Great Western Bancorp, Inc. Announces Earnings for First Quarter Fiscal Year 2021

Highlights for the First Quarter of Fiscal Year 2021 (all quarterly comparisons in this document refer to the fourth quarter of fiscal year 2020, except as noted)

  • Net income of $41.3 million, or $0.75 per diluted share, up from $11.1 million, or $0.20 per diluted share
  • Net interest income1 of $109.5 million, up from $107.5 million, with net interest margin1 of 3.63%, up from 3.51%
  • Noninterest income of $14.1 million, up from a loss of $4.0 million
  • Noninterest expense of $57.4 million, down from $74.9 million
  • Average total loans of $9.57 billion, a decrease of $0.45 billion
    • Includes the sale of $208.8 million of loans secured by hotels, reducing the hotel (excluding casino hotels) portfolio size by 20.2%
  • Average deposits of $11.13 billion, an increase of $0.10 billion
  • Allowance for credit losses ("ACL") of $308.8 million of total loans, up $158.9 million
    • ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and subsequent related ASUs, ("CECL") adoption on October 1, 2020 resulted in a Day 1 increase of $177.3 million in the ACL and a cumulative effect adjustment decrease of $132.9 million (after-tax) to retained earnings.
  • Net charge-offs of $30.4 million, or 1.22% of average total loans (annualized), up from $15.1 million and 0.59%, respectively
    • Excluding the impact from the hotel loan portfolio sales, net charge-offs were $4.8 million, or 0.19% of average total loans (annualized)
  • Total capital ratio of 14.3%, up from 13.3%; tier 1 capital of 12.7%, up from 11.8%; common equity tier 1 capital of 12.0%, up from 11.0%
  • The Company's Board of Directors declared a quarterly dividend of $0.01 per share

SIOUX FALLS, S.D.--()--Great Western Bancorp, Inc. (NYSE: GWB) today reported net income of $41.3 million, or $0.75 per diluted share, for the first quarter of fiscal year 2021, compared to net income of $11.1 million, or $0.20 per diluted share, for the fourth quarter of fiscal year 2020.

"Our quarterly results reflect the meaningful progress in key areas over the past several months," said Mark Borrecco, President and Chief Executive Officer. "Our focus on credit risk management resulted in a 10.0% decrease in nonaccrual loans. We reduced our hotel (excluding casino hotels) portfolio by 20.2% through multiple sales at a 12.0% discount to loan value, and our deferrals tracked lower to 1.29% of loans excluding Paycheck Protection Program ("PPP") loans. Our adoption of CECL allowed us to build an ACL to total loans ratio of 3.50% (excluding PPP loans), and we managed funding and noninterest cost savings leading to $66.3 million of pre-tax pre-provision income2. Our conservative and measured actions helped further strengthen our total capital position to 14.3%."

"We have taken multiple steps to reshape our small business and treasury management functions, and I am excited that we saw progress this past quarter. While in the near term we will continue to focus on improving asset quality and de-risking the balance sheet, we are implementing initiatives to simplify processes and improve client experience."

Impact and Response to COVID-19 Pandemic

We remain focused on keeping our employees safe and our bank running effectively to serve our customers. We are managing branch access and occupancy levels in relation to cases and close contact scenarios, encouraging remote work and supporting our employees with paid time off and following CDC guidelines for those working in the office. For our customers, we are supporting PPP, having provided $727.3 million in loans to over 4,800 customers and now having processed $27.8 million of loans through the forgiveness pathway. We are prepared to provide additional PPP lending as part of the recently enacted Economic Aid to Hard Hit Small Businesses, Non-Profits, and Ventures Act.

Net Interest Income and Net Interest Margin1

Net interest income was $109.5 million for the quarter, an increase of $2.0 million, while net interest margin was 3.63%, a 12 basis point increase from 3.51%. Adjusted net interest income2 was $106.1 million, an increase of $2.1 million, and adjusted net interest margin2 was 3.52% for the quarter, an increase of 12 basis points from the prior quarter. Interest income was lower by $1.2 million as loan interest decreased slightly and securities interest decreased by $1.2 million. Loan interest reflects a decrease of $3.7 million from lower volumes and lower yields largely offset by a $3.6 million increase in net recovery of interest on nonaccrual loans. Securities interest decreased due to lower yields driven by the low interest rate environment. The decrease in interest income was offset by a $3.2 million decrease in interest expense driven by a $1.8 million decrease in deposit interest from increased noninterest bearing deposits and lower yields on interest-bearing deposits, along with a $1.4 million decrease in borrowings interest following the prepayment of FHLB borrowings in the prior quarter.

Noninterest Income

Noninterest income was $14.1 million for the quarter, an increase of $18.1 million from the prior quarter, driven by a $2.0 million increase in core revenue items and a $23.7 million improvement in fair value adjustments and derivative interest items, offset by a $7.6 million decrease in securities gains. The increase in core revenue was driven by slight increases in mortgage banking revenue on strong origination demand and in service charges from a continued rebound in customer transaction activity. The improvement in fair value adjustments was driven primarily by a total of $21.5 million in charges incurred in the prior quarter and realized losses on certain loans, including a swap break fee.

