Highlights for the Second Quarter of Fiscal Year 2021
(all quarterly comparisons in this document refer to the first
quarter of fiscal year 2021, except as noted)
- Net income of $51.3 million, or $0.93 per diluted share, up
from $41.3 million, or $0.75 per diluted share
- Net interest income1 of $104.4 million, down from $109.5
million, with net interest margin1 of 3.51%, down from 3.63%
- Noninterest income of $17.2 million, up from $14.1 million
- Noninterest expense of $59.1 million, up from $57.4
million
- Total loans of $9.01 billion, down $506.5 million, including a
reduction of $132.7 million in Paycheck Protection Program ("PPP")
loans
- Average deposits of $11.27 billion, up $138.9 million
- Allowance for credit losses ("ACL") of $296.0 million, down
from $308.8 million, and a ratio of ACL to total loans of 3.28%, up
from 3.24%
- Net charge-offs of $7.8 million, or 0.34% of average total
loans (annualized), down from $30.4 million and 1.22%,
respectively
- Total capital ratio of 15.1%, up from 14.3%; tier 1 capital of
13.5%, up from 12.7%; common equity tier 1 capital of 12.8%, up
from 12.0%
- Return on average common equity of 19.8%, up from 15.2%
- The Company's Board of Directors declared a quarterly dividend
of $0.01 per share
Great Western Bancorp, Inc. (NYSE:
GWB) today reported net income of $51.3 million, or $0.93
per diluted share, for the second quarter of fiscal year 2021,
compared to net income of $41.3 million, or $0.75 per diluted
share, for the first quarter of fiscal year 2021.
"I am proud of our continued improvement this quarter and the
laser focus and dedication of the Great Western team," said Mark
Borrecco, President and Chief Executive Officer. "We strengthened
our capital position posting net income of $92.6 million and
earnings per diluted share of $1.68 through the first half of
fiscal year 2021, along with 17.4% return on average common equity.
Credit quality also showed progress with both nonaccrual and
classified loans down 12.4% this fiscal year, and loans with
payment deferrals dropping to $19.7 million. This improvement,
along with our allowance for credit loss coverage of 3.50%
excluding PPP, reinforces our conservative approach on managing
underwriting and risk management of the portfolio as our markets
evolve into their new normal post pandemic.
In addition, we are excited to launch our new small business
platform, which will transform the small business client experience
while reducing our average small business loan closing time from 22
days to 3. This enhancement, along with our investments in treasury
management and the improving outlook for the agricultural loan
portfolio positions Great Western well for building momentum."
Impact and Response to COVID-19 Pandemic
We remain focused on keeping our employees safe and our bank
running effectively to serve our customers. Our branches have been
reopened across our footprint, and we are targeting 75% employee
occupancy in our offices by June, with plans for return in August
involving remote work optionality and adherence to CDC guidelines
in the office. For our customers, we have supported PPP, having
provided $727.3 million in loans to over 4,800 customers in the
first round followed by $196.0 million to over 2,500 customers in
the second round. Related to PPP forgiveness, we have processed
$356.5 million of loans for over 2,000 customers. Additionally, we
have granted both full and partial payment deferrals to help
provide relief from COVID-19, which resulted in a peak of $1.69
billion of loans on deferral as of the third quarter of fiscal year
2020. As of April 16, 2021 the balance of loans with a payment
deferral was $19.7 million, or 0.24% of total loans excluding PPP,
compared to $113.0 million as of January 13, 2021.
Net Interest Income and Net Interest Margin1
Net interest income was $104.4 million for the quarter, a
decrease of $5.1 million, while net interest margin was 3.51%, a 12
basis point decrease from 3.63%. Adjusted net interest income2 was
$101.3 million, a decrease of $4.8 million, and adjusted net
interest margin2 was 3.40%, also a 12 basis point decrease from
3.52%. Interest income was lower by $6.6 million as loan interest
decreased by $7.1 million while securities and other interest
income increased by $0.5 million. Loan interest reflects a $2.2
million decrease in nonaccrual interest recoveries, a $4.4 million
decrease driven by lower loan volumes, and a $4.7 million decrease
due to lower day count and other loan fees, all partially offset
with a net $4.2 million increase in PPP interest and fee income.
The decrease in interest income was partially offset by a $1.6
million decrease in interest expense driven by a $0.7 million
decrease from lower time deposit volumes and a 16 basis point
decrease in yield to 0.52% combined with a net $0.8 million
decrease driven primarily by a 5 basis point decrease in yield of
interest-bearing deposits to 0.17%.
Noninterest Income
Noninterest income was $17.2 million for the quarter, an
increase of $3.0 million from the prior quarter. The increase was
driven by a $2.4 million increase in other derivative income from a
favorable credit adjustment on derivatives and a $1.7 million
improvement in FVO credit risk. These were partially offset by a
$1.0 million decrease in service charges from lower overdraft
activity and a seasonal decrease in crop insurance revenue.
