Great Western Bancorp, Inc. Announces Earnings for Fourth Quarter & Full Fiscal Year 2020
Great Western Bancorp, Inc. (NYSE: GWB) today reported net income of $11.1 million, or $0.20 per diluted share, for the fourth quarter of fiscal year 2020, compared to net income of $5.4 million, or $0.10 per diluted share, for the third quarter of fiscal year 2020. Net loss for fiscal year 2020 was $680.8 million, or $12.24 per diluted share. Adjusted net income 2 which excludes the COVID-19 pandemic impact on goodwill, certain intangible assets and credit and other related charges, was $88.9 million, or $1.60 per diluted share, compared to net income of $167.4 million, or $2.92 per diluted share for fiscal year 2019.
"This quarter's results bring to a close what has been a challenging fiscal year," said Mark Borrecco, President and Chief Executive Officer. "Our underlying earnings were again offset with increased credit charges and costs from strategic actions to improve the position of the bank. This includes the closure of our Wichita LPO, a reduction of FTEs to align with current market conditions, payoff of $205.0 million in FHLB borrowings to right-size the balance sheet and improve future earnings, and a commitment to a new platform to support our small business initiative. Asset quality continues to be our primary focus resulting in higher frequency monitoring and proactive issue identification. We used a third party to complete a supplemental review of critical areas of the loan portfolio this quarter, confirming the risk ratings of our portfolio. As a result of the actions we have taken, including the dividend reductions, we saw an improvement of our capital ratios as we remain above well-capitalized regulatory limits."
"The COVID-19 pandemic is still running its course, and the uncertainty of its continued impact on the economy and on families and individuals is not something we are taking lightly. As we work through these difficult times, we continue to seek to make conservative decisions as we pivot and optimize our resources in this time of disruption. I continue to be proud of the contributions made by our employees as we maintain our focus on serving our customers and supporting our communities."
Impact and Response to COVID-19 Pandemic
Through this time of disruption we remain committed to keeping our employees safe and our bank running effectively to serve our customers. We have reopened all of our branches and are continuing shut down protocols according to CDC guidelines when we become aware of a possible close contact scenario, and a majority of our employees who can work outside of our offices are doing so. Social distancing, restrictions on in-person meetings and conferences, company travel restrictions and increased sanitary protocols all remain in place and are all intended to offer the best protection for our employees and customers and enhance our ability to provide our banking services. We are supporting our employees with paid time off, work from home flexibility and paid time for volunteering. Finally, we supported the Paycheck Protection Program, having provided $727.3 million in loans to over 4,800 customers, improved engagement with customers in impacted segments, and remained committed to working with customers for solutions as we transition through loan deferral expirations and new requests.
Net Interest Income and Net Interest Margin 1
Net interest income was $107.5 million for the quarter, a decrease of $0.3 million, or 0.3%, from the prior quarter. Interest income was lower by $3.0 million as a result of decreases in loan interest of $1.8 million and securities interest of $1.2 million, primarily as a result of repricing in a lower rate environment. The decrease in interest income was offset with a $2.7 million reduction in interest expense as a result of a $2.2 million decrease in deposit interest due to lower rates on interest-bearing deposits combined with time deposit runoff, and a $0.5 million decrease in interest as a result of a reduction in higher interest borrowings.
Net interest margin was 3.51% for the quarter, a decrease of 6 basis points from the prior quarter. Adjusted net interest margin 2, which adjusts for the realized gain (loss) on interest rate swaps, was 3.40% for the quarter, a decrease of 7 basis points from the prior quarter. Net interest margin declined a net 16 basis points as yields on the securities and loan portfolios decreased 27 and 12 basis points, respectively, due to renewing volumes impacted by a lower repricing environment, combined with a benefit from PPP loan income and lower nonaccrual interest reversals. Offsetting that impact was a 7 basis point lift from a 24% decrease in deposit yields by 9 basis points from lower offering rates and improved mix. In addition, there was a 2 basis point lift from reduced borrowings, including the nominal yield impact resulting from the payoff of $205 million in higher interest FHLB borrowings offset with a reduction in securities and cash late in the quarter.
Noninterest Income
Noninterest income items resulted in a $4.0 million loss for the quarter, compared to a loss of $11.7 million for the prior quarter. Service charges and other fee income increased $1.7 million with a rebound in transaction activity, mortgage banking income increased $1.4 million on stronger origination demand, and wealth management revenue remained flat compared to the prior quarter.
As part of the reduction in higher interest FHLB borrowings, a $7.6 million prepayment charge was recognized in other noninterest expense, which was offset with a sale in investment securities which resulted in a $7.9 million realized gain.
Noninterest income items related to loans carried at fair value this quarter include an $8.0 million charge for a classified loan sold in September, $4.3 million charge for credit risk and swap break fees for a loan moved to substandard, and a $12.5 million charge for credit risk on the remaining fair value portfolio based on updated default risk assumptions. In addition, the interest rate cost on total swap derivatives for the quarter was $3.5 million, compared to $3.0 million for the prior quarter.