Noninterest Expense

Total noninterest expense was $57.4 million for the quarter, a decrease of $17.5 million from the prior quarter. A large portion of the decrease was driven by several items incurred in the prior period, including a $7.6 million FHLB prepayment expense, a $2.0 million expense related to the completion of the FDIC loss-sharing agreement, approximately $1.8 million in severance, closure and consulting costs, and a $0.9 million decrease in the unfunded commitment reserve, which is now accounted for within loan provisioning under CECL.

Other real estate owned expenses were $0.3 million, a decrease of $4.0 million from the prior quarter due to lower provisioning, and professional fees were $3.9 million, a decrease of $1.6 million from the prior quarter due to reductions in consulting costs and FDIC insurance premium.

The efficiency ratio1 was 46.2% for the quarter, compared to 72.1% for the prior quarter.

Asset Quality

The ACL was $308.8 million as of December 31, 2020, an increase of $158.9 million from the allowance for loan and lease losses of $149.9 million as of September 30, 2020. The increase was driven by the adoption of CECL on October 1, 2020, where we recognized a Day 1 increase in the ACL of $177.3 million, which was partially offset by the net impact from provisioning and charge-offs during the quarter.

Provision for credit losses on loans was $11.9 million for the quarter, compared to $16.9 million in the prior quarter under the incurred loss model.

Net charge-offs were $30.4 million, or 1.22% of average total loans (annualized) for the quarter, up $15.2 million and 63 basis points from the prior quarter, respectively. The increase was driven by $25.6 million of discount on the sales of certain hotel loans. Excluding those, net charge-offs for the quarter were $4.8 million, or 0.19% of average total loans (annualized).

The ratio of ACL to total loans was 3.24% as of December 31, 2020, an increase from 1.49% as of September 30, 2020. Excluding PPP loans the ratio was 3.50%.

Included within total loans are approximately $611.6 million of loans with long-term maturities 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 ACL, but management has estimated that approximately $27.5 million of the fair value adjustment for these loans relates to credit risk, or 0.29% of total loans.

Nonaccrual loans were $292.4 million as of December 31, 2020, a decrease of $32.6 million from $324.9 million as of September 30, 2020, driven by a number of payoffs causing agriculture loans to decline by $24.7 million and non-agriculture loans to decrease by $7.9 million. Classified loans, which include nonaccrual loans, were $716.9 million as of December 31, 2020, a decrease of $52.6 million from $769.5 million as of September 30, 2020, driven by a number of upgraded agriculture relationships, and a number of payoffs and sales in both agriculture and non-agriculture loans, partially offset by approximately $54.0 million in new hotel downgrades. Total other repossessed property balances were $18.1 million for the quarter, a decrease of $1.9 million from the prior quarter.

A summary of total credit-related charges incurred during current, previous and comparable quarters is presented below:

GREAT WESTERN BANCORP, INC.

 

 

 

Summary of Credit-Related Charges (Unaudited)

 

 

 

 

 

 

 

 

 

 

For the three months ended:

Item

Included within F/S Line Item(s):

December 31,
2020

September 30,
2020

December 31,
2019

 

 

(dollars in thousands)

Provision for credit losses ¹

Provision for credit losses

$

11,899

 

$

16,853

 

$

8,103

 

Increase (decrease) unfunded commitment reserve ¹

Other noninterest expense ¹

 

 

 

(920

)

 

200

Net other repossessed property charges

Net loss on repossessed property and other related expenses

 

345

 

 

4,350

 

 

342

 

Net (recovery) reversal of interest income on nonaccrual loans

Interest income on loans

 

(2,913

)

 

730

 

 

2,006

 

Net realized credit loss on derivatives

Change in fair value of FVO loans and related derivatives

 

210

 

 

1,243

 

 

 

Loan fair value adjustment related to credit

Change in fair value of FVO loans and related derivatives

 

1,464

 

 

23,407

 

 

2,134

 

Total credit-related charges

 

$

11,005

 

$

45,663

 

$

12,785

 

1 Beginning in the first quarter of fiscal year 2021, increase in unfunded commitment reserve is included in provision for credit losses.

We continue to evaluate the impact of COVID-19 on our loan portfolio. Industries such as hotels & resorts (excluding casino hotels), casino hotels, restaurants, oil & energy, retail malls, airlines and healthcare have experienced significant revenue loss due to COVID-19. Within our portfolio we are closely monitoring the following segments with elevated risk (excluding PPP loans): hotels & resorts (excluding casino hotels) with $822.6 million, or 8.6% of total loans, restaurants with $123.1 million, or 1.3% of total loans, arts and entertainment with $115.5 million, or 1.2% of total loans, senior care with $312.1 million, or 3.3% of total loans, and skilled nursing with $215.2 million, or 2.3% of total loans, for a total exposure of $1.59 billion, or 18.0% of total loans excluding PPP 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 further to 1.29% of loans excluding PPP as of January 13, 2021 from 1.98% in the prior quarter.

Loans and Deposits

Total loans outstanding were $9.52 billion as of December 31, 2020, a decrease of $0.56 billion from the prior quarter. Average total loans outstanding were $9.57 billion as of December 31, 2020, a decrease of $0.45 billion from the prior quarter. The decrease in loans during the quarter was driven by sales of $208.8 million in hotel loans, a number of payoffs in nonaccrual and classified loans, an increase in paydowns across the commercial, agriculture and consumer portfolios, and processing of $27.8 million of PPP loan forgiveness.

