

12,788,301

 

$

12,954,896

 

$

12,830,162

 

$

12,573,641

 

Less: Goodwill and other intangible assets

749,481

 

745,197

 

745,563

 

745,947

 

746,341

 

Tangible assets

$

12,096,039

 

$

12,043,104

 

$

12,209,333

 

$

12,084,215

 

$

11,827,300

 

 

 

 

 

 

 

Tangible common equity to tangible assets

9.7

%

9.6

%

9.3

%

9.2

%

9.0

%

 

 

 

 

 

 

Tangible book value per share:

 

 

 

 

 

Total stockholders' equity

$

1,920,669

 

$

1,900,249

 

$

1,881,128

 

$

1,852,394

 

$

1,812,008

 

Less: Goodwill and other intangible assets

749,481

 

745,197

 

745,563

 

745,947

 

746,341

 

Tangible common equity

$

1,171,188

 

$

1,155,052

 

$

1,135,565

 

$

1,106,447

 

$

1,065,667

 

 

 

 

 

 

 

Common shares outstanding

56,382,915

 

56,283,659

 

56,939,032

 

56,938,435

 

56,938,435

 

Book value per share - GAAP

$

34.06

 

$

33.76

 

$

33.04

 

$

32.53

 

$

31.82

 

Tangible book value per share

$

20.77

 

$

20.52

 

$

19.94

 

$

19.43

 

$

18.72

 

 

GREAT WESTERN BANCORP, INC.

Media and Investor Relations Contacts:

Peter Chapman, 605.373.3198
peter.chapman@greatwesternbank.com

Seth Artz, 605.988.9523
seth.artz@greatwesternbank.com

Source: Great Western Bancorp, Inc.