Noninterest Expense
Total noninterest expense was $74.9 million for the quarter, an increase of $7.9 million from the prior quarter. This quarter included a $7.6 million expense related to the early payment of FHLB borrowings, $2.0 million expense related to the completion of the FDIC loss-sharing agreement, which ended June 4, 2020, and net credit related charges of $3.4 million related to OREO and unfunded commitment reserves, along with approximately $1.8 million in severances, closure costs for the Wichita LPO and consulting costs.
The efficiency ratio1 was 72.1% for the quarter, compared to 69.4% for the prior quarter.
Provision for Loan and Lease Losses and Asset Quality
The ALLL to total loans increased to 1.49% as of September 30, 2020 from 1.44% as of June 30, 2020, an increase of 5 basis points from the prior quarter. Excluding PPP loans the ratio was 1.60%. Provision for loan and lease losses was $16.9 million, a decrease of $4.8 million, with the quarterly provision related to increased specific reserves on a number of loans moved to substandard in the quarter. Net charge-offs were $15.1 million, or 0.59% of average total loans (annualized) for the quarter, up $5.7 million and 22 basis points from the prior quarter, respectively. Charge-offs were related to a dairy facility, a health care facility and various other loans charged off in the quarter.
Included within total loans are approximately $655.2 million of loans with maturities greater than 5 years that use derivatives to manage a fixed rate structure for the customer and for which management has elected the fair value accounting option. These loans are excluded from the ALLL process, but management has estimated that approximately $30.5 million of the fair value adjustment for these loans relates to credit risk, or 0.30% of total loans. In addition, total purchase discount remaining on all acquired loans equates to 0.08% of total loans.
Loans graded "Substandard" or worse were $769.5 million for the quarter, an increase of $66.7 million from the prior quarter. The increase was primarily due to the downgrade of a dairy relationship, a number of hotel loans and various other commercial and agriculture loans that deteriorated in the quarter, partially offset with the sale of a health care facility loan in September. Nonaccrual loans were $324.9 million for the quarter, or 3.22% of total loans, an increase of $50.5 million from the prior quarter, or 2.66% of total loans. The increase was largely due to one dairy relationship. Watch loans were $982.8 million for the quarter, an increase of $505.7 million. The increase was primarily a result of $230.0 million in hotels & resorts, $109.0 million in healthcare and $75.0 million in other CRE relationships moving to Watch, reflecting the current operating environment. The Watch category will be retired for the December 2020 quarter and replaced with the Special Mention category to better align to peers. Total other repossessed property balances were $20.0 million for the quarter, an increase of $0.8 million from the prior quarter.
Beginning with the third fiscal quarter of 2020, we ceased separating credit-related charges between those related or unrelated to the COVID-19 pandemic as it has become more difficult to attribute losses caused or not caused by the pandemic as it continues. A summary of total credit-related charges incurred during the current and comparable twelve month periods and current, previous and comparable quarters is presented below:
GREAT WESTERN BANCORP, INC.
Summary of Credit-Related Charges (Unaudited)
For the twelve months ended:
For the three months ended:
Item
Included within F/S Line Item(s):
September 30,
2020
September 30,
2019
September 30,
2020
June 30,
2020
September 30,
2019
(dollars in thousands)
Charges unrelated to COVID-19 pandemic
Provision for loan and lease losses
Provision for loan and lease losses
$
58,680
$
40,947
$
16,853
$
21,641
$
1,982
Net other repossessed property charges
Net loss on repossessed property and other related expenses
9,544
4,367
4,350
2,475
305
Net reversal (recovery) of interest income on nonaccrual loans
Interest income on loans
4,894
312
730
1,070
(157)
Increase (decrease) in unfunded commitment reserve
Other noninterest expense
1,495
—
(920)
2,215
—
Net credit loss on derivatives
Net realized and unrealized loss on derivatives
2,952
—
1,243
1,709
—
Loan fair value adjustment related to credit
Net decrease in fair value of loans at fair value
52,256
7,664
23,407
23,292
2,085
Subtotal charges unrelated to COVID-19 pandemic
$
129,821
$
53,290
$
45,663
$
52,402
$
4,215
Charges related to COVID-19 pandemic
Provision for loan and lease losses
Provision for loan and lease losses
$
59,712
$
—
$
—
$
—
$
—
Net other repossessed property charges
Net loss on repossessed property and other related expenses
3,314
—
—
—
—
Net reversal (recovery) of interest income on nonaccrual loans
Interest income on loans
—
—
—
—
—
Increase (decrease) in unfunded commitment reserve
Other noninterest expense
444
—
—
—
—
Net credit loss on derivatives
Net realized and unrealized loss on derivatives
—
—
—
—
—
Loan fair value adjustment related to credit
Net decrease in fair value of loans at fair value
7,100
—
—
—
—
Subtotal charges related to COVID-19 pandemic
70,570
—
—
—
—
Total credit-related charges
$
200,391
$
53,290
$
45,663
$
52,402
$
4,215
We continue to evaluate the impact of COVID-19 on our loan portfolio. Industries such as hotels & resorts, restaurants, oil & energy, retail malls, airlines and healthcare have experienced significant revenue loss due to COVID-19. Within our portfolio we have identified the following segments with elevated risk: hotels & resorts with $1.21 billion, or 12.0% of total loans, restaurants with $156.5 million, or 1.6% of total loans, arts and entertainment with $130.3 million, or 1.3% of total loans, senior care with $330.7 million, or 3.3% of total loans, and skilled nursing with $250.9 million, or 2.5% of total loans, for a total exposure of $2.07 billion, or 20.7% of total loans. Loan exposure in such other identified industries is either immaterial or has not shown general distress thus far. Loan deferrals related to COVID-19 relief have declined from 17.7% of loans excluding PPP in the prior quarter to 2.0% this quarter. At this time it is difficult to determine ultimate impact upon our portfolio, but we are of the view the credit-related adjustments reflect the best estimate of incurred losses in our portfolio as of September 30, 2020.