Noninterest Expense
Total noninterest expense was $59.1 million for the quarter, an
increase of $1.7 million from the prior quarter. The increase was
driven by a $1.6 million increase in salaries and benefits due to
annual merit increases and accrued incentives, a $0.3 million
increase in data processing costs due to various software
maintenance and upgrades, a $0.4 million increase in consulting
costs to support strategic initiatives and a $0.3 million increase
in seasonal grounds maintenance. These were partially offset by a
$0.4 million decrease in other real estate owned operating costs
and a $0.5 million decrease in FDIC insurance premiums.
The efficiency ratio2 was 48.4% for the quarter, compared to
46.2% for the prior quarter.
Provision for Income Taxes
Income tax expense was $14.7 million for the quarter, an
increase of $3.3 million from the prior quarter, yielding an
effective rate of 22.2% compared to 21.6%.
Asset Quality
The ACL, as quantified by the Company under the CECL methodology
adopted October 1, 2020, was $296.0 million as of March 31, 2021, a
decrease of $12.8 million from $308.8 million as of December 31,
2020. The decrease was primarily driven by the lower loan volumes
and the impact from improved economic forecast assumptions. The
ratio of ACL to total loans was 3.28% as of March 31, 2021, an
increase from 3.24% as of December 31, 2020. Excluding PPP loans
the ratio was 3.50% for the current and prior quarter.
Net charge-offs were $7.8 million, or 0.34% of average total
loans (annualized) for the quarter, down $22.6 million and 88 basis
points from the prior quarter, respectively. The decrease was
driven primarily by $25.6 million of charge-offs that occurred in
the prior quarter related to a bulk sale of hotel portfolio
loans.
As a result, the provision for credit losses on loans resulted
in a $5.0 million net benefit for the quarter, compared to an $11.9
million provision in the prior quarter, as the required reserves
released from the decreased loan volume more than offset the net
charge-offs in the period.
Included within total loans are approximately $568.9 million of
loans, down from $611.6 million as of December 31, 2020, with
long-term, fixed rate structures using derivatives for which
management has elected the fair value accounting option. These
loans are excluded from CECL and the ACL, but management has
estimated that approximately $27.4 million of the fair value
adjustment for these loans relates to credit risk, which is 4.82%
of the fair value option loans and 0.30% of total loans, compared
to approximately $27.5 million of the fair value adjustment for
these loans relates to credit risk, which is 4.49% of the fair
value loans and 0.29% of total loans as of December 31, 2020.
Nonaccrual loans were $284.5 million as of March 31, 2021, a
decrease of $7.9 million from $292.4 million as of December 31,
2020, largely driven by two payoffs from successful workouts and no
material downgrades. Classified loans, which include nonaccrual
loans, were $673.9 million as of March 31, 2021, a decrease of
$43.0 million from $716.9 million as of December 31, 2020, driven
by a $23.0 million decrease in agriculture loans from a number of
upgrades and payoffs, the sale of a $23.5 million classified hotel
loan, and the upgrade of a $35.8 million agri-related relationship,
all partially offset with $41.4 million in downgraded hotel loans.
Total other repossessed property balances were $17.5 million for
the quarter, a decrease of $0.6 million from the prior quarter.
A summary of total credit-related charges incurred during the
current and comparable six month periods and current, previous and
comparable quarters is presented below:
GREAT WESTERN BANCORP, INC.
Summary of Credit-Related Charges
(Unaudited)
For the six months ended:
For the three months ended:
Item
Included within F/S Line
Item(s):
March 31, 2021
March 31, 2020
March 31, 2021
December 31, 2020
March 31, 2020
(dollars in thousands)
Provision (reversal of provision) for
credit losses ¹
(Reversal of) provision for credit losses
¹
$
6,899
$
79,898
$
(5,000)
$
11,899
$
71,795
Increase provision for unfunded
commitments reserve ¹
Other noninterest expense ¹
—
644
—
—
444
Net other repossessed property charges
(income)
Net (gain) loss on repossessed property
and other related expenses
291
6,033
(54)
345
5,691
Net (recovery) reversal of interest income
on nonaccrual loans
Interest income on loans
(3,620)
3,094
(707)
(2,913)
1,088
Net realized credit loss on
derivatives
Change in fair value of FVO loans and
related derivatives
210
—
—
210
—
Loan fair value adjustment related to
credit
Change in fair value of FVO loans and
related derivatives
1,437
12,657
(27)
1,464
10,523
Total credit-related charges
$
5,217
$
102,326
$
(5,788)
$
11,005
$
89,541
1 Beginning in the first quarter of fiscal
year 2021, increase (decrease) 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, theaters, oil &
energy, retail malls, airlines and healthcare have experienced
uncharacteristic revenue loss due to COVID-19. Since the beginning
of the pandemic we have been closely monitoring the following loan
segments (excluding PPP loans) given elevated industry risk from
COVID-19: hotels & resorts (excluding casino hotels) with
$783.7 million, or 9.3% of total loans, restaurants with $124.3
million, or 1.5% of total loans, arts and entertainment with $119.4
million, or 1.4% of total loans, senior care with $314.2 million,
or 3.7% of total loans, and skilled nursing with $212.3 million, or
2.5% of total loans, for a total exposure of $1.55 billion, or
18.4% of total loans excluding PPP loans, and $205.9 million of
which was classified as of March 31, 2021. Loan exposure in such
other identified industries is either immaterial or has not shown
general distress thus far.
