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
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210127005283/en/
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
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