Loans and Deposits
Total loans outstanding were $10.08 billion as of September 30, 2020, a decrease of $0.24 billion from the prior quarter. The decrease in loans during the quarter was mainly attributable to the agriculture segment of the portfolio, which decreased $0.09 billion, the CRE segment, which decreased $0.08 billion, and the commercial non-real estate segment, which decreased $0.05 billion. The decline in the loan balances was driven by the exit of a large commercial non-real estate facility, progress in deleveraging of agriculture and commercial problem loans in workout, an acceleration of paydowns in commercial and consumer HELOC balances and a decrease in new volume originations due to softer demand.
Total deposits were $11.01 billion as of September 30, 2020, a decrease of $0.14 billion from the prior quarter, due to a continued decrease in time deposits by $0.10 billion and a decrease of $0.09 billion for brokered funds and public deposits, offset with a net increase in checking and savings balances of $0.05 billion.
Capital
Tier 1 and total capital ratios were 11.8% and 13.3%, respectively, as of September 30, 2020, compared to 11.3% and 12.9% as of June 30, 2020. The common equity tier 1 capital ratio and tier 1 leverage ratio were 11.0% and 9.4%, respectively, as of September 30, 2020, compared to 10.6% and 9.3% as of June 30, 2020. All regulatory capital ratios remain above regulatory minimums to be considered "well capitalized" and above internal thresholds, which are in excess of regulatory minimums.
On October 28, 2020, the Company's Board of Directors declared a dividend of $0.01 per common share payable on November 27, 2020 to stockholders of record as of close of business on November 12, 2020. The aggregate dividend payment will be approximately $0.6 million.
Provision for Income Taxes
The benefit from income taxes for the quarter ended September 30, 2020 was $0.9 million, compared to a provision for income taxes of $0.5 million for the prior quarter, reflecting an adjustment to the expected tax liability due to lower taxable income realized in the fiscal year.
Conference Call
Great Western Bancorp, Inc. will host a conference call to discuss its financial results for the fourth quarter of fiscal year 2020 on Wednesday, October 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 November 11, 2020. To access the replay, dial (877) 344-7529 (U.S.) and use conference ID 10149074 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, strategies for managing troubled loans, the impact on the business arising from the COVID-19 pandemic 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, Form 10-Q for the quarters ended June 30, 2020, March 31, 2020 and December 31, 2019 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 twelve months ended:
At and for the three months ended:
September 30,
2020
September 30,
2019
September 30,
2020
June 30,
2020
March 31,
2020
December 31,
2019
September 30,
2019
(dollars in thousands, except share and per share amounts)
Operating Data:
Interest income (FTE)
$
499,718
$
548,760
$
118,429
$
121,472
$
126,757
$
133,060
$
140,257
Interest expense
74,147
122,209
10,903
13,620
23,260
26,364
32,061
Noninterest income
17
60,732
(3,950)
(11,683)
(83)
15,733
15,023
Noninterest expense
1,007,368
224,898
74,936
67,049
808,453
56,930