Total deposits were $11.37 billion as of December 31, 2020, an increase of $364.5 million from the prior quarter, driven by a $438.5 million increase in checking and savings balances offset by a $67.9 million decrease in time deposits.

Capital

Tier 1 and total capital ratios were 12.7% and 14.3%, respectively, as of December 31, 2020, compared to 11.8% and 13.3% as of September 30, 2020. The common equity tier 1 capital ratio and tier 1 leverage ratio were 12.0% and 9.7%, respectively, as of December 31, 2020, compared to 11.0% and 9.4% as of September 30, 2020. All regulatory capital ratios remain above regulatory minimums to be considered "well capitalized." The Company has elected the 5 year CECL transition for regulatory capital ratios, resulting in an add-back of $129.5 million to common equity tier 1 capital as of December 31, 2020.

On January 27, 2021, the Company's Board of Directors declared a dividend of $0.01 per common share payable on February 26, 2021 to stockholders of record as of close of business on February 12, 2021.

Provision for Income Taxes

Income tax expense was $11.4 million for the quarter, an increase of $12.2 million from the prior quarter, yielding an effective rate of 21.6%. The increase was due to the prior quarter reflecting the impact of lower taxable income for the fiscal year 2020.

Conference Call

Great Western Bancorp, Inc. will host a conference call to discuss its financial results for the first quarter of fiscal year 2021 on Wednesday, January 27, 2021 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 by visiting ir.greatwesternbank.com. A replay will be available beginning one hour following the conference call and ending on February 10, 2021. To access the replay, dial (877) 344-7529 (U.S.) and use conference ID 10150836. 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 to be held virtually at www.meetingcenter.io/225325833 on Tuesday, February 9, 2021. The meeting will commence at 9:00 a.m. Central Time. The record date for determination of stockholders entitled to notice of, and to vote at, the Annual Stockholder Meeting was December 11, 2020.

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, 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,
2020

September 30,
2020

June 30,
2020

March 31,
2020

December 31,
2019

 

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

Operating Data:

 

 

 

 

 

Interest income (FTE)

$

117,195

 

$

118,429

 

$

121,472

 

$

126,757

 

$

133,060

 

Interest expense

$

7,689

 

$

10,903

 

$

13,620

 

$

23,260

 

$

26,364

 

Noninterest income

$

14,148

 

$

(3,950

)

$

(11,683

)

$

(83

)

$

15,733

 

Noninterest expense

$

57,449

 

$

74,936

 

$

67,049

 

$

808,453

 

$

56,930

 

Provision for credit losses ³

$

11,899

 

$

16,853

 

$

21,641

 

$

71,795

 

$

8,103

 

Net income

$

41,319

 

$

11,136

 

$

5,400

 

$

(740,618

)

$

43,274

 

Adjusted net income ¹

$

41,319

 

$

11,136

 

$

5,400

 

$

29,080

 

$

43,274

 

Common shares outstanding

 

55,105,105

 

55,014,189

 

55,014,047

 

55,013,928

 

56,382,915

Weighted average diluted common shares outstanding

 

55,247,343

 

55,164,548

 

55,145,619

 

55,906,002

 

56,457,967

Earnings per common share - diluted

$

0.75

 

$

0.20

 

$

0.10

 

$

(13.25

)

$

0.77

 

Adjusted earnings per common share - diluted ¹

$

0.75

 

$

0.20

 

$

0.10

 

$

0.52

 

$

0.77

 

Performance Ratios:

 

 

 

 

 

Net interest margin (FTE) ¹ ²

 

3.63

%

 

3.51

%

 

3.57

%

 

3.59

%

 

3.68

%

Adjusted net interest margin (FTE) ¹ ²

 

3.52

%

 

3.40

%

 

3.47

%

 

3.55

%

 

3.65

%

Return on average total assets ²

 

1.30

%

 

0.35

%

 

0.17

%

 

(23.16

)%

 

1.34

%

Return on average common equity ²

 

15.2

%

 

3.8

%

 

1.9

%

 

(155.3

)%

 

9.0

%

Return on average tangible common equity ¹ ²

 

15.3

%

 

3.9

%

 

2.0

%

 

(9.3

)%

 

15.0

%

Efficiency ratio ¹

 

46.2

%

 

72.1

%

 

69.4

%

 

63.5

%

 

46.2

%

Capital:

 

 

 

 

 

Tier 1 capital ratio

 

12.7

%

 

11.8

%

 

11.3

%

 

11.3

%

 

12.0

%

Total capital ratio

 

14.3

%

 

13.3

%

 

12.9

%

 

12.9

%

 

13.0

%

Tier 1 leverage ratio

 

9.7

%

 

9.4

%

 

9.3

%

 

9.2

%

 

10.4

%

Common equity tier 1 ratio

 

12.0

%

 

11.0

%

 

10.6

%

 

10.6

%

 

11.3

%

Tangible common equity / tangible assets ¹

 

8.3

%

 

9.2

%

 

8.9

%

 

9.3

%

 