Loans and Deposits
Total loans outstanding were $9.01 billion as of March 31, 2021,
a decrease of $506.5 million from the prior quarter. The decrease
in loans during the quarter was driven by a $132.7 million net
decrease in PPP loans, paydowns of criticized loans, commercial
real estate loans refinanced in the secondary market and an
increase in paydowns across commercial, agriculture and consumer
from property sales and excess liquidity.
Total deposits were $11.56 billion as of March 31, 2021, an
increase of $190.7 million from the prior quarter, driven by a
$202.4 million increase in checking and savings balances and a
$59.2 million increase in other interest-bearing deposits,
partially offset by a $70.9 million decrease in time deposits.
Capital
Tier 1 and total capital ratios were 13.5% and 15.1%,
respectively, as of March 31, 2021, compared to 12.7% and 14.3% as
of December 31, 2020. The common equity tier 1 capital ratio and
tier 1 leverage ratio were 12.8% and 10.0%, respectively, as of
March 31, 2021, compared to 12.0% and 9.7% as of December 31, 2020.
All regulatory capital ratios remain above regulatory minimums to
be considered "well capitalized."
On April 29, 2021, the Company's Board of Directors declared a
dividend of $0.01 per common share, payable on May 28, 2021 to
stockholders of record as of close of business on May 14, 2021.
Conference Call
Great Western Bancorp, Inc. will host a conference call to
discuss its financial results for the second quarter of fiscal year
2021 on Thursday, April 29, 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 May 13, 2021. To access the replay, dial (877) 344-7529
(U.S.) and use conference ID 10153589. 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 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
quarter ended December 31, 2020 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 six months
ended:
At and for the three months
ended:
March 31, 2021
March 31, 2020
March 31, 2021
December 31, 2020
September 30, 2020
June 30, 2020
March 31, 2020
(dollars in thousands, except
share and per share amounts)
Operating Data:
Interest income (FTE)
$
227,769
$
259,817
$
110,574
$
117,195
$
118,429
$
121,472
$
126,757
Interest expense
13,816
49,624
$
6,127
$
7,689
$
10,903
$
13,620
$
23,260
Noninterest income
31,341
15,650
$
17,193
$
14,148
$
(3,950)
$
(11,683)
$
(83)
Noninterest expense
116,552
865,383
$
59,103
$
57,449
$
74,936
$
67,049
$
808,453
Provision for credit losses ³
6,899
79,898
$
(5,000)
$
11,899
$
16,853
$
21,641
$
71,795
Net income
92,618
(697,344)
$
51,299
$
41,319
$
11,136
$
5,400
$
(740,618)
Adjusted net income ¹
$
92,618
$
72,354
$
51,299
$
41,319
$
11,136
$
5,400
$
29,080
Common shares outstanding
55,111,403
55,013,928
55,111,403
55,105,105
55,014,189
55,014,047
55,013,928
Weighted average diluted common shares
outstanding
55,351,871
56,141,816
55,456,399
55,247,343
55,164,548
55,145,619
55,906,002
Earnings per common share - diluted
$
1.68
$
(12.42)
$
0.93
$
0.75
$
0.20
$
0.10
$
(13.25)
Adjusted earnings per common share -
diluted ¹
$
1.68
$
1.29
$
0.93
$
0.75
$
0.20
$
0.10
$
0.52
Performance Ratios:
Net interest margin (FTE) ¹ ²
3.57
%
3.63
%
3.51
%
3.63
%
3.51
%
3.57
%
3.59
%
Adjusted net interest margin (FTE) ¹ ²
3.46
%
3.60
%
3.40
%
3.52
%
3.40
%
3.47
%
3.55
%
Return on average total assets ²
1.47
%
(10.86)
%
1.64
%
1.30
%
0.35
%
0.17
%
(23.16)
%
Return on average common equity ²
17.4
%
(72.9)
%
19.8
%
15.2
%
3.8
%
1.9
%
(155.3)
%
Return on average tangible common equity ¹
²
17.6
%
2.8
%
20.0
%
15.3
%
3.9
%
2.0
%
(9.3)
%
Efficiency ratio ¹
47.3
%
54.1
%
48.4
%
46.2
%
72.1
%
69.4
%
63.5
%
Capital:
Tier 1 capital ratio
13.5
%
11.3
%
13.5
%
12.7
%
11.8
%
11.3
%
11.3
%
Total capital ratio
15.1
%
12.9
%
15.1
%
14.3
%
13.3
%
12.9
%
12.9
%
Tier 1 leverage ratio
10.0
%
9.2
%
10.0
%
9.7
%
9.4
%
9.3
%
9.2
%