55,212
Provision for loan and lease losses
118,392
40,947
16,853
21,641
71,795
8,103
1,982
Net income
(680,808)
167,365
11,136
5,400
(740,618)
43,274
50,285
Adjusted net income ¹
$
88,890
$
167,365
$
11,136
$
5,400
$
29,080
$
43,274
$
50,285
Common shares outstanding
55,014,189
56,283,659
55,014,189
55,014,047
55,013,928
56,382,915
56,283,659
Weighted average diluted common shares outstanding
55,612,251
57,257,061
55,164,548
55,145,619
55,906,002
56,457,967
56,804,172
Earnings per common share - diluted
$
(12.24)
$
2.92
$
0.20
$
0.10
$
(13.25)
$
0.77
$
0.89
Adjusted earnings per common share - diluted ¹
$
1.60
$
2.92
$
0.20
$
0.10
$
0.52
$
0.77
$
0.89
Performance Ratios:
Net interest margin (FTE) ¹ ²
3.59
%
3.74
%
3.51
%
3.57
%
3.59
%
3.68
%
3.70
%
Adjusted net interest margin (FTE) ¹ ²
3.51
%
3.74
%
3.40
%
3.47
%
3.55
%
3.65
%
3.69
%
Return on average total assets ²
(5.32)
%
1.33
%
0.35
%
0.17
%
(23.16)
%
1.34
%
1.55
%
Return on average common equity ²
(44.2)
%
9.1
%
3.8
%
1.9
%
(155.3)
%
9.0
%
10.6
%
Return on average tangible common equity ¹ ²
2.9
%
15.3
%
3.9
%
2.0
%
(9.3)
%
15.0
%
17.6
%
Efficiency ratio ¹
61.9
%
45.8
%
72.1
%
69.4
%
63.5
%
46.2
%
44.5
%
Capital:
Tier 1 capital ratio
11.8
%
11.7
%
11.8
%
11.3
%
11.3
%
12.0
%
11.7
%
Total capital ratio
13.3
%
12.7
%
13.3
%
12.9
%
12.9
%
13.0
%
12.7
%
Tier 1 leverage ratio
9.4
%
10.1
%
9.4
%
9.3
%
9.2
%
10.4
%
10.1
%
Common equity tier 1 ratio
11.0
%
11.0
%
11.0
%
10.6
%
10.6
%
11.3
%
11.0
%
Tangible common equity / tangible assets ¹
9.2
%
9.6
%
9.2
%
8.9
%
9.3
%
9.7
%
9.6
%
Book value per share - GAAP
$
21.14
$
33.76
$
21.14
$
21.10
$
20.97
$
34.06
$
33.76
Tangible book value per share ¹
$
21.03
$
20.52
$
21.03
$
20.98
$
20.84
$
20.77
$
20.52
Asset Quality:
Nonaccrual loans
$
324,946
$
107,191
$
324,946
$
274,475
$
213,075
$
156,113
$
107,191
Other repossessed property
$
20,034
$
36,764
$
20,034
$
19,231
$
27,289
$
39,490
$
36,764
Nonaccrual loans / total loans
3.22
%
1.10
%
3.22
%
2.66
%
2.20
%
1.62
%
1.10
%
Net charge-offs (recoveries)
$
39,279
$
34,713
$
15,124
$
9,433
$
8,626
$
6,096
$
7,754
Net charge-offs (recoveries) / average total loans ²
0.40
%
0.36
%
0.59
%
0.37
%
0.36
%
0.25
%
0.31
%
Allowance for loan and lease losses / total loans
1.49
%
0.73
%
1.49
%
1.44
%
1.40
%
0.76
%
0.73
%
Watch-rated loans
$
982,841
$
405,549
$
982,841
$
477,128
$
420,252
$
416,259
$
405,549
Substandard or worse loans
$
769,515
$
478,717
$
769,515
$
702,795
$
629,327
$
640,501
$
478,717
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 twelve months ended:
At and for the three months ended:
September 30,
2020
September 30,
2019
September 30,
2020
June 30,
2020
March 31,
2020
December 31,
2019
September 30,
2019
(dollars in thousands)
Interest income
Loans
$
449,536
$
498,935
$
107,522
$
109,227
$
113,356
$
119,431
$
126,779
Investment securities
42,653
41,510
9,294
10,532
11,329
11,498
10,935
Federal funds sold and other
1,383
2,472
105
112
558
608
1,056
Total interest income
493,572
542,917
116,921
119,871
125,243
131,537
138,770
Interest expense
Deposits
58,603
106,718
7,785
10,011
18,867
21,940
27,211
FHLB advances and other borrowings
11,028
9,951
2,221
2,539
3,155
3,113
3,487
Subordinated debentures and subordinated notes payable
4,516
5,540
897
1,070
1,238
1,311
1,363
Total interest expense
74,147
122,209
10,903
13,620
23,260
26,364