9.7

%

Book value per share - GAAP

$

19.39

 

$

21.14

 

$

21.10

 

$

20.97

 

$

34.06

 

Tangible book value per share ¹

$

19.28

 

$

21.03

 

$

20.98

 

$

20.84

 

$

20.77

 

Asset Quality:

 

 

 

 

 

Nonaccrual loans

$

292,357

 

$

324,946

 

$

274,475

 

$

213,075

 

$

156,113

 

Other repossessed property

$

18,086

 

$

20,034

 

$

19,231

 

$

27,289

 

$

39,490

 

Nonaccrual loans / total loans

 

3.07

%

 

3.22

%

 

2.66

%

 

2.20

%

 

1.62

%

Net charge-offs (recoveries)

$

30,357

 

$

15,124

 

$

9,433

 

$

8,626

 

$

6,096

 

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

 

1.22

%

 

0.59

%

 

0.37

%

 

0.36

%

 

0.25

%

Allowance for credit losses / total loans

 

3.24

%

 

1.49

%

 

1.44

%

 

1.40

%

 

0.76

%

Watch-rated loans (under former risk rating system) ⁴

 

n/a

$

982,841

 

$

477,128

 

$

420,252

 

$

416,259

 

Special mention loans ⁴

$

453,484

 

 

n/a

 

n/a

 

n/a

 

n/a

Criticized loans (special mention or worse) ⁴

$

1,170,432

 

 

n/a

 

n/a

 

n/a

 

n/a

Classified loans (substandard or worse)

$

716,948

 

$

769,515

 

$

702,795

 

$

629,327

 

$

640,501

 

 

 

 

 

 

 

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.

3 Prior to the adoption of ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and subsequent related ASUs, on October 1, 2020, this line represented the provision for loan and lease losses under the incurred model.

4 Upon implementation of the new risk rating system on October 1, 2020, the reported Watch rating was retired and new Special Mention loans and Criticized loans ratings were introduced for monitoring and reporting purposes.

GREAT WESTERN BANCORP, INC.

 

 

 

 

 

Consolidated Income Statement (Unaudited)

 

 

 

 

 

 

 

 

At and for the three months ended:

 

December 31,
2020

September 30,
2020

June 30,
2020

March 31,
2020

December 31,
2019

 

(dollars in thousands)

Interest income

 

 

 

 

 

Loans

$

107,323

 

$

107,522

 

$

109,227

 

$

113,356

 

$

119,431

 

Investment securities

 

8,119

 

 

9,294

 

 

10,532

 

 

11,329

 

 

11,498

 

Federal funds sold and other

 

155

 

 

105

 

 

112

 

 

558

 

 

608

 

Total interest income

 

115,597

 

 

116,921

 

 

119,871

 

 

125,243

 

 

131,537

 

Interest expense

 

 

 

 

 

Deposits

 

5,992

 

 

7,785

 

 

10,011

 

 

18,867

 

 

21,940

 

FHLB advances and other borrowings

 

880

 

 

2,221

 

 

2,539

 

 

3,155

 

 

3,113

 

Subordinated debentures and subordinated notes payable

 

817

 

 

897

 

 

1,070

 

 

1,238

 

 

1,311

 

Total interest expense

 

7,689

 

 

10,903

 

 

13,620

 

 

23,260

 

 

26,364

 

Net interest income

 

107,908

 

 

106,018

 

 

106,251

 

 

101,983

 

 

105,173

 

Provision for credit losses ¹

 

11,899

 

 

16,853

 

 

21,641

 

 

71,795

 

 

8,103

 

Net interest income after provision for loan and lease losses

 

96,009

 

 

89,165

 

 

84,610

 

 

30,188

 

 

97,070

 

Noninterest income

 

 

 

 

 

Service charges and other fees

 

9,624

 

 

9,413

 

 

7,731

 

 

9,188

 

 

11,409

 

Wealth management fees

 

3,029

 

 

2,913

 

 

2,773

 

 

3,122

 

 

2,964

 

Mortgage banking income, net

 

4,090

 

 

3,780

 

 

2,422

 

 

1,145

 

 

1,612

 

Net gain (loss) on sale of securities and other assets

 

248

 

 

7,890

 

 

 

 

 

 

 

Derivative interest expense

 

(3,393

)

 

(3,541

)

 

(3,040

)

 

(1,251

)

 

(890

)

Change in fair value of FVO loans and related derivatives

 

(1,672

)

 

(24,648

)

 

(25,001

)

 

(10,533

)

 

(2,124

)

Other derivative income (loss)

 

898

 

 

(890

)

 

2,242

 

 

(2,889

)

 

1,597

 

Other

 

1,324

 

 

1,133

 

 

1,190

 

 

1,135

 

 

1,165

 

Total noninterest income (loss)

 

14,148

 

 

(3,950

)

 

(11,683

)

 

(83

)

 

15,733

 

Noninterest expense

 

 

 

 

 

Salaries and employee benefits

 

37,554

 

 

37,182

 

 

39,042

 

 

37,312

 

 

35,905

 

Data processing and communication

 

6,226

 

 

6,742

 

 

5,817

 

 

6,123

 

 

5,773

 

Occupancy and equipment

 

5,213

 

 

5,332

 

 

5,251

 