Common equity tier 1 ratio
12.8
%
10.6
%
12.8
%
12.0
%
11.0
%
10.6
%
10.6
%
Tangible common equity / tangible assets
¹
8.4
%
9.3
%
8.4
%
8.3
%
9.2
%
8.9
%
9.3
%
Book value per share - GAAP
$
19.85
$
20.97
$
19.85
$
19.39
$
21.14
$
21.10
$
20.97
Tangible book value per share ¹
$
19.75
$
20.84
$
19.75
$
19.28
$
21.03
$
20.98
$
20.84
Asset Quality:
Nonaccrual loans
$
284,541
$
213,075
$
284,541
$
292,357
$
324,946
$
274,475
$
213,075
Other repossessed property
$
17,529
$
27,289
$
17,529
$
18,086
$
20,034
$
19,231
$
27,289
Nonaccrual loans / total loans
3.16
%
2.20
%
3.16
%
3.07
%
3.22
%
2.66
%
2.20
%
Net charge-offs (recoveries)
$
38,199
$
14,722
$
7,841
$
30,358
$
15,124
$
9,433
$
8,626
Net charge-offs (recoveries) / average
total loans ²
0.80
%
0.31
%
0.34
%
1.22
%
0.59
%
0.37
%
0.36
%
Allowance for credit losses / total
loans
3.28
%
1.40
%
3.28
%
3.24
%
1.49
%
1.44
%
1.40
%
Watch-rated loans (under former risk
rating system) ⁴
n/a
$
420,252
n/a
n/a
$
982,841
$
477,128
$
420,252
Special mention loans ⁴
$
512,320
n/a
$
512,320
$
453,484
n/a
n/a
n/a
Criticized loans (special mention or
worse) ⁴
$
1,186,174
n/a
$
1,186,174
$
1,170,432
n/a
n/a
n/a
Classified loans (substandard or
worse)
$
673,854
$
629,327
$
673,854
$
716,948
$
769,515
$
702,795
$
629,327
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 six months
ended:
At and for the three months
ended:
March 31, 2021
March 31, 2020
March 31, 2021
December 31, 2020
September 30, 2020
June 30, 2020
March 31, 2020
(dollars in thousands)
Interest income
Loans
$
207,597
$
232,787
$
100,274
$
107,323
$
107,522
$
109,227
$
113,356
Investment securities
16,437
22,827
8,318
8,119
9,294
10,532
11,329
Federal funds sold and other
560
1,166
405
155
105
112
558
Total interest income
224,594
256,780
108,997
115,597
116,921
119,871
125,243
Interest expense
Deposits
10,471
40,807
4,479
5,992
7,785
10,011
18,867
FHLB advances and other borrowings
1,736
6,268
856
880
2,221
2,539
3,155
Subordinated debentures and subordinated
notes payable
1,609
2,549
792
817
897
1,070
1,238
Total interest expense
13,816
49,624
6,127
7,689
10,903
13,620
23,260
Net interest income
210,778
207,156
102,870
107,908
106,018
106,251
101,983
Provision for (reversal of) credit
losses ¹
6,899
79,898
(5,000)
11,899
16,853
21,641
71,795
Net interest income after provision for
loan and lease losses
203,879
127,258
107,870
96,009
89,165
84,610
30,188
Noninterest income
Service charges and other fees
18,223
20,597
8,599
9,624
9,413
7,731
9,188
Wealth management fees
6,211
6,086
3,182
3,029
2,913
2,773
3,122
Mortgage banking income, net
7,780
2,757
3,690
4,090
3,780
2,422
1,145
Net gain (loss) on sale of securities and
other assets
247
—
(1)
248
7,890
—
—
Derivative interest expense
(6,575)
(2,141)
(3,182)
(3,393)
(3,541)
(3,040)
(1,251)
Change in fair value of FVO loans and
related derivatives
(1,630)
(12,657)
42
(1,672)
(24,648)
(25,001)
(10,533)
Other derivative income (loss)
4,153
(1,292)
3,255
898
(890)
2,242
(2,889)
Other
2,932
2,300
1,608
1,324
1,133
1,190
1,135
Total noninterest income (loss)
31,341
15,650
17,193
14,148
(3,950)
(11,683)
(83)
Noninterest expense
Salaries and employee benefits
76,679
73,217
39,125
37,554
37,182
39,042
37,312
Data processing and communication
12,771
11,896
6,545
6,226
6,742
5,817
6,123
Occupancy and equipment
10,724
10,690
5,511
5,213
5,332
5,251
5,597
Professional fees
7,649
9,027
3,734
3,915
5,552
7,382
5,263
Advertising
1,033
1,823
477
556
823
750
958
Net loss (gain) on repossessed property
and other related expenses
291
6,033
(54)
345
4,350
2,475
5,691
Goodwill and intangible assets
impairment
—
742,352
—
—
—
—
742,352
Other
7,405
10,345
3,765
3,640
14,955
6,332
5,157
Total noninterest expense
116,552
865,383
59,103
57,449
74,936
67,049
808,453
Income (loss) before income
taxes
118,668
(722,475)
65,960
52,708
10,279
5,878
(778,348)