32,061
Net interest income
419,425
420,708
106,018
106,251
101,983
105,173
106,709
Provision for loan and lease losses
118,392
40,947
16,853
21,641
71,795
8,103
1,982
Net interest income after provision for loan and lease losses
301,033
379,761
89,165
84,610
30,188
97,070
104,727
Noninterest income
Service charges and other fees
37,741
43,893
9,413
7,731
9,188
11,409
11,674
Wealth management fees
11,772
8,914
2,913
2,773
3,122
2,964
2,322
Mortgage banking income, net
8,959
4,848
3,780
2,422
1,145
1,612
1,482
Net gain (loss) on sale of securities
7,890
(178)
7,890
—
—
—
13
Net (decrease) increase in fair value of loans at fair value
(32,529)
61,412
(31,019)
(22,118)
35,541
(14,933)
11,749
Net realized and unrealized (loss) gain on derivatives
(38,439)
(63,444)
1,940
(3,681)
(50,214)
13,516
(13,191)
Other
4,623
5,287
1,133
1,190
1,135
1,165
974
Total noninterest income (loss)
17
60,732
(3,950)
(11,683)
(83)
15,733
15,023
Noninterest expense
Salaries and employee benefits
149,441
136,305
37,182
39,042
37,312
35,905
33,099
Data processing and communication
24,455
24,077
6,742
5,817
6,123
5,773
6,602
Occupancy and equipment
21,273
20,784
5,332
5,251
5,597
5,093
5,185
Professional fees
21,961
14,579
5,552
7,382
5,263
3,764
3,398
Advertising
3,396
4,493
823
750
958
865
1,194
Net loss on repossessed property and other related expenses
12,858
4,367
4,350
2,475
5,691
342
305
Goodwill and intangible assets impairment
742,352
—
—
—
742,352
—
—
Other
31,632
20,293
14,955
6,332
5,157
5,188
5,429
Total noninterest expense
1,007,368
224,898
74,936
67,049
808,453
56,930
55,212
(Loss) income before income taxes
(706,318)
215,595
10,279
5,878
(778,348)
55,873
64,538
(Benefit from) provision for income taxes
(25,510)
48,230
(857)
478
(37,730)
12,599
14,253
Net (loss) income
$
(680,808)
$
167,365
$
11,136
$
5,400
$
(740,618)
$
43,274
$
50,285
GREAT WESTERN BANCORP, INC.
Summarized Consolidated Balance Sheet (Unaudited)
As of
September 30,
2020
June 30,
2020
March 31,
2020
December 31,
2019
September 30,
2019
(dollars in thousands)
Assets
Cash and cash equivalents
$
432,887
$
311,585
$
347,486
$
247,421
$
243,474
Investment securities
1,774,626
1,972,626
1,990,027
1,904,291
1,783,208
Total loans
10,076,142
10,313,999
9,693,295
9,626,224
9,706,763
Allowance for loan and lease losses
(149,887)
(148,158)
(135,950)
(72,781)
(70,774)
Loans, net
9,926,255
10,165,841
9,557,345
9,553,443
9,635,989
Goodwill
—
—
—
740,562
739,023
Other assets
470,671
484,276
492,950
405,948
386,607
Total assets
$
12,604,439
$
12,934,328
$
12,387,808
$
12,851,665
$
12,788,301
Liabilities and stockholders' equity
Noninterest-bearing deposits
$
2,586,743
$
2,592,376
$
1,973,629
$
2,029,872
$
1,956,025
Interest-bearing deposits
8,422,036
8,558,238
8,205,486
8,058,656
8,344,314
Total deposits
11,008,779
11,150,614
10,179,115
10,088,528
10,300,339
Securities sold under agreements to repurchase
65,506
70,362
64,809
66,289
68,992
FHLB advances and other borrowings
195,000
355,000
800,000
575,000
340,000
Other liabilities
172,221
197,708
190,420
201,179
178,721
Total liabilities
11,441,506
11,773,684
11,234,344
10,930,996
10,888,052
Stockholders' equity
1,162,933
1,160,644
1,153,464
1,920,669
1,900,249
Total liabilities and stockholders' equity
$
12,604,439
$
12,934,328
$
12,387,808
$
12,851,665
$
12,788,301
GREAT WESTERN BANCORP, INC.