 

5,597

 

 

5,093

 

Professional fees

 

3,915

 

 

5,552

 

 

7,382

 

 

5,263

 

 

3,764

 

Advertising

 

556

 

 

823

 

 

750

 

 

958

 

 

865

 

Net loss on repossessed property and other related expenses

 

345

 

 

4,350

 

 

2,475

 

 

5,691

 

 

342

 

Goodwill and intangible assets impairment

 

 

 

 

 

 

 

742,352

 

 

 

Other

 

3,640

 

 

14,955

 

 

6,332

 

 

5,157

 

 

5,188

 

Total noninterest expense

 

57,449

 

 

74,936

 

 

67,049

 

 

808,453

 

 

56,930

 

Income (loss) before income taxes

 

52,708

 

 

10,279

 

 

5,878

 

 

(778,348

)

 

55,873

 

Provision for (benefit from) income taxes

 

11,389

 

 

(857

)

 

478

 

 

(37,730

)

 

12,599

 

Net income (loss)

$

41,319

 

$

11,136

 

$

5,400

 

$

(740,618

)

$

43,274

 

1 For the quarter ended December 31, 2020, this line includes a $(0.1) million decrease in unfunded commitment reserve. For the quarters ended September 30, 2020, June 30, 2020, March 31, 2020 and December 31, 2019, (decrease) increase in unfunded commitment reserve of $(0.9) million, $2.2 million, $0.4 million and $0.2 million, respectively, were recorded in other noninterest expense in the consolidated income statement.

GREAT WESTERN BANCORP, INC.

 

 

 

 

 

Summarized Consolidated Balance Sheet (Unaudited)

 

 

 

 

 

 

 

As of

 

December 31,
2020

September 30,
2020

June 30,
2020

March 31,
2020

December 31,
2019

 

(dollars in thousands)

Assets

 

 

 

 

 

Cash and cash equivalents

$

1,061,796

 

$

432,887

 

$

311,585

 

$

347,486

 

$

247,421

 

Investment securities

 

2,059,615

 

 

1,774,626

 

 

1,972,626

 

 

1,990,027

 

 

1,904,291

 

Total loans

 

9,517,876

 

 

10,076,142

 

 

10,313,999

 

 

9,693,295

 

 

9,626,224

 

Allowance for credit losses ¹

 

(308,794

)

 

(149,887

)

 

(148,158

)

 

(135,950

)

 

(72,781

)

Loans, net

 

9,209,082

 

 

9,926,255

 

 

10,165,841

 

 

9,557,345

 

 

9,553,443

 

Goodwill

 

 

 

 

 

 

 

 

 

740,562

 

Other assets

 

483,890

 

 

470,671

 

 

484,276

 

 

492,950

 

 

405,948

 

Total assets

$

12,814,383

 

$

12,604,439

 

$

12,934,328

 

$

12,387,808

 

$

12,851,665

 

Liabilities and stockholders' equity

 

 

 

 

 

Noninterest-bearing deposits

$

2,858,455

 

$

2,586,743

 

$

2,592,376

 

$

1,973,629

 

$

2,029,872

 

Interest-bearing deposits

 

8,514,863

 

 

8,422,036

 

 

8,558,238

 

 

8,205,486

 

 

8,058,656

 

Total deposits

 

11,373,318

 

 

11,008,779

 

 

11,150,614

 

 

10,179,115

 

 

10,088,528

 

Securities sold under agreements to repurchase

 

80,355

 

 

65,506

 

 

70,362

 

 

64,809

 

 

66,289

 

FHLB advances and other borrowings

 

120,000

 

 

195,000

 

 

355,000

 

 

800,000

 

 

575,000

 

Other liabilities

 

172,209

 

 

172,221

 

 

197,708

 

 

190,420

 

 

201,179

 

Total liabilities

 

11,745,882

 

 

11,441,506

 

 

11,773,684

 

 

11,234,344

 

 

10,930,996

 

Stockholders' equity

 

1,068,501

 

 

1,162,933

 

 

1,160,644

 

 

1,153,464

 

 

1,920,669

 

Total liabilities and stockholders' equity

$

12,814,383

 

$

12,604,439

 

$

12,934,328

 

$

12,387,808

 

$

12,851,665

 

1 Prior to the adoption of ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and subsequent related ASUs, on October 1, 2020, this line represented the allowance for loan and lease losses under the incurred loss model.

GREAT WESTERN BANCORP, INC.

 

 

 

 

Loan Portfolio Summary (Unaudited)

 

 

 

 

 

 

 

 

 

 

As of

Fiscal year-to-date:

 

December 31,
2020

September 30,
2020

Change
($)

Change
(%)

 

(dollars in thousands)

Construction and development

$

482,462

 

$

415,440

 

$

67,022

 

16.1

%

Owner-occupied CRE

 

1,411,558

 

1,411,894

 

 

(336

)

%

Non-owner-occupied CRE

 

2,660,682

 

 

2,910,965

 

 

(250,283

)

(8.6

)%

Multifamily residential real estate

 

476,159

 

 

536,642

 

 

(60,483

)

(11.3

)%

Total commercial real estate

 

5,030,861

 

 

5,274,941

 

 

(244,080

)