Provision for (benefit from) income
taxes
26,050
(25,131)
14,661
11,389
(857)
478
(37,730)
Net income (loss)
$
92,618
$
(697,344)
$
51,299
$
41,319
$
11,136
$
5,400
$
(740,618)
1 For both the three and six months ended
March 31, 2021, this line includes a $(0.1) million decrease in
provision for unfunded commitments reserve. For the three and six
months ended March 31, 2020, increase in provision for unfunded
commitments reserve of $0.4 million and $0.6 million, respectively,
were recorded in other noninterest expense in the consolidated
income statement.
GREAT WESTERN BANCORP, INC.
Summarized Consolidated Balance Sheet
(Unaudited)
As of
March 31, 2021
December 31, 2020
September 30, 2020
June 30, 2020
March 31, 2020
(dollars in thousands)
Assets
Cash and cash equivalents
$
1,383,071
$
1,061,796
$
432,887
$
311,585
$
347,486
Investment securities
2,265,261
2,059,615
1,774,626
1,972,626
1,990,027
Total loans
9,011,352
9,517,876
10,076,142
10,313,999
9,693,295
Allowance for credit losses ¹
(295,953)
(308,794)
(149,887)
(148,158)
(135,950)
Loans, net
8,715,399
9,209,082
9,926,255
10,165,841
9,557,345
Other assets
650,008
483,890
470,671
484,276
492,950
Total assets
$
13,013,739
$
12,814,383
$
12,604,439
$
12,934,328
$
12,387,808
Liabilities and stockholders'
equity
Noninterest-bearing deposits
$
2,845,309
$
2,858,455
$
2,586,743
$
2,592,376
$
1,973,629
Interest-bearing deposits
8,718,745
8,514,863
8,422,036
8,558,238
8,205,486
Total deposits
11,564,054
11,373,318
11,008,779
11,150,614
10,179,115
Securities sold under agreements to
repurchase
63,153
80,355
65,506
70,362
64,809
FHLB advances and other borrowings
120,000
120,000
195,000
355,000
800,000
Other liabilities
172,613
172,209
172,221
197,708
190,420
Total liabilities
11,919,820
11,745,882
11,441,506
11,773,684
11,234,344
Stockholders' equity
1,093,919
1,068,501
1,162,933
1,160,644
1,153,464
Total liabilities and stockholders'
equity
$
13,013,739
$
12,814,383
$
12,604,439
$
12,934,328
$
12,387,808
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:
March 31, 2021
December 31, 2020
September 30, 2020
Change
($)
Change
(%)
(dollars in thousands)
Construction and development
$
472,939
$
482,462
$
415,440
$
57,499
13.8
%
Owner-occupied CRE
1,381,693
1,411,558
1,411,894
(30,201)
(2.1)
%
Non-owner-occupied CRE
2,340,206
2,660,682
2,910,965
(570,759)
(19.6)
%
Multifamily residential real estate
619,353
476,159
536,642
82,711
15.4
%
Total commercial real estate
4,814,191
5,030,861
5,274,941
(460,750)
(8.7)
%
Agriculture
1,549,926
1,635,952
1,724,350
(174,424)
(10.1)
%
Commercial non-real estate
1,897,569
2,054,478
2,181,656
(284,087)
(13.0)
%
Residential real estate
660,450
708,086
830,102
(169,652)
(20.4)
%
Consumer and other ¹
89,216
88,499
100,553
(11,337)
(11.3)
%
Total loans
9,011,352
9,517,876
10,111,602
(1,100,250)
(10.9)
%
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
$
9,011,352
$
9,517,876
$
10,076,142
$
(1,064,790)
(10.6)
%
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
March 31, 2021
December 31, 2020
March 31, 2020
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
$
818,162
$
213
0.11
%
$
492,105
$
155
0.12
%
$
56,883
$
558
3.95
%
Other interest-earning assets
71,330
192
1.09
%
—
—
—
%
—
—
—
%
Investment securities
2,167,784
8,318
1.56
%
1,905,771
8,119
1.69
%
1,987,045
11,329
2.29
%
Non-ASC 310-30 loans, net ³
9,016,221
101,851
4.58
%
9,567,679
108,921
4.52
%
9,496,153
113,484
4.81
%
ASC 310-30 loans, net ⁴
—
—
—
%
—
—
—
%
50,372
1,386
11.07
%
Loans, net
9,016,221
101,851
4.58
%
9,567,679
108,921
4.52
%
9,546,525
114,870
4.84
%
Total interest-earning assets
12,073,497
110,574
3.71
%
11,965,555
117,195
3.89
%
11,590,453
126,757
4.40
%
Noninterest-earning assets
602,004
614,946
1,273,143
Total assets
$
12,675,501
$
110,574
3.54
%
$
12,580,501
$
117,195
3.70
%
$
12,863,596
$
126,757
3.96
%
Liabilities and Stockholders'