Loan Portfolio Summary (Unaudited)
As of
Fiscal year-to-date:
September 30,
2020
June 30,
2020
March 31,
2020
December 31,
2019
September 30,
2019
Change
($)
Change
(%)
(dollars in thousands)
Construction and development
$
415,440
$
407,024
$
434,264
$
496,156
$
463,757
$
(48,317)
(10.4)
%
Owner-occupied CRE
1,411,894
1,436,615
1,414,476
1,380,773
1,411,199
695
—
%
Non-owner-occupied CRE
2,910,965
2,965,971
2,910,516
2,827,484
2,853,131
57,834
2.0
%
Multifamily residential real estate
536,642
545,883
463,563
380,301
364,323
172,319
47.3
%
Commercial real estate
5,274,941
5,355,493
5,222,819
5,084,714
5,092,410
182,531
3.6
%
Agriculture
1,724,350
1,815,121
1,881,792
1,980,678
2,008,644
(284,294)
(14.2)
%
Commercial non-real estate
2,181,656
2,226,759
1,699,197
1,676,426
1,719,956
461,700
26.8
%
Residential real estate
830,102
862,821
820,759
811,735
812,208
17,894
2.2
%
Consumer
63,206
61,452
52,640
50,697
51,925
11,281
21.7
%
Other ¹
37,347
34,713
39,908
46,875
47,541
(10,194)
(21.4)
%
Total unpaid principal balance
10,111,602
10,356,359
9,717,115
9,651,125
9,732,684
378,918
3.9
%
Less: Unamortized discount on acquired loans and unearned net deferred fees and costs and loans in process
(35,460)
(42,360)
(23,820)
(24,901)
(25,921)
(9,539)
36.8
%
Total loans
$
10,076,142
$
10,313,999
$
9,693,295
$
9,626,224
$
9,706,763
$
369,379
3.8
%
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
September 30, 2020
June 30, 2020
September 30, 2019
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
$
167,048
$
105
0.25
%
$
144,805
$
112
0.31
%
$
39,617
$
1,056
10.58
%
Investment securities
1,992,448
9,294
1.86
%
1,987,648
10,532
2.13
%
1,822,670
10,935
2.38
%
Non-ASC 310-30 loans, net ³
9,977,591
107,813
4.30
%
9,974,802
109,326
4.41
%
9,693,395
126,410
5.17
%
ASC 310-30 loans, net
47,006
1,217
10.30
%
49,250
1,502
12.27
%
54,141
1,856
13.60
%
Loans, net
10,024,597
109,030
4.33
%
10,024,052
110,828
4.45
%
9,747,536
128,266
5.22
%
Total interest-earning assets
12,184,093
118,429
3.87
%
12,156,505
121,472
4.02
%
11,609,823
140,257
4.79
%
Noninterest-earning assets
610,228
598,159
1,238,412
Total assets
$
12,794,321
$
118,429
3.68
%
$
12,754,664
$
121,472
3.83
%
$
12,848,235
$
140,257
4.33
%
Liabilities and Stockholders' Equity
Noninterest-bearing deposits
$
2,575,732
$
2,414,567
$
1,903,177
Interest-bearing deposits
7,079,302
$
4,534
0.25
%
6,974,915
$
5,604
0.32
%
6,241,782
$
17,211
1.09
%
Time deposits
1,371,589
3,251
0.94
%
1,430,246
4,407
1.24
%
2,054,370
10,000
1.93
%
Total deposits
11,026,623
7,785
0.28
%
10,819,728
10,011
0.37
%
10,199,329
27,211
1.06
%
Securities sold under agreements to repurchase
73,451
18
0.10
%
64,645
15
0.09
%
62,302
40
0.25
%
FHLB advances and other borrowings
315,641
2,203
2.78
%
500,248
2,524
2.03
%
512,924
3,447
2.67
%
Subordinated debentures and subordinated notes payable
108,812
897
3.28
%
108,766
1,070
3.96
%
108,622
1,363
4.98
%
Total borrowings
497,904
3,118
2.49
%
673,659
3,609
2.15
%
683,848
4,850
2.81
%
Total interest-bearing liabilities
11,524,527
$
10,903
0.38
%
11,493,387
$
13,620
0.48
%
10,883,177
$
32,061
1.17
%
Noninterest-bearing liabilities
94,798
97,553
79,273
Stockholders' equity
1,174,996
1,163,724
1,885,785
Total liabilities and stockholders' equity
$
12,794,321
$
12,754,664
$
12,848,235
Net interest spread
3.30
%
3.35
%
3.16
%
Net interest income and net interest margin (FTE)
$
107,526
3.51
%
$
107,852
3.57
%
$
108,196
3.70
%
Less: Tax equivalent adjustment
1,508
1,601
1,487
Net interest income and net interest margin - ties to Statements of Comprehensive Income
$
106,018
3.46
%
$
106,251
3.52
%
$
106,709
3.65
%
1 Annualized for all partial-year periods.
2 Interest income includes nominal and $0.7 million for the fourth 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 $0.2 million and $0.3 million for the fourth quarter of fiscal years 2020 and 2019, respectively, resulting from accretion of purchase accounting discount associated with acquired loans.
GREAT WESTERN BANCORP, INC.