(4.6

)%

Agriculture

 

1,635,952

 

 

1,724,350

 

 

(88,398

)

(5.1

)%

Commercial non-real estate

 

2,054,478

 

 

2,181,656

 

 

(127,178

)

(5.8

)%

Residential real estate

 

708,086

 

 

830,102

 

 

(122,016

)

(14.7

)%

Consumer and other ¹

 

88,499

 

 

100,553

 

 

(12,054

)

(12.0

)%

Total loans

 

9,517,876

 

 

10,111,602

 

 

(593,726

)

(5.9

)%

Less: Unamortized discount on acquired loans and unearned net deferred fees and costs and loans in process ²

 

 

 

(35,460

)

 

35,460

 

(100.0

)%

Total loans

$

9,517,876

 

$

10,076,142

 

$

(558,266

)

(5.5

)%

 

 

 

 

 

1 Other loans primarily include consumer and commercial credit cards, customer deposit account overdrafts, leases. Loans in process are included in this category beginning first quarter of fiscal year 2021.

2 Beginning in the first quarter of fiscal year 2021, loan segments are presented based on amortized cost, which includes unpaid principal balance, unamortized discount on acquired loans, and unearned net deferred fees and costs, as a part of the adoption of ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and subsequent related ASUs.

GREAT WESTERN BANCORP, INC.

 

 

 

 

 

 

 

 

Net Interest Margin (FTE) (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

December 31, 2020

September 30, 2020

December 31, 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

$

492,105

 

$

155

 

0.12

%

$

167,048

 

$

105

 

0.25

%

$

32,803

 

$

608

 

7.37

%

Investment securities

 

1,905,771

 

8,119

1.69

%

 

1,992,448

 

9,294

1.86

%

 

1,904,350

 

11,498

2.40

%

Non-ASC 310-30 loans, net ³

 

9,567,679

 

 

108,921

 

4.52

%

 

9,977,591

 

 

107,813

 

4.30

%

 

9,554,161

 

 

119,232

 

4.96

%

ASC 310-30 loans, net ⁴

 

 

 

 

%

 

47,006

 

 

1,217

 

10.30

%

 

52,296

 

 

1,722

 

13.10

%

Loans, net

 

9,567,679

 

 

108,921

 

4.52

%

 

10,024,597

 

 

109,030

 

4.33

%

 

9,606,457

 

 

120,954

 

5.01

%

Total interest-earning assets

 

11,965,555

 

 

117,195

 

3.89

%

 

12,184,093

 

 

118,429

 

3.87

%

 

11,543,610

 

 

133,060

 

4.59

%

Noninterest-earning assets

 

614,946

 

 

 

 

610,228

 

 

 

 

1,267,983

 

 

 

Total assets

$

12,580,501

 

$

117,195

 

3.70

%

$

12,794,321

 

$

118,429

 

3.68

%

$

12,811,593

 

$

133,060

 

4.13

%

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

$

2,664,117

 

 

 

$

2,575,732

 

 

 

$

1,977,084

 

 

 

Interest-bearing deposits

 

7,278,073

 

$

3,966

 

0.22

%

 

7,079,302

 

$

4,534

 

0.25

%

 

6,306,861

 

$

13,373

 

0.84

%

Time deposits

 

1,187,148

 

 

2,026

 

0.68

%

 

1,371,589

 

 

3,251

 

0.94

%

 

1,847,954

 

 

8,567

 

1.84

%

Total deposits

 

11,129,338

 

 

5,992

 

0.21

%

 

11,026,623

 

 

7,785

 

0.28

%

 

10,131,899

 

 

21,940

 

0.86

%

Securities sold under agreements to repurchase

 

78,639

 

 

18

 

0.09

%

 

73,451

 

 

18

 

0.10

%

 

66,527

 

 

31

 

0.19

%

FHLB advances and other borrowings

 

120,000

 

 

862

 

2.85

%

 

315,641

 

 

2,203

 

2.78

%

 

497,034

 

 

3,082

 

2.47

%

Subordinated debentures and subordinated notes payable

 

108,846

 

 

817

 

2.98

%

 

108,812

 

 

897

 

3.28

%

 

108,663

 

 

1,311

 

4.80

%

Total borrowings

 

307,485

 

 

1,697

 

2.19

%

 

497,904

 

 

3,118

 

2.49

%

 

672,224

 

 

4,424

 

2.62

%

Total interest-bearing liabilities

 

11,436,823

 

$

7,689

 

0.27

%

 

11,524,527

 

$

10,903

 

0.38

%

 

10,804,123

 

$

26,364

 

0.97

%

Noninterest-bearing liabilities

 

61,601

 

 

 

 

94,798

 

 

 

 

98,951

 

 

 

Stockholders' equity

 

1,082,077

 

 

 

 

1,174,996

 

 

 

 

1,908,519

 

 

 

Total liabilities and stockholders' equity

$

12,580,501

 

 

 

$

12,794,321

 

 

 

$

12,811,593

 

 

 

Net interest spread

 

 

3.43

%

 

 

3.30

%

 

 

3.16

%

Net interest income and net interest margin (FTE)

 

$

109,506

 

3.63

%

 

$

107,526

 

3.51

%

 

$

106,696

 

3.68

%

Less: Tax equivalent adjustment

 

 

1,598

 

 

 

 

1,508

 

 

 

 

1,523

 

 

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

 

$

107,908

 

3.58

%

 

$

106,018

 

3.46

%

 

$

105,173

 

3.62

%

1 Annualized for all partial-year periods.

2 Interest income includes nominal and $0.4 million for the first quarter of fiscal years 2021 and 2020, respectively, resulting from interest earned on derivative collateral included in other assets on the consolidated balance sheets.