Equity
Noninterest-bearing deposits
$
2,713,360
$
2,664,117
$
1,942,686
Interest-bearing deposits
7,550,507
$
3,196
0.17
%
7,278,073
$
3,966
0.22
%
6,473,524
$
12,083
0.75
%
Time deposits
1,004,405
1,283
0.52
%
1,187,148
2,026
0.68
%
1,686,977
6,784
1.62
%
Total deposits
11,268,272
4,479
0.16
%
11,129,338
5,992
0.21
%
10,103,187
18,867
0.75
%
Securities sold under agreements to
repurchase
69,282
13
0.08
%
78,639
18
0.09
%
56,369
24
0.17
%
FHLB advances and other borrowings
120,000
843
2.85
%
120,000
862
2.85
%
581,834
3,131
2.16
%
Subordinated debentures and subordinated
notes payable
108,879
792
2.95
%
108,846
817
2.98
%
108,714
1,238
4.58
%
Total borrowings
298,161
1,648
2.24
%
307,485
1,697
2.19
%
746,917
4,393
2.37
%
Total interest-bearing liabilities
11,566,433
$
6,127
0.21
%
11,436,823
$
7,689
0.27
%
10,850,104
$
23,260
0.86
%
Noninterest-bearing liabilities
59,680
61,601
95,457
Stockholders' equity
1,049,388
1,082,077
1,918,035
Total liabilities and stockholders'
equity
$
12,675,501
$
12,580,501
$
12,863,596
Net interest spread
3.33
%
3.43
%
3.10
%
Net interest income and net interest
margin (FTE)
$
104,447
3.51
%
$
109,506
3.63
%
$
103,497
3.59
%
Less: Tax equivalent adjustment
1,577
1,598
1,514
Net interest income and net interest
margin - ties to Statements of Comprehensive Income
$
102,870
3.46
%
$
107,908
3.58
%
$
101,983
3.54
%
1 Annualized for all partial-year
periods.
2 Interest income includes $0.4 million
for the second quarter of fiscal year 2020 resulting from interest
earned on derivative collateral included in other assets on the
consolidated balance sheets. For the second quarter of fiscal year
2021, all amounts were included in other interesting-earning
assets.
3 Interest income includes $0.0 million
and $0.4 million for the second 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.
GREAT WESTERN BANCORP, INC.
Net Interest Margin (FTE) (Unaudited)
Six Months Ended
March 31, 2021
March 31, 2020
Average Balance
Interest
(FTE)
Yield / Cost 1
Average Balance
Interest
(FTE)
Yield / Cost 1
(dollars in thousands)
Assets
Interest-bearing bank deposits 2
$
655,133
$
316
0.10
%
$
44,843
$
1,166
5.20
%
Other interest-earning assets
45,637
244
1.07
%
—
—
—
%
Investment securities
2,026,806
16,437
1.63
%
1,945,698
22,827
2.35
%
Non-ASC 310-30 loans, net 3
9,291,950
210,772
4.55
%
9,525,157
232,716
4.89
%
ASC 310-30 loans, net 4
—
—
—
%
51,334
3,108
12.11
%
Loans, net
9,291,950
210,772
4.55
%
9,576,491
235,824
4.93
%
Total interest-earning assets
12,019,526
227,769
3.80
%
11,567,032
259,817
4.49
%
Noninterest-earning assets
608,475
1,270,562
Total assets
$
12,628,001
$
227,769
3.62
%
$
12,837,594
$
259,817
4.05
%
Liabilities and Stockholders'
Equity
Noninterest-bearing deposits
$
2,688,739
$
1,959,885
Interest-bearing deposits
7,414,290
$
7,162
0.19
%
6,390,193
$
25,456
0.80
%
Time deposits
1,095,776
3,309
0.61
%
1,767,465
15,351
1.74
%
Total deposits
11,198,805
10,471
0.19
%
10,117,543
40,807
0.81
%
Securities sold under agreements to
repurchase
73,960
31
0.08
%
61,448
55
0.18
%
FHLB advances and other borrowings
120,000
1,705
2.85
%
539,434
6,213
2.30
%
Subordinated debentures and subordinated
notes payable
108,863
1,609
2.96
%
108,688
2,549
4.69
%
Total borrowings
302,823
3,345
2.22
%
709,570
8,817
2.49
%
Total interest-bearing liabilities
11,501,628
$
13,816
0.24
%
10,827,113
$
49,624
0.92
%
Noninterest-bearing liabilities
60,641
97,204
Stockholders' equity
1,065,732
1,913,277
Total liabilities and stockholders'
equity
$
12,628,001
$
12,837,594
Net interest spread
3.38
%
3.13
%
Net interest income and net interest
margin (FTE)
$
213,953
3.57
%
$
210,193
3.63
%
Less: Tax equivalent adjustment
3,175
3,037
Net interest income and net interest
margin - ties to Statements of Comprehensive Income
$
210,778
3.52
%
$
207,156
3.58
%
1 Annualized for all partial-year
periods.