Net Interest Margin (FTE) (Unaudited)
Twelve Months Ended
September 30, 2020
September 30, 2019
Average Balance
Interest (FTE)
Yield / Cost
Average Balance
Interest (FTE)
Yield / Cost
(dollars in thousands)
Assets
Interest-bearing bank deposits ¹
$
100,385
$
1,383
1.38
%
$
61,646
$
2,472
4.01
%
Investment securities
1,967,873
42,653
2.17
%
1,681,185
41,510
2.47
%
Non-ASC 310-30 loans, net ²
9,750,677
449,855
4.61
%
9,610,956
496,753
5.17
%
ASC 310-30 loans, net
49,731
5,827
11.72
%
61,139
8,025
13.13
%
Loans, net
9,800,408
455,682
4.65
%
9,672,095
504,778
5.22
%
Total interest-earning assets
11,868,666
499,718
4.21
%
11,414,926
548,760
4.81
%
Noninterest-earning assets
937,489
1,206,151
Total assets
$
12,806,155
$
499,718
3.90
%
$
12,621,077
$
548,760
4.35
%
Liabilities and Stockholders' Equity
Noninterest-bearing deposits
$
2,227,518
$
1,860,645
Interest-bearing deposits
6,708,650
$
35,594
0.53
%
6,286,878
$
69,305
1.10
%
Time deposits
1,584,191
23,009
1.45
%
2,030,619
37,413
1.84
%
Total deposits
10,520,359
58,603
0.56
%
10,178,142
106,718
1.05
%
Securities sold under agreements to repurchase
65,248
88
0.13
%
66,485
180
0.27
%
FHLB advances and other borrowings
473,689
10,940
2.31
%
345,375
9,771
2.83
%
Subordinated debentures and subordinated notes payable
108,739
4,516
4.15
%
108,553
5,540
5.10
%
Total borrowings
647,676
15,544
2.40
%
520,413
15,491
2.98
%
Total interest-bearing liabilities
11,168,035
$
74,147
0.66
%
10,698,555
$
122,209
1.14
%
Noninterest-bearing liabilities
96,806
75,045
Stockholders' equity
1,541,314
1,847,477
Total liabilities and stockholders' equity
$
12,806,155
$
12,621,077
Net interest spread
3.24
%
3.21
%
Net interest income and net interest margin (FTE)
$
425,571
3.59
%
$
426,551
3.74
%
Less: Tax equivalent adjustment
6,146
5,843
Net interest income and net interest margin - ties to Statements of Comprehensive Income
$
419,425
3.53
%
$
420,708
3.69
%
1 Interest income includes $0.9 million and $0.7 million for the fiscal years 2020 and 2019, respectively, resulting from interest earned on derivative collateral included in other assets on the consolidated balance sheets.
2 Interest income includes $1.4 million and $1.3 million for the 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 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 COVID-19 impact on credit and other related charges and the impairment of goodwill and certain intangible assets). 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 and for the twelve months ended:
At and for the three months ended:
September 30,
2020
September 30,
2019
September 30,
2020
June 30,
2020
March 31,
2020
December 31,
2019
September 30,
2019
(dollars in thousands except share and per share amounts)
Adjusted net income and adjusted earnings per common share:
Net (loss) income - GAAP
$
(680,808)
$
167,365
$
11,136
$
5,400
$
(740,618)
$
43,274
$
50,285
Add: COVID-19 related impairment of goodwill and certain intangible assets, net of tax
713,013
—
—
—
713,013
—
—
Add: COVID-19 impact on credit and other related charges, net of tax
56,685
—
—
—
56,685
—
—
Adjusted net income
$
88,890
$
167,365
$
11,136
$
5,400
$
29,080
$
43,274
$
50,285
Weighted average diluted common shares outstanding
55,612,251
57,257,061
55,164,548
55,145,619
55,906,002
56,457,967
56,804,172
Earnings per common share - diluted
$
(12.24)
$
2.92
$
0.20
$
0.10
$
(13.25)
$
0.77
$
0.89
Adjusted earnings per common share - diluted
$
1.60
$
2.92
$
0.20
$
0.10
$
0.52
$
0.77
$
0.89
Tangible net income and return on average tangible common equity:
Net (loss) income - GAAP
$
(680,808)
$
167,365
$
11,136
$
5,400
$
(740,618)
$
43,274
$
50,285
Add: Amortization of intangible assets and COVID-19 related impairment of goodwill and certain intangible assets, net of tax
714,339
1,337
261
261
713,440
377
315
Tangible net income
$
33,531
$
168,702
$
11,397
$
5,661
$
(27,178)
$
43,651
$
50,600
Average common equity
$
1,541,314
$
1,847,477
$
1,174,996
$
1,163,724
$
1,918,035
$
1,908,519
$
1,885,785
Less: Average goodwill and other intangible assets
375,549
745,920
6,265
6,527
741,257
748,146
745,349
Average tangible common equity