3 Interest income includes $0.0 million and $0.6 million for the first quarter of fiscal years 2021 and 2020, respectively, resulting from accretion of purchase accounting discount associated with acquired loans.

4 Beginning in the first quarter of fiscal year 2021, ASC 310-30 loans began being reported with non-ASC 310-30 loans. Upon adoption of ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and subsequent related ASUs, discounts on ASC 310-30 loans related to noncredit factors accreted to interest income were immaterial.

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, pre-tax pre-provision income ("PTPP"), 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 second quarter of fiscal year 2020 COVID-19 impact on credit and other related charges and the impairment of goodwill and certain intangible assets). Our PTPP income excludes total provision for credit losses, credit gains/losses on loans held for investment measured at fair value and goodwill impairment. 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), measure our ability to generate capital by providing net income excluding credit losses (for PTPP income) and measure net income 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 loans and adjusted yield on 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,
2020

September 30,
2020

June 30,
2020

March 31,
2020

December 31,
2019

 

(dollars in thousands except share and per share amounts)

Adjusted net income and adjusted earnings per common share:

 

 

 

 

 

Net income (loss) - GAAP

$

41,319

 

$

11,136

 

$

5,400

 

$

(740,618

)

$

43,274

 

Add: COVID-19 related impairment of goodwill and certain intangible assets, net of tax

 

 

 

 

 

 

 

713,013

 

 

 

Add: COVID-19 impact on credit and other related charges, net of tax

 

 

 

 

 

 

 

56,685

 

 

 

Adjusted net income

$

41,319

 

$

11,136

 

$

5,400

 

$

29,080

 

$

43,274

 

 

 

 

 

 

 

Weighted average diluted common shares outstanding

 

55,247,343

 

55,164,548

 

55,145,619

 

55,906,002

 

56,457,967

Earnings per common share - diluted

$

0.75

 

$

0.20

 

$

0.10

 

$

(13.25

)

$

0.77

 

Adjusted earnings per common share - diluted

$

0.75

 

$

0.20

 

$

0.10

 

$

0.52

 

$

0.77

 

 

 

 

 

 

 

Pre-tax pre-provision income ("PTPP"):

 

 

 

 

 

Income (loss) before income taxes - GAAP

$

52,708

 

$

10,279

 

$

5,878

 

$

(778,348

)

$

55,873

 

Add: Provision for credit losses - GAAP

 

11,899

 

 

16,853

 

 

21,641

 

 

71,795

 

 

8,103

 

Add: Change in fair value of FVO loans and related derivatives - GAAP

 

1,672

 

 

24,648

 

 

25,001

 

 

10,533

 

 

2,124

 

Add: Goodwill impairment - GAAP

 

 

 

 

 

 

 

742,352

 

 

 

Pre-tax pre-provision income

$

66,279

 

$

51,780

 

$

52,520

 

$

46,332

 

$

66,100

 

 

 

 

 

 

 

 

 

 

 

 

 

Tangible net income and return on average tangible common equity:

 

 

 

 

 

Net income (loss) - GAAP

$

41,319

 

$

11,136

 

$

5,400

 

$

(740,618

)

$

43,274

 

Add: Amortization of intangible assets and COVID-19 related impairment of goodwill and certain intangible assets, net of tax

 

261

 

 

261

 

 

261

 

 

713,440

 

 

377

 

Tangible net income (loss)

$

41,580

 

$

11,397

 

$

5,661

 

$

(27,178

)

$

43,651

 

 

 

 

 

 

 

Average common equity

$

1,082,077

 

$

1,174,996

 

$

1,163,724

 

$

1,918,035

 

$

1,908,519

 

Less: Average goodwill and other intangible assets

 

6,004

 

 

6,265

 

 

6,527

 

 

741,257

 

 

748,146

 

Average tangible common equity

$

1,076,073

 

$

1,168,731

 

$

1,157,197

 

$

1,176,778

 

$

1,160,373

 

 

 

 

 

 

 

Return on average common equity *

 

15.2

%

 

3.8

%

 

1.9

%

 

(155.3

)%

 

9.0

%

Return on average tangible common equity **

 

15.3

%

 

3.9

%

 

2.0

%

 

(9.3

)%

 

15.0

%

* 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

$

107,908

 

$

106,018

 

$

106,251

 

$

101,983

 

$

105,173

 

Add: Tax equivalent adjustment

 

1,598

 

 

1,508

 

 

1,601

 

 

1,514

 

 

1,523

 

Net interest income (FTE)

 

109,506

 

 

107,526

 

 

107,852

 

 

103,497

 

 

106,696

 

Add: Current realized derivative gain (loss)

 

(3,393

)

 

(3,541

)

 

(3,040

)

 

(1,250

)

 

(890

)