2 Interest income includes $0.8 million
for fiscal year 2020 resulting from interest earned on derivative
collateral included in other assets on the consolidated balance
sheets. For fiscal year 2021, all amounts were included in other
interest-earning assets.
3 Interest income includes $0.0 million
and $1.0 million for the 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 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 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 derivative
interest expense 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 six months
ended:
At and for the three months
ended:
March 31, 2021
March 31, 2020
March 31, 2021
December 31, 2020
September 30, 2020
June 30, 2020
March 31, 2020
(dollars in thousands except
share and per share amounts)
Adjusted net income and adjusted
earnings per common share:
Net income (loss) - GAAP
$
92,618
$
(697,344)
$
51,299
$
41,319
$
11,136
$
5,400
$
(740,618)
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
$
92,618
$
72,354
$
51,299
$
41,319
$
11,136
$
5,400
$
29,080
Weighted average diluted common shares
outstanding
55,351,871
56,141,816
55,456,399
55,247,343
55,164,548
55,145,619
55,906,002
Earnings per common share - diluted
$
1.68
$
(12.42)
$
0.93
$
0.75
$
0.20
$
0.10
$
(13.25)
Adjusted earnings per common share -
diluted
$
1.68
$
1.29
$
0.93
$
0.75
$
0.20
$
0.10
$
0.52
Pre-tax pre-provision income
("PTPP"):
Income (loss) before income taxes -
GAAP
$
118,668
$
(722,475)
$
65,960
$
52,708
$
10,279
$
5,878
$
(778,348)
Add: Provision for credit losses -
GAAP
6,899
79,898
(5,000)
11,899
16,853
21,641
71,795
Add: Change in fair value of FVO loans and
related derivatives - GAAP
1,630
12,657
(42)
1,672
24,648
25,001
10,533
Add: Goodwill impairment - GAAP
—
742,352
—
—
—
—
742,352
Pre-tax pre-provision income
$
127,197
$
112,432
$
60,918
$
66,279
$
51,780
$
52,520
$
46,332
Tangible net income and return on
average tangible common equity:
Net income (loss) - GAAP
$
92,618
$
(697,344)
$
51,299
$
41,319
$
11,136
$
5,400
$
(740,618)
Add: Amortization of intangible assets and
COVID-19 related impairment of goodwill and certain intangible
assets, net of tax
522
713,817
261
261
261
261
713,440
Tangible net income (loss)
$
93,140
$
16,473
$
51,560
$
41,580
$
11,397
$
5,661
$
(27,178)
Average common equity
$
1,065,732
$
1,913,277
$
1,049,388
$
1,082,077
$
1,174,996
$
1,163,724
$
1,918,035
Less: Average goodwill and other
intangible assets
5,873
744,702
5,742
6,004
6,265
6,527
741,257
Average tangible common equity
$
1,059,859
$
1,168,575
$
1,043,646
$
1,076,073
$
1,168,731
$
1,157,197
$
1,176,778
Return on average common equity *
17.4
%
(72.9)
%
19.8
%
15.2
%
3.8
%
1.9
%
(155.3)
%
Return on average tangible common equity
**
17.6
%
2.8
%
20.0
%
15.3
%
3.9
%
2.0
%
(9.3)
%
* 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
$
210,778
$
207,156
$
102,870
$
107,908
$
106,018
$
106,251
$
101,983
Add: Tax equivalent adjustment
3,175
3,037
1,577
1,598
1,508
1,601
1,514
Net interest income (FTE)
213,953
210,193
104,447
109,506
107,526
107,852
103,497
Add: Derivative interest expense
(6,575)
(2,141)
(3,182)
(3,393)
(3,541)
(3,040)
(1,251)
Adjusted net interest income (FTE)
$
207,378
$
208,052
$
101,265
$
106,113
$
103,985
$
104,812
$
102,246
Average interest-earning assets