$
1,165,765
$
1,101,557
$
1,168,731
$
1,157,197
$
1,176,778
$
1,160,373
$
1,140,436
Return on average common equity *
(44.2)
%
9.1
%
3.8
%
1.9
%
(155.3)
%
9.0
%
10.6
%
Return on average tangible common equity **
2.9
%
15.3
%
3.9
%
2.0
%
(9.3)
%
15.0
%
17.6
%
* 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
$
419,425
$
420,708
$
106,018
$
106,251
$
101,983
$
105,173
$
106,709
Add: Tax equivalent adjustment
6,146
5,843
1,508
1,601
1,514
1,523
1,487
Net interest income (FTE)
425,571
426,551
107,526
107,852
103,497
106,696
108,196
Add: Current realized derivative gain (loss)
(8,721)
619
(3,541)
(3,040)
(1,250)
(890)
(127)
Adjusted net interest income (FTE)
$
416,850
$
427,170
$
103,985
$
104,812
$
102,247
$
105,806
$
108,069
Average interest-earning assets
$11,868,666
$11,414,926
$12,184,093
$12,156,505
$11,590,453
$11,543,610
$11,609,823
Net interest margin (FTE) *
3.59
%
3.74
%
3.51
%
3.57
%
3.59
%
3.68
%
3.70
%
Adjusted net interest margin (FTE) **
3.51
%
3.74
%
3.40
%
3.47
%
3.55
%
3.65
%
3.69
%
* 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
$
443,709
$
490,910
$
106,305
$
107,725
$
111,970
$
117,709
$
124,923
Add: Tax equivalent adjustment
6,146
5,843
1,508
1,601
1,514
1,523
1,487
Interest income (FTE)
449,855
496,753
107,813
109,326
113,484
119,232
126,410
Add: Current realized derivative gain (loss)
(8,721)
619
(3,541)
(3,040)
(1,250)
(890)
(127)
Adjusted interest income (FTE)
$
441,134
$
497,372
$
104,272
$
106,286
$
112,234
$
118,342
$
126,283
Average non-ASC 310-30 loans
$9,750,677
$9,610,956
$9,977,591
$9,974,802
$9,496,153
$9,554,161
$9,693,395
Yield (FTE) *
4.61
%
5.17
%
4.30
%
4.41
%
4.81
%
4.96
%
5.17
%
Adjusted yield (FTE) **
4.52
%
5.18
%
4.16
%
4.29
%
4.75
%
4.93
%
5.17
%
* 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
$
419,442
$
481,440
$
102,068
$
94,568
$
101,900
$
120,906
$
121,732
Add: Tax equivalent adjustment
6,146
5,843
1,508
1,601
1,514
1,523
1,487
Total revenue (FTE)
$
425,588
$
487,283
$
103,576
$
96,169
$
103,414
$
122,429
$
123,219
Noninterest expense
$
1,007,368
$
224,898
$
74,936
$
67,049
$
808,453
$
56,930
$
55,212
Less: Amortization of intangible assets and COVID-19 related impairment of goodwill and certain intangible assets
743,745
1,538
261
278
742,779
427
366
Tangible noninterest expense
$
263,623
$
223,360
$
74,675
$
66,771
$
65,674
$
56,503
$
54,846
Efficiency ratio *
61.9
%
45.8
%
72.1
%
69.4
%
63.5
%
46.2
%
44.5
%
* 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
$
1,162,933
$
1,900,249
$
1,162,933
$
1,160,644
$
1,153,464
$
1,920,669
$
1,900,249
Less: Goodwill and other intangible assets
6,164
745,197
6,164
6,425
6,703
749,481
745,197
Tangible common equity
$
1,156,769
$
1,155,052
$
1,156,769
$
1,154,219
$
1,146,761
$
1,171,188
$
1,155,052
Total assets
$
12,604,439
$
12,788,301
$
12,604,439
$
12,934,328
$
12,387,808
$
12,851,665
$
12,788,301
Less: Goodwill and other intangible assets
6,164
745,197
6,164
6,425
6,703
749,481
745,197
Tangible assets
$
12,598,275
$
12,043,104
$
12,598,275
$
12,927,903
$
12,381,105
$
12,102,184
$
12,043,104
Tangible common equity to tangible assets
9.2
%
9.6
%
9.2
%
8.9
%
9.3
%
9.7
%
9.6
%
Tangible book value per share:
Total stockholders' equity
$
1,162,933
$
1,900,249
$
1,162,933
$
1,160,644
$
1,153,464
$
1,920,669
$
1,900,249
Less: Goodwill and other intangible assets
6,164
745,197
6,164
6,425
6,703
749,481
745,197
Tangible common equity
$
1,156,769
$
1,155,052
$
1,156,769
$
1,154,219
$
1,146,761
$
1,171,188
$
1,155,052
Common shares outstanding
55,014,189
56,283,659
55,014,189
55,014,047
55,013,928
56,382,915
56,283,659
Book value per share - GAAP
$
21.14
$
33.76
$
21.14
$
21.10
$
20.97
$
34.06
$
33.76
Tangible book value per share
$
21.03
$
20.52
$
21.03
$
20.98
$
20.84
$
20.77
$
20.52
1 All references to net interest income and net interest margin are presented on a fully-tax equivalent basis unless otherwise noted.
2 This is a non-GAAP financial measure management believes is helpful to understanding trends in 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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20201028005334/en/