Adjusted net interest income (FTE)

$

106,113

 

$

103,985

 

$

104,812

 

$

102,247

 

$

105,806

 

 

 

 

 

 

 

Average interest-earning assets

$

11,965,555

 

$

12,184,093

 

$

12,156,505

 

$

11,590,453

 

$

11,543,610

 

Net interest margin (FTE) *

 

3.63

%

 

3.51

%

 

3.57

%

 

3.59

%

 

3.68

%

Adjusted net interest margin (FTE) **

 

3.52

%

 

3.40

%

 

3.47

%

 

3.55

%

 

3.65

%

* 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

$

107,323

 

$

106,305

 

$

107,725

 

$

111,970

 

$

117,709

 

Add: Tax equivalent adjustment

 

1,598

 

 

1,508

 

 

1,601

 

 

1,514

 

 

1,523

 

Interest income (FTE)

 

108,921

 

 

107,813

 

 

109,326

 

 

113,484

 

 

119,232

 

Add: Current realized derivative gain (loss)

 

(3,393

)

 

(3,541

)

 

(3,040

)

 

(1,250

)

 

(890

)

Adjusted interest income (FTE)

$

105,528

 

$

104,272

 

$

106,286

 

$

112,234

 

$

118,342

 

 

 

 

 

 

 

Average non-ASC310-30 loans

$

9,567,679

 

$

9,977,591

 

$

9,974,802

 

$

9,496,153

 

$

9,554,161

 

Yield (FTE) *

 

4.52

%

 

4.30

%

 

4.41

%

 

4.81

%

 

4.96

%

Adjusted yield (FTE) **

 

4.38

%

 

4.16

%

 

4.29

%

 

4.75

%

 

4.93

%

* 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

$

122,056

 

$

102,068

 

$

94,568

 

$

101,900

 

$

120,906

 

Add: Tax equivalent adjustment

 

1,598

 

 

1,508

 

 

1,601

 

 

1,514

 

 

1,523

 

Total revenue (FTE)

$

123,654

 

$

103,576

 

$

96,169

 

$

103,414

 

$

122,429

 

 

 

 

 

 

 

Noninterest expense

$

57,449

 

$

74,936

 

$

67,049

 

$

808,453

 

$

56,930

 

Less: Amortization of intangible assets and COVID-19 related impairment of goodwill and certain intangible assets

 

261

 

 

261

 

 

278

 

 

742,779

 

 

427

 

Tangible noninterest expense

$

57,188

 

$

74,675

 

$

66,771

 

$

65,674

 

$

56,503

 

 

 

 

 

 

 

Efficiency ratio *

 

46.2

%

 

72.1

%

 

69.4

%

 

63.5

%

 

46.2

%

* 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

$

1,068,501

 

$

1,162,933

 

$

1,160,644

 

$

1,153,464

 

$

1,920,669

 

Less: Goodwill and other intangible assets

 

5,904

 

 

6,164

 

 

6,425

 

 

6,703

 

 

749,481

 

Tangible common equity

$

1,062,597

 

$

1,156,769

 

$

1,154,219

 

$

1,146,761

 

$

1,171,188

 

 

 

 

 

 

 

Total assets

$

12,814,383

 

$

12,604,439

 

$

12,934,328

 

$

12,387,808

 

$

12,851,665

 

Less: Goodwill and other intangible assets

 

5,904

 

 

6,164

 

 

6,425

 

 

6,703

 

 

749,481

 

Tangible assets

$

12,808,479

 

$

12,598,275

 

$

12,927,903

 

$

12,381,105

 

$

12,102,184

 

 

 

 

 

 

 

Tangible common equity to tangible assets

 

8.3

%

 

9.2

%

 

8.9

%

 

9.3

%

 

9.7

%

 

 

 

 

 

 

Tangible book value per share:

 

 

 

 

 

Total stockholders' equity

$

1,068,501

 

$

1,162,933

 

$

1,160,644

 

$

1,153,464

 

$

1,920,669

 

Less: Goodwill and other intangible assets

 

5,904

 

 

6,164

 

 

6,425

 

 

6,703

 

 

749,481

 

Tangible common equity

$

1,062,597

 

$

1,156,769

 

$

1,154,219

 

$

1,146,761

 

$

1,171,188

 

 

 

 

 

 

 

Common shares outstanding

 

55,105,105

 

55,014,189

 

55,014,047

 

55,013,928

 

56,382,915

Book value per share - GAAP

$

19.39

 

$

21.14

 

$

21.10

 

$

20.97

 

$

34.06

 

Tangible book value per share

$

19.28

 

$

21.03

 

$

20.98

 

$

20.84

 

$

20.77

 


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.

Contacts

GREAT WESTERN BANCORP, INC.

Media Contact:
Lexie Feterl, 605.978.5829
alexis.feterl@greatwesternbank.com

Investor Relations Contact:
Seth Artz, 605.988.9253
seth.artz@greatwesternbank.com

$Cashtags

Contacts

GREAT WESTERN BANCORP, INC.

Media Contact:
Lexie Feterl, 605.978.5829
alexis.feterl@greatwesternbank.com

Investor Relations Contact:
Seth Artz, 605.988.9253
seth.artz@greatwesternbank.com