$12,019,526
$11,567,032
$12,073,497
$11,965,555
$12,184,093
$12,156,505
$11,590,453
Net interest margin (FTE) *
3.57
%
3.63
%
3.51
%
3.63
%
3.51
%
3.57
%
3.59
%
Adjusted net interest margin (FTE) **
3.46
%
3.60
%
3.40
%
3.52
%
3.40
%
3.47
%
3.55
%
* 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
$
207,597
$
229,679
$
100,274
$
107,323
$
106,305
$
107,725
$
111,970
Add: Tax equivalent adjustment
3,175
3,037
1,577
1,598
1,508
1,601
1,514
Interest income (FTE)
210,772
232,716
101,851
108,921
107,813
109,326
113,484
Add: Derivative interest expense
(6,575)
(2,141)
(3,182)
(3,393)
(3,541)
(3,040)
(1,251)
Adjusted interest income (FTE)
$
204,197
$
230,575
$
98,669
$
105,528
$
104,272
$
106,286
$
112,233
Average non-ASC310-30 loans
$9,291,950
$9,525,157
$9,016,221
$9,567,679
$9,977,591
$9,974,802
$9,496,153
Yield (FTE) *
4.55
%
4.89
%
4.58
%
4.52
%
4.30
%
4.41
%
4.81
%
Adjusted yield (FTE) **
4.41
%
4.84
%
4.44
%
4.38
%
4.16
%
4.29
%
4.75
%
* 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
$
242,119
$
222,806
$
120,063
$
122,056
$
102,068
$
94,568
$
101,900
Add: Tax equivalent adjustment
3,175
3,037
1,577
1,598
1,508
1,601
1,514
Total revenue (FTE)
$
245,294
$
225,843
$
121,640
$
123,654
$
103,576
$
96,169
$
103,414
Noninterest expense
$
116,552
$
865,383
$
59,103
$
57,449
$
74,936
$
67,049
$
808,453
Less: Amortization of intangible assets
and COVID-19 related impairment of goodwill and certain intangible
assets
522
743,206
261
261
261
278
742,779
Tangible noninterest expense
$
116,030
$
122,177
$
58,842
$
57,188
$
74,675
$
66,771
$
65,674
Efficiency ratio *
47.3
%
54.1
%
48.4
%
46.2
%
72.1
%
69.4
%
63.5
%
* 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
$
1,093,919
$
1,153,464
$
1,093,919
$
1,068,501
$
1,162,933
$
1,160,644
$
1,153,464
Less: Goodwill and other intangible
assets
5,643
6,703
5,643
5,904
6,164
6,425
6,703
Tangible common equity
$
1,088,276
$
1,146,761
$
1,088,276
$
1,062,597
$
1,156,769
$
1,154,219
$
1,146,761
Total assets
$
13,013,739
$
12,387,808
$
13,013,739
$
12,814,383
$
12,604,439
$
12,934,328
$
12,387,808
Less: Goodwill and other intangible
assets
5,643
6,703
5,643
5,904
6,164
6,425
6,703
Tangible assets
$
13,008,096
$
12,381,105
$
13,008,096
$
12,808,479
$
12,598,275
$
12,927,903
$
12,381,105
Tangible common equity to tangible
assets
8.4
%
9.3
%
8.4
%
8.3
%
9.2
%
8.9
%
9.3
%
Tangible book value per share:
Total stockholders' equity
$
1,093,919
$
1,153,464
$
1,093,919
$
1,068,501
$
1,162,933
$
1,160,644
$
1,153,464
Less: Goodwill and other intangible
assets
5,643
6,703
5,643
5,904
6,164
6,425
6,703
Tangible common equity
$
1,088,276
$
1,146,761
$
1,088,276
$
1,062,597
$
1,156,769
$
1,154,219
$
1,146,761
Common shares outstanding
55,111,403
55,013,928
55,111,403
55,105,105
55,014,189
55,014,047
55,013,928
Book value per share - GAAP
$
19.85
$
20.97
$
19.85
$
19.39
$
21.14
$
21.10
$
20.97
Tangible book value per share
$
19.75
$
20.84
$
19.75
$
19.28
$
21.03
$
20.98
$
20.84
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/20210429005228/en/
GREAT WESTERN BANCORP, INC. Investor Relations
Contact: Seth Artz, 605.988.9253
seth.artz@greatwesternbank.com
Media Contact: Lexie Feterl, 605.978.5829
alexis.feterl@greatwesternbank